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Thursday, 23 August 1973
Page: 338

Mr CREAN (Melbourne Ports) - I move:

That the Bill be now read a second time.

The main purpose of this Bill is to authorrise capital grants to the States in 1973-74 totalling $278,307,000. This represents the grant component of the State Government Loan Council programs for 1973-74. The Bill also provides for the payment of grants in the first 6 months of 1974-75 pending the passage of similar legislation in that year. The Bill provides that the payments authorised in it may be made from the Consolidated Revenue Fund or from the Loan Fund, and includes appropriate borrowing authority. As part of the revised revenue assistance arrangements with the State governments settled at the June 1970 Premiers Conference, the Australian Government undertook to provide, on a continuing basis, a portion of the State Government Loan Council programs in the form of interest-free grants in lieu of what would otherwise be borrowings by the States. The grants are designed to help the States finance capital works from which debt charges are not normally recovered, such as schools, police buildings and the like. They are not. however, subject to conditions as to the purposes for which they might be expended. At its meeting in June 1973, the Loan Council approved programs for the State governments totalling $867m, comprising $278,307,000 in the form of grants from the Australian Government and $588,693,000 in the form of borrowings.

In determining the size of the State Government Loan Council programs which the Australian Government should support, 2 special factors had to be taken into account. Firstly, at the Premiers Conference Loan Council meeting new arrangements for financing the construction of welfare housing were agreed upon. Whereas in 1972-73 such expenditures were financed by the States out of their borrowing programs as approved by the Loan Council for that year, they will be financed in 1973-74 and subsequent years by specific purpose advances from the Australian Government under a new housing agreement. Legislation to authorise the payment of these advances will be introduced in these sittings of parliament. Secondly, at the same meeting, the States accepted the Australian Government's offer to assume full responsibility for financing tertiary education from January 1974 and agreed that their Loan Council programs should be reduced by estimates of the capital expenditures of which they would thereby be relieved. The agreed reductions for 1973-74 total $32.8rn, representing the estimated half year savings to the States, and will total $65.4m for the full year in 1 974-75.

These 2 factors explain why the States' Loan Council programs for 1973-74 - totalling $867m - are lower than the programs in 1972-73, when they totalled $982m. If adjustments are made to put the programs for both years on a comparable basis, the 1973-74 program is $84.7m, or 10.4 per cent, greater than the 1972-73 program. This is a substantial increase, and it should assist the States in maintaining a high level of capital expenditures. The capital grants represent 32.1 per cent of the total programs. The Australian Government has undertaken to support the States' borrowing programs by subscribing any shortfall between these programs and amounts available from public borrowings from its own revenue sources. The Loan Council, at its June 1973 meeting, also approved borrowing programs for the larger State semi-government and local authorities totalling $564m, which represents an increase of $5 1.6m, or 10.1 per cent, over total borrowings by these authorities in 1972-73 - again a substantial increase. Larger State authorities are those semi-government and local authorities whose individual borrowings for the year exceed $400,000. The Loan Council, following the practice of recent years, has set no overall limit in 1973-74 on borrowings of authorities whose individual borrowings amount to $400,000 or less. Further details concerning the Loan Council programs of the States and their authorities for 1973-74 may be found in Chapter III of the Budget document 'Payments to or for the States 1973-74'.

I now turn to the specific provisions of the Bill. It will be noted that besides authorising, in clause 3, the payment of grants to the States totalling $278,307,000 in 1973-74 the Bill, in clause 4, authorises the Treasurer to make advance payments in the first 6 months of 1974-75 at the same annual rate as in the current financial year. The Australian Government has a continuing obligation to provide these grants and it is desirable that there be authority to make payments to the States in 1974-75 before the passage of legislation in that year. Under clause 5 of the Bill, payments under the Act may be made either from Consolidated Revenue Fund or Loan Fund, and clause 9 provides for the necessary appropriation of these funds. The extent to which the payments will be met from Loan Fund will depend on borrowings during the year, which cannot be estimated in advance.

Clauses 6 and 7 of the Bill authorise the Treasurer to borrow funds, in the period from the commencement of the Act to the end of December 1974, up to the total of the amounts of the grants payable in 1973-74 and in the first 6 months of 1974-75. This borrowing authority will be reduced by the amount of any borrowings made before the commencement of this Act, under the authority of the States Grants (Capital Assistance) Act (No. 3) 1972, which may have been used to finance grants made in the first 6 months of 1973-74. These capital grants, by replacing what would otherwise be loan funds, relieve the States of interest and sinking fund charges which they would otherwise have to meet from their revenue budgets, and thus free funds for expenditure in other directions. The savings in debt charges arising from the capital grants are estimated to have totalled $36.4m by the end of 1972-73, and to amount to a further $38.4m in 1973-74. They are thus providing considerable relief to the States' revenue budgets. I commend the Bill to the House.

Debate (on motion by Mr Fairbairn) adjourned.

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