FEDERAL FINANCE

Hawera Star, Volume XLVI, 17 June 1927, Page 5

FEDERAL FINANCE

NEW SCHEME PROPOSED.

RAISING LOANS. DEALING WITH STATE DEBTS

40* BT CABLE-PRESS ASSOCIATION-COPYRIGHT MELBOURNE, June 16. A conference of the Premiers of the. States and Commonwealth to consider the financial relations between. the 'Commonwealth and the States has commenced. The Federal Prime Minister, the I?t Hon. S. M. Bruce, in outlining the scheme proposed by the Commonwealth, said the only reason actuating the Commonwealth in its present action was the feeling that it was essential that the present basis financial relations should be established with the obligation of assistance definitely placed on the shoulders of the Commonwealth. He then submitted the Commonwealth scheme, which provides for the Commonwealth to take over the whole of the public debts of the States and apply £7,584,912 annually from its revenue towards the payment of interest charges, the States to contribute the balance. Properly safeguarded sinking funds will be established in respect to the existing State debts, and new borrowings, the management of debt, and future borrowings on behalf of the Commonwealth and States will be vested in an Australian Loan Council, eon- * sisting of a representative of the ComW monwealth and a representative of each State. This council will he given power under a constitutional amendment. The scheme cannot operate without an amendment of the Constitution, which will involve taking a referendum. As this will take a long time, the Commonwealth proposes a temporary two years’ arrangement. It is proposed that a sinking fund of 7s fid per cent, per annum, on the nett amount of the existing State debts, including debts due by States to the Commonwealth, be established under the new constitutional powers, to provide for the extinction of those debts during a period of 58 years, commencing on July 1 next. -

During this period of 58 years, the Commonwealth will pay into the sinking fund annually a sum estimated at £BOB,OOO, equal to 2s fid per cent, on the nett amount of the existing State debts. During the same period each State will pay into the sinking fund annually a sum of 5s per cent, on the nett amount of its existing State debt. Regarding new debt, it is proposed tliat,a sinking fund of 10s per cent, per annum, on the total amount of the new loans raised for. States be established to provide for the extinction of such loans within a period of 53 years, the Commonwealth, during the period of 53 years from the raising of each new loan for States, to pay into the sinking fund annually a sum equal to 5s per cent, on the amount of the loan of each State during 53 years after the raising of each new loan, and the State to pay into the sinking fund annually a sum equal to 5s per cent, on the amount of the loan. Subject to the control of the new Loan Council, the Commonwealth will arrange for all future borrowings, including conversions, redemptions and the consolidation of debt, the Commonwealth and States to submit to the Council their loan programmes for each financial year. The council will then determine whether the amount of the loan programme is available on the money market at reasonable rates and conditions. Loans for defence, approved by the Federal Parliament, are to be excluded from the operations of the scheme.,., Mr. Bruce concluded that, under the Commonwealth proposals, there would be no necessity foi;. any additional State taxation. Mr. Lang, replying, said the proposals were not acceptable to New South Wales and, under them, before 20 years had elapsed, New South Wales would have to increase taxation by more than £1,000,000.