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Tuesday, 23 October 1973
Page: 2545

Mr HALLETT (Canning) - The Bills before the House are very important to the States. We know that, over the years, the States have always been short of funds. This is nothing new. Lots of people are. The honourable member for Mackellar (Mr Wentworth) has made certain suggestions in relation to the types of funds that should be used. If I understood him correctly, he said that more loan moneys and less grant moneys should be used. I cannot go all the way with him in that proposition. One of the major problems in financing has been that the States and local government authorities have had great difficulty in servicing loans. Had the honourable member for Mackellar made his suggestion in 1927 - probably he was not here at that time - and had a more businesslike management of loan moneys commenced at that time, the States would not be faced with the problems which they have today.

All the loan moneys borrowed over the years by the Commonwealth have been made available to the States. The Commonwealth for its part has used the revenue about which the honourable member for Mackellar has spoken for works within its works system. Also, as he said, some of the grants from taxation revenue have been made available to the States for the purpose of making up loan deficiencies. The main point is that over the years that this loan program has been in progress the States have run themselves into tremendous troubles. One of the principal problems is that, in the early years of the operation of this scheme, the States amortised each loan over the total period in which the loan was repayable to the Commonwealth, that is, 53 years. In the first few years of the loan program, the transport system, for instance, which the honourable member for Mackellar mentioned was a very cheap system indeed. But as the loan program progressed, with the States adopting this amortisation program, costs got out of hand. This is the basis of the problem today. These costs are completely out of hand.

This was the reason why the previous Government in 1970, 1 think it was, agreed to pick up $ 1,000m over a 5-year period - $200m a year - and to service loans on behalf of the States to get them out of the dilemma they were in. The major problem within the financing system of the States is that the revenue that they are collecting through various State taxation charges and from the Commonwealth was going largely to repay earlier loans from the Commonwealth. The move commenced by the previous Government to pick up $ 1,000m of loan repayments over a 5-year period undoubtedly has helped the States tremendously. In his second reading speech on the States Grants (Capital Assistance) Bill 1973, the Treasurer (Mr Crean) states that arrangements have been settled to provide: . . 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.

This is another step towards alleviating the problems that the States have been experiencing over the years. This action should have been taken many years ago. I believe that loan moneys can be used in relation to those enterprises which return something to the States. Railways, for instance, if financed on a sound basis, should return a reasonable amount with which to repay and service loans. This is the major problem. Had the honourable member for Mackellar put up his proposition many years ago, it would have been OK then. But, at this stage, I think that it is necessary to continue with this program of assisting the States to service their loans. They must be assisted to meet the backlog in the servicing of those loans. The need to revise policies for the future is mentioned in the Treasurer's second reading speech.

The other point that I wish to make in relation to local government authorities throughout Australia is that the position of these authorities is even worse. Local governments do not have the opportunity to borrow through the Loan Council in the same way as the States do. State Treasuries have the opportunity to borrow cheaper money, as I call it, through the Loan Council. This is money collected by the Commonwealth and made available by it to the States. Local authorities in Australia have only borrowing rights at the Loan Council level. They have the right to go outside and borrow in any form in which they can obtain the money that they need. The cost of borrowing that money is considerably dearer than the cost of borrowthe money made available through the Loan Council. This is one problem faced by local government. The further problem in relation to the dearer money that local government borrows is that of servicing the loans in question.

The present Government has suggested that local authorities in Australia will have access to the Loan Council. Precisely what the Government means by that statement has never really been explained. I do not quite know what it means. Local authorities today have access to the Loan Council. They do not sit at the Loan Council table - that is true - but the moneys made available for borrowing by local authorities in fact are agreed to at the Loan Council. I say again that, if the only difference is to be that local authorities will have representation at the Loan Council but they will still be obliged to borrow dearer money, they will not be any further ahead.

What is required is action to alleviate the problems faced by local authorities in servicing their loans. Some grants of that nature are what is required for the purpose either of helping them to service their loans or of helping them in some other field. The real trouble affecting local authorities arises from borrowing moneys at dear rates of interest. Local authorities have great difficulty in collecting sufficient revenue within their shire or local council areas generally to service their loans. If one looks at the statistics in relation to these matters, one will see that Australian local authorities on the whole are falling further behind than the States are in servicing loans. I do hope that, if local authorities are given a seat at the Loan Council, some method different from that operating at present will be found to provide them with money.

I direct the attention of honourable members to that section of these Bills which relates to education. The agreement between the States and the Commonwealth, as I understand it, is that the Commonwealth will take over tertiary education responsibilities from the States. This is reflected in the legislation by a reduction in revenue grants to the States for 1973-74 totalling $11 1.8m, representing the estimated savings to the States for the half year from the time when the Commonwealth assumes this responsibility. The reduction for the financial year 1974-75 totals $229.7m and represents the estimated savings for that full year to the States from the Commonwealth's action. It is obvious that, following agreement apparently reached between the Commonwealth and the States, those sums are to be deducted from the total amount made available from the Commonwealth to the States, as a result of the Commonwealth assuming responsibility in this field. Therefore, those amounts will appear in the education program of the Commonwealth and no longer will appear in the State programs.

A Bill has been passed through this House relating to regional authorities. It is the intention of the Government to make certain moneys available to regional authorities. I hope that in the near future the Government will explain precisely what will happen in that field. The Government's intentions in relation to forming these regions have not been stated clearly. We do not know what amounts of money will be made available and on what terms and conditions they will be made available. I believe that, having legislation before the Parliament, the Government should make its position clear. It is obvious that the local authorities throughout Australia have to draw up their own budgets in the same way as the States and the Commonwealth have to do. So they are anxious to know precisely what this Government has in mind.

The Leader of the House (Mr Daly) has indicated that he wants to move on to the next order of the day. I agreed to take only about 10 minutes of the time of the House. I repeat that these Bills are important to the States. The States have their rightful place in the government of this country. I hope that they will be allowed to continue to function in that field in the future in the same way as they are functioning now. I hope also that we can improve their situation in relation to their financing by a more equitable arrangement regarding the servicing of various loans which have been made available. The previous Government made a move in that direction by picking up $ 1,000m. The present Government has indicated that it can see the problem. I certainly hope that it intends to continue in that direction.

Question resolved in the affirmative.

Bill read a second time.

Message from the GovernorGeneral recommending appropriation announced.

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