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Thursday, 8 July 1926

Senator PEARCE - In view of the new proposals regarding the Commonwealth's financial relations with the States, Part IV. of the Estimates, page 374, is of considerable importance, and to this I should like to make reference. Under this part of the Estimates provision is made for a more satisfactory adjustment of the financial relationships between the Commonwealth and States, based on the true Federal principle that the States should, so far as is possible, be financially independent of the Commonwealth. The Government's programme in this connexion is the withdrawal of the present capitation payments and the discontinuance of the imposition of certain Commonwealth taxes. The State Governments will thus be enabled to recoup themselves for the loss of the capitation payments by raising equivalent funds by their own taxation methods in the surrendered fields. The Commonwealth, in this respect; is proceeding on the principle that the authority which expends money shall have responsibility for raising it. Under the new scheme, duplication of existing taxation collection agencies will be avoided, with a saving of approximately £100,000 to the taxpayers of Australia. The Government has given careful attention to the objections made by the State Governments to the Commonwealth proposals, but it is firmly convinced that the proposals are sound in principle and should be translated into statute form. To meet objections by the States that the States have not sufficient time to put the required machinery into motion for 1926-27, the Government has decided to ask Parliament to pass such legislation as will enable the Commonwealth to operate the scheme during the first year, instead of leaving the arrangements to the State Governments. This will give to the State authorities an additional period of twelve months in which to formulate their plans for raising the necessary revenue.

Senator Elliott - Will there be any saving during that period ?

Senator PEARCE - I cannot say that there will be, because the two taxing authorities will be operating. In the States Grants Bill a clause will be inserted to enable the Commonwealth to pay over to the State Governments land tax, entertainments tax, and estate duty, for 1926-27 - collected at the rates which existed in 1925-26 - and also 40 per cent. of the income tax at last year's Federal rates.

Senator Needham - In the meantime will the per capita payments remain intact ?

Senator PEARCE - No. This will take the place of the per capita payments. Bills will be submitted to Parliament for the repeal, as from the end of the year 1926-27, of the Land Tax Act, the En tertainments Tax Act and the Estate Duty Act. For the year 1927-28. the Commonwealth will abandon 40 per cent.. of its income tax. The special payments to Tasmania and Western Australia, amounting to £828,000, to meet special conditions existing in those States, show the unsuitability of the payments on a capitation basis.

The next item, Main Roads Construction £2,000,000, is the Commonwealth's contribution under a scheme arrived at with the States for an expenditure of £35,000,000 covering a period of ten years. Motor transport has so much entered into the commercial and social life of Australia that roads of a standard suitable for motor traffic are now an absolute necessity. It is considered that the users of these roads should share tha cost in proportion to their use of the roads, and the most effective method of obtaining this is through the Customs. The Commonwealth's contribution will be distributed amongst the States on a basis of area and population - three-fifths according to population, and two-fifths on area. The roads included in the scheme with the States are -

1.   Main roads which open up and develop new country.

2.   Trunk roads between main towns.

3.   Arterial roadsto carry concentrated traffic from the developed main trunk and other roads.

Senator Elliott - Will not that be perpetuating the system of one authority collecting the revenue and another authority spending it?

Senator PEARCE - To some extent, it will.

I wish now to refer to the national debt. The gross debt at the 30th June, 1926, was £458,443,637. Deducting loans to the States and other sums repayable to the Treasury, the net debt amounts to £338,841,476. The war debt is £28,500,000 less than four years ago. New borrowing is, of course, increasing the amount of gross debt; but, since the war, this borrowing has practically been limited to developmental and reproductive works which provide revenue-producing assets to offset the new debt created. The national debt sinking fund, established less than three years ago, has resulted in the satisfactory figure of £20,067,046 being applied to the redemption of debt.

The steps taken to reduce the national debt have enhanced our credit, and will result in future loans being floated at a lower rate than otherwise would be the case.

I have now outlined the principal features of the financial' statements, and the manner in which they are set out will enable honorable senators readily to obtain any other information desired. For the benefit of those honorable senators who are unacquainted with the procedure in this chamber, I again direct their attention to the fact that, if they desire to debate the general principles underlying the budget, they should do so when the motion for the printing of the budget papers is before the chamber, as that is the only effective opportunity provided. The Appropriation Bill comes before this chamber rather late in the session, when there is usually only sufficient time to discuss the items in the Estimates. This procedure was adopted early in the history of Federation to give the Senate an opportunity to fully discuss the general principles of the budget.

Debate (on motion by Senator Needham) adjourned.

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