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Friday, 23 March 1928

Senator NEEDHAM (Western Australia) . - I have no hesitation in saying that this bill is of far-reaching importance. It will, we may presume, for some considerable time determine the financial relations of the Commonwealth and the States. It is not my intention to traverse the history of the negotiations that led up to the agreement embodied in this measure. I dealt with that phase of the question fully when we were discussing a similar measure last year, and I am confident that honorable senators are all well aware of the detailed provisions of the agreement. Nor is it my intention to discuss the proposals in so far as they affect the States generally. I intend to confine my remarks almost entirely to the position of Western Australia under this agreement, or rather, to state my view of how it will affect the State which

I assist to represent in this chamber. I may add that in dealing with the . bill I am stating only my own personal opinion. Whether we like it or not, Parliament has definitely decided to abolish the per capita payments to the States. Before I leave this phase of the proposal, I wish to quote a statement bearing on the general position made, by the late Lord Forrest on the 15th July, 1910. It is as follows : - 1 make this statement in the full knowledge of its truth, that the reason that the States were willing to accept 25s. per head was that they were guaranteed that amount until the people should otherwise direct and that it did not depend on the chance vote of parliament.

That was the well considered opinion of the late Lord Forrest concerning a matter that had been agitating the public for seventeen years. The opinion is as sound to-day as it was when first uttered. I believe that the people of Australia, if they had an opportunity to express their view, would desire a continuance of the per capita payments until such time as they gave Parliament a mandate to alter the arrangement. At the Premiers' Conference in 1926, the proposals submitted by the Prime Minister (Mr. Bruce) were unanimously rejected, and following the publication of reports of that gathering, there was a strong wave of indignation throughout the Commonwealth. Leading public men and important sections of the press adversely criticized the scheme put forward by the right honorable the leader of this Government. In effect the arrangement then contemplated by the Government was to abolish the per capita payment of 25s. and in return the Commonwealth would evacuate certain fields of direct taxation. The effect of those proposals, if adopted, would have been to add considerably to the burdens of the several States. It would have been necessary for State Governments to increase taxation to make good the deficiency caused by the withdrawal of the per capita payments. Naturally, State Governments have no desire to adopt that course. They contend, and rightly so, that since they have" substantial commitments in the way of developmental public works within their territories, their financial resources should not be in any way impaired. Their responsibilities are daily increasing. This is particularly true of

Queensland and Western Australia, and perhaps I may be pardoned if I say that it is especially true of Western Australia. I hope I shall not be charged with parochialism whenI say this. Itis common knowledge that Western Australia must carry through many big developmental works in the near future. The Government of that State has incurred already, and must continue to incur, heavy liabilities, to ensure the satisfactory development of vast new areas that are being opened up for settlement. The representatives of the States, realizing that, with the progress of time, their responsibilities would increase, unanimously rejected the proposals made by the Prime Minister in 1926, and as a result of pressure inside and outside Parliament the Ministry deemed it wise to submit other proposals. The agreement, which is attached as a schedule to the bill that we are now discussing, is the outcome of conferences held in June and July of last year. . It has been stated, and the statement is true, that all of the State Premiers have accepted this agreement and that certain of the State Parliaments have agreed to it.

Senator Sir George Pearce - Four State Parliaments have approved it.'

Senator NEEDHAM - The State Premiers had no alternative. They put up a splendid fight but they realized that, if they could get nothing else, they would be obliged to accept the agreement. They endeavoured to get the best terms possible for the States, and I believe they succeeded.

Mr GREENE (NEW SOUTH WALES) - Does' not the honorable senator think that the State Premiers now are thoroughly satisfied ?

Senator NEEDHAM - I do not know. They realized, as I stated, that they had to make the best of an awkward situation. The agreement, I admit, is much preferable to that which was formerly offered by the Commonwealth Government. The earlier proposals were not acceptable to either the Premiers or many members of this Parliament. But even this agreement will not ensure to the States complete financial justice in the shape of their fair share of the Commonwealth revenue. It will adversely affect Western Australia. The Commonwealth proposes to take over all the State debts existing at 30th June, 1927, and in the case of Western Australia will pay £473,432 towards the interest charges on the amount of debt taken over. That amount is equivalent to the per capita payment which was made to Western Australia for the financial year 1926-27. In addition, the Commonwealth proposesto create a sinking fund of 7s. 6d. per cent., to which it will contribute at the rate of 2s. 6d. per cent, and the State at the rate of 5s. per cent. A set of figures that I have analysed discloses that the net public debt of Western Australia at the 30th June, 1927, was £61,060,675. The following table shows the method by which that figure is arrived at, and includes also the figures relating to the six States of the Commonwealth : -


The Prime Minister (Mr. Bruce) has stated that those contributions "will be continued for a period of 58 years, when it is expected that the debt will be extinguished ; and the bill makes provision in that direction. The next concession proposed by the Commonwealth is that on all new loans raised by the State, there shall be a sinking fund of 10s. per cent., to which the State will contribute at the rate of 5s. per cent, and the Commonwealth at, the rate of 5s. per cent. The remaining concession is that the Commonwealth will increase from 31/2 per cent, to 5 per cent, the rate of interest payable to the State on transferred property. The total additional amount which the whole of the States will receive by that means will be £163,865, of which Western Australia's share will be £11,047. I wish to show how, in the case of Western Australia, these concessions will compare with what that State would receive under the system of per capita payments. According to statistics that appear on page 182 of the budget for 1927-28, the population of Western Australia more than doubled itself during the period 1900 to 1926. The question of population is a vital one in a discussion of this nature. In 1900 the population of Western. Australia was 179,967, while in 1926 it was 378,746, an increase of 198,779. I may add that Western Australia is the only State which more than doubled its population during that period. The following table sets out the. estimated annual increase of population in the different States, from 1900 to 1926.


The population of Western Australia increased at the rate of 2.91 per cent, per annum between 1900 and 1926, but in view of the rapid progress now being made by that State I think it may be safely assumed that the increase in the future will be at the rate of 3 per cent. That is the percentage increase on which' I propose to base my calculations. The per capita payment of 25s., on a population of 378,746, would amount to- £473,432, which is the flat rate that is to be contributed to the interest charge. In order to arrive at the payment which Western Australia would receive under the per capita system in the ensuing 58 years, it is necessary, to add 3 per cent, to the population at the end of each year. Perhaps I can. illustrate my contention more clearly by quoting the following table: -


Senator Sir George Pearce - The honorable senator has gone too far back with his calculations. Western Australia was paid at the rate of 25/- a head for the financial year 1927-28. Under the proposed agreement she would receive a larger sum. The honorable senator should commence his calculations as from the time when the payment becomes fixed; that is, at the end of this financial year.

Senator NEEDHAM - These figures have been worked out not only by me, but by others. Under the proposed agreement, Western Australia will receive only £27,459,056, and will thus suffer a loss of £46,553,439 in the next 58 years, as compared with the actual per capita payments. There is, however, a set-off against that figure; we must deduct the concessions that Western Australia will receive under the proposed agreement. In the . first place we must take into account the 2s. 6d. per cent, to be paid into sinking fund by the Commonwealth in respect of the old debt. There is also the 5s. per cent., which the Commonwealth proposes to pay on new debts. I admit that it is practically impossible to visualize what will be the State's requirements in the years that areahead. For calculation purposes I have taken from the finance bulletin the ' debt of Western Australia as at the 30th June in each year over a period. The average increase in the ten-year period, 1916-26, was £3,166,000, and in the fiveyear period, 1921-1926- which, I think isa fair period to take- £4,353,000. I assume for the purposes of my calculation that £4,000,000 annually is approximately the amount that Western Australiawill require for at least some years to come. If the Commonwealth makes to the State a payment at the rate of 5s. per cent, on- that amount, its contribution to the sinking fund will be £10,000 per annum. Then there is the increase of 1-1/2 per cent, on transferred properties, which amounts to £11,047 per annum. In order to bring the whole of the computations together, I have prepared a statement which shows that under the old per capita system Western Australia would have received in the next 58 years approximately £74,000,000, estimating the increase of population at the rate of 3 per cent. The amount which it will receive in that period, under the proposed new agreement, is in respect of the fixed contribution to interest charges at the rate of £473,432 per annum, £27,459,056. There is also the amount of £76,326 per annum which will be paid by the Commonwealth to the sinking fund at the rate of 2s. 6d. per cent, to liquidate the present net debt with, and this for a period of 58 years, will total some £4,426,908.

Senator McLachlan - -Didnot the honorable senator say that the annual payment would be about £76,000 ?

Senator NEEDHAM - On the old basis, with a three per cent, increase of population Western Australia would receive £74,000,000 during a period of 58 years. I was stating the amount which that State will receive under the new agreement. In addition to the £4,426,908 to be paid to the sinking fund, Western Australia will receive an increase of11/2 per cent, on the interest paid on the value of the transferred . properties. This, which is set down at £11,047 per annum will mean, in respect of the period of 58 years, an additional £640,726. Further there is the 5s. per cent, which the Commonwealth will pay into a sinking fund in respect of all new loans 'which, assuming that Western Australia borrows £4,000,000 per annum, will amount in the first year to £10,000; in the second year, with the raising of an additional £4,000,000, it would amount to £20,000, and so on. Over the full period of 58 years the Commonwealth would thus pay into the sink ing fund in respect of new loans raised by Western Australia, approximately £17,000,000. From these figures it will be seen that at the end of the 58 years my State will be £25,000,000 worse off under this agreement than she would be if the per capita payments were continued.

Senator Sir George Pearce - Evidently the honorable senator is of the opinion that the Labour party will not be in power in the Commonwealth for 58 years.

Senator NEEDHAM - I am not now expressing the Labour party's policy, but am giving my own opinion of the effect of this agreement on Western Australia.

Senator Sir George Pearce - Should the Labour party get into office the per capita payments will be discontinued.

Senator NEEDHAM - There is no foundation for that statement.

I desire to say a word with regard to the Loan Council. I have always been in favour of a Loan Council and am glad that now all the States are represented on it. It is better to have one borrower in the money market than seven.

Mr GREENE (NEW SOUTH WALES) - Does the honorable senator suggest that there should be only one borrower?

Senator NEEDHAM - Occasions may arise when it will be necessary to have more than one borrower in the market at the same time, but generally that will not be the case. I move -

That all the words after "That" be left out with a view to insert in lieu thereof the words " the Bill, involving as it does an alteration of the Constitution, be postponed until Parliament has had an opportunity to discuss a comprehensive scheme of constitutional reform including the evidence taken before the royal commission now sitting and its proposals when made."

The " Constitution Royal Commission is taking voluminous evidence in each of the capital cities from representatives of every section of the community - commercial,industrial, social, legal and otherwise. Seeing that it is proposed at the next election to ask' the electors to empower this Parliament to make agreements, and to ratify this agreement, it would be wise to wait until the Commission's report has been presented to Parliament. In my opinion the financial relations between the Commonwealth and the States should have been one of the first things dealt with by the Commission. Indeed the importance of the question warrants an interim report. Honorable senators may ask what we should do in the meantime, because, obviously, with a large proportion of their financial supplies cut off, the States could not be left waiting until a determination was arrived at. It has not been suggested that any difficulty will be occasioned by waiting until the next election for the ratification of this agreement. In that case, we should wait a little longer until the Constitution Commission has presented its report. I trust that the Senate will agree to the amendment.

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