It concerned financial relations between the federal level of government and the Australian states.

The purpose was to ensure the constitutionality of the Financial Agreement, which had been reached by the federal and all state governments in 1927.

Henceforth all governmental borrowing, except for purposes of defence, was to be under Loan Council control.

Due to doubts concerning the constitutionality of this new body, it was agreed that its legality would be put beyond doubt by the insertion of a new provision, Section 105A, into the Finance and Trade Chapter of the Constitution.

The Loan Council, described as "a unique institution among federations", attracted overseas attention from the moment of its birth: if Australia has made a unique contribution to federal finance it lies in its harmonisation of public borrowing by an institutional device [i.e. the Loan Council] which offers a solution for a host of related federal problems-the co-ordination of public investment, economic planning, tax conflicts, and so on.The Loan Council has had a dramatic impact on Commonwealth-State financial relations, particularly in helping the Commonwealth government oversee the national economy.