I refer to your memorandum herein dated 4th July, 1945. The question for determination is whether, for the purpose of providing capital funds for housing purposes of the States under the National Housing Scheme, it would be legally in order for the Commonwealth itself to raise the funds required and make from those funds advances to the State Governments on stated terms and conditions regarding repayment.

Section 51(iv) of the Constitution provides that the Parliament shall, subject to the Constitution, have power to make laws for the peace, order and good government of the Commonwealth with respect to borrowing money on the public credit of the Commonwealth. Section 96 of the Constitution gives the Parliament power to grant financial assistance to any State on such terms and conditions as the Parliament thinks fit.

It appears, therefore, to be competent for the Parliament to borrow moneys for the purpose of granting financial assistance to a State. The borrowing of moneys for the purpose in question would, of course, be subject to clause 3(8.), (9.) and (10.) of the Financial Agreement.

I am of opinion that subject to the observance of those provisions of the Financial Agreement the alternative method of Commonwealth borrowing mentioned in your memorandum could legally be resorted to to provide capital funds for advances to the States for housing purposes.

[Vol. 36, p. 577]