9 November 1950

19th Parliament · 1st Session

The PRESIDENT (Senator the Hon. Gordon Brown) took the chair at 11 a.m., and read prayers.

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– Oan the Minister for Trade and Customs say whether the attention of the Government has been drawn to the frequency of serious industrial accidents to New Australians and the large number of fatalities Among those people during the last year? If the proportion of accidents is greater than that experienced by Australians in industry, will the Government cause inquiries to be made as to the reasons for those accidents, and take the necessary steps to remove the causes?

Minister for Trade and Customs · QUEENSLAND · LP

– So far as I am aware, the details referred to by the honorable senator have not been brought to the notice of the Government. It is most unlikely that they would be, because the legislation and regulations dealing with the safety precautions taken in factories, workshops and plants are essentially matters within the province of State government?. Earn State ha? its own legislation providing precautions te be taken for the safety of employees. I do not know what action the Australian

Government can take, but I agree thai it is a matter that should be brought t<> the notice of the appropriate State authorities.

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Senator LARGE:

– On the 5th October I asked the Minister representing the Minister for Civil Aviation whether he would give serious consideration to the desires of residents of Lord Howe Island for the supply of electric power-


– -Order ! I am informed that that question appears- upon the notice-paper.

Senator LARGE:

– I am asking why ii has not been answered. Will the Minuter for Trade and Customs cause an investigation to be made to ascertain the reason why I have not received h reply to my question? It could have been answered simply in the affirmative or negative. Two weeks ago, I inquired why I had not received a reply to it. J have not yet received a reply, but yesterday a note was handed to mc. It reads a.follows : -

The mutter i» not one for the Commonwealth Government. Primarily, a New Smith Wales Government responsibility. Mr. Casey is having inquiries mode through his department in an endeavour to provide the senator with as much information as possible.

The position is most unsatisfactory. In the question on the notice-paper-


– Order !

Senator LARGE:

– I shall be brief. 1 am not throwing stones at any one. The question standing upon the notice-paper in my name is directed to the Minister representing the Minister for Works and Housing, but I did not direct it to him.


– It is true that many questions asked by honorable senators could be answered simply by the words “ Yes “ or “ No “, but this Government desires to give the fullest possible information in answers to questions placed upon the notice-paper if the questions warrant that course being taken. The Minister for Social Services has something to say about thi* matter.

Senator SPOONER:
Minister for Social Services · NEW SOUTH WALES · LP

– The question on the notice-paper to which Senator Large has referred is directed to me, as the Minister representing the Minister for

Works and Housing. As the question had been upon the notice-paper for some time, I endeavoured to expedite a reply to it. The- note that Senator Large read was one written to me by my secretary. As a matter of courtesy, I gave it to the honorable senator in order that he should know the reason for the delay in replying to his question. I did not expect that it would be used in evidence against me. This is a tangled skein. Senator Large has said that he addressed his question to the Minister representing the Minister for Civil Aviation, but I do not see what the subject-matter of the question has to do with the Minister for Civil Aviation. According to the notice-paper, the question is addressed to the Minister representing the Minister for Works and Housing. The Minister for Works and Housing made inquiries and ascertained that the matter raised by Senator Large had nothing to do with him and was the responsibility of the New South Wales Government. He, I think very courteously, said to me, “ This matter has nothing to do with my department, but I shall find out what I can about it and write a letter to Senator Large telling him what I have ascertained “. That is the appropriate way in which to deal with the matter.

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Senator McLEAY:
Minister for Fuel, Shipping and Transport · SOUTH AUSTRALIA · LP

– On the 31st October, Senator O’Byrne asked me a question concerning the supply of rice to Tasmania. I am now able to inform the honorable senator that the distribution of rice to the Australian public is arranged by the trade. TheGovernment has no control over the distribution arrangements. Merchants have agreed to proceed with the distribution of rice in all States, to ensure that members of the public, in addition toinvalids, shall be able to procure rice supplies in the ordinary way from grocers.

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Senator KATZ:

– When answering a question in another place yesterday, the Prime Minister stated that a political alliance with the Opposition was needed in order to overcome production problems in Australia. I ask the Minister for Trade and Customs whether, if it is necessary to have co-operation in the realm of production, is it not equally necessary for the Government to co-operate with the Opposition by appointing members of the Government to the proposed select committee to inquire into the functions of the Commonwealth Sank?


– I am sure that all honorable senators agree that we owe- an obligation to the country to pull together in the common interest, where that is at all practicable. That is highly desirable in all instances. But I do not know what that co-operation has to do with the Commonwealth Bank. Of -the ten members of the proposed Commonwealth Bank Board, eight have been already indicated. I do not know who the other two will be. However, I am sure that the Prime Minister and members of the Cabinet will exercise their usual discretion in connexion with those appointments.

Senator KATZ:

– The Minister for Trade and Customs has sought to sidetrack my question. I referred to the proposal of the Opposition to appoint a select committee in connexion with the banking legislation that is now before this chamber. I asked the Minister whether the Government was prepared to co-operate in that connexion by appointing Government members to that committee, in view of the fact that the Government had sought the co-operation of the Opposition to overcome production problems in Australia.


– I think that members of the Opposition are under some misapprehension. “We did not seek the co-operation of the Opposition for our own advantage, and the withholding of it does not hurt us. We sought their co-operation in the interests of the country, not in our interests as a Government or a party. I believe that mo9t members of the Opposition would be prepared to give their co-operation on those terms. It has been established during the very dreary debate on the Commonwealth Bank Bill that the only real objection of the Opposition is to the appointment of a board to control the Commonwealth Bank. It seems to me that the proposal to refer the bill to a select committee of the Senate lacks the stamp of sincerity. The bill first came before the Parliament several months ago. The proposal to refer it to a select committee is a ruse to enable the Opposition to avoid the responsibility of rejecting the bill, failing to pass it, or of passing it with unacceptable amendments.

The PRESIDENT (Senator the Hon Gordon Brown:

– Discussion of these matters might well be left until the bill itself is before the Senate. It is not right that they should be discussed during question time.

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Senator AMOUR:

– Will the Minister representing the Postmaster-General inform the Senate whether he has received a petition from telephone subscribers connected with the manual exchange at Black Mountain, in New South Wales, asking for the provision of a continuous telephone service ? If it is not practicable to provide the service sought, will steps be taken to establish a rural automatic telephone exchange at Black Mountain?

Senator COOPER:
Minister for Repatriation · QUEENSLAND · CP

– I shall bring the honorable senator’s question to the notice of the Postmaster-General and ask to be” supplied with an answer at an early date.


– Will the Minister representing the Postmaster-General inform the ‘Senate whether the formula applied by the Postmaster-General’s Department to the raising of non-official post offices to official status has revealed that the non-official post office at Hawthorn West, in Victoria, should be raised to official status? Is it a fact that the Postmaster-General has overruled the departmental recommendation, and restricted that post office to non-official status? Does the Government intend to alter the formula that was applied by the former Labour Government?

Senator COOPER:

– The honorable senator’s question involves departmental policy. I shall bring it to the notice of the Postmaster-General and seek a reply at an early date.

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– Will the Minister representing the PostmasterGeneral inform the Senate whether it is the intention of the Government to erect experimental television stations in Australia, and, if so, the progress that has been made in this connexion? If the Government does not intend to erect such experimental stations, will he state the reason?

Senator COOPER:

– The honorable senator’s question involves departmental policy. I shall bring it to the notice of the Postmaster-General and request a reply for the honorable senator at an early date.

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Senator COLE:

– Can the Minister representing the Minister for Health Bay whether any progress has been made with the scheme for the distribution of free milk to school children, or has it been discarded as unworkable?

Senator COOPER:

– The Government does not intend to discard the scheme for the distribution of free milk for school children. The Minister for Health has approached the State governments separately to arrange for their co-operation in the distribution of milk. I cannot say what stage the negotiations have reached, but I understand that one of the larger States is prepared to co-operate, and that the distribution of milk will begin at an early date. The honorable senator will understand that there are certain physical difficulties connected wtih the distribution of milk in large, thinly populated areas.

Senator WRIGHT:
TASMANIA · LP; IND from June 1978

– After the last conference of Commonwealth and State Ministers it was reported in the press that the Premier of Tasmania had said that he would not co-operate in the Commonwealth scheme for the distribution of free milk to school children. The Premier was also reported to have said that there were no butter factories in southern Tasmania that could absorb the excess supplies of milk that would be available during school holidays and at weekends. Has the Minister representing the Minister for Health been advised of any change of the Premier’s views on either of those matters ?

Senator COOPER:

– I have not received any intimation that the Premier of Tasmania has changed the opinions that he is reported to have expressed. However, I shall bring the honorable senator’s question to the notice of the Minister for Health and obtain a considered reply.

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Senator ARNOLD:

– In view of the fact that the present Government has been in office for nearly twelve months without any clear statement having been made about its national health policy, will the Minister representing the Minister for Health give an assurance that, before the end of the present sessional period, a statement of Government policy on this matter will be made?

Senator COOPER:

– As I am not the Minister for Health but only his representative in this chamber, I am unable to give the honorable senator the assurance that he seeks. However, I shall ask the Minister for Health whether he can provide me with a statement in order that T may make it in the chamber.

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Senator O’BYRNE:

– I ask the Minister for Trade and Customs whether it is a fact that the Prime Minister, speaking in Adelaide prior to the 1949 elections, stated that if any monopoly organization could be shown to him to be exploiting the people, he would not hesitate to nationalize that industry? Has the

Minister seen a copy of the New York publication Fortune of November of thisyear, which shows that the Broken Hill Proprietary Company Limited, which, with its subsidiaries, has made very large profits, has been guilty of not trying toincrease production, and has been “limping along on 70 per cent, capacity “ l Will the Minister accept that as evidence that this monopoly organization is exploit ing the Australian people, and take the steps foreshadowed by the Prime Minister in the speech to which -I have referred ?


– The various speeches made by the Prime Minister are undoubtedly noteworthy but I do not carry details of them in my mind. However, if the right honorable gentleman did say in Adelaide that, if returned to power, he would take drastic action against any monopoly that was exploiting the public, that would be in accordance with his general attitude. I have read in the newspapers, and learned from conversations that, tragically for this country, the Broken Hill Proprietary Company Limited is operating only to about 70 per cent, of its capacity. That, however, is not due to any lack of desire on the part of the company, but to the shortage n coal. I know that the management of the company takes a. serious view of the fact that this country is suffering because the capacity of the organization is not being fully used.

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Senator O’BYRNE:

asked the Minister representing the Minister acting for the Minister for External Territories, upon notice -

  1. What is the policy of the Government regarding the development of the natural resources of Papua and New Guinea, particularly the Mekeo rice areas, and the Bulolo timber area ?
  2. Will the Acting Minister investigate the complaint that an undue period of time of up to nine months elapses between the lodgment of an application for the lease of a timber area mid the granting of the application?
Senator SPICER:
Attorney-General · through Senator O’SULLIVAN · LP

– The acting for the Minister for External Territories has supplied the following answers : -

  1. It is the announced policy of the Government to develop the resources of the territory to the fullest extent and as speedily as possible.

Particular attention is being given to the question of rice cultivation in the territory and hu experimental station covering 2,000 acres has been established at Bereina, about 60 miles from Port Moresby.

Timber from the Bulolo Valley is being used for reconstruction needs in the territory and recently authority was given for export from the territory of Klinkii pine in flitches suitable for the manufacture of battery separators. The manner in which the main pine stand in the Bulolo Valley will be developed is at present receiving the attention of the Government.

  1. If the honorable senator will furnish me with particulars of the complaint an immediate investigation will be made.

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Senator BENN:

asked the Minister representing the Postmaster-General, upon notice -

  1. . Is it a fact that the Postmaster-General’s Department does not fill vacancies caused by resignations of men engaged in the line section ?
  2. If so, (a) does the Postmaster-Geners.1, by this method, intend to eventually to achieve a 20 per cent, reduction of staff; and (6) does he consider that by this action the efficiency nf his department will be impaired and the public prevented from availing themselves of a satisfactory telephonic service?
Senator COOPER:

– The PostmasterGeneral has supplied the following information: -

  1. While there are fluctuations in the number of men employed in individual localities for varying reasons the lines staff as a whole was increased by approximately 350 during the first three months of the current financial year.
  2. There has been no overall decline in the lines staff which will be maintained at the maximum strength possible consistent with the availability of materials.

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Senator- McCALLUM asked the Minister for Fuel, Shipping and Transport, upon notice -

In view of the serious overseas and» international position, will the Minister state whether adequate stocks of petroleum products are being maintained at seaboard terminals throughout the Commonwealth; also whether adequate reserve stocks of lubricating oils arc being maintained at a sufficiently high level to meet increased consumption necessitated by defence, transport and industrial requirements?

Will he state whether future imports of petroleum products from dollar areas are likely to bc curtailed or affected in any way as l he result of the dollar loan recently nego tiated by the Prime Minister, particularly in view of the recurring annual interest charges which have to be met?

Has there been any substantial increase in the consumption of petrol and other petroleum products since the lifting of petrol rationing, ami to what extent have the sales of petrol and kerosene increased during the last eight months of this year, compared with the corresponding period of 1949?

Will he furnish a return showing the total sales by States throughout Australia of lighting kerosene, power kerosene, motor spirit, distillate and fuel oils for each month, January to August, inclusive, compared with the corresponding months of last year?

Senator McLEAY:

– The answers to the honorable senator’s questions are as follows : -

  1. Stocks of petroleum products, including lubricating oils, are being maintained at seaboard and other terminals throughout Australia at a level adequate to meet the requirements of defence, transport and industry.
  2. Future imports of petroleum products will not be curtailed or affected in any way as a result of the dollar loan recently negotiated.
  3. The percentage increase in sales during the first eight months of 1950 compared with the corresponding period of 1949 was -

In the case of diesel oil there was a decrease of 5.23 per cent.

  1. The information available to my department relates to oil company State marketing areas, which are not necessarily defined by State boundaries. I am therefore unable to furnish the information in the form requested by the honorable senator. However, the following figures indicate the total Australian sales of the products as mentioned for the first eight months of 1949 compared with the first eight months of 1950 : -

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Bill received from the House of Representatives.

Standing Orders suspended.

Bill (on motion by Senator SPOONER) read a first time.

Second Reading

Senator SPOONER:
Minister for Social Services · New South “Wales · LP

.. - I move -

That the bill be now read a second time.

The purpose of this bill is to authorize the payment to the States in 1950-51 of an additional tax reimbursement grant of £5,000,000. Under the formula laid down in the States Grants (Tax Reimbursement) Act 1946-48 it is estimated that the tax reimbursement grant to the States in 1950-51 will amount to £70,393,000 or £7,856,000 more than last year. As a consequence of this bill, therefore, the total tax reimbursement grants to the States will be increased by £12,856,000 this year.

At the recent conference of Commonwealth and State Ministers the Premiers indicated that they expected serious budget difficulties .this year as a result of rising costs on State expenditures, and suggested that the tax reimbursement formula should be amended. This formula was laid down in the legislation pased in 1946, and it provides that the aggregate tax reimbursement grant be varied each year in accordance with variations in the populations of the States and with increases in the level of average wages. The formula was amended in 1947 and again in 1948. The general effect of the 1948 amendment was to increase the grant for 1948-49 by £8,740,000 whilst this year the formula will result in the States receiving about £19,000,000 more than they would have received under the 1946 formula. In the five years since 1946-47 the grant will have increased from £40,000,000 to over £70,000,000- an increase of more than 75 per cent.

After considering all the circumstances, including the present and prospective financial commitments of the Commonwealth, the Premiers were informed that the Commonwealth could not agree to amend the formula but that as a special measure this year it would supplement the amount payable under the present act by an additional grant of £5,000,000 in 1950- 51. At the same time, the Commonwealth suggested that a complete review be made of the financial relations between the

Commonwealth and the States. The Premiers agreed to participate in such a. review and a special conference of Commonwealth and State Ministers will be convened by the Commonwealth for this; purpose.

The bill provides that the grant of £5,000,000 will be distributed among the States in the same proportions as the grant payable under the States Grants (Tax Reimbursement) Act 1946-48 is distributed in 1950-51. The precise amount which each State will receive this year under the legislation will not be known until the Commonwealth Statistician has completed the calculations which he is required to perform under legislation. Preliminary estimates furnished by the Commonwealth Statistician, however, indicate that the share of each State in the additional grant of £5,000,000 will be approximately as follows: -

I commend the bill to honorable senators.

Debate (on motion by Senator Ashley/) adjourned.

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Second Reading

Debate resumed from the 8th November (vide page 2058), on motion by Senator Spooner -

That the bill be now read a second time.

Senator ASHLEY:
Leader of the Opposition · New South Wales

[11.38 J. - This bill provides for the payment of special grants of £12,175,000 to the States of South Australia, Western Australia and Tasmania, during the current financial year. The grant in 1948-49 was £7,450,000. I wish to draw a comparison between the 1948-49 figure and the amount of £12,175,000 that has been provided for distribution during the current financial year, because I suggest that that indicates the inflationary trend being experienced in all the States. The necessity for increased grants to the various States in this financial year is due, in my opinion, to the abolition of prices control in 1948. I do not say that the increase of those grants has resulted from the assumption of office by the present Government, but the rise from £7,450,000 in 1948 to £12,175,000 to-day is a significant one; nor do I suggest that this Government is responsible for the abolition of prices control, because that was done as the result of a decision by the people of Australia. However, many members of the Government, including the Prime Minister (Mr. Menzies) and the Treasurer (Mr, Fadden), must accept some responsibility for influencing the people of Australia to make that decision, and the consequent defeat of the prices control referendum.

The figures for 1948-49 and for 1950-51 show very little variation as far as the allowances to the claimant States are concerned. Doubtless the Government will claim that the increases which have such an inflationary effect are due to the effect of the 40-hour week and a lack of production.

The continued increase of prices in this country poses a problem, not only to this Government but also to the State governments, irrespective of their political colour. At the conference of Commonwealth and State Ministers held in August, the State Premiers claimed that it was almost impossible for them to balance their State budgets and that they were placed in an intolerable position. The Ministers now present in the chamber who attended that conference know of the protests that were made then by the State Premiers. Liberal and Labour Premiers made common cause in complaining that the Commonwealth had failed to provide the States with the financial resources necessary to enable them to perform their functions efficiently. The Premiers stated that this Government by using its financial powers, was whittling away the authority of the States and making them vassals of the Commonwealth. That was a very serious accusation, and I hope that the Minister in charge of the bill will reply to it. According to press reports, Mr. McGirr said after the conference -

It is very doubtful whether the present Federal Government, on its showing at the Premiers’ Conference, is prepared to pay more than lip service to the principle of federal government. The objective seems to be not only to strangle the States financially but to discredit them by forcing them to restrict services and curtail their plans for development.

That was a serious charge. I agree that the States usually ask for more money than they actually require because they know that their claims will be pruned by the Commonwealth Treasurer, but on this occasion, although the States claimed the very large additional sum of ?25,000,000, this Government has made provision to pay only ?5,000,000 in respect of that claim. That requires some explanation. When reference is made in this chamber to price rises generally in Australia, the Government invariably says that the reason for the increases is lack of production. If the Government wants production in this country to be increased, it must adopt a more co-opera tive and tolerant attitude to the States.

I have not yet seen the official report of the proceedings of the conference to which I have referred, and the observations that I have made are based upon what I have read in the press. Apparently the Premiers were unanimous in their complaints, as the following extract from a report published in the Sydney Morning Herald of the 7th September, shows -

In the closing stages of the debate on taxation the Premiers summed up their impressions in this way: -

Mr. PLAYFORD. ; Nearly every conference I come to puts another nail into “the coffin of the States. This one is no exception.

Mr. HANLON. ; I wish to make an emphatic protest against the way in which my submissions have not been considered.

Mr. MCDONALD. It is a deplorable position. The people of Victoria have been submitted to a great indignity at this conference.

Mr. McGIRR ; I join in the protest, Mr. Prime Minister. The right thing for th? Federal Government to do is to take a vote of the people to see whether they want State governments. “ What is happening here will destroy the State Governments by a process of strangulation. I object very strenuously and suggest you submit a referendum to the people rathe than do the work you are going on with here “

Further evidence of the unanimity of opinion on this matter among State politicians is provided by the following extract from ari article published in th,

Sydney Morning Herald of the 8th September : -

The problem of Commonwealth-State financial relationships was “ over -ripe for settlement “, the Leader of the Opposition, Mr V. H. Treatt, said yesterday.

Mr. Treatt said the loss of State sovereignty included a High Court decision to give thu Commonwealth first “ cut “ of income tax. “ It is gratifying to note that the New South Wales Premier, Mr. McGirr, has made his annual protest about the allocations to the States, but on the other hand it is regrettable that this occurs only once a year “, he said

There is a general complaint about the allocation of revenues by the Commonwealth to the States.

I understand that one of the grounds upon which the States based their claim for increased allocations was that they wished to provide greater educational facilities in this country. That is a very important matter. This Parliament has an obligation imposed upon it in relation to the education of the Australian people, and any failure of the Government to make funds available for educational purposes should not be countenanced by honorable senators opposite, let alone by members of the Opposition. I shall listen with interest to the Minister’s reply to this debate and I hope that a satisfactory explanation of the Government’s actions will be given. In the dark days which, according to the Government, lie ahead, we shall need to be tolerant and co-operative in order that we may work together for the benefit of the Australian people. That remark applies, not only to the members of this Parliament but also to the Commonwealth in its relation; with the States.

Senator WRIGHT:
TASMANIA · LP; IND from June 1978

– The measure before the chamber provides honorable senators with an opportunity to consider the subject of Commonwealth-State financial relations. It provides for the exercise of power under sections 96 of the Constitution, which enables the Australian Parliament to vote financial assistance to the three claimant States. The Leader of the Opposition (Senator Ashley) devoted the first part of his speech to propaganda about the inflationary trend that has developed in this country during the last two or three years. It is interesting to recall that between 1909 and 3920 the value of the original per capita payment of 25s. to the States declined considerably. By 1920 the value of that payment was no more than 12s. That decline of value was probably attributable to the inflationary trend that followed the termination of “World War I. It is significant to note from the third report of the Commonwealth Grants Commission that the gradual decline of the value of the £1 was maintained until the next decade, when the system of per capita payments to the claimant States was replaced by a financial agreement. I commend to the Leader of the Opposition the first paragraph of the Seventeenth Report of the Commonwealth Grants Commission that has just been published, in order that he may correct his initial views on this subject. A perusal of the report convinces one that the Australian economic position is germane to the present debate. Paragraph 12 of that report reads -

  1. . This fall in the real value of money disturbed every aspect of incomes, from wages to government revenues.

That comment relates not to the period since this Government took office, but to the period when the Leader of the Opposition waa a member of the Cabinet in the former Government in 1948-49. The paragraph continues -

The industrial picture was also radically affected. The supply of many types of consumer goods increased by reason of higher imports and greater home production; hut the supply of all types of essential goods, materials and services such as coal, steel, building materials, houses and power continued to be seriously short of higher levels of demand.

Then the following poignant observation : -

This increase in demand was a natural consequence of the continuance of full employment of all available labour, of further rises in wage levels, of the general inflationary impact of additional income from primary products, especially wool, and of larger investment expenditures, particularly from overseas.

Therefore the inflationary position that was bequeathed to us by the Chifley Labour Government was the product of a further rise in the level of wages, additional income from primary products overseas, particularly wool, and larger investment expenditure that the Chifley Government boasted was attracted to this country because of the confidence of over seas investors in Labour’s banking policy. The paragraph concludes with these words -

There was, therefore, a strong inflationary character in the whole economic situation.

I stress that that comment related to conditions during 1948-49. It is not a matter for wonder, therefore, that the amounts of special grants to the claimant States are greater, in terms of figures, than they were years ago. Tasmania received its initial grant of the munificent sum of £95,000 in 1912. The grant now proposed is £1,004,000. The proposed grants to other States also have been increased correspondingly. The increases of the special grants are not attributable to causes that have operated since the 10th December last. The total of the grants that were voted to the claimant States by the Australian Parliament in the financial year 1942-43 was £2,175,000, compared “with £11,054,000 in 1948-49. If the contention of the Leader of the Opposition that the increase of the figures in which the grants are expressed is’ an indication of the inflationary trend, the increase from approximately £2.000,000 in 1942-43 to approximately £11,000.000 in 1948-49, is significant. In order to consider this matter in proper perspective in relation to the criticism of honorable senators opposite that the present Government has failed to restore value to the £1, I point out that our difficulties have been accentuated by the overwhelmingly difficult and strong inflationary trend that developed during the regime of the Chifley Government. Such tendencies cannot be analysed and unwound in a period of ten months. Furthermore, if the Labour Opposition in this chamber persists with its obstructive tactics, the process will be much delayed.

I shall now deal with tax reimbursement grants, as distinct from grants under section 94 of the Constitution. The dependence of the States upon the special grants of the Australian Parliament is obvious from the following figures : - In 1942-43 the special grantsamounted to 7 per cent, of the budget revenues of the claimant States. In 1946-47 the special grants under section 96 of the Constitution amounted to 20 per cent, of the general revenues of the budgets of the claimant States. Commonwealth grants increased until, in 194S-49, they represented 23 per cent, of the total revenue. I speak with particular reference to Tasmania, not because I am insular in my outlook, but because I am proud of my State. The relatively small budget of Tasmania shows that onequarter of the revenue of the State consists of Commonwealth grants. Another quarter of Tasmania’s revenue is received from the Commonwealth in the form of income tas reimbursements, so that Tasmania is dependent upon the Commonwealth for 50 per cent, of its revenue. I mention these matters, not in order to admit that Tasmania is a mendicant State, as was said on one unfortunate occasion, but to emphasize how dependent Tasmania has become upon Commonwealth grants under the present system of raising and allocating national revenue, and to point out what a blow has been dealt by federation to responsible government in the States. For some years past, I have studied this important subject, and I am ardently of the opinion that power to raise revenue should be associated with government responsibility. I deplore the present dangerous tendency for the States to become increasingly dependent on the Commonwealth for revenue, whilst their responsibility for expenditure diminishes. State governments should be responsible for both the raising and the expenditure of revenue.

Having said that, I repudiate the pessimistic outlook of the Leader of the Opposition (Senator Ashley). For the sake of political propaganda, he referred to some acrimonious and disappointing statements that were made at the last conference of Commonwealth and State Ministers. I have not been able to study a report of that conference. I inquired for it, but learned that, because of congestion in the Government Printing Office, the report is not yet available. However, the conference had one satisfactory outcome to which due prominence has not been given. I refer to the proposal of the Federal Government itself that there should be a review of Commonwealth and State financial relations. When I was a member of the Tasmanian Parliament, and also when I became a candidate for election to the Senate, I consistently emphasized the need for a review of Commonwealth and .State financial relations. 1 trust that, when a conference is called to make such a review, the State Premiers will not make it an occasion for peddling political trash on party lines. I hope that they will try to adopt the outlook of the founders of the Commonwealth, and consider the interest of Australia as a whole, rather than indulge in attempts to frustrate the Federal Government. At such a conference it should be possible to lay down general propositions for correcting the top-heavy financial situation into which Australia has drifted by the adoption in 1942, under a Labour Government, of the principle of uniform taxation. State governments cannot progress unless they are responsible for the raising and expending of their own revenue? I hope that, out of the special conference, there will emerge a convention similar to that which framed the Commonwealth Constitution. The political heads of the Commonwealth and the States should confer at such a convention with other able representatives of the States, and with treasury officials and economists in an endeavour to divide fairly between the States and the Commonwealth the various fields of taxation.

Senator Nash:

– Is. the honorable senator an anti-federalist?

Senator WRIGHT:

– I am not an antifederalist, and I do not think that any one could be one in this year of 1950. I believe in maintaining the federal system as opposed to the unified form of government advocated officially by the Labour party. That is not to say that, at some time in the future, it will not be necessary to revise the federal system; but for the time being, with the prospect of a greatly increased population, and with the need to develop Australia and decentralize industry, it is obvious that only under a federal system, providing, for effective co-operation between the States and the Central Government, can there be proper development. I wish to make it clear that I am npt in favour of going to the other extreme by dividing Australia into districts or provinces, which would have no sovereignty, and which would be dependent on the Central Government for their revenue.. Tha:; system should be strenuously opposed because, at the present stage of our development, the Commonwealth Parliament is altogether too remote to ensure the proper development of decentralized areas. The convention to which I have referred could, in a non-party atmosphere, revise Commonweath and State financial relations to ensure that there would be no return to the old system under which the States had to compete with the Commonwealth on an equal basis for a share of the income tax revenue.

Senator O’BYRNE:

– The honorable senator favoured that system.

Senator WRIGHT:

- ‘Senator O’Byrne shows such a superficial understanding of what I have said, that, out of kindness to him, and in an effort to assist his understanding, I repeat emphatically that I am opposed to such a system. The financial commitments of the Commonwealth have so grown because of the increased importance of defence, and because of the increased responsibility that the Commonwealth has accepted for social services, that, to make the States dependent on whatever share of the income tax field was left to them after the Commonwealth has taken its ‘paramount share, would lead only to chaos. However, I do- not subscribe to the Labour belief in unifying the parliaments of this country, and handing to the Commonwealth Parliament exclusive access to the revenues of the Commonwealth. I suggest for the consideration of the Senate that some thought could be given to distributing the available fields of revenue between the Commonwealth and the States. The States would then operate exclusively in certain fields on which they would depend for their revenue, and, similarly,, the Commonwealth, would have its- own exclusive fields.

Senator Nash:

– That would not work.

Senator WRIGHT:

– I should be unwilling to offer that suggestion to the Senate if it were entirely the original product of my own meagre thought,, but the proposal, is based on. a. considered analysis made by Mr. K. J. Binns, Economic Adviser to the Tasmanian Trea- sury, after a thorough study of Federal and State financial relationships in. Canada and in this country. As the result of that study Mr. Binns has advanced a stimulating and constructive line: of thought. Therefore, if Senator Nash seeks to disparage the proposal at all, he will be disparaging not merely my humble status and outlook, but also the work of an eminent economist. The scope of a constitutional convention, of course, would not be limited to consideration of any particular lines of thought. In marked contrast to the pessimistic and purblind outlook of the Leader of the Opposition, I think we can say that this measure, which authorizes the payment to the claimant States of the largest grants that they have had since federation, indicates that the Government is fully cognizant of State needs, and of the value of decentralization of the activities and the development of the Commonwealth. I am confident that, as the result of the special Premiers conference, to which I have referred, and the Constitution convention which, I hope, will follow, we shall be able to look forward to an improvement of the system under which grants are made to the States.

Speaking, as a representative of Tasmania, which depends upon the Commonwealth for 50 per cent, of its revenue, I say that f ull credit should be given to the Menzies Government for its ready acceptance of the recommendations of the Commonwealth Grants Commission and for the allocation to the State of Tasmania of this magnificent grant. Defective though the present system may have become under the influence of the uniform income tax scheme, I believe that, for ite introduction, we owe a debt of gratitude to a former Prime Minister of this country, Mr. Lyons. All Tasmanians are proud of the fact that a Tasmanian was responsible for the introduction of a scheme under which the disabilities of the less populous States under federation are so fully recognized that Tasmania, for instance, receives from the Commonwealth no less than one-half of its annual revenue.

Senator GORTON:

– The purpose of this bill is to provide for the payment of special grants to certain States. The character of the measure is such, that it should be possible for honorable senators to discuss it, not on party lines, but as representatives of the States -which sent them here. Some political bia9 was revealed by the Leader of the Opposition (Senator Ashley) in the opening stages of the debate, but as most of his remarks have since been adequately answered by Senator Wright I sholl deal only with his statement that, following the last conference of Commonwealth and State Ministers, the Premiers’ returned to their States and complained that they had not received enough money from the Commonwealth. I should like the Leader of the Opposition to name one occasion since the adoption of uniform income tax on which a State Premier, with the possible exception of the Premier of New South Wales, who invariably does well for his State, returned from a conference of Commonwealth and State Ministers and said that he was satisfied with the amount which the Commonwealth had agreed to allot to his State.

It is interesting to consider the purposes for which the Commonwealth Grants Commission was established and the lines along which it has tackled its task, and also the degree to which the status of the respective States has changed since grants were first made to them. As Senator Wright has said, grants to. the States are made in accordance with the provisions of section 96 of the Constitution for the purpose of ensuring that the less populous and financially weaker States shall not suffer as the result of federation. Grants were first made to Western Australia and Tasmania in 1911 and to South Australia in 1925. When the Commonwealth Grants Commission was established in 1933, it first intended to recommend the payment of grants to those States which had suffered adversely in a financial sense as the result of federal action. After more careful consideration it decided to make a different approach to the problem, and to recommend the payment of grants which would enable the weaker States, not to be raised to the standard of prosperity enjoyed by more populous and financially stronger States but to a level approaching that standard. It has followed that criterion throughout its operations.

It is interesting- to observe from the seventeenth annual report of the commission, which has just been published, the changes that have taken place in the relative status of the States. The report discloses that in the important field of education New South Wales was able to expend 70s. 8d. per capita; Queensland, 62s. 10d.; South Australia, 70s. 3d.; Western Australia, 75s. 4d. ; Tasmania, 83s. 10d.; and Victoria only 67s. Id. Thus the amount expended by Victoria on education was lower than that expended by any other State and below the average expenditure of the six States. A similar position is revealed in the field of health. I shall not weary honorable senators by citing the detailed figures. I simply say that, per capita, expenditure by Victoria in the field of health was considerably less than the average per capita expenditure of the six States. It may be to the credit of Victoria that that State has also spent less per capita than have the other States on law, order and public safety. The small amounts spent by the State of Victoria are not the result of parsimony on the part of the present State Government or of any previous government, and I think that that statement will be accepted by all honorable senators. The Victorian figures are lower than those for any other State only because Victoria cannot obtain the revenue to enable it to spend more. This year it will certainly have a budget deficit, and as the impact of the recent increase of the basic wage is felt, that deficit will grow. From those figures it is apparent that Victoria is now in such a position that the State Grants Commission should consider making to it a grant so that its public services may be raised towards the level now obtaining in the other more fortunate States.

I give great credit to the Prime Minister (Mr. Menzies) for having recently stated that a conference of Commonwealth and State Ministers will soon be held in accordance with the declaration made in his policy speech. That conference will consider not only the question of Commonwealth grants, but alao the subject of financial relations between the Commonwealth and the States. I see no reason why the members of the Opposition, as well as the members of the

Government, should not be pleased that that conference is to be held, and particularly if it is agreed that some authority should be set up to examine the financial relations between the various governments of Australia. It is not ». simple and easy matter -to decide to what extent the Australian Government should enter the taxation field, what functions should be left to the States, and what grants may be given. The responsibilities of the Australian Government and of the State governments have grown aud arc growing. I hope that all parties in this Parliament will take an interest in this matter and will assist any body that is set up to examine the facts, and to report on the respective responsibilities of the Commonwealth and the States. After its report has been presented I have no doubt that there will be a great division of opinion. On past evidence, it is obvious that the desire of the Opposition is not for federation, but for unification and for the concentration of more and more powers in the Central Government of Australia. I am not at the moment debating whether that is a good or a bad objective; I merely state that that appears to be the policy of the Australian Labour party, and, from memory, I have seen it stated as a plank in the party’s platform.. Those who are opposed to the Australian Labour party do not wish to see concentrated in a remote central government any more powers than are absolutely necessary to permit the limited functions of such a government to be carried out. The members of the Government parties wish to leave as much sovereignty as possible in the hands of the State governments, which are closer to the people.

On the question of the establishment of a commission or other body to report on the facts, I see no cause for division to occur concerning the grants to the respective States. I trust that all honorable senators - even those from New South “Wales, including Senator Grant - will agree that Victoria should be given a grant in common with the other States.

Senator McKENNA:

– The Opposition has pleasure in extending its support to this measure. I understand that there is some degree of urgency about its passage, so that the

State governments may know what their exact revenues will be and so that they may accordingly condition their expenditures. 1 entirely agree with Senator Wright, and with another honorable senator who has spoken, that the subject of CommonwealthState financial relationships is one that should seriously concern all honorable senators. Despite the urgency for the passage of this bill, I think it would be derogatory to our responsibilities as honorable senators if we allowed a measure such as this to pass without adequate consideration and comment of some kind. A study of CommonwealthState relationships was one of the earliest matters to which I addressed myself when I entered this Parliament six years ago, and I regret that my only opportunity to look at the report of the Commonwealth Grants Commission relating to the bill now under consideration came after the Senate adjourned last evening. I have been able to do little more than glance through it, and therefore may not be in a position to do complete justice to it. It is well to remember that the report of the commission, and this bill, deal with only one aspect of CommonwealthState financial relationships. That aspect, in the light of the present financial situation, is in a relatively limited field.

These grants arise, not at the instance of the Australian Government or Parliament, but by virtue of the existence in the Constitution of section 96, which enables any State to make an application to the National Parliament for financial assistance. I say at once to Senator Gorton that if the State of Victoria is interested in coming within the purview of the Commonwealth Grants Commission, it can do so merely by lodging an application under section 96 of the Constitution. It is not a matter for the Australian Government to take the initiative. Any State, if it wishes, may make application under that section. The section provides that grants may be made with or without conditions, and the history of grants of this nature shows that they have been made without conditions of any kind. If the honorable senator had ever attended a conference of Commonwealth and State .Ministers, he would understand that the fundamental difficulty at the base of CommonwealthState financial relationships is the conflict between State sovereignty on the one hand, and the need for national unity on the other. They are two concepts that inevitably, at point after point, must come into collision one with the other. It will be found that Premiers of the non-claimant States of Queensland, New South “Wales and Victoria are most insistent upon the preservation of the highest degree of State sovereignty, and for that reason are most averse to making an application under section 96 of the Constitution, which would immediately bring their affairs under the close scrutiny of a body such as the Commonwealth Grants Commission. Much as the State of Victoria may be in need of further assistance from the National Parliament, I think Senator Gorton would have the greatest difficulty in persuading the Government of that State to make an application under section 96. When I say that, I agree again with Senator Wright that the lodging of applications under section 96 does not import any degree of mendicancy on the part of the States who make applications. There is not the faintest element of it.

In the beginning, federation was a contract entered into between six sovereign States, whereby each of those States surrendered some degree of sovereignty in the need for national unity, particularly in a matter such as defence, and it was then clearly recognized that there were all kinds of inequalities and differences between the States. As support for that statement it is only necessary to refer to factors that are still in existence to-day, such as differences in area, topography, soil fertility, distances from Australian markets, density of population in relation to area, and natural resources. Those factors all constituted inequalities from the beginning of federation. Because there was a recognition of those inequalities at the time federation was instituted, certain financial provisions were made in the Constitution. One was the Braddon clause, in section 87, that provided that three-quarters of the customs duties for the first ten years should go to the States ; another provision that recognized the need for adjusting inequalities was con- tained in section 96, which this chamber is considering to-day. Because it was desired that there should be even progress towards standards of development and services throughout Australia favorable to all Australian citizens, and not only to the citizens of a particular State, it was recognized that there should be assistance from the federal authority. The whole purpose of making those constitutional provisions relating to the finances of the States was that inequalities between them could, in that way, to some degree be ironed out.

On behalf of the claimant State of Tasmania, I extend to honorable senators representing the States of Queensland, New South Wales and Victoria thanks and appreciation for their attitude in relation to these grants. To my knowledge, there has never been any objection from honorable senators representing those States to grants being made to their less fortunate sister States. I expect that this measure will pass through the Senate without objection from any honorable senator.

The work and qualifications of the three members of the Commonwealth Grants Commission - Mr. Fitzgerald, Professor Wood, and Mr. Kenneally - are so well known that I do not propose to touch upon them, but I wish to say a word about the small, but very experienced, staff of the commission. Any honorable senator who peruses this report will no doubt pay tribute, as I do now, to its literary excellence, the clarity of its presentation, and the importance of the matters that are touched upon. From actual experience, I know that the commission’s staff is continually engaged in examining trends in the budgets of all States, and not merely of the three claimant States, and that it is continuously preparing statistics. Knowing the ways of boards with their staffs, I have no doubt the commission’s staff is primarily responsible for the preparation and presentation of the report before this chamber to-day. Honorable senators who are interested in the question of Commonwealth-State financial relationships cannot do better than make a thorough .study of the reports of the Commonwealth Grants Commission.

Those reports make a complete review of the economic trends in the individual States, and their appendices are mines .of valuable information.

Sitting suspended from 18.1/5 to 2.15 p.m.

Senator McKENNA:

– At federation it was anticipated that all States would, to an appreciable extent, be dependent upon financial assistance from the Commonwealth, and we have only to trace the history of this matter since federation to realize how true that anticipation waa. We begin -with the “ Braddon clause “ - section 87 of the Constitution - which provided that, for the first ten years of federation, there should be payable to the -States three-quarters of the total amount of revenue derived by the Commonwealth from customs duties. That was succeeded by the payment to the States of 25s. per head of population, which operated from 1911 to 1927. That .arrangement was open to the criticism voiced by Senator Wright that, because the value of money diminished, 25s. was worth more in 1911 than it was in 1927. There was an “undue rigidity in an arrangement that pegged Commonwealth assistance to the States to a fixed sum of ’25s. per head of population. It was that defect, amongst others, which resulted in the third step - the ‘Financial Agreement of 1927. Pursuant to that agreement, the Commonwealth assumed, to a great degree, responsibility for State debts. It made a fixed contribution of £7,500,000 a year towards the payment of interest upon the national debts of the States, and it is paying that amount at the present time. It also assumed responsibility for some of the capital involved in State debts and agreed to make a contribution of 2s. 6d. per annum per £100 towards the repayment of the principal of debts incurred by States prior to the 1st July, 1927, which meant that the debts would be discharged in a period of 58 years. In addition, the Commonwealth agreed to make a contribution of 5s. per annum per £100, conditional upon the States making an equal contribution, towards the repayment of the principal of debts incurred by the States after the 1st July, 1927, which meant that those debts would be discharged in a period of 55 years.

Between 19.27 and 1933, the position : between the Commonwealth and what I shall call the three claimant States was one of negotiation year by year, or argument between the governments of those States and the federal government of the day. That was a very haphazard system. Then in 1933, came the great blessing of the establishment of the Commonwealth Grants Commission. With the establishment of that body, an endeavour was made to evolve some .kind of principle and some firm methods of dealing with the problem. That arrangement was supplemented in 1942 by the income tax reimbursement .scheme, which was followed by an amendment of the Financial Agreement in 1944. Pursuant to that amendment, the Commonwealth assumed an additional burden. It made a very special arrangement in relation to the vast deficits that the States had incurred during the depression period and which had never been funded. It agreed to make a contribution of 5s. for every 15s. contributed by the States with the object of funding those debts and discharging them in a comparatively short period.

I .have mentioned those matters to show that, from the beginning, it was implicit in federation that the Commonwealth would have to give financial aid, not only to what are called the three claimant States but also to all States I refer honorable senators to Appendix ~No. 21 of the report of the Commonwealth Grants Commission for this year. In that appendix is set out a complete statement of the financial assistance rendered by the Commonwealth to the States during the period of ten years from 1938-39 to 1948-49. The assistance is set out under various heads. The first head is the contribution of the Commonwealth to the payment of interest upon State debts. During that period, the contribution remained constant at approximately £7,500,000 a year. The next head is the Commonwealth’s contribution to all State budgets in connexion with the sinking fund on State debts. Between 1938-39 and 1948-49 the Commonwealth’s contribution under that head increased from £1,478,000 to £1.852,000. Grants made under the Federal Aid Roads and Works legislation increased during that period from £4,266,000 to £7,631,000. The other heads in the appendix relate to the special grants that we are now considering - the tax reimbursement grants that commenced in 1942; the special grants relating to taxation that began in 1945-46; hospital benefits in respect of public hospitals; assistance towards the relief of primary producers, which was as much as £21,000,000 in 1945-46; assistance in respect of housing; assistance in respect of other general works, which, I assume, includes payments made to the States in 1948-49 as reimbursement of the expense of administering prices control under State laws; grants for medical research, and miscellaneous payments.

It is interesting to compare special grants such as those we are considering to-day, made under section 96 of the Constitution with the total payments made by the Commonwealth to the States. There are several interesting facets of that matter upon which I shall comment. Special grants such as we are considering to-day rose from £2,020,000 in 1938-39 to £7,450,000 in 1948-49. The Senate has already been informed that that figure rose to £11,054,000 last year and will be £12,175,000 this year. The total payments made by the Commonwealth to the States rose from £20,266,000 in 1938-39 to £106,527,000 in 194S-49. There is a very interesting comment to be made upon the comparison of State grants and the total amount of Commonwealth assistance to the States. In 193S-39 and for the next twu years, States grants represented 10 per cent, of the total payments made by the Commonwealth to the States. In 1942-43, when the tax reimbursement scheme was introduced, the figure fell to 4-J per cent. In 1943-44, State grants represented only 3-^ per cent, of the total Commonwealth financial assistance to the States. The figure was 4 per cent, in 1945-46 and 1946-47 and then it rose to 6 per cent, in 1947-48 and 7 per cent, in 194S-49. Although the total of State grants made under section 96 of the Constitution has increased enormously during the last twelve years - in fact, from approximately £2,000,000 to approximately £12,000,000 - it represents a diminishing proportion of the total amount of Commonwealth assistance to the States. It is as well to view the grants made under section 96 of the Constitution in their true perspective in relation to the total sum made available by the Commonwealth to the States.

If honorable senators will refer to Appendix 19 of the report, which is to be found on page 115, they will see a most interesting graph, in which, in picture form, are shown the total revenues of South Australia, “Western Australia and Tasmania. The picture shows the revenues derived by each of those States from business undertakings, State taxation, tax reimbursement at the hand of the Commonwealth, special grants and other payments by the Commonwealth. Looking at that graph, it is interesting to note the wide area of State revenue that is made up of grants from the Commonwealth under the heads to which I have referred.

The report makes its usual survey of Australian economic conditions and of the economic position of each of the three claimant States. It reviews the financial position of each of those States and refers to the parlous position of their business undertakings. On page 12 of the report, the commission states -

The deterioration in the finances of the claimant States since ] “42-43 has been the direct result of cumulative increases in salaries, wages and other costs, which have been offset to some extent by larger revenues. A summary nf the net retrogression in each State, by main groups of revenue and expenditure, is given in Chapter II.

T direct the attention of the Senate particularly to the next sentence - lt will be seen that the retrogression in the net financial results of State business undertakings has been particularly serious. This fact raises problems which are causing the Commission grave concern.

In paragraphs 170 to 175 of its report, the commission deals in detail with the very serious problem confronting the State governments as a result of the deterioration of the financial position of their State business undertakings. The claims of the three States are reviewed State by State. A chapter of the report is devoted to enunciating the commission’s main principle and the broad methods by which it works. The commission, measuring the grants that it ultimately recommends should be made, embarks upon its usual discussion. 1 propose to make a few comments upon the relation of the claims made by the States to the grants made to them. South Australia, in a detailed claim, sought £5,600,000, and the recommendation was that it should receive £5,332,000. South Australia was given almost all that it asked for. Western Australia did not submit a detailed claim but asked for approximately, £7,000,000. The recommendation of the commission was that it should receive £5,839,000. Tasmania asked for £1,575,000, and the recommendation was that it should receive £1,004,000. The States claimed a total sum of £.14,175,000, and the commission recommended that they should be paid £12,175,000. From the claims made by the States and the grants recommended, one may draw the conclusion that the Commonwealth Grants Commission has clone a very good job. It is apparent that the States recognize the principles enunciated by the commission, have an appreciation of the methods that it applies, are presenting their claims in accordance with that principle and those methods, and are now able to assess in advance with some degree of certainty, what their grants will be.

I propose to deal with only one other matter arising from the report. I shall in due course refer to the second part, in which the commission set out its principle and its methods. At this stage, however, I wish to refer again to the 17th Report of the commission. Paragraph 2 of the introduction and summary reads -

In any federation, it is not to be expected that any system of financial relations and adjustments between the central government and the governments of the member units will automatically ensure continuous balance between the varying needs and financial resources of the several members.

I think that that is a very important comment, because I believe that it is impossible, owing to the variant conditions to which States are subject from year to year, to evolve any hard and fast formula that will resolve the primary differences that arise between the Commonwealth and the States in relation to their reimbursement. No amount of foresight on the part of any expert body can make provision for unpredictable occurrences such as droughts, industrial troubles, fires, hail-storms, floods, and all kinds of influences that are suddenly exerted and can have a very serious effect upon the economy of a State, and accordingly upon the revenues and budgets of the State governments. This very complex problem is not peculiar to Australia. It arises in every country where there is a federation and where there are component bodies with extensive powers. It arises in the United States of America very acutely. It arises, again acutely, in Canada. To any honorable senator who is interested in pursuing this aspect further, I would commend the report of the Rowell-Sirois Royal Commission on Financial Relations between the Dominion and the Provinces of Canada. That report was produced only a few years ago, and adverts to the work of the Commonwealth Grants Commission with approval. It made a very notable contribution to the very difficult subject of federal and provincial relations in the financial sphere. It is true of India that there are difficulties, and again of Russia, where there is exactly the same trouble. In no country in the world has a solution been evolved that gives real satisfaction to both the federal body and the subsidiary State governments. I consider that the problem must be tackled with great understanding on the part of the Government, which necessarily must play a dominant role in the collection of revenues, responsibility for defence, and responsibility for other factors that are most important in connexion with the economy of the country. And there must be a degree of generosity in the outlook of the Commonwealth, if Commonwealth and States in a federation are to proceed with a reasonable degree of equanimity in working out their financial problems. Paragraph 3 of the introduction and summary reads -

  1. War-time and post-war conditions in Australia have involved rapid and extensive changes in the economy, with consequential disturbance of budgetary conditions. Important aspects of these changes have been -

    1. unavoidable assertion in war-time of the constitutional financial power of the Commonwealth Government, and the continued exercise of that power since war conditions ceased;

SenatorWright. - Significantly said not to be avoidable.

Senator McKENNA:

– I shall make no comment on that aspect at this stage. Uniform taxation was introduced by a Labour’ government in 1942, as a matter of sheer necessity, and has continued in the post-war period as a matter of great advantage to the people of Australia. It is significant, too, that the Menzies Government has taken no steps whatever to alter it; it held as rigidly to uniform taxation at the recent conference of Commonwealth and State Ministers as ever did the Chifley or Curtin Labour Governments. Therefore, I do riot see any room for a difference of opinion between the Government and the Opposition about the merits or demerits of uniform taxation. I repeat, that when a national parliament is charged with vast responsibilities, it is clearly right that it should play a dominant role in financial considerations.

I agree with Senator Wright’s contention that those who expend money should have the responsibility of raising the revenue. That principle is theoretically perfect. However, when we consider the history of federation, the ideas that inspired it, and the financial relations that have existed in this country during the past 49 years, we must inevitably come to the conclusion that there cannot be a division of revenues between Commonwealth and States, relying on a clear division of powers. The principle that Senator Wright advanced does not measure up with realities in Australia. As facts and figures, and the whole history in relation to this subject show, it is; inescapable that the Commonwealth must continue to play a dominant role in the matter of those relations. It is proposed that there should be a conference upon the subject. I have attended many conferences between State premiers and Commonwealth representatives, when this very tortuous question has been under discussion. Senator Gorton asked if there was ever a time when the State Premiers were satisfied with the amounts of Commonwealth grants to the States. I remind honorable senators that such a high degree of unanimity was reached when income tax reimbursement legislation was under consideration, and the total basic amounts were fixed at £40,000,000 per annum, that the States agreed for a period of ten years not to seek to alter the formula that was then written into the legislation. It was a formula that was designed to bed down Commonwealth and State relations in that important financial field for a period of years, to give some stability to the situation. The first outline of the formula that was proposed came from the premiers themselves. It was a complicated formula. The fact that I had something to do with shaping it is not the cause of that particular position; we had to make complicated adjustments, based on wage increases, and the taking into account of things such as the density of population and the relative number of children in a community. A very comprehensive formula was arrived at, which received the complete accord of both the Commonwealth and the States.

Although everybody agreed in 1947 that the formula would be sufficient for a decade, in the very next year it was completely upset. The situation had developed in the various States that costs had risen and, in effect, the whole formula was scrapped from the next year. In truth, the matter has now come down to a consideration of Commonwealth and States commitments. With a great deal of regret, I have come to the conclusion that no formula that will remain static for any length of time can be evolved. There are too many imponderable and unpredictable elements in the situation.

I do not object to the Premiers and Commonwealth. Ministers conferring frequently about this matter. I think that it is vastly important that the Commonwealth should be kept in touch with trends in State budgets, and not be required to wait until the end of the year, until questions of income tax reimbursement crop up, or until a report of the Commonwealth Grants Commission comes before the Parliament. It should be the responsibility of the Australian Parliament to follow the trends of State bodies month by month,, and to be prepared to understand the’ difficulties of the States. The Commonwealth should be prepared, if necessary, to make interim adjustments during’ a period. In my mind, what is wanted’ is not so much formulae as a degree of flexibility, particularly on the part of the Australian Parliament, so that itcan adjust itself to these constantly changing situations. I point out, as proof of the difficulty,that even an expert body like the Commonwealth Grants Commission cannot lay down a permanent formula. The report that that body made in September last is hopelessly out of date this year, due to factors over which the commission bad no control. It submitted its report in September last in the light of what it could foresee. However, in the following month a substantial basic wage increase was granted by the Commonwealth Court of Conciliation and Arbitration. That was immediately picked up by wages boards in the various States, and will permeate the whole of the economic structure of Australia, costing governments and private enterprise about £140,000,000 a year. It is completely clear that even estimates that were prepared in September for this financial year must be held to be completely falsified by the great increase of the basic wage. It is certain that, taken intoto, the expenditure of the several States will be increased by millions of pounds as a result of this increase. The report that we are considering could not have taken account of this factor. I am not voicing any criticism of the Commonwealth Grants Commission. I am merely seeking to show how impossible it is to look into the future even to the extent of one year, in view of the violent changes that may occur within a month. That is why I despair of the production of a formula that is going to bed down this very vexed question for any appreciable period.

Reverting to important aspects of extensive changes in the economy of this country, paragraph 3 of the introduction and summary of the report continues -

  1. rapid, expansion of social services, both by the Commonwealth and the States;
  2. great extension of the development programmes ofthe States and more active collaboration between the Commonwealth and the States in those programmes :
  3. acute and persistent shortages of resources, especially materials and labour, in the face of urgent demands, both public and private;
  4. unprecedented enlargement of export income; and
  5. sustained rise in costs of almost all commodities and services.

    1. Some of these influences are doubtless of a transitory nature; others may prove to be more or less permanent. Consequently, Com- monwealth-State financial relationshave not yetsettled into a new equilibrium. In this transition phase, the work of the Commission has inevitably become much more complex, and the amounts of the grants recommended have grown rapidly.

Thus, even the commission, an expert body -which has functioned with great success since 1933, admits the difficulty of achieving an exact balance between the claimant and the non-claimant, or standard, States. Senator Wright referred to the1936 report of the commission. That is a monumental document, which makes it clear that the commission set out with courage and determination vo evolve order and to establish principles. On page 65 of the current report, the commission repeats the principle first enunciated in its report of 1936. I quote as follows : -

Special grants are justified when a State through financial stress from any cause is unable efficiently to discharge its functions as a member of the federation and should be determined by the amount of help found necessary to make it possible for that State by reasonable effort to function at a standard not appreciably below that of the other States.

To that principle the commission has remained constant all through the years, but the methods of applying the principle have changed frequently, because of changing conditions. It is to the credit of the commission that there has been great flexibility in its methods. Last year, it made a fundamental change by dividing each grant into two parts, one part being justified only in the light of facts disclosed two years later. Unfortunately, the commission cannot obtain audited figures relating to State expenditure until two years after the money has been spent. Only by insisting upon audited accounts, and by ignoring estimates, can the commission apply the principles which it has laid down. While I approve of that approach to the problem, it has the unfortunate consequence that the needs of the claimant States must be assessed, in the first instance, according to the financial situation that existed two years previously. That is a difficulty, but I cannot suggest a way of overcoming it, any more than can the commission itself.

The commission examines budgets of the standard States, Queensland,New

South Wales and Victoria, in order to find out whether they have balanced their budgets, finished the year with a surplus or finished with a deficit. Having determined that, the commission then proceeds to compare the budgets of the claimant States with those of the standard States. If a claimant State has been found to bo spending at a rate greater than the average spending rate of the three standard States, a deduction i3 made from the grant payable to that claimant State. The commission also considers the severity of taxation in the various States. Some claimant States receive an addition to their grants because of the severity of taxation, while others suffer a deduction because their taxation rate is not up to the standard. The commission also considers the level of charges made by business undertakings, such as tram and train fares, electricity charges, &c, and balances such charges made by the claimant States against those made by the standard States. My own opinion is that such adjustments should be carried even further than is done now.

The commission says in its report that it has been afflicted with staff shortages, and has not been able to make all the comparisons and adjustments on a statistical basis that it desires. There arc two elements in the comparisons that demand some comment. It was the practice of the commission some years ago to make adjustments, favorable or otherwise, according to whether a claimant State had exercised duc economy in administration. In paragraph 113 of its report, the commission touches on this point as follows: -

At the hearings in Hobart, Tasmania repeated its claim for a favorable adjustment for relative economy of administration. The Commission pointed out that further evidence would he required to substantiate the claim. The Tasmanian representatives undertook to present further evidence later. Meanwhiie, the Commission has made no adjustment on account of relative economy of administration.

That should be followed up. Tasmania does, I believe, exercise greater economy in its administration than do the other States.

The commission used to contend that a special effort should be made by claimant States to get out of their financial difficulties. It left the State free to choose what form the effort should take. The commission used to deduct something from the amount that would otherwise be paid in order to induce the claimant States to make this effort. Some time ago, that requirement was suspended because of the difficult financial conditions prevailing. The commission touches upon the matter in paragraph 169 of its report, and points out that, although it had suspended for a period its demand for a special effort by the claimant States, it intended to reimpose that requirement. In the course of my rapid perusal of the report, 1 could not find anything to indicate that any deduction had been made on that ground. 1 should be glad, when the Munster replies if he will say whether or not any such deduction has been made.

The Minister pointed out, in his secondreading speech, that the commission, when assessing the second part of the grant, functioned conservatively, and worked within a margin of safety. At a time like this, when we are caught in an inflationary spiral, and it is certain that all government costs will rise, the caution of conservatism mentioned by the Minister might well be dispensed with. The commission should take the realistic view that an increase of costs is inevitable, and it should assess the needs of thu States in such a way as to make it unnecessary for them to budget for deficits.

Senator Gorton pointed out that it was open to any State to apply to the Commonwealth for a grant under section 9(i of the Constitution. However, T arn certain that the Premier of Queensland. Mr. Hanlon, the Premier of New South Wales, Mr. McGirr, and the Premier of Victoria, Mr. McDonald, would be the last three persons to agree to their States making such an application. They have gone so far as to say that they are humiliated, as the leaders of sovereign States, to have to go cap in hand to the Commonwealth to ask even for an increase of income tax reimbursements. The one thing that they wish to avoid is the scrutiny of their accounts by the Commonwealth Grants Commission, which would be necessary if they themselves became claimant States. I must say in their favour, however, that they have always co-operated readily with the Commonwealth. Grants Commission to enable it to compare the budgets of the claimant States and the standard Statesit is important that none of the States should have to budget for a deficit. The Financial Agreement provides that any State which finances a deficit by overdraft, or by the issue of treasury-bills, must fund the debt, and pay it off at the rate of 4 per cent, per annum within seventeen years without Commonwealth help in any form. Thus, if a State finishes the year with a deficit, the paying off of that deficit places an additional burden on its budget for each one of the next seventeen years. I do not suggest that, if the standard States finish the year with a surplus, the budgets of the claimant States should be brought up to their level. I only suggest that deficits should be avoided. Balanced budgets all round would make for better relations between the various States, and between the States and the Commonwealth.

Commonwealth and State financial relations are of fundamental importance, and this chamber should take the keenest interest in the subject. I conclude with the suggestion that the Senate might, as a proper development of its functions, appoint an all-party committee to keep Commonwealth and State financial relations constantly under review. We should then have in the Senate a body of wellinformed opinion, and honorable senators would understand the difficulties and problems associated with the matter tha” is of the greatest importance to State governments and to this National Parliament.

Senator MATTNER (South Australia) “3.0]. - As a back-bencher who has listened to almost every debate that has been held in this chamber during the present sessional period, I regard to-day as a red-letter day for the Senate. My only regret is that our proceedings ave not being broadcast. Had we been on the air, the public would have had an opportunity to listen to honorable senators speaking on a national plane. To-day’s debate has been most refreshing, and I trust that nothing that I may say will detract from the high standard thai has already been set. I should like to associate myself with the remarks of

Senator Wright, and particularly with the concluding portions of Senator McKenna’s speech. It augurs well for the future of the Senate that speakers from both sides of this chamber should be able to discuss some matters, at least, frankly and with a broad national outlook.

The improvement of Commonwealth and State financial relations is vital to all of us. As senators, we have a duty to further the interests and uphold the rights of the States that we represent. As a representative of a claimant State, I appreciate, as I am sure other honorable senators from South Australia, Western Australia and Tasmania do, the magnanimity of my colleagues in this chamber who represent the more fortunate States of the Commonwealth. Like all other South Australians, I am proud of my home State, even though it is a claimant State. We believe that we are doing as much as are any other citizens of the Common wealth in the interests of this nation. After fifty years of federation, it is most refreshing to learn that most members of this chamber are nationally minded, and are prepared to do everything possible to improve Commonwealth and State relations. Our Constitution was framed by wise men. Section 96 - the provision with which we are most concerned in dealing with this measure - enables the States which, by force of circumstances, are not so financially buoyant as are the more populous States, to obtain Commonwealth assistance. Much has been said about the financial responsibilities of the States and of the Commonwealth. Undoubtedly, an authority that spends public money should have some responsibility for raising that money. The Senate could well consider Senator McKenna’s suggestion that a committee be appointed to review Commonwealth and State financial relations.

Many of the subjects with which I proposed to deal in my speech on this measure have already been dealt with far more lucidly by Senator McKenna. Nevertheless, I think that I can claim that my sincerity is equal to his, and I appreciate many of the views he has expressed. A feature of our present Commonwealth and State financial system that impresses me is the’ fact that the finances of claimant States are very keenly scrutinized by the Commonwealth Government. I do not regard that as undesirable. I am sure that most governments in Australia wish to conduct their financial affairs as efficiently as they are able; but Commonwealth scrutiny does ensure that the claimant States shall exercise caution in the spending of money.

The seventeenth, report of the Commonwealth Grants Commission is, as usual,, a carefully considered, document. My only regret is that we have not had. it before us for a little longer, so that we could have devoted more time to it. An unfortunate feature of the working of the Commonwealth. Parliament is that, whereas an enormous amount of time is spent on matters that could be- dealt with amply in three or four days, out opportunities to consider important matters such as that now before this chamber, are frequently far too limited. I hope that,, if the committee envisaged by Senator McKenna. becomes a reality, we shall have more time to devote to a study of the work of the Commonwealth Grants Commission.. I had intended to read certain paragraphs of the commission’s report, but Senator McKenna has already referred to some of them., and I shall not weary the Senate with repetition. I agree with Senator McKenna that paragraph 2 is the crux of the problem. It states -

In any federation, it is not to be expected that any system of financial relations and adjustments between the central government and the governments o£ the member units will automatically ensure continuous balance between the varying needs and financial resources of the several members.

That is quite true, and: it is in that direction that the Senate could do much to assist by acting as a buffer between the “States and the Commonwealth Government. The report goes on to deal, with war-time and post-war conditions which, as we. all know, have, had a vital effect on the economy of this country. The rapid expansion of social services by both the Commonwealth and the States has also had a great bearing on CommonWealth and State relations. The report states that the changes in an economy resulting from war-time audi post-war conditions include -

Acute and persistent shortages of resources, especially materials and labour,, in the face of urgent demands,, both public and private.

The commission, expresses: the. hope that some of our troubles will be transitory.. We, too, hope so, and we trust that economic conditions in the very nearfuture will be such that men and womenwill be able to feel some.’ sense of security, and to- plan, for the years ahead, realizing that our economy will, not be subject to upsetting, fluctuations.

The report deals briefly with the effects of cumulative increase of salaries, wages and other costs. That’ brings me to a point on which Senator McKenna touched’ briefly. I refer to the proposed increase of the basic wage by £1 a week, which, of course, will have a profound influence onthe revenue and expenditure of the States as well as of the Commonwealth. Senator McKenna said that the increased basic wage would impose additional expenditure totalling £140,000,000 on the States. We are inclined to talk rather glibly to-day in terms of millons of pounds, but £140,000,000 is a. considerable sum to beabsorbed into our economy, and the immediate impact, on State budgets of this additional commitment will cause a serious problem. Therefore, I support wholeheartedly the suggestion that,, from within our own ranks, a body should, be chosen to study the matters that, have been set out so clearly for us in the report of the Commonwealth Grants Commission. The welfare of the States is a vital consideration. We realize that it is not possible to set down a hard and fast formula for adjusting Commonwealth and State finances, but perhaps the Senate could assist in some way in the solution of the. problem that is caused by the time lag of two years between tha economic conditions upon which reports of the Commonwealth Grants Commission are based, and the publication of the reports. I confess that I have no solution to offer immediately, but I am sure that the views of members of this chamber would be valuable. The balancing of State budgets also seems to be surrounded by numerous difficulties and if the Senate were to consider State budgets in relation to Commonwealth finances, it might be able to suggest ways and means of overcoming some of these difficulties. If so, the Senate would be rendering a valuable national service.

I support the payment of the grants provided for in this measure. The bill may not provide the solution of the problem that everybody desires, but it will go a long way towards establishing happier relations between the States and the Commonwealth. Again, I express my appreciation of the suggestion that a committee of the Senate should be appointed to consider Commonwealth and State financial relations. Through such a committee, we should be able to gather much useful knowledge which could be applied to the benefit of Australia as a whole. In that way, we could scotch once and for all this talk of the abolition of the Senate.

Senator NASH:
Western Australia

– It is refreshing to us to be told that the manner in which this measure has been discussed by honorable senators on both sides of the Senate meets with the approbation of Senator Mattner. The honorable senator described this as a red-letter day. It is strange that the honorable senator should make such a statement having regard to some of Ids utterances on other matters that have been discussed in this chamber. I agree with him that the seventeenth report of the Commonwealth Grants Commission is a very valuable document and that it should have been made available to members of the Senate much earlier. Almost every year the relevant report of the commission has been made available only when the legislation to give effect to its recommendations has been introduced. Honorable senators on both sid.69 of the chamber have been placed at a great disadvantage in considering the legislation because they have had insufficient time to study the report thoroughly.

With his usual exuberant oratory Senator Wright urged Opposition senators to discuss this matter in a nonparty spirit, but immediately after he had made that appeal he sought to make political capital out of the bill by stating that the total grants proposed to be made constitute a record. Listening to the honorable senator one would think that it was unusual for the government of the day to adopt the commission’s recommendations. I remind him that since the commission was first appointed in 1933 its recommendations have always been accepted by the government of the day without reservation. In introducing this bill the Minister for Social Services (Senator Spooner) said -

The special grants recommended each year by the Commission since its establishment in 1933 have always been adopted by successive Australian governments, and the present government can see no reason why the recommendations contained in the Commission’s seventeenth report cannot be adopted this year.

Thus, although the total grants proposed in this bill may constitute a record, this Government has done no more than have other governments in the past in accepting the commission’s recommendations. After having made an appeal to us to discuss this bill on non-party lines, Senator Wright apparently could not resist the urge to give it a political slant.

The very valuable report on which these grants are based sets out the economic and social factors that affect the claimant States and covers the ramifications of the other States. From that data it is able to present balanced recommendations. The information contained in the report enables honorable senators to gauge the financial position of the States and to make some assessment of the extent to which they should be assisted. .Some weeks ago, just before the Parliament re-assembled, a conference of Commonwealth and State Ministers was held at Canberra to discuss the financial relations between the Commonwealth and the States. It is common knowledge that at one stage during, the proceedings of the conference the Premiers got so out of hand that the Prime Minister (Mr. Menzies) was called in to take the helm and restore order. Almost immediately after the conference had concluded the right honorable gentleman announced that he would convene a further conference to discuss the subject. Of what use is it for honorable senators opposite to extol the virtues of the Prime Minister for having made such a decision when we all are aware that the decision was forced upon him by the Premiers, who had expressed great dissatisfaction with the results of the earlier conference? That dissatisfaction was expressed by not only Labour Premiers but also nonLabour Premiers, all of whom had taken umbrage at the stand taken by the representatives of the Commonwealth.

This bill proposes to make available to certain States grants aggregating to £12,175,000. Honorable senators on this side of the chamber have suggested that increased grants had to be made to the claimant States because of the effects of inflation on their budgets. Honorable senators opposite have said that inflation has resulted from the actions of the previous Government. Let us examine the facts. After the conclusion of World War II. the economy of this country was so sound that it was regarded with envy by the governments of other countries. It will be recalled that the referendum on rents and prices was held in 1948 because of doubts of the validity of such controls after the war bad ended. The majority of the people, having been wrongly advised by the non-Labour parties, refused to clothe the Commonwealth with power to control rents and prices, and, consequently, that control was abandoned. Those who examine this subject dispassionately admit that immediately after prices control had been abandoned inflation became more pronounced. To-day it has increased to such a degree that this Government is unable to devise means to combat it.

In appendix No. 11, which appears at page 111 of the report, the commission ha3 set out the grants made to each of the claimant States since it was first established in 1933. In 1934-35 the total grants amounted to £2,400,000. By 1949-50 the total grants had risen to £11,054,000. In order to emphasize my comments regarding the effect of inflation, let me cite the figures relating to grants made to the claimant States from each of the years from 1945-46 to 1949-50. They are as follows : -

Inflation was the dominant factor which influenced the great increase made in 1949-50.

When Senator Wright said that the total grant in 1948-49 amounted to £11,054,000, I interjected, saying that Le had made an error and that that amount had been provided, not in 1948-49, but in 1949-50.

Senator WRIGHT:
TASMANIA · LP; IND from June 1978

– I referred to the grant made in the last financial year in which the Chifley Government was in office.

Senator NASH:

– The honorable senator did not say that. He sought to link up that figure with the record which he so proudly claimed for the Menzies Government. I merely wish to state the position correctly, so that there may be no misunderstanding about it.

The report of the Commonwealth Grants Commission has been extensively quoted by several honorable senators, and particularly in the splendid speech delivered by Senator McKenna. The constructive suggestions made by the honorable senator are worthy of consideration, and I trust that the Government will afford them the serious consideration they deserve. The commission’s report is set out under various headings. Chapter 2 deals with the Australian economic position, and I think it would be worth while, if only for the purposes of record, to comment on that portion of the report. It starts on page sixteen, under the heading “ The Australian National Income, 1948-49 “. The report points out that the gross national production in 1948-49 was estimated at £2.256,000,000, compared with £1,998,000,000 in 1947-48. In 194S-49 the net national income was £1,955,000,000, a rise of £202,000,000, or approximately 12 per cent., over the 1947-48 figure, and nearly two and a half times greater than in the pre-war period. The largest single item contributing to that increase was wages and salaries, which rose by £151,000,000. The second largest increase was occasioned by farm incomes, professional incomes and incomes from unincorporated businesses, which increased by £40,000,000. The report also points out that personal expenditure on consumable goods increased from £1,234,000,000 in 1947-48 to £1,418,000,000 in 1948-49, but that the proportion of gross national expenditure remained stable at 63 per cent. It is stated that the gross private investment in 1948-49 was £400,000,000, or IS per cent, of the national income, compared with £460,000,000, or 23 per cent, of the national income in 1947-48. Despite the increasing working population, the demand for additional labour continued strongly throughout 1948-49 and 1949-50. In 1948-49 the total number of wage and salary earners in recorded employment rose by 76,300, to a record level of 2,451,900 persons in May, 1949. At that time 106,267 vacancies were recorded for employment with the Commonwealth Employment Service, and in 1949-50 the recorded employment expanded by approximately 96,000 persons, the registered vacancies at June, 1950, being 108,110. That indicates that there are many more jobs available in the community to-day than there are people to fill them. In that respect this country is suffering to a considerable extent because of its internal economy.

The report also points out, in dealing with secondary industries, that the value of all factory production in 1948-49 was 65 per cent, above that of 1938-39. Because of post-war expansion of the building industry, 52,684 new houses and flats were erected in 1948-49 compared with 44,271 in 1947-48. As at September, 1949, there were 107,000 persons employed in the building industry, compared with 35,000 in September, 1-945. Honorable senators are aware that in September, 1945, the war had just concluded. As a result of the legislation enacted by the previous Australian Government and continued in operation by the present Government, the number of employees in the building industry increased from 35,000 to 107,000. Ey furnishing such informtaion, the commission has provided a document of considerable value to the people of this country. In addition, the report mentions various matters affecting particular States.

As a Western Australian representative, f am naturally concerned to see what the report has to say in relation to that State. In dealing with Western Australia the report of the commission states that considerable economic progress was achieved in 1948-49 and in 1949-50, that production was fully maintained and that employment continued to rise, lt states that the demand for additional labour remained strong and that the vacancies for employment, registered as at the 31st May, 1949, and the 30th June, 1950, numbered 4,124 and 3,602 respectively. Mention is also made of the fact that during the two years 1948 and 1949 the population of the State increased by 36,000, or approximately 7 per cent.

I wish to refer to that portion of the commission’s report which states that rehabilitation of the Western Australian railway system was begun, and that progress was made with other developmental projects. Western Australia is at a great disadvantage because of the narrow gauge of most of its railway lines. On many occasions I have advocated in this Parliament that the Commonwealthowned railway line should be extended from Kalgoorlie to Fremantle, and at one time I thought that success would bc achieved with that objective. The previous Australian Government spent many thousands of pounds in having a survey of that line carried out, and the Western Australian Government has negotiated with the Commonwealth concerning the widening of the gauge. That proposal, which was referred to in the report of Sir Harold Clapp, was to provide a broad gauge system of railways throughout Western Australia. The State has approximately 4,500 miles of railways, but many lines which were built for developmental purposes are conducted at a loss. It was only because of socialization that those railways were laid down. The people of Western Australia have the same right to have quick and comfortable rail transport as other people in the Commonwealth, and I trust that the Government of Western Australia will continue its negotiations with the Australian Government with a view to the extension of the line that I have mentioned.

Under the same heading in the report, reference has also been made to the fact that gold production slumped in 1948 and that there was a further decline in 1949. Gold production is of tremendous importance to Western Australia. Many people resident in the Kalgoorlie, Boulder and adjacent areas are still dependent on the gold-mining industry, which has tremendous possibilities. I understand that the State government has for many years had a prospecting scheme in operation. It was more .effectively used, perhaps, during the depression period, but it is still in operation. Under the scheme, parties financed by the State authorities endeavour to locate new gold-fields. My Western Australian colleagues in this chamber will be aware, as I am, of the large area of auriferous country in and around the gold-fields of that State.’ Although there has been a revival of goldmining activities at Coolgardie and Southern Cross, many fields now regarded as ghost areas went out of production because gold could not be produced at a profit at the price it then commanded. The price was then approximately £3 15s. or £4 an ounce, whereas to-day it is approximately £15 an ounce. While that high price is being obtained in Kalgoorlie, the fact remains that the costs of production have become so high that gold-mining is still not a very profitable pursuit.. Timber that is used for fuel on the fields of Kalgoorlie has to be transported more than 100 miles before it reaches the furnaces. That transport is very costly, and in addition there has been great difficulty in obtaining the necessary labour .to make the timber available. Moreover, as the quantity of timber readily available is rapidly diminishing, the industry must now look for new sources and kinds of fuel. It has been suggested that the time is rapidly approaching when it will have to use coal, either from Collie, which is approximately 450 miles from Kalgoorlie by rail, or from overseas.

I have raised this matter in the hope of persuading the Government to give special consideration to gold-mining in Kalgoorlie, Boulder, and other places in Western Australia. I know that the gold tax has been abolished and that the Commonwealth lias assisted the gold-mining industry in various ways, but, despite that assistance, the industry is confronted with grave difficulties. Although the price of gold is high, production costs are high also. The increase of production costs is attributable more to increases of the prices of necessary materials and equipment than to increases of wages. I believe that the Government should give serious thought to stimulating prospecting f»r gold in Western Australia. I hope that tie Government, having considered the difficulties that confront the gold-mining industry despite the high price of gold, vill re-introduce a gold basis. I am not pessimistic enough to believe that the gold-mining industry in Western Australia will die unless it receives assistance from the Commonwealth, but I believe that if the assistance were provided the populations of the gold-fields of Kalgoorlie and Boulder would increase considerably, and possibly be as large as they were in the buoyant years. Many honorable senators know what wealthy towns Kalgoorlie and Boulder were at that time.

A private company is engaging successfully in the whaling industry on the Western Australian coast. It has received assistance from the Commonwealth, and I must say that it has done a very good job. If it continues to develop in the way in which it is developing now, a new township will be established on the Western Australian coast, and that would be of benefit to- Western Australia and Australia generally. On the 29th March I directed a question to the Minister representing the Minister for National Development, in which I asked, among other things -

Has the Government given any consideration to the exploitation of the marine wealth of the sub-antarctic regions and the tropical seas off the north-west coast of Western Australia?

Has the Government any knowledge of the potentialities of the waters off the north-west coast of Western Australia, between the NorthWest Cape and Broome, in .respect to tunny and turtle fishing?

The Minister, in reply to that question, stated -

The Government is giving consideration to the possibilities of exploiting the resources of the sub-antarctic regions and the tropical suns off the north coast of Western Australia

. The Commonwealth Scientific and Industrial Research Organization has recently been engaged on a survey of the fisheries of the north-west coast of Western Australia, particularly in relation to the possibilities of tuna fishing. Reports of this survey are at present being compiled.

All that I have been able to learn is that reports are being compiled. I do not know what active work is being done in that field. Having regard to the potentialities of the north-west of Australia from the viewpoint of minerals, sea wealth, and agriculture with irrigation systems, 1 believe that the Commonwealth should give priority to the development of the resources of that State. I hope that this Government will do everything it can do to assist the Western Australian Government in that connexion. I have said before, and I repeat it now, that it would be silly to expect a State which has the largest area but the smallest population of all the States of the Commonwealth to develop its resources unaided. The difficulties would be accentuated if it were divided into smaller States, because the revenue of the smaller States would be inadequate for developmental purposes. Western Australia, which has played a great part in the history of this country, needs all the assistance that it can get from its sister States.

I have no hesitation in saying that there is some overlapping of the activities of the Commonwealth and the Western Australian Government in connexion with national developmental projects. I believe that the Commonwealth should make surveys and decide what works of national importance should be begun in this country, and that, having done so, it should make the necessary finance available to the States concerned and leave them to undertake the work. That would be a practical method of developing the States in the way in which they should be developed. Western Australia, owing to its inadequate taxing power, cannot raise the money with which to develop its resources properly, but even if we were to revert to the system of taxation that was in operation prior to the introduction of uniform taxation, that State would still be unable to raise sufficient money to finance necessary national works projects.

Uniform taxation was introduced in this country during World War II. If ray memory serves me correctly, the then Prime Minister, Mr. Curtin, proposed that it should operate for the period of the war and for one year afterwards, but the States, as it were, upset the apple cart. They were not satisfied with that proposal and approached the High Court, which ruled that the Com monwealth had prior rights in the field of taxation. Since then, uniform taxation has been in operation in Australia. I am certain that the present Government does not intend to abandon uniform taxation, despite the criticisms that some members of the present ‘Government parties had- made of the system. I agree with Senator McKenna that frequent conferences of the Commonwealth and the States should be held to discuss CommonwealthState financial relations. At those conferences the States and the Commonwealth could state the problems that confronted them and many difficulties could be solved. I conclude my remarks upon uniform taxation by saying that I have ascertained that taxpayers in Western Australia - I take that State as an example - are paying less in taxes under the uniform taxation system than they paid under the system that was in operation previously.

I am pleased with the manner in which honorable senators have discussed this bill. I do not believe that the Western Australian Government would have asked for a grant of £7,000,000 unless it needed that sum to enable it to meet its commitments. I observe that it is to receive £5,839,000 of the £7,000,000 for which it asked. It appears to me that the Commonwealth Grants Commission is trying to be scrupulously fair and to do its job to the best of its ability. That it has been successful in its efforts is proved by the fact that so far all Commonwealth governments have agreed with the recommendations that it has made.

Senator ROBERTSON (Western Australia) “3.57]. - I agree with Senator Nash that the Commonwealth Grants Commission has acted with a great deal of discretion and has done a very commendable job, but I express my disappointment that it has not recommended that special grants be made to the States for educational purposes. The educational facilities available in Western Australia are inadequate to meet the needs of that State, which is faced with the colossal task of undertaking the education of the people in an area equal to one-third of the size of Australia, although it contains only one-fourteenth of the total Australian population. I should like to see a special grant of £1,000,000 made specifically for educational purposes, to be divided amongst the States on tie basis of the size of their populations. There is a great need for a medical school in Western Australia, but its establishment would involve the expenditure of a large sum of money. The suggestion made by Senator McKenna that a committee of the Senate should be appointed to enable honorable senators to be kept informed about State budgets and the efforts of the States to balance them instead of budgeting for deficits, as some of them are now doing, was a very good one. If such a committee were appointed, the Senate would be in a position to advise the Commonwealth Grants Commission upon special grants for purposes such as education, which would be very acceptable to the States.

I congratulate Senator McKenna upon his fine analysis of the report of the commission. It was so clear and detailed that it is unnecessary for other honorable senators to deal with the portions of the report with which he dealt. As I have mentioned previously, one-fourteenth of the population of Australia is centred in Western Australia, the area of which is approximately onethird of the Commonwealth. Because of the distance of Western Australia from the Australian Capital, the difficulties of that State may be overlooked at times by the Parliament. Western Australia is entering upon an era of groat progress and prosperity, and in that connexion the special grants of the Commonwealth are proving valuable.

I am glad that Senator Nash has referred to the gold industry in that State, because of the derogatory comments about that industry that appeared in a recent publication in Sydney. The article stated that because of the diminishing value of Australia of the gold industry in Western Australia, people engaged on the goldfields there should seek other occupations. The article was most unintelligent, and did not, I feel sure, reflect the view of the Government. People who suggest that the workers on the goldfields in Western Australia should seek other occupations are a menace and their suggestion should not be allowed to gather weight. I am convinced that there is still a large quantity of gold to be won from those fields, but the winning of that gold is being hampered by lack of capital. Fields to the north of those that were mentioned by Senator Nash would well repay development at Commonwealth expense. The honorable senator also referred to the timber that is being used for fuel on the Western Australian goldfields. I am convinced that this is a matter of major importance. Contrary to the view of many people in this country, Australia is not well timbered. We have some good timber belts, but they are being rapidly denuded, and re-afforestation on an Australiawide basis has become an urgent necessity.

Only recently, attention was drawn in the press to shipping facilities at Fremantle, and a photograph of a long queue of ships in the roads between Fremantle and “Rottnest was published. I point out that Fremantle Harbour is not a small harbour, but frequently as many as 15 vessels may be seen waiting in the roads for an opportunity to discharge their cargoes. This is evidence of the necessity for decentralization in Western Australia. I consider that Commonwealth assistance should be provided to develop facilities in the harbours at Esperance, Albany, Bunbury, and Geraldton. Although a colossal capital cost would be involved, I am convinced that the avoidance of double handling of cargoes, and long waits for wharf space warrants that development.

Unfortunately, the railway system of Western Australia has become obsolete. Although the State Government is striving to rehabilitate the railway service, it is meeting with serious competition from road transport. Furthermore, airline companies are offering severe competition in the conveyance of passengers. I consider that it is imperative that the railway system should be maintained efficiently. However, once again, the cost of maintaining the 5.000 miles of railways in Western Australia is tremendous, and I consider that Commonwealth assistance should be provided in this connexion. I realize that current feeling in certain quarters in Western Australia is that if the State cannot pay for current maintenance, the Commonwealth should pay. Although that attitude should be corrected, I stress the necessity for Commonwealth assistance in the directions that I have outlined.

I heartily endorse Senator McKenna’s suggestion that a committee should be established in order to maintain a close liaison between the Commonwealth and Western Australia, in their common interest. Again, I should like to compliment the Commonwealth Grants Commission on its excellent report.

Senator COOKE:
Western Australia

– The bill before the chamber is one to authorize grants to South Australia, Western Australia, and Tasmania, in accordance with the recommendations contained in the seventeenth report of the Commonwealth Grants Commission. As honorable senators are aware, thai commission operates under the authority of section 96 of the Constitution. It performs valuable service in relation to the adjustment of the financial difficulties of the weaker States, with a consequent leavening effect on the ability of the larger States to contribute to the development of the claimant States. In other words, Western Australia, South Australia and Tasmania claim on the more prosperous States of Victoria, Queensland and New South Wales. The Commonwealth Grants Commission has prepared its report in a highly commendable manner. It has supported in detail its recommendations for grants to the weaker States. However, I consider that the manner of the allocation of Commonwealth moneys to the States should be reviewed. The commission has recommended the payment of a grant of £5,332,000 to South Australia, £5,839,000 to Western Australia, and £1,004,000 to Tasmania. I point, out that the grants recommended for payment to South Australia and Tasmania approximate the amount of assistance that was sought by those States. Western Australia, however, did not claim a specific amount, but its representatives suggested that the indispensable requirements of that State for 1950-51 would be substantially greater than those for 1949-50, and would probably amount to £7,000,000. I point out that the claims submitted by South Australia and Tasmania were itemized. In my opinion, it would be preferable for

Western Australia to adopt the principle of itemizing its claim in future, in order that the individual items could be analysed, with a view to a reconciliation. Such, a procedure would enable honorable senators to consider more fully the recommendations of the Commonwealth Grants Commission in this connexion, when the appropriate measure is before this chamber for approval. I consider that, in view of its area, Western Australia has a major claim. New South Wales has a population of 3,063,973, and an area of 309,433 square miles ; Victoria has a population of 2,113,286, and an area of 87,844 square miles ; Queensland has a population of 1,134,738, and an area of 670,000 square miles; and Western Australia has a population of 522,184, and an area of 975,000 square miles. Although the population of Western Australia is disproportionate to its area, I consider that the services provided for the people in Western Australia should be comparable with those provided in the more populous States. I point out that although the population of Western Australia i9 only about one-sixth of the population of New South Wales, Western Australia is required to provide educational facilities on a per capita expenditure of 70s. 3d., compared with 70s. 8d. in New South Wales. As a result, the education system in “Western Australia must, of necessity, be conducted in a parsimonious and beggarly fashion, particularly in the remote country areas. Insufficient teachers are available to maintain the educational system in that State at a desirable standard. Hospital services are maintained in “Western Australia at a cost of 593. 2d. per capita, compared with 58s. lOd. in New South Wales. Because of the long distances between towns, and the immense sparsely populated areas, the people of “Western Australia are poorly provided for in this respect. I commend the commission for what it has done by .the application of rule-of-thumb methods, but the fact remains that the grant to Western Australia is £2,000,000 less than was asked for. Some other method of assessment should be evolved under which a State government would be able to state its disabilities to the commission, and due allowance would be made for them.

Western. Australia has received a larger allowance for social services than has either of the other claimant States, its disability in this respect being assessed at 10- per’ cent, as against 4 per cent, for South Australia, and 2 per cent, for Tasmania.. Whilst I commend the generosity of the standard States in this respect, I point out that the assessment does no more than reflect the disability under which the Western Australian Government, labours because of the large area and small population of that State.

I appeal to this Government to recognize, as did the Labour Government, that Commonwealth grants made on the recommendation of the Commonwealth Grants Commission should not be the end of the matter. There is also need for special Commonwealth grants for developmental purposes, and such grants would prove beneficial to Australia as a whole, as wellas to the State concerned. When the Labour Government was in office, a special grant of £2,250’,000’ was made for water conservation and irrigation in the Great Southern district, and certain other specific areas. The Government of Western Australia submitted a comprehensive scheme covering areas from Wagin down to the lower Great Southern district. Those- submissions’ were whittled down until the scheme covered a comparatively small area in the Great Southern, and in certain pastoral areas. There has been much criticism in Western Australia about the allocation of money for water conservation and irrigation. I asked on several occasions in the Senate how much money had been drawn from .the Commonwealth grant for this purpose, and how it had been expended. I was told that some: money, but not the full amount, of the grant, had been drawn, but I was not told what progress has been made with the work. If the original programme is adhered- to, the work should be completed within two years. It was stated in the Parliament of Western Australia recently that the original plan agreed upon between the Commonwealth and Western Australia had been varied, and that some of the areas which it was originally decided to irrigate would not now be irrigated. I believe that when the Commonwealth advances money for a specific purpose, it should see that the money is expended for that purpose. I do not know whether the original agreement between the Commonwealth and the Government of Western Australia has been varied, and I suggest that the Minister for Social .Services (Senator Spooner) when replying to the debate, should make that point clear. There has already been considerable expenditure in the Great Southern district, and I have no doubt that dealing, in property took place on the assumption that the original scheme would be adhered to. Therefore, a statement by the Minister on. this subject is called for.

The Government of Western Australia submitted a claim for the recoupment of losses incurred on the settlement of exservicemen on the land. In paragraphIll of its report, the Commonwealth Grants Commission states -

When- it becomes known how similar items are to be treated by the other States, the commission will consider whether it should make any adjustment in respect of the item, in the Western Australian accounts of £54,0I12 for war service, land settlement losses.

Full details of the claim should be submitted by the State government to the commission, and should also be available for the information of this Senate. Every one agrees that the settlement of ex-servicemen on the land has been very slow. A conservative policy has been applied in order to protect the exservicemen themselves. However, if a loss of £54,012 has been sustained in Western Australia, consideration of the claim should, not be delayed until the other States have finished sorting out their accounts. The withholding of money due to Western Australia must tend to retard the settlement scheme.

The Senate should be keenly interested’ in the work of the Commonwealth Grants Commission, and should play a major role in considering its recommendations. All reports on the financial relations between the Commonwealth and the States should be tabled in the Senate, and State leaders should keep their senators informed upon the claims being submitted to the commission. In its 1936 report, the commission laid down the following principle: -

Special grants are justified when a State, through financial stress from any cause, is unable efficiently to discharge its functions as a member of the federation and should be determined by the amount of help found necessary to make it possible for that State by reasonable effort to function at a standard not appreciably below that of the other States.

That principle is sound. The more thickly populated States have been able to provide better transport and educational facilities, health services, &c., than has been possible in the thinly populated States. Considerable development has taken place in the south-western corner of Western Australia because that area was readily accessible, and private enterprise was attracted to it. However, all of the State north of the 20th parallel is sparsely populated, and its development is beyond the resources of the State government. Like the Northern Territory, it has great potential wealth, but developmental work will prove expensive; yet it is in the interest of the whole of Australia. If a committee of the Senate is appointed to consider the granting of financial assistance to the States, it should also consider methods for the development of remote parts of Australia, such as the north-west of Western Australia. This is a subject upon which honorable senators can preserve a national outlook, and the making of grants by the Commonwealth for the developmental purposes is amply justified on national grounds.

I propose to say something about production in Western Australia. The annual production of wheat in that State declined by 500,000 bushels between 193S-39 and 1948-49; the production of wool increased from 78,800,000 lb. to 98,000,000 lb. ; meat production increased from 53,900 tons to 65,400 tons; and the production of whole milk increased from 45;600,000 gallons to 50,600,000 gallons. The production of apples on the other hand declined, due mainly, I believe, to the operation of the war-time acquisition scheme under which orchardists were paid under a measurement system. There was no incentive to greater production under that system, but I realize that, in the absence of the acquisition scheme, the outlook for the apple industry in Western Australia would have been bad indeed. The growers have now elected to return to the normal marketing system, and arc free to make private contracts with merchants and with shipping companies. They will sell their product at ruling world prices. In 1946-47, 2,720,000 bushels of apples were grown in Western Australia. In 1948-49, production totalled only 1,670,000 bushels. I believe that the transition from the acquisition scheme to normal marketing arrangements should be watched closely and that, if necessary, Commonwealth assistance should be given to apple growers who are now dependent entirely upon their own efforts to market their product overseas. The apple export industry is of great importance to Western Australia, and it could be assisted also by improving shipping facilities at Albany, Bunbury and other West Australian outports.

Coal production in Western Australia has increased substantially. The Western Australian mines have been free from the industrial dislocation that has characterised production in New South Wales, with the result that the output of black coal increased from 604,800 tons in 1938-39 to 7*32,900 tons in 1949-50. Working conditions in the coal-mining industry in Western Australia are good and are conducive to industrial peace, which of course is the key to increased production. In 193S-39 sheep flocks in Western Australia totalled 9,200,000 sheep. Ten years, later, that figure had been increased to 10,900,000. Similarly in the same period the number of cattle increased from 767,700 to 864,100. The production of whole milk has increased, as I have shown, but whereas at one time there was an excess over requirements, now it is in short supply not only in the city areas but also in the outback.

The depreciation of the purchasing power of the £1 in Western Australia has been as great, and perhaps a little greater, than in the eastern States, so that Western Australia, while contributing substantially to increased production generally, i3 suffering grave shortages of certain commodities. I believe that governmental expenditure in Western Australia as a result of inflation is becoming too high for the State to develop satisfactorily unless a greater amount of revenue is made available by the federal Government. When I said that the value of the £1 in “Western Australia was if anything a little less than it is in the eastern States, Senator Robertson shook her head, indicating, that she disagreed with that statement. I remind her that the basic wage in Western Australia has increased by 6s. more than it has in any other St.ate. A majority of Western Australian workers are covered by State award? and, as a result of the increase of the basic wage, State expenditure has increased more rapidly in Western Australia than in any other State. Higher wages are, of course, reflected in increased costs of public works. To-day the Commonwealth Government is budgeting for a revenue pf £789,658,000. It is true that grants to States have been increased, but these increases are not commensurate with the increase of Commonwealth revenue.

Senator Wright said that, as the States had the pleasure of spending the money, they should also accept a share of the responsibility for raising it. That is not altogether a fair criticism because the States have sovereign rights which involve them in certain financial responsibilities in relation to matters that are of great importance to the people. The fields of revenue that have been left to the States are small indeed. Therefore, generous consideration should be given by the Commonwealth to the needs of the States in relation to their important financial responsibilities. It is true that the Commonwealth Government has now undertaken financial commitments that were never contemplated in years gone by. Expenditure on defence, for instance, has reached huge proportions. However, State developmental projects too have considerable defence value and transport is a vital factor in defence. I do not think that the Commonwealth has any chance of spending to full advantage the huge sum of money provided in its current budget. It could well consider making some of that money available to- the States, under agreement, for the improvement of transport facilities, the inauguration of water conservation and irrigation schemes, and even the decentralization of industry, all of which would have considerable defence value, and would be of mutual benefit to the Commonwealth and the States.

One frequently hears the argument that the States should increase passenger fares and freight rates to eliminate railway deficits. That would be quite impossible in Western Australia where so much uneconomic development has taken place. Unless the Western Australian transport system can be completely reorganized, the economy of that State will reach a deplorable condition. If warstruck, the results of parsimony on the part of the Commonwealth Government,, and the inability of the State to maintain transport facilities at an efficient standard would create a serious problem. I realizethat in the past, substantial Commonwealth grants have been made to Western Australia for various purposes, but I believe that there is a responsibility on the Commonwealth Government to ensure that such grants will be expended to the fullest possible advantage. In the past, the claimant States have expended in their own way Commonwealth moneys voted to them. Frequently, at the end of a financial year, substantial proportions of such grants have remained unexpended due sometimes to the absence of specific agreements between the State governments and local governing authorities. In some instances the money has not actually reached the local governing authorities, and they have been unable to buy plant that has been available to them at low cost, or to undertake essential developmental work. A considerable amount of money made available to Western Australia through various grants in the past has not been expended, and the surplus funds have been taken into consideration in assessing succeeding grants. Great difficulties have been experienced by the States in implementing their works programmes as the result of the shortage of labour. The Government of Western Australia has recently appealed to the Commonwealth for the allocation of additional new Australians to meet its labour requirements. Additional labour and the utilization of modern plant and equipment will enable the States to complete their developmental works with greater expedition. After making a grant to a State the Commonwealth should ascertain how the grant has been expended, what State works remain uncompleted, and the reasons why their completion has been delayed. Information should also be sought relating to the unexpended balance of the grant at the end of the financial year and provision made for its utilization when labour and materials are available. The completion of developmental works should not be prejudiced by the curtailment of the subsequent grant because a State has been unable . to expend the moneys allotted to it in the year in which the grant was made.

Senator GUY:

.- 1 join with Senator Mattner in expressing my appreciation of the high plane on which honorable senators have discussed this measure. It is pleasing to hear honorable senators discuss it on a national basis, free from party politics. I trust that they will adopt a similar attitude in all future debates.

Senator O’flaherty:

– The honorable senator is a.n optimist.

Senator GUY:

– Probably I am, but there is no harm in trying to raise the level of debate in this chamber. Although we may disagree with one another, we should not necessarily be bitter. Surely we can disagree and still be pleasant to one another.

Senator Critchley:

– The honorable senator does not suggest that all th»> bitterness has been on one side?

Senator GUY:

– No. In the debate on this bill honorable senators have been able to cover a very wide range of subjects. After listening to the excellent speeches that were made by Senator Wright and Senator MoKenna 1 fear, however, that there is very little new that can bv said about the hill.


– Oh. these Tasmanians !

Senator GUY:

– We ure, perhaps, a little clannish. This bill gives effect to the recommendations of the Commonwealth Grants Commission in relation, to the payment of grants to certain States. As there is no opposition to the measure, and because of its urgency and the fact that it has already been thoroughly debated, T shall not detain honorable senator? unduly.

I approach the consideration of this bill from the viewpoint not of the individual States but of the federation of .States. Prior to the establishment of the Commonwealth Grants Commission, Tasmania was the first State to make application to the Common wealth under the provisions of section 96 of the Constitution for financial aid to compensate it for disabilities arising out of federal policy. The application was referred to Sir Nicholas Lockyer who made a comprehensive investigation and submitted a report in which he recommended the payment of a grant which, although it was not as large as the Tasmanian Government hoped to receive, provided some compensation for the disabilities suffered by the Tasmanian people as the result of federal policy. The Commonwealth Parliament gave effect to that recommendation. On the next occasion on which Tasmania applied for financial aid its application was referred to what was then known as, and what I hope will again be known as the Joint Parliamentary Committee on Public Accounts. The committee investigated the claim and made a recommendation which once again was not as generous as the State hoped it would be. The then Government and the Parliament accepted the recommendation. Later, Western Australia and South Australia became claimant States. In 1933, the Lyons Government, of which I was privileged to be a .member, established the Commonwealth Grants Commission and appointed to it men of integrity and high repute in financial affairs. I am glad to bc able to say that the commission, since its inception, has consisted of men of very high standing and ability, and that as a result its activities have met with the unanimous approval of the people. By reason of its constitution the commission has been able to base its conclusions on a firmer and sounder footing than any parliamentary committee could do. Naturally some of the States have not always been satisfied with its recommendations. At most times they have believed that they were entitled to larger grants from Commonwealth revenues. Like other instrumentalities, such as industrial organizations which make applications to the Commonwealth Arbitration Court for increases in the remuneration of their members, and public or semi-public bodies which seek financial assistance, the States have adopted the practice of asking for more than they nr-od and more than they expect to obtain in the hope that in the final result they will at least get as much as they believe they are entitled to receive.

In paragraph 115 of its seventeenth report the commission states -

The commission, in its third report (1936), adopted the principle of financial needs, which it then expressed in the following terms: -

Special grants are justified when a State through financial stress from any cause is unable efficiently to discharge its functions as a member of the federation and should be determined by the amount of help found necessary to make it possible for that State by reasonable effort to function at a standard not appreciably below that of the other States.

Throughout the period of its operation the commission has adhered to that principle. Its members, having no political axe to grind, are animated solely by the desire to do justice. It must be remembered that the moneys granted by the Commonwealth to the claimant States are to some extent provided by the nonclaimant States, for, after all the Commonwealth is made up of the six States. The decision of the Lyons Government to establish the commission and thus to place this subject beyond the sphere of political influence was a very wise one and it has been acclaimed by the people. As Senator Wright and other honorable senators have said, one of the most unsatisfactory features of Commonwealth and State relations is the fact that one instrumentality raises revenue and another expends it. In my view the instrumentality which is responsible for the expenditure of public money should be responsible for raising it. As three States are now dependent on the Commonwealth for financial aid the time has arrived when we should consider making provision for the States to raise their own revenue and thus restore to them some degree of sovereignty.

In 1942-43 the total grants recommended by the commission amounted to £2,175,000. This bill provides for grants for this year, based on the financial position of the States in 1948-49, amounting to £12,175,000.. The commission has pointed out that the increased grants definitely indicate the deterioration of thefinances of the three claimant States during the last three years. In itsreport it states -

It will beseen that the retrogression in thenet financial results of State business undertakings has been particularly serious.

That aspect of the problems of the States was undoubtedly given a great deal of consideration by, and caused a great deal of worry to, its members as, indeed, it has to members of the governments of the claimant States and members of this Parliament, which lends weight to the suggestion of this Government that further consideration should be given to the relations between the Commonwealth and the States as a matter of urgency.

The Commonwealth Grants Commission has very fairly held thefinancial balance between the Commonwealth and the States, especially in respect of expenditure on such items as education, social services and law and order. The object sought by the Lyons Government when it established the commission was to provide a means whereby the citizens of all States could enjoy similar social rights. It is wrong in principle that a person who lives in one part of the Commonwealth should be placed at a disadvantage compared with a person who lives in another part. Because a person chooses to live in Western Australia, Tasmania or South Australia, he should not be placed at a disadvantage compared with a person who chooses to live in, say, New South Wales or Victoria. The commission has carried out its task with marked success.

An examination of the per capita expenditure of the States discloses that on an average they expended 69s. 3d. on education, 52s.8d. on social services and 22s. l1d. on law and order. I invite honorable senators to compare those averages with the actual amounts expended on those services by each of the claimant States. They will find that in the claimant States expenditure on those services has been fairly uniform.

On page 17 of the commission’s report, in paragraph 18, it is pointed out that since 1939 increases in the Australian labour force have been concentrated in industries other than primary, and that the number of rural workers has declined. That is a definite drawback,because a concentration of labour insecondary industries is detrimental to the interests of primary industries. Rural industries in this country have not been encouraged as they should have been, and that neglect may lead to economic disaster. It would seem that we have almost reached a stage in this country where foodstuffs will have to be imported. I ask honorable senators what it would mean to the United Kingdom today if it were able to produce sufficient foodstuffs for the needs of its people, without being forced to import food from other countries?. If Australia does not provide more encouragement to the primary producing industries it will soon be in the same position as Great Britain.

I entirely agree with the Government’s proposal to establish a convention to consider relations between the Commonwealth and the States. I consider that there are no arguments against such a proposal. The time has arrived when consideration should also be given to the holding of a Constitution convention. The Australian Constitution has been, in existence for over 50 years, and. it is no occasion for wonder that certain defects from time to time exhibit themselves. It is apparent that such a- convention should be held and that it should, report to the government of the day what alterations, if any, are necessary in the Constitution. If such a convention should be held, I trust that the Parliament will deal with its recommendations on. a national and not on a party basis. I support the bill before the Senate.

Senator O’BYRNE:

– The standard of debate on this measure has been high. As honorable senators are1 representative of the various States of the Commonwealth, it is right that they should endeavour to present to this chamber the merits of the claims of the States they represent. I do- not agree with Senator Wright’s suggestion that the States should revert to a scheme under which collection of taxes would be the respondsibility of individual States. I consider that that would be a retrograde step. If a solution could be reached by the holding of a convention to consider alternatives to that proposal, I think some advantage might be gained.

Senator Guy has stated that the States always ask for more than they need. If honorable senators survey the industrial potential of the State of Tasmania, they must agree that it i3 not receiving sufficient from the annual grants. The population of Tasmania is increasing annually. Any comparison that is made between the grant for this year and those made in past years must have regard, as has been pointed out in the commission’s report, to the increasing costs of labour and materials, and also to the fact that greater responsibilities are being assumed by the States every year. To say that they should not ask for more is, in my opinion, contending that they should remain stationary from year to year.

Honorable senators will perhaps agree that Tasmania is blessed with remarkable natural resources. It possesses deposits of minerals that are in relatively short supply throughout the Commonwealth, and in some cases, throughout the world. It has a steady rainfall, and a variety of types of soil, making it the garden of the south. Its industrial activities are being increased from year to year, because of the development of hydro-electric power. Honorable senators from time to time have learned of the great potential of Tasmania’s hydro-electric schemes, and Chey may be interested to hear that in the next three years the output will rise from the present 230,000’ horse-power to over 500,000 horse-power. The Hydroelectric Commission ds laying the foundations on which the natural resourses of Tasmania may eventually be developed to an enormous degree. The activities of the commission are assisting other industries, and attracting new industries to Tasmania. The reticulation of electricity is making possible an equal distribution of population between the towns and the country, and. also an equal distribution of the available labour force between primary, secondary and tertiary industries. Hydro-electricity is the secret of Tasmania’s economy, and a considerable portion of the annual grant is devoted to the development of hydro-electric power. The fact that revenue is received by the Hydro-electric Commission is frequently used by the- Commonwealth: Grants Commission as a reason for making deductions from the annual State grants. The Hydro-electric Commission is able to supply electricity at a rate morethan, comparable with that” of any other undertaking in the Commonwealth, and it has maintained a very low level of charges, in spite of increased costs. Honorable senators may be interested to learn that small industries are supplied with electricity at a cost of approximately one penny a unit. The State government, through the instrumentality of the Hydro-electric Commission, has been able to transmit electricity to the remote portions of the State and to make it possible for people on farms, in mines, and in sawmills to enjoy such amenities as electric light and refrigeration.

There are many other industries in Tasmania on the threshold of great development. The State is fortunate in that it has a larger proportion of timbered areas than has any other State of the Commonwealth. Of the 4,000,000 acres of timbered country 1,700,000 are covered by State forests. The production of timber from those forests has increased by 50 per cent, during the past ten years. That has been made possible by the development of hydro-electric power, and the reticulation of that power to the sawmilling areas. The production of timber in Tasmania has increased from S’0,000,000 super, feet in 1939-40 to 119,000,000 super, feet last year, or by approximately 45 per cent. The State’s future development depends to a large degree on the assistance that it is able to receive from the Commonwealth. A large increase of population and in the development of natural resources calls for the utmost generosity from the Australian Government. The Tasmanian people are agreeable that there should be a central taxing authority, and that annual grant? be made, provided that the needs of the .State are kept in mind. From any point of view - political or otherwise - the people of Tasmania do not wish to have duplication of taxation.

Tasmania claims to have applied its annual grants in a proper manner. Its health services are second to none in the Commonwealth, and its hospitals are efficient. The efforts that have been made to eradicate tuberculosis and other diseases are an example to the other States. The costs of all those government activities must, of necessity, be . met mainly from the Commonwealth grants.

Even with its relatively small population, Tasmania is making a very big con- tribution to the national revenue. If the State is developed to its fullest extent there will be a ‘ great opportunity to attract overseas capital.

Senator WRIGHT:
TASMANIA · LP; IND from June 1978

– Does the honorable senator refer to the introduction of more “ hot “ money?

Senator O’BYRNE:

– It does not matter whether it is hot or cold. If Tasmania is able to attract tourists, it will he not only in its own interests, but also in the interests of the nation. Approximately 7S0 square miles of parkland in Tasmania is under the control of the Scenery Preservation Board, and some parts of the island have been described as “ bewildering in their beauty “. Tasmania, with its natural attractions for tourists, should receive some assistance from the Commonweath to enable it to develop its tourist industry. It has been estimated that the industry is now worth £1,000,000 a year to Tasmania and that, if assistance were provided to enable the State to develop roads, hotels and other facilities, and make its resorts more attractive to tourists, the tourist trade would be worth approximately £10,000,000 a year. . A large number of the tourists would come from overseas, and that would be an advantage to Australia generally.

On numerous occasions, 1 have directed the attention of the Senate to the need to develop metal industries in Tasmania, especially the tin and bauxite industries. In addition to extensive deposits of those metals, we have large deposits of iron ore, lead, copper, gold and osmiridium, the surfaces of which have been only scratched. Only with Commonwealth assistance could the Tasmanian Mines Department and other authorities open up those undeveloped areas to enable miners to go in with their small plants, or, if they received adequate assistance, with bigger equipment that would enable them to make the best use of the deposits. Mining is one of the best industries for a State, because metals can be won from the . ground comparatively cheaply and, because they come from under the ground, their extraction does not harm the soil. In that respect, mineral resources are a great asset to a State.

I have referred to Tasmania’s natura] advantages. One of the disadvantages from which it suffers is its isolation. Tt is separated from the mainland by Bass Strait, and the transport of goods to the mainland is causing serious difficulties. “When considering grants to Tasmania, the Commonwealth should bear in mind always that the State suffers from a natural disability owing to its geographical position. Unless transport services between Tasmania and the mainland are improved, the development of the State’s secondary industries will be retarded, and possibly some of them will be compelled to close. The cost of transporting apples from Tasmania to the mainland is now equal to the price that was obtained for that commodity before the war. In 1939, the cost of transporting apples from Tasmania to the mainland was lOd. a case, and at the present time it is 3s. lOd. a case. Before the war, the price of a case of apples was 3s. 6d. or 4s.

Senator Wright:

– Did the honorable senator obtain that information from Mr. D’Alton.

Senator O’BYRNE:

– I obtained it from statistics published by the Commonwealth Statistician and also by the Tasmanian Government. This matter has been raised in the Tasmanian Parliament by Mr. D’Alton, the Leader of the Government in the Legislative Council. I support his plea that Tasmania should receive greater consideration from the Commonwealth in relation to its transport difficulties. I can sum the matter up by saying that we are in the grip of a shipping monopoly. One of Senator Wright’s colleagues in Tasmania recently referred to the case of one of his employees who decided to bring his furniture to Tasmania. The employee received a quotation of £89 for the transport of the furniture by sea. He was given no guarantee of early delivery and was told that a storage charge of 7s. 6d. a week would be imposed. He decided to have the furniture sent to him by air. I do not know whether it was sent by the “ Friendly Way “, hut the fact that TransAustralia Airlines is operating in Tasmania has enabled Tasmanians to loosen, to some degree, the grip of the shipping octopus that holds them in its tentacles. The charge for transporting the furniture by air was £49, compared with the quotation of £89 by the shipping company. I do not want to lower the standard of this debate. I want only to emphasize that the factors to which I have referred should be considered by the Commonwealth Grants Commission when Tasmania’s economic position is under review.

Tasmania requires assistance in the form of a subsidy upon shipping freight charges. Senator Guy referred to the fact that the late Mr. Lyons was a sponsor of the proposal to establish the Commonwealth Grants Commission. He realized the necessity to assist Tasmania by subsidizing shipping freight charges, and he caused substantial subsidies to be paid. They were very much appreciated. An undue burden is being imposed upon the Tasmanian people by the high cost of transporting goods to and from the mainland. Other States are served by government railways which are subsidized. The outback areas of Queensland and New South Wales, which are as far from the principal markets as Tasmania is, are served by Government transport systems. Tasmania suffers from the disadvantage that it i3 separated from the principal markets by a stretch ‘of water and that shipping is not controlled by the Commonwealth. Air transport exercises some check upon the shipping companies, but it is only the operation of Trans-Australia Airlines which is keeping the fares and freight rates charged by airways companies at a reasonable level.

Senator Wright:

– Trans-Australia Airlines increased its charges by 10 per cent, last week.

Senator O’BYRNE:

– Having regard to the impetuosity and other characteristics of the Minister for Civil Aviation (Mr. White), that is understandable. The fact that the shipping companies that operate between Tasmania and the mainland are, to use a colloquialism, “ on our backs “ is proved conclusively by the case that I have cited of the man whose furniture was transported by air from the mainland to Tasmania for £49, whereas the shipping company quoted him £89 as the cost of transport by sea. Some relief would be afforded by Commonwealth steamers trading to Tasmania, even if they were operated at a loss. They would take products from Tasmania to the mainland markets, thus encouraging the development of secondary industries and enabling us to make a larger contribution to the national revenue. At the present time the shipping bottleneck is retarding Tasmania’s development.

Flinders Island and King Island also suffer from the disability to which I have referred. The shipping services to those islands are inadequate and irregular, and unfortunately the shipping companies do not face competition from airlines. On several occasions I have asked officials of Trans-Australia Airlines to visit the islands to inquire whether it would be profitable to operate air services there, but so far that has not been done. The transport difficulties of Flinders Island and King Island are being accentuated by the settlement of ex-servicemen under the war service land, settlement scheme. The scheelite mining industry on King Island is of great importance from the defence viewpoint. Lack of adequate transport services is putting King Island and, to a less degree, Flinders Island at a great disadvantage compared with Tasmania, and I have already explained that in that respect Tasmania is at a disadvantage compared with the mainland States.

The great hydro-electric undertaking in Tasmania will enable the State to develop its natural resources and secondary industries quickly, if it receives Commonwealth assistance. When Tasmania complains of the inadequacy of its annual grant, I hope the complaint will not fall upon deaf ears, because that State has a big job to do with a relatively small population. A convention to duscuss alterations of the present method of making grants to the States could do no harm, and I should like to see one held. I am certain that if the matters to which I have referred are taken into consideration when the annual grant to Tasmania is under consideration, the Commonwealth Grants Commission will willingly recommend a larger grant than it has recommended in the past. The outstanding advantage of the Senate is that equal representation is accorded to the States.. I agree that in matters affecting the future development of the States, debatesshould be maintained at the highest possible level. Although in common with other Tasmanian senators who havealready spoken during this debate, I register my opinion that the proposed grant for Tasmania is inadequate. I support the measure.

South Australia

– I think that all honorable senators will agree that’ the tenor of this debate has been vastly different from that to which we have become accustomed during the last three or four weeks. Honorable senators are able to direct themselves to the best interests of the States that they represent when debating measures such as the one before the chamber. It has been very pleasing to observe during this debate that honorable senators have taken the opportunity to express their views about matters pertaining to their respective States, in accordance with the intention of the framers of the Constitution. I am reminded of an old saying that there occurs in the life of every one an opportunity to be of service to his fellow men. It is imperative that honorable senators should bring to the notice of the .Senate matters affecting their respective States, if this country is to prosper. During a previous debate, Senator Hannaford stated that South Australia was a relatively poor State. At the risk of being termed boastful, I contend that South Australia is the cream of Australia. Senator Guy has claimed that a former Prime Minister, Mr. Lyons, was responsible for the establishment of the Commonwealth Grants Commission. Without wishing to detract in any way from the efforts of the right honorable gentleman in that connexion, I point out that the credit for the initial step towards the appointment of the Commonwealth Grants Commission is due to Sir Richard Butler, who was at one time Liberal Premier of South Australia. He convinced contemporary Premiers and the Prime Minister at the time that the most practicable manner of overcoming the financial difficulties of South Australia,

Western Australia and Tasmania was the appointment of a commission to consider the claims of the weaker States. On occasions such as this I consider that credit should be given where it is due. Sir Richard Butler’s father before him had also advocated the establishment of such a committee.

Australians are an adventurous people, who are not afraid to attempt to achieve their ideals if an opportunity to do so is presented. Although South Australia has a population of less than 1,000,000 people, some of the greatest undertakings in the world are located in that State. A Liberal Government has been in office in South Australia during the last fourteen or fifteen years, and I am happy to be able to say that during that period developments of a socialistic nature have taken place in that State. Perhaps the outstanding development of that nature was the laying of the MorganWhyalla pipeline over relatively poor country. The town of Whyalla was established at the terminal of that pipeline. It is one of the most modern towns in Australia. More recently, electricity and gas supply undertakings have been acquired by the South Australian Government. It is to the credit of the Liberal Premier of South Australia, Mr. Playford, that, even at the risk of incurring the displeasure of the Liberal party, he has had the courage of his convictions. I consider that he merits great praise for having accomplished something of a socialistic nature that has never before been attempted by any Liberal government in the world. One can well imagine the difficulties with which he was confronted by his colleagues. However, he is a “big” Australian, irrespective of his politics.

As Senator McKenna has pointed out, section 96 of the Constitution reads -

During a period of ten years after the establishment of the Commonwealth and thereafter until the Parliament otherwise provides, the Parliament may grant financial assistance to any State on such terms and conditions as the Parliament thinks fit.

It was in 1932, when Sir Richard Butler was Leader of the Opposition in the South Australian Parliament, that he promised that if he were returned to the treasury bench he would endeavour to effect an improvement in the method of allocating State grants. In 1933 claims made by South Australia, Western Australia .and Tasmania under this section were referred to the ‘Commonwealth Grants Commission for examination and report as to the compensation that should be made to those States for disabilities arising out of federation, and their financial needs. That was a big step forward, which enabled the States to submit evidence in support of their claims for the purpose of increasing production and providing amenities for their people. I remember that in 1924 a Labour Premier of South Australia was told, when he approached the Commonwealth for assistance, that if he could not balance his budget he should relinquish office.

One of the reasons why New South Wales and Victoria are more prosperous than South Australia is that there was rapid development in those States in the early days. Since federation, the claimant States have always had difficulty in balancing their budgets because of the vagaries of the seasons and their lack of population. It was only the discovery of gold in Western Australia that enabled that State to be developed with reasonable rapidity, and I do not think that Australia has ever fully acknowledged the debt it owes to the pioneers of the goldfields who made such development possible. However, because of fluctuations in the price of gold, and declining returns from some of the fields, Western Australia has found .itself in much the same kind of financial difficulties as South Australia and Tasmania. Gold has never been found in South Australia in impressive quantities, and although copper and certain other minerals have been discovered the fields have not been scientifically exploited.

The railway system of South Australia is a cumbersome one. I know that many people believe that the days of railways are numbered, but I do not agree. Railways are a national utility, and are essential for the proper development of Australia. However, because of the competition from other modes of transport, the railways are being left to carry only the least profitable kinds of freight. Of course, that is no reason why a State should not modernize its railway system.

In South’ Australia, the work was delayed, first by the depression, and later by the war, but it is now under way, particularly in the rich south-eastern part of the State. Unfortunately, the cost of reconditioning the railway system cannot be met out of the revenue of the State. The National Government cannot claim to be actuated by charitable or even generous motives when it comes to the financial assistance of a State in the prosecution of such an undertaking, nor need the Government of South Australia have any hesitation in asking the Commonwealth for help.

Perhaps it is because of maladministration by previous governments, but the fact remains that, unless Providence mercifully intervenes, the Government of South Australia will be forced to impose water rationing in that State. Various water schemes are now in progress, or in contemplation. For instance, a beginning has been made on a project to bring water from the River Murray to Adelaide. It will be a costly undertaking, because it will involve laying pipes across the Mount Lofty ranges. That, surely, is a national work, and every honorable senator, no matter what his political affiliations, should commend the State government for undertaking it.

We all favour the decentralization of industry and population, and the provision in country areas of amenities such as water supplies, good transport, telephones, &c, is one of the best ways in which to achieve that end. Most communities in South Australia, except those along the coast or in areas where bore water is obtainable, are without a proper supply of water, and the efforts of local citizens to remedy the position have been frustrated by lack of funds. Unless better nin eni ties are provided in country areas we cannot expect family men to settle in them. In paragraphs 156 and 157 of its report, the Commonwealth Grants Commission comments as follows on the financial position of South Australia: -

The year 1949-50 closed with a budget deficit of £190,000 after receipt of a special grant of f 4, 174,000. Of this special grant. £313.000 was applied to extinguish the budget deficit for 1947-48, leaving £3,801,000 available towards meeting the financial need of 1949-50. Thus, excluding this portion of the special grant received in 1949-50. the deficiency for that year was £4,051,000. In 1948-49, after receipt of two special grants totalling £2,850,000, the deficit was £284,000. Thus, excluding the special grants received in .1948-49, the deficiency for that year was £3.134,000. The retrogression in 1949-50 was, therefore, £917,000.

The budget for 1950-51 had not been presented when this Report was completed, but preliminary State estimates of revenue and expenditure showed an expected deficit for the year of £4,839,000j before allowing for receipt nf a special grant. The preliminary estimates thus indicated an expected retrogression in 1950-51, as compared with 1949-50, of £788,000, or, as compared with the year of review, 1948-49, of £1,705,000.

The Government of South Australia appreciates the seriousness of the position. When the report was compiled, seasonal conditions were better than they are now, and it will not be surprising if, at the end of the financial year 1950-51, the position of the State should be even worse.

A debate like the present one cannot do other than serve a useful purpose. I know the men who gave evidence before the Commonwealth Grants Commission in South Australia. They have a wide knowledge of the State, and the only comment I have to make on their evidence is that they understated the position rather than overstated it. I commend the bill to the Senate.

Sitting suspended from 5.59 to 8 p.m.

Senator COLE:
TASMANIA · ALP; ALP (A-C) from 1955; DLP from 1957

– .We are deeply indebted to Senator McKenna for his lucid explanation of Commonwealth and State financial relations and the work of the Commonwealth Grants Commission. The honorable senator’s speech was most helpful, particularly to the more recently elected members of this chamber. Reference has been made to the high plane on which this debate has been conducted. If the discussion has been on a high plane only because all speakers have been in agreement on the proposed grants to the States, it is time that that plane was lowered a little. Senator Wright is, of course, a State righter, but, to me, his approach to this problem was far too parochial. Sovereign State rights may be necessary at present, but we should abandon any tendency that we may have to be parochial in our outlook and try to think in terms of nationhood. We are still not a nation although we are sometimes inclined to think that we are. We are merely a collection of rather loosely knit components. While the States retain their sovereign rights and their own parliaments we cannot classify ourselves as a nation.

The function of the Commonwealth Grants Commission is to guide the Commonwealth in hand-feeding the claimant States. Members of this chamber, being representatives of the States, are, in effect, State righters, and if this Parliament is to be a truly national legislature, the Senate should be abolished. That may appear to be a drastic suggestion coming from a member of this chamber, but I believe that retention of the Senate emphasizes our parochialism. We are elected to this chamber as the representatives of the States and so our national outlook is limited to some degree. Certainly we cannot be as nationally minded as we would be if we were members of a single legislature and represented the interests of all Australians. To hasten Australia’s growth to nationhood, we must clothe the Commonwealth Parliament with more and more powers. The uniform tax system has already greatly strengthened the authority of the Commonwealth Parliament. When members of the present Government parties were in opposition many of them spoke strongly against uniform taxation, but now that they are charged with the responsibility of government, they have apparently changed their views. In my opinion, to abolish the uniform tax system would be very foolish.

Senator Gorton pointed out that whereas Victoria spent only 62s. per capita on education annually, Tasmania spent 83s. on that work. That is one of the quarrels that I have with the Commonwealth Grants Commission. The Victorian Government has refused to raise its standard of education, and to improve educational facilities and the conditions of teachers and pupils. Without being too parochial, I think I can say that the Department of Education in Tasmania has reached a high standard of efficiency, but because of our efforts to improve educational standards, we are penalized by the Commonwealth Grants Commission. That is wrong. Education should be a national consideration. That is another reason why we should have i truly national parliament with complete sovereign powers in the field of education. I should like to see a bigger percentage of Commonwealth grants to the Stales devoted to the improvement of educational standards.

I come now to a matter about which I have asked several questions in this chamber and to which I have referred on the motion for the adjournment of the Senate. According to the report of the Commonwealth Grants Commission, the wheat freight subsidy and fruit-growers’ relief payments will contribute £271,000 to an expected total expenditure increase of £1,603,000 compared with 1948-49. I should like the Minister for Social Services (Senator Spooner) to tell me, when he replies to the second-reading debate on this measure, whether those figures answer the questions that I have asked in this chamber. I should like to know whether, in assessing the grant for Tasmania, the commission has taken into account the expenditure that will be incurred by the State government in subsidizing wheat freights.

Senator O’Byrne has referred to transport services between Tasmania and the mainland. As every one knows, those services are deplorable, and must be improved. They can be improved only by extending the use of the Commonwealth shipping line. Private enterprise will not operate at a loss. Many of Tasmania’s exports are not profitable to the shipping companies. At present, most of the uneconomic cargoes are being carried by Commonwealth vessels, which naturally are operating at a considerable loss. I have endeavoured to ascertain whether that is being done intentionally so that the Government may be able to rid itself of what it regards as an incubus. If the Commonwealth shipping service %were abandoned, Tasmania would suffer greatly, because, although the Commonwealth ships are not being operated at a profit, they are providing an essential service. For instance, they are carrying pyrites from Strahan, and also the produce of the north-west coast. They also carry pyrites for the manufacture of sulphuric acid used for the manufacture of superphosphate, which is necessary to the successful continuance of our primary industries. Therefore, in addition to serving Tasmania, those ships render a service to the Commonwealth as a whole. Trans-Australia Airlines, too, is providing a splendid service to Tasmania. At the opening of the Devonport aerodrome on Saturday, I was rather surprised that, whereas the Minister for Air (Mr. White) referred in glowing terms to Australian National Airways, he did not even mention Trans-Australia Airlines.. I hope that the service now provided by TransAustralia Airlines will be extended.

Tasmania i3 a claimant State, but not a mendicant State. It is contributing to the well-being of the more populous States, and is a claimant State only because of its limited population. I hope that in future the Commonwealth Grants Commission will make available the funds necessary to ensure that Tasmania will eventually become an even greater asset to this nation than it is to-day.

New South Wales

.: - I had no intention to speak in this debate, but I think that some of the antiquated sophistries that have been uttered by Senator Cole should be answered. To argue that to advance the rights of the States is parochialism, and that the only way for Australia to become a nation is to have unification and to abolish the Senate, is the kind of thing that used to be uttered 50 years ago in debating societies. I was astonished to hear that view uttered by one ‘ who speaks with a sense of responsibility and is supposed to represent a State. The existence of the Commonwealth Grants Commission is proof that those States which are favoured, possibly by nature and possibly by federal policy, should be asked to contribute some of the wealth of their citizens towards the less favoured States. For that reason I favour this bill.” I do not see how we can in any other way benefit the citizens of the claimant States. If we abolish the existing system and establish a uniform system of government, the great centres of population which have immense voting strength and great wealth will exercise far greater power over the National Parliament than they do at present. The existence of this

Senate is a guarantee not only that the less populous and less wealthy States will have a fair deal but also that the ordinary citizens in them will have a fairerdeal than they would get if those States were abolished. Australia, which has been a nation for the 50 years that have passed since this Parliament was first established, made two great steps forward, in nationhood during the two world wars. Any one who fears that there will be too little centralization and that the great aggregation of power at Canberra will cease to grow knows little of what is going on in the world. The great danger that confronts every free citizen in the world to-day is that his liberty will be taken from him by the act of some centralized authority. I desire to strengthen every State government and every local governing body. This Parliament has adequate powers for the defence of the Commonwealth, which is the main reason for its existence.

I propose now to deal briefly with the subject of education. I have spent most of my life in the service of what I believe to be the largest education system in the world. I kno.w all its ramifications. I have taught in most types of schools; I have acted as inspector ; and I have been an administrator at its head office. That department is far too large effectively to administer education as it should be administered. Education is not primarily a matter of buildings, public employees and grants of money. I do not deny that those things are necessary, and I do not want any one to twist what I have said by saying that I oppose the provision of such moneys as we can afford for education. Education is primarily a matter of facilitating communication between one being and another, and we cannot provide a proper education system by centralizing everything at Canberra, yielding to the clamour of the largest pressure group and getting a uniform system of education and a uniform curriculum. Boards of education exist only so that the teacher may come into contact with the population and to ensure that the work of education, which is primarily to facilitate communication between one being and another, shall go on. Education develops individuality.


– Order! I remind the honorable senator that we are dealing with the States Grants Bill.

Senator McCALLUM:

– I was answering an argument raised by an Opposition senator who dealt with the subject of education. I believe that education is properly handled by the States and that the proper method for the Commonwealth to adopt to assist it, apart from certain special methods which it can employ, is to give the States adequate revenue. 1. agree with Senator Wright that some means must be found for giving each State adequate revenue and so restoring the principle of responsibility.

It is idle to deny that this measure, which has been forced on us partly by previous policies of the Commonwealth, and partly by the natural conditions of certain parts of the Commonwealth, is an inadequate and unsatisfactory way of dealing with the needs of the three claimant States. Everybody to-day admits that the States are divided into two classes - three States which, as Senator McKenna has said, do not wish to come under this legislation, and three States which, as Senator Wright has so ably pointed out, are compelled to come under it. I support the bill, but I do so only because I believe that we have not yet found a proper way of ensuring that the people of each State shall secure justice.

Senator SPOONER:
Minister for Social Services · New South Wales · LP

– in reply - I should have an easy task in terminating the debate on this measure because it is apparent that it has the unanimous support of honorable senators on both sides of the chamber. More than one speaker has commended the work of the Commonwealth Grants Commission over the years and in so doing has followed the line of successive Commonwealth Treasurers who have complimented that body. The commission has had to deal with one aspect of what is perhaps one of the most complicated problems that face the Australian Government. I refer to the’ financial relations between, the Commonwealth and the several States. The fact that the Commission has done its task well and has gained the confidence of all three interested parties - the claimant States, those States which are not claimants, and the Australian Government itself - must give great satisfaction to people of all shades of political thought.

This debate has covered a wider field than do the terms of the bill and during the course of it many views have benn aired. I found many of them most interesting indeed. A good deal has beep, said about the discussions and negotiations that have taken place at conferences of Commonwealth and State Ministers. It is unwise to regard the discussions at such conferences as a measure of the depth of this particular problem. When the representatives of the Commonwealth and the States meet in conference the State Premiers openly endeavour to obtain as much as they possibly can from the Commonwealth knowing that they have no responsibility to the electors for raising the money and being in a position to gain all the advantages that are to be derived from its expenditure. It cannot be gainsaid that there is a weakness in the present system. A solution of this problem must eventually be found. I tilt a lance with Senator McKenna, who stated that the suggestions that have been made to overcome that difficulty do not measure up to realities. I do not share his pessimistic view that a formula cannot be found for the solution of these difficulties. There is an increasing appreciation among people of all shades of political thought that a solution of this problem will not be found in the abolition of the system of uniform income tax. The people appreciate the advantages that flow from the single income tax return and the single assessment and will be very hesitant to accept any proposal to revert to the former system.

Another note which I should like to strike is that I have no doubt that the Premiers realize the advantages to the States of the present arrangement. That, of course, applies with particular emphasis to the three States that will benefit from the legislation now before us. I go as far as to say that I doubt whether any State Premier, in his heart of hearts, wants a change from the present system.

Senator Critchley:

– I have no doubt about that.

Senator SPOONER:

– On more than one occasion in recent years the Premiers have modified their criticism of the Australian Government when it has been suggested that the Commonwealth might vacate certain fields of taxation. I predict that when this problem is again discussed at the conference table the real difficulties will arise from the disinclination of the State Premiers to revert to the system under which they have to take the responsibility for raising the revenue they need to meet their commitments. The majority of the people of Australia are resentful of the continued growth of the power of the Australian Government. Most of them ‘ would like to be in closer control of the money that is raised and expended by governments, and I believe that the track along which we may reach that end must follow a formula which contains three ingredients - first, that the State governments have direct responsibility .to their electors for raising their financial requirements; secondly, the maintenance of uniform income tax; and, thirdly, overcoming the disinclination of State governments again to assume the onerous burden of financial responsibility. I am not bold enough to forecast the way in which that solution may be reached, except to say that the two main ingredients are not nearly as irreconcilable as they at first appear. Indeed, I put the thought before honorable senators that the difficulties now apparent are perhaps no greater than those that were confronted at the time the Commonwealth Grants Commission was appointed. I do not think it is possible to put aside the view that a solution may come in the form of a body similar in character and composition to the Commonwealth Grants Commission. Whatever may be the views on this matter, the Government has promised that there shall be a meeting of all interested parties to consider it and to attempt to find a solution. That promise wa3 recently reiterated by the Prime Minister (Mr. Menzies), and I believe that the meeting will be held in the early part of next year. Events may well prove it to be one of the most interesting meetings on Commonwealth-State relations that have occurred since federation.

The Leader of the Opposition (Senator Ashley) accused the Australian Government of crippling the States because of its financial allocations. By implication, I take it that the honorable senator supported the States in their application for £25,000,000 instead of £5,000,000. If that assumption is correct, then I think it is fair to say that the honorable senator in opposition is not as responsible as he was when he was a member of the Government.

Senator Ashley:

– I merely asked for an explanation of the disparity between the amount claimed and the amount granted.

Senator SPOONER:

– The honorable senator has been concerned in conferences of Commonwealth and State Ministers. It seems to me to be a matter of a case being submitted and answered. I think it is a fair statement that the. present allocation of £12,175,000 is the largest in the history of the arrangements.

Senator Finlay:

– Is that sum distinct from the £5,000,000 additional tax reimbursement.

Senator SPOONER:

– We are dealing with the State grants. At the next sitting we shall deal with the £5,000,000. The debate has been concerned more with a measure which will be considered at a later date rather than with that at present before the chamber.

Senator Ashley:

– The Minister no doubt appreciates the difficulty the Opposition is in because it has no copy of the report of the conference of Commonwealth and State Ministers.

Senator SPOONER:

– The Government is also in that position.-

Senator McKenna suggested that a committee should be appointed to review Commonwealth-State financial arrangements. I point out that there are not now many non-party committees operating. It is a matter for regret that the growth of party politics has brought about circumstances in which those non-party committees do not appear to be regarded with favour. The suggestion is an important one, and I shall ensure that it is given proper consideration. The honorable senator also inquired whether any adjustment had been made this year in respect of effort for efficiency and effort for incomeraising. The answer is that no such adjustment has been made by the commission since 1942-43. The commission has done no more than draw attention to the problem, and it makes that clear in paragraph 176 of its report.

Senator Cole raised the matter of wheat freights, and I regret that I have not the necessary information readily available. I think it must be some item carried forward from past years.

Senator Cooke inquired whether there was any truth in reports that departures had been made from the scheme agreed upon in 1948 between the Commonwealth and the Western Australian Government for the development of water supplies in certain areas of Western Australia. The result of my inquiries is that no change has been made in the scheme agreed upon between the two governments. I commend the bill to the Senate.

Question resolved in the affirmative.

Bill read a second time and passed through its remaining stages without amendment or debate.

page 2179


Bill received from the House of Representatives.

Standing Orders suspended.

Bill (on motion by Senator O’ Sullivan) read a first time.

Second Reading

Senator O’SULUVAN (Queensland-

Minister for Trade and Customs) [8.39].- I move-

That the bill be now read a second time.

Indoingso,Iwishtoexpressmy appreciation of the courtesy of the Leader of the Opposition (Senator Ashley) in agreeing to deal with this measure at very short notice.

The tariff schedule to which this bill relates was introduced on the 11th May, 1950, and gives effect to the tariff concessions undertaken during the tariff negotiations at Annecy in 1949. Those negotiations were undertaken and agreed to by the previous Government, and this Government is giving effect to them by the introduction of this measure. The bill does not fully implement the tariff concessions granted by Australia, as in some cases concessions in primage duty were involved. These have been effected by primage proclamations. In other instances concessions were accorded by operating intermediate tariff rates of duty. As it is some time since the tariff negotiations were concluded at Annecy, I should perhaps trace events in the meantime. On the 13th October, 1949, the then Minister for Trade and Customs made a statement regarding the results of the Annecy negotiations and circulated for information schedules giving details of the negotiations as they affected Australia. The proposals are identical with these schedules. At the Annecy tariff negotiations, ten countries sought to accede to the general agreement, and at the conclusion of the negotiations the contracting parties decided that accession of the new members and the putting into effect of the concessions should be carried out in two distinct stages. The first stage required approval by a two-thirds majority of the then 23 members by the 30th November, 1949, for admission of the ten new countries to the agreement. That decision was taken by the previous Government, and the United Nations Secretariat was advised that Australia agreed to the accession of the ten countries. The second stage required each government to notify the United Nations by the 30th April, 1950, of its intention to apply the Annecy concessions, and application of the concessions had to take place within 30 days of notification. Australia is at present provisionally applying the general agreement on tariffs and trade and has also agreed to the accession of the additional ten countries. Taking those factors into consideration, it was decided to apply the Annecy tariff concessions, and the Secretariat of the United Nations was notified accordingly on the 28th April, 1950.

A memorandum of alterations has been distributed to honorable senators showing the proposed rates as compared with the rates operating under the Customs Tariff 1933-1949. It will be noted that there has been no substantial reduction accorded in respect of any particular tariff item.

The concessions negotiated range over some twenty tariff items. As the individual items come up for consideration I shall endeavour to supply honorable senators with any information they desire.


– The Leader of the Opposition (Senator Ashley) wishes me to indicate that no opposition will be offered to this measure. It was agreed to in the House of Representatives practically without discussion.

The Minister for Trade and Customs (Senator O’sullivan) has clearly stated the position. The proposals referred to were introduced in May last, and they require ratification within a period of six months. Negotiations took place last year between the contracting countries, and a general agreement on tariffs and trade was arrived at. A number of other countries now desire to accede to the agreement, and I understand that many of those countries have indicated their acceptance of the proposals. The tariff and trade negotiations have been going on for some years, and are still taking place. I understand that a number of officers are still at Annecy, in France, negotiating with representatives of other countries in regard to tariff matters.

Senator O’sullivan:

– They are now at Torquay, England.


– The idea is to promote better trade relations throughout the world. It may be safely stated that considerable progress has taken place concerning trade generally, and that a better understanding and an ironing-out of difficulties has been arrived at in regard to trade matters with other countries. Honorable senators may be assured that Australian industries will not be affected adversely by the negotiations and by the trade discussions, decisions, and ultimate agreements. I was closely associated with the officers of the Department of Trade and Customs who undertook these negotiations on behalf of Australia and, for a long time, worked very hard and efficiently. I should like publicly to pay tribute to their work. They rendered a great service to this country. I should like to refer also in this connexion to the ex-Prime Minister (Mr. Chifley). He was the chairman of the Cabinet subcommittee that dealt with these matters, and was not absent from one of its meetings. In this matter, the Government is following the lead given by the Chifley Government, and I am sure that it is doing good work.

Some industries were fearful that negotiations would have an adverse effect upon them, but their fears have been proved to be groundless. I do not know of one real protest being made by an Australian industry in this matter. The agreements that have been made will be of advantage to Australia and will help to improve trade relations throughout the world. I hope that, by removing some causes of friction between countries, they will assist the cause of world peace. I have much pleasure in supporting the bill.

QueenslandMinister for Trade and Customs · LP

. - in reply - The Government is attempting to put upon the statute-book a measure that was really conceived by a previous government. The bill has been accepted by the Opposition, and I express my appreciation of the co-operation of honorable senators opposite in securing its speedy passage through this chamber. Since the contest between free trade and protection was decided in the first decade of this century, the differences between the policies pursued by Australian governments, regardless of their political colour, have related only to matters of degree. They have all agreed that it is necessary to protect and foster Australian industries, especially those that are capable of being established upon sound economic lines, if the protection afforded to the industries does not cast an unduly heavy burden upon the Australian people. I am sure the public will be very heartened by what has transpired in this chamber this evening. If we can see eye to eye upon important matters relating to our trade - and, as Australians, there is no reason why we should not - perhaps the bridge will be lengthened and, in the not too distant future, we shall agree upon other matters of equal importance.

Question resolved in the affirmative.

Bill read a second time.

In committee:

The bill.

Senator FINLAY:
South Australia

.- I refer to item 78 in the schedule. It relates to almond kernels. The country of origin is given as Italy. Do we import almond kernels from any country other than Italy? Is the proposed tariff different from the old tariff? If so, what is the difference?

Minister for Trade and Customs · Queensland · LP

– In 1938-39 we imported from Italy and Spain 177,763 lb. of almond kernels, valued at £13,926. In 1947-48, we imported 118,796 lb. from Italy, valued at £19,971; 3,077 lb. from Cyprus, valued at £666 ; and 769 lb. from other countries, valued at £1,400. In 1948-49 we imported 483,429 lb. from Italy, valued at £53,579; 30,524 lb. from Spain, valued at £3,311; 21,122 lb. from Turkey, valued at £1,527; and 6,169 lb. from other countries, valued at £1,027. To sum up, in 1938-39, we imported a total of 177,763 lb.’ of almond kernels, valued at £13,926; in 1948-49, 122,642 lb. valued at £20,777; and in 1948-49, 541,244 lb. valued at £59,444. The countries from which we have imported the kernels chiefly are Italy, Spain, Cyprus and Turkey - in that order.


– I refer to item161 (a), agricultural implements, and item 161 (D), garden and field spraying machines. A large section of Australian industry is engaged in supplying agricultural implements to primary producers. I realize that it is essential that we should have in this country the most modern agricultural implements, but I should like to know whether Great Britain, United States of America, Italy and France, which are the countries from which we import agricultural implements, have responded to the reduction of our tariff by reducing their tariffs upon our goods. The high tariff walls of some countries are threatening our primary industries, especially the canning industry. Has there been any quid pro quo in this matter? If so, what form has it taken?

These people are glad to accept concessions from us, but they are not keen to give anything in return.

QueenslandMinister for Trade and Customs · LP

– I am informed that item 161 (a) has been included in the schedule only for drafting purposes. No alteration of the tariff has been made and no concession has been granted by this country in that connexion. “With regard to item 161 (d), at the Annecy negotiations, Denmark requested us to reduce our tariffs upon the articles to which the item refers. With regard to ordinary duties, the British Preferential Tariff was not affected, and the mostfavoured nation rate was reduced from 271/2 per cent, to 25 per cent. It was not bound. If a duty is bound, it cannot be increased, even by the Tariff Board, for a period of three years from the date of binding. The most-favoured-nation rate not being bound, it is competent for us to increase it. With regard to primage duties, the rates are unchanged. The preferential margin was reduced from 221/2 per cent, to 20 per cent, and bound against increase. The Ottawa commitment to preserve a preferential margin of at least ten per cent, has not been affected. As local manufacture is extensive and was firmly enough established as long ago as 1934 for the Tariff Board to recommend the low rates of 5 per cent., British preferential tariff, and 121/2 per cent., general tariff, the proposed unbound most-favoured nation rate of 25 per cent, should provide adequate protection to local manufacturers against importations from any country to which the rate is applicable. The bound preferential margin of 20 per cent., which is the principal commitment taken by these goods, is 10 per cent, greater than required under the Ottawa Agreement. I think therefore that honorable senators will appreciate that the concession that has been given, in return for which Australia has received reciprocal benefit, has not in the slightest degree endangered the productive capacity of Australian industries. The concession that we gave, was, as I indicated, considerably higher than what was actually recommended by the Tariff Board for the protection of our own industry, but in return for that Australia got a duty-free admission into Denmark of wool and tannery extracts.


– Although I do not desire to add to what the Minister for Trade and Customs (Senator O’Sullivan) has said, there is no doubt that Australia has definitely received a concession. I shall not comment in relation to the last item that the Minister mentioned. I do not think that it was quite right for Senator George Rankin to say that these people are prepared to take all that they can get from us and give us nothing in return. Managements in this country practically agreed to these proposals. The duties are considerably higher than the Tariff Board determined essential for those industries. We received definite concessions from Italy and Denmark.

QueenslandMinister for Trade and Customs · LP

. - in reply - I appreciate very much the remarks of Senator Courtice. They have all the more weight by reason of the fact that for more than three years he had the responsibility of administering the Department of Trade and Customs during the regime of the former Government. I am sorry that I omitted to acknowledge earlier his very gracious tribute to the loyalty, efficiency and industry of the senior officers of the Department of Trade and Customs, which it is now my privilege, as it was his, to administer. I most cordially endorse the remarks of Senator Courtice in relation to the submission by Senator George Rankin. I emphasize that nothing has been given away for nothing. Although the final responsibility is with the Government, the senior officers of the Department of Trade and Customs, the Department of Commerce and Agriculture, and other departments, who attend these conferences are a highly efficient, well-trained, and very loyal body of Australians. I am quite sure that Senator Courtice will agree with me that they know no politics, and that their sole interest is to discharge faithfully the responsibilities with which they have been entrusted.

Bill agreed to.

Bill reported without requests; report adopted.

Bill read a third time.

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Bill received from the House of Representatives.

Standing Orders suspended.

Bill (on motion by Senator O’Sullivan) read a first time.

Second Reading

QueenslandMinister for Trade and Customs · LP

– I move -

That the bill be now read a second time.

This bill requires very little explanation. It is necessary to fulfill our treaty obligations with New Zealand, and this measure is complementary to the principal Customs Tariff Bill covering the negotiations at Annecy, with which the Senate has already dealt.


– New Zealand has been closely associated with Australia in tariff matters and trade associations, and this measure is to validate the agreement with New Zealand. Because of the alterations of duty that were agreed to at Annecy and Geneva the amount of preference that Australia had been enjoying with New Zealand, and vice versa, was interfered with to some extent. This measure will harmonize the altered duties. Trading conditions with New Zealand will remain as they were before these negotiations took place.

QueenslandMinister for Trade and Customs · LP

in reply - I thank the Senate for the manner in which it has received this measure. As Senator Courticehas pointed out, it will implement consequential amendments or adjustments of our trade relationships with New Zealand.

Question resolved in the affirmative.

Bill read a second time, and passed through its remaining stages without requests or debate.

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The following papers were presented : -

Air Navigation Act - Regulations - Statutory Rules1950, No. 69.

Commonwealth Bank Act - Regulations - Statutory Rules 1950, No. 70.

Meat Export Control Act - Regulations - Statutory Rules 1950, No. 71.

Re-establishment and Employment Act - Regulations - Statutory Rules 1950, No. 68.

Senate adjourned at 9.9 p.m.

Cite as: Australia, Senate, Debates, 9 November 1950, viewed 22 October 2017, <>.