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Thursday, 5 August 1926

Senator PEARCE(Western Australia-

Vice-President of the Executive Council) [4.6]. - I move -

That the bill be now read a second time.

The object of the measure is simply to extend for another year the provisions of the States Loan Act 1925, so that the Comonwealth Parliamentand the Government may, in accordance with a resolution of the Australian Loan Council at its meeting on the 27th May last, borrow moneys for the States for the financial year 1926-27. It merely enables the Commonwealth, during this financial year, to borrow for the States in exactly the same way as was done last year. During the last two and a half years the loan operations of the Commonwealth and the States have been conducted in accordance with agreements made by the Australian Loan Council. The generalpolicy of the Loan Council includes the following points: -

(1)   That every maturing loan shall be converted in the place where the original loan is domiciled.

(2)   That for new money the States shall rely on both the Australian and overseas markets, the amounts to be raised overseas being determined by the Loan Council after consideration of the amount of money which will probably be available in Australia.

(3)   That while the States remain free to accept money ' ' over the counter," they shall not raise in Australia any money by the issue of an advertised prospectus.

(4)   That money required for the States in Australia, except money taken " over the counter," is to be raised by the Commonwealth on behalf of the States, in accordance with a prospectus and publicity campaign.

(5)   That the Commonwealth shall not raise new money for its own purposes in Australia, but shall satisfy its requirements by oversea borrowing.

(6)   That each State shall manage its own flotations in London, whether for new money or for conversions, in consultation with the Loan Council.

(7)   That any oversea loans required in America, either by the Commonwealth or by any State, shall be raised by and in the name of the Commonwealth.

Under the act passed last year the Commonwealth floated in Australia for the States a loan of £5,100,000. The rate of interest offered was5¼ per cent., or¼ per cent, below the rate at which £67,000,000 of our own war loans, which matured on the 15th December, 1925, had been converted. The5¼ per cent. loan raised for the States, I might say, was over-subscribed - a total of £6,274,810 having been raised. Later, the Commonwealth was able, by private negotiation, to secure a further sum of £1,640,000 at the same terms on behalf of the States. As regards borrowing overseas, the States participated in the £15,000,000 loan raised by the Commonwealth in New York to the extent of £5,008,733, so that the total borrowings for the States, in Australia and overseas under the act of last year, reached the sum of £12,923,543. As the measure is only to renew the existing act for another year, I trust that it will have a speedy passage.

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