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Senate
17 March 1927

10^th Parliament · 1^st Session

QUESTION
- WINE BOUNTY
QUESTION
- KIDMAN-MAYOH CONTRACT
QUESTION
- COMMONWEALTH BANK OFFICERS
QUESTION
- FEDERAL CAPITAL
STATES GRANTS BILL
- Second Reading
PAPER

The Deputy President (Senator Plain) took the chair at 3 p.m., and read prayers.

page 545

QUESTION

WINE BOUNTY

Senator CHAPMAN:
SOUTH AUSTRALIA

asked the Minister representing the Minister for Trade and’ Customs, upon notice -

How many gallons of wine have been shipped on which bounty has been paid?
What was the average price declared by the shipper?
How many gallons have been declared at ls. 6d. per gallon f.o.b. or under?

Senator CRAWFORD:
Honorary Minister · QUEENSLAND · NAT

– The honorable the Minister for Trade and Customs supplies the following answers: -

2,475,077 gallons.
The average f.o.b. sale price of wine exported under bounty is about ls. 10d. per gallon ex casks.
This information is not in the possession of the Department, and it would mean a considerable amount of work and take some time to obtain the particulars from the individual exporters.

page 546

QUESTION

KIDMAN-MAYOH CONTRACT

Senator NEEDHAM:
WESTERN AUSTRALIA

asked the Leader of the Government in the Senate, upon notice -

Does the Government intend to charge Man. Kidman and Mayoh interest on the money that waa due by them to the Commonwealth in connexion with the wooden vessels contract from the date of the decision arrived at by Sir Mark Sheldon?
If not, why?
What is the amount that Messrs. Kidman and Mayoh stilT owe to the Commonwealth in this matter?

Senator PEARCE:
Vice-President of the Executive Council · WESTERN AUSTRALIA · NAT

– The replies to the honorable senator’s questions are as follow: - 1 and 2. The Government is advised that interest is not payable. 3. £7,847 15s.

page 546

QUESTION

COMMONWEALTH BANK OFFICERS

LEAVE to Attend AGRICULTURAL Shows.

Senator HOARE:
SOUTH AUSTRALIA

asked the Leader of the Government in the Senate, upon notice -

Is it customary for the employees of the Commonwealth Bank within the area of the capital cities of the Commonwealth to be given the privilege of attending during working hours the annual show held ‘ within those cities?
If such a privilege has been granted to some employees, why has it not been extended to the Commonwealth Bank employees of Adelaide?

Senator PEARCE:
NAT

– The information is being obtained.

page 546

QUESTION

FEDERAL CAPITAL

Gas Service

Senator OGDEN:
TASMANIA

asked the Minister for Home and Territories, upon notice -

Does the Federal Capital Commission intend to install a gas service for heating and cooking at Canberra?
Has the Government or the Federal Capital Commission received any report from an expert or experts upon the practicability of installing such a service at Canberra?
If such a report has been received, will the Minister lay it upon the table of the Senate ?

Senator Sir WILLIAM GLASGOW.The replies to the honorable senator’squestions are as follow: -

A report by the Federal Capital Commission on the question of the installation of a gas service at Canberra was to have been posted to me yesterday. An announcement a* to the action decided upon in connexion therewith will be made at the earliest possible moment after the arrival of the report.
The Federal Capital Commission has received such a report.
The report will he laid upon the table of the Senate when the decision on the subject has -been announced.

page 546

STATES GRANTS BILL

Second Reading

Debate resumed from . 16th March (vide page 495), on motion by Senator Pearce) -

That the bill be now read a second time.

Senator Findley:

– How many thousands of pounds have been granted by the Commonwealth as bonuses for non - paying industries in Australia?

Senator McLACHLAN:

– That is a matter for the Parliament to decide. I am endeavouring to point out that the continuance of the per capita payments is a direct inducement to the States to continue their enterprises; it is placing a premium on the continuance of a practice which, in the financial circumstances of the Commonwealth, should no longer be tolerated.

Senator H Hays:

– Are we to understand that if the per capita payments are abolished, and further consideration is given to the States by a new financial agreement, the Federal Government will lay down the conditions under which the States shall spend the grants?

Senator McLACHLAN:

Braddon clause, which I regard as vicious, was embodied in the Surplus Revenue Act of 1910, as the people declined to embody it in the Constitution. At the various conferences that have been held between 1919 and 1923, it was recognized that the principle was wrong, but unanimity on the part of the States as to what should be substituted was found to be impossible. The conference of 1923 was the only occasion when the proposals submitted were in any way acceptable, but the negotiations which have been continued since then have proved abortive. Later it was admitted by a certain section that the per capita payments should be abolished, and suggestions were made as to the manner in which the States could be compensated. The State Premiers and State Treasurers of the day, including Sir William McPherson, who is regarded as being exceedingly cautious in financial matters, met in conference in 1923, and Sir William McPherson said -

The Common wealth to retire from the field of income taxation.
Contingent on this being done, the States to relinquish their claim to any share in Customs and excise revenue and, if necessary, recoup the Commonwealth on an equitable basis for the loss of revenue to the Commonwealth under these proposals, the amount payable in each year by the several States to be determined in conference with the Prime Minister.
This arrangement to be embodied in a ten years’ agreement between the Commonwealth and the States.

Senator Findley:

– When was that statement made?

Senator McLACHLAN:

– I am reading from page 7 of the report of the proceedings of the 1923 conference. The honorable member for Dalley (Mr. Theodore), who was then Premier of Queensland, in discussing these proposals, said -

Personally, I believe that the Commonwealth will have to take on fresh functions which will involve greater expenditure than the Government is now committed to. In that event, they must tap sources of revenue which the States now claim as their sole right. I think the Commonwealth Government ought to consider the question of adopting the suggestion of the States that they should retire from the field of income taxation, and enter into an agreement with the States for them to recoup, or partially recoup, the Commonwealth for the loss of revenue from that source.

Sir Henry Barwell, who was representing South Australia, said -

We concede that the Commonwealth was quite justified in coming into the field of direct taxation and imposing both land and income tax; but, now that the war is over, we feel that the time has arrived when we should take a step towards getting back to first principles. We contend that this can only be done by the Commonwealth going right out of one particular sphere of taxation. What would justify any alteration at all? I say the only tiling which would justify an alteration would be the consideration of economy and the providing of relief to the taxpayers. “The toad beneath the harrow” was then being considered. Further on, when proposals involving the payment by the Commonwealth of a sufficient sum to recoup the States were being considered, Senator J. B. Hayes, who was then representing Tasmania, said -

Mr. Bruce has made it clear that he will welcome any scheme which will enable the Commonwealth to get out of the field of direct taxation altogether. As this question of taxation is essentially one for discussion by the State Treasurers, I suggest that those Treasurers who are not also Premiers should be afforded the opportunity of expressing their views.

An opportunity was afforded and the proposals to which I have just referred were brought forward. Later the Prime Minister, in submitting a counter proposal, said -

It seems to me that we are not such a tremendous distance apart as might be thought. The States want the Commonwealth to go right out of the field of direct taxation. . . .

One of the objects of our proposal is to get rid of the arrangement under which the Commonwealth Government is collecting revenue which is expended by the States. We arenot prepared to perpetuate a system of that sort by allowing the States to make payments to the Commonwealth, or raise revenue for it to expend.

A counter proposal which was modified was then submitted, and after considerable discussion, Sir William McPherson, representing Victoria, said -

So long as you do not make the prohibition of the taxation of companies part of the agreement, Victoria is prepared to fall in with the arrangement suggested.

Senator Barwell said that it could be done. Here are his words : -

I am certain that if we can readjust our rates, and do what the Treasurer of Victoria suggests - that is to say, revise the whole field of taxation - we shall be in a position to raise the money we lose under this arrangement without inflicting any hardship on the taxpayers of the State.

That was in 1923. Since then there has been no marked change in the principle underlying the States system of taxation. Senator Barwell at that conference summed up the position when he said -

There is an insistent demand by the taxpayers of Australia for relief from the burden of duplication. Thu Commonwealth recognizes that demand, and is going to meet it, if possible in agreement with the States; but if it cannot arrive at an agreement it will do it on its own. In that case, the States must accept the position as laid down by the Commonwealth Government.

– There is no good ground for such a fear. Is it suggested that the Commonwealth Government will deal with them less generously than it proposed to act in 1923, or at the conference of 1926? So long as the Surplus Revenue Act of 1910 remains on the statute-book, we shall never make any progress in the financial negotiations with the States. The Government’s sole purpose is to bring about a conference between the representatives of the States and the Commonwealth, with a reasonable assurance of accomplishing something. The nearest approach to an agreement was in 192*3, but last year, the States escaped in the smoke of the “ moral right “ claim. In- the consideration of these matters, as Mr. MacKay has pointed out, we should have the assistance and advice of experts. He went on to say -

The advice should be tendered by economic experts, and so on. That evidence being of an impartial nature, the convention would be sufficiently informed to take up the question. I have a feeling that if the economists in the other States went into the question they would have no doubt in their minds as to what the position was. As trained economic experts, they would see quite clearly what the effect of the tariff is.

At a later stage, Mr. MacKay said that the only way in which this could be settled, was by a convention or a conference between the Commonwealth and the States, guided by the advice of experts. When the Prime Minister returned recently from his visit to Great Britain, he expressed his willingness to appoint a royal commission, composed of independent persons, to examine carefully the figures dealing with the proposed financial arrangement between the Commonwealth and the States. That offer, as we know, was rejected for the simple reason that the States did not wish to face the position; they desired a continuance of this “ easy money “ which comes from imposts levied by another Government. I say without hesitation, that the people wish the Commonwealth to get out of the field of direct taxation at the earliest possible moment. The Constitution .clearly intends that, except to meet a great emergency, the Commonwealth should not embark upon a policy of direct taxation at all. That emergency did arise, and the Commonwealth, as was its duty in order to meet its obligations, levied direct taxation, which, broadly speaking, up till then, had been the special privilege of the States. I wish it were possible for the Commonwealth to retire altogether from all avenues of direct taxation, but, since we cannot, the Prime Minister recently made a gesture to the States that he was prepared to go a certain distance along that road, on the definite understanding that the States would not be worse off than they are at present. As a matter of fact, they will be better off if this bill is adopted. The Prime Minister’s offer to appoint a royal commission, composed of economic experts, to examine the figures was, with the exception of Tasmania, rejected by the States. A suggestion has been made that this vexed problem should be submitted to the people in the form of a referendum. Obviously, that is not a proper solution of the difficulty. If the representatives of the Commonwealth and the States face the position in a truly Australian spirit, rather than with the object of securing political advantage, it should be possible to arrive at an agreement satisfactory to all parties. When this bill passes, as I am confident it will, I believe that the States will quickly realize the obligation laid upon them to put their houses in order. They can rest assured that the Prime Minister will deal with them generously. Mr. MacKay went on to state -

Having been right through the controversy which took place in the various conferences, I know how very great are the difficulties and how easy it is to get worked up on these financial questions.

– The point that I made was that the total taxation per head of the population had increased.

Senator McLACHLAN:

– The detail of the figures quoted by the Right Honorable Mr. Hughes are -

1925-26 income tax on individuals was reduced by 12£ per cent. The full effect of that reduction was not reflected in the collections for that year. The estimate for 1926-27 is £1 14s. 4d. per head, which is ls. lid. less than the amount included in the figure quoted by Mr. Hughes. In regard to the petrol duties, it would seem that Mr. Hughes arrived at his figure of 6s. 8d. by assuming that £2,000,000 was to be collected. The tariff originally introduced for the imposition of special Customs duties for roads purposes, included duties on petrol, chassis, and tires. It was estimated that the new duties would produce £1,500,000. “When submitting the tariff, the Minister for Trade and Customs stated, as reported in H onward, page 3596 -

If the imports for the financial year 1926-27 are the same iis those in the financial year just closed, the extra 2d. per gallon on petrol will produce an additional revenue of £983,000.

Subsequently, the proposed duties on tires and chassis were abandoned, and only the petrol duty was imposed by Parliament. Mr. Hughes is, therefore, wrong in putting down 6s. 8d. per head as the amount of the petrol tax.] Based on the figure quoted by the Minister for Trade and Customs, that tax would be equivalent to 3s. 2d. per head. Allowing for the discrepancies that I have pointed out, the increase quoted by Mr. Hughes should be varied thus -

– Fair means or foul.

Senator McLACHLAN:

Senator OGDEN:

Senator OGDEN:

– No; but I entered it pledged to maintain my independence and to make the Senate a non-party house. The Senate was never intended to be a party house. I regret that it has drifted from the old position and no longer follows the example of the great men who at one time occupied this chamber. The Constitution provided that the several States should have equal representation in the Senate in order that it should be a house of revision and review, and that the rights and interests o’f the States should be preserved. The first proposal was to call it “ The States Council,” but instead, the old Roman term, “ Senate,” was adopted. In order to strengthen the Senate, to give it a sense of independence, and to ensure that it would thoroughly represent the States, and not any one section of the people, the Constitution also provided that the representatives of each State in the Senate should be elected by the whole of the people of the State. Has the Senate dm ing; the last four years carried out the functions and duties assigned to it by the conventions and the .Constitution? Indeed, has it done ‘any useful work during that period? I doubt it. The Senate is now being tested. If it agrees to this measure which has been condemned by the Parliaments, the Cabinets and the people of all the States, its death knell will almost bo sounded.

To show the intent of the framers of the Constitution, I propose to make one or two quotations from the debates at the various conventions. During the 1891 convention, Sir Henry Parkes, rightly said : -

What I mean is an upper chamber - call it what you may - which will have within itself the only conservatism possible in a democracy - that of maturity of judgment, distinction of service, length of experience, and weight of character, which are the only qualities we can expect to collect and bring into one body in a community young and inexperienced as Australia.

I endorse Sir Henry Parkes’ reference to the need for a little conservatism. From the manual which Sir Richard Baker framed for the guidance of the 3891 convention, 1 quote the following extract : -

If there be some outward and visible sign of State rights, how can it be better effected than by equal representation in the Senate? A Federal Senate, a second House which represents State unity, has this advantage; it embodies a feeling - a feeling which is older than complicated politics; which is stronger a thousand times than political feeling; the local feeling, “My shirt” says the Swiss patriot, “ is nearer to me than my coat.” An elected Senate, in which each State is equally represented, is a guarantee that no law will be passed, not only without the consent of the people, but also without the consent of a majority of the States.

Senator OGDEN:

– We are asked to trust the Government to do what is right and fair to the States. I do not propose to do that. Therefore I shall vote against the bill. The. Senate will forfeit for all time every atom of respect and confidence of the people if it neglects the sacred duty confided to it under the Constitution to safeguard the interests of the States. I have no more to say because I believe that the fate of this bill has been already decided. The Government should not come down with a cut and dried proposal like this, and ask the Senate to pass a bill to abolish the per capita payments without providing a substitute for those revenues which the States will lose.

Senator CHAPMAN:
South Australia

– During the discussion which took place on the budget I defined my attitude with regard to the principle of the per capita payments, and stated also my position concerning the Government’s proposals which were then before the Senate. Quoting from the report of the Premiers’ Conference in 1923, I showed that the finance committee of the conference had estimated that duplication of taxation in Australia was costing not less than £600,000 a year, and I stated that I would go a long way to avoid this huge waste of the taxpayers’ money. I further stated that I would support the proposals put forward, which would eliminate some of that costly duplication if it could be shown that every State would benefit to the extent of ?50,000, as stated by the Government. Direct taxation in 1921-22 yielded ?22,048,483, made up as follows :-

The collection of that amount of direct taxation, I remind the Senate, cost Australia ?600,000. Wherever one goes, one finds the man in the street and the man on the farm complaining about the evils of duplication in taxation. It is surprising that this public demand for its elimination is not made a feature by the daily press now that we have a chance to eliminate it. Doubt has been expressed as to the accuracy of the figures submitted by the Commonwealth Government. On that point, Mr. Gunn, then Premier of South Australia, stated recently -

The Commonwealth Government claimed that the income tax figures were based on the actual assessments for 1924-25, but mention was not made of the fact that during the year under review many assessments had been made which were rightly attributable to the previous year. That position arose through the delay consequent upon the amalgamation of the Taxation Department. Figures available in the Taxation Department of this State showed that tax, totalling between ?300,000 and ?400,000, added to the tax for the year 1924-25, rightly belonged to the previous year and represented a carry-over of tax assessed but not collected, f.nd tax on assessments not made until after the close of the financial year to which they belonged, namely, 1923-24.

I refer to that statement because this scheme, which was placed before us previously will doubtless be considered later, and I want to make my attitude clear. Mr. Gunn further stated, after reviewing the position: -

Those factors were of paramount importance in determining the adjusting grant to the State of South Australia under the new proposals. In the tabulations circulated it was shown that the proposed grant would be ?23,000; but a careful analysis of the position disclosed that South Australia should receive a further ?110.000 as representing the difference between the Commonwealth Government figures on the inflated basis and the calculated figures arrived at by the latest analysis.

Mr. Gunn contended that the Commonwealth Government’s figures were wrong. The following is an extract from the report of the Premiers’ Conference in 1926:-

We know the figures in South Australia, ns we collect the income tax for the Commonwealth. … I am probably right in assuming that similar mistakes in calculation have been made in regard to other States.

Dr. EARLE PAGE The figures which form the basis of our memorandum were supplied by the Deputy Commissioners in the different States.

Mr. ALLAN. Our officers say practically the same us Mr. Gunn is saying.

Mr. GUNN. I would like to see the questions which Dr. Earle Page submitted to the Deputy Commissioner of Taxes in South Australia. He is with mc to-day, and has supplied me with the figures.

Dr. EARLE PAGE. We asked for the total assessment for the financial year 1924 25.

Mr. GUNN. Evidently you were at cross purposes, because, according to the officers who collected your taxes, your figures were all wrong.

– What is the good of saying that the whip has been cracked to ‘bring followers of the Government to heel? Such statements are unfair and unwarranted. A majority of honorable senators will agree that the per capita payment is inequitable. New South Wales and Victoria are the great est gainers from Australia’s policy of protection, because the increase in their population during the last few years has enabled them to draw a considerably augmented per capita payment, whereas other States have remained practically stationary. There has always been a large body of opinion in opposition to the invasion of the field of direct taxation, except in very extreme circumstances, by the Commonwealth Government. At the Premiers’ Conference which was held in 1923, Sir William MacPherson, putting the case for the States, said -

I think that, if we could accomplish something like that, we would really be getting back to first principles; because, while we realize that you have the power to collect direct and indirect taxation, when we federated it was generally assumed that you were going to stand out of the field of direct taxation. Of course, the war came along, and you exercised your right, very properly, and came into the field of direct taxation.

Sir Henry Barwell represented South Australia on that occasion, and said -

We want to get back to the principle that the Commonwealth should operate entirely and exclusively within a certain sphere, and that the States should operate entirely and exclusively within another sphere. The first principle is that the States should have control of direct taxation, and that the Commonwealth Government should rely upon Customs and excise revenue.

That was a. direct and definite expression of opinion. The framers of the Constitution also took a very strong stand in relation to the imposition of direct taxation by the Commonwealth Government. I have gone through the debates, and I am satisfied that, although a difference of opinion existed in regard to the financial proposals, every member of the convention held strongly the view that the Commonwealth should have the field of Customs and excise duties, and dreaded its invasion of the field of direct taxation. At the Federal Convention which was held in Melbourne in 189S, Mr. (afterwards Sir George) Reid said -

I point out that this will make a peculiarity in the position of the Treasurer of the Commonwealth, which needs only to be stated to be seen at once. The Treasurer of the Commonwealth, when he is constructing his fabric of ways and means, will have the strongest possible temptation to look on Customs and excise as an unsatisfactory method of raising revenue, because he only gets 5s. out of every £1 raised in that way, whereas, from other forms of taxation, he gets the full £1 raised. Now, I must say, it is scarcely a scientific piece of legislation to put that temptation in the way of the Treasurer to make him discriminate as to methods of taxation.

Mr. Barton. You may make him impose direct taxation.

Mr Reid:

– We may. If, for example, I had anything to do with the Commonwealth finances, and I found myself in a difficulty, should I go to a source of revenue which would only return to me 25 per cent, of the produce? No; I should go to a source which gave me the whole ?1. I only put this view as one objection to this proposal, because it makes the position of the Commonwealth in a peculiar state, inasmuch as one form of taxation will give the Treasurer 100 per cent, of the taxes raised, and the other only 25 per cent. We know what may be the consequences of anything of that sort. l t is evident that those men dreaded that the Commonwealth might invade the field of direct taxation.

I come now to the provision in the Constitution that the Commonwealth should retain not more than one quarter of the Customs revenue for a period of ten years after the establishment of the Commonwealth and thereafter until Parliament otherwise provided. At the expiration of that period it became necessary for Parliament, in whose hands the responsibility was placed, to make a new arrangement. A fresh defence policy was contemplated, and the Australian Navy was established. It was also considered that the Commonwealth should undertake the payment of old-age and invalid pensions. These additional responsibilities altered the whole prospect of Federal finance, and reduced very considerably the amount of revenue which could be returned to the States. As honorable senators are aware, provision was then made whereby the States were to receive 25s. per head of the population for a period of ten years, or until Parliament otherwise provided. The responsibility having been placed in the hands of this Parliament, it should be shouldered. 1 can see no reason for the submission of the question to a referendum of the people. If the time has arrived for abolishing the per capita payment, it is the duty of this Parliament to deal with the matter. A possibility which was foreseen at the time of the Federal Convention, was the war, which altered the whole financial position of the Commonwealth and .increased its liabilities tremendously. This year, the interest on our war debt amounts to no less than ?20,700,000, and we have also to provide ?7,400,000 for war pensions and ?1,120,000 for repatriation. In addition to our war liabilities, we have also to make provision this year for ?2,000,000 for road grants to the States, and ?9,000,000 for invalid and old-age pensions. The total expenditure of the. Commonwealth this year is ?53,066,000. Of this amount we receive revenue totalling ?4,000,000 from sundry sources, excluding direct and indirect taxation, leaving ?48,768,000 to be met from other sources. As our Customs and. excise duties will not yield more than ?42,000,000, if will be necessary for us to get ?6,768,000 by direct taxation. In these circumstances, it is clearly impossible for the Commonwealth Government to abandon all direct taxation.

It has been said by Senator Barwell and Senator Greene, that, by passing this bill, we shall be signing a blank cheque. I do not see it. The proposals put forward are definite enough. The Government asks Parliament to pass this bill, providing for the abolition of the per capita payments, and it proposes to call a conference at which the whole question of the financial relations between the Commonwealth and the States can be looked at from every angle. It is prepared to consider any method which may be suggested, and if it is thought that there is a mistake in the figures on which its calculations are based it is prepared to appoint a royal commission of independent experts to examine them. It will not limit the discussion to any particular matter - the whole field of taxation may be reviewed and proposals for the establishment of a sinking fund for the liquidation of the State debts, or for the assumption by the Commonwealth of some portion of the State debts, will be considered. In fact, the Government has intimated plainly that it is willing to consider any proposal or suggestion brought forward by the States. Are we to bludgeon something through this Parliament without the approval of the States, or are we to meet them in conference and make an arrangement with them before legislation is introduced here? The subjects suggested for discussion at the proposed conference are of two classes. One class related to schemes anon as for taking over the States debts or for the establishment of a sinking fund for the liquidation of those debts. Those schemes cannot be put into operation unless they have the approval of all the States. One State standing out, could wreck such proposals. If all the States agreed to it, would honorable senators oppose a bill to carry it into effect? It is not a case of signing a blank cheque when we make it possible to set in operation a scheme which can only be adopted with the unanimous consent of all the States. The other class is a scheme which can be put into operation by this Parliament without consulting the States, ar.ci the only proposals which nave been suggested in this direction are those which were previously before Parliament. The action taken is the only step the Government can take to bring about a conference with the States at which the whole question of the financial relationship of the two authorities may be fully discussed, and the result brought before this Parliament, which has the final say. Surely that proposal is definite enough. At any rate, we know what we are doing in passing this bill. It is often said that the position of the States will not be secure if this measure becomes law. It will be much more secure than it is to-day, because now any Government can como forward with a proposal to wipe out the per capita payments to the States, without compensation, in order to provide it with money to embark upon some fancy scheme.

Senator FINDLEY:
Victoria

– A few months anterior to the last Federal elections the compo-combination Ministry was damned and doomed. Defeat was staring it in the face, and Ministers and a majority of their supporters had almost reconciled themselves to their impending fate. But as the election drew near, in sheer desperation, they deliberately faked an issue. They whooped and screeched from innumerable platforms that the mighty hosts were advancing and that the enemy was within the gate. They alarmed and they scared the community into the belief that a revolution was coming upon them, and they asked all sections opposed to ‘Labour to unite and fight Labour. They said that there was but one issue before the people, and that it was the most vital that had ever been raised in the history of the Commonwealth. The Federal Treasurer, in his policy speech, declared -

The issue is whether those things which stand for civilization, order, and progress are to remain, or whether we are to lapse into savagery and revert to the rule of violence, force, and might.

That was the issue at the last general election. It was a false issue, yet all other matters were subordinated to it. Victory, which was assured to Labour anterior to the election, was turned into defeat. Had Labour been victorious we should not have had this legislation before ns, because Labour is pledged to a continuance of the per capita payments. Tlie Federal land tax and the Federal income tax would have remained. There would have been no instability in the States, no irritation, and none of the uneasiness that now exists. We should have established closer and more harmonious relations with the States. In short, we should have worked in co-operation with, and not, as this Government is doing, in opposition to, the States. I heard some one say in this chamber that the people of Victoria were not interested in this question. My reply is that every candidate at present seeking election in Victoria is opposed to the Commonwealth Government’s action. I doubt whether any candidate would bc successful if he pledged himself to sup port the provisions of this bill. It is said that as the Commonwealth Government now in office is Protectionist, the fiscal policy of Australia is safe. Again it is said that the present combination is dominated by Free Traders. I do not share that opinion. I say that there is not a Free Trader in the Cabinet, and I supplement that statement by declaring that there is not a genuine Protectionist in it. The Commonwealth is now controlled by an administration composed of men who are essentially revenue tariffists. At any rate, the revenue tariffists are the dominating force in the present Cabinet. Senator Pearce owes his seat here to the pledge that he gave before he was accepted as a candidate on behalf of a certain party in Western Australia. That pledge was -

That, as the present high fair j ft’ is inimical to the best interests of Western Australia, the full strength of the two associations shall be devoted to securing a substantial reduction in the existing tariff.

That as a reduction can only bc secured through our .parliamentary representatives, neither party shall give its endorsement to any candidate not in agreement with this policy. That, subject to the abovementioned conditions of policy being accepted as the basis of an appeal to the electors, the Primary Producers’ Association is willing to co-operate with the united party of Western Australia in running a joint team consisting of two representatives of the united party and one representative of the Country party for the forthcoming Senate elections. The team so selected shall receive the endorsement and support of both associations and no other candidate shall be nominated, endorsed, or supported by either association.

Senator H Hays:

– There is nothing wrong in that.

Senator FINDLEY:

– If the present system is wrong, as the Government say it is, how can they change their front and admit later that it is right? The Treasurer has said the conference will be convened to consider the best method of altering the existing financial arrangements between the Commonwealth and the States in order to place them on a permanent basis. How can a conference do that ? Governments come and governments go, and the decisions reached will not have a binding effect upon future governments. The proposals adopted at that gathering will be submitted to Parliament and, as the Treasurer 6aid, Parliament may, perhaps in a year’s time, reverse its decision.

Sitting suspended from 6.30 to 8 p.m.

Senator LYNCH:

– When the Senate adjourned, I was directing attention to the importance of this measure. This is the second attempt which has been made in 27 years to divide the public revenues between the Commonwealth, on the one hand, and the States, on the other, and from all appearances this is likely to be the final attempt. Of course, finance ‘ is not a simple matter with governments, any more than with individuals; and when the task is essayed of making a fair division it necessarily follows that the parties are watchful of the outcome. Knowing that the Commonwealth and the States have not, except on rare occasions, been what might be called a happy family during the last 27 years, one can understand the negotiations being embarrassed on the present occasion by considerations that ought not to have been allowed to intrude. The manner in which this question was handled in 1910 is altogether dissimilar from that which has been in evidence on the present occasion. At that time the whole of the States co-operated with the Commonwealth in an endeavour to arrive at a solution of the problem. Happily they succeeeded in doing so, and, more happily, the result was embodied in an act of the Commonwealth Parliament which has operated for the last seventeen years.

Senator Pearce:

– That is not the agreement which was arrived at by the conference ; the agreement was that it should be embodied in the Constitution.

Senator LYNCH:

– That is so; but up to the stage of deciding upon a fair division there was unanimity between the States and the Commonwealth. The sole difference of opinion was as to whether the provision then made should be guaranteed to the States for all time, or whether it should be left to the will of this Parliament to maintain the payment at 25s. per head for a certain period only and then increase, decrease, or abolish it. The difference between the situation seventeen years ago and that of to-day is that the Federal authority now occupies a position of almost isolated grandeur. It has adopted the attitude, “ This much only will I give to thee,” and the States have no option but’ to accept holus bolus what is offered to them or place their case before a higher authority. This is likely to be the last occasion on which this subject will be reviewed by the Commonwealth Parliament. Such being the case, honorable senators should approach the matter as free agents, with absolutely open minds, and - as the Constitution intended - as the guardians and custodians of the States which they represent. I go further, and say that the Senate should collectively act in such a way as to do itself not only present, but also future, credit. The first requisite is that the Senate should not prejudge the case; but I am very much afraid that that is being done. The case for the Commonwealth Government is placed before us in the bill that we are now considering ; but we have not yet had the opportunity to find out what are the wishes of the States, and how far they are prepared to assist in the making of a bargain that will be mutually acceptable.

I have been told that the Government has offered a royal commission. What was to be the nature and the terms of that commission? It was to be an independent body of men, before whom witnesses could be called. As is the case with all commissions, it was to be carefully and jealously circumscribed. In the interests of the States? No ! In the interests of the Commonwealth ? Yes ! The ambit of its authority, and the area of its research, should have been so fixed that the case for both the States and the Commonwealth could have been examined without any limitation whatsoever. Let us recall the terms upon which it was to be appointed. It was to inquire into and report upon whether the figure £7,600,000 put forward by the Commonwealth was correct or not. Such an inquiry could be carried out by any body of accountants. The question could bo settled by an examination of the books of the Treasury. Then the commission was to say whether or not the States could, by legislation, obtain the amounts which they would be called upon to raise in lieu of the capitation grant. That is not a very extensive authority. The question is a simple one, and could be answered by a competent legal authority. It is significant that one line of inquiry was excluded from the terms of the commission : Whether or not the States have an inherent constitutional right to the payment which the Government proposes to withhold from them. The Government is the best judge of why such a line of inquiry was not to be pursued. The absence of that all-important provision completely nullified the value of the commission. If it were desired that the position should be investigated, why could the commission not inquire into everything relating to the status of the two authorities? Seeing that their case would not be adequately represented, the States said: “We cannot agree to this commission because circumstances make it a one-sided, partisan body, from which we can expect no good “ ; and they rejected the offer of the Commonwealth.

I congratulate Senator McLachlan upon his elevation, but I am sorry that during, his speech he was either hazy or non-committal in respect to vital points that were raised by previous speakers. The Government has been asked, “ Wherein is your mandate or authority for doing this -thing?” The Minister did not reply to that, so I shall endeavour to fill the blank caused by his want of thought or good generalship. At the last elections in Western Australia I travelled with Senator Pearce, who enunciated the policy of the Government; and I distinctly remember that there was only one reference to finance in that campaign. It was, that a conference would be called during the life of the ensuing Parliament for the purpose of dealing with the finances of the States and the Commonwealth. In nearly every policy speech during the last seventeen years either that sentence, or something similar to it, has appeared. The question was not ventilated. Throughout the length and breadth of Western Australia it was urged that the matter of outstanding importance was to see that established law and order should prevail over disorder. Therefore, so far as the people in that State are concerned, no warrant exists for the introduction of this bill. The Minister (Senator McLachlan) was also asked to consider the position of the States subsequent to the withdrawal of the per capita payment, and to say whether they would find themselves better or worse off, richer or poorer, their status improved or lowered. T am not aware that he addressed himself to that matter; so, in my humble view, I propose to make good the deficiency. I remind the honorable senator that we are living in a curious age. I remember the time when the party of which the present Government is largely the lineal descendant was very pronounced upon this particular question. Where did it stand? The majority of its members left no doubt in the minds of any person that the rights of the States vere to be jealously preserved. They would not. allow anybody to suggest, or to even hint, that they were in the least degree inclined to make an incursion upon the preserves of the States. The descendants of that party have wedded themselves to a policy which shows a considerable declension from that of their forefathers. It is the very opposite of that which the progenitors of this party once propounded. The fathers of the Constitution, who were to a great extent the forerunners of this party, placed section 87 in the Constitution, and at a later date in altered circumstances sought to insert in it another provision equally jealously guarding the interests of the States. But the present party, the relict of the earlier party, is saying, ‘ ‘ No matter what our forebears did, we stand to-day to rob the States of everything then given to them.” This criticism applies equally to the party opposite, on whose banner is to be found the one word “Unification.” Strange to say, in the whirligig of politics #nd interchange of opportunities we now find that instead of being the unificationists they want the electors to believe they are, they are stout defenders of State interests, and will not budge a single inch from that position. In the circumstances, seeing that party policies and party opinions are so much in the melting pot, it is our duty to find out exactly where we stand to-day.

Just as the fathers of the federation recognized this duty, so to-day we are called upon to see wherein lies the well-being of the citizen apart from parties and governments, and to ascertain how he will be affected by this bill. 1 propose to direct brief attention to what has been said by previous speakers as to the respective spheres and functions of the State and Federal Governments. Before doing so, let me say that I shall never subscribe to a doctrine that would have the effect of lowering the prestige of the National Government. Just as we outgrew our adolescence 27 years ago, and as a leading parliamentarian said, put on the toga of manhood, so in the natural order of things we shall grow to a lustier manhood. We need, therefore, to have, on all occasions, a. central or national government strongly and securely entrenched, and able to defend the citizens of this country from attack from within or without. But side by side with that declaration I stand stoutly for the maintenance of the States, rotating on their own axes, and performing the functions which the founders of the Constitution knew they would be called upon to perform, without being harassed or handicapped as I contend they would be if we pass this bill.

I want now to picture the position of the average workaday citizen, the man, so to speak, whose head is down to his work from early morn to late at night, and who takes little interest in politics. I refer to the man, who, once he has elected his representatives to Parliament, has sense enough, and sometimes overconfidence enough, to think that they will act fairly towards him. We may imagine him setting out for the interior from any big centre of population. How will he fare ? On what authority will he depend for his progress on the road of life? If he makes up his mind, as, unfortunately, not too many are inclined to do, to turn his back on the crowded city, and lead a pioneering life by engaging in that class of work which is the basis of all our prosperity, he will take a railway train. Thus he will have to depend on the State Government for the first necessity. When he goes out he has again to come in contact with another State activity to get the land that he will spy out after some trouble. Having got the land and applied his scanty capital to its development, to whom does he go in order to supplement his earnings or reinforce his credit facilities? On whom will he rely to furnish him with the wherewithal to till the land ? Naturally he must apply to the State authority. And if, when he has brought the land under subjection and to a point of productivity, either by raising crops or feeding animals, a pest assails his crop or his stock, to whom will he look with all confidence for aid in hia unequal struggle? Again he must look to the State authority. If in the course of his operations, he is short of water - that vital necessity in our semi-arid interior - again he looks to the aid of the State authority. If he wants pustice from his neighbour, to whom does he apply for that justice which is so necessary in every civilized community?

He applies to a State authority. “When he seeks to get his children educated, or when he is stricken by the wayside and needs attention in a hospital or some other similar institution, the State authority once more comes to his aid. When lastly and finally, he brings his produce to market, sometimes to sell it below cost, on whom does he depend again ? Upon the State authority.’ In these ten instances the average Australian citizen, who turns his back on the city and goes into the interior, has to depend upon the State Government for the wherewithal to live and try to prosper. What does he expect from the Commonwealth Government? It assists him when he posts a letter or gives him facilities to telephone to his nearest neighbour. That is all.

How will that man fare in the future ? We know that the State Governments, not being possessed of the philosopher’s stone, which will turn wood into gold, will have to find money, but we also know that there is a very pro.nounced limit to that which can be gained by taxation in any community. We know that, in Australia, the two authorities, State and Commonwealth, have been roaming over and fossicking almost the entire area of tax production in Australia. Of course, the Commonwealth now says that it will surrender a portion of its direct taxation, but that brings us back to the point that has been stated so often : Is there any guarantee that the States will be given a charter of immunity from any invasion by the Commonwealth of that field of taxation which can be derived by taxing the surplus earnings of the people? We all know that, at any time it chooses, the central Government can claim its share of the surplus earnings of the citizens of the country and that the local authorities are thrust into the position of having to depend upon the scraps that fall from the table of the higher authority. In the natural order of things the minor authority always gets the worst of the deal, and the National Parliament the best. In the meantime, what is the effect upon the citizen ? What will his progress be ? Am I to be told that the man who uses the State Government almost as a prop for at least ten operations during the course of his activities will have his position in life enhanced or made more attractive by the Commonwealth Government stepping in as it is at liberty to do and levying direct taxation upon him? We must view this question from his stand-point, because, unless he is fairly treated, he will rise in his outraged might and hurl from office any party in power that would behave so callously towards him. It is, ‘therefore, time to see what is fair between man and man and authority and authority.

The national authority has done fairly well since it was established 26 years ago. My information on the point is somewhat cramped, because the bulk of the material available has been transferred to Canberra, and I am dependent on fragments. But, even with their help, I find that, whereas at the outset of federation the personnel of all the departments transferred and newly created did not exceed 11,000 persons, with a payroll amounting to £1,500,000 per annum, the number has since increased to 26,000 persons and the pay-roll is over £7,000,000. I postulate that the rate of progress by the Federal Government will not be outpaced by that of the State Governments. In the first year of our federation, the revenue of the Commonwealth was between £7,000,000 and £8,000,000. To-day, after 26 years, it is £75,000,000. In the light of these figures, is there any need to bolster u)> the Federal authority or to say that the Federal spirit needs reinvigorating t Is there any need for a bill such as this to solidify the financial and moral position of the central Government?

The central Government is now raising taxation by means of Customs duties, which Senator McLachlan describes as easy money, and also by a invasion of fields of taxation which are more irksome, thorny, and distasteful than indirect taxation, The income tax collector is regarded as a villain, but indirect taxation in the form of Customs and excise duties are paid without complaint. The form of collection is easy. The States are now to be placed in a different position, and are to shoulder the responsibility of collecting practically the whole of the direct taxation, which is always unpopular. The States are to be deprived of certain revenue to which they are constitutionally entitled, and which, but for the fallacious arguments adduced, they would still continue to receive. I could quote from niv own declaration in Western Australia when I was chided by the State Treasurer at that time for opposing ti’”, inclusion of an amendment in the bill guaranteeing 25s. per capita to the States for all time, because, as I said, an occasion might arise when the States would be entitled to receive a larger amount. I instanced at the time the possibility of the discovery of mineral wealth in the far interior of Western Australia, which would considerably increase the revenue-producing capacity of the State. I said that it would be manifestly unjust if the State could not rightly claim a greater share of Commonwealth revenue than that which it was then receiving. The position has now changed, and the Government says that the States are no longer entitled to a portion of the Customs and excise revenue. The Minister in charge of the bill (Senator Pearce) expressed his views at the same time, and the Deputy Leader of the Opposition (Senator Needham) quoted the right honorable gentleman as saying that the per capita payment should be continued until at least the year 1935. Senator Pearce is now associated with a Government which proposes to abolish them altogether. I expressed my individual opinion at that time, not as a Western Australian representative, but as one who thought that the State might be entitled to a greater share of revenue on the basis I have given. Something might have happened that would have increased that State’s revenue capacity up to a point which would enable it to obtain a greater share instead of the central government receiving the largest portion.

– Yes. I checked these figures with a responsible officer, and I intend to stand by them. So far as I can remember the total revenue of the Commonwealth last year was about £75,000,000, and it is a simple matter to ascertain the proportion of £17,000,000 to £75,000,000. It is a trifle over 20 per cent. It must be borne in mind, however, that the £17,000,000 I have already mentioned is the maximum, and by the time we reached the fiftieth year the amount would, in comparison, be hardly perceptible. Are we, therefore, to change a fundamental principle by reason of a transient cause. The Government’s case must be based on something more secure than the shifting sand of some transient consideration.

– Section 118 of the South African constitution reads - . . . there shall be paid annually out of the Consolidated Revenue Fund to the administrator of each province -

An amount equal ‘to the sum provided in the Estimates for education, other than higher education, in respect of the financial year 1908-9, as voted by the legislature of the corresponding Colony during the year 1908.
Such further sums as the GovernorGeneral in Council may consider necessary for the due performance of the services and duties assigned to the provinces respectively.

In that we see nothing of the so-called sacred principle that the authority which raises revenue should spend it. That principle has never operated in Canada or South Africa, nor is there any intention of introducing it there. In the Mother Country this principle finds no place. On page 25, volume 1, of Round Table Studies, we find that the amount raised as rates by the local authorities increased from £25,000,000 in 1884 to £33,000,000 in 1894, and to £59,000,000 in 1907. It is true that the Exchequer grants have increased more than proportionately, and that in 1907-8 they reached a total of £20,000,000. That amount was given by the Imperial Exchequer to the local authorities in Great Britain. Again, I ask where is the observance of the socalled sacred principle that the authority which raises revenue should spend it?

None of these Governments havethought it necessary to follow that principle : and they have had experience extending, in the case of the Mother Country, over many centuries. In the face of those facts, the Government should bring forward better arguments in support its proposals than the limp, halting, onelegged reasonsso far presented. [Extension of time gr anted.]

Let me refer briefly to the moral aspect of this question. The word “ moral “ needs to be defined. In my opinion a moral right is the greatest right that exists. If a person is given his moral right he is given all that is his due; no other right that he may possess can exceed his moral right. When we say that we give a man his legal right, suspicion is at once aroused. Thereare other rights, such as inherent rights, mutual rights, and so on, but I shall confine my remarks to the moral right. It will be conceded - the Honorary Minister himself admitted it - that at one time the States did have a moral right to receive a portion of the revenue derived from Customs and excise. So universal was that belief that a successful effort was made to include the principle in the Constitution. I remind honorable senators that the provision in the Constitution requiring three-fourths of the revenue from Customs and excise to be paid to the States, was inserted at the instance of the State Premiers, and not at the suggestion of the selected representatives of the States. The limitation of ten years was imposed by them because the people of New South Wales thought that, without it, the presence in the Constitution of such a provision would commit the Commonwealth to a policy of protection. It was thought that if the Commonwealth were limited for all time to one-fourth of the revenue derived from Customs and excise duties the tendency would be to increase those duties so that the Commonwealth’s revenue would be greater. New South Wales was then regarded as a freetrade State. When I first took my place in this chamber I saw before me six senators from New South Wales, all of whom were opposed to the policy of protection. I refer to Senators Sir Albert Gould, Neild, Pulsford, E. D. Millen, Walker, and Gray. It was almost dangerous to mention protection in the presence of those men. Then a change came over the spirit of the dream. Now, instead of six stalwarts from that State upholding the banner of freetrade, we have strong protectionists in the persons of my honorable friends, Senator Greene, Senator Duncan, and others.

Senator FOLL:
QUEENSLAND · NAT; UAP from 1931

– Including Senator Thomas ?

Senator LYNCH:

– No. I shall not make any reflections upon Senator Thomas. We know where he stands. But for the then fiscal policy of New South Wales, that provision which was described as the ‘ ‘ Braddon blot ‘ ‘ would be in the Constitution still. The ground for calling it a “blot” and limiting its operation to ten years was the accident of a freetrade Government in New South Wales.

This attempt to belittle the claim of the States on moral grounds-to a share of the Customs and excise revenue has a most shadowy foundation. As a matter of fact, the claim rests on granite, and, as I have shown, the provision would be in the Constitution still but for the fiscal tendency of the hour in one State. Now, in some quarters, at all events, this banner of the moral right is as torn and tattered as the red flag is on the Yarra bank. Other important amendments were inserted in the Constitution Bill at the instance of the Premiers in conference. There was, for instance, the provision with regard to the deadlock between the two Houses, and that other clause to safeguard the principle of majority Tule in the case of deadlocks between the two houses. Following on the vital amendment agreed to by the Premiers to take away the constitutional ‘and moral right which the States then had, and still have in my opinion, to a major share of the Customs and excise revenue, there was the clause to empower the Federal Government to come to the assistance of necessitous States. It was realized that the financial arrangements were such that something might have to be done to assist financially certain of the States.

Let me now examine the position in Western Australia. I am in duty bound to give that aspect of the proposal weighty consideration, since the electors of that State have sent me to this Chamber as one of their representatives. If in the course of my remarks under this head I tell other honorable senators what they should do, I remind them that this Chamber is essentially and for all time a States House. It was created to safeguard the rights of the States whenever an onslaught might be made upon them from either within or without. Recent happenings suggest that in some quarters, at all events, party considerations have a stronger claim on the suffrages of certain members of this Parliament than the intertsts of the States which sent them here.

Senator Ogden:

– That is quite certain.

Senator LYNCH:

– All I can say is that if party considerations are paramount here, then I misconceive the purpose and aim of this Chamber. For my part, I can say that whenever the interests of my State clash with the interests of my party, I am in duty bound to place the interests of the State in the forefront so as to safeguard the wellbeing of the people who sent me here. Therefore, when I see before me a measure which strikes at the root of the prosperity of my State, and indeed the prosperity of all the States, I feel that there is a solemn obligation upon me to maintain the charge given to me by the people who elected me to this Parliament. What am I going to do now? Vote for the Government? If I did that, I should be deliberately assisting to cripple the financial stability and destroy the prosperity of my State.

Figures supplied by the Under-Treasurer of Western Australia and by the State Commissioner of Taxation relating to this Government’s proposal tell a sorry story. The Commonwealth Treasurer estimates that the evacuation by the Commonwealth of land taxation will surrender £87,000 to Western Australia; but according to the State Commissioner of Taxation the amount will be only £65,000. Similarly, according to the Commissioner, the amounts to be surrendered by way of estate duties and income tax have been over-estimated by the Commonwealth Treasurer, with the result, according to figures based upon the over-estimate of those two fields, that the State will suffer to the extent of £100,000 in the four departments proposed to be abandoned by the Commonwealth. In these circumstances can I accept the Government’s proposals? If the Ministry has treated the States in the same way that it has treated its own followers, the States will be able to complain of lack of courtesy or cordiality. I remember on one occasion, when I was upstairs in the party room the only chance I had of summing up the result of the deliberations was by looking at a blackboard ! In this important issue, affecting so vitally as it does the interests of my own State, I should be false to the trust reposed in me - false to the pledges I gave - if I did not reject the bill contemptuously, because it will vitally undermine the financial solvency of my State.

Turning now to the special grant made to Western Australia, I am reminded that the Government appointed its own commission to inquire into the grievances and disabilities suffered by that State under federation. Honorable senators will recall that the majority report stated that in order to make good the loss sustained by Western Australia a3 the result of federation, that State should receive £450,000 a year until such time as it regained control of its own Customs and exoise revenue. Even the minority report, which was not so favorable, recommended the payment of £300,000 a year. What did this Government do ? It paid £450,000 for one year, with allowance for a diminishing portion of the £250,000 granted in 1910. What is happening now? Everything is in the air. As a representative of Western Australia I do not know where I stand. Do honorable senators think that I am going blindly to accept this proposal at the dictation of the Leader of the Senate ? I repeat that I should be false to my trust, and false to my solemn word to the people who sent me here, if I did otherwise than vote against the bill. What do the people of Western Australia think of my colleague, Senator Pearce in connexion with this matter ? During the last election campaign he spoke with me at Kalgoorlie. These are the words he used, according to the report in the Kalgoorlie Miner of the 16th October, 1925 -

During the next financial year it was proposed to have a conference with the States in order to place the financial arrangements of the Commonwealth and the States on a proper basis. The Commonwealth Government having appointed a Western Australian Disabilities Commission, felt bound to give effect to the commission’s recommendation, and no matter what arrangement was proposed by the conference as to the basis of future finance, it would be made clear that Western Australia needed, and must receive, this £450,000 a year outside any other arrangements between the Commonwealth and the States.

That studied pronouncement was made by Senator Pearce, -on behalf of the Govern- ment, in Western Australia on the eve of the last election. Clearly the electors of that State were led to believe, from the utterances of the principal mouthpiece of the Government, that they would receive indefinitely the full amount recommended by the Disabilities Commission. That amount, as I have stated, was paid for one year, and now it is to be cancelled, with no guarantee. in the bill that it will be resurrected. That, I say, is repudiation of the promise made by Senator Pearce at Kalgoorlie. The measure suggests that the people of Western Australia are about to be fooled, because they were led to believe they would get the full amount recommended by the commission. How can I support the Government? Let Senator Pearce and his Government honour the platform pledges which he gave in Kalgoorlie, and then I will reconsider my position. Whilst the financial stability of Western Australia is trembling in the balance I should bo false to my trust, and be a first rate traitor to the interests of that State if I supported the bill. I intend to stand where I stood in 1910, and also when I supported federation. I want the two authorities to exhibit a spirit of mutual co-operation. I have no desire that one should endeavour unduly and unwisely to acquire for itself a swollen prosperity at the expense of the other. If financial and executive power is taken from the States that have done so much for the workers of Australia, what will be the result? There is no need for this measure. If it is passed, it will impose untold misery upon the States, under whose fostering care so many people are making a decent livelihood. The late Honorable Alfred Deakin said on one occasion -

You can heap power upon power, until such time as the central organ of the nation, the great heart of the nation, will be overweighted and overstrained.

When that happens, there follows a process of devolution, the taking off of powers that have been heaped on, and a just division of the finances. But look at the injury and misery that has been caused in the meantime ! What have the States done to be treated in this fashion? Upon what basis do they rest? Their foundation is as secure and as democratic as that which we enjoy. The importance of their functions is equal to, if not greater than, that of the National Government. With the postulation that the States, as such, shall occupy a subordinate, but sovereign, position, it has to be conceded that they must be given the wherewithal to live. It is not our province, either as citizens or senators, to impinge upon or impair the rights of the States. Where is the necessity for this action of the Government? Is the Commonwealth short of money? No! Are its finances disarranged? No! Will it be injured by the maintenance of the status quo? No! Let us apply those questions to the States. Will these proposals have the effect of disorganizing their finances? Yes! Will they make the States short of money? Yes! Will they reduce their status? Yes! Will they impair their usefulness as articulate agents for the fostering and advancement of the interests of this country? A thousand times, yes! Such being the case, until I see that there is a warrant for this measure, I shall not support it. So that further time may be allowed foran interchange of views and an interplay of thought, I move as an amendment -

That the word “now,” he left out, with a view to insert in lieu thereof the words “this day six months.”

Question - That the word “now” be left out - put. The Senate divided.

AYES: 10

NOES: 17

Majority . . . .7

AYES

NOES

Question so resolved in the negative.

Amendment negatived.

Senator GUTHRIE:
Victoria

– It is unfortunate that I, a comparatively inexperienced speaker, should be called upon to follow so brilliant an orator as Senator Lynch. He is, in many ways, a hard man to follow. We cannot follow him in his argument or in his figures, which, on this matter, are incorrect. I should not have spoken but that the people, who are our masters, will expect us - and rightly so - to state our reasons for the attitude that we adopt towards the bill. As. we all know, this measure provides for the abolition of the per capita payment that is now made to the States. The existing system is a clumsy, temporary expedient, which was introduced when federation was established. Time has shown that it has fed the rich and starved the poor. The great bulk of the money is given to highly-developed States like New South Wales and Victoria. Had the per capita system been strictly adhered to, it would have led to the starvation of States with large areas but small populations, such as that which Senator Lynch so ably represents. The area of Western Australia is onethird of the total area of Australia. It has a sparse population, and its developmental needs are great. No other portion of Australia lends itself so readily to development, or possesses greater potentialities. It is not the intention of the Government to in any way cripple or belittle the States. The idea is to devise a better and a sounder financial basis than that which at present obtains, and to avoid the unnecessary duplication of departments that have grown up under the present system. Unfortunately, a spirit of antagonism has been displayed towards the Commonwealth Government, and the flame has been fanned by men in public, semi-public, andwould-be public positions who ought to know better. Many of them have not even bothered to acquaint themselves with the proposals of the Government. A number of those who are opposing these proposals are not giving the Prime Minister a fair deal. That right honorable gentleman has time and again assured us that injury will not be done to the States either financially or in any other way. In the eyes of some of his opponents the greatest crime which Mr. Bruce has committed is that he has been a brilliant success as Prime Minister of Australia. He was acknowledged to be the outstanding figure at the Imperial Conference. One wonders at this bitter hostility that is being shown towards him. I do not insinuate that any honorable senator is actuated by a desire to see a reshuffling of portfolios, or by any other selfish motive; but there are some persons to whom personal spite and ambition are of more importance than the readjustment of the financial relationships of the Commonwealth and the States. The other night, in the ultra-aristocratic suburb of Toorak, a gentleman who has made himself conspicuous of late used the threat that, if those honorable senators who represent Victoria did not oppose the Government on this matter, they themselves would be opposed by the National Federation and the Australian Women’s National League at the next elections. That gentleman had no mandate from the National Federation or the Women’s National League to make such a statement, but he evidently thought that he could intimidate the Victorian senators and induce them to obey the dictation of an outside organization rather than their own consciences. I know that none of the Victorian senators will pay the slightest heed to any outside threat. We shall vote according to our consciences, and in the best interests of Australia. As a matter of fact, a,t the last annual conference of the National Federation, a motion that the per capita payments should not be discontinued was defeated by an overwhelming majority. In the circumstances, how can this gentleman who was speaking at Toorak, or any member of tho Federal Parliament, or any public man, say that the Federal Government is acting contrary to the wishes of the National Federation? Honorable senators are determined to do what is right rather than have an eye to the next election. It is, we realize, perfectly true that at the present time the proposal to abolish the per capita grant is unpopular; but that is possibly due to the fact that the public has been ill-informed as to the intentions of the Commonwealth Government. It is for the States to accept the invitation of the Government which has been extended te them from time to time - and which will be extended to them again after the bill goes through - to meet it in conference to state their requirements. We are assured by Mr. Bruce, by Senator Pearce, by other Ministers, and by the supporters of the Government that thev will receive most generous consideration and treatment. There is another great safeguard which has not been stressed sufficiently. When the Commonwealth and State Governments meet, and formulate and agree upon a basis by which the States may be recompensed for the abolition of this blundering, uneconomic, stupid old system of per capita payments, the agreement so arrived at must be ratified or rejected by this Parliament. Therefore, in our paramount position, we shall have an opportunity to discuss m detail the suggestions put forward, and to decide what it is right and just to do. It is only then that honorable senators will need to be on the qui vine to see that justice is done to the States, and, if necessary, to fight in their interests. But until this bill is passed we know perfectly well the States will refuse to make any suggestions. Already they have slammed the door in the face of the Commonwealth Ministry. They have “not offered suggestions, or put forward any compromise. One wonders why there is so much fuss; why honorable senators flare up into such oratorical displays of fireworks, such as we have just had from Senator Lynch, whose brilliance is almost sufficient to outshine the sun. The honorable senator is entertaining, and also brilliant, although perhaps, somewhat illogical. After listening to so much bitter opposition, and witnessing so much play-acting in some quarters, when one knows the facts one is inclined to think that there is a good deal in the leading article of the Sydney Daily Telegraph of the 10th March, which reads -

Three and a half years ago the State Premiers were agreeable to forgo their share of Customs and excise in consideration of the Commonwealth Government giving up income tax. Mr. Watt, who has tried to tear the Government’s bill to ribbons, was probably the first Federal Minister to suggest the abolition of the per capita payments. . . .

This journal goes on to say -

There is a strong suggestion in the per capita crisis that the discontented Nationalists of the House of Representatives are more concerned with re-constructing the Cabinet than they are with a division of the Commonwealth and State revenues.

I am glad to say that I think differently of some members of Par- liament -who are opposing the bill, and of all honorable senators. The changed attitude of the Labour party is most remarkable, when one compares speeches made at conferences and on earlier occasions in Parliament with those which have been delivered upon this bill. Senator Pearce has already referred to this phase of the matter, but I should like to draw attention to the utterances of the right honorable William Morris Hughes. Speaking in 1910, and dealing with the proposal to embody in the Constitution the payment of 25s. per head, he said -

There arc two objections to the agreement, both of which are fatal. One is that the payment is too high, and the other that the arrangement is to be permanent.

He went on to say that “ the Commonwealth had at its disposal the entire situation, and was in a position to dictate reasonable terms, and have those terms accepted by the States.” He said further -

After ten years of a burden which, as time went on, became almost intolerable, does any one think that the Common wealth is justified in neglecting an opportunity to come into its heritage ?

That was the opinion of the gentleman who last week so mercilessly attacked the Government and this bill in another place. He also said -

The interests of the States consist in sidetracking, delaying, and hampering the Commonwealth in every conceivable way. . . . I oppose the proposed agreement, because I consider the contribution per head too high. I oppose it because it is to be permanent, and because of its underlying recognition of our dependence on the States.

At the Premiers’ conference in 1919, Mr. Watt said -

Sine- the Surplus Revenue Act, 1910, the Commonwealth is saddled with an increasing liability for interest on war loan, repatriation loan, war pensions, and invalid and old-age pensions. . . . For these reasons I propose to ask that the Commonwealth Parliament shall bc asked to diminish the payments progressively by 2s. 6d. per head of the population in each year until the total payment to the States is 10s. *per capita. That payment will continue definitely for five years subject to alteration at the end of that period as Parliament determines.

Sooner or later the States may have to do without any help whatever from the Commonwealth.

Mr. Watt has been most merciless in his attack upon a bill which has been brought in to carry into effect something which he advocated in 1919. Senator Findley, speaking in 1910, said -

I have no objection to State Treasurers receiving a per capita grant from the Commonwealth, but I decidedly object to embodying the proposed agreement in our Constitution, because I arn satisfied that, owing to the newspaper influence which will he brought to bear in favour of its retention, it would never have been taken out of it.

As I have already said, the per capita system is a very clumsy method of giving the States the revenue considered necessary for them. It is a system that has fed the rich States and starved the poor. Take Western Australia, that huge and wonderful State, with its great opportunities for development. Take also South Australia and Tasmania. Those three States need special consideration. A per capita payment of 25s. is useless to them. That has been proved by actual experience. The actual grants to the States by the Commonwealth Government work out as follows. - New South Wales, £1 10s. 8d. per head ; Victoria, £1 9s. 6d. per head ; Queensland, £1 18s. 2d. per head ; South Australia, £1 14s. 8d. per head; Western Australia, £3 14s. per head; and Tasmania, £3 8s. lid. per head. The average payment to all the States has been £1 15s. 8d. per head.

Senator Kingsmill:

– Do those figures include special grants?

Senator GUTHRIE:

– Yes. They are the actual payments made to the States by the Commonwealth Government. The per capita payment was merely a temporary arrangement. In 1910 the people at a referendum rejected a suggestion to embody that agreement in the Constitution. They refused to make the method permanent, and it was continued for another ten years, but really lapsed seven years ago. Senator Pearce has shown that no other country in the world adopts the per capita basis for payments to States. We all realize that money has to be found somewhere for the development, defence, and administration of our great Commonwealth. But whether the money be collected by the Federal authorities or by the State authorities the same people in all instances provide it. To me it seems a’ very unwise policy for the Commonwealth to collect a tax and then hand the money to more or less irresponsible States to spend and squander. Much , has been said of the Commonwealth’s affluence and extravagance; but practically every one will realize that it has been extraordinarily economical in comparison with socialstic States such as Queensland which have absolutely scattered and wasted millions of the taxpayers’ money on all sorts of socialistic enterprises that from the very start never had a chance of making good. The Queensland Government has butted into things about which it knows nothing, using the money provided by the people in the purchase and management of such enterprises as State cattle stations. The result has been that these concerns have been so badly manaegd that they have involved the taxpayers in a loss of nearly £1,000,000.” The Queensland Government now sees the error of its ways, and its stations are up for sale on the 9th April next. I hope that some one will buy them, but the properties have not vet been written down to the value that is likely to be fixed upon them by purchasers. When one socialistic enterprise in Queensland can show a loss of nearly £1,000,000, why should the Common, wealth Government tax the people and raise money to hand it over to five of the State Governments of Australia to squander on all sorts of socialistic enterprises. To do so is unsound.

Several opponents of the bill have spoken of the affluence . of the Commonwealth Government. Let us examine the facts. Very few of them have dealt fairly with the Government’s huge war and other commitments, which including repatriation, war pensions, invalid and old-age pensions, and maternity allowance, amount to £50,000,000 per annum. These are statutory obligations. The ratio of the financial requirements of the Commonwealth and of the States has entirely altered in consequence of the war. Senator Lynch said that the Commonwealth Government required only £17,000,000 a year to meet its obligations. I challenge many of the. honorable senator’s statements, and practically all his figures, and say without fear of contradiction that they are incorrect. The honorable senator certainly said that ho was speaking from memory, owing to the absence of records which have been transferred to Canberra; but clearly stated that the annual commitments of the Commonwealth did not exceed £17,000.000. According to the last budget the commitments of the Commonwealth are as follows: -

The latter is a commitment which no one wishes to escape; I do not think any honorable senator wishes to see the amount of pension reduced in any way. The list continues -

– I shall reply to the honorable senator’s statement.

Senator GUTHRIE:

– The Prime Minister said -

We must so conduct ourselves that no charge of unfairness to the States can be made against us, and that we cannot rightly be accused of wishing to invade the realm of State authority. We must make it clear that we are not’ endeavouring, because of the power that accrues to the central Government by reason of its ever-increasing resources, to dictate financially to the States, or to place them in an unfair or invidious position. I recognize that today there is a considerable body of opinion iti this country to the effect that the present Government desires to aggrandize the Commonwealth at the expense of the States, that we wish to bring the States into some form of financial tutelage, and desire to invade realms that legitimately and properly belong to them, t give my assurance to the House and to the people of Australia that Ministers have no suck desire. It is our desire not merely, to give the States absolute justice, but, so far aB lies in our power, to deal with them generously, and we do not wish to invade fields in * which the State authorities alone should function. This Parliament will not permit injustice to be done to them, and that the purpose of the measure is to give them fair and equitable treatment in a financial readjustment, which is essential in the interests of the whole of the people, and particularly of the State authorities themselves.

Senator Kingsmill:

– Where was that statement made?

Senator GUTHRIE:

– That definite assurance was given by the Prime Minister when speaking on the bill in another place a few days ago. The proposals are submitted to Parliament for our consideration. The Minister in charge of the bill (Senator Pearce), who handled this question very ably, said -

The present system is, and must remain, a disturbing factor in the relationship between the Commonwealth and the States. We have now an opportunity to end it, and Parliament has also the opportunity to see that the Commonwealth Government acts with justice and even generosity to the States, in. making a new financial arrangement with them. On the assurance that the Government will approach the question in that spirit, and do its utmost to bring about a fair and equitable arrangement with the States, I ask the Senate to agree to the second reading of the bill.

– It is not. I submit that, under the Standing Orders, the honorable senator is bound to take my word. Unfortunately, I have not with me now the means of proving what I say. However, the onus of proof does not rest upon me, but upon Senator Cox. If he is an honorable gentleman, he will accept my word, or bring proof that I am not speaking the truth.

Senator Cox:

Senator Reid:

– Is the weight of evidence against the bill?

Senator DUNCAN:

Senator Kingsmill:

– What about the bill ?

Senator COX:

Senator H HAYS:

– Yes; and I have not charged any other honorable senator with inconsistency. It is regrettable that, on occasions such as this, when we act as our conscience dictates, we should be charged with inconsistency. We have to consider the financial responsibilities of the Commonwealth, and also those of the States. Tasmania has nothing to gain and everything to lose under this proposal. If it is adopted, it will be compelled to appeal to the Government, as it has had to do before, under section 96 of the Constitution, for financial assistance. Whatever our difficulties have been in the past, in making our expenditure and revenue balance, we will, if this measure becomes law, be confronted with oven greater difficulties. Wealthy States, such as Victoria and New South Wales, may not be embarrassed; but I have no hesitation in saying that Tasmania will be at a great disadvantage. The more I consider this question, the more am I convinced that it is my duty to vote against the bill ; and J am sure my action will be justified by the results which follow. Such a drastic alteration in the financial arrangements between the Commonwealth and the States has not been sought by any section of the community, and it is difficult to understand why the bill has been introduced. The States, undoubtedly, have a moral right to the per capita payment.

Senator Cox:

– “Moral” is a good word.

Senator H HAYS:

– It is. The right of the States to a portion of the Customs revenue has been recognized since Federation. The state of the Commonwealth’s finances cannot be used in justification of the bill. If this legislation is passed and given effect, the Government must take the responsibility. Senator Guthrie has said that honorable senators of the Nationalist party who oppose the bill are going back on the Government, but I am prepared to accept the responsibility of my action. If the Government repudiates mo in consequence of my vote I shall have no quarrel with it. Under the Nationalist platform I believe that on this measure I am free to vote according to my convictions. This legislation is not in the best interests of Tasmania. There has been no demand for it, and its passage will only antagonize the States. We have evidence of that on every hand. The question of the separation of Federal and State finances has nothing at all to do with the bill, and certainly is no justification for this Government discontinuing line per capita payments. I intend to oppose the second reading of the bill.

Debate (on motion by Senator Abbott) adjourned.

page 594

PAPER

The following paper was presented : -

Immigration Act - Regulations - Statutory Rules 1026, No. 186.

Senate adjourned at 11.15 p.m.

Cite as: Australia, Senate, Debates, 17 March 1927, viewed 22 October 2017, <http://historichansard.net/senate/1927/19270317_senate_10_115/>.

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Senate17 March 1927

QUESTION

WINE BOUNTY

Senator CHAPMAN:SOUTH AUSTRALIA

Senator CRAWFORD:Honorary Minister · QUEENSLAND · NAT

QUESTION

KIDMAN-MAYOH CONTRACT

Senator NEEDHAM:WESTERN AUSTRALIA

Senator PEARCE:Vice-President of the Executive Council · WESTERN AUSTRALIA · NAT

QUESTION

COMMONWEALTH BANK OFFICERS

Senator HOARE:SOUTH AUSTRALIA

Senator PEARCE:NAT

QUESTION

FEDERAL CAPITAL

Senator OGDEN:TASMANIA

STATES GRANTS BILL

Second Reading

Senator MCLACHLAN:Honorary Minister · South Australia · NAT

Senator Lynch:

Senator McLACHLAN:

Senator Chapman:

Senator McLACHLAN:

Senator H Hays:

Senator McLACHLAN:

Senator Sir Henry Barwell:

Senator McLACHLAN:

Senator Sir Henry Barwell:

Senator McLACHLAN:

Senator Needham:

Senator McLachlan:

Senator H Hays:

Senator McLachlan:

Senator H Hays:

Senator McLACHLAN:

Senator Sir Henry Barwell:

Senator McLACHLAN:

Senator Needham:

Senator MCLACHLAN:

Senator Sir Henry Barwell:

Senator MCLACHLAN:

Senator Needham:

Senator McLACHLAN:

Senator GREENE:NEW SOUTH WALES · NAT

Senator McLACHLAN:

Senator Findley:

Senator McLACHLAN:

Senator H Hays:

Senator McLACHLAN:

Senator H Hays:

Senator McLACHLAN:

Senator Grant:

Senator McLACHLAN:

Senator Findley:

Senator McLACHLAN:

Senator H Hays:

Senator McLACHLAN:

Senator Sir Henry Barwell:

Senator McLACHLAN:

Senator GREENE:NEW SOUTH WALES · NAT

Senator McLACHLAN:

Senator GREENE:NEW SOUTH WALES · NAT

Senator McLACHLAN:SOUTH AUSTRALIA · NAT

Senator Sir Henry Barwell:

Senator McLACHLAN:

Senator Sir Henry Barwell:

Senator McLACHLAN:

Senator Findley:

Senator McLACHLAN:

Senator Graham:

Senator McLACHLAN:

Senator Findley:

Senator McLACHLAN:

Senator Findley:

Senator McLACHLAN:

Senator Findley:

Senator McLACHLAN:

Senator Findley:

Senator McLACHLAN:

Senator McHugh:

Senate
17 March 1927

Senator CHAPMAN:
SOUTH AUSTRALIA

Senator CRAWFORD:
Honorary Minister · QUEENSLAND · NAT

Senator NEEDHAM:
WESTERN AUSTRALIA

Senator PEARCE:
Vice-President of the Executive Council · WESTERN AUSTRALIA · NAT

Senator HOARE:
SOUTH AUSTRALIA

Senator PEARCE:
NAT

Senator OGDEN:
TASMANIA

Senator MCLACHLAN:
Honorary Minister · South Australia · NAT

Senator GREENE:
NEW SOUTH WALES · NAT

Senator GREENE:
NEW SOUTH WALES · NAT

Senator GREENE:
NEW SOUTH WALES · NAT

Senator McLACHLAN:
SOUTH AUSTRALIA · NAT

Senator GREENE:
NEW SOUTH WALES · NAT

Senator GREENE:
NEW SOUTH WALES · NAT

Senator GREENE:
NEW SOUTH WALES · NAT

Senator GREENE:
NEW SOUTH WALES · NAT

Senator GREENE:
NEW SOUTH WALES · NAT

Senator OGDEN:
Tasmania