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Friday, 23 March 1928


Senator LYNCH (Western Australia) . - I feel that in opposing the second reading of the Financial Agreement Bill I am adopting an attitude which, judging by the vote just taken, is unpopular in this chamber. But I am not in the least dimayed because now, as previously, majorities do not get any slavish respect from me. Majorities are not always right. In the past they have done a great many foolish things that the well-balanced judgment of to-day universally condemns. It was at the will of the majority that hemlock was handed to Socrates. The first judicial murder committed in the world was endorsed by a majority - it was a majority which said, "Away with Him." Another majority persecuted the Christians and sent them to the catacombs. Later on majorities caused the Christians to persecute one another. Even to-day things that are obviously wrong are often upheld and maintained by majorities. I say, therefore, that although there is an array of honorable senators supporting this bill it does not prevent me from saying that a majority has no right to deprive posterity of what is due to it. In this case I am appearing for posterity.

In considering the question before the Senate, it is just as well first of all to define this chamber's position in the drama that is unfolding and to specify its right and obligations. Its duty, as we know, is to see that the interests of the States are safeguarded. Thatis its raison d'etre. We should not be here but for the need to preserve the interests of the States, and once those interests are determined, it is our responsibility to see that they are carefully and jealously safeguarded. The standing and reputation of the chamber suffer somewhat at the hands of not only the unthinking section of the public but also some of .its friends. The chamber is very often referred to in frivolous if not disrespectful terms by persons who are prompted by two motives; one because their party or interests are not represented here, and the other because the Senate is too democratic for them. In the early days of the framing of the Constitution the Labour party looked to the creation of a Senate because they thought that it would be a bulwark of democracy. The self-same party to-day, because it finds itself in a hopeless minority here, has, as an integral part of its platform, a proposal to abolish the Senate. The other element that" seeks to bring this chamber into disfavour is the Tory or reactionary section of the community, which finds no representation here, and has its champion in. the Melbourne Age, that reactionary journal which, at different periods of the same month, finds itself at opposite points of the compass on most questions. I am dwelling upon the rights and standing of the Senate to bring .home to honorable senators the seriousness of- the question we are discussing today and in the hope that even at this eleventh hour, an agreement may be made with the States which will he more equitable to them than this. The Senate is even more firmly established than the British House of Commons. It springs from the loins of the people of the country without any hindrance to the expression of their views. It is at once a child and instrument of democracy. It is the first chamber of its kind in any English speaking nation, "broad based upon the people's will." It stands on a high and pre-eminent level that can only be reached by a legislature brought into being by the popular will for the purpose of administering to the popular welfare. It is not a House of privilege. That is why it is not liked by one section of the community. Nor is it a House of political sections, factions, or cliques. That 5 s why it is not like another section of the community. Its purpose is to register the will of the people, as spontaneously expressed at the polls, and, despite what its critics may say, it will remain in existence as long as the federation lasts. I prophesy that the federation will be wiped out the day after the Senate is wiped out. Its duty is to hold the scales evenly: to see that the interests of each State are preserved, that each State gets fair play among its fellows, and that the States as a whole receive fair play as between them and the central government.

We are now asked to endorse an agreement arrived at between the Commonwealth Government and the several States. But were the representatives of those States free agents when they entered into this agreement with the Commonwealth Government? Were they free to accept or reject it? Did they enter the conference as free men ? No ; they entered it as a body of men with only one course open to them : that was to accept the agreement. Knowing that such was the case, how are we to regard a compact which was brought about by duress or tyranny; because undoubtedly it was a tyrannical act on the part of the Commonwealth Government to force the States to accept this agreement without an alternative? On his return to Western Australia, the Premier of that State placed on record the fact that he had no option but to accept- it. Mr. Forgan Smith, of Queensland, and Mr. Lang, of New South Wales, said practically the same, and at the conference itself Mr. Lyons, of Tasmania, quoting with approval Mr. Lang, said that the Premiers of the States had no option but to accept the agreement holus bolus. We know that that is true. The Commonwealth Parliament having passed a bill to abolish the per capita payment, had stripped the States of any right or title to anything in the shape of money from the Federal Treasury, and the St.atcs when they came to that conference could do nothing but raise a hollow protest and accept the agreement placed before them. When one party to a bargain is compelled to accept it, we must admit that it has not been entered into as would an agreement which conferred equal privileges and rights. Aristotle has said that there is no such thing as right between combatants who are unequal. Bight applies only when combatants are equal. "When they are unequal, as in this case, it stands to reason that the elements of justice and right are absent. The party in a position to enforce its will has all the say and all its way. It is clear as the noonday sun that the effect of a bargain entered into in such circumstances must be in favour of the party that can dictate the terms and not in the interest of the party that is hound to accept them. I cannot be led to believe that the States have entered into this agreement freely. The witnesses I call to prove the contrary are the actors in the drama, the various Premiers of the States. And when it is said by Commonwealth Ministers that this agreement- has been signed by So-and-so and Suchandsuch, their statement has to be qualified by the admission that the document was signed tinder compulsion - that the Premiers had to sign it or get nothing, or, at any rate, terms which were likely to be less favorable. It is about time we cast a searching eye on this agreement before calling it a bargain entered into fairly and squarely between two agents. As a matter of fact, it is not entitled to be so described. It is a one-sided bargain dictated by a strong central government, and a bargain which six weak State Governments have had no option but to accept. Can we say that these six State Premiers were free agents? We know that they were not; and we must admit that the agreement brought into this bill cannot be regarded as fin arrangement that has about it anything of the nature of even primitive justice.

Having called attention to the' nature of the agreement and the arrangements which led up to the signing of it, I want now to say something about the effect it is likely to have. But before doing so, let me clear away some of the misapprehension which has been created in the public mind regarding it. The first Minister of this country said, among other things, that the chief reason why this agreement was entered into was because the central Government wanted to safeguard the interests of the States. The Prime Minister made it quite clear that he abandoned the role of spokesman for the central Government and became, for the time being, spokesman and con server of the interests of the six States. The Prime Minister said that he considered that the interests of the States had to be conserved. Cannot that duty be left to the people charged with it? I grant that it was a useful and skilful argument, used in the endeavour to abate hostility and opposition. The Prime Minister endeavoured to make people believe that he was adopting a chivalrous role by going out to fight the battle of the States. He said further, as a subsidiary reason 'for sustaining this agreement which was forced upon the States under duress, that a chance majority of a political party of a special complexion might spring into existence in Australia and, by a kind of villainous marauding instinct, inaugurate a public policy that would empty the coffers of the Commonwealth Treasury and leave nothing for the States. A fine bogy indeed! I re- ' mind the Prime Minister that the electors of the country would not be inactive if that were attempted. They would not countenance such actions. That is my answer to the right honorable gentleman's bogy.

The States were treated with but scant courtesy at the conference held in Melbourne, when they claimed that they had a moral right to a continuance of the per capita payments. The Prime Minister denied their claim. In the past those payments had been made to the States freely, as an act of common equity. I ask the Minister representing the Prime Minister whether, if the States had not a moral right,- they had not a legal right to the per capita payments? Of course they had, and we know that there is no higher warrant for the establishing of a legal right than making it spring from a moral foundation. And as these payments were made for years in virtue of a legal and moral basic right, time cannot alter the nature of that right.


Senator Sir George Pearce - The act provided for the payments "until Parliament otherwise provides."


Senator LYNCH - The per capita payments would not have been made to the States had they not a moral and a legal right to them, and it is merely a paltry quibble to claim now that no moral right exists. I fail to see why those payments should terminate suddenly merely because the Prime Minister suggests that that moral right is non-existent. With all respect, I differ from the Prime Minister on that point. The whole scene regarding the financial relations between the States and the Commonwealth has been so kaleidoscopic that it is very difficult to know exactly where we stand. For the last 25 years the central Government and the States have been at loggerheads over financial matters. As school boys, when we were all political neophytes, we were told that "finance is government, and government is finance." If that is so the central Government is the best government in the world. It is certainly the " boss cockie" in financial matters. The future holds an extremely sorry outlook for the States ; very little finance promises to come their way. Year after year the central Government has experienced accumulated surpluses while, on the contrary, the States have experienced accumulated deficits. It is about time that we endeavoured to bring about an equitable position by allowing the States to show surpluses instead of deficits, the Commonwealth, if necessary, to have a deficit by way of a change. At each of the conferences held in 1910, 1915, and onwards, the Commonwealth got the best of things. From the time when the States got three-quarters of the customs revenue as a constitutional right, to the time when as under this agreement they will get but a contemptible dole, is but a single span of life. Was this intended by the founders of federation? That is plainly disclosed by the figures now before us. But it will be some time before the worst is experienced by the States, and that is the deceiving feature of this agreement. When a man or a State becomes of necessity an object of patronage, he is in a sorry plight. That is the position of the States. Year after year they have been unable to pay their way. Croesus, the Commonwealth Government, has strangled their financial aspirations. Also, it has attracted to its service the best public officers in Australia. Honorable members will admit that, periodically, the pick of the public servants in each State gravitate to the central Government, attracted by the possibilities offered by service, with the " rich man," who might reward them even beyond their merits. It is practically an un- heard-of thing for a Commonwealth servant to revert to the State service. That is a simple illustration of how the Commonwealth Government always has the best end of the stick; in fact, the whole stick to itself.

We are told that this agreement commences with the payment to the States of £7,584,912 annually towards meeting interest on State debts. An amount of 2s. 6d. per £100 is to be paid by the Commonwealth, and 5s. per £100 by the States to a sinking fund for the whole of the existing State debts, and by that means it is hoped to' wipe out the State debts in 58 years. The generation which will follow us will have no capitation grant, and will find that all payments from the Commonwealth to the States will promptly cease after the term of 58 years expires. I may be informed that it will secure other advantages. It will; but what will they be?


Senator Andrew - They will have no debts then.


Senator LYNCH - Even if the Commonwealth did not take a hand in their extinction by enforcing this agreement, it is probable that, by other means, there would be no State debts at the end of 58 years. Senator Andrew knows that it is as broad as it is long. It matters not whether the Commonwealth pays the money direct to the bondholders or whether it hands.it over to the States, which, in turn, will pay it to the bondholders. The point

I wish to emphasize- is that, while this agreement is claimed to be a step in the right direction, that is to say, that it is a proposal to deal fairly and even generously with the States, actually the opposite will be the case. Posterity, as I have shown, will not enjoy either, fair dealing or generosity. The State governments, eventually, will receive next to nothing from the Federal Government. Such a state of affairs as that was not contemplated when federation was consummated. What would have happened if a man, posing as a keen-eyed prophe*t, had said to the people 28 years ago, " The time will come when the States will not be in the enjoyment of 75 per cent, of the customs revenue, and later a time will come when the per capita payments of 25s., which will have been substituted, will be abolished altogether. Still later a time will come when the States will get nothing but a poverty-stricken dole from the Federal Treasury." If that position had been put to the people prior to federation, and if the majority could have been made to realize that events would so shape themselves as to justify the prophecy, is it likely that they would have voted for federation" Is it not morally certain that they would have rejected the Federal scheme in its entirety? If that is so, and who can deny it, WhY should we trade upon the gullibility and credulity of the people of that day? At the inception of federation they believed that the States would never be deprived of payments from- the Federal Treasury to the extent now contemplated in this agreement. Unfortunately the States have been stripped of their financial strength to such an extent that only the bare bone is left, and that is hardly worth while flinging to a dog. All the assistance which they can expect in the future from the Commonwealth will be in respect of re-payments on borrowed moneys. In the course of time - the period is specifically set out in this agreement - they will be stripped of every vestige of financial rights from the Commonwealth Government which they have enjoyed hitherto, and which they honestly believed would be secured to them for all time. Solemn declarations to this effect were made by the late Lord Forrest, the late Sir George Turner, and other responsible Ministers in previous Commonwealth governments. We were told over and over again that the States's financial stability was to be the foundation stone of the Federal structure, and that their rights in that regard would never be invaded by the Federal Government. It is true that these inherent rights were not guaranteed in black and white in the Constitution; but they were by implication guaranteed to the States. The people were asked to " trust the Federal Parliament." They have done so. But they were never told that that " trust " would turn out to be one-sided and would completely extinguish the fundamental rights of the States as constitutionally guaran- teed to them. We have seen how that trust has been abused. We have only to look around to see how the States are now faring. We need only contrast their financial position with that of the Commonwealth. Can it be said or suggested that there is any sign of poverty or financial stress in the affairs of the central government? Who says " Yes " ? On the other hand, is there any sign of financial stringency or poverty on the part of the States? Who says "No"? Unquestionably there is. The right honorable i\e Leader of the Senate (Senator Pearce) knows how these proposals will affect his and my State, as well as Queensland, South Australia, and other States.


Senator Thompson - Are State revenues diminishing?


Senator LYNCH - No.


Senator Thompson - Then any responsibility for financial difficulty must be shouldered by the State governments.


Senator Andrew - It is due to bad management.


Senator LYNCH - Responsibility for the financial difficulties in which the States find themselves cannot be charged against one political party or the other, because State, as well as Federal affairs, have been controlled alternatively and successively by Labour, Liberal or National governments. There have been the same alternating complexions in State as in Federal politics, so public extravagance cannot be charged against any particular party. For many years certain of the States have been in a chronic state of "hardupness." This is particularly true of Western Australia, which this agreement will hit very severely. The Leader of the Senate has not dealt fairly by the people of Western Australia. Some time ago in an address at Kalgoorlie he told them that the payment by the Commonwealth of £450,000, made on the recommendation of .the Disabilities Commission, would be the basis of the future arrangement, and might be regarded as a permanent addition to the State's revenue. Where is that £450,000 now? It materialized for one year only. Therefore the Minister has been false to his promises.


Senator Needham - And that promise was made on the eve of a Federal election.


Senator LYNCH - The payments to Western Australia now are to be £300,000 for a period of five years. The Leader of the Opposition has just reminded me that the speech of the Leader of the Senate, in which he announced the payment of £450,000 to Western Australia was made on the eve of an election. It is possible that many votes were obtained by Ministerial candidates- in that State on the strength of that promise. The right honorable gentleman may think he was justified in making it. Perhaps he was, but it was not honorable to discontinue that payment. As a matter of fact, it should be paid to the State for all time. That certainly was the interpretation which the people placed upon his promise. The Minister later spoke in Melbourne on the same subject. There the right honorable gentleman told the people that in its financial dealings with the States the Government would see that the latter suffered no loss. Is it not true that under this agreement payments to the States on a per capita basis will cease. Does not that represent a loss in State revenue? This agreement is indeed a poor return from the Leader of the Senate to a State which has been so kind to him. It raised Senator Pearce from a position of obscurity and placed him where he is.

The PRESIDENT (Senator the Hon. Sir John Newlands) . - Order ! I ask the honorable gentleman to confine his remarks to the bill.


Senator LYNCH - I am dealing with statements made by a responsible Minister of the Crown, and I am showing how, under this agreement, a promise made by the Minister to people of Western Australia has been falsified. How can we ventilate these matters unless we are permitted to criticize the people who are responsible for them?







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