The Auckland Star: WITH WHICH ARE INCORPORATED The Evening News, Morning News and The Echo. MONDAY, APRIL 23, 1906. FEDERAL FINANCE.

Auckland Star, Volume XXXVII, Issue 96, 23 April 1906, Page 4

The Auckland Star: WITH WHICH ARE INCORPORATED The Evening News, Morning News and The Echo.

MONDAY, APRIL 23, 1906. FEDERAL FINANCE.

For the caute tJtat lacks assistance. For the wrong that needs resistance, For the future in the d(stanoe, And the good that ice can do.

The recent visit of Sir John Forrest the Federal Treasurer, to London, was undertaken chiefly with a view to preparing the British money market for tbe contemplated transfer of the State debts to the Commonwealth. This is a step that was proposed at the very inception of Federal Government; for it is obvious that the security represented by the Commonwealth's credit should enable the States to raise money on more favourable terms than was possible when they depended upon their own individual efforts. The existing State debentures will ultimately be replaced by Commonwealth stock; and Sir John Forrest has assured himself that such a step will meet with the full approval of the financial world at Home. It will probably not be advisable to effect this conversion until a considerable amount of State stock is approaching maturity. But if due precautions are taken the Federal Treasurer is confident that the transference will be well received in England, and that it will result in a considerable saving of interest to the States, through the rise in the market value of colonial securities.

But though the Commonwealth a3 a whole will receive this intelligence with satisfaction, the terms ou which the transfer of State debts should be made have not yet been arranged; and the recent conference of State Premiers brought out very clearly the divergence of opinions between the various States and the Fedoral Government on several points of Commonwealth finance. The State Premiers are determined that the Braddon clause shall be retained as the basis of Federal finance. This clause in tbe Constitution Act compels the Federal Government to return to the States three-fourths of the revenue raised from tliem by Customs and excise. The effect of this is that the Commonwealth Government, desiring to raise a certain

amount of revenue from this source, must arrange its scale of duties so as to collect four times as much as it needs, for the purpose of returning threefourths of that amount to the States. The State Premiers popaxently regard the "Braddon Blot" a? ir chief safeguard against Federal on .;vvngance. But the Commonwealth's Premier, and all who have shared the burdens of Federal finance with him, realise that the present system is an extremely wasteful and cumbersome method of raising revenue. Mr Deakin has appealed earnestly to the State Premiers not to demand that the Braddon clause should be perpetuated beyond the ten years of its fixed currency; but so far he has appealed in vain. Another financial point on which the Premiers' Conference expressed a decided opinion was what is known as the "book-keeping clause" in the Constitution Act. As this clause has been frequently confused with the "Braddou Blot," it may be advisable briefly to explain its meaning. Clause 93 of the Constitution Act provides that for at least five years after uniform Customs duties are imposed, all Customs duties and excise levied ou goods manufactured in or imported into one State, and subsequently transported for consumption to another State, shall be regarded as having been collected not in the former State, but in the latter; and the Commonwealth shall credit revenue and pay over balances to the several States an this understanding. This clause make's a serious difference to the minor States, such as Western Australia, which imports few dutiable goods directly, but consumes large quantities of goods that have already paid Customs dues and exjeise in Victoria, South Australia, and New South Wales. This concession to the smaller States was almost necessary in the first instance to reconcile them I to the burdens of Federation. But this "book-keeping" clause necessitates a very laborious lyid confusing system of financial administration, and the State Premiers' Conference recently passed a strong resolution in favour of its abolition. West Australia is now remonstrating strongly against such a course; in fact, the Under-Treasurer says that he can see nothing but bankruptcy in" front of the State if the revenue returns are to be made to the States on a population basis only. At present West Australia is drawing a large portion of its "excess" revenue from Customs and excise dues on goods actually paid at Adelaide or Melbourne; and it would certainly make a great difference to Perth if this arrangement were altered. We hope that our Australian friends will be able to come to some amicable compromise over these difficulties; but New Zealanders cai_ hardly avoid a certain sense of satisfaction in reflecting that we

can afford to look on at the financial difficulties of. the Commonwealth as disinterested spectators butside.