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Tuesday, 23 October 1956

Mr HULME (Petrie) .- At this late hour I do not intend to try to refute many of the comments made by the honorable member for Bendigo (Mr. Clarey), but I shall direct attention to some of his remarks and draw conclusions other than those he has arrived at from the facts as I see them. I think I should mention at the outset two matters which I had not intended to deal with until I heard the honorable member's remarks. The first concerns the cost to the States of education needs arising from the immigration programme. I remind honorable members that when I spoke only a few days ago in the debate on the Estimates about the education costs arising out of the immigration programme, I pointed out that 75 per cent, of the increased cost of education results from Australia's natural increase of population and only 25 per cent, from the children of immigrants who have come to Australia since World War II. Having made that point, I think the honorable member for Bendigo will appreciate that the impression he endeavoured to create is entirely wrong. I remind him also that 75 per cent, of the immigrants have been added to the work force, compared with only 25 per cent, of the natural increase. I suggest that the contribution made by immigrants in the field of education as well as in the field of industry more than balances the increased costs of services rendered in the isolated cases mentioned by the Opposition.

The honorable member for Bendigo also mentioned the problems of the States in relation to roads. I think it is a good idea for us to remind ourselves of what the present Government has done to assist the States to overcome their road problems. In the financial year 1949-50 the Commonwealth contributed £9,267.000 to the States in Commonwealth aid roads funds for road works. In the financial year 1955-56 the Commonwealth's contribution was no less than £26,500.000, and in the current financial year it will be £31 .500,000. This represents an increase of more than three times since 1949-50. I suppose any honorable member could say that this is not sufficient and will not cover the cost of new roads and repairs to existing roads, and could prove his case. I think it is recognized by all honorable members that it is impossible for the Commonwealth to provide in any one year, or even over a period of five years, sufficient money for the

States to undertake all the necessary road works in addition to other essential works. So I am sure no one will be lead astray by the remarks of the honorable member for Bendigo or will criticize the Commonwealth for what it has not done to assist the States, but rather will commend it for what it has done. I think that if we compare the funds provided by the Labour Government in its last year in office and those provided by this Government, it will be seen that the present Government merits the people's commendation. The amount provided by the Commonwealth under Part 4 of the Estimates in payments to or for the States in 1949-50 was £101,000,000. In the current financial year it will be £244,000,000. In 1949-50 the Commonwealth provided a total of £120,000,000 for the States, and it will provide a total of no less than £274,000,000 in the current financial year. I suggest that if we have regard to those figures we shall perhaps agree that there is little substance in the comment made by the honorable member for Bendigo except on the general basis, which I have mentioned, that it is impossible to find all the money required by governments, private industry, and local authorities at the present time.

I shall now proceed to make some general comments on this measure. The honorable member for Bendigo has correctly pointed out that its purpose is to provide financial assistance additional to that provided under the formula prescribed in the States Grants (Tax Reimbursement) Act 1946-1948, under which the States are entitled to £153,600,000 in the current financial year. This bill provides for an additional grant of £20,450,000, which includes an additional special grant of £1,050,000 for Victoria. This compares with a special grant of £15,348,000 made last financial year. The first mention of special assistance of this type was contained in the 1950 budget speech of the present Treasurer (Sir Arthur Fadden). I point out that during the previous eight years there was no provision for such special assistance in the budgets of the Labour government. This special assistance was instituted by the present Government and, as I have said, was mentioned for the first time in the 1950 budget speech. I remind the House that when the Treasurer brought down that budget he mentioned that although the formula under which tax reimbursement grants were made to the States had been adjusted in 1948 it was not intended to alter it in 1950, because the special assistance was to be given for 1950-51 only. I direct the attention of the House specially to that comment. As we have seen since, special assistance was given to the States not only in 1950-51, but also in varying amounts in each financial year since under the administration of this Government. As the honorable member for Bendigo pointed out, the formula was first promulgated in 1946, and was altered in 1947 and again in 1948, but it has not been altered since.

In 1950 the Treasurer indicated that discussions between the Commonwealth and the States in relation to these financial problems would be held. There have been many such discussions since 1950, but we have not been able to solve many of the problems. However, I am not completely satisfied that the amount that is provided in this bill is an indication of a correct approach to the problem. Might I ask why the figure of £20,000,000 was decided upon? Without desiring to criticize the Treasurer (Sir Arthur Fadden), I must say that I have not found one reason in his speech for the provision of this amount of £20,000,000. The only reference to it which might be interpreted as a reason is the statement that when the Commonwealth representatives met the State Premiers in June last it was decided that the Commonwealth would make a total contribution of £173,000,000, but that the amount calculated by the application of the formula was only about £153,000,000, so that the Commonwealth, it was decided, should give an additional £20,000,000. Such meagre information is insufficient to justify this appropriation of £20,000,000 for the States.

The amount itself does not bear any fixed percentage relationship to the actual tax reimbursement. It is, I admit, distributed to the States generally on the same basis as the tax reimbursement under the formula, but it has not, over the years, borne a fixed percentage relationship to the tax reimbursement. In this particular year that is under consideration it represents about 13 per cent, of the total of the tax reimbursement, but the percentage has fluctuated between 1 1.5 per cent, in 1955-56 and 39 per cent, in 1951-52. I suggest that this is not a proper method of making moneys available to the States year by year. It would appear to me to be more in the nature of a haphazard payment than a payment based upon reason or upon the many considerations that are put forward by the States at Premiers conferences and at meetings of the Australian Loan Council. I hope that in the concluding stages of the debate on this bill the Treasurer will tell us why the Commonwealth believes it is justified in making this additional amount of £20,000,000 available to the States.

The honorable member for Bendigo (Mr. Clarey) suggested that the amounts provided for the States were totally unsatisfactory, that the Premiers would feel resentment, and that some of the States are heading for bankruptcy because of their treatment by the Commonwealth. I invite the honorable member's attention to a situation that is disclosed by an analysis of the figures for Queensland, which, I believe, are similar to those for the other States. If we go back to 1947, we find that in that year the Commonwealth provided only 45 per cent, of the total revenues of the Queensland Government. In 1950, the Commonwealth provided 47 per cent., but in 1955, which is the last year for which I have figures, the Commonwealth provided 56 per cent, of the revenues of the State of Queensland. It appears to me that the Commonwealth has accepted more than its responsibility, but that the States themselves have not maintained a reasonable level for the portion of their revenues that is collected directly by them.

Mr Clarey - I think the honorable member will agree that their field of taxation is very limited.

Mr HULME - That may be suggested, but I remind the honorable member for Bendigo that when this Government came to office a Commonwealth entertainments tax was being imposed. We have since vacated the field of entertainments tax. I am reminded that a federal land tax was also in operation. In my recollection, there has always been a State land tax in Queensland, and I can assure the honorable member for Bendigo that the Queensland Government has not been as solicitous for the people of Queensland in regard to land tax as the Commonwealth Government has been. That tax has proved a pretty serious burden for many of the people of Queensland. We have vacated at least those two fields of taxation, which have become available to the States, and have in fact been entered by some of the other States for the purpose of raising some of their own revenue. If we were to examine the various avenues available to the States for raisingrevenue, I think we would find that the States have not availed themselves fully of their opportunities.

The Labour Government in Queensland has continually raised the howl, as has the Labour Opposition in this chamber, that this Government has continued to increase taxes. We have been subjected to demands for continued increases in taxes so that finance might be made available for not only our own services but also those of the States. Let us consider, for example, stamp duty on cheques. This stamp duty in Queensland still stands at 2d., as it did ten years ago. Does the honorable member for Bendigo deny that there is an avenue, small though it may be, of increasing State revenue? The opportunity has been availed pf by other State governments. I believe that other such opportunities are available, and I say quite definitely that in my humble opinion the State governments should try to raise a reasonable proportion of the revenues that they spend from time to time.

Mr Clarey - If the honorable member examines the position of the various States I think he will find that they are doing what he suggests, but that they are unable to bridge the gap.

Mr HULME - I cannot agree with the honorable member's contention. I shall mention another factor in a few moments that has an important bearing on the situation that the States have allowed to develop. While I am dealing with this particular bill, however, I wish to comment that we have reached a cross-roads in relation to this problem. It is time that the Commonwealth considered amending the formula that has been used. If we decide, as a Commonwealth government, that we will continue to provide 50 per cent, or 60 per cent, of State revenues, then I believe that the formula should be adjusted to make an appropriate provision in that regard. We should not continue with this haphazard approach to the problem, following a formula to a degree, but then giving an additional amount year by year that represents 5 per cent., 10 per cent, or more of the tax reimbursement. 1 remind the House, as I did earlier, that when the Labour government was in office it did not give any special assistance in this direction. We can regard it as reasonably certain that if the Australian Labour party came to power again in the federal sphere it would not make special grants of this kind, and the finances of the States would be in a much more chaotic condition than they are under the present scheme. I believe, therefore, that the formula should be amended so that the government of the Commonwealth, whether it be Liberal, Australian Country party or Labour, will know where it stands.

I move now to another aspect of the matter, which I believe is closely bound up with the question of making money available to the States. Although I cannot give the figures for last year, I may inform the House that for the three previous years the loss on the railways in Queensland was £8,700,000. ls it the responsibility of the Commonwealth to cover such losses on the State railways throughout Australia? Surely the honorable member for Bendigo would not submit that, irrespective of maladministration by State governments, of whatever political colour, the Commonwealth is always under an obligation to provide the money to cover those losses.

Mr Clarey - I think that the Commonwealth should take the railways over.

Mr HULME - The honorable member for Bendigo can always slide out of a situation by producing a suggestion which is ridiculous. I suggest that if the Commonwealth took over the railways, their position might be worse, particularly under a Labour administration, than it is under some State administrations at the present time. But I submit to this House that the State governments are themselves responsible for a good deal of the difficulties with which they are faced in relation to their finances at the present time.

Let us look at the situation which existed last year, as mentioned by the honorable member for Bendigo, when the States had a total deficit of £15,000,000 or £16,000,000.

Mr Daly - Cheer up!

Mr HULME - The honorable member for Grayndler (Mr. Daly) should tell us how he lost the position of party whip. I asked the Prime Minister (Mr. Menzies) a question this afternoon in relation to the funding of these deficits. Since I asked that question, 1 have ascertained that the New South Wales Government and the Queensland Government have funded their deposits from their own trust accounts. It might be of interest to the honorable member for Bendigo and other members of the Opposition to be told that some State governments have had very substantial balances under their care to which they have been adding, year by year, and which they have shown no inclination to spend. In 1955 the Queensland Government had funds totalling no less than £26,000,000 and when it creates a deficit, it is possible out of its trust fund to cover the deficit - to fund it in that way. In Victoria the deficit is being funded out of this year's loan allocation.

In addressing my question to the Prime Minister this afternoon, I also raised the question of whether there had been an attempt to obtain a guarantee from the States in relation to this deficit financing, or budgeting. I believe it may be necessary for the Commonwealth, in relation to adopting an improved formula for assisting the States finances, to expect the States to balance their budgets year by year. I do not want to go into many of the details that bring about these details, because they are just as well known to every other member of the House as to myself. I believe that this Government has done its best, in planning its budget, to assist in restricting the inflationary spiral, but many of the State governments have actually made our task much more difficult. There is nothing that is more inflationary than deficit budgeting by the State governments, and I think that nearly all of them have been responsible for it in the financial year ended 30th June last. The States should give the guarantee to which I have referred. If they are not prepared to give it, the Commonwealth must hold the gun at their heads and indicate to them that their next year's contribution will be reduced as a result of their attitude. I think that the States must show themselves to be more responsible in the future than they have been in the past.

In any discussion of Commonwealth and State financial arrangements, the subject of uniform taxation is always raised. The honorable member for Mallee (Mr. Turnbull) mentioned it a little while ago by way of interjection. I do not desire to express any views in regard to it in this debate. I have done so on other occasions in the House.' I prefer, on this occasion, to concentrate my remarks on the subjects that 1 have raised, and I should like to summarize them in this way: Firstly, the Treasurer should give a more detailed explanation to the House for the reason for making this payment of £20,450,000 to the States. As I said before, I think that the explanation, so far, must be regarded as unsatisfactory to a Parliament which is asked to appropriate the money. Secondly, I think that consideration should be given to whether the States are accepting reasonable obligations and responsibility in relation to their own revenue. At this stage, the Commonwealth should determine approximately the percentage of State revenues that it will contribute and the States should be made responsible for the balance. Thirdly, I think that the Government should review the formula under which we are operating at the present time. In addition, we should consider the restrictions that I mentioned a few moments ago, particularly in regard to the deficits which were incurred last year and which may be incurred next year, and in future years by State governments. If they are not prepared to stand up to their responsibilities and balance their budgets, the Commonwealth should consider inserting a provision in this legislation whereby the Commonwealth could take from the States part of the amounts that they were due to receive in the following year, so that deficit financing would not occur as an unfortunate boost to inflation in the community.

Debate (on motion by Mr. Duthie) adjourned.

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