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Friday, 26 February 1932

Mr HOLMAN (Martin) .- Rising at this late stage of the debate, I feel that I must preface my remarks by an appeal to the indulgence of honorable members. The case for the bill has been put, not only by the Prime Minister (Mr. Lyons), but by two of his colleagues, in speeches which all honorable members will agree were admirable, and many will consider convincing. It may seem superfluous, therefore, that another member should attempt to add illumination where already so much light has been given. I can only say in defence that, there are still points which require further discussion, especially those raised by the Leader of the Opposition (Mr. Scullin).

The right honorable member for Flinders (Mr. Bruce), speaking for the Cabinet, invited those of us who had suggestions to make not be to backward in stating them. I assure honorable members that I shall shorten my remarks all round, and particularly to the extent that I shall not occupy time in discussing the need for some such measure as that before us. I take the need of it for granted. There has been no serious opposition to the view that some such measure is needed, except from the honorable members who more or less represent in this House the present Government in New South Wales. They have put their opinions very forcibly, and I have listened to them with deep attention and some benefit. I was among those who were thanked by the honorable member for East Sydney (Mr. Ward) for the courteous and attentive hearing accorded to him. I gave those honorable gentlemen such a hearing, and benefited by their remarks; but I am bound to say that I did not hear from the honorable member for West Sydney (Mr. Beasley), or from any of his followers, . anything which sways my conviction that the introduction of this measure is absolutely justified at the moment.

References which were made yesterday by the honorable member for Hunter (Mr. James) to the Gospels, stand, perhaps, on a somewhat different footing. I remind him of a passage which may have escaped his notice. It is there laid down as a Christian duty to " render to Caesar the things that are Caesar's." I suggest that the honorable member, in his unaccustomed theological studies, might devote some attention to the passage I have quoted, because it bears a close relation to the matter now under discussion. In fact, it constitutes Scriptural authority for the action we propose to take.

I desire to confine my remarks to the bill, the wholebill and nothing but the bill, and so far as possible to refrain from commenting on the present state of affairs in New South Wales, or the division of opinion which arises when honorable members who represent New South Wales discuss this measure across the chamber.

It is nowa commonplace that the bill aims at the achievement of two entirely different objects. The first part of the measure - by which I do not mean technically Part I. of the bill, which contains merely preliminary matter, but the first portion of the bill taken as a whole - does absolutely create new rights. It imposes new liabilities, and brings those liabilities to bear upon new parties. That is of the first importance, and this portion of thebill must be distinguished from the remaining portion, which deals with rights that are already in existence. The liabilities there dealt with have been created by the existing law, and the parties which are made subject to the provisions of the measure, are already in existence, and are already in contractual relation to each other as a result of past loan operations. The second portion of the bill provides for an alteration of procedure, and for nothing else. It does not change substantive rights; it makes no man liable, even to the extent of Id., who was not liable before; it merely replaces the existing method of procedure for the establishment of rights and the recovery of debts by a better method. That is not to say that the second portion of the bill is not an enormously important piece of legislation. Honorable members will forgive me for taking a parallel drawn from the history of the English law. The Habeas Corpus Act is recognized by all constitutional historians as one of the turning points in the history of English liberty. But that Act, when passed in the reign of Charles II., was merely a law governing procedure. The right itself had existed from time immemorial. 3fet the procedure for its enforcement enacted some years after the Restoration is regarded by all students of legal history as marking a great advance in English freedom, because it substituted for an illusory and fallacious remedy one that is practical and can be easily applied. Similarly there is a remedy available to the Commonwealth to-day for the recovery of debts from the States; but the Attorney-General (Mr. Latham), whose personal opinion is based upon his knowledge of the papers which accumulated during the effort - no doubt, a perfectly sincere and energetic effort - on the part of the Leader of the Opposition (Mr. Scullin) when in office last year, has come to the conclusion that that procedure is unsatisfactory, and to some extent illusory. Therefore he proposes other remedies, remedies which he believes - and I share that belief - will be swifter, more certain, and more satisfactory. I regret to have taken up time in pointing out this distinction between the two portions of the bill, which has been mentioned by the honorable member for Darting Downs' (Sir Littleton Groom) and other speakers. But I feel that the importance of distinguishing between the two objects aimed at has not been borne in mind by all honorable members, and as I propose to review briefly the objections which have been made to both portions, it is essential that it should be made clear that one portion aims at one result, and the other at another.

The Leader of the Opposition, in his most weighty volume of criticism against the first portion of the bill - criticism to which I listened with the utmost attention, and have given full consideration - said this: "Is it necessary or advisable that the Commonwealth should at this stage assume liability for State debts abroad ; and secondly, i3 it permissible to do so under the grant of power added to the Constitution by section 105a, which was carried by the people some two or three years ago." Then passing to the second portion of the bill, the provisions for obtaining redress, the Leader of the Opposition put two questions of the utmost importance: (1) Are those provisions actually unjust in any way - a most important consideration, and (2) can those provisions be made to appear unjust by interested parties. The Leader of the Opposition says-and I am entirely with him - that both of those possibilities are to be avoided with most scrupulous care. We must avoid, not only what is actually unjust, but also anything likely to instil into the minds of a State the fear or doubt that this Parliament is legislating to injure its rights. On that the majority of honorable members will be at one with the Leader of the Opposition. By way of illustrating his points, he asked, "Are we not making ourselves accuser and judge in our own cause?", and he strongly deprecated that that should be done or should appear to be done. We are all in agreement with him there. He doubts whether the new scheme will provide a better remedy than we have to-day under the ordinary procedure of the High Court. The right honorable member for Cowper (Dr. Earle Page) followed that line of criticism with observations which must have struck every honorable member as being most important. Let me briefly review his criticism. He said that the bill attacks the indivi- dual citizen in this country, and puts him in a position of great discomfort, and, possibly, loss, because of the misconduct of a person who happens for the moment to be the Premier of New South Wales, whom that individual may have taken no hand in putting into the position he occupies. The right honorable member says that there is the possibility of a 'period of chaos. He thinks, too, that we should - ultimately at all events - apply also to the Commonwealth the precautions that we are applying here regarding a State headed by a dishonest Government, or one unscrupulous in respect of its obligations, because of the possibility of the Commonwealth being similarly governed in years to come. That is an extremely profound suggestion, yet if it were acted upon, it might lead to delays and difficulties in legislation which would defeat the object which the honorable member equally with members on this side of the House desires to attain. Finally, taking these important objections in their order, the honorable member for Darling Downs pointed out yesterday that the notice to be given to a State before the new remedy can be enforced may be absurdly insufficient, and he mentioned the possibility of the Government of Western Australia being summoned to defend itself on three days' notice. With each of those objections, in turn, I propose now to deal briefly.

The Leader of the Opposition asked, " Is it wise or desirable to accept liability for the States in regard to foreign bondholders? On that point I am in some difficulty. When the right honorable member found himself confronted by a similar problem some six or seven months ago he obtained, as he has told us, the advice of counsel of standing, both in Melbourne and Sydney. As a legal man, I am at considerable disadvantage in not having seen the opinion given in respect of the points that were submitted, otherwise I should not have thought that there was any real doubt whether foreign bondholders had any remedy against the Commonwealth on a State bond. I understand that the advice that the right honorable member obtained was to the effect that there was a remedy against the Commonwealth.

Mr Scullin - The strength of the information given to me was that the Commonwealth was liable to the States - not to the defaulting State - to meet the liability of a defaulting State.

Mr HOLMAN - I am indebted to the right honorable member. I was under a misunderstanding, which arose in the course of the debate. I am entirely at one with the counsel whom the right honorable member consulted. The language of the agreement is not always perfectly clear. It is a lengthy and complex document. The bulk of it is perfectly lucid and intelligible, but certain passages in it are ambiguous. I do not commend that which I am about to read as one of the best drawn in the agreement, but, notwithstanding, it has, I submit, a clear meaning. This is portion of Part III. of the agreement. It appears on page 104 of Sir Edward Mitchell's book, and reads -

Subject to the provisions of this part of this agreement the Commonwealth will take over on the 1st July, 1929 -

(i)   the balance then unpaid of the gross public debt of each State existing on the 30th June, 1927; and

(ii)   all other debts of each State existing on the 1st July, 1929, for moneys borrowed by that State which by this agreement are deemed to be moneys . borrowed by the Commonwealth for and on behalf of that State-

Then appear these words - and will in respect of the debts so taken over, assume as between the Commonwealth and the States the liabilities of the States to bondholders.

What that precisely means is a little difficult for a lawyer or layman to answer at the first reading, but the phrase " as between the Commonwealth and the States " was not inserted for nothing. Let me read the passage without that phrase - and will in respect of the debts so taken over assume the liabilities of the States to bondholders.

That might be taken as an assumption of liabilities to the bondholders. Reading the passage as it appears in the agreement greatly strengthens the view that there is a liability on our part to the States, and a liability on their part to us ; but the contract is wholly between the

States and the Commonwealth, and it is an elementary proposition in law that a stranger to a contract cannot sue on it. Even though a contract is made wholly for the benefit of a third person, that person cannot enforce it. If I wish to send some books to a man in the country, and pay money to a bookseller who fails to send them, the man in the country cannot sue the bookseller, although the contract was made entirely for his benefit. The only person who can sue in that case is myself. Therefore, an agreement between the Commonwealth and the States would not, according to the ordinary principles of law, allow a third person, a bondholder in Great Britain or Europe to sue upon it, even though everybody- knows that the agreement was really made for his advantage. I confess that because of my misunderstanding of the right honorable gentleman's observation, I thought his mind was not clear on that pont. But there being no real doubt in his mind regarding it. it is clear that the Commonwealth of Australia could take no better step with the object of restoring confidence in the eyes of the world, which has been shaken by recent unfortunate happenings, than to pass this law and announce widely in London, New York, Paris, and other financial centres, that whatever may be the actual language of the agreement the Commonwealth is now, by act of the Parliament, accepting full liability to the bondholders of Australia. That' is what this Government is doing. In these circumstances the main difficulty raised by the Leader of the Opposition in this connexion disappears.

It may be asked whether the first portion of the bill is a valid exercise of the legislative powers of this Parliament. I submit with great respect that it must be. The Commonwealth Government, if it so chooses, could take liability for any matter, for it has full control of the finances of the country. "We are meeting here as the representatives of the people, and we shall not spend the people's money without good cause. The power to make arrangements with foreign countries carries with it the power to accept any liabilities which, in the opinion of the Government of the day, and of this Par- liament, it is considered desirable to take in order to improve or complete our friendly relations with other countries.

Mr Scullin - Could we pass legislation reducing our liability under- the agreement ?

Mr HOLMAN - That interjection raises a difficulty which was referred to by the Attorney-General. It would probably be held in the courts that contracts made by our agent3 in London are subject to English law. I think the Australian courts would hold that that principle of international law would apply as the basis of the contract. In my opinion, there is no real doubt that we can accept responsibility for any financial obligation which Parliament thinks it proper to accept. I have already dealt with the wisdom of doing this, and have suggested that such action would go far to restore confidence in Australia which has been shaken. I have no doubt about either our power to do this, or the wisdom of our doing it. I consider that the passing of this bill would be an eminently desirable step forward, and that it is well within the power of this Parliament to pass it. With these observations, I dismiss all the questions relating to the first portion of the measure.

I turn now to what honorable members clearly recognize as a much more disputable question, the fitness and the legal possibilities of the second portion ©f the bill, that is the provisions from Part III. to the end of the bill. The general legislative power of this Parliament is defined by section 51 of the Constitution, but very special power defined by section 105a was recently granted to the Commonwealth by referendum. The justification for the introduction of this measure, I frankly admit, must be found in section 105a or nowhere. There is no other provision in the Constitution which would justify the introduction of a bill of this kind. I submit to honorable members that so far as one can be certain about the true meaning of a grant of power to Parliament by the people, we may be certain that that grant at least covers this bill. It covers very much more than this bill, of course, for this measure is only a minimum exercise of the power granted by that section. Honorable members will be perfectly safe, in my opinion, in casting out of their minds any idea that we would exceed our power if we passed this bill. But after all, every new grant of power has to be brought to the test sooner or later. There is the highest British judicial authority for the proposition that when new power is given to a government it is the duty of the Government to exert it and, if necessary, to obtain from the courts a Judicial interpretation of the extent of it. I do not wish to mislead honorable members by suggesting that our case is quite analogous with that of Great Britain, because Great Britain has no written constitution. The declaration to which I have referred was made in the House of Lords in a very important case, and had application to an executive government acting for the first time under the authority of a new act of parliament. In such circumstances, it was declared to be the duty of the executive government to use the power and to test it. If the Government exceeded its power the court would say so, and determine the true limits of the power. In our case, it is the Parliament which first finds itself in that position. It is the duty of the Executive to bring a bill to Parliament. After the bill has been passed the measure may be brought before the court for consideration. The decision of the court in our case would determine either of two things. It might be to the effect that the act of parliament itself was not warranted by the grant of power, or that the action taken by the Executive under the act of parliament was not warranted by the act. Only one of those situations could arise in Great Britain owing to its different constitution. If it is the duty of the Executive of Great Britain to act - and we have the highest warrant for that statement - it is doubly the duty of the Australian Executive to act, because if the grant of power is not sufficient to do what is sought to be done, the people may always be approached by way of referendum for an extension of power. In my opinion, it is the duty of the Executive to introduce legislation to enable it to exert its power. When such measures become operative, any person or authority which conceives that he has been injured may approach the High Court. In that way we obtain full and exact knowledge of the law.

The clauses of this bill which set out this power have been repeatedly read by honorable members. I shall, therefore, merely refer to one or two points that have been raised. I think it was the Leader of the Opposition who said that although there was no doubt power to make laws for the carrying out of the Financial Agreement, there was doubt whether the Auditor-General could be brought into the matter. The right honorable gentleman observed that the Financial Agreement made no reference to the Auditor-General. That objection is, at first sight, a little staggering; but it will be seen on consideration that the position is met by sub-section xxxix of section 51 of the Constitution which provides that -

Parliament shall, subject to this Constitution, have power to make laws foi' the peace, order, and good government of the Commonwealth with respect to:

(xxxix)   Matters incidental tn the execution of any power vested in this Constitution in the Parliament or in either House thereof or in the government of the Commonwealth . . .

We may assume, therefore, for the purposes of this argument, that there is no doubt that power is vested in Parliament not only to deal with the matters contained in the agreement which has been ratified by the States - this is covered by paragraph xxxviii - but also under paragraph xxxix, with any matters incidental to the execution of the power given in paragraph xxxviii. Let me illustrate the matter in this way. If I enter into a contract to buy 10 yards of cloth from a man, I am not introducing a new element into the contract if I take with me a tape measure or a yard stick to measure the cloth before I accept delivery of it. The measuring of the cloth is a matter incidental to the contract. If I employ a man to work eight hours for me, I am not introducing a new element into the contract if I install a Bundy clock, and require him to punch it. In either case I am merely taking steps to assure myself of the actual performance of the contract. I submit, therefore, that we are entitled, under the provisions to which I have referred, to make laws for the carrying out of the Financial Agreement, and also to make laws covering matters incidental thereto. In this case we need to know the extent of the default, aud for that purpose we are entitled to call upon the AuditorGeneral and his staff to act as a kind of measuring stick.

Mr Scullin - I did not raise the point to which the honorable member is referring. My objection was that the declaration of the Auditor-General was to be accepted as prima facie evidence.

Mr HOLMAN - I shall come to that point later. I am now dealing with the validity of this provision. My submission is that the Financial Agreement is one which this Parliament was entitled to validate, and that the Parliament is also empowered under the provisions of the Constitution to make laws for the carrying out of the agreement, and any matters incidental thereto. It is, therefore, competent for the Government to call upon the Auditor-General, or any other authority, to assist it to determine, by a convenient and reasonable method, the exact position of the parties. This power is expressly given in sub-section xxxix of section 51. Portia's pronouncement in The Merchant of Venice, that Shylock, though entitled to his pound of flesh, could take no blood, was not, and never has been, good law. The creditor entitled to a pound of flesh is entitled to that which makes up or is incidental to the forfeit. The contention put forward in The Merchant of Venice was merely a specious argument intended to mislead an ignorant court. Whenever power is given to make laws power is also given to do things incidental thereto.

I now refer honorable members to the paragraphs c and e of this comprehensive but cumbersome agreement. These read as follows: -

(o)   Each State shall in each year during the same period of 08 years pay to the Commonwealth the excess over the amounts to be provided by the Commonwealth under the last preceding sub-clause necessary to make up as they fall due the interest charges falling due in that year on the public debt of that State taken over by the Commonwealth as aforesaid and then unpaid, and on any moneys borrowed by the Commonwealth on behalf of that State and then unpaid, and after the expiration of the said period each State shall in each year pay to the Commonwealth, as they fall due, the whole of the interest charges on any debt then unpaid and included in the public debt of that State taken over by the Commonwealth as aforesaid, and on any moneys borrowed by the Commonwealth on behalf of that State and then unpaid.

(e)   The rate of interest payable under subclause (c) of this clause in respect of moneys borrowed by the Commonwealth on behalf of a State shall be the full rate of interest payable by the Commonwealth in respect of the loan by which such moneys were borrowed or such other rate of interest as may bc payable by the State to the Commonwealth under any agreement made or to be made between the Commonwealth and that State in respect of such moneys and such interest shall bc payable by the State for the full term of that loan.

The two duties cast on the States by the terms of the agreement are mandatory; the States shall pay the principal and the interest. I call particular attention to that language. That agreement is now made law, and under the grant of power to which I have already referred every such agreement, after validation - and this agreement has been validated by an act - and any variation thereof, variations being only possible with the consent of all the seven parties unanimously -

Shall be binding 'upon the Commonwealth aud the States parties thereto, notwithstanding anything contained in this Constitution or the Constitution of the several States, or in any law of thu Parliament of the Commonwealth or of any State.

The agreement once validated is binding upon us, notwithstanding anything that we may find in the Commonwealth Constitution or in any Commonwealth law. We need not trouble about State constitutions aud State laws. That principle has been adopted by the people, and i3 now embodied in section 105a of the Constitution. I submit that the agreement is unalterable; it compels the States to pay, as provided in the two paragraphs that I have read. A law passed by -this House facilitating the obtaining of payment where a State is reluctant to pay, must be within the terms of that grant of power.

Mr Scullin - And within the terms of the agreement.

Mr HOLMAN - -If it is within the terms of the agreement it is within the grant of power. Until the High Court has decided the question, mere practitioners' can only express their opinion on it; but it appears to me that that portion of the grant of power which makes an agreement binding upon this Parliament, notwithstanding anything to the contrary in the Constitution, or in any Commonwealth law, lifts the agreement to the level of the Constitution. We cannot, legislate to alter it; it can. be altered only by the seven States acting in unanimity. Whatever legislation we pass must be legislation in accordance with the agreement. If this bill is in accordance with the agreement, and facilitates the recovery of moneys which are lawfully due under the agreement from one party to another, it is, on that ground, a law within the power of this Parliament to pass.

The grant of power contains several sub-sections only, one of which has frequently been referred to in the course of the debate. I am far from suggesting that I have interpreted everything the other one means. In my judgment, it gives the same right to pass this legislation, and is as authoritative as the more frequently quoted subsection of the grant of power. My right honorable friend had other hesitations. He thought that in this case there might be some actual invasion of State rights, or some appearance of invasion which he was anxious to avoid. The point is that this power has been given by the people of the States, and it has been given in these extraordinary terms. Nothing could be more sweeping than the passage that I have just read. All laws made in pursuance of that grant are valid laws of the Commonwealth. Honorable members will recall that under section 5 of the covering act all laws made by the Parliament of the Commonwealth are binding on the courts, judges and people of every State. Turning to section 10') we find that when a law of a State is inconsistent with a law of the' Commonwealth, the latter shall prevail, and the former shall, to the extent of the inconsistency, be invalid. That of course relates to a valid law, and I submit to honorable members the present bill is such a law.

Now let me take in brief detail the plan of procedure provided for. The certificate of the Commonwealth AuditorGeneral is made prima, facie evidence of the existence of a State's liability. I beg honorable members who are not lawyers not to imagine that this certificate will be conclusive evidence ; it will be open to any State that disputes its contents to bring any evidence it likes to the contrary.

Mr Scullin - But the onus of disproof is put on the defendant.

Mr HOLMAN - To a certain extent, yes. That is a frequent incidence of Commonwealth legislation, the Customs Acts for example. " Suppose we furnish the High Court with the certificate of our Auditor-General to the effect that New South Wales is in default to the extent of, say, £1,000,000. It is then perfectly open to the Premier or Treasurer of New South Wales to say, "We owe nothing of the kind. The Commonwealth owes us money. We have counter claims, and the balance is in our favour ".

Mr Maxwell - And the material facts are in the possession of the State Government.

Mr HOLMAN - Yes. That is why the onus is put upon it. If the State Treasurer is not given sufficient notice - this point was raised by the honorable member for Darling Downs (Sir Littleton Groom) - injustice will be done; but the High Court would not let the case proceed, supported only by prima facie evidence, in the absence of the defendant because of insufficient notice. The right honorable member fears an attack on the validity of the act on the part of the defence; so do I. But he has an exaggerated idea of the length of time for which proceedings testing the validity of a statute can be drawn out. Such proceedings are usually brief. There would be no appeal to the Privy Council, without the certificate of the High Court that an appeal was desirable, and I do not think that the High Court would dream of granting such a certificate in a case of this kind.

Mr Beasley - Why does the honorable member say that?

Mr HOLMAN - I speak as a lawyer, on a subject concerning my own profession. The High Court does not usually give such certificates in these cases, though I admit that it is conceivable that it might. I do not think there is any doubt that this is one of those cases which comes within section 74, under which there is no appeal to the Privy Council unless the certificate of the High Court is given. [Leave to continue given.] I am grateful to honorable members for their courtesy, and will not abuse it. I realize that these matters have carried me a little further than I anticipated, hut I have almost completed what I wish to say. I pass over the question of possible delays in the litigation. Having obtained the declaration from the High Court, I imagine that the Government would, in most cases, when fortified and guided by the resolutions of this House and the Senate, specify some plentiful fund, such as the income tax, as a fund for attachment. The income tax, so far as one can forecast the results of an experiment of this character, which is unprecedented in its nature, would afford a peculiarly convenient field. State income tax is collected-by the same officers as collect the Commonwealth income tax, and all that would be necessary would be to ask them to place to the credit of the Commonwealth what was received on account of the State. The individual citizen would not even have to change his habits. He would send his tax to the same office as before, and the money would be received by the same officers; but it would be diverted to another and more wholesome destination.

Mr Scullin - It sounds very simple.

Mr HOLMAN -- The right honorable gentleman and I have both had experience of collecting income tax; it is one of the simplest things ^^statesmanship.

In my judgment, clause 6 should be deleted from the bill. When the honorable the Attorney-General was addressing us, he spoke of the necessity of proceeding by an appeal to the judicial power of the Commonwealth. He also said that, although he had prepared two alternative methods of procedure, they both involved an appeal to the judicial power. Yet when we read the provisions pf clause 6 we find that, owing apparently to some misunderstanding between the AttorneyGeneral and the draftsman, what he spoke of in his explanatory opening speech has not been done. In regard to the alternative procedure, which goes forward on a resolution of the two Houses without any approach to the High Court in the first instance, sub-clause 3 of clause 6 says -

Nothing contained in or done in pursuance of this section shall prevent or affect the making of an application under the last preceding section.

On referring to the last preceding section, we find that it provides for an application by the Attorney-General on behalf of the Commonwealth. There is apparently no provision in the bill for the defendant State to make an application to the High Court. I have no doubt that that is an inadvertence, due to failure on the part of the draftsman to give effect to the principles which the Attorney-General explained to us with great clearness and candour. We now no longer have the benefit of his counsels. It is difficult, merely by reading the bill, to suggest emendations which would restore its provisions to what the Attorney-General originally proposed, and I would urge upon the Government at this stage that the alternative procedure originally suggested might be eliminated from the bill altogether.

Mr BRUCE (FLINDERS, VICTORIA) - In my speech I stated that the Government was prepared to make it mandatory for the Commonwealth to apply for a declaration within a reasonable period.

Mr Scullin - But the vital question is whether the Commonwealth is to seize the revenues of the State before it ap:proaches the High Court.

Mr HOLMAN - I am afraid that it proposes to do that. The amendment indicated by the right honorable member for Flinders would certainly make the clause valid ; at present it is not valid, because section 71 of the Constitution clearly lodges the judicial power in the High Court and certain other courts. In its present form clause 6 is taking the judicial power into the hands of this Parliament. A judicial power is difficult to define, but honorable members will agree that any person or authority who says that A shall give to B something to which B is entitled is exercising judicial power. That is in effect what clause 6 proposes, and, therefore, it would not be a valid enactment of this Parliament. Although the amendment which the Assistant Treasurer now suggests would remove the invalidity, the clause might still be unwise. The fuller consideration we have been able to give to the bill since the AttorneyGeneral explained it must have convinced many of us that clause 6 will be widely misunderstood and even more widely misrepresented. Even if there is to be an ultimate appeal to the High Court, I cannot conceive of conditions of emergency arising which would justify thi3 Parliament iu apparently departing from the general fairness of the scheme contained in the bill. The time lost in the action before the High Court would be brief; perhaps a fortnight would be occupied in argument, and the court might take a further week to consider its judgment, but almost certainly a judicial interpretation of the measure would be given within a month. As drafted, clause 6 is a danger, and should be eliminated. If amended as the Assistant Treasurer has suggested it would not, perhaps, be a danger to the validity of the bill, but it would give rise to much difference of opinion and opposition, and would thwart the desire of supporters of the bill to show to the world that it is backed by a large body of public opinion as can possibly be obtained. Clause 6 is not perfect. It is not what was intended by the author of the measure, and it is difficult of amendment in the manner he would have chosen if he were present. It permits direct parliamentary action against the revenues of another government - for some days at any rate. On that ground it will be criticized ; its purpose and meaning will be distorted; and thus a weapon will be given to those who are concerned to show that this Parliament has acted with unfairness and tyranny in dealing with States that are in financial difficulties.

Clause 14 also should be eliminated, and my criticism of it, as of clause 6, is based on two grounds. First, I strongly fear that iu its present form it is invalid secondly, even if it be valid, I urge the Government not to insist upon it. It reads -

Without prejudice to, the foregoing provisions of this net, if ut ti ti y time during the currency of any proclamation relating to any State, any moneys come into the possession or control of the Commonwealth in pursuance or by virture of the Financial Agreements, or of any decision of the Loan Council, for aud on behalf of that State, or for the purpose of payment to that State, or to which that State lias any claim under those agreements, those moneys shall be charged with the due performance by that State of its obligations under those agreements, and may be applied in discharge of any liabilities of that State which have accrued under those agreements.

I have already spoken of the extraordinary sanctity to which this agreement is raised by section 105a of the Constitution. Part l, clause 3 n of the agreement, reads -

A decision of the Loan Council in respect of a matter which the Loan Council is by this agreement empowered to decide shall be final and binding on all parties to this agreement.

The parties to it include the Commonwealth. When we examine the matters which the Loan Council is empowered to decide, we find that where an amount borrowed in any given year is not sufficient to meet the programmes presented by the Australian Governments, the Loan Council may allocate the amount available to the Commonwealth and States. Having allocated portion of a loan to a given State, that allocation is binding on all parties to the agreement. For the reasons I have already submitted to the House, that portion of the agreement cannot be altered by our legislation. If this bill conflicts with that provision it is to that extent invalid. Clause 14 purports to do that. Moneys have been raised and allocated by the Loan Council, but clause 14 purports to say that although the council has allocated, say, £1,000,000, to a defaulting State, which allocation is final and binding on all parties, this Parliament may impound that amount. Clearly, in those circumstances, this legislation would conflict with the decision of the Loan Council, and I believe that the High Court would hold that this Parliament would have to give way. By this dangerous provision the prestige of the Government and this Parliament may be hopelessly damaged. Again, I urge on the Government that this clause might, without loss of full power to handle the situation, be eliminated. Further, I feel that by taking from the people of a State loan moneys duly allocated to them, we shall be doing one of those injuries which the Assistant Treasurer (Mr. Bruce) has declared himself anxious to avoid. To date, the Government of New South Wales has invested about £9,000,000 in the North Shore Bridge. That capital is dead; it can earn no revenue until the work has been completed. The State borrows, say, a further £1,000,000 to complete the structure and convert the dead capital into live capital. That £1,000,000 should not be subject to arrest on its way into the hands of the New South Wales Government. The right honorable member for Flinders (Mr. Bruce) declared that the citizens of the State should not be penalized because of errors and default on the part of politicians in power for the time being, and in consonance with that sentiment I urge him not to retain this clause 14. It is not necessary. The bill without it confers ample power upon the Commonwealth. The proper source to which to apply for payment of State debts is the State revenue, not its loan funds. Interest debts are not paid out of loan. In private life we do not rob Peter to pay Paul.

Mr Beasley - Interest debts have been paid out of loan.

Mr HOLMAN - That practice should he discouraged, and not elevated into a principle by this bill.

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