from the State who which they were imported before the uniform tariff, and in which

arrival in the port of discharge. This view was sustained by the Privy Council on Dummon on her way to her ultimate destination; that "imported" meant at least

$391. "On Thence Passing into Another State."

Briefly, all revenue was to be credited to the State in which it was collected, and all expenditure was to be debited per capita; but only until the Parliament should make different provision. From the date of the imposition of the federal tariff, the Parliament was to have an absolutely free hand. (Conv. Deb., 1891, pp. 802-833.)

Adelaide Session, 1897 (Debates, pp, 877-908, 1067-70).-The system of distribution recommended by the Finance Committee, and embodied in the first draft, provided for three periods (1) Before the uniform tariff, the provision was the same as in 1891. (2) For five years after the uniform tariff, the same basis was to be retained, subject to the book-keeping adjustments necessitated by intercolonial free-trade. (3) After five years, revenue was to be credited and expenditure debited on a per capita basis. (See pp. 169-170, supra.)

These provisions were debated (pp. 877-908) on the consideration of the clause dealing with distribution before the uniform tariff. Mr. McMillan pointed out that the difficulty of distribution arose from the fact that the federal tariff and its operation were unknown quantities. The problem was to secure fair distribution without unnecessary taxation in any colony, and yet without leaving an undue shortage of revenue in any colony. There were two aspects of the problem: the question of guarantees (see Historical Note, sec. 87) and the question of distribution. As to the latter, the per capita system would be unfair to New South Wales for some years Mr. Reid had wished to postpone it for ten years, but the Finance Committee had compromised with five. The "detestable book-keeping system" on the borders was an unwelcome necessity, to be abolished as soon as possible. Mr. Holder, Sir George Turner, and Mr. Reid all agreed that if the book-keeping could be done away with it would be a great blessing; and eventually the clause was postponed to enable the Treasurers to consult on the subject. Subsequently (Debates, pp. 1067-70) the Treasurers brought up the sliding-scale system, which only involved book-keeping for one year, and a subsequent scaling down, by equal gradations, from the contribution basis of the test year to a per capita basis at the end of five years. The sliding scale, on the recommendation of the Treasurers, was adopted with hardly any debate, though Mr. McMillan feared that, owing to probable "loading up" of dutiable goods, the test year would be a bad one for New South Wales. (See pp. 176-8, supra).

Sydney Convention, 1898 (Debates, pp. 35-222).—The sliding scale was unfavourably criticized in New South Wales, as well as in all the other colonies except South Australia, where it was lucidly explained and strongly championed by Mr. Holder. In the general debate at the Sydney Convention it did not receive much support, and a new Finance Committee was appointed, to which the whole question was referred. (See p. 188, supra.)

Melbourne Convention, 1898 (Debates, pp. 775 et seqq., 1041-84).-In accordance with the report of the Finance Committee, the sliding scale and the ultimate per capita distribution were struck out, and the book-keeping system was restored for five years and "thereafter until the Parliament otherwise provides" (see p. 197, supra.)

The basis of charging expenditure was also altered (see Historical Note, sec. 89). There was little debate upon the mode of distribution--the discussion turning chiefly on the question of guarantees. Drafting amendments were made before the first Report and after the fourth Report.

Thereafter until the Parliament Otherwise Provides."

This section provides for the distribution of the surplus revenue during the second of the three periods marked out by the Constitution (see secs. 89, 94). The characteristic of this period is that there is now a uniform tariff for the whole Commonwealth, and absolute freedom of trade between the States (with the temporary revenue. protecting exception in the second paragraph of sec. 92). Secs. 90 and 92, whose

operation has been suspen-led “until the in position of unform duties of customs," are now in operation, and the commercial unity of Australia is an accomplished fact.

This is the period during which the financial provisions of the Constitution will be put to their first and severest text. So long as each State retained its own tariff, the disturbance of pre-existing conditions was slight; the basis of revenue and expenditure in each State was very much as it had been during the old provincial regime, except for the inconsiderable item of new federal expenditure, borne in proportion to population. But now the provincial tariffs have disappeared; customs taxation throughout the Commonwealth is on a uniform basis; and each State must accordingly regulate its budget, both as regards local expenditure and local taxation, to the new circumstances. The difficulty of establishing a common tariff has been the lion in the path" for many years, and its final establishment must inevitably be followed by extensive financial rearrangements.

This period has a minimum duration of five years; and at the expiration of those five years it will still continue until the Parliament, under sec. 94, has substituted some other basis of distribution. The expiration of the five years does not annul this section, but merely annuls'its sanctity as a constitutional provision, and makes it alterable by the Parliament, subject of course to the provisions of sec. 94.

Any disagreement between the Houses on the question of the new basis will not leave the Commonwealth without a financial system, but will merely prolong the operation of this section.

$393. "For Consumption."

'Consumption" is a term of Economics, applied to denote the absorption, by use. of all kinds of wealth. It is the converse of production; production having reference to the creation of wealth, and consumption to its utilization. "As production is the first stage in economics, consumption is the last. Consumption is the chief end of industry, for everything that is produced and exchanged is intended in some way to be consumed." (Chambers' Encycl. sub tit. "Consumption."

The process of consumption, in the case of many articles, may be a very prolonged one. The consumption of food or fuel is immediate; but the consumption of a waggon, or a steam-engine, or a work of art, or a jewel, many extend over many years, or indefinitely. The expression "passing into another State for consumption" is not intended to imply that complete consumption within the State should be contemplated, but merely that distribution to consumers within the State is contemplated. Goods are "for consumption" in a State if it is intended that they shall be retailed in that State.

§ 394.

"Shall be Taken to have been Collected."

Notwithstanding the great difference between this and the preceding period as regards the mode of raising revenue, the alteration in the mode of distributing the surplus is very slight. The object is still the same-to give to each State credit for the revenue which it has contributed, and to charge each State with its fair share of the federal expenditure. Accordingly the provisions for debiting expenditure remain as before (see sec. 89, supra); but with regard to crediting revenue one further adjustment is needed. With free trade between the States, the State in which imports pay customs duty, or products pay excise duty, is not necessarily the State in which the goods are retailed or consumed; and, on the assumption that these duties are paid by the consumer—or at least by the people of the State in which the goods are retailed-it is necessary to make an adjustment in respect of goods which have paid duty in one State, but which afterwards pass into another State for consumption.

To obtain the necessary facts upon which to base this adjustment, it will be necessary, during the whole of this period, to keep an account of the passing from one State

to another of all goods on which customs or excise duty has been paid. That this can be done with absolute completeness and accuracy is not to be expected; but small omissions will not seriously interfere with the efficiency of the provision—especially as they are likely to occur on both sides of the ledger, and so cancel one another. There will be no motive on the part of traders to evade observation, because no duty is chargeable to them; it is merely a matter of book-keeping entries for and against the several States.

$395. "Subject to the last Sub-section," &c.

The adjustment mentioned in sub-s. i. is the only difference, as regards the mode of distribution, between this and the preceding period. It is obvious, however, that owing to the great difference in the incidence of customs taxation-and, in a less degree, of excise taxation-the amounts and proportions actually distributed to the several States will probably differ very considerably from those of the years immediately preceding. It is for the purpose of meeting any temporary dislocation of State finances which may thus be caused that sec. 96 has been added. (See Notes to that section.)

Distribution of surplus.

94. After five years from the imposition of uniform duties of customis96, the Parliament may provide397, on such basis as it deems fair, for the monthly payment to the several States of all surplus revenue of the Commonwealth 399.

HISTORICAL NOTE.-Under the Bill of 1891 a similar provision took effect immediately after the imposition of uniform duties (see Historical Note, sec. 93).

Adelaide Session, 1897 (Debates, p. 1070).-The clause as drafted in Adelaide provided that after the five years "all surplus revenue over the expenditure of the Commonwealth shall be distributed month by month among the several States in proportion to the numbers of their people as shown by the latest statistics of the Commonwealth." In Committee, Mr. Reid secured the insertion of the explanatory words Each State shall be deemed to contribute to the revenue an equal sum per head of the population."

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Melbourne Session, 1898 (Debates, pp. 775, &c., 1085-99, 2380-1). The provision for ultimate distribution, as embodied in the Finance Committee's Report, was on such basis as shall be fair to the several States, and in a proportion and after a method to be determined by the Parliament." To make it clear that the Parliament alone was to be the judge of what was fair, these words were altered to "on the basis which the Parliament deems fair." Sir George Turner still wished to keep to the per capita basis; and Mr. Glynn wished the discretion of the Parliament to be limited to postponing the per capita basis for, at most, another five years. However, the Finance Committee's proposal was carried by 25 to 17-the New South Wales representatives who were present voting solid for it, and the Victorians solid against it. Mr. Glynn then moved to add a further provision that after ten years the distribution should be per capita. The debate showed a general desire for ultimate per capita distribution-with the single exception of Sir John Forrest, who saw no prospect of its being fair to Western Australia. But Mr. Holder, Mr. Reid, and others wished it left open, being confident that the per capita system would be adopted as early as possible, but unwilling to tie the hands of the Parliament. The amendment was lost by 31 to 16-New South Wales and Victoria again voting solid with the majority and the minority respectively.

On the second recommittal Mr. Glynn again moved an amendment with the same object; but it was defeated by 23 to 14. Drafting amendments were made before the first Report, and after the fouth Report.

$396.

"After Five Years from the Imposition of Uniform Duties of Customs."

This section provides for the termination of the second period marked out by the Constitution for the distribution of revenue according to principles fixed by the Constitution, and inaugurates the third and last period, from the commencement of which the monthly distribution will be left to the Parliament to determine on such basis as it deems fair. From the moment when this section comes into operation-that is to say, at the expiration of the five years mentioned-the Parliament will have a new power of legislation—the power to supersede sec. 93 by legislation of its own under this section.

§ 397.

"The Parliament may Provide."

The Parliament, being a body with purely legislative powers, can only "provide by means of a law. (See sec. 51-xxxvi.) The power to make this law does not attach until the expiration of the five years mentioned. The section clearly requires, not only that the provision by the Parliament shall not take effect until after that time, but that it shall not be made until after that time. It seems therefore that the Parliament cannot, before the expiration of the five years, pass a law under this section to take effect on or after such expiration.

This disability is intentional. The object of postponing the legislative power of the, Parliament until the expiration of five years is that the Parliament should not be empowered to take any action until it has sufficient data and material before it to enable it to fix the basis of distribution. (See Conv. Deb., Melb., pp. 1085-9) The object of the Convention was that the basis prescribed in sec. 93 should remain in force until the Federal Parliament, with five years' experience behind it, should agree upon a better basis. The Convention recognized themselves unable, owing to the absence of data, to determine the ultimate basis, and were careful to ensure that the basis which was to supersede their provisional basis should not be determined upon until the data of five years' experience were available.

Any provision which Parliament may make under this section will not be unalterable, and therefore will not necessarily be final. The legislative power under which any such law is made will continue in existence after the law is made, and will justify different provision being made from time to time as circumstances may demand. It would undoubtedly be undesirable for the financial basis of the Constitution to be frequently altered; but it might be still more undesirable for a financial basis which had been ill-conceived, or had outlived its usefulness, to be made unalterable, except by an amendment of the Constitution.

§ 398. "On such Basis as it Deems Fair."

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The words as originally proposed by the Finance Committee were on such basis as shall be fair ;" but these words were altered to prevent any possibility of its being contended that any assumed unfairness might be made the subject of an appeal to the High Court, thereby making that tribunal the arbiter of a purely political matter. (See Conv. Deb., Melb., pp. 1085-9.) The Parliament is therefore laid under a solemn constitutional obligation to provide a "fair" basis, but it is made the sole judge of what is fair. The command is addressed to the conscience of the Parliament and of the people; and such a command, embodied in the Constitution, is not likely to be disregarded.

But leaving intentional unfairness out of the question, the question what is fair may lead to considerable differences of opinion. It is submitted that the constitutional command that the basis shall be fair" will strengthen the claims of a basis founded on a broad principle. The only basis which the Convention-from the standpoint of existing provincial conditions-could agree upon as "fair" was the basis of the contributions