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Thursday, 30 June 1994
Page: 2509

Senator MARGETTS (6.20 p.m.) —The Financial Agreement Bill 1994 and the Debt Sinking Repeal Bill belong to that strange category of bills that come through the parliament from time to time—bills we do not want to support but, given the alternatives, do not want to oppose. The Financial Agreement Bill seeks to legitimise what has already happened in the Loans Council, which is that the Commonwealth is basically demanding tighter control over state finances. It is seeking to extend Commonwealth powers of control over state borrowing, or subsequent control over global borrowing, to include levels of available state funds as a criteria for borrowing.

  It seeks to make the states more accountable by demanding quarterly instead of annual reports and by including a wider range of elements in the assessment for borrowing. It seeks to make this situation hold less by legislation and more by regulation, taking it from having a basis in law to a basis in power.

  In many ways, this bill tightens Commonwealth control over the states, increasing Commonwealth control of taxes and revenue raising and its ability to control state grants. It uses this control over revenue to exercise control over state borrowing and in this way exercises control over the money available to state governments.

  By moving to a position where the power is held in fact rather than in law, the bill appears to be loosening Commonwealth control when actually it is not. For these reasons, we have problems supporting both bills. They give the Commonwealth more power while making that power less formal and less accountable to parliamentary review.

  There are reasons for this occurring, and these reasons affect our ability to accept the existing legislative framework. The Loan Council's shift to control over global borrowing occurred because states were using the ability of state instrumentalities to borrow without scrutiny to avoid any controls on actual state borrowing. They also used the ability to borrow to create large cash funds to use as they wished—the so-called hollow logs.

  As a result, during the 1980s and early 1990s states, such as Victoria, got into massive borrowing and got into trouble. This trouble reflected on the economic position of Australia as a whole, and it was the Commonwealth that the states turned to when they needed to get out of trouble. It is clear that allowing the states unrestricted control can harm and has harmed other states and the nation as a whole. Therefore there must be some measure of responsibility by individual states to other states and the Commonwealth. This leads us to support the need for a change.

  The first question is whether the changes proposed adequately and appropriately address the issue. We feel that the move to greater control by the Loan Council is designed to entrench and extend Commonwealth economic power over the states, but it also responds to irresponsible borrowing by the states. The old legislation no longer reflects the reality and leaves holes which have allowed the problem borrowing; therefore it should not stand. The proposed legislation simply gives the Commonwealth more power without making its responsibilities clear.

  The bills will pass but this is mainly because the formal powers of the Commonwealth appear to be diminished. States will be allowed to borrow in their own right. But this is actually a move to reduce Commonwealth debt, since it has been negotiated as part of a deal which will see the states making an accelerated payback of Commonwealth debt taken out on their behalf.

  The sinking or payback of this debt will go from $900 million in 1993-94 to $1,800 million in 1994-95. The Commonwealth will get nearly $1 billion extra from the states towards its deficit reduction. States are allowed to go out and borrow on the commercial markets in order to sink this debt. While states can now borrow in their own names, they will still be constrained in borrowing through the Loan Council so they do not actually have more power to borrow.

  Many honourable senators will be aware that the Greens favour a more decentralised system of decision making. Part of our problem with these bills is that we do not see the states as the natural framework for this power. We feel that decentralisation is about giving the community more control over the issues and actions that affect people's lives, and this means decentralisation of decision making to regions and communities.

  States have often been worse than the Commonwealth when it comes to ignoring communities and the public. Although we oppose the centralisation of power we are not jumping on the states rights band wagon—the centralisation of power at state level. We are also not in favour of increasing the debt levels of either the states or the Commonwealth and believe that additional spending should be the result of community collective value decisions and paid for by the additional revenue collected as the community decides is appropriate.

  While the Greens are in favour of increased decentralisation, we also know that there are issues that should be dealt with over larger areas—multi-regionally, federally, internationally. The issues that need such treatment are those that affect people over those areas. But such agreement should ideally be made by communities of communities—regions and communities acting together in the collective interest—not by some autocratic paternalistic organisation that will decide what is best for people.

  The current financial agreement and Loan Council structure has already been abandoned as inadequate. The new Financial Agreement Act seems fundamentally flawed. Neither the ALP nor the coalition seem to be flexible enough to support any approach that would be in line with the position put by the Greens. There does not seem to be any appropriate response for us to make in this case and, since the coalition is voting with the government on this, it hardly matters what we say.

  The passage of this bill is a foregone conclusion. Obviously, nothing can be done at this time and hopes of real change lie in the future. We would therefore like the Senate to seriously look at the roles of communities, regions, states and Commonwealth in regard to powers and responsibilities, and to consider the entire issue of the various tiers of government, particularly any proposal to fundamentally alter the constitution to move towards a republic. We will therefore abstain from voting on this bill.