SYDNEY, May 21 1901

THE NEW COMMONWEALTH.

BUDGET PROBLEMS.

REQUIREMENTS AND RESOURCES.

FROM OUR SPECIAL CORRESPONDENT.
SYDNEY, May 21 1901; Jun. 25 1901.

Their Royal Highnesses the Duke and Duchess of Cornwall and York are being welcomed in Queensland; and Sydney is busy with preparations which will enable us to vie with Melbourne. As a consequence the actual commencement of our first Australian Parliament is in some danger of being overlooked. Its proceedings will probably prove fitful, if not languid, until our distinguished visitors have left for New Zealand. But for all that, the far-see­ing, especially among the mercantile classes, and those in Parliament who are in touch with them are being seriously exercised as to our immediate financial prospects. The Budget should be delivered in a month or so in the ordinary course, and its pro­posals are awaited with great anxiety. There has been considerable speculation among importers of all classes in anticipation of increased duties, Sydney is heavily stocked with all kinds of goods, and shiploads are still arriving, providing for a consumption far beyond that of the present season. There is a feverish feeling among holders who have taken the risks of these exceptional purchases, but the real apprehensions entertained by the well-in­formed have graver and more general grounds to rest on. Mr. Kingston is preparing the first Federal tariff, and Sir George Turner the first Federal Budget. If, as is the case with all other Ministries, they con­sidered only their own Administration theirs would be the easiest of undertakings. The new Union has no debts, and can have no deficits. We could accept the lowest of tariffs, and yet make the most liberal allowance for all Federal Departments. But we cannot use our freedom. Constitutionally at liberty the Commonwealth is yet vicariously fettered hand and foot: legally assured of a surplus, it is actually in straits for want of money. No surplus it can show will enable it to satisfy the demands of all its States. We in New South Wales are likely to have forced on us more money than we can wisely spend, taken out of the pockets of our citizens under a Federal tariff and returned to us as a State subsidy. On the other hand, Queensland for a time, and Tasmania, per­haps, for all time, must face large deficits under precisely the same arrangements.    

AUSTRALIAN STATISTICS.

To begin at the beginning, let us remember that Australian statistics always require to be read with a preliminary caution, since both revenue and expenditure accounts are swollen by the cost of railways and other public works on one side and their earnings on the other. At first blush we might easily appear to be the most heavily-burdened community in the Empire, if not in the world, and the most extravagant. With con­siderably less than four million people our States have altogether accumulated a debt amounting to £190,000,000. When it is explained that of this huge total £160,000,000 have been invested in reproductive undertakings and nearly £20,000,000 more spent on useful works of a practically permanent character any apprehensions at first created disappear. From our scanty population we receive each year nearly £29,000,000 sterling, or more than £7 per head. But only one-third of this can be called taxation, for the remainder is either earned or obtained from the sale of land. Our public expenditure absorbs our large income, but one-third of this goes for education and charities, and another third for the maintenance of railways and public works. There is plenty of room for saving, but no inclina­tion and no necessity to attempt it in most Colonies. From customs and excise Australia now draws over £7,000,000 a year, and must con­tinue to obtain it unless we are prepared to dis­locate the administration and wreck the finances of two or three Colonies. The Commonwealth receives the whole of this revenue, subject only to the condition imposed by what is known as the “Braddon” clause that it shall return to the States severally 15s. out of every pound sterling thus collected. There is a further condition that all intercolonial duties shall be abolished from the day on which the first Federal-tariff comes into effect. The Commonwealth, therefore, must for the future rely on its excise, and particularly on its receipts at the sea­board from duties levied on goods intro­duced into its territory. As most of the States cannot face even the reduction of their customs revenues by the one-fourth transferred to the Federal Treasury without being plunged into serious difficulties it is plain that our present tariffs must be inadequate. The new Federal tariff must levy on goods from abroad an extra three-quarters of a million to make up for the deficiency in the customs accounts occasioned by the cessation of inland border duties. Add to this the new expenditure to be provided for the new Parliament and departments established to give effect to the union and the sum of our require­ments is known. It is tacitly conceded that there must be no direct Federal taxation at present, so that £8,000,000 or £8,500,000 will require to be raised from four million people, and almost wholly by duties on the goods they purchase from the Mother Country, America, and Germany. That is, it must be secured if all the States are to pay their way and preserve their present liberal outlay on public conveniences. Taxation must, in a word, be heavier than before for us to sustain our weaker brethren. The dominating consideration of the Federal Treasurer is, and must be for a long time to come, how to collect £2 a head through the customs from every man, woman, and child in the com­munity. This in itself constitutes a great pro­blem, which is rendered trebly difficult by the com­bined effects of two other factors.

FISCAL DIFFICULTIES.

The first already appreciated is fiscal. Mr. Barton and his majority are pledged not to be guided simply by the desire to raise this large sum in the easiest possible way. Certain indus­tries in all the Colonies are said to be unable to cope with their extra-Australian rivals on equal terms. To avoid the destruction of the capital and the employment involved in these they are to be permitted to produce free of duty the same goods that are to be heavily taxed if brought into Federal territory. The inevitable consequence is that to whatever extent they suc­ceed in retaining our market they exclude the articles from which we should have received revenue had they been imported into Australia. Except so far as additional employment afforded by them may mean additional hands and extra con­sumption of dutiable goods, the growth of local manufactures of this kind implies a corre­sponding loss to the public Treasury. We are not, then, to have a tariff for revenue alone, but a hybrid which will seek in some instances to maintain employment at the expense of revenue. The country has accepted the Protectionist gospel, and the majority behind the Government is satisfied that it is about to add to the prosperity of Australia by discrimination between duties or between duties and excise so as to locally increase the demand for labour, encourage the outlay of capital, and retain higher rates of wages. Whatever they may achieve, they have at least hampered the Treasurer and introduced a very disturbing element into his calculations.

FIRST AUSTRALIAN TARIFF.

A yet more complex cross current, interfering in another way with revenue considerations, presents itself, because of a provision in the Constitution under which for five years after the adoption of a uniform tariff each State is to receive back its share of the three-fourths receipts from customs and excise collected by the Federal Government, not according to its necessities or its population, but in exact proportion to its consumption of dutiable articles. The object in view being to return to every State as nearly as may be the amount of income it has surrendered, this condition com­pels the adoption of a scale of duties selected not for what they will yield to the Federal Treasury, but for what they will allow to be returned to one or other of the State Treasuries. This means looking at every item in the list from six different points of view, and the endeavour to adjust each so as to escape an excess or a deficiency in any Colony. Obviously human ingenuity cannot be expected to produce a schedule of rates uniform throughout the Commonwealth which will fulfil all these demands. The first Australian tariff must be based on Australian considerations, and this means that it will not suffice to meet the necessities of two or three States.

SOME DIFFERENCES.

In Tasmania for years the expenses of govern­ment and the upkeep of public works have weighed heavily on a stationary population, including a small proportion of adult males. Western Aus­tralia, lifted out of a similar condition by the development of great goldfields, possesses an abnormal number of men in the prime of life who consume large quantities of dutiable goods. As a consequence a duty on spirits will give Western Australia nearly £4 for every £1 it would return to Tasmania. What duty can be devised which would yield £4 in Tasmania to £1 in Western Australia? Tobacco in the west, for the same reason, pays more than twice as much to the State as in the eastern island, though their popula­tions are the same. Take another illustration of another difficulty. With intercolonial Free Trade, and heavy Federal duties, Queensland sugar would enjoy a monopoly of the Australian market, while the remaining States, which up till now have col­lected from £3 to £6 a ton on this product wherever it was grown, would soon find that source of income altogether destroyed. Any excise imposed would fall wholly on Queensland, and yet would have to be counted as part of the three-fourths of the net receipts from customs set apart for the States taken together. Its neighbours, therefore, not only lose the duty on all the Queensland sugar they consume, while that Colony pockets all the excise levied on its own production, but they find the total sum divisible among the rest of them, reduced by the amount of that excise.

FEDERAL ADVANCES.

Owing to the late disastrous drought and con­sequent decline in her railway receipts, Queens­land will need all she can get, and probably more than she is entitled to receive for several years to come. Still, with her vast area and in­exhaustible resources she can readily repay any debt she may incur. But what of Tasmania? To meet her demands it would be necessary to adopt an Australian tariff which would tax, New South Wales £1,000,000, or some estimate £2,000,000 a year more than we require. This would be intoler­able, even though that sum is to be credited to our State, and therefore the provision in the Consti­tution which permits of Federal advances to any State during our first decade is certain to be employed to assist her. When can Tas­mania hope to repay? There will be a consider­able sum coming to her from the Commonwealth in payment for the buildings and appliances taken over with her post-offices and telegraph depart­ment, but to use this in aid of revenue would be to live on her capital. We have for years applied the proceeds of our land sales in this way, but the system is universally condemned, and the only excuse offered is that with our population and re­sources we can afford the extravagance. Tasmania cannot. The financial outlook, therefore, is anxious—not for our creditors, who are all abundantly secured, and who have in the Commonwealth a new national guarantee for their money—but for our­selves, our four million people can afford to levy £8,500,000 or £9,000,000, if we require so much, even out of customs and excise alone, and without entering on the field of direct taxation. The real crux is how we shall agree to proportion that amount among ourselves, and what effect the dependent position into which they are to be thrust may have on some of our States, and possibly on the course of our politics. These are the questions now commencing to agitate the minds of thoughtful men, particularly the public men at the State Treasuries, to whom the eternal want of pence which has become familiar is about to pre­sent in the Federal field a new and momentous series of problems.

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