Senate
25 September 1906

2nd Parliament · 3rd Session



The President took the chair at 10.30 a.m., and read prayers.

page 5209

PAPER

Senator KEATING laid upon the table the following paper: -

Regulations under the Commonwealth Electoral Acts 1902-1905 - Statutory Rules 1906, No. 78.

page 5209

QUESTION

COINAGEOF SILVER

Senator McGREGOR (for Senator

Pearce) asked the Minister representing the Treasurer, upon notice -

Will the question of securing the profit on the local silver currency, for the benefit of the Commonwealth, be submitted to the Imperial Conference next year?

If the Conference decide that Australia is not entitled to the profits, will that decision bind theCommonwealth?

Does the Dominion of Canada possess a local silver currency, the profits on which go into its’ Treasury?

Are the Commonwealth Government aware if any proposal is to be brought forward at the Conference, that the profits on Canadian silver currency are to be treated in the same way that the profits on Australian silver currency are now treated?

If not, is there any reason why Australia should not be treated in the same way as Canada in this matter?

Senator PLAYFORD:
Minister for Defence · SOUTH AUSTRALIA · Protectionist

– The answers to the honorable senator’s questions are as follow : - 1

  1. Yes.
  2. Not necessarily. 3- Yes.
  3. No.
  4. It is thought that Canada and Australia should be treated in the same manner.

page 5209

QUESTION

RED HILL POST-OFFICE

Senator STEWART:
QUEENSLAND

asked the Minister representing the Postmaster-General, upon notice -

  1. The number of persons at present employed at the Red Hill Post-office, Brisbane? 2.. Has there been any change of the numbers or persons on the staff within the past two years; and, if so, what?
  2. The salary paid to each person so employed ?
Senator KEATING:
Minister (without portfolio) · TASMANIA · Protectionist

– The Deputy PostmasterGeneral, Brisbane, has furnished the following information: -

  1. Three, of whom only one is a staff officer.
  2. Yes. In July, 1904, the staff consisted of a Postmistress and Messengers McCaskie and

Woulfe. On the1st December, 1904, McCaskie was transferred to Longreach, and his place was taken by a new appointee, Blundell. On the 1st January, 1905, Woulfe exchanged with H. V. Loveday, of Brisbane. On1st March, 1905, Blundell exchanged with Kirk, of Brisbane. On the1st May, 1905, Loveday exchanged with Rees, of Brisbane. On 23rd August,1905, Rees was transferred for six months to the Central Telephone Exchange, his place being filled by a temporary messenger. On 15th December, “1905, J. W. Brown was appointed to Red Hill, vice Rees, promoted, the temporary messenger ceasing. On 15th January, 1906, Brown was transferred to Brisbane, and his position abolished, the Postmistress being allowed£39 to provide assistance. Miss Henderson commenced as Assistant on 18th January, 1906, and the Postmistress, on being called upon for a report, now advises the following changes: - Miss Henderson ceased 7th February ; Miss Corten engaged from 9th February till 31st May ; Mrs. Ferguson from 6th June to date. 3. (a) Postmistress, £110 per annum and free quarters.

  1. Assistant, provided and paid by the Postmistress as stated in 2.
  2. Messenger, £39 per annum, shortly to be replaced by a lad at £26 per annum, owing to an exchange recently sanctioned.

page 5210

QUESTION

EASTERN EXTENSION TELEGRAPH COMPANY

Senator HIGGS:
QUEENSLAND

asked the Minister representing the Postmaster-Genteral, upon notice -

Will the Minister lay on the table of the Senate a copy of the petition and the names of the signatories thereto, having reference to the Eastern Extension Company ;also a copy of the Postmaster-General’s reply to the said petition? (These were ordered to be laid on the table of the Senate on the 30th August last.)

Senator KEATING:
Protectionist

– The papers were laid upon the table yesterday.

page 5210

SPIRITS BILL

Report adopted.

Standing Orders suspended, and Bill read a third time.

page 5210

EXCISE TARIFF (SPIRITS) BILL

Reports adopted.

Standing Orders suspended, and Bill read a third time.

page 5210

CONSTITUTION ALTERATION (STATE DEBTS) BILL

Second Reading

Debate resumed from 24th September (vide page 5205), on motion by Senator Playford -

That the Bill be now read a second time.

Senator DRAKE:
Queensland

– I am glad that we have an opportunity, even at this late period of the session, to discuss the State debts question, since it is a subject of the greatest importance, especially to the States which are weakest, financially speaking. It has been considered on more than one occasion in the other branch of the Legislature. The first Treasurer of the Commonwealth made certain proposals to a Conference of State Treasurers’, which were afterwards brought before the House of Representatives, but nothing came of them. Then a scheme was propounded by the honorable member for Kooyong, and partly considered. Later, the present Treasurer visited England, and, on his return, put forward another scheme, and during its discussion a fourth was suggested by the honorable member for Mernda. But though I have read some of the discussions, it appears to me that not one of the schemes was ever definitely accepted or rejected. They were merely brought forward, looked at, and talked about, and though no! decision seems to have been arrived at in regard to any one of them, the Government have brought in a proposal to amend the Constitution, apparently leaving the consideration of all those schemes’ to a later occasion. I believe that an invitation has been issued to the States Treasurers to assemble, and consider them after this definite action has been taken. That seems to me to be treating the States Treasurers with rather scant courtesy. I am glad that at last we have an opportunity, though it has been long delayed, of expressing an opinion on this very important question, because, in a matter of this kind, it is not sufficient that the other branch of the Parliament should discuss schemes and either come or not come to a decision. We have, I hope in the Senate men who are just as capable of understanding and expressing an opinion about the question as there are inthe other Chamber. From time to time a scheme has been brought forward, talked about, and dropped, and at the present time the Minister of Defence, although he is proposing to amend the Constitution in a most important particular cannot tell us of any definite schemewhich is entertained by the Government. There are four schemes floating in the air; dissatisfaction has been expressed with every one of them ; and the Treasurers of the States have been invited to meet after we have finished with this Bill, probably to tell us what they think of our action. Although this most important question of how the transfer of the States debts is to be accomplished, has not been seriously tackled by the Government, yet we are asked by them to amend the Constitution.

Senator Playford:

– We cannot take over all the debts unless we alter the Constitution, so that it would be of no use to proceed in that direction.

Senator Sir Josiah Symon:

– There is no definite proposal to take them over.

Senator DRAKE:

– I shall deal with that point directly. It is as clear as daylight that the proper course of proceeding is for the Parliament to consider the matter, and come to a decision before it amends the Constitution, and not after that step has been taken to consider what it is going to do.

Senator Sir Josiah Symon:

– It may not be necessary to amend the Constitution.

Senator DRAKE:

– I think that some honorable members in another place have been under a considerable misapprehension about the Bill. For months and months the probability of a proposal to amend the Constitution being submitted has been discussed. On each occasion it has been suggested that all that the Parliament would “be asked to do would be to amend the Constitution in order that the States debts, which haveaccrued since the establishment of Federation, might be taken over. That was the one thing which was to be effected by the proposed alteration.

Senator Playford:

– Hear, hear. That is the only thing there is to do.

Senator DRAKE:

– I am glad that the Minister has made that remark. At the present time he does not know what the Bill proposes to do, and I did not know until I received a copy of it. He says that the only proposal in the Bill is to amend the Constitution so as to enable States debts which have accrued since the establishment of the Commonwealth to be taken over. But that is not what the Bill proposes to do. It proposes to sweep out of the Constitution the safeguard, provided particularly for the weaker States, that when any portion of the States debts is taken over a proportional part should be taken over from each State. For what purpose’ is that safeguard to be swept out of the Constitution? It can be ascertained by looking at paragraph b of clause 2. which proposes to insert the word “redeem “ after the word “convert,” in section 105 of the Constitution. . Why is it desired to insert that word? It is simply to enable the taking over of a loan, which is no part of a debt that has been taken over by the Commonwealth. As I propose to speak at some length, I shall anticipate my conclusions. The object of the Bill is, I think, to sweep out of the Constitution the provision that safeguards the smaller States by requiring a proportional part of all the debts which are taken over to be taken from each of the States, and the word “redeem” is sought to be inserted in section 105 in order to enable the Commonwealth to take up a Victorian loan of , £4,000,000, which will fall due next year.

Senator Clemons:

– Does not the honorable and learned senator think that the expression “any part thereof” in paragraph a has the same meaning ?

Senator DRAKE:

– Certainly. It is proposed that “ any part thereof “ may be taken over, but the Government are asking the Parliament to sweep out of the section the safeguard I mentioned, in order that the Commonwealth may be able to take the whole portion from the debt of one State. Their reason for proposing to insert the word “ redeem “ is because it is considered, and I think quite rightly, that the word “ convert ‘ ‘ means converting a portion of a debt whch has already been taken over, and therefore they want power to redeem a loan which has not been taken over. When we look at how the debts will mature, we find that Victoria has a loan of £4,000,000 falling due next year, and a loan of £2,000,000 falling due in 1908 - shehas smaller loans falling due - and that New South Wales has a loan of nearly. £3,000,000 falling due in 1908. According to the Constitution, the balance of the Customs and Excise revenue may be handed to the States or used in payment of the interest on States debts which have been taken over. Up to lastyear, that balance was sufficient to pay the interest on all the States debts which existed at the establishment of the Commonwealth. The Commonwealth has handed over to the States about £7,000,000 a year, and the interest on the States debts of £201,000,000 would come to within a few thousand pounds of that amount. The way in which the Government are proceeding - their extravagance in many respects, such as, for instance, in the introducing of penny postage - is gradually dissipating that fund. The Government propose to alter the

Constitution so that in future they may be able to raise revenue by Customs and Excise duties, and devote the money to special purposes, that is to say, to divert the three-fourths from the fund which is now available for the payment of the interest on the States debts. Putting these proposals together, it seems clear to me that, with the sources of revenue being dried up, and the expenditure of the Commonwealth constantly increasing, the fund at the disposal of the Commonwealth to pay the interest on the States debts will become less and less as the years proceed. What will then happen ? If there is not sufficient money available to pay the interest on the debts of the States owing at the present time, and if the Government adopt the policy of taking up States loans as they fall due bv means of the power which the Commonwealth has of taking over States debts, clearly the time must come when it will have no funds available to pay the interest on any more debts. Let us look at the importance of that position. The last Victorian debt will fall due in 1920, which is comparatively near at hand. Queensland debts will go on until 1951 ; Western Australia will have a small debt falling due a few years hence, and then she will have no debts accruing for some time. Up to the present time the Commonwealth has shown no disposition to raise more money for the purpose of paying the interest on the States debts. At the present rate of expenditure the time must soon come when the funds available for the payment of interest will give out, and, thus, special significance attaches to an amendment of the Constitution which would enable the Commonwealth to take up large loans of the big States as they fell due, quite irrespective of the interests of the smaller States which are now safeguarded by the provision that the debts must be taken over- in proportion to the population of the States.

Senator DAWSON:
QUEENSLAND · ALP

– Does the honorable senator object to the word “ redeem “ ?

Senator DRAKE:

– I think that we have a right to know with what object the word “ redeem “ is to be inserted. As the Constitution stands at present, it provides for the conversion of the debts taken over bv the Commonwealth, whereas the word “redeem” might apply to the taking up of a loan that was not part of the debt taken over.

Senator Pearce:

– The insertion of theword “redeem”’ would merely give the Commonwealth the alternative .of converting or paying off a loan by using the sinking, fund.

Senator Playford:

– We can do noharm by inserting the word.

Senator DRAKE:

- Senator Pearce confirms the opinion that I have formed with, regard to this amendment, and the proposal to delete the provision that the debts, shall be taken over in proportion to the population of the respective States. Apparently, the object is to enable the Commonwealth to take up the larger Statesdebts as they fall due, without regard tothe interests of other States whose debtsWill fall due later on.

Senator Playford:

– We shall take upthose debts as they fall due also. 1 Senator Pearce. - The honorable senatorhas not told us how it would injure the other States.

Senator DRAKE:

– The Commonwealth has in its hands every year a certain amount of money derived from Customs and Exciseduties which it must either hand over to theTreasurers of the States, or apply to the payment of the interest on the States debts. Last year the amount left in hand wasabout enough to pay the interest on thedebts that existed at the time that the Commonwealth was established, but this year there will not be a sufficiently large amountavailable. There is no- sign of any intention on the .part of the Commonwealth toincrease that amount, but, on the other, hand, there is every indication that if the financial proposals of the Government arecarried put, the balance will be sadly diminished. If certain debts are taken up asthey fall due, the Commonwealth may not have a sufficient amount of money availableto take up other loans which mature later on.

Senator Pearce:

– The honorable senator apparently expects that our revenue will remain stationary.

Senator DRAKE:

– Not at all. Undersome circumstances the Customs revenuemay increase, but it will not keep pace with the expenditure, of the Government if wego on as we have been going. Honorablesenators must be aware of the financial proposals of the Government for increased’ expenditure, and of their intention to sacrifice from ^200,000 to ,£300,000 in connexion with the penny postage proposal”. Some years ago I ventured to form my own> opinion with regard to the transfer of the:

States debts, and I came to the conclusion that no amendment of the Constitution was necessary. I think that the scheme sanctioned by the Constitution for the transfer of the States debts is the right one, and in any case, it has been indorsed by the people of Australia. I contend that it should have been carried out from the very first.

Senator Trenwith:

– Was not the honorable senator a member of the first Federal Government ?

Senator DRAKE:

– Yes, and I take my full share of any responsibility for its sins of omission or commission. In considering the provision in the Constitution, we should be careful to use the right terms. It is provided that Parliament may take over from the States their public debts. Presumably the term “take over” is synonymous with the expression “ assume the liability “ used in the American Constitution. Therefore, the Commonwealth may assume the liability of the States with regard to their public debts as existing at the establishment of the Commonwealth. This assumption of liability is frequently confused with the conversion of loans, but the expressions have different meanings. First, the Commonwealth has to decide to take over the debts. When it does so, it will assume the liability. of the States. Then it may proceed to convert, renew, or consolidate such debts.

Senator Trenwith:

– It can renew, consolidate, or redeem.

Senator DRAKE:

– That is the position of things after the taking over. Mv contention is that the meaning of” the Constitution is that Parliament - of course, by an Act of the Parliament - having taken over the ‘debts, has assumed the liability of the States, and stands in the position of the States. Then, of course, it is quite legitimate for the Commonwealth to proceed to “convert, renew, or consolidate” - to do what it likes in fact. The Commonwealth pays the interest for the States, and may make any arrangements in order, for instance, to reduce the amount of interest that it has to pay. It is very important to remember that for this reason : We are asked who is going to benefit from the conversion ; and that seems to be a moot point. The Minister of Defence told us last night that any benefit which accrues will go to the States. I think - subject to correction, but this is the way my thinking leads ne - that it was intended that any benefit that arose from the conversion, should be that of the Commonwealth. That is to say, it should be shared by all the people, irrespective of the States to which they belong. If the plan, of the Minister of Defence were adopted, it seems to me that the bookkeeping principle would have 10 be continued for eternity. Suppose there were a Victorian loan coming due next year, and bearing interest at 4 per cent. Suppose the Commonwealth were to convert that loan at per cent. According to the view of the Minister of Defence, the State of Victoria for all time would receive the benefit of that reduction of interest, or at all events would receive that benefit for the whole term of the conversion loan ; and perhaps when that loan were converted, say, at per cent., it’ would still receive the benefit of the reduction of interest. If that were the case, the bookkeeping system would continue for all time. What I think is contemplated by the Constitution is that as soon as the Commonwealth Parliament has passed an Act taking over a certain proportion of the debts of the States, it assumes the liability for those debts. The States are relieved from the pressure of that obligation. The Commonwealth pays the interest; and if the Commonwealth can make any advantage by consolidating, converting, or renewing, the benefit inures to the whole people of the Commonwealth

Senator Trenwith:

– All savings made ought to be paid into a sinking fund.

Senator DRAKE:

– -The Commonwealth would arrange for establishing a sinking fund in its own interest, in order to be able eventually to wipe out the debts altogether.

Senator Trenwith:

– The saving should, so to, speak, be an extra means of augmenting the sinking fund.

Senator DRAKE:

– It seems to me that the saving must inure to the Commonwealth. It would lead to inextricable confusion if we attempted to transfer that benefit to the Treasuries of the different States. I am fortified in my opinion by Quick and Garran. The correctness of these annotators of the Constitution is to me marvellous. I find that almost invariably the views of the learned authors of this book prove to be correct in the working out of the financial problems of the Constitution. ‘ The view which’ they take is that the words “convert, renew, or consolidate,” are unnecessary. They say

These words were inserted on Sir George Turner’s motion at the Adelaide Convention; but they hardly seem to be necessary.

Senator Trenwith:

– Hear, hear.

Senator DRAKE:

– That is the view which I take.

The powers of conversion, renewal, and consolidation would seem to be necessarily incidental to the power to take over the debts - or, at least, to be included in the power to boizow money on the public credit of the Commonwealth.

When the Commonwealth has taken over the debts and assumed the liability, it fol- lows, as a matter of course, that it may “ convert, renew, or consolidate,” or do anything it likes with the debts it has taken over.

Senator Sir Josiah Symon:

– Because when it assumes the liability it is the debtor, and may make its own arrangements for payment.

Senator DRAKE:

– Quite so. To return to section 105 of the Constitution, I point out that power is given to take over the whole of the debts as existing at the establishment of the Commonwealth. I do not think that the fact of my having been a member of the first Federal Government should preclude me from expressing my individual opinion that what should have been done in the first session of our Parliament was to introduce a Bill to transfer the whole of the debts of the States to the Commonwealth. There was one objection to that course, and that was that we did not know at the time what the Customs and Excise revenue would yield. It was clear under the Constitution - though some of the Treasurers of the States stated that they were in doubt with regard to it - that the three- fourths Customs and Excise revenue that was to be returned to the States meant three-fourths of the total revenue; that is to say that at least that amount was to go to the States in the aggregate. Some of the States Treasurers considered that each State individually should receive at least three-fourths of the amount collected in each State, but that view was entirely a misapprehension. The amount that had to be returned to the States, of course, varied considerably, not only in consequence of variations in the yield of revenue from Customs and Excise, but also in consequence of different rates of expenditure that had been initiated before Federation by the States. So that it came about that, though from the first there

The States shall indemnify the Commonwealth in respect of the debts taken over, and thereafter the interest payable in respect of the debts shall be deducted and retained from the portions of the surplus revenue of the Commonwealth, payable to the several States, or -

I desire to show that this was anticipated :

If such surplus is insufficient, or if there is no surplus, then the deficiency or the whole amount shall be paid by the several States.

Senator Trenwith:

– That answers the honorable senator’s objection that the fund is decreasing.

Senator DRAKE:

– Except to this extent: - The trouble was - and I know that this is what Sir George Turner felt - that, under such circumstances, it would happen that some States would be indebted to the Commonwealth. How, then, if those States refused to pay up their debts, would the Commonwealth enforce them? What Sir George Turner urged was that it was necessary that certain of the States should hypothecate their railway revenue to make up the deficiency between what was due to them on account of Customs and Excise revenue, and what was paid for them by the Commonwealth on account of interest on their debts. In reply to that I say, first of all, thatI think we might have trusted the States. I do not think that they would be more likely to repudiate their obligations to the Commonwealth than they would be to repudiate their debts to the English lenders. Therefore, I think that the scheme of taking over the debts might have been carried out from the beginning. We might have gone ahead under section 105 of the Constitution, and brought forward a Bill to take over the whole of the debts existing at the time of the establishment of the Commonwealth. I must allude to another section in passing, because it seems to me to be intimately connected with section 105. I fancy that a good many people have not realized the meaning of section 96, which deals with the allocation of expenditure from Customs and Excise. The section reads -

During .a period of ten years after the establishment of the Commonwealth and thereafter until the Parliament otherwise provides-

The very words of the Braddon section - the Parliament may grant financial assistance to any State on such terms and conditions as the Parliament thinks fit.

Does not that mean that if the Commonwealth had taken over the whole of the States debts, and if it had happened that a particular State found it extremely inconvenient - in consequence of its Customs revenue having declined, and of its expenditure having increased - to provide the balance with which to pay interest upon its debt, the Commonwealth would have had power during those ten years to say that the payment of interest might be deferred for that time ? It would have been able to s.ay that it could stand over. It was quite competent ‘ for this Parliament to have taken over all the States debts which existed at the time the Federation was established, because the balance of Customs and Excise revenue in its hands was more than sufficient to pay interest upon them.

Senator Stewart:

– If the Customs revenue had decreased largely, how would the Commonwealth have paid the deficiency ?

Senator DRAKE:

– I will deal with that point presently. Of course, if the Customs revenue fell off, the States would become indebted to the Commonwealth in a larger amount, and °a larger demand would have to be made upon their revenue, in order that the Commonwealth might receive the interest which it had undertaken to pay to the public creditor.

Senator de Largie:

– What Senator Stewart asked was, how the Commonwealth would be able to pay it?

Senator DRAKE:

– The Commonwealth would make a call upon the States for it. Senator Stewart knows perfectly well that the Commonwealth has unlimited powers of taxation, and, if it chose to do so, it could derive a larger revenue from Customs and Excise.

Senator Stewart:

– Does the honorable senator think that the interest upon our national debt ought to be made a perpetual charge upon our Customs revenue?

Senator DRAKE:

– I think that the Customs is our best source of revenue at the present time. When we hear complaints from the States concerning their financial relations with the Commonwealth, Senator Stewart should recollect that the former have borrowed very largely, and that, to a great extent, they have done so upon the security of their Customs revenue. They have relied upon the revenue from the Customs for the money with which to pay interest upon their indebtedness.

Senator Stewart:

– They borrowed for developmental purposes, and the interest ought to be paid out of the revenue derived from their public works.

Senator DRAKE:

– I am aware that that is a pet scheme of the honorable senator, but I am now dealing with facts. It is undeniable that the States look to the Customs to provide them with the means with which they mav pay interest upon their indebtedness. In Queensland, prior to Federation, the Government derived 35. per cent, of their total revenue from the Customs House, which was a higher percentage than that obtained by any other State except Western Australia. When the Federation was established, the Treasurer of that State naturally expected to secure from the Commonwealth a large amount by way of Customs and Excise revenue to enable him to pav interest upon its indebtedness. The finances of Queensland are considerably upset when the Federal Treasurer returns to him a smaller amount than he anticipates. But I do not wish to be diverted from my main line of argument. I wish to make clear the nature of the scheme sanctioned by the Constitution. The section to which I have referred further provides that if the Commonwealth does not desire to take over the whole of the States debts, it may take over any portion of them, but always with the proviso that if it fakes over only a part of them it must take over a proportional part of the debts ofl each of the States. That is a fair principle to establish. Let us see what would have followed had we done that. If we had abandoned the larger scheme, we could have taken over a portion of the debts in such a way as to have absolutely relieved the States of their obligation in that connexion.

Senator Trenwith:

– It would be very undesirable to have two classes of Australian loans running simultaneously.

Senator DRAKE:

– When we shall have that state of things - if the Commonwealth takes over the States debts - right up to the period when the last loan matures.

Senator Sir Josiah Symon:

– What is to be the limit for taking over the subsequent debts ?

Senator DRAKE:

Senator Trenwith is confusing the taking over with the conversion of the debts. The taking over of those debts would not make the slightest difference in that respect.

Senator Trenwith:

– But the taking over will mean the conversion.

Senator DRAKE:

– No. The two things are entirely separate. It is because they have been mixed up that there is so much misapprehension upon the subject. We have been returning to the States about £7,000,000 per annum, which has been available for the payment of interest upon their debts under section 87 of the Constitution ever since the establishment of the Federation. We could have taken over a stated proportion of the debts of each State so as to insure to the State Treasurers that they would be relieved for all time to that extent. We could have done it in such a way that no question would have been raised about the States being indebted to the Commonwealth, or about the difficulty of inducing them to hand over to the Commonwealth any sum with which to pay interest upon their debts. They would have been relieved absolutely of their liabilities in respect of the proportion of their debts which the Commonwealth took over. Assuming that we could not have taken over a sufficient proportion of their debts to absorb the £7,000,000 annually, we might have taken over, say, one-half or three-quarters of their debts. Thus we should have insured that £5,000,000 or £6,000,000 annually would be permanently appropriated for the payment of the States debts. To that extent the States Treasurers would have been for all time relieved. Now let us consider the nature of the. difficulty under which they have been labouring, as is evidenced by the discussions which have taken place whenever they have met the Commonwealth Treasurer in conference. Their trouble is that they have a large amount of interest to pay. In Queensland it aggregates about £1,200,000 per annum.

Senator Turley:

– It is £1,500,000 per annum now.

Senator DRAKE:

– Each of the other States occupies a similar position. They have to pay large sums as interest upon their indebtedness. They have been relying upon their Customs and Excise revenue to make these payments, and they now find that the amount which is being returned to them by the Federal Treasurer is year by year becoming less. We have been told that though Queensland has hitherto had returned to her about three-fourths of the Customs and Excise revenue collected in that State, this year she must expect to receive £83,000 short of that amount. The complaint of the States Treasurers is that it is not a fair thing that all the difficulty of making both ends meet should be thrown upon them. They urge that the Federal Treasurer can spend as much as he chooses up to the limits of the Braddon section, and can then throw upon them all the trouble of making both ends meet.

Senator Trenwith:

– No.

Senator DRAKE:

– When the Braddon section has expired, they will not have any assurance of getting back any portion of the Customs and Excise revenue, and they may be left, in the absence of any such revenue, with the whole of their debts to pay. What some ofthe States Treasurers ask for - and in this I think there has been some inclination to meet them - is a fixed amount in the place of the portion of revenue returned under the Braddon section, so that they might know that for all time they could rely on a certain amount.

Senator Playford:

– We could not do that, and also take over the debts.

Senator DRAKE:

– The position would then be that the Commonwealth Treasurer would be compelled by increased taxation, if necessary, to find the fixed amount for the States Treasurers year by year.

Senator DAWSON:
QUEENSLAND · ALP

– And the States would spend up to the fixed amount.

Senator DRAKE:

– The States Treasurers, having a fixed amount, would know exactly what provision they had to make in the future.

Senator Higgs:

– The States Treasurers are asking the Federal Treasurer to do for them something that he cannot do for himself.

Senator DRAKE:

– In what way?

Senator Higgs:

– The States Treasurers are asking for a fixed amount of revenue each year. How can the Federal Treasurer say what amount he will get, seeing that the revenue is always a matter of uncertainty ?

Senator DRAKE:

– The Commonwealth Treasurer like the States Treasurers, could effect a balance in two ways; he could either restrict his expenditure or increase his revenue. The complaint of the States Treasurers is that, while all Treasurers ought to balance their revenue in one of these two ways, the whole obligation to do so is thrown on the States Treasurers, simply because the Commonwealth Treasurer has this big balance of Customs and Excise - a balance which, up to the year 19 10, he is under an obligation to return only in a certain proportion, but of which there may subsequently be no obligation to return any part. What the States Treasurers asked for - namely, a fixed amount - they could have .got in a very much better way if the Commonwealth had passed an Act to take over portions of the States debts, and thus relieved the States exactly to that extent. At present something like £7,000,000 is returned to the States ; and if sufficient of the States debts were taken over to require£6, 000,000 of that to be paid away in interest, the States Treasurers would know that, at all events, they were relieved of obligation to that extent. Senator Dawson interjected just now that if a fixed amount were returned the States Treasurers would spend it all, and go on borrowing; and I point out that there is nothing in the Bill before us to prevent the States continuing to borrow.

Senator DAWSON:
QUEENSLAND · ALP

– If the States Treasurers get a stated sum they will live up to that sum

Senator DRAKE:

– The States Treasurers would still have the rest of their interest to make good, and would have to raise the necessary money. But they would know for certain - and this is the point - that the Commonwealth had undertaken to pay interest on their debts to the extent to which those debts were taken over.

Senator DAWSON:
QUEENSLAND · ALP

– Has the honorable senator considered the likelihood that the States Treasurers would spend up to the fixed amount, and then cast about for other means of revenue?

Senator DRAKE:

– If a State had £1,500,000 in interest to pay, and the Commonwealth took over debts representing interest to the amount of £800,000 per annum, the State would know that it had still £700.000 to make good.

Senator Playford:

– The honorable senator’s idea is that we ought to have done this long ago?

Senator DAWSON:
QUEENSLAND · ALP

– The honorable senator’s idea is that we ought to increase the Customs revenue.

Senator DRAKE:

– I do not say so.

The PRESIDENT:

– I ask that Senator Drake be not interrupted, because he is pursuing a most intricate argument.

Senator DRAKE:

– Two arguments have been used, which, however, do not in any way apply as against the scheme sanctioned by the Constitution. One argument is that if the Commonwealth, takes over a portion of the States debts, there will be created a new Commonwealth stock on the market in addition to the States’ stocks, whereas it is desirable to get rid of all the States’ stocks and have only one Commonwealth stock.

Senator Playford:

– That was Sir George Turner’s idea.

Senator DRAKE:

– We may get rid of that idea at once. It is certain that we shall not get rid of the States’ stocks until the last of the debts fall in.

Senator Pearce:

– We cannot get rid of the whole, but the debts will be decreased as we convert them.

Senator DRAKE:

– Quite so; but the proposal is to deal with only two or three loans as they fall due. The general idea people have is that there is to be some scheme by which all the States’ stock are to be swept away.

Senator Playford:

– So they will be in time.

Senator DRAKE:

– But the idea is that the States’ stocks are to be swept awa in a moment, and that there is to be only a. Commonwealth stock. Such an idea is entirely visionary.

Senator Playford:

– We have never had that idea.

Senator O’Keefe:

– That idea is not presented in this Bill.

Senator Playford:

– The Bill gives power to take over the whole of the debts.

Senator DRAKE:

– This Bill will not have the effect of creating one Commonwealth stock in substitution for the States’ stocks ; because, whatever we do, there must be the States’ stocks until all the loans fall due. We are now dealing with the creditor who has lent his money, say, to New South Wales, on the credit of that State ; and the loan may go on for the next thirty or forty years. We cannot deal with the individual stock-holders, who will still look to New South Wales for the payment of interest. A gradual transfer such as the Constitution proposes is, I think, the best, and it would get rid of the multiplicity of stocks just as quickly as would any other scheme. I have pointed out that there is nothing in the Bill to prevent any of the States from borrowing, and it is certain that some of the States will borrow as soon as the market is favorable ; and, therefore, unless by some amendment of the Constitution of which we have not yet heard, we cannot abolish the multiplicity of stocks. I have always expressed the opinion that the States will not give up their right to borrow if they think it desirable to do so. The Queensland Government are wedded to the carrying out of a railway policy ; and at the present time, simply because they are not able to borrow on favorable terms, they are actually selling the public lands to find the necessary funds. Is there any community which would sell its lands for the purpose of making railways if it could borrow money for the purpose on favorable terms?

Senator de Largie:

– Some States do both.

Senator DRAKE:

– We have every reason to suppose that the States will never willingly give up their right to float fresh loans.

Senator Higgs:

– Did not the States Treasurers agree to borrow through the Commonwealth ?

Senator DRAKE:

– I think not.

Senator Playford:

– Yes, they did ; when Sir George Turner was Treasurer.

Senator Millen:

– The States have never committed themselves.

Senator Playford:

– The States may not have absolutely committed themselves.

Senator Millen:

– The States made certain reservations which rendered the whole proposal nugatory.

Senator DRAKE:

– That does not in the slightest degree affect the view I have taken, namely, that, by a gradual transfer, the conversion could be carried out under the Constitution just as well as under any other scheme, and that, therefore, no amendment of the Constitution is necessary.

Senator Playford:

– That is, if we take over the whole of the debts, but the honorable senator is talking about taking over a part.

Senator DRAKE:

– I have been talking about taking over the whole of the debts, as at the time of the inauguration of the Commonwealth. I should like the Minister who keeps on interjecting to tell me from that point of view whether there would be any difference in the position if the Commonwealth had authority to take over debts amounting to £201,000,000 or £235,000,000?

Senator Playford:

– A difference of so many millions.

Senator DRAKE:

– But what real difference should we have in the position? I am pointing out the hypocrisy- if I may use that expression- of this proposal. My complaint is that the Commonwealth Government has from the first had authority under the Constitution to take over debts amounting to £201,000,000, but hasdone nothing.

Senator DAWSON:
QUEENSLAND · ALP

– Would the States hand over any assets?

Senator DRAKE:

– Why has not the Commonwealth taken over at least half of the debts of the States? Six years after the establishment of Federation, the Government come forward with the presence - it is nothing more than a pretence-that because they have not been able to take over the whole of the debts, amounting to £235,000,000-

Senator O’Keefe:

– The honorable and learned senator has been a member of more than one Government.

Senator DRAKE:

– I am prepared to take the responsibility for any act of omission or commission as a member of previous Governments.

Senator Sir Josiah Symon:

– But the honorable and learned senator’s point is that this Bill is brought forward without any proposition to carry out the scheme suggested by theproposal to amend the Constitution.

Senator DRAKE:

– There is no proposal whatever to carry out that scheme. I come now to the question of conversion. I hope that honorable senators will not confuse terms. If the desire is to convert States’ stocks into Commonwealth stock, that can best be done in the way provided by the Constitution. In other words, we should first take over the whole, or a portion, of the debts of the States as existing at the inception of the Commonwealth. If we took over aportion of those debts and relieved’ the States altogether of the liability in respect of interest upon them, we should have power under section 105 of the Constitution to convert, renew, or consolidate them. Let us assume that we have taken over a portion only of the debts - that we have assumed a liability amounting to £100,000,000, which I suppose would, roughly speaking, represent an annual payment of £4,000,000 by way of interest.

Instead of paying back to the States the £7,000,000, representing their three-fourths of the Customs and Excise revenue now returnable to them, we should, in that event, deduct from it the £4,000,000 per annum, representing the interest due on the debts taken over. It is quite clear that in dealing with a proportionate part of the debts we must have regard to the time when we took them over. We have to take over the debts of the States in proportion to their population at the time of transfer. We should have to assume for all time the liability in respect of that proportion of the debts, and I think that any benefit resulting from the conversion - on this phase of the question I am open to correction - should inure to the Commonwealth. When this point was mentioned last night, an honorable senator interjected very pertinently - “What would be the position if there were a loss resulting from such conversion ?” The Minister, however, swept aside the question by saying that there would be no loss. Any loss that occurred would have to be borne by the Commonwealth, and if any benefit were derived it should be reaped bv the Commonwealth on behalf of the whole of the people. The Minister gave an instance of great loss sustained by New Zealand, and resulting, apparently from the taking up of a loan before it reached maturity. I gathered from the honorable senator that authority had been given to convert a loan into another bearing a lower rate of interest, and that the Government went into the market expressly to buy up the stock. The market was naturally rigged against them, and they had to pay rather high prices. I see no reason why, if we took over States debts to the extent of £100,000,000, we should not gradually convert them into Commonwealth stock.

Senator Turley:

– Before the debts became due?

Senator DRAKE:

– Yes. We should not have to go to the market when a loan fell in ; the market would come to us. When a debt became due after it had been taken over by the Commonwealth, we should hold the master position. We could make practically our own terms, since a great many would be anxious to continue their investments in it.

Senator Turley:

– Even at a reduced rate of interest.

Senator DRAKE:

– Quite so. Apart from that, I think the conversion of debts taken over in this way could gradually becarried on. A certain number of persons always desire to exchange their holdingsfor stock supposed to offer a better security and which perhaps has a longer currency than that in which they have invested. At the same time, there are always some peoplewho desire to sell out their holdings so that in this way a constant market is secured. We should buy stocks at a certain market rate. The Commonwealth stock will beplaced on the market, and if it be correct that there will be any saving of interest under this arrangement, it should command’’ a better price than State stocks bearing interest at the same rate. That is equivalent to saying that at the same price the Commonwealth would have to pay a slightly lower rate of interest. Having taken over the States stock, there is no reason why the Commonwealth should not convert’ whenever the market is favorable. Whenwe had absolutely taken over £100, 000,000- of the States debts, we should have to float a small loan for conversion purposes. Weshould then be able to go info the marketprepared to purchase States stock at theruling price. There would probably be a margin between the price of the Statesstock and that of the Commonwealth stock.

Senator Millen:

– What basis has thehonorable and learned senator for the suggestion that Commonwealth stock would’ bring the higher price ? I have been’unable to find any financial authority for such an assertion.

Senator DRAKE:

– I merely put a hypothetical case. If the Commonwealth stock: will not command a slightly better price,, then so far as the interest bill is concerned,, no advantage whatever will be derived by the transfer of the debts. Every one whohas proposed a scheme of this kind supposes that a better price will be obtained^ The Government at the present time basetheir figures in connexion with this measure on the supposition that the saving ininterest will be represented by J per cent.

Senator Turley:

– The holders of Statestock would not be likely to invest their money at a lower rate of interest whilst” they hold their securities.

Senator DRAKE:

– The whole of themwould not, but there would always be somewho have invested in State stock, whowould desire to get their money out, and’ there would always be some who have not: invested money in State , securities who- would desire to invest in Commonwealth stock.

Senator Turley:

– There will always be brokers watching the market?

Senator DRAKE:

– That is so, and advantage would be taken of every opportunity to convert State stock into Commonwealth stock. These schemes are always based on the supposition, first of all. that the Commonwealth will take over States debts to a certain amount and that when it does so it will deal with them in an intelligent manner, and will Have agents in London watching the market for a favorable opportunity to convert the State stock into Commonwealth stock.

Senator Millen:

– But the very knowledge that the Commonwealth will be prepared to operate in that way at any time will prevent State stock falling below a certain figure.

Senator Playford:

– Of course it will.

Senator DRAKE:

– In that case the States would be in no worse position than they will be under the proposal of the Government.

Senator Millen:

– Then the Bill is useless.

Senator DRAKE:

– To my mind it is not only useless, but absolutely mischievous. Before I leave that point, I have been trying to show what is the scheme to which the people of Australia have agreed. The Commonwealth might take over debts of the States to the extent of £100,000,000, which would require for the payment of interest £4,000,000 of the surplus at present going to the States. But if that course were followed the Commonwealth must take over debts of the States proportionately according to population. That is the important point, and that is the safeguard which is removed by the present proposal. I do not say that the States would get any advantage in the reduction of interest, but I have said all along that if there were any advantage gained in the reduction of interest in the future it would be by the Commonwealth, and not by the States whilst the help to the States would be that they would be relieved of portion of the burden that is now crushing them.

Senator Stewart:

– No they would have topay interest on their loans all the same.

Senator DRAKE:

– They would be relieved in this way. that they would have the assurance that the funds in the hands of the Commonwealth Treasurer would be devoted to the payment of interest on their debts taken over. To that extent they would be relieved.

Senator Stewart:

– They would have no such assurance. Suppose we had a highly protective Tariff which would not yield an adequate revenue?

Senator DRAKE:

– The honorable senator does not follow me. The Commonwealth Government may finance in any way they please, but if by an Act of Parliament we take over £1 00,000,000 of the debts of the States the Commonwealth must find the interest on those debts.

Senator Stewart:

– That is so.

Senator DRAKE:

– It would be for the

Commonwealth Government to find the interest on States debts to that extent, and the States Treasurers would be relieved to that extent. The States in that case would be satisfied, because that would carry out the course contended for at the Convention. The Commonwealth Treasurer would to that extent be made responsible, and would have to do his own financing. If his revenue ran short he would have to raise extra revenue, and he could not go on gaily spending revenue, and then say to the States: “The revenue from Customs and Excise is all gone, and you must make provision for the payment of interest on your debts.” I conclude this portion of my remarks by saying that, in my opinion, the scheme sanctioned by the Constitution is the right one to adopt. It would put us on the high road at once to the conversion of the States debts into Commonwealth stock, and it would be fair to the States, because the States Treasurers would have the assurance that the balance of Customs and Excise would be used for the purpose of paying interest on States debts taken over by the Commonwealth. The proposed amendment of the Constitution strikes that provision out. Of course there is an object in doing that, and I have no doubt it is the one I have suggested. The reason for striking out that provision is that the Commonwealth Government desire to have the power to use the revenue from Customs and Excise which they have at the present time to enable them to take over the loans of particular States as they fall in. I say that is wrong and unjust, for the reason that the fund is very limited, is gradually becoming smaller, and Governments up to the present time have shown an absolute disinclination to increase the fund in any way. They will do nothing in the way of raising additional taxation in order to increase the fund, and they have shown themselves absolutely reckless as to the way in which they spend it. Therefore, unless some great change takes place, there will not be enough in the fund at their disposal to pay the interest on the whole of the debts, and in the meantime they will have taken over unfairly and contrary to the terms of the Constitution the debts of some of the States. Another Government taking office will say that they are not responsible for what their predecessors have done. It is right that I should point out that the last Victorian loan falls due in 1929. There is a New South Wales loan falling due in 1935, and the last Queensland loan will not fall due until 1952. West Australia’s big loans do not begin to mature until 1927, and one of her biggest loans, of nearly £7,000,000, will not fall due until 1935. What might happen under the scheme which the Government now propose is this : They will have this fund of -Customs and Excise revenue which may be returned to the States or may be used for paying, off loans, they will pay off’ loans of the States as they fall due, and the time must come when a loan will fall due and the Commonwealth will have no fund of revenue returnable to the States which car? be used for the purpose of meeting that Joss. If we have then in power a Commonwealth Government of the same frame of mind as the present, they will simply say, “ We have no fund now’ for the payment of interest on the debts of the States,” and they will hand the debts back to the States, who will have no Customs revenue to enable them to meet the interest upon them. That would be a most unsatisfactory state of things, and I hope honorable senators will think for a verv long time before they allow this provision, which was embodied in the Constitution to safeguard the interests of the States, and especially of States financially weak, to be struck out. I have referred to the insertion of the word “ redeem.” I should like to know the object of putting in this word. ‘ I do not’ know on what ground it can be considered necessary-. We have the authority of Quick and Garran that all necessary provision is made for conversion, renewal, consolidation, or redemption when the States debts are taken over. The only reason for using the word here is that if we do not take over the whole debts we must have some other word put in to enable us to deal with loans which are not taken over. If the loans are taken over in the way prescribed by the Constitution, there can be no doubt that all power of conversion, consolidation, redemption, and everything else goes, as of course, and there is no necessity to put in the word “redeem.” If we assume liability for State debts under the Constitution, we can do what we please with them. It is beyond a doubt that we can convert, renew, consolidate, or redeem them. So that the proposed amendment of the Constitution is not necessary, except as a sequel to this proposal that the safeguard with regard to a proportional part of the debts of each State being taken over shall be struck out. It should be borne in mind that we have not yet had an opportunity to discuss in the Senate any scheme for the transfer of the debts of the States. The discussion which has taken place on the subject in the House of Representatives has been of a most unsatisfactory character. Honorable members in another place have talked about four different schemes, ‘and have decided upon nothing.

Senator Millen:

– They have never had a thorough discussion upon any one of the schemes.

Senator DRAKE:

– No. they have been taken up from time to time as a sort, of pastime for the evening. When honorable members in another place have had nothing else to talk about, one of these schemes has been brought up for discussion.

Senator Fraser:

– We could not do justice to it in a month.

Senator DRAKE:

– One scheme is brought forward, there is a lot of talk about it, and it is laid aside. Then another scheme is propounded, and, later, a third and a’ fourth ; but the Government have no broad scheme to which thev are pledged. They ask us to agree to a proposed amendment of the Constitution, apparently with no other object than to enable the Commonwealth to take over the loans falling due next year. Of these. Victoria owes about £4,000,000, South Australia £1,037,500, and Tasmania a small amount. Of the loans falling due the following year New South Wales owes nearly £3,000,000, Victoria and South Australia about £2,000,000 each, and Tasmania a small amount. Western Australia, has a debt of £1,500,000 falling due in 1:910.. and Queensland’ a debt falling due in 1913. Clearly, therefore, the reason for rushing through, this measure now is to enable the Commonwealth to assist a State which has nearly ,£6,000,000 falling due within the next two years. I do not make this statement because of any provincial feeling; but it is necessary to mention the fact when it is proposed to sweep aside the financial safeguards of the smaller- States. I am of opinion that the Senate should not agree to the proposed amendment of the Constitution. At any rate, it should not do so until the very important question of a scheme for the transfer of the debts of the States to the Commonwealth has been discussed and decided.

Senator FRASER:
Victoria

– I entirely agree with what I have heard of Senator Drake’s remarks. In my opinion, there is no immediate need for an amendment of the Constitution in the manner proposed, and it would be a most dangerous step to take under present circumstances. I am mixed up in money matters a great deal, dealing in debentures in both London and Australia, so that I know a little about the subject, and it is my firm conviction . that Victoria and the other States can borrow more cheaply than the Commonwealth could borrow. Australia is booming, financially. Its prospects were never brighter. I could give ample reasons for making that statement, and would not exhaust them if I spoke for an hour. When their loans mature, the States will be in a position to redeem part of them with Australian capital. Victoria has already taken such action, and is prepared to continue it. That is the sensible and best way of inspiring confidence in our debenture- holders in England and elsewhere. Our credit will improve enormously if we repay part of our loans as they mature, and borrow locally. What little has been done bv Victoria and New South Wales in that direction has already given great confidence to the English lender. But it would be a mistake to attempt to redeem before the date of maturity, except when money is extraordinarily cheap, and a dear market is expected to follow. Such occasions are very rare. I do not remember any of late years. The Federal Government will* do an injustice to some of the States if it provides for the taking over of the States debts, and nothing is to be gained by doing so at the present time. Let the States deal with their own debts. They are more interested in the matter than we are. If we take over the existing debts, and the States go on borrowing, we shall have to take over more debts later on. Victoria, however, will be able to pay off £[2,000,000 during the coming year.

Senator Playford:

– And the honorable senator does not agree with Senator Drake that the Bill has been introduced by the Government to assist Victoria.

Senator Macfarlane:

– Let us stand by the Constitution.

Senator FRASER:

– I agree with thehonorable senator, that- we should stand by the Constitution. I do not think that any saving would be made if the Commonwealth took over the debts of the States, because they can borrow as cheaply as, if not more cheaply than, it can. Some of the States have borrowed very largely. The indebtedness of New, South Wales, for instance, is ,£86,000,000 or £[87,000,000, though that will amount to nothing if her present rate of development continues. But some States have borrowed very largely and others very lightly. As the population of Queensland or Western Australia, or even Tasmania, increases, so its debts win proportionately become lighter. The debts of the smaller States will be made light bv bringing farmers from the old country, settling them upon the land, increasing the output! and thus making themselves strong financially. That is the true way te proceed.

Senator McGregor:

– Have we a large “area of land upon which to settle immigrants ?

Senator FRASER:

– There are millionsof acres available in Queensland alone.

Senator McGregor:

– But the honorable senator was speaking of Victoria.

Senator FRASER:

– There is plenty of land available in Victoria and New. SouthWales. It is altogether too late in the session to deal with this important subject. It would not be doing justice either to the subject or to the States to pass the Bill. Moreover, before the matter is dealt with here, the Premiers and the Treasurers of the States ought to be brought into consultation with the Prime Minister and the Treasurer, or the Government of the Commonwealth with regard to the conditions. It is not proper to ignore the States Premiers in a matter in which they are deeply concerned. They are taking a much keener interest in the subject than we are, and are acting with great caution. The Premier of Victoria has taken action already. I (have no doubt that when the Victorian loan of £4,000,000 falls due at least £2,000,000 can be paid off by the people of the State. At the present time the local banks are full of .money. The banks in Australia are now lending money in London.

Senator McGregor:

– I thought the Labour Party had driven it all away?

Senator FRASER:

– I am quite sure that they have not attracted money here..

Senator Millen:

– The fact that the banks are holding money shows that people are not investing.

Senator Stewart:

– The banks have sent the money to London for fear that it might be stolen by the Socialists.

Senator FRASER:

– I am not dealing with that view of the question. At the present time money is dearer in London than in Australia. That has been the case on and off for years past. Therefore our debentures will sell better in Australia than in London. A few years ago I bought ^£8,000 worth of debentures in London by a cablegram from a bank here, made a saving of about i£ per cent., and saved the exchange on my produce going Home. That is being done at the present time, and it can continue to be done. The banks are investing their money abroad, and not here. The discount rate is 4 J per cent., which is J- per cent, over the Bank of England a:ate. Does not that tell a tale? Does it not show that there would be no use in going to London at the present time either to redeem or convert? It would be the very worst time to go there. Let us rely upon our own resources. Even if we in Victoria pinch a little when the next loan becomes due, and pay one-half of the £4,000,000, we may save per cent, interest, and not J per cent., as the Government has estimated. I do not believe for a moment that there would be any saving effected if the Bill were passed. ‘ It was ant ici Dated that when the Federation was established there would .be as great a saving effected in Australia as in Canada, but in this regard, unfortunately, things are not the same here as in Canada.

Senator Stewart:

– They are better here.

Senator FRASER:

– In Australia we (have a better country, and more production. Canada cannot be compared with Australia in the matter of production. In the. interests of the States I cannot support the

Bill, much as I should like to do so if I could see my way clear.

Senator PEARCE:
Western Australia

– This is, I think, a good Bill, because it proposes what seems to me to be the most practicable alternative in dealing with the question of the transfer of the States debts. At the present time, as Senator Drake pointed out, the Constitution provides that if the Commonwealth takes over a portion of the debt of one State it must take over a proportionate amount of the debts of the several States. That in itself would not accomplish’ more than a change in trusteeship of the debts. The responsibility for the amount would be shifted from the States to the Commonwealth, but it would not necessarily follow that any saving would be effected. Senator Drake went on to point out that the Commonwealth might then come forward as a buyer of the stock, and redeem it as it came upon the market.

Senator Millen:

– Is there likely to be any saving effected if this Bill should become law?

Senator PEARCE:

– I shall deal with that point presently. I am now dealing with the contingency pointed out by Senator Drake. It seems_ to me that if his idea were carried out. it would be just the way to prevent the possibility of effecting any saving. If the bond-holders knew that the six States, in the form of the Commonwealth, had become responsible for stock for which p.reviously only one State was responsible, and if there is anything in the contention that Commonwealth stock would realize a higher price than the stock of a single State, then the possibility of the Commonwealth deriving an advantage after becoming responsible for the stock fades away. In fact, if it bought it, it would probably have to buy at a price above par. That seems to show the inadvisability of the present system under which the Commonwealth must take over a proportionate amount of the debts of the other States when it takes over a portion of the debts of one State.

Senator Millen:

– There is no compulsion upon the Federation to take over any of them.

Senator PEARCE:

– There is a compulsion if it takes over a portion of the debts of any one State.

Senator Millen:

– The question I am trying to get the honorable senator to discuss is the advisability of taking over any States debts at all.

Senator PEARCE:

– I can only deal with one question at a time. Senator Drake sought to show that there might be an advantage in the present constitutional provision in that when we took over a portion of the debt of one State we should have to take over a proportionate amount of the debts of the other States, and that we could take any opportunity the market afforded to buy back the stock, and thereby might effect a saving. I have been trying to show that the very thing which he pointed out would defeat the possibility oft making any saving. Senator Millen has asked would it be any advantage to take over the debts of the States at all. There would be two advantages, I think. One is the possibility of effecting a saving in the rate of interest, and the other is the lessening of the borrowing propensities of the States.

Senator Fraser:

– Will the States agree to refrain from borrowing?

Senator PEARCE:

– That is a question for the people of the Stales, who are the same as the people of the Commonwealth, to answer. I believe that they are of opinion that it will be. necessary “to pursue a more cautious borrowing policy in the future than has been pursued in the past. As regards the relative extravagance of the States and the Commonwealth, let me point out that during a period of five and a half years no debt has been incurred by the Commonwealth, and that many public works, which formerly were carried out with loan moneys bv the States, have been paid for out of revenue bv the Commonwealth.

Senator Drake:

– That would not have been done if it had not had the surplus to draw upon.

Senator PEARCE:

– That surplus was formerly in the hands of the States. The Commonwealth derived no new revenue, because Customs and Excise duties existed prior to Federation, and the revenue was used by the States. Some States had a larger Customs and Excise revenue prior to Federation than they have had since that time, but nevertheless they carried out such works with loan moneys.

Senator Millen:

– We should have to adopt a borrowing policy if we went in for railway construction.

Senator PEARCE:

– I am not convinced that we should. T could show that it would be possible for the Commonwealth to carry out a railway policv without raising a loan ; but that would not be pertinent to the question before the Senate. Let us consider what the proposed alteration of the Constitution would make possible. At the present time we are committed to the policy that if we take over a portion of the debt of one State, we must take over a proportionate part of the debts of the other States, and it is now proposed bv this Bill to enable the Commonwealth to take over the loans of any State as they mature. When a loan matures, the Commonwealth, will be in a position to go upon the market, and, instead of. treating with the holders of the stock, obtain money from other sources,, and pay it off. If the stock realizes a higher price, the Commonwealth, instead of the original bond-holders, will gain the advantage.

Senator Millen:

– That would happen if the State conducted the transaction.

Senator PEARCE:

– But the States have almost invariably had to convert their loans at a loss.

Senator Millen:

– Oh, no.

Senator PEARCE:

– Three or four years ago the Victorian Government had to face the conversion of a loan, and added £300,000 to the public debt.

Senator Millen:

– Does not the honorable senator think that he ought to take some notice of the general tendency of interest rates extending over a longer term of years ?

Senator PEARCE:

– I am taking the practical experience of the State of Victoria since the establishment of Federation, although I admit that at the time she was in severe financial straits.

Senator Fraser:

– Our credit was very had at Home, on account of drought and booms.

Senator Sir Josiah Symon:

– Probably the Commonwealth would have had the same, experience.

Senator PEARCE:

– It may have had. But, rightly or wrongly. I think that the financial standing of the Federation, in which six States are combined, which possesses unlimited powers of taxation, and which, at the expiration of the Braddon section will have the exclusive control of taxation through Customs and Excise, must be infinitely greater than that of the States,, whose powers of taxation are secondary, and from whom will pass, at the expiration of the Braddon section, the right to three-‘ fourths of the Customs and Excise duties.

Senator Millen:

– Can the honorable senator mention a single authority, other than those who have put forward financial schemes, in support of his view?

Senator PEARCE:

– I shall develop my argument in my own way. Surely any capitalist who had money to invest would prefer to take the security offered by the Commonwealth, possessing powers of taxation such as I have mentioned, in preference to that offered by States possessing only secondary powers., of direct taxation, and having no authority whatever to levy taxation through the Customs. Let us apply our own common-sense, and put ourselves in the place of capitalists with money to lend. We should undoubtedly regard the Commonwealth as offering the best security.

Senator McGregor:

– That is what they told us when we were considering the question of establishing Federation.

Senator PEARCE:

– If the security offerred by the States is represented bv the denomination of fifty, surely the consolidation of the six States into one body should have the effect of raising the security value to seventy or eighty.

Senator Millen:

– Provided the guarantors are of equal standing.

Senator PEARCE:

– The guarantors are of equal standing, in so far that the power of raising money wherewith to pay interest on loans is fairly equalized. What authority shall we take upon this question? Is it proposed to pay regard to what is stated by leader writers in the newspapers, who, oil the one hand, may be dominated by a desire to extend the power of the Commonwealth, and, upon the other, by a desire to extend the powers of the States ? We must remember that many of the articles written in the newspapers even by financial authorities are, on the one hand, tinged with a desire to extend the powers “ and functions of the Commonwealth, and, on the other, by a desire to restrict our powers.

Senator Millen:

– The honorable senator must know that the States Governments have certain financial advisers in London, to whose advice they attach some weight.

Senator PEARCE:

– I attach considerable weight to the opinions voiced bv the Treasurer after his recent visit to England. Sir John Forrest has been, not only Treasurer of the Commonwealth, but Treasurer in his own State for many years, and no one, however bitterly he may be opposed personally or otherwise to the right honorable gentleman, can deny that lift has had considerable experience in financial matters. The knowledge he has obtained enables him to form a fairly good judgment upon this question. Owing to his long association with the finances of Western Australia, he is able to view this matter from the State point of view. As a matter of fact, Western Australia has less to “gain than any other State, for the reason that she has provided a sinking fund, which in fifty-five years will extinguish her debts. That fund is inviolable, and is quite beyond the reach of the State Treasurer.

Senator Drake:

– Then this question is not of such vital interest to Western Australia as to some of the States that have not provided for sinking funds?

Senator PEARCE:

– I am merely indicating the position of Western Australia, in order to show that Sir John Forrest would not be swayed by any desire to bring about a state of affairs that would be especially favorable to Western Australia. ‘ He went to London, where he was brought into contact with a number of the financial experts on the Stock Exchange.

Senator Millen:

-Have they anything to gain from a big conversion scheme ?

Senator PEARCE:

– I take it that Sir John Forrest is not so simple as to take the opinion of these people without considering the source from which it comes, and the motives which might probably cause the advice to be given. But he unmistakably said on his return to Australia that he was convinced, from the inquiries which he had made, and looking at the situation all round, that the substitution of Commonwealth consols for State stock would be advantageous, and that those consols could be placed on the London market at 3 per cent. There are many State stocks to-day which bear interest at 4 per cent and 4J per cent. I think that the cheapest State stock bears 35 per cent, interest. So that there wound be a saving in interest of per cent, on the cheapest State stock. The question arises - how can we best take over the indebtedness of the States, substituting Commonwealth for State stock; and achieve that saving? Well, as has been pointed out, if we were to take over the States debts as a whole, and go in for a grand conversion policy, the existing bond-holders would not surrender the advantage which they have for nothing. They would not be so philanthropic as to give up the 4 and 4$ per cent. stock which they now hold simply for the purpose of enabling the Commonwealth of Australia to accomplish a conversion scheme of 3 per cent. Therefore, no conversion scheme, to apply to the whole of the State stocks before maturity, is possible or advisable. That being so, the only practical scheme that will achieve a saving is one which will substitute Commonwealth consols for States stocks as the debts mature.

Senator Millen:

– That argument is based on the assumption that the Commonwealth can borrow on better terms than the States.

Senator PEARCE:

– Yes.

Senator Dobson:

– The Commonwealth cannot borrow at 3 per cent. now, surely ?

Senator PEARCE:

– We are not talking of any particular juncture. ‘The Government, I take it, thinks that the Constitution should be altered, so that when we take over a debt that is maturing we shall not be bound - as we should be by the Constitution as unaltered - to take over a corresponding debt of the other States, ah.d thereby make the bond-holders a present of the appreciated value given to their bonds by the substitution of Commonwealth for State securities.

Senator Dobson:

-Taking over debts does not mean that we are bound to convert them.

Senator PEARCE:

– I know that; but under the Constitution as it stands, if we took over a loan of £5,000,000 from Victoria, we should have to take over a proportionate amount of debt from Western Australia. Assuming that we took over £200,000 from Western Australia and converted it at 4 per cent. - assuming that its value in the market to-day was £95 - there would have to be ear-marked the number of bond-holders whose securities had been transferred from the State to the Commonwealth.

Senator Drake:

– I do not think so.

Senator PEARCE:

– There would have to be a proper bookkeeping system. Surely each of those bond-holders would have to be designated?

Senator Drake:

– No.

Senator PEARCE:

– Surely it would not be a matter of becoming responsible haphazard for £200,000 of debt? What £200,000 ? We should have to designate the stock-holders whose stock had been transferred. That being so, we should put those stock-holders in the position of being able to realize a higher price for their stock because of the added security given to it above what they would be able to realize if Western Australia alone had continued responsible for it.

Senator Drake:

– I have not proposed anything of that kind.

Senator PEARCE:

– But that would have to be done. Suppose the Commonwealth wanted to treat with the bond-holders for whose bonds it was responsible. Surely it would have to know who they were. The very action of the Commonwealth Government in becoming responsible for a proportionate amount of the debts of the other States would add a value to those securities, and would place the bond-holders in an advantageous position, which would make it more difficult for the Commonwealth to redeem their stock.

Senator Drake:

– I think that that is purely imaginary.

Senator PEARCE:

Senator Drake seems to think that the possibility of the Commonwealth taking over, say, the £5,000,000 loan which is coming due in Victoria, constitutes an injustice to the other States, if a proportionate amount of their debts, is not also taken over. I cannot see that there is any injustice. Senator Drake argued as if he thought that the Customs and Excise revenue were a fixed quantity, that it is not at present sufficient to pay the interest on the debts of the States, and that, therefore, the latest debts to fall due would be at a disadvantage, because the funds of the Commonwealth would be exhausted. But we cannot argue on those lines, because the Commonwealth revenue is undoubtedly an expanding quantity. It has been so for a few years past. As our population increases, our revenues will increase.

Senator Drake:

– It has not expanded so fast as the expenditure has done.

Senator PEARCE:

– The honorable senator is arguing on the assumption that a great many proposals for new expenditure which have been made will be sanctioned by Parliament. There is a penny postage proposal before Parliament at present, but it has not been passed and I do not think that it is likely to be passed. The Bounties Bill is also before us, but it has not been passed. A number of proposals for increasing expenditure are on the stocks to-day, but they are by no means on the statute-book. I think that many of them will never get there. Senator Drake sees many objections to the proposal from the point of view of the smaller States. I confess that I think it would be a good thing for Australia if the Commonwealth were to substitute Commonwealth consols for Victorian stock when the next Victorian loan matures. It would result in a saving of interest to Victoria, and I hope that Senator Drake will concede that, while Victoria would secure a saving, on the other hand, she would still be responsible for the interest on the amount of debt taken over. So long as the bookkeeping sections remain in the Constitution, so long Victoria and the other States will be responsible for the interest on their debts.

Senator Drake:

– Not after they are taken over.

Senator PEARCE:

– I think so.. Let the honorable senator look at section 105, of the Constitution, as it will read as proposed to be amended -

The Parliament may take over from the States their public debts or any part thereof, and may convert, redeem, renew, or consolidate, such debts or any part thereof; and the States shall indemnify the Commonwealth in respect of the debts taken over, and thereafter the interest payable in respect of the debts shall be deducted and retained from the portions of the surplus revenue of the Commonwealth payable to the several States, or if such surplus is insufficient, or if there is no surplus, then the deficiency or the whole amount shall be paid by the several Slates.

Under the bookkeeping provisions of the Constitution, the surpluses returnable to the States are the surpluses remaining after the expenditure incurred in keeping up the Departments in each State has been, deducted from the receipts collected in that State. So long as those provisions continue, so long will Victoria be responsible for the payment of interest upon her debt. Victoria, whilst still being responsible for the interest, would, as a consequence of Commonwealth action, effect a saving. If that result can be achieved by the Commonwealth without injustice to any other State, why should it not be done? Even if, as the result of Commonwealth action, Victoria were called upon to bear an added burden, she would still have to pay.

Senator Clemons:

– When the honorable senator supposes that, he destroys the whole scheme.

Senator PEARCE:

– I do not imagine that Victoria will be placed in a worse position. I am merely replying to Senator Drake’s contention that the taking over of the Victorian loan of -£5,000,000, which will shortly mature, would constitute an injury to the other States.

Senator Clemons:

– It will create a disparity in the matter of benefit at any rate.

Senator PEARCE:

– I have already pointed out that under the old system an equality of benefit could not be conferred if the Commonwealth took over the States debts. “Under the new system, whilst we cannot insure an equality of benefit to the States at once, we should not - even at the worst - injure any other State. I have always maintained that the Commonwealth was established for the benefit of the individual States, and that if Commonwealth functions can be exercised so as to confer a benefit upon any State without injury to the others, it should be so exercised. Under the Constitution in its present form, we cannot exercise our Commonwealth functions in such a way as to confer benefit upon the State in this connexion. But the amendment proposed by the Government opens up a way by which that result can be attained. For these reasons I heartily support the Bill. I urge honorable senators - even if thev cannot see that it will result in any benefit to their own States at the present time - to pass it, because I believe that in the matter of bargaining as to the financial relations between the Commonwealth and the States, we hold the upper hand. The Braddon section of our Constitution will expire shortly, and the Commonwealth is practically in a position to dictate to the States the conditions under which it. or some modification of it, shall continue to be operative. The question of whether the States shall have the power to continue to borrow outside of Australia rests almost with the Commonwealth to decide. Western Australia is vitally concerned in this question, but I am prepared to believe that whatever terms are arranged, the Commonwealth will see that the development of no State is retarded. We need have no fear of the future, because the question of the financial relations of the Commonwealth to the States is one which we shall decide, and decide justly. If, by passing this Bill, we can enable the Commonwealth to effect a saving upon the conversion of the Victorian loan of £5,000,000, which will shortly mature, we shall do good work.

Senator Stewart:

– But we want to know the Government policy as a whole.

Senator PEARCE:

– It does not matter a fig what is the policy of the Government upon the question, because if the Constitution be amended in accordance with the terms of this Bill, the policy which will be of consequence will be that of the Government which is in power at the time the loan matures. Let us assume that the Government said, “ We are going to take over every loan as it matures.” Wouldthat policy bind future Governments?

Senator Millen:

– Then we may have a Government taking over a loan upon behalf of one State and another Governmait declining to take over a loan upon behalf of another State.

Senator PEARCE:

– Yes. At the same time I think that the passing of this Bill will indicate that each loan, as it matures, will be taken over. We do not lay down any hard-and-fast rule in the matter, and there are reasons why we should not do so. Is the policy of the present Government in this connexion a matter of any consequence? What is of importance is the opinion which is entertained by the people of Australia. That alone will shape the policy of future Governments, and I think that those Governments will find that there is a consensus of opinion in favour of the substitution of the Commonwealth credit for that of the States.

Senator Drake:

– The Constitution does not prevent that being done now.

Senator PEARCE:

– It enables it to be achieved in a manner that I think would be harmful to the States.

Senator Clemons:

– If the Commonwealth took over the Victorian loan of £5,000,000, which is about to mature, tomorrow, the Government of this State might borrow another £5.000,000 the next day.

Senator PEARCE:

– The question as to the terms upon which any loan shall be taken over is a matter for negotiation between the Federal and States authorities, and it is quite possible for us to lay down conditions which would prevent that. Of course it is for the State Government to say whether they will agree to those conditions.

Senator Givens:

– The Commonwealth has the power to fake over that loan, if it chooses to exercise it, in spite of the Victorian Government.

Senator PEARCE:

– Exactly. But it might not see fit to exercise it unless the State Government bound itself to certain conditions. It is because of that fact that I have already pointed out that this Parliament practically has the determination of the conditions under which some modification of the Braddon section shall continue in force. That I believe to be a position of advantage, and I support the Bill.

Senator MILLEN:
New South Wales

Senator Pearce, a few minutes ago, appealed to honorable senators, even if they were not enthusiastic regarding the measure, to support it, because he ventured the opinion, or hope, that some good might result. I hardly know that we ought to pass legislation, much less amend the Constitution, without some clear objective beyond the mere hope that some good may result. What is the objective of this measure ? What do the Government seek to accomplish? What is it the Government propose ?

Senator Playford:

– Practically to take over an additional £34,000,000 or £35,000,000 of debt.

Senator MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917

– Are the Government making any proposal to take those debts over? Not a bit.

Senator Playford:

– We are proposing to take the power.

Senator MILLEN:

– Exactly. The Government say. that they want power to do certain things, and I ask the Minister of Defence whether the Government, as a matter of Cabinet policy, has determined to take over the whole of the debts?

Senator Playford:

– Not at once.

Senator MILLEN:

– Or at any time?

Senator Playford:

– Here it is - all laid out by Sir John Forrest.

Senator MILLEN:

– If it comes down to “ Here it is - all laid out by Sir John Forrest,” we might as well go home.

Senator Playford:

– The Government have approved.

Senator MILLEN:

– The Government have approved of what?

Senator Playford:

– Of Sir John Forrest’s scheme.

Senator MILLEN:

– The Government have not matured a scheme for taking over the States debts, or, if they have matured a scheme, they have not disclosed it to the public. Before we attempted to alter the Constitution to enable certain steps to be taken, the Government ought to have made up their mind that those steps would, if possible, be taken. But the Ministry have not yet determined that it is possible to take over the whole of the debts, even if this alteration of the Constitution be made. We have not arrived at any determination with the States as to whether they are willing to face the probably necessary restrictions on their future action if the debts be taken over. What are we altering the Constitution for? It is proposed to alter the Constitution on the mere chance - as a sort of legislative fishing excursion

Senator Givens:

– To “ go blind.”

Senator MILLEN:

– If it were not for the fear of Mr. Judkins that would be a very apt description on the part of Senator Givens. Whatever I might do in my lighter moments, I am not prepared to “go blind” in the amending of the Constitution. For the Government to invite us to amend the Constitution, when, if the amendment be secured, they are not prepared to take any steps in consequence appears to me to be putting the cart before the horse. If the Government had any definite scheme advantageous in itself and acceptable to the States, and there was some portion of the Constitution which was a hindrance or a block, I could understand the Government coming to Parliament and the country and saying - “ Here is the scheme we propose; unfortunately, one of the provisions in the Constitution stands in the way, and we ask you to remove the difficulty and enable us to give effect to the scheme we have matured.” But the Government have not done anything of the kind.

Senator Playford:

– Oh, yes, we have; the scheme is all right.

Senator MILLEN:

– The Minister may talk in that way, but-

Senator Playford:

– Perhaps Senator Millen will read the scheme?

Senator MILLEN:

– I have read Sir John Forrest’s scheme, and I shall deal with it presently. Is the Minister of Defence prepared to say that the Ministry have absolutely approved of the scheme, and will make it a plank of the Ministerial platform? If that be so, I may remind the honorable gentleman that there are still in Australia sovereign entities known as States, and that those States are not prepared to be brushed on one side by the honorable gentleman’s assurance that Sir

John Forrest has approved of a certain course of action.

Senator Playford:

– The Ministry have approved.

Senator MILLEN:

– Any scheme ought to have been discussed with the States, and then if there had been found to be a provision in the Constitution which operated as a block, an amendment could have been proposed in the direction known to be necessary. But we are now asked to amend the Constitution on the off-chance, that, if we do so, some scheme may ultimately be accepted by the States and the Commonwealth. I direct attention to what I regard as the most marvellous position I ever heard of in either public or private life. The Commonwealth, or certain of the leading men connected with the Commonwealth Parliament, are becoming greatly excited with the idea that thev shall be allowed to take over’ somebody else’s liabilities. It is not the States which are worrying about this matter, but a few Federal gentlemen, who seem to think that they have a special mission to do something of .magnitude. I ask any honorable senator what would happen if someone came rushing after him post haste, imploring to be allowed to take over his liabilities? It is a peculiar position; and I must say that if any one came after me in that way I should not keep him waiting long. Why this haste? Why is it that Sir John Forrest, Sir George Turner, Mr. Knox. Mr. Harper, and one or two others are trying to excel themselves, and each other, in a wild desire to take over somebody else’s debts?

Senator Givens:

– Who are Knox and Harper ?

Senator MILLEN:

– I have read the schemes of those gentlemen, and I conclude that thev consider themselves qualified to offer advice to us on financial questions.

Senator O’Keefe:

– The honorable senator will admit that one of the chief arguments in favour of Federation was the consolidation of the States debts.

Senator MILLEN:

– So many utterly ridiculous promises and statements were made at that time, that-

Senator O’Keefe:

– That is no answer; does the honorable senator admit that what I have stated was one of the chief arguments used to. induce people to vote for Federation ?

Senator MILLEN:

– I know it was one of the inducements held out, but it was an inducement for which there was no moral or actual justification.

Senator O’Keefe:

– But it may furnish a reason why so many gentlemen are anxious to deal with the matter.

Senator MILLEN:

– That may be; but it was pointed out that as a result of Federation, we were to have savings in every direction. Listening to the arguments then used; I know that I came to the conclusion that if we had a big enough Federation we could run the Commonwealth Government for nothing. It was pointed out that under the States there were halfadozen commanders-in-chief, whereas under the Commonwealth there would be only one; and that in other directions there would be an enormous saving. With regard to the public debt it was said that we were going to save from 10s. to 20s. in every £100 of debt. But all who had looked into the matter knew that the gentlemen who made those promises were victims of their own zeal.

Senator Givens:

– If we have no power to restrict future borrowing by the States there will be no advantage in taking over the States debts.

Senator MILLEN:

– I shall deal with that point, but at present I am’ referring to the anxiety on the part of a limited number of gentlemen that the Commonwealth shall take over the States debts’, and to the fact that the States are not troubling themselves at all in the matter. There have been no deputations asking the Federal authorities to take over the States debts ; and I ask why it is that we find this limited number of Federal politicians - statesmen, if they like - so anxious, even to the extent of amending the Constitution, for the Commonwealth to be allowed to take over the liabilities of the States ?

Senator O’Keefe:

– Is it not a fact that in every States Parliament there is a great deal of anxiety as to what will happen when the Braddon section ceases to operate?

Senator MILLEN:

– The honorable senator is anticipating me a little. I shall show directly why I think it is necessary thatwe should not deal with the States debts by themselves, but with them as part of the whole financial position, which we shall shortly have to pass under review. So far as the States debts are concerned, I repeat that the States have never troubled about the matter. Whenever the matter has been brought up at Conferences of Premiers, the States have shown themselves extremely indifferent in the matter of transferring the debts, but extremely tenacious of their right to continue to borrow if they think fit. When Senator Pearce was speaking I asked, by way of interjection, what advantage he could point out in the federalizing of the States debts. The honorable senator mentioned two advantages - a saving in interest, and a lessening in the borrowing propensities of the States. The whole of the arguments we have heard this morning in favour of the Bill, and the schemes put forward, rest on the assumption that there is to be a saving in interest. What substance is there in that contention ? I asked Senator Pearce once or twice toquote some authorities in favour of his contention. I have every respect for the eminent gentleman Senator Pearce mentioned - Sir John Forrest. But Sir John Forrest is one of the gentlemenwho have put forward a scheme for federalizing the debts; and it is a matter of common experience, in political, as in other walks of life, that where people have arrived at certain conclusions, they will find means and arguments to support those conclusions. On whose authority is Sir John Forrest speaking ? I do not know that Sir John Forrest, simply because he lias been Treasurer of Western Australia, is in a better position, to judge as to the possibility of the federalization of the debts effecting a saving in interest than is anybody else. But I do know that there are certain recognised authorities in London, on whose advice all the States Governments have been content to act from time to time. I would refer honorable senators to the ablest memorandum on this subject that I have been able to obtain - the memorandum prepared by Mr. Coghlan, Agent-General for New South Wales, and presented to either this or the other branch of the Parliament on 22nd June last. It is dated 28th March. 1906, so that it is a recent document. I presume that honorable senators have read it. Throughout this somewhat lengthy memorandum we find a very clear definite expression of opinion on the part of Mr. Coghlan - an opinion based upon the views of the. eminent financial authorities whom: he consulted - that the Commonwealth cannot hope for some time to effect any saving. I shall make two quotations from this memorandum. At page 4, Mr. Coghlan points out that -

If the Commonwealth were to take the place of the various States in the London money market -

And that is what is proposed. Conversion loans are not suggested. It is merely proposed that the Commonwealth shall at first take the place of the States, paying interest and redeeming the loans as they fall due - it would probably not be able at first to obtain money on better terms than the States could do for themselves. Some of the leading brokers who deal with Australian stocks in this country - men of wide knowledge of financial conditions - have been consulted in this matter, and their views are in agreement with those herein expressed.

He goes on to point out - and I invite Senator Pearce’s attention to this statement -

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 hone impossible to realize.

Senator Playford:

– He was referring to the state of the market at the time he wrote.

Senator O’Keefe:

– But the memorandum is a very recent one.

Senator MILLEN:

– Yes, it is dated 28th March, 1906. If it were necessary I could give a dozen quotations from this report showing that Mr. Coghlan makes it abundantly clear that, after consulting the best authorities with whom he could come in touch, he is unmistakably of opinion that there is no possibility for some years of the Federation floating loans upon terms more advantageous than those obtained by the States.

Senator Playford:

– That is only an opinion.

Senator MILLEN:

– Quite sot and the same may be said with regard to the views of Sir John Forrest.

Senator Playford:

Mr. Coghlan based these opinions upon the conditions existing when he wrote that memorandum. He was not referring to what might happen later on.

Senator MILLEN:

– He says that for some years we cannot hope to float loans on better terms than the States.

Senator Playford:

– The Treasurer does not say that we should at once effect a saving.

Senator MILLEN:

– No, but in the memorandum in which he suggests that we should be able to save some millions of pounds, he takes credit for the saving which he declares the Federation would effect from the moment a conversion took place.

Senator Guthrie:

– He consulted high financial authorities in London.

Senator Playford:

– He consulted all the best financial authorities.

Senator MILLEN:

- Mr. Coghlan did the same. Without casting any reflection upon Sir John Forrest - accepting his memorandum as being, entirely well founded - I am prepared to accept as my guide Mr. Coghlan, an official who is not advocating a scheme framed and put forward by himself, but is simply an inquirer on behalf of the Commonwealth, rather than the Treasurer, who, having formulated a scheme of his own, has necessarily an unconscious inducement to find arguments in support of it.

Senator Playford:

– The Treasurer did not formulate his scheme until he returned from London.

Senator MILLEN:

– That is immaterial. The object that he had in view is apparent. It seems to me that there is a very strong desire on the part of many_ of those associated with Federal politics to draw greater power to the Federation. Such a. policy may be right or wrong; I am not going to discuss it, but I think that we find in it an explanation of this desire on the part of successive Treasurers to go on increasing the centralization at the expense of the States. This is not the time to discuss that point; but I think I have pointed out the explanation for the extraordinary position taken up by successive Federal Treasurers, who have become so extremely anxious that the Commonwealth shall take over the States debts, whilst the States themselves evince no concern about the matter. I wish to read a- short extract from an article in the Daily Telegraph by Mr. Nash, whose views are entitled to be accepted with every respect as those of one of the first of Australian financial authorities.

Senator Pearce:

– Has the honorable senator ever read the article written by him in pre-Federation days, in which he forecast the first Federal Tariff? He only went astray to the extent! of about £2,000,000.

Senator MILLEN:

– As to the revenue that it would yield?

Senator Pearce:

– Yes, and the articles that would be taxed.

Senator Drake:

– We made many alterations in the Tariff as submitted.

Senator MILLEN:

– It is ridiculous to refer to the article in question as an indication that Mr. Nash is not a gentleman of considerable financial abilities. He- had a perfect right to assume, from preelection pledges made by those who were leading the Federal movement, that we should have a moderate revenue Tariff. He was disappointed in that regard, and hence his estimate proved incorrect. I shall leave the facts to which Mr. Nash points to speak for themselves. He says -

Sir John Forrest has put forward a statement that there will be a saving by the year 1952 of £15,646,016 if the State debts are taken over by the Commonwealth - that is, on the supposition that the credit of the Commonwealth is all through better than that of the States to the extent of £ per cent, per annum in interest. He might add that if the credit pf the ‘Commonwealth were good for 1 per cent, advantage the whole of the debts might be liquidated out of the savings effected. The point to be decided is whether the credit of the Commonwealth will be any better than that of the States - or even as good ?

Senator Pearce pointed out .what he described as the common-sense view - that men with money to invest would prefer to lend it on the joint security of the Commonwealth rather than upon the security of the individual States. At first sight that appears to be a very strong argument. I would ask him, however, to listen to this further statement by Mr. Nash -

What is the position? New South Wales has a debt of £85,000,000, the bulk of which is earning more than the interest, and last year the revenue of this State was £12,300,000, and there was a surplus of £900,000, after redeeming £360,000 debt. But the Commonwealth, if it took over the debts, would have a liability of £237,000,000, without any assets, with an income of under £12,000,000, and an expenditure of £14,000,000, and for the excess of expenditure it would have to depend upon contributions from the States, which looks in the sounder financial position, quite apart from the desire of the Commonwealth to augment its expenditure in other directions and its socialistic tendencies. Under these conditions we entirely disbelieve in the credit of the Commonwealth being better than that of the States.

I ask honorable senators not to lose sight of these figures. If the Commonwealth were to take over the debts of the States, she would have, under the present financial adjustment, an annual expenditure of £[14,000,000, and an annual income of only ,£12,000,000. I am asked to believe that the Commonwealth, in those circumstances, could negotiate a loan on the

London market better than could New South Wales, which had, last year, a surplus of nearly £[1,250,000 and which, as against its public debt of £[85,000,000, has revenue-earning assets representing more than the whole amount of interest.

Senator Pearce:

– Having regard to the fact that it has unlimited powers of taxation, why should the Commonwealth have a deficit of nearly £[2,000,000?

Senator MILLEN:

– If the honorable senator turns to Mr. Coghlan’s memorandum he will find that one of the principal factors which money-lenders take into account is the extent to which’ a country is taxed !in order to raise revenue. If a national crisis arose, the Commonwealth could raise twice the amount mentioned.

Senator Pearce:

– London financiers would take into consideration the total taxing ‘powers of the Commonwealth. If it relieved the States of the payment of the interest, additional taxation would not have to be imposed.

Senator MILLEN:

– The honorable senator is arguing on the assumption that, in proportion to the extent to which the Federation taxes the public, the States would remit taxation. Can he point to any instance in which taxation has been remitted by the States?

Senator Pearce:

– The States have not transferred their debts.

Senator MILLEN:

– That is immaterial.

Senator Pearce:

– We have not relieved them of the expenditure.

Senator MILLEN:

– Have we not relieved New South Wales of the expenditure upon the public Departments which have been transferred to the Commonwealth, and has not the result of Federation been to give that State a large increase of revenue?

Sitting suspended from 1 to 2.30 p.m.

Senator MILLEN:

– Dealing with the contention of the advocates of this Bill, that a saving of interest would be effected by the federalization of States debts, I have quoted from the document prepared by Mr. Coghlan in support of the view I express, that that is entirely problematical. I should like to direct the attention of Senator Playford. who seems to attach so much) importance to Sir John Forrest’s memorandum, to what that right honorable gentleman has to SaX on the subject. It will be found that he does not claim that there will be any immediate saving. At page 102 of his paper I find that he speaks of it in paragraph 1 as only an “eventual result,” and, in a later paragraph, he uses the words “Australian Consols would in time …” So that Sir John Forrest does not claim that there is any immediate prospect of saving as the result of federalizing the States debts.

Senator Playford:

– He, therefore, does not in any way controvert what Mr. Coghlan says. They appear to be of the same opinion.

Senator MILLEN:

– I accept that, and it is sufficient for mv argument to say that both these authorities agree that there is no prospect of an immediate saving, and that any saving to be made will come eventually, if at all. I emphasize this point, because it shows that the matter under discussion is not at all urgent. Another question I wish to deal with is that of borrowing by the States. Senator Pearce has put forward as two advantages to be derived from the federalization of the States debts, first, a saving of interest - and with that I have dealt - and, second, that it would have a tendency to check the propensity to borrow on the part of the States. We have no guarantee, nor have we any reasonable anticipation of that. I find, on referring again ‘to the documents that the Premiers, at their Conference, made it quite clear that thev were not prepared to give up, or even to have any. restriction placed upon, their right to borrow. Sir John Forrest appears to have agreed to the contention they then advanced. I may, on this point, quote again from Mr. Coghlan’s memorandum. It will be found that, at page 5, he says -

The transfer of existing loan obligations of the States to the Commonwealth coupled with the right of the States to continue borrowing in the London market would lead to disastrous results.

I do not think that that sentence needs amplifying. The position which would arise if the Federation were to take oyer the States debts, and leave the States with a clean sheet, and at liberty to continue to borrow as much as they pleased, would, undoubtedly, in the language of Mr. Coghlan, lead to results that would be absolutely disastrous.

Senator Stewart:

– And leave them in full possession of the assets.

Senator MILLEN:

– Just so. Sir John Forrest agrees to that proposition. In an appendix to the document he has prepared, at page 109, there is a table bearing upon the proposal of the States Premiers. It is practically set out that, according to their proposal, the States are to have full liberty to borrow, only they must borrow through the Commonwealth. The proposal set out, and to which Sir John Forrest agreed, is that, if a State Treasurer desires to borrow, he can notify the Federal Treasurer of his intention to float a loan The Federal Treasurer can then confer, presumably, with London financiers, and advise the State Treasurer as to what the prospects are. But the State Treasurer has the right, after the advice has been received, to say whether the loan shall be proceeded with or not. Practically, the only difference is that to-day the State Government conducts its negotiations with the London financiers itself, and under the proposal here made it would conduct them through) the Commonwealth Treasurer. It will be admitted that that difference is quite immaterial.

Senator Playford:

– No, the Commonwealth would operate; the loan would be floated by the Commonwealth, and would be a portion of Australian consols.

Senator MILLEN:

– If Senator Playford finds any satisfaction in the name, he is welcome to it. I am pointing out that the procedure would be exactly the same as at present, except that the Federal Treasurer would be the individual who would formally launch the loan.

Senator Stewart:

– He would be responsible.

Senator MILLEN:

– But it would not in any way restrict the rights of the States to borrow. At present, if the Government of a State wishes to borrow, it confers with its advisers in London, and may, or may not, act upon the advice received; and all that is proposed here is to place the Federal Treasurer in the position of an inquiring agent for the State Government.

Senator Playford:

– More than that. He is placed in the position of floating the loan as a Commonwealth loan.

Senator MILLEN:

– I do not quite follow the Minister. The Federal Treasurer has no right to veto such a loan ; the State Government could go on with a proposed loan even if the Federal Treasurer were absolutely assured, on the advice he received, that to float a State loan at that particular time would be disastrous. The State Government could still say to the Federal Treasurer - “ We do not care what the results will be, you go ahead and float the loan.” The proposal puts the Federal

Treasurer actually into the position of an agent. That is the only position he can occupy under the proposal to which Sir John Forrest has agreed. I do not think that desirable.

Senator Playford:

– I think that was first mooted by the previous Treasurer, Sir George Turner.

Senator MILLEN:

– It does not matter who mooted it, it is embodied in Sir John Forrest’s proposal, and he has agreed to it, although it is quite clear that he recognises the danger underlying it. The exact proposal is set out in these words -

That within three months after the receipt of such notice -

That is the notice of the State Treasurer to the Federal Treasurer that a loan is desired - the Federal Treasurer shall ascertain the terms and extent of the proposed loan, and notify the State Treasurer thereof, who shall elect whether to proceed with the loan or not to the Commonwealth.

Senator Stewart:

– Does that mean that he can borrow directly, or through the Commonwealth, as he pleases ?

Senator MILLEN:

– No; it means that the State Government can determine after the receipt of the advice obtained by the Federal authorities whether ‘to proceed1 with the loan or not. If the State Government determines to proceed with the loan the Federal Treasurer will be absolutelyimpotent. He will have to place the loan on the London market, even though it should be against his own opinion, and against the advice he has received. He will have no power of veto or revision. All he can do is to secure advice in London, and place it before the State Treasurer. If, having considered that advice, the State Treasurer still determines that the loan shall be floated, the Commonwealth authorities will be absolutely impotent. Although, and here is the point, they are absolutely responsible for the payment of interest on the loan, and for its redemption, they will have no voice in saying whether the loan shall be put on the market or not. A more unbusiness-like proposition I have never been called upon to consider. Sir John Forrest evidently saw the danger of that proposal, although he agreed to it because he seeks to limit lt as to time. At page 105 of his report, in paragraph r6, he says -

It is, I think, inadvisable at the present time to ask the States to undertake f.or all time not to borrow on the London market except through the Commonwealth.

That rather negative way of stating the matter does, I think, show that there is a doubt in Sir John Forrest’s mind as to the wisdom of the proposal, although he has marked his agreement to it by a side note to the proposal. It shows that Sir John Forrest is himself conversant with the danger which must underlie any proposition that one ‘Government shall be called upon to accept responsibility for a loan, and another shall have the right to say whether the loan shall be floated. I have said that there is no urgency in this matter, and that is the chief reason I advance against the consideration of this Bill to-day. It seems to me that in considering a portion only of the financial questions which call for our attention, the Government are going to work in a most slovenly way. The question of taking over the debts of the States should not be considered bv itself, but as a part of the whole financial relationship existing between the States and the Federation. To propose to deal with a portion of the financial question is to deal with it incompletely, and to further complicate matters when later on we are called upon, as we shall’ be, to consider other branches of the financial relationship existing between the States and the Federation. In Sir John Forrest’s memorandum, the right honorable gentleman sets out in the very first page that in considering the financial position, we ought to take into review the questions of the taking over of the States debts ; the amount of the States debts to be taken over; the continuance or otherwise of section 87 of the Constitution ; the amount and basis of the annual payments to the States under the bookkeeping system ; and future borrowing by the States. All these matters, if not immediately under review, must come under review shortly, and I am unable to understand why the Government should propose to deal with one portion of the financial question in this haphazard fashion rather than with a complete scheme, bringing the whole matter under review and affording an opportunity to determine it once and for all time. If this Bill be passed, all the other branches of the subject will still have to be considered, and any one of them may have an important bearing .upon the terms on which we should take over the States debts. Let us take, for instance, “the question of the distribution of revenue upon the -per capita basis, which has already occupied the attention of the Senate. In considering that question we are at once brought face to face with the question of the transfer of the

States debts or the taking over of some other liability of the States. The same thing applies in considering the distribution of the surplus revenue over and above the three-fourths which the Commonwealth is bound to return to the States. Let us take again the amount of the debts it is proposed to take over. These’ vary very much. Tasmania has a debt per head of ,£52, Queensland £%o, Victoria £[40, South Australia -06, Western Australia t:u, and New South Wales .£55. “ There is great variation there, and when we come to look at the revenue to be returned, I find that the variation in the amounts to be distributed to the different States is equally great, whether distributed on the present basis or on a per capita basis. How oan any one divorce these subjects? We should consider all these financial questions at one time. We might find that the adoption of the per capita system of distribution of expenditure and revenue might be of special advantage to one State, and the taking over of the debts might give a corresponding relief to another State, and we should thus have that give and take, which we understood would operate when Federation was inaugurated. To take over the States debts bv themselves will simply render the final adjustment of the financial relations between the Commonwealth and the States more complicated and difficult. What I wish to see is a complete divorce between Federal and States finance. I know of nothing more pernicious 1 an , a system which throws upon one Government the responsibility of raising revenue, and gives to another the privilege of expending that revenue. Whether in private or in State matters there can be only one result of such a system - the spending body will always be dissatisfied. That is the position of the States to-day,. We continually hear complaints from them concerning the method by which the Federal authorities conduct their affairs. It does not seem to matter how much revenue the Federation receives, we mav receive twice as much as we do. and return twice as much to the States, and they will spend it without difficulty,bbecause the responsibility of raising it will not rest on their shoulders.

I wish to make each Government complete in itself, as the more frequently thev come into contact the greater the opportunity will there be for friction to arise between them.

Senator Stewart:

– How does the honorable senator propose to do it?

Senator MILLEN:

– Certainly not by, dealing with a portion of our financial arrangements. The whole subject ought to be brought under review at the one time.

Senator Stewart:

– We cannot do it bytaking over the whole of the States debts.

Senator Playford:

– Yes, we can. We would have no money to repay then.

Senator MILLEN:

– If my honorable friend has studied the memorandum of the Treasurer he will know that the latter had in his mind two things - either the possibility of payment by the Federation to the States, or the possibility of payment by the States to the Federation. Each of them is undesirable. It is far better to look thoroughly into the whole matter, especially as there is no urgency, and to see if we cannot devise a scheme which, either by a re-adjustment of the present method of distributing the revenue or by relieving the States of liabilities, as in the case of federalizing their debts, would be equitable to each State and reasonable to the Commonwealth, and which, at the same time, would place each State upon a sound financial basis. That is the objective I have in view.

Senator Stewart:

– We cannot do it by meddling with the States debts.

Senator MILLEN:

– I am not at all keen to fake over the States debts. It seems to me foolish to consider that question unless we also consider the other questions. Have we, for instance, yet made up our mind as to whether the Braddon section shall be continued indefinitely or whether we shall have fixed payments to the States ?

Senator Playford:

– If we take over the States debts, and pay the ‘interest on them, we shall find that instead of our having to pay money to the whole of the States, some of them will have to pay money to us.

Senator MILLEN:

– Exactly ; aand there is the evil in another way.

Senator Stewart:

– We cannot separate Commonwealth and States finance in that way.

Senator MILLEN:

– Exactly. If the Minister of Defence had come down and said, “ The Government propose to take over the States debts and to terminate the existence of the bookkeeping period and the Braddon section,” 1 should have known what he meant. But he has made no proposal of that kind. On the contrary he has simply come down with a proposal which, so far as one can see or learn from anything he has or has not said, is simply a bald proposal to take power to transfer the States debts. We have no information as to the intention of the Government if the constitutional alteration be made.

Senator Playford:

– We can deal with that question next year. The Bill would only give the Commonwealth power to take over an additional £34,000,000 or £35,000,000 of debt.

Senator MILLEN:

– Just now the Minister said that if we took over the States debts that would settle the question of the Braddon section. It is not clear, however, that the States would agree to the removal of that provision unless they got a substantial guarantee in its place.

Senator Playford:

– “ Unless otherwise provided,” it will continue to operate.

Senator MILLEN:

– I want the Minister to say what provision he has to substitute, and not to simply submit a proposal to transfer the States debts without showing what his ultimate objective is, or on what basis he proposes to put the financial relations between the States and the Commonwealth. It is because I regard the proposal as so entirely incomplete and unsatisfactory that I propose to vote against the second reading of the Bill.

Senator Sir JOSIAH SYMON (South Australia) [2.48]. - I propose to confine myself, as much as possible, to the proposal which is contained within the four corners of the Bill. I do not think it necessary at this stage to discuss the propriety or otherwise of taking over the States debts. I donot intend to enter into details as to how the assumption of the liability, as I prefer to call it, is to work itself out, or whether any. and, if so, how much, profit would be gained by the Commonwealth - that is, by the people of Australia, either as States or as a nation - by a transaction of that kind. This morning we had some extremely useful explanations from a practical financial point of view, and some very cogent arguments which ought to be weighed by every honorable senator before he assents to the proposal of the Minister. Nor do I wish to look at the Bill from the stand-point that the Constitution is to be regarded as something sacred.I do not look upon the Constitution in that aspect at all. But I hold that there ought to be no alterations made unless they are urgently and imminently required. It is of no use to have a Constitution if every now and then, whenever a suggestion, which is more or less in the clouds, is made, we are to have a referendum of the people with a view to secure an amendment of it. Therefore, I do not resent the suggestion that is sometimes made against those who resist an amendment of the Constitution - we have sanctioned one already this session - which they hold as sacred. Whilst on the one hand I think that that is a perfectly legitimate observation to make as regards myself or any other of the old Federalists; on the other hand, I am quite sure that it is equally to the point to appeal to honorable senators to say that the Constitution, if not sacred, should not be lightly changed or altered. I regret that this Bill should have been introduced at this stage. With the utmost respect to those who have carefully considered the question of the transference of the States debts - three or four different proposals have emanated from competent men, and have been subject to the deliberations of conferences, and so on - I hold that a Bill of this kind is fancifiul, unnecessary, and uncalled for. We might as well, in relation to the Bill, be a, mere debating society dealing with a purely abstract subject. There is no concrete proposal with which we can deal, and say that the suggested alteration in the Constitution is necessary to give it effect

Senator Givens:

– It is all nebulous.

Senator Sir JOSIAH SYMON:

– That is the word to apply. Not merely has the Parliament decided on no policy ; not merely has it never assented to the proposition that we should enlarge our power of taking over States debts, so as to comprise debts incurred since Federation, but no Ministry has submitted a policy of that kind to Parliament. I cannot understand why the Bill should be introduced. We know that in commercial circles there is a practice called kite flying. I can only look upon the Bill as a kind of political kite that is set flying in order to give persons something to talk about or to’ ascertain in which way the wind blows, or simply to occupy a little time. There can be no question that it is a Bill to effect a radical change in the Constitution. In his instructive speech. Senator Drake indicated, without elaborating them, two or three points in that connexion, to which I shall very briefly refer. The Bill involves an entirely new constitutional departure, which will affect the States and the States debts, and which will enlarge the power of the Commonwealth - because the consent of the States is not necessary - in a direction in which hitherto it has been expressly limited. I hope that we shall all think of the proposal in that way quite apart from any party consideration. It is our duty, I might almost say our religious duty, to the Constitution to see that it is carried out. I ask myself what has happened to render the proposed amendment necessary. Has there been any attempt to exercise the existing powers, and has it failed owing to some defect in the Constitution?

Senator Givens:

– We have not even taken over a portion of the States debts corresponding to the value of the transferred properties.

Senator Sir JOSIAH SYMON:

– We have done nothing. Why should we enlarge the powers of the Constitution? Surely in all conscience we have enough to do under the Constitution as it is ! Let us exercise the power it gives us before we seek to arrogate to ourselves more power. If we should find that a great national purpose cannot be fulfilled, then the Government might fairly come to the Parliament and the people and say, “ Let us enlarge the Constitution to enable that to be done.” But we are in a situation in which all the inquiries which we make of ourselves must be answered in the negative. What is it that the Bill proposes to do? The power in the Constitution was inserted after the greatest care and deliberation, and for a purpose which will be very obvious to honorable senators when I make a few quotations. It was inserted to enable the Commonwealth to take over the debts of the States existing at the time of its establishment. The Convention also provided that if only part of the debts were to be taken over it should be a fro rata proportion. That is, that we could not take over part of the debts of one State and leave the other States with their debts, because they were bad and heavy, or bearing too high a rate of interest. That would have been utterly unjust, and therefore the Convention provided that if there was to be a partial taking over of the debts it should be on a fair and just proportion, as between the different States, according to population, and in that way no one State should have a right to complain that, the debts of another State had been preferred to its debts. Senator Drake called that provision a safeguard, but I call it an essential condition in the Constitution. I think that it was absolutely necessary, in order that justice should be done, that that provision should be inserted. The Convention thought so after a very exhaustive deliberation. Now, what is proposed in the Bill? It is proposed, first of all, to repeal the provision which limits the debts that are to be taken over to those existing at the establishment of the Constitution. Then it is proposed to repeal altogether the essential condition that there shall be a just proportion maintained if only a part of the debts be taken over. I am one of those who are anxious te magnify the power and jurisdiction of the Commonwealth as much as I possibly can. But I am not going to magnify thiem in this way, and in this direction. We are asked to extend this power of the Commonwealth without the consent of the States - without saying to them, “With your leave or by your leave.” We are asked to put it within the power of the Commonwealth regardless of proportion, and of the interests of one State as against another, to take over the debt or any part thereof of any State, and leave the rest lamenting. Is, not that a radical alteration Of the Constitution ? It is not like the alteration of the Constitution affecting Senate elections. I had some observations to make to honorable senators then, but as they thought fit to agree to what was proposed there was nothing more to be said, because it was intended to meet a difficulty that had arisen. But no difficulty has arisen in this case. This is simply a Bill to effect a root and branch alteration in -a vital part of the Constitution in a very lighthearted unconsidered way. The provision of the Constitution is clear, intelligible, careful, just. But this Bill asks- us to complicate the forthcoming elections by expounding - in opposition it may be to this proposa - complicated questions with regard toStates debts which are already settled under the Constitution. From that point of view alone it would be utterly unjust. -But let me enforce that aspect. It is not simply because the constitutional provision and the Bill are absolutely antagonistic - because the one is a repeal of the other - that we ought to say that we will not entertain what is proposed. Let us look at the origin of the constitutional provision. Some people seem to have forgotten the basis upon which it was inserted. What was .it ? It was this : When the American and Canadian Constitutions were, framed the people of those countries were faced with exactly the same position as we are in Australia; except that of course in the United States the problem was infinitely more complicated and more difficult than is our little problem. I quite agree with Senator Drake in his lament that something has not been done before to settle the States debts problem. He has expressed himself as willing to take a share of the blame, though I do not think that much rests on his shoulders. But there is nothing in our problem that is anything like so troublesome or so apparently insuperable as that which faced the statesmen of the United States 125 years ago. There the Federal Government became responsible for the whole of the debts incurred prior to the Union. When the Canadians entered into their Union under section m of their British North America Act, the Dominion Government became liable for the debts and liabilities of each of the Provinces as they existed at the time of the Union. It was part of the bargain ; my honorable friends who are introducing this measure forget that in the United States it was part of the bargain ; in Canada it was part of the bargain, and in Australia it was part of ‘ the bargain. Why?. Because it” was essential that the Commonwealth on its establishment should take over that fertile and enormous source of revenue, Customs and Excise, from the States, as well as other taxing powers to which I need not refer. As a consequence, it would have been proper to do what was done in Canada - -namely, to make the Commonwealth assume the liabilities of the States at the time of Federation. Then we should have had no trouble about the Braddon section. But we were a timid people in the Convention. We knew perfectly well that there was a great deal of sensitiveness as to the conditions under which the debts existed, and that the States might desire to be directly consulted. It was mainly with a view of smoothing the way that the method embodied in the Constitution was adopted”. But the essential foundation of the whole thing was that on the establishment of the Commonwealth we should take away the Customs and Excise source of revenue from the States. Otherwise there would be no obligation upon the Commonwealth to assume responsibility for any part of the debts. But what is the security for the debts of Australia? Not our railways, nor our telephones, nor our telegraphs, nor our public buildings. It is the tax-paying power of the citizens. Of course, we are prepared to tell our’ creditors that if they distrust the honesty or the tax-paying power of the people of Australia they have the railways and other public property to look to as security. But that is not the real basis of security for a national loan, lt is the tax-paying power of the people, with” the honesty and honour of the tax-payers pertaining to it. When the Commonwealth took away a great deal of the fruit of that tax-paying power, it is obvious that it had to do what the statesmen of the United States and Canada did, namely, to provide for assuming the liability for then existing debts. But that responsibility did not apply to subsequent debts. How could it? If the States chose to contract debts after Federation on the basis of the tax-paying power left to them, what have we to do with that constitutionally? Nothing whatever. It will be a proper thing when we come to deal with the taking over of the debts to provide, if we like, ‘.hat the .States shall curtail their borrowing, or to endeavour in some way or other to prevent extravagance. I do not say that (hat will be unfair, and I do not know that the States will think it so unreasonable that they will object. But there is no reason in the wide world why we should, under the Constitution, ask for power to take over subsequent debts, or that the States, even if they wished to do so, should request us to seek that power. But, as I said a minute ago, in the Commonwealth, as in the United States, and in Canada, it was part of the bargain to take over the then existing debts ; and, when in the Convention we came to frame the part of the Constitution dealing with this subject, a number of us felt that it was very desirable that the provision with regard to taking* over the debts should not be permissive, but compulsory. My honorable friend Mr. Glynn, in the Melbourne session of the Convention, moved an amendment to strike out the word “mav” and substitute “shall.” That amendment was negatived because another amendment was moved later on b- Mr., now Sir, William McMillan, to the effect that the Commonwealth should only take over debts with the consent of the States. Upon that Sir George Turner moved an amendment to leave out the word “may” and substitute “shall.” That amendment was carried by one of the largest majorities recorded in -the Convention - a majority of seventeen. It was therefore made obligatory upon the Commonwealth to take over- the debts existing at the time of the establishment of Federation, so long as that was done with the consent of the States. Why? Because in that way the interests of the States would be safeguarded to the fullest possible extent. It so happened that in the course of the debate the suggestion was made to strike out the safeguard with regard to the proportion of debts that should be taken over. The strongest argument against that was used by my honorable friend Sir George Turner, in the sentences which I. shall take the liberty to quote to honorable senators, pointing out that power should not be given to the Commonwealth to take a choice of debts, because, if that were done, the good debts would be taken for the sake of the credit of the Commonwealth, leaving the bad debts with the States which, perhaps, could least afford to pay the heavy interest. That argument seems to me to be absolutely convincing as to the extreme undesirableness of this amendment of the Constitution.

Senator Drake:

– And yet that is what the Government proposes as soon as Sir George Turner ceases to be Treasurer.

Senator Sir JOSIAH SYMON:

– I do not believe that he would have done it. The passage which I shall quote is to be found in volume 2 of the Convention Debates (Melbourne Session, page 158.1) Sir George Turner said -

It seems to me that the proposal of the honorable member (Mr. McMillan) will allow the Federal authority to deal with the States individually. It will be able to say to Victoria - “We will take over your bad loans.” By bad loans, I mean loans obtained at high rates, or short-dated loans, and it may discriminate be. tween the States. Some of the States may think that they are being treated unfairly and improperly, because some of their loans, which they may regard as good, may be taken over by the Federal authority, while loans of the other colonies, which they regard as bad, may also be taken over. I think it is a mistake that we should allow (he Commonwealth Parliament to deal in this way with the States. If I had my way I would at once transfer to it the whole of the debts of the States. I should throw the onus upon the Federal authority of paying the interest upon the States debts, because I believe that by doing so we should, in the future, prevent the extravagance which the Federal Treasurer might otherwise be forced into against his will, simply because there would be no surplus. We all know what the experience of these colonies has been in regard to surpluses, and that Treasurers are forced to spend surplus revenue in a way in which they know it ought not to be spent. I believe that if we took the proper course we should at once hand over to the Federal Parliament the liability for the payment of the interest upon the States debts. Under the Constitution we do not compel the Federal Parliament to raise any specified amount of revenue, but I wish to insert some provision which will have the effect of making the Federal Parliament expend its revenue instead of, what I am afraid it may do, squandering it. If I thought it would meet the views of the majority of honorable members, I should feel inclined to move the .omission of the word “ may,” with a view to the insertion of the word “ shall,” in order to test the feeling of the ‘Convention in regard to this matter.

Which he did afterwards -

I think that the provision in the Bill as it stands -

That is what the Government now propose to repeal. is better than the proposal to allow the Federal Parliament to take over the debts of any one State.

What this Bill proposes, Sir George Turner condemned in the Convention of 1898-

The proposal in the Bill as it stands- is that the Federal Parliament may take over the whole or a rateable proportion of the debts of the States. That provision compels the Federal Parliament to treat all the States alike. The Federal ‘Parliament will be able to say: “We will take over so much of the debts of all Ihe States,” but it will not be able to say to one State : “ We will take over a certain portion of your debts,” and to another State: “‘We will not take over any of your debts.” I think, too, that it would be a grave mistake to insert the words “ wilh the consent of the States.”

Honorable senators will see that the point which is now sought to be not rectified, but put wrong, by this proposed amendment of the Constitution, was not overlooked at the Convention, but was fully debated, not only by Sir George Turner, but many other members ; and the conviction of the Convention was that what is now proposed would be altogether unjust and unfair. During the course of Senator Drake’s speech references were made by way of interjection which showed, .if I may say so, that some honorable senators do not quite appreciate the position. The words of the Constitution, which are said by the commentators quoted by Senator Drake to be unnecessary - and I think so, too - are that the Commonwealth shall have power to “convert,” “renew,” or “consolidate.” Singularly enough, this point also was under discussion in the Convention. I venture to say, with great respect, that the Government have overlooked the fact that the power of taking over the debts has absolutely nothing to do with redemption, but is, as Senator Drake says, an assumption of liability, which places the Commonwealth in the position of the States as to the debts which the States had at the particular time when they were, so to speak, deprived of the power to pay interest. Sir George Turner dealt with this matter, and honorable senators will see how plainly he placed it before the Convention. The question was as to what the taking over of the debts really meant. The motive might be that the Commonwealth would be able to make better terms with the country’s creditors, but the object was that the Commonwealth should assume the liabilities which rested on the shoulders of the States, and, afterwards, of course, do as they thought best with something - if an obligation be something - which belonged to them. At page 1583 of the Convention reports, Volume 11, Sir George Turner, in moving the substitution of the word “ shall “ for “ may “ is thus reported -

By that amendment I mean that the Commonwealth has to take over the liability, has to pay our interest, has to appropriate our surplus for that purpose, and has to collect from the States whatever balance there may be due to the ‘Commonwealth, or pay ‘over to the States whatever surplus there is after paying the interest. It does not make it compulsory on the Commonwealth to convert the loans. It does not make it compulsory on the Commonwealth to consolidate the loans. The Treasurer will take his own good time to do that, and, no doubt, will take full advantage of the money market when he thinks that the advantage ought to be taken.

That is all. For the reasons I have endeavoured briefly to indicate, the Commonwealth was to assume the liabilities of the States, because the Commonwealth was to take over the revenues of the States.

Senator Playford:

– That was . the argument, but it was never done.

Senator Sir JOSIAH SYMON:

– And because it was never done, the Government propose to take power to do a lot more - to do something which rests on no principle whatever. The Government desire, without the consent of the States, to pick and choose amongst the debts andthe States and to take the debts over by the will of the Parliament of the Commonwealth, without terms or conditions on the part of the States, or without the latter having the power to make any stipulation. Having before us the basis and principle of the provision in the Constitution, we are now asked to repeal that provision, and to do so without any policy or proposal being placed before us. Parliament is not pledged to take over the debts incurred subsequent to Federation, and the Government have made no proposal, and have no policy on that subject. This is not a case of a policy being approved by Parliament, or being submitted by the Government and adopted by Parliament, and requiring an amendment of the Constitution to carry it into effect. It is not even an assumption, but a theory, suggested without practical shape of any description, and upon it we are asked to repeal a most salutary and essential provision of the Constitution. We are asked to enlarge the power of the Constitution without the consent of the States; and, as I have said, the States may have no opportunity to stipulate or make terms or conditions “ of any sort. So far as concerns the debts existing at the time of the inauguration of the Commonwealth, we have a perfect right to take them over; in fact, that liability is really on us, although “ may “ is the word used in the Constitution. But subsequent debts are matters of bargain. What right have we to extend the Constitution so as to interfere with the States borrowings? When is it all to end? If this change in the Constitution be made, there will be no limit to the debts we shall have the power to take over. One condition always discussed in connexion with the taking over of the debts, is the restriction of future borrowings by the States. But. instead of restricting future borrowings, this proposed amendment of the Constitution will be an absolute encouragement. If, however, the power of the Constitution be limited to the debts existing at the time of the inauguration of the Commonwealth, the States will know full well that any further borrowings they may make will be on their individual credits, without any obligation on the part of the Commonwealth as to liability. But if the power sought by this Bill be conferred, we shall encourage the States to go on borrowing in the expectation that if the debts become too heavy to be managed - I do not say too heavy to be paid, because I do not think any State would refuse to pay its debts - they may bring pressure to tear on the Commonwealth to assume the liability. From every point of view the proposal is altogether indefensible, but it is particularly mischievous in that it repeals a basic provision - a basic principle - on which the Constitution, rests. It is substituting something which has no principle - something which is directed to getting machinery to carry out some definite proposal adopted by this Parliament - and it is placing in a state of confusion a matter which ought to be solved without difficulty and without further delay.

Senator STEWART:
Queensland

– This is probably one of the most important, and one ofl the most difficult, questions which the Senate could be called on to consider. I confess that I approach the discussion of it with fear and trembling, knowing the very important issues that hang upon our decision. Here I desire to make a complaint, in which I. think I shall be supported by every member of the Senate. In my opinion,’ it is something - to put it rather strongly - shameful that a proposal of this character should be introduced here at this particular period of the session. This is a question in which the States are very much involved. It is a question more particularly for discussion by the Senate, which is the States House; and, that being so, I should have thought that during the earlier portion of the session, when we were simply twiddling our thumbs, the Government, if they had made up their minds to do anything, would have submitted their proposals to us in order to insure the necessary free and full discussion. I .may sm at once that I intend to vote against the proposal of the Government, and more particularly for the reason I have just given. I desire more time to consider this matter. I wish to know what the policy of the Government is, or whether it be the fact that the Government have no policy. ‘ We are asked to submit to the people a proposal for the alteration of the Constitution; and when I go before my constituents during the coming recess, I desire to know exactly what I am doing - to know what the Government’s whole policy is. I do not wish to know one particular section of the policv, but to be fully informed whether the Government have any policy in regard to the States debts, and, if so, what that policy is. The Government may have a policy, but if so, they have been at no pains to disclose it. i find that Sir John Forrest in his memorandum makes some propositions with regard to the taking over of the States debts ; but none of these propositions appear to have been adopted by the Government, or, at any rate, we have no evidence of the fact.

Senator Playford:

– Oh. ves.

Senator STEWART:

– Until, the Government take Parliament into their confidence, and disclose their policv, I submit that the Senate, being more peculiarly the States House, ought to reject this Bill. The whole question of taking over the States debts appears to have been approached by members of the various Conventions, and by the several Commonwealth Governments, purely from one stand-point. They said, ‘ We are handing over the control of the Customs and Excise revenue to the Commonwealth Government, and, therefore, so as to prevent that Government and the Commonwealth Parliament from indulging in extravagant expenditure, we shall saddle them with the responsibility of paying the interest on the loans that have been contracted by the various States.” That appears to me to have been the principal idea in the minds of all the gentlemen who considered this question - the passing on to the Commonwealth of the responsibility for the interest on the public debt, seeing that the public revenue had been placed solely in its control. Another reason was given, and it was that, by the Commonwealth taking over the indebtedness of the States, and converting or consolidating the debts, a large annual saving in interest would be effected. It has been found that anything in the shape of a large consolidation or conversion is absolutely impossible, and that the hope held out by the advocates of Federation of a large annual saving has vanished into thin air. There really was nothing in that contention. The whole question now narrows itself down to this : Whether the Commonwealth having control of the Customs revenue should also’ be saddled with the payment of the interest on the public debt? I am aware that the old school of financiers maintained that the interest on the public debt formed a legitimate charge upon the Customs revenue. But, just as we have protectionists of the old school, and also new protectionists, so we have financiers of the old school, and men who do not believe in the principles enunciated by them. For my part, I do not believe now, and -never have believed, that the Customs owes any responsibility whatever in the matter of paying, interest on the public debt. I would ask honorable senators to look at the whole question dispassionately. In Australia we are situated differently from the people of any other country. We have, as we are continually being told, a huge national debt amounting to something like £240,000.000. But I remind honorable senators that this debt is essentially different from the public debt of any community under Heaven. It has been borrowed, not for the purpose of war, to be expended in ammunition and smoke, or to be squandered by kings or their favorites, but for the purpose of developing the resources of Australia. That is the reason why our public debt is in existence, and, that being so, I say that the expenditure of this £240,000,000 in developing the resources of the Continent has increased the land values of the Continent, and the interest on it ought not to be chargeable to the Customs, but ought to be chargeable to the revenues derived from the developments which the expenditure has brought about. If we take, for instance, an ordinary mining company, floated with a capital of, say, £100,000. It spends a very large sum in developmental work. Ultimately dividends are being paid ; but those dividends, instead of being distributed equitably amongst the shareholders of the company, are paid to one particular set of “shareholders, whilst the ordinary expenses of carrying on the mine, instead of being charged to the revenue derived from the mine, are paid out of calls upon the general body of shareholders. We know that the shareholders of a private company would not stand an arrangement of that kind for twenty-four hours. Yet that is exactly the arrangement that exists with regard to ‘the payment of interest on the public debts of the States at the present moment. Whilst we permit the profits which have accrued from this huge expenditure to pass into the pockets of private individuals, we are taxing the community as a whole to pay the interest on our public debt. I claim that this system of financing is utterly unbusinesslike and fallacious, and the sooner we alter it the better our position will become. I maintain that, instead of taxing the people to the tune of £7,000,000, £8,000,000, or £9,000.000 per annum to meet the interest on the public debt, our bounden duty is to go, as I have already pointed out, to the revenue which has been, or is being, derived from the expenditure of the money borrowed by the various States. I will begin with my own State. Queensland has borrowed about £40,000,000, and of. that sum she expended about £25,000,000 in building railways, £3,000,000 on immigration, and several other millions on schools, postoffices, roads., and bridges, and so forth. In all, I should say that Queensland has spent some £35,000,000 iin developmental work pure and simple.. The railways which have been built, the schools and post-offices erected, roads and bridges constructed, and all the numerous conveniences of civilization afforded have tended to increase the value of land throughout the entire State. I am well within the mark when I say that the expenditure of this £35,000,000 has increased land values in Queensland by an equivalent sum, that is to say, by £35,000,000. If we take the interest on that sum at 5 per cent., we have an amount considerably over £1,500,000, which ought to be going into the public Treasury, but which is now diverted into the pockets of private individuals. As a matter of fact we should conduct our business just as any ordinary company would conduct theirs. Instead of allowing this money to go into the pockets of private individuals we should strain every nerve to divert it to the public Treasury. I admit that it would be a most difficult task to at once divert the whole of it into the public Treasury. But I think we should make a beginning. We should start now.

The PRESIDENT:

– I have not stopped the honorable senator up to now, but really I do not think that the question he is discussing is relevant to the subject-matter of this Bill.

Senator STEWART:

– I submit that it is impossible to consider ‘the Bill apart from the general financial conditions of the Commonwealth.

The PRESIDENT:

– I have not stopped the honorable senator, but really I do not think that what he was saying is relevant.

Senator STEWART:

– If I am not permitted to discuss the whole financial situation in dealing with this measure, the only thing; I can do is to vote against it and say nothing. I find it impossible to consider the Bill apart from the whole financial problem. In considering this measure, I am compelled to direct my attention to the whole question of the financial relations between the States and the Commonwealth.

The PRESIDENT:

– No doubt ; but was the honorable senator doing that?

Senator STEWART:

– In any . case, I think the time has arrived when we should get rid of the idea that the interest on the public debt is a fair charge on the Customs. We should conduct our business affairs as any private company would do if it desired to keep out of the Bankruptcy Court. If by the expenditure of public money we have increased the value of our estate, it is our bounden duty to get that increased value before falling back upon the community for taxation through the Customs to pay the interest on the public debt. Coming to the Bill itself. As I have already pointed out, and as other speakers have mentioned, the measure discloses only one portion of the policy of the Government. We have a right to know what the Government policy is as a whole. Section 105 of the Constitution provides that -

The Parliament may take over from the States their public debts as existing at the establishment of the Commonwealth, or a proportion thereof according to the respective numbers of their people as shown by the latest statistics of the Commonwealth.

The amendment of the Constitution we are asked to sanction in this Bill proposes quite a different policy. It proposes a fundamental change in thepolicy with regard to the transfer of States debts. The Commonwealth, under the proposed amendment, might take over the whole of the debts or one of them, or only such debts year by year as they mature.

Senator Sir Josiah Symon:

– It might take over a bit from one State and a bit from another.

Senator STEWART:

– Exactly ; it might take over the bad loans and reject the good ones, or vice versa.

Senator Drake:

– One Government might take over all the debts, good and bad, but the next Government might refuse to take over any debts.

Senator STEWART:

– Yes ; it would be possible for anything to happen under the proposal. In these circumstances, I think that the safe thing for us to do is to vote against the Bill until we get more information. There is a number of matters which require to be very closely scrutinized. Suppose that the Bill should become law. In the event of the Commonwealth taking over the whole of the States debts, what is to be the policy of the Government, if any, in regard to future borrowing? Is Senator Playford authorized to make any statement as to its policy, because, if not, I shall be compelled to vote against the Bill. Under the proposed amendment, the Commonwealth Parliament would have power to take over the whole of the States debts. Suppose that it did, would the States be permitted to go on borrowing, as they have done hitherto? There ought to be a provision to prevent that. Otherwise the Commonwealth would be liable for the debts of the States at the time it took them over, while the States would have full control of the assets which represented the debts, namely, the railways, the lands, the mines, the timber, and all their natural resources. There would be nothing left, so far as the Commonwealth was concerned, but the power of taxation. I know that some honorable members maintain that that power would be ample. I do not know whether it would or not ; I am not very sure about that. My contention is, and always has been, that if the Commonwealth did take over the debts of the States, it must of necessity take over the assets. If I have become responsible for the interest on the debts of another party, surely I ought to have a supervising power over the conduct of his affairs ! If, after I have taken over the liability, he were allowed to pile up debt after debt, what would become of my security? Therefore, if it be decided to take over tihe debts, the Commonwealth must, in order to save itself, prohibit the States from borrowing, except through its agency, and with its consent.

Senator Mulcahy:

– The States will not consent to that.

Senator STEWART:

– Then there is an easy way out of the difficulty. Let the Commonwealth have nothing to do with the debts of the States; let the States keep their debts.

Senator Mulcahy:

– The Constitution places that honorable obligation upon the Commonwealth.

Senator STEWART:

– The Constitution only says that the Commonwealth may take over the States debts in a certain way, and up to a certain date. The interjection convinces me that the honorable senator is one of those who believe thatthe interest on the national debt is a fair charge on the Customs revenue.

Senator Mulcahy:

– Yes.

Senator STEWART:

– In this we have the dividing line between the new school of financiers and the old school. The honorable senator belongs to the old school, and I flatter myself that I belong to the new school. We may be in a minority at the present time.

Senator Mulcahy:

– The old school believes in paying twenty shillings in the pound.

Senator STEWART:

– I believe in paying twenty shillings in the pound, but I do not believe in robbing Peter and allowing Paul to rob me. That is exactly what is being done at the present moment. Suppose that I am the Government, that Senator Mulcahy belongs to the unwashed multitude, and that Senator O’Keefe is one of those fortunate land-owners. In my position, as the Government, I compel Senator Mulcahy to pay tribute to me so as to defray the interest on the national debt. Senator O’Keefe, as being one of the privileged few, robs the Government and the unwashed at one and the same time. Those of us who think that the interest on the national debt is not a fair charge on the Customs revenue are quite entitled to look at the question from that point of view. Senator Millen said that, to his mind, the principal thing to be striven after in connexion with Federal and States finance is their complete separation, and I agree with him. I think that every honorable senator must have come to the conclusion that the present arrangement is an exceedingly unfortunate one, not only with regard to the States Treasurers, but also with regard to the Federal authority. At the present moment the States Treasurers have no control over a very large portion of their revenue. Consequently a State Treasurer can never frame an approximately correct estimate of his income, and if he cannot tell what that is likely to be, how is he to arrange his expenditure? A sweeping change in the fiscal policy of the Commonwealth might either largely decrease or largely increase the revenue; in fact, we have seen both those results occur. In Queensland the Federal policy was responsible for a large decrease in the public revenue, while in New South Wales it resulted in a very large increase in the Customs revenue. If we adopted now a purely free-trade policy, probably it would involve a loss of between £4,000,000 and £5,000,000 a year to the revenue.

Senator Clemons:

– And if we adopted a prohibitive policy?

Senator STEWART:

– If we did, the result would be exactly the same. The point I wish to make is that the States Treasurers are entirely in. the hands of the Federal Parliament. They are mere waiters-on for the crumbs which fall from the Federal table. Thev have no means of telling their income with any approximate exactness, and therefore they cannot very well provide for their expenditure. If extravagant, they have the excuse that they thought that thev would get more from the Federation; but if parsimonious - a vice that is not very common in public affairs - they have exactly the same excuse. In any case their responsibility is completely destroyed, and the whole arrangement leads to an immoral condition of public affairs, so far as finance is concerned. Senator Millen claimed that by taking over the States debts as a whole, and becoming responsible for the interest, the Federal Treasurer and the State Treasurer would be each supreme in his sphere. I contend that even if the States debts weretaken over to-morrow holus-bolus, Federal finance and State finance, instead of being separate as we all desire them to be, would become more inextricably intertwined than ever. Take, for instance, Victoria and Queensland. If we took over the debts and became responsible for the interest thereon we should find at the end of every year that whereas a large surplus would be returnable to Victoria, Queensland had incurred a very serious deficit. By that arrangement the dutv of meeting the interest would be cast upon the Federal authority. How would it have to be met? If the revenue from the Customs were not sufficient, other sources of taxation would have to be resorted to. In such circumstances the Federal authority would be compelled to impose, for instance, a Federal land values tax, and that tax, of course, must be uniform throughout the Commonwealth.

Senator Clemons:

– That would be a tax to get revenue and not the other tax that we have heard about?

Senator STEWART:

– Exactly. The Commonwealth could not impose a tax of id. in the £1 in Victoria, and-2 d. in the £1 in Queensland. The tax must be uniform throughout the States. The Commonwealth, therefore, would have to raise a sufficient sum bv means of a land value tax to pay the deficiency of the poorest States.

Senator de Largie:

– Could not the poor States do that for themselves?

Senator STEWART:

– But the obligation to raise the money would be cast upon the Commonwealth.

Senator de Largie:

– Not necessarily.

Senator STEWART:

– Oh, yes. If the Commonwealth takes over the debts, it becomes responsible for the interest upon them. It assumes the whole responsibility.

Senator McGregor:

– And the States, have to indemnify the Commonwealth.

Senator STEWART:

– They have.

Senator Guthrie:

– If they can.

Senator STEWART:

– If they cannot, or will not, what is to be done? The Commonwealth can only raise sufficient revenue to defray the necessary expenditure by imposing additional taxation ; and I am assuming that that additional taxation would take the form of a land values tax. If the Queensland deficiency were £[400,000 or £[500,000, the Commonwealth, in order to obtain enough money to cover it, would be compelled to raise probably £[1,500,000 in Victoria more than was necessary for Victorian purposes. What would the Federal authorities do with that money, except return it to the Victorian Government? If that be admitted, honorable senators will at once see that, by the system referred to by Senator Millen, it will be altogether impossible to separate State and Federal finances. I agree with Senator Millen that their separation is one of the first things that the Federal authority should turn its attention to. The present situation is an extremely uncomfortable one for both parties. That being the case, I maintain that there is only one method of separating the two.

Senator Clemons:

– It could not be done by one operation.

Senator STEWART:

– We could hardly expect to go into the whole matter so hurriedly as we are now asked to do. But the only way, so far as I can see, by which Federal finance can be separated from State finance, is that the Commonwealth should raise just enough money for its own purposes, and that the States should raise enough for their purposes. That involves the States retaining their debts, as they propose to retain their assets.

Senator Mulcahy:

– Does the honorable senator think that any State or group of States can manage to pay their interest bill out of direct taxation?

Senator STEWART:

– I do. Let me point out the essential difference between the new and old ideas of taxation. Take the State of Queensland. The interest on its debt is, roughly, £[1,500,000. The amount of money going into the pockets of private land-holders which ought, I contend, to pass into the public Treasury. is £[1,750,000 a year. I know that to effect a change such as’ I propose would be something akin to a revolution. But it must come if we are to place our finances upon a sound, business-like foundation.

Senator Clemons:

– In what way does the honorable senator mean that £[1,750,000 is going into the pockets of private people?

The PRESIDENT:

– The honorable senator has already explained his views on that point three or four times.

Senator STEWART:

– I have made the point as clear as I possibly could. Take the State of Victoria. The unimproved value of land in Victoria amounts to £[120,000,000. Those land values have been created in a very great measure by the expenditure of ‘money which has been borrowed by the people of Victoria, and for which thev are responsible.

The PRESIDENT:

– Has not the honorable senator brought forward that argument four or five times.?

Senator STEWART:

– I have not previously referred to Victoria. I propose to show that Victoria could not only defray the interest on her public debts by means of direct taxation, but would have such a large surplus that it would not be necessary for a single farthing of revenue to be raised from the Customs. That is my answer to Senator Clemons ; and, if he will investigate the matter in connexion with each of the States in the spirit which ought to animate those who are desirous of acting fairly, justly, honorably, and honestly by every one, he must, I think, come to exactly the same conclusion as I have done. There appears to me to be only one way of separating States and Federal finance. Let each authority raise the money necessary for its own purposes. The Commonwealth within five years will have an opportunity to say whether the Braddon section shall expire or be continued. So far as I can gather at present, the general feeling of this Parliament at present is against continuing the Braddon section. Then will be the opportunity fori inaugurating a new state of affairs. The Commonwealth, for some time, at any rate, will be in a position to return, probably, not three-fourths of the Customs and Excise revenue, as at present, but probably one-half, or even a lesser amount. That being the case, during the next ten years, perhaps, the States will gradually come to the conclusion that thev are able to- raise for themselves sufficient revenue within their own territories for their own purposes, and the Commonwealth, by means of Tariff manipulation, will have so to reduce its present revenue as to make it just sufficient for its own purposes. That, it appears to me, would be an ideal position for both Commonwealth and States to be placed in, and that, 1 submit, is the position which every man who desires to see financial reform accomplished ought to try to reach. There is another reason why I shall vote against this Bill. It proposes to give the Federal authority power to take over all. the debts. I say frankly that I am opposed to the Federation having anything whatever to do with the debts of the States, for this reason, above every other - that, from the moment the Commonwealth takes control of the States debts, the process of unification begins, and we have the old evil of centralization, which was such a force in Australia at one time, in full blast again. I know that some honorable senators say that it is quite possible for the debts ofAustralia to be consolidated under the Federation, and yet for each State to maintain its sovereign power. I differ from that view. I say that, if the Commonwealth becomes responsible for the interest on the debts of the States, and for the debts themselves, it must have control over the assets. That follows, I consider, as an essential. It must have control of the railways; and, as the profitable working of the railways depends largely on the use to which the lands are put, the next step would be to take possession of the lands, the mines, and all the natural resources of the Commonwealth.

Senator de Largie:

– Do our present creditors control our assets ?

Senator STEWART:

– No; but they have no responsibility to find the interest on the debts. Their whole responsibility is to receive the interest. But the Commonwealth, under what is proposed, would be in a position to take responsibility for the debts ; and, if I am responsible for a man’s debt, surely it is only a fair thing that I should have some control over his assets. Some honorable senators appear to think that, if we take over the debts, the States can go on just in the old way - that they can, being relieved of their liability in regard to interest and principal, run the railways in any fashion they please, either to pay or not to pay, just as public opinion demands; that they can lock up the lands as most of them do at present, or utilize them at their option. I do not hold that opinion. I contend that, if the Commonwealth takes over the debts, it must, and will inevitably, assume control over the assets ; and the ultimate of that means absolute unification. To the unification of Australia, as at present constituted, I am strongly and bitterly opposed.

Senator Findley:

– Cannot the honorable senator see another way - by means of Customs ?

The PRESIDENT:

– I ask Senator Findley not to interject, because we have had the argument about the Customs several times.

Senator STEWART:

– I do not think that Senator Findley was in the chamber when I brought forward that argument. If he has not grasped it, I think I ought to have an opportunity to make it clear to him.

The PRESIDENT:

– If the honorable senator repeats it, I shall have to warn him under standing order 407. I think the presentation of an argument five or six times is quite enough.

Senator STEWART:

– A number of honorable senators have not been in the chamber to listen to what I have said.

The PRESIDENT:

– They ought to have been here.

Senator STEWART:

– I think they have missed something.

The PRESIDENT:

– I really must draw the line somewhere, and I draw it at arguments being repeated five or six times.

Senator STEWART:

– A good argument cannot be repeated too often; and if honorable senators have not been present, and they by interjection–

The PRESIDENT:

– Honorable senators ought not to go away, and then come back and interject.

Senator STEWART:

– As I appear to have used all my arguments five or six times, I have no desire to use them again, and probably I had better conclude. There are a number of other matters in connexion with this question to which I should have liked to refer; but seeing that the discussion is rather restricted by the provision of the Bill, I shall leave them untouched. In any case,I think I have shown sufficient reason why I should vote against the second reading.

Senator McGREGOR:
South Australia

– I am rather timid in attempting to express an opinion on such an important financial question as that of the States indebtedness after listening to the eminent authorities who have already given expression to their views. However, I should like to point out, in contradistinction to even such an authority as Senator Stewart that when the strongest Federalists in Australia were endeavouring to induce the people of the Continent to come under the yoke, as one might say, their most forcible argument was that nearly the whole cost of Federation would be made up by the saving that would be effected by the transfer and conversion of the debts of the different States.

Senator Col Neild:

– It was a lovely piece of humbug !

Senator MCGREGOR:

– I believe that the people of Australia are now beginning to find that out. At the time, however, it was clearly pointed out to the people that, although ultimately they might reap a great amount of benefit from the conversion, consolidation, and so forth of the debts, the present benefits would be of a very doubtful character. This Bill, it must be remembered, has nothing to do witH any scheme that may be adopted by the Federal Parliament in the future respecting the transfer or consolidation of the States debts. It has been repeatedly said that the Government were going to* do this or that in regard to the States debts. As a matter of fact, no Government have ever done anything, because no Government have ever had the power ; it is the Commonwealth Parliament which will have to agree to anything that may be done in the future.

Senator Mulcahy:

– But the Government should initiate a policy, and ask parliamentary sanction for it;

Senator MCGREGOR:

– I was about to point out what in my opinion has prevented any Government from taking that course, and it affords a -very good reason why we should vote for this Bill. According to the Constitution, there are two alternatives open to the Commonwealth : I say “Commonwealth,’” and not “Government.” One alternative is to take over all the debts up to the time of Federation, and the other is to take over a portion of the debts of any one State, and at the same time take over a similar proportion of the debts of all the other States, according to population. This was, and is, the position of the Commonwealth. Everywhere we go we are asked when anything is to be done in connexion with the States debts - when the consolidation, or conversion, or whatever it mav be that is to save £200.000 or ,£300,000 a year in interest, is to take place. No Government ha«e been able to take over all the States debts, or at least no Government have ever had the courage to present to Parliament a scheme for taking over all the debts incurred up to the commencement of the Commonwealth. What is the reason? It is because the finances of the different States have been in such a condition that, although such a proceeding might seem to be fair when proposed, it would become very unfair in a short time. At the inauguration of the Commonwealth, when all the debts might have been taken over, some of the States had borrowed to a considerable extent for the development of their own territories, while other States had not taken that course. For instance, Western Australia had borrowed practically nothing as compared with Queensland, New South Wales, or Victoria. Consequently, any attempt to take over all the debts at that period would very soon have resulted in an unfair position, because the proportion would have been very large with respect to some States, and very small, for instance, with respect to Western Australia, and probably Tasmania. That was the difficulty in the way ; and any Government would be justified in saying that under such conditions it was not advisable to put before Parliament a scheme for the transfer of the debts. Honorable senators should not accept Senator Stewart’s statements about “ robbing Peter to pay Paul,” and so forth. In regard to the Commonwealth and the States, it is “ Peter” all the time- there is no “ Paul.” It is “ Peter “ in the States, and “ Peter” in the Commonwealth; and it really does not matter whether the debts remain with the States, or are taken over by the Commonwealth, because there is no “Paul” to rob. I shall not deal with the economic arguments of Senator Stewart, because T do not think they affect the .position. The other alternative to which I refer is that when opportunity arose, it might be beneficial to a -State and to the Commonwealth, that a certain amount of the indebtedness of the State should be transferred. If that were done, it would be absolutely necessary, under the Constitution, to take over a proportion of the debts of the rest of the States, according ‘to population. What does that mean? Such a provision may have been thought very wise when the Convention was sitting, and when the representatives of each State were endeavouring to prevent the representatives of every other State from gaining an advantage. But look at the absurdity of the proposal now ! Suppose that next year debts to the amount of £1.000,000 belonging to Tasmania were in the market, and that it was thought a good thing for Tasmania and the Commonwealth to transfer those debts under the Constitution. The Commonwealth would transfer £1,000,000 of Tasmanian indebtedness, and according to the Commonwealth Constitution there would, I suppose, have to be transferred indebtedness to the amount of about £10,000,000 from Victoria, £12,000,000 from New South Wales, £1,500,000 from Western Australia, £.:. 000,000 from South Australia, and £3,000,000 from Queensland. The probability is that if the Commonwealth made such transfers, it would be burdened with those debts with no possibility of making any radical alteration in the conditions, excepting in regard to the £1,000,000 taken over from Tasmania.

Senator Staniforth Smith:

– Would it not be better to take over the whole of the indebtedness ?

Senator McGREGOR:

– It would be better to do that than to adopt the alternative I have just illustrated.

Senator Pearce:

– This Bill would not prevent the whole of the indebtedness being taken over.

Senator McGREGOR:

– That is so.

Senator Staniforth Smith:

– The Bill enables the Commonwealth to take over the whole of the indebtedness of one State, and none of the indebtedness of another State.

Senator McGREGOR:

– That is not likely to be done, unless it would be of great advantage to both the Commonwealth and the States concerned, and no disadvantage to any other State. Senator Fraser, to whose experience as a great financier, we doubtless, ought to bow, made a very absurd kind of observation this afternoon. The honorable senator said that the time may arrive - though I think it very improbable, if not impossible - when the interest on the London market will be so low that we may be able to convert some of our indebtedness, and reduce the interest to 3 Fer cent., or even less, by making terms with the debentureholders or bond-holders. I invite honorable senators to look at the matter from Senator Pearce’s common-sense point of view7. Supposing that Senator Stewart had a bond for £100, with fifteen or twenty years yet to run, at 4 per cent., and that I, as the representative of the Commonwealth, thought that the interest was low enough to enable me to borrow at 2 per cent, or 3 per cent. I should then go to Senator Stewart and say, “ Look here Stewart, you have a bond bearing 4 per cent., how much will you take for it?” How much would Senator Stewart take? He would take just as much as would give him the same return at 3 per cent, as he was entitled -to at 4 per cent. - I do not believe that Senator Stewart, as a Scotchman, would take a farthing less. Although there might be other complications with respect to the period to run, and to the profit or loss, I shall not enter into those questions, although I could do so if I desired to occupy time. I may say, however, that Senator Stewart, under such circumstances as I have imagined, would require for his £100 bond at 4 per cent, a sum of £133 6s. 8d., so as to give him the same return at 3 per cent, as he would have obtained at 4 per cent. Honorable senators will see the position the Commonwealth would be in if a similar transaction took place with respect to millions. This only shows the absurdity of the statement made by Senator Fraser. I believe the honorable senator made the statement without thought. As the rate of interest goes down in the London market, the price of bonds, or anything which bears a higher interest than the ruling rate, must go up. If the price of money goes down to 3 or to 2 per cent., the value of bonds bearing interest at 4 or 5 per cent, must go up. That shows the difficulty in which the Commonwealth is always placed in doing anything under existing conditions. The people are asking what is going to be done, and the Government say, “ Up to the present time we have not been able to do anything, and we should like your advice. We should like you, the people of the Commonwealth, to have a voice in the matter.” It must not be forgotten that when this Bill is passed by the Federal Parliament, it will not become law until it has on it the imprint of the approval of the people of Australia. This Parliament cannot pass and enforce such a measure without the sanction of the people. The Government say, “ We find that the provisions in the Constitution are too restrictive.” Some people contend that the Government should have power to take over all the debts of the States, and a large majority of the people of Australia is coming to the conclusion to-day’ that the only time at which the Commonwealth can step in and take over the debts of the States is when they become due. Of course, I agree with Senator Drake that we could take over the whole of the debts of the States at once, and it would then be in our power to deal with the various loans as the necessity arose. But we have not done that, and are not likely to do ifr. I have heard people in various parts of Australia say, “ We believe now that the proper time at which to take over the States debts is when the loans become due.” We cannot do that under the Constitution as it stands, and the Government have introduced a Bill in which they say to the people, “ Seeing that we have so far done nothing, would it be wise, in your opinion, to give the Commonwealth power to take over the States debts when the various loans become due, and to take over not only debts which were in existence when the Commonwealth was established, but any debt which may have been contracted by the States since that time?” We are asked in this Bill to put that question to the people. If their answer is “No,” that will finish the matter for the present. But if they say “ Yes, we think it is right that the Commonwealth should have the extended power asked for,” we can take such action as may then be considered advisable. I never knew a Parliament that would give a vote to curtail its own powers and privileges. The vote which honorable senators are being asked to give on this Bill is not to curtail the powers and privileges of the Commonwealth. Parliament, but to extend them, and the extension proposed is in the interests of the Commonwealth and of the citizens of the different States. I am not afraid that any Government that may come into power in the future will do anything wrong in dealing with particular States. I believe that ‘the Federal Parliament will always have sufficient power to control a Government if it is doing wrong, and it is the Parliament that in future will have to pass any measure which may be introduced to deal with the States debts in any way. It is because this measure proposes an extension of the powers of the Commonwealth Parliament that I am prepared to vote for it, and to leave it to the people of Australia to say whether the powers asked for shall be granted to us or not.

Senator MULCAHY:
Tasmania

Senator McGregor has put the matter very clearly and fairly. He has made out, what no doubt exists, and that is a very good case for an alteration of the Constitution in the way proposed. The Commonwealth has the power, and, I believe, the moral obligation, to take over the debts of the States.

Senator McGregor:

– The people were led to believe that that would be done.

Senator MULCAHY:

– Quite so, but the method provided for the purpose in the Constitution, as it stands, is an utterly impracticable one. The method proposed in this Bill is one which I have myself recommended in this Chamber from time to time - that is to say, that provison should be made for the taking over of the debts of the various States as the loans mature. Although I have advocated that, and still believe in it, I am unable at the present time to support this Bill, and for a very good reason. If I were to support it here I should consider myself in honour bound when the measure was submitted to the people to advise my constituents as to what they should do in regard to it. and I could not at the present time conscientiously ask them to accept the proposed amendment of the Constitution, although I think that at no distant date it will be found to be necessary. My objection is that the method proposed is not at present accompanied by what I consider to be a necessary safeguard. I have advocated the plan now proposed for the taking over of the debts of the States, but I have advocated something else much more strongly, and that is the abolition of the bookkeeping system. What we are being asked to do now is really ‘to offer a premium to certain States to stand out against the abolition , of the bookkeeping system. I think that the continuance of that system will prove disastrous to Tasmanian finance. It was never contemplated that it should operate permanently, and we are reaching the close of the period fixed bv the Constitution for its continuance. We know that under it the finances of Tasmania have suffered to an enormous extent. Most, if not all, of us have believed that at some time or another a Commonwealth security would be regarded in the financial world as better than the security of an individual State. It certainly should be so. One State might suffer from a. bad season, or a series of bad seasons, whilst the others might be prosperous. If we were really federated, and the wretched bookkeeping system were abolished, the various States would be able to assist each other, and States now requiring assistance would probably later on have their years of prosperity, when they would be in a position to assist the other States of the Commonwealth. It has been stated that one of the objects of the measure is to enable the Commonwealth to take up a State loan of £5,000,000 which will mature within the next year or two. If we assume, as we have a right to do, that a higher price will be given for the Commonwealth bonds than for the bonds of the State, or a lower interest charged for the money - which amounts to the same thing, as Senator McGregor has just explained - and the result of the transfer of the £5,000,000 loan from the State to the Commonwealth will be a reduction in the interest charged from, say, ‘4 to 31/2 per cent., that will mean an annual saving to the State of £25,000. That will be accomplished on the credit of the Commonwealth backing the bills of the State in question. In the meantime, the other States will not participate in the benefit.

Senator Playford:

– - They will as their loans fall due.

Senator Pearce:

– They will not be injured in any way.

Senator MULCAHY:

– They will not be specifically injured, but they will have assisted in conferring a benefit upon a particular State, and the result will be a practical inducement to the State concerned, which I understand is Victoria, to continue to hold out against any abolition of the bookkeeping system. Until that system is abolished we shall not have complete Federation. Under the wretched system now in operation, we do not derive the benefit of Federal finance. The objects of the Bill are such as on the whole I approve of. but I feel constrained to vote against it, and I feel that it will become the duty of every honorable senator to advise the electors, when passing an opinion on the constitutional questions of great importance which are to be submitted to them, not to accept this measure at the present time. At the same time, I hope that, at no distant date, the abolition of the bookkeeping system will enable such an amendment of the Constitution as is here proposed to be carried out’ satisfactorily to both the Commonwealth and the States. Honorable senators must pardon me if I remind them that the financial position of Tasmania at present is nothing short of critical. We are sometimes charged with not taxing ourselves to the fullest extent, but. so far as direct taxation is concerned, Tasmania is the most highly taxed State in the Commonwealth.

Senator de Largie:

– And the most lightly taxed State in the Commonwealth.

Senator MULCAHY:

– We may be mast lightly taxed through the Customs, but that might be considered creditable to usrather than otherwise.

Senator de Largie:

– Tasmania is the most lightly taxed State, taking all taxation into account.

Senator Macfarlane:

– Not at all.

Senator MULCAHY:

– I think that possibly Senator de Largie is right. The people in none of the States can be considered to be greatly overtaxed, and I believe that the people of Tasmania and Victoria are more lightly taxed than, perhaps, are the people of any other part of the world. But I am speaking now of taxation imposed by the States Governments, and for which they are forced to accept the responsibility.

Senator de Largie:

– What does direct taxation in Tasmania amount to?

Senator MULCAHY:

– I think it amounts to £1 4s. 3d.per head, which is higher by some few shillings than is the direct taxation of any other State of the Commonwealth .

Senator de Largie:

Cogfilan’s latest publication gives the figures at 15s. 2d.

Senator O’Keefe:

– That is someyears old. and heavy taxation has been imposed in Tasmania since then.

Senator MULCAHY:

Senator de Largie can accept my assurance on the subject.

Senator Trenwith:

– Never mind, it is a poor little place, and a nice little place, too.

Senator MULCAHY:

– It is not poor, except in a comparative sense. It will be admitted that it is the duty of the Senate particularly to consider the obligations and responsibilities of the various States Governments. The State Government of Tasmania must see that they pay 20s. in the £1, and that is often a matter of very great difficulty where extreme direct taxation has to be resorted to. Notwithstanding the fact that Tasmania is so heavily taxed, the direct taxation returns only something like £256,000 a year to the State Treasury. In the circumstances._ the idea of our being able to meet our interest bill from that source of revenue, seeing that it’ amounts to £335,000or £340,000a year, is simply absurd. Every representative of Tasmania in the Commonwealth Parliament must carefully watch all financial questions. Apart from the desire which we should all have to consider the interests of the Commonwealth as a whole, we are each sent here specially to regard the interests of our own State, and to see that no undue burden of taxation is forced upon her people, or the obligation to impose it upon the Government of the State.

Senator Playford:

– This is not a question of the burden of taxation.

Senator MULCAHY:

– The only objection I have to the Bill is that it might offer an inducement to the perpetuation of the bookkeeping system. That seems to me to stand out very prominently as one of the results which are likely to accrue from its enactment.

Senator Col. NEILD (New South Wales) [4.46]. - I think it will be my duty to give a vote in the direction of securing sufficient delay to allow the people of the Commonwealth and the Governments of the States to be acquainted with what we are doing. I have found that immediately after certain measures have passed through the Chamber the representatives of New South Wales have been bombarded with representations - from the Prime Minister in some cases, from the Lord Mayor of the city in others, and so on - indicating wishes to which we had not given effect, because we had not known anything about them. I am against the Bill, because of the fact that if it were passed it would mean that a matter of the gravest consequence to both the Commonwealth and the States had been considered with very little more deliberation than is applied to settling the preliminaries of a well-conducted dog fight. The question of taking over the States debts has been discussed, but it has not been settled. There have been. I suppose, in the other Chamber three, or four, or five different schemes, all of which have been advocated zealously, and discussed without a decision having been arrived at.

Senator Trenwith:

– Is not this an effort to settle the question ?

Senator Col NEILD:

– No. If ever a Bill was proposed for shooting Niagara it is before the Senate to-day. It Is the wildest blindest step that ever a Parliament has been asked to take.

Senator Trenwith:

– It is asked to do nothing but to take powers.

Senator Drake:

– No; it is asked to strike out a limitation in the Constitution.

Senator Col NEILD:

– What was the Constitution prepared by Australasian Convention for the establishment of the Commonwealth but a proposal for taking powers? The very best men in our Parliaments were sent to the Convention to discuss projects, and they did not do so in a single sitting, with Standing Orders suspended, in order that everything might be rushed through, contrary to the best traditions of parliamentary procedure. I do not take any exception to the suspension of the Standing Orders, with a view to bringing the session to a close, but I certainly do take exception to proposals which would involve the gravest consequences without those rules for serious discussion and mature deliberation having been complied with. In point of fact, it is proposed to have only one stage, because, although the Bill would go through the different stages, still, so long as the Standing Orders were suspended, it would be practically one act.

The PRESIDENT___ No; the motion for the suspension of the Standing Orders relates to the time for making a call of the Senate. A call will have to be made.

Senator Col NEILD:

– I thank you, sir, for the correction. There is such a multiplicity of contingent motions on the noticepaper in the name of the Minister of Defence that, not unnaturally, I am slightly confused. In another place there has been a discussion on a proposal by a Mr. Harper, . on a proposal by a gentleman named Sir John Forrest, on a proposal by a gentleman named Sir George Turner, and on a proposal by, I think, the late chairman of the Victorian Chamber of Commerce. These various schemes have been discussed, but no conclusion has been come to. I admit that it has bewildered me to some extent. I have no doubt that the man or woman in the street who will be called upon to vote at the referendum will be as blissfully ignorant of what it all means as it is possible to conceive. I am one of those who hold the view that we cannot wisely separate our debts from our assets. Who has ever heard of that being done in the affairs of an individual or a company? The security for Australian loans hitherto hasnot been based upon taxation, but on assets.

Senator Trenwith:

– We have never given anything in security except the power to rax the people.

Senator Col NEILD:

– My honorable friend is quite right. I do not think that any of the States has ever given anything in security, but I think it has been the universal boast of the States that their borrowings have been chiefly represented by remunerative assets.

Senator Trenwith:

– We have told ourselves that.

Senator Col NEILD:

– We have told that to our creditors.

Senator Trenwith:

– It has not been quite true.

Senator Col NEILD:

– In New South Wales, we have a sort of understood “division of our indebtedness - that so much of the borrowed money has been expended on remunerative investments, and a small portion on unremunerative works - and we have always held that our railways, alone would suffice to represent the value of our public debts. . That may. or may not. have been the case, but at least that tradition of valid assets, of interest earning investments, has been continuously put before the English money lender. It is now proposed to give all that the go-by. To leave all the assets with the States, and to take over their liabilities. When we have to go to the market to borrow what security shall we have to offer? All we can offer will be one-fourth of the Customs and Excise revenue, because the balance is hypothecated to the States under the Constitution. Therefore, it is of no use to puff ourselves out, like the frog in the fable, and to say, “ We have such and such a revenue to represent our indebtedness.” We should have only 5s. in the £r of our revenue to offer to the British or foreign investors in our stocks. This measure is altogether too serious to be rushed through in this needlessly hasty manner. Who has “asked for the Commonwealth to take over the State debts? I understand that as soon as this thing is achieved, if possible, the Prime Ministers of the States and the leaders of the Oppositions, are to be invited to meet, and to be asked, not “ Do you approve of this,” but “ What do you think about what we have done?” It is proposed to take over an indebtedness of nearly £250,000,000, which is equal to quite one-third of the national debt of the Old Country, and to say that we have nothing to represent that enormous sum except 5s. in the £1 of the Customs and Excise revenue. . That is a position which we ought not to assume. When the promises were made to the people of Australia that if they would only vote for the Constitution Bill, they would save at least £ per cent, in the rate of interest on the public debt, the Colonies which were best off were then borrowing at 3 per cent. Certainly, New South Wales was borrowing at 3 per cent, in the nineties.

Senator Dobson:

– In 1897, New South Wales was borrowing at a trifle above 3 per cent., but not since then.

Senator Col NEILD:

– It was the year when I was in England, I spent almost every day of my life in the city for months, and I had rather excellent opportunities for exchanging opinions with some of the largest financial operators in the city, who did me the honour to consult me about their investments in Australian stocks. I had every means of gaining knowledge of what was going or; in their minds, and I certainly came to the conclusion that in that year, when we were borrowing at about 3 per cent., the Commonwealth, if established, would not be able to borrow any more cheaply. If a State with very large resources, with very large remunerative State investments in the shape of railways, telegraphs, and other works, and with an immense area, of Crown lands as a further asset, could not borrow on better terms than 3 per cent., how can the Commonwealth, without a foot of ground, or without a yard of railway, and with no command of revenue beyond 5s. in the £1 of what it collects through the Customs House, hope to do so? What attraction would there be in all that to the money lender? What greater attraction has the Commonwealth *o offer to the money lender than has, say, Western Australia? The figures for that State show a large amount of mineral wealth, a very considerable development of agricultural industry and production, and practically an unlimited area of land. Surely those are valid securities for a loan as against a Government which” owns nothing except two or three buildings and a lease of two or three more ! True, it has taken over from the States a number of properties, but it has been careful not to pay for them. In that respect, I do not know that we need preen our feathers over what we have done. We certainly have done about the biggest piece of free-hooting that I have ever read of. If that is called an asset, well and good.I do not regard it as one, because I think that the Commonwealth owes the States for the properties. In the circumstances, I see no reason to suppose for a moment that the Commonwealth could borrow any more cheaply than could the best of the States. I do not say every one, because there may be circumstances arising, through change of policy, change of Ministry, droughts, or some other causes, which may bring about adverse conditions. But, speaking “ big and large,” as the sailors say, I cannot, as an old business man, see any prospect of the Commonwealth, which has control of only 5s. in the £1 of Customs revenue, being at any greater advantage than are some of the States in regard to loans. For these reasons, and particularly because of the lack of decent consideration, I am opposed to the Bill passing at the present time. When it has been canvassed, and when it’s provisions have become thoroughly understood by the States Parliaments and Governments, it will be time enough for us to consider it. again. But, in any case, I should like to see the Bill, if it be passed, put in a form that will be likely to be understood by the people. It will be seen that a number of questions have to be submitted to the people at the referendum in such a manner that, apparently, from what one of the morning newspapers says, the only chance of their being able to understand what is proposed will be to have the papers printed in orange and green - with, perhaps, a few more neutral tints. If any person acting in a fiduciary capacity proposed to deal with trust funds in such a manner those affected would be quite entitled to swear a commission in lunacy against him.

Senator Dobson:

– Lord Goschen. when Chancellor of the. Exchequer, dealt with £700,000,000 in one Bill.

Senator Col NEILD:

– But not with the same promptitude as is proposed in regard to this matter.

Senator Millen:

– His proposals were canvassed for months beforehand.

Senator Col NEILD:

– He was carrying out a definite financial transaction. But this is a deliberate scheme that will lead to the most utter darkness that any Parliament ever attempted to jump into. It is a deliberate attempt to perpetrate an absurdity. I have the most kindly feeling towards the members of the present Ministry, and I wish, as far as I can, to facilitate the transaction of public business in the closing days of the session,. But I really cannot vote for this Bill, for the reasons which I have given, and which I may be permitted to sum up in three points - first, because the Governments and the people of Australia do not understand the question; secondly, because the matter is proposed to be transacted with reckless carelessness ; and, thirdly, because, as a business man, I can see no prospect of the Commonwealth or the people of Australia deriving any benefit whatever, but rather die reverse, from this haphazard sort of legislation. I shall therefore feel it to be my duty to give a vote, not to prevent some measure of the same type being put upon the statute-book, but for delay at the present stage, in order that more consideration may be given to the subject, and that, when we come to deal with it again, we may do so on sounder grounds than are possible at present.

Senator DOBSON:
Tasmania

, -

The matter before us is mainly one of State rights. I think that it is the duty of the Senate to discuss any question of that description most exhaustively. This is the Bill which absolutely upsetsone of the safeguards of the Constitution, that was determined upon after weeks of conference in the Finance Committee, and considerable discussion in the Convention. It was deemed to be one of the essential privileges of each State that if any debt was taken over by the Commonwealth, a proportionate part of the debt of every other State should also be taken over. I can see no reason why that safeguard should be departed from. The subject is little understood ; but the mere fact that the States are going to be deprived of that safeguard has aroused suspicion in the minds of some of our. statesmen. I have recently had a communication from the Treasurer of Tasmania, in which he states that he does not quite understand the effect of the Bill. He asks whether one of its effects will not be to abrogate the Braddon section, and whether it will not give the Government fuller powers than it had before to take over the States debts or any part of the States debts as it pleases.

Senator Keating:

– The Premier of Tasmania has repeatedly urged that the Commonwealth should take over the whole of the debts of the States.

Senator DOBSON:

– But that is proposed to be done in this Bill without observing one of the safeguards of the Constitution.

Senator Keating:

– Not at all.

Senator DOBSON:

Senator Keating does not seem to understand the matter himself.

Senator Keating:

– He does.

Senator DOBSON:

– Then it is a pity that he does not enlighten us with information about it. We have had several Conferences of Premiers, at which the matter was discussed. Two years ago there was a Conference in Hobart, at which the States debts question was debated for many hours. The Premiers could not arrive at an unanimous opinion as to what should be done. I am not aware that a later Conference, held in Sydney, arrived at a more decided conclusion. In point of fact, no agreement has been come to. I should be unwilling to pass this Bill unless I was satisfied as to what is to be done hereafter with regard to the States continuing to borrow money on their own account.

Senator Staniforth Smith:

– That is entirely in the hands of the States themselves, and will continue to be even if this Bill passes.

Senator DOBSON:

– My honorable friend is stating a truism. Of course it is in the hands of the States. But, before the States debts are taken over by the Commonwealth, I want to know what position the Commonwealth is going to be in. The Commonwealth ought to be able to conduct the business properly. Otherwise, a single State may be able to affect the credit of the Commonwealth by going into the market for a loan at an inconvenient time. Is the Commonwealth to take over £236,000,000 of debts without there being any provision that the States may not borrow except through the Commonwealth? Are the States to be left to operate, in respect of loans, as cautiously and prudently, or as recklessly, as they please, without the consent of the Commonwealth ? Those are points that certainly ought to be settled, and until they are, I am not prepared to vote for such a Bill as this.

Senator Millen:

Sir John Forrest’s memorandum makes it clear that the States may operate just as recklessly as they like after the debts are taken over.

Senator DOBSON:

– I should like to read Mr. Coghlan’s evidence on this point. He says -

The change of stock into Commonwealth stock must be a thing of gradual accomplishment; the only course open to the Federal Government is to accept the duty of renewing existing loans, and of raising fresh loans, but these duties can only be exercised with efficiency if they are vested exclusively in the Commonwealth. Any other arrangement would place the Australian States and the Commonwealth in a worse position than they occupy at the present time.

Then he goes on to say -

In fact, the transfer of the existing loan obligations of the States to the Commonwealth, coupled with the right of the States to continue to borrow in the London market, would lead to disastrous results.

That is the point which I want settled -

The corollary to the transfer of the State loan obligations to the Commonwealth is the restriction of the borrowing operations of the States to their own local markets.

Senator Fraser this morning gave good reasons why States with small loans to convert would be able to pay them off on the Australian market, or to pay half of them off in such a way as to give our creditors in London the utmost confidence in our future operations. Mr. Coghlan goes on to say -

The reasons for this are so obvious as not to need stating, and this opinion is warmly concurred in by the financial authorities here, on whose judgments the States Governments have been wont to rely.

If the States are to be allowed to go on floating loans of their own after we have taken over their debts, we do not need Mr. Coghlan and financial experts in England to tell us that that will be disastrous. Mr. Coghlan goes on to say -

Moreover, it would be desirable that when the Commonwealth takes up the business of placing new loans for the States, the management of all other stocks should also be transferred to Federal control. No appreciable saving, it is true, would follow such transfer, but it is desirable that, once the Commonwealth appears in London as the representative of the Australian States financial interests, uniform ideas should govern the management and control of their business.

It seems to me that Sir John Forrest’s opinion is absolutely contradictory of Mr. Coghlan’s statement in that respect, because the Treasurer says -

It is, I think, inadvisable at the present time to ask the States to undertake for all time not to borrow on the London market except through the Commonwealth.

How are we to judge between these financial experts? I ask those honorable senators who desire to uphold the dignity and rights of the Senate not to allow a measure affecting the States as intimately as this does to go through without the closest scrutiny. The Senate has recently shown a determination to regain lost ground as a very important part of the Legislature under our Constitution. I hope that, in regard to this measure, we shall regain further ground as the tribunal which is essentially empowered to look after the interests of the States. I can only repeat that the Premier of Tasmania seems to be all at sea as to what we, propose to do, and no wonder. The Bill, which we are” considering, was not in print, and I do not think that any one in the Senate knew what t!he effect of it would be - that one of the safeguards of the Constitution was to be taken away.

Senator Drake:

– Neither did they know in the other Chamber, where honorable members talked about anything but the Bill.

Senator DOBSON:

– It is a very disgraceful way of dealing with an important problem. Perhaps I ought not to use the word “disgraceful,” and I shall say that it is a most unbusiness-like and careless way of dealing with the question. Under the circumstances, there is all the more need, for the Senate to exercise its ‘power. Senator Millen pointed out that the States have not been urging that the debts should be taken over, r.or have they, so far as I can judge from the statements of the Minister, been concerning themselves with the financial problem. But, the moment these Bills appeared, the Premiers and Treasurers of the States, instead of waiting to be asked, decided to meet as soon as possible, because they are alarmed at the two measures. Senator Playford smiles.

Senator Playford:

– I never heard that that was the reason of the meeting of the Premiers and Treasurers.

Senator DOBSON:

– Cannot the Minister read between the lines? I have not heard that given as the reason for the Conference, but I venture to suggest that the Conference is being convened because of these proposed amendments of the Constitution.

Senator Playford:

– The Conference would have been held in any case.

Senator DOBSON:

– This Bill is to give Parliament the right to levy special duties for no particular purpose, and it, therefore, abrogates to some extent the Braddon section before it has been settled what shall be done in regard to that section, or in regard to the bookkeeping section. I believe that the States are alarmed at this spasmodic, hasty 2 and thoughtless legislation; and the Premiers and Treasurers are arranging for a Conference during the very week we are considering these measures. I agree with Senator Drake that if there ever was a time when it would be fitting to lay a Bill aside, it is on the present occasion, when the Premiers and Treasurers are to meet to consider the proposals before us, and, what is more important still, the effect of those proposals. Every honorable senator who regards himself as the guardian of States rights is bound to see that this Bill is laid aside until we know the feelings of the States. We have heard over and over again from the Ministers now in office, and those who have preceded them, that they desire in every way to take the States into their confidence, and to work in conjunction with the States.

Senator Playford:

– With the people of the States, a referendum of which this Bill proposes.

Senator DOBSON:

– I suppose the Premiers and Treasurers may be taken as representing the people of the States? If ever there was a time for caution and delay, it is in dealing with this great financial problem. Like Senator Drake and Senator Millen, I am quite at a loss how to deal with this Bill, unless the whole ‘problem is before us, and we know what is the scheme cf the. Government. Do the Government intend to take over the Victorian debt of £4,000,000 due in January, and place that on the market ? Are the Government going to wait until another loan becomes due, or do they desire to at once take over larger sums ? We have had nothing placed before us but the Bill, the contents of which’ nobody knew until forty-eight hours ago.

Senator Playford:

– The Bill has been before another place.

Senator Millen:

– The Bill was not properly, explained in another place.

Senator DOBSON:

– Supporters of Federation in their earnestness told the people what might be saved by the Commonwealth taking over the debts, and if the statement read by Senator Playford is correct, we may save a great deal. But it is quite problematical whether in the future the Commonwealth will be able to float loans to any better advantage than can the States. The Dominion stock of Canada is much more valuable, and much more sought after, than, the stock of the Canadian States ; but I do not think that Australia can attain such a position, for, at any rate, a generation or two.

Senator Millen:

– The honorable senator knows the reason of that. The Canadian indebtedness is ridiculously small, and there is a sinking fund which represents a big percentage of the amount of their indebtedness.

Senator DOBSON:

– The Canadian indebtedness is, I think, about £60,000,000.

Senator Millen:

– It is very small, I know.

Senator Playford:

– The Canadian stock has a better price in the market than has the stock of the Australian States.

Senator DOBSON:

– Of course it has.

Senator Playford:

– And Commonwealth stock would be equal to Dominion stock there is no doubt.

Senator DOBSON:

– What I say is that there is nothing to show that the Commonwealth would be able to float or convert loans on any better terms than can the States. I hope the Commonwealth will be able to do so; and I must say that I should have liked to see a commencement of the issue of Australian consols. I should like Australian consols to be known everywhere and to be popular; and it would be very interesting to all of us to see whether they would stand : high and result in figures like those of the Canadian stock. So far as I can make out, the Canadian 3 per cent. stock stands at about £96, and Coghlan tells us that Australia can never hope, in the present state of the market, to deal with a 3 per cent. stock at anything above £90. It appears to me that in those matters honorable senators do not seem to think of the market. If we could hit the psychological moment, we might do wonders with a conversion scheme, supposing the loans were nearly matured. If, however, the loans were not nearly matured, we should be in the hands of our creditors. When we were talking to the people of Australia, and urging them to accept the Constitution. we were thinking of 1897, when three of the States issued 3 per cent. loans, which in every case, I think, came near par. If I am right in my recollection, some of the loans were floated a trifle above par, but taking off £1 odd per cent. for expenses, I do not think any State got exactly £1:00 for its debentures.

Senator Playford:

– Not all the 3 per cents. were at par.

Senator DOBSON:

– Very nearly.

Senator Playford:

– In the case of New South Wales, it was not within £2 or £3 ofpar.

Senator DOBSON:

– I think it was closer.

Senator Playford:

– I do not think so, when the expenses of flotation were deducted.

Senator DOBSON:

– However, if we had a market like that we might, by converting loans, make a considerable saving; but the market is now dead against us, and I do not see what we could do. Coghlan says -

In regard to its stocks on the London market, Canada stands in an extremely favorable position. The Dominion has been able to pay off a fair proportion of its loans falling due out of its surplus revenue, and has accumulated very large sinking funds, and these funds have been for the most part transmitted to London, where they are employed in purchasing Canadian securities, so that all classes of its stocks are very well maintained. According to the latest returns available, 3 per cent. stock is outstanding to the extent of £10,468,629. against which there is an accumulated sinking fund of £3.755.711 invested in the stock.

That is a position which we can never hope to attain.

Of21/2 per cent. stock there is an amount outstanding of£2,000,000, and an invested accumulated sinking fund of£958,563.

In view of the small indebtedness and the sinking fund of Canada, we can never hope for a generation or two to equal that country. But the question is whether the Commonwealth would have a better credit than the States. I listened with some interest to the figures Senator Millen read, as coming from Mr. Nash, the commercial editor of the Sydney Daily Telegraph. If I were a broker in London and States stocks were being run against Commonwealth stock, I would rather choose States’ stocks to fight with. I should have very little difficulty in pointing out to investors, either collectively in meeting or ‘individually, that the stock of an Australian State, with an enormous land revenue–

Senator Playford:

– What State has an enormous land revenue?

Senator DOBSON:

– New South Wales.

Senator Playford:

– That revenue is going down every year; it has gone down to a mere nothing.

Senator Millen:

– It has not gone down to a mere nothing-.

Senator DOBSON:

– Is it not over £1.ooo,ooo a year?

Senator Millen:

– Yes.

Senator DOBSON:

– The land revenue of New South Wales has gone down from perhaps £2,000,000 to £1.500.000.

Senator Playford:

– That revenue is not £1,500,000, or anything like.

Senator DOBSON:

– I could point out to investors that all the lands and assets were possessed by the States, and that the States have enormous interest-earning power, as shown by the New South Wales revenue of over £12,000,000. Under all the circumstances, I think that the man who was running the State stock would be in the better position. If we take two or three of the wealthier States, I believe most firmly that their security is better than that of the whole Commonwealth, which must contain, every now and then, a financially weak State. The finances of Tasmania are not particularly elastic. That State has been deprived by the Tariff of £150,000 of revenue, and it is being dragged into expenditure which it cannot afford in connexion with penny postage and other enterprises ; and the State is made financially weak, when, if left alone, it might have been strong.

Senator Playford:

– How is Tasmania losing £150,000?

Senator DOBSON:

– Through the Customs and Excise. Does the Minister know that the Federal Tariff has taken out of the pockets of the people £1,000,000 less in six years than would have been taken by the State Tariff?

Senator Playford:

– Some of that may be made up by Tattersall’s.

Senator DOBSON:

– I shall vote against the second reading of the Bill. I hope that nothing will be done by the Government, even if they have the power, to Hasten on either of the measures for the amendment of theConstitution which are before the Senate. Premiers and Treasurers have met, and expressed their views. It is most essential that in this matter the Federal Government and the States Governments should work together. It would be most unfortunate if the Commonwealth were to pass an Act relating to States debts which the States thought was wrong or unwise. As Coghlan says, it would be disastrous for us to go on with this matter until we know what the future borrowing powers of the States are to be.

Senator O’KEEFE:
Tasmania

.- This is one of the most important questions we have yet had before us, and I have listened with! the greatest attention to the deeply interesting discussion, with a view to getting as much light as possible. While we may give the Treasurer andhis colleagues credit for doing their very best in what they consider the direction of benefiting the Commonwealth and the States, this Bill, after all, deals with only one section of a very big problem. This question may be divided into three parts - States debts, the bookkeeping period, and the Braddon section - and I have come to the conclusion that it is impossible to separate one from the other.

Senator Clemons:

– We require one pronouncement on the three questions before we can know where we are.

Senator O’KEEFE:

– It seems to me that, by taking any important departure in dealing with one section of the question without at the same time considering the other sections, we might be doing something which would prove to be dangerous to the finances of the States. The question of State and Federal finance is one of the biggest questions before the people at the present time. I am unable to separate the question of the transfer of the States debts and the proposal to deal with them in the way provided for in this Bill, from the other two sections of the same important question - the discontinuance of the bookkeeping system next month or next year, or its continuance indefinitely ; and the operation of the Braddon section until 1910 - the substitution for it of some other provision which will guarantee to the States Treasurers something in lieu of what they now get under that section, or its termination without provision for any substitute. These three questions, separate in themselves, are involved in the one big question of the financial relations between the Commonwealth and the States. In the circumstances one may be excused for asking for further time to consider this measure in all its bearings. I subscribe to the statement of the Minister that Commonwealth stock must inevitably become of greater value than the stock of any particular State, owing to the fact that the Commonwealth has far greater powers of taxation than has any single State; but I still hold that we should go slowly in seeking to alter one of the most important provisions of the Constitution. No harm will result if this question is deferred for further consideration. If the measure before the Senate should become law, and a future Parliament should take over a loan floated by any particular State, that State must be responsible for the interest on the loan. Each State will have to find the amount of money, in excess of the surplus revenue from Customs and

Excise returnable to it; required to meet the interest on the whole of its loans that have been taken over. The question is one which is so mixed up with the general financial relations between the States and the Commonwealth, and is so important in its bearing upon the interests of the States, that it should detract in no way from the dignity of the Government if the Senate, which is in a particular sense the States House, should decide that the matter should be deferred. I have not much sympathy with the cry which is sometimes raised with respect to States rights. The rights of the States are the rights of the people, of the Commonwealth, and the electors of the States are the electors of the Commonwealth; but this question is one which affects the interests of the States individually, and which may affect the interests of one State as against those of another. If the Senate, in the circumstances, considers that sufficient time has not been given for the consideration of the Bill in all its bearings, and of the consequences likely to follow from it, we shall do nothing wrong in postponing its consideration until next session. I should like to vote for the measure, if I could feel that it had been sufficiently discussed, but we cannot forget that another branch of the Legislature did not thoroughly discuss the measure. One thing is certain, and that is that the other financial questions to which I have referred, and which seem to me to be inseparably bound up with this measure, were scarcely mentioned in another place.

Senator Pearce:

– How does this affect the bookkeeping system ?

Senator O’KEEFE:

– It must be patent to everybody that the bookkeeping system has a most important bearing upon the finances of the States.

Senator Pearce:

– How will it be affected by this Bill ?

Senator O’KEEFE:

– We must consider what is to be done in connexion with the bookkeeping system as a portion of the same question.

Senator McGregor:

– The honorable senator loses sight of the fact that this is a referendum Bill.

Senator Pearce:

– How will the bookkeeping system affect this Bill ?

Senator O’KEEFE:

– If this Bill is passed, and is subsequently approved by the people immediately Parliament begins to exercise “the power which will thus be conferred upon it for the transfer of the first State loan, it must be patent to every one that the whole question of the relationship between Commonwealth and State finance will be brought under review.

Senator McGregor:

– That will be the time to deal with the matter.

Senator Pearce:

– Does not that difficulty arise under the Constitution as it stands at present?

Senator O’KEEFE:

– There is another reason why I think we should gain by delay irc dealing with this measure. When we seek to alter the Constitution to give us the power to deal with the debts of the States in the way contemplated bv the Government, would it not be wise that we should ask the people at the same time to give us the power to limit further State borrowing outside of Australia. The chief object of this measure is to enable the Commonwealth to take over £34,000,000 of States debts other than the £202,000,000 which we have constitutionally the power to deal with now. If the Commonwealth is given that power, and the Federal Parliament proposes to exercise it immediately, we shall be able to deal with the whole of the States debts as they exist next year, and not as they existed at the establishment of the Commonwealth. Parliament might assume responsibility for the whole of the debts of the States, and there is no power provided in the Constitution, nor is such a power sought, in this Bill, to prevent the States from immediately becoming borrowers again. The fact that no such power is provided for in this measure seems to me to be rather a serious, blot upon it. If the Government had included in the measure a provision to restrain .the States from borrowing outside of Australia, except with the consent of the Commonwealth Parliament, there would be some good reason for asking that the Commonwealth should have the power to deal with the whole of the “debts of the States.

Senator McGregor:

– The honorable senator is condemning the Constitution as strongly as he is condemning the Bill.

Senator O’KEEFE:

– - It does not matter what I am- condemning, we cannot escape from the fact that if this Bill is approved by the people, and the new Parliament chooses “to exercise the powers it confers, there will be nothing to prevent the States borrowing again immediately. That may appear to be desirable to the Treasurer, but I think that the majority of the people of the Commonwealth would not consider it so.

Senator Guthrie:

– The States are as anxious to refrain from borrowing as is the Commonwealth.

Senator O’KEEFE:

– I do not know that they are. I believe that some of the States Governments have said that they do not wish to be restricted as to future borrowing. It seems to me to be rather a loose way of doing business to submit a measure to enable the Commonwealth to assume control of and responsibility for the whole of the debts of the States, without at the same time placing some restraint upon future borrowing by the States outside of the Commonwealth, unless with the consent of the Federal Parliament. Viewing the matter as I do, and having fully considered the measure, it appears to me that the best thing I can do is to vote against the second reading, in order that more time may. be given for the discussion and consideration of the important financial questions with which it is inseparably bound up.

Senator STANIFORTH SMITH:
Western Australia

– - This proposal is a double-barrelled one. It seeks to authorize the Commonwealth to take over, not only the debts which existed prior to Federation, but also those which have been subsequently incurred. It also proposes to remove the restraint imposed upon the Commonwealth that it shall take over the debt from each State according to its population. I believe that there is no member of the Senate who is opposed to the first part of the proposal. I never could understand why the Constitution restricted the right of the Commonwealth to take over only the debts owing at the time of Federation.

Senator Drake:

– “Was it not done on the assumption that the transfer would take place as soon as the Commonwealth was established? Was it not part of the compact ?

Senator STANIFORTH SMITH:

– I suppose it was intended that as soon as Federation was consummated the debts should be taken over, because power was given to the Commonwealth to take them over without the consent of the States. I think we are all agreed that it should be given the power to take over subsequent debts. The other part of the proposal opens up a very large and difficult question in finance. But it must be remembered that of the thirty-nine articles in the Constitution this is the one case in which the States have absolutely the whip hand. With regard to the transfer of the debts they are the masters of the position.

Senator Keating:

– No.

Senator STANIFORTH SMITH:

– No Commonwealth Government would agree to take over any debts unless they came to an understanding as to the subsequent borrowing power of the States. That is not restricted in the Constitution, nor is it now proposed to be restricted. Therefore, in any negotiations the States would occupy a position in which they could dictate to the Commonwealth. While we have the right to take over a proportion or the whole of the States debts un to a certain date, we have no power to _ restrict the borrowing power of the States. That dominates the whole question of the transfer of the debts. It has formed the subject of negotiations between the States and the Commonwealth in every Conference which has been held, and it rests entirely with the former to say whether or r.ot thev will agree to their borrowing being restricted. This is. not a proposal which’ would jeopardize the interests of the States, because it would rest with them to say on what terms they would allow the debts to be taken over.

Senator Givens:

– If we had power to take ove’r the debts we could take them over whether the States liked it or not.

Senator STANIFORTH SMITH.The reason why we have .not taken over the debts is simply because we have to come to an arrangement with the States as to their right to borrow in the future. That is not interfered with in the slightest degree in the Bill, and therefore if it were passed the States would continue to occupy that strategic position. It seems to me to resolve itself into a question as to whether we should remove certain restrictions so as to give both the States and the Commonwealth the opportunity of negotiating with greater freedom. No proposal will be made to take over debts individually or collectively, unless the State or States concerned come to an arrangement vountarily. to restrict the borrowing or to confine it to a certain year.

Senator Drake:

– Does the honorable senator suppose that the Commonwealth will make that stipulation before they take over the Victorian loan falling clue next year ?

Senator STANIFORTH SMITH:

– I feel quite certain that no Government would think of taking over the whole or a portion of the debts from a State without coming to an undertaking as to future borrowing. Otherwise, it would be exactly like trying to bail out a ship with a hole in her bottom.

Senator Millen:

– Does the honorable senator think that the States will give up the right to borrow?

Senator STANIFORTH SMITH:

– That is the question. It is only when the Commonwealth can offer a proposal which in their opinion would be safe in the interests of the States or not injurious to them, that it will be accepted. In either case, the States will be the arbiters, and not the Commonwealth. Therefore, in submitting this proposal to the people, we shall ask them to remove certain restrictions’, in order to enable the Commonwealth on the one hand, and the States on the other, to deal with greater freedom with this most difficult and intricate question. If it had not been that the States possess the power to borrow, and can only relinquish it of their own free will, I should not have agreed to the second part of the proposal. But, seeing that they possess that power, I, as a member of the States’ House, feel that I shall not be jeopardizing the rights and interests of the States in any way by voting for the Bill as it stands.

Senator BEST:
Victoria.

.- I must confess great disappointment at the turn which the debate’ has taken. I do not complain, because honorable senators have the right to give the fullest consideration to a measure of this kind. I can only deal with the question from my own standpoint. A leading argument in the ‘Federal campaign was the advantage which would accrue to the States by reason of the Commonwealth taking over their debts. At every election in Victoria that has been one of the most prominent questions, and I am not aware of a single candidate who has ever expressed himself as being adverse to the proceeding.

Senator Col Neild:

– I was, for one.

Senator BEST:

– I am speaking of candidates in Victoria only. If I gather public opinion at all in this State, it seems to be universal that the sooner the transfer of the debts is accomplished, the more likelihood will there be of the promised advantages accruing to the States. Many efforts have been made by way of conference and otherwise to secure their transfer, but from time to time it has been discovered that the Constitution is somewhat restrictive and hampering in its terms. The public, I think, recognise that if it were possible for the Commonwealth to take over the debtsas they became due we should much more satisfactorily be able to accomplish what is contemplated by the Constitution. So far as I can judge, the Bill is consonant with popular opinion in that regard. It was thought that the most practical way would be to take over the debts from time to time as they fell due, and it was objected on various occasions that that could not be done according to the terms of the Constitution. The Bill has two objects: The first is to enable the Commonwealth to take over,not only pre-Federal debts, aggregating £202,000,000, but also additional debts of £34,000,000, which have been incurred since Federation. So far as I can gather, every one is agreed that it is desirable for the Commonwealth to take over the whole of the debts, and to have perfect freedom in that direction.

Senator Drake:

– At all events, that is the object which has been talked about, and put before the public.

Senator BEST:

– Yes. Senator Drake and others have urged, with very great force indeed, that the Bill goes one step further, and seeks to restrict the present limitation as to taking over proportionate parts of the debts. If it were practicable to continue that provision of the Constitution - and I have been greatly impressed with the views which have been urged - I should be disposed to do so. But from my stand-point, it does not appear to me to be practicable.

Senator Drake:

– Why?

Senator BEST:

– Let me take Victoria by way of example. Within the next two or three years, she will have a loan of £6,000,000 falling due. By an arrangement with the State, it might be desirable that the Commonwealth should take over that debt. But if an obligation were thrown upon the Commonwealth to compulsorily take over a proportionate part of the debts of New South Wales and other States, it could not possibly take over the maturing loan of Victoria.

Senator Clemons:

– Why?

Senator BEST:

– Because, while a considerable advantage might be derived from the Commonwealth taking over that loan, and a very considerable sum in interest be saved, if it were also obliged to take over a corresponding amount of indebtedness, whether it was approaching maturity or not, from the other States, the disadvantage which might be suffered in that connexion would outweigh the advantage.

Senator Drake:

– In taking over the debts, the Commonwealth would simply be assuming the liability in respect of them, and we have the money with which to pay the interest. The honorable senator ‘ is talking of conversion.

Senator BEST:

– I am not talking of conversion, but of the Commonwealth taking over State loans upon their maturity. If we are to reap any advantage from the taking over of State debts, then the taking over of a loan at its maturity would be calculated to secure that advantage.

Senator Drake:

– But the point is that we can take over the debts before we convert them into Commonwealth’ stock.

Senator BEST:

– My honorable and learned friend puts it in this way, that if we take over the loan of £6,000,000 falling due within the next two or three years, we must also assume a corresponding liability in regard to the debts of the Other States. That means that the taking over of any stock on maturity must necessarily be encumbered by obligations and mutual arrangements with the States.

Senator Drake:

– No; there would be no encumbrance whatever.

Senator BEST:

– The taking over of the obligations must necessarily be a matter of mutual arrangement.

Senator Drake:

– No. We have power, under the Constitution, to take over the debts without the consent of the States. If we. take over a proportion, Ave do not require their assent at all.

Senator BEST:

– What I urge is that the Bill gives greater freedom so far as concerns the taking over of the debts. In order to accomplish that object, we must wait until the various debts fall due. That is the only advantageous manner in which we can take them over. If that is encumbered with an obligation to take over a proportion of the whole of the debts, it would be quite impossible to accomplish the taking over of debts at maturity at all. My honorable friend Senator Drake seems to think that it is a matter of great simplicity to accomplish that object without making a mutual arrangement with the States. But the scheme that I am dealing with as to taking over debts on maturity, is one that is necessarily applicable not to one State, but to the whole of Australia. When the various debts fall due, it seems to me that with very great advantage the Commonwealth might have power to substitute Commonwealth stock for them. My honorable friends who have opposed the Bill have urged what any Government might do in this connexion. According to my view, it is necessary that the Parliament, not the Government of the Commonwealth, should have the power proposed to be granted by this Bill, in order properly and efficiently to formulate a scheme, and to come to a satisfactory arrangement with the States. This is merely an enabling Bill to allow Parliament to legislate. If from time to time the Government of the day has any scheme to propose, it has to come to Parliament, and it is for Parliament itself to impose its terms. In other words, the purpose of the Bill is that we shall ask the people to intrust Parliament with greater freedom to legislate in this connexion. I think that the State Premiers have expressed themselves as desirous that the Commonwealth shall take over the debts.

Senator Clemons:

– They have not agreed to anything.

Senator BEST:

– At the Hobart Conference, they first dealt with the Braddon section, and then they said that -

Subject to the foregoing and following stipulations, the whole of the” States debts be taken over by the Commonwealth when arrangements can be made.

Senator Clemons:

– Which arrangements have never yet been made, because the States Premiers cannot agree as to terms.

Senator BEST:

– I do not deem it necessary that a scheme should be formulated before an amendment of the Constitution such as is proposed by the Bill is made. As soon aswe have the necessary freedom

Ave shall be enabled to formulate a scheme, and such a scheme would very likely fol- low. It is not as though Ave were seeking to take advantage of anybody in the event of the Bill being passed and being accepted by the people. Whatever proposals the Government make will necessarily be the result of negotiations with the various States. What have we to be afraid of? If New South Wales has £3,000,000 of debt falling due within the next year or two, and the Government came down with a proposal to take over that debt, surely we in this Parliament should have the liberty to assist New South Wales in that connexion. I do not think for a moment that any proposal will be made by any Government which has not received the sanction of the State concerned. Some honorable senators have urged that the Bill should not be passed because it does not stipulate for some restriction on the powers of the States as to future borrowing. But if an arrangement has to be made for taking over debts on maturity, which I believe to be the real solution of the question, surely it can well be a stipulation in negotiations between the Commonwealth and the State concerned, that the State shall not be permitted to. borrow further, or shall be limited as to the amount of its future borrowings. Of course, it may be said that the States would not consent to such a condition. If they would not consent, such a scheme would not be proposed to Parliament. I take it that Parliament cannot go far wrong in granting a simple enabling power. Parliament itself will have to exercise that power in the future by legislation in the interests of the States, recognising, as I conceive it must do, that any advantage to accrue from the consummation of a scheme of the kind must be for the benefit of the States affected. For instance, if an advantage accrued to Victoria by the taking over by the Commonwealth of its debt of £6,000,000, that scheme would be one to which Parliament could not ‘reasonably object, provided that it was satisfied with the terms. It is not as though the Commonwealth were attempting to make money out of the States. That would not be tolerated.

Senator Clemons:

– What is it trying to do?

Senator BEST:

– It is seeking to fulfil its functions, and assist in the solution of the States debts transference question.

Senator Givens:

– It is not trying to do anything of the kind. It has evaded that duty- all the time.

Senator BEST:

– Nothing will be done under this Bill without the consent of the States, and even’ proposal made by the Government has to meet with the sanction of Parliament.

Senator Givens:

– Why does the honorable senator assume that it would not be done without the consent of the States?

Senator BEST:

– Because all the Bill does is to give Parliament greater facilities regarding the taking over of the States debts.

Senator Givens:

– Parliament can do that without the consent of the States, within limits.

Senator BEST:

– In other words, it can take over £202,000,000 of debt, or a proportionate amount for each State. My honorable friends, I am sure, will concede that the Commonwealth and the States wilt consent to work together in this connexion. I know that it is urged that the threefourths Customs and Excise revenue which at present we pay over to the States would enable us to assume most of their interest obligation. But in one case - that of Queensland - the interest obligation is greater than the three-fourths revenue received by the State. In such an event, what does the Constitution provide? According to section 105, the State has to indemnify the Commonwealth in respect of the extra amount. I say this in frankness and honesty - that if I were not of opinion that the Bill would aid in the solution of this great, vital, and important question, of the transfer of the States debts, I would be no party to it. It is because 1 believe that the removal of a restriction would assist the States and the Commonwealth that I urge that, with the sanction of the people, which must be given before the Bill can become law, there is nothing to fear from its enactment.

Senator GIVENS:
Queensland

– I -desire to say a few words to explain why I do not propose to vote for the Bill at this stage. I approach the matter from an entirely impartial stand-point. Unlike some honorable senators who have spoken, I am strongly in favour of the Commonwealth taking over the debts of the States. I think it would be a great advantage, not only to the Commonwealth, but to the States themselves, if the debts were taken over. But it will be time enough for us to proceed to alter the Constitution when it sets bounds to our action. So far it has set no bounds whatever to what we have desired to do. We have not yet acted within our limits. Why should we proceed to exceed the present limits when we have not acted up to them? Senator Best says that the Bill only gives Parliament power to act, and that therefore there is no danger in it. If that be so, where is the necessity for the Constitution to contain any provision at all regarding “the “States debts ? All that would be necessary would be to call Parliament together, ‘ and allow it to work its own sweet will.

Senator Best:

– That is what section 105 says.

Senator GIVENS:

– Our duties and restrictions are set forth in the Constitution, and if Senator Best was right in what he said, there would be no necessity for the Constitution. Before we alter the Constitution in the way proposed, some very cogent reasons ought to be adduced. This is a most intricate subject ; and I regret exceedingly that the Government should have planked down this Bill on the table at this late hour of the session in what is practically a dying Parliament, and asked us to submit this question to the electors without that consideration and full’ discussion its great importance deserves. Most of the electors have but a very imperfect knowledge of the financial problem. They are unacquainted to a large extent with the details, troubles, and difficulties of the question ; and I do not see how they are to give an intelligent vote when it is submitted to them. The only means to educate and enlighten the electors is a full discussion at an early date - a discussion which may be commented on by the press from one end of Australia to another. The electors would then be enabled to study the speeches as reported in Hansard, and from these, and the comments in the press, would be able to form an intelligent judgment as to what ought to be done.

Senator Pearce:

– The honorable senator is very optimistic if he thinks the press will report the debates on an important subject.

Senator GIVENS:

– I do not say that the press would report the debates, but that the question would be discussed in the press. The press in Australia is not confined to one party, nor even do the newspapers of the same party hold the same views, especially on questions which are outside party politics, as I contend this question ought to be.

Senator Pearce:

– There is only one party that is solid on the question here.

Senator GIVENS:

– I do not know what party that is, and would be obliged for the information. The public ought to have a clear understanding of any question submitted to them in the way in which it is proposed to submit this question. It is quite true that by the Constitution we are limited as to . the time in which we must pass a Bill of this kind before submitting it to the electors. Such a Bill must be passed no longer than six months, nor a shorter time than two months before the referendum is taken, so that there are only four months in which to deal with it. This, however, need not in any way limit the discussion, because the Bill could be introduced earlier, and fully discussed, and the third reading held back until a convenient time, so as to fit in with the date of the elections. Although six years have elapsed since the Commonwealth was established, no feasible scheme has been placed before the public by either the Commonwealth Government or Parliament ; all the proposals, so far, are nebulous. Schemes have been put forward by Sir George Turner and Sir John Forrest, and there have been papers by Mr. Higgins, Mr. Knox, and Mr. Harper, while various other gentlemen have written about the matter in the press. But up to the present time there has been no scheme which commends itself to general acceptance. That being so, I think it is premature, and paltering with the question, to introduce this Bill, seeing that we have done nothing so far in the way of exercising the powers we already possess. We have been told about the advantage of taking over the debts of Victoria and New South Wales as they mature; but I think there is a simple way in which much could be done in that direction without any alteration of the Constitution. There is considerable dissatisfaction and disappointment in the States because, although the Commonwealth has been in existence six years, no arrangement has as yet been arrived at for the payment for transferred properties. If the Government are sincerely desirous to take over the debts maturing next year, they could easily do so by taking over the debts of each State to an amount corresponding to the value of the transferred properties in each State. Instead of squabbling over the price of this or that transferred property, the Government should proceed to make some arrangement of the kind I have indicated. There need be no squabbling about valuations, because the same people who owe the money will have to provide the interest, and pay the debt. When the Commonwealth was instituted the debts of the States amounted to £[2o’2, 000,000, and at the present time the amount is £[236,000,000 odd. Why should we bother ourselves about the have taken no steps whatever in connexion with the £202,000,000? Until we have made some arrangement for dealing with the matter so far as we have power at the present time - until we reach our limitation - where is the necessity for removing the limitation? Supposing I were bound to walk a mile in a straight direction, and there was no obstacle or hindrance in the way, why should I first proceed to remove a fence half-a-mile further on? There is one aspect of this question which appeals to me more strongly than any other. What I fear may be the outcome of this Bill is that, instead of making our security better - instead of organizing and systematizing our borrowing - it may lead to greater confusion, and, perhaps, very seriously injure and diminish our credit. When a State is relieved from a certain portion of its liabilities under this Bill, a new borrowing boom may set in, and the State may proceed to lavishly waste money, as many States have done in the past. Until some arrangement is arrived at by which the powers of the States to borrow will be strictly limited, it is practically useless to take over the debts. As Senator Smith very forcibly pointed out, it would be like bailing out a ship in which there was an enormous hole, through which the water came in faster than it was removed. We should have to be continually taking over States debts almost at the very moment when they were incurred, and the result would be to encourage some States to indulge in extravagantborrowing, while careful, prudent States would be made responsible. Once the Commonwealth has taken over the States debts, if a State, although it may indemnify the Commonwealth, does not pay the interest, the Commonwealth will be liable for the whole, and thus a premium will be placed on lavish borrowing and waste.

Senator de Largie:

– With the power of taxation the Commonwealth has?

Senator GIVENS:

– Even then.

Senator de Largie:

– I think we could very quickly shut down on any extravagance.

Senator GIVENS:

– What could we do? I agree with Senator de Largie that we could extract more money out of the people’s pockets by taxation, but that would be just the same as if I had power to take money out of a man’s pocket, while he could continually run and pawn all his property - he would be rendered none the less extravagant because I, as well as other people, was robbing him. My desire is that when the Commonwealth takes over the debts, the power of the States to further involve the Commonwealth in fresh indebtedness, should be severely curtailed and restricted, and that the Commonwealth should have supreme control in this connexion. For the reasons I have stated, I do not think we need trouble to pass a Bill of this kind asyet.

Sitting suspended from 6.30 to 7.45 p.m.

page 5264

AUDITOR-GENERAL’S REPORT

The PRESIDENT:

– I have to lay upon the table the fifth annual report of the Auditor-General on the Treasurer’s statement. It is a very lengthy document, and it is not in print. I presume that the Senate will require that it shall be printed.

Ordered to be printed.

page 5264

CONSTITUTION ALTERATION (STATE DEBTS) BILL

Second Reading

Debate resumed.

Senator CLEMONS:
Tasmania

– I feel it impossible to speak on this motion without making some passing reference not only to the manner in which the Bill is introduced to the Senate, but also to the manner in which it has been debated in another place.

The PRESIDENT:

– The honorable senator must not refer to the debate in another place.

Senator CLEMONS:

– I amnot doing so.

The PRESIDENT:

– I thought the honorable senator said that he was going to do so.

Senator CLEMONS:

– I am offering some criticisms as to the action of the Government. In introducing to the Parliament of Australia a measure of far-reaching importance, the introduction of which had been delayed for five years, the Treasurer of the Commonwealth occupied about ten minutes of public time, and his speech covers about one page of Hansard. The report of the subsequent proceedings on the Bill in another place reveals the fact that at most three or four of the whole of the members of that House debated the measure, and one very briefly, in order to have printed a speech which was never delivered and a long series of statements which were never even read. Of course such procedure could not take place under our Standing Orders.

The PRESIDENT:

– The honorable senator is not in order in referring to the debates in another place. We have a special standing order to that effect.

Senator CLEMONS:

– I accept your ruling, sir, and will leave that matter in order to refer to the action of the Government. The people of Australia, quite apart from the members of the Federal Parliament, and especially in view of the fact that it is proposed to ask them by referendum to express an opinion on the subject, were justified in expecting that a full discussion of this very important measure would take place in both Houses of the Federal Parliament. I am glad that the Senate has to some extent redeemed the situation by giving, even at short notice, full consideration to the measure, so far as the debate has gone. I venture to offer a few criticisms with regard to the effect which will possibly be brought about if we pass this Bill. The Constitution provides that the debts of the States shall be taken over by the Commonwealth, due regard being paid to the proportion of ‘ the total debts transferred represented by the debts of each State. The Bill we are now discussing has for one of its objects the breaking of that proportion. It really enacts, in so many words, that, whereas the Constitution provides that due regard shall be had to the proportion of the debts transferred represented by the debts of each State in regard to all debts contracted by the States’ up to 1901, no question of proportion shall be considered when those debts and any other debts contracted up to T906 are taken over by the Commonwealth. The Constitution made clear and direct provision for the possible transfer to the Commonwealth of the whole of the debts of the States contracted up to the year 1901. The Bill with which we are dealing makes provision for the transfer to the Commonwealth of States debts contracted up to the year 1906.

Senator Best:

– And all subsequent debts also.

Senator CLEMONS:

– One feature common to the Constitution and to this Bill is that there is no provision in either with respect to future debts.

Senator Best:

– The Bill includes them.

Senator CLEMONS:

– I am not at present disposed to dispute Senator Best’s contention that the Bill in its present form will apply not only to debts contracted by the States up to the present time, but to all future debts. But I do say that, in introducing the measure, the Minister gave the Senate no indication whatever of any desire on the part of the Government to do anything but deal with the debts, amounting to some £34,000,000, incurred by the various States between 1901 and 1906. I offer this criticism as to that: That it is a strange way of paying old debts to incur new ones. I mean to say that it is a strange way for the Government to pretend they are going to discharge the obligation of this Parliament under the Constitution to take over the States debts by merely making provision that the Commonwealth shall have power to fake over £34,000,000 more than is provided for by the Constitution. The Government merely say: “We admit that under the Constitution it was our bounden duty to deal with the States debts, at the time of the establishment of the Commonwealth amounting to some £202,000,000. We have done nothing, but we are asking you now to give us more work to do. We give no intimation that we intend to do it, but we ask the Senate to pass a Bill throwing upon the Commonwealth the further responsibility of dealing with an additional £34,000,000 of States debts.” Whilst the Bill provides for an addition to the indebtedness of the States with which the Commonwealth has power to deal, it also unfortunately provides for a change in the method proposed by the Constitution for dealing with the transfer of States debts to the Commonwealth. That is an obvious criticism which has been advanced by many honorable senators, but it indicates a feature of this measure which accounts for much of the hostility displayed towards it. For good and substantial reasons, the framers of the Constitution provided that due and proper regard should be had to the proportion of States debts, borne by the various States. This Bill sets that provision at nought. It provides that, whilst the Commonwealth mav incur the liability of dealing with the additional £[34,000,000 of debts, with respect to that sum no regard whatever shall be paid to the proportion between the various States.

Senator Playford:

– Suppose that is altered in Committee, what would the honorable and learned senator say then?

Senator CLEMONS:

– We can deal with the proposal if it is made in Committee. This is not my sole objection to the measure, and I am glad that Senator Playford recognises that this objection is a valid and a very strong one.

Senator Drake:

– Hear, hear ; it shows the danger we have escaped.

Senator CLEMONS:

– It is a proof that we have done something in the Senate by debating the measure up to the present time. The whole question of the transfer of the debts of the States to the Commonwealth is bound up inseparably with the constitutional provision for the establishment of the bookkeeping system with the Braddon section and also - if the Conferences of Premiers and Treasurers of the various States which have been held more than once dealt with the subject in any way effectively - with the question of the transferred properties. We have heard that when the question of the transfer of the States debts comes up for actual consideration, it will be impossible to avoid dealing at the same time with the question of the transferred properties. I have not heard this question mentioned before during the debate, but there can be no doubt that such a contention was advanced by the Premiers and Treasurers of the States in conference as worthy of our consideration. If we ask for any illumination on that point from the Minister we get none. We have heard nothing of the policy of the Government in connexion with that matter. One point which has beenmade abundantly clear is that the Commonwealth will not gain a single penny as the result of the transaction for which this Bill is intended to provide. Senator Playford does not deny that. It is clear beyond any doubt that the whole of the benefits, if any, accruing from the transactions which might take place under this Bill, would go directly to the States concerned.

Senator Best:

– Hear, hear !

Senator CLEMONS:

– I direct the attention of Senator Best to the conclusion to which one must arrive from such a statement. If this Bill should be effective it will mean nothing less than the continuance for an indefinite period of the operation of the bookkeeping provisions of the Constitution. Unless they are continued the Bill, in the estimation of Ministers, will be worth nothing. The sole object of the measure is not to secure any benefit for the

Commonwealth, but for those States whose loans might be taken over immediately.

Senator de Largie:

– Surely that would not be a crime.

Senator CLEMONS:

Senator de Largie may think that it would not be a crime to continue the bookkeeping system, but I hold that it would be a most unjust and unFederal thing to do.

Senator de Largie:

– I am sure that it would not.

SenatorCLEMONS. - I can agree to differ from Senator de Largie and other Western Australian senators on that point, but I must think occasionally of my own State, and I say that, so far as Tasmania is concerned, whilst it is a bad thing that the Government do not propose to put an end to the system next month, it is nearly a disaster that they should introduce any legislation which would have the effect of maintaining the system for an indefinite period. That is one of the many reasons why I must oppose the Bill.

Senator Playford:

– It is merely making more bookkeeping provisions, it is not continuing those which now exist.

Senator CLEMONS:

– If it does not continue the bookkeeping provision, then the Bill might as well be thrown into the waste-paper basket now. Judging by their utterances, it has no value in the estimation of the Ministry. One of the chief reasons why they urged another place to accept the Bill was that the Commonwealth would not benefit a penny by the transaction. But they profess to be about to embark in financial undertakings which would result in profit to some one. It is clear and decisive that the State concerned would get the profit, and it could only be obtained by the operation of the bookkeeping provisions.

Senator Best:

– Not necessarily by the present form of the bookkeeping provisions.

Senator CLEMONS:

– The present form is bad enough.

Senator Best:

– There is nothing very serious in what the honorable senator is suggesting.

Senator CLEMONS:

– If we pass the Bill, it will mean the continuance of the bookkeeping provisions for an indefinite period. If I am told that they are not to be continued, then I hold that the Bill is of no value.

Senator Dobson:

– The honorable senator’s argument only emphasizes the fact that the Government ought to tell us their policy.

Senator CLEMONS:

– I am no more able than the honorable senator to extract from the Government an indication of their policy. There is another assumption, and that is that it is practically a bad thing to carry out the Constitution as it is,! unless it is altered so as to enable additional debts to the amount of £34,000,000 to be taken1 over. I disagree with that contention entirely. I do not think that it would necessarily be a good thing to add that sum to the pre-Federal debts. It would be very much better, and quite practicable, for the Commonwealth to take over the latter debts amounting to £202,000,000. if that is desirable, as I believe we all think it is. It is almost grotesque to tell us that before we could take over the pre-Federal debts wo must add £34,000,000 to them. I do not see that that would in any way improve the position. That is another reason why I am bound to oppose the Bill. Every honorable senator will recognise that the question of taking over the States debts is necessarilv. bound up with the question of future borrowing by the States. Again, the Government are absolutely silent. The difficulties which would arise in that connexion have been clearly indicated with one~hundred different voices at various Conferences of Premiers and Treasurers. Those who followed their proceedings know that half-a-dozen different proposals have been made with the object of solving the problem. I can indicate a few points of divergence. Take, for instance, the question of how a State should in- future obtain a loan. It has been suggested that no State should be allowed to borrow except with the consent cf the Commonwealth, which must do the borrowing. There have been different opinions expressed as to the feasibility and desirability of adopting that course. A further difficulty has arisen, and it is as to where future borrowings should be made. Many members of each House of this Parliament desire that in the future the States shall borrow in the Commonwealth. At the Conferences, a great deal of debate focused round the question as to whether or not the States - assuming that they were to have a free hand or a fettered hand - should borrow only within the Commonwealth. The Ministry have outlined no policy in that regard. That is another point which has been debated, but not settled.

Senator DAWSON:
QUEENSLAND · ALP

– The honorable senator wants a new Bill.

Senator CLEMONS:

– I do not want this Bill. ‘

Senator Playford:

– We can only settle a question of that sort with the consent of the States, and they will not agree to that suggestion.

Senator CLEMONS:

– It is a strange thing that, almost contemporaneously with the introduction of the Bill here, arrangements had almost been completed, according to the press, for a Conference of States Premiers and Treasurers to deal with the question of the States debts. Yet we have the Commonwealth Government, who are prepared to join in the Conference, asking us to pass the Bill before that question is decided !

Senator Playford:

– The Bill only gives the ‘Commonwealth power to take over a comparatively small amount more of the debts than it can take over at the present time, and these other matters can all be decided afterwards.

Senator CLEMONS:

– If the Minister had not time to thoroughly master the contents of the Bill - and he can be excused if he had not, because of recent events here - it is a strange thing that the debate has not enlightened him that it- contains much more than that. Statement after statement has been made here showing most clearly that there is. far more in the Bill than he has indicated, as he admitted just now, when he asked, “ What will you do in Committee if we alter the method proposed in the Bill, and go back to the method arrived at by the Convention?” Is that no divergence ?

Senator Millen:

Senator Best claimed that that was one of the advantages of the Bill.

Senator CLEMONS:

– I admit that some supporters of the Bill may find themselves in a very strange position if Senator Playford should get it into Committee, and propose to take out the very thing which to them is a recommendation and a strength.

Senator Drake:

– No doubt that is what the Government want.

Senator CLEMONS:

– I suppose they want to get the Bill put through anyhow, and are prepared to flout their supporters, such as Senator Best, whose chief argument was : “ It is absurd that the Commonwealth should be bound down .by any question as to proportion between States. Let the first State which has a loan falling due get the benefit.” Now the Minister seriously proposes, if the Bill is taken into Committee, to take out the very thing which is a recommendation in Senator, Best’s eyes.

Senator Playford:

– I never said anything of the sort. All I said was, “ Suppose that when we are in Committee we do this, how will the honorable senator act then ?” I did not say that we were going to do it.

Senator CLEMONS:

– That is a very ingenious way of getting out of the difficulty. If the honorable senator has no better reply than that.to make, I am afraid that he will have to make his peace with Senator Best in some other way. If the Bill were agreed to, and an attempt were made by the Government to apply its provisions in such a way, as in the words of its authors that it would not save one penny for the Commonwealth, but would do all sorts of wonders for the States, Tasmania would not get any benefit for some time, so far as I can see. Suppose that it was proposed to take over the States debts, it would be extremely difficult for Tasmania to say what security she could give the Commonwealth in return for the latter accepting the liability to pay her debts and the interest thereon. The position of Tasmania is worthy, at any rate, of passing attention. The amount which the State receives from the Commonwealth amounts to about £”250,000 a year, while the interest on her public debt is about £”350,000. I assume that the State would be asked to offer to the Commonwealth some security for the annual deficit of £[100,000 in the interest bill. It is obvious that that would be a serious question indeed to be settled by the State Parliament.

Senator Best:

– Under the Constitution as it is, if the debts were taken over, Tasmania would have to face that position.

Senator CLEMONS:

– The debts should be taken over, in my opinion, after due regard had been paid to three other important financial provisions in the Constitution. One would be the continuation or non-continuation, of the Braddon section, which affects Tasmania to the extent of £250,000, because it is solely through its operation that that sum is returned, and we have no guarantee for a penny otherwise. The State would suffer or benefit just as the bookkeeping provisions were continued or abolished. The State Parliament would have a perfect right, if the question were submitted, as it ought to be, to each State for its consideration before the debts were taken over, to say to the Federal authorities, “ We ask that, in fairness, you will distribute the revenue as you distribute the expenditure, and that is -per capita.’” I know that such a request would meet with opposition from other States ; but that is not my immediate concern just now. I do not flatter myself that such a demand would be conceded at once, but that question would have to be faced. The next point is that, although the Commonwealth has been in existence for over five years, still it has failed to discharge its obligation with regard to the transferred properties.

Senator Playford:

– It does not matter a snap of the finger whether the States are paid or not.

Senator CLEMONS:

– Does the honorable senator admit that there is no difference in the result to the six States when the transferred properties are accounted for?

Senator Playford:

– If the Commonwealth has to pay so much to Tasmania for the transferred properties the State will have so much deducted from what she receives, so that the position will be just as broad as it is long.

Senator CLEMONS:

– That is because of the bookkeeping provisions.

Senator Playford:

– Not necessarily.

Senator CLEMONS:

– The question of the transferred properties is not capable of the easy solution that Senator Playford supposes. If I wanted proof of that statement, need I go further than to point out that although this Parliament has been in existence over five years, it has done nothing in the matter? At the’ Conferences of Premiers and Treasurers, the question has been constantly referred to, and although we have had many changes of Ministry in the Commonwealth, it is not yet settled. At least three Conferences of Premiers and Treasurers have debated the point, and I venture to say that many Ministries in the Commonwealth have considered it. Why is it not settled yet?

Senator Playford:

– Because it does not affect any one.

Senator CLEMONS:

– The honorable senator is throwing a reflection on this Par- liament if he says that it does not matter, because I can remember more than one important debate upon the question.

Senator Playford:

– Does the honorable senator suppose that if the States had been injured by the question of transferred properties not being finally dealt with, there would not have been more interest taken in it than there has been?

Senator CLEMONS:

– Does the Minister suppose that if the States had been injured by their debts not being taken over by the Commonwealth, there would not have been .more demand for their transfer than has been the case? There has not been, so far as I know, in a single State, any strong demand that the Commonwealth should take over its debts.

Senator Playford:

– At every meeting of Premiers and Treasurers it has been agreed that the Commonwealth ought to take over all the debts or none.

Senator CLEMONS:

– I will not dispute that fact, but Senator Playford, on his own showing, admits that an alternative is offered. He says that the States have demanded that all the debts or none shall be taken over. As the Conferences have not been unanimous on that point, it is a fair assumption that the States do not want this Bill.

Senator Playford:

– They want us to take over the whole of the debts.

Senator CLEMONS:

– Whether that be so or not, I venture with great respect to differ from Senator Playford when he says that the question of the transferred properties has no reference to this question. If it had no bearing,, half-a-dozen Treasurers and half-a-dozen Conferences would’ not have said that it had. I do not wish to dwell any longer upon the case of my own State, except to say this - because I must emphasize it - that the keynote of this Bill is the continuance of the bookkeeping system. It will not be valid or effective, or worth more than waste-paper,^ unless the bookkeeping system is continued in operation. I venture to say that any senator from Tasmania will be sadly lacking in his dutv - I was almost saying will be a traitor to the best interests of his State - who does not use every effort to bring about that Federal spirit which can only be created and maintained by a distribution of the revenue on the same lines, and bv the same method as we distribute our expenditure.

Senator de Largie:

– By some States dipping their hands into other States’ pockets !

Senator CLEMONS:

– The value of the bookkeeping system depends entirely upon whether a State imports or makes its purchases within the Commonwealth. Certain honorable senators, in desiring to retain the bookkeeping system, really say, “ We may , preach protection, but we are going to enable our States to get all the benefit they possibly can out of imports.” That is the keynote of the whole position. The more a State imports, the more it gets under the bookkeeping section. There is nothing el’se in it. Take away Customs duties, and what value has the bookkeeping section? The value of it depends upon the extent to which a State imports, and the extent to which it does not use things made in Australia. If the people of a State use things made in Australia - and I am at least as strongly in favour of that being done as any protectionist, probably a great deal more - what use is there in maintaining that obnoxious system? It is merely because the so-called protectionists from certain States want to secure benefits for their States by the consumption of imports that they cling to the system. If honorable senators wish to see Australian made goods consumed by our people, they will not desire to maintain a’ system, the only advantage of which is to save certain States from additional taxation. That is why I say that Tasmania, and every other State which recognises the Federal spirit, and wishes to give practical support to Australian interests, is opposed to it, and why I shall do everything in my power to bring about the abolition of a system which has nothing to recommend it on its intrinsic merits, and has everything to condemn it from the point of view of those who wish to see an increased consumption of goods made in Australia. It is because this Bill means the continuance of a system which is abhorrent to every one who wishes to see the Federal spirit fostered, and the States treated with fairness that T intend to vote against it.

Senator DE LARGIE:
Western Australia

– I do not wish to give a silent vote on an important measure of this kind. In mv opinion, it is a dutv that is forced upon this Parliament to do something in the direction of transferring the debts of the States to the Commonwealth. It has been said that no demand has been made in this direction. But I think it is obligatory upon us to take some steps towards a settlement of this large financial question - perhaps the greatest undertaking that this Parliament is likely to venture upon for many years. Though it is true that no cut-and-dried scheme is presented for our acceptance, we shall, by the passage of this Bill, give the voters of Australia an opportunity to say whether the Constitution shall be altered in such a manner that Parliament will be able to propound a scheme for the settlement of the question. I quite agree that if the Government had submitted a definite scheme with, the Bill the electors might have been afforded an opportunity to express their opinions upon it. But really I do not know of any subject upon which there is so much difference of opinion amongst the members of various parties as there is upon that of the means of settling the great States debts question. We have only to read the speeches that have been made, and the papers that have been published upon it, to realize that there is no unanimity in any one party with regard to it. That being so, it appears to me to be evident that some steps should be taken to clear the way, in order that later on a definite ‘scheme may be propounded. The public have a just cause for complaint that nothing has been done in this direction. State politicians are fond df complaining that the Federal Parliament interferes with their rights, whilst the very problem which Federation was brought into existence to settle, we have made no attempt to deal with. We even hear the same allegation made in this Parliament. There is some ground for it. At last a beginning is made by the Government.

Senator Drake:

– This Bill contains no scheme.

Senator DE LARGIE:

– I quite agree with that remark, but the Bill is a beginning. It gives the people of Australia a right to say by referendum - the . most democratic method of appealing to the electors - whether ‘they are willing to give the Federal Parliament power to solve the problem in a comprehensive way. I cannot understand why any opposition should be made to the proposal from that point of view. I see no reason for party feeling upon it.

Senator Drake:

– Oh, no.

Senator DE LARGIE:

– But the debate upon the Bill has undoubtedly manifested a party complexion.

Senator O’Keefe:

– There is no party question about it.

Senator DE LARGIE:

– Well, up to the present moment not one member of the Opposition has risen to support the Bill.’

Senator O’Keefe:

– How can the honorable senator say that it is a party question when members of his own party are voting against the Bill?

Senator DE LARGIE:

– Strange things have happened lately, and I can quite understand that some of the members of my party have not yet recovered from the influence of recent caucus meetings.

Senator O’Keefe:

– The honorable senator is not very fair, and his opinion is not worth much in the light of the facts.

Senator DE LARGIE:

Senator O’Keefe shed very little light on the question. I listened to him carefully, but he did not instruct me to any extent. The fact that not one member of the Opposition has given this proposal its support justifies me in saying that it has been made a party question in the present debate. I do not think that we should look at this matter purely from the States standpoint, notwithstanding all the lectures we have recently had about States rights. I quite admit that Western Australia will not receive any immediate benefit from this measure, owing to her financial position. In that State there are no loans maturing in the near future, and there is not likely to be any great saving of interest for the reason that that State is more favorably situated than are the other States. The interest that Western Australia has to pay is at a lower rate, the money having been borrowed on more advantageous terms than were obtained by other Governments. There is no reason, however, why other States, which have to pay a heavy interest on loans shortly to mature, should not be given the advantage- of some scheme to afford them relief as soon as possible. It is not as though one State would benefit at the expense of the other State. Victoria, for instance, would get an- immediate benefit from any action taken under this Bill, for the reason that that State has loans maturing ; so’ that’ in one sense this may be regarded as another Victorian measure.

Senator Best:

– But there is no disadvantage to any other State.

Senator DE LARGIE:

– That is so ; and consequently we can afford to be generous to Victoria. Western Australia, as I have indicated, is not so deeply interested in the proposal to bring all the debts into one fund, because in that State there is a sinking fund, which will, in due course, pay off all the debts. As a matter of fact, that sinking fund in Western Australia is greater than all the sinking funds in the other States put together, and it is so hedged round with safeguards that no Treasurer could use it in ways that sinking funds have been used in bygone years in other States. There is no doubt that the States have a great burden of interest to bear. Victoria’s load is, I think, the least per head.

Senator Stewart:

– Victoria is much better off than Western Australia.

Senator DE LARGIE:

– Yes, per head of population.

Senator Stewart:

– In every way

Senator DE LARGIE:

– The debt of Western Australia may be greater per head of the population, but in the western State there is a. much higher percentage of adults than elsewhere, with a greater earning and spending power, which necessarily means a larger revenue. In reply to Senator Clemons, I point out that in Western Australia, owing to the larger adult male population, there is a greater income through the Excise than is the’ case in the other States.

Senator Clemons:

– I do not deny that, but the value of the bookkeeping clause to Western Australia consists in the import duties.

Senator DE LARGIE:

– The imports from the other States to Western Australia are greater than the imports from the other States to Tasmania, so that, in this connexion, there is nothing un-Federal on the part of the former State. It is a notorious fact that, since Federation, goods which used to be imported from Great Britain and foreign countries, have been displaced by goods from the eastern States.

Senator Clemons:

– The honorable senator ought not to use the term “ imports” when referring to goods from another State.

Senator DE LARGIE:

– I am obliged to mention the fact in reply to the argument used bv Senator Clemons.

Senator Clemons:

– I dealt only with imports.

Senator DE LARGIE:

– The honorable senator made it appear that Western Aus’ tralia took up an un-Federal attitude by doing business with outside people at the expense of the eastern States.

Senator Clemons:

– Andi that is so; and just because of that Western Australia benefits.

Senator DE LARGIE:

– Western Australia is doing a greater business to-day than she ever did before with the eastern States. In the case of Victoria, we can see how great the benefit would be if a scheme were launched by which the heavy interest bill could be lessened. As I have already said, Victoria is the lightest taxed per head of any State of the Commonwealth. Speaking in round figures, Victoria, during her fifty years of self-government, has borrowed £50,000,000, and has paid something like £50,000,000 in interest. The debt still remains, .and the interest has to go on being paid; and surely if that load can be lightened without disadvantage to any other State steps should be taken to that end.

Senator Best:

– The honorable senator is overlooking the fact that £42,000,000 of the £50,000,000 are invested in railways, which pay the full interest.

Senator DE LARGIE:

– I am not questioning the way in which the money has been spent or invested, but simply indicating the great load of interest which; the taxpayers of Victoria have to bear. At the present time Australia pays between £7>000>°0° and £8,000,000 per annum in interest; and if that amount can be reduced we should take the opportunity now presented, always bearing in view the fact that the scheme will not involve additional cost to any State. I, therefore, hope that this Bill will be passed, so as to give t/he people a voice on the question whether power shall be given to the Commonwealth to deal with the whole of tire debts, including those incurred since Federation.

Senator PLAYFORD:
Minister of Defence · South Australia · Protectionist

– I have listened with considerable attention to the debate, which, on the whole, has been very interesting. I deprecate to a certain extent the introduction of the affairs of individual States into the discussion. I do not see any connexion between the proposal before the Senate and the bookkeeping system; and I am quite astonished that Senator Clemons should have introduced that subject. Whether the bookkeeping period should or should not be abolished has nothing to do with the Bill before the Senate.

Senator Clemons:

– May I tell the Minister who first introduced the subject in this connexion? It was the Treasurer of the Commonwealth, who did so in distinct terms.

Senator PLAYFORD:

– I do not recollect that the Treasurer did so; but, at any rate, I do not agree with the Treasurer in all cases - I am not bound to agree with him. What I say is that the retention or otherwise of the bookkeeping system has nothing to do with the Bill, any more than have the affairs of Western Australia or any of the other .States.,. But ,Ii do know that if the bookkeeping period were abolished, and revenue were distributed -per capita, Tasmania would gain at the expense of Western Australia to an enormous amount.

Senator Clemons:

– -Why ?

Senator PLAYFORD:

– Because £[300,000 would be taken from Western Australia and distributed! amongst Tasmania, South Australia, Queensland, and Victoria. The two States of Western Australia on the one hand, and New South Wales on the other, would be the sufferers.

Senator Clemons:

– Does the Minister know why Tasmania is losing?

Senator PLAYFORD:

– It would be a monstrous injustice to do away with the bookkeeping period at present.

Senator Clemons:

– Tasmania is losing because the people of that State consume more goods of Australian manufacture than does any other State of the Commonwealth.

Senator PLAYFORD:

– That is not it.

Senator Clemons:

– That is it.

Senator PLAYFORD:

– All I know is that the Tasmanian revenue from Customs and Excise is the lowest in the whole of the States, and if the distribution were on the per capita basis, the Tasmanian people would be putting their hands into the pockets of the people of States who contribute more largely. It would be manifestly unfair if the two States I have mentioned were subject to such conditions. I can understand Senator Clemons, of course, looking after die interests of has own State, but, at the same time, I do not see why these matters should be dragged into a discussion om a Bill with which thev have nothing whatever to do. The only question before us is whether power should be given to the Commonwealth to take over the whole of the States debts, or whether it should continue to be limited to the taking over only of those debts which existed at the inauguration of the Commonwealth.

Senator Millen:

– And there is the further power sought to take over a portion.

Senator PLAYFORD:

– Yes; there is the further power to take over portion of the debts as loans become due. Senator Drake, who resumed the debate to-day. made remarks which mav be summed up as “Not wanted,” and further, “ Why not take over £[100,000,000, and start operations on that and do the best we can ? ‘ ‘ Then the honorable senator went into hypothetical cases to show ‘ how that could be managed and told us, “ The Government are doing this in the interests of Victoria.” I give that statement a flat and unmistakable denial. One of the reasons which Senator Clemons advanced why this measure should not be passed was that the States, on the loans of which a saving would be effected by the transfer, would receive the benefit. What right would the other States have to receive that benefit? Does the honorable senator think for a moment that if a loan of South Australia were taken over, and a certain amount of interest saved, that saving should go to the benefit of Tasmania?

Senator Clemons:

– Certainly.

Senator Mulcahy:

– Certainly.

Senator PLAYFORD:

– Nothing of the sort; the saving should go to the benefit of the State in connexion with which the saving was made ; that would be only common fairness and justice. Any honorable senator would be a thief and a robber if in his private affairs he adopted any other principle.

Senator Clemons:

– Take the transferred services - what are we doing with them?

Senator PLAYFORD:

– We are not dealing with the transferred services at the present time, but with the statement which the honorable senator made, and to which I object. I take it that the proposal we make is a perfectly fair one, and it is that if the Commonwealth takes over the debts of a State and, in the conversion of its loans as they fall due, is able to make a considerable saving, the State whose loans are taken over should receive the benefit of that saving.

Senator Mulcahy:

– Will not those loans have become Commonwealth loans?

Senator PLAYFORD:

– Honorable senators have contended that that will per.petuate the bookkeeping system. What it will do will be to institute a new bookkeeping system.

Senator Clemons:

– Worse than the old.

Senator PLAYFORD:

– Not worse than the old, but a common-sense, intelligent, and fair bookkeeping system. If the Commonwealth makes a saving on loans taken over from a State, the saving will go to the State from which the loans have been taken over.

Senator Mulcahy:

– When they are taken over they will be Commonwealth loans. The Minister does not understand his own Bill.

Senator Pearce:

– Honorable senators representing other States would squeal if they were asked to share any loss.

Senator PLAYFORD:

-If honorable senators represented States other than the State whose loans were taken over, would they agree to bear any loss that might ensue? Of course they would not. They would squeal like a pig that was being rung.

Senator O’Keefe:

– The Minister has never said so far what would happen if the transaction resulted in a loss.

Senator PLAYFORD:

– We do not believe that there will be a loss, but if there were a loss in the conversion of a State loan, the State from which the debt was transferred would have to bear it.

Senator Clemons:

– That is a great Federal idea.

Senator PLAYFORD:

– It is a Federal idea, and a proper idea.

Senator Clemons:

– It is antagonistic to the whole spirit of Federation.

Senator PLAYFORD:

– I do not know that what the honorable senator suggests is a Federal idea - that some States should dip their hands into the pockets of others to secure an unfair advantage.

Senator Clemons:

– Should we be doing that when we consume Australian-made goods, and in that way lose revenue.

Senator PLAYFORD:

– Consume Australianmade goods !

Senator Clemons:

– Yes ; that is why the revenue of Tasmania is so small. Any baby would be able to see that.

The PRESIDENT:

– I ask honorable senators not to make so many interjections.

Senator PLAYFORD:

– There is another statement which has been repeated so often that one has been tempted to think it must be true. It was rubbed in first by Senator Drake, then repeated by Senator Symon. and other honorable senators, and Senator

Clemons finally rubbed it in with a lot of fearful adjectives. The Government have been blamed for bringing this matter forward without any definite scheme. We have a schema. There is not the slightest doubt about that. I mentioned it in moving the second reading, and it is as plain as a pike-staff what the scheme is. It is embodied in a memorandum which the Treasurer laid before Parliament with his Budget papers. Honorable’ senators opposite have been grumbling because there is no scheme.

Senator Millen:

– What is the scheme?

Senator PLAYFORD:

– I shall read it for the information of the honorable senator, who appears to have overlooked it. After complaining that honorable members in another place have overlooked what honorable senators found out here in connexion with these proposals of the Government, they should certainly not have overlooked the Government’s scheme.

Senator Clemons:

– Is the honorable senator going to read it for the second time ?

Senator PLAYFORD:

– It will be for the second time. This is the first proposal of the Government -

That a law be passed enabling the whole of the States debts to be converted before maturity or redeemed at maturity by the Commonwealth -

That is what we are proposing in this Bill. So far, well - (subject in regard to debts incurred since1st January, 1901, to the necessary amendment of the Constitution) -

That also we are trying to provide for in this Bill- by such successive operations as may be thought fit.

  1. That until conversion or maturity of the States debts, as the case may be, each State continues to pay its own annual interest and sinking fund (if any).
  2. That on conversion or at maturity of the

States debts, as the case may be, the Commonwealth becomes solely liable for the annual payment of interest and sinking fund, as well as for the redemption of the stock.

  1. That the Commonwealth deducts each year from the amount to be paid to each State the expenditure made on behalf of that State for interest and sinking fund, and if such amount is insufficient in any case the deficiency to be paid to the Commonwealth by that State.
Senator Clemons:

– Is that a policyor a machinery catalogue?

Senator PLAYFORD:

– It is a policy. It is what the Government propose to ask Parliament to adopt, provided the various States agree by the necessary majority at the referendum, to allow the whole of the debts of the States to be taken over by the Commonwealth. There is the policy and the scheme, yet honorable senators opposite have overlooked it altogether. It is plain and unmistakable, and it carries the proposal through from the inception to the close.

Senator Millen:

– The policy the honorable senator has now outlined does not conform to the Bill. The Minister, quoting from the scheme, said that a law was to be passed enabling the whole of the States debts to be taken over, whilst the Bill gives the further power to the Commonwealth to take over only a portion.

Senator PLAYFORD:

– We could take over the whole or a portion.

Senator Millen:

– It is as near conformity as I could have expected in proposals submitted by the Government.

Senator PLAYFORD:

– That is the course which the Government propose shall be adopted if this Bill is passed and becomes law. The memorandum prepared by Sir John Forrest sets out the policy of the Government with respect to the Braddon section, and also with respect to the bookkeeping system. I am not prepared to refer to them in detail now, because they have no connexion with this special measure.

Senator Clemons:

– They are not connected with the transfer of States debts?

Senator PLAYFORD:

– Not at all. Senator Millen quoted largely from the evidence of Mr. Coghlan, who appears to be the authority by whom the honorable senator swears.

Senator Millen:

– And from Sir John Forrest also.

Senator PLAYFORD:

– The honorable senator quoted a little from Sir John Forrest, and made a very considerable quotation from Mr. Coghlan. I do not object to that, but after reading from Mr. Coghlan’s report, and contending that on this question Sir John Forrest and he are at opposite poles-

Senator Millen:

– I said they were absolutely agreed.

Senator PLAYFORD:

– Starting with the assumption that they were in conflict on this question, the honorable senator wound up by reading a few remarks from the memorandum of Sir John Forrest, which showed that he and Mr. Coghlan agreed that so far as the notation of Commonwealth loans on the London market is concerned, we cannot expect for some time to make any particular profit out of them.

Senator Millen:

– I used those quotations in answer to Senator Pearce.

Senator PLAYFORD:

– Another statement which Senator Millen made was to the effect that the security offered by New ‘ South Wales would be, if anything, better than- the security which could be offered by the Commonwealth, and that that State would be able to float loans on the London market on better terms than could be obtained by the Commonwealth. He referred to the idea of Commonwealth consols alluded to by the Treasurer as though they would . be worthless, so far as any profit to the Commonwealth in the floating of loans, was concerned. The honorable senator does not understand the position. We have only to go to Canada to see what is done there. Dominion loans are floated for 1 per cent., and more than 1 per cent, less than the interest at which loans can be floated by the different provinces. Ontario, Quebec, and the other provinces of the Dominion have general agents in London, and float loans as they require them, but they have to pay a considerably higher price for money than has the Dominion. The reason for that is that Ontario - which is one of the biggest provinces of the Dominion, and has a population of some 2,000,000 or 3,000,000, a larger population than any of the Australian States - cannot give the same security to investors as can be given by the Dominion.

Senator Millen:

– Why not give the real reason, which is that the Canadian Government are always buyers in the London market of their own stock, and that keeps up to the price of the Dominion stock.

Senator PLAYFORD:

– There should be no difficulty in the Commonwealth following suit in that direction. I do not care what the reason is. When in London as Agent-General for South Australia, at the time the Conventions were being held in Sydney, Melbourne, and Adelaide, at which the Commonwealth Bill was being framed for submission to the people, there was a great deal of talk about the taking over of the debts of the States by the Commonwealth if Federation were established. I floated two very large loans for South Australia at the time, and was in constant intercourse with bankers, members of the Stock Exchange, and brokers outside the Exchange, and when I asked what would be the effect if the Commonwealth took over the debts of the States, and converted them into Commonwealth inscribed stock or consols, the universal opinion expressed was that we should gain from J to J, and in some instances, if the market were favorable, as much as 1 per cent, by the conversion. New South Wales is a large and important State, and has a splendid revenue, but the New South Wales Government have only the power of direct taxation, and it is absurd to say that she could float a loan on the London market at as, good a price as could be obtained by the Commonwealth, which represents six States, including New South Wales, and has the power, not merely of direct, but also of indirect, taxation. It is nonsense to suggest that people who have money to lend would not consider the security of the Commonwealth as better than the security of a single State. Senator Millen, in arguing as he has done, has allowed his feeling and his love for New South Wales to outweigh his judgment. He considers that the position of New South Wales would be even superior to that of the Commonwealth in the flotation of loans. I do not.

Senator Millen:

– I consider her financial position superior, certainly.

Senator PLAYFORD:

– I come now to deal with the speech made by Senator Stewart. The honorable senator made one remark which I took down. He said that we have not given him time to make up his mind. He claims that we have brought this -measure on at the fag-end of the session, when honorable senators are given no proper opportunity to consider it, and that it is one of those great and important questions which require very careful consideration. All I can say is, that if honorable senators have not followed what has been going on in the Commonwealth during the last five or six years, they ought to have done so. The question of whether we should take over the States debts as a whole, or only in part, as provided bv the Constitution, has been debated times without number. In the second year of the existence of the Commonwealth, and in the third or fourth year also, special Conferences were held to deal with the subject.

Senator Clemons:

– Always in conjunction with other matters of finance.

Senator Drake:

– And no decision was ever come to.

Senator PLAYFORD:

– The matter of taking over the States debts was one of the principal questions considered, and another was the mode of payment to be adopted for the transferred properties. This question has been discussed by itself, and it is a month since the Treasurer placed a memorandum on the table in another place, which was subsequently forwarded to honorable senators. ‘ They have, therefore, had an opportunity to see what the Government propose to do, and to make themselves thoroughly acquainted with one of the simplest propositions of which it is possible to conceive. That is, whether we should ask the people of . the States to empower the Commonwealth to take over the whole of the debts instead of only the pre-Federal debts. That is the whole question which has to be considered, and which, as honorable senators know, has been considered by the States hitherto. It has been complained that we have brought forward the Bill without any justification. I contend that the Government has adopted the right and proper course, because during their discussions the States Premiers and Treasurers have never been able to agree upon any but one point, and that is that the Commonwealth should have the right to take over the whole of the States debts. We have brought in a proposal on which, not only they, but the late Federal Treasurer, Sir George Turner, are agreed.

Senator Drake:

– The latter is dead against this scheme, as Senator Symon showed.

Senator PLAYFORD:

– He was against the scheme, so far as it proposed to take over a portion of the debts of one State without taking a proportionate amount from each of the other States, but he has altered the opinion which he expressed at the first Conference.

Senator Drake:

– No.

Senator PLAYFORD:

– If I read his statement aright, he certainly came to a different opinion. But whatever opinion he may have come to on other matters, he has always held that the Commonwealth ought to take over the whole of the States debts, and so have the others. Senator Dobson also said that we ought to limit the right of the States to borrow. I do not think that we ought to interfere with them at all.

Senator Dobson:

– We shall never know where we are, then.

Senator PLAYFORD:

– What right have we to interfere with a State In a matter of that sort?

Senator Dobson:

– What right have we to take over an indebtedness of £202,000,000 without knowing whether the States are going to act cautiously and prudently ?

Senator PLAYFORD:

– If the honorable and learned senator wants to carry out his view, it strikes me that he ought to advocate unification with one Parliament. That, I should think, would be the cure for the evil which he fears. So long as we leave the States sovereign in regard to the powers which have not been intrusted to the Commonwealth we have no right to interfere with their action.

Senator Dobson:

– We do not want to dictate to them.

Senator PLAYFORD:

– My honorable and learned friend wants to tell the States how and when they shall borrow, and I suppose that his next proposal will be to tell the States for what purpose they shall borrow money. He is always crying out here about preserving States rights, but just when it suits him he turns round and says that we are proposing to take them away. That is the position which he has taken up all through the piece.

Senator Millen:

– Allow me to draw the attention of the Minister to page 105 of the Treasurer’s memorandum, where he points out the desirability of preventing the States from borrowing.

Senator PLAYFORD:

– That is the second time that Sir John Forrest has been hurled at my head. I am expressing my own thoughts on this subject. I have the Bill in front of me, and am trying to do the best I can to get it passed. I do not know why Sir John Forrest should be so continually quoted to me when I am discussing the question.

Senator Clemons:

– Because he is the author of the policy.

Senator PLAYFORD:

– My own opinion is that all this trouble has been caused by the use of the word “ may,” instead of the word “ shall,” in section 105 of the Constitution. ‘ The peremptory form was adopted by Canada and the United States, and it would have been the right form for Australia to adopt, because, if we had taken over the whole of the debts at the inception of the Commonwealth, we should have had to return practically no money to the States. I am certainly at one with Senator Drake in the view that it was a pity that the Convention did not insist upon the use of the word “ shall “ instead of the word “may.” Canada, in addition to taking over the debts of the provinces, agreed to make an annual grant of £80,000 to Ontario, and I think a similar grant to Quebec. It was thought that, inasmuch as the maritime States, such as Nova Scotia and Prince Edward Island, had a larger debt per head of the population, it was only right and proper to make an annual grant to those two States for all time. I ask honorable senators to support the Government in their effort to get this Bill placed upon the statute-book.

Question - That the Bill be now read a second time - put. The Senate divided.

AYES: 12

NOES: 0

Majority.. 3

AYES

NOES

Question so resolved in the affirmative.

Bill read a second time.

In Committee :

Clause 1 agreed to.

Progress reported.

page 5276

CONSTITUTION ALTERATION. (SPECIAL DUTIES) BILL

Second Reading

Debate resumed from 24th September (vide page 5209), on motion by Senator

Playford -

That the Bill be now read a second time.

Senator Col. NEILD (New South Wales) [9.14]. - I desire to draw attention to two features of the proposal of the Government which, strangely enough, I dealt with in a special report eight years ago. I do not intend to go into the matter at any length, but it strikes me as somewhat remarkable that when I dealt with the matter - I was in Europe in 1896 and 1897, but my report is dated 3898 - I drew attention to the action of the Swiss Government, which the Governnent of the Commonwealth now propose to imitate. . I used these words, that seem to me to be appropriate to quote on the present occasion -

With the Constitution amended to permit of legislation imposing State Insurance in respect of accident and sickness, it is but a question of time ere these important issues are determined, but the larger and more complex question of old-age provision cannot be dealt with, unless the Constitution is again revised.

The difficulty existing plainly shows the disadvantage of a rigid constitution as against the elastic systems of government obtaining in other countries, and points a moral, deserving attention, in connexion with the proposed establishment of an iron-bound Federal Constitution for Australia.

Nearly eight years have passed, and I now find myself in the Senate assisting to correct the very evil which I pointed out, and in respect of which I issued a warning word so long ago.

If taxation is to be resorted to, it is essential that, as the pensions are to be free to every member of the community upon coming within the “ necessity limit,” every member of the community should contribute to the pension fund. They would contribute, not with the intent of obtaining a pension, but with the assurance that did necessity so require, one would be theirs, not as a grudging charity, but as a statute right. Exactly as people pay premiums, not with the expectation of having a fire, but to provide against loss should one eventuate ; so every person in the community should, under any taxation scheme, contribute, not in order to actually obtain a pension, but that should necessity so require, a pension would be forthcoming.

A tax to fall, so far as is possible, equally upon all, must of necessity be indirect in character, and hence must be applied to some article of universal consumption. No direct tax can be made to fall upon every one - unless a poll tax - and universality of incidence is essential for a tax to provide for pensions universal in their possible application, i.e., at the option of all who unhappily need them.

In the present circumstances of New South Wales, no tax would so nearly fill the stipulated requirements as a tax upon tea, an article of such universal consumption that a reimposition of the duty removed a tew years ago would undoubtedly produce the amount necessary to provide the pensions likely to be claimed, and at the same time would fall with equality and universality of incidence upon the entire people.

Senator DRAKE:
Queensland

– - This Bill, in my opinion, is open to the same objection as the Bill with which we were previously dealing. It proposes to amend the Constitution at a very late period of the session, when it is almost impossible to get the Senate to seriously discuss so important a matter. I cannot help looking on the proposed amendment of the Constitution as virtually a breach of a compact entered into between the States. We have to bear in mind that, though there is ample provision for amending the Constitution, and that, therefore, almost any kind of alteration is within our legitimate powers, there is something beyond that we have to consider. The Constitution is the fundamental instrument of government; and it represents the compact made between the States when they federated. That is the compact which was ratified by the people; and we ought to be specially careful to do nothing which would, in spirit, if not in letter, violate the arrangement then approved. It will be seen how closely this Bill is connected with the Bill we have just been discussing. All the States before Federation had, as they have now, very heavy debts, and big interest bills to meet. The States, before Federation, were accustomed to rely on the Customs and Excise for the fund with which to meet their debts; and when they agreed to resign the power of raising revenue from Customs and Excise, they did so on the understanding that the Commonwealth Government would take over their debt liabilities. As the Minister for Defence stated a short time ago, in connexion with another Bill, there would have been no difficulty in connexion with the matter if the provision with regard to taking over the debts had been made mandatory and not permissive. In that, I quite agree with the Minister, because then, under the Constitution, the States would have agreed to give up their right to raise revenue by Customs and Excise On the condition that the Commonwealth took over their debts. That being so, we are not justified in trenching on this particular source of revenue, which should go towards the payment of the States debts. A Bill of the kind before us, which says that we may raise revenue from Customs and Excise,and devote it to a special purpose outside the payment of the interest on the debts, seems practically a breach of that agreement. Section 87 of the Constitution was carefully inserted in order that, if the debts were not taken over, a large proportion of this particular revenue should be paid to the Treasurers of the States for a period of ten years. The object of the Bill now before us is to provide that the Government may raise revenue from Customs and Excise, and, at the same time, escape the provision which is made in section 87 for the protection of the States.

Senator Findley:

– But these will be special duties.

Senator DRAKE:

– They will be special duties for a special purpose; and for that reason they appear to me to be wrong. The result will be to reduce the fund available to the States for the payment of their debts. The Bill will leave to the States the obligation to pay the interest on the whole of the debts, and deprive them of a portion of the revenue raised from Customs and Excise, which they had a right to expect.

Senator Findley:

– The special duties will not do that.

Senator DRAKE:

– They will. There is a revenue derived from Customs and Excise, and anything that trenches on that source must be an injury to the States, which rely on the Braddon section to insure them with the moneys necessary to pay the interest on their debts.

Senator de Largie:

– But the States get nothing from the duties on tea and kerosene at the present time.

Senator DRAKE:

– I must answer that from the point of view of my own State, because in some of the other States the position is not felt so keenly. For the past four orfive years, there has been a constant struggle in Queensland to preserve financial equilibrium, owing to the great falling off in the Customs and Excise revenue, which the State Treasurer previously had the handling of. As a matter of fact, in Queensland more help is required from Customs and Excise than in the past; but this year the State Treasurer has received an intimation that his share of the threefourths revenue returned will be less by £83,000

Senator Findley:

– The honorable senator says that Queensland is expecting more through the Customs; is not Queensland a protectionist State?

Senator DRAKE:

– I may say that I do not agree with the dictum that revenue cannot be raised by a protective Tariff.

Senator Findley:

– But the more protection the less the revenue.

Senator DRAKE:

– That does not follow. Of course, it is obvious that if duties are raised to such a height that nothing can enter the country, no revenue is returned; but it does not follow that there may not be a Tariff highly protective, and, at the same time, highly revenue producing. If there be any doubt on the point, honorable senators have only to look to the United States, where, under a heavy protective Tariff, there has been an enormous revenue for years past - a revenue so large that sometimes the Government have scarcely known what to do with it.

Senator Stewart:

– But the revenue in America is very low per head of the population - about one-third of that in Australia.

Senator DRAKE:

– The revenue is not so low, considering the purposes for which it is required, a large proportion being used for the payment of pensions to soldiers and so forth. However, it is no use discussing the matter now; but, if time permitted, I think I could easily show that the result depends exactly on the pointto which the Tariff is raised. No doubt Queensland, in the main, is in favour of a policy of protection. The trouble of the Treasurer of Queensland is that he has very heavy liabilities to meet, and that for a long time the Customs and Excise have been looked to as the principal source of revenue. Various expedients have been resorted to in the last few years to raise revenue to take the place of that previously derived by the State from Customs and Excise, and those expedients, while occasioning a great deal of friction and inconvenience, have not resulted in placing the State in what may be considered a satisfactory financial position. The Queensland Treasurer was hoping that the amount from Customs and Excise under the Commonwealth Tariff would this year be larger than in the past; but now we have a Bill to provide that this particular source of revenue may be tapped for a special purpose, and that no part of the revenue thus raised shall go to the assistance of the States Governments in the payment of their debts. That is not treating the States fairly. The measure has been tacked on to a subject we all have very much at heart. I do not think the Government would have brought it forward, or that Parliament would have been disposed to consider it for five minutes, if it had not been devised as a means of providing for old-age pensions. It is that which has gilded this proposal, and which has probably recommended it to many members of the Federal Parliament. Still the principle involved is one which is entirely wrong. I think we should hold ourselves bound to give back to the States as much as we possibly can of the whole of the revenue derived from Customs and Excise that is not absolutely required for Commonwealth expenditure.

Senator Findley:

– Still the States will be considerably relieved if Commonwealth old-age pensions are established as a result of this proposal.

Senator DRAKE:

– Some of them will be, to a certain extent. It seems, however, to be a roundabout way of taking money out of one pocket and putting it into another. If the States desire that a Commonwealth system of old-age pensions shall be established, why should they not in some way contribute to the fund necessary to provide for them, to the extent of the expenditure which they now devote to a similar purpose? In two of the States old-age pensions schemes have been established, and if the Commonwealth were to take over the whole business the burden upon those States would be no greater than it is now. In some of the other States a smaller expenditure is incurred in maintaining homes and providing trifling pensions.

Senator Findley:

– They involve fairly large sums.

Senator DRAKE:

– In Queensland an institution for old people is maintained, and in addition an allowance of 5s. per week is made to a number of persons. I think that the practice in that State has not even the direct sanction of ‘aw, but I am aware that, on the whole, it involves a considerable expenditure, of which the State would be relieved, in a certain sense, if a uniform Commonwealth system of old-age pensions were established. It is a very great pity that some arrangement could not be come to by which States in which old-age pensions are now being paid could contribute to the Commonwealth fund to the extent of the expenditure they now devote to the same purpose. That would very considerably reduce the amount which it would be necessary for the Commonwealth to raise for such a purpose. If the Commonwealth raises money through Customs and Excise taxation to provide a fund for the payment of old-age pensions, the States now paying pensions will be relieved without any request on their part, and at the same time the people of those States will be called upon to find the money in another way. Victoria is now paying a certain amount to provide old-age pensions.

Senator Pearce:

– The cost is £205,000 a year.

Senator DRAKE:

– Under this proposal the State would be relieved of that expenditure, but at the same time the people of

Victoria would really be paying for old-age pensions in another way, and how? I point out that under existing conditions the £205,000 which Victoria pays for old-age pensions is derived partly from the surplus Customs and Excise revenue returned by the Federal Government, partly from land, income, and other forms of taxation, since the money is paid from the Consolidated Revenue of the State. If the proposed scheme were carried out, the Commonwealth would pay the pensions from a fund derived from the taxation of tea and kerosene, which would be contributed chiefly by the poorer people. One honorable senator mentioned that it was likely that a tax of 5d. per lb. on tea, and 3d. per gallon on kerosene, would be imposed. Honorable senators will remember that when, in another place, it was proposed to impose a duty of 2d. per lb. on tea and 2d. per gallon on kerosene, the proposal was scouted and thrown out, on the ground that it would be a tax upon the poor. This proposal, as I understand it, involves a tax of 5d. per lb. on tea, and5d. per gallon on kerosene, in order to provide for the payment of old-age pensions, which at the present time in Victoria are paid from the Consolidated Revenue, which includes revenue derived from all sources of taxation. Honorable senators must see from this that there is an element of weakness in it. The same remarks will apply to New South Wales. Old-age pensions are paid in that State from the Consolidated Revenue, and we are here really proposing that they shall be paid instead from the taxation of the tea and kerosene used by the poorer people.

Senator Findley:

– Queensland and Western Australia would probably suffer most from the imposition of tea and kerosene duties.

Senator DRAKE:

– In Queensland, prior to Federation, we derived a revenue of £130,000 a year from a tax of 6d. per gallon on kerosene, and of 6d. per lb. on tea, and 8d. per lb. on packet tea. The proposal would be of no benefit to Queensland. The State Government of Queensland might well say that this is a matter with which! they should be left to deal for the next three or four years. Victoria and New South Wales have dealt with it. We have dealt with it in Queensland to a certain extent, and I think I may say that if the Government of Queensland have not done more in providing for old-age pensions, it is simply because of their financial embarrassments, due to a great extent to the small amount they have been receiving fromCustoms and Excise revenue through the Federal Government. If the Commonwealth Parliament were now, without passing any measure of this kind, to impose duties on tea and kerosene, and to permit the revenue derived from those duties to be distributed in the ordinary way, under the Braddon section, States like Queensland would receive so much larger a sum from Customs and Excise taxation than they now receive that they would be in a position to institute a system of old-age pensions. I can quite understand the Treasurer of Queensland saying, “ This is very hard upon us. We are willing to incur expenditure of this kind, but we are unable to do so because the amount we receive from Customs and Excise is so small.” It does not seem a fair thing that we should say in reply, “ Although we shall not give you any more revenue from Customs and Excise for general purposes, we are going to impose duties upon the tea and kerosene consumed by your people in order to raise a fund which we shall ourselves devote to the payment of old-age pensions.” The operation of the Braddon section will cease in four years time.

Senator Findley:

– Unless Parliament otherwise provides.

Senator DRAKE:

– Just so; but it seems to me that there is something radically faulty in a proposal which requires that the provisions of the bookkeeping section and of section 87 of the Constitution, should be set on one side in order that revenue derived from Customs and Excise should be devoted to the special purpose of providing a fund for the payment of oldage pensions. Of course, there will be a good deal to be said in Committee when we come to deal with the particular provisions of the Bill, because we shall then lose sight of old-age pensions, which I think has been the sole consideration recommending the Bill. When we come to examine the Bill as it stands, we shall find that it proposes to give the Commonwealth Parliament extraordinary powers. It sets whole provisions of the Constitution entirely on one side, and gives the Commonwealth Parliament power to levy special duties of Customs and Excise on any article not dutiable at present, and for any purpose whatever. If the , Common wealth Government had a big scheme on hand, and found that in the attempt to finance it they were getting near to a deficit, as they well might be, they could, under this measure, impose duties of Customs and Excise on some special articles for the purpose of replenishing the Treasury. That would be a special purpose, and it seems to me that She Bill upsets one’s idea of Federal Government, and sets aside the compact which I think underlay the agreement of the States to adopt Federation, and that was that if they gave up their right to levy duties of Customs and Excise, the Commonwealth Government in return would take over the debts of the States. I must vote against the second reading of the Bill.

Senator STEWART:
Queensland

– The Bill we are now called upon to consider is one of the most extraordinary that ever emanated from any Government south of the line - or north of it, either. It is proposed, instead of defraying the entire expenditure of the country, to earmark certain revenues for a particular purpose. I do not know whether that has ever been done in “a civilized country or not. But if it has been done, it is something to which I do not think the people of Australia ought to be asked to agree. It is not proposed to defray the cost of the defence services by means of special duties. Why, then, should we be asked to provide in this way a fund for old-age pensions? Of all things under the sun, why should they be singled out for the application of a vicious principle of that character? The States Governments, administer many Departments, but they have never dreamed of imposing a particular tax to defray the cost of, for instance, education. Every item of expenditure is paid out of the Consolidated Revenue Fund, as it ought to be, and that is a principle from which I trust the Senate will never consent to depart.

Senator Guthrie:

– Some States make endowments for education.

Senator STEWART:

– That is quite a different thing from “a special tax. I do not believe in endowments or anything of that kind. I believe that if the expenditure is legitimate it ought to be defrayed out of the Consolidated Revenue Fund.

Senator McGregor:

– But the State Government is not hamperedby a Braddon section

Senator STEWART:

– True,and the Federal Government is not hampered In this instance by the Braddon section. It is only pure cowardice which has driven Ministers to propose this unworthy and undesirable expedient to the Parliament. I do not know whether wry honorable friend intends to support it, but, if he does, I have no intention to follow his lead.

Senator McGregor:

– That does not matter. The honorable senator has not often done that. He has a new leader.

Senator STEWART:

– I have the only leader I have ever had, and that is the Labour platform. I do not acknowledge any other leader, either inside or outside the Senate. I must confess that the Government, with a cunning worthy of a better cause, has endeavoured to place every democrat in the Chamber in a most difficult position. The Government faas said to itself, “These fellows are pledged to oldage pensions. They are also pledged to oppose a tax on tea and kerosene. We will induce them by offering the bribe of an old-age pensions scheme to depart from their principles with regard to taxation.” It is a very cunningly devised scheme, I might almost say that it is cruel in its cunning, because it puts senators like myself in a most peculiar and difficult position. Here I am offered for my constituents something for which I have been clamouring for years. When, on the” one hand, I think of the thousands of old pioneers who are spread all over the Continent, and of the benefit which old-age pensions would be to them, I must say that the inducement to desert my principles in the present instance is verv strong. But when, on the ether hand, I think of the manner in which. not only I, but almost every other member of the Labour Party swaggered up and down every corner of the country, telling the people how we had abolished the duties on tea and kerosene, I do not think that I can swallow a tax on those articles, even with a dash, of old-age pensions thrown in. I am distinctly opposed to the imposition of special duties for any public purpose. But, even if we are to adopt that principle, it is most improper to propose to derive a fund for an old-age pensions scheme from a tax on such articles as tea and kerosene. What is the purpose of such a scheme? The rich do not want it; the middle class do not want it; and, probably, a fair proportion of the working classes are not very much in need of it. It is really for the benefit of the very poorest in our midst that it is proposed to be estalished. I believe that a pension should be the right of every citizen, rich or poor. A scheme of that character is not proposed at the present moment, and, therefore, it need not be discussed. Our object now is to provide for the very poor. Are we to provide for them by authorizing the taxgatherer to dip his hand into their cup of tea, almost the only comfort which they have?

Senator Playford:

– Let the honorable senator try some of them with beer.

Senator STEWART:

– In this connexion I am forcibly reminded of something which I read about two individuals named Dives and Lazarus. I read that Dives was found dining off a fat goose while Lazarus was below the table eating the crumbs.

Senator Pearce:

– The honorable senator’s scripture is rather shaky.

Senator STEWART:

– It will do for the present occasion. Just imagine the taxgatherer going along and levying tribute from the poor wretch who was eating the crumbs, and allowing the man who was feasting on the goose to escape, scot free ! That is exactly the position in which the Government desire to place us. They propose to tax the very poorest persons in the community, so as to give them pensions. Not content with taxing their cup of tea, the Government swoop down upon their kerosene. I wonder very much why they did not also propose to tax their candles and their slush-lamp.

Senator Findley:

– And their matches, too.

Senator STEWART:

– Yes. So far as I can discover there is no enormity of which the Government are not capable in this connexion. We know perfectly well that kerosene, as a light, is largely used by those who live in the bush. “Under the Bill it is not proposed to tax any one of the many conveniences which are enjoyed by those who live in the city, such as, for instance, gas and electricity. But it is proposed to tax the kerosene of the very poorest persons who live in the bush. Of course, tea is an article of very general consumption. If our working people take the advice of certain medical experts, who have told us that tea is one of the most unhealthy articles which can possibly be drunk, then the consumption will be very much less in the near future than it is. When that position comes about where will the Government find funds for old-age pensions? Will Ministers, throw some light on that aspect of the question? Is there anything permanent about a duty on tea? We have been told time and again that in the very near future kerosene will be out of the running as an illuminant.

Senator Playford:

– Spirit will come in.

Senator STEWART:

– Will the Government then levy ‘a tax on spirit or whatever the source of light may be ?

Senator McGregor:

– But this is not a Bill to tax kerosene.

Senator Turley:

– It is a Bill to tax anything that is not already taxed.

Senator STEWART:

– We havebeen told that the object of the Government is to impose a tax on tea and kerosene for the purpose of providing funds for a scheme of old-age pensions.

Senator Playford:

– We have never said that.

Senator Clemons:

– What else can it be?

Senator Playford:

– Those are duties which have been mentioned.

Senator STEWART:

– I do not intend to give the Government authority to levy any taxes until I know what they are to be.

Senator Playford:

– But the Government cannot levy any taxes unless the Parliament approves of them.

Senator STEWART:

– I am not prepared to give the Government the power asked for until I know what articles are to be taxed. Suppose that during the election campaign I were to go out and ask the people to vote for this Bill, and I were asked this question, “ Upon what articles does the Government propose to levy a duty ?” I could only say, “ I do not know.” What kind of answer would that be to give to the electors? The Government ought to take them into its confidence.

Senator Clemons:

– That is exactly the kind of answer which the Government has given to us.

Senator STEWART:

– Yes. The Government will not tell us what articles it intends to tax. I wonder whether it really knows or not. I intend to oppose the Bill in the first place because it proposes a very distinct departure from the compact which was entered into by the acceptance of the Constitution Bill, and that was that of the Customs and Excise revenue three-fourths were to be returned to the States. I in tend, so far as I am concerned, to stick to that bargain until the time mentioned in the Constitution arrives; and if I have the honour of a seat in the Senate at that period, I shall vote for the abolition of what is known as the “ Braddon blot,” unless I get some better light on the subject in the meantime. I put in that reservation. I object to this proposal on another ground - that I am utterly opposed to any increase of taxation through the Customs. I think it is a scandalous thing that three-fourths of our Commonwealth taxation should be levied by means of Customs and Excise duties, and only one-fourth by direct means.

Senator Findley:

– The proposed taxes are utterly at variance with protectionist principles.

Senator STEWART:

– Yes; both of them are purely revenue duties. I have hundreds of times in my constituency objected to more Customs duties being imposed, and wherever I. have gone what I. urged has been received with favour by the’ great majority of those who are responsible for my presence in the Senate. I have no doubt that some people will take me to task for putting an obstruction in the way of an old-age pensions scheme being carried. I cannot help it. I am not going to do evil that good may come. There are vast virgin areas of taxation not yet touched by the hand of the tax-gatherer. I invite the Government to exploit that region, instead of dipping its hand into the tea-pot of the poor, and filching away some portion of their earnings. Let the Government do something to break up the land monopoly that is strangling Australian progress. Let them find money for old-age pensions by that means.

Senator de Largie:

– That is a long way off.

Senator STEWART:

– It will remain a long way off until we do something to bring it nearer. If we carry this proposal, instead of bringing it nearer, we may put it still further off. Every democrat, every labour man, ought absolutely to refuse to assist the Government to find funds in this fashion. If the Government wishes to establish an old-age pensions scheme, let it find funds in a proper manner. There are many ways in which money can be obtained ; and, as I have pointed out, if it is at all permissible to impose duties for the purpose of paying old-age pensions, we ought not to go to the poor, butto the accumulated wealth of the country. I think I have made my position sufficiently clear. I intend to vote against the second reading of the measure. If the motion is carried, I intend in Committee to move an amendment giving power to retain from the money paid to the States their proportion of the cost of old-age pensions.

Debate (on motion by Senator Dobson) adjourned.

page 5285

ADJOURNMENT

Kalgoorlie to Port AugustaRailway Survey Bill.

Motion (by Senator Playford) proposed -

That the Senate do now adjourn.

Senator CLEMONS:
Tasmania

– I wish to ask Senator Playford whether he is in a position to give the Senate definite information upon a subject which was mentioned yesterday, namely, the intention of the Government with regard to taking steps to replace upon the notice-paper the order for the third reading ofthe Kalgoorlie to. Port Augusta Railway Survey Bill ? The honorable senator will recognise that it is fair that honorable senators on all sides should know whether the Government intend doing anything in that direction ?

Senator PEARCE:
Western Australia

– I would respectfully suggest to the Minister of Defence that he has already given an intimation regarding the question put by Senator Clemons, and that that intimation is all that we have a right to ask for at the present juncture. Furthermore, I do not know whether the honorable senator desires this subject to be re-opened, but, if he is anxious for it, there are certain matters upon which some of us would like to have information.

Senator Clemons:

– We want the honorable senator, as well the the opponents of the Bill, to know what is to be done.

Senator Dobson:

– We do not want it re-opened.

Senator Playford:

– Let sleeping dogs lie.

Senator PEARCE:

– I think that the answer we have had should be satisfactory, so far as it goes.

Senator MILLEN:
New South Wales

– May I remind the Minister that in giving his information to the Senate regarding this matter the other day, he said that unless some arrangement were arrived at the question would not be re-opened. I do not know of any arrangement. I take it from what the Minister said that there was some hope or possibility of an arrangement being made.

Senator Playford:

– I meant an arrangement between the two parties.

Senator MILLEN:

– I merely remind the honorable senator that the language which he used suggested the possibility of the Government bringing forward the matter again under certain circumstances. I take it that Senator Clemons wants to know whether that is the intention of the Government. The Senate has a right to know whether the Government intends to bring forward the Bill again or not.

Senator DE LARGIE:
Western Australia

, - I have not a strong objection to the Minister of Defence explaining the position to the Senate if for no other reason than that we might have an explanation from some honorable senators as to the votes that were cast on Friday last upon the third reading of the Bill. Perhaps if the matter were re-opened, some light would fee shed upon what took place. As for the information asked for by Senator Clemons, I would advise him to apply to his friends Senator Givens and Senator Millen.

Senator Clemons:

– I am asking the leader of the Senate.

Senator DE LARGIE:

– I think those two gentlemen are about as well able to give information on this subject as any.

Senator Millen:

– If the honorable senator appeals to me, I reply thatI have no information, and cannot get it.

Senator MULCAHY:
Tasmania

. Honorable senators who have made engagements to meet their constituents are naturally anxious to know whether there is a possibility of the Railway Survey Bill being revived this session. If so, they will be compelled to remain here. Those who have entered into such arrangements have a right to elicit from the leader of the Senate exact information with regard to the measure. The reply given to a question by the Minister yesterday, although satisfactory for the time being, was not definite. It was too vague to allow honorable senators who feel deeply about this measure to go away in a serene frame of mind.

Senator Col. NEILD (New South Wales) [10.26]. -I draw attention to the fact that upon the notice-paper there is a motion in accordance with which the matter referred to will be dealt with on Thursday of next week. I suggest the possibility of the present discussion being a breach of the standing order referring to anticipating debate.

The PRESIDENT:

– A question has been asked ; that is all. I could not, of course, allow the debate on a motion to be anticipated.

Senator PLAYFORD:
Minister of Defence · South Australia · Protectionist

[10.27”. - The answer to the question whether I have anything further to add is - No. I have nothing further to say in addition to the statement which I made yesterday. I think that honorable senators might very well leave the matter as it stands without stirring it up any more.

Question resolved in the affirmative.

Senate adjourned at 10.28 p.m.

Cite as: Australia, Senate, Debates, 25 September 1906, viewed 22 October 2017, <http://historichansard.net/senate/1906/19060925_senate_2_35/>.