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Monday, 21 March 1927

Senator PEARCE (Western Australia) (Vice-President of the Executive Council) . - As the bill has been exhaustively discussed, I do not propose to go over the whole subject again, but, during the course of the debate, certain points have been raised to which I think I should make some reply. In the first place, there seems to be somemisapprehension about a statement made by the Honorary Minister (Senator McLachlan). When that honorable senator was asked whether the special grants for Tasmania and Western Australia could not be put in a separate bill, if this measure were defeated, he replied that they could. That is certainly so, but the Honorary Minister's reply, I am sure, was not intended by him to be exhaustive ; it did not explain the whole position. The special grants to Western Australia and Tasmania, in such circumstances, could be included in a separate bill and submitted to this Parliament for approval, but not by the present Government. If done at all, that step would have to be taken by some other government. It is obvious that this measure constitutes an important portion of the Government's financial policy, and if a vital amendment had been carried in another place the Government would have had no option but to resign. Equally if a request for such an amendment were carried in this chamber the Government would, of course, have to ask another place to reject it, and if it were made the Government would be defeated, and would have to resign. This would not be because of a desire on the part of the Government to make this a party question, but because of the inexorable rule which every self respecting government follows in respect of its financial proposals.

Let me answer at once an attack made by Senator Greene, who said that the Government had been guilty of a tactical blunder and had in some way damaged the party by introducing this bill. My reply is that this measure finds its place in the financial proposals of the Government after full consultation with both parties supporting the administration. Before it was brought before Parliament both parties supporting the Government were called together so that they might know what it was proposed to do, and only three of those present at that meeting took any exception to our proposal. The Government, therefore, had a right to assume that in bringing it forward it had behind it the overwhelming support of members of both parties. So much for that criticism. Another point was raised by Senator Carroll, who asked why the special grants to Western Australia and Tasmania found a place in this bill. I point out that in the Surplus Revenue Act of 1910 special provision was made for a grant to Western Australia. At that time no special grant was being paid to Tasmania, but if it had been it would also have been included in the bill. ' In that respect, therefore, we have only followed precedent. There has been a good deal of undue heat, and, if I may say so, much unnecessary eloquence, expended on the bill. It seems to me that one of the last to speak - Senator Sampson, who made, perhaps, one of the shortest speeches - put the whole question in a nutshell, when he saidthat from the people's point of view it was largely a question of whether they should pay 10s. to each of two governmental authorities, or £1 to the one authority. The question at issue really resolves itself into that.

Senator Abbott,in criticizing Senator Greene in his second-reading speech, said -

Is Senator Greene, who is opposed to the bill, unmindful of the fact that in 1920-21 he was a member of the Hughes Ministry which advocated the withdrawal of the per capita grant?

Senator GREENE (NEW SOUTH WALES) - Did that not happen in 1920-21?

Senator PEARCE - Senator Abbottwas referring to the proposal put forward in 1920, when the right honorable member for Balaclava (Mr. Watt), Senator Greene, and I were members of the same Cabinet. Senator Abbott continued -

Did Senator Greene say, " Yes, I was a member of the Ministry in 1920-21 that resolved to withdraw the per capita payment, but I omitted to tell my leader or my electors in the north of New South Wales that I objected to the. proposal." As a member of the Government of the day he must be supposed to have held the opinion that it was necessary to withdraw the per capita payment.

Senator Greenethen interjected ;

I can give the honorable senator an explanation. The suggestion for the gradual withdrawal of the payments was not accepted, and I subsequently introduced a tariff which made the withdrawal unnecessary.

The facts are these: The tariff, which is now known as the Massy Greene tariff, was tabled on the 25th March, 1920, and duties were collected at the increased rates from that date. The Premiers' conference, at which the right honorable member for North Sydney (Mr. Hughes), who was then Prime Minister, said he would carry out Mr. Watt's proposal, sat from the21st to 25th May, 1920. It will, therefore, be seen that Senator Greene was under a misapprehension when he said that he " subsequently " introduced the tariff. When the conference was held at which these proposals were put forward, the tariff was actually in operation. I also wish to correct some of the figures put forward by Senator Greene in his personal explanation on Friday last. The Honorary Minister (Senator McLachlan) had challenged the statement made by him, that since the coming into office of the present Government taxation had increased by 12s.1d. per head of the population, and Senator Greene, in his personal explanation, said that the taxation per head in 1922-23 was ?8 13s. 4d. The honorable senator gave the total amount of taxation as ?49,855,017, and the population as 5,749,807. These figures, he said, had been obtained from the budget-papers. It is true that the figures quoted are published in the budget-papers, but Senator Greene made the serious mistake of taking the population figures for 1923-24. which show the population as at the 31st December, 1923.. for ascertaining the taxation per head for the previous year, 1922-23. The population, of course, was greater in 1923-24 than in 1922-23.. If Senator Greene had divided the taxation of 1922-23 by the number of people who actually paid those taxes he would have found the amount per head to be ?8 17s.1d., instead of ?8 13s. 4d., as stated by him - a difference of 3s. 9d. per head. In addition to adopting the wrong basis for ascertaining the taxation per head, the honorable senator was also wrong in his calculations. The second error is small, and would be scarcely worthy of notice if the honorable senator had not been endeavouring to give what purported to be the exact figures. He was endeavouring to show that the increase in taxation per head was 12s.1d. - an amount quoted by a right honorable member in another place. The Honorary Minister (Senator McLachlan) had already shown that the figures used in another place were wrong, and it is a remarkable coincidence that Senator Greene, working independently, obtained exactly the same result as that quoted in another place. Notwithstanding this, the honorable senator made a mistake of 3s. 9d. per head by adopting the wrong basis for his calculations.

Senator GREENE (NEW SOUTH WALES) - I do not agree that it is wrong ; I think the basis is correct.

Senator PEARCE - On the basis that the honorable senator adopted, his calculation shows an error of 2d. per head. There is also an error of 5d. per head in his calculations for 1926-27, even if we accept as correct his estimate of what our taxation will yield this year.

Senator GREENE (NEW SOUTH WALES) - The right honorable gentleman's basis is wrong.

Senator PEARCE - I have only 30 minutes in which to reply--

Senator GREENE (NEW SOUTH WALES) - Why make an incorrect statement ?

Senator PEARCE - It is open to the honorable senator to make another personal explanation. I come now to the general debate, concerning which I have a few comments to make. The statement has been made on several occasions that the Senate represents the States. That, of course, is true; but what is meant by " the States " ? According to some honorable senators, it means, not the people of the States, but the Governments of the States. Let me remind those honorable senators that when the Constitution was drawn up, its framers largely followed that of the United

States of America as a guide. At that time in the United States of America senators were elected by the legislatures of the States. Had the framers of our Constitution intended that the Senate should represent the State Parliaments, and thereby the State Governments, is it not obvious that they would have adopted the American system of electing senators? They did not do that. They deliberately turned their backs on the American system, and provided that senators should be elected by the people of the States. It is idle, therefore, to say, on this or any other question, that the Senate should be guided by the opinion of State Governments, and that when an honorable senator does not adopt the view of the Government of the State he represents, he is acting contrary to the opinion of his State. Let me give one illustration of how ridiculous it would bo for us to assume that the State Governments in this matter speak on behalf of the people of the States. A while ago, when we were considering the imposition of taxation for the purpose of assisting States in the matter of road development, we imposed a tax on petrol. At that time, we were told iu the Senate and outside that we were acting against the interests of the States, because certain States objected to that proposal. The Government of Victoria refused to accept its share of the revenue obtained from the petrol tax, so that, if a3 some honorable senators argue, the State Governments speak for the States, Senator Guthrie, Senator Findley, and other Victorian senators, if they were doing their duty, should have voted against that tax. A few months afterwards, however, the State Government adopted a different attitude and decided to accept the money collected in that way. What would have been the position of these honorable senators had they adopted the view that they are here to represent the State Governments? It would then have been too late for them to put themselves right, and they would have been wrong in either case. It is clear that, in speaking of the responsibilities of the Senate in this way, some honorable senators are arguing on wrong premises.

I also wish to correct a statement made by Senator Lynch, who said that the per ca-pita system is in the interests of

Western Australia. Under the Surplus Revenue Act of 1910, the per capita payments to Now South Wales, from 19.16 to 1926, increased by £566,000, and in Victoria by £248,000, but in the same period the payments to Western Australia decreased by £7,866. If the per capita system is right, it should be applied in all cases where grants of money are made to the States. It should be applied in connexion with the roads grant, and also in connexion with advances for wire netting. Under the system adopted by the Government, Western Australia, with its vast area and heavy financial responsibilities, gets as much as Victoria, with its larger population, whereas, under the per capita system, Victoria would get four times as much as the western State. Notwithstanding this, Senator Lynch says that the per capita system favours Western Australia. The honorable senator also quoted a statement I made at Kalgoorlie to the effect that this Government would undertake that Western Australia should receive £450,000 above and beyond any arrangement made by the States iu the redistribution of the Commonwealth grants - this, by the way, is surely proof that I did indicate to the people that there would be some redistribution. What has the Government put before the Government and the people of Western Australia under this bill? We are providing for a special grant of £300,000, and we long ago put up to the State a proposal that was recommended by a section of the Western Australian Disabilities Royal Commission, as one of the best methods of assisting Western Australia, namely, that we should take over a portion of the northwestern territory, which represents a State liability of £150,000 a year. Those two sums are equivalent to the amount that I then outlined.

Senator Needham - The Minister is confounding two different propositions.

Senator PEARCE - It does not matter whether there are two or six propositions. Senator Lynch was in error when he said that the total war liabilities of the Commonwealth amounted to only £17,000,000 per annum. If the honorable senator will turn to the statement of the receipts and expenditure of the Commonwealth which, I remind him, are the official figures audited by the Auditor-General, so that there can be no mistake about them, he will see that interest and sinking fund on the war debt, war pensions, repatriation and other war services - in other words, war liabilities- amount to ?29,219,000.

Senator H Hays - Is it not a fact that the special grants to Tasmania and Western Australia were agreed to by the Government before this bill was brought before members in the party rooms ?

Senator PEARCE - Yes. Senator Ogden, claiming a moral superiority, which I remind him is somewhat irritating to other honorable senators, seeing that we do not agree that he possesses all the virtues and his colleagues none, said that the Government had made a party question of this bill.

Senator Ogden - I do not claim any moral superiority.

Senator PEARCE - The Government necessarily makes a party question of its financial measures, but I point out that the Government gives to its supporters a. liberty that the Labour party does not grant to its members. The division lists in another place, as well as in this Senate, show that Government supporters have voted against this bill ; but, notwithstanding that in this Senate we heard from Senator Grant what was probably one of the strongest speeches in support of the bill, no member of the Labour party voted in favour of it.

I desire now to refer to the point raised by Senator Needham, that at the last conference Mr. Bruce would entertain no other proposal than that submitted by him. As other honorable senators repeated the statement, I shall read from the official report of the conference. Under the heading " Commonwealth Proposals " we find the following -

As the nearest approach now practicable towards the ideal solution, the Federal Government proposes -

(   1 ) That the Commonwealth and State finances be now separated as far as possible, on the principle that, normally, indirect taxation is the proper field for the Commonwealth and direct taxation the proper field for the States.

(2)   That as a first step towards this ideal, the Commonwealth evacuate the field of taxation of incomes of individuals.

(3)   That the capitation payments now made to the States under the Surplus Revenue Act be discontinued.

(4)   That temporary financial assistance be given to the States to prevent undue dislocation of the State finances under the new arrangements.

(5)   That for the development of the national resources, the Commonwealth give financial assistance, without regard to State boundaries or population, in special cases where proper and necessary development cannot otherwise be secured.

These proposals offer a satisfactory basis for a definite and final determination of the present unsound system of capitation payments with its accompanying duplication of income taxes.

After giving details of various proposals, the statement concluded -

It is recognized that the problem to be solved is difficult. It must, however, be solved in the interests of both Commonwealth and States. It is most desirable that the solution should be reached by agreement, and it is with that object that the Commonwealth Government, instead of proceeding direct to legislative action, invites the States to give these proposals their most careful consideration.

On page 28 of the report, Mr. Bruce is reported to have said -

We have now reached the point when this question has again to be considered, and the Commonwealth Government has asked the Premiers of the States to come here and discuss it with them. Of course, I recognize that this question of per capita payments to the States is one entirely within the discretion of the Commonwealth Parliament. But I think it is essential that the State representatives should come here and be afforded an opportunity to discuss any proposals which may bo put forward by the Commonwealth.

The Prime Minister also said -

We are trying to bring about the change with the least possible dislocation of the finances of the States, and we have been reasonably generous in our proposals to obviate the States being placed in an embarrassing position. Therefore, we ask the State Premiers to co-operate with us.

I draw Senator Needham's attention to the next sentence -

If they can suggest a better, more efficient and easier way of doing what we propose, we shall bo only too pleased to listen to them, and to have their assistance.

At the end of the second day of the conference, Mr. McCormack said : -

Mr. McCORMACK.; I do not question the morality of the present Commonwealth Government in the matter. The proposals may appear quite sound to the Government of which the Prime Minister is the head, but from the point of view of the States, they constitute a breach of a moral understanding or contract entered into at the time of federation. The question is whether the people of Aus tralia at the present time consider that there is a moral obligation upon the Commonwealth Government to hand over portion of the Customs revenue to the States.

Mr. BRUCE.;That is the very point I have been trying to make. The Commonwealth has put forward certain proposals, and listening to the speeches made by the Premiers this afternoon, I have gathered that the Commonwealth action is being challenged on the ground that something is being done which is morally wrong, and opposed to the right of the States under the federation.

Mr. McCORMACK.We believe that, under the general terms of the Constitution, the States have a right to participate in the Customs revenue.

To indicate the feeling of the Premiers as to the attitude of Mr. Bruce, I desire to quote from the remarks of Mr. Allan, the Premier of Victoria, when seconding a vote of thanks to Mr. Bruce -

We are also grateful for the way in which you have presided over the proceedings because you have not taken up a standanddeliver attitude, such as,I regret to say, was adopted on a previous occasion, and which must always result in a deadlock.

It will be seen that every opportunity was given to the States, not only to consider the proposals of the Commonwealth, but also to submit alternative proposals.

Senator Kingsmill - But they put forward nothing.

Senator PEARCE - That is so. They merely rested on their "moral right." That being so, can the States now complain when this Parliament is proceeding in accordance with its undoubted right under the Constitution to take what action it thinks fit in relation to the per capita payments ? That right was exercised by the Commonwealth Parliament in 1910. The Government recognizes that it is not desirable, in the interest of either the Commonwealth or the States, that the States should be disregarded, flouted, or bludgeoned, and for that reason it is now saying to the States that, while the Commonwealth Parliament is determined to end the existing system, the Commonwealth is still willing to meet the States in conference to discuss any alternative scheme that may be put forward by them. When the Government's proposals were first placed before the States, the State Premiers said that the figures submitted were wrong; but when asked to agree to the examination of those figures by experts they would not do so. The

Commonwealth Government is now saying to the States, "Come, let us reason together, with a view to arriving at the best arrangement possible in the interests of the Commonwealth and the States."

Senator GREENE (NEW SOUTH WALES) - What will happen if the States maintain the attitude that they are not prepared to relinquish their share of the Customs revenue.

Senator PEARCE - With the passing of this bill, that share goes from them. Seeing that the Commonwealth's obligations exceed ?50,000,000 per annum, and that the Customs and excise revenue is a little over ?40,000,000 per annum, the argument that the States are still entitled to a share in the Customs revenue is, in my opinion, humbug and nonsense. The States would be foolish to maintain the attitude they adopted on the occasion of the last conference. I do not think that they will take that stand again, but that they will come to the conference in a reasonable frame of mind, prepared to submit alternative proposals. It is significant that when at the last conference it was suggested that State officers should examine the Commonwealth figures which had been criticized, one Premier admitted that he had not brought with him any officer capable of examining the figures. Evidently, he intended that there should be no examination. I hope that the bill will be passed, and that when the States meet the Commonwealth in conference a spirit of harmony will be manifest, and that results satisfactory to all will accrue.

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