Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Thursday, 16 August 1906

Mr KNOX (Kooyong) .- I congratulate mv honorable friend the Treasurer upon having been able to submit a Budget statement which indicates that the affairs of the Commonwealth are in a very satisfactory condition, and that the community, as a whole, is prosperous. I am s,ure that his statement will attract considerable attention, and that it will be read with interest by our friends and others abroad. I am sure that those who read the Treasurer's speech must wonder what kind of persons he was addressing, amd whether thev would be able to assimilate the whole of the voluminous but interesting information that his Budget contained. > I do not propose at this stage to deal with matters which may, perhaps, be discussed with greater advantage when the Estimates are being considered in detail. I wish to address myself more particularly to the question of the transfer of the States debts. I trust that honorable members will read closely and carefully the admirable memorandum which has been prepared by Mr. T. A. Coghlan, the Agent-General for New South Wales. I have some knowledge of. the methods adopted in financial circles in London, and I cannot conceive of any more complete and accurate description of such methods than that given by Mr. Coghlan. The reputation of Mr. Coghlan as a statistician, must cause considerable weight to be attached to the conclusions at which he has arrived. He makes certain statements which should induce honorable members to seriously consider the whole situation. He says -

The Commonwealth will probably not be able at first to obtain money on better terms than the States could do for themselves.

He goes on to say - *

Many sanguine forecasts have been made as to the monetary gain arising by the transfer of the State debts to the Commonwealth. It has been seriously contended that the rate of interest, 3.7 per cent., which our loans now average, can probably be reduced by the operation "of. consolidation and conversion to under 3 per cent. This is a hope impossible to realize, though, as already stated, we may look forward to a time (perhaps not far distant) when, the States and the Commonwealth working harmoniously for the good of the Australian people, and the unmistakable but unwarranted distrust of Australia now existing in London being removed, the Commonwealth Government will be able to obtain for the renewal of loans falling due, terms so advantageous as will materially reduce the interest bill now to be paid.

An authoritative statement of that kind must receive our fullest consideration when we are dealing with proposals such as have recently been submitted to the House. It behoves us to ascertain, if possible, why the Commonwealth, which was founded under such happy auspices, should have drifted into its present unsatisfactory position. The explanation, is not to be found in the state of our trade, or the condition of the community generally, because the Treasurer had the privilege of submitting one of the most satisfactory Budgets that has ever beep presented to an Australian Parliament. Therefore, it is necessary for us to consider whether our legislation or the general trend of our politics is such as to account for the position which we occupy. Apart, however, from that consideration, there is in the document to which I refer informative matter which I venture, with becoming diffidence, but with all sincerity, to commend to the attention of every honorable member who has the slightest interest in the future of the Commonwealth. As honorable members are aware, several schemes have been submitted at various periods for taking over the States debts. When the right honorable member for Balaclava filled the office of Treasurer, he submitted to the Hobart Conference of Premiers most excellent representations regarding the difficulties which underlie the transfer of those debts. His successor, in presenting his Budget the other day, laid before honorable members recommendations which bear the specific imprimatur of Government approval. That is the first occasion upon which such proposals have come before us in an authoritative form. The honorable member for Mernda has also outlined a scheme for the consolidation of the States debts. I yield to nobody in my appreciation of that honorable member's capacity to deal with that subject. But I have given very close consideration to his recommendations, and I regret to say that I find myself unable to agree with many of them. He has looked far into the future, and it may possibly be that twenty-five years hence we should be in a favorable position to investigate his proposals. His scheme is an elaborate and complete one, and constitutes an attempt to secure finality so far as the redemption of the States' indebtedness is concerned. But I venture to say that his recommendations are not such as the individual States can accept at the present juncture. I think, further, that he has strained a very important section of the Constitution when he suggests that the Commonwealth should render financial assistance to the States in this connexion. It was never intended by the framers of our Constitution that any State should receive from the Commonwealth such a large sum as the honorable member suggests. On the contrary, I hold that section 96 of our Constitution, which provides that financial assistance may be rendered by the Commonwealth to the States, relates only to temporary assistance. Certainly, such assistance was never contemplated in connexion with the States' indebtedness. In short, the scheme of the honorable member - if effect were given to it - would result in a unification!.

Mr Harper - Does the honorable member mean a unification of the States or of their debts?

Mr KNOX - I mean a unification of the States and their financial interests. His scheme would not permit of the continued existence of the States as separate entities. I hold that we shall be acting unwisely if we take any step which is calculated to destroy the individuality of the various States.

Mr Harper - I quite agree with the honorable member.

Mr KNOX - The more I read the proposals of the honorable member, the more I am convinced that to give effect to them would mean merging the Federation into a unification. There is just one other matter to which the honorable member referred to which I wish to address myself. I refer to the appointment of States Debts Commissioners. In common with many other honorable members, I regret that he did not even acknowledge the fact that two years ago, and again last year, honorable members were called upon to consider a proposal which I had the honour to submit relating to the establishment of a Council of Finance.

Mr Harper - That was for a totally different purpose.

Mr KNOX - I think not. Personally, I am indifferent as to the source from which the proposal may emanate, but I am satisfied that, until effect is given to some such arrangement as I have suggested, we cannot satisfactorily carry out any scheme for the transfer of the States debts. I do not think the honorable member for Mernda has attached sufficient weight to the fact that, so far as the responsibilities of the States to the Commonwealth are concerned, we are now passing through a transition stage. We have to recognise that during the next fifteen years a great change will probably take place in our population. If present conditions were to continue, the outlook would be a bad one indeed for the whole of the Commonwealth. We can only hope for an expansion of our population, which will entirely change our present view of the situation. I regard the scheme submitted by the Treasurer as a more practical one than that which has been presented by the' honorable member for Mernda, and I think that it is likely to meet with a more ready acceptance by the States. It has always been my desire that we should, adopt a system that would induce the States and the Commonwealth to work harmoniously together, and I feel that we shall never succeed in solving this problem until we are able, as it were, to carry the States with us. We shall do injury to our people if we refrain from taking action until the end of the Braddon period, and then endeavour to use what may be regarded as a coercive lever to induce the States to fall into line. with us. We should clearly and definitely indicate that, as a Parliament, we feel that we have no right to take any step that would be subversive of the claims of the various States. I am sure that the electors would indorse such an attitude." I had intended to deal at some length with the proposals submitted by the Treasurer, the honorable member for Mernda, and the honorable member for North Sydney, but I feel much more at home when discussing the details of such a question as this at a round table than I do when addressing myself to it in general terms in 'Committee. The honorable member for North Sydney has submitted what is practically a modification of the scheme propounded bv the honorable member for Mernda. His proposition appears to me to be a most liberal one, and indicates that the honorable member, who is always careful to master the facts of any matter with which he deals, has secured a complete grip of the position. Suggestions have been made by the Treasurer and his predecessor - the right honorable member for Balaclava - as well as by the honorable member for Mernda and the honorable member for North Sydney, which I feel could be so welded together as to produce a scheme satisfactory alike to the States and to the Commonwealth. I have no desire to detain the Committee by dealing at length with the excellent statement prepared by the honorable member for North Sydney, but, speaking generally, I think that we shall fail in our efforts to solve the problem of the transfer of the States debts unless we take the whole of them over at one operation. If we deal with them in a piecemeal fashion, we shall seriously prejudice our future operations. I am opposed to the proposal that we should at once do away with the bookkeeping system. I have ascertained from business men in this city that they have become so accustomed to it that it now causes them but little inconvenience. As a matter of fact, from a statistical point of view, it is highly advantageous, and will continue to be so until we acquire a closer knowledge of Inter-State conditions, and until our population settles down, and our lands become more fully occupied. I agree with the Treasurer and his predecessor that it would be a mistake to discontinue the operation of the Braddon section at the present juncture, and that, for the sake of securing harmony between the States and the Commonwealth, the bookkeeping system should be continued until 1920.

Mr Fisher - Is the honorable member in favour of the bookkeeping sections being continued indefinitely ?

Mr KNOX - I am not. The time must come when the proposal made by the honorable member for Mernda will prove the final solution of the problem which confronts^ lis. I venture to suggest, however, that 'at the present juncture, it is premature and unnecessary - that it is unlikely to be accepted by the States, and would, if adopted, introduce unnecessary complications.

Mr Fisher - I should like to hear the honorable member's reasons for that opinion. I think that the principle enunciated by the honorable member for Mernda is sound, and that the question is one of urgency.

Sir John Forrest - It would suit some of the States very well.

Mr Fisher - Queensland would lose by it.

Mr KNOX - I hold that we have not yet arrived at a proper understanding as to what is the true indebtedness of the States. We have not yet reduced the debts to a common standard such as will be necessary if we adopt the per capita system. I have pointed out in a memorandum, which has been circulated, that not only, does the per capita incidence of the principal vary, but the per capita incidence of the interest also varies to such an extent that we cannot possibly apply the per capita system until we have reduced the whole of the debts to a common standard. I agree with the suggestion that we should adopt a 3 per cent, basis. I would draw attention to the fact that, whereas the total debts of the States amount to £236,680,739, the funded debts of Victoria amount to £51,513,767, whilst she has also an unfunded debt of £2,476,609. This State has also a municipal and corporation debt amounting to £13,182,377, but the municipal obligations of New South Wales amount to only £2,941,939. Queensland, South Australia, and Western Australia have also a very small municipal indebtedness. This is due to the fact that in Victoria we have had for many years a very complete municipal system - a system which, until quite recently, was not in operation in the other- States. I feel that in order that we may arrive at a fair recognition of what are the responsibilities of the States, we must take into, consideration this municipal indebtedness, since in Victoria it has been largely incurred in carrying out public works which in New South Wales have been undertaken by the Government. This is a point worthy of being considered when we proceed to determine the individual responsibilities of the States. It is true that the Constitution does not contemplate the taking over of municipal debts, but if the per capita system were adopted, we should be taking over a large amount of indebtedness incurred by the Government of New South Wales in carrying out work undertaken in Victoria by municipalities.

Mr Harper - Does the honorable member mean to say that part of the New South Wales indebtedness was incurred in connexion with municipal works?

Mr KNOX - Undoubtedly. A large part of the indebtedness of the New South Wales Government has been incurred in connexion with obligations similar to the municipal obligations of Victoria.

Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - Similar to the municipal and shire obligations of Victoria.

Mr KNOX - Yes. I have prepared some figures which the officers of the Treasury have been good enough to check and to verify, showing the purposes with which the loans of the States were made. They will demand consideration in connexion with the per capita incidence of taxation, the transfer of liability, and the refund of interest, and are as follow: -

Statement of Loans raised for Railways and other purposes, and showing earnings of Railways, per head.&c. (Year, 1904-5.) 1 r 5 5 r


It will be seen that, while New South Wales borrowed £21,800,689. Victoria borrowed only -^.9, 563,639 for " other purposes " ; but, if her large municipal obligations were added she would be entitled to a refund of interest on an amount almost equal1 to the borrowing for "other purposes" by New South Wales. The following tables show the revenue and expenditure of the six States, in important departments, together with their population on the 31st December, 1904: -


Population at 31.12.04 (taken at that date to obtain fair comparison) : -


I have also a table showing the net earnings of the railways less working expenses, the net earnings per head of population, and the percentage paid on railway loans. It is as follows : -


We shall not be able to deal satisfactorily with the transfer of the debts of the States to the Commonwealth until a properly constituted body of qualified men is appointed to advise on the whole subject. The honorable member for Mernda has proposed the appointment of a Committee for another purpose ; but a body such as I speak of is necessary, not only to deal with the actual transfer, but to bring the various proposals which have been made into harmony, so that the very best results may be obtained from them. When dealing with mv proposal for the establishment of a council of finance for the Commonwealth of Australia, I shall elaborate my views on this subject. I intend to ask for the appointment of a Commission, to consist of members of the Commonwealth and of the States Parliaments, for the drafting of a scheme for the transfer of the debts of the States1 to the Commonwealth, and the making of recommendations as to the constitutional amendments and powers required. These recommendations will have to be submitted to the various Parliaments before effect can be given to them. My suggestion is that all the proposals which have been put forward for the transfer of the debts of the States shall be submitted to this Commission. In this way we shall secure the co-operation of the States. I shall not, however, deal with the matter fully to-night. I wish to repeat what I have already contended, - that we must not expect that the Braddon section will not be renewed. I am sure that the States will not agree to its ceasing to have effect at the end of the period provided for in the Constitution. We can, however, accomplish nothing of a satisfactory and useful character in connexion with these large financial transactions unless: we appoint some such body as I have spoken of. The Debts Commissioners of England were first appointed by Pitt in 1786, and very many Acts of Parliament have been passed imposing upon them new obligations. They were appointed chiefly to see to the proper investment of various sums, and their application to the reduction of the national debt. Their last report gives particulars of what they have done, and their work is a splendid example of what can be accomplished by a body of men which has assigned to it special functions of this nature. A similar Commission exists in Egypt, and in South Australia our Speaker, when Treasurer of the State, appointed another body of the kind.

Mr Fisher - Is not the Egyptian Commission an international body, appointed to advise the Egyptian Government on financial affairs?

Mr KNOX - It was originally appointed to control the interests1 of the various nationalities, and each nation concerned appoints one or two representatives. They have great powers in regard to the distribution of interest, the undertaking of public works and the management of the debt. The functions of the Commissioners suggested by the honorable member for Mernda would not be so wide as those of the body which I should like to see created. It .may interest honorable members to be informed as to the constitution of the English Commission, ft consists 'of the Speaker of the House of Commons, the Chancellor of His Majesty's Exchequer, the Master of the Rolls, the AccountantGeneral of the Court of Chancery, and the Deputy-Governor of the Bank of England for the time being. All these are men of high standing and wide experience, and I think we should do well if we appointed a similar .body of men to help us in arriving at a solution of this most important question. I think the Treasurer has presented a scheme which, with one or two modifications, might prove effective. He has properly guarded himself in regard to the payment of a lump sum to each of the States, by proposing to take power to levy extra duties in the event of it becoming necessary to make good a deficit in the Commonwealth funds, or to provide funds to meet any special emergency. I have endeavoured to ascertain whether it is proposed to take any definite action during the present session, but all the informationthat is vouchsafed by the Treasurer is that a Bill is in preparation. I would ask honorable members to seriously consider whether we should not at once proceed to appoint a Commission to consider the various proposals that have been made for the proper adjustment of the financial relations of the Commonwealth and the States, and to formulate a scheme for overcoming the difficulties which now present themselves. I think we should endeavour to secure the cooperation of the States in this matter, and that we should go the length of inviting them to appoint representatives to the proposed Commission. I do not mean that individual States should be represented, but that, say, two experts should be appointed to represent the whole of the States, and to co-operate with two representatives of the Commonwealth, the four experts having a Judge of the Supreme Court to preside over them as Chairman. I have been able to deal with only the very fringe of this great question, and I shall take an opportunity at a later stage of putting forward my ideas in a memorandum in which I shall endeavour to clothe the skeleton presented by me in this Chamber two years ago.

Suggest corrections