It will be seen that Western Australia was the only state that obtained a revenue from its services during 1903-4, after working expenses and interest on capital had been allowed for, a result brought about chiefly by the decrease in the revenue of most of the states, due to the after effects of the prolonged drought. The next table shows the adjusted expenditure:

The figures just given show that the actual cost of government is materially less in the states than would appear from the returns of ordinary revenue and expenditure.

POSITION OF REVENUE ACCOUNTS.

The following table has been compiled with the view of showing the position of the Revenue Account of each state at the close of the last financial year. It will be seen that five of the states have large overdrafts, partly cash and partly in the form of Treasury bills, and that to establish the necessary equilibrium between income and outgo a restricted expenditure by future administrations will be absolutely necessary. For Tasmania the figures refer to the end of the year 1903; for New Zealand, to the 31st March, 1904; and for the other five states, to the 30th June, 1904. The figures given in the last column of the table represent the total debit balances at these dates. It is very necessary

that this fact should be borne in mind, as it often happens that the official returns of the states show only the cash overdraft, the amount represented by outstanding Treasury bills being omitted from considera

tion:

It will be seen that for the state of New South Wales the table shows an overdraft of £1,977,626 which has been liquidated by Treasury bills, and a cash overdraft on 30th June, 1904, of £524,064, inclusive of £484,356 brought forward from the previous year. In reference to the South Australian cash overdraft of £364,189, it should be pointed out only £32,230 represents the debit balance for South Australia proper, while the overdraft liquidated by Treasury bills belongs both to South Australia proper and the Northern Territory. During the year ended 30th June, 1903, the Government issued Treasury bills liquidating the cash overdraft on the 30th June, 1902, for the state proper.

The condition of the revenue accounts of New South Wales, Victoria, and New Zealand needs further explanation. In New South Wales land was resumed in 1889 for the purpose of facilitating certain improvements in connection with a street facing the General Post-office, Sydney, and it was determined that the sum paid for resumption should not be treated as a matter of ordinary expenditure, but be held in suspense pending the sale of the land resumed, or so much of it as was not needed for the formation of the Post-office street. Another resumption of land by the Government of New South Wales was authorised by the Centenary Celebration Act of 1887, which provided for the acquisition of a large area of land, close to Sydney, for the formation of a public park to

commemorate the centenary of the state. Of the area so acquired, 640 acres were to be set aside for the park, and the remainder was to be sold, and the proceeds placed against the expenditure. So far no sales have been effected, and in 1894 the payments on account of the formation of the park were transferred from the Consolidated Revenue Fund Account to a special Suspense Account. On the 30th June, 1901, the debit balance of the Centennial Park Account was £228,417, and of the General Post-office New Street Resumption Account, £376,762, neither of which amounts is included in the above table. Legislation has been passed, and Treasury bills have been issued covering the liability under the Suspense Accounts referred to, and the replacing of £150,000 to the credit of the sinking fund for Railway Loan, 53 Vic. No. 24, which was applied to the redemption of the balance of Railway Loan, 31 Vic. No. 11. The authority was for the issue of Treasury bills to the amount of £755,179, which will cover all deficiencies to 30th June, 1902, with the exception of the debit balance of the Consolidated Revenue Fund. Provision was made that on the 31st December, 1902, and on the same day in each year thereafter, until all the payments provided for have been made, the sum of £100,000 was to be paid from the Consolidated Revenue Fund to the credit of the respective accounts mentioned. Such annual sums are in the first place to be paid to the credit of a special Trust Account. In addition to the annual sum of £100,000, the net proceeds of the sales of the unsold portions of the land resumed under the General Post Office (Approaches Improvement) Act of 1889, and the net proceeds of the sale of the unsold portions of the land referred to in the Centenary Celebration Act of 1887 (Centennial Park), are to be paid to the credit of the account. The moneys at credit of such account are to be applied to the purpose of redeeming the bills issued under the Treasury Bills Deficiency Acts of 1901 and 1902, and when all such bills have been redeemed the account is to be closed. The appropriation of £100,000 is, however, to continue to redeem bills issued under the Deficiency Act of 1889, and on the redemption of these bills, the same annual appropriation is to be applied to redeem bills issued under the Deficiency Act of 1895. When this has been effected the appropriation is to lapse. The annual appropriation of £150,000 under the Deficiency Act of 1889 continues, so that the total annual appropriation for the liquidation of the unfunded debt for revenue purposes will be £250,000.

In Victoria certain public works to the amount of £678,624 were undertaken on the understanding that the cost should be defrayed from the proceeds of the sale of certain lands specifically set apart for the purpose. These works have been constructed, but the sales have fallen short to the extent of £297,183, and this sum has been placed to a Suspense Account, which is likewise excluded from the debit balance given above. In the credit balance of New Zealand, shown on page 697, allowance has been made for the transactions of several Suspense Accounts, viz., the State Forests Account, the Local Bodies Account,

the Deposits Account, and the State Coal Mines Account; but in order to place the revenue and expenditure of that colony on the same footing as those of the other provinces, the operations on the accounts referred to have not been taken into consideration in the table on page 661. The credit balance of the Consolidated Revenue Fund proper amounted to £649,741.

The practice of issuing Treasury bills for the purpose of liquidating an overdraft, which is illustrated by the above table, obtains in all the states. The bills have been sometimes compared to the exchequer bills issued by the British Treasury. There is, however, only a slight resemblance between the two. The British exchequer bills bear interest at a rate which is fixed from year to year, and at the end of every twelve months the holder has the option of retaining them or presenting them at the Treasury for payment. They are, therefore, readily saleable, and are used with great freedom in commercial transactions, for, as will be seen, they combine the two advantages of ready money and money bearing interest. The Treasury bills of these states, on the other hand, are only payable at the Treasury on the expiry of the period for which they are issued, and they carry interest at a fixed rate during the whole term of currency; consequently they are not used to any extent in commerce. The nearest approach to the British system is that prevailing in New Zealand, where Treasury bills to the amount of £700,000 are outstanding at the close of the financial year, but are redeemed early in the following year. With the exception of these New Zealand bills, Treasury bills are regarded as unfunded or floating debt, and until wiped off form part of the public debt.

TRUST FUNDS.

It may be pointed out here that all the Governments in Australasia hold sums in trust, either directly or indirectly. In some instances these sums are considerable, and are found extremely useful in adjusting the finances, forming a strong reserve which a Government is able to use in tiding over temporary difficulties. It is, however, very questionable whether the existence of a large balance, out of which a necessitous Treasurer can make advances to an overdrawn Revenue or Loans Account, is desirable. In past years it has led to much extravagance that a Treasurer forced to rely on the legitimate revenue of the country would have been compelled to avoid. Several states have seen this, and in Victoria, New Zealand, and South Australia, public trustees have been appointed to control Trust Funds in the hands of the Government; but in the other states these funds are directly subject to the Treasury. The following are the balances of the Trust Funds at the close of the financial year, exclusive of the Funds now dealt with by the Federal Government. The figures for New South Wales, Victoria, Queensland, South Australia, and Western Australia, are for the year ended 30th June, 1904; for

Tasmania, for the year ended 31st December, 1903; and for New Zealand, for the year ended 31st March, 1904 :

The New Zealand figures include £1,660,716 in the hands of the Public Trustees.

GROWTH OF PUBLIC DEBT.

The practice of raising money for state purposes by means of public loans was begun in 1842, when New South Wales issued debentures redeemable in two years and bearing interest at the rate of 8 per cent. per annum. The sum raised-£45,900-was devoted to immigration purposes. This, as well as the succeeding loans, nine in number, raised prior to 1855, was obtained locally; in the year named, however, New South Wales placed on the London market the first instalment of a 5 per cent. loan for £683,300, which was the first external loan raised, and may be rightly said to mark the commencement of the present Australasian indebtedness.

So far as most of the states are concerned, their public debts date from about the time of their assuming the control of their own affairs; but Western Australia, which obtained responsible Government in 1890, incurred liabilities in London as far back as 1872. In the case of that state, however, the granting of Parliamentary government was unduly delayed. The following table is interesting as showing the liabilities of each of the provinces at the date of its taking charge of its own affairs:—