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Thursday, 16 August 1906

Mr CULPIN (Brisbane) .- The proposal that the Commonwealth,, with a revenue of about £2,000,000 per annum, should take over the indebtedness of the States, amounting to about £236,000,000, is a very serious one, and should be very carefully considered before effect is given to it.

Mr Storrer - The conversion of the States debts is one of the objects of Federation.

Mr CULPIN - I accept the statement of the honorable member, and I am merely pointing out to the Committee that we ought to be careful what steps we take, lest we make the position worse for those who come after us. I agree with the honorable member for Angas that no saving could be effected by the Commonwealth immediately taking over the whole of the debts of the States, and that we may only hope to secure economy by taking over the loans as they fall due. We must possess our souls in patience until the States have loans falling due, when we may proceed to take action, if we feel that we are in a position to do something in this connexion. I do not think that any good result would follow an attempt on our part to convert the whole of the loans of the States. The evidence is against any serious proposal in that direction at the present juncture. Coghlan points out that the market value of the 3 per cent, stocks of this State range from £84 to , £85, that Queensland 3 per cent, stock is quoted at £84, and that Tasmania's 3 per cent, stock is quoted at £85. On the other hand, he quotes figures showing that the 3 per cent, stocks of the Canadian Dominion have a market value of £96. We should endeavour to borrow on equally advantageous terms, but I am afraid that at present we shall not be able to do so. The favorable position of the stocks of the Dominion of Canada should furnish a powerful reason for seeking to improve our credit. We must improve our credit before talking of borrowing more money. By obtaining gold to a substantial amount, and then buying Australian bonds, we should, after two or three years, find our credit increased. Mr. Coghlan does not suggest that we shall be able at once to retrench or reduce our interest bill. He says -

The extent of the reduction in principal or in interest which the Commonwealth will ultimately be able to secure when it undertakes the redemption or renewal of the State loans is, of course, purely a matter of speculation which a series of issues alone can determine. It would be wise, when dealing with the matter, not to count upon any great reduction available from this source at the outset of the new arrangements, though, as already pointed out, satisfactory results may ultimately be obtained.

We have not reason to expect satisfactory results at present, but they will be obtained eventually. In years to come, our stocks' will have increased in value, and we shall then have to pay more than when we borrowed or converted. Let us, therefore, first go into the market as buyers. By doing so we shall improve our position. Queensland has already done something of this sort, though almost by accident. It has certainly not been done of set purpose. When she found herself in possession of a Targe amount in gold with which she did not know what to do, she very sensibly applied it to the reduction of her debt. She bought £386,522 worth of bonds, and placed on deposit £85,000, while she has in her strong-room £317,000. This is a special fund which has been created by her Treasury-note issue.

Mr Kelly - Is that the system which the honorable member wishes the Commonwealth to adopt?

Mr CULPIN - I think it would be a good one for the Commonwealth to adopt, though I do not intend to discuss that matter now. I feel that the suggestion of the honorable member for Angas as to the manner in which the transferred properties might be dealt with is the correct one. We might relieve each State of a portion of debt, which would balance the value of the properties transferred bv it to the Commonwealth, and, if we adopted a scheme similar to that of Queensland, we could use our available gold to buv up stock. The amount of stock which we could purchase would not be large, but we might invest £3,000,000, £4,000,000, or £5,000,000 in that way. This would greatly improve our financial position, and the time would come when we might very reasonably go on the market, not to buy up the stock, but to ask investors to agree to its conversion at lower rates of interest. In this way, we should increase our credit, and that would be an advantage to us when we wished to make use of it.

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