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Tuesday, 25 September 1906


Senator MULCAHY (Tasmania) . - Senator McGregor has put the matter very clearly and fairly. He has made out, what no doubt exists, and that is a very good case for an alteration of the Constitution in the way proposed. The Commonwealth has the power, and, I believe, the moral obligation, to take over the debts of the States.


Senator McGregor - The people were led to believe that that would be done.


Senator MULCAHY - Quite so, but the method provided for the purpose in the Constitution, as it stands, is an utterly impracticable one. The method proposed in this Bill is one which I have myself recommended in this Chamber from time to time - that is to say, that provison should be made for the taking over of the debts of the various States as the loans mature. Although I have advocated that, and still believe in it, I am unable at the present time to support this Bill, and for a very good reason. If I were to support it here I should consider myself in honour bound when the measure was submitted to the people to advise my constituents as to what they should do in regard to it. and I could not at the present time conscientiously ask them to accept the proposed amendment of the Constitution, although I think that at no distant date it will be found to be necessary. My objection is that the method proposed is not at present accompanied by what I consider to be a necessary safeguard. I have advocated the plan now proposed for the taking over of the debts of the States, but I have advocated something else much more strongly, and that is the abolition of the bookkeeping system. What we are being asked to do now is really 'to offer a premium to certain States to stand out against the abolition , of the bookkeeping system. I think that the continuance of that system will prove disastrous to Tasmanian finance. It was never contemplated that it should operate permanently, and we are reaching the close of the period fixed bv the Constitution for its continuance. We know that under it the finances of Tasmania have suffered to an enormous extent. Most, if not all, of us have believed that at some time or another a Commonwealth security would be regarded in the financial world as better than the security of an individual State. It certainly should be so. One State might suffer from a. bad season, or a series of bad seasons, whilst the others might be prosperous. If we were really federated, and the wretched bookkeeping system were abolished, the various States would be able to assist each other, and States now requiring assistance would probably later on have their years of prosperity, when they would be in a position to assist the other States of the Commonwealth. It has been stated that one of the objects of the measure is to enable the Commonwealth to take up a State loan of £5,000,000 which will mature within the next year or two. If we assume, as we have a right to do, that a higher price will be given for the Commonwealth bonds than for the bonds of the State, or a lower interest charged for the money - which amounts to the same thing, as Senator McGregor has just explained - and the result of the transfer of the £5,000,000 loan from the State to the Commonwealth will be a reduction in the interest charged from, say, '4 to 31/2 per cent., that will mean an annual saving to the State of £25,000. That will be accomplished on the credit of the Commonwealth backing the bills of the State in question. In the meantime, the other States will not participate in the benefit.


Senator Playford - - They will as their loans fall due.


Senator Pearce - They will not be injured in any way.


Senator MULCAHY - They will not be specifically injured, but they will have assisted in conferring a benefit upon a particular State, and the result will be a practical inducement to the State concerned, which I understand is Victoria, to continue to hold out against any abolition of the bookkeeping system. Until that system is abolished we shall not have complete Federation. Under the wretched system now in operation, we do not derive the benefit of Federal finance. The objects of the Bill are such as on the whole I approve of. but I feel constrained to vote against it, and I feel that it will become the duty of every honorable senator to advise the electors, when passing an opinion on the constitutional questions of great importance which are to be submitted to them, not to accept this measure at the present time. At the same time, I hope that, at no distant date, the abolition of the bookkeeping system will enable such an amendment of the Constitution as is here proposed to be carried out' satisfactorily to both the Commonwealth and the States. Honorable senators must pardon me if I remind them that the financial position of Tasmania at present is nothing short of critical. We are sometimes charged with not taxing ourselves to the fullest extent, but. so far as direct taxation is concerned, Tasmania is the most highly taxed State in the Commonwealth.


Senator de Largie - And the most lightly taxed State in the Commonwealth.


Senator MULCAHY - We may be mast lightly taxed through the Customs, but that might be considered creditable to usrather than otherwise.


Senator de Largie - Tasmania is the most lightly taxed State, taking all taxation into account.


Senator Macfarlane - Not at all.


Senator MULCAHY - I think that possibly Senator de Largie is right. The people in none of the States can be considered to be greatly overtaxed, and I believe that the people of Tasmania and Victoria are more lightly taxed than, perhaps, are the people of any other part of the world. But I am speaking now of taxation imposed by the States Governments, and for which they are forced to accept the responsibility.


Senator de Largie - What does direct taxation in Tasmania amount to?


Senator MULCAHY - I think it amounts to £1 4s. 3d.per head, which is higher by some few shillings than is the direct taxation of any other State of the Commonwealth .


Senator de Largie - Cogfilan's latest publication gives the figures at 15s. 2d.


Senator O'Keefe - That is someyears old. and heavy taxation has been imposed in Tasmania since then.


Senator MULCAHY - Senator de Largie can accept my assurance on the subject.


Senator Trenwith - Never mind, it is a poor little place, and a nice little place, too.


Senator MULCAHY - It is not poor, except in a comparative sense. It will be admitted that it is the duty of the Senate particularly to consider the obligations and responsibilities of the various States Governments. The State Government of Tasmania must see that they pay 20s. in the £1, and that is often a matter of very great difficulty where extreme direct taxation has to be resorted to. Notwithstanding the fact that Tasmania is so heavily taxed, the direct taxation returns only something like £256,000 a year to the State Treasury. In the circumstances._ the idea of our being able to meet our interest bill from that source of revenue, seeing that it' amounts to £335,000or £340,000a year, is simply absurd. Every representative of Tasmania in the Commonwealth Parliament must carefully watch all financial questions. Apart from the desire which we should all have to consider the interests of the Commonwealth as a whole, we are each sent here specially to regard the interests of our own State, and to see that no undue burden of taxation is forced upon her people, or the obligation to impose it upon the Government of the State.


Senator Playford - This is not a question of the burden of taxation.


Senator MULCAHY - The only objection I have to the Bill is that it might offer an inducement to the perpetuation of the bookkeeping system. That seems to me to stand out very prominently as one of the results which are likely to accrue from its enactment.

Senator Col. NEILD(New South Wales) [4.46]. - I think it will be my duty to give a vote in the direction of securing sufficient delay to allow the people of the Commonwealth and the Governments of the States to be acquainted with what we are doing. I have found that immediately after certain measures have passed through the Chamber the representatives of New South Wales have been bombarded with representations - from the Prime Minister in some cases, from the Lord Mayor of the city in others, and so on - indicating wishes to which we had not given effect, because we had not known anything about them. I am against the Bill, because of the fact that if it were passed it would mean that a matter of the gravest consequence to both the Commonwealth and the States had been considered with very little more deliberation than is applied to settling the preliminaries of a well-conducted dog fight. The question of taking over the States debts has been discussed, but it has not been settled. There have been. I suppose, in the other Chamber three, or four, or five different schemes, all of which have been advocated zealously, and discussed without a decision having been arrived at.


Senator Trenwith - Is not this an effort to settle the question ?


Senator Col NEILD - No. If ever a Bill was proposed for shooting Niagara it is before the Senate to-day. It Is the wildest blindest step that ever a Parliament has been asked to take.


Senator Trenwith - It is asked to do nothing but to take powers.


Senator Drake - No; it is asked to strike out a limitation in the Constitution.


Senator Col NEILD - What was the Constitution prepared by Australasian Convention for the establishment of the Commonwealth but a proposal for taking powers? The very best men in our Parliaments were sent to the Convention to discuss projects, and they did not do so in a single sitting, with Standing Orders suspended, in order that everything might be rushed through, contrary to the best traditions of parliamentary procedure. I do not take any exception to the suspension of the Standing Orders, with a view to bringing the session to a close, but I certainly do take exception to proposals which would involve the gravest consequences without those rules for serious discussion and mature deliberation having been complied with. In point of fact, it is proposed to have only one stage, because, although the Bill would go through the different stages, still, so long as the Standing Orders were suspended, it would be practically one act.

The PRESIDENT___ No; the motion for the suspension of the Standing Orders relates to the time for making a call of the Senate. A call will have to be made.


Senator Col NEILD - I thank you, sir, for the correction. There is such a multiplicity of contingent motions on the noticepaper in the name of the Minister of Defence that, not unnaturally, I am slightly confused. In another place there has been a discussion on a proposal by a Mr. Harper, . on a proposal by a gentleman named Sir John Forrest, on a proposal by a gentleman named Sir George Turner, and on a proposal by, I think, the late chairman of the Victorian Chamber of Commerce. These various schemes have been discussed, but no conclusion has been come to. I admit that it has bewildered me to some extent. I have no doubt that the man or woman in the street who will be called upon to vote at the referendum will be as blissfully ignorant of what it all means as it is possible to conceive. I am one of those who hold the view that we cannot wisely separate our debts from our assets. Who has ever heard of that being done in the affairs of an individual or a company? The security for Australian loans hitherto hasnot been based upon taxation, but on assets.


Senator Trenwith - We have never given anything in security except the power to rax the people.


Senator Col NEILD - My honorable friend is quite right. I do not think that any of the States has ever given anything in security, but I think it has been the universal boast of the States that their borrowings have been chiefly represented by remunerative assets.


Senator Trenwith - We have told ourselves that.


Senator Col NEILD - We have told that to our creditors.


Senator Trenwith - It has not been quite true.


Senator Col NEILD - In New South Wales, we have a sort of understood "division of our indebtedness - that so much of the borrowed money has been expended on remunerative investments, and a small portion on unremunerative works - and we have always held that our railways, alone would suffice to represent the value of our public debts. . That may. or may not. have been the case, but at least that tradition of valid assets, of interest earning investments, has been continuously put before the English money lender. It is now proposed to give all that the go-by. To leave all the assets with the States, and to take over their liabilities. When we have to go to the market to borrow what security shall we have to offer? All we can offer will be one-fourth of the Customs and Excise revenue, because the balance is hypothecated to the States under the Constitution. Therefore, it is of no use to puff ourselves out, like the frog in the fable, and to say, " We have such and such a revenue to represent our indebtedness." We should have only 5s. in the £r of our revenue to offer to the British or foreign investors in our stocks. This measure is altogether too serious to be rushed through in this needlessly hasty manner. Who has "asked for the Commonwealth to take over the State debts? I understand that as soon as this thing is achieved, if possible, the Prime Ministers of the States and the leaders of the Oppositions, are to be invited to meet, and to be asked, not " Do you approve of this," but " What do you think about what we have done?" It is proposed to take over an indebtedness of nearly £250,000,000, which is equal to quite one-third of the national debt of the Old Country, and to say that we have nothing to represent that enormous sum except 5s. in the £1 of the Customs and Excise revenue. . That is a position which we ought not to assume. When the promises were made to the people of Australia that if they would only vote for the Constitution Bill, they would save at least £ per cent, in the rate of interest on the public debt, the Colonies which were best off were then borrowing at 3 per cent. Certainly, New South Wales was borrowing at 3 per cent, in the nineties.


Senator Dobson - In 1897, New South Wales was borrowing at a trifle above 3 per cent., but not since then.


Senator Col NEILD - It was the year when I was in England, I spent almost every day of my life in the city for months, and I had rather excellent opportunities for exchanging opinions with some of the largest financial operators in the city, who did me the honour to consult me about their investments in Australian stocks. I had every means of gaining knowledge of what was going or; in their minds, and I certainly came to the conclusion that in that year, when we were borrowing at about 3 per cent., the Commonwealth, if established, would not be able to borrow any more cheaply. If a State with very large resources, with very large remunerative State investments in the shape of railways, telegraphs, and other works, and with an immense area, of Crown lands as a further asset, could not borrow on better terms than 3 per cent., how can the Commonwealth, without a foot of ground, or without a yard of railway, and with no command of revenue beyond 5s. in the £1 of what it collects through the Customs House, hope to do so? What attraction would there be in all that to the money lender? What greater attraction has the Commonwealth *o offer to the money lender than has, say, Western Australia? The figures for that State show a large amount of mineral wealth, a very considerable development of agricultural industry and production, and practically an unlimited area of land. Surely those are valid securities for a loan as against a Government which" owns nothing except two or three buildings and a lease of two or three more ! True, it has taken over from the States a number of properties, but it has been careful not to pay for them. In that respect, I do not know that we need preen our feathers over what we have done. We certainly have done about the biggest piece of free-hooting that I have ever read of. If that is called an asset, well and good.I do not regard it as one, because I think that the Commonwealth owes the States for the properties. In the circumstances, I see no reason to suppose for a moment that the Commonwealth could borrow any more cheaply than could the best of the States. I do not say every one, because there may be circumstances arising, through change of policy, change of Ministry, droughts, or some other causes, which may bring about adverse conditions. But, speaking " big and large," as the sailors say, I cannot, as an old business man, see any prospect of the Commonwealth, which has control of only 5s. in the £1 of Customs revenue, being at any greater advantage than are some of the States in regard to loans. For these reasons, and particularly because of the lack of decent consideration, I am opposed to the Bill passing at the present time. When it has been canvassed, and when it's provisions have become thoroughly understood by the States Parliaments and Governments, it will be time enough for us to consider it. again. But, in any case, I should like to see the Bill, if it be passed, put in a form that will be likely to be understood by the people. It will be seen that a number of questions have to be submitted to the people at the referendum in such a manner that, apparently, from what one of the morning newspapers says, the only chance of their being able to understand what is proposed will be to have the papers printed in orange and green - with, perhaps, a few more neutral tints. If any person acting in a fiduciary capacity proposed to deal with trust funds in such a manner those affected would be quite entitled to swear a commission in lunacy against him.


Senator Dobson - Lord Goschen. when Chancellor of the. Exchequer, dealt with £700,000,000 in one Bill.


Senator Col NEILD - But not with the same promptitude as is proposed in regard to this matter.


Senator Millen - His proposals were canvassed for months beforehand.


Senator Col NEILD - He was carrying out a definite financial transaction. But this is a deliberate scheme that will lead to the most utter darkness that any Parliament ever attempted to jump into. It is a deliberate attempt to perpetrate an absurdity. I have the most kindly feeling towards the members of the present Ministry, and I wish, as far as I can, to facilitate the transaction of public business in the closing days of the session,. But I really cannot vote for this Bill, for the reasons which I have given, and which I may be permitted to sum up in three points - first, because the Governments and the people of Australia do not understand the question; secondly, because the matter is proposed to be transacted with reckless carelessness ; and, thirdly, because, as a business man, I can see no prospect of the Commonwealth or the people of Australia deriving any benefit whatever, but rather die reverse, from this haphazard sort of legislation. I shall therefore feel it to be my duty to give a vote, not to prevent some measure of the same type being put upon the statute-book, but for delay at the present stage, in order that more consideration may be given to the subject, and that, when we come to deal with it again, we may do so on sounder grounds than are possible at present.







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