States Loan Act 1925

States Loan Act 1925 — Plain English Summary

This is a short, century-old piece of Commonwealth financial legislation that allowed the Australian Government to act as a financial middleman between international money markets and the individual States.

What does it do?

• Authorises the Commonwealth to borrow money on behalf of the States. Rather than each State going to the market separately, the Commonwealth Treasurer could strike deals with State Treasurers and raise funds centrally, then on-lend (lend on) those funds to the States.
• Sets a time limit on the borrowing. The amounts borrowed had to be authorised by the relevant State parliament, and the arrangement covered loan purposes up to 30 June 1926 — making this a short-term, one-off measure tied to a specific financial period.
• Allowed the Commonwealth to "convert" existing State debts. If a State had its own loans (securities — essentially government IOUs) falling due by 1 July 1926, the Commonwealth could swap those out for Commonwealth-issued securities. This is called conversion — replacing old debt with new debt on potentially better terms.
• Permitted short-term advances to States. While waiting for the borrowed money to actually come in, the Treasurer could front the States cash from the Commonwealth Public Account (the government's central bank account), to be repaid once the loan proceeds arrived.