Senate
22 September 1939

15th Parliament · 1st Session

  1. Senate
  2. 15th Parliament
  3. 1939

The President (Senator the Hon. J. B. Hayes) took the chair at 10 a.m., and read prayers.

page 1016

QUESTION

MIGRATION

Senator KEANE:
VICTORIA

– Is the Minister for the Interior in a position to make a statement as to the present procedure in regard to migration, particularly from enemy countries?

Senator FOLL:
Minister for the Interior · QUEENSLAND · UAP

– A natural consequence of events overseas is that migration from enemy countries has been entirely suspended. In respect of refugee migrants who are located in other countries, each case is considered on its merits, as previously. The arrangements in connexion with the migration of British subjects have not been altered, but. naturally not so many British migrants are able to come to Australia as previously.

page 1016

QUESTION

WHEAT INDUSTRY

Senator FRASER:
WESTERN AUSTRALIA

– In view of the likelihood of Parliament going into recess this week, is the Minister for Commerce in a position to make a statement with regard to the wheat industry?

Senator McLEAY:
Minister for Commerce · SOUTH AUSTRALIA · UAP

– The Government has issued a statement, which appears in to-day’s press, setting out the first step that it proposes to take in order to deal with this subject. Those proposals should prove very satisfactory to honorable senators from Western Australia who have made representations on this subject.

page 1016

PRINTING COMMITTEE

Sixth report of the Printing Com mittee, brought up by Senator Leckie, and - by leave - adopted.

page 1016

QUESTION

CABINET MEETINGS

Senator ABBOTT:
NEW SOUTH WALES

asked the Leader of the Senate, upon notice -

  1. Is it a fact, as suggested in the press, that during the recess the Cabinet intends to hold its meetings in a State capital city instead of at the national capital city?
  2. If so, is it not considered that this is a deliberate defeasance of the very spirit and object of the founders of the Constitution in endeavouring to provide that Parliament and Government would be free from the environment and sectional influence of State capitals?
Senator McLEAY:
UAP

– Cabinet meetings will be held in Melbourne and, I presume, in Sydney also.

Senator Collings:

– And probably some in Canberra.

Senator McLEAY:

– That is a matter which will be decided by the Prime Minister from time to time. In view of the enormous task ahead of Cabinet Ministers, and the fact that the head-quarters of the Defense Department and the Department of Supply and Development are in Melbourne, as also is the shipping branch which is under the control of the Commerce Department, it is of the utmost importance that Ministers shall be on the spot in Melbourne in order to attend to the many details that will need prompt consideration during the next six weeks. Officers of the Department of Commerce have been working day and night for the last three weeks in connexion with negotiations with the British Government, for the disposal of surplus produce from Australia.

Senator Collings:

– That work has been done from Canberra.

Senator McLEAY:

– Having almost completed those negotiations, Ministers have now to devote their attention to the planning of the shipping to take those products to the other side of the world.

Senator Ashley:

– Will the Government charter ships?

Senator McLEAY:

– I assure honorable senators that the work can be done effectively only from Melbourne in the immediate future; but doubtless Ministers will be visiting Sydney, Brisbane and Adelaide.

Senator Abbott:

– They ought to be in Canberra.

Senator McLEAY:

– I appreciate the interjection; but as it will be necessary for Ministers to work day and night, and be in the closest contact with key men, it is essential that they shall be in Melbourne for the next six weeks.

page 1016

QUESTION

ENLISTMENT OF AUSTRALIANS ABROAD

Senator ALLAN MacDONALD:
through Senator Wilson

asked the Minister representing the Minister for Defence, upon notice -

  1. Will the Government ascertain from the High Commissioner in London the number of Australians enlisting for war service in the Allied armies, in France or elsewhere?
  2. Will Australia House in London be urged to ensure that no delay occurs in advising the next of kin in Australia regarding the welfare of any Australians so enlisting?
Senator FOLL:
UAP

– A reply will be furnished to the honorable senator as early as possible.

page 1016

QUESTION

WHEAT AND BARLEY PRICES

Senator JAMES McLACHLAN:
SOUTH AUSTRALIA · UAP

asked the Minister for Commerce, upon notice -

  1. Seeing that the Government has decided to acquire all wheat now held in Australia, except that held by farmers, will the Minister inform the Senate what advance the Government intends to make to farmers; and will he see that the initial advance is as high as possible?
  2. What action is the Government proposing to take to protect the interests of farmers who have been forced to sell their wheat since the outbreak of war at prices much lower than those ruling to-day, or the figure they would be likely to receive from the pool?
  3. Does the Government - propose to treat wheat now held in Australia as a pool separate from the 1939-40 crop?
  4. In view of the difficulties in making sales of barley overseas and the fact that homeconsumption sales will be considerably below the cost of production, will the Government consider the question of fixing a reasonable home-consumption price for barley?
  5. Will the Government consider the question of having barley graded on the following lines: - Barley No. 1 quality; barley No. 2 quality; barley, feed quality?
Senator McLEAY:
UAP

– The answers to the honorable senator’s questions are as follows : -

  1. A considerable quantity of wheat acquired by the Government has been sold. The first advance will be made as soon as possible and will be as high as possible, subject to the approval of the Wheat Board.
  2. This matter is still under consideration.
  3. Yes.
  4. A representative deputation of barleygrowers met and discussed this matter generally with the Minister for Commerce at Mai tland, Yorke Peninsula, South Australia, on 18th August and their representations are being given careful attention and consideration. A further deputation of representative barley interests will wait on the Minister for Commerce in Melbourne on Monday.
  5. Representations have already been made to the Minister to have barley graded ; one section seeking five grades and another section three grades. This matter will be further discussed with the deputation in Melbourne on Monday.

page 1016

BLACKSMITHS IN DEFENCE DEPARTMENT

Senator FOLL:
UAP

– On the 20th September, Senator Keane. asked me whether arrangement would be made for the appointment of three shifts of blacksmiths in the defence factory at Maribyr- nong.I am now in a position to say that the staffing arrangements at the munitions factory at Maribyrnong are adequate to meet present needs.

page 1016

QUESTION

CUSTOMS TARIFF (No. 2) 1939

Bill received from the House of Representatives.

Standing and Sessional Orders suspended.

Bill (on motion by Senator Foll) read a first time.

SecondReading.

Senator FOLL:
Minister for the Interior · Queensland · UAP

– I move -

That the bill be now reada second time.

In doing so I draw attention to the fact that when the Government decided, early last year, to remove the import restrictions imposed in May, 1936, under what is known as the trade diversion policy, I introduced a temporary protective measure and assured honorable senators chat all of the items that were affected by it would be inquired into by the Tariff Board. Those tariff increases were made in May of last year, but investigations by the Tariff Board took some time. Up till May of this year, the board had not completed its review of the higher duties, and that is the reason why they were re-introduced in Customs Tariff, No. 7, which is now before the committee. Since May, the Government has received practically the whole of the Board’s reports on the items covered by Customs Tariff, ‘No. 7, and on the 14th September, Customs Tariff Proposals No. 9 were introduced. They contained amendments based upon the findings of the Tariff Board. In a few instances these amendments will eliminate the higher duties imposed in May, 1938: in other instances such duties will be reduced, whilst a number will remain practically untouched. In committee,I shall be pleased to supply to honorable senators any information that they may desire regarding the importations, and the protective duties in respect of each item.

Motion (by Senator Collings) put -

That the debate be now adjourned.

The Senate divided. (President - Senator the Hon. J. B. Hayes.)

AYES: 13

NOES: 18

Majority 5

AYES

NOES

Question so resolved in the negative.

Senator COLLINGS:
QueenslandLeader of the Opposition

– I trust that my action in moving the adjournment of the debate on this bill will not be misunderstood. The Opposition has no desire to delay its passage; but the Leader of the Opposition should have a few minutes at least to peruse such an important measure. That opportunity has not been afforded, and consequently I am quite incapable of debating the bill intelligently. I know that the Government is determined to dispose of a number of important bills by to-night. I have not prepared the necessary matter to enable me to deliver a second-reading speech, and I do not believe in displaying my unpreparedness without placing the blame upon the Government. In committee we shall do our best to elicit more information than has been supplied. Obviously we are in a difficult and unenviable position. We cannot even obtain answers to questions on notice, and now we are asked to debate a bill immediately -the second reading has been moved.

Senator KEANE:
Victoria

.- The purport of this measure should have been explained more fully. I understand that the bill has passed the House of Representatives and that certain items in the schedule were debated last year or earlier this year. Why cannot the Government arrange for some of the business to be transacted by Parliament to be handled simultaneously by both branches of the legislature? When the Senate is not fully occupied we could discuss bills such as this and avoid undue haste.

Senator FOLL:
Minister for the Interior · Queensland · UAP

– in reply - I can assure honorable senators opposite that the Government has no desire to be discourteous. Ministers are working under abnormal pressure, and as the House of Representatives sat until after six o’clock this morning, and as Ministers were up throughout the night we could not obtain answers to questions upon notice before the Senate met this morning. Some of the departments concerned are established in Melbourne.

Senator Collings:

– I have had a question on the notice-paper for two days asking what the Government proposes to do with the “ Watchman “ who recommended that Canberra should be scrapped.

Senator FOLL:

– This bill deals with tariff items affected by a previous government’s trade diversion policy including the removal of certain embargoes. Temporary duties were imposed at rates which the Government thought would prevent undue foreign competition. The Tariff Board has since dealt with the items involved and this schedule gives effect to its recommendations. I cannot give to the Senate all the information at this stage, but if so desired in committee I shall state whether duties have been increased or decreased as a result of the Tariff Board’s recommendations.

Senator Keane:

– Have not these duties been in operation since May of this year ?

Senator FOLL:

– They become opera tive as soon as they are tabled. Generally speaking, it is impracticable to handle business simultaneously in both, chambers; but that is done wherever possible. The Constitution prevents money bills from originating in this chamber, but by tabling the budget papers in the Senate, financial policy can be discussed here without waiting for the appropriation bill to be received fromthe House of Representatives. I express regret that the business has to be rushed, but this course has to be followed to enable the Government to proceed with the. tremendous volume of work which it has on hand.

Question resolved in the affirmative.

Bill read a second time.

In committee:

Clauses 1 to 3 agreed, to.

Schedule

Senator WILSON:
South Australia

– Do any of the duties in this schedule differ from those recommended by the Tariff Board?

Senator FOLL:
Minister for the Interior · Queensland · UAP

.- Some of the duties under the General Tariff are slightly higher than those recommended by the Tariff Board. That is done to permit of international bargaining; but all the British Preferential and Intermediate duties have been recommended by the Board.

Schedule agreed to.

Title agreed to.

Bill reported without requests; report adopted.

Third Reading

Motion (by Senator Foll) proposed.

That the bill be now read a third time.

Senator ABBOTT:
New South Wales

. - In a time of war I do not take exception to measures adopted by the Government to meet a national emergency, but there has been a peace-time movement to encourage the complete manufacture of motor cars in Australia, and this would probably involve an almost prohibitive import duty. If the local market were sufficiently large, the complete manufacture in this country of motor cars would be highly desirable; but I am not yet satisfied, in view of the present stage of development in this country, and the present population, that the time has arrived for us to endeavour, to compete with the United States of America and other large and highly industrialised countries. As a country representative, I do not support the bill insofar as it aims at the complete manufacture of motor cars in this country.

Senator A J McLACHLAN:
SOUTH AUSTRALIA · NAT

– More motor cars are used in Australia than in Italy, in which country there are large works for their manufacture.

Senator ABBOTT:

– That may be so. but Australia is a country of wide, open spaces, and has a population of only 7,000,000.

Senator FOLL:
Minister for the Interior · Queensland · UAP

– The only item in Division 16 that covers original equipment for a motor car is that relating to springs. The special increased duties on gear wheels relate solely to replacements. A big step forward has been made in Australia in the manufacture of replacement parts, and I believe that, this is a step in the direction of thecomplete manufacture of motor cars in this country. With regard to replacements the Australian industry should be protected.

Question resolved in the affirmative.

Billread a third time.

page 1019

EXCISE TARIFF 1939

Bill received from the House of Representatives.

Standing and Sessional Orders suspended.

Bill (on motion by Senator Foll) read a first time.

Second Reading

Senator FOLL:
Minister for the Interior · Queensland · UAP

– I move -

That the bill be now read a second time.

The excise tariff proposals now under dis- cussion relate to one item only, namely, item 19, “ Valves for wireless telegraphy and telephony including rectifying valves “, the excise duty on which, it is proposed, shall be reduced from 2s. each to1s. 9d. each; that is, a reduction of 3d. a valve. This amendment of the excise tariff is associated with the amendments made by the Customs Tariff Prosposals (No. 7) of the 3rd May, 1939, of the duties on imported wireless valves. The import duty under the general tariff on wireless valves was increased by 6d. a valve, and with the proposed reduction of the excise by 3d. each on Australianmade valves, an increased protection of 3d. each against British valves and 9d. each against foreign valves has been given to the Australian manufacturer, who is now accorded an effective protection of 6d. each by the British preferential rate and 2s. 3d. each by. the general tariff. The importation of wireless valves from North America was restricted for a period of two years to- approximately 50 per cent, of previous importations. During that period production in Australia increased fourfold, and a second Australian manufacturer commenced business. Before the import restrictions were removed, local production costs and landed duty-paid costs were examined. A comparison of these costs indicated that, if the duties were permitted to remain unaltered, importations would tend to revert to their previous dimensions, and the increased capital, amounting to about £200,000. which had been expended in further developing this industry, as well as the increased employment created, would have been endangered. It was decided, therefore, to adjust both the import and excise duties, in order to give increased protection to the local manufacturers, pending a full inquiry into the industry by the Tariff Board. The board has submitted its report, and the Senate has already dealt with the import duties which have been adopted in view of that report. The import duties passed by the ‘Senate are based on an excise duty of1s. 9d. each, as now proposed, and, accordingly, I submit the present proposal for endorsement.

Senator LECKIE:
Victoria

.- The reduction of the excise duty of 2s. each to1s. 9d. each on valves for wireless telegraphy and telephony is a step in the right direction, but the system or imposing excise duty on goods manufactured in Australia is altogether wrong. The import duty and the excise practically balance one another. I should think that a better way of getting revenue could be found. Why have wireless valves been specially chosen as the subjectmatter of a separate bill? Care should be taken by the Government that the principle of reducing the protection on articles of everyday use that are’ manufactured in Australia shall not -be extended.

Senator ALLAN MacDONALD:
Western Australia

– I also desire to know why wireless valves have been specially picked out as the subject -of a separate bill instead of being included among various other items which must still be awaiting attention, as far as excise duty is concerned. Is it to be assumed that Amalgamated Wireless (Australasia) Limited, in which the Government is a large and influential shareholder, suddenly requires this extra protection ?

Senator FOLL:
Minister for the Interior · Queensland · UAP

– This measure dealing entirely with wireless valves was introduced some time ago, when no other excise matters were awaiting consideration by the Parliament, and the bill has now come from the House of Representatives for ratification. The remarks by Senator Leckie will be brought under the notice of the Government. The only explanation that can be given is that, before wireless valves were made in Australia, they were considered by the Government to be a luxury item, but 1 agree that wireless sets have now become practically a necessity in the homes of the people.

Question resolved in the affirmative.

Bill read a second time.

In committee:

Clause 1 agreed to.

Clause 2 (Amendment of tariff).

Senator WILSON:
South Australia

. - The Minister did not make it clear whether the adjustment of the excise duty in conjunction with the import duty is in conformity with the recommendation of the Tariff Board.

Senator FOLL:
Minister for the Interior · Queensland · UAP

– I point out to the honorable senator that the Tariff Board does not handle excise as that is purely a revenue duty. In respect of the import duty on this item, the Government, decided upon a higher general rate than was recommended by the board.

Senator Wilson:

– What was the reason for departing from the Tariff Board’s recommendation?

Senator FOLL:

– The principal reason was revenue, but the Government also wished to take full advantage of the scope which these items offered for bargaining in trade negotiations.

Clause agreed to.

Clauses 3 and 4 agreed to.

Schedule

Senator LECKIE:
Victoria

.- I take this opportunity to amplify the remarks which I made on the second reading. No excise duty existed on wireless valves when Amalgamated Wireless (Australasia) Limited commenced to manufacture these articles. For a time that company had a free hand, but so soon as it was threatened with competition an excise duty was imposed. Consequently,I suspect that some peculiar manipulations have taken place in this matter. In that respect I do not blame the present Government. However, the method adopted in dealing with this matter does not ring true. It has been suggested to me that excise duty was imposed on wireless valves deliberately in order to give

Amalgamated Wireless (Australasia) Limited a free hand in this field. I do not believe in monopolies. Indeed, the more companies we encourage to manufacture any particular article the greater becomes the volume of employment, and the community generally benefits. Ido not like this method of getting revenue, and I suggest that this matter warrants closer examination in order to ensure that no particular company is scoring some advantage at the expense of competitors. In view of the fact that Amalgamated Wireless (Australasia) Limited is controlled to a large extent by the Commonwealth Government, we should dispel any suspicion that excise and customs duties are being used in any way that would assist a government-controlled concern at the expense of private enterprise.

Senator FOLL:
Minister for the Interior · Queensland · UAP

– I assure the honorable senator that this excise duty was not imposed in order to favour Amalgamated Wireless (Australasia) Limited at the expense of any competitor. In 1930, when the manufacture of wireless valves in Australia was first mooted, the Government announced that, in order to recoup itself some of the loss of revenue from import, duty, which would result from the establishment of the industry locally, an excise duty would be imposed. That action was not taken, however, until this industry had been given an opportunity to get on its feet, and to produce an article equal to that previously imported. That is the history of this duty. I assure the honorable senator that no attempt has been made in any way to benefit one company as against another.

Schedule agreed to.

Title agreed to.

Bill reported without, requests; report adopted.

Bill read athird time.

page 1020

INCOME TAX ASSESSMENT . BILL 1939

Bill received from the House of Representatives.

Standing and Sessional Orders suspended.

Bill (on motion by Senator McBride) read a first time.

Second Reading

Senator McBRIDE:
Assistant Minister · South Australia · UAP

– I move -

That the bill be now reada second time.

The principal amendment, particularly from the point of view of revenue, which it is proposed to effect under this bill is contained in clause 3 which relates to absentee holding companies. The purpose of that amendment is to discontinue, so far as those companies are concerned, the allowance of the rebate of income tax at present allowed on dividends received by them out of profits derived from operations in Australia. It is designed to obtain from profits passing to absentee holding companies a greater revenue contribution than that now obtained from the flat rate of tax paid by the Australian operating company on the profits which it derives from this country. Under Common wealth taxation law, profits made by a company are subject to a flat rate of tax and dividends distributed by the company to its shareholders.are taxed in the individual shareholders’ assessments at graduated rates determined by the total a mount of taxable income derived by each shareholder. Each of these shareholders is allowed a rebate of tax on the dividend at the company rate of tax or at the shareholder’s rate of tax. whichever is the loss.

Honorable senators will readily appreciate that when dividends are paid by a company to a. holding company no income tax is payable by the holding company, as the rebate of tax on the dividends assessable to the holding company : at the company rate is equal to the amount of tax assessed to the holding company. Where dividends arc. paid by an Australian operating company to a resident holding company and, inturn, by that resident holding company to individual shareholders. Commonwealth income tax at the graduated rates of tax in excess of the company rate is payable by those individual . shareholders, and payment of the tax assessed is enforcable as against the individual shareholders. But where dividends are paid, by an Australian operating company to an absentee holding company, and, in turn, by that absentee holding company to absentee individual shareholders, Commonwealth income tax at the graduated rates of tax in excess of the company rate is assessable to those absentee individual shareholders; but payment of the tax assessed cannot, be enforced as against the absentee individual shareholders, because they have no assets in this country which may be levied for payment of the tax.

In the two sets of circumstances which 1. have described the burden of income tax falls upon individual shareholders in a resident holding company, whilst absentee individual shareholders in an absentee holding company, similarly deriving dividends from profits made in this country, cannot be compelled to meet their obligation to make a direct, income tax contribution tothe revenue of this country. Very large amounts of profits are taken annually from Australia by. these absentee holding companies for distribution to absentee individual shareholders; there is no reason why these absentee individual shareholders should continue to enjoy freedom from the pay ment of income tax, and there is every reason why they should be called upon to make some contribution to the defence and development of this country.

The Government considers that its proposal for the withdrawal of the rebate, of tax allowable under the present law on dividends paid to absentee holding companies is a. step in the direction of the more equitable spreading of the burden of income tax amongst shareholders generally. Although payment of Commonwealth income tax by absentee individual shareholders in absentee holding companies cannot be enforced because the shareholders and their assets are beyond the jurisdiction of the. Commonwealth, there will be an indirect payment, of tax by the absentee individual shareholders, as the fund ofthe absentee holding company available for distribution to the absentee individual, shareholders will be diminished by the amount of income tax which the holding company will be called upon to pay.

With regard to the payment of the tax, I would inform honorable senators that the tax assessed should be paid by the absentee holding company. If, however, there is default by the absentee holding company in payment of the tax, the Commissioner of Taxation is empowered by the law to require the Australian operating company to pay the tax out of any dividends which may subsequently become payable to the absentee holding company.

There is just one further aspect of this proposal of the Government which calls for some explanation. I refer to the suggestion that has been made in some quarters that the adoption of the proposal will involve double taxation. The contention that the Government’s proposal involves double taxation is sound only if it is agreed that profits which are made by a company and distributed to its shareholders should bear tax at the flat company rate only, and that when those profits pass out of Australia through the medium of an absentee holding company into the hands of absentee individual shareholders no further Commonwealth income tax should be payable. Honorable senators will agree with me, I am sure, that there should be no differentiation between the liability to income tax on dividends received by individual shareholders through the medium of resident holding companies and the liability of absentee individual shareholders similarly deriving dividends through the medium of absentee holding companies.

The question of whether double taxation is involved in the Government’s proposal leads to a consideration of the wider question of what constitutes double taxation. That question may best be answered in the words of Lord Wright in the case of Hely v, Hutchinson - a case in which the House of Lords considered the problem whether there had been double taxation in the levying of tax on profits or gains of a company, and on dividends paid to a shareholder in the company. These are the words of Lord Wright -

The English company is taxed on the balance of its profits or gain - that is, on its income. The shareholder is never taxed on the company’s fund of profits, but only on the dividend which comes to him in payment of the debt which is created when the “company declares the dividend. The tax is in every case on the individual’s income, not on a fund possessed by another person, the company, even though it is the fund of profits of that company, from which the individual’s income or part of it will be paid . . . The fund which is taxed in the hands of the. company, and the dividend which is declared by the company and paid to the shareholders, are separate items for taxation law. It is only the latter which is the shareholder’s income.

And later on in his judgment Lord Wright observed -

Whatever the precise scope of the rule against double taxation, it must at least involve that it is the same income, that it is the same person in respect of the same piece of income that is being double-taxed, whether directly or indirectly, and that the double taxation is by British assessment.

If the doctrine enunciated by Lord Wright correctly expresses the rule regarding double taxation, honorable senators will agree that this proposal of the Government cannot be said to infringe that rule.

Turning to clause 4 of the bill, I would inform honorable senators that this provision is designed to encourage the search for, and production of, crude petroleum in Australia, Papua and New Guinea. The encouragement which the Government proposes to afford to these enterprises takes the form of an exemption from income tax until the capital expended in searching and mining for petroleum has been fully recouped out of profits. In granting this concession, the Commonwealth is coming into line with Canada and New Zealand, both of which have afforded, by means of income tax concessions, similar encouragement to the searching and mining for petroleum in those countries.

There will be no division of opinion amongst honorable senators as to the importance of locating and developing sources of oil supplies nearer than those at present available to the Commonwealth, and the Government offers this encouragement to “the investigation of areas within Australia and its territories, in order to determine whether oil in commercial quantities may be obtained from those areas.

The highly speculative and hazardous nature of the investment of capital in prospecting and mining for petroleum in Australia and its territories needs no emphasis, and, if and when oil is located, it cannot reasonably be said that profits have been made until the total capital expenditure on the enterprise has been recouped by profits.

The deduction which is proposed does not infringe the general principle long recognized in Commonwealth income tax law that in. mining operations there should be allowed a recoupment of capital in determining the quantum of profits to be subject to income tax. This concession applies only to enterprises engaged in searching and mining for oil in a free state, and does not apply to operations for the extraction of oil by processes of distillation, such as are conducted at “Newnes.

The remaining amendment is in clause 1 which extends the definition of “ resident”. The purpose of this amendment is to cause Commonwealth income tax to become payable on the salaries of Australia House officials who have been recruited in London. A comparatively recent amendment of the Commonwealth Superannuation Act has extended the benefits of that act to the Australia House officials so recruited, and there is now no essential difference between those officials and the officials who have been sent to London from Australia and who retain their status of residents of Australia.

Residents of Australia are liable to Commonwealth income tax on income derived outside Australia, if the income is exempt from income tax in the country in which it is derived. The salaries of these officials will be exempt from English income tax under arrangements which are being made by the High Commissioner with the United Kingdom revenue authorities, and the proposed extension- of the definition of “ resident “ will bring the salaries of the officials within the field of Commonwealth income tax. I may add that this proposed amendment of the law is being made at the request of the officials themselves.

Clause 5 of the bill provides that the amendments effected by the act shall apply to assessments for the current financial year and subsequent years.

I commend the bill to honorable senators.

Senator COLLINGS:
QueenslandLeader of the Opposition

– I listened attentively to the Minister’s second-reading speech. The bill is a move in the right direction, but I regret that this Government never sees the wisdom of reforms such as are now proposed until war renders the collection “of extra revenue. »n imperative necessity.

Senator McBride:

– Better late than never.

Senator COLLINGS:

– I agree with the Assistant Minister. But I am surprised that United Australia party governments do not wake up to the fact that absentee dividend-takers should be taxed to the limit for peace-time needs as well as for wa.r-time requirements. I know, of course, that this Government will never do .anything in that direction. However, we are pleased that it has introduced this bill.

Senator WILSON:
South Australia

– I wholeheartedly support the bill. Every one will agree that in time of war, absentee shareholders should, equally with other sections of the Australian community, be required to make an adequate contribution to expenditure on defence. In normal times, however, it is advisable and in the interests of Australia to encourage the introduction of outside capital for the purpose of building up our industries. Accordingly, it is often desirable to make special concessions to encourage the investment in A.ustralia of capital from overseas. It is not wise always to take the narrow view that the foreign investor should pay the maximum amount, of taxes. There’ are times when we should give every encouragement to the investment in this country of outside capital.

Question resolved in the affirmative.

Bill read a second time.

In committee:

Clauses 1 and 2 agreed to.

Clause 3 (Rebate on dividends).

Senator ALLAN MacDONALD:
Western Australia

– I agree with Senator Wilson as to the desirability of encouraging the investment of overseas capital in Australia. This policy has benefited substantially the mining industry throughout the Commonwealth. But another feature of taxation is, at the moment, exercising my mind.. I would like the Minister to tell me whether this bill has relation to profits of foreign film exchanges and the holding, companies which have been set up for the importation of foreign films to Australia. Is it possible, under this measure, to secure a full measure of fax from foreign film exchanges?

Senator McBRIDE:
Assistant Minister · South Australia · UAP

– In respect of dividends, yes. Overseas filmproducing companies are taxed on 30 per cent, of their receipts from the hire of films to the Australian film-distributing company. If they lodge accounts showing the actual percentage of profits made, they are assessed on the returns. Overseas producing companies will, in common with other absentee companies, come under the provisions of this bill.

Clause agreed to.

Clauses 4 and 5 agreed to.

Title agreed to.

Bill reported without amendment; report adopted.

Bill read a third time.

page 1024

INCOME TAX BILL 1939

Bill received from the House of Representatives.

Standing and Sessional Orders suspended.

Bill (on motion by Senator McBride) read a first time.

Second Reading

Senator McBRIDE:
South AustraliaAssistant Minister · UAP

– I move -

That the bill be now rend a second time.

This is the bill which comes before the Senate each year for the imposition and collection of income tax. Honorable senators are already acquainted with the proposed increase by .1 0 per cent, of the rates of income tax in respect of individuals, and the increase- of 10.2d. in the £1 in respect of companies. The estimated additional annual yield from these increases of the rates of tax is £3,287,000, of which it is expected that £2,860,000 will be collected in the current financial year. Late collections after the 30th June next account for the balance of the estimated increase of revenue. There is no material departure from the Rating Act of last year, apart, of course, from the increase of the rates of tax.

Clause 2 provides that the act shall come into operation on the day on which it receives the Royal Assent. This clause has been inserted so that the rates enacted for the current year shall become operative in assessments for the current year as soon as possible. The Income Tax Act of last year applies to assessments for the current financial year until the commencement of the Rates Act for this year. As honorable senators know, there is a provision in the Acts Interpretation Act to the effect that, unless some specific provision regarding the date of commencement is made in any act, other than an act to alter the Constitution, the commencement of that act is delayed until the expiration of 28 days after the Royal Assent has been received. It is most undesirable, however, that the operation of rates enacted for application in assessments for the current year should he delayed for 28 days, as any assessments for the current year made during that period of 28 days could then be made only at the rates in force for last year. This position is adjusted by clause 2.

There appears to be no need to explain to honorable senators the remaining clauses. I shall, accordingly, confine my remarks to some brief observations on the several schedules to the bill. The first and second schedules contain the formulas for the ascertainment of the rates of tax in respect of taxable incomes from personal exertion and property respectively. The formulas” in brackets were adopted in 1931 in order to determine the rates to be applied to assessments for the financial year 1931-32. Since 1931, there have been reductions and increases of the 1931-32 rates, according to revenue demands, and it may interest honorable senators to know that the rates which are proposed by this bill are approximately 3 per cent, lower than the 1931 rates on personal exertion income, and 14 per cent, higher than the normal income tax rates applied in 1931 to taxable income from property. One effect of the alterations of the rates since 1931 has been to give a rather formidable appearance to the formulas, and honorable senators will be in agreement with me. as to the desira’bility of expressing the rates of tax in a simpler form. The simplification of the formulas is being kept in mind, hut the Government has been unable to give full consideration to the question, as its attention has been directed to more important matters. It is hoped, however, that these formulas will be simplified when the rating bill is introduced next year.

The rates of tax on taxable income from personal exertion are provided foi in the first schedule. The rate increases progressively as the taxable income increases, until a taxable income of £6,900 is reached. For each £1 of taxable income from personal exertion in excess of £6,900, a flat rate of 87.09525d. is applied. As an illustration of the working of the formulas, I point out that the rate of tax on £1 of taxable income from personal exertion is approximately 2.9d. The rate then graduates until a taxable income of £6,900 carries a rate of 44.636 in the £1.

The rates of tax on income from property are prescribed in the second schedule. These rates are also graduated, but the rate of progression is steeper than in the rates applicable to personal exertion income. For instance, the personal exertion rate on £3,700 of taxable income is 25.28d. compared with 53.85d. on £3,700 of taxable income from property. A flat rate of 102.465d. is payable on each pound of taxable income on property in excess of £3,700.

The third schedule provides for the rates of tax where the taxable incomes of taxpayers are derived partly from personal exertion and partly “from property. The effect of this schedule is that the rates of tax on the separate amounts of taxable income from personal exertion, and from property, are ascertained as if the taxpayers had derived the whole of their taxable incomes from personal exertion, or from property, respectively. The taxpayer, accordingly, pays tax on his personal exertion income, and his property income, at rates which are applicable to his total taxable income.

Tn the fourth schedule provision is made for the rates of tax which are to be applied in assessments which are subject to the “ averaging “ system. Honor.able senators know that the system of averaging incomes for rate purposes does not now apply to taxpayers generally, hut > is limited to primary producers. The working of the averaging system calls for only a short explanation. An average is taken of the taxable income of the taxpayer for the year of income and the preceding four years. The rate of tax payable by the taxpayer is the rate applicable to the amount of the average taxable income over the period of five years.

The fifth schedule relates to taxpayers who receive premiums on the grant, or assignment, of leases. Lease premiums are regarded as commuted rent paid in advance, and for that reason they are subject to income tax under special provisions of the Assessment Act. It would be inequitable, however, to tax the full amount of the premium in the year of receipt, without making some adjustment of the rate of tax, as, owing to the graduated rate, the taxpayer would be called upon to pay a greater amount of tax than he would be obliged to pay if the lease premium had been received as rent and spread over the term of the lease. The Assessment Act removes this inequity to n considerable degree by providing for the taxing of the premium at a rate applicable to a notional income, which is an amount calculated by dividing the lease premium by one-half of the number of years in the period of the lease. If the taxpayer receiving the lease premium derives any other taxable income, the rate of tax payable by him on his total taxable income is ascertained after adding the lease notional income to the balance of the taxable income.

The sixth schedule provides for the rates of tax payable by trustees in those cases in which trustees are assessable under the provisions of the Assessment Act. The seventh schedule prescribes the flat rate of 24d. in the £1 payable by companies. This rate of tax is 10.2d. in. the £1 greater than the rate applied to companies last year. Sub-clause 6 of clause 5 continues the principle of charging a minimum tax of 10s., which has prevailed since 1927. Sub-clause 2 of clause 6 is designed so that assessments may be made for subsequent financial years, in those cases in which it is found necessary to issue assessments before the rates bill for next year is passed by Parliament. I commend the bill to th, Senate.

Question resolved in the affirmative.

Bill read a second time, and passed through its remaining stages without, requests or debate.

page 1025

SALES TAX EXEMPTIONS BILL 1939

Bill received from the House of Representatives.

Standing and Sessional Orders suspended.

Bill (on motion by Senator Foll) read a first time.

Second Reading

Senator FOLL:
Minister for the Interior · Queensland · UAP

– I. move -

That the bill be now read a second time.

The purpose of this bill is to provide exemption from sales tax for materials and machinery used in connexion with the setting up of armament annexes, and for uniforms purchased by members of the defence forces. Honorable senators are aware that the Government has entered into agreements with certain persons in Australia for the construction of armament annexes for the manufacture of munitions and other defence supplies. In some cases, the contractor will be reimbursed by the Commonwealth for the cost of construction of the annexes, the ownership of which will vest in the Commonwealth. In other cases, the buildings will be erected at the cost of the contractor, and will be leased to the Government at a. nominal rental for a period of not less than ten years. The materials, which will be used in those buildings which are owned by the Government of the Commonwealth will be exempt under existing provisions, but there is some doubt as to whether materials for the buildings which will be erected by contractors free of cost to the Government, and leased to the Commonwealth at a nominal rental, will be free of sales tax in the present form of the law. It is considered that there is complete justification for providing exemption for the materials for all types of armament annexes erected at the request of, and in co-operation with, the

Commonwealth Government. The proposal will achieve consistency, and tend to reduce the cost of the supplies to the Commonwealth Government. In the majority of cases, the plant and machinery for use in the annexes will be the property of the Commonwealth Government, and is therefore exempt under existing item 74 of the present schedule. In some instances the owners of the annexes have volunteered to purchase the plant and machinery free of cost to the Government. Under the present law, such voluntary purchases would be subjectto sales tax.It is considered that they should be free of sales tax,, and the bill now presented achieves that objective. It is important to remember that in respect of both the materials for the annexes and the plant and machinery for use therein, the exemption is conditional upon the terms of the agreement with, the Government being such as to require the buildings, plant, and machinery being used exclusively in the production of defence supplies for the Commonwealth Government for a period of not less than ten years. It is proposed that this exemption shall be effective from, the 1st October, 1938.

The bill also provides for the exemption of uniforms for the members of the naval, military and air force services. During’ the recruitment of the present Militia Forces the Defence Department found it impossible to equip all volunteers with the articles of uniform and equipment which ordinarily it would issue from stores. Accordingly, many different methods were followed in equipping the various units ; some were provided with uniforms and kit through the efforts of citizens’ committees, municipal council* and other non-governmental bodies, whilst many members purchased them personally from naval and military outfitters. Had the Defence Department been in a position to issue the uniforms and kit as. in the ordinary course of events, it would have done, sales tax would not have been payable. In the circumstances the Government authorized the Commissioner of Taxation to refrain from collecting tax on uniforms and kit purchased by members of naval, military and air force units from the 1st October, 1938, the approximate date on which recruitment of the Militia. Forces commenced . I assure honorable senators that the benefit of the G overnment’s action has been obtained by the members of the Militia Forces and not by the manufacturers of the uniforms. This measure will validate the action authorized by the Government, andI ask honorable senators to support it.

The opportunity has also been taken to put beyond doubt the legality of the. course which, the Commissioner of Taxation has followed since the- 1st October. 1932, in respect of articles of clothing and equipment purchased from the Defence Department by permanent, members of the naval, military and air forces out of clothing allowances to replace worn-out or lost items of uniform or kit originally issued to them. In such instances the issuing government department makes a charge for replacements. These transactions have not been regarded by the Commissioner of Taxation as sales by the Defence Department, and sales tax on them has not been recovered. There is some doubt whether item 74 as at present enacted fully supports the course followed, and the bill places the matter beyond doubt.

In view of the financial commitments of the Commonwealth, the Government has not found it possible to accede to the many claims for exemption which have been placed before it, and I ask honorable senators not to regard the introduction of this bill as a suitable opportunity to press claims for exemption. As was stated in the budget speech, the Government gave earnest consideration to the matter of obtaining some of the extra revenue required by the withdrawal of the sales tax exemptions, but decided, for the time being at any rate, not to take that course. I ask honorable senators to support the bill in the form in which it is presented to the Senate.

Senator KEANE:
Victoria

.- The Opposition does not intend to oppose the second reading of this bill, because, in the circumstances outlined by the Minister (Senator Foll), and in view of the assurance given that no corporation or company associated with the construction of annexes for the Government will derive any financial benefit, the exemptions are reasonable.

Question resolved in the affirmative.

Bill read a second time.

In committee:

Clauses 1 and 2 agreed to.

Clause 3 (Amendment of schedule).

Senator ASHLEY:
New South Wales

.- Will the Minister (Senator Foil) explain whether companies such as the Broken Hill Proprietary Company Limited and the Australian Glass Manufacturing Company Limited, which may be associated with the erection of annexes for the manufacture of arms and munitions, will, despite their strong financial position, be exempt from paying sales tax on taxable commodities used in construction.

Senator FOLL:
Minister for the Interior · Queensland · UAP

– It is not a matter of granting exemptions to companies; the exemption is to the Government itself. In most instances annexes are being erected and handed over to the Government, and in such cases all taxable material will be exempt. On the other hand, companies such as those mentioned by the honorable senator may erect annexes and place them at the disposal of the Government at a nominal rental of £1 a year, and in these circumstances also the Government thinks it only reasonable that the taxable materials used in construction should be exempt.

Clause agreed to.

Clause 4 agreed to.

Title agreed to.

Bill reported without amendment; report adopted.

Bill read a third time:

page 1027

STATES GRANTS BILL 1939

Bill received from the House of Representatives.’

Standing and Sessional Orders suspended.

Bill (on motion by Senator McBride) read a first time.

Second Reading

Senator McBRIDE:
South AustraliaAssistant Minister · UAP

– I move -

That the bill be now read a second time.

The grants for which approval is sought in this bill are those recommended by the Commonwealth Grants Commission to be paid to the States of South Australia, Western Australia and Tasmania during the financial year 1939-40. The recommendations of the commission are contained in its sixth report, which was tabled in Parliament on the 8th September last. The proposed grants, compared with those paid last year, are as follows : -

Before proceeding to an explanation of the methods adopted by the commission iu arriving at its recommendations, I submit for the information of honorable senators a table showing the trend of these grants during the last eleven years, which I believe will be of interest. The grants paid for 1934-35 and following years are those based on the recommendations of the commission : -

Whilst the total amount of the grants now recommended, namely, £2,020,000, is the same as the total of the grants paid last year, this is not a true comparison, because of the fact that both last, year and this year reductions are made from the normal grant to Western Australia in order to repay advances made in previous years. As will be seen from the following comparison, the total normal grants for 193S-39 were £2,064,000, whilst the total normal grants for this year are £2,156,000, an increa.su for this year of £92,000 :-

The general principles upon which the recommendations of the commission are based have been explained at some length in previous years, and, therefore, I do noi propose to enter into a full and lengthy discussion of the principles involved in arriving at the amount of these grants. These principles are explained very fully in the commission’s sixth report, which was recently tabled and copies of which are available to honorable senators.

It is necessary, however, to explain that the plan which the commission has evolved and followed in each of its six reports is to base the grants recommended for the three States concerned on financial needs, as indicated by a comparison of their budgets with those of the nonclaimant States. The grants recommended are calculated to bring the finances of the claimant States up to what the commission considers to be a fair Australian standard. In short, the commission is of the opinion that the grants should be sufficient to enable a State which is in difficulties to function at a standard not appreciably below that of other States. The States concerned, however, are required to make some effort themselves to remedy their inferior financial position.

It is necessary, perhaps, to mention that the basis adopted by the commission hits evoked some criticism, to which reference has been made when submitting legislation for approval in previous years. It has been claimed by certain of the States concerned that the grants which are made to those States should be based on compensation for disabilities arising from federation or the effects of federal policy.

The Grants Commission has given very en nif ul consideration to the matter from this aspect, and in earlier reports has expressed the opinion that the necessity for grants to these States j* in no case due to any appreciable extent to the operation of federal policy. The commission states in its present report that it is convinced of the impracticability of assessing special grants on the basis of disabilities arising from federation and the operation of federal policy. In the view of the commission - and this view is said to have been supported by many expert witnesses who appeared before the commission - the reactions of the protective tariff and other effects of federal policy are so interwoven with the financial and economic structure of Australia as a whole that it is impossible to express in monetary terms their full effect on the finances of the individual States.

Moreover, even if it were practicable correctly to assess the financial effect of federation and federal policy on the finances of the claimant States, it would at the same time be necessary to make proper allowance for the advantages which accrue to those States from federation. This factor has been given a great deal of consideration by the commission, as is evident from its various reports. Any financial disability which a State suffers by reason of federation will be reflected in the State’s budgetary results, and is automatically provided for by the commission’s method of assessing grants according to “financial needs”.

The commission is satisfied that the only safe and practicable basis upon which these grants can be assessed is the careful analysis of the relative financial position* of the States as expressed in their annual budgets. This fundamental principle was expressed by the commission, in one of its earlier reports as follows : -

Special grants uri.- justified when a Stat* through financial stress from any cause i» unable efficiently to discharge its? functions as

member <if the federation, and should he Intermitted by th« amount of help found necessary to make it possible for that State by reasonable effort to function at a standard not appreciably below that of other States.

The adoption of the principle just stated has involved a careful comparison by the commission of the budgetary results of the claimant States with those of the non-claimant States. The accounts of all States are not compiled on a uniform basis, and it is accordingly necessary for the commission to make certain adjustments to the figures, in order to place the budgetary results on a comparable basis. Having arrived at the amount that is required to raise the claimant States to the budgetary standards of the non-claimant States, the commission then proceeds to make certain adjustments which it considers necessary, after a comparison of the relative severity of taxation in the several States, differences in the cost of social services, costs of administration, and other relevant factors.

Last year, the commission introduced a new feature into its work. In its report for that, year it expressed the view thai, iti times of prosperity, a claimant State should take action to improve its financial position which it cannot take in less prosperous years, and that it should not incur expenditure which is unjustified or uneconomic. The commission examined the finances of the claimant States from that point of view, and imposed certain nominal penalties with a view to drawing the attention of the claimant States to their duty in that respect. The item? particularly examined were, in the case of South Australia, the failure to recover debts due to the Crown; in the case of Western Australia, the expenditure of loan moneys on u unproductive projects; and, in the case of Tasmania, the failure to take action to secure an improvement of the railway finances in that State. lu its present report, the commission expresses the belief that its criticism of last year lias not bean adequately mci. though iti certain accounts improvement is noted. In particular, the commission has mentioned heavy loan fund expenditure on unreproductive road works, notwithstanding the greatly increased grant> from the Commonwealth for federal aid roads, the dangerous trend in railway losses. and losses on land settlement in Tasmania. After considering all. these factors concerned, the commission decided to make general deductions from the grants of the three .States, namely:-

I think honorable senators will agree that so long as the Commonwealth continues to make subventions to the Sta few based on their budgetary accounts, a duty devolves upon the commission, and finally upon this Parliament, to ensure that the interests of all federal taxpayer.’ shall, be protected to the extent of requiring the claimant. States to maintain their finances on a sound basis. For this reason the Government endorses the procedure adopted by the commission to achieve this objective.

The calculations by the commission for the purpose of assessing the grants for the present year are based on the financial results for the year 1937-38, which is the latest year for which complete statistics are available. It has been complained that the calculations made by the commission are based, on figures which are, in effect, two years old. The term commonly used in this regard is the “ timelag”. As an example, the grants proposed for the year commenced on the 1st July, 1939, are based on the financial position of the States for the year ended the 30th June, 1938. There are disadvantages attaching to this procedure, as the conditions two years ago may not truly reflect the circumstances of the present time, but any inequality which might result from the use of figures of a previous year is not cumulative, as differences will balance out over a term of years.

It has been sometimes urged that a formula should be evolved so that the amounts of the grants may be automatically fixed for a term of years. In the view of the commission, a fixed formula could not take full account of the relative effects of changes in prices, in wages, in fluctuations of trade, in unemployment, in the effects of droughts, floods and bush fires, in movements of population, as well as in the effects of external influences on the economy of the nation. Another factor to be borne in mind is the changing position caused by the uneven growth of Federal and State responsibilities in relation to their financial resources. The commission considers that, in view of fluctuating financial and economic conditions, financial adjustments in the. form of special grants cannot be fairly assessed without a searching annual review of the finances and economic conditions of all of the States.

I shall now refer briefly to the variations of the grants now proposed from those recommended and paid last year.

The reduction of South Australia’s grant by £45,000 is duc in the main to improved economic conditions in 1937-38, the year upon which the present grants are based. The total revenue, and the taxation revenue of the State constituted records, and a surplus was achieved for the fourth successive year.

Whilst the grant recommended foi Western Australia is £25,000 in excess of that recommended last year, actually the normal grant now recommended is £117,000 greater than the normal grant of last year. The normal grant for last year was £614,000, but a deduction of £44,000 was made to adjust an advance made iu 1936-37, the grant actually paid being £570,000. The normal grant recommended for this year is £731,000, from which is deducted a special advance of £136,000 made in 1937-38 on account of drought. The increase of the normal grant is therefore £117,000. This increase is due to the effects of drought, which had serious repercussions on the income year 1936-37, on which the taxation assessments for 1937-38 were based.

The grant recommended for Tasmania is £20,000 greater than that of last year. This is caused mainly by changes of the relative financial positions of the States.

There is ample evidence that the commission, which has been set up as ari independent body to investigate the claims of the States for financial assistance, has discharged its duty with thoroughness and in a wholly impartial manner. The Government, therefore, considers that it must accept the amounts recommended by the commission as special grants as bona fide recommendations to adjust the financial needs of the claimant States. The Government has invariably accepted the recommendations of the Grants Commission in the past, and it has decided to accept the commission’s recommendations in this instance.

Senator COLLINGS:
QueenslandLeader of the Opposition

– This is one of those bills which we sometimes facetiously call hardy annuals. Members of the. Opposition support the measure, because we realize the justice of the claims of the three smaller States to compensation in respect of disabilities which they suffer under federation. I have never been quite sure that the basis upon which these amounts are arrived at is the best that can be devised. It can hardly be described as scientific. Nevertheless, the Opposition believes that the States concerned are entitled to those grants.

Senator E B JOHNSTON:
Western. Australia

– I support .the bill.. I have read the very interesting reportof the Commonwealth Grants Commission in which’ is again apparent the journalistic ability of the chairman, Mr..

Eggleston. It is somewhat, strange that the commission’s recommendations always produce ultimate results which appear to meet with the satisfaction of the Commonwealth Government. It is also strange that following its abstruse and comprehensive calculations, it recommends for Western Australia an amount which generally approximates £600,000- the amount of the grant paid to that State in the year immediately preceding the appointment of this commission. With one exception, when the grant to Western Australia was £800,000, that has been the general rule, despite the fact that in some years that State has suffered severely from drought, grasshopper plagues and adverse conditions.

Senator Leckie:

– I cannot understand why ‘South Australia gets more than Western Australia.

Senator E B JOHNSTON:

– That, point also perplexes me. Apparently, it is due to anidiosyncracy of the commission.

Senator Cooper:

– Should losses resulting from drought in one State be a charge on the Commonwealth?

Senator E B JOHNSTON:

– I think so. That principle is recognized under the federal system of government in the United States of America and Canada. The central government in those countries provides considerable assistance in respect of drought and other losses suffered by individual States. The commission appears to be a law unto itself. According to its own sweet will, it decides what conditions it will ignore or observe. Paragraphs 4. and 5 of the commission’s report are -

  1. The alternative grounds on which a State may base a claim for a special grant from the Commonwealthare that it is unable to carryout its functions’ to the federal system because of- -

    1. disabilities arising from federation and federal policy:
    2. financial needs.

  2. After careful consideration, we are convinced that . it is impracticable to assess special grants on the basis of disabilities arising from federation and from the operation of federal policy. The reactions of federal policy, notably of the protective tariff policy, are so interwoven with the financial and economicstruc tu re of Australia as a whole that it is impossible., in our opinion, to express in. monetary terms their full effects on the finances of the individual States. This view is supported by many expert witnesses who have appeared before the commission.

We in Western Australia differ from the commission on that point. We contend, that our claim for a grant is based primarily on disabilities resulting from federation and the operation of federal policy. The commission admits that, according to the law, it should take’ those factors into consideration, but states that it does not do so. Indeed, it suggests that it is impossible to assess ‘these disabilities.

Senator Herbert Hays:

– The commission says that it is difficult to assess them.

Senator E B JOHNSTON:

– Such difficulties were overcome a few years ago. The commission appointed in 1925 was definitely charged with the duty of considering the disabilities of Western Australia under federation. That commission made a very comprehensive report, in which its chairman, Mr. Higgs, an exTreasurer of the Commonwealth and a very able man, pointed out that Western Australia’s difficulties were due mainly to the incidence of our policy of high protection. That view was supported by other experts, including the committee of economists appointed by the Bruce-Page Government and the “ big four “ from England. They declared that the Common wealth tariff policy, whatever advantages it may have conferred on certain States - and Victoria and New South Wales benefited most in this direction - was a. severe handicap to the primary industries of Western Australia. I submit that the commission is flouting the law by refusing to take any notice of the disabilities suffered by the claimant States as a result of federation and the operation of federal policy. Until a tribunal is established which will carry out the law in that respect, justice is not likely to be done to the smaller States, particularly Western Australia. I draw the attention of honorable senators to the grants which have been made to the -iiia Her States since 1929 -

Honorable senators will note how the recent grants to Western Australia in each year have’, with, one exception, approximated £600,000, which was the amount granted to that State before the present commission was appointed. I cannot understand why this year a deduction of £136,000 is made from the grant recommended to Western Australia as a set-off to an advance made in 1937-38, when that State received £575,000 inclusive of this advance.

Senator MCBRIDE:

– -No.

Senator E B JOHNSTON:

– I understood from a statement made by the Treasurer last year that that sum of £136,000 of which Western Australia is to be deprived on this occasion, brought the grant to Western Australia in’ 1937-38 to £575,000, and that our real grant for that year was only £440,000. Here again we see how the commission juggles its figures in order to get, back to the same old figure of £600,000. The commission, apparently, finally assessed Western Australia’s grant on this occasion at £753,000. Its report states-

In arriving at its final assessment, the commission allowed for the advance of £13(1,000 made to Western Australia in 1937-38, and for other considerations which necessitated a modification of the grants indicated by the measurement of the relative financial position ( spe paragraphs 188-20] ) .

The report then sets out the elements contained in the grants. An amount of £20,000 is credited to each of the three States in adjusting administrative costs. This is a recognition of the careful and economical manner in which the funds pf these States are administered. For social services South Australia receives an additional £.1-40,000, but Western Australia is reduced by £84,000. Apparently because the State Arbitration court awards a higher basic wage and better conditions to workers than they obtain under Commonwealth awards, Western Australia is penalized. - Tasmania gets an extra £6,000. The differentiation in the amounts recommended would suggest that in South Australia and Tasmania the workers do not enjoy social services “of the standard obtaining in Western Australia, which is penalized, I say unjustly, to the amount of £84,000. In its assessment of the severity of taxation, the commission deducts £173,000 from the amount for South Australia, birt adds £265,000 to the grant for Westem Australia, because of the greater tax burdens on the people of that State. The State emergency tax, which is synonymous with unemployment taxes in other States, rises to ls. in the £1. This tax is, I think, higher than unemployment taxes elsewhere in the Commonwealth, and for this reason the commission apportions an additional £265,000 to the western State. But for this allocation, due to the severity of taxation in Western Australia, the grant for that State this year would be reduced to £330,000 - approximately the amount of the old treasury grant from .1929 to 1932. Under the same heading Tasmania this year gets £111,000 less. The total recommendations in respect of the claims mentioned are: South Australia, £1,017,000; Western Australia, £753,000’; ‘ Tasmania, £453,000. I admire the ingenuity displayed by the chairman of the commission (Mr. Eggleston) in then reducing the amounts to be paid. I can see his band in the framing of the recommendations in the report now before the Senate, and I commend his energy and ability.

Senator Dein:

– Also his liberality?

Senator E B JOHNSTON:

– No ; but I believe that he is unconsciously biased and finds it difficult to do the fair thing by Western Australia, particularly in view of his frequent adverse criticism of that State prior to his appointment to the commission. I also note his apparent intention not to submit a report containing recommendations of a revolutionary nature in relation to the existing system for the keeping of treasury accounts. On the commission’s own figures the grant to Western Australia this year should be £753,000, but a deduction is made of £22,000 for financial adjustment which is explained in some other section of the report. I think it was due to the depression or other adverse circumstances. The advance of £136,000 which Western Australia received two years ago is also deducted, with the result that the amount now recommended is £595,000, although the commission admits that the State is really entitled to £753,000. The net result is that we have got back to the old average of about £600,000, and the Commonwealth is put to the additional expense of maintaining the commission in order to achieve a result originally fixed by the Treasury. But I am grateful to the Government for its adoption of the commission’s report, particularly when we re: member that the Ministry is faced with enormously increased expenditure for war purposes. As one of the representative? in this Parliament of Western Australia, I say that we accept in a spirit of thankfulness this half loaf of bread that has been offered to us, it being the full measure to which we have been accustomed.

Having said this, 1 repeat that the commission should be given clearly to understand that in future it should not regard as impossible of recommendation the proposal put forward by the commission, of which Mr. Higgs was chairman, namely, that to deal justly by the claimant States, the disabilities which they suffered under federation and from the operation of Commonwealth policy should be assessed. Mr. Entwistle, the representative of South Australia on that commission and a man of wide farming experience, submitted a minority recommendation that Western Australia should have the right to secede from the federation. Such a recommendation, under existing war conditions, might now be disregarded. But the majority report, signed by Mr. Higgs. Mr. Mills (a representative of Victoria), and Mr. Entwistle contained the valuable suggestion thai for 25 years Western

Australia should have complete control of its own customs and excise tariff, provided the tariff against the eastern States did not exceed the rates imposed on imports from Great Britain or the other dominions. The adoption of that recommendation would have been possible only following an alteration of the Commonwealth Constitution, but it would have had important results on the development of Western Australia. Under present conditions, approximately 50,000 persons find employment in the eastern States in manufacturing goods required by the people of Western Australia. The establishment of such industries in the western State would, therefore, have been a. serious blow to many secondary enterprises in the eastern States. I am well aware that there is as much chance of that recommendation being adopted as there would be of a hungry hawk dropping a nice plump pigeon. If the establishment of these industries in Western Australia had been possible, they would have given work to probably the same number of persons as now find employment in the eastern States in the manufacture of goods for Western Australia, and my State would have benefited accordingly. I believe also that the adoption of the recommendation would have been beneficial to the Commonwealth, as a whole, because at present, the development of the continent is illbalanced. In Western Australia, there if a population of only 470,000 as compared with over 6,000,000 people in the eastern States. This distribution of the population does not make for national safety or national unity. I think it would be a very good thing if in all federal legislation, and especially in connexion with these grants, more regard were paid by the representatives of the eastern States to the desirability of making possible a more evenly-balanced economy. I am glad to be able to state that there is a movement in Western Australia to stimulate secondary industries in that State. A campaign, headed by Mr. Hawke, the Minister for Labour and Industrial Development, has been launched to bring about this desirable state of affairs. Mr. Hawke lately visited the eastern States with a view to persuading some of the manufacturers who are interested in supplying Western Australian needs, to establish branch factories in that State, and I believe that eventually that will be done. The people are being urged to buy Western Australian products first, other Australian products second, and Empire products third. I feel sure that this campaign, which has the support of the Government in Western Australia, will result in the establishment of a number of secondary industries in that State.

Senator LAMP:
Tasmania

.- As a representative of Tasmania, I can say that we are thankful for small mercies. Last year the grant to our State was reduced by £165,000. Among r lui reasons advanced for such a drastic reduction was the assertion that the State railways were not functioning in the best interests of the people; that the system of local government was not. so efficient as it might be and was not collecting outstanding rates and that taxes were lower than in other States. The Government of Tasmania has made heroic attempts to correct the anomalies co which the commission had directed attention in its earlier report. In a speech, reported in the Hobart Mercury of the 26th October, 193S, the then StateTreasurer, Mr. Dwyer Gray, said -

The reduction of £105,000 in the special Commonwealth Grant to Tasmania for 1938-30 left the Government with three alternatives - Reduction in expenditure to a corresponding amount; increased taxation with a view to making good the decrease in revenue: or a substantial deficit.

The Government had decided, he said, that die situation must be met by reducing expenditure and increasing taxation. Consequently, the contemplated expenditure for the current financial year was reduced, and will exceed that for 1937-38 by only £2,790- “a figure,” commented Mr. Dwyer Gray, “ which is in marked contrast with the large increased expenditure already authorised in all other States “. He added that the increased taxation would remove one of the chief causes for the reduction in the Commonwealth Grant.

Tasmania’s budget for the year 1937-38 was prepared in the expectation that the grant in the following year would be increased by £165,000, but, unfortunately the commission has not taken into consideration the fact that effect has been given to its previous recommendations. The newspaper report continued-

Quoting opinions by the Commonwealth Grants Commission that Tasmania must lace its transport problem, because it could not stand the cost of duplicated services, the Treasurer indicated that legislation containing the Government’s proposals would be submitted to Parliament shortly.

He referred lengthily to the problem of local government, and gave another comment by the Grants Commission that “ a reorganisation of the local government system seems to be urgent “.

Mr. Dwyer Gray then indicated that his Government had decided to introduce legislation to increase the rates of income tax on the incomes of individuals, from both personal exertion aud property, by 20 per cent., and to increase the rate of income tax in respect of companies by 25 per cent. Motor taxation also would be increased.

Although Tasmania has done all that was required to correct the anomalies which had been pointed out by tho Commonwealth Grants Commission, that body has seen fit to impose a permanent burden, the penalty of £165,000 imposed on that State last year. When the Government of Tasmania tried to carry out tho recommendations of the Commonwealth Grants Commission, by putting the State railways in order, it was met with much hostility from farmers, carriers, and other persons interested in motor transport. The expert who was brought from New South Wales met with a hostile reception wherever ho went. Nevertheless, the Government of Tasmania, is determined to push on with the rehabilitation, of the State railways. It also appointed a royal commission to inquire into local government matters. The report of that body which, lias ju3t been made available, contains recommendations for the better working of local government in that State. Motor taxes also have been increased in order to bring them more into line with the rates in the other States. I can only repeat that the reduction of £165,000 made last year appears to have become permanent. . Under the headings “Amount of Special Grant: Government ‘surprised and disappointed ‘ “ the Mercury of the 15th September stated -

The Treasurer (Mr. R. Cosgrove), referring to-day to the sixth report of the Commonwealth Grants Commission, containing the recommendation for a special grant of £430,000 for Tasmania for the current financial yea.r, said the State appreciated the work the Grants Commission was doing, and was satisfied that, generally speaking, the methods of the commission were fair, and produced reasonable results. There was, however a fairly wide area in which the commission must exercise its discretion in determining the amount of money to be recommended, and lie thought that in its latest report the commission had hardly treated Tasmania fairly.

When I spoke on this subject previously, I referred to the drift of population to the mainland States, and said that Tasmania received no consideration whatsoever for training men for the other States. The latest report of the commission overlooks that contribution by Tasmania.

Another matter that has been referred to on previous occasions is company taxation. The Commonwealth Grants Commission has based Tasmania’s taxable capacity on the Federal income tax. Of the revenue which the Government of Tasmania derives from companies 85 per cent, is paid by companies outside that State. That extra money raises the estimated taxable capacity of Tasmania unduly, and, therefore, an unfair burden is imposed upon the State.

The commission has also inflicted on Tasmania a penalty of £23,000 in respect of losses incurred on soldier settlement. In this connexion, it is well to recall the enormous losses on soldier settlement schemes in other States. It would appear that the commission was seeking justification for its action in imposing a permanent burden of £165,000 on Tasmania. I realize that at the present time the Government cannot be expected to pay to Tasmania more than the Commonwealth Grants Commission has recommended, but as soon as existing difficulties have been overcome, determined efforts will be made to secure justice for that State.

Senator WILSON:
South Australia

– I support this bill because there is no alternative. When the Commonwealth Grants Commission was first created its appointment was acclaimed on all sides. In its first report, the commission set forth certain principles, one of which was that grants to necessitous States should be based upon needs, and that each claimant State should be entitled to carry on its economy at a standard equal to the average of the nonclaimant States. With those principles there can be no quarrel. Unfortunately, however, the commission ha3 become afraid of its own principles ; year by year it has run away further from the principles which it enunciated in its first report. By means of exemptions, exceptions, and reservations, those principles have been whittled away. It would appear that a figure is first arrived at, and then efforts are made to justify it. Instead of giving to the claimant States the Australian standard of living and equality of opportunity, we now find on page 88 of the commission’s latest report the following specious words -

The grants recommended by the commission are thus based on “ financial needs “, and are designed to place the claimant States in such a position that they can, by reasonable effort, function at a standard not appreciably below that of the other States.

Why should the standard in the claimant States be below that of the other States? Why should the weaker States be required to impose taxes higher than operate in the other ‘States ? Last year I pointed out that the claimant States are expected to tax their citizens more heavily, and be content with a lower standard of social services than obtains in the other States, thus placing the weaker members of the federation at a perpetual disadvantage. Last year, for reasons given in the commission’s report, South Australia was deprived of £361,000. The very fact that the citizens of the poorer States are kept below the standard of the Commonwealth as a whole, makes . them perpetual claimants on the Commonwealth, whereas if the weaker States were allowed to strengthen their economy, and maintain the Australian average, instead of something below that average, and if moreover, they were allowed to impose taxes at the average rate for the Commonwealth, and not be forced to levy higher rates, the time would eventually arrive when they would become self-supporting and would not need special assistance. For a number of years, South Australia rehabilitated itself; confidence was restored; new industries were established, and the State budget was balanced. There were hopes that the position of the State would gradually improve until eventually the State could stand on its own feet. But. just as things were tending in that direction, the Commonwealth Grants Commission, by departing from its original principles, forced South Australia into a position in which it, was totally unable to balance its budget. Last year that State had a deficit of £400.000 and, unless taxes be raised tremendously, the current financial year will end with a deficit of £.1,000,000. The purpose of appointing the Commonwealth Grants Commission was to enable all of the States to retain their solvency. However, by the reduction of grants, and the compulsory imposition of taxes above the Australian average, industries, instead of being encouraged, are being forced out of South Australia, with the result that the State is unable to maintain its economy.

Sitting suspended from.12.45 to 2 p.m.

Senator WILSON:

– I have directed attention to the fact, chat had South Australia, not been wrongfully deprived of £361,000 last year, it would have been able to maintain a condition of solvency and so have assisted materially to increase its prosperity. This year the commission has made the position even more difficult for South Australia, first by continuing to make wrongful deductions, and, secondly by making the penalty in respect of the deductions even more severe. Had the commission recommended a sum sufficient to enable South Australia, with taxes not higher than the Commonwealth average, to maintain a. standard of social services not above the Commonwealth average, the State would have received an additional £434,000. Using the apparently harmless words “reasonable effort” and “not appreciably below “. the commission has deprived . South Australia, of £434,000. The South Australian social services are 10s.

Iter capita below the average standard of the Commonwealth, and had that State received an. amount to enable it to bring its standard up to the average of the Commonwealth, it would have been entitled to £296,000 as against the £140,000 allowed. The Commonwealth average for social services is 75s. per capita, whereas the South Australian average is 64s. 9d. per capita or 10s. 3d. per capita below the Commonwealth average. Having regard to the severity of taxes, and taking as the Commonwealth average an index figure of 100. the South Australian figure is 100.2.

Senator McBRIDE:

– In what year?

Senator WILSON:

– That figure will be found on page 75 of the Commonwealth Grants Commission’s last report. South Australia is already taxing its citizens above the Commonwealth average; nevertheless. it has been debited with £173,000. because the commission says that its citizens are not taxed with sufficient severity. It should be quite obvious to the commission, as it is to most thinking people, that if South Australia is to raise its taxes considerably above the average of the Commonwealth, its population and its industries will be driven out of the State. That is exactly what is going to happen if the commission perpetuates the principle of forcing States to maintain standards higher than the average for the Commonwealth. As I have already mentioned, this heavy penalty of £156,000 for social services is based on the apparently harmless words “ not appreciably below “. The deduction of £173,000 for taxation severity is also based on the apparently harmless words “ reasonable effort “. Is it reasonable to compel South Australia to pay £173,000 above the Commonwealth average? On many occasions the commission has said that it is concerned not with private finance but with government finance and government budgets. When it was suggested that a formula should be adopted to bring up the average of the citizens of South Australia to the average of the citizens of the Commonwealth., the commission said, “We . shall not have anything to do with that; we are considering budgets and the means . necessary to enable governmental bodies to function on a reasonable standard “. The commission has penalized South Australia by including not only ordinary taxes, but also local government taxes. By including local government taxes South Australia has been penalized an additional £105.000. merely because in that State, owing to the care and economy exercised in managing finances, local government taxes are low. The commission brings that factor into its fictitious calculation of taxation severity, and imagines that local government taxes are central government taxes. South Australia has been penalized to an amount of £156,000 for social services, £173,000 for tax severity and £105,000 for local government taxes, or a total penalty of £434,000. Had the c ommission recommended a grant of that amount in addition to the amount awarded, South Australia would have been able to maintain the Australian standard, which otherwise is quite impossible. As a result South Australia will have to increase taxes, and thereby retard the progress that has already been made in industry. Quite unjustifiably, the commission has imposed a further penalty of £22,000 on South Australia. The amount to which that State is entitled in order to maintain the Australian standard is £456,000 more than the commission recommended. The commission also criticized South Australia because it claimed £1,500,000; that, amount is regarded as extravagant. It. is not extravagant, as is borne out by every one of the principles which the commission has laid clown, except those governed by the words “ reasonable effort “ which cost South Australia £173,000 and “ not appreciably below” which has cost it £156,000. I have no hesitation in. saying that the commission is departing from the high principles of Australian nationhood. Citizens of the Commonwealth, whereever resident, should be entitled to the A ustralian standard. Surely it is not expected that the poorsh all always be poor, and that weak States shall always be weak. Whenever the commission lays down a principle, it invents exceptions in order to enable it to keep the grants down to the lowest possible level.

Senator DARCEY:
Tasmania

– I intend to support this measure in which provision is made for the payment of grants to Western Australia, South Australia and Tasmania. Claims on the Commonwealth were made by the less populous States year after year until the Commonwealth Grants Commission was appointed. Western Australia even went so far with its grievance as to threaten to secede from the federation. The commission has been in operation for some years, and I believe that it has endeavoured to be just to the claimant States. Last year Tasmania was penalized very severely by its grant being reduced £165,000 below that received in the previous year. According to a statement made by the Treasurer of Tasmania, that State made the greatest sacrifice when it entered the federation.

Senator E B Johnston:

– I think that Western Australia did.

Senator DARCEY:

– In 1901 the revenue of Tasmania was £1,050,854, and at that time the State was able topay its way and to show a surplus. In that year £466,218, or 44 per cent., was contributed by the Tasmanian people. In 1905 we received £30 7s. 9d. for each £100 of Tasmania revenue, but in 1937-38 we received only £23 2s. 7d. I am glad to learn that the grant to Tasmania this year has been increased. The commission has referred to Tasmania’s railway system. Again we have an illustration of the dead weight of debt, that is oppressing all governments. Although the Tasmanian railway system cost £7,000,000, the people of that State have already paid £14,000,000 in interest, and the principal is still owing.

Senator McBride:

– Is the honorable senator sure of that?

Senator DARCEY:

– Yes ; 1 took the figures from papers tabled in Parliament last year.

Senator A J McLACHLAN:
SOUTH AUSTRALIA · NAT

– But what of the asset?

Senator DARCEY:

– There is not, much left of that. The honorable member for Northern Territory (Mr. Blain), in referring to the Port, Augusta to Kalgoorlie. line, said tha t there was not much of that system which could be regarded as an asset .

Senator Herbert Hays:

– What of the honorable senator’s financial scheme which he has brought, under the notice of the Senate from, time to time?

Senator DARCEY:

– I am credited with the responsibility of having devised a. financial scheme; it, is not my scheme, but that recommended by the Royal Commission on Monetary and Banking Systems appointed by the Lyons Government.

Senator Wilson:

– Does the honorable senator support the whole of the recommendations of that commission?

Senator DARCEY:

- Senator Wilson asks questions so absurd that they almost knock me off my feet. Some time ago I gave the honorable senatora book on finance,but judging by a question which he asked me a few days ago, I believe that be is suffering from infantile paralysis of the financial faculty. Although Tasmania is to receive a larger grant than last year, we are not satisfied, but I suppose that we shall have to wait until next year before we shall be able to make an appeal for an increased amount. We have been penalized by the commission because our social services are not up to the average of those of the other States. Some of these days when the system which I advocate is in operation, there will be no need for grants such as these, because Tasmania will be able to finance its own requirements just as it did prior to federation. Without extra taxation, it would be possible to defray the whole of the war expenditure, and the interest saved, could be used in providing more generous grants to the smaller States.

Senator ALLAN MacDONALD:
Western Australia

– I cannot allow to go unchallenged Senator Darcey’s statement that Tasmania has suffered more under federation than has any other State. Western Australia has that undesirable distinction.

Senator Keane:

– Western Australia would have been bankrupt but for the financial assistance received from the Commonwealth.

Senator ALLAN MacDONALD:

– I recognize that that State has gained a great deal through federation; but it has suffered financially because of its partnership with the. other States, particularly New South Wales and Victoria. This is not a time for the repetition of old arguments, and, in common with honorable, senators from the smaller States, I am pleased to assist in the passage of the bill. The grants to he made are urgently required, never more so that at the present time. This is the thirtieth special grant to be made by the Commonwealth to Western Australia. These grants began about 1910, long before the Commonwealth Grants Commission was appointed. It has been suggested that, in calculating the needs of the three claimant States, a permanent formula should he applied to obviate the necessity for recurring investigations. I should object to the adoption of such a plan, since the economic posi tion ‘ of the smaller States is far from being static, and the continuance of the investigation by the commission is essential to the proper calculation of the sums that should be granted to those States annually. I should strenuously oppose the abolition of the commission, unless a permanent Interstate Commission were appointed. As that is not practicable at the present time, Western Australia is determined to support the retention of the Commonwealth Grants Commission. The work of this body creates an alliance between the three smaller States, and provides a bulwark against unfair proposals that might he fathered by the representatives of the larger States. It is essential that this alliance shall continue, because the smaller States have very much in common, and in time it may prove their only bulwark to protect them from unification. In the event of alterations of the Constitution from time to time, this alliance would prove most useful in protecting the interests of these States. For that reason, if for no other, I strongly favour the retention of the commission.

Senator AYLETT:
Tasmania

– Honorable senators from the larger States should not imagine that the people of those States are being taxed in order to enable an annual gift to he made to the smaller States. The Assistant Minister (Senator McBride) said that these States are expected to make some effort to help themselves, the implication being that they are not now doing so ; but I claim that they are. Tasmania is thankful for the grant that it will receive, although the sum is not quite so large as that to which it is entitled. Tasmania, .Western Australia and South Australia are not the only States that receive financial assistance from the Commonwealth. During the last six years New South Wales has received £33,506,112 from this source, whilst Victoria has had £24,560,308. Direct payments from the Commonwealth to the States were made in 1938-39 as follows : -

All of the States have also shared in Commonwealth assistance to primary producers, the amounts last year ranging from £662,000 to New South “Wales to £73,000 to Tasmania. The Minister said flint the States should do something to help themselves.

Senator McBride:

– Does noi the hon.,gable senator agree?

Senator AYLETT:

– Of course I do, but I. shall show that they are doing it. In the calculation of the grant for 1936-37 Tasmania was victimized to the amount of. £23,000 on account of its losses on soldier settlement, although the State had tried to help itself in that direction, instead of leaving returned soldiers to be ruined on the land, legislation was passed iai the State Parliament for the revaluation of the properties many of which bad been purchased at inflated prices by :< government of the same political colour as that now in office in this Parliament. The effect of the re-valuation was to show a loss to the State, but the loss would have been much greater if the re-valuation had not been made. The State, us I have said, was penalized to the amount of £23,000 for attempting to help itself and hold on the land its primary producers, including returned soldiers, whose disabilities should always be the concern of the Commonwealth authorities.

Tasmania increased State taxation in 1.937-38 to a far greater extent than did any other State in the Commonwealth. Although it increased taxes from £4 14s. 2d. a head of the population in 1936-37 to £5 8s. a head in 1937-38, the taxation penalty imposed by the Grants Commission has been increased from £82,000 to £.111,000; therefore Tasmania has been further penalized for trying to help itself. The more Tasmania has endeavoured to help itself, the more it has been victimized by the Grants Commission. As Senator Darcey pointed out, Tasmania to-day would be receiving a grant of £1,000,000 if justice were done to it under the terms of the financial arrangement entered into between the Commonwealth and the States at the inception of federation. Indeed, on that basis, each of the three claimant States is entitled to much more than it receives by way of these grants at the present time. Tasmania also suffers a considerable disability as the result of the drift of its population to the mainland, a development for which it cannot he held responsible. Large numbers leave Tasmania annually in search of employment on the mainland, because the biggest works of the Commonwealth are confined to the rich States of Victoria and New South Wales. In these circumstances Tasmania, and the other less populous States, are becoming mere breeding grounds for the richer States. The claimant States are entitled to a considerable measure of compensation in respect of that particular disability. Last year Tasmania received the huge sum of £12,000 out of the millions voted by this Government for public works, whilst its total share of expenditure under supply and development legislation was the miserly sum of £300. On a previous occasion I pointed Out that whilst the population of Victoria is from only six to seven times greater than that of Tasmania, the benefits received by that State from Commonwealth expenditure is 6,800 times greater than benefits of this kind enjoyed by Tasmania. Such comparisons must be borne in mind if we hope to do justice to the smaller States. Tasmania’s grant this year is £170,000 le3s than the amount it received two or three years ago. In its expenditure on defence also, this Government has discriminated against the poorer States.

Senator Dein:

– Protection is what Tasmania wants, and it is getting it.

Senator AYLETT:

– That would be so if a fair share of the Government’s defence expenditure was allocated for works in Tasmania. If such works were undertaken the populations of Melbourne and Sydney would be more effectively protected than they are to-day. At the present time Tasmania is defenceless, and an aggressor could simply walk in unopposed. As my leader has said, this measure is a hardy annual. On previous occasions I have placed Tasmania’s claims fully before honorable senators. On this occasion I have broken fresh ground and I think that I have made out a convincing case against the argument that Victoria and New South Wales are being penalized in order to enable the Commonwealth to make gifts to the smaller States! I have shown that the latter are justly entitled to much greater amounts than they receive to-day by way of grants.

Senator LECKIE:
Victoria

.- It is time that something was said in this debate on behalf of the beneficent States which enable the Commonwealth to make these grants. Senator Aylett’s argument that the3e grants are really made in place of certain payments made by the Commonwealth to the States under a previous financial agreement is beyond my comprehension. If he follows that line of argument in respect of other matters which come before the Senate, we shall know what value to place upon his claims. Had it not been for certain remarks made by Senator Johnston, I should not have participated in this annual exhibition, in which honorable senators from the smaller State are looking a gift horse in the month. I am not concerned about the squabble between those honorable senators as to which of the smaller States has reached the greatest depths of misery. They can settle that dispute among themselves. Senator Johnston made certain statements regarding the lack of secondary industries in Western Australia. As a manufacturer myself, I know that the general body of manufacturers in Sydney and Melbourne are most anxious that industries should be established in Western Australia. In fact many of them have established branches there. At last Western Australia appears to be awakening to the fact that it should encourage the establishment of secondary industries. As a first step in that direction, the people of Western Australia should be educated to absorb a greater share of products manufactured in their State. For instance, a greater proportion of the output of the woollen mills at Albany should be consumed on the Western Australian market. To-day that rail] exports three-quarters of its output to the eastern States. Western Australians should show a greater willingness to consume products manufactured in their own State. However, one cannot help noticing a prejudice on the part of Western Australians against locallymade goods. The reason for that I do not know. Recently the Government of Western Australia appointed a Minister of Industry, and preparatory to embarking on a policy of giving greater encouragement to secondary industries, commissioned that gentleman to visit the eastern States in order to confer with manufacturers in Melbourne and Sydney. Those manufacturers placed as much information at his disposal as they could. Nevertheless, they told him that as a prerequisite to the expansion of secondary industry in Western Australia, manufacturers there must be enabled to compete with manufacturers in Melbourne, Sydney and Adelaide. They pointed out that the wages ruling in Western Australia, for the most part fixed by State tribunals, were generally much higher than those prevailing in the eastern States. They also drew attention to certain other expenses in Western Australia, such as workers’ compensation contributions, which are at least double, and in some cases treble, the rates in the other States. The disparity is not due to the fact that, injured workers in Western Australia receive a greater measure of compensation. In answer to these representations the Western Australian Government’s emissary gave no indication that it would be willing to adjust these costs, but replied in effect that the eastern States should raise their standards in these matters to Western Australia’s standard. It is a case of the tail wagging the dog. It is useless for Western Australia to endeavour to establish secondary industries unless it is prepared to enable manufacturers to reduce costs of production. Otherwise, manufacturers in the eastern States, as hard-headed business men, will say that they can do much better by operating in the eastern States even though they must then pay freight on goods sent to Western Australia. I reiterate that the manufacturers in the eastern States are sympathetic towards the establishment of secondary industries in Western Australia and are only too willing to help in that direction. Before they can do so, however, Western Australia must realize that industrially the tail cannot wag the dog.

Senator JAMES McLACHLAN:
SOUTH AUSTRALIA · UAP

– As a representative of one of the claimant States, I take this opportunity to thank the Government for these grants. I trust that world conditions will improve during the next twelve months to such a degree that the grants can be maintained at their present level. I recall that recently a change was made in the personnel of the Commonweal th Grants Commission. With due respect to previous members of the commission, that body has lost nothing by the appointment of Sir George Pearce as one of its members. As honorable senators are aware, Sir George, is a man of wide experience, not only in Western Australian, but also in Commonwealth affairs, and is ably equipped to combat any tendency towards parochialism on the part of the commission. We must always bear in mind that we are members of a national Parliament. I have no intention to take part in any dispute as to which of the smaller States is the poorest. I am proud of South Australia. Critics of the methods employed by the commission in arriving at its recommendations have produced volumes of figures to show that this or that State has been robbed of some benefit to which it is entitled. In such a matter, I prefer to accept the judgment of the commission, and do so unreservedly. My colleague, Senator Wilson, spoke of the penalties which, he said, ha d been inflicted on South Australia by the commission’s recommendations, and he questioned the interpretation to be placed on some of its findings. I believe that words mean what they say, though I am aware that members of the legal fraternity are capable, in some circumstances, of submitting varying interpretations.

Senator Wilson:

– How would the honorable senator measure the term “ reasonable effort “ ?

Senator JAMES McLACHLAN:
SOUTH AUSTRALIA · UAP

– By the rule which the commission used.

Senator Wilson:

– The commission has used different bases for deductions recommended in respect of expenditure on social services. Originally the basis was 6 per cent. This year it is 10 per cent. Which percentage- would the honorable senator accept?

Senator JAMES McLACHLAN:
SOUTH AUSTRALIA · UAP

– The one approved by the commission.

Senator Wilson:

– But the commission has suggested both.

Senator JAMES McLACHLAN:
SOUTH AUSTRALIA · UAP

– The commission has made its own deductions, and I am prepared to accept its findings.

As regards the losses sustained by some States under federation, I would say that it does not matter , very much what a particular State may have lost. The fact is, we are a federation of Australian people, and it behoves us to think as citizens of the Commonwealth. It will not avail anything to regard federation in retrospect, and think of what might have happened to different States if federation had not been accomplished. J. believe that, on the whole, the States have been fairly treated, and, as I have already said, I am grateful to the commission for the help it has recommended to the weaker States of the Commonwealth. I hope that twelve months hence we shall be in the position to get the same consideration.

Senator McBRIDE:
South AustraliaAssistant Minister · UAP

– in reply - I appreciate the very generous support which honorable senators have accorded to this measure, though I admit that some have not been quite so enthusiastic about the recommendations of the commission as we thought they might be. Every reasonable person who studies the position will, I believe, approve the recommendations that are made by the commission from year to year. Whilst, undoubtedly, great diversity of opinion may exist as regards the formula to be used in assessing the amount of grants to individual States, a. survey of their position will reveal that in most instances the results have been entirely satisfactory. Senator Johnston was somewhat caustic of the commission’s findings, and the methods employed by that body in arriving at the recommediation for the grant to Western Australia. The honorable gentleman said that the findings of the commission were always satisfactory to the Commonwealth Treasury. Need I say to him that the figure that would be most satisfactory to the Treasury this year is one which he would not care to support? It is agreed that the purpose, of the grants is to enable the claimant States to function in a normal way, and, as Senator Wilson admitted, although the honorable gentleman did not continue along that line, the grants have enabled South Australia not only to balance its budget, but also to have considerable surpluses.

Senator Wilson:

– Not considerable surpluses.

Senator McBRIDE:

– -The honorable senator may not agree with me as to what is a considerable surplus, but the fact remains that South Australia showed a surplus for each of the four years, 1934-35 to 1937-38.

Senator Allan MacDonald:

-What was the total amount of those surpluses?

Senator McBRIDE:

– Approximately £500,000. Although criticism may he levelled at the formula adopted by the commission for arriving at its findings, the payment of the grant to South Australia has undoubtedly achieved its object in the period mentioned.

The economic position of a claimant State is, I think, a reasonable guide. That view has been expressed in this chamber on a number of occasions. One of the most reliable guides is the index figure relating to unemployment. An examination of the position of the claimant States from this point of view discloses that their economic condition is reasonably good, the average of unemployment in those States being rather less than the average for the Commonwealth.

Senator Collings:

– Two of the States have been under Labour rule for some years.

Senator McBRIDE:

– I admit that, and I do not hold it against them.

Senator A J McLACHLAN:
SOUTH AUSTRALIA · NAT

– It should rather buttress the Minister’s argument, because Labour governments are notorious for their extravagance.

Senator McBRIDE:

– Unfortunately for some State governments, the commission, in assessing the amounts that should be recommended, has made deductions for extravagances in former years.

Senator Johnston, who complained somewhat bitterly about the amount recommended for Western Australia, cannot find support for his argument in the figures relating to unemployment. They how that Western Australia has not been unduly- handicapped.

Senator E B Johnston:

– The goldmining industry of Western Australia has absorbed the unemployed.

Senator McBRIDE:

– I agree with the. honorable senator, and I am at a loss to understand why he should have opposed so bitterly the Gold Tax Bill, the purpose of which was to take some of the unearned increment of gold-mining in order to defray defence expenditure. He has just now admitted, by interjection, that goldmining is so flourishing in Western Australia that it has absorbed a great number of the unemployed in that State.

Tasmanian senators also have been somewhat critical of the bill, and haw argued that their State is entitled to a larger grant. I had an opportunity last month to visit Tasmania and, from my observations, I should say that that State is in a sound economic position. Indeed, it might not be too much to say that Tasmania has made more progress in recent years than have some of the mainland States. There would not be so much apparent prosperity if the State were suffering so seriously as has been suggested as a result of Commonwealth policy. The index figures relating to the condition of agricultural and factory production are, I think, a reliable guide. If we take 1927-28 as the base year, we find that as regards agricultural production, the figures for Tasmania in 1933-34 were 74 and in 1936-37 they had risen to 191. Last year, I believe the index figure declined to 177. It has been urged also that the fiscal policy of the Commonwealth has handicapped the smaller States. This allegation is not supported by the index figures. In 1933-34, the index figure of factory production was 83, and in 1937-38 it was 145, representing an increase of between 50 and 60 per cent.

I thank honorable senators for their support of the bill, which I hope will ho passed promptly.

Question resolved in the affirmative.

Bill read a second time, and passed through its remaining stages without amendment or debate.

page 1042

DEFENCE EQUIPMENT BILL 1939

Assent reported.

page 1043

SALES TAX ASSESSMENT BILL (No. 5) 1939

Assent reported.

page 1043

FLOUR TAX (WHEAT INDUSTRY ASSISTANCE) ASSESSMENT BILL 1939

Bill received from the House of Representatives.

Standing and Sessional Orders suspended.

Bill (on motion ‘by Senator McBride) read a first time.

Second Reading

Senator McBRIDE:
Assistant Minister · South Australia · UAP

. -I move -

That the bill be now read a second time.

The purpose of this bill is to resolve a doubt which has been cast upon the validity of the rates of tax which have been declared from time to time by the Minister in accordance with the recommendations made by the Wheat Stabilization Advisory Committee in pursuance of section 5 of the Flour Tax Act 1938, section 5 of the Flour Tax (Stocks) Act 1938, and section 5 of the Flour Tax (Imports and Exports) Act 1938. It will be remembered that, in the course of the hearing of the case in which the constitutionality of the whole- of the scheme for the relief of wheat-growers was before the High Court of Australia, this aspect was mentioned, but no judicial pronouncement could be obtained on the matter in that case because the matter had not been raised in the original pleadings which had begun in a lower court. Whatever doubt existed as to the matter, still remains, and in this respect I point out that there is a divergence of opinion amongst eminent legal authorities as to the precise methods by which the Wheat Stabilization Advisory Committee is required to arrive at the amount which should form the basis of its recommendation to the Minister. The doubt is as to the interpretation which should be placed upon the words “ based upon the price of wheat per bushel free on rails at Williamstown in the State of Victoria”, “price” being defined as value for export. Some of the legal opinions received support the committee’s conclusion, whilst other opinions are that a different conclusion should have been reached. It is not proposed at this stage to take any legislative action to attempt to clarify the formula upon which the committee should base its future recommendations to the Minister. That formula will be left as originally enacted. It is considered that it is inappropriate at this juncture to interfere in any way with the basis enacted by Parliament upon which the rate of tax is to be calculated. Since the passing of the original act, war has been declared, and it is possible that within a few days an announcement may be made as to the future control of the wheat production of Australia. The doubt which has arisen in connexion with the rates already declared may then no longer obtain. Conversely, it may be necessary, at the earliest opportunity after the policy to be followed in marketing wheat during the period of the war has been formulated, to present for consideration by Parliament an amended formula in order to meet the changed circumstances.

In view of the fact that the Commonwealth Government has already paid over to the State governments, for distribution to wheat-growers, substantially the whole of the moneys which have been collected since the enactment of the legislation in 1938, it is of extreme importance that there should be no possibility of the amounts which have already been collected and distributed having to be refunded to the persons who paid them. The Government proposes, therefore, that there shall be no challenge to the validity of the rates which have from time to time been declared by the Minister since December, 1938. In making this proposal, it is pointed out that vendors of flour who have been required to pay tax at the declared rates have, in the majority of cases, recovered, by way of increased prices for flour, the whole of the tax which they have paid to the Commissioner of Taxation. In a few cases, taxpayers have refrained from paying any tax. These taxpayers have claimed either that payment should not be enforced, pending an appeal to the Privy Council on the constitutional aspect, or that tax is not payable because the rate has not been validly imposed. It has been reported to the

Government that certain persons are taking advantage of these reasons to avoid the immediate payment of amounts which their competitors are paying in compliance with demands made by the Commissioner of Taxation. They arc using the advantage thus obtained to sell flour at a price insufficient to recoup them the tax which they should be paying to the Commissioner. The complaint is made that they are thus depriving competitors of legitimate business and, consequently, that the trade is being disorganized. The view is held that it is essential for the implementation of the scheme of relief, and in order to preserve legitimate trading, that payment should he made by all taxpayers, notwithstanding any intention of any party to seek leave to appeal to the Privy Council on the constitutional or any other aspect of the legislation. This legislation is accordingly submitted as a first step towards the enforcement of payment, and in order to prevent any further delay in such enforcement. Honorable senators will appreciate that it would not be possible at this stage to make any change of the rates which have from time to time been declared, even if that course were considered necesssary or desirable. I ask honorable senators to support this measure in order to facilitate the collection of outstanding tax, and to preclude any possibility of the necessity to refund tax already collected on the grounds of the invalidity of the rates in operation from time to time.

Senator COLLINGS:
QUEENSLAND · FLP; ALP from 1937

– It is scarcely necessary for me to say that the Opposition entirely disagrees with the levying of a flour tax in any circumstances, or for any purpose. Our opposition to the flour tax is well known. But Parliament has decided that this tax shall be levied, in spite of the vigorous protests against it both in this chamber and in the House of Representatives. That being so, we entirely agree that no person who is required to pay the tax under the legislation which has been passed should be allowed to escape payment. If the legislation is to operate at all, it must operate over the whole field contemplated by Parliament ; no one section of the comm unity should be allowed to escape at the expense of any other section.

Senator Foll:

– Especially when the tax has already been collected from the others.

Senator COLLINGS:

– That is an important point. It is easy to. take advantage of a. situation, and then to agitate to upset the validity of the act by legal action, in the hope of gaining advantage both ways. In the circumstances which I have mentioned, the Opposition will not oppose the bill.

Senator E B JOHNSTON:
Western Australia

– This measure deserves the full support of all those who wish to see the home-consumption price, which has been established after years of agitation, given permanent effect. When the tax was first imposed, and the legislation authorizing it was new, representations were made to the Government to the effect that the tax imposed in the earlier stages was too low, having regard to the export price rather than the home price at Williamstown, Victoria. However, that is a matter that belongs to the past. It is essential that this measure shall become law without delay, in order to ensure the validity of everything that the Minister and the Government have done. I desire only to ask the Minister whether he can give any indication as to when the next payment to the farmers of money collected under the parent measure will be made. This matter is being freely discussed by the wheat-growers of Australia. The Minister is well aware of the serious financial position of a great number of wheat-growers. It is strange that the price in the more isolated States always seems to he lower than in the eastern States.. As the Minister knows, prices have been abnormally low this year. It would be a good thing if the Government could see its way clear to secure an advance from the Commonwealth Bank, or, failing that, to make a second payment to the farmers out of the money which it will have in hand, in anticipation of money which it is sure to collect between now and the end of this year. Such an assurance would be greatly appreciated by the wheat-growers.

Senator McBRIDE:
South AustraliaAssistant Minister · UAP

– in reply - Senator Johnston will realize that this tax was imposed late last year, and operated only from December, 1938, and that consequently a full year’s collec tion will not have been made until December of this year. One payment has al ready been made to the farmers, and it is hoped that, before December next, another payment, bringing the total to the collection for twelve months, will be made. The Government realizes that it is of prime importance to the wheatgrowers that they shall get the money as early as possible, and, therefore, whilst I cannot give any undertaking in the matter, I assure Senator Johnston that the Government hopes to expedite matters so that payment can be made not later than November of this year.

Question resolved in the affirmative..

Bill read a second time.

In committee:

Clauses1 and 2 agreed to.

Clause 3 (Declaration of rate of tax not to be challenged).

Senator A J McLACHLAN:
SOUTH AUSTRALIA · NAT

. -I observe that proposed new section 35a is to validate all past declarations by the Minister.- Can the Minister say how it is proposed to secure the future? The proposed new section merely validates declarations which the Minister has made under section 5 of the Flour Tax (Stocks) Act or section 5 of the Flour Tax (Imports and Exports) Act. It may be that some other step is contemplated.

Senator McBRIDE:
South AustraliaAssistant Minister · UAP

. - Under the arrangements that will be made in terms of the Government’s proposals to handle the balance of the 1.938-39 wheat crop, and also future crops, it is expected that the difficulties that have existed during the last few years will disappear. Consequently,itis expected that there will not be any doubt as to the validity of the recommendations that will then be made by the Wheat Stabilization Advisory Committee in regard to the rate of flour tax. The honorable senator knows of the difficulties that have existed in the past owing to the varying prices of wheat in the several States. In the future, such conditions are not likely to exist, and the Government does not expect to have to make any declarations in similar circumstances.

Clause agreed to.

Title agreed to.

Bill reported without amendment; report adopted.

Bill read a third time.

page 1015

TARIFF BOARD REPORTS

Senator FOLL laid on the table reports and recommendations of the Tariff Board on the following items: -

Bounty on sulphur. leather, rubber, canvas and composition belting; also cotton and other textile belting suitable for use in elevator, con veyor and like systems and for power transmission purposes.

Tinplate

Tractor . engines.

page 1015

LOAN BILL 1939

Bill received from the House of Representatives.

Standing and Sessional Orders suspended.

Bill (on motion by Senator Foll) read a first time.

Second Reading

Senator FOLL:
Minister for the Interior · Queensland · UAP

– I move -

That the bill be now read a second time.

This bill is to appropriate and to authorize the raising of loan funds to meet certain expenditure for the financial year 1939-40, which, with the exception of that relating to the war, was forecast in the budget speech of the Treasurer (Mr. Menzies). The services of the bill may be summarized as follows : -

To the above has been added an amount of £225,000 to provide for the expenses of raising the necessary loans. The whole of this additional sum may not, of course, be needed. The amount of £10,405,000 provided in the bill for the defence programme represents another step in the progress of Australia towards being able to defend itself against attack. This programme is an earnest indication of the country’s awakening to the realities and dangers of international unrest. The degree of the awakening and the consequent effort may be measured by a comparison of the following figures of Commonwealth expenditure on defence during the last six years : -

At the beginning of 1938-39, a defence programme of £43,000,000 to extend over a period of three years was contemplated. The necessity for a programme of this magnitude came as a distinct shock to the people of Australia. Many were, I believe, unconvinced of its necessity. International events and the continued aggression of certain powers very soon suggested that even these plans were inadequate. In December last, the Government announced that the programme would be increased to a total of £63,000,000 over the three years. Details of the increased programme, with the cost of the several proposals and initial financial measures to meet the increased programme, and particulars of the programme itself, have been fully explained by the former Treasurer (Mr. Casey) and the Minister for Defence (Mr. Street). Since that date, further developments have taken place. Extension of some of the munitions factories, the Australian Imperial Force Reserve, and the national register may ‘be mentioned in this connexion. In addition, the decision, in agreement with the British Government, to manufacture in Australia the new Beaufort aeroplane for the Air Force was announced. These additional liabilities amount to approximately £6,000,000. This great programme is designed to be the groundwork of Australian defence and is capable of expansion to meet still greater needs. Its purpose is to bring our military preparation, within the shortest space of time, to such a state that it will be adequate to deal with any military eventualities. The plans cover the mechanization of the Army, the production of munitions and the manufacture of aeroplanes, the last mentioned representing, it is to be hoped, the permanent expansion of a valuable industry. Finally, the programme was designed to prepare an adequate military force based on our system of Militia training. In no branch of defence have the results been more encouraging than in this. It was proposed to increase the military esta’blishment from 35,000 to 70,000. The response to the invitation to join up was so rapid that the enlistments substantially exceeded the numbers asked for. The following table sets out the authorizations of capital expenditure made, or to be made, in the various financial years up to . and including 1939-40 :-

The following financial provision has been made by Parliament to meet the authorizations in the foregoing table. -

These tables do not include salary and maintenance expenditure, of which £7,505,000 was charged to revenue iu 1938-39, and £10,121,000 is estimated to be so charged in 1939-40.

The difference between the necessary authorizations to the 30th June, 1940, and financial provision already made is £10,405,000. This amount has been included in the bill. The programme, which is the groundwork and basis of Australian defence and is essential to ensure our national safety, must be completed. The projected expenditure of £33,137,000 in 1.939-40 will be met. from the various funds in the following proportions : -

The outbreak of hostilities necessitates ti intensification of effort in the production of munitions, in the training of men, and in placing all services on a war basis. It has not been the practice to mention in war loan bills the purposes for which war moneys will be used. The items of expenditure were shown in the Estimates and budget papers. In this instance I have given an indication of the main directions in which the expenditure will be incurred, and have. made an allocation of the funds required beween the three services, navy, army and air force.

It will be quite impossible to finance the greater part of our war effort from revenue. In all wars and in all countries, it becomes necessary to raise money by borrowing. Some information as to funds raised during the Great War of 1.914-18, may be of value to honorable senators. At the outset, an arrangement was made with the British Government ro finance our initial war expenditure by a loan of £18,000,000 at the rate of £.1,500,000 a month from December, 1914. Later, another loan of £25,000,000 at the’ rate of £2,000,000 a month was arranged. The total of advances actually received from Great Britain up to 1.916-17 was £47,500,000. That amount was later included, in- a “ funding arrangement “ made with the British Government in 1921. The British Government also met a great deal of the cost of the maintenance of the army in the field. Our total indebtedness to Great Britain under the Funding Arrangements Act was £92,480,000. Of that amount £12,756,000 has been repaid and £79,724,000 is still outstanding. The collection of debt charges, interest and sinking fund on this amount has been “ postponed “ since “1931, but the amount is still included in the Treasury accounts us part of the Australian war debt. In addition to the amounts advanced by the British Government, loans amounting to £250,000,000 were raised in Australia to cover the cost of war and demobilization.

Altogether our total loans raised amounted to about £342,000,000, a part of which was for soldier land settlement. Redemptions and repayments have substantially reduced this peak debt of £342,000,000, and it now stands at £265,000,000, including the £80,000,000 owing to the British Government on which interest and sinking fund is not being paid. The loans raised in Australia, amounting to £250,000,000, were raised by the Treasury through the Commonwealth Bank in the usual manner. This obviated the necessity to underwrite, and the expense of flotation was therefore kept to the low average figure of 5s. 7d. per cent. The Government anticipates that appeals for funds will meet with an equally willing and patriotic response in the future. During the years 1914-15 to 1919-20 inclusive the war charges to revenue were : -

It is impossible at present to forecast the financial calls which will be made on the Australian people in respect of war finance. That they will be heavy is clear, and we must meet them as they arise with courage and determination.

The last item of the bill relates to £2,000,000 for postal works, which should have a greater appeal to members of a civilized community than items relating to war expenditure. It is regrettable that we have to spend so much on projects which are necessary only because of the threats and misunderstandings between nations. This provision is to carry out postal works of a capital nature. This expenditure produces genuine assets, and is fully reproductive. Of recent years, we have charged all postal works to revenue with the desire to leave the loan field open as far as possible to the urgent requirements of States. In view of the present position of our finances, it is now necessary to charge some of this capital expenditure to loan fund. A general review of items of Commonwealth expenditure, forecast in the budget, is now being made and probably some reduction of the total estimated expenditure on these works will be effected. The progress of the works may also possibly be delayed to some extent by late or nondelivery of necessary material.

Senator Keane:

– For what period will the Government be able to carry on with this £22,630,000?

Senator FOLL:

– It is difficult to say. The sum provided for postal works is for twelve months, but the war requirements I cannot estimate. During recent years, in order to make additional loan money available to the States, many works that could be legitimately allocated to loan account were charged to revenue, although they should have been put in the category of capital expenditure.

Senator COLLINGS:
QueenslandLeader of the Opposition

– It is proposed to authorize the Government to borrow money for certain purposes to an amount not exceeding £22,630,000. The Opposition does not intend to delay the passage of this bill, but it is my duty on behalf of, not only the Opposition, but also the nation, to say that we regret exceedingly the apparently inflexible intention of the Government to do nothing whatever to raise this money by other than orthodox methods. The sum required will be either borrowed or raised by means of taxation. The borrowing of this huge amount will have the effect of adding to the national debt, and to the interest burden for the future. The Opposition declined to join a national war cabinet, believing that it could best contribute its maximum effort on behalf of the nation by exercising its historic right to criticize Government proposals when it believes that criticism is desired. We now say that the time has arrived when Australia, with its population of less than 7,000,000, must call a halt in public borrowing, because of the tremendous interest burden that is being imposed on the community. We have no desire to hamper the Ministry,because we believe that it is doing what it thinks to be right, but we consider that, as the months pass, the financial needs of the nation will increase, and that there is danger of the burden of debt being increased to the saturation point. When that, is reached, not only will it be impossible further to defend the nation, but also there will be nothing left worth defending.

Senator McBride:

– We are a long way from that point yet.

Senator COLLINGS:

– The Government should cease heading the ship of State for the rocks. The people have to produce the wealth of the nation by the application of labour, manual and mechanical, to industry.

My second point is that it is proposed to pay interest on these loans. While this nation is passing through the throes of a great emergency, one privileged class, those who put their money into these loans, which will be free from income tax and carry the usual rates of interest, will find the war a heaven-sent blessing, and the longer it lasts the more wealthy will that class become. No country has fought a war except at the sacrifice of the lives of its people. This war, and all of its concomitant evils, cannot be laid at the door of the Labour party.

Senator McBride:

– I have heard Russia eulogized in this chamber.

Senator COLLINGS:

– My friend the Assistant Minister has an obsession that obscures his better judgment. If hip better nature were allowed to prevail, he would be able to absorb some of the suggestions made by the Opposition.

Senator A J McLACHLAN:
SOUTH AUSTRALIA · NAT

– What does the honorable gentleman suggest the Government should do?

Senator COLLINGS:

– I shall state exactly what the intention of the Labour party is in this matter. We believe that it is our duty to warn the Government, and the nation that the present method of raising loanscannot be continued indefinitely, and that, if not to-day, perhaps to-morrow, the party opposite will be forced to listen to a different proposal. I was saying that this war, and all its attendant evils cannot be laid at the door of any country in which there is a Labour party, be- cause in all parts of the world that party claims that international disputes should be settled by arbitration before the first shot is fired, and not after the last shot is fired.

Senator McBride:

– That idea is not peculiar to Labour parties.

Senator COLLINGS:

– It has not been adopted by the honorable gentleman’s party.

Senator McBRIDE:
UAP

– That is not correct.

Senator COLLINGS:

– When the Labour party adopts it in connexion with industrial disputes, the party opposite attacks us at every stage; but we claim t hat what is good in industrial disputes is good in international disputes. No country has ever financed a war except by the methods by which this war will be financed. Every war has been followed by a long period of terrible depression, in which the rank and file of the people, not. the money- jugglers or the interestmanipulators, have had to suffer starvation, disease, and bankruptcy. We say that it is much better to tell the people that while those who produce the wealth are rushing to the colours, prepared to lay down their lives in defence of the country, these who produce no wealth, but live on the productive capacity of others, should make their contribution in this crisis.

Senator McBride:

– They will.

Senator COLLINGS:

– The honorable senator knows that they will merely lend their money at interest, and the longer the war lasts, and the more loans it is found necessary to raise, the greater will be their rake-off. There is an unholy alliance between this Government and the financial thieves that bleed all’ nations white, because of this interest-mongering policy. I am putting forward an argument that the Government has heard before, and will hear again. One of these days the Labour party will have a majority in this Parliament, and then it will how the people how to finance the requirements of the people without adding to their interest burden.

I have been asked what remedy my party proposes. The statement may be made that the Opposition would finance this war entirely by the expansion of the credit of the nation; that statement would not be in accordance with the platform of the Labour party. We say that the Government has the oppor- runity through the Commonwealth Rank to do what Sir Denison Miller did during the last war,that is, to raise a credit structure - not a new money structure - which will not add to the interest burden of the nation. That was the function of the bank when it was brought into being by the Australian Labour party.

SenatorMcBride. - If what the honorable senator says is true, how is it that we are still paying interest on the loans raised in the last war?

Senator COLLINGS:

– If the honorable senator wishes to put up any bogy he will have an opportunity to do so, but it is useless for him merely to throw remarks of that kind across the chamber. The Labour party does not propose to allow wealthy people in this country to escape their share of financing this war, simply because it believes in the expansion of national credit. We believe in the expansion of national credit, but we say that this war should be financed first by a wealth tax. How do honorable senators opposite like that? If such a tax were imposed, some of them would not now be smiling, as they smile on every occasion on which we on this side deal with this subject. If honorable senators opposite were afraid that the people of this country had the courage to demand that the unduly rich shall disgorge, a portion of their wealth to help the nation in its hour of trial, they would have apoplectic fits, because they would then be obliged to make their share of sacrifice in defence of their stake in this country, as will the young members of our Militia Forces who to-day are prepared to lay down their lives. I shall give a simple illustration of Labour’s financial policy. Let us assume that the Assistant Minister desires to engage in industry, just as the Government desires to conduct a war of defence. He wants an overdraft of £50,000 to enable him to erect a factory. If he. has been, through the mill as I have been - for I have been on the rack’ of capitalism’ which has squeezed the last ounce of financial blood out of me - he knows that he will be obliged to place his proposal before the bank’s manager. The . manager will receive himvery nicely. But the Assistant Minister knows, as I. and other honorable senators know, that neither the manager . nor . the bank itself will give him anything in the form of money. In the course of the interview, the manager will probably hand him a cigar - bank managers are rather good fellows - and it will be a very good cigar. Eventually the manager will decide that the Assistant Minister’s proposition is sound and then he will ask the Assistant Minister what collateral he has to offer. The Assistant Minister will reply that he has two acres of land on which he proposes to erect the factory, and that the factory together with the land, will temporarily become the property of the bank. At that stage the manager will say that he thinks that the Assistant Minister’s proposition is all right.

Senator McBride:

– He must be a good chap !

Senator COLLINGS:

– If the honorable senator can show me one flaw in what I am saying, I shall never repeat this argument. After the interview the manager will introduce the Assistant Minister to the accountant as a new customer of the bank, and the accountant will introduce him to the teller, and repeat the story. By this time the Assistant Minister’s cigar has been smoked and all that has been given to the Assistant Minister has gone. In that copperplate hand, for which bank tellers are famous, the teller will write the Assistant Minister’s name in a ledger, and on the credit side he will write £50,000. But the bank will not have given the Assistant Minister anything. Some time later certain work on the erection of the factory will have been done, and the contractor must be paid. What will the Assistant Minister do then ?

Senator McBride:

– First, I should object very much if the bank manager debited me with £50,000 at that point.

Senator COLLINGS:

– That is merely the limit of the overdraft. If the honorable senator cannot find anything really the matter with my argument, he cannot destroy it simply by ridiculing it. When the Assistant Minister next goes to the bank, he will take out his cheque book, which has been supplied to him by the bank and charged for, and write out a cheque for, say, £1,000. The teller will hand the cheque to the ledgerkeeper, and the ledger-keeper will say to the teller, “ This joker has £50,000 worth of credit here”. The ledger-keeper will not use the term “ money “. He will then put his magic initials on- the cheque, and the teller will ask the Assistant Minister. “ How do you want it? “ The Assistant Minister will, of course, note on the back of the cheque how he wants it - so much in £10 notes, so much in £5 notes, down to 10s. notes ; and because there is no note of a smaller denomination than 10s., he will take a certain amount in silver. Were this transaction to be effected in, say, Paris, where notes for 2½d. are in circulation, he would not require to take any silver at all. In the course of time, the Assistant Minister will have his factory, and while be is operating it he will pay interest to the bank on his overdraft. At no stage of the transaction will the bank give to the Assistant Minister anything but an issue of credit. We propose that the Government should finance its war expenditure in the same’ way. However, we do not ask it to finance this war solely by means of an overdraft on the Commonwealth Bank. We suggest that the Government should make the wealthy contribute their share towards the defence of this country. If it followed this plan, it would avoid increasing the burden of interest which wo are now carrying. In any case, if the Government approached the Commonwealth Bank for accommodation, the Governor, if he knew his business, would ask for security against the Government’s overdraft. The Government would then submit its collateral. What is the collateral of the Government of this country? It is the wealth-producing power of tie men and women in the factories in the cities and on the farms - that is what the Government would pledge to the bank as security for this loan. In addition, it would pledge its power of taxation. The bank would be satisfied, because it could not lose on the transaction. The Government can finance its defence programme in that way in conjunction with a wealth tax on the unduly rich. If it did so, it would have no need to squeeze the unduly poor, or aggravate their poverty and desolation when the war is over and the next depression is in full operation in this country. Senator A. J. McLachlan asked us to state our remedy ; that is our remedy and it is not mixed up with any fantastic proposal toget something for nothing.

We propose to offer tangible security for every £1 the Government needs to borrow. No doubt honorable senators opposite will say that such a system would lead to inflation, and other dangers of that sort. But there is no point at which the Government need worry in such a scheme until it reaches the limit of the productive power of this country. If it followed this plan, we should not have 50,000 compulsorily idle men in Victoria, or 100,000 compulsorily idle men in New South Wales, or any farmers below the breadline because they cannot get payable prices for their products. All of these people would be in permanent employment and contributing towards the full utilization of the productive powers of the Common wealth. There would be no danger of reaching saturation point in using the national credit in this way. Before that point was reached, we would be enabled to sit back satisfied and say to ourselves that nowhere else in the world was there a country where everybody able and. willing to work had work to do, and where the national wealth was so evenly divided as it was in the Commonwealth of Australia. I realize, however, that the Government will not follow this plan. It would not be running true to the class it represents if it attempted anything of the kind. However, as Leader of the Opposition, I voice the Labour party’s disapproval of the Government’s method of financing this defence expenditure. At the same time, we are determined that we shall not lay ourselves open to the charge that we have done anything to hinder any of its proposals for the defence of the nation.

Senator DARCEY:
Tasmania

– I approve of the method enunciated by my leader for the raising of this money. On no occasion have I said in this chamber that the national credit should be used in. such a way as to dispense with taxation. We have heard much about new taxes. Honorable senators opposite probably would like to know what the interest on this loan would amount to annually. This method of financing the war is suicidal. I challenge any honorable senator to tell me a better way of financing the war than through the Commonwealth Bank free of interest. The bank is the property of the nation and its profits go back to the nation.

Senator McBride:

– The honorable senator, in reply to Senator Wilson, undertook the other night to give an instance of a bank lending more than the total of its deposits.

Senator DARCEY:

– It was such an infantile question. I shall give the answer in the words of Reginald McKenna-

Senator McBride:

– Give it in your own words.

Senator DARCEY:

– The Commonwealth Bank is the only bank of its class in the world that was founded by the people for the people. It was practically strangled in 1924 by the Bruce-Page Government, but it is still our bank and is in a position to advance such credit as the Government needs. Let us suppose that the Commonwealth Bank lends money to the Government at 4 per cent.; the Government pays the interest and finally repays the principal and the money is returned to the bank. The bank belongs to the people, so the people are merely lending to themselves and repaying to themselves. There is nothing else in the transaction. Therefore the bank could just as easily make the money available free of interest. I drew the attention of honorable senators yesterday to a false statement which appears in the budget in connexion with the conversion loan of £53,000,000. It is stated in the budget that that loan represented cash subscriptions. That is not correct. When I questioned the Government regarding a recent loan of £4,800,000, the reply given by the Minister representing the Treasurer was that £3,750,000 was bank-created credit, the public subscribing only £1,050,000. I told the Treasurer personally that had that been real money as stated in the budget instead of bankcreated credit, without departing in any way from accepted banking practice the Commonwealth Bank could have advanced £40,000,000 of credit to the Government. This is the way in which the Government is misleading the people. Honorable senators have only to realize that orthodox methods of finance, in which the Government believes so strongly, have brought us into a position where we have a national debt of £1,200,000,000. Australia cannot be adequately defended on money made available through the banks at 4 per cent, interest. As I have said so often before, the banks do 11Ot lend money. Although I have cited the greatest authorities as supporting that statement, some honorable .senators opposite profess to regard it as the expression of a new idea. It is nothing of the kind.

Senator A J McLACHLAN:
SOUTH AUSTRALIA · NAT

– The same ideas wore held before Christ; they were tried out in China.

Senator DARCEY:

– -For hundreds of years the Jewish church taught that money should be lent without interest and that loans should be cancelled at the end of seven years. The honorable senator cannot confound rue on theological matters because I know a.« much about theology as I do about finance, l.n London to-day there is n Jewish church which will not admit to membership any Jew who lends money at interest. I. am not concerned as to how this money is to be. expended so much ais ro how ii i.= to be raised because we all know that it is to be expended on the defence of .Australia. How any body of mcn could listen to me expounding my financial beliefs for twelve months, and still maintain that orthodox finance will carry Australia through the war, is beyond my comprehension. “We are to raise £23,000,000 this year. I told an honorable senator the. other day that it would not be possible to raise that amount, of real money through the banks because the statement issued by the Commonwealth Bank six months ago disclosed that the whole of the money held by the eight private banking institutions amounted to only £17,000,000 in notes, and a few millions of pounds in silver. That being so, how could the banks lend £23,000,000? The answer, of course, is that they do not lend money at all; they create credit, and lend that credit. Senator McBride has chided me with having refused to answer a, question put to me by Senator Wilson as to whether I could name one bank which lends more than its deposits. I can only come to the conclusion that Senator Wilson is suffering from infantile paralysis of the financial faculty if he does not as;iw that T have already answered bis question satisfac torily. If he had asked me if I could name one bank which limits its lending to the amount of its deposits I must confess 1 would be unable to answer him. All private banks lend in excess of their deposits; all operate on the same system and create credit on every deposit made. When he reads a statement issued by a bank that its deposits total £54,000,000 Senator Wilson is evidently under the impression that that bank actually has that amount of money in its hands. The reply to that is very simple. As the eight private banks have between them only about £17,000,000 how could an individual bank have deposits totalling £54,000,000 ? The amount set down at the deposits represents not what is put into the bank but what is loaned by the bank. I have a statement which shows the deposits in the Bank of New South Wales as £54,000,000. If that bank puts £2,000,000 into this loan ite deposits will be shown in its next statement as £50,000,000. Surely honorable senators can grasp the simple fact that when money is subscribed to a loan it does not reach the hands of the Treasurer at all. When this loan of £10,000,000 is floated the Government will merely have the right to draw cheques against the amounts subscribed by the banks. I have tried hard to convince honorable senators opposite of the soundness of my contentions regarding this subject, but” there are some who will always disregard-the truth. However, I believe that once a man’s conscience is touched he is responsible for his subsequent actions. I challenge honorable senators opposite to point out where any of my contentions are wrong, or to prove that it is fair to the taxpayers of this country to raise money at 4 per cent, when it could be obtained for nothing.

Senator CAMERON:
Victoria

– It is not my intention to traverse the. ground already so ably covered by the Leader of the Opposition (Senator Collings). I wish merely to emphasize, very brief! v a few points. The first is that we on this side of the chamber stand for the defence of this country without reservation of ;mv kind: but w part company with the Government, on the methods it adopts to finance defence. We say that it is wrong to nl!m» a small section of the community, known as the owners of money capital, to capitalize the need of the nation to defend itself. We challenge the Government to dispute what we say in that connexion. The Leader of the Opposition has said that a capital levy should be struck. The time may come, if this war continues, when the Government will have no alternative but to strike a capital levy. Honorable senators know that quite recently the owners of money capital refused to subscribe to Commonwealth loans. If they continue their refusal, what will the Government do? Are our defence requirements to go by default? I.s the country to be left at the mercy of the enemy because of lack of finance?

Senator A J McLACHLAN:
SOUTH AUSTRALIA · NAT

– In that event wealth would have to be eonscripted.

Senator CAMERON:

– That is so. I am suggesting that, in this hour of need, it is wrong for the Government to borrow money and commit posterity to pay a huge amount in interest. The Prime Minister (Mr. Menzies) has said that posterity must pay its share. To whom? The debtor section of posterity is to be committed to pay to the creditor section of posterity enormous sums in interest. That policy cannot be justified and is immoral from every point of view, in addition, it is ineffective. If the Government were prepared to take a bold stand and say, “We shall strike a capital levy consistent with the ability of the owners of money capital to pay “, the money could be raised without very much difficulty, and very few, if any, of the owners of money capital would refuse to contribute their quota. If that were done the internal economy of this country and the incidence of taxation would be changed for the better.

Senator Herbert Hays:

– Would the honorable senator adopt that practice in peace time as well as in war time?

Senator CAMERON:

– Yos. where needed. ‘ Why should posterity be required to pay huge amounts in interest? For every fi paid to the returned soldiers and their dependants to-day the owners of money capital are receiving more than £2 4s. 3d.

Senator McBride:

– Who are the owner? of this money capital ?

Senator CAMERON:

– The honorable senator may be one of them, for all 1. know to the contrary. The point I wish to make is that so far we have not been able to do justice to our returned soldiers and their dependants because of the huge amount we are committed to pay in interest to the owners of money capital. The same remarks apply .with regard to taxation. If the existing liabilities cannot be fully met, how do honorable senators opposite expect to meet them later, after an additional £23,000,000 or even £1.00,000,000 has been borrowed?

Senator McBride:

– We have met our commitments to date.

Senator CAMERON:

– 5Tes, but only by keeping at the irreducible minimum the amounts payable to the dependants of soldiers and others, thus, enabling the payment of the maximum rates of interest to the owners of money capital. That is where the patriotism of the Government and its supporters is put to the acid test. On the one hand, men and women are asked to be willing to sacrifice their lives; on the other hand, the owners of money capital are being told in effect “ Here is a chance to invest your surplus capital in a way which will bring you profits “. Effect cannot be given to that policy without a progressive reduction of the living standards of the fighters and the workers on whom the country will depend mainly for its defence. That is where we. on this side part company with honorablesenators opposite. When Senator Leckie, or any other senator, opposite tells us that he is patriotic, or indicates that he regards himself as an example of patriotism, he should do so with reservations. I! describe such patriotism as “patriotism us profits”. It certainly is not true patriotism, and has no association with, the principle of equality of sacrifice. Coming from such persons, the term “equality of sacrifice” is a mere figure of speech, which is used to delude the ignorant who do not. realize the way in which their credulity is being capitalized in this hour of need. I say these things not in order to hold up the work of the. country, but because I believe that they should be said in reply to what was said last night reflecting on members of the

Opposition. The Government is preparing for the defence of this country on a basis which will show enormous profits to those who invest their capital in war loans; it is making many appointments at salaries far in excess of what are justified; and at the same time the salaries of the men who will do the work and the fighting are being kept at the lowest possible level.

Senator ALLAN MacDONALD:
Western Australia

– This is not the time to indulge in flights of fancy in regard to finance. The fact is that the Government has launched its first loan for the prosecution of the war; and all sections of the community should assist it in the task to which it has set its hand. We must get down to bedrock, and realize that the Government has only three ways of raising this money - it may impose taxes; it may float loans; or it may act through a central bank. That being so, it is useless to waste time in discussing doubtful methods. If the experiences of the last war are any true guide, the Government has undertaken a stupendous task in financing its war operations. The figures cited by the Minister in relation to the last war expenditure should provide food for reflection. Between 1914 and 1918 the sum of £265,500,000 was raised within Australia. That sum did not include £40,000,000 or £50,000,000 which was expended on war services from revenue, or the £80,000,000 which Great Britain lent to Australia, and which this country has made little effort to repay. Britain has not asked for repayment. This country has started on a job which may require from £100,000,000 to £300,000,000, and’ it should receive all the help and encouragement that can be given to it. I have no doubt that people with a few hundreds of pounds, as well as the wealthier sections of the community, will do exactly as similar people did during the last war; they will make their money available’ to the Government for the prosecution of the war, so long as the Government does its job. I have no doubt whatever that, the present Government will do its job. The one fear that I have is that, in raising these huge sums of money for war purposes, the progress of Australia will be retarded. The well of wealth on’ which we can draw is not bottomless ; there are limits beyond which no government can go with its borrowing policy. By the utilization of all of this loan money for war purposes, there is danger that capital required for the development of Australia will be stinted, and the development of the continent delayed. However, that is something that we cannot rectify at the present time. I urge the Government to exercise caution in the raising of these huge sums of money for the prosecution of the war so that Australia’s development may not be brought to a standstill. I commend the Government for its courage in starting on this road, the end of which no one can forsee, but which we all hope will lead into the light of a better day.

Senator SHEEHAN:
Victoria

– I disagree with Senator Allan MacDonald that the time is not opportune to discuss this important matter. I do not desire to speak at length, but I believe that this is a time when attention should be drawn to what we consider to be the wrong methods that are being adopted by the Government in financing the war, and also to the refusal of the Government on other occasions to raise money for the peace-time requirements of the nation. If one thing more than another has struck me during this discussion, it is the paradoxical attitude of supporters of the Government in regard to the manner in which the war should be prosecuted. We know that man-power, materials and money will be necessary in the task ahead. There have been strong demands by Government supporters for the conscription of. Australia’s man-power, but some honorable senators opposite would make the road easy for those whose wealth could be used in the nation’s defence.

Senator Foll:

– I rise to a point of order. I submit that at the secondreading stage, the discussion must be limited to the objects of the bill. Extraneous matters may be discussed only on the first reading.

The PRESIDENT (Senator the Hon. J. B. Hayes). - I ask Senator Sheehan to keep his remarks within the limits allowed by the Standing Orders.

Senator SHEEHAN:

– This bill seeks authority to raise money for certain purposes, and I submit that I have a perfect right to discuss the manner in which that money is to be raised and expended.

Some of it will doubtless be used to pay soldiers and to provide the various materials necessary for the prosecution of the war. That being so, the possibility of men being conscripted for war service comes within the scope of the measure. I claim also that I am in order in discussing the degree to which the wealthy section of the community should be called upon to contribute the funds necessary to carry on the war. It has been suggested that there is a possibility of this loan not being fully subscribed. I hope that that is not an indication of the Government’s lack of faith in the willingness of persons with money to subscribe to the loan, but the attitude of the Government justifies that inference.

Senator Herbert Hays:

– The honorable senator complained because millions of pounds are being raised by means of taxation.

Senator SHEEHAN:

– I did not. I directed attention to the fact that the Commonwealth is raising over £100,000,000 from a population of fewer than 7,000,000 persons, and to the further fact that our economic conditions are such that we are becoming a race of old-age pensioners. I also read a portion of a speech delivered by the . then Treasurer (Mr. Casey) when introducing the’ National Health and Pensions Insurance Bill in the House of Representatives. I said that the Government has not done anything to plan the economy of the nation, and that we are drifting into a hopeless economic and financial position. We must visualize the position- which Australia has: reached as a result of past borrowing, and the possibility of the war being; continued, for a long, period.. In these circumstances- we should, pause to consider the. heavy demands that must necessarily be made upon the people.For these reasons,. I regret that some honorable senators opposite are inclined to treat facetiously the- speeches made by Senator Darcey when he cites the recommendations of the Royal Commission on Banking and Monetary Systems,, a body appointed by the Lyons Government - which was supported by Senator Herbert Hays - to investigate Australia’s monetary resources and control That commission presented its report, and it ill becomes those responsible for its appointment to ridicule its findings. It simply shows that the supporters of the Government still wish to adhere to the orthodox methods of finance which they have followed so slavishly, and which are bringing this country to the verge of ruin. Honorable senators opposite prefer to adhere to methods which have enabled those with whom they are associated to make fortunes out of the difficulties of the country, and they are still willing to support a financial system which has plunged this and other countries into war. We deplore the present, position, but we have said from time to time that we are prepared to assist Australia and the British Commonwealth of Nations to carry the war to a successful conclusion. But in doing so we must pause to think. They are not always the Kaisers, the Hitlers and the Mussolinis who are responsible for war, because those who make money out of war incite the nations to fight.

The PRESIDENT:

– The honorable senator must discuss the bill.

Senator SHEEHAN:

– -I shall conclude by saying, that honorable senators should give more consideration to whathas been said by honorable senators, on this side- of the chamber on the subject of raising, loans, and endeavour to extricate Australia from its present desperate financial position.,

Senator HERBERT HAYS:
Tasmania

– Senator Cameron and Senator Sheehan have been responsible for a tirade of abuse against the Government and its supporters because of the method which it employs’ to borrow money for war purposes. They contend that the Government should’ depart from the orthodox method of raising loans, but neither submitted constructive suggestions as to how the huge amount of money required should be raised. Senator Sheehanhasat the back of his mind some magic way in which huge sums can be drawn from the air, and Senator Cameron, who was most abusive,, suggested that honorable senators’ on this side of the. chamber are associated with those who lend money and who are sapping thelife-blood: of the nation for the sake of personal gain. Every honorable senator should realize that he has a responsibility to his country in its hour of need. Senator Cameron and Senator Sheehan should recognize that their wild Statements are not likely to bring the people of this great democracy closer together. The speech of . Senator Sheehan should have been delivered in the Domain or on the Yarra bank, where he is in the habit of speaking. His utterances were unworthy of a deliberative assembly in which the whole of the Australian people are represented. Senator Sheehan believes that by waving a magic wand an endless flow of money can be produced from the air to finance, not only war expenditure, but also all other needs. I asked the honorable senator by interjection whether he would adopt the same policy in times of peace. Senator Cameron supports a similar policy. Why does he borrow money?

Senator Cameron:

-i do not.

Senator HERBERT HAYS:

– The honorable senator -should be ashamed of the statements which he made to-day; I am sure that they will not meet with the approval of those whom he represents. He also said that we are satisfied to sit back and make money out of war while he and those with whom he is associated represent those who. do the actual fighting. The honorable senator knows that that statement-: is absolutely . untrue. Not only workers fought in the GreatWar, but also the sons of captains of industry, bankers, pastoralists, barristers and other professional and commercial men. The honorable senator should not speak so disparagingly of the Australian citizens. He underestimates the sentiment, of the people of Australia, and if the honorable senator made such a scandalous statement outside he would be tarred and feathered. Senator Cameron is not prepared to. make such an utterance elsewhere. I am ashamed of the honorable senator. I am sure that he is not speaking on behalf of the workers of this country, and that he does not represent the views of a vast, majority of the Australian people. He would not dare to make such scandalous statements outside of this chamber, and his utterances suggest that ‘ he has a cramped mind.

When Senator Cameron reads the proof of his speech to-day, he will use the blue pencil extensively, because he will realize that his statements are untrue. He spoke of a financial scheme. What financial scheme?

Senator Cameron:

– Borrowing money.

Senator HERBERT HAYS:

– Issuing credit! Whose credit is to be used? It is easy to speak of using the credit of the nation, but that can be done only within limits. Senator Sheehan contends that orthodox methods of finance should be discarded and the proposal supported by Senator Darcey should be adopted.

Senator Sheehan:

– I did not say any- thing about Senator Darcey’s scheme. I referred to the recommendations of the Royal Commission on Banking and Monetary Systems, and said that honorable senators opposite treated facetiously the remarks of Senator Darcey concerning the findings of that commission.

Senator HERBERT HAYS:

– Senator Darcey cited only one paragraph of the commission’s’ report. Honorable senators opposite know that the commission, which did not condemn borrowing, reported that the Commonwealth Bank can do certain things within limits. The proposal- advocated by Senator Darcey has not the support of the Leader of the Opposition’ (Senator Collings), the Deputy Leader of the Opposition (Senator Keane ) i and many other honorable senators on that’ side of the chamber. They should direct their efforts to an attempt: to convert- the members of their own party. I venture to suggest that the Leader . ‘of’- the Opposition (Senator Collings)’, Senator Keane and certain other members of the party opposite do not subscribe to the wild-cat financial proposals of Senator Darcey and those who support him, in his views. I rose to protest against the unjustifiable suggestion by Senator Cameron that the patriotism of the Ministry and its supporters’ does hot extend beyond issuing loans . and enabling people with money to lend to profit by war expenditure.

Motion (by Senator McLeay) put -

That the question be now put.

The Senate divided. (The President - Senator the Hon. J. B. Hayes.)

AYES: 16

NOES: 14

Majority . . 2

AYES

NOES

Question so resolved in the affirmative.

Original question resolved in the affirmative.

Bill read a second time, and reported from committee without amendment or debate; report adopted.

ThirdReading.

Motion (by Senator Poll) proposed -

That the bill be now read a third time.

Senator COLLINGS:
QueenslandLeader of the Opposition

– Mr. President, I protest-

Motion (by SenatorFoll) proposed -

That the question be now put.

Senator COLLINGS:

- Mr. President

Motion - by leave - withdrawn.

Senator COLLINGS:
QueenslandLeader of the Opposition

– I am ashamed at the methods adopted by the Minister for the Interior (Senator Poll), who has shown that he is prepared to the bitter end to bludgeon legislation through this Parliament. There is no necessity whatever for the Senate to adjourn to-day. It can sit to-morrow, next week, and the following week. The taxpayers are paying us to do their work, but we are passing bills by the dozen without one of us being given an opportunity to pay intelligent attention to them. The Government may call this legislation, but, if the people understood the way in which parliamentary work is now being done, they would realize how little freedom is enjoyed by their elected representatives. Why should I, a man of at least ordinary intelligence, have to sit here and assume an air of wisdom, as though I had exercised my right to criticize and review the measures submitted to this chamber? The Opposition is prevented from doing the job which it was sent here to do. No longer is it granted the right of free speech. It is muzzled by the Government, because the party in power has a majority of two votes in this chamber. It is able to bludgeon its measures through, and to deceive the electors into imagining that they are getting representative government. I protest against this despicable conduct.

Question resolved in the affirmative.

Billread a third time.

page 1057

SUPPLEMENTARY APPROPRIATION BILL 1937-1938

Bill received, from the House of Representatives.

Standing and Sessional Orders suspended.

Bill (on motion by Senator McBride) read a first time.

Second Reading

Senator McBRIDE:
South AustraliaAssistant Minister · UAP

. - I move -

That the bill be now read a second time.

The Supplementary Estimates, which have been tabled, cover the items of expenditure during the year ended the 30th June, 1938, for which no specific approval has yet been given by Parliament, but which have been met temporarily out of the provision for Treasurer’s Advance pending submission to Parliament in the form of these Estimates.

As honorable- senators are aware, it is the custom to include each year in the

Estimates in chief a vote under the heading “ Advance to the Treasurer “. This provision is made so that the Treasurer may make advances to the various departments to meet urgent and essential expenditure which was unforeseen and therefore not included in the Estimates in chief. This vote- £2,000,000 in 1937- 38 - provided parliamentary authority for the expenditure included in the Supplementary Estimates for the year ended the 30th June, 1938. Particulars of such expenditure in the form of Supplementary Estimates are now submitted to Parliament for covering appropriation. Copies of these Estimates are being circulated among honorable senators, and I therefore do not propose to refer to the items in detail at this stage.

The amount voted for advance to the Treasurer in 1937-38 was £2,000,000, and of this £903,892 was used for ordinary departmental services and war services payable from revenue, whilst £394,902 was used for additions, new works and buildings, estimates for which I shall submit shortly.

In this bill Parliament is being asked to appropriate £903,892, but the total of the original appropriation - the main Estimates - has been exceeded by only £234,047. That is because in many cases these new charges were made contingent upon savings of similar amounts being made in other items. In other votes straight-out savings were possible. The result is that the net increase over the amount previously approved by Parliament forthese services is only £234,047.

Full details of the expenditure now submitted have already been furnished to Parliament in the Estimates and Budget Papers for 1938-39. In the 1938-39 Estimates, the expenditure for 1937-38 is set out alongside the amounts voted for 1938- 39. The budget statements record the full expenditure. The details are also shown in the Treasurer’s finance statement for the year 1937-38.

It is the practice to await the report of the Auditor-General on the accounts of the year under review before submitting the Supplementary Estimates to Parliament. This practice is followed so that honorable senators may have assurance that these Estimates are based upon properly audited accounts. The Treasurer’s finance statement was forwarded to the Auditor-General on the 7th December, 1938, and the Auditor-General’s report was tabled on the 20th April, 1939.

Question resolved in the affirmative.

Bill read a second time and passed through its remaining stages without amendment or debate.

page 1058

SUPPLEMENTARY APPROPRIATION (“WORKS AND BUILDINGS) BILL 1937-38

Bill received from the House of Representatives.

Standing and Sessional Orders suspended.

Bill (on motion by Senator Foll) read a. first time.

Second Reading

Senator FOLL:
Minister for the Interior · Queensland · UAP

– I move -

That the bill be now read a second time.

When the Supplementary Estimates for ordinary services were presented, honorable senators were informed of the reason for and the procedure adopted with bills of this nature. This bill provides for an appropriation of £394,902 for expenditure on additions, new works, buildings, &c, which had been met from the vote “ Advance to the Treasurer “ during the year 1937-38. This appropriation is required although the total provision was not exceeded. Although the amount of this bill is £394,902, this sum does not represent an amount expended on works and buildings in. excess of the original Estimate. Actually, the total expenditure, was £169,224 less than the appropriation. Parliament is, therefore, being asked to approve of new works expenditure which was more than counterbalanced by savings on other works. The main, items making up the total are: -

I do not. propose at this stage to refer in detail to all the items which are included in the schedules. The calls on the shares held by the Government in Commonwealth OilRefineries Limited and Amalgamated Wireless (Australasia) Limited were not foreseen when the original Estimates were prepared.

Question resolved in the affirmative.

Bill read a second time.

In committee:

Clauses 1 and 2 agreed to.

The schedule.

Senator ALLAN MacDONALD:
Western Australia

– Can the Minister supply details of the expenditure of £13,784 on the trans- Australian railway?

Senator FOLL:
Minister for the Interior · Queensland · UAP

– It represents money expended on the permanent way in order to enable the operation of a faster service. It was necessary to provide additional ballast on the line.

Senator Leckie:

– Does the item relating to the payment to Amalgamated Wireless (Australasia) Limited represent fresh capital.

Senator FOLL:

– The money was required to meet calls on shares held by the Government in Amalgamated Wireless (Australasia) Limited for the purpose of expanding the business.

Senator Allan MacDonald:

– What about the payment to Commonwealth Oil Refineries Limited?

Senator FOLL:

– That was new capital for the purpose of expanding the operations of Commonwealth Oil Refineries Limited in which the Commonwealth Government holds one more than 50 per cent, of the shares.

Schedule agreed to.

Preamble and title agreed to.

Bill reported without amendment; report adopted.

Bill read a third time.

page 1059

TRACTOR BOUNTY BILL 1939

Bill received from the House of Representatives.

Standing and Sessional Orders suspended.

Bill (on motion by SenatorFoll) read a first time.

Second Reading

Senator FOLL:
Minister for the Interior · Queensland · UAP

– I move -

That the bill be now read a second time.

The bill authorizes an extension of the bounty on the production of tractors of the internal combustion engine type for another five years at the following rates, which are the same as the net rates provided in the Iron and Steel Products Bounty Act 1922-1934 as amended by the Financial Emergency Act, 1931 : -

These rates of bounty will be paid if not less than 90 per cent, of the materials and parts used in tractors is of Australian origin. Where Australian materials and parts are less than 90 per cent., the bounty will be reduced in exact proportion thereto, but no bounty will be paid at all unless at least 60 per cent, of the materials and parts is Australian. The rates of bounty will also be reduced concurrently with any increase that may occur in the customs duties operative at the 1st September, 1939, on the types of tractors subject to bounty, or on parts of such tractors except pneumatic tyres and tubes. Any such reduction of bounty will, of course, be equivalent to the value of the increase of customs duty.

Under the bill, bounty will for the first time be payable upon two-wheel tractors operated by a pedestrian from the tractor’s handle-bars. Hitherto, bounty has only been payable on four-wheel tractors operated by a person seated on the tractor. Bounty will not be payable on the various cultivator attachments to these two-wheel tractors.

The bill also stipulates that bounty may be withheld from any manufacturer to the extent that payment thereof would cause his net profit to exceed 10 per cent, of the capital actually used in the manufacture and sale of the particular tractors subject to bounty. Other provisions in the bill relate to standard powers for the administration of bounty legislation in general. The bounty on Australian tractors was initiated in 1922 under the Iron and Steel Products Bounty Act, the object being to encourage Australian production without imposing any direct cost burden on users, most of whom are farmers and especially wheat-growers. Imported tractors have therefore remained unaffected by protective customs duties - the rates being free under the British preferential tariff and 10 per cent, for crawler-type tractors, and 12½ per cent, for other types under the general tariff. Under the bounty, local production of tractors has gradually increased to 334 for 1938-39, with a peak output of 455 in 1937-38. During thesame period 1923-24. to 1938-39, imports of tractors have also increased very substantially, the number for 1938-39 being 4,377; the peak quantity of 11,026 occurred in 1937-38. The general increase of the use of tractors, both Australian and imported, reflects the marked development of power-farming in the Commonwealth, with an attendant increase of productive efficiency.

Evidence submitted during the Tariff Board’s recent inquiry into tractor production indicated that the quality and efficiency of Australian tractors have been excellent, and that their selling prices compare favorably with those of similar imported tractors. Capital expenditure of approximately £150,000 has already been incurred by the industry, and further substantial outlay is planned by manufacturers in order to achieve more economical production. Under previous tractor bounty legislation, manufacturers have not been permitted to receive bounty which would cause their net profit to exceed 15 per cent, of the capital employed, but the maximum rate of profit is reduced to 10 per cent, by the present bill, thus bringing it into conformity with all other similar bounty legislation. The maximum profit of 10 per cent, is subject to Federal and State income taxes. The alteration from 15 per cent, to 10 per cent, will result either in reduced payments of bounty by the Commonwealth, or in reduced selling prices for Australian tractors. In accordance with the Tariff Board’s recommendation, bounty will not be paid on tractors which are exported.

The bill appropriates for bounty payments each financial year a sum of £35,000, which will allow for considerable expansion of local production. At present Australian tractors supply only 8 per cent, of the demand, and it is obviously desirable that Australia should be less dependent on overseas sources of supply for a product which is so essential to economical farming. The industry now provides whole-time employment for approximately 250 direct workers, and, of course, is responsible for much additional employment in the production in Australia of materials and parts required by tractor manufacturers. The industry has proved itself worthy of further encouragement, and is of considerable present and potential value to the Commonwealth. Progress in manufacturing efficiency is reflected in the fact that the rates of bounty in the present bill are 20 per cent, less than those provided in the original legislation. I therefore commend the bill to honorable senators.

Question resolved in the affirmative.

Bill read a second time.

In committee:

Clauses1 to 8 agreed to.

Clause 9 (Reduction of bounty where profits exceed 10 per cent, per annum).

Senator WILSON:
South Australia

– I should, like to know where the firms engaged in this manufacture are situated, and how much was paid to them by way of bounty during the last financial year.

Senator FOLL:

– One is situated in Melbourne, and one in Sydney, and between them these factories received £17,313 by way of bounty during the last financial year.

Clause agreed to.

Clauses 10 to 18 agreed to.

Clause 19 (Bounty not payable unless act complied with).

Senator E B JOHNSTON:
Western Australia.

– The Minister said that bounty will not, be payable on tractors that are exported. Does that provision apply to tractors exported to the mandated territory of New Guinea ? If so, what is the reason?

Senator FOLL:

– Bounty will not be payable on tractors exported toPapua, nor on those exported to the mandated territory of New Guinea, which has its own customs tariff.

Senator Wilson:

– Will bounty be payable on charcoal-gas tractors?

Senator Foll:

– Yes.

Clause agreed to.

Clauses 20 to 22 agreed to.

Preamble and title agreed to.

Bill reported without amendment; report adopted.

Bill read a third time.

page 1061

SULPHUR BOUNTY BILL 1939

Bill received from the House of Representatives.

Standing and Sessional Orders suspended.

Bill (on motion by SenatorFoll) read a first time.

Second Reading

Senator FOLL:
Minister for the Interior · Queensland · UAP

– I move -

Th at the bill be now read a second time.

The bill repeals the Sulphur Bounty Act of 1923, and authorizes an extension of t he bounty on the production of sulphur for five years on a sliding scale adjusted, to a basic rate of £1 7s. a ton, which rate is payable when the average cost of imported sulphur for any financial year is £6 a ton. As the average cost of imported sulphur rises or falls from £6 a ton in stages of1s., the actual bounty payable will fall or rise from £1 7s. by1s. a ton, with the proviso that the maximum rate of bounty under any circumstances shall be £1 His. a ton. Bounty will be payable on Australian elemental sulphur, or on the sulphur equivalent of sulphuric acid produced from Australian zinc concentrates, iron pyrites, and spent oxide. So far, no deposits of elemental sulphur have been found in. Australia, and thus the bountyis likely to be confined for a considerable period to sulphuric acid production, the sulphur equivalent of which is almost exactly one-third of the weight of the acid.. In accordance with similar provisions in other bounty acts, the bounty on sulphur will be reduced at any time new or increased customs duties may be imposed on imported sulphur by amounts equivalent to those duties.

The bill restricts the payment of bounty so that it shall not cause t he net profit of any producer to exceed 10 per cent, of the capital he actually uses inthe manufacture andsale of sulphuror sulphuric, acid. Only the capital utilized in the production of the actual sulphur upon which bounty is claimed will be taken into account in this regard. All other provisions in the bill convey the usual powers which experience has proved are essential to the efficient administration of the bounty and the safeguarding of the Commonwealth’s funds. In considering this bill, it is perhaps advisable that honorable senators should be reminded that the production in Australia of sulphuric acid was commenced in 1922, following Australia’s great difficulty during the world war of 1914-18 in obtaining supplies even at very high prices. Sulphur, or sulphuric acid, is indispensable to the manufacture of fertilizers, many chemicals, matches, certain gunpowder, and other important goods. At the same time, the Government’s attention was invited to the serious economic waste involved in the nonutilization of the sulphuric acid available in large quantities in certain mineral? and ores. In Australia this acid had always been wasted in the dispersal of fumes to the atmosphere during the process of roasting zinc concentrates and iron pyrites for metallurgical purposes.

The Government realized that the establishment of sulphuric acid produc- t ion in Australia would not only provide a much-needed local source of supply of sulphur, thus safeguarding fertilizers and chemical industries, but would also create considerable new employment in sulphuric acid . producing plants and transport industries, additional revenue for State railways, and new opportunities for the profitable investment of Australian capital. Accordingly, customs duties of 15s. a ton, British preferential tariff, and £2 10s. a ton, general tariff, were imposed in June, 1921, on imported sulphur ; whereupon the Electrolytic Zinc Company of Australasia Limited and the Mount Lyell . Mining and Railway Company Limited set about the installation of the necessary sulphurroasting plants at an expenditure which finally amounted to over £1,000,000.

The duties 1 have mentioned were not made operative until the 31st March. 1.922, and they were suspended on the 18th January, 1923. On the 1st September, 1923, however, the present Sulphur Bounty Act became law, whereunder the establishment of local sulphur production waa ensured by a bounty of £2 5s. a ton. No customs duties have applied to imported sulphur since then. The bounty has always been restricted to the sulphur content of sulphuric acid produced from Australian sulphide ores and concentrates. This policy has been of great benefit to the sections of the metalliferous industry concerned, some millions of tons of concentrates and pyrites having been treated for the recovery of sulphuric acid. In all probability the existence by this means of fairly substantial sources of sulphur in Australia has had a favorable effect on the prices Australian manufacturers of superphosphate have had to pay for foreign sulphur.

Production of sulphuric acid is at present confined to South Australia, Tasmania and New South Wales. Four manufacturers are engaged in producing this acid, the employees numbering 320. These figures will be substantially increased when the mine at Captain’s Flat, New South Wales, is opened next year, as that mine is expected to produce annually some 100,000 tons of iron pyrites which will be treated for the recovery of 50,000 tons of sulphur. Local sulphur production now meets 27 per cent, of Australia’s requirements, but new sources of supply from Captain’s Flat pyrites and expansion of existing outputs are expected to raise local supplies to 50 per cent, or 60 per cent, of all requirements within a comparatively short time.

The original bounty of £2 5s. a ton was reduced in July, 1931, to £1 16s. a ton by the Financial Emergency Act. The latter rate will now be reduced to an average of £1 7s. a ton - a saving to the budget of 25 per cent., or £22,000 per annum on the present volume of expenditure. During the period of the war, it is expected that the cost in Australia of imported sulphur will increase. For every ls. increase above the present cost of about £6 a ton, the bounty of £1 7s. a ton will fall by ls. a ton. Hence the present bill is likely to save the Commonwealth appreciably more than £22,000 per annum while the war continues. The bill also enables the Minister’s profit limitation powers to be more stringently applied. To such extent as bounty would cause manufacturers’ net profits to exceed 10 per cent, of the capital they actually use in the particular sulphur upon which bounty is claimed, such bounty will be withheld in future. The permitted profit of 10 per cent, will be subject to Federal and State income taxes. The annual appropriation of £110,000 from Consolidated Revenue under the bill is only £10,000 more than the provision in the expiring legislation, and is necessary to meet the expanded production of sulphur which is expected in Australia.

Protection of this important industry by means of a bounty has the merit of keeping superphosphate at the lowest possible price, which is particularly beneficial to many agricultural industries. At present 90 per cent, of our sulphur supplies is used for the manufacture of superphosphate. In addition, as I previously stated, local manufacture of sulphuric acid renders the treatment of various ores and concentrates much more economical than it would otherwise be. Prior to the 1922 bounty act, the sulphur contents of these materials were utterly wasted. The sulphuric acid industry has increased its efficiency from time to time. The latest and most scientific equipment has been installed and . production costs have accordingly been reduced. Hence the Tariff Board reports that it is now possible to maintain the industry on an expanding basis by an average bounty of £1 7s. a ton which is 40 per cent, less than the original bounty of £2 5s. I feel sure the Senate will approve the bill as a progressive measure for an efficient and valuable Australian industry.

Question resolved in the affirmative.

Bill read a second time.

In committee:

Clauses 1 to 4’ agreed to.

Clause 5 (Limit of annual bounty).

Senator KEANE:
Victoria

.- Will the Minister inform me what the cost of this bounty was last year?

Senator FOLL:
Minister for the Interior · Queensland · UAP

– The cost last year was £87,000.

Clause agreed to.

Clauses 6 to 8 agreed to.

Clause 9 (Reduction of bounty where profits exceed 10 per cent, per annum).

Senator FRASER:
Western Australia

– I should like to know how the figure of 10 per cent, mentioned in this clause was arrived at?

Senator FOLL:
Minister for the Interior · Queensland · UAP

– It was considered that 10 per cent., which is subject to Federal and State income tax, was a fair basis of profit to allow.

Clause agreed to.

Clauses 10 to 22 agreed to.

Preamble and title agreed to.

Bill reported without amendment; report adopted.

Bill read a third time.

page 1063

WIRE NETTING BOUNTY BILL 1939

Bill received from House of Representatives.

Standing and Sessional Orders suspended.

Bill (on motion by SenatorFoll) read a first time.

Second Reading

Senator FOLL:
Minister for the Interior · Queensland · UAP

– I move -

That the bill be now read a second time.

The hill authorizes an extension of the bounty on the production of wire netting for another five years. The proposed rate of bounty is 9s. 7d. a ton, which is subject to reductions equivalent to any increases that may occur in the present customs duties on imported wire netting. The bill also provides that bounty payments to any manufacturer may be reduced to such extent as they would cause his net profit to exceed 6 per cent, of the capital actually used in the manufacture and sale of wire netting. Bounty will not be paid on’ exports of wire netting. Other provisions in the bill are merely standard powers for the administration of bounty legislation in general.

Question resolved in the affirmative.

Bill read a second time.

In committee:

Clauses 1 to 4 agreed to.

Clause 5 (Limit of annual bounty).

Senator E B JOHNSTON:
Western Australia

– The maximum amount provided for payment this year is £5,000. That seems to me to be a very small sum, particularly in view of the fact that there may be some expansion of the use of wire netting, and that it may be difficult, if not impossible, to import this product. I should like to know how much was paid last year, and whether or not the Government considers £5,000 i.sufficient for this year?

Senator Allan MacDonald:

– How much was paid, in Western Australia?

Senator FOLL:
Minister for the Interior · Queensland · UAP

.- The total amount of bounty paid during 1938-39 was £5,736, of which £292 was paid in Western Australia. In view of the fact that the profit rate this year is lower than it had been in previous years, two big eastern States will be cut out, and the bulk of the bounty will be paid in Western Australia.

Senator E B Johnston:

– Does the Minister regard £5,000 as being sufficient?

Senator FOLL:

– Last year only £5,736 was claimed at the higher rate, and it seems evident that there will not be even sufficient wire netting manufactured this year to claim £5,000 at the* lower rate.

Senator Wilson:

– What firms received the money last year?

Senator FOLL:

– The firms were Rylands Brothers, Lysaght Brothers, and the Western Australian Netting and Wire Company Limited.

Senator SHEEHAN:
Victoria

– Honorable senators are being asked to pass legislation involving the payment of large sums of money, without having an adequate opportunity to examine or discuss them. I understand that it is the intention that Parliament should meet again this year, and I should like to know what the effect would be if these measures were not passed until then?

Senator FOLL:
Minister for the Interior · Queensland · UAP

– Were this bill not to pass now, the higher scale of bounty would continue, and I think it is desirable that money should be saved wherever possible.

Senator Fraser:

– Can the Minister explain why 6 per cent, has been laid down ? Does that figure include State and Federal taxes ?

Senator FOLL:

– The rate was cut down from 15 per cent, to 6 per cent, in order to exclude the big firms and to allow the Western Australian manufacturers toenjoy the benefits of the bounty. As a matter of fact the Tariff Board recommended that no bounty should be paid; but the Government in a spirit of generosity towards the Western Australian manufacturers decided to allow the bounty to remain.

Clause agreed to.

Clauses 6 to 22 agreed to.

Preamble and title agreed to.

Bill reported without amendment; report adopted.

Bill read a third time.

page 1064

DEFENCE BILL (No. 2) 1939

Bill received from the House of Representatives.

Standing and Sessional Orders suspended.

Bill (on motion by Senator Collings) read a first time.

Secondreading.

Senator COLLINGS (Queensland -

Leader of the Opposition) [5.50]. - I move -

That the bill be now read a second time.

When introduced in the House of Representatives this bill had two objectives. The first related to service beyond the limits of the Commonwealth of Australia, particularly service in the territories of the Commonwealth. The Opposition contended that section 49 of the Defence Act, which provides that members of the defence forces who are members of the Military Forces, shall not be required, unless they voluntarily agree to do so, to serve beyond the limits of the Commonwealth and those of any territory under the authority of the Commonwealth, should apply only to those territories which were administered by the Commonwealth at the time when the act was passed. However, the Government refused to accept that amendment and the hill comes to the Senate without it.

The bill deals with the question of conscientious objectors. There are two substantive amendments in this regard. One is to section 61 of the principal act, and the other to section 61a. The bill seeks to amend section 61 by omitting from paragraphi of sub-section 1 the words. “ who satisfy the prescribed authority that their” and to insert in their steadthe word “ whose “. Thus, the paragraph which now reads, “persons who satisfy the prescribed authority that their conscientious beliefs do not allow them to bear arms “ will read, “persons whose conscientious beliefs do not allow them to bear arms “. A further sub-section is added to section 61 defining “ conscientious beliefs and section 61 a is expanded to provide the right to appeal, on questions as to objection, to the High Court or to the Supreme Court of the State or territory in which the application for exemption from service on that ground was made. I commend the bill to the Senate.

Senator COLLETT:
Assistant Minister · Western Australia · UAP

.- I believe that this is the first occasion on which Senator Collings has had the privilege of introducing a bill to the Senate. I congratulate him, but I suggest that he should not be too greatly encouraged by that fact. The Government does not intend to oppose the measure, because it believes that it clarifies the position regarding the rights of citizens.

Senator ALLAN MacDONALD:
Western Australia

– The Government may not intend to oppose this bill, but I do. First, I should like to know what is the reason for this great urgency to amend the Defence Act in order to cater for those known as conscientious objectors? The existing provision is sufficient to cope with gentlemen of that kind and, provided that such persons satisfy the prescribed authority, their conscientious objections, usually based on their religious convictions, will be given every consideration. I see no reason why the parent act should be amended as suggested by the Leader of the Opposition (Senator Collings). At least I see no great need for hurry to cater for the conscientious objector; rather I should like to see the Government turn its attention more towards the enlisted man who will contribute something more material towards the defence of his country. I would even go further and say that no person, irrespective of his religious scruples, should be exempted from service to his country. There are quite a number of positions in our military forces of a non-combatant nature which persons with religious scruples of this kind could occupy - positions in which they could- do their share in the defence of this land which has been so good to them. During the last war, Mr. Ramsay MacDonald had very definite objections to bearing arms against any one, but those objections did not preclude him from joining the expeditionary force to Belgium as a member of an ambulance brigade, and from doing his share in alleviating the pain of those who were bearing arms in the defence, not only of their country, but also of the principles which they held dear. Ample provision exists in the parent act for the reasonable and equitable treatment of conscientious objectors, and the special consideration extended to them in this bill is not necessary. , I believe that that is the sum total of the position.I ask the Senate, irrespective of what the Government thinks of this measure, to vote against it.

Senator WILSON:
South Australia

– I support Senator Allan MacDon ald’s comments in regard to this bill. At present we are at war, and should be concerned with marshalling our resources and man-power for its defence. All the Labour party seems to be concerned about . is, not who shall defend Australia, but who shall not. Every Australian should be prepared to serve his country. A bill such as that now before us merely encourages cowardice, and provides a way out for people who desire to escape their obligations to defend their country. I am surprised that the first action taken by the Labour party after the declaration of war should be one designed to encourage people to avoid their obligation to defend their country.

Senator DEIN:
New South Wales

– As I regard this bill as dangerous and iniquitous I intend to oppose it. 1. believe that the existing provision in the act is quite sufficient for the purpose. In considering this bill which, although introduced by the Labour party, is sponsored by somebody outside of the Parliamentary Labour party, I am reminded of the attitude taken up by members of that party with regard to the compulsory provisions of the Defence Act and I shall show what isthe policy of the Labour party in this connexion.

The PRESIDENT (Senator the Hon. J. B. Hayes). -From what does the honorable senator propose to quote?

Senator DEIN:

– From Hansard, page 1772, dated the 14th June, 1939.

The PRESIDENT:

– The honorable senator may not do so.

Senator DEIN:

– . Do’ you, sir, regard that period as being a part of this session ?

The PRESIDENT:

– Yes.

Senator DEIN:

– I am astonished that the Opposition should attempt to stifle me when I intend to quote from a speech made by its Leader (Senator Collings) in this chamber during the debate on the National Registration Bill in June last, when he explained the defence plank of the Labour platform.

Senator E B Johnston:

– On a point of order, may I refer you, Mr. President, to Standing Order No. 414 which reads -

No senator shall read extracts from newspapers or other documents, except Hansard, referring to debates in the Senate in the same session.

I respectfully submit that under that Standing Order the honorable senator is entitled to read what he intended to read.

The PRESIDENT:

– Standing Order No. 414 is qualified by No. 416a which reads -

Where a session of Parliament has continued tor more than fifteen months, Standing Orders Nos. 133, 413, 414 and 416 shall not apply to any subject or matter that has transpired or been dealt with more than six months previously.

I interpret that Standing Order to mean that if the period be less than six months, the matter may not be read, but if it. be beyond six months it may be read. I admit that the point is a fine one.

Senator E B Johnston:

– Standing Order No. 416a provides that for the period within six months the prohibition applies ; it ceases to apply if the period exceeds six months.

Senator A J McLACHLAN:
SOUTH AUSTRALIA · NAT

– Standing Order No. 416a enlarges, it does not restrict, the rights of honorable senators.

The PRESIDENT:

– As a doubt exists,I shall look into the matter and give a considered opinion on the next day of sitting. Meanwhile, the honorable senator may read the passage.

Senator DEIN:

– I wish to quote from a speech delivered in the Senate by the Leader of the Opposition on the National Registration Bill, on the 14th June, 1939.

It appears at page 1772 ofHansard, and enunciates Labour’s new policy in relation to defence. On that, account I urge honorable senators to note it closely. It reads -

It- meaning Labour’s platform - contains the Constitution and general rules of the party as amended in 1938, and these are operative from the 1st January, 1939; but its defence policy has remained the same for years.I read that policy in this Senate from a red book dated 1935, and from a white book dated 1932. That policy provides for -

Amendment of Defence Act to secure -

deletion of all clauses relating to compulsory trainingand service.

Therefore, the Labour party wishes to remove from the Defence Act any reference that it contains to compulsion for the home defence of Australia. In. other words, should Australia be attacked, Labour’s policy would be that the man who wanted to fight might do so, but he who wanted to get into a hollow log and let the other fellow do the fighting might do that. That is not distorted one iota. At the moment, this policy is being kept hidden in the background. Senator Collings let the cat out of the bag, unfortunately for himself. When I consider one of the provisions of this bill in relation to that platform, what do I find ? We are passing through a period of emergency, and do not know what the future holds in store for us. No honorable senator, I feel sure, will say that we can disregard the likelihood of our being attacked. Yet we have introduced into this Senate by a back-door method, a bill the object of which will alter the compulsory provisions of our Defence Act. I strenuously object to it, and cannot understand its being supported by honorable senators who sit on this side of the Senate.

Senatorsheehan. - Does the honorable senator charge the Prime Minister with being a party to the use of back-door methods ?

Senator DEIN:

– I say that this is a back-door method adopted by the Labour party.

Senator Sheehan:

– And accepted by the Government.

Senator DEIN:

– I am accusing the Labour party of attempting, by back-door methods, to alter our Defence Act. I may charge whom I like, but the fact remains that the party responsible for this is the Labour party. The amendment was conceived at the Trades Hall in Melbourne, by men who have no voice in this Parliament, but who can direct the actions of certain honorable senators. That is why I object to it.

Let us see what this provision means. The Defence Act as it stands provides that, in case of attack or aggression, every able-bodied man between the ages of eighteen and 60 years shall be liable to military service. Provision is made for the exemption of conscientious objectors. What more is wanted? But this goes further: it will open the door and allow to escape anybody who so wills. I have never seen in any bill an escape clause to equal this one. This is included for a purpose, and I know what that purpose is. The Labour party has been unable to alter the act by ; frontal attack, because it has been in opposition. Had it been in power, the act would have been altered, perhaps, earlier this year. Being unable to attack from the front, the attempt is made to come in by the back door. I shall nullify those efforts if that be possible. In the present disastrous conflict in which, unfortunately, we are engaged, if the Executive Council saw fit to invoke the compulsory provisions of the Defence Act, I know quite well that an overwhelming majority of Australians would respond without demur. Then why make a special means of escape for certain other persons ? Who are those persons who do not want to come under the compulsory provisions of the act? Those who have religious objections are already exempt; therefore the amendment relates to persons whose objections are not founded on religious beliefs. Political beliefs may be the reason advanced, or lack of intestinal stability. I shall not help such persons to evade their obligations. When the National Registration Bill was before us, meetings of protest were held by certain persons, who urged their fellow citizens not to fill in the register cards. That was a harmless document, issued in peace time. I am satisfied that, if the compulsory provisions of the act were invoked on account of our being attacked, meetings would bo held in the Sydney domain - they have already been held on the

Yarra bank - and the men who are behind this move would form a league of conscientious objectors. They would say to the multitude, “ Let the other fellow do the fighting. If you want to escape, register as a conscientious objector, and we shall stick to you “. What would happen then? I am a ‘frequenter of the Sydney domain, and know a good deal of what goes on there. I know the sort of tripe that is put over there and on the Yarra bank. In the Sydney domain I have heard men who are utterly disloyal speak against both Australia and Great Britain. Britain is fighting our battles, and in my opinion any person who is disloyal to Britain is disloyal to Australia also. I do not differentiate between them.

The PRE SIDENT. - With the concurrence of the Senate, I propose to sit after 6.15 p.m.

Honorable Senators. - Hear, hear !

Senator DEIN:

– The very man who introduced this bill into the House of Representatives has, from his place in that chamber, referred to Britain as a foreign imperialistic power.

The PRESIDENT:

– Order ! The honorable senator must not reflect upon a member of another place.

Senator DEIN:

– If he made such a statement when the nation was at peace, there is no knowing what he would say in a time of national emergency. I recommend honorable senators to read his remarks in Hansard. Is he the kind of man to frame Australia’s defence legislation? I, for one, refuse to have anything to do with his proposals. I know what some honorable senators would do if an invader attacked us. They would go to the Sydney domain, or the Yarra bank, and endeavour to foment all sorts of trouble. Even if stopped in one direction, they would take advantage of the privileges that Australians enjoy to advise their fellow Australians to submit their names as conscientious objectors, and all would be well. Whilst an overwhelming majority of Australians would not wait for compulsion, but would gladly respond to their country’s call, there are some who would take advantage of this provision. They would apply for exemption, and in course of time their cases would come before the court. There might be thousands of such applications. Senator Sheehan may say that I am casting a slur on Australians, as he said on a previous occasion.

Senator Collings:

– The honorable senator himself is a slur on Australians.

Senator DEIN:

– There are some people in our midst who would be prepared to see their country go down before an enemy. I know some of them. Some of these fellows would have their objections heard by the court. Their numbers would not represent a great percentage of the population, but there would probably be some thousands of them, because the people behind, this proposal are interested not in the tens and the twenties, but in much larger numbers. Even if the court decided against them they would have the right of appeal.

Senator Collings:

– What did you do in the last war, daddy? “

The PRESIDENT:

– Order!

Senator Lamp:

– The honorable senator is a slanderer.

Senator DEIN:

– The honorable senator has such a thin, sensitive skin that he cannot take it.

Senator Lamp:

– Come outside and I will give you a go.

Senator DEIN:

– You are an absolute cur.

The PRESIDENT:

– Order! Honorable senators must address the chair.

Senator Lamp:

– The honorable senator is game to threaten only an old man.

Senator DEIN:

– I have not threatened any one. I am prepared to let the Leader of the Opposition say whether or not I threatened him. If he takes exception to what I have said, he has his privileges as a member of this chamber. There is too much of a man in me to threaten any one, unless I am provoked beyond forbearance.

SenatorFraser. - The honorable senator is too full of his new-born patriotism.

Senator DEIN:

– No one can be more unkind or unfair in his remarks than the Leader of the Opposition in this chamber. He says unkind and unfair things and he says them frequently and with great vigour. We on this side, however, can take it; but whenever I rise to my feet, the Leader of the Opposition, and others of the poor thin-skinned senators opposite who cannot take it, get upset. They know that what I am saying is true; otherwise they would not object. They are out to provide a loophole for alleged conscientious objectors. Some of them would bo willing to construct concrete dug-outs for fellows who would keep in the background and let other men do the fighting. 1 wonder that provision for dug-outs for conscientious objectors is not contained in the bill.

SenatorFraser. - What did the honorable senator do in the last war?

Senator DEIN:

– It is easy for the honorable senator to hurl insults across the chamber, but no one takes any notice of him. I assure him that I do not. Honorable senators opposite should do what they conscientiously believe to be right. Whether in the civil or the military sphere, so long as they do that, it is their own business. But they would deny others the same right. The Leader of the Opposition writhes under my criticism, but I did not say anything untrue. Some of you fellows on the other side-

Senator Ashley:

– I rise to a point of order. I take exception to the honorable senator referring to members of the Opposition as “you fellows”.

Senator DEIN:

– I apologize for the appellation. I did not think that the use of such a term wouldbe . regarded as harmful or offensive, but the poor sensitive skin of SenatorAshley cannot take it. As it is not an expression that I use frequently, I withdraw it and express the hope that I shall not offend similarly

Again. Honorable senators opposite who are in the habit of hurling insults across the chamber have a perfect right to determine their own destiny. That is the privilege of every Australian, unless the country is attacked by an aggressor, when, in a military sense, we lose our individual freedom. In such an event, the law reminds us of our responsibilities. At. other times, men are free to act as they think fit; they are the masters of their destiny. Honorable senators opposite do not need me or any one else to tell them what their duty is; but they attempt to dictate to me. In the heat of the. moment, things are often said that would ‘be better unsaid. I do not bear any ill-will to honorable senators opposite.

Senator Collings:

– We accept the honorable senator’s apology.

Senator DEIN:

– It is easy to throw insults across the chamber.

Senator Collings:

– The honorable senator finds it easy.

Senator DEIN:

– Evidently I have the unhappy knack of stirring up a hornets’ nest if one exists. I speak on this bill as I feel. It is an attempt to provide a loophole, or a back-door method, by which men may evade their obligations. The Labour party’s idea of a defence policy for Australia is to provide a back-door method by which some fellows may stay in the background in. a time of national emergency, while the other fellows do the fighting. I shall resist the second reading and every clause of the bill to the utmost of my power.

Senator LECKIE:
Victoria

.- The remarks of Senator Dein were directed against members of the Opposition ; I am in danger of becoming heated in criticizing the Government. As a supporter of the Government, I cannot understand how Ministers in the House of Representatives could accept a clause of this kind. I cannot imagine any of the four Ministers in. this chamber accepting it. I do not object to the Labour party attempting to place this legislation on the statute-book. If that party believes that it represents especially the class of people in whose interests this legislation has been designed - those who want to get out of the fighting - it can have the honour of representing them. But the Government’s acceptance of it is something that I cannot understand. I protest against this betrayal of the supporters of the Government in this chamber. Section 61 allows any genuine conscientious objector to have his case heard, but the amendment contained in the bill goes further than to meet the cases of men with religious convictions against bearing arms. If it covered only members of the Society of Friends or persons holding similar views, I should not mind ; but to extend exemption to any person who says that he has conscientious objections against bearing arms is going a little too far for me. If the clause be agreed to, the persons covered by it may apply to a court for exemption. If that be refused, they will have the right of appeal to another tribunal. I can imagine thousands of so-called conscientious objectors coming, first, before one tribunal and, later, before another. Before long, we should have the courts clogged; there would be so many cases before them that the last of them would not be heard until years after the war had ended. I do not like to speak harshly of the Government of which I am a supporter, but, T am ashamed of what has happened.

Senator Wilson:

– Why not ask the enemy to put off the war while the appeals are heard?

Senator LECKIE:

– 1 do not approve of the action of the Government in this matter; nor is that action approved by the people of Australia. I object strenuously to what has been done. The Government probably agreed to this proposal in order to facilitate the passage of other legislation that had been delayed for a week.

Senator Collings:

– That is not so.

Senator LECKIE:

– Perhaps in a weak moment, it allowed pressure to be brought to bear upon . it during an all-night sitting. Whatever happened, I am sure that at least half the people of Australia are opposed to this proposal. I blame the Government for having given any support to it. Personally I shall vote against it.

Senator A. J. MCLACHLAN (South Australia. [6.31]. - I also shall oppose the bill. The grounds upon which persons may conscientiously object to military service would, in my opinion, be made far too wide by this measure. I can understand a man being tried in respect of his religious beliefs, but the bill does not provide merely for religious beliefs. It provides that “ conscientious beliefs “ shall include “ all conscientious beliefs whether the ground thereof is or is not of a religious character or whether the beliefs are or are not part of the doctrine of any religion “. The provision is as open as the world. How could a tribunal apply any real test under a provision of that description? It is said that “The devil knoweth not what is in the mind of man.”. It seems to me that only the devil can know what is behind this provision. If we intend to tinker with provisions of this description, and to encourage conscientious objectors of the kind indicated by this provision, God help the country! I am not entirely in step with a lot of the high strategy behind the defence policy of this country. Have honorable senators really thought about this subject at all? This provision would permit disloyalists and other persons with sinister motives to escape their fair obligation to, fight for the defence of the country if it should be attacked. I cannot see how a judge could possibly reach a reasonable decision under a provision of this description. The thing is utterly preposterous. The existing provisions of the Defence Act meet all reasonable requirements. I am not quite sure whether a right of appeal exists at present, but men had a right of appeal to special tribunals in Great Britain during the last war. We all venerate the Quakers for their stout religious convictions, but surely we cannot appla ud shirkers, cowards and others who may simply say: “I have a conscientious belief against fighting”? I shall vote against the Government on thi* issue.

Senator Allan MacDonald:

– I rise to a point of order. I submit that further debate on this subject should be deferred until after the dinner adjournment. The Leader of the Opposition (Senator Collings) has often vilified the Government for attempting to rush legislation through the Senate, but he is now trying to do the same thing himself. .1 protest against it.

The PRESIDENT:

-! said that if any objection was offered to the Senate sitting beyond 6.15 p.m., I would suspend the sitting. I shall, therefore, suspend the sitting until 8 p.m.

Senator Collings:

– I protest. Surely, Mr. President, you are not reopening the question of suspending the sitting?

The PRESIDENT:

– The Senate has sat beyond the usual hour in order to oblige the Leader of the Opposition, but as objection has been taken. I shall suspend the sitting until 8 p.m.

Sitting suspended from 6.37 to 8 p.m.

Senator COOPER:
Queensland

– During the suspension of the sitting I had an opportunity to study the bill, and in the language of its vital provision 1 could not conscientiously vote for it. Senator Dein, earlier in the debate, adequately expressed my feelings towards the measure, so I shall not delay the Senate by traversing the ground covered by that honorable gentleman. As we are engaged in war, we should do everything possible to marshal the whole of the strength of Australia in order to assist Great Britain andFrance to bring the conflict to a successful termination. We should not provide legislative loopholes to enable a limited number of Australians to escape their obligations. I feel sure that not many individuals in Australia will take advantage of this measure to escape service in a time of crisis, but we should,, nevertheless, tighten up the law so that there will be no chance of exempting from service those whose conscientious objections may be called in question.

Senator COLLINGS:
QueenslandLeader of the Opposition

. -in reply - Those honorable senators who have spoken in opposition to the bill advanced no arguments that call for a reply. I regret that the tone of the debate was certainly below the usual standard in this chamber. I do not quite know why it is, but apparently subjects of this nature cannot be approached by some people in a reasonable and calm way. When this bill was under discussion in the House of Representatives some trouble arose there also, but on this occasion the Senate has distinguished itself. The incidents in the House of Representatives were like a Sunday school picnic compared to what occurred here this afternoon. I hope that the bill will be carried.

Question put -

That the bill be now read a second time.

The Senate divided. (The President - Senator the Hon. j. B. Hayes.)

AYES: 19

NOES: 12

Majority 7

AYES

NOES

Question so resolved in the affirmative.

Bill read a second time.

In committee:

Clauses 1 and 2 agreed to.

Clause 3 -

Section 61 of the principal act is amended -

by omitting from paragraph (i) of sub-section ( 1 ) the words “ who satisfy the prescribed authority that their “, and inserting in their their stead the word “whose”; and

by adding at the end thereof the following sub-section: - “ (3) In this section ‘conscientious beliefs ‘ include all conscientious beliefs whether the ground thereof is, or is not, of a religious character, and whether the beliefs are or are not part of the doctrines of anyreligion.”

Senator A. J. McLACHLAN (South

Australia) [8.9]. - I move -

That after the word “all”, proposed new sub-section 3, the word “ real “ be inserted.

In its present form, the proposed new subsection includes all conscientious beliefs whether or not they are of a religious character. I believe we should insert my amendment in order to ensure that conscientious beliefs are real. I take it that it is not the desire of the Leader of the Opposition to apply the provisions of this measure to other than those who are really conscientiously opposed to the taking of human life.

Senator COLLINGS:
QueenslandLeader of the Opposition

– I rather admire the confidence with which Senator A. j. McLachlan, in submitting his amendment, refers to me for endorsement of it. OrdinarilyI am an exceedingly placid old gentleman, but I never thought that any member of thu chamber would regard me as entirely unsophisticated. I regret that I am unable co accept the amendment and I draw the attention of Government supporters to the fact that the bill as it now stands, without any of these time-wasting suggestions which Senator Mclachlan has just made-

Senator A J McLACHLAN:
SOUTH AUSTRALIA · NAT

– I object, Mr. President, to the remark of the Leader of the Opposition. The honorable gentleman is himself so sensitive about these matters. The remark is offensive to me. I have wasted no time in this chamber. I ask for the withdrawal of the statement.

Senator COLLINGS:
QUEENSLAND · FLP; ALP from 1937

- Mr. President, before you are put to the trouble of asking mo to withdraw the remark, and in view of the agitation which Senator A. J. McLachlan has displayed, I withdraw it unreservedly and with pleasure.

Senator A J McLACHLAN:
SOUTH AUSTRALIA · NAT

– Now that the larger matter has been disposed of, there should bo no real objection to the adoption of my amendment. As I have said, my purpose is to ensure that only those people who are sincere in their conscientious beliefs should be permitted to escape their obligations. In my secondreading speech I advanced reasons why the provisions of this measure should not be available to any man who might come along to the authorities and simply say, “J. do not believe in fighting. I do not believe in war, or in taking human life “. The purpose of my amendment is to make quite sure that only those who have sincere conscientious objections shall have the protection which this bill affords. The court should try this question and determine whether a conscientious objector is sincerely conscientious or whether he is merely a. shirker trying to evade his duty as a citizen of the Commonwealth. My amendment would not touch such individuals as members of the Society of Friends. Unless the court is to be permitted to try this question, the measure opens wide the door to those whose conscientious beliefs may not be sincere.

Senator WILSON:
South Australia

– Under the Defence Act every Australian, within the prescribed ages, is compulsorily liable for home defence. If this proposed new sub-section be inserted, that section in the principal act requiring citizens to serve compulsorily lor home defence, will be nullified. No government could compel Australian citizens to serve for home defence because those who wished to shirk their duty would simply say “ I am a conscientious objector They may not have any religious beliefs whatever, and may not belong to any organization that objects to war. The insincerity of the Labour party is shown by its refusal to accept the amendment moved by Senator A. J. McLachlan. It is not the real conscientious objector whom the Labour party wishes to protect, but the shirker - the man who does not wish to defend his home or his country. The Senate knows now where the Labour party stands, and if it had not previously made its position clear it has done so now. The members of that party represent the shirkers who will not fight to protect their country. This party, with certain exceptions, will stand by the Defence Act, because it believes that every Australian, within the prescribed age limits, should defend his country. I support the. amendment.

Senator ALLAN MacDONALD:
Western Australia

– The obnoxious portion of the hill is contained in proposed new sub-section 3, and, in accordance with the views I expressed on the second reading of the .bill, I shall oppose the clause. Senator A. J. McLachlan has. endeavoured to clarify the position; but as Ministers in this chamber are supporting the bill those opposing it will suffer another defeat. I intend to support the amendment moved by Senator A. J. McLachlan, which shows most definitely the truth of the remarks of Senator Dein. We are beginning to see the Opposition in its true colours. Many of us have a good deal of sympathy with the members of pacifist bodies, who, owing to their religious beliefs, will not hear arms against their fellow-men. But there is ample scope in the Defence Act to deal with genuine conscientious objectors. They should have some real objection. The Leader of the Opposition (Senator Collings) has demonstrated most clearly that he is not concerned with the degree of objection. As Senator Dein said, the originator of the amendment, and those with whom he is associated, desire to provide a hollow log in which they can seek shelter while others hear arms in their defence. I regret that the Leader of the Opposition, and the members of his party should sponsor a proposal which definitely brands them as the champions of the shirkers. In view of the non-acceptance of Senator A. J. McLachlan’s amendment by the Leader of the Opposition, that is the only conclusion that can be reached. I trust that honorable senators opposite will reconsider their attitude and do some constructive work by encouraging those willing to bear arms rather than assist those who are sheltering behind others. This provision is so wide that any person who invents an objection may, by the mere assertion that he objects to fight, be given an opportunity to shirk his responsibility. The principal act makes ample provision for the exemption from service in time of war of persons medically unfit, members and officers of Parliament, judges of Commonwealth and State courts, ministers of religion and many others who can satisfy a prescribed authority that their conscientious beliefs prevent them from bearing arms. Such persons could appear before a prescribed authority, and it would not be difficult for Quakers or members of other similar organizations opposed to bearing arms so to do. The measure sponsored by the Leader of the Opposition encourages other than real conscientious objectors, and for that reason I shall support the amendment.

Senator LECKIE:
Victoria

.- I do not know whether the amendment moved by Senator A. J. McLachlan will strengthen the provision to the degree that I should like. There seems to be a difference of opinion as to the real effect of the amendment. Sub-section 1 of section 61 of the principal act reads: “ People who satisfy a prescribed authority that their conscientious beliefs do not allow them to bear arms …” In this measure the reference to “ a prescribed authority” is deleted. All that a person will need to do will be to say that be has conscientious objections; he will not need to satisfy any prescribed authority. An objector could say that he belonged to the shirker’s union which was affiliated with a trades hall. Are we to understand that the Leader of the Opposition (Senator Collings) believes that it is. right that any person should shirk his responsibility merely by saying that be objects to bearing arms? I am not blaming honorable senators opposite for supporting the bill, because they are acting under the directions of those whom they represent. It is remarkable that this change should be made in respect of service within Australia while we arc at war.” The Government could not have realized the full effect of the proposed amendment, and its oversight must be due to the fact that the measure was passed during or after an all-night sitting. I intend to support the amendment although I do not consider it sufficiently wide. After all, the interpretation of the word “ real “ is left to the conscientious objector. All that the amendment provides is that, instead of a person saying that he is a conscientious objector, he will have to say that he is a real conscientious objector.

Senator A J McLACHLAN:
SOUTH AUSTRALIA · NAT

– The word “ real “ gives the court a direction.

Senator LECKIE:

– It would be preferable to re-insert the words relating to prescribed authority. On the flimsiest excuse a person could be relieved of all responsibility.

Senator Collings:

– Perhaps the honorable senator thinks that the provision could be improved by using the words “ really a real conscientious objector “. The honorable senator should realize that I have a loyal team behind me.

Senator LECKIE:

– “We have a loyal team. Unfortunately some of our leaders have kicked over the traces, but unlike honorable senators opposite, they are not in chains. The Government should realize where this is leading, and even at this late stage Ministers in this chamber should point out to their colleagues that they have made a mistake. Members of the Senate object to being dragged at the coat-tails of the other House ; they expect to make up their own minds. This matter should be adjourned so that a fresh start may be made on it.

Senator A J McLACHLAN:
SOUTH AUSTRALIA · NAT

– I have moved this amendment in order to restrict the definition of the term “ conscientious objector “.

The point has to be tried under section 62, not by a prescribed tribunal, but by a court set up under the Defence Act. This court will see the term “ conscientious objector “ defined in the widest possible way. Who is to try the conscience of man? In the section there should be a pointer to the tribunal to find out whether the person’s objection is real or simulated.

Senator McBride:

– Will not the court do that in anycase?

Senator A J McLACHLAN:
SOUTH AUSTRALIA · NAT

– How can it? As the term is defined in this clause there will be no obligation on the tribunal to determine whether the objection is real or simulated. What can the court do if the person concerned declares that he has a conscientious objection to fighting? There will be nothing for the court to inquire into. A man might, in fact, have been engaged at the stadium the night before,but the next day he could say that he had a conscientious objection to fighting at all. It is in order to meet cases of that kind that I want the word “ real “ inserted.

Question put - -

That the word proposed to be inserted (Senator A. J. McLachlan’s amendment)be inserted.

The committee. divided. (The Chairman - Senator James McLachlan.)

Ayes . . . . . . 11

Noes . . . . . . 21

Majority . . . . 10

Question so resolved in the negative.

Amendment negatived. .

Senator WILSON:
South Australia

.- I move-

That paragraph (a) be left out.

The purpose of my amendment is to restore section 61 i of the Defence Act to its original condition. I ask of honorable senators opposite - who is to decide whether a person is a conscientious objector, the court or the person concerned? Why does the Labour party want to cut out the provision that the person claiming exemption must satisfy the prescribed authority ? At the present time, no minister of religion may be called upon to serve, and the Labour party wants to extend that exemption to any one who objects to serving.

Motion (by Senator McLeay) put -

That the question be now put.

The committee divided. (The Chairman - Senator James McLachlan.)

AYES: 20

NOES: 11

Majority . . . . 9

AYES

NOES

Question so resolved in the affirmative.

Question put -

That the paragraph proposed to be left out (Senator Wilson’s amendment) be left out.

The committee divided. (The Chairman - Senator James McLachlan.)

AYES: 11

NOES: 20

Majority . . 9

AYES

NOES

Question so resolved in the negative.

Amendment negatived.

Senator LECKIE:
Victoria

.- I move -

That paragraph (b) be left out.

No doubt the Leader of the Opposition (Senator Collings) is very pleased with bis brutal majority, and I am pleased to note that the Opposition has decided that there is some virtue in the “ gag “. For a long time it had not approved of the application of the “ gag “-

SenatorCollings. - I rise to a point of order. Is the honorable senator not entirely out of order in discussing the “gag”?

Senator LECKIE:

– I have just experienced the “ gag “ and I am expecting it to be applied again.

The CHAIRMAN:

– The honorable senator should discuss the amendment.

Senator LECKIE:

– Am I not in order in referring to the “gag”?

The CHAIRMAN:

– No; not until it is applied.

SenatorFoll. - Does not the honorable senator believe in honouring a bargain?

Senator LECKIE:

– If a bargain has been entered into with regard to this clause, members of the committee should know all about it. I object to being told by one of the Ministers that I and honorable senators supporting me are not honouring a bargain. If such an arrangement has been entered into, I know nothing about it.

The CHAIRMAN:

– I ask the honorable senator to confine his remarks to the amendment.

Senator LECKIE:

– If the clause has been the subject of a bargain I shall probably be in order in referring to the arrangement.

The CHAIRMAN:

– The honorable senator must refrain from that attitude.

Senator LECKIE:

– I contend that members of the committee have a perfectly free hand in this matter. I strongly object to the terms of paragraph b. The proposed new sub-section widening the definition of “ conscientious beliefs “ has been deliberately framed to enable exemption to be obtained by persons other than those who have objection to military service on religious grounds. The committee should be told to what objections this proposal extends, apart from religious ones.

Senator Collings:

– Conscientious beliefs “.

Senator LECKIE:

– But what does that amount to? To whom will the exemption apply? The Leader of the Opposition, in the consideration of other bills, claims the right to a full explanation of any clause on which he desires information. Under paragraphb three-fourths of the people of Australia could escape their duty to defend this country.

Senator Collings:

– The honorable senator knows that they will not be exempt.

Senator LECKIE:

– But anybody could obtain exemption under this proposal.

Declaration of Urgency.

Senator McLEAY:
Minister for Commerce · South Australia · UAP

– I declare the bill an urgent bill.

Motion (by Senator McLeay) put-

That the bill be considered an urgent bill.

The commitee divided. (The Chairman - Senator James McLachlan.)

Ayes . . . . . . 22

Noes . . . . . . 10

Majority . . . . 12

Question so resolved in the affirmative, there being at least thirteen senators voting in favour of the motion.

Allotment of Time.

Senator McLEAY:
Minister for Commerce · South Australia · UAP

– I move -

That the time allotted in connexion with the consideration of the bill up to the end of the committee stage be until 9.5 p.m. this day.

It is now that time.

Question resolved in the affirmative.

The CHAIRMAN:

- (Senator James McLachlan). - The time allotted for the proceedings in committee has expired.

Amendment (Senator Leckie’s) negatived.

Clause agreed to.

Clause 4 agreed to.

Title agreed to.

Bill reported without amendment; report adopted.

Bill read a third time.

page 1075

SUPPLY BILL (No. 2) 1939-40

Bill received from the House of Representatives.

Standing and Sessional Orders suspended.

Bill (on motion by Senator MoBride) read a first time.

Second Reading

Senator McBRIDE:
Assistant Minister · South Australia · UAP

– I move -

That the bill be now read a second time.

Until the Appropriation Act is passed by Parliament, it is necessary to provide by means of supply acts the funds required to carry on the essential services of the Government. The first Supply Act for the year, which was passed in June last, covered the period to the end of September, and further supply is now necessary in order to provide for departmental expenditure until the House again meets and is able to consider the Estimates and the Appropriation Act. The present bill is for a period of two months to the end of November, and with the amounts already included in the last act will provide an amount of approximately fivetwelfths of the previous year’s appropriation. .

The measure makes provision for an amount of ?7,433,800 to meet expenditure under the following heads : -

With the exception of defence, in respect of which it is inevitable that some provision must be made for new proposals, this bill does not include any new commitments or expenditure which may be provided in the Estimates of Expenditure submitted to Parliament recently. Only in the exceptional case of defence, and in certain . items where the expenditure is normally heavier in the early part of the year, has the proportion of five-twelfths of last year’s estimate been exceeded.

With the outbreak of hostilities the Government has instituted a close examination of all items of Commonwealth expenditure with a view to placing the finances on a war footing. All nonessential or escapable expenditure must be eliminated and departmental expenditure reduced to a minimum, consistent with efficiency. New works will be closely scrutinized, and any that are not urgently required must he postponed for a time. We are faced with heavy additional expenditure^ not only directly but also indirectly, as the result of the war, and the Government is determined that all our resources shall be available for its prosecution.

Honorable members will note that an amount of £1,500,000 is included in this bill under the heading of “ Treasurer’s Advance “, which, with the amount of £2,500,000 already provided in Supply Act No. 1, brings the total to £4,000,000. The Estimates of Expenditure, recently circulated, provide only £3,000,000 for this purpose, and the necessary amendment will be made at a later date. Until the Appropriation Act is passed, it is necessary to finance from this vote all works which were uncompleted at the 30th June last, and for which provision will be included in the “Additions, New Works and Buildings” Bill to be submitted for the approval of Parliament at a later date. Emergency expenditure also must be met from this source.

The increase of £1,000,000 in the amount of Treasurer’s Advance has been made in order to provide for any emergency which the Government may be called upon to meet in these abnormal times, but it is hoped that it will not be necessary to have recourse to the increased amount.

Question resolved in the affirmative.

Bill read a second time and passed through its remaining stages without requests or debate.

page 1076

SUPPLY AND DEVELOPMENT BILL (No. 2) 1939

Second Reading

Senator COLLINGS:
QueenslandLeader of the Opposition

– I move -

That the bill he now read a second time.

The object of this bill is to extend to the 5,000 or 6,000 persons employed on the production of munitions in government workshops the safeguards contained in section 27 (2) which, by the terms of the existing definition of. “ employee “, are now limited to similar employees of private enterprises and certain public servants. The interpretation of the word “ munitions “ is wide. The range covers the manufacture and disposal of almost every commodity that we could conceive of. As it now stands, section 27 of the Supply and Development Act empowers the Governor-General to make regulations enabling the Minister, whoever he may be, to suspend, cancel, reduce or otherwise interfere with wages, customs and practices that have taken a century to develop. The guillotine prevented the Opposition from effectively exposing the weakness of the act in this respect. This bill amends section 27 of the principal act as follows : -

  1. Section twenty-seven of the principal act is amended -

    1. by omitting from sub-section (3.) the definition of “ employee “ and inserting in its stead the following definnition ; - “‘employee’ means employee not being a person who is an officer within the meaning of the Commonwealth’ Public Service Act 1922-1937”; and
    2. by omitting from the definition of “trade union” in sub-section (3.) the words, “ but does not include an association of employees in the PublicService “.

The definition of “ employee “, which it is intended to omit is - “ Employee “ means employee other than an employee in the Public Service within the meaning of the Arbitration (Public Service) Act 1920-1934.

Section 10 of the Commonwealth Public Service Act reads -

  1. For the purposes of this act the Public Service shall comprise -

    1. The Commonwealth Service; and
    2. The Provisional Service.
  2. The Commonwealth Service shall include the departments specified’ in the Second Schedule at any time proclaimed by the Governor-General.
  3. The Provisional Service shall include any department or branch of the Public Service of a provisional or temporary character which is included by proclamation.

The amendment now suggested means that not only will the safeguard cover what are generally understood to be public servants, that is, permanent employees of the Government in public service departments, but also those persons who are temporary employees. At all times, peace-time or war-time, there are large numbers of people who go in and out of departments; they are not on the permanent staff; they are temporary employees. This amending legislation would cover those people.

Senator COLLETT:
Minister in charge of War Service accepts the principle involved in this bill which, as the Leader of the Opposition (Senator Collings · Western Australia · UAP

has pointed out, is designed to clarify certain definitions relating to employees and public servants contained in the principal act.

Question resolved in the affirmative.

Bill read a second time, and reported from committee without amendment or debate.

Standing and Sessional Orders suspended.

Report adopted.

Bill read a third time.

page 1077

LEAVE OF ABSENCE

Motion (by Senator McLeay) - by leave - agreed to -

That leave of absence be granted to every member of the Senate from the determination of the sitting this day to the day on which the Senate next meets.

page 1077

SPECIAL ADJOURNMENT

Motion (by Senator McLeay) agreed to -

That the Senate, at its rising, adjourn till a day and hour to be fixed by the President, which time of meeting shall be notified to each senator by telegram or letter.

page 1077

ADJOURNMENT

Commonwealth and State Public Servants : Military Service - Questions upon Notice.

Motion (by Senator McLeay) proposed -

That the Senate do now adjourn.

Senator FOLL:
Minister’ for the Interior · Queensland · UAP

– I take this opportunity to furnish the following reply to a question asked by Senator Dein regarding the position of Commonwealth and State public servants who enlist for military service. At the Conference of Commonwealth and State Ministers held in Canberra on Saturday, the 9th September, the following conditions to be extended to permanent public servants who are called out for ‘naval, military or air force duty were agreed upon by the conference, subject to reservations where mentioned: -

  1. That officers who have accrued or accruing recreation leave due to them be granted such leave upon application.
  2. That officers who are eligible for extended leave be granted such extended leave upon application.
  3. That officers who do not desire recreation and/or extended leave be granted special leave of absence without pay.
  4. That officers granted special leave of absence without pay be allowed the difference between their civil pay and their military pay for a period not exceeding one annual training period of sixteen days of their respective units.
  5. That, in respect of any period beyond the period referred to in paragraph (iv), in the case of officers who are granted special leave of absence without pay (and where the civil pay is not made good by departments), the Government pay the Public Service Superannuation Fund contributions and the assurance premiums of such officers where such are compulsory.

Reservation to (v) : Subject in the case of New South Wales and South Australia, who desire to consider their position on this aspect, to the provision that neither State will act on any other basis without first placing the matter before the Premiers Conference.

  1. That the service of officers with naval military or air force units be recognized for the purposes of -

    1. Computing salary payable on return to duty;
    2. Computing extended leave, sick’ leave, recreation leave and retiring gratuities;
    3. Seniority.

It has been decided that temporary Commonwealth employees whose employment is not casual are to be treated on the same basis as permanent employees so far as . their conditions of service permit.

Senator ALLAN MacDONALD:
Western Australia

– I ask the Leader of the Senate (Senator McLeay) what is the position with regard to questions asked by honorable senators and to which no replies have yet been given? Will the honorable senators concerned be advised of the replies by letter?

Senator McLeay:

– Yes.

Question resolved in the affirmative.

page 1078

PAPERS

The following papers were pre sented : -

National Security Act -

National Security (Aliens Control ) Regulations - Order under Regulation 24.

National Security (General) Regulations -

Air Restrictions Order.

Broadcasting Censorship Order.

National Security (Advisory Commit tee) Rules.

Navigation order under Regulation 45.

Order under Regulation No. 4 (Postal lands and buildings).

Post and Telegraph Censorship Order.

Wireless Stations Control Order.

Commonwealth Standing Committee on Liquid Fuels - Fourth Report - 25th July, 1939, dealing with the production of oil from coal.

Science and Industry Research Act - Thirteenth Annual Report of the Council for Scientific and Industrial Research, for the year ended 30th June, 1939.

Lands Acquisition Act - Land acquired at - Cairns, Queensland, and Rathmines, NewSouth Wales - ‘For Defence purposes. Claremont, Tasmania - For Postal purposes.

Supply and Development Act - Regulations - Statutory Rules 1939, No. 97- No. 98 -No. 99.

Invalid and Old-age Pensions Act - Statement re Pensions for the year ended the 30th June, 1939.

Senate adjourned at 9.26 p.m. till a day and hour to be fixed by the President.

page 1078

ANSWERS TO QUESTIONS

” The following answers to questions were circulated: -

Militia Forces : State Electricity Commission Employees

Senator Keane:

asked the Minister representing the Minister for Defence, upon notice -

Is it a fact that the State Electricity Commission in Victoria is not making up the difference between salary and military service pay in the case of employees called up for militia training?

Senator Foll:
UAP

– The Minister for Defence has supplied the following answer : -

Inquiries made from the State Electricity Commission to-day (22nd September) elicited the information that no decision had yet been reached in regard to making up the difference between salary and military service pay in the case of employees called up for military training.

Defence Annexes: Midland Junction Workshops

Senator Fraser:

asked the Minister representing the Minister for Supply and Development, upon notice -

  1. Has any further progress been made by the Government with a view to the utilization of railway workshops at Midland Junction, Western Australia, for the manufacture of equipment or munitions?
  2. Has any decision been arrived at by the Government in respect of representations made by a deputation which waited upon the Prime Minister during his visit to Perth in connexion with the Western Australian share of defence work ?
Senator McLeay:
UAP

– The Minister for Supply and Development has supplied the following answers : -

  1. Full consideration has been given to the question of the utilization of the railway workshops at Midland Junction, Western. Australia, for the manufacture of equipment or munitions, but it has not been found practicable for economic and other reasons to use these workshops for the purposes mentioned. Their potentialities will, however, be borne in mind in connexion with future requirements considered to be within their compass.
  2. Defence supplies which are not manufactured at government factories are obtained generally by public tenders invited throughout the Commonwealth. Irrespective of the Statu of destination tenders provide that delivery shall be accepted f.o.b. in the several States, and the Commonwealth itself bears the cost of freight. Manufacturers in Western Australia, in common with those in other States, thus have an opportunity to compete for defence requirements, not only for their own State, but also for the larger requirements of the Commonwealth as a whole. In addition, while no provision has yet been made for the actual manufacture of munitions in Western Australia, technical investigators have inspected the works of the leading engineering firms in Perth, and have compiled an inventory of plants, together with an assessment of their capacity. The directions in which these firms could assist have been recorded for use if required.

State Price-fixing Tribunals.

Senator Keane:

asked the Minister representing the Treasurer, upon notice- -

What are the names of the consumers’ representatives on the Commonwealth and State price-fixing tribunals?

Senator McLeay:
UAP

– The Treasurer has supplied the following answer: -

Price fixing in the Commonwealth is vested in a single authority who will be known as the Commonwealth Prices Commissioner, and who will have the assistance of two advisers. Deputy Commissioners have been appointed in the various States, each of whom will have the help of an advisory committee. Statu Premiers have been expressly asked that representatives of consumers be appointed to the advisory committees. Karnes of proposed appointees have not yet been received from all States.

Air Raid Precautions

Senator Cameron:

asked the Minister representing the Minister for Defence, upon notice -

  1. Does the Government propose,either through its own departments or those controlled by the State governments, to provide suitable shelters and gas masks for the civil population in the cities and suburbs throughout the Commonwealth likely to be attacked by the enemy from the air?
  2. If not, why not; or, if so, when?
Senator Foll:
UAP

– The Minister for Defence has supplied the following answer : - -

The preparation of the details ofair raid precautionary measures deemed to be necessary in Australiahas been undertaken ‘by the respective State governments. The Commonwealth Government sees no necessity at this juncture to embark itselfon a programme of air raid shelter construction or to attempt to influence the States to commit themselves to any such construction programme. The States are in possession of the latest technical information received from Great Britain in respect of the construction, of air raid shelters should developments overseas indicate the necessity for such activity in this country. Certain investigations in connexion with this aspect of air raid precautions planning are, however, being conducted in the States at the present time. In the opinion of the Commonwealth Government the existing international situation does not call for any further action than is now in hand in respect of the provision of anti-gas respirators for issue to the civil population of the country.

Australian Broadcasting Commission : “ TheWatchman “ Broadcast.

Senator Collings:

asked the Minister representing the Prime Minister, upon notice -

Has any action been taken, and, if so, what, in connexion with the broadcast speeches of “ The Watchman “, advocating unconstitutional action regarding the transfer of the National Capital from Canberra?

Senator McLeay:
UAP

– The Prime Minister has supplied the following answer: -

The script’ has been called for, and will be examined.

Cite as: Australia, Senate, Debates, 22 September 1939, viewed 22 October 2017, <http://historichansard.net/senate/1939/19390922_senate_15_161/>.

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