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Tuesday, 25 September 1906

Senator STANIFORTH SMITH (Western Australia) - - This proposal is a double-barrelled one. It seeks to authorize the Commonwealth to take over, not only the debts which existed prior to Federation, but also those which have been subsequently incurred. It also proposes to remove the restraint imposed upon the Commonwealth that it shall take over the debt from each State according to its population. I believe that there is no member of the Senate who is opposed to the first part of the proposal. I never could understand why the Constitution restricted the right of the Commonwealth to take over only the debts owing at the time of Federation.

Senator Drake - "Was it not done on the assumption that the transfer would take place as soon as the Commonwealth was established? Was it not part of the compact ?

Senator STANIFORTH SMITH - I suppose it was intended that as soon as Federation was consummated the debts should be taken over, because power was given to the Commonwealth to take them over without the consent of the States. I think we are all agreed that it should be given the power to take over subsequent debts. The other part of the proposal opens up a very large and difficult question in finance. But it must be remembered that of the thirty-nine articles in the Constitution this is the one case in which the States have absolutely the whip hand. With regard to the transfer of the debts they are the masters of the position.

Senator Keating - No.

Senator STANIFORTH SMITH - No Commonwealth Government would agree to take over any debts unless they came to an understanding as to the subsequent borrowing power of the States. That is not restricted in the Constitution, nor is it now proposed to be restricted. Therefore, in any negotiations the States would occupy a position in which they could dictate to the Commonwealth. While we have the right to take over a proportion or the whole of the States debts un to a certain date, we have no power to _ restrict the borrowing power of the States. That dominates the whole question of the transfer of the debts. It has formed the subject of negotiations between the States and the Commonwealth in every Conference which has been held, and it rests entirely with the former to say whether or r.ot thev will agree to their borrowing being restricted. This is. not a proposal which' would jeopardize the interests of the States, because it would rest with them to say on what terms they would allow the debts to be taken over.

Senator Givens - If we had power to take ove'r the debts we could take them over whether the States liked it or not.

Senator STANIFORTHSMITH.The reason why we have .not taken over the debts is simply because we have to come to an arrangement with the States as to their right to borrow in the future. That is not interfered with in the slightest degree in the Bill, and therefore if it were passed the States would continue to occupy that strategic position. It seems to me to resolve itself into a question as to whether we should remove certain restrictions so as to give both the States and the Commonwealth the opportunity of negotiating with greater freedom. No proposal will be made to take over debts individually or collectively, unless the State or States concerned come to an arrangement vountarily. to restrict the borrowing or to confine it to a certain year.

Senator Drake - Does the honorable senator suppose that the Commonwealth will make that stipulation before they take over the Victorian loan falling clue next year ?

Senator STANIFORTH SMITH - I feel quite certain that no Government would think of taking over the whole or a portion of the debts from a State without coming to an undertaking as to future borrowing. Otherwise, it would be exactly like trying to bail out a ship with a hole in her bottom.

Senator Millen - Does the honorable senator think that the States will give up the right to borrow?

Senator STANIFORTH SMITH - That is the question. It is only when the Commonwealth can offer a proposal which in their opinion would be safe in the interests of the States or not injurious to them, that it will be accepted. In either case, the States will be the arbiters, and not the Commonwealth. Therefore, in submitting this proposal to the people, we shall ask them to remove certain restrictions', in order to enable the Commonwealth on the one hand, and the States on the other, to deal with greater freedom with this most difficult and intricate question. If it had not been that the States possess the power to borrow, and can only relinquish it of their own free will, I should not have agreed to the second part of the proposal. But, seeing that they possess that power, I, as a member of the States' House, feel that I shall not be jeopardizing the rights and interests of the States in any way by voting for the Bill as it stands.

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