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Wednesday, 24 October 1973
Page: 1409


Senator MURPHY (New South WalesAttorneyGeneral and Minister for Customs and Excise) - I move:

That the Bill be now read a second time.

I ask leave to incorporate my second reading speech in Hansard.

The DEPUTY PRESIDENT (Senator Prowse)- Is leave granted? There being no objection, leave is granted. (The document read as follows)-

The purpose of this Bill is to authorise revisions to the financial assistance grants arrangements agreed between the Australian and State Governments at the Premiers' Conference held on 28 and 29 June 1973, namely:

(i)   The reductions to the financial assistance grants which it was agreed would accompany the transfer to the Australian Government of financial responsibility for tertiary education as from January 1974;

(ii)   the payment in 1973-74 of special additional revenue assistance of $25m to the States, to be distributed between them in proportion to the formula grants; and

(iii)   the payment of grants to Western Australia in 1973-74 and 1974-75 additional to those authorised by present legislation.

The financial assistance grants at present being paid to the States are authorised by the States Grants Act 1971-1972. In view of the fact that the provisions of a substantial number of sections of this Act are no longer operative and unnecessarily complicate the Act, it has been decided to provide for an entirely new Act. Apart from the deletion of these inoperative sections and the new provisions to effect the revisions referred to above the form of the legislation follows closely that of the present legislation.

The present financial assistance arrangements were originally settled at the June 1970 Premiers' Conference and were intended to apply over the 5 years to 1974-75. However, the arrangements have been substantially revised on a number of occasions since then, principally by the provision of additional grants and by adjustments which accompanied the transfer of payroll tax to the States, although the formula incorporated in the arrangements has not been altered.

I turn now to discuss the 3 revisions to the arrangements in more detail. At the Premiers' Conference in June the States accepted the Australian Government's offer to assume full financial responsibility for financing tertiary education from 1 January 1974, and it was agreed that estimated amounts of recurrent expenditure of which the States would thereby be relieved should be deducted from the financial assistance grants otherwise payable. The estimated capital expenditures of which the States are to be relieved are being deducted from the States' Loan Council programs. I will refer to this aspect of the matter in my second reading speech on the States Grants (Capital Assistance ) Bill 1973.

The reductions from the revenue grants for 1973-74, totalling $11 1.8m, represent estimates of the half-year savings to the States. The amounts for 1974-75, totalling $229. 7m, represent the estimated full-year savings.

These reductions are being made in accordance with a general policy expressed by the Prime Minister (Mr Whitlam) in his opening speech at the conference that, where the national Government undertakes new or additional commitments which relieve the States or their authorities of the need to allocate funds for expenditures at present being carried by them, there should be adjustments in the financial arrangements between the 2 levels of government to take account of the shift of new financial responsibilities. Legislation to authorise the necessary additional grants to the States for tertiary education will be introduced by the Minister for Education (Mr Beazley) in the present sittings of Parliament.

The additional revenue assistance of $2 5 m which the Australian Government agreed to provide to the States in 1973-74 is being paid in recognition of Budget difficulties which they were seen to be facing this year. It is to be distributed between the States in proportion to the grants payable to them in 1973-74 under the financial assistance grants formula.

At the Premiers' Conference the Prime Minister made it clear to the States that the Australian Government does not intend to provide further general revenue assistance to the States in this financial year. We would contemplate providing such assistance only if the States were to face undue difficulties due to factors beyond their control which could not have been foreseen at the time the States' budgets were brought down.

The Bill also revises the provision in the existing Act under which grants additional to those calculated under the formula are to be paid to Western Australia in 1973-74 and 1974-75.

Those additional grants were being paid in accordance with a decision taken at the June 1970 Premiers' Conference. They were $12. 5m in 1970-71, $9.5m in 1971-72 and $6.5m in 1972-73 and were to have been $3. 5m and $0.5m in 1973-74 and 1974-75 respectively. At the June 1 973 Premiers Conference it was agreed that the additional grant payable to Western Australia in 1973-74 should remain at $6.5 m instead of being reduced to $3. 5m as provided in the existing legislation. It was agreed at the Conference also that Western Australia would receive an additional temporary grant in 1973-74, the amount of which would be the subject of further discussion between the Australian and Western Australian Governments. It has been agreed, following such discussion, that a special temporary addition of $3. 5m- the same as the amount added last year- would be made to the

State's revenue grants in 1973-74. It has also been agreed that the additional financial assistance grant for Western Australia remain at $6.5min 1974-75.

Thus, additional grants to Western Australia totalling $ 10m in 1973-74 and $6.5m in 1974-75 are provided for in the Bill.

Turning to the details of the Bill, the first 5 clauses are of a machinery nature. Clause 6 sets out the manner in which the 'formula grants' payable to the States in 1973-74 and subsequent years are to be determined. These grants constitute the bulk of the grants payable under the Act. Sub-clause ( 1.) of this clause sets out the general method of determining these grants. The method is the same as that provided in the existing legislation- that is, the formula grant for each State is calculated by taking that State's grant for the previous year and increasing it in proportion to the increases in the State's population and in average wages in Australia as a whole and by a further factor of 1 .8 per cent.

Sub-clause (2.) of clause 6 sets out the amounts to be used as the base for purposes of determining the formula grants for 1973-74. These amounts are the actual financial assistance grants paid to each State in 1972-73 under section 7 of the States Grants Act 1971-1972, the equivalent section in that Act to this clause, plus an additional $2m in the case of Queensland. This latter addition, in conjunction with subclause (4.), continues the arrangement agreed at the June 1970 Premiers' Conference and embodied in present legislation that there be an addition of $2m to the 'base' for calculating Queensland's formula grant for each of the 5 years ending 1974-75.

Sub-clause (3.) of clause 6 provides for the reductions to the 1974-75 grants on account of the Australian Government's assumption of full responsibility for financing tertiary education. As the grants payable under this clause (with the addition of $2m for Queensland) become the base' amounts for purposes of calculating the grants in the next year, this provision effects a permanent reduction in the grants.

Clause 7 sets out the reductions to be made, on the same account, to the grants which would otherwise be payable under the Act during 1973-74. These reductions do not affect the base' amounts for purposes of calculating the grants under the formula in 1974-75.

Clauses 8 and 9 provide, respectively, for the additional revenue assistance of $25m to be divided between all the States and the additional grants to Western Australia. The remaining clauses are mainly of a machinery nature and are similar to those contained in the existing legislation. Full details of the general revenue assistance to be paid to the States in 1 973-74 are given in chapter 1 1 of the Budget document 'Payments To Or For The States 1973-74'. Comparison of the amounts of such assistance estimated to be paid in this year with the amounts paid in 1972-73 are affected by the reductions to be made to the 1973-74 grants on account of tertiary education. If, however, the figures for the 2 years are adjusted to make them comparable in this respect, total general revenue assistance estimated to be payable to the States in 1973-74, on assumptions spelt out in the document to which I have referred, will be some 15.6 per cent greater than that paid in 1972-73. This is a substantial increase, which should assist the States to continue to improve the standards of the services they provide. I commend the Bill to the Senate.

Debate (on motion by Senator Withers) adjourned.







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