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Thursday, 29 September 1927

I shall now deal with the budget proposals for the financial year 1927-8. These proposals are based on the assumption that the financial agreement which was arrived at by the Commonwealth and State Governments at the recent conferences in June and July last will be ratified by the respective Parliaments. Honorable senators are aware that previous conferences had been held since 1919, but that no agreement could be arrived at in connexion with the vexed question of financial relationship. In the meantime capitation payments were paid to the States under the provisions of the Surplus Revenue Act 1910, although Parliament had the right to discontinue or vary the payments at any time since 1920. That system of payments has been recognized as unsatisfactory in many respects, and it has been evident that it could not be left in its existing uncertain condition. After carefully considering the whole matter, the Government came to the conclusion that the existing arrangement should be replaced by some system which would grant adequate compensation to the States from a definite source for a definite period.

As a first step towards a final settlement of the question, Parliament, at the instance of the Government, repealed the capitation payments as from the 30th June, 1927. Parliament also provided for financial assistance to the States for 1927-8, subject to the terms of any agree ment that mightbe arrived at between the Commonwealth and the States.

As a next step the Government invited the States to an open conference to find the best substitute for the capitation system. At this conference the Commonwealth Government submitted for the consideration of the States a scheme based on the following proposals : -

1.   The whole of the debts of the States at the 30th June, 1929, to be taken over by the Commonwealth.

2.   Properlysafeguarded sinking funds to be established in respect of existing State debts and new borrowings.

3.   The management of debt and future borrowing to be vested in an Australian loan council.

4.   The Commonwealth to make substantial contributions towards interest and sinking funds on State debts.

5.   A filial settlement to be made in respect of "transferred properties."

These proposals were thoroughly discussed and subsequently embodied in a draft agreement which was approved by the Sydney conference, subject to final drafting alterations by the law officers. It will be necessary to secure an amendment of the Constitution to give full effect to the agreement, but, in the meantime, the provisions of the permanent agreement are to be applied as far as practicable for a temporary period of two years, commencing from the 1st July, 1927.

In accordance with the agreement arrived at, provision has been made in the budget for 1927-28 for the following payments by the Commonwealth to or for the States: -


Under the States Grants Act 1927 provision was made for payments to the States during 1927-28 of £7,734,990, subject to any agreement made between the Commonwealth and the States and adopted by Parliament. Payments under the agreement will therefore in 1927-28 be £900,455 more than the payments provided for under the States Grants Act.

Estimated Expenditure from Revenue 1927-28.

Having thus outlined the effect of the financial agreement with the States, 1 now propose to deal with other phases of the budget for 1927-28. If honorable senators will turn to pages 6 to 9 of the printed budget papers they will see a summary of the budget, together with corresponding figures for previous years.

Under Part 1. - Departments and services other than business undertakings and territories of the Commonwealth - the estimated expenditure for 1927-28 is £50,855,434, an increase of £809,485 over the actual expenditure 1926-27. This increase is made up as follows : -


The net increase of £326,293, under war repatriation and defence expenditure is mainly due to war pensions and increased interest, which will result from the conversion of war loans bearing 4½ per cent. and 5 per cent. interest that will mature in December next.

The increase of £260,760 in interest and sinking fund on loans for works is mainly due to migration loans to the States and the Grafton-South Brisbane railway. A substantial portion of this increase will be recovered from the British Government and the States.

The increase of £255,411 under invalid and old-age pensions is due to the increase in the number of pensioners.

The increase of £142,541 under ordinary votes of departments is mainly due to the activities of the Development and Migration Commission, and to the increased health programme as recommended by the Royal Commission on Health.

Part II. - Business Undertakings.

The estimated expenditure of the PostmasterGeneral's Department from revenue for 1927-28 is £12,223,353, and the estimated revenue of the Post Office is £12,391,000. The estimated surplus is, therefore, £167,647. The expansion of business, increased rates of pay due to Arbitration Court awards, additional payments to railways departments for the carriage of mails, a higher scale of payment to nonofficial postmasters, and the increased cost of operating large additions to the telephone, telegraph, and postal services, interest and sinking fund, make it necessary to provide £937,454 more than was expended in 1926-27.

Reference to the figures in the budget statement relative to 'Commonwealth railways will show that there has been a steady improvement in the finances of all lines controlled by the Commonwealth.

Part III. - Territories of the Commonwealth.

The estimated expenditure on the territories under the control of the Commonwealth for 1927-28 is £615,405, and the estimated revenue is £169,190, the result being an estimated deficit of £446,215 for the year. In 1926-27 there was a deficit of £364,045. The increased deficit is mainly due to the expenses of the transfer of staffs to Canberra, and the provision of £70,000 for the purchase of Melbourne homes of officers transferred. This amount of £70,000, however, will be subsequently recovered.

Part IV. - Payments to or for the States.

Under Part IV. - Payments to or for the States, provision is made for the following : -



These sums represent an increase of £885,000 over the corresponding payments for 1926-27. This is due to the provisions of the financial agreement with the States. Under that agreement there is to be, as already stated, a further payment of £165,533 representing the increased interest on transferred properties. This amount is shown under the estimates of the departments concerned. All the States have now signed the Federal Aid Roads Agreement. Last year a special duty which was levied on petrol was estimated to produce £1,000,000 towards the road grant. The Government now proposes to levy other duties which it is estimated will realize a further sum of £500,000 a year.

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