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Thursday, 25 February 1932


Mr FORDE (Capricornia) .- The Leader of the Opposition (Mr. Scullin) dealt comprehensively with this matter yesterday, and raised the level of the debate to a high plane. This is a matter on which we should not entertain bitter party animosities towards any government or individual. In its importance, it transcends party politics altogether, and I trust that honorable members will be able to consider the question free from any bitterness which they may feel towards a certain gentleman who happens at the present time to be Premier of New South Wales This legislation is going to be most unpopular in certain quarters, and very popular in others. Members of the legal fraternity are looking to it as a means of reaping a rich harvest. They, in common with other sections of the community, have suffered from the depression, because, when people have very little money, they are not prepared to quarrel and engage lawyers. Not only will this legislation be unpopular with certain honorable members in this House who take a long view of the situation, and are apprehensive that unconstitutional act's may be committed by the Government, but it has also met with the disapproval of at least one of the State Governments, that of Tasmania. That is the State from which our own Prime Minister comes, and its Premier, in a published statement, takes strong exception to this bill. Probably when we hear from the Premiers of the other States some of them will take similar objection. In this morning's issue of the Sydney Morning Herald it is recorded that, after a Cabinet meeting yesterday, the Premier of Tasmania, Mr. McPhee - who, by the way, is a Nationalist Premier - forwarded the following message to the Prime Minister of the Commonwealth: -

My Government views with grave concern the important and far-reaching nature of the financial and emergency measures now before the Federal Government. We feel justified in urging that the States be given a reasonable opportunity of examining these proposals, details of which have only just come to hand. I would appreciate advice whether your Government can accede to this request.

That is a reasonable request. No one knows the Prime Minister better than does Mr. McPhee, because they were colleagues in the Tasmanian Parliament. It is only reasonable to assume that the Premiers of the other States will also be most anxious to have an opportunity of examining this legislation carefully before they commit themselves regarding it. This gives point to the suggestion of the right honorable member for Cowper (Dr. Earle Page) and the Leader of the Opposition (Mr. Scullin) that the States might very well have been consulted regarding this legislation before -it was submitted to Parliament. I do not suggest that we should hand over any of our powers or authority to the States, but the Prime Minister himself has said that this measure is one which vitally affects all the States, so that he might have sought their opinion regarding it or they might have been consulted at the Premiers Conference. There appears to be no doubt that the Premier of Tasmania, at any rate, is hostile to the measure.

From my study of the bill it seems to me that it must inevitably result in protracted litigation. The Attorney-General (Mr. Latham) was the author of this measure, and chief legal adviser to the Government. He is leaving Australia, and will not be present to unravel the legal tangle which will undoubtedly come about when the bill is passed, or, at any rate, when steps are taken to enforce it. A former Nationalist Government introduced a certain piece of legislation into this Parliament, and assured honorable members that it was constitutional. It was stated that the best legal advice had been obtained, and there was no doubt as to the constitutionality of the proposed legislation. But when its validity was tested in the High Court, judgment was given against the action taken by the Government under the deportation sections. The Federal Labour party, which constitutes the official Opposition in this House, does not stand for repudiation in any form. It stands rather for the fulfilment of this nation's obligations, and of obligations between individuals in this country. While we cannot support, the measure in its present form, we are prepared to support any legitimate step which in law may be taken to compel a State government to recognize that, just as a ci tizen who chooses to live under British rule must observe the law of the land, so must a government which accepts the responsibility of administering an Australian State observe the law of the

Commonwealth. The Government in introducing this measure has blundered. I agree that if a government is at liberty to default deliberately, then no individual should be compelled by that government to honour his obligations to the State. Deliberate default by a government does not find jobs for any one in the community. Instead of putting people into employment it undermines confidence, -withholds capital from industry, and thus adds to the number of unemployed in the community. The Federal Labour Executive and the Federal Labour Conference, the controlling bodies of the Australian Labour party of which I am a member, gave serious consideration to this question at the time the Premier of New South Wales enunciated what is known as the Lang policy, and the Federal Executive carried this resolution - "The platform and policy of the Australian Labour party does not' declare, and never has, declared for repudiation ". This subject was of such importance to the Labour movement throughout Australia that a Federal Labour Conference was held, and it approved of this declaration -

This conference declares against the Lang pronouncement to refuse deliberately to pay interest obligations on loans raised from the general public of Australia and in England, which is contrary to the Labour policy.

That was the well-considered pronouncement' of the Federal Labour Conference, comprising delegates drawn from every State of Australia. It shows clearly that the action taken by this party in opposing a deliberate act of repudiation is in accordance with the expressed wishes of the Federal Labour Executive and the Federal Labour Conference of the Australian Labour party. The ^ conference also stated that the act of repudiation would not restore stable economic conditions, and place men back at work, but on the contrary would aggravate the position. It added that the application of the so-called Lang policy to overseas debts would result inevitably in trade reprisals against Australia, which would bring in their train increased unemployment and financial chaos. I agree with the decision of the Federal Labour Conference. If we are to give employment to the people we must create credit. We must so ad- minister the laws of the country as to give confidence to investors to spend money in the development of industry. Deliberate repudiation tends to tie up all sources of credit, and to bring about a withdrawal or withholding of capital from industry, thus putting more people out of work and on the dole.

I have listened with interest to the speeches of many honorable members on this measure, and particularly to that of the right honorable member for Cowper (Dr. Earle Page). For seven years he was Treasurer of this country and whatever we may think of him politically, we know that he has made a close study of the financial position. He has given this measure much consideration, and everybody who listened to him must agree that, apart from his preliminary remarks indicating that he was behind the Government, and was elected on a mandate to support the Government, his speech was, in the main, against this measure. He killed it with faint praise. He pointed out all the loopholes in if. In effect, he showed that it was ill-considered legislation. Let me summarize some of his objections to it. He said, first, that we should be careful not to infringe State right's; secondly, that we should be careful not to destroy federation, and adopt a form of unification ; thirdly, that the States should have some say in the initiation of this legislation. It is evident that' the Premier of Tasmania at least thinks that he should have been consulted before this measure was introduced. The right honorable member for Cowper (Dr. Earle Page) said, fourthly, that we should bring about an alteration of this legislation to enable a dishonest Federal Government to be caught in its own net; and, fifthly, that the Commonwealth Government should not have powers which could not be exercised by State governments in the event of the Federal Government defaulting.


Mr Maxwell - Does the honorable member endorse those objections?


Mr FORDE - I endorse some of them. The speech of the right honorable member for Cowper shows clearly that there are a number of honorable members in this House, even on the Government side, who do not believe in this legislation.

Unfortunately, they are under the domination of the party machine. No one knows that better than the honorable member for Fawkner (Mr. Maxwell) who was expelled from the Nationalist party because he voted against the Arbi1tration Bill in this House in 1929, and the honorable member for Darling Downs (Sir Littleton Groom) who was the victim of a bitter vendetta instigated by the then Prime Minister (Mr. Bruce), because he, as Speaker, dared to stay outside the House and to adopt a neutral attitude when Mb leader considered that he should put party before the speakership and the country. I mention that because the honorable member for Fawkner laughed at the suggestion that some of the Government supporters will blindly follow the decision of Cabinet and vote for this party measure. The right honorable member for Cowper, in raising a number of objections to this legislation, did a service to this House. He said that the. bill should be divided into two parts. He pointed to the possibility of its being proved unconstitutional because it contains matters other than taxation. He said emphatically that the nonpayment of interest on its due date was a huge blunder. , His criticism against this measure was effective. I quote his remarks, because, at one time, he was a colleague of the Assistant Treasurer (Mr. Bruce) who is credited with being one of the authors of this legislation. The Assistant Treasurer contended that the Government in taking action by resolution of parliament under clause 6 would not be ousting the court. I refer the right honorable gentleman, who is now Acting Attorney-General, to the following statement made by the AttorneyGeneral (Mr. Latham) in this Parliament last Friday morning: -

An alternative procedure is set out in clause G 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.

It is clear from that statement that provision is being made to oust the court if thought necessary, ('because this Parliament has power to rush in and carry certain resolutions which the Attorney-General considers will give the Government power to take revenues that otherwise would be paid to the Government of New South Wales, without first obtaining the decision of the High Court of Australia - the recognized interpreter of the Constitution. Although the Assistant Treasurer spoke plausibly and glibly about the bill, and tried to enumerate its good features, it is evident from a study of his speech and that of the Attorney-General that they, at least, have two minds on the subject. The right honorable gentleman was unconvincing when he tried to show that the High Court would not be prevented from discharging its proper functions if the provisions of clause 6 become operative; but he admitted that extraordinary power was being conferred upon the Government by those provisions, and said that a proviso could be inserted to the effect that if the powers were exercised, application must be made within a reasonable time for a judgment of the court. The criticism to which the bill has so far been subjected has, therefore, been sufficiently strong to oblige the right honorable gentleman to reconsider his position and to change his ground. Even if provision was made for an application to be submitted to the court within a reasonable time, the phrase " reasonable time " would need to be defined. It will be remembered that the Constitution provided that the Federal Capital should be established within a reasonable time. That " reasonable time " turned out to be 27 years. This shows the necessity for definiteness in our legislation.

The honorable member for Perth (Mr. Nairn) has also criticized this bill to some extent, but he did not maintain the standard of debate set by the Leader of the Opposition (Mr. Seullin). He misrepresented both the attitude and motives of this party.


Mr Makin - His speech was most illogical.


Mr FORDE - That is so. He said that when the present Leader of the Opposition was Prime Minister he took no action against the Government of New South Wales. That statement was quite inaccurate. The Leader of the Opposition outlined definitely yesterday the action taken by his Government to oblige the New South Wales Government io meet its obligations. He pointed out that the writs issued and proceedings instituted in the Hight Court were withdrawn only after the Premier of New South Wales had agreed to meet his obligations, and that the withdrawal was made with the complete endorsement of the Prime Minister (Mr. Lyons), the Attorney-General (Mr. Latham), and the present right honorable member for Flinders (Mr. Bruce).

The Assistant Treasurer was also forced to admit yesterday that a provision should be included in the bill toindemnify State taxpayers in respect of subsequent proceedings that might be taken against them if their taxes were paid to the wrong authority. The Leader of the Opposition and other speakers had drawn attention to the necessity for such a provision. It might happen that a State taxpayer, from fear of being fined or for other reasons, might pay his taxes to both the Commonwealth and State authorities. In present circumstances it is extremely difficult for primary producers in particular to find the money to meet their taxation in a normal way; and they would bo involved in very grave disabilities if they felt it necessary to pay twice in order to protect themselves. We know very well that shareholders in such a concern as the Newcastle steel works, who are resident in States other than New South Wales, might also be gravely inconvenienced if the provisions of this ill-considered bill became law. Enough has been said to show that the measure has serious defects.

Reference has been made to the attitude of the Labour party in respect of war debts, and the interest due thereon. Although this party is definitely opposed to the deliberate repudiation of this indebtedness, it believes that the time has arrived when the whole subject of international war debts should be reconsidered with a view to cancellation of the debts by agreement or, failing that, to reductions in interest payments, but any such reconsideration must be given honorably. We should not adopt a " stand and deliver " attitude, because those who lent us money to prosecute the war did so in good faith. I am hopeful that this subject will receive careful consideration at the Geneva Disarmament Conference, because it is one which must vitally affect the whole problem of disarmament. It cannot be denied that war debts are weighing very heavily upon practically every country in. the world to-day. I believe that some honorable amelioration of our position in this' respect is essential before the economic depression in which we find ourselves can be lifted. If an individual incurs a debt which he subsequently finds he cannot meet, he seeks his creditor in an honorable way, if he is an honest man, and endeavours to re-arrange the conditions of repayment. That is' the attitude which should be adopted by the nations. The Labour party stands for the reconsideration of our' war indebtedness by honorable negotiation.

The honorable member for Swan (Mr. Gregory) revealed by interjection yesterday his fear that this bill is fraught with real danger, for he asked whether the duration of the measure could not be limited. The honorable gentleman is a State lighter, and resists every proposal which he regards as an infringement of the sovereign rights of the States. I point out to him that a limitation of the life of the bill would not get over the difficulties which he doubtless sees ahead, for once a bill of this kind has been put into operation, other governments may adopt similar measures tq suit their own purposes.

If the view of the Attorney-General is right, that there may be some resistance to a judgment of the High Court given under the provisions of clause 5 of the bill, we can take it for granted that there will certainly be resistance if the provisions of clause 6 ever become operative. This clause provides that the machinery of the bill may be put in operation after a resolution has been adopted by both Houses of the Parliament, and before the highest legal tribunal in the land has been approached. It has been pointed out already that the Commonwealth would have difficulty in collecting State taxation to serve the objects of this bill. At present the State authorities collect taxation for both Federal and State Governments, excepting in Western Australia. If the Commonwealth Governmentattempts to interfere with, say, the taxation officers of the New South Wales Government, it will find itself in a very queer position. Such, officers are dependent for their future promotion on the goodwill of the State authorities, and they will not readily disobey instructions given to them by a State Government. I have always held the view that the Commonwealth made a retrogressive step when it handed over its tax-collecting machinery to the State Governments. That action tended to strengthen the power of the States, and to reduce the power of the Commonwealth. "We can see now that the collection of State taxes for Commonwealth purposes will, in the existing circumstances, he very difficult. It is probable that passive resistance will first be offered to any attempts of the Commonwealth to collect taxation clue to the States, but it is quite likely that, later, force might be used. It would be deplorable if such a state of affairs developed in Australia.

It has been said that clause 4 of the bill is designed to remove any doubt that might exist as to the liability of the Commonwealth Government to pay interest on public debts taken over by the Commonwealth from the States. In my opinion, the clause is a sham, and has been inserted in the bill to cover up the grave blunder perpetrated by the Federal Government in allowing Australia to default on the 1st February. It might be said that there was no default, but such a statement cannot be substantiated. As the Assistant Treasurer said last night, everybody recognized that when the Commonwealth assumed responsibility for the State debts it also accepted liability to pay all interest that became due in the event of a State defaulting. The Commonwealth, as a matter of fact, became the guarantor to other States that interest and State debts would be paid. Under ex sting legislation although the bondholders abroad could not sue the Commonwealth, they could sue the States. The Commonwealth guaranteed to the other States that the interest would be paid, and I doubt the wisdom of diverting the legal fire from the States 10 the Commonwealth. The right of action which bondholders formerly had against defaulting State Governments will, under this bill, bo right of action against the Commonwealth Government. This may be regarded as a hint to

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States that do not wish to pay, that their legal liabilities may be transferred to the Commonwealth. This year Australia will have to borrow £13,000,000 in London to meet maturing loans, and during the next two years many millions more will have to be borrowed. The action of the Commonwealth Government in allowing default, to take place in respect of the interest obligations of New South Wales will make more difficult the raising of new loans. Bondholders in Great Britain do not think of Australia in terms of Federal and State Governments and Federal and State politicians; to them it is one nation. They have in good faith invested in Australian loans - those raised by New South Wales were not for war purposes, but for the building of roads, railways, bridges, land development, and irrigation schemes, which gave employment to the people of the State - and when hundreds of thousands of comparatively poor persons, who are dependent upon their interest income for their sustenance, do not receive it on the due date, they do not place the responsibility on this or that politician; they know only that Australia has defaulted. Therefore, the Commonwealth Government struck a serious blow at the credit of this country when, in order to crush Mr. Lang, it allowed default in respect of the interest due by New South Wales, and payable in the last resort by the Commonwealth. During the recent general election campaign, Nationalist candidates assured the electors that if the Commonwealth Government were changed, Mr. Lang would be put out of office within three months. The Lyons Government has been in office for two months, and Mr. Lang is still secure. The Nationalists -undoubtedly played on the sentiment of the people, particularly in those portions of New South Wales in which public feeling is hostile to the present State Government. They condemned the Scullin Government for alleged weakness because it paid the interest liability of New South Wales when that State defaulted last year. Yet, the election having been won by such propaganda, the Prime Minister admits that his predecessor acted rightly in making good the default of New South Wales, whilst the Attorney-General in his speech on Friday last emphatically approved of the action of the last Government. I remind the House of the concern expressed in many newspapers when the Commonwealth allowed Mr. Lang's default to continuewhen it said to him, " We shall both default together, because if the Commonwealth pays your debt you may gain something." The Melbourne Age, in a lending article oil the 17th February, said - '

With any legal notion that may be pending between governments, bondholders have no call to be concerned. The liability for the payment of their interest is the Federal Government's liability, and as long as it leaves the liability unredeemed it is advertising its lack of competence and sensitiveness to national dishonour.

Even the Assistant Treasurer said last evening, "We have always said that the Commonwealth was liable to pay interest on State debts in the event of the State Governments, defaulting." As a matter of fact every person who ha3 an interest claim on the New South Wales treasury understood that in the last resort the Commonwealth would accept liability. The right honorable member for Cowper (Dr. Earle Page) rightly said that the Government had gravely blundered when it refused to make the payments due to the overseas bondholders. I contrast this' action with that taken by the Scullin Government. When Mr. Lang advised the Federal Government on the 24th March last, that he did not intend to meet the interest payable to the Westminster Bank on the 1st April, the then Treasurer rightly sought legal advice regarding the responsibility of the Commonwealth, and on receipt of it cabled to the High Commissioner in London, inter alia -

Advice received shows that the Commonwealth is under legal obligation to States which ave parties to Financial Agreement to pay the interest, and also that the Commonwealth has legal right to pay. The Commonwealth accordingly will make provision to pay the interest falling due in London, which New South Wales has declined to pay.

The present Government could have followed the same course. Two wrongs do not make a right. Apparently the Prime Minister thought to bring about the downfall of Mr. Lang by refusing to pay the State's debt, but he made a great mistake.

In hi.3 endeavour to strike a blow at the prestige of the New South Wales Premier he besmirched the credit of Australia abroad. Tho National Bank of Australasia, in its monthly summary for January last, said in reference to the default by New South Wales and the Commonwealth - it is unfortunate that the consequent delay in paying certain matured interest obligations of the State of New South Wales has had a disturbing influence on the investing market, but there is no doubt that the interest will be paid shortly.

Many newspapers pointed out the bacl effect which the Commonwealth's default had had on the overseas money market. It caused Australian stocks to slump, and has made more difficult the conversion of loans about to fall due on the London market.

The drastic provisions of clause 6 infringe the sovereign rights of the States. The exercise of such powers was never contemplated by the framers of the Constitution, or by the representatives of the States when they signed the. Financial Agreement, or by the people of Australia when they endorsed it. It is a negation of the spirit of federation. The Federal Labour party stands for one sovereign parliament for Australia, but desires that the transfer of power from the States to the Commonwealth shall be made, not- by back-door methods, but by a referendum of the people, and with the approval of the majority of those voting in a majority of the States. No government is entitled to use its parliamentary majority to whittle away the rights of the States."


Mr Maxwell - What right is being taken away? Is it the right to repudiate honorable obligations?


Mr FORDE - Clause 6 gives to the Attorney-General of the Commonwealth a right to move the High Court which is not given to any State Government. Both plaintiff and defendant should have right of access to the High Court. Confiscation of State revenues by a snap vote of Parliament, without recourse to a High Court decision, is an infringement of State rights. But a chance majority in this Parliament may decide upon taking drastic action against a State without allowing it to be heard before the highest tribunal in the land. Clause 6 is unfair, and would not be tolerated by members opposite if they were not bound hand and foot to the party machine. The framers of the Constitution never intended or contemplated that the federal authority should be able to seize the revenues of a State without first applying to the High Court. Such drastic action would not be permitted a private individual, and should not be permitted a government.

No doubt there will be. some who, for party political purposes, will misrepresent the attitude of the official Opposition to this measure, but my leader has clearly pointed out that the Federal Labour party stands for the fulfilment of the nation's obligations. It has no sympathy for any party to a contract who elects to dishonour his or its obligations. If the question at issue were simply whether New South Wales should honour its obligations under the Financial Agreement, and whether the Commonwealth would be justified in exercising its legal rights to compel the State to do so, the Opposition would undoubtedly answer in the affirmative. The questions at issue, however, are not so simple, even though we approach the subject with the firmest conviction that New South Wales should discharge its obligations. If all the members of the Nationalist and Country parties were free to vote as they think on this measure, and free of political prejudices, many of them would adopt the same attitude as the right honorable member for Cowper. I would like to hear the views of the honorable member for Martin (Mr. Holman), and the right honorable member for North Sydney (Mr. Hughes). I know that consideration of their prospects for promotion to Cabinet rank will not deter them. They have expressed themselves candidly in the past, and I hope that they will give to the House the benefit of their long study of the Constitution.

The questions honorable members are called upon to decide are whether the course- which the Government is proposing in this legislation is a valid exercise of the powers conferred on this Parlia ment under the Constitution as amended; and if it is valid, whether it is a proper exercise of them. Whether it is valid or otherwise must be ascertained by the interpretation of section 105a of the Constitution, which em"powers the Commonwealth to enter into agreements with the States, and to enforce the provisions of such agreements. Protracted litigation is bound to ensue if this bill is passed. If the Government exercises the powers conferred by clause C it will, as the accuser, decide the case, by the use of its parliamentary majority, the members of which are bound, under pain of expulsion from the party, to vote according to the Cabinet's direction. A fundamental principle of the protection of life, liberty, and property is that no mau shall be the judge in his own cause. If that principle is sound as between individuals, it is surely sound as between governments. The Financial Agreement is a partnership between the Commonwealth and the States. What if the Commonwealth deliberately defaulted? Certain powers are given hy this measure to the Commonwealth to deal with the defaulting States, but no powers are given to the States to cope with a defaulting Commonwealth.' If it is right that the Commonwealth should be both the accuser and the judge in this matter, in accordance with the powers given under clause 6, what would be the way to decide the. question if the Commonwealth had defaulted and the States had a grievance? It may be argued that notwithstanding any action taken under paragraph a of clause 6, the jurisdiction of the High Court might be invoked. That course could be followed, but only at the instance of the Federal Attorney-General. That is an important point which has been recognized by the Assistant Treasurer. The same right is not given to the State Governments which have sovereign power and control their own revenues and staffs, including the police force, as the Commonwealth Government controls its affairs. The High Court has always been recognized as the interpreter of the Commonwealth Constitution, and that issues such as this should be decided by the Commonwealth High Court is one of the cherished principles of our judicial system. Once we depart from that principle we are stepping on uncertain ground.

I consider that the introduction of this measure in its present form was a huge blunder. This action was dictated by_ personal bitterness and party political" feeling between the Commonwealth Government and . the party in power in the State of New South Wales. The seriousness of the blunder which has been committed will be brought home to the Government in a few months, and it is only one of many mistakes, such as the removing 'of the preference to members of the Waterside Workers' Federation and to returned soldiers on the waterfront, which is one of the biggest blunders of this Government. It blundered also when it appointed the Assistant Treasurer to be Resident Minister in London, and one of its most grievous mistakes was its failure to meet the interest payments due on the 1st February, when it allied itself with the Lang Government in a policy of repudiation. That action will redound to the discredit of Australia and -will shake the confidence of bondholders abroad in the ability of Australia to honour its obligations. These mistakes have been made by the party that came into office by shouting that it believed in paying every penny of interest clue by the Commonwealth, whether it was State or Federal indebtedness. They secured a victory on the 19th December last by sheer misrepresentation. Because of some of the objectionable provisions in this measure it should be rejected, and I believe that that is the view of a number of honorable members who would like to express that opinion, but for party considerations are not prepared to admit it.







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