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Friday, 9 October 1936

Senator BADMAN - The effect of the commission's report is that there are no disabilities, and that grants are now made on the basis of the needs of the States. This bill is the outcome of a weakness of the federation. Whatever may be said in favour of federation, it must be admitted that there are some weaknesses associated with it, in that some States derive great benefits from the partnership, whilst other States are losers. Thirty-six years of fighting in an attempt to adjust matters in this Parliament has not removed those weaknesses. Only to-day the Leader of the Senate (Senator Pearce) quoted tiopinion of the commission that those States which are seeking grants might have been in the same financial position had there been no federation. The statement was applauded by some honorable senators who thereby showed an attitude unfavorable to the necessitous States. No previous government has done for the weaker States what the Lyons Government has done, even in the depression years. In 1931-32, the year before the Lyons Government came into office, South Australia received a grant of £1,000.000, Western Australia £300,000. and Tasmania £250,000, a total of £1,550,000 for the three States. In the following year, South Australia received. the same amount as in the previous year, but the grant to Western Australia was increased to £500,000, whilst Tasmania was paid £330,000, the total grant for that year amounting to £1,830,000, an increase of £280,000 over the total grant for the previous year. The Commonwealth Grants Commission was not appointed until May, 1933. Before any recommendation was received from it, the Lyons Government introduced legislation to give to South Australia £1,150,000, to Western Australia £600,000, and to Tasmania £380,000 in 1933-34. That total of £2,130,000 was an increase of £300,000 over the expenditure during the former year. Following the first recommendations of the commission, the grants for 1934-35 were - South Australia, £.1,400,000; Western Australia, £600,000; Tasmania, £400,000, a total of £2,400,000, or £270,000 more than the total grant for 1933-34. Those figures show clearly that, notwithstanding the grants for which the Lyons Government was responsible before the establishment of the commission, that body recommended increased payments to the States which suffered disabilities. Senator' Hardy said just now that there were more unsheltered industries in New South Wales than in Western Australia, but I remind him that the former State derives compensation in respect of its secondary industries, whereas primary industries, mainly wheat-farming and grazing, predominate in the western State. If the effect of the tariff on Western Australia were shown, it would be seen that the burden on that State is greatly in excess of the amount which the commission has decided shall be the basis for future grants. The payment of special grants to necessitous States prior tq the appointment of the commission is evidence that successive governments recognized that those States suffered, disabilities under federation. The findings of the commission in its first two reports are further evidence of the existence of disabilities. Notwithstanding that £2,130,000 was disbursed by way of grants in 1933-34, the amount paid in the following year, after the commission's first report had been submitted, showed an increase of nearly £300,000, and in the following year, 1935-36, that increased grant was further augmented when a total of £2,750,000 was paid to the three claimant States. For 1936-37, however, a reduction of £320,000 is proposed, because the commission lias departed from the principle adopted in connexion with earlier grants. Instead of recommending payments on the basis of disabilities, the commission in its latest report has substituted the needs of the States as a basis for grants. Paragraph 191 of the commission's third report reads -

We are strongly of opinion that no State in such a position of prosperity should receive a special grant. States federating expose themselves to certain hazards, and must stand by their decision. It cannot be expected that federation will have precisely the same effect on the prosperity of all States. It would be absurd, even if it were possible, to attempt a strict debit and credit account for each State for all of the effects of federation. On the contrary, there is in general some more or less automatic arrangement, like the per capita payments in Australia, by which the financially stronger States help the weaker. We have taken the position that grants should be given to States in financial difficulties sufficient to make it possible for them with reasonable effort to maintain Australian standards of government, whether the financial inferiority is duo to the effects of federation or any other case. We cannot see any valid grounds for recommending a grant to a State whose financial position is inherently as favorable as that of the other States which have to find the money , for the grant.

Paragraph 201 reads : -

We have found that special grants will in general be necessary to supplement the other transfers of revenue from Commonwealth to States, and that these grants should be determined from a strict comparison of the financial position of a claimant State with that of other States. If a State is in financial difficulties it must be made possible for it by a " reasonable " effort to get as good financial results as other States . . .

In paragraph 202 the commission says -

The estimation of grants will be a matter of some difficulty. It will require a comparison of the inherent financial position - that is of its actual budget position taken in relation to variations between States of accounting practice, of economy in expenditure and severity of taxation and other charges.

The charge has been levelled against South Australia and "Western Australia' of extravagant loan expenditure. So far as South Australia is concerned, the present Government led by Mr. Butler has been the most economical the State has ever had. There has been a paring down of social services and other governmental expenditure, and the Government has done its utmost to meet its liabilities and at the same time to show a surplus. Thanks to the grant of £1,400,000 in 1933-34 the South Australian Government was able to show a surplus of about £36,000 the next following year. Since that time the Premier and Treasurer (Mr. Butler) has endeavoured to keep expenditure as low as possible. With the grant of £1,500,000 made by the Commonwealth last year South Australia was able to show a surplus of approximately £140,000 for 1935-36. This year, even after having budgeted for a surplus of only about £2,000, Mr. Butler finds that the Commonwealth grant recommended by the commission is to be cut down by £170,000. I am afraid that because of adverse seasonal conditions South Australia will show a deficit next year even greater than is estimated at present. We have heard a good deal of the difficulties confronting Western Australia as the result of adverse seasonal conditions, but in. all my experience I have never seen a season develop more disastrously than it has in South Australia during the last -five weeks. Recently the Premier of South Australia communicated with the Commonwealth Government pointing out the plight of many people in that State as the result of adverse seasonal conditions, and requested that further consideration be given to South Australia's needs upon which the Commonwealth Grants Commission has based its recommendation. It is estimated that this year South Australia will produce only 20,000,000 bushels of wheat, or between 10,000,000 or 11,000,000 bushels less than last year. This will bring about a shrinkage of railway revenues and will add to the disabilities under which the State labours. With regard to natural disabilities we are not caviling. But South Australia claims that it has suffered very definite disabilities through federation. Many of its secondary industries which previously had been in a flourishing condition were driven to the wall after federation, and have not been able to carry on since because of large corporations in the eastern States, forcing their goods on the South Australian market at prices against which the local manufacturers cannot compete. South Australian indus- tries, particularly the machinery and the bootmaking industries, are now almost extinct. It appears that South Australia's needs are likely to become greater than they have been during the last two years. Prior to the establishment of the Commonwealth Grants Commission during the depression period, the Lyons Government had already generously recognized the disabilities imposed upon States by federal policy, by giving them special grants to assist them out of their difficulties. The State governments have made every endeavour to balance their budgets by drastic curtailments of social services. In paragraph 76 of its second report the Commonwealth Grants Commission stated -

The tariff policy of Australia may be accepted as successful, and, on the whole, beneficial. One effect of it, however, is to put the other States at a disadvantage in comparison with Victoria and New South Wales, and this inequality is likely to grow rather than diminish in the future.

The present position of South Australia is comparable with that of Western Australia; both States are in great need because of adverse seasonal conditions. The Commonwealth Government need not have accepted the recommendations of the commission. In view of the fact that it showed a surplus of over £3,000,000 last year, it might have dealt more sympathetically with Western Australia and South Australia, despite the recommendations of the commission, and have granted the same amounts as were given last year.

I intend to support the amendment as a protest against the recommendations of the commission. I consider that if the commission, based its recommendations on the needs of the States, then both South Australia and Western Australia certainly need at least the amount which wa3 granted last year.

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