The following memorandum has been forwarded by the Acting Secretary to the Treasury to me for advice:

It is anticipated that the Loan Bill⁽²⁾ now before Parliament will shortly become law, and it is necessary that a decision should be given at an early date as to any distinction to be made in the Treasury accounts between the borrowings under the old Loan Act and the borrowings under the new one.

2.Under the authority of the Loan Act of 1911 capital stock amounting to £2,460,476 was created. The capital stock was created in accordance with section 4 of the Commonwealth Inscribed Stock Act 1911. In accordance with section 7 of that Act stock amounting to £700,000 was sold. A few thousands of the proceeds of the sale of the stock remain unexpended at present.

3.It is now necessary for the Treasury to raise by way of loan an additional amount of £500,000. We require the money for the purposes mentioned both in the Loan Act 1911 and the Loan Bill now before Parliament.

4.If we are compelled to earmark the sales of stock so that we can say that a particular amount of money was raised for the purposes mentioned in each Loan Act, we shall be compelled to keep a very inconvenient set of accounts. Not only that, but the money having been earmarked for the purposes of one Act cannot be expended for the purposes of the other Act. Thus, before selling any stock we should have to estimate the amount required for the purposes of each Loan Act, and would certainly find subsequently that our estimate was not in accordance with the actual requirements. The result would be that we might have a large sum of money in the Treasury earmarked for a particular Loan Act and not required for the purposes of that Act. The money might lie idle for some time notwithstanding that expenditure under the other Act had to be provided for by the sale of fresh stock.

5.On the one hand it may be argued that the money borrowed under the authority of the Loan Act 1911 must, in its passage through the Treasury, be earmarked for the pur-poses mentioned in that Act. On the other hand, there is no reference in the Common-wealth Inscribed Stock Act 1911 to a sub-division or earmarking. Indeed, section 12 implies that there should be no earmarking because it provides that all moneys raised by the sale of stock shall be placed to the credit of the Loan Fund. Moreover, in section 7 it is provided that stock may be issued and sold in such amounts as the Governor-General di-rects, and apparently, after capital stock had been created under the authority of two or more Acts authorising the borrowing of money, the Governor-General could sell stock without indicating the particular Loan Acts in connection with which the money was required. The Audit Act also provides for the creation of a Loan Fund-see section 55-but directs that it shall be kept under such separate heads as are specified in the sev-eral Loan Acts.

I do not think it necessary as a matter of law to earmark any particular issue of stock so as to identify it with any particular Loan Act.

As regards money raised by the sale of stock in cases where only one Loan Act was in existence when the money was raised, it appears to me that the money is necessarily available only for the purposes of the Loan Act in question and could not, without statutory authority, be used for the purposes of a later Loan Act.

But where two or more Loan Acts are in existence at the time when the money is raised, the money so raised could be used for the purposes of either of the Loan Acts unless the stock were expressly created for the purpose of one Loan Act only.

The intention of the Commonwealth Inscribed Stock Act 1911 and the Audit Act 1901-1912 appears to be that the Loan Fund is to form a general reservoir of loan moneys from which moneys are to be drawn as required for the purposes for which they are available and that proper separate heads of account are to be kept in accordance with the Loan Acts under the authority of which the moneys were raised.⁽³⁾

[Vol. 10, p. 474]

(1)This date is derived from the Parliamentary Paper (see endnote(3)),but in the opinion Book the date is 17 December 1912.

(2)Enacted as the loan act 1912.

(3)This opinion was published in Commonwealth of australia , Parl.Papers,1913,Vol.II,p.1172.