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Wednesday, 1 September 1937

Senator Sir GEORGE PEARCE (Western Australia) (Minister for External Affairs) [4.48]. - I move -

That thebill be now read a second time.

The grants for which approval is sought in this bill are those recommended by the Commonwealth Grants Commission to be paid to the States of South Australia, Western Australia and Tasmania during 1937-38. It has been the custom hitherto to provide for the appropriation for these grants by means of separate bills, but to debate the three of them together. On the present occasion, for the sake of convenience, this is being accomplished by means of one measure. The recommendations of the commission are contained in its fourth report, which was tabled on the 24th August. The proposed grants, compared with those paid during 1936-37, are as follows: -

For the information of honorable senators, I submit a table showing the special grants made to the three States since 1928-29. The grants paid for the year 1934-35 and following years are those based on recommendations of the Commonwealth Grants Commission: -

In presenting similar legislation last year I went fully into the grounds on which the commission based its recommendations. On this occasion I do not propose to cover that ground so fully, but I suggest that honorable senators would find the third and the fourth reports of the commission interesting.

I refer, in passing, to the fact that two of the three commissioners have acted during the last year for the first time as members of the commission. Assistant Professor G. L. Wood, of the University of Melbourne, and Mr. G. L. Creasey, of Launceston, have replaced Professor Giblin and Sir Wallace Sandford, and the appointments of the two gentlemen first-named have been extended to the 31st December next. Notwithstanding the change in personnel, the commission has based its recommendations broadly on similar grounds to those used in previous years. The possible bases for grants of this kind are narrowed down to those of " needs " or " disabilities ". The Commonwealth has consistently advocated the latter basis, but the difficulties . of assessment appear insuperable, whilst, on the other hand, the commission has evolved a technique in assessing on the " needs " basis that gives a very workable and adequate result. In support of its use of this basis the commission, in its fourth report, said -

Thus, a grant on these principles, is not merely for the relief of distress; it covers the effect of forces, arising indifferently from geography, from economic conditions, or from national policy, which tend to make it impossible for a State to give its citizens the standard of public services necessary for a State in the Commonwealth.

The measurement of the needs of the claimant States is based, in the first place, on their budgetary results in relation to those of certain standard States. This relation is subjected to . a number of adjustments designed to make the comparison equitable. These adjustments make allowance for such factors as severity of taxation, differences in the cost of social services, and other matters. The commission does not, however, tie itself to an arithmetical result, and in this connexion it made the following observation : -

We do not take the various calculations as a final determinant of the grants, but as the material on which our final judgment is to be exercised. We test the figures by our knowledge of economic conditions of the claimant States, and take into account conclusions which are derived from the movements of the finances of the various States. The commission has now been considering these finances for four years, and is in a position to sec factors operating which are not visible merely from the analysis of accounts or from the presentation of a series of figures.

In one respect the commission has made an important departure from a practice followed in its recommendations for 1935-36 and 1936-37. In its first report, it arrived at a " standard " deficit for comparison with the claimant States by taking into account the financial position of New South Wales, Victoria and Queensland. In its second and thirdreports, Victoria and Queensland only were used. In the words of the commission they constituted - a fairly balanced pair, Victoria with a settled policy of great economy of administration with low taxation, and Queensland of more liberal provision of services with high taxation.

New South Wales was excluded because of certain abnormal features in its accounts. This year, New South Wales has been restored as a standard State, a course which, I may add, was advocated in the evidence submitted by the Commonwealth Treasury. The commission made the following remarks on this change: -

Without the inclusion o£ New South Wales, the grants would have suffered a substantial reduction. By the inclusion of that State tha grants are lower than in the previous year, but not seriously low. It is fortunate, therefore, that the present year offers a very good opportunity to adopt a course which is logically right, but which could not be followed before because of disturbing features in the finances of New South Wales.

Because of the higher rate of expenditure on social services in New South Wales, this action will probably tend to higher grants than would otherwise have been the case, but the Government agrees with the view of the commission that it is logically right.

In its assessment of the allowance to the claimant States in respect of the costof services, the commission has on this occasion introduced an area allowance to cover the increased cost of social services and administration. This allowance is designed to meet the increased overhead cost of administration over wide and sparsely populated areas.

A feature to which I draw special attention is the "advance" of £136,000 to Western Australia. The proposed grant for 1937-3S to that State consists of a grant proper of £439,000 and an advance of £136,000, the total being £575,000. The grants for 1937-38, for which appropriation is now sought, are assessed on the results of the financial year 1935-36, the last year for which complete statistics arc available to the commission. As, however. Western' Australia has been suffering from a severe drought, the effects of which on its budgetary position are already being felt, the commission recommends the advance of £136,000 so that that State may receive the assistance when it is most needed. This -advance is to be adjusted in 193.9-40, grants for which year will be based on the accounts for the current year, 1937-38. A similar advance of £44,000 was included in the amount paid in 1936-37, and will become due for adjustment, in 1938-39.

These special grants to the States are decreasing as the necessity for them diminishes with returning prosperity. This is, of course, to be expected, and, as the commission observes, the grants are pursuing a normal course when they decrease with financial recovery. The decrease is retarded by the time lag attendant on recommendations being based on the results of the last previously completed year, but this time lag is adjusted over a series of years.

It. seems unlikely, at least for many years, that a position will be reached when grants will be unnecessary. Some adjustment must therefore he made to enable the less fortunate States to function on a basis comparable with the others. It is the aim of the Government that an impartial and periodic examination of the subject be maintained, and, in its opinion, that cannot be effected better than by a commission which impartially examines evidence and economic effects. The Government is confident that the proposed grants for 1937-38 represent a reasonable estimate of the needs of the States.

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