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Wednesday, 28 March 1928


Senator SAMPSON (Tasmania) . - This is a bill to approve of an agreement which has been signed, subject to parliamentary approval and the concurrence of the people of Australia, by the Government of the Commonwealth and the Governments of the six States. Possibly it is the most important financial measure that has ever come before the Senate, providing as it does for the permanent and final settlement of the financial relations between the Commonwealth and the States. The problem of settling those relationships has occupied the attention of every Commonwealth Government, and it was the most difficult problem that faced the founders of the federation. It is quite unnecessaryf or me to go over the history of the various negotiations between the Commonwealth and the States. They are fresh in the minds of honorable senators, and the whole position was thoroughly reviewed during the' debate that took place on the States Grants Bill. At that time the Prime Minister made it abundantly clear that his Government had no intention of inflicting any injustice or hardship on the States or of exercising its full legal rights by withholding from the States the financial, assistance they had enjoyed under the Surplus Revenue Act. On the contrary, he said that he was prepared to negotiate with them if they would meet him with a sincere desire to arrive at a fair arrangement. Ho said-

If the States will meet us we are prepared to consider any scheme and any method that may be suggested. It is our desire not merely to give the States absolute justice, but, so far as lies in our power, to deal with them generously.

I propose to show that he has lived right up to the full measure of his promise. The representatives of the States met the Commonwealth Government in conference in Melbourne in June, 1927, and in Sydney in the following month, and a full report of the debates that took place has been supplied to honorable senators. It makes most interesting reading. I propose to quote somewhat freely from it. The conference was probably one of the most momentous that has taken place between the Commonwealth and the States. We find that five of the States were in agreement with the main principles of the financial proposals submitted by Mr. Bruce. We have heard quite a lot during this debate about the States having the point of the bayonet levelled at them as if they were being bludgeoned into thi3 agreement, or, to put it vulgarly, as if the Commonwealth was " putting the boot into them." In this document I fail to find any evidence of any such intention on the part of the Commonwealth, or of any outcry on the part of the Premiers to indicate that that was the attitude assumed by the Commonwealth. I propose to read extracts from the debates at the conference. Any honorable senator who has studied the report of the proceedings at the conference will have his mind absolutely disabused of the idea that representatives of the Commonwealth and the States met in any hostile or cantankerous spirit. The Honorable J. T. Lang, Premier and Treasurer of New

South Wales, who was at the conference was, in the main, agreeable to the Commonwealth's proposals. He said -

I am prepared to accept as the basis of contributions to the States the amounts set out in the schedule of the Act to abolish the per capita payments.

With regard to the establishment of a sinking fund he said -

I am prepared to go just as far as the Commonwealth desires that the States should go in establishing a sinking fund.

Dealing with the transferred properties he said -

The Commonwealth proposal in this respect is absolutely acceptable to me.

As to the establishment of the Loan Council, he stoutly expressed the view that " With regard to borrowing the Commonwealth and the States should be absolutely free to do as they saw fit individually " ; and he was of the opinion that, " individually they could secure better terms than united ". This is what he had to say on that score -

The Commonwealth should not ask the sovereign States to give up their rights and hand themselves over shackled hand and foot to a Loan Council which, in effect, will be a Commonwealth Authority. I judge what has happened in the past is likely to occur in the future. If the Commonwealth has these extended powers, I do not think it will hesitate to use them. For these reasons T must state definitely that I entirely object to bind New South Wales to a Loan Council, anr] for me to agree to the insertion of such a provision in the Constitution would be practically to betray the sovereign rights of the State of New South Wales.

We must remember that Mr. Lang had very little if any experience of the workings of the Loan Council and subsequently the other State Premiers who had that experience did their best to persuade him to come into it, by telling him how well and smoothly it worked, and what a good institution it was. Mr. Forgan Smith, Acting Premier of Queensland, approached the subject before the conference in a very broad and tolerant spirit. He 'heartily approved of the Loan Council. Speaking of Queensland he said -

For a period of twenty years it would gain considerably under the proposals as submitted.

Then he went on to say -

There can be no doubt as to the advantage of the sinking fund proposals. They mean that, instead of the various Commonwealth and State authorities competing in the money market, they shall go as an organized body to the organized financiers. No one is so innocent as to believe that there is no organization or co-ordination of work on the part of those who control and to a large extent, are responsible for the success or otherwise of our loan flotations. It is right, therefore, that we should organize so that we can go on the loan market as one borrower. By having one Australian security and establishing a sinking fund we shall secure better terms than we can hope to obtain while we have the States endeavouring to raise individual loans. The proposals in this regard are sound..... I have only to say, in conclusion, that while we come here as representatives of the several States and the State Governments, we should endeavour to approach the consideration of these matters from the point of view that we all represent the same people, and I am convinced that if we do so we shall be able to lay down the basis of a scheme calculated to give general satisfaction.

That was the spirit adopted by the Acting Premier of Queensland throughout the Conference. Mr. Hogan, Treasurer and Premier of the State of Victoria, was, with some minor reservations, in agreement in- the main with the scheme now put forward, and was heartily in favour of the Loan Council. He had quite a number of worries, particularly about soldier settlements, a subject which he desired to stress . at the conference. He said -

I am not in a position to State definitely to-day the final opinion of the Government of Victoria regarding the proposed Loan Council, but I agree strongly with the view put forward by Mr. Bruce and Mr. Forgan Smith that all the States would be infinitely better off if there was one borrowing authority instead of seven. " Unity is strength ", and to say that the six States and the Commonwealth would be stronger separately than if united, is to deny a truth which is as certain as the law of gravitation. I am prepared to approach this matter in the same frame of mind as that adopted by Mr. Bruce, Mr. Forgan Smith, and Mr. Lang; I am ready to consider alternative proposals and amendments in an endeavour to arrive at a just and equitable settlement. I hope that before this conference concludes a settlement will be found. The proposal now before us is infinitely better than that submitted by the Commonwealth previously and unanimously rejected by the States.

Mr. Butler,the Treasurer of the State of South Australia said that he was struct by the soundness of the Prime Minister's argument when explaining the Commonwealth's proposals. On the whole he agreed with these, but he suggested that special consideration should be given to what he termed agricultural States, of which South Australia . was one. He favoured the establishment of the Loan Council on the ground that it would restrict extravagant borrowing. Mr. Butler said -

The present proposal has three advantages over that which preceded it - it makes provision for the payment ' of a portion of the interest on the State debts; it provides definitely for a sinking fund for all debts; and it provides for a Loan Council, which will act as a common borrower for the Commonwealth and the States. . . . The Loan Council is a natural corollary of the scheme. I cannot conceive of any Commonwealth Government taking over the huge loan liability from the States without having some protection. I have not the slightest objection to the loan expenditure of my State being reviewed by what I regard as an independent tribunal. The Loan Council will probably restrict the borrowing of the Commonwealth- more than of the States. The Commonwealth is prepared to have her loan expenditure reviewed by a council composed mainly of State representatives. That, certainly, will not interfere with the sovereignty of the States. It gives to the States as a whole the opportunity to review the expenditure of each State, but good rather than harm will come from that. The Loan Council may restrict -extravagant borrowing, but it will not restrict legitimate borrowing.

I turn now to the attitude taken up by the Hon. P. Collier, Premier and Treasurer of Western Australia. He stated that while recognizing the many valuable features embodied in the Government's proposal, he hesitated to take any steps without further consideration. He did not doubt the advantage of the establishment of the Loan Council, but he feared that it might restrict the borrowing activities of his own State. He stated -

I am certain that, operating through the Loan Council, we shall be told that we must curtail our borrowing. It may be argued that if we agree to the proposals now before the conference, we shall be surrendering our rights of independent borrowing; but, after all, we shall only be giving power to our sister States, and it matters not whether this authority is vested exclusively in the Commonwealth or in the several States. As I see it, those proposals are the greatest steps yet taken towards the unification of State finances since the inauguration of the Commonwealth. , ; ,

I come now to the views expressed by the Hon. J. A. Lyons. Premier and Treasurer, of Tasmania. He said that the new proposals were . infinitely better ' than. those submitted previously. The following is an extract from his speech at the conference : -

Mr. LYON'S.I can quite understand the objections which some representatives have to constitutional provision being made for the establishment of a Loan Council, thinking that the operations of such a body may be of disadvantage to the States ; but it is my experience - I think Mr. Collier will support me in this, as he and I have had more experience on the council than perhaps other representatives - that there has been no antagonism between the States, or between the Commonwealth and the State representatives.

Mr. Collier.If I were sure that the proposed council would work as smoothly as the one now in existence, I would have no objection to offer.

Mr. LYONS.We should be guided by experience, and if Mr. Lang, who is hostile to the constitutional proposal, had become a member of the council, he would be of the same opinion. The State representatives on the Loan Council do not endeavour to take advantage of each other; but try to understand each other's difficulty. Certain objections may be raised to the proposal, but from our experience we must admit that one borrower is preferable to a number competing with each other.

These quotations indicate clearly the trend of thought at the conference. On the following day the States Treasury officials, who were present with their Ministers, carefully examined the proposals in camera, and the result of their conclusions is to be found in the agreement which is attached as a schedule to the bill now before the Senate. I heartily support the bill, because the proposals contained in it aim at a settlement, on a permanent basis, of the financial relations of the Commonwealth and the States. Under the agreement the States will be assured of a permanent arrangement for their financial stability. It makes for the consolidation and improvement of the credit of Australia as a whole, and it should ensure our being able to obtain loans upon more favorable terms than otherwise would be possible. It makes provision also for the establishment of a proper system of national debt redemption. This Parliament already has that power with regard to the redemption of the Commonwealth debt, including our gigantic war loans, but under this bill the power is extended to the whole of the debts of the Commonwealth and the States, past, present and future. I am optimistic enough to believe also that it will put a most effective brake on reckless borrowing. The agreement represents a truly harmonious settlement of what may be regarded as the most difficult problems that have confronted us since the inception of federation. I sincerely trust that the people of Australia will agree to the insertion in the Constitution of the proposed new section 105a to give effect to the proposals which, I believe, are in the best interests of the nation.

Listening to the debate this afternoon I came to the conclusion that some honorable senators appear to be under a misapprehension as to the nature of the agreement. They affect to believe that it is an absolutely rigid instrument, incapable of alteration in any shape or form. If they had had the privilege which was mine on the 14th December, of hearing the right honorable the Prime Minister (Mr. Bruce) moving the second reading of this bill in another place, any doubts which they might have had on this point would have been dissipated. The Prime Minister explained to members of another place the meaning of the proposed new section. Its terms are so important that it is advisable that I should quote at least certain of its sub-clauses. They are as follows: -

4.   Any such agreement may be varied or rescinded by the parties thereto.

5.   Every such agreement and any such variation thereof shall be binding upon the Commonwealth and the States parties thereto, notwithstanding anything contained in this Constitution or the Constitution of the several States or in any law of the Parliament of the Commonwealth or of any State.

6.   The powers conferred by this section shall not be construed as being limited in any way by the provisions of section 105 of this Constitution.

These indicate that the agreement is not by any means an absolutely hard and fast arrangement. When the States Grants Bill was under discussion in this chamber, it was claimed by several honorable senators that the States would be robbed if it were agreed to. In certain quarters there appears to be a disposition to regard the people of the States and the people of the Commonwealth as separate entities. Actually we are one and the same people. It matters not if we pay ? 1 in taxation to the Commonwealth and ?1 to the States, or whether we pay ?2 to the Commonwealth and nothing to the States. To suggest that under this agreement the States will be down and out at the end of 58 years is to talk arrant nonsense. There is not a scintilla of truth in such a suggestion. For the reasons which I have given I intend heartily to support the bill.







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