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Thursday, 31 October 1912

Senator DE LARGIE (Western Australia) . - The motion introduced by Senator St. Ledger last Thursday was to many of us like an old friend, because similar motions made their appearance in the Senate very frequently some time ago. In the early years of Federation, there was no more fruitful subject of discussion than the question of how we should deal with the State debts, and a number of interesting schemes for the purpose were proposed. We were accustomed to go into figures to estimate the savings that might be made by the consolidation of the State debts, lt was estimated that by a saving of 1 per cent, we should be able to wipe out the whole of the debt of Australia in a given number of years. We indulged in these fanciful pictures for a long time; but it has remained for Senator St. Ledger to paint even a brighter picture than any which has heretofore been presented to the Senate by schemers, if I may so call them, because quite a number of schemes were brought under our notice. Notwithstanding the terms of his motion, and the reference to State debts which it contains, the honorable senator commenced with a declaration to the effect that there is no such thing as State debts in Australia. He quoted as an authority for that remarkable statement the present Premier of Victoria, Mr. Watt.

Senator Needham - Is not Mr. Watt a Napoleon of finance?

Senator DE LARGIE - He must be something more than that if he can cause the debts of the States to vanish entirely. We are told that it is nonsense to say that the various States of Australia have borrowed something like ^250,000,000, and are paying between ^8,000,000 and ^9,000,000 in interest upon them. It is all moonshine to say that the State of Victoria, in fifty years of self-government, has borrowed ^50,000,000, and has paid something like ^50,000,000 in interest upon' that money.

Senator Needham - She must have paid it all back.

Senator DE LARGIE - Notwithstanding the fact that Victoria has paid about £50,000,000 in interest upon borrowed capital amounting to about£50,000,000, the whole of the principal is still remaining, and she must go on paying interest upon it in the years to come. Senator St. Ledger entirely ignored the debts of the States.

Senator St Ledger - I did not speak in a universal sense.

Senator DE LARGIE - The honorable senator's reference to the matter may have been simply a little bit of legerdemain that he was playing on us, but he certainly painted a rosy picture - one, indeed, almost as rosy as his own complexion ! There is no getting away from the reality of the debts question. It is a very substantial one. . I regret that more has not been done towards the consolidation of these obligations. But we have to remember that the fault does not lie with the Federal Parliament. The Commonwealth is but one of two parties in this affair, and before a scheme can be propounded the other party will have to consent. Until the States move, and show an earnest desire to solve the problem, the Federal Parliament can do no more than has been done. If we turn to the reports of Conferences of State Premiers, we shall find that the matter of the State debts, if referred to at all, was mentioned in such a way as to put it into >the background of the proceedings, and to leave it there. At the Brisbane Conference in 1907, the Premiers objected to the State debts question being dealt with at all.

Senator St Ledger - Not absolutely, I think.

Senator DE LARGIE - What they said was that the question should not be dealt with until the matter of distribution of the Customs and Excise revenue was settled. Accordingly, they refused to negotiate on the question.

Senator St Ledger - There were strong reasons for that.

Senator DE LARGIE - If there were strong reasons, I fail to understand what they were. Certainly, those reasons do not exist to-day, because the Customs and Excise revenue matter has been settled pretty well for all time - at all events, for such a time that we may very well say that there is now plenty of opportunity for giving attention to other financial issues. In 1909, a Premiers' Conference was held in Hobart, when the State debts matter was not even mentioned. Towards the end of the same year there was another remarkable Conference held in Melbourne - a Conference which will go down to history as, perhaps, the most remarkable that has ever taken place in any country. Certainly, it - was the -most peculiar Conference ever held in Australia.. The Fusion party was the outcome of it. Not only did it bring the Fusion party into existence, but I think it was responsible for raising a question which was one of the factors in -driving the Fusion out of office. I am unable to say with certainty what was done regarding the State debts question at that Conference, for the simple reason that the proceedings took place behind closed doors.

Senator St Ledger - The honorable senator knows that the 87 th section of the Constitution was the main matter at that Conference.

Senator DE LARGIE - I am unable to say what was done. We were afterwards told that certain arrangements were arrived at, and I have no doubt that section 87 was dealt with. But, in regard to other subjects, we were totally in the dark.. The public were informed that the records were burned. Even the blotting pads were destroyed, in order that not the slightest atom of information should leak out to the public.

Senator St Ledger - There was no more secrecy there than there is at the Labour Conferences.

Senator DE LARGIE - There is no destroying of records or sitting behind closed doors at 'our Conferences. We publish reports, and at some of our Conferences even the reporters of the press of our opponents are permitted to be present. At all events, there is no getting away from the fact that at these Premiers' Conferences the State debts matter was riot dealt with seriously. The next Conference was held at the beginning of this year, in Melbourne. The question was not even touched on that occasion. Nothing, therefore, has been done by the Premiers to bring this question forward. That being so, we must conclude that the Premiers had no desire to do anything to bring about a settlement.

Senator St Ledger - A State cannot deal with any debts but its own. My motion speaks of the consolidation of the whole of the Australian debts.

Senator DE LARGIE - I think it is fairly well understood to-day that we cannot very well deal with a particular portion of the . debts. We must be prepared to deal with the whole of them.

Senator St Ledger - Why?

Senator DE LARGIE - Because we have already as good as decided that it would be foolish to take over a portion of the debts of the States and leave another portion standing over. In order that we may be in a position to deal with the matter comprehensively, we have had a referendum question submitted to the people.

Senator St Ledger - How would the honorable senator tackle a portion of the debts ?

Senator DE LARGIE - I did not say that I would tackle a portion of them. I would deal with the whole question.

Senator Vardon - We have power to do that now.

Senator DE LARGIE - We have, as far as the Constitution can give us that power, but a great deal more than that is required before a satisfactory settlement can be effected. Surely the honorable senator would not say that, because we have power to take over the debts, we should proceed to do so without taking some power over the assets which the debts represent. These are considerations which can only be resolved upon by the people who owe the money, and who are responsible for paying it. They have the assets which the debts represent; and until they are agreeable to meet the Commonwealth and come to an understanding as to what assets we are to control to represent the debts for which we assume responsibility it is impossible for us to attempt to settle the question.

Senator St Ledger - That means that the honorable senator would not touch the debts question until the Commonwealth secured control of the railways?

Senator DE LARGIE - Certainly the railways represent the principal asset. Senator St. Ledger himself was too bashful to offer a suggestion as to how the task was to be accomplished.

Senator St Ledger - I did.

Senator DE LARGIE - Let me point out what the honorable senator did in that remarkable- speech of his ; and it was one of the most remarkable addresses that even he has delivered. Towards the end of it, notwithstanding that he- had been adversely criticising the present Government for having done nothing towards the settlement of the question, he said that the present was not an opportune time to undertake the consolidation and conversion of our State debts.

Senator St Ledger - I said that, by reason of the difficulties in front of us, the present is the proper time to consider the question.

Senator DE LARGIE - The honorable senator means that we are to " consider," but do nothing. Well, we are " considering." But the honorable senator certainly did assert that the present was not an opportune time for taking any practical steps towards the consolidating of the debts.

Senator St Ledger - The money market is against us.

Senator DE LARGIE - And because the money market is tightening the whole question should be hung up. Why, then, did the honorable senator introduce the subject at all?

Senator St Ledger - Because this is the very time for considering the best way of proceeding.

Senator DE LARGIE - But do nothing. That attitude seems to turn logic upside down.

Senator St Ledger - Does the honorable senator know how long it took Mr.. Goschen to effect his conversion scheme?

Senator DE LARGIE - We heard a good dear in the honorable senator's speech about Mr. Goschen, but I have yet to be informed that even that great financier was quite the equal of Senator St. Ledger. The honorable Senator claimed credit for his' party for some extraordinary things in regard to Australian finance. He asserted that -

It was the Liberal Government that made the suggestion for removing that fetter and wiping out section 87. It was the Liberal Government that proposed to pay to the States 25s. per capita. Our Government made such an arrangement with the States and submitted the proposition at a referendum to the people.

Senator St Ledger - That is so; the statement is absolutely correct.

Senator DE LARGIE - It is a claim that the honorable senator was in no way entitled to make. It was not his party that suggested the per capita arrangement. That proposition emanated from the Labour Conference held in Brisbane in 1908. I was present.

Senator St Ledger - I said that our Government submitted the proposition to the people.

Senator DE LARGIE - The honorable senator claimed that his Government put the proposal forward as a means of settling the financial question. As a matter _ of fact, it had been made time after time by the Labour party before the Fusion Government stole our thunder.

Senator St Ledger - I do not think so.

Senator DE LARGIE - The honorable Senator said that it was the Liberal Government which submitted this new financial scheme. It was not a new financial scheme as far as they were concerned. It was not originally proposed by them. It was proposed by the Labour Conference at Brisbane. A number of financial schemes were submitted to Parliament before that. Indeed, there was hardly a man in this Parliament laying claim to some knowledge of finance who did not propound a scheme. Proposals were put forward by Sir George Turner, Sir William Lyne, Sir John Forrest, Mr. Harper, Mr. King O'Malley, and Mr. Knox, amongst others. But the only scheme propounded on the per capita basis, and worked out clearly, was the scheme of the Brisbane Conference.

Senator St Ledger - The per capita method of dealing with the subject was referred to in the Convention over and over again.

Senator DE LARGIE - Every one of the previous schemes which were condemned differed from the scheme ultimately laid before the people, and I repeat that it was the Labour Conference that propounded the per capita scheme, and even went to the length of mentioning the sum of 25s. per head, which was ultimately adopted. The Premiers' Conference, at Hobart, a few months later, adopted the Labour Conference scheme practically holus bolus. Really Senator St. Ledger should be more cautious in the claims which he makes for his party. He has no right to claim for them schemes which were put forward by others. It is true that his party was in office long enough. Some of its members posed as being great financiers. They used to lecture the unfortunate Labour party, and to refer to us as knowing nothing of finance. We could not, they said, be expected to propound a financial scheme for the Commonwealth. Nevertheless, I must insist, it was our party which brought forward the scheme which settled the question that has been referred to to-night. In submitting this motion Senator St. Ledger has occupied the time of the Senate to no very good purpose.

Senator St Ledger - Why did the Government mention the subject in the GovernorGeneral's Speech at the commencement of the session if it was not to be considered ?

Senator DE LARGIE - It was mentioned to remind the State Governments that the question was awaiting their attention. It is they, and not the Federal Parliament, who block "the way and prevent a settlement. Until they move, neither the present Federal Government nor any other Government that may succeed us can do anything. It is only right and proper that the State Governments should from time to time be reminded that the debts question is not settled, and awaits their attention.

Senator St Ledger - Is that the interpretation which the honorable senator puts upon the reference in the Governor- General's Speech?

Senator DE LARGIE - That is an interpretation which may be put upon the reference. It was a reminder to the States. Until Senator St. Ledger, or some one else who presumes to submit a motion on this subject, has a scheme better than any that has yet been formulated, and one which will move the States to face the music and tackle the question, we shall be merely beating the air by discussing it.

Senator Lt.-Colonel Sir ALBERTGOULD (New South Wales) [8.58].- The latter portion of the speech of Senator de Largie was rather remarkable. He tells us that the question of the consolidation of the State debts, although mentioned in the Governor- General's Speech at the commencement of the session, cannot be dealt with until the States take action. Consequently, the reference in the Speech meant nothing. I have always been under the impression that when a Government submits its programme at the opening of a Parliament, the matters mentioned therein are considered to be subjects for legislation with which the Government is prepared to deal if time and opportunity permit. They are not supposed to be merely placards - things put in the shop windows - for the purpose of attracting attention. Apparently, however, the Government only included the paragraph in the Governor- General's Speech for the purpose of reminding somebody else of a power which exists in the Constitution. I do not know that Senator St. Ledger need be called upon to apologize for directing at- tention to the matter in what is practically the only way within the competency of one in his position. We know perfectly well that it would not be possible to deal with the question effectively by means of a Bill, and it is not within the competency of a private senator to submit a measure that would have any effect whatever.

Senator de Largie - There is nothing to prevent him from introducing a measure or making suggestions.

Senator Lt Colonel Sir ALBERT GOULD - The only course open to an honorable senator who feels that a matter calls for immediate attention is to place a motion on the notice-paper, and have it discussed. He may, for instance, give notice of a motion that, in the opinion of the Senate, it is desirable that the Government should take the matter in hnd ; but, instead of resorting to that course, Senator St. Ledger has proposed that, in the opinion of the Senate, a Royal Commission should be appointed to consider and deal with this subject. We have had projects by individuals considered one after another. I believe that a proposal was made by a 'Labour Conference. Proposals have been submitted, first by one person, and then by another - with what effect? They have been submitted with no effect. Simply because not one of them has been regarded as a practicable proposal. What more reasonable, then, than that an honorable senator, in attempting to set forth his own scheme for the consolidation of the State debts, should say, " Let a Royal Commission be appointed to inquire into the whole subject, and deal with the mass of valuable material which is now available"?

Senator Lynch - In the present state of the money market, you would not advise that the Commonwealth should take over the State debts, or convert them ?

Senator Lt Colonel Sir ALBERT GOULD - The honorable senator raises another question when he asks what advice 1 would give. When the acceptance of the Constitution Bill was under consideration there was much argument used to the effect that, by consolidating the State debts, a great deal of money would be saved to the States in the way of payment of interest. If that saving will be effected, then a consolidation of the debts 'must be beneficial to every State.

Senator Vardon - We were told that South Australia would save ^10,000 a. year.

Senator Lt Colonel Sir ALBERT GOULD - No doubt that statement was made. I have heard honorable senators talk of the Commonwealth consolidating the State debts and getting the whole of the money at 3 per cent. ; but, in my opinion, that is a dream; it is not practicable. We all know that to-day there would be very little chance of consolidating the debts on anything like favorable terms to the States. It was only the other day that a State found, when it went into the market, that it could not' get the money it wanted under 4 per cent. I know of a " great municipality which, quite recently, found itself compelled, when it attempted to raise a loan, to pay over 5 per cent. The States find that, at present, they cannot borrow money on anything like as good terms as those on which the existing debts were incurred. We know that in the past States have borrowed at 3§ , 31, and 3^ per cent. One can buy British consols to-day at such a rate as will give him from 31 to 4 per cent, on the money which he outlays. When we find that the British Government, with a first class security, cannot borrow money at a low percentage, we may depend upon it that the Australian States, whether they consolidate their debts or not, will not be able to borrow money on more favorable terms. We shall always have to pay a higher rate of interest than the British Government have to pay on their first-rate security.

Senator Pearce - It is only fair for the honorable senator to say that those who made the calculations were correct at that time, when, as he knows,' money was very much cheaper than it is to-day.

Senator Lt Colonel Sir ALBERT GOULD - Yes; but my contention is that money has never been so cheap that there has been an opportunity to consolidate the State debts on a 3 per cent, basis. When the British consols were brought down to a 21 per cent, basis, it was not long before an investor could get £100 for his consol, which, at that time, was, possibly, a much' more favored investment than it is in existing circumstances, because it belonged to a very limited list of securities in which trustmoneys could be invested. The alteration of the law, and the consequent enlargement of this list, has been the means of deteriorating the value of British consols. I know that a dear old friend in the Senate has talked about Australian stock on a 3 per cent, basis; but my opinion is that if we attempted to convert at present any of the State debts into 3 per cent. Australian consols they would be found to sell at a very low price indeed ; and, instead of having to raise about ^250,000,000, we should probably have to raise about ^300,000,000. In such circumstances, there is no opportunity to do anything practical or valuable in the way of conversion. Another point to be considered is what debts is it proposed to convert. Originally the Constitution only empowered Parliament to take over from the States their public debts as existing at the establishment of the Commonwealth, and, consequently, debts subsequently incurred could not be taken over. But, as honorable senators will remember, the Constitution has been amended to enable the Parliament to deal with an additional amount of the State debts. Large Bums have been borrowed since that time, and I cannot say, off-hand, whether the Constitution would permit us to deal with those borrowings.

Senator Vardon - There is no limit now in. the Constitution.

Senator Lt Colonel Sir ALBERT GOULD - Assuming that we are going to consolidate State debts to the amount of ^250,000,000, what is intended to be done with regard to future debts? Is it proposed to say to the States : " In the future you shall not be permitted to borrow without the permission of this Parliament"? Or are we going to say to them, "Although we have consolidated the whole of your old debts,, and accepted the responsibility for the payment, ' you are free to borrow as much or as little as you please, without consulting the Commonwealth at all"? One idea of the friends of consolidation was that we would have only one Australian debt; but, apparently, we are to have, not only one Australian debt, but a number of minor debts. Again, are we to take over any of the securities for the debts, or to say to the States, ' ' You have spent the money in building railways and in effecting large public improvements ; you keep these things, and we will take over your debts " ? Now, what means shall we have to pay the debts eventually? We are now making a per capita allowance to the States, and it is suggested that that allowance will, provide more than suf ficient money to pay the interest on the debts which we are supposed to have con-: solidated. If we have a pay-day fixed ata future time, we shall have not only to> make provision for the payment of interest,, but to establish a sinking fund, by meansof which the debts will ultimately be extinguished. The whole subject bristles1 with difficulties, but I by no means suggest that my criticisms cannot be met or dealt,with on a satisfactory basis. It willi not be done, however, by. the efforts of any individual. The subject calls for the close attention of the keenest financial intellects in . the Parliaments of Australia,, and even they will have to be assisted byexpert advice. Possibly some Treasurermay consider that he has sufficient knowledge to enable him to deal with thewhole subject, and may submit a Bill toParliament ; but, so far, we have not found' any man in a position to do that. We havefound men, however, in a position to offerideas and make suggestions as to the best-.' way of working out a scheme; always assuming that the consolidation of the Statedebts is desirable in the interests of theCommonwealth. But even these personsadmit that theirs are by no means schemes-, which are unassailable, and will not require very great consideration before theycan be adopted. It is a wise proceeding on« the part of Senator St. Ledger, if he regards the" consolidation of the State debtsas a proper work to be taken in hand, tosubmit this motion to the Senate. A Royal Commission, if appointed, could formulatea scheme, or come to some conclusion ; but the subject bristles with so many difficulties that I think it will be very many years?before it is tackled in an effective manner by the Commonwealth, whatever we or theStates may think. It should be remembered, too, that, eventually, we shall haveto meet the investors, and consider thescheme which they are willing to accept. We cannot force any scheme upon, them.On the contrary, we shall have to persuadethem that our scheme will conserve, not only their interests, but also the interests of the Commonwealth and the States. I am quite willing to vote for the motion,-, leaving it to either the present or a succeeding Government to make up their minds. as to whether they will act upon the suggestion or not.

Debate (on motion by Senator Lynch)* adjourned.

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