HEADS OF. GOVERNMENT. MEETING
CANBERRA, 11 OCTOBER 1973
OPENING STATEMENT BY THE PRIME MINISTER
Welcoming remarks.
The purpose of this meeting is to discuss, and I
hope agree on, proposals of the Australian Government which
are directed towards our objective of assisting and
strengthening local government and making it a fuller and
more effective partner in our Federal system.
There can be no doubt of the firmness of my
Government' s commitment to that objective. It is encompassed
in our Platform; it was explicit in my Policy Speech before
the last election;. most recently I re-affirmed it in my
speeches to the Constitutional Convention0 Indeed, our
meeting here today. had its direct impetus from the discussions
we had at the Convention0
Repeatedly, I have emphasised that one of the
essential requirements for full achievement of our objective
is a re-casting of the arrangements embodied in the present
Financial Agreement. These are arrangements which were based
on the situation of the 1920s, when the relative roles and
responsibilities of the Australian Government, the State
Governments and local government were vastly different from
what they now are0 They ar e not good enough0 They have not
been adequate for some time. They are certainly not adequate
for the future. We do not seek change for change's sake nor, as
some would say,, to centralise power in Canberra0 The planning
and provision-of public services and facilities to meet the
expanding needs of the whole community is becoming an
increasingly complex task. It is one which cannot be
accomplished satisfactorily if we cling to old concepts, old
demarcation lines of interest and responsibility drawn up in
the distant past. Of course, when the Financial Agreement was
drawn up local government authority borrowing was relatively
insignificant. Things are very different now. The situation
now is that local government authorities have been borrowing
more each year than the total amount of their outstanding debt
only twenty years or so ago. It can be fairly said that if
the Financial Agreement were being drawn up now it would be
unthinkable that local government would be. entirely excluded
from it. Over at least the last two. decades there have
been serious deficiencies developing in the provision of many
of the public services and facilities which it has fallen to
the State-local government sector to provide. Partly this
has been a product of insufficiency of resources; but it has
also reflected processes of planning and of determination of
priorities which have been inadequate or too narrowly based.
My Government has set itself the task of helping
to remedy, in co-operation with the States and their
authorities, the deficiencies which now exist. We have made
a strong beginning witness the new or enlarged allocations
in our budget for 1973-74 for such purposes as education,
community . health, public . housing, sewerage services, land
management, urban--transport and . growth centres. . Total
allocations . to the.. States in 1973-74, including the State
Governments' Loan Council programs but excluding
unemployment relief grants, are estimated to be no less than
24 per cent greater than the corresponding allocations in
1972-73. Local government is an area of special importance
which has suffered imbalances between responsibilities and
resources. The importance of local government derives from
the very fact that it is local that the services and
facilities which it provides have such a close and direct
impact on the welfare of the population it services. It is
our aim, in part, to make available to local government
resources more adequate for its functions. But our aim is
larger than that. If local government is to play the fuller
and more effective . part that I believe the community wishes
it to play, then we must also increase the effective influence
local government exercises in relation to the fundamental
decision-making affecting its activities, It will represent
a most significant step towards real Federalism, real local
participation in public affairs and, indeed, real
decentralisation of government when this is achieved.
We have already taken several very important
steps in that direction, We secured the representation of
local government at the Constitutional Convention, In its
Autumn Sittings the Australian Parliament passed a new Grants
Commission Act authorising that body to inquire into
applications for assistance by regional organisations of
local government, Any assistance recommended by the
Commission and approved by the Australian Government will be
paid to the States under section 96 of the Constitution on
condition that it be passed on to the local government
organisations concerned. Additional members have been
appointed to the Commission and its staff is being expanded
to enable it to deal with this large new responsibility. It
is hoped that applications by regional organisations will
begin to be received and considered early next year.
Additionally, under the Australian Assistance Plan there will
be available to local government authorities special
assistance to enable them more effectively to provide welfare
and health services to their communities.
The proposals I am now putting to you and for
which I now seek your unanimous support represent a further
long step towards the same objective0 They are proposals of
which I have spoken many times before, including at the
recent Constitutional Convention, so I expect that you have
already thought about them a good deal yourselves. They
are:-that elected local government have both a voice
and a vote in the Loan Council0 It is of the
utmost importance, I believe, that the voice of
local government the voice of those people
with the closest knowledge of community needs
at the local and regional level be heard in
this decision-making forum; and
that the Australian Government be empowered to
borrow on behalf of elected local government.
There are, broadly, three bases on which the
first of these proposals might be sought.
One would be to admit representatives of local
government to the Loan-Council on the same basis as the
present members, with full representation and voting rights
covering all matters dealt with by the Loan Council. While
I see considerable merit in this, I recognise that, in terms
of the present nature and range of Loan Council interests and
functions, it would raise some difficulties.
The other two bases would impose some limitations
on the role allotted to the local government representatives
in the Loan Council. We could, for example, limit local
government participation in both discussion and voting to
those matters directly affecting local government. Again,
I see difficulties in this approach, since the borrowing
programs of both the State governments and their local
and semi-government authorities are, I gather, generally
discussed in the same context at Loan Council meetings.
There would be a. constant problem as to the precise point
at which local government representatives would be admitted
to the discussions in the Loan Council. I have not the least
doubt that, experienced in and aware of the Loan Council
procedures as you are, it is unnecessary for me to enlarge
on this problem. For my own part, I see such arrangements as
providing much too limited a role for local government for
it to meet my Government's objectives.
The intermediate approach is therefore the one
I wish to propose to you. This would admit representatives
of elected local government to all Loan Council discussions,
with a right to vote on those matters directly affecting
local government essentially, the borrowing programs for
the bodies they represent and the allocations of these
programs.
6.
Before I throw this proposal open for discussion
there are some points of principle and procedure that I
should canvass. First, there is the legal . framework within which
such a situation could be achieved. As I see it, the
Financial Agreement could be amended to accommodate and
provide a firm and proper basis for the new arrangements. I
am advised that the necessary amendments to the Financial
Agreement could be made, by agreement between the Australian
and State Governments, without taking it outside the scope
of section 105A of the Constitution as it stands. It would,
of course, be accepted that, in accordance with practice, any
such amendments should be validated by Acts of the Australian
and State Parliaments. Borrowings by local government bodies are at
present governed by the Gentlemen's Agreement, which also
covers borrowings by statutory authorities of the Australian
and State Governments. I should make it clear that my
proposal concerning representation in the Loan Council is
limited to elected local government bodies, I appreciate
that some of the largest borrowers,. individually, under the
Gentlemen's Agreement are statutory authorities mainly
public utilities of one kind or another, These bodies I see
as having adequate representation in the Loan Council through
the Premiers, They are essentially arms of the Governments
concerned. Indeed, there is in many cases only a fine
dividing line between the types of function they perform and
those of some State departments, and the respective functions
of the two vary from State to State,
7.
It is clear that the proposed new arrangements
would require that provisions which are now part of the
Gentlemen's Agreement be re-cast, as would the nature of the
" programs" to be considered by the Loan Council. I envisage
that, in place of the existing division of the programs into
" larger" and " smaller" authorities, what would now be
required would be separate borrowing programs for local
government bodies and for the State Government
instrumentalities . I have no firm view on whether there
would still need to be a borrowing limit corresponding to
the existing amount of $ 400,000 below which there would be
no program ceiling imposed by the Loan Council. I am
inclined to think that there should be such a limit if we
are to avoid loss of the flexibility that now exists for
borrowings by smaller bodies. However, I see that as a
procedural matter to be resolved if agreement is reached on
the principle of local government representation.
The other proposal that I have said I want to
place before you is that arrangements be agreed upon for the
Australian Government to borrow on behalf of local government.
The Financial Agreement as it stands does not provide for
this. Let me provide some background. At June 1947
( satisfactory figures for earlier years are not available)
local government authorities total outstanding debt was about
$ 140 million about 7 per cent of total State Government
debt; at June 1971 the preliminary figure, provided by the
Statistician, was $ 1,730 million almost 15 per cent of
estimated total State Government debt at the time. In
8.
twenty-four years local government authorities debt increased
more than twelvefold compared with an increase of not quite
sixfold in State Governments' total outstanding debt. Yet
after the period of extraordinary growth in the magnitude and
cost of local government activities, their place and role
in the forum determining the nation's broad public
borrowing programs was as it had. been at the beginning
in a word, nil. Does it not. strike you as odd that, while we
have established arrangements for borrowings by State
Governments to be undertaken on their behalf by the
Australian Government, local. government authorities are
largely left to fend for themselves in the capital markets?
Especially with the growing complexity and sophistication
of these markets, they are handicapped as borrowers.
I see this as being not only odd, but also as
quite unsatisfactory. Given the nature and range of public
servicesand facilities that local government authorities are
called upon to provide, why should they not also have the
opportunity to have the Australian. Government, with its
superior capacity as a borrower, undertake borrowings on
their behalf? I repeat here what I said earlier; that if
the Financial Agreement were being drawn up now it would be
unthinkable that these authorities could be ignored.
The costs of servicing their borrowings bear
heavily and increasingly so on the budgets on local
government authorities. While the picture differs from
State to State, and as between individual authorities,
9.
overall interest payments by local government authorities
would now be equivalent to about 12 per cent of their
revenues. Interest payments plus capital repayments amounted
to some $ 177.5 million in 1970-71 and were equivalent to
about 25 per cent of revenues.
If the Australian Government were to be able to
borrow on behalf of local government authorities, the costs
of servicing the resultant debt would of course be
significantly lower than if those authorities borrowed the
funds directly themselves. And this would mean lesser costs
of services and lesser burdens on the local ratepayers.
It would be possible, of course, for the
Australian Government to borrow moneys and pass them on,
under section 96 of the Constitution, to State Governments
on condition that they be made available to local government
authorities. This procedure is not what I have in mind when
I speak of Australian Government borrowings on behalf of
local government. Premiers will appreciate the difference
between borrowings made by the Australian Government on behalf
of their States and borrowings made wholly on the Australian
Government's account which might be used to finance payments
to the States under section 96.
What I am seeking is your agreement to amend
the Financial Agreement to enable the Australian Government
to borrow for and on behalf of elected local government
bodies, just as it borrows for and on behalf of the State
Governments, and to provide the funds direct to those bodies.
The amendment would also make provision for consequential
arrangements for the servicing of such debt.
I am not proposing that local government should
be required to havp borrowings for their purposes undertaken
on their behalf by the Australian Government regardless of
their wishes in the matter. It would be for each authority
to choose whether to take advantage of the new facility or
to rely on its own abilities as a borrower.
I am well aware that there would be a number of
legal and practical arrangements to be settled before the
proposal could be implemented. However, I am again advised
that the necessary amendments could be made to the Financial
Agreement to enable this to be done without taking it outside
section 105A of the Constitution as it stands.
In brief, those are the proposals I put to you
for your consideration and, I trust, agreement. It will be
clear from what I have said that I am seeking the cooperation
of the States in arrangements to provide local
government with a role and the resources adequate to its
responsibilities. With your assistance and co-operation
I believe, as I have already indicated, that this can be done
within the existing constitutional framework.
I urge your agreement to these proposals; that
way we can proceed quickly and with the least fuss and bother
to the urgent task of putting local government on a
satisfactory and viable basis0 I do not think there can be
any argument that such assistance is necessary indeed, it
is being demanded by the community. If, together, we cannot
agree on such arrangements, however, I do not see any adequate
alternative open to my Government but to seek to have the
Constitution amended for the purpose. However, as I say, I
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do not see that course as necessary if we can agree to adopt
the arrangements I have outlined. Indeed, I have not discussed
the alternative course in any depth here because I think each
of you will be as anxious as I to see your own local government
authorities playing their part in public affairs more
effectively. It must be made quite clear, however, that if I
am mistaken in that belief then my Government will adopt
the alternative course. I also . make it clear that I expect
that at this meeting here today we will decide between the
alternatives of co-operative action or constitutional
amendment. I am not, of course, seeking a solution to all
the practical and procedural problems today. Neither am I
suggesting that those problems should be cleared away before
the decisions in principle are reached. If we can reach
unanimous agreement on the broad proposals I have outlined,
we can then quickly proceed to establish machinery to put
them into effect. But I am seeking such agreement today for
the reason that, in its absence, I would wish to have before
the end of the current sittings of the Australian Parliament
the necessary legislation for a referendum on the amendment
of section 105A.