Senate
25 August 1910

4^th Parliament · 1^st Session

RETURN OF PAPERS
SURPLUS REVENUE BILL
COMMONWEALTH BANKING COMPANIES RESERVE LIABILITIES BILL
PAPER
SURPLUS REVENUE BILL
ADJOURNMENT
- Additional Sitting Day

The President took the chair at 2.30 p.m., and read prayers.

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RETURN OF PAPERS

Motion (by Senator Pearce) agreed to -

That the Acting Clerk of the Senate return ro llie Department of Trade and Customs the papers, relating to the Agricultural Implement Makers’ Employes, Provision for Reimbursement of Legal Outlay, laid on the table of the Senate on the 6th October, 1909.

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SURPLUS REVENUE BILL

In Committee (Consideration resumed from12th August, vide page 1501):

Clause 4 -

The Commonwealth shall, during the period of ten years beginning on the first day of July One thousand nine hundred and ten, and thereafter until the Parliament otherwise provides, pay to each State by monthly instalments, or apply to the payment of interest on debts of the State taken over by the Commonwealth, an annual sum amounting to Twenty-five shillings per head of the number of the people of the State :

Provided that in the six months ending the thirtieth day of June One thousand nine hundred and eleven the Commonwealth may deduct from the amounts payable in pursuance of this section the amounts set out in the Schedule…..

Upon which Senator Givens had moved by way of amendment -

That the words “ during the period of,” lines 1 and 2, be left out.

Senator Fraser:

– It was a very good tactical move, and the shipping companies soon came off their perch.

Senator GIVENS:

– The honorable senator forgets that we have an additional £^5, 000,000 of expenditure to meet now. He is not acquainted with the facts of Federation, or has not brought his information up to date, or he would know that the expenditure of the Commonwealth is going to be doubled. It is only a question in arithmetic, and any member of the Senate can get the information for himself. Anyhow, I have got it, and I am satisfied that I am right in my contention that the Government must either abandon a large portion of their policy, or abandon the proposed payment of 25s. per head to the States. We have a direct mandate from the people with regard to our policy, but we have no mandate with regard to the payment to the States. Our first duty is to the people who elected us. The State Parliaments have the responsibility of raising and expending their own revenue. There are ample fields of taxation, which they have never yet attempted to explore, and we should give them every opportunity to enter those fields. Our first duty is to ourselves. We must carry out our own policy, or be discredited in the eyes of the people. If we do carry out our policy, we cannot pay 25s. per head per annum to the States for ten years. Here is a difficulty. Every honorable senator supporting the Government, who votes for the ten years’ period will pledge himself so far as he is able to carry out that arrangement. Is not that the case? He has already pledged himself to his constituents to do a number of things, and in supporting this Bill he will now pledge himself to the States to do something additional. If he will go into the figures, he will find that the thing cannot be done. He will find that if 25s. per head is to be paid to the States during the ten years, a large portion of the policy to which he is pledged must be set aside. Some day, he will have to choose between the States and the Commonwealth, and when that day comes, I hope there will be no hesitation as to the side of the fence on which honorable senators will drop. My principal trouble now is that the Government are proposing that we. should lull the States into a condition of false security. Depending upon a promise to this Parliament, the State Treasurers will arrange their finances on the understanding that they will receive each year 25s. per head of their population for a. period of ten years. I say they must be disappointed, because we cannot carry out that promise. We, therefore, should not make it. It would be much better to tell the State Governments now that we are not sure of being able to make this payment for a longer period than three years. That would be giving them fair warning, and those who are forewarned are forearmed. It would give them an opportunity to recast their systems of taxation, and ‘to overhaul their expenditure. It would give them a chance to set their houses in order for the day which will inevitably come long before the ten years’ period has elapsed, when the Commonwealth must, of necessity, cease to pay the States 25s. per annum per head of their population. For these reasons, I intend to support the amendment proposed by Senator Givens. I trust that every honorable senator who thinks that our relations with the States should be conducted in an honest and a candid fashion will also vote for the amendment.

Senator SAYERS:
Queensland

– I intend to support the amendment, because the Government are assuming in this Bill a power which we do not possess. They are trying to bind future Parliaments. There will be two Parliaments after the present one before the ten years period will have expired. We cannot pretend to bind those Parliaments. I was in favour of the embodiment of the Financial Agreement in the Constitution if that were the wish of the people. It was the wish of the people of my State, and also of the people of Tasmania, but it was not the wish ot the people generally of the Commonwealth. Future Parliaments might see reason to reduce the proposed payment from 25s. to j£i, or 15s. per head of the population of the States. I should have been prepared if the agreement had been embodied in the Constitution to leave it to the people to say whether the payment should be increased or decreased. The Government, in this measure, as Senator Stewart has said, are trying to lull the people of the States to sleep. The Treasurers, if they are wise, will take no notice of it, but if they are unwise they will carry on in the belief that for ten years they will receive from the Commonwealth 25s. per head per annum. But every one here knows that that is not a fact, and that the next Parliament may allow the States only 10s. per head, or 5s., or, perhaps, nothing. On these grounds only I intend to support the Bill. I hope, if the amendment is carried, to submit a proposal pledging the Commonwealth to return to the States, .for the life of this Parliament - that is, for a period of three1 years - the sum of 25s. per head per annum, but beyond that I do not feel inclined to go. It is of no use to pledge ourselves for a period of ten years. I intend to support the amendment.

Senator Lt.-Colonel Sir ALBERT GOULD (New South Wales) [3.31].- Senator Sayers has, I think, placed himself in rather an inconsistent position, because in the last Parliament a majority, rightly or wrongly, favoured the placing of a provision in the Constitution for the payment of 25s. per head per annum. Had the decision of Parliament been accepted by the people at the referendum, we should have been pledged, in any circumstances, to find that amount until the people saw fit to again alter the Constitution. Senator Sayers now takes up the position that the Parliament has no power to bind the Commonwealth for ten years, but that it may bind itself for three years. He argues that a new Parliament, might be elected with entirely different views from ours. That may be so, but it should be borne in mind that the present Parliament, in its peal this very measure. The honorable senator may say that that would be an inconsistent proceeding, because, inasmuch as honorable senators had made a pledge today, they would be bound, in honour, to observe it until the expiration of the Parliament.

Senator Sayers:

– I should, anyhow.

Senator Lt Colonel Sir ALBERT GOULD:

– That, I admit, is a very strong position to put. Technically, this Parliament, in another session, would have exactly the same right to abandon its decision of to-day as a subsequent Parliament would have.

Senator Sayers:

– It would not be honorable.

Senator Lt Colonel Sir ALBERT GOULD:

– 1 admit that.

Senator Sir Josiah Symon:

– -There would be no more stability in the three years than in the ten years in the Act of Parliament.

Senator Lt Colonel Sir ALBERT GOULD:

– No. A great many honorable senators have stated that they would not consider themselves individually bound by a period of ten years. But individual senators would be just as much bound by a ten-years’ period as by a three-years’ period. Honorable senators have said that if, in their opinion, the needs of the Commonwealth called for a repeal of the Act, they would be. prepared to do so at any time. If we follow out the wording of section 87 of the Constitution, it will put us in an awkward position, because it will lead the public to believe that this payment was absolutely fixed for a period, and that the Parliament did not intend to alter the provision until after the expiration of that period. We all know that, with regard to any law, one Parliament cannot bind itself or any succeeding Parliament. Senator Stewart laid great stress upon a mandate which, he said, had been given by the people to the Labour party to do many things. But I would remind him that a mandate has also been given to the Parliament by the people in regard to making this payment to the States for a period of, at least, ten years. During the progress of the elections a manifesto from the Labour party, signed by Mr. Fisher, as chairman, and Mr. Watkins, as its secretary, was placed before the people. Although honorable “senators may say that individually they are not bound by the manifesto, yet they cannot overlook the fact that it bore the signatures of two representative members of the Labour party. When the leaders of a great party, speaking on its behalf, make a certain statement to the electors, and it is returned with a majority, that statement is as much a mandate from the people as is any other matter which was included in the manifesto, and which may have been advocated.

Senator Findley:

– It will be observed, too.

Senator Lt Colonel Sir ALBERT GOULD:

– Here is a Minister who recognises that there was just as much a mandate to the Parliament to enact this payment to the States for ten years as there was to carry out important portions of the policy of the Labour party. The manifesto which appeared in the Sydney Morning Herald of the 5th March, 1910, contained this reference to a ten years’ guarantee -

We have been told that some guarantee of reasonable stability of this arrangement is due to the State. We do not deny the reasonableness of such a demand, and have always been prepared to concede it. And we are prepared to give a guarantee that, for a period of ten years, we will do nothing to disturb the proposed arrangement. At the end of that period, if the Parliament so decided, the matter may be submitted to a simple referendum of the people to determine whether the scheme should be accepted for a further period.* In this way an effective assurance of stability would be assured to the States, the financial arrangements of the Commonwealth fixed for a definite period, and the rights of the people to make what laws they please remain unimpaired.

Senator de Largie:

– The honorable senator should get down off the rail.

Senator VARDON:

– We have seen some other people doing this kind of thing. I heard the honorable senator say the other day, in reply to a question put to him in connexion with this matter, that his answer was “ No-.Yes-Yes.” Seeing that we could not get the Financial Agreement embodied in the Constitution, I do not think I should be justified in refusing to accept a proposal to make this payment to the States for a period of ten years.

Question - That the words proposed to. be left out be left out (Senator Givens’ amendment) - put. The Committee divided.

AYES: 3

NOES: 24

Majority … … 21

AYES

NOES

Question so resolved in the negative.

Amendment negatived.

Senator Givens to test the feeling of the Committee on the question of fixing no period.I propose now to move the omission of the word “ ten,” with a view to insert in lieu thereof the word “ fifteen.”

GOULD.- Oh that question I desire to say a few words. In the first place, sir, I draw your attention to the language of section 53 of the Constitution. Mine is not a proposal either to impose taxation or to appropriate revenue or money for the ordinary annual services of the Government. I think that those two points can be fairly conceded.

The Senate may not amend any proposed law so as to increase any proposed charge or burden on the people.

I suggest, sir, that you should defer giving a ruling until the first portion of my proposal has been dealt with.

That the word “ten,” line 2, be left out. My object is to afford to the Committee an opportunity to express its opinion as to the period which has been inserted in the clause.

I admit at once that if this amendment is carried it is not my intention to propose a shorter period than fifteen years. In the manifesto issued by its Leader during the general election, it was stated that the Labour party were prepared to submit a Bill fixing the period of payment at ten years, and, therefore, its members may not be prepared to vote for the omission of ‘ ten ‘ ‘ with a view to insert a longer or shorter term. I can understand the reason why they object to make any change. If my present proposal is carried I intend to submit, in the form of an amendment or a request, a proposal for a period of fifteen years. VVe have had a long discussion as to whether no period should be fixed ; but by the recent division the Committee have shown that they are in favour of some period being adopted. I desire to follow out the suggestion which was offered when this question was being considered in the late Parliament. It will be remembered that a proposal was made by one honorable senator to fix the period at twenty-five years, and by another to fix it at fifteen years. Either twenty-five years or fifteen years - whichever had been accepted - would have been the period which the people would have been asked to place in the Constitution. If it was legitimate a few months ago toprovide for a longer period than ten years, it is equally legitimate to-day to do so. I submit that while the Government are in honour bound to recognise the period of ten years, they will not be departing from any principle if on reconsideration they see fit to adopt a period of fifteen years. It was stated in portions of the Commonwealth that members were in favour of inserting a longer period, so that people in the various States might clearly understand that it was not intended to make the revenue of the States dependent from year to year onthe bounty of this Parliament. On the contrary, it was intended to let them clearly see that there would be a lengthy period during which the States would receive 25s. per head per annum. I shall not weary honorable senators with a reiteration of the views whichI expressed on a previous occasion.

Senator PEARCE:
Minister of Defence · Western Australia · ALP

– I wish to acknowledge that Senator Gould submitted his amendment as briefly as he possibly could, and to appeal to honorable senators not to go over the ground which was traversed on the previous amendment. The Treasury officials are naturally very anxious to see this Bill passed, . because, as honorable senators can well imagine, it will revolutionize the whole system of bookkeeping. They are now waiting to bring their books in order, and the Prime Minister asked me to appeal to the Senate to put the Bill through as early as possible, so as to get it assented to and brought into operation. With regard .to the amendment, I have only to say that after due consideration the Government adopted the period of ten years. It will be noticed that under this clause the payment is to be made to the States for a period of ten years, “ and thereafter until the Parliament otherwise provides.” Just as people recognised that this Parliament could be trusted to deal with the allocation of the Customs and Excise revenue at the end of ten years, so they can trust the Parliament of ten years hence to do justice to the States for another term. It is only now asked to do justice to the States and honour the obligation placed upon the Commonwealth by the Braddon section. Without further debate 1 ask honorable senators to reject the amendment and agree to the clause.

Question - That the word proposed to be left out be left out (Senator Gould’s amendment) - put. The Committee divided.

AYES: 7

NOES: 18

Majority … 1 1

AYES

NOES

Question so resolved in the negative.

Amendment negatived.

Senator Lt Colonel Sir ALBERT GOULD:
New South Wales

5-55]- - 1 move -

That the word “July,” line 2, be left out, with a view to insert in lieu thereof the word “ January.”

If this amendment is agreed to, a subsequent amendment will be requisite, with the object of making the clause provide that the. Commonwealth shall carry out the new arrangement for ten years, dating from 1st January, 191 1. While I am quite satisfied with the amount of 25s. per capita, I. am strongly opposed to any endeavour to take away from the States, by a side wind, that to which they are clearly entitled. We have no power to alter the constitutional provision which insures to the States threefourths of the Customs and Excise revenue of the Commonwealth until the end of 1910. But the Government propose to go behind that provision. During the present six months, the States are entitled to receive from the Commonwealth revenue at the rate of about 19s. per capita. Under the new agreement, they should receive, for the first six months of next year, 12s. 6d. per capita. But it is now proposed that they shall receive only 25s. per capita for the two periods of six months. Consequently, the States will suffer a loss of revenue to the extent of 6s. 6d. per capita.

Senator Givens:

– The States will get the full amount that is due to them this half-year. The reduction will be made in the following year.

Senator Lt Colonel Sir ALBERT GOULD:

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COMMONWEALTH BANKING COMPANIES RESERVE LIABILITIES BILL

/// Committee (Consideration resumed from nth August, vide page 1419) :

Clause 2 (Interpretation).

Senator WALKER (New South Wales) f 7.45]. - I hope that this clause will meet with the approval of the Committee. In a former session, Senator Givens pointed out that there were so-called banking companies which had a very small capital, and which in some cases might almost be called bogus. I saw a good deal of force in his remarks, arid, as honorable senators will notice, have altered the interpretation of “ Joint Stock Banking Company “ and “Company.”

Clause agreed to.

Senator GIVENS:
Queensland

.- I propose to move the insertion of another definition clause. One of the chief things dealt with in the Bill is the question of net profits, and if it is to have any useful effect it will be necessary to define that term. I am surprised that Senator Walker, in response to previous criticism, has not included a definition. I ask him if he cannot give us a definition of what he means by the term, because it is a matter which involves very great issues.

Senator WALKER:
New South Wales

.- - I propose to again quote the definition of “ net profits,” which is contained in Lindley on Partnership, at page 37 -

Profits (or nep profits) are the excess of returns over advances; the excess of what is obtained over the cost of obtaining it. Losses, on the other hand, are the excess of advances over returns; the excess of the cost of obtaining over what is obtained. Profits and net profits are for all legal purposes synonymous expressions; but the returns themselves are often sailed gross profits; hence it becomes necessary lo call profits net profits in order to avoid confusion. In the present treatise, however, the word profits will be used in the sense of net profits; and the expression gross profits will l>e avoided us much as possible. [ think that I can give a banker’s definition of the term. It means the net profits made by a bank from its current business after paying all expenses incurred, providing for bad and doubtful debts, and allowing for accrued interest on fixed deposits up to that date. It means the moneys made during a half-year in excess of the cost of obtaining the profits, and also in many cases after the revaluation of the assets. Bankers, as a rule, bring forward a balance from the previous half-year, and generally leave a portion of the profits undistributed until the following half-year. As a matter of fact, the net profits very often enable a bank to build up a local reserve fund, so that, as a rule, strong banks do not declare each half-year the total profits earned. They are always strengthening their position, not only for the benefit of the shareholders, but also for the benefit of their creditors and depositors.

Senator GIVENS:
Queensland

.- There is a very grave defect in the definition offered by Senator Walker. I am not questioning or denying that that is the legal definition. One of my principal objections to the Bill has been that that definition would allow a banking company to use up its assets in creating a reserve fund for its own protection.Lindley bears out that view in its entirety, because “ profits “ or “ net profits “ mean what is obtained after due provision has been made for the cost of obtaining it. If a bank converts its assets or estates, that is profit, according to the legal definition. If the Bill were to become law in its present form, then undoubtedly any banking company could provide against any risk or loss on its part at the expense of its customers and depositors by merely converting its assets. I think that a more rigid definition of net profits is required, and therefore I move -

That the following new clause be inserted : - “ 2A. ‘ Net profits ‘ means the profit made after full and due provision for current expenditure has been made and does not include the proceeds from the realization of assets or the conversion of reserves or any portion of reserves.”

If Senator Walker desires to pass the Bill in such a form that the public cannot incur any risks, he ought to accept this definition.

Proposed new clause agreed to.

Clause 3 -

From and after the passing of this Act it shall be lawful for any Joint Stock Banking Company to form a reserve fund for the purpose of protecting its shareholders against their liabilities in respect of the uncalled capital (if any) and the reserve liabilities (if any) on the shares field by them in such company and to pay and to carry to the credit of such reserve fund such sums out of the net profits of the Banking Company made after the passing of this Act in any half-year and such premiums from the sale after the passing of this Act of new shares and proceeds of sale of shares forfeited after the passing of this Act and such sums (if any) representing the recovery after the passing of this Act of debts previously written off as bad from time to time (as shall be determined by the company in general meeting). No transfer shall be made to the said reserve fund from any other reserve fund, nor shall any reserve fund formed for the purpose of providing for occasional losses be used for any other purpose.

Senator Lt Colonel Sir Albert Gould:

– The honorable senator has got into the Bill the definition of net profits that he thought desirable.

Senator GIVENS:

– Thirty pounds.

Senator Lt Colonel Sir ALBERT GOULD:

– That bank pays a’ dividend of 10 per cent, but on the ^12 10s. paid-up capital on each share, so that if an honorable senator bought shares of that bank at £30 he would get in dividends only about 4 per cent, on his money.

Senator Stewart:

– The Commercial Bank of Australia has no reserve liability.

Senator Lt Colonel Sir ALBERT GOULD:

– That is another instance that I was not aware of. The capital of a bank might be represented by ^1,000,000 paid UP> .£1, 000,000 reserve fund, and ^1,000,000 reserve liability, and Senator Walker proposes that there may be set aside from the profits of the bank certain sums to create a fund to meet that reserve liability of the shareholders. He is really proposing a means by which the shareholders may pay up their reserve liability in advance.

I am explaining how the Bill will operate, and I think I have some knowledge of these matters. Clause 3 provides that -

From and after the passing of this Act it shall be lawful for any Joint Stock Banking Company to form a reserve fund for the purpose of protecting its shareholders against their liabilities in respect of the uncalled capital (if any) and the reserve liabilities (if any) on the shares held by them in such company and to pay and to carry to the credit of such reserve fund such sums out of the net profits of the Banking Company made after the passing of this Act in any half-year.

This means that out of the net profits made by a bank during the current halfyear the proposed fund may be built up, and the net profits are the profits on the business, after making provision for all doubtful or bad debts, adding to the reserve, and such inner reserve funds as the banking company may see fit to have. It is clear, therefore, that the fund would be built up from moneys which would otherwise go into the pockets of the shareholders by way of dividends. The clause continues - and such premiums from the sale after the passing of this Act of new shares -

A bank very often increases its capital by issuing a large number of new shares. ft may call upon people to pay a premium upon these shares. If the £20 shares of the bank are worth £25, a premium of ^5 on new shares issued may be asked for, and this clause would make it lawful for the directors of the bank to place premiums paid in that way upon shares to the credit of the proposed reserve fund. It would not enable the bank to alter the face value of the shares, and in the case I have quoted of shares worth £20, the ^20 for each share would be available for trading purposes, and dividends would be paid on the £20 as they were earned. The next provision of the clause reads - and proceeds of sale of shares forfeited after the passing of this Act -

Very often bank shares are payable in instalments. A bank may have power when a man fails to pay up his instalments to forfeit his shares and retain the instalments which he has already paid on them. The share having been forfeited would be as if it had no existence, and the clause would permit instalments paid to be placed to the credit of the reserve liability fund. I admit that if the directors saw fit they might refund instalments paid in this way or put them to the credit of an ordinary reserve, but it is proposed in. the Bill that they may be put to the credit of the reserve liability fund. I do not suppose that this is regarded as a very important provision, and Senator Walker will probably have no objection to an alteration in this respect if the provision is strongly objected to.

Senator Pearce:

– Nobody disputes any of these points.

Senator Lt Colonel Sir ALBERT GOULD:

– 1 certainly thought that Senator Givens disputed some of them, and the Minister will admit that Senator Givens challenges the wisdom of the next provision of the clause, which reads - and such sums (if any) representing the recovery after the passing of this Act of debts previously written off as bad from time to time (as shall be determined by the company in general meeting)

Senator Givens:

– That is a realization of assets.

Senator Lt Colonel Sir ALBERT GOULD:

– The honorable senator challenges that provision. A debt becomes due to a bank, and circumstances arise which render it so doubtful whether it can be recovered that it is written off. The directors of the bank say that they do not feel justified in including the amount as a debt due to the bank. It is charged to the reserve built up to meet bad and doubtful debts, so that, although it is a bad debt, it is paid out of the profits made from the business of the bank, and is then as if it had never existed, or as if it had been paid by the debtor. It is not charged against the general reserve fund of the bank, but against a special fund provided for meeting bad and doubtful debts. Senator Walker proposes that these sums should be allowed to go to the special reserve liability fund. This fund will not alone protect the shareholders, but will give an assurance to the creditors of the bank that money has been provided to meet the reserve liability of the shareholders. I cannot understand why there should be so much objection to a provision of this character. I have been at considerable pains in going over these matters of detail about which there seemed to me to be some doubt, and to point out as clearly as possible what is the object of the Bill. If I have not made myself clear as to the meaning of these provisions, I shall be only too happy to afford any further explanation in my power in order that honorable senators may get a complete grip of the Bill. I do not say that all banks will take advantage of this measure.

Senator Givens:

– If it is desirable that they should, they ought to be compelled to take advantage of it.

Senator Lt Colonel Sir ALBERT GOULD:

– The opportunity will be afforded them to take advantage of it if the Bill is passed, and it would surely be better to build up such a reserve fund than to have to reconstruct under such conditions that there would be no fund to meet the reserve liability of the shareholders.

Senator Rae:

– Have the banks asked for this ?

Senator Lt Colonel Sir ALBERT GOULD:

– I do not know, but I do know that Senator Walker told me that one of the most eminent banking men in New South Wales, who is dead long since, thought that some such provision would be a measure of strength to the shareholders of a bank, and particularly to the creditors, because they would know exactly the amount of money upon which they could rely to meet the reserve liability on the shares in the event of the liquidation of the bank.

Senator PEARCE:
Western AustraliaMinister of Defence · ALP

– I have no wish to “ stone- wall “ this Bill, as some of its friends seem inclined to do, by arguing points on which there is no difference of opinion. It -is not a question of how the proposed fund is to be built up. The vital objection to the Bill is that it proposes to relieve the shareholders of a bank of the liability placed upon them for the deliberate purpose of protecting the depositors in the bank. Why is it that banks deal with their shares in a way different from other companies ? Why is it that they undertake this reserve liability? Do honorable senators think that it is for the benefit of the shareholders? Of course, it is not. It is done because in a banking business there is risked not merely the capital of the shareholders, which may be only a flea-bite, but millions of pounds belonging to people who have no voice at all iri the policy of the bank. If I invest my capital in any other kind of company I have a voice in directing the policy of the company, which affects my own capital as well as the capital of my fellow shareholders. But if I become a shareholder in a bank it is not only my own capital that may be affected by the policy which I permit the directors of the bank to follow, but the millions placed in the bankhy the depositors to be used, and from the use of which I and my fellow shareholders make our profits. The idea of a reserve liability is, that when the shareholder knows that the result of a foolish or unwise policy on his part or on the part of the directors may oblige him to pay up his liability, he will take a very much greater interest in the business of the bank, and will satisfy himself that it is carried on on much more conservative and safe lines than he would if he knew that if the bank went “ bung “ to-morrow all his liability could be met out of some reserve fund built up from the profits of the business.

Senator Lt Colonel Sir Albert Gould:

– All his capital in the bank would be swept away.

Senator PEARCE:

– I quite recognise that, but he would know that every pound’s worth of property he possessed in other forms would be liable to cover the reserve liability on his shares. I say that if we relieve the shareholder of a bank from that reserve liability we shall remove one of the strongest safeguards we could have in the interests of the shareholder and in the interests of depositors of millions sterling placed in the banks and used by them in their business transactions. Senator Gould remarked that bankers, however wise they may be, sometimes make mistakes. They certainly do. When one recalls the debacle to which he referred, and which sometimes follows as the result of such mistakes, the question naturally suggests itself - In which circle are the effects of such a disaster spread most widely? Are they spread among a small ring of shareholders, who, in the main, are wealthy men, or are they the vast circle of depositors, who have placed their savings in the banks. Is it not the latter who lose their all as the result ot the adoption of an unwise policy in which they had no voice? The object of Ibis provision is to establish a reserve fund, largely to relieve a bank’s shareholders from that liability. That is an unwise step to take in their interest, because, whilst it may make things easy and safe for them if there should be a disaster, at the same time it will lead them not to take that vigilant interest in the affairs of the bank which they would do with that liability hanging over their heads. And much more is it an unwise thing to do in the interests of the large circle of depositors who, last year, had over ^100,000,000 lodged in the banks. They have absolutely no voice in the management, and the only guarantee which they now have is the knowledge that a liability is hanging over the heads of the shareholders. This measure emanates from the large shareholders in banks, who, being wealthy men, can afford to dispense for the present with pro.fits, so long as they are able to get a reserve fund built up, when they can live in sweet security, knowing that if the worst should happen they would only lose their capital, and would have no liability to meet.

Senator Rae:

– Does the law put all bank shareholders in this reserve liability?

Senator PEARCE:

– No; but I was under a different impression until to-day. Take the bank which Senator Gould described as one of the strongest in New South Wales. Every share is paid up to /I12 10s., but it carries a liability of that amount. The existence of that liability is a constant incentive to every shareholder, and a greater incentive if he is a large shareholder, to keep a close watch upon the actions of the directors, and to see that their policy is a safe one. I have no doubt that the character which the bank in New South Wales enjoys is due to the fact that, the existence of a big liability has induced the shareholders to choose wise directors, and to see that they do a safe business. I appeal to the Committee to reject the clause. I am paired with my colleague, Senator McGregor, who supports the Bill. In my opinion, it would be unwise to allow the Bill to pass, because it would introduce a dangerous innovation into the banking system of Australia.

Senator GIVENS:
Queensland

.- I think it would be well to make it quite clear that the Committee has no objection fir se to the building up of a reserve fund for the protection of the customers of, and the depositors in, banks. Times out of number we have been told that this Bill is brought in, not as much for the protection of such persons as for the protection of bank shareholders. But that is not shown in its provisions. Both in the preamble and in this clause it is stated that the express purpose of the Bill is the protection of shareholders. Senator Pearce has put the case forcibly and clearly. There is no doubt that it would be unwise to remove the penal provision which compels careful and far-seeing management of banks, so that “ ducks “ and “ drakes “-may not be played with the funds, or the interests of shareholders and depositors, with comparatively little consequence to the culprits. As Senator

Pearce very forcibly pointed out, shareholders and directors are not dealing merely with their own capital ; if they were it would 3>e largely a matter for themselves. They are dealing with millions sterling belonging to the public, with vast interests in which every person is concerned. If disaster overtakes a bank, who will suffer most - the comparatively few rich shareholders or the wide circle of the public, who are too poor to be almost able to live in ordinary circumstances, and who, in a time of disaster, would be reduced to the most abject misery and poverty, because of the neglect of directors and shareholders to safeguard the interests of the banks? In Australia we have had one or two banking disasters, and the consequences have been exceedingly serious. Therefore, we should proceed very warily. In order to show that the opponents of the Bill are not opposed to the building up of a reserve fund, I intend to take a test vote. I move -

That the words “ for the purpose of protecting its shareholders against their liabilities in respect of the uncalled capital (if any) and the reserve liabilities (if any) on the shares held by them in such company and to pay “ be left out, with a view to insert in lieu thereof the words, “ equivalent to the uncalled capital (if any) and the reserve liabilities (if any) of the share capital of such company for the purpose of protecting the interests of the depositors and customers of the company.”

With this Committee, the interests of the general public should come first, and the interests of wealthy shareholders in banks should come a long way afterwards.

Senator WALKER:
New South Wales

– Senator Gould referred to Mr. Thomas Buckland, who had been President of the Bank of New South Wales for many years. He occupied that position at the time of the crisis in 1893. I saw that many of the banks were going to have great difficulty in getting in their reserve liability. The bank to which I had the honour to belong, of course, pulled through all right, hut the fact was that the general depositors of the banks were placed at a perplexing disadvantage through the shareholders being afraid of the liability and forcing their shares on the market. The shares fell in value, the depositors got frightened, and the panic was accentuated. Although it is true that this Bill is brought in for the [benefit of shareholders, still it is indirectly, -indeed, I might almost say directly, for the benefit of the great body of depositors that such a debacle as occurred in 1893 should not again happen. I can cite a case which shows the desirableness of making a provision of this kind. During 1893, a certain man, whose name is stated, was so afraid of the reserve liability on his shares that he transferred his property to his sister, went through the Insolvency Court, proceeded to England, and, after a time, got the property transferred to himself again, and died last year or this year, worth £12, 500. Fortunately, the official trustee, on seeing the intimation of his death, got the insolvency annulled, and seventeen years afterwards got in .£9,000. Honorable senators will now realize that in all banks and companies there are persons with good, bad, and indifferent character. If they had had to wait until the liability was called up, probably that money would have been lost. We are really carrying out the intention of the deeds of settlement by providing a fund to meet the liability. So far, therefore, from departing from’ the object of those deeds of settlement, we are forestalling it. We are carrying out the object in a much better way than would be done by calling upon the shareholders to pay for calls at a time of crisis.

Senator Givens:

– Is the honorable senator going to accept m> amendment ?

Senator WALKER:

– I am not quite clear that I will. I am half inclined to do so, but I should like my honorable friend to read the clause in conjunction with it. I consider that a reserve fund is as much for the benefit of a bank’s creditors as it is for the benefit of its shareholders. The former could not get more than the reserve liability that is there.

Senator Givens:

– But the honorable senator said that the reserve liability might not be there.

Senator WALKER:

– Probably, if they had to wait until the reserve liability fell due, a very large portion would never be found. But it will be available if a reserve fund is built up under the provisions of this Bill, otherwise you will never get 20s. in the £1 from all the shareholders of an institution. Senator Pearce spoke about the banks being largely composed of wealthy persons, but I can inform him that a fourth of the shareholders of the largest bank in Australia are widows and orphans. It is for their interests, as well as for that of others, that we should have a provision made against a bad time.

Senator Pearce:

– Some of the wealthiest persons * in America are widows and orphans.

Senator WALKER:

– :Perhaps so. I believe, if ever an honest Bill in the interests of the whole community was before the Senate, it is now. The Bulletin writes as follows about it -

Senator Walker has in hand a very commendable Bill, the object of which is to provide that any bank may accumulate a special reserve for the purpose of paying the shareholders’ calls for them in time of stress. The money is not to be taken from any existing reserve, and it is not to be mixed up in the business of the bank. It is to be invested in Government securities only, and is to be held by an elective board of trustees (not more than five or less than three), of whom only one may be a director of the bank. The fund, once started, is to accumulate at compound interest until it not only equals, but exceeds by 10 per cent., the total amount for which shareholders are liable. The proposal would make the banks’ customers feel safer, for uncalled capital is often a hard thing to collect when it is most wanted ; and it would reduce the tendency to nightmare on the part of shareholders.

The Brisbane Courier, of the 16th instant, contains this reference -

Senator Walker has introduced in the Senate a Bill which was read a first time on July 6. The proposals made have the virtue of novelty and at the back of them is the grace of plain common-sense. Mainly the Bill is to authorize any joint stock banking company formed or incorporated in any State to form reserve funds to protect the shareholders against their liability in respect of the uncalled capital or reserve liabilities on their shares, and to provide for the creation of corporate bodies in which such reserve funds may be vested. The proposals must not be taken as in any sense referring to the ordinary reserves or contingency accounts of the banks; which are funds provided for meeting unexpected developments in connexion with the ordinary banking business. The idea may be the better explained by taking the case say of a Queensland bank with shares of £$ each, upon which say £3 per share has been paid, leaving a liability of £2 in respect to each share. In the event of a financial collapse the shareholders might be suddenly called upon to pay the £2 uncalled capital, and that might involve many persons in ruin. A special reserve fund earmarked as Senator Walker proposes it shall be and built up to £2 per share would practically relieve the shareholder of the immediate result of his liability ; but it would do more : it would be a surety to the bank concerned that the money called for would be available. That is a very important feature in the measure. It protects not only the individual shareholder who might be ruined by a sudden pressure at a critical time, but also the shareholders who would be able to pay but whose individual payments would not give the relief that would be afforded by a complete response to the call. And there is the matter of the reserve liabilities as well as the liabilities in respect of the ordinary uncalled capital. A reserve liability may be also explained. A bank the shares of which are say £25 each are fully paid up, and for ordinary banking purposes no further call can be made; but there may be a reserve liability of say £40 per share which may be called upon in the event of a financial collapse, and when the bank has closed its doors or gone into liquidation. Under such a reserve a bank has available the whole of its trading capital and an insurance fund as well, which is largely in the public interest. In the case of these banks the proposed creation of the special reserve funds would be to cover the amount of the reserve liability. The aim of Senator Walker seems to be a simple one : to give even greater stability to the banking institutions by the establishment of what is practically an insurance fund. The machinery clauses of the Bill are equally simple, and there is much in the general idea which will commend it to those who look to absolute safety in trading.

I propose now to read the case of the man who I said tried to evade his liability -

In Sheffield County Court yesterday a revelation was made concerning a Sheffield man, Charles Clayton, .who accumulated a fortune in Australia, became a bankrupt in 1901, and contrived to conceal his money from the Bankruptcy Court. He died in Australia in 1907, leaving

The Official Receiver now applied to have the unconditional order of discharge, which was granted to the bankrupt in 1902, revoked, and the judge granted the request.

The evidence showed that Clayton went to Australia in 1S52, did well at the gold fields, and speculated with his savings in bank shares. When the financial crash came in Australia in 1893 ne> t0 avoid payment of the calls from the banks, made all his money over to a female relative. He then came to England and received remittances from her, amounting tt> ^’5,000, which he invested in various names in this country.

After passing through bankruptcy with ,£9,000 liabilities to the banks and “ assets nil,” he gathered together his secret investments, went back to Australia, and died, as already stated, worth £12,500

The banks will now recover the whole of the £9,000 due to them from Clayton’s estate.

There is a practical instance showing the advantage of having the money in hand. Surely that remarkable case corroborates what I have said. I have several letters bearing upon this subject. One is from a leading merchant in Sydney, Mr. P. T. Taylor, of the firm of P. T. Taylor Limited, who says -

My feeling is th:it the proposal is a veryexcellent one. and I am sure would tend to give better security alike to customers and shareholders of the banks, as such a fund once substantially established is a much better protection to banks’ customers than the reserve liability of shareholders, who at a time of crisis would probably be unable to meet their calls.

I have also received a letter from the general manager of the Bank of New South Wales, who expresses his approval of the scheme. Another letter is from an ex-president of the Chamber of Commerce, Mr. G. S. Littlejohn, who says -

Speaking in general upon this matter, I think thu this Bill, if passed into an Act, will establish a much greater degree of confidence on the part of investors generally in public companies, though profits will be reduced until the reserve is established. Had such provisions been in force at the time of the failure of several banks in 1893 the shareholders of several of the banks, such as the Australian Joint Stock Company, would have been saved much hardship, and the re- establishment of the bank upon a satisfactory footing would, doubtless, have been accomplished much more speedily.

Senator Rae:

– To what extent would the reserve liability of the Australian Joint Stock Bank, if met by a reserve fund such as that proposed, have benefited the creditors ?

Senator WALKER:

– If that bank had had such a reserve as I propose, it would have been able to pay an extra £1,000,000 to its creditors.

Senator Givens:

– To cover how much debt?

Senator WALKER:

– At all events, the creditors would have had £1,000,000 more than they received. I have also a letter from the general manager of the Western Australian Bank, who writes -

I am in receipt of your letter of the 20th ulto., enclosing a typewritten copy of the Commonwealth Banking Companies Liability Bill 1910, a printed copy of which you had already forwarded to me, for which I thank you.

I thank you for the interest you have taken in this Bill, which it appears to me opens a door for banks, to which institutions I note you limit it, to provide against a rainy day so far as the shareholders are concerned.

Senator Walker’s “Commonwealth Banking Companies Reserve Liabilities Bill “ is brought forward with a very laudable object, though why he has now confined its proposed operations to banks we do not know. The object is to permit banks to accumulate special reserve funds to cover their liability upon uncalled capital, and when established, it is proposed to place such funds under the control of trustees, who may invest the funds only in Government stocks, and these funds will be beyond the control of the company, and interest thereon will accumulate until the funds reach 10 per cent, more than the aggregate uncalled capital and reserve liability. The difficulty about the proposition is in the working details’. At present the reserve funds accumulated out of profits are used in the business, and tend to its expansion. But these reserves would be wholly separate, and would tend to restrict the ordinary reserves. Take a case in point. If, say, the Bank of New South Wales raised such a fund, as the present capital is ^3,000,000, with ^3,000,000 reserve liability, it would have to accumulate ^3,300,000 outside its business, which might tend to restrict its banking operations. Then, too’, if in course of years the fund had been accumulate’d, and £1,000,000 new shares were issued, would the new shares participate in the accumulations? If not, there would be two, or more, classes of shares, some with no liability, and others with it. Otherwise, a shareholder who was covered .by the reserve might upon a new issue find his liability revived. Then the accumulation of reserves to the extent of no per cent, would be a very long process, and it is difficult to get companies and shareholders to look forward for 30 years, or so. Why should not shareholders accumulate such funds on their own account? But then, every investment by a private person is part of his reserves. The bill provides for the removal of trustees, but not for the liquidation of the trust, even if it were desired.

After publishing that article, Mr. Nash called upon me, and told me that if I would write a letter to the Daily Telegraph, it would be published. The following is the letter which I wrote : -

Sir, - The reference to this bill in your journal on 22nd inst. is my warrant for these explanatory remarks.

My experience of the great difficulty in piloting a private member’s bill through the Senate is my principal, although not my only, reason for simplifying the measure. If this bill should become law, anc! its underlying principle meet with approval, other bills, affecting other classes of companies, may be expected to follow.

As regards banking companies, not a few of the alterations have been suggested by the debates on the previous measure, which was defeated in Committee. Some of the changes may be briefly summarised thus : -

A bank must have a paid-up capital of at least £100,000.

Existing reserve funds must not be used in the building up of the new special reserve fund, which is to be in the hands of trustees, of whom not more than one shall be a director of the bank.

The liability of shareholders for notes in circulation is not limited.

The trustees of the fund are appointed bygeneral meetings of shareholders, and not bv the board.

The bill is confined to banks having only one class of shareholders.

Needless to say, the bill is merely permissive, and, doubtless, will be availed of by banks who recognise its advantages both to their shareholders and their depositors. It is true it will probably, in some cases, entail a certain present self-denial on shareholders for the sake of a future very substantial relief and freedom from loss should, unfortunately, financial crises ever arise. Bankers who went through the banking crisis of 1893 acquired a painful, but very valuable, experience, which, I submit, points to the wisdom of, in time, making ample provision for the proverbial “ rainy day.” It may here be mentioned that, in 1893, the late Mr. Thomas Buckland, at that time the able and respected president of the Bank of New South Wales, gave his cordial approval to the principle of this bill, but he thought it well action should be postponed until more prosperous times arrived ; surely, therefore, the present time is not inopportune.

You seem to think the establishment of the proposed reserve fund for each bank might tend to restrict banking operations. I combat that view by saying, were the funds not established, the profits so represented would, in all probability, have been distributed as dividends to shareholders. You also suppose that, when the reserve fund equalled the reserved liability on shares (plus 10 per cent, to allow for possible depreciation or fluctuation in value of investments) were a bank to issue new shares that would mean two or more classes of shares. Not necessarily. We shall suppose a bank has £500,000 paid-up capital, pays regularly a dividend of 10 per cent, per annum, and that the proposed reserve fund under this bill amounts to the reserved liability on the shares, say, £500,000. Under such circumstances it is not unreasonable to suppose £20 shares paid-up to £10 would be quoted rather above than below £20. A new issue representing£25,000 is issued firstly to existing shareholders in the proportion of one new share for each four old shares held - price £20-the premium of £10 to go to the special reserve fund. These, judging by similar transactions, would be readily taken up, and the suggested difficulty would be obviated. But, supposing the new shares were issued at a premium of only £5 a share, the position would be as follows : -

£562,500 would not represent £10 for each share paid up to £10, but it would represent £9 for each share paid up to £10. Under such circumstances there is scarcely room for doubt the new shares would be gladly accepted by existing shareholders, the extra amount to be accumulated by accruing interest, on the reserve fund alone, at 3½per cent., making up the required £62,500 in about 3¼ years. I take it for granted that a bank, before increasing its capital as ‘suggested, is satisfied it sees its way, with the additional capital put into the business, to keep up the same rate of dividend on its larger capital as it did before.

One point more. You say the bill does not provide for the liquidation of the trust, even if it were desired. The reserve fund is intended to last as long as the bank exists, and rightly so. But if the bank is wound up, voluntarily or otherwise, and all its liabilities liquidated without trenching on the special reserve fund, of course the shareholders would get back from the trustees the equivalent of their capital on realization of investments held by the trustees of the reserve fund.

Trusting you will now see your way to give the bill your valuable approval. - I am, Sir, yours faithfully,

T. Walker.

July 23.

I have no more to say on the subject at this stage.

Senator GIVENS:
Queensland

.- I think that it will simplify procedure if we take a direct vote on clause 3 as it stands, to test the feeling of the Committee. In order that that may be done without any complication, Iask leave to. withdraw my amendment.

Amendment, by leave, withdrawn.

Senator VARDON:
South Australia

– I have carefully read this clause, which proposes to make it lawful for banks to establish special reserve funds. The clause is not imperative. What I wanted to ascertain was whether the provision would make things better or worse for the depositors and customers of banks as well as for shareholders. As far as I can see, it makes the position of the customers neither better nor worse; because I imagine that if a bank starts to build up a reserve fund for the purpose indicated, and, if before that fund reaches 1 10 per cent, any trouble arises to the bank, the shareholders will still be liable for the full amount to make up any loss that may accrue. What possible harm can be done by allowing a bank to build up. a reserve of this character? Personally, I cannot see the least objection, either from the shareholders’ point of view, or from the point of view of persons doing business with banks. My fear is that very few banks will take advantage of the measure. Experience teaches me that shareholders, rather than lay aside money in the manner proposed, will generally prefer to have it distributed in dividends. In nearly all cases, there is a reserve liability ‘ on bank shares equal to the amount of paid up capital represented by the shares. That is to say, if shares are paid up to £10, there is a reserve liability of £10 per share upon them. If the shareholders of a bank think it wise to insure against trouble in the manner proposed, is there anything wrong in allowing them to do so? Would it do any damage, either to the business of a bank or to its depositors? I do not think that it would. I take it that shareholders who avail themselves of this measure will say to themselves, “ Let us insure against risk.” Suppose that a business man under a Workmen’s Compensation Act is liable in case of accidents occurring to any of his employes. Suppose that he chooses to build up within his own business a reserve fund to provide against accident. Surely there isno objection to that.

Senator Givens:

– The employer in that case is not managing the employes’ money, so that there is no analogy. The honorable senator is merely begging the question.

Senator VARDON:

– We are dealing with the liability of shareholders ; and if they choose to build up an insurance fund, surely that is very much better for them and for the public than that they should take all the profits earned, and pay them away in dividends. In the latter event, if a day of trouble arises, many of the shareholders may be unable to meet their liabilities.

Senator St Ledger:

– Depositors might choose a bank which has that safeguard in preference to one without it.

Senator VARDON:

– That is quite likely. I have no wish to labour the matter, but I fail to see why we should refuse any bank permission to build up a reserve fund of this kind if the shareholders think it well to do so.

Question - That clause 3 stand part of theBill - put. The Committee divided.

AYES: 12

NOES: 9

Majority … … 3

AYES

NOES

Question so resolved in the affirmative.

Clause agreed to.

Progress reported.

page 2056

PAPER

The Acting Clerk laid on the table the following paper : -

Return to an Order of the Senate of 14th July,1910-

Molasses produced in, and imported into, the Commonwealth.

page 2056

SURPLUS REVENUE BILL

In Committee (Consideration resumed from this day.vide page 2044):

Clause 4 -

The Commonwealth shall, during the period of ten years beginning on the first day of July One thousand nine hundred and ten, and thereafter until the Parliament otherwise provides, pay to each State by monthly instalments, or apply to the payment of interest on debts of the State taken over by the Commonwealth, an annual sum amounting to Twenty-five shillings per head of the number of the people of the State……

Upon which Senator Lt. -Colonel Sir Albert Gould had moved -

That the word “ July,” line 2, be left out, with a view to insert in lieu thereof the word “ January.”

Question - That the word “ July” proposed to be left out be left out (Senator

Gould’s amendment) - put. The Committee divided.

AYES: 6

NOES: 16

Majority … … 10

AYES

NOES

Question so resolved in the negative.

Amendment negatived.

Senator Lt.-Colonel Sir ALBERT GOULD (New South Wales) [9.53]– So far as this clause is concerned, the Committee has affirmed that the per capita payment of 25s. per head per annum shall be made for ten years beginning from the ist July, 1910. It contains another provision which we might debate at considerable length, and which has been debated to some extent on various amendments. But before dealing with sub-clause 2, I would again draw the attention of honorable senators to the proviso to sub-clause 1 -

Provided that in the six months ending the 30th day of June One thousand nine hundred and eleven the Commonwealth may deduct from the amount payable in pursuance of this section the amount set out in the schedule.

I understand that the deduction of the ^450,000 referred to is really to meet the deficit which has been brought about in consequence of the Commonwealth having taken over the responsibility for the payment of old-age pensions, and, to a certain extent, is in accordance with the understanding which had been arrived at between the State Premiers and the Commonwealth authorities. In the circumstances, I am prepared to accept the position with regard to the payment of the ^450,000. But I want honorable senators to bear in mind that that sum is in addition to the difference between the per capita payment of 12s. 6d. per head and the States’ three- fourths share of the Customs and Excise revenue, and will be a further reduction on the amount which the States will have to receive. Under this provision the States will be entitled to receive, during the first six months of next year, not 12s. 6d. per head, but about 6s. 3d. Then that amount is to be further reduced by 2s. or 3s. in respect to the ^450,000. It is open to honorable senators to consider whether it is fair that subclause 2 should also come into operation in addition to the deduction of ^450,000. In speaking to this subject this afternoon. Senator Walker seemed to be under the impression that the sum would represent the sole deduction which would be made from the per capita payment of 12s. 6d., but he should hear in mind that this is in addition to a deduction of about 6s. 3d., or one-half of the amount which otherwise the States would be entitled to. Sub-clause 2 clearly goes back upon section 87 of the Constitution. It provides very clearly that if the amount during the six months ending the 31st December, 1910, should exceed the per capita payment of 12s. 6d., the excess is to be deducted from the per capita payment of j 2s. 6d. which the States are to receive in the future. It appears to me to be treating die States very unfairly. I do not intend to debate the question at greater length, because a good deal of discussionhas already taken place. But I wish to again protest against what I think is a most unfair and unjust way of treating the States, and to reiterate my belief that it was never made known to the people of the States that any such deduction would be made. They were led to believe that the 25s. per head per annum would be paid to them for ten years as from the ist January, 1911, instead of which they are to receive less than they are entitled to under the Constitution, and then only to re- ceive their per capita allowance for a period of nine and a half years. In fact, it appears almost worse than that, because of the way in which this Bill is getting behind section 87 of the Constitution.

Clause agreed to.

Clause 5 -

The Commonwealth shall, during the period of ten years beginning on the first day of July One thousand nine hundred and ten, pay to the State of Western Australia, by monthly instalments, an annual sum which in the first year shall be Two hundred and fifty thousand pounds and in each subsequent year shall be progressively diminished by the sum of Ten thousand pounds.

One-half of the amount of the payments so made shall be debited to all the States (including the State of Western Australia) in proportion to the number of their people, and any sum so debited to a State may be deducted by the Commonwealth from any amount payable to the State in pursuance of this Act.

Senator NEEDHAM:
Western Australia

– I move -

That after the word “ ten,” line 3, the following words be inserted: - “and thereafter until the Parliament otherwise provides.”

– It does not run out in ten years, but diminishes at a given rate ; but the amendment says that at the end of ten years the special payment will continue decreasing at the rate of£10,000 a year until Parliament otherwise provides. If Parliament does not otherwise provide, the special payment will run out in twenty-five years.

Senator Lt.-Colonel Sir ALBERT GOULD (New South Wales) [10.9].- I am rather astonished that such an amendment, should have been submitted by a private senator and immediately accepted by the Government. I should like to know why the Government did not submit the amendment themselves and take the responsibility for it.

Senator Rae:

– What difference does it make ?

Senator Lt Colonel Sir ALBERT GOULD:

-It makes a great deal of difference. In this case the Government apparently were not prepared to submit the amendment, but when one of their supporters submits the amendment for which he takes the primary responsibility the Government accept it and take only a limited responsibility. In a matter in which the finances are concerned to the extent of tens of thousands of pounds, it is the usual course for the Government to take action and not to allow a private member of Parliament to take the question up and goad them into accepting an amendment. I do not say that Ministers have been goaded in this case. I do not believe that there has been any necessity to use a goad. Perhaps I am doing them an injustice. Possibly this will be another example of one House of the Legislature, at the instigation of a Minister, doing one thing, and the other House, also at the instigation of a Minister, doing quite another. How long are we to see a State like Western Australia dependent upon the bounty of the Commonwealth for the maintenance of its own Government ? We know perfectly well that Western Australia is producing a large Customs and Excise revenue per capita, owing to the character of its population. Therefore, we are told we must give a special concession. In order to induce Western Australia to come into the

Federation in the first instance, the other States consented to give important concession by way of gratuity or as a bribe to Western Australia.

Senator Needham:

– Is the honorable senator in order in using the word “ bribe “ concerning a State?

Senator Sir Josiah Symon:

– What else would the honorable senator call it ?

Senator Needham:

– I ask that the word shall be withdrawn.

Senator Chataway:

– Call it a charitable dole.

Senator Lt Colonel Sir ALBERT GOULD:

If the honorable senator objects to the word “ bribe “ I will use the term “ charitable dole.” and say that that was given to Western Australia to induce her to throw in her lot with the other States of Australia.

Senator Needham:

– I ask you, Mr. Chairman, to insist that the honorable senator shall withdraw the word “bribe.” He has not done so yet.

The CHAIRMAN:

- Senator Gould has withdrawn the word “bribe” and substituted the term “charitable dole.”

Senator Walker:

– I rise to order. I wish to have your opinion, sir, as to whether the amendment is in order, inasmuch as the effect of it is to impose an additional burden upon the people? Must we not proceed by way of request ?

The CHAIRMAN:

– I have been asked whether Senator Needham’s proposition ought to have been submitted in the form ot a request. I am of opinion that it is out of order as an amendment.

Senator Needham:

– I feel inclined to dispute your ruling, sir.

Senator Pearce:

– What does it matter whether we proceed by way of request or amendment?

Senator NEEDHAM:
Western Australia

– My amendment being out of order, I now move -

That the House of Representatives be requested to amend the clause by inserting after the word “ ten,” line 3, the words “ and thereafter until Parliament otherwise provides.”

Senator Lt.-Colonel Sir ALBERT GOULD (New South Wales) [10.15].- The honorable senator has perhaps acted rightly in submitting his proposition as a request.

Senator Sir Josiah Symon:

– We ought not to proceed by way of request unless we are forced to do so.

Senator Lt Colonel Sir ALBERT GOULD:

– I should have been better satisfied if an amendment had been moved. If it was afterwards shown that that was not the proper course, the matter could have been put straight, but I take exception to the Senate whittling down its powers any more than it needs.

The CHAIRMAN:

– Does the honorable senator dispute my ruling ?

Senator Lt Colonel Sir ALBERT GOULD:

.- No, I do not.

The CHAIRMAN:

– Then the honorable senator is not in order in referring to it.

Senator Lt Colonel Sir ALBERT GOULD:

– In fact, 1 think that we should present a humble request to the other House to make a present to the people of Western Australia, in order to enable them to meet their obligations.

Senator Guthrie:

– Did not New South Wales insist on a special concession in the matter of the Federal Capital before she would enter the Federation?

Senator Chataway:

– What about the railway for Western Australia?

Senator ALBERT GOULD:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913

– The transcontinental railway is not provided for in the Constitution, though the Western Australian senators have repeatedly argued that the construction of it was a condition of the Union.

Senator Needham:

– That has nothing to do with this question. Western Australia is in the Federation, and we are simply asked to do her common justice.

Senator Lt Colonel O’LOGHLIN:
SOUTH AUSTRALIA · ALP

– ALBERT GOULD. - How are we doing it? Under section 95 of the Constitution, special provision was made for Western Australia with regard to Customs and Excise duties.

Senator Pearce:

– What was that special provision? That she should have power for a certain period to work a special Tariff.

Senator Lt Colonel Sir ALBERT GOULD:

– But no other State was permitted to have a Tariff of its own. The people of the other States had to come under the Commonwealth Tariff, but special terms had to be offered to Western Australia. Now we are asked to grant further special terms.

Senator Needham:

– Would New South Wales have joined the Federation unless the Federal Capital had been promised to her?

Senator Lt Colonel Sir ALBERT GOULD:

– Probably not.

Senator Needham:

– Then the honorable senator gives his whole case away.

Senator Lt Colonel Sir ALBERT GOULD:

– In section 95 of the Constitution there was a distinct departure from the general principle laid down when Federation was determined upon, namely, that Customs and Excise should pass into the hands of the Commonwealth, and that three-fourths of the proceeds should be distributed amongst the States in proportion to population.

Senator Sir Josiah Symon:

– More than that was done for Western Australia. She was given the right to impose Inter-State duties.

Senator Lt Colonel Sir ALBERT GOULD:

.- Yes; she had this right, although one of the very objects of Federation was to break down Inter-State barriers. Not content with that, this poor, struggling State of Western Australia now comes along, as though she had had no increase of population, no wealth, no expansion of industry, and asks for special financial consideration from the Commonwealth. She is to be made still more the favoured State of the whole Union. By this Bill we are asked for her benefit to take £2,050,000 out of the pockets of the other States. Even Tasmania, the smallest and poorest State in the Commonwealth, has to put her hand in her pocket and make her little contribution towards the £2,050,000 for Western Australia. Is that fair? Is it just? The Minister of Defence, a Western Australian senator, not content with asking for £2,050,000 out of the pockets of the Commonwealth, now wants a special concession of £3,250,000.

Senator Needham:

– How does the honorable senator make that out?

Senator Lt Colonel Sir ALBERT GOULD:

– By the simple arithmetical process of taking the amount of money that* would be paid to Western Australia during the twenty-five years under the honorable senator’s proposal. I want the country to realize that we are called upon to pay to keep Western Australia within the Commonwealth.

Senator Chataway:

– No, to keep her solvent.

Senator Needham:

– She will remain within the Commonwealth, anyhow.

Senator Walker:

– I do not think that it is necessary to pay this sum to keep Western Australia solvent. ‘

Senator Lt Colonel Sir ALBERT GOULD:

– She has immense resources of her own, and ought to be in a position to pay her own way just as well as any other State.

Senator Pearce:

– She is in a position to pay her own way, but she does not want to pay the way of other States as well.

Senator Lt Colonel Sir ALBERT GOULD:

– I recognise that every State has a right to make the best provision it can for its own financing ; but I again remind the Senate that Western Australia had to be induced to come into the Federation. She was not the only State that, gave up something. New South Wales gave lip a great deal. It was generally admitted that Federation would never [have been accomplished unless New South Wales came in. I do not suppose that Queensland would have joined if New South Wales had remained out. The great fear when the first Commonwealth Bill was under consideration was that New South Wales, and Queensland would form themselves into a Federation of their own.

Senator Findley:

– And be able to defy the world.

Senator Lt Colonel Sir ALBERT GOULD:

– The time has gone by for a great State like Western Australia to ask for a concession without giving a reason for it, except that it would be inconvenient to suddenly lose the special treatment which she has- enjoyed since Federation. It has been suggested that the allowance might be reduced annually by ^25,000 instead of ,£10,000. Had that proposition been made, it would have evoked less protest than that under discussion.

Senator Stewart:

– Tasmania will be the next State to ask for a concession.

Senator Lt Colonel Sir ALBERT GOULD:

– Tasmania is in a different position. Her revenue has been so much diminished by Federation that she could with better grace ask for a concession. She would have to make out a case, but could not ask for so enormous a sum as is to be paid to Western Australia, which has no case. Can it be argued that that State has been living beyond its means, and must have a special annual payment beginning at £”250,000 from the Commonwealth to keep it solvent? The position is much as if a wealthy man were to demand that a struggling neighbour should give him something to assist him in developing his immense estates. Western Australia has boundless prospects, and great mineral, pastoral, and agricultural wealth.

Senator Chataway:

– Settlers are pouring into the country.

Senator de Largie:

– A few months ago the party opposite was offering £[3,500,000. to Western Australia as a special payment.

Senator Lt Colonel Sir ALBERT GOULD:

.- 1: had nothing to do with that. There is no surer way of pauperizing persons than to give them help now and again. Such treatment saps their independence, and weakens their moral fibre. Are we to do that with Western Australia?

Senator Rae:

– The honorable senator’s arguments could be applied to defeat the proposal to return 25s. per capita to the States.

Senator Lt Colonel Sir ALBERT GOULD:

– If the honorable senator thinks that the States should not receive 25s. per capita from the Commonwealth, and presses his view on the Government, Ministers may withdraw that proposition. Surely Western Australia’ will not require help for the next ten years.

Senator Guthrie:

– Western Australia is a very young State.

Senator Lt Colonel Sir ALBERT GOULD:

– Western Australia has slept for a long time, but has awakened to find herself a giantess; but although she has shaken off her shackles, she asks the other States for a dole.

Senator de Largie:

– She cannot afford to be robbed by them.

Senator Lt Colonel Sir ALBERT GOULD:

– How is she robbed by them? All the States are to be treated alike. It is true that one of them contributes ,£3 per head of population to the revenue, and another only ,£2, but the State which makes the largest contribution is not to get special treatment. I am glad that New South Wales has shown her readiness to throw in her lot with the other States. That State, like Tasmania and the others, will obtain from the Commonwealth 25s. per capita of population. If the proposed land tax is carried, New South Wales will contribute to the Federal revenue much more than Western Australia, but, under Federation, the Commonwealth expenditure there will not be greater per capita than in the other States. The Commonwealth Government will spend its money for the benefit of Australia as a whole, and all the States will contribute towards the cost of any work wherever it may be located.

Senator Rae:

– Did not the last Government which the honorable senator supported propose to give a concession to Western Australia ?

Senator Lt Colonel Sir ALBERT GOULD:

– I have never admitted that Western Australia should receive a special concession. Under the Government’s proposal she will obtain a special grant of nearly £3,000,000, but she has no need to come cap in hand to the Commonwealth.

Senator Needham:

– She is not doing so.

Senator Henderson:

– Has the honorable senator never supported a Government which has done a more grievous thing?

Senator Lt Colonel Sir ALBERT GOULD:

– I supported a Government, but I did not care to speak on the subject while I occupied a certain position - because I thought it best not to speak, and simply vote for what I deemed to be best in the interest of the Commonwealth.

Senator Henderson:

– Then it was right then?

Senator Lt Colonel Sir ALBERT GOULD:

– Whether it was then right or wrong is beside the question. I have a right to protest against what I regard as the unfair treatment of the whole of the States for the benefit of one State. I have said that I would be prepared to support a special concession to Tasmania, seeing that her position is altogether different from that of Western. Australia. I desire to see Western Australia progress, but it is too tad for so wealthy a State to come cap in hand for a special concession.

Senator Pearce:

– I rise to a point of order. Surely the honorable senator is guilty of tedious repetition in saying ad nauseam that Western Australia is coming to the Common wealth Parliament cap in hand ?

Senator Lt Colonel Sir ALBERT GOULD:

– I have concluded my remarks, and I can only say that I am sorry to have touched the honorable member so severely as to render it necessary for him to make a protest.

Senator ST LEDGER:
Queensland

– I am inclined to think that the term accepted by the Government, like the term proposed by the Government, is too long. I know that that is open to the reply that under the Financial Agreement proposed by the previous Government a similar concession was to be given to Western Australia, but in that case the advantage was to be gained within the Constitution. The Commonwealth Year-Book shows that the contributions from Western Australia are steadily falling. In 1904-5, the contribution of Western Australia, per head of the population, was £5 18s. 2d. ; in 1905-6, it was £5 is. ; in 1906-7, it was £4 12s. nd.j in 1907-8, it was £4 17s. 2d.; and in 1908-9, £4 7s. 4d. The average contribution for the whole of the Commonwealth is £3 7s. 2d. During the five years, the contribution from Western Australia has fallen by £1 10s. iod., and, assuming that during the next five years it falls at a similar rate, it will then amount to £2 10s. 6d. only. Notwithstanding that there is every indication of a similar fall in the next five years, thus bringing the figure below the average for the Commonwealth, Western Australia is still importunate for a special concession at or about the same rate that was granted in the beginning, probably to induce her to enter the Commonwealth. While the average contribution over the “whole of the Commonwealth has been steadily increasing, that of Western Australia, as I say, has been steadily decreasing, almost at the same ratio. The general -per capita averages during the five years are as follow : - In 1904-5, the average was £2 17s. 7d. ; in 1905-6, it was £2 18s. 8d. ; in 1906-7, it was £2 3s. 4d. ; in 1907-8, it was £3 us. 7d. ; and in 1908-9, it was £3 9s. 2d. It is quite apparent that both the Financial Agreement of the late Government and the proposal of the present Government are too generous to Western Australia ; and how the representatives of that State can, under the circumstances, persist in their demand, and why Parliament should agree to it, has not been satisfactorily explained. Tasmania’s financial position is somewhat critical in relation to the Commonwealth ; and if Western Australia insists on her financial “pound of flesh,” wc shall be deprived of any possible opportunity to even consider a concession to Tasmania. It is about time that Western Australia ceased to be the importunate beggar - the financial Cinderella - of the Commonwealth.

Senator Stewart:

– I do not quite understand the position. For instance, what will the payment be in the eleventh year?

Senator PEARCE:
Minister of Defence · Western Australia · ALP

– Perhaps the honorable senator will permit me to explain the amendment. The clause provides for a payment to Western Australia in the first year of the ten years’ period, of £250,000. This payment is to be diminished by £10,000 in each of the following years. Clause 4 provides for a payment of 25s. per head to the States for ten years, “ and thereafter until Parliament otherwise provides.” Senator Needham proposes that the House of Representatives should be requested to insert the same words in this clause dealing with the special payment to Western Australia, so that the payment shall continue for ten years, “ and thereafter until Parliament otherwise provides.” The reason for this is that it is possible that Parliament might not be sitting at the close of the ten-years’ period, and the payment might cease for a few months, although Parliament might desire to continue it.

Senator SAYERS:
Queensland

– After the figures which we have heard quoted by Senator St. Ledger, showing the per capita contribution to the revenue from Customs and Excise by the State of Western Australia, I should like to know what reason the Government can offer for this proposed special payment, lt is proposed by the Bill that it should continue for ten years, and now Senator Needham suggests that it should continue after that time until Parliament has otherwise provided.

Senator Pearce:

– Parliament may do as we are doing in this Bill, and make provision to deal with the matter before the expiration of the ten-years’ period. We are making provision for an alteration in the payment to the States before the expiration of the Braddon section.

Senator SAYERS:

– That is so; but, in my opinion, the Government are proposing to deal with the matter in an unfair way, and are really circumventing the Constitution. If, at the close of the ten-years’ period, there were six months for which Parliament had not provided, would this special payment run on under the amendment suggested?

Senator Pearce:

– Yes.

Senator SAYERS:

– So that, although

Western Australia’s per capita contribution to the Customs and Excise revenue might at that time be below that of the other States, she would desire to grasp money to which she was not entitled? Other States have suffered under the Federation as well as Western Australia; but they are not coming down to Parliament cap in hand for a special subsidy. I saw in the press to-day that the Western Australian Government intend to go in for a vigorous policy of immigration, and that over 2,000 immigrants are expected to arrive in the State shortly. The Commonwealth will have to pay Western Australia 25s. per head for those immigrants next year. We have evidence, from official figures, that Western

Australia’s per capita contribution to the Customs and Excise revenue is decreasing, and, in the circumstances, I should like to know how the Government justify a proposal to take from the other States money which they should have, and make a present of it to Western Australia? I cannot support the amendment.

Senator NEEDHAM:
Western Australia

– I wish to say, in reply to Senator Gould, that Western Australia is not seeking a charitable dole, but a measure of common justice. When honorable senators tell us that Western Australia is bending the knee, and is coming cap in hand to the Commonwealth, I reply that she is simply asking for common justice, and my amendment is intended only to secure it for her.

Question - That the House of Representatives be requested to amend the clause by inserting after the word “ ten,” line 3, the words “ and thereafter until Parliament otherwise provides ‘ ‘ - put. The Committee divided.

AYES: 14

NOES: 9

Majority … … 5

AYES

NOES

Question so resolved in the affirmative.

Request agreed to.

Clause agreed to with a request.

Senator KEATING:
Tasmania

– I move -

That the following new clause be inserted : - “ 5A. - (1) The Commonwealth shall, during the period of ten years beginning on the first day of July, One thousand nine hundred and ten, pay to the State of Tasmania, by monthly instalments, an annual sum which in the first year shall be Seventy-five thousand pounds, and in each subsequent year shall be progressively diminished by the sum of Three thousand pounds.

The payments so made shall be debited to all the States (including the State of Tasmania) in proportion to the number of their people, and any sum so debited to a State may be deducted by the Commonwealth from any amount payable to the State in pursuance of this Act.”

Those who occupied seats in the Senate during the last Parliament will remember that I submitted a similar motion in connexion with a proposition to refer to the people of the Commonwealth a Bill relating to the distribution of the surplus revenue. That measure - the Constitution Alteration (Finance) Bill - provided for an alteration of the financial relations between the Commonwealth and the States consequent upon the anticipated exclusion from the Constitution of what is known as the Braddon section. At that time some honorable senators readily supported the proposal I put forward. It was realized that the condition of Tasmania was distinct from that of the mainland States.

Senator Givens:

– What did the honor- able senator’s colleagues from Tasmania at that time think of the proposal?

Senator KEATING:

– They differed from my honorable friend, and voted in absolute hostility to him.

Senator Givens:

– There has been an indication that Tasmania repudiated their decision.

Senator KEATING:

Senator KEATING:

Senator KEATING:

– The figures do not show that Queensland has lost in the same way as Tasmania, whose Customs and Excise revenue in some of the years since

Federation has been nearly £[200,000 less than it was before she joined the Union. The State has suffered because of her loyalty to Federal principles and to Protection. Senator Ready, who knows a good deal about the commerce of the State, and all other representatives of our State, will bear me out in the statement that she has traded very freely with the mainland, and her own manufacturers have had to take second or third place. We prefer Australian manufactured goods to imported goods. Personally, I have always done so, and always will do so, but we should get recognition of the fact that often imported goods on which duty has been levied have been consumed in Tasmania without the State being credited with the duty.

Senator Chataway:

– Why did the honorable senator not mention Queensland in his memorandum?

Senator KEATING:

– It was written at the request of the then Treasurer, the honorable member for Hume, Sir William Lyne, who asked me for data to fortify him for an interview with Mr. Wade, the Premier of New South Wales. At that time negotiations were taking place with Mr. Wade and the late Sir Thomas Bent. The memorandum is more or less unofficial. Had I been asked for a general statement, I should have referred to other States besides New South Wales and Victoria. In view of the fact that special provision has been made for Western Australia, and that we ask for an initial payment of only £[75,000, ‘I hope that the Committee will see that justice is done to us.

Senator Chataway:

– Do not let there be two mendicants.

Senator KEATING:

– Tasmania is not a mendicant, but she expects to receive her due share of the revenue derived by taxing goods which she consumes.

Senator PEARCE:
Western AustraliaMinister of Defence · ALP

– In another place a Select Committee has been appointed to ascertain what revenue, if any, Tasmania has lost under Federation.

Senator Keating:

– The Committee will inquire only in regard to past losses.

Senator PEARCE:

– What has happened in the past will be a guide for future action. If the statements which havebeen made are justified, it will be for the Government to consider whether special1 provision shall be made for Tasmania. I am sure that the honorable senator will not expect Ministers to commit themselves until the Committee’s evidence and report is available. If, then, the action taken does not satisfy him, he will be able to move accordingly. Under present circumstances the Government cannot accept the amendment, and he will be well-advised if he withdraws it.

Senator Lt.-Colonel Sir ALBERT GOULD (New South Wales) [11.44].- Senator Keating has made out a strong case for Tasmania, whereas we were asked to vote a concession for Western Australia without reasons being offered for such a course. I have thought for a long time past that Tasmania’s position entitles her to consideration, though the honorable senator asks for too much. It must be recognised t that the State has gained many advantages from Federation, but, on the other hand, her revenue is small, and no doubt her people often patronize shops on the mainland, and import goods, the duty on which is credited to some other State. But all that was done away with under the Commonwealth ; and in view of her small revenue, Tasmania is entitled to some consideration. The proposal of Senator Keating would require £615,000 in all, and that is a very large sum to ask Parliament to grant in the way suggested. With the assistance of Senator Walker, I have made one or two other calculations, and I find that a grant of ,£50,000, diminishing at the rate of £5,000 a year, would require £275,000; £40,000, diminishing at the rate of £4,000 a year, would require £224,000; and £30,000, diminishing at the rate of £3,000 per annum, would require £166,000.. I think that £50,000, diminishing at the rate of £5,000 a year, would be a fair compromise. Provision lias been made to pay Western Australia £2,050,000 during the next ten years, and if that allowance were continued tor twentyfive years, it would involve a sum of £3,250,000. Tasmania has, according to the latest statistics available, a population of 186.000,. as against Western Australia’s 273.000, and on this basis Tasmania is certainly entitled proportionately to a greater sum than £50,000, diminishing by £5,000 a year. However, Tasmania has not the same claim in consequence of the -large revenue she has contributed previously : and, no doubt, the Government of that State recognise the fact, and, therefore, the grant I have indicated would, I think, be fair and just. 1 should “be glad if the Minister can see his way to accept the proposal of Senator

Keating in some modified form, if he thinks the amount to be too large. If this question is to go to a division, a very convenient way of ascertaining the feeling of the Committee would be first to decide whether or not Tasmania should receive any consideration, and to that end the principle could be affirmed on the first part of the clause, and then the question of amount settled. Personally, I should be glad to see the amount given as a recognition of the disadvantages Tasmania has suffered in consequence of the abolition of the InterState duties, and of the benefits which the other States have received from trade with Tasmania under Commonwealth conditions. It has been objected that the matter is now under consideration by the Government, but Tasmania is in the unfortunate position that, if the matter is left over until the conclusion of the inquiry now proceeding, the State will have to wait for special legislation, instead of having the matter dealt with in the Bill now before us. If we put an amendment in the Bill, an opportunity will be given to the Government, through the Customs officials, to ascertain the probable loss that Tasmania has sustained. If the other Chamber, when the Bill goes there, considers that there is not sufficient information on which to give proper consideration to the matter, it will still be open for consideration at a later date. In the first instance, however, some figures should be placed on record in the Bill.

Senator de Largie:

– Where was all this sympathy previously ?

Senator Lt Colonel Sir ALBERT GOULD:

– I had no opportunity to express my sympathy, owing to the position I occupied.

Senator Needham:

– The honorable senator had his vote.

Senator Lt Colonel Sir ALBERT GOULD:

– The question was never submitted to a vote. My sympathy has been with Tasmania for years past, and had I had the opportunity I should have voted in the direction I suggest. Indeed, I did move in the matter four or five years ago, but honorable senators representing Tasmania were not then prepared to take up the question.

Senator READY:
Tasmania

.- I regret very much that it is necessary to dehate this very important question at so late an hour of the night. I should much have preferred if it had been possible to discuss, it in the daytime, when there might be a full attendance of honorable senators to hear the arguments in favour of a special grant for the island State of Tasmania. We in Tasmania claim to be Nationalists, and the history of Federation proves that we are ardent Federalists. We have manifested generally a good Federal spirit. I need hardly remind honorable senators, for instance, that Tasmania raised no objection to the sugar bounty.

Senator Guthrie:

– Her representatives did.

Senator READY:

– Perhaps so ; but I do not think there was very much objection to the granting of the bounty in the Senate. The Commonwealth has paid in the form of the sugar bounty, which has gone almost entirely to New South Wales and Queensland, a sum of £[1,845,000, and Tasmania’s contribution to the amount is £[71,000. It will not be denied that , we have shown a Federal spirit in that matter. Then there is the great national project of the acquisition by the Commonwealth of the Northern Territory, and I may say, as one representative of Tasmania, that I shall approach the consideration of that question from a national, and not from a provincial, stand-point. Although it will involve the Commonwealth in an expenditure of £[10,000,000, Tasmania’s representatives will be found ready to give it reasonable support. Then I might remind our Western Australian friends that Tasmanians have never adopted an anti-Federal attitude towards the proposal to grant that State special consideration. The vote which I gave only this evening is a proof that in dealing with such questions Tasmanians are Australians first. The proposed transcontinental railway from Port Augusta to Kalgoorlie will involve an expenditure of nearly £[4,000,000, and Tasmania’s share of that expense will amount to £[160,000.

Senator Needham:

– Surely the honorable senator does not refer to the expenditure on such a work as special assistance to Western Australia?

Senator READY:

– No; I agree that it is a great national work, and should be regarded in this Parliament from a national stand-point. Tasmania is prepared, to regard all these projects from a national stand-point. I agree that the special consideration provided for Western Australia in this Bill is no more than that State is fairly entitled to, but I claim to be able to say the same for the proposal now made on behalf of Tasmania. I wish honorable senators to understand that we are pleading, not for mercy, but for justice. I should be very sorry that any member of the Committee should be under the impression that we are asking for something as a favour. We claim that we are asking for something to which we are fairly entitled. Senator Keating, in dealing with the matter, gave the Committee figures as to the revenue of Tasmania since Federation. We received, prior to Federation, an average annual revenue from Customs arid Excise of £[475,000. During 1908-g, we received from the Commonwealth only £[245,000 from that source. Our revenue losses have been between £[100,000 and £[150,000 per annum as a result of Federation. We have found it necessary to increase our direct taxation from 12s. lod. to 32s. 6d. per head. Tasmania has the heaviest direct taxation of any State in the Commonwealth. We have been obliged to increase our land, income, and other direct taxation.

Senator Blakey:

– Tasmania has the highest income tax in the Commonwealth.

Senator READY:

– She has, and it is also one of the most unfair taxes levied in the Commonwealth. Our land taxation isvery much higher than the land taxation of any other State in Australia. Prior to Federation, Tasmania’s revenue represented £[6 2s. 2d. per head of her population. In the first year of Federation it fell to- £[4 13s. per head, and it is now only ;£5 os. 7d. per head.

Sitting suspended from 12 midnight to- 12.4.5 a.m. Friday.

Senator READY:

– When we adjourned’ for supper, I was dealing with the direct taxation paid by the people of Tasmania, and I wish to compare it with that paid by the people of the other States in orderto give honorable senators some idea of the unfortunate position that we occupy as a State. According to the last issue of the Year-Book, the direct taxation of the other States is as follows : - New South Wales, 6.55 per cent. ; “Victoria, 13 per cent.; Queensland, 11.22 per cent.;. Western Australia, 12.54 per cent. ; and” Tasmania, 26.84 per cent. During thisyear the direct taxation in force in Tasmania has been increased by a 25 per cent, surtax on income, land, and ability taxesamounting to 5s. 6d. If Tasmania is to remain solvent, she must adopt the policy of paying for the construction of roads and’ bridges out of revenue. That would represent a payment of 14s. 9d. per capita..

She must also refrain from continuing to use the revenue derived from the sale of Crown lands in defraying current expenditure - a practice which Knibbs most emphatically condemns. The revenue so derived in Tasmania at present amounts to 6s. 5d. per capita per annum, so that if we had honest finance there at the present time, we should be paying by way of direct taxation £2 13s. 8d. per capita. That is the heaviest burden of direct taxation that any State is carrying. The fact that, at the last general election, the people of Tasmania indorsed by a large majority the Financial Agreement, whilst at the same time they returned six out of eight Labour candidates who stumped the country in opposition to that agreement, shows that the people, recognising that they were labouring under a heavy burden of direct taxation, were prepared to vote for the Financial Agreement, in order to make sure that Tasmania would receive from the Commonwealth 25s. per capita per annum. The incident is an index to public feeling in the island State at that time. I come now to what, in my opinion, is the crux of the whole question, and that is the Inter-State trade between Tasmania and the rest of the Commonwealth. Obviously if any State consumed only Australian products, it would have no Customs . revenue; but whilst Tasmania’ has not been doing that, she has been consuming more Commonwealth products per head of the population than has any other State. Whilst the other States on an average have increased their purchases of Australianmade goods since Federation by 40 per cent. - from £27,424,000 to £38,444,000 - Tasmania on the other hand has increased her purchases from the mainland from £1,069,000 to £2,534,000 or an increase of 139 per cent. It is true that the other States have been consuming Tasmania’s hops and jams, as well as certain other products, but their consumption of Tasmanian goods has been as nothing compared with Tasmania’s consumption of goods purchased from the mainland. Prior to Federation our trade with the mainland was increasing at the rate of 13 per cent, per annum, and since Federation it has dropped to 6 per cent. As a matter of fact, our manufacturers have been unable to compete with those of the other States. Tasmania has only increased her oversea purchases by £287,000. I claim to be able to speak from experience in this connexion, for I have been engaged in business in Tasmania for the last fifteen years.

– And more particularly in Tasmania. For instance, the Victorian millers last year found that they had a considerable surplus of flour, and they sold thousands of tons of it in Tasmania below cost price. Letters from some of the Tasmanian millers appeared in the Age at the time, objecting to Victoria dumping her products into the Tasmanian markets and swamping them. The Tasmanian trade has been rushed by the manufacturers of the other States.;

– No, because we have been good Federalists, dealing with the rest of the Commonwealth instead of importing goods from outside. I have presented the case of Tasmania as briefly aspossible, and I hope that it will receive from honorable senators the consideration, which it deserves. Through the representatives of the State not taking a proper interest in this matter, but puttingparty before its needs, the proposal of Senator Keating is somewhat belated. But.

I am glad to see that those who voted against its claim on a previous occasion now admit their mistake. Quite recently exSenator Dobson, in Hobart, moved the following motion -

That in the opinion of this meeting it is desirable to hold a public meeting in the Town Hall, Hobart, on Monday, August 4, in order to allow the citizens to express their views upon the proposals now before the Federal Parliament for the grant of financial aid from the Commonwealth Treasury to the State of Tasmania, and further to encourage our Federal Parliamentary representatives in the making of a strong endeavour to obtain just consideration for our State, and that a requisition be prepared for presentation to His Worship the Mayor accordingly.

– But will not the State whose population does not increase want it still more? On that, as well as other grounds that have been clearly put, 1 maintain that we are entitled to have our claim sustained. Honorable senators should recollect that we who come from Tasmania are prepared to consider the great national questions that will come before this Parliament on national grounds. In the same way, we ask the representatives of other States to consider this question, on broad national grounds. We did not federate on hard-and-fast figure lines. It is all very well to say, “ Because you only contribute so much per head of population, we will not grant you what you ask for;” but there ought to be something higher and nobler than that in this great Federation. The representatives of all the States ought to be permeated by the feeling that we are building up a great nation, and we should determine to make our people satisfied that Federation is a good thing for every part of Australia. In particular, the Senate, which has been called the State House, and which has been established by the Constitution to act as the guardian of the rights and privileges of the States, should be prepared to consider this question on broad lines, rather than in the light of bare cold figures supplied by Government officials. I am not speaking as a State Righter, but as a Federalist. During my former term in this Senate I never spoke as a State Righter. I have always been a firm Federalist. Even if the figures seem to be against us, I maintain that the proposal which we bring forward ought to be considered on broad Federal grounds. We ought to remember that Federation was accomplished for better purposes than making such calculations as have been brought forward on this question. We ought to make ours a real Federation, satisfactory to the people of all the States.

Senator RAE:
New South Wales

– Some years ago, the people of this country were asked to “ think in continents.” We are now being asked to think in millions.- One may infer, from the doleful tale told by the representatives of Tasmania, that things are in a very low condition in that State. It appears to me that there is no possible salvation for Tasmania unless she goes in for a process of unification, and adopts the principle of manufacturing for use instead of for profit - that is unless she becomes a Socialistic State. Otherwise, her position seems to be hopeless from a financial stand-point. I expected that the Government would oppose this idea of a special grant. But I also thought that they would oppose the amendment previously carried in favour of making a special grant to Western Australia. Had the Government determined to oppose all amendments to the Bill, I could have understood their attitude. But I am surprised that they should have readily adopted one amendment while setting their face against another. Of course, they may be entitled to do so on the merits of the questions raised. The appointment by the.

– The Prime Minister was most emphatic in his statement that the Select Committee could only inquire into past affairs.

Senator BARKER:

– I point out that the Senate could be represented on the Select Committee. Surely the Government of the day would not refuse to listen to a suggestion to that effect? I do not think that honorable senators can accuse the Government of any desire to be unjust to Tasmania.

Senator Keating:

– The Prime Minister made it perfectly clear that the Select Committee’s investigation must be retrospective only.

Senator BARKER:

– Surely there is no reason why we should distrust the assurances given to-night that Tasmania in this connexion will receive fair treatment from the Government? If it is to be assumed that a matter of this kind will not be dealt with honestly and decently, we had better all scramble for all we can get. I support the attitude taken ,by the Government in this matter, and believe that it should be investigated by the Select Committee. I cannot support the amendment.

Senator Lt.-Colonel Sir ALBERT GOULD (New South Wales) [1.47 a.m.].I am sure there is every intention on the part of honorable senators to do justice to Tasmania. As there seems to be some misapprehension with regard to what was done in another place, it might be as well to quote the following from the Votes and Proceedings of the House of Representatives of the nth August -

The Order of the Day having been read for the resumption of the. debate on the following motion of Mr. Jensen - That in the opinion of this House it is desirable that the State of Tasmania be granted a sum of Twenty-five thousand pounds yearly by the Commonwealth for a period of nine years to recoup the said State for the loss sustained in Customs leakage since the advent of Federation.

Several amendments of that motion were proposed, but it was finally resolved -

That a Select Committee be appointed with power to send for persons and papers and to inquire into and report upon the alleged Customs leakage of Tasmania and any losses the State has suffered since the advent of Federation, such Committee to consist of Mr. Bamford, Sir John Forrest, Mr. Jensen, Sir William Lyne, Mr. Roberts, and Mr. Wynne. Three to be a quorum.

It would appear from this that it was decided in another place to consider the loss which Tasmania had sustained in Customs leakage.

Senator Pearce:

– As a guide to what we should do in the future.

Senator Lt Colonel Sir ALBERT GOULD:

– What is proposed here is that we should insert in this Bill a provision to grant to the State of Tasmania a certain sum annually for the next ten. years.

Senator Pearce:

– Before we know what sum, if any, she is entitled to receive.

Senator Lt Colonel Sir ALBERT GOULD:

– In order to bring the debate to a close I move -

That the proposed new clause be amended by leaving out the words “ Seventy-five,” with a view to insert in lieu thereof the word “ Fifty.”

NOES: 11

Majority … … 3

AYES

NOES

Question so resolved in the negative.

Amendment negatived.

Senator KEATING:
Tasmania

– Senator Pearce persists in harking back to the Committee of Inquiry which has been appointed ; but that has no relation to the future. The Prime Minister told the deputation of representatives from Tasmania, some time ago, that whatever the Committee did should have relation to the past only. This is the time and the opportunity for us as part of the Parliament to legislate as to the future. We are determining what are to be the financial relations between the Commonwealth and the States’ for the the period of time covered by the Bill. We have never before had it in our power to do so. The Braddon section will not expire until the end of this year; and is it to be said that this House, representing the whole of the States, while realizing the difficulties under which certain States are carrying on their functions - difficulties, to some extent, brought about by Federation - refuses to rise to a sense of its responsibilities in regard to them? We have done so in the case of Western Australia. The Constitution allows it, and this measure provides for it, as did the financial measure submitted to the people at the late referendum. Are we simply to sit by and wait, in the case of Tasmania, for the report of the inquiry by the Select Committee? That Committee is absolutely designed to con sider past obligations on the part, either of the whole Commonwealth, or of some of the States, to Tasmania. The new clause I have proposed is intended to meet the responsibilities of other States, or the rest of the Commonwealth, to Tasmania, for the period of the operation of this Bill. Surely that is not too much to ask. In the case of Tasmania, with a population of 182 , 000, all that I am moving for is £75,000 per annum, diminishing annually by £3,000, for a period of ten years ; whereas Western Australia, with a population of about 260,000, is to receive £250,000 per annum, diminishing annually by£10,000. There seems to be a lack of consideration, of generosity, and an absence of Federal spirit on the part of the representatives of some of the other States.

Senator Blakey:

– In Victoria?

Senator KEATING:

– No.

Senator Needham:

– Will the honorable senator name the State and the representatives ?

Senator KEATING:

– I am not disposed to do so. Honorable senators can fit the cap as they find it.

Senator Findley:

– Does the honorable senator want to imply that unless we are generous we cannot be Federal ?

Senator KEATING:

If such a statement had been made by any other honorable senator I should have said that it was unworthy of him, but I say it is quite worthy of Senator Mulcahy. ‘Whether or not he is prepared to support the amendment is a matter for himself to determine. I intend to deal with the proposal on its merits. If there be any State of the group which is entitled tospecial consideration it is Tasmania.

Senator Givens:

– Which she is going to get if the Select Committee which has been appointed reports that her claim is justified. I said the same thing a few moments ago.

Senator READY:

– It struck me that the honorable senator said something very different. He proceeded -

What are the facts ? Under the proposed! agreement a large subsidy is to be granted toWestern Australia over a term of twentyfiveyears - a subsidy beginning at ^250,000 per annum, and decreasing until it finally disappears. _ Senator Keating, in order to do justice to his own State, is endeavouring to securesimilar assistance for it. Undoubtedly there is more jutification for granting special treatmentto Tasmania than there is for granting it to- Western Australia.

I am sorry that Senator Givens’ views now do not coincide with the opinions which he expressed on 26th November last. This matter is a very serious one, so far as Tasmania is concerned, and a good deal was heard of it during the recent electoral campaign. The presence of three new senators is evidence that the people thought that their old representatives failed in their duty. I hope that the Government will support this proposal “on its merits,” as Senator Givens said. If honorable senators consider it fairly, we shall have their support.

Senator GIVENS:
Queensland

– I am quite willing to let what I said on a previous occasion stand. The concluding sentences of the passage quoted by Senator Ready are these : -

Nobody has insisted, more than has Senator Mulcahy, that owing to her geographical position Tasmania is losing revenue every year. He has repeatedly affirmed that she is not being credited with the amount of Customs and Excise revenue with which she is entitled to be credited, owing to the impossibility of keeping trace of the goods consumed within her borders. i shall vote for the amendment, which i hope will be carried.

– There is direct shipping abroad from Queensland and South

AYES: 8

NOES: 10

Majority … … 2

AYES

NOES

Question so resolved in the negative.

Proposed new clause negatived.

Clauses 6 and 7, schedule and title, agreed to.

Bill reported with a request.

Suspension of Standing Orders.

Senator PEARCE:
Western AustraliaMinister of Defence · ALP

– I have consulted Senator Gould, and if honorable senators have no objection, I should like to ask for the suspension of the Standing Orders in order that the report may be adopted forthwith. The Treasury officials are very anxious to have the GovernorGeneral’s assent to this Bill before Wednesday, as they wish to commence a new set of book’s under this measure. I move -

That so much of the Standing Orders be suspended as would prevent the report being considered forthwith.

Question resolved in the affirmative.

Motion (by Senator Pearce) agreed to -

That the report from the Committee of the whole on the Surplus Revenue Bill be adopted ; and that the Committee have leave to sit again on receipt of a message from the House of Representatives in reference to such Bill.

page 2083

ADJOURNMENT

Additional Sitting Day

Motion (by Senator Pearce) proposed -

That the Senate do now adjourn.

Senator O’KEEFE:
Tasmania

– I wish, on this motion, to ask the Minister of Defence to bring under the notice of his colleagues the advisability of the Senate sitting on Tuesdays at a very early date.

Senator Pearce:

– The honorable senator is anticipating a statement I intended to make to-morrow.

Senator O’KEEFE:

– I did not know that the Minister proposed to make a statement on this matter. The fact that even at this stage of the session we have already had two all-night sittings should induce the Government to take the suggestion I. have made into favorable consideration.

Senator ALBERT GOULD:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913

-Colonel Sir ALBERT GOULD (New South Wales) [3.3 a.m.].Before the Minister replies, I should like to suggest that if we are to have an additional sitting, we should arrange to continue the Friday sitting, so that honorable senators living in adjoining States may be able to catch the Saturday afternoon trains to reach their homes. This would be a great advantage to them, as they could roch their homes on the Sunday, might rest on that day, and be fresh for their ordinary avocations on the Monday and Tuesday. I hope that the advisability of making such an arrangement will be given full consideration.

Senator MCDOUGALL:
New South Wales

– I think that it would be wrong to adopt Senator Gould’s suggestion. Personally, I should like to have the Saturday afternoon free. If we leave here on the Saturday afternoon, we shall arrive in Sydney too late for divine worship on Sunday morning. That would never do for me. I am afraid we should be breaking the Sabbath if such a suggestion were adopted.

Senator PEARCE:
Western AustraliaMinister of Defence · ALP

– I had intended to-morrow to make a statement on this subject. Honorable senators coming from the adjoining States will know that I have been during to-day consulting them with a view to considering their convenience.

Senator O’Keefe:

– I had no knowledge of that.

Senator PEARCE:

– Honorable senators may be assured that the Government are keeping an eye on this matter. We do not wish to ask for an additional sitting day and then find that it may be necessary to ask for an adjournment of the Senate a little later. Before we come to any decision on the matter, we shall do our best to meet the wishes of honorable senators, and suit the convenience of the majority.

Question resolved in the affirmative.

Senate adjourned at 3.6 a.m. (Friday).

Cite as: Australia, Senate, Debates, 25 August 1910, viewed 22 October 2017, <http://historichansard.net/senate/1910/19100825_SENATE_4_56/>.

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Senate25 August 1910

RETURN OF PAPERS

SURPLUS REVENUE BILL

Senator GIVENS:Queensland

Senator Pearce:

Senator GIVENS:

Senator Pearce:

Senator GIVENS:

Senator Pearce:

Senator GIVENS:

Senator Fraser:

Senator GIVENS:

Senator Fraser:

Senator GIVENS:

Senator Fraser:

Senator GIVENS:

Senator Chataway:

Senator GIVENS:

Senator Fraser:

Senator GIVENS:

Senator Needham:

Senator GIVENS:

Senator E J RUSSELL:VICTORIA · ALP; NAT from 1917

Senator GIVENS:

Senator STEWART:Queensland

Senator Vardon:

Senator STEWART:

The CHAIRMAN:

Senator Sir Josiah Symon:

Senator STEWART:

Senator Sir Josiah Symon:

Senator STEWART:

Senator Vardon:

Senator STEWART:

Senator Sir Josiah Symon:

Senator STEWART:

Senator Vardon:

Senator STEWART:

Senator Sir Josiah Symon:

Senator STEWART:

Senator Guthrie:

Senator STEWART:

Senator Sir Josiah Symon:

Senator STEWART:

Senator Givens:

Senator STEWART:

Senator Vardon:

Senator STEWART:

Senator Ready:

Senator STEWART:

Senator St Ledger:

Senator Givens:

Senator STEWART:

Senator Givens:

Senator STEWART:

Senator W RUSSELL:SOUTH AUSTRALIA · ALP

Senator STEWART:

Senator Pearce:

Senator STEWART:

Senator Pearce:

Senator STEWART:

Senator Pearce:

Senator STEWART:

Senator W RUSSELL:SOUTH AUSTRALIA · ALP

Senator STEWART:

Senator W RUSSELL:SOUTH AUSTRALIA · ALP

Senator STEWART:

Senator W RUSSELL:SOUTH AUSTRALIA · ALP

Senator STEWART:

Senator Givens:

Senator STEWART:

Senator Vardon:

Senator STEWART:

The CHAIRMAN:

Senator STEWART:

Senator Vardon:

Senator STEWART:

Senator Barker:

Senator STEWART:

Senator SAYERS:Queensland

Senate
25 August 1910

Senator GIVENS:
Queensland

Senator E J RUSSELL:
VICTORIA · ALP; NAT from 1917

Senator STEWART:
Queensland

Senator W RUSSELL:
SOUTH AUSTRALIA · ALP

Senator W RUSSELL:
SOUTH AUSTRALIA · ALP

Senator W RUSSELL:
SOUTH AUSTRALIA · ALP

Senator W RUSSELL:
SOUTH AUSTRALIA · ALP

Senator SAYERS:
Queensland

Senator McDOUGALL:
New South Wales

Senator GIVENS:
Queensland