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Thursday, 24 October 1912

The PRESIDENT - Order !

Senator ST LEDGER - I was going to point out, in connexion with the consolidation of the State debts, thatpossibly the Government might try to escape the difficulties of the position by adopting a system of taxation to which reference has frequently been made in the Senate. If, sir, you consider that irrelevant to the question, I shall leave it. Apart from any financial policy of that kind, and taking the Treasurer's own statement of the financial position of the Government, it is evident that the Commonwealth must shortly become a borrower. What will then be the position? We would not permit the States to control or influence in any way our policy with regard to borrowing. It is inconceivable that the Federal Parliament would tolerate, for a moment, even a suggestion by a State Parliament as to how we should conduct the inevitable Commonwealth loan policy. The converse of the proposition is equally true, and the States, very properly, in my opinion, would not tolerate any interference on our part with their control of their own borrowing policies. The full and free acceptance of these two propositions is the first step towards a successful solution of this great problem. There is another aspect of the question which arises out of that. The authorities of the States will consider it, and we have a right to consider it. If, when we undertake the consolidation of the State debts, we are successful in consolidating some of them as they mature at a lower rate of interest than has had to be paid upon them in the past, the States will, of their own volition, and as a matter of common sense, come to us for further assistance in the matter. There will be no need to alter the Constitution, or to bring pressure to bear upon the States, if we are successful in our first efforts in this direction. What the Government are seeking to do in the way of altering the Constitution, and to bring financial pressure to bear upon the States, will be unnecessary. Given success in the initial attempt to consolidate the debts, the State Governments will come in with us of their own accord. I propose now to refer briefly) to one of the schemes which have been proposed for dealing with the State debts which has received the greatest attention throughout the Commonwealth from the various State Parliaments, and, as it deserved, from the Federal Parliament. I refer to the scheme put forward by Mr. Harper. I shall mention only its salient features. The honorable gentleman proposed, first, that future borrowing should be vested entirely in the Commonwealth. Secondly, that there should be a Public Debt Commission, consisting of the Commonwealth Treasurer, two finance members outside Parliament, and the Secretary of the Commonwealth Treasury to be Secretary of the Commission. He proposed, also, that trustees should be appointed to provide, amongst other things, for the loan requirements of the Commonwealth, and of the States. These were the most important features of Mr. Harper's speech. With all respect to the honorable gentleman, and with a great deal of diffidence in differing from such an authority, I beg, with fear and trembling, but still quite clearly, to condemn each and every one of those proposals. I hope that if a Royal Commission be appointed, we shall be able to give reasons why such a method of dealing with the question of the State debts should not be adopted. I shall give one or two reasons now. If <4he Commonwealth is to have control of all future borowing by the States, that will mean that the Federal Parliament will raise a loan, and that a State Parliament will have to provide the means, by taxation or otherwise, for the payment of the interest upon it. There is an anomaly which strikes not only at representative government, but at one of the very roots of sound finance. Those who have to pay the piper have the right to call the tune.

Senator Rae - - They will be the same people, whether of the Commonwealth or of the States.

Senator ST LEDGER - Exactly, and on the argument that the people of the Commonwealth and the States are one and the same, it might be contended that we should abolish every State Parliament. I assume, however, that the , State Parliaments will continue, to exist in possession of, substantially, their present financial and legislative powers. If they do, and the Federal Parliament is to be vested with authority to control all future borrowing, that will involve the awful financial principle that one authority willi raise the money, and another will be responsible for the payment of the interest upon it. That is one of the radical objections to Mr. Harper's scheme.

Senator Rae - The honorable senator's proposal involves the same thing from the other point of view.

Senator ST LEDGER - No, it does not. I agree with Sir George Turner and Mr. Coghlan in refusing to consider the question of interfering with the borrowing power of the States. These two great financial authorities are clear and emphatic upon the point. Their proposals would leave the States their present financial power. To attempt at the same time to control their borrowing policy would be to endeavour to work a financial principle which is abhorrent to our Constitution, and opposed to common sense. The Commonwealth Treasurer might be in such a position that, if he considered it necessary, he could veto a proposed State loan at any time. What would happen if the Federal Treasurer exercised his power to veto a loan proposed by a State? Under Mr. Harper's scheme, he would do so upon the advice of the Debts Commissioners, and he would himself necessarily be the head of the Commission. The States would at once seek representation on the Debts Commission, or they would be bound to send to this Parliament representatives whose business it would be to represent them financially, and at once log-rolling and intrigue would begin in the Treasury. The Treasurer might frustrate the financial policy of Queensland, or of Western Australia, by ranging the influence of the other Statesagainst them. That kind of thing goes on here to a certain extent now ; but if we gave the Commonwealth Treasurer control over State borrowing, we should bring about an abominable and intolerable state of intrigue. Assuming that we can approach the consolidation of our State debts, in what position should we seek to be at the time? A portion of the answer to that question is very easily supplied. In the first place, we should require to take a clear inventory of the debts which will fall due up to 1920.

Senator Rae - The total amount is increasing every year.

Senator ST LEDGER - We ought to appoint a Commission to ascertain the amount of the loans which bear a higher rate of interest than 3 J per cent., and how many of them are redeemable at option. We should then have to decide how we can deal with those loans. Obviously, we must be in a position to say to recalcitrant creditors who will not accept a less interest than 3½ per cent., '' If you will not take a lower interest, here is your money." ' But where are we to get that money ? That is the one great question which we have to consider.

Senator de Largie - What is the honorable senator going to do about the matter?

Senator ST LEDGER - I would not have asked that question. It is one which any fool might ask. I would never have put such a question, unless, with some humility, I had a suggestion to offer.

Senator Rae - I do not think it is fair for the honorable senator to claim the possession of humility.

Senator ST LEDGER - The honorable senator's perceptions must be very dull if he mistakes a saint for quite a different character. I have written and circulated an opinion on this matter throughout some portions of Australia. There are £60,000,000 - the deposits of the people - in the Government Savings Banks. To my mind, that money will represent a powerful asset whenever we may be confronted with the task of dealing with recalcitrant creditors.

Senator Pearce - The great bulk of that money is already loaned by the States.

Senator ST LEDGER - Our debentures are as good as gold, or we cannot talk of our Savings Banks. I expected the Ministerwould make a remark of that sort. Does he mean to imply that when the deposits in our Savings Banks are loaned out the State Treasurers are not able to redeem them? The State Savings Banks are being mismanaged if they are not conducted on the basis that State stocks are as good as gold. The Minister of Defence has fallen into an error by insinuating that the State Government debentures are not as good as gold. I assume that they are, and that the Commonwealth. Treasurer, if he had power to deal with Savings Bank deposits as the result of State legislation, would have a fund upon which he could draw for the purpose of dealing with recalcitrant creditors.

Senator Rae - If our debentures are as good as gold, the same sovereign cannot be in two places at once.

Senator ST LEDGER - But we can make a sovereign do more work than it has done previously. Every man who is a financier knows that. I would point out that it was the deposits in the Post Office Savings Banks, amounting to £26,000,000 or £27,000,000, which enabled Mr. Goschen to successfully deal with recalcitrant creditors. He was instrumental in securing the passing of an Act by which he was able to obtain control of that money, so that it was available when creditors might possibly have refused to submit to his terms. Why cannot we use the Government Savings Bank deposits in the same way whenever we choose to approach the problem of converting our State debts ? But, unfortunately, the Government have entered into competition with the Government Savings Banks of the States, with the object of securing deposits for the Commonwealth Savings Banks. To me it has always been a problem whether the Government did not intend to lay hold of the Government Savings Bank deposits of the States in anticipation of doing with them what Mr. Goschen did.

Senator Pearce - If the States would do what the honorable senator suggests there would be nothing to prevent them doing it now in the case of their own loans. But they do not do it.

Senator ST LEDGER - I have said that they do not do it. I have noted as a regrettable feature the fact that they do not approach the question of consolidating and converting their debts in that way.

Senator Pearce - What indication is there that they would do for the Commonwealth something which they will not do for themselves?

Senator ST LEDGER - The answer to that question is that the States have been relying on the Commonwealth to comply with the express direction contained in the Constitution to proceed with the work of consolidating and converting the whole of their debts. I welcome the remark of the Minister of Defence, because it enables me to warn the Government that if they do not immediately approach this question, the States must approach it themselves, and the more successful they are in dealing with it, the less chance of success will this Parliament have of dealing with it satisfactorily. I come now to the establishment of the Commonwealth Bank.

The PRESIDENT - Order ! There is nothing in the honorable senator's motion which permits him to deal with the establishment of the Commonwealth Bank.

Senator ST LEDGER - Not in relation to the consolidation and conversion of the State debts? The Bank of England was a most powerful factor in the successful carrying out of Mr. Goschen 's scheme.

The PRESIDENT - Order ! The honorable senator's motion is very plain and definite. '

Senator ST LEDGER - Unless you, sir, rule me put of order, I am inclined to say that the Commonwealth Bank may prove a most powerful instrument in the successful consolidation and conversion of the State debts. I do not propose to discuss its constitution.I merely mention it as a means towards an end. Had I been the Treasurer of the Commonwealth, or the financial adviser of the Government, I would have liked to have seen the Commonwealth Bank invested with certain powers. If, in time to come, it is found that with enlarged powers that Bank would be a powerful instrument in the successful consolidation and conversion of our State debts, I hope that enlarged powers will be given to it. I trust that our State Government Savings Banks will be used in the direction I have indicated. I recognise what everybody who knows anything about the A B C of finance must recognise, namely, that the money markets of the world are tightening, and that the champion stock of the world - British consols - is falling, so that this is not an opportune time to undertake the consolidation and conversion of our State debts. But in anticipation of a favorable change, I say that the Government should take immediate steps, by means of the appointment of a Royal Commission, to enable us to successfully solve the great problem which confronts us. If they do that, I am sure that the result will be to the great advantage of every State.

Debate (on motion by Senator de Largie) adjourned.

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