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Wednesday, 26 October 1904

Mr WATSON (Bland) - I do not know that it is necessary to say a great deal with regard to the Budget. I was rather disappointed with the scope of the remarks of the Treasurer. So far as the Estimates themselves are concerned, he was, as is usual with him, clear, and easily understood. The Estimates bear evidence of the care that the right honorable gentleman always bestows upon any business he takes in hand, and the fact that they are largely those which I myself practically arranged a few months ago naturally detracts much from any criticism I might be disposed to level at them. There are one or two considerations, however, to which the Treasurer might have devoted some attention. For instance, as has been pointed out, the revenue from the Tariff is gradually diminishing, largely because of its protectionist incidence. We have heard a great deal during the last few days as to the desirability of some proper inquiry into the effect of the Tariff upon industry. It is true that the Customs and Treasury officials have for some time past been engaged upon an inquiry of this description - an inquiry necessarily not as full and complete as one in the course of which witnesses are summoned, and all forms are at the disposal of those engaged in the investigation. At the same time, the matter has been engaging the attention of the authorities, and I had expected something more definite from the Treasurer as to the incidence of the Tariff, and its effects upon colonial industry generally, and as to how far the diminishing tendency of the Tariff returns arising from the building up of local industries might be expected to affect our finances for some years to come. I had hoped that we should have had something like a complete expression of opinion from the right honorable gentleman. So far as the other aspects of the Budget are concerned, I do not see a greaf deal to which exception can be taken. Perhaps the most important feature of the Budget statement, one in which all honorable members will require to take some interest, is that relating to the manner in which the expenditure on new works and buildings is to be charged. Most honorable members are aware that for some years past the expenditure upon new works has been charged to the various States as transferred expenditure, and it seemed to me that that was the proper course to pursue. On the present occasion, however, the Treasurer, as he informed the House the other day, has adopted the alternative of charging all these new works and buildings as " other " expenditure, and consequently debiting the whole of the Commonwealth upon a populationbasis. In my view that course is not only not imposed by the Constitution, but will work out in an absolutely inequitable fashion. Take the case of Defence expenditure. Those States which have foi years past been alive to their duties and responsibilities in this connexion, which have built forts and have kept their equipment up to date, and have made accumulated reserves in the way of rifles and other armaments, will, under the new arrangement, find themselves seriously handicapped 'in their finances because of the remissness of other States in the past in that particular regard.

Mr McCay - Hardly that, because a great portion of that which was necessary to. equalize conditions in the States has already been done.

Mr WATSON - I beg to differ from the Minister - a great portion of that work has not already been done.

Mr McCay - A great deal of what is necessary to equalize the conditions.

Mr WATSON - No, "that is not so. Take the case of Western Australia, for instance. The Defence expenditure under the head of new works and buildings - I am not speaking of the ordinary defence expenditure-

Mr McCay - I thought the honorable member was referring to such things as equipment.

Mr WATSON - The vote under the head of " additions, new works and buildings " upon page 236 of the Estimates, in cludes such items as accoutrements, £16,160; camp equipments, , £7,365; saddle-trees, irons, and bits, , £10,173. Surely those are items of equipment.

Mr McCay - Yes ; but speaking generally, the States are on very level ground, so far as warlike stores are concerned.

Mr WATSON - I do not think that that statement can be fully borne out.

Mr McCay - I promise . the honorable member that I will inquire into the matter.

Mr WATSON - I know that a good deal has been done during the last three years to equalize the equipment of the various States, but, leaving out the items given at page 236 of the Estimates, and assuming that the money spent in that direction will be roughly on a population basis', and calculating " other " expenditure at £300,000, it will be found that nearly 25 per cent, of the expenditure on new works and buildings will take place in Western Australia, whose population percentage is just over 6 per cent. That is to say, that while their population percentage is 6, their percentage of expenditure will be roughly 25. That is not a proper state of affairs. If we were proposing to abolish the bookkeeping system altogether I could understand - even if some sacrifice were involved on the part of some of the States - the stand-point from which the Treasurer approached the position. I admit that, whilst New South Wales would have to lose a considerable amount by the adoption of the population basis of estimating the receipts arid expenditure as compared with that adopted under a book-keeping system, she would receive compensations through the removal of restrictions upon commerce which would to a large extent make up her loss. The proposal of the Treasurer, however, simply means that those States that have made some preparation for defence will suffer all the disabilities of "having to pay for the erection of forts in Western Australia, without receiving any compensation.

Mr Carpenter - We shall have to take over the defence works in New South Wales by-and-by.

Mr WATSON - The honorable member refers to the eventual faking over of the works. That is a matter which I am afraid will be deferred until the distant future.

Mr Carpenter - No matter when.

Mr WATSON - Yes, it does matter considerably when. When payment is made for the transferred properties as a whole, each of the States will have to bear its proper proportion of the cost, but the burden will have to be borne by all at the same time. But what the Treasurer proposes is that the expenditure for this year in Western Australia shall be borne by the whole Commonwealth, whilst New South Wales and other States,' which have spent money in the past, will have to wait hu ten years before the equalization of the burden is brought about by the payment for the transferred properties. Surely it is not anticipated that the full cost of the defence works will be borne by the Commonwealth. I do not anticipate that we shall be justified in paying any of the States the full cost of the various forts they have erected.

Mr McCay - The Treasurer has raised that point.

Mr WATSON - Yes, I know he has. Any equitable method of payment for the transferred properties should not involve the responsibility of the Commonwealth for the full amount expended upon forts and other rapidly depreciating assets.

Mr McCay - I believe that the Treasurer's view is that we should not pay anything more than the market value.

Mr WATSON - Of course it is very difficult to say what should be the basis of valuation for non-productive works such os forts. It is a very difficult thing to determine. The point which I am emphasizing has nothing whatever to do with the basis of the valuation that we shall eventually adopt for payment for the transferred properties. My point is that, in this regard, the Treasurer proposes to give consideration to one State at an earlier period than he proposes to extend it to the other States.

Mr Crouch - The defence of one State is the defence of all.

Mr WATSON - Surely a similar argument might be urged in regard to every Department which has been transferred to the Commonwealth. Take, for example, the position of South Australia in reference to the Post and Telegraph Department. Because of the bookkeeping system, that State is compelled to bear the whole of the loss sustained upon the transcontinental telegraph line - a loss which accrues as the result of the construction of the Pacific Cable which connects with Brisbane. The whole of the decline of revenue upon that line falls, not upon I the people of the Commonwealth, who ought to bear it, but upon the people of South Australia. That is one of the difficulties which the bookkeeping system imposes, and one which we shall not overcome until it has been abolished. In the present instance, the Treasurer proposes to place Western Australia in connexion with defence matters, upon a footing quite different from .that of the other States.

Mr Carpenter - These defence works might have been carried out in any other State.

Mr WATSON - I am quite aware of that.

Mr McCay - If Fremantle is to be used as a strategical base, its fortification is of Australian interest, and not merely of Western Australian interest.

Mr Reid - The larger the amount of money spent upon defence works by any State prior to Federation, the more will it receive for the value of those works.

Mr WATSON - Exactly. But the position to-day is that the Treasurer proposes that the Commonwealth shall bear the cost of Western Australian defences, whereas he does not propose that it shall reimburse New South Wales and Victoria for the expenditure which they have already incurred in connexion with their defences.

Mr Reid - Every pound of that expenditure will be repaid.

Mr WATSON - No doubt, in the dim and distant future, it will be repaid. But the conditions which the Treasurer proposes to lay down may continue for years. In the meantime the finances of New South Wales and the other States will be unduly and unfairly hampered by an additional contribution being made to Western Australia as compared with the sum to which she is entitled upon the basis that has been hitherto recognised.

Mr Carpenter - That is not a very Federal view to take.

Mr WATSON - A Federal spirit consists in observing just treatment to every portion of the Commonwealth. I admit that .the Commonwealth would be failing in its duty if it did not erect necessary defences for Fremantle, or for any exposed portion of the Continent. My point is that, until the Treasurer submits a scheme for the payment for transferred properties generally he should allow the expenditure . upon defence works in Western Australia, and other portions of the Commonwealth, to continue to be charged as transferred expenditure, thereby placing all the States upon the same footing. In the meantime, Western Australia would be compelled to bear the cost of her own fortifications, even though those works were undertaken at the instance of the Commonwealth, and New South Wales would continue to occupy the position which she at present occupies.

Mr McCay - No matter how this expenditure may be charged, the honorable member must recollect that the balances have to be paid month by month. When once they have been paid they cannot be recovered, and the works which are paid for now by the Commonwealth will not be included in the amount of the settlement for the transferred properties. Consequently, Western Australia would be permanently debited with an amount with which she should not be permanently debited.

Mr WATSON - That does not affect the position which I have been putting, namely, that New South Wales has practically made a loan to the Commonwealth. Assuming that New South Wales and Victorian defences are necessary for Commonwealth defence purposes, those States have really made a loan to the Commonwealth, which will ultimately require to be repaid.

Mr McCay - The amounts to which I refer will not be ultimately repaid?

Mr WATSON - Every schoolboy knows that the money will not be paid twice. The fact remains that while those States which have made preparation for their own defence will continue to grant a loan to the Commonwealth until such time as the Treasurer can submit a scheme for the payment for transferred properties-

Mr Carpenter - It is not a loan.

Mr WATSON - It is a loan in essence. Until the Treasurer submits a scheme for the payment . for transferred properties the other States will contribute towards paying for the defence of Western Australia. T admit that it will be all the same in a hundred years' time. Some day the Commonwealth must pay for the defences in New South Wales. I object, however, to what amounts to a partial treatment of this question. T protest against any State having its expenses borneby the revenue of the Commonwealth, whilst the other States are compelled to do without the money which is represented by the same class of expenditure.

Mr Carpenter - The Commonwealth derives the benefit accruing from the construction of the works.

Mr WATSON - Yes ; but if Western Australia were debited with the expenditure which is to be incurred this year in that State, she would also, have the benefit of the works, and would occupy no worse a position than New South Wales or Victoria, because the Commonwealth would owe her the amount of that expenditure. I do not wish to do any injustice to Western Australia. That State has a right to equitable treatment, but to no more. With all deference to the Treasurer, I cannot see the equity of spending between 20 and 25 per cent of our expenditure upon works and buildings - excluding the new vote for munitions of war - in Western Australia, which possesses a population of only 6 per cent, of the Commonwealth.

Sir George Turner - I should like, to act otherwise' if the Constitution permitted me to do so.

Mr WATSON - The Treasurer practically admits the equity of my case.

Sir George Turner - I did so last year by adopting the method which the honorable member advocates.

Mr WATSON - I mentioned at an earlier stage that I did not agree with the departure from the method which was followed last year. Now I come to deal" with the constitutional aspect of this matter. I understand that the Treasurer bases his action upon his interpretation of the Constitution. Speaking with that deference and hesitation which become a layman, I cannot see where any justification for the proposed departure arises under the provisions of the Constitution. Section 93 of the Constitution says -

During the first five years after the imposition of uniform duties of Customs, and thereafter until the Parliament otherwise provides -

1.   The duties of Customs chargeable on goods imported into a State, and afterwards passing into another State for consumption, and the duties of Excise paid on goods produced or manufactured in a State and afterwards passing into another State for consumption, shall be taken to have been collected, not in the former, but in the latter State.

2.   Subject to the last sub-section, the Commonwealth shall credit revenue, debit expenditure, and pay balances to the several States as prescribed for the period preceding the imposition of uniform duties of Customs.

The method prescribed by that section is to be found in section 89, which says -

Until the imposition of uniform duties of Customs -

1.   The Commonwealth shall credit to each State the revenues collected therein by the Commonwealth.

2.   The Commonwealth shall debit to each State-

(a)   The expenditure therein of the Commonwealth incurred solely for the maintenance or continuance, as at the time of transfer, of any Department transferred from the State to the Commonwealth.

(b)   The proportion of the State, according to the number of its people, in the other expenditure of the Commonwealth.

Mr Higgins - The question to be solved is, " Is the building of a new fort the maintenance of a Department ? "

Mr WATSON - Thus we arrive at a very peculiar position. If it is said that the building of new forts does not give effect to the provision of the Constitution in regard to the " maintenance or continuance" of a Department, what are we to do in reference to the Postal Department? Upon every occasion that a new officer is appointed, or a new switchboard is erected, or an additional section of a switchboard, or a telegraph line is constructed, are we to say that the additional expenditure thus incurred must be charged as "other" expenditure, and therefore upon a population basis ?

Sir John Quick - That is not new expenditure.

Mr WATSON - What a contention to put forward ! Take the case of the telegraph line from Port Augusta to Tarcoola. Does not that represent new expenditure?

Sir John Quick - It represents developmental expenditure.

Mr WATSON - Then what is the expenditure upon the erection of new forts but developmental expenditure ? I utterly fail to follow the subtleties of the legal mind which distinguishes' between these two propositions. If we adopt a narrow reading of the Constitution, the Commonwealth should have drawn a line right across the books of the Department, and have declared - " This is the point which the various Departments reached in1901, and beyond it any expenditure should be debited as new expenditure upon a per capita basis." That is the only inference which can be drawn from the narrow interpretation which is sometimes placed upon that portion of the Constitution. If the expenditure upon the erection of the Tarcoola telegraph line, or of a new switchboard or a telephone exchange, is properly chargeable as transferred expenditure, then the emplacement of a new gun or a dozen guns at Fremantle is equally " for the continuance of " the Defence Department.

Mr Isaacs - Some weight must be given to the words " at the time of transfer."

Mr WATSON - If so, that argument applies all round. It cannot be expanded here, and contracted there, to suit the convenience of the Treasurer, or of honorable members of this House. The Constitution is certainly rigid. It lays down distinct terms. I do not suggest for a moment that it is wise to pay too much regard to a literal or narrow interpretation of the Constitution. In my judgment, so long as the equities are conserved and the Constitution will permit, we should carry out the scheme which will meet the circumstancesof the people. I contend that, until the bookkeeping period has expired - and there is nobody who more earnestly desires the abolition of that system than I do - the equities can be best conserved by continuing the development of the transferred Departments upon the basis of transferred expenditure.

Sir George Turner - For those which we took over at the establishment of the Federation we shall have to pay at some time or other on a population basis.

Mr WATSON - The difference, so far as the right honorable gentleman's new proposal affects New South Wales, is this: That for the forts on which they expended money a few years ago, the Commonwealth now say that there is a certain sum of money owing. That means that there is a loan to the Commonwealth.

Sir George Turner - And that money has to be paid by the Commonwealth on a population basis.

Mr WATSON - In the meantime, it is a loan by the people of New South Wales to the Commonwealth. The objection T have to the right honorable gentleman's proposal is that, whilst that loan is still owing to New South Wales, it is now proposed that the Government of that State shall contribute an undue proportion to the expenditure in Western Australia, in respect of an exactly similar class of property.

Sir George Turner - It will have to do so sooner or later.

Mr WATSON - That is not the point. In the meantime the finances of New South Wales may be crippled by the payment to

Western Australia - prematurely, as compared with the other States - of a sum of money out of proportion to her population. From the constitutional stand-point, I cannot see how it is possible that any new expenditure beyond that which was involved when the Commonwealth took over the transferred Departments can be entered upon if there be an objection to debiting military expenditure in a similar way- We cannot draw any line other than a hard and fast one - if a line is to be drawn at all - as to the expenditure at the time that the Commonwealth assumed control. Let us see what is the meaning of the words " maintenance or continuance as at the time of transfer."

Mr JOSEPH COOK (PARRAMATTA, NEW SOUTH WALES) - The point made by the honorable member seems to be an argument for a speedy payment being made in respect of transferred properties.

Mr.- WATSON.-Quite so.

Sir George Turner - Supposing that I arranged the matter next week, would I not in future have to charge everything on a population basis?

Mr WATSON - Of course. But if the matter were fixed up next week, the objection that I am now raising in equity would no longer exist. There is no proposal accompanying that to which I object to arrange for the payments for transferred properties. I do not say that there is any urgency in respect of making payment for transferred properties ; but it is most unfair, practically, speaking, that we should pay one State and not another. I refuse to believe that the Constitution renders any such course imperative. The words " maintenance or continuance," to my mind undoubtedly mean the maintenance of a Department in an efficient condition. " Continuance " means something more than the keeping of a Department exactly in the position that it occupied at the time of transfer. Surely it could not be held that if we so maintained a Department that was uptodate when we took it over as to allow it to fall behind the times in the course of a few years, we should be keeping up its efficiency.

Mr JOSEPH COOK (PARRAMATTA, NEW SOUTH WALES) - What is the standard of judgment?

Mr WATSON - I admit that the personal equation enters very largely into the matter; but I am endeavouring to show that we are not bound by the Constitution to keep every Department exactly in the position that it occupied when we took it over. It certainly appears to me that if the Treasurer be right in the contention that the Constitution imposes this duty upon him, he must be equally constrained, under the Constitution, to charge as new expenditure all those items which are in excess of the amount actually expended in the various Departments in 1901. I hold that it would be most unfair to adopt this new method of adjusting the expenditure on works and buildings without at the same time providing for payment for transferred properties. There is only one other matter to which I desire to refer, and that is the military expenditure. The Treasurer has adopted the proposal, to which I agreed when I held office, that this year there should be a net expenditure of £130,000; and that we should commit ourselves to a total expenditure of about £180,000, in respect of military armament and equipment. A't the same time, to me there seems to be a large increase in the vote for training.

Sir George Turner - They did not commence recruiting until the 1st January last year, so that there were only six months to provide for.

Mr WATSON - But an understanding was arrived at in this House with regard to the expenditure on training - an under derstanding to which the present Prime Minister, the Treasurer, and myself, on behalf of the several parties in the House, were all committed. I refer to the arrangement that the expenditure on training generally should be kept within £700,000 a year, independent of course of special votes for arms and equipment. That sum was to include the cost of camps, and ordinary ammunition ; but was not to include expenditure in respect of special armament and equipment, such as is covered by the warlike stores vote. I have not been able to analyze the amounts, but I understand from the Treasurer's Budget- statement, which I did not have an opportunity to read until a couple of days ago, that there has been an increase in this vote.

Sir George Turner - When the understanding to which the honorable member refers was arrived at, we had to pay a naval subsidy of £106,000, and there was a proposed expenditure of £592,000. That brought the total just below the limit fixed. These figures, however, did not include works and buildings, repairs, and matters of that kind.

Mr WATSON - I thought that they included repairs. They were certainly held to include all expenses other than those in respect of warlike stores,, such as armament and equipment.

Sir George Turner - The Defence Estimates did not include-

Mr WATSON - On that occasion they did include repairs.

Sir George Turner - The Estimates did not include repairs. They were provided for in a separate branch, and the House directed that, irrespective of repairs, the Defence Estimates should be reduced to £700,000.

Mr WATSON - That was not my view of the understanding arrived at.

Sir George Turner - If the honorable . member inquires into the matter he will find that what I say is correct.

Mr WATSON -I am not speaking of any expenditure due to the increased naval subsidy. That is another matter. The total sum to be expended on military and naval training beyond the sums necessarv for warlike stores was not to exceed £700.000. That was the understanding, as I followed it. and it seems to me that the limit fixed was a very reasonable one. If any additional sum could be spared bv the Treasurer, my contention was that he should devote it to the purchase of warlike stores.

Sir George Turner - I did so whilst I held office. The Department ought to have used more in that way, but they did not.

Mr WATSON - If the Treasurer could see his way clear to expend a greater sum than was then fixed upon, I should prefer to see him purchase more warlike stores rather than lexpend at on training men, when we have not the equipment which we should desire to place at their service in the event of trouble occurring.

Sir John Forrest - I think that the honorable member's view of the position is correct.

Sir George Turner - The only question is whether the Estimates, as reduced to £700,000, were to include repairs.

Mr WATSON - I think they were to include repairs. As the Treasurer is, no doubt, aware, the military authorities are so prone to make large demand's in respect of repairs, buildings, and matters of that description, that it is necessary to keep a very close watch in that direction, if the expenditure of the Department is to be kept within reasonable limits.

Sir John Forrest - I do not think that the £700,000 was to include the cost of new works and buildings.

Mr WATSON - It was to cover repairs and works of that kind carried out by. the Department of Home Affairs. The idea was that we should spend £700,000 on the Defence Department, and under the new Naval Agreement that expenditure was brought up to £800,000. We were to expend £700,000 on military training and maintenance, as well as any further sum that could be spared for the purchase of arms and equipment. That was the understanding arrived at, and I think that it should be observed. I anv willing to vote any sum that the Treasurer may be able to spare towards the purchase of proper equipment. We shall want to expend more than £180,000, if the men are to be properly equipped.

Sir George Turner - Last year's expenditure was £742,000, including £196,000 in respect of the Naval Subsidy, which was £90,000 in excess of the sum paid under the terms of the old Naval Agreement.

Mr WATSON - I admit that last year the Treasurer kept well below the amount fixed.

Sir George Turner - This year the proposed expenditure is £774,000. with £148,000 in respect of the Naval Subsidy. That includes £30,000 for repairs - the only question between us.

Mr WATSON - I should prefer to see the sum of £30,000 mentioned by the Treasurer, devoted to the purchase of additional warlike stores, rather than to the training of troops. I do not see anything in the rest of the Estimates to which exception may be taken.

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