The Constitution Alteration (State Debts) 1928,[1] was an amendment to the Australian Constitution approved by referendum on 17 November 1928. It concerned financial relations between the federal level of government and the Australian states. It became law on 13 February 1929.
Quick Facts Results, Choice ...
1928 Australian State Debts referendum|
|
|
|
Choice |
Votes |
% |
 Yes |
2,237,391 |
74.30% |
 No |
773,852 |
25.70% |
| Valid votes |
3,011,243 |
93.39% |
| Invalid or blank votes |
213,257 |
6.61% |
| Total votes |
3,224,500 |
100.00% |
| Registered voters/turnout |
3,444,766 |
93.61% |
|
Close
The purpose was to ensure the constitutionality of the Financial Agreement, which had been reached by the federal and all state governments in 1927. The agreement discontinued the per-capita payments system that had existed since 1910 and restricted the borrowing rights of the states by subjecting such borrowing to control by a Loan Council.
The referendum was held in conjunction with the 1928 federal election.
The financial relations between the Commonwealth of Australia and the states worsened during the 1920s. A financial settlement between the governments in 1910 had introduced "per capita grants", whereby each state received annual grants from the commonwealth of 25 shillings ($2.50) per head of its population. By the mid-1920s, inflation had made serious inroads into this sum but no new formula had been found.
The 1927 Financial Agreement, apart from establishing a new grants regime, provided for commonwealth assistance in state debt reduction and, most importantly, established the Loan Council. Henceforth all governmental borrowing, except for purposes of defence, was to be under Loan Council control. Due to doubts concerning the constitutionality of this new body, it was agreed that its legality would be put beyond doubt by the insertion of a new provision, Section 105A, into the Finance and Trade Chapter of the Constitution. The amendment was carried by a large majority of voters, and in all six states.
The Loan Council, described as "a unique institution among federations", attracted overseas attention from the moment of its birth:
if Australia has made a unique contribution to federal finance it lies in its harmonisation of public borrowing by an institutional device [i.e. the Loan Council] which offers a solution for a host of related federal problems-the co-ordination of public investment, economic planning, tax conflicts, and so on.
The Loan Council has had a dramatic impact on Commonwealth-State financial relations, particularly in helping the Commonwealth government oversee the national economy.
