ISSUE OF COMMONWEALTH TREASURY BILLS TO REPAY STATE OVERDRAFT ISSUE OF COMMONWEALTH TREASURY BILLS TO REPAY OVERDRAFT ACCORDED TO NSW BY WESTMINSTER BANK: borrowing by Commonwealth on behalf of NSW: APPROVAL OF LOAN COUNCIL: ENFORCEABILITY BY Commonwealth against State OF provisions with respect to such borrowing of Financial Agreement BETWEEN COMMONWEALTH AND STATE
Financial Agreement between the commonwealth and the states -AGREEMENT <span class="char-style-override-3">dated <br />12 December</span> 1927 BETWEEN THE COMMONWEALTH OF AUSTRALIA , THE STATE OF NEW SOUTH WALES, THE STATE OF VICTORIA, THE STATE OF QUEENSLAND, THE STATE OF SOUTH AUSTRALIA, THE STATE OF WESTERN AUSTRALIA and THE STATE OF TASMANIA
The following is the text of a memorandum dated 24 April 1931 addressed to me by the Secretary to the Treasury:
- The Westminster Bank in London has granted an overdraft of £5,000,000 in London to the Governments of New South Wales, Victoria and Western Australia–New South Wales’ share of such overdraft being £2,950,000.
- The Westminster Bank has now asked that it be issued Treasury Bills in respect of the amount of this overdraft.
- Assuming that the Loan Council authorises the issue of Treasury Bills to the Westminster Bank for the purpose of paying off the overdraft on account of New South Wales, Victoria and Western Australia, could the Commonwealth, without the consent of New South Wales, apply portion of the moneys so borrowed towards paying off the overdraft granted by the Bank to New South Wales.
The Secretary to the Treasury now forwards the following letter for opinion:
- Referring to my letter dated 24th April, I have now to inform you that on the 28th April the Chairman of the Loan Council sent the following telegram to the Treasurer of New South Wales:
Commonwealth Government has been negotiating with Westminster Bank regarding renewal of overdraft of £5,000,000 of which New South Wales’ share is £2,950,000. Bank has now asked Loan Council to agree to issue of £5,000,000 Commonwealth Treasury Bills maturing 30th September next to provide moneys for paying off overdraft. Bank undertakes not to place such Bills on market. Please advise whether you consent to issue of these Treasury Bills to Westminster Bank and to your State’s share of proceeds thereof being applied to repayment of your State’s overdraft with Westminster Bank.
- On the 28th April, the Under Secretary to the State Treasury, Sydney, sent the following telegram to the Chairman of the Loan Council:
- Will you be good enough to advise whether the matter is now in order for the issue of Commonwealth Securities to the Westminster Bank, and whether in the event of New South Wales failing to pay interest on these securities, or to meet the principal when due, the Commonwealth would be in a legal position to recover the moneys involved from New South Wales.
Referring to your telegram 28th Colonial Treasurer Sydney consents to issue of Treasury Bills and to repayment of this State’s overdraft Westminster Bank.
The consent of the New South Wales Treasury having now been obtained to the issue of the Treasury Bills and their application to repayment of the overdraft, I am of opinion that, when the approval of the Loan Council to the transaction (if not yet obtained) has been obtained, the transaction will be in order as a borrowing by the Commonwealth on behalf of the State of New South Wales.
Accordingly, the Commonwealth will be able to enforce against the State, with respect to principal and interest, the provisions of the Financial Agreement with respect to such borrowing.
[Vol. 25, p. 32]