Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Friday, 23 March 1928

Senator OGDEN (Tasmania) . - The financial relations of the Commonwealth and the States was one of the most controversial questions that was discussed by the delegates at the several federal conventions. It occupied a great deal of time and very nearly destroyed the proposal to bring about Federation. The delegates could come to no agreement, but eventually, as honorable senators know, a compromise was adopted under which the States were to receive threefourths of the customs revenue and the Commonwealth the remaining one-fourth.

Senator Sir George Pearce - An agreement as to the allocation of the revenue was not arrived at by any of the conventions.

Senator OGDEN - I was about to say that the compromise was agreed to at a meeting of Premiers held in Sydney. It was decided that the arrangement should stand for ten years. At the termination of that period the per capita payments were substituted, and from that time until this agreement was made the financial relations of the Commonwealth and the States continued to be a vexed problem. The capitation payments were neverregarded as a permanent settlement of the difficulty. I supported the attitude taken up by the Government of New South Wales at that time. I held that the allocation to the States by the Commonwealth Government of a considerable portion of the customs revenue would always necessitate the imposition of high protective duties. In those days New South Wales was looked upon as a freetrade State. As one who believes in lower customs duties, I can see that if the Commonwealth Government is obliged to make capitation payments to the States, a policy of high protection is inevitable. Personally, therefore, and from that aspect alone, I am pleased that the per capita payments have been withdrawn. How does this proposal compare with that submitted by the Government some time ago. The Government took up the attitude that the per capita payments must cease. I was in complete agreement with the Ministry on that point, as also were a number of other honorable senators; but my objection then was that the Government did not indicate what it proposed to substitute for the payments. In the first place the Ministry suggested that the Commonwealth might evacuate certain fields of taxation. That proposal, I believe, was in the nature of a feeler put out by the Government to test public opinion. If it had been accepted it would have crippled the finances of my State at all events, and certainly it would have brought aboutunification, which was the objective of the Treasurer some time ago.

Senator Kingsmill - The honorable senator will perhaps remember that a suggestion which I made, but which was rejected at the time, is now included in this agreement.

Senator OGDEN -- -If the Government's earlier proposals had been adopted they would have had a serious effect upon the finances of several of the States. However, the Government abandoned them, and introduced a bill to abolish the per capita payments without informing members of this Parliament what financial arrangements would be substituted for them. The Government's scheme was strenuously opposed in another place as well as in this chamber and at one time the Ministry was faced with a crisis. Although Senator . Foll just now commended ministers for having introduced those proposals there is not the slightest doubt that this new agreement is the result of pressure that was brought to bear upon the Government by members of the Senate and another place.

Senator Sir George Pearce - This agreement is the result of parliamentary endorsement of the Government's proposal to abolish the per capita payments.

Senator OGDEN - I do not agree with the Minister. Parliament indicated clearly that if the per capita payments were withdrawn the Government would have to substitute some other arrangement to assist the 'States. As a matter of fact. Senator Kingsmill submitted an amendment to provide for that.

Senator Sir George Pearce - It was never suggested th'at the Government did not propose to substitute some other form of payment. As a matter of fact it was always understood that the Government would do so.

Senator OGDEN - I asked the Minister repeatedly if the Government had in mind any other proposal and was informed that the Government would consider the question of taking over the State debts.

Senator Sir George Pearce - I said that the suggestion made by Senator Kingsmill would receive consideration, together with any other proposal that might be made.

Senator OGDEN - At all events the Minister's reply to questions in this chamber left some doubt in the minds of honor able senators as to the Government's intention.

Senator McLachlan - Does not the honorable senator think that if the Government had indicated its probable line of action it might have created difficulties ?

Senator OGDEN - That might have been considered a matter of policy. This new agreement certainly is a vast improvement on the original proposal. The discussions at the conventions indicated that the framers of the Constitution considered that some such proposal as this should be adopted, and in section 105 of the Constitution empowers the Commonwealth Government to take over the State debts existing at the time of federation. In 1912 the people gave the Government extended powers to take over nil or any portion of the State debts. As a supporter of the Constitution 'and a believer- in federation I have always urged that the Commonwealth should take over the State debts in substitution for the per capita payments. I am afraid that if the opportunity came again to vote for federation my advice to the electors would be some what different from what it was at the first appeal to the people. '

Senator Andrew - Why?

Senator OGDEN - Because federation has not worked out as well as was expected for some of the smaller States. In the course of the debate the other day an honorable senator asked, by-way of interjection, why the Commonwealth should assume responsibility for debts contracted by the States. One reason is that but for the developmental work undertaken by the States in the construction of roads, railways, harbour improvements, in respect of education and in the discharge of many other functions of government, federation would not have been possible. Thu Commonwealth could not exist without prosperous States. I am afraid that our present prosperity is somewhat superficial because the raising of enormous revenues through the customs leads to governmental extravagance. I believe that there is a time of trouble ahead for us unless we curtail our present lavish expenditure; unless we limit our borrowing abroad; unless we stand up to our obligations and work harder. However, that is another matter. I think I have shown why the Commonwealth Government should assume responsibility for debts contracted by the States.

Senator McLachlan - Is not there a stronger reason than the one supplied by the honorable senator? Has not the Commonwealth a moral responsibility for those debts?

Suggest corrections