12th Parliament · 1st Session
The President (Senator the Hon
W.Kingsmill) took the chair at 11 a.m., and read prayers.
The following papers were presented : -
Invalid and Old-age Pensions Act - Regula- tions amended - Statutory Rules 1931, No. 91.
Maternity Allowance Act - Regulations amended - Statutory Rules 1931, No. 92. Northern Territory Acceptance Act and Northern Territory (Administration) Act - Ordinances of 1931 -
No. 4 - Darwin Town Council.
No.5 - Darwin Town Council (No. 2).
asked the Minister representing the Prime Minister, upon notice -
– Inquiries are being made in the matter, and a further reply will be furnishedas early as possible.
Senator HERBERT HAYS (through
– The information is being obtained, and the honorable senator will be further advised at the earliest possible date.
asked the Minister representing the Minister for Trade and Customs, upon notice -
In view of the very limited time available to the Senate for the proper discussion of the Tariff from 1st November onwards, willthe Government providethe Senate with complete records of commodities imported under the successive rates of rising duties, to enable a competent opinion to be formed of the efficacy or otherwise ofsuch duties !
– The matter will be carefully looked into with a view to seeing whether it is possible to supply the desired information.
– I move -
That the hill be now read a second time.
During recent years the financial position of South Australia, in common with that of the other States, has been difficult. For two or three years South Australia suffered from unfavorable seasons, fol- t lowing which there came a serious fall in the prices of primary products. The reactions following the heavy reduction of loan expenditure have probably affected South Australia to a greater extent than the other States.
In 1929 a royal commission, which investigated’ the position of South Australia under federation, recommended that that State be given a grant of £500,000 a year for two years. Parliament voted £1,000,000, to be spread over three years, namely, £360,000 for the year ended 30th June, 1930, and £320,000 in each of the two following years. The position of South Australia in 1929-1930, however, was much worse than in previous years.
At the conference of Commonwealth and State ministers held in August, 1930, all the States were prepared to help South Australia, and a resolution was passed under which the other States agreed to forgo certain grants from the Commonwealth, aggregating £850,000, in order that the Commonwealth might give further assistance to South Australia. Under the South Australia Grant Act, 1930, that amount was paid to South Australia during 1930-1931, making the total assistance from the Commonwealth for that year £1,170,000. But notwithstanding that assistance from the Commonwealth, the State’s deficits have increased.
The question of granting further assistance to South Australia was referred to the Public Accounts Committee for report. South Australia asked for £1,950,000 a year for an indefinite period. I take the following extract from page 30 of the report of the committee under the heading “Amount of Grant”: - . . The committee has examined the position of South Australia from many angles in an endeavour to assess the disabilities arising from federation ;” but after exhaustive investigation it feels that, in view of the numerous economic problems involved, and of the absence of reliable figures relating to many important aspects of federal policy, it cannot express in monetary terms the extent of .such disabilities. The committee is of opinion, however, after a careful study of the finances of the State, that South Australia has a reasonable claim for a grant of £1,000,000 for 103i-1032. ThiB sum would include the amount of £320,000 to which South Australia, is entitled under the South Australia Grant Act, No. 28, of 1020. Having regard to the fact that the Commonwealth and the other States will be faced with’ heavy deficits at the 30th June next, the committee considers that, in fairness to the taxpayers of Australia as a whole, it is a matter for Parliament to determine whether this amount can be paid. Having regard also to the existing abnormal mid constantly changing conditions affecting the finances of the Commonwealth and the States, the committee does not deem it desirable to recommend a grant for any definite period beyond one year. The indications ure that the next financial year will be a difficult one for all treasuries, State and Commonwealth; but the upward . trend of prices for our staple exports inspires the hope that by 1032-1933 the national income will have recovered to an extent that will bring about an appreciable improvement in the finances of the Commonwealth and the Sta tes.
Having carefully considered the report of the Public Accounts Committee, the Government recognizes the difficulties of South Australia and the heavy burden of taxation placed on its people; hut it also realizes that the Commonwealth and all the other States are themselves faced with serious difficulties.
The authority for granting financial assistance to any one State is contained in section 96 of the Constitution, which reads :-
During a period of ten years after the establishment of the Commonwealth and thereafter until the Parliament otherwise provides, tha Parliament may grant financial assistance to any State on such terms and conditions as the Parliament thinks fit.
I suggest that that section never contemplated the giving of a huge grant of £1,950,000 for an indefinite period, as was requested by South Australia, or the continuation of assistance on the scale of last year, namely, £1,170,000. Last year’s grant was of a special nature ; it included £850,000 arranged in co-operation with other States with the object of enabling South Australia to balance its budget that year. The difficulties then confronting South Australia have since become manifest in the accounts of all governments. Having considered the matter fully, the Government has decided to recommend to Parliament that further assistance, making in all £1,000,000, be granted for this year. In making this recommendation the Government suggests that such assistance should be regarded as of a temporary nature, designed to help South Australia towards a re-adjustment of her financial difficulties. The bill now submitted gives effect to that recommendation. It provides for a grant of £680,000 for 1931-32 which, with the grant of £320,000 already approved, will bring the total assistance for the year to £1,000,000.
It is hoped that with the assistance which this bill will render to South Australia that State will be able to overcome some of the difficulties facing it. South Australia being primarily an agricultural and pastoral State, has suffered more than the other States from the poor seasons which have been experienced for several years, and from the low prices obtained for our stable export products. The purpose of the bill is to render South Australia some assistance to pull through. I commend the bill to the Senate.
Senator Sir GEORGE PEARCE (Western Australia) [11.13]. - I support the second reading of this bill, although I regret the necessity for its introduction. It is well that we should consider the circumstances which make such a grant necessary. Under a federation such as ours, with the population of the country unequally distributed among the States, the smaller States suffer disabilities, due largely to our tariff policy, and the fact that the bulk of our manufactures are situated in two States, leading to the aggregation of capital in those States. The result is that wealth is drawn from the smaller States to those centres, and is, therefore, not available in the smaller States for taxation purposes. The aggregation of wealth in two States, while increasing the capacity of those States to bear the cost . of Government, lessens the capacity of the smaller States to bear their share of that cost. These grants are a rough and unscientific method of redressing that wrong. But I suggest that the time has arrived when we should endeavour to find a more scientific and efficient basis for such assistance. At present questions of this kind are referred either to royal commissions or to committees of this Parliament. This practice is, in my opinion, most unwise. A royal commission may or may not be composed of men qualified to deal with, the subject referred to it; but, in any case, its members can devote only a momentary part of their time to the problem. The commission may or may not call evidence from persons competent to deal with the subject.
The framers of our Constitution contemplated that inequalities would arise between States in such a federation as this is. It is obvious that there must be inequalities when one State - New South Wales - although six States are included in the federation, contains nearly one-third of the entire population of the Commonwealth. We all know that it is of tremendous advantage to a manufacturing community to have a large home market, and New South Wales enjoys that advantage, whereas States like South Australia, Western Australia, and Tasmania do not. The Constitution provided, therefore, not only for a judicature to determine legal questions and questions involving the interpretation of the Constitution, but also for a body termed the Interstate Commission to deal with, among other things, the inequalities which were expected to arise between the States.
– The late Mr. Deakin called the Interstate Commission the eyes of Parliament.
Senator Sir GEORGE PEARCE.One of the duties of the Interstate Commission was undoubtedly to devise a scientific method of dealing with inequalities among the States. Unfortunately, the High Court destroyed the Interstate Commission by deciding that, as it was intended to discharge duties of a judicial character and to make judgments upon the subjects submitted to it, it must be composed of persons who would be in the same position as judges, in that they would have a life tenure of office, and therefore be qualified to do work of a judicial character.
Seeing that we must look forward to a continuation of inequalities among States for some years at least, we should amend our Constitution to enable us to reconstitute the Interstate Commission and clothe it with power to investigate and report upon such questions. It should be a standing body competent to recommend well-considered measures for the removal or counterbalancing of inequalities. I know of no more unsuitable body to attempt to do this work than a parliamentary committee. If I were appointed to a committee to investigate and report upon the claims of Western Australia for compensation in respect of alleged inequalities, could I be regarded as impartial in the matter? By reason of the fact that I represent Western Australia, I would be made a judge in my own cause. [n making these remarks I wish it to he clear that I am not casting any reflection upon the capacity or impartiality of members of Parliament; but I am certainly of the opinion that they are unfit to discharge such duties. They have neither .the time nor the facility for inquiring and adjudicating upon such subjects. We have had reports of royal commissions and of parliamentary committees upon the disabilities of Western Australia, South Australia, and Tasmania, but none of those investigating bodies has been fully competent ito deal with the subjects referred to it. I therefore repeat my suggestion that an interstate commission with real power should be constituted to do this work. Many questions are constantly arising which involve the consideration of the inequalities which exist between the States.
A great deal of the force behind the secession movement in my own State arises from the fact that no such body is in existence to grant the people real relief from their sufferings consequent upon interstate inequalities, and there should be some such body available. It is because of the absence of such a body that the people, in desperation, are turning to the extreme remedy of secession. The secession movement in Western Australia is a real movement, with a considerable body of public opinion behind it. I am a believer in the federal system and in a united Australia, and I will never lend either my voice or my vote to any movement which seeks to ‘break up this union, which has been sanctified by the blood of our men, who have fought together as soldiers in battle. I will never support any movement which advocates secession from the Commonwealth, although I recognize that there is justification for the dissatisfaction of some States with certain results of the federation. It is for this reason that I urge honorable senators to consider seriously the wisdom -of reconstituting the Interstate Commission. I believe that such a body would be able to play the part that a governor plays in a piece of machinery. It would be able to smooth out inequalities and to suggest remedies which would give relief to the people of the States which are at present in- difficulties, thus placing the federation on a sounder basis than at present.
– I support the bill, and express my appreciation of the action of the Government in providing this measure of relief for a State which in- the last few years has suffered severely, not only from natural causes, but also from the imposition of tariff duties. Speaking as a South Australian, I also express my appreciation of the truly Australian spirit manifested by the members of the Premiers Conference last year, who agreed to forgo their claims to certain moneys to which their States were entitled in order that it might be paid to South Australia, to give her a measure of relief. I do not propose to quarrel with the amount that it is proposed to vote to South Australia, nor with the recommendations of the committee that reported upon the disabilities of South Australia. That State realizes that Australia is at the moment in a very difficult financial position, and that the Commonwealth Government is suffering considerable financial embarrassment. I should have contented myself with these few remarks’ but for the fact that Senator Pearce made certain statements in his speech upon which I desire to comment.
I have on a previous occasion in this chamber made reference to what I regard as the impropriety of members of Parliament conducting inquiries into such subjects as State disabilities, on the ground that members must be more or less partisan. I make that statement without any “desire to offend. I did not gather from the speech of the Leader of the Senate (Senator Barnes) that the assistance which it is now .proposed to afford to South Australia was being granted upon any definite principles. The Leader of the Senate quoted an extract from the report of the Public Accounts Committee to the effect that the committee could not express in monetary terms the disability from which South Australia was suffering. That is always the difficulty. I do not blame either the committee or the Government for this. We are all sinners in this regard; but it is high time that Australia took stock of herself. Instead of complaining about the limitations in our Constitution and of our impotence to do certain things, we should have the courage to apply the provisions now in the Constitution - for there are provisions in it for determining questions of the kind we arc now considering. The provisions for the appointment of an Interstate Commission were regarded by the framers of our Constitution as most important. It was realized when tho Constitution was framed that such inequalities as have now arisen between various States would arise, and the Interstate Commission was the machinery provided for meeting these, and also for meeting difficulties which were inevitable in consequence of changed fiscal policies. The Interstate Commission was visualized as an independent body which could deal adequately with such problems, and lay down broad general principles for the solution of them. I have read the report of the Higgs Commission on the- disabilities of Western Australia, the report of the Lockyer royal commission on the disabilities of Tasmania, and also the reports that have been made by various bodies on the disabilities of South Australia; but none of these investigating authorities probed the subject to its roots. In my opinion - and I say this without any desire to be offensive - there has always been a political colour in the investigations that have been made. There have been in one party, those who look for the development of the Commonwealth by means of an extremely high protective policy; in another party, those who favour only a revenue, tariff; and in another - and I regard these as the sane protectionists - those who favour a protective policy which will not operate to the detriment of Australia.
What we need is an investigating body which will determine the degree of relief to which any State will be entitled if it can establish certain facts. We need to determine the basic principles upon which relief may be granted. In my opinion no body would be so suitable for this work as the Interstate Commission.
Let us .look at one or two important factors of the situation which faces us. It has been definitely proved that the operation of the coastal sections of the Navigation Act is detrimental to Western Australia, South Australia and Tasmania. If these sections are retained in the act, the States which benefit from them should be willing to contribute something towards the relief of the States which suffer from them. Let us consider for a moment the tariff situation; and I shall take only one illustration. Quite recently a very heavy additional duty was imposed upon the importation of Oregon, notwithstanding the antagonism to the proposal of every political party in South Australia, including the party which supports the Government. In order that honorable senators may not be under any misapprehension, I intend to quote, not the views of the Builders and Contractors’ Association, nor of the Architects Association, but of the South Australian branch of the Australian Labour Party. I shall read from an article contributed to the press by the secretary of that body, Mr. F. P. Ward. The article states: - “The enormous duty of 14s. for 12 x 6 inch
Oregon is beyond all reason,” declared Mr. F. Ward.
Mr. Ward, I may add, has had a long practical experience in the building trade in South Australia, having been a contractor, I understand, for a great number of years.
– He was an accountant in the Globe Timber Mills.
– I understand that Mr. Ward was for many years connected with the timber trade before assuming his present position as secretary of the Australian Labour party in Adelaide. The article quotes him as stating that merchants and workers alike would benefit from a revision of the duty, and then ho goes on to say: -
The duty adds greatly to the cost of a house, and houses are required mostly by the workers.
He expresses appreciation of the action taken by the Government to help bush mills, and continues : - »
It is impossible to use Australian hardwoods for roofing purposes, as our local timbers are not long enough for joists and rafters, and are absolutely useless for fascia and barge boards.
Our hardwoods are too heavy for roofing, even if they were long enough, and their heaviness causes walls to crack. Hardwoods are also useless for roofs. ‘ If Oregon is shut out altogether the bush mills will be able to supply requirements only for a short time. There is not a great quantity of hardwoods in Australia.
– I assume that the honorable senator, in discussing the duty on oregon, intends to show the relation of the subject to the bill?
– My intention is to indicate that the imposition of the duty on Oregon inflicts a definite hardship upon the whole of the taxpayers in South Australia.
– It certainly is one of our disabilities under federation.
– I do not wish to limit unnecessarily the scope of the debate, but I remind the honorable gentleman thatthe discussion of the tariff at this stage would be out or order.
– I thought I made it clear that I was referring to the duty on Oregon merely for the purpose of illustrating my point. The timber duties have been debated in the Senate ad nauseam; but, as Senator Daly has just pointed out by way of interjection, this is one of the disabilities under which the people of South Australia are suffering, although it is difficult to express it in money terms. There is, therefore, need for the appointment of an independent tribunal, such as that suggested by the right honorable the Leader of the Opposition (Senator Pearce), to examine the position of the various States tinder the tariff. All the industries which use Oregon in South Australia are in agreement that the present high duty inflicts a distinct hardship upon that State.
– The Timber Workers Union takes the same view.
– I understand that it does. The concrete manufacturers also have expressed themselves in no uncertain terms about the duty, which is affecting the trade and commerce of the State. I strongly support the suggestion of the Leader of the Opposition for the constitution of an impartial tribunal to deal with all these questions on well-defined principles. I express appreciation of the action of the Govern ment in proposing to make the grant to South Australia, and, needless to add, I shall support the second reading of the bill.
– Unlike a number of honorable senators who, a few weeks ago, were hostile to the Government’s policy for the assistance of the sugar industry, I intend to support this bill. It is desirable that we should consider all proposals affecting the financial stability of the various States from a national point of view rather than from the viewpoint of anyparticular State. I trust, also, that my example, as a representative of Queensland, will be remembered by some honorable senators from other States. The right honorable the Leader of the Opposition (Senator Pearce) men’ tioned the “ amateurish “ basis, as he termed it, upon which these grants to the various States have been computed. It may not be out of place to remind Senator McLachlan, and other honorable senators from States that are seeking financial assistance from the Commonwealth, that the whole of the blame for disabilities under which they arc suffering cannot be attributed to federation.
– I did not say that it was; I merely contended that the Commonwealth has never administered the Constitution.
– The major portion of South Australia’s difficulties, at all events, is the direct result of extravagance in State administration. This criticism applies particularly to its railway management. South Australia had a comparatively good railway system, but for reasons best known to the Government of the day, it suddenly launched a huge programme for the rehabilitation of the entire system. The Adelaide railway station, which was sufficient for the requirements of that city for thenext 100 years, was demolished, and there was erected in its place a palatial structure that would meet the requirements of a city almost as large as London or New York.
– It was to rival the North Shore Bridge.
– Or the Brisbane Town Hall.
– Although the Brisbane Town Hall is a costly structure, Queensland is not ashing the people of the other States to help to pay for it. I repeat that much of the trouble in which some States find themselves to-day is due to their extravagance in administration, and I now remind honorable senators who, a few weeks ago, showed such marked hostility to proposals for the assistance of the sugar industry in Queensland, that if objection is taken to these measures for the mutual assistance of the various States, the federation will be unworkable. For this reason I am not objecting because the taxpayers of Queensland will be called upon to pay a large proportion of the amount required for the grants to be given to South Australia, and, in later measures, to Western Australia and Tasmania ; but I suggest that the system under which the grants are paid is not conducive to economy in State administration. I contend that the people who spend the money should also be required to provide it by means of taxation, because the history of parliamentary government in Australia has shown that money easily obtained is easily expended ; very often it is disbursed upon works which, prove to be uneconomic. However, I intend to support the bill, but I hope that the lesson which has been learned in South Australia will not be lost upon other States.
– I direct attention to a point which has not been stressed by other speakers, namely, the position of Victoria’ and Queensland. New South Wales has, during the last few months, helped itself to Commonwealth revenue to the extent of approximately £3,500,000 ; and now we have proposals for special grants to Western Australia, South Australia and Tasmania, for which the taxpayers of Victoria and Queensland will be called upon to shoulder more than their fair share of financial responsibility. For this reason I would welcome the reappointment at the earliest possible moment of an interstate tribunal which would consider all questions affecting the various States in a judicial atmosphere and make recommendations that would, I hope, compel all States to keep expenditure within the range of income. There need not be un due delay in reconstituting the Interstate Commission, because we have the material at hand in the personnel of the Arbitration Court bench. I should like to see federal arbitration suspended, if not abolished altogether, and the present occupants of the Arbitration Court bench appointed members of the Interstate Commission to deal with all these important questions which must arise from time to time.
– I shall be as brief as other honorable senators have been and as some have promised to be. The strongest argument in favour of the course suggestedby the right honorable the Leader of the Opposition (Senator Pearce) has, I think, been furnished by Senator Foll this morning. Clearly, if the representatives in this chamber from Queensland bargain for support of proposals to . benefit the sugar industry in return for their support of grants to necessitous States, there is grave reason to believe that the Senate will become distinguished by certain features . which have marked the State parliaments from time to time.
– A chamber of logrolling.
– I did not want to use the expression, but the practice must inevitably lead to a system of logrolling. One State would agree that another State should have certain concessions, providing that its own requirements were granted when submitted, the total result being somewhat demoralizing, while all the States would, in the end, be much where” they were before the log-rolling began.
It appears to me that there is still room for the operation of an Interstate Commission under the Constitution as it stands. I have always thought that the quietus given by the High Court to the Interstate Commission was accepted too easily. It appears to me that there is still room for the operation of that body. Any government occupying the treasury bench might well have the matter investigated.
– In reply to Senator Thompson and Senator Foll, I point out that if to-morrow the railway men in South Australia decided to give their services free, thereby enabling the Railways Commissioner to save the amount at present paid in wages, that would not balance the State budget in South Australia. Existing wage costs are not responsible for the position of the South Australian railway system.
– Surely they are, in some way.
– They certainly affect the cost of carrying on the railways, but the important point is that South Australia has laid down a number of developmental lines over which, due to harvest failures, practically empty trains, are drawn. It is the interest costs of the South Australian railways which prevent them from proving a financial success. It is possible that, as a result of the negotiations at present taking place between the Premiers, there may be a revision of interest costs as they affect public bodies. Wage costs have already fallen very considerably, the basic wage of South Australia being the lowest in the Commonwealth. In addition, employees are being rationed. I feel certain that if other costs are brought down, South Australia will be able to carry on: I assure Senator Thompson and Senator Foll that the problems of that State have not been accentuated by the operation of the system of arbitration of which the Labour party is so proud.
– I should not have risen but for the remarks of one or two honorable senators who, while supporting the bill, damned it with faint praise. It was hinted that the Public Accounts Committee, which made the recommendation to the Government out of which the bill originated, did not do its duty in connexion with its inquiry. I venture to suggest that such honorable senators have not read the report which the committee presented to the Government on the finances of South Australia as affected by federation. By glancing cursorily at the report, honorable members cannot appreciate the value of the finding of the committee on which this legislation is based, and I suggest that they should not have made such statements without first fortifying themselves with facts.
Senator Foll would have the Senate believe that the financial position of South
Australia is due to extravagant administration over a number of years, and that for that reason the Senate should carefully examine any proposal recommending the granting of financial assistance to the State. The honorable senator even hinted that when the Commonwealth renders financial assistance to South Australia it might prescribe conditions for the expenditure of the grant.
In arriving at its findings as to the disabilities suffered by South Australia under federation, the accounts committee gave the fullest consideration to everything that could be regarded as extravagant government expenditure over the past ten years, and before making its recommendation it deducted what it deemed to he extravagant expenditure on railway rehabilitation, water-reticulation schemes, and so forth. So that, despite this grant of £1,000,000, the people of South Australia have still to bear the full cost of any mistakes made by its governments in the past. I submit that the committee erred on the side of caution in its endeavour to conserve the finances of the Commonwealth and the other States. The other Australian States are not free from blame in the matter of governmental extravagance. If a searching inquiry were made into their public expenditure it would disclose mistakes similar to those committed by South Australia.
It has been claimed that the Public Accounts Committee had no proper formula to apply in arriving at the amount of the grant. I point out that it had a formula, one laid down by eminent economic authorities in Australia, which was accepted after others had been tested and rejected. It is based on severity of taxation, in relation to taxable capacity, after taking into consideration the paucity or otherwise of the natural resources of the State. Applying that formula to South Australia a very alarming state of affairs was disclosed. For instance, it was found that the index figure of the relative income tax paying capacity of South Australia was 122 in 1923-24, while it had fallen to 70 in 1928- 29. In connexion with the relative severity of taxation in the different States, it was found that that of South Australia was 101 in 1923-24, while it had risen to 174 in 1920-30. The complete comparative table is set out at page 11 of the report of the committee, and it contains information that will be of interest to the Senate now and also in the future -in connexion with problems that will arise.
After proceeding for a timo with its inquiry, the committee was asked by the Government to attempt specifically to assess the disabilities to South Australia arising from federation. It made a very exhaustive inquiry into the possibility of doing so, and determined that, with the data at its disposal, it was not practicable to make even an approximate estimate of those disabilities. The committee asked Professor Giblin, who has probably given more study to the financial relations of the Commonwealth and the States than has any other economist in Australia, if he could advise it on the subject. He agreed with the contention of the committee as to the impracticability of assessing South Australia’s disabilities under federation. The committee attached such value to the opinion of Professor Giblin that it printed, it as an appendix to its own report. The following is an extract from that opinion : -
It is not possible to determine special grants to States by assessing directly the net economic disadvantage on account of federation. At first view this procedure seems simple and attractive. On examination, however, it appears that it is practically impossible, however desirable it may be.
Consider the effects of high protection. There is no doubt that this is some disadvantage to a State chiefly occupied with .primary production. How is it to be measured? The report on the tariff, published under the title of The Australian Tariff, goes further than has been attempted before for any country in measuring tariff effects. Even if all the conclusions unci tentative conclusions of that book are fully accepted wo arc a long way from being able to assess the economic disadvantage to a single State caused by the tariff. Even if this were roughly determined (and the results would, even after long investigation, be more uncertain than those of The Australian Tariff) we should still have the task of translating an economic disability to a State into a subsidy to a State government. I see no way in which that can be done with sufficient certainty to bo of any practical use.
That, sums up the position very well. The committee had to accept the formula to which I have referred as the only authoritative basis so far established, and it arrived at the firm conclusion that South Australia was entitled to a grant of £1,000,000 for this financial year. I am pleased that the Government so promptly translated the recommendation of the committee into effect.
I entirely agree with the Leader of the Opposition (Senator Pearce) that some permanent body should be established to deal with claims from the States. That point was considered when the Public Accounts Committee was dealing with the disabilities of Tasmania under federation, and the following strong recommendation was submitted by it to the Government: -
The committee is strongly of opinion that the time has arrived when a permanent body should be appointed to make u continuous study of the financial relations of the Commonwealth and the States. Of recent years the task of investigating the finances of three of the States - Western Australia, South Australia, and Tasmania - has been assigned to different bodies, involving the expenditure of a considerable amount of public money. The reports submitted to Parliament indicate that the investigations were conducted with efficiency and thoroughness, and that a considerable amount of research was involved in their preparation. With the growing complexity of the finances of the Commonwealth and the States, however, the committee holds the view that the financial relations of the Commonwealth and the States should be the subject of a continuous and intensive study by a permanent body. In fairness to the Commonwealth and the States uniform methods and procedure in relation to financial assistance to the States should be evolved. The essential requirement is that all questions of State grants should be referred to the same body for investigation. Uniformity cannot be achieved in any other way. The committee fully recognizes that the principles of determining grants cannot be developed and clarified in a day; but the importance of the matter to the Commonwealth, the States, and the taxpayers demands that there should be no further delay in setting up a body capable of evolving definite basic principles under which the claims of any State may be measured or assessed from time to time without the necessity for protracted investigation.
– The answer to that is, that each State should live within its income.
– The answer to the honorable senator’s observation ib, that the income-earning capacity of each State is not equal, and that that inequality is considerably increased by actions of the Commonwealth Government. That particularly applies to the State which the honorable senator represents. The relative tax-paying capacity of Queensland is comparatively high, largely on account of the protection that
U afforded by this Parliament to one of Ha great staple industries. I have supported that protection, and shall continue to do so. But it is not my policy to cast aspersions on other States who happen to be less favorably situated in regard to the possession of natural resources, coupled with facilities to enjoy them that have been given by this Parliament.
The Public Accounts Committee again considered this matter in its inquiry into the finances of South Australia, and was strengthened in its conclusion that a permanent body should be established. It reaffirmed its previous recommendation in the following terras : -
The committee again strongly recommends the establishment of a permanent body to make a continuous and intensive study of Commonwealth and State finances.
– How should that body be chosen?
– The committee made a suggestion in regard to the constitution of the body.
– In answering that interjection, which was irrelevant, the honorable senator is introducing a subject with which the bill does not deal.
– Had you, sir, permitted me to conclude my sentence, I would have shown clearly that I was not endeavouring to deal with the constitution of this body. I was merely pointing out that the committee made a suggestion in regard to the constitution of the body, and I intended to add that this was not the time to discuss that matter. If the Government proposes, by the introduction of legislation, to constitute a permanent body to study the financial relations of the Commonwealth and the States, doubtless consideration will be given to the recommendations of the Public Accounts Committee. All that I am now doing is to support the suggestion of the right honorable the Leader of the Opposition (Senator Pearce) and other honorable senators that a permanent body of this character should be constituted.
– I rise to a point of order. You have ruled, Mr. President, that the honorable senator may not refer to the personnel of the suggested body, nor to the manner in which it should be appointed. I submit that if it is in order for the honorable, senator to sug gest that such a body should be established, it is equally in order for another honorable senator to ask, by way of interjection, what the personnel of this body might be, and in what way it would be appointed.
– The honorable senator is quite right. Both are out of order, and I am sorry that honorable senators should make me regret the latitude that I have allowed in the debate.
– I was merely following the course that was set by other honorable senators. I again express my pleasure at the fact that this grant will be translated into an actuality in the immediate future.
, - It is my intention to make, not a speech, but a few audible reflections.
This bill furnishes us with a very valuable example of the unwisdom of those who have contended that this chamber has not fulfilled the purpose for which it was established. The folly and the foolishness of that contention were exposed when Senator McLachlan and Senator Daly linked arms and boldly made the same demand, forgetful of all their past differences. No better illustration could have been afforded of the fact that this is a States house. For the time being, those honorable senators flung to the wind3 every other consideration and joined forces in an endeavour to have justice done to South Australia. This is a proof that those wiseacres are wrong who say that the Senate has outlived its usefulness.
The claim of South Australia for financial assistance from the Commonwealth will be repeated again and again unless one of the fundamentals of our public policy is altered. South Australia is being given this grant on the present occasion. Why? Because, I suppose, it is universally conceded that she is entitled to it for some reason or other. It is unquestionable that, although her people are of the same flesh and blood as the people of other States, and have the same physical and mental constituents, politically she is not in such a good position as they. It is but natural that she should come to the federation for assistance, because it is federal policy that has helped to reduce her as well as other constituent parts of the federation to the lowly, dependent condition in which she finds herself to-day. It is on record that one of her chief secondary industries finds it so infinitely difficult to carry on that it is to be transferred to Melbourne, where conditions are easier, more promising and better calculated to promote success. What is it that makes Melbourne and Sydney so attractive? The fundamental cause is the policy of this country, which operates in the direction of attracting to the capitals of the two largest States all the surplus energy and production of the Commonwealth, leaving the outlying portions, including South Australia, in a bad way. We have gone stark, staring mad on the policy of protection. Time after time South Australia has sent to this Parliament contingents that have supported that policy, and they have assisted to make the conditions in South Australia such that Holden Brothers can no longer carry on successfully their fine enterprise in that State. South Australia, Western Australia, and Tasmania find themselves in their present condition because no proper relation is maintained between the protected secondary industries on the one hand, and the primary industries on the other. Enlightened opinion the world over, is beginning to realize that there must be established a better equilibrium between those two sets of industries, and until that object is achieved, States like South Australia will be compelled to seek assistance from other States that have been able to enrich themselves as a consequence of the disequilibrium that has so far existed. If South Australia continues to send to this Parliament men, whoare pledged to a policy that has succeeded only in producing her own impoverishment, she will have to pay the penalty that is thereby involved.
Question resolved in the affirmative.
Bill read a second time, and passed through its remaining stages without amendment or debate.
– I move-
That the bill be now read a second time.
This measure is similar to that of which the Senate has just disposed.
In 1927, Parliament approved of a special grant to Western Australia of £300,000 a year for five years from the 1st July, 1926. That grant expired on the 30th June last.
The Premier of Western Australia recently asked that the grant be extended, and also that it be increased to £450,000. The whole question was referred to the Public Accounts Committee for inquiry, under terms of reference similar to those for South Australia and Tasmania. The Government of Western Australia prepared a case for the Public Accounts Committee, but owing to the pressure of otherbusiness it was found impossible for the Governments of Western Australia and the Commonwealth to present detailed evidence to the Public Accounts Committee in sufficient time to enable the inquiry and report to be completed for the budget.
The Commonwealth Government, therefore, proposes that the existing grant of £300,000 shall be continued for the present year. The purpose of the bill is to enable Parliament to approve of this arrangement, and to provide a grant of £300,000 to Western Australia for the year 1930-31.
Before the year is closed the Commonwealth Government proposes that the position of Western Australia shall be fully examined, and that the question of further assistance shall be dealt with in connexion with the budget for 1932-33. lt appears to me from the . remarks of honorable senators that at last some of them are in favour pf wiping out State Governments, and making the Federal Government responsible for the conduct of the affairs of this country. If such a position were brought about, we should have no complaints regarding the treatment meted out to the smaller States; parish pump conditions would cease to exist, and one State would not be grumbling because another State with greater productive capacity was in slightly better circumstances. The people, through this Commonwealth Parliament, would then be in the position of tho father to the family; each child would be treated alike, and guided wisely and well. That is the sentiment that seems to prevail in the minds of some honorable senators to-day, and I am in total agreement with it. I am an Australian, and, as such, I have no time for State quibbles.
– The honorable senator is introducing an utterly foreign subject into the debate, and I must ask him to confine his remarks to the bill before the Senate.
– The Leader of the Opposition (Senator Pearce) introduced this subject, and it was also dealt with by other honorable senators.
– The debate during which that subject was raised has been closed.
Senator Sir GEORGE PEARCE (Western Australia) [12.23]. - I am sorry that my remarks have been misrepresented. I am certainly not an advocate of unification. I accept this bill, not as a step in the direction of unification, but as a part of the obligations of the Commonwealth to assist necessitous States. My remarks on the previous bill apply to this measure, and I, therefore, have pleasure in supporting it.
.- This bill is a further effort on the part of the Commonwealth Government to do justice to Western Australia. I support it, although I consider that the word “ grant “ has been badly chosen. I prefer the use of the word “ reparations”.
– Why not the word “ gift “?
– Western Australia wants not a gift but justice. When the Treaty of Versailles was framed, the word “ reparations “ was used because it was thought that no other word in the English language fully met the necessities of the situation. The phrase “ reparations for losses incurred “ was adopted and this bill provides for reparations for losses incurred by Western Australia under federation. In 1925-26 a commission representative of the Eastern States was appointed to inquire into the position of Western Australia, and its report was to the- effect that that State had been badly treated. The members of that committee were Messrs. Higgs, Mills and Entwistle. The majority of the commission urged that an amount of, not £300,000 as at present proposed, but £450,000 as asked for by the Premier of Western Australia, be given to that State until such time as it obtained the absolute control of its own customs and excise, on the ground that the fiscal policy of Australia was calculated not to help, but rather to hinder and hamper that State at every turn. The least favourable report was that of Commissioner Mills, who recommended that Western Australia be given £300,000 a year for ten years commencing on the 1st July, 1924. Under the Surplus Revenue Act of 1910 Western Australia, because of its exceptional position, was given a sum of £250,000 a year, dwindling at the rate of £10,000 a year for 25 years. I have obtained figures from the Treasury which show that the sum total of the payments to which Western Australia waa entitled to receive from 1925 onwards until the provisions of the 1910 act were exhausted, was £1,400,000. ‘ If we deduct that special grant of £1,400,000 from the sum of £3,000,000 which Commissioner Mills proposed should be given to Western Australia over a period of ten years, we find that there is a clear shortage of £1,600,000 in the payments to that State under the terms of the least favorable recommendation of the commission appointed in 1925-26.
– That commission recommended the continuation of the per capita grant as well.
– That was to continue. The commission recognized the fact that Western ‘Australia was justly entitled to reparations.
– The use of the word “ reparations “ by the honorable senator seems to suggest that the other States have been at war with Western Australia.
– I object to Western Australia continuing to be the beast of burden among the States. That State is now to be given ‘£300,000, but that sum should be increased by £1,600,000, if it is to receive any justice at all.
– The Commonwealth is hard up at the present time.
– Not because of its treatment of Western Australia, South Australia, and Tasmania. These States will continue to be chronic applicants for justice at the hands of the Commonwealth unless we alter our public policy. Mention has been made by Senator Daly of the taxation burdens which have been placed on the primary producers. Let me tell honorable senators that Western Australia would not be able to exist to-day were it not for its primary industries, mainly wheat, and wool. A committee of experts which was appointed to ascertain the extent of the burden placed upon primary production because of our protective policy, reported that the additional impost represented 14 per cent, of production. On that basis alone £1,000,000 in tribute is being drawn from Western Australia every year. The people of that State are not prepared to adopt the role of the lowly saints who, when one cheek was smitten, turned the other. Our protective policy is doing Western Australia a great deal of harm, and the old saying that an injury to one is an injury to all, can well be applied to Australia to-day.
Under our policy of protection the cities of Sydney and Melbourne are being swollen at the expense of the country districts, which are being correspondingly impoverished. As Professor Spragg and other experts have said, until we can maintain a proper equilibrium as between secondary and primary industries, we shall never reach a satisfactory position. I admit that the people of Western Australia have at times, in their blindness, elected protectionists to this Parliament, who have supported the imposition of a duty of 45 per cent, on mining machinery. Valuable mining plant in Western Australia is lying idle and mines containing 6, 8 or 10 dwts. of gold are not being worked, owing largely to the imposition of a duty of 45 per cent, on mining machinery. The Castlemaine Engineering Works, in Victoria, which manufactured large quantities of mining plant for the Great Boulder mine under a tariff of 25 per cent, are now enjoying the benefit of a 45 per cent, tariff; but there will always be idle manufacturing plants in the east, and rusting mining machinery in the west while we maintain the present unequal balance between primary and secondary industries. At present some industries arereceiving a decided advantage over others, and the primary producers in particular are being crushed in a most unreasonable manner. If industry is to prosper a proper equilibrium must be maintained. I support the bill. ‘
– In supporting this measure I desire to point out that Commonwealth grants to Western Australia have been only two-thirds of the amount recommended by the royal commission on the finances of Western Australia as affected by federation - an independent tribunal - the report of which was presented to Parliament on the 23rd of September, 1925. That was before some honorable senators, now present were elected to this chamber. The chairman of that commission was Mr. W. G. Higgs, who for many years represented a Queensland constituency in another place, and who was for a time Treasurer of the Commonwealth. His colleagues were Mr. Mills, of Melbourne, and Mr. Entwistle, of South Australia. In their recommendations, the ‘ chairman and Mr. Commissioner Entwistle said -
That whatever benefit the Commonwealth protectionist policy may have conferred upon other States of the Commonwealth, ithas not benefited the State of Western Australia; that it is impossible to give the primary producers of Western Australia relief by the way of reduced customs duties without injuring the secondary industries of the eastern States; and that the only effective means of removing the chief disability of the State is to restore to the State for a period of years the absolute control of its own customs and excise.
A further recommendation by those two Commissioners reads -
That the State of Western Australia shall during a period of 25 years, and thereafter until the Parliament otherwise provides, have the absolute right -
To impose its own customs tariff as in pro-federation days, provided the State of Western Australia shall not impose higher duties upon the importation into the State of Western Australia of any goods produced or manufactured in or imported from the other States of Australia than are imposed on that importation into the State ofWestern Autsralia of the like - goods produced or manufactured in or imported from other countries.
Effect has never beengiven to that recommendation, which would necessitate an amendment of the Constitution, but it provides a way in which this Parliament could afford some relief. The chairman and Mr. Commissioner Entwistle made the following recommendation consequent upon their first recommendation: -
That until the State of Western Australia is granted the right to impose its own customs and excise tariff, the Commonwealth shall pay to the State a special grant of £450,000 per annum, in addition to the 25s. per capita payment made in accordance with clause 4 of the SurplusRevenue Act of 1910, the aforesaid special payment to include the special annual payment now being made to the State of Western Australia in accordance with clause 5 of the said act. The above special payment of £450,000 to commence on the1st July, 1924.
A special grant to Western Australia was paid a year later; but the amount paid for the last five years has been only £300,000 a year. I merely wish to place on record the fact that Western Australia has received from this and preceding governments only two-thirds of the amount recommended by an independent tribunal.
– I have a rooted aversion to financial grants being made by the Commonwealth to assist State Governments, because I think that the necessity for such grants is brought about in most cases by the maladministration of the governments seeking assistance. Senator Foll referred to the mistakes that had been made in South Australia in connexion with its railway policy, and I think that similar mistakes have been made in Tasmania’. As far as Western Australia is concerned, I may say that in passing through Perth in 1917 I met one of its leading citizens who said that Western Australia had been brought to a state of ruin by the action of the Government then in power - I do not know its political brand - and that it would take the State fifteen years to recover. Queeusland, by reason of its extravagant railway policy, might easily be a mendicant State, but up to the present has been able to avoid the necessity of approaching the federal authority for financial assistance. I mention these matters because the basis of these requests is the mistakes of the past. I am not opposing the bill; but I trust that in future there will be no necessity for similar requests to be made.
Question resolved in the affirmative.
Bill read a secondtime and passed through its remaining stages without amendment or debate.
Senator BARNES (Victoria - Vice-
President of the Executive Council) [12.40].- I move-
That the bill be now read a second time.
Sub-clause 4 of the bill provides that an officer may appeal to an appeal board against punishment imposed upon him by a chief officer. Sub-clause 5 prescribes how the Appeal Board shall be constituted, and provides that there shall be a permanent chairman who shall be an officer of the Service who shall possess the qualifications of a stipendiary or police magistrate. When the principal act became operative, two appointments as chairman were made, one with headquarters in Sydney, to function for New South Wales and Queensland, and the other with head-quarters in Melbourne, Whose duty it was to function in Victoria, South Australia, Western Australia and Tasmania. The salary of a chairman is £612-£684 per annum. Recently the chairman of the Appeal Board, whose head-quarters wore in Melbourne, retired. Owing to the long distance to be traversed, and the time involved, it would be impracticable for one chairman to deal with the whole of the appeals against punishments throughout the Commonwealth. Any attempt to provide for such appeals to be heard by one official would only result in the time for hearing appeals being unduly prolonged, and officers remaining under suspension for excessive periods with consequent hardship upon themselves and inconvenience to departments. On the ground of economy it is not proposed to fill the existing vacancy by a permanent salaried officer, but to arrange that in each State in which the retired officer functioned an officer or an ex-officer of the State Service, with the qualifications of a stipendiary or police magistrate, shall act as chairman of local appeal boards, as occasion requires, with remuneration by way of a daily fee for the actual time he is engaged upon the hearing of appeals. Until sub-clause 5 is amended, as proposed, it is impossible to make this arrangement. The savings to be effected from the proposed alteration include (a) The difference between the daily fee to be paid to a chairman for the actual time occupied upon hearing appeals and the annual salary of a permanent chairman; (b) The fares and travelling allowance payable to a chairman stationed in Melbourne in connexion with the hearing of appeals in the other States.
Based upon the number of appeals heard in Victoria, South Australia, Western Australia and Tasmania in 1930, and assuming that the fee payable to the chairman will be £3 3s. a day, the following annual saving would have been effected had the new arrangement been in operation in 1930: -
In addition to the saving in expenditure, the new arrangement will have the effect of curtailing the time taken to bring punitive cases to finality. A chairman stationed at Melbourne who receives an appeal from an officer in Perth must necessarily fix a later date for hearing the appeal than if the appeal were to be heard in Melbourne as a visit to Perth to hear the appeal would be necessary. Again, if he has already arranged to hear an appeal in Tasmania, the date for the Perth appeal must be further advanced to meet his movements. Such delays extend the period during -which officers are under suspension - in many instances they receive salary while off duty-and also prolongs the inconvenience caused to departments by the absence of the suspended officer. If there were a local chairman in each of the States the delays would be obviated.
The second amendment submitted is to ensure that a majority finding by an appeal board shall be effective. When one of the three members of the Appeal Board submits a minority report disagreeing with the finding of the other members the majority report is to be accepted. In Commonwealth acts where it is intended that a decision by majority shall be binding a provision is usually inserted to that effect, for instance, in section 23 of the Judiciary Act. It is, therefore, desirable to insert a provision on similar lines in section 55 of the Commonwealth Public Service Act.
Question resolved in the affirmative.
Bill read a second time, and reported from committee without amendment or debate; report adopted.
Standing and Sessional Orders suspended, and bill read a third time:
Sitting suspended from 12.45 to 2.15 p.m.
Senator BARNES (Victoria - Vice-
President of the Executive Council) [2.17].- Imove-
That the bill be now read a second time.
The objects of this bill are (a) to give ‘ effect to the announcement in the budget speech that the general exemption of incomes from personal exertion would be reduced from £300, diminishing by £1 for every £3 of the excess over £300, to £250, diminishing by £1 for every £2 of the excess over £250; and (b) to remedy a few defects in the act which have been disclosed either as a result of a judgment of the court, or as the result of recent experience in the administration of the law.
The proposals contained in the budget announcement need no further explanation. The bill is also designed to overcome the effect of a decision of the High Court relating to the calculation of rebates of tax on dividends. The principle of company taxation, introduced in 1923, was that a company should be taxed at a relatively small rate upon the whole of its income, and that a shareholder receiving a dividend out of income so taxed should obtain a rebate of tax at his own rate, or the company’s rate, whichever was the less, on so much of the dividend as was included in his taxable income. To discover the part of any dividend included in the shareholder’s taxable income, the department deducted from the full amount of the dividend any of the allowable deductions which were properly attributable to it. In the recent case of Douglass v. The Commissioner of Taxation, the High Court held, in effect, that the part of a dividend which is included in a shareholder’s taxable income is the whole of that dividend. Parliament intended merely to prevent double taxation, and in limiting the rebate to the net amount of dividends on which a shareholder is taxed, calculated on the departmental formula, double taxation is avoided. The decision of the High Court goes further than is necessary to prevent double taxation, and is .to that extent a negation of the principle of company taxation adopted in 1923. It is, therefore, considered necessary to insert a provision to give effect to the original intention of Parliament, and to ratify the departmental practice which has obtained since 1923.
It is also proposed to exclude the special tax on property income from the calculation of rebates of tax on dividends. The provisions dealing with rebates on dividends were drafted in the expectation that they should relate only to the normal rates of tax payable by companies and shareholders. “Where a company pays the special tax on its income from property, the shareholder is specifically exempted under the rates act from that special tax, when he receives a dividend paid by the company out of that income. Hence, there is no need to provide for any rebate of that special tax. If the law were not amended as proposed, it would be open to a shareholder to claim a rebate, not only of his normal tax on any dividend received by him, but also of the special tas on property income for which he is liable in respect of that dividend. ThiB position would, to a large extent, defeat the purpose of the special tax on property income.
In clause 4 of the bill it is proposed to indemnify companies against liability for additional tax on interest paid to absentee debenture holders and depositors where such tax is imposed after the debentures are redeemed, or the deposits are with drawn.- This proposal is inserted as the result of representations made on behalf of the various banks. Every company, in addition to being liable to pay tax on its own taxable income, is liable to pay tax at the ordinary company rate upon all interest paid or credited to absentee depositors or debenture-holders. In the case of banks, withdrawals of deposits by absentees are of common occurrence. When such withdrawals take place, it is necessary to retain out of the principal and interest payable to the absentee an amount sufficient to meet the tax on all interest paid to the absentee, which has not been assessed at the time of the withdrawal. As a bank, in such a case, is unaware of the rate of tax which will he subsequently imposed on such interest, it has no option but to retain an amount based on the rate of tax in force when the deposit is withdrawn. If the rate subsequently imposed is higher than the rate in force when the deposit is withdrawn, the bank is compelled to pay the additional tax out of its own funds. This position, arises in connexion with the increase of 5 per cent, in the rates proposed for the present financial year.
Clause 5 entitles a married woman or a widow to make deductions of life insurance premiums, superannuation payments and medical and funeral expenses paid in respect of herself, husband and family. This provision will remove an obvious injustice. Precedents for the amendmentare to be found in the income tax laws of the United Kingdom and of New South Wales. The intention is to place a woman who maintains a home and family on the same basis as her husband would be if he were performing those duties.
Authority is taken in clause 7 to ratify arrangements which it has been found necessary to make for the effective collection of tax on premiums paid to Lloyd’s insurances. It was considered inequitable that” income derived by Australian insurance companies should be subject to income tax, whereas income derived from insurance premiums by Lloyd’s, who have no offices in Australia, and who pay no’ rent, rates, taxes or duties in Australia, should be exempt from income tax. The provision which waa made last year to deal with the position - section 28b of the principal act - was associated with another provision which prohibited a deduction of premiums paid by any taxpayer to any insurance company which did not carry on business in Australia in a principal office, or by means of a branch, or through any other representative empowered to receive and deal with premiums. The second provision was precautionary, and was inserted because of the doubts existing as to the effectiveness of the provision to tax premiums paid to Lloyd’s. The literal effect of the two provisions was to impose double taxation, i.e., by taxing the premiums in the hands of the insurer, and disallowing a deduction of the premiums in the assessment of the insured. Since the proposals were inserted in the act, certain difficulties have arisen which have proved to be practically insuperable in the absence of further legislation ; and negotiations have been taking place practically continuously for the past twelve months between the department and the underwriters and insurance brokers concerned with a view to solving the difficulties. The negotiations have shown that the only possible method of collecting the tax on premiums paid on Lloyd’s insurances is to arrange for its deduction at the source at the time such premiums are paid, and for the furnishing of annual returns of tax so deducted. Both the committee of underwriters at Lloyd’s and the insurance brokers at Lloyd’s, who are carrying on business, in Australia, have undertaken to pay the tax on that basis, and, in fact, they have actually deducted tax on all premiums received during the financial year 1930-31 at the rate in force for that year. As the law stands, the rate of tax applicable to such premiums will be the rate imposed by the Income Tax Act ]931, which has not yet been passed. In order to give effect to the arrangements mentioned, it will be necessary to authorize the assessment of premiums paid to Lloyd’s at the rate in force at the time of payment of the premium. This is effected by the additional sub-section to section 28b, inserted by clause 7 of the bill.
Part of the arrangement which has been made is that the Australian resident who pays the premium upon which tax is payable, will be furnished with a cer- tificate to the effect that tax has been deducted from the premiums so paid, and that such resident, by furnishing that certificate with his annual return, will be entitled to a deduction in respect of the premiums upon which tax has been paid. To give effect to that part of the arrangement, it is necessary to amend the second proviso to section 23 (1) a to permit of a deduction in respect cif premiums paid to Lloyd’s in any case in which arrangements to the satisfaction of the commissioner have been made for the payment of tax on those premiums. This is provided for in amendment a of clause 5 of the bill.
It is practically impossible to make any brief explanation of the difficulties associated with taxation of premiums paid to Lloyd’s but it may be mentioned that they aro not due to any unwillingness on the part of tho underwriters at Lloyd’s to pay the tax. The difficulties mentioned are associated with the peculiarity of the organization at Lloyd’s, one of the features of which is that practically every policy is taken up by a different set of underwriters, with the result that the premiums paid under each policy represent income derived by a legal entity - a company within the meaning of the definition prescribed - which is distinct and separate from the legal entity deriving premiums under any other policy.
It is proposed to enable holding companies which are liable to pay the special tax on property incomes, to deduct the special tax from preference dividends paid out. of the income so taxed. The incidence of the special tax on property incomes hat been somewhat inequitable in the case of certain classes of holding companies. The effect of the tax is that when a company distributes its profits to a holding company, the holding company is liable to pay the full amount of the tax - at present ls. 6d. in the £1 ; as proposed, 2s. in the £1. When the holding company has preference shareholders, it is under a contractual obligation to pay a dividend of a fixed percentage to such shareholders. Consequently, in the absence of any special legislative provision, the special tax which any such company is liable to pay on its income from property is payable only out of the balance of its profits remaining after the payment of the preference dividend. The result is that the full burden of the special tax on income from property is borne by the ordinary shareholders of the company. The object of the amendment proposed in this bill is to enable any such company to deduct from dividends payable to its preference shareholders the amount of the special tax payable by it on its property income out of which it pays dividends to preference shareholders.
The purpose of clause 10 is to prevent mortgagees passing on to mortgagors income tax payable in respect of interest received under mortgages. -Many existing mortgages contain provisions which have the effect of imposing on the mortgagor a liability to pay income tax on the interest payable to the mortgagee. A provision to prevent mortgagees from so passing on their income tax was inserted at the inception of the Commonwealth Income Tax in 1915, but the provision was more or less rendered ineffective by a decision of the High Court in the case of Brett v. Barr-Smith. That decision showed that a mortgagee could avoid the provision by simply stipulating for a high rate of interest subject to a reduction on prompt payment to a lower rate to be fixed by reference to the amount of income tax payable in respect of the mortgage interest. No steps were taken to overcome the High Court’s decision until last year, when there were certain indications that mortgagees who had not previously been exercising their rights to pass on income tax to mortgagors would do so for the purpose of passing on the special tax on property income. To prevent this, a provision was inserted in the second of the amending act3 of last year, which made void any provision in a mortgage deed having the effect of including in, or adding to, any interest payable by the mortgagor, the income tax payable on the mortgage interest. Since then cases’ have arisen which show that last year’s amendment did not go far enough. One means of avoiding its effects is to include the stipulation as to payment of the mort.gagee’s income tax in some document or other instrument which is not a part of the mortgage deed.
Another weakness of the provision as it stands is that when the rate of interest fixed by the mortgage is reducible upon prompt payment to a lower rate to be calculated by reference to income tax payable on the mortgage interest, the interest payable by the mortgagor is technically the interest at the higher rate, and, therefore, it cannot be said that the provisions of the mortgage have the effect of including in or adding to that interest any income tax payable by the mortgagee. The two weaknesses mentioned are dealt with by an extension of the definition of mortgage to include any collateral or supplementary agreement, and by the insertion of an additional sub-section in section 94 to provide for cases in which the mortgage interest is reducible by reference to the income tax payable by the mortgagee.
The purpose of this bill is to prevent double tax from being imposed on certain people, and to amend the act in a way which experience has shown is necessary in order that the tax may apply more equitably in certain directions.
Senator Sir GEORGE PEARCE (Western Australia) [2.35].- The first of the two points upon which I shall touch at this stage is the matter of avoiding double taxation referred to by the Minister. There is evidently grave doubt whether this bill will accomplish that end, as shown by the following telegram which I have received from Senator Greene : -
Income tax bill, clause 3, sub-clause- 2, provides exclusion rebates respect of special flat rate in cases where income from property tax first paid by company and then passes to shareholders (Stop) This means same income doubly taxed (Stop) In cases of hold-‘ ing companies and subsidiary companies treble and quadruple taxation possible (Stop) Please do what you can.
Before we deal with the bill in committee I hope that the Government will consider whether Senator Greene’s criticism is justified.
The second point upon which I wish to touch at this stage is the matter of deductions from income, for federal income taxation, purposes, of amounts paid by taxpayers in respect of State income tax, which has always been a feature of Commonwealth income tax legislation. In some of the States a new form of tax has recently been collected under the name of Unemployment Relief
Tax, and I understand that the decision of the Federal Income Tax Commissioner is that no deduction from federal income tax can be made in respect of unemployment relief tax payable under State legislation. Recently I had occasion to fill in an assessment form for the unemployment relief tax in one State. It was exactly similar to the form I filled in for my income tax assessment, the only difference being in the name. If it is right that the ordinary State income tax should be deductable from the amount of income liable to income tax under the Commonwealth act, it seems to mo that it is also fair to allow a deduction in respect of State unemployment relief tax, and I urge upon the Government the desirability of making provision to enable this to be done.
Question resolved in the affirmative.
Bill read a second time.
Clause 1 agreed to.
Clause 2 (Definition).
.- If I understand the Minister clearly, this is the provision which will prevent mortgagees from prescribing conditions in their mortgages which compel the borrowers to pay the income tax for which the mortgagees arc liable on the earnings from the mortgages; and the means adopted is an extension of the definition of “ mortgage”, that it will include any documents which may be prepared in connexion with the same transaction. I do not know whether the Taxation Department, in drawing up this amendment, has taken into consideration the weakness of human nature, because it seems to me that the amendment will not overcome the difficulty. If the rate of income tax payable by a mortgagee on the income derived from loans on mortgage is one-quarter or one-half per cent., what is there to prevent him, when he is approached by a borrower, from adding to the interest rate one-quarter or one-half per cent, to represent the income tax payable by him ?
– The honorable senator’s remarks would be more appropriate on clause 10.
– That being so, I shall defer what I have to say until we reach that clause.
Clause agreed to.
Clause 3 (What is included in income).
– Strong representations have been made to me in regard to the effect of what the Government is doing under this clause, and in order to clarify the position, and get an authoritative statement upon it, I propose to quote portions of a letter forwarded to me by a gentleman in Sydney, who is a competent authority upon this class of legislation. The letter sets out that -
Section 20 (4), which has been in the acts since the commencement of federal income tax in1915 provides for the allowance, where the shareholder’s rate of tax exceeded the tax paid by the company, of the tax paid by the company on the whole of the dividend included in the shareholders’ assessable income. This section applies only to profits derived by companies up to the year ended the 30th June, 1922. There is no doubt that justice demands that the shareholder should be allowed a rebate of the whole of the tax which in effect the company has paid as his agent when the profits on which the company has paid tax are distributed to the shareholder and fall . again to be taxed. The commissioner’s amendment is taking part of this rebate from the taxpayer, and is entirely unwarranted. Besides the injustice of the proposed amendment, it leads to unnecessary complications, and puts the shareholder in a difficulty in checking his assessments. ‘
Then it proceeds to give an example, which is far too complicated to attempt to place before the committee. It goes on -
In view of the present financial position, much as retrospective legislation is to he deplored, I do not think that the amendment in so far as it validates what has already been done should be opposed, but I do think that it should be strictly limited to the past years, and the section as it stands at present, andas it has been interpreted by the High Court in the Douglass case should apply to future assessments.
The Prime Minister, in referring to the clause, said it had the effect of closing a loophole in the act, which permitted taxpayers to escape taxation. This statement is true inso far as it applies to paragraph (2) of the clause, but is entirely inaccurate if he intended it to apply to paragraph ( 1 ) of the clause, the effect of which is not to close loophole to avoidance of tax, but has, on the authority of the highest judicial tribunal in the land, the effect of working an injustice on taxpayers.
Section 20 of the act, complicated as it is, is deserving of the notice of the Minister. Sub-section 4 of that section provides that where a company has paid income tax on undistributed income, and the income in any year is subsequently distributed to a shareholder who is a taxpayer, he shall be entitled to a rebate. I must confess that, having discussed the matter with some of the experts of the Government, my mind is not yet clear on the matter, and I am not sure that justice is being done between the taxpayer and the nation. If £100 has been paid by a tax-paying company with respect to some dividend which is afterwards distributed, the taxpayer should have the benefit of that £100 - no more and no less. Iunderstand that.it is contended by the department that, in certain circumstances, he may have considerably more than £100 credited to him, which I think, is not intended by either branch of the legislature. I take it that the Government does not desire to engage in double taxation; but, on the judgment of the High Court, it would appear that would be the effect of leaving sub-section 4 of section 20 as it stands. It appears to me that we ought to insert a clarifying section to state that the taxpayer, in the circumstances that Ihave mentioned,, shall have the benefit of that amount of money - no more and no less - being credited to him. Although I understand that in some instances, tinder the present proposals, he may get the full amount credited to him, in other circumstances, ho may not. The difficulty has arisen, I think, owing to the very complex system of assessment that we have adopted. Paragraphs a and b of subsection 4 of section 20 are a little confusing, and have been given judicial effect by the High Court. If they stand, the judgment of the High Court necessarily controls the actions of the Commissioner of Taxation. On the other hand, I understand that if we allow the subsection to remain, the practical effect in regard to assessments made by the Commissioner may, in some instances, result in injustice being done to the Government. I submit that the Minister should endeavour to have the sub-section recast. I do not wish a taxpayer to receive creditfor one penny more than has actually been paid in tax with respect to the dividend that he has drawn. I have just had handed to me a telegram from an expert in another State who strongly objects to the retrospective aspect of the measure. The gentle man from whose letter I have just quoted, stated, on the other hand, that no strong objection could be taken to the retrospective nature of the bill. I should like the Minister, in reply, to deal with a concrete case. Suppose a man has had £100 paid on his behalf by a company of which he is a shareholder. Under this bill, would he be entitled to credit for the £100 which has been paid? That is the substance and gravamen of the objection taken to sub-clause 2 of the clause before the committee.
– I point out to Senator McLachlan that there is no fear of the position contemplated by the author of the telegram, which ho has read, arising. The Commissioner of Taxation and the draftsmen and experts consider that the provisions of this bill will prevent double taxation.
– Willit prevent the same income from being doubly taxed?
– Yes. That was the original intention, but owing to the decision of the High Court in the Douglass case, the Government found that the act did not express the intentions of Parliament and, therefore, the amendments embodied in this clause were brought down to prevent a taxpayer being doubly taxed with respect to the same income. I think that, on further consideration of the bill, Senator McLachlan will realize that it accomplishes what was intended.
– I am obliged to the Minister for his assurance ; but I still wish to know whether, when a man has received £100 by way of dividend, in respect of which tax has been paid, he is entitled under this clause to deduct the full amount of tax that has been paid by the company. I realize the difficulties that the Douglass case has created, and the need for the Government to remedy the position.
– Does the honorable senator refer to the second sub-clause?
– Yes. So far as the first sub-clause is concerned, I am content to let the Minister overcome the difficulty that has arisen because of the decision in the Douglass case; but I am afraid that an injustice may be done in another direction. It has been suggested to me that double taxation will occur in some cases, and my sole desire is to see abstract justice done. If the Minister will consider the clause further with his advisers, we may be able to meet the difficulty, and adopt a formula which will do what the Government wishes, and at the same time prevent injustice being done.
– The decision referred to by the Leader of the Government (Senator Barnes) related to the first sub-clause, and not to the second, which has been discussed by Senator McLachlan. The considered opinion of the draftsmen and the taxation authorities is that the second sub-clause is necessary to prevent the special tax on property incomes from being taken into account in calculating rebates on dividends paid out of profits upon which a company has paid tax. The rebate provisions of the principal act were designed to deal only with the normal rates of income tax payable by companies and shareholders, and they were not enacted in contemplation of the imposition of a special tax such as that imposed on property income last year. There is no need to provide for a rebate of the special tax, because where a company pays dividends out of property income, upon which it pays a special tax, the shareholder is specifically exempted from liability to pay special tax with respect to that dividend. Where a company pays dividends out of income upon which it is not liable to pay the special tax, all that is necessary to prevent double taxation is to rebate to shareholders the tax actually paid by the company upon the income out of which the dividends were paid, or if any shareholder’s ordinary rate of tax is less than the company’s, the particular rate of tax payable by the shareholder in respect of that dividend. The special tax on property income was deliberately intended to apply to dividends paid to shareholders out of the business profits of . the company. If the law were not amended as proposed, the shareholder, upon being assessed with a special tax, would be entitled to receive a rebate of that tax, and thus the imposition ofa special tax, so far as it applied to dividends, would be wholly negatived. The whole object of this amendment was to bring about equality of sacrifice in the matter of taxation in connexion with revenues collected by the Commonwealth.
– In thecase of a shareholder in a company deriving, say, £100 in income in the ordinary course of business, does not the act provide that that sum shall be brought to account in aggregating the income of a shareholder, therefore determining a higher rate of tax upon his own income?
– The honorable senator will realize that that point is covered by another section in the Income Tax Act. This clause seeks to protect the department against evasion of payment of the special tax by shareholders who receive dividends from a company. The amendment refers to incomes derived from dividends.
– Can the Minister give some information in regard to paragraph c of sub-clause 2?
– The same provision is in the present act.
– Are we to understand that ordinary income from business is to be regarded as income from property ?
– Certain words which were formerly in the principal act have been inserted in this new provision. Subject’ to the qualification that dividends should not evade the special tax, the law on this particular aspect of the subject remains unaltered.
– I am afraid that the Minister misunderstands me. I am desirous of obtaining an explanation in regard to paragraph 1. Section 16 of the Income Tax Assessment Act, which it is proposed to amend, gives a list of things which constitute the assessable income of a person liable to pay income tax. Paragraph b of sub-clause 1 deals with deductions allowable from the income derived from various sources, which are set out in subclause 2. It is proposed to insert a provision to cure the position which arises from the decision in the case of Douglass v. The Commissionerof Taxation. In curing that deficit - which we agree should bo cured, as regards the past - we should be certain that we shall not inflict an injustice upon those persons who will derive income from that source in the future. While we are willing to let the past go, and to allow the Government to retain the revenue which it received, - shall we say improperly - will not the language employed in sub-clause 1 debar a shareholder from getting credit for that which Parliament intended he should have credit for, namely, the amount paid on his behalf by the company?
– I thought I had made the position clear. Paragraph 1 of the amendment contained in the clause is designed to overcome the effect of the High Court’s decision in Douglass v. The Commissioner of Taxation. Where a company distributes income upon which it has paid tax, the shareholder is entitled to a rebate of the part of the dividend which is included in his taxable income. The High Court decided that the part of any dividend which is included in the shareholder’s taxable income is the whole of the dividend, provided his taxable income equals the amount of the dividend.” The department contends that the part of any dividend included in a shareholder’s taxable income is the part which remains after deducting from the full amount of the dividends any allowable deductions properly attributable to the dividend.
For instance, if a shareholder has an assessable income of £800 consisting of £400 interest and £400 dividend, and he is entitled to a deduction of £200 in respect of children maintained by him, his taxable income is £600, and the department contends that the part of the dividend which is included in that taxable income is £300, because one-half of the deduction of £200 for children is properly deductible from ‘ the £400 received from dividends. The effect of the High Court’s decision is that in such a case the whole of the £400 received from dividends is included in the shareholder’s taxable income. This means that the shareholder receives a rebate of tax on a part of the dividend upon which he does not actually pay tax. This result was not intended. In fact, an amendment of the rebate provisions of the principal act was made last year to ensure that that result should not be obtained. The whole purpose of the amendment is, therefore, merely to give effect to the clearly declared intention of Parliament.
The rights of the appellant in the case which was decided by the High Court are preserved by the provisions of clause 11.
– The Minister has supplied the information I desired. It is now evident that under this clause an injustice will be done to certain taxpayers. Let us take the case of a man with as income of £800, which includes £400 from dividends, on which taxation has already been paid by the company. According to the Minister’s explanation, he will get credit for the dividend tax on only £300. If. that is the departmental view, it appears that an injustice will be done to the taxpayer in respect of that £100 upon which he is allowed no rebate; he will be subjected to double taxation.
– If no deductions were allowable, he would still pay double tax.
– According to the explanation given by the Leader of the Senate, the taxpayer will be doubly taxed on £100 of his income.
– What about the man who has no children?
– I am concerned with the principle involved. It is not right that we should perpetuate an injustice. In this clause wo are going too far; we are doing more than was intended by the previous legislation introduced by the present Government. The position could be met if the Minister would reconsider this clause with a view to employing different language. In its anxiety to stop the leakmade evident in the Douglass case, the Government has gone too far. The Minister has admitted that double taxation will be paid in respect of £100.
– The Senate must look at this provision in the light of the law prior to the suggested alteration, and what will be the law if this legislation is placed on the statute-book. The Government having decided to tax property incomes it had to decide what, amount of revenue should be obtained from that source. In arriving at its conclusions, it had also to decide what deductions should be permitted. By this amendment the Government seeks to put into operation a fair system of deductions. A man without children is not entitled to the deductions which a man with children may make.
– A man without children should pay double taxation.
– If the Senate would agree to that principle, and it was acceptable to the Government, we might be able to relieve from the payment of taxationthat class of taxpayer in whom Senator McLachlan is so interested.
– All taxpayers suffer hardship under this legislation.
– All taxation imposes hardships. The principle underlying this proposal is that of deciding what deductions, if any, can be made from the gross income derived by a taxpayer from interest and dividends. The Government in this clause has provided that certain deductions may be made. It is not a question of paying double taxation, but of deciding whether we can allow greater deductions than the Government suggests in the bill.
– The real point is that in the case mentioned by the Leader of the Senate a rebate is granted in respect of only £300, not the full £400.
– In the case cited, the £200 would be divided between the two parties.
– That is unjust. When income tax legislation is under consideration, we have to consider what is a fair tax to impose upon certain incomes and classes of income. In addition, in order to provide as nearly as possible for equality of sacrifice, certain deductions are allowed in the case of taxpayers with dependent children. All this clause does is to distribute equitably the deductible allowances which the Government feels should be allowed.
– The Government’s proposal deprives certain taxpayers of the benefit of the tax paid on their behalf by companies.
– If the taxpayer mentioned in the case quoted by the Leader of the Senate had no children, he would pay on £400.
– He gets credit only for the tax paid on £300.
– Let us compare the position of a taxpayer with children and another without children. Senator McLachlan would not complain about the assessment in the case of a man without children; his complaint is with reference to a man with children, and I would point out that the Government has extended to that class of taxpayer the maximum relief possible in the form of deductible allowances.
– I think that the Minister is avoiding the issue.
– That is not so. The honorable senator is contending that, under this provision, a man with children would be paying into the Treasury a higher amount by way of income tax, assuming that his income was £400, as suggested by the Leader of the Opposition (Senator Pearce), and was distributed in the proportions suggested by him. This being so, we have to ascertain the maximum deduction that can be permitted. With all respect to Senator McLachlan, I think he has approached the consideration of this problem from the wrong angle. The section expresses the law as it existed prior to the decision in the Douglass case. The High Court considered that the language of the section did not express the intention of Parliament, and this proposal simply means that relief is to be given only to a certain class’ of taxpayer, because, unfortunately, the Government is not in a position to widen the field of deductions to the extent desired. The provision now before the committee has been fully considered, and, unless Parliament is prepared to give to the Government the revenue anticipated under it, the Commonwealth and other governments may find it difficult to give effect to the plan for the restoration of financial stability.
– It is obvious that the Government is not prepared to allow the full rebate in the case cited by tha Minister. If this stand is taken on the ground of financial emergency, we have nothing further to say about it; but in my view it is the introduction of a vicious principle of double taxation. I have no wish that any taxpayer should escape his just measure of taxation. My only concern is to avoid double taxation, and preserve the principle of justice in regard to deductions.
Clause agreed to.
Section proposed to be amended - 14 (1) The following incomes, revenues and funds shall be exempt from income tax.
.- I move -
That the following new clause be inserted: - “3a. Section 14 of the principal act is amended by inserting the following new paragraph: - (da) the income of the Hobart Savings Bank and the Launceston Bank for Savings ‘ “.
My object is to include the two savings bank institutions mentioned in the list of exemptions from the payment of income tax. Several organizations and institutions, notably friendly societies, benevolent institutions, and trade unions, are exempted under the principal act. The Hobart and Launceston savings banks are very deserving institutions. They were estab- lished over 85 years ago to enable persons of thrifty habits to place their savings on deposit and obtain some return by way of interest upon the amount standing to their credit. As they are not carried on for the purposeofprofit, they should be included in the list of exemptions. The only way in which they can dispose of any profit - I use that term advisedly - is to use it for the building up of the reserve fund.
– They are in the same position as a co-operative building society.
– They are not. The rate of interest payable on deposits is governed entirely by the profit earned, and it varies from time to time. It should be borne in mind also that the reserve fund is not distributed profits; it is a fund established for the sole purpose of ensuring the solvency of the institutions. As the depositors are taxed upon the income which they receive in the form of interest, the banks’ profits which, as I have stated, are employed for the building up of reserve funds, should be exempt. Taxation of these institutions under this bill would be double taxation, a principle to which the Senate is opposed. The position is clearly set out in the following communication from the manager of one of these banks : -
I believe you are fully aware of the position whereby these institutions arc taxed the same as ordinary companies, despite the fact that they are carrying out, in the interests of the community, similar functions to the State savings banks of the mainland States, which are exempt from the tax. Excepting for the reason that the exemption from income taxation is not specially provided for under the act, no logical reason can be given for the collection of the impost, and as the earnings of the banks will soon be most seriously affected under the provisions of the Commonwealth Debt Conversion Act 1931, and the coming State legislation intertwined therewith, it is most essential that, for the well- . being of the institutions which are performing a necessary public service in the interests of the people in the State, they should be placed on exactly the same footing as State institutions, seeing that they are such in all but name and control.
These banks are controlled by act of Parliament, which has been amended from time to time. The only salaries paid are to the staff, and the banks hold Commonwealth bonds to the amount of about £2,000,000.
– Upon which they are drawing interest.
– Which also they will have to convert at the lower rate of interest so that their future revenue from this source will be seriously diminished.
– Is not the building up of a reserve fund equivalent to the making of profits for personal gain?
– Certainly not. These banks have branches in various parts of the State. These are not companies; there are no shareholders.
– They are not State banks.
– The honorable senator is envious of their freedom from governmental interference. At the time of their establishment, no colony in Australia met the needs of the people in this respect. A dozen or more prominent gentleman in Tasmania, who were anxious to encourage industry and thrift among the people, did so in this way.
– The honorable senator must confine himself to the amendment.
– I am showing the value of these institutions to Australia. They were practically responsible for the colonies being placed in a position to expand and develop, and later to unite in a federation. The little colony of Tasmania not only pioneered the savings bank movement, but also, early in its history, saved the people of the colony of New South Wales from starvation and nakedness. Many of the best foundation stones of the Commonwealth were laid by it. I submit in all earnestness that my request is a fair one, and trust that it will be granted.
Senator BARNES (Victoria- VicePresident of the Executive Council)
Si.32]. - The circumstances related by e honorable senator are totally different from those that affect State savings banks. The latter institutions are created by and have the backing of the States, while the institutions which the honorable senator is trying to convince the Senate should be exempted from taxation were established by a number of individuals, and are backed up only by their strength. How, then, are they comparable with State savings banks, which are established for a specific pur pOSe, and which provide accommodation or governments at particularly favorable rates?
The proposal for the complete exemption of these banks was submitted in 1929, but was rejected on the ground that it was within the power of the State Parliament to pass legislation making them State savings banks. That action has not been taken. The Commonwealth could not be expected to lose the revenue that is involved. That view was particularly stressed to the Taxation Commissioner by the Attorney-General of the day (Mr. Latham). I hope that tho Senate will not seriously consider the amendment.
– The arguments of the Minister in opposition to the contention advanced by Senator Payne are quite unconvincing. To all intents and purpose’s, these institutions fulfil every requirement of a State savings bank. The Minister has expressed the view that they should be taken over by the State Government. At one time, there was a State savings bank in Tasmania, but it was absorbed by the Commonwealth. These institutions had then been in existence for 70 or 80 years. They cannot, by any stretch of imagination, be classed as companies ; yet, for the purposes of taxation, they are treated as though they were companies earning profits and paying dividends. Whatever objections the Minister may raise, are not founded on sound principles governing exemption from taxation.
– Are these institutions governed by trustees?
– They are governed by honorary trustees. Trustees have directed their operations for the last 70 or 80 years. They can be accurately described as penny savings banks, because their funds are contributed principally by small depositors, who are encouraged to be thrifty.
– What is done with the profits?
– They are placed in a reserve fund. It is ridiculous “ to contemplate the National Parliament being driven into the position of seeking revenue from such a miserable, pettifogging source. There is a great deal of merit in the amendment, and every reason why it should be agreed to.
Senator Sir GEORGE PEARCE (Western Australia) [3.38]. - I asked Senator Herbert Hays by way of interjection what became of the profits of these institutions, and understood him to say that there are no profits. If that be so, there is no taxation.
– The profits are miserably small.
Senator Sir GEORGE PEARCE.Taxation obviously can be imposed only on profits, because they represent the income of the bank. If there are profits, I cannot see any difference between these institutions and other private banks. Money can be placed on deposit in a private bank, and interest earned on it.
– The shareholders of private banks get the profits.
– If no profits are made by these institutions, they cannot be taxed. Therefore, we are merely beating the wind.
.- I shall endeavour to enlighten the Leader of the Opposition (Senator Pearce). Profits are made by these banks and are taxed in the hands of the depositors, because they are distributed by way of interest. A certain amount is used for the maintenance of the reserve fund, which is a nest-egg that ensures the solvency of these institutions.
– What is the amount of the reserve fund?
– That is governed entirely by legislative act. It has to be maintained at a certain figure. Should it exceed that amount, it must be reduced by an increase in the interest rate payable to the depositors.
– The amount paid by a company into a reserve fund is not taxable.
– If that be so, the Commonwealth Government has been guilty of imposing a double tax with respect to the profits of these institutions, because the depositors among whom those profits are distributed by way of interest have to include such receipts in their income tax returns.
– Profits are taxable only when they are distributed among shareholders.
– There are no shareholders iti these institutions; yet they are taxed as banks, and any individual depositors who are liable to federal taxation must pay on the amount received by way of interest. I have been a depositor in one of these institutions since I was ten years of age. The £2 or £3 that I receive annually by way of interest I include in my return, and pay upon it whatever rate is imposed.
– Are the interest rates limited, or are they the same as those paid by State savings banks?
– They have ranged from 3£ per cent, to 5 per cent, during my lifetime. Recently, the rate has been 4 per cent, or 4J per cent. These institutions accept fixed deposits for not longer than twelve months, and pay interest at the rate of 4£ or 5 per cent.
– Does the honorable senator consider that a provision such as he proposes to insert is within the power of the Commonwealth to enact! Would it not mean discrimination in favour of Tasmania?
– No. The Leader of the Senate (Senator Barnes) questioned my statement that the functions of these banks are similar to those of State savings banks. I assure him that they are identical. The honorable gentleman also said that they ought to have been taken over by the State. The Stats recognizes the magnificent work they have done, and knows full well that they are operating the principles of savings banks much more effectively than could any State instrumentality. That is proved by the experience of the last 85 years. They have never been so situated that they could not meet their commitments with their depositors. They are splendid institutions, the sole idea of their controllers being to do the best that they c&a for a particular section of the community which frequently needs encouragement.
– I am surprised that the Government should prove so hard-hearted in regard to this modest proposal. 1 cannot understand its attitude. I am aghast at its unwillingness to reach out and embrace it eagerly, because it is perfectly in consonance with that plank of the platform of the Labour party which stresses the necessity for establishing a self-reliant Australia. If language hat any meaning, that doctrine embraces what has been done by these institutions during the last 80 years. When it ia a case of protecting the claims of those entrusted with the control of these institutions, the Government proposes to disregard them. The trustees of these institutions could be employed in selfish pursuits instead of successfully conducting the management of these banking institutions, without charge, for the benefit of the Tasmanian people. They are setting an example to the rest of Australia. Instead of assisting those who are making a sacrifice by denying themselves of opportunities of personal gain and home comforts, we are penalizing them. If they are entitled to the punishment which is to be inflicted upon them, it is a wonder that some provision has not been made in the criminal code to meet their case. Indirectly, we are punishing men who have manifested a fine public spirit. This affords the Government an opportunity to give effect to one of the planks of its platform, and to assist in establishing a self-reliant nation. A gentleman named Bradman has displayed his marvellous powers in the world of sport, and what we need in this country is the manifestation of a desire on the part of the Government to assist the Bradmans of our banking institutions. We need the Bradman stroke in finance and industry as well as on the cricket field. It would be as much appreciated in that sphere as it is in the realm of sport. This hardened old sinner of a government apparently has no bowels of compassion for Tasmania. It will extend its protection of governmental institutions; but it will not afford any assistance to similar institutions which are not under government control. As the trustees of these institutions are not paid for their services, they warrant the support of this Parliament. I am astonished that this Government should decline to accept the request submitted by Senator Payne. By so doing it is missing a fine opportunity to give effect to one of the planks of the Labour party’s platform.
– I trust that the committee will be consistent in dealing with this amendment of our income tax legislation. We should not overlook the two aspects of the . principle with which we are now considering, and which were dealt with a few months ago. We should not deal with this subject with the levity displayed by Senator Lynch, who referred to the necessity of the Government adopting the Bradman stroke in matters of finance. Some honorable senators opposite have gained distinction in the law, and I respectfully bespeak the opinion of those honorable senators that the amendment is unconstitutional. We cannot insert a provision in Commonwealth legislation which discriminates as between States.
– There would be no need to mention the names of the banks.
– That is exactly the position that I should like Senator
Lynch to consider. We should have to include among the exemptions the class of banks to be covered.
– That suggestion it made by a member of the legal fraternity.
– The qualifications which I possess were, perhaps responsible to some extent, for my election to this chamber, and it is my duty to use those qualifications to tho best of my ability in the interests of this country.
– Where would there be discrimination as between the States if the amendment were adopted?
– The honorable senator has moved to insert a provision, which must be read in conjunction with the provisions, of the principal act, under which he proposes to exempt the Hobart Savings Bank and the Launceston Bank for Savings.
– lt would not involve discrimination as between States.
– If the provision were inserted, and tested before the High Court, that body would simply have to deal with these particular savings banks as a class. It would be shown that there was discrimination as between certain classes of savings banks operating in Tasmania, and State savings banks operating in other parts of the Commonwealth.
– I am surprised at the Assistant Minister’s contention.
– The honorable senator should realize that there is very little distinction between the Hobart Savings Bank and the Launceston Bank for Savings and co-operative societies known as investment societies, into the funds of which, say, 5s. a month is contributed, and on which interest and principal are paid at the end of a specified period. The depositors in savings banks receive the full return resulting from the utilization of the capital employed in those institutions. The honorable senator should read the provision in the principal act with respect to friendly societies, which is to the effect that the exemption applies to the income of societies registered under the Friendly Societies Act of the Commonwealth or of a State which are not carried on for the purpose of profit or gain te their individual members. Senator
Payne, who admits that profits are made by these banks, suggests that there is discrimination as between them and friendly societies.
– Income tax is paid on the profits.
– Income taxation is paid on the interest on deposits in other savingsbanks.
– We are not complaining of that.
– What is the honorable senator’s complaint ?
– Of taxation being levied on money paid into reserves.
– As was pointed out by the Leader of the Opposition, no income tax will be payable if the profits are not distributed.
– I think the Assistant Minister is wrong.
– I merely accepted the interpretation of the Leader of the Opposition.
– If the profits are divided amongt the depositors, income taxation will be paid in the ordinary way, but if they are placed to reserves taxation should not be payable.
– Assuming that the amendment is intra vires the powers of this Parliament, and the profits are placed to reserves, presumably the depositors are the owners of the reserves.
– The profits are held in reserve.
– For whom?
– The trustees.
– Who are the beneficaries?
– The depositors.
– Then what is the difference between institutions of the class under consideration and co-operative buildings societies?
– No principle is involved.
– The principle is contained in the section which provides that the income of a friendly society, when once it earns profits, even if those profits are held in trust for the members of the friendly society, have to bear income tax. If the profits made by a friendly society are for the benefit or gain of its individual members, it is liable to income tax. Supposing that the Hobart Savings Bank and the Launceston Bank for Savings decided to cease operations and distributed their reserves. Who would receive the money?
– The depositors, and they would then have to pay income tax.
– The honorable senator suggests that the profits placed to reserves, which then become capital, should not be liable to income taxation
– What would happen if a friendly society went into liquidation ?
– It would not be liable to income taxation.
– The members would.
– The profits of friendly societies are not available for the benefit of individual members. Under the law of a State, it may be rendered possible for a society to assume a somewhat abnormal character, in which event it would be liable for income tax. Trades unions registered under the law of the Commonwealth or of a State are expressly precluded from earning profits. If we feel disposed to accept this amendment we have to consider whether it is within our legislative powers.
– The Assistant Minister is partly abandoning that point.
– No. If we are to have a first-class legal discussion, I could quote the case of Cameron v. Commonwealth, 32 C.L.R., and give the judgment of Chief Justice Knox, which is on page 72. I could also quote the judgment of Mr. Justice Isaacs in the Barger case.
– That is not a parallel case.
– Of course it is not That is a matter of discrimination between localities. Senator Payne wishes to include in the exemptions two semiprivate banking institutions.
– We can do that without discriminating as between the States.
– If the Senate desires to do what is suggested by Senator Payne we shall be obliged to introduce into our income tax legislation a new class of taxpayer. If a new class of exemption was provided in respect of savings banks, the legislation could not be made definite enough to exclude co-operative building societies and co-operative investment societies, and it would then be impossible for the Government to collect the revenue this legislation is expected to bring in.
– In what way are the Launceston and Hobart savings banks more co-operative than State savings banks ?
– It is all a matter of funds.
The CHAIRMAN (Senator Plain).The honorable senator has exhausted his time.
.- The honorable senator claims that my amendment would bo unconstitutional, in as much as it proposes to discriminate as between the States. As a layman, I contend that there can be no discrimination as between the States unless there is the same class of combined interests in the various States. I am not to be adjudged as defeated in a race unless I am a contestant; neither can it be said that when we are dealing with an institution which exists in one State only we are thereby discriminating between the States. There are no savings banks other than State savings banks in any other State hut Tasmania. There is no difference between a friendly society and a savings bank. The former provides means whereby the poorer section of the people may contribute weekly in order that they may have a fund out of which to pay for medical attendance or provide sick pay in time of sickness, or to pay for funeral expenses, and leave a small sum over for widows. The latter enables people, out of their savings, to accumulate sufficient to render them independent of assistance from the State. Both institutions have the highest ideals, yet the Government will not recognize savings banks as performing a useful social function.
– The Tasmanian Government rejected a proposal to exempt savings banks.
– I am dealing now with the Commonwealth legislation. I know that the Minister has a warm heart for the people who try to make ends meet or improve their positions. He would be the last to do anything to put a burden on that class of people who form the great bulk of savings bank depositors. For that reason I confidently appeal for his help.
Question - That the new clause be inserted (Senator Payne’s amendment) - put. The committee divided.
Question so resolved in the negative.
Proposed new clause negatived.
Clause 4 agreed to.
Clause 5 (Deductions).
– ‘Strong representations have been made to the Treasurer (Mr. Theodore) in regard to the operation of this clause on the levies that are being imposed by the Sales Tax Act. The position set out by those representations is as follows: -
Under the present rulings of the Commissioner a person who has been forced to meet the sales tax himself will have to pay income tax upon the sales tax, whilst a person in a trade, the circumstances of which enable him to pass the tax on, can avoid income tax on these amounts.
This is a clear instance of the tendency that “ to him who hath shall be given and from him that hath not shall be taken away, even the little that he hath,” for it imposes the income tax burden on the man who is forced to bear the sales tax burden, and relieves of income tax the man who has been able to relieve himself of the sales tax burden.
I do not know what reply was given, and I shall be glad to know the attitude of the Government on the point. There are, of course, two or three different classes of cases. Some are always able to get relief under the law as it stands. I am referring particularly to those who bear the sales tax themselves, and do not pass it on. Dealing with that class of persons, the body who communicated with the Treasurer said -
In regard to the third class of case, the taxpayer must include in his income tax return the actual sale price of the goods, and Is not entitled to any deduction in his income tax assessments in respect of sales tax absorbed by him, as the Income Tax Assessment Act does not permit the deduction. Persons in this class may overcome the position by endorsing their invoices that the price charged for the goods therein is net after deduction 2.439 per cent, discount and adding sales tax at21/2 per cent, on the discounted price. Provided this endorsement appears on all relevant Invoices, the taxpayer is entitled to deduct sales tax when ascertaining the total sales to be shown in his income tax return.
It seems to me that there is no protection for the persons in that third class.
– I was referring to the exemption clause. I want to know whether those persons who pay sales tax will be able to make deductions. According to the representations made by them, they will be penalized as compared with others. This clause provides that section 23 of the principal act is amended -
That relates to premiums paid in respect of insurance. There is nothing here which gives relief to that class of sales taxpayer who pays his own tax and does not pass it on specifically to the purchaser.
– Those taxpayers will get their deductions when they submit their returns. They will be amply protected.
Senator Sir GEORGE PEARCE (Western Australia) [4.17]. - Can the Minister explain why unemployed relief taxation is not an allowable deduction? I understand that it is a form of income tax.
Senator BARNES (Victoria- VicePresident of the Executive Council) such deductions. The unemployed relief tax operates differently in the several States. Apparently, there is no remedy.
– Are we to understand that if the clause otherwise provided there would be discrimination? In some States unemployment relief tax is regarded as income tax, but not in others. The amount payable under the Now South Wales legislation in relation to unemployment relief tax is more than either the State or the Federal income tax. In my own case, 1 paid about £28 10s. in State income tax, and about £31 for unemployed relief tax.
– The law provides only for deductions of income tax actually paid.
Clause agreed to.
Clause 6 agreed to.
Clause 7 (Income derived from insurance).
.- This clause applies particularly to that great institution of Lloyd’s, London, an institution which has wide ramifications throughout Australia with respect to marine and fire insurances. It has agents at different centres, particularly at Melbourne and Sydney, who employ a considerable number of persons. I understand that this company has not been taxed as have been companies doing business in Australia. If that is so, the time is ripe to rectify the anomaly. Indeed, I believe that Lloyd’s is willing to pay taxes, but that there has been some difficulty in arriving at a basis of assessment, because of the way in which Lloyd’s policies are issued. There are groups of signatories, and it is difficult to tax the premiums at the source. I understand that . the Government has been in communication with the representatives of Lloyd’s. Probably, some arrangement has been arrived at. In my opinion, the position could be met by obtaining returns from the agents, of whom there are not many in Australia ; there are only three in Sydney. I hope that the Government will arrive at a mutually satisfactory arrangement with the agents for Lloyd’s, so that while the revenue will be protected, Lloyd’s will not be driven out of business in Australia.
– The amendment will ratify the arrangements which have been made with the underwriters for the collection of income tax in respect of premiums paid on Lloyd’s insurances at the rates in force at the time the premiums are paid. Experience has shown that the only possible means of collecting income tax in respect of such premiums is that provided in the arrangements which have been made. The bill protects the revenue.
Clause agreed to.
Clause 8 agreed to.
After section 88 of the principal aci the following section is inserted: - 88a. Where a company is liable to pay, in addition to income tax payable at the rates fixed for companies, further income tax of a specified percentage of its taxable income which is derived . . .
.- I move-
That after the word “ company “, proposed new section 88a, the words “has paid or” be inserted.
The clause would then read “… Where a company has paid or is liable to pay . . . “.
– This is an important clause in that it seeks to mete out a measure of justice to taxpayers who derive income from various sources. I should like to see the provisions extended to embrace other forms of income than those from companies. Some sections of the community have, during recent years, suffered diminishing incomes, and soon it is probable that they will have no income left to tax. It may be wise to exempt certain callings altogether from taxation. The report of the Income Tax Commissioner for 1916-17, shows that in that year 42,000 farmers paid income tax, whereas his report for1927-28 indicates that only 14,000 farmers made incomes sufficiently high to be taxable. It is significant that whereas in 1918-19 there was a taxable income of £9,000,000, it had shrunk to £6,000,000 by 1927-28.
– They will probably have no taxable income this year.
– The point I wish to emphasize is that the number of farmers liable to pay income tax has fallen from 42.000 in 1916-17 to 14,000 in 1927-28.
SenatorO’Halloran. - Was not the exemption raised in the meantime?
– I believe it was raised by either £50 or £100. But would that make this startling difference? The taxable income fell from £9,000,000 to £6,000,000 in nine years. Those figures indicate that the taxable incomes of the farmers of Australia are gradually being reduced to vanishing point; and soon, without any statutory exemption, they will be exempt from the payment of taxes because they will have no incomes to tax. What is necessary is an alteration of public policy in order to give the farmers of Australia a chance to make incomes sufficiently high to be liable to income taxation.
– It appears to me that the Commonwealth is embarking on legislation which is not only dangerous from a constitutional point of view but also injurious to preference shareholders in companies. This clause provides that -
Where a company is liable to pay, in addition to income tax payable at the rates fixed for companies, further income tax of a specified percentage of its taxable income which is derived -
by way of interest, dividends, rents, or royalties, whether derived from personal exertion or from property; and
in the course of carrying on a business, where the income is of such a class that, if derived otherwise than in the course of carrying on a business, it would be income from property, the company may, notwithstanding anything contained in the memorandum or articles of association of the company, or in any other document or agreement, deduct from any dividends payable to the preference shareholders of the company an amount equivalent to that percentage of such portion of the dividends as is distributed out of the taxable income of the company which is so derived.
In this clause we are proposing to interfere with contracts between companies and their preference shareholders. That is exceedingly dangerous, and also unjust, because clearly the intention is to place upon the preference shareholders some part of the burden that has been levied on the company.Why should the preference shareholders be expected to bear this additional taxation?
– Why should ordinary shareholders bear it?
– Ordinary shareholders know that preference shareholders are in front of them in any distribution of profits. This legislation will have a very bad effect upon companies. I do not know what are the official figures with regard to the amount of revenue estimated to be derived from this source, but if the Government enforces this legislation, the effect upon some companies ‘ may be very serious. The interest return to preference shareholders is fixed. Suppose, for the sake of argument, that it is 6 per cent., and that, as a result of this enactment, a company returns to its preference shareholders only51/2 per cent. What will be the effect upon a company which is really living at the mercy of its preference shareholders? There is a considerable number in this position, I remind the Senate.As a rule, preference shareholders are covered by the assets of a company, although values have been depleted in recent years, and it is possible for them to imperil its very existence. Unless we have some further explanation from the Minister, I shall have to vote against the clause, because of its probable reaction upon companies.
– What does the honorable senator mean?
– It is well known to all that preference shareholders in many companies have received no dividends for a number of years, and it is within their power to take drastic action to safeguard their investment. To this end they may force a realization of a company’s assets and take their money out of the concern. Because of possible reactions of this nature, the Government should hesitate before it forces through the Senate any legislation which may disturb the operation of companies especially those concerns which may be at the mercy of their preference shareholders. In my own State preference shareholders in many companies have been without a dividend for five or six years.
– If they are not drawing dividends, they will hot be taxed under this measure.
– I am aware of that, but surely the honorable senator will admit that they are already sufficiently penalized, without being called upon to make further sacrifices. If the amount involved is not considerable, I urge the Minister to reconsider his attitude.
. - Ordinary shareholders are already taxed. The object of the proposed new section is to give companies which are required to pay the special tax on property income, the right to deduct from dividends paid to preference shareholders so much of that special tax as it has paid on income which has been distributed to preference shareholders. Under the existing law the whole burden of the special tax paid by a company on its property income falls upon the ordinary shareholders of the company, the reason being that as preference shareholders are entitled to dividends at a fixed rate out of available profit, the special tax on property income has to be wholly deducted from the remaining profits before any dividend can be distributed to ordinary shareholders. Examination of the clause, as drafted, shows that it does not give precise effect to the Government’s intention. It is, therefore, proposed to make it fully effective.
– I have been requested to urge the Government not to regard tribute received from mines, particularly coalmines, as royalties. The tribute system is the only way in which certain mines can be worked. The owners find the machinery, plant, &c., and pay all administration charges and, in order to avoid labour troubles, let tonnage on tribute to miners. This system has been in operation in Central Queensland for some years now, and it has given complete satisfaction to all concerned. These people now find, to their dismay, that tribute, which is only the ordinary profit of the mines, is treated as royalty under this section by the department. I have mentioned this matter before, and hope the Minister will see that this injustice is removed.
– I am afraid that the Leader of the Senate (Senator Barnes) does not understand the probable commercial result of this new provision, or realize that its constitutionality will be challenged. This interference by the Commonwealth in State contracts is going a little too far. I warn the Government that its repercussions may be serious and far-reaching in all States. I shall have to vote against the amendment.
Amendment agreed to.
– I move -
That the words “ to that percentage of such portion of the dividends as is distributed out of the taxable income of the company which is bo derived “, proposed new section SSa, paragraph (c), be left out with a view to insert in lieu thereof the words, “ to the amount of that further income tax which has been paid or is payable by the company upon taxable income which has been distributed to its preference shareholders “.
Representations have been made to the Government that the provision in the bill which authorizes a company to deduct from dividends payable to preference shareholders the special income tax of 10 per cent, which may be payable by the company on its income from property, out of which dividends to shareholders may be distributed, will not assist a company which has already distributed that particular income, because the provision in the bill does not permit the company to charge the tax against future dividends which may become payable to the company. The intention of the provision is to enable a company to recover the income tax from the preference shareholders. It is now realized that the pro vision is defective as disclosed by therepresentations. It is desired to remedy the defect. The amendment now proposed is submitted by the Crown Law Department as being effective to provide the desired remedy.
Amendment agreed to.
Clause, as amended, agreed to.
Clause 10 (Covenant by mortgagor to pay tax).
– I direct attention to what I consider would be an improvement in the drafting of this provision. The proposed new sub-section reads -
Where, in any mortgage, provision is made for the reduction of the rate or amount of interest in the event of prompt payment of the interest or in any other circumstances-
That is a common form of mortgage - and for the rate or amount of such reduction to be diminished by or in proportion to any amount of income tax payable by the mortgagee
That is the point which the Government wants to get at in this provision for a reduction of interest in the event of prompt payment, which is a good thing as between mortgagor and mortgagee - the portion of the provisions which provides for that diminution shall be void, and the reduction of the rate or amount of interest, shall take effect as if the portion of the provision which provides for that diminution had not been inserted.
Had the Government wished to “ trail its coat “ it could not have adopted mort effective means than this. It appears advisable to eliminate, as far as possible, all references to the reduction of the rates of interest, if promptly paid. The clause will not bring about the result expected.
– Provision has already been made to meet the point raised by the honorable senator.
– Two things are being hit at, and the attempt is being made to have them run side by side. One clearly is not within the ambit of the Commonwealth Parliament to legislate upon. The regulation of interest and of mortgages is purely a State matter.
.- To a certain extent this clause is unnecessary, and if enacted will have no effect whatever. It provides that where a mortgage prescribes a fixed rate of interest, to be diminished if paid by a certain date, and provision is made in the deed of mortgage that the diminution shall be in proportion to the amount of income tax payable by the mortgagee, the portion of the provision which provides for that -diminution shall be void. I did not know that such mortgages were in existence. But let us assume that this is a general practice. What is to prevent a lender from stipulating that the rate of interest payable by the borrower shall be in excess of the current rate to an extent that will cover the income tax that the lender will have to pay? If the taxation is equivalent to i per cent., and the current rate of interest is 6 per cent., what is to prevent the mortgagee from stipulating that 6-J per cent, shall be paid? No matter how we legislate, we cannot stop that practice, much as I deplore its existence. If we could prohibit certain obnoxious features in mortgage deeds, something would be gained. Cases have come under my notice of people who will take the last penny from an individual if that can be done legally under a deed of mortgage, and I have been appalled. But if I wished to take the last ounce of blood from some one that I had accommodated, and was determined not to pay taxation, I would see that the rate of interest which I charged covered everything.
Clause agreed to.
– I move -
That the following new clause be inserted: - “ 10a. The application of section 20 of the Commonwealth Debt Conversion Act 1931 shall extend to such Commonwealth treasury-bills issued to banks in Australia on or after the thirty-first day of July, 1931, as the Australian Loan .Council, constituted in pursuance of the schedule to the Financial Agreement Validation Act 1929, determines.”
This amendment is necessary to secure, with respect to interest on treasury-bills that are issued or renewed at reduced interest comparable with the reduced interest to be paid on converted stocks and bonds of Commonwealth loans, the same treatment in regard to the rate of income tax in the future as was accorded to loan interest by section 20 of the Commonwealth Debt Conversion Act 1931. On the 31st July, 1931, the Australian banks renewed Commonwealth treasury- bills in Australia for an amount of nearly £21,000,000. About two-thirds of those bills are held by the trading banks. On previous occasions treasury-bills have been discounted at the rate of 6 per cent., but on this occasion the banks were asked to discount them at 4 per cent., which is the rate provided in section 17 of the Commonwealth Debt Conversion Bill. The banks raised the question whether, if they discounted the bills at 4 per cent., they would enjoy the same privileges in regard to income tax that they would have enjoyed had the Commonwealth Debt Conversion Bill been in operation on the 31st July, 1931. When the matter was examined, it was found that, if that bill had been in operation on the 31st July, 1931, the banks would not have obtained any reduction of tax, because section 20, which fixes the maximum rate of income tax that may be imposed on interest on converted loans, does not apply to interest on treasury-bills. When the Commonwealth Debt Conversion Bill was being finalized, it was decided to deal fully with treasury-bills under section 17 of that act, and sub-section 2 of that section definitely states that the other provisions of the act shall not apply to treasury-bills. This differential treatment of interest on treasury-bills was unintentional. It was really intended that, if the banks discounted bills at the rate of 4 per cent., they should get special treatment similar to that accorded to interest on converted loans, so that they would not be subject to the special income tax on property income or to any increase in the rate of normal income tax above the rates in force in 1930-31. It is impracticable now to amend the Commonwealth Debt Conversion Act so as to meet the position; therefore, a suitable provision should be included in this measure. The Government considers that the Loan Council should be authorized to determine what classes of treasury-bills shall be accorded the beneficial treatment mentioned.
Proposed new clause agreed to.
Clause 11 (Commencement).
Senator Sir GEORGE PEARCE (Western Australia) [4.54]. - Sub-clause 1 reads -
The amendment effected by section 8 of this act, .except that part which is contained in paragraph 2 thereof, shall apply to assessments for the financial year beginning on the first day of July,- 1923, and all subsequent years:
Provided that the operation of that amendment shall not affect the rights of any person under a judgment obtained by him prior to the commencement of this act.
That iscapable of two explanations. The first is that the department has been acting in a certain way, and that there has been a case which has upset the practice that it has been following, and it does not wish to make refunds in accordance with the judgment. I have in mind the case of Douglass v. Commissioner of Taxation. If that is the meaning of the clause, well and good. But it may also mean that the department has become conscious of something that it might have done, which this measure will enable it to do, and proposes to rip up all assessments back to 1923. That would be manifestly unjust. I should like to know what is the real reason for the retrospecti vity.
.- The effect of sub-clause 1 will be to ratify the practice of the department in connexion, with the calculation of rebates to shareholders. That practice dates from the alteration in the principles of company taxation which was made by the Income Tax Assessment Act 1923. The proviso to the sub-clause will preserve the rights of the appellant in the case of Douglass v. Commissioner of Taxation.
Clause agreed to.
Title agreed to.
Bill reported with amendments; report adopted.
Bill read a third time.
Debate resumed from the 4th August (vide page 4883), on motion by Senator Barnes -
That the bill be now read a first time.
SenatorFOLL (Queensland) [4.59].– I rise merely to answer what I consider to be unfair charges, which were levelled against me yesterday by Senator Sampson in connexion with the position of the Royal Australian Navy. Had the honorable senator taken the trouble to read the speeches that I have made in the Senate on that subject, he would have seen that there was no question of my having indulged in cheap sneers at the expense of the Navy,, but that I simply endeavoured to show that the amount of money which we have at our disposal does not enable us to do justice to the Navy as a separate unit. I contended that it is unfair to attempt to conduct the Royal Australian Navy as a separate naval unit in its present semi-starved condition. 1 simply urged that an investigation should be conducted by the department to ascertain whether the Government is obtaining the value for the money it is expending in naval defence, or whether better results could be obtained by paying a subsidy to the British Government, as was done prior to the establishment of the Royal Australian Navy. Senator Sampson’s main objection appeared to be based upon my reference to the annual cruise of the vessels of the Royal Australian Navy in Victorian waters during cup week. My remarks were only of a jocular nature, and I was merely repeating what has frequently been said in the same spirit on numerous’ occasions. I listened to the honorable senator’s oration yesterday, in which he gave the history of the Australian Navy; but I was already fully aware of the great service that the Royal Australian Navy rendered to the Empire during the Great War. It is unnecessary for me to read a volume published fifteen years after the war to realize the value of the work of the Australian Navy, not only to the Commonwealth, but also to the Empire as a whole.
I should now like to revert to the system of recruiting in the Australian Navy, and of the necessity to develop what Senator Sampson terms a sea sense in the minds of the youths of this country. The Assistant Minister (Senator Daly) mentioned yesterday instances in which recruits who, after undergoing considerable training in the Royal Australian Naval College at Jervis Bay, and on the vessels of the Australian Fleet, were transferred to naval colleges in Great Britain to complete their training, but who, after a comparatively short period, were recalled to Australia and asked to accept junior positions in government departments. As honorable senators are aware, naval recruits are compelled to reach a very high educational standard, and to pass a severe medical and physical examination before being accepted as cadets. I could give -the names of at least three cadets who, after reaching a stage in their training at British naval colleges, when they were likely to be granted junior commissions in the Royal Australian Navy, were recalled to Australia and their sea career terminated. One of these cadets, upon returning to Australia, was appointed a junior clerk in the Observatory, and one of the other two was discharged from the naval service. That is merely making a fool of them. What is the use of expense being incurred by the parents and the Government in training these youths up to a certain standard and expecting them to develop a sea sense when, without apparent reason, their engagement is suddenly terminated.
– I could not give the exact period. An arrangement exists between the Australian and Imperial naval authorities for a certain number of cadets to be sent to Great Britain each year. Under the present system we are sending new recruits and returning those who have received some training. We are virtually placing them upon the scrapheap. What encouragement do they receive in developing a sea sense? The youths I have mentioned have given up the best years of their life, believing that they were to adopt a naval career, but, after reaching the stage where they were entitled to qualify as junior commissioned officers, they have been returned to Australia and placed in government departments. The nephew of a prominent South Australia lady, after serving a considerable period in the naval college at Jervis Bay, and receiving further training in Great Britain, was returned to Australia and appointed to a junior position in the Observatory. In another instance, a youth whose father served in the Navy during the war and has since died was treated in the same way. This unfortunate youth, who has been deprived of the opportunity to qualify in any other profession or trade, will be 21 years old in a year’s time, and under our arbitration law must be paid an adult’s wage. But he is now dependant upon his widowed mother, and there is no possibility of his receiving other than the wages of an unskilled workman.
– While these advanced students are being recalled, others are being sent overseas.
– That is the position at present. Under the terms of an agreement, a certain number of recruits have to be sent overseas each year.
– Additional recruits are being fooled in the same way.
– Exactly. I am assured that this is the position ; but if I am in error in this matter, the Minister will correct me. Under the present system Australian naval cadets are able to receive training only on the four vessels at present in commission, and, consequently they have not the same opportunities of promotion as are available to those serving in vessels of the British Navy. Their training is limited to the two cruisers, the seaplane carrier, Albatross, and the one small destroyer now in commission. They are deprived of the opportunity to transfer from one ship to another, or to serve on different naval stations, as would be the case if serving on vessels of the British Navy. If it can be shown that the present system is economical, I am prepared to accept such an assurance; but, studying our naval defence from the viewpoint of a layman, it appears to me that we are not receiving full value for the expenditure we are -incurring.
– Would it not be better to spend more upon the Air Force?
– I think it would. Senator Sampson referred to the fact that during the great war aeroplanes were unable to operate efficiently owing to defective visibility; but similar difficulties were experienced by the vessels of the British fleet. During a severe fog in the North Sea vessels of the German fleet cleared the Kiel Canal, actually bombarded the coast of Britain, and returned to their base, without interruption. It will, therefore, be seen that the effectiveness of the Navy, as well as that of the Air Force, is impaired when visibility is bad. Probably there is no country in which flying conditions are more favorable than they are in Australia; the days on which flying would be unsafe could he counted on one’s fingers. I resent very much Senator Sampson’s accusation of crass ignorance on the part of those honorable senators who are endeavouringto determine the most effective means of defending this country. The honorable senator should not assume that those who do not see eye to eye with him in matters of defence are devoid of national pride. He suggests that I have not the interests of my country at heart ; but I remind him that I was in camp fourteen days after the outbreak of the great war. Honorable senators whose opinions on matters of defence differ from those of Senator Sampson are as sincere intheir beliefs as he is. I trust that he will not further indulge in such cheap criticism concerning his colleagues, who, whatever their policy may be, are anxious to serve their country in the way they think best. We know now that if we had looked a little further ahead the chances are the cruisers Canberra and Australia would not have been built. A few months after they were actually in commission a statement was made by a naval officer that they were considered to be a most uneconomical type of vessel. I understand that the Admiralty do not propose to build any more of the type.
– Not because they are unsuitable, but because Britain already has a full complement of vessels of that type, and under the Washington treaty can build no more.
– When these two cruisers were under construction, the whole question of naval disarmament was more or less in the melting pot. These vessels are undoubtedly an efficient unit for defence purposes, but I understand that they are not considered economical.
– One naval officer said it; the Admiralty did not.
– He was not voicing the opinion of the Admiralty.
– One naval officer’s opinion is as of much value as one military officer’s opinion in this Senate. However, I have no desire to deal further with the point. We have the vessels, and undoubtedly they are a valuable unitin Australia’s defence.
Now that we are not likely to have huge sums of money to spend on defence, I think the best friends of Australia are those who advocate “the spending of whatever money is available in the wisest and most careful manner, and so as to ensure that we shall get the maximum amount of defence at the minimum cost. In that connexion I think it would be wise to inquire whether some other method of maintaining our naval defence should not be adopted. I have already pointed out the advantages and disadvantages of maintaining a separate naval unit. 1 deny the charge made by Senator Sampson, that I am unpatriotic because I maintain that the money available should be spent in the most economic manner. I trust that on future occasions when the honorable senator crosses swords with others, he will at least give them credit for sincerity of desire -to serve the country that he claims for himself. There was certainly no endeavour on my part to indulge in cheap sneers. Furthermore it was unnecessary for me to read a book published fifteen years after the war, in order to learn what the Australian Navy did during the war. J happened to be in the first convoy which left Australia, and I remember the memorable morning when the news came to our troopship that the Emden had been destroyed by the Sydney. No one was prouder than I that day.
I believe the Government would be well advised to consider whether we are adopting the best and soundest scheme of Australian naval defence. At any rate no harm can be done by inquiring into the question of attaching our Naval Forces to the British Navy on the understanding that certain units arc maintained in Australian waters, and that provision is made for the employment of a percentage of Australian personnel. Such an arrangement would give young Australians desirous of following a naval career the opportunity to do so, instead of after two or three years training, just when they are likely to become sailors in the true sense, being transferred into jobs as junior clerks in the Observatory.
.- A debate on a motion for the first reading of an Appropriation Bil] is one of the most interesting in which we can engage, because -it is about the best opportunity which presents itself for dealing with matters which vitally affect the Australian community. I avail myself of the opportunity, therefore, to say something that I hope will not only cause honorable senators to think of the possibilities of our eventually getting out of our present financial and industrial difficulties, but will also awaken in the people themselves a keener interest in tho problems with which we are confronted and in the solution of which every individual should be expected to take a part. I want to supplement what has been said during this debate in regard to some of the causes that have brought us into our present position, and to endeavour to point out the. possibility of bringing about eventually a better and more stable condition of affairs in this fair Commonwealth by concerted action on the part of the Commonwealth Government, the Commonwealth Parliament, the State Governments and the State Parliaments. Unfortunately, we lj ave in Australia combinations of interests which to-day, notwithstanding all the distress apparent on every side, are determined to make that distress more accentuated than ever, and efforts in that direction are not confined to small groups of individuals, who have no direct interest in this country. The desire to bring about entire chaos in Australia is much more widespread than the average individual imagines. I quote the following from the Argus of the 25th July: -
At its final session yesterday, the Australian Council of the Australian Railways Union decided to affiliate with the PanPacific Trade Union Secretariat, and to take immediate steps to affiliate with the Red Internationale.
If ever’ an item of news has appeared in the columns of the Australian newspapers which ought to cause concern to all rightthinking people in this country, it is this.
– No one seems to have taken much notice of it.
– That is the trouble. It is just that disregard which has brought us to out present condition. Unfortunately, the rank and file, and a very large proportion of our business community, have taken no notice of these portents, which have been on the horizon for some years past. Here we have in a reputable daily newspaper a statement that the Council of the Australian Railways Union has decided to take immediate steps to affiliate with the Red Internationale, in addition to affiliating with the Pan-Pacific Trade Union.
– It affiliated with the Pan-Pacific Trade Union nearly ten years ago.
– If honorable senators understood what affiliation with the Third Internationale, called here the Red Internationale, means, they would realize that this movement, which has been in existence, according to Senator Kneebone, for the last ten years, is growing ana growing”. Unless there is a widespread movement to crush it, what will happen? The Australian Railways Union consists of the whole of the employees of the railways of Australia, but E do not believe that 20 per cent, of those men were consulted on this subject.
– Not 10 per cent., I should say.
– That is probably’ the case. Unfortunately, during the last year or two we have had instances in which less than 10 per cent, of the members of an organization have ordered al] the others out on strike. Our present industrial distress and unemployment can really be attributed to that movement which, on the part of one organization at least, had the support and assistance of the man who is now Treasurer of tho Commonwealth.
– What has that to do with this bill?
– It has a Lot to do with a bill under which we are asked to provide a sum of money for the purpose of carrying on the work of Australia. As a matter of fact, the Vice-President of the Executive Council (Senator Barnes), in introducing the bill, referred to th*> terrible condition of affairs prevailing in the Commonwealth to-day, and asked us to help the Government to find a solution.
Honorable senators interjecting,
– I ask honorable senators not to prolong the debate by unnecessary and irrelevant interjections.
– These interjections remind me of the meeting in the Sydney Domain last Sunday, when some Nationalist members of the New South Wales Parliament attempted to speak to the people. Immediately they opened their mouths they were met with organized attempts to count them out. I shall not be counted out in this chamber. Let us see what the Third Internationale means. It was founded in 1919 ; its head-quarters are in Moscow; it is an organization of the communist parties of each nation; its chief purpose is to accelerate the development of events towards world revolution; it rejects any compromise or co-operation with the ‘bourgeois parties; similarly it rejects the parliamentary system as a normal method of political development. The conditions of affiliation with the Third Internationale prescribe that every party which desires affiliation must develop a systematic and persistent communist activity within the trade unions, co-operative societies and the other mass organizations of workmen. Within these organizations it is necessary to organize cells which, by persistent and continuous, work must win the unions to the cause of communism. Now we have an announcement in the press of Australia that the council of the Australian Railways Union has decided to affiliate with that body of communists.
– If the honorable senator does not like Australia, there is nothing to prevent him from leaving it.
– I am a native of Australia, and I love my country. So long as I am able, I shall fight against the spread of the terrible doctrine of communism. I am surprised at the attitude of honorable senators who support the Government towards a matter which threatens the very life of the community.
SenatorPAYNE. - It is not nonsense.
– I ask the honorable senator not to take any notice of interjections.
– The happenings of the last year or two make it impossible for me to look forward with confidence to the early rehabilitation of Australia. Week after week, month after month, indeed, ever since a Labour government came into power in the Commonwealth unemployment has increased. It is appalling to think that in a country like Australia, so blessed by Providence that it has more blessings to the square foot than any other country has to the square yard, the things which have happened during recent years could be possible. The year 1929 was a record year for waste and dislocation in industry, due to the activities of certain organizations which control large sections of workers. In that year the loss of wages to unionists alone amounted to £4,869,000, while the total working days lost because of industrial upheavals numbered 4,671,478. That loss can never be recovered. I hope- that never again will that record be equalled or approached. 1 emphasize that those strikes were not the result of unfair conditions of employment, but were, to a great extent, the result of the activities of the organization to which I have referred. It is part of the plan of that organization to bring about industrial disturbances throughout the British Empire. I commend to the consideration of honorable senators The Pan-Pacific Worker, one-half of the pages of which are filled with denunciation and abuse of the British Empire. It contains article after article designed to educate its readers to believe that those who have controlled Great Britain during the last 50 or 60 years were men of the worst type, and that everything possible should be done to break down the system of government under which British communities live.
Another cause of unemployment in Australia has been our fiscal policy. I take this opportunity of picking up the gauntlet thrown down yesterday by the Assistant Minister (Senator Daly). The honorable senator challenged the Senate togive one instance of a duty imposed by the present Government which was not justified. I accept his challenge. I shall refer to one important item, and when I am finished I feel sure that the honorable senator will admit that he was wrong. Some years ago, a tariff schedule, which included window glass, was under discussion in Melbourne. The duty on window glass imported from Great Britain was then 2s. per 100 square feet, while the duty on foreign glass was double that amount. A proposal was made to increase the duty on British window glass from 2s. per 100 square “feet to lid. per lb., which would be equivalent to 12s. 6d. per 100 square feet. That duty was agreed to, notwithstanding a strong protest in both Houses. It was agreed that the duty should not be immediately operative; it was known as a deferred duty, which would not come into operation until a date to be prescribed, and not even then, unless the Tariff Board first gave a certificate that a reasonable proportion of the Australian requirements of window glass was actually being manufactured in Australia. From time to time, over a period of years, notices appeared in the Commonwealth, Gazelle, deferring the duty for further periods. In either March or May of last year a further notice appeared in the Commonwealth Gazette deferring the duty until August. But in June of that year the Minister for Trade and Customs tabled in another place a tariff schedule in which window glass was included, the duty being at the higher rate which I have mentioned. The tabling of that schedule meant that the higher duty immediately became operative. I emphasize that that schedule was tabled notwithstanding that the Minister had not received from the Tariff Board the necessary certificate stating that window glass was, at the time, being manufactured in Australia. The Minister knew that glass was not then being manufactured in Australia, because he was aware that the managing director of the company which proposed to make it had notified publicly that his company could not manufacture window glass in Australia for another twelve months. In defiance of the law of the land, the Minister imposed that duty. The result was Hi at certain firms made thousands of pounds profit out of the glass which they held in stock. That profit was made largely at the expense of Australian primary producers, many of whom use glass extensively in ripening their tomato crops. They had to pay from 15s. to £1 more for a case of glass than -previously. I ask the Assistant Minister (Senator
Daly) whether he accepts my statement as a fact. If so, he. should withdraw his remark of yesterday.
– Seeing that the honorable senator knows that his statement is not in accordance with fact, why does he ask me such a question?
– An honorable senator must not accuse another of making a statement which he knows is not in accordance with facts.
– I withdraw the statement, and say that the honorable senator ought to know that his statement is not in accordance with fact.
– I have given facts, as can be proved by referring to the records of the department. Those records show that, when the tariff schedule to which [ have referred was tabled, no report had been made to the Minister that window glass was being manufactured in Australia. The Minister knows that the reasons why notices appeared in the Commonwealth’ Gazette from time to time deferring the duty was that no such glass was being manufactured in this country. He knew when he withdrew that notice and tabled a tariff schedule in another place that glass was not being manufactured in Australia. He also knew that the new schedule would increase immediately the price of glass to the people of Australia; and he was aware that enormous stocks of glass were held in Australia at the time. Can we wonder at the country going fo the dogs when, contrary to the law of the land, a Minister takes action which will enrich a few individuals?
– Who put on the deferred duty in the first; instance?
– That interjection ill-becomes the Assistant Minister, who has a legal mind. I have admitted that another government provided a deferred duty.
– Evidently the honorable senator wanted the present Government to repudiate a contract. Does he know what a deferred duty means?
– A deferred duty is one which does not become operative until the receipt by the Minister of a certificate from the Tariff Board that a certain proportion of Australia’s requirements of the item to which the duty applies is being manufactured in Australia.
– Will the honorable senator give me the section of the act which dennes a deferred duty in that way? That is not in the Customs Act; it is left entirely to the discretion of the Minister.
– It is in the Customs Act and is not left to the discretion of the Minister. Section 15 of the Tariff Board Act reads -
The Minister shall refer to the board for inquiry and report tho following matters: -
The necessity for new, increased, or reduced duties, and the deferment of existing or proposed deferred duties; and shall not take any action in respect of any of those matters until he has received the report of the board.
That provision is not permissive; it is mandatory. It was inserted after a’ lengthy discussion in the House of Representatives and also in the Senate. During that debate an attempt was made to make the provision permissive, and I remember fighting the late Senator Pratten on this very, point. The late honorable gentleman, who afterwards became Minister for Trade and Customs, moved to i insert the word “ may “ instead of “ shall,” but after discussion the Senate decided that the provision should be mandatory. Consequently, if the Minister observed the law, he could not take action in respect of any alteration of the tariff until he had received the report of the Tariff Board dealing with any particular request. But, as we all know, the present Minister for Trade and Customs has violated that important provision in the Tariff Board Act. Last year, and again this year, he tabled schedule after schedule, containing items, none of which have been referred to the Tariff Board, and now the Assistant Minister (Senator Daly) is endeavouring to persuade us that the provision is permissive; that the Minister may do as he pleases in the matter. I do not subscribe to his view. Ministers, above all other people, should observe the law; they should set the example to the rest of the community. Instead of doing this, Ministers in this Government have de liberately violated a law enacted for the express purpose of preventing any alteration of the tariff at the whim of a government which may command a majority in another place.
Latterly, we have heard a good deal about the prohibitive duties that were imposed recently on hosiery. The Minister for Trade and Customs assured us, when these duties were brought down, that they would lead to the stimulation of local industries and reduce unemployment. They have had exactly the opposite effect, and, what is more deplorable, they have been responsible for enormous losses on the part of investors. As was to be expected, these prohibitive duties encouraged people to invest heavily in new factory enterprises, and production was commenced on such a large scale that within three months a number of factories had to be closed because of over-production. The total output of one Sydney factory which went into liquidation, was purchased by a large retail firm in Melbourne and sold over the counter at a price 50 per cent, below the cost of production. Disaster also overtook a factory in Brunswick, Melbourne, where no fewer than 350 female operatives were dismissed in one week. The prohibitive duties certainly encouraged the investment of capital in new industries, but as we have a population of only 6,000,000 people, it was not long before the output was greater than the demand. Consequently many of these mushroom companies were forced out of business.
Australia cannot afford to live to itself. Any attempt to check the development of trade relations with other countries will have most disastrous consequences. Only yesterday, I read in one of the Sydney newspapers a report to the effect that a well-known Sydney firm, in a communication to a Chinese business firm, asked if it were possible to place 1,000 tons of the best Australian flour. The reply was to the effect that, as the Commonwealth Government had imposed a prohibitive tariff on articles of Chinese manufacture, and had, in other ways, discriminated against Chinese products, Chinese merchants were” unable to accept orders for Australian export commodities. In much the same way, we have seriously injured our trade with New Zealand. During the last, ten years it has declined by 40 or 50 per cent. At one time, also, we had a thriving trade with Fiji. That lias been heavily decreased as a direct result of our tariff policy.
– We have also lost our trade with Java.
– That is so. I do not pose as a freetrader, for I realize that in a young country like Australia, industrial enterprises must have a reasonable measure of protection. But there is a vast difference between reasonable protection and prohibition. A prohibitive tariff is, in fact, no protection at all for Australian workmen. We should depend to a greater extent upon the natural protection which our geographical position gives to our industries, and the will of all employees, male and female alike, to give of their best, instead of relying upon legislative enactments and the strength of the industrial organizations to limit the output in industry. If all these artificial methods for the limiting of output could be eliminated from industry, Australian workmen would respond to the call upon them as citizens of the Commonwealth, and the success of industry would be assured. I know quite well how they resent all this interference by trade union officials from time to time.
– That is a very old bogy.
– Unfortunately, it is only too true, as I have good reason to know. A personal illustration which came under my notice may, perhaps, convince the honorable senator. About eighteen months ago, a Victorian employee in a furniture trade - a man who had a good reputation as a workman - obtained employment in a Sydney furniture shop, and was working alongside a young man whom I know very well, and who related to me what happened. The employer set this man a certain task which, without undue exertion, he completed in one and three-quarter hours. As this was below the time allowed by the trade anion of which he was a member - the time limit for the job was two hours - the union fined him £10.
– Ridiculous !
– It is the truth. If the honorable senator wishes to have a further assurance on this point, I invite him to obtain a copy of the Furniture Trade Worker, which published details of the incident to which I have referred, and concluded with this significant announcement : “ This worker has since returned to Victoria”, the suggestion being, of course, that the Sydney union was glad to get rid of a “ scab “ as he was termed. These are facts which it would be well for the honorable senator to bear in mind.
– Order! The honorable senator must not address another honorable senator in a threatening manner.
– I was not threatening any honorable senator, Mr. President. I was merely emphasizing the point to which I was directing attention.
– I am unaware of any standing order of the Senate which declares that an honorable senator must npt be guilty of over-emphasis when ‘ speaking to any motion. I know, of course, that an honorable senator must not be guilty of tedious repetition, or use unparliamentary language, but I think I am perfectly justified in emphasizing any point which I wish to establish.
– Everything connected with the conduct of debate is not contained in the Standing Orders.
– The suggestion is that an honorable senator must not forget that he is a gentleman. I hope I have not done that, but I contend. that I am quite justified in emphasizing my objection to this crushing burden of taxation that is being imposed upon the people.
– It is all part of the Premiers’ plan.
– It is not part of the plan to inflict an injustice upon any section of the people by differentiating in the way proposed between the late of tax upon incomes from personal exertion and the tax upon incomes from savings in the form of investments.
– The taxpayers whose income is from personal exertion are protecting the savings of the thrifty section of our people.
– But why should an undue burden be placed upon the thrifty person who has worked conscientiously, and who, in his later years, is depending for his sustenance upon income from the investment of his savings? These constitute the only reservoir from which the Government can now draw, and if that reservoir is exhausted by this extraordinary heavy taxation, all I can say is “ God help the country “.
I have taken the trouble to make a comparison between the taxation to be levelled upon this section of our people in Australia and similar taxation in the sister Dominion of New Zealand where, so far as internal commitments are concerned, the situation is as difficult as it is in the Commonwealth. A recent cablegram from Wellington reports a prospective budget shortage of £6,850,000 which will be met by reductions in Public Service salaries and wages of £1,390,000; other economies and increased charges, £1,650,000; suspension of war debt payments, £850,000; and the use of reserves, £1,140,000, leaving approximately £1,800,000 to be provided from additional taxation. It is proposed to raise £730,000 additional income taxation by increasing the surtax from 10 per cent, to 30 per cent. In New Zealand, there is a differentiation of only 10 per cent, as between income from personal exertion and income from property. The differentiation in Australia in the case of a person earning £350 per annum from property is 2,000 per cent. Such a person in New Zealand, under the proposed taxation, including the surtax of 30 per cent., will pay £14 12s. 6d., compared with £26 10s. in Australia. A taxpayer with a net income of £500 will pay £24 7s. 6d. in New Zealand as against £62 10s. in Australia. It must be remembered, also, that there is only one taxing authority in New Zealand; whereas in Australia the States, in addition to the Commonwealth, have the right to tax, and their taxation is probably equal to 50 per cent, or 75 per cent, of the federal tax.
T!he returns of the Taxation Commission for the last few years show that there are 196,780 taxpayers, who pay in taxation £536,000, while 61,000 persons are obliged to pay no less a sum than £5,682,000. The field has been so whittled down that only a handful of people now pay direct taxation. Every additional £1,000 that is 1 taken, from people who have money to invest in industry means the reduction by that amount of available employment. If this policy is continued, goodness knows what the ultimate result will be. It vis time that public men in Australia determined to investigate matters, with a view to effecting within a given period an alteration of the system that will remove the artificial restrictions under which we are labouring, and the interference which is so common with those who are prepared to give of their best to industry. Unless we instil into the minds of the people the lesson that they shall receive nothing unless they earn it, I cannot see any hope of the rehabilitation of Australia. I shall do all that I can to help to right the financial affairs of Australia within the next month or two, so that the Commonwealth may be relieved of a certain degree of responsibility in regard to interest payments. But the reduction of those payments, and of pensions and public service salaries, will not solve our problems; we have a long way further to go. For many years, Australia will have to depend upon primary production, and do ‘ everything possible to encourage an extension of .that production. The burdens that have been imposed on the primary producers must be removed as speedily as possible. In the three largest of our primary industries, the producers are dependent upon world’s market prices; yet by legislative interference, the like of which is not attempted in any other country, we have made it most difficult for them to obtain any return for their arduous labours, I am .not animated by a spirit of antagonism to the workers in our secondary industries. The two should go hand in hand, because secondary industries cannot be prosperous until our primary pl Oducers are prosperous and contented. For years it has been manifest that no matter to what extent secondary industries were extended, we could not hope to export their products. I remember the time, not very many years ago, when Australia exported, principally to New Zealand, over £828,000 worth of boots and shoes a year. In 1927-2S that trade had dwindled to a value of about £20,000. There must be a reason for such a falling off.
– It has gone up again now.
– Because to-day boots and shoes can be bought at less than the cost of production at the factories, on account of over-supply. Similar conditions are being experienced in the hosiery industry. But as soon as the existing surplus stocks have been sacrificed, they cannot be replaced and be sold at a profit unless our policy is altered.
– Keep the Scullin Government in power and everything will be all right.
– The Scullin Government, is the great barrier to a desirable alteration of the conditions generally.
– Did. not the honorable senator want a bounty on the export of evaporated apples?
– By legislative interference, the cost of production and of freight was forced up to such a height that it was impossible to export evaporated apples, although the product turned out was equal, if not superior, to that of any other country. If the heavy burdens that were placed on that type of primary producer had not been imposed, Australia would have been enabled to retain the market which at one time she held in the Old Country.
Tasmania has some natural advantages that are possessed by no other State. It has a hydro-electric power scheme that is not surpassed in the world, and is capable of expansion to twenty times its present capacity. Unfortunately, however, the legislation passed by this Parliament has not only interfered with the development of that scheme, but has had the effect of closing down one industry after another. Tasmania grows some of the finest timber in Australia, such as stringy bark, blackwood, red myrtle, celery-top pine, and humanbeing, but every year hundreds of thousands of pounds are lost by wastage. When a human being reaches a certain age, he begins to go down hill. Similarly, trees at a certain age begin to deteriorate. The wastage to which I have referred results from the operation of acts of this legisla ture which prevents the timber from being marketed at a profit. I refer to the Navigation Act and the Arbitration Act which have caused Tasmania to lose probably millions of pounds. Recently an honorable senator who at one time was connected with the sawmilling trade, illustrated the effect of the operation of that act upon Tasmania. The freight on every 100 feet of timber which crosses Bass Strait from Tasmania to Victoria or South Australia, is at least double that which is charged to bring pine from Norway and Sweden. That result is brought about entirely by the operation of the Navigation Act and the Commonwealth arbitration law. Those two laws work hand in hand, and have an oppressive effect upon the primary producer.
– Tell us why the paper pulp industry cannot be developed in Tasmania.
– Tasmania is as suitable as any other country in the world for the manufacture of that commodity. The raw material is right at its doors, and the wharfage accommodation is ample for the requirements of a number of mills. The industry has not been established partly because we have lost the confidence of the people overseas from whom we expected to obtain the necessary capital for the development of this project.
– That is not so.
– The capital cannot be obtained locally.
– The reason is that two companies are wrangling with each other.
– That is not the reason. Whether two or ten companies are wrangling, makes no difference. I understand that one company is prepared to make a commencement to-morrow with the initial stages of development provided the capital is assured. The necessary legislative action has been promised to ensure the firm establishment of the industry.
Sitting suspended from 6.15 to 8 p.m.
– I have been under the impression that one of the reasons for the delay in establishing the paper-pulp industry, from which Australia expects so much, was the difficulty of obtaining the necessary capital. I was delighted to be informed by the Assistant Minister (Senator Daly) that the capital will be forthcoming provided the two companies concerned can settle their differences. Senator Daly. - There is no doubt about that.
– I trust that the Government will do all that is necessary to bring the companies together. Their differences should not present an insuperable barrier to the establishment of the paper-pulp industry, which will be of enormous value to the whole community.
– Is the position affected by the Canadian trade agreement recently adopted by this Parliament?
– Not materially. The Government has definitely promised that the necessary financial assistance will be provided to ensure the permanent establishment of the industry, and all that the Government has now to do is to be satisfied with the bona fides of the companies concerned. I sincerely trustthat the Government will bring the companies together, and that the difficulties which now exist will not prevent the permanent establishment of the industry.
I now wish to refer to the effect of the coastal provisions of the Navigation Act upon the tourist traffic to Tasmania. With the approachof spring, many tourists are looking forward to visiting Tasmania. For many years thousands of persons travelled to that State by vessels of the Peninsular and Oriental and other overseas companies; but, since the coastal clauses of the Navigation Act have been in operation, they have been denied that means of transport. This has resulted in Tasmania losing the revenue derived from large numbers of tourists, who prefer to travel on overseas vessels. Seeing that Tasmania does not enjoy the advantage of interstate railway communication, no obstacle should be placed in the way of those who desire to visit that State. I trust that the Government will exercise the power it possesses to remove the obstacles which now exist.
The difficulties experienced by importing firms in Tasmania in the matter of customs duties -have been brought under the notice of the Government from time to time, and requests have been made that the Customs Act should - be amended to remove the present injustice. Since the first Customs Act was passed, vessels carrying cargoes of overseas merchandise have discharged the major portion of their consignments at mainland ports, and the Tasmanian portion later. On several occasions, when a duty of, say, 25 per cent, on a particular line of merchandise had been in operation, vessels have discharged a portion of their cargo at mainland ports on which importers have paid duty; but, by the time the Tasmanian portion has been discharged, the duty has been increased to 40 per cent., and the consignees in Tasmania have, therefore, been compelled to pay an additional impost of 15 per cent. Some time ago a vessel discharged a portion of her cargo in Melbourne, and the remainder at Hobart; but, while the vessel was travelling between the two ports, the duty on a particular line of goods was increased. The Melbourne warehousemen, who paid a lower duty, were then able to send their travellers to Tasmania, and offer the same goods at a lower price than that at which they could be sold by the Tasmanian warehouses. The latest incident was even more striking. A vessel discharged the Hobart portion of her cargo, and then proceeded to Launceston to discharge the balance. While travelling up the coast the new primage duties were imposed, and the Launceston merchants were at a disadvantage as compared with the merchants in Hobart. The Government should amend the act as soon as possible by providing that the duty prevailing at the first port of call shall be the duty until the whole cargo has been discharged. I trust that the Government will give favorable consideration to the request.
Reference has been made by Senator J. B. Hayes to the additional grant asked for by Tasmania, and which is not included in the Estimates for this financial year. The Tasmanian people are grateful for the financial - assistance received from the Commonwealth, and I thank honorable senators representing other States for their recognition of Tasmania’s claims in this respect. We have never got all that we have asked for; perhaps it would be too much to expect ; but we are thankful for small mercies. We did reasonably expect that when the Public Accounts Committee was asked by the Prime
Minister to inquire into the financial disabilities of Tasmania, South Australia and Western Australia the outcome would be that Tasmania would receive some recognition this year. Unfortunately >the recommendation contained in the minority report of the committee has not been taken into favorable consideration by the Government. It is evident from a perusal of the portion of the report which deals with the class of evidence given that Tasmania proved conclusively that the cost of government services in that State is very much lower per head of the population than is that of any other State, and that governmental activities in Tasmania have been less extravagant than those of any other State. That should weigh very much indeed with the Government in dealing with the request of Tasmania for further financial aid. Of course if it had been shown that the Government found it difficult to meet its obligations because of extravagance in administration, one can understand a disinclination on the part of any government to make good the amount of any loss, but this decidedly is not the case so far as Tasmania is concerned. It must be remembered that many inquiries have been made into the disabilities of Tasmania, and, I think, it is conceded by most people who have gone into the question that on the whole the State has suffered greater disabilities from federation .than any other State, mainly because of the geographical difficulties of Tasmania. It is separated from the mainland by many miles of water, and has not the same opportunity for the interchange of products that one State on the mainland has with another mainland State. I think the figures show conclusively that Tasmania has suffered more from the fiscal policy of the Commonwealth than has any other State. Indeed its losses on this account are computed to be very heavy.
– Tasmania is part of Australia.
– I know, but it is laid down in the Constitution that regard must be paid to any State in need of financial assistance, and that in measuring the amount of- assistance to be given due regard must be paid to any peculiar disadvantages the State may be suffering in comparison with other States. I am, therefore, disappointed that no extra provision for Tasmania has been made this “year. The Public Accounts Committee ( in its first report recommended additional assistance to the amount of £120,000. That was under the terms of the original reference, and if the inquiry had been made by the committee along the lines of that reference some extra provision would have been made this year. Unfortunately the reference was entirely altered, and the committee was asked to take into consideration matters which to a certain extent may have had a bearing-
– But were not relevant.
– They were not relevant to Tasmania’s position, and the State was handicapped in consequence. I regret that the Government has not seen fit to make some provision for even part of the amount previously recommended.
Although not much is heard about the terrible difficulties we are experiencing in Tasmania through unemployment, I can assure honorable senators that we are feeling the strain there as much as it is being felt by any other State. I have personal knowledge of the great privations that are being borne in the northern portion of the island where I reside, and they are not so great there as they are in the south. Tasmania has had to face not only the general depression caused through unemployment, but also in the prolific northwest a series of setbacks in agricultural production, such as would break the heart of the average individual. Fortunately, however, the pioneers engaged in primary production in Tasmania have hearts like lions, and they are prepared to do their best to repair next year the handicap imposed this year. But the fact that they are worse off than they were at the beginning adds to my disappointment that on extra financial assistance is being provided to help the State in its time of distress.
Having made the financial provision we are asked by the Government to make in these estimates, I hope that the Government will get down to work without delay, and that one of its first steps will be to endeavour to secure the co-operation of a committee of, say, half a dozen of the best type of men Australia can produce - men skilled in financial operations and business activities, and with a knowledge of the ramifications of industrial concerns - to assist it in devising a plan by which, over a number of years, we can gradually eliminate all the disturbing factors which have helped very materially to bring us to the position in which we find ourselves to-day. Unless that is done I am afraid there is no hope for the rehabilitation of this fair Commonwealth of Australia.
In Australia revolutionary forces have been at work for some years, and recently, as one knows from visiting the cities, intensified efforts have been made to take advantage of the distress we have among our people to create among them a spirit of revolution instead of a determination to give of their very best to their country. If these revolutionary forces cannot be killed entirely, we must do something to scotch them and render them impotent to engage in the nefarious practices in which they are indulging to-day. If the Scullin Government fails to do something in the direction I have indicated, that failure, in conjunction with faults innumerable in its administration for the last eighteen months, will inevitably sound its deathknell within a very short period.
– I did not intend to speak on this motion, as the sittings are drawing to a close, and I feel less disposed to do so now after having heard the address of Senator Payne, because the honorable senator puts into whatever speeches he delivers a great deal of patience and industry that rather embarrasses those of us who have not the exact mind which he has. But what really induces me to speak is his reference to the growth of communism in this community, and the dangers which it threatens. Our freinds on the Government benches pooh-poohed his observations on that subject. They treated them as being unworthy of attention.
– We did not do that.
– I so construed them at any rate. They certainly did convey the impression that there was nothing in the growth of communism in Australia or elsewhere that should cause us the slightest concern.
– Senator Barnes said that the Government was not interested in the- subject.
– I adopt entirely the view put by Senator Payne. When communists read of the efforts which are made to discount their advance they must chuckle to themselves; because the very purpose which they have in view is, as a prominent member of one of the industrial organizations in Sydney once put it, to “ white ant “ the Labour movement. Their set policy is not to advertise their advance, but to advance slowly and steadily within the Labour movement.
– r-By peaceful penetration.
– By peaceful penetration or infiltration. It seems remarkable that when we get an organization like the Australian. Railways Union carrying resolutions in connexion with its intentions towards the Red Internationale
– How many were present at the meeting?
– That is just the point. I was not there to count, and I do not know how many were present; but I know that no legislature can work except through a system of representation. When an industrial organization is getting into working order it must work on the principle of representation. It chooses its officers and .because it is impossible for all the members of the organization to meet, its delegates, and is bound by what they do. If it is felt that the delegates have overstepped their mandate, or gone further than they had authority to do, it is competent for them to take measures to retrace their steps and put themselves right in the eyes of the .public. No such attempt has been made in the case’ of the Australian Railways Union. The resolution stands. . When an honorable senator asks how many were there, my answer is that I neither know nor care, because the number present at the meeting is unimportant.
Early in my short career in this chamber, I heard from Senator Rae strong views as to what the trade unions had done’ for the betterment of the trade union class - if class it car be called. I am not prepared to admit that we can draw a line of cleavage and say that certain persona are in one class, and that other persons arc in a different class. Exaggerated views are held as to how much trade union organizations have done to improve the conditions of unionists and workers generally. Frequently, people who hold these views mistake cause and effect. I cannot think of any other way of expressing what I mean than by quoting the well known Latin phrase, post hoc ergo propter ‘hoc. which means making the mistake of thinking that because one thing follows another the one is the cause of the other. That does not follow at all. The condition of thu workers in all countries has been a matter of growth extending over centuries - a growth which was originated by men who , would be regarded as aristocrats. Tho danger of the growth of modern unionism - I put it with the greatest friendliness to honorable senators supporting the Government - is that it creates a new standard of loyalty and of honour. Senator Hoare asks how many were present at the meeting. I repeat that I do not know. But if the representatives of that organization who were at the meeting called upon its members to adopt a certain course of action, that course would be followed; because it is a point of honour among them to follow their leaders. In some of the great industrial struggles which we have experienced during recent years, we have seen that, although many of the rank and file of the unions totally disagreed with their leaders, they regarded it as their duty to follow their lead. It may be that on some occasions they follow the advice of their leaders and break solemn contracts into which they have entered. They do so in perfectly good faith, because, as I have said, they regard it as their first duty to follow their leaders. When the right honorable the Leader of the Opposition (Senator Pearce) suggested this morning that there should be a “ gettogether conference “ to see what could be done in certain industrial matters, I agreed with him completely.
– It was recommended by the Public Accounts Committee.
– The difficulty I see is - and I again put it in all friendliness to honorable senators supporting the Government - that if we get the repre sentatives of all classes to meet to consider whether nominal wages should be reduced or not, Ave know, before the conference begins, that those who represent the labour organizations will adhere to the view that wages should be as sacrosanct as the Leader of the Opposition this morning said, the Constitution should be.
– The Prime Minister had less trouble with the unions than with the banks.
– I shall not deal with that matter now, first, because it is not within the scope of the present discussion, and secondly, because I do not feel competent to (leal with it at the moment. We had a good instance of this some three years ago, when a royal commission was appointed to study the Constitution with a view to altering it. Of that committee comprising, I think, seven members,” two represented industrial organizations. The minority report which they presented was exactly- in accord with the written platform of the party to which they, belonged. These organizations are depriving us of the benefit of the independent minds of their members. The organizations and their members are bound by pledges which prevent them from exercising that intelligence with which God has endowed them. I have been led to say these things because of the opening remarks of Senator Payne.
Coming now more particularly to the bill, I wish first to allay the fear that, having talked so long on matters which are only incidental to the bill, I might take a much longer time to deal with all the matters which could arise from a study of these 400 pages of printed matter. I assure the Senate that I shall not occupy much time. The bill seeks to appropriate a sum of approximately £22,000,000. Of that amount, about £12,000,000 is for expenditure in connexion with other than business undertakings; £9,000,000 is for business undertakings, and £450,000 for territories of the Commonwealth. When I saw that enormous expenditure, I was tempted to dip into history to see what the framers of the Constitution bad in view. Senator Barnes said this morning that the States and the Commonwealth stood in the relation of children to a parent. That is an entirely incorrect way of looking at the position. Parents are responsible for bringing the offspring into the world; but in this case the parent, as understood by the Minister’ did not do so. On the contrary, if the States are the offspring at all, the curious fact is that they brought the parent into the world. The framers of the Constitution intended the federation to be an indestructible union of indestructible States. The federation is founded on the States. The Senate is peculiarly representative of the States he Constitution hands over to a central government certain limited and enumerated powers which its framers thought could best be carried out by a central authority. At that time is was estimated that the new expenditure would be about £300.000 per annum, and that the expenditure in connexion with the then existing services - the departments which were taken over by the new authority - would amount to about £1,250,000 a year, or a total of approximately £1,550,000 per annum. I have not forgotten that over 80 years have elapsed since the federation was established, and that our population has grown in the meantime. I do not even leave out of consideration the tendency the world over for governments to undertake rather more of the duties which originally were left to individuals. That estimate of £300,000 for new expenditure was well borne out in the first two financial years of the federation. In 1901-2, the customs yielded £8,692,000, of which £7,368,000 was returned to the States. In 1902-3 the amounts were a little more. If we take a step further forward, and come to the end of the war period, we shall find that in 1917-18 the new expenditure by the Commonwealth had risen to £7,079,000. That does not take into account the cost of the departments taken over by the Commonwealth, such as Defence, Customs, and the Post Office.
Recently, we have had to face the unpleasant task of reducing federal expenditure. Reductions have been made; but I venture to say that the reductions which we ought to set ourselves to make should not be,limited to 12$ per cent., or even 22$ per cent. What is necessary is that we shall check the growth of government expenditure, and the multiplication
Senator Brennan. of departments. I do not know whether a senator who comes into this chamber and suggests that the Federal Parliament is extending its operations too widely will be regarded as “ white- * anting “ the Federal Parliament ; but 1 cannot help expressing the view which I held strongly for many years before I entered this chamber, that the Federal Parliament is extending its activities too far. A great many of the functions taken over by it really belong to the States. The. Health Department, for instance, involves an expenditure of £109,000, and the Forestry Department £6,310 this year. Those two departments are duplicating work which is well and effectively done by the States. In another place, a discussion is now taking place on the federal aid roads grant. The making and maintenance of roads is essentially a matter for the States. The federal authority should not interfere with that work in the slightest degree. This duplication arose because the Commonwealth in 1926 had money to spare. At such times I am sorry to say that, the States are tempted to look at the largesse which is offered to them, and to forge the duties they have under their own constitution as well as that of the Commonwealth. When I have regard to the maternity allowance, I ask myself where the money comes from? Where, in the Constitution, do we find anything which permits the federal authority to grant an allowance of that kind? The answer is that it cannot be found at all in the letter. The only authority for it is that which says that the Federal Parliament has full powers of taxation. Having those powers, and having extracted money from the people, which would have been better left in their pockets, it has said, and the court has held that it is entitled to say, “ this is our money, and we are entitled to spend it as we please.” From the point of view of organized government, 1 do not deny the importance of seeing that proper attention is given to women at that crucial time of their lives; but I dispute strongly that it is a matter which, under our Constitution, ought to have been taken up by the central authority. I do deny that the Federal Government gets anything like good value for the money expended. This seems to me to be a matter as far removed from the proper sphere of a central government as anything can possibly be, and essentially a matter for State governments.
Turning now to what may be regarded as- a small subject, namely, the recording of our own debates, I suggest that some economy should be possible. When I visit the Library, and see the enormous growth of the Federal Hansard, I feel tempted to ask myself if it will not be necessary one day to make additions to our library buildings in order to accommodate these volumes, unless some modern tyrant arises and disposes of all this material as the Alexandrian library was dispersed. Parliament, I think, might very well consider whether there is need for such a complete record of our debates. Whatever may be the view as to the recording of debates on the motion for second reading of bills, I certainly question the wisdom or the value of placing on record for all time the full discussions, irregular, conversational, and business-like, which take place when a bill is in committee. I would go further and say that the competent members of our reporting staff could condense immensely the Hansard reports of our debates without doing the slightest harm either to existing generations or to posterity.
I do not know that I have any further observations tooffer at this stage unless it be to proclaim that I stand as a very strong opponent of the modern tendency of governments to interfere so much with the activities of the people. A respected colleague referred last week to the efforts of governments to obtain markets for our producers and manufacturers. I submit that it is not the duty of, nor is it necessary for, governments to find markets for our people. If governments will only free the people of the fetters which they have imposed upon them, the people can be safely relied upon to find markets for themselves. Furthermore, we may rest assured that, whatever may be the nature of an industrial activity, it will be more successfully and economically controlled by private enterprise than by a government department. In particular I shall always resist the tendency which governments have shown to embark upon matters which by the letter and spirit of the Constitution fall distinctly within the province of State governments. If we avoid this tendency in future, and I think we can do so without inflicting injustice upon any section of the community, we shall be able gradually to reduce governmental expenditure to reasonable limits without being forced to adopt such expedients as those which have been discussed in this Parliament during the last few weeks.
– I had intended to speak at some length upon the first reading of this measure, which gives honorable senators an opportunity to skim lightly over the surface of things, and indulge in some generous advice to the Government, as well as criticism of its acts of policy during the last few months. But having regard to the volume of business yet to be transacted, I shall curtail my remarks.
Referring more particularly to a statement made by the Leader of the Senate (Senator Barnes), and also, I understand, by the right honorable the Prime Minister (Mr. Scullin) in another place, concerning the attitude of the banks in the present financial crisis, I should like to say that the Government appears to have lost all sense of proportion in handling transactions of such magnitude as those with which it has been called upon to deal lately. But whatever may be the problems confronting the Government, this is not a time for attacking institutions which have supported the Government so loyally during the last year or two and which will stand by it in future if only “they are given a fair deal. The other afternoon the Leader of the Senate read a statement which, to my mind, was entirely provocative, absolutely unjustified, and certainly did no credit to the Government. The Minister implied that the banks, after agreeing to a certain course of action at the Premiers Conference, had failed to honour their pledges. I ask any honorable senator who has taken the trouble to read the report of that conference to point to one single reference to any such agreement. I may add that the proceedings of the conference seemed to have been characterized by a looseness altogether unworthy of leaders of public opinion, assembled to deal with such serious problems. That, surely, was a time when the position of banking institutions in relation to the general plan should have been clearly denned in explicit terms, and I have no hesitation in saying that, in their attitude since that historic gathering, they have done nothing to imperil the safety of the plan. The statement of the Prime Minister was not only unwise but also ill-timed. No one can deny that the banks have given loyal assistance to the Government in this time of crisis, and that, by co-operating in the conversion scheme, their general financial position will be very materially affected by the reduced rates of interest which they will receive on the new securities. The attack was quite unjustified, having regard to the obligations of the banks to their customers. These institutions, I remind ‘the Senate, have managed their own affairs prudently, and they stand behind the Government to-day. Other important institutions are the insurance companies which, I regret to say, have been treated in the same cavalier manner up to the present. As they are holders of a large amount of Commonwealth securities, they have, at all events, the power of dissent, in connexion with the conversion operations, and they should have been consulted with regard to the Government’s taxation proposals, in order to ensure the success of this gigantic conversion operation. Nothing should have been done by this Government in the way of unfair discrimination in taxation, to place any obstacle in the way of their wholehearted _co-operation with the nation in its time of need. These are matters upon which, no doubt, the Prime Minister is now reflecting. I trust that the meeting of the Loan Council in Melbourne this week, will make it perfectly clear that what is needed at the moment is not hostility from, but the generous cooperation of all financial institutions to ensure the success of the conversion loan. If we did not give the Prime Minister credit for sincerity in this matter, notwithstanding the frothy vapourings about the fiduciary currency by certain of his following, we might be tempted to think that this criticism of the banks was deliberately designed to injure the prospects of the conversion loan, the success of which will do more than anything else to rehabilitate our credit overseas, as well as restore our own self-respect. Notwithstanding the untoward happenings in
New South Wales, if the conversion scheme is successful we shall place our foot at last on the road to prosperity, painful and slow though the process might prove to be.
I have said so much, because I feel that the Government is entitled to have absolutely plain speaking at a time like this. This is no time for the mincing of words, for political manoeuvring, or for window dressing. It is essentially a time for an honest expression of views regarding the position in which we find ourselves.
Another subject which was discussed with some fervour and sincerity by Senator Sampson, is the attitude of this Government towards the problem of defence. I yield to none in my desire to see this country fully defended, and I feel that the Government might well take into consideration the point of view stated by Senator Sampson with reference to military defence, and consider also whether some effort should not be made to co-ordinate the naval defence units of the Empire. That co-ordination would, I believe, ensure the continued existence of the Royal Australian Navy, of which we have good reason to be proud. Whatever may be said to the contrary, the fact that we are an isolated portion of the Empire, suggests that one day, which may not be far distant, we shall have to depend upon the naval arm for our defence, and it is somewhat reassuring to know that the British naval authorities, acting with that far-sightedness which characterizes the defence policy of the Mother Country, have built a naval base at Singapore for the protection of Empire trade routes. Eventually, under such a scheme, this country might have at its disposal a much larger fleet than it possesses to-day. While I give way to none in my admiration of what the Royal Australian Navy has clone, I believe that something more is necessary than the establishment that we have at the present time. I would not weaken that in any respect; but I consider that, by co-operating with the Motherland and the sister dominions, we might accomplish a great deal more. In unity of Empire lies the safety, not only of the Empire, but of civilization itself.
I pass now to criticism that may appeal with greater force to one member of the Government; that is, in relation to the maintenance of the Council for Scientific and Industrial Research. We heard yesterday from Senator Glasgow a speech that dealt at length with , the buffalo fly pest in Queensland. I am glad that there has been no lessening of research work, except on one important point. It is good to know that the Government recognizes the importance of this matter. I deprecate, however, the proposal to defray the whole of the expense of the council this year out of the moneys standing to the credit of the trust fund. Presumably that is due to the existing financial difficulties; but it is, nevertheless, unfortunate, because the effect will be to weaken the efforts of the council in the future. I could not blame the Government very greatly, however, if it were compelled this year to employ the pruning knife in that direction. I merely wish to say that it would be detrimental to the future of this country were the policy to be continued. Nothing is doing, or is likely to do, so much good for posterity and the development of this country as the investigations that have been embarked upon and the examinations that have been made by this body. After all, we are only keeping ourselves in line with the rest of the world. When the testing time arrives we shall have to be right up- to date if we wish to hold our own in competition with the other nations.
One of the matters that have been dealt with at length in this debate is the tariff. I deprecate most strongly the withholding of the tariff schedules from the Senate. The Government is bringing in big vested interests that we shall have to attack in a couple of months’ time. It will be a difficult and heartrending task to do our duty by the various States, and the people of Australia as a whole, when we are confronted with the fact. that our action may bring ruin to a number of people. That argument was used when this Parliament sat in Melbourne, and it will be employed again with respect to hundreds of items In the tariff. It appears to me that the schedules have been kept on the stocks for the purpose of preventing this chamber from doing its duty as it sees it. I am no freetrader, as my friends opposite know; but I do say that we have reached the stage when the tariff needs examination - not the casual examination which causes a duty to be imposed to-day and removed tomorrow, or a prohibition to be placed upon imports on one day and a different policy to be adopted on the next. Commercially, this country wants certainty. The other day I mentioned the extraordinary position that had arisen as the result of the imposition, of a special duty on whisky, not bottled in bond. That is one of the most inane, childish and puerile actions that has been taken in the history of tariff-making. When I asked the Minister a few days later what had been done, he replied that the matter was still under consideration. Action of that kind will not assist the revenue; its only effect is to inflict hardship on a section of the community which already is bearing its share of the burden.
I have also brought under the notice of the Senate the refusal of the Government to recognize the justice of allowing conveyors for the Adelaide News Limited to be imported duty free. In this matter there has been backing and filling. In the first place, certain reasons were given for the refusal; but when the department was driven against the wall and found that it had no answer to the statements of the company concerned, it sheltered itself behind the act by saying that the application should have been made before the machinery was imported. The Minister has been guilty of an immoral act, and one that is inconsistent with what has been done previously. I know that glassware, which, . at the time, could not be made in Australia, and in respect of which there was no application by the breweries concerned, was imported without payment of duty. Probably the influence that could be exercised in that case was greater than that possessed by the newspaper whose cause I advocated the other day.
– I take the very strongest exception to being charged with immorality, and ask that the honorable senator be called upon to withdraw the expression.
– I was merely endeavouring to convey the idea that the refusal of the Minister to make a refund of duty in the case to which I have referred, was immoral. I claim that that was perfectly in order. I am not imputing immorality in any sense of the term to the Leader of the Senate. In the truest sense, it is immoral for the Minister to act differently in similar circumstances towards two bodies, and to claim the advantage of a statute which, in the first place, he did not suggest furnished an answer to the claim that was made. Originally, he replied on the facts that the company in question could have had the conveyors made in Australia; but when it was demonstrated out of the mouths of the very people who he suggested could have made them, that they were unable to do so, and it was shown that they had actually examined the imported conveyors before embarking on the enterprise, he turned round and, probably at the instigation of his department
– I again rise to order. The honorable senator has charged me with immorality. I object to that very strongly, and I ask you, Mr. President, to protect me to the extent of demanding a withdrawal. My morals are unimpeachable.
– I believe that the Leader of the Senate and. Senator McLachlan are at cross-purposes, not only as to the Minister concerned, but also as to what immorality is. In such cases, I always look to intention. In the present case, I do not think that there was any intention to impute immorality, either politically or otherwise, to the Leader of the Senate.
– None whatever. I have no illusions in regard to either the morality or the sobriety of the honorable senator who so brightly leads this Senate. I was not alluding to him, but to the action of a department which is represented in this chamber by one of his colleagues. That action warrants investigation by the Government. It is not a matter which may be passed over lightly. The department cannot treat men in Melbourne and Sydney differently from others in Adelaide. That is an altogether wrong principle. By having done so, the Minister for Customs and the department have been guilty of an immoral act. The Minister may, or may not, know anything bout the matter; he may have signed the letter relying on his responsible officers; but it is a most improper course to take, and one that should be rectified. I trust that the Government will consider the facts of the matter, peruse the correspondence, and see that a measure of relief is afforded.
On the broad principles to which the Leader of the Opposition (Senator Pearce) referred yesterday, we find that it was hoped, by means of the tariff, to establish a number of industries in this country. Some of the results have been related by Senator Payne, and others of a like nature also could be narrated. There was the wonderful project associated with the firm of Heinz Limited. That firm was going to export preserves to the East, and develop over there a market for other Australian goods; but instead of having done so, Mr. Heinz, viewing the position which he found in Australia, and becoming acquainted with the administration of the Customs Department, disposed of his stocks on advantageous terms.
– As a matter of fact, he was deeply impressed by the administration of the Customs Department.
– So deeply impressed was he, that he fled from Australia. A few days ago he sailed for America, and .intimated that he did not think of returning. Certainty and business aptitude are necessary in the administration of the Customs Department. Until it is under something like business control, satisfaction will not be given to the people of this country.
I again direct the attention of the Government to the absolute necessity of preventing the existing overlapping between Commonwealth departments, and also the unnecessary duplication of Commonwealth and State activities. “We have reached the stage when we shall have to adopt the policy of Great Britain, and appoint a body such as the Geddes Commission, which rendered such valuable service to that country. “Although Sir Eric Geddes was not free from blame in the matter of establishing certain departments, he brought his ability to bear upon governmental activities in Great Britain with such force that the British Exchequer was eventually saved millions of pounds. I am afraid that the Government has not exercised sufficient care in keeping the expenditure of departments within reasonable limits, and so safeguarding the taxpayers’ interests.
I wish now to refer to wireless broadcasting and the methods adopted by the present Postmaster-General (Mr. A. Green). Some of us had hoped that the Commonwealth Constitution would be so amended as to endow the Commonwealth Parliament with power to control wireless broadcasting. There is not the slightest doubt that the Government, through the Postmaster-General, has done a great deal to destroy the Commonwealth’s powers in this respect. I have received complaints to the effect that the Postmaster-General has prevented the broadcasting of certain matter from B class stations in South Australia, which has caused a good deal of resentment among the people of . that State.For the information of the Senate I quote the following letter, which appeared in the South Australian Advertiser and Register of the 24th July, which explains the position very clearly : -
grave Attack on Free Speech.
To the Editor.
Sir, - On Wednesday, the Advertiser expressed the charitable but optimistic hope that Mr. Green’s decision to gag the broadcast was due to a “ misconception.” Mr. Green has now confessed that he deliberately attacked an aspect of the British liberty of free speech. He has thereby raised some of the gravest issues the Australian democracy has seen.
The truth is that the action of the PostmasterGeneral has raised a question of far more importance than party politics. It involves the vital matters of unjust government, and of official interference with private liberty and speech. The history of England provides many examples of how our fathers dealt with the abuse of official powers.
– By Mr. Grenville Price, the chairman of the emergency committee formed to preserve the rights of the Australian people.
– And one of the strongest anti-Labour men to be found anywhere in Australia.
– That is not so. It was not until the present Government attempted to inflate the currency by the issue of fiduciary notes that this gentleman stepped into the political arena. He is not an anti-Labour man, but a champion of the people’s liberty.
– The Premiers plan having been adopted, he should keep out of the way.
– He merely wishes the people to receive that meed of justice to which they are entitled, and to see that there shall be no partisanship in the matter of broadcasting. The Postmaster-General has rendered a fell service to the Commonwealth. The Government, through the PostmasterGeneral, instead of preserving freedom of speech, is preventing the Commonwealth obtaining the power which it should possess. The control of wireless broadcasting should not be in the hands of some petty tyrant who controls the Postal Department; but should be administered by some independent tribunal which would give a fair deal to those who desire to use this modern means of disseminating news. Wherever I go I hear statements concerning the tyranny of the Postmaster-General, who, in a partisan manner, is serving his own party, and at the same time preventing the members of other parties from being heard over the air. This is only one example of the discreditable way in which Commonwealth departments are being administered, and I deplore the action being taken in this instance, which discloses inherent injustice.
– It is a direct interference with the freedom of speech.
– Yes, and the dissatisfaction is not confined to South Australia. I heard this matter discussed in Melbourne the other day. It is action which does not redound to the credit of the Government, and which is not in the interest of Australia. We have always been under the impression that we are a free people, but freedom shrieks since the present Postmaster-General assumed control of the department.
The Government has quite a number of acts o( maladministration to answer for. I trust that the tariff schedule will be placed at our disposal as soon as possible. There is no need to misjudge the attitude which this chamber will adopt with respect to some of the tariff items. If the Government wishes at least a measure of justice to be done to those whose businesses it may be seeking to foster, it should arrange for the tariff to be considered in this chamber as early as possible. The tactics it has adopted are not in the interests of the Commonwealth or of the people of Australia. Duties have been imposed on the ipse dixit of the Minister. The schedule is still before another place, but it has to be passed by this chamber before it becomes law.
– Why should the honorable senator discuss the tariff on this motion f
– The Minister should realize that the administration of the Customs Department can be discussed on this motion. For the reasons given, I trust that the tariff will be introduced into this chamber as speedily as possible.
– This motion provides honorable senators with an opportunity to debate matters of public importance. The mere passage of this bill, which authorizes the expenditure of £21,900,000, signifies more than some appear to realize. It means that a demand may be made upon the Treasury to the extent mentioned. Before we pass this measure, I intend to refer to the cost of government in this country, and also the cost of a wrong public policy. Senator Brennan in his estimable speech , this evening dealt very exhaustively with the subject, but he did not quote some figures which I shall supply. He omitted to state the cost of Commonwealth and State Governments. When federation was first launched the cost of government was small, and did not occasion very much anxiety to our people; but as the years proceeded one of the anxieties experienced by the taxpayers of the Commonwealth was the rate at which the cost of government was increasing. To-day it stands at an extraordinarily high figure. At the inception of federation the cost of government, was only a little over £3 per head for Commonwealth and State activities; but during the intervening thirty years it has increased to over £14 per head of the population. The cost of government in Australia having more than quadrupled during that period, we cannot wonder at this country being so deep in trouble as it is to-day. I realize that there have been insurmountable contributing factors. For instance, the Great War caused a tremendous strain upon the man-power, financial resources, and spirit of the nation. But notwithstanding our financial resources, we . stand to-day committed to an annual expenditure, this year of approximately £30,000,000, for the payment of interest, pensions, and the protection and assistance of disabled soldiers, and soldiers settled on the land, all of which means levying taxation to that extent upon a population of a little over 6,500,000. That expenditure had to be met if for no other -reason than to preserve for ourselves and to posterity the glorious freedom which we now enjoy. I merely mention this for the purpose of generating in the minds of my hearers the need for addressing themselves to this subject on every occasion they can, in order to find out, if possible, whether there is not some means of easing the cost of government, and so easing the drain upon the resources of our people - their surplus earnings and power to consume. After all, we cannot depend on borrowed money for our administrative costs. Unhappily, in the past it has been the practice in this country for Treasurers, unable to square the ledger, to turn to the loan market, and by that means to supplement the revenue of the country in order to defray the expenses of legitimate administration. The time has come when, as Sir Otto Niemeyer has said, we must balance our budgets. We must deal with the problems of governments, just as a board of directors in charge of any business is bound to do in the interests of its, shareholders. We have to square up to the position, and say we must balance our budget honestly, and not rely on any adventitious aid in the shape of borrowed money. My parting word on this subject is that one of the main contributing factors to our present distressful period is the fact that the cost of government has gone up. Apart from the cost attributable to the war, it now is £9 per head of the population compared with a little over £3 when federation was established. That is to say, it has trebled within 30 years. We cannot go on like that. We have been told that as a result of the reduction in the value of our staple products, and an unfavorable exchange our national income has fallen from £650,000,000 to £450,000,000. The cost of government being £90,000,000, it is, therefore, roughly one-fifth of our national income.
– It is more than that.
– The figures I quote in this chamber always err on the safe side, because I do not want any one to contradict me if I can possibly avoid it. One-fifth of our national income is not being applied to the best advantage. If 20s. is to be spent by the Government, we can depend on it that it will not be as wisely spent as it would be by private enterprise. Quite rightly, this Government, through its Prime Minister, has declared that the country is dependent on private enterprise to absorb labour. If it were to depend on government enterprise to absorb the out-of-work in Australia to-day, not more than a fractional part of the unemployed could be absorbed. The fact that the Government has appealed to private enterprise in this connexion goes to show how much dependence is placed on individual effort to carry on the burden of the country. When the Government is engaged in lavish expenditure on various undertakings, it simply means diminishing the resources of those who are responsible for carrying on the industries of the country.
The policy of levying duties on certain products has gone on to an extraordinary degree, far above and beyond even the dreams of those who used to pin their faith to the efficacy of a tariff to bring about the prosperity of this country. When I came to this Parliament 25 years ago, the nian who dreamed of a tariff of 25 per cent, or 30 per cent., was looked upon as one who was not capable of - exercising a prudent opinion on public questions. But to-day, anything in the neighbourhood of 40 per cent., 45 per cent., 55 per cent, or even 60 per cent, is common talk.
– It is 100 per cent, in some cases.
– It is even 160 per cent., but in accordance with my usual practice, I am keeping well within the mark. The tendency is to pile on duties in the misguided belief that by doing so we shall bring this country into a prosperous .condition. But the goods have not been delivered. We have had embargo after embargo imposed, and rate after rate risen, but even the most hopeless fiscal fanatic in Australia cannot claim that this country is better off because of what has been done in that direction. On the contrary, its position is lamentable, and mainly because of the insane desire to put on duties, and, almost in the words of the Book of Genesis, “ Thereafter let there be prosperity and happiness “. In order to illustrate the effect of this policy, I have prepared three cards to show the movement of population since federation. Each card has 75 squares in black and white, representing the 75 federal electoral divisions. The first shows Sydney and Melbourne, with sixteen full members in this House, which was the position at the commencement of federation. After 30 years Sydney and Melbourne now have 24 seats, while the countryside has been deprived of eight. It is only a matter of simple calculation to say that in another 30 years the clamour of Sydney and Melbourne for still more representation will bear such fruit that these cities will have 36 members out of 75. They will then require only two seats more to control the continent, and bring about the happiest results dreamt of by our fiscal lunatics! Such is the three-card trick that the protectionists of Australia have been working on this unfortunate country of ours. “Where is the predicted prosperity of this country as the result of the application of a protective policy? Is it not high time we had a change, if for no other reason than to stop the mad drift of people to the two big centres of population ? There is, however, a revulsion that is playing sad havoc with the feelings of the people on the countryside. Like a jibbing horse under his load, they are no longer willing to undergo harsh conditions in pioneering the countryside for residents of the cities who have all the advantage of high wages. For my own part, I do not care what wages a man earns so long as he leaves a profit. Labour wanted a 48-hour week and it got it, but the 48-hour week is no longer fashionable. The pillar which commemorated that achievement of the Labour movement has been torn down. The/ policy is obsolescent. Labour is now down to a 44-hour movement. I remember what one genius said in a court in South Australia. He asked the judge to make the hours of labour 44 hours a week. The judge said, “ If I grant this, the next week you will ask for 36 hours, and the week after that, you will ask for 32. Where will the production of this country stand then “ ? This genius upended himself, and said, “ You are right, sir, we shall go on reducing the hours of toil “ - toil ! “ until we abolish work altogether “. See the absurd position into which Labour is rushing in thi* country! When such things are happening is it not time to call a halt?
It stands to reason that the wheatgrowers and the gold-producers will not continue their occupations if they find them unprofitable, but will soon join tho giddy throng in the cities. Then what will be the plight of the cities? An injury to one part of the community is an injury to all. When we force one section of the community to accept unduly hard conditions, that section will, like a jibbing horse, refuse to carry on any longer. We cannot blame them if they take that stand. We must maintain a reasonable balance between the city and the country, between those engaged in secondary production and those engaged in primary industries. When the man in the country iB afraid to plough or to sow his land, something is wrong. These things require looking into. Those engaged in secondary production must accept their share of the burden. Why should the man in the city live in ease and comfort at the expense of those in the country whom they call “ comrades “. If a weight has to be carried, it should be placed midway on the stick, not nearer one man’s shoulder than the other. One man should not bend under the weight of the burden while the other walks along jauntily making faces at the crowd. . The burden of taxation must be spread equitably over the community. I know the life of a wheat-grower from A to Z. . Many of those who are engaged in wheat ‘ production in light and dry soils are putting up a great fight. Even with superphosphates - something unknown to the farmers of Canada, the United States of America, and the Argentine - they cannot hope to reap more than 10 bushels to the acre.- Yet they are holding their own in the markets of the world against all comers. Why cannot those engaged in secondary production do the same? Canada exports secondary products to the value of £100,000,000 per annum, whereas Australia’s exports of such products are valued at only £2,000,000 each year. That section of the people which is always lagging behind when work has to be done, is ever in the forefront when favours are being distributed. The time is coming when clamour as they will for bread and amusements, as they did in the days of ancient
Rome, the people will tire, of them, and then will come an end to our political system, as in days that have passed, the Roman Empire came to an end.
Thinking men and women realize that the time has come for a review of our fiscal policy. Our tariff must be cut down by 25 per cent. The manufacturers of Australia will have to be made to understand that they must do their job without coddling. Until they realize the necessity for so doing, we shall never make any progress, or bring about any reform whatever. The Labour party should scrap its policy of protection, lt is a new plank of the party’s platform, which has been added since I was expelled from the movement. The policy of the Labour party is filling our cities, and robbing the countryside of its population. One section of our people is living in cotton-wool, while another section on which it depends is clothed in hair.shirts; one lives in comfort while the other rises early and remains working till late; one gets bounties, and embargoes, while the other gets taxes and promises. The country’s production and prosperity will fall unless a move perfect balance is maintained between primary and secondary industries, ‘
– I had intended to refrain from speaking on this bill, but since some honorable senators have seen fit to refer in unfair terms to a section of the community which I assist to represent. I feel constrained to speak. In this time of national crisis, when ail sections of the people should pull together, it serves no good purpose to indulge in abuse. It is wrong for Senator Payne to say that those persons in the community who, during the last year or two, have been deprived of the right to earn a living, and have, in consequence, become somewhat discontented, are communists, and must be dealt with as such. Such talk will not solve our problems.
– I was not referring to those out of work, but to men in constant employment.
– It is cowardly to suggest that good Australians, 100,000 of whom are returned soldiers, are communists because when unable to maintain those dependant upon them they sometimes outstep the bounds of the law.
– I did not refer to them at ail; I referred to the railway workers.
– The honorable senator cast a slur on all workers. 1 refuse to accept his statements as being applicable to Australian workers generally. The honorable senator referred to the case of one worker in NewSouth Wales who, he said, was fined £10 by his union and transported back to Victoria, because he completed his work within less than the union’s log time. That was an isolated case.
– It was one of scores.
– The honorable senator unfairly represented the position. The workers have gained much from the trade union movement. Had there been no trade union movement, Australia would have had no White Australia policy, nor would conditions be so satisfactory for either employer or employee as they now are. It is easy for an honorable senator in a coward’s castle to abuse the workers of the community.
– I rise to a point of order. I ask that Senator Kneebone be required to withdraw two imputations against me - one that I made a cowardly attack on Australian workers; the other that I occupy a coward’s castle. I made no cowardly attack on the workers; I simply stated facts. It is not a sign of cowardice to state facts. On the contrary, it is cowardly to attempt to cover facts by making false statements.
The DEPUTY PRESIDENT (Senator Plain). - I did not hear the honorable senator make the statement attributed to bini.
– Like Senator Payne, Senator Brennan was so lacking in argument that he also got back to the bogy of communism in Australia. 1 remind him of what took place in a recent by-election in South Australia, in which State one person in every ten is living on the dole, one person in three is out of work, and one out of every two who are working is on part time. At that by-election a communist candidate sought the suffrages of the people, but he received so few votes that he will forfeit his deposit of £25. When we have thousands of workers deprived of the right to earn an honest living, and to provide bread for their children, it is surprising that there has not been more lawlessness. If honorable senators were to exchange places with these unfortunates, I wonder how long they would remain law-abiding citizens?- The wonder to me is that the unemployed in our midst have been so law-abiding. Last Sunday Senator Payne was in the Sydney Domain, where he saw a deliberate attempt by a number of politicians to provoke an outbreak of disorder. According to press reports, there were 50,000 persons present; 2,000 of whom were in the immediate vicinity of the speaker; but, notwithstanding that those speakers made most disparaging remarks concerning some of those present, they were unharmed, and no trouble occurred.
– Was the honorable senator there?
– The . press reports make it clear that the speakers were subjected to considerable interruption; but, in -view of the statements that were made by them, that was only to be expected. It speaks well for the behaviour of the Sydney crowd that the speakers were able to leave the Domain uninjured, and ‘ that no trouble occurred. When dealing with the serious problems facing the country, it is wrong of honorable senators to indulge in abuse and recrimination. The Commonwealth and the States will only be able to extricate themselves from their present difficult position by means of additional wealth produced by the workers of this country, t therefore ill becomes any man occupying an important public position to in any way misrepresent or reflect upon those 400,000 Australian workmen, including a large number of Australian soldiers who, at the present time, are being denied the right to earn a living.
– I rise to a point of order. I cannot allow the honorable senator to charge me with misrepresentation. No one has more sympathy for our returned soldiers than I have. This is the third time that Senator Kneebone has deliberately misrepresented my remarks.
– If I have misinterpreted the honorable senator’s views I readily withdraw what I said; but I repeat that it ill becomes any honorable senator to refer in derogatory terms to those who are unemployed, inoluding possibly. 100,000 returned soldiers.
– I did nothing of the kind.
– I shall be glad if the- honorable senator will particularize the disparaging statement which, he alleges, was made by Senator Payne.
– I was referring to thoseportions of the speeches delivered by Senator Payne and Senator Brennan, in which, without any discrimination, they cast the slur of communism, if it is a slur, upon the workers of the community.
– I referred to the action of the Railway Workers Union, and the honorable senator knows it.
– I listened carefully to the speeches of both the honorable gentlemen mentioned, without discovering in them anything to which exception could be taken by any honorable senator.
– If I have misrepresented Senator Payne I am prepared to withdraw what I said; but I certainly was under the impression that he very severely and unfairly criticized the working classes of this country. The honorable senator referred particularly to the action of the Railway Council which is affiliated with the Pan-Pacific Secretariat.
– It is affiliated with the Red Internationale.
Senator - KNEEBONE.- I ‘am not aware that even that is a crime; but, as I have said, it is affiliated with the PanPacific Secretariat, an international trade union organization with world-wide affiliations. Its discussions are directed to the solving of international labour problems, and I think all will admit that, under present world conditions, the problems which beset all countries cannot be solved without international co-operation. We have had evidence of this urgent need for the closest co-operation within the last few weeks, even in Great Britain. According to recent cable news, the Governments of Great Britain, United States of America, and France are working together in a triangular arrangement for thesolution of grave European tronbles.
Senator McLachlan referred in somewhat scathing terms to the action of the Postmaster-General (Mr. A. Green) in preventing the broadcasting from station 5AD, of speeches delivered at a recent meeting convened by a body known as the Adelaide Citizens’ League. I have no comment whatever to make with regard to the broadcasting system. Before it is possible for any one to sit in judgment on the action of the Postmaster-General, it is advisable to study the newspaper report of the speeches delivered and determine whether or not they were of a non-political character as alleged. I extract the following from a newspaper report of that gathering: -
Freedom for Private Enterprise Demanded. “Federation Strangling South Australia.”
Mr. A. L; Langsford, country organizer of the league, said
Under the federal bill the farmer was asked to work for untold hours each day, and at the end of the year was to be divested of the product of his labour. Wheat marketing was one of the most highly, complicated and specialized businesses in the world, yet the qualification of the Federal Minister who was in charge of the bill, and who would, in all probability, secure the appointment of the Minister in charge of the pool, was trained as a State school teacher.
That may be all right. Christ was a carpenter, and the first Labour Prime Minister of Australia was a compositor. I think that the Right Honorable W. M. Hughes was a school teacher, so also was Mr. Lyons, the Leader of the Opposition in another place. Mr.Fisher and Sir Joseph Cook were both miners. . -Mr. Langsford wont on to say -
In theory the growers were supposed to control the pool. The Government member would be the chairman of the board.
If that statement had been broadcast to the farmers of South Australia it would have been absolutely misleading, because it was deliberately untrue. Mr. Langsford added -
There was a catch in it, and that catch was that the regulations were the all governing feature of the Commonwealth bill and the regulations had to be approved by the Government, which in the present instance meant caucus, ruled from the Trades Hall..
This was the kind of propaganda which it was desired to issue from the King William-street Farmers Citizens League, which was brought into existence to cut the ground from beneath the old Liberal party in South Australia. This, too, is the party which took Mr. Lyons to its bosom as the saviour of the country, but later dropped him like a hot brick, and is now usurping the position formerly occupied by the other anti-Labour forces in South Australia. Because the PostmasterGeneral refused to allow the broadcast of speeches delivered at the meeting in question it is alleged that the Government acted unfairly in the matter. The report continues -
Farmers, who were -bitterly opposed to bounties as a rule, were invited to join the band of pickpockets.
Such a statement as that should certainly -not be broadcast. Mr. Bagot, the organizer of this new “ non-party-politi cal “ party, was also reported as saying - A serious attempt at revolution is being prepared for 1st August.
Utterances like that are calculated to create panic. Certainly, if that speech had been broadcast, the people of South Australia would have been under the impression that there would be a bloody revolution in Sydney on the 1st August. Senator Payne, I understand, went down to Sydney to find out all about it. Apparently he was disappointed. I may add that this “ non-political “ party has already selected its candidates for the next federal election’. Mr. Bagot went on to say- -
August 1 is a Saturday, August 2 a Sunday, and August 3 a public holiday in New South Wales. The Lang Government in New South Wales is masquerading under the honorable title of Labour - is purely Communistic; and Lang supporters to-day maintain the Federal Government in power.
Hence the stage is now well set to secure the complete victory of Communism - by peaceful penetration if possible - but otherwise by force.
To-day in Australia, owing in part to a world-wide depression beyond our control, but largely accentuated by Russia, and also partly to the inevitable consequences of our own defiance of economic laws, there exists a condition of affairs favorable to the overthrow of our system of government.
I warn the people who control business operations in this State, the executives of the larger firms, the bankers, insurance managers and heads of the churches, that unless they are prepared to get together and actively support our movement, not only will they go down, but they will deserve the fate that awaits them.
There is a striking similarity between the position in Australia and that in the Mother Country at the moment, and it is significant that, in both countries, Labour governments are faced with the responsibility of restoring order from chaos. In Great Britain the first Labour Government, when it was defeated, left a substantial surplus of approximately £20,000,000, but after Mr. Churchill had been handling the till for a few years, the second Labour Government found a shortage of £40,000,000. We have had much the same experience in Australia. Mr. Philip Snowden, the British Chancellor of the Exchequer, in introducing his budget recently, said -
The budget may be described as a makeshift budget, intended to tide over a difficult and, I hope, temporary time.
The New Statesman and Nation, reviewing the budget, stated -
There are to be no large measures of national development, no great housing schemes, no big constructive effort to set the unemployed to work. Wo are to stagger on, waiting for recovery to come to us from the world outside.
That might have been said in Canberra, because the position in this country is almost identical with that of the Mother Country. It was then stated there were four proposals by means of which it was hoped to bridge the gap between estimated revenue and expenditure in the Mother Country. The first was a reduction of the expenditure on unemployment benefit; the second was a reduction in departmental expenditure proposed by the economy committee, which would be the counterpart of our expert committee; the third was a reduction of interest obligations by a loan conversion scheme on lines similar to the conversion proposal about to be undertaken in this country. It should, however, be noted that the whole of the £7,000,000,000 of British indebtedness is dead weight war debt, whereas only onethird of the Commonwealth national debt is in that category, the balance of our obligations being represented by assets of a more or less tangible nature, so, by comparison with Great Britain, our position is not so deplorable as some pessimists and calamity-howlers would have us believe. Only by co-operation can we succeed as a nation. Production alone will enable us to balance our budgets and pay our way, and production is not possible to the extent required except by the maximum employment of our wealth-producing power. More than 500,000 persons in Australia to-day are not pulling their full weight, not because of any laziness on their part, but because of the present horribly mismanaged state of society. Patching up will only postpone the evil day. These Estimates make provision for a depressed state of society generally. Expenditure is to be reduced here and there, and those reductions will be reflected correspondingly iu the revenue received, because hundreds of thousands of really good Australians who, so far, have been able to live an independent life, will be forced down to the level at which they will be compelled to apply to the State for assistance by way of either the dole or a pension.
There is nothing of a satisfactory nature in the Estimates for the best people in Australia - the workers, whether they be in primary or secondary industries. No provision is made to assist the farmers, and not a penny is provided for the relief of the unemployed, sustenance for whom during this year the experts have told us will cost £13,000,000. Presumably, that task has to be undertaken by six different State authorities. Men are going from New South Wales to South Australia, because in the latter State they get a little more in their tucker bag. One State is being worked off against another. The cost is unnecessarily high, because we have not up-to-date machinery to deal with the unemployed. Unemployment is a national problem. With the application of science to industry, it must increase, and permanent means for dealing with it must be found. The only sound, logical, scientific way is a national unemployment insurance scheme. It has been said that the present is not an opportune time to embark upon such a scheme ; but if unemployment increases - as it must’ do - we shall be forced in a few months to resort to some sensible scheme for dealing with those whom we cannot absorb in industry. The farmers are expected to find some comfort in a loan in a dim and distant future.
The dearest thing in life is health, and it is a national responsibility.
I heard it stated in this chamber to-night that six different State authorities could handle the matter better than the single Commonwealth authority. That is altogether wrong. Anything that oversteps the boundaries of a State is a national problem. When people are healthy, they should be found work. To gay that we cannot accomplish that in the present stage of the nation’s history is to admit that we are not the men we should be.
It is argued that there shouldbe no government interference with any activity. When one alights from the train at the beautiful Adelaide railway station, of which we have heard so much, one finds in- a prominent position an invitation to tourists to deposit their old clothes in a big basket that is provided for the purpose, the object being to send them to necessitous farmers. That is the best that can be done by those who say, “Don’t let the Government interfere ; we will look after the farmers “. Night and day in Adelaide many good women are making up clothing for despatch to needy farmers. That is not the way to handle a national industry.
– -It should be systematized and handled properly. It is not fair to ask farmers to wear the old clothes of any other individual. There are in South Australia a sufficient number of unemployed women who, if put to work properly, would make all the clothing required by the farmers. The question is simply one of organization. The woollen mills could provide the material ; the machines are available for making it up ; and there are workers who could turn out the articles required. That State has drought relief legislation, State bank legislation, concessions in regard to the removal of starving stock from droughtstricken areas, debt adjustment legislation to save the farmer from being thrown out by a mortgagor. All that is Government interference. The time has passed when private enterprise could be trusted to do these things. It is not their job, and they should not be allowed to undertake it.
Let us consider the position of Great Britain, where there are between 2,000,000 and 3,000,000 unemployed, and where this year it is expected that there will be a deficit of something like £120,000,000. Are they falling down on their job? In Australia we are adopting the line of least resistance, reducing the old-age pensioner at one end of the social ladder and cutting out schools at the other. That is robbing the children of their education. Nothing constructive is being done. When it is suggested that a few million pounds should be spent, the cry is “You must not”. Evidently, it is considered better to let some people starve and others to go to a premature grave.
– Does the honorable senator contend that the British Government is doing more for its people than the Australian Government?
– The present budget in Great Britain allows for adeficit of £120,000,000. The assistance ofFrance and the United States of America had to be obtained to save the Gibraltar of finance in Threadneedlestreet. A few weeks ago the Prime Minister of Great Britain said “ I know what it is to walk along the Strand and envy the newsboys because, whatever they earn, it is more than I am earning to-day “. The following is a list of the works that are to be undertaken to assist unemployment in that country: -
SenatorHerbert Hays. - How does that compare per capita with Australia?
– We are doing nothing. The largest contributor to our financial difficulties to-day is our railway systems. A Minister stated this afternoon that, but for the interest which has to be paid on the capital expenditure, the railways of South Australia would be a payable proposition. There is suggestion of repudiating that interest. All that we have done is to cut the wages of the railway workers by as much as 30s- a week. A man with a family, working on the railways to-day, is in some instances receiving less than he would getwere he on the dole.
– Does the honorable senator suggest that we should repudiate our interest liability?
– I do not. But we are repudiating the worker, and yet not assisting ourselves. The Commonwealth has assumed responsibility for the whole of the debts of the States, but has no control over their assets.
– The States are liable for their debts.
– A State may default, in which case the Commonwealth would be liable. That has been our bitter experience within recent weeks. In England there is a network of railways that are privately owned. I have stood on Clapham Junction bridge and seen five or six trains racing abreast.
– The railways had to be commandeered during the war.
– Private enterprise always fails in an extremity. In such circumstances, the resources of the nation have to be mobilized and controlled by the State. That ought to be possible also in time of peace. The late Sir Denison Miller was asked on one occasion “ Could you use the Commonwealth Bank to greater purpose than this in time of peace “ ? and he replied, “ Certainly I could “. A national bank can be used during a period of reconstruction more readily and extensively than during a period of destruction. The Commonwealth has assumed responsibility for the liability incurred on the railway systems of Australia, which are the principal cause of our deficits. The amount required to finance its own federal lines is £750,000. It is not common sense to have seven different authorities operating seven different services in seven different States, with almost that number of gauges. In England a committee was appointed to inquire into the railway systems of that country, and it recommended that the entire system should be electrified at a cost of £400,000,000, the work to be spread over from fifteen to twenty years, during which time employment would be given to 60,000 men. When costs are mentioned, the reply invariably is : “ Fancy undertaking these works in a time of depression “ ! It is in times of depression that public works should be speeded up. The report of the Weir committee goes on to say that the electrification of the railway system of Great Britain would lead to the provision of speedier services and a greater number of trains over shorter distances, greater public convenience, cleaner travel, and no smoke. It also stated that the railways were not likely to be displaced as the nation’s main transport system. In Australia the fool’s policy has been adopted of building railways and bituminous concrete roads side by side, and also of subsidizing an air service to take passengers away from the railway. Great Britain’s difficulties are immeasurably greater than ours, yet it is said that the electrification of its railway system would fill the greatest gap in the industrial equipment. It has also been said that “ the Weir report is a useful contribution to the gospel of organization and forethought, which socialists have been preaching for long years past.” It costs Australia £13,000,000 a year to keep a number of people in idleness. What would it cost to place its railways under one central control, to remove duplications, unify the gauges, and provide a single national system of transportation?- The cost has been estimated at £60,000,000. In a few years, at the present rate of expenditure, that amount will be spent in feeding the unemployed, and there will be nothing to show for it, whereas the unification of the railways would make them a payable proposition. We cannot attain our objective by continually referring to the effects which tha tariff is supposed to have upon certain forms of industry, or to the action of those who support the communist policy. Other countries in which there are no tariffs, are feeling the depression to the same extent that we are. If our primary industries are to prosper, and our primary products are to be successfully marketed overseas, we must adopt some means of international cooperation. The secretary of the coal-miners organization in New South Wales was once asked by the coal-owners if his organization would work the coal-mines if they, were given to them. He replied that it would not, because it did not know the world’s requirements and the technique of the industry. A colliery proprietor, in speaking to a representative of the coal-miners, once said, “You fellows always go on strike at the wrong time. We see that you strike only when our stocks of coal are more than sufficient to meet current requirements “. That is the position which obtains in practically every industry in Australia, and it will not improve until we have an organization capable of gauging the world’s supply and demand of different commodities. The tariff and the Arbitration Court are not responsible for our financial difficulties. The imposts placed upon employers are always passed on to some other section of the community. I know of an instance in South Australia where workers engaged in delivering goods received an increase of 6d. a day in their wages. The employers said: “Very well, we shall increase the cost of each delivery by 6d.” That meant that a driver who handled 20 loads a day, brought in that number of additional sixpences to his employer and received one. Of course, such a policy is economically unsound, and should not be allowed to continue.
I have already stated that the amount involved by the United Kingdom in paying one year’s interest would be sufficient to transform the whole of the existing railway systems in that, country, with their conflicting interests, into one electrified system. According to the recommendations of the Weir Committee, coal could be concentrated where electricity, capable of meeting the requirements of an electrified railway system and of supplying the power for other industries as well as supplying the lighting requirements of the nation, could be generated. During the past five years Great Britain has spent on building roads an amount sufficient to meet the cost of electrifying the whole of its railway systems. Notwithstanding all this we are foolish enough to continue our present policy of road construction. Roads cannot show a profit.
– Profits wouldbe obtained by increased land settlement.
– The value of the land would be improved; but the Government would not receive the benefit. During a period of depression* we should adopt one or two schemes which would arouse the enthusiasm of the people, and show them that there is an opportunity for them to do something useful. We cannot restore financial stability by continuing to cut until we get down to the bare bone, and there is nothing left to cut. If the present system continues, our position next financial year will be worse than it is this year. We cannot save the nation by tinkering with the tariff or by reducing wages. This does not produce anything. The committee in Great Britain, to which I have referred, recommended that the railways should be brought together under one head. A psychology should be developed. In this connexion the psychological effect would be tremendous. The committee’s report continues -
We are undergoing au industrial revolution. lt would be wrong to say that the coal age has ended. Coal, translated into electric energy, gas, or oil, will continue to dominate industry. But the age which depended for its industrial power upon the burning of raw coal is certainly drawing near its end.
We have wonderful coal deposits iu Australia, and we would not be drawing upon our imagination if we suggested that by generating electrical power, at such places as Newcastle where some of the coal-mines are idle and the workers are starving, a wonderful impetus could be given to industry generally. After every war there are periods of depression ; the people begin to wonder what is happening. After the Boer Avar a committee was appointed to ascertain the cause of the depression which followed. According to the British Methodist Text Book - which I presume is a reliable source - the committee reported that depression was due to the decline of agriculture and the decay of apprenticeship. Apprenticeship has ceased to exist in Australia. It is impossible for parents to apprentice their boys to any trade. In Great Britain young men are growing up and marrying on the dole. In Australia there are young men from sixteen te nineteen years of age who have never worked, and who will be entitled to vote before they have realized what it means to earn their living. What will be the value of the votes of such persons) The committee also stated that the growth of cities was a responsible factor. Senator Lynch said the cities of Melbourne and Sydney are developing to such an extent that they will soon be able to control the representation in this Parliament. Fully one-half of the people in Australia are living within ten miles of the post offices of the capital cities. They are not encouraged to go into the country and naturally live where the conditions are more congenial. The committee to which I have just referred also stated that the depression was due to over.time. drinking and gambling, the introduction of machinery, seasonal trades and the employment of women and children in industry. The use of machinery was condemned by John Stuart Mill, Emerson, Ruskin, and William Morris. President Hadley, said that the suffering brought about by the introduction of machinery is terribly severe.
– Did those authorities condemn the introduction of machinery?
– Yes, but possibly under certain conditions.
– It is the change over that is most difficult.
– At a recent conference held in London an eminent authority said that we are creating a man power which we cannot control, and that if we do not control it it will control us. It is useless to sit idly by while we have so many thousands of unemployed, and who, when they demand consideration, are termed Communists. Dr. Sir E. John Russell, D.S.C., F.R.S., speaking in the Exeter Hall, London, this year, said -
Mankind is in possession of a new machine that can easily achieve things impossible to our fathers. The machine has saved labour, but it has not saved the labourer. Instead an ever-decreasing force is over loaded with work, while an ever-increasing force falk out of the ranks of the producers who lose their purchasing power. As the machine is only in the early stages of development, we must expect this process to continue. What are we doing with this machine? Where do we want to go? What is our goal as a community? Science can give no answer. It can only produce a better machine. Politics certainly cannot answer. Statesmen cannot tell us. What is needed is a clearer conception of the relations of community of men to each other and to the universe … It is something different from a statement of the relation of the individual to himself and his Creator, something more than the setting forth of an idea) for a personal life, which happily has been done for us. We want to use the machine for common good. The greatest boon in this generation would be a leader - a Martin Luther or a John Wesley - who could not only see the way himself, but make others see it and follow.
To what extent have the workers been displaced by machinery? In America we find that in four years the output of the farmers increased by 10 per cent., while employment decrease’d by 4 per cent. In four industries - manufacturing, farming, mining and rail roads - 2,000,000 workers were displaced by machinery. Fully 70 per cent, of American bituminous coal is mined by machinery. The output of pig iron by the steel companies has been increased threefold with the same number of employees. In four years the tobacco companies increased their output by 53 per cent., and reduced their employment figures by 13 per cent. The railways handled 30 per cent, more traffic with 1 per cent, less labour. Men were never made for machines, but machines for men.
I come now to the point from which the right honorable the Leader of the Opposition (Senator Pearce) started. His wise suggestion was that our national problems cannot be solved by legislation. Political economy is one thing, industrial economy is another. I had the pleasure of attending all the conferences called’ by the previous Government to meet the members of the British Economic Mission, and I regret that the Sydney conference broke down through what was, in my opinion, an unwise action on the part of some of our people. The point that I wish to make is that we cannot rely entirely on political action to effect the country’s emancipation. Men may be the best of politicians, but may not know anything about industrial matters. Side by side with Parliament there should be set up an organization that knows industry. The right honorable the Leader of the Opposition has suggested an economic conference. Germany had one, and as a result has made a considerable advance. We have been talking about naval and military disarmaments, and honorable senators have suggested that if we only cut down our tariff everything in the garden will be lovely. It will be nothing of the kind. If we are to maintain our ideal of a White Australia, and to refuse to accept the goods produced by cheap and coloured labour in other countries, we must have some tariff barrier. But we may have to get down to solid economic facts. Every worker recognizes that 20s. worth of wealth will not provide him with 25s. as a dividend. Dr. J. H. Richardson, of Leeds University, touching on the same point - that national emancipation and rehabilitation will not be brought about by tariffs or parliamentary action - say9 -
Tariffs are unsatisfactory for dealing with international competition. The method is negative and is based on isolated national policy. More positive is the regulation of production and trade by international agreements. Large numbers of producers, acting in isolation and often in ignorance of the trend of world demands, are likely to cause successive waves of over-production and underproduction.
That is exactly what has happened today as a result of a hotch-potch system of every one doing as he likes, and the devil taking the hindmost.
The amplitude of these waves would bc reduced if estimates for each of the great staple commodities were made of probable world requirements for the near future, and production adjusted to these requirements. The allocation of quotas of production to the different countries and to individual producers involves many difficulties but would be superior to the present chaos of unregulated competition, which results in unfair practices and international bitterness. Regulation of production would be more difficult in agriculture than in industry, because total output depends not only on the area under cultivation and the capital and labour applied, but on the weather conditions, which may result in a pood or a bad harvest. Where marketing is individual, producers are usually compelled to sell their output immediately, and this disturbs the world’s economic system by causing wide fluctuations in prices. To meet this difficulty, regulation of the scale of production should be supplemented by . . . creating a reserve or pool in the fat years to meet the shortages of the lean years.
Those arc the views held by a great section of the working classes of this country than whom no one is more desirous of seeing the rehabilitation of the country carried out properly, because it means their future well-being and happiness.
– I think it behoves members of Parliament to consider carefully how we can best make use of the money we are spending upon defence, and that while not setting ourselves up as the equals of the naval, military or air experts, we should be in a position to offer some criticism if not assistance. History has shown that naval and military leaders always base their preparations for future wars upon the experienced gained in the last preceding war. For that reason, at the outbreak of the last war in 1914, the greater proportion of our defence forces consisted of mounted men. There were practically no air forces; and machine guns were regarded merely as a small adjunct to infantry units. It was not until the war had been in progress for two years that methods were devised and subsequently effectively employed to meet the altered conditions of warfare. Tanks, aeroplanes, poison gas, individual machine gun units and submarines completely revolutionized the means previously employed for carrying on war. At the present time, most of the nations, excepting Russia and France, are spending the greater part of their* defence votes on naval and military armaments. France and Russia are spending large sums on their air forces. It behoves us to consider exactly how Australia would stand in the event of another war. We should endeavour to secure the most efficient, and at the same time, the most economical means of attack or defence, and the quickest means of achieving the desired result. Air development during the post-war period has proved that the nation which .has the greatest superiority in the air is likely to prove the victor in any conflict. Victory has always gone to a nation capable of putting the most mobile force into the field, and an air force is the most mobile in the world to-day. It has been truly said that the mobility of the baggage train fixes the movements of an army. A Blow-moving baggage train, and inferior communications will hold up any attack. The Tartar invasion of Europe, under the wonderful leadership of Genghis in the 14th century, actually swept all before it and conquered a great portion of the then known world. Because of their great mobility, these mounted hordes could concentrate overwhelming forces at any selected point before the enemy could bring up reinforcements. Theywere thus enabled to operate on a wide front and destroy their adversaries completely. It will be possible for the armies of the future to be split up into different portions. There will probably be large aeroplanes fitted with small artillery, and carrying large quantities of bombs, representing the present ground artillery; scout planes, corresponding to the cavalry of to-day; and also a lighter type of aircraft fitted with machine guns, and apparatus for distributing poison gas, representing the infantry. The effect of a surprise attack by thousands of such machines would be stupendous. Large aeroplanes could also be used for the transport of troops. The harbours, railways, canals, and factories of an enemy would be made the objective of such an attacking force. In warfare of that kind, the nation with the superior force would be in an infinitely better position than one which depended largely on its naval and land forces for its defence.
I mentioned the use of poison gas in aeroplanes. Tests of machines equipped todistribute poison gas have proved them to be thoroughly effective. Although in 1925 a protocol prohibiting the use of poison gas and bacteriological methods of warfare was signed by 44 powers, that protocol, unfortunately, has not yet been ratified. It is useless to say that in another war such methods would not be adopted. History shows that when nations are at war, treaties are frequently disregarded, and that whatever a nation thinks will be most effective in achieving its purpose is adopted. The nation which is best equipped is generally the victor. In days gone by we had the armoured knight, whose armour was proof against the arrows of the archers; but as time went on and our methods of warfare changed he would have fallen an easy victim to a man equipped with powder and bullets. Similarly, in the wars of the future, the more up-to-date the equipment the greater the chances of victory.
Now let us see how seaplanes could be used for naval warfare. When we consider the cost of a super-dreadnought, such as the H.M.S. Hood, which cost £9,000,000, it is easy to understand why an admiral of a fleet is careful that such a vessel shall not come to any harm if it can possibly be avoided. The loss of money and personnel resulting from the loss of such a ship would be very great. During the Great War, two of the largest fleets in the world remained bottled up ‘ in either Scapa Flow or Kiel Harbour for the greater part of . the war. After two years of warfare, Germany found the submarine to be a far superior weapon to the huge battleship. Indeed, a battleship, costing £9,000,000. unprotected by a fleet of other lighter craft, was entirely at the mercy of a submarine if the latter happened to get within striking distance. So great was the destruction wrought by submarines that in one month they sank nearly 9,000,000 tons of British shipping. At that time it was impossible for new ships to be built quickly enough to replace those which were destroyed.
– What has all this to do with the Appropriation Bill ?
– I pointed out that on the first reading of an Appropriation Bill the discussion need not be revelant to the bill. The discussion so far has amply justified the Standing Order.
SenatorCOOPER. - I was leading up to the proposed expenditure on defence. During the period of Germany’s sub marine campaign, 11,000,000 tons of allied and British shipping were destroyed. It was found that seaplanes were most effective in . combating submarines, because at the heights which they were able to reach it was much easier to detect the presence of submarines than it was from a destroyer or other ship. Aircraft which accompanied convoys were able to. locate submarines or spot for the gunboats and destroyers, or to drop depth - charges, and in that way the submarine menace was successfully combated.
It may be said that the British Empire is bound to maintain the freedom of the seas, and to protect mercantile shipping. That could be done effectively by aircraft carriers carrying both battle planes and scout planes. Indeed, such a system of defending convoys would be both cheaper and more effective than protecting them with cruisers. A scout plane is speedy, and able to cover a big range ; while from the high altitude which it can reach, the range of vision is considerable. Such a vessel could carry a sufficient number of battle planes to ward off any attack on the convoy. .
The British Air Force has demonstrated that in ten minutes 100 aeroplanes can put an effective smoke screen over an area of ten square miles to a depth of from 50 to 100 feet. Such a smoke screen would be a wonderful protection to a convoy of ships. They can also lay an invisible but deadly poison gas against which all but the most elaborate gas masks would be ineffective. A cruiser of that type used to protect merchant ships during the war cost about £1,700,000 whereas one of the largest aeroplanes built at the present time - a machine capable of flying from 600 to 800 miles without refuelling - costs about £17,000. One hundred aeroplanes of that type would cost only as much as one cruiser, but they would give far greater protection to a convoy. If a cruiser protecting a convoy of ships were attacked and sunk, the ships would be at the mercy of the enemy; whereas it would be practically impossible to destroy every one of the 100 planes. There would still be some left to protect the convoy. The Blackburn Iris, one of the largest air machines used by the British Government, can carry bombs weighing 4!,000 lb., in addition to its equipment of guns and fuel. Visualize the effect of 100 planes of this type able to drop nearly 200 tons of high explosive on every craft. The cost of a super-dreadnought is £9,000,000. For that expenditure it would be possible to obtain a fleet of 1,000 aeroplanes, which would have the advantage of greater mobility, and there would not be the danger of the whole of the fighting force being destroyed at once, as in the case of a super-dreadnought.
– We should require seaplane carriers,
– Carriers could not be provided within that estimate. The proposed fleet would not comprise only the heavier type of machines; it would include light scouting aeroplanes, costing from £1,500 to £2,000, fast fighting machines, and the necessary complement of huge bombing ‘seaplanes. I understand that tho very latest type of plane carrier, the Eagle, capable of carrying 500 planes, has been launched in Great Britain at a cost of between £4,000,000 and £5,000,000. At a time like this we should explore every avenue of economy, even in relation to defence expenditure, and I submit that the proposal which I have outlined has advantages which should commend it to the consideration of honorable senators. Extraordinary developments have taken place in recent years in the construction of aircraft. The large Dornier type machine, capable of carrying as many as 100 persons with a full -load, has been tested and found successful. As to the increasing effectiveness of air machines in warfare, I may mention that during the last war the dropping of 12 tons of bombs in one month was considered to be a very satisfactory achievement. Compare that record with the possibility of presentday machines, 100 of which could drop in one raid, no less than 200 tons of high explosive bombs It is contended, in support of seaborne craft for naval defence, that a moving vessel is always a difficult target for an aeroplane, but we should not disregard the known effects of depth charges. Although a seaplane might not be able to register a direct hit on a war vessel,. a bomb dropped in close proximity to one, even of the most modern type, would, in many instances, put it completely out of action. At the present time seaplanes are equipped with torpedoes. Summed up, there are many points in favour of greater attention being paid to the development of the air force as an effective arm in our defence scheme. The first which I would mention is the fact that aircraft are interchangeable for use with equal effectiveness in land or sea operations, lt is a mistake to assume that its area of effective operations is restricted, because modern aeroplanes can remain in the air for many hours and travel great distances without refuelling. The second point in its favour is the fact that, because of its ability to rise above danger zones, an air force is particularly immune from gas attacks. Furthermore, its mobility is a factor which should not be overlooked, and it provides a more effective means of defence for the expenditure of a given sum. This is an important consideration in countries of large area and small population such as ours, and also for governments responsible for the maintenance of order in a far-flung territory, such as the British Empire. In this connexion, the figures relating to the expenditure of the British Government for the maintenance of order in Mesopotamia are informative. In 1920-21 the cost to the British Government for the policing of Mesopotamia with an efficient land force, was £38,500,000. In the following year, as the result of an agitation for retrenchment in Great Britain, the expenditure was reduced to £20,750,000. This expenditure was further reviewed, and the lowest estimate for the policing of that area with land forces was fixed at £10,000,000. Representations were then made to the Royal Air Force to furnish estimates for an alternative scheme, and the Royal Air Force authorities drew up a proposal to police the area with military aeroplanes, supported by two battalions of the Imperial army at a cost of £4,000,000. Shortly afterwards the Royal Air Force received authority from the British Government to accept the entire responsibility for that important work. Accordingly all land forces were withdrawn and the Royal Air Force, in its first year carried out the work for £1,500,000. I understand that a further reduction is anticipated this year, as reports indicate that the hitherto rebellious tribes have been disciplined, and now prefer to live peaceably. Their changed attitude is due to the watchfulness of military aircraft. In view of the possibilities, as indicated by the experience of the British Government in Mesopotamia, the Government would be well advised to set aside a larger proportion of defence expenditure for the development of our air force. I do not suggest that it should provide more money on the Estimates for defence, but that it should allow the Royal Air Force to participate more in the funds that are available for this purpose. It should also encourage the development of commercial aviation to a greater extent because it is only in this way that we are likely to get together a considerable number of well trained air pilots, who, in the event of hostilities occurring, could quickly be trained for war service. It is, I think, admitted that once an aviator has developed an air sense, the actual technical training to qualify for war service will not occupy anything like the time necessary to train a raw recruit into a finished infantryman. I, therefore, ask the Government to consider carefully the suggestions which I have made. A liberal grant to the commercial aviation companies would prove to be one of thebest investments which the Government could make in the interests of the defence of the Commonwealth.
Question resolved in the affirmative.
Bill read a first time.
Standing and Sessional Orders suspended.
.- I move-
That the bill be now read a second time.
The Prime Minister promised the Leader of the Opposition in this chamber that an opportunity would be given to honorable senators to discuss fully the Appropriation Bill. We have had a full discussion on the first reading, and the Government is now concerned with what is to happen to-morrow.
– The whole of the business will be disposed of to-morrow, if we adjourn at a reasonable time to-night.
– I have no knowledge of the intention of the Opposition, but it seems obvious that the public servants will not be paid to-morrow.
– They will be paid on Friday - the usual payday.
– I do not intend to assume the responsibility for refusing to pay them to-morrow. There is no reason why this bill should not pass through all its stages to-night. We have had a long discussion, during which honorable senators have expressed various views.
– I rise to a point of order. While on the first reading of a bill the discussion need not be relevant to the subject-matter; on the second-reading, the rule is, I think, that the discussion must be strictly relevant to the subject-matter of -the bill. I therefore submit that the Minister’s remarks are not relevant to the bill.
– That is perfectly true. As I told the Senate some time ago the discussion on the first reading need not be relevant, and, indeed, on this occasion it has notbeen relevant to the bill. I ask the Minister, in speaking on the second reading, to confine his remarks to the subject-matter of the bill.
– I have endeavoured to do that. The bill makes provision for the appropriation of a certain sum of money and, as honorable senators know, the Government has been compelled to cut its expenditure to the bone. There can now be no objection to the bill unless the Opposition wishes to increase or to reduce the expenditure still further. This Government is not going to have its nose rubbed in the mud. I, as the representative of the Government, wish this bill to be passed to-night, and if the senators opposite adjourn the discussion, the responsibility for the delay in paying the public servants must rest, not with the Government, but with the Opposition. I want honorable senators to pass this bill to-night.
– We are the servants of the public, and not of the Government, and we do not take our orders from the Minister.
– I plead with the Leader of the Opposition to allow this bill to go through to-night. That is a fair proposition. I have extended the utmost courtesy to him, and I have no complaint to make in regard to his treatment of me. But the matter is urgent, and I do not think that the Opposition should take advantage of the fact that they are in a majority in this chamber to humiliate the Government. The responsibility for any delay will be on them, not on the Government.
Motion (by Senator Sir George Pearce) put -
That the debate be adjourned.
The Senate divided. (The President - Hon. W. Kingsmill.)
Question so resolved in the affirmative.
Motion (by Senator Barnes) proposed -
That the Senate, at its rising, adjourn till to-morrow at11 a.m.
Honorable Senators. - Make it 10 o’clock.
Senator Sir GEORGE PEARCE (Western Australia) [11.44]. - On behalf of the Opposition, I offered to meet at 10 a.m. to-morrow, but the Leader of the Government said that 11 a.m. would be sufficiently early. I told him that I felt quite sure that by dinner time to-morrow the Senate would have passed the remaining legislation. In justice to the Opposition I wish to say that it has never desired to delay the passage of the Appropriation Bill, nor has it done bo. But when the negotiations took place between Mr. Scullin, Mr. Lyons, and myself, it was distinctly understood that the Senate should have a full opportunity of debating that measure in a proper manner, and that no attempt would be made to rush legislation through this chamber. That assurance, I may say, was repeated by the Leader of the Government in the Senate and by the Prime Minister in another place, in the statements that were made following the conclusion of those negotiations. The Leader of the Government ought to have acknowledged the fact that we have a full right to debate the first reading, because that stage of an Appropriation Bill fulfils the functions of grievance day in another place. That right has not been unduly exercised. The Opposition has no intention of delaying the passage of the bill. We are willing to meet, if necessary, at 10 a.m. to-morrow. There will be ample time before the dinner adjournment to dispose of all the business that remains to be dealt with.
– I ask leave to amend my motion to provide that the hour of meeting be 10 a.m.
Leave granted ; motion amended accordingly and, as amended, agreed to.
– I lay on the table the report of the War Pensions Inquiry Committee of representatives of returned soldier organizations, appointed to consider matters relating to the necessary reductions in war pensions. The Government is giving consideration to this report.
Motion (by Senator Foll) proposed -
That the paper be printed.
Debate (on motion by Senator Daly) adjourned.
Sheet Glass - Heinz and Company - Royal Australian Navy: Statement by Senator Foll - Darwin Landing Ground - Civil Aviation - Maribyrnong Ammunition Works.
Motion (by Senator Barnes) proposed -
That the Senate do now adjourn.
– As the hour is late, I ask leave to incorporate in Hansard two statements by the Minister for Trade and Customs relating to importations of sheet glass and the products of Heinz and Company.
– Such statements cannot he incorporated in Hansard unless they are read.
– To certain statements made, by Senator Payne to-day, the Minister for Trade and Customs (Mr. Forde) has furnished replies. On other occasions honorable senators have obtained leave to incorporate unread matter in Hansard.
– Only as part of their own speech. I point out to the honorable senator how utterly futile it would be to allow a senator to incorporate in Hansard a speech he had not delivered.
– It is not my speech.
– If that is so, the objection to the course proposed by the honorable senator is accentuated.
– The first statement furnished by the Minister for Trade and Customs relates to sheet glass, and is as follows: -
The present rates of duty on plain clear sheet glass, about which Senator Payne had so much to say this evening, were first incorporated in the tariff and scheduled to come into operation on the 1st July, 1926. The rates were recommended by the Tariff Board in 1925 after inquiry and report and were subsequently agreed to by Parliament as a deferred duty. The date of operation of these duties, however, was postponed from time to time. As it became evident to importers of. sheet glass that a local company was preparing to commence the manufacture of this commodity in Australia steps were taken to import large quantities at the nominal rates of duty then operating. A perusal of the trade statistics will confirm the fact that abnormal importations occurred during the period immediately preceding the imposition of the increased duty. In 1926-27, 11,000,000 square feet were imported; in 1927-28. 12,000,000; in 1928-29, 10,000,000; and in 1929-30, practically 20,000,000 square feet, despite the fact that with the accentuation of the depression the building trade was inactive.
It is true that the increased duties under the 1921-28 tariff were deferred until the 1st August, 1930, and that, despite this fact, a tariff resolution was introduced into the House of Representatives on the 19th June, 1930, which provided for immediate payment of the increased duty. The. Government’s justification for taking such action is that importers were stocking up with largo quantities of sheet glass in anticipation of the increased duties being imposed, and holding such stocks for the higher price which would afterwards obtain. Moreover, the terms of a deferred duty provide that such duty shall not be imposed until the goods concerned are made in Australia in satisfactory quantities and of a satisfactory quality. With this knowledge the importers loaded up stocks in 1925-26, and have kept heavy stocks ever since in order to prevent the Government from bringing in the deferred duty. So long, therefore, as the importers could keep the supplies of glass up to a point that precluded the Australian Glass Company from selling any appreciable quantity of glass, the possibility of commencing manufacturing in Australia was delayed. Before deciding to impose the increased duty-
And this point should be emphasized in justice to the Minister for Trade and Customs -
– I did not refer to the present Minister. The duties were imposed before he assumed office.
– Senator Payne stated to-day that the Minister for Trade and Customs without justification or preliminary inquiry imposed the increased duties. The Minister’s statement continues - trade inquiries were made by the department, and it was ascertained that at least twelve months’ normal requirements of sheet glass were held by various interests. As the building industry was not in a normal condition, it was evident that the quantity imported would last much longer than the period of twelve months which was assessed as representing normal requirements. In order to prevent importers from obtaining still larger stocks, the Government decided to impose the duty as from the 20th June, 1030, with a view to bringing about local manufacture in Australia, as early as possible.
The company which has equipped itself, at a cost of £250,000, to manufacture sheet glass did import substantial quantities primto the imposition of the increased duty. This was done in order to enable the Australian company to establish a trade in the actual class of glass it proposes to manufacture and thus establish a market before the factory began to operate. To have done otherwise would have courted disaster, for the simple reason that a factory turning out large quantities of glass for which no market had previously been provided would quickly bc obliged to close down while the sales organization was being built up.
Criticism has been levelled against the company for its action in importing supplies before the imposition of the increased duty. Tt has been stated that the company did so to hold stocks against the rise in price which would inevitably follow. Complaints were made to the department that higher prices had resulted since- the imposition of the increased duties and inquiries made by the department elicited the interesting information that immediately the new duties were imposed importing and distributing firms raised their prices by an amount equivalent to the increase of duties, despite the fact that only a nominal rate of duty had been paid on the huge stocks held by them. There was absolutely no justification for such action by the importers, as it was deliberate exploitation of the public, including primary producers who use glass houses to grow certain of their products.
A refreshing contrast in business morality is furnished by the action of the Australian company which proposes to manufacture sheet glass. This company refused to increase its price for stocks on which the higher duty had not been paid. It not only maintained its pro-tariff selling prices, but inquired into the bona fides of each purchaser in order to ensure that sales were made to actual users and not to the dummies of the glass importing and distributing houses. Honorable senators should hesitate to plead the cause of these glass importers who have proved that they are only too ready and willing to exploit the public.
An aspect which will interest those senators interested in the welfare of tomatogrowers, and other primary producers who use glass houses, is that the Australian Glass Company has given an assurance to the Minister for Trade and Customs (Mr. Forde) that, when they are producing sheet glass, they will supply unlimited quantities for primary producers’ glass houses at prices substantially lower than have been paid in the past for imported glass upon which duty at very nominal rates was imposed.
The Minister for Trade and Customs (Mr. Forde) has supplied the following information concerning Heinz products :- ;
Shortly after the embargo was placed upon pickles, sauces, &c. (item 82 of the tariff) in April, 1930, Heinz and Company’s Australian representative submitted a request for a partial lifting of the embargo on Heinz products. His company had a turnover of approximately £300,000 on the Australian market, and approximately £250,000 worth was affected by the prohibition. The request was based on the grounds that as Heinz. and Company intended to commence manufacturing in Australia in 1031, they should be allowed to import sufficient quantities of their products to tide them over the transition period, and to keep their lines before the public. Eventually, it was agreed to permit them to import £30,000 of goods on condition that they established a factory. The intention to manufacture in Australia was, at a later date, abandoned by Heinz and Company for various reasons. They honorably adhered to their agreement, because of £30,000 worth of goods for which permission to import was given, nothing whatever has been imported. From inquiries it is also evident that the existing factories in Australia manufacturing pickles, tomato sauce, &c, are ample to supply Australia’s requirements during a period of depression.
Senator J. B. Hayes raised certain questions relating to the shale oil industry in connexion with which I submit the following information: -
In January last a committee was appointed by the Commonwealth and State Governments, representative of the two Governments, of the industry, and of the employees’ organisations, with the honorable the Minister of
Mines of Tasmania as Chairman. Mr. H. W. Gepp, consultant to the Commonwealth, was the Commonwealth’s nominee.
The reference to the committee was -
1 ) to ascertain what obstacles were in the way of developing the industry; and
whether these obstacles could be overcome, and, if so, what means should be taken for the purpose.
Several meetings of the committee have been held, and sub-committees on mining, on retorting, and on refining and economies of marketing, were appointed, and these sub-committees have reported back to the main committee.
At a meeting of the main committee, held on the 17th April, 1931, at Launceston, the following resolution, inter alia, was carried: -
1 ) That, with a view to facilitating the investigation of the shale oil industry in the Latrobe-Railton districts, the committee recommends that an endeavour be made to amalgamate all interests concerned ; and
That the committee approve the offer of Mr. Gepp to investigate the position without fee, and as a private consultant to formulate a scheme for amalgamation, and that the interests concerned be recommended to accept this offer.
Mr. Gepp has investigated the position in detail, and submitted to the chairman of the main committee his recommendations regarding the amalgamation of interests. Following upon the receipt of these recommendations, the honorable the Minister of Mines of Tasmania, as chairman of the committee, called together at Launceston, at the end of last month, representatives of the interests concerned. As the result of discussion a scheme of amalgamation has been approved tentatively for submission to the shareholders of the companies concerned, and a draft agreement is being presented accordingly.
Work by the staff of the Mines Department of Tasmania in connexion with the geology and the average oil content of the deposits has been proceeding for several months past. The proposed new company will doubtless carry on the investigation into the economics of the industry, which has been commenced by the Tasmanian Shale Oil Committee. Pending the result of these thorough investigations, no definite pronouncement regarding the future prospects of the industry under existing conditions can be made.
– I congratulate the Assistant Minister (Senator Daly) upon his industry in supplying the Minister for Trade and Customs (Mr. Forde) with a report of my remarks on the imposition of glass duties. Immediately after the dinner adjournment, the Minister for Trade and Customs asked me if I would be good enough to supply him with the Hansard report of my speech so that he could furnish me with a reply to the statements
I made. I informed him that I should be glad to do so at the earliest possible opportunity, and I think the Minister should have allowed me to comply with that request before commenting further upon the subject. I made no attack whatever upon the present Minister for Trade and Customs. That gentleman was - not the Minister controlling the department when the duty to which I referred was imposed. That is a point which the Assistant Minister apparently overlooked. I merely said the Minister for Trade and Customs.
– Who. was the Minister?
– It docs not matter. The Minister controlling the department when the duty was imposed was not the present Minister for Trade and Customs. The Assistant Minister who said that the Minister for Trade and Customs was justified in the action he took has not denied my statement that in imposing this duty the spirit and letter of the law was broken. Neither has he definitely stated the quantity of glass held in store by the glass manufacturing company for whose benefit the duty was imposed. Clearly a high duty was imposed without any evidence as to its necessity. I asked a question some time ago as to the increase in the price per case of ordinary window glass in Sydney at -the beginning of the month following the imposition of the duty. The Minister replied that the increase in price was 15s. per case. I have not forgotten that. If the Minister knew that the Australian glass manufacturing company did not increase the price of glass in - Sydney, surely he should have said that the company directly interested in the duty did not increase the price: He said that the price of glass was increased in Sydney by 15s., but I know that in Melbourne it was increased by 20s. The Minister said that that was an instance of the way in which the people have been exploited. By whom have they been exploited? I contend that the exploitation was due to the Minister’s action. If he had not taken the action he did, the exploitation could not have occurred. If a heavy reduction of duty was contemplated, the price of the commodity affected would be reduced, because of the importations under lower duties. It is purely a matter of business. The point I endeavoured to make was that the law distinctly provides the procedure to be adopted before a deferred duty can be imposed. That procedure was not adopted by the Minister, and the duty was imposed without regard to the provisions of the Customs Act with respect to the imposition of deferred duties. I do not regret what I said. I stated the facts; and I shall take an opportunity, at a later stage, of dealing with the matter more fully when I have compared the Minister’s reply with my own statement.
– I desire to make a personal explanation. Earlier in this sitting, Senator Foll took umbrage at some remarks which I made on Tuesday afternoon in the course of a speech in this chamber, and said that I had accused him of cheap sneers and gibes at the Royal Australian Navy. He assured the Senate that his remarks were made more in jest than in earnest. I am glad to know that the honorable Senator was not in earnest; but I desire to remind him of the following statement that was made by him on the subject of the Australian Navy on the 21st July last, fis reported in Hansard at page 4119 : -
On a previous occasion I referred to the necessity to revert to a system in vogue at the inception of federation of subsidizing the British Navy instead of endeavouring to maintain our own naval unit I do not want it to be thought that I am hostile to an Australian navy, but we have to consider the actual position. At present we have three ships which spend most of their time in Sydney harbour with the exception of the time they are in Melbourne during Cup week.
– They put in many weeks of training in Tasmanian waters.
– In the summer time. They arc now on a cruise in northern waters, because Mie conditions in the south at this time of the year are, perhaps, too frigid.
I think that my interpretation of the remarks made by him was quite justified, and I have no apology to offer for what I said, on Tuesday afternoon.
– When discussing the Works and Buildings Estimates, certain questions were asked by honorable senators ; but, owing to the lateness of the hour, I had not an opportunity then of supplying the information required. I am now in a position to inform Senator Foll that, included in the provision of £9,550 for civil aviation works, an amount of £500 is hypothecated for extension of the aerodrome at Darwin. Senator Foll also referred to the question of closer co-operation between the Royal Australian Air Force and ‘ the Civil Aviation Department. That a step has been taken in that direction is shown by the fact that, as from the 1st July, 1931, the latter branch has taken over the maintenance of a number of Royal Australian Air Force landing grounds at country centres in Victoria, New South Wales, South Australia and the Northern Territory.
With regard to Senator Lynch’s remarks concerning the Small Arms Ammunition Factory, I may say that that factory is an important- one in the big chain of munition establishments at Footscray and Maribyrnong, the Small Arms Ammunition, Gun Ammunition, Explosives, Ordinance and other factories, as well as tho administrative offices, being located in that area. The centralization of these activities in that locality results in economical management, control and general administration. The transfer of the Small Arms Ammunition Factory, as suggested by Senator Lynch, is not only undesirable, but economically impracticable.
Question resolved in the affirmative.
Senate adjourned at 12.15 a.m. (Thursday).
Cite as: Australia, Senate, Debates, 5 August 1931, viewed 22 October 2017, <http://historichansard.net/senate/1931/19310805_senate_12_131/>.