in each state, the total expenditure and the deficiency in revenue would be as follow: With the progress of settlement and the increase of population, the expenditure on the postal and telegraphic services naturally expands year by year, and it is apparent that in order to keep pace with the growing needs of the community the department must be administered on ordinary business principles. Hitherto the application of such principles has not been obvious, and perhaps it has not been possible, but now that the affairs of the six states are centred under one control, much of past extravagant expenditure will be avoided, and there is every prospect of the service becoming self-supporting-that is, returning a revenue sufficient not only to meet current expenditure, but provide a surplus to cover maintenance of works and buildings, together with interest on capital cost. 769 COMMONWEALTH FINANCE. THE financial obligations of the Commonwealth began with the appoint ment of the Executive and the proclamation of the Constitution on the 1st January, 1901, at which date also the administration of the Customs passed over to the control of the Commonwealth. Besides the Customs and Excise, the Commonwealth has authority to take over from the states the administration of the following services, viz., posts, telegraphs, and telephones; naval and military defence; lighthouses, lightships, beacons. and buoys; astronomical and meteorological observations; quarantine; census and statistics; bankruptcy and insolvency; patents and copyrights; naturalisation and aliens; divorce and matrimonial causes; and immigration and emigration. In accordance with this power, the Postal Service was transferred to the Commonwealth on the 1st March, 1901, and on the same date the Defence Administration was taken over. None of the other depart ments has yet been completely transferred. The expenditure of the Commonwealth is divisible into new expendi ture, that is to say, on services called into being after the proclamation of the Federal Union, and other expenditure, or expenditure on services previously existing. The new expenditure is charged to the states proportionately to their population, and the cost of transferred services over and above the revenue derived therefrom being ascertained, the total of the two amounts is deducted from the net revenue from Customs and Excise, and the balance handed back to the states. Under the provisions of section 87 of the Constitution Act, the Treasurer of the Commonwealth is entitled to retain one-fourth of the net proceeds of Customs and Excise services for the purposes of defraying the expenses of the Commonwealth, the remaining three-fourths, and as much more as the Treasurer does not require, being handed back to the states. It is, therefore, very essential in considering the question of Federal and State Finance to remember that, so far as concerns threeparts of the net revenue derived from customs and excise, such revenue, though appearing in the receipts of the Commonwealth, is not within the disposal of Parliament, but must be returned to the states. A large amount, in a normal year estimated at over seven and three-quarter millions, appears first as a federal receipt and a federal expenditure, and again as received by the states. Therefore in calculating the total sums raised by the Australian Governments, the amount returned to the states by the Federal Treasurer should be deducted from the total receipts. It is necessary, however, that the whole transactions of the Federal Treasurer should be shown both as to revenue and expenditure ; for, unless this is done, a proper understanding of federal and state accounts cannot be obtained. The financial year of the Commonwealth ends on the 30th June. Since the 1st January, 1901, there have been three periods, the first being the six months, January to June, 1901, the second, the twelve months from 1st July, 1901, to 30th June, 1902, and the third, the twelve months from 1st July, 1902, to 30th June, 1903. The first of these periods was quite abnormal, the transferred departments were not administered by the Commonwealth for the whole period, while in addition there were some exceptional expenses by reason of the federal elections, and the cost of establishing the Commonwealth itself; on the other hand, the federal departments were not organised, and cost less than in an ordinary year. OPERATIONS FOR HALF-YEAR ENDED 30TH JUNE, 1901. For the half-year ended 30th June, 1901, the following were the income and expenditure of the Treasurer : During this period the state tariffs existing at the establishment of the Commonwealth remained in force, the uniform customs tariff with the abolition of interstate duties not coming into operation until some time later. The collections in each state were : The expenditure on account of new services distributed on a capitation basis, and the other expenditure chargeable to the states were as follows: The difference between these figures and the amounts set out in the preceding table represents the payments which the states were entitled to receive under the provisions of section 87 of the Constitution Act, and the sums handed back to each were as shown below. The financial operations of the Commonwealth for its first half-year call for no special comment, -the payments made and the sources of income were in continuation of those of the states; no new sources of revenue were entered on by the Commonwealth, while the amount of new expenditure was comparatively small. OPERATIONS FOR YEAR ENDED 30TH JUNE, 1902. An entirely new set of conditions came into operation on the 9th October, 1901, when the schedule of uniform customs duties was promulgated. Under the new conditions the interstate duties ceased, except, as will be hereafter explained, in the case of Western Australia. The federal customs and excise duties were in force for thirty-eight weeks and the state duties for fourteen weeks, while the Post Office and Defence Services were administered by the Commonwealth for the whole year. The following is a statement of the transactions of the Federal Treasurer for the year : The amount of revenue collected within each state was as shown in the following table. The Customs and Excise collections of Western Australia include £1,134,045 revenue from the Commonwealth tariff, and £201,569 from interstate duties. £ £ 3,698,567 2,975,544 1,610,907 73,010 277,811 1,639 977,530 62,489 225,752 172 1,565,608 37,739 91,611 10,331 New South Wales... Cr. 4,300 2,324,000 474,803 The distribution of the expenditure between the states was as shown in the following table, the new expenditure as it is called |