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Thursday, 29 October 1959

Mr HAROLD HOLT - I have not seen the report to which the honorable member has directed my attention, but the general argument which he has expressed as representing the view of Mr. Hiley is one with which I have become familiar at the various discussions that have taken place with the State Premiers. I think that honorable members generally are aware of the position. It would take me far longer than time permits this morning to deal adequately with this matter. Briefly, the situation is that the Commonwealth Government's debt before the war was about one-third of the total debt of the States. During the war years, when the States' debt remained virtually stationary, the Commonwealth debt, which was a result of loans raised for unproductive but very essential war purposes, increased by about £1,300,000,000. Since the end of the war, the State debt has, of course, increased relatively to the Commonwealth debt and relatively to its former situation to a significant degree, for revenueproducing assets which the States have been able to provide out of the moneys that have been made available to them.

The Commonwealth has been required to redeem a certain amount of the debt that was incurred during the war years, and that process is continuing. As honorable members know, that has placed a very heavy burden on Commonwealth budgets over recent years. The fact that the Commonwealth, because it makes all the loans that can be raised available to the States, finds it necessary to finance its own capital programmes out of revenue, is not a matter of great comfort to the Commonwealth. We must carry the odium of raising the taxes necessary for this purpose. The interest paid by the States is one of the matters taken into account when financial assistance that is provided out of tax reimbursements and in other ways is decided by the Commonwealth.

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