THE New Zealand Herald AND DAILY SOUTHERN CROSS. SATURDAY, FEBRUARY 20, 1932. CHALLENGE TO LANG.

New Zealand Herald, Volume LXIX, Issue 21112, 20 February 1932, Page 8

THE New Zealand Herald AND DAILY SOUTHERN CROSS. SATURDAY, FEBRUARY 20, 1932. CHALLENGE TO LANG.

!By the piece of legislation the Federal Government of Australia has just produced, issue is definitely joined between it and the Lang Government in New South Wales. Mr. Lang, as spokesman for a docile following, has defaulted in his obligations and has flouted his pledges. He has done it openly, wantonly and defiantly. Criticism of himself or his policy has not been received meekly, but has been answered by vitriolic attacks on the critics, as witness his vehement outburst about Mr. S. M. Bruce during the recent Sydney by-election. Nothing the Commonwealth has attempted up to the present has had the slightest effect on Mr. Lang's demeanour or actions. He has continued deliberately to default in loan obligations, resting on the technical point that the Commonwealth is ultimately responsible for them. So, with its patience utterly worn out at last, the Federal Government proposes to intercept "the revenues of New South Wales between the taxpayer and the State Treasury. Previously, in one small way, it passed over the head of the State Government when it paid overdue interest direct to bondholders in Australia instead of remitting it through the State. On other occasions it has withheld moneys that were normally due to New South Wales-to cover defaults in interest payments. Within the past few days it proposed through the Loan Council to obtain bank advances for the State and then to intercept the credit to meet interest liability. None of these actions was, nor could be, any more than a minor palliative. Now the Federal authority has decided on a bolder throw by legislating to take over the whole taxation revenue of the State, seizing it at the very source. It would be necessary to search long and far for a precedent to what the Commonwealth proposes to do. Even then there would be no certainty of finding one. This is natural, since fortunately the circumstances which have forced the hand of the Federal Government are. as uncommon as the course it has chosen to follow. Though the accompanying facts are far different, the direct breach between central Government and part of the federation recalls the' final break which precipitated the American Civil War. This indicates how drastic the step taken by the Commonwealth really is. Yet how deep and continuous has the provocation been! It was on April 1 last year that Mr. Lang began his career of financial outlawry by defaulting in interest payments to overseas bondholders amounting to £BOO,OOO. As he had expected, the Commonwealth immediately stepped into the breach, paid the money, recouped itself to the extent of £243,000 by stopping contributions due from Federal revenue to New South Wales, and issued writs on behalf of itself and the other States for recovery of the balance. As this left the advantage with Mr. Lang to the extent of more than £550,000, he was quite content to await legal proceedings, which in fact did not eventuate. A similar spirit of defiance was shown in the various shifts and negotiations during the remainder of the year. Even when, at the beginning of the present month, the Commonwealth declined to find the money due from New South Wales, and proposed to State to default overseas, it produced signs of neither repentance nor dismay. Mr. Lang probably relied on the certainty of what happened shortly afterward, payment by the Commonwealth, which could not escape its legal liability, however it was morally entitled to do as had been proposed. As nothing else seemed likely to discipline him, the. Federal Government has now embarked on the drastic course mentioned earlier. Much naturally turns on the success or failure of the course chosen by the Commonwealth. If it can carry out its avowed intention the New South Wales Government will soon be as completely bankrupt practically as it already is morally. The effect will be equivalent to that of an order of the Court putting its affairs into the hands of a receiver—only in this instance the Court and the receiver are one and the same. According to early comment from Australia, Parliamentary support for the emergency measure is assured. Yet, the message proceeds, the Government realises "this by no means spells a simple end to the difficulties, legal and constitutional, which must be faced." They will undoubtedly be real. The hare text of the Constitution Act leaves it by

no means certain that the Commonwealth will have an easy victory legally. This is likely to lie another proof that the rigidly defined Constitution under which the federation works has its very decided drawbacks. The legality of what is proposed will assuredly be tested in every possible way, for Mr. Lang and his backers are not likely to reject, the challenge deliberately flung to them by the Commonwealth. However they may resist, they will be under a very grave handicap. 'Outside of New South Wales they can expect little sympathy or moral support. The other States have shown much less patience with Mr. Lang than, until the recent change in colour, the Commonwealth did. Even in his own State a large section of the people have been utterly alienated, have had their moral sense outraged by his course of repudiation and of cynical flouting of obligations. However strenuously it may be resisted by Mr. Lang and his Trades Hall associates, the Federal plan 1o discipline him will most certainly be warmly supported by many sections, of all political colours, throughout Australia.