House, and allowing the states to adjust their incomes and expenditures to the revenue thus provided. The question of taking over the whole or part of the state debts by the Commonwealth has been much discussed from time to time, and is a matter of considerable importance. The debts of the states consist of their obligations in regard to debentures, inscribed stock, and treasury bills, as well as the debits on a loan or consolidated revenue account. Confining attention solely to the part of the obligations of the states for which debentures, stock, or treasury bills have been issued, the following is a statement of the gross amount of the public debt of each state, the interest charge thereon, and the balance of Commonwealth revenue which the Treasurer estimates he will return to the states during the year 1905. It will be seen that in the cases of Victoria and Western Australia alone are the returns sufficient to cover the interest payments. In regard to New South Wales the excess of state charges over the balance of revenue returnable to the state amounts to £260,230. In Queensland the excess is £807,978, in South Australia £518,906, and in Tasmania £80,813. The foregoing figures give the total debts of the states represented by debentures, stock or treasury bills as on the 1st July, 1904, but the question arises as to the limitation placed upon the Commonwealth by Section 105 of the Constitution. This section reads as follows: "The Parliament may take over from the states their public debts as existing at the establishment of the Commonwealth, or a proportion thereof, according to the respective numbers of their people as shown by the latest statistics of the Commonwealth, and may convert, renew, or consolidate such debts, or any part thereof; and the states shall indemnify the Commonwealth in respect of the debts taken over, and thereafter the interest payable in respect of the debts shall be deducted and retained from the portions of the surplus revenue of the Commonwealth payable to the several states, or if such surplus is insufficient, or if there is no surplus, then the deficiency or the whole amount shall be paid by the several states. If it be accepted that this section limits the transfer of such debts only as existed on the 1st January, 1901, the following is a statement of the amounts of the outstanding loans, debentures, stock, and treasury bills, with the annual interest payable in respect thereof : The question is, however, complicated by the fact that since the establishment of the Commonwealth, all the states except Queensland have paid off loans then existing, and the point way arise as to whether the amount of the debts which the Commonwealth may take over is not thus further limited. The following is a statement of the loans redeemed from the 1st January, 1901, to the 1st July, 1904, together with the interest payable in respect thereof : Few of the redemptions indicated above were absolute, that is to say, effected out of revenue or from sinking funds. For the most part, the loans redeemed were repaid from the proceeds of new loans, and the total amount of the debt was not appreciably reduced; nevertheless, technically speaking, certain debts existing on the 1st January, 1901 no longer exist, their place being taken by new loans to the extent just indicated. If it be accepted that the Parliament of the Commonwealth can take over only the debts of the states existing at the establishment of the Commonwealth and now extant, the following is a statement of the public debts of the states under this category together with the interest payable thereon : During the next five years loans to the extent of £18,179,645 will fall due, and in the ensuing 5 years £24,879,364 and so on in large amounts within no very distant period. An early settlement of the question of transfer of debts is therefore, not only of great, but of pressing importance. THE STATE FINANCE. HE functions of government are much alike throughout Australasia, and it is only to be expected, therefore, that similar items of expenditure should be found in the budgets of the various states. The chief point of difference is the extent to which local requirements are provided for out of general revenue. In most of the states provision for local improvements is a matter of which the state has long since divested itself; but in New South Wales and Western Australia the central government still charges itself with the construction of works of a purely local character, especially in the rural districts; hence the appearance, in the statements of public expenditure of those states, of items of large amount which find no parallel in the other states. Also, when comparison is made with outside countries, other points of difference are found. In Australasia, as in other young communities, it has been necessary for the state to initiate works and services which in older countries have come within the province of the local authorities or have been left to be undertaken by private enterprise. Even at the present day it is deemed advisable that the Government should retain the control of services, such as the railways, which in the United Kingdom and some other countries are not regarded as forming part of the functions of the state, and it is on account of the administration of these services that the budgets of the Australasian states reach such comparatively high figures. The revenues of the Australasian states have been subject to considerable fluctuations, due not so much to changes in the incidence of the revenue, as to variation in the amount of the imports, for it was upon taxation of imports that the states have most largely depended for revenue. The years of highest revenue ought, under normal conditions, to be coincident with the years of greatest prosperity; but some of the states have been able to efface the effect of unfavourable seasons by lavish borrowing, and the inflow of loans, as represented by taxable goods, has, at times, more than counterbalanced the shrinkage in the imports, due to failure in the wool or wheat crops, for which these imports are payment. This effect of the borrowing policy of the various states upon their revenue was not so great in the last decade as in the previous one, but that it was considerable may be gathered from the fact that in the ten years 1895-1904 the various state Governments contrived to borrow and spend over £52,000,000, obtained in London. The unsteadiness of the railway revenue, due to variations in the seasons, is another cause of disturbance to Australian finance, and one which will not be obviated until the resources of the states are so developed that wool and wheat will no longer play the important part they do at present in the railway trade of the country. In 1895 large reductions were made in the New South Wales tariff; these account for a reduction in the revenue of the state during that and the three following years, while to other influences must be added the financial crisis of 1893, which had a numbing effect upon trade throughout the states comprised in the Commonwealth. It will be observed from the table that Western Australia and New Zealand are in a different position to the more important mainland states. The financial position of Western Australia is exceptional, being due to the opening up of the goldfields, and the influx of a large amount of capital, and, as the tariff was of a wide range, the importation necessarily involved a large customs revenue, while the trade expansion increased the earnings of the railways. The configuration of the colony of New Zealand renders it to a very great extent immune from the droughts that so much affect the mainland of Australia, and the financial crisis of 1893 had only a comparatively slight influence on its trade; the progress of trade in that colony was, therefore, fairly regular during the years when the finances of the mainland states were most disturbed. The establishment of the Commonwealth on the 1st January, 1901, necessitated the transfer of the Customs Department to the Federal Government; and, by proclamation, the Postal, Telegraph, and Defence Departments were taken over on the 1st March of the same year. The receipts of the six states are inclusive of the surplus returned by the Commonwealth, but the expenditure excludes all Federal transactions. The finances of the Commonwealth are dealt with on page 635. The revenue for each state during the past ten years is shown in the following table. For New South Wales and New Zealand the figures shown for the year 1895, are those for the twelve months ended on the 31st December of the previous year; while for the remainder of the period the fiscal year ended on the 30th June in the former state, and on the 31st March in New Zealand. The amounts given for Tasmania are for the year ended 31st December prior to the years shown, while for the remaining states the financial year ends on the 30th June : New Year. South Victoria. Wales. : South Australia, Western QueensTas- Common- New Australincluding land. Australia. mania. wealth. Zealand. asia. Northern £ £ £ £ £ £ £ £ £ 1895 9,350,051 6,712,152 3,413,172 2,497,648 1,125,941 696,795 | 23,795,759 4,447,899 28,243,658 1896 9,091,368 6,458,682 3,641,553 2,585,230 1,858,695 761,071 24,397,529 4,556,015 28,953,544 1897 9,109,253 6,630,217 3,613,150 2,698,759 2,842,751 797,976 25,692,106 4,798,708 30,490,814 1898 9,304,884 6,898,240 3,768,152 2,633,727 2,754,747 845,019 26,204,769 5,079,230 31,283,999 1899 9,573,415 7,378,842 4,174,086 2,731,208 2,478,811 908,223 27,244,585 5,258,228 32,502,813 1900 9,973,736 7,450,676 4,588,207 2,853,329 2,875,396 943,970 28,685,314 5,699,618 34,384,932 1901 10,612,422 7,722,397 4,096,290 2,886,854 2,964,121 1,054,980 29,337,064 5,906,916 35,243,980 1902 11,007,356 7,006,378 3,535,062 2,477,432 3,349,450 826,163 28,201,841 6,152,839 34,354,680 1903 11,296,069 6,968,051 3,526,465 2,531,543 3,630,238 734,663 28,687,029 6,447,435 35, 134,464 1904 |11,248,325 7.313,591 3,595,440 2,568,101 3,550,016 857,668 29,133,144 7,130,116 36,263, 260 |