THE New Zealand Herald AND DAILY SOUTHERN CROSS. TUESDAY, APRIL 7, 1891.

New Zealand Herald, Volume XXVIII, Issue 8534, 7 April 1891, Page 4

THE New Zealand Herald AND DAILY SOUTHERN CROSS. TUESDAY, APRIL 7, 1891.

Now that it has become apparent by the result of the debate upon. Sir Henry Parked proposals re Australian Federation, that his opinions thereon will receive a general endorsement 1 by the Convention, there arises a natural curiosity about the reception which is likely to be accorded to the Bill which shall have received the assent and approval of so distinguished a body of Legislators as the delegates now assembled in Sydney, by the various colonies to be affected by it. Although in the course of the debate differences of opinion among the speakers have arisen regarding very important points concerning the constitution and powers of the Commonwealth, as the intended Australian Federation is styled in the Bill, such for example, as the powers of the Senate, the State rights of individual colonies, mode of election to the Legislature, the powers of the Federal Judiciary, particularly in its appellate jurisdiction, appointment of GovernorGeneral, &c., the main consideration for the colonies interested is the effect which the proposed change will have upon their revenues, and thereupon, to the necessity which may arise for an enlargement of direct taxation, to take the place of'that now raised indirectly by means of customs and excise.

In order to explain the probability of such a need occurring, it must be borne in mind that the Bill creating federation provides that to the Commonwealth alone shall belong the power of levying Customs and Excise duties, and that, as between the federated colonies, trade shall be absolutely free. By such an arrangement two important results to each individual State must arise. The first, that the commercial policy of each, whether in favour of freetrade or of protection, may be seriously modified by the Federal Legislature ; the second, that all of them will lose the revenue springing from the Customs duties imposed upon intercolonial trade ; and it yet remains to be shown whether the exigencies of the Commonwealth will permit the return to the States of an equivalent for the certain loss to which they must thus be submitted.

It has been estimated by statistical authority, accepted by the Convention, that the cost of the Federal Government, with the present population, will amount to £2,226,000, equal to lis 5d per head. Supposing this estimate not to be seriously exceeded, the sum required to carry on the new system would easily be found in the revenue raised by Customs duties upon British and foreign commerce, therefore, at the present time no special taxation for Union purposes would be needed, but all the same, each colony would be compelled to increase taxation in order to make up for the loss of revenue sustained by the operation of intercolonial free trade, and by the transfer of Customs and Excise . from the colonies to the Commonwealth. So far, it is not intended to appropriate the whole of the Customs revenue to Federation purposes ; on the contrary, it is expected by some that a surplus, variously estimated from £6,000,000 to £7,000,000 will be available for distribution amongst the contributing States. Captain Russell, however, is of opinion that the. powers given to the Commonwealth would absorb every penny which the colonies required to pay their own liabilities with. As the above views relative to the probability or otherwise of a surplus remaining after all necessary appropriations shall have been made for the federal services are merely hypothetical, it may be worth while to apply the test of figures to the new conditions operating in Victoria, one of the most important of the colonies represented at the Convention. There the total- Customs and Excise duties for the year 1888-9 amounted to £3,026,579, of which sum about a third was raised from Australian trade — say £1,000,000 — which figure would, therefore, represent the first loss accruing to that colony by Federation. But the balance of her income from that source would be levied and appropriated by the Commonwealth, by which, also, a large portion of it would be absorbed. It is, therefore, perfectly clear that Victoria would be called upon to make a serious financial sacrifice by giving her adhesion to a federal union. No doubt the case of Victoria is an extreme example of the price to be paid by the colonies for the maintenance of a Federal Government, because Customs' taxation there is of a highly protective character, consequently the amount so raised bears a larger proportion than usual to the whole revenue of the colony, nevertheless every State forming part of the Federation must be prepared to furnish a quota to the revenue of the Commonwealth, and pro tanto to suffer a diminution of her own resources, a deficiency which could only be met by three expedients, viz., increased taxation, retrenchment in expenditure, or a lessened demand on the part of the Central Government, the last named of which need hardly bo taken into account for obvious reasons. Another obstacle in the way of large contributions to the federal exchequer by the colonies is the general indebtedness of the whole of the Australian group, the interest payable upon which exceeds in some cases the total revenue derived from Customs dues. This point of the situation could hardly

escape the notice of the Convention, the members of which who took up the question seemed £o be of opinion that in the event of the Common being established it would be absolutely necessary to take over the liabilities of the Federated States, a course to which the public creditor would give a ready assent, owing to the improved security which would be the consequence of federation. From the colonial point of view, the aspect is not less favourable, the responsibility in each case being lessened by reason of the federal guarantee, with the certain prospect of diminished liability, which would follow conversion upon favourable terms, an undertaking which would be easy for the Commonwealth, while difficult or perhaps impossible for the indebted States separately. In the meantime, the lion in the path of Federation is represented by the financial changes which are rendered necessary by it. .