FINANCIAL RELATIONS

Evening Post, Volume CXVII, Issue 114, 16 May 1934, Page 14

FINANCIAL RELATIONS

POSITION IN AUSTRALIA

THE PREMIERS' CONFERENCE

New Zealand beinr one "State" as it were, may not readily appreciate the problems that may confront not only tho State Governments, but tho Federal Government of the Commonwealth of Australia. The Bank of New South Wales, in its circular issued today, refers to-some of these with special reference to the now histot-ical Premiers' Conference. It is indicated that the most fundamental issues raised by the January Conference of Premiers were closely bound up with the problem of preserving an appropriate balance between the allocation of functions to the Commonwealth and the States on the one hand, and the division of fields of taxation on the other. There has for some time been a feeling of unrest among the States in face of the growing nower of the Commonwealth, but instead of discussing the original intentions of the makers of tho Constitution, it is more important to achieve that balance which will best foster the material progress' of Australia. The financial relations of a federation are never easy to adjust. In a unitary country, or inside a State which is a member of a federation, taxation taken from wealthy regions is regularly spent in the poorer areas, for. education, for unemployment relief, and other purposes, and. no . controversy arises as to the legitimacy of such transfers. But in a federal State complications arise because there are component States with claims to sovereignty,, which implies a right to collect and spend revenue as the States themselves may determine. Since 1901 the differences between the Australian States have become more obvious, as Commonwealth legislation has given benefits to some State's and imposed burdens on others. So far the problem has found a partial and rather unsatisfactory solution in special grants from the Commonwealth *o three of tho States. STATES' PROBLEMS. At the conference it was pointed out that while the States had found it impossible to make ends meet, the Commonwealth had a substantial surplus for the last financial year and Lad been able to remit a great deal of taxation without incurring a deficit. This was attributed o the superior taxing power of the Commonwealth, and the question was whether the States could be given any additional power of taxation. Three main proposals were discussed in this connection. To the proposal of the Premier of South Australia that 30 per cent, of Customs and excise revenue should be returned' to the States the objection was raised that Customs duties were liable to a great deal of fluctuation which would make State budgeting difficult f and that the States would have a definite interest in the tariff, which might lead to undesirable political complications. The Victorian proposal that the Constitution snould be amended so as to exclude the Commonwealth from income taxation received even less support, as it was felt .that..the authority responsible for defence,.carinot do without such a flexible source- of revenue as the income tax, and that such, an amendment would give little' substantial relief to the States who needed it most. Tho Commonwealth Government's proposal that"the States should be given concurrent power in respect of excise was more seriously considered. But tho greatest dange- involved in this proposal was the threat which it made possible to freedom of niterstate trade, and which might wipe out the slender remains' of section 92 of the Constitution, which provides that "trade commerce and intercourse among"'the States . . . shall be absolutely free." Clear and uncompromising as it seems, there is probably no other section of the Constitution concerning which more uncertainty exists. VEXATIOUS DISCRIMINATION. Various States have found means ot making it meaningless; by railway freight rates which discriminate against the products of other States,'although they do not' appear to be discriminatory, by using the power of quarantine in eases in which there is no need for it, and by a variety of other means. The decisions of the High Court in complaints concerning breacht? of the section havo settled nothing and are in some respects: contradictory and further complications arise from the marketing schemes which have becomo so fashionable in recent years. The conference came to the conclusion that- the whole matter of 'interstate free 'trade needed further consideration and .postponed it to a later conference, but it is, fairly clear that in view of the further threat to interstate trade involved, the Commonwealth's suggestion will not be proceeded with. ■ ■ -But if : it is. impossible or impracticable to- curb the Commonwealth's power to raise revenue, it may be desirable to. hand over to it additional functions, on. which it • may. spend its surplus revenue. ;The States, however. a ; rp jealous of., their powers and are likely to look on any transfer !of functions !as another: step towards unification. , ,■■■.... BURDEN OF STATE DEBTS. There remains the a'olution that the Conimonwealth should take, over some additional part, of . the, debts of the States. This proposal has the merit if being both simple and providing a solution with some degree of permanency. The Comm.onwealth Government, however, declared that: /hileit might give consideration, to helping, the. small States, it would not give anything to New South-Wales, .Victoria,! or Queensland. :It may ,be that the major portion of the , difficulties ■ of ; these. States is of a temporary nature, in which case temporary .accommodatiqn .is, all that is ; needed. 1 But the troubles of the smaller States seem to be, mpre; deeprooted, and some assistance from the Commonwealth on a more . permanent basis appears necessary. ; If the, Commonwealth took- over some portion of the-debts of, the small States, by amendment of the financial agreement the concurrence of the other States would-be -necessary; but pronouncements at the .conference showed little opposition to this course..