The referendum of the 17 November 1928 approved an amendment to the Australian constitution

Constitution of Australia

The Constitution of Australia is the supreme law under which the Australian Commonwealth Government operates. It consists of several documents. The most important is the Constitution of the Commonwealth of Australia...

 concerning financial relations between the Commonwealth of Australia

Australia

Australia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans. It is the world's sixth-largest country by total area...

 and its states. Technically it was a vote on the Constitution Alteration (State Debts) Act 1928, which, after being approved in the referendum

Referendum

A referendum is a direct vote in which an entire electorate is asked to either accept or reject a particular proposal. This may result in the adoption of a new constitution, a constitutional amendment, a law, the recall of an elected official or simply a specific government policy. It is a form of...

, became law on the 13 February 1929.

The purpose of the amendment was to ensure the constitutionality of the Financial Agreement which had been reached by the federal and all state governments in 1927. This agreement discontinued the per-capita payments system which had previously existed since 1910, and restricted the borrowing rights of the states by subjecting such borrowing to control by a Loan Council.

Overview

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 to oversee the national economy.

Changes to the text of the constitution

Insertion of new 105A: The Commonwealth may make agreements with the States with respect to the public debts of the States, including-

1. the taking over of such debts by the Commonwealth;

2. the management of such debts;

3. the payment of interest and the provision and management of sinking funds in respect of such debts;

4. the consolidation, renewal, conversion and redemption of such debts;

5. the indemnification of the Commonwealth by the States in respect of debts taken over by the Commonwealth; and

6. the borrowing of money by the State or the Commonwealth, or by the Commonwealth for the States.

The Parliament may make laws for validating any such agreement made before the commencement of this section. The Parliament may make laws for the carrying out by the parties thereto of any such agreement. Any such agreement may be varied or rescinded by the parties thereto. Every such agreement and any such variation thereof shall be binding upon the Commonwealth and the States parties thereto notwithstanding anything contained in this Constitution or the Constitution of the several States or in any law of the Parliament of the Commonwealth or of any State. The powers conferred by this section shall not be construed as being limited in any way by the provisions of section one hundred and five of this Constitution.

Referendum results

Question: Do you approve of the proposed law for the alteration of the Constitution entitled 'Constitution Alteration (State Debts) 1928?

State	Electoral Roll	Ballots Issued	For		Against		Informal	Result
			Vote	%	Vote	%
New South Wales	1,335,660	1,244,918	754,446	60.60%	318,412	25.58%	74,626	Yes
Victoria	1,006,4639	953,477	791,425	83.00%	110,143	11.55%	51,909	Yes
Queensland	465,423	435,298	367,257	84.37%	47,250	10.85%	20,791	Yes
South Australia	319,584	301,179	164,628	54.66%	98,017	32.54%	38,534	Yes
Western Australia	203,146	183,475	96,913	52.82%	71,552	39.00%	15,010	Yes
Tasmania	114,490	106,153	62,722	59.09%	31,044	29.24%	12,387	Yes
Total	3,444,766	3,224,500	2,237,391	69.39%	773,852	24.00%	213,257	Yes
Sources: Standing Committee on Legislative and Constitutional Affairs (1997) Constitutional Change: Select sources on Constitutional change in Australia 1901-1997. Government Printing Office.

See also

• Politics of Australia
  Politics of Australia
  The Politics of Australia take place within the framework of a parliamentary democracy, with electoral procedures appropriate to a two-party system. Australia is governed as a federation and as a constitutional monarchy, with an adversarial legislature based upon the Westminster system...
  
  
• History of Australia
  History of Australia
  The History of Australia refers to the history of the area and people of Commonwealth of Australia and its preceding Indigenous and colonial societies. Aboriginal Australians are believed to have first arrived on the Australian mainland by boat from the Indonesian archipelago between 40,000 to...
  
  

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Preceded by: 1st State Debts Amendment Australian referendum, 1910 (State Debts) The referendum of the 13 April 1910 approved an amendment to the Australian constitution. Technically it was a vote on the Constitution Alteration Act, 1909, which after being approved in the referendum received the Royal Assent on the 6 August.Upon the establishment of the Commonwealth of...  (1910)

Amendments to the Constitution of Australia

Followed by: Social Services Amendment Australian referendum, 1946 (Social Services) Constitution Alteration 1946 proposed to extend the powers of government over a range of social services. The question was put to a referendum in the Australian referendum, 1946 with two other questions... (1946)

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