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Thursday, 2 August 1906


Senator O'KEEFE (Tasmania) . - I move -

1.   That, in the opinion of this Senate, the true Federal spirit will not be created among the people of Australia until the present unfederal system of dealing with Commonwealth revenue and expenditure is abolished.

2.   In pursuance of such purpose, all revenue and all expenditure should be shared by all the peopleof Australia on the basis of populationand under section 93 of the Constitutionthe bookkeeping system should terminate at theend of five years from the passing of the UniformTariff.

I shall be as brief as possible in submittingthis motion, and shall not quote any morefigures than are absolutely necessary for the purpose of proving my case.I admit at once that it may be charged against methat this motion, if carried, would act inequitably to some States. But while I reply that there is only one State that has any serious cause for objection to the motion, and while I admit that my proposal does appear to be inequitable to that State, the view which I take is that it is only by means of the bookkeeping system that perfect equity in the distribution of surplus revenue can be maintained. But does the present bookkeeping system achieve for us any real and true Federation? I say that it assuredly does not;. seeing that we have not any bookkeeping system for dealing with the expenditure. The' Treasurer, in delivering his Budget in another place 011 Tuesday, mentioned a number of. items of expenditure. Amongst them is a proposal to .spend £37,000 in the construction of a telephone system between Melbourne and Sydney. No one, I am sure, will contend for a moment that the State which I represent will derive any benefit from that expenditure. I merely use this item as an illustration - I think a forcible one - to show that our present system of distributing surplus revenue under the bookkeeping system, and distributing new expenditure according to the population of the different States, is inconsistent, and utterly opposed to the true spirit of Federation. While those two systems are running; side by side, it is impossible that there can be a true Federal spirit created amongst the people of Australia, and especially in those States which seem to suffer most. We know that the consuming . power per head depends largely on the proportion of adult males in each State. The enormous discrepancy between the amount contributed per head to the Customs and Excise revenue in Western Australia, and the amount contributed per head in the other States, has been almost entirely due to the cause 1 have mentioned. We must remember, however, that there are large areas of unexplored country in South Australia, Queensland, and the far back portions of New South Wales, which may at any time attract a rush of population for the purpose of developing mining or other newlydiscovered resources. It seems possible, and, in fact, probable, that for many years we shall be subject to changing conditions, with the accompanying, result of an excess of males over females and children in particular States. To-day the excess is in Western Australia,, but next year it may be in some other State, possibly Queensland, South Australia, or New South Wales, or even, to some extent, in the more thickly populated State of Victoria, or the smaller State of Tasmania. These conditions could not, of course, operate to so large an extent in the latter places, but we may find them present in the larger States as time goes on. The present dissatisfaction, which exists in Tasmania - I leave honorable senators to speak for other States - was foreseen bv the keenest financial minds at the Federal Con vention ; and in support of my contention I shall read some brief extracts from the report pf the Convention "debates. In my remarks under this head, I am subject to correction, because there are in this chamber several senators who were members of the Convention. Senator Symon, Senator Dobson, Senator Fraser, Senator Walker, and also the President, were members of the Convention, and thev will recollect what took place. Sir George Turner fought strenuously from beginning to end for the per capita system of distributing the surplus revenue, and Sir Frederick Holder, who was also regarded' as a financial expert, favoured that system, only accepting the bookkeeping proposal for five years as a. compromise. Then I think I am right in saying that Senator Symon favoured the system.


Senator Clemons - He will have to favour it now, at any rate.


Senator O'KEEFE - Senator Symon,I think, opposed the provision for a bookkeeping system for so long a period as five years, and contended that it ' should be limited to three years.


Senator Clemons - He was never more right than then,


Senator O'KEEFE - That is so..


Senator Walker - The average contribution of the whole of the States was exactly the contribution of South Australia, so that! it would have made no difference to that State if the per capita system had been adopted.


Senator O'KEEFE - Sir JohnDowner , regarded the book-keeping system as objectionable, and Mr. Deakin, the present Prime Minister, in that debate said that the financial position of the States should be made secure, and he was in favour of the per capita system after five years. A clause was first drafted providing that after five years there should be a per capita system of distribution, and Sir Edmund Barton submitted :in amendment providing

That after the first word of clause 93 the following words-" Five years from the imposition of uniform duties of Customs, all surplus revenue over the expenditure of the Commonwealth, shall be distributed month by month amongst the several States on the bas'is which the Parliament deems fair," be inserted.

Tn the debate that followed, Sir George Turner spoke as powerfully as he could in favour of the per 'capita system, and Sir William Lyne said that he would like to see that system adopted as soon as Federation was an accomplished fact. Senator Eraser pointed out that the federation of Canada was begun with a per capita system ; and it is interesting to quote the following remarks of this gentleman on that occasion : -

The sooner the distribution is madeper capita the better, and we have only departed from that principle because of the serious difficulties that seem to confront us. In Canada the per capita system of distribution was adopted at the very start, and it has not caused any dissatisfaction. If this matter is left to the Federal Parliament, that may be an inducement to some of the States to be extravagant ; they, may waste their money, get into financial difficulties, and appeal to the Commonwealth Parliament to rescue them. If the per capita system of distribution is adopted, each State will know what its position is, and the sooner that is done, in my opinion, the better.

Sir WilliamLyne, in the course of the debate, said: -

I agree with what has fallen from the Right Honorable the Treasurer of Victoria. I should like to see the per capita distribution applied as soon as possible.

SirJohn Forrest. You can't get it.

Mr.LYNE. - I would like it to take place the moment Federation is accomplished. I have heard some say that it could not take place until twelve 'months, but I hope the Convention will not agree to extending the period to ten years. Five years is a long time - a great deal longer time than a State should be called on to be bound, and go cap in hand to the Federal Treasurer.

Then Senator Walker spoke in approval of the application of a sliding scale to the distribution of the revenue after the first five years ; and Sir George Turner, when he saw that he could not get his way, moved that the difference between the revenue collected in each State under their Tariff before Federation, and the amount they would receive under the Federal Tariff, should be made up to the State concerned. This was to guarantee the State Treasurers against any loss. Mr. Deakin then suggested a special Tariff for Western Australia for the first five years, and1 Mr. Isaacs, the present Attorney-General, contributed to the debate the following: -

Then we come- to the proposal of Mr. Deakin. But before we consider that, or any proposal, I think that all we ought to do - the position is difficult enough - is to see that each State does obtain some guarantee on the face of the Constitution that it will not suffer any diminution of its revenue from what it received immediately "before the imposition of the Customs duties.

Mr. Isaacsmoved accordingly. I quote these extracts to show that the members of the Convention foresaw the great disar rangement of the finances which must ensue in some of the States, owing to the operation of Inter-State free-trade. That disarrangement has been greater in two of the States - especially in Tasmania - than in the other States ; and it is that fact which prompts me to submit this motion. I invite honorable senators, who arelikely to oppose the proposal I now make, to note the amounts collected in Tasmania from Excise and 'Customs in the three years preceding Federation. In 1898 the amount collected from this source in Tasmania was ?429,700; in 1899 it was ?440,660; and in 1900 it was , ?492,459. Now observe the difference since Federation - the great loss tothe Tasmanian Treasurer. I speak of this as a loss to the Tasmanian Treasurer as distinct from a loss to the people. In 1901-2 the amount collected from Customs and Excise in Tasmania was ?315,540, though I think the Federal Tariff did not apply to the whole of that financial year; in 1902-3 the amount was ?301,978; in 1903-4 it was ?263,191; in 1904-5 it was ?259,099 ; and in 1905-6 the estimated amount was . ?247,162, but I believe, though I am not sure, that there was a little increase on the estimate.


Senator Clemons - The honorable senator might summarize the total loss, which is something under ?1,000,000.


Senator O'KEEFE - I shall do so later. That there is ample justification for a motion of this kind by a Tasmanian senator is shown in the fact that the revenue which has flowed into the Tasmanian Treasury for the needs of that State since Federation, has gradually dwindled from an averageof ?450,000, prior to Federation, to the" amounts I have just mentioned. It must be patent to any one that such a. serious disarrangement of the finances, particularly in a small State, the total revenue ofwhich was, before Federation, only about ?1,000,000, all told, must cause great trouble to the Government in finding the money necessary to carry on the work of the State. In this connexion it is interesting to look at a table submittedby Sir John Forrest, when making his Budget speech on Tuesday last, showing the gain or. loss to each State in Customs) and Excise revenue from 1 st July, 1901, to the 30th June, 1907, on the basis of the revenue received in 1900 in each State. I may say that I do not regard that as a fair basis, because, in consequence of merchants loading up in view of the Federal Tariff, the revenue received in the former year was rather greater than it otherwise would have been. New South Wales, under the Federal Tariff, has made a total gain of £7,475,188.


Senator Pulsford - Do not call that a gain. We were taxed all those millions extra.


Senator O'KEEFE - I am not putting the case from that point of view. I have been careful to say that I do not call any loss a people's loss, but simply a Treasurer's loss.


Senator Pulsford - I understand.


Senator O'KEEFE - I am arguing from the point of view of the States Treasurers, who have been put to great trouble by the disarrangement of their finances. The Treasurer of New South Wales has certainly had reason to. bless Federation. If the figures I have read are correct, the Treasurer of that State has had quite a rosy time in the matter of finances.


Senator Millen - The honorable senator is assuming that during the five years there would have been no natural increase in the revenue of New South Wales, 'had the conditions remained as they were prior to Federation.


Senator O'KEEFE - I have to assume that for the purposes of my_ argument.


Senator Millen - I am seeking information, and not contraverting the statement of the honorable senator.


Senator O'KEEFE - I am simply showing the extra amount received by certain States over and above what would,1 under other circumstances, have been received, taking the last year prior to Federation as a basis. . I should like to remind honorable senators from Western Australia that the figures. I quote for that State have no- reference whatever to the Western Australian special Tariff. That State has gained under the ordinary Tariff to the extent of £468,122.


Senator Pearce - At the expense of the Western Australian taxpayers.


Senator O'KEEFE - I am not . saying that this has been a gain to the Western Australian taxpayers. I have already said that I am putting the matter from the point of view of the States- Treasurers: If it will satisfy Senator Pearce, I am prepared to admit that one of the reasons for which I advocated Federation in Tasmania was that I thought that in that State too much money was being raised from Customs taxation prior to Federation, and I thought that the amount raised in that way would be less after Federation. I am dealing with this subject from the point of view of the Tasmanian Treasurer, whose financial arrangements have been so completely upset. The Western Australian Treasurer, if I must put it in thai way, has been a gainer under the system adopted to the extent of £468,122 under the operation of the ordinary Tariff. Victoria has gained £19,431. Queensland has lost £2.608,208, and Tasmania' has lost £908,112.


Senator McGregor - Why has the honorable senator left out South Australia?'


Senator O'KEEFE - I was not aware that I had done so. South Australia has gained to the extent of £59,337. I wish to make it clear that these figures include the Treasurer's estimate of revenue for the current financial year ending 30th. June, 1907. These are the facts undertime existing system, and it will be interesting to honorable senators to know what the position would have been under the per capita system of distribution of revenue. I shall give the figures for Tasmania for 1901-2, although, as that was the yearin which there was so complete a disorganization of business, it can hardly be accepted as a fair basis. If the surplus: revenue had been distributed on the percapita basis, Tasmania would have gained' in. that year £11,040. In 1902-3, she would have received an additional sum of £62,161; in 1903-4, £65,332; in 1904-5,£57,450; and for 1905-6, according to the estimate of the Treasurer, the amount which she would have received' in addition would have been £52,786. Though Tasmania has suffered greatlyin loss of revenue since Federation, Queensland has suffered in a much greater degree,, and the Treasurer of that State must havebeen inconvenienced in his financial arrangements, even to a greater extent thanthe Treasurer of Tasmania.


Senator Pearce - Did the honorablesenator quote what the loss to Western Australia . would be under the per capita System ?


Senator O'KEEFE - I did not. I amquite satisfied that Senator Pearce will dothat, and it is hardly worth while to give the figures twice over. I am prepared togrant that Western Australia would haveshown a loss if the distribution had. beenper capita.


Senator de Largie - Has the honorable senator figures which show how much Tasmania has gained from the totalizator?


Senator O'KEEFE - I ask the honorable senator not to put such totally irrelevant questions. I do not object to interjections, but a question of that sort is irrelevant. It is quite probable thai Tasmania has not gained anything like . as much from the totalizator as has Western Australia. It is notorious that the totalizator in Western Australia brings in more revenue than in any other State of the Federation. I have stated the amount by which Tasmania would have gained in revenue under the per capita system of distribution.


Senator Dobson - The honorable senator has given the figures only for Tasmania.


Senator O'KEEFE - That is so, and it is because I desire to be brief. I might supply the figures for the whole of the States, but I take it for granted that honorable senators may be trusted to quote the figures which affect their own State.


Senator Millen - It would make the honorable senator's statement more complete if he gave the figures for all the States.


Senator O'KEEFE - While on this part of my subject, I may say that I have made a calculation to show the difference between the figures of the two systems of distributing the revenue. It should please Western Australian senators to know that in making this calculation, I have excluded that State, and have assumed, if that were constitutional, that the per capita system should be applied only to the other States, in order to meet the special circumstances of Western Australia.


Senator Mulcahy - That is only what has been done during the last four years.


Senator de Largie - Is this an afterthought suggested by Senator Pulsford?


Senator O'KEEFE - No, it isnot Under a per capita system of distribution, excluding Western Australia, Tasmania in 1901- 2 would have lost £22,000. In 1902- 3 she would have gained to the extent of£37,804; in 1903-4, £40,788; in 1904-5,£35,309: and in 1905-6, according to the Treasurer's estimate, the gain would be £37,359.


Senator Playford - Those figures differ from mine.


Senator O'KEEFE - I have been asked by honorable senators to quote the figures for the other States, and I think it will be sufficient to quote those for Queensland. Under the actual distribution which has taken place, Queensland received in 1901-2 £904,775. If the surplus revenue had been distributed on the basis of population, she would have received , £947,284, or an increase of £42,509. In 1902-3 Queensland would have gained by the per capita system of distribution to the extent of ; £142,974; in1903-4,£132,439; in 1904-5, £163,828; and, according to the Treasurer's estimate for the current year, she would gain to the extent of £139,000. Honorable senators representing Queensland might, in the circumstances, be anxious to see some system adopted for the distribution of the revenue other than that which is at present in force.


Senator de Largie - Queensland has received a fair share as it is between bounties and other concessions.


Senator O'KEEFE - Although, on the figures, Queensland as compared with Tasmania might appear to be in very much the worse position, there can be no doubt that that State has received a great deal of consideration in the matter of the bounties on sugar grown by white labour, which I ardently supported, and I am inclined to think that if there be a Cinderella in the Federation, it is Tasmania. In order that the position may be thoroughly understood, it is absolutely necessary, in dealing with this matter, to place side by side with the revenue figures the figures showing the actual expenditure and the expenditure debited to each of the States. From these figures it will be seen that the finances of Tasmania are affected in both ways. There has been, as I have shown, a very serious disarrangement of the finances of that State as the result of decreased revenue every year since Federation. But Tasmania has also been debited with expenditure very largely in excess of the amount which has been actually expended in the State.


Senator Clemons - She has been paying for luxuries for New South Wales.


Senator O'KEEFE - I direct the attention of honorable senators to the figures connected with the expenditure. Tasmania in 1901-2 was debited with a total expenditure amounting to £158,982, whilst there was actually expended in that year in the State, only £149,654, or some £10,000, inround figures, less' than the expenditure with which the State was debited. In 1902-3 Tasmania was debited with £154,521, whilst the amount actually expended was .£140,604. In 1903-4, thefigures debited were £^182,654, actually expended, £168,098 ; in 1904-5, debited, £[185,712, actually expended, ^165,154; and for 1905-6, the actual figures are not yet available. Honorable senators will see that for every year during the past five years, Tasmania has been debited with sums varying from ,£10,000 to £20,000 in excess of the money actually expended in the State. I am therefore justified in saying that in a financial sense, the State which I represent has had to suffer in both ways. As I said at the outset, a number of new items of expenditure are included in the Treasurer's Budget speech, and I am satisfied that under the present system of allocating new expenditure according to population, Tasmania is likely to be a greater sufferer in the ensuing, year than she was in the past. I may refer to one item of £37,000, which it is proposed shall be spent on the telephone line connecting Melbourne and Sydney. If this is a necessaryservice, it would be unfederal of me to object to it. But I can surely claim some sympathy for Tasmania in this respect. So long as these heavy items of new expenditure are to be distributed on the population basis, it seems distinctly unfederal that the present bookkeeping method' should be continued, so far as revenue is concerned.


Senator Dobson - Has the honorable senator got any figures showing whether Western Australia has made a gain or a loss with regard to expenditure?


Senator O'KEEFE - I have the figures; but I do not know why the honorable senator wishes me to pick out Western Australia more than any other State.


Senator Dobson - Because I recognise that she must have special terms if we are going to do away with the book-keeping system.


Senator O'KEEFE - In 1901-2 the amount debited to Western Australia was £339,589, and the amount expended was £328,324. In 1902-3 the amount debited to the State was £365,000 and the amount expended was £348,000. In 1903-4 the amount debited to the State was ^429,661, and the amount expended was .£405, 000. In 1904-5 the amount debited to the State was -£400.464, and the amount expended was £397,728. I am not Quite sure, but I think that the figures are exclusive of the expenditure on defence.


Senator Dobson - Then the figures are of no use for the purpose of making a comparison.


Senator Keating - They may be exclusive of the transferred portion of the defence expenditure.


Senator Dobson - That would bring things about square,- but is it exclusive of defence expenditure ?


Senator O'KEEFE - According to the footnote it is not. I have not claimed that more money was expended in Western Australia than was debited to her. ' What I have claimed is that more money was debited to Tasmania than was expended therein.


Senator Henderson - And the honorable senator tried to show that she was faring worse than other States.


Senator O'KEEFE - Yes, because side by side with that system of distributing the expenditure is the book-keeping system of distributing the revenue. Cannot the honorable senator see the point? I am quite willing that " new " expenditure should be distributed oni a population basis in Tasmania if he would agree that the Federal revenue, should be distributed on that basis. Probably I have used sufficient figures to weary honorable senators, and I shall not weary them any longer in that way. I admit that Western Australia would seem to be treated unfairly if, after October next, we were to adopt straight away the per capita system of distributing the revenue. Even although the discrepancy between the consuming power of the population of Western Australia and that of other States is very great, it is gradually and rapidly diminishing. The last Budget shows that in that State the contribution per head to the Customs and Excise revenue has decreased from £5 16s. 4d. in 1901-2 to ,£3 12s. 5d. - that is estimated - in the current vear, being a decrease of £2 3s. nd. To show how nearly .that' approximates to the consuming power of the population of other States. I may mention that in the current year the Treasurer estimates that the contribution per head to the Customs and Excise revenue will be -£2 4s. yd. in New South Wales, -C2 is. 8d. in Victoria. .£2 3s. in Queensland. £t 16s. in South Australia. £3 12s. t;d in Western Australia, and £1 1.6s. id. in Tasmania. While I admit that as regards Western Australia the discrepancy in the contribution per head is very large, and that necessarily the adoption ' of the per capita system of distributing the revenue would work a seeming injustice to that State, I submit that after October next there should be a financial re-adjustment in the interests of other States, particularly Tasmania. Now, how are we going to effect that re-adjustment without doing a seeming injustice to Western Australia? A suggestion has occurred to me. Certainly it originated with Senator Walker, because in poring over the debates on the financial clause of the Constitution in the Convention, I found that, after all- the keenest financial minds had discussed the question from every possible point of view, and had agreed to the present system, Senator Walker was still of his original opinion. Here, perhaps, I ought tq do justice to Senator Dobson bysaying that one cf the most statesmanlike speeches on this subject made in the Convention was made by him. Although I do not often agree with him in politics, still, I think that I ought to pay him that tribute.


Senator Sir Josiah Symon - When the honorable senator does agree his unanimity is wonderful.


Senator O'KEEFE - Yes. Senator Dobson was just as far-sighted as were any of the financial men who sat in the Convention. If the other representatives of Tasmania had backed him up as they should have done, and' not remained dumb dogs, as a good many of them did, I think-


Senator Mulcahy - We should net have had a Federation.


Senator O'KEEFE - I think that we should. At any rate, I believe that Tasmania might have got a fairer deal, and that special arrangements might have been made in the interests of her finances just as was done in the case of Western Australia. Now, how are we going, without doing an injustice to Western Australia, to readjust this financial system, which admittedly is causing so much dissatisfaction in the States, and which is a constant bar to the growth of the Federal spirit, which we all wish to see growing.


Senator Findley - The Tasmanians knew the conditions under which they entered the Federation.


Senator O'KEEFE - If there is one State in the group which has benefited by the Federation, it is Victoria.


Senator Mulcahy - And she has benefited particularly at the expense of Tasmania through pursuing a wise policy.


Senator O'KEEFE - I am not jealous that Victoria has benefited in that way. It reflects credit upon her statesmen that before the consummation of the Union they had adopted a policy which afterwards enabled their manufacturers to swamp other States, and probably to knock out a few small manufacturers in Tasmania. Can we readjust the financial system without doing an injustice to Western Australia, and without, at the same time, putting her Government to a great deal of inconvenience such as other States have been put to? One way out of the difficulty has occurred to me, and I hope that it will be discussed by honorable senators from their particular point of view. Perhaps better suggestions may be offered for the solution of the difficulty. When the time arrives to take a vote I can say whether I shall submit my proposal or not. If we take the difference between the amount which Western Australia would1 have received under the per capita system during the last financial year, and the amount which she did receive under the present system, of" course excluding her receipts under her special Tariff, we shall find that it amounts to £400,000. Would it not be fair to take that amount as a basis, and to say that the per capita system of distribution should come into force in October next, and that there should be made to that State a special vote for a period of five years, but decreasing bv twenty per cent, in each year. In the first year, she would get one-fifth less than £400,000, that is £320,000, and in each following, year she would get £80,000 less than in the previous year until the vote disappeared.


Senator Henderson - Why not put in a provision that Tasmania shall get a special donation from Western Australia?


Senator O'KEEFE - I am not asking for a special donation for Tasmania. If the representatives of Western Australia will only remember how the discrepancy in consuming power has been disappearing, they may come to the conclusion that it will continue to disappear at the rate of about twenty per cent, in each year during the next five years. Possibly, if it has disappeared by the end of that term, Western Australia will have nothing to complain about. What we do. contend is that we should end the present unfortunate system of dividing the revenue in one manner and the expen- diture in another. If any method can be devised or any suggestion thrown out during the debate which would be acceptable to the majority of honorable senators from other States, and would not work injustice to Western Australia, the discussion will not have been in vain. I ask honorable senators to remember that the State which I represent has been struck at both ends. Her Treasurer and her Governments have, for the last five years, been considerably inconvenienced - perhaps more inconvenienced than the Government of any other State except Queensland. We shall never have a real and true Federation until a true system of dealing with finance is adopted. I am a Federalist, and always have been. I am as sincere a Federalist to-day as ever I was. But I recognise that, until the present system is altered, it will be impossible to create a better Federal feeling in the minds of the Tasmanian electorsthat is there to-day. Wherever a Federal member goes on to the platform, in any portion of Tasmania - even in the remotest parts of the State, where one might think that the people would not take much interest in politics, and especially in financial questions - he invariably meets with an expression of the feeling that Tasmania is not receiving fair treatment. I always reply to such criticism : " It is simply constitutional ; it cannot be altered, and you cannot, strictly speaking, call it unfair treatment." Then the argument used is, " The system should be altered in fairness to this State." It is impossible to make any elector in Tasmania see the fairness of a financial system which adopts two methods of distribution for revenue and expenditure. I hope that those honorable senators who address themselves to the motion will do so in the same spirit as I have endeavoured to maintain. I trust that those who think their States would be disadvantaged or unfairly treated if my motion were carried, even with the suggestion which I have thrown out, will try to look at the subject from the point of view of the people of a State where the disarrangement of the finances has caused so much trouble and complaint, and has prevented the growth of that Federal spirit which I am sure we all wish to see nourished.







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