Senate
23 March 1928

10th Parliament · 1st Session

  1. Senate
  2. 10th Parliament
  3. 1928

The President (Senator the Hon. Sir John Newlands) took the chair at 11 a.m., and read prayers.

page 4097

QUESTION

FEDERAL CAPITAL

City and Territorial Revenue and expenditure- footpath and Guttering Charges.

Senator LYNCH:
WESTERN AUSTRALIA

asked the Minister representing the Treasurer, upon notice -

  1. What is the total expenditure on the Federal Capital City and Territory from (a) loan moneys, (b) revenue?
  2. What is the present income derived from the city and territory?
  3. Does the income derived cover the interest charges on the total expenditure?
  4. If not, what is . the deficiency?
Senator Sir GEORGE PEARCE:

– The information is being obtained.

Senator ELLIOTT:
through Senator Poll

asked the Minister representing the Minister for Home and Territories, upon notice - 1.Is it a fact that the Federal Capital Commission is calling upon lessees to pay half the cost of making the footpaths and gutters in addition to extremely high ground rents under their leases?

  1. If so, under what clause in the leases is this demand made?
  2. If there is no such clause in the leases, how can this demand he supported, and in particular is it claimed that the Commission ran at will- alter or add to the terms of such leases without regard to the rights of the lessees ?
  3. Is it intended by the Commission, by reason of its governmental powers, to treat, in effect, such leases, as “mere scraps of paper”?
  4. If otherwise, to what extent is it contended that the Commission can rightfully amend, add to, or depart from the terms of the leases?
Senator Sir WILLIAM GLASGOW:

– The replies are: -

  1. It is a fact that owners of leases are being required to pay half the cost of the kerbing and guttering adjoining their lands. No charge will be made in respect of footpaths until they are laid in permanent construction.
  2. The charge in respect of kerbing and guttering is being made in pursuance of regulations under the Building and Services Ordinance. This ordinance was made prior to the first sale of leases in the Territory.
  3. Leases are subject to the general law of the Territory.
  4. See answer to No. 3.
  5. See answer to No. 3.

page 4097

QUESTION

AUSTRALIAN COMMONWEALTH LINE OF STEAMERS

Details of Tenders - Wirelessrates

Senator THOMAS:
NEW SOUTH WALES · NAT

asked the Minister representing the Prime Minister, upon notice -

  1. Is it a fact that tenders have been received in London for the purchase of the Commonwealth Line of Steamers?
  2. Is it a fact that the Prime Minister has stated that it would cost a small fortune to have the full details of the offers cabled to Australia, and that before taking action he is awaiting communication by mail?
  3. Is it a fact that for want of traffic the beam wireless is idle for many hours- daily ?
  4. Is it the opinion of the Prime Minister that it is- business to permit, for the use of the beam wireless, such charges as to make it prohibitory for even the Federal Government to use it in connexion . withbig business transactions ?
  5. Is it the opinion of the Prime Minister that it is business to carry on negotiations by the slow and out-of-date methods of mail communication when it could be done by wireless?

Senator Sir GEORGE PEARCE.The Prime Minister has furnished the following replies: -

  1. Yes.
  2. The receipt of the tenders by mail is being awaited. Apart from the question of cost involved, the information which has been received by cable indicates that it is not practicable to communicate full particulars of the tenders by this method.
  3. I am not aware that this is the case.
  4. The charges for messages sent by beam wireless have been fixed after full consideration of all the conditions and are aslow as the existing circumstances justify.
  5. The Government takes the . fullest advantage of the wireless service, but this method of communication cannot entirely take the place of communication by mail.

page 4097

QUESTION

NEW GUINEA

Offences Against White Women

Senator CHAPMAN:
SOUTH AUSTRALIA

asked the Minister representing the Minister for Homo and Territories, upon notice -

  1. Has the Minister seen a statement in the press to the effect that several travellers from New Guinea had expressed concern at the increasing number of attempted offences on white women by natives in New Guinea?
  2. Is the Minister aware whether members of the Parliamentary party which visited New Guinea recently were informed of the seriousness of the position? .
  3. Will the Government have full enquiry made into the matter, and take action if necessary ?
Senator Sir WILLIAM GLASGOW:

– The answers are-: -

  1. Yes.
  2. No.
  3. The matter is already receiving attention with a view to the taking of such action as may be deemed to be necessary.

page 4098

EXCISE TARIFF BILL

Bill read a third time.

page 4098

CUSTOMS TARIFF VALIDATION BILL

Bill road a third time.

page 4098

BEER EXCISE BILL

Second Reading

Senator McLACHLAN:
Honorary Minister · South Aus tralia · NAT

.- I move -

That the bill benow read a second time.

This is a short measure framed to place Australian brewers in a similar position to those importing beers and stout. The Beer Excise Act of 1921-23 provides that no beer shall be removed from a brewery unless it is in vessels or in quart, pint or half-pint containers. Imported stout is done up in quarter-pint bottles known as “ split nips “ whereas under the Beer Excise Act Australian stout must be in bottles containing not less than one half-pint. The Australian brewers have asked that the Australian product be placed on a similar basis to imported stout. The amendment provides that stout . may be put up in quarter-pint bottles.

Question resolved in the affirmative.

Bill read a second time, and reported from committee without amendment.

Report adopted.

page 4098

COMMERCE (TRADE DESCRIPTIONS) BILL

Second Reading

Senator McLACHLAN:
Honorary Minister · South Australia · NAT

, - I move -

That the bill be now read a second time.

This measure is to.’ amend the Commerce (Trade Descriptions) Act in relation to goods which subsequent to being landed have had false trade descriptions attached to them. The existing law relates only to goods bearing a false trade de scription found in any package or covering, and the amendment is to cover all imported goods found in Australia which bear a false trade description and which, until the contrary is proved, will be deemed to have been imported in contravention of the act. By this means the department will be able to deal with persons who attach false trade descriptions to imported- goods which originally bore a proper trade description. The remaining amendments are of a machinery character and widen the scope of section15 of the principal act, which provides that sections 7 and 11 shall not apply to any goods other than articles of food, medicines, manures, apparel, jewellery, or seeds and plants - hrushware was added in 1926. We are now proposing to add to section 15 “ or any other goods specified by proclamation.” This will make that section more elastic and enable the department to administer the act more effectively.

SenatorNEEDHAM (Western Australia) [11.12]. - From a cursory glance the measure appears to be of a machinery nature to extend the provisions of the principal act and to afford greater protection in the matter of trade descriptions. TheMinister did not indicate if any offences of the kind mentioned by him have been discovered.

Senator McLachlan:

– They are not offences as the law stands at present.

Senator NEEDHAM:
WESTERN AUSTRALIA

– As these amendments are to facilitate the adminis tration of the law, I offer no objection to the passage of the bill.

Question resolved in the affirmative.

Bill read a second time.

In committee -

Clauses 1 and 2 agreed to.

Clause3 (Imported goods found in Australia with false trade descriptions).

Senator PAYNE:
Tasmania

– As this appears to be the most important clause in the bill, perhaps the Minister will give the committee more information concerning the proposed amendment

Senator McLACHLAN:
Honorary Minister · South Australia · NAT

. - Section 8 of. the principal act deals with -

All imported goods to which a trade description is by this Act or the regulations required to be applied and which are foundin

Australia in any package or covering in which they were imported and-

We have just eliminated under clause 2 the words “ in any package or covering in which they were imported and “ without the prescribed trade description shall, until the contrary is proved, be deemed to have been imported in contravention pf this Act or of the regulations as the case may be.

The amendment will enable the Act to apply to any goods specified by proclamation. Let me cite a typical instance to illustrate the need for this amending mea sure. Cricket balls are imported from India without any trade description being applied to them, and immediately they are branded in such a way as to lead the public to believe that they have been made in Australia. It is to meet such contingencies that the proposed new paragraph has been inserted, so as to enable the main provisions of the act to be operative.

Clause agreed to.

Clause 4 agreed to.

Title agreed to.

Bill reported without amendment; report adopted.

page 4099

FINANCIAL AGREEMENT BILL

Second Reading

Debate resumed from 22nd March (vide page 4029), on motion by Senator Sir George Pearce -

That the bill be now read a second time.

Senator NEEDHAM:
Western Australia

– I have no hesitation in saying that this bill is of far-reaching importance. It will, we may presume, for some considerable time determine the financial relations of the Commonwealth and the States. It is not my intention to traverse the history of the negotiations that led up to the agreement embodied in this measure. I dealt with that phase of the question fully when we were discussing a similar measure last year, and I am confident that honorable senators are all well aware of the detailed provisions of the agreement. Nor is it my intention to discuss the proposals in so far as they affect the States generally. I intend to confine my remarks almost entirely to the position of Western Australia under this agreement, or rather, to state my view of how it will affect the State which

I assist to represent in this chamber. I may add that in dealing with the . bill I am stating only my own personal opinion. Whether we like it or not, Parliament has definitely decided to abolish the per capita payments to the States. Before I leave this phase of the proposal, I wish to quote a statement bearing on the general position made, by the late Lord Forrest on the 15th July, 1910. It is as follows : - 1 make this statement in the full knowledge of its truth, that the reason that the States were willing to accept 25s. per head was that they were guaranteed that amount until the people should otherwise direct and that it did not depend on the chance vote of parliament.

That was the well considered opinion of the late Lord Forrest concerning a matter that had been agitating the public for seventeen years. The opinion is as sound to-day as it was when first uttered. I believe that the people of Australia, if they had an opportunity to express their view, would desire a continuance of the per capita payments until such time as they gave Parliament a mandate to alter the arrangement. At the Premiers’ Conference in 1926, the proposals submitted by the Prime Minister (Mr. Bruce) were unanimously rejected, and following the publication of reports of that gathering, there was a strong wave of indignation throughout the Commonwealth. Leading public men and important sections of the press adversely criticized the scheme put forward by the right honorable the leader of this Government. In effect the arrangement then contemplated by the Government was to abolish the per capita payment of 25s. and in return the Commonwealth would evacuate certain fields of direct taxation. The effect of those proposals, if adopted, would have been to add considerably to the burdens of the several States. It would have been necessary for State Governments to increase taxation to make good the deficiency caused by the withdrawal of the per capita payments. Naturally, State Governments have no desire to adopt that course. They contend, and rightly so, that since they have” substantial commitments in the way of developmental public works within their territories, their financial resources should not be in any way impaired. Their responsibilities are daily increasing. This is particularly true of

Queensland and Western Australia, and perhaps I may be pardoned if I say that it is especially true of Western Australia. I hope I shall not be charged with parochialism whenI say this. Itis common knowledge that Western Australia must carry through many big developmental works in the near future. The Government of that State has incurred already, and must continue to incur, heavy liabilities, to ensure the satisfactory development of vast new areas that are being opened up for settlement. The representatives of the States, realizing that, with the progress of time, their responsibilities would increase, unanimously rejected the proposals made by the Prime Minister in 1926, and as a result of pressure inside and outside Parliament the Ministry deemed it wise to submit other proposals. The agreement, which is attached as a schedule to the bill that we are now discussing, is the outcome of conferences held in June and July of last year. . It has been stated, and the statement is true, that all of the State Premiers have accepted this agreement and that certain of the State Parliaments have agreed to it.

Senator Sir George Pearce:

– Four State Parliaments have approved it.’

Senator NEEDHAM:

– The State Premiers had no alternative. They put up a splendid fight but they realized that, if they could get nothing else, they would be obliged to accept the agreement. They endeavoured to get the best terms possible for the States, and I believe they succeeded.

Mr GREENE:
NEW SOUTH WALES · NAT

– Does’ not the honorable senator think that the State Premiers now are thoroughly satisfied ?

Senator NEEDHAM:

– I do not know. They realized, as I stated, that they had to make the best of an awkward situation. The agreement, I admit, is much preferable to that which was formerly offered by the Commonwealth Government. The earlier proposals were not acceptable to either the Premiers or many members of this Parliament. But even this agreement will not ensure to the States complete financial justice in the shape of their fair share of the Commonwealth revenue. It will adversely affect Western Australia. The Commonwealth proposes to take over all the State debts existing at 30th June, 1927, and in the case of Western Australia will pay £473,432 towards the interest charges on the amount of debt taken over. That amount is equivalent to the per capita payment which was made to Western Australia for the financial year 1926-27. In addition, the Commonwealth proposesto create a sinking fund of 7s. 6d. per cent., to which it will contribute at the rate of 2s. 6d. per cent, and the State at the rate of 5s. per cent. A set of figures that I have analysed discloses that the net public debt of Western Australia at the 30th June, 1927, was £61,060,675. The following table shows the method by which that figure is arrived at, and includes also the figures relating to the six States of the Commonwealth : -

The Prime Minister (Mr. Bruce) has stated that those contributions “will be continued for a period of 58 years, when it is expected that the debt will be extinguished ; and the bill makes provision in that direction. The next concession proposed by the Commonwealth is that on all new loans raised by the State, there shall be a sinking fund of 10s. per cent., to which the State will contribute at the rate of 5s. per cent, and the Commonwealth at, the rate of 5s. per cent. The remaining concession is that the Commonwealth will increase from 31/2 per cent, to 5 per cent, the rate of interest payable to the State on transferred property. The total additional amount which the whole of the States will receive by that means will be £163,865, of which Western Australia’s share will be £11,047. I wish to show how, in the case of Western Australia, these concessions will compare with what that State would receive under the system of per capita payments. According to statistics that appear on page 182 of the budget for 1927-28, the population of Western Australia more than doubled itself during the period 1900 to 1926. The question of population is a vital one in a discussion of this nature. In 1900 the population of Western. Australia was 179,967, while in 1926 it was 378,746, an increase of 198,779. I may add that Western Australia is the only State which more than doubled its population during that period. The following table sets out the. estimated annual increase of population in the different States, from 1900 to 1926.

The population of Western Australia increased at the rate of 2.91 per cent, per annum between 1900 and 1926, but in view of the rapid progress now being made by that State I think it may be safely assumed that the increase in the future will be at the rate of 3 per cent. That is the percentage increase on which’ I propose to base my calculations. The per capita payment of 25s., on a population of 378,746, would amount to- £473,432, which is the flat rate that is to be contributed to the interest charge. In order to arrive at the payment which Western Australia would receive under the per capita system in the ensuing 58 years, it is necessary, to add 3 per cent, to the population at the end of each year. Perhaps I can. illustrate my contention more clearly by quoting the following table: -

Senator Sir George Pearce:

– The honorable senator has gone too far back with his calculations. Western Australia was paid at the rate of 25/- a head for the financial year 1927-28. Under the proposed agreement she would receive a larger sum. The honorable senator should commence his calculations as from the time when the payment becomes fixed; that is, at the end of this financial year.

Senator NEEDHAM:

– These figures have been worked out not only by me, but by others. Under the proposed agreement, Western Australia will receive only £27,459,056, and will thus suffer a loss of £46,553,439 in the next 58 years, as compared with the actual per capita payments. There is, however, a set-off against that figure; we must deduct the concessions that Western Australia will receive under the proposed agreement. In the . first place we must take into account the 2s. 6d. per cent, to be paid into sinking fund by the Commonwealth in respect of the old debt. There is also the 5s. per cent., which the Commonwealth proposes to pay on new debts. I admit that it is practically impossible to visualize what will be the State’s requirements in the years that areahead. For calculation purposes I have taken from the finance bulletin the ‘ debt of Western Australia as at the 30th June in each year over a period. The average increase in the ten-year period, 1916-26, was £3,166,000, and in the fiveyear period, 1921-1926- which, I think isa fair period to take- £4,353,000. I assume for the purposes of my calculation that £4,000,000 annually is approximately the amount that Western Australiawill require for at least some years to come. If the Commonwealth makes to the State a payment at the rate of 5s. per cent, on- that amount, its contribution to the sinking fund will be £10,000 per annum. Then there is the increase of 1-1/2 per cent, on transferred properties, which amounts to £11,047 per annum. In order to bring the whole of the computations together, I have prepared a statement which shows that under the old per capita system Western Australia would have received in the next 58 years approximately £74,000,000, estimating the increase of population at the rate of 3 per cent. The amount which it will receive in that period, under the proposed new agreement, is in respect of the fixed contribution to interest charges at the rate of £473,432 per annum, £27,459,056. There is also the amount of £76,326 per annum which will be paid by the Commonwealth to the sinking fund at the rate of 2s. 6d. per cent, to liquidate the present net debt with, and this for a period of 58 years, will total some £4,426,908.

Senator McLachlan:

– -Didnot the honorable senator say that the annual payment would be about £76,000 ?

Senator NEEDHAM:

– On the old basis, with a three per cent, increase of population Western Australia would receive £74,000,000 during a period of 58 years. I was stating the amount which that State will receive under the new agreement. In addition to the £4,426,908 to be paid to the sinking fund, Western Australia will receive an increase of11/2 per cent, on the interest paid on the value of the transferred . properties. This, which is set down at £11,047 per annum will mean, in respect of the period of 58 years, an additional £640,726. Further there is the 5s. per cent, which the Commonwealth will pay into a sinking fund in respect of all new loans ‘which, assuming that Western Australia borrows £4,000,000 per annum, will amount in the first year to £10,000; in the second year, with the raising of an additional £4,000,000, it would amount to £20,000, and so on. Over the full period of 58 years the Commonwealth would thus pay into the sink ing fund in respect of new loans raised by Western Australia, approximately £17,000,000. From these figures it will be seen that at the end of the 58 years my State will be £25,000,000 worse off under this agreement than she would be if the per capita payments were continued.

Senator Sir George Pearce:

– Evidently the honorable senator is of the opinion that the Labour party will not be in power in the Commonwealth for 58 years.

Senator NEEDHAM:

– I am not now expressing the Labour party’s policy, but am giving my own opinion of the effect of this agreement on Western Australia.

Senator Sir George Pearce:

– Should the Labour party get into office the per capita payments will be discontinued.

Senator NEEDHAM:

– There is no foundation for that statement.

I desire to say a word with regard to the Loan Council. I have always been in favour of a Loan Council and am glad that now all the States are represented on it. It is better to have one borrower in the money market than seven.

Mr GREENE:
NEW SOUTH WALES · NAT

– Does the honorable senator suggest that there should be only one borrower?

Senator NEEDHAM:

– Occasions may arise when it will be necessary to have more than one borrower in the market at the same time, but generally that will not be the case. I move -

That all the words after “That” be left out with a view to insert in lieu thereof the words “ the Bill, involving as it does an alteration of the Constitution, be postponed until Parliament has had an opportunity to discuss a comprehensive scheme of constitutional reform including the evidence taken before the royal commission now sitting and its proposals when made.”

The “ Constitution Royal Commission is taking voluminous evidence in each of the capital cities from representatives of every section of the community - commercial,industrial, social, legal and otherwise. Seeing that it is proposed at the next election to ask’ the electors to empower this Parliament to make agreements, and to ratify this agreement, it would be wise to wait until the Commission’s report has been presented to Parliament. In my opinion the financial relations between the Commonwealth and the States should have been one of the first things dealt with by the Commission. Indeed the importance of the question warrants an interim report. Honorable senators may ask what we should do in the meantime, because, obviously, with a large proportion of their financial supplies cut off, the States could not be left waiting until a determination was arrived at. It has not been suggested that any difficulty will be occasioned by waiting until the next election for the ratification of this agreement. In that case, we should wait a little longer until the Constitution Commission has presented its report. I trust that the Senate will agree to the amendment.

Mr GREENE:
NEW SOUTH WALES · NAT

– I do not propose to discuss this subject at length. Nor do I intend to deal wit-h Senator Needham’s abstruse calculations as to the ultimate effect of this agreement on Western Australia. The future is so uncertain that it is impossible to say now what difference the agreement will make to any State at the end of 5S years.

The Government is to be complimented upon having arrived at such a satisfactory solution of the difficult question of the financial relations of the Commonwealth and the States. My only regret is that they did not act earlier along similar lines. The trouble which arose was caused by the proposals originally put forward by the Government. So far as I was concerned, my criticism was against the method rather than the objective. I have always been willing to allow this question to be settled on the basis of an adjustment of the State debts, and before this arrangement was proposed I informed the Government accordingly.

In considering this bill we must remember that the agreement has yet to be ratified by the new Parliament which has to be elected and also by the electors. Seeing that several of the State Parliaments have ratified the agreement, believing that it offers the best possible solution of a difficult problem, it is probable that the electors also will accept it. I am not in entire accord with the agreement - in some directions I should like to see it altered - but that is no reason why I should not vote for the bill. The State Governments have accepted the agreement and this Parliament must either accept it or reject it as a whole.

The agreement appears to assume that in the future the Commonwealth will be the sole borrower. I am aware that it actually provides otherwise. I am also, conscious that there is a very general belief that the credit of the Commonwealth in the world’s money market is greater, than that of the individual States, and that consequently for the Commonwealth to..do the borrowing for the whole of Australia’s requirements would represent a saving. I think that is a misconception. One would naturally suppose that the securities of the Commonwealth would be regarded by the overseas lender of money as better than those of any individual State, but the ways of the money market of the world are very weird. I had before me the other day a set of figures which gave the value in London on a certain date of all the securities issued by various bodies in Australia - the Commonwealth, the States, and local governing bodies, including such semi-government instrumentalities as water and sewerage boards. The figures were calculated on a common basis with the whole of the interest payable eliminated and it will surprise honorable senators to learn that Tasmanian State bonds stood at par on the London market, and, if my memory serves me rightly, were 15s. per cent, above any other Australian security. The Tasmanian loan was 25s. above the highest priced Commonwealth security and 30s. above that of any security of New South Wales. The investor on the other side of the world Joes not like to have all his eggs in one brisket. The tendency is for him to spread his investments, and just as supply and demand fix the value of everything else, so does the value of any security depend upon the demand for it. On the date covered by the figures I have mentioned, there was a surplusage of Commonwealth securities on the London market - I think they stood third on the list - but there was not sufficient to meet the demand for the Tasmanian security.

Senator THOMAS:
NEW SOUTH WALES · NAT

– There is a limited supply of Tasmanian stock.

Mr GREENE:
NEW SOUTH WALES · NAT

-There is not much of it, but it is in demand. The same conditions apply to certain State and municipal securities and to other stocks, particularly those in which trust funds can be invested. If we prevent the various States and local governing bodies and semi-government instrumentalities from going on the London Market, and borrowing in their own names, we shall find still greater difficulty in floating loans in London than w,e are experiencing at the present time because the London market will become .glutted with Commonwealth stock. “We know that at the present moment the position of Commonwealth securities on the London market is not too happy. “When we find that 75 per cent, of a 5 per cent. Commonwealth loan issued at £98 is left in the hands of the underwriters it shows that the demand for our securities is for the moment at any rate oversupplied. It is quite evident that we can feed the London market with too much of one class of stock and I think that the provision in the agreement with the States under which, with the unanimous consent of the members of the Loan Council, the States may borrow in their individual names, should be utilized to the greatest possible extent. In that way I think we shall get the best results out of the money market overseas. If the Commonwealth had not borrowed -quite so much in its own name and had allowed the States to borrow more in their own names, I am sure Commonwealth securities would be at a higher level than they are at the present time. The right course to follow is for the Commonwealth to raise its own loans and for the States to raise loans in their own names. I have not a word to say against the arrangement that is embodied in the agreement under which the Loan Council is now to be regularized in the legislation of the country. Honorable senators are aware that the Loan Council, as we know it today, had its genesis in the war period. The State Treasurers were then called together from time to time by the Treasurer of the Commonwealth, the moneys required by the various States were, as far- as .possible, policed by the general body, and limitations were placed upon the borrowing activities of the States. That was a necessity which arose out of the, war and the Commonwealth Treasurers, during that period, took the lead in the arrangement thus made. The Loan Council which we have to-day is the natural outcome of that arrangement. It started during the war and has not ceased to function, because ever since the war, of course, the financing of the Commonwealth and the States has become more and more difficult. I congratulate the Treasurer (Dr. Earle Page) on having continued that arrangement, and on having brought it to the stage of having it embodied in this agreement. It is certainly to the advantage of all concerned that the demands of Australia on the money market of the world should be limited, and that each Australian Treasurer should know when a fellow Treasurer is about to float a loan. It has been necessary for Australia to go on the American money market, but I am not satisfied that we have adopted the best method of handling that market. I am aware that the Government has obtained what is considered expert advice on the matter, and we have commenced borrowing in New York on the assumption that it is quite right to follow exactly the lines we have hitherto followed with great success in London. But I do not share that view, because the conditions under which the money market is operated in New York are entirely different from those to which we have been accustomed in London. However, we can only leave it to the future to decide whether the present method should be continued in New York, or whether it will be necessary to adopt other methods to meet the entirely different conditions which operate there.

It is a great pity that when the Government originally decided to take the step of perpetuating payments by the Commonwealth to the States, it did not definitely announce that it would probably do so. by taking over so much of the State debts under the provisions of the Constitution which ‘ contemplated such a step. The Constitution does not make full provision for the procedure which the Government has now chosen to adopt, and it will be necessary to alter it to give effect to the principle which is contained in this bill. But the Senate, particularly in its capacity as the guardian of the rights of the States, can have every confidence in endorsing the lines upon which this question has been settled between the Commonwealth and the States, because they are directly in accordance with those sections of the Constitution which provide for the Commonwealth ultimately accepting some of the liability for the State debts, and because in that way the Commonwealth is making a true contribution to the growing needs of the States.

Senator FOLL:
Queensland

.- A great deal of bitterness was felt in Queensland in the early stages of the negotiations between the Commonwealth and the States when it was thought that the Commonwealth intended to throw upon the States the onus of collecting through income taxation the amount of revenue that it would lose by the abolition of the per capita payments. But the people of Queensland were not so much disturbed because of the proposals of the Commonwealth itself. They realized that for the previous ten or twelve years they had been heavily overtaxed and they felt that if the Commonwealth Government abandoned the field of direct taxation mid handed it over to the State Government, the taxation would be imposed by the State in an inequitable way, just as it bacl been in the immediate past, and that considerably more would be extracted from the taxpayers than was actually needed to compensate the State for the loss of the per capita payments. That was the main objection of a large section of the people of Queensland to the original proposals brought forward by the Commonwealth Government.

Senator Givens:

– If the State Government was taxing the people inequitably, the electors of Queensland had the remedy in their own hands.

Senator FOLL:

– The honorable senator knows quite well that what he says is theoretically correct.

Senator Givens:

– And actually, too.

Senator FOLL:

– The electors of Queensland are the victims’ of one of the biggest swindles which has ever been perpetrated in the political life of Australia. Even if those opposed to State Labour rule secure a majority of the votes cast, they are prevented from securing a majority of the seats owing to the unfair redistribution. That is the reason why such a strong feeling exists in that State. They have been swindled out of their rights.

Although those opposed to the present administration have polled a majority of the votes, they have not had an opportunity to unseat the present government.

Senator Givens:

– That is quite true.

Senator FOLL:

– Yes’. That is why a majority of the people of Queensland regard the Commonwealth Government as their only arm of defence, and the only source from which they can get justice under present conditions. When the Government stated that they proposed to dispense with the per capita payment, and to make available to the States certain fields of taxation in which the Commonwealth was operating, the States thought that they were not getting a fair deal. That is why the Queensland Chamber of Commerce and other influential organizations waged such a bitter’ campaign against the original proposals of the Government. The agreement now under consideration has been signed by the Commonwealth Government and the Governments of the six States, and has also been ratified by four of the State Parliaments. 1 believe that a majority of the people in Queensland are satisfied with the Government’s proposals, and are gratified to learn that the agreement is likely to be ratified by all parties. The proposal for a readjustment of Commonwealth’ and State finances is not of recent origin; the problem has been a nightmare to Commonwealth and State treasurers ever since the financial operations of the Commonwealth reached any magnitude. After nearly 28 years’ experience of other systems, we can say that this agreement will have the effect of overcoming practically all the difficulties in this regard with which the Commonwealth and States have been confronted for many years. It is a tribute to the present Commonwealth Government that such an arrangement should have been reached. I do not blame the State Governments for declining to offer suggestions at the first conference. It was only natural that they should wish to retain the per capita system under which they received moneys ‘which they did not raise. They were able to spend that money as they liked, ‘and, to use a colloquialism, would have” been “mugs” if they had given up their claims to it without putting up a strong fight. When the

Government decided to simplify the financial arrangements between the Commonwealth and the States they had to definitely dispense with the per capita payments. The fact that this agreement has been entered into will have a very beneficial effect upon the credit of the Commonwealth arid of the States, and will assist them considerably in many of their financial transactions overseas. When the agreement was adopted, many/ of the leading financial newspapers in Great Britain expressed pleasure at the prospect of Australia’s finances being placed on a much sounder basis, and provision being made for our debts to be redeemed within a specified period. During the last twelve or thirteen years the taxpayers in Queensland have been wondering what the future has in store for them. They have been alarmed at the unrestricted borrowing which has been carried on by the Government without any attempt to establish a sinking fund to provide for the redemption of the debt within a certain period. Many loans on falling due have been converted at higher rates involving expenditure greater than the taxpayers should be asked to bear. Under the re-constituted Australian Loan Council, each State will have an interest in the borrowing policy of the Commonwealth and the other States. In the past the Commonwealth Government and two or three of the State Governments have been on the London money market at the same time. In one instance when South Australia and Queensland were anxious to obtain a fairly substantial loan, there was almost indecent competition between the two States. Tinder this agreement the Australian Loan Council will function on behalf of the - Commonwealth and the States, and their representatives on the Loan Council will, in a sense, be financial partners. Prior to New South Wales being represented on the Loan Council, that State raised a loan on which the flotation expenses and interest charges for the first year amounted to thousands of pounds more than they need have done. That was due largely to the fact that Mr. Lang, who was then Premier of New South Wales, declined to be associated with the Loan Council. The terms tinder which that loan

Senator Foll. was obtained were so disadvantageous to the State that even Mr. Lang eventually decided that his Government should be represented on the council. This was on the eve of the New South Wales election. It must be satisfactory to the Commonwealth and State Governments and also to the people to realize that in all future borrowing, the Commonwealth and the States will be acting in unison, instead of competing against each other. Every credit is due to those responsible for the establishment of an Australian Loan Council. A few years ago almost unlimited amounts of money were available to borrowers, but that is not the position ta-day. Mr. McCormack, the Labour Premier of Queensland, on his “ return from Great Britain a few months ago, sounded a wise note of warning when he said that Australia should call a halt in borrowing, and that in future the same amount of loan money would not be available. That is interesting, coming as it does from- one who for years has spent freely from the public purse, and who was a member of the State Government led by the honorable member for Dalley (Mr. Theodore), who was responsible for the most reckless financing that Queensland has ever experienced. In saying that overseas borrowing should be curtailed I do noi suggest that Australia’s credit has been impaired. This agreement is a satisfactory solution of the problem that was unsolved by the original proposals. Under this arrangement the Commonwealth and State Governments are working in a partnership for the purpose of stabilizing the finances of Australia generally, instead of the States as formerly competing one against the other for any loan moneys that might be available. I believe that this agreement will do much to create a truer spirit of federation and a better feeling between the Commonwealth and the States than has existed up to the present.

Senator THOMAS:
NEW SOUTH WALES · NAT

– Does not the honorable senator think that it will lead to unification?

Senator FOLL:
QUEENSLAND · NAT; UAP from 1931

– I fail to see how it will do that. I believe that a continuance of the disagreements which previously existed between the Commonwealth and the States would have hastened unification. Harmonious relationships such as now exist and which we hope will continue, will not do that. I feel sure that Senator Thomas, whether or not he now believes in unification - I understand that at one time he did - is, like myself, gratified that the unfortunate tangle of Commonwealth and State finances has been reasonably straightened out by the agreement, and, therefore, that he will support the bill, believing that it will do much to place the financial relations of the Commonwealth and States on a more satisfactory footing.

Senator OGDEN:
Tasmania

– The financial relations of the Commonwealth and the States was one of the most controversial questions that was discussed by the delegates at the several federal conventions. It occupied a great deal of time and very nearly destroyed the proposal to bring about Federation. The delegates could come to no agreement, but eventually, as honorable senators know, a compromise was adopted under which the States were to receive threefourths of the customs revenue and the Commonwealth the remaining one-fourth.

Senator Sir George Pearce:

– An agreement as to the allocation of the revenue was not arrived at by any of the conventions.

Senator OGDEN:

– I was about to say that the compromise was agreed to at a meeting of Premiers held in Sydney. It was decided that the arrangement should stand for ten years. At the termination of that period the per capita payments were substituted, and from that time until this agreement was made the financial relations of the Commonwealth and the States continued to be a vexed problem. The capitation payments were neverregarded as a permanent settlement of the difficulty. I supported the attitude taken up by the Government of New South Wales at that time. I held that the allocation to the States by the Commonwealth Government of a considerable portion of the customs revenue would always necessitate the imposition of high protective duties. In those days New South Wales was looked upon as a freetrade State. As one who believes in lower customs duties, I can see that if the Commonwealth Government is obliged to make capitation payments to the States, a policy of high protection is inevitable. Personally, therefore, and from that aspect alone, I am pleased that the per capita payments have been withdrawn. How does this proposal compare with that submitted by the Government some time ago. The Government took up the attitude that the per capita payments must cease. I was in complete agreement with the Ministry on that point, as also were a number of other honorable senators; but my objection then was that the Government did not indicate what it proposed to substitute for the payments. In the first place the Ministry suggested that the Commonwealth might evacuate certain fields of taxation. That proposal, I believe, was in the nature of a feeler put out by the Government to test public opinion. If it had been accepted it would have crippled the finances of my State at all events, and certainly it would have brought aboutunification, which was the objective of the Treasurer some time ago.

Senator Kingsmill:

– The honorable senator will perhaps remember that a suggestion which I made, but which was rejected at the time, is now included in this agreement.

Senator OGDEN:

– -If the Government’s earlier proposals had been adopted they would have had a serious effect upon the finances of several of the States. However, the Government abandoned them, and introduced a bill to abolish the per capita payments without informing members of this Parliament what financial arrangements would be substituted for them. The Government’s scheme was strenuously opposed in another place as well as in this chamber and at one time the Ministry was faced with a crisis. Although Senator . Foll just now commended ministers for having introduced those proposals there is not the slightest doubt that this new agreement is the result of pressure that was brought to bear upon the Government by members of the Senate and another place.

Senator Sir George Pearce:

– This agreement is the result of parliamentary endorsement of the Government’s proposal to abolish the per capita payments.

Senator OGDEN:

– I do not agree with the Minister. Parliament indicated clearly that if the per capita payments were withdrawn the Government would have to substitute some other arrangement to assist the ‘States. As a matter of fact. Senator Kingsmill submitted an amendment to provide for that.

Senator Sir George Pearce:

– It was never suggested th’at the Government did not propose to substitute some other form of payment. As a matter of fact it was always understood that the Government would do so.

Senator OGDEN:

– I asked the Minister repeatedly if the Government had in mind any other proposal and was informed that the Government would consider the question of taking over the State debts.

Senator Sir George Pearce:

– I said that the suggestion made by Senator Kingsmill would receive consideration, together with any other proposal that might be made.

Senator OGDEN:

– At all events the Minister’s reply to questions in this chamber left some doubt in the minds of honor able senators as to the Government’s intention.

Senator McLachlan:

– Does not the honorable senator think that if the Government had indicated its probable line of action it might have created difficulties ?

Senator OGDEN:

– That might have been considered a matter of policy. This new agreement certainly is a vast improvement on the original proposal. The discussions at the conventions indicated that the framers of the Constitution considered that some such proposal as this should be adopted, and in section 105 of the Constitution empowers the Commonwealth Government to take over the State debts existing at the time of federation. In 1912 the people gave the Government extended powers to take over nil or any portion of the State debts. As a supporter of the Constitution ‘and a believer- in federation I have always urged that the Commonwealth should take over the State debts in substitution for the per capita payments. I am afraid that if the opportunity came again to vote for federation my advice to the electors would be some what different from what it was at the first appeal to the people. ‘

Senator Andrew:

– Why?

Senator OGDEN:

– Because federation has not worked out as well as was expected for some of the smaller States. In the course of the debate the other day an honorable senator asked, by-way of interjection, why the Commonwealth should assume responsibility for debts contracted by the States. One reason is that but for the developmental work undertaken by the States in the construction of roads, railways, harbour improvements, in respect of education and in the discharge of many other functions of government, federation would not have been possible. Thu Commonwealth could not exist without prosperous States. I am afraid that our present prosperity is somewhat superficial because the raising of enormous revenues through the customs leads to governmental extravagance. I believe that there is a time of trouble ahead for us unless we curtail our present lavish expenditure; unless we limit our borrowing abroad; unless we stand up to our obligations and work harder. However, that is another matter. I think I have shown why the Commonwealth Government should assume responsibility for debts contracted by the States.

Senator McLachlan:

– Is not there a stronger reason than the one supplied by the honorable senator? Has not the Commonwealth a moral responsibility for those debts?

Senator OGDEN:
TASMANIA · ALP; NAT from 1926

-That is true, though I do not know that we can establish the case on the moral responsibility of the Commonwealth Government.

Senator McLachlan:

– Could we afford to allow any State Government to de/ ault ?

Senator OGDEN:

– I do’ not think that we could, if there were danger of that happening. I wish briefly to point to the advantages of the agreement embodied in this bill. In the first place it gives to the States some guarantee of financial permanency. It is not altogether a permanent solution of their difficulties, but I shall deal with that later. It will, as I have said, give to the States some guarantee that they will receive a certain fixed sum annually.

Under the original scheme the Commonwealth proposed to evacuate certain fields of taxation. That would have left the States in a position of uncertainty. They would not havebeen able to budget with any confidence because they would not have known where their revenues were coming from. Under this agreement there is at least some basis of permanency and a guarantee of what the States will receive.

Sitting suspended from 12.15to2.45 p.m.

Senator OGDEN:

– Another reason why I welcome this arangement is that I realize the evils of unrestricted public borrowing. If governments like the Queensland Government and other Labour administrations, who have deserted their old ideals and have become the most extreme borrowers in the Commonwealth, can be thrust from office or converted to a less extravagant policy, limitations may be placed upon public borrowing both at home and abroad. Every thinking man must admit that we are drifting into extravagant expenditure. The public debt of the Commonwealth and the States exceeds £1,000,000,000. As it grows our interest bill increases and taxation soars. The 6,000,000 people who live in Australia pay annually £78,000,000 by way of Federal and State taxation, and revenue from that source is increasing year by year. The total Commonwealth and State taxation is something over £13 per head of the population. Of that £78,000,000 two-thirds, or £50,000,000, are utilized in the payment of interest. We cannot continue along those lines. Therefore, I welcome this proposal, one of the chief features of which is the limitation of public borrowing.

Senator Andrew:

– Are not our railways a sufficient security for our indebtedness ?

Senator OGDEN:

– We have to base our calculations on the capacity of the people to pay taxation; when that is exhausted our assets will not help us. A stronger reason for my approval of this proposal is that under it a sinking fund is to be established for the extinction of existing debts in a certain number of years. New South Wales has borrowed a huge amount, but has made no provision for its redemption by way of a sinking fund. Western Australia has established a considerable sinking fund and at the same time its taxation is lower than that of any other State in the Commonwealth. Although Tasmania has been reproached on many counts, she makes per capita as large a contribution to a sinking fund as even Western Australia, and in additionto having built up an appreciable fund has [wiped off a large portion of her liability. This proposal establishes the principle ..that all States must contribute to a sinking fund. That will be a very great advantage, and on that account alone every honorable senator should welcome it with open arms. It would not be altogether correct to say that.it is a permanent solution of our financial troubles, although I admit that it is a fairly satisfactory one. It . is not quite permanent because smaller States like Western Australia and Tasmania will need to receive special federal allowances from time to time. Western Australia, with its big area and the possibility of an extension of its wheat industry, may eventually be able to make herself independent of assistance other than that provided for under this proposal. But for very many years Tasmania will not be in a position to dispense with additional Commonwealth assistance, for reasons that are obvious. I do not think any opposition will be offered to the bill, even by labour senators.

SenatorReid. - An amendment has been moved to postpone the secondreading of the bill.

Senator OGDEN:

– That cannot be regarded as opposition to the measure. I do not think that the Labour party objects in anyway to the proposal. That is evident from the fact that the agreement contains the signature of four labour Premiers.

Senator Hoare:

– They knew that they would have to accept it.

Senator OGDEN:

– The fact remains that they have accepted it. This is the best arrangement that could possibly be made. I congratulate the Government, with the reservationthat this action was practically forced from them.. The proposal contained in the bill represents a triumph for representative government. We forced the Government to do what the framers of the Constitution intended should be done, and what the Constitution itself provided for. I believe that in the future there will be less friction among the States and that eventually the Commonwealth Government will be able to so raise our credit abroad so that when Ave have to borrow we shall be able to do so on satisfactory terms. I trust, however, that a halt will be called to public borrowing, because the burden is becoming almost too heavy to bear and is the cause of many of our economic troubles.

Senator HOARE:
South Australia

– I agree with the Leader of the Opposition (Senator Needham) that the further consideration of the bill should be postponed. Before its introduction a vote- of the people ought first to have been taken. If the people had agreed to the proposal, the Government could have proceeded with the measure with the assurance that it would become a permanent arrangement when it had been passed by both Houses. As it is, there is nothing to prevent the people from rejecting the proposal. If they do, all our trouble will have been in vain ; because in such an event this legislation cannot become operative and the Government will have to find some other means of making payments to the different States. I think it was the late Sir Alfred Deakin who said -

Federal Government might ‘be, and in my opinion ought to be, introduced with a guarantee to each colony of the return to it of the sums it at present receives from the sources which the Federal Government takes over - of course, deducting the cost of the departments which the provisional Governments at present pay in order to obtain the revenue: and I would make the guarantee obtain not for five or twenty years, but for all time. The States have not been given back anything like the amount that has been taken from them.

Under this proposal the States will not receive the amount that should be given to them. Seemingly, the agreement will remain in force for a period of 58 years. In that time Victoria would receive under the per capita system £190,000,000, whereas under the agreement it will receive only £123,000,000, a- loss of £67,000,000, Queensland would receive under the par capita system, £132,000,000, but under the proposed system will re ceive only £64,000,000, a loss m £68,000,000. South Australia under the old system would receive £72,000,000, but now will receive only £41,000,000. Under the old system Western Australia would have received £73,000,000, but under this agreement only £27,000,000 will be paid to that State. That represents a loss of £46,000,000. The payments to Tasmania under this agreement will be £15,500,000, as against £20,000,000 under the old system. Under this agreement the States will lose between £400,000,000 and £500,000,000 during the next 5S years. Speaking in the South Australian Parliament, the Hon. L. L. Hill, Leader of the Opposition, in support of his statement that customs and excise revenue is continually increasing, gave the following figures: -

Revenue collected in South Australia - Customs and Excise (actual) 1919-20, £1,157,057; 1920-21, £2.460,106; 1921-22, £2,221,284; 1922-23, £2,806,638; 1923-24, £3,196,314; 1924-25, £3,031,543; 1925-26, £3,902,626.

From those amounts South Australia received the following amounts as per capita payments: - Per capita payment (actual) 1919-20, £578,094; 1920-21, £588,603; 1921-22, £621,862; 1922-23, £635.833; 1923-24, £650,453; 1924-25, £068,084; 1925-26, £684,932.

Senator Sir George Pearce. From what publication are those figures taken ?

Senator HOARE:

– I am quoting from the South Australian Hansard of 20th December, 1927. If the Commonwealth Government had desired to treat the States fairly, it would have- paid them according to the figures I have quoted. Under this agreement the States will receive the same flat rate each year, al though there is every indication that the amounts received as customs and excise duties will increase.

Senator Herbert Hays:

– Under a policy of protection the customs revenue should decrease each year.

Senator HOARE:

– Perhaps it should ; but it does not. A period of 58 years is a long time for which to bind any people. Before the expiration of that period some better arrangement may be evolved; but difficulty will be experienced in altering this agreement. Provision should be made for an alteration should the States desire it. Notwithstanding its defects, this bill is an improvement on the one Ave had before us previously, but, in my opinion, the States should have been consulted before the Commonwealth took the action it has taken,

Senator Sir George Pearce:

– All the States have accepted the agreement.

Senator HOARE:

– The State Parliaments may have done so; but they may not correctly represent public opinion. The fairest way would have been to consult the people.

Senator McLachlan:

– The electors must be consulted before the agreement can become operative.

Senator HOARE:

– That is so; but I still maintain that the cart is being put before the horse. The per capita payments should have been continued until the people had been consulted. The Government could then have gone ahead knowing that, it had the approval of the people.

Senator Duncan:

– Was not the abolition of the per capita payments at one. time a plank in the Labour party’s platform ?

Senator HOARE:

– I do not think so; but even if it were, time brings many changes. In any case, the people are superior to any party or parliament. They should be consulted. The bill contains one redeeming feature, in that it consolidates our borrowing. Instead of the several States going on the market perhaps at the same time, there will in future be one borrowing authority. I am glad that the New South Wales Government has decided to join the Loan Council. To the extent that it provides for uniformity of action and prevents overlapping and competition, the bill is an improvement on the Government’s original proposal, but something more is necessary. I therefore hope that the Senate will agree to the amendment.

Question - That the words proposed to be left out (Senator Needham’s amendment) be left out; - put. The Senate divided.

AYES: 5

NOES: 20

Majority . . . . 15

AYES

NOES

Question so resolved in the negative.

Amendment negatived.

Senator LYNCH:
Western Australia

– I feel that in opposing the second reading of the Financial Agreement Bill I am adopting an attitude which, judging by the vote just taken, is unpopular in this chamber. But I am not in the least dimayed because now, as previously, majorities do not get any slavish respect from me. Majorities are not always right. In the past they have done a great many foolish things that the well-balanced judgment of to-day universally condemns. It was at the will of the majority that hemlock was handed to Socrates. The first judicial murder committed in the world was endorsed by a majority - it was a majority which said, “Away with Him.” Another majority persecuted the Christians and sent them to the catacombs. Later on majorities caused the Christians to persecute one another. Even to-day things that are obviously wrong are often upheld and maintained by majorities. I say, therefore, that although there is an array of honorable senators supporting this bill it does not prevent me from saying that a majority has no right to deprive posterity of what is due to it. In this case I am appearing for posterity.

In considering the question before the Senate, it is just as well first of all to define this chamber’s position in the drama that is unfolding and to specify its right and obligations. Its duty, as we know, is to see that the interests of the States are safeguarded. Thatis its raison d’etre. We should not be here but for the need to preserve the interests of the States, and once those interests are determined, it is our responsibility to see that they are carefully and jealously safeguarded. The standing and reputation of the chamber suffer somewhat at the hands of not only the unthinking section of the public but also some of .its friends. The chamber is very often referred to in frivolous if not disrespectful terms by persons who are prompted by two motives; one because their party or interests are not represented here, and the other because the Senate is too democratic for them. In the early days of the framing of the Constitution the Labour party looked to the creation of a Senate because they thought that it would be a bulwark of democracy. The self-same party to-day, because it finds itself in a hopeless minority here, has, as an integral part of its platform, a proposal to abolish the Senate. The other element that” seeks to bring this chamber into disfavour is the Tory or reactionary section of the community, which finds no representation here, and has its champion in. the Melbourne Age, that reactionary journal which, at different periods of the same month, finds itself at opposite points of the compass on most questions. I am dwelling upon the rights and standing of the Senate to bring .home to honorable senators the seriousness of- the question we are discussing today and in the hope that even at this eleventh hour, an agreement may be made with the States which will he more equitable to them than this. The Senate is even more firmly established than the British House of Commons. It springs from the loins of the people of the country without any hindrance to the expression of their views. It is at once a child and instrument of democracy. It is the first chamber of its kind in any English speaking nation, “broad based upon the people’s will.” It stands on a high and pre-eminent level that can only be reached by a legislature brought into being by the popular will for the purpose of administering to the popular welfare. It is not a House of privilege. That is why it is not liked by one section of the community. Nor is it a House of political sections, factions, or cliques. That 5 s why it is not like another section of the community. Its purpose is to register the will of the people, as spontaneously expressed at the polls, and, despite what its critics may say, it will remain in existence as long as the federation lasts. I prophesy that the federation will be wiped out the day after the Senate is wiped out. Its duty is to hold the scales evenly: to see that the interests of each State are preserved, that each State gets fair play among its fellows, and that the States as a whole receive fair play as between them and the central government.

We are now asked to endorse an agreement arrived at between the Commonwealth Government and the several States. But were the representatives of those States free agents when they entered into this agreement with the Commonwealth Government? Were they free to accept or reject it? Did they enter the conference as free men ? No ; they entered it as a body of men with only one course open to them : that was to accept the agreement. Knowing that such was the case, how are we to regard a compact which was brought about by duress or tyranny; because undoubtedly it was a tyrannical act on the part of the Commonwealth Government to force the States to accept this agreement without an alternative? On his return to Western Australia, the Premier of that State placed on record the fact that he had no option but to accept- it. Mr. Forgan Smith, of Queensland, and Mr. Lang, of New South Wales, said practically the same, and at the conference itself Mr. Lyons, of Tasmania, quoting with approval Mr. Lang, said that the Premiers of the States had no option but to accept the agreement holus bolus. We know that that is true. The Commonwealth Parliament having passed a bill to abolish the per capita payment, had stripped the States of any right or title to anything in the shape of money from the Federal Treasury, and the St.atcs when they came to that conference could do nothing but raise a hollow protest and accept the agreement placed before them. When one party to a bargain is compelled to accept it, we must admit that it has not been entered into as would an agreement which conferred equal privileges and rights. Aristotle has said that there is no such thing as right between combatants who are unequal. Bight applies only when combatants are equal. “When they are unequal, as in this case, it stands to reason that the elements of justice and right are absent. The party in a position to enforce its will has all the say and all its way. It is clear as the noonday sun that the effect of a bargain entered into in such circumstances must be in favour of the party that can dictate the terms and not in the interest of the party that is hound to accept them. I cannot be led to believe that the States have entered into this agreement freely. The witnesses I call to prove the contrary are the actors in the drama, the various Premiers of the States. And when it is said by Commonwealth Ministers that this agreement- has been signed by So-and-so and Suchandsuch, their statement has to be qualified by the admission that the document was signed tinder compulsion - that the Premiers had to sign it or get nothing, or, at any rate, terms which were likely to be less favorable. It is about time we cast a searching eye on this agreement before calling it a bargain entered into fairly and squarely between two agents. As a matter of fact, it is not entitled to be so described. It is a one-sided bargain dictated by a strong central government, and a bargain which six weak State Governments have had no option but to accept. Can we say that these six State Premiers were free agents? We know that they were not; and we must admit that the agreement brought into this bill cannot be regarded as fin arrangement that has about it anything of the nature of even primitive justice.

Having called attention to the’ nature of the agreement and the arrangements which led up to the signing of it, I want now to say something about the effect it is likely to have. But before doing so, let me clear away some of the misapprehension which has been created in the public mind regarding it. The first Minister of this country said, among other things, that the chief reason why this agreement was entered into was because the central Government wanted to safeguard the interests of the States. The Prime Minister made it quite clear that he abandoned the role of spokesman for the central Government and became, for the time being, spokesman and con server of the interests of the six States. The Prime Minister said that he considered that the interests of the States had to be conserved. Cannot that duty be left to the people charged with it? I grant that it was a useful and skilful argument, used in the endeavour to abate hostility and opposition. The Prime Minister endeavoured to make people believe that he was adopting a chivalrous role by going out to fight the battle of the States. He said further, as a subsidiary reason ‘for sustaining this agreement which was forced upon the States under duress, that a chance majority of a political party of a special complexion might spring into existence in Australia and, by a kind of villainous marauding instinct, inaugurate a public policy that would empty the coffers of the Commonwealth Treasury and leave nothing for the States. A fine bogy indeed! I re- ‘ mind the Prime Minister that the electors of the country would not be inactive if that were attempted. They would not countenance such actions. That is my answer to the right honorable gentleman’s bogy.

The States were treated with but scant courtesy at the conference held in Melbourne, when they claimed that they had a moral right to a continuance of the per capita payments. The Prime Minister denied their claim. In the past those payments had been made to the States freely, as an act of common equity. I ask the Minister representing the Prime Minister whether, if the States had not a moral right,- they had not a legal right to the per capita payments? Of course they had, and we know that there is no higher warrant for the establishing of a legal right than making it spring from a moral foundation. And as these payments were made for years in virtue of a legal and moral basic right, time cannot alter the nature of that right.

Senator Sir George Pearce:

– The act provided for the payments “until Parliament otherwise provides.”

Senator LYNCH:

– The per capita payments would not have been made to the States had they not a moral and a legal right to them, and it is merely a paltry quibble to claim now that no moral right exists. I fail to see why those payments should terminate suddenly merely because the Prime Minister suggests that that moral right is non-existent. With all respect, I differ from the Prime Minister on that point. The whole scene regarding the financial relations between the States and the Commonwealth has been so kaleidoscopic that it is very difficult to know exactly where we stand. For the last 25 years the central Government and the States have been at loggerheads over financial matters. As school boys, when we were all political neophytes, we were told that “finance is government, and government is finance.” If that is so the central Government is the best government in the world. It is certainly the “ boss cockie” in financial matters. The future holds an extremely sorry outlook for the States ; very little finance promises to come their way. Year after year the central Government has experienced accumulated surpluses while, on the contrary, the States have experienced accumulated deficits. It is about time that we endeavoured to bring about an equitable position by allowing the States to show surpluses instead of deficits, the Commonwealth, if necessary, to have a deficit by way of a change. At each of the conferences held in 1910, 1915, and onwards, the Commonwealth got the best of things. From the time when the States got three-quarters of the customs revenue as a constitutional right, to the time when as under this agreement they will get but a contemptible dole, is but a single span of life. Was this intended by the founders of federation? That is plainly disclosed by the figures now before us. But it will be some time before the worst is experienced by the States, and that is the deceiving feature of this agreement. When a man or a State becomes of necessity an object of patronage, he is in a sorry plight. That is the position of the States. Year after year they have been unable to pay their way. Croesus, the Commonwealth Government, has strangled their financial aspirations. Also, it has attracted to its service the best public officers in Australia. Honorable members will admit that, periodically, the pick of the public servants in each State gravitate to the central Government, attracted by the possibilities offered by service, with the “ rich man,” who might reward them even beyond their merits. It is practically an un- heard-of thing for a Commonwealth servant to revert to the State service. That is a simple illustration of how the Commonwealth Government always has the best end of the stick; in fact, the whole stick to itself.

We are told that this agreement commences with the payment to the States of £7,584,912 annually towards meeting interest on State debts. An amount of 2s. 6d. per £100 is to be paid by the Commonwealth, and 5s. per £100 by the States to a sinking fund for the whole of the existing State debts, and by that means it is hoped to’ wipe out the State debts in 58 years. The generation which will follow us will have no capitation grant, and will find that all payments from the Commonwealth to the States will promptly cease after the term of 58 years expires. I may be informed that it will secure other advantages. It will; but what will they be?

Senator Andrew:

– They will have no debts then.

Senator LYNCH:

– Even if the Commonwealth did not take a hand in their extinction by enforcing this agreement, it is probable that, by other means, there would be no State debts at the end of 58 years. Senator Andrew knows that it is as broad as it is long. It matters not whether the Commonwealth pays the money direct to the bondholders or whether it hands.it over to the States, which, in turn, will pay it to the bondholders. The point

I wish to emphasize- is that, while this agreement is claimed to be a step in the right direction, that is to say, that it is a proposal to deal fairly and even generously with the States, actually the opposite will be the case. Posterity, as I have shown, will not enjoy either, fair dealing or generosity. The State governments, eventually, will receive next to nothing from the Federal Government. Such a state of affairs as that was not contemplated when federation was consummated. What would have happened if a man, posing as a keen-eyed prophet, had said to the people 28 years ago, “ The time will come when the States will not be in the enjoyment of 75 per cent, of the customs revenue, and later a time will come when the *per capita payments of 25s., which will have been substituted, will be abolished altogether. Still later a time will come when the States will get nothing but a poverty-stricken dole from the Federal Treasury.” If that position had been put to the people prior to federation, and if the majority could have been made to realize that events would so shape themselves as to justify the prophecy, is it likely that they would have voted for federation” Is it not morally certain that they would have rejected the Federal scheme in its entirety? If that is so, and who can deny it, WhY should we trade upon the gullibility and credulity of the people of that day? At the inception of federation they believed that the States would never be deprived of payments from- the Federal Treasury to the extent now contemplated in this agreement. Unfortunately the States have been stripped of their financial strength to such an extent that only the bare bone is left, and that is hardly worth while flinging to a dog. All the assistance which they can expect in the future from the Commonwealth will be in respect of re-payments on borrowed moneys. In the course of time - the period is specifically set out in this agreement - they will be stripped of every vestige of financial rights from the Commonwealth Government which they have enjoyed hitherto, and which they honestly believed would be secured to them for all time. Solemn declarations to this effect were made by the late Lord Forrest, the late Sir George Turner, and other responsible Ministers in previous Commonwealth governments. We were told over and over again that the States’s financial stability was to be the foundation stone of the Federal structure, and that their rights in that regard would never be invaded by the Federal Government. It is true that these inherent rights were not guaranteed in black and white in the Constitution; but they were by implication guaranteed to the States. The people were asked to “ trust the Federal Parliament.” They have done so. But they were never told that that “ trust “ would turn out to be one-sided and would completely extinguish the fundamental rights of the States as constitutionally guaran- teed to them. We have seen how that trust has been abused. We have only to look around to see how the States are now faring. We need only contrast their financial position with that of the Commonwealth. Can it be said or suggested that there is any sign of poverty or financial stress in the affairs of the central government? Who says “ Yes “ ? On the other hand, is there any sign of financial stringency or poverty on the part of the States? Who says “No”? Unquestionably there is. The right honorable ie Leader of the Senate (Senator Pearce) knows how these proposals will affect his and my State, as well as Queensland, South Australia, and other States.

Senator Thompson:

– Are State revenues diminishing?

Senator LYNCH:

– No.

Senator Thompson:

– Then any responsibility for financial difficulty must be shouldered by the State governments.

Senator Andrew:

– It is due to bad management.

Senator LYNCH:

– Responsibility for the financial difficulties in which the States find themselves cannot be charged against one political party or the other, because State, as well as Federal affairs, have been controlled alternatively and successively by Labour, Liberal or National governments. There have been the same alternating complexions in State as in Federal politics, so public extravagance cannot be charged against any particular party. For many years certain of the States have been in a chronic state of “hardupness.” This is particularly true of Western Australia, which this agreement will hit very severely. The Leader of the Senate has not dealt fairly by the people of Western Australia. Some time ago in an address at Kalgoorlie he told them that the payment by the Commonwealth of £450,000, made on the recommendation of .the Disabilities Commission, would be the basis of the future arrangement, and might be regarded as a permanent addition to the State’s revenue. Where is that £450,000 now? It materialized for one year only. Therefore the Minister has been false to his promises.

Senator Needham:

– And that promise was made on the eve of a Federal election.

Senator LYNCH:

– The payments to Western Australia now are to be £300,000 for a period of five years. The Leader of the Opposition has just reminded me that the speech of the Leader of the Senate, in which he announced the payment of £450,000 to Western Australia was made on the eve of an election. It is possible that many votes were obtained by Ministerial candidates- in that State on the strength of that promise. The right honorable gentleman may think he was justified in making it. Perhaps he was, but it was not honorable to discontinue that payment. As a matter of fact, it should be paid to the State for all time. That certainly was the interpretation which the people placed upon his promise. The Minister later spoke in Melbourne on the same subject. There the right honorable gentleman told the people that in its financial dealings with the States the Government would see that the latter suffered no loss. Is it not true that under this agreement payments to the States on a per capita basis will cease. Does not that represent a loss in State revenue? This agreement is indeed a poor return from the Leader of the Senate to a State which has been so kind to him. It raised Senator Pearce from a position of obscurity and placed him where he is.

The PRESIDENT (Senator the Hon. Sir John Newlands) . - Order ! I ask the honorable gentleman to confine his remarks to the bill.

Senator LYNCH:

– I am dealing with statements made by a responsible Minister of the Crown, and I am showing how, under this agreement, a promise made by the Minister to people of Western Australia has been falsified. How can we ventilate these matters unless we are permitted to criticize the people who are responsible for them?

The PRESIDENT:

– The honorable gentleman knows that, to be in order, hi,s remarks must be confined to the subject matter of the bill. I ask him to comply with the Standing Orders.

Senator LYNCH:

– I am analysing the public utterances of a responsible Minister of the Crown in respect of matters that are touched by this financial agreement, and I am endeavouring to show that anything that may be said in future by that honorable gentleman must be viewed with the utmost suspicion. My purpose is to put the people on their guard, and to see that these things do not occur again. Of course the States will lose financially under this agreement. Nobody, excepting, perhaps, the Leader of the Senate, has pretended that the position will be otherwise. Certainly Western Australia will suffer. The time will come when that State will be second to none in the Commonwealth from the point of view of development. Why then should it be treated now with such cruelty and unkindness by the central Government - by men who ought to be kind to it because it has been kind to them? I shall never forget what that State has done for rae. It raised me from obscurity to a position in this Senate, and I should be wanting in all the qualities that go to make a man if J spoke of it in other than the kindliest terms. It has first claim to my best endeavours. I know only too well what is the lot of the people who are working under a semi-tropical sun in their endeavour to promote its development. My . purpose in this chamber is to see that they get a fair deal. I wish to safeguard the interests of future generations who will hold that State in trust for the rest of the Commonwealth. Their interests will not be trampled upon or ignored if I can help it, especially by those who ought to be their friends; by those whose stomachs were fed by the State, and whose naked limbs were covered by the goodwill of the people, who brought them from obscurity into prominent public positions. They should return benefaction for benefaction. I am here to do what I can to advance the interests of the people I represent, simply because I am part and parcel of the State that sent me here. I am grateful for what the people have done for me, and the last thing I want to do is to forget them.

I have already pointed out that under this- agreement, in 58 years’ time the States will get nothing from the Federal” Government. I again remind the Government that the founders of federation and the earlier leaders of public thought in the federal sphere avowed that the in,terests of the .State would not be impaired.

Honorable senators should read the speeches that were delivered many years ago by Sir John Forrest, Sir George Turner, Sir William Lyne, and the Honorable C. C. “Kingston. The records of the past are studded with the most emphatic language affirming the principle that the States would never be deprived of their financial rights by the central administration if due respect was paid to the spirit of the Constitution. That undertaking had to be given to the States to bring them into line; otherwise there would never have been a federation. Such being the case, we should not now be false to our trust by ignoring the intention of the founders of federation. At the end of the 58th year the States will receive nothing except the trifling amount represented by the sinking-fund contribution on their indebtedness.’ How much will that be? The proposal of the Government is based upon the assumption that £40,000,000 will be borrowed every year; and it is claimed that on that basis the contribution of 5s. per cent, by the central government will amount to £100,000 a year for the next 53 years. I have some startling figures which will prove to the Senate that that £40,000,000 is an imaginary figure, and is introduced merely for the purpose of magnifying the generosity of the Commonwealth towards the States. I have studied the borrowing of the early nineties, when the London money market was closed to Australia, and can show that the indebtedness of Australia in 1890-91 amounted to something like £47 per head of the population. The indebtedness of some of the States has more than doubled in the meantime, while that of others has increased sixfold. The public debt of the Commonwealth as a whole is now in the neighbourhood of £96 per head. Yet we have been told by a responsible Minister that borrowing is to be continued at the rate of £40,000,000 a year ! That fiction has been employed, as I have already said, to magnify the generosity of the Commonwealth towards the States! The sum of £100,000 annually will be required to amortize in the 53rd year the £40,000,000 borrowed in the first year. A further £40,000,000, it is said, may be borrowed in the second, third, and suc ceeding years. If that should be the amount borrowed every year for a period of 53 years, the sinking fund payment made by the Commonwealth on behalf of the States in the 58th year in full requital of the far capita payments will be a little over £5,000,000. Yet we have been told by the right honorable humbug who sits on the right of the Chair that the States will suffer no loss of wealth!

The PRESIDENT (Senator the Hon. Sir John Newlands). - Order! Did I understand the honorable senator to refer to another honorable senator as a humbug ?

Senator LYNCH:

– Well, he made a humbugging statement.

The PRESIDENT:

– Order f I have asked the honorable senator if he has referred to another honorable senator as a humbug. If he has done so I call upon him to withdraw the remark.

Senator LYNCH:

– I withdraw it. The effect of the statement to which I have referred is to humbug the people. In the 58th year of this agreement the population of the Commonwealth will probably be 20,000,000. Payment by the Commonwealth at the rate of 25s. per capita would involve a sum of something like £25,000,000. If we deduct the £5,000,000 odd, which the Commonwealth undertakes to pay it will be seen that the Commonwealth will be enriching itself at the expense of the States to the extent of no less than £20,000,000. It will thus be seen that there is no warrant for the claim that the States will not suffer any loss. Why should not the naked facts be told? Why is witness not borne to the truth? Is it because there is no truth in the honorable gentleman ? Is- not this a question in which not only the present population of 6,000,000, but also the probable future population of 20,000,000 must be interested? When I am told by a responsible Minister that there will be “ no loss to the States” as the result of this bargaining my answer is that the loss will be of such colossal proportions that the States of that day, and the people who live in them and are dependent upon them, will be in a helpless and hapless condition. If they are still able to survive and make provision for the economic, social and domestic welfare of their people, it will not be because of any help they receive from the Federal Government, hut rather on account of a stroke of good fortune. If they find themselves in a helpless position, the cause will be this iniquitous agreement, that has been brought forward under false pretences.

Let me now deal with another equally audacious reason that has been advanced for accepting this agreement. We have been informed that the per. capita system is a means of enriching the rich and impoverishing the poor. I do not know what is the hypothesis upon which such an assertion is founded, but my retort is that those who have followed the development of this country are able to find arguments to prove the contrary. The States of New South Wales and Victoria will not be aggrandized and made richer. The experience of Canada and the United States of America proves that the rich are likely to be impoverished rather than enriched. The early settled States in Canada, such as Ontario, Quebec, New Brunswick, and Prince Edward Island, which are the equivalent of our older and richer States of the present day, have become comparatively poorer instead of richer. The population of Quebec has increased in the last twenty years by a shade over 2 per cent., and that of Ontario by slightly over 1 per cent. The movement of population has been to new lands like Saskatchewan, Manitoba, British Columbia and Alberta, where the increase has been from 6 per cent, to 36 per cent. In the case of Saskatchewan, the increase in population in 21 year? was from 91,279 to 757,510. Who will dare to say that such may not be the experience of. Western Australia- in the near future, and where then will be the justice and “ generosity “ of this proposal of the Government ? Therefore the Prime Minister worked on the credulity of the people when he said that the per capita payment would enrich the rich and impoverish the poor; the experience of Canada completely contradicts such an as.sertion. In the United States of America we find that the thirteen New England States which, at the beginning of the last century, stood high on the list, now contain only a fractional part of the population of that country.

It is quite true that, pro rata, a fair share of the wealth still remains in the older centres; but on a per capita basis the new areas in both Canada and the United States of America furnish proof that the vacant places in Australia are likely to derive the greatest benefit by way of increase in population and the creation of new wealth. If honorable senators will compare the relative progress of Queensland and New South Wales in the last 50 years they will find that that is a correct assumption to make. In Western Australia the experience has been similar to that of Canada and western America. In those countries the population migrated to places where there was elbow room, and founded vast cities like Chicago, which in the early part of last century was only a hamlet. As this country occupies a position similar to that which was occupied by America only 50 years ‘ago, its experience will be identical. In the settlement of a new country the relative progress in the new regions is greater than that of the old, so that the per capita system will decidedly favour the older, while inflicting unmeasured hardship on the newer” and less developed areas.

We cannot prevent the party aspect from creeping into this discussion. We have in power to-day a party to which I give that support which is always the most valuable - the support of a candid friend who will tell a person of his faults as well as of his virtues. When I meet a man who will apprise me of my faults, I regard him. as one whose friendship I should cultivate; but it is wise to regard with suspicion the smooth-tongued gentleman who will flatter you and tell you only of your virtues, whether they be real or imaginary. I am a candid critic of this, as I have been of previous, governments. Of course, if I were more amenable to discipline, I should possibly fare better; but it is my nature to be as I am. In the past, I have been considered a .valuable man to send here and there to” places in which other persons were afraid to trust their skins. They lived in the security of salaried positions, while Lynch was sent out on dangerous escapades from which they stood to. benefit. So it is. in regard to the present Ministry. The astonishing thing is that the party in power is the party which all along lias claimed to have a deep-seated respect for the rights of the States. That party is now engaged in .stripping from the States the last shread of their financial security. [Extension of time granted,.’] Instead of assisting the States, this Parliament proposes to persecute them. If the giant spirits of the past- were on the Treasury bench, this bill would not be before us; there would not be this attack on the States. If honorable senators have ever stopped to consider what the States stand for they will realize that those things which make for the welfare of the people- are in the control and keeping of the States. There is scarcely an economic and social advantage enjoyed by the people of this country which is not directly traceable to State activity. Honorable senators, when they leave this chamber to-day, cannot Teach their homes without the assistance of at least one State, because the control of transportation is a State function, and has been since the States were formed. “We have but to think of our water supplies and systems of education and justice, to say nothing of the other manifold. activities of the States, to realize the important part they play in the welfare and daily lives of the people. Why is it then that this attempt to rob them of their financial resources is made? Honorable senators will agree that “money makes the mare go,” yet they will vote for a bill to impoverish the States. I am sorry to see the party in power endorsing such an outrageous proposal. Had the latterday Labour party been in power, it would not have surprised me to see attempts made to bring about federalization and centralization of everything. Yet even that party, if returned to power, notwithstanding its desire to aggrandize the central authority and establish bureaucratic government, would probably recognize that the States have some rights. In other directions we have evidence that that party has altered its view-point. But supposing it came into power, and put into effect its policy by which the Senate would be abolished and the wings of the State governments clipped, what would happen? Let us consider the position of the dwellers outback in that event. Supposing that a main water pipe were to burst in an outback district of Western Australia through the neglect or incompetence of the local authority - a pipe on which a duty of 50 per cent, has . just been imposed - the settlers would be compelled to appeal to the central government first for assistance and then for an explanation. Before it was given their plight would indeed be serious. By robbing the States of their financial resources we shall cripple them. And what will be the gain ? The central,/ government could not discharge all the functions now discharged by the States ; it would be overloaded. I remind the Senate of the warning expressed by the late Mr. Alfred Deakin, that by overloading the central authority the heart of the nation would be so strained as to be utterly impotent to discharge its functions. I warn the Senate against bringing about the dawn of that period when in Australia we shall have a huge bureaucracy similar to that which has been bewailed by the President of the United States of America quite recently. Writing to the London Morning Post years ago the late Mr Alfred Deakin gave expression to some truths of which honorable senators should be reminded. I have not bore his exact words; but he pointed out that just as the power of the purse was the means whereby the House of Commons ascended to power, and became entrenched in the people’s confidence, so would the same agency in Australia, particularly in the case of the central government, be the means of bringing to it one power after another until practically all authority within the Commonwealth would be vested in it. Mr. Deakin was a man of keen observation and prophetic instinct. He looked ahead and saw the time when we should be faced witu the conditions which now exist. He foresaw that the central government would continue to rob the States of their power and usefulness, and he realized that that would be a bad and a black day for the people in the outback districts. The measure before us is the first of many to rob the States of every penny excepting that paltry £5,000,000 to which I have already referred. In the interests of the people of Australia the Government should call a halt. The electors are fully engaged in the performance of their daily work, and in trying to pay their way, and have not the time to study these questions. They leave’ to us the control of. public affairs. But they expect us to do our job properly. The correct thing for us to do is to adhere to the fundamental principles of the ‘Constitution, and to allow the States to retain that financial independence which the framers of the Constitution guaranteed to them.

Senator Kingsmill:

– After all, the people are the judges.

Senator LYNCH:

– That is so, and it is well they will have a final say in this matter. Woe betide some of the members of this Parliament when next they appear before the electors! Suppose that that which so many desire comes to pass, and we find the central authority rolling in wealth, of what avail will it be? Will it advantage the average citizen if one government is rolling in wealth while the coffers of the others are empty or dependent on the’ grace of the other? Is it not plain that the balance of utility will be badly upset to the disadvantage of civil and social progress and contentment? Do honorable senators believe that that would bc a desirable state of affairs? I ask them to reflect that tens- of thousands of people in this country are denied necessities because the State governments cannot provide them. Already the position is serious; but if this bill is agreed to, it will become worse. It is for that reason that I am making this protest. Probably my effort will be futile; but my voice will ring throughout the country as it has in the past to some good purpose. I oppose this measure because I know that the State governments ‘ have accepted it against their will, and perhaps . mortgaged . the rights of the next and future generations to meet the needs of the passing hour. We have the witness of Mr. Lang and Mr. Collier, and other members of the Premiers’ Conference that they were coerced into accepting it. The agreement has been conceived, begotten, and brought forth in circumstances that augur ill for the country. In order to build . up a strong central authority, the State governments of the future are to be impoverished, and made weak, pale, anaemic imitations of the powers they ought to be. Again I say, what will it avail us if they become mere shadows of their glorious past? It is my intention, in committee, to move an amendment to provide that after the expiration of ten years from the passing of this bill, and thereafter every ten years, the population of each State shall be ascertained, and on the basis of 25s. per capita a calculation made showing the amount which would be payable to each State, which amount shall be - compared with the actual payments under this legislation, and that any deficiency, resulting from this legislation shall be made up to ‘ the States on the basis of their respective populations.

The PRESIDENT:

– Order ! The time fixed under the sessional orders for the adjournment of the Senate on Friday.’ having arrived, I must put the motion -

That the Senate do now adjourn.

Motion agreed to.

Senate adjourned at 4.0 p.m.

Cite as: Australia, Senate, Debates, 23 March 1928, viewed 22 October 2017, <http://historichansard.net/senate/1928/19280323_senate_10_118/>.

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