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MONDAY, 6 SEPTEMBER, 1897.

Petitions-Report of Statistician's Department, New South Wales-Federal Finance-Population and Electoral Returns-Commonwealth Bill-Adjournment.

The PRESIDENT took the chair at 10.30 a.m.

PETITIONS.

The Hon. J.H. GORDON (South Australia) presented a petition from the Adelaide Ministerial Association, praying for it recognition of God in the Constitution of the Commonwealth.

Petition received.

The hon. Sir R.C. BAKER (South Australia): I have the honor to present a petition to which twenty-seven signatures are attached. Inasmuch as the petition asks the Convention not to agree to certain suggestions made by the Legislature of South Australia, I wish it to be distinctly understood that I do not in any way identify myself with the opinions expressed. I move:

That the petition be received, and read.

Motion agreed to.

The CLERK read the petition as follows:

To the Honorable the President and Members of the Australasian Federal Convention in session assembled:

The petition of the undersigned on behalf of the Australasian National League (in South Australia) humbly sheweth:

That your petitioners are of opinion that provision should be made in the preamble of the Commonwealth Bill for the recognition of Almighty God as the Supreme Ruler and the source of all law and authority.

That your petitioners are of opinion that the power of the federal parliament to impose direct taxation should be limited so as to provide that such taxation should only be imposed in the event of foreign war.

That your petitioners are of opinion that the right of appeal by litigants from the decision of the Australasian courts to her Majesty-in-Council should still be retained.

That your petitioners are of opinion that the control and regulation of the river Murray, and the use of the waters thereof by the federal parliament, should be extended so as to include all navigable rivers within the commonwealth and the tributaries thereof.

That your petitioners are of opinion that the suggestion of the South Australian House of Assembly that the qualification of electors for the senate, and the house of representatives should be in each of the states, one adult one vote should not be agreed to.

That your petitioners are of opinion that the suggestion of the South Australian House of Assembly that the powers of the federal parliament in reference to postal, telegraphic, telephonic and other like services should be limited to "outside the limits of the commonwealth," should not be agreed to.

Your petitioners therefore humbly pray that such amendments may be made in the Commonwealth Bill during the present session of the Convention as will give effect to the prayer of your petitioners,

REPORT OF STATISTICIAN'S DEPARTMENT, NEW SOUTH WALES.

Mr. HIGGINS (Victoria): I desire to ask a question without notice. I understand that there is a report extant of the

[start page 34] Statistician's Department of New South Wales with regard to financial matters, and I wish to know if it will be made available to members of the Convention? I understand there is a similar report in Victoria, and that there is no objection to its production.

The Hon. E. BARTON (New South Wales): I received a copy of "Notes on Federal Finance," and I think the paper has been distributed to hon. members. A number of hon. members have received copies, though some of the reports distributed may have miscarried. The matter will be inquired into, and I have no doubt the hon. member will receive a copy of the report referred to.

FEDERAL FINANCE.

Mr. GLYNN (South Australia): I beg to ask the Premiers of the colonies represented in the Convention, and, in the case of South Australia, the hon. the Treasurer, Mr. Holder, whether, for the purpose of helping the deliberations of the Convention, they will lay upon the table copies of all reports presented to, their respective governments on the question of the finances of the proposed federation, the financial clauses of the draft bill, federal control or ownership of the railways. Since I gave notice of this question, some of the papers have been presented to the members of the Convention.

The Right Hon. G.H. REID: I do not think there will be any objection on the part of any of the Premiers to lay upon the table any documents of the character named, which are not confidential.

The PRESIDENT: Do any of the other Premiers desire to say anything in reply to the question?

The Right Hon. Sir G. TURNER (Victoria): I agree with the reply of Mr. Reid.

The Hon. W. MOORE (Tasmania): As far as the Premier of Tasmania is concerned, I think there will be no objection.

POPULATION AND ELECTORAL RETURNS.

Dr. QUICK (Victoria) rose to move:

That a return be laid before this Convention showing, according to the latest available information,-

(1.) The population and number of electors in each electoral district for the Legislative Assembly of New South Wales; and

(2.) The population and number of electors in each electoral district for the Legislative Assembly of Victoria.

He said: I would ask that the Premier of New South Wales should make this information available as early as convenient, because to be of any use it will be required in connection with the debate on the representation of the states, which will come on, apparently, very early.

The Right Hon. G.H. REID: It will be done at once!

Question resolved in the affirmative.

COMMONWEALTH OF AUSTRALIA BILL.

In Committee:

Clause 1.

The Hon. E. BARTON (New South Wales)[10.37]: Objection was made at the last sitting by the Right Hon. Sir George Turner that inasmuch as the financial question presented the greatest difficulties with which we should have to deal at this adjourned sitting-or at any rate it was arguable that it presented as many difficulties as any other-a discussion should be taken first on the financial clauses for the information not only of members of the Convention, but also of the select committee on finance. Such hon. members as have mentioned the matter to me since that time, appear strongly to approve of the suggestion, and I need not say, as far as I am concerned, that if it would facilitate business and meet with the convenience of hon. members, it has on that ground every reason in its favour. If, therefore, it will be a means of facilitating the consideration of this very important question, I shall have no objection to [start page 35] move the postponement of clauses from 1 to 88. That would include the requirement of a uniform tariff within two years, the requirement that there should be free-trade within the commonwealth, the basis of distribution before the uniform tariff is imposed, and the basis of distribution afterwards. We could then discuss the clauses from 88 to 93, inclusive, as a whole without being restricted in any way. Of course, in moving the postponement of clauses from 1 to 88, I shall ask that clauses like clause 84 shall, for the present, at any rate, be accepted as necessary provisions in any federal commonwealth-that is to say, that the federation should have to collect the customs revenue, and that there should be freedom of intercourse between the various parts of the commonwealth. Therefore, if the clauses I have mentioned-say, from 88 inclusive-afford us a sufficient basis for the discussion desired, I would ask that the prior clauses be postponed. I take it that you, Mr. Chairman, in view of the kind of discussion which is suggested, will not ask for a vote upon any of those clauses at present, or upon any amendments which may be proposed, but will leave all suggestions in regard to them for future consideration. I move:

That the consideration of the clauses, 1 to 87 inclusive, be postponed.

The Right Hon. Sir G. TURNER: Will the hon. and learned member invite a discussion on clause 88 or clause 89?

The Hon. E. BARTON: I will invite it discussion on the bunch of clauses commencing with clause 88. Let there be one discussion.

Motion agreed to.

Clause 88. Uniform duties of customs shall be imposed within two years after the establishment, of the commonwealth.

The Hon. E. BARTON: I understand there is some intention on the part of the several Colonial Treasurers to make a short statement to the committee as to the position assumed by the legislatures of their respective colonies with regard to these clauses. That would be a very convenient way of opening the discussion.

The Right Hon. G.H. REID (New South Wales)[10.42]: As the Colonial Treasurer of the colony of New South Wales, I have to make a very short statement of the nature of the amendments suggested by the two houses of our legislature. It is understood that in making this statement we do not propose to indulge in any comment or argument; but simply to give the Convention, in the shortest possible form, the substance of the suggestions which have been made. In order to do that I must go back to clause 84, which vents exclusive power in the parliament of the commonwealth to impose custom duties and duties of excise, and to grant bounties after the passing of a uniform tariff. I have to state that the Legislative Council of this colony suggests the omission of that clause. With regard to clause 86, which provides that property used in connection with state services taken over by the commonwealth, should vest in the commonwealth subject to certain provisions as to valuation and payment, both houses of this legislature suggest its omission. I may make the remark, however, that I believe that was done simply in order that some other clause of a similar character and more fully considered, should be introduced. Clause 88 provides that uniform duties of customs should be imposed within two years after the establishment of the commonwealth. Both houses suggest the omission of that clause. With regard to clause 89, which provides for free-trade amongst the federated colonies after the imposition of a uniform tariff, the Legislative Assembly suggests an amendment preserving to each federated state the power of regulating the liquor and opium traffic in accordance with [start page 36] the laws of the states as to the sale of such articles. The Legislative Council suggests the omission of clause 90, which provides for the keeping of accounts of the revenue and expenditure of the commonwealth, and of what is due to the states. Both houses suggest the omission of clause 91, which places limits on federal expenditure during the first three years. Clause 92 provides for the first five years of a uniform tariff, a scheme for the distribution of the surplus, and stipulates that each state should, for those five years, keep back each year at least as much as during the year preceding the imposition of uniform duties. The Legislative Council suggests the omission of that clause; but the Legislative Assembly suggests the omission of certain words and the insertion of other words, leaving the parliament of the commonwealth free to raise what revenue it pleases, and to distribute any surplus on a basis to be determined by the federal parliament. Both houses suggest the omission of clause 93, which provides for the distribution of surplus after the first five years on a per capita basis. With regard to clause 94, applying the audit of the accounts of the commonwealth to the laws of the several states, the Legislative Council suggests its omission; and if the inter-state commission may be considered, as I think it can be, a part of the financial scheme, I have to mention that both houses suggest the omission of both clauses relating to that commission. Both houses suggest the omission of clause 98, which gives the federated parliament power to take over wholly or partially the public debts of the states. That is the substance of the suggestions of the houses of Parliament in New South Wales with reference to the financial clauses.

The Right Hon. Sir G. TURNER (Victoria)[10.48]: With regard to the colony of Victoria, no suggestions respecting financial matters have been made by the Legislative Council. The Legislative Assembly suggests, with regard to clause 84, that we should strike out the words,

and to grant bounties upon the production or export of goods.

There are consequential amendments throughout that clause. They suggest that clause 92 should be omitted altogether. I understand the reason of that is that they do not agree with the scheme, but they have not suggested any other. Then they propose a new clause (A) after clause 93, to the effect that where any goods have been imported into a state before the imposition of the uniform duties are, during the first year of uniform duties, exported into any other state, we should authorise the collection on such exportation of the amount of the difference between the duty chargeable on such goods before the imposition of uniform duties in the state from which they are exported, and the duty chargeable on such goods before the imposition of uniform duties in the state into which they are

imported, or the uniform duty, whichever shall be less. Those are the only amendments suggested by the Parliament of Victoria.

The Hon. F.W. HOLDER (South Australia)[10.50]: The only amendment proposed by the South Australian Parliament in these clauses is to the effect that liberty should be given to regulate the opium and alcoholic imports of trade within the states. The recommendations are precisely similar to those made upon the same subject by the colony of New South Wales. All the other clauses of the Commonwealth Bill were passed as printed.

The Right Hon. Sir G. TURNER (Victoria): I have been somewhat misled by an error in the printing of this document. On page 49 hon. members will see under the heading "Tasmania":

That the following resolution be sent to the Federal Convention as a suggestion:-"That in the opinion of the Legislative Council of Victoria [start page 37] the finance and trade proposals of the Commonwealth Bill require further inquiry and consideration."

I did not notice that until my hon. friend, Mr. Fraser, pointed it out to me.

The Hon. Sir P.O. FYSH (Tasmania)[10.51]: I regret that I was not in my place earlier in the morning. I understand that the intention is that the Treasurer of each colony or state shall briefly announce the amendments which that state has proposed in respect to the financial provisions of the Commonwealth Bill. If that be the case, my statement may be exceedingly brief. The purpose of the amendment suggested by the Tasmanian legislature with respect to finance is, first of all, to secure the taking over of the whole of the debts of the various states by the commonwealth. It starts on the assumption that the minimum of the debts of the whole of the colonies, or of each of the states separately, is £40 per head, and it is assumed that all amounts beyond the £40 per bead shall be taken over in a separate form. For the whole of the debts the interest is to be paid by the federal executive or parliament; but for such sum as each state is indebted in excess of the £40 per head, each state shall give to the commonwealth debentures or bonds. To give an example, Tasmania at the present time is indebted £47 per head. It will, then, need to give to the federal executive bonds to the extent of £7 per head of its population, and such bonds will be redeemed, as I will proceed to state. The whole of the interest, as I have already said, is to be paid by the commonwealth or federal executive. But that portion of the interest which relates to the excess of the debt over £40 per head is to be borne separately by the state so indebted. Tasmania, therefore, in giving bonds for £7 per bond, will be responsible to the commonwealth for the interest on that £7 per head. But with respect to the excess of £40-I am following up the example of Tasmania only, and leaving the representatives to apply it to each of their own states separately-as the population increases, taking a census year by year, it is proposed that the amount of debt shall be cancelled. So that, ultimately, the commonwealth will have acquired the whole of the debts of the various states, and the various states will be relieved entirely. Now, it may be said, of course, that this may appear at first to be very much to the advantage of those who are most indebted. But I would like representatives to bear in mind that directly we have established the commonwealth it is presumed that we shall be working for the common weal, and that the revenue from customs will be divided per capita. If that revenue be revenue belonging to the states per capita, then, as the population of the various states increases, they will be contributing more and more year by year to the commonwealth, and so meet the extra expenditure incurred for interest upon their extra debt. I presume that that is all the statement that is required of me now. I understand that there will be other amendments with respect to these various proposals; but they will come hereafter, and I shall, therefore, reserve any elaboration of my remarks on this subject for the proper and more convenient season.

The Right Hon. Sir JOHN FORREST (Western Australia)[10.57]: The amendments made by the Legislative Council and Legislative Assembly of Western Australia in regard to these clauses now under notice-clauses 88 and 98-were not very numerous, although, I have no doubt, they will require a good deal more consideration than we were able to give them during the short time at our disposal. Both the Legislative Council and the Legislative Assembly suggested that clause 88 should be struck

out, and that in clause 89 the words in the third line, "throughout the commonwealth" [start page 38] be struck out and the words, "between the states" be inserted. The reason for that was that it was thought that the words "throughout the commonwealth" were too wide, and might relate to many things to be done by the state itself-in regard to licenses, &c.-and that the words "between the states" seemed to be quite wide enough, and to carry out what the Convention desired. An addition was made to clause 89 with regard to opium and alcohol, similar to that proposed and carried by the Legislative Assembly of New South Wales. That was added to the clause by the Legislative Assembly of Western Australia; it was not dealt with by the Legislative Council. Clause 90 was amended by adding the word" excise" after the word "customs," so that the clause should read

Until uniform duties of customs and excise have been imposed, and for five years afterwards.

Clause 91 was struck out by both Council and Assembly. In regard to clause 92, the same alterations were proposed by both the Legislative Council and the Legislative Assembly. Sub-clauses I to V were struck out, and it was suggested that the clause should be made to read:

During the first five years after uniform duties of customs have been imposed the amount to be paid to each state shall not be less than the amount returned to each state during the year last before the imposition of such duties.

In clause 93 the words

numbers of their people as shown by the latest statistics of the commonwealth

were struck out, and the words

amount of revenue contributed to the commonwealth

inserted. That amendment provides that the distribution among the several colonies month by month shall be proportionate to the amount of revenue contributed to the commonwealth. Clause 98 was amended so as to make it obligatory upon the federal parliament to take over a proportion of the public debt of the states as it existed at the time of the commonwealth to the extent of £60 per head of the adult males residing in each state. Of course, £60 was put down in order that the matter might be discussed; but the principle there laid down was one that met with the approval of the Legislative Assembly. With regard to this matter, there was no suggestion by the Legislative Council. The word "ratable" in the third line from the bottom of the page was struck out, and in the last line but one the words "adult males" were omitted. The principle of the clause, as we amended it, is that the federal parliament shall be compelled to take over the debts of the colonies in a fixed proportion per head of the adult males in each state. Those were all the important amendments suggested by the Legislative Council and the Legislative Assembly of Western Australia.

The Hon. E. BARTON: I think that hon. members who wish to address themselves in a broad way to the question of finance will have an opportunity to do so now before the Finance Committee commences its practical sittings.

Mr. MCMILLAN (New South Wales)[11.4]: Although it was only this morning that I understood that we were to devote ourselves to the question of finance in the first part of our sittings, I recognise that as most of the Premiers of the colonies are also the Treasurers of those colonies, and as they have only just returned from England and have had a mass of duties to perform since, it is scarcely fair that we should call upon them at the earlier stage of this debate. I do not intend to make anything in the way of a second reading speech, because I am sure that the object which we now have in view is to be as practical as possible. Neither do I intend to address myself, with the short time I have had for preparation whilst sitting here, to any matters of mere verbal [start page 39] alteration. I shall confine my remarks to a few of the absolutely salient and vital questions which, if they could be settled upon some satisfactory foundation, all the others ultimately would find themselves in their proper places.

We cannot shut our eyes to the fact that all the difficulties which have arisen in regard to this question of finance have arisen out of the character of the different policies into which the various colonies have drifted, owing to their separation from one another. Of course, this applies more especially to the strong line of fiscal antagonism between New South Wales and all the rest of Australia. But beside that there is another very salient fact in the finance of New South Wales, which differentiates it from the other colonies; in other words, our land revenue. If hon. members will turn to that very valuable book of Mr. Coghlan's called the "Seven Colonies of Australia" they will find on page 383 a statement of the relative position of the different colonies as regards their land revenue. They will find that New South Wales receives from every source land revenue equal to £1 11s. 7d. per head; Victoria, 6s. 11d.; Queensland, £l 4s. 1d.; South Australia, 12s. 5d.; Western Australia, £1 10s. 5d.; Tasmania, 6s. 5d.; New Zealand, 8s. 5d.

Mr. GLYNN: Have yon the proportion received as rent separate from sales?

Mr. MCMILLAN: Yes.

The Right Hon. G.H. REID:-

Mr. MCMILLAN: In New South Wales it is about half and half. Roughly speaking, our total land revenue is about £2,000,000, of which £1,160,000 comes from land sales, and the rest from pastoral rents, &c. The exact amount received from auction and other classes of sales during the years 1895-6 was £1,158,235, and from occupation, &c., of Crown land, £859,96l.

The Right Hon. G.H. REID: There are scarcely any auction sales now!

Mr. MCMILLAN: I take it that the main subdivision of land revenue is that which comes from alienation, either in the payment of instalments on conditional purchases or by auction sales, which last amount, as the right hon. gentleman says is very small now.

The Right Hon. G.H. REID:-

Mr. MCMILLAN: No. Although this remains to some extent a diminishing quantity, it is one of the items. Two-thirds of our land is still unalienated, and for practical purposes there is no reason to suppose that because of the increased value of our lands, and increased occupation, we shall not, for years to come, have a large advantage in our land revenue over all the other colonies. The other colony which differentiates itself in many respects, because of its youth and the abnormal character of its transactions-I say nothing of those who govern it-is Western Australia. You will find its land revenue, its railway revenue, and some of its other sources of income, to a certain extent of an abnormal character. This brings us to the absolute, root question of colonial finance. I honestly confess that I have tried to weigh this question in the scales. I have tried to concoct to the best of my ability scheme after scheme which might prevent us from having to face an unpleasant fact-the necessity of insuring under some scheme or other, at any rate for a limited period, some, security for the different Treasurers when we come together, and give up our customs duties to the federal parliament. I feel, of course, that in dealing with this question, besides these differentiations between the colonies, we are also dealing with an absolutely unknown quantity in a uniform tariff. It is all well enough for people to talk and speculate upon that tariff; but I say most decidedly that when we-those who will represent the colonies-come together in the federal parliament, when, instead of looking at this question from [start page 40] each particular local standpoint, we look upon it as a united Australia, then in the union of the conflicting classes of interests as arising out of one tariff instead of several, it is impossible to say what the character of that tariff will be. Now, without attempting to prophesy, but simply as a mode of throwing light on the subject, my own opinion is that when we come together we shall have to agree upon some broad revenue-producing tariff which will bring in a certain volume of revenue, and the great question whether these colonies are to live under a free-trade or protective system must, from the peculiar mode in which we differentiate, be left for some years to come. You might have a variety of tariffs, under different circumstances. You might have either a

moderate protective tariff or all round ad valorem duties, some of which would be protective in their incidence, and some of which would not. I may, at once say, in order to make clear my view on the question, that I believe no sensible man will think for one moment that revenue for the first few years of the federal commonwealth will be raised in any way except through the customs. I know that is a great admission on my part, and on the part-if he agrees with it-of the right hon. gentleman at the head of the New South Wales Government.

The Right Hon. G.H. REID: I certainly do not agree with it!

Mr. MCMILLAN: To a certain extent we are put in this position: We have to say to our people that the process of federation involves an alteration to some extent in our fiscal system. I want to be still more clear. I am dealing with this question now on the understanding that we come to some conclusion before this Convention rises, because, having come to the last stage of our operations, I consider that it is only fair to the Convention, that it is only fair to the people of this country, that having thrashed this thing out, we should come to what is the only reasonable conclusion, allowing them to decide for themselves in the full light of day whether or not union is acceptable under those conditions. There is no use in going -and I absolutely object to go-before my constituents as a member of this Convention to tell them that it is possible by some jugglery, by some means or other of which no one can conceive at present, seeing that there are four or five of the colonies whose fiscal systems are based on large customs duties, to unite as one out of these several colonies without having to alter to a certain extent our fiscal system.

HON. MEMBERS: Hear, hear!

Mr. MCMILLAN: I think it is far better in the earlier years of this federation, in the first clash of controversy, when this country may feel that it is overweighted by the opinions of the other colonies-it is far better for us to say to them now what they may expect, than for them to say to us afterwards, "You led us astray." I come then absolutely to what I consider the kernel of this arrangement. In the clauses that have been placed before us at the previous sittings of the Convention I see nothing that can be found fault with, speaking generally, up to the end of clause 92 without including the sub-sections. I am speaking now of the mode of getting at the surplus revenue -in regard to matters which we have thrashed out previously. When we give over this great machinery of revenue-the customs, and when the federal government take credit for the expenditure on the services which are relegated to them, I take it for granted that we all assume there must be a large surplus. The question then arises how that surplus is to be dealt with. I may say that it is my present opinion-although, of course, I am open to alter it, if anyone can show me an improved scheme-that for five years after the commonwealth has produced a uniform tariff [start page 41] a certain aggregate amount based upon twelve months of the old tariff should be guaranteed to them for that period.

The Right Hon. Sir G. TURNER: In what proportion?

Mr. MCMILLAN: When this question was debated in the Finance Committee at first the word "aggregate" was left out. Now it was very clear that New South Wales, with a tariff producing about £1,400,000, through the absolute sweeping away of all protective and other duties, and with that tariff brought into competition with the tariff of Victoria, yielding nearly £2,000,000, if the surplus for five years were divided upon the actual facts of the case, would be unfairly treated, because hon. members will see this: that whatever the uniform tariff is, we have to come in with it. Supposing that when the uniform tariff came into operation, the revenue from New South Wales was £2,000,000, instead of under her present tariff, £1,400,000, if we had to take the surplus on the basis of £1,400,000, we should be robbed, practically, by the other colonies. I think that is very clear. Therefore, the word "aggregate" was introduced so that New South Wales should be brought in equitably with the new tariff, and while she did not ask more than her neighbours, she got her proper distribution on an equitable basis.

The Right Hon. Sir JOHN FORREST: What about Western Australia?

Mr. MCMILLAN: I am quite willing to confess that there has been no scheme yet in which it has been possible to reconcile the equities of the case with the peculiar position and conditions of Western Australia,

The Hon. Sir P.O. FYSH: Except interstate accounts!

Mr. MCMILLAN: That is what I wish to avoid.

An HON. MEMBER: It is the only safe and equitable plan!

Another HON. MEMBER: The provision of the 1891 bill was all right!

Mr. MCMILLAN: I come now to the question of dealing with the surplus in the future. I have said that I believe every hon. member in this Convention, no matter what his fiscal views may be, will agree with me that the uniform tariff is all absolutely unknown quantity, therefore we are in the first place trying to do work which is legislation in this Convention, and, in the second place, we are trying to legislate upon an unknown quantity. From my point of view, and of course I speak only for myself, I do not think-and I do not suppose that even the right hon. gentleman at the head of the New South Wales Government will doubt my free-trade principles

The Right Hon. G.H. REID: Hear, hear!

Mr. MCMILLAN: Speaking for myself I say now-and I want to lose no time-that I have come absolutely to this conclusion, that this is the sacrifice of New South Wales; although I believe that even with that sacrifice, and with the hope of converting these peoples from fiscal folly to righteousness in the future, there will be probably a free-trade Australia in a shorter time than some persons imagine. But we have to do this, and I say most distinctly that if you trust this great federal parliament with a thousand and one things, if you trust it with the greatest power of taxation you can possibly conceive, if you trust it with all your rights and liberties, with all your international relations, and absolutely with your political existence, it is folly to attempt to say that you will not trust it to equitably agree upon financial matters. Now, you must recollect this, that by the modus operandi which we adopt in this bill, by declaring that a certain surplus shall be distributed during a short period-and it is only a short period-you establish a nexus be- [start page 42] tween the provincial and central government. As you hear a great many people talk, and by their questions you might almost imagine that it was proposed that we should band over our affairs to a foreign kingdom; whereas we are handing over our affairs exactly to ourselves. Will anybody tell me that there will not be some kind of provincial check, because each of us will have to go back if we are in that parliament to our own provinces to be elected by them? There will be the same machinery, the same check, the same exercise of public opinion upon that central government as there is upon the governments represented here now. It is an absolute negation of the whole principle of federation and trust in each other for us to stop short of handing over that power to the federal government.

Mr. LYNE: How would you redistribute the surplus?

Mr. MCMILLAN: I do not think there would be any difficulty about redistributing the surplus. But the question of per capita distribution, which we fix in this bill after a certain period, commits us to too much. It is attempting to prophesy what will be the condition of these colonies under the federation, and what will be the policy of the Federal Parliament. I should be quite willing to leave all that for the ultimate determination of the Federal Parliament, because there may be great changes. We do hope now, although we are meeting here in this Convention, each watching closely and jealously the interests of his own province, that when this parliament does meet, and has been in operation for five years, a great many of the geographical lines which we now consider to be so necessary will, in their practical effect, be swept out of existence, and that while we will be still a federation, we shall have all the strength and concentration of union. Now I come to another proposal which has been

made for the covering up of this surplus. It has been said by prudent economists and politicians that it is an unwise thing to place in the hands of this Parliament any surplus whatever-that you will give them a means of extravagance which will land the provincial Treasurers in debt and difficulty. There, again, we have at once the assumption that the federal parliament is not to be trusted. I want to point out this-that, even if you get a batch of debts, or a railway revenue, and put it up against that surplus, you do not touch the difficulty at all. Even supposing you believe that the railways should be given over, under certain conditions, to the federal government, it does not touch the difficulty in any way whatever. There is one scheme which might meet it; but that is surrounded at the present time by enormous, and, to my mind, insuperable difficulties. If the advocates of that scheme will pardon me for saying so, these gentlemen are very anxious to give over our railways to federal control, not, perhaps, because it is the right principle, but because it gets rid of the financial difficulty from their point of view. But I want them to keep clearly before their minds that we have not merely to pass a constitution which may be suitable to our own views, but we have to pass a constitution which will be accepted by the people of the different colonies. If you intrude into that constitution any things which are not absolutely necessary, which will weight it with responsibility, and give rise to differences of opinion in the different colonies, and give a handle to anti-federationists, you may blow the whole scheme into atoms. Let us inquire for a moment, as a matter of enlightenment, what is the scheme of those gentlemen who want to federate the railways. The scheme is that you should give over your railways-I am speaking at any rate of one scheme-to the federal parliament, and give that parliament the exclusive management. But they do not propose to [start page 43] vest these railways absolutely, they do not propose to say to the federal government, "Take over all our liabilities and we will give you our assets." Nothing of the kind. They propose to keep up a system of bookkeeping by which the interest will be charged to the different colonies on the capital debt of the respective railways, by which all the losses will be charged to the different colonies. They thus give up the management of the railways but keep the responsibility. Who ever heard of such a principle? If you give up the management you must give away the responsibility. What do we mean by vesting the railways? Simply this: That whatever the arrangement it must be a complete and final transaction. These railways, the moment they are given over to the central administration, must cease to have anything to do with the different colonies. How could we do that? If the scheme is to capitalise the railways on the returns now exhibited, which may be in abnormal times, Victoria, as compared with New South Wales, would have to write off, probably, £8,000,000 of debt. Is Victoria prepared to act in the like manner to do that?

The Hon. A. DEAKIN: I do not think that would be the result!

Mr. MCMILLAN: I am simply arguing it in that way. I am not going to speak of the normal results of years to come. I am simply stating what the problem would be for a convention like this if we tackle it at all. If I were in the place of the Right Hon. Sir George Turner-if he will pardon me for assuming that for a moment -I would say to New South Wales, "You were down to 2 1/2 per cent on your capital some years ago. By wise administration you have raised it now, and practically the railways are paying interest on the debt.

The Right Hon, G.H. REID: Last year they more than paid interest!

The Hon. A. DEAKIN: Your method of keeping accounts is different from ours. Ours now pay 3 per cent.!

Mr. MCMILLAN: I would be justified in going on to my "we hope to do the same thing under improved administration." Furthermore; the Premier of Victoria might be justified in saying, "While you get this railway system of ours into your hands, which we are already improving, and which, at the end of five years, will pay 31/2 per cent, on the debt, are we going to write off that sum of money while you will have an absolute monopoly and a magnificent asset which we could probably sell in Europe for the full amount of the debt." Is that a question that could be dealt with in this Convention? I hold that it is a question for the future. I would not say for a moment that it would not be a wise thing for a, federal treasurer, when he got all the power in his hands, when this question is looked

upon as a truly federal question, when all these petty jealousies are destroyed-I do not mean to say for a moment that it would not be a great stroke of policy and of statesmanship to say, "It does not matter what the capital account is, we will take over all the railways and take the liabilities with them." But we cannot do that here. Who is going to propose a scheme at the present time to take over these railways, and to take over all the capital debts exactly as they stand at the present moment? Furthermore, while from my own, which I take to be a business point of view, and from an administrative point of view, I should like to see all these discordant elements under one strong hand, still I doubt very much whether, at the present period of our history, we are ripe for such a union. The only two colonies nearly ripe for this operation are Victoria and New South Wales. Queensland, with the exception of her grand trunk line, has absolutely an isolated system. Western Australia has an isolated system, and so [start page 44] has Tasmania; and there is not a very great length of line even in South Australia. Therefore, I say, in the first place, that it is absolute folly, from my point of view, to risk the acceptance of this constitution by loading it with unnecessary things. I say, in the next place, to ask New South Wales, or any other colony, to give over practically the management and control of that great asset, and to take all the responsibility of the results, and keep all the liabilities, is an absolutely unbusinesslike proceeding. With regard to the debts-and I am only dealing with the salient facts-I hold in the same way that if they are to be dealt with at all they must be dealt with on broad federal lines, and it will only be when you have your federal parliament in operation for a certain period, at any rate when you have the central machinery, and when the federal treasurer in that Government is a great negotiator with all the other governments for some equitable arrangement that we will be able to do what will be substantially equitable. I feel that we may spend months and months in this Convention over these intricate questions, and get no nearer to a solution of them than in the beginning. Therefore, to sum up, I am of opinion that we ought simply to propose some plan for guaranteeing for the first five years -it will not be a long period in the life of this new nation-a certain amount which will prevent the dislocation of the provincial finances, and all this matter of debt, all this matter of railways we ought to leave absolutely and entirely in the hands of the federal parliament. I am not sure that it is a wise thing to make this clause, with regard to the debts, so sweeping as to give full power to the federal parliament to act without the consent of the states. I cannot at all make up my mind that it is a fair or righteous thing to put a drastic clause in the bill by which it will be compulsory whether the states like it or not to give over the debts.

The Hon. A. DEAKIN: Are you afraid of being robbed of your debts?

Mr. MCMILLAN: No; but there are certain conditions, certain principles, on which you should take them over. This bill provides simply that the Parliament may take them over. It says nothing about the consent of the states.

The Right Hon. Sir G. TURNER:-

Mr. MCMILLAN: That may be; but you must recollect that this is, after all, purely a matter of local concern. The debt of any colony is not essentially a matter of vital concern to the federal parliament. What I want to do is to prevent anything which is essentially local from being absolutely mandatory in this constitution bill with regard to its being dealt with by the federal parliament. It practically amounts to this: that you have to arrange about your debts, if I take it rightly, if the scheme were proposed, although it seems to me that there is some omission there, because one colony may be able to bear a certain arrangement of a financial character which may press more heavily on another. These, I think, are the principal points that we have to deal with in this financial matter. There is only one thing I would like to say a word or two about, and that is the inter-state commission with regard to the railways. I want to point out to hon. members, especially to the representatives of New South Wales, what great difficulties and trouble may arise if, while we do not vest the railways absolutely, we allow a certain power in the federal parliament to deal with our rates as they think well.

The Hon. A. DEAKIN: Can we not discuss that question separately?

Mr. MCMILLAN: I think the interstate commission is a very important point. The inter-state commission comes under [start page 45] the observations I have been making with regard to, I will not say a foreign element, an outside element attempting to interfere in the administration where the responsibility exists elsewhere.

The Hon. A. DEAKIN: It can only affect state finances, not federal finance!

Mr. MCMILLAN: We have a system of railway management in which there are what are called differential rates, and, if this bill remains as it is, I take it that in almost every matter coming under that general clause as to the equality of trade that the inter-state commission can practically dictate the mode of regulating rates.

Mr. HIGGINS:-

Mr. MCMILLAN: Did the hon. member agree with Mr. Barton? Because I know there is a reserve power in my hon. friend which is edifying and which I would like to get out of him. We all agree as to what are called absolutely preferential rates. We all agree that two sets of rates are preferential. We all agree that the rate now levied by Victoria on goods coming into that colony from New South Wales, in which she gives a preference to outsiders over her own people, is a preferential rate. We all agree that a rate which has been levied by our people, say, from Wagga Wagga to Albury, at a greater rate per mile than from Sydney to a similar distance up country, in order to prevent trade from going to the Victorian border, is a preferential rate. But when we open up the great class of differential rates, which were originally and which in certain localities now have never had any regard to the other colonies, but are simply based on the principle of giving a helping hand to the people in the far interior of a country which has no navigable rivers, and for whose benefit these railways were constructed; if, because trade happens to trend towards another border, the whole of these differential rates are to be dislocated, and our people are not merely diverted from our markets but are also handicapped in rates for the sake of this federal connection, then I say, if that is to be the province of the interstate commission, it opens out a very large and very important question for the people of New South Wales. I would make one or two other observations in which I feel I shall not be at one with, at any rate, the legal members of the convention. I know that, by the reading of a certain clause in the Constitution of the United States, the federal parliament has got this control over private lines and has instituted an inter-state commission, because the principle is that it absolutely interferes with equality of trade. Whether I am right or whether I am wrong, I do not for one moment consider that the question of warfare and competition in railway rates has any analogy whatever with customs duties on the different borders.

SEVERAL HON. MEMBERS: Oh!

Mr. MCMILLAN: They are analogous up to a point. But the people whom I am answering say if you leave your present system of railway rates you may as well not have intercolonial free-trade at all. I do not believe there is any such strict analogy, and although I am not a lawyer, and have not investigated the question, I doubt very much whether it is not a great straining of the American Constitution to have the procedure which at present exists.

Mr. GLYNN:-

The Hon. E. BARTON:-

Mr. MCMILLAN: My hon. friend says that a differential rate is no infraction of free-trade; but you come to a point when the question is whether a rate is differential or preferential, and that is exactly the point where we have got from our provincial standpoint at present, where we have to safeguard the people of New South Wales, who have spent such enormous sums in the construction of railways.

[start page 46] An HON. MEMBER: The inter-state commission will represent the states!

Another HON. MEMBER:-

Mr. MCMILLAN: That is not an analogous position to that which we are dealing with now. We take up this position as a matter of business: that if we give up our railways at all we want to get rid of the whole responsibility; but if these railways, at any rate from my point of view, are not absolutely vested so that we get rid of responsibility, and put them on a par with everything else that we give over absolutely-my hon. friend will see the difference between dealing with a thing that you retain in its connection with the provincial government and dealing with a thing that you give over for ever to the central government, because you must recollect that everything that you leave as a matter of friction between the border line of duties, between the line where the state government comes in and the central government comes in-you leave as the seeds of trouble in the future. Therefore, it is to my mind inequitable and unbusinesslike to attempt to work this great asset, and at the same time to give over to the federal government the power of intermeddling and dealing with the railways in such a way as if they practically belonged to the commonwealth.

Mr. GLYNN: According to the latest reports, the very power that we are giving they are asking for in America

Mr. MCMILLAN: Who are asking for it?

An HON. MEMBER: Writers in the American States!

Mr. MCMILLAN: There is no analogy between the two positions. In America the railways are privately owned. There are a great many people who would destroy everything that belongs to private individuals. We are dealing now with our state assets, which stand practically in the same position with regard to this federal compact as our land or court-houses, and thousands of other things that we retain to ourselves; and it is no derogation of the principle of federation-it is not in any way distrusting the federal parliament-if on this question we retain the control of our railways. There is no improper conflicting interest affected between the provinces and the central government that may lead to trouble in the future.

Mr. HIGGINS: Are you willing to stop differential rates where they become preferential?

Mr. MCMILLAN: The hon. member is asking me a question upon which, if I wanted to decide, I would retain his special counsel to answer it. That is just the thing which it is impossible to decide. I have with some temerity opened this debate. I have tried to go straight to my views, whatever they may be worth, in order to make the discussion as practical as possible. I think that upon those matters on which I have dwelt we have the kernel of the whole difficulty, and as far as I am concerned, I see the only simple solution of it, and if that solution is now arrived at I am willing to trust the future federation of Australia to do justice to all the provinces.

The Hon. A. DEAKIN (Victoria)[11.45]: If the hon. member who has just resumed his seat spoke with diffidence on this question, practised a financier as he is in his own calling, and an ex-Treasurer for many years of this great colony, with how much more diffidence must I address myself to it, claiming no such experience either inside or outside of Parliament! It is only because I feel that when this discussion, as it possibly may, passes into the hands of the financial experts present, it may become too intricate that I am impelled to offer a few simple observations thus early. The hon. member, Mr. McMillan, has dealt with questions which though they affect the financial [start page 47] issue-and, indeed, what proposals in the bill do not affect the financial issue?-appear to me to unnecessarily enlarge the scope of the financial problem now submitted to us.

The Hon. E. BARTON:-

The Hon. A. DEAKIN: If the hon. member could have subdivided his remarks, we should have been more readily able to follow one question at a time through a prolonged discussion to its conclusion than when we have the three or four great subjects which he has broached, and which if dealt with by each speaker cannot lead us to the same clear results. For instance, an inter-state commission may have undoubtedly an influence on federal finance, and it must have an influence upon provincial finances; but the question of its utility has no relation to our present problem. I should hope that the difficulty relating to the establishment of such a body, or the neglect to establish it might be postponed. At all events, I will pass on with a single sentence or two of reference. The hon. member draws a distinction, or desires to draw a distinction, between differential and preferential rates, but I hold that such a distinction is one which depends wholly upon anti-federal conditions. It is a distinction which has no meaning apart from state boundaries. If the railways are dealt with on federal principles, why should not the rates for the same distance from any one point to another be in a general way the same over all Australia?

Mr. MCMILLAN: Will the hon. member allow me to explain? My argument in that direction was based on the proposal to take over the control of the railways, but not to take them over absolutely. Once the railways are vested the differential rates would disappear.

The Hon. A. DEAKIN: I quite understand that. The point is that the hon. member discusses the inter-state commission from a state standpoint. He says there are clauses in the bill under which, irrespective of an inter-state commission, preferential rates will disappear. There will no longer be power for either Victoria or New South Wales to offer any advantage to goods coming over their railways because they are brought from other colonies and from long distances. If the hon. member looks at it a moment he will see that there need be no difference between differential rates and preferential rates, except that state boundaries intervene in the one case and not in the other. The hon. member says it means giving outsiders an advantage over the people in your own colony. But that argument might apply to cases in which an advantage is given to people in your own colony who send goods long distances over those who send them short distances. A preferential rate might be deemed a federal rate, because it is giving people outside the colony advantages that you give to people going long distances in your own colony. I do not put that forward as a full statement of the case. To me it is distinctly a better statement of the case, and a fuller statement than that urged by those who draw such a broad distinction between preferential and differential rates on professedly federal lines. We charge one rate for the first 100 miles, a lower for the second 100 miles, and a lower still for the third 100 miles, and so on. It is just as true to say that we give to a person living 300 miles off advantages over a person living 100 miles away as to say we give a person living 500 or 600 miles away in another colony still greater advantages than those who live at a lesser distance. The principle is exactly the same. The longer the distance the lower the charge. What I wish to point out is that, providing the same rate of reduction in charges is observed, there is nothing necessarily anti-federal in the existence of preferential rates. Therefore, I pass this part of the [start page 48] question by with the simple statement that when we come to consider the establishment of an inter-state commission I, for one, will not fall in with the contention that necessarily preferential rates are anti-federal. They may be or they may not be. It all depends upon whether they are adjusted in accordance with the scale of differential rates that you adopt in your own colony. If they are, they appear absolutely unobjectionable; but if they go beyond that they may be objectionable. Neither do I propose to detain the Committee by a discussion as to the taking over of the railways as a whole. I have already made a confession of faith on that subject, which is, that it appears to me essential to the full and perfect federal government of these colonies, that such important agencies as the railways should be taken over by the federal authorities. We are in this country, unfortunately, not possessed of the advantages of the United States of America, traversed as that country is by magnificent streams which afford natural highways for its people. Our railways in the future will have to serve, in a sense, for streams as well as for railways. They will be practically our only great means of intercommunication, and it appears to me, for reasons which I urged at the prior meeting of the Convention, that under these circumstances federation will not be complete, will not be able to conserve those common interests of the whole of the people of Australasia-for which purpose I understand a federal government is to be

created -it will not be able to conserve them or develop them, as it must and should do, without the control of the railways. That, however, I also regard as not necessarily bound up with the financial question. I am quite with the hon. member in declining to indorse the contention that, because we find ourselves under certain embarrassments as regards a financial settlement, we should throw in the railways as a make-weight on one side or the other. If it be proposed that the railways should be federalised, it must be a proposal on its own merits, and because it would be in the common interests of the whole of the people of Australia, and not simply to help us out of the financial difficulty. For that reason I propose to put such a suggestion aside. The one matter to which I desire to direct attention is the principal financial problem by which we are faced. I am perfectly aware that on this subject destructive criticism is easy, and the fact that it is easy is evidenced by the number of legislative bodies throughout Australia who have contented themselves by striking out the financial provisions, without substituting any clauses of their own. This problem appears to me to resolve itself into the discussion of two principal points. The first, alluded to by Mr. McMillan, was how to provide for the transfer to the federal government of the customs revenues of all the colonies within the federation without utterly dislocating their systems of financial administration and taxation. That is the first problem. The second problem, and one which seems to me to occupy quite a different ground, and to be, to a certain ex tent, a problem of our own creation, is on what plan or principle should any surplus retained by the federal government after discharging its own expenditure, paying the cost of the departments it has taken over, and the cost of any other undertakings which it might see fit to carry out-on what principle should it distribute the surplus supposed to necessarily result to it from the imposition of the federal tariff? Now I say, in the first instance, that there is no necessity for a surplus ever existing-or a surplus of any magnitude-by the action of the federal parliament; and certainly it cannot exist unless the federal parliament so desires. Whether the federal government [start page 49] of the future adopts a protectionist or a free-trade policy, it is perfectly within its competence to so adjust its tariff as merely to provide sufficient revenue for its own current expenses, or the federal parliament may if it pleases spend all that it receives. It is not essential, therefore, that under any tariff which the federal government may adopt there should be a surplus of overwhelming magnitude.

Mr. GLYNN: What about the current purposes of the states?

The Right Hon. Sir G. TURNER:

Mr. GLYNN: We shall be taking away revenue from the states at the same time!

The Hon A. DEAKIN: I pointed out that there were only two aspects of the financial problem which we are immediately and at this stage obliged to face. The first of these I said related to its effect upon the states, and the second was as to the distribution of the surplus. I am now speaking of the distribution of the surplus, and I say that so far as the federal government is concerned, looking at the question wholly from a federal aspect, there is no certainty of any notable surplus.

The Hon. J.H. GORDON: That would be inconceivable in our present conditions. It would be absurd!

Mr. LYNE: Absolutely!

The Right Hon. G.H. REID: Not inconceivable, because the hon. member is putting such a case!

The Hon A. DEAKIN: It is neither inconceivable, nor, with all deference, is it absurd, as I will presently endeavour to show. But perhaps it would clear the way if I dealt first with the immediate problem of the effect of the transfer of the several provincial customs revenues to the federal government, and asked hon. members to consider what evidently their minds, judging from their interjections, are much exercised about-to consider how that is to lie done without undue dislocation of the local revenues. This question, of course, list been approached from a great variety of standpoints. I would concede with Mr. McMillan, that the very first condition in considering the financial proposals is that the state treasuries should not be subject to a revolution-that there should be

an undertaking and a guarantee upon which state treasurers should be able to proceed. I would go further than the hon. member did, and probably further than the hon. member would be prepared to go. In my opinion, that guarantee on behalf of the states ought to cover the whole of the revenue of which they would be deprived by the introduction of the federal system of government. Federal government might be, and in my opinion ought to be, introduced with a guarantee to each colony of the return to it of the sums it at present receives from the sources which the federal government takes over, of course deducting the cost of the departments which the provincial governments at present pay in order to obtain the revenue; and I would make that guarantee obtain, not for five or twenty years, but for all time.

The Hon. R.E. O'CONNOR: Suppose some of the services taken over show a loss?

The Right Hon. Sir G. TURNER: The customs revenues will increase!

The Hon. A. DEAKIN: I will reply first to the hon. member, Mr. O'Connor, and say that in assessing this fixed payment I would not limit the data to any particular year. It would, probably, be beat to take the net result of the last five or ten years. If there bad been a loss over the whole of the five years, or on the average, then the colony would not be entitled to receive anything, because of parting with that service. Allowance, of course, could be made for exceptional circumstances in any colony, so long as the sum is fixed. I make this suggestion in view of a further proposal hereafter; but at this stage hon. members will see that, if it be competent and possible, as surely it is-we are competent to do it, and it is possible-this would at once relieve the state treasurers of all [start page 50] anxiety for the next few years, because they might safely reckon that, having an ascertained and certain sum placed to their credit by the federal government, there would be no dislocation of the local finances.

The Right Hon. G.H. REID: They would make a profit out of federation!

The Hon. A. DEAKIN: They could scarcely make a profit, because the states would only receive their average profit during the last five or ten years; as they have received that profit in the past, in my opinion, they are entitled to receive it in the future.

Mr. GLYNN: Western Australia might object to that arrangement!

The Hon A. DEAKIN: So far as Western Australia is concerned, I believe some special arrangement will in the end have to he made in regard to that particular colony to do justice to its great growth, and, at the same time, to avoid doing injustice to the other colonies. But, putting aside Western Australia, I see no difficulty in giving effect to the plan. Then, in answer to the Premier of Victoria, who says that the customs revenue in the future will yield increase, I say, undoubtedly it will. The natural growth of population, the increased prosperity which we all anticipate in the different colonies after their union, the more rapid development of their natural resources, the greater expansion of intercolonial trade-all these will in the end react upon the external customs and internal excise so as to produce a greater and greater revenue. Then, I come to the next point which I wish to submit to the Convention, and it is, that, in regard to that growth, we should follow the suggestion of Mr. McMillan, and trust absolutely to the federal parliament to distribute or expend it. It appears to me that this is not an evasion of any duty we are called upon to fulfil, because, in the first instance, the admitted failure, or, if not failure, the admitted fallibility of every scheme which has yet been proposed for returning surpluses to the different states is of itself an argument that all the best financial intelligence does not find the problem soluble. Indeed, almost the whole of the proposals of the financial experts-right down to, that admirable paper from the Assistant Government Statistician of New South Wales which has been placed in our hands -the whole of them, from Sir Samuel Griffith's first criticism of the proposals of 1891 down to the proposal which-was placed by the Convention in the Adelaide draft bill, and even Mr. Nash's-very effective articles are vitiated by a fundamental and transparent fallacy. That fundamental and transparent fallacy has been the acceptance of a forecast as to, the earnings of a uniform tariff, based upon the imports of goods into

different colonies under different tariffs, and upon the wild, utterly indefensible assumption that, no matter what tariff may be imposed in the future as the uniform tariff of federated Australia, exactly the same quantities of goods would continue to be brought into those colonies. I need not develop this argument-it was indicated at Adelaide; I called attention to it at the time, and if has been very elaborately discussed here by Mr. Pulsford in the Upper House, by Mr. Ashton in the Lower House, and by several other members whose speeches I have had the privilege of reading in the New South Wales Debates, and in those of other colonies.

The Right Hon. G.H. REID: Does the hon. member say that under a uniform tariff the contributions per bead would be pretty nearly the same in all the colonies?

The Hon. A. DEAKIN: I will come to that in a moment. I say so, with one or two reservations, which I think will be admitted by all persons.

The Right Hon. G.H. REID: Add ad valorem duties to our tariff, would Victoria get quite as much per head?

The Hon. A. DEAKIN: I will not contradict the right hon. gentleman on that [start page 51] subject, if he is granting that by our tariff we have raised up local industries of such magnitude that their production would necessarily decrease our customs returns from import duties on those articles. If he admits that, I am with him. To that extent, I admit that New South Wales, not possessing the industries which we possess, would import more goods.

Mr. MCMILLAN: Most of us took these figures as approximate!

The Hon. A. DEAKIN: But I think they are not even approximate. We, in Victoria, have, perhaps, had more experience of tariff changes than most of the colonies, and nothing can be more absurd than to endeavour to convince us that they have not been followed in each instance-where the change really was a change-by a great difference in the importation of goods. As we have lowered certain duties, goods from abroad have flowed in. As we have raised them, they have ceased to come in. We have seen every alteration of the tariff followed by an alteration in regard to the import of the goods affected by it, and I assume the experience of the other colonies. is the same.

The Right Hon. G.H. REID: That is so, only your cripples would get stronger if they lived on us a bit!

The Hon. A. DEAKIN: Certainly, if we have any cripples we shall only be too glad that they should get stronger; but it is not of cripples that the right hon. gentleman is afraid; it is the strong whose competition he fears.

The Right Hon. G.H. REID: And yet we have local all our borders free for two years!

The Hon. A. DEAKIN: New South Wales has been most generous, and I trust will always remain so. On that score the right hon. gentleman and myself will not dispute. I have been led away from the statement that this was a transparent fallacy, and that so far we have no ground which would enable us to predict what an unknown tariff will produce. We can only -as the Premier of New South Wales, with his customary quickness, at once saw-approach the problem from another side and that is in regard to the question of consumption. Then again, in that respect, consumption does not mean all consumption. It means the consumption of goods which either pay excise or customs. The paper of the Assistant Statistician of New South Wales, admirable as it is, fails to draw that distinction, since it speaks of the consumption and the spending power of the different colonies, ignoring the fact that some of the colonies, having deliberately and expressly adopted a protective tariff in order to develop their industries, and therefore to produce and consume their own goods, do not necessarily consume less because they import less, or pay less excise. The question of consumption, so far as we can test it by customs and excise, only relates to goods that pay excise within the colony, and goods imported

from abroad. Limiting it to that, and again taking Western Australia as, not a shocking, but an admirable, example, we find in that colony a population of 70 per cent of males. It is the habit of the male species to consume more narcotics and stimulants than the female. I am informed that between one-third and one-half of the customs revenue of these colonies is raised from narcotics and stimulants. We can understand, therefore, that the overflowing treasury of Western Australia is very largely due to the simple fact of the abnormal number of males in that colony, not to speak of the abnormal quantity of stimulants and narcotics consumed by them.

Mr. MCMILLAN: Federation will cure that!

The Hon. A. DEAKIN: Time will cure it. The new woman is not to be excluded from Western Australia any more than from any other colony. There is no doubt that the sex inequality which at present exists will, in course of time, be removed by purely [start page 52] natural causes. I understand that the Premier of Western Australia signalised, amongst many other achievements, his visit to the mother country by importing a certain number of females in order to make up for the deficiency which at present exists. Putting aside Western Australia, as separated by its present circumstances, and having some familiarity as a visitor with the rest of the colonies, it appears to me to be hard to lay the finger upon any particular cause in any particular colony which would make any great difference in the consumption of dutiable goods in that colony. I assume that the proportion of total abstainers and non-smokers is about the same in one colony as in another. Putting that aside, regarding the circumstances of the life of the people, the manner in which they live, and the appearance of their cities and country districts, I for one can discover nothing which should make any marked difference in the consumption per head. It seems to me that the only variations which really exist in the consumption per head throughout Australia arise from the fact that these are rapidly growing and expanding colonies, that all their conditions are changing, and as all their conditions are changing with great rapidity from year to year, necessarily there are some variations in consumption. But all these differences are temporary; they are all local; they all tend to disappear; and the probability is that at no distant date they will disappear altogether. Putting aside Western Australia, it appears to me that the consumption of dutiable goods would be about the same all over Australia.

The Right Hon. G.H. REID: From the first?

The Hon. A. DEAKIN: Not quite from the first; it takes time. The settlement and the development of great territories takes time, and during that time there will be, as I say, variations.

The Hon. E. BARTON: Will it take longer than five years?

The Hon. A. DEAKIN: It may; but I should doubt whether it would take a decade.

Mr. GLYNN: There is a great deal of difference between the proceeds from the liquor traffic in the different colonies!

The Hon. A. DEAKIN: There is, because in one colony people may largely drink whiskey and in another locally grown wine.

Mr. SOLOMON: It may be a question of climate. The hon. member wants a little experience of Western Australian weather to know what thirst means!

The Hon. A. DEAKIN: If hon. members have followed me thus far, I will now revert to the position to which that brings me. Why should we be so afflicted by the fear of trusting the federal parliament with any possible surplus we may gain-why should we be so afflicted when we consider the possible disposal of the surplus by the federal parliament any more than we should be afflicted by the possible disposal of that surplus when paid over to the several provincial parliaments? What reason have we to fear any greater extravagance on the part of the federal parliament than on the part of the provincial parliaments if the surplus were paid to them? It would come to them in the same

fashion as it would come to the federal parliament, and save and except that it might be supposed that the federal parliament would be encouraged to extravagance, because it could abnormally increase the departments that bad been banded over to it, and study their interests regardless of expense, so as to band back as little as possible to the provincial parliaments-if that be put aside, we have no more need to fear the disposal of the surplus by the federal parliament than by the provincial parliaments.

The Right Hon. Sir G. TURNER: In the federal parliament there would be a surplus: not in the provincial parliaments?

[start page 53] The Hon. A. DEAKIN: With all deference to the right hon. gentleman, I say that would be a surplus in both. The treasurer of a state would not be justified in previously disposing of the share of the surplus that was to come to him from the federal parliament. He would not know exactly-perhaps not within a considerable margin -what it was going to be. It would therefore come to him as a surplus, and he would have the same opportunities for spending it extravagantly as the federal treasurer would.

Mr. LYNE: How would the hon. member arrive at the fixed sum to be returned to each colony?

The Hon. A. DEAKIN: Broadly by taking the last five or ten years' net profits which that particular colony has gained by the services in question.

Mr. LYNE: Out of the customs and excise?

The Hon. A. DEAKIN: Customs, post-offices, excise, and so on; the whole net sum it has been receiving from those departments after meeting the cost of those departments and defence; the money which each colony has been receiving from those services which it now proposes to transfer to the commonwealth; and that sum would be given for all time.

Mr. LYNE: And would you take into account the direct taxes, too? For if you do not take into account direct taxation, New South Wales will be placed in an unfair position, if you take into account the customs duties in New South Wales the last two years.

The Hon. A. DEAKIN: Not so unfair as the hon, members seems to suppose, because the present tariff in New South Wales is not Imposed as a tariff to lose revenue, but to gain revenue. You do not measure the gain from your customs duties by their height. Raise them above a certain height, and the returns will begin to diminish. The duties of the present New South Wales tariff are, I understand, adjusted to bring in the largest possible amount of revenue from those sources.

Mr. LYNE: They have fallen from £2,000,000 to £1,000,000!

The Right Hon. G.H. REID: We get £1,500,000 from seven or eight articles, instead of £2,000,000 from a large number of articles!

The Hon. A. DEAKIN: I shall leave the Premier of New South Wales to reply to that.

Mr. LYNE: He cannot reply to it!

The Hon. A. DEAKIN: If, as I understand would be the case, a period of ten years were taken, that would include the customs returns of New South Wales during a period when some degree of protection, at all events, was in operation; so that would be provided for.

Mr. LYNE: Take it for the years 1893 1894, and 1895; that would be quite different!

The Hon. A. DEAKIN: Those are the worst years for Victoria, but they would necessarily be included in a quinquennial period, and still more in a decennial period. My ideas are probably crude; but I have tried in a simple way to go to the root of the matter as it presents itself to me. The difficulties with which we are surrounded in regard to the surplus can be best settled by trusting the federal parliament to dispose of the surplus. It may be a great deal longer than hon. members anticipate before the federal parliament will have a surplus. The federal parliament, for instance, may take over the customs and excise department, and by the necessities of the case may require to raise a certain amount of revenue; but it may not necessarily require to raise more than that amount, and if it discovered that the tariff which it had adopted was bringing in more revenue than was absolutely necessary, it would always be possible to adjust it, just as it would if it found that particular [start page 54] items were bringing in less revenue than was needed. It is not to be supposed that the federal parliament would be capable of passing a tariff as it were in the dark, and on mere anticipation, and that, on finding that it was pouring into its treasury much more than it needed, and was imposing greater burdens on the people than were necessary, it would continue it simply because it had been passed. The federal parliament would be capable of adjusting the tariff as required, and of determining how much revenue it should receive every year, and how it should be disposed of.

Mr. HIGGINS: How long is the guarantee to last?

The Hon. A. DEAKIN: The fixed amount is to be paid to the states for all time, and no other amount is to be paid to them except the federal parliament direct; but it may so direct. If in the future the members of the federal parliament are of the same opinion as many hon. members here appear to be, or have been-that, if there were a surplus, it should be returned to the states-there will be nothing to prevent its carrying out the design to arrange for further annual payments to the states as states.

The Hon. J.H. GORDON: Is not that absolutely necessary in the present condition of things?

The Hon. A. DEAKIN: We might arrange, for the payment of a fixed amount to the states for the first five or ten years. After that, the federal parliament would consider the situation each year, and would look at the circumstances of the time, and if it thought that it was desirable to make a return to the states as states, it could do so. But the people of Australia will be the constituents of the federal parliament -the states as, states will not be the constituents of the federal parliament, except in so far as they are defined in the second chamber; the people of Australia will be the constituents of the federal parliament, and if the federal parliament can see its way to benefit the people of Australia in the expenditure of that money, no matter in what direction, the federal parliament will be competent to undertake that expenditure. It can spend that money directly, instead of voting it to the states for them to spend it as states. The future members of the federal parliament will be perfectly free, either to spend any surplus for the benefit of the people of Australia, or to hand it over to the states, and say to them, "Spend it in this proportion as you may think best for your people."

The Hon. E. BARTON: If they may spend it for the benefit of the people, you must give them objects on which they may spend it!

The Hon. A. DEAKIN: That will follow, but I will not discuss it now. I believe that the federal parliament will take over the whole of the railways with the responsibility of opening up new territory by means of railway communication, and if so the federal parliament is not likely to have an enormous surplus to trouble them. If I have made hon. members understand the one or two points that I have tried to put simply before them, I have succeeded in my endeavour. I would only remind hon. members that at the formation of the United States of America exactly what I am now suggesting was done. The United States took over the debts of the old confederation.

The Hon. J.H. GORDON: The figures were nothing like ours!

The Hon. A. DEAKIN: Nothing whatever like ours. But, the United States took over the debts, such as they were, of the old confederation-they took over the war debt-and in return the federal

government took absolutely the whole of the customs and excise. Of course it may be urged, and it is true that in later years great extravagance has been shown in the [start page 55] expenditure of the surplus derived from customs and excise in the United States; but I do not think that you defend yourself from extravagance by simply giving money to the state parliaments to be extravagant with, instead of leaving it with the federal parliament. I think that one is as likely to be extravagant as the other.

The Hon. J.H. GORDON: State control is more direct and effective than federal control!

The Hon. A. DEAKIN: I do not think that it would be in this instance. Because, in this matter of expenditure, in so far as it is federal expenditure, there will be no states as states. There will be no state feeling in connection with it. If there is an expenditure at Dubbo, Dubbo will rejoice, and the rest of New South Wales will care little about the matter. If there is an expenditure at Goulburn, Goulburn will be satisfied, and the rest of New South Wales will have nothing to say. It will be a question, not of state interest against state interest, but of conflicting local interests. Each locality will look after its own interests, and the states as states will neither be injured nor benefited. The electors of Australia will decide. Certain localities, which it will appear to the federal parliament desirable to make the subjects of expenditure, will be benefited. In my opinion, one great advantage of this proposal is that it would tend to lessen the bargaining, the dealing, the chaffering on federal matters, between the states.

The Right hon. Sir GEORGE TURNER: Would that be so? What about Canada?

The Hon. A. DEAKIN: Canada has adopted the very plan i am objecting to, making payments from the federal government per capita to the states as states. That circumstance has caused continual dissension in Canada, and at the present time is causing demands for a revision of the terms, and for more liberal payments from the federal government to the states. The payments, take this form in Canada, because there is apparently no other means-or if there be another means it has not been adopted-by which the federal government could meet the needs of the people of the states without dealing with them through the states-could meet them directly as I am now suggesting. It appears to me that if the United States plan is adopted the federal government of the future is more likely to act for and deal with the peoples of the states as people of the commonwealth than with the states as states. Anything which tends to reduce the friction between the states and their governments, and the federal government and its executive, appears to me to make for progress and peace. Any system that tends to leave the federal expenditure just as it now is in all our colonies a question between the constituents and their representative is to be preferred. The majority of the representatives have not in any colony, taking administration over a term of years, been known to do injustice to any part of their, domain. Why then should we suppose that a federal assembly will be found any more blind to the wants of its constituents, in whatever part of the continent they may reside? What reason have we to suppose that the least populated parts of the continent will not receive the same amount of consideration as the most populated parts? In Victoria more money has been expended upon the least populous parts of the colony, where the representatives are fewest, than in the most populous and influential districts; and I believe that that is probably true of the other colonies, and would be true of the federal parliament. That parliament would be composed of members as patriotic as those of any of the provincial assemblies. It would represent the taxpayers of all Australia, and its members would not look at the artificial dividing lines which it is the purpose of this Convention to abolish.

[start page 56] Mr. LYNE: If the hon. and learned member's argument means anything, it means the destruction of the states and the establishment of unification!

The Hon. A. DEAKIN: Not in the least degree. You will have the states as states, with all the powers secured to them in this measure, and with every other power which is not expressly given to the central government. What I am proposing does not in the slightest degree affect the clauses of the measure defining the federal powers to which the hon. member has already agreed; but it would allow

the federal parliament to say whether it would deal with its surplus revenue directly, or hand it over to the states.

Mr. LYNE: That would destroy the states!

The Hon. A. DEAKIN: Not at all. It would allow the federal parliament to decide whether it would spend its surplus through the states or give it directly to the people instead of confining its expenditure to the states. The people themselves would decide.

Mr. LYNE: That would mean the destruction of the states!

The Hon. A. DEAKIN: If the hon. member thinks that the states in the future are to be dependent upon the proportion of the surplus they will receive from the central government, all I can say is that his proposal would place the several states in a position of dependance upon the central government, which would make them so much more subordinate and less powerful.

Mr. LYNE: Not if you fixed the sum to be returned. Will the hon. member tell me how the states are to get revenue at all if we take away the power of levying customs duties, and do not return to them a certain sum of money each month?

The Hon. A. DEAKIN: But we do. We return the fixed sum of which I have spoken. I say that they should get that fixed amount for all time. They are to get that sum, and they know that they are to get it. They get it, as the hon. member might say, out of customs and excise. They get as much more too as the people may choose to give themselves through their channel instead of through the federal channel. I do not propose to deal with the question of taking over the debts of the colonies, because, although that is a financial question, it is a different financial question from that which I am now considering. But in my opinion the fixed sum to be given to the states year by year could take no more acceptable, or definite, or desirable shape than by the assumption of such a part of each of the state debts as the interest upon which would be equivalent to the payment to be made to the states. I add that to the proposal I have just been urging. We should make the spheres of state and federal finance as distinct as they can be made. That has been done in America, and Mr. Bryce has called especial notice to the fact that in those spheres most separated in America, where there has been no overlapping of state functions and federal functions, there has been the least friction and the least disadvantage. By the means I suggest you cut the connection between state and federal finance, subject always to the power of the federal parliament at any time, on being moved by its constituents, to make any grants to the state parliaments, and, if they are of the opinion of the hon. member, Mr. Lyne, to follow the course which he desires. But it is of advantage to separate as far as possible the spheres of state and federal finance, to make a fixed arrangement for the taking over of the customs and excise duties by the federal parliament, and then to trust the federal parliament. As the hon. member, Mr. McMillan, has said, you trust the federal parliament in a hundred and one cases. They are to be trusted in the future to decide upon what measures they think beat for the commonwealth and the people; and why should this matter be taken from their control, instead of its being left to be dealt with after fuller [start page 57] research and wider knowledge than can be obtained in this Convention but which is sure to be enjoyed in the federal parliament!

Mr. WALKER (New South Wales)[12.29]: I am one of those who consider that the accomplishment of federation is much more important than rigid adherence to a fiscal policy, and that it is much more easy to draft a theoretical constitution upon paper than, to manufacture one which will be equitable and acceptable to the whole of the colonies. In my opinion the main principle in a satisfactory financial scheme would be that each state should get back directly or indirectly what it contributes, less a per capita proportion of the federal expenses. I am glad to see that our Western Australian friends, judging by what I have read in the newspapers, take up a somewhat similar stand. I am aware that, amongst others, the hon. member, Mr. McMillan, objects to what he calls the book-keeping system. I do not object to it if it means doing that which is equitable and right. I admit, however, that it is desirable that it should only last for a certain time-probably for only five years-after

the uniform tariff comes into vogue. At the end of that period we should have, I trust, sufficient information as to the average annual contribution from each colony to enable us to what I call capitalise the discrepancies; but if preferred it might be arranged that the respective colonies should get so much less or so much more per annum than their share of the revenue upon a mere per capita basis. In fact, our so-called prudent federationists are not far wrong in saying that the principle upon which federation should be accomplished is that each colony should pay only a per capita proportion of the expense. I do not however expect to get much assistance from them, as they look upon me as a federationist at any price. As to the difficulties to be overcome, it was proposed in the first session of the Convention that the aggregate amount to be returned to the states should be equal to the aggregate amount from customs for the year prior to the uniformity of tariff. I dissent from that idea. Intercolonial duties give us something like £1,000,000 a year, and it seems to me that if the consumers have not to pay those duties they will have the equivalent in their pockets, and it is therefore not unreasonable to suppose that each colony should make up in the best way it can its loss upon the duties. We, in New South Wales, do not want anything beyond the federal tariff, because that will give us more income than we receive from the old tariff.

The Hon, A.J. PEACOCK: How are we going to get it?

Mr. WALKER: If you receive less your per capita proportion will be less.

The Hon. A.J. PEACOCK: If the amount is not obtained from customs, how would the hon. member raise it?

Mr. WALKER: I think we shall have to raise it by direct taxation. But upon this point I will quote the words of a member of the Victorian House of Assembly. I have not the pleasure of knowing the hon. member; but I have been struck with his common-sense views upon some subjects. The hon. member to whom I refer is Mr. Fink.

The Hon. A.J. PEACOCK: He supports the Government. He's all right!

Mr. WALKER: He says:

The task of readjusting tariff rates on fair lines would not be difficult. It must not be forgotten that the £1,000,000 of intercolonial duties would not really be lost. They would remain with the people, and would practically operate as an industrial and commercial incentive to the continent. Now, before I sit down I want to make one or two observations on the industrial effects of intercolonial free-trade, because after all, what we have heard upon it lately has been mere abstract or general statement. But I really think that if the matter is studied we shall see that intercolonial free-trade, judging the future by the past, and judging this country by others similarly situated, will not be the realisation of [start page 58] a mere sentimental idea, but the greatest boon that any legislature could confer upon a community.

Mr. Styles, who is also a man of generous federal instincts-

The Hon. A.J. PEACOCK: Another Government supporter!

Mr. WALKER: He says:

If we are to have a commonwealth parliament we must trust it. The man who has not full confidence in the commonwealth parliament should vote against this bill, and against every other step in the direction of federation. But the commonwealth parliament, I apprehend, will be composed probably of a good many members of this Chamber and of other well-known public men throughout Australia. We are not aware that they do anything wrong now; and I do not see why, because they become members of the commonwealth parliament, they should be expected to do anything wrong then. Instead of saying to that parliament, "You shall do this, and you shall do that," I would lay down

general lines with reference to these, and other matters. How do we know what will happen in the course of three or four years after the uniform duties come in?

With regard to the book-keeping principle, we provide for book-keeping during the first two years; and I think a similar system might be carried on for the five years. I do not know how we can prophesy what the incidence of the tariff will be when we do not know what the tariff is to be. We can only judge from the present tariffs what the incidence possibly may be. The hon. and learned member, Mr. Deakin, said the experience of Victoria was that the higher the customs duties the smaller the consumption of goods.

The Right Hon. Sir G. TURNER: Not the smaller the consumption of goods, but the smaller the imports!

Mr. WALKER: As regards the draft bill, it seems to me to be a radical mistake to arrange for intercolonial free-trade during the first year of the uniform duties. That year will, in the case of New South Wales, at all events, be a bad year upon which to commence our average, because in the last year of the present tariffs naturally merchants and others will send in, through free-trade New South Wales, all the goods they can in order to escape the higher duties of the ensuing year.

The Right Hon. Sir G. TURNER: New South Wales, can prevent that easily!

Mr. WALKER: I say, that we ought to take the second, not the first year as the basis of calculation in making our average. I dissent absolutely from the idea of a sliding scale. It is inequitable, and it is generally acknowledged that it is so, so that I need not enlarge upon that branch of the question. I have already said that I look to the accomplishment of federation as being of more importance than adhesion to fiscal policy. We, free-traders, however, are willing to recognise that certain concessions must be made, that certain give-and-take principles must actuate us in this matter. Although I am a free-trader, I am not so ardent a free-trader as those who advocate no customs duties at all. My impression is that we must recognise that our policy form any years to come will be one of revenue tariff, including, possibly, duties with a, slight tendency to protection. I should like, however, to see that question met by a system of bounties which would come to an end within a certain time.

The Hon. E. BARTON: The hon. member likes spending money instead of getting it!

Mr. WALKER: Mr. Nash has suggested that each state should retain the duties upon stimulants and narcotics, and that the other duties could be divided upon a per capita basis. I do not think we have sufficient statistics to enable us to say whether that would or would not be a good arrangement. Sir Samuel Griffith suggested that the whole question should be left to the federal parliament. I look upon that as a pis aller. If we cannot do better we shall have to adopt that course. On that subject I will quote from what will be recognised as an authority on such a subject-the Australasian Insurance and Banking Record.

An HON. MEMBER: Who wrote it?

[start page 59] Mr. WALKER: I did not. That journal says:

Another suggested mode of getting over the difficulty is to remit the whole question of federal finance to the parliament of the commonwealth, giving it a free hand. A more unbusiness like proposal can hardly be conceived. It is equivalent to asking several men to sign a deed of partnership in blank and to settle the terms of partnership afterwards, and the terms are to be settled, it is to be presumed, by members of parliament of like calibre to the members of the convention, who have made such a dismal failure of the fiscal sections of the Federation Bill. The colonies are, however, hardly likely to enter into partnership without clearly settling the terms first.

So say I for one. In the case of South Australia, which derives considerable profit from the post and telegraph department, some special arrangement will have to be made. I do not say that it should last for all time, but an allowance of so much for the first year, so much for the next year, and so on till the fifth year would have to be made in a case like that. Again, in a case like that of Tasmania, which must have a larger revenue than a uniform tariff will give, there will be a loss for some time, and that might be made a charge on the federal government, because otherwise the tariff would have to be raised to an enormous amount to give Tasmania what she requires on a per capita basis. It would be much better to subsidise temporarily a state in that position than to take the course of unduly raising the tariff. If we could get Tasmania into line with the continent, the continent could afford to have a much lighter tariff than otherwise would be the case.

An HON. MEMBER: That is to give Tasmania a bonus!

Mr. WALKER: A bonus or subsidy. I am not going to weary the Committee by going fully into the question of the railways. The hon. member, Mr. McMillan, has referred to various schemes. He referred to one which was drafted at the Bathurst Convention. I may say that I recognise that this, Convention will not accept that scheme. At the last session, so far as I could judge from the votes, thirty-six members were against taking over the railways, so that it would be a waste of time to advocate it. I never did advocate a clear purchasing out of the railways; I advocated federation of the railways which would have left each state full permission to have its own differential rates, so that, the idea of New South Wales being robbed, as some people seem to suppose would be the case, never entered my mind. I would take all reasonable precautions against such a thing occurring. With regard to the consolidation of the debts, I have something to say. Under any system of federal finance it is evident that there will be, nominally, a large surplus, that, is to say, the customs receipts will be largely in excess of the federal government expenditure. The hon. and learned member, Mr. Deakin, has in general terms said that he was inclined to think that the surplus going to each state might take the form of the federal government paying so much interest on behalf of that state, and taking over, therefore, so much of the debt. Of course right through I have been a believer in the conversion and the consolidation of the debts, if it can be done without perpetrating a wrong. I am aware that you cannot have a federation of the railways at the present time; but is there any good reason why we should not take steps to have the debts converted and consolidated I putting it briefly this way: We shall suppose that there is an income from customs, if Queensland comes in, of about £6,300,000 a year, or about £1 15s. per head. That will not be sufficient in some people's view. If we take off £1,300,000 for the expenses of the federal government, that will leave a surplus of £5,000,000. New South Wales, on a population basis, would be entitled, I presume, to about one-third of that amount. The interest of the debt of [start page 60] New South Wales is about £2,300,000 a year. Her share of the surplus would be £1,650,000 a year or thereabouts. The difference between what would be necessary to pay the whole of the interest on the New South Wales public debt and the surplus would be something like £650,000 a year. Why should not New South Wales, or any other colony, after hypothecating a portion of its net railway income go to the federal government, and say, "Our share of the federal surplus plus this amount of our railway income will be sufficient to enable you to pay the whole of the interest on our debt"?

The Right Hon. Sir G. TURNER: The amount of interest payable would be reduced after consolidation!

Mr. WALKER: No doubt that would be the case. For instance, in this supposed year £650,000 would be required by New South Wales to enable her to pay the balance of interest on her debt. That would be half the net railway income for the year. After consolidating the debts, however, the amount of interest would be so much less, and New South Wales would only have to be asked for sufficient of her railway income to make up the difference. On this subject of the consolidation of the debts I am not relying merely on my own judgment. I wrote to a gentleman in London who is recognised as a high authority-that is Mr. David George-who has had thirty-five years' banking experience in London, and is at present manager there of the Bank of New South Wales. He has had a good deal to do in

days gone by with the negotiation of loans, and he has consequently acquired extensive practical experience. His letter is an admirable one, and I will read it. He says:

Consolidation of colonial debts.

Referring to your letter of 1st February, we have now considered the subject of your inquiry, and, perhaps, the best plan would be to take the different points in your letter and answer them seriatim.

First, as to the idea of substituting "Australasian consols" as an interminable stock for the various colonial debentures and stocks.

We think the idea in a very good one, and if it could be carried out, we believe the result would be a considerable saving. But it is difficult to see how the debts of the various colonies could be consolidated until federation, on satisfactory lines, has been accomplished. It seems to us that until the colonies have obtained federation, and the federal government has full power over the railways and customs to enable it to provide for the service of the debt, it will not be possible to secure consolidation; but if you are successful in federating the colonies, we think consolidation of the debts will follow as a necessary corollary.

Federation will be incomplete without consolidation of the debts.

I think that voices the sentiments of every man here.

Secondly, as to whether the consolidated stock idea could be brought into practical operation in such a way that the various debentures and stocks could be merged in time in the consolidated account,-

The Hon. F.W. HOLDER "In time"!

Mr. WALKER: I quite agree with the hon. member. I am not one of those who want to rush like a bull at a china shop, and to get things done right off.

We think this could be done; but by this process it would take a long time before all the various debts were consolidated, and for so long the benefits anticipated from consolidation would be delayed. It would also be a rather difficult matter to arrange, and we doubt if it would prove satisfactory. It would create an anomalous state of affairs to have only the loans as they mature brought into the consolidated stock as a debt of the federal government, leaving the outstanding loans as debts of the different colonies who contracted them to remain intact until their maturity the same as at present, except, we suppose, that their management would be in the hands of the federal government-

The Right Hon. Sir G. TURNER: No one would suggest that, surely!

Mr. WALKER: No.

Thirdly, as to bringing about a consolidation into Australasian console at once of all the various debts of the colonies.

This we believe to be the beat plan; but in order to carry it out a large conversion scheme would have to be introduced. The whole ques- [start page 61] tion depends upon terms-that is to say, the quid pro quo that would be offered to the holders of the different stocks to induce them to exchange their present securities into stock of the consolidated fund-

An HON. MEMBER: What is the quid pro quo?

Mr. WALKER: He shows you now-

This, of course, will be a difficult and delicate matter to arrange, and it will require to be placed in the hands of actuarial experts of great experience and skill to ascertain the relative values of the different loans of the separate colonies to a single interminable consolidated inscribed stock, and the most influential medium will have to be employed to launch the scheme, and to find an opportune time for the purpose. The varying dates of maturity, and rates of interest, and the feeling existing here as to the position which the different colonies afford as security for their loans, would all have to be taken in account. Present holders cannot be compelled to exchange their securities, and, therefore, sufficiently liberal terms will have to be offered to induce the great bulk of them to fall in with a conversion scheme. The different merits and values of the loans of the various colonies will make it difficult to ascertain an all round satisfactory basis of exchange. Holders, for instance, of New South Wales securities, owing to their superior credit, will require a greater inducement lo exchange their present holdings, while it may suit holders of Victorian, South Australian, and Tasmanian stocks to accept a security of a federated Australia much more readily.

The Right Hon. Sir G. TURNER: South Australia is a long way ahead of the others!

Mr. WALKER:

As an illustration of this, to give the present quotation of the three Australian 3 per cent. inscribed stocks, namely:-New South Wales, 3 per cent., 1935, 101 1/8-3/8; Western Australia, 3 per cent., 1915-35, 99-1/4; South Australia, 3 per cent., 1916-26, 98 1/2-3/4-

The Hon. F.W. HOLDER: They were expecting a loan then!

Mr. WALKER:

Fourthly, as to the rate of interest upon which such a conversion should be based,-

We certainly think that the best rate would be 3 percent. This we believe would be the most practical basis upon which the debt could be consolidated. A lower rate we fear would simply cause any scheme to result in failure, therefore we would certainly recommend a 3 per cent. inscribed stock, and we believe that in course of time it would go to a premium. If the whole of the debts were consolidated into one stock, it would make a very big market on our Stock Exchange, and would cause larger dealings, and attract more public attention, and become a more favourite investment.

Fifthly, as to whether such a consolidated inscribed 3 per cent. stock would be likely to be placed upon the list of "trustees' securities,"-

This is a very important matter, and I dare say the Premier of Victoria could tell us that it is not at all an easy thing to get any stock put on that list.

We very much doubt if this could be done unless the federal government consented to give the Chancellor of the Exchequer-that is the British Government-control over the borrowing powers.

I told him that they would never do that.

The idea seems to be that the home Government would not authorise any stock to be placed on the privileged list of trustees' securities unless they had some power over it. But apart from this, many people by will authorise their trustees and executors to hold colonial stocks, and if a satisfactory scheme of federation could be carried through and all the debts consolidated into one stock, and some satisfactory restrictions made as to borrowing and good provision made for paying off the debt, we believe a great many more investors in colonial securities would by will authorise their executors to hold the new stock as trust funds. Most regrettable as it is, since 1893 the relative credit of the

colonies has materially suffered in the estimation of British investors, and difficult as it would have been before then to have obtained an act of parliament creating colonial loans trustees' stocks, the difficulty is greater now, and the prospect much more remote. But with good and economical management by a federal government, and some finality in borrowing, there is no doubt the present feeling will pass away, and the stock of the federation become more and more as time goes on a stock which will be authorized in wills to be held by trustees. There is a continual tendency to do this with good stocks outside the privileged list owing to the returns from trustees' stocks being now so small.

Sixthly, as to whether inscribed stock or debentures would be the better form in which the consolidated debt could be issued,-

We have no hesitation in saying that inscribed stock would, beyond question, be preferable. [start page 62] Owing to the risks of fire and robbery this form of security is now most favoured by the investing public, and it is the only form of stock likely to be held by trustees. Our opinion differs from Sir Samuel Montague's as regards colonial bonds. From our own experience we are quite sure that a comparatively small amount of the present bonds are held by people on the Continent. They are not dealt in on the Continental exchanges, and it would be obviously impossible to issue two forms, namely, bonds and stock; but in the event of a better security being required for borrowing or other purposes there will be no difficulty in arranging for the issue as in the case of consols of bearer's certificates with coupons attached, and which can be reinscribed when so desired by the holder.

We have seen Mr. Rose, the senior of Messrs. Hinton, Clarke, & Co., our stock-brokers, and he entirely agrees with our opinions expressed above.

I am sorry to be obliged to read such a long letter; but it is a very important one. My impression is that the fears of many persons that federation is going to be an additional expense will be largely removed if they are assured that we shall save by the consolidation of the debts, as much as the extra expenditure will be in founding the federal government.

[The Chairman left the chair at 1 p.m. The Committee resumed at 2 p.m.)

Mr. WALKER: I desire at this point to elucidate the remark which I made with regard to bounties. The hon. and learned member, Mr. Barton, asked how these would be provided for. Of course, the idea is that the customs duties will produce a sufficient income out of which to pay, if the federal parliament so desire it, certain bounties where it is decided to grant bounties. That is all on that point. My hon. friend, Mr. Holder, seems to think that I am against the principle, so-called, of a sliding scale. It is not the principle so much that I object to as the application of the principle. I think five years far too short a time within which to expect each colony to come into line as to customs contributions.

An HON. MEMBER: How long would you give?

Mr. WALKER: I do not desire to follow that up at all. I would leave that to the federal parliament. Probably ten years would be likely to be a sufficient time.

The Right Hon. Sir G. TURNER: Five years was accepted its it compromise!

Mr. WALKER: I do not think it would suit New South Wales, Western Australia, or Queensland. I am very certain it would not.

An HON. MEMBER: What does the hon. member propose!

Mr. WALKER: I propose to capitalise the discrepancies at the end of five years if the commonwealth parliament so desires. I will show what I mean by capitalising discrepancies. At the

end of five years, the commonwealth parliament will have sufficient data to go upon to say what has been the average contribution according to the population of each state.

The Right Hon. Sir G. TURNER: That is, if they keep accounts during the five years!

Mr. WALKER: I am presuming that we shall keep accounts. But where a state contributes in excess of the average contribution per head, such annual excess on an average of four or five years may be determined, and shall be capitalized, say, at thirty years' purchase, and the commonwealth shall issue its funded stock for the amount so ascertained, or -relieve the state of a similar amount of its public debt at the current market value of the stock, provided that where the state contributes less than the average contribution per head, such annual deficiency on an average of four or five years shall also be capitalised at thirty years' purchase, and the state issue its funded stock for the amount so ascertained. The course will be that in the one case an annual subsidy will be granted, that is to say, for the surplus due [start page 63] to one state, and the money should come out of the consolidated fund, before the annual per capita distribution, and in the other case the amount will be retained by the federal government, out of the surplus otherwise payable to the state.

The Hon. Sir P.O. FYSH: At what rate would you capitalise?

Mr. WALKER: I say thirty years. It ought to be thirty-three and one-third years, but that is a matter of detail.

An HON. MEMBER: Will the state receive the money in cash in the meantime?

Mr. WALKER: That also is a matter which depends upon whether you we going to consolidate the debts. If you consolidate the debts the state will not get so much cash back, but, will get the interest paid for an equivalent amount. I see my hon. friend, Mr. Henry, will follow me and, perhaps, out we up on this matter; but I trust that I have the courage of my convictions.

An HON. MEMBER: Do I understand you to say that, if they gave a state too much, you would expect it to refund by capitalisation?

Mr. WALKER: No. Under the bookkeeping principle every state will get back what it pays in, less a per capita proportion towards the federation government expenses.

An HON. MEMBER: No sliding scale!

Mr. WALKER: No; I am not going in for a sliding scale at all. With regard to statistics during those four or five years, I know that many hon. members object to the book-keeping principle. I combat that view as follows:-I think there is a great misapprehension with regard to the difficulty. To begin with, each state has already its statistical department. Goods crossing the border will not require to be examined by the customs officials after the institution of intercolonial free-trade. Neither importers nor exporters, if so disposed, will have any object to gain by furnishing false returns to the government. All that will be required will be for the exporters to prepare invoices is triplicate-one copy for the customs department in their own state, one for the house to whom the goods are consigned, and one to be sent by the importing house after they have received the goods to the customs department in their state. The invoice will show the value of the goods and the amount of the duty paid. The remainder will be merely book-keeping is the customs department. There will be no border customs officers, consequently there will be no vexatious examination of goods.

An HON. MEMBER: You would trust to the importers to send the returns!

Mr. WALKER: They would have no object in telling lies, and it is only for five years. Then the trouble comes in with regard to the retail goods. This is where the great trouble, does come in. To get over that I propose this: during the two years during which the present customs duties are going on,

and in the first year of the uniform duties we shall have certain data which will enable us from that time forth to say approximately that the broken bulk goods crossing the border are so much, and they will, not improbably, continue much the same in future as in the past. The federal government, from the statistics obtained during the three previous years-that is, two years of the present customs duties, and one year of the uniform duties-would, no doubt, have a fairly good idea of the course of trade across the border, and could arrange a system to allow drawbacks by lump sums between the colonies for locally manufactured articles and for broken bulk imported goods. That, would enable retailers to send goods across the border without any statistics. We should only have statistics of the wholesale goods. I have already said that I think it lo a great mistake to lay down hard and fast lines of expenditure.

[start page 64] The Right Hon. Sir G. TURNER: Why do you capitalise on an average of four years?

Mr. WALKER: I am not tied to four years. I do not care whether it is four or five years; but I argue In this way: It is proposed to have five years' uniform duties. I think the first year will not, be a good year for statistical purposes, because it would be affected by the over-importation of the previous year into New South Wales. So that for statistical purposes-that is to ascertain the average contribution in an ordinary time-I would take the second, third, fourth, and fifth years. I am not wedded to four years or to five years. If you are going to have a sliding scale, I think it would be better to take fifteen years or even twenty years. On this matter I think the views of the Convention are in touch with those of Sir Samuel Griffith, who says:

Is this too great a responsibility to be entrusted to the federal parliament?

That is the final settlement of the discrepancy.

That body will have more information, more time at its disposal, and more real sense of immediate responsibility, than a convention can have. Moreover, its mistakes can be corrected, while those of the Convention cannot, without serious trouble, delay, and danger.

I am one of those who thoroughly believe in the principle of federation. I am prepared to support any moderate scheme by which we can come together. Just one word more with regard to the railways. Although I think it is impracticable to have an amalgamation of the railways at present, or even a federation of the railways -I distinguish between the two-there are certain things that I think the federal government, as such, ought to take in hand. There is the unification of the gauges. I think that is a matter the expense of which ought to be defrayed by the federal government. Then there may be certain strategic railways-possibly to connect South Australia with Western Australia, or the northern end of the South Australian line with Port Darwin. I trust sufficient power will be given in the federal constitution to enable the federal government, when they think the time has come, to take in hand these great national undertakings. I do not for a moment think we should be justified, from a free-trade point of view at all events, in guaranteeing that each of the states shall get back as much income for so many years as it received the year before the institution of the uniform tariff. The reason why I cannot agree to that is this: that it practically means that in the colony of New South Wales we should have to submit to enormous customs duties-that is to say, judging by the remarks made by the Acting Government Statistician. This gentleman contrasts the consequences of a uniform tariff upon the different colonies. The figures he gives are so extraordinary that I may be excused for quoting them.

An HON. MEMBER: It is purely assumption!

Mr. WALKER: I admit that. He says:

As the results stand, however, they show that on the basis of population at the close of the year 1896, the New South Wales tariff, as it will exist in July, 1897, will probably yield to the commonwealth the sum of £3,517,000; the Victorian tariff, the sum of £6,260,000; the South

Australian tariff, £5,975,000; the Western Australian tariff, £4,712,000; and the Tasmanian tariff, £7,429,000; allowance being made for the freedom of intercolonial trade.

It would be very much better if the federal government had power, if need be, to subsidise Tasmania than that New South Wales should have to submit to a tariff which would bring in £7,429,000 as against even the Victorian tariff yielding £6,260,000. Surely we ought to empower the federal government to give subsidies, because federation is a national matter. I do not wish [start page 65] to speak otherwise than in a complimentary manner of our Tasmanian friends; but I hope there would be on their part no false pride to prevent them, if need be, accepting a subsidy for a short time, to bring all the colonies to the same level. One word more with regard to free-trade. A member of the Legislative Council in this colony has been twitting me that, as a free-trader, I am going to give away New South Wales. He thought he made a very good point against me by drawing my attention to the fact that at the time, of the union of England and Scotland, England was a protectionist country and Scotland was a free-trade country, and he said, "There you are! A free-trade country like Scotland went into partnership with a protectionist country like England, and it had to become practically protectionist." My reply to that is "Yes, but, as time went on, the truths of free-trade permeated England so much that to-day we have free-trade in Great Britain." I trust we shall also have Queensland with us before we close our work.

The Hon. J. HENRY (Tasmania)[2.16]: In rising to address myself to this important question, I think it is well that I should say that in my opinion the financial question as embodied in this bill was not debated at the Adelaide Convention. It is within the memory of every lion. member that the Right Hon. G.H. Reid got up in the Convention and addressed himself to the question, and that before sitting down he proposed that the four Treasurers should meet and prepare a scheme to be submitted for the approval of the Convention. That was done; and, as the Premiers were going away, we all thought it was quite hopeless to enter upon the task of discussing the financial proposals until this meeting of the Convention. I think it is only right to say that.

Mr. MCMILLAN: We only looked upon it as tentative!

The Hon. J. HENRY: Quite so. A considerable minority, of whom I was one, who were strongly opposed to the whole of the scheme, kept their mouths shut, waiting for this opportunity. Otherwise it is undoubted that the whole scheme would have been discussed at length, and the views of the minority would have been put before the Convention and before the public. I regret to think that, after the lapse of some four months, and after the discussion that has taken place on the scheme proposed in this bill-that is the book-keeping portion -an hon. member of this Convention should stand up and still declare himself a pronounced supporter of that scheme. I notice however, that the ground is somewhat shifted, and it is contended that it would not be fair in the interests of New South Wales to adopt the first year of the sliding scale. I especially noticed that my hon. friend, Mr. McMillan, whose able and admirable address I listened to with great attention, was also still wedded to the five years. While professing his readiness to trust implicitly to the federal parliament, the hon. gentleman would not trust them for the first five years.

Mr. MCMILLAN: I would trust them, but I do not think the other colonies would. It was in deference to the other colonies that I took that view!

The Hon. J. HENRY: I am very glad to hear the hon. gentleman say so, as it will save much trouble. However, I feel that it becomes my duty to express the very strong opinions I hold against the proposed system of book-keeping. I hold that the proposal to keep accounts of the customs duties collected by the several states for a period of five years is anti-federal in spirit, inequitable, and in my judgment, unworkable.

Mr. WALKER: Will the hon. gentleman explain how it is inequitable?

The Hon. J. HENRY: The hon. member has himself admitted its inequality by [start page 66] abandoning the proposal as regards the first year. If the Right Hon. Sir George Turner can carry his memory back to within twenty-four hours after the scheme was proposed -if all the pomp and ceremony through which he has recently passed has not put it out of his mind-he will recollect distinctly that I pointed out the difficulty of the position, and that Mr. McMillan and myself, as commercial men, both saw that when the astute member for New South Wales, the Right Hon. G.H. Reid, thought he made a splendid bargain for his colony, he really made the greatest mistake a man possibly could make in the interests of his colony. I do not think I need refer much further to the inequality, because it is admitted on all bands. I was pleased to read the admirable article by Mr. Nash, which exposed the whole thing so clearly, and which was entirely in accord with my views, expressed within twenty-four hours of the proposal being made. I fear to enter at length upon this book-keeping question lest I might weary hon. members; but I have given the question a good deal of consideration, and I regret to find that my hon. colleague, Sir Philip Fysh, has been carried away by the figures, and has adopted the view that in the interests of New South Wales and fair play book-keeping will be necessary. It will be my duty to endeavour to show that those figures wore founded on a fallacy. What is the common idea in connection with this business? It is proposed, as regards trade, that we should be one people. What is the corollary to that? In my judgment that we should have one common purse to which the revenue should flow, and that out of that common purse the whole of the charges in connection with federation should be paid. It is urged that the state of the finances of a colony like New South Wales on the one hand, and Western Australia on the other, is such that that would be inequitable. I grant that so far as Western Australia is concerned, to federate on a mere per capita distribution of any surplus would not be just to that colony, and that some special provision will require to be made if the conditions are the same hereafter as they are now. The point I wish to make is this: that for all time there must be a difference in the wealth of the several colonies, and it is in proportion to the wealth and population of the respective colonies that their proper contributions through customs and excise will be. That is inevitable. Are we to attempt, in a constitution bill, to provide for the inevitable changes in the future in regard to the increase or decrease of wealth in any particular colony? If we intend to federate the rich and the poor must come in alike. The richer colonies must be prepared to take the poorer colonies along with them, or there will be no true federation. With reference to Western Australia, let us go back to 1891, to see the changes which are inevitable in the future in regard to any of the colonies-changes which we cannot possibly foresee. Let us take a retrospective view of the history of Western Australia, going back to 1891 when the convention bill was framed.

An HON. MEMBER: That was before the gold!

The Hon. J. HENRY: I admit it was, but that is the point to which I wish to draw attention. Who could then foresee the position of Western Australia? I wish to point to the great object lesson we have in Western Australia, to show the possible changes which may be lying ahead of us, and which we cannot foresee, and to show how impossible it is, in a constitution bill, in view of those changes, to provide for perfect equity in connection with the financial question. Who could possibly foresee what the condition of Western Australia would have been to-day? I think it would be instructive to inquire into the causes of her present prosperity. It has been stated to-day that one of the [start page 67] causes is the excess of males in the population. There is no doubt that is one important factor, but there is also another important factor in her prosperity. Western Australia is now posing through a similar experience to that through which many other colonies have passed. She is having a boom period. What is causing the large increase in her customs revenue, independent altogether of her male population? It is the large amount of privately borrowed money which is being poured into the colony for the development of her mines, and the public borrowing as well. The money comes in in the shape of goods, and under the customs tariff there is a very considerable toll levied as the borrowed money flows into the country. That is the obvious reason of her present abnormal prosperity and of the increase in her customs revenue. The question naturally arises, how long is this going to last? Of course she is stocked up very heavily now. Loads of mining machinery, building material, furniture, and so on, are being poured into this new country, and there is no doubt that for some time, with a great output of gold, there is great prosperity before her. But before we have a uniform tariff who can

foretell what changes may take place in the revenue of Western Australia? I merely point to this as an illustration.

The Right Hon. Sir JOHN FORREST: Is she going down, do you think?

The HON. J. HENRY: I do not say that. I have no doubt Western Australia will pass through the same experience as other colonies having passed through. She will have it period of fall. She cannot go on borrowing money for ever. I point to this fact as showing how difficult it is, in a constitution bill, to provide for all the changes lying ahead of us in these colonies. The proposal to keep accounts of all the goods passing between the several colonies seems to me to be a parochial idea.

Mr. WALKER: Oh!

The Hon. J. HENRY: It appears to me that the proposal to keep accounts of what the different colonies consume is very parochial. I know that, so far as the colony of Tasmania is concerned, different sections of the community contribute very differently to customs revenue. We might as well, in that colony, divide the country into parishes and find out what our west coast, which is a considerable mining centre, and where there is a considerable excess of males, contributes relatively to any of the cities or agricultural districts. The idea is anti-federal in spirit; that is how it presents itself to my mind. I know what has led to this. Those of us who were engaged on the Finance Committee know what led to the introduction of this book-keeping idea. It was the fear that New South Wales was going to make great sacrifices by a per capita distribution of surplus, and that the only way New South Wales could have justice done to it, relatively to the colony of Victoria, was to have this book-keeping system carried out, so that each colony should know exactly what customs' duties it paid. The whole of this is founded on certain figures published by Mr. Coghlan, and I have no hesitation in saying, after a study of the subject, and after having had the assistance of our able statistician, Mr. Johnston, that they are founded on fallacy.

The Hon. E. BARTON: I quite agree with the hon. member-absolute fallacy!

The Hon. J. HENRY: I hope I shall demonstrate the fallacy before sitting down. In the first place, Mr. Coghlan-and I notice that the figures are repeated in the "Notes on Federal Finance" which have been placed in our hands-founds his estimate on the imports of Victoria and New South Wales for three particular years-1893, 1894, 1895. What are the facts? We are all familiar with that terrible period of depression from which-I think I am justified in saying it - Victoria especially [start page 68] suffered during l893-94. Prior to that we all know the abnormal excess of imports over exports in the colony of Victoria, which surprised and astonished so many. They had gone on during their boom period just as our Western Australian friends are having their boom period now-they had imported heavily, and when the collapse came, Victoria was heavily stocked with building material and all the commodities used by the wealthier classes. We all know the terrible suffering that the wealthier classes in Victoria were called upon to endure when the collapse came. They had not the power to purchase the goods they had been accustomed to buy, the country was heavily stocked, and for a considerable period people were working to run down their stocks. I believe, without going into statistics, that that is a correct statement of the position.

Mr. HIGGINS: They were importing £24,000,000, and exporting £12,000,000 worth!

The Hon. J. HENRY: Yes; before that there is no doubt that the country was heavily stocked, and I do not think that New South Wales at the same time was in a like disastrous position; therefore, to take the imports of the two great colonies for that period is not a safe method of arriving at a just conclusion as to the purchasing power of the, people. Besides, I hold that, under a uniform tariff, the whole of the trade relations of those two colonies, and of all the colonies, will be entirely changed. I am not at all in accord with the view put forth by my hon. friend, Mr, Deakin, that in consequence of the strides that Victoria has made in certain manufactures she will not contribute as much under a uniform tariff as New South Wales would. I take it that if the hon. and learned member will traverse

the case very closely he will find, in all probability, that what suits the Victorian consumer will, under a uniform tariff, suit the New South Wales consumer. Should not the manufactures of Victoria, if they suit the Victorian consumer, also find consumers across the New South Wales border? In my judgment it will be found, with a uniform tariff, that goods from New South Wales will flow into Victoria and goods from Victoria will flow into New South Wales. What are we federating for but to secure larger markets and freer intercourse among the people? I do not see that Victoria would contribute less to the customs revenue in consequence of her manufactures. I believe that it is one of the fallacies contained in this paper.

The Hon. A. DEAKIN: I was merely answering the Right Hon. G.H. Reid's interjection in regard to protection.

The Hon. J. HENRY: I was going to point out in connection with this question that in all probability, seeing that the future federal tariff would not be likely to be so high as the present Victorian tariff, Victoria would import goods which she does not import now. I think that is a reasonable supposition. However, what we want to get at in considering the question as to the relative contribution by the several colonies, is the purchasing power of the people of the several colonies, and I say that that is governed by the wealth of the colonies. In proportion as one colony is richer than another so will it contribute more to the customs and excise revenue. As I have already said, I consulted our very able statistician, Mr. Johnston, and I asked him to get out, on some better principle than Mr. Coghlan’s, what the probable relative contribution by the people of each colony would be, and I think that hon. members will be interested in knowing the method which Mr. Johnston adopted in getting it out, and the results. The method which he adopted was this: He took seven articles -tea, coffee, sugar, tobacco, spirits, wine, and beer-and lie made a very elaborate [start page 69] and careful analysis of the quantity consumed per head in each colony. This is merely the method which our statistician adopted for measuring the purchasing power of the people.

An HON. MEMBER: A very good method, too!

The Hon. J. HENRY: What are the results? I may state that these articles cover 52 per cent. of the entire customs and excise duties. The statistician took the precise quantities consumed in each colony according to the import returns, and he also took the rates in Tasmania. Hon. members will see that it does not matter what particular rates were taken-that would not affect the question-but the interesting point is that, with the Tasmanian rates, and the precise quantities consumed in each colony-and each colony of course being calculated at the same rate-the following is the result:-New South Wales would contribute £1 18s. 7d.; Victoria, £1 18s.; Queensland, £1 17s.; South Australia, £1 12s. 4d.; and Western Australia, £2 17s. I may state that those are the quantities imported into the several colonies in 1895.

Mr. GLYNN: That makes Queensland have it bigger purchasing power than New South Wales!

The Hon. J. HENRY: No; Queensland, £1 17s., and New South Wales, £1 18s. 7d. Now I come back to Mr. Coghlan's figures in the paper which has just been given to us.

The hon. J.H. GORDON: They are not the figures of Mr. Coghlan, but of the Acting Statistician!

The Hon. J. HENRY: The statement is based on Mr. Coghlan's figures.

The Right Hon. Sir JOHN FORREST: Spirits alone were £2 10s. per head with us last year!

The Hon. J. HENRY: This is only a method adopted for getting at the purchasing power, not the contribution of each colony. We are asked to believe, in the statement just laid before us, that New South Wales, under a uniform tariff, would contribute £2 3s. 9d., and Victoria £1 6s. 7d.

Mr. SOLOMON: Does that not show that that method of ascertaining the purchasing power is fallacious?

The Hon. J. HENRY: That is the whole of my argument. I am endeavouring to demonstrate the fallacy of this paper. Our common-sense revolts at it. What is the difference in the wage-earning power of the two great colonies? Will any one endeavour to persuade me with figures like those that there is a difference of 17s. 2d. per head? The thing bears on the face of it its own refutation. I think that the figures which I have just submitted demonstrate very conclusively that the tables which have been placed in our hands in "Notes on Federal Finance," by the Acting-Government Statistician in New South Wales, are entirely fallacious.

The Right Hon. G.H. REID: The facts of the importation are absolutely correct!

The Hon. J. HENRY: I am not disputing them. The right hon. gentleman has not been here during the whole of my speech or he would have known what my arguments were. I have no intention of going over them again; but I have demonstrated that the method of getting at the purchasing power of the people under the tariff of 1893, 1894, 1895, is fallacious.

The Right Hon. G.H. REID: The method is right, but the application is wrong!

The Hon. J. HENRY: The application is wrong. I am sure that no one would admit more readily than the right hon. gentleman that when you get a difference of 17s. 2d. per head of the population between the purchasing power of Victoria and New South Wales the figures are thoroughly unreliable; and when I saw them I felt disposed to cast the whole of the papers aside. While I am dealing with this matter I think I might call attention to a very [start page 70] erroneous statement made in these papers. I do so because I know that there are wreckers about, who are desirous of defeating federation, and it is possible that when the question comes to be discussed in the several colonies they will use this as: an authoritative statement of one of the results of federation. This is the statement to which I refer:

Within the limits imposed by the bill for the first three years, the net cost of the federal authority, after making an allowance for the expenditure of which the states will be relieved, may reach little short of £6,000,000 in the aggregate, while the loss of revenue by intercolonial free-trade may involve the provincial governments in a further deficiency of £450,000.

As a matter of fact, the several state parliaments will have entirely thrown over their tariffs, and there will be no such thing under the bill as intercolonial free-trade until we have a uniform tariff. The Right Hon. G.R. Reid must know that very well. But put this statement before the public, and circulate it amongst the colonies that there is going to be a loss under a system of intercolonial free-trade-

The Right Hon. G.H. REID: Surely there will be a contraction in the customs revenue?

The Hon. J. HENRY: Yes, when we have a uniform tariff; but this applies to a period prior to the introduction of that tariff. The man who wrote this statement did not understand what he was writing. I have said that I believe that the book-keeping system will be unworkable, and I will endeavour to show in a few words what is in my mind in regard to it. I see here two veteran politicians, the Hon. Sir Graham Berry and the Hon. Adye Douglas, both of whom have had some experience in attempting to make reciprocity treaties. But the difficulties which have arisen in attempting to arrange reciprocity treaties will arise under the book-keeping system in passing goods from one colony to another. Of course, it is obvious that you must find out, when a parcel of goods passes from Victoria to New, South Wales, or from New South Wales to Victoria, what portion is colonial product and what has paid duty, because there will have to be a debit and a credit entry. If the goods are passing from Victoria to New South Wales, Victoria will have to be debited with the amount of duty, and New South Wales will have to be credited with that amount. There will have to be a debit and a credit entry

for every parcel of goods passing between the two colonies. I will assume that £1,000 worth of clothing is sent from Victoria to New South Wales. The clothing, we will say, is made of Victorian tweed, which, of course, is a colonial product. But there are also the buttons, the twine, the lining, and other material to be accounted for. These articles, in all probability, would have paid duty, and it would be necessary to find out what their value was, so that Victoria might be debited with the duty which she had paid upon them, and that New South Wales might be credited with the same amount. The whole system of book-keeping would be so full of difficulties that I think the common-sense of the Convention will say that we should have none of it.

Mr. HIGGINS: Would the hon. member have no book-keeping for the two years before the uniform tariff?

The Hon. J. HENRY: I am speaking entirely of the period of the uniform tariff. The book-keeping for the period before the uniform tariff comes into operation is simple, because provision is made in the bill that the customs revenue from the several states, whatever it may be, less the proportion per capita of the new expenditure of all the states, shall be debited to their accounts.

The Right Hon. Sir JOHN FORREST: We do not want to say per capita. We shall know the actual expenditure of each colony!

[start page 71] The Hon. J. HENRY: Yes; but I am talking about the new machinery. Each colony will share the new expenditure.

The Right Hon. Sir JOHN FORREST: They will do that. Each state will pay its own share!

The Hon. J. HENRY: Each state will pay its own share upon a per capita basis.

The Right Hon. Sir JOHN FORREST: Not upon a per capita basis!

The Hon. J. HENRY: It has been suggested by Sir Samuel Griffith that the states should have power to impose special customs duties subsidiary to those imposed by the federal government. I think the hon. member, Mr. Walker, also made that suggestion.

Mr. Walker: I did not say anything about it!

The Hon. J. HENRY: It was suggested to me that the hon. member was in favour of some such arrangement. I can scarcely imagine a states custom-house and a federal custom house alongside each other. However, that is one of the alternative proposals, and I think it has only to be mentioned to be disregarded.

The Hon. E. BARTON: It is like the plan of the Irishman, who made a big hole through the fence to enable the hens to come into the yard, and a little hole to allow the chickens to get through!

The Hon. J. HENRY: Yes. We should have to say on what articles the federal government should levy duties, and on what articles the states should be allowed to levy duties. If the states were allowed to levy upon any particular article, they might levy a double duty. Now, I come to the question of dealing with the state debts. I should like to say something about the proposal of Tasmania, which was shortly described by the hon. member, Sir Philip Fysh, this morning. Of course, many of us hold the opinion that when we part with the right to levy customs duties, it will be imperative that the federal government shall, take over the obligations of the states, because, otherwise, we shall not be able to get on. Tasmania, by the amendments which hon. members will see in the bill, proposes that, to start with, the federal government should take over an equal, amount of debt from each colony.

Mr. HIGGINS: Absolutely?

The Hon. J. HENRY: Per capita, taking the colony with the least amount of indebtedness per head as the basis.

The Right Hon. Sir JOHN FORREST:

The Hon. J. HENRY: I understand from the Right Hon. Sir John Forrest that Western Australia has suggested an amendment, using the word "adults" instead of the words "per capita." That, no doubt is a point worth considering; but I wish now to explain the Tasmanian proposal. It is this: In the first instance, the federal government shall take over the responsibility for the debts of all the colonies; but it shall only relieve each colony of an equal amount, assuming that that is the lowest amount that any colony owes. Take the case of Victoria, for example. I think I am right in saying that the indebtedness of Victoria is about £40 per head of population. That would mean that the federal government would relieve the, several states of £40 per head of their public debt, and that the balance, the difference between the £40, and whatever the debt might be would be a liability on the part of the state. Now, under the amendment of our Attorney-General, Mr. A.I. Clark, whose absence from this Convention I certainly regret, it is proposed to have a census every five years. I am not in accord with him in that respect. I think the adjustment should take place annually. But the principle is there; it is elastic; and it accommodates itself to all changes. According to the increase of population so would the federal government cancel the obligation. Mr. Clark [start page 72] proposes that bonds should be given. I do not think there is any necessity for bonds.

The Right Hon. G.H. REID: Hear, hear!

The Hon. J. HENRY: It is simply an obligation on the part of the state, and of course the necessary power could be given to levy such duties or taxes as might be necessary. When the proper time comes I hope the Convention will give that scheme due consideration. It is, as I have said, elastic; it accommodates itself to all possible changes in the future, and it is thoroughly equitable.

Mr. HIGGINS: What about the differing rates of interest?

The Hon. J. HENRY: We are bound in the amendment to 31/2 per cent.; but I do not think there is such a great difference in the rates in the several states that we need go into fractional amounts. At all events I have not thought closely upon that branch of the subject. I do not regard the plan as providing thoroughly for the whole of our debt, but it has a great deal to commend it. We should still have to trust to the federal government to set the state finances right. No man has been more pronounced in this Convention than I have been for insisting that there should be some definite obligation upon the federal government to keep the state finances right. I have in season and out of season advocated that; but I suppose I shall have now to modify my views in this respect, having regard to the enormous difficulties that lie in front of us in drafting a scheme that will work equitably under all the changing conditions of the future. I say that the federal treasury, the federal executive, the federal parliament, assisted by the ablest men among the heads of departments, will be the right men to deal with this financial question as the circumstances arise in each year. I have pointed to the history of Western Australia. We do not know what changes may be in the future for any of us. I know that the colony in the representation of which I have the honor to share has a great future before it. We have, according to reliable statistics, comparatively undeveloped mines in which there are £30,000,000 of ore in sight. That being so, we are justified in anticipating a great increase in our mining population, and this increased population, as contributors to the customs, will in due course place us alongside the other colonies. We cannot enter a federation if the incidence of our taxation is so changed as to largely increase our direct and decrease our indirect taxation. But I should feel justified in going back to my fellow-colonists, and saying that I would trust the future federal parliament implicitly. Whether we have federation now or at some future time, the federal parliament will be made up of men who know the financial as well as the other requirements of the several states. Next to the great question of free-trade and protection which will have to be fought out, the

paramount question to be considered will be the preservation of the state treasuries, and I, for my part, would be disposed to leave the whole question, with entire confidence, to the federal parliament.

The Hon. F.W. HOLDER (South Australia)[2.55]: I am very glad that on this occasion the Convention is considering this question, not in Committee, but publicly-in the light of day. I am sure the fact of our consideration of the matter in Adelaide in secret robbed our determinations of much of that weight which otherwise might have attached to them. Persons have said tome concerning the matter, "We see your conclusions; but as we do not know the paths by which you arrived at them, we are unable to say whether or not the conclusions are justified; and therefore we cannot say whether or not we can accept them." On this occasion I hope that, not only shall we arrive at a right conclusion, but that the pathway along which we travel will be made so clear that others [start page 73] outside will be able to note the way and follow us in it. I am taking this afternoon a very easy role-one which has been followed by many ever since, in 1891, the financial proposals referring to federation were first formed. It is easy to criticise other people's work; it is easy to pull down, to find fault, to pick holes; it is not so easy, by any manner of means, to construct a scheme with which other persons cannot find fault. I infer that the purpose of this debate at the present stage is rather to clear away schemes which will not run, to remove theories against which there are serious objections, rather than to set up theories of our own. Therefore, I do not propose to conclude with any definite statement of a scheme to take the place of the schemes we have; but I shall endeavour to show, for the sake of those present, as well as for the sake of those outside, some of the strong objections that can be taken to some, if not to all of the various plans which have been suggested. In dealing with Part IV of the bill, I think we are dealing with those provisions which have to do with the very essence of federation. If we wish to establish a tariff of customs duties, we must recognise that without uniform customs there can be no true federation. A federation, including States which maintained between them a customs warfare would be no federation. Then comes the question of the railways. I quite agreed with my hon. friend, the Secretary for Lands of this colony, Mr. Carruthers, when he said in Adelaide that it was useless to do away with the strife between the customs-houses it we were merely to transfer that strife to the railway-stations. I take, as I took emphatically in Adelaide, this ground-that unless our federation will serve not merely to abolish the customs-house strife, but will also end the railway tariff strife, it will not be a federation worthy of us, or worthy of the countries we wish to federate. I think it is of equal importance that we should abolish cut-throat railway rates as that we should abolish rival border customs duties. The hon. member, Mr. Deakin, this morning thought that there was too much made of what he spoke of as preferential railway rates. Now I am somewhat with him as to the point he made with regard to differential rates growing into preferential rates. It undoubtedly must be admitted that what is a differential rate in a colony applied outside that colony may or may not be a preferential rate. But in many cases it would be, I think, an advantage that we should lay down the line, and say that such a rate should be tolerated as might be a differential rate applied beyond the borders of the colony on the same basis and on the same principle as applies within the colony. But so soon as you depart from these principles, and, either to bring trade into a colony or to prevent trade going from one colony to another, you adopt a principle which you would never adopt within your own borders, I think we come to a class of rates which we must absolutely prohibit, or our federation will not be worthy of the name. There is another question included in this chapter which cannot be left out of sight-that is, in relation to the rivers, Reference was also made by the hon. member, Mr. Deakin, to the fact that in many cases our rivers take the place of railways. Where we have not had waterways we have had to maintain our railways as methods of communication between state and state, and district and district. But we have some waterways, and they are as essential to us as our railways are, and the freedom of trade and intercourse over them and along them is as essential to federation as is the freedom of intercourse over our railway lines. I refer specially, of course, to the rivers Murray and Darling. Along those rivers, from the furthest point away from their mouth, where navigation begins, right down [start page 74] to the mouth of the Murray itself, it is to my mind of the first importance, if we are to have real freedom of trade at all-if our freedom of intercourse between part and part of the great commonwealth is to be real and true-it is of the first importance that we should say we shall tolerate no interference with those principles which, rightly applied, will secure equality of trade over all those rivers. We cannot have equality of trade over those rivers-we cannot make that use of them which the commonwealth is entitled to make-unless we see that the riparian

rights are fully guarded. Of what use is it to us in South Australia to have within our borders both banks and a large portion of the lower Murray unless we have the water flowing between those banks? What is the advantage to us of the possession of the lower waters of the Murray which ought to come to us, if higher up, by means of locks or irrigation works, large quantities of water are taken away, and the river when it comes within our borders ceases to be navigable? As the hon. member, Mr. Higgins, says, we have the bottle but not the liquor, and not many of us care much for the bottle without the liquor.

The Right. Hon. G.H. REID: We are supplying you with the liquor all the time!

The Hon. F.W. HOLDER: I dare say New South Wales would not do it if she could help it. I think it is characteristic of New South Wales to give nothing away that she can keep her hands upon.

The Right Hon. G.H. REID: Broken Hill!

The Hon. F.W. HOLDER: For a very long time we have been striving to enforce in South Australia our riparian rights-to obtain some recognition of those rights to which if we were private persons we should he undoubtedly entitled. I take it that the position between South Australia and New South Wales is parallel to the relation which would subsist, if New South Wales were a private landowner and South Australia were also a private landowner.

We should then have the right to demand that a certain and proper flow of water should come to us. We, as private landowners, would then see that our rights in this respect were not trenched upon. That is all South Australia has sought; that is all South Australia desires to assert in future. But what was the position taken up at the late session of this Convention at Adelaide with reference to the Murray waters? The colony of New South Wales would not, in any sense, permit the control of the Darling waters passing to the federation, because both banks of the river were in New South Wales. When, however, we came to deal with the lower Murray, where both banks are in South Australia, it was maintained that quite a different principle must prevail. Federal control must never come in when both banks belong to New South Wales; but when both banks belong to South Australia federal control must prevail. It may happen that the wolf will obstruct free navigation, and yet we are not to complain. The unfortunate lamb down stream from the wolf was said to be guilty of fouling the water to the detriment of the wolf, and, therefore, it had to pay the penalty of death. Poor South Australia which is down stream with reference to geographical position compared with New South Wales, must give up all her riparian rights to the commonwealth; but New South Wales up stream, which has the power of doing damage and may do it, would not give up any of her riparian rights to the commonwealth. Let us have fair play in this matter, which does not merely affect the rivers which I am now dealing with, but which affects freedom of intercourse and trade between state and state, and between part and part of the commonwealth. Let us have fair play in this matter. Either let us have all parts of this navigable stream within [start page 75] federal control-and no one will then complain-or else let us see that South Australia is left untouched in her right and authority over the water of the Lower Murray. With regard to the concession to her of all her riparian rights, do not hand over to the federal authority powers properly belonging to South Australia.

The Right Hon. G.H. REID: Did the hon. member mention the Lachlan River?

The Hon. F.W. HOLDER: So far as the Lachlan River is navigable precisely the same argument will apply, and I am very much obliged to the right hon. gentleman for calling my attention to the fact, I am simply pointing out that whatever is done customs, railways, and rivers must be taken together. Unless we consider and take them together all through this constitution, we shall not fully secure that freedom of trade and commerce which I assume we ought to secure in a federal constitution. Passing from these things more definitely to the financial question involved in our consideration, the hon. member, Mr. Deakin, said this morning that it mattered not to the federal authority whether there was a surplus or not.

The Hon. A. DEAKIN: I said it was not essential to the federal governments!

The Hon. F.W. HOLDER: In one sense the hon. member is right; in another he is quite wrong. Seeing that it is essential to the federal government that the state shall prosper, it is essential to the federal government that where it has taken over from the states their chief engine of taxation, it shall have something to return to them from the proceeds of that engine. It seems to me that a federation in which the federal authority is not interested in the solvency and prosperity of the states is such a thing as we ought not to consider for a moment. In fact our first duty to-day is, and I think I can go further and say that the first duty of the federal parliament of the future will be, to conserve the, interests of the states. What are we doing to-day? We represent not some idea, some conception of federation; we represent the individual units of the population which makes up Australia. In all our deliberations, we conceive as far as, we can what will be the beat for those individual units on which the prosperity of the whole mass will be built up, and the prosperity of the separate persons forming the mass. So it will be in the federal parliament. The prosperity and strength of the federal authority will depend upon the-prosperity and strength of each individual state comprising that federation. Therefore I do not apologise for placing in the very forefront of my remarks a plea for the necessity of securing the strength and prosperity of every stater to be in this commonwealth. I deprecate what I am going to state being set aside as parochial. I object to its being said that what I am about to state savours of parochialism or anything of that kind. That is the kind of argument used. But I take my ground again where I took it before on this fact: that in my view the success of federation itself must depend on the success of every state in it, and, therefore, in arguing for the strength and financial stability of the states, I am arguing, not for, that which is parochial, but for that which is essential to the success and strength of, the commonwealth itself.

The Hon. A. DEAKIN: The success of the people of the states as well as the success of the state governments!

The Hon. F.W. HOLDER: I think what I said carried me right back to the personal units forming the states. We may begin with the individual units on which the, states rest, and then take the state units on which the commonwealth rests, and, wherever we stand for the moment whatever we argue from, of course the individual unit must be that which is at the back of everything in our thoughts. Now, the question is raised by some, shall we have [start page 76] a surplus or shall we not? I think the question answers itself. We must have a surplus, or else the states of the federation cannot carry on. Let us look for a moment at their position to-day. In most of them there is not only the indirect taxation which is proposed to be handed over to the commonwealth, but also some direct taxation, and in most of them just about up to the measure of their capacity to carry it. I do not know any state, unless, indeed, it be this wealthy splendid state in which we are assembled to-day, which can afford any very considerable addition to its present burden.

An HON. MEMBER: Queensland!

The Hon. F.W. HOLDER: Queensland might afford some. Besides those two states I do not know any other which can afford any very considerable addition to its present taxation.

Mr. HIGGINS: Victoria has no land-value tax yet!

The Hon. F.W. HOLDER: Victoria has a land-tax.

Mr. HIGGINS: It is not a land-value tax, and it only yields £120,000!

The Hon. F.W. HOLDER: I know it is not a very large sum; but I do not think my hon. friend, Mr. Higgins, if he were the Victorian Treasurer, would be free to propose any very considerable addition to the direct taxation of that colony. I am wanting to point out that when the states have handed over to the federation, as it is proposed they should, all their power of customs and excise taxation, unless there can be returned to them a sum very closely approximating to the sum which

they realise from those sources, they will be not only prospectively but at once in very serious straits. I have spoken to most of those who are here, I think all, on the question, and I do not know a Treasurer or a budding Treasurer who would be willing to go back to his colony and advocate any system of federation which did not provide for the return of practically the whole of the sum now collected from customs and excise to the state from the federal authority. It has been said that we need have no surplus, that we can provide for a proportion of the debts to be taken over. I noticed with interest the very practical remarks which my hon. friend, Mr. Henry, made on this question. The Tasmanian Parliament propose that a certain proportion of the debts should be taken over, and I think the hon. member mentioned £40 per head. The average interest on our public debt to day is 4 per cent. I believe. Taking over £40 per head of the public debts of all the colonies would mean taking over an obligation amounting to £1 12s. per head of the population.

An HON. MEMBER:-

The Hon. F.W. HOLDER: It is not only the insufficiency, it is the inequity I want to point out. How would that proposal work out? Under any conceivable new tariff the people of New South Wales would, at least for some years, contribute a great deal more than £1 12s. per head of the population. And under almost any conceivable tariff, Western Australia would contribute an immensely larger sum, for some time to come. Tasmania, certainly, would, for some years to come, contribute a less sum than £1 12s. per head of its population from any conceivable tariff of the commonwealth. What is the position? The position is this: that we are asking that a return shall be made to the states equal per head over the whole commonwealth, while the contributions of the states are very unequal. We shall be asking New South Wales to contribute perhaps £2 per head of its population, and to receive back only £1 12s. per head; Tasmania to contribute perhaps 25s. per head, and to receive back 32s. per head. I do not mention South Australia, because it is almost at the point of average for the whole of the colonies in respect of customs and excise duties.

[start page 77] The probability is that whatever plan be adopted South Australia will neither suffer much loss nor realise much gain. South Australia is not far from the mean line. But if the basis of £l 12s. per head be adopted, that is more than South Australia is contributing per head through customs and excise. Therefore, while it would be a nice little arrangement for South Australia, and might put £60,000 or £70,000 a year into our pockets, some one else would have to find that sum. New South Wales and Western Australia would doubtless be the kindly parties.

The Right Hon. Sir JOHN FORREST:-

The Hon. F.W. HOLDER: We do not want any such position. South Australia wants her own, if she can get it. She is going to get as near to her own as she can; but she does not want one penny belonging to anyone else. I think I may say the same for Tasmania. We all of us want our own, no more and no less. That being so, it is apparent at once that neither £40 per head, nor any other amount per head, equal over the whole commonwealth will do. You appear to wipe out the surplus, but you do not wipe it out at all. You simply provide that there shall be a return equal per head over the whole population at once throughout the commonwealth. Suppose it were proposed that at once a per capita distribution of the surplus should take place, would that be accepted? Do not even the representatives of Tasmania themselves argue against the inequity of such a proposal? Is it not apparent to us all, whatever may be possible in the future, that when things have settled down, and the new tariff has been some years in operation, it is simply out of the question that we should begin right away with an equal per capita distribution, which is what this scheme of taking over it certain proportion of the debts amounts to if you go to bedrock in considering it. Now there have been various other schemes suggested for dealing with the surplus-and I am taking it for granted that we must have a surplus for the reason I have mentioned-and among them is a suggestion that we should have a book-keeping system. I thoroughly agree with every word the hon. member, Mr. Henry, said as to the undesirability, impracticability, and half a dozen other things of this book-keeping system. To my mind, one of the strongest recommendations, if not the strongest, of federation is the removal of border custom-houses.

How are you going to remove them if you are going to keep up the bookkeeping system? As long as you have your book-keeping system, as long as you are taking these accounts strictly between colony and colony, you must maintain your border custom-houses, your border customs officers, and practically all your border customs restrictions. I have had some little experience of this system, and I am going to repeat what I said in Adelaide, not publicly, but to the Finance Committee. In South Australia for some years we have striven to keep accounts very strictly between ourselves and the Northern Territory, which in a sense is not of us, although it belongs to us. Part of the book-keeping necessary has been a discrimination between duty paying goods and free goods passing over the border or arriving by sea. The task has been a practically impossible one. It has involved a scrutiny of goods, it has involved delays, it has involved in other ways all the difficulties of a hostile tariff, and this impossibility of its correct application has become apparent again and again. You have shipments of goods which may include dutiable goods of different kinds in one article. You may have shipments including some dutiable goods and some that are free. There may be South Australian tweeds which are not dutiable, or you may have English tweeds, or some other tweeds. The difficulty is to find out the [start page 78] origin of them. You may find out the origin of one part of a shipment, but you may have a difficulty in finding out the origin of another part, and it would not be certain whether the goods were dutiable or not. If we are going to have that system carried on, not between South Australia and the Northern Territory, but between these great colonies with their huge trade and intercourse, we shall have something that will be irksome in the extreme, which will be unsatisfactory in the extreme, and which will break down of its own weight as it ought to do.

Mr. WALKER: What about collecting statistics?

The Hon. F.W. HOLDER: We shall, of course, try to get all the statistics that we can with regard to trade and commerce; but such statistics as will be required for a system of book-keeping between all the colonies, will, I hope, not be sanctioned by this or any other Convention. If we are going to have a hook-keeping system for twenty years, let us postpone federation for that time. If we are going to have this system of book-keeping for five years it amounts to postponing the benefits of federation for another five years. In South Australia, when preparing the financial scheme, we very reluctantly, as the only way of dealing with the matter, after much shrinking from it, adopted the scheme which provided for book-keeping for one year, and we thought that that was a great deal to tolerate, and I am sure that we ought not to tolerate even that. Now, I come to another scheme which has been suggested for dealing with the difficulty; that is, returning to the states the amount of revenue that they contribute, less a per capita contribution to the cost of federal government. There is a difficulty here to which I will call attention, not because I do not think that any one has mentioned it, but because I desire to freshen hon. members' memories, It has been suggested that any surplus in the hands of the federal government shall be handed back to the states after a reduction per capita to meet expenditure. I want to point out the difficulty of that being carried out unless you have a book-keeping system. Suppose that there is a surplus of £5,000,000 and the federal authority has to determine where it arose, whence it came. Without a book-keeping system they cannot tell. I defy any federal treasurer or statistician if there is a surplus of £5,000,000 to say where it arose. Shipments of goods come into places like Sydney, and are sent away, finding ultimate consumption in other places. There are distributing centres like Melbourne where goods come to and are scattered far and wide. When we have uniform duties, and the duties are paid at the port of shipment, those places will become distributing centres. Sydney will be a distributing centre, not only for its own state, but also for Queensland and other states. Melbourne will become a distributing centre, and goods paying duty in Melbourne will be sent to Tasmania, South Australia, Western Australia, and elsewhere. Who is to say where they are ultimately consumed, and yet it is where they are ultimately consumed that the duty belongs? How is it possible to find out to which state the duty belongs?

An HON. MEMBER: You will have to ear-mark it all the time!

The Hon. F.W. HOLDER: Of course the hon. member understands that that would be quite impossible. If we are not going to have a system of book-keeping we must set aside as impracticable the scheme in the bill of 1891. Of course there the provision was simply that until a uniform tariff

came into operation, book-keeping should be carried on. But a scheme was proposed by which revenue was to be received and then paid back to the various states after the deduction of the amount for federal expenditure. I say that that is impos- [start page 79] sible unless you have some principle laid down by which you will determine the proportion in which you will make the return to each separate state of the commonwealth. Then we have the proposal which was made by the hon. and learned member, Mr. Deakin, this morning, to return to every state a fixed sum which maybe based on the last five or ten years, or may be arrived at in some other way, paying every state a certain fixed sum in perpetuity. I will refer to the case of South Australia, to give an illustration as to how this would work. Put down our present customs and excise duties at £600,000 a year. There is a small profit in the Post Office, but that would be swallowed up by losses on other departments. it might fairly be assumed that if South Australia received a grant from the federal authority of £600,000 a year in perpetuity, she ought to be satisfied. But the defect in the scheme is this: that, whilst for the present it would be all right, what about the future? Is South Australia going to remain for ever the size that she is to-day? As the population increases, the cost of police and other local administration which have to be paid out of the state revenues will increase too.

The Hon. A. DEAKIN: The proposal is to give that much at least, and as much more its the federal parliament may determine!

The Hon. F.W. HOLDER: I will come to that. I am pointing out the weakness of the system which the hon. and learned member proposed this morning so far as regards the grant of a fixed sum based upon present factor. We want elasticity, we want a provision for the growth which we expect in all our states in the early future, and the very serious defect of Mr. Deakin's proposal is that it does not provide for it. The hon. and learned member said that this fixed sum would be a minimum, that the federal parliament would give not only that but as much more as it could afford. You may make us this guarantee of £600,000 a year, but we want a further guarantee. Why not make a guarantee of so much per head of the population as the £600,000 represents, and as population increases let the amount of the guarantee be carried on with the increase of the population? If you do that you will be providing what would be a fair and equitable system.

Mr. TRENWITH: It is the same principle in another form!

The Hon. F.W. HOLDER: It is suggested that we should not trust the federal parliament up to a certain amount; but beyond that we should trust them altogether. I think the two positions are inconsistent. I would rather trust the federal parliament out and out from the first penny, or else I think they cannot be trusted with regard to the balance over £600,000. I would rather trust them all through and give them a free hand. They are not aliens or strangers-we should trust them out-and-out. Or if we must have guarantees at their hands, let us take a guarantee that will be worth something, not only now, but ten, twenty, or thirty years hence. There is one other system, and that is the unfortunate sliding scale, which found its way into the Adelaide bill, and which has had short shrift since that time. That sliding scale was a child of misfortune-misfortune in that it was laid before the Convention and accepted on the faith of those who recommended it; never discussed, never explained-thrown into a cold world, without anybody to be father to it, and it has never had a show from that time to this. I am quite sure that had the Premier of New South Wales, when he tabled the scheme, explained it, as he can explain schemes-put the facts clearly before the public, as be can do-the public would have understood it; and if they had understood it, very much of the antagonism to it that has sprung up would have been avoided. Most of the antagonism to it arises from absolute mis- [start page 80] understanding and misconception. As to the principle of the sliding scale, it appears to me there can be no possible fault found with it. As to its application, I shall deal with that later on. The suggestion was to take the actual facts for one year after the coming into operation of the uniform tariff. Well, if we take the facts we cannot be very far wrong there. That was only for one year.

An HON. MEMBER: The wrong year!

The Hon. F.W. HOLDER: Possibly it may have been the wrong year; but that does not alter the correctness of the principle of the sliding scale. The first thing was to find out the facts for the first year. Let it be any other test year-only this trouble comes in: If you make it the second, instead of the first year, you have to keep the accounts between the, colonies for two years, instead of one, and that makes it considerably worse. It was simply for the sake of avoiding this book-keeping that some people are so fond of, that it was proposed that the test should be the first year, and the first year only. Then came another question: If we are to take the first year, or make a test year, are we to understand that the time will come when, practically, all over the commonwealth, the per capita contribution through customs and excise will be equal? I do not think we are far wrong in assuming that such a time will come. There are special circumstances in Western Australia today; there are circumstances of a special character which must prevail in New South Wales for some time after the coming into operation of the uniform tariff. No one can question this. But, surely, in a period-I am not going to say how long it will be-

Mr. WALKER: Twenty-five years!

The Hon. F.W. HOLDER: I am inclined to think the period will not be twenty-five years. I am of opinion it will not take twenty-five years for things to settle down and for equality to establish itself. At the beginning my right hon. friend, Mr. Reid, strongly took the position that ten years was the shortest possible period which would see an equilibrium established, and perhaps he was right. It was as a concession to other colonies-chiefly Victoria-that the reduction was made from ten to five years.

An HON. MEMBER: Why Victoria?

The Hon. F.W. HOLDER: Because the representatives of Victoria held that the sooner the per capita principle came into operation the better. They would like to have seen the per capita principle in operation at once. They deemed it would suit them-naturally.

An HON. MEMBER: I do not think they looked at it from that point of view!

The Right Hon. G.H. REID: They never have!

The Hon. F.W. HOLDER: No, never. It matters not where we put this per capita point-whether we put it at five years or ten years-there must be between the first year-the year of test-and this per capita point, wherever it comes, a gradual approximation of all the divergent colonies to the mean point. It must be so. If it comes within five years, the sliding scale set out in this bill is right. If it takes ten years to come, then all we have to do is to make the period ten years, let the lines approach a little more slowly, and still it is right. The principle of the sliding scale cannot by any possibility be wrong. But do as we may, determine if we like that there shall be a certain fixed subsidy paid for so many years-five or ten, say-what then? Are we going to have an absolute collapse then? It seems to me, above all other things, what we want to avoid in connection with the finances of the federation is convulsion. Let us pass from stage to stage easily-step by step, up or down, whatever it may be; and let us have no convulsions. Convulsions, however they arise, in all financial matters, are a serious damage to the state in which they occur.

[start page 81] Mr. MCMILLAN: Under that scheme you still leave five years as the per capita basis-the parliament to decide!

The Hon. F.W. HOLDER: But the scheme in the bill contemplated that the inequalities should adjust themselves in five years, and therefore that the distribution should be on a per capita basis.

Mr. MCMILLAN: You leave the amount absolutely open. You must trust the parliament then?

The Hon. F.W. HOLDER: Yes; but the principle which is to guide them in their distribution is that, an equal amount per head being assumed to be collected in each colony, an equal amount per head would have to be distributed to each colony. The principle of the sliding scale being the only one to avoid these convulsions, the only one which will bring the colonies which are above the average gradually and by a slow course down to the average-the only one which will bring the colonies that are far below the average by slow degrees up to it-must be right, and must be wise. The only points for discussion are as to the year of test, and as to the length of the time during which the sliding scale shall apply-whether it shall be for five, seven, or ten years, or any other period. These are points open to discussion; but, as to the value and fairness of the sliding scale, it seems to me there can be no question. However, all these are matters of very considerable difficulty, and in all of them we are dealing with questions with which we are not face to face. We are trying to leap over the stile before we come to it. While most of the words of Sir Samuel Griffith are words of wisdom, I do not think those he used with reference to the finances of the commonwealth are words of such wisdom as he is accustomed to exhibit. Are we or are we not justified in trusting the federal parliament? There are two or three reasons why we should trust them. In the first place, they will have the facts and figures before them-we have not. They will know what the result of the tariff is-we do not. They will know the special conditions that prevail at that time. Which of us can say what they will be? Reference has already been made to the extraordinary and unexpected developments in South Australia during the last three or four years. Who shall say where the next development will be? It may be in New South Wales, it may be in Tasmania-who is to say? We know that the prospects of the mining industry in Tasmania were, perhaps, never so bright before as they are now, and, that being so, it may be that Tasmania will be the place which next will boom, and where the next extraordinary growth and development will take place. There is another part of the commonwealth -a part that is too often forgotten, though it ought not to be, for we have one here who is a special representative of it in the local Parliament-a part less known than Tasmania, and with a smaller population. I refer to the northern territory of South Australia. It may be that these new developments, these advances by leaps and bounds, will next be seen there, and, if that be so, then it will be Northern Australia, and not Western Australia, where these special alterations will come about. That being the case, as we cannot foresee these things, cannot measure them, cannot forecast what their nature or direction will be, is it wise for us to attempt to leap this stile before we come to it? It seems to me that there is a great deal indeed to be said for leaving this matter to the federal parliament to be dealt with. There are one or two reservations I wish to make. If, instead of our having taken the financial problem first, we had taken the constitutional problem first-if, this afternoon, we knew what would be the constitution of the senate, what its relations to the house of representatives, I [start page 82] should be prepared personally to make a very clear utterance as to whether I would or would not trust the coming federal parliament; but as that question is not settled I cannot say whether I will or will not trust it. At least, however, I say this: Given a constitution of both houses of the federal parliament, which is fair to the larger states and to the smaller ones, then I am prepared to trust this matter, as I trust many other matters of very great importance, to the coming federal parliament, believing it can and will, with the knowledge and information which it will possess, do fairly by all the states within the commonwealth. If one thing more than another were necessary to induce me to trust the coming parliament, it is this: that we have with us in the position of absolutely requiring large and generous treatment at the hands of the federal authority in the matter of finance, the great colony of Victoria. I say it without any reflection on Victoria; I say it as simply the utterance of an undoubted fact, that Victoria can as little afford, as can any of the smaller states afford, to lose a very large portion of its revenue. Therefore the smaller states may feel secure, seeing that they have with them in their difficulties, the great colony of Victoria. They are safe in taking the same side as it will have to take, and in being sure that the treatment which will be meted out to them, will be fair and liberal. I end this part of my speech by stating what I stated at the beginning-that I have rather sought to show reasons why the various schemes suggested would not do than to set up any new scheme of my own. I have said what I have said with a view to saving time. If I have shown that any scheme over which much time might have been spent will not do, and that there are radical difficulties which make it impossible to accept it-if I have thus saved debate I have saved time. I now come to a word or two on the important question of the debts and economies which may be practised by the federal authority. If it could be shown that the federal authority could make any large savings, that it could by any means at all economise to the

extent of the loss of revenue through intercolonial free-trade, and the cost of the new machinery of federation, the way would, indeed, be easy. I want to refer to one fact bearing on this point. It has been said that the loss through intercolonial free-trade would be over £1,000,000 per annum. Without Queensland this loss would be very much diminished. I hope Queensland will come in, but should Queensland stay out, it will reduce by practically one-half the loss on intercolonial free-trade, and make so much smaller the difficulty. with which I am going to deal. We will assume, for the moment, that Queensland will come in, and that the amounts to be made up are, roundly, £1,000,000 loss of revenue through intercolonial free-trade-lost to the states, but gained to the people, who will not have to pay the duty-and about £300,000 for the new machinery, or a total of £1,300,000 a year. If it were possible to show to the electors, who will have to vote on this question ultimately, that the federal authority could make a saving of that amount, our way would be easy. Can it be so shown? I am not in favour of the railways being taken over by the federal authority. Many of the railways have been constructed with a view, not to direct but to indirect return-with a view to the value they give the Crown lands through which they pass; and the traffic is maintained on them, not because of the profit arising from them, but because by means of that traffic the profitable occupation of large areas of country is made possible. If the railways were to pass into the hands of some federal authority, I can conceive at once that lines such as these would be little used. Naturally a federal [start page 83] authority, having no local interest in the Crown lands, having no interest in the development of local industries, would run the lines upon commercial principles. Where the trains paid they would be run as frequently as they paid, and where they did not pay they would be run as infrequently as possible. That will not suit us. I do not think it will suit any of the states that the lines should be run on those principles. I do not admit, therefore, that any saving can be held out before the eyes of our constituents resulting from anything to be done with the railways; but I do believe that very large savings can accrue, as time goes on, from the proper handling of our public debts. but if we are to obtain these advantages, we must move with very great judgment. A declaration that, on the coming into being of the commonwelth, all these debts shall be assumed by the commonwealth, would be an act of the utmost folly. Can I Illustrate that? I am amazed that there is any necessity for illustration; and yet, when I read some of the articles in the newspapers, when I hear some people talking, it really does appear to me to be necessary that some illustration should be given of the folly of the suggestion to which I have referred. Let the illustration be this: Here are five persons who have a fairly good commercial standing, whose paper is regarded as being good-perhaps not quite gilt-edged, but good enough; and to them comes another of the highest possible standing, whose name is good enough, not only for all the other five together, but for far beyond that. This one with his huge security, comes to the others and at once takes over all their liabilities. Do not hon. members see that he has made a present of an enormous advantage to the holders of the securities of the five persons? The paper was worth so much when the individual of the five persons alone was behind it, but now that the security not only of the five but of the greater power is behind it, the paper is worth so much more.

The Hon. Sir P.O. FYSH: At the same rate of interest!

The Hon. F.W. HOLDER: Interest is one thing, security is another. I believe that if a federal loan were offered, better terms could be got for it than for any state loan. What does that mean? Undoubtedly, it means that the credit of the commonwealth will be better than the credit of any individual state in it.

An HON. MEMBER: How would the state be injured?

The Hon. F.W. HOLDER: The state would certainly be injured. Surely the hon. member sees my point.

The Hon. Sir P.O. FYSH: Surely the hon. member sees the point that the interest must come down!

Mr. MCMILLAN: The hon. member means in case of conversion!

The Hon. F.W. HOLDER: Certainly. The point is so clear that I thought the mere statement of it would convince everybody of the force of the argument. We have in these colonies a certain public debt today. Behind it there is only the security of the individual colonies who incurred the debt; but if, by some act of the Imperial Parliament, there were placed behind the whole of this debt-every million of it-not merely the state security, which is behind it to-day, but the commonwealth security, we should give an enormous advantage to the holders of the securities.

Mr. MCMILLAN: But it would be only if you wanted to convert. If the loans expired it would not affect it at all.

The Hon. F.W. HOLDER: I will take an example again. Our South Australian 3 per cents. to-day stand at about 101-a little more, I think. If the federal authority came into being with such a provision in the constitution as that which I have heard argued for, at once the federal security [start page 84] would be behind the South Australian loan, and that South Australian stock would go up in the London market from 101, to what-103, 104? And do you not see that the very moment that that takes place, a bonus of 3 or 4 per cent. is given to the present bond and stock holders?

An HON. MEMBER: How does it affect the loans you want to convert during currency?

The Hon. F.W. HOLDER: We lose enormously.

Mr. MCMILLAN: Not unless you want to carry out a conversion scheme!

The Hon. F.W. HOLDER: But we do want to carry a conversion scheme through. I am showing that the state stocks in the London market would go up 3 or 4 per cent. directly the commonwealth security came behind it, and that that bonus would be a present that we should give for nothing on earth to the bond and stock holders. To give it to them for nothing would be the greatest folly of which any sane man could be guilty. I want to retain that bonus for the people, and I say that it must be retained for them, and that getting hold of that bonus is about the best plan I can suggest for paying the expenses of the federation, and the best argument for recommending federation to the people. How are you going to get hold of it for the people? Not by putting, in the bill to be passed by the Imperial Parliament a provision which gives away the whole position for nothing-a provision that from and after the passing of the act the commonwealth shall be responsible for the states debts-nothing of the kind. I started by saying that articles in the newspapers suggested that we should give away this enormous advantage which we should certainly keep in our own hands-that we should give away this bonus for nothing.

The Hon. E. BARTON: It is said that if you take over the debts without the assets they represent, the enhanced credit which the commonwealth would otherwise give to the states would not accrue. I mention this because it has been the subject of great discussion in the Parliament here. That is what is urged. I do not hold that view, but I want my hon. friend to deal with it.

The Hon. F. W. HOLDER: My own opinion is that the British bondholder looks much more to the number of people behind the debt, and to the prosperity of the colony, than to the purposes for which the money is to be spent.

The Hon. E. BARTON: That is the answer I made!

The Hon. F.W. HOLDER: And that so long as we do not borrow too largely it does not much matter whether railways or other assets are behind the debt. The stockholders will look at the tax-paying capacity of the people, and not at the assets. I hope that we shall take care to guard ourselves by providing that the commonwealth may take over the loans of the states-that we may place the federal security behind them -but will so leave the matter that, in every case, we may give the federal security if, and only if, those who hold our bonds and stock will offer to make it worth our while to give them a larger security than we have now to offer. If we do that, we shall be able to go a long way

towards paying all the expenses of this federation without putting any increased burden on the people, and without loss of revenue to the states. I hope, however, that we shall be very careful to provide that there shall be no rushing of this matter, for the nearer we come to the dates of expiry of these loans-to the dates when they will fall in by effluxion of time-the better the terms we can make with those who hold our bonds and stocks; and, therefore, while this is a matter which must be left entirely to the federal government and to the federal treasurer, we should provide in the financial clauses of the bill in such a way as to let the people see that we are keeping in our hands all the power we [start page 85] can with the view of exploiting all these debts in their favour and interest.

Mr. MCMILLAN: Is the hon. member in favour of the states being required to give their consent to the taking over of their loans?

The Hon. F.W. HOLDER: I agree with the hon. member that there ought to be a provision requiring the consent of the parliament of each state to any transfer of its loans, for otherwise the federal authority, at a time when the state was able to make very advantageous terms itself, might step in and take over its public debt, and might obtain for the commonwealth treasury an advantage which by right belonged to the state treasury. For that and other reasons, I think the local authorities ought in every came to give their consent to any portion of the debt for which they are responsible being taken out of their hands. In some cases the premium might fairly belong to the local authority, and in such cases they ought to have a right to retain it. There are many other points of great interest one might touch upon in connection with the financial position of the commonwealth; but at this stage I am not going to take up any more of hon. members' time. I have already taken up a good deal more time than I intended to take up when I rose to speak, but I have been led on by interjections and by the interest I take in the subject. I only hope that, if I have taken a long time, I have solved some difficulties which other hon. members may have felt, and which they themselves might have spent some time in discussing hereafter. I thank hon. members heartily for the kindly way in which they have listened to me.

The Hon. Sir JAMES LEE-STEERE (Western Australia)[3.58]: I think it is necessary that one of the representatives of Western Australia should rise now to state why it is we find some difficulty in accepting the financial provisions of the bill as agreed to in the Convention at Adelaide. We have been taunted by some saying that Western Australia does not want federation. We certainly cannot see our way to enter the commonwealth parliament under the present financial clauses of the bill. I think that every member of the Convention is aware of that fact. We were not present in the Adelaide session at the time these financial clauses were discussed there -they were brought forward after the Western Australian delegates had left Adelaide to return to Western Australia-and, therefore, hon. members cannot say that we are at all responsible for the financial provisions which were placed in the bill at Adelaide. I do not altogether agree with some hon. members, who say that the statistics prepared by the statisticians of the different colonies are fallacious. Perhaps they are not in accordance with the wishes or ideas of some hon. members, because they place their colonies in a position they do not like to see them placed in. But considering that the statists of New South Wales, Tasmania, and Western Australia all agree pretty well as to the amount which Western Australia would lose, I cannot think that their statements are incorrect.

An HON. MEMBER:-

The Hon. Sir JAMES LEE-STEERE: That may be the case, but I do not think their statements are incorrect. In the first place we should stand very unfairly in relation to the other colonies if we gave up the amount of customs duties which we should have to give up. Our customs duties in the last financial year amounted to £7 15s. per head of the population, while I think the average amount received by the rest of the Australasian colonies was only about £2 per head. Thus it will be seen at once in what a disadvantageous position we should be placed by giving up this amount of customs duties. I know that it is said that in Western Australia we are in an [start page 86] abnormal position. Perhaps we are; but in my opinion this abnormal position will continue for some considerable time yet. I do not acknowledge that these are boom times in Western Australia, if by a boom time is meant

a time which does not last long, and is followed by depression. I say that the present condition of Western Australia, which is owing to the increased production of gold there, will continue for a long while.

An HON. MEMBER: But the customs revenue will fall off, because Western Australia will establish manufactories of her own.

The Hon. Sir JAMES LEE-STEERE: It will be many years before we do, and it will be a bad day for the rest of Australia when we establish manufactories there.

An HON. MEMBER: Western Australia taxes manufactures pretty highly!

The Hon. Sir JAMES LEE-STEERE: I do not know that that is so. With the exception of the New South Wales tariff, the tariff of Western Australia is considerably lower than that of the other colonies.

The Hon. A. DEAKIN: But it is heaviest upon Australian goods!

The Right Hon. Sir EDWARD BRADDON: They have preferential rates in favour of foreign goods!

The Hon. Sir JAMES LEE-STEERE: I hope the time will soon come when we shall not want to import so largely from the other colonies. I think hon. members will be rather surprised when I tell them that, of the total importations of Western Australia, which are valued at £6,493,000, £3,000,086 worth is the product of Australasia. The figures seem to me enormous; but I suppose that they are perfectly correct, because they are taken from the report of the Collector, of Customs, who is a very careful man. I think the report presented by the Government Statistician of New South Wales is a very interesting one. He certainly does not make federation very pleasant for us, because he shows that we shall have to pay £900,000, and that New South Wales will have to pay about £500,000 a year more than the colonies, Victoria, South Australia, and Tasmania. He concludes his report with words which I have used myself. He says that as regards Western Australia, it would be not only foolishness for us to enter into federation upon the terms contained in the bill, but it would be madness. I quite agree with him. I think it would be madness for us to enter into federation unless different financial arrangements were made.

An HON. MEMBER: There must be special conditions for Western Australia!

The Hon. Sir JAMES LEE-STEERE: I do not know what those special conditions may be; but unless they are more favourable than the provisions contained in the bill, I cannot see any prospect of our recommending that our colony should join the federation. Our own statist has put the case very plainly, I think, and if hon. members will bear with me I will read what he says.

The conclusion I have come to is that in order to be able to unite with the other colonies in a federation on the basis of the draft constitution, without risk of serious detriment to its financial interests, it would be necessary that the annual expenditure per head of this colony, particularly in public works (apart from that out of borrowed money), should be considerably curtailed, or that the colony should be prepared to impose a land, income, or other direct tax, so as to provide the funds requisite to meet the liabilities attendant upon federation. That the colony should defer the matter until the colony has developed its resources to such an extent as to be practically independent of outside supplies for the ordinary articles of consumption, that is, until the customs revenue per head assumes a normal rate, appears to be a reasonable course, unless the draft constitution is so modified as to equitably provide for the special condition of this colony when federated.

What would be the use of our going back and telling the people that if we entered into federation we should have to impose [start page 87] direct taxation or to reduce our public works expenditure? It

is not likely that they would be in favour of federation under those conditions. In order to develop our colony, we are obliged, and for some years we shall be obliged, to expend large sums upon public works. Is it likely that the people of Western Australia will agree to give up to the federal government a large part of the money that is now spent in that way, or that they will approve of the imposition of direct taxation? I am certain that none of the representatives from the other colonies think that Western Australia would consider those favourable Conditions under which to enter the federation. I am pointing out to hon. members the difficulties under which we labour in regard to this matter. I do not consider myself a financier, and, therefore, I am not able to say what are the provisions which would be just and would bear equally upon all the colonies; but I have no doubt that the members of the select committee appointed to consider the question will be able to devise some plan. I am sure that we are just as anxious to enter into federation as the other colonies are, so long as we can be sure that we shall not be great losers thereby.

The Hon. Sir P.O. FYSH (Tasmania)[4.8]: I am very much afraid, after the speeches which we have listened to to-day, that we are not coming nearer to the solution of the financial problem. I have been waiting in the hope that the representative of some colony like New South Wales or whose representatives must dominate the Convention in connection with a subject of this nature, would give us some idea as to the arrangement that would be acceptable to themselves, because they are hardly likely to accept any proposal coming from the smaller colonies. Therefore, with some deference, I have held back. I am induced to rise now because of some of the observations of the hon member, Mr. Holder. I listened with great interest to his admirable address. There was the true federal ring throughout it, and I wish I could believe that New South Wales, moving on the lines indicated in his speech, is prepared to make whatever personal or state sacrifices are necessary with the one object in view of becoming part of a federated people. If we found New South Wales and Victoria moving upon such lines as those to which Mr. Holder referred, I am sure that the financial difficulty would be swept away, because in entering into this contract we should no longer be seeking to make a commercial bargain; we should be treating each other as part and parcel of a great state where the whole revenue might at first go into one pocket, and then be distributed ratably. I find that already my observations are causing my friends below me who represent New South Wales to smile. I am fully aware that a great difficulty of the whole problem is that we shall be as separate states subscribing to what will be the commonwealth fund sums of revenue which are disproportionate, and here I should like to dwell upon a statement which has been before us to-day-upon figures which we considered at an earlier convention, figures which have moved my mind over and over again, and from which I have never been able to sever the connection-I allude to those figures which Mr. Coghlan, the Government Statistician in New South Wales, published. Upon these I placed great reliance, because, in common with all, we know Mr. Coghlan's capacity, we know his determination to arrive at a solid foundation of truth, and for the three years to which he has referred I believe he has stated accurately the statistics of the colonies. If statistics be worth anything they should be considered in a matter of this kind. I am fully aware that in taking the years 1893, 1894, and 1895, Mr. Coghlan may have [start page 88] taken a period which so far as Victoria is concerned, shows her at her worst. Those of us who have followed the progress of imports, associated with a lower tariff than is necessary in connection with a policy of protection, must arrive at the conclusion that the higher the rate of duty the smaller will be the volume of goods imported. I have read two admirable papers by Mr. Pulsford, a gentleman resident in New South Wales. I referred in Adelaide to one of these papers which, with others, was exhibited to those of us who were associated with the Finance Committee. Allusion was made to the fact that while New South Wales imported a large value of ready-made articles, Victoria only imported for the same purposes of her people the raw material, there being £1,000,000 per annum. imported in the three years, year by year, by New South Wales and £750,000 imported by Victoria. The larger sum in the case of New South Wales was not a disparity which to my mind, indicated any serious error. Mr. Pulsford called attention to the fact that whereas in one article only in New South Wales, that of soda crystals, she imported all she required, Victoria imported none, the soda crystals being all manufactured upon the spot. I will carry the matter further, and say that while in New South Wales, as I believe, the great portion of the wearing apparel of the people, certainly of the masses, is imported ready-made, there is imported into Victoria only the material. In connection with the article of wearing apparel, textile fabrics only, that would represent a much larger value than

any of us suppose. But passing away from this particular article, I come to those articles which are most revenue-bearing, and to which my hon. friend, Mr. Henry, has referred. And while he was perfectly correct in dealing with these figures from one point of view, there is yet another concerning which I feel it my duty to express myself with respect to the figures, although I may differ from the hon. member's conclusions. He appeared to overlook the fact that in dealing with the important articles of duty he gave to us-namely, sugar, tea, coffee, tobacco, spirits, and beer-he gave to us 53 per cent. of the whole of our imports. We may have in them a thorough indication as to the consuming power of the people, and we find that in a given year-1895-a year in which we began to return to the prosperity we enjoyed in years gone by-I pass over years 1891, 1892, 1893, and 1894, in which many of us were in adversity, and I come to the Year 1895-when, at any rate, the sun was beginning to shine upon us-we were realising a fair customs revenue. In that year we find a disparity between New South Wales with £1 18s. 7d. per head, and South Australia with £1 12s. 4d. per head on these articles, of 6s. 5d. per head, or one-fifth of the whole revenue in respect of these particular articles. There was that quantity less consumed in South Australia than was consumed in New South Wales. Now, what is the conclusion? That the consuming power of the people of South Australia was less, by reason of the fact that they had not so many miners, or so many shearers or so many persons engaged in manufactures as were in the colony of New South Wales. And we find that, so far as Tasmania is concerned, the disparity between £1 1s. 2d. per head as compared with the £1 18s. 7d. per head in New South Wales. These figures, therefore, cannot fairly be used with as an argument to show that there is throughout Australia the same consuming power in every state. Neither do I think the figures can be used with any fairness to indicate that we shall presently come-those of us who are poor-into the wealth-giving conditions of those who are richer. It may be true-I trust it is-that Tasmania is very gradually, and only gradually, perhaps at present [start page 89] more quickly-coming to the front. We are increasing our mining population, and there can be little doubt that each year Tasmania will be seen to so increase her £1 1s. 2d. per head as to approximate more closely to the rates of her neighbours.

An HON. MEMBER: Where are those figures taken from?

The Hon. Sir P.O. FYSH: They are figures compiled by Mr. R.M. Johnston, who will be regarded in Australia as a statistician of equal ability to Mr. Coghlan. I am quite satisfied that Mr. R.M. Johnston as an actuary and statistician is acknowledged throughout the whole of Australia, and I might say, throughout the whole statistical world, as a man in whose figures much reliance can be placed. The figures are taken for the whole of the colonies for the year 1895. Therefore we must admit at the commencement that there is a different consuming power between the colonies at the present time. I quite agree, however, that the positions at present, while they fairly indicate the spending power, and also the earning power of the people, may not last. Western Australia has given us an instance during the last few years of great change. In Tasmania a customs revenue of less than 12 per head in 1894 will rise in the present year to £2 7s. 6d. per head of the population. This does not reach the total realised by New South Wales, and we want to see whether in connection with the federal movement, New South Wales is prepared to receive the other colonies on the principle of equal partnership. If New South Wales will remove that difficulty the financial problem can be readily overcome; but if New South Wales wants to make a bargain with the neighbouring states, we have come to the conclusion-at which I myself arrived long, long since-that there is no other way in which we can equitably distribute the funds of the commonwealth except under an inter-state keeping of accounts. Now, almost all who have spoken on that subject deprecate any idea of keeping inter-state accounts, and have alluded to the immense difficulties that arise in connection therewith. I have never seen any difficulty, and the financial problem has been under my observation since 1891.

An HON. MEMBER: What about the cost?

The Hon. Sir P.O. FYSH: The bill of 1891, after the Financial Committee had sat, embodied the conclusion that there should be a state keeping of accounts for a certain period. The Finance Committee of April last, after sitting seven days, with twenty members present, composed of Treasurers and past Treasurers, had to arrive at the conclusion that there was no equitable method of distribution except by the keeping of accounts. If there be any state which desires to get away from

this inter-state keeping of accounts, it is time that it should announce itself, and let us know what the problem is to be. The public, the press, members here and elsewhere, and in our various parliaments, have all been exercising destructive criticism upon the work of that Finance Committee. Although there has been plenty of this destructive criticism, we have heard of no construction yet, except by those men who have asserted the opinion that the solution of the problem is in the keeping of accounts. They have committed themselves, and have shown what the results will be. For instance, the hon. member, Mr. Holder, to-day instead of coming to the point and telling us the solution, what did be tell us? He arrived at the same conclusion as almost every other speaker, that we must remit this matter to the federal parliament. I do not know what there is behind. When I see so many with possible dissolutions staring them in the face avoiding this subject, and preparing to shunt the difficulty on to some body to be brought into existence by this bill, I often ask myself the question why it is they cannot face the difficulty now? If they would only face the difficulty for five years and let [start page 90] us agree that the keeping of accounts shall he for five years only, and that upon the basis so established you will have given to the federal executive an opportunity of gauging the future possibilities, we may accomplish something. But surely this Convention will not meet again now and dissolve without having inserted in the bill some proposal with respect to federal finance. To leave the whole matter open to the future is to say that you do not know how to deal with the difficulty, and that so far as finance in concerned we must trust to the future. £50,000 a year is as much to Tasmania as £300,000 a year is to New South Wales. I very much doubt whether any colony, be the amount £50,000 or £300,000, will be justified in going into the federation when it does not know whether its position would be that of a bankrupt state or not. The hon. member, Mr. Holder, reminded us of that at the last meeting, and pointed out how important it was to the whole of us that we should, at any rate up to a certain period, know what the revenues of our own country are to be. Treasurers now have to anticipate revenues for a year or eighteen months ahead, but how can a treasurer give any estimate of the revenue of the year that is to follow unless there is secured to him some definite proportion of the customs revenue to be handed over? It is, therefore, of importance that there should be some provision made in the bill to return to the states something like a proportion of that which they contribute, or instead that there should be one of the responsibilities of the various states taken over by the commonwealth, and thus relieve them. I would suggest that, while we do not wish the federal executive to be in possession of any large surplus, we may obviate such a possibility by casting on the federal executive the responsibility of paying the whole of the interest upon our debts. It is much more simple to deal with the whole than to begin to talk about parts. We talk about £40 per capita as being the proportion that may be taken over, leaving it for Tasmania to give bonds to be responsible for £7 per head of her debt, while Queensland would be responsible for £16, and the other colonies the same in proportion. Why not at once throw the responsibility of the whole of the interest upon the federal executive, and let the federal executive charge against each state the total amount of interest which it expends on its behalf? It comes to the same thing, but it will deal with one debt. You will then have a debt of Australasia, instead of having a separate debt for the commonwealth, and separate debts for the states. This leads me to an observation by the hon. member, Mr. Holder, which I should like to challenge. He was very clear in his intention of deprecating before this Convention the purpose of announcing to the world that the debts of the several states of Australasia were to be taken over, and form a responsibility of the commonwealth. Now, our present bill uses the term "may." That term was used advisedly on the assumption that the treasurer of the future, having such a power without being called upon to secure the cooperation of any separate state might, when the opportunity occurred, and it will occur, consolidate and unify the whole of the debts of Australasia. But I would add that I have no objection to the word "Shall." I do not see the serious difficulty which the hon. member recognises-a difficulty which I remember an hon. member on the other side, Sir William Zeal, alluded to on a former occasion, when I was speaking-a difficulty which is evidently in the minds of many here to-day, namely, that you are raising the value of your securities against yourselves. Now, that is just what I rise to controvert. Will anybody tell me that a bill of Rothschild for £100, bearing 3 per cent. interest, will be [start page 91] worth more than £100 a week hence if I get Peabody & Co., of New York, to put upon the back of it their names? Therefore will anybody tell me that the bonds of Australasia worth £110, and bearing 31/2 per cent. interest, will be worth any more when you obtain the joint and several guarantees of all the separate states? I would ask those who believe so, what is it gives value to the bond?

The Hon. F.W. HOLDER: Why are the bonds of the different colonies at different prices to-day?

The Hon. Sir P.O. FYSH: The bonds of the different colonies are not at such different prices as to warrant such a conclusion. The bonds of the whole of the colonies in 1892 fell down to less than 80. They all rose until, in May of last year, they were as nearly as possible on a par with each other, or within I per cent. of with each other. They have risen or fallen in proportion to the value of, money in the English money-market. My observation with respect to the hon. member, Mr. Holder, is that it is not the guarantee which you put upon the back of that bond which gives it value, but, seeing that the value and the security is already good-seeing that a 31/2 per cent. Australian bond is worth £110 now-if you put the names of all the other Australian colonies behind it, It will be worth no more, because it is wholly upon the rate of interest that it depends.

The Hon. S. FRASER: And the security!

The Hon Sir P.O. FYSH: I started off with that fact, that if it be a Rothschild bond, you cannot improve on the security. If the rate is £3 per cent.-it will only produce £3 per annum, and an inscribed Australian bond will produce £3 per cent. if it is a 3 per cent. stock. If it runs up to £150 then your rate, of interest is reduced to £2.

The Hon. H. FRASER: English censors are much lower than that!

The Hon. Sir P.O. FYSH: If then the rate of interest on its face value be reduced to £2, so much the better for Australia, because a low rate of interest is what we require. Therefore to assume that because we are going to back the bills of the states they are going to rise in some very important degree is a great mistake. They may rise to a small extent for one reason only: they may get into the preferent list for the investment of trust funds, and seeing the enormous amount of trust funds which cannot find investment in Imperial consols -which are reduced to £400,000,000 now -directly you can get Australasian debentures or stocks put into the preferent list, so soon may we expect the prices to rise; and they will rise, whether the stock belongs to separate states or represents the consolidated debt of Australasia. The price of money at home it is which varies the value of your stocks.

The Hon. F.W. HOLDER: Why are British consols a better price than on our stock?

The Hon. Sir P.O. FYSH: I might almost answer the question with another; how comes it that whereas we were paying 6 per cent. for our stocks in years gone by we have now got them down to a rate which is equal to about £2 10s., because I think if we work out £110 for our 3 1/2 percents., we will find that it reduces them to about £3.

The Hon. C. H. GRANT: One is a home stock and the other is a foreign stock!

The Hon. Sir P.O. FYSH: There are all sorts of differences. We have year by year been consolidating ourselves; we have become a people on whom the world is placing more and more reliance. I believe every year we live, as we develop our population, as we show a stern determination to maintain our credit, as we show an ability to pay our way, and particularly as we develop our mines from time to time, so we shall have the value of our stocks increased, and gradually we are drawing them nearer and nearer to the value of European stocks. Australian stocks, last May, were of more value, judging by the rate of interest which [start page 92] they were realising, than American stocks, and of more value than any of the stocks of Europe, except English stocks.

Mr. HIGGINS: That is because there is no enterprise!

The Hon. Sir P.O. FYSH: No, it arises from a combination of two circumstances. The withdrawal of Imperial consols by reason of investments to the extent of £200,000,000 by Government officers in England leaves only about £400,000,000 of Imperial consols to work upon for the public generally. It

arises also from the fact that money was very low in England-less than 1 per cent-while we were paying 3 1/2 per cent. face-value, or equivalent to about 3 per cent. on the market value. While money kept so low as that, our stocks must go up. They will not be lower for another reason: that we are year by year becoming more and more a consolidated people, and every year of our lives now, after the fifty years of our free institutions we have enjoyed, is bringing us more and more credit before the English investing public. So soon as you consolidate stocks and unify them as to value with one rate of interest, and possibly make them an interminable security, with power to the commonwealth to renew or pay them within thirty, forty, or fifty years, so soon shall we begin to realise the advantages to which our friend, Mr. Walker, has drawn attention. I was very pleased to discover that my right hon. friend, Sir George Turner, on his return from England lately, was able to tell the press that the time is fast approaching when the conversion of Australian stocks must be carried out. I was pleased to know that it confirmed the letter which Mr. David George had sent to our friend, Mr. Walker, and it also confirmed other letters of equally important financial authorities which I am pleased to receive from time to time. The time is rapidly approaching, and but for our hope of an early federated Australia some of the colonies, although they may be small, would have moved in the direction of consolidation before this, and directly you do so move I believe you will get your money at 2 3/4 per cent., and then you will save not a few hundred thousands, but £2,000,000 per annum by way of economy. If you only allow, £1,000,000 by way of saving through the consolidation of your debts you certainly will then have secured a sufficient sum of money in the commonwealth to have rectified any differences which may occur in connection with the various states we represent. But we are, at the present moment, in difficulties as to our next movement, and we, as the smaller colonies, ask those whose influence must guide this Convention to consider that even though they may today be collecting revenue per head per annum in excess of that which is collected by the smaller states, we are all moving on in the same prosperity. No one knows which colony in five years will be to the front. It is very certain, therefore, that directly you have a uniform tariff, you will immediately begin to level down these disparities, that the value of the imports into Victoria will very largely increase, and we shall have no longer the disparity existing between the figures which Mr. Coghlan has given us, and the figures which we will realise under the uniform tariff; for directly we have that uniform tariff-I have no doubt that it must be a revenue-giving tariff-the return of goods imported into the colony will be increased and enhanced in value very considerably. I have been watching the result of manufactures in our small way in Tasmania. I have discovered that the small mills which we have put up have completely thrown out of gear the imports on which the Treasurers have been in the habit of depending; so much so, that I may mention two articles. Blankets and flannels ten years ago were largely imported-most of those which were used in the colony were im- [start page 93] ported; but now blankets have wholly fallen out of our import list, and flannels nearly so, and I may say so partly with respect to boots and shoes. The value of these imports has fallen 40 per cent., and we know that the value has fallen in this particular instance, not by reason of the reduction of their intrinsic worth in Europe, but by reason of our local manufactures. The intrinsic value of goods, of course, has considerably fallen off, but that affected equally Victoria and New South Wales. And when we have a uniform tariff established through the whole of Australasia we shall each be taking advantage of the ground from which we are now kept. We will have free-trade running throughout the whole, and no one can predict the immense advantages which we shall all realise. I sincerely hope that one of these larger colonies will give to us some indication of the purpose they have in view, because simply to discuss these measures, and to point out what the difficulties are, is not leading us to their solution. We all of us know the difficulties. Will any one put before us some substantial scheme which we can lay hold of? I venture to say that the best scheme, and that which is likely to be most useful to us, would be to take the whole of the expenditure and the revenue of any period which you may name-I would say so soon as uniform duties of customs are imposed and to make a return per capita to the people.

An HON. MEMBER:-

The Hon, Sir P.O. FYSH: I am aware that Western Australia cannot come in at present. As suggested by the hon. and learned member, Mr. Deakin, special arrangements would have to be made with Western Australia for the present; but as far as the other colonies are concerned, even including

Queensland, it must be immensely beneficial. By dividing the total revenue from customs and excise per head of the population, there will be a credit in account for the amount due, and having taken over the whole of the responsibilities by way of debt, let there be charged to it the whole of the interest that is paid for that particular state. The result, according to such figures as have been put before me will be that when uniform duties are imposed we shall come out with this advantage: That the smaller state that does not consume so much whiskey and tobacco would get the advantage of New South Wales, which consumes the most. Queensland consumes a great deal more whiskey than we do in Tasmania. I think the proportion is as 6 gills to 4. Queensland, when they begin to entertain the question of federation, will be induced to federate by reason of intercolonial free-trade. Directly we give Queensland a free market or a preferential market for her sugar, so surely shall we establish in that land a permanent product of that which will be so enormously beneficial to her as to realise almost £1,000,000 per annum. of export. But we need not lose the whole of the million to which the hon. member, Mr. Holder, referred when we have intercolonial free-trade. Surely Queensland will not expect us to give up entirely our excise duty upon sugar? I have always taken care to guard my opinion. I express it so that Queensland may not overlook the fact that we are not likely to give up for the present the duty of excise upon so important an article as sugar.

An HON. MEMBER: Will Queensland come in on those terms?

The Hon. Sir P.O. FYSH: If she gets a preferential rate of £3 excise as against £5 duty she will sweep the markets, and give to us in the next five years, according to Sir Hugh Nelson's figures, 170,000 tons of sugar all grown in Queensland. She would have an entire monoply of all the markets of Australasia for sugar. That would be an immense benefit to her.

[start page 94] An HON. MEMBER: That depends upon beet sugar!

The Hon. Sir P.O. FYSH: Beet has been reducing the price of sugar very considerably; but, notwithstanding that, Queensland now and for a few years past has always been able to meet the constantly reduced price of sugar, whether it came from the Mauritius or elsewhere. We do not get beet sugar in the colonies.

An HON. MEMBER: We do!

The Hon. Sir P.O. FYSH: A small quantity of beet sugar known as Dutch crushed, loaf sugar. The sugar consumed in the colonies is Mauritius sugar made from cane. We are not likely to import beet sugar. Queensland will consider it her interest to join the federation if fair terms are made in connection with the proposal before us. I hesitated to rise because I felt that it is beating the air. We are waiting for the Right Hon. Sir George Reid and the Right Hon. Sir George Turner. These are the gentlemen who must tell us what the-fiscal policy is to be. We are entirely dependent upon them, and unfortunately we are dependent upon the exigencies of political life.

Mr. LYNE (New South Wales)[4.45]: I do not rise to speak on this question. We have heard some very good speeches and some long ones. I think it would be very reasonable now to adjourn. I would ask the leader of the Convention, the hon. and learned member, Mr. Barton, whether lie will consent to an adjournment until to-morrow morning?

The Hon. E. BARTON (New South Wales)[4.46]: Under the circumstances, I think it is right that progress should be reported now, having in view the very great gravity of the subject, and also the very great assistance which I think will arise to the Convention, and to the members of the Finance Committee from some of the speeches which have been made, which, if I may say so, denote a distinct advance in federal tendency, and also a very keen appreciation of the value of the criticism, written and verbal, that has taken place since the last meeting of the Convention,

Progress reported.

ADJOURNMENT.

The Hon. E. BARTON (New South Wales)[4.47] rose to move:

That this House do now adjourn.

He said: A suggestion was made by Sir George Turner yesterday in reference to the extra parliamentary programme that has been designed for the delegates. I think that is a matter which deserves consideration. I have had some conversation with the Premier of New South Wales on the subject, and, without undertaking to express any opinion whatever, I should like to say that I think there is a general desire on the part of hon. members that there should be no extension that can be avoided of festivities, at any rate beyond the present week, in order that after the present, week the Convention may be enabled to sit at night as well as by day. I do not forget that next week there are two occasions on which hon. members will no doubt desire not to sit. I need not mention those, but with those exceptions I take it that after this week it will be the general desire of hon. members to sit every night.

The Hon. A. DEAKIN (Victoria)[4.49]: I rise with great diffidence to say that there was a very strong feeling in Adelaide against night sittings, and they should be avoided. This is not the time to discuss it, but there are some of us who will only consent to them as a last resort.

The Hon. E. BARTON: We sit at night elsewhere!

The Hon. A. DEAKIN: No. I heartily concur with what my hon. and learned friend has said, and for my part am quite willing to forego all festivities. But night sittings are not calculated to produce that class of work that I should like to see in this Constitution.

The Hon. E. BARTON: I do not know!

Question resolved in the affirmative.

Convention adjourned at 4.51 p.m.