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Monday, 9 November 1964


Senator LILLICO (Tasmania) . - I listened with interest to the Leader of the Opposition (Senator McKenna) and his references to the activities of the Grants Commission. I believe it is a fact that for the first time, Tasmania does not suffer an adverse financial correction because of its expenditure on social services. In that respect, the new approach of the Grants Commission must confer a very distinct benefit on the claimant States. I call to mind that for many years the great bugbear in the finances of the Tasmanian Government was the adverse correction suffered in respect of social services, education and similar expenditure. However, I must endorse what the Leader of the Opposition has said about the Grants Commission. As the Minister for Civil Aviation (Senator Henty) pointed out in his second reading speech, the Grants Commission's recommendations have been adopted without amendment in every year since the Commission was established in 1933. That means its recommendations have been accepted by all Governments without reservation or qualification.

The Grants Commission has been operating for 31 years. It holds a unique position so far as the Commonwealth Government and the claimant States are concerned. That is somewhat unusual because one would think that a commission charged, not with expenditure but with the recommendation of expenditure, would come in for a good deal of adverse criticism. However, in my years in the State Parliament I have heard the work of the Grants Commission highly commended from time to time by the Parliament of Tasmania.

One cannot help but think how different was the position that existed prior to the establishment of the Commonwealth Grants Commission. In those days, whenever the position became desperate I believe it was a case of the Premier or the Treasurer of Tasmania waiting upon the Commonwealth Treasurer and seeking assistance from the Commonwealth Government. I can remember reading a report in the Press about a then Premier of Tasmania waiting upon the Commonwealth Treasurer and putting his case for assistance for that State. According to the report, the Treasurer was not in a very good humour that day and when the Premier said that he had come to see him about Tasmanian affairs the Treasurer replied: " Damn you, and Tasmanian affairs ". That was the report that appeared in the Press. A lot of time was occupied in compiling cases in detail showing the disabilities suffered by Tasmania under Federation - disabilities brought about by the tariff policy imposed upon the whole of the Commonwealth, which benefited some States and inflicted penalties on others; disabilities brought about by the Navigation Act; and disabilities brought about by other factors. I call to mind that the late Mr. E. Dwyer-Gray was one who concentrated very much on the disabilities suffered by Tasmania - Tasmania was his Stale - as a result of its membership of the Federation of Australia. It was left to a man who had been Premier of Tasmania - the late Mr. J. A. Lyons, who became Prime Minister of the Commonwealth - to establish the Commonwealth Grants Commission, which has continued operating ever since and has removed all the contention, the bitterness and the ill feeling that existed because the claimant States felt that they were being just dragged along in the wake of the standard States and were suffering a penalty because of their membership of the Federation. Here was a man who had had experience on both sides of the fence. It was due to him that the Grants Commission was established. It has carried on ever since. We now have before us the Commission's 31st report. The Commission's methods are complete and its inquiries are exhaustive and thorough. It looks into almost every aspect of State finances and, as Senator McKenna has explained, it recommends adjustments in the finances of the claimant States.

Although the honorable senator has pointed out that every State Government is the captain of its own ship in that it can do what it likes, let me say that in the imposition of State taxes and in the expenditure of funds by the States a very close weather eye is kept upon the Commission. I can remember an occasion when certain expenditure was deemed to be valid and the State thought that it could proceed in a certain direction because it believed the Commission would approve the expenditure. But the State found itself in difficulties. In spite of the Commission's thoroughness and its fairness - no-one can deny that it is fair - in its comprehensive reviews of State finances, because of the necessity to have a yardstick by which to measure the grants that shall be paid to the claimant States, certain anomalies creep in. I remember an occasion when there was a lot of heart-burning. Tasmania suffered a correction because of the funds that were devoted to subsidising extensions of hydroelectric power into rural areas. That went on for many years. In passing let me say that the Metropolitan Transport Act, which applies to both Hobart and Launceston, confers a very distinct benefit on both those cities.


Senator Wright - To the exclusion of the country areas.


Senator LILLICO - To the exclusion of the country areas. In this report the Commission states that because the losses of the Metropolitan Transport Commission in both Hobart and Launceston are comparable with the losses sustained in the standard States, no correction will be made. However, in the same report the Commission refers to the subsidising of extensions of hydro-electric power into rural areas and, when dealing with the correction states -

Briefly, the reason for making such a correction was that similar expenditure was not borne in the other States, except in part by New South Wales.

It seemed to us at the time that the Commission was adhering very closely to the yardstick when consideration was not given to the fact that the other States did not have the necessary potential for such rural extension, did not have the closer settlement that we had and did not have our resources of hydro-electric power. In any case, the Commission goes on to say -

In past years, Tasmania has submitted to the Commission that corrections and adjustments should be considered together and that a claimant State should be entitled to offset any adverse correction, such as this against a net favourable adjustment . . . Although adhering to this principle, the Commission has given further consideration this year to the treatment of this special correction in Tasmania . . . With only two standard States, with contrasting procedures on the subject matter, some greater force resides in the Tasmanian contention that it should be enabled to avoid the prejudicial effect of a correction for the items under review.

The Commission concludes this portion of its report in these terms -

The Commission considered that it would not require Tasmania to fund the amount of this expenditure, £56,000, incurred in 1962-63, as had been required in previous years. It took the view thar Tasmania had a net favourable adjustment in excess of the deficit standard in 1962-63 and it would not be equitable to expect the State to fund the amount at this stage because of the proposed new legislation and the proposal of the Commission further to consider adjustments for deficit funding in its next report.

I do not know what the proposed new legislation is that the Tasmanian Parliament intends to introduce to alter the principle which has been adopted.


Senator McKenna - The Commission states very plainly in paragraph 146 on page 79 of its report that the legislation is designed to relieve the Consolidated Revenue Fund of any responsibility to contribute to the cost of these rural extensions in future years.


Senator LILLICO - It appears that the money will have to come out of the funds of the Hydro-Electric Commission.


Senator McKenna - I should think it would come from loan funds.


Senator LILLICO - Perhaps it will come from loan funds. At long last the State will be relieved of the penalty which has been imposed upon it, by reason of this adverse correction, because it assisted in the extension of hydro-electric power into rural areas.


Senator Henty - It was not the fact that the State Government assisted but it was where it assisted. The Grants Commission is saying: " You may not assist out of the Consolidated Revenue Fund, but you may assist out of loan funds." The Tasmanian Government continued to assist from Consolidated Revenue and it copped the penalty.


Senator LILLICO - Because that position has been altered, I take it that it will be much easier for the State of Tasmania so far as rural expansion is concerned.


Senator Henty - The legislation should have been passed long ago.


Senator LILLICO - Yes. While the Grants Commission insists, and rightly so, that State taxation imposed by the claimant State be levied at a rate comparable with that of the standard States, it is interesting to see that both Western Australia and Tasmania have levied State taxation at a rate in excess of that of the standard States. In the year 1962, had Western Australia levied State tax at the same rate as that of the standard States it would have collected £217,000 less. Tasmania, although it has less than half the population, I think, of Western Australia-


Senator Wood - It is losing population, too.


Senator LILLICO - No, it is not losing population. If Tasmania had more people like Senator Wood, the State would gain population. While Western Australia would have collected £217,000 less had it levied State taxation on the same rate as the standard States, Tasmania would have received £218,000 less. That makes the Tasmanian taxation pretty savage when you compare the small population of Tasmania with that of Western Australia. In 1963, the same position applied. State taxation in Western Australia would have been £106,000 less and in Tasmania it would have been £194,000 less had it been levied at the same rate as that of the standard States. In the year dealt with in the last report of the Grants Commission, Western Australia would have received £117,000 less and Tasmania - I do not know what has caused the drop - would have received £72,000 less.

But that is not the whole story. A lot of the State taxation in Tasmania is based on the valuations that are made there. This is a factor which the Commission cannot be expected to take into account. In the State of Tasmania, there has been a revaluation of land. So far as rural properties are concerned, those valuations are, in my opinion, fictitious. They have yielded a great amount of money by way of probate duty and land tax. The policy of the Valuation Branch in Tasmania with respect to rural properties is to take into account the sale of properties in a neighbourhood and to value all other properties in that neighbourhood at the rate at which those properties have been sold. This method has caused the very basis upon which this form of taxation is levied to be increased drastically. In some cases the increase is 40 per cent.


Senator McKenna - Would not that be reflected in the severity of taxation per capita?


Senator LILLICO - My understanding of the position is that the Grants Commission takes into account the rates of taxation. As far as I can see, it does not lake into account the valuations upon which that taxation is imposed. I believe that the Valuation Branch, on seeing that a farm has been sold for a substantial sum, increases the valuations of all other properties in the neighbourhood. It supposes that the sale price of the particular property represents its true valuation. Nothing could be further from the truth. Properties are sold for a number of reasons. I have heard of extraordinary prices being paid because a neighbour has wanted to buy a property which has a good running creek on it. I have heard of other properties being purchased for sentimental reasons. A property is put on the market and stays there until it is sold. The seller waits until the man comes along who wants that property sufficiently to offer the best price. This is no criterion whatever as to the value of the properties in the neighbourhood. In fact, I believe that people who own some farm properties on which valuations have been increased would not lose an opportunity to sell their property for the capital value fixed by the Valuation Branch.


Senator Benn - What method should be adopted to fix valuations?


Senator LILLICO - That is one of the anomalies in the activities of the Grants Commission. I believe that the Commission could hardly be expected to take fully into acount the fact that valuations differ from State to State. So far as I can see, the Commission does not do so. But this fact does make the severity of State taxation higher than it otherwise would be.

In the main - in fact, I could say overall - the State of Tasmania has been fairly treated. I believe this is as a result of the Grants Commission. In my time here, I have never heard a senator from any party make any complaint about the treatment meted out to the State. It is true that some people maintain that everything is not just quite right in Tasmania. Only today I saw in the " Australian " an article that interested me very much. This has a distinct bearing on the assistance that the State of Tasmania will need from the Grants Commission. The article commences with the question -

Is Tasmania in danger of drifting to the position or being Australia's "Hill-billy State"?

A special article in tomorrow's issue of The Australian examines factors which are delaying the island's development.

Then, the " Australian " sets out questions that will be asked and answered. I do suggest that before any newspaper prepares to publish an article such as this it should make sure that its premises are completely sound. The article continues -

Why is Tasmania losing to the mainland industries which are large labour users, while unemployment is at a high rate compared with the rest of Australia?

The answer to that question is simple. The question can be answered in one word - freight. Freight charges between Tasmania and the mainland have been the greatest impediment to the progress and advancement of that State. If I may say so, that handicap has been aggravated by the attitude of the .waterside workers. I do not altogether exclude the shipping companies from blame. Only this week I heard two large concerns say that Tasmania markets only 3 per cent, of its products within the State. Almost all our products have to be transported over the sea to other markets. That is why freight and conditions on the waterfront, which have penalised Tasmania for a long time, are an important factor in the relative prosperity of that State.

This article in the " Australian " poses the further question -

Why is the gross value of Tasmania's main crops declining?

It is scarcely correct to say that the value is declining. If we look at the statistics at the end of the report of the Commonwealth Grants Commission and examine the whole ambit of Tasmania's production, we find that, although there have been fluctuations, the production of almost every commodity has shown a gradual upward trend. The gross value of Tasmania's main crops is not declining. That remark applies to wool, meat, milk, butter and the production of every other commodity with the exception of potatoes, the value of which has shown a very sharp decline, again as a result of freight charges. I can recall the time when one could put potatoes on the Sydney market for 30s. a ton. Today the figure is between £10 and £12 a ton. Tasmania grows the best potatoes in Australia, but the Tasmanian potato grower has been priced out of the Sydney market to which formerly he sent his potatoes as far back as I can remember. Then the article raises this ridiculous question-

Why are there fewer pupils over 16 in Tasmania's secondary schools than the number of students at the State's solitary university?

I take it that is because soon after the age of 16 years most boys and girls go to the university.

In making these comments 1 am not saying for one moment that the State's progress could not have been very much greater. One of the disabilities from which Tasmania has suffered has been 30 years of administration by a government that has become stagnated. A change of government in that State would be like a shot in the arm. Much could be done to develop the tourist industry. In Tasmania we have a full-blown Minister for Tourism who has jurisdiction over the expenditure of, I understand, £20,000. A lot could be done to develop this industry. Although Tasmania is suffering from the effects of high freight charges, a bill now before the Tasmanian Parliament seems to indicate that the Government is bent on imposing a still greater burden on industry. The position is not as bad as this article in the " Australian " indicates. But I repeat that much more progress could have been made, lust let us reflect on the progress that has been made in Victoria and South Australia. South Australia has progressed from being a claimant State to being not a standard State but one which does not now need special Commonwealth assistance. Let us think of the progress that has been made in Western Australia. Most thinking people are convinced that similar progress could have been made in Tasmania, in spite of its handicaps, if it had had a forward looking government which had not become stagnated through 30 years of office. The Tasmanian Government does not seem to have one fresh idea in its head.

With all due deference to you, Mr. Acting Deputy President, Tasmania offers greater tourist attractions than does any other State in the Commonwealth. It could have been made Australia's summer mecca for tourists. The tourist industry could have been so developed that it could have attracted an income not of £4$ million, but many times that sum.


Senator Henty - We cannot attract tourists by shutting down on Friday afternoon and opening on Monday morning.


Senator LILLICO - That is so.


Senator Henty - Tourists are attracted by offering service.


Senator LILLICO - In Hobart everything is closed for the weekend, and the powers that be want to make every other part of the State the same. Insufficient thought and money are being devoted to developing the tourist industry, the potential of which I believe is unequalled elsewhere in the Commonwealth.

I support the Bill. I repeat that the Grants Commission has done a wonderful job for the claimant States. It seems to me that it is adopting methods which are even more advantageous to the claimant States than those adopted in the past. I repeat also that Tasmania has been well treated not only in respect of the proposed special grant but in respect of every other grant it has received. My only regret is that the money so allocated to Tasmania has not been put to better use.

Senator BRANSON(Western Australia) 19.91. - In rising to speak to this measure I find myself in rather distinguished company. I am following the Leader of the Opposition (Senator McKenna) and Senator Lillico, and I believe that the next Government speaker is to be Senator Wright. I say that I am in distinguished company because I have a healthy respect for the approach of these three men to the very great problem of Commonwealth and State financial relations. I always like to listen to their contributions to debates on this subject.

The Bill is designed to authorise the payment of special grants totalling £15,860,000 to Western Australia and Tasmania, which are the two remaining claimant States. Western Australia will receive £8,560,000 and Tasmania will get £7,300,000. The Bill also authorises the payment of advances to the two States for the earlier months of 1965-66 until this Parliament authorises payment of the special grants for the next year. Most senators probably are quite familiar with the workings of the Commonwealth Grants Commission. Nevertheless, I believe it is appropriate to mention briefly some of the procedures adopted by the Commission. Senator McKenna covered seme of this ground but I believe that several of the subjects he mentioned are worth repeating.

The special grants, recommended for payment each year consist of two parts. One part consists of the advance payments based on the Commission's assessment of the financial needs of the claimant State for the year in which the grant is to be paid. This part is subject to financial adjustment two years later when the Commission has completed its examination of the audited results of the States' finances for that year. The second part of the grant consists of the final adjustment of the advance payments made two years earlier. The Bill includes provision for an adjustment of £660,000 for Western Australia, and £491,000 for Tasmania in respect of 1962-63. The Commission arrives at the figures it recommends for payment after a very close and detailed comparison of the budgets of the claimant States - Western Australia and Tasmania - with the budgets of the standard States. I think that New South Wales and Victoria arc used as the standard States. As Senator Lillico said, the Commission pays particular attention to the defferent levels of expenditure and to the efforts made by the States to raise revenue.

The special grants of £15,860,000 authorised by the Bill represent an increase of £4,410,000 on last year's figure. I draw the Minister's attention to page 1890 of the " Hansard " report of the debate in the House of Representatives, because either the Treasurer (Mr. Harold Holt) was misreported or a typographical error has occurred. The " Hansard " report states that the special grants recommended for payment in 1964-65 are £4,140,000 greater than those paid in 1963-64. It seems obvious that an error has occurred in the report, because Senator Henty, representing the Treasurer in the Senate, quoted the correct figure of £4,410,000.

One reason why the States are to receive tin increase in special grants is that the Commission adopted a new method of comparing the levels of expenditure on social services in the claimant and standard States. The result of the adoption of the new method has been favorable to the claimant States. Usually the debate on the States Grants (Special Assistance) Bill is rather academic and the only contributors are representatives of the claimant States. It is interesting to note that since the establishment of the Commonwealth Grants Commission 31 years ago its recommendations have been wholly accepted by governments and no amendment has ever been moved to the relevant legislation. I suppose that the founding fathers of the Commonwealth realised the problems that would confront them in attempting to form six separate sovereign States into one Commonwealth. Time has shown that some of their fears were valid. Thank goodness that 31 years ago some one had the wisdom to establish the Commonwealth Grants Commission. The credit has been given to a former Prime Minister, Mr. Lyons.


Senator Wright - Undoubtedly it was J. A. Lyons.







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