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Wednesday, 24 October 1956

Mr CREAN (Melbourne Ports) .- I wish to support the views put forward by my colleagues, the honorable member for Bendigo (Mr. Clarey) and the honorable member for Adelaide (Mr. Chambers). This is one of a series of annual measures that have come before this House in the last seven years. It is apparent that the formula that was arrived at in about 1950 has never been adequate to achieve the purpose for which it was supposed to have been designed. This shows that in an economy such as ours, in which circumstances are constantly changing, we cannot hope to arrive at any cut and dried or simple solution of these problems that effect all of the governments of Australia, be they local, State or Commonwealth.

As the honorable member for Moreton (Mr. Killen) has rightly remarked, the central problem confronting our federal system to-day is bound up with the question of State and Commonwealth financial relations. The honorable member has been here for only a short time, and I can assure him that this is not the last occasion on which he will hear statements to the effect that the time has arrived to face this problem. The time is always ripe to face the problem, but we do not seem to face it, and, consequently, the problem is always with us.

The Opposition stands by the principle of uniform taxation. We believe that it is the most sensible method of ensuring that some of the resources of the more fortunate sections of the Commonwealth shall be used to assist those sections which are not so well off. From the very nature of our continent, containing as it does over 3,000,000 square miles of territory, and sustaining a population of less than 10,000,000, and with the most suitable areas for settlement located in a narrow strip around the coast, there must be an economic imbalance between the various areas that initially became States only through geographical accidents. I submit that the major problem facing Australia to-day is that the Commonwealth still has a lot of money to play around with, while the States have no financial manoeuvrability at all. The States cannot plan ahead. They have to live from year to year, depending on what the Commonwealth may see fit to give them. We on this side of the House do not believe that the moneys received by the Commonwealth belong to the Commonwealth as of right; they are held by the Commonwealth as a trustee for the good government of the nation as a whole. I believe that this position will obtain for a great many years to come.

Constitutionally, a great amount of responsibility still rests with the States. One nas only to consider the various social ser vices that affect the community and which are provided by the States. Education, health, law and order are three headings under which services are provided by the States. These services are still, constitutionally, the functions of the States, but each year the States find themselves in an embarrassing position in trying to obtain enough money to meet the needs of a community that is growing, as we know, both by natural increase and by immigration. An honorable member last night suggested in this House that immigration was not as great a factor in our economic problems as was sometimes argued. It is, nevertheless, a significant factor. Even if, in the field of education, as suggested by the honorable member for Petrie (Mr. Hulme), only one-quarter of the expansion in schools can be attributed to immigration, that is still a significant proportion, and I suggest that the most difficult problems confronting the States are associated with the uncertainty of population growth through immigration and of the amount of money that they can expect to receive from the Commonwealth.

Each year the States have to plan their budgets, not knowing precisely how much they will ultimately receive from the Commonwealth, either by tax reimbursements or in the form of loan moneys from the Australian Loan Council. The report of the Commonwealth Grants Commission that was tabled in this House to-day indicates that in the financial year ended lune, 1955, out of a total revenue of £325,000,000 obtained by the States from all sources, only £94,000,000 was raised by the States themselves from their own sources of taxation. I have excluded the figures relating to State railways because those are business undertakings which are expected to balance themselves out. The remaining amount of £231,000,000 was provided from payments under the tax reimbursement formula, from special grants under section 96 of the Commonwealth Constitution, from various aid roads grants and a number of other minor grants.

One has only to look at the kind of measures that have gone through the House recently to see the difficulties under which the States are labouring. We dealt recently with a bill to assist home-nursing organizations. It was estimated that no more than £40,000 would be expended for that purpose by the Commonwealth during the current financial year. The fact that the six States, between them, cannot afford to pay £40,000 a year to expand what is, constitutionally, a State service highlights the embarrassing position in which they find themselves. State governments want to expand, for instance, their library services and their facilities for adult education, but they find that the money that would be required to finance such schemes must be used for, say, the expansion of hospital services and for additional schools. No one will deny that there is a shortage of hospitals in this country, but recently the absurd position arose in Victoria that work on a hospital building project, already well on the way to completion, almost came to a standstill owing to a shortage of £75,000. That is absurd in a community that is raising over £1,300.000,000 a year by taxes of one kind or another. It is an indication of the kind of problems which the honorable member for Moreton says, quite rightly, have not been faced squarely.

There is an annual wrangle known as the meeting of the Loan Council. The States and the Commonwealth start off on the wrong foot at those meetings, because they argue, not about what needs to be done most for the benefit of the nation, but about how certain sums of money shall be distributed. Under that system, it is impossible to get coherent national planning, and unless we have coherent national planning all the citizens of this country will suffer. lt is high time that we made a more realistic approach to these problems.

Measures of this kind will continue to come before us for many years. The tax reimbursement formula is designed to proceed progressively to what is called a per capita basis of distribution. That may serve the interests of the wealthy States, but the poorer States - I do not refer to them as mendicant States, a term that is used sometimes, because T think they are poor, not in that sense, but only in the way in which nature has distributed their populations and their resources - will still require additional subventions, subsidies and payments of one kind and another. That will be the pattern for a great many years to come - until there are fundamental shifts of constitutional responsibility.

The suggestion is made from time to time that the States should hand over to the Commonwealth responsibility for such things as railways and roads. If such a proposition were put to them, the States might agree to it. I think they are still zealous to retain the constitutional powers entrusted to them, but there is no doubt that they lack the financial resources necessary to make the present system work satisfactorily. The honorable member for Bendigo (Mr. Clarey), in a closely reasoned speech which indicated that he had dug down to the very roots of the problem, said that it was most unfair that the Commonwealth should pay for all its public works from revenue and expect the States to finance their works from available loan moneys, on which they have to pay interest, and from moneys made available to them by the Commonwealth from its budget surplus, on which they have to pay interest also. The honorable member suggested that all moneys raised from loans and taxes should be pooled and that the States should not be required to bear the burden of interest charges alone. I agree that such a scheme would not make any over-all difference. There would be merely a transfer of a part of the burden of interest charges from the States to the Commonwealth. The national picture would be the same as before.

The honorable member for Bendigo explained that we are paying about £130.000.000 a year in interest charges on our national debt. Looking at the community as a whole, that is a transaction in which money is taken from the pockets of all the taxpayers and a proportion of it b paid to a set of individuals in the community who are interest receivers. As we know, a large part of the national debt is held by agencies such as the Commonwealth Bank and various State savings banks, and the interest payments made to those agencies is used ultimately for the benefit of the community. Nevertheless, the payment of interest does impose a great burden on the States. Every year, the sum paid in interest charges rises by over £10.000,000, and additional taxation to that extent must be levied. The aggregate debt of the Commonwealth has been stationary for a number of years, whilst that of the States is rising by over £200,000,000 a year. That throws an additional burden upon the resources of the States, yet when a measure such as this comes before the Parliament honorable members on the Government side talk about the extravagance of the States. It is the foolish interest policy adopted by the Federal Government that is the direct cause of the need of the States for an additional £10,000,000 a year.

The Opposition takes advantage of this opportunity to affirm its view that uniform taxation is the best taxation system for Australia. If we analyse the suggestions made by the honorable member for Moreton, we see that they relate more to machinery than to fundamental issues. He asked: How could we divide the income tax field? Committees which have examined that problem have said that it would be very difficult to divide the income tax field in anything other than a very illusory fashion. The honorable member said that there ought to be one taxation return form and one collecting authority. Under uniform taxation, there is one taxation return and one collecting authority. I think the majority of the people of Australia prefer that. I have forgotten his second proposed solution, but I submit that the problem will not be solved along the lines that he suggested.

I believe that the solution will be found in co-operation between the States and the Commonwealth as working partners. The problem will not be solved while one partner ungraciously wields the big stick and tells the other partner that, as a junior partner, it is not really entitled to what it is getting. The problem will never be solved while the Commonwealth makes grants to the States only grudgingly and makes no attempt to acquaint itself with the problems with which the States are faced in their budgeting. Only a few million pounds more, shared amongst the States, would give a little more flexibility and permit them to go ahead with their plans for development. I refer mainly to development on the social and cultural side, because that kind of development is necessary for a healthier public life.

Question resolved in the affirmative.

Bill read a second time, and passed through its remaining stages without amendment or debate.

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