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Friday, 19 February 1932


Mr SPEAKER - This is the second time that I have had to call attention to the frequency of interjections. The Attorney-General is entitled to make his speech in his own way, within the limits of the Standing Orders. Every honorable member will have an ample opportunity to express his views on the subject. In these circumstances, I must insist that when an honorable member is addressing the House he shall be given a fair opportunity to state his case, and shall not be subjected to disorderly interjections.


Mr LATHAM - Clause 7 of the bill provides that as from a date to be fixed by proclamation, and during the currency of the proclamation, the specified revenue of the State shall be payable to the Treasurer, or if the Treasurer, by notice in the Gazette, so directs, to authorized persons. The proclamation may be revoked when it is thought proper to revoke it.


Mr Beasley - Will these provisions apply to municipalities, such as the Municipality of Manly?


Mr LATHAM - No. An alternative procedure' is set out in clause 6 of the bill. This is designed to meet cases of urgency in which Parliament is prepared to act without a declaration of the High Court having first been obtained; but it is provided that any such action shall be subject to any subsequent declaration of the High Court. As under the provisions of clause 5, the first step is the obtaining of a certificate by the Auditor-General in accordance with the provisions of sub-clause 1 of clause 5. Such certificate must be published in the Government Gazette. If urgent action is desired, motions may then be moved in each House of the Parliament, under clause 6, to the effect -

That the certificate be approved and adopted and that by reason of urgency it is desirable that the provisions of sections 7 to 13 inclusive of this part should apply immediately in relation to the States specified in the motion . . . and should have effect with respect to the specified revenue of that State.

If such resolutions are passed, a proclamation may be made in accordance with the provisions of clause 7 of the bill, and " the specified revenue of the State " will become subject to the provisions of the measure, and must be paid to the Treasurer of the Commonwealth instead of to the Treasurer of the State. It is provided in sub-clause 3 of clause 6 that a declaration may be obtained from the High Court while the procedure which I have outlined is going on. In other words, a certificate may be obtained from the Auditor-General and published in the Gazette, and resolutions may be introduced in each House of Parliament, contemporaneously with the making of an' application to the High Court. The purpose of this provision is to avoid delay.


Mr Gregory - What delays are likely to occur?


Mr LATHAM - It is quite impossible to answer that question; but it may be observed that it is a three days' procedure so far as the notice of the application to the High Court is concerned. Every effort has been made to ensure that the procedure shall be as speedy as is consistent with the giving of proper notice to the public, the State, and Parliament.

These are the main provisions of .the bill ; but certain other provisions in Part IV. of the measure deal with enforcement against other funds than the revenue of a State. Clause 14, which is the first clause in this part of the bill, confers power upon the Commonwealth to retain certain moneys received on behalf of a State by virtue of the Financial Agreements, or of any decision of the Loan Council. It is provided that those moneys shall be charged with the due performance by the State of its obligations under the Financial Agreements and may be applied in the discharge of any obligations of the State which have accrued under those agreements. But there is an important proviso that if the Auditor-General certifies that the obligations of the State under those agreements have been satisfied, or if the High Court determines that no amount was due and payable and unpaid by the States of the Commonwealth in pursuance of those agreements, the moneys which have so come into the possession or control of the Commonwealth shall be dealt with as set out in clause 18 of the bill, which deals with the procedure in the event of a judgment in favour of a State.


Mr Scullin - Could the Commonwealth seize these moneys before taking any of the steps outlined?


Mr LATHAM - This procedure can operate only " during the currency of any proclamation." This part of the bill brings into question the propriety of applying loan moneys due to a State to the discharge of the current obligations of the State. In that connexion I merely make two comments. The first is, as I have already pointed out, that it will be a matter for determination at the time whether this power should be exercised. The second is that, as at present advised, I find it very difficult indeed to conceive how anybody with a sense of responsibility could agree to allow loan moneys to reach the hands of any government which was repudiating its obligations .in respect to interest or principal on other loans. It appears to me to be ihe logically necessary result of such a course of action that no loan moneys should be made available to such a government because it does not recognize its obligations in regard to its current loans.


Dr EARLE Page - A government could not possibly borrow money under those conditions.


Mr LATHAM - No. The only other provisions in this part of the bill are contained in clause 15, and they also become operative only during the currency of a proclamation. Clause 15 relates to moneys held by banks on behalf of a State, and provides that the chief executive officer of any bank, or the manager of any branch of a bank, may be required to render to the Treasurer, or an authorized person, a return of the amount of the balance to the credit of the State to which a proclamation relates, and pay to the Treasurer any such amounts as he may demand. The receipt of the Treasurer will be a sufficient discharge to the bank in respect of such moneys. The effect of this provision is that the Commonwealth would be entitled to any amounts standing to the credit of a State in respect of which a proclamation has been issued, and a State would not be able to draw upon them. There is also a provision that any transactions under this clause may be reviewed by the High Court. If the Commonwealth could be shown to have acted wrongly in any such matter the State and the bank concerned would have its remedies.

Part V. of the bill provides for the adjustment of accounts with a State in respect of which a proclamation has been issued. Under the provisions of this part of the measure the Treasurer is required to keep an account of the moneys received, and the Auditor-General is authorized to give the Treasurer a certificate upon the discharge of all the liabilities of the State. Clause 18 provides that notwithstanding any proceedings under this act to which the Commonwealth is a party, if, in the final judgment of the High Court, it is declared that no amount was due and payable, or that a smaller amount was due and payable than was set forth in the certificate, the moneys received by the Commonwealth in respect of the State shall be paid by the Commonwealth to the State, subject to any allowances which, in the opinion of the High Court, are fair and equitable. [Leave to continue given.'} In effect the clause means that the High Court may order repayment to the State if the AuditorGeneral, the Parliament, and the Government have erred. It is an attempt to provide for the effective enforcement of -an obligation already undertaken by the parties to the Financial Agreement. If put into operation it only means that a State pays, out of money belonging to it, what it has already contracted to pay. Unless we in this National Parliament are prepared to defend that principle, the future of Australia is dark indeed

Some criticism has been levelled against the Government of the Commonwealth for not having forthwith made- an arrangement to meet the liability of New South Wales on this last occasion. I have already pointed out that it was only on the evening before the day that the payment fell due that information was conveyed to this Government that the State of New South Wales was on the eve of default. I am afraid that when default took place last year, a great many people formed the idea that it did not matter very much as all was fixed up; the Commonwealth paid; New South Wales would later sign a piece of paper; and all would be well No very real or permanent impression was produced on the public mind. It is important in the interests of Australia as a whole that such an impression should be produced upon the public mind in relation to the significance of deliberate default by a government. I'f a government is at liberty deliberately to default, then surely no individual can properly be asked to honour his obligations. A course of procedure such as that adopted by the Government of New South Wales means the undoing of our civilization. Apart altogether from the legal points to which I have referred, and apart from the actual difficulty of arranging t« raise the money here and transferring it to London, it was very desirable that everybody should understand exactly what had been done and whose was the fault. I think that the people of Australia do realize that to-day. Further, the Commonwealth Government desired, if possible, to obtain this amount of £458,000 from the proper source, namely, the funds of the State of New SouthWales, before it engaged the credit of the Commonwealth to that extent. It is hoped that that amount of money may still be found by that State. Up to the present that has not been done.

The course adopted by the Commonwealth Government in emphasizing the significance of default, and in then agreeing to make the necessary provision, and in introducing this legislation, accepting, unambiguously, liability for the future, but at the same time declaring that this Parliament is determined to enforce the obligations entered into under the Financial Agreement, by both the Commonwealth Government and the State Governments, is the course best calculated to promote the true and ultimate interests of Australian credit. I believe that this bill will do a great deal to improve the credit of the Commonwealth. We must now either act - and if we act, it must be effectively and decisively - or allow matters to drift. Allowing matters to drift means inevitable disaster to everybody in the Commonwealth. There are those who profess to protect, particularly, the interests of the poor and the needy in our midst. There can be nothingless designed to promote the interests of those people than a policy of neglect of obligations. The interests of all, but particularly of those who are least able to protect themselves, depend upon the recognition by governments of their obligations under the law of the land. The rich man is able to protect himself; he can hire defence. The poor man depends upon an honest and a faithful government. No government can be so described unless it is honest and faithful in the discharge of its public obligations. Accordingly, this measure is designed as surely in the interests of those who are poor and suffering in our midst as in the interests of anybody else in the community. Any other view may appeal to ignorance, to prejudice and to passion, but, I am sure, will not appeal to the common-sense of the people of Australia.

Debate (on motion by Mr. Scullin) adjourned.







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