Page did not give up, however. At the 1926 Premiers’ Conference he suggested abolishing the 25-shilling payments in favour of giving the states the right to levy land, entertainment and estate levies. But this too was rejected by the states. Having again failed to win consensus, Page decided to utilise the degree of toughness in negotiations that had seen him remove Hughes as prime minister: he unilaterally legislated for the removal of the 25-shilling payments in the federal parliament. This tough action forced the states back to the negotiating table. This time, it was agreed that the Commonwealth would provide the states with straight cash grants for ten years.
This was a step forward, but it was hardly revolutionary. Each of the treasurers who have had to grapple with the problems of fiscal vertical imbalance would find it very difficult to agree with Ulrich Ellis, historian of the Country Party, who argues that Page’s 1927 financial agreement ‘resulted in the solution of the problems which had baffled statesmen since the dawn of the federation movement’.16 A more lasting achievement was Page’s reformation of the borrowing arrangements between the state and federal governments. The Loan Council that Page introduced still remains in place to govern the borrowing requirements of the two levels of government.
Page was concerned that NSW and Victoria so dominated the British and American loans markets, as far as the Australian states were concerned, that it was difficult for the smaller states to avail themselves of international finance. At the same Premiers’ Conference that rejected his attempt to improve the distribution of taxation powers, Page also suggested the formation of a Loan Council to better coordinate the borrowing activities of the governments. By 1925 it had been agreed that there should be one borrowing authority for all Australian governments, and there should be no competition between governments for scarce funds on the international markets. Two years later, Page submitted a draft financial agreement to the states that included a proposal to transform the existing voluntary and informal Loan Council into a statutory body, with the power to regulate all Commonwealth and state borrowing. This was agreed and the legislation was passed.
The establishment of the Loan Council not only brought a more coherent approach to public-sector borrowing in Australia; it also significantly increased the power of the Commonwealth Government in terms of economic management, and increased the status and power of the Treasury within the Commonwealth apparatus. Each state and territory had one vote on the Loan Council, while the Commonwealth had two votes plus a casting vote in the event of a deadlock. This gave the Commonwealth a considerable advantage in any disputes. Leading economic historian Greg Whitwell argues that the ‘Loan Council was significant, first in that it was a symbol of the growing financial domination of the federal government over the states and second, in that gave rise to a measure of centralised decision making in economic policy, something previously lacking.’17 Whitwell also states that the increase in the power of the Treasury in the 1930s was mainly due to its function as a secretariat to the Loan Council, an argument that is convincing.
The establishment of the Loan Council was certainly unique. Australia is alone among the world’s great federations—the United States, Germany, Canada and India—in having such a central mechanism to coordinate borrowings. Semi-government and local government authorities were brought under the council’s remit in 1936. In 1995 the council’s right of veto over the borrowings of any jurisdiction was replaced with measures to emphasise transparency and public scrutiny.
The Tariff Dilemma
Tariff policy was one of the most divisive issues in federal politics at the start of the twentieth century, as underlined by the splitting of Australia’s conservative forces into the Protectionist Party and the Free Trade Party—they only combined again to form a single party when it was recognised that a greater degree of unity was required to defeat the emerging Labor Party. In any case, while the Nationalist Party became firmly protectionist, the Country Party under Page’s leadership took a sensible free-trade approach, quite different from the stance the party would adopt under future leaders.
There was a test of Page’s commitment to free trade before he assumed the Treasury portfolio. In 1920, after an exhaustive process of inquiry, Hughes’ minister for trade and customs, Sir Walter Massy-Greene, proposed a major rewriting of the tariff schedule that involved both increases and reductions in tariffs. The postwar pressure on the Budget meant that the government was attracted to tariff increases not only for protection purposes but also as a revenue raiser. Page and his party, however, strongly opposed the tariff increases. Page well understood the economic costs of tariffs, recounting his views thus:
The policy of both the Nationalist and Labor Parties to establish secondary industries by imposing heavy barriers against competitive imports, without considering the costs on export industries, protected industrial workers but exposed workers in primary industry to unfair competition on uncontrolled economic circumstances abroad. In addition, primary producers were obliged to buy implements of production in the high-priced local market and to sell their products on the low-priced markets abroad.18
The Country Party made ‘sorties against item after item of the Massy-Greene tariff’,19 but it could do little in the face of the combined opposition of the Nationalist and Labor parties. This gave rise to Page’s phrase ‘protection all round’, given the Country Party view that if it could not be successful in reducing tariffs, it would need to pursue policies like bounties and subsidies for agricultural producers to alleviate the adverse impacts of tariffs.
Less rational was Page’s approach to the so-called ‘orderly marketing’ of rural products, which saw the establishment of a complex network of non-market mechanisms that would force rural producers to sell their products to a
