26th Parliament · 2nd Session
Mr SPEAKER (Hon. W. J. Aston) took the chair at 2.30 p.m., and read prayers.
– How long is it since the Postmaster-General has looked at the outside of the Sydney General Post Office? Is he satisfied that it is in a clean and satisfactory condition? Does he still believe that it is only a few years since it was steam cleaned? If he is uncertain about the answers to these questions, will he promise to contact me when he next visits Sydney so that T can point out to him the accumulation of many years of dirt, dust and grime which needs removing?
– Mr Speaker, it is less than 36 hours since I had a look at the outside of the Sydney General Post Office. Since I became Postmaster-General, T have been more concerned with the interior of the General Post Office in Sydney. I believe that the circumstances under which people have been working and in which members of the public have been doing their postal business have been completely unsatisfactory, and in an endeavour to effect an improvement $75,000 is being spent on the interior of the Sydney GPO at the present time. I believe that if one looks around Sydney one will find that the outside of the Sydney GPO is in no worse condition than many other buildings.
– I address my question to the Minister for the Army. Will the honourable gentleman give special consideration to highly trained national servicemen whose skills cannot be used by the Army? Will he ensure that they will be retrained after their service to a standard of expertise not less than that attained before their Army service? In particular, will he consider the problems of veterinary science graduates whose profession requires a combination of scientific knowledge, art and judgment for its successful practice? These special attributes are apt to be lost quickly by graduates who commence their Army service before practising. Will the Minister endeavour to employ veterinarians in tasks in which they will use their technical skill? Also, will the Minister give consideration to their employment in the United States Army or in civilian work in Vietnam?
– Mr Speaker, the purpose of the national service scheme is to enable the Army to have sufficient manpower to meet the defence needs and commitments of the Army as determined by Government policy. In the allocation of national servicemen to the various corps of the Australian Army, every effort is made by the Army to maximise to the fullest the professional skills, background, experience and general capacity that national servicemen may possess. However, it will be clear that this is not always possible particularly when the basic need of the Army is for infanteers
I am well aware of the problem posed by the honourable gentleman in relation to employment of veterinary scientists. Every effort in fact is made to make use of their skills in the Army. However, I must say that the Army has no direct method of applying the skills of veterinary scientists. Although the Army at one stage did have a specific veterinary corps there is no intention to re-establish that corps because no need exists for it at this time. However, there are marginal areas in which veterinary scientists can be employed. I refer initially to our civil aid programme in Vietnam. A very limited number of veterinary scientists can be employed in this area. Limited vacancies are available also with the Australian Army Medical Corps. As to the possibility of some reciprocal method of utilising the skills of Australian veterinary scientists in the United States Army, this is something that we have not considered. Difficulties may be involved but I will have a good and careful look at the possibilities.
– Without reflecting on the personal integrity of the Prime Minister, and guided by the highest motives, I ask-
-I remind the honourable member that any personal reflection would be out of order.
– ls the Prime Minister aware that listed amongst the shareholders of Canberra Television Pty Ltd, the sole commercial telecaster in Canberra, is the Right Honourable John Gorton, c/o Prime Minister’s Lodge, as the holder of 800 shares? Is this the Prime Minister? If so, does he consider it ethical and appropriate that he should be involved financially in this company while occupying the position of Prime Minister? Does he not place himself and his Government in a difficult and embarrassing position in view of the activities of this and similar companies, especially as his Government may be involved in various ways with the particular organisation? Would it not be in his interests and the interests of the Government for the Prime Minister and his Ministers to be completely divorced from financial investments of this kind?
– I think it is true that I own something like 800 shares in Canberra Television Pty Ltd. 1 would not in the least mind supplying to the honourable member details of shares I hold as a shareholder in other companies. I can assure him that they are a very small number and not worth very much. I do not myself see that there is anything in the least improper in a member of Parliament investing in a company in an ordinary way, particularly by the purchase of 800 shares out of the number issued by this company. I do not know how many shares there are altogether in the company, but my holding is just a small fraction. I cannot for the life of me see anything improper in that; I just cannot.
-I desire to ask the Postmaster-General a question, at the request of the Victorian Amateur Athletic Association. We realise that a direct telecast by satellite of the events of the Olympic Games is probably beyond the financial limits that we can afford in Australia, but is it not possible to have an immediate radio coverage at least of final events in which Australians are competing so that Australians could have had, for instance, the full thrill of hearing a description of Ralph Doubell’s win in the 800 metres event?
– I am prepared to ask the Australian Broadcasting Commission to have a look at this matter. I mentioned yesterday, in answer to a question, that there is a time difference between Mexico and Australia. It may be that this would affect considerably the number of listeners. Many people who would normally like to have the direct broadcast might prefer being in bed asleep to listening in the early hours of the morning.
– The Minister for the Navy will be aware that a new wharf is about to be built at Cockatoo Island, Sydney, for $1,030,000. Will this wharf be used only by naval vessels? Will merchant vessels be allowed to use it? Is Cockatoo Island Dock leased to a private company that undertakes repair work on the island for both naval and merchant ships? Does the construction of the new wharf mean that the Navy is about to take over Cockatoo Island Dock? Finally, if the answer to the last part of my question is no, will the charges for the lease of Cockatoo Island be increased so as to recoup some of the money paid out for the new wharf?
– The honourable member for Batman will no doubt be aware that Cockatoo Island is the property of the Commonwealth and is leased to a subsidiary of the Vickers group. The terms of the lease are, firstly, that naval work and defence work shall have priority over other work, and secondly, that any increase in the turnover of the company means an increase in the lease payment to the Commonwealth. The new Sutherland wharf to which the honourable member refers is being constructed under the terms of that lease. When it is completed naval work will have first priority and after that it will be available for merchant shipping. There is no suggestion at all for a takeover by the Commonwealth of the company’s operations.
– I ask the Treasurer a question. Has he had the opportunity to examine the text of my question of Wednesday 11th September as he said he would concerning the future of primary industry and resulting from his address to the Cold Storage Association of Australia? If so, will he please clear the questions
– I will have a look in detail at the honourable gentleman’s question and will let him have a letter on it without fail tomorrow.
– My question is directed to the Minister for the Navy. Will he have compared the conditions relating to off-ship accommodation, at other than their home ports, of Royal Australian Navy submarine crews, with existing conditions enjoyed by both British and American naval submarine personnel? If the comparison shows that the conditions of (he Australian crews do not match those enjoyed by their British and American counterparts, will the Minister take appropriate action to adjust the position?
– I will have a look at the question posed by the honourable member for Port Adelaide and give him a considered reply.
– 1 address my question to the Minister for Primary Industry. Has the Government considered extending the functions of the Australian Meat Board from being a promotion quality control organisation to enable it to enter the marketing field? Also, has the Government considered the matter of appointing an elected producers’ representative from each State to the Board?
– The Australian Meat Board is a marketing authority, although it is not a full marketing authority as is the Australian Dairy Produce Board or the Australian Wheat Board. It is nol an inspection authority as the honourable gentleman mentioned; it is the role of my Department to lay down quality standards. I have had some representations that the structure of the Australian Meat Board should be altered. It was altered in 1964 to give producer control - that is producer representation is dominant - plus a number of members representing exporters and a representative of the Commonwealth Government. I have
– My question is directed to the Treasurer. Why was it necessary for the Governor of the Bank of England, Sir Leslie O’Brien, to make his recent visit to Australia as a top secret affair? What is the nature of the agreement arising out of the negotiations that took place to which Australia is committed? Was the announcement which appeared in the Press last Saturday concerning overdrafts the outcome of discussions with the Governor of the Bank of England? Could the visit of Sir Leslie O’Brien be tinged with the shades of the apostles of doom and gloom of the 1931 depression days, Sir Otto Niemeyer and Sir Gregory Guggenhiemer, who were also representatives of the Bank of England?
– The visit of Sir Leslie O’Brien to Australia had nothing whatever to do with the recommendations of the Board of the Reserve Bank that a call-up should be made to the statutory reserve deposits and that interest rates should be increased. I would be absolutely certain that he had no knowledge whatever of the possibility of such changes occurring. So somebody has obviously misinformed the honourable gentleman or he is suffering from hallucinations. As to the first part of the honourable gentleman’s question, Sir Leslie did come here as the representative of the United Kingdom Government to assist in the discussion of Australia’s participation in the Basle agreement, which was then under negotiation. He put a point of view to us and we listened to it with great attention. We have already stated in the House exactly what we intended to do and we have stuck to the terms of the negotiations to which we originally agreed. Sir Leslie came here, he let us know the Bank’s views, out attitude was explained to him and the attitude of the Australian Government was accepted by the United Kingdom. [16 October 1968]
– I address my question to the Minister for Civil Aviation. Has he seen a report that a senator has claimed that, in a recent emergency landing of a large passenger aeroplane at KingsfordSmith Airport, the Department of Civil Aviation fell down on its job by not notifying the St George District Hospital that an emergency existed? Can the Minister say whether the senator’s statement is correct and if it is not will he give the House the facts of this incident?
– I did see a statement in the Sydney Press along the lines outlined by the honourable member, lt was attributed to an Opposition senator who, I understand, intends to ask a question on this subject in the Senate, lt is a pity he did not wait to get a reply to his allegation, when he would have seen that it was completely without foundation. The facts are that there is a very long standing arrangement between my Department and the Hospitals Commission of New South Wales which provides for contact to be made by the DCA emergency services with the Royal Prince Alfred Hospital in Sydney to enable provision to be made for medical services, casualty clearance and hospitalisation when any emergency arises. The Royal Prince Alfred Hospital contacts other hospitals if further hospital services are required. This practice was followed as usual in relation to the emergency landing in Sydney on 10th October last. It has been followed when emergencies have occurred in the past and will be followed if emergencies occur in the future. The same procedure also is adopted in all other States.
– My question is directed to the Minister for the Navy. I refer to the twenty naval patrol vessels being built for the Royal Australian Navy, the twentieth of which is expected to be delivered by April of next year. The last of those being built by Walkers Ltd will be launched on 6th November. Have those vessels so far delivered proved to be invaluable for patrol work and the training of reserve personnel? Has the Minister any information as to whether the Naval Board wants any more of this type of vessel for coastal patrol work? If it does, can the Minister say whether further orders will be placed in the not too distant future?
– The patrol boats that are in commission have acquitted themselves very well indeed. The members of the Naval Board have expressed1 to me their very great satisfaction with the way the vessels have operated. At present we do not foresee a need for any more than the twenty vessels, although this position will, be reconsidered when the new defence programme is considered in more detail.
– ls the Minister for Health aware that the Tasmanian Minister for Health has been reported in the Hobart Press as declaring to a general meeting of the Old People’s Welfare Council of Tasmania not only that the Federal Government did not understand, the grievous financial situation that faced many homes for the aged but also that despite decisions in the Commonwealth Budget to increase the grant to intensive nursing care institutions from $2 to §5 per day for patients in need of intensive care, ‘ such an increase appeared to have fallen through? ls the Minister prepared to comment on this and to indicate the present position regarding payment of the benefit and- the extent to which it will be payable to patients in nursing homes in Tasmania?
– ] have. seen the Tasmanian Minister’s statement. Despite what he says. this benefit will come into- force on the date that was announced. It will be of great assistance both to those in need of intensive nursing home care who receive it and also to the institutions themselves. 1 can also tell the honourable gentleman that a preliminary survey by my Department shows that this benefit will mean an additional $400,000 to Tasmanian nursing homes in- a full year. Let me put it in another way. Take, for instance, a typical infirmary in an aged persons home of thirty-five beds capacity, ten of the patients of which have already been classified by my Department as needing intensive home care. The payment of this benefit will mean an additional $11,000 a year to a nursing home of that size. Amounts of this order are not insignificant and I think the benefit will have a great effect on the finances of both the patients and the nursing homes. I regret that Mr Everett, the Tasmanian Minister, obviously for political purposes, should have sown doubt and confusion in the minds of such a body as the Old People’s Welfare Council which, of course, is concerned with the problems of the sick and the aged.
– I ask the Minister for the Navy a question supplementary to the one asked by the honourable member for Wide Bay. Will the last of the present order of twenty patrol boats be delivered next March or April? Was the Flag Officer Commanding the Australian Fleet correctly reported as saying at a Press conference on the ‘Perth’ on 9th August that the Navy needed at least twenty more patrol boats if it was to protect Australia’s northern fishing grounds? Do the Minister and the Naval Board disagree with this view? How long would it take to get another twenty patrol boats after an order was placed?
– The last of the twenty patrol boats will be delivered in April 1969, I think. This number will be sufficient to fulfil the Navy’s presently allotted tasks of surveillance and of reserve training in particular. I regret that I am unable to inform the Leader of the Opposition as to the exact timetable involved in getting extra vessels if they are needed, but at present it is quite definitely the opinion of the Naval Board that more patrol boats are not required.
– I address a question to the Prime Minister. In view of the fact that this is National Export Week and that manufacturers in particular are being exhorted on all sides to export more and more of their products, has the Government given consideration to the fact that manufacturers are unable to assess costs accurately 12 months forward, due to inconsistent and unpredictable wage increases? Does the Government realise that to initiate exports of manufactured goods, 12 months or more of negotiations take place before orders can be expected? Can the Prime Minister suggest how potential suppliers should quote over extended periods ranging up to 5 years whilst we have these irregular cost increases of varying magnitude, when labour is a considerable factor of cost?
– I think it would be generally understood that the variations in costs in Australia as a result of wage variations would have an effect upon the price at which goods could be manufactured and exported. On the other hand, the Government is doing quite a considerable amount to assist secondary industry in its export drive. I need only remind the honourable member of such things as the payroll rebates given to firms for exports of this kind and, indeed, certain arrangements by which insurance is extended to them. They also have to form their own opinions - and this many firms do - as to the additional savings they will make per item as a result of a bigger throughput of whatever it is they are making, because there is an export market as well as a home market. The other factors which the honourable member mentioned are, of course, common to all production in Australia.
– Did the Prime Minister say about the time of the recent Budget debate that bis Party should have a new philosophy regarding pensions which should provide frugal, self-respecting independence? Secondly, does he consider that the 75c rise for a married pensioner in 2 years reflects this new philosophy, since his predecessor, less than 2 years ago, declared that pensions were never intended for that and that it would be a sad day for Australia when relatives were not called on to bear a share of the upkeep of pensioners? Thirdly, if he agrees that the 75c increase does little or nothing beyond restoring the buying power which pensioners had 2 years ago, does he foreshadow a much more substantial rise before the forthcoming general election than under the old philosophy, or will we have a new Prime Minister or a new Treasurer before the next election?
-Order! The latter part of the question is out of order.
– And also untrue. Yes, at or about the time of the Budget debate, or indeed since then, I have indicated that we on this side of the House believe that a social service payment to the aged or the ill ought to be sufficient in itself to maintain these people in the kind of frugal comfort to which the honourable member has referred. This is a goal which we have and a goal which we will seek to attain. I would like to point out - merely to put the record straight - that the rise for a married couple is not 73c as indicated, but $1.50. I would also bring to the attention of the honourable member that it is not enough merely to talk in dollars or of $1.50. There are great differences of circumstances in which individual pensioners find themselves, and the*e must be taken into account in deciding how to attain the goal that we have set ourselves. They are being taken into consideration by the welfare committee which is studying this matter.
– My question is directed to the Minister for Civil Aviation. It refers to the emergency landing of the Viscount aircraft at Sydney (Kingsford-Smith) Airport on 10th October. In view of the superb operation by all branches of the Department of Civil Aviation, indicating again that this is probably the finest department of its kind in the world, and in view particularly of the actions of the captain and his crew, I ask whether there is any award available by means of which the Department can duly recognise efforts such as those that were made by all concerned in this operation?
– I think the honourable member’s question adequately recognises the work that has been carried out by officers of my Department and others and I appreciate the comments he has made.
– My question is directed to the right honourable the Treasurer. Was he correctly reported yesterday as having praised the action of the Reserve Bank in establishing a new interest rate? If so, I ask him whether he took into consideration ni. responsibilities under Section 11 of the Reserve Bank Act, which says:
The Board shall, from time to time, inform the Government of the monetary and banking policy of the Bank.
Was the Government advised by the Reserve Bank before it made the announcement? If so, and if there was no disagreement between the Bank and the Government, why was it necessary for the Treasurer to applaud the action of an institution established by the Parliament? Why did he not take the responsibility of announcing that the Reserve Bank had made a recommendation to the Government and the Government had approved of it, instead of trying to pass the responsibility on to the Reserve Bank? If he did that-
– Order! The right honourable member is now going beyond the bounds of question time. The question should ask for information.
– The. sting is in the tail.
-I ask the right honourable member to put his question.
– Did the Treasurer do this for political purposes, forgetting his responsibilities to Parliament and the people?
– In reply to the right honourable and dignified gentleman, 1 say that if he will carefully read the answer I gave to the question I was asked he will find I . said that under the Act the Reserve Bank Board had the right to take action on its own initiative and without reference to the Government, should it wish to do so, on statutory reserve deposits. This bas been done. I was wise enough to have all this checked because I thought a question like this might be asked. The right honourable member is correct in saying that the Bank shall from time to time refer its policies to the Government, and that the Government, if it wishes, can object. The Act sets out what the Board shall do. Under the Act the Board must refer its monetary and banking policy to the Government, which in turn refers it to the House. In the case of interest rates it is necessary for the Bank to state its intentions, and the Government has the right of approval or disapproval. That sets out in detailed form what the law provides as to the obligations and responsibilities of both the Reserve Bank and the Commonwealth Government. What I said yesterday was completely accurate and conveyed the impression which 1 meant to convey. 1 had no wish to do anything other than to let the House know that with regard to both statutory reserve deposits and interest rates the Reserve Bank Board had made recommendations to us. 1 had looked at them very carefully and I came to the conclusion initially that the Bank was right in deciding on a call-up of statutory reserve deposits. I had some doubt about the necessity to increase interest rates. The Bank made further representations to us, and in the light of events that have taken place since, particularly the fall in numbers of registered unemployed, the changes in trade figures, the increase that I knew would be announced quite soon in private capital expenditure on plant and equipment, I came to the conclusion - and the Prime Minister and the Government came to the conclusion - that it was wise to agree to the recommendation made by the Board on interest rates, and consequently to agree that statutory reserve deposits and interest rates should be moved at the same time.
– Has the Minister for External Affairs seen a report that the Shah of Iran is threatening to grow opium poppies in his country because of the widespread addiction of Iranians to opium produced in neighbouring countries, such as Turkey and the Lebanon? Will the Minister do his utmost to secure an effective international agreement for the stamping out of traffic in a substance which reduces human beings to the lowest depths of degradation, demoralisation and depravity? In particular, will he endeavour to institute a system of internationally organised aerial surveillance with a view to the destruction of these crops by aerial spraying?
– I have no first hand knowledge of the matters alluded to as having taken place in Iran. The honourable gentleman will be aware that there are international conventions controlling narcotics and the drug traffic with international supervision - an international system of reporting and a constant international attempt to control the traffic. The honourable gentleman will be aware also that some of these drugs are produced for medicinal purposes. Even in Australia the opium poppy is cultivated for the production of opium strictly in accordance with the requirements of the international convention. I will make further inquiries regarding the matter but I would ask the honourable gentleman not to assume too hastily that there is either ill faith or ill intention on the part of the Government of Iran.
– I refer the Minister for the Navy to an answer given to me by the Minister for Defence who stated that in the past 2 years the value of ammunition imported for the Navy has trebled. What are the reasons for this spectacular increase?
– The fundamental reason for the increase in the amount of ammunition used by the Royal Australian Navy is that it has been very actively engaged in Vietnam, firing off a considerable quantity of shells in that area.
– Is the Treasurer aware that Mr Martin Black, a highly qualified professor of accounting from the United States, told a Perth audience a few days ago that Australian auditors were not completely independent and that many Australian financial reports gave the impression that the shareholder was the forgotten man? Will the right honourable gentleman advise the House whether such matters have been considered by the Government in the interests of developing greater confidence in Australian development and investment? Have any steps been taken to establish a securities and exchange commission to require nationally full disclosure of financial information?
– I have not seen the report of the alleged statement by Mr Black, the United States accountant. Consequently I am unable to comment on what he may have said. I think that the remark that has been attributed to him - that the shareholder is all too frequently the forgotten man - is probably correct. A lot of people hold much the same view as 1. As to the matter of a securities and exchange commission, I think it is high time that the various State governments considered the desirability of establishing such a commission in each State. I am not at all sure that except with regard to the Territories, the Commonwealth has no power to establish such a commission. As very little business is done on the stock exchange in the Territories, this is a responsibility that should-
– Maybe, but it would be so small as to be negligible. I will get my Department to have a look at the matter. If I find that there is anything of interest that I can convey to the honourable gentleman in addition, T will do so.
– The Minister for the Army will be aware that a large number of new Australians have joined the Commonwealth military forces. Is he aware that many new Australians serving in such units as the Army Signals Corps have been informed that they are to be transferred to other units? New Australians have asked why they are to be transferred. They have been informed that it is due to security risk and because they were born in foreign countries. If the Minister is not aware of these facts, will he have this matter investigated and rectified?
– I will check the full details of this matter, Mr Speaker, and let the honourable gentleman have a considered reply.
– Has the Minister for Primary Industry received a report from those who were appointed to make investigations regarding devaluation compensation to the Australian dried fruits industry? If so, when can the industry expect the compensation to be paid? If not, can the industry do anything to facilitate the investigations?
– I have not received any report from the Australian dried fruits industry regarding compensation for losses brought about by Britain’s devaluation of sterling. I am led to believe that a submission has been presented to the Devaluation Reporting Committee, whose responsibility it is to examine that submission and then to make recommendations to the Government. As yet, the Government has not received any recommendations from that Committee. As soon as it does, it will handle them as quickly as it has done in previous cases.
– My question is directed to the Treasurer. When can I expect an answer to my question concerning the quarrying industry which was placed on the notice paper on 15th August of this year? Am I going to get a reply?
Government supporters - No!
- Mr Speaker, I am sorry that I cannot reply in the way that some of my supporters are suggesting. I will get an answer for the honourable member as soon as T can.
– I direct my question to the Minister for Social Services. In so doing. I refer to my constant, unsuccessful attempts to gain recognition for the plight of persons who have either twins or triplets. Is the Minister aware that I have advised my constituents to write to me. after they have had twins or triplets, so that I may make personal representations to the Minister for Social Services on the principle that constant dripping will wear away a stone.
– Order! I suggest that the honourable member ask his question.
– Is the
Minister aware of the extra cost of feeding utensils for twins and triplets and that babies cannot share the same bottle? Can the Minister’s attitude be interpreted as being that he considers that people who have twins or triplets are bargain hunters who are seeking quantity rather than quality? Furthermore, since 1901, how many Cabinet Ministers have fathered twins or triplets? Does the answer to that question indicate some inadequacy on the part of members of Cabinet?
-Order! I do not think that the home life of Cabinet Ministers has anything to do with the Minister for Social Services.
– May I compliment the honourable gentleman for his persistence and advise him to keep trying.
– Has the attention of the Minister for Education and Science been drawn to the tremendous damage that has been done in recent times by bush fires? I ask the Minister: Has the Commonwealth Scientific and Industrial Research Organisation carried out any research in relation to ways and means of extinguishing these fifes, preferably from the air?
– I am not quite sure how much work the Commonwealth Scientific and Industrial Research Organisation has done in relation to grass fires, but the honourable member will be interested to know that as a result of a scientific agreement concluded with the United States of America this morning the possibility of bush fire prevention in forests is one of the matters likely to be investigated jointly by the United States and Australia.
– In view of the fact that so many people con sider that our primary producers are inefficient, can the Treasurer confirm the recently published facts that the cost of wheat production per metric ton in Australia is the lowest in the world except for the Argentine, and that the cost of producing butter fat is the lowest in the world except for New Zealand? If these figures are correct will he consider allowing primary producers special lower interest rates on overdrafts in order to help them meet overseas prices, to continue providing the commodities that earn 70% of our export income which is used to buy the materials without which secondary industries could not exist?
– I think I can go a little further than requested by the honourable gentlemen when he referred to wheat and butter fat. Figures on the increase in gross production and the comparable figures relating to increases in farm incomes will show that the productivity of Australian farmers is probably equal to or even better than that of farmers in any other part of the world, including the Argentine in one case and New Zealand in the other case. As to the second part of the honourable gentleman’s question, I think it should be emphasised that already the policy of the Reserve Bank and of the Government is to ensure that special rates of interest apply to individual primary industries and export industries. I will have a look at the figures as soon as I can to make certain that the objectives of the Government are in fact being achieved.
– I present the following papers:
Forty-seventh Report of the Commissioner of Taxation dated 1st October 1968.
Taxation Statistics 1966-67.
That the papers be printed.
Honourable members will recall that it is the practice of the House to agree forthwith to the motion to print these papers so that they may be covered by parliamentary privilege. This course has the concurrence of the Leader of the Opposition (Mr Whitlam). When the motion to print the papers is agreed to, the report will be circulated immediately.
Question resolved in the affirmative.
– I move:
That the Bill be now read a second time.
The purpose of this Bill is threefold. Firstly, in the case of those who are on ‘special service’ serving overseas it extends the repatriation cover they have under the Repatriation (Special Overseas Service) Act to include visits to Australia under the Rest and Recuperation arrangements commonly known as R & R, and certain other visits to Australia of short duration which are on duty, for medical treatment or on compassionate leave. Secondly, it provides for those who have served on ‘special service’ automatic acceptance of pulmonary tuberculosis contracted after discharge from the forces. Thirdly, the Bill provides service pension eligibility for those who serve on special service’.
Eligibility under the Act is for ‘special service’, that is to say for any period of service outside Australia at a time when the serviceman is a member of or attached to a unit of the naval, military or air forces which is allotted for special duty in a special area; this includes units currently allotted for service in Vietnam. Under the present provisions of the Act a period of special service ends if the serviceman returns to Australia, and the service he then commences in Australia does not give him entitlement to repatriation benefits. This is appropriate when his return to Australia signifies that, at least for the time being, his service abroad in connection with warlike operations has terminated.
However, there are circumstances where the return to Australia is temporary and of short duration during which time the serviceman’s unit remains allotted for service. In these cases the Government has decided that the serviceman’s period of ‘special service’ should not be broken, and he should for the period of such a short visit retain his cover under repatriation legislation while in Australia.
Servicemen spending their R & R period away from a special area but outside Australia already retain their repatriation cover and it is proper, now that the R & R programme has been extended to enable them to take R & R in Australia, that they should retain that cover while they are here. Likewise it is appropriate that they should do so during other short periods where the visit to Australia is temporary and with the intention of their being returned to a unit which has remained on special service.
The Bill therefore proposes that, in the case of a serviceman serving on special service, eligibility for war pension and other repatriation benefits under the Repatriation (Special Overseas Service) Act will be continued during the period of his return to Australia for R & R, or on a short term visit on duty, for medical treatment, or on compassionate leave. In the case of an R & R visit the normal period is 5 to 6 days which may be extended by a few days dependent on transport arrangements. For the purposes mentioned the Bill provides for a period of up to 14 days, which is regarded as reasonable to meet all of these particular circumstances.
The second amendment is to extend to ex-servicemen who have served on ‘special service’ as defined in the principal Act, and to their dependants, the same war pension and associated benefits in respect of tuberculosis contracted after war service as applied for ex-servicemen who served in a theatre of war in the two World Wars and in the Korea and Malaya operations.
The effect of the amendment will be that where at any time after his discharge from the forces an ex-serviceman who has served on ‘special service’ became or becomes incapacitated, or died or dies from pulmonary tuberculosis, he and his dependants as the case may be will be entitled to war pension and other benefits as though the incapacity or death was attributable to his war service. For such an ex-serviceman this means he will be entitled to a war pension for life at a minimum rate equal to the 100% General Rate, and a higher rate if the severity of his incapacity justifies it. He will also be entitled to free medical treatment from the Repatriation Department for other disabilities not due to war service. For his dependants it means that they will be entitled to pensions at maximum rates during his lifetime, and in the case of his death from tuberculosis, or while he is receiving a pension for tuberculosis under the Second Schedule to the Act, his dependants will receive pension and other benefits as though his death was due to war service. For example, his wife and children will receive all the benefits available to a war widow and her children.
The third amendment which the Bill proposes is to extend eligibility for service pensions to those who have served on ‘special service’ under the Repatriation (Special Overseas Service) Act. The Government believes that the nature of the special service, which is similar to theatre of war service in earlier wars, justifies the recognition of its intangible effects in the future. The Bill makes three important improvements in the repatriation system in respect of current service and I commend it to the House.
Debate (on motion by Mr Barnard) adjourned.
Consideration resumed from 15 October (vide page 1977).
Department of National Development
Proposed expenditure, $33,944,000.
– I wish to speak briefly in this debate on the estimates for the Department of National Development, particularly in relation to the reluctance and sometimes the refusal of the Government to provide basic information to the Parliament and the people on the extent of mineral deposits, the value of production and the value of exports from Australia’s new mineral discoveries. The Australian people and the Parliament are entitled to receive better consideration from the Government and to be supplied with basic information. We are entitled to be given the best estimates available of the value, on the prices that are obtained, of our major mineral exports, such as those at Weipa, Blackwater, Moura and Groote Eylandt. We should also be given information about the profitability of these investments because after all they are Australian assets. Many of these great deposits have been found by the expenditure of public money, either in assistance for exploration or in direct investigations such as those made by the Bureau of Mineral Resources. For instance. I think I am right in saying that the Bureau of Mineral Resources can claim a large measure of the credit, if not all the credit, for the discovery of the manganese deposits at Groote Eylandt. It has also helped in the discovery- of other major deposits, such as the phosphate deposits in north western Queensland.
The first point I make is that we should be given more information. With that in mind, I asked the Minister for National
Development (Mr Fairbairn), who unfortunately is not here - I understand he is ill - to provide me with certain basic information relating to the value of exports. I wanted to know the value of exports and the volume of exports from Weipa, for example. The Minister for National Development told me that it was not possible to give me the information, because it was confidential and to supply it would be a breach of section 24 of the Census and Statistics Act 1905-1966. 1 asked the Minister to give the reason for the Government’s refusal to divulge to the Parliament information as to the quantity of bauxite exported from Weipa and to say why this information should remain- secret. Again his answer was that it was not possible to give the information because of the confidential provisions of section 24 of the Census and Statistics Act which makes anybody, apparently including the Government, liable to a charge if information is divulged. To me this is an archaic provision. The same question was asked in the Queensland Parliament and the State Government had no hesitation iri supplying the answer. I quote from the Queensland Hansard a question by Mr Jones, member for Cairns, as follows:
Basically these questions were the same as the questions I addressed’ to the Minister for National Development in this Parliament and in respect of which I was told that it would be a breach of the Census and Statistics Act to disclose the information and that such disclosure would render the person making it liable to a fine of SI 00 - it might be even more now - under section 24 of the Act. However, the Queensland Government supplied information giving the total tonnages of bauxite exported from Weipa and complete details of the places to which the bauxite was exported - over one dozen countries. There is something wrong when the Federal Government refuses to divulge information on the grounds thai it would be a breach of confidence under a legally enforceable Act and the Queensland Government makes the information available. These figures must have come from the same source as would be available to the Minister for National Development - the Commonwealth Statistician. The Queensland Government had no hesitation in making the figures available and I would suggest that someone in this Parliament or in the Queensland Parliament is at fault as regards the legal requirements of the provisions of the Census and Statistics Act.
The more basic argument is that surely members of the Federal Parliament and the Australian people have some right to basic information with respect to the profitability of established mineral deposits and particularly the value of reserves, the value of exports and the prices received for those exports. In the north of Australia some substantial mineral deposits have been located and are being exploited. I instance deposits at Weipa, Gove and Groote Eylandt, the phosphate deposits at Duchess and in other parts of the Gulf of Carpentaria region, and the large mineral deposits in the Pilbara area of Western Australia. If it is good enough for a State government to provide basic information to the members of the State Parliament surely it is good enough for the Minister for National Development, on behalf of this Government, to supply members of this Parliament with the same information.
The other point I wish to make relates to the question of the secrecy of reports. There seems to be a growing tendency for the Government not to furnish Parliament with reports on developmental works and projects which involve large sums of money when they are implemented. I instance the provision of beef roads which will cost in excess of $50m. Comprehensive investigations were carried out on the reports arising from those investigations the Government based its decisions, but the Parliament and the people were not supplied with any data to enable them to examine the proposals or to argue against them. Research students at universities were not given any information on how the Government arrives at its priorities in respect of works. The Ord River project, which is now in the news again, and the Nogoa Dam, are two big works for which comprehensive and detailed investigations were made by the Government or its advisers, but not one word of basic information on these projects was revealed to the public. There is considerable doubt in people’s minds about the proposed reduction in the cotton bounty and its effect on the viability of these projects.
If the Government made available more information, particularly basic information, on development it would lessen the suspicion which is in the minds of many people about political decisions on particular projects. After all the Government has a precedent. It made available the report on the brigalow scheme on which it has contracted to spend about $20m or more, directly and indirectly. It made available information on the comprehensive water scheme for Western Australia. These were two detailed reports that were made public, but now we have a growing tendency for the Government to clam up, and it seems to be the policy to disclose less information to the Parliament. This is not a good policy. Members on both sides have repeatedly stressed the need for planning, development and expansion of techniques, such as benefit-cost analyses and quantitative marginal analyses. The honourable member for Eden-Monaro (Mr Munro) last night dealt with the need for more detailed work on benefit-cost analyses. A benefit-cost analysis is a comparison of alternatives, but the term is incorrectly used in respect of a single project. A benefit-cost analysis is a comparison of like projects, not unlike projects, and it uses the same general assumptions, thus enabling the government of the day to make a decision on quantitative and qualitative factors.
The best example I have seen in the last 12 months of a scheme which needed a benefit-cost analysis, but for which one has not been employed, is the national water resources development programme. Honourable members will recall that the Minister for National Development gave details in this chamber of the six projects that would be investigated under that programme. I immediately asked him how the priorities had been determined. I asked a detailed set of questions which were not dashed out idly but which were thought about. They were detailed questions relating to the choosing of alternatives by a responsible government. I asked how the Government could choose 6 projects out of 28 and reject 22. As honourable members know, I have stated repeatedly that too much emphasis is given to political expediency and political decisions with respect to developmental projects. One way to remove suspicion from people’s minds is to make available basic data on how the Government makes up its mind on projects. The answer to my detailed questions on this subject was:
The basis on which- projects were selected for closer study at this stage was set out in my statement to the House on 16th May last. lt took the Minister approximately 2 months to give that answer of three lines. When we turn to the Minister’s statement we find that the projects were chosen on the basis of the information given to the Commonwealth by the States. That is all, Apparently there were no investigations by the Commonwealth and no checking to see whether in fact the States’ submissions were correct or incorrect or wrong in assumptions. To me this is a very grave injustice because projects, particularly those in Queensland, such as the Kolan-Burnett project, which is a highly rated project, and the Burdekin scheme, have been omitted. I am not saying that those schemes are better than other projects, but certainly the method by which the Government made its decisions leaves a great deal to be desired. We in this Parliament should be able to get more basic information from the Parliament, particularly with respect to projects which involve public expenditure.
– Order! The honourable member’s’ time has expired.
– The honourable member for Dawson (Dr Patterson) talked a great deal about priorities and how they should be arrived at. He has not talked a great deal about the needs of the Department of National Development, The honourable member for Macquarie (Mr Luchetti), who was the first speaker on the Opposition side in this debate, attacked the Government for not spending more money on national development. 1 believe it is desirable that we should spend as much money on national development as can reasonably be made available to this very important Department, but the Government has to relate its priorities to the finance available and at the same time it has to keep in mind the question of stability of our economy. Of course, it is easy for the
Opposition to say that larger amounts of money should be spent in every field, because it does not have the responsibility of finding the money which is to be allocated to all departments. Indeed, it has never had any real conception of how to maintain stability in the economy. Problems arise and tragedy occurs when this matter is overlooked. We have seen this happen’ in recent years in many countries, including the United Kingdom.
I should like to make one other comment regarding the speech of the honourable member for Macquarie. He said:
With few exceptions the figures reveal a monotonous pattern of inertia …
He said this simply because the figures in the estimates were in line with the amounts of finance which were made available last year. I suppose it is a matter of .how one looks at these things. I prefer to. say that whatever the figures might show, the results indicate a splendid record of achievement in the field of national development, in this country. 1 believe that statement is incontestible. If this record has been achieved with the amount of money that- has been made available and if we can continue to progress at this .rate, 1 feel that, our great country will have no regrets. It has-certainly been through an exciting period of great development.
I want to touch on some factors relating to national development. I refer particularly to water conservation. This statement has been made very often, but I will repeat it: Water conservation is of the utmost importance in this country, which is one of the driest continents in the world. It is a very real basis and in fact .the only really sound basis for decentralisation, A very good example of the progress that has been made in outlying areas, as a result pf water conservation, can be found in the town of St George, which is an inland town’ in my electorate. Even without rail communications it has progressed and developed and, as a result of the development that has taken place, the people who live there have a feeling of prosperity and confidence. We should continue to develop our water resources and to promote water conservation, despite the problems that might be attached to the sale of production from time to time. This is something that has to be overcome.
Here I agree, to a certain extent, with some of the comments that have been made with regard to planning. I believe that careful planning should take place. Obviously this is a wise measure to take. But it is very difficult to rely completely on a cost benefit analysis in the production of, say, a product which is dependant upon world markets which can change. Also, a cost benefit analysis can be altered by virtue of the fact that costs can rise. Nevertheless, I believe that planning is taking place in Australia. I believe that the best efforts are being made to try to ensure that the projects which are being undertaken by the Department of National Development are based on a sound cost benefit analysis. If this analysis is upset by something beyond the control of the Department or of the Government, this is a problem which we will have to face. This question has been related mainly to primary industry and to primary products, but in the drive for increased exports from this country, exports of secondary industry can be upset as a result of changes in world markets, if those exports are dependant upon these markets. This is one of the facts of life that we have to face, but it should not deter us from going ahead with water conservation.
Our population will be restricted, to a large extent, if adequate water supplies are not available. Desalination may help us in this direction, but it will not help us in the production of food by means of irrigation projects. Before I leave this point I want to emphasise, in case this matter has been forgotten - and sometimes we very quickly forget things - the recent conditions which were experienced in southern New South Wales. The need for water to continue to flow to projects serviced by the Snowy Mountains scheme highlights the fact that we have to conserve as much water as possible in order to keep a continuity of supply to our irrigation projects. I believe that it is good, sound national development work to do this. I want to touch for a moment on the matter of priorities. I go along with the suggestion that the States should submit their priorities to the Commonwealth Government and that the Commonwealth Government should give very serious and earnest consideration, as it has done, to the priorities that are submitted. There has to be an inter-relation of programmes. I believe that the method that has been adopted has been a good one and I think that it has achieved very good results.
Now I want to refer briefly to the Bureau of Mineral Resources. I believe that the Bureau has served a very valuable purpose but more geologists are needed to make the preliminary surveys which result in the investment of capital both from overseas and from Australia. 1 believe that the progress that has been made in mineral exploration is such as to justify a drive to obtain more geologists. I hope that a special effort will be made to obtain them, perhaps from overseas, and I think that we should make a special effort to encourage our young men to train in this particular field of activity. There is no doubt that whilst a great deal has been achieved in the field of mineral exploration for the benefit of all Australians, much more remains to be done and much more will be done provided we can find men who will continue to make the surveys - so far as it is possible for the Government to make them - which should be a preliminary to the further investigation of our mineral resources.
I also agree with the points that have been made regarding incentives in the mineral exploration field. We hear a good deal of discussion and comment about the profits that are made in some of the mining ventures. But unless there is the incentive of a worthwhile profit when explorations are successful, we will not get any explorations carried out at all. We have heard a good deal about the profits that can be made from oil discoveries, but we have not heard nearly so much about the losses that have been incurred. A lot of companies have proved unsuccessful.
– Which are they?
– There are quite a number of them. I am not going to waste my time listing them now. I will give the honourable member a list of them when I finish this speech. I can assure him it will be worth his while to study it. If it were not for the incentives that have been offered there probably would have been no discoveries at all of oil and natural gas in this country. I take some pride in the fact that the first oil pipeline in Australia was built to carry oil from the Moonie field, which is in my own electorate. The first natural gas pipeline is now under construction from the Roma field to Brisbane. Development will be of great benefit to Queensland and to Australia generally. I understand that the Moonie oil field, although it is one of the successful ventures, will not show very great profits. At one stage it was expected there would be quite large profits for those persons who had invested their money in the operating company.
The discovery and development of natural gas is of tremendous importance to this country and natural gas does seem to have a bright future even since the oil pipeline was started. Further reserves of gas have been found in the area. From the point of view of decentralisation I suggest that a further investigation be made of the economics of establishing a power house on the field itself. The Roma town council has a power house which uses natural gas. Even though the economics of this power house are not outstanding they are still reasonable and in most cases when an operation is widened there is a reduction in cost. An investigation should be made to see whether it is practical and sound to have a power house in that area using natural gas as a source of generating electricity. It would be valuable from a defence point of view because most of our other power installations are close to the coast and are therefore vulnerable.
I agree with other speakers that we should have a planned approach to our national development in the years ahead if we are to gain the best and quickest returns from our mining development. But I make the point that the fullest consideration should be given to permanent and selfgenerating development wherever practicable, either accompanying or following mining activities.
I think this has already been considered, but it will be given further consideration because if we are to gain the fullest advantage we must have not only mining activity in the places where community centres are established but also primary or secondary industries or both.
– In speaking on the estimates for the Department of National Development I first of all quote a statement allegedly made by the Prime Minister (Mr Gorton), and which appears on the back cover of a’ booklet entitled ‘Export . . . Why Us?’ which was circulated to all honourable members by the National Export Week Committee, which is now being celebrated. In this publication the Prime Minister is alleged to have said:
Australia’s export income is an essential factor in our nation’s growth and long-term prosperity. lt is important that all sections of the community should recognise that we must export to prosper. The rewards will be shared by all of us - the nation, industries and citizens.
I think that is a statement that we can all agree with. But it is necessary for Australia to have the means whereby it can export commodities produced in this country to overseas markets. The failure ‘ of this Government to take necessary and adequate steps to bring about the development of Australian ports is a matter of grave concern. No country can export ils produce unless it has ports available to accommodate ships of adequate size to transport its goods. 1 agree with the Prime Minister when he says that this is the responsibily of the nation as a whole. The nation as a whole must accept its share of responsibility in the development of ports. 1 always look on the Commonwealth Government as the Government of the nation and therefore the Government that must be prepared to provide the finance for the development of the ports.
I want to bring several facts lo the a;tention of honourable members. Firstly, there is no Australian port capable of handling a 50,000-ton wheat ship. There is no Australian port capable of handling ships in excess of 50,000 tons carrying iron ore, wilh the exception of those ports recently developed on the west coast of Australia’ for the export of iron ore to Japan- and other parts of the world. We are in a somewhat similar position in the export of coal and bauxite. These four items are of major consequence to this country.
The monthly bulletin of overseas trade statistics for June 1968 discloses that in the year ended 30th June 1968 Australia exported 6,409,000 tons of wheat compared with the previous year’s ‘figure of 6,403,000. When one considers the fact that wheat exported was worth S343m last year and $361 m in the previous year it is easy to understand why this is of major importance to this country. In 1968 Australia exported 10,193,000 tons of coal valued at $86m, compared with 8,804,000 tons for a value of $71m the year before. Those two items indicate clearly the value of these exports which can be handled in bulk.
At the end of last year and early this year 1 had an opportunity of inspecting a number of overseas ports. After having visited ports at Rotterdam and Hamburg, the Tilbury docks operated by the Port of London Authority, the port at Liverpool, the installations of the New York Port Authority, I was very depressed. There are excellent ports also on the west coast of the United States in such places as Los Angeles and San Francisco. I was astounded to see the work carried out by the various port authorities in Japan. I was astounded par.ticulately by the cammoth projects being undertaken in the port of Kobe and the port of Tokyo. Tokyo is not Japan’s largest importing port, but it is the port through which the largest amount of goods goes. 1 was astounded at the work being done in Kobe. 1 am equally astounded by a comparison of what is happening in Kobe with what is happening in Australia.
Recently, together with other honourable members, I had the opportunity of discussing the port of Liverpool with Sir Clifford Dove, who was in Australia publicising the virtues of the port of Liverpool. An article on grain shipments, published in the April 1968 issue of ‘Port of Liverpool Bulletin’ reads:
One important aspect of the study was into the size of grain ships likely to be used in the foreseeable future.
Sir Clifford said he had discussed broad details of the project with Dr A. R. Callaghan, Chairman of the Australian Wheat Board. The new berth will have 48 feet of water and an entrance width of 130 feet,’ he said. ‘This should bc adequate for grain ships up to 100,000 tons’.
The publication carries a nice photograph of Sir Clifford and Dr Callaghan. Liverpool is the second major port in the United Kingdom. It will have facilities for handling grain ships of up to 100,000 tons, but we do not have such facilities. Bear in mind that Great Britain is one of the principal importers of our wheat. The use of larger vessels is one way in which we may reduce the cost of shipping our wheat overseas. Importers of crude oil from the Middle East are no longer concerned by the closure of the Suez Canal. It is cheaper to carry the crude from the Middle East around the Cape to Europe in huge bulk tankers than it is to go through the Canal in. smaller tankers of about 50,000 tons. The same reasoning applies to the carriage of wheat and other commodities in bulk ships. All the ports of Europe - Rotterdam, Hamburg, London, Liverpool - are competing for business. The Chairman of the Rotterdam port authority told me that the authority intended to build facilities so that all of the wheat destined for Europe could be brought to the port in huge bulk carriers of 100,000 tons or larger capacity. The wheat would be transhipped to smaller vessels. This would be more economical than sending the wheat from Australia to Liverpool, London or other parts of Europe in smaller ships. We must bear in mind all of these developments. This Government controls the finances of the nation. It is the Government’s responsibility to ensure that our wheat ports can take ships of 100,000 tons. A report in the ‘Australian’ of 25th March this year reads:
The Takuyo Maru’s departure’ from the Sydney grain terminal was delayed for three days after the ship grounded. At a critical point during the loading of the wheat, the ship became stuck on a shelf alongside No. 6 berth, Glebe Island.
The vessel was of 33,850 tons. Glebe Island is one of Sydney’s major export berths. This situation should be of concern to my friends in the Australian Country Party, because wheat is one of their hobbies. Allegedly the Country Party represents the .wheatgrower. It is important that our wheat be carried by the most economical method available. Obviously it is cheaper to, carry wheat in large ships than to carry it. in small ships, yet large ships cannot use, Australian ports. A report published in the ‘Australian Financial Review’ of 4th April this year stated:
Overseas shipowners yesterday complained to the Commonwealth Government over increasing wharf congestion at Melbourne. . . . Shipowners said in Sydney yesterday that congestion in both of the nation’s two main ports was bad but that the situation in Melbourne was ‘worse than it has been for a decade or more.
In a report published in the ‘Australian’ of 9th September 1968 - not very long ago - Mr J. D. Martin, Secretary of the Australian Chamber of Shipping, said:
About $100m needs to be spent on Australian ports to make bulk and general cargo handling fast and economic.
What is the Government doing about these things? lt is hiding behind the fact that, in the main, development of ports is the responsibility of the States. I submit that development of ports and export industries is the responsibility of the Commonwealth. Officers of the Department of National Development should, either alone or in conjunction with officers of the Department of Shipping and Transport or the Department of Trade and Industry, plan our ports. Over the years Sir Alan Westerman has made statements criticising port facilities in Australia. I submit that responsibility in this matter lies with the Commonwealth. Will it accept the challenge and make sure that Australia’s exports are carried by the most economical method possible - by ships of much larger tonnage than exist at the present time?
I would like to say a few words about the port of Newcastle. Recently the Chairman of Directors of the Broken Hill Pty Co. Ltd. Sir Colin York Syme, said that Australian steel was no longer the cheapest in the world. This situation had arisen because of increased shipping costs. The coal of transporting ore from the west coast to the east coast, where most of it is converted to steel in Port Kembla or Newcastle, had increased. Many warnings have been issued about the port of Newcastle. The editorial in the ‘Newcastle Morning Herald’ of 29th December 1967 reads:
At the jubilee dinner of BHP in Newcastle in 1965. the Chairman of Directors (Sir Colin Syme) warned that it would be useless for the industry to have big plans for expansion in Newcastle if public services did not keep pace. If, he said, Newcastle could not handle the ships now under construction or planned, its future would be severely limited.
The depth of water at the entrance to Newcastle harbour is quite inadequate to cater for modern shipping. The largest ship that can negotiate the entrance is a vessel of 50.000 tons, but should a slight sea be running, such a vessel could not leave the port. In July this year a Japanese ship loaded 52,000 tons of coal in Newcastle for carriage to Japan. A storm blew up and a fairly heavy sea was running. The ship had to leave the port carrying about 2,000 tons less than it was capable of carrying. The serious aspect is that the vessel was laid up in port for 24 hours before it could leave. In 1967 almost 3 million tons of coal was exported from
Newcastle. In 1968 the amount was even greater. In 1967 more than 800,000 tons of wheat was exported from Newcastle while 2,230,000 tons of iron ore was brought to Newcastle from the west coast and from Whyalla for use in the steel works of the BHP company. If Newcastle is to develop it is important that these commodities bc carried in the largest ships available - ships of the kind in common use in other parts of the world. First of all, the cost of freighting wheat from Australia to Europe can be reduced by the use of larger ships. The cost of carrying coal from Australia to Japan also can be reduced by this means. The cost of transporting ore from the west coast of Australia to the east coast of Australia can be reduced by using larger bulk carriers than are in use at the present moment. This will result in increased money from the export of these commodities :ind, most important of all from the point of view of our internal economy, it will allow Australian industries to compete.
– Order! The honourable member’s time has expired.
Mr KATTER (Kennedy) 14.11 J- Mr
Chairman, I wish- [Quorum formed]. I wish to deal with three subjects which, I think, arc not only of importance to the northern part of this continent but also most assuredly are of importance to the national economy and to the nation generally. First, I wish to speak about superphosphates and phosphates. Perhaps I should preface my remarks by referring to the action that the Government took approximately 4 years or 5 years ago in establishing a special investigating committee to ascertain just what quantities of phosphate rock and phosphate generally were available to Australia, how long those supplies would last and what would be available to replace them when they finally ran out.
The result of this investigation was rather surprising. Practically no discoveries of phosphate rock were made. I think some guano was found on a small island in the Gulf country. Apart from that, new sources of supply of phosphate rock and phosphate generally were found to be pretty well negligible. So, it became quite apparent that with the existing supplies at Nauru, Cocos Island, Christmas Island and Ocean Island we had perhaps 30 years to 40 years supply available from these traditional sources. Almost providentially, the year before last, during drilling operations in the Boulia area of western Queensland an examination of cores revealed traces of phosphate rock. Within 48 hours, the huge deposits southwest of Cloncurry had been found. These enormous phosphate rock deposits are situated south of Duchess and south-west of Cloncurry. 1 prefer to refer to the deposits being south-west of Cloncurry for obvious reasons.
The extent of these deposits was almost unbelievable. First and foremost, they were so readily mineable that the discovery was a mining company’s dream. These deposits were almost completely available with open cut methods. The area was approximately 100 square miles. Varying opinions were expressed about the grade of the material, but we can safely calculate that it is between 15% and 35% to 40%, and this is a particularly high purity value for phosphate or phosphate rock, immediately after the discovery there was a great hue and cry. The Queensland Department of Mines and the then Premier of Queensland acclaimed this discovery as one of the greatest mineral finds in the history of the world. The hue and cry went up but it slowly and quietly died away. Now we are all wondering what is to be done about the development of these deposits.
What rather fascinates, frustrates and appals me is that always the discussions centre around the export of phosphate rock from the area. No one ever considers that the phosphate rock should be treated in the area and that superphosphate should be produced right there. Honourable members may well ask: ‘Well, to what use would superphosphate be put there? Where are the markets in that area?’ The greatest market of all for superphosphate is to be found in the northern parts of Australia. I am rather surprised at the attitude of this Government. Some remarkable work has been done in northern Australia. The results of experimentation over many years are well known. Let me correct one thing here and now. The Tipperary scheme was a direct result of the research work carried out by our departmental officers. It was they who discovered the great potential of this area and who found that Townsville lucerne was a legume that could be used to tremendous advantage there. The results of that experimentation were quite spectacular. Not only was the quality of the beef produced in that area improved tremendously by the promulgation of these legumes; the numbers of cattle also increased in quite a spectacular fashion.
Of course, virgin country that is in many cases gravely in need of superphosphate cannot be opened up unless we have the means of promulgating these legumes and unless an unlimited supply of superphosphate is readily available. Here, right in the far western part of Queensland, a huge deposit of phosphate has been found, lt is said that the ingredients to produce superphosphate must be available. Well, Mount Isa Mines Ltd blows out of its chimneys every day and night unlimited quantities of sulphur which is the ingredient most required in the production of superphosphate. 1 suppose the mining companies have their reasons for playing it pretty close to the chest. I have always thought that a mining official would make a most successful poker player. People talk about the Japanese. We have been negotiating with the Japanese for years. It is almost impossible to get any material information from them when it comes to mining matters, but their attitude is quite the usual attitude of representatives of mining companies. No doubt this is necessary because of problems that arise from going off half cocked. In any case it has been traditionally accepted. Perhaps rumours get around, perhaps deposits that are supposed to be most spectacular turn out to be disappointing. No doubt the share market is involved. These factors must all be considered.
But this state of affairs does make it rather difficult for the various governments involved. The whole three arms of government are involved, as I will point out to the Committee. No doubt the Federal Government has a part to play in the development of a huge deposit such as this. The State Government is very much involved. I believe that already a close examination has been made of freight costs. The harbour board in Townsville has already gone very closely into this matter and has indicated that it will have no difficulty at all in stockpiling the quantity of phosphate rock which it is expected willi be received to be exported through that port.
Local government has an important role to play. For example, the Cloncurry Shire Council, in whose shire this large deposit of phosphate rock was found, is examining on a preliminary basis the possibility of constructing a dam at a cost of the best part of Sim. If it goes ahead and constructs this dam, this phosphate area south of Duchess will derive no benefit from this water conservation scheme. Hence it is stymied for the moment and cannot go ahead and plan a dam at Slaty Creek. On the other hand, the Council could go ahead and plan a dam to be built on an alternative site at Painted Rock if it knew it would have to supply water to develop these phosporite deposits.
Although it may be necessary to a large degree for mining companies to guard their secrets with the greatest of care, the stage is reached where they should be a little more frank if they are going to look for Federal. State and local government participation. Various suggestions have been made. It was even suggested that the phosphorite be pulverised and pumped through a pipeline to a port on the Gulf of Carpentaria. The Minister for Social Services and Minister-in-Charge of Aboriginal Affairs (Mr Wentworth), the honourable member for Lilley (Mr Kevin Cairns), a few other members and myself made a very close examination of this proposal and we found that there were not many sites for a deep water port on the Gulf. But there are sites that could be developed, and it is not beyond possibility that this plan will be adopted.
I want to say something about grain sorghum. If nickel is the glamour metal in Australia today, grain sorghum could very aptly be described as the glamour crop, with all due respect to the honourable member for Mallee (Mr Turnbull) and other members from wheat growing areas who have turned up in force to give me some encouragement. 1 say without any qualification that the market for grain sorghum in Japan at the moment is insatiable. I know this is a broad statement and that I could be taken to task, but I have made it and I stand by it. This market is insatiable because the Japanese have become great meat iters. They are not meat eaters like Australians who like a good, thick, tender sirloin steak or a pound of sausages. I have a friend who campaigns at election time with sausages. He goes around the Gulf country, and instead of taking newspapers he takes sausages and distributes them to his friends. He has won numerous votes in this way. This is a hint to some of my friends.
– Did he give them to the donkey voters?
– You do not give sausages to the donkey voter; you give him grain sorghum. I will get back to grain sorghum. I can see that you are looking at me Mr Chairman, and wanting me to get on with the job. The market in Japan is insatiable. As 1 have said, the Japanese have become meat eaters, but not in the sense that we are. They consume chicken and pork in vast quantities. To raise the livestock to provide these products they need unlimited supplies of grain sorghum. The time has now arrived when the State and Federal governments should cash in on this situation. They should have a look first of all at the market structure. The average grain sorghum farmer that I strike - there are a few of them in my electorate - claims that grain sorghum is not a very profitable crop to grow at the moment and that it is certainly not a profitable crop to grow for export. We should do something about this. To a very great extent we are at the wrong end of the stick. I know that Japan is easily our greatest customer and 1 know all the involvements that appear when we come to consider the Japanese and our trade with them. In some ways we are extremely liberal with Japan and the United States. We should adopt a harder attitude in some respects and pursue it relentlessly. This should be done in regard to our beef exports and our wool exports to the United States and more specifically our grain sorghum exports to Japan. An improved market would contribute tremendously to our national development. It seems fairly certain that Tipperary station in the Northern Territory will achieve its objective and will be producing 193,000 acres - I have always wondered where the ‘3’ comes from - of grain sorghum within the next 3 years. The grain sorghum grown on Tipperary is primarily for export to Japan. When 1 did my research into this matter I asked: ‘With all this, is it still an insatiable market?’ The reply was yes. If we have an insatiable market, why do we not exploit it?
The last matter I want to mention is cattle production in the Gulf country and the northern part of the Northern Territory. As an expert, a man intimately associated with the industry, is present, I will be careful in what I say. I will speak in broad terms. We have a most stable market for beef despite anything that, has happened over the last month or so. The panic button was pressed and everyone thought the graziers in these areas were a lot of bushies and would sell their cattle at any price. But they are becoming a little bit wise. We all know the saying: ‘For whom the bell tolls’. We tolled the bell on this occasion for the graziers in the west and told them to put up their guard and hang on to their beasts whatever they did, because this was a purely temporary situation. That is what it proved to be. There have not been many fences in the past up in the Gulf country. The honourable member who has just attempted to interject apparently anticipated that I was going to give a run down of crime in the Gulf - poddy dodging and that sort of thing. Not for one moment. The difficulty about lack of fences is very apparent. Until very recently there was a 40% mortality rate among beasts in that area. Very young cows were throwing calves at an immature age. I suppose that reflects on the bull a bit. There were few fences. The mortality rate in the Gulf country, which had risen as high as 40%, was due in great measure to this lack of development. This situation is rapidly changing. The final point I want to make is that tied up with this stimulation of the cattle industry and the establishment of Townsville lucerne pastures is the production of superphosphates in the interior areas of Australia, more particularly in the north western part of Queensland.
– I sometimes wonder in a debate on national development whether this Government really understands the meaning of national development, much less has the ability to implement it. ‘Planning’, of course, is a dirty word to this Government. It conveniently and quickly shoved under the carpet the report of the Vernon Committee of Economic Inquiry, and today we stand in a worse position than ever before in the terms of our foreign trade. In fact, if it were not for the wholly fortuitous inflow of some Si, 000m last year in portfolio capita] into mining and associated shares, Australia would be in very serious straits. We will face that position again in the coming year. The honourable member for Kennedy (Mr Katter) referred in glowing terms to the potential of the Japanese market. I might very well ask him what the Government, of which his Party is a coalition partner, has done to even up the trade with the United States. What success did it have in relation to improving the sugar quota? What is its answer to the present stoppage of imports of Australian lean hamburger beef? We buy from the United States twice as much as we sell to it. What is the Government doing to equalise the traffic? What is it capable of doing? Nothing. Members of the Australian Labor Party will be telling the constituents of members of the Government that, too. I have here a cartoon which appeared in the ‘Australian’ on 5th September last, lt shows a guide with obviously a rather mordant caricature of the Prime Minister on his recent barnstorming tour of north Australia, northwest Australia and Western Australia. The guide is showing the right honourable gentleman what is obviously a typical mining enterprise with a poppet head, screens and all the other impedimenta associated with mining. Of course there is a stop sign and a boom, and the caption says: ‘The Australian boom, sir, and if your Japanese, Swiss, Dutch, United States and United Kingdom visas are in order we can have a look at it’. In case it might be suggested that this is a question of artistic licence or that injustice is being done to the right honourable gentleman, may I remind the Committee what the real position is of the ownership of Australia’s vast mineral wealth of which we hear so many glowing reports and on the sale of which the Government sets so much store to equalise things, they hope, in the very near future.
The Prime Minister, accompanied, of course, by the Minister for National Development (Mr Fairbairn) recently toured northern Australia. The right honourable gentleman first went to central Queensland.
There he saw the alumina refinery at Gladstone which is owned fully 1% by Australian shareholders! The major developers of the Moura black coal field is the Peabody, Mitsui group and they have a 58% interest. The Thiess organisation holds only a 22% interest. At Weipa, where there is one-third of the world’s bauxite in a fantastic deposit, an overseas company has 92i% ownership. These deposits are fantastically rich. How much of the benefit from these deposits will come to Australia?
From Weipa the Prime Minister went to the other side of the Gulf of Carpentaria. At Gove he saw a sight to warm the cockles of his heart - a 50% Australian shareholding, at the moment. This shareholding is made up of a consortium of the Bank of New South Wales, the Australian Mutual Provident Society, the Colonial Sugar Refining Co. Ltd, the Peko mining group and the like. But even there the squeeze is being applied and it looks as though they will be pressed down to a 40% holding. In the case of Groote Eylandt what is commonly referred to as a wholly Australianowned company - the Broken Hill Pty Co. Ltd, which is in fact 85% Australianowned - does actually conduct the exploitation of the manganese deposits. What do we find when we go a little further on the Prime Minister’s tour? He flew over Mount Goldsworthy. Fully 7% of the iron ore deposits at Mount Goldsworthy were in Australian hands and just a matter of a paltry 66i% was owned by the Cyprus Lines Corporation and Utah Construction and Mining Co. of the United States of America. The remaining 26% was held by Consolidated Gold Fields Ltd.
As evidence that Australians still have a little stake in the crown country’s natural resources, the Prime Minister would next have seen from the air Mount Newman where 30% of the iron ore deposits are owned by a sudisdiary of the Broken Hill Pty Co. Ltd, 30% by Pilbara Iron Ltd and a mere 40% by a combination of United States, Japanese and United Kingdom companies. Of course, when the Prime Minister finally completed his tour and got back home to Bass Strait, he would have discovered that an Australian company actually had what appeared to be a half interest in natural gas resources.
Of course, when the Prime Minister visited Mount Newman, he got the inspiration that this was one area at least where Australia did own something. He thought: ‘Well, we might be able to do better than that’. He thought that he could fly the Australian flag, big note himself and pose as the saviour of Australia’s mineral wealth from overseas takeovers. The opportunity to do this came in a most unexpected fashion, again when he was in the west. By remote control he decided that he would come thundering in on the MLC Ltd. To the horror of his advisers, the shock of orthodox financial interests and the amusement of any constitutional lawyer worth his salt, the right honourable gentleman promptly announced with a great blare of trumpets that legislation would be introduced to control the takeover of MLC Ltd. This company was not even a life assurance company; it was not even covered by the Life Insurance Act of this Parliament. This matter has not yet been dealt with and the Attorney-General (Mr Bowen) has been left to nurse the baby. The best that the Attorney-General can do to deal with the constitutional position is to turn to an Australian Capital Territory Ordinance which will deal with an ad hoc situation with one company in respect of one situation. To complete the joke, it was finally revealed that the foreign company concerned was the Sun Fire Insurance group which has been trading in Australia for 135 years.
The point I want to make is this: We have here an incompetent Prime Minister and an incompetent Government. No attempt has yet been made, and no attempt will be made, to come to grips with the problems of overseas investment in this country. Portfolio investment we need; portfolio investment we are entitled to. But when overseas interests come to this country and want actually to own the fee simple of what is here, this is where the line should be drawn.
This Government has no policy whatsoever in respect of overseas takeovers. It is not even prepared to act in the most simple and most elementary case where a well established Australian company dealing, for example, with food processing, a pastoral company or a trading company is the subject of a takeover by an overseas company which buys the shares of what is a profitable enterprise and then remits the dividends overseas. This is a disgraceful situation and is one that the Government could very well start on.
There are plenty of cases where overseas investment should be encouraged. One case in particular is Gove Peninsula where there is merely a 10% shortfall in investment. In this case the Australian Government could very well come in. Direct Australian Government participation may be an answer to a lot of problems of investment in mineral development in northern Australia. But these companies are here and in many cases we have to honour arrangements that have been entered into. However, in other cases 1 believe that we are entitled to look companies straight in the eye and say: “You have had more than a fair deal; you have been treated with fantastic generosity. We are going to clip your wings a little’. In any event, it is necessary for the Australian Government to come in.
On the question of investment generally: Australia does in fact, and is still generating from the savings of the Australian people 90% of its capital requirements. In other words, what needs to be done is to bridge the 10% gap of deficiency. 1 believe that if this Government were really to apply itself to the task and overcome its squeamishness. it could have a very good look at what is happening in many fields. If the principles of cost benefit analysis were applied it would be found in many cases that capital is being channelled into many avenues where there is unreasonable competition and it could well be channelled into avenues of national development. We can take a particular case in point. Recently the Australian Resources Development Bank opened a subscription list for its transferable certificates of deposit and wanted to obtain S20m. The applications were of the order of S80m. Of course, there was a sweetener. The interest rate for long term investors was 6i% and for short term investors it was 6%. In the main this is more than the interest that will be available to long term investors in Commonwealth bonds, especially with the proposed abolition of the tax rebate of 2s in the £1 .
There is a case for the review of general investment in hire purchase in Australia.
Hire purchase has its significant part to play in mass production, but even in the activities of hire purchase companies there are many ways in which money could be directly channelled into Australian development. In the main, companies, particularly those engaged in mining activities, are not making any notable contribution in technology. They have massive experience rather than scientific or technical knowledge. They are engaged in quarrying, mining and marine transport. This Government is the most backward in the world. Even the Republic of India, which is desperately in need of investment capital, has laid down as a minimum condition that 51% of the shares in any overseas company operating there must be held by Indian people. Is it unfair to ask that Australia should do less than this? In the aggregate, Australia has a gross national product equal to (hat of Indonesia, the Philippines, Vietnam, Thailand, Cambodia and Burma, but it is incapable of generating sufficient capital for normal investment requirements, lt is not unreasonable to suggest that Australians should have a majority shareholding in overseas companies operating here, but this Government will never look at such a proposition, lt is committed to the principle of laissez faire capitalism, of private enterprise untrammelled and unregulated. Australia is the last country in the world to hold to such a view and if is paying the price because today, as never before, we are dependent on an inflow of capital at any cost and on any terms to balance our trading position.
Mr ARMSTRONG (Riverina) [4.441-1 am convinced that the Department of National Development, the estimates for which we are debating now, has played a very great part in the expansion that has taken place in many fields of activity in Australia. I refer particularly to its influence with the Murray River Commission, which is of particular importance to my electorate. Overseas consultants are examining the salinity problem that exists in the river as a whole. The salinity problem is particularly difficult in areas in the electorate of my colleague, the honourable member for Mallee (Mr Turnbull), through which it flows. Views on the impounding of more water in the upper regions of the river have been revised. I think the need for this is self-evident. The honourable member for Maranoa (Mr Corbett) referred to the importance of water storage. I believe that the storage of water has never been more important in our history than it is today. The next big break through in the use of water will come, I believe, with the development of the use of underground water in inland areas. A cost-benefit analysis of projects is very necessary. It is interesting to note that, excluding the cost of the Blowering Dam, which was constructed recently, the return from the Murrumbidgee Irrigation Area in primary products in 1 year is greater than the cost of the whole project. That does not take into account the secondary industries and tertiary industries that have also developed.
I should like to refer to the part played by the Bureau of Mineral Resources in the expansion of our mining activities, to which the honourable member for Cunningham (Mr Connor) referred so gloomily, and the incentives that have been provided to encourage this expansion. People will not take risks unless the prospect of a reward is present and people will not take big risks unless the rewards are big. People are taking these risks today. The spectacular expansion of mining in recent years is fortuitous, but it has to some extent diverted attention from the continued importance of the export income earned by our agricultural and pastoral industries. Export income from mining rose in little more than a year from 11% in 1966-67 to 17% last year. This is not a new trend. In 1912-13, 28% of our export income came from mining. It declined rapidly, rose to 18% in 1938-39 and then declined again to about 11%. This shows the fluctuating nature of the export earnings from mining. The importance of mining should not be discounted in any way, but its expansion has required the investment of large sums of money, particularly for the purchase of equipment, in the development stages and a large part of this money has come from overseas. We have reason to be grateful for this, of course, because the investment of overseas funds also brought overseas know-how. Overseas capital has brought to this country far more know-how than the honourable member for Cunningham seems to realise. A very good example of this can be seen in the development of Mount Newman and Mount Tom Price. There is no doubt that errors were made, and considerable benefit was derived from the lessons learned, in the early stages of the development of Mount Newman.
It is, of course, necessary to service overseas capital, but I will have more to say on the detail of that aspect in a moment. Much that has been said about overseas capital does not take all the facts into calculation. The percentage of earnings actually repatriated is comparatively small. When we hear about the large profits that are made, particularly in the oil industry, we do not hear very much about the $700m that has already been spent in drilling wells that are not productive. The figure I have given is not a recent one. I have referred here before to the Mount Isa Mines Ltd and I refer to it again. Slightly more than 50% of the company is owned by overseas investors. It needed four infusions of fresh capital before it showed any sign of success. On three occasions it virtually failed. For every cent that is paid to overseas shareholders in this company, slightly less than lc is paid to Australian shareholders. But 6c are paid in taxation, 7c in salaries and wages to Australians and 5c in freight costs and material charges. Although we have a reputation amongst ourselves as gamblers, we are not prone to risk our capital in the initial stages of development. This is shown by the fact that in 1913 the capital of North Broken Hill Ltd was 34% Australian owned and today it is more than 84% Australian owned. In 1911 the capital of the Broken Hill Pty Co. Ltd was 26% Australian owned and now is 85% Australian owned. In the 1890s the capital in the Western Mining Corporation Ltd was entirely overseas owned, but today it is more than 90% Australian owned. The company at Mount Lyell also shows the same trend. It was about 80% overseas owned and is now about 80% Australian owned.
I do not believe that we should discourage the investment in Australia of overseas capital, particularly if this brings know-how to Australia. We should not discourage an investment that would result in people coming here from overseas and using their skills to help in the development of Australia. What we should do is give moTe encouragement to our own investors and provide more opportunities for them to participate in the development of Australia. If they are to overcome this trait of character that we seem to have exhibited in the past, they must be given more opportunity to share some of the cost. This is applicable also to our primary industries. Although much of the development in our north calls for comparatively large capital on a personal basis, there are still many opportunities for Australian participation.
Many Australians, principally young people, have been sufficiently industrious and thrifty to have acquired enough capital to enable them to succeed on the land - I know many who have been able to save S30.000 or S40,000 by their early 30s- but they have been deprived of the chance to use that capital and succeed, because the additional finance they have required has not been available. In many cases the same institutions which declined to take the risk and to finance these people - and it would be wrong and unfair to say that this situation applies widely - very readily financed the purchase of consumer goods involving large sums. More finance is required in our pastoral and agricultural industries on a term basis at reasonable interest rates if we are to give Australians who have already proved themselves - and the people to whom I have referred have proved themselves - a chance to participate in the development of our country, which awaits development. Whilst I welcome overseas capital I believe that Australians should be given more opportunity to participate in the benefits that come from the development of our land and its resources.
I take this opportunity of correcting a much used and much abused statement which is attributed to the Leader of my Party, the Minister for Trade and Industry (Mr McEwen). He does not need protecting but he has been accused of making a statement and we should put on record the statement that he really made. We are told that he said that we must not sell a bit of the farm every year. What he said was that we must be careful not to sell a bit of the farm every year. The statement that some people attribute to him is a clever distortion of the actual statement for political purposes.
Much of our development in the last decade has been brought about by the expansion of our trade with Japan and. to a lesser extent, wilh other parts of Asia. Might I also mention that the architect of our trade agreement wilh Japan, the Leader of my Party, was subjected to opposition at all levels in this chamber when he announced the agreement. Since .1958 our trade with Japan has doubled, but Japan’s trade with Australia has increased thirteen times. Last year we exported to Japan goods to the value of S642m and we purchased from Japan goods worth $343m. On a population basis this represents four and a half times as much Australian purchasing of Japanese goods as Japanese purchasing of our goods. Our exports to Japan represent about 20% of our total exports. In discussing our trade with Japan many people have a grave misconception of the value of the goods we export. We exported to Japan meat and meat preparations to the value of S26m: cereals worth S40m; sugar and sugar preparations worth $24m; hides and skins worth S6m; textiles, mostly wool, worth S246m; metalliferous ores and metal scrap worth $I43m; coal, etc., worth $85m; and non ferrous metals worth Slim We imported from Japan S75m worth of textile yarn and fabrics, but the total value of our imports of transport equipment, which included heavy equipment as well as motor cars, was S63m. So. this was not the biggest item, and it represented about 17% only of our total imports from Japan. When the matter of the importation of motor cars from Japan had so much light focused on it recently it was suggested that although Japan bought a wide variety of goods from us we bought nothing but motor cars from Japan. That was wrong and ill informed comment.
An economist I know - and I might be forgiven for calling him an eminent economist - recently said that if a cost-benefit analysis had been applied rigidly in Australia in the past there would be no development further inland than 60 miles. He did not mean to imply that a cost-benefit analysis was not of immense value; he did imply that we should be required to take some calculated risks in our future development of Australia. I would be the last to write down, for one second, the value of science and technology. They are tremendously valuable, but in the end it is the enterprise, courage and industry of a people that make a nation great. We have ample reserves of these qualities in Australia, but we need to take calculated risks in our development of Australia if we are to have a proper share in the benefits of our resources. We must ensure that Australians have more opportunity to participate in the expansion that will certainly continue. I believe that the activities of the Commonwealth Development Bank of Australia are not sufficiently diverse, that the Bank’s charter is not sufficiently wide, and that not sufficient capital is supplied to it to enable it to have the latitude it should have in assisting the people to whom I have referred - particularly young people with all the necessary attributes - to participate in the development of Australia by working on the land. 1 mention my own occupation particularly because f could name at least fifty young people who are deprived of the opportunity of engaging in it. Some reference has been made to priorities for developmental projects but, of course, this is limited to some extent by State activities. The part that is being played by the Department of National Development and the Minister for National Development is contributing greatly ro Australia’s future development.
– Order! The honourable member’s time has expired.
– I will not delay honourable members for long but I. want to round off what I was saying earlier this afternoon when I was milking a plea to the Commonwealth Government for financial assistance for the development of the port of Newcastle. This is not a new type of proposal. Recently the Government made available some S3m for the development of the port of Weipa so that it could handle ships of a larger tonnage. On the eve of an election some years ago - in 1963 when the Government was in trouble electorally - a similar type of grant was made for improvements to the port of Newcastle. Money was made available by way of a non-repayable grant and by special loan funds to the State of New South Wales. 1 am asking the Minister for National Development (Mr Fairbairn) and the Government to give serious consideration to making similar financial arrangements now with the Slate of New South
Wales by way of non-repayable grants or special loan allocations, which will not be taken into consideration when the Australian Loan Council meets to determine loan allocations to each of the States. If the Government’s policy is that loan funds that are made available to a State are to be taken into consideration when the loan allocation is decided by the Loan Council, obviously State Governments will be reluctant to seek special loan allocations and will determine priorities for works on which money is to be spent.
In my earlier remarks I read statements by the Chairman of the Broken Hill Pty Co. Ltd, Sir Colin York Syme, and by the captain of a Japanese coal ship which had been delayed for over 24 hours in the port of Newcastle because it could nol get out of the port over the bar. I want to emphasise once again that the port of Newcastle is the major bulk port in Australia today. No other Australian port handles a greater tonnage of bulk commodities. 1 repeat that in 1967 almost 3 million tons of coal were exported from Newcastle and that there was an increase in 1968. In 1967 more than 800,000 tons of wheat were exported from Newcastle, 2,230.000 tons of iron ore were brought to Newcastle and 585,000 tons of limestone were handled at Newcastle.
From these figures alone honourable members can see it is obvious that Newcastle is the major bulk handling port in Australia today. Therefore, with the changeover to larger ships and the necessity to carry these bulk commodities in larger ships, it is essential that the Commonwealth Government should provide the finance to the New South Wales Government so that the harbour at Newcastle can be deepened. There is only one thing holding up the use of the port of Newcastle by larger ships, and that is the fact that there is only 36 feet of water at the bar. The internal leads themselves are not of sufficient depth. The deepening of the harbour requires money and effort, lt should not be carried out over a period of years. The position should be corrected by a crash programme of harbour deepening by the State Government.
The best equipment that is available has been installed to handle the commodities, to which I have referred. Recently a 12 million ton coal loader was installed which will handle 2,000 tons of coal an hour. That would make it one of the best coal loaders in Australia. Very shortly a wheat handling terminal will be completed which will permit the handling of 4,000 tons of wheat per hour. The equipment for handling the bulk commodities of the Broken Hill Pty Co. Ltd is equal to anything in Australia and, from a statement that was made to me on one occasion, it is equal to anything in the world today. Newcastle has become the centre of one of the principal fertiliser industries in Australia. First class bulk handling equipment has likewise been installed at Carrington to handle the imports of raw materials, including phosphates, in the most economical manner. 1 return once again to the important point - and I emphasise it - that the future economic development of these industries will be prejudiced unless the Government is prepared to carry out a crash programme of deepening the port entrance and also the leads within the harbour. Unless the Government gets on with the job it will mean that Newcastle coal will no longer be competitive with coal from other countries on the markets to which we presently export coal. It will mean loss of employment to many hundreds of men in the coal industry. It is well known to honourable members that because of mechanisation there has been a serious decline in employment in the coal industry. Newcastle is the export port for all of the wheat that is produced in the north west of New South Wales. If the work of deepening the harbour is not carried out it will mean that the future of that industry will be jeopardised by increased freight rates, if the wheat has to be carried on to Sydney or to some other port. If the harbour of the port of Newcastle is deepened larger bulk carriers will be able to call at the port. At the present time, because of the depth of water at the silo wharf, it is not possible for 50,000-tonners to ship wheat out of Newcastle. That is another area which has to be deepened.
I have already referred honourable members to the statement of Sir Colin York Syme, that Australian steel was no longer the cheapest in the world and that this situation had arisen because of increased shipping freights. On 24th August 1967 the Managing Director of BHP, Sir Ian
McLennan, said that Newcastle’s future industrial growth could be limited by the depth of water on its bar and in its harbour channels, because the world trend is to use bigger, and still bigger, ships for freight haulage. I emphasise again that the port of Newcastle is the largest bulk handling port in Australia today. I know that shortly it will be surpassed by ports on the western coast of Western Australia, but they will be exporting only one commodity, whereas at Newcastle it is a question of exports and imports. If the harbour is deepened it will mean a continuation of Australian industry. It will mean the continuation of the coal industry. It will result in Newcastle being a cheap export port for wheat. It will also mean that iron ore can be brought to Newcastle much more economically than it is at the present time. This will guarantee work for Australian workers in the steel industry. Believe me, if BHP has to retard its development and if it is not able to carry on with the normal expansion that is necessary in Australian industry, this will have a very serious effect on employment in the Newcastle area. Even though it may cost this Government some millions of dollars to carry out the necessary work in deepening the harbour, it is essential that this work be carried out.
I could go on and elaborate on what could be an alternative method of gaining entrance to the port of Newcastle. I refer to entry through Port Stephens. But any possibility of this method of entry to the port of Newcastle being adopted has been killed by the stupidity of the State Government in putting across the river a bridge which will have only 100 feet of clearance above the river level and the navigational channel will be 200 feet. This would prevent completely ships of any reasonable size being able to use this method of entry to the port of Newcastle. I am assuming that it is not possible to deepen the bar at present. I make a plea to the Minister and to the Government that they should provide the necessary finance, by way of non-repayable grants and loans which will not be taken into consideration in the allocation of funds to the State of New South Wales, so that this most important harbour deepening programme can be undertaken and so that the State Government can get on with the job of ensuring continuation of employment and development in the port of Newcastle.
– As we are discussing the estimates of the Department of National Development 1 pay a tribute to the Minister for National Development (Mr Fairbairn). His courtesy, co-operation and goodwill are keenly appreciated. We in the Australian Country Party, and I believe all members in this Parliament, regret his indisposition during the past 8 or 10 days. 1 ask the Minister for Civil Aviation (Mr Swartz), who is acting for the Minister for National Development to convey to him our best wishes for an early full recovery and return to Canberra.
– Although the honourable member for the Riverina (Mr Armstrong) has adequately answered in detail the propositions put to the Committee by the honourable member for Cunningham (Mr Connor) I should like to make a couple of comments concerning them. The honourable member for Cunningham began by saying that the capital inflow into Australia is fortuitous. He then spent the rest of his time describing it as disastrous. 1 should like him to make up his mind what he was talking about. We were treated by him to the usual sad monologue, describing the sort of Socialism that might have a place in primitive countries which have a majority of illiterate people but which certainly has no place in this country.
In this debate it has become quite evident that there is a very fundamental difference of thinking between honourable members on the Opposition benches and honourable members on the Government benches. Honourable members opposite have reiterated again and again that the only way in which they can see development taking place is by the Government coming in to it or by the Government planning it or by the Government directing it. We on our side have shown that we believe in national development as against government development. 1 mean national development by both government and private enterprise. There is no question but that the kind of proposal advanced by the honourable member for Cunningham would ensure the minimum amount of enterprise in any country, and certainly in Australia, whereas the policies being followed by the present Government are designed to encourage the maximum of enterprise right throughout the community. We do not claim that the present position cannot be improved. We never take the view that we have reached finality and that nothing more can be done: quite the contrary. In the whole of this debate on the Department of National Development estimates it has been apparent that the only constructive suggestions have come from this side of the House. It is a truism to say that you cannot, have Socialism without salt mines, but it would be interesting to find out what sort of fate the honourable member for Cunningham (Mr Connor) would deal out to Australians who dared to be more enterprising than his Department, if he were ever placed in charge of one. He would certainly get little opportunity to deal with anyone else, as those people who come here from overseas and who share our own faith in the future of this country would certainly no longer have that faith and would no longer be coming here.
I want to add a few remarks to what 1 said on these estimates last night in connection with the desirability of appointing a Commonwealth Minister for Human Resources whose job would be to attempt to predict the skills, particularly the graduate skills, that will be required in this country, so as to influence those who are making decisions about the sort of disciplines they will study at the tertiary level at the moment people are making these decisions. I believe that this information would be valuable not only to those who at present have to look only at their own family or their own inclination or the present situation of supply and demand in any particular discipline, but also to the Government in varying the numbers of Commonwealth scholarships to encourage people to take up disciplines in which shortages were predicted in 5, 10 or 15 years time, and equally to discourage those who might be looking for scholarships to help them enter certain fields of study which were predicted to be in oversupply. Any of these predictions could be wrong or not completely correct. However. I believe that the appointment of a Minister and a department of this nature could provide reasonably valuable information to individuals requiring it and to the Government, having regard to our present stage of knowledge of our own development and educational requirements.
– 1 apologise for the absence of my colleague the Minister for National Development (Mr Fairbairn) who. as honourable members know, is ill at the moment and unable to attend during the debate on the estimates for his department. J am happy to represent him on this occasion. I will convey the tribute which has been paid by the honourable member for Mallee (Mr Turnbull), and, 1 am sure, supported by other members of the House, to the Minister.
There are one or two matters 1 want to refer to briefly. The first one is a matter which the honourable member for Macquarie (Mr Luchetti) raised concerning the Bureau of Mineral Resources. He drew attention fo the fact that the estimates for this year are lower than they were for 1967-68. Of course this is quite correct, but this is due almost entirely to the fact that the contract investigations allocation has been reduced from $1.54m to $1.3m. Finance under this heading is normally expended on the use of rotary and fixed wing aircraft as support for field parlies. The total programme for this year is in fact larger than last year’s but less support of this type is required.
The honourable member for Kalgoorlie (Mr Collard) referred to the lack of effort on the Gascoyne scheme and he asked what was taking place with the proposal at the moment. The scheme involves a matter of priorities as far as the Commonwealth and Stales are concerned. The work that has already been done in this field shows that the problem of water conservation in this area is a very, very complex one indeed. 1 understand that the State Government is continuing engineering investigations and that the Commonwealth Department of National Development is investigating the economic feasibility of irrigated production in the region.
The honourable member for Dawson (Dr Patterson) raised quite a number of matters relating to basic information contained in a number of documents and studies undertaken by representatives of the Commonwealth Government to gain information on which to base its decisions. He referred to documents which had been provided to the Government and studies which had been carried out in the Weipa area, and he asked for information and answers to a series of questions on reserves, price, profitability, exports and things of that nature. Unfortunately the detailed information which he required could not be provided by the Minister for National Development because the information received is in total statistical form having been collated by the Bureau of Census and Statistics. However, it was possible for the information to be provided, as it was, in the Queensland Parliament, because detailed information is kept and maintained by the Department of Mines in that State. The honourable member also referred to various reports on information which the Government obtains from time lo time in relation to the development of water resources and the like and he asked why the documents could not be tabled or debated in the House. As the honourable member knows - and he did admit this - the Government does provide information to the House where possible, and many documents of this type have in the past been provided and indeed debated in this House.
On the question of studies of water resources and water resources projects, a total of twenty-six studies were provided by the various States. Immense detail was set out in those studies. They were eventually reduced to a selected group, but even then it took 18 months for officers of the Department of National Development to study these documents in order to make final submissions to their Minister. I point this out to indicate the massive documentation involved, and in such circumstances it would not be possible to condense them into reports suitable for submission. But where possible, it has been done, and it will continue to be done in the future, lt is the desire of (he Department of National Development to provide to the House as much information as possible on these matters.
The honourable member for Newcastle (Mr Charles Jones) requested the Commonwealth Government to develop Australian pons. He referred to this as a matter of national development. In many respects it is, but I draw his attention to the fact - and I think he admitted this himself - that this is principally a matter which concerns State governments, and in some cases
Industries. Although it is outside its responsibility, the Commonwealth has however made special grants or given other forms of assistance to improve seven ports in three States, one being the port of Newcastle, which is in the honourable member’s electorate. There is no doubt that when special matters related to national development are considered they will be dealt with on grounds relating to Commonwealth responsibility, but the overall responsibility rests with the States, and the matter referred to by the honourable member for Newcastle is one that should be referred to the State Government.
The honourable member for Cunningham (Mr Connor) made a rather gloomy forecast regarding future development in a national sense. This is not unusual because we have heard comments of this type from him in this House before. As he referred to visits by the Prime Minister (Mr Gorton) to a number of projects throughout the north and north-west country, I can only suggest that perhaps he should undertake a visit of this type, and by doing so he would perhaps have a better understanding and gain a better appreciation of the tremendous development and growth taking place all over Australia, in both secondary and primary industries and in the mineral field at the present time. The other matters raised by the honourable member relating to overseas investment were very suitably answered by the honourable member for Riverina (Mr Armstrong) and the honourable member for Eden-Monaro (Mr Munro), so 1 will not pursue them. The honourable member for Maranoa (Mr Corbett), the honourable member for Kennedy (Mr Katter) and the honourable member for Riverina made very constructive contributions. I will draw their remarks to the attention of the Minister for National Development.
Proposed expenditure agreed to.
Remainder of Bill - by leave - taken as a whole, and agreed to.
Bill reported without amendment; report adopted.
Bill (on motion by Mr Swartz) - by leave - read a third time.
APPROPRIATION BILL (No. 2) 1968-69 Second Reading
Consideration resumed from 13 August (vide page 103), on motion by Mr McMahon:
That the Bill be now read a second time.
Question resolved in the affirmative.
Bill read a second time.
Leave granted for third reading to be moved forthwith.
Bill (on motion by Mr Swart-/) read a third time.
Debate resumed from 26 September (vide page 1531), on motion by Mr Freeth:
Thai the Bil) be now read a second time.
Mr CREAN (Melbourne Ports) 1.5.23]- The Opposition will support the Bill, which is a comparatively simple amendment to the Income Tax Assessment Act. The Bill is designed to discontinue, as from 1st November 1968. the rebate allowed to taxpayers who receive income from Commonwealth securities of one kind or another. I understand that the rebate has been allowed since 1942. Prior to the introduction of uniform taxation the States were nol allowed to levy tax on Commonwealth securities. In order to preserve this investing advantage under the uniform taxing arrangements, provision was inserted in the Act for the rebate to be granted in respect of interest received from investments in Commonwealth loans. The relevant section is section 160AB Incidentally, at the time of introducing uniform taxation it was said that with only one authority collecting taxes only as much would be collected as had formerly been collected by the Commonwealth and States combined.
When the rebate provision was introduced our currency was in pounds, shillings and pence, not dollars. The rebate was 2s in £1 of taxable income derived from bonds. That is to say, if a taxpayer was entitled to a deduction from taxable income of 2s for every £1 of Commonwealth loan interest that he received. The provision of the rebate has had a number of interesting side effects over the years. One effect has been to create a difference in value of roughly 0.5% between the current Commonwealth long term bond rate and the rate applying to semi-government or local authority bonds which did not carry the tax concession. It has been estimated, for instance, that because of the rebate, in the case of a person paying $5,000 or $6,000 a year in tax, the Commonwealth loan at an interest rate of 51% is as good as another investment carrying interest at 6i%.
The rebate will continue to apply to all existing securities until those securities are exhausted historically or are redeemed, but it will not apply to securities issued by the Commonwealth after 1st November 1968. After that date Commonwealth securities will be issued without any tax advantage. Of course, a likely repercussion from this legislation is that the Commonwealth bond rate will rise. It is pretty difficult to say by how much the rale will rise, but the Minister for Air and Minister Assisting the Treasurer (Mr Freeth) in introducing this legislation said that it was believed that the increase could be of the order of 0.25%. According to the Minister, this is the opinion of experts in the field and is shared by the Reserve Bank and other authorities. The Minister stated that the Government hoped that the interest rate for semi-government loans would not rise. After all, these securities are in the same position now, with the abolition of the rebate, as they were before, because the rebate never attached to such securities.
This seems to be the position as far as surface probings can take us. But beneath all the surface activity a mysterious activity known as ‘bond washing’ has been going on in the community. It is about bond washing that 1 want to say one or two things this afternoon. I do not think bond washing would be possible without collusion between parties in the community who should have a much higher ethical attitude towards this matter than they seem to possess. It is easy to say that anybody is entitled to drive a coach and horses through the law. Equally, the law is entitled to close loopholes that may exist. The bond washing activities that have been engaged in reflect very little credit on people who are regarded as pillars of integrity in the investment world. Before saying more 1 would like to read a short extract about bond washing prepared for me by the research service of the Parliamentary Library. I commend the Service for having supplied me with this information at short notice. The document reads:
Bond Washing’ or ‘Rebate Washing’ as it is usually known in Australia, is the practice of buying Commonwealth Securities cum-dividend, and selling them back later ex-dividend at a lower price, the resulting capital loss being at the time tax deductible, whilst the interest on the securities would be eligible for the income tax rebate o£ 10 cents in the $1. The transaction is between institutions such as superannuation funds or State savings banks, which do not pay income tax (and. are, therefore, unable to take advantage of the 20 cents in the $1 rebate), and finance companies or others who are classified as professional traders and are, therefore, subject to income tax, including capital gains tax on share market transactions. Such traders are, of course, also able to claim for any trading losses on the share market.
The price of Commonwealth Bonds varies according to when the interest coupon is due. As interest is paid every six months, the trader in securities buys the securities at a date close to the interest due date. He pays a price which includes the value of the interest, and then collects the interest when it becomes due. The value of the security ex-dividend then falls below the price the trader paid for it cum-dividend. The trader sells the security at the lower price which represents a capital loss. The sale is usually back to the institution or person from whom it was bought. The trader has to pay income tax on the dividend received but claims refund for the capital loss. He also is entitled to the rebate of 10 cents in the $1 as he has been a holder of income bearing bonds. It is this rebate claim which constitutes his profit on the transaction.
In other words, he loses, as it were, 2£% in capital loss but he receives 2i% in interest. But, in addition, he is able to get a rebate of 24% multiplied by 10c for each dollar of investment for taxation purposes. This is his profit in the transaction.
The document continues:
As $1 million would not be a large transaction, it can be seen that the practice of ‘rebate washing’ offers large scope for profit-making and the Commonwealth loses a considerable amount of taxation revenue.
I will indicate in a moment how much this is from the figures of the Treasurer. The quotation continues:
An alternate to the ‘resale’ or ‘buy back’ arrangements is the practice of traders buying securities nearing maturity date. The traders collect the interest and then redeem the bonds at maturity date. This has been the practice by a number of institutions and has resulted in a high level of redemption of securities. Had the securities stayed with their original owners, a large proportion would probably have been converted. The Treasury would, in consequence, have been relieved of the necessity for finding funds to redeem the securities.
In practice, the transactions between traders and non-traders (where the non-traders buy the bonds back ex-dividend) are frequently the result of a deal between the two. Prices are arranged between them and the profits are split.
Where the securities are redeemed, the trader retains the whole of the profit.
That information seems to outline the nature of these transactions.
I want to try to give some indication of the magnitude of these transactions. In the course of the speech delivered by the Minister for Air (Mr Freeth), who is Minister assisting the Treasurer, when introducing this Bill, it was stated: lt is estimated that approximately one-third of all large bond transactions are now associated, directly or indirectly, with what has come to be known as ‘rebate washing’.
In other words, the bond market which is supposed to be part of the financial mechanism of this country is in this situation: One-third of its capacity in large holdings is really fictitious as far as the total market is concerned, but highly profitable to the operators.
Just how profitable is it? It is estimated - again the Treasurer gave the figures - that in the last several years the value of this rebate - that is the taxation revenue that has been lost to the Commonwealth by reason of the existence of this 10c in the Si rebate - has risen to somewhere between $1.5m and 5516m per annum. The loss in tax revenue has increased by over onequarter in the last 2 or 3 years because of this practice. What is happening, of course, is that people who, until this very cunning device had been found, would not have been able to avail themselves of the rebate are transferring their bonds to somebody who can avail himself of it. The Treasury is the loser. It is suggested that if this sort of thing were allowed to go on this practice would continue to grow.
One of the disturbing things is that whilst this legislation plugs a hole as far as new issues are concerned it does not seem to me that it plugs activity at all as far as existing securities are concerned. Let me quote figures to show the magnitude of this loss. I take these figures from the statistical bulletin from October 1967 which is published by the Reserve Bank of Australia. From the table headed ‘Maturity Structure of Non-Official Holdings of Marketable Government Securities’ we find that nonofficial holdings aggregated $6,384m as at 30th June 1967. These are still bonds that even after 1st November 1968 will attract a rebate and presumably will be able to be subjected to the same kind of rebate washing as has been going on for a considerable number of years.
I think the Treasurer stated that approximately $150m in the last 2 years has been redeemed that otherwise most likely would have been converted. All I suggest is that this places a serious limitation upon the ability of the Treasury, the Reserve Bank and our fiscal and other weapons to operate properly in this country. 1 happened to see one of the most recent issues of the quarterly bulletin of the International Monetary Funds’ magazine ‘Finance and Development’, lt contains an article on ‘The Central Bank in the Policy Making Process’. One of the things it suggests is that:
All I suggest is that this practice of bond washing certainly seriously limits the role of debt management in the Australian economy in 1968.
Those who are familiar with monetary and banking documentation know that the general finding of the Radcliffe Committee which investigated monetary affairs was that the sophisticated use of debt management should be one of the principal weapons of a government for controlling the level of economic activity in the community. Yet, in Australia, one-third of the large transactions that take place in this field have nothing to do with debt management. They are attempts by one section of the money market in collusion with another section to take profits to themselves at the expense of the rest of the taxpaying community and, I would suggest also, at the expense of monetary stability in the economy. That is why I think that this matter is a much more serious one than it appears at first blush.
While the Treasurer may be commended for having plugged a hole as far as future activity is concerned, nothing whatever has been clone, or it seems to me that the field is in no way blocked, as far as the holdings of more than $6,000m in Commonwealth securities are concerned. One should exclude from that the treasury bills that did carry the rebate. Interest payments become due every 6 months and I am told that almost every day of the year, or certainly every month of the year, some interest payment becomes due. ft is at that point, that the smart operators move in. They operate close to the date of maturity. A writer in the Sydney ‘Morning Herald’ described the tandem effect of this operation on 8th February 1967. What surprised me when 1 first came to examine this rather curious phenomenon is that two parties can be advantaged by it. Such is the nature of things. The two parties do exist and generally can be brought together only by collusion in very high places.
Some of the sorts of institutions that have been engaging in this transaction are the trading banks and finance companies. This is very serious indeed. The recent credit restrictions that have been placed upon this country might have been necessary in order to make the position of the trading banks less liquid. They were apparently taking a course that was making their position more liquid. Instead of holding securities to redemption through the Reserve Bank they were selling them just prior to maturity to certain people in the finance market. The writer of an article published in the ‘Sydney Morning Herald’ on 28th May 1968 said that he did not like mentioning any company, but he said one company did brag about its success in this field. That company was Mercantile Credits Ltd. The article states:
For iiic year ended last June 3(1, Mercantile Credits earned a net p rom of SI. 5 17.89 1 after providing only 3432,471 for income lax.
When announcing the result, the directors advised shareholders that this was taking into account $164,073 rebate applicable to interest received on Commonwealth inscribed stock.
As me rebate is at the rate of 10c in the S (2<, in the £) on interest received, die amount of SI 64.073 evidently exceeds by a great margin the routine tax concession applicable to the bonds held by Mercantile Credits al 30 June. 1966. . . .
That is one firm that is operating in this sort of fashion. I am told that there are very few who operate in this way. But, since they do, I for one cannot see any reason why they should be protected. Something further ought to be done in this matter. Precisely what can be done, I do not know. It may be possible, as under other sections of the Income Tax Assessment Act, to give the Commissioner of Taxation a discretion as to whether some of these transactions are bona fide. If companies have been rebate washing they should not be eligible for the concession. J can see no great difficulty in framing a section to deny it to them. On the other hand, there could be some difficulty over genuine holders of bonds.
Bond washing is one of the disturbing factors and may be one reason for the recent increase in the bank interest rate. I hope that the rate will be raised only one-quarter of 1%. An increase in the rate has the effect of deflating the capital value of bonds, which are issued at lower interest rates. It is true that some will still have the tax concession. 1 have no doubt that the markets will juggle amongst themselves in determining where they will settle down. There will now be markets for bonds issued prior to 1st November and for bonds issued after 1st November, lt is the genuine small holder - and he is not a very significant part of the market, I know - who is not looked after in the process. Where it can be established that a small holder is forced to sell prior to maturity, the option should be given to him by the Government to convert his bonds into another kind of security so that he can be the only holder and the only one entitled to the interest, lt may be that he would get a lower rate of interest, but his capital would be protected. If that were done he would be isolated from the others and the Government would be in a position lo manoeuvre against the large operators.
It is a terrible thing from the point of view of financial probity that so called reputable trading banks lend themselves to this process. We know that it is legitimate according to a strict interpretation of the law. If anybody is prepared to justify this driving of a coach and horses through the spirit of the law. let him get up and say so. The Government is beginning to close the door but something more has to be done. The Treasurer may have certain processes in mind to handle the problem in the future. On the face of it. it does not seem that anything will prevent this sort of transaction from going on. Even though it is operating on a narrower base than before it still has a pretty wide base when we remember that something like $6,000m worth of securities is involved. The last of them, according to the Minister Assisting the Treasurer, will not go out of existence until the year 2004, so they will go out relatively slowly.
According to the maturity dates listed in the document that I quoted, a quarter of the S63S.4m worth of securities held are for periods up to 3 years. Thirty-one per cent are for periods from 3 years to 10 years. So it will be a long while before that amount is repaid. About 40%, or $2,500m worth, of the securities will mature after periods between 10 and 25 years. So the problem will be there for a considerable number of years. At least a loophole is being closed. It is a sensible thing to amend the Act generally. Most people did not know that this kind of transaction was going on. After all, it is only those who move in the realms of high finance who seem to know that these things are going on. In fact, one of: the difficulties is that, with the publicity that is given, people who did not previously know about this kind of transaction begin to take advantage of it. That is why there is more responsibility incumbent upon the Government than just that of closing the door for the future.
Something has to be done. If there are so few operators in the game of bond washing, surely it would not be difficult to subject their income tax returns to internal scrutiny by the Commissioner of Taxation. If he believes these transactions have been carried out just for the purpose of bond washing or rebate washing, the concession should not be made available. If that were done it would not take very long, I suggest, for the practice to cease. On the other hand, I am convinced that it is a very disturbing sort of thing. When it operates at a magnitude of $50m or $60m worth of transactions per annum and something like one-third of the transactions take place on a big scale, it is very serious. This practice is a very limiting circumstance as far as the proper mobilisation of resources is concerned and it takes, as it were, some of the teeth out of the efficacy of the Budget. Part of the object of the new concept of overall balance in the economy is how this level of public or net deficit is financed. This is one of the significant things in trying to obtain a proper overall balance to the economy.
Without any doubt, it seems that about SI 00m that ought to have been retained in the public sphere last year was redeemed by people who made a profit and were simply duck-shoving between one kind of account and another. I do not know whether all trading banks participate in this kind of practice. Nevertheless, in view of the role that they claim they play in the community as the custodians of free private enterprise, I think that occasionally a little self-denial on their part would help at least to see that instead of there being two parties to a market, there would only be one. I leave it at that, and ask the Treasurer whether he has any further information as to what is to be done in regard to the existing bonds. I understand that contracts cannot be cancelled but perhaps there ought to be some procedures for redeeming and re-issuing. In this way we could certainly cut out this rather unhealthy practice which, according to the Minister for Air or to some Treasury facts with which I was supplied via the Treasurer, would indicate that if this practice went on, the cost to the Government in tax foregone, instead of being SI 6m, could be double that amount. Also, according to the nature of the transactors the additional SI 6m would go into very few pockets and as a result it would be collected at the expense of the rest of the community.
Therefore, I believe that this matter deserves more detailed explanation later, lt may be that the arrangement will settle down after 1st November when the new government securities are issued at a higher rate. Maybe some mysterious balance will occur that certainly I am not familiar with. But I doubt very much that this will be the case as far as bond washing is concerned. lt seems that this is the kind of practice that can simply go on. The practice points quite distinctly to a loophole in the law: certainly, it is a hole in the law that people never thought was there.
– They go to 2004. The practice can go on, although on a diminishing scale, until that year. But something like $1 ,600m to Si, 700m worth of securities will mature in the next couple of years. This practice can continue on quite a heavy scale in that short period. I certainly would like to have some assurance that the Treasurer will be able to act in regard to bond washing - in the type of securities on which one cannot close the door because of the legal way in which the securities are issued.
It seems a horrible thing that people can fall back on the legality of contracts or the wording of bonds and can operate on a basis that goes pretty close to being illegal. The operations are certainly illicit if not illegal; they are certainly evasive rather than avoiding. I for one have no sympathy whatever for these kinds of transaction. It is the public who pay in the long run. One effect of this practice now is that the general interest structure will go up by at least a quarter of 1%. This is the first cost of the transaction and it means repercussions as far as Commonwealth-State financial relations are concerned. Part of the moneys that are advanced to the States is advanced at what is within the ruling bond rate. So if the ruling bond rate goes up. the rate at which the States borrow also goes up and, of course, this puts quite a dent in a State’s annual accounts.
– Such as housing accounts.
– The effect is felt in housing and indeed the whole structure of the community. Apparently this practice is merely to give certain operators a great deal of power and glory to which they are not entitled.
Sitting suspended from 5. 55 to 8 p.m.
– The honourable member for Melbourne Ports (Mr Crean) gave details of the rackets that were being operated by people who had big parcels of government securities. He explained how they sold the securities and then bought them back from the people to whom they had sold them. The result of the intricate operation was that these people evaded a considerable amount of taxation. He rightly said that this sort of operation should be prevented. He also pointed out that the Bill is designed to prevent big business from taking advantage of the community by evading taxation in this way. But unfortunately all the Bill will do is ensure that those who invest their money in Government loans in the future will not be able to indulge in the malpractices and the rackets that have been used in the past. Those who now have investments in Government loans will be able to continue the operations that they have used in the past. Some of the Government securities at present on issue will not mature until some time after the year 2000.
– lt will be 2004.
– The honourable member for Mallee points out that they will mature in 2004. This means that, if those people who have in the past practised this method of evading the payment of their rightful taxation have securities that still have not matured, they can continue with their practices until the loans mature. Some people will be able to continue in this manner until 2004. As the honourable member for Melbourne Ports said, a much worse aspect is that some people were honest because they lacked knowledge of these loopholes that would enable them to become dishonest and evade their legitimate taxation. The introduction of this Bill is an advertisement to all and sundry that if in the past they have not taken advantage of the loopholes they can do so in the future. It is almost an invitation to these people to do so. How often it is that the honourable member for Melbourne Ports is right. He is right again when he says that the Government should take action to prevent the present holders of unmatured government securities from taking advantage of the situation we have described. The honourable member pointed out that the unmatured securities are valued at about $6,000m. If this is so, a vast avenue is left open for malpractice in the future. I agree that the Government should not merely prevent those who secure bonds in the future from doing what those who have secured bonds in the past have done and those who now hold bonds are able to do; it should prevent anyone from using this method of avoiding tax at all.
There is another feature of the elimination of the taxation rebate of 10c in the $1 that is given to bond holders. You, Mr Speaker, will be aware that about 300 years ago Sir Francis Bacon in an essay on usury said: The tooth of usury must be grinded; it biteth too much’. That is the position in
Australia today. Interest rates are too high. We should have lower interest rates because they are the rates that promote the development of the nation and spread the advantages of that development over most of the community. Some people may say: ‘Well, after all, that is what the Government is doing. If the Government takes away the advantage of the taxation rebate of 10c in the $1 that is granted to those who receive interest on government securities, it is in effect reducing the rate of interest that they receive.’ That is right, and if that was all the Bill did, inevitably this would be an advantage to the community. But that is not all that it does. All investments are not made in government securities only; investments are also made in private companies. If the rate of interest offered by private companies is 7% or 8% and the rate of interest paid on government securities is only 5%, the inevitable tendency is to force all the money available for investment in the community into private industries instead of into government loans. This, of course, would be an undesirable result.
Something should be done and taxation is the method that gould be used to ensure that private investment is not so much more beneficial to investors than government securities are. Every newspaper that is issued contains advertisements from the Ansett group, credit companies and others offering 71% and 8% for money invested for periods up to 5 years and sometimes more than that rate for money invested for longer periods. Because of this, any reduction of the rate of interest on government securities will tend to increase the demand for loans in private companies and to reduce the demand for government loans. The Government, of course, must get the money it needs. What does it do? It sends the Treasurer (Mr McMahon) abroad. In West Germany he pleads with all the influential people and asks: ‘What money can you invest in Australia?’ They say: ‘We can invest money in Australia but we want 7% free of Australian taxation’.
– And they get it.
– Yes, and they get it. Then he goes to Switzerland and he says: ‘Are there any crumbs falling from the rich man’s table that we can get for Australia, and what will be the price that we will have to pay?’ The Swiss say: ‘About 6i% and you can have a limited amount of accommodation’. He takes it and he continues on his way to New York where he says: ‘Is there any money available here that I can get to take to Australia?’ Americans tell him: ‘Yes, there is some here. You can get some money at 6% or 7% and you can take it to Australia.’ And so he does; he gets some money there. Interest earnings on all of this money are free of Australian taxation. I would say unhesitatingly that for the people of Australia a loan free of taxation, raised at 7% in Germany, is as costly to the people and Government of Australia as is a loan raised in Australia from Australian people at the rate of 10%. Is there anyone who will deny that? Of course not. Does the tooth of usury not bite too much? Certainly it does, and it should be grinded, as our friend, Bacon, said in days gone by, by the processes of the utilisation of the control by this Government of taxation to see that moneys that are invested privately in Australia are not so immensely profitable that they destroy all the opportunities for securing money for government purposes from the Australian public. As our friend, the honourable member for Melbourne Ports-
– The right honourable member.
– He will be the right honourable member one day; I have not the slightest doubt of that. And he will be a worthy follower in the footsteps of some eminent people who have gone before him. But that point aside, the honourable member for Melbourne Ports (Mr Crean) pointed out that this legislation is desirable enough though it is not sufficiently effective to get the results that it is designed to achieve. It should not merely cover those who have received loans in the past and who have up to date been carrying out practices that evade taxation; it should definitely ensure that those who still have loans in government securities shall not have an opportunity of evading their legitimate taxation. The Government, as I have pointed out, should look carefully at the whole question of investments, at the profitability of government loans secured from overseas compared with government loans secured from within Australia, and at the profitability of government loans compared with loans granted to private enterprise. Because taxation is the weapon that governments have, the Government should see that the moneys of the community are let out io those who require to use them in the promotion of the best interests of the nation, the development of all its resources, and the improvement of the welfare of its people. The Government should see, through taxation, that there do not occur inequalities in connection with interest rates that force the Government to go overseas to secure its requisite funds. This is happening because private enterprise in Australia is offering higher rates of interest than public authorities are offering.
Mr SPEAKER (Hon. W. J. Aston)Order! 1 think that the honourable member is getting a little wide of the context of the Bill.
– Of course he is.
- Mr Speaker. 1 did not think that you were wrong until your ruling was endorsed by the honourable member. However, I think that on a question of taxation and of the methods by which we deal with the taxing of dividends that are accruing to people because of their investments in government securities or any other type of security the whole subject of the taxation of dividends is relative. Only by a proper survey of the results of taxation generally can the Government see that it does not, by the process of eliminating the 10% rebate payable to those who have government loans, make it more and more difficult for the Government to secure loans under equitable conditions. I do not want to take any further time, because I think that I have made myself clear, even to the honourable member for Barton (Mr Arthur) who was interjecting.
– A remarkable feature of this debate is that apart from the Minister for Air (Mr Freeth) who introduced the Bill and spoke on the second reading. Government supporters are not participating in the discussion. Is the Government ashamed of this measure or does it lack members who are competent to debate on it? Although this Bill is needed to protect the Commonwealth revenues in some respect, are honourable members opposite afraid that: big brother is watching and that the people who support their Party will mark them down for future treatment at appropriate times when questions of reendorsement of re-selection arise?
This measure is very important, lt is small in its drafting and contents but in its implications it can revolutionise the whole of the financial setup of Australia. After all, finance is government, and the rate of interest - particularly the rate on government bonds and bank overdrafts - determines the economic welfare of the community. The best that can be said for this measure is that the Government, as from November next in respect of bonds that are issued after that date, will not continue thi time honoured tax rebate of 10% in respect of interest on bonds issued by the Government. Despite the SI 6m a year which the Minister said it is costing the Federal Treasury, the Government will still tolerate the situation until the year 2004 when the last of the current Commonwealth bonds are redeemed. Although the Government has blocked the loophole for the future, the loophole still remains and no-one has yet informed the House, though we are entitled to know, exactly what this will cost the Commonwealth taxpayer. It has been apparent for a long time that the labyrinth of tax concessions and other special inducements to favoured holders, of government securities has sadly distorted and twisted the money markets of Australia. The beneficiaries of this system, as is natural wilh this Government, are the biggest and the strongest. Those who have the biggest incomes can secure the biggest tax rebates because the very essence of (he tax rebate system, in respect of bond interest, is that the bigger the income the greater the actual worth of the rebate.
Whilst a long term Commonwealth bond is currently yielding 5i%, my recollection i.s that as much as 6.3% effective interest can. in fact, be yielded by virtue of the tax rebate which is made available. Of course, there are certain groups of captive institutions which cannot claim these rebates. There are certain other groups of people who cannot claim them either. But the main beneficiaries have been the least deserving. The Australian Mutual Provident Society and the Bank of New South Wales are eminent paupers who are really struggling to make ends meet! There is quite a privileged group of big financial institutions which are protected and which benefit greatly from these tax rebates.
One of the main characteristics of the Commonwealth loan market has been the number of captives who make their contribution. From time to time, when a Commonwealth loan is announced, with great eclat, it is stated that it is fully subscribed within 2 days or even less, but in point of fact the captives are lined up in advance. The first of these is the savings banks who, quite correctly, have to make a certain proportion of their funds available for housing purposes. The balance goes into government securities. The LOS ratio - the ratio of liquids and government securities - in respect of these matters is very closely supervised by the Reserve Bank of Australia. The other captive groups, which are the superannuation funds and the life assurance companies and societies in particular, come within the scope of the 20-30 rule. They must invest a minimum of 20% in straight government securities. The other 10% can bc invested, if they so wish, in semi-governmental securities.
One of the most remarkable features of the Government loan system today is the distortion not only of the interest rates and of the concessions, but also in the variation in the liabilities of the different borrowing authorities. I shall take the various State governments as a case in point. These figures are worth placing on record. In between the years 1950 and 1965 the Commonwealth’s indebtedness fell from $3,700m to S3, 134m. lt has since risen to about $3, 600m. At the same time, the indebtedness of the States rose from $2,367m to S7,090m. These are the figures that 1 want particularly to emphasise because they indicate the people who will be most, affected by this legislation. 1 refer to local government and semigovernmental authorities, who are the people responsible for the supply of major public services, such as water, sewerage, electricity, transport and the like. The total indebted, ness of local governments in respect of loan borrowings has increased from $189m in 1950 to S820m in 1965. This is fantastic. In the case of the semi-governmental authorities which are the suppliers of the public services to which I have referred, the total indebtedness in the same 15 year period has increased from $593m to $4,532m.
In other words, today, in aggregate, the less effective or the weakest section of the various strata of government is the most heavily in debt. Local government and semigovernmental authorities - the statutory corporations in particular - owe 50% more by way of loan borrowings than the Commonwealth itself does. As to the Commonwealth’s own borrowings, they are a rather pious fraud, if I might be permitted so to term it. As a matter of fact, the Commonwealth has the rather delicate habit of investing in its own loans. In this regard I quote no less an authority than Mr W. J. Campbell, the former New South Wales Auditor-General, who referred to this matter in an article on Commonwealth-State relations which was written and published in the Sydney ‘Bulletin’ of 7th October 1967. He was referring to the channel for this purpose which is euphemists !’; ‘ nt .1 as the Loan Consolidation and investment Reserve Fund. He quotes figures for 1966- 67 and he says that after receiving S227m from the Budget and paying out SI 50m in liquidating the Federal debt, the::, remained a credit balance of $915m. That has since increased - drawing on my memory - to approximately $.1 ,070m. Last year, despite the Government’s alleged financial stringency, it was able to divert another $180m into the Loan Consolidation and Investment Reserve Fund. Further Mr Campbell said:
Euphonic, but precise, the wording of this reserve affords little guide to its role in FederalState financial relationships, namely the so-called underwriting of State loan programmes. The reserve is built up by regular annual appropriations from Federal Revenue, and together wilh other Treasury cash resources it has been used to a large extent towards making good the shortfall in receipts from public loans against the Loan Council’s yearly borrowing approval. Operating through the reserve, the Commonwealth it:211 becomes a subscriber to these loans. In the outcome of many years, the Commonwealth has grown into quite a large scale bond holder in the ever-growing debt structures of the States, if allowance be made for the present investment by the Commonwealth in Stale loans and other set-off to the existing fixed term debt of the Commonwealth, there would seem to be not so much of this debt left to bc paid off from future Federal revenues.
That is a very happy position. He continued:
Celebrating this happy state, the Parliament recently- and that was some 18 months ago - enacted a large scale reduction in the annual sink ing fund charge on the Budget. In 1966-67, the first year under the changed legislation, the pay into the fund was less by some $76m as against 1965-66. Twenty-odd years is not a lengthy period in the lifetime of national debt. The success of the Commonwealth’s repayment efforts in that period since the end of the war must surely rank among the most remarkable achievements in public debt management anywhere.
In other words, they are like the celebrated ship, the ‘SS Nonsuch’, which had three decks, no bottom and which burned its own smoke.
-Order! I would suggest to the honourable member that whilst his comments might have some obscure relevance that I cannot see at the present time to the Bill before the House, the purpose of this Bill is to amend the Income Tax Assessment Act in order to discontinue the present 10c in the $1 income tax rebate on Commonwealth loan interest. This does not mean that the Bill is drawn wide enough to cover the whole loan field.
– With respect, I want to link these comments up with the position with regard to semi-governmental borrowings, which arc of vital importance in this measure.
– I got the honourable member’s point at the beginning, butI think that he has strayed away from the point somewhat, and I would ask him to get back to it.
– Very well. With regard to semi-governmental borrowings, I again want to quote from the ‘Australian Financial Review’ because this relates to the essence of the problem which will result from the abolition of the rebate in the future. Semigovernmental loans have been the poor relation in the bond market. Mr David Lowe in the Australian ‘Financial Review’ of 27th September last said:
The situation in the semi-governmental securities market is already approaching mayhem, and without some indication of what official interest relativities are going to be, semigovernmental paper would have become almost impossible to sell profitably between now and November. The point of course is that whilst semigovernment bonds are being offered at 55/8% or a little more it has been very difficult to get major institutions to invest in them.
We have the paradox in Australia that the people who have the greatest debt in proportion to their ability to pay have the least prospects of being able to borrow. That is a situation on which we have had no more than the vaguest of hints from the Government. In that same item Mr Lowe said:
Recent semi-government flotations in which public subscribers have failed to take up as much as 50% of the issue are understood to include the N.S.W. Electricity Commission, the Melbourne and Metropolitan Board of Works, the Queensland S.E.C.. and the Prospect Council, among others.
The interest rate set for public subscription to these semi-government flotations is 55/8% for 10 to 15 years.
The recent action of the Reserve Bank in deciding to tighten up bank liquidity ties in with this. The Reserve Bank announced on Saturday last that it was calling up between $58m and $59m in statutory reserve deposits. As a sweetener to offset the banks’ loss of interest on the percentage of that $58m or $59m which they would have loaned out, they are being give,¼% another¼% interest. That¼% will be reflected in rates of interest being charged by trading banks to co-operative building societies. It will also be reflected in the loans to be made to the Stale Housing Commissions because the loan rate there is 1% less than the current rate, and the rate will certainly go up by¼%. To the average home borrower, borrowing, say,$8,000 over a period of 25 years the extra interest is something like $250. Here again, as in all these cases, the burden falls heavily on those least able to pay.
During the last 18 years one of the most remarkable features of the Australian money market has been the emergence of the hire purchase industry. Hire purchase organisations have been literally syphoning off money that would normally have gone into the Commonwealth bond market. Hire purchase organisations make no contribution at all to the Commonwealth bond market. At the present time the average interest rate they are offering is of the order of 7½% for first class debentures for a term of 5 years. While this situation is tolerated we will have dearer and dearer money.
As to some of the results that will flow from the abolition of the rebate - and we support it - here again is evidence of the Government’s incompetence and inability to deal with the interest structure. It will be found that there will be repetitions on a much greater scale of the success of the recent issue by the Australian Resources Development Bank Ltd when it asked for a subscription of $20m and was offered S80m. The Resources Development Bank is offering 6% for a 5 year term or 6±% for a 10 year term. It is obvious to me that a lot of money that would previously have gone into the ordinary long term loans will jump up over and beyond semi-government rates and go direct into the Resources Development Bank. No-one will cavil at the need for money to be available for that purpose, but the point 1 want to make is that Commonwealth loans are going to suffer and the whole interest rate structure will grow. The Government deserves the greatest censure for its failure to use regulation of interest rates as one of the means of controlling the economy of this country. II has been a case of stop and go; press down the accelerator for the economy to rush like mad, apply the brakes and come to a grinding halt. This stopping and starting has been one of the characteristics-
-Order! I again remind the honourable member of the contents of the Bill. I suggest he get back to the contents of the Bill. He is not entitled to roam all over the economy in the debate on this Bill. The purpose of this Bill is to amend the Income Tax Assessment Act in order to discontinue the income tax rebate.
– The question of bond washing has been of great relevance to this subject and it is because of the excessive interest that can be obtained by these means that we should have the whole structure of interest rates in the Australian economy altered. The Government is taking an entirely empirical approach to this problem and whilst what I have to say might certainly be distasteful to the Government and those responsible for advising it, it nevertheless needs to be said. In a country such as this we are paying interest rates which are out of all proportion to those in any other country in similar circumstances. Our economy will continue to be distorted while these interest rates escalate.
– I would again remind the honourable member that this Bill is not a Bill dealing with interest rates. This Bill deals with the rebate on Commonwealth loans interest.
– Wilh respect, Mr Speaker, I would suggest that the Minister’s second reading speech showed that this is merely a device to assist the flow-on into Government securities and the like, and I think it is a bit difficult to circumscribe the debate.
– The Chair has been fairly lenient with the honourable member in this respect.
– 1 have never in the past queried a ruling of the Chair. I have always treated the rulings with the utmost respect. I have no desire to circumvent your ruling in any way, Mr Speaker. I can assure you that what I have to say is of the utmost relevance and is most directly related to the measure under consideration.
– I would again point out to the honourable member that the Chair has been lenient in relation to the remarks the honourable member has been making.
– I congratulate the honourable member for Melbourne Ports (Mr Crean) for exhibiting the dirty washing in relation to bond washing. I want to quote from an article in the ‘Sydney Morning Herald’ of 28th May last by the financial editor. He commented on the then doubtful future of the 10c in the $1 bond rebate and he referred to the explanation made by the Treasurer in general terms as to how the various institutions would be quite happy to purchase Commonwealth securities in the market immediately before the halfyearly interest dale when it suited other institutions to sell. This is the essence of techniques being followed, and from which flow the other matters to which I have referred. The financial editor continued:
The second group, the sellers, include, institutions which are either unable to take full advantage of the tax rebate (for instance, private savings banks) or cannot use it at all (State Savings Banks).
He also said - and 1 quote this so that it will be seen by the people who will undoubtedly be reading Hansard:
The inability of private savings banks to take full advantage of the rebate was settled by a series of High Court test cases in the early 1960s.
The Court ruling was that the banks could claim the 2s rebate only on their net taxable income and not on the full amount of the interest they received from Commonwealth Bonds.
Sincethe savings banks are heavy captive subscribers to government securities, the ruling meant that they are unable to employ the rebate on a very large proportion of bond interest they receive.
Dealers in the official short-term money market whose assets consist entirely of Commonwealth securities, are in a similar position.
It suits such holders to self substantia! amounts of bonds as the interest dale approaches, provided the market price offering shows some modest premium in respect of interest accruing.
This is the moment for say, finance companies. which are now classified as professional traders in bonds, to pay the modest premium and enjoy the full income lax rebate.
If the bonds still have some time to go before maturity, they will fall in price after the interest payment is made. The buyer may then resell them at the nominal capital ‘loss’ which offsets the interest income received - but he still enjoys the 2s in the £ rebate on his net income derived from various sources.
The matching of buyers and sellers is not done directly but essentially through the market or through expert intermediaries.
The combination of capital loss and rebate on income can provide the rebate washer with a very high effective yield on the bonds.
This legislation will certainly prevent the further issue of bonds of this type. It will do nothing to remedy the obvious abuses referred to in the article which I have just read. The situation will continue - in diminishing degree it is true - until theyear 2004.
– The honourable member for Melbourne Potts (Mr Crean) suggested that the Commissioner of Taxation should be given a discretion to disallow the rebate where he consideres that transactions are not bona fide. If this were done it would be difficult to distinguish between a bona fide transaction and a transaction of another kind. There would be a risk of penalising the wrong people. This is an important point. Many institutions which do not engage in rebate washing arc continually buying and selling bonds for legitimate purposes. Should we penalise these people? The Commonwealth has a contract with holders of bonds. The prospectus under which bonds are sold constitutes a contract. It is hard to say how the action suggested by the honourable member could be taken without breaching that contract. The Commonwealth cannot break the contract into which it has entered. It is important to preserve the reputation of the Commonwealth
Treasury in this regard. If we were to act as the honourable member has suggested we should, investors would feel that they cannot take the prospectuses seriously.
It is estimated that in the normal course about half of the outstanding issues will have been redeemed or converted into nonrebatable issues within about 5 years. So, au though the last of the rebatable bonds will not mature until the year 2004, the bulk of them will mature well before that time. The honourable member for Scullin (Mr Peters) claimed that because rates of interest offered by private companies were higher than rates paid on government bonds, investment funds were being drawn away from the Government. He said that this imbalance should be adjusted through taxation. This Bill has been introduced partly because it is not considered appropriate to use the taxation system to alter effective yields on bonds. It should be noted also that it is appropriate for the Government to offer interest rates lower than those offered by private companies. This merely reflects the higher credit standing of government bonds. They are gilt edged securities. No issues have a higher standing than have Commonwealth bonds.
A good deal has been said by members of the Opposition about rebate washing. While the Government would like to eliminate this practice, it is not the only reason for introducing this measure. The reasons for introducing the legislation were referred to by the Minister for Air and Minister Assisting the Treasurer (Mr Freeth) in introducing the Bill. One reason is that the rebate gives a different return to different investors, depending on their tax position. Another reason is that it complicates the loan market and monetary arrangements. The cost of the rebate in 1966-67 was about $ 1 6m, but about two thirds of this amount went to the ordinary holder of securities. Perhaps $5m went to rebate washers. Because of the number of bonds maturing, in 5 years time the cost of the rebate will have declined to between $2m and $3m a year. I think these few comments answer the criticisms that have been levelled by honourable members opposite.
Question resolved in the affirmative.
Bill read a second time.
Leave granted for third reading to be moved forthwith.
Bill (on motion by Mr Barnes) read a third time.
Debate resumed from 1 1 September (vide page 894). on motion by Mr Freeth:
Thai the Bill be now read a second time.
– There being no objection, that course will be followed.
– On behalf of the Opposition I move:
The measure before us imposes the rates of tax to apply to companies and individuals for the period 1st July 1968 to 30th June 1969. lt is anticipated that in that period about S3, 000m will be collected in income tax from individuals and companies - some 52,000m from individuals and about $ 1,000m from companies. I am sometimes surprised that measures of this magnitude go through the Parliament with very little debate and, I am afraid, very little interest. Looking around the chamber tonight, the lack of numbers on the Government side is matched only by the lack of numbers on the Opposition side. We are dealing with the most significant tax that we levy. The importance of this tax is reflected not only in the Parliament but also in the distribution of finance to the States, lt is a sad commentary that so little interest is taken in the matter.
If some perusal is made of our amendment it will be seen that we are concerned about the total impact of taxation in Australia. The Commonwealth is still the major levier of taxation at all levels, ft is the principal and almost the only raiser of direct taxation from individuals and companies. It receives taxation also from probate and estate duties although a certain amount of this is collected at the State or local government level. Basically the pattern for the year 1966-67 showed a total taxation in Australia at all levels - Commonwealth. State and local government - of $5,430m, which for that year was 23.8% of our gross national product or near enough to SI in even’ $4 that circulated in the Australian economy.
If we look at the breakdown as between direct and indirect taxation and also take into account the fact that a relatively new taxing device in recent times has been the charging of more for public utility services than those services cost to produce, we see that the balance of our taxation system is deteriorating adversely as far as direct luxation is concerned and more heavily as far as indirect taxation is concerned. We feel that the time has been reached in Australia when we should begin to call into question the kind of sanation that we have reached.
I am fortified in my approach to this matter by a document issued by an independent research organisation. This British organisation is ‘Political and Economic Planning’, more briefly known as PEP. In March 1966 it published a broadsheet entitled ‘Tax Policy - Can Surveys Help?’. I feel that what it says is relevant to our situation. The broadsheet reads:
The current issues of tax policy lend therefore to bc concerned with rather more mundane and limited problems, although the absence of glamour and excitement does nol mean that they are not important. For the tax system has come to be used in recent years for a wide variety of purposes, its role as a source of finance for governmental operations becoming increasingly overlaid by other considerations of economic policy, such as the redistribution of income and wealth, providing specific incentives for investment or for exports, discouraging certain kinds of consumption, and so on. In addition, variations in the general level of taxation are used frequently as a means of stimulating or damping down the general level of activity in the econony, and some of the more dramatic annual tax changes have been movitated by this consideration.
That is referring to the British situation. The broadsheet continues:
Yet to the layman the two most immediate issues in tax policy appear to be those concerning incidence and disincentive effects, upon which debate rages continuously and furiously, but unfortunately generating more heat than light, largely owing to the abysmally low level at which much of the debate is conducted. 1 would suggest that in Australia the Commonwealth is now the principal levier of taxes. Of every$6 that is collected in taxation, $5 is collected at the Commonwealth level and the other$1 at the level of State and local governments. Of course a fair amount of redistribution takes place, if honourable members like, from the Commonwealth back to the States via the redistribution formula, about which, of course, currently a lot of dissatisfaction is being expressed. Nevertheless, we have reached the stage where taxes have been crystallised, of ossified if you like, around a certain sort of. principle and we argue mostly about whether sales tax will be increased or reduced by2½% or whether an additional levy will be imposed on individuals or companies. One of the measures before the House at the moment seeks to increase taxation on company income by raising the basic tax on companies, after the first $10,000 of income, from 42½c in the $1 to 45c in the $1.
Really, the pattern has become stuck, as it were, and in many respects it would be almost a good thing if we could have a tax holiday and start from the beginning again as to all taxes that are imposed in the Australian community. Basically, most people do not know and cannot determine how much tax they pay. Many people have an exaggerated idea as to what taxation is paid. They certainly know what they pay via their weekly pay envelope but they have no idea what they pay by other indirect methods. 1 noticed recently in the ‘Taxpayers Bulletin’ a rather interesting article called The Effect of Australian Income Tax on Initiative’. We talk a lot in this Parliament, particularly on the Government side of the House, about private enterprise, initiative and so on. The article that is reproduced in the August issue of the ‘Taxpayers Bulletin’ is prepared by authority of the Liberal Forum of the Liberal Party of Australia. How much status that body has, I do not know. The lecture concerned was delivered by one J. K. Connor, LL.B, JD (Chicago). He said:
In fact, if one examines the present Australian Income Tax System one finds that it: He goes on to list these items:
The instruments used to arrive at these extraordinary results are:
It is the last one of those that I would like to have a look at. It is time that we in Australia had a look at the way we levy taxes and the purposes for which we levy them. Why do we choose this way rather than that? Why do we choose to levy taxes directly, or perhaps indirectly? Why do we choose particular rates or mathematical formulae when ultimately all taxes that are levied have to be expressed in terms of so many cents in the dollar, whether they are imposed directly on income earned or indirectly on goods that are purchased and are the subject of tax? This surely is the purport of the amendment that I have moved. 1 for one would suggest that the total level of tax will in the future be higher rather than lower. At the moment it is near enough to a quarter of the gross national product. An increase of 1%. from 25% to 26%, would represent$250m. It is about that sort of calculation that we argue at Budget time. We look not at the total but only at the change from the previous year. As a result of this year’s Budget an additional $34m in sales tax will be collected during the current financial year and an additional $44m will be collected during a full year. Company taxation has been increased by 2½% and the increase will yield $40m a year. The two increases together will add about $80m to the total level of taxation, which is close to$6,000m a year. This increase is marginal compared to the total. It is time we began to look at the total and its impact and ask ourselves whether some taxes that have been historically imposed are any longer significant, whether they are equitable and where their final burden falls.
I mentioned the British survey because, when one asks people what tax they pay or what tax they think they pay, one finds in the answers confusion about what really is paid. If people were asked whether they thought the quality of their education service was good enough or whether there was sufficient provision for public health or something else, they would be disposed to say no and suggest that there should be more money for this and more money for that. Therefore, when we are considering tax on individuals and on companies we should surely pay some attention to the total area to which taxes apply and have a look at some of the exemptions and concessions that are granted. We should see whether concessions have been given, as they ostensibly have been, for particular purposes. We should ask ourselves whether they achieve the purpose that they were intended to achieve or whether there are occasionally some contradictions between what has grown up historically in one direction and what is happening socially, culturally and economically in another. If this sort of examination of the income tax structure in Australia at the moment were made we would find some rather curious anomalies.
The situation is fairly well set out each year in the taxation statistics. The document ‘Taxation Statistics 1968-69’. which was presented today, shows in quite comprehensive detail the total tax that is levied on individuals. It shows that some 4½ million people in Australia pay income tax. This section is a pretty broad conspectus of the population of Australia and covers what we call the breadwinners in the community. The majority of the people who make up this figure are wage earners employed by somebody else. There are fortunate groups in the community who own their own businesses or engage in professions, but by and large the majority of taxpayers are wage earners who earn an average income that is not very high when compared with the costs and other problems that exist in Australia in 1968. Prices have risen rather more rapidly than incomes despite what some people say about an equitable sharing of the annual increase in production. To some extent we think we perform a great service with our arbitration system. We seem to think that it adjudicates fairly between the wage earning sector of the economy and the profit earning sector and determines what weekly wage and margins should be. The taxation system works alongside the arbitration system hut is quite independent of it and has no correlation with it. Perhaps the members of this Parliament belong to a fortunate group, for they are above the average income group in the community. Sometimes 1 do not think we stop to think what it would be like to support a wife and two or three children, particularly if the children were young and the wife could not work, on an income of $50 or$60 a week. However, this is the lot of a large number of people.
I bring to the attention of the House the taxation statistics that are available. I have taken them from the document presented last year because this year’s report was tabled only today and I have not had the opportunity to collate the up to date figures. There are nearly 700,000 married taxpayers in Australia, with 700,000 dependent wives and nearly 1,400,000 dependent children, who have actual incomes of less than $3,000 per annum, or $58 a week and less. I would not like to keep a wife and two children on a wage of $58 a week or less. That group of 700,000 husbands, 700,000 wives and 1,400,000 children represents nearly one-quarter of the population. lt would be difficult enough if a person received the whole $58. With tax deductions totalling $750, which would cover his wife and two children and leave a little bit over, a person on such an income would have to pay $273 a year in tax, or a shade more than §5 a week. In other words, his apparent income of $58 a week would be reduced to $53 per week after allowing for income tax. I say categorically that that is too much income tax for a man on that income in those circumstances to pay. That is why I think something has lo be done to restructure the whole income tax system as it operates in Australia. 1 have heard a lot of sympathy expressed for the so called middle class man who gets twice this income. Whatever teats should be shed for him, at least a little more should be shed for those who are beneath him. The term ‘middle class’ is rather a broad kind of description in any social evaluation. Of course, the reason why this sort of thing has happened is that we have, or we are supposed to have, a progressive scale of levying taxes. Those of us who were students of economics recognise this as the marginal theory of costs and incomes. The idea was that if a person had an income of $10,000 per annum, an additional $1 was less significant to him than it would bc to a person on an income of $1,000 per annum. Therefore, if one built a tax scale it was equitable, just and mathematically precise to levy tax on the income of $10,000 at a higher rate than on the income of $1,000. That is what underlies the structure of a progressive tax scale.
The progressive tax scale, as it exists in 1968, is scarcely different, with the exception of one or two minor adjustments, from the tax scale that operated 10 or 12 years ago. What has happened in the years between 1956 and 1968 is that the value of money has declined. There has been a decline in the real purchasing power of the $ or the £ as it was in 1956. A dollar now is worth very much less than 10s in 1956. Yet the same sort of precise mathematical scale that was supposed to be equitable in 1956 still operates in 1968. I suggest that is unjust, stupid and illogical in itself. Yet that is the situation we have reached.
When I appeared with the Treasurer in a television interview on the night of the Budget, I was interested to hear him indicate that the Government had given serious consideration to this problem, but felt that the time was not ripe this year to do much about it. If it was not ripe last year or in the current year, 1 suggest that it will be ripe in the next 12 months. We on this side of the House would be at one with the Government in altering the incidence of total taxation. 1 quite appreciate the position that if a couple of hundred million dollars is cut off the income tax structure by giving different sorts of concessions, the Government has to find money to cover the shortfall. This is presuming that the Government still has the same total demands - probably it has greater demands.
Again we are faced wilh (he question of shifting the incidence of taxes among not only income earners but also other sources on which taxes are levied. lust at the time we think that there is inequity in the present structure we also begin belatedly to suggest that we need to have something like a comprehensive social insurance scheme. The ideas about such a scheme vary all the way from giving people on retirement age pensions, health benefits and so on. It would be an act of folly and a gross injustice at the moment to graft that on to the top of a tax structure (hat is inequitable. That is why I think that in some respects it would almost be a good thing if we could scratch all the taxes we have and start again. If this were done, we could look at the totality of taxation including the likely provision for health and age insurance.
The sentiment in Australia over the years has been against a contributory scheme of social insurance. Personally, I have been against such a scheme as a method because basically the approach has always been that such a scheme should be conducted on a flat rate basis; that it should be so much in the $1 of the wage that was earned instead of being graduated or progessive according to total income. I think this is why we cannot long neglect the restricting of the whole of the lax system. People want to have greater benefits bestowed - and maybe there is some justice in that - but under the present arrangement ‘A’ can only get more if ‘B’ gets less. As a result we get arguments about social equity and the like. That is why I, on behalf of the Australian Labor Party, have moved the amendment, as was done last year, asserting that the existing structure of tax rates and concessions has failed to keep pace with the changing circumstances and changing productivity and many other factors.
As well as a tax on individuals we have a system which imposes tax on what is called the corporate activity in the community - the company as such. The tax on companies yields about one-third of the total amount, of revenue derived from income tax. Of an estimated total yield of S3,000m this year, $2,000m will be derived from individuals and about $ 1, 000m from companies. When one looks at the statistics that are published quite voluminously in the forty-seventh report of the Commissioner of Taxation, one finds that it is rather a loose way to use the word ‘company’ as though all companies are the same. I draw the attention of the House to the statistics that are contained in the report between pages 160 and 180. These figures show in great detail the structuring of company income. They show that while there are 9,963 public companies, which pay net tax of $562m, there is another $21 Om collected from private companies. But of the 9,963 public companies there are 714 that pay more than three-quarters of the total tax that is collected. I point out that 435 companies have taxable incomes between $400,000 and $1m a year. Also, 138 of them have taxable incomes between Sim and $2m each year and 141 have taxable incomes in excess of $2m. The significant thing is that if 714 companies have incomes of $l,273m we gain some idea of what the turnover of these companies must have been in the course of the year - the profit that they derive by reason of their activities during the year. We also get some idea of how much of the total turnover or economic activity in terms of goods and services is produced in the community by this relatively small number of companies. The statistics show, too, the expenditure that these companies incurred for new plant during the course of the year. In fact, the 714 companies spent $581m on plant. The value of the plant that they owned at the end of the year was nearly $2,500m and the value of stocks, the goods in course of production or ready for sale, was $ J, 800m. This gives some idea of the magnitude of the operations of a relatively small number of companies.
Some of the companies are locally owned; quite a large number of the more important of them are foreign owned. Nevertheless, when the expenditure on plant in that year is related to the gross fixed capital investment, we can see the significance of the figures. To some extent, whether new plant is produced or something else is done is conditioned by the tax concessions that are made available. That is one of the points made in the extract I quoted from the British report. The prime movers, who determine the future pattern of development of the total economy, are the very large corporations that exist in our midst. We are now proposing an increase in the basic rate of company tax from 421c to 45c in the SI. One serious argument can be raised. I know that all sorts of objections are put against it and it is said that we cannot differentiate between small company A and big company B unless we take into account the number of shareholders in each. All 1 would suggest is that the very logic of taxation as it operates in Australia suggests that at least a company that makes a profit of Sim per annum and maybe has total sales of ten or twenty times that amount is a much more significant economic animal than is the person who sells toothpaste and ice cream in a corner store. I know that honourable members on the Government side of the House would characterise both as private enterprise. However, when organisations of this magnitude operate in a community, their activities are far from being purely private. There impact is of tremendous public significance and sometimes they must be regulated publicly. This is what we do directly by taxation and indirectly by other methods, but at least the situation is clear enough in Australia in 1968. We have a relatively small number of rather gigantic economic enterprises.
When we examine the structuring of taxes, we find that most of the companies that make profits are taxed at a rather peculiar place called ‘Central Office’. This means thai they are undertakings which derive incomes from more than one State. Most of them are national operators rather than State operators, although they may for incorporation purposes be registered under the company law of one State. They can now be incorporated in Canberra and I understand that rather curiously some of them are incorporated even in an obscure place called ‘Norfolk Island’. They are incorporated locally at some point but their activities are national. Certain recent activities around an insurance company, around the operations of oil companies and so on show that, our present methods of dealing with these undertakings on State bases are inadequate. They are national in their operation, they are national in their impact and their activities are national. I would think that a careful reading of the Statistics in the document I have mentioned - I would hope that the statistics are read carefully by honourable members when they are available - shows that we should again examine the effect of taxation in Australia.
I quoted earlier the rather broad comments made by Mr Connor from Chicago at a forum of the Liberal Party of Australia. How much of his speech sank in I do not know, but certainly not enough sank in to cause any structural changes in our taxes to be made. The verdict at the moment seems to be that we will not have an election this year. The Treasurer has said - ] presume he speaks with the authority of his Cabinet - that there is reason to doubt whether all the taxes imposed in Australia are being levied precisely at the right rates and exactly on the right people. I think that was the purport of his observations a few weeks ago. If this is so. when does the Government intend to change the position? Does it intend to leave it lie now until the next Budget, which will be an election Budget, and come out again with the sort of gimmicks that look very appealing but can be quite destructive several years after the election? Or will it do something between now and the introduction of the next Budget?
We have said in this House before that in many respects the taxation laws have become quite complicated. I was interested to see the other day that the Commissioner of Taxation apparently has re-determined the amount of depreciation that is allowed to airline operators. Previously an aeroplane that lasted for 10 or 15 years had apparently been written off in 4 or 5 years. Decisions as to the rate that is applied are fairly arbitrary but again can be quite significant in determining the pattern of future capital expansion. We have had all sorts of measures, such as accelerated depreciation and initial allowances, that are supposed to encourage advances in particular directions, but mostly they tend to be imposed on a kind of political gimmick basis rather than on any systematic appraisal of the requirements of the totality of Australian development.
Most of the companies operate in a corporate form. The basic rate of tax has been 424x lt will now become 45c. This is getting pretty close to 50c in the $1. Therefore, when the Government decides to allow S I of expenditure as a taxable deduction, in essence it underwrites the capital expenditure by close to one-half. The very firms that are glad to take advantage of the concession are the first to demand the right of unfettered private enterprise. There are at least some contradictions in the process. The figures in the document showing national income and expenditure reveal that depreciation allowances, which extend not only to corporate businesses and companies but also to individual traders, amounted to about $2,000m. With a company rate of tax at 42 ic in the $1 and with individual rates, some higher and some lower, the allowance of $2,000m for depreciation probably meant that the Government lost $800m or S900m in the amount of tax collected. Whether the depreciation allowed was adequate or inadequate or whether any attempt was made to direct investment into socially desirable channels and so on are all matters that are worthy of consideration. I doubt very much whether they can be decided by the House in the way that we do decide them. We have this sort of debate about taxation rates and, after all, whether we tax something at 50c in the $1 rather than 40c might not appear to be very important but it is important when we take into account the aggregate on which the tax is imposed. On the other hand we have amendments to the general principles of taxation, which are contained in the Income Tax Assessment Act, and this Act has become a very large document some 2 or 3 inches thick with very complicated provivisions. It is not an easy document for a layman to peruse.
I know that sometimes political parties can differ about the principles of equity in taxation but occasionally there is some common ground about anomalies in the field of law and as to what ought to be taxed, what ought not to be taxed, what concessions ought to be allowed and so on. I would urge upon the House, as I have done on other occasions, that a joint standing committee of the Parliament should investigate not so much the rates of taxation as the questions of what tax is imposed as it relates to the Income Tax Assessment Act rather than the Income Tax Act. I commend this proposal to the Government for serious consideration. We have a Public Accounts Committee, a Public Works Committee and a couple of other joint committees so why can we not have a joint committee on the Income Tax Assessment Act? This committee could call witnesses from inside and outside the Parliament and take evidence about what should or ought not to be proper subjects of taxation.
Order! The honourable member’s time has expired.
Is the amendment seconded?
– I second the amendment and reserve my right to speak.
– I oppose the amendment. The implication that the Government is unaware of the problems outlined in the amendment is patently wrong. To suggest that the review should be commenced fails to recognise that the Government has an awareness of the problem outlined. Indeed, the honourable member for Melbourne Ports (Mr Crean) acknowledged that the Treasurer (Mr McMahon) in a television interview had admitted his recognition of the need for constant reassessment of the impact of the tax structure. The honourable member for Melbourne Ports did not do other than superficially identify the problem; nor did he give any great detail as to the objectives to be achieved in changing the rate structure. No-one but the least perceiving would object to the fundamental thesis, nor would anyone deny the right of a member supporting legislation designed to give effect to the proposals contained in a sound budget to express his recognition of the need for regular fundamental analyses of the principles upon which revenues are raised through taxes on personal incomes.
The Bill in respect of which the amendment is proposed declares the general rates of tax for the current financial year applicable to the incomes of individuals and companies, both public and private. It also provides for an increase in the exemption levels of the age allowance. So far as individuals are concerned not only are the rates declared the same as last year but, with one exception, the rates structure is left unaltered. Over recent years, due largely to the progressive rates scale, income tax collections from wage and salary earners have increased faster than wages and salaries. A regular close examination of the rates structure and the incidence of liability for tax undoubtedly is necessary. Although it is a difficult and complex task, such an assessment must continue to be made to determine the manner in which the tax incidence on various classes of taxpayers has changed since the present rates scale was introduced. Such an examination, if it is to be adequate, must of necessity extend beyond the tax structure itself to take account of the system of transfer payments. This whole question should come before the Welfare Committee of Cabinet.
In a modern economy a tax structure is designed not merely to raise revenue. Had the raising of revenue been its sole purpose, a poll tax or a tithe system might at first sight seem somewhat more equitable. Such methods of distributing the burden of providing the Government with revenue would have mitigated against the social objectives which the Government, through the tax system and other measures, seeks to achieve. The tax system is used as a vehicle for providing special concessions for particular groups of taxpayers. The income tax structure is part of the legislative fabric designed to prevent poverty due to income deficiency. It must form part of any comprehensive social security programme designed to provide a net level below which none will be permitted to fall. If it is to fulfil this role, the tax structure in a dynamic economy must be kept under constant review. Alterations in the rate of work force participation, and changes in the level of wages, salaries and personal income, both have a bearing on the tax incidence.
Due to changing conditions, the effect of a rates scale coupled with any established system of social concessional allowances must be examined regularly to ensure that the tax structure, instead of helping to prevent poverty, does not in fact create pockets of poverty, or, through the avoidance by the taxpayer himself of the risk of poverty, cause a slowing down in population growth rate. The concessional deductions available to the family man are sometimes regarded as adjustments of his gross income in recognition of the fact that family responsibilities affect his capacity to pay tax. lt would be better if they were more often regarded as adjustments to gross income in recognition of the need to ensure an adequate and proper standard of living for all families whatever the number of children and whatever their ages. This would lead to the examination of the influence of the incidence of tax on the size of the families of the recipients of taxable income.
It is becoming apparent that our tax laws discriminate against the family man. As a consequence of the combined effect of the rates structure and concessional allowances, the severity of the tax incidence on the family man, particularly in the middle income range, is greater in Australia than in the United Kingdom, the United States of America or Canada. If the reduction of incentive for a man to earn an extra $1 is too great, the burden of taxation can have a severely limiting effect on individual effort and, through this, on national production. With an unchanged progressive rate scale, increased money incomes, whether due to inflation, however mild, or to improved real income, result in reduced income incentives. Maximum rates of tax in Australia are imposed on incomes substantially less than the incomes in the United States of America and Canada on which the maximum rates are imposed. It is essential that marginal rates of tax be kept low enough to ensure that incentives to the use of initiative and incentives to work and to save are not destroyed.
When the present rate structure and system of concessional allowances was first devised there were fewer families in receipt of two incomes. The time has come for the manner in which a family unit is treated under our fax system to be examined to determine whether the social objectives sought lo be achieved are, in fact, being achieved. The honourable member for Melbourne Ports referred to an article which appeared in the Taxpayers Bulletin’ in August this year. The article by J. K. Connor stated: . . recognition should be given to the family unit as a tax paying entity so as lo minimise the present thrust of our income tax system against married couples with younger children. In many cases it is significantly better for a wife to work rather than for her husband to work longer hours and exert greater effort to achieve a higher income since the combined tax burden on husband and wife is significantly less in this way. This is a positive disincentive to family growth and is quite inequitable.
Our present system of taxation recognises only the individual when it should, perhaps, recognise the family as a unit for tax purposes. Under the present system a family wilh one income recipient often pays substantially more than another family with the same aggregate income derived by two income recipients. If there are compelling social or even economic reasons why families should, for a time, have only one income recipient, the fear of income deficiency must be removed by means of the proper adjustment of the tax incidence and the use of transfer payments. The extent to which a childless couple should pay lower taxes, than an unattached individual with the same income needs careful appraisal. The difference should reflect the fact that two cannot live as cheaply as one. but in the modern day economy should recognise that over certain age ranges both could and indeed should be income earners. Likewise, the appropriate relationship between taxes imposed on families wilh one child relative to those with several needs examination.
The tax burden on those families where the mother must and indeed should be at home with her children, because of their age or number, needs appropriate adjustment relative to the tax burden on the family where, without harm to the children, both mother and father can be income earners. Whilst I support the proposal in the Bill to increase the age allowance. I am critical of the automatic increase in this concession whilst others are altered only on an ad hoc basis. The impact of the automatic adjustment of one concessional allowance whilst others are changed only on an occasional basis is to discriminate against the family man. An increase in the agc tax allowance raises the lowest level of income at which tax liability begins for those who, if men, are aged 65 years and, if women, are aged 60 years. Such a lift in the tax threshold for these taxpayers according to a formula unrelated lo the basis upon which the tax threshold of other groups of taxpayers is raised discriminates against those other taxpayers - even if it removes a discrimination which might otherwise exist between the age pensioner and the age non-pensioner.
The age allowance has the effect of raising the lax threshold for persons of pensionable age above that applicable to other groups of taxpayers, lt was originally introduced lo remove the anomaly whereby persons of pensionable agc were subject to taxation on the receipt of superannuation or other income - or both - which did not exceed amounts received by age pensioners by way of pension and other income on which no tax was payable. The age allowance raised the tax threshold for people of pensionable age noi merely to the extent of the pension but also to a level of pension plus permissible income. Indeed, if pensions are thought of as income, the tax threshold for a pensioner is, after the value of fringe benefits are taken into account, even higher than the threshold for a non-pensioner who is entitled to the age allowance.
At the time the age allowance was first introduced both pension and permissible income were, relative to the tax scale, lower than they are today. Since the age tax allowance has been introduced, rates of pension nil ve been increased, not merely to keep pace with the rising cost of living but also to improve the real value of the pension. The merged means test has been introduced, and since its first introduction it has been liberalised both as a result of increase in the rates of pension payable and as a result of increases in permissible income. The age allowance has from time to time been increased to keep pace with the increasing sum of age pension and maximum permissible income. Last year the law was altered so that it related to taxable income, whereas previously it had been based on net income. These increases in the age allowance have been made in isolation and nol in conjunction with increases in other concessional deductions, thereby improving the position of the aged relative to other groups in the community
In the income year 1964-65, there were over 400.000 families where the wife and one or more children were dependent upon a male breadwinner whose taxable income did not exceed §1,800 per annum. For them the tax threshold was below this figure, whereas the age tax allowance in that year was $1,872 in the case of a married couple. This Bill proposes to raise the tax threshold for people of pensionable age so that no tax becomes payable until taxable income exceeds $42 per week. 1 support this proposal because I believe it is important that the aged person in receipt of an income should not be placed at a disadvantage relative to the pensioner with a permissible income. Despite wage increases since 1964-65 there would still be a considerable number of families with taxable income of S42 per week or less. Because for them the tax threshold is lower than for the aged, the income of these families is reduced by tax liability which is nol incurred either by age pensioners or by those whose means as assessed make them ineligible for a pension, but whose incomes are within the range affected by the age allowance.
The tax threshold for a man wilh a dependent, wife and one child is a taxable income of S 1 8 per week. The tax threshold for a man with a dependent wife and two children is a taxable income of $21.50 per week. The tax threshold for a dependent wife and three children is a taxable income of $24 per week. The tax threshold for persons eligible for the age pension is $4^ per week. If a couple of pensionable age have a net income before tax. but after meeting out-of-pocket payments for chemist expenses, medical expenses and other concessional deductions other than dependants allowances, of S48 per week, as a family unit they have an after tax income of $48 per week. For families under pensionable age. where there is one breadwinner wilh a similar income of $48 per week, the after lax income available to the family with a dependent wife only is $43.05 per week: to a family with a dependent wife and one child it is $43.90; to a family with a dependent wife and two children it is $44.50; and to a family where there is a dependent wife and three children it is $45.10.
The family man with a dependent wife and three children, who, after meeting outofpocket payments of chemist, medical and education expenses, life assurance and superannuation payments, has a net income before tax of $48 per week, pays tax at the rate of $2.90 per week, whilst a couple of pensionable age with a similar income pays no tax. In the case of a taxpayer who has a dependent wife and three children, child endowment of $2.50 still leaves this family 40c worse off. Why should the children of these families suffer?
A widow supporting three children with no assessable means has a pension entitlement of $25.50 per week. If she earns $22.50 she does not receive $48 a week by way of income from pension and earnings, because her pension entitlement is reduced at the rate of a dollar per week for each dollar per week of income in excess of permissible income, which is $19 per week. Her pension is thereby reduced from $25.50 to $22 per week, but worse still her income is further reduced by a liability of 35c per week by way of income lax, thereby reducing her total income to $44.15 per week. Even if she limits her earnings to the maximum permissible income of $19 per week she is liable to tax at the rate of 15c per week. By doing this she is better off to the extent of 20c per week than she would have been had she earned an additional $3.50 per week. Why should her children suffer?
Very often an aged married couple relieved of tax as a consequence of the age allowance have an income which exceeds the present minimum wage, or assets assessible under the merged means test exceeding $21,000 in value but returning an income not exceeding pension plus permissible income, or a combination of income and assets providing an aggregate taxable income which does not exceed pension plus maximum permissible income after deduction of all concessional allowances, their own home, motor car and personal effects, and pay no tax. On the other hand there are many young couples just embarking upon the purchase of a home and family formation with small cash reserves on which to draw and a small equity in fixed assets who bear a tax liability. It would be more equitable, and indeed it would be in the national interest, if the tax threshold of the family man with a dependent wife and dependent children were at least as high as the threshold of the aged taxpayer.
For many people taxation is a bitter pill to swallow at any time, but most people recognise that the tax mechanism can be used to both prevent and alleviate poverty. If it is to have this effect its ingredients must be constantly checked. If they are not it may cause side effects more significant than its preventative and ameliorative qualities. Indeed it may act in a more effective way than ‘the pill’ in controlling population growth. Some families have one bread winner and others have two breadwinners. Some families with one breadwinner have children. Some families with two breadwinners have children. Some families with children have two breadwinners when in fact it would be in the interests of the children and the national interest that there be only one breadwinner so that the mother can be at home to care for the children. The tax system with other means at the disposal of the Government should be used to ensure that the standard of living of the family with children but only one breadwinner compares favourably with a family with children and two breadwinners. The tax system should use its mechanism to ensure that those families have incomes which enable them to maintain standards of living which compare favourably with the single man and woman and the family with no dependent children.
With the help of the tax mechanism the social security programme must be developed so that men and women are able to spread their incomes over their lives in order to have the means of providing for themselves and their families a proper standard of living which rises as national productivity improves, and does not fluctuate according to the number of dependents within the family from time to time. Any scheme which establishes and maintains a national minimum standard of living for all persons must neither stifle individual incentive, opportunity or responsibility. The tax structure should not be permitted, as a result of fundamental changes in the economy, to deprive the nation of children who might otherwise be born to its families, and nor should it be permitted to continue to discriminate against those families with children. Why should the children suffer? I urge the Government to continue its dos( study of the income tax structure and to come up with a plan at the earliest possible time to change the tax structure so that the incidence of the tax burden may be such that it identifies family needs and retains for each family the incentive, both to increase in size and to work its way to a better standard of Jiving for its members by its own efforts.
– I support the amendment moved by the honourable member for Melbourne Ports (Mr Crean), who, in his usual capable and deliberate manner, proved fairly conclusively that the existing structure of tax rates and concessions is completely out of step with modern situations and requires early and comprehensive examination. J. would expect any responsible member of Parliament who wants to see the implementation of fair methods of taxation promptly to lend his support to this amendment.
I listened attentatively to the honourable member for Sturt (Mr Wilson). The longer he spoke the more surprised T became that he should express opposition lo the amendment, because I thought that most of the views he advanced highlighted the need for an investigation into this matter. It seems to me that while he is prepared to express these views he is not prepared to use his vote to try to ensure that the things he seeks come into force.
Section 8 of the Income Tax Act provides an exemption from tax, either in full or in part, for persons over a certain age whose incomes do not exceed a certain amount. The honourable member for Sturt referred to this matter. The Bill proposes to amend that section simply to increase the amounts of income in keeping with the recent increases in age pensions. It is to this part of the Bill that 1 wish to address a few remarks.
I point out firstly that the exemptions do not apply only te age pensioners, notwithstanding that the emphasis seems always to be placed on exemptions to age pensioners whenever the legislation is introduced into this place. The exemption applies to all aged persons, irrespective of whether they are pensioners. The exemption does not apply to male pensioners below the age of 65 years or to female pensioners below the age of 60 years. For instance, the exemption does not apply to invalid pensioners, widows or to service pensioners unless they meet the age qualifications. In my opinion this denial is both unfair and unjust. It is completely unnecessary to deny the exemption to these persons, particularly having regard to the maximum permissible property and/ or income that these people may have compared with the maximum property and/or income that an aged person other than a pensioner may have and still qualify for the age allowance. So we find that the partial exemption referred to simply applies to aged persons other than pensioners. It will be found also that aged persons not pensioners who have very substantial savings may qualify for an exemption. These people are in a much better position with regard to tax than a married man with a couple of children whose income is the same as the aged person to whom I have referred. There seems to be something wrong in this situation. In introducing the Bill the Minister for Air and Minister assisting the Treasurer (Mr Freeth) pointed out that the age allowance exempts from tax aged persons whose taxable income does not exceed the sum of the full age pension and the maximum amount of other permissible income for aged persons. He said:
In line with the increases in age pensions announced in the Budget speech, these exemption limits are being increased to $1,248 and $2,184 respectively.
The exemption limit for a single person will be $1,248 and for a married couple $2,184. The legislation provides that if the incomes are in excess of those amounts but not in excess of $1,532 in the case of a single person and $3,514 in the case of a married couple, a partial exemption will be granted. But pensioners cannot participate in the partial exemption provision because if they had incomes in excess of $1,248 or $2,184 they would no longer be eligible for a pension. I see no reason why a pensioner, who during his working life has contributed by way of taxes to the national welfare fund, should have to pay tax upon his pension or upon any income which he is allowed to earn in order to supplement his pension. Surely no good reason exists why the exemption should apply only to age pensioners. There seems no good reason why the exemption should not apply to all pensioners. Why should the exemption be denied to an invalid pensioner, whose total income can be no greater than the age pension? It is unlikely that any income an invalid pensioner has will come from personal exertion although he may have an income from other sources such as superannuation. Yet as matters now stand, and under the legislation now before us, pensioners other than age pensioners will be obliged to pay tax notwithstanding that their taxable income may be less - perhaps much less - than the amount which qualifies some aged persons to obtain an exemption.
I do nol quarrel with the exemption being granted to aged persons, although I sometimes wonder whether the means test should include a property component as well as an income component. My quarrel is wilh the fact that the exemption has not been extended to all pensioners irrespective of agc. For instance, why should the exemption not apply to a service pensioner, particularly one who has a pension due to being unemployable on account of sickness or other causes? It must be remembered that the exemption applies to the taxable income and not to gross income. So an aged person nor. being a pensioner - perhaps a retired businessman - has some advantage because he may have a gross income quite a bit in excess of that of the pensioner and he may use the deduction provisions of the legislation, such as the allowance of $312 for a spouse, $1,200 for life assurance premiums, rates and land taxes, and perhaps other deductions. These could reduce his taxable income to the exemption figure, but the pensioner on the other hand can obtain no benefit in that regard because his combined income is governed by the provisions of the Social Services Act.
While section 8 is to be amended to provide that a married aged person with taxable income of $2,184 will be totally exempt from tax, such a person could still qualify for exemption if he had an income of $3,184 or $61 a week. That income could be derived from interest on money in the bank or from money invested in property or from some similar source. This means thai in addition to his income he may have considerable money or property which is no’, taken into account in deciding whether he should enjoy the exemption. This may be all right, but I point out that if we can see our way clear to give exemptions in cases such as that, surely we can extend the exemption to the poor invalid pensioner, the widow and the service pensioner, who are still below the required age qualifications. 1 said earlier that a married aged person - perhaps a retired businessman - could, under this legislation, be much better off than a married man with two or more children. This will be readily seen if we compare the aged person on a gross income of $61 a week with a married man with three children whose gross income is $61 a week. The married man could claim a deduction of $312 for his spouse. So too could the aged person. The married man could claim a deduction of $208 lor the first child and $156 for each of the other two children. No doubt he could claim something in respect of contributions to a hospital and medical benefits fund, as could the aged person. The married man may be able to claim a deduction for education expenses and perhaps for life assurance premiums, but it is unlikely that these will be anywhere near the maximum if he has a wife and three children to support. He may have a few other deductions. But he would be very lucky to reduce his taxable income to $1,800. This would mean that his deductions totalled about $1,400. He would be obliged to pay tax of about $180, whereas the retired businessman would be totally exempt from tax.
Let us go further and look at the partial exemption which, following the passing of this legislation, will be available lo an :i Mei person whose taxable income does not exceed $3,514. 1 do not know whether this is getting a bit beyond what is actually necessary. L suggest that this could be so simply because we could have a situation, after this amendment is passed, where a married couple could have a combined gross income of $4,500, about $86 per week, which is twice as much as the age pensioner receives, and which after allowable deductions, could be reduced to a taxable income of $3,514. The married couple would be entitled to a partial exemption where the tax payable on that $3,514 taxable income would not exceed nine-twentieths of the excess income over $2,184, plus 2i% of the amount so calculated. 1 have not worked out very closely what the amount of tax would be. I think it would be somewhere around $50. But if the married man of whom I spoke earlier and who has three children had an income of $4,500, most likely he would pay approximately $400 in income tax, which hardly seems to be a fair proposition measured against $50 paid by the other person with the same income.
If we examine the Acts we will find that following the passage of the amendment now before the House we will have a situation where partial exemption will be granted on taxable incomes which are $1,330 above the amount of combined income which a pensioner may have. At the moment the difference is $1,181. In 1965, I think, the difference was $828. So, since 1965, the partial exemption has risen by $512 whereas the amount for total exemption, that which affects pensioners, rose by $312 only. I just wonder why it is considered that such other age persons require the higher amount.
Earlier this year 1 asked the Treasurer (Mr McMahon) whether the Government would act to bring invalid pensioners within the provisions of section 8 of the Income Tax Act. The Treasurer replied that this was a matter of policy and was one that would be reviewed before the introduction of the next Budget. Of course, that Budget has now been presented. Obviously any decision in relation to this matter went against the invalid pensioners. In fact, replies received more recently by the honourable member for Hindmarsh (Mr Clyde Cameron) make it quite clear that the Government has very little sympathy for invalid pensioners at all and in fact has none for age pensioners either. These pensioners come within this age allowance only because it would be fairly difficult to keep them out
The question asked by the honourable member for Hindmarsh was:
Is an invalid lacking the age qualification for the income tax age allowance, and whose income is such as to disqualify that person from receiving any pension entitlement, able to claim any income tax allowance in respect of income which disqualifies him from receiving an invalid pension?
The answer given was:
Such a person may deduct from his assessable income expenses incurred in gaining or producing that income which are not of a capital or private nature. He is also entitled to concessional deductions in respect of dependants, medical expenses, educational expenses etc.
He is not telling us anything there, of course. We all know this. The answer continues:
However, as the honourable member was advised in the answer given on 26th September 1968 to Question No. 784- Hansard, page 1629 - no special allowance similar to the age allowance is available to invalid persons solely by virtue of their being invalids.
This view is held by the Treasurer and also apparently by the Prime Minister (Mr Gorton) as is shown very clearly by the answer to which I will refer now.
This question, too, was placed on the notice paper by the honourable member for Hindmarsh. He asked the Acting Treasurer, who was the Prime Minister:
Is there an income tax allowance available to invalids with residential qualifications but lacking age qualifications, similar to that which applies to a person who meets the residential and age qualification for the income tax age allowance?
The answer given by the Prime Minister reads:
Residents of Australia who are invalids but who are under the age of 65 years if male, or 60 years if female, do not qualify for the age allowance and there is no similar income concession available to them solely by virtue of their being invalids.
Invalid pensions received by such persons are, however, wholly exempt from tax.
We know that
Moreover, there is no liability for income tax on other income derived by them unless the amount of that income, after taking into account concessional and other deductions, exceeds $416.
I think no-one would suggest that much sympathy is expressed for invalid pensioners in those two answers; nor is there anything there to suggest that the Government intends to take any action to bring these people within the terms of section 8 of the Act.
I think it must be agreed that the present rates of pensions are not sufficient to meet the needs of the recipients of those pensions. Pensions rates must increase. Also, the means lest must be eased. While I would never want to see pensioners pay tax, as we are going at present with regard to section 8 of the Income Tax Act with partial exemptions being granted to aged people who, in many cases, as I said earlier, would be retired businessmen or at feast people with substantial means, we will find partial exemption being granted to people with incomes of Si 00 per week or more. Perhaps retired members of this Parliament could qualify for these taxation exemptions that invalid pensioners are to be denied.
Surely it is time we had a look at this matter. Surely it is well beyond the time when the exemptions should be extended to all pensioners irrespective of age. lt seems quite wrong to me that a married invalid pensioner, for instance, with a total income of $2,184 should have to pay perhaps $40. $50 or more in income tax while another person - the person to whom 1 referred earlier - with an income of $4,500 should pay only $40 or $50. This is not justice in my book and certainly is not a fair method of imposing taxation. I simply wish to place my views on this matter before the House in the hope - a forlorn hope no doubt - that the Government and the Treasurer will see fit to amend the Act to bring all pensioners within the section to which I have referred.
Mr CONNOR (Cunningham) 1.10.17]- Mr Deputy Speaker, 1 listened with very great interest to the remarks of the honourable member for Sturt (Mr Wilson) who unfortunately is not in the House now. I want to assure the House that, as he quoted from the article by one, J. K. Connor, in the ‘Economic Record’, I agree neither with that gentleman nor with the theories that he advocates, ft seemed to me that whatever the merits of his argument were at the best he was seizing on the lesser anomalies produced by the Act and nol dealing with the major matters. 1 refer to those very big fish which constantly have been escaping the tax net of the Government and which continue to do so. I will deal more thoroughly with that matter later in my address.
One of the main features of the Australian industrial scene today is the fac that the 40-hour week and the wage which is payable under the average award in themselves will not maintain a man, his wife and family. In other words, it is necessary for the average tradesman, and even more particularly lor the average unskilled worker, to seek overtime. If he cannot get that, he is in serious trouble. The honourable member for Sturt re/erred lo the way in which a young married couple could rear a family and save sufficient for a deposit on a home. In my district at least - and I. believe that this goes for most of Australia - the average young couple have a choice either of rearing a family or of saving a deposit for a home, lt is literally impossible for them lo do both.
– lt takes them a long time lo get a home.
– Precisely. In addition, the rate at which they can save is barely beating the rale of inflation in building costs. The honourable member for Sturt also spoke of the iwo job family as though employment of a man and his wife was the natural order of things in Australian society. This does exist today but it should not be tolerated. I would nol deny to any woman the right to pursue a career or, if she chose to do so. to seek employment to support the family income. But the Opposition does not accept that women should be forced to do that, as 95% of the women who are out at work today are under economic pressure.
I naturally support the amendment that was moved by the honourable member for Melbourne Ports (Mr Crean) because it strikes at the very root of the inequity of the present system of income tax. We are in the era of the two-job family, lt is lo be regretted that many of the social consequences that have flowed from it have been created by the inability of mothers to be at home to attend to their children in the normal way. The problem is particularly acute in my constituency, because the steel industry there is utilising unskilled and semi-skilled labour as far as possible, and by the introduction of automation in various processes it is succeeding in its objective in minimising as far as it can the wage component of its production costs. At the present time the average take home wage of an unskilled steel worker in my constituency, with an average family of a wife and two children, would be some $40 a week. Nothing less than $50 a week is sufficient to keep body and soul together and pay rent or the instalments on a very modest home being purchased through a normal co-operative building society.
The Australian Labor Party, as a party, has always stood for the principle of fair taxation. Taxation should be based on ability to pay. But progressively over the years this Government has quite smugly accepted a situation in which there is a ratchet effect on or an escalation of, the liability to pay income tax without its having to make any major adjustments of taxation in the lower income groups. A most interesting study was published in the Australian Financial Review’. It cited the case of the average Australian worker with the average family - a wife and two children. The average wage then was $62 a week. It was pointed out that whereas 12 months ago some 6% of the former rate of salary or wage was taken by way of wages tax, today it is a matter of 12% of the present income. The Government, with a scarcely concealed smirk, pockets the difference.
Taxation is never at any time taken into account by the Commonwealth Conciliation and Arbitration Commission when considering applications by unions for wage increases. The Commission does not consider it as part of its function to pay any attention to the incidence of income tax. But taxation is increasing and is a material and vital factor to be taken into account when ascertaining what is a fair and reasonable wage. The impact of this situation will intensify.
The honourable member for Melbourne Ports, in his very carefully prepared address, made special reference to the incidence of indirect taxation. This is a field in which this Government naturally excels, because at all costs it will wherever possible off-load the burden of taxation on to the lower income group in any way that can be concealed. One of the worst injustices of indirect taxation is the imposition of customs and excise duties. The figures I will cite are from the Commonwealth ‘Year Book” for 1967, but they still apply in principle today. For the income tax year ended June 1966 the total amount collected by way of excise on beer, spirits, tobacco, cigarettes, petrol and some other sundry items was $751m. In the same year the amount of company tax that was collected from all companies in Australia, from the largest to the smallest - from the Broken Hill Pty Co. Ltd, the Colonial Sugar Refining Co. Ltd and the Bank of New
South Wales downwards - was $7 15m. The incidence of sales tax is somewhat different because a quite large number of items of capital equipment are subject to sales tax and the comparison is not necessarily just as applicable. But $366m in sales tax was collected. Just imagine, Sir, a situation in which the average man on a lowincome has to pay more by way of indirect taxation for the consumption of the few commodities which are able to provide him with relaxation and pleasure than is paid in company tax by all the companies of Australia put together.
Today there are two ways in which taxes can be increased. They can be increased either by legislation such as that now under consideration or by allowing the ratchet effect of the present tax scales to operate. The Commonwealth has a vested interest in wage increases. Its representatives go along to the tribunal, abandon all pretence of impartiality and ask that no increase be given. It has the best of both worlds. Let us take as a classic illustration the increase of $1.35 a week in the total wage recently awarded by the Arbitration Commission. The Commonwealth, as a result of income tax and sales tax and other forms of associated indirect taxation, will glean by way of increased revenue no less than $60m. It will pay out to its employees in all grades and in all States a total of $14m. In other words, the Commonwealth has an inbuilt advantage and will show a very tidy profit of $46m.
When our Constitution was drafted - I do not know whether the significance of this has escaped honourable members - income tax was of lesser importance than it is today. Those who have closely examined the Commonwealth Constitution will know that no fewer than 10 out of the 120 or so sections start by stating that on the imposition of uniform duties of customs and excise certain things will occur. Customs and excise duties were the main source of tax revenue of that period. But progressively over the years, and especially as a result of World War I and World War II, income tax has assumed major importance. Today it is a very real and crushing burden, particularly on those in the lower wage bracket.
For many years the trade union movement has sought unsuccessfully to have fares paid by men and women travelling to and from their places of employment allowed as a tax deduction. The Government has no answer to the obvious illustration of the company director or business proprietor who travels daily to and from his place of business and who. quite correctly, is allowed to deduct from his income before assessment of tax the amount of travelling expenses involved. His travelling expenses incurred in soliciting business or visiting interstate or capital cities are all permissible deductions. What answer has the Government to the repeated requests of the trade union movement in this regard? It does not intend to grant the concession. This attitude is typical of the hardness of this Government, whose Treasurer has slated, as we know, that it is a compassionate government. This is the Government that was allegedly prepared to do something to help the little people in my electorate because of the great amount of female unemployment! There are still in my electorate between 5.000 and 6,000 women who are seeking employment. Many are forced to go daily to Sydney, and are paying between $5 and $6 a week in fares. Because of the closing of local factories, it has been necessary for some of the women to charter buses to take them to the main factories in Sydney, which closed down the local branches. These buses are chartered to take women to and from Sydney on a daily basis. I believe they are entitled to claim their fares as a deduction for tax purposes. This situation is unfair and unjust and it is a matter that gives rise within my constituency to scathing criticism of the Government.
Local government is also entitled to some share of the revenues derived from income tax. The case has been presented many times: it will continue to be presented. As I said earlier tonight. State governments are getting progressively a dwindling share of lax revenues. Recent figures show that in the previous 12 months 38% of tax revenues were handed back by the Commonwealth to the States in one form or another, but in the current year only about 30% will be handed back to them. Therefore, we have today a unique situation in this country. The Premiers of New South Wales and Victoria, who are of the. same political persuasion of this Government, are :it the throat of the Government. They h:ive public opinion behind them, irrespec tive of party, and they are entitled to the full support of every section of the community because while the Commonwealth has retained an unfair proportion of revenues, the States have been forced further to pledge their credit.
We now have this shocking situation: The States, with 30% of tax revenues, have a total loan indebtedness of over S7,000m whereas the total indebtedness of the Commonwealth is about $3,600m. Lest it be thought that the money is owing by the Commonwealth, anyone who cares to examine the operation of the Loan Consolidation and Investment Reserve will find that no less than $ 1 ,070m from that fund is invested in Commonwealth bonds. The Commonwealth is well on the way to owning most of its own debt. If anyone doubts me on this point. I refer him to an article written by Mr W. A. Campbell, a former Auditor-General of New South Wales, and published in the Sydney ‘Bulletin’ of May last year. It was Alfred Deakin who said that ‘In the fullness of time and with the operation of the Commonwealth Constitution, the States would be tied to the chariot wheels of the Federal Government’. This is the position today.
Irrespective of our ideologies and the objectives of our respective parties, the State governments are entitled to a fair proportion of tax revenues. They have certain functions to discharge a.nd unless and until there is reallocation of those functions, whether by referendum, cession or otherwise, they are entitled to get what they need. They are entitled to spend this money economically.
T do not want to delay the House further: but I did wish particularly to stress certain major defects in the Government’s approach to the question of taxation. I suppose one of the most scandalous anomalies in many years has been the way in which various petroleum companies that import crude oil or refine petroleum products from overseas have successfully thumbed their noses at this ‘ Government. The technique adopted by those companies is a simple one; it is time honoured and well perfected. An overseas major oil producing company with a company structure in the Arabian Gull” will sell to its Australian subsidiary al an inflated price crude oil or the refined product. Then the Australian subsidiary, when it conies (o render its company tax return claims - and the claim is correct in terms of accountancy - that its profits were very nominal. In many cases it would appear that these companies claim substantial losses after depreciation and the like. But the Government has never faced up to this problem. I doubt whether it wants to do so. The Government of the Republic of India was prepared to stand up to this type of company. That Government decided vo purchase the crude itself, bring it into the country and tax accordingly, ft is time the Australian Government took its courage in its hands and did the same thing.
Quite a number of us have followed with very great interest the way in which a major iron ore producing company was able to weave its way successfully through the gaps in the present legislation. After a major and protracted case in the High Court of Australia the Government was unsuccessful in disallowing a claim for depreciation by this company for a major port and a major railway line, lt is true that the Government closed the gap in the income tax legislation but there will be many similar gaps. I suggest that the Government, instead of literally putting the boot into the little man, should have a look at a super tax in respect of those companies which are successful, with the help of the best brains money can buy - and they have the money to buy them - in driving a coach and four horses through the various loopholes in income lax legislation today.
– At the outset 1 should say that this Bill is an essential part of the Budget legislation. lt declares the general rates of tax for the current financial year. Insofar as the amendment submitted by the honourable member for Melbourne Ports (Mr Crean) on behalf of the Opposition has any effect at all, if carried ti would simply defeat the motion for the second reading of the Bill. If the amendment was adopted, it would be quite impossible for the Government to provide the essential finance to carry out the terms of its Budget during this financial year. 1 am quite sure that the Opposition must have had this in mind when the honourable member moved the amendment although no reference was made to it in the course of the debate. I am convinced that the Opposition never dreamed that the amendment was likely to be carried: nor do I imagine that the Opposition would expect anyone on the Government side of the House to support its amendment.
Having said that, I want to deal very briefly with arguments advanced by Opposition speakers because we have had a long discussion about taxation in general terms. I want to say very briefly a few things about the general tax structure. In the first place, it has been made clear that the Government would like, as soon as a reasonably budgetary opportunity arises, to have a reconsideration of the whole tax structure. The Treasurer (Mr McMahon), in answer to a question on 20th August 1968, said:
As to the first part of the honourable gentleman’s question, I did state in a television interview that: I had looked very carefully at taxation schedules and so had the Government and the Prime Minister. I also said that if it had been within our financial capacity, 1 would have liked to consider a reduction within certain ranges. 1 pointed out that in these tantalising years - and again I use a phrase that has been used before - it is not practicable to do so, because of increases in other expenditures and particularly because of o:her needs that face the Government.
That is the situation. We believe that it would be an excellent thing to reduce rates of taxation generally, and particularly rates in the lower income ranges. But the opportunity is not here at this time lo do so. Again I. point out that, if the Opposition’s amendment is carried, in effect it defeats the whole of the budgetary proposals of the Government.
Let us not imagine that the community is suffering great hardship. Honourable members opposite have mentioned anomalies in the Income Tax Act. In any tax system anywhere in the world, anomalies can be found according to the point of view that is adopted in relation to certain results of taxation. So there are anomalies in our income tax structure and there always will be, no matter what forms we adopt, according lo the point of view that we have. I will mention one. The honourable member for Kalgoorlie (Mr Collard) spoke about an anomaly that he considered existed in relation to age and invalid pensions. He said that the aged person who had a certain income and was debarred from receiving a pension was given a special taxation concession, but this concession did not extend to an invalid pensioner. That to him seemed to be an anomaly. When we look at the very good reason why this concession was originally introduced - that is, to encourage people to save for their old age, a consideration that does not apply in the same way to invalid pensioners, and to give them some reward for having done so although they had been paying taxes for 40 or 50 years - we can see that it is not so much of an anomaly as the honourable gentleman suggests. There will be anomalies in taxation, depending on the point of view. Listening to honourable members opposite, one would have thought that the community was living on the border line of starvation. But what is the situation? We have a situation of full employment, of rapid national growth, of rising living standards and of increasing personal consumption expenditure. If the incidence of taxation were bearing too harshly on the population, it is quite obvious that we could not have all these things at once. I just make that elementary point.
It is not correct to say, as has been said, that we have not considered the impact of taxation over the years. It is true that the general rates and the general structure have remained largely unchanged, except for rebates at times and special levies at other times. However, there have been increases in concessional deductions and these have reduced the amount of tax payable by the family man. For instance, we have had increases in dependants allowances and the allowance for education expenses, which was originally introduced by this Government, has been periodically increased. From the taxation statistics contained in the report of the Commissioner of Taxation, it can be seen that taxpayers in receipt of about the average earnings claim on average about $50 a year as education expenses for each child under 16 years. The incontrovertible fact remains that, although progressive tax rates absorb a greater proportion of income as income increases, the growth of average earnings in Australia in real terms in recent years has been big enough to more than offset the effect of the progressive tax rates. As to the desirability of ironing out anomalies in income tax - the real and not the imaginary anomalies - there can be no argument. As to the opportunity to reduce taxation, there can be great argument. As for the Opposition’s amendment, I can only say that during the whole of the Budget debate I never heard any Opposition member once suggest that expenditure should be reduced to the point where it was reasonably practicable to reduce taxation.
That the words proposed to be omitted (Mr Crean’s amendment) stand part of the question.
The House divided. (Mr Deputy Speaker - Mr P. E. Lucock)
Majority . . 30
Question so resolved in the affirmative.
Original question resolved in the affirmative.
Bill read a second time.
Leave granted for third reading to be moved forthwith.
Bill (on motion by Mr Freeth) read a third time.
Consideration resumed from 1 1 September (vide page 894), on motion by Mr Freeth:
That the Bill be now read a second time.
Question resolved in the affirmative.
Bill read a second time.
Leave granted for third reading to be moved forthwith.
Bill (on motion by Mr Freeth) read a third time.
Debate resumed from 10 October (vide page 1 87 1), on motion by Mr Nixon:
That the Bill be now read a second time.
– The Opposition supports this Bill and I suppose that honourable members will be pleased that this debate will not take a great deal of time. The Bill will amend the Excise Tariff 192 1-1967, first, by inserting a provision to provide for the exemption from excise duty of ships stores and, secondly, by providing for exemption from excise duty of spirit used for scientific and industrial purposes. We were told by the Minister for the Interior (Mr Nixon), who introduced the Bill, that the first provision arises from the Government’s decision to exempt from customs and excise duty ships stores which are consumed on overseas vessels in Australia and which are not landed in Australia. This seems to be a reasonable provision. The only surprising thing is that it was not introduced before. The Opposition supports the provision. There is no need to debate it at length. The second provision, exempting from customs duty spirits used for scientific and industrial purposes, equally seems to be a necessary and valid provision and the Opposition supports it. The Bill should not take long to dispose of and I do not intend to prolong the debate.
Question resolved in the affirmative.
Bill read a second time.
Leave granted for third reading to be moved forthwith.
Bill (on motion by Mr Bury) read a third time.
House adjourned at 10.58 p.m.
The following answers to questions upon notice were circulated:
asked the Minister for Defence, upon notice:
– The answers to the honourable members questions are as follows:
Iroquois aircraft with spare engines and associated spares.
Tracker aircraft with spare engines and support equipment.
Skyhawk aircraft with spare engines and support equipment.
Gyro compass equipment.
Radio transmitters and receivers. 750 KW and 1000 KW generating sets.
Main engines and associated spares for H.M.A.S. ‘Stalwart’.
Propulsion engines and associated spares for patrol boats.
Tracker weapon systems trainer.
Modification kits for sonar and avionic equipment.
Torpedoes and batteries.
Tartar missiles and spares.
Seacat missiles. 4.5-in gun mountings.
Gunnery’fire control equipment. 5-in/54 calibre ammunition.
Howitzer pack 105mm L1.
Gun 84mm anti-tank.
Ranging machine gun for Centurion tank.
Entac missiles and system.
Surface-to-air guided missile - Redeye.
Rocket HE 66mm.
Shell 5.5 in.
Cartridges 105mm HE.
Cartridges 8lmm HE.
Cartridges . 50 in tracer.
Cartridges 84mm HEAT. TPTP and illuminating.
Cartridges 6.5mm tracer and ball.
Aeroplane utility with engines, spares, etc. (Pilatus Porter).
Helicopter Bell 47G-3B-1.
Carrier full track M11 3 A1 and spares.
LARCV amphibious vehicle.
Truck wrecker M543.
Turret Cadillac - gauge T50.
Radio sets AN/PRC-25 and AN’PRC-47.
Radio equipment AN/GRC-125 and AN/ GRC-106 and spares.
Cypherequipment and terminal telephone TA5006/AU.
Radio equipment for M113 carrier.
Rough terrain fork lift truck.
Radar- counter mortar AN/KPQ-1.
Mystere 20 aircraft.
HS748 trainer aircraft.
HS748 S/T aircraft.
Macchi jet trainer aircraft.
Material for manufacture of Mirage aircraft.
Material and kits for modification to aircraft.
Synthetic navigation trainer.
Air-to-air missile for Mirage.
Mirage 500 litre wing tanks.
Replacement control and reporting units.
Equipment for Joint Operations Centre.
Navy - None of these items of equipment could have been supplied by Australian industry within the time required; also with such complex equipment local costs would have been considerably higher particularly for the small production runs required.
Cartridges 105mm HE.
Cartridges81mm HE. lt was necessary to place these orders in 1963-64 to establish a stock in Australia while production capacity was being established. All subsequent orders have been placed in Australia.
Radio set AN/PRC-25.
Radio set AN/GRC-125.
Estimates of cost of production in Australia indicated that, for the number required, the cost of local production would have been unacceptably high.
Eniac missiles and system.
Terminal telephone TA5006/AU.
Radio equipment for Ml 13 carriers.
Radio set AN/PRC-47.
Radio equipment AN/GRC-106.
Surface-to-air guided missile - Redeye.
Production capacity for these items was not available in Australia, and the cost of setting up production of the small quantities involved would have been too high.
Aircraft. - with the exception of Mirage and Macchi none of the aircraft listed in (2) could have been provided by Australian h,dustry. The overseas purchases for Mirage and Macchi included some initial aircraft and materials required to manufacture the aircraft in Australia. The overseas purchases of modification kits was confined to items not available from Australian industry.
Air-to-air missiles for Mirage - this type of weapon is not available from Australian industry.
Sonobuoys - -after consultation between the Departments of Air and Supply it was decided that it was not practicable to manufacture these items in Australia at the time.
Control and reporting units - at the time the requirement was established there was no single organisation cither overseas or in Australia capable of building this equipment. A consortium of contractors with a United Kingdom firm as prime contractor was awarded the contract. One Australian firm was a contractor in the consortium.
Mirage 500 litre wing tanks - a small number of complete tanks were purchased from overseas. The balance of the order represents the cost of material which was purchased overseas to allow manufacture of the tanks in Australia.
Mirage ammunition - at the time this ammunition was ordered it was not practicable for manufacture in Australia within the required time. Local industry is now planning to undertake production on orders placed after January 1969.
Mk 46 torpedoes - these items could not be provided by local industry within the required time scale.
Equipment for Joint Operations Centre - I his equipment contained cypher and radio equipment nol manufactured in Australia. lt was also necessary that this particular equipment conform with similar equipment of American origin and used by Army personnel.
Synthetic navigation trainer - Australian industry was circulated in connection with this item but no bids were received.
asked the Minister for Defence, upon notice:
– The answers to the honourable member’s questions are as follows:
asked the Minister for Health, upon notice:
– The answers to the honourable member’s questions are as follows:
2 and 3. No. The formulae apply to all registered organisations. 4. (a) The total number of collecting agencies for registered medical or hospital benefits organisations is not known.
asked the Treasurer, upon notice:
Is an invalid lacking the age qualification for the income tax age allowance, and whose income is such a.s to disqualify that person from receiving any pension entitlement, able to claim any income lax allowance in respect of income which disqualifies him from receiving an invalid pension?
– The answer to the honourable member’s question is as follows:
Such a person may deduct from his assessable income expenses incurred in gaining or producing thai income which are not of a capital or private nature. He is ako entitled to concessional deductions in respect nf dependants, medical expenses, education expenses, etc. However, as the onour- able member was advised in the answer given on 26th September 1968 to Question No. 784 - Hansard, page 1629 - no special allowance similar to the age allowance is available to invalid persons solely by virtue of their being invalid-;.
Snowy Mountains Authority: Investigations in Queensland (Question No. 177)
asked the Minister for National Development, upon notice:
– The answers to the honourable member’s questions are as follows:
Trans-Australia Airlines: Routes and Licences (Question No. 773)
asked the Minister for Civil
Aviation, upon notice:
On what (hues and For what routes has Trans-Australia Airlines sought and been granted or refused a licence since his predecessor’s answer to me on 27th September 1967?
– The answers to the honourable member’s questions are as follows:
Capital Works at Airports (Question No. 804)
asked the Minister for Civil
Aviation, upon notice:
What was the total expenditure from 1st July 1950 to 30th June 1968 on capital works at each of the following airports: Sydney. Melbourne (Essendon), Melbourne (Tullamarine). Brisbane, Adelaide, Canberra, Perth, Hobart, Launceston, Townsville, Lae, Port Moresby, Coolangatta, Cairns, Mackay, Rockhampton, Darwin and Mount Isa?
– The answer to the honourable member’s question is as follows:
The following figures show capital expenditure, less the value of demolished assets, between 1st July 1950 and 30th June 1968 for each of the nominated locations:
asked the Postmaster-General, upon notice:
– The answers to the honourable member’s question”; are as follows:
With regard to Morawa, whilst there would bo difficulties on account of the distance involved, the practicability of extending service to this centre by the use of translator stations will be fully investigated in due course. Concerning Mingenew it is pointed out that this centre is on the route of the broadband link and the possibility of providing service to Mingenew by means of a low powered relay station will be fully investigated.
Cite as: Australia, House of Representatives, Debates, 16 October 1968, viewed 22 October 2017, <http://historichansard.net/hofreps/1968/19681016_reps_26_hor61/>.