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PROBLEMS OF EMPIRE. is rigidly excluded from the internal management of the Department, Mr. Mathieson should be able to effect a great improvement in the financial position. He has, however, to face a most serious loss in goods traffic for the current year, owing to the drought, from which many parts of the Colony have suffered.

I had intended to discuss the village settlements of Victoria, South Australia, and New South Wales, and to give some account of that most interesting and successful experiment for dealing with the problem of the unemployed at Leongatha, but time will not permit.

Two remarks I would like to make in conclusion. In the first place, I think the Governments of the various Australian Colonies, more especially those of New South Wales and Victoria are deserving of the very greatest credit for the heroic efforts they have made to produce an equilibrium between revenue (which has suffered so much from the depression) and expenditure.

In the second place, it is my profound conviction that the sentiment of loyalty to the mother country is far deeper in Australia to-day than it was when I was there ten years ago. Just as we in England have come to recognise, so have our fellow subjects in the Colonies become convinced, that their future greatness depends on our remaining firmly united under the British flag. 232