AUSTRALIAN LOAN COUNCIL

Press, Volume LXXXVIII, Issue 26723, 6 May 1952, Page 7

AUSTRALIAN LOAN COUNCIL

“Rebellion” By State Premiers (Special Correspondent N.Z.P.A.) (Rec. 9 p.m.) SYDNEY, May 5. The rebellion of the State Premiere in the Australian Loan Council during the week-end is making big headlines in all the Australian newspapers, but an inquiry reveals that few Australians know what it is all about. Australia, unlike Britain or New Zealand, is a confederation of Statee whose individual w powefs are secured by a Constitution more than 50 years old. These States must plan their own works programmes, and must raise money for education, road building and jnaintenance, irrigation, hydroelectric power, and a score of other projects. Since July 1, 1929, however, the Commonwealth Loan Council has taxes over control of all State loan programmes. The Loan Council itself is merely a board comprising all the State Premiers, sitting together with the Federal Prime Minister and Treasurer.

In practice, the relegation of loan control to this council has meant that the Federal Government holds the purse strings, and thus can dictate ths economic and financial courses of the States. The Commonwealth’s grip on the purse strings was tightened during the Second World War. when a single taxation system was adopted, making the Federal Government the sole taxation authority. The result of these decisions haa been that the States, which are principally concerned with speeding loan and taxation receipts, have no independent means of obtaining either, and that the Federal Government has fulfilled the role of money gatherer and loan arbiter. This has made for stormy sessions in the Loan Council. Loan Programmes Padded

The State Premiers have tended to pad their loan programmes, in the knowledge that the Federal authorities would try to whittle them down. Last week-end the meeting of the council was a case in point. In spite of warnings about the discouraging condition of the loan market, the States produced total loan demands exceeding £351,000.000. The Federal Prime Minister (Mr Menzies) and the Federal Treasurer (Sir Arthur Fadden) informed them that the Commonwealth could give them only £130,000,000 in Federal loan money, and that the Treasury advisers considered that the loan market would .iot produce more than an extra £50.000,000. The Commonwealth offer, therefore, was £180.000,000, plus whatever the loan market would produce above the Treasury estimates. Meeting privately, the Premiers almost immediately decided to reduce their demands to £247,500.000. They adhered to this figure, and forced it through the Loan Council. Two remarkable features emerge: (1) the premiers, meeting together without apparent prior collusion, were able to cut their original demands by more than £100.000.000; and (2) even after so doinf. each individual State made a substantial gain on its loan figures for the previous year. For the current financial year, approved State loan programmes total £45,400.000 Jess than the States’ selfimposed minimum for 1952-53. Limit on Information Mr Menzies refused the Premiers* request to hear evidence by the Governor of the Commonwealth Bank (Dr. H. C. Coombs) and other financial experts, or to permit the use by ths trading banks of funds held in a special account by the Commonwealth Bank. The Premiers say that lack of firsthand information about the financial market must hamper thein in the preparation of their loan claims. •ne Premier of South Australia (Mr T. Playford) says he believes that the Commonwealth Government has placed an entirely new construction on the loan agreement between the Commonwealth and the States. Last week, he says, the Premiers were informed that they had no right to consider economic or banking policy, aa these were matters under the sole jurixdiction of the Commonwealth, ana that thp Loan Council, as such, could not obtain information even from the stock exchanges or banks. Mr Playford says he is determined to test the legality of this opinion, which, he believes, does not square with the States’ rights under the Constitution.

Sir Arthur Fadden has accused the Premiers of making a mockery of the Loan Council by defying the Commonwealth Government and voting themselves £247,500,000 to finance works in 1952-53.

He says that by their demands the Premiers have not only washed their hands of any responsibilities for the great national problem of inflation, but are apparently prepared to add to it. Knowing that the loan market went badly in the current year, and that the prospects were no better for next year, the Premiers came to the total P r °S rammes of i. 0a1.000,000 —5a per cent, more than the amount they used in the current year, he adds.