THE OTAGO DAILY TIMES FRIDAY, FEBRUARY 26, 1932. STATE VERSUS COMMONWEALTH.

Otago Daily Times, Issue 21579, 26 February 1932, Page 6

THE OTAGO DAILY TIMES FRIDAY, FEBRUARY 26, 1932. STATE VERSUS COMMONWEALTH.

While the conflict between the Commonwealth Government and the Government of New South Wales is providing an unpleasant spectacle, since dignity is an unknown quantity to Mr Lang and his party, it is not without its interesting features, especially in the latest developments. It will be recalled that at the end of January Mr Lang announced his inability to honour the interest obligations of his Government to the extent of £500,000, falling due within a few days. The Loan Council to which he appealed refused aid. The Federal Government adopted the same attitude, its decision being a form of protest, dramatically made, against a Premier who had already impaired the credit of Australia, and seemingly had no intention of mending his conduct. The Federal Government subsequently announced its intention of providing for the payment of the whole amount in default by New South Wales, a sum of £958,763. This left it, however, with the problem of squaring up satisfactorily its own financial relations with the New South Wales Government, and ensuring that the latter would not be in a position to repeat the performance of suspending interest payments. In the Speech placed in his hands at the opening of Parliament at Canberra last week the Governor-General said that the avoidance of financial collapse had been the main objective of the self-sacrificing measures adopted by all the Governments in Australia save that of New South Wales. The Federal Government, it was emphasised, regards the financial drift in New South Wales as imperilling the whole budgetary position of Australia, and views with the utmost concern the failure of the Government of that State to meet its obligations. “ While unhesitatingly condemning,” said the GovernorGeneral, “ the policy that has led to public default by the Government of the State of New South Wales, my Advisers have felt impelled, in the interests of the credit of the nation as a whole, to honour the obligations of that Government. My Ministers will take steps to compel the repayment of these moneys to the Commonwealth by the Government of the State.” The Federal Government has lost no time in initiating steps upon the lines thus indicated. The Financial Agreement Enforcement Bill provides that the payment of revenue due to the State must be made by the taxpayer through the Commonwealth, payment to the Commonwealth discharging the taxpayers’ liability to the State, while payment to the State has no such effect. The Bill contains provisions for the enforcement of payment to the Commonwealth of State revenues; power is conferred on the Commonwealth to retain loan moneys borrowed for a State by a decision of the Loan Council; and banks may be required to hand over to the Commonwealth moneys they

hold or receive on behalf of a State. This is legislation of a distinctly extraordinary character, and Mr Lyons has admitted that it is '“of a type never contemplated before.” The justification for it is that it is necessary for the Commonwealth Government, in the interests of the national finance and of Australian credit, to render it impossible for a State to treat its financial obligations in the manner in which New South Wales has done. The purpose of the measure is to place the Commonwealth in a position to discharge the liabilities of a State the Government of which cannot be relied on to discharge them for itself. Although previously it was reported that the Federal Labour Party would give this legislation its full support, Mr Scullin has since intimated that his party will oppose the measure on the ground that it contains dangerous' principles affecting the rights of the States. That it does materially affect these rights is sufficiently apparent, but the States that are prepared to honour the financial agreement adopted among themselves must recognise the force of the circumstances which have led to the introduction of such a measure. Undoubtedly its provisions confer powers upon the Commonwealth that were never previously regarded as coming within the scope of Federal administration, but the indication afforded of the determination of the Federal Government to end the undesirable situation created through the attitude of the Lang Government will probably be widely welcomed.