Ensuring the future financial good health of the states was a matter of great importance to the writers of the constitution, and they worked hard to produce a workable Finance and Trade chapter. Two important provisions of the chapter were Section 87, which required the return of surplus tariff funds to the states, and Section 105, which provided for the Commonwealth to take over State debts that existed at the time of Federation. By the end of the Commonwealth's first decade it was clear that Chapter IV had serious flaws, and in 1910 attempts were made to amend Sections 87 and 105. In mid-1909, Alfred Deakin succeeded Andrew Fisher as Prime Minister for what would be his third and final time. Impetus had built in recent years for changes to state-federal financial relations, and Deakin made several important administrative decisions on this matter. Negotiations between Deakin, Forrest and state premiers produced the financial agreement of 1909, which gave the states per capita grants of 25 shillings annually. Deakin proposed two constitutional amendments at the 1910 ballot to ratify these administrative changes, though the second question was much more pressing than the first. It failed, but in practice the agreement set Commonwealth-State financial relations until 1927. The first question on the state debts proposal dealt with a perceived need to expand the operation of Section 105 to allow the Commonwealth to take over state debts whenever they were incurred. The state debts amendment was carried by a 'yes' vote of approximately 55 per cent, with only New South Wales in opposition. According to a historian of the Loan Council, this indicated that the nation had "decisively favoured a scheme on the basis of s. 105 to relieve the States of some of their financial burden". Despite the smooth passage of the amendment, it would be more than a decade before the specifically endowed powers would be used. However, the state debts amendment was important in giving greater potential flexibility to Chapter IV of the constitution, and became an important aspect of federal-state intergovernmental financial relations.
Referendum results
Question:Do you approve of the proposed law for the alteration of the Constitution entitled 'Constitution Alteration 1909? Obtained majority in five States and an overall majority of 128,782 votes. Carried.
