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Thursday, 2 December 1971
Page: 4015

Mr CREAN (Melbourne Ports) - These 3 Bills cover a variety of Commonwealth-State financial relationships. One bill deals with capital assistance which the Commonwealth proposes to give to the States. The States Grants (Special Assistance) Bill, which is an annual one, provides for grants to the States of Tasmania and South Australia under the terms of section 96 of the Constitution. The Slates Grants Bill (No. 2) reorganises the formula for distribution of the amount which goes from the Commonwealth to the States under the uniform tax reimbursement arrangements and so on. The kinds of assistance that the Commonwealth gives to the States are set Out in the publication that comes down in association with the Budget described as Commonwealth Payments lo or for the States 1971-72'. 1 refer to the table on page 10 of the' document which sets out Commonwealth payments to or for the States and Australian Loan Council borrowing programmes. In aggregate this year the Commonwealth will pay to the States an estimated sum of $3,480m. So 1 1 per cent or 1 2 per cent of the gross national product is distributed from the Commonwealth to the States from resources 01 an annual taxing kind and a capital kind that become available to the Commonwealth.

If one consults the rather voluminous statistics that are contained in the 38Hi report of the Commonwealth Grants Commission dated 1971 it will be seen that every State in Australia, including even New South Wales, is now more than half dependent - some are as much as two-thirds dependent - for total financial resources on what comes to them from the Commonwealth. I suppose this indicates the financial domination of the Commonwealth. I would regard the financial domination of the Commonwealth as an inevitable part of our functioning federal system at the moment. The Commonwealth is best placed to collect the principal tax, the income tax as it is levied on individuals and companies. The Commonwealth is the only level of Government that has any jurisdiction over the issuance of money, the flow of credit and the central banking or Reserve Bank powers. But what has not been satisfactorily worked out as yet, of course, are flexible arrangements between the Commonwealth and the States. I want to include also a third level of government that operates in Australia - the important level of local government.

What we have not worked out is a flexible and equitable formula that will match finance and function as far as the proper operation of our federal arrangements are concerned. The fact that so many measures come before the Parliament each year shows the unsatisfactory nature of the piecemeal solutions at which we have arrived. I know it is very easy for those who do not have to raise money to suggest to somebody who does that they are not getting enough of it for the functions they have to perform, and it is no easy matter to secure an equitable solution. But nevertheless it seems that in this area as in many others, the Commonwealth Government is not as properly appraised as it ought to be of what the real problems are.

As I indicated earlier, I want to say something about what might bc described as the third level, or the poor relation, in the Commonwealth-State-local financial relationships. The poor relation is local government. One of the difficulties in this situation is to be able to find adequate, up-to-date statistical material that satisfactorily separates from the functioning of Commonwealth and States the activities of local authorities. A publication called 'State, Territory and Local Government Authorities' Finance and Government Securities' comes out regularly from the Commonwealth Statistician. The latest one I have was issued in December 1969. I presume that there is a later one, but it does not make a great deal of difference to my argument. I shall quote from Bulletin No. 6 issued in December 1969. which relates to the year 1967-68, some 4 years ago. What is interesting is the high amount of indebtedness that local authorities have incurred and how much of the annual resources available to local authorities goes in servicing the debt that has been incurred over the years. For the most part they are restricted as far as revenues are concerned by what is known as the local rate or the rate assessed in relation to the value of property.

The total debt of the local authorities - this is extrapolated forward a bit from the last figure - would seem to aggregate something like $ 1,500m. I refer to local authorities as such. There is also a variety of other bodies, such as statutory authorities, State electricity undertakings and metropolitan boards of work, whose debt is much higher. As far as one can see, their aggregate debt is in the region of $5,000m. One can at least obtain later information about the overall debt of the Commonwealth and the States in the publication brought down with the Budget entitled 'Government Securities on Issue'. The latest one, for 30th June 1971, shows that Government securities have aggregated something like S 12,000m of which over S9,000m, or about three-quarters, was attributable to the States and $2,700m, or a bit less than a quarter, was attributable to the Commonwealth.

Of course, it has been a bone of contention for some time that the Commonwealth has been able to pay for its public works out of revenue but the States have had to borrow, or have access to the loan market for, all the funds made available to them. In many cases they were paid out of the surplus revenues of the Commonwealth and not out of loan raisings at all. But even though, as the argument runs, these funds had been collected as taxes, they were loaned and interest was charged upon them. In many respects I have often believed this sort of thing to be in the nature of internal bookkeeping rather than as a substantial argument about proper allocation of functions. Nevertheless, it is certainly a real burden for the other level of government, the local authorities who do not have direct access to any revenue of their own except rates and who. if they engage in capital works, have to borrow as almost borrowers of last resort from such moneys as are left over after the Australian Loan Council has made its arrangements.

In many cases local authorities are forced to borrow at rates of interest well in excess of 7 per cent. Often they have to borrow from life insurance companies or to secure bank overdrafts at the rate of 8 per cent. Their finances are in quite a serious plight. The Government at least seems to have conceded the argument of the States about capital funds. One of the Bills before this House, the States Grants (Capital Assistance) Bill, is part of the recommendation made by the previous Prime Minister at a Premiers Conference held earlier this year when he said that over a period of years the Government would assume something like $ 1,000m of the States' debt and pay the interest and sinking fund contributions on it and also that part of the funds made available to the Stales in future for capital works, as distinct from annual works, would be financed out of funds that would not bear an interest component. At least that relieves the surface picture for the States.

Let me refer to the item 'Interest' in the document 'Public Authority Finance 1963- 64 to 1967-68'. I am sorry that the last available figures are only for 1967-68. There is a table in this document which lists the aggregate finances of State and local government authorities. On the one side are their receipts of a current kind and their capital receipts, and on the other side current outlay and capital outlay. Again, it does not separate the local authority from the State authority. But in 1967-68 the total receipts of State and local government authorities were $2,81 6m of which SI, 050m came from taxation which they raised themselves. That includes the local rates. An almost equal amount - $ 1.057m - came from grants from the Commonwealth Government. The other principal item was the gross operating surplus of public utilities, that is, electricity undertakings, gas. fuel, railways and so on. which had a gross operating surplus of $582m. They were the major components on the current receipts side.

But on the outlay side we find the item of interest. The aggregate amount of interest to be met out of those funds of $2,81 6m for 1967-68 was $59 1 m. Of course, this simply shows the very real difficulty that interest charges represent for the State governments and local authorities. They impact more viciously upon the local authorities than they do upon the State governments because the State governments do pick up some of it in the reimbursement arrangements, and there is some adjustment of it now in the second Bill. What the States were able to do so far as capital adjustment was concerned was mainly due to their successful agitation at various Premiers Conferences, but so far the local authorities have not been quite so successful. In my State of Victoria there is a body known as the Committee for More Federal Finance for Local Government. T have no doubt that most Victorian members know of it and I think there are like bodies ;n other States. This body has prepared a submission to the Prime Minister (Mr McMahon; on the position of local government in Australia in 1971. but with particular reference to Victoria.

I want to make one or two quotations from the submission because they highlight the kind of difficulties that are facing local authorities. The document is very well prepared and I commend the Committee for its quality, lt gives a brief history of local government and indicates that its origins in Australia were similar to those of a like body in the United Kingdom 't has evolved to what it is from the middle of the 19th Century but modern society demands the assumption by local authorities of responsibilities that were not acceptable before. Many of them are in the nature of welfare services. They have the o'd traditional services, of course, of rating, fire brigade, waste disposal and sewerage services. Those are historical kinds of assumptions, but in later times more and more has it been expected of the local authorities that they should go into the fields of health and social welfare services. The document lists such responsibilities as family casework, family counselling, day care centres, home help services, care of the aged, low cost meals or meals on wheels as they are called in some areas, community centres, citizens advice bureaux, clubs for children, young people and the aged, and day camps and other holiday camps as well. All of these aggregate quite considerable sums of money and the document quotes a number of individual instances. The document mentions the electorate of my colleague the honourable member for Wills (Mr Bryant).

For the year 1969 in Brunswick - these were figures given in a 1971 submission - out of a total expenditure by the Municipality of Brunswick of $1,420,000, an amount of 8165,000 - that is, close to 12 per cent of the available income of the Municipality of Brunswick - was spent on health and welfare. The document points out that costs are rising yearly. In Brunswick, for example, home help and elderly citizens charges rose from 0.67 per cent of the rate revenue in I960 to 4.32 per cent in 1970. The document also goes on to refer to a council in the electorate of the Minister for the Army (Mr Peacock). The Kew City Council pointed out in its 1971 submission that whilst the cost of maintaining those services is subsidised by government, increased costs make the subsidy inadequate. The document reads:

In Kew. for example, infant welfare centres cost, the council in 1970 $18,276 wilh a government grant of $3,700, i.e. 31 per cent . . . Pre-school kindergartens cost the council in 1970 $34,400 with a government' grant of '$20,900, i.e. 6f per cent . . . The provision of pre-school facilities for all is a prerequisite lo the development of education in Australia and the need to use manpower to its greatest efficiency.

The document goes on to describe such matters as meals on wheels, lt then lists a number of matters for which councils are now increasingly being asked to share responsibility, or even to take full responsibility for. The document mentions pollution, and states:

The control of the pollution of our environment has become a problem that concerns all mankind: and in this local authorities have a pari to play. To prevent pollution requires however adequate finance.

This is a national problem. The document then lists the other problem that is rather broadly described these days as urban renewal, facing up to the reality that in Australia the majority of our population lives within a 50-mile radius of the capital cities. If we were to take an area of about 50 miles around the centres of Melbourne and Sydney we would encompass something like 40 per cent of the population of Australia - certainly more than half of the population of New South Wales and Victoria. In the Commonwealth Giants Commission report there is a rather interesting table showing the degree of urbanisation in Australia. I think Victoria has 65 per cent of its population in metropolitan areas while New South Wales has something like 58 per cent. This simply highlights the fact that while the majority of people, who are the ultimate responsibilities of government, live in these metropolitan areas, the resources that the councils or (he local authorities have are quite inadequate to meet the new demands that are being thrust upon them. As well, there is the rising burden of the interest rate. A document that I have indicates that, again taking the City of Brunswick as an example, nearly one-fifth of that council's rate revenue goes to service annual interest payments on its debts. The Brunswick City Council in its 1971 submission staled that loan liability had increased from $220,000 in 1950 to $1,436,000 in 1970- more than- 6 times the amount in 1950 - while the rate revenue, which is the source or funds to repay this debt, had increased only 3.8 times and the proportion of rate revenue required' to service the debt has increased - from 12.6 per cent in 1950 to 18.1 per cent in 1970. lt is the belief of my Party - and this view has been expressed persistently and with eloquence by the Leader of the Aus- tralian Labor Party (Mr Whitlam) - that it is time it was acknowledged that (here is a need to make some separate reimbursements to these local authorities. I know that this would not be a very easy process to accomplish because in many ways sometimes the existing arrangements are not always the most satisfactory in handling some of these broader problems. But these, broader problems are being thrust upon the councils, as they are at present constituted, to be dealt with without any additional resources, lt is true that a number of piecemeal arrangements have been made, such as assistance for the mealsonwheels organisations and so on. Rut in the aggregate these arrangements are quite trivial. I do not mean that the functions of these organisations are trivial but the resources which go from the Federal Government to the local authorities are quite trivia! when we have in mind what is expected of them in 1971 and in the years ahead. We all talk about pollution. We talk about delinquency. We talk about the problems of cities. We talk about access roads and all sorts of things. It is pretty difficult to assign the ultimate cost of these things in any precise way to individuals merely because they live in this municipality rather than that municipality. As I said earlier, in many respects the local governing authority has become the poor relation in the system.

The organisation to which I referred, the Committee for More Federal Finance for Local Government, recently sought an interview with the Leader of the Australian Country Party (Mr Anthony) but as he was away the Minister for Repatriation received the deputation in his absence. That deputation presented to the Minister this document from which I have quoted. The people on that Committee are very worthy people who so far have contributed funds out of their own finances to bring to the notice of the Government the kinds of problems which they feel exist and which they think there is no thought of remedying. I commend them for their zeal. But I hope that the Government in assessing the total constitutional pattern in Australia will give consideration to that Committee's representations. There is no doubt that whilst the dominance of finance is here many of the functions that constitutionally have to be performed by governments still remain as part of the province of State and local authorities and to be carried out by them.

It is the problem of better matching function to finance that has become a critical problem in the State and local sphere. I hope that the Minister Assisting the Treasurer (Mr Peacock) will draw to the attention of the Government the seriousness of this situation so that it may begin to grapple systematically with the problem.

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