Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Tuesday, 26 July 1921

Senator RUSSELL (VICTORIA) (Vice-President of the Executive Council) - Yes; but there is not a correct definition' of what should be the subject-matter of arbitration proceedings. This Bill will tend to make the position' clearer.

Senator Earle - Evidently there is a difficulty in deciding what are really the services rendered.

Senator RUSSELL - Let me point out what has been the practice under the existingsystem. Prior to Federation, it appears that the fixing of the amount debited to the Post Office by the Railways for the carriage of mails was upon a purely arbitrary basis. The fact that both concerns were under the same Government control did not render the question of equitable payment by the one Department for services rendered by the other Department one of any moment. Both services belonged to the States.

Senator PRATTEN (NEW SOUTH WALES) - If they robbed Peter, they paid Paul.

Senator RUSSELL - In 1900, the railways in New South ' Wales were credited with £79,894 per annum for the conveyance of mails; in Victoria, they were credited -with £57,834; in Queensland, with £50,000; in South Australia, with £18,181 ; in Western Australia, with £17,121; and in Tasmania with £10,981. The amounts of payment were npt computed upon a uniform basis- throughout the States. In New South Wales and Tasmania the payments were computed at so much per mile on lines upon which mail vans were provided, whilst upon other lines they were computed by weight. In Victoria and Western Australia the payments were based upon mileage, according to the number of trains run. In Queensland, a lump sum was paid; and in South Australia the payment was computed upon a per-mile ' basis, according to service. The total payments to the whole of the railways was £234,011 per annum. Between 1901 and 1907 the Railways pressed for increased payment for the carriage of mails, but their requests were not based upon any evidence of cost ' of Service, and the Postal Department strongly resisted their demands. In 1907, however, as the result of a conference between the parties, it was' agreed that the Post Office should make payment of a lump sum of £275,000 per annum, for the conveyance of mails by railways.

The Railway authorities were empowered to devise a scale which would apportion this £275,000 between the States in about the proportion which each State had received of the original £234,000. The apportionment was upon a line-mileage basis. In 1908, an agreement was entered into for a period of eight years, under which payment was to be computed upon the scale to which I have referred.' That agreement terminated in 1916. A conference was then held between the Kailway authorities and the PostmasterGeneral, with a view to the drawing up of a fresh agreement. Agreement was reached upon practically' all the points at issue, except the rate of payment. In regard to that the railways insisted that in any negotiations the amount then paid should be taken as .a minimum basis. The Postal Department, however, contended that the then existing rate was excessive. Failing agreement, the matter was submitted to arbitration, under section 18 of the Post and Telegraph Act, and it was mutually agreed that the InterState Commission should act as arbitrator. The Department contended before the Commission that payment for the carriage of mails should be in relation to cost of service. The Commission, in a majority report, decided that the annual sum to be paid by the ,PostmasterGeneral to the principal railway official in each State should be 50 per cent, of the scheduled State railway rates for parcels, Intra and. Inter State, in force on 1st January, 1917. The Commission classified mails as parcels. In other words, it was decided that "the highest rate for the carriage of goods by the Railway Department should be adopted. The reason why 50 per cent, of the rate was fixed upon was that, in handling parcels, the railways were involved in services1 such as booking, &c, which did not apply to mails. This award was made binding for only one year. The principle upon which parcels rates were fixed was the ability of the consignor to pay, because the Railways Commissioners had a fixed parcels tariff which would enable the greatest revenue possible to be secured without diverting or discouraging traffic. The chairman of the Inter-State Commission, in a minority report, disagreed with this finding, contending that the payment to the railways should represent the amount incurred in -giving the services. Mr. Piddington concluded his finding as follows: -

(1)   The State Governments would be acting in contravention of law if they taxed the mails by classifying them as commodities in their schedules of railway rates.

(2)   That the Arbitrators ought not to do indirectly for the States what it would be illegal for the ' States to do directly.

(3)   That it was contemplated by Parliament that the State Railways should perform with the Federal Post Office the joint service of mail carriage on the basis- of being recouped for expense.

(4)   That the only evidence before the Arbitrators by which they can evaluate the expense of carrying the mails is that of the ton-mile cost on all traffic, which must therefore be taken as a basis.

Senator Bakhap - What was the cost to the Commonwealth of the carriage of mails by rail that year upon the basis of that award ?

Senator RUSSELL - I cannot say offhand. In order to determine the amount of payment to be made to the Railway Department in accordance with the award, the weights of mails consigned by rail were taken in March, 1918. Upon these weights, payment was computed at the rate of £184,296 per annum. The State railways were paid a,t this rate from 1st January, 1917, to 31st December, 1920, plus £7,500 per annum for the conveyance of second-class overseas mail matter. In October, 1920, the mails were again weighed. The weights taken, computed at half the parcels rates' operating on 1st January, 1917, would involve payment at the rate of £230,683 per annum, an increase of £46,387 per annum.

Senator PRATTEN (NEW SOUTH WALES) - For what year ?

Senator RUSSELL - For the previous year. In 1920 the final adjustment was made.

Senator PRATTEN (NEW SOUTH WALES) - Did not the honorable gentleman tell us earlier that, at the inception of Federation in 1901, we were paying over £200,000 for the carriage of mails by rail?

Senator RUSSELL - Yes.

Senator E D MILLEN (NEW SOUTH WALES) - The State Post Offices were paying that sum to the State railways.

Senator RUSSELL - The railways declined to accept payment, as from 1st January, 1921, on the basis of the parcels rates operating on the 1st January, 1917, demanding that it should be computed on the parcels rates operating on 1st January last. If payment were so made, on the weighings of October, 1920, an amount of £352,956 per annum would be involved. The Postal Department would thus have to pay £168,660 per annum more than the amount determined under the award - an- increase of, approximately, 91 per cent. That is a point that I desire to emphasize. If payments were made on the parcels rates operating on 1st January, 1921, instead of on the rates operating on 1st January, 1917, as provided for in the award, the increase would amount, approximately, to 91 per cent.

Senator Crawford - But it costs the States more to operate their railway systems than it did in 1917.

Senator RUSSELL - We do not object to pay for the carriage of our mails on the basis of the actual cost of the services rendered. We do object, however, to the State railways making a profit out of us iii this respect.

Senator PRATTEN (NEW SOUTH WALES) - What is the increase compared with the rate paid during the first year of Federation?

Senator RUSSELL - The total payments made to the whole of the State Railway Departments in 1902 was £234,404 per annum, whereas they would sow have us pay £352,956 per annum.

Senator E D MILLEN (NEW SOUTH WALES) - One of the claims made by the State Railway Departments is that payment should be made on the basis of 50 per cent, of the parcels rates prevailing to-day, instead of upon the basis of those which prevailed when the Commission gave its award.

Senator PRATTEN (NEW SOUTH WALES) - What does the Commonwealth Government claim it should pay?

Senator RUSSELL - We make no claim. We simply propose to have the matter decided by arbitration. The point of difference between us is that whereas the States desire to charge us for this work as an ordinary commercial undertaking, and so to make a profit on the carriage of our mails just as they might do on the carriage of parcels for a Flinders-lane warehouseman, we say that payment should be on the basis of the cost of the services rendered.

Senator Benny - Can we compel them to- accept that basis?

Senator RUSSELL - We are advised that we have the power.

Senator JOHN D MILLEN (TASMANIA) - Would that cost include interest on railway construction expenditure?

Senator RUSSELL - I take it that the arbitrators will deal . with the matter according to equity and good conscience, and will take into consideration all costs that are properly chargeable.

Senator Bakhap - Interest on cost of railway construction should be taken into account.

Senator RUSSELL - The cost of the services rendered will . be determined by neither the Commonwealth nor the State Railway Department, but by the arbitrators to be mutually agreed upon under the Act.

Senator Crawford - But the Commonwealth, under this amending' Bill, is determining the basis of arbitration.

Senator RUSSELL - We are defining it. The intention of Parliament undoubtedly was that payment should be on the basis of the cost of services rendered.

Senator THOMAS (NEW SOUTH WALES) - Are the States agreeable to that basis?

Senator RUSSELL - I' do not know. Speaking quite plainly, their one desire seems to -be to get as much as possible Out of the Commonwealth.

Senator Benny - It should be possible to come to an arrangement.

Senator RUSSELL - The parties have met, and have agreed on all points except the question of payment.

Senator Wilson -rr-Have all the States failed to come to. an agreement with the Commonwealth, or are only one or two holding out? *

Senator RUSSELL - Speaking generally, there is no hope of an agreement being arrived at without recourse to arbitration.

Senator PRATTEN (NEW SOUTH WALES) - I suppose the States think that the Commonwealth is asking too much of the Railway Departments.

Senator RUSSELL - The figures I . have just given showing that the State Railway Departments are claiming an increase of 91 per cent, as compared with the payment made under the award shows that it is not the Commonwealth that is asking too much.

Senator Crawford - But the weight of mails has increased since then.

Senator E D MILLEN (NEW SOUTH WALES) - That point is met byus when we ask that payment shall be made on the basis of the cost of the services rendered. As the , cost of transport of the mails increases, so our payment must increase.

SenatorRUSSELL. - Quite so. The Bill now before the Senate does not determine what amount shall be paid; it merely provides that the arbitrators shall ascertain what is the cost of the services rendered, so that a reasonable payment may be made.

Senator Vardon - But under this amending Bill the Government are proposing, to a certain extent, to tie the hands of the arbitrators.

SenatorRUSSELL.-We are defining the basis. On the occasion of the previous arbitration a question arose as to whether payment should be made on the parcels rates or tonnage basis.

Senator PRATTEN (NEW SOUTH WALES) - If the honorable senator could give us a little information as to the attitude of the State railway authorities, it might be helpful.

SenatorRUSSELL.- We have met them in conference and have tried to come to an agreement, but have failed. The Eailways are making a claim that we consider to be too high, and we propose that the matter shall be finally determined by arbitration.

Senator PRATTEN (NEW SOUTH WALES) - Is there not power to refer the matter to arbitration under the principal Act?

SenatorRUSSELL. - Yes; but the principal Act does not lay down any definite basis upon which the arbitrators are to proceed in determining the payment to be made.

Senator PRATTEN (NEW SOUTH WALES) - The words of the amending Bill are rather exacting.

Senator E D MILLEN (NEW SOUTH WALES) - Some one has to cut the knot.

Senator JOHN D MILLEN (TASMANIA) - The States should have confided in their representatives in the Senates - they should have told us what they want, but they have not done so.

SenatorRUSSELL. - At all events, I think that no objection can be taken to our proposal that the matter shall be determined by arbitration. We are not taking to ourselves any despotic power.

Senator Bakhap - Would the Government consent to an amendment of the Bill making -it clear that in estimating the cost of the services rendered the arbitrators shall take into account interest on the cost of railway construction?

SenatorRUSSELL. - No. I take it that the arbitrator- will have full power to allow any cost or charge which, is considered fair. If I were acting in his position, I should allow the interest charge for the month, and take a general view of the railway tonnage on all trans-, portation. All we are seeking is a fair method of arbitrating in order to settle the problem which is now holding up the Postal Department. I therefore ask the Senate to pass the Bill, so that we may reach finality.

Suggest corrections