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Wednesday, 1 September 1937

Senator BROWN (Queensland) . - Whilst the members of the Opposition have no immediate interest in this measure, Queensland not being a claimant State, they realize their duty to those who pay the taxes which make possible these payments to the claimant States. The Opposition does not begrudge these payments,' for it is always prepared to recognize the disabilities which some States suffer. It hopes, however, that in the near future, there will be a change of government, resulting in the lessening of the disabilities of certain States.

Senator Herbert Hays - What has the honorable senator in mind?

Senator BROWN - I am thinking of unification, although I readily admit that, even under a unified form of government, there would still be ground for claims by Provinces, but not to the same extent as at present. In the United States of America, because of the special difficulties of certain States, financial adjustments between the Federal and. State governments are constantly being made. In pre-war Germany, payments were made by the Reich to various States, but the position is different under the Nazi, regime and the Hitler dictatorship. Even in South Africa, where there is a unified form of government, financial adjustments between the provinces and the central government have to be made from time to time.

There is dissatisfaction on the part of not only the claimant States, but also the other States, in regard to the financial relations of the Commonwealth and the States. Speaking at a conference on constitutional matters about three years ago, Mr. Forgan Smith, the Premier of Queensland, said that it was grossly unfair that there should develop in Australia a financial over-lordship by the Commonwealth Government. He said that action would have to be taken to remedy what he described as . a hybrid state of affairs.

Senator Sir GEORGE Pearce - No two States could agree as to the action to be taken.

Senator BROWN - Admittedly, there is a difference of opinion among the States upon this subject. The Premier of Queensland said that it would be only fair for the Commonwealth Government to take over some *.of the capital debts of the States. He contended that, as State governments expended large sums on roads and- other works, thus contributing to an improvement of Commonwealth finances, the Commonwealth should, as far as possible, reimburse them, especially as the tendency of the central government was to invade still further areas from which State governments obtained their revenue. However, this is a subject for future consideration rather than for debate on this measure. I merely express the hope that one day the people of Australia will approve of proposals to widen the Constitution, and so render unnecessary the payment of further subsidies and grants to State governments. The smaller States must not misunderstand the attitude of the Labour party to their claims for compensation for disabilities which they suffer under the present federal system. I understand that the Commonwealth Grants Commission will shortly be abolished and that much of the work done by it will then be undertaken by the proposed Inter-State Commission. The personnel of the latter body is not yet settled, so we are not certain whether, as rumoured. Senator Sir George Pearce will be its chairman, whether Mr. Lyons will take the job, or whether it will be given to Senator E. B. Johnston who, I think, would prove highly capable. But I have learned that there is likely to be some hitch over the arrangements, because of the possible construction to be placed on section 101 of the Constitution. According to the former Governor-General, Sir Isaac Isaacs, this section will prevent the Inter-State Commission from taking over the work now being done by the Commonwealth Grants Commission. I hope that this possibility, which, I understand, was mentioned by Mr. Blackburn in the House of Representatives, will not disturb unduly the minds of any aspirants for a position on the commission. We know that the first. Inter-State Commission, nearly in its career, encountered a veritable Serbonian bog of legal and constitutional difficulties. I doubt if it would be possible for anybody to satisfy the claims of all the States that have suffered disabilities under federation. I expect that my Tasmanian friends will have something to say about the conclusions of the commission in its fourth report. In paragraph 81 the commission stated -

Tlie -dependence of the finance of Tasmania on federal subsidies gives cause for serious consideration ; and it would be unhealthy if this had to continue permanently. This position, however, has to be looked at in the light of the State's history, and of the static conditions of the last 20 and 30 years. Tasmania mice supplied the mainland with many products of the soil, from timber to wheat and from potatoes to hops. This market has declined because these industries have been developed on the mainland.

Thus we see a development of the spirit of economic nationalism in the Commonwealth, industries which formerly flourished in Tasmania, being established on the mainland, to the detriment of the island State.

Senator A J McLACHLAN (SOUTH AUSTRALIA) - One industry - sugar growing - has not moved from its original State.

Senator BROWN - That is because it was established in a fertile part of Australia, has been developed on scientific lines, and has rendered wonderful service to Australia, although Senator Brennan said on one occasion, prior to becoming a member of the Ministry, that it would pay Australia to abolish the sugar industry and pay a subsidy to every person engaged in it, in order to be free to import sugar from other countries. But I am digressing. The Commonwealth Grants Commission made this further statement in its fourth report -

Tasmania is deficient in natural resources, and, as we have seen,has a poor terrain. But she has some assets of great value; and a constructive policy of development is needed to induce these to contribute to community income.

I understand that the present Labour Government in Tasmania has adopted a constructive policy of development to counteract the effect of economic nationalism on the mainland. I feel sure that the pending economic development of Tasmania will make for the benefit of its people and that, under the aegis of a Labour government, the island State will again make rapid progress.

I was interested in the commission's observations concerning future problems. In paragraph 222 it stated -

The commission, in its recommendation of grants, has attempted to find amounts which will enable the claimant States to bring their financial position up to what the commission has called an Australian standard.

It goes on to say that this standard has been based on the financial position of non-claimant States. For two years it took Queensland and Victoria as the standard. This year New South Wales is included -

Three views have been put to us. The first view is that we should not do more than would enable the claimant States to balance their budgets, and, if the application of a standard obtained from the position of the standard States would do more than this, the excess should be ignored. This view is justified by the statement of principles of the old commission, although it never had to deal with this precise position. The second point of view was urged by South Australia, namely, that the grants should enable the claimant Statesto balance their budgets even if the standard States were in deficit. This the first commission rejected, and with that decision we agree. There remains the third view. Tasmania contended that if the standard States are in surplus there should be astandard surplus and the grants should enable the claimant States to show a surplus. This is the main point of controversy. We have not to decide it this year, but it may be an issue next year.

Thus there are still many difficulties to be dealt with. The solution, I believe, is the adoption of a more modern form of government, wherein power is vested in the central governingbody and residual power is delegated to the States.

Senator Millen - That will be ten years ahead, and has no present interest for the States.

Senator BROWN - I am aware that because of the disabilities which they suffer under federation, the claimant States require relief from year to year, and knowing the interest which our Tasmanian friends have in this matter, I shall listen with interest to what they, as well as senators from Western Australia and South Australia, may say on the bill.

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