would leave the States unable to carry on the work of government, and that their efforts in the direction of developing the resources of the country would be paralized. It was pointed out that the States had not only lost the customs and excise revenue which had originally belonged to them before federation, but that they had also lost the exclusive right to resort to land taxation, income taxation, and estate probate and succession duties. All these lucrative fields of taxation are now jointly occupied by the Commonwealth and the State taxing authorities. The Commonwealth has even taken possession of public entertainments as a source of income. On the other hand the burdens and responsibilities of the States instead of diminishing under federation have been increasing in leaps and bounds as shown by the State expenditure out of the consolidated revenue fund during the following years :

The States' debts had also gone on increasing and now amounted to the enormous total of £397,950,506.

On the other hand the Commonwealth Treasurer was able to point out that the financial obligations and burdens of the Commonwealth had gradually increased under federation, and, owing to the enormous expenditure involved in the prosecution of the war and provision for war pensions, the financial position of the Commonwealth in 1920 will be very serious indeed compared with its position in 1910, when the financial arrangement was legalized. The Commonwealth has now a national debt of £362,518,347: supra, p. 55, which is mainly the result of war conditions, the interest on which would have to be provided for as well as a sinking fund. The Treasurer informed the representatives of the States that it would be impossible to hold out any hopes of any renewal of the financial scheme based on 25/- per head of the population, and the best they could expect would be a reduction of the subsidy on a sliding scale gradually reducing it to at least 10/- per head of the population.

Reasons for Reduction of Subsidy.

In support of the proposal to reduce the per capita subsidy to the States, the Commonwealth Treasurer, Mr. W. A. WATT, has pointed out that since the Federal Parliament determined in 1910 that the Commonwealth should pay to the States 25/- per head the Federal Government has had enormous additions to its responsibilities. During 1918-19, for example, it is estimated that the following sums must be paid out of the consolidated revenue in respect of the war :

These demands will recur annually, and all of them will greatly increase in amount. Expenditure on repatriation will be many millions sterling, and has to be borne, in accordance with the policy of the Ministry, partly out of revenue, and partly out of loan money. In 1910-11, the first year in which the States became entitled to the per capita payment, old-age pensions absorbed £1,868,648, while in 1918-19 it is estimated that the sum will be £3,925,000, an increase of £2,056,352, or more than double the cost of old-age pensions in 1910-11.

The Commonwealth is also confronted with a possibility of a decreasing revenue. It is probable, says the Treasurer, that higher protective duties will sooner or later cause a diminution of customs revenue, and a fall in prices may be experienced, which will result in a further shrinkage of that source of revenue. It is also inevitable that the proceeds of the Federal land tax will become less, because subdivision of large estates is proceeding. Revenue from the war time profits tax, estimated in 1918-19 at £1,800,000 will disappear altogether. Faced, therefore, with increasing and unavoidable expenditure, and with a falling off of revenue, the Commonwealth has proposed to ask Parliament to reduce the per capita payments to the States. Under the circumstances the Treasurer considers this is quite legitimate. The possibility that such a course would be necessitated was clearly in the minds of the framers of the Federal

Constitution, who gave the Commonwealth Parliament, after the ten years' period, the right, if need be, to use the whole of the receipts from customs and excise for Federal purposes. The Ministry does not propose, however, to take the whole of that revenue, but to leave the States 10/- per head of the population of each State.

War burdens, payable out of revenue, will certainly, for many years, amount to upwards of £25,000,000 annually. The proposed reduction of the per capita payment to the States will provide the Commonwealth with an additional amount of only about £4,700,000 per annum, leaving about £21,000,000 to be found by Federal taxation. The financial pressure is so great that all the resources of Australia must be levied upon. The States can help, both by economies and by the collection of additional revenue. They cannot expect the Commonwealth to suffer serious financial embarrassment while they go on their way as though the war had not occurred. The proposal to ask the States to find for themselves the £4,700,000, instead of looking to the Commonwealth for it, is not only moderate and reasonable, but is also a necessity.

Uniform duties of customs.

88. Uniform156 duties of customs shall be imposed within two years after the establishment of the Commonwealth.

§ 156. "UNIFORM DUTIES OF CUSTOMS."

LEGISLATION.

CUSTOMS TARIFF 1902.

The first Act imposing uniform duties of customs came into operation on 8th October 1901, at 4 o'clock in the afternoon, reckoned according to the standard time in force in Victoria. See Note to Constitution, section 51 (II.) p. 317.

Payment to States before uniform duties.

89. Until the imposition of uniform duties of

customs

(i.) The Commonwealth shall credit to each State the revenues collected therein by the Commonwealth.

(ii.) The Commonwealth shall debit157 to each State

(a) The expenditure therein of the Commonwealth incurred solely for the maintenance or continuance, as at the time of transfer, of any department transferred from the State to the Commonwealth;

(b) The proportion of the State, according to the number of its people, in the other expenditure of the Commonwealth.

(iii.) The Commonwealth shall pay to each State month by month the balance 158 (if any) in favour of the State.

$157. "DEBIT EXPENDITURE."

Meaning of Expenditure.

The Commonwealth Parliament has authority to appropriate money out of the consolidated revenue for a specific purpose, and money so appropriated, although not yet actually disbursed, is expenditure" within the meaning of section 89 of the Constitution, and cannot form part of the surplus revenue distributable among the States under section 94 until the actual disbursement of it for that purpose is no longer lawful or no longer thought necessary by the Government. Therefore the sums appropriated by the Old-Age Pensions Appropriation Act 1908 and the Coast Defence Appropriation Act 1908, were properly deducted from the revenue for the financial year in which the appropriations were made in order to ascertain the "surplus revenue payable to the States in respect of that year under section 94 of the Constitution and section 4 of Surplus Revenue Act 1908. Expenditure" does not necessarily mean disbursements actually made. In making up accounts for the purpose of striking a balance it may have a wider meaning." Per GRIFFITH, C.J. in New South Wales v. The Commonwealth, (1908) 7 C.L.R., 179.

"The money appropriated from the Consolidated Revenue Fund, withdrawn from the Treasury and paid to the credit of the two trust accounts was in my judgment expenditure within the meaning of the Constitution. It was lawfully devoted to the purpose expressed While the appropriation stood it could not lawfully be devoted to any other purpose, though its disbursement might be deferred." Per BARTON, J. 7 C.L.R., at p. 196.

"I am of opinion, with my learned colleagues, that on the true construction of section 89, the word 'expenditure' includes not only the moneys actually paid, but the moneys which Parliament has appropriated to be expended until it finds that the money so appropriated is not wanted, that is to say, practically until the appropriation lapses. In this case, by the express provision of section 5 of the Surplus Revenue Act, the provisions of the Audit Acts (section 36), which make appropriations lapse at the close of the financial year, are made inapplicable to trust accounts such as those now in question. The word 'expenditure' has not, as was urged by plaintiffs' counsel, the primary meaning of moneys already expended. Primarily, indeed, it is an abstract noun; but it is often used to express collectively, in financial matters, moneys actually expended and to be expended." Per HIGGINS, J., 7 C.L.R., at p. 205.

§ 158. "BALANCE IF ANY."

Meaning of balance.

"I agree that the word 'surplus' in section 94 must be interpreted with reference to section 89, and that the surplus is the same thing as the aggregate amount of the balances which are required to be returned monthly to the States-no more and no less. The word expenditure' does not necessarily mean disbursements actually made, although that is its meaning in some contexts. But when it is used in a direction as to the mode of making up accounts for the purpose of striking a balance, it may have a wider meaning. The real question for determination is, in my opinion: What is the meaning of the words 'balance' and 'surplus' as used in sections 89 and 94. In a transaction between principal and agent, if the agent were required to pay over monthly to his principal all moneys collected for him after deducting disbursements made on the principal's behalf, I agree that the agent could only bring into account actual disbursements made by him in the course of the month.