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Thursday, 27 October 1904


Sir JOHN FORREST (Swan) - When speaking upon this motion last evening, I overlooked the fact that my suggestion that the Commonwealth should take over the

States debts which existed at the inauguration of the Commonwealth, only as the loans matured, was not strictly in accordance with the provisions of the Constitution. Section 105 provides -

The Parliament may take over from the States their public debts as existing at the establishment of the Commonwealth, or a proportion thereof, according to the respective numbers of their people, as shown by the latest statistics of the Commonwealth, &c.

My attention was drawn to that section by the honorable member for Bland. According to its provisions, we must either take over the whole of the States debts, or a proportion, per capita. That, however, . does not deter me from saying that whilst it is advisable to take over the States debts as they existed at the time of the establishment of the Commonwealth, no advantage is likely to be derived from interfering with the loans until they are nearing maturity. Last evening, the honorable and learned .member for Parkes asked, by way of interjection, whether it would not be possible for the Commonwealth to buy up the stock on the London market whenever the opportunity offered. I do not think that any plan of that sort would be effective, because people are usually very much alive to their own interests, and our bond-holders would see that they obtained as good value as possible for their bonds. But, in addition to that, the Commonwealth does not possess the necessary funds to permit of the adoption of that course, and, therefore,, it would necessarily be required to raise loans upon existing market conditions. I take it, therefore, that the proposal of the honorable and learned member is scarcely a practicable one.


Mr Henry Willis - How would the right honorable member do it?


Sir JOHN FORREST - By conversion. Loans would require to be raised for the purpose of paying off those maturing, and bond-holders would be given an opportunity of taking up a ' part of the new issue. That is the way in which conversions are usually carried out. An idea seems to prevail in this House, and it has been put forward in some papers presented to this House - especially in a memorandum which was submitted to the Treasurers' Conference by Sir Frederick Holder - that if the Commonwealth took over the public debts of the States, and gave the bond-holders the advantage of Commonwealth security, we should be making -a free gift to the bondholders of an increased value, which should properly belong to the Commonwealth. It has been urged that that increased value should not go to enrich those who hold our bonds. I entertain no such opinion, because any country must be benefited by its bonds standing high in the money market. The higher they stand the better. If by some stroke of good fortune to the

British Empire, bonds which are now worth from £84 to£86, or £87, were suddenly to rise to £100, would any one say that we should not rejoice? Would any one begrudge the bond-holders the increased value of their stocks? I think not We must remember that many of the bonds which are at present selling for£84, atone time cost £100. I know of some Western Australian 3 per cent, bonds, for which£100 was paid, but which are now selling at the price I have just mentioned, yet no one appears to be ready to commiserate with the holders on the loss of £16 per £100 which they have sustained.


Mr watson -They will not lose that sum unless they are compelled to sell.


Sir JOHN FORREST - Of course not; but in all these matters we have to consider the marketable value of the bonds. It is no satisfaction to a bond-holder to be told that if he will only wait he will receive £100 in respect of every £100 bond possessed by him. I take it that an increase in the value of the stock of any country is to the advantage of that country. We are not to allow our opinions to be swayed by the feeling that if we converted any portion of the loans of the States we might confer a benefit on some private individual. We could not take that point into consideration unless it were possible for us in any proper way to participate in the advantage so secured, and we may depend upon it, that if we seek to convert before the date of maturity our bond-holders will endeavour to extract from us the full value of their stocks. For this reason I do not think that there is very much hope of our gaining anything, by converting loans until tbey are nearing maturity, and I do not recommend that we should attempt to do so at the present time. The memorandum placed before the Conference of Treasurers by the Federal Treasurer, and subsequently laid on the table of this House, affords us very clear and full information as to all the loans of the States that were outstanding at the date of its preparation. Under section 105 of the Constitution, we can take over only the loans which existed at the date of Federation, and these amount to £203,978,482. Honorable members are aware that since the establishment of the Commonwealth, further loans, representing a considerable sum have been raised by the several States; but under the Constitution we cannot deal with those loans, unless they were floated for the conversion of any loan existing at the date of Federation.


Sir George Turner - All such loans are included in the figures which the right honorable member has just quoted.


Sir JOHN FORREST - Quite so, but I refer to any loans that may be raised at a future date, for the purpose of converting loans, which under the Constitution mav be taken over by us. It is only reasonable that such loans should be included in the public debts of the States to be taken over by the Commonwealth. The annual interest on that portion of the public debt of Australia, which existed at the date of the establishment of Federation, amounts to £7,290, 190. Under the Constitution, during the bookkeeping period of five years, we have to return to each State the balance between the Commonwealth expenditure in that State, and the amount of revenue produced in it through the Customs and other Federal sources, and this year it is estimated that the Treasurer will return to the whole of the States a sum of £7,138,986. It will be seen that the estimated amount to be returned this year is almost equal to the interest due on the debt which we are empowered to take over.


Sir George Turner - But we must deal with each individual State. We could not take the total amount of the surplus to pay the total interest of all the States. We should have to take the amount due to each State to pay the interest due in respect of the debt of that State.


Sir JOHN FORREST - That phase of the question requires, of course, careful consideration, and increases the difficulty. The point I wish to make is that under our powers of taxation we have sufficient security to justify us in taking over the public debts of the States. Our powers of taxation by way of Customs and Excise duties have not been exhausted. Items remain untouched which would produce a considerable amount of revenue, and which in times of stress ordifficulty would have to be drawn upon. For this reason I have not been able to understand why the Treasurer should have demanded so much' security from the States ; I do not know why he should have asked that the whole of the railway revenue of the States should pass through his hands in order that he might retain any sum required by him to meet expenditure on account of the redemption of the public debts taken over by the Commonwealth.


Sir George Turner - I modified that request very considerably at the Conference. I said that I should only need the railway revenue if there were a shortage in the Customs revenue, and the Treasurers of the States did not provide me within the proper time with the money necessary to meet demands on account of those debts.


Sir JOHN FORREST - A provision of that kind would be reasonable. I am inclined to have confidence in the Legislatures of the States. They do not show the slightest tendency to repudiation in dealing with bondholders at the present time, and I do not think they would be likely; to do so when dealing with the Commonwealth. The Constitution to which the people of the States have agreed provides that -

The States shall indemnify the Commonwealth in respect of the debts taken over, and thereafter the interest payable in respect of the debts shall be deducted and retained from the portions of the surplus revenue of the Commonwealth, payable to the several States, or if such surplus is insufficient, or if there is no surplus then the deficiency for the whole amount shall be paid by the several States.


Sir George Turner - If a shortage occurred the States. Governments would say to the Federal Treasurer, "You have been extravagant, and you ought to find some other way to pav our interest."


Sir JOHN FORREST - If we raised the necessary funds in some other way, the States would still have to pay.


Sir George Turner - But we should have to raise the money in States in which we should not want to raise it.


Sir JOHN FORREST - That, no doubt, is so, but we must have faith and confidence in the future. The great powers of taxation which have been given to the Parliament of the Commonwealth must be realized. The matter rests entirely in our own hands, and if any difficulty were experienced in obtaining the money required to carry out the obligations practicallyforced upon us by the States, we should be able to -take action.


Mr Storrer - In a matter of this kind security is better than faith.


Sir JOHN FORREST - There is such a thing as desiring to be a little too safe. A man who always seeks to be on the safe side will endeavour, as a rule, to get the better of the party with whom he is negotiating, instead of being as generous to him as he would have him be to himself. The loans which mature during the next ten years amount to about ^44,000,000, and that is not a very large proportion of the total of ^203, 978,482 with which we have to deal. I would advise that, in taking over the responsibility for these debts, we should deal only with the' loans as they mature, and that we should adopt a system of interminable bonds, with power for the Commonwealth to repay at any time, after a certain number of years have elapsed, on due notice being given. If we did that we should place ourselves in the position now occupied by some of the States. I am glad to say that Western Australia has this power at the present time. The loans of that State have a currency of forty years, and the Government have"" the right to give twelve months' notice of intention to repay at any time after the lapse of twenty years. In that way the State Government have been placed in an excellent position, because it is open to them to choose their own time to repay.


Sir George Turner - Western Australia has no interminable bonds. .


Sir JOHN FORREST - That is so. But we might get as good a price, if not a better price, by having interminable bonds.


Sir George Turner - Our London advisers say that we should not. I tried to obtain interminable bonds.


Sir JOHN FORREST - I believe that South Australia has interminable bonds.


Sir George Turner - In respect of only one .loan.


Sir JOHN FORREST - I am not prepared to be dogmatic. As the Treasurer knows, one may entertain strong opinions, but he has to consider the views of others. In a matter of this kind, the views of those who have the money to lend us must be considered, and we cannot always obtain the exact terms that we should like to secure.


Mr Henry Willis - What should we save by having interminable bonds?


Sir JOHN FORREST - We should secure the advantage of being, able to pay off a loan whenever we desired to do so. If it were not convenient for us to pay it off we should not be bound to do so.


Mr Henry Willis - I presume that when a man was lending money on such terms he would take into consideration the fact that the bonds were to be interminable.


Sir JOHN FORREST - Although the Treasurer says that the money lender objects to interminable bonds, we know they are negotiable instruments.


Mr Henry Willis - But under such a system we should have to pav more for our money.


Sir JOHN FORREST - On the contrary, I believe that we might obtain a better price -for interminable bonds. That is a matter, however, which must depend upon the advice of those who represent us in London.


Mr Mahon - The interminable bonds, of New South Wales command higher prices.


Sir George Turner - - But they are local.


Sir JOHN FORREST - My reason for addressing myself to this question is that it is one of great and most pressing importance. It will be necessary for us to take immediate action before very long. We have a duty cast upon us under the Constitution, and it is not as some persons imagine purely a matter in which the States may take action. We have the power to take over the debts of the States existing on the establishment of Federation without obtaining, their consent. The Constitution provides that " the Parliament may take over from the States their public debts." That is to say, we can take them over nolens volens. We should not. of course, -desire to do anything of the kind. It would be our wish to work in harmony with the States, but it is clear that the intention of the Constitution is that these debts should be taken over by the Commonwealth. I find from the excellent memorandum prepared on this subject by the Treasurer, that over .£3,000,000 worth of stock falls due next year, and will have to be met by the States concerned, unless we can come to an agreement for the taking over of the public debts of the States under the provisions of the Constitution. During the next five years - 1905 to 1909- a sum of £20,000.000 will fall due, including the £3,000,000 to which I have just referred. During the next five years - between 1910 and 1914, ,£24,000,000 more will fall due, while ,£51, 000.000 will fall due between 1 9 r 5 and 1 919 ; £5 1 ,000,000 between 1920 and 1924; and £60.000,000 between 1925 and 1929, and the balance at a later date. The pressure begins next year, when £3,000,000 falls due, and the pressure will continue for the next twenty-five years. I hope that the Government will be able, to take the matter in hand very soon, and that next session a proposition for taking over the whole-of the debts of the States will be laid before ,us. I anticipate the success of the scheme probably with more confidence than does the Treasurer, who, of course, has the greater responsibility. At the same time, I believe that there is no need to show any want of confidence in the States by asking them for more security than, we require, since we have almost enough at the present time, and. our latent powers are sufficient to allow us to provide the money ourselves if the States do not fulfil their obligations.


Sir George Turner - If we had the surplus revenue only, Queensland would be short by £610,000, South Australia by £439,000, and Tasmania by £28,000, whereas if we had the net revenue from Queensland that State would still be £200,000 short.


Sir JOHN FORREST - These facts make the position more- difficult, but if the surplus is insufficient, or if there is no surplus the deficiency should be made up in some other way. I am sure that a workable scheme will be found for achieving what was one of the great objects of Federation.


Sir George Turner - Has the right honorable gentleman formed an opinion as to whether, as part of the bargain, it would be wise to extend the operation of the Braddon provision ? That is the stumbling block of the Treasurers of the States.


Sir JOHN FORREST - I know that there are difficulties in the way of extending the operation of the Braddon provision, because so long as at has force, the Federal Parliament will not have the freedom of expenditure which it would otherwise have. But necessity knows no law, and therefore I am of opinion that it would be wise to extend the operation of the Braddon provision for some years. The varying conditions of the States would create serious difficulty if any per capital distribution of the surplus revenue were adopted. I am aware that the honorable member for Mernda has a plan for overcoming the difficulty. I have not examined it but I have tried my best to discover how the difficulty can be overcome, except by the present bookkeeping mode, but up to the present have- not been successful. I know of no way by which full justice can be done to the States by any mode of distribution other than that vh Ch 1 is carried out under the bookkeeping and Braddon clause provisions. I do not bind myself to the exact terms of that provision ; but unless some plan can be devised for returning to each State the revenue it raises, less the Fe- deral expenditure, great dissatisfaction must be caused, since the citizens of the States have not yet sufficient of the Federal spirit to be willing to pay money for the assistance of other States, unless for some very specific and well-defined object. The ingenuity of the Treasurer, however may discover some means whereby, while dispensing with the Braddon and bookkeeping provisions of the Constitution, full justice may be done to all the States.


Mr Mauger - We cannot have an effective, scientific protective Tariff so long as the Braddon provision is in operation.


Sir JOHN FORREST - Then perhaps the honorable member will devise some scientific way of getting rid of the difficulty. I find by the papers which have been placed before us, that the amount paid for sugar bounties this year will be £104,162, and that., we have already paid £252,000 These payments are made to encourage the production of sugar cane by white instead of by coloured labour, and to recompense the employers of white labour for the greater expense which they have to incur. Up to the present time the Queensland growers have received £138,000, and the New South Wales growers £114,000. This latte, amount may be regarded as practically a present to the growers, because very little black labour has ever been employed in New South Wales. The Sugar Bounties Act will, however, expire on the 1st January, 1907, and then there will probably be a demand for its re-enactment for a term. Prior to the imposition of the Federal Tariff, the- people of the State of Western Australia had admitted for years past both tea and sugar free of dutv, but now they are not only paying a duty upon sugar, but are contributing towards the bounties given to the growers in New South Wales and Queensland.


Sir George Turner - Western Australia would have had to raise money by some other means if a duty had not been imposed upon sugar. That State has not had too much money within the last two years.


Sir JOHN FORREST - No other Stat? in the Commonwealth raises nearly so much revenue per head of population as Western Australia does. A State which raises u revenue of £3,500,000 from a population of 240,000, cannot be said not to raise sufficient revenue. If the amount raised is not enough, the remedy should lie in reducing expenditure.


Mr Kelly - She is rich enough to build a railway - the Transcontinental Railway - herself.


Sir JOHN FORREST - The Treasurer has not told us the amount that will have to be paid in the shape of bounties in 1907 ; but if the sugar industry is developed to the extent that we are led to expect, I shall not be at all surprised if the present made to Queensland, and particularly to New South Wales, amounts to £500,000.


Sir George Turner - That will be about it - another £250,000 for the next two years.


Sir JOHN FORREST - That is a very large amount ; but I am not finding fault with it. The honorable member for Wentworth seems to think that when one makes observations of this kind he is begrudging the money, but no such idea has entered my mind. We knew what we were doing when we consented, to grant the bounties, and we shall have to keep the compact. If we wish to encourage white men to grow sugar we shall have to pay for it'; that was thoroughly understood at the time. Therefore, any remarks I am making are not by way of complaint.. What I desire to point out, however, is that the other States are required to make a very large contribution towards the sugar bounties. The State which I represent has always met with generous treatment at the hands of New South Wales, but I desire lo point out to the representatives of Queensland that Western Australia - that far-off country of which people know so little - has already paid the sugar-growers ;£x5>394» and that her contribution by 1907 will probably amount to ,£50,000.


Mr Kelly - Does the right honorable member suggest that in return for that contribution we should give Western Australia £4,000,000 ?


Sir JOHN FORREST - I suggest that those Honorable members who object to the small contributions their States would have to make towards the cost of the survey of the proposed railway from Kalgoorlie to Port Augusta should remember that a far larger amount than they will be required to pay in regard to the proposed survey has already been contributed by Western Australia in payment of the sugar bounties. Within a short time New South Wales will have received considerably more than the amount required to defray the whole cost of the survey.


Mr Henry Willis - Does she not con tribute about one-third of the total sum that has to be paid in bounties?


Sir JOHN FORREST - I am dealing only with Western Australia, which has already paid £15,394, and will, by 1907, have probably paid . £50,000.


Mr Kelly - Were not the representa tives of Western Australia solid on the subject of the sugar bounties?


Sir JOHN FORREST - What I desire to point out to honorable members is that what holds good in One case should also be regarded as having application in another, and that where one State derives benefits from another it should look generously upon any application, based upon national grounds, that may be made by that State. The honorable member for Wentworth has often referred to the Western Australian special Tariff. "I have always held that the people of Western Australia paid the duties under that Tariff, which was chiefly their concern.


Mr Kelly - That is an astonishing theory for a protectionist to hold. I thought it was the outsider who paid the duty?


Sir JOHN FORREST - The Treasury of New South Wales has benefited by the Federal Tariff to a much larger extent than has the Treasury of any other State. Owing to the operation of the Federal Tariff, it has received £5,003,289 in excess of the revenue he would have derived under the duties in operation prior to the introduction of the Federal Tariff. The people ofNew South Wales have had to contribute that revenue themselves, in the same way that the people of Western Australia have paid the duties imposed upon them by the special Tariff. I can see no point in the reiteration of the remarks which have been made with regard to the Western Australian special Tariff, apparently on the presumption that it has inflicted some injury upon the other States.


Mr Kelly - Does the right honorable member reallv say that a country pays the duties upon its own imports?


Sir JOHN FORREST - The sugar bounties do not seem to have had that stimulating effect upon the production of sugar by white labour that we all desired to see. In 1903, 24,406 tons of sugar were produced by white labour in' Queensland, whilst the production for the present year is estimated to reach 31,190 tons - an increase of only 7,284 tons. In regard to that production a bonus of £62,800 has to be paid. I do not think that that is a satisfactory state of affairs. The production of white-grown sugar was practically doubled between 1902 and 1903 ; but the increase for the current year is a comparatively small one. In New South Wales the position is still worse, because the production of sugar in 1903 was 19,236 tons, and for 1904 18,600 tons, or a decrease of 636 tons. For this production we have to pay a bonus of , £37,200.


Mr Henry Willis - That falling off is accounted for by the fact that the sugarplanters are now engaging in a more remunerative occupation.


Sir JOHN FORREST - I am dealing with the amount of money that we have to pay by way of bounties.


Mr Henry Willis - The bounties are not required.


Sir JOHN FORREST - I do not desire to say one word against the policy we adopted. I am simply studying the effects of the bounties,with a view to arrive at some explanation. Although we are paying bounties amounting to £100,000 for the encouragement of the production of sugar by white men, the net increase in the production for the current year is estimated at only 6,648 tons. I commend this matter to the attention of the Treasurer.We find that the sugar grown by black labour in Queensland last year was 65,456 tons, whereas for the present year the yield is estimated at 97,810 tons, or an increase of 32,354 tons. In New South Wales the production of sugar grown by black labour last year was 2,561 tons, and during the present year the estimate is 2,000 tons, or a decrease of 561 tons. This tends to show that there is less black labour being employed there.


Sir George Turner - There is a smaller crop altogether in New South Wales.


Sir JOHN FORREST - But the amount of black labour employed in that State is very small.


Sir George Turner - I received a letter from the secretary of some society in New South Wales, stating that, owing to the bonus being granted, the sugar growers had, at the outset, substituted white labour for black labour, and had thus been enjoying the advantage of the bonus from the beginning.


Sir JOHN FORREST - If the figuresshow anything, they demonstrate that the greater part of the sugar grown in New South Wales was by white men, and that the planters of that State have derived the greatest advantage from the bounties, because they have not been required to change their mode of operations to any great extent, and have already been paid in bonuses a sum of . £114,000.


Mr Henry Willis - They are still going out of business.


Sir JOHN FORREST - The point is that we have been paying bounties with a certain object, namely, to secure the substitution of white for black labour on the plantations.


Mr Chanter - They are not growing any less sugar than formerly in New South Wales.


Sir JOHN FORREST - They are growing less, because the quantity of sugar produced this year. was 1,200 tons less than last year.


Mr Chanter - It does not necessarily follow that there has been a reduction in the acreage.


Sir JOHN FORREST - I am speaking of the actual production. I do not know that I need "delay the Committee any longer. I hope that we shall soon dispose of the Estimates. Three Governments have had a hand in them. The Deakin Government had them about ready when they left office in April last. Then the Watson Government came into power, and the honorable member for Bland had the Estimates ready to present to honorable members about the time he left office. I am glad to see the present Treasurer back in his old position. I am sure that he did not find it necessary to make many alterations in the Estimates which he left behind him when he resigned office. There is nothing new nor startling in the Estimates. It will puzzle any honorable member - even if he studies them from beginning to end - to discover any item with which he can find much fault. They have been framed with too much care to permit of our criticising them in Committee, except with a view to elicit information, and to give the Treasurer the . benefit of any suggestions which may occur to us. I trust that the Estimates will be quickly disposed of, and - seeing that Parliament has been sitting almost continuously for three years, thereby rendering honorable members who occupy a similar position to myself almost strangers to their own homes - that we shall have an opportunity of visiting our respective States at the earliest possible moment.







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