14th Parliament · 1st Session
Mr. Speaker (Hon. G. J. Bell) tool; the chair at 10.30 a.m., and read prayers.
Motion (by Dr. Earle Page) agreed to -
That the House, at its rising, adjourn until Tuesday next at 3 p.m.
– Last night, in the course of a speech, the honorable member for Cook (Mr. Garden) said that. I was a large share-holder in an £8,000 gold-mining company operating at Tennants Creek, and that, by reason of such interest, I was concerned in making the conditions difficult for the workers. Earlier in the day I had made a number of recommendations in regard to Central Australia. If this charge of the honorable member is allowed to pass unchallenged, the impression will be given that I was actuated by motives of self interest. The statement was absolutely uncalled for, and is entirely untrue. 1 ask the honorable member to withdraw it, and to apologize to me for having made it.
– The honorable member in exceeding the scope of a personal explanation. He should have asked for a withdrawal when the statement was made.
– I admit having said that a company was formed in Adelaide with a capital .of £8,000 to engage in gold-mining operations at Tennants Creek, and that it was most likely that the honorable member for Adelaide was deeply interested in it. That reference te the honorable member, however, was made in a spirit of banter, as a rejoinder to interjections for which he was responsible. I t does not appear in the Hansard report of roy speech.
– Has the attention of the Acting Leader of the House been drawn to the declaration by Sir John Latham, Chief Justice of the High Court of Australia, in a pamphlet just published by the Melbourne University press, which states, inter alia -
The application of economic sanctions is not fi substitute for war, but is really an act of war … If the prohibition of inter- course is to be real, and if it is resisted, then the Government applying the sanctions must he prepared to sec the matter through by the application of physical force.
Did the Government have that opinion before it prior to its decision to commit Australia to the imposition of sanctions. Will the right honorable gentle ?nv whether the Government sought Sir John Latham’s legal opinion before deciding what action it should take?
– I understand that the pamphlet mentioned by tho Deputy Leader of the Opposition was published some nine months ago. The Government did not seek Sir John Latham’s legal opinion in regard to the matter.
– How does the right honorable gentleman reconcile the decision of the jurists to whom the matter of the legal obligations of member States of the League of Nations was referred, that every member State is bound by the provisions of the Covenant of the League, with the replies given to questions asked in this House yesterday, in which it was declared that Australia had exercised its right to decide whether or not it should adopt sanctions and also the manner in which it would give effect to them?
– As the question involves the giving of a legal opinion, I ask the Attorney-General to reply to it.
– I am sorry that I did not hear the replies given to questions yesterday. I should just like to point out that . article 16 of the Covenant as originally framed has been modified in practice by the resolutions of the League of Nations of 1921. These resolutions, which were set out the other day in a statement made by my colleague the Acting Leader of the House (Dr. Earle Page), modified the procedure. Instead of making the imposition of sanctions automatic, they interpose certain procedural steps by the League and leave open to member. States the determination of methods by, and the time at, which the sanctions shall be applied.
– And their extent.
– In using the term “ methods “, I intended to cover that fact. Article 16 as it originally stood provided that, upon certain events happening, member States of the League should automatically impose certain obligations on the defaulting member; but the modifications contained in the resolutions of 1.921 - a copy of which I could obtain for the honorable gentleman if he so desires - are of the general nature that I have indicated.
– Is it a fact that the amendments made in 1921, and described as procedural amendments, to article 16 of the Covenant, of the League, mean that each member State h free, while being perfectly loyal to the Covenant, either to adopt or to reject the specific sanctions formulated by the Co-ordination Committee ? Furthermore, is it in conformity with the obligations of a member State under the Covenant that it should declare that all of the sanctions contemplated by the (Jo-ordination Committee are of such a character that, it will not participate in them?
– The obligations imposed by the Covenant are not taken away by the resolutions of 1921. Insofar as my opinion has any weight in this matter, it is to the effect that no constituent nation of the League could refuse to give effect to the policy of sanctions once those sanctions had been ascertained and declared by the Co-ordination Committee. The point at which each nation has a discretion is when the question arises as to whether some nation, a member of the League, is an aggressor. Each other member of the League then has the right to determine for itself whether it subscribes to the view that the nation in question is or is not an aggressor. In this case all the nations other than Italy agreed that Italy was an aggressor.
– Two nations dissented from that view.
– I think that I am right in saying that there was only one - Italy. It was on a subsequent point that two others abstained from voting. Once we declared that, in our view, as a member of the League, Italy was an aggressor, we then, following the machinery of the League, became committed to the imposition of some sanctions. The matter of what those sanctions were to be was then discussed and ascertained by the Coordination Committee. In my opinion we are not at liberty, while retaining our membership of the League, to say that we will not participate in any of the sanctions that the honorable member has indicated.
– Can the AttorneyGeneral say definitely that the Argentine Republic has agreed to fall in with the rest of the members’ of the League of Nations with respect to the enforcement of sanctions?
– I am unable to answer that question.
– Is Australia, as a member of the League of Nations, which has declared Italy to be an- aggressor, bound to adopt the sanctions determined by the Co-ordination Committee of the League, and is therefore committed to the procedure which the Covenant sets down for giving effect to such sanctions?
– Subject to the resolutions of 1921, a copy of which is now available for the perusal of the honorable member, my answer is : “ Yes “.
– I have just received from Mr. Seward, member for Pingelly in the Parliament of Western Australia, a telegram which reads -
Apparently, for reasons of economy, the Postal Department has eliminated messengers from many country post offices, thus preventing delivery of telegrams. Please protest strongly and urge reinstatement.
Iii view of the handsome surplus of the Postal Department, will the Government see that its services are not impaired?
– If the honorable member will supply particulars of specific cases, I shall bring them to the notice of the Postmaster-General and obtain a reply for him.
– The Australian equivalent of the London price for butter is now 5s. 6d. per cwt. above the Australian price. Can the Minister for Commerce give the assurance that the Australian market will not be allowed to go short of supplies, and that the local price will not be raised?
– Exports of butter are controlled by the industry itself. It has always acted reasonably and wisely in the exercise of its powers, and I have no doubt that it will continue to do so.
– About a fortnight ago I asked a question in connexion with the appointment of cadets in New Guinea, and was informed that 1,736 applications had been received and that three of the six appointments had been made from Nev South Wales. If the remaining three appointments have since been made, will the Acting Leader of the House furnish the names of the appointees?
– I am not able to supply the information desired by the honorable member, but shall obtain it from the Minister for External Affairs.
– Some months ago the Department of Education in New South Wales made representations to the
War Service Homes Commission with a view to the purchase from it of ten acres of land at Mayfield West, for the purpose of enlarging the school grounds to meet the requirements of the pupils. Will the Minister in charge of War Service Homes state whether the negotiations have fallen through, and, if not, whether the department has come to an arrangement in regard to the purchase price, &c. ?
– Until within the last two weeks the control of all vacant land originally held by the War Service Homes Commission was vested in the Commonwealth Works Department, which is administered by the Minister for the Interior. Arrangements have since been made for the commission to repossess the files and to resume control of such lands. The specific matter referred to by the honorable member has not been brought under my notice. I shall have inquiries made, and shall advise him of the result.
– Is the Treasurer in a position to say whether the Government is prepared to consider amending the legislation which now precludes a naturalized Asiaticfromreceivingan invalid or old-age pension? I have in mind the case of a man who, during a long residence in Australia, has paid to the Commonwealth thousands of pounds in income tax but is now unable to receive an old-age pension,although he is entirely destitute.
– As the provision debarring naturalized Asiatics from receiving a pension has been in the act from the beginning, I can give the honorable member no assurance offhand that the Government is prepared to alter its policy in this connexion.
The following paper was presented: -
Invalid and Old-age Pensions Act - Statement for year 1934-35.
Debate resumed from the 17th October, (vide page792), on motion by Mr. Casey -
That the bill be now read a second time.
That the order of theday be discharged.
Message recommending appropriation reported.
In committee (Consideration of GovernorGeneral’s message) :
Motion (by Mr. Casey) agreed to -
That it is expedient that an appropriation of revenue he made for the purposes of a bill for an act to grant and apply out of the Consolidated Revenue Fund sums for the purposes of financial assistance to the States of New South Wales, Victoria, Queensland, South Australia and Western Australia.
Standing Orders suspended; resolution adopted.
That Mr. Casey and Mr. Paterson do prepare and bring in a bill to carry out the foregoing resolution.
Bill brought up by Mr. Casey, and read a first time.
.- I move-
That the bill be now read a second time.
The reason for the introduction of a second bill, in place of that which has been discharged from the notice-paper, is that a technical error in the message which was read to the House yesterday has been discovered. As the purpose of this bill is identical with that of the previous measure, I shall not deliver a second-reading speech, but ask honorable members to refer to that which I delivered yesterday.
.- As the Treasurer (Mr. Casey) indicated yesterday, this bill has for its purpose the reduction of the deficits of the States from the amounts which the State Treasurers estimated when they met as a loan council to consider their financial requirements for the current year’s operations. Apparently either the Loan Council or some other body considers that it is desirable that such large deficits as were forecast should be reduced. It is extremely difficult for this Parliament to ascertain precisely what occurred at that meeting of the Loan Council. The proceedings are held in camera, and honorable members learn only so much of what takes place as is supplied in the official statement issued by the chairman, or is contained in hints which appear in the newspapers. The only conclusion I can draw is that either because of the difficulty of raising money from the public, or because the Commonwealth Bank has refused to provide short-term accommodation to the full extent expected by the Treasurers, this bill has been submitted by the Commonwealth asking this Parliament to provide £500,000 for the reduction of the deficits of five States, which in turn are expected to curtail their expenditure by a similar amount or, alternatively, to raise it by taxation. In any event, this bill supports the view,- expressed yesterday by the honorable member for Wakefield (Mr. Hawker), that there is a determination to restrict government expenditure, and, indeed, the ordinary expenditure of the public, in respect of industrial enterprises. In my opinion, the £500,000 which this bill seeks to appropriate in order to finance the deficits of certain States, would do more for the economic welfare of Australia if it were expended in providing employment.
The difficulty in connexion with the State deficits is greater than is generally appreciated. Apparently the only way in which they can be reduced is by increasing the ordinary loan provision for the carrying out of State activities. A scrutiny of the accounts of all the States for the last few years reveals that a large part of their loan expenditure has been for purposes which, prior to the depression, were financed from revenue. This bill indicates that difficulty is still experienced in balancing the budgets of the States. I say that, notwithstanding that the deficits of the States at the end of the financial year just closed were less than the amount estimated when the States entered into an agreement for the reduction of their indebtedness, it appears to me to be a curious state of affairs that State governments should have their estimates of revenue and expenditure upset, because of the difficulty of obtaining the necessary financial accommodation, and should be forced to reduce their deficits. As a means of escape from the difficulty which confronted the Loan Council, the
Commonwealth Treasurer agreed that the Commonwealth should provide £500,000 to assist the States. There is evidence that the old conflict between the Commonwealth Bank and the associated banks on the one hand, and the governments of Australia on the other, in respect of the manner in which government financing shall be carried on in ‘this country, is still with us. In my opinion, we should do well to consider the advantages which might accrue from an open bill market. I admit that there would be difficulties in the way; but this bill shows to what extent Australian governments are dependent on banking institutions which, after all, look at these problems from the point of view of their shareholders, rather than from that of the whole community. It cannot be gainsaid that the monetary policy of Australia no longer operates in conformity with the law of supply and demand, but is deliberately managed to achieve certain ends. It is too late to deny that during the last two or three years Australia has had the equivalent of a managed currency; and this measure indicates that it is an outside authority which has been the determining factor in the management of that currency. That should not be so. This Parliament, apparently afraid to trust itself in such matters, prefers to trust the directors of certain banks. Neither in themselves, nor corporately, are those directors more competent than this legislature to think in such matters for the people of Australia. Furthermore, they are not answerable for the consequences of their decisions, as are the representatives of the people in this Parliament. In view of the attention which this question will no doubt receive by the royal commission which has just been appointed to investigate the monetary and banking systems, I do not propose to elaborate further on this matter. I conclude with the declaration that this bill is symptomatic of the continuance of financial difficulties for the governments of Australia, preventing them from embarking upon programmes for tho relief of unemployment which, if initiated, would considerably relieve the industrial and economic troubles that have arisen out of the depression. Only by . the adoption of something of the nature of a longterm plan to cope with unemployment shall we be enabled to grapple with what is indeed a grievous major economic malady. That plan involves a consideration of what private enterprise can do. I-
Mr. SPEAKER (Hon. G. J. Bell).Order! The honorable member is going beyond the scope of the bill.
– I am suggesting that this problem involves such a consideration, and I am pointing out that Australian governments are not prepared to take a long view of the unemployment situation, because of their difficulty in meeting their ordinary financial commitments to enable them to meet current requirements. This measure indicates that the plans which the various governments had made prior to the last meeting of the Loan Council had in part to be scrapped or substantially modified. The proceedings of the Loan Council must have failed if some arrangement had not been made whereby the contemplated deficits could be reduced by approximately £1,000,000; and the only means by which the State governments could meet their immediate requirements was through the decision of the Treasurer of the Commonwealth to make a contribution out of the funds controlled by this Parliament. Thus, in advance of the meeting of this Parliament, its authority over its own budget was to some extent affected. To-day we find ourselves committed to the passing of this measure, because it is part of general arrangements made to enable the State governments to carry on during the current year. I shall not oppose the second reading of this bill; but I would have regretted losing this opportunity to point out its significance in relation to things gone before in the matter of Australian governmental finance, and things which, I believe, are still in front of us.
.- The object of this bill is to grant out of the Consolidated Revenue of the Commonwealth a sum of £500,000 to the States with the sole exception of Tasmania. I listened carefully to the arguments just advanced by the Leader of the Opposition (Mr. Curtin), and I noticed that to some extent he objects to this measure. Personally, I am very sorry that this bill has been brought down. I object to it very much, because the principle involved in it - that money raised by the Commonwealth should be handed over to another authority to spend - should not be perpetuated by this Parliament. It is a practice which is open to a good deal of abuse. Certain obligations are imposed upon a government when it spends money which it has raised itself. In this case, however, it is proposed that the Commonwealth shall give £500,000 of its excess receipts to the States, and that they will be allowed to spend it practically as they choose. Although I have no objection, as I believe no honorable member has, to the Commonwealth assisting the States to do their best in an attempt to balance their budgets - and much has been done in this direction during the last few years - I submit that it is more important to observe the principle that one government should not raise money to be spent by another. If this £500,000 can be handed over to the States in this way it means that the Commonwealth Government is taking money unnecessarily from the taxpayers. On the other hand, if it was necessary to raise the money, the Commonwealth itself should spend it. But rather than raise money and hand it to the States, a much more desirable course would be for the Commonwealth to cease collecting it from the taxpayers.
– This money will be used by the States to pay their debts; it will not be lost virtually to the Commonwealth.
– It may be that the States will use this money for social services or on undertakings to which they have committed themselves, and would have had to finance whether or not these grants were made available to them. Consequently, they may be able to avoid expenditure which they would have incurred in the ordinary course of events. But I contend that the Commonwealth would more greatly benefit the people of Australia as a whole by declining to take this money from them in the form of taxation. We raise money in two ways - directly, by means of income tax and land tax, and, indirectly, by customs and excise duties and by the sales tax. lt has already been proposed to make certain remissions of sales tax. I am not suggesting that this Government should remit this £500,000 in the form of sales tax, although that would be one way of restoring it to the taxpayers; it could also be restored to the community through further reductions of income tax or customs duty or other taxes, direct or indirect. In that way, the taxpayers generally, whether they pay direct or indirect taxes, would benefit more materially than by raising this amount from them unnecessarily and passing it over to the States for expenditure. Alternatively, this Government itself could spend the money, as has been suggested by the Leader of the Opposition, to relieve unemployment, although I hold the view that the practice adopted bv the Commonwealth Government of giving grants to the States to relieve unemployment is only a palliative. Honorable members will agree that much good could be accomplished if this Government devoted this money to some reproductive public work which would not only create employment while the undertaking was being carried out, but also provide a certain amount of permanent employment in maintenance. Thus this Government has two ways of getting over this difficulty. In the first place, it could refrain from collecting this money from the taxpayers or, far better than the means at present proposed for distributing this revenue, it could spend the money itself, thereby avoiding any transgression of the principle that a government should not be allowed to spend the money which another government has raised.
In his ‘remarks on this measure yesterday, the Treasurer (Mr. Casey) emphasized that this grant was a nonrecurring payment. I doubt whether it can be considered as such. This proposal will, no doubt, form a precedent, and, as is well known, once a precedent has been established there is always a tendency in governmental circles to have recourse to that precedent and to suggest similar proposals in the future. Following the making of this grant to the State governments this year, it is not improbable that a similar proposal may be advanced next year, and the next amount may not be limited to £500,000. As in other directions, this payment will probably become a recurring payment. Because of the principle involved in the bill and because of the unnecessary nature of the taxation, which is revealed by this Government’s ability to make such a grant, I cannot support this measure. It will be of no use to move an amendment in view of the statement of the Leader of the Opposition that he does not intend to oppose it, but I reiterate that personally I object to the measure, as I think the principle involved in it is altogether wrong. Had it not introduced this measure, this Government would have given greater effect to its oft-repeated promise to reduce taxes. I am sorry that it has been introduced.
– I listened very carefully to the remarks of the Treasurer (Mr. Casey). Under this measure it is proposed to make grants to the States of New South “Wales, Victoria, Queensland, South Australia and Western Australia. Tasmania is not to participate. It seems to me that the bill is wrong in principle, in so far as one State will not be enabled to benefit in the financial adjustment proposed to be effected. I am not in. a position to say why Tasmania has been excluded from participating in this grant, but I understand from what the Treasurer has said that the measure is the result of deliberations at the last meeting of the Loan Council. Tasmania’s unsatisfactory financial position is undoubtedly due to the effects of federation. I now ask the Treasurer to make a clear and unambiguous statement of the reason why Tasmania is not included within the provisions of this bill. I understand that the participating ‘States are under obligation to reduce their deficits by an amount equivalent to that which they will receive under the provisions of the bill. If Tasmania has been omitted because it has declined to agree to reduce its deficit in this way, it is unfair and inequitable. For a number of years, that State has been effecting economies in social services and in other directions to a much greater extent than those effected by the other States. Today, its social services are on a definitely lower scale than those of the other States, and it would be most unfair to exclude it from the provisions of this bill because the State Government is not willing to reduce its expenditure on social services to a still greater degree. The deflationary process has been applied in Tasmania more drastically than in any of the other States.
– If the other ‘States have agreed to reduce their deficits, why should not Tasmania do so?
– Because Tasmania has already done so to a greater degree than the mainland States. If the reason for the exclusion of Tasmania from this bill is that the State Government has declined to reduce its deficit still further by making a greater reduction of the value of the social services provided by the State, I agree with it. But I point out that the money which the Commonwealth Government is proposing to distribute is raised from the taxpayers in all the States, including Tasmania. That State is therefore entitled to its fair share of the proceeds. The effect of federation, speaking in general terms, is that the States with the larger populations have benefited at the expense of the States with the smaller populations. It is entirely unjust to submit a ‘bill to this Parliament that will have the effect of accentuating such an inequity.
.- The introduction of this bill provides honorable members with an opportunity to review the financial relations of the Commonwealth and the States. It is becoming more and more apparent that the Commonwealth Government is adopting a domineering attitude towards the States and dictating the line of policy which the State governments shall pursue. Undoubtedly the intention of the framers of the Constitution was to repose certain defined power in the Commonwealth Parliament and leave the residual power with ‘the .State authorities ; but for a considerable period now the Commonwealth Parliament has assumed far greater power than -the framers of the Constitution ever intended it to have. This has been possible because the Commonwealth Parliament has such great power to raise revenue. One effect of the exercise by the Commonwealth of the power it has over the public purse -has been to force the States into a position of inferiority.
To-day, the Commonwealth Government is, to a large extent, dictating the policy which the State governments must apply. An example of this was provided in 1927, when the Commonwealth Government, by withdrawing the per capita payments from the States, forced them to accept the Financial Agreement. The Commonwealth Government, no doubt, thought that the financial agreement should be accepted; but it had no right to threaten the States with the withdrawal of the per capita payments, as a means of forcing them to accept the agreement. The whole of the negotiations for the acceptance of the Financial Agreement were overshadowed by the withdrawal by the Commonwealth of the per capita payments. An agreement arrived at under such circumstances could not be expected to provide a permanent and satisfactory solution of the financial relations between the Commonwealth and the States.
– There can be no satisfactory solution of these relations under the Constitution as it stands.
– That may be the opinion of the honorable member for Batman (Mr. Brennan), but I hold a different view. The Financial Agreement provided, among’ other things, that the Commonwealth Government should subsidize the interest payments of the State governments by an amount equal to the amount -received by the States in per capita payments in 1927. Certain other provisions were made for Commonwealth contributions towards the sinking fund for the liquidation of the capital debts of the States. It was provided, however, that such contributions by the Commonwealth should be subsidized by the State governments. This was, perhaps, the first instance of Commonwealth grants to States being made contingent upon the provision of equivalent amounts by the States themselves. We have now reached the situation that the very autonomy of the States is being threatened, paradoxically, by the generosity of the Commonwealth. Practically every gift made by the Commonwealth to the States is contingent upon the States accepting certain additional liability.
That is obviously unsound as well as unfair. It is also inconsistent with the intention of the framers of the Commonwealth Constitution that the State governments should be left entirely free to pursue their own policy within their own provinces. A review of the financial assistance provided by the Commonwealth Government last year for the States shows very clearly that Commonwealth interference with State policy is reaching serious proportions. Moreover, the conditions under which such assistance is afforded to the States involve substantial extra expenditure by the States. The Commonwealth Government contributes 2s. 6d. per cent, to State debt sinking funds on condition that the States make a contribution of 5s. per cent, in respect of debts contracted prior to 1927. The Commonwealth also pays 5s. per cent, in respect of debts incurred since 1927 and the Spates must also contribute a like sum. Under the federal aid roads scheme the Commonwealth Government contributes £1 for every 15s. provided by the State governments. The Commonwealth Government also made substantial grants to the States last year to relieve unemployment, and to stimulate forestry and mining, but these were only available upon the States agreeing to contribute on a £1 for £1 basis. In addition, grants were made to facilitate rural debt adjustment, encourage the use of superphosphate, and assist the wheat-growers. In respect of these items, the States are obliged to incur fairly substantial expenditure in administrative expenses. Proposals have also been made by the Commonwealth Government to the State governments, ns outlined in the budget, to encourage the construction of sewerage systems and water supply services in country towns. These proposals also have a £1 for £1 subsidy condition attached. Unfortunately the necessities of the States are such that it is almost impossible for them, for political reasons, to decline to accept the proposed grants, yet acceptance involves them in heavy obligations and so limits their ability to pursue their own planned policies. The following table shows the amounts granted last year by the Commonwealth to the States for various purposes, and the contingent obligation of the States consequent upon the acceptance of the grants : -
It will thus be seen that Commonwealth grants to the States last year involved the States in a direct expenditure, on their own account, of nearly £5,000,000. This is in addition to administrative costs of the wheat bounty, the superphosphate subsidy and grants for farmers’ debt adjustment, assistance to wheat-growers who have suffered particularly adverse seasonal conditions, assistance to fruit-growers, and the cost of administration and capital losses of soldier settlement, although the latter is partly a Commonwealth matter. This Government has been subjected to somewhat caustic criticism for having incurred such heavy expenditure in certain directions ; but the Treasurer pointed out -iii an effective reply that a very small proportion of Commonwealth expenditure was flexible. He should recognize that a great deal of the expenditure of the State governments is of a fixed nature. After the payment of statutory commitments only a small proportion of the revenue received is capable of being used for new purposes. The Treasurer, having ‘been forced to point this out in defence of the Commonwealth policy, should have been aware of the fact that similar circumstances exist in the States, and also of the fact that the acceptance by the States of the £5,000,000 voted to them last year by the Commonwealth committed them to find a further £5,000,000 and thereby restricted them to the smallest ambit of their ability to pursue an independent policy. The generosity of the Commonwealth under these conditions has thus created the paradox of restricting, almost to obliteration, the autonomy of the States.
– Is not the trouble due to the fact that the Commonwealth is overtaxing the people both directly and indirectly ?
– I shall point out where the fault lies and what I believe the remedy to be. The pursuance of this policy is arousing within the States, not only criticism of the Commonwealth, but also opposition to it. The number of State politicians directing attention to this fact being greater than the number of Federal politicians, the people are becoming prejudiced against the Commonwealth. Every State politician criticized about the shortcomings of State governments is able to say “I agree with your criticism, but the explanation is that the Commonwealth having the control of the purse is able to, and actually does, dictate to the States the policy that they are to apply; or, if it does not dictate policy, it restricts the capacity of the States to deal with matters requiring attention from them.” To quote one instance in Victoria, a State which is not affected by this policy to the same extent, as are other States, a very unsatisfactory position prevails with respect to the financing of the State railways. The railways commissioners are liable for capital expenditure which is not represented by assets. Some railway lines constructed as the result of mistaken policy many decades ago having proved to be utterly unprofitable, have been dismantled. Yet they still appear in the balance-sheet of the Victorian Railways Department as a tangible asset. The charges for railway services are based on such capital costs, and the capacity of the railways commissioners to reduce fares and freights or to afford employment a-t reasonable rates of pay is limited by their capital obligations in this respect. That such position is acknowledged by the members of all the political parties in Victoria ; and that there is need to ‘ write off some of the capital liability of the railways, and transfer the liability from the users and the employees of the railways to where it should . rest on the shoulders of the’ general taxpayers, is also generally admitted; but the capacity of the State Parliament to handle the situation is limited by the manner in which funds are restricted. Not only are the resources of the State restricted by the depression through which we are passing, but the position is also aggravated by the grants which the Commonwealth is making and the conditions attached to such grants. This bill affords honorable members an opportunity to review the relationship between the Commonwealth and the States.
No member of this Parliament should permit to pass lightly the fact that one State has been forced to refuse to accept certain money which the Commonwealth proposed to make available to it. The fact that the Tasmanian Government has refused to accept Commonwealth money places an unfair weapon in the hands of its political opponents. From the angle of political repercussions it is almost impossible for a government to refuse to accept Commonwealth money, regardless of the conditions attaching to it. The States are forced by political considerations to accept it, although the acceptance of it restricts them in the policies they are anxious to apply.
I ask the Government to give the fullest consideration to the situation that I have outlined. I believe that the Commonwealth should terminate the conditions which it constantly attaches to the grants it make; . to the States. If it deems it right that the States should be given certain funds to be used for a specific purpose it should do so, but it should not bind the States to a £1 for £1 subsidy. There should not be any semblance of distrust on the part of the National Parliament as to the policy which the States will apply.
Instead of the Commonwealth pursuing this course of handing out doles to the States with conditions attached and thereby restricting State activities, the Commonwealth should take upon itself the burden of paying for some nonproductive services.
– It should take over some of the States’ normal responsibilities?
– Yes. Instead of the Commonwealth continuing its present policy of voting money to the States on condition that they use it on afforestation and such like things. I think it would be better for it to take over, say, the cost of education. Again, it could reasonably be asked to share some of the losses associated with soldier settlement. The fact that the Commonwealth is enjoying immunity from the repayment of capital and interest on the war debt owing to the British Government should be conducive to its assumption of some of the losses in which the States are involved under their soldier settlement policy.
I think that the time is overdue for a complete revision of the constitutional and financial relationships of the Commonwealth and the States, and also of the constitutional authority which rests upon the different governments to-day. The Government is now taking action to compensate the wheat-growers in some equitable manner to- enable them to overcome the disabilities they are suffering as a result of our high protective policy. The fixing of a. home-consumption price for wheat will, I believe, have the support of all political parties, because it is felt that something must be done to stabilize a national industry. But although the Commonwealth has the power under its tariff policy to prejudice the wheat industry, it lacks authority to compensate those engaged in it, and is driven to haggling with, bargaining with, and threatening the States in an endeavour to bring them into line so that it may be permitted to compensate those engaged in the industry. That is a striking instance of the need for a complete review of the constitutional authority of the Commonwealth. I could quote many instances to show the need for a complete review of the functions of the Commonwealth and the States. I do not think any one can regard as satisfactory the fact that a person who happens to reside on the border of two States has to register a motor vehicle in each State, while another person residing only a short distance from, the border can enjoy the full use of roads without being faced with the necessity for a double registration.
– The honorable member must confine his remarks to the financial relations between the Commonwealth anc! the States.
– I was going to develop the point by referring to the federal aid roads legislation and the grants made by the Commonwealth to the States for the purpose of road construction, and fo suggest that a petrol tax, which is more equitable than motor registration, would avoid dual registrations. The acceptance by the States of that grant is contingent upon them providing 15s. in the £1, and that 15s. is raised by the charges made for the registration of motor vehicles.
– That condition was withdrawn four years ago.
– I am glad to hear that there is one instance in which the Commonwealth has recognized the folly of the policy which it first laid down. The Commonwealth would be well advised to apply the result of its experience under the federal aid roads legislation to other grants which it makes to the States. The time is overdue for a constitutional convention to review the financial relationship of the Commonwealth and the States and the respective constitutional authority of these bodies. One point which emerges from a consideration of this subject is that the constitutional or financial relationship between governmental authorities in Australia should remain static. Not only should we have a convention to review the position which exists to-day, but provision . should also lie made for similar conventions at regular intervals to revise the constitutional and financial relationships of the Commonwealth and the States.
– In my opinion, the honorable member for Echuca (Mr. McEwen) has given a practical review of the situation which confronts the States in their relationship with the Commonwealth. I followed his remarks with great interest. Every honorable member who has watched the development of the States and the Commonwealth particularly in the last two years, will agree, I think, that, among the States, strong feeling is growing against the Commonwealth. Australia now seems to be going farther away from. instead of coming closer to, the ideal of unification and its avoidance of many parliamentary institutions for a small population. In the last two years at least the States have been totally dissatisfied with their circumstances, and with having to shoulder. the whole of the obligations entailed in meeting social requirements. In that most important aspect of finance they have been hindered and restricted.
We have watched the Commonwealth heap up fairly large surpluses, and the States flounder in a morass of deficits, and inherent difficulties. The difficulties of the States have been accentuated by the unemployment problem, of which the Commonwealth has virtually washed its hands. It has taken up the attitude that it is entirely a matter for the States which possess the necessary machinery. Such a state of affairs cannot continue much longer. As the honorable member for Echuca has said, the States are gradually reaching the end of their tether. Something practical will have to be done by the Commonwealth on their behalf. Evidence of the dissatisfaction of the States is to be found in the sharp division that existed between the States at the recent Loan Council meeting. I understand that, arising from that division at least three of the States propose to meet independently to devise a programme to. counteract the hand-in-glove working of the other States with the Commonwealth, which prevents their development.
The case of the Victorian Government provides further evidence of dissatisfaction with the attitude adopted by the Commonwealth at the Loan Council meeting. That Government had pledged itself to a certain course of action and, in order to carry out its promises, had to apply to the Loan Council for a certain amount of finance. Honorable members will remember the very fierce debate and argument which occurred at that meeting. At one stage, it appeared that the meeting would break down, and that the Loan Council would be done away with altogether. That may not be a quite correct statement of what occurred, but, at any rate, it was the impression to be gained from the various press reports of the council’s deliberations.
– The Victorian Premier (Mr. Dunstan), promised what he knew he could not give.
– The honorable member is not competent to make an observation of that character. Surely the Premier of Victoria was in a better position to judge the requirements of his State and the obligations of his govern ment than the honorable member. The Premier of Victoria had promised to giveadequate relief in the form of payment of full wages to sustenance workers, and to endeavour to meet the requirements of the primary producers. A common point of unity had been achieved between the various sections of the Victorian public, and the Premier had received support for his policy from all sides, including Labour. The Victorian public had become sick and tired of the vacillatingattitude adopted by previous administrations. Mr. Dunstan, therefore, had the Victorian people behind him in his earnest endeavours; but when he proceeded to give effect to what the peopleconsider to be a burning and urgent necessity, and to obtain sufficient loan money to work out a practical solution of the problems which confront theState, he was frustrated at the Loan Council meeting by an alliance between the Commonwealth and certain other States. The bill before the House seems to make for a continuance of that state of affairs.
If certain States decide to get together they can frustrate and destroy the economic policy of a State which does not fall in with the wishes of the majority. Victoria has suffered from that. Arising out of that frustration, Victoria, South Australia, Tasmania and, I think, Western Australia, propose to meet prior to the next Premiers Conference in order to arrive at an understanding, and to devise a scheme which in effect will bring about an inner group in the Premiers conferences and loan councils that will enable the members of that group to carry out their policies, irrespective of the decisions of the Commonwealth.
– If the States to which the honorable member refers put into the Senate a “ smaller States party “ the end sought would be achieved.
– Unfortunately we are not permitted to talk about another place. The circumstances surrounding this measure have forced States into expenditure which they may not have approved. For example, expenditure on forestry works may not have been approved by all the States; and there are other examples. Whether the States approve or not, however, the
Commonwealth is in a position to compel them to observe its wishes. If the Commonwealth makes an allocation of money to the States on condition that they provide similar amounts, and the States refuse, it may be argued against them that they are not meeting their commitments in the direction of providing work for the unemployed. Thus, serious repercussions may follow upon the adoption of that policy by the States. Political opponents could use the refusal of the Government as propaganda against the party in power. The public is not prone to go into the details. It accepts, instead, the propaganda of the party which is financially the best able to disseminate it.
I desire to carry this argument a stage further than the last speaker was prepared to go, and to point out the power of private finance. The issue in this bill seems to be the wish of Tasmania not to carry out certain instructions issued by the Commonwealth. Evidently private finance does not approve of Tasmania’s attitude, and that State is accordingly excluded from benefits. The majority decision of the Loan Council regarding the meeting of deficits did not meet with the approval of Tasmania.
– Tasmania is not able to carry out the decision.
– It is obvious that the majority of the Loan Council would not accept Tasmania’s view, and who is better able to express Tasmanian opinion than the State’s own representatives at the council? They go to the poll with a policy and they know the requirements of the State. What is a matter of little importance in New South Wales may be a major question in Tasmania. Tasmania is down to bedrock and cannot afford to meet the demands of the larger and more powerful States. Accordingly, it is brushed aside and not included in the list of beneficiaries. But what applies to Tasmania to-day may equally apply to any other State in future. It may be argued that New South Wales is prepared to meet the requirements of the Commonwealth and reduce its deficit, but, in order to do so, it may adopt a policy which would not be approved by many members of this
House. For instance, it might enter upon a programme of reducing taxation imposed on people who could well afford to share in the burden; or social services might be reduced and a standard of living created at a level considerably lower than what it should be.
If private finance is to be permitted to influence government policy, the time will arrive when there will be hardly any need for governments at all. All that will be required will be an official in the Treasury with the necessary organization, and the whole machinery of administration will be carried out from the real source of government, namely, the Loan Council. That will dispense with the frills of State parliaments. It would be fitting, therefore, for other States to realize that what is taking place regarding Tasmania to-day may react to their cwn disadvantage at some future time. States should have the right to determine their own policy. I leave it at that, but I could not let pass the opportunity to endorse the comment of the honorable member for Echuca, because I regard it as the most practical review of the situation I have heard for some time.
– in reply - This bill has opened up a very interesting debate, the discussion having followed in general two main lines. First there is the broad, general question of Commonwealth and State financial relations, and secondly, the subject of monetary policy introduced by the Leader of the Opposition (Mr. Curtin). There is a good deal of misapprehension in the public mind regarding State and federal relations, and, without reflecting upon anyone individually, I may say that there is a tendency to make political capital out of something that is really not of any great consequence at all. I think sometimes that Machiavelli’s advice to his prince, that when confronted with a difficult situation at home he should draw attention away from it by embarking upon a foreign adventure, is not out of the minds of some gentlemen in State politics. In this case the foreign adventure to which State leaders direct attention of their people is an attack upon Commonwealth financial policy.
The general outline of the position in regard to State and federal financial relations, as I see it, is this: The State governments were able to balance their budgets in normal times from the revenues available to them, but with the advent of and the intensification of the depression, the States experienced increasing difficulty in balancing their budgets and for some years have, in fact, been unable to do so. For instance, during the 10 years prior to 1929, the States, generally speaking, balanced their budgets. In the period after 1929 all the States have had difficulty, although I am glad to say, decreasing difficulty with their budgets, lt has been suggested that the States, being sovereign authorities, should have power to collect adequate revenues by taxation to enable them to balance their budgets in all circumstances. As an ideal proposition, it is difficult to combat that’ statement, but a federation is an extremely difficult form of government to operate ideally in respect of the financial relations between the component governments. All federations ha ve had the same difficulty. It is only necessary to mention the experiences of the United States of America, Canada, Germany and South Africa to understand that the difficulties with which we are confronted are not peculiar to ourselves. I think I can safely go so far ns to say that no other federation has got along in this respect even so well as we have, despite the fact that Australia has difficulties peculiar to itself. The States are possessed of natural resources of greatly varying degrees, and seasonal variations are likely to affect the financial position of any one State even from year to year - particularly a State -which is largely dependent on primary production. I was particularly impressed by one paragraph in the report of the Commonwealth Grants Commission, in which the commissioners stated that they did not believe that any re-arrangement of taxation fields, or of responsibilities between the States and the Commonwealth, would enable special grants from the Commonwealth to the States to be done away with. I do not believe that we shall ever be able to avoid the making of periodical grants from the central government to those of the States, which are least fortunately situated. The ideal condition under which the States would be able to balance their budgets in all circumstances is unattainable, even with all the. goodwill in the world on the part of this Parliament. During the last few years the governments of Australia, and particularly the Commonwealth Government, have had the choice of two courses. They could allow the States to go on producing deficits each year until such time as conditions improved, and State budgets could once more ‘be balanced. That was one course. The alternative was to increase taxation to such an extent that all governments would be able to balance their budgets. The Commonwealth Government can balance its budget, and is doing so now, whereas the States in general are in deficit- although, fortunately, in a decreasing measure each year. It has been stated that, if the Commonwealth Parliament wished, it could abandon to the States certain fields of taxation, thus enabling them to adjust their finances. If that were done, the Commonwealth would, in turn, be faced with a deficit, or, in order to balance its budget, would be compelled to impose new taxes, or greatly increase the rate of existing taxes. It is more important that the Commonwealth should balance its budgets than that the States should, because, in the eyes of the people outside Australia, and particularly in places where the credit of the country is determined, the financial position of Australia is taken as being reflected in the Commonwealth budget. If the Commonwealth abandons certain fields of taxation to the States, or takes over some of the responsibilities now borne by the States, the inevitable result must be that the people of Australia as a whole will be taxed considerably more than they are at present. I believe that, until world conditions are more stable than they are now, we shall be right in accepting the lesser of two evils.
– But why impose new obligations on the States?
– I regret that I did not hear the whole of the honorable member’s speech; but I understand that his contention was that the Commonwealth, by exercising the power of the purse, was attaching conditions to certain grants in a manner derogatory to State authority. It is true that the Commonwealth does attach conditions to certain grants; but I do not think that that should be a reason for complaint. For instance, when the federal aid roads grant was first made, fairly rigorous conditions were attached; but, after the depression had descended upon the country, most of those conditions were removed., until now the States may use the money for practically any purpose connected with the construction or maintenance of roads. In regard to the forestry and mining grants to the States, £2S4,000 and £322,000, respectively, which were made last year, the conditions attached to them were accepted by the State representatives after a full and frank discussion. All the representatives agreed that the States should accept the grants on the understanding that they were to contribute, if my memory serves me correctly, something like.£l for £1. I cannot see that there was anything derogatory to State sovereignty in that.
In regard to the present grant of £500,000, I draw attention to the fact that, in the case of all the States, the deficits this year are lower than was believed would be the case when the last Loan Council meeting was held. Therefore, the condition of a £1 for £1 subsidy by the States will not impose any hardship upon them.
– Why was the condition imposed if it was not necessary?
– Of course, the Commonwealth could have made an outright grant to the States; but, when the Loan Council met, the States were not able to make anything more than a rough guess at their deficits. As a matter of fact, the estimates submitted at the Loan Council were rather high, and it was my duty, as chairman, to make every effort in order to see that the deficits were kept as low as possible, so that the amount of short- term finance necessary to meet them should not be greater than was necessary. I obtained the approval of Cabinet for a grant of £500,000, and, it being my duty to make the money go as far as possible, I suggested that the States should make efforts to reduce their deficits by a similar amount. This proposal was accepted by all the States with the exception of Tasmania, whose representative said that, in the absence of his Premier, he would not commit his Government. It was agreed that the grant should be apportioned roughly on a population basis among the mainland States. Although the charge can be made that the Commonwealth imposes conditions upon the making of grants to the States, I do not think it can be argued that the conditions are severe, or that they cause hardship. It has been said that a constitutional conference should be called and that the relations between the States and the Commonwealth Government should be rearranged. We had one constitutional conference in the early part of 1934, but nothing came of it. I did not believe that anything would come from that conference, because I could not believe that the six States would agree upon any proposal as to how the Constitution should be amended in a way that would be fair to all the States. I believed that anything to suit the three eastern States would certainly not suit the other three States, and vice versa. With all the goodwill in the world, and the most earnest desire to settle the vexed financial relations of Commonwealth and States, I do not think the matter will ever be adjusted satisfactorily. We may better the present position slightly, but I believe the central parliament will always be faced with the necessity for making grants out of the taxes yielded by the more populous States to aid the States with more limited resources and smaller populations. The honorable member for West Sydney (Mr. Beasley) mentioned the growing feeling against the Commonwealth in this regard. I shall not repeat what I have said about Machiavellian tactics, but I believe that such tactics are not unknown in certain States. When there is trouble in domestic politics - when, for instance, two parties are not getting on well together in the same political bed - there is a tendency to inveigh against this iniquitous Commonwealth Government and to charge it with doing something to tread the States into the mud. The honorable member would admit under other conditions that what he said about, the States being wholly dissatisfied with Commonwealth treatment may be slightly exaggerated.
– Not very much.
– No doubt the honorable member, coming from Victoria, is affected by the political atmosphere of that State at the moment. The honorable member for West Sydney has given voice to an opinion which has been frequently expressed in this House and, perhaps, more frequently in the press, namely, that the Commonwealth, by iniquitously high taxation, and with a fine disregard for the rights of the States, is gradually eating into the fields of State taxation, thus making the balancing of State budgets impossible. That is the impression left on the minds of many people by a lot of the propaganda that is indulged in outside this Parliament and in some sections of the press. The people are led to believe that the Commonwealth revenue has been growing year by year and that it has been necessary for it to search for means of spending its huge revenues, while, on the contrary, State revenues have dropped year after year until the States are on the brink of penury. Lately 1 have gone into the figures of Commonwealth and State revenues, and have tabulated for the last 25 years the revenue of the combined States from all sources - that is, their revenue from taxation, together with the grants and payments that they have received from the Commonwealth. In other words, I have endeavoured to set down how much money each year the States have had available to them. In another column I have set down the net Commonwealth revenues after paying the grants to the States. These figures are quite illuminating.
– The Minister must not forget the responsibilities of the States.
– Side by side with their growing responsibilities the States have enjoyed growing revenues. The conception in the popular mind of the swollen coffers of the Commonwealth Treasury and the depleted resources of the downtrodden States is entirely erroneous.
The table which I have compiled is as follows : -
Honorable members will observe that between 1920 and 1935 the revenue available to the States to spend had grown from £21,199,000 to approximately £51,000,000, and the Commonwealth revenue in that period had grown from £35,128,000 to approximately £45,000,000. In the last ten years the States’ revenues have grown by nearly £20,000,000, whereas last year the net amount available for expenditure by the Commonwealth was practically the same as it was a decade ago.
– But the States had full obligations to deal with unemployment.
– I agree that the States have not had too much revenue; on the contrary they have .had too little; but the statement that they have been ground into the mud while the Commonwealth has been rolling in affluence is totally erroneous.
– .Has the Minister included the wheat bounty as money available to the States?
– The wheat bounty has not been included in the figures quoted. I have no desire to speak at length at this stage. I have hesitated to embark on the stormy seas of monetary policy though the Leader of the Opposition has given me a fine opportunity to do so. The honorable member raised the whole subject of expansionism in the monetary situation - an issue which is by no means irrelevant to a discussion of the bill. In Australia the Commonwealth Parliament is charged with responsibility for monetary policy. This Parliament voluntarily delegated that authority in great part to the Commonwealth Bank. I think I can short-circuit what I might otherwise be tempted to say at much greater length by declaring that the Commonwealth Government has no complaint to make regarding the Commonwealth Bank’s exercise of its responsibilities in respect of monetary policy. If the honorable member’s proposal were carried out, and short-term bills for the financing of deficits of State governments were not to be funded in the year in which they were issued, I believe we should very soon reach a position of dangerous expansion.
– “What about the open market ?
– That matter was discussed at great length at the last two meetings of the Loan Council and the arguments for and against its adoption were very, nicely balanced. I, too, was at first very much attracted to the idea of an open market, but I am sure that, if the honorable member had an opportunity to consider it further he would be less enamoured of it. It is, as I have said, a very complicated question, the advantages and disadvantages of which arc very evenly balanced. The Loan Council came to the decision, with which I am completely in accord., that the time is not ripe for the adoption of an open market for treasury-bills. I do not look upon an open market as one of the major elements that will make for a solution of our difficulties; I rather regard it as of relatively minor importance.
– The present system of issuing treasury-bills has been very profitable to some people.
– The rate of treasurybills has been reduced in harmony with the general drop in interest rates, until it is now very far from being attractive to the trading banks.
– Ordinarily interest rates in Australia and England are comparable, but the short-term debt rates are not.
– That is so. But the money markets in England and Australia are as different as chalk is from cheese. All the surplus funds of the world are concentrated in London, and are available to earn any interest that is offered, because of the volume of such funds and the tremendous demand for treasury-bills each week. In Australia tie local money market is restricted. We have no funds from outside for invest ment in treasury-bills, and I am glad that we have not, because these fugitive funds from overseas might cause us embarrassment in times of difficulty.
– We do not know what money a change of policy would attract.
– If we had to count on the attraction of overseas funds to Australia to take advantage of the open bill market the Leader of the Opposition would be quickly determined against that system. Those fugitive balances are dangerous; they would be with us while it suited the investors, but disappear on the slightest scare. So long as we can carry on with our own resources without large and indigestible aggregations of money surging into Australia and on the slightest scare surging out again our economy will be more stable.
– It does not necessarily mean that.
– If we had an open bill market in Australia and the rate of interest was attractive to overseas money, then such funds would come here.
– Sellers cannot sell unless there are buyers.
Mi-. CASEY. - These bills have three months currency.
– They are then due for redemption ?
– Yes ; and if the investors are scared the balances can be withdrawn. In Australia it would be necessary to attach conditions to the open market quite different from those that operate overseas. In London the Government can be quite sure that when it invites tenders for treasury-bills each fortnight the bills will be taken up to almost any amount; but in Australia we could not be so sure, and one condition we would have to impose would be that the Commonwealth Bank would have to underwrite the fortnightly issue of treasurybills, so that the ‘Commonwealth would not be cut short of funds practically at a day’s notice.
– Lt is practically doing that now. Does it not undertake to discount bills on presentation?
– Yes, but at its own rate. If it does not suit the Commonwealth Bank to redeem treasury-bills before the due date it can exercise control over the market by imposing a punitive rate of discount. However, I hope that on some future occasion the House will have probably a more appropriate opportunity to discuss monetary policy, because I think there is a good deal to be said about it. I should not like honorable members to think that the Government is in any way opposed to the policy of the Commonwealth Bank. It keeps closely in touch with the position here and in London, and, so far as is appropriate, with the work of the Commonwealth Bank generally. My personal belief is that if we had adopted the course suggested by the Leader of the Opposition and had financed the deficits of the States by short term Treasury bills and if we had not funded those bills within the year in which the deficits had been incurred, we should, by this time, have created a condition of dangerous expansionism in Australia.
Question resolved in the affirmative.
Bill read a second time and passed through its remaining stages without amendment or debate.
In committee: (Consideration resumed from the 17th October, vide page 788) :
– The purpose of the bill is to seek formal Parliamentary approval for the expenditure, on public works, of the relatively small sum of £45,9S1, paid for out of the Treasurer’s Advance for the financial year 1933-34. Honorable members may recall that in April last the ordinary supplementary Estimates were passed but owing to the pressure of other public business it was not possible to dispose of the measure now before the committee. It is the practice to await the report of the Auditor-General before submitting these Estimates to Parliament. The report was laid on the table of the House on the 14th March last, and I submitted this bill about a month later but, as I have explained, the pressure of other business prevented its passage.
Bill agreed to, and passed through its remaining stages without amendment or debate.
– by leave - Certain questions which have been asked in Parliament in reference to the ItaloAbyssinian dispute and the actions of the League of Nations and its member States in imposing sanctions under article 16 of the League Covenant, as amended and interpreted by the declaration of the League Assembly in 1921, following on the declaration by the League Assembly that Italy is the aggressor in the dispute, would seem to indicate that a brief statement should be made regarding the relationship between the League and its member States.
The inference contained in the questions referred to, and in comments which have been made in debate by some members of the Parliament, seems to be that a member State, having joined in the declaration that Italy is the aggressor, is automatically and without further consultation committed to support certain specific sanctions. This assumption is inaccurate. The procedure is that each member State has a representative on the League, and the committee that has been sitting to deal with sanctions consists of the whole of the members of the League with the exception of Austria, Hungary and the parties to the dispute. When, therefore, any proposal is made, either for the imposition of any new sanction, or for the extension of an existing one, the representative of the member State can, and in the case of Australia, does, consult his government as to the action he should take on the proposal placed before the League. It will thus be clearly seen that before the Commonwealth can be committed to the imposition of a new sanction or to the extension of an existing one, the Government of the Commonwealth has an opportunity to consider the proposal and to instruct its delegate, Mr. Bruce, as to its attitude to the new proposal. To give an instance of this procedure, before Australia, or any other member State, could be committed to the imposition of military sanctions, the proposal to impose them would first have to come before the Government of the Commonwealth, which would give a decision thereon and instruct its representative, Mr. Bruce, as to the vote he was to give on the proposal. Once any sanction is approved by the League - and this is the point of my answers this morning - no member State, unless it is able to have its case treated as a special one, as provided under the 1921 resolutions, can refuse to give effect to that sanction without breaking its obligations under the Covenant, although certain details of method and time are left to the individual governments.
.- by leave - The purport of the statement made to the House by the AttorneyGeneral (Mr. Menzies) is that, before the Co-ordinating Committee determines what sanctions shall be imposed, the Government of the Commonwealth will have been consulted by its representative on the League of Nations regarding the view of Australia concerning such sanctions. From the stand-point of the Government, that may be quite satisfactory, but from the stand-point of the Parliament and of the people it is not, because this Parliament has been kept entirely in the dark regarding the views which the Government indicated to the High Commissioner in respect of the imposition of sanctions. The very statement -which the Attorney-General has just made to the House is the best evidence that could be adduced in support of the contention that the duty of the Government was to have consulted Parliament before any votes were cast by the High Commissioner, as the representative of Australia. I also think that it is important to keep in mind the consequences of every vote which the High Commissioner may cast. Subject to the statement of the AttorneyGeneral, it now appears to be clear that, as Italy has been declared the aggressor in this dispute, if sanctions are approved by the League of Nations, Australia is automatically and irrevocably committed to them. That would be the case in respect to. naval and military sanctions as well. It may also be a fact that, even though the High Commissioner, in interpreting the wishes of Cabinet, indicated to the Co-ordinating Committee the objection of Australia to the imposition of naval and military sanctions, the League may, despite that expression of disapproval, adopt a certain measure of military and naval sanctions. In that event, Australia, according to the Attorney-General’s interpretation of our obligations, will be irrevocably committed to the application of naval and military sanctions. That is a major issue which cannot be evaded. It really means that this Parliament has to accept a situation in which Australia may be embroiled in war. It is, I think, the view of members sitting on this side of the House that on such an important issue, having such tragic possibilities, before the High Commissioner acted as the mouthpiece of the Government, the Government should first have secured a mandate from Parliament for the views which its representative in Geneva was to express. Australia ought not to be placed in the position of being automatically committed to war with another country because of decisions made outside Australia. I am not aware of the existence of any obligations to the League of Nations that would necessitate Australia going to war with a country far removed from our shores, because of some decision by the League of Nations. Finally, I ask that before the Government commits itself further to an expression of views in regard to the nature of sanctions for which it will instruct the High Commissioner to vote, this Parliament should discuss the character and practicability of the proposals, and whether Australia ought to be a participant in their enforcement. In short, the present position is that the High Commissioner, as the mouthpiece of the Government, has expressed on behalf of Australia, views of which this Parliament has had no cognisance.
. - -by leave - The statement of the AttorneyGeneral (Mr. Menzies) is the first definite indication given by the Government to Parliament as to the exact position in which Australia now stands in this dispute. Yesterday, while questions concerning this matter were being asked in this chamber, honorable members were led to believe that it was competent for the Commonwealth Government to decide for itself just what sanctions it would aPPly> and the method of applying them. In other words, irrespective of what tho
Co-ordinating Committee in Geneva might decide or what votes might be cast, the final determination of the form of the sanctions, and the methods of applying them, was still, so far as Australia is concerned, a matter to be decided entirely by the Commonwealth Government. The statement made by the Attorney-General. (Mr. Menzies) alters that aspect materially. We now find that while the Government is permitted to discuss the form of the sanctions and may advise its representative to take a specific course, or advocate action along definite lines, if the Co-ordinating Committee’s decision is contrary to what the Government here decides, Australia will still be committed to abide by the verdict of the Coordinating Committee, or rather by the decision of the majority. That is an entirely different position from what the House was led to believe yesterday.
-The Co-ordinating Committee has been voting unanimously.
– Do I understand the Attorney-General to say that before sanctions can be applied, the Coordinating Committee must be unanimous in its decision ?
– The representative of Australia has not cast a vote contrary to the decision of the Co-ordinating Committee. Consequently, the contingency mentioned by the honorable member for West Sydney (Mr. Beasley) has not arisen.
– The AttorneyGeneral’s explanation, to my mind, adds confusion to an already complicated situation. In the first instance, the application of sanctions was a matter for unanimous decision; but the form of the particular sanction to be applied was not a matter for a unanimous vote. On the contrary, I believe it is a matter for the decision of the majority of the Coordinating Committee. Otherwise, one member could prevent the application of any sanctions at all by continuing to disagree in some form or other with every proposal made. I do not think that that is the case. To require a unanimous decision in this case would bo illogical. I join with the Leader of the Opposition (Mr. Curtin) in emphasizing the very serious nature of the situation at this stage. Apart from the form of the sanctions, the next important consideration is the enforcement of them, and Australia as a member of the League is bound by the Covenant to supply its proportion of the armed forces necessary to enable the sanctions to be put into operation; that, in short, means that Australia will be committed to direct participation in war. The effects cannot be foreseen by any person. As the lives of Australian men may be at stake, this Parliament should be immediately advised of every detail, and be given the opportunity to discuss the matter fully so that it may know exactly whither this country is heading.
Bill brought up by Mr. Casey, and read a first time.
. - by leave - I move -
That the bill be now read a second time.
As honorable members are aware, the Government proposes that exemptions shall be made from sales tax to an amount of £200,000 per annum. That represents a loss to the revenue of something under £150,000 during the present financial year. Including what is proposed by this measure, exemptions to a nominal amount of £2,500,000 have been made since the sales tax legislation was first introduced. That represents the exemption of about £50,000,000 worth of goods, or, taking into account the increase of trading activity within the last few years, probably £60,000,000 worth of goods, the loss to the revenue being approximately £3,000,000.
I anticipated that honorable members might be confused by the formidable size of the bill, which, unfortunately, was rendered necessary by the form in which exemptions had so far been made, and therefore have had circulated a printed sheet, which sets out briefly the additional exemptions proposed.
The method by which provision has to be made is so cumbersome that I propose later to introduce a consolidating measure giving sales tax exemptions in the form of a single self-contained schedule, classified in groups of associated goods, and arranged in numerical sequence. Such a relatively small document should be of great value to taxpayers generally.
I do not propose to deal in detail with the proposed exemptions. The list includes a larger number of minor items that are designed to remove competitive and other anomalies which have been disclosed within the last twelve months, the wiping out of which will afford much greater relief than the amounts involved would indicate, both to the commercial community and to the department. The most important exemptions are the following : -
Containers for exempt goods.
The relief afforded under that item will amount to about £40,000 a year -
Goods for use in public hospitals and public benevolent institutions and organizations.
– Is there a definition of of public benevolent institution “ ?
– The department is satisfied that it has a classification of what may properly be regarded as public benevolent institutions -
Pipes for drainage, sewerage, irrigation and water supply works.
Aids to hearing.
Sole leather for boot repairing.
The exemption of containers will, I think, remove a most troublesome item. A large class of merchants have to continue their registration as sales taxpayers, not by reason of the fact that the goods which they handle are taxable, but solely because the containers of their exempt goods are subject to the tax. It is expected that a large number will now be enabled to de-register, and thus be saved a good deal of administrative and clerical trouble.
The exemption of goods for the use of public hospitals and public charitable institutions has been strongly advocated by honorable members on both sides of the House from the inception of this tax. The list of exemptions has been gradually extended, and possibly embraces two-thirds of the requirements of these institutions. As the exemption of the remainder will not cause the Government to lose a great deal of revenue, it is proposed to make the exemption complete.
The general exemption of pipes will remove a number of anomalies, and I think will be welcomed by the community generally. Until recently, the exemption was limited to galvanized iron pipes of a dimension of 3 inches. Revenue considerations have so far prevented wholesale exemption; and even now the Government has not found itself able to give complete exemption to all piping accessories, because further anomalies might ensue.
The exemption of pipes for drainage, sewerage, water supply and irrigation purposes, and the necessary fittings, will be greatly appreciated in view of the considerable amount of sewerage work that is being put in hand. The addition of spectacles and aids to hearing to the list of exempt goods removes from the sphere of sales taxation practically the last of the articles used for the alleviation of human suffering and infirmity.
The items now being included in the list of exempt goods have been selected after the most careful investigation, and every effort has been made to remove anomalies and prevent new anomalies from occurring. The very closest investigation is necessary before any article may safely be added to the list of exempt goods. Most of the troubles that have occurred in the past in the administration of our sales tax legislation have been due to the addition of items to the list of exempt goods before a proper investigation had been made into the effect of such action. The most careful investigation must be made before the effect of adding an article to the list of exemptions can be ascertained. It takes weeks of investigation by expert officers to make sure that the addition of even one article to the list of exemptions will not create competitive anomalies in respect of goods of a somewhat similar kind.For this reason, I intimate to honorable members that the Government will not be able to make any further additions to this list during the passage of the bill through Parliament. Applications for exemptions from sales taxation are being continually examined by the officers of the department. Further administrative difficulties can be avoided only by this means. The Government proposes, therefore, to follow the procedure of introducing one bill in each twelve months to add to the list of exempt goods only such articles as have been carefully considered.
Statements have appeared in the various sections of the press during the last twelve months to the effect that no further additions should be made to the list of exempt goods.
– Hear, hear ! The rate of tax should be reduced.
– The honorable member does not seem to realize that a reduction of the rate of tax by 1 per cent, would involve a revenue loss of £1,750,000. The Government is not prepared to surrender this amount of revenue at present. It intends, however, to continue adding items to the list of exempt goods from time to time, following upon the closest investigation of applications for this relief. If no exemptions from sales taxation were made the tax would bear with equal hardship, quantitatively, on all sections of the community, and the poorer people, who are the least able to pay, would be involved to the same extent monetarily as the richer people, to whom sales taxation is no burden at all. The Scullin Government, therefore, when it introduced the original sales tax legislation rightly, in my opinion, provided for the exemption of a wide range of goods chiefly of the kind used by people on the basic wage or thereabout. This procedure has been followed since that time, until it can now be said that sales tax is imposed on only a very few of what might be called the necessaries of life in common use by the poorer people of the community. Practically every article included in the regimen adopted by the Arbitration Court, and also many other articles in every-day use have, happily, been exempt from sales tax, with the result that only a very small proportion of the wages of the working people now goes in this class of indirect taxation. The Government does not intend to falter in its policy of adding goods to the exempt list from time to time. If it did so, it would be neglecting its duty. To make a reduction of even 1 per cent, in the rate of the sales tax would occasion a loss in revenue of £1,750,000. The time may come when that . loss can be faced ; but that is not the case at the moment.
For some, little time the officers of the department have, at my request, been making a comparison between the Canadian sales tax legislation and our own. The Canadian law, though not entirely similar to ours, is closest to it in structure. In fact, our law was to a certain extent based on the Canadian enactment. Under the Canadian law, a wide range of goods is exempt. A close comparison of the Canadian and Australian exemptions shows a remarkable coincidence, not only in the general groups affected, but also in the actual articles of each group; but our range of exemptions is somewhat wider than that of Canada.
– Will the Treasurer elaborate the proposal for the exemption of goods for hospitals and charitable institutions ?
– A complete exemption is being given to all goods purchased by hospital authorities for their own use. I have directed attention to the list of organizations to which exemptions apply.
– Does the exemption from flour tax apply to exactly the same organizations ?
– I cannot, offhand, commit myself on that point; but I have been given to understand by the officers of the department that general satisfaction has been expressed, not only with the list of organizations to which the exemptions apply, but also with the general administration of the law in regard to them.
– Will the Treasurer inform me whether chemicals used for clearing timber are exempt as well as those used for eradicating noxious weeds?
– -I believe that the exemption applies in both cases, though I cannot at the moment recall any instance of the use of chemicals for clearing timber.
Debate (on motion by Mr. Curtin) adjourned.
Message recommending appropriation reported.
In committee (Consideration of GovernorGeneral’s message) :
Motion (by Dr. Earle Page) agreed to -
That it is expedient that an appropriation of revenue be made for the purposes of a bill for an act to provide for financial assistance to the States in the provision of relief to primary producers, and for other purposes.
Standing Orders suspended; resolution adopted.
That Dr. Earle Page and Mr. Hunter do prepare and bring in a bill to carry out the foregoing resolution.
Bill brought up by Dr. Earle Page, and read a first time.
Dr.EARLEPAGE (Cowper- Minister for Commerce) [2.53]. - I move -
That the bill be now read a second time.
This is a bill to provide for the payment, through the States, of a subsidy of 15s. a ton on fertilizers used in the production of primary products other than wheat. In the Financial Relief Act, 1932, provision was made to assist farmers in the purchase of fertilizers used in growing crops other than wheat. Through the State governments a subsidy of 15s. a ton was paid on fertilizers applied to the soil in the year ended the 30th November, 1933, the total payments ‘being approximately £245,000. That amount was distributed among the States in the following manner : -
New South Wales, £20,000; Victoria, £88,500; Queensland, £32,500 ; South Australia, £35,000; Western Australia, £51,000; Tasmania, £18,000. Of the amounts advanced £71,000 was expended on top-dressing; £60,000 on the cultivation of oats; £55,000 in producing fruit and vegetables; and £29,000 in growing sugar cane.
The subsidy proved of such benefit to primary producers, in that it encouraged the desirable practice of adequately fertilizing the soil, that the Commonwealth provided a further £250,000 in order to pay a subsidy of 15s. a ton on fertilizer applied to the soil in the growing of crops other than wheat during the year ended the 30th June, 1935. That amount also was paid to the State governments for distribution to the primary producers concerned. The accounts for that year are not yet complete, but so far the sum of £215,000 has been distributed as follows : -
Victoria, £58,500; New South Wales, £22,000 ; Queensland, £24,500 ; South Australia, £44,500; Western Australia, £52,000; and Tasmania, £13,500. A further £35,000 has still to be distributed. The primary industries which use artificial manures have benefited greatly from their use. Although applied chiefly to pastures, considerable quantities of artificial manures are also used in the production of oats, fruit and vegetables.
Experience has shown that when there is a tendency towards reduced returns from farms, f armers are inclined to curtail their expenditure by reducing the quantity of fertilizer used. That is most undesirable. As it is essential that Australia’s primary production should be maintained at the highest state of efficiency, the Government feels fully justified in assisting farmers to use fertilizers to the greatest possible extent where such fertilizers are necessary to obtain the bestresults from farming operations. Provision is, therefore, made in the bill for the appropriation of £275,000, which will be paid to the State governments for distribution to the primary producers concerned at, the rate of 15s. a ton on fertilizers used in the production of primary produce other than wheat during the year ending the 30th June, 1936.
In previous years it has been found that a certain amount of hardship was imposed on farmers by excluding from the bounty quantities of fertilizer in less than one-ton lots. It has, therefore, been decided that the bounty will be paid on halfton lots during the current financial year.
No provision was made in the Financial Relief Act, 1932, for a closing date for applications for relief in respect of the year ended the 30th November, 1933, and it has been found difficult to close the accounts in respect of that year, because isolated applications are still coming in. Clause 11 of the bill fixes the 30th day of November, 1935, as the closing date for applications in respect of the 1932-33 assistance.
The approximate allocation of the £275,000 to be provided for this year is as follows: -
The increased amount payable to Victoria is mainly due to the extension of the practice of top-dressing pastures in that State. Following previous practice, these amounts will be paid to the State governments for distribution to the primary producers concerned, after claims have been certified by the Department of Commerce.
Debate (on motion by Mr. Curtin) adjourned.
Consideration resumed from the 17th October, (vide page 833), on motion by Mr. Casey -
That the first item in the Estimates under Division 1 - the Senate - namely, “ Salaries and Allowances, £7,379,” be agreed to.
Upon which Mr. Curtin had moved by way of amendment -
That the first item be reduced by £1.
.- At this juncture I do not propose to deal with the financial aspects of the budget, but shall refer, first, to the Government’s policy in regard to trade treaties. In my opinion, most honorable members are over-sanguine regarding the advantages (o be derived by Australia from a greater export trade. Having given this matter some thought, I am of the opinion that great difficulty will be experienced in obtaining advantages from other countries, as the result of any trade treaties which may be entered into with them.
It is indeed unfortunate that the Government is unable to make public the results of each stage through which the negotiations are passing. No such secrecy was observed in the negotiations prior to the Ottawa Agreement which was the most important treaty ever concluded by an Australian government. All sections of the Australian community affected .were represented at these negotiations.
This matter is of para’mount importance to the people of Australia and it is hardly necessary to state that the Government’s inability to make known developments as they take place is very disquieting to hundreds of thousands engaged in industry. These people realize that a false move on the part of the Government can cause untold disaster to many industries which are now depending upon an established market for the sale of their output.
Coming now to the basic principle upon which the whole subject must rest, I think I speak with the concurrence of all honorable members when I declare that no good purpose can be served by treaty negotiations unless the direct gain from each bargain to the Australian community as a whole, will show a satisfactory return for what is conceded. I feel certain that this is the principle upon which the Minister directing negotiations for trade treaties (Sir Henry Gullett) is basing his deliberations. If it were not, then no good purpose could be served by continuing negotiations. Furthermore if the Government had not been actuated up to the present by this principle great dangers would now lie ahead. However, the Prime Minister (Mr. Lyons) has frequently stated that this Government will not legislate in the interests of any one particular group in the community, but will take into full consideration the conditions, requirements and interests of all sections. The Government’s record over the past four years proves beyond doubt that this principle has at all times been upheld. It has always been maintained that industry cannot give of its best while confidence is lacking; therefore, to allay the anxiety of many who may be affected by the implementing of trade treaties the Prime Minister might consider the advisability of again assuring the people of Australia - specifically in regard to trade treaties - that nothing will be done to jeopardize their future in any way. From evidence obtained by association with workers in my own electorate I feel sure that such a declaration would be appreciated.
The difficulties confronting the Government in its attempt to give practical effect to the theory of ideal reciprocity are easily recognized. Fundamentally, reciprocity is the underlying principle of all trade. There is nothing novel about it; trade is exchange, and reciprocal treaties merely limit the range within which trade may be carried on. Trade treaties which damage Australian industries ‘or British trade in Australia will be satisfactory neither to this country nor to the foreign powers with whom they are concluded. To avoid dissatisfaction and possible international complications, the utmost care must be taken to ensure that concessions are confined to noncompetitive products. It is obvious that by reciprocal treaties we can only exchange a greater quantity of our primary products for a greater quantity of another country’s secondary products. There is a limited field on either side. If concessions can be made permitting the entry of n’on-competitive secondary products carrying only a revenue tariff, the amount lost in taxation will have to be foregone or made good from some other source. Undoubtedly concessions in this direction may be justified and, possibly, <jan be arranged without unsatisfactory repercussions. “ But large importations of competitive secondary goods can have only one result - the diminution of employment in Australia. It is simply a matter of degree; the effect can be irritating, damaging or devastating. If we agree to accept more of certain imported goods which are competitive with some of our own products and the importation of which, therefore, may cause unemployment, it then becomes a matter of transferring labour to other productive sources. This is the crux of the whole problem of trade treaties and of most other economic problems as well. In regard to primary products, there are limits to the quantities which can be exported at present world parity. Exports ‘of primary products have not been limited in volume except in the case of meat. Our productive capacity therefore, is mainly regulated by price. No benefit is to be derived from acquiring wider markets in which our products have to be sold at prices below the cost of production. The greater the quantity we export of these goods the heavier is the cost to our community.
I draw attention to our balance of trade with Great Britain and our obligations under the Ottawa Agreement. The United Kingdom does not at present purchase from Australia goods sufficient to pay for the goods we buy from it, and the interest we ‘owe it. “We are now compelled to utilize the favorable balances in our trade with other countries in order to make good the deficiency in our payments to Britain; and satisfaction of the demands of foreign governments for a more equitable balance, of trade will, therefore, reduce the foreign credits we have available to meet obligations to Britain. This is a prospect which must be faced. Personally, while I ‘have every sympathy with the Government’s efforts to improve our trade, I cannot see any avenues for substantially increasing our imports from foreign countries except at the expense, of Australian industry or British trade with Australia. If means can be found to avoid that result, I shall support them.
At present we do not happen to have a most-favoured-nation agreement with Japan, but, nevertheless, if we should now arrange a treaty with that country, any concession we make in carrying out that treaty must be conceded automatically to all those countries with regard to which we do happen to be bound to extend mostfavourednation treatment. It will be necessary for us in practice to negotiate simultaneously with all powers with whom we already have a most-favoured-nation agreement, in order to see that Australian exporters receive adequate reciprocity for such widely spreading concessions that Australian manufacturers are not injured by some unexpected competition.
I now propose to examine the present basis of our external trade. People outside Australia do not, as a rule, purchase Australian goods because of any special regard which they have for the Australian people. On the whole they buy them because they believe that, as compared with similar products offered by other countries, Australian goods are of equal quality, or represent better value for the money. Our own purchases from abroad are also - to a large extent - governed by similar motives. Again, we must remember that trade is almost entirely carried on between individuals and not between governments. It is interesting to note our trade position with Japan and America. In 1934 Japan purchased from us goods to the value of £11.468,459, while we took in return goods valued at £3,536,581. Wool is responsible for £7,969,600 of this total and it is around this product that discussions will centre. In purchasing 22 per cent, of our total production of wool, Japan is obtaining a raw product vital to its textile industries, thus providing work and purchasing power for thousands of Japanese workers. J apan is buying wool from Australia, not from any altruistic motive, but because Australia is the only country which can supply it of the quality and at the price desired. I am referring more particularly to our fine merino wool. Australia produces only 23 per cent, of the world’s wool, but, fortunately. 75 per cent, of the best wool produced.
– Does not Australia obtain the best price for fine merino wool ?
– Yes. Large quantities are purchased in Australia, because wool of a similar quality i3 not obtainable elsewhere. Japan is buying large quantities of Australian wool, and will continue to do so while it can obtain supplies at id. per lb. cheaper than it can be obtained elsewhere. As a negotiator in the produce markets of Australia, I can say quite definitely that if I were the Governor-General of Australia, and booked my seat in the Sydney Wool Exchange alongside an Australian aboriginal whom I might be opposing, the sale would be made to the aboriginal if he offered £d. per lb. more than I was able to give. I mention this to show that sentiment does not enter into business. Japan’s position in this regard is totally different from that of Germany, which in implementing its national policy is directing its purchases to “ other countries, and is now purchasing increased quantities from South Africa. Germany purchases a considerable quantity of wool on the London market. As there is only a given quantity of wool in the world, buyers were sent from Germany to operate directly or indirectly on the Australian market. Their purchases had the effect of maintaining Germany’s purchasing power in Australia. It does not necessarily mean that Germany must buy the same quantity of wool on the Australian market to maintain its purchasing power in that market. If Germany buys some of our wool on the London market, the competition created must react in Australia. I admit, of course, that aggressive competition in the sales room makes a great difference; but it must not be thought that because some countries make some of their purchases in Australia and some in other markets, their buying power is completely lost to Australia. The position of Japan is quite different. I trust that Ave shall be able to come to some satisfactory arrangement
Avith Japan, but I am sure that that country is fully alive to, and appreciates, the difficulties Avith which Ave are faced. On the other hand, the United States of America is able to sell large quantities of goods in Australia and take very little of ours in return, because it can sell us the goods Ave require at favorable prices. The position in connexion with Japan is exactly the reverse. Our unfavorable balance Avith the United States of America is about £6,000,000, but Ave have a favorable balance Avith Japan of about the same amount. We are continuing to purchase American goods simply because that country can supply us Avith motor ears, films and liquid fuel. Some have suggested that an even balance could be established by transferring some of our purchases from America to Japan, but, unfortunately, we cannot do so because the range is limited. At present America is negotiating a series of trade treaties, of which five have been concluded and about thirteen are still under consideration. In reading the Economist I noticed that Australia is not mentioned. The Economic Intelligence Service of the League of Nations states that -
The theory underlying most trade treaty negotiations is that commerce can be made to flow back and forward between two countries. This is of course quite impossible. Manifestly trade does not move along parallel lines between any countries, but is triangular or many-sided in shape. The effect of reciprocal trade agreements is to divert and clog these normal streams of trade and force such into channels running parallel between the two bargaining countries.
There may be uni-lateral, bi-lateral, triangular or multi-lateral trade agreements, but the recent history of trade negotiations discloses that bi-lateral agreements are usually adopted with the object of obtaining reciprocal trade between two contracting parties. The Economic Intelligence Service of the League of Nations recently examined the basis of foreign trade of twenty-two countries and found that -
Triangular or many-cornered trade forms the basis of the system by which the majority of countries acquire the raw materials they need. It has permitted young countries to develop their productive resources by means of foreign capital, and lias rendered it possible for the transfer of interest and dividends on account of the capital invested. The system which has developed determines to a large extent the economic structure of all trading countries and the international distribution of economic activities.
An examination of the trade between 22 countries during the years 1920-33, accounting for three-fourths of the total of the world’s trade, shows that the bi-lateral trade between these countries increased from 78.7 per cent, to 83.4 per cent., while triangular trade fell from 20.3 per cent, to 16.6 per cent. A very large proportion of the international trade having been triangular in the past, it is obvious that the attempt to build up balanced bi-lateral trade must mean a shrinkage in world trade as a whole. A move in the direction of bi-lateralism may thus cause a reduction of world trade many times greater than in the trade of the two parties originally concerned. So long as the world as a whole, in the scope of triangular transactions, is contracting as a result of the trend of trade policy towards bi-lateralism, the difficulties involved in the disposal of goods produced are likely to prevail.
I am not suggesting that because of these conditions the Government should not endeavour to arrange trade treaties. The Minister directing negotiations for trade treaties (Sir Henry Gullett) has said that practically every country has negotiators iri different parts of the world endeavouring to arrange treaties, and whether this is good or bad economically it is an established fact. Many economists, and also some honorable members in this House, are continually deprecating the trend towards economic nationalism prevailing throughout the world. Whether such a policy is right or wrong we have to face the fact that it is in operation in many countries. Australia is justified in making gestures to other countries in an endeavour to increase trade. For example it is reducing its custom tariff, while other countries are increasing theirs. Even Great Britain is increasing its tariff. An extract from the Empire Industries Association News Service, dated the 30th August of this year, reads -
The agricultural marketing report of the Ministry of Agriculture and Fisheries for 16th August. 1935, publishes the annual agricultural returns for 1935 for England, Wales and Scotland.
The report contains a table showing that the number of persons employed in rural industries has decreased from 801,300 in 1934 to 783,600 in 1935. The report continues -
The total decrease of 17,700 is exceedingly disturbing, following, as it does, a decrease of 28.211 between 1933 and 1934. When, between 1932 and 1933, there was an increase of 192,731, that is after the first full year of a measure of agricultural protection, there was every hope that the pursuance of a sound policy of protection was at last going to reverse the steady decline in agricultural employment which had taken place without a break between 1921 and 1931; but the unfortunate decision to enter into trade agreements with foreign countries, and the nature of those agreements when concluded, arid the misguided experiments with quotas in place of straight tariffs have disappointed the hopes that were properly entertained. As a result we have to record to-day a total agricultural employment which is 212,481 less than the total in 1021, the year in which this series oi statistics was commenced. It is, unfortunately, true to say that at this moment employment in agriculture is at a lower level than at any time in living memory.
The more the subject of trade treaties is considered the plainer it becomes that Australia’s economic salvation lies, not in them, but in maintaining a policy of one tariff for all countries alike, with a margin of preference, such as already exists for goods produced in British countries. It is to be sincerely hoped that nothing will be done by trade treaties seriously to retard our development of primary and secondary industries, and endanger our relations with other countries.
Before concluding, I desire to ask the Prime Minister (Mr. Lyons) to make an early statement on the question I addressed to him earlier. The workers in my electorate are anxious.
– In moving -
That the House do now adjourn,
I desire to notify honorable members of an appointment that the Government has made to the Commonwealth Bank Board. Under the Commonwealth Bank Act the term of office of Mr. R. W. B. McComas, as a director of the bank, expired on the 10th October, 1935. Mr. McComas was first appointed to the board on its establishment in 1924. He was re-appointed for a term of seven years in 1928. Mr. McComas brought to the board a wide experience in commerce, and a very special knowledge of primary industries; and as a director he has rendered signal public service during the last eleven years. As the Bank Act requires that any further appointment must be for a term of seven years, the Government has been regretfully forced to the conclusion that, on account of Mr. McComas’s age, his appointment should not be renewed.
After careful consideration, the Government has decided to fill the vacancy by the appointment of Professor L. F. Giblin, D.S.O., M.C., M.A., at present Ritchie Professor of Economics at the Melbourne University, and a member of the Commonwealth Grants Commission. Professor Giblin, besides having had practical experience in mining and farming, was Government Statistician in Tasmania for eight years, and was Acting Commonwealth Statistician in 1931-32. In this latter office he was a general adviser to the Government on financial and economic matters. Professor Giblin’s appointment will, in accordance with the Commonwealth Bank Act, be for a period of seven years.
.- At the risk of detaining honorable memhers for a few moments, I desire briefly to set out clearly my views concerning the Italo-Abyssinian crisis. The. world, and with it Australia, is on the verge of international conflict. “We have realized, I think, that the risk of war is latent to the present economic system, and that while the present system continues, it is impossible to prevent war. But means of diminishing the risk of it have been devised, and one of them is collective security. By signing the Pact of Paris Australia has subscribed to a policy that says that neither as a means of securing international security, nor for obtaining national redress or national self-assertion will it resort to war. The Commonwealth has also subscribed to the policy that in certain circumstances it will apply to belligerent nations the sanctions set out in article 16 of the Covenant of the League of Nations.
I am not concerned whether we take that action or not. All I am concerned about is that we should endeavour to exploit the possibility of preventing war, and particularly the present war, by the use of economic pressure, boycott, or, if you will, what we might call the sanction of non-intercourse. If the nations sincerely and concertedly apply that sanction they can prevent a conflict. I believe that if a great imperialistic struggle arises from the present trouble, it will be because the nations have not sincerely and concertedly applied an economic boycott, or the sanction of non-intercourse. If Australia says in advance that it is not prepared to co-operate in the application of that sanction, the sanction of nonintercourse will break down entirely. This country is an important factor in this connexion. It produces food, wool and metals, and if, as a producer of those commodities, it says that it is not prepared to join in with the other nations in the application of an economic boycott or a sanction of non-intercourse, the whole policy of economic sanctions will collapse at the outset, and the only result must be a great war, either immediately or within a short period. In Great Britain to-day the Government is preparing for an election campaign. For many years Britain has pinned its faith to collective security, under the aegis of the League of Nations ; but the British Government is preparing to face the electors with a request for a mandate, not for a policy of collective security, but for one of defence by isolated preparation for war, or, as it may be termed, collective security in the British Commonwealth of Nations.
This policy assumes the failure of the League of Nations and the policy of peace by collective security. Such a policy cannot but involve Australia. It is useless to talk of Australia being neutral. What General Hertzog said in South Africa in 1928 was based on his own construction of the resolutions of 1926; but I remind honorable members that those resolutions have been interpreted, with the consent of South Africa and of every other dominion, in a manner different from that in which General Hertzog interpreted them. General Hertzog said that the effect of the resolutions was to destroy the common allegiance to the Crown, and to convert the British Commonwealth of Nations into a number of nations held together by the mere fact that they had the same sovereign, just as Holland and Britain were held together under William III., and Hanover and Britain were held together by having the same sovereign during the period from 1714 to 1837. In support of that view General Hertzog quoted the opinion of Professor Lowell. That authority admitted that the conference of 1926 did not change the law, but, anticipating tha t the decisions of the conference would be worked out subsequently in the law, he said that what would happen would be a substitution of a loose personal union in place of the common allegiance. Since then there has come the Statute of Westminster, in the framing of which all the nations of the British Commonwealth took a hand. In the forefront of that statute is a declaration that the nexus of Empire is no longer subjection to the Imperial Parliament, but common allegiance to the British Crown. That means that, although when Britain is at war, we may not participate, we cannot trade with Britain’s enemy. We might say, “ We will not trade with anyone “ ; but we cannot say, “ We shall carry on business as usual “. There cann’ot be a war in which Britain is involved that does not affect Australia. We might not send men, but still it would affect our life in the world.
I think that everybody in Australia, and certainly the members of my party, are agreed on two things, the first being this: that we ought not to give spiritual or material comfort or assistance to Italy in its attack on Abyssinia, not merely because it is attacking Abyssinia, but because it is resorting to a method of settling a dispute which we,, in common with the other nations of the world, have repudiated. The second point on which there is agreement, not only universally within my party, but also to a large extent outside the party, is that we should not take part in any hostilities. To those propositions I subscribe, and. I believe the great bulk of the people of this country subscribe to them, also.
– What does the honorable member mean by “ hostilities.”
– I mean the use of arms. It is a strange thing to hear it urged that, while we are not constrained by membership of the League of Nations to participate in economic sanctions, we are constrained by our membership to employ military sanctions. We are not constrained by our membership of the League to do anything at all. It is not a superstate or a world government, but the position is that, if we desire to remain a member, we must co-ordinate our policies with the policies of the League of Nations. Otherwise, although it would not trouble me greatly, our membership may be cancelled. I have never professed great faith in the League, or belief in its possibilities. Indeed, I have much less faith in its possibilities than have most members of my party. However, having decided not to give spiritual or material comfort to Italy, we are limited to one of two courses. We may either do as the United States of America has done, and say that we will not supply goods to Italy, or possibly to either belligerent ; or we may co-ordinate our action with that of the other members of the League, so that the burden of non-intercourse may fall on us as lightly as possible. I prefer the former course - that we should not trade with Italy, and I am prepared to say that we should not trade with Abyssinia, either. It would not hurt Abyssinia for us to make such a declaration.
– That is the American: position.
– Yes, except that the embargo was limited to certain things. It is my duty to support any measures which .are designed to make it clear that the Australian people do not propose to give spiritual or material comfort to the Italian Government, and I believe it will be less harmful to Australia to carry out such measures in co-operation with other nations than to do so by isolated action.
I regard article 16 of the League Covenant as being subject to the later agreements entered into between the nations, and known as the Pact of Paris, which I take to mean that the nations repudiate the use of military force for national or international action. I am not prepared to support - and I join with every other member of my party in this - any military action by Australia on any pretext whatsoever. I have always feared that the League of Nations may become a screen behind which imperialistic wars may be prepared. The economic rivalries of the nations still exist, and they have been brought into prominence in connexion with Abyssinia. I believe that not one man should be sent from this country to serve overseas. I believe that no forces should be raised in this country for service overseas, and I will oppose to the best of my ability, both here and elsewhere, the raising of forces for service overseas to participate in this war. I believe, however, that the best way to create a .situation in which Australia will have to make up its mind is to break down the policy of economic sanctions. The only chance we have of averting the actual outbreak of war is to make the policy of economic sanctions and boycott as vigorous as possible. If the nations join in making that policy vigorous and effective, the danger of war is, may be, for the time being, averted, and is possibly removed. If they do not act in concert, then the danger of war is imminent; and if Australia says at the outset that it will not be a party to economic sanctions or boycott it will help to thrust the world into war.
I felt constrained to state my opinion to the House, because I have the misfortune to find myself at variance with members of my own party, for whom I have the greatest respect, and with the leaders of the two sections of the Labour party in this Parliament. I did not speak on this- subject last week, because I wished to consider the matter more fully before expressing disagreement with the members of my party. After earnest consideration over the week end, I have taken this first opportunity to express my opinion upon it.
.- The differences which the honorable member for Bourke (Mr. Blackburn) has propounded are differences of point of view and of consequences. The honorable member declares that economic sanctions, if properly applied, will prevent war. The answer is that war is already raging, and has been raging for some time, and the countries of the world have been engaged in taking steps to attempt to coerce Italy into abandoning its campaign in Abyssinia. But what has occurred? Italy continues its campaign in Abyssinia and the League of Nations as a world concert has become weaker as the result of the abstention from the League of Nations of major countries whose importance in carrying out economic sanctions cannot be minimized, and whose co-operation is essential to their enforcement. The honorable member for Bourke says that we should go on the road of an economic boycott of Italy, but if the course we . take leads to war, we should then retrace our steps.
The point of view of the Australian Labour party is that to march along that road is to bring Australia definitely nearer a situation in which the very thing the honorable member seeks to avoid will become inescapable. Australia will be gathered up into the vortex of European ‘ friction and in the conflict of world interests based upon differences as to whether sanctions shall be applied or not. “We see in sanctions the regrouping of world powers in which antagonism cannot be overcome, and the consequences, says the Australian Labour party, are that Australia is dragged into every European embroglio, and is pledged to endanger the lives of its citizens, and cripple itself economically in a task which the major countries of the world refuse to shoulder adequately, and which, in present circumstances, Australia is not strong enough to undertake. In the interests of Australia and in the interests of the preservation of its people, the Australian Labour party therefore believes that the Commonwealth should decline to he a participant in the present situation in Europe, because it cannot do so without ultimately being brought face to face with the necessity for taking up arms in the defence of the policy to which it has committed itself. If wc do not intend to fight for sanctions we ought not to undertake to enforce them. It is the view of the Australia Labour party that the present situation in Europe is of such a character that there is no justification for the lives of Australian citizens being imperilled as a result. Wo refuse to step out on the road on which the honorable member for Bourke, in a sort of cautious way, suggests we should take a few steps, because we believe that that road leads ultimately to world war.
– The situation which has arisen in connexion with the Italo-Abyssinian dispute opens up a phase of great interest, to honorable members on this side of the House. Mention has been made of the effect of the Pact of Paris on article 16 of the League Covenant. One honorable member has suggested that article 16 does not now apply, because it is superseded by a subsequent agreement known as the Pact of Paris. As I understand it, the position is that the Pact of Paris is to apply in terms not inconsistent with article 16. My colleagues and I take the view that the situation which has arisen as the result of the application of sanctions is that Italy will bc forced to take retaliatory action in its own interests. As a matter of fact, we are informed in to-day’s press of intensive warlike activity in the Mediterranean in the vicinity of the Egyptian border. It is said that Italy is massing armed forces to the fullest possible extent, and that Great Britain is likewise moving troops to meet any situation that may develop at any moment. All these things have happened within the last 4.8 hours, because of an action which the honorable member for Bourke (Mr. .Blackburn) says is necessary for the purpose of prs- venting war. As a matter of fact, instead of the dispute being confined to the actual parties and to the African continent, present indications lead us to believe that the conflict is likely to reach world-wide dimensions. It is quite possible that Italy, in defence of what it conceives to be its national rights, will interfere with ships travelling between Australia and Abyssinia just as the German submarines attacked Australian troopships and others during the Great War. In these circumstances Italy would claim that it was justified in taking such steps as it might deem necessary to protect its interest, and to use whatever military force it considered necessary tn meet any situation that might arise. Ali this has resulted from the application n’ sanctions by the League of Nations. The two things are interlocked. No honorable member can say that, while Aus- tralia is a party to the application of sanctions by the League it can be immune from the consequences of military action by Italy. Sanctions under these circumstances mean war; there is no getting away from that. Once we are committed to the application of these forms of sanctions, there is no limit to how far we may go, and we may eventually have to apply them to the fullest extent. If we engage in the application of these sanctions, wc must he prepared to take the fullest consequences of our action.
Question resolved in the affirmative.
House adjourned at 3.49 p.m.
The following answer to a question was circulated: -
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Cite as: Australia, House of Representatives, Debates, 18 October 1935, viewed 22 October 2017, <http://historichansard.net/hofreps/1935/19351018_reps_14_147/>.