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Wednesday, 24 February 1932

Dr EARLE PAGE (Cowper) .- I desire to say at the outset that I stand absolutely behind the principles of this measure. This bill, as I understand it, has been framed for the purpose of stating unequivocally that the policy of Australia is to honour its obligations, whether those obligations were incurred directly by the Commonwealth as guarantor for any of the States, or by the States as debtors. In my opinion, it declares that honesty is the policy of Australia. To have that declared in a special measure surely should not have been necessary. It should have been as a matter of course in this great Commonwealth of ours. Unfortunately, however, this policy does require stating. Every one must deplore that fact, but every one must recognize that the need has arisen.

Although I stand behind the principles of the bill, I believe that those principles are so important, so vital, and so farreaching, that they should not be all included in one measure. The bill should be divided into two parts, and I propose to offer some constructive suggestions in this regard which, I trust, the Government will be able to accept. If accepted they will have the effect, I believe, of enabling the measure to withstand the legal attacks certain to be made upon it, and also may succeed in earning for it the goodwill of the people of the various States. The bill should be in two parts, the first dealing with the Commonwealth liability under the Financial Agreement in respect to the interest owing on State debts; and the second dealing with the laws which are necessary under the terms of the constitutional amendment passed in 1928, to make New South Wales meet its obligations in full. The amendment of the Constitution upon which this legislation is based was carried in New South Wales by a majority of three and a half to one ; therefore the attitude of the people in that State with regard to the principle of this measure is not in doubt.

The bill is in two portions. The first, portion proposes -to establish beyond dispute the ultimate liability of the Commonwealth for the interest, and, even the principal, of State debt3; the second portion is to provide machinery which will enable the Commonwealth to enforce the carrying out of an agreement made with a State by that State. These two matters are entirely distinct. The former affects vitally Australia's reputation and credit overseas. As the AttorneyGeneral (Mr. Latham) stated, there is no doubt about the Commonwealth liability for the Australian debts of

State governments; the only liability that was in dispute was that relating to State bonds issued overseas. To remove that uncertainty, the first portion included in part II. of the bill is essential to maintain our credit abroad. The second portion, included in parts III., IV. and V. of the bill, however, relates to a matter of purely domestic concern - the financial relations between the Governments of the Commonwealth and the States. If the two matters are separated, and a bill is introduced to establish definitely that the credit of the Commonwealth is behind the debts of the States, regardless of any defective wording of the Financial Agreement, it will have the support of every party. If possible, it should be agreed to unanimously. The best course, if it were practicable, would be a unanimous assent to that principle by the parties to the Financial Agreement, which would have the same effect as a constitutional amendment. If such a declaration of . agreement between all the parties to the Financial Agreement be not possible immediately, we should seek it in the near future. I believe that if the controversial clauses of the bill now before the House were removed, we could immediately get unanimous acceptance of the principle of the ultimate liability of the Commonwealth for all State debt3 in this Parliament. That would assure the outside world that whatever government might be in power in this Parliament that liability would not be disputed. The responsibility of the Commonwealth to the bondholders overseas was never doubted by investors until the Commonwealth Government failed to pay the interest due by the State of New South Wales a few weeks ago. In future, that liability is not likely to be questioned by the investors or be the subject of litigation. But the measures to be taken to enforce Commonwealth rights against a State government will undoubtedly be the subject of legal dispute. Already almost every leading barrister in Sydney is preparing to participate in the constitutional argument to which this bill will give rise. Litigation over a measure affecting the credit of Australia overseas should be avoided. The point may be taken, and possibly upheld by the High Court, that a Commonwealth measure deflecting the revenue of a State into Federal coffers, especially if it taxes individuals,' is a taxing measure, and by section 55 of the Constitution, such a measure is invalid if it deals with more than one specific matter. That possibility is an additional reason why the two parts of the bill should be separated. Undoubtedly the Commonwealth was thought to be ultimately liable for all the debts of the States. According to the AttorneyGeneral, the actual meaning of the Financial Agreement is that the Commonwealth is responsible for all State debts other than certain overseas obligations, and even these were generally understood to be included in the guarantee by the Commonwealth. That is proved by the comments published in the financial newspapers of London and New York when the Financial Agreement Bill was passed in 1929, and by the published statements of the leaders of the Government at that time. Having regard to the fact that these overseas debts will, upon maturity, be converted into Commonwealth bonds in accordance with the debt conversion legislation, Ave should take the earliest possible opportunity to place the ultimate Commonwealth liability beyond dispute. If that be done, particularly by the unanimous vote of this Parliament, the task of the Assistant Treasurer (Mr. Bruce) in London, in seeking the consolidation of our overseas debt and the diminution of the overseas interest burden, will be made easier.

In regard to the disciplinary provisions of the bill, I support the Government on principle. Australia is a federation, and when this Parliament makes laws in pursuance of its constitutional powers, and particularly in pursuance of extended powers accepted within recent years by substantial majorities of the electors in each State, every real patriot should support a government that sets out to ensure that the federal law shall run throughout Australia. I again remind the House that the New South "Wales electors, by a majority of three and a half to one, endorsed the constitutional amendment relating to the Financial Agreement. It is the duty of all of us to support a federal law which will remove from the national credit and honour the stain put upon them by the action of the New South Wales Government. But although the majority of honorable members will agree with the principle involved in these provisions, the methods proposed to be employed by the Government for the enforcement of the rights of the Commonwealth are likely to be the subject of protracted and bitter struggle. With the result of this fight will be bound up the whole future of the Australian federation. I, and the members of my party, are prepared to fight to the finish to uphold the federal principle. It is now ingrained in the public and social life of our country, and its continuance is essential for the advancement of Australia, and will materially promote our progress and prosperity. But unless we are prepared to fight to the last ditch, employing every means at our disposal, the federation may be destroyed. I hope, therefore, that the Government will recognize the need for stripping this legislation of all extraneous verbiage, irrelevant principles, and methods that will not make a general appeal, so that the vital issue may be' put fairly and squarely before the people. Nothing must be allowed to interfere with the clear presentation of this issue as a fight,- not between the Commonwealth and individual taxpayers, as may be unscrupulously suggested, but between honesty and dishonesty on the part of government's. The principle at stake is not the putting of food into the mouths of starving people instead of paying our just clues to our creditors, although in my opinion honest dealings by governments with their creditors will speed up the development of Austrafia, create more employment, and provide more food for the needy. In every newspaper throughout the Commonwealth, propaganda should be conducted to inculcate that fact into the minds of the people. This continent, with an area of 3,000,000 square miles is inhabited by only 6,500,000 people, and how can we develop it without the assistance of capital from abroad?

Dr Maloney - We have borrowed too much already.

Dr EARLE PAGE - I hope that when we again seek capital from abroad it will be borrowed, not solely for public works, but principally for the development of private enterprise. We shall, however, get no accommodation from the overseas lender unless all the governments of Australia maintain the highest standards of honour and integrity. We shall not get private enterprise or anybody else to bring money into this country unless we maintain these standards. The machinery of the bill should be kept as bare as possible. "No superfluous words should be inserted in it. Lawyers know probably better than any one else how legal fights hinge upon superfluous words, the use of which has, in some instances, invalidated the whole of an act. We should keep out of the bill any suggestion of the infliction of injustice or hardship upon individual taxpayers, and make sure that there is no possibility of its provisions being misconstrued, because, in vulgar parlance, this is going to be a skin game. That is quite evident from what took place yesterday in the "New South Wales Parliament. We must frame this legislation in such a way as to prevent any distortion of its meaning. We must also avoid any' suggestion of infringing State rights. One of the chief virtues of the Financial Agreement was that it sought to perpetuate federation in Australia. It was an arrangement which secured to the various States for 58 years a certain and definite portion of increasing federal, revenues. It consolidated the position of the States which had not the opportunities of larger States to obtain public moneys. Its object was to assist and maintain the federal principle, and we should ensure that, under this legislation, nothing is done which may ultimately force unification. We must also be careful not to include in the bill any provisions which may tend to invalidate it. We need to succeed both in our legal and political fight, and if we lose a legal battle on this issue we shall find that those who are opposed to this bill will hail that event as a victory. That undoubtedly would be a bad thing for us from a political point of view, and, ultimately, from the point of view of the whole of the people. We shall have great difficulty in getting the taxpayers interested in this particular fight, because, whether the Commonwealth or "New South Wales wins, there will be no immediate reduction of taxation. The ordinary taxpayer is not very keen on a fight to decide whether the Federal Government or the State Government is to collect his taxation.

Mr Blakeley - The taxpayer may have to pay taxation to the two Governments.

Dr EARLE PAGE - We must provide against that. This fight should be between governments, and not directed or misdirected into one between governments and individuals. In framing this legislation we must endeavour to protect the rights of the States, and I should like to incorporate in it some provision which would ensure to the States some say in its actual operation. For instance, before the Commonwealth Government takes action under this legislation, it should be supported by a majority decision of the Loan Council. That would bring the States into the matter, and place the issue on a proper basis. It would prevent any attempt to make the fight appear as one between, say, the right honorable member for Flinders (Mr. Bruce) and the rest of Australia. Such a thing would be harmful to the future of Australia, although it might have some temporary political advantage. We must confine this fight to one between the honest Governments of Australia, whether Federal or State, and any dishonest government. The bill should contain also a provision setting out the action to be taken against any dishonest Federal Government. Ultimately all securities of the various States will become Commonwealth securities, and in that event any interest moneys paid by the States to the Commonwealth may be put to an improper use. There should, therefore, be placed in this bill some provision to secure the States against the action of a dishonest Federal Government, and, if that is done, the public will understand the real issue. It cannot be distorted into a fight between the Commonwealth and the States, but will be seen for what it is, a fight between honest and dishonest governments. When discussing this bill we must decide whether it will do the work for which it is destined without inflicting injustice upon individuals or even States. We must make certain that this legislation contains no provision which would make it dangerous in the hands of wreckers. We have to make it an instrument as fool-proof as possible. A dangerous government might think twice before introducing dangerous legislation, but it would not hesitate to use for its own purposes legislation already in existence. We must also ask ourselves whether this bill properly protects State rights. When we examine its procedure we find that although there is in it a provision which enables -the Commonwealth to attach all the revenues of the various States should they default up to the point of meeting the defaulting State's liabilities, yet from ' the speech of the Attorney-General (Mr. Latham) it is quite obvious that that is not the Government's intention. The Attorney-General said, and the Leader of the Opposition (Mr. Scullin) quoted his exact words, that any action on the part of the Commonwealth to attach the revenues of a State by putting in a receiver might easily lead to civil conflict. Therefore, another method has been adopted which seems to attach the amount due by the individual taxpayer by making certain that he pays it, not to the State, but to the Federal Government. That method presents great practical difficulties. For instance, if the State taxation officers refuse to collect taxation, we shall have to create new taxation machinery. The State may cancel its legislation levying income taxation, or suspend its collection, and make it impossible for the intention of this Parliament to be carried out. I suggest that instead of worrying about this civil conflict, which, if it must ultimately arise will arise just as quickly from attacking the individual and the Government, we should take the bold course and attach the revenues of a State Government at the central point of payment. This will save any irritation directly to individual taxpayers, and will not put subordinate officials in an invidious or difficult position. Provision is made in the bill to enable us to do that in regard to moneys held by banks on behalf of a State. The revenue that, in my opinion, we should specifically attach - and this should appeal to the people of Australia as a just attachment - is that derived from railways. Railway revenue is essential revenue derived from the operation of assets for which State debts have been incurred. In the early days of federation Sir George Turner, in submitting his proposals for the consolidation and taking over of State debts by the Commonwealth, always accompanied them with a proposal for the handing over to the Commonwealth of State railway revenues up to the point necessary to reimburse interest. He obviously, was not so trustful of the other States as we have been in respect of our financial agreements. Railway receipts are definite receipts from a large public undertaking and are paid into various banking institutions.

Mr Lane - If railway receipts are to be handed over to the Commonwealth, the States may stop the operation of the railways.

Dr EARLE PAGE - No, because the railway services are being paid for, not merely from railway receipts, but from taxation levied by the various States.

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