A.—4

XI

The Federal control of these important services must seriously abridge the legislative powers of the State Parliaments ; and, remembering that " When a law of a State is inconsistent with a .law of the Commonwealth the latter shall prevail, and the former shall, to the extent of the inconsistency, be invalid " (section 109), the conclusion is inevitable that the legislative independence of any colony as existing prior to Federation must be seriously impaired when such colony becomes a State of the Commonwealth. The extent of the legislative powers of the Federal Parliament has yet to be tested by experience, and your Commissioners are of opinion that when that test is applied it will be difficult to define or determine the limits of such powers. An argument strongly urged by certain witnesses who favoured the federation of New Zealand was that thereby harmonious legislation would be secured. Your Commissioners are of opinion that federation per se would not secure such harmony, except in matters of Federal concern; whereas, without federating, New Zealand would be able to legislate upon any subject allowed by her Constitution, upon similar lines to any law existing in the Commonwealth. Your Commissioners have given attention to the question whether there is any probability that the legislative powers of the States Parliaments will be hereafter abridged, or the States abolished. From the evidence adduced on thjs point it will be seen that while there are prominent public men who favour the unification of Australia under one Federal Parliament, there is an almost unanimous conviction that the States Governments are in no danger of extinction. Many advocates of State rights, however, believe that the railways must ultimately come under Federal control, and that the functions of the Federal Government will gradually be enlarged in other directions. There can be no doubt that the political power which will accrue to the Federal Government from the fiscal control it exercises over the States, through the possession and administration of large Customs and other revenues, and from the management and construction of railways, will cause the people of the Commonwealth to regard the Federal rather than the State Government as the more important and useful political body. The States Governments mnst therefore decline in power, dignity, and importance, and there is already an active agitation in a majority of the States in favour of' a reduction in the numerical strength of the States Parliaments and Executives. 11. Public Finance. Your Commissioners have considered the question, how the public finances of New Zealand would be affected by the colony becoming a State of the Commonwealth of Australia, as one of the most serious they have had to review in connection with the inquiries committed to them. Great attention has therefore been paid to the financial provisions of the Commonwealth Act, and they have had the advantage of evidence in Australia given by many members of the Federal and State Governments, and of men eminent as financial authorities. It will be seen from the evidence of these witnesses that there are great differences of opinion not only as to what results Federation will have upon the public finances of the several States, but also as to what is the proper interpretation of the financial provisions of the Act. It appeared to your Commissioners that the majority of the electors in the several States in Australia had accepted Federation without having fully understood how the public finances of those States would be affected by the provisions of the Federal Constitution. Whether the Constitution is founded upon desirable lines, or whether a better Constitution could have been devised, are matters upon which your Commissioners are not required to express any opinion. Their duty is to consider and report as to whether the Constitution of the Commonwealth is one which it is prudent or desirable that the Colony of New Zealand should accept, even upon the basis of an original State.