Senate
14 November 1957

22^nd Parliament · 2^nd Session

QUESTION
- STANDARDIZATION OF RAIL GAUGES
QUESTION
- DEFENCE PRODUCTION
QUESTION
- NEW SERVICE RIFLE
QUESTION
- FISHERIES RESEARCH
QUESTION
- AIRCRAFT SAFETY PRECAUTIONS
QUESTION
- VISITS BY BRITISH PARLIAMENTARIANS
QUESTION
- AIRLINE PILOTS
QUESTION
- DEFENCE PRODUCTION
QUESTION
- AIR FARES
QUESTION
- WAGE MARGINS FOR SKILL
QUESTION
- IMPORT LICENSING
QUESTION
- KANGAROOS
QUESTION
- LAND SETTLEMENT OF EX-SERVICEMEN
QUESTION
- VISIT OF BRITISH PRIME MINISTER
QUESTION
- PAY-ROLL TAX
QUESTION
- OFFICE RENTALS
QUESTION
- POSTAL DEPARTMENT
GOVERNMENT BUSINESS
- Precedence
COAL INDUSTRY BILL 1957
- Second Reading
LOAN (HOUSING) BILL 1957
- Second Reading
CUSTOMS TARIFF BILL (No. 4) 1957
- Second Reading
CUSTOMS TARIFF (NEW ZEALAND PREFERENCE) BILL 1957
- Second Reading
CUSTOMS TARIFF (NEW ZEALAND PREFERENCE) BILL (No. 2) 1957
- Second Reading
CUSTOMS TARIFF (PAPUA AND NEW GUINEA PREFERENCE) BILL 1957
- Second Reading
EXCISE TARIFF BILL 1957
- Second Reading
CUSTOMS TARIFF BILL 1957
- Second Reading
CUSTOMS TARIFF BILL (No. 2) 1957
- Second Reading
GIFT DUTY ASSESSMENT BILL 1957
- Second Reading
STATES GRANTS (SPECIAL FINANCIAL ASSISTANCE) BILL 1957
- Second Reading
STATES GRANTS BILL 1957
- Second Reading
INCOME TAX AND SOCIAL SERVICES CONTRIBUTION BILL 1957
- First Reading
ADJOURNMENT

– Naturally, since this unfortunate occurrence, I have had a number of inquiries made in the department as to the possibility of radio interference occurring as suggested by Senator Anderson. The life rafts of all aircraft of Qantas Empire Airways and of other aircraft operating to and from Australia are equipped with hand-operated radio transmitters. They use the international distress band, the 8,364 kilocycles frequency. With regard to interference, I am advised that while the frequency of 8,364 kilocycles has been adopted as an international aircraft distress frequency by the member States of the International Civil Aviation Organization, it is possible for it to be used for other purposes by nonmember States. Further, while there might be absolute silence on the 8,364 frequency, it is possible for interference to be caused by transmissions on adjacent frequencies, particularly when high-powered stations are involved, or by harmonic radiations from stations operating on frequencies having a harmonic relationship to the 8,364 band. As to Senator Anderson’s request that steps be taken by the International Civil Aviation Organization-

Senator BYRNE:
QUEENSLAND · ALP; QLP from 1957; DLP from 1968

– This is a Dorothy Dix-er!

Senator PALTRIDGE:

– lt is. As this is a matter of some public importance and one of interest, I thought, to at least the intelligent members of the Senate, I had this information prepared. As to Senator Anderson’s request that steps be taken by the International Civil Aviation Organization to ensure that radio silence is maintained on the distress frequencies when an aircraft is missing, I quote from Annex 10 to the Convention of International Civil Aviation, which deals with aeronautical telecommunications -

The distress call shall have absolute priority over other transmissions. All stations which hear it shall immediately cease any transmission capable of interfering with the distress traffic and shall listen on the frequency used for the emission of the distress call. This call shall not be addressed to a particular station and acknowledgment of receipt shall not be given before the distress message is sent.

A further paragraph states -

For the entire duration of distress traffic, stations which are aware of this traffic and which are not taking part in it shall not transmit on the frequencies on which the distress traffic is taking place. lt will thus be seen that the International Civil Aviation Organization has set a pattern which aims at ensuring that, so far as possible, there shall be no interference with distress traffic.

page 1245

QUESTION

VISITS BY BRITISH PARLIAMENTARIANS

Senator BROWN:
QUEENSLAND

– I direct a question to the Leader of the Government in the Senate. As the Government has, from time to time, extended to prominent leaders and democrats invitations to visit Australia, will it consider favorably extending such an invitation to Messrs. Gaitskell and Aneurin Bevan?

Senator O’SULLIVAN:
LP

– I am quite sure that, not only the Government but, indeed, the Australian people would be delighted to have the two distinguished members of the House of Commons mentioned by the honorable senator visit this country. However, I am not aware whether protocol permits such invitations to be extended. I will mention the honorable senator’s suggestion to the authorities.

page 1245

QUESTION

QUESTION

PAY-ROLL TAX

Senator WRIGHT:
TASMANIA

asked the Minister representing the Treasurer, upon notice -

What amounts of the pay-roll tax assessed in the year ending 30th June, 1957, were paid by (a) the States or State instrumentalities, (b) localgoverning bodies, (c) manufacturing, building and construction employers, (d) distribution wholesalers, (e) distribution retailers, (0 primary producers, (g) mining organizations, and (h) others?
Is the estimate that income tax would be increased by £14,000,000 if the pay-roll tax were abolished regarded as reliable?
Has the Tariff Board’s estimate that abolition of the tax would relieve the cost structure of the economy by approximately £98,000,000 been checked, and if so, with what result?

Senator SPOONER:
LP

– My colleague, the Treasurer, has supplied the following answers: -

Precise figures are not available, nor are statistics on which reliable estimates may be based. The following estimates have been made, however, on such statistical material as is available.

The extent to which income tax collections would be affected if pay-roll tax were abolished is dependent upon so many contingencies that it is doubtful if any estimate of this nature could be regarded as reliable. However, assuming that upon the abolition of pay-roll tax, the prices of goods and services were consequently reduced, it would follow that income tax collections might be slightly reduced. If, on the other hand, there were no reduction in prices as a result of the reduction in production costs consequent on the repeal of pay-roll tax, it is probable that income tax collections would be increased by some amount not exceeding £12,500,000.
Inquiries made of the Tariff Board reveal that it has not at any time estimated that abolition of pay-roll tax would relieve the cost structure of the economy by approximately £98,000,000. The 1956 Tariff Board Annual Report included the following statement: -

Pay-roll tax is another example of a Government impost, right at the base of the cost and price structure which might be considered for removal. It may be true to say that every pound of income received by the Government in pay-roll tax means an increase in price to consumers of at least two pounds.

With this estimate I do not agree. So far as any reliable estimate can be made of the effect of pay-roll tax upon the retail price of goods, it would appear that it does not increase that price by more than 1.68 per cent.

page 1248

QUESTION

OFFICE RENTALS

Senator KENNELLY:

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

Is there a uniform basis upon which the Department of the Interior fixes rents paid for areas occupied by Commonwealth departments?
If so, what is the basis?
If not, how are rents determined?

Senator HENTY:
Minister for Customs and Excise · TASMANIA · LP

– The Minister for the Interior has supplied the following answer: - 1, 2 and 3. Where a Commonwealth department occupies office accommodation in premises not owned by the Commonwealth, the rental debited against the department is the amount payable to the owner of the premises. This amount of rental is determined by negotiation with the owner, and naturally varies according to circumstances, particularly in regard to location. There is no uniform basis. When the building is Commonwealthowned, no charge for rental is raised against the occupying department.

page 1248

QUESTION

POSTAL DEPARTMENT

Senator COOPER:
Minister for Repatriation · QUEENSLAND · CP

– On 29th October, Senator Wardlaw asked me the following question: -

I preface my question, which is addressed to the Minister representing the Postmaster-General, by asking him whetherhe has seen the report in a leading daily newspaper that a group of business men in Wolverhampton, England, consequent on an increase in postage rates, is planning to set up a private post office for the purpose of delivering and taking delivery of local letters and secondclass mail, considering that this will result in appreciable economies. Following the recent rise in postage rates in Australia, many business houses in Tasmania have made a practice of delivering by hand monthly statements and letters at certain periods. Will the Minister consider a lower rate of postage on local letters and second-class mail matter and will he also express an opinion as to whether similar action to that suggested in England, if carried out in Australia, would be infringing Post Office rights?

The Postmaster-General has now furnished me with the following information: -

The press report that a group of businessmen in Wolverhampton, England, propose to establish a centre for the exchange of local letters has been examined by officers of the Postmaster-General’s Department. As far as Australia is concerned, section 98 of the Post and Telegraph Act clearly sets out that; subject to certain minor exceptions, no letter shall be sent or carried for hire or reward otherwise than by post.

On the question of. the desired lower rate of postage for local letters and second-class mail, I regret that a reduction along the lines sought is not possible at this stage. It has been the policy of successive governments to prescribe uniform rates of postage within Australia for these categories of mail-, irrespective of their destination, and this is a generally accepted principle in postal services throughout the world.

I should like to point out that the principal cost of the service lies in the handling and delivery of postal articles rather than in their transportation.

page 1249

GOVERNMENT BUSINESS

Precedence

Motion (by Senator O’Sullivan) agreed to -

That unless otherwise ordered, Government business take precedence over general business after 8 p.m. this sitting.

page 1249

COAL INDUSTRY BILL 1957

Bill received from the House of Representatives.

Standing Orders suspended.

Bill (on motion by Senator O’Sullivan) read a first time.

Second Reading

Senator O’SULLIVAN:
General · QueenslandVicePresident of the Executive Council and Attorney · LP

– I move -

That the bill be now read a second time.

This short measure is designed to enable us to give effect to the Government’s recent decision to appoint an additional presidential member to the Commonwealth Conciliation and Arbitration Commission. It has become apparent in recent months that, with only four presidential members, there are risks that important matters, which require the attention of presidential members of the commission, will be delayed. These risks necessarily increased recently when the Government met the wish of Mr. Justice Foster to be granted a period of absence. The fact that three of the presidential members are assigned to work in particular industries also means that there can be some clash between the competing requirements of work needing their individual attention, and work needing the attention of two or more presidential members in a full commission. In other words; if full commission work is to proceed without delay, there may be delays in dealing with work relating to individual industries, such as the stevedoring and maritime industries.

I am pleased to be able to inform the Senate that the appointment to the commission which we offered to Mr. Justice Gallagher, who is a member of the New South Wales Industrial Commission, and who is also the Coal Industry Tribunal, has been accepted by him. I am’ also glad to be able to add that the New South Wales Government has expressed its concurrence in Mr. Justice Gallagher, as a member of the Commonwealth Conciliation and Arbitration Commission, continuing to be the Coal Industry Tribunal. It is rather interesting to recall that, in 1955, when the New South Wales Government proposed his appointment to the New South Wales Industrial Commission, the Commonwealth concurred in his continuing as the Coal Industry Tribunal while a member of the New South Wales Industrial Commission. On this occasion, when we indicated to the Premier of New South Wales that we wished to appoint Mr. Justice Gallagher, the Premier was pleased to agree that Mr. Justice Gallagher would continue his work as the Coal Industry Tribunal.

The Coal Industry Act, in section 30, provides that the Coal Industry Tribunal shall be deemed to have vacated his office if he engages in any paid employment outside the duties of his office, or if, except on leave granted by the Governor-General, or by the Governor of New South Wales, he absents himself from duty for fourteen consecutive days, or for 28 days in any twelve months. When Mr. Gallagher - as he then was - was appointed to the New South Wales Industrial Commission in 1955, by agreement between the New South Wales Government and the Commonwealth Government, as I have already mentioned, the Commonwealth Coal Industry Act and the New South Wales Coal Industry Act were amended to avoid the necessity for him to vacate his office as the Coal Industry Tribunal.

To give effect to the arrangements which have now been made with the New South Wales Government, under which, as a member of the Commonwealth Conciliation and Arbitration Commission, Mr. Justice Gallagher will remain the Coal Industry Tribunal, amendments of the Commonwealth and New South Wales Coal Industry Acts, along the lines of the 1955 amendments, are necessary. In short, the bill now before the Senate makes mainly the same provision as was made in 1955. I should point out also that the two governments have agreed, as they did in 1955, that the coal industry shall, as far as is practicable, have priority of attention by the judge.

The bill now before the Senate also makes a minor amendment to the Judges’ Pensions Act. As a member of the New

South Wales Industrial Commission, Mr. Justice Gallagher is entitled to the benefits of the New South Wales legislation which deals with judges’ pensions. Incidentally, in some respects that legislation is rather more advantageous than is the Commonwealth’ legislation. Without the amendment of our Judges’ Pensions Act which is now proposed, Mr. Justice Gallagher would be very much worse off in relation to his pension entitlements under the Commonwealth act than he is under the New South Wales act.

The Commonwealth act counts judicial office under a State as service for the purposes of the Commonwealth Judges’ Pensions Act, subject to a maximum of ten years. The bill now before the Senate provides that service as a Coal Industry Tribunal shall count as judicial service under the State.

The Coal Industry Tribunal functions under Commonwealth and State legislation, and while the work of the tribunal is not judicial in character, the qualifications for appointment as Coal Industry Tribunal are the same as those for a justice of the High Court, or a presidential member of the Commonwealth Conciliation and Arbitration Commission. Mr. Justice Gallagher has been the Coal Industry Tribunal for slightly more than ten years, so the effect of the amendment contained in this bill will be that, on appointment to the Commonwealth commisison, he will be deemed to have had ten years’ service, for the purposes of entitlements under the Judges’ Pensions Act. I should add that, even under these arrangements, Mr. Justice Gallagher will not be so favorably placed under the Commonwealth act, in relation to his pension entitlement, as he would have been under the State act. I commend the bill to the Senate.

Senator McKENNA:
Leader of the Opposition · Tasmania

– The Opposition supports the measure. As the Leader of the Government in this place (Senator O’sullivan) has indicated, Mr. Justice Gallagher was appointed the Coal Industry Tribunal by the Commonwealth and New South Wales Governments some years ago. The fact that at the end of that period I am able to say that he still enjoys the confidence of both governments and that he unquestionably enjoys the confidence of both employers and employees in the coal industry is a tribute both to his character and ability and the excellence of the work he has done down the whole of those ten years. The Opposition congratulates Mr. Justice Gallagher upon his new appointment in a wider sphere, and wishes him well in that office.

The Leader of the Government pointed out that difficulties arise from the fact that there are not enough presidential members of the Commonwealth Conciliation and Arbitration Commission to enable the multiple work of that commission, when two or more members of it are required-, to proceed evenly by reason of the fact that individual members of the commission are allocated to particular industries. I hope that the appointment of Mr. Justice Gallagher to relieve that difficulty will not militate against or prevent his giving all the attention that is required to the coal industry where he has done such excellent service. I realize that it is not a matter which this Government controls. The allocation of the members of the commission to particular industries is a matter for the president of the commission, but, if anything can be done to ensure that the excellent work of Mr. Justice Gallagher, as the Coal Industry Tribunal, will not be interrupted or delayed in an industry that has some turbulence and some difficulties, and that is going through a difficult period at the present time, then I invite the Government to take that action. This is one bill which the Opposition will cordially support.

Senator WRIGHT:
Tasmania

.- I desire to take this opportunity to make but brief reference to this bill. I regret that I was advised only a few minutes ago that it was to be accorded an uninterrupted passage through the Senate, and therefore, I speak completely without preparation. I noticed the bill when it was introduced in another place, but I have not had time to study it in conjunction with the Coal Industry Act.

I recognize that the Commonwealth Conciliation and Arbitration Commission was set up as a commission without judicial power but with authority to exercise very comprehensive arbitral power, an authority which requires the greatest independence, such as that required by the judiciary. 1 join with the Leader of the Opposition (Senator McKenna) in expressing my regret that an agency of that very great importance is left with, I think, too few personnel. An agency that has the responsibility year by year of adjusting the basic wage should not be confined to four or five members. The minimum number that should contribute to a judgment of that importance is eleven.

Having said that, I wish to say only one other thing, and it is specifically related to the bill. I very much regret that any person in an office so closely approximating a judicial office as this one does should be the subject of specific benefits by legislation in which he is particularly named. If it is desired to provide for the office of member of the Commonwealth Conciliation and Arbitration Commission, then the qualifications should be set out generally in that legislation. It is invidious, as between members of the judiciary - I use that term in the wider sense to include the members of the Commonwealth Conciliation and Arbitration Commission - and, I think, damaging to the independence of those members, that their appointments to and from tribunals - in this case Mr. Justice Gallagher’s appointment from the New South Wales Industrial Commission to the Commonwealth Conciliation and Arbitration Commission - should require special legislation in which the appointee is personally named to give him benefits that are not available to other members of the same bench.

I emphasize here that anything I have said is not intended to detract from what I have heard from both sides of the Senate as to the meritorious work of Mr. Justice Gallagher. What I have said has been intended to make a contribution to ensuring his independence, along with that of his brother judges, under the law.

Senator BENN:
Queensland

.- I should like some information from the Attorney-General (Senator O’Sullivan) with respect to certain matters, especially after listening to the remarks of Senator Wright. The purpose of this measure is to appoint Mr. Justice Gallagher to the Commonwealth Conciliation and Arbitration Commission. The Leader of the Government in this place has informed us that at the present time he is a member of the New

South Wales Industrial Commission and is the Coal Industry Tribunal. In this instance it is proposed to appoint a person who is at present functioning under State law as the Coal Industry Tribunal. I attach greater importance to the office of member of the Commonwealth Conciliation and Arbitration Commission, and it is for that reason that I am making inquiries now.

I should like to know whether there will be any conflict between the functions exercised by Mr. Justice Gallagher and the Coal Industry Tribunal and those carried out by him as a member of the Commonwealth Conciliation and Arbitration Commission. I have some knowledge of these matters, and I am aware that it is possible for Mr. Justice Gallagher to have administrative functions as the Coal Industry Tribunal and also to exercise purely judicial functions in his new office. I should like to know whether there is any likelihood of conflict between the functions of his present office and those pertaining to his future office of member of the Commonwealth Conciliation and Arbitration Commission.

Senator O’SULLIVAN:
Vice-President of the Executive Council and Attorney-General · Queensland · LP

– in reply - I thank the Senate for the reception it has accorded this measure. I find it pleasing to hear from all sides tributes to Mr. Justice Gallagher as the Coal Industry Tribunal. As I mentioned during my second-reading speech, it has been agreed between the Commonwealth and New South Wales governments that as far as practicable priority shall be given to Mr. Justice Gallagher’s work as the Coal Industry Tribunal. In reply to Senator Wright, 1 have not examined the matter thoroughly from a drafting point of view. Mr. Justice Gallagher was specifically mentioned because of the provisions of section 30 of the Coal Industry Act. That section provides that the person appointed to constitute the tribunal -

shall be deemed to have vacated his office if-
1. he engages in any paid employment outside the duties of his office;
2. … he absents himself from duty for fourteen consecutive days or for twenty-eight days in any twelve months.

It so happens that Mr. Justice Gallagher, on acceptance of this office, will be in receipt of further emoluments and remuneration, and it was considered necessary to mention him specifically. If Senator Wright reads section 30 of the Coal Industry Act, I think he will see that clause 4 of the bill is specifically drafted to meet a situation which has already arisen.

In reply to Senator Benn, the Commonwealth Conciliation and Arbitration Commissi^, to which it is proposed to appoint Mr. j Justice Gallagher, is not a judicial body; it is essentially arbitral. The judicial functions are discharged by the Commonwealth Industrial Court, which is presided over by Mr. Justice Spicer. The Commonwealth Conciliation and Arbitration Commission is presided over by Mr. Justice Kirby. In any event, whether the commission is judicial or arbitral in character, there should be no more occasion for conflict between the duties of Mr. Justice Gallagher as the Coal Industry Tribunal and as a member of the Commonwealth Conciliation and Arbitration Commission, than existed while he was the Coal Industry Tribunal and a member of the New South Wales Industrial Commission. He apparently carried out those combined functions in a way which evoked universal acclaim and satisfaction. I see no reason why there should be any more conflict in the future than there was formerly.

Question resolved in the affirmative.

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

page 1252

LOAN (HOUSING) BILL 1957

Bill received from the House of Representatives.

Standing Orders suspended.

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

Second Reading

Senator SPOONER:
Minister for National Development · New South Wales · LP

– I move-

That the bill be now read a second time.

The purpose of this bill is to authorize the raising of loan moneys totalling £33,160,000 for financial assistance to the States for housing. In accordance with the requests of the States, the estimated amount of £33,160,000 will be allocated among the. States as follows: -

The provision of £33,160,000 in 1957-58, for which approval is now being sought, represents an increase of £1,010,000 over the amount advanced to the States in 1956-57 to meet in full their requests for housing finance under the 1956 housing agreement.

Advances to the States will be made in accordance with conditions already approved by the Senate and incorporated in the Housing Agreement Act 1956. In accordance with the agreement authorized by that act, the amount of £33,160,000, which it is estimated will be advanced to the States in 1957-58, is to be used for two separate purposes.

An amount not exceeding £26,528,000, or 80 per cent, of each State’s advances, is to be used by the States for their own housing programmes. The remaining 20 per cent., or an amount of £6,632,000, will be allocated by the States to building societies and other approved lending institutions for the erection or purchase of homes for private ownership. The amounts provided in 1956-57 for these two purposes were £25,720,000 and £6,430,000 respectively.

Under the terms of the housing agreement an amount specified by the Commonwealth, but not exceeding in any year 5 per cent, of the moneys made available for State housing programmes, is set aside by the States for the erection of dwellings for allotment to serving members of the forces. The Commonwealth provides supplementary advances of an equal amount for the same purposes. These supplementary advances are met from the respective votes of the Service departments and are thus additional to the loan moneys to be raised in pursuance of this bill.

The amount set aside by the States for the housing of serving members of the forces in 1956-57 was £1,189,214 and the estimated a’mount for 1957-58 is £1,171,150. The number of houses to be provided for -serving personnel from these allocations is 794 for 1956-57 and 747 for 1957-58. The net result is, of course, that the additional advances provided by the Commonwealth to match the appropriation of the States results in a substantial increase in the number of houses constructed by the State housing authorities each year. In 1956-57 the State authorities commenced 10,329 dwellings with funds made available under the housing agreement. This number includes dwellings built for serving members of the forces.

This bill is concerned with the raising of moneys for the second year of the operation of the housing agreement. I would remind honorable senators that a new concept was introduced in the first year of the agreement’s operation. This was the arrangement that portion of the moneys advanced by the Commonwealth would be paid into the Home Builders’ Account, from which the States would provide homes for individual home ownership through building societies.

When I spoke in the Senate last year on the bill to authorize the housing agreement, I said that in setting up the Home Builders’ Account the Government was to some extent processing a new line of approach to a vexed problem. Frankly, my hope then was that when the five-year period of the housing agreement had run its course we would see established in every State of Australia a co-operative building society movement comparable to that existing in New South Wales and Victoria.

I am pleased to announce that the first year’s operations of the Home Builders’ Account have not only greatly strengthened the building societies of New South Wales and Victoria but also we have seen the beginnings of an interesting growth of building societies in Queensland. In this State thirteen new building societies have been formed so far as a direct result of the availability of funds from the Home Builders’ Account. Existing building societies in the other three States have also been strengthened.

In 1956-57 no less than 167 building societies and other institutions shared in the funds from the Home Builders’ Account under the housing agreement; the number in 1957-58 will be more than 180. In 1956-57 the funds made available under the Home Builders’ Account were responsible for the commencement of 3,100 homes and the purchase of 702 new nouses and 105 previously occupied homes.

I am sure that many thousands of people who want to invest their savings in a home welcome the home-builders’ scheme under the housing agreement because it provides an opportunity for them to obtain finance while still retaining the right to choose the design and locality of their home. I commend this bill to honorable senators.

Debate (on motion by Senator Benn) adjourned.

page 1253

CUSTOMS TARIFF BILL (No. 4) 1957

Bill received from the House of Representatives.

Standing Orders suspended.

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

Second Reading

Senator HENTY:
Minister for Customs and Excise · Tasmania · LP

– I move -

That the bill be now read a second time.

Honorable senators are requested to consider a bill relating to duties of customs which have been in operation since 18th October, 1957. The new duties in the main are based on recommendations made by the Tariff Board following public inquiries to determine the assistance to be given for the protection of certain Australian industries. Tariff protection is being provided for industries engaged in the manufacture of various metal working grinding machines, a range of chemicals mainly of the insecticidal and weed-killing types, slide fastener tape and cycle saddles. An alteration to the wording of the tariff item dealing with pneumatic rubber tyres is being made to remove any doubts which might be thought to exist in respect of the classification of tubeless tyres.

Perhaps I could invite the attention of honorable senators to that portion of the bill imposing protective duties on certain insecticidal and weed-killing type chemicals. This action was not taken earlier when the Tariff Board’s report was tabled in the Parliament in May this year. Assurances have been received by the Government from the local manufacturers that they will not take advantage of protective duties to increase prices and the Government considered that the Tariff Board’s recommendations could now be implemented without detriment to our export industries.

Another amendment which I feel will interest honorable senators is one made following the Government’s consideration of a Tariff Board report dealing with the measure of assistance to be accorded to the Papua and New Guinea rubber industry. The amendment to which I refer is that amending the duties applying to imported rubber, synthetic rubber, rubber latex and synthetic rubber latex. Although the bill provides for the rate of customs duty on such goods to be increased from 2d. per lb. to 4d. per lb., action has been taken to remove the 1 0 per cent, ad valorem primage duty applying before 18th October. The net effect of these changes has been to reduce the import duty payable. Provision has also been made for concessional entry of the rubber materials I have mentioned at the rate of 2d. per lb. in approved circumstances.

Such concession will be operated under the statutory provisions relating to customs by-laws only after arrangements have been made by Australian manufacturers of rubber goods for the purchase of all rubber produced in the Territory of Papua and New Guinea at a satisfactory price. For the purposes of the by-law concession, a “ satisfactory price “ is to be the world price appropriate to the particular grade of rubber purchased when the world price for No. 1 R.S.S. grade rubber is 30d. or more per lb. Should the world price for No. 1 R.S.S. grade rubber fall below 30d. per lb. a “ satisfactory price “ would be the world price appropriate to the particular grade of rubber purchased plus id. per lb. for each penny by which the world price for No. 1 R.S.S. grade is less than 30d. per lb., with a maximum excess payment of 3d. per lb.

I might mention that the Tariff Board recommended a substantial reduction in the rates of duty but recognized that, in view of the revenue implications, it might not be; possible to implement its recommendations, in full immediately. The board envisaged that it might be necessary for the reductionssuggested to be implemented by stages. The action now taken represents the maximum reduction which the Government feels able to make at present. This amendment represents a substantial cost-saving to local industry at a manageable cost to revenue, whilst according a significant concession to major suppliers of natural rubber to the Australian market. The Federation of Malaya, which supplies some 90 per cent, of Australian rubber imports, is the major beneficiary.

Another amendment provided for in this bill reduces the British preferential margin on certain machine tools to Ti per cent, ad valorem. This action is supplementary to that taken in Customs Tariff Bill 1957 which honorable senators will recall dealt with the reduction in the preference margin on a wide variety of producer goods following the signing of the United KingdomAustralia trade agreement early this year.

I commend this bill to honorable senators.

Senator McKENNA:
Leader of the Opposition · Tasmania

– I hope I do not disconcert any honorable senator by proceeding with the debate immediately. Unless any honorable senator indicates to the contrary, I do not intend to seek the adjournment of the debates on the remaining customs tariff measures which appear on the notice-paper and which will be introduced later.

Senator Henty:

– We are not taking the Excise Tariff Bill beyond the second reading.

Senator McKENNA:

– I did not refer to excise; I said customs tariff only. The Opposition will certainly seek the adjournment of the debate on the Excise Tariff Bill. I said customs tariff very particularly so that there would be no misunderstanding.

The Minister has quite adequately set out the purpose of the bill with which we are now dealing. The Opposition does not oppose the passage of the measure. I note that the proposals became operative on 18th October, following the filing of the proposals iri the House of Representatives on 17th October. The point to which I should like the Minister to direct his mind is this: 1 think I am correct in saying that these proposals have not hitherto been filed in the Senate; they are filed in the House of Representatives only. The reason for filing them there in the first instance is quite obvious. They initiate taxation and could not, and should not, originate in this chamber. ] ask the Minister whether there is any good reason why, perhaps on the day after the proposals have been filed in the House of Representatives, they should not be tabled in this chamber, purely to direct the attention of honorable senators to the fact that the proposals are afoot. I believe it is correct to say that the Minister who tables the proposals in the House of Representatives extends to each honorable senator, so far as I know, the courtesy of supplying him or her with a copy of the proposals. They go to honorable senators with the mass of papers that is sent to them almost every day. My own experience, even with the aid of a staff at Canberra, is that they tend to get out of sight and that it is difficult to find them when I want to study them.

I think that it might help to focus the attention of honorable senators on the very important tariff proposals and the relevant Tariff Board reports if they were tabled in the Senate as well as in the House of Representatives. I put the suggestion tentatively to the Minister, believing that it has some merit. I should be interested to hear his comment on it.

I take this opportunity to point out that there has been very considerable delay on the part of the Government in making up its mind about the implementation of a number of the Tariff Board’s recommendations. Once the findings of the board have been promulgated, it is a matter of great importance to the industries affected to know just what the attitude of the Government will be. T remind the Minister that there was a delay of, I understand, far more than a year in making a decision on a report of the board in relation to certain woollen goods, blankets and things of that type. Secondly, in relation to matters affecting the chlorine industry, the delay between presentation of the board’s report and the Government’s decision was approximately two years. Those may be relatively rare exceptions. I hope they are. I think the Government might give an assurance that consideration of reports by the Tariff Board will be speeded up and that delays of that order will not be encountered in the future.

The proposal before the Senate provides for some reductions and increases in tariff duty, the increases being for protective purposes, and the Opposition has no objection to the passage of the measure.

Senator WRIGHT:
Tasmania

.- I had no indication that this bill would be accorded immediate passage. I rise only because, having listened to the speech of the Minister for Customs and Excise (Senator Henty) as it was read, I did not absorb and understand to a degree satisfactory to me how the proposed alteration of duty on rubber goods coincided with the recommendation of the Tariff Board. I refer to this statement by the Minister in his secondreading speech -

I might mention that the Tariff Board recommended a substantial reduction in the rates of duty, but recognized that in view of the revenue implications, it might not be possible to implement its recommendations in full immediately.

I rise to direct attention to that passage because I shall require a full explanation of it in the committee stage.

Senator HENTY:
Minister for Customs and Excise · Tasmania · LP

– in reply - The matters that have been raised by the Leader of the Opposition (Senator McKenna) will be investigated. I believe that there is merit in the proposals that he has made. I do not know at the moment what legal difficulties may be involved. I shall consider the matter closely because I believe that the more information honorable senators have on it, the better it will be for all concerned.

Question resolved in the affirmative.

Bill read a second time.

In committee:

The bill.

Senator WRIGHT:
Tasmania

.- I wish to direct attention to the statements I made during the second-reading debate and to give the Minister for Customs and Excise (Senator Henty) notice of my desire for an explanation of how the proposed duties stand in relation to the report of the Tariff Board.

Senator COURTICE:
Queensland

– I wish to refer to the matter that was raised by Senator Wright. We have been told that the delay in accepting the report of the Tariff Board was designed to protect the revenue. That is a novel reason. The report is of long standing and the implications of the effect of its recommendations on the revenue are vague. I should like the Minister for Customs and Excise (Senator Henty) to explain the situation fully.

Senator O’BYRNE:
Tasmania

– In his second-reading speech, the Minister for Customs and Excise (Senator Henty) referred to the Tariff Board report and the assistance that was to be granted to the rubber industry in Papua and New Guinea. Later on, the Minister stated -

Although the bill provides for the rate of customs duty on such goods to be increased from 2d. per lb. to 4d. per lb., action has been taken to remove the 10 per cent, ad valorem duty applying before 18th October.

Later on in the speech, the Minister stated -

For the purposes of the by-law concession, a “ satisfactory price “ is to be the world price appropriate to the particular grade of rubber purchased when the world price for No. 1 R.S.S. grade rubber is 30d. or more per lb. Should the world price for No. 1 R.S.S. grade rubber fall below 30d. per lb., a “ satisfactory price “ would be the world price appropriate to the particular grade of rubber purchased plus a id. per lb. for each penny by which the world price for No. 1. R.S.S. grade is less than 30d. per lb. with a maximum excess payment of 3d. per Jb.

Does that mean that a subsidy will be paid on rubber other than Papua and New Guinea rubber to the amount of 3d. per lb. if the world price falls below 30d. per lb.?

Senator WRIGHT:
Tasmania

.- While the Minister for Customs and Excise is engaged in consulation, I wish to give notice of a further question that occurs to me on turning over the pages of the schedule. If I read the schedule correctly, the duty on drugs and chemicals is to be increased. In the Minister’s second-reading speech he stated -

Tariff protection is being provided for industries engaged in the manufacture of various metal working grinding machines.

According to my reading of the schedule, the duty is to be reduced. I should like to be corrected if I am wrong. Reference has been made also to the duty on a range of chemicals mainly of an insecticidal and weed-killing type. Will the Minister explain to me in what portion of the schedule reference is made to those drugs and chemicals?

Senator HENTY:
Minister for Customs and Excise · Tasmania · LP

– I shall reply first to the query raised by Senator O’Byrne. The position with regard to New Guinea rubber is, first, that the 10 per cent, primage has been removed. The duty was raised to 4d. but, under by-law, it becomes 2d. only after the Australian manufacturers have purchased all the New Guinea rubber at the price of 30d. per lb. when that is the world price. By-law admission is related to a “ satisfactory price “. Should the world price fall below 30d. per lb., a “ satisfactory price “ would be world price, plus a farthing per lb. for each penny by which the world price of first-grade rubber falls below 30d. per lb. That provision is entirely satisfactory to the producers in Papua and New Guinea.

Senator O’Byrne:

– The preference fluctuates as the world price drops below 30d. per lb.?

Senator HENTY:

– Yes, it rises by id. per lb. for every Id. by which the world price falls below 30d. per lb. I refer now to the question in relation to drugs and chemicals that was raised by Senator Wright. When the Tariff Board’s report was presented some little time ago, the Government was not prepared to grant the concession that was recommended.

Senator Wright:

– I thought that the reference in the Minister’s second-reading speech to the Tariff Board’s report related to rubber. I may be wrong.

Senator HENTY:

– The honorable senator also referred to chemicals. I shall obtain the desired information in a moment or two.

Senator COOKE:
Western Australia

– While the Minister for Customs and Excise is waiting for that information from his departmental officers, I should like to refer to that section of the legislation which relates to the imposition of protective duties on certain insecticides and chemical weed-killers. Has the Government considered what disability, if any, will be suffered by the primary producers? Australia is a great primary producing country, and insecticides and weed-killers are in great demand. 1 know that the Minister gave an assurance, on behalf of the manufacturers, that there would be no increase in the price of these commodities, but is he satisfied that that assurance is sufficient protection for the primary producers and that they will not suffer any disability as a result of the implementation of the Government’s policy in relation to these protective tariffs? I want the Minister to understand that I think these industries should exist in Australia, but not at the expense of the primary producers and without the Government taking some action to compensate the producers for any increase of price.

Senator Courtice:

– An undertaking has been given.

Senator COOKE:

– The firms have given an undertaking, but what has the Government done about it? I should like to know whether the Government has taken any action to ensure that the most efficient insecticides will be made available to primary producers at the cheapest possible price. If the Government has not taken such action, will the Minister, during the period in which this protective tariff operates, watch the position and have investigations made to ascertain whether Australia can produce cheaper but efficient insecticides which will be able to meet competition without protection? In other words, will the Government assist the primary producers by offsetting any impost that may be placed upon them as a result of the Government’s policy and, at the same time, watch the situation to ensure that an efficient article is produced a a low price?

Senator HENTY:
Minister for Customs and Excise · Tasmania · LP

– In reply to the question asked by Senator Wright, I point out that the Tariff Board recommended that the duty imposed be 2d. pei lb. in normal instances but that the duty-free admission under by-law be remitted when the produce of Papua and New Guinea had been purchased by local importers. The Government, however, could not agree to that recommendation, which would have involved a reduction of up to 3£d. per lb., and adopted an import duty of 4d. per lb. This rate of 4d. per lb., together with the removal of primage duty up to 3id. per lb., gave a net reduction of up to lid. per lb.

I inform Senator Cooke that the Tariff Board inquired into the chemical industries concerned. It dealt with their efficiency and so forth. The Government adopted the board’s report only after it had received assurances from the industries that the price at which they were selling the goods would not be increased as a result of this increase of duty.

Senator COOKE:
Western Australia

– I thank the Minister for the information he has just given, which of course is a facsimile of what he said in his secondreading speech. What I want to know is to what degree the users of these insecticides and weed-killers are protected. What disability will they suffer as a result of the imposition of these duties? I am quite satisfied that, in accordance with the recommendation of the Tariff Board, the Government probably is doing all that is necessary to protect the industries that are manufacturing these chemicals; but I want to know what it is doing to protect the primary producers and the users of these chemicals against having to pay an excessive price. Alternatively, what would be the difference between the world parity for the imported article and the price of the Australian manufactured article?

Senator HENTY:
Minister for Customs and Excise · Tasmania · LP

– My reply to Senator Cooke, if I understand his question correctly, is that the price at which the Australian-manufactured article is sold and the price at which the imported article could be sold are similar. The increase of duty will come out of the marginal profit that was made on the imported article which, I understand, was sold at the same price as the Australian article.

Senator WRIGHT:
Tasmania

.- I am very happy to have that information from the Minister with regard to drugs and chemicals and to be assured that the industry has given an assurance that it will not increase the price. I rise now to make that acknowledgment and, secondly, to try to clarify my understanding of what was said by the Tariff Board in relation to imports of rubber. I am not sure that I really understand what particular kind of rubber is covered by this measure. I confess quite freely that I have not had sufficient time to make myself conversant with all this tariff apparatus.

It seemed to me that the Minister indicated that we were putting into effect a provision in relation to duty on rubber goods which differed in not unimportant respects from the Tariff Board’s recommendation. Because of the way in which the Senate has chosen to deal with the bill, I have not had an opportunity to refer to the board’s report. As 1 understand the situation, the board recommended that the existing duty of 2d. per lb. be abolished except insofar as it was necessary to maintain the duty until rubber imports from Papua and New Guinea were absorbed. I gather from what the Minister has said that the duty is being increased to 4d., but that provision will be made by by-law to reduce it to 2d. and that that reduction will operate after the industry has absorbed the imports from Papua and New Guinea. The position is not very clear to me, especially in view of the reference made by the Minister in a previous speech to a payment of lid. I should be glad if the Minister would take this opportunity to explain why the present proposal differs from the recommendation of the Tariff Board. Will he tell us precisely why, although the Tariff Board recommended a certain rate, this measure proposes a different rate?

Senator HENTY:
Minister for Customs and Excise · Tasmania · LP

– The difference is a matter of 2d. per lb. The Tariff Board recommended 3½d. per lb., but the Government at this stage has decided to adopt1½d. per lb. The Tariff Board recommended a further 2d. per lb., which recommendation has not yet been accepted.

Senator O’BYRNE:
Tasmania

.- The maximum excess payment of 3d. per lb. applies to top-grade smoke sheet rubber. Will it apply also to the lower grades of rubber? Reference has been made to synthetic rubber, rubber latex and synthetic rubber latex. Will this payment apply to lower grades of rubber such as pale crepe, thick brown crepe and Peruvian ball types of rubber produced in New Guinea - in other words, to those types of rubber that do not quite come up to the standard of the highest grade smoke sheet rubber? Will there be a flat rate of 3d., or a proportionately lower rate for lower” grades of rubber?

Senator HENTY:
Minister for Customs and Excise · Tasmania · LP

– It is the Government’s intention that the by-law provisions should apply only after arrangements have been made by Australian manufacturers of rubber goods to purchase the rubber crop from the Territory of Papua and New Guinea at a satisfactory price, which is to be the world price appropriate to the particular grade of rubber purchased when the world price for No. 1 ribbed smoke sheet grade rubber is 30d. or more per lb. Should the world price for No. 1 R.S.S. grade rubber drop below 30d. per lb., the Government will expect Australian manufacturers of rubber goods to pay to Territory growers the world price appropriate to the particular grade of rubber purchased plus id. per lb. for each penny by which the world price for No. 1 R.S.S. grade rubber is less than 30d. per lb., with a maximum excess payment of 3d. per lb. That will occur if the world price for No. 1 R.S.S. grade rubber drops to 18d. or less per lb. Each grade is covered.

Bill agreed to.

Bill reported without requests; report adopted.

Bill read a third time.

page 1258

CUSTOMS TARIFF (NEW ZEALAND PREFERENCE) BILL 1957

Bill received from the House of Representatives.

Standing Orders suspended.

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

Second Reading

Senator HENTY:
Minister for Customs and Excise · Tasmania · LP

– I move -

That the bill be now read a second time.

The purpose of the amendment in this bill is to ensure that the rate of 22½ per cent. ad valorem applicable to certain woollen piece goods the produce or manufacture of New Zealand does not apply to furnishings and upholstery fabrics mentioned in Customs Tariff (No. 2) Bill 1957. The New Zealand Government has agreed to this amendment which is necessary if the Commonwealth is to maintain its international commitments as laid down in the General Agreement on Tariffs and Trade. I commend the bill to honorable senators.

Senator McKENNA:
Leader of the Opposition · Tasmania

– This measure became operative on 23rd May as the result of proposals filed in another place. As the Minister for Customs and Excise (Senator Henty) has indicated, the measure relates to proposals contained in Customs Tariff (No. 2) Bill 1957. From my understanding of the matter - the Minister will correct me if I am wrong - the schedule has been amended mainly to abolish the item providing for concessional admission of wool piece goods of a type not manufactured in Australia. I understand further that there are no imports of that type.

Senator Henty:

– Quite so.

Senator McKENNA:

– The Opposition offers no objection to the passage of the measure.

Question resolved in the affirmative.

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

Sitting suspended from 12.45 to 2.15 p.m.

page 1259

CUSTOMS TARIFF (NEW ZEALAND PREFERENCE) BILL (No. 2) 1957

Bill received from the House of Representatives.

Standing Orders suspended.

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

Second Reading

Senator HENTY:
Minister for Customs and Excise · Tasmania · LP

– I move -

That the bill be now read a second time.

The provisions in this bill are complementary to those in Customs Tariff Bill (No. 4) 1957 relating to insecticides.

The item in the Customs Tariff (New Zealand Preference) 1933-1954 providing for the free admission of agricultural insecticides, the produce or manufacture of New Zealand, has been redrafted to ensure that those insecticidal chemicals for which tariff protection has been provided in Customs Tariff Bill (No. 4) 1957 will not be admitted into Australia free of duty. I commend the bill to honorable senators.

Senator McKENNA:
Leader of the Opposition · Tasmania

– The explanation of the Minister is completely clear and the Opposition has no objection to the passage of the measure.

Question resolved in the affirmative.

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

page 1259

CUSTOMS TARIFF (PAPUA AND NEW GUINEA PREFERENCE) BILL 1957

Bill received from the House of Representatives.

Standing Orders suspended.

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

Second Reading

Senator HENTY:
Minister for Customs and Excise · Tasmania · LP

– I move -

That the bill be now read a second time.

The bill now before the Senate is necessary to maintain duties on Territory rubber, and rubber latex, at the rate of 2d. per lb. which existed prior to 18th October, 1957. I should explain that prior to 18th October, Territory rubber and rubber latex were dutiable at the rates applying under the British Preferential Tariff. With the increase in the British Preferential rates from 2d. per lb. to 4d. per lb. as now provided for in Customs Tariff Bill (No. 4) 1957, specific provision for Territory rubber and rubber latex needs to be written into the Customs Tariff (Papua and New Guinea Preference) 1936-1956. 1 commend the bill to the Senate.

Senator McKENNA:
Leader of the Opposition · Tasmania

– The Opposition supports the measure.

Question resolved in the affirmative.

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

page 1259

EXCISE TARIFF BILL 1957

Bill received from the House of Representatives.

Standing Orders suspended.

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

Second Reading

Senator HENTY:
Minister for Customs and Excise · Tasmania · LP

– I move -

That the bill be now read a second time.

This bill refers to duties imposed, as part of the 1957-58 Budget, on locally produced aviation turbine kerosene and automotive diesel fuel. The bill imposes, as from 4th September, 1957, revenue rates of duty of id. a gallon on aviation turbine kerosene and ls. a gallon on automotive diesel fuel. This bill is complementary to Customs Tariff Bill (No. 3) 1957, the provisions of which 1 have already explained to honorable senators. I commend the bill.

Debate (on motion by Senator Kennelly) adjourned.

page 1260

CUSTOMS TARIFF BILL 1957

Second Reading

Debate resumed from 13th November <vide page 1200), on motion by Senator Henty-

That the bill be now read a second time.

Senator McKENNA:
Leader of the Opposition · Tasmania

– The measure now before the Senate has been operative since 23rd May, 1957. As the Minister for Customs and Excise (Senator Henty) has pointed out, the schedule of alterations to tariff duties relates to approximately onethird of all the items subject to Australian customs tariff. I understand that the value of imports of those particular items amounted, in the year 1955-56 to about £160,000,000, or 20 per cent, of the total for the year. All of the items, with the exception of admissions under by-law, are to be completely free of duty if imported from the United Kingdom. As I have indicated, this provision has been operative since 23rd May. The items comprise, very largely, capital goods, raw materials, and producer goods. Most bear, at present, an intermediate duty of 12i per cent. That duty is, in the main, to be reduced by from 5 per cent, to 7i per cent. Corresponding alterations are made, in most cases, in the general tariff rates, the existing margins between the intermediate and the general tariff rates being preserved throughout. Insofar as the lower duties apply to imports from countries other than the United Kingdom, they will certainly result in lower importation costs for manufacturers and others requiring capital goods. From that viewpoint, that is all to the good. How far it will affect imports will depend upon how far away from the United Kingdom our importers can get in seeking their necessary supplies. I hope that if there is extensive importation from sources other than the United Kingdom at cheaper rates the benefit of those cheaper rates will be passed on to the consumers in this country. If raw materials can be obtained, that fact, too, should help to lower manufacturers’ costs and should certainly result in a passing on of benefit to the consumers.

I think the Minister has not given any information as to what loss of duty is likely to be implicit in the operation of these proposals. I, personally, would be interested if he is in a position to give some estimate of the loss of duty likely to be involved, because that will enable the Senate to get a view of the scope of importations from sources apart from the United Kingdom. With those comments, and with the further one that these proposals flow very largely from the United KingdomAustralia Trade Agreement that was considered by this chamber earlier this year, under which it was agreed that duties would be lowered and under which Australia was put in a position to lower duties and reduce margins in favour of the United Kingdom, I indicate that I offer no objection to the bill.

Senator WRIGHT:
Tasmania

.- 1 just wish to make two brief comments on this bill. The first is that the Opposition, I think with quite justifiable concern, when debating the Japanese Trade Agreement, asked us to look to our trade relations with the- United Kingdom and see that they were not being unduly impaired. I just wish to state my understanding of this measure to be an expression, in legislative form, of an agreement which the Minister for Trade (Mr. McEwen), with his usual practical forethought, had arranged before announcing the Japanese Trade Agreement. I believe that the reduction of these duties in favour of United Kingdom goods from, I think, 12i per cent, to 7£ per cent, on the average - in some cases the reduction is more while in other cases it is only from 10 per cent, to 7i per cent. - will make a substantial, contribution to enabling free access of United Kingdom goods to the Australian market.

But ! want to say to the Minister for Customs and Excise (Senator Henty) that it is obvious that there is real concern in the United Kingdom manufacturing markets for the continuance of our trade and the impact that is going, to be made upon our markets by Japanese goods. 1 just wish to state, because it is of the utmost importance, that whilst expanding trade with Japan, we should maintain the- strongest trade relations with Great Britain, develop the British market for our goods, and grant preferential treatment to her. It has, of course, an indirect aspect in regard- to the very troublous issue now facing the British Government in connexion with participation in the European trade group.

The other matter to which I wish to refer is the reduction of revenue that is anticipated as a result of this measure. If the Minister has that information at hand now, or if he can supply it at some other time, I shall be pleased to have it.

The main point I have in mind to mention on the passage of this bill is the matter to which I adverted in a question several months ago. I brought to the notice of the Senate the fact that in 1929 or 1930 the government of that day was still mindful of the development of Australian tariff and submitted the whole of its economic trends to examination by a most experienced and thoughtful panel of economists, of whom Professor Douglas Copland and the late Professor Giblin were members. I experienced great delay - at this stage I make no criticism of that - in getting an answer to that question, and when J got the answer it certainly yielded no information.

Senator Cameron:

– That is not unusual.

Senator WRIGHT:

– I shall reserve comment on that interjection for the moment, although I am not disposed to disagree with it emphatically. But I do think the subject to which I am referring deserves more than an interjection. This is a problem with which this Parliament should concern itself, because -I remind the Senate that the tariff developed itself in the 1930’s. We then had, the war,,- and in- the, post-war period Parliament has taken little or no interest in the tariffs. Such, has been its confidence in the Tariff Board that it has almost implicitly accepted the management of the tariff by the Tariff Board as a post-war agency.

Senator Courtice:

– The Government had a committee running on it for years.

Senator WRIGHT:

– I shall be only too receptive of any information that can beadded to my meagre comments. What I say is. that. I think it is time now - perhaps it is even a. little late - when we should have a thoughtful body of experience and competence parallel to the committee of 1929 or 1930 to subject our tariff policy to a. complete, scrutiny in relation to the devastating trends, that have, in a large, measure, destroyed our economy in the post-war period. With that as a basis, Parliament might then renew its interest in the tariff and take some stock as to where it is going.

I conclude by expressing the hope that there will .be an early announcement of. the acceptance of the idea that we need a. thoughtful, penetrating, examination of our tariff policy- placed before Parliament at an early date.

Senator BYRNE:
QUEENSLAND · ALP; QLP from 1957; DLP from 1968

.- The one or two observations I wish to make relate, not- specifically to this measure, but perhaps more to the implications of it. In Australia for a number of years now one of the most hated occurrences has been the continual increase of the cost level which is not only making it difficult for the people of our own community but also severely prejudicing our economic and trading position overseas. In an attempt to halt the inflationary spiral and to handle the cost structure, an early sacrifice was made by the workers of this community. The basic wage was virtually pegged and the periodic costofliving increases were no longer carried into adjustments to the fixed wage. I think it should be placed on record that whatever contribution those workers made it did have an effect. It was, indeed, a very substantial contribution by one section of the- community to the solution of a national problem.

Through a series of budgets, the same phrase has fallen on many occasions from the mouth of the Treasurer (Sir Arthur Fadden) or the Minister representing . the Treasurer in this chamber (Senator Spooner). That phrase has been that, “A- great deal of the responsibility has always been reposed by this Government on the good sense and contribution of private enterprise towards handling this cost problem “. We have repeatedly heard that phrase, which occurs in Budget speech after Budget speech. 1 do not know to what extent private enterprise has answered the call.

Two points emerge from this bill and the taxation bill providing for depreciation allowances in accordance with the recommendations of the select committee on depreciation. Obviously, an inducement is being offered to private industry, to primary producers and manufacturers, to re-equip their concerns and their factories with capital equipment which will make for more efficient production and, therefore, for production at a lower cost. That is tremendously important. I think it has always been a matter for regret in this community that, in spite of the onus that has been consistently thrown on private enterprise and the inducements given, private enterprise has not responded by reequipping its concerns to allow our production efficiency to reach the level demanded by world trading conditions to-day. By implication, this bill is an attempt by the Government again to induce private enterprise to measure up to its responsibility. It will give private industry a chance to re-equip, partially with imported plant at a lower price.

Senator McKenna said that he hoped the benefit of this policy would be carried to the point of consumption. That, of course, is very desirable. I want to see it carried at least to the point of production. I want to see production costs reduced as a result of efficient re-equipment, particularly in secondary industries. The concessions proposed by this bill, coupled with the provisions in relation to depreciation allowances, provide a double inducement to private industry to re-equip. It will be able to re-equip with imported materials at a lower cost, because of the concessions in duty to be applied, and it will have the benefit, in addition, of the higher depreciation allowances proposed by another measure.

I rise only to put on record my hope that private industry will measure up to its responsibilities voluntarily, just’ as the workers of this country compulsorily measured up to their responsibilities in such a high degree and over such a large field. So far as this bill, the other bill to which I referred, and any other similar measures are components of a formula to reduce costs, they are tremendously important. For those reasons, I give this bill my blessing. I trust that its provisions will be availed of by Australian manufacturers, fully and in the spirit in which they are offered, and that we shall see some serious attempt made by those manufacturers to discharge their responsibility. In a peculiar way, the responsibility is theirs only, and only they can discharge it. They are now to be given every selfish inducement, by tax rebates and depreciation allowances, which could possibly be afforded them. I shall look with continued interest to see the extent to which they take advantage of these new inducements. I sincerely trust that they will at least be as nationally minded in their outlook as were the workers of the community when they; were asked to make their sacrifice.

Senator CAMERON:
Victoria · LP

.- Senator Wright’s reference to the economic position of this country in the 1930’s should be kept in mind, particularly as he recommends the appointment of a committee of experts to go into the matter in order toprepare for what is likely to happen in thefuture. In the 1930’s Professor Copland, the late Professor Giblin and two or threeothers went into the matter and, speaking-, from memory, recommended the adoption, of what was then known as the Financial” Emergency Act or the Premiers plan, which was accepted by the State governments. The effect of the implementation of their recommendation was to make the position a great deal worse. Right up until the outbreak of the war unemployment increased, mainly as a result of the flooding of this country in the 1930’s with cheap goods from Japan and other countries. Judging from the remarks that Professor Copland has made from time to time, there has been no change in his policy. In my opinion, he would be prepared to recommend now what he recommended then.

Personally, I would have very little confidence in such a committee, particularly because, as I mentioned before, the approach is purely from a money-centric conception: of the economy, which, translated into simpler terms, means production costs reduced to the minimum and profits raised to the maximum. That is the approach of almost all of the orthodox or official economists to-day. I have in mind the last issue of the publication of the Institute of Public Affairs, wherein they speak of high costs. As I have said before, to say that costs are high is to speak only a half-truth. Costs assessed in terms of gold, if you like, were never lower, but costs are made to appear high because of the way in which the currency is inflated. 1 directed attention in the Senate on 30th October to a statement made by the Economic Secretary of the Treasury in reply to a question asked in the House of Commons. He supplied a table showing the estimated changes in the purchasing power of the £1 sterling between 1914 and 1956. Applying an index figure of 100 to the value in 1914, the value in 1956 was represented by an index figure of only 22.

That is the approach that the economists make. They have no idea at all of re organizing the economy. Their conception is to make the present system work more effectively. The more effectively it works according to their view, the worse the position becomes, as is shown by developments to-day. Senator Wright recommends the appointment of a committee of experts. In view of the schools from which they have graduated, he has much more confidence in them than I have. From my experience, in this country, dating back as far as 1893, whenever a serious position has developed a similar approach has been made by these so-called ultra-intellects. The position has always gone from bad to worse.

Senator Byrne referred to the responsibilities of private enterprise. Private enterprise is in the same category. The principle on which it operates, and must operate under existing conditions, is minimum cost and maximum profit, otherwise it would not be able to meet its inflated overhead. When Ansett Airways Proprietary Limited and Australian National Airways Proprietary Limited were merged, it was suggested that costs would be reduced, and costs were reduced. Hundreds of men were dismissed, but prices are being increased. That is the position with which we are faced. Prices are increased so that bigger dividends can be paid, not to stabilize the economy. That is the approach of private enterprise, not only in airline operations, but also in production generally.

I cannot conceive the Government attempting to do anything better than it did in the 1930’s. The position was developing all the time, but no heed was taken of it. The position would have been desperate had it not been for the outbreak of war, when all the leeway was taken up, just as it was taken up in the American economy on the outbreak of the Korean war. The Government’s action in entering into an agreement with Japan indicates very clearly that established precedent will not be departed from in any way. Under existing conditions, the position will go from bad to worse.

Personally, I have no confidence in the economists referred to by Senator Wright. Their approach, in technical terms, is purely arithmetical, but the approach that should be made is a geometrical approach, which is quite the opposite. I have yet to meet a professor of economics who is prepared to make a geometrical approach, as distinct from a purely arithmetical approach. In the arithmetical approach, it is accepted that the part is greater than the whole. The axiom in geometry is that the whole is greater than the part. That is quite a different approach altogether. The Government makes the arithmetical approach. It believes that those with capital are more important than anybody else. Therefore, since this Government has been in office, those with capital have benefited in every way. Governmentally controlled industries, such as Amalgamated Wireless (Australasia) Limited, have been taken over by private enterprise. The Government will continue that policy. To the extent that it does, the position will go from bad to worse. Very soon, we will find that the Government will fall apart, just as anti-Labour governments did in 1941 and in subsequent years. Then it will be replaced by a Labour government.

The PRESIDENT (Senator the Hon. Sir Alister McMullin). - The honorable senator is coming back to the bill later?

Senator CAMERON:

– I thought I had dealt with the bill sooner, and I was elaborating. Senator Wright directed attention to a position, that developed. If you recall, Sir, he said that a similar position had developed in the 1930’s. I am pointing out that he had- made a wrong assumption. I said that what is being done to-day in connexion with the Japanese Trade Agreement is quite consistent with the Government’s policy, and the situation we experienced in the past will develop in the future, because the policy has not been changed.

Senator HENTY:
Minister for Customs and Excise · Tasmania · LP

– in reply - Senator McKenna and Senator Wright asked what revenue would be lost through the change in the British preferential tariff. The loss will be £1,900,000 a year. It is hoped that, with keener prices, imports will be greater, and that, in that way, the loss of revenue will be made up.

The comments of Senator McKenna on this bill show that he has a keen grasp of the effects of the measure, as he has of most legislation. I was most interested to hear the comments of Senator Wright, particularly his reference to the report of Professor Brigden. That report is well worth studying. One cannot help being struck by the fact that the analysis of the economy and the effect of tariffs which was made by the body of which Professor Brigden was chairman, applies to-day in many ways as much as it applied at that stage. The only difference to-day is that our economy has changed from a rural economy, as it was then, to a manufacturing economy and, as Senator Byrne said, will gradually lead to an economy based on the export of secondary products. The inquiry was an excellent one and its findings were of great assistance to the Commonwealth. 1 have answered the question asked about the loss of revenue, and, without attempting to answer Senator Cameron, I shall make no further comment.

Question resolved in the affirmative.

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

page 1264

CUSTOMS TARIFF BILL (No. 2) 1957

Second Reading

Debate resumed from 13th November (vide page 1203), on motion by Senator Henty -

That the bill be now read a second time.

Senator McKENNA:
Leader of :’the Opposition · Tasmania

– The measure now before” the chamber covers three tariff proposals - Nos. 2, 3 and 4 - which were submitted to- the House of Representatives on 22nd May last. They have been operative since 23rd May. Each makes changes in tariff rates. Mainly, they are increases affording further protection to Australian - industries. In his second-reading speech, the Minister for Customs and Excise (Senator Henty) indicated the kind of industries that are affected. There is no need for me to recapitulate them. The only further comment I can make usefully at this stage is that each of the changes has been effected at the instance of the Tariff Board, and that -the changes are in accordance with the board’s recommendation. The Opposition has no objection to the passage of the measure.

Question resolved in the affirmative.

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

page 1264

GIFT DUTY ASSESSMENT BILL 1957

Second Reading

Debate resumed from 12th November (vide page 1146), on motion by Senator Spooner -

That the bill be now read a second time.

Senator McKENNA:
Leader of the Opposition · Tasmania

– The Opposition has no objection to this measure. It extends the provisions of the original act to children of a marriage, adopted children, step-children and ex-nuptial children.

Senator WRIGHT:
Tasmania

.- This bill, which is to amend the provisions for the imposition of a gift duty, affords the Senate an opportunity to consider this tax and its principles. In broad terms, this measure is designed simply to extend the meaning of a child, as contained in the original act, from that of a natural legitimate child to cover a step-child, an adopted child, and an ex-nuptial child. It will so exempt from gift duty gifts not exceeding £100 a year by way of premiums on life policies in favour of those children. It is obvious, therefore, that the bill has an extremely midget ambit, but consideration of the tax itself is long overdue.

The original tax, as I shall remind my colleagues, was introduced in the early years ©f World War II. The Government, then under the leadership of Mr. Fadden, had given indications that, collaterally with the intense strengthening of fiscal measures to fight the world war in that year of 1941, there should be some gift duty. I hope I am not doing the Treasurer (Sir Arthur Fadden) wrong in relating this matter to him.

When the Government under his administration went out of office and the Curtin Labour Government was elected, Mr. Lazzarini announced a proposal for a gift duty. It is a very disheartening reminder of the downward trend that Parliament has taken since 1941 to recall that, in the grip of war that year, in relation to a vital fiscal proposal by a Labour government, the administration was prepared to commit the whole measure to the consideration of an all-party committee. It did so, and the draft bill, after being scrutinized by an all-party committee, was presented to the legislature with many modifications.

– Then children are born. They are dinkum Australians, and they cost the country less than do immigrants. Gift duty is a family tax. In 99.9 cases out of every 100, gifts occur as between members of a family and, just because there has not been an allocation of assets as between individual members of a family on a strict accountancy and legal basis, when it comes to a question of recognizing the justice of the situation the disposition of property is regarded as a gift, as it is in law.

There is another circumstance which requires of any thoughtful government a reconsideration of this tax. In the post-war era, the States have been reduced to a position of financial inferiority. Yesterday Senator McKenna referred to the extent to which they have to scrape the bottom of the remaining financial barrels that they have for their own purposes, and to the fact that they are dependent upon loans. He referred, too, to rising interest bills, a subject to which I shall refer when we are considering the appropriate legislation. I mention the matter now to point out that since 1953, when State taxation in this field was imposed, possibly with a little more moderation in Tasmania than in New South Wales, instead of the old nominal duty on a gift of property a substantial ad valorem duty has been imposed. So, as a matter of dire necessity, new ad valorem taxes are imposed upon gifts of property under the heading of stamp duty. That form of tax is coming into competition with the federal gift duty.

Mr. President, if you had had experience of the irritation to which donors and donees are subjected, you would know just how they feel about this matter. If an officer somewhere or other sees a record of a transfer of property from Smith to Smith, the prevailing practice is for each of the Smiths to receive a requisition asking them to reveal all their property transactions over a period of years on the presumption that as between two Smiths the disposition is likely to be at an undervalue and is a gift, or a transfer for no consideration at all and therefore a gift. I have had some experience of these matters, and I know what genuine resentment there is against this kind of tax on the part of people who have earned a little property. Believe me, the spirit of our race is such as to lead people to rebel against the idea of a capital tax. All that the Commonwealth garners from this tax is £1,900,000 a year.

When this Government assumed office, the original exemption of £500 had been lifted to either £1,000 or £1,500 - I think it was £1,000. This Government raised it to £2,000 away back in 1950. It is unreal to pretend that, if that margin of exemption was appropriate to those years, it is a proper margin to be maintained to-day.

So I raise my voice once more against the continuation of this gift duty. I ask, for all the reasons that I have given, that an early abandonment of this field of taxation in the federal sphere be considered.

Question resolved in the affirmative.

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

page 1266

STATES GRANTS (SPECIAL FINANCIAL ASSISTANCE) BILL 1957

Second Reading

Debate resumed from 13 th November (vide page 1231), on motion by Senator Spooner -

That the bill be now read a second time.

Senator PEARSON:
South Australia

– I had scarcely commenced my speech yesterday when I asked for leave to continue my remarks at a later stage in order to allow other business to be taken. However, I indicated my support for the bill. I support the measure because it provides for assistance to the States in addition to the amount that is to be provided under the formula for tax reimbursements.

The Minister for National Development (Senator Spooner) explained, in his secondreading speech, that the exact amount which will be provided this year under the formula is not yet known. That amount will be determined, probably very soon, by the Commonwealth Statistician, who has the responsibility to determine from year to year the figures that , govern the formula payments. It is expected by the Government, apparently, that under the formula £166,200,000 will be due to be paid to the States. This bill provides for the payment of a further £23,800,000, bringing the total amount to £190,000,000. That is the amount that will be placed in the hands of the States by way of taxation reimbursement in this financial year.

This is a process which has been going on for at least eight years. During that time, various bills of this nature have come before the Senate, providing for sums to bc paid to the States in addition to the amounts payable under the formula. Because of the frequency and regularity of this type of legislation providing for additional payments, one begins to ask what the real value of the formula is. 1 make bold to say that the formula has never really met the situation. It might not be entirely right to say that it has never worked, because it does provide a basis for giving something extra, but it has never really been adequate to meet the situation. I am casting no reflection on the people whose responsibility it was to devise the formula; I am simply saying that the formula has never been adequate to establish the amount which the States should receive in any given year.

– I am quite sure that no such change will occur if ever Labour takes office. I am reminded that not so very long ago Victoria took the matter to the High Court. I regret that it was not more successful. It established certain principles, but they were not of great value if the States were still to be obliged to seek a tax reimbursement grant.

I am afraid that I have allowed honorable senators opposite to cause me to deviate from my line of argument. I hope that a real attempt will be made to revise the formula which is basic to the particular legislation with which we are dealing at the moment. I have suggested that the Commonwealth Grants Commission might be an appropriate body, in the first place at least, to do that.

I wish to make another plea - one that goes far beyond this debate. It is time that an examination of the whole financial relationship of the Commonwealth and the States was made. When I say that, I have more than just this bill in mind. CommonwealthState financial relationships have not been overhauled for years. The last really momentous event in this field was the introduction of uniform taxation.

I was interested recently to hear a question which was addressed to the AttorneyGe’neral (Senator O’sullivan) on a matter which had a great bearing upon this whole question of financial relationships. In the course of his reply, the Attorney-General suggested that all matters impinging on the Constitution - I think that I am quoting him accurately - were being dealt with by the

Constitution Review Committee. That was a terrifically wide statement. I have no reason to doubt the sincerity of the Attorney-General, but if the committee is really examining all matters impinging on the Constitution we shall not hear from if for another five years. However, I would hope that the matter would receive some attention from the committee. It is certainly high time that a revision of CommonwealthState financial relationships was made, and the Constitution Review Committee would be a proper body to indicate what should be done to conduct such an inquiry effectively in the next year or two. I make that plea in all sincerity, believing it to be in the interests, not only of the Commonwealth, but also the States, to whom Senator McKenna referred last night as partners with us in this great federation of Australia. If he meant that, I heartily endorse what he said.

Meanwhile, it is interesting to note the trend in the Commonwealth’s financial treatment of the States. A perusal of the White Paper which accompanied the Budget reveals certain interesting trends. In 1948-49 the gross national product amounted to £2,278,000,000. By 1956-57 the gross national product had increased to £5,643,000,000. Honorable senators will notice that in that eight-year period the gross national income had increased by two and a half times, or approximately 250 per cent. During the same period, wages and salaries increased from £1,076,000,000 to £2,807,000,000, approximately two and a half times on the 1948-49 figure. I should point out here that when I refer to wages and salaries I include pay and allowances to members of the armed forces, and so on. Honorable senators will find all these particulars in table 4 on page 19 of the Statement of National Income and Expenditure.

Public works expenditure - and this is where I want particularly to make a comparison - increased from £142,000,000 in 1948-49 to £455,000,000 in 1956-57, as shown in table 10 on page 23 of the Statement of National Income and Expenditure. That is an increase of approximately three times, or 300 per cent, in the eight-year period.

Senator Mattner:

– Tt is an increase of 200 per cent.

Senator PEARSON:

– Three times as much! The amount expended in 1956-57 was three times more than that spent in 1948-49.

Senator Mattner:

– That is an increase of 200 per cent.

Senator PEARSON:

– The honorable senator can have it whichever way he likes. Perhaps he went to school after 1 did.

Let us analyse public works expenditure.

On education, which is, quite rightly, a function mainly of the States, the expenditure in 1948-49 was £26,500,000. By 1956-57, that figure had grown to £93,000,000, an increase of approximately - three and a half times. On school buildings alone - I should imagine this item covers only the physical materials such as bricks and mortar that go to make up school buildings - the expenditure in 1948-49 was £3,000,000. By 1956-57, that figure had increased by over six times, to £20,000,000. The expenditure on roads in 1948-49 was £28,000,000, and by 1956-57 it had grown by three times to £S2,000,000. 1 venture to state that this is an increase of 300 per cent.

The expenditure on hospitals in 1948-49 was £3,000,000, while by 1956-57 it had increased by nearly six times to £17,000,000. On immigration, the expenditure in 1948-49 was £4,000,000, and by 1956-57 it had increased by nearly five times to £19,000,000. The expenditure on railways in 1948-49 was £13,000,000. That figure increased to £38,000,000 by 1956-57.

I am making the point that in proportion to our gross national income the amount spent mainly by the States under these headings has increased by anything from three times to six times. I admit immediately, of course, that some of this money was not tax reimbursement money, that it was loan money, but in these days it is sometimes hard to distinguish what is tax reimbursement money from what is loan money. In any case, the expenditure under these headings by the States represents the spending of money from the cash resources of the Commonwealth.

It would seem, from a perusal of those figures, that it cannot be suggested that the States are being very hardly done by. After all, it has to be remembered that it is the percentage of the gross national income which governs the ability to spend money under any of the headings I have mentioned, and when we find that in some instances the expenditure has increased by as much as six times, I feel that the comparison is worth making.

After having made that comparison, I” do not attempt to deny that the money is really required by the States, nor do i suggest that the Commonwealth has been overgenerous to them. As one who has a fairly full knowledge of the finances of South Australia, 1 know that this is no. so. I know that the expenditure of this money there was urgently required, lt was urgently needed because of our population increase and because of the rapid development throughout the country. 1 do not suggest there is any irresponsibility on the part of the States in the actual expenditure of “that money. On the contrary, it is obvious that they must exercise some degree of responsibility in spreading the money made available to them over ail requirements in the various States.

I shall now comment on some remarks made by the Leader of the Opposition (Senator McKenna) in connexion with a matter which, although foreign to the bill, might have some relation to it. 1 refer to the procedure under which, the Commonwealth now makes available to the States large sums of money which it raises by way of revenue to boost loan raisings. It is very easy, of course, to make out a case to show that the Commonwealth is not dealing justly with the Slates in this matter. On the face of it, it does look as if the Commonwealth is avoiding interest charges itself by providing for the whole of its loan requirements from revenue and by making loans to the States from any balance of revenue that it has. On the face of it, it does look as though the Commonwealth is getting the better end of the stick. I am not prepared to say whether the present system is entirely right or wrong, but I do suggest that Senator McKenna did not tell the whole story last night. The remaining part of the story which should be told, is that under the Financial Agreement entered into in 1927-28, the Commonwealth assumed certain responsibilities for the States’ debts at that time, lt also assumed certain responsibilities and entered into certain commitments in connexion wim future loans which may be raised by the States.

Only recently, I read with interest the speech made by Mr. S. M. Bruce, as he was then, when introducing the financial agreement legislation to the Parliament in 1927 and 1928. That speech is well worth reading. In it, Mr. Bruce pointed to certain trends obtaining at that time and what he said then could be repeated with advantage now. I do not propose to read his speech; I simply remind the Senate of what the Commonwealth undertook to do under that agreement which still binds the Commonwealth in connexion with certain State responsibilities. The 58-year period has not yet expired, and if the Commonwealth is still responsible for some of the States’ liabilities, it cannot be fairly said that money which is raised by way of revenue should be handed over to the States without making some charge. I do not believe it is proper to suggest that this should be done; indeed, I think it would be unfair to expect the Commonwealth to do so.

I go so far as to say that the States are no worse off by having to pay, say 4 per cent., for money which is collected by the Commonwealth as revenue and lent to them than they would be if the money were made available from ordinary loan sources. After all, what difference does it make to the States’ liabilities whether they pay interest at 4 per cent., or whatever the rate may be, to the Commonwealth or to he people who have invested in government bonds? 1 cannot see that it makes any difference to the burden of the States once the money is put into their hands. Although this is perhaps only a minor point, I imagine that it is not very amusing for the Federal Treasurer to be collecting a lot of money which he hands back to the States, realizing that, but for his obligation to do that, he could reduce taxation to a corresponding extent and be a very popular fellow in this country. There is at least some odium attaching to a government which has undertaken the responsibility of underwriting State loans to the extent accepted by the present Government. The Government, having accepted that obligation to provide money for the States, is asked to accept the proposition that the money should be provided without any interest being payable by the States. There are two sides to the question. 1 cannot accept the proposition as a whole, but it might be acceptable in part.

I have taken far too long, as every honorable senator will agree, but I hope the two requests that I have made will receive some consideration by the Government. Firstly, there should be a reexamination of the formula which governs the grants we are now considering, and secondly, there should be a really thorough and proper examination of the whole financial relationship between the Commonwealth and the States.

Senator COOKE:
Western Australia

– 1 am very disappointed that the Minister for National Development (Senator Spooner), who introduced this measure, which, in my opinion, is one of the most important measures to be discussed in the Senate, is not present in the chamber now. Of course, he is ably represented by the Minister for Shipping and Transport (Senator Paltridge), a Western Australian. Nevertheless, Senator Spooner’s interest in the matter is not sufficient to keep him here.

The importance of the Senate, constitutionally, is in relation to State matters, and we are charged with the responsibility of looking after State interests, but the secondreading speech of the Minister on this measure, which to the States is most important, was absolutely bereft of detail. The relations between the Commonwealth and the States were not dealt with by the Minister. There was no information on State problems or on the steps taken by the Commonwealth Government to meet them. There was merely a cold, factual, statement of figures. Probably the Minister said less in his speech than did the Treasurer (Sir Arthur Fadden) in his speech in the other House. I think that was an absolute disgrace. The Senate was entitled to expect much more information from the Government on this bill, which we must inevitably pass. The procedure is open to severe criticism.

The Government, with the Senate concurring, has gone on with the process of making grants under the taxation reimbursement formula, with special grants being made to the claimant States, as determined by ti:t Commonwealth Grants Commission. Those special grants are determined by the budgetary position of the claimant States and by certain standards which are adopted. It is a mechanical way of fixing monetary grants and is never satisfactory. The Commonwealth says that the States come to Canberra with exorbitant demands. The State Premiers, after having made their requests, invariably go back to their home States and say that the Commonwealth Government said, “ This is the amount of money that you will have to administer, and that is the end of it”. I say that this system stultifies national development and advancement.

On this occasion I raise again the matter of responsibility for civil defence, which I referred to in the debate on the Estimates and Budget papers and on other occasions. Nobody seems to be quite certain where the responsibility lies in this matter. The Minister said, virtually, that it was a State responsibility. I asked the AttorneyGeneral (Senator O’sullivan) to get a definite ruling in relation to the matter. In this atomic age, civil defence is most important. The battlefront will probably be the doorsteps of our own citizens. If civil defence is properly dealt with, the States will be faced with extraordinary expenditure. There is a great challenge posed by the need for development, for roads suitable for fast transport and for the rapid evacuation of cities, and for the extension of water supplies. All these matters have to be examined. Has the Commonwealth considered them? Has Senator Paltridge, who represents Western Australia in the Senate - the guardian of State rights under the Constitution - given any thought at all to the matter?

The formula for tax reimbursements is working very satisfactorily from the point of view of the Commonwealth Government, but from the point of view of the nation it is extremely bad, antiquated and restrictive. The convenient catchcry of the Government is, “ Abandon uniform taxation. Return taxing powers to the States.” It is quite easy to say that to the less populous States. Their answer invariably is that, although uniform taxation is bad, they do not wish to revert to the former system. There is some vague idea of an overall scheme for the development of Australia, under which the lesser States would get more money from the Commonwealth, but it is not implemented. Commonwealth revenue for 1957-58 is estimated to be £1,321,700,000, but the amount to be returned to the States is £266,739,000, which is very small by comparison. The expenditure by departments of the Commonwealth may be greater than that sum.

Whilst there is a. formula for determining the amounts made available to the States in taxation reimbursement, and grants are made to certain States in accordance with certain disabilities, those grants being determined by the Commonwealth Grants Commission, the vital question in relation to development is the apportionment amongst the States of the terrific amount of £1,000,000,000 which the Commonwealth expends in excess of the amount provided for the States. Public and defence works in Western Australia are very few. Expenditure on them is very small by comparison. If the States got a reasonable proportion of that huge amount, there would be no argument in the Senate. The States could develop their resources and provide full employment, but that does not happen.

The States struggle on in an effort, not to fulfil their ambitions, but to do as much as the finances supplied by the Commonwealth Government permit. If any State Premier were asked whether his budget provided for the realization of his government’s ambitions, he would almost invariably say, “ No, I have cast my budget within the framework of the finances which the Commonwealth has provided for the State “. He cuts his suit in accordance with the cloth, the cloth being supplied by the Commonwealth Government. Nobody seems to be interested in changing the system. I have asked for information on the apportionment of expenditure on public works and other Commonwealth activities within the States. My questions have been evaded repeatedly. The information has not been given, though we are entitled to it. The Minister representing the Treasurer has said that he will supply information about the expenditure of the various sub-treasuries, but he knows- that that information would be quite useless and that it would be impossible to analyze it. The Government is collecting more in taxation than has ever been collected in the history of this country, and the information I have sought is the only means that we have of satisfying, ourselves that the money is being;apportioned.between the States to the advantage of Australia generally and in fairness to the States.

The 24th report ‘ of the Commonwealth Grants Commission tells a very said story regarding the States. The Commonwealth has entered on the fields of taxation available to the States, not only with income tax but, as Senator Wright pointed out some time ago, also with death duties and indirect taxation. The Commonwealth has used every means of taxation available to it and has left the States in the situation where they could not reasonably collect any further taxes from the seriously denuded fields. The system of making income tax reimbursements to the States, together with grants from time to time, is not good enough if we are to develop as a nation.

I shall read some of the comments- made in the report of the Commonwealth Grants Commission. If the Minister were interested, he would have intimated that the Government has taken notice of the commission’s remarks, but apparently he is not interested. The following statement appears on page 32 of the report -

Last year the Commonwealth Treasury expressed doubts about the validity of the Commission’s calculations of the relative severity of State nonincome taxes, and suggested that these calculations implied that the taxable capacities of the claimant States were considerably below what might have been expected from an examination of certain economic indicators. This matter was discussed in paragraphs S0-S3 of the 23rd Report.

It was adequately discussed and properly presented, but no notice has been taken of the commission’s comments by the Senate, though the Senate is supposed to be the guardian of State’s rights. If any honorable senator tries to pursue this matter, the Minister, who represents’ the government and not a State, and who wants to do a party political job and not a Senate national job, will evade any question that is asked and will take considerable trouble to stop the Senate doing the job that it is required to do under- the Constitution. The report continues -

At the Canberra hearings this year, the Commonwealth Treasury again pressed this argument, and said that the results of the Commission’s calculations in the 23rd Report had reinforced the Treasury’s doubts. The Treasury’s argument was based mainly on the premise that, as all taxation is paid out of income, the relative capacity of a State to raise revenue from non-income taxes could be judged by reference to the relative level of personal income per capita in that State.

The Commission cannot accept this premise. Such taxes as estate duties and land tax are not assessed on the basis of income, and estate duties are not necessarily paid out of the income of the estate or of the beneficiaries. Other taxes, such as those on liquor, racing, entertainments and lotteries, are affected by- spending habits rather than’ by levels of income, and are in large measure a means oE taxing income groups whose liabilityto income taxes is comparatively low. In general, revenues from non-income taxes do not respond directly to changes in levels of income, nor can the assessments be varied readily to take account of changes in incomes.

The Commission believes that its present method of calculating the relative severity of State nonincome taxation by examining all aspects of the imposition, the rates levied, ana the revenue collected for each class of tax separately is the most satisfactory way in which to arrive at the adjustments; and that, having regard to the peculiar characteristics of non-income taxes, this method is not invalidated merely because it produces results which differ from those which would be -expected from comparisons of personal income per capita or similar indicators.

The views of the Commonwealth Grants Commission and the Government are at variance on matters such as the imposition of taxes and the economic results on the States and the Commonweath.. The Commonwealth has imposed taxes to such an extent that,, if the States, were to levy further taxes, the incidence of taxation would be absolutely crippling. Senator Pearson went to some lengths, quite sincerely, to say that he could not see the force of the argument of the Leader of the Opposition (Senator McKenna) that it was wrong for the Commonwealth to use revenue for capital works, without the payment of interest, and to charge the States interest on money advanced to them to meet deficiencies in loan raisings. That practice is most unfair to the States, but a third party is involved. The third party is the man who pays the taxes, but the Government does not consider him.

Some years ago the Treasurer suggested that taxes should be imposed and that the taxpayers should then make enforced loans - a capital levy. That money would be used by the Commonwealth and interest would be paid on the amount of the loan. However, the Government is now taking money in excess of its requirements, lending it to the States and charging interest on it.

If the proper principles had been applied, taxation would be levied only to meet requirements. Any additional money that was needed would be raised through Commonwealth loans. The Government is, in fact, taking money from the taxpayers and then acting as a money lender to the States. The argument is advanced that money made available to the States is Commonwealth money. It is not Commonwealth money; it is money taken from the taxpayers, though the Government .is not strictly or morally entitled to it. The formula under which reimbursements are made to the States is static, except for minor variations. The Commonwealth gives money to the States under that formula and then tells them to raise any further sums required from the residue of the taxation field. But there is no residue, after the Commonwealth has extracted its taxes.

From time to time, the Premiers confer with the Commonwealth. They produce a plan - not a particularly ambitious plan for this nation - and ask for loan moneys to be allocated. I ask the Minister whether he can give any information as to the submissions made by the Premiers. Do they make any extraordinary requests? Has the Commonwealth been able to prove that the requests are not reasonable or give any reasons why they should be written down? We are entitled to know about these matters, but I do not believe the Minister could give the Senate that information.

– When we are talking, of Commonwealth and State relations, that is only chicken feed. I remind honorable senators of Western Australia’s submission. Its representatives approached the Commonwealth Government for money, but consideration was delayed. The Commonwealth expressed a lot of magnanimity, but the fact is that the State was treated like an unemployed person seeking charity at a soup kitchen. The States are told, in effect, “ Here is a nice bowl of soup “. I remind the Minister for Customs and Excise (Senator Henty) that Tasmania gets the same treatment. Tasmania was having trouble with its berry fruits crop and the Commonwealth Government said, “ We will give you a little more sugar to put on it “. Like the Western Australians, the Tasmanians are in the position of a man who must go to a soup kitchen to get a meal.

After applying to the Commonwealth Government, Western Australia has to budget for a considerable deficit. Recently, there was a great deal of unemployment in Western Australia. It was not due to the fact that the State Government was not carrying out, as vigorously as possible, a developmental policy. It did what its finances would permit.

Senator Henty:

– The Western Australian Government was driving private capital out of the State with silly State laws.

Senator COOKE:

– It was most successful in the work it undertook. Now we have to go to the Commonwealth Government to claim a grant from the Commonwealth Grants Commission. For 1957-58, South Australia sought £7,342,000, Western Australia wanted £12,544,000 and Tasmania applied for £5,546,000.’ Some one says, “ Not enough “. They sought as much as they thought they would possibly get, but they did not get it. The amounts were written down, so that once more the States, which, in many ways, are closer to the people than we are, and have greater responsibilities to the people than we have, apart from such matters as defence and postal services, have to carry on as best they can. The Commonwealth Government has shown no desire for State development. It has no national outlook and it has not shown any consideration for the States. From time to time, the States come back to the Commonwealth Government and get an advance. It might be £4,000,000. The Commonwealth might be extraordinarily generous and give it £6,000,000 or £7,000,000. But the Commonwealth Government has taken from the people as much as £1,331,000,000 a year. It is handling the national finances.

Senator Nicholls:

– That is a lot of money.

Senator COOKE:

– It is a lot of money, but it is not too big a sum for the development of Australia. It is too big an amount to be kept in the hands of a few persons who feel that they are, not the custodians of the money for the States and the people, but an all-powerful section which can say to one State, “ You will live “ and to another, “ You will die “. They like to say that this development work will be carried out and that work will not be done. I see in the policy of the Commonwealth Government a definite reluctance to finance developmental projects, both Commonwealth and State. We had an extraordinary example of the Governments attitude in the case of an airways organization which was competing with Trans-Australia Airlines in a normal way, under rules set down by this Government. It obtained a loan of millions of pounds to continue its business. It wanted to compete with T.A.A., not under the Marquis of Queensberry rules, but under Rafferty’s rules - under rules which suited it best.

The DEPUTY PRESIDENT (Senator the Hon. A. D. Reid). - Order! The honorable senator may not anticipate legislation that is on the notice-paper.

Senator COOKE:

– I bow to your ruling, Mr. Deputy President. Private enterprise is given every assistance by the Government, but when the States submit projects and ask for loans for them, although the States can offer better security and have a constitutional right to ask for such assistance, they are continually refused. The Senate is supposed to represent the States, and most State governments repeat continually that they feel the need for this House to exist, but the Minister’s speech on this bill - a most important measure - was simply a collection of figures, lt contained no details of the distribution of Commonwealth expenditure over the States. The Minister’s attitude was, “ There it is. That is the formula “. It was a calculating machine job. That is the attitude of the Government to grants to the States.

In the taxation field, the Commonwealth has left little to the States. The Commonwealth Government stepped out of the field of entertainment tax and suggested that, if the State governments were mindful of the interests of their people, they would not impose entertainment tax themselves. However, some State governments pushed into the field of entertainment tax. The Commonwealth Government imposes death duties, pay-roll tax, sales tax, and other forms of indirect taxation. At one time, all the revenue from taxes imposed for social service purposes was put into a special fund and the States could reasonably expect that they would be relieved of some of their heavy expenditure on hospitals, health and the provision of homes for aged persons. That relief is not available to them now. All social service payments are made to individuals, with the addition of small payments from time to time to various associations. Here again, the Commonwealth is following the policy of depriving the States of their share of the money which it collects and holds as the custodian for the people of Australia, who are also the citizens of the States.

The Commonwealth Government announces that it will give some collections of people grants on the basis of £2 for £1 to provide homes for the aged or the sick. That is an excellent proposition, but the money available is not taken up fully, and the State governments cannot get the same consideration. Why? Finance for homes of this kind is normally provided from the National Welfare Fund. Governmental authorities which are interested in these projects cannot get any help from the Commonwealth. The Government has asked for constructive criticism, and I am being constructive. That is a constructive criticism, which I think the Government should consider. But the Minister who introduced the bill is absent from the chamber and the Minister for Customs and Excise (Senator Henty), who is looking after his interests, is sleeping peacefully. That is the scene now in this chamber, which is supposed to be the States’ constitutional bulwark.

Senator Hannaford:

– The fact that the Minister has fallen asleep is a reflection on your speech.

Senator COOKE:

– I am not afraid of its being a reflection on my speech. Actually, I think he is closing his eyes in deep reverence.

Senator HENTY:
TASMANIA · LP

– It may be in deep despair.

Senator COOKE:

– It should be a feeling of despair after the job you have done! So we get from the sublime to the ridiculous in discussing these problems! I could have prepared a lot of figures in relation to this matter, but because of the way in which the Senate deals with its business, to prepare such figures is in vain.

I ask the Government to make a statement on its financial policies and to give the Senate an opportunity to debate it. Although honorable senators on both sides of the chamber would welcome such a debate, they will not have an opportunity to discuss the Government’s policy. The Treasurer and the Minister for National Development, who are members of the Cabinet, would not think of discussing the matter with members of their own parties any more than they would think of discussing it with us. The way these matters are dealt with is an absolute farce. There is a complete disregard of the development of the States.

Senator Cameron:

– But not in relation to private enterprise.

Senator COOKE:

– There is no doubt that the Government is paying off to private enterprise. Let us consider the Western Australian whaling project of which we have heard so much. Originally that enterprise was started by the Western Australian Government, but no assistance could be obtained from the Commonwealth Government. Messrs. Ford, Rowe, Carter and Davies spent a lot of money on the industry. Eventually the undertaking in the hands of the Commonwealth was profitable. It was thought in the early stages that the money that was earned would be ploughed back into the area for developmental purposes. But what happened? This Government eventually sold the enterprise to a company at a bargain price. The nation was robbed. Government supporters say that the company that now operates the enterprise pays taxes. It does, but the amount of tax that is paid is infinitesimal when compared with the profits that are derived. Even the tax that is paid does not find its way back into the area with any effect.

If we are to continue to grant to the States refunds of income tax in such small doses and to cast upon them the responsibility of development within the financial framework that this Government has built around them, nationally we will be doing very poorly. 1 would have no objection to the Commonwealth’s embarking upon a vigorous development of the States. If the Commonwealth, under its defence powers, were to build roads, standardize rail gauges and develop the north-west of Australia, there would be some argument for the raising of such huge amounts of revenue which at the present time are being lent to the States and on which the States pay interest. To continue the present practice is quite unmoral and unsound. While the present system of debate obtains, we have no chance of challenging the present method of raising and distributing the funds.

Senator Vincent:

– After the State Government had over-expended its advance.

Senator SEWARD:

– State governments do not get money to waste. It is difficult for them to make the money that they get go round. I will not have it said that Western Australia has wasted any money.

Senator Vincent:

– 1 did not say it had wasted money; I said it had overspent.

Senator SEWARD:

– If honorable senators desire an example of overspending, I refer them to the various reports of the Public Accounts Committee, where they will find references to instances of gross overspending by the Commonwealth. That overspending needs to be curtailed so that the Commonwealth can make more money available to the States.

I think the time is ripe for a revision of this formula so that greater assistance can be given to State governments to meet their added responsibilities. The present formula is outdated and unless we can bring it up to date the development of the States will be retarded, lt is easy to accuse the Government of taxing the people at a high rate, as is undoubtedly the case, but with the demands that are being made for public works, it is necessary to obtain that extra revenue. The Government has granted concessions. It has been very considerate in granting concessions to the taxpayers as far as possible, but, after all, money has to be raised from the taxpayers to meet our requirements. I do, however, commend the Government for not being unmindful of the demands of the taxpayers.

Another matter, which may not be really relevant to this bill, is the continued alteration in the interest rates payable on government loans. That is preventing the Government from raising more money on the loan market. People who are receiving low interest rates on money they put into government loans are not likely to invest any more money in government loans. That is one of the avenues the Commonwealth might explore with a view to establishing more confidence in government loans. 1 do not wish to take up any more of the Senate’s time. I am pleased that this money is being made available to the States. 1 once again stress the need for an investigation into the whole matter by a competent committee. I hope such an investigation will not be delayed. Senator Cooke said that the matter had been neglected and that this Parliament had done nothing about it. I remind honorable senators that it is always open to any honorable senator to move that such a committee be formed. The Senate would then have the opportunity to debate the matter fully. With those few remarks I support the bill.

Senator BYRNE:
QUEENSLAND · ALP; QLP from 1957; DLP from 1968

.- I have not on any previous occasion spoken during a debate on a bill such as this, because the State which I represent has not heretofore presented a case to the Commonwealth Grants Commission. I do not know what the new Government in Queensland proposes to do, but, if my memory serves me correctly, I think there was an announcement in the local press to the effect that the present Queensland Treasurer thought it would be necessary for the State to approach the Grants Commission. If that takes place, we can expect that when future discussions take place on bills such as this honorable senators from Queensland will be as vocal in support of the claims of their State as honorable senators from the three recipient States have always been when bills of this kind have come before the Senate.

Senator Anderson:

– I think the honorable senator is dealing with the wrong bill.

Senator BYRNE:
QUEENSLAND · ALP; QLP from 1957; DLP from 1968

– I was speaking in general terms, but I wish to refer to the question of special grants to the States. I have tried to explain why I do not normally speak on matters associated with grants by the Commonwealth to the States.

In spite of the protestations of Senator Pearson that he had trespassed unduly on the time of the Senate, I think we were all indebted to him for the speech he made. His speeches are generally well-informed, carefully thought out and logically presented. Speeches of that type not only inform the Senate, but advance the case which the senator making the speech desires to present. I join with him, as I join with Senator Seward, with Senator Cooke, with every other honorable senator in this chamber, with every State Parliament, with every State Premier and, virtually, with the whole population of Australia in saying that the financial relations between the Commonwealth and the States are due for a complete overhaul. It is an extraordinary thing that so many honorable senators and State governments, representing all shades of political opinion, and thousands of informed people from al! walks of life, should find it necessary to mention publicly the fact that Commonwealth-State financial relationships should receive immediate attention. Yet year after year these protestations fall on deaf ears, so far as the Commonwealth Government is concerned.

Senator McCallum:

– The Constitution Review Committee may be considering it.

Senator BYRNE:
QUEENSLAND · ALP; QLP from 1957; DLP from 1968

– If it is, we have heard nothing of it. I should be delighted if it were. If my remarks do no more than direct its attention to that matter they will not be without merit.

Senator Vincent:

– The honorable senator is overlooking the fact that State Premiers can originate discussion on this matter de novo.

Senator BYRNE:
QUEENSLAND · ALP; QLP from 1957; DLP from 1968

– lt is common knowledge that the State Premiers are now completely disillusioned about the whole question.

Senator Wade:

– Victoria has been disillusioned about it for years.

Senator BYRNE:
QUEENSLAND · ALP; QLP from 1957; DLP from 1968

– That is so. The States have been placed in a position of annual beggary. Year after year they are subjected to this indignity, and State sovereign rights are gradually trodden into the dust. It is the commonly accepted opinion of the great bulk of Australians that something should be done about it immediately.

Whenever Mr. Gair, as Premier, and Mr. Walsh, as Treasurer, of Queensland, submilted proposals to the Commonwealth, and perhaps I or some other honorable senator ventilated the matter in this place, the proposals were spoken of as unconscionable, and not completely warranted. The position of Queensland did not inspire a great deal of sympathy on the part of honorable senators on the Government side. It was almost as if there were continuous friction between the then government oi

Queensland and the Commonwealth Government, which was putting everything out of focus; as if the actions of the Queensland government proved irritating to the Commonwealth and could not be soundly supported in financial fact.

Therefore, it is very interesting to look at what has happened with a new government in Queensland. What has been the immediate experience of the LiberalCountry party Premier of Queensland, Mr. Nicklin, in the few months since he came to office? I wish to refer to this morning’s Brisbane “ Courier-Mail “, a copy of which has already reached honorable senators. I propose to quote a statement by the Premier of Queensland in relation to his Government’s recent request for special drought relief for his vast State, which has suffered so severely, from north to south and from east to west, from the ravages of drought. The following appeared this morning in the “ Courier-Mail “: -

The State Government arid the Queensland people did not expect the Commonwealth Government to “ shirk the issue of drought relief “, the Premier (Mr. Nicklin) said yesterday. He said he was “ astounded “ by a reported Commonwealth statement that the Commonwealth had refused drought relief to the State because it “ had not had an exceptional disaster “.

Mr. Nicklin said tens of thousands of valuable stock had died, more than 50 per cent, of the State’s grain crop had been lost and there had been big losses in sugar, vegetables, and other crops. “ If this toll of economic tragedy is not an exceptional disaster, let us hope we will never have one. To the end of last week the Queensland’ Government had spent £210,203 on drought relief”. Mi. Nicklin said.

– I intend to make one or two suggestions. As other honorable senators have suggested, a formula cannot emerge until there has been proper investigation. I do not know whether that investigation should be undertaken by the Constitution Review Committee, a select committee of this Senate, or a convention called for the purpose, but I am sure that whatever approach is employed a formula, or something else greatly in advance of the present haphazard system, would emerge. I can only describe the present system of special grants as a type of “ hiccup “ finance. It does not flow smoothly or serenely, but jerkily, lt comes and goes.

Would it be possible for us to create, from the annual Budget, a- trust fund for an emergency such as this? It- could be administered by a commission comprised of men- with the status of the members of the Commonwealth Grants .Commission. They would have made actual investigations and would recommend to the Government special grants’ to the States in peculiar and special circumstances from’ this gradually accumulated trust fund. I do not know what on-the-spot investigations the Commonwealthmakes in these matters. When the Commonwealth refused the application by Queensland for drought relief, I wonder what actual physical investigation any Commonwealth official has made at the direction of the Prime Minister, or of the responsible Minister, to see exactly what the effects o.f drought were in Queensland, or, for that matter, in any other State? I strongly doubt whether any. investigation was made at the physical level. No doubt representatives would, come- here from Queensland and would put what, after , all, would be an ex parte case. They would come from the scene of operations, but, as is the case with any claimant, they would be entitled to have their case .investigated in the way that would be best for them - that is an onthespot investigation - to see whether the claim was properly based, whether it was exaggerated and, whether in any circumstances, it could be met.

In other words, the Commonwealth approaches the consideration of this special grant with the outlook, prima facie, that the States do not need it at all. As if the Premiers and responsible officials would come from the States to the Commonwealth unless they had what was in their own opinion a very reasonable case to present and a very worthy reason why such grants should be made! The Commonwealth asks the States to discharge completely an onus which, I think, should partially be discharged by the Commonwealth itself.

If my suggestion were practicable constitutionally and administratively, if a special trust fund, ari accumulating fund, could be created iti budgets annually for special purposes, if commissioners could investigate particular circumstances and if the moneys could be made available as a loan, perhaps at a lower rate of interest than would apply generally in relation to loan funds, then we would’ be getting some order out of what is continual chaos. We would no longer hear the” recriminations which are constantly corroding the atmosphere in this Senate. And they are recriminations which ensue from all sides of political philosophy and from all States. When there is such unanimity of- opinion among all sections of the community in all parts of the Commonwealth on this matter, the Commonwealth Government,- whatever its political character may be, is recreant to its trust if it does noi acknowledge that there is a festering sore, that- there is a grave problem, which is crying out for solution. The nation demands that it shall be solved, and the solution is, in the first place,, the responsibility of the Commonwealth.

It is for those reasons that I think if these bills which provide for grants to the States do no more than give us the opportunity of ventilating those thoughts, and to represent to the Commonwealth Government its responsibilities in this- fieldi even though in this particular case a certain Stale might have been omitted, then the debate will have done some good.

As a representative of Queensland, 1 make these final reflections: It is no wonder that we feel a sense of frustration and a sense of having been overlooked, especially after we have read with interest the Budget speech of the Federal Treasurer. Speaking from memory now, I think that Queensland was the only State that was not mentioned in specific terms for additional Commonwealth assistance. Is it any wonder that the people of Queensland feel that in the Commonwealth political sphere their State is overlooked? There was for Tasmania assistance under the States Grants (Special Financial Assistance) Act. The same applied to Western Australia. There was a special grant to South Australia.

Senator Vincent:

– Queensland had the assistance of the Commonwealth. Government for the development of great mineral deposits.

Senator BYRNE:
QUEENSLAND · ALP; QLP from 1957; DLP from 1968

– I have not heard much about that; I am referring now to the Budget. Provision was made, quite justifiably, for other States. I am not for one moment denying that it was necessary and highly desirable, but there was further assistance for the Western Australian water scheme, and special assistance for the Snowy Mountains Scheme, which benefits New South Wales and Victoria. The only State which did not receive, by particular reference, some measure of practical additional Commonwealth assistance was Queensland.

Senator Vincent:

– What about the Mount Isa railway?

Senator BYRNE:
QUEENSLAND · ALP; QLP from 1957; DLP from 1968

– We have not heard much about it. That is a matter that may still be under negotiation. Many things in Queensland have been crying out for assistance for years. After all these years, even to be able to point to some small measure of assistance of this character is, in itself, a condemnation of the breadth of vision of a succession of Commonwealth governments.

I do appeal to the Government to be sensible of the representations which are now being generally made, and of the protests which are stemming from all sections of the Australian community and to set about this task of regularizing and, it possible, formularizing, in new and modern terms, the financial relations between the Commonwealth and the States. Under the spirit and letter of the Constitution the States are the constructing authorities on which, in a practical way, the people of the nation depend, and the Commonwealth Government should take the responsibility for its expansion and defence. S’.’rely this canker of difference between those two sides should not be able to destroy or even retard the rate of national development for which

W3 are all striving!

I leave those thoughts with honorable senators and trust that on this occasion this clarion call from all parts of Aust; alia which has now risen to a veritable crescendo will not continue to fall on deaf or inattentive ears.

Senator ANDERSON:
New South Wales

– I thoroughly enjoyed the contribution made by Senator Byrne. Tn fact, 1 enjoyed contributions offered by most honorable senators to this bill, but I do feci that much of what has been said has no relation to the measure. It seems to me that most of the debate relates to the Australian Loan Council and the relationship between the Commonwealth and the States on loan matters. In those circumstances, I feel that we should be brought back to reality, and to do so I shall read the first paragraph of the second-reading speech of the Minister for National Development (Senator Spooner). It says -

The purpose of this bill is to authorize the payment to the States in 1957-58 of a special financial assistance grant of approximately £23,800,000. The grant is to supplement the amount payable under the formula embodied in the State Grants (Tax Reimbursement) Act 1946-48.

Whilst I thoroughly enjoyed hearing Senator Byrne and indeed found myself much of the same opinion as he is, I do not think that loan problems and national development are pertinent to this bill.

– In my view, the distribution of the money to the States has been the subject of some confusion this afternoon. The formula was introduced in 1946 by a conference under the chairmanship of Mr. Chifley. It is rather significant that the last year of office of the Chifley Government was the only year in which it departed from a rigid application of the formula. An additional amount of about £8,000,000 was provided in that year, the real reason, I understand, being the coal strike in New South Wales. New South Wales received an extra £3,000,000 and, of course, the other States had to receive something also. After the system was introduced in 1946, that was the only occasion on which the government departed from the formula.

It is true to say that every year this Government has paid to the States amounts in excess of the amounts provided under the formula. This year the amount provided under the formula is estimated to be about £166,200,000 but the Government proposes to provide a supplementary amount of £23,800,000, which will bring the total to £190,000,000.

Senator Wright:

– But that larger grant is not made under this bill. This bill is the States Grants (Special Financial Assistance) Bill.

Senator ANDERSON:

– lt provides for the payment of a supplementary amount of £23,800,000, which will bring the total amount provided to £190,000,000. 1 think that this afternoon there has been some confusion about what we have been debating. If 1 arn discussing the wrong bill, please tell me, but, quite frankly, I think I am discussing the correct one, and that many honorable senators this afternoon have been riding a good horse in the wrong race.

Senator Spooner:

– But that does not mean that they have to make the same speeches over again when we come to the other bill.

Senator ANDERSON:

– I hope not. The basic issue is uniform taxation and the return of taxing powers to the States. Some little time ago, 1 was reading something about the Constitution and I encountered a report of some remarks made by Alfred Deakin when he was attending those conventions which were held prior to federation. I think that I may have referred to this matter before, if not here, then somewhere else in a political atmosphere. It is extraordinary that, of all the great statesmen who wrote the Constitution, it was Alfred Deakin who foretold with uncanny accuracy the position we are in to-day. He did not know anything about the formula that would be produced in 1946. He did not know that uniform taxation would be introduced. But he had enough knowledge of human nature to know that control of the purse would be the dominant factor in the control of government, and that, with taxing power in the hands of the Commonwealth, we were likely to have the situation that the States would be able to cry poor mouth all the time and not accept their responsibilities.

I believe in the sovereignty of the States. Despite everything that has been said, and despite all the difficulties, we should return taxing powers to the States. If the Commonwealth sincerely believes that taxing powers should be returned to the States, and that the future of our federation is wrapped up in the sovereignty of the States - that proposition, of course, has been challenged - and if the Commonwealth envisages that some day these powers will be returned, it is fatal for the Commonwealth to be retiring piecemeal from various fields of taxation, leaving the States to re-occupy them piecemeal, because the stage will be reached where the Commonwealth will have no ability to make an agreement with the States.

When the Commonwealth vacated the field of entertainment tax, the States entered it straight away. The position was the same in regard to land tax. Whilst we all, as taxpayers and people of responsibility, think that it is a very good thing that the Commonwealth should vacate these fields of taxation, the transition from uniform taxation is thereby made more difficult, because quite obviously the Commonwealth has less to offer to the States. I think that the matter would have been far better and more courageously handled by calling a top-level conference, throwing everything into the ring at once, and devising a formula for the States to exercise their own taxing powers. It would not be in the interests of Australia if the States were to lose their sovereignty completely. The future of Australia depends on decentralization, and inherent in that principle is the sovereign power of the States. If the States are to retain their sovereignty and if they are to be effective and do a job for Australia in their own fields of government, they must have the means to obtain finance. We cannot continue the present situation in which the States have all the advantages without responsibility. If anything goes wrong, the States blame the Commonwealth, and the matter then becomes a political football. That does not benefit the Commonwealth at all.

Though my contribution may have been a little wide of the mark, it has been on a par with most speeches made this afternoon. Honorable senators have dealt, not with State reimbursements, but with the loan raising activities of the Commonwealth.

Senator WRIGHT:
Tasmania

.- I am pleased that this subject has excited so much interest at this time. We have been reminded more than once in the past two or three weeks that a committee is considering the revision of the Constitution. A debate of this nature provides an opportunity for the Senate to alert the committee on this subject. As a member of the committee, I acknowledge that the remarks made in this debate are of much assistance to it.

I was particularly pleased to hear the contributions of Senator Pearson, Senator Byrne and Senator Anderson regarding the paramount constitutional problem that has drifted perilously in this post-war era - an era that is significant for the lack of guides and standards. If the representative system of government is to be preserved, and a member of the Parliament is to have definitely recognizable responsibility, discernible in the eyes of his electors, then we must understand distinctly where the State member’s financial responsibility to his electors begins and ends and where the federal member’s financial responsibility to his electors begins and ends. When my colleague, Senator Pearson, overheard me refer to responsibility, I was referring to financial responsibility, not to any personal obligation. When I spoke of financial responsibility, I was not referring to Premiers conferences. The cardinal principle of financial responsibility must be re-established.

Senator Anderson denied that it was relevant on this matter to speak of loans and of the development of uniform taxation. With great respect, 1 suggest that he should reconsider the matter. When the Constitution was adopted, every one looked solely to customs and excise as the source of federal revenue and of practically all State revenue. During the first ten years of federation, the States were guaranteed threequarters of the customs and excise revenue. The States reached such a stage of poverty and indebtedness that they had to ask the Commonwealth to pay their debts. The Commonwealth struck a bargain. The Commonwealth discontinued its obligation to return three-quarters of the customs and excise revenue, with some justification having regard to expenditure during the first world war. The Commonwealth took over the States’ debts and agreed to make payments to a sinking fund to redeem the debts. The Commonwealth has been paying about £7,000,000 a year into the sinking fund since that time and between £3,000,000 and £5,000,000 in interest payments. Anybody who had an opportunity to refinance on a fixed money basis on the levels of 1929 was in a uniquely advantageous position, having regard to the subsequent financial inflation.

One of the problems that transfixes the States is that, in lieu of access to indirect revenue such as customs and excise, which was confidently expected to be due to them at the time of the adoption of that Constitution, they have now, by a process of bargaining, taken in exchange a mess of pottage consisting of a payment by the Commonwealth of £7,000,000 or £8,000,000 a year. The indirect revenues of the Commonwealth from customs and excise and sales tax to-day amount to about £400,000,000. That is one of the considerations to be taken into account, along with the terrific burdens that the Commonwealth has undertaken in respect of war finance during the first and second world wars and the increased responsibility in relation to social service expenditure.

That is the first aspect that has led to the demarcation of financial responsibility between the States and the Commonwealth. It underlies the policy, which we are predisposed to accept, that all this confusion stems exclusively from the system of uniform taxation. That system came to us as a demand of the second world war, and it now yields about £630,000,000 a year. 1 have not the exact figures before me and I give only the approximate figures. Income tax yields such a large part of our national revenue that we are predisposed to think of it as the sole source of revenue. It is the major source of revenue, but it is not the exclusive source.

From the system of uniform taxation, we have evolved the formula for reimbursements to the States. It is said on all sides that the reimbursements have proved to be insufficient. I am’ glad to hear echoed on both sides of the chamber the idea that there is need for a rule of law in a formula to give rights to the States and to the Commonwealth as to reimbursements that should be made out of uniform fax revenues. I suggest that we should consider the amount that is inexorably required by the Commonwealth from income tax. We should also consider the complexity that would arise if the income tax field were again carved up between seven governments and the difficulties that could arise as a matter of political policy if a government adopted a particular course on income tax deductions. A dominant deduction in the federal sphere is that allowed for agricultural development. If, for instance, a State government of a different political colour wished to emphasize other deductions, say of an urban or secondary industry kind, an irreconcilable conflict of policy would arise, stemming in one case from the Commonwealth Government and in the other from a State government. That makes the division between seven governments of one field of taxation probably a matter of real impracticability.

So, I think we should give serious consideration to the idea that has been submitted this afternoon that the guarantee that the States require as to their share of income tax revenue should be in accordance with a constitutional rule in the shape of a formula, lt may be something like the very simple formula that was incorporated in the original section 87 of the Constitution regarding customs and excise which simply stated “ three-quarters “. I do not suggest that this formula could be as simple as that, but I remind honorable senators that there was a formula at the very beginning of these grants. As to the States, very serious consideration should be given to a constitutional formula so that their right of reimbursement would be guaranteed by the Constitution.

These views are put forward, of course, in a spirit of appreciation of what has been said in the chamber and to stimulate further views if that is not too presumptuous, lt is there that the defect of the bill before us appears. I am indebted to Senator Anderson for reminding me that we are voting here on what is called “ special financial assistance “. I have looked at the title of the bill and associated it with the assistance that is given for the special help of the States of Tasmania, South Australia and Western Australia, but that is not the situation at all. It is a case in which special financial assistance of £23,800,000 which is being added to the expectation of the formula grant of £166,000,000. There are some persons who say that because the first formula has proved insufficient over the years, we should despair of formulas. I would not be so uncomplimentary of the original author of the formula, although the author himself never loses an opportunity to disparage his product. I take leave to remind the Senate, however, that that formula had to confront an era of exceptionally rapid inflationary money movement. If we examine the degree to which it has been found necessary, since 1949, to supplement the formula grant, we find that the amount has been running by way of supplementary assistance to the order of about £20,000,000.

Senator Hannaford:

– The Labour Government provided a supplementary grant too, did it not?

Senator WRIGHT:

– No. As Senator Anderson has said, the only supplementary grant that was given by the Labour Government was provided in 1949. I will not suggest that it was made because that was an election year; it was provided because of 3 coal strike in that year. The grant has been deficient by a uniform amount of about £20,000,000. It might be suggested, as I have -said, without unduly complimenting the author, that that is not a bad performance in view of the difficulties of the period, because anybody who has survived the fluctuations of the money market between 1949 and 1957 and has kept a straight bank account has been doing pretty well. The maintenance of the supplementary grant at a uniform level of about £20,000,000 should not destroy our faith in formulas. On the contrary, 1 think it suggests that, if not for the whole requirement of State finance, at least for the States’ basic needs, a formula could be fixed over a foreseeable term of, say, seven or ten years, with provision for revision on a constitutional basis over that period. Therein might lie some method of solving the problem. These are merely thoughts which other more fertile minds might develop to fruition.

Senator Anderson:

– The formula might be adjusted according to population.

Senator WRIGHT:

I suggest that this distortion of the capital account as between the Commonwealth and States probably shows that the arrangement that was good in 1929 is, because of the huge change in financial levels in the interim, due for revision. I point out that the States had a legitimate right to expect a share of indirect revenues in the form of customs and excise, sales tax, or any other indirect revenue that we like to invent. They bargained their mess of pottage for between £7,000,000 and £9,000,000, which is the total benefit they received under the Financial Agreement - a matter of £5,000,000 in relation to the sinking fund and £3,000,000 to £4,000,000 for interest. That is shown in one of the tables contained in the report of the Commonwealth Grants Commission. I leave it at that.

Senator Anderson:

– Of course, the Commonwealth makes a contribution to the States each year on account of loan sinking funds. I think the sum for this year is about £12,000,000.

Senator WRIGHT:

– I thought it was £9,000,000.

Senator Anderson:

– 1 think it is about £12,000,000.

Senator WRIGHT:

– We need not stay on that point, even if the amount is £25,000,000. In relation to present indirect tax collections of £400,000,000, it is nothing like three-quarters of the total, which was the target of the Braddon blot on section 98 of the Constitution - not that I think the proportion of three-quarters is applicable to present circumstances in which the Commonwealth has huge defence and social services obligations attributed to it under the Constitution.

The whole question needs to be examined. I do not pretend to have stated the basic material in a way that would form the basis for expressing a responsible viewpoint, but I think I have said just a little more than is sufficient to retain interest - certainly sufficient to stimulate interest in what might be the subject-matter of another debate.

Senator SPOONER:
New South WalesMinister for National Development · LP

– in reply - I am in the not unusual situation of having a great deal of difficulty in winding up this debate. I suppose that a Minister’s main task in relation to legislation such as this is to get his bill through all stages; but he is confronted with a decision on whether to reply or make observations on the debate.

I think it will be agreed that this afternoon’s debate has been fascinatingly interesting, so much so that one wonders whether it would be rank heresy to ask just how much better the proceedings of the Parliament would be if they were not broadcast. In the political world in which we live, with such. a large listening audience, it is difficult to conduct informative debates such as we have had this afternoon.

Another observation which may also be regarded as heresy, at least in some quarters, is that it is a pity that a debate of this calibre, in which such constructive thinking has been evident on both sides of the chamber, is not reported to a greater extent in the newspapers. I think it is true to say, with all respect, that it is not possible for a Minister to answer the points that have been raised this afternoon. It is not for a Minister to express his personal opinions on uniform taxation. It is not for a Minister to get on to his hobby horse and gallop off in the direction that he likes in dealing with the financial arrangements between the Commonwealth and the States. After all, a Minister speaks as a member of the Government. Having the great privilege of occupying his position, he has to deny himself the gratification of expressing his own personal views” in a debate like this. If this debate had a wider audience or were reported widely by the press, it would, in my opinion, make a contribution to educating and directing public opinion and public thinking on fundamental governmental problems. I make those remarks instead of attempting to express my own views on what has been said during the debate.

– I am dealing with the terms of this special application. On this occasion, the application to the Commonwealth was not to assist in relieving personal distress or hardship, but to make capital advances available to settlers. The request was that the Commonwealth provide finance, on a £l-for-£l basis, up to £250,000, in an entirely new field so far as national calamities are concerned. The State Government asked the Commonwealth to provide assistance on a £l-for-£l basis so that it could make advances to settlers to enable them to rehabilitate their properties. If this Government acceded to that request, it would be, in truth, taking over the functions normally carried out by the banker of the settler or the person or authority from whom he usually obtains his finance. Some State governments have schemes under which they provide advances of that sort.

The position needs to be clearly understood against the background of the bill now before the Senate. One of the specific conditions under which this supplementary special financial assistance is made available to the States is that the Commonwealth expects the States to meet their financial responsibilities during the ensuing year, without calling on the Commonwealth for any additional financial assistance. There is a tradition, or a background, that in times of adversity or distress, such as bush fires, floods and what-have-you, the Commonwealth will subsidize the State governments on a £l-for-£l basis for the purpose of relieving personal hardship and personal distress.

Senator Courtice:

– There could be just as much personal hardship during a drought as after a flood.

Senator SPOONER:

– I have been speaking for some time. I thought I had explained that the request from the Queensland Government was not for a subsidy to relieve personal hardship at all, but was for the purpose of lending money to settlers. That comes in a different category altogether. It may be an overstatement to say that there is a tradition, but there has been a procedure which the Commonwealth has adopted in the past and which it desires to continue to adopt. Goodness knows, it may be said - although possibly with not a great deal of success - that at Loan Council meetings the Commonwealth Government gives until it hurts - gives to the utmost. It gives what it can to the various State governments by way of loan moneys, tax reimbursements and what-have-you. It gives as much as it can, but the understanding on which the money is given is that the States will make that money serve their purposes- for the year and will not come back to the Commonwealth to ask for more. When the Commonwealth makes its annual financial arrangements, it disburses all the moneys it has reason to believe will become available to it during the year.

– That is so. The States are, of course, also members of the Australian Loan Council and if the Commonwealth did not charge them interest they would surely, in the world in which we live, have no desire to finance works programmes from loan moneys. I think that they would have a natural disposition to turn to the source from which they could obtain interest-free money. I think that that is a reasonable comment to make. In conclusion, I again thank the Senate for the speedy passage of the bill.

Question resolved in the affirmative.

Bill read a second time.

In committee:

The bill.

Senator McKENNA:
Leader the Opposition · Tasmania

– I wish to refer to what has been said at another stage of the debate in relation to the help that the Com monwealth has given the States in supporting their works programmes from revenue. 1 refer the Minister for National Development (Senator Spooner) to a speech made on 7th November by the Treasurer (Sir Arthur Fadden), whom he represents in this chamber, in closing the debate on this bill in another place. At page 1970 of the “ Hansard “ report of proceedings, the Treasurer is reported to have said -

I turn now to the overall position of the States in their loan programmes. From 1951-52 to 1956-57, the Stales have spent an amount of £1,175,882,000. Where did that money come from?- The Slates obtained it because we left the whole of the loan market, both internal and external, to them. in addition, in order that they could obtain the maximum amount to finance what we considered were their inescapable developmental programmes, we paid out of revenue, by unorthodox methods so far as accountancy principles are concerned, for the whole of our capital works and services, postal services, the Snowy Mountains scheme, war service homes, war service land settlement and so on. But who carried the stigma for raising that revenue? Why was it raised? Why did we adopt that particular method? The loan market could not yield the requirements of the States. The amounts raised were less than were necessary for their indispensable and inescapable loan programmes and, being the National Government with a national outlook and a national responsibility, we could not allow the States to stagnate.

I shall refer to that particular comment later - perhaps during the debate on another bill. The Treasurer continued -

So we had to come to the party to the extent I shall point out in a moment, and we had courageously to adopt politically unpopular methods in order to help the States. Despite the fact that we left the loan market to theStates and that the whole of our capital expenditure was paid out of revenue, the Australian and overseas loan markets yielded only the sum of £587,000,000. Who supplied the remainder? The Commonwealth found the huge sum of £588,351,000 or practically half the total amount of £1,175,882,000. Yet honorable members opposite say we are starving the States and have no regard for them.

Therefore, if I was in error in indicating that special assistance amounting to £588,000,000 was provided from revenue, I was at least accepting the statement of the Treasurer himself. Apparently the Minister for National Development, who represents the Treasurer here, now corrects what the right honorable gentleman said, and claims that, of that sum, £ 1 30,000,000 was derived from overseas sources. My own impression is that nothing of that order- hasbeen borrowed in recent years.

My second comment is that the idea which 1 put before this chamber was that if the loan market was deficient in providing the moneys required by both the Commonwealth and the States, it would have been reasonable in what is termed the “ partnership of federation “ for the Commonwealth to say, “ We will share the vagaries of the loan market with you, and will share, pro rata, what is left for capital works “. I suggest that would have been fair because the Treasurer himself puts a proposition that I shall describe. He recognizes it is a burden to lend revenue moneys. No matter how they have filtered through trust funds, loans and the rest, it is an artificial use of a loan by the Commonwealth which charges the States interest, lt is a terrific burden on the States, running, as I have indicated, to an extra £40,000,000 a year in interest in recent years, while the Commonwealth’s interest bill rose to only £4,000,000 per annum. lt is not an answer, however, for the Treasurer to say, in making this grant of £23,800,000, “We have regard for the fact that we have put an interest burden on the States “. I think it is completely wrong to say that, because it not only puts an additional burden upon State finances but also compels the States to increase the level of their charges for all their services. That is one of the factors that is adding to costs, and the position is not corrected when the Treasurer, belatedly, either at the end or the beginning of a period, says, “ We will have regard for the fact that we have imposed a load of interest on the States and we will make a contribution towards meeting it “.

From the viewpoint of equity, if there is some element of reimbursement of that interest, which I suggest ought never to have been charged, this special grant ought to specify what is the figure the Treasurer allocates for that purpose. If that were done, we would know the degree of reimbursement. How can anybody say there is an element of contribution to the burden of interest in that £23,800,000? One can claim that there is no such element in it. It is a futile argument, unless the bill specifies what amount of this £23,800,000 the Treasurer claims is allocated for that purpose. He claims he had some figure in mind, and I ask the Minister just what figure was in mind. Surely that is a reason able request. Tell us the figure, and then we .shall be able to address our minds tothe balance of the £23,800,000.

I estimated yesterday that if, taking the Treasurer’s own figures, £588,000,000 represented the total contribution out of revenue to the works programmes of the various States, then 4 per cent, of that figure would almost cover the whole amount mentioned here. It would represent £23,500,000, and the advance proposed here is £23,800,000. If I am correct, and if one were to apply the principle that the Treasurer claims he applies in determining these grants, one could truthfully say the whole of this special assistance grant is merely to offset the interest he has charged on moneys that he has provided from revenue. That seems to me to be a wrong accounting principle, lt seems to me to be contrary to the whole spirit of what should constitute a partnership between the Commonwealth and the States.

The Minister’s second point was that we could not expect the States to participate helpfully in an approach to the loan market while they had any prospect of having their loan programmes carried out with interestfree money. Frankly, 1 think that reflects unduly upon the States. I believe the States can be relied upon to support the loan market to the fullest extent. It is rather an undue reflection upon them to suggest that they would not. But assuming that the Minister is right, I make the point that the States are not the executive agent of the Australian Loan Council. No State is. The Commonwealth is. The Commonwealth makes the whole approach to the loan market. The rates and conditions are determined, certainly, by the Loan Council, although I think even the Minister will acknowledge that the Commonwealth does play a dominating part. It is in the hands of the Commonwealth to sell any loan on the market, to advertise, to make the approach, and to do all the other things connected with it. Premiers are asked to help by giving an occasional broadcast. That is the only way in which Premiers participate in an approach to the market. That being so, how could any one of them decline to participate and to help? repeat that the whole approach to the market is in the hands of the executive of the Loan Council, which is not any State but the Commonwealth Government itself.

Bill agreed to.

Bill reported without amendment; report adopted.

Bill read a third time.

page 1292

STATES GRANTS BILL 1957

Second Reading

Debate resumed from 13th November <vide page 1208), on motion by Senator Paltridge -

That the bill be now read a second time.

Senator McKENNA:
Leader of the Opposition · Tasmania

– The measure now before the Senate is an annually recurring one, although the amount proposed to be appropriated varies from year to year. The bill authorizes the payment to the three applicant States, Tasmania, South Australia and Western Australia of a total of £19,500,000. Of that amount, £4,858,000 will go to South Australia and £9,828,000 to Western Australia, while Tasmania will receive £4,466,000.

I say at once that the Opposition supports the measure very cordially. I hope that Senator Vincent was in the chamber when the Minister for Shipping and Transport (Senator Paltridge) read his second-reading speech, because, having regard to an interjection that Senator Vincent made in relation to another bill some little time ago, I think he would have been interested to hear the Minister say this -

The special grants recommended each year are divided into two parts. One part represents the commission’s estimate of the State’s financial needs for the current financial year. This part is regarded by the commission as an advance payment which will be the subject of a final adjustment two years later when the commission has examined the audited budget results of the States for that year. The other part of the grant represents a final adjustment of the special grant paid two years earlier.

And that is a fact. It has been a fact for quite a number of years. The amounts that it is proposed, under this bill, to pay to the three applicant States are based upon recommendations made by the Commonwealth Grants Commission. This body was appointed for the first time in 1933 and has rendered most signal service in evolving a considerable degree of order out of the chaos that existed and still persists in CommonwealthState financial relations.

The commission consists of three persons, Professor Sir Alexander Fitzgerald, Professor Wilfred Prest and Mr. A. J. Reid. I can say at once that those three gentlemen are worthily carrying on the very fine traditions that had been established by their predecessors, many of whom I knew personally. I mention Professor Giblin, Professor Mills and Professor Woods, and there may be others with whom I had associations. All performed at an exceedingly high level.

Now I should like to mention for a moment the commission’s staff. Although this grant, running very close to £20,000,000 for the year, is not, having regard to the total federal budget, a matter of great significance in a budget of more than £1,300,000,000, it is nevertheless of the most vital importance to the three States concerned because the payment of these grants, coming on top of all the other grants that are made by the Commonwealth to those three States, makes all the difference between solvency and bankruptcy. There is no question about that, despite the relatively small amount. I say that despite the fact that overall grants of more than £250,000,000 are made to the States throughout the year. This little extra that is provided by the Commonwealth Government at the instance of the Commonwealth Grants Commission, makes a vital difference to those three States.

The work of the commission is carried on most economically. Its vote for the 1957-58 financial year, as shown in the Budget which we have recently considered, totals only £22,000. There are three commissioners, a secretary, six investigation officers, a librarian, a clerk, and two typists. The salary bill for all of those people is £15,050. So, the magnificent work that this body does is done most economically, and at a very low cost.

I should like to pay tribute to the secretary and the staff of the commission. During the year, they have to watch all the budgetary trends and to examine the audit results of prior years. They have no right to demand information from the standard States, Queensland, New South Wales and Victoria. One knows how difficult it may be to follow the ebb and flow of trust funds, loan funds, conversions and investments. The commission, although armed with complete authority to get from the applicant

States all the information it wants and to elicit all the details it needs, has to go cap in hand to the standard States and ask questions about their budgets, lt is not nearly so easy for the commission to go into the highways and byways of the budgets of the standard States as it is for it to go into those of the applicant States.

Senator Hannaford:

– Is not that information forthcoming voluntarily?

Senator McKENNA:

– I was going to add that, to a very high degree, it is forthcoming voluntarily, and I have no doubt that the relations between the commission’s staff and the authorities in the standard States are most cordial. But over and above the officers of a State is the State government, and it may well be a matter of governmental policy not to disclose the full story of its finances. The States are not anxious to disclose full information about their finances, and officers must obey the directions and behests of their ministerial controllers. In all the circumstances, the officers of the commission - who must make these approaches, who must use a great deal of insight, and who are specialists - do a magnificent job in analysing the budgets of all the States and adjusting them so that a proper common standard can be determined for the three eastern States.

Then it is a work of art to apply the commission’s principles and methods to the budgets of the applicant States, so that they may be adjusted to a level not appreciably below the average for the three standard States. I pay a very cordial tribute to the magnificent work that this staff must do to obtain the information on which the reports are based, to inform the commissioners, and to present the annual reports in the excellent form in which they are always presented. In my view, the form of presentation of the commission’s reports is a model form.

The commission itself faces criticism most cheerfully. In fact, at all points it invites criticism of its principles and its methods, and it replies to that criticism most objectively. It lays down its principles and methods most clearly in writing and it takes up very pleasantly any criticism, no matter how trenchant, analyses it, states its position and, further, records its reasons for its opinions. I cannot imagine anything more satisfactory than to find that kind of approach. I pay the tribute that I have paid on many occasions to the excellent style of English in which the reports are presented.

The other great attribute of this report is that for anybody who has any interest at all in Commonwealth-State financial relations it is a veritable mine of useful and interesting information. Anybody who wants to interest himself in that particular field can do no better than study the report of the Commonwealth Grants Commission. When he was able to say, “ I understand it, and I have a pretty fair knowledge of the information that it presents “, I would be prepared to give him a certificate as a very knowledgeable person in the field of Commonwealth-State financial relations. I regret that, having regard to recent events, I have not had time to give to this report the complete study that I invariably give to the commission’s reports, and which I shall give to this report presently. However, I have made a hurried scanning of the report and have studied it sufficiently to justify all the comments I have made about it to-night.

The commission has made a momentous departure this year. For the first time since 1941 it has stated that the claimant States are to be brought to a deficit budget standard. During the war years, when the standard States accumulated big surpluses, because they lacked materials and manpower for use in work on their railway services and other facilities, the applicant States . pressed for an adjustment of their finances on the basis of a surplus budget. I am not criticizing the Commonwealth Grants Commission’s decision then. The commission said, “ No, we will deal with you on a balanced budget basis, and when those surpluses come into play after the war we will have regard to them and we will still keep you up to a balanced budget standard “. But it is interesting to note that when the standard States are on a deficit budget, that is the norm or the standard for the three applicant States. When one studies this report, which records the adoption of a deficit standard, one finds that from every State is deducted 17s. per head of population to bring it below the standard, that amount being the average of the standard of deficit in the budgets of the three eastern States. So, over all, there is a levelling down.

To those who talk about CommonwealthState financial relations I say, without bitterness, that proof positive that those relations are not satisfactory is to be found in the fact that to-day, when we are told there is great prosperity, the Commonwealth Grants Commission has declared a deficit budget as the standard for the States. We have to accept the budget of a State that cannot pay its way, and the applicant States have to be brought up only to that low standard. It is quite obvious that the flow of funds from the Commonwealth to the States has not been adequate. There can be no clearer proof of that. Whilst I am not criticizing the commission for having, in all the circumstances, adopted a deficit budget, I just point to the fact that a deficit budget standard is the standard for the States to-day, and say that is a fact to be deplored. It is a fact to which the Commonwealth should address its mind. Having regard to its predominance and the part it plays in the finances of Australia and the adjustment of State finances, the Commonwealth must accept some responsibility for the fact that a deficit budget pervades the States to-day. The commission dwelt at some length on the fact that there was a budget deficit and gave its reasons, as it always gives its reasons, in chapter IV., at paragraphs 45, 48 and 49. I ask the Senate to bear with me for one moment while I read two brief paragraphs. Paragraph 48 states -

The Commission has decided to adopt a deficit standard for 1955-56-

The commission was reviewing the audited results of the applicant States for that year - but, in arriving at the amount of that deficit standard, it has considered the extent to which the corrected budget deficits of the standard States should be modified by bringing into account revenue reserves which were available to those States and which had not already been taken into account by the Commission in previous years.

I ask the Senate to note paragraph 49, which states -

In reaching this decision the Commission has thought that it would be unwise to regard the circumstances of 1955-56 as so exceptional that th:y would be unlikely to recur in future years, lt believes that in determining the budget standard for any year it must be guided primarily by the budgetary experience of the standard States in that year.

The commission, in short, said in that paragraph, “ The position may well persist. When we take a deficit budget standard for 1955- 56, we may indeed find that that persists.” It is interesting to find the commission’s view confirmed in figures which I put to the Senate when speaking on another bill. For the year ended 30th June last, four States had deficits. The overall deficits of the six States amounted to £6,945,000. Two States had a narrow surplus; New South Wales had a surplus of only £129,000 and Queensland had a surplus of £15,000. Two States barely balanced and the others had very substantial deficits. It seems certain, in view of those results for last year, that, when the year 1956- 57 becomes the year of review for the commission, a deficit budget standard will again be established. That seems to be indicated by the paragraphs of the commission’s report, which I have read, and by the figures I have given which are disclosed in Treasury Information Bulletin No. 8, published in October, 1957.

Despite all that can be said about the money that has been made available for loan purposes, special grants, income tax reimbursements, roads, tuberculosis and the rest, it is perfectly clear that justice has not been done to the States when the deficit budget standard has emerged, as 1 have mentioned, and seems certain to be established for next year. The Commonwealth should consider more closely the fact that the States perform functions that are intimate to the lives of the people - the functions of law, order and public safety, education, health, hospitals and the rest. They are matters of great moment to every individual.

The commission performs a great function, so far as its powers enable it, in enabling Australians in the various States to have a reasonably uniform level of services. The grant is made to the States without a single condition being attached to it by the Commonwealth. The States collect amounts through the income tax reimbursement grant and the special assistance grant, and they have complete responsibility to allocate them as they wish. However, the Commonwealth Government and the National Parliament wish to see that the citizens of Australia have services provided for them at a fairly uniform level. That is one reason why the representatives of the standard States so readily support a measure eS this type year after year. We who represent the applicant States are indebted to them, and I express my appreciation and that of my colleagues from the applicant States to them for not raising any difficulties about this grant, which I might call the important “ topping up “ grant.

I now refer to paragraph 23 of the commission’s report. It is relevant to the matter of the impact of interest charges on State budgets. Paragraph 23 reads -

At the time of the 3rd Report (1936) the Commission regarded loan losses as a main cause of the present difficulties of the States, but the Commonwealth Treasury has pointed out that gross debt charges now constitute a much smaller proportion of State expenditure than before the war. This can be regarded as the natural result of the post-war inflation and of the expansion of State social services.

I ask the Senate to note particularly the following words: -

Nevertheless, the burden of debt charges in absolute terms has risen seriously in all States in the last eight years, and is relatively heavier on the claimant than on the non-claimant State budgets.

I suggest to the Minister in charge of the bill that that is a factor of which the Government does not take proper cognizance. It affects the budgets of the non-claimant States and that in turn affects the standards that are chosen by the Commonwealth Grants Commission for the claimant States. It operates as a penalty upon the development of services in the States, and that is bad for Australia. I hope that the comments I now make may induce a degree of real generosity in the approach of the Commonwealth to Commonwealth-State financial relations. At a time when Australia is literally bursting at the seams, with its population growing apace, a tremendous demand for activity of every kind and all the signs pointing to great boom and development, the Commonwealth should have the States moving ahead of development, and not trailing behind. It needs only a little imagination to alter the viewpoint; do not fight the States off and hold back funds. What is wrong with giving them a little extra, even if it is too much, and letting them move ahead of events? That is the approach that I suggest should be adopted by the Government. I commend chapter II. of the report to any one interested in this question. It deals with inequalities amongst the States and is very informative. 1 come now to the recommendations of the commission. They appear in paragraph 150. It is interesting to note that, on the application of the commission’s methods, the part of the grant based upon the adjustment for the period two years before has meant a favorable additional grant toSouth Australia of £842,000 and a favorable grant to Western Australia of £322,000, but has meant a deduction from the advance grant to Tasmania of £816,000. The broad estimate the commissioners made - I invite Senator Vincent’s attention to it - gave £4,800,000 to South Australia, £9,800,000 to Western Australia and £4,400,000 to Tasmania. The net figures were -

Those three States will be very grateful for the receipt of those amounts. The only other comment I feel impelled to make is in relation to a change for the better in procedure that is made in this bill. It is obvious that the States cannot stand by and wait for funds while the amounts recommended for them in this report are being made available. Hitherto, the Treasury has been making monthly advances to the States out of the advance to the Treasurer. The proposal under this bill is to authorize the making of monthly payments to the States by authority of an act of this Parliament. I think that regularizes the matter and puts it in better parliamentary form, and the Opposition approves that proposal.

I conclude with the comment I made earlier, that I think that we, the Commonwealth, generous as we are in acceding without question to these adjusting grants that the Commonwealth Grants Commission recommends, ought to be prepared to set our sights a little higher and do our best to enable the States to provide better facilities for their people, because in improving their standards and providing better facilities, they are providing not for people of the States, but for people of the nation.

Senator VINCENT:
Western Australia

– T do not very often agree with the remarks of the learned Leader of the Opposition (Senator McKenna), although I will admit that he rarely makes a speech that has not some meat in it. Although I do not agree with something he said to-night, I do very cordially agree with quite a lot of what he said. I particularly concur in his remarks concerning the really fine work of the Commonwealth Grants Commission and its personnel. The Leader of the Opposition said that they had performed a signal service to the Commonwealth. In that sentiment I heartily concur. It is particularly fine to see such a splendid instrumentality of the Parliament working so efficiently and carrying out such a vital task for the smaller States with relatively few personnel. The volume of work that these gentlemen must get through in a year is so obviously enormous, as is seen from their excellent report, that it is a matter of considerable wonder to me that such a small staff should be able to encompass the tremendous field of research and investigation involved in the work of the commission. I personally express my humble appreciation of the very effective work of the commission, not only during the current year, but also in previous years.

Having said that, and having heartily agreed with Senator McKenna on that point, I joint issue with him on his major thesis. He can correct me if I am wrong, but I believe that his theme purported to be, first, that he deplored the deficit budgets of the standard States. I think every one does that and I do not disagree with him there, but from that point he argued - without a great deal of logic, I suggest - that those States were not getting a fair deal. That might or might not be correct, but the Leader of the Opposition did not prove his point. He asserted it, and one can equally assert the opposite without getting very far. Mere assertion and denial do not achieve much in debate.

I do not think that Senator McKenna has proved his proposition that, merely because the standard States bring to light deficits in their budgets, that fact prima facie establishes a proposition that the Commonwealth is not giving those States a fair deal. I suggest that there are many reasons why the larger States have fallen by the wayside, as it were, in their budgets. I, for one, do not agree with the argument that that has been attributable to any act on the part of the Commonwealth. Of course, those States could apply for a grant under the procedure laid down in section 96 of the Constitution. There is nothing inherently objectionable in that. I understand that Queensland is contemplating an application to the commission under section 96, and I shall be most interested to see the report of the commission if such an application is made.

I shall deal with Senator McKenna’s argument as I proceed with my own, because it has some relevance to what I have to say. Before I discuss this bill, I think it is desirable for me to cover very briefly some of the historical background of the Commonwealth Grants Commission’s activities, which is relevant to my remarks. The three applicant States which, I am pleased to observe, have not been called the mendicant States in this debate, all have obtained substantially from the commission recommendations covering the respective amounts for which they applied. I refer in this quotation to the second part of the amounts recommended for payment. These show this result -

So, by and large, the States got very close to the amounts they actually sought from the commission. I think it might be pertinent to what I have to say to invite the attention of the Senate to the principle underlying the work of the commission. Section 96 of the Constitution provides -

During a period of ten years after the establishment of the Commonwealth and thereafter until the Parliament otherwise provides, the Parliament may grant financial assistance to any State on such terms and conditions as the Parliament thinks fit.

The very important and relevant words of that section are these - . . the Parliament may grant financial assistance to any State on such terms and conditions as the Parliament thinks fit.

The history of the Commonwealth Grants Commission briefly is that it was established in 1933 to inquire into and report upon applications made by the various States in pursuance of section 96 of the Constitution. It proceeded to carry out that work, and in the initial stages it considered applications based upon a principle known as the disabilities principle, which meant that a State was entitled to apply for assistance or compensation arising from any disability from federation. Recommendations were made by the commission on that principle. I shall not go further into the details of the history of the commission except to say that in 1936 it rejected the principle of compensation for disabilities arising from federation and it chose or introduced quite a new principle known as the financial needs principle. I ask the Senate to take particular note of that fact, because not only is it of great significance to what I have to say but also it is relevant to what Senator McKenna said earlier.

The commission, in its current report, denned the principle of financial need in the following terms: -

Special grants are justified when a State through financial stress from any cause is unable efficiently to discharge its functions as a member of the Federation and should be determined by the amount of help found necessary to make it possible for that State by reasonable effort-

I emphasize those words - to function at a standard not appreciably below that of the other States.

Hence, of course, Senator McKenna’s explanation about the adjustment of budgets of the claimant or applicant States to those of the standard States on a population basis.

I invite the attention of the Senate to the significant portion of that principle, which is that as from 1936 the commission, to use its own words, has considered only applications for assistance to make it possible for States to function at a standard not appreciably below that of the other States. My point is that there is a marked difference between the financial needs principle, which actually is still operating, and the earlier principle upon which the commission functioned. I repeat that the financial needs principle is still adopted by the commission. If one turns to the commission’s terms of reference, one will see why. Paragraph (b) of the terms of reference, which relates to the really important matter that the commission has to inquire into, reads - any matters relating to grants of financial assistance made in pursuance of that section-

That section being section 96 of the Constitution - by the Parliament to any State which are referred to the Commission by the Governor-General;

From that term of reference, the commission has determined its policy, which is based on financial need.

I suggest to the Senate that that policy needs to be looked at. I think that very soon, if not immediately, we must ascertain whether the work of the commission, good as it is, is having the desired effect. We must ask ourselves whether we could carry on with the commission and with compensation in accordance with the needs principle perhaps in perpetuity. I do not think that is the intention of section 96 or that it is desirable in a federation.

There are various elements which I think should be referred to and which are important in this discussion. It is important to note, first, that the terms of reference now available to the commission do not by any means exhaust the rights of the States under section 96. It will be noted that section 96 enables the Parliament to grant financial assistance to any State on such terms and conditions as the Parliament thinks fit, that is, for any reason at all - not necessarily on the principle which now dominates the considerations of the commission, nor for that matter on any other principle. That is the first thing to be remembered about problems associated with Commonwealth and State financial relations.

The second feature of the present situation to which I refer and which 1 think is objectionable is this: The Grants Commission is confined to a consideration of matters that more or less are referred to it by the Governor-General in Council. It is objectionable for various reasons, the main one being that the States have no authority to originate the subjects or to determine the policy upon which the commission should operate. In other words, there is no CommonwealthState agreement which would tend to assist the States in obtaining assistance under section 96 of the Constitution, and no State can put up its own case unless it is within the existing terms of reference that the commission accepts.

Therefore, 1 think we must come to the conclusion that the existing policy of the commission is somewhat narrow and could have the effect of not achieving the desired result. I feel that the only way in which the applicant States can ever succeed in obtaining a standard comparable with that of the standard States is for their development to be pressed forward at an accelerated rate. But that development could be increased only with federal aid. i think immediately of my own State of Western Australia - a large, arid State, which needs a tremendous amount of public and private investment that is not available from resources within the State. I do not agree with the argument that Western Australia can be developed or that the rate of development can be accelerated as a result of payments made by the Grants Commission in pursuance of its present policy. If Western Australia gets only enough money from the Grants Commission to enable it to balance its budget each time, that is merely a palliative to the real problem. I suggest to the Senate that the real need is sufficient investment to accelerate development so that the State will not have to call upon the Grants Commission indefinitely.

We often hear it said that the States do not get enough money from the Commonwealth Grants Commission. I do not agree with that proposition. That may sound rather anomalous in view of the manner in which I have been arguing. However, if we read the reports of the commission we cannot come to any other conclusion than that the final recommendations of the commission are perfectly just. If we consider those recommendations against the background of the commission’s policy, we must conclude that the States, are getting a fair deal. My argument is that the present terms of reference of the commission are too narrow. That is not quite the same as saying that the States are not getting enough. If the terms of reference were widened, the States might even get less in certain circumstances. I suggest that we have another look at the formula under which the commission works and under which it makes its recommendations. I think that we should return to the disability formula and abolish the needs formula which is now the basis of the policy of the commission. 1 feel that that is the only way in which we can provide for an accelerated rate of development in the undeveloped States. We are liable otherwise to perpetuate a situation in which we are suffering a disability.

That leads me to my concluding remarks. One often hears the claimant States aver that the Commonwealth is too parsimonious in its special grants. I do not accept that as a general proposition. Western Australia has never had more money than now. I think the responsibility for doing something about this matter rests squarely on the State Premiers. At present, the Commonwealth Grants Commission, an instrument of this Parliament, is operating in pursuance of a policy which has never been attacked by the State Premiers. They .have never asked for any alteration of the policy. I am reminded of a reference made by the commission to the case presented by Western Australia. At page 13 of its report the commission refers to the fact that Western Australia presented a special memorandum on “ The Need for Increasing Special Grants under Section 96 “. The report goes on to say -

In this memorandum it was stated that “ Special grants to overcome the financial strain of developing a State with small and/or sparse population could normally be expected to decrease as the State grows and the need for further development decreases, although this effect may be somewhat mitigated by the loss of taxable capacity through Income Tax Reimbursement procedures. At the same time, the unequal distribution of natural resources gives rise to financial difficulties which will not be eased with the passing of time and may possibly increase”.

I agree with that, and I think everybody else does too. My point is that a meeting of the Commonwealth Grants Commission is not the proper place for the representatives of Western Australia to be saying that sort of thing. The proper place for that to be said is a Premiers’ conference. Western Australia is acting too late when it submits a case for a variation in the policy of the commission after the commission has commenced its work. The time for a decision in relation to policy is when a Premiers’ conference is held.

I suggest that the responsibility for suggesting alterations of the policy affecting the considerations of the commission is primarily one for the State Premiers. Unless and until they move, we will not have any alteration of the present methods of procedure. Actually the commission has given a hint in this report. If honorable senators turn to page 19 of the report, they will find a most significant remark in regard to present policy. The report reads -

The commission has so far been offered no guidance as to how it should judge whether development should have proceeded in one State rather than in another.

There, I think, is my thesis in a nutshell. The commission is seeking guidance in relation to the policy for overcoming the disabilities of the applicant States. I would not be at all surprised to find that the commission agrees with me when I say that the only way out of the troubles of the applicant States is to take action to accelerate the economic development of those States. All the parochial balancing of their budgets per medium of the commission will not do that. Unless some one gets down to taws and does some thinking about a new formula, or, in the words, of the Commonwealth Grants Commission itself, unless some guidance is .given to the commission, We can expect a continuation of the policy of doling out a few pounds to enable the applicant States to balance their budgets, with cries of woe from standard States like Victoria. Unless something is done, the situation will not improve.

I suggest in all sincerity that we can expect improvement only from a properly planned and accelerated rate of development per medium of this very fine body, the Commonwealth Grants Commission. Again, I emphasize that the responsibility for alteration of policy lies fairly and squarely on the State Premiers, not on the Commonwealth Government. I think that is all I should say on this matter. I do not wish to develop my proposition further. I think the arguments I have put forward can be found in the report of the commission itself, a document that I enjoin all honorable senators to read.

Senator O’FLAHERTY:
South Australia

– We have just listened to a very learned discussion, not on the disabilities of the States, but on the activities of the Commonwealth Grants Commission. The Commonwealth Grants Commission was set up because of section 96 of the Constitution. lt was set up to consider the disabilities, budget deficits and other factors relating to what have become known as the claimant States and to assess them in terms of money. That is a very scientific business.

It is extraordinary that when honorable senators are discussing a bill to give effect to recommendations made by the Commonwealth Grants Commission, they can discuss almost anything that has been happening in any of the States to which the bill applies.

This is a bill to authorize the payment of special grants to the so-called mendicant States. I have been twitted several times about living in a mendicant State by those complacent people who live in States such as Victoria and New South Wales. I noticed today that honorable senators from Queensland are not quite so sure of themselves as they were a little while ago.

I have gone through this report, but I frankly admit that I have not read it very closely. I can assure honorable senators they will have a headache before they get half-way through the report. I have come to the conclusion that they must be scientific gentlemen who compiled it and examined all the figures put before them. We should approach this matter realistically. The claimant States undoubtedly put the best figures that they can before the Commonwealth Grants Commission and play up their disabilities as much as they can. That is only to be expected in this world, where every one tries to get something for nothing. The commission has, over the years, changed its formula. It has been obliged to do so. For instance, recently the Government has suggested that a Treasury official should be in attendance at its meetings. The Government apparently thinks that the applicant States have been getting at the Treasury to an extent that even the commission has been unable to figure out. Now, apparently, a Treasury official is to attend meetings with the representatives of the States, and the commission will act as adjudicator. The report indicates that that is to be the practice. I do not know how the poor old States will get on in future. They will have to face, not only the commission, but also another censor - the chap who pays the money. I have always found that he scrutinizes the bills pretty closely before he pays them.

I have attempted to understand the report, and I find that a new formula is set out. I am afraid that it was drawn up by a solicitor. Certainly, I do not think the members of the commission were responsible for it. On page 28 of the report, at paragraph 41, the following appears: -

The Commonwealth Treasury proposal was further discussed at a meeting in Melbourne in February, 1957 . . .

The proposal referred to is that a Treasury official should be in attendance - . . of representatives of all claimant States and of the Treasury. As a result of that discussion, the commission has decided that, beginning with this report, the procedure for submission of estimates of financial need by the claimant States will be as follows: -

The report then sets out what shall be done in July of each year, and so on. Then we learn that, in respect of the first part, payment will be made according to a given formula. As for the second part, payment will be made according to the formula of the second part. Upon examination, one discovers that the formula of the first part deals with disabilities and so on. Then one finds that the formula of the second part deals with deficits, whether or not the particular State provides social services and hospital accommodation, and so on, equivalent to what is provided by the complacent States. Having gone through all that we find on page 28 of the report the following: -

The grant recommended for payment is the second part, determined as explained in step (iv).

If honorable senators are not quite sure what step (iv) is all about, I am afraid that I must ask them to study it for themselves. The report says further -

. plus or minus the first part, determined as explained in step (iii).

I am sure that terminology was created by a lawyer!

Senator Kennelly:

– They try to blind you with science!

Senator O’FLAHERTY:

– I think that the honorable senator’s comment describes the position exactly. The application of this involved formula produces the information that South Australia is to get £5,700,000, and Western Australia £10,150,000. I heard an honorable senator from Western Australia complaining just now about that State getting £10,000,000. I do not know what he had to complain about. Perhaps his State had been granted £150,000 too much. Tasmania - that little speck of land at the bottom of Australia - is to receive £3,650,000. 1 do not want it to be thought that I am criticizing the work of the Commonwealth Grants Commission, but surely some of these matters could be reduced to ordinary, everyday Australian terminology, so that we should know what the commission was driving at.

A new proposal in the bill provides foi a continuous payment over the period covered by the particular grant in the next year. Previously, the sum was paid from the Advance to the Treasurer. The difficulty has often been that no appropriation for the specific amount granted has been made by Parliament. Secondly, in the early stages the various applicant States had to apply to the Treasurer for an advance with which to carry on. That meant that, at the end of the year, the States were in an even more impecunious position. Usually they carried on by resorting to the use of an overdraft, on which they paid interest. The Commonwealth Grants Commission took that into consideration. This year we will authorize the payment of a total grant of £19,500,000. The new arrangement will carry on for about six months of the following year. By then we shall have before us another recommendation from the commission which will carry the States forward again. That is an excellent idea because the States will no longer have to rely on an overdraft, or issue treasury-bills, in order to carry on. They will know each month, for about six months ahead, that they will receive an amount equal to that advanced in the previous year. I commend the Commonwealth Grants Commission for making that recommendation. Something like that will have to be considered because the States’ are now placed in a most disadvantageous position.

Another point to be considered is the development taking place in the States themselves. In South Australia, we have a rather go-ahead Premier.

Senator Scott:

– Hear, hear!

Senator O’FLAHERTY:

– He is a great friend of mine, and he is a go-ahead man, but it must be remembered also that he hassome extraordinarily good advisers around him. Even he finds it necessary to come to the Treasurer from time to time seeking more money for South Australia, and headopts many ways of inducing the Treasurer to help him. Sometimes he conducts a propaganda campaign through the press. At other times he even resorts to threats tosue the Commonwealth Government because it will not do what he wants it to do, although it must be admitted that the threat to sue has no relation to his application for finance. It is true, however, that he has been able to obtain advances which have made it possible for South Australia to develop more than any other State of the Commonwealth, including Queensland, about which so many representatives from that State boast. Because the Premier has been able to obtain this money, it has been possible to establish in South “Australia works that will benefit the whole of Australia in the very near future. For instance, it has been estimated that the revenue from the production of uranium alone will amount to approximately £3,000,000 in the coming year. This has been made possible only because the goahead Premier of South Australia has been able to cajole the Treasurer into making advances to that State. I am not saying that he has been successful always in inducing the present Treasurer to advance money, but he was extremely successful with the previous Treasurer and for that reason it has been possible to develop many great projects in that State.

One of the great disabilities which South Australia has suffered, is still suffering and will continue to suffer for some time is the shortage of good water. We do have pipelines running from the Murray River, and this work was financed with money obtained from the Commonwealth.

Generally speaking, the States are able to balance their budgets with the grants made available to them on the recommendation of the Commonwealth Grants Commission although I think that this year South Australia’s grant has been cut down by about £400,000. Because the deficits are usually met in the following year by moneys received on the recommendation of the Commonwealth Grants Commission, the applicant States are working continually for either a balanced budget or a deficit. In my opinion, that is wrong procedure, but” it must be appreciated that the fault lies not with the Grants Commission but with this Parliament for not taking into consideration the methods adopted to apply the provisions of section 96 of the Constitution.

I conclude by pointing out that the people who are engaged in preparing the cases for the applicant States are devoting almost the whole of their time to preparing documents, examining costs, availability of supplies and so on. The presentation of cases to the commission costs each, of the applicant States thousands of pounds every year. It is necessary to arrange some different method of dealing with States grants. A scientific band of people is employed preparing material for presentation to another scientific band of people who are theadjudicators between the applicant States and the Commonwealth Treasurer. Tha States are spending thousands of pounds to prove that they are entitled to grants from the Commonwealth Government. That is not the fault of the commission, which was established under a section of the Constitution to do a certain job. The Parliament should give to the commission detailed instructions to comply with that section of the Constitution, so that there will be no necessity for huge expenditure by the three claimant States each year in an effort to wheedle, through the commission, a little more from the Commonwealth. I can remember only one year when the commission’s recommendation was not followed. I. think it was in the late 1920’s, when there had been many droughts and Australia was in a rather bad way. The Government did not discard the recommendation of the commission, but merely reduced the amounts recommended.

The matter- of the formula has been raised two or three times in this Parliament. On one occasion the commission got a bit of a belting because some honorable senators thought its personnel were at fault. I- do not think there is anything wrong with the commission. It is doing its job, in accordance with the instructions it has received, under the charter on which it works. I- would not like anybody to think for one moment that I am criticizing the members of the commission or their actions. It is the charter under which they work that I criticize. I stress that some formula should be devised to give the States that are now harshly termed “ mendicant “ States some chance of expanding their economies and developing” to such an extent that they would not need grants at all.

That brings me back to what I was saying about water in South Australia. A considerable amount of the money that has been spent on the conservation of water along the river Murray has come from federal grants. Originally Victoria and South Australia each, contributed one-third of the cost, but later, after some discussion, New South Wales came into the scheme, and to-day we have what is called the River Murray Commission. The conservation of water for use in irrigation and other purposes at places down the river was recently the subject of an argument. The worthy Premier of South Australia got his back up a- little and threatened to take proceedings against the Commonwealth; because the Commonwealth was taking a few drops of water from- the Murray at one place and putting1 a few drops in at another place. I understand that now- there is no question of litigation1 and that all” court- proceedings have been called off. An amicable arrangement Has been reached, so that South Australia will have water available for irrigation and other purposes. But it is of no use to conserve water unless- provision is made for utilizing the water. Some provision must be made for the development of the country along the Murray and the utilization of the water about which the governments have been quarrelling. That must be done. But South Australia cannot finance the work with loan money, because it is not allowed to raise loans in excess of those permitted by the Loan Council, which is dominated by the Commonwealth Treasury, and if it financed the work from revenue, it would be penalized by the Commonwealth Grants- Commission. Somebody asks, “ What would you use for money? “ You can use credit for capital works.

It comes back to the Commonwealth. Grants Commission. Some formula should’ be arrived at so that States will not be placed at a disadvantage through having used some of’ their’ revenue for developmental’ purposes. At present, if a State does use revenue for those purposes, the commission is likely to say, “You should have financed those works from loan moneys. Because you have used money from revenue, your budget shows a deficit this year of £500,000; but we cannot recommend the making of a grant to cover that “. The State then has to make other arrangements to find the money to cover the deficit. As only a certain amount is available from the Loan Council, other works may have to be cancelled.

Some formula will have to be devised and incorporated in the charter of the Commonwealth Grants Commission to give those States that are now applicant States some chance of developing their resources from the revenues they receive and from the grants that are made by the Commonwealth Government in the circumstances that we are discussing to-night.

Senator WILLESEE:
Western Australia

– I rise to take part in the debate at this late stage in order to speak on an interesting point that has arisen from speeches that have been made by honorable senators on both sides of the chamber. I refer to the fact that nobody feels that this bill provides all the financial assistance that should flow from the Commonwealth to the States. Indeed, we know that it does not.

Senator Vincent said that more than the money provided in this measure should be given to the claimant States, particularly to Western Australia. He developed that argument by saying that the action should lie with the State Premiers and not with the Commonwealth. That argument is highly debatable. We in Australia - particularly members of Parliament - waste too much time in trying to fix responsibility and trying to pass the buck. Surely we are all Australians! Surely we are governing the one land mass! One beauty of the Australian continent is that the same language is spoken in all the States. When the Lord Mayor of Brisbane says to some one, “ Pull your head in “, his remark is understood throughout Australia. Therefore, much time is wasted when we try to hold some one responsible for a particular job.

The Commonwealth Grants Commission is at present sitting in Perth. The Premier of Western Australia has pointed out the difficulties under which his State is labouring and the rapid progress that is being made to overhaul the deficit incurred by the railways. He has pointed out that if a claimant State is to become a standard State, it must be developed to the point where it no longer needs to approach the Grants Commission. When speaking on the Budget, I mentioned the Tariff Board’s reference to the discovery of bauxite at Weipa in northern Queensland and pointed out that that one discovery will mean that in, the very near future Australia will no longer be an importer of aluminium and soon will become an exporter of aluminium. That type of thinking is necessary when we are considering the correct approach to the claimant States.

The Premier of Western Australia, in his submissions to the Grants Commission, stated that two years ago he put before the Commonwealth Government the question of the development, of- the Ord River, basin, but so far had not received a reply. I suggest to Senator Vincent that some State Premiers have taken action and have given the lead to the Commonwealth, but apparently the Commonwealth has not the time to answer their submissions to it. Senator Vincent referred to paragraph 26- of the commission’s report, which reads -

The Commission has so far been offered noguidance as to how it should judge whether development should have proceeded in one State rather than in another.

Senator O’Flaherty suggested that the formula should be altered. Could any one, who thought about this matter realistically, imagine any Commonwealth government giving to anybody, even such a worthy body as the Grants Commission, the authority to say what development should proceed in any one State? Could any one imagine a Commonwealth government giving the Grants Commission the right to say that, now that the experimental work on the Ord River development scheme is finished, millions of pounds should be spent to develop the townships that would be established if the results of the experimental work were put into effect?

I remember thinking, when I was very young and very naive - I am growing older, but I do not know whether the naivete has altered - that that work should be done by the Senate. I felt that an all-party Senate committee should be constituted to report on the developmental work that should be undertaken by the Commonwealth. I have not changed my thoughts on that subject. I suggest that the committee should be a Senate committee because it would then be away from the narrow considerations which electorate work forces upon members of the House of Representatives. A unanimous report - and that is not impossible in committee work, as the Senate has proved - would go a long way to meeting the objections raised by the commission and developed by honorable senators to-night.

I turn now to the Ord River scheme. On 3rd September, I asked Senator Spooner a question. He replied on 13th September, but the question and answer were never included in “ Hansard “ because I agreed, when the reply was sent to me in

Perth, to have it taken off the noticepaper. I thought that that would help to keep the notice-paper uncluttered. I did not realize that it meant that the question and answer would not be reported in “ Hansard “. With the concurrence of honorable senators. I incorporate in “ Hansard “ the question and answer, which are as follows: -

What has been the total cost to date to - (a) the Commonwealth; and (b) the State government of Western Australia, of the experiments

Carried out at the Ord River in Western Australia?

What is the annual cost to each government?
Is the Minister’s department satisfied that some crops could be grown commercially in the area; if so, what crops, and when is it intended to encourage their commercial growth?
What new experiments are proposed, if any?

Senator Spooner:

– I am now in a position to give you the following answers: -

Total expenditure to 30th June, 1957, was £240,895 10s. 6d. of which the Commonwealth and the State Government of Western Australia each bore one-half, or £120,447 15s. 3d. This expenditure does not include the salaries of staff either of the C.S.I.R.O. or the Western Australian Department of Agriculture employed at the Kimberley Research Station. The C.S.I.R.O. has advised that to 30th June, 1957, the total salaries cost of its staff engaged at the station was £30,791. The Commonwealth has no information on salaries paid by the Western Australian Department of Agriculture to its staff employed at the Kimberley Research Station.
A five-year agreement concluded last year between the Commonwealth and the Western Australian State Government approved maximum expenditure of up to £50,000 a year on the Ord River investigations, with equal contributions of up to £25,000 a year by the State and Commonwealth Governments. Salaries payable by the C.S.I.R.O. and the Western Australian Department of Agriculture in respect of staff employed at the Kimberley Research Station are not included in this amount. The new agreement came into operation in 1956-57.

Total expenditure under the agreement for 1956-57 was £48,828 of which the Commonwealth and the State Government of Western Australia each contributed £24,414. In addition, salaries of C.S.I.R.O. staff employed at the research station amount to £6,272.

The Kimberley Station is engaged in research into agricultural possibilities and the problems of growing various crops in the area. Before the commercial and economic possibilities of any such crops can be established, examination would also need to be made of the engineering and economic aspects of providing the irrigation water, and the marketing prospects for the crop.

The only systematic work done to date in these fields is the work of gauging the Ord River, which needs to be carried out over a term of years before it can be significant.

No conclusions have yet been reached as to the commercial possibilities of crop farming in the Ord River area. Experiments to date have yielded some encouraging results and, with regard to rice growing, a useful contribution has also been made to agricultural development in other parts of northern Australia.

For one major crop, sugar cane, experiments have demonstrated the practicability of cultivation on farm sized blocks. It has been shown that sugar yields equal to the best of Queensland’s irrigated cane areas can be expected, under irrigation, on the Ord River flood plain. Experiments are continuing to observe insect-pest and variety behaviour under continued cropping conditions.

Experiments with rice have shown that yields better than the low, subsistence-level yields normally prevailing in tropical countries can be obtained.

Earlier investigations with cotton demonstrated that insect pests were very serious in the area, but over the last two years promising control has been obtained from the use of insecticides.

Preliminary testing of safflower as a wintergrown crop has given promising results. This crop is a minor one but could be useful as a means of diversifying production and income sources.

Tests with grain sorghum and wheat have given satisfactory results, under irrigation.

The commercial possibilities for agriculture, as distinct from the progress made on the scientific possibilities of crop production, have not been established. Production of sugar cane, the crop which has given the most promising results to date, would require a heavy capital expenditure not only for irrigation and farm establishment but also for the construction of a sugar mill. My department is not convinced that such expenditure would be warranted at the present time in the light of the current market situation.

The future programme for the research station comprises principally a continuation of the experiments in hand already.

Rice is the major crop currently being investigated with experiments aimed at improving plant nutrition and methods of pest control. Other experiments are continuing with sugar cane, safflower, cotton and grain crops.

A new programme is being undertaken with linseed, with the testing of new seed varieties.

There is also being undertaken an extension of the programme with fodder crop work and animal nutrition, with the object of assisting the cattle raising industry in the region as a whole.

About twelve years ago, the Commonwealth and Western Australian Governments started developmental work in the very rich Ord River basin. One interesting geological feature is that very rich soil is found in that part of the country, but to reach it one must travel over arid regions. The total expenditure by the Commonwealth in the twelve years has been £120,500, exclusive of the salaries of the staff of the Commonwealth Scientific and Industrial Research Organization, which amount to almost £31,000. The State Government has spent another £120,500, but 1 do not know what amount was expended on the salaries of the staff of the Department of Agriculture. I assume that that amount would be roughly the same as the salaries of the C.S.I.R.O. staff, although I do not know whether more or fewer officers were employed. The total expenditure, therefore, is about £300,000. A new contract has been entered into. The Commonwealth and the Western Australian Governments have each agreed to spend £25,000 a year, or a total of £50,000, exclusive of wages, which would amount to about £10,000 or £12,000 a year.

The interesting part of the Minister’s reply is that the experiments have shown beyond any doubt that many crops, particularly rice and sugar, can be grown in that part. It is unfortunate that we have a Treasurer who comes from Queensland and who is sensitive about where sugar should be grown. The market potential of both rice and sugar has not yet been proved. The experimental stage at the Ord River is over. In his reply, the Minister said that the future programme for the research station comprises principally a continuation of experiments already in hand. After twelve years, all that can be learnt about crops must surely have been learnt, although perhaps further work is necessary on the gauging and testing of the Ord River. The Premier of Western Australia, in his submissions to the Commonwealth Grants Commission, said that he pointed out to the Commonwealth Government two years ago that the potentiality of the area had been proved and that if it was to be developed, a large amount of money would be needed. He wrote to the Commonwealth but has not yet received a reply. Still, if he composes himself for another two or three years he might get a reply.

This means big money, and it must be made available by way of a special grant. It could not possibly come within the terms that the Commonwealth Grants Commis sion has suggested or be provided by an alteration of the present formula. Construction of the dam alone would cost about £20,000,000 on the latest figures that are available. Very good results would flow from its construction, however. The establishment of about 100 farms, each of 100 acres, would revolutionize the development of the area, but it requires a courageous step by the Commonwealth Government. There was never a more appropriate time for the Commonwealth to step out. We have passed through a fairly stable period of peace and we have overflowing coffers.

Senator Kennelly:

– Is the honorable senator speaking about his own State?

Senator WILLESEE:

– I am speaking about the Commonwealth when I refer to the overflowing coffers. I do not want to enter into an argument with my Deputy Leader about State boundaries. I assure him that it was not a Western Australian who drew up the State boundaries and left all the desert area in one State while the rich land went to Victoria and the coal basin to New South Wales. I do not think in terms of boundaries because I believe that the development of the part of Australia to which I have been referring is vital to the whole Commonwealth, just as the defence of Australia is vital to every Australian.

The plea I want to make is on behalf of the Western Australian Government, which has put forward propositions as far back as 1951 and still has not had a satisfactory reply. I join with Senator Vincent on that point. The potentiality of the area for rice growing has been proved at Liveringa, behind Derby and the port of Wyndham. A private company known, I believe, as the Northern Australian Development Company, is satisfied that rice can be grown there and will put private capital into the project. The Western Australian Government has scooped out a bit of a pool and will put more money into it for the supply of water.

Once this area is developed, a problem will arise because of the lack of port facilities. A proposition for such a port was put forward in 1951. I have the relevant papers in my hand. The proposal was for the construction of a deepwater port at Black Rocks. A wharf would be expensive because of the shallow ledge that runs into the sea and the big rise’ and fall in the tide, which is as great as is to be found in any part’ of the world. The jetties, therefore, must be very long, and their construction would be very expensive.

I suggest that proposed expenditure in that area should be very closely examined.

If the Commonwealth Government is not prepared to proceed with the development based on experiments in the Ord River basin, it should move in behind the private project which has been established near Derby and at least provide proper port facilities for the development that will occur there. It is anticipated that another town will grow out of the rice projects in that area. The moment development takes place in one part of Australia, ancilliary services and industries grow around it. There is always the pleasing prospect of a successful outcome of the search for oil, and in that event the Commonwealth is likely to be caught- flat-footed without port facilities in that area.

These matters are relevant to the debate that has taken place tb-night: The one point on which we have reached common ground’ is that this is not properly a- matter for consideration by the Commonwealth Grants Commission. The development of the claimant States is of vital importance if they are to be removed’ from that status. Obviously that will not be achieved by the small handout to which Senator. O’Flaherty has referred.. That, objective will be achieved by developing those’ areas- so that the States will’ be able to look after themselves, and only by the huge expenditure of Commonwealth money. If ever there was a time for the Commonwealth Government to open its shoulders- and belt the ball to the boundary, this is it. Everything is favorable. If it can achieve these objectives, the Government will save itself a lot of worry and a lot of future expenditure.

Senator Toohey has pointed out to me that the figures relating to immigration, employment and unemployment in the claimant States that are contained in the excellent report of the Commonwealth Grants Commission are alarming. There is enough material there for a special discussion in the Senate occupying several days. Surely the way out of this problem is to develop the small States. I agree with Senator Vincent that the methods by which we can attain such- development lie outside* the- province of the commission. I enter into the field of- disputation with him, however, when he claims- that the matter rests with the State Premiers. The Premiers have already taken action and stilt await a reply from the Commonwealth Government.

Senator TOOHEY:
South Australia

– This” debate has covered a wide field, including uniform taxation, formulas and suggestions that new methods for tax reimbursements to the States should be devised. I do not intend to go over the ground that has already been traversed. I am afraid that, like most honorable senators who have spoken in this debate, I shall become extremely parochial. I concede that Senator Wright took the debate out of that field to some extent. Nevertheless, we do represent the States which are known as the claimant or mendicant States, and we have a responsibility to the people whom we represent. That responsibility is to point out the disabilities from which our States are suffering. Before I turn to one or two of those, problems, I wish to refer to some ot the comments- that were made by Senator Pearson regarding uniform taxation.

Senator Pearson:

– Not in the debate on this bill.

Senator TOOHEY:

Senator McCallum:

– I wish we had him in New South Wales.

Senator TOOHEY:

– What annoyed me most was the manner in which he gerrymandered the electorates and nullified the principle of one vote one value, and in fact interfered with democratic processes.

The DEPUTY PRESIDENT (Senator the Hon. A. D. Reid). - Order! The honorable senator must relate his remarks to the bill.

Senator TOOHEY:

– I accept your correction, Mr. Deputy President, but I was more or less trapped into that reply by the interjection. I come now to the subject of education, which is vital in South Australia. Paragraph 21 of the current report of the Commonwealth Grants Commission reads -

In both Western Australia and Tasmania the high rates of natural increase have resulted in a high proportion of school-age children for whom educational facilities have to be provided. In South Australia the proportion to population of school-age children has recently increased more rapidly than in the other States, and the South Australian representatives have claimed that it would be appropriate for the Commission to increase its percentage allowance for social services on this account.

The DEPUTY PRESIDENT.- Order!

Senator TOOHEY:

– One of them must be wrong. The argument you are pursuing is stupid and futile.

Senator Pearson:

– Thanks very much.

Senator TOOHEY:

– I want to be frank. I do not wish to leave you under a wrong impression. What I am saying is that if that £500,000 had been made available, it would have helped educational facilities in South Australia tremendously. Regardless of our political views, we cannot ignore the deplorable conditions that exist in South Australian schools. The fact is that South Australia asked for £500,000 more than it ultimately received. Whose fault it is that it did not get what it asked for is not important. The important thing is that South Australia did not get the money. As I have said before, I do not think the need for increased educational facilities has been advocated as strongly as it should have been. Senator Pearson and I, regardless of the fact that we are members of different political parties, both have a duty to get behind anybody who is prepared to highlight the very serious deficiency in the educational set-up in South Australia.

I desire finally to refer to comments made by the commission on basic wage determinations, at page 32 of the report. We see an extraordinary situation. Paragraph 55 reads -

Differences between the Federal and State basic wages in the several States are shown in Appendix No. 22. The Commission thinks that it would be preferable to follow the procedure suggested by the Commonwealth Treasury rather than that proposed by South Australia. It has decided that in making its adjustments for differential impacts of State undertakings on the budgets of the claimant States it will consider differences in State wage policies. This procedure is justifiable on the ground that a State which has a relatively high wage level could reasonably be expected to make a better than standard effort to recover the resultant higher costs by higher levels of charges.

That passage is couched in what I consider to be rather ambiguous terms, with about: 30 or 40 unnecessary words. What it means, in effect, is that South Australia is. a low-wage State. The South Australian Government is using the money that it has literally wrung from the workers of that State as a means to obtain a better grant. That injustice to the South Australian, workers highlights the disadvantages from which they suffer under a Liberal government and the advantages enjoyed by workers in other States which are fortunate enough’ to have Labour governments. I leave the’ position there. As I have said I hope that the subject of education will loom large in the minds of those who have to make these determinations in the forthcoming, year.

Question resolved in the affirmative.

Bill read a second time, and passed1 through its remaining stages without amendment or debate.

page 1309

INCOME TAX AND SOCIAL SERVICES CONTRIBUTION BILL 1957

First Reading

Debate resumed from 12th November (vide page 1182), on motion by Senator Spooner -

That the bill be now read a first time.

Senator McCALLUM:
New South Wales

– I wish to take advantage of therules of the Senate to speak on the subject of defence on the motion for the first reading of this bill, and to reply to a number of allegations that have been made by the Opposition. I am not one of those whothink that at the present time all criticism of our defence policy is wrong. I have myself, during the debate on the Budget and at those other times when we can speak our minds freely and perhaps rove a bit far afield, criticized certain aspects of thedefence policy. But I feel that the attack that has been made by the Opposition has not been sustained by facts and that there is in it an element of unfairness, to which I shall refer later.

The Leader of the Opposition (Senator McKenna) has asked us for facts. I intend, to-night, to adhere fairly strictly to the bringing forward of facts relevant to this- discussion. Criticisms should always be made against the background of what is possible. If you accept some ideal standard which no one has ever reached, then you can make some very biting criticisms. I was brought up to believe that we are all unprofitable creatures and, however much we try, we never reach the standard we should. Against that background, I will admit that some of the criticism that has come from the Opposition has a basis in fact. I am one of those who think that the defence programme should be pursued vigorously. I am one of those who think that our civil defence programme has lagged and has not reached the standard it should have reached. I think that in equipment, organization and everything else we can find a great deal that could be better. But, Sir, we live in a real world. We know that there has been no democracy in the whole of history that has in peacetime achieved what it should have achieved in the matter of defence.

Therefore, I begin with two basic facts. When this Government came into office in 1949, there was virtually - almost literally - no defence in Australia. Senator Gorton referred to that and said, with, I think, a little more than justice and a good deal of generosity, that he did not in any way blame the Opposition for it. I intend to give the Senate the facts of the situation. We ended the war, as all countries end wars, with an army, equipment and factories to maintain the equipment. We had not only magnificent fighting men, but also very great leaders. All that went, and went very rapidly. That was inevitable, because our men had to go back to peace-time occupations and industry had to try to get back to peace-time tempo. The plain fact is that in 1949 our army, navy and air force were virtually negligible and that the whole of the great industrial organization for defence had gone.

We had in Salisbury, South Australia, a permanent filling factory. We have heard a great deal about filling factories, and the Leader of the Opposition has promised us more. It is just as well to know what a filling factory is. A filling factory is something that exists to supply a properly equipped shell, bomb, or other ammunition Of that kind. The old process was very slow and depended almost entirely upon manual labour. As honorable senators know, explosives are very dangerous, and have to be handled with great care. That filling factory went. St. Mary’s, which was only an auxiliary factory, went over to private industry under contracts made by the Chifley Government. In addition to those two great filling factories, our ammunition and small arms factories also went. There was one at Welshpool, in Western Australia, one at Hendon, in South Australia, one at Rocklea, in Queensland, and one at Derwent Park, in Tasmania.

Senator Courtice:

– You would not have been able to keep them going either.

Senator McCALLUM:
NEW SOUTH WALES · LP

– Senator Courtice knows that his interjection is irrelevant. I am not concerned with whether, if we had been in office, we could have, or ought to have, kept them going. I am merely concerned with the facts, for Which the Opposition has asked. The factories were no longer there.

Senator Courtice:

– The Constitution would not have allowed us to keep them there.

Senator MCCALLUM:

– Senator Courtice will have an opportunity later to establish anything he wishes. At the moment I am concerned only with giving the facts. All these factories, upon which defence depends so greatly, disappeared. There was another at Rutherford, near Newcastle, in New South Wales. There were small arms factories at Villawood, in New South Wales, and Ballarat, in Victoria. In addition, a large number of annexes and supporting factories were scattered throughout the States. There was, for instance, one at Kalgoorlie. I am not suggesting that assets were wasted. I know that these factories had to go. Many went to private industry, and possibly the changeover was much less wasteful than is usual, because an attempt was made to decentralize and establish industries at the sites of those factories. I give the Chifley Government of the day full credit for that.

In addition, our Army, Navy and Air Force were reduced virtually to a handful of men. We also lost - and this is very important when we come to the question of planning, and of receiving proper advice - some of our greatest soldiers. The ordinary citizen went back to his civilian occupation. As honorable senators know, in both world wars our civilian generals have been among our greatest. In the first world war we had Sir John Monash, and in the second world war, to name only a few, Sir Iven Mackay, Sir Leslie Morshead, MajorGeneral Windeyer, Major-General Dougherty, Sir Edmund Herring and Sir John Northcott. One very easily could extend that list.

Will any one deny that, when we came to office in 1949, we were worse equipped for the great task before us than any government has been in the history of this country? Senator Gorton has said that he did not blame the Opposition for anything that happened at the cessation of hostilities. Nor do I, except for one thing. When hostilities ceased, all of lis hoped that we should not see the implacable hostility which has since grown up between our old ally and ourselves. I say quite frankly that in 1945 and 1946 I hoped that our war-time alliance with Soviet Russia had bridged the gulf that existed between us in earlier days. I was disappointed to find that I was wrong. I do not blame any one for not recognizing, when I did, that that great gulf existed once more. I do not know when honorable senators made up their minds about it, but in my own case I can fix the exact date. It was March, 1948, more than a year before we came to office. In that month the Soviet Union marched into Czechoslovakia. For me, that was the end of any prospect of decent relations between our two countries. Never since then have I been in a position to be gulled by the Soviet Union. All of us might well have realized then that the Soviet Union was a possible enemy. We were experiencing the cold war, and it should have been the immediate task of every government in the free world to set about reorganizing its defences.

Some countries had never disarmed, or dismantled their factories, to the extent that we had done. Great Britain had not done so, even under a Labour government. The United States of America had not done so, nor had the countries of Western Europe, even though they had been devastated and occupied. To the contrary they embarked upon and maintained vigorous military preparations. The only exception was Western Germany, which, by the terms of the peace treaty, was forbidden to do so. On every hand there was a determination to be prepared for hostilities, if they should come. The need for the revival of our defence policy was apparent in March, 1948. I do not know of any action on the part of the Government then in office which indicated that it realized this fact.

This Government realized it as soon as it was returned to office, and set to work to establish a defence policy which was based on an adequate foreign policy. How difficult it was to do that. No nation in history has had a more difficult task. All our foundations had gone, or been severely shaken. The British Commonwealth had lasted, but in neither the strength nor the form that had characterized it previously. We had to depend on the United States of America. We made alliances with that country and had to shape our defence policy to suit their own.

In addition, we had to face up to what the Soviet Union and its ever-increasing band of allies were doing. During that period several countries in Europe were over-run. This culminated in a more severe control of those countries, and in Red China becoming one of the strongest - and ultimately the strongest - member of the Soviet group. We had also to accustom ourselves to invention at a pace that the world had never previously known.

Who was here to undertake the task of planning? We had a new Cabinet, but many of its members were inexperienced. We had a depleted general staff and I think I may say, without any disrespect to its members, that it had lost its best people. I think that that was true of all the services. As time will not permit me to conclude my speech to-night I shall end by saying that in the face of all those difficulties, we have evolved a defence policy. We have a navy, an army and an air force. We have begun the great task of supporting those three services with the factories and equipment that they need.

Debate interrupted.

page 1311

ADJOURNMENT

The PRESIDENT (Senator the Hon. Sir Alister McMullin). - Order! In conformity with the sessional order relating to the adjournment of the Senate, I formally put the question -

That the Senate do now adjourn.

Question resolved in the affirmative.

Senate adjourned at 10.30 p.m.

Cite as: Australia, Senate, Debates, 14 November 1957, viewed 22 October 2017, <http://historichansard.net/senate/1957/19571114_senate_22_s11/>.

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Senate14 November 1957

QUESTION

STANDARDIZATION OF RAIL GAUGES

Senator SANDFORD:VICTORIA

Senator PALTRIDGE:Minister for Shipping and Transport · WESTERN AUSTRALIA · LP

QUESTION

DEFENCE PRODUCTION

Senator SCOTT:WESTERN AUSTRALIA

Senator O’SULLIVAN:Attorney-General · QUEENSLAND · LP

QUESTION

NEW SERVICE RIFLE

Senator KENNELLY:VICTORIA

Senator PALTRIDGE:LP

QUESTION

FISHERIES RESEARCH

Senator WARDLAW:TASMANIA

Senator PALTRIDGE:LP

QUESTION

AIRCRAFT SAFETY PRECAUTIONS

Senator ANDERSON:NEW SOUTH WALES

Senator PALTRIDGE:LP

Senator BYRNE:QUEENSLAND · ALP; QLP from 1957; DLP from 1968

Senator PALTRIDGE:

QUESTION

VISITS BY BRITISH PARLIAMENTARIANS

Senator BROWN:QUEENSLAND

Senator O’SULLIVAN:LP

QUESTION

AIRLINE PILOTS

Senator COOKE:WESTERN AUSTRALIA

Senator PALTRIDGE:LP

QUESTION

DEFENCE PRODUCTION

Senator VINCENT:WESTERN AUSTRALIA

Senator O’SULLIVAN:LP

QUESTION

AIR FARES

Senator O’BYRNE:TASMANIA

Senator PALTRIDGE:LP

QUESTION

WAGE MARGINS FOR SKILL

Senator HANNAN:VICTORIA

Senator O’SULLIVAN:LP

QUESTION

IMPORT LICENSING

Senator O’FLAHERTY:SOUTH AUSTRALIA

Senator SPOONER:Minister for National Development · NEW SOUTH WALES · LP

QUESTION

KANGAROOS

Senator SCOTT:

Senator O’SULLIVAN:LP

QUESTION

LAND SETTLEMENT OF EX-SERVICEMEN

Senator AYLETT:TASMANIA

Senator PALTRIDGE:LP

QUESTION

VISIT OF BRITISH PRIME MINISTER

Senator SEWARD:WESTERN AUSTRALIA

Senator O’SULLIVAN:LP

QUESTION

PAY-ROLL TAX

Senator WRIGHT:TASMANIA

Senator SPOONER:LP

QUESTION

OFFICE RENTALS

Senator KENNELLY:

Senator HENTY:Minister for Customs and Excise · TASMANIA · LP

QUESTION

POSTAL DEPARTMENT

Senator COOPER:Minister for Repatriation · QUEENSLAND · CP

GOVERNMENT BUSINESS

Precedence

COAL INDUSTRY BILL 1957

Second Reading

Senator O’SULLIVAN:General · QueenslandVicePresident of the Executive Council and Attorney · LP

Senator McKENNA:Leader of the Opposition · Tasmania

Senator WRIGHT:Tasmania

Senator BENN:Queensland

Senator O’SULLIVAN:Vice-President of the Executive Council and Attorney-General · Queensland · LP

LOAN (HOUSING) BILL 1957

Senate
14 November 1957

Senator SANDFORD:
VICTORIA

Senator PALTRIDGE:
Minister for Shipping and Transport · WESTERN AUSTRALIA · LP

Senator SCOTT:
WESTERN AUSTRALIA

Senator O’SULLIVAN:
Attorney-General · QUEENSLAND · LP

Senator KENNELLY:
VICTORIA

Senator PALTRIDGE:
LP

Senator WARDLAW:
TASMANIA

Senator PALTRIDGE:
LP

Senator ANDERSON:
NEW SOUTH WALES

Senator PALTRIDGE:
LP

Senator BYRNE:
QUEENSLAND · ALP; QLP from 1957; DLP from 1968

Senator BROWN:
QUEENSLAND

Senator O’SULLIVAN:
LP

Senator COOKE:
WESTERN AUSTRALIA

Senator PALTRIDGE:
LP

Senator VINCENT:
WESTERN AUSTRALIA

Senator O’SULLIVAN:
LP

Senator O’BYRNE:
TASMANIA

Senator PALTRIDGE:
LP

Senator HANNAN:
VICTORIA

Senator O’SULLIVAN:
LP

Senator O’FLAHERTY:
SOUTH AUSTRALIA

Senator SPOONER:
Minister for National Development · NEW SOUTH WALES · LP

Senator O’SULLIVAN:
LP

Senator AYLETT:
TASMANIA

Senator PALTRIDGE:
LP

Senator SEWARD:
WESTERN AUSTRALIA

Senator O’SULLIVAN:
LP

Senator WRIGHT:
TASMANIA

Senator SPOONER:
LP

Senator HENTY:
Minister for Customs and Excise · TASMANIA · LP

Senator COOPER:
Minister for Repatriation · QUEENSLAND · CP

Senator O’SULLIVAN:
General · QueenslandVicePresident of the Executive Council and Attorney · LP

Senator McKENNA:
Leader of the Opposition · Tasmania

Senator WRIGHT:
Tasmania

Senator BENN:
Queensland

Senator O’SULLIVAN:
Vice-President of the Executive Council and Attorney-General · Queensland · LP

Senator SPOONER:
Minister for National Development · New South Wales · LP

Senator HENTY:
Minister for Customs and Excise · Tasmania · LP

Senator McKENNA:
Leader of the Opposition · Tasmania

Senator WRIGHT:
Tasmania

Senator HENTY:
Minister for Customs and Excise · Tasmania · LP

Senator WRIGHT:
Tasmania

Senator COURTICE:
Queensland

Senator O’BYRNE:
Tasmania

Senator WRIGHT:
Tasmania

Senator HENTY:
Minister for Customs and Excise · Tasmania · LP

Senator COOKE:
Western Australia

Senator HENTY:
Minister for Customs and Excise · Tasmania · LP

Senator COOKE:
Western Australia

Senator HENTY:
Minister for Customs and Excise · Tasmania · LP

Senator WRIGHT:
Tasmania

Senator HENTY:
Minister for Customs and Excise · Tasmania · LP

Senator O’BYRNE:
Tasmania

Senator HENTY:
Minister for Customs and Excise · Tasmania · LP

Senator HENTY:
Minister for Customs and Excise · Tasmania · LP

Senator McKENNA:
Leader of the Opposition · Tasmania

Senator HENTY:
Minister for Customs and Excise · Tasmania · LP

Senator McKENNA:
Leader of the Opposition · Tasmania

Senator HENTY:
Minister for Customs and Excise · Tasmania · LP

Senator McKENNA:
Leader of the Opposition · Tasmania

Senator HENTY:
Minister for Customs and Excise · Tasmania · LP

Senator McKENNA:
Leader of the Opposition · Tasmania

Senator WRIGHT:
Tasmania

Senator BYRNE:
QUEENSLAND · ALP; QLP from 1957; DLP from 1968

Senator CAMERON:
Victoria · LP

Senator HENTY:
Minister for Customs and Excise · Tasmania · LP

Senator McKENNA:
Leader of :’the Opposition · Tasmania

Senator McKENNA:
Leader of the Opposition · Tasmania

Senator WRIGHT:
Tasmania