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Wednesday, 2 March 1932


Mr BAKER (Oxley) .- This bill is concerned with the fundamental principles of the Constitution, and for that reason is one of the most important, if not the most important, measure which has been considered by the Federal Parliament since the federation of the States'. It is liable, moreover, to have farreaching effects. It is regrettable, however, that many speakers on the Government side have concerned themselves only with the sins of omission and commission of the Lang Government, and have contented themselves with airing their personal opinions of the present Premier of 'New South Wale's. What we have to declare now is, not our opinion of individuals, but whether we are for or against the repudiation of debts, and, if we are opposed to repudiation, the method to be adopted to give effect to our opinions. The Government, in bringing in this bill, is making a pretence of carrying out its election promise to deal with Mr. Lang. The action of the Scullin Government was not sufficiently spectacular, so the present Commonwealth Government has hit upon the present proposals.

The Labour party's attitude towards repudiation has been definitely laid down. At a conference of the Federal Labour party, held some months aero, serious consideration was given to what is known as the Lang policy. The executive decided that the platform and policy of the Australian Labour party did not include, and never had included, repudiation . of debts. The conference declared against the Lang policy, which is to refuse deliberately to pay interest on loans raised from the general public in Australia, and Great Britain. That was the considered pronouncement of the Australian Labour Party at a conference representative of every State in Australia. It may, therefore, be taken for granted that the Australian Labour Party is uncompromisingly opposed to anything in the nature of repudiation. There should not be any doubt upon the 1 matter, because the Australian Labour Party proved in unmistakable fashion during the last election that it was opposed to repudiation, when many of its members were sacrificed politically because they would not subscribe to the socalled Lang plan.

No portion of the overseas debt of New South Wales represents war expenditure. The Labour party believes that it is immoral to borrow money for the construction of bridges, the erection of buildings, and the building of railways, roads, and the like, and then to repudiate our obligations in respect of those debts. The railways and roads in particular represent a valuable asset belonging to the Government and to the people. They haveopened up vast areas of land, and have increased the value of the land to the primary producers and to the nation. Even if we do not pay attention to the moral aspect of the matter, and confine our consideration to what will pay us best, it will bo seen that nothing is to be gained by adopting the Lang plan. All that has resulted so far from the Lang plan has been a change of government in the federal sphere. No doubt to honorable members opposite that is satisfactory enough, but from the point of view of the Australian Labour PaTty it is not a result which would induce il? to favour the Lang plan. This plan has split the Labour party, and has put into power a government opposed to all the doctrines for which the Labour party has stood. It must be obvious that if we desire to obtain concessions in regard to our overseas debts, the best way is, not to say that we will not pay, but to point out that we ai-e in serious financial difficulties, and are deserving of some consideration at the hands of our creditors. Largely as a result of the activities of Mr. Scullin when he was overseas last year, payments to the English Government amounting to £1,600,000 a year for two years have been suspended. That sum, plus exchange amounts to a saving of over £2,000,000 for the financial year ending 30th June next, and a similar sum for the following financial year. Also as a result of the Hoover moratorium, a payment of £3,920,000, which was due by Australia during this financial year, was suspended, but at the same time' we lost ah amount of £830,000 due to us in respect of German reparations. This nation, therefore, benefited to the net extent of £3,090,000. These arrangements were come -to by agreement, not by holding a piStOl to the heads of nations whose population is ten or twenty times as much as ours. Let me quote the words of the honorable member for Bourke (Mr. Anstey) in his book Money Power, written over ten years ago. Referring to our interest obligations overseas, then approximately £40,000,000 per annum, which sum is considerably less than our present commitments, he said - While that exists even the Socialist State would be a mere collecting agent for the holders of the £800,000,000 blister on Australian industry, and so long as Great Britain stands upon her legs and her navies float upon the seas, so long must Australia's obligations to British financiers be met, irrespective of the character of Australian Governments or the composition of her industries. Repudiation, so easy to say, would impose upon the country economic difficulties and boycotts as burdensome as the load of interest from which it was sought, to escape.

If any proof is needed that Great Britain and the United States of America would have taken action either by economic boycott or by military measures to enforce the interest payments due to them, let me remind honorable members that questions have recently been asked in the legislatures of both those countries respecting the non-payment of interest by the Government of New South Wales, and sub sequently by the -Federal Government. Even if armed force were not resorted to, reprisals of any kind would prejudice Australia, because this is a primary producing nation. We have, therefore, to realize that the Premier of New South Wales in challenging all the forces of capitalism is merely making a theatrical gesture unworthy of much attention. Money power knows no boundaries, and the bondholders overseas will make sure that they get their pound of flesh. I am convinced that before long all nations will have to come to an arrangement with regard to the cancellation, or at least h substantial reduction of debts. That is the attitude of the members of the Australian Labour Party, and it ha3 frequently been advocated in this House by Mr. Theodore, an ex-Treasurer of the Commonwealth. The action of the Federal Government in repudiating the debt due to overseas bondholders was foolish and unfortunate for this nation. Professing that it would never repudiate, it repudiated. It has been contended that this Government was not legally liable. But though, technically, it may not have been legally liable, there is no doubt that it was morally at fault in not meeting the debt which the Premier of New South Wales refused to pay on behalf of that State. The Assistant Treasurer (Mr. Bruce) stated in reply to the Leader of the Opposition (Mr. Scullin : -

If the right honorable gentleman says that we owe it to the States to meet these payments, I entirely agree with him. There is no doubt whatever, that the good name of the Commonwealth was at stake. Whatever may have been the exact legal position, there is no doubt that the Commonwealth has led every one to believe that it was liable to meet these payments.

Yet the right honorable gentleman is the Assistant Treasurer in the very Government which did not meet these interest payments when they were due. The Attorney-General (Mr. Latham), referring to the previous default said -

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.

Undoubtedly, and unfortunately, a very real and permanent impression has been produced upon the public mind, not onlyhere, but also overseas, by the action of the Federal Government, which, beyond all governments, said that it could not even consider the possibility of default. The attitude of members of the Country party and of certain supporters of the Government is interesting, and can be best described in the words of Pope, when he spoke of those who -

Damn with faint praise, Assent with civil leer,

And, without sneering, Teach the rest to sneer.

They have criticized and condemned the bill, and have suggested amendments. Then they have said that they will support the bill whether the suggested amendments are inserted in it or not.


Mr A GREEN (KALGOORLIE, WESTERN AUSTRALIA) - And saying that they would ne'er consent, consented.


Mr BAKER - The Labour party, though opposed to any refusal to pay debts, does not agree with the action of this Government. The Commonwealth Constitution is an act of the British Parliament, and our powers under it are clearly defined. The British Parliament has absolute power by legislation to do anything that is humanly possible, but the F ederal Parliament is in a different position. We are tied hand and foot by the Constitution; the powers which the various State Governments of Australia possess arc not clearly defined ; and are similar to those conferred upon any independent nation under its constitution. In that respect we differ from Canada, the Dominion Government of which has power to overrule the provincial governments regarding their laws. Therefore, this Parliament has to be particularly circumspect when dealing with matters affecting the Constitution. The powers of this Parliament are limited in another regard. Our Constitution is founded to a large extent uponthe Constitution of the United States of America, and similarly Commonwealth powers are divided into three classes - legislative, executive, and judiciary. Any power which is defined as "judicial" cannot be exercised by this Parliament. That is another handicap to the Federal Government. The High Court, as the guardian of the Constitution, has absolute power to upset any act of this Parliament which is in any way beyond the powers given to us in black and white under the Constitution. It may be contended that federal legislation is not often upset in the High Court, but that is for two reasons : first, the Federal Parliament, in considering legislation, endeavours, or should endeavour, to keep within its limitations; and, secondly, any legislation of this Parliament cannot be upset until proved to be unconstitutional by an action in the High Court. That, of course, means much expense. In the great majority of cases in which individuals are concerned, the expense of litigation would be sufficient to prevent them from appearing before the High Court to challenge the constitutionality of any particular measure. Another aspect which I do not think has been stressed in this Parliament is that any act of the Federal Parliament which is upset by the High Court becomes null and void ab initio. On page 24 of the text book, The Law of the Australian Constitution, written by Mr. Kerr, paragraph 41 states -

The result of the declaration by the Court that a statute is unconstitutional is that the statute is " as if it had never been ". No rights can be acquired nor liabilities imposed under it, at any time, either as between the Commonwealth and the individual, or as between individuals, and whether before or after the declaration of constitutionality. It is void ab initio.

Paragraph 42 states -

When the court declares a statute to be unconstitutional, it does not annul, or repeal the unconstitutional statute, it simply refuses to recognize it and determines the rightsof parties just as if such statute had no existence.

I have quoted those two paragraphs to emphasize the fact that if at any time this legislation is upset by the High Court, the Commonwealth Government may be met with a considerable number of claims for compensation during the time that the measure was in force. Honorable members will recollect the attempt to deport Messrs. Walsh and Johnson. The High Court decided that the Commonwealth had no power to deport those men; thereupon they sued the Federal Government and were awarded substantial compensation. The Commonwealth had also to pay heavy costs. Clause 10 of this bill reads -

A person shall not, from and after the date fixed by Proclamation, and during the currency of the Proclamation, pay to any person, other than the 'Treasurer or an authorized person, any moneys owing by the person to the State, which, if received by or on behalf of the State, would have formed part of the specified revenue of that State. and Clause 12 provides -

Any Minister of, or officer or person employed by, a State, who -

(a)   receives, directs or permits the receipt of any moneys by or on behalf of a State the payment of which would be a contravention of the provisions of this Act; or

(b)   gives, or offers to give to any person any indemnity in respect of the payment to or on behalf of the State of any moneys the payment of which to the State would he a contravention of those provisions, shall be guilty of an offence.

The High Court may declare that those who have been penalized under this legislation have suffered through bad law, and thereupon the Federal Government will have to pay compensation. There is a legal maxim that every man is presumed to know the law, but that is based on the assumption that the legislature has made the law clear so that no person may be in doubt as to its meaning. Possibly many taxpayers who may be instructed under this legislation5 to pay their taxes to the Federal Government will doubt the validity of the federal law ; they will not know whether to obey it or the State law, and whatever they do they may eventually be liable to a penalty.

The attitudeof the Labour party, as exemplified by the actions of the last Commonwealth Government, was that the rights of the Commonwealth against a State can be ascertained and established only by a judgment of the High Court, the highest legal tribunal in Australia. Such a judgment having been given, neither layman nor lawyer could remain in doubt of the law, and, thereafter, no individual would have any excusefor not obeying it. Members of the Ministerial party have often boasted oftheir high regard for the unsullied purity of British law; yet they are supporting such provisions as clause 6, which gives full authority to the Federal Parliament, instead of the judiciary, to determine the rights and wrongs of an action to which the Commonwealth is a party. If a Commonwealth Government so chooses, it can. act under clause 6 only, and disregard entirely clause 5. The Commonwealth is claiming the right to be both plaintiff and judge, and that attitude is not likely to increase the popular estimationof the law. This legislation would enable a government with a majority in both chambers of this Parliament, to discriminate against a particular State. The Senate was intended by the framers ofthe Constitution to be the defenderof State rights, but history has shown that on important matters the Senate is as much a party chamber as is the House of Representatives. There is no reason to doubt that senators will vote on this bill according to their party adherence, and regardless of the welfare of the-States they are supposed to represent. The promise of the Prime Minister that the duratiou of the bill would be limited to two years suggests that it is intended to operate only while Mr. Lang's Government is in power in New South Wales, but on that point the honorable gentleman differs from his colleague, the right honorable member for Flinders (Mr. Bruce), who said -

I hope that the House will regard this bill as a non-party measure, designed not merely for a passing emergency, but for all time.

That is the declaration of the Assistant Treasurer and Acting Attorney-General.

The bill empowers the Commonwealth to obtain revenues for the payment of overseas interest liabilities by attaching the revenue of the defaulting State. History records many conflicts between nations over taxation matters, and when we set out to attach the revenues of any State, we shall need to be careful that we do not commit ourselves to effecting the will of this Parliament by resort to force. Members of the ministerial and Country parties would have us believe that they are opposed to unification. I believe that the Federal Parliament should have unlimited power, but any extension of its present authority should not be obtained forcibly in the manner proposed in this bill. This is a long step towards unification, for if the Commonwealth is empowered, for any reason, to attach the revenues of a State, it will beable thereby to cripple that State; in fact, its financial power would be as complete as under a system of unification. The Labour party believes that the last Commonwealth Government adopted the right attitude to compel a defaulting State to meet its obligations to the Commonwealth, and that that course should have been adhered to when Mr. Lang defaulted a second time. The High Court should have been consulted, and there would have been no fear of an appeal from its decision because, on constitutional issues, no appeal to the Privy Council can lie except with the consent of the High Court, which is very difficult to obtain. By that simple procedure the legal position of the Commonwealth and the States would have been speedily determined, and we should not have witnessed the sorry spectacle of the complete legislative machinery of this Parliament being utilized to secure the political defeat of one man and one State Government. Vindictive legislation often overreaches itself, and recoils upon its authors. Although I am not a supporter of Mr. Lang, or his famous plan, 1 am convinced that this legislation and the attacks by the Government and its supporters upon Mr. Lang have served only to increase his prestige, so that his plausible story that this is an attack on New South Wales by the other States will fall upon credulous ears. The attitude of the Commonwealth Government towards Mr. Lang is similar to its attitude towards the Communists. Whenever they are fairly quiet, an attack is made upon them, and immediately they are invested in the public mind with an importance they do not deserve. The present Commonwealth Government was elected on the 19th December with a record majority in both chambers. It was given a blank cheque, not to pursue petty vindictive measures against a political opponent, but to endeavour to solve the difficult problems confronting the Australian people. The evil of unemployment must be minimized, and the monetary problems must be solved, but the Government is wasting the time of the National Parliament with trifling measures designed to achieve in a cumbersome way what could be done smoothly and expeditiously by a judgment of the High Court.







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