23rd Parliament · 3rd Session
The PRESIDENT (Senator the Hon. Sir Alister McMullin) took the chair at 1 1 a.m., and read prayers.
– I address the following questions to the Minister for Civil Aviation: - Will he comment on the accuracy or otherwise of a statement attributed by the press on 28th April last to a spokesman for the New Zealand Government who was reported as having said that the offer of £2,000,000 by Mr. Ansett for Tasman Empire Airways Limited was ridiculous and that the aircraft alone were worth more than £7,000,000? In commenting, will the Minister have regard to the fact that the company’s balance-sheet as at 31st March, 1960, shows the value of the aircraft as being £3,962,755 after provision for depreciation? What changes, if any, have taken place in the company’s fleet of planes since the date of that balance-sheet? When will the balance-sheet as at 31st March, 1961, be available? What was the market value of the company’s planes as at 31st March, 1960, and as at 31st March, 1961? In settling the sale price of the Commonwealth’s shares in T.E.A.L. what regard, if any, was paid to the market value as against the book value of the planes and to the Commonwealth’s interest in the reserves of the company, which at 31st March, 1960, totalled £214,695?
– I express my thanks to the Leader of the Opposition for having given me some notice of this question and thus permitting me to have a look at some of the figures referred to in it. I did not see the statement that the aircraft alone of Tasman Empire Airways Limited are worth more than £7,000,000. Senator McKenna has said that it was attributed to a New Zealand Government spokesman. T am sure it was not made by a New Zealand Government spokesman. The simple fact is that the statement is completely and utterly wrong. The company’s present aircraft fleet is not worth £7,000,000, or anything like it. At present it has a fleet of three Electras. They were bought fifteen or sixteen months ago. The price, which included payment for extra engines and spares, was £3,700,000. The current book value of those aircraft is about £3,000,000, and I think that figure also reasonably reflects their current market value.
The last balance-sheet of the company, which was for the year ended 31st March, 1960, shows that its total assets - its aircraft, plant and machinery - were worth £6,400,000. On the other side of the sheet its total liabilities amount to £4,600,000. That includes the loan of more than £3,000,000 which the company borrowed to help in the purchase of its three Electras. Thus, the net asset worth of T.E.A.L. is £1,800,000. I do not think that any one should be in doubt about whether Australia got a fair and reasonable price for its halfshare in the company, particularly having regard to the fact that the deal means participation by Qantas Empire Airways Limited in an area previously closed to it because of the T.E.A.L. monopoly. As Senator McKenna has pointed out, the last T.E.A.L. balance-sheet shows the value of the fleet at 31st March, 1960, at £3,900,000 after provision for depreciation. The fleet then included the present fleet of three Electra aircraft, three D.C.6 aircraft and one old Solent flying boat.
Let me deal with the flying boat first. It had been depreciated down to no value in the company’s books and, because it was no longer of any use or value to the company, some months ago T.E.A.L. donated the aircraft as a museum piece. Recently, the company was also authorized to sell its three DC6 aircraft to the Royal New Zealand Air Force for £300,000, slightly more than their book value. I might add that this was a happy solution, as the aircraft were no longer of use to T.E.A.L. and the company would have had some difficulty in trying to sell them on the world market.
I would say that the company’s annual report will probably be presented next August or September. Senator McKenna also asked the market value of the company’s aircraft on 31st March, of both last year and this year. This is difficult to assess, particularly as I understand that there has not yet been a sale of a second-hand Electra. The market for second-hand aircraft fluctuates, but I believe that the value shown in T.E.A.L. ‘s last annual report can be taken as a fair, if not an optimistic, reflection of the market value. As to the market value of the company’s fleet at 31st March this year, I can only repeat my earlier statement that something like £3,000,000 appears to be a fair and reasonable figure.
Finally, let me say that in settling the sale price of Australia’s half-share in T.E.A.L., this Government considered every aspect of the company’s present financial position and its future prospects. I believe that we have treated the New Zealand Government in the way that all Australians would have us treat it, fairly and squarely. We have reached an agreement which, while fully protecting our own rights and our own commercial interests, is also in keeping with the long-standing and deeprooted spirit of friendship that exists between our two countries, particularly, may I add, in matters of civil aviation and its development.
– I ask the Minister for Customs and Excise: What was the value of Australia’s imports for the first nine months of this financial year? What were the types of goods imported? How many cases of canned chicken were imported and what was the duty on these? In view of the decline in our overseas balances, does the Minister think that we should continue to import luxury goods of this type?
– According to the last figures that I saw in the Statistical Bulletin, the total import duties collected in the nine months were, I believe, about £78,000,000, being a net increase of about £21,000,000. The greatest increase was in imports of metals, metal manufactures, electrical machinery and other machines and machinery, amounting in all to about £10,000,000. That was the major item in the increase. The honorable senator mentioned imports of canned chicken. He could not have hit upon a happier example, because I understand that imports of this item have led to the establishment of an Australian industry. Having learned that there is a far bigger market in Australia for this item than was previously believed, Australian producers are now canning an article which is more than comparable with the imported article, being properly steamed and not treated in pressure cookers. It is a superior commodity which, I understand, can be sold for ls. 6d. or 2s. a tin cheaper than the imported article. The manufacturer believes that there is an export market available in countries close to Australia. These things have a balancing effect. If this commodity had not come into Australia, those engaged in the industry at present would never have realized the market potential and we would not now have a canned chicken industry. I say to the honorable senator that trade is a two-way affair. We have to trade with other countries if they are prepared to trade with us. The relatively small quantity of canned chicken which is coming into Australia adds very little to the total import bill. At this stage, I do not know that I would be prepared to include reindeer meat in this category.
– I wish to direct a couple of questions to the Leader of the Government in the Senate. Is it not a fact that the credit squeeze, besides causing unemployment, has created so much unrest amongst our basic producers, such as engineering firms, that many contracts have been cancelled and expected contracts have not been entered into? Before the Parliament rises, will an assurance be given that the credit squeeze will shortly end, and thus lead to the restoration of confidence in those who have suffered so grievously?
– There is a marked divergence of views on this matter between Senator Brown and myself. My personal opinion is that credit restrictions, instead of causing unrest, are engendering confidence in Australia, both here and overseas, because of the successful way in which they are operating. It is very heartening to know that overseas investment in Australia is increasing. People overseas are realizing that this was very good medicine for the Australian economy, and that view is reflected by the activities of Australian industrialists. In other words, although there was resentment in November, when the policy was introduced, the beneficial effects are becoming apparent. There is a growing confidence in commercial and industrial circles that this was a good thing to do. We are watching the employment position from day to day. lt is our earnest endeavour to carry this policy through successfully, without causing unemployment.
– Has the attention of the Leader of the Government in the Senate been directed to the publication by the Commonwealth of a booklet entitled “ Eat Better for Less “, which, amongst other things, advises the people to eat less butter? In view of the importance of butter and of the dairying industry to the economy of this country, I ask the Minister whether that advice represents Government policy.
– I think that Senator Drake-Brockman wants me to eat humble pie instead of butter. I have not seen the booklet to which he has referred. I think it was issued by the Department of Health. Judging by the comments I have heard, it certainly has attracted a good deal of attention. A publication of that kind cannot reflect government policy; it merely represents the desire of the officers concerned with its publication to make a contribution to the subject.
– My question, which is addressed to the Minister representing the Minister for Health, refers to the recently tabled report of the Public Works Committee, in regard to unsatisfactory conditions at the Commonwealth Serum Laboratories, Parkville, Victoria, and the recommendation for the erection of new buildings. Will the Minister ensure that when new buildings are being considered due regard is given to the frequently expressed opinion of civil defence authorities, supported by an eminent authority in the person of Sir Kingsley Norris, that the dispersal and decentralization of the work of the laboratories are vital in order to ensure that in an emergency Australia could not be totally deprived of the essential facilities by one large-scale fire or one bomb?
– The question is a very interesting and very important one. I could not answer it without reference to the Minister for Health. I shall certainly see that it is conveyed to him and ask him to give the honorable senator an answer. I suggest that if the Public Works Committee recommends that the factory be in one area, some attention should be given to the dispersal of the storage of the products.
– In reply to the honorable senator, I repeat what I have said previously. Technical officers of my department are in close touch with the developments and know what is happening. I am refraining from making public statements on the matter because 1 believe it is more proper that they should come from the directors of the company who represent the shareholders who found the money for the venture. I believe that is the correct thing for me to do.
To make myself more knowledgeable on the matter, I shall go tomorrow to the site with Dr. Raggatt, the permanent head of my department, and one of the technical officers of the department. Whilst there, I will have an opportunity to have a discussion with Mr. Babson, who is an American director of the Union Oil Development Corporation and who is visiting Australia for the purpose of getting a grasp of the situation, and also with Mr. Graves who is the resident director of that company. The trip will enable me to become knowledgeable on the matter, to see what is happening, to have a discussion with representatives of the company, to keep closely in touch with them, and to see whether they have yet reached a stage at which their thoughts are clear and whether they have sufficient technical knowledge to be able to say what their future programme may be. As I have said, I do not think it is right for the relevant Minister to discuss the pros and cons of the matter. I think the directors of the company should do that.
– In view of the answer which the Minister for Customs and Excise gave to a question this morning, namely, that the importation of tinned chicken has led to the establishment of an Australian industry,- does the Minister consider that, since chocolate-coated ants are among recently imported expensive table delicacies, an Australian industry could be started to dispose of red ants, white ants, Argentine ants, Singapore ants and ordinary ants, which are at present a liability and not an asset to Australia?
– I am not sure whether I can give an answer to that question. If an industry took ants out of pants it might be useful.
– My question, which is directed to the Minister for Air, is prompted by a statement made in the press subsequent to the decision of the Government to purchase the French Mirage III fighter aircraft, to the effect that certain components of the aircraft would be manufactured in Australia. Will the Minister say whether consideration has been given to completely manufacturing the Mirage III aircraft in Australia? Is not the Australian workman capable of undertaking this work? What proportion of the aircraft will be manufactured in Australia?
– Very full consideration was given to the advisability of manufacturing the Mirage III aircraft in Australia. The Government has decided to undertake as much of the work of manufacturing this aircraft in Australia as is consistent with sound business practices. It will be readily conceded, I am sure, that the huge capital expenditure required to tool up for the manufacture of 30 aircraft could not be justified on any count at all. Overseas authorities pay very high tribute to the skill of Australian artisans in the aircraft industry. Their ability and know-how to do the job was never in question. All air-frame jigs will be assembled in Australia and no doubt those parts requiring replacement from time to time also will be manufactured here. It is expected that 80 per cent, of the engine will be manufactured in Australia. A very high proportion of the components of the engines is consumable and will require frequent replacement. For that reason we propose to manufacture a larger proportion of the engines than of parts of the fram” some of which will come here prefabricated.
– I preface my question to the Minister representing the Minister for Labour and National Service by pointing out that in reply to a question on notice by Senator Buttfield, designed to indicate that the Australian Council of Trade Unions lacked sincerity in its policy of equal pay for equal work, <n Tuesday last, the Minister said, inter alia-
No applications have been made by the A.C.T.U. for equal pay for equal work either to the Commonwealth Court of Conciliation and Arbitration or to the Conciliation and Arbitration Commission since 1949-50.
Is it a fact that the A.C.T.U. has no power to make claims to the commission in its own right in respect of equal pay or any other matter? Is it a fact that if no specific differential rate exists in an award or determination covering the employment of females, females employed in that industry would receive the relevant adult rate for the job upon which they were employed - in other words, equal pay for equal work? If the answer to the latter question is in the affirmative, does it of necessity follow that if a union lodges a log of claims not providing for a differential rate it is in fact claiming equal pay for equal work? Also is it not a fact that if employers, including the Commonwealth Government, did not press before wage-fixing authorities claims for differential rates for females, we would have equal pay for equal work just as we have it in respect of members of this Senate?
– I am not sure that I fully understood the last part of the honorable senator’s question. All I can say to the honorable senator, before asking him to put his question on the notice-paper so that a considered reply may be obtained from the Minister for Labour and National Service, is that it is true that the Minister provided an answer to a question asked about this matter by Senator Buttfield. That answer stated - quite truthfully I am sure - that there has been no application whatever by the Australian Council of Trade Unions during the last ten years before any court for equal pay for equal work. Honorable senators opposite are interjecting. I was asked whether that statement had been made and I am now saying that it was made. Do not honorable senators opposite want answers to their questions? Mr. President, I repeat that a statement was made by the Minister for Labour and National Service that the A.C.T.’U., during ‘the last ten years, had made rfo.applicat.i6n for an award of equal pay for equal work. That is the answer to the honorable senator’s question. I imagine that there are very few ‘industries Which are not covered by specific awards th’a’t ‘differentiate between the pay of male and female employees. I should think that in nearly all industries such differentiation exists in effect and that consequently there is ‘plenty of room for an application by the A.C.T.U., or by the representatives of the unions which comprise that body, but they have riot ‘made any move to overcome the situation. If the honorable senator puts the question on the notice-paper, I shall get a detailed reply from the Minister for Labour arid National Service for him.
– My question is directed to the Leader of the Government in the Senate. Has the Minister seen the most mischievous and lengthy leading article in his morning’s issue of the “ Sydney Morning Herald “ written by Professor Messel, in which he recommends that the Government should hand over the very efficient Commonwealth Scientific and Industrial Research Organization to university control? Does the Minister know that Professor Messel says that this would be the most important take-over in Australia’s history? Is it a fact that the Council of the University of Melbourne is at present considering reports of Communist activities in that university, particularly in the Social Services Department and the Criminology Department? Also, is it a fact that universities jealously guard their right to academic freedom by insisting that political affiliations shall not be inquired into and that nothing but academic qualifications should be considered when staff are being engaged? If these are facts, will the Minister give an assurance that no consideration will be given by the Government to the idea of handing over to universities a scientific research organization which, under present conditions of government control, can still hope to be kept free of Communist infiltration and subversion?
– I have seen the article in this morning’s “ Sydney Morning Herald “. I scanned it briefly; I did not read ‘it intently. With respect, I say that Senator Buttfield was wrong when she described it as the leading article. A leading article expresses the policy of the newspaper concerned. This was a signed article-
– I meant to say a special article.
– Yes. It is a signed article expressing Professor Messel’s own views. I must say that the argument that is advanced in the article does not attract 5any s’u’pport from me. My own reaction f6 the suggest’ion contained in the article may be expressed in this way: The Commonwealth Scientific and Industrial Research “Organization is a research organization that has facilities, staff, knowledge and all that goes with ‘those things, which could not be matched if its activities were distributed “amongst universities. I do agree that the ‘control of matters, such as the selection of staff and the selection o’f activities which should be undertaken in a big. research organization “such as the C.S.LR.6., in which the Government, on behalf ‘df the community generally, is investing so much money for research programmes, should be directly under the control of the Government itself. However, I am expressing a personal opinion on the matter. I do not know that any proposal of “the kind mentioned by the honorable senator has been placed before the Government.
– My question ‘s directed to the Leader of the Government in the Senate in his capacity as Minister for National Development. I preface it by reminding ‘him that a vast amount of speculation took place after it was announced that oil had been found at Rough Range in Western Australia, that the deposit has since been found not to be a commercial proposition, and that similar speculation is .now taking place as a result of the oil strike at Cabawin, iri Queensland. t In view of the ..fact that the companies which are engaged in the search for_ oil are being subsidized by the Government, will the Minister consider drawing up a code of ethics to be followed by such subsidized companies and lay down the procedure to be followed in the future so that statements based on unsubstantiated reports relating to the discovery of oil will not be made? I point out that such statements lead to speculation on the Stock Exchange which is unhealthy from the stand-point of the economy of this country, because it tends to reduce the widespread interest that all Australians should take in such an important event as an oil strike. Will the Minister give some thought to this matter?
– Senator O’Byrne has asked me a question which is extraordinarily difficult to answer. I am able to say from my own personal knowledge that one of the principal objectives of the chairman of directors of this company was to try to avoid speculation. The information which has now been published had been expected for some time, and the fact that it did not become public knowledge earlier reflects credit on the directors of the company. It must be remembered that, although our hopes run high, some time must elapse before the significance of this find is evaluated. Additional information has to be obtained.
Senator O’Byrne has asked, about a code of ethics. I do not know how you could establish a code of ethics in this field. I think that shareholders do two things when they invest in a company. First, they decide to risk their money in the venture, and secondly, they decide that the directors of the company are people of good standing and good reputation who will look after their interests properly. It is true that there has been some speculation in the shares of this company, but not nearly so much as has occurred in other instances. My personal opinion is that the directors of the company are to be congratulated on the way in which they have handled the matter up to this stage.
– My question, which is directed to the Minister for Customs and Excise, relates to information I have been given concerning the establishment of agencies in Australia, supposedly for the purpose of collecting funds from new Australians to send gift parcels to their relatives behind the iron curtain. Is the Minister aware that agencies have been established in Australia through which must pass all gifts sent by new Australians to their families behind the iron curtain? In particular, is the Minister aware that such an agency exists in Western Australia? Furthermore, is he aware that sums of money in Australian currency are extracted from new Australians, supposedly for foreign duty purposes? Has the Minister any information about the alleged rates of duty, and does he know whether the money is actually transmitted for duty purposes?
– I have received quit’ a lot of information recently on this subject. There is an agency of this kind in Western Australia. It is the Echo Agency, located at 252 William-street, Perth. There is one in Victoria - the Patria Overseas Gift Parcel Service, located at 132 Hampshireroad, Sunshine. I know that those two agencies are sending parcels overseas on behalf of new Australians. I have had invoices supplied to me. There are only two rates of duty - 100 per cent, and 75 per cent, of the retail price paid for the goods. The new Australian has to state the retail price of the goods, and to that sum is added 100 per cent, or 75 per cent., depending upon the category into which the goods fall. I have noted with great interest that in addition to duty at the rate of 100 per cent or 75 per cent, there is a charge of approximately 17i per cent, for “U.S.S.R. fees”, whatever they may be Then there is an additional charge of 334 per cent, for overseas agency and postal fees. There is an extra packaging, shipping and insurance charge of about 30 per cent, and on top of that a commission of about 20 per cent.
I have a number of invoices here. I have before me one in which there was a charge of approximately ?9 for labour and additional charges amounting to ?17 18s. 3d. This information is shown in Australian currency. It is rather interesting to note how the charges vary. There does not seem to be any set charge for “ U.S.S.R. services “. When parcels are sent to Poland, the charges rise steeply. 1 note that in one invoice for goods valued at ?17 17s. overseas agency and parcel charges amount to ?2 16s. 7d. In another invoice for ?7 15s. in relation to a smaller parcel, the charges amount to ?3 15s. 7d.
– This is a pretty good answer to a question without notice, is it not?
– It is relevant to bring these facts to the notice of the Senate. I believe they should be ventilated. I do not know whether the honorable senator is feeling uncomfortable about the matter. Even if he is, I certainly do not intend to discontinue my reply, because I believe these facts are of great interest to the country as a whole.
– But it is not a bad answer to a question without notice, is it?
– The honorable senator may be & bit uncomfortable, but 1 shall finish my reply. On the next occasion on which such a question is to be asked I shall warn him so that he may leave the chamber if he feels uncomfortable. As most of these invoices relate to gifts of such things as ordinary dress wear and clothing, it seems to me that duty at the rate of 100 per cent, or 75 per cent, is quite out of keeping The Union of Soviet Socialist Republics does not do what the Australian customs authorities do with gifts. We apply a reasonable valuation for duty purposes. A new Australian stated in one letter that I have received that he became so sick of paying these charges that he by-passed the agency and sent a parcel direct to his people. He has had no acknowledgment of receipt of the parcel from his people. Moreover, he has had no communication from them since sending the parcel two years ago, even though prior to that they were constantly in communication. He suggested that they had been removed from the country. This is a serious matter. It is one which we should look at.
– I address to the Minister for National Development a question relating to the oil strike at Cabawin and the reply which he gave to Senator Sir Neil O’sullivan. I preface it by saying that I believe there are considerations other than market values or the speculation that would take place on the stock exchange or elsewhere. Does the Minister realize that more information is required than the pros and cons that he mentioned in reply to the question asked by Senator Sir Neil O’sullivan? Geological and core information in respect of this or any other oore where oil is shown should be made available quickly, not for speculation purposes but for the purpose of assisting others who are prospecting and searching for oil. I have raised this matter before.
– This is quite a difficult problem. One has to do what is right for all interested parties and the Australian community as a whole. The technical information is made available to the Commonwealth’s professional advisers from day to day. Moreover, a detailed report on any operation that is subsidized by the Commonwealth is made public, subject to the reservation, which Senator O’Flaherty has mentioned previously, that the companies concerned are entitled to protection and that the information is not made available for r. period of, I think, six months after they have finished their drilling operations. That seems to be reasonable.
The hole in question has cost approximately £350,000, without oil having previously being struck. As I understand the situation, interpretation of the information obtained is a rather difficult technical process. The companies concerned are - I think quite correctly - being given a breathing space so that they may make full use of the information before it is made available to others. I do not know what we could do to improve upon the present arrangement. What is happening is known to the Commonwealth. Such information eventually becomes public knowledge. The information that is released from day to day is very much a matter for interpretation; quite different opinions may be expressed upon it. I cannot see any better approach to the problem than to let the people concerned carry the responsibility for those opinions. If we started to release information and different interpretations were placed upon it, or if the information varied from day to day as could well happen in changing circumstances, there would be a greater area of uncertainty than would be necessary.
– I ask the Minister representing the Minister for Primary Industry these questions: Has his attention been directed to a statement in last week’s issue of “ Muster “ which indicated that “ vast sales of Australian wheat are at present being negotiated with Communist China on a best-terms-available basis “? Does this expression mean that the Australian Wheat Board is contemplating “ vast sales “ to Communist China on whatever extended credit Communist China may demand? In view of the Government’s forthright pronouncement that this sale is purely a commercial transaction between the Australian Wheat Board and the Communists without any guarantee by the Government, is the board eligible for protection from the Export Payments Insurance Corporation? In other words, would the payment by the Chinese Communists for credit wheat sales be guaranteed to the board by the Export Payments Insurance Corporation? If so, in the event of a credit sale of the same magnitude as the earlier cash sale of £27,000,000, would not the risk to the corporation exceed the statutory limit set by Parliament and thereby bring about the risk of bankruptcy to the corporation? Would not the reasonable certainty that Communist China will default in any credit purchases mean that the Australian Treasury and the Australian taxpayer would in fact be financing the tyrannous regime in red China? In view of the fanciful expectations that have been referred to by the journal I have mentioned and in the press generally, will the Government consider the issue of a child’s guide in which would be set out the facts of life in relation to economic and commercial negotiations with Communist countries?
– I have seen the statement in “ Muster “ and I am bound to say that at present a good deal of speculation, not all of which is well informed, is current on the sale of wheat to red China. Whilst I do not know the thinking of the Australian Wheat Board, I do know that it is a hardheaded business organization, that it has conducted all of its transactions on normal commercial terms, and that it accepts dictation from no buyer or would-be buyer. The next portion of the question is based on supposition. The only information that I can give the honorable senator on that point is that protection for any exporting authority is a matter entirely for the Export Payments Insurance Corporation and the exporter, and all decisions are taken on a commercial basis. I can tell the honorable senator that the Government will not issue a child’s guide, for the very good reason that every man, woman and child in Australia knows the attitude of this Government towards communism. If it is suggested that the proposed guide might be of some value to the Australian Wheat Board, I remind the honorable senator that the board, during some twenty years of its existence, has sold Australian wheat to the value of about £100,000,000, and not one bushel of wheat remains unpaid for in accordance with the terms of sale.
– Some weeks ago I asked the Minister representing the Minister for Health about the distribution of potatoes imported from New Zealand. Since then, I understand a considerable amount of disease has been found in those potatoes. Has the Minister any information on the matter to give to the Senate?
– Senator Arnold did contact me by telegram two or three weeks ago in regard to this matter, particularly in its relation to his district of Newcastle. I had investigations made and found that importations of potatoes from New Zealand were made under very strict quarantine regulations. The Department of Health insisted that they be supplied only through one importer. The quarantine officers go to the processing plants and ensure that the peel is destroyed, because of a virus disease to which the potatoes are subject. The potatoes have gone only to processing plants. I was further informed that there were quite substantial quantities of Australian potatoes around Newcastle for supply to that district, and that that was the reason why no direct shipment of imported potatoes was made to Newcastle.
– The honorable senator was good enough to inform me that he proposed to ask this question and
I have obtained from the Minister for Trade the following particulars of importations of plywood since 1st January, 1961: -
– I direct to the Leader of the Government a question which is consequential upon one asked by Senator Buttfield a few minutes ago. Is it not a fact that there is and has been in the past the closest liaison between the Commonwealth Scientific and Industrial Research Organization and the various universities in Australia? Is it not a fact that the organization depends largely for its staff upon the graduates of the various Australian universities? Also, is it not a fact that scientific research for defence purposes is carried out mainly not by the organization but by the Australian National University and other universities where research into physical and nuclear sciences is conducted at a higher level than at the C.S.I.R.O., which exists primarily for research into scientific and industrial questions affecting the development rather than the defence of the nation?
– I am not aware of the detailed arrangements within the C.S.I. R.O. but obviously most of its scientists are recruited from university graduates. I understand that the organization does pass some of its research programmes to various universities, and I agree that it is not the only research body that operates in the Commonwealth. For instance, under the jurisdiction of my own department is the research programme of the Australian Atomic Energy Commission.
– I direct to the Minister representing the Minister for Primary Industry a question which relates to one asked earlier by Senator DrakeBrockman and the reply given by the Leader of the Government. If the recommendations in the Department of Health booklet referred to are found to be in conflict with the policy of the Government and with the facts in relation to the value of these Australian exports, will the Minister for Primary Industry order the withdrawal of the publication?
– I believe that this is properly a question for the Minister for Health, but I should like to make some comment upon the point raised by Senator Wedgwood. I am amazed to read in this publication the statement that table margarine is just as good a source of fat and vitamins as butter. My comment is that every country in the world with a high standard of living eats butter rather than margarine. My second comment relates to the statement that one can economize by using powdered skim milk, which is said to be the cheapest source of protein and calcium.I suggest that if the authors of the booklet have a look at some poddy calves that are fed on skim milk and others that are fed on whole milk they will understand the derivation of the word “ poddy “. Specifically replying to the question, I shall bring this matter before the notice of my colleague, the Minister for Health, who, I am sure, will take appropriate action to put the record straight.
– May I add that when I read this booklet this morning I naturally took the matter up with the Minister for Health and asked him to examine the position. He told me that he was examining the aspects mentioned and will deal with them next week.
– I address a question to the Minister representing the Minister for Primary Industry. Is it a fact that the Commonwealth Government has refused to guarantee payment for wheat sold on credit by the Australian Wheat Board to Communist China?
– So far as I am aware, the Government has not been asked to guarantee payment for wheat sold to Communist China. Therefore, I cannot add anything more to the answer I have already given.
– Supplementary to the question asked by Senator Vincent of the Minister for Customs and Excise, who seemed to be shocked by the information that the honorable senator gave, and rightly so, 1 now ask whether the Minister intends to take action to remedy this state of affairs, which seems to result in unfair advantage being taken of unfortunate people in the world. If the Minister’s department lacks power to do so, does he intend to pursue the matter by seeking power to deal with it either at the diplomatic level or through this Parliament?
– Naturally enough, 1 am examining the position with a view to ascertaining whether my department has power to deal with the matter and, if it has not, whether any other department has such power.
. - I move -
That Standing Order No. 68 be suspended up to and including Thursday, 18th May, to enable new business to be commenced after 10.30 p.m.
In explanation of the motion, Mr. President, I point out that it is expected, or hoped, that this sessional period of the Parliament will end on to-day week. I have delayed moving the motion for as long as possible. I do not know whether advantage will be taken of the suspension of the standing order in the remaining four days of the sessional period, because we cannot always foretell the trend of events. There may be small bills which we wish to introduce after 10.30 p.m. It is necessary to have power to do so, for the convenience of the Senate, and I hope that the motion will be acceptable to honorable senators.
– I am afraid that the Minister’s hope will not be realized. Time and again from this place, on behalf of the Opposition, I have opposed similar motions. I have given reasons for my attitude on many occasions and I do not propose to repeat them now. The motion is an obvious preliminary to late sittings. It could lead to an all-night sitting. I understand that the House of Representatives sat through until half-past six this morning. The aftermath of that kind of thing is always bad. It means bad tempers, bad health, bad deliberations and in the end, probably bad legislation.
– And cranky tempers.
– I mentioned bad tempers. I accept the amendment. I think that we all know the very bad effect that such late sittings have on everybody concerned.
I ask the Minister why we could not sit for one more week to avoid late sittings and, at the same time, avoid undue strain on everybody connected with the work of the Parliament. What difference would it make if we were to sit for one more week, since the Parliament is about to rise for three months? I suggest that it would be infinitely better to do that than to have late sittings, in a frantic endeavour to conclude by an arbitarily selected date such as this day week. In that way we could give reasonable consideration to the work before the Senate. Let us endeavour to finish on 11th May, if we can. Nobody wants to stay here unnecessarily. On the other hand, the Opposition does not want to get away at an earlier date at the cost of very late sittings.
I should appreciate it if the Minister would indicate that the intention of the Government was merely to float new business after half-past ten at night and not to proceed to sit after, say, midnight. If we had such an assurance we could approach the position with more equanimity. The Minister has not given any such hint and the door is wide open for the late sittings that we of the Opposition are exceedingly keen to avoid. For that reason we shall oppose the motion.
– in reply - It is not customary to give an assurance such as that requested by the honorable senator. I have no desire to have late sittings of the Senate. I am willing to give careful thought to Senator McKenna’s suggestion that we should sit for an additional week if the trend of events justifies our doing so, but I think it is impracticable for the Senate to operate efficiently in the last week of a sessional period unless the Government can bring forward legislation whenever it is desired to do so. That can only be done if the relevant standing order has been suspended. I can give no assurance as to the procedure that will be followed, but I shall keep well in mind the honorable senator’s views on the matter when I am arranging the business of the Senate.
Question put -
Thatthe motion be agreed to.
The Senate divided. (The President - Senator the Hon. Sir Alister McMullin.)
Majority . . . . 4
Question so resolved in the affirmative.
Bill received from the House of Representatives.
Standing Orders suspended.
Bill (on motion by Senator Henry) read a first time.
– I move -
That the bill be now read a second time.
The purpose of this bill is to impose certain special duties of customs to provide protection for Australian industry against various forms of unfair trading. It also covers emergency action which may be taken against imports which cause or threaten serious injury to domestic producers or to producers in certain third countries. It is proposed that the Customs Tariff (Industries Preservation) Act be repealed. The bill incorporates those parts of the Customs Tariff (Industries Preservation) Act which are in current use and in addition makes provision for some additional measures of protection against unfair trading. Its provisions incorporate the means of dealing with dumping and subsidies which have been internationally agreed in the General Agreement on Tariffs and Trade. It also takes account of comments which have been made by the Tariff Board on problems arising from the Customs Tariff (Industries Preservation) Act.
The bill provides for a dumping duty on goods that are exported to Australia at an export price which is less than the normal value of the goods, where this causes or threatens injury to an Australian industry or may hinder the establishment of an Australian industry. The imposition of dumping duties will continue to be subject to inquiry and report by the Tariff Board. On the question of injury to an Australian industry or hindrance to the establishment of an Australian industry the bill does not authorize the imposition of dumping duties if the injury or hindrance is of an insubstantial nature.
The intention of the bill is to introduce dumping legislation which is consistent with Article VI. of the General Agreement on Tariffs and Trade, which lays down internationally accepted criteria for the imposition of dumping duties. The General Agreement on Tariffs and Trade states that dumping, by which products of one country are introduced into the commerce of another country at less than the normal value of the products, is to be condemned if it causes or threatens material injury to an established industry or materially retards the establishment of a domestic industry. The Government would have preferred to introduce these criteria in the words in which they are expressed in the General Agreement on Tariffs and Trade but our legal advisers have pointed out that this could have given rise to problems of legal interpretation. The bill is therefore framed in such a way as to provide for the application of the criteria laid down in Article VI. of the General Agreement on Tariffs and Trade, but avoids possible difficulties of legal interpretation which might have been met by using the exact wordingof that article.
The provision relating to dumping duty covers the types of cases which are now dealt with under sections 4, 5 and 6 of the Customs Tariff (Industries Preservation) Act - that is, goods sold to Australia at less than their fair market value, goods sold to Australia at less than cost of production plus a reasonable mark-up, and goods consigned for sale in Australia which may be sold at less than a reasonable price. It is, however, broader in scope than these three sections of the Customs Tariff (Industries Preservation) Act in that it empowers the imposition of dumping duties not only where injury to an Australian industry is caused or threatened, but also where the establishment of an Australian industry may be hindered. It is also broader in that “ the normal value “ of goods exported to Australia is defined more comprehensively than is done in the two definitions in sections 4 and 5 of the existing act which deal with fair market value and cost of production only. In establishing a fair price, the Minister may take account not only of these factors, but of the price of like goods sold in the country of export for export to a third country and of the fair market value of like goods produced in a third country where costs of production are similar to those in the country of export.
These are the tests which are recognized in the General Agreement on Tariffs and Trade as representing proper means of establishing the normal value of goods entering into international trade; in addition, they provide a means of establishing the normal value of goods in cases where the fair market value or cost of production cannot be readily ascertained.
The bill makes provision, as does the present act, for imposing dumping duties to protect the trade of third countries against unfair trade practices. The provisions of sections 11b and 11c of the Customs Tariff (Industries Preservation) Act relating to the imposition of countervailing duties on imported subsidized goods are reproduced in this bill. The countervailing duty provisions cover not only subsidies on imported goods, but also subsidized freight rates. The sections of the present act which relate specifically to subsidized freights are therefore being omitted. The bill also reproduces the provisions of section 11a of the Customs Tariff (Industries Preservation) Act which permits the imposition of emergency duties, in accordance with Australia’s international obligations, to prevent serious injury to an industry.
The sections of the Customs Tariff (Industries Preservation) Act which relate to depreciation of currencies have not been brought forward in this bill. Protection against exchange depreciation is available through other channels. Most countries have accepted obligations under the International Monetary Fund which prevent the occurrence of situations of the type which sections 8 to 11 of the Customs Tariff (Industries Preservation) Act were designed to counter. Moreover, there is provision in the Customs Act for the Minister for Customs and Excise to fix a fair rate of exchange in respect of imported goods and there is also provision both in the Customs Act and in this bill to deal with manipulation of exchange rates through the use of multiple currency practices. I might mention that sections 8 to 11 of the Customs Tariff (Industries Preservation) Act have not been invoked since the1920’s.
I commend the bill to honorable senators.
Debate (on motion by Senator O’Flaherty) adjourned.
Bill received from the House of Representatives.
Standing Orders suspended.
Bill (on motion by Senator Wade) read a first time.
.- I move-
That the bill be now read a second time.
The bill which is now before the Senate contains a number of relatively minor amendments to the Commonwealth Electoral Act. In general the measure aims to give the electors somewhat better facilities for voting, particularly with regard to postal voting, and to improve the efficiency of the organization of elections so far as the Commonwealth Electoral Office is concerned. 1 think it can be said that our electoral system compares more than favorably with electoral systems operating elsewhere in the world. When we examine matters which are vital to a democratic franchise, such as ensuring maximum opportunities for each elector to cast his vote, the preservation of the secrecy of that vote, the rights of candidates to campaign freely, with the protection of candidates and electors from intimidation, bribery, and other electoral malpractices, there are no great deficiencies in our law as it now stands. More importantly, our law as it is is becoming better understood by an increasing number of people. Many suggestions have been made for quite substantial amendments over recent years. Most of these suggestions have been concerned with the actual ballot-paper itself. They have all been carefully examined, but whereas many have some merit, most have also some defects. These have been weighed together but nowhere have there been any great advantages found from proposed changes. The Government has felt that stability and certainty in the electoral law is preferable to the confusion that would be caused by changes which might be of doubtful value.
Many of the suggestions received were aimed at eliminating the weight given to electoral results by the careless or unintelligent voter. Our present system, however, does not require a great amount of knowledge or study to ascertain how to cast a valid vote for particular candidates or parties. A careful study of the results in various elections leads to the conclusion that if any reform is desirable it is in the direction of educating the individual elector as to the value to him of his right to exercise an intelligent judgment and to vote accordingly, and his national duty to do so.
I will mention briefly the various proposals contained in the bill. One important feature of the bill enables members of enclosed religious orders and other persons whose religious beliefs preclude them from voting before sunset on a Saturday to avail themselves of the postal voting facilities. Representations for the provision of such facilities for this class of elector have been made on numerous occasions by certain religious organizations and interested persons.
Provision is also made which will enable an elector who is entitled to a postal vote to apply to a registrar for a subdivision which has been declared a remote subdivision. This provision will be of particular advantage to an elector who may be in a remote area in Western Australia and who does not have time to apply to a divisional returning officer for his postal vote. At present, a registrar for a declared remote subdivision may issue postal votes only to those electors enrolled for the subdivision to which the registrar’s appointment relates.
A further provision relating to postal voting authorizes an officer at a place in Australia to observe local time for the receipt and issue of postal votes on polling day and on the day preceding polling day, instead of observing the standard or legal time in the State or Territory where the election is to be or is being held. It remedies the situation whereby under the present law a Western Australian elector in New South Wales, Victoria or Queensland on polling day is entitled to vote up to 10 p.m. Eastern Standard Time, whereas an elector from an eastern State who may be in Western Australia is not entitled to vote after 6 p.m. Western Australian Time on polling day. The law relating to voting by electors temporarily outside Australia is not affected. Tn such cases the time to be observed is the standard or legal time in the State or Territory in which the election is to be or is being held.
It is also proposed in this bill to widen the provisions of section 39 of the Commonwealth Electoral Act to permit British subjects of non-European origin to enrol and to vote, provided they are not subject to any impediment under the Migration Act which would prevent them remaining in Australia as permanent citizens. The holders of temporary entry permits or prohibited immigrants under that act will not be entitled to enrolment.
The bill also removes the objectionable and outmoded reference to aboriginal natives of certain other countries. Under the existing law a British subject born in, say, Hong Kong, Singapore or Fiji, even though he may hold a certificate of registration as an Australian citizen, as distinct from a certificate of naturalization, is not entitled to enrolment. This anomaly is remedied.
In 1943, under the National Security Regulations, restrictions were placed for the first time on the size of electoral posters. They were restricted to 60 square inches - which only permitted a small card, say 12 inches by 5 inches, or 10 inches by 6 inches. The object at the time was to preserve paper and cotton material in the interests of the war effort. This was embodied in the act in 1946. To-day, however, we suffer no such shortages. Bearing in mind that as far as possible candidates should be free to campaign, subject only to necessary restrictions, it has been decided to extend the permissible size of posters to 1,200 square inches. This, it is felt, has the merit of bringing this method of advertising more into line with others that are open to candidates, such as newspapers, radio, television, and the like. At the same time, some limitation of size was felt to be desirable to prevent undue extravagance and the ugly disfiguring of the countryside. The figure of 1,200 square inches corresponds to the standard poster size of 40 by 30 inches.
A further provision relates to the appointment of scrutineers. Under the present law a candidate may appoint only one scrutineer at each counting centre, although immediately after the close of the poll all ballot-boxes at that centre are opened, the ballot-papers removed and sorted into groups in readiness for examination by the officer conducting the scrutiny. It is not practicable for one scrutineer to observe the whole of the proceedings at this stage of the scrutiny and it is proposed, therefore, to empower the officer conducting the scrutiny, subject to directions, to determine the number of scrutineers which a candidate may appoint. The intention of this provision is to allow a candidate to appoint to each counting centre a number of scrutineers up to the number of tables at which ballot-papers are being scrutinized or are being prepared for scrutiny.
This bill also provides that in the case of a conviction for an offence for failure to enrol or to notify change of address as required by section 42 of the act, the fine to be imposed by a court for a first offence shall be a fixed amount of 10s. Hitherto, for an offence of this nature a court could impose any fine up to 10s. The penalty for an offence under this section has not otherwise been changed. Court action is taken only after other means of enforcing the law have been exploited.
A further provision in this bill transfers to the act the substance of a regulation which defines “ the entrance “ to a polling booth where such polling booth is within an enclosure. Canvassing for votes and certain other acts are prohibited within 20 feet of the entrance to a polling booth. In the past, some difficulty has been experienced in keeping the ingress and egress clear of overenthusiastic canvassers. This new subsection gives strength to what is now covered by regulation.
This bill is also intended to remove the need for officers to attend the courts to put in evidence claims for enrolment or transfer of enrolment in connexion with such matters as tenancy cases, divorce proceedings and small debts cases. The practice of serving subpoenas on electoral officers to produce claim cards in courts has developed over recent years and is increasing as it becomes more widely known that evidence of this nature can be obtained. The law requires the completion and submission of claim cards for the purpose of securing enrolment, and the fact that such claim cards are being produced as evidence in the courts may result in persons evading their responsibilities to enroll or to notify changes of address. Details appearing on the claim cards relating to the date and place of birth are not published. These particulars are used for official purposes only.
The final provision is an administrative one. By reason of the fact that the divisional returning officers are now appointed registrars for all subdivisions except a few isolated subdivisions in Western Australia, and due also to the increase and concentration of enrolment operations, it is not now practicable for the registrar personally to initial each alteration made in a roll. This provision permits an officer making alterations in a roll on behalf of a registrar to initial such alterations. The other clauses in this bill are of a formal or consequential nature. I commend the bill to honorable senators.
Debate (on motion by Senator Kennelly) adjourned.
Debate resumed from 3rd May (vide page 719), on motion by Senator Paltridge -
That the bill be now read a second time.
– The bill before the Senate is a novel one of fascinating interest. It purports to regulate the investment pattern of life insurance companies and superannuation funds in Australia. It is a strange bill to be introduced by a government that was elected on a pledge that it would abolish all restrictive controls, and that has constantly affirmed its belief that if things were left alone they would sort themselves out. One cannot but comment upon the change of heart one discerns in the Government on that matter.
This is a bill of great importance and great complexity, and I would have liked to have a day for each hour I have been able to devote to a consideration of the measure. It came into the Senate only yesterday, of course. It is not very long ago - in fact, it was on 15th November last - that the Treasurer (Mr. Harold Holt), when speaking on behalf of the Government, startled the Australian nation with a series of economic measures directed to curing very grave defects in the economy. The nation was, I think, completely unprepared for that statement. The Budget that had been introduced in the preceding August gave no indication of the dangers, the gravity of various situations, or the need for the almost desperate measures that were announced on 15th November last.
The outstanding situations of gravity to which the Treasurer directed attention were, first, the difficulty about our balanceofpayments position overseas and, secondly, within Australia the failure - the gross failure - of the local loan market. So far as the Government is concerned, in my view both of these wounds were self-inflicted.
Let me spend a moment or two on the balance-of-payments position. The difficult situation that we are in is due, first,, to the abrupt lifting of import controls in February, 1960, and, secondly, to the
Government’s failure for a little longer than a decade to take effective measures adequately to stimulate our export trade.
I turn now to the failure of the local loan market, a topic upon which, the Senate will remember, I have been very vocal during the last ten years. I attribute that failure, in the first place, to the inflation that has run constantly throughout the term of office of this Government and which is still unchecked, and secondly, to the manipulation of interest rates upwards, destroying confidence in bonds that had been issued at lower rates of interest and causing the collapse of their capital, value on the loan market. I attribute the failure, thirdly, to the acquiescence of the Government in the development of what it terms the fringe institutions of banking - the various great financial concerns that have developed down the last decade.
The Government, being unwilling to attempt to exploit what constitutional power it has to ensure some degree of regulation, and having made up its mind, perhaps, that it lacks the power, has done nothing to seek an alteration of the Constitution so that it would bc armed with power to deal with this vast reservoir of credit facilities beyond the reach of the banking power. The Government has claimed that that field is beyond the reach of the banking power. This Government has not attempted either to exploit all the powers it has or, if it is convinced that there are no adequate powers, to proceed to rectify that defect. ‘
The bill before us has been prompted by that second situation - the failure of the local loan market in Australia - and the Government has pounced upon two institutions, the life insurance companies of Australia and the various superannuation funds, and it is treating them - and them alone - as the villains in the piece.
Year after year, I have directed attention to the failure of this Government. I sometimes wearied myself by my constant advertence to that topic, and I can only hope that I did not weary the Senate. I think that every member of this chamber will recall the persistence with which I have directed attention to the collapse of the loan market. I have been emphasizing that it is unfair to contemporary taxpayers that they should be bearing a colossal burden of taxation, amounting, approximately, to £200,000,000 per annum, to make up for the gap in the loan market.
– Did not the Treasurer say that a deficiency of £367,000,000 is made good out of revenue?
– I have taken the average, Senator. The Treasurer cited -I shall quote him verbatim in a moment - the very figures that I gave to this chamber whenI dealt with the Appropriation Bill 1960-61.I shall come to that.
I am quite certain that the electors of Australia generally have no understanding of what has happened to them in this matter and the unfairness of the tax burden that has been imposed upon them due to the collapse of the loan market. If they had understood the position, I believe that the Government would not have existed as long as it has.
As I said a moment ago, the Treasurer has repeated the figures that I gave to this Senate quite recently, which show that in all a sum of £2,000,000,000 - that is an extraordinarily large amount - of taxation revenue collected by the Government has been used to remedy the gap in the loan market during the last ten years. Of that amount, £1,400,000,000 has been expended on Commonwealth capital works alone. Every penny of it throughout that period has been paid for out of revenue; no demand whatever was made on the local loan market. The remaining £600,000,000 represents revenue collected from the taxpayers and used to supplement State works programmes. I have before me a statement of capital works for the Commonwealth for this year totalling approximately £140,000,000 - all to be paid for out of revenue. No contribution is to come from the loan market at all.
– Those are Commonwealth works?
– Commonwealth works alone, amounting to £140,000,000. I note that four items included in the list of Commonwealth works and services total approximately £116,000,000. They are war service homes. £35,000,000; Snowy Mountains Hydro-electric Authority. £18,500,000; the Post Office - for all its works and developments - £42,000,000; and the Australian Capital Territory, £12,000,000.
So far as the States are concerned, there will be a gap in loan money of approximately £80,000,000, which this Government will fill from revenue. It will pass the money through various trust accounts, mainly the Loan Consolidation and Reserve Account, and will actually lend it to the States, charging interest on it. I have complained repeatedly in this place of the unfairness of that procedure, not only to the States, but also to the taxpayers. Presently I will read to the Senate exactly what the Treasurer has said recently on that topic. He has repeated almost verbatim the burden of my lament down the years.
– You would do the same when you got back into office.
– I can recall the honorable senator who has interjected telling me whenI put up this proposition - perhaps it was Senator Hannaford, not Senator Scott.
– It was Senator Hannaford this time.
– I wish that honorable senators in that section of the chamber did not have such similarity of voice. It was Senator Hannaford, I think, who told me, when 1 voiced this complaint before, that there would be a lot more of the financing of capital works out of revenue.
– I think that was Senator Mattner.
– If the honorable able senator says that, I shall not deny it. I shall simply say that a government senator in the part of the chamber at which I am looking voiced that remark. I hear the same thought expressed and repeated now.
– On your figures we are saving only about £100,000,000.
– I do not want to open up this subject again as it takes a long time to develop thoroughly. However, let me put this to the honorable senator: If the money were raised on the loan market, the taxpayers of the current years would be paying something like £5,000,000 or £6,000,000 a year instead of £100,000,000 a year.
– Oh no!
– I will not open up that subject with the honorable senator, because 1 think he would be a bit too hard to convince. Nevertheless, that is the fact. I am afraid that I have never been able to convince Senator Mattner on any matter of mathematics, although I have tried to do so once or twice.
If the loan market were restored, let us consider what would happen. We would free some £200,000,000 of revenue per annum. That would enable the Government to grant tax reductions; to wipe out indirect taxes that affect directly, with cumulative effect, the cost structure of this country; to do justice to pensioners; and to promote the preventative aspects of a great national health scheme. All these things would be readily possible to the current generation of our people. It is a desperate pity that the loan market has been allowed to collapse, as it has done, to the tune of more than £200,000,000 per annum, depriving our people of better standards in the interim, as well as being quite unfair to them. That is the tragedy of it. The only consolation I get out of this bill at the moment is that after ten long, weary years, and after taking £2,000,000,000 of revenue for capital works during that period, the Government now recognizes that a problem has to be faced and is making a tentative, timid and discriminatory approach to the solving of that problem.
– Is it a crime to pay your way?
– I think the honorable senator knows the answer to that question as well as I do.
– It would be if you paid it wilh other people’s money.
– I think that is the adequate answer. I am developing no new theme in the Senate. I do not wish to develop my argument on this point at length at the present time. I have done so repeatedly before. My views are well known, but for the sake of the record I am summarizing them. Before the Treasurer (Mr. Harold Holt) spoke on 15th November, 1 thought I was beyond the stage at which I could be surprised by anything that happened in politics, but I confess that I was surprised at the announcement on that occasion of the proposal to compel - there is no other word that can properly be used - life insurance companies and superannuation funds to proceed with their investment programmes according to a patter:, laid down by the Government.
– The actual word was “ require “. It is synonymous with compulsion.
– I recall the exact words. I think the words “ in effect “ were added to the word “ require “. The proposition was to require, in effect, the companies to establish a 30/20 ratio, the meaning of which we all understand in this place. Moreover, the proposal was directed to the total assets of the companies in Australia. Presently I shall indicate the variation that has taken place since that time. There is no question that it was a case of compulsion and that assets were required to be invested in public securities in the ratio of 30 to 20.
Now let me refer to Mr. Harold Holt’s comments on 23rd March, when he gave us a preview of ‘.his legislation. I almost hear my own voice and my own words when 1 read two extracts from his speech, as reported at page 568 of “ Hansard “. This is what he said -
Over the last ten years, more than 60 per cent, of Commonwealth and State capital works expenditure has had to be financed ultimately from Commonwealth taxation revenue. The total amount supplied from revenue over this period exceeds £2,000,000,000, a heavy burden-
Will the Senate please note this - on this generation of taxpayers for public assets which will, for the most part, be servicing many generations to come.
– A most interesting observation.
– It is a most interesting observation, and I might add that, to me, it is a most gratifying one because 1 have used those very words throughout the years.
– Whom are you quoting?
– You would think I was quoting my own words, but I am quoting your Treasurer. I think the Senate will agree that I have expressed the same idea almost in those very terms on many occasions in this place. Now, at last, the Treasurer sees the problem. At last he admits the case that I have made for the Opposition from this side of the chamber. At last he admits the unfairness to the taxpayers. 1 want him to go only one step further and admit the unfairness of his practice to the States. Then my whole case will have been accepted.
The tragedy is that this acknowledgement that there is a problem and that this practice is grossly unfair to the taxpayers, has been made only after the taxpayers have been denuded of £2,000,000,000 over a period of ten years. Let me read one other extract from the same page of “ Hansard “. The Treasurer said further -
In fairness to the taxpayer, and having regard to the need for a more balanced use of community savings to sustain sound national expansion, the Government reached the conclusion that action to check this drift was necessary. lt took the Government ten years to do that. It took from the people £2,000,000,000 in taxes before it woke up to the unfairness of the practice. Gratified as 1 am to see the Treasurer at last using words that I have used on behalf of the Opposition, I think that is a most shocking commentary.
– In other words, you are hoping to pass the burden of paying £2,000,000,000 on to posterity.
– I think that it should be passed on to posterity. I am concerned about the future. Quite obviously, the Government, belatedly and at long last, is also concerned about it. It sees the problem. It should have seen the problem during the last ten years. It acknowledges the problem now in the very terms of the case that has been put by the Opposition for so long. The stage has been reached where the Government has abandoned the frank, honest and direct approach of complete compulsion. It now wants to sugar-coat the pill. It has broken down the initial proposals of November, 1960, saying how ill-conceived they were in relation to a major matter of fundamental importance to the economy. We have had a complete change within a very short space of time.
One remarkable characteristic of this Government is that, when it finds itself in a difficult situation, it invents new words. It now says, in effect: “We do not intend to compel the insurance companies and the superannuation funds to invest a specified proportion of their funds. We are providing for a system of incentives and disincen tives.” I had never heard of the word “ disincentive “ until it was used by the Treasurer. I was sufficiently intrigued by it to have a look at Webster’s dictionary, the Oxford dictionary and all the other acknowledged dictionaries, but I still could not find it. I found it ultimately in an obscure little American dictionary compiled by a relatively uninspiring author who, I believe, is of no great repute. When I found the definition, I discovered that it was not appropriate to this case. A disincentive is defined as being a deterrent to wholehearted work. So in looking for a nice new word with which to’ sugar-coat the pill the poor old Treasurer has fallen into a desperate trap.
– What about “phantasmagorical “?
– I do not see how that fits in. The use of the word “ disincentive “ is typical of what the Government has done over the years in inventing new words. It. invented the word “ recession “ to be used instead of “ depression “, it invented the word “ disemployment “ for use in place of “ unemployment “, and now it has invented the word “ disincentive “.
– Who found the word for you in the dictionary?
– My secretary found it.
– I thought so, judging by the smile on her face as she sits at the back of the chamber.
– She found it after an exceedingly long search and after great perseverance.
– Has she found any glossary for the algebraic formula that is contained in the bill?
– I could not, in a word, attempt to define that. What has happened is quite, obvious. The Government became fearful of the element of straight-out compulsion after seeing the reaction to its initial proposal. It saw the practical difficulties that were involved in forcing these bodies to change their portfolios, even over an extended period, particularly in the case of the superannuation funds. Much of the money is invested in the businesses for whose employees the superannuation schemes were introduced originally. It would be quite impossible to untangle those moneys. That affords another illustration of the lack of consideration that was given to the matter originally. Just look at the tangle, the complexity and the technicalities that the Treasurer has been forced into in introducing this bill, which was born of a desire to get away from the frank, open approach of compulsion that he announced on 15th November last.
– I am beginning to believe that you would have supported the original bill whole-heartedly.
– This is the original bill.
– I mean the original intention.
– The honorable senator misrepresents the attitude of the Opposition in stating it in that way. I shall announce presently what our attitude is. It will be in terms which will indicate that we do not oppose the measure. I shall have other criticisms of the bill to offer, but I repeat that we are gratified to see that the problem is being acknowledged and that an effort is being made to solve it. I say immediately that the Government has made a quite inadequate approach to filling the gap. At the best, what will its proposal yield?
– In other words, you would have gone further than the original proposition?
– Please do not put words into my mouth. I am quite competent to express all the thoughts I have on the matter and I shall state the attitude of the Opposition quite fully before I conclude my speech. Now that I have been diverted, I shall continue to be diverted. Let us assume that the scheme works and that out of the increase in assets, which runs to the order of £100,000,000 a year, the Government gets £30,000,000. Let me give credit for the whole of that sum as though it were an addition to the funds available to the Government. Part of it would have been put up in any event, but I am quite certain that the additional money to be released under this proposal - I am talking of government and semi-government securities - will be considerably less than £30,000,000 a year. As I said, let me concede for the sake of argument that the gap will be bridged to the tune of the full £30,000,000. What will be the position in relation to the remaining £190,000,000 or £200,000,000? That is the important question. Not one word has been said about that. The Government makes this sectional, discriminatory, inadequate approach; but there is not one word in the whole of the Minister’s secondreading speech about what the Government will do in relation to the remaining gap. Even if this proposal proves to be a complete success, that is an aspect of the matter to which I direct the attention of the Minister.
Let us suppose that the Government’s proposal goes to the full extent of providing an additional £30,000,000 a year or thereabouts. I again ask: What does the Government propose to do about the remaining gap of £190,000,000 or £200,000,000 year after year which it now acknowledges it would be unfair to take from the taxpayers? It is of no use to pretend that this is an adequate, thorough, complete or even frank approach to the problem. The Government would have to go very much further before the Opposition would be satisfied with this measure. In view of the new faith affirmed by the Treasurer, himself, the Government ought to be addressing itself with real vigour to the great gap that will remain even if this legislation is a complete success.
I should like the Minister to deny the proposition that the most that could come out of this would be £30,000,000 and that some of that would have come in any event. Above all, I invite, urge and press him to let the nation know just what the Government proposes to do about the vast problem that remains in relation to the gap that continues to exist in the loan market. It is quite obvious that insurance companies and superannuation funds were happy to invest to a very high degree in public securities at a time when there was stability in our currency and when there was no inflation. It is quite obvious that inflation has been the major matter that influenced them to abandon the loan market and invest in the fringe institutions, in industry, and in all those activities that move with inflation. The directors and trustees of all these bodies have a duty to their beneficiaries to ensure that they get the best return, and who can blame them for having the business acumen to get away from Commonwealth bonds in a period of inflation, when they can do better for themselves by getting into those activities that move with inflation? That is the main reason why they have abandoned the loan market and why the Treasurer is able to tell us to-day that out of a £562,000,000 accretion in their assets in the last ten years they have put only £81,000,000 into public securities, of which only £4,000,000 went into Commonwealth securities.
Commonwealth securities should be regarded as the most attractive, safest and best gilt-edged investment in the country, but they are treated with scorn by investors by reason of their history under this Government’s management of the economy. I know that the Commonwealth Government has not sole responsibility for the loan market. The Australian Loan Council has responsibilities in that connexion. But at least the Commonwealth is the chief executive officer of the Loan Council and, whether it likes it or not, the Commonwealth Government is responsible for the economy of the nation. There is only one economy in Australia; there are not six separate economies. The nation looks, very properly, to the Commonwealth to guide that economy in a way that will be satisfactory to the great bulk of the people. Only £4,000,000 of the £562,000,000 increase in the assets of life insurance companies and funds has gone into Commonwealth securities. What a condemnation of this Government’s policy in relation to the loan market! Nobody can have any pride in that; I certainly have not.
I have indicated that this bill is discriminatory. That is quite true. There is no approach, for instance, to the enormous reserves that have been amassed out of excessive prices which have led to excessive profits for nearly all of the major corporations in this country. They run completely free of any responsibility at this stage. Does the Government propose to confine its energies and activities in restoring the loan market to two classes of bodies, life insurance companies and superannuation funds, or is it prepared to look at the vast reserves which the White Paper shows have been built up and magnified disproportionately in the capital resources of great companies down recent years? in this place before 1 have cited figures showing increased reliance upon reserves rather than upon the raising of new capital, whether by debentures or share subscription. The emphasis has been to get all the money they want for their future development out of the prices and profits of current years. Their tremendous expenditures are bringing about the disproportion in this country between private investment and the money that is available for government activity.
Sitting suspended from 1.0 to 2.15 p.m.
– I shall conclude my reference to the discriminatory effects of the proposal contained in the bill before us with the comment that the burden of the provision is, in effect, thrown on the policyholders of life insurance companies and the beneficiaries of superannuation funds. For that reason, the legislation is sectional. It goes only a small part of the way to bridging the gap. It should not be beyond the ingenuity of a government to devise a plan - I admit that some imagination would be required - to spread the burden over the community at large and thus rectify the unfairness which the Opposition sees in the present situation.
I am fearful that I shall not have sufficient time to discuss all the matters that I should like to discuss in speaking of a bill of such interest. I hope to have time to make some reference to the taxation concessions which life insurance companies and private superannuation funds now enjoy and to point to the incentives and, if I may use the term, the disincentives that the Government proposes to apply to them to coerce them into adopting the Government’s idea of the pattern of investment. First, however, I wish to refer to three or four matters in respect of which I propose to direct questions to the Government. As I listened to the Minister’s second-reading speech, my mind was busy thinking about the methods that might be adopted by the organizations concerned to evade the provisions of the legislation. One of the first thoughts that occurred to me was that they probably would make investments in overseas bonds issued by this Government. Such bonds are issued entirely tax-free. T thought that i investment might occur in that field and that that might comply with the Government’s requirement. It seemed to me that they might either subscribe abroad or buy bonds after they had been sold initially abroad. However, I see that the definition of “ public securities “ eliminates that possibility, because the term, as used in the bill, does not include securities in respect of a loan raised outside Australia. It is very proper that there should be such a provision, because the problem concerns the need to rectify defects in the loan market in this country. That gap has therefore been closed.
The next thing that occurred to me was that perhaps the organizations would pass assets, which did not consists of public securities, over to other companies by way of a physical exchange of securities, or pass non-government securities over to other bodies in exchange for public securities, with, perhaps, a side arrangement to reimburse each other for the appropriate reduction in the value of the bonds or investments involved in the transaction. I notice, however, that proposed new section 121e, which deals with trustees, states - (1.) Where the income of a superannuation fund is derived from assets that are not vested in a trustee of the fund, those assets shall, for the purposes of this Division, be deemed to be assets of the funds. . . . (2.) Where property is held in trust for the trustee of a superannuation fund, that property shall, for the purposes of this Division, be deemed to be assets of the fund.
So far as that proposed new section carries the matter, it resolves the doubt that I had in my mind. I notice that the provision refers to superannuation funds only. Can the Minister tell me whether it will be deemed also to have application to life insurance companies, in all their aspects, as it clearly has application to superannuation funds? If that is not so, I ask whether the Government will address its mind to the need to close that gap.
My third question relates to the local loan market. In the limited time that 1 have had to consider the bill, I have noticed that the obligation is cast upon life insurance companies and superannuation funds so to alter their portfolios of investment that they will represent a proper ratio of investment in public securities. I ask the Minister whether that requirement will be complied with if the organizations go on to the open market and buy bonds which have been issued in prior years. If they may do so, and they buy bonds for which they pay money to other financial and commercial institutions, that money immediately will be available for all sorts of purposes which may not necessarily be connected with the public interest. ls there any provision in the bill which requires that a proper proportion of the annual increase of assets shall be invested in loans that are floated in the year of income? I take it that the purpose of this measure is to ensure that there shall be some support for future loans. In the limited lime that has been available to me to make a detailed study of the bill, I have not noticed any provision which requires that the public securities are to be those that are current or which have been issued in the year in which the assets are accrued. I invite the Minister to tell me what hold it is expected the legislation will have, unless that is the intention. If the organizations may merely pay cash to the holders of bonds issued in. the past, who will be free to invest where they wish, there will be a tremendous bolt hole, from the viewpoint of the purpose which the bill seeks to achieve.
It may be that there is such a provision in the bill and that in my relatively cursory examination of it it has escaped my attention. 1 should be reassured by hearing from the Minister on this point. I do not suggest that he necessarily give me an answer when he replies to the second-reading debate. If he cares to do so at the committee stage, I shall be perfectly content. Perhaps the main question that I want to ask is this: What are the Government’s proposals to bridge the remainder of the gap in the loan market, apart from the contribution that may be expected from life insurance companies and superannuation funds? 1 wish now to come back to the question of taxation concessions that are granted under the law at present to superannuation funds and life insurance companies. Looking first at the position in regard to life insurance companies, 1 find that section 1 1 1 of the Income Tax and Social Services Contribution Assessment Act exempts premium income altogether from classification as taxable income. Section 115 exempts three per cent, of what are termed the calculated liabilities. That term has required a good deal of definition in the act. I notice that the Treasurer (Mr. Harold Holt), instead of using the phrase mentioned in the act, ha-, used the words “ three per cent, of Australian policy reserves “. I take it that the two terms are synonymous. The phrase used by the Treasurer is certainly much easier to follow than the other phrase. A very big taxation deduction is provided under that section. The various provisions mean that instead of the companies paying tax at the rate of 5s. in the £1 on the first £5,000 of income and 7s. in the £1 on income in excess of £5,000, their average rate of income tax is only ls. 6d. in the £1. That gives us some idea of the great benefits that are conferred by the taxation concessions.
Section 46 of the Income Tax and Social Services Contribution Assessment Act provides for a rebate of tax on dividends received by a life insurance company from any other company. That is a privilege which is common to all companies. But in the case of life insurance companies it is carried further by section 26 (i) which eliminates from taxable income reversionary bonuses distributed by such companies In other words, the companies are able to distribute their profits as dividends but they are not taxable in the hands of the beneficiaries. That is a provision which is of enormous benefit to the life insurance companies and their policy-holders in comparison with the share-holders of other companies in the community. So the life insurance companies have been singled out for very special treatment.
– But they provide a very special service.
– I am not complaining about it. At the moment all I am doing is recording the privileges they receive. I voice no complaint about them. These privileges have been extended by governments of all political colours. There is no question about that. The position of superannuation funds is covered by section 23, paragraph (j) (0. and paragraph (ja). Those two paragraphs between them provide complete exemption from income tax.
There is a further provision in the act in relation to both life insurance companies and superannuation funds. Their develop ment has been greatly accelerated by the provision that an individual taxpayer may claim as an allowable deduction premiums paid up to an amount of £400’ per annum. lnc extent of that concession may be gauged from the fact that the Treasurer acknowledges that that concession alone Cleans a loss to revenue of £35,000,000 a year. That is a very substantial sum of money. That concession is a vast benefit to the policy-holders and does a great deal to stimulate the activities of the life insurance companies. On the other side of the picture, employers’ contributions to superannuation funds for their employees are an allowable deduction up to £200 pei annum per employee or 5 per cent, of the employee’s salary. The two concessions combine to give great help to the life insurance companies and very great relief to their policy-holders.
At this stage I should certainly like to thank the Commissioner of Taxation and his staff fo;- the explanatory memoranda that they have circulated in connexion with this highly complex bill We have always been indebted to the commissioner and his staff for this type of presentation. This is a sphere in which the Commonwealth excels. It is very important when we are considering a bill of this complexity. In regard to the detail of the bill - the machinery provisions which seek to implement the Government’s purpose - I confess that I have relied very heavily upon my confidence in the skill and understanding of the expert officers of the Taxation Branch in settling these provisions. Going back a long time, I do not recall picking up a bill which required as much intense study as this bill requires to understand its meaning and significance in all phases. In the limited time which obviously I have had to address myself to this measure, I repeat that I have relied very heavily upon my knowledge of the skill of the officers of the branch.
There have been two great changes in the Government’s proposals between November, 1960, and now. In November last year the Government proposed that 30 per cent, of the total assets of both superannuation funds and life insurance companies should be invested in Commonwealth securities within a limited time. The total assets of the fund and companies were involved in that proposal. That no longer applies to superannuation funds. That is not the present proposal at all. Now they will have to invest 30 per cent, of the increase in their assets after 1st March, 1961. The Government has not disturbed their investment portfolios up to that date. They will be required merely to contribute 30 per cent, of the increase in their assets after that date. That is a very different proposition from a proposition dealing with a percentage of their total assets which at the present time are of the order of about £600,000,000 and which the Treasurer has told us are increasing at the rate of 15 per cent, per annum. The other element of change, of course, is the one to which I have already adverted. The element of direct compulsion is abrogated. This new procedure of incentives and curbs or restraints is replacing it.
I should like to talk about the effect of what the. Government is doing upon the superannuation funds whose assets are of the order of £600,000,000. These funds have not played a significant part in contributions to public securities. We have been told that the amount that they had invested in Commonwealth securities dropped from 20 per cent, of their assets in 1956 to 11 per cent, of their assets in 1959. The bill provides that there will be no tax disadvantage in respect of investment income earned up to their 1960-61 level of investment income if the funds maintain public authority securities as they are at 1st March, 1961, whether or not they comply with the. 30/20 ratio in respect of future increases in assets. If they do not comply with the ratio provision in regard to their future assets, they will lose their exemption on the income that they gain in excess of the 1960-61 level. In other words, whereas up to date they have been paying no tax, they will now fall into the category where they will pay 5s. in the £1 on the first £5,000 of income and 7s. in the £1 on income in excess of £5,000. A discretion is vested in the Treasurer to enable him to meet the case where a superannuation fund encounters some temporary difficulty in complying with the ratio requirement. He may waive the obligation upon a fund and extend it for a period in particular circumstances.
I come now to the life insurance companies. The bill requires that whether by the creation of separate funds or not their income from superannuation shall be divorced from their income from other life insurance business. At this point we find one of the complicated formulas which are’ contained in the bill. The requirement is that they must reach their quota in both facets - the superannuation fund that they operate and their ordinary life insurance business - if they want to receive the taxation benefits provided under the bill and it they want to avoid the. penalties that are imposed on them by the bill. Unlike the superannuation funds, those quotas must relate to their total assets, and they are given the ten-year period as the maximum in which to reach the level. A provision is made that no matter what the difficulty is and how far off they may be even in reaching their quotas over the whole tenyear period, they are not to be asked to put in more than 40 per cent, of the increase in any year and more than 25 per cent, of that increase into Commonwealth securities. It is not contemplated, nor is it to be expected, that the life insurance companies could reach their quota in any short period. The requirements of this legislation will mean a tremendous upheaval in the pattern of their portfolio of investments, and the one thing that is to be deplored is that it is expected that it may take ten years to reach the 30/20 per cent, ratio in relation to their total assets. But the case of life insurance companies whose total assets are involved in that ratio is different from the case of ordinary superannuation funds, which are concerned merely with the increase in assets after 1960-61.
Dealing with penalties, let us see what happens to the life insurance companies. If they do not qualify as I have indicated, under section 46, as amended, they will lose the benefit of rebates on dividends received from other companies above the 1960-61 level. If they exceed the 30/20 ratio, they will get something in the nature of a bonus on the 3 per cent, exemption provided under section 115 of the act. I have already explained the workings of that section. If the life insurance companies fall below the 30/20 ratio, they will suffer a penalty under section 115 of the act. For every £1 that they fall below the 30/20 ratio, they will suffer a reduction of £1. There is another penalty of .5 per cent, if they fail to obtain the 10 per cent, requirement in relation to semi-governmen securities. So again there is a discretion in favour of the Commissioner of Taxation, enabling him to meet cases of hardship and cases where a bona fide offer has been made and where, through no fault of the company, the ratio has not been achieved in the specified time. There is provision for agreements to be made between the life insurance companies and the commissioner as to the term within which the ratio is to be completed. The commissioner has a discretion to vary and to extend the time. I think that is quite proper.
The time at my disposal is dwindling. I do not want to delay the Senate unnecessarily. I am obliged to honorable senators for the attentive hearing that they have given to me in dealing with this complex matter. I undertook to explain the Opposition’s attitude to the bill. Our attitude is simply that we do not oppose the bill. We see defects in it. We see that the great problem of the balance of the loan market is still unsolved. We appreciate that the Government now recognizes that problem. We approve the fact that the Government is taking any step, desperate as is this measure from the Government’s point of view, to meet what I believe is a critical and desperate situation and one from which so many consequences flow, such as reduction of taxes, removal of indirect taxes, better social services, better health services ar.d the one hundred and one benefits that would flow from a complete restoration of the loan market. Those are not impossible objectives. They are objectives at which we must aim. I still hold the view that I held a year or two ago when from this place I submitted that this problem should be tackled with vigour and imagination. We on this side of the chamber are not cheering loudly for the bill. We are simply not opposing it. We are very interested in it as a step in the right direction. We think it is sectional and discriminatory. We think that a better or more becoming approach to the problem would be to see that the burden of restoring the loan market is cast over the whole community.
– The Senate is now concerned with a bill which is of very great importance from all points of view. The measure is most complicated and involved. I regret that the Senate’s programme for legislation does not permit a sufficient understanding of the measure. As soon as the measure passed through the House of Representatives last week 1 secured sufficient understanding of the measure. As accompanying memorandum. 1 have devoted time in no unstinting fashion to a study of the bill but I do not pretend in the slightest respect to understand it. That is unfortunate, because the bill is important in its impact, both from the point of view of the policy of the party to which I belong and its most important effect on the national finances of this country. Nevertheless, with such preparation as one can give to the matter one at least enjoys the advantage of speaking freely on such an important measure. I trust that no one in this chamber would attempt to hinder or fetter in any way that freedom of speech.
The background to this bill is the policy adopted in Australia of financing public works out of Commonwealth revenue. It is history now that over the last decade the Commonwealth, seeing the shrinkage in the voluntary internal loan market, felt it advisable to advance to the States supplementary grants to fill the deficiencies of State requirements to finance capital works, such as hospitals, schools, electrical undertakings, fuel undertakings and all those other constructive works that are necessary to provide the sinews of national development and the framework upon which private enterprise may advance. It is the drift in that policy that is highlighted in this measure and which is the backdrop to the measure. We have been reminded - the facts are on record - that over the last ten years Commonwealth revenue has been used to finance Federal and State public works to the tune of more than £2,000,000,000. To put that figure in its proper perspective, we must remember that the total assets of life insurance companies to-day are of the order of £1,000,000,000 That is a figure that we should bear in mind. Over the last decade we have financed public works out of Commonwealth revenue to the tune of £2,000,000,000. I believe that that policy is fraught with ruin, for three reasons which I shall mention but briefly. The first reason is that this Parliament takes the responsibility of raising revenue by taxation which it makes available for expenditure to parliaments which had no responsibility for imposing the taxation. The State parliaments that expend that revenue are autonomous bodies; they acknowledge no responsibility to us, to the government of the nation, in respect of that expenditure. I am dismayed that that principle in parliamentary government to-day is endorsed. Secondly, 1 believe that the £2,000,000,000 to which I have referred rightly belongs to the taxpayers. In this Senate before we have engaged, to a minor degree, in discussions of this problem.
It should not go unnoticed that on 15th November last the Treasurer (Mr. Harold Holt) stated a proposition which has been vigorously supported by his representative in this chamber, Senator Paltridge. The Treasurer stated that the total amount supplied from revenue over this period exceeds £2,000,000,000- a heavy charge on this generation of taxpayers for public assets that will, it must be remembered, service many generations to come. That statement provokes contention. The fact is, I believe, that if the taxpayers, in addition to providing the ordinary revenue needed for repatriation services, social services and the one hundred and one things that go to sustain governmental and developmental purposes, not including capital works, have to provide an additional £2,000,000,000, it is easy to see how the taxation instrument can become the most effective agent to achieve socialization that one can have. That is the position that is reached when £2,000,000,000 can be transferred from private ownership to publicly owned property that will endure for generations.
Thirdly, I believe that the policy of undertaking capital works out of current revenue aggravates inflation. Taxation is a growing ingredient of costs, and it is the cost increase in Australia that is chiefly responsible for inflation. For these three reasons, I believe that the current approach to our economic problems contains elements of ruin for the principles that the Liberal Party espouses. Already, it has threatened to endanger the nation in a special degree, because if you depend upon current annual revenue for developmental capital works and a temporary depression is encountered, your revenues for ordinary current purposes diminish. Public expenditure on capital works should be for the purpose of meeting a deficiency when current revenue slumps. A slump in the national economy is intensified 100 per cent, if you depend upon current revenues to keep the development programme going.
It is a matter of intense regret to me that in Australia over the last decade inflation has gone on persistently to a degree that causes grave anxiety. But for two or three fortunate circumstances affecting the growth of Australia, the inflation that we have experienced in this country over the last ten years might have been much more devastating than it has been. Inflation has eroded the position of our sectional interests, which are deserving of some protection and support. On previous occasions, I have instanced its effect on the family man, the farmer and the fixed income earner. To-day, I am concerned in the main with the fixed income earner.
People who are dependent upon the income from investments in fixed securities made in 1950 have been adversely affected. I am reminded of Labour’s one-time boast that, given ten years in office, it would change the face of Australia. During the ten years of administration of this Government a change of considerable significance has occurred which has had regrettable effects, particularly in relation to the fixed income earner. Suppose some one has left in trust an estate of, say, £10,000 or £20,000 to maintain his dependants. The income from the investment leaves them comparatively pauperized, whereas they should have been entitled to expect to enjoy some degree of comfort. This is not possible because the fixed income from the estate has been so dreadfully reduced.
Successive good seasons in the agricultural areas, the maintenance of external markets and the political stability within this country have attracted the interest of those who have been tax-ridden overseas. These factors have induced a flow of capital money into this country. All these factors have helped us to sustain the demand that inflation has made upon us. I believe that while I am a member of this chamber I have a responsibility to state my opinions according to my judgment of the position. I believe that the sixties will not provide any easy progress such as the fifties provided because the competition from abroad is becoming much more energetic and intense.
About the middle of last year inflation reached such a stage as to cause alarm and anxiety in the community. Share speculation was completely unreal, land speculation was entirely unsafe, and other elements in the economy were causing fear lest the value of savings should collapse. Consequently the Government, very properly even though belatedly, introduced measures which were designed to bring reality into the factors that pass for exchange in commerce. Having regard to the directive to the Reserve Bank, the lifting of import restrictions was surely a sound measure. The first step in this direction became effective in the early half of the year, and the second, having been announced in the early half of the year, was left until the latter half to become effective. Both measures, in my view, were thoroughly sound.
But, Mr. President, when you come to the trilogy of measures that constituted the brainstorm of the Treasurer on 15th November you have definite cause for disquiet. The sales tax imposition has been and gone. Non-deductibility of interest payments is about to die. We are now concerned with the second measure, which was announced in November. Tt is a requirement that the life insurance companies and the superannuation funds shall have not less than 30 per cent, of their investments in public securities. That announcement was completely contrary to my idea of the measures that a Liberal Party Treasurer should enunciate for the regulation of the economy. Neither compulsory direction of persons nor compulsory subscription of capital is condoned or accepted, as I understand it, ‘by a Liberal. I am glad that now, after further reflection - motivated, no doubt, not only by a consideration of the forthright protests that came from purposeful sections of the Treasurer’s own party, both inside and outside the Parliament, but also by protests made throughout the community - the measure has been dropped. I congratulate the Treasurer for having abandoned that idea.
Before I leave this subject, let me make the comment that my confidence is not completely restored in the Government’s fidelity to the policy that we have come here to propound. The Commonwealth’s power with respect to the direction of insurance companies’ assets is confined to life insurance only, and it may be that second thoughts indicated that to attempt to extend the compulsion to superannuation funds would have been in vain. I do not know, but I hazard the opinion that the Federal Parliament has no power whatever to pass legislation controlling the investment of superannuation funds. I think too, that some reflection upon the grand decision of the High Court, supported by the Privy Council, nullifying expropriation of bank assets of an interstate nature on the ground that such expropriation interfered with the freedom of interstate trade, which is guaranteed by section 92 of the Constitution may have acted as a reminder that compulsory direction of this sort, directed to the assets of interstate insurance companies, impinged upon the absolute freedom of interstate exchange of investment that life insurance companies, along with other interstate bodies, have under the Constitution. If constitutional inhibitions were the reason for dropping the compulsory direction idea, it is not so reassuring to those who place some importance upon the principle of faithful adherence to Liberal policies.
I hope we will not be too ready to forget the days when we crusaded throughout the country in opposition to those who told the working men that the interests of national development would not always permit them to see the town clock in Melbourne in the morning and to hold their wives’ hands at night. We paraded that idea round the country as an instance of gratuitous interference with the freedom of the working man, in the interests of national development, that a robust community such as ours would not tolerate. Nor would the people tolerate it, as they showed in 1949. When the Chifley Government put into its banking legislation a requirement that municipal corporations should invest or deposit their funds only in a government bank, the High Court decided that that was a freedom of which the Australian people had not yet been deprived. It is a freedom that is just as precious to-day as it was then. Life insurance companies and superannuation funds are entitled, at least to the same degree as municipal corporations, to freedom of investment, and are much more entitled than are banks to freedom to control their investments.
The compulsory direction idea has been dropped and taxation is the device that is put forward as a substitute. It has long been said that the power to tax is the power to destroy. It is obvious that one must look at the realities and the substance of this measure. If this taxation were of such an order and incidence that it meant the destruction of these institutions, it would be intolerable, but I do not put it into that category at all. However, having acquitted the measure of that intention, I have said all that I can say in favour of it.
I oppose the measure. I submit that it cannot be justified. Just let us consider the position of the life insurance companies and the superannuation funds, which are the objects of this special form of taxation. Why are they the targets for discriminatory taxation the purpose of which is not to raise revenue but to channel the investments of those bodies into public securities? The policy-holders of the life insurance companies discharge their tax obligation. The superannuation funds were established specifically to relieve one of the problems which threatened this country fifteen or twenty years ago - the dependence of aged, sick and retired persons - even though the recipients of the benefits conferred are dis<qualified from receiving the national age pension. The establishment of these funds has had the effect also of easing the demand upon the Treasury for aged persons homes, which over the last four or five years has been running at the rate of £1,000,000 or £1,500,000 a year.
What credit can be given to a scheme that seeks out life insurance companies, which for the most part are co-operative and mon-profit making organizations? As the Treasurer himself has said, those companies, because of the integrity they have displayed over the years, have risen to the status of custodians of the savings of people who want to ensure the independence of their families in the event of accident, against which the insurance is issued. What special obligation is cast upon them to become the subjects of the force of this legislation and to have their assets in this period of inflation subjected to the stagnation that is characteristic of government stock, when the rest of the community is rollicking in flexible inflationary securities? The capital value of fixed investments over the last decade has declined by 40 per cent. Is that an overstatement? I rather think it is an understatement. Is the life insurance company to be compelled to freeze the annual contributions of its policy-holders for the next fifteen years by subscribing to a fixed investment in public securities which will be paid back in currency having a much reduced value? Investment of that sort to the degree contemplated would be a dissipation of the funds of the policy-holders. It is a mockery of the idea of investment. Such a form of investment completely wastes savings and deprives one of any confidence about being able to establish one’s independence. We know sufficient of the nature of life insurance business.
If we look at the definition of exempt funds at page 4 of the bill, we get an idea of the kinds of funds which are the subjects of this measure. Two kinds of superannuation funds are affected by the bill - employees’ funds and the funds of selfemployed persons. I have not the actual figures, but it is my impression that the employees’ funds constitute the great majority of superannuation funds. They have been created for the purpose of making payments in cases of injury, sickness, retirement or the death of employees. For the most part they have been built up by contributions from the employer and the employee, the employer in the great majority of cases having contributed the greater amount. Usually two-thirds of the moneys are provided by the employer and one-third by the employees. A statement in relation to this matter which was issued by the Commonwealth Statistician in 1956 shows that approximately 22 per cent, of these funds were established before 1940, the remainder having been established since then.
Let us bear in mind the cause we were supporting in the days when we fought the Chifley Government because of the inroads it was making into freedom of investment and the right to save. We encouraged this community of interest in the relationship of employer and employee. That was one of the bridges upon which the strong and revived Liberal Party was built. Employers were encouraged to develop these funds to give confidence and community of interest to their employees in the undertakings ir. which they were engaged.
– They are not in danger, are they?
– They are not in danger. That is one of the tributes we can pay io the people who accepted our policy. They accepted it in such a way that we are told the funds have since risen by approximately £600,000,000. To select people with assets and income, to select these funds, and to readjust their burden of taxation by driving 30 per cent, of their moneys into public securities is discriminatory. I should have thought that the purpose for which life insurance companies and superannuation funds were established would be applauded on both sides of the Senate. 1 pause here to direct attention to the fact that Senator McKenna said that all governments had encouraged the establishment of such organizations. The tone of his speech was in remarkable contrast to that of the speech of the honorable member for Melbourne Ports (Mr. Crean), who led for the Opposition in another place. The honorable member for Melbourne Ports screamed criticism of the inequity of the people who created these funds and of the life insurance companies. One would have thought that these organizations were monsters in the community. I am pleased to note that in this place the Labour Party has adopted no such approach. 1 want to emphasize that a great proportion of superannuation funds consists of moneys which have been accumulated for the purpose of providing against the retirement, sickness, injury or death of employees. I should think that one would have the complete support of both Labour parties in an effort to ensure that no discriminatory measure was levelled against such funds to try to force, by way of taxation, the channelling of funds into public securities. Why not have a look at a few of the banks’ subsidiaries? Why not have a look at all the fringe banking institutions? Why not consider the pastoral companies, the newspaper companies and the television companies? Why go to the saving institutions, and first to the little savings bank depositor who, individually, as a rule, does not know what is going on? Because a government savings bank largely had a monopoly in the savings bank field until recent years, the savings of the small depositor made a reservoir for the support of public security loans. Now that idea leads to the notion that the Government can say to kindred savings institutions, such as life insurance companies and superannuation funds, “ You shall invest 30 per cent, of your funds in public securities or you will suffer a reduction in the deduction allowed for taxation purposes “. In other words, they are told to conform to this requirement and thereby get what I am sorry to see was described as a bonus. If they do not conform to this requirement, they will pay increased tax.
I should think that all those companies that have indulged in huge takeovers and have huge reserves would be. just as appropriately the subject of a levy by way of incentive or punitive taxation according to whether or not they channel a proportion of their investable funds into public securities. I cannot justify the. idea that policyholders in life insurance companies or beneficiaries of superannuation funds should be the persons to whom we should give exclusive attention. These people who have developed superannuation funds developed them under State laws applicable to companies and trustees. There was no thought, in most cases, of making the funds investible in fixed securities or public securities. Why? Because the very fact of investing in the undertaking of the company gave to the employees that community of interest in the company’s affairs which was an essential part of the psychological approach to the whole matter. They were to become partners in the undertaking, lt would be ruinous had the original idea prevailed that of the funds so set up at least 30 per cent, should now be channelled into public securities, but as to the future that is the requirement of this legislation. No reason at all can be advanced for the proposition that a superannuation fund should invest in public securities. The scope of its investment is a matter entirely for those who joined the fund and those who established it. These funds, having been established as adjuncts to business, can be hopelessly frustrated if one-third of their future increments are to be put, under the compulsion of this legislation, into public securities.
We are told that because policy-holders in life insurance companies are allowed a deduction of £400 from their taxable income in respect of premiums paid, it is just to compel the companies to invest 30 per cent, of the premiums in public securities, lt is regrettable that this was not made clear at the outset, when the individual contributors were granted that increased deduction. It is a new principle to me that, just because it is thought to be proper government policy, in the interests of encouraging savings, to allow a high deduction of that nature, it is justifiable to take control, whether directly or indirectly, of the assets induced by those benefits. If that is to be a principle of taxation, I hope that the Country Party will alert itself to a consideration of whether a policy of this sort will be directed to farmers who, byreason of their great developmental deductions, improve their farms on a capital basis at the expense of income. I submit that the allowable deduction of life insurance premiums should stand or fall upon its merits.
I had great disquiet about whether it was proper to increase the allowable deduction to £400. I did not believe that it was, especially in a year in which, for the first time, the higher public servants of the Commonwealth started to make superannuation contributions of between £300 and £400. lt is a curious coincidence of events that that was the year in which the allowable deduction was increased from £300 to £400. What bona fides or genuineness, to use the language of the bill, are there i the claim that when that allowable deduction was increased to £400 it was impliedly a part of the arrangement that life insurance companies would subscribe to public securities? I have it on the best of information that life insurance companies never sought that increase in the allowable deduction. There was no arrangement of 3n” sort and it is n complete myth to say that it whs implied or expressed in any arrangement that because the allowable deduction w«.s advanced to that degree the companies were obliged to invest in public securities.
The next aspect of this bill that I think is alarming relays to the position of the Commissioner of Taxation. If the bill is passed by th° Parliament, he will be the arbiter of the incidence of taxation in respect of life insurance companies and superannuation funds. If a life insurance company wishes to qualify for the taxation benefits provided by the bill and to escape the tax penalties, it will be required to bring its total investment assets up to the prescribed ratio of 30/20 per cent, at the earliest time that is determined by the Commissioner of Taxation, which shall not be later than 1971. Imagine the power that is to be given to the commissioner in relation to this one matter! A revision of the whole investment programme of a company will be required. The commissioner will have power to decide the year by which that revision must be completed, and it will be the earliest year which he considers to be reasonable in the circumstances.
Other provisions in the bill give the commissioner a discretion in many respects. For instance, he may adjust the rate of tax according to whether or not, in his opinion, genuine or bona fide attempts are being made to comply with the legislation. He may, in certain circumstances, impose or lift the tax according to his judgment of whether or not compliance with the act would affect the financial stability of the fund concerned. As I hope to demonstrate, Mr. Acting Deputy President, the whole of the legislation shows that the Commissioner of Taxation is to be given exceptional powers to enable him to govern the affairs of life insurance companies and to direct the investment of superannuation funds. The investment programmes of the companies and funds are really being placed in his power. That being so, it is not surprising that the Leader of the Opposition (Mr. Calwell) should have used the word “ socialism “ in referring to the measure on 15th March last. In my opinion, the Commissioner of Taxation is to be given discretionary powers which are altogether unjustified and too wide. We should have confidence in the directors of the companies and the trustees of the funds to control the affairs of those organizations. After all, the policy-holders of the insurance companies and the contributors to the funds trusted their judgment when they entered into transactions with the organizations.
There has been a good deal of censure of life insurance companies and private superannuation funds regarding their contributions to public securities in the last ten years. It has been stated that while their assets have increased by £562,000,000 in that time, they have subscribed only £81,000,000 of that to public securities, only £4,000,000 being in Commonwealth loans, lt is said that that rate of investment is in remarkable contrast to the proportion of investment in government loans in the preceding ten years. I remind the Senate that that was a period during which wartime exigencies induced these investment custodians, as well as many individuals, to subscribe to public securities for purposes of national defence. That was a time when the remainder of the commercial community was subject to economic controls. There was not then the present freedom to go outside investment in fixed securities and to invest in equities on the market or in securities, such as mortgages, which yield higher rates of interest. Is it not natural that a prudent trustee of a superannuation fund, and more particularly, a prudent director of a life company, would seek, in the subsequent decade, to redress the imbalance that occurred under those conditions and to distribute the risks in his investment programme according to his idea of a proper proportion between mort on ‘s, shares, bonds to companies, and public securities?
The very essence of a free enterprise community is that those who have assets to invest should be free to invest them in securities that will provide the capital security and income return that they prefer. I am informed that at the present time the life companies maintain £224,000,000 worth of investment in government securities and £107,000,000 worth- of investment in semi-government securities, out of a total investment in securities of £1,009,000,000. Nothing has been said of the fact that they have invested £143,000,000 for housing purposes. I hope to move an amendment at the committee stage with the object of bringing housing loans within the scope of the public securities referred to in the bill. 1 submit that it has been established beyond controversy that in post-war Australia, when we have been contributing millions of pounds to provide war-service homes and housing generally, the provision of housing has been an essential and fundamental purpose of our public securities.
As at December, 1960, 22 per cent, of the assets of the life companies were in vested in government securities, 10 pei cent, in semi-government securities and more than 14 per cent, in housing securities. I have before me a table which has been prepared by a Treasury officer showing ledger balances of Australian assets of all life companies in Australia at 31st December, 1960, and with the concurrence of honorable senators, I shall have it incorporated in “ Hansard “. It is as follows: -
The trend away from investment in public securities in the post-war years has not been peculiar to life insurance companies in Australia. There has been an exactly parallel trend in the United States of America and the United Kingdom. I shall not take up the time of the Senate by reading a most cogent excerpt that was read in the House of Representatives by the honorable member for Bradfield (Mr. Turner), but I assure honorable senators that it indicates such a trend in the clearest way. Therefore, the problem is not connected with the shortcomings of these institutions. It is a problem that should be considered upon a national basis in order to make the rewards of investing in Commonwealth stock comparable with those yielded by the market place and to make rewards yielded by the market place comparable with those yielded by Commonwealth stock. Once you eliminate the income disadvantage on Commonwealth stock,, you ensure that inflation will not waste away a third or a half of the capital value over the period of investment. You also ensure that in ten or fifteen years’ time, when the investor is repaid the money that he subscribed, he does not receive false currency.
I will merely mention two other matters at this stage. I hope that detailed consideration will be given to them in committee. One matter is the opportunity that has been taken in the bill to bring companies which carry on the business of life assurance only in a subsidiary way within the scope of this measure. Life insurance should’ not be developed simply as an offshoot of financial organizations such as those companies. The development of this business is so important and the record of integrity, progress and confidence that life insurance companies in Australia have earned is so wonderful that we should be very sure that the entrance of hire-purchase companies, which make a subsidiary business of life insurance, into the field of life insurance will not detract from the confidence that that field of investment and protection enjoys.
The other matter is in relation to superannuation funds. The idea has dawned on some one that there has been a drafting deficiency in relation to the effect of this legislation upon dividends received. Am I wrong in saying- “ superannuation funds “? Should I have said “ life insurance companies “? I do not pretend fully to understand this subject, but I will search for enlightenment in: committee. It seems to me to be the oddest idea that the income that a superannuation fund’ may receive with immunity from taxation should be fixed at the figure of the dividends that it receives in 1961. I thought that we were against profit control. I must have misunderstood the position. I thought that we would reject instinctively the idea of fixing a limit to profits in that line of business in future. Yet that is precisely what is to be done by this measure, as I read it, in relation to superannuation funds.
In my opinion, the measure should be rejected. I know that it will not be rejected. The Labour Party is not opposing it and I am not conscious of any considerable opposition elsewhere in the chamber. I believe that the Government is attacking a citadel of great and unique value when it chooses for specal discriminatory treatment two custodians of the savings of the people - first, the life insurance companies which are entirely mutual and non-profit making, and secondly, employees’ superannuation funds which, by joint contributions from employers and employees, protect the employees against sickness, retirement, injury or accident.
.- My remarks on this measure will be extremely brief. The Australian Democratic Labour Party supports the bill because it believes that the measure is necessary. An indication of how necessary it is is the fact that in this measure one finds a Liberal-Country Party government treading a path which normally one would expect a Labour government to be treading. The original proposals of the Government, announced in November, 1960, contained some objectionable features. The Government wisely decided to water down the element of compulsion. It has been replaced by an element of inducement.
It appears to me that there is very little serious objection from the organizations most affected. On two occasions I have taken part in political campaigns in which the interests of the great banking institutions were affected. I was on the side opposed to them. I have a hearty respect for the ability of the big financial organizations to swing into action if they think that their interests are being interfered with. What have we heard from the- life insurance companies and the other financial organizations on this occasion? If they had been unhappy we would have heard more from them. Possibly the key to the situation lies in figures which were published in to-day’s Melbourne “ Sun-News Pictorial “, setting out the percentages of the assets of some of the principal life insurance companies which are presently invested in securities under public control. I notice that the Australian. Mutual Provident Society already has 32 per cent, of its assets invested in government securities; the City Mutual Life Assurance Society Limited, 32 per cent.; the Colonial Mutual Life Assurance Society Limited, 39 per cent.; the Mutual Life and Citizens Assurance Company Limited, 29.8 per cent.; and the Temperance and General Mutual Life Assurance Society Limited, no less than 45 per cent.
When one finds that those big companies are already doing, to a large extent, what is being asked of them in the bill, one is led to ask, “ What is the necessity for legislation? “ 1 believe that the report of the Australian Mutual Provident Society, as published to-day, indicates one of the reasons why the Government has decided to offer inducements to the companies. That report shows that the society was able to lift its holding of ordinary and preference shares by £15,600,000 in the year ended 31st December, 1960, and that rise has increased the proportion of its assets represented by those ordinary and preference shares fom 5.1 per cent, to 7.9 per cent. Here is the point: In the same period the society’s holding of public body securities dropped from 36.5 per cent, to 32 per cent, of its total assets. That is a trend away from investment in securities under public control which we have all noticed. I do not think that any government could afford to ignore that trend. For that reason, I believe that this is an instance where the Government has had to act. Therefore, the Democratic Labour Party supports the bill.
.- I desire to express some thoughts in connexion with this measure, which is one component of the financial restrictions announced by the Government last November. Honorable senators will recall that one of the other components of those restrictions was the increase of sales tax on motor cars. When the bill to increase the sales tax on motor cars was introduced I strongly opposed it and we all know that it has since disappeared from the statute-book. I am very happy at that result. The third component of the financial restrictions was the provision that interest payments shall not be deductible for purposes of income tax. It would appear that that component, too, will pass out of existence.
In November last I made it clear that 1 was not in agreement with the Government’s economic proposals. At that time I claimed - I think my view has been vindicated since - that the measures adopted in the last Budget were already having the desired effect. However, somebody got panicky and these further economic strictures were hastily introduced in November last. I think that the economy, as a result of the proposals contained in the Budget, is shaping satisfactorily. I do not think there is any necessity for measures of the kind now before the Senate. I had no kind thoughts about the proposal to increase sales tax on motor cars and I have no kind thoughts about the proposal in respect of interest payments or the proposal now being given effect to in this bill.
The original proposal was designed to compel life insurance companies and superannuation funds to invest a certain percentage of their funds in government securities. The view that I and many of my colleagues on this side of the chamber hold is that that proposal cut right across Liberal principles. The proposal has been altered and the bill as we now have it provides tax incentives for life insurance companies and superannuation funds if they invest a certain proportion of their funds in government securities. I have the thought at the back of my mind that if no objection had been raised to the original proposal, it may have been given effect. Although effect is now given to the proposal by providing tax incentives to life insurance companies and superannuation funds, I am wondering whether there is some hidden force behind the bill.
The bill is distasteful to me because it leads along the socialist road. The bill has met with the approval of both Labour parties and may well be the first step along a road that we as a Liberal Party-Country Party Government may live to regret having followed. I am confident that in the days of the former Treasurer, Sir Arthur Fadden, a step such as this would not have been taken.
I do not propose to vote against the bill. It is a foregone conclusion that the majority of honorable senators will support the bill. We have known since the legislation was foreshadowed that it would be passed. Last year I decided that the proposal on which to express myself most’ vocally was the sales tax proposal. That was the vehicle through which to bring to the attention of the Government my opposition to its economic proposals.
This bill is an important piece of legislation and more time should be devoted to its consideration. Two features of the bill concern me and perhaps the Minister for Civil Aviation (Senator Paltridge) will enlighten me on them. One feature relates to the discrimination between life insurance companies and superannuation and provident funds. From my understanding of the bill superannuation and provident funds are expected to invest 30 per cent, of new funds in government securities. Insurance companies are expected, over a period of time, to invest 30 per cent, of their total business in government securities. I do not think that the element of retrospectivity should apply to life insurance companies if it does not apply to superannuation and provident funds. I suggest, not that superannuation and provident funds should be dealt with in a retrospective fashion, but that both life insurance companies and superannuation and provident funds should be dealt with on a similar basis.
My other objection relates to dividends received by life insurance companies from investments in other companies. We know that the moneys earned by companies that pay dividends are already taxed, and unless insurance companies invest a stipulated percentage of those earnings in government securities they will again be subject to tax. That provision will have a drastic effect upon insurance companies. Most insurance companies are operated on a mutual basis. I feel that the Government is dealing with them with too heavy a hand and somewhat unfairly.
With those remarks I express my general objections to the bill. Let me emphasize again that I am not prepared to vote against the bill, although I have expressed myself in opposition to it. The fate of this measure is a foregone conclusion. I registered my general disapproval of all of the Government’s economic proposals in November last. I will let the matter rest there.
– in reply - Senator McKenna, while informing the Senate that his party did not intend to oppose this measure, took the opportunity to present to us what has now become a fairly well-known argument. He said in effect that Australia was in an economic position of danger and despair. He said that our position was due, in his view, to two factors - the balance-of-payments position and what he termed the failure of the loan market. He made that claim despite the encouraging tendencies that are to be seen in the balance-of-payments position in recent times. Those tendencies will in all probability lead to the dire prognostications of the Labour Party, made over some months, not being fulfilled. lt would be idle for any government to attempt to delude itself that our economy in its present expanding state is free of all troubles. What can be truly said is that the troubles which beset this country at the present point of history are troubles which flow from the very robustness of the country’s development. Of course, the economy needs watching. Of course, the problem of the loan market must be treated with all the care and skill that we possess. In passing, let me say that the measure we have before us to-day is one which is directly aimed at that result. But I refuse to let go unchallenged the assertion by the Leader of the Opposition that this country and its economy are in a position of danger and of despair. On the face of it, that statement is plainly stupid. The honorable senator could not bring any reliable witness to testify favourably in relation to that statement because if it were even half true the confidence which this country enjoys overseas and the continuing inflow of capital into this country would not be evident, nor would we see the expansion and the development that are going on about us. We would not be able to sustain our immigration policy which is, I believe, the pride of every Australian and the envy of many countries of the world.
I want now to make a brief reference to the repeated criticism that has been made of the practice of undertaking capital works from revenue. One would think, from what has been said, that this practice is completely alien to the political philosophy of the Leader of the Opposition. But history cannot be erased, and history shows that in the years during which Labour was in power after the war, when loan money was available for capital works, Labour chose to undertake capital works with revenue. Indeed, that aspect of Labour’s policy was frequently commented upon and defended by the then Prime Minister, Mr. Chifley who, in a speech in June, 1949, said -
Another complaint against the Government is that it has financed public works, including those for the Post Office, out of revenue instead of out of loans. Surely there is nothing wrong with that. Is it not right that in a time of prosperity we should try to finance public works out of revenue?
That was the policy that was applied by the Labour Government of those days, and I can only assume that the same policy would be applied again by Labour in the unlikely event of its again attaining office.
What the Leader of the Opposition said to-day frightened me as much as what he has said on other occasions. While insisting that public works should be financed from loans, he bitterly criticized the advance in loan interest rates that this Government felt was necessary. It would appear from what the Leader of the Opposition has said that all the old clamps would be placed on the economy and money would be positively forced into Government loans. Notwithstanding that, there would be an abundance of money available for public loans, we would return to the old policy of supporting capital works from revenue.
The Leader of the Opposition also said that this measure was tentative, timid and discriminatory and that its provisions would need to go very much further than they went before the Australian Labour Party would be completely satisfied with it. What this measure attempts to do, Mr. President, and what I believe it does, is to ensure that the Government will have reasonable access to the historical and traditional source of loan funds for governments - nothing more, and nothing less. It seeks to have access to that source of loan funds, not by forcing investment in government securities, but by granting incentives to encourage such investment. The provision of incentives, in the Liberal philosophy, is a completely acceptable and laudable principle.
I turn now to the contribution that was made to the debate by Senator Wright. He commenced his speech by making a few general comments on the condition of the economy and on the financial policy being pursued by the Government. I gained the impression from what he said at that stage of his speech that he fervently believes that, in every instance, capital works should be paid for out of loan funds. As I believe that exception could not reasonably be taken to what this bill seeks to do by offering incentives, at that point I thought that the honorable senator must support the measure. But he went on to develop an argument which was, in fact, a plea - a strong case - to leave the life offices and superannuation funds alone, to give them complete freedom, despite the fact, as I have said, that they have constituted the traditional source of investment in government loans. Senator Wright said repeatedly that direction of finance was embraced in this measure. I repeat with emphasis what I said previously, that the measure provides incentives for the life offices and superannuation funds to invest in government loans.
– I assume that the Minister acknowledges that penalties, also, are provided.
– The so-called penalty is applied only when the 30-20 ratio is complied with.
The history of life offices and of superannuation funds in respect of public loans has been that they have received encouragement to invest in public loans in two ways - by section 46 rebates, and by deductions allowed to policy-holders in respect of premiums paid. It was never envisaged that the advantage that has been received by the life offices would be applied in the manner that it has been applied in recent years. In view of these concessions, it is considered to be a fair thing, and it was expected that, in accordance with the established practice, the companies would continue to invest in public loans. History shows that that has not been the case. They have not continued to invest in public loans to nearly the extent that they formerly did. During this debate, at the stage of the second-reading speech and since then, reference has been made to the continual decline in investment in government loans by superannuation funds and life offices.
Senator Wright has said that superannuation funds particularly, because they have the: effect of improving employer-employee relations and have the extremely commendable objective of providing for sickness, death, accident and the like, should not in any way be compelled to invest in government loans, although their investments in those loans have fallen. I suggest that the two thoughts are entirely separate. The superannuation funds are doing a grand job for the community in more ways than one, and they receive concessions. Because they do this grand job, that does not relieve them of their historical responsibility to subscribe to public loans to what can be considered a reasonable level. That is the broad and simple purpose of this measure. It says, in effect, “If you subscribe to loans, you shall receive certain tax concessions “.
I return to the point which I made earlier, namely, that the use of inventives for this purpose is not in any way offensive to any principle, particularly to any Liberal principle. Very shortly we will have in the Parliament a bill which, by offering payroll tax remissions, aims at improving our export position. For the very laudable purpose of attracting money to its Joans, the Government allows a tax rebate on the interest paid on such investments. Farmers are given special incentives by way of depreciation allowances. These are incentives in the true sense of the word, just as are the incentives provided in the measure before us.
– What about the goldmining industry?
– We could go through the whole economy and pick up incentives in almost every sphere. This bill extends that principle to this important part of the economy, which historically is a source of government loan funds and should be encouraged to remain so.
Senator Wright referred to the housing investments of life insurance companies. Although he said that little mention was made of that activity, I have certainly heard no criticism of the action of insurance companies in making housing loans. I think it is gratefully acknowledged by the Australian public and that this is one of the normal activities of insurance offices.
– And is a part of their business.
– It is a part of their business. In saying that, I want to make it perfectly clear that the Government, looking at housing as a separate and distinct part of its activities, will accept its responsibility for housing and will see that funds for housing are made available to the maximum possible extent through governmental and other financial channels. However, I suggest that that is an aspect of policy that should be dealt with in isolation, as the Government has already started to do.
I took a note of what Senator Wood said, or of as much of it as I could get down. At the time the additional sales tax on motor vehicles was imposed the Government declared repeatedly that the additional tax was imposed to achieve a result, and that just as soon as that result had been achieved the additional tax would be removed. The result having been achieved, the Government, in the terms of a promise specifically and sincerely given, removed the additional tax. It had achieved the result that was required and, having achieved that result, it was removed. I cannot understand why Senator Wood should offer any criticism of that action of the Government.
I was interested in what Senator Wood said about this measure. I was pleased to note that he did not intend to oppose it, but I was surprised when he criticized it, because after listening to Senator Wood in this chamber for ten years I have the very firm and fixed impression that his main object for sitting in this chamber is to obtain for the less-developed States, including Queensland, greater allocations of loan moneys. Every honorable senator has heard him, time and time again, criticize the Government for failing to make available, to Queensland in particular, loan money for this, that or the other project. As an ex-mayor of Mackay he has privately, and no doubt publicly, deplored the fact that money for semi-government loans has at times been limited. Here is a measure particularly designed to raise loan funds and assist local authorities, yet it brings from Senator Wood, not opposition, I say gratefully, but nevertheless criticism. His criticism is completely beyond me.
He made a comparison between superannuation funds and life insurance offices. There are obvious and numerous reasons why the two categories should not, and cannot, be treated similarly. Superannuation funds are of different types, styles and varieties, with different dividendearning rates. I understand there are about 20,000 of these funds. There is no competition between superannuation funds of the kind that exists between life insurance offices - of which, incidentally, there are not a great number. There are only 38. The approach to the problem necessarily called for different treatment of the two categories. Senator Wood appears to be under the impression that the superannuation funds are to be treated rather worse than the insurance offices. In point of fact, that is not the case. Their existing investments will remain unaltered. They will not be required to rearrange them at all. The 30/20 ratio, for which provision is made in the legislation, will have application to only those new investments. Existing investments will be left unaltered. In that respect the superannuation funds are, in effect, being treated better than are the life offices.
asked one or two questions ot which I should like to reply. First, he asked whether the life offices would be permitted to buy on the open market. The answer is that they will be permitted to buy on that market. The honorable senator seemed to imply that that would rob the scheme of any effectiveness it might have. I think he will realize on reflection that that will not be the case. Those which will sell their bonds on the market will fall into two categories - those which require funds and those which will sell to obtain temporary finance and which no doubt subsequently will re-invest their money in loans. There is no provision to the. effect that increases in the assets of the life companies must be subscribed to loans, but the amounts involved could be so invested by those companies.
A question was asked about proposed section 121e, and the transfer of securities from superannuation funds to life offices. Proposed section 121e has no relation to that kind of transaction, and it was not so intended. The position would be covered by section 260, which deals with the avoidance of taxation. The Leader of the Opposition asked what the Government proposed to do in relation to the difference between the sum of £30,000,000 that would be raised under the terms of this measure and the sum of approximately £200,000,000 which is now provided out of revenue for public works. I can only say that in 1958-59 we had reached the situation where loan raisings were sufficient to cover all State works. We believe that the policies which we are now following will have the effect of increasing the stability and improving the health of the economy, and consequently the productivity of the loan market, and that as those policies take shape we will get back to the position that obtained in 1958-59.
Question resolved in the affirmative.
Bill read a second time.
Clauses 1 and 2 agreed to.
Clause 3 (Definitions).
– I refer to clause 3 (b), which deals with the definition of public securities. I note that the definition includes Commonwealth securities; securities of a State, a territory, a municipal corporation or a local governing body. Sub-clause (c), which was inserted as an amendment in the House of Representatives, refers to securities issued in respect of a loan to a company the principal business of which is the supply and distribution by a system of reticulation, in Australia or a territory of the Commonwealth, of water, gas or electricity. It is satisfactory to note that the public aspect of such a company’s functions is preserved.
I should like the committee to consider the situation that arises in relation to life companies which in the past have placed the emphasis upon housing and so have diminished the volume of their holdings of Commonwealth stock and local government securities. I am not one of those in this chamber who have been pressing for increased government expenditure for housing. I believe that the assumption of responsibility by the Commonwealth Government in post-war years to raise money for housing is one of the factors that has caused us to be starved of loan funds for public works. I know there was a very real problem in relation to housing after the war and that it had to be faced. But the assumption of that responsibility has had the effect of riveting upon this Government and the preceding government a deliberate policy of extending the provision of loan moneys for housing. Surely that is a public function. I want to be persuaded that there is a good reason for discriminating against a company which has placed the emphasis on housing and which has invested greater sums in housing and correspondingly less in public securities.
It seems to me that, in accordance with the spirit of the legislation, the Government might be willing to accept an amendment which would include, in the definition of public securities, securities that are issued for the purpose of housing. I realize that “ housing “ is a broad term and that there is a variety of transactions in this field. I daresay that under the Commonwealth and State Housing Agreement there is placed on the value of each house that is financed a limitation which would not obtain in the case of money spent by insurance companies in the provision of mortgages for housing. I suggest that that limitation should not prevail over the acceptance of my suggestion. I should be pleased to hear the comments of the Minister for Civil Aviation (Senator Paltridge), who is in charge of the bill.
Senator Sir NEIL O’SULLIVAN (Queensland) [4.24]. - I should like to make a few comments in support of Senator Wright’s suggestion. I am not sufficiently optimistic to believe that at this stage the Minister will accept an amendment. I hope he does, but if an amendment be not accepted, 1 trust that he will urge it upon his colleagues in the Cabinet. After all, the Commonwealth makes a very substantial amount of money available to the States every year for housing purposes. To the extent to which life assurance companies make funds available in the way of loans for home building, the burden is lifted from the Commonwealth and States. This is a matter of very great concern in making more homes available. In addition, provided that the interest rate was kept as reasonable as that which is now applied by the life assurance companies, repayments on such loans would be within the reach of young couples seeking to build homes. This is a work of vast national importance. It is just as important as the items referred to in the provision. I commend the sentiments expressed by Senator Wright to the urgent and sympathetic consideration of the Minister.
– This question of housing continually engages the attention of the Government, lt so engaged the Government’s attention in respect of the drafting of this bill. In all the circumstances and having regard to the fact that the bill could be widened in a number of ways, the Government felt that to amend the bill to include the three instrumentalities mentioned was as far as it could go. The Senate will be aware that life assurance policies are in fact closely connected with the provision of housing finance by life offices. In marr* cases, one goes along with the other. 1 am aware, and the Government is aware, of the point made by Senator Wright, that some companies might engage more heavily in housing business than others and might find themselves at a disadvantage in some ways. That is recognized but at the moment it is not possible for the Government to accept an amendment of this kind.
Clause agreed to.
Clause 4 (Rebate on dividends).
.- I do not understand the clause. I should like the Minister to explain the provisions of this clause and a later clause in relation to superannuation funds, and the rebate on dividends under the old section 46.
– Apparently Senator Wright made known in advance his query in respect of this matter. I have a note of it. Unless a limit were imposed on section 46 rebates to companies which decided not to invest in accordance with the 30/20 per cent, ratio, such companies could become tax free by increasing their dividend income to a sufficient level. They would then have no incentive to invest in bonds. This is because of a peculiar arrangement whereby section 115 deductions, calculated partly on the assets providing dividend income, cannot be offset against gross dividends. A company could therefore receive a section 46 dividend rebate equal to the total amount of the tax payable, even if it had a large proportion of non-equity income in its assessable income.
.- I am obliged to the Minister for that statement, but I am still in a fog with regard to the matter. Even if what the Minister says be the fact, and even if one approves of that objective, will the committee please explain to me why the appropriate remedy is to limit the provision to the 1961 income? I can understand that, if this policy is to be accepted, there should be a provision in the legislation to prevent the rebate on dividends under section 46 from exceeding the penalty imposed under this bill, but to limit it to the 1961 income seems to me to be without reason. What relationship is there between the two? Am I right in interpreting this mass of material before me as a complete limitation on income from dividends from other companies received by a superannuation fund to the amount received in 1961, otherwise the penalty of this legislation will apply? In relation to a superannuation fund, the penalty is quite severe. It does not come within the category of incentive in any shape or form, unless I completely misunderstand my terms, because a nonconforming superannuation fund passes out of the realm of complete immunity from taxation in to the realm of the taxation provided by this bill. That is in no way, as I see it, an incentive. There is complete immunity at the present time. If the fund does not conform with the ratio in its future investments, it is taxable as provided by the bill.
– Only above the 1961 level.
– One of the provisions of the bill, as I understand it, is not quite what my leader, Senator Spooner, says, but the dividends are limited, insofar as rebate is concerned, to the 1961 level. Insofar as they increase after 1961, they enjoy no rebate, as I understand it, under section 46. I have found this matter very intricate and involved, but I do feel that one has a duty to try to get elucidation from all those who are at hand.
– I invite the Minister to say whether my interpretation of section 46 might be correct and provide some kind of answer to Senator Wright. It is that the rebate on dividends provided by section 46 is in respect of dividends paid by one company to another company. Superannuation funds in most instances would, I think, be constituted by trustees and would not fall into the category of companies. Section 46 would not have any application to a superannuation fund presided over by trustees and not incorporated. Would that be at least part of the answer to Senator Wright’s inquiry?
– I think that it would be. The matter is fully explained at page 23 of the notes, under the heading “Clause 10: Modification of section 46.”. in the following terms: -
Section 46 of the principal act provides for a rebate to be allowed, in the case of a resident company, which has the broad effect of freeing from tax that part of the company’s income that consists of dividends received from other companies.
That is the point that Senator McKenna has made. The passage continues -
This rebate will continue to be allowable, as at present, to companies to which section HOA applies.
Clause agreed to.
Clauses 5 to 13 agreed to.
Title agreed to.
Bill reported without amendment; report adopted.
Bill read a third time.
Senate adjourned at 4.38 p.m.
Cite as: Australia, Senate, Debates, 4 May 1961, viewed 22 October 2017, <http://historichansard.net/senate/1961/19610504_senate_23_s19/>.