12th Parliament · 1st Session
Mr. Speaker (Hon.. Norman Jilakin) took the chair at 2.30 p.m., and offered prayers.
– Is the Prime Minister yet in a position to announce the Government’s intentions regarding the future of the naval and military colleges?
Settlers in Drought-Stricken Aseas.
– Is the Treasurer aware that the Federal Land Taxation Department is issuing summonses against settlers in drought-stricken areas for the recovery of land tax due? Will the honorable gentleman give the instruction that leniency be shown where the failure to pay is due to adverse seasonal conditions ?
– I am not aware that prosecutions are being launched against taxpayers in the drought-stricken areas. The Land Tax Act. provides for the remission of taxation where losses are suffered on account of drought or seasonal disabilities. I shall ask .the Commissioner of Taxation to give consideration to the matter mentioned by the honorable member.
– Recently the Treasurer delivered two addresses on the financial and economic position of Australia. He stated that £500,000,000 of loan money from the United Kingdom had been invested in Australia, the interest on which amounted to over £30,000,000 per annum. Our present troubles, he added, would soon disappear, and the cure was in our own hands. Was the honorable gentleman’s cheerful statement made with a view to the raising of further loans outside Australia, or for the purpose of reminding the people that Australia might make better use of its own credit?
– The statement was not made with any thought of preparing the ground for the issue of new loans outside Australia. I was merely striking a note of optimism which I am sure the present circumstances and prospects fully justify.
– Will the Prime Minister consider the practicability of publishing during the present distressful time unemployment statistics monthly instead of quarterly?
– I shall consult- the Commonwealth Statistician as to the practicability of the honorable member’s proposal.
– Has the attention of the Acting Minister for Trade and Customs been drawn to the following statement in a sub-leader published in the Statist of 22nd March, 1930 -
But if Australia continues to insist upon growing it with white labour under existing conditions, sugar in England would cost about Ave times what it does at present. How is it reasonable to suppose that the English housewife would be willing to pay five times what she is paying at present 1 Can she afford to do it?
I find on referring to the English Labour Gazette that on the 1st March the price of sugar in England was 2Jd. per lb., and the suggestion that Australian sugar would cost five times as much, or ls. Ad.; is absurd;
– Order ! The honorablemember may not debate the matter.
– Will the Acting Minister for Trade and Customs have this misleading statement corrected.
– I have seen the statement referred to by the honorable member. It is a great distortion of the facts. At the end of March, 1930, the retail price of refined sugar in Loudon was 3d. per lb., usagainst 4½d. is capital cities in Australia. If England could find no other source of supply than the Commonwealth, Australian sugar could be shipped to England and after paying the British import duty be retailed in London at 6d. per lb. It is absurd to suggest that Australia, with its present export surplus of under 200,000 tons per annum, would be in a position in the near future to supply the British market requirements of 2,000,000 tons per annum. In any case the British Government would not create preferential conditions for Australian sugar more favorable than those available to other British dominions capable of producing sugar, and as they produce sugar with coloured labour they would obviously sell their surplus to Great Britain at less than a price based upon Australia’s cost production. I shall take steps to have the Statist informed of the facts.
– In order that the Wine Export Bounty Act may fulfill its purpose, will the Prime Minister consult with the Premiers of New South Wales, Victoria, South Australia and Western Australia with a view to legislating to restrict or prevent the planting of vines during the next two years?
– The Commonwealth Parliament has no power to restrict or prevent the planting of vines; that is a matter within the jurisdiction of the States. But having regard to the difficulties with which the wine industry is confronted, it might be advisable to discuss with the State Governments the prevention of further over-planting which has already created a marketing problem which the Commonwealth is endeavouring to solve.
– Will the Prime Minister consider the advisability of inserting in the. Wine Export Bounty Bill a pro vision restricting the payment of bounty to wine made from grapes grown in areas planted before a certain date? A similar provision is contained in existing legislation.
– The bill contains a clause similar to a section in the old act, but the matter is one that might be more fittingly discussed when the bill is being considered in committee.
New Basic Award
– In connexion with the new basic award of the Arbitration Court, I desire to know whether the Attorney-General will have gazetted the names of the land agents, storekeepers and others who supplied figures for the various towns in Australia in respect of the cost of living?
– I shall have inquiries made, and give the honorable member an answer at a later date.
– Is it a fact that instructions have been issued by the Taxation Department that all income tax assessments must be paid by the end of the financial year, and that extensions will be granted only on condition of the penalty of 10 per cent. being paid, irrespective of any hardships that may entail or any peculiar circumstances that may exist?
– I am not aware that such instructions have been issued. Whatever is being done, is not being done under an instruction from the Treasury. However, I shall make inquiries into the matter.
– Has the Postmaster-General examined the programmes of the broadcasting stations with a view to their improvement?
– The department is constantly in touch with the programmes of the broadcasting companies, and maintains a continuous supervision, endeavouring all the time to effect improvements.
– Is ita fact, as stated in the press of South Australia, that a loan of £10,000,000 is to be floated in the near future for the purpose of carrying out public works in the States; if so, will first consideration be given to public works the construction of which has been recommended by the Public Works Committee?
– The statement published in the press recently that it is proposed to go on the market in Australia for a new loan is without authorization. The Loan Council has not yet decided either the date when the market shall be approached, or the amount which will be sought.
– Will the PostmasterGeneral take into consideration the suspension, during such periods as farmers maybe in receipt of drought relief from the State Governments, of contracts for telephone services into which they have entered ?
– I shall give the matter consideration.
– Has the Acting Minister for Trade and Customs yet. completed his examination of Norman Lindsay’s book Bed Heap: and if so is he prepared to state whether it is to be admitted into Australia?
– The matter is under consideration.
asked the Prime Minister, upon notice -
– The answers to the honorable member’s questions are as follow : -
Instructional Corps - Senior Officers - Pro motion.
asked the Minister for Defence, upon notice -
Will he furnish a return giving the names of senior officers of the Australian Military Forces holding the rank of Brigadier-General and higher, with one or more sons respectively cither in the Staff Corps or Stair Cadets?
– Brigadier-Generals Dodds, Blarney. Foott and McNicoll. These are the only officers now in the Australian Military Forces who have sons either in the Staff Corps or in the Staff Cadets. It is explained, however, that there are, or have been, in the Staff Corps or Staff Cadets sons of the following : -
Permanentforces - Officers :
General Chauvel, now on retired list (2).
Honorary Major General Trving, now on retired list (1 ).
Honorary Lieutenant-Genoral Legge, now on retired list ( 1 ) .
Colonel Murdoch, at present serving (2).
Colonel Ryrie, now on reserve of officers (1 ) .
Colonel Hurst, now on retired list (1).
ColonelRidley, at prevent serving (1).
Honorary Major Ordish, Australian Instructional Corps (1).
Honorary Captain Morgan, Australian Instructional Corps (1).
Quartermaster Christie, now with Royal Australian AirForce (1).
Honorary Captain Durham, now on retired list (2).
Sergeant-Majors, Warrant Officers, A.I.C. :
Warrant Officer Kendall, retired (2).
Warrant OfficerDewar (1).
Warrant Officer Bernard ( 1 ) .
Citizen Forces - Officers :
Brigadier-General Campbell, now on retired list (1).
Colonel Rowell, now on retired list (1).
Colonel McCall, now on retired list (1).
Colonel Newmarch, deceased (1).
Major Gilchrist (1).
Major Watchorn (1).
asked the Minister for Defence, upon notice -
In view of the fact that section 22 of the Defence Act prescribes that “ The GovernorGeneral may, for distinguished services in the time of war or for exceptional gallantry on active service, appoint any person to bo an officer or non-commissioned officer, or promote an officer or non-commissioned officer in the Citizen Military Forces without passing the prescribed examination “, willhe consider amending the Defence Act to include in this provision officers and non-commissioned officers of the Permanent Forces, and to make such provision retrospective?
– Section 22 of the Defence Act was introduced in order to permit members of the Citizen Forces, on their return to the Australian Military Forces in Australia, to retain the higher rank which they gained on active service.
The position of a member of the Permanent Forces is entirely different. The functions of the Permanent Forces are to form an instructional unit and to provide higher staffs for the Citizen Army. In order to fit them for such duty it is essential that in the first place members of the Permanent Forces should have a thorough sound elementary grounding. Then they must keep themselves up to date in improved methods of training and in the great developments in military equipment and improved armament that are continually taking place, and examinations are essential to ensure the constant study necessary for this purpose. Unless such examinations are insisted upon, the Military Board feels assured that the standard of efficiency in the ranks of the Permanent Forces will immediately deteriorate. It would not only fall below what is necessary for the peace training of the Militia Forces, but it would gravely militate against successful mobilization and the proper conduct of military operations in national emergency.
In view of the foregoing it is not proposed to take any action to amend the Defence Act in the direction suggested by the honorable member.
asked the Minister for Defence, upon notice -
– The re-organization of the Defence Department is at present under consideration and an announcement will be made in due course of any decisions reached.
Excise Duty Remitted
asked the Acting Minister for Trade and Customs, upon notice -
– The information will be obtained.
asked the Treasurer, upon notice -
– The answers to the honorable member’s questions are as follow : -
Cost of Office
asked the Prime Minister, upon notice -
What is the total annual cost of the maintenance of the office of Governor-General, including cost of residences, salaries, allowances, &c.?
– The figures for the financial year 1928-29 are as follow: -
asked the Treasurer, upon notice -
– The answers to the honorable member’s questions are as follow : -
The annual interest charge on the Commonwealth debt at 30th June, 1929, was -
The amount of State debts at 30th June. 1929, was -
asked the Prime Minister, upon notice -
– The answers to the honorable member’s questions are as follow : -
Effect Whisky Prices
asked the Acting Minister for Trade and Customs, upon notice -
In viewof the announced intention of the Government to protect the public from profiteering and exploitation as a result of the tariff proposals of November last -
Is it a. fact that the Licensed Victuallers’ Association of Brisbane is attempting to compel the hotelkeepers to charge10d. per nip (an increase of 2d. per nip over the previous price charged) for “Old Court” Australianwhisky?
Is it a fuel that Federal Distilleries Proprietary Limited ( proprietors of “Old Court” whisky) have not increased their price for this line to the hotel trade?
Is it a fact that the president of this Licensed Victuallers’ Association (Mr. E.H. Ruddle) is a director of the Queensland Brewery Company, and a director of a wholesale wine and spirit firm, both of which firms are agents for certain well-known brands of imported whisky?
Is it in the power of the Government to frustrate what appears to be an insidious attempt to nullify the avowed protection policy of the country?
– The information will be obtained.
asked the AttorneyGeneral,upon notice -
– The answers to the honorable member’s questions are as follow : -
For the information of the honorable gentleman, I may add that there isno right in the association referred to, nor in any other person, to make arbitrary demands that are not supported by law.
asked the Acting Minister for Trade and Customs,upon notice -
What was the gross export value of Australian wine on which £1,298,000 has been paid in bounty?
– The information will be obtained.
asked the Prime Minister, upon notice -
What geophysical work is at present being carried on by the Commonwealth, and from what sources do the funds come for such work?
– No geophysical work is at present being carried on by the Commonwealth. The Imperial Geophysical Experimental Survey ceased operations in February last, having completed its agreed-upon two years’ programme of work. The funds for this work were provided, half by the Empire Marketing Board and half by the Commonwealth.
asked the Prime Minister, upon notice -
Whether the “ Preference to Returned Soldiers “ clause in Works and Railways contractu has been deleted or amended, and whether a clause or instruction relating to the supply of labour from the Trades Hall has been substituted therefor?
– In view of the distress through widespread unemployment, thequestion of distribution of labour has given the Government serious concern. The final instructions issued to the department are as follows: -
In carrying out the work under this contract preference shall be given - other things being equal - firstly, to returned soldiers and sailors with satisfactory service, who are members of trades unions, and, secondly, to members of trade unions.
asked the Prime Minister, upon notice - 1.Does the Common wealth possess any areas of land in the Warringah Shire?
– The answers to the honorable member’s questions are as follow : -
Yes. 2.Parish of Manly Cove -
Parish of Broken Bay -
Parish of Narrabeen - (e)Barrenjoey. - Defence site and lighthouse area - area 78 acres.
– On the 30th April, the honorable member for Corangamite (Mr. Crouch) asked the following questions upon notice: -
I am now in a position in inform the honorable member as follows: -
All members of the Service Boards hold fulltime administrative positions (as distinct from board duties), the salaries paid being in respect of those positions.
The amount of any saving which may result would be governed by the scheme of amalgamation adopted.See also reply to 5. 3. (a) Yes. Naval Board - staff 3 - cost £1,621 per annum. - Military Board - staff 3, and a part-time typist, £1,306 per annum. - Air Board - staff 3 - cost £1,223 per annum.
£’2.55]. - I move -
That the bill be now read a second time.
The bill is a proposal for the establishment of an important new financial institution, which it is intended shall operate for the maintenance of the stability and security of Australia’s monetary and credit system. I am aware that this proposal has been received with somewhat mixed feelings, and that in certain quarters there appears to be misapprehension regarding it, but that misapprehension, I think, is not well founded. During my speech I shall endeavour to answer the criticism that has been published in the newspapers or otherwise expressed, and to justify the provisions of the measure.
At the outset I may say that there was no sinister motive for the introduction of this measure; there is no sinister purpose behind the proposal to set up a central reserve bank. We are merely following a course that has been adopted in many other countries.
The extension of central reserve banking is a notable feature of the financial developments in many countries in the world during the last ten years. To-day practically every important country in the world has a central reserve bank, the three outstanding exceptions being Australia, Canada and the Argentine. It is a rather remarkable commentary upon what can happen in the absence of central reserve banks that in those three countries there have been serious financial disturbances in the last couple of years, and that at the present time they are probably the worst sufferers from financial stress.
– What about the United States of America?
– I am speaking of the present time. It is true that last year the United States of America had a most disturbing experience because of over speculation on the stock exchange, but it was the federal reserve system which then came to the rescue of the monetary and credit system of that country, and probably saved it from a worse calamity.
Some critics of this proposal question whether the present time is opportune for the introduction of this measure and the inauguration of a new system for the control and organization of credit in Australia. It is my opinion that there never was a more opportune rime for this action. It would not be opportune if the setting up of the central reserve bank would create confusion or disturb in any way the financial relations of industry, commerce, and exchange in Australia; but there are no sound grounds for believing that such confusion or difficulty will arise. There is a generally held opinion among economists, bankers, and financiers generally, that our existing banking and financial system has proved defective, and that that has been partly responsible for the difficulties which Australia has encountered in the last year or two. The lack of means for the mobilization of our credit resources has been a serious defect in our monetary system within recent months.
I have said that central reserve banking has been resorted to in many countries. That system is equally beneficial whether the established banking system be based on a large or on a small number of banks. For example, in the United States of America the federal reserve system is in operation on a very large scale, and the number of banks in that country exceeds 25,000. A central reserve bank also operates effectively in the Union of South Africa, where there are only three banks ; the successful operation of the reserve bank system does not depend on the number of separate banking institutions, nor on the magnitude of their operations.
A central bank can aid greatly in tiding a country over a period of financial stringency and credit difficulties by concentrating the reserves of all the banks operating in the country, and enabling the best use to be made of them. The federal reserve system of the United States of America was established after the financial crisis of 1907. As the result of the great panic of that year much weakness was seen to exist in the financial fabric of that country, because of the tremendous disturbance caused and the absence of any authority which could prevent the calamitous movements that were taking place.
To prevent a repetition of that experience, the federal reserve system of hanking was inaugurated, and it has well justified its existence.
There are some who, while approving of a central reserve hank for Australia, think that we ought to allow the Commonwealth Bank gradually to become such a bank. They consider that there is no need to set up such an institution as the bill outlines. In answer to them, I can only point out that the Commonwealth Bank was established by its founders, and was carried on for a number of years, with an objective quite different from that desired in the establishment of a central reserve bank. The Commonwealth Bank was intended to be a trading institution, and to operate freely in competition with the private trading banks. In the course of its development 90 branches have been opened in different parts of the Commonwealth, and it has carried its business far and wide in active competition with the private trading banks. It was only later in its career that an attempt was made to enable it to assume central banking functions. Originally it had not even control of the note issue. Subsequently it was given that control, and an attempt was made to enable it to develop into a central reserve hank; but it has not succeeded in fulfilling the functions of such an institution, and cannot be regarded as a central reserve bank. The principal obstacle in the way of such development was the attitude towards the Commonwealth Bank of the private trading banks. They declined to deposit any considerable portion of their reserves with it, because they realized that such reserves might be used to further its active competition with them. One cannot blame the managers and controllers of the private banking institutions for that attitude. They realized that in the Commonwealth Bank they had a competitor of tremendous power; and it was unreasonable to expect them to strengthen that competitor by handing over to it large proportions of their reserves. A great many commentators on the Australian banking system have pointed out that the Commonwealth Bank cannot function properly as a central reserve bank while it is in active competition with the private banks. The present Government, recognizing this, has brought down the measure we are now discussing. We do not desire to destroy the Commonwealth Bank, and I do not think that there are many persons in the community who would like to see that bank abolished, or to see” it retire entirely from the field of competition. We must, however, recognize the rights of the private trading banks, and it’ we want a central reserve hank in Australia it must be an institution separate from the Commonwealth Bank. This bill proposes to set up such an institution.
– Is this not rather a had time to bring forward the proposal?
– Some of the criticism directed against this proposal is based on the belief that this is not an opportune time at which to embark on an undertaking of this kind. I have yet, however, to hear any convincing argument in favour of that view. I cannot see any reason why the present time should be inopportune, and I know many reasons why it should be regarded as suitable. The existing system is deficient. The community is not getting the best results from the aggregate financial reserves it possesses, because those reserves are distributed among, and controlled by, a number of separate banking institutions. If those reserves were mobilized, concentrated, and used to the best advantage, the community as a whole would benefit.
The present general manager of the Bank of New South Wales, Mr. A. C. Davidson, has given much thought to this subject, and has written a brochure on it which has been largely circulated. In that publication he states that the Commonwealth Bank is incapable, as at present constituted, of ever becoming a central reserve bank, and he puts forward as an alternative the proposal that it should go out of the trading business altogether. He continues -
Failing such a development it will become necessary to create in Australia an entirely new central reserve bank such as a recent commission has recommended in India.
We recognize the force of that advice, and are now proposing to follow it. Before central reserve banks were set up in many countries that now enjoy them, searching inquiries into the whole subject were carried out. In some cases special inquiries were made by royal commissions, such as that which dealt with the matter in India. We have had the advantage of their reports, and the principles laid down in them have been incorporated in this bill. ‘ One authoritative critic in Australia has suggested that this measure be deferred until a royal commission had inquired into the subject. That might be a reasonable course if no inquiries of such a nature had been made elsewhere; but Australia is happily able to draw upon the experience gained in such matters in many other countries. There is no need of a further inquiry to inform ourselves of the principles which should be pursued or the constitution which should be laid down. Such information is already in our hands.
One of the primary functions of this central reserve bank is that it should control the note issue, and be the sole note issuing authority. That should include the holding of reserves of gold and short dated securities. The bank should hold reserves of other banks, both for the benefit of the other banks, and for the protection of the public.
– What effect, if any, would the establishment of a central reserve bank have on the currency?
– Such bank’s have had the effect of stabilizing currency, which, to be a safe instrument in the financial system, must be capable of being effectively controlled. But it cannot be so controlled unless there is an efficient body, such as a central reserve bank, to control it. Here, as elsewhere, the central reserve bank will be able to utilize its resources to keep the currency stable, and the commodity price levels regular, and in conformity with the necessities and demands of the day. Credit will be expanded or contracted as may be necessary to meet particular circumstances.
It is advanced by those who advocate the central banking reserve system that private banks are not able to make full use of their reserves without a central reserve bank. The Australian practice is for the trading banks to keep a reserve of from 16 per cent, to 18 per cent, against their liabilities. This is considered necessary for the safety of their business, and, in the aggregate, these reserves amount to a wry large sum. Under a central reserve banking system, a considerable proportion of those reserves could be utilized without impairing in any degree the safety and security of a bank’s investments or the safety and security of its depositors. The private banks necessarily have to allow a far larger margin of reserve to meet unusual demands from their depositors than would be needed if there were a. central reserve bank on which they could make demands from time to time. In Great Britain all the banking companies lodge a proportion of their reserves with tin3 Bank of England. There is no compulsion, and no statutory minimum amount, that a bank must deposit with the Bank of England, but through many decades, if not centuries, the practice has grown of the banking companies lodging a considerable proportion of their reserves with that institution. If a British bank finds that the demands made upon it are unusually heavy, and that its funds are diminishing, it takes its bills to the Bank of England to get them re-discounted. In Australia we have nothing that exactly corresponds with the London Bill Market. Possibly our distance from our markets and from the principal financial centres of the world has made it difficult to effect transactions in commercial paper of the kind effected in the bill markets of other countries. But under a central reserve banking system there is hope that the bill market practice may grow in Australia. This would make for greater facility in private credit. The Australian banks have heretofore transacted short-dated loan business with financial operators and with traders by means of overdrafts. Should a central reserve bank be established, as proposed in this bill, the private trading banks could still follow this practice, or they could get their paper discounted with the central reserve bank, or get a direct advance and by means of negotiable commercial bills establish a more convenient method of meeting the temporary credit requirements of their customers.
– What is the value of the re-discounting as against the overdraft system ?
– I do not know that any tangible value can be precisely stated. The re-discounting of bills is a more facile method of business than the overdraft system. With an overdraft there must be a definite term, a definite .rate of interest, and a definite period of repayment, and the transaction is confined to two parties. Under the bill discounting system, hills are accepted as negotiable security, and readily bought and sold on the hill market, lt may or may not be of great advantage to us to have this method of dealing freely with commercial paper.
It is proposed in the bill that the trading banks shall deposit 10 per cent, of their demand liabilities and 5 per cent, of their time liabilities with the central reserve hank; in other words they will deposit 10 per cent, of the amount of their current accounts and 5 per cent, of the amount of their fixed deposits with it. Therefore at the outset the central reserve bank would have a minimum reserve of approximately £20,000,000, of which between £16,000,000 and £1S,000,000 would represent deposits made by the trading banks and the balance would be made up of amounts to the credit of current accounts with the various Governments doing business with the batiks. The Commonwealth Bank would be included with the trading banks; the Savings Banks would not be so included. The Commonwealth Bank will be under exactly the same obligation as the other trading banks to keep a proportion of its reserves with the central bank.
There has been an almost inexplicable misunderstanding by the Victorian banks of the purpose of the proposed reserve bank. In a criticism of this proposal which has been issued by the Victorian banks, it is stated that if they had to deposit 10 per cent, of their demand liabilities and a certain proportion of their time liabilities with the central bank, they would be seriously handicapped at a period like the present, when they needed to retain command of all their resources. Those banks show clearly that they have quite misunderstood the function which the proposed central reserve bank is intended to fill. At present the banks must keep certain reserves, and surely it does not matter where they keep them - whether in their own vaults, or in the care of a central reserve bank.
– But they would still have to keep some reserves themselves?
– That is so. They would lodge perhaps half their reserves with the central reserve bank and retain the balance for their daily transaction and for till money. If honorable members consider that the proportion required to be lodged with the central reserve bank is too high, I hope that they will say so; it may be practicable to provide for some smaller proportion to be lodged. That is a mere matter of detail ; but the central reserve banking system is founded on the principle that the trading banks must keep a proportion of their reserves with it.
– What proportion is kept, by the central bank in other countries?
– In the United States of America the proportion varies in accordance with the geographical location of the trading banks in relation to the head offices of the various reserve banks. It goes as high as 13 per cent, of the demand liabilities. In South Africa the percentage is 10 per cent, of the demand liabilities and 3 per cent of the time liabilities.
– Are the reserve banks of other countries government-controlled institutions?
– I shall show later what similarity there is between the central reserve bank that Ave propose to establish and other reserve banks, and I shall also deal with the measure of government control that is exercised.
– Have not the private banks a reserve of £40,000,000 at present ?
– The aggregate amount of the reserves of the private banks may total the sum mentioned by the honorable member. If a proportion of those reserves were mobilized in the vaults of a central reserve bank they could be used as a basis for making advances to one or more- banks to meet unexpected demands on their resources, whereas at present, practically the whole of the reserves are lying idle in the vaults of the separate private banks.
The central reserve bank must hold 2”> per cent, reserve against its liabilities; but the reserve against deposits is increased to 50 per cent, on the amount of the deposits in excess of £20,000,000.
That means that of the aggregate deposits made by the other banks, the central reserve bank must keep at least 25 per cent, in reserve, of which at least half must be in gold; the balance may be invested in British Government securities or first-class trading bills negotiable on the overseas markets. That is a slight departure from the practice that has prevailed in Australia hitherto, but is adopted by most of the continental reserve banks, which keep a proportion of their reserves in England or other foreign countries with which they are doing business.
– What is the maximum duration of those negotiable bills?
– It may not exceed 120 days. The practice in other countries in regard to the holding of reserves against the liabilities of the central reserve banks varies greatly. In some instances there is a rigid reserve of up to 50 per cent.-, and in other cases there is no statutory reserve. France has no legal minimum in respect of the central bank or the note issue. There is a disposition on the part of economists who have studied the monetary problem to believe that too great a reserve in gold is an onerous restriction that often works disadvantageously. In the March review issued by Lloyd’s Bank, Professor Gustav Cassel, a leading authority on monetary problems, dealing with what he terms gold economy, says -
The gold-economizing policy that I have advocated ever since 1020 contains two factors. Firstly, the use of gold coins as a circulating medium should bc abandoned. The introduction of the now British currency not redeemable in gold coins, and India’s abandonment of the idea of putting gold coins into circulation, are the chief features that mark the success of this policy. The second measure for securing economy in the use of gold consists in a reduction of the central banks’ requirements of gold reserves. The Genoa conference in 1922 recommended the cooperation of the central banks for this purpose .ind a certain concentration of gold reserves in some /ending financial centres.
That comment throws an interesting light on modern thought in regard to the value and utility of gold reserves. We are providing in this bill that the central bank shall keep 50 per cent, of its statutory reserves in gold ; the balance may be invested in securities that will earn interest in the markets in which they are likely to be of the greatest use. The central reserve banks of Italy, Sweden, Denmark, and Germany have special sanction to hold a portion of their reserves abroad in markets where they are doing their principal exchange business.
The bill provides for the transfer of £2,000,000 from the Commonwealth Bank to become the initial capital of the new central reserve bank. In setting up a central bank we are fortunate in having that capital to call upon, for it obviates the need to ask the public or the existing banks to subscribe capital, as has been done in connexion with many other central reserve banks established ‘in recent years, or for the Commonwealth Parliament to appropriate money for the purpose. This transferred £2,000,000 will provide all the capital that will be necessary for the functioning of the new institution, and will be added to from time to time out of the profits of the hank as its business progresses.
– Will the £2,000,000 be a loan from the Commonwealth Bank to the central reserve bank?
– No. That is an absolute transfer of part of the existing capital of the Commonwealth Bank, and it is justified, because a considerable proportion of the profits of the Commonwealth Bank have been made out of the control of the note issue and the lending of money to other institutions, which are the functions of a central reserve bank. Nobody can reasonably cavil at this transfer of capital from the Commonwealth Bank to the new institution.
– What will become of the Commonwealth Bank?
– It will be left with reduced functions but still with almost unimpaired capacity to make profits. The central reserve bank will take over certain other functions and liabilities and their accompanying profitearning capacity.
– What has been the average profit of the Commonwealth Bank during the last ten years?
– I cannot say offhand, but certainly if it be regarded as interest on the original capital it represents a very high and remunerative rate.
– How will the profits of the central reserve bank be apportioned - in the same way as those of the Commonwealth Bank?
– A certain proportion will be applied to the redemption of the public debt and the balance to increasing the internal reserves of the bank. In that way it will build up its own capital. Although it must charge for its services, profitmaking will not be a primary or even important function of the bank. It is necessary to make this clear, because some people believe that the right of the bank to engage in the overseas exchange business will give it a tremendous capacity to make profits out of external exchange. Although it will be necessary for the bank to engage in that business for the purpose of rectifying difficult exchange conditions, and although it will have the use of the reserves which it will be able to build up in London, it will not engage in these transactions primarily for profit-making purposes. Indeed, its capacity to keep the profit on exchange transactions down to a low figure, will have a salutary effect on those dealers who are making very heavy profits out of exchange under existing conditions.
The functions of the bank are clearly set out in the bill, and those clauses are very important, for, according to its functions, the usefulness of the bank may be extended or circumscribed. The bill expressly states what the bank may do, and, perhaps more important, what it may not do. The bank will have power -
– That includes municipalities ?
– That will interfere with the trading banks. The central reserve bank will take the deposits that they use for their loans.
– The Commonwealth Bank has been doing that for years.
– This will accentuate the practice because the central bank will have the reserves of the trading banks to play with.
– The honorable member must not assume that because the central bank is given fairly comprehensive powers it will exercise them foolishly or prove recreant to its trust and responsibility to the other banks.
– Will the executive of the central reserve bank be entirely distinct from that of the Commonwealth Bank?
– Entirely; there will be no connexion between the executive control and management of the two institutions.
– Where will the headquarters of the central reserve bank be?
– In Sydney, and the bank will be housed in a portion of the present Commonwealth Bank buildings. The premises and staff to he taken over from the Commonwealth Bank will be settled between the governing authorities of the two institutions. The restrictions placed on the reserve bank are clearly set out in clause 9 -
The reserve bank may not -
make advances against land or any estate or interest in land;
engage in trade or have a direct interest in any commercial or industrial undertaking;
purchase shares of trading companies or of other banks except the Bank for International Settlements ;
There is in process of formation a bank of international settlements. This bank is being organized under the Young plan to handle reparations payments and to do other banking business in the international field.
– Is it a going concern?
– It is in process of formation, and as Australia is interested in reparations payments, provision is made that the central reserve bank may become a shareholder if that is thought advisable. The bank may not -
– Why is that excep tion made.
– The municipalities of the capital cities have securities that are negotiable in the open market; therefore it may be safe business for a central bank to take up such securities, knowing that they can be realized, but it would not be safe business to invest in other municipal bonds that are not marketable in that way. The bank may not -
– What is meant by unsecured loans” ?
– The central reserve bank may make an unsecured loan toa trading bank but another provision in the bill gives to the debt of the central reserve bank priority over all other debts of private trading banks. In that way these advances will be fully protected.
– It is a. dangerous provision.
– It is necessary and quite usual. A trading bank which finds its position jeopardized through adversity, seasonal or otherwise, may have to go to the central reserve bank for considerable advances to enable it to meet the requirements of its customers. It would not be proper for the central reserve bank to make advances in those circumstances unless it ranked in priority in regard to them.
– The bank would look for security.
– The bank in that case could make an unsecured advance. It would use its own judgment and discretion as to the conditions under which the advance was made, but it would be understood that that advance would rank in priority over oilier liabilities of the bank obtaining the accommodation. It is stipulated in the prohibitions and inhibitions which I have just set out that the bank must not accept deposits bearing interest, nor will it accept non-interest bearing deposits except with respect to one or two limited classes of depositors. It would accept as depositors banks, financial concerns, stock exchange firms, or trust companies. If there is a bill market built up in Australia, and we follow the practice of older countries, certain firms will become recognized as operators in that market, and the imprimatur and test of recognition of those firms will be that they are depositors with the central reserve bank. They no doubt will be required by the central reserve bank to lodge substantial deposits with it before being permitted to operate in that way. Only such concerns as those I have mentioned, in addition to the Commonwealth and State Governments, would be depositors with the central reserve bank. The same conditions apply in respect of the Bank of England. Certain large stock and share brokers and operators on the money market, such as financial institutions and trust companies, are depositors with that bank. They must maintaina minimum deposit with it, the minimum amount in most eases being £50,000. These firms receive no interest on their deposit, it being merely a guarantee of their bona fides.
– They really lodge securities with the bank.
– It is a necessary safeguard.
– Would those firms always keep their account up to the minimum amount?
– The credit balance must not fall below a certain minimum.
– In those circumstances I do not think that the central reserve bank will be rushed.
– There is every expectation that that connexion with the bank will be much sought after. I do not say that the minimum deposit in this case would be £50,000. The minimum will be determined by the authorities of the bank. Once this institution is established it will be regarded as a privilege and an advantage to become a depositor, because a depositor will have entry to and recognition in the money market.
– Would the Treasurer be prepared to include solicitors as depositors?
– That is really a matter for the authorities of the central reservebank to determine. The provision in the bill is in a general form.
– Many solicitors hold trust funds.
– The control of trust: funds is another problem which, I think, shouldbe dealt with by the State Governments. .
– Will the central reserve bank discount bills?
– Yes. It will discount the bills of other banks and financial institutions that are operating in the money market.
The bill provides that a certain return must be rendered to the central reserve bank by other trading banks.
– Will that provision repeal the section requiring returns to be rendered to the Commonwealth Bank?
– That section will be superseded by the provision in this bill. The returns will now be sent to the central reserve bank. The trading banks must also give particulars of their balances and their dealings overseas. At present no one can call for a return from the Australian batiks showing their dealings in the overseas market; therefore, this provision is very necessary. There is naturally reluctance on the part of the banks to disclose their position to the Commonwealth Bank, because they regard it as a competitor. There should be no such reluctance in respect of the central reserve bank, which, of course, must treat the returns and information supplied to it as entirely confidential. It is essential that some one should have access to that information. No one at present can analyse the financial position either in Australia or overseas, more particularly the Australian position in London. At present no one knows the aggregate amount of the balances of the Australian banks in London. Each bank knows its own position, but does not disclose it to other banks. It will be of immense advantage to have this information supplied to the central reserve bank, so that the exchange position may be known at any time.
– Why is it necessaryto ha ve weekly returns?
– To enable the central bank to keep in close touch with the financial and credit positions. Thai can be done only by frequent recourse to the statistical returns made by the private banks. The Bank of England publishes statistical information weekly, and so do all central reserve banks throughout the world.
– In what way is the overseas position now made known?
– Not at all. At the conference of Australian banks called at Canberra at the suggestion of the Loan Council a couple of months ago, in order to obtain their advice and cooperation in regard to the London exchange position, it was surprising to me to learn that the banks individually were as much in the dark as to what their collective resources were and their capacity to meet the position in London, as was the Loan Council. They were quite ignorant of the exact position.
– Each bank knew its own position.
– Yes. Each bank knew the amount of its funds and commitments, but would not disclose that information to the other banks. No one, therefore, could say what was the aggregate balance held by the Australian banks in London. It is not intended that these returns should be used to place any bank at a disadvantage. Where it is necessary to maintain secrecy, that will be done.
I come now to the subject of the control of the bank, which has been exercising the minds of a good many critics. The central reserve bank will be controlled by a board of directors, and there will be a governor and two deputy governors.
– Why does the Treasurer insist upon designating them governors?
– I know of no other nomenclature that is more suitable. The chief executive officer of the Bank of England is termed the governor, and there is also a deputy governor. We are providing for a board of directors, which will consist of a governor, two deputy governors, the Secretary to the Treasury, and five other directors representative of the commercial, banking, and other interests of Australia ; eight members in all. It has been suggested that the governor of the bank should not be the chairman of the board of directors; but there is a good reason for having the governor the principal executive and the principal controlling officer of the bank. If we have a chairman of directors, some one separate and distinct from the governor of the bank, we may get a clash of authority, especially if both persons are of a dominating character and have a high status in the commercial and financial world. I have studied the constitutions of a number of reserve banks throughout the world, and I find that almost invariably the chief executive position corresponds with that of the governor of the bank. He may be appointed for a limited period, but yet devote the whole of his time to the business of the bank. We are following the practice that seems to be the most advantageous.
– In what other countries is there such a large number of directors ?
– I shall be able to give the right honorable member detailed information on the subject when we are discussing the bill in committee. A number of central reserve hanks on the Continent have a sufficient number of directors to give separate representation to different interests, such as commercial, manufacturing, and banking interests, and in many cases special representation is given to labour, not in a political sense, but as a factor in the life of the community. The Labour representative is not a political nominee. He represents the wage-earning community as distinct from the commercial and manufacturing interests. In that sense it is desirable to give representation to Labour.
– What about the primary producer?
– He is to be provided for in the sense that he is to have representation on the board.
– Who will make that selection ?
– Provision is made for the appointment of a representative by the Governor-General. What practice the Government will follow in making recommendations to the Governor-General I am not able to say at present; naturally those details have not yet come under consideration. I presume that the practice will be followed in respect to representative bodies that they will be asked to submit nominations.
– The Government will make the appointments.
– Under the bill the Governor-General makes the appointments. The bill provides that the directors shall be appointed for three years, but it may be necessary to alter that provision, and to appoint the directors for a term of five years, so as to arrange for annual retirements in rotation. The appointment of the governor by the GovernorGeneral has been criticized. I have examined the constitutions of a number of central reserve banks throughout the world, and I find that almost invariably the principal executive officer is either the governor, or as he is called in some cases, the president of the bank, and that officer is usually appointed by the Government. In the United States of America the governor of the bank, the vice-governor, and all the directors are appointed by the President of the United States, the governor being appointed with the approval of the Senate. In the case of the National Bank of Belgium the appointments are made by the Crown, and suspensions and removals of officers are also made by the Crown. The Governor and the two Deputy Governors of the Bank of France are appointed by the President of the Republic, on the recommendation of the Finance Minister. The Governor of the Bank of Japan is appointed by the Government, upon imperial nomination, and the Vice-Governor with imperial approval. I take that to mean that the Governor is appointed by the Government upon imperial selection and nomination, and that, in the case of the Vice-Governor, the directors select a person who has the approval of the Government. In the case of the South African Reserve Bank, the Governor and Deputy Governor are appointed by the Governor-General. In regard to all the leading central reserve banks of the world, the process is similar to that which we are laying down, that the Government takes the responsibility for the appointment. The only exceptions occur where either authorities or individuals find the whole or a proportion of the capital of the bank. Where the whole of the capital, or the principal part of it, is found from government funds, the Government exercises the prerogative of selecting the principal governing officer. The capital of some central reserve banks is derived partly from government funds, partly from private banks, and partly from subscriptions by the public. In those cases there is a different mode of selecting directors and governors. In some cases direct representation is given to subscribers, and in other cases the directors are elected by the shareholders, and select the governor of the bank.
I have been asked to give reasons for the proposal to have two deputy governors. The only reason is that the central reserve bank will have two main functions to fulfil, and it may be advisable to have in control of each of those functions a man who is a specialist in them. One of the main functions of the central reserve bank will be to control the fiduciary issue, the currency, and gold reserves of the country, and it will be necessary to have a specialist at the head of that department. This officer will have heavy responsibilities. The other main functions of the bank will be to make advances, control issues to the market, and raise and manage governmental loans. The man who is charged with responsibility for the proper discharge of those functions will require a different kind of knowledge, and such work may properly be left to one who is expert in such matters. No political principle is involved in the proposal to have two deputy governors.
– Will they be able to outvote the governor, and reduce him to a figure-head ?
– No. The mere fact that they have a seat on the board will not enable them to do that. There will be, in all, eight directors. Provision is made for an executive committee of directors, to act in the interval between the meetings of the directors. As that committee will be appointed by the board of directors, it is not likely, nor would it be desirable, that they will appoint the governor and two deputy governors. There is a greater likelihood of the appointment of the governor and two ordinary directors, who will be accessible and available. If there is any doubt upon the matter, the bill can be amended in committee to provide that the executive committee shall not consist of three permanent officers of the bank.
– Is this practice favoured in any other country?
– The Federal Reserve Bank of New York has five deputy governors, and the Bank of France two deputy governors, while in a number of other reserve banks there is more than one. The practice varies throughout the system of reserve banks.
– What is the practice in the Bank of England?
– There is only one deputy governor of the Bank of England ; but there is a controller, whose authority is almost identical with that of a deputy governor. Sir Ernest Harvey was Controller of the Bank of England until last year, when he was appointed Deputy Governor of that bank. There are in that institution highly authoritative executive officers who are not designated deputy governors.
– Is it not a dangerous provision to allow the board of directors to appoint an executive committee? May it not exclude entirely some important section?
– If the board of directors is not to appoint the executive committee, who does the honorable member suggest ought to make the appointment?
– There should be no executive committee.
– The bill provides that the board shall meet at least once a month; but there must be some authority with power to give decisions from day to day, if necessary, or at any rate more frequently than oncea month. That is the reason for the provision which has been made in connexion with the executive committee.
Some criticism has been directed to the proposal to give the deputy governor a seat upon the board of directors. Certain private banking authorities consider such a practice entirely wrong. I have found, however, that in almost .ill the leading central reserve banks of the world the deputy governor has a seat upon the board of directors. In the United States of America, both the Governor and ViceGovernor of the Federal Reserve Bank, which is the principal authority in control of the ( central reserve banks, have seats upon the board of directors. In the case of the Bank of France, the Deputy Governor is a member of the General Council, which is the authority that corresponds to the board of directors. In the Bank of England the Deputy Governor is a member of the Court of Directors, which is the principal controlling authority. In the Bank of Japan, the Vice-Governor is a member of the Administrative Board, which is the authority that corresponds to a board of directors. In the South African Reserve Bank, both the Governor and the Deputy Governor are members of the Board of Directors.
I have incorporated in the bill provisions which, upon its passage, will lay upon the private banks the obligation to conduct governmental exchange business free of charge. I wish to explain that feature, because it may easily be misunderstood. The central reserve bank that is to be created under this measure will make provision to supply Australian notes to any bank trading in Australia, and to exchange those notes free of commission. That practice is adopted by the Commonwealth Bank at the present time. If a bank doing business in, say, Western Australia, lodges any quantity of notes there with the agency of the central reserve bank, it will be able to receive from any branch or agency of the reserve bank iti any other , part of Australia a similar quantity of notes, without any charge or commission being made. These are very necessary facilities, and a charge could be made for them. But in order, that there may be reciprocity, it is only right that the private banks should conduct free of charge the internal exchange business of the governments of both the States and the Commonwealth. I have had conversations with private banking authorities on this matter, and they have explained that there may be cases in which they are involved in a charge. If they happen to transact business for a government, or make money available to cash government cheques to pay men who are engaged, say, on construction work, in some remote part, and are actually involved in an outlay, they ought to be recouped that outlay; but in all cases in which they are not involved in an outlay I consider that they ought to do the business free of charge.
– In the event of the central reserve bank floating loans for any government, will a charge be made?
– The question whether an underwriting commission will be paid to the central reserve bank is to be discussed between the Loan Council and the authorities of that bank. Where they take a risk in underwriting, they may consider that they are entitled to a payment commensurate with the risk taken. Before the creation of the Australian Note Issue, when each bank issued its own notes, the trading banks carried out interstate exchange transactions between themselves, a payment of exchange being made from one to the other on a basis ranging from ls. to 2s. 6d., and even higher, for every £100 dealt with. A bank which desired to transfer funds from, say, Perth to Sydney, and was unable to find another bank that wished to make a reverse transfer, was compelled to ship gold from Perth to Sydney at considerable expense. It is largely because of these factors that the interstate exchange rates charged by the banks to the public were, in those days, considerably higher than they are at the present time. Since the Australian Note Issue has been conducted by the Commonwealth Bank of Australia, however, other banks that have desired to make a transfer of funds have merely had to lodge Australian notes at .one centre and to withdraw them from the Commonwealth Bank at another centre, without being obliged to bear any cost on account of exchange. During the last two or three years, this procedure has been still further simplified by the banks keeping exchange settlement accounts with the Commonwealth Bank of Australia, and merely having telegraphic transfers made, free of cost, from the balance of their account at one centre to the credit of their account at another centre. I do not think that the banks will raise any objection to the stipulation that they shall conduct government exchange business within Australia free of charge. The Canadian Government has an arrangement with the private banks of that country whereby they conduct the whole of the government exchange business free of charge.
– Does the provision in the bill apply to all government business?
– It relates to all government business where the banks are called upon to cash cheques or drafts drawn upon the Government.
– Wherever situated?
– Yes; but in the case of a remote district, if the bank is put to any expense with regard to a particular transaction, because of the necessity to provide cash at some distance from its office, it will be recouped that expenditure.
Provision has not been made in the draft bill for a staff appeal board. The existing Commonwealth Bank Act contains that provision. My attention was called to the omission by members of the present Commonwealth Bank staff, and I have undertaken to make the necessary provision. It will relate to appeals against decisions of the authority of the bank that involve dismissals, suspensions, fines, reductions in grade, or other similar decisions affecting the individual status of members of the staff.
– An appeal board within the bank?
– Yes. The provision to be made will follow the lines of that which is made in the Commonwealth Bank Act.
– Is it intended to extend any measure of protection to the employees’ representative on the appeal board?
– Does the honorable member suggest that the representative of the staff on the Appeal Board might require some special protection against dismissal?
– He should not fear intimidation in the discharge of his duties.
-I do not know whether such a contingency has been provided for, but I shall be glad to have the advice of the honorable member on that matter later.
I have referred in the course of my speech to a number of points raised in criticism of the bill without specifying its origin. This criticism has not been violent and much of it has been helpful. Yesterday I received a telegram from the President of the Sydney Chamber of Commerce setting out the views of the chamber on the establishment of a central trading bank. I understand that a copy of the document was handed to the press and has been published. The message is signed by George A. Parkes, President of the chamber, and is as follows: -
At a special meeting of the Council of the Sydney Chamber of Commerce held this morning the following resolution was unanimously adopted -
That a federal reserve bank such as is proposed in the bill under consideration, whilst capable of material and important benefits, has also highly dangerous possibilities if subject to pressure from varying and variable political interests, in so far as it can absorb funds from other banks withhold credit from banks and the market in favour of governments, and bo forced to depart from a sound policy, in which connexion the words of Sir Ernest Harvey, K.B.E., Controller of the Bank of England, referring to the collapse of central banking systems on the continent, are that in every instance an examination of the events which led to their collapse revealed that their failure in time of crisis was largely due to the fact that political pressure was put upon the central banks to abandon the fundamental principles of sound central banking and to subordinate financial prudence to political expediency.
In answer to the first contention there made, I say that there is not the danger which the Sydney Chamber of Commerce appears to apprehend. Highly dangerous possibilities may be considered to be created by any institution set up by legislation of this Parliament. A judicial body, for example, might conceivably use its powers unwisely, and might be guilty of some dangerous interference with the liberties of the people. There is force in the objection only if it is assumed that the bill has some ulterior sinister purpose, and that the institution which it establishes will be improperly administered. The message from the Sydney Chamber of Commerce quotes Sir Ernest
Harvey inhis reference to the collapse of central banking institutions on the continent. 1 am quite sure that it has not fully quoted Sir Ernest Harvey, because I am convinced that he never made a statement to the effect that central reserve banking on the continent bad collapsed, for that would be contrary to fact.
– Did he say that central banking had collapsed?
– The words of the message are -
The controller of the Bank of England, referring to the collapse of central banking institutions on the continent -
I am sure the authors of that message have misquoted or misunderstood Sir Ernest Harvey.
– “Were such systems in operation on the continent when the financial collapse took place in Germany and other countries?
– Not in the way in which they are operating to-day. Most of the central banking institutions, as at present constituted, have been established since thecollapse of the internal monetary system of such countries as Germany, Esthonia, Hungary, &c. It would be wrong to assume that there has been a collapse of central reserve banking since the present system has been in operation during the last ten years. The message from the Chamber of Commerce proceeds -
With that I agree. It is our object that a central reserve bank shall have as its complement an open bill market ; but even if it has not, there will be nothing to prevent such a bank from functioning fully and freely. The document continues -
A central reserve bank will not interfere in any adverse way with the existing banking institutions carrying on business to-day. It will not hamper them, nor restrict their operations. It will, indeed, assist them to carry out their proper functions. The next point raised by the Chamber of Commerce is -
I have already replied to that contention in dealing with other aspects of the bill. The next point refers to the constitution of the Commonwealth Bank, and is set out in the message as follows : -
That is rather an important point, which is the basis of some other criticism also. It has been suggested that a bill defining the constitution of the Commonwealth Bank after the central reserve bank has been established should be introduced and considered side by side with the present measure. The reason why that has not been done is that it would be a waste of parliamentary time to embark upon the consideration of such a comprehensive measure until we know the fate of the central reserve banking bill. I wish to assure honorable members, however, that the amending Commonwealth Bank bill will contain only such provisions for the alteration of the existing law as will be rendered necessary by the passage of the bill we are now considering. That is to say, it will provide for nothing more than the consequential amendment of the law. The bill is now in the hands of the draftsman for preliminary draft, and if, as I hope, it is ready in time, I shall endeavour to have it introduced and laid on the table before the present bill is disposed of. The final point raised by the Sydney Chamber of Commerce is -
I have no objection to meeting representatives of the Sydney Chamber of Commerce. I have already met many persons representing commercial and banking interests in Sydney, Melbourne, and other places, and have discussed the matter fully with them. I have found them very helpful, and I am sure that I have been able to allay much of the apprehension and alarm in their minds regarding this proposal.
I have no doubt that the bill will accomplish what I have said are its objects. It will not create disturbance in banking circles, nor lead to any confusion in our credit system. The bill has been widely reviewed in Australia and abroad. I was pleased to read that most of the overseas criticism was of a favorable nature. In most quarters it was admitted that a central reserve bank would be advantageous to Australia in the present state of our trade and national development. There is much detail involved in this proposal, and the discussion of it can be appropriately reserved until the bill is in the committee stage. I shall welcome any constructive criticism which honorable members have to offer, and any suggestions which will lead to the improvement of the bill and the setting up of a sound central banking organization in Australia will be received with pleasure by the Government and acted upon.
Debate (on motion by Mr. Latham) adjourned.
Debate resumed from 30th April(vide page 1257), on motion by Mr. Forde -
That the bill be now read a second time.
.- This bill, which was brought forward by the Acting Minister for Trade and Customs yesterday, is for the purpose of extending the period during which bounty is to be paid on fortified sweet wines exported from this country. It is proposed to extend this period for a further four and a half years, and to increase the rate of bounty as from the 12th March, from1s. a gallon to1s. 9d. a gallon. Concurrently with this increase in bounty there is to be an increase of 5s. per gallon in the excise duty on fortifying spirit used in wine. That increase of 5s., stated in terms of taxation upon the wine itself, is equivalent to1s.1d. per gallon of wine consumed in Australia. Formerly there was collected on spirit used for fortifying wine an average of 5s.8d. per gallon. The duty was 6s. per gallon on fortifying spirit made from grapes other than doradillos and 5s. per gallon on spirit made from doradillos. About two-thirds of the spirit has to pay the 6s. excise, the other third 5s. and the average tax collected was thus about 5s.8d. per gallon. The average will now be 10s. 8d. per gallon. It is proposed to retain an amount equal to the proceeds from the old rate of tax for revenue purposes. Both the Acting Minister for Trade and Customs (Mr. Forde) and the Prime Minister have made that clear. Speaking for myself, I do not quarrel with the Government on this score, because I regard reasonable taxation on alcoholic liquor as a fair means of obtaining the revenue that is so necessary. But I shall point out to honorable members that as the bill is drafted it will be absolutely impossible for the Government to do as it proposes to do.
– An amendment is being drafted to cover the point to which the honorable member proposes to refer.
– I can only deal with the bill as it was introduced by the Acting-Minister. [Quorum formed.] If we export 2,000,000 gallons of wine in the coming season - and that is a conservative estimate, for in the past we have exported more than 3,000,000 gallons in a season - the Government will have to refund to exporters as drawback nearly two-thirds of the amount which it has indicated it intends to retain as revenue. It is proposed to pay the extra 5s. per gallon tax into a trust fund from which the new bounty of1s. 9d. per gallon is to be paid. The Government has applied the principle of the Paterson butter stabilization scheme to the wine industry. The bounty will be provided by the industry itself. But there has been an almost incredible oversight, which has reduced the whole proposal to an absurdity. The Government has forgotten that, unlike the butter industry, the wine industry receives this assistance in two parts; first, as a drawback on the tax paid on exported wine, and secondly, as a bounty. Of course, there is no excise duty on the exported wine. It would be unthinkable to tax directly any exported commodity. Until
I drew attention to the fact last night, the Government was apparently blissfully unconscious that it had perpetrated an economic joke of the first order in bringing down the bill in its present form. It had completely forgotten to take into consideration the fact that the drawback on the wine exported was greater by onethird than the amount paid in bounty.
-In committee an amendment will be moved which will cover that point.
– It is extraordinary that such an oversight could have occurred. The first evidence of the omission is in sub-clause 3 of clause 4 which reads -
There shallbe payable monthly out of the Consolidated Revenue Fund, which is hereby appropriated accordingly, into the Trust Account established in pursuance of this section, a sum equal to five shillings upon every gallon of spirit for fortifying Australian wine upon which spirit duty of excise is paid, or has since the twelfth day of March, One. thousand nine hundred and thirty, been paid.
Further evidence of it is to be found in sub-clause6 of the same clause, which reads -
The surplus in the trust account, after all claims for bounty in respect of fortified wine exported from the Commonwealth during theperiod specified in section five of this act have been paid and after repayment to the Consolidated Revenue Fund of any amount which has been paid from that fund into the trust account in pursuance of the last preceding sub-section, shall be applied in the prescribed manner in the marketing overseas and the encouragement of the export of Australian wines.
Those words entirely preclude the possibility of taking the drawback out of the trust account. It may be possible to amend the bill to provide that the drawback shall be taken from the trust account, but it cannot be done as the bill is now worded.
– Approximately1s.1d. per gallon drawback will come out of the trust account.
– If provision is made for that, the difficulty to which I have directed attention will be overcome; but it is extraordinary that the Government should have brought clown the bill in this form. The proposal now before us is that the equivalent of 5s. per gallon shall be paid into Consolidated Revenue, whether the wine is used locally or exported. That, of course, cannot be done.
The Government, to that extent, is chasing a phantom.
If we turn to the other side of the ledger we shall find another extraordinary provision which the Acting Minister may also have discovered by now. It is proposed to retain for revenue purposes an amount equivalent to the yield from the old excise duty.
– The amount will be retained, less the drawback.
– The figures quoted by the Acting Minister yesterday did not. take the drawback into account. The honorable gentleman said yesterday that the average amount of excise collected in the last five years, on the basis of 5s.8d. per gallon, was £354,000, and this, he said, he regarded as a fair contribution to the revenue. He added that he looked forward to retaining the whole of that amount under the new scheme.
– I did not say that.
– I took down the honorable member’s words while he was speaking. As the bill is drafted it will not be possible to retain anything like that amount. It is unlikely that the enlarged drawback of 2s. 4d. will be paid on the wine that will be exported during the next few months, for it will have been made with fortifying spirit on which the old rate of excise was paid. But soon the new drawback of 2s. 4d. per gallon must become operative. From where is that money to come? It cannot come from the trust fund, for the terms of the bill will prevent that. We have to assume, therefore, that the whole of the 2s. 4d. drawback must come from Consolidated Revenue and that a sort, of contra account must be set against the excise revenue which it was hoped to retain. To what extent will this drawback reduce the £354,000 which the Government expects to retain as revenue if we export 2,000,000 gallons of sweet wine per annum. I have already said this is a. conservative figure. It is true that last year we exported something less than 2,000,000 gallons, but it is confidently expected that we shall export fully 2,000,000 gallons this year, and on this the full drawback will have to be paid. It must be apparent, therefore, that two-thirds of the revenue which the Government hoped to obtain will disappear.
Let me give a concrete illustration to make my meaning clear. I will assume that our local consumption will he 4,000,000 gallons of fortified sweet wine. Various estimates have been made of the amount of fortified sweet wine consumed in Australia. These vary from something under 4,000,000 to 4,250,000 gallons; but I think that 4,000,000 gallons is a fair estimate. If we export 2,000,000 gallons the total production on which excise duty will be paid will be 6,000,000 gallons. Under the new rates of excise the Government will collect on this quantity about £700,000. Nearly half of this, or about £330,000 of it, will go into the trust fund to be used for the payment of the bounty and for the encouragement of the industry in other directions. A little more than half - £370,000 - will go into general revenue, and the Minister optimistically supposed that it can be retained there. The full drawback on 2,000,000 gallons at 2s. 4d. per gallon will amount to £233,000, so that nearly two-thirds of the amount paid into general revenue would disappear, leaving only £137,000. Turning to the other side of the picture, we find that the amount paid into the trust account, £330,000, would suffice to pay not merely 1s. 9d., but 3s. 3½d. per gallon on 2,000,000 gallons of exported wine. I will illustrate what might happen if the hill be left in its present form. Let us assume that as a result of the stimulus given to the industry, the exportation of wine increased to 4,000,000 gallons. If we continued to consume 4,000,000 gallons of sweet wine in Australia, the total production would be 8,000,000 gallons, on which the gross excise revenue would be £930,000. Of that amount the trust fund would absorb £440,000 and revenue would receive £490,000. The full drawback on the 4,000,000 gallons would amount to £466,000, which would absorb nearly the whole of the revenue.
– Under the old scheme the whole of the bounty was paid out of general revenue.
– The total of the bounty and the drawback was only 2s. 3d., but under this bill, 2s. 4d. will have to be taken out of general revenue for drawback alone. Yet the Minister argued yesterday that his proposal Will retain more for revenue than is retained under the existing legislation. Assuming that our export trade developed to 4,000,000 gallons per annum, the trust fund, as the bill is drawn, would still be buoyant, and the £440,000 paid into it would suffice to pay a bounty on this huge quantity at the rate of 2s. 2½d. per gallon. [Quorum formed.] The reason why the trust fund would remain so strong while the revenue dwindled to practically nothing, is that the new portion of the excise duty on fortified spirit, the extra 5s., evades its rightful share of the drawback payments, while the old tax has to carry not only the drawback applicable to it, but, also the drawback applicable to the new tax. The one means of insuring that these two shares of the excise shall retain their relative proportion - by shares, I mean the portion which goes into trust fund, and the portion which is intended for revenue - is by arranging that each shall provide its own share of the drawback. The effect of this would be to limit both the trust fund portion and the revenue portion to the excise duty collected on locally-consumed spirit. On a basis of a local consumption of 4,000,000 gallons the trust fund at 5s. per gallon of fortifying spirit, would receive about £220,000 per annum, and the revenue about £250,000. The latter figure is £100,000 less than the Minister estimated, but he must realize that it is out of the question to expect to obtain any revenue from the exported proportion, which must leave our shores free of excise duty, but it is £113,000 more than he will get. if the bill is passed in its present form. As for the trust fund, the £220,000, representing 5s. per gallon of fortifying spirit used in wine for local consumption, would suffice to pay a bounty of 3 s. 9d. per gallon on’ 2,500,000 gallons. If the honorable member for Angas (Mr. Gabb) is correct in saying that the local consumption of sweet wine is nearly 5,000,000 gallons, sufficient excise duty would be collected to provide a bounty of1s. 9d. per gallon on more than 3,000,000 gallons of exported wine.
Clause 6 of the bill contains a defect which is evidently due to an oversight. It reads -
The rate of bounty payable under this act shall be one shilling and ninepence per gallon
Provided that in the case of fortified wine in respect of which bounty has been paid or is payable under the Wine Export Bounty Act 1924-192S, the rate of bounty payable under this act shall be ninepence per gallon.
I assume that the object of that provision is to provide for the interim between the 12th March, when the new bounty became operative, and the passage of this bill. Assuming that ‘ the bill is passed on the 12th May, a period of two months will have elapsed from the date on which the proposed new bounty started, during which a. certain quantity of wine will have been exported and on which bounty at the rate of ls. will have been paid or be payable. The clause is evidently intended to enable an additional 9d. to be paid in respect of wine on which ls. has already been paid. But an oversight has occurred in connexion with Canadian wine. The last Government allowed the original bounty of ls. 9d. to continue to apply to wine exported to Canada. Australian wine is not given the same preference in the Dominion as in the United Kingdom, and the object of allowing the bounty to continue at ls. 9d. for a further period was to help the development of the Canadian market. As clause 6 is drafted, it will be competent for a merchant who baa exported wine to Canada between the 12th March and the date of the passage of this bill, to claim an additional 9d., and thereby obtain a total bounty of 2s. 6d. I presume that the Acting Minister did not intend that more than ls. 9d. should be paid in respect of wine exported to Canada.
– That is so.
– It is a reasonable interpretation of the clause as drafted that the exporter to Canada may claim 9d. over and above the ls. 9d. to which he is entitled under the old act. I suggest to the Minister that this clause requires amendment. Although we are now dealing with sweet wine, I should like to pay some little attention to the amount of the bounty itself, which is now ls. 9d. The Government has shown itself to be as changeable as the chameleon in regard to the amount of the bounty, and in regard to almost everything that it has done since it was first indicated in the press that it was proposed to increase the bounty to ls. 6d. In the first place we read in the press that the Government had decided, after mature consideration and after meeting all sections of the trade, to increase the bounty from ls. to l,s. 6d. That was evidently the considered opinion of the Government. All went merry as a wedding bell until the Acting Minister announced some few days afterwards the intention of the Government to collect an additional 5s. excise. That increase in excise brought a storm of protest about the Government’s ears, and those engaged in the wine industry realized that while they were to get 6d. extra in bounty - the amount proposed at that time - they were to give far more to the Government. The wrath of the industry was brought down on the heads of the members of the Government to such effect that they did not stand their ground. The Government realized that the increased excise which it proposed could not be justified if it were regarded as merely being imposed to balance the increase in the bounty, and in order to stop the clamour it offered as a sort of sop to the wine industry to increase the bounty to ls. 9d. I do not know whether it has occurred to the Acting Minister that the bounty of ls. 9d. per gallon on exported wine is slightly more than enough to pay for the whole of the grapes used by the makers of that wine at the rates laid down by the Acting Minister. If we take doradilloes on the basis of £5 15s. per ton - which I think is the price set out in the list - and if we take the other grapes used for the wine itself as distinct from the spirit, at, say, £7 10s. or* £8 per ton, we shall find that the yield that would be obtained from those varieties would work out so as to cost the makers about ls. 8d. a gallon; therefore this bounty of ls. 9d. is just a little more than enough to pay for the whole of the grapes. The wine-maker begins with getting his grapes for nothing and Id. thrown in to the bargain.
Viewed from another angle, this bounty is more than sufficient to provide for wood and freight on the wine. The Government was induced to change its mind again by pressure put upon it by those who had made contracts and who pleaded that the old excise should obtain. The Government gave way, and the Minister brought in a schedule in addition to that which he had previously brought down, increasing the ex- cise, which restored the previous excise ou fortifying spirit used in wine which was the subject of contracts already made. Again pressure was placed upon the Government by the makers who were caught with large stocks in bond. The Prime Minister made quite a rhetorical display in this chamber, and pointed out that it was quite useless for those gentlemen to attempt to intimidate the Government; that the Government was going to stand its ground, and that the additional excise would remain. Shortly afterwards these gentlemen came to Canberra, and the Government again gave way. I do not suggest for one moment that all these decisions or re-decisions of the Government were wrong. The point that I wish to emphasize is that these repeated changes of ground show that the Government acted in the first place without full consideration, that it acted first and thought afterwards. The bill as it stands is a priceless illustration of that. The proposed increase of the bounty to ls. 9d. will no doubt be popular, but that does not necessarily mean that it will prove to be in the best interests of the industry. To obtain the proper perspective we have to go back over recent years. The Bruce-Page Government established the export sweet wine industry by means of bounties ranging from 2s. 9d. net for the first three years, then ls. 9d. for one season, and ls. thereafter up to the 31st August, of this year. It is important for honorable members who are interested in this subject to remember the incidence of British duties with regard to empire and foreign wines during this period. When we began exporting sweet wines under the bounty of 2s. 9d., we had a preference in Great Britain of only 2s. per gallon on wines of our own strength and class, and Ave were at a disadvantage of ls. 6d. as against wines that wore a little lower in strength than our own wines up to and not, exceeding 30 degrees proof spirit. Our wines had to bear ls. 6d. more duty than those foreign wines. Then when the Baldwin Government assumed office early in 1925 we obtained an additional preference of 2s. per gallon. We therefore had a preference of 4s. instead of 2s. on wines of our strength and class, and an advantage of 6d. on rather lighter wines up to 30 degrees proof spirit, instead of, as previously, a disadvantage of ls. 6d. We were, all round, 2s. a gallon better off in our competition with foreign wines. The former Government, in view of the alteration in the incidence of the British preference, would have been justified in reducing the bounty of 2s. 9d. at an earlier stage than it actually did. The bounty was, after three years, reduced to ls. 9d. The next change that took place in Great Britain brought all foreign wines of over 25 degrees proof spirit into the class on which the higher duties were charged, the datum line being reduced from 30 to 25 degrees. The division between light wine bearing a low duty and heavier wine bearing a high duty was moved downwards so that all these wines with which Ave formerly competed, wines of 25 to 30 degrees proof spirit which previously bore a lower rate, ail came under the higher rate. We thus had a 4s. preference. Instead of merely an advantage of 6d. over wines a little weaker than our own Ave had an advantage of 4s. on the whole of our wines, and the only way the Portuguese and Spanish wine people could, to some extent, frustrate that very heavy additional impost was by more or less unsuccessful attempts at blending. It will be noticed that successive diminutions in the bounty by the Bruce-Page Government synchronized with better and still better preferential treatment from Great Britain. It is true that, at about the time when the last reduction was made, so-called British wines came into the field, wines which were made from cheap foreign must, on which the makers had to pay to the British Government an excise of ls. a gallon. The Australian wine industry thought that that excise should be more than ls. and they clamoured to have pressure put upon the British Government to increase it. I remember, when introducing the bill for the reduction of the bounty from ls. 9d. to ls., that I pointed out to honorable members who talked in that way, that one of the greatest obstacles to the British Government increasing the excise on their own wines made from imported must was the existence of such a substantial and generous bounty as ls. 9d. per gallon on our wines competing with theirs. I pointed out that probably one of the things that we might hope for from a reduction to ls. would be that Great Britain would increase its own excise, and thus to some extent nullify any disadvantage that might be felt by the Australian exporter because of the reduction in the bounty. That actually took place within a few weeks of my making the suggestion, although I had no knowledge of the intention of the British Government. It was merely a guess on my part which happened to be correct. Our bounty was reduced in March, and the British Government in April increased the excise on wine made from imported must from ls. to ls. 6d. a gallon. That increase of 6d. a gallon imposed on the cheaper class of wines of Great Britain wiped out two-thirds of the disadvantage suffered by the Australian exporters because of the reduction of the bounty from ls. 9d. to ls. With respect to competition hot ween that wine and ours 1 mentioned a little while ago that in competing with foreign wines, as distinct from these cheaper British wines, we have had for some time a substantial preference equal to 4s. a gallon on wine of our own strength and class. The former Government, therefore, felt that it was amply justified in reducing the bounty from ls. 9d. to ls.
The Acting Minister said yesterday that the wine industry , after that time suffered a great depression, and exports fell off, and he attributed that to some extent to the reduction in the bounty. I entirely disagree with him. I believe that the factors which caused a reduced demand for our sweet wines wore in existe6 some considerable time before the reduction took place in the bounty, and can be traced as far back as 3927, when we exported an enormous quantity of sweet wine at comparatively low prices because of the very high bounty which was then paid. During 1927 we exported to Great Britain some 3.600,000* gallons of sweet wine, only half of which was consumed in that year. It will be readily grasped by honorable members that that enormous export had a great deal to do with the building up in London of the huge glut of Australian stocks, which created a depression and destroyed the immediate demand for wine. Only yesterday the Minister said that, at that time, there were over 3,000,000 gallons in stock in London. He also said that those stocks had now been reduced to about 1,900,000 gallons. The reduction of our stocks to a normal level is evidence of a rather healthy tone in the market. I have been informed by those who understand the wine industry that a fair stock of both dry and sweet Australian wine in Great Britain would be about 1,000,000 gallons. It follows that it will be to our advantage to reduce still further the stocks that are held in London, rather than to take action which may result in the building up of those stocks to a level that will prove detrimental to the best interests of the industry. One of the reasons why we suffered so greatly because of accumulations of stocks in London was that weak holders offered their stocks for whatever they could receive. I am alluding now to 1927 and the early part of 192S. At that time the industry would not consent to the establishment of an export control board. A little later, however, the last Government succeeded in inducing the industry to agree to the establishment of a board, and legislation designed to give effect to that decision was brought down. The reduction of the bounty from ls. 9d. to ls. a gallon undoubtedly did a real service to the industry, in that it checked cut-throat selling at almost any price and enabled u? to reduce very considerably our stocks of wine in London.
The Minister said yesterday that our exports were not equal to the demand for our wine. I take it he meant that in Great Britain we were reducing our stocks at a greater rate than we were replenishing them. That is an argument not in favour of an increase of the bounty but rather in the opposite direction. It is evidence that we are in a particularly healthy condition in regard to the reduction of our stocks on the British market.
– I said that Great Britain is importing annually 10,000,000 gallons of sweet wines, that we are exporting under 2,000,000 gallons, and that consequently there is ample scope to develop the trade and build up our export business.
– Undoubtedly. The Minister, however, made a significant omission. He quoted figures to show that we are steadily displacing Spanish and Portuguese wines, that as our sales on the British market increase so the sales of Spanish and Portuguese decline. The words that he used were “ Australian wines are taking the place of Portuguese and Spanish wines.” When I made that point a couple of years ago, however, it was received with a good deal of scepticism by the honorable gentleman, and he had much to say about the bugbear of British wines. Yet he now says that our wines are taking the place of Portuguese and Spanish wines on the British market! I have already pointed out that the duty upon Portuguese and Spanish wines that enter Great Britain is8s. a gallon, whereas we pay only 4s. a gallon. That is of tremendous advantage to us.
– They get over that.
– I know that to some extent the difference can be reduced by blending. I point out, however, that that practice has proved only partially satisfactory. I can assure the honorable member that the advantage to be thus gained is nothing like so great as is generally imagined.
– What is our effective advantage?
-It depends upon the ratio that exists between the wine which is below 25 degrees and carries a low rate of duty, and the wine up to about 42 degrees. I am informed that it has been found unsuccessful to blend more than one part with one part. On that basis, therefore, we get avery substantial advantage.
The Minister said yesterday that the last government, could be blamed for the depression in the industry, because it had reduced the bounty from1s. 9d. to 1s. a gallon.
– I said that it could be partly blamed.
– When an industry gets into a difficulty someone must be blamed ; and no one is more convenient than the Government. Honorable members opposite will appreciate that fact in the future. The depression in the industry, and the falling off in our exports to Great Britain, were due not to the reduction of the bounty, but to causes which operated some consider able time before that event, when enormous quantities of wine were sold on consignment at any price that was offered, and were bought by speculators who, at a later period, as weak holders, placed it on the market for any price that they could get. I believe that, in relation to the position in London at all events, the industry was gradually regaining a healthy condition on the basis of a bounty of1s. a gallon. We should ask ourselves whether this advance to1s. 9d. a gallon is likely to interfere with that gradual improvement. I wish to quote the opinion of an Australian wine-maker of repute who belongs to a wine firm and does a very large export business in addition to operating within Australia.
– What is his name?
– As this is a private letter I do not think it would be fair of me to divulge his name on the floor of this House, but I am prepared to supply it to the honorable member to prove my bona fides.
-I rise to order ! Is the honorable member in order in reading a private letter?
– If the honorable member reads the letter he must disclose the name of the writer.
– I am willing to disclose it to the honorable member who has asked for it, but merely as a guarantee of good faith. There is no standing order to prevent me from supplying the House with the contents of the letter, without giving its precise terms. This gentleman expresses the opinion that the wine merchants of Great Britain were satisfied with the bounty of1s. per gallon, that they expected to carry on on that basis, that the most they hoped for was that the bounty of1s. a gallon would be continued for a further seven years, and that they believed that as the trade expanded the bounty would naturally have to drop, perhaps by1d. a gallon at a time, until eventually it disappeared.
– That is not the view of the wine-makers of Australia.
– That is the view of this gentleman ; and I can assure the honorable gentleman that he is a man whose opinion is well worth seeking.
– I should like to know his name before I place any value upon his opinion ; he may have been a member of the deputation which asked that the bounty be increased to ls. 9d. a gallon.
– I should be fearful of the result of an increased bounty were it not for the existence of the Export Control Board; for the simple reason that, as the Minister said yesterday, buyers in Great Britain sought reduced prices in accordance with the increase in the bounty. No power on earth could have prevented them from obtaining that reduction if we had not had an export control board, because of the position of the industry in Australia to-day. There are large quantities of wine on hand, and it is necessary for certain makers who are in financial difficulties to effect sales immediately. Practically the full advantage of the additional bounty would have gone to the British merchants but for the check which was put upon them by the board that was established recently. I join with the Minister in hoping that the hoard will use the power that it possesses to so regulate exports as to avoid unnecessary accumulations in London. I trust that, if necessary, it will even go so far as to fix a price below which wine may not be exported, and that it will prohibit sales on consignment. So long as wine is sent overseas on consignment, for sale at what it will fetch at auction, it will be impossible to get out of the difficulty in which we have found ourselves for some years. A further argument in favour of the board taking action to prevent exports at a rate greater than the capacity of the market to absorb them is that, within twelve months, a 3 per cent, evaporation takes place. That is to say, a 65-gallon hogshead loses by evaporation 2 gallons in twelve months. The longer we keep our wine the less freight we have to pay. If we export it before the evaporation takes place we pay freight on 2 gallons which later does not exist. Another factor is that costs of bonding, rental, &c, are greater in Great Britain than they are in this country. It will thus be seen that it pays us to mature our wines as much as possible before they are exported.
– Is the honorable member opposed to the increase in the bounty?
– The position in regard to the increase is affected by the fact that it is being paid out of taxation imposed on the industry itself. I have no objection to a bounty that is fixed on that basis. But, having admitted that, in the interests of the industry I very much question the wisdom of the increase to this highly artificial level. I believe that it would have been better for the industry if it had battled on a little longer with its feet nearer to the ground.
I wish to allude to the provisions that relate to industrial conditions. It is surely unusual to include conditions of that kind in a bounty measure. I agree that it should be the object of the Government to give a fair deal all round. It is essential that provision should be included in the bill to safeguard the growers in regard to prices. The object of this measure is to assist the grape-grower, not the wine-maker. But I do not think that that should extend to industrial conditions, which in my opinion are foreign to a bill of this character. “We have State wa.ge3 boards and a federal arbitration court. It is their duty, and the duty of the unions to which the men in the industry belong, to look after the conditions under which they have to work. It seems to me that we are doing something unusual in embodying provisions of that kind in a bounty bill.
– That provision was included in other bounty bills, including some introduced by the last Government.
– To sum up my remarks the Government has undoubtedly overlooked the important factor of drawback. The Government expected a substantial amount of revenue as a result of the alteration of excise duties. The Acting Minister quoted the figure £350,000, which he hoped would go into revenue. I wish to point out that nothing of the kind will happen. Even after the amendment referred to by the Acting Minister, that estimate will have to be reduced by one-third. I also wish to remind the Acting Minister of his obvious oversight in regard to the payment of 9d. per gallon referred to in clause 6 which, in my opinion, would apply to wines sent to Canada on which ls. 9d. bounty is already being paid. The
Acting Minister was hundreds of thousands of pounds out in his estimate. I shall look with a good deal of interest for the amendments, without which I certainly would have found it impossible to support the bill. I hope that when the amendments are brought forward the Acting Minister will have the grace to acknowledge the assistance that has been forthcoming from this side of the House, without which the Government would have landed itself in a very awkward situation.
.- I congratulate the honorable member who has just resumed, his seat upon the keenness with which he has reviewed the bill before the House. In that regard he has fulfilled his duty as a member of the Opposition. I do not agree with him. however, in wishing that the industry had its feet a little nearer to the ground before an increase in bounty was given. [Quorum formed.”) I fear that if the honorable member for Gippsland (Mr. Paterson) had remained a Minister, and had continued to hold the views he has expressed to-day, it would not have been very long before the wine-growing industry was, figuratively speaking, underneath the ground.
I propose to review the history of the bounties paid in respect of this industry; to review the principles of the bill itself; to comment on the increase of the excise rates on spirit used in fortifying wine; to refer to the efforts that have been made by some wine-makers to thwart the purpose of this bounty; and to issue a warning to grape-growers engaged in the industry. The need for paying a bounty to assist this industry can be traced back to the Great War. When the State Governments were faced with the task of repatriating their returned soldiers, some of them, including that of South Australia, resolved to place many of the men in the grape-growing industry for winemaking and for the production of dried fruits. This bounty differs from any other bounty of which we have had experience, with the exception of that on dried fruits, in that there is a moral obligation on the Governments concerned to assist those engaged in the industry because they were really forced into it on conditions determined by those Governments. In South Australia the blame lies largely at the door of the Legislative Council, a Tory house. Legislative provision was made for the compulsory purchase of estates in South Australia to enable returned soldiers to be placed on the land, but that act was made inoperative by the Tory Legislative Council, which must, for that reason, accept the responsibility for making this bounty necessary, and also for most of the losses which have been incurred in respect of repatriation schemes along the river Murray. An effort was made in 1924 to solve the difficulties under which the wine-growers were labouring. I was then a member of this House, and I remember the passing of the first Bounty Bill which provided for the payment of a bounty at the rate of 2s. 9d. a gallon net, and of 4s. a gallon gross. Later, after I had ceased to be a member of the Federal Parliament) the bounty was reduced in 1927 to ls. 9d. a gallon net, and in 1928 to ls. a gallon. During that period the cost of the bounty, for the respective years ending 30th June was as follows : -
In terms of millions of gallons the quantities of wine exported during those years was as follows : -
When I was last in Parliament in 1925 there was a net bounty being paid of 2s. 9d. a gallon. When I returned here, last year, that bounty had been reduced to ls. a gallon, and was due to expire within a few months. As I represent a district in which there are more persons growing grapes for wine-making than in any other three or four wine-making constituencies, I naturally felt that it was my duty to do what I could to have the bounty increased. I did not hold the same views as the honorable member for Gippsland (Mr. Paterson), and I propose later to justify my opinion by quoting figures relating to the operations of different wine manufacturers. Those figures will be a sufficient answer to the question whether there was any need for an increased bounty. The honorable member for Gippsland claimed that the accumulation of stocks was responsible for the falling off of wine exports.
– That, and the lack of organized selling.
– We hope to overcome that difficulty by means of a board which will undertake the marketing of Australian wines. I propose to show that the value of the wine exports of some firms dropped from £38,000 a year to £200 worth. I stayed in Canberra for five weeks, without returning home one week-end, so that I might be able to buttonhole Ministers, and prepare the ground for obtaining an increase in the bounty. I went back before Christmas satisfied that there was a chance of securing an increase.I did not know by how much, butI believed that it would depend upon the report brought back in the new year by the Senior Inspector of Excise.
– The extra 6d. has been given as the result of consideration, and the further 3d. as the result of fright.
– That statement should not come from an ex-Minister, who was a member of the Government which fixed the price of grapes, but which backed down on that price in the face of the uncompromising opposition of Penfold Hyland. Later on I shall quote that gentleman’s own words on the matter. This Government has not backed down. It did not yield to the pressure brought to bear by the wine-makers when the recent excise increasewas made. On that occasion this Government behaved very differently from the way you did when your Government was threatened by the wine-makers. If you had stood up to your job months ago-
– I rise to a point of order. I ask whether the honorable member for Angas is in order in saying “If you had stood up to your job “ and if “you “ had done this, that and the other? Should he not address the Chair?
– I ask the honorable member to address the Chair.
– I shall endeavour to conform to the practice of the House; and I trust that I take instruction at the hands of the Leader of the Opposition (Mr. Latham) with good grace.
– The honorable member need take instructions only from the Chair.
– When Mr. Penfold Hyland pointed a gun at the head of the Government of which the honorable member for Gippsland (Mr. Paterson) was a member, it surrendered, and altered the price of grapes as it was requested to do. That was the thin end of the wedge. When Mr. Penfold Hyland led the revolt of the wine-makers, the Government of the day should have fought him. He should have been told that he did not govern the country. Had that been done, he would not have tried to bluff and bounce the present Government, but would have learned a lesson. Whatever else this Government has done, it has not shown fright.
– Did the honorable member say “fight”?
– I said “fright”; andI do not desire the honorable member for Warringah (Mr. Archdale Parkhill) to talk to me about fighting, for he knows very little about it. Some years ago, when there was a possibility of his being selected to contest a seat in this Parliament, the present right honorable member for North Sydney (Mr. Hughes) entered the field and the honorable member for Warringah did not care to fight.
I returned to South Australia only after I had satisfied myself that there was a good prospect that the Government would increase the bounty. The increase can be justified on numerous grounds. The first is the moral obligation thatI have already mentioned. I was pleased to notice at the various deputations which waited upon the Prime Minister in connexion with this subject that the moral obligation argument appealed strongly to the right honorable gentleman. We are fortunate to have a Prime Minister who has an earnest regard for moral obligations. The second reason which justifies the increase in the bounty is that it prevented additional unemployment in the grape-growing and wine-making districts. I was rather surprised to hear the Acting Minister say last night that 12,500 persons were directly employed in this industry and that 27,500 indirectly relied upon it for their livelihood. These figures are larger than I expected. An industry which gives so much employment deserves every consideration.
The increase is justified also because the Governments of Victoria and South Australia have invested large sums of money in the industry. One other reason was mentioned by the Acting Minister, namely, that the industry had caused £1,500,000 of new capital to come into Australia.
The main provision in the bill is that in increasing the bounty from ls. to ls. 9d. a gallon on exported fortified sweet wine. Seeing that the bounty is as much as was asked for I expect it to have a beneficial effect. Those engaged in the industry undoubtedly asked for the amount of bounty which they considered necessary. The next provision of importance is that a trust account is to be established. I shall not attempt to enter the maze of figures which the honorable member for Gippsland traversed. To be quite candid on the matter, T am not very much concerned about his criticism of the proposed trust fund, but I appreciate the provision that any amount left in it after the statutory requirements have been met shall be used to assist in the marketing of our wine overseas. The honorable member for Gippsland seems to think that nothing will be left in it; but when the right honorable member for Cowper (Dr. Earle Page) - spoke on this subject some time ago he said that, of the amount of £600,000 provided by the industry by the taxation of itself, £300,000 could be paid into revenue and £300,000 into the trust, fund, and that this would be considerably more than the amount required for the purposes of the fund.
– The right honorable member had in mind at that time a bounty of ls. 6d. a gallon.
– That is so, but the difference of 3d. a gallon would not seriously affect the value of the statement.
The next important provision of the measure to which I shall refer is that which gives the bounty a five-year period. For five or six years those engaged in the industry have asked for a bounty over a sufficiently long period to enable the industry to become thoroughly established, and I believe that a five- year period will make it possible to stabilize the position. If that period is not sufficient the policy can be continued for a longer time.
– Would the honorable member favour an extension of the period?
– I would, so long as the amount necessary to provide the assistance comes from the wine consumers of the country. I would also favour au extension of the period, if necessary, for the reason that the grape-growers deserve protection on moral as well as economic grounds.
– Will not the longer period also enable the winemakers to market a more mature product ?
– I do not propose to discuss that aspect of the subject, except to say that the five-year period should result in the marketing of an improved wine. I am afraid that the action of the previous Government in extending the period of the 2s. 9d. net bounty for an extra three months caused many wine-makers to export immature wine which did the industry a good deal of harm.
I am glad also that provision is made in the bill for the fixing of the price of grapes. This Government cannot take credit for that, for the principle was included in previous wine export bounty measures. The honorable member for Gippsland commented upon the fact that provision is made for policing the working conditions and wages paid in making wine on which the bounty is paid. As a Labour man I cannot, take exception to that provision ; but I believe that those engaged in our wineries and distilleries are fairly protected, for they are all members of the Liquor Trades Employees Union, which keeps a close eye upon the conditions under which its members work. I do not think that there is very much prospect of applying these policing conditions to the grape-growers, for large quantities of grapes are grown by men engaged in mixed farming, who carry on their operations with the assistance of their families. In order to confer the five advantages I have mentioned it has been found necessary to double the excise duty on spirits used for the fortification of wine. This proposal provoked a storm of protest in the district I represent. 1 agree with the honorable member for Gippsland (Mr. Paterson) that there is no reason why the wine section of the alcoholic liquor industry should not be required to pay something towards general revenue, particularly in this time of financial stress. - The outcry raised in some quarters would lead one to believe that the wine industry has been singled out for unfair treatment. What are the facts? In answer to a question asked on the 25th March concerning the duties imposed on alcoholic liquors the Acting Minister for Trade and Customs said: -
The alcoholic content is the important factor which governs the sale of alcoholic beverages. The excise duties payable, inclusive of recent tari If increases, are as follows: - Whisky and brandy, containing 70 per cent, proof spirit, 21s. 3d. per gallon; beer, containing 7 per cent, proof spirit, ls. lOd. per gallon; fortified wine, containing 32 per cent, proof spirit, 2s. 3d. pur gallon. On the basis of the duty on whisky and brandy, the equivalent duty on fortified wine calculated according to the comparative alcoholic content would bc 8s.. 1 Id. per gallon. On the basis of the duty on beer, the equivalent duty on fortified wine, calculated according to the comparative alcoholic content. would be Ss. 4d. per gallon. Dry, unfortified wines pay no excise duty.
Shortly after the increase in the excise duty was announced I attended a meeting at Tanunda, the principal centre of thewine industry in South Australia, which was addressed by Mr. Hill, the then Leader of the Opposition in the State Parliament, and three other Labour candidates. A great deal of political capital was being made out of the new duty to the detriment of Labour candidates in the State election campaign, and I was asked to attend the meeting in order to confront the critics. After the candidates had finished their speeches I addressed the meeting until 11.30 p.m. I challenged the audience to state one reason why the wine section of the alcoholic liquor traffic should not make a contribution to general revenue. Nobody accepted the challenge.
– It was a sham fight.
– It was not. I knew that my general statement was likely to be unpopular, but it was necessary frankly to state the facts. I faced the opponents of the new duty and as a result have been subjected to a good deal of criticism. In fact, the Barossa A’c-ivs, in the course of an attack on me, stated : -
Mr. Gabb, iri triumphantly reviewing the position at Tanunda last week, stated that he was glad the big wine-maker was caught. And so we have the stalwart Labour member holding the victim’s feet while Mr. Scullin swings the axe.
The big wine-maker to whom I referred is Mr. Penfold Hyland, and I repeat that I am glad that he has been caught; otherwise the growers would not be assured of a fair price for their grapes from his firm this year. What was the reason for the loud squeal against the new duty? The explanation is that it required several of the principal winemakers to pay many thousands of pounds extra before they could get their wine out of bond, although they would no doubt be recouped ultimately by the consumers. They resorted to direct action. They closed their doors aud convinced some of the growers that their grapes would be allowed to rot on the vines, and the fruits of their year’s labour would be lost. One can appreciate such fears. The growers were persuaded by the wine-makers to demonstrate; I believe a petition was drawn up for signature, but it has not yet reached this Parliament, probably because the position has been clarified since. A big outcry was raised in my electorate, aud I received many warning letters; one wine-maker mentioned my name censoriously at every opportunity. The vignerons said that the extra excise would militate against the sales of Australian wine. I do not believe that the increase, equivalent at the most to 3d. a bottle, will make much difference to the sales of wine in Australia. Nor do I think that the wine-makers themselves believe that it will. The amount of excise due at the 30th June, 1929, on fortifying spirit used during the year 1928-29 in fortifying wine in bond was- New South Wales, £17,027 ; Victoria, £30,287; Queensland, £501; South Australia, £175,528; total, £223- 343. The amount due on the same date in respect of fortifying spirit used prior to the 1st July, 192S, for the fortification of wine in bond was - New South Wales, £11,307; Victoria, £17,790; South Australia, £85,809; total, £114,906. Those figures show that the amount of excise due in South Australia was £261,337. It is safe to say that the firms of Penfolds,
Seppelt and Gramp would have to pay at least £.150,000 of that amount; in fact, I have heard that one firm was involved to the extent of more than £50,000 by the increase in the excise rate. This liability accounts for the outbursts by those wine-makers in South Australia. They were not all equally to blame. The man primarily responsible was Mr. Penfold Hyland, who led the opposition against the Government’s proposals.
– Is it not mean to bring up personal matters in the House when the persons concerned have no opportunity to reply?
– It is not mean. I am convinced that the greatest enemy of the South Australian grape-growers is the gentleman I have mentioned, and I shall submit facts in support of that statement. He is a constituent of mine and will use his influence against me again as he has done in the past; no doubt I would be studying my own interest if I did not criticize him, but I am speaking in the interests of the growers.I cannot betray private confidences, but I have good reason to believe that Penfold Hyland calls the tune to which the other South Australian wine-makers dance. This is the third occasion on which he has tried to break down the prices fixed by the Government to be paid to the gra pe-growers.
– Challenge him where he has a chance to answer.
– He is well able to look after himself and he will hit when and where he wants to. I shall be quite frank about my attitude towards the South Australian opposition to the new duty and will take my share of any praise or blame. When I read on the press board at the Adelaide railway station on the 19th March last that Penfold Hyland threatened to shut down his wineries I immediately telegraphed to the Acting Minister for Trade and Customs “ Do not be stampeded by Penfold Hyland’s bluff. Visiting district, Canberra early next week. Whatever you do, hold fast to price fixed for grapes.” I took that action because I felt that Mr. Penfold Hyland was putting over a deliberate bluff in an endeavour to get this Government to break down the prices of grapes. When an extremist - I care not whether it be Jock Garden or Penfold Hyland - endeavours to endanger the interests of my constituents, nothing will deter me from doing everything within my power to prevent an injustice from being done. For that reason I took the stand that I have indicated, and I am prepared to pay the price, even if it means my political extinction. I am doing what I believe to be in the interests of the grape-growers that I represent.
– The whole of the honorable member’s speech is political propaganda.
– This is the first opportunity that the honorable member has had of listening to me in this chamber, and if he will refer to other honorable members, who are well acquainted with my views and convictions, they will inform him that I am honest and sincere in the statements that I make. Par from my speech being political propaganda, let me inform the honorable member that it may bring about my political extinction.
– Did not Mr. Penfold Hyland address a meeting on behalf of a Labour candidate?
Mr.GABB. - I have been told that Mr. Penfold Hyland helped to return me to this Parliament. If he did soI thank him, but I doubt the statement. The fact that he helped the Labour party at the last State election does not prevent me from endeavouring to safeguard the interests of the majority of those engaged in the wine industry. Mr. Penfold Hyland is working for a monopoly in the wine industry, just as John Wren is endeavouring to obtain a whisky mononoly in Australia. Mr. Penfold Hyland is ruthless in his methods, and cares not who suffers so long as he is successful. I have already referred to the fact that a deputation, representative of the grape-growers at Griffith, waited upon the previous Government, and in that connexion Mr. Penfold Hyland, in March last, said -
Last year when the Bruce-Page Government threatened the industry, grapes were refused at Griffith (New South Wales) winery of the company. The credit of the whole district was affected.
That bluff was put over the Bruce-Page Government, and Mr. Penfold Hyland has now attempted to put it over the present Government. If the previous Ministry had taken the opportunity to put this gentleman in his proper place it would have saved a lot of heart-burning during the critical period through which the grape-growers have just passed. The following paragraph is taken from a circular issued to all honorable members by Mr. Penfold Hyland -
Some members are labouring under the impression that the grape-growers applaud their action, but the truth is just the opposite, but as the Attorney-General, Mr. Brennan, knows, of all the growers in Mr. Gabb’s electorate, Barossa is the loudest in its condemnation of the Government’s action.
Similar statements appeared in the press, but I have doubts as to their truth. I question whether some of the growers, who were stampeded, still hold the views that they then expressed. I, myself, have not been intimidated, and have taken the same stand throughout. For three years I was secretary of a union, and on several occasions I acted in opposition to the wishes of my members, and was prepared to take the consequences. I took the stand that by opposing them I was acting in their interests, and I am taking that stand to-day as a representative of those grapegrowers who are opposed to excise increase. I advised the Government as to what I considered was the proper course to take irrespective altogether of the views of my constituents. I contend that we, as representatives of the people, should use the brains that the Almighty has given us, and act according to our convictions. I visited my electorate making inquiries at the time of the grape lock-out and I found that among the wine-makers, were those of two schools of thought. I had always been under the impression that as the hymn says, the wine-makers were “ all one body we “, but when I made inquiries I was surprised to find that that was not the position. I found that certain wine-makers practically confined their operations to the Australian trade, and others operated both on the Australian and the export markets.
Sitting suspended from 6.15 to 8 p.m..
– Those who are interested only in the Australian market are endeavoring to avoid paying the prices that have been fixed by the Government. The following is a list issued about the 17th March by Penfolds Wines Limited and B. Seppelt & Sons, of prices to be paid to the growers. I have placed in the margin opposite each item the price fixed by the Government. It will be seen that the difference ranges from 10s. to £2 a ton. Penfold is the leader of this group, and in the long run it will be found that his firm is an enemy of the growers -
The following further table shows the amount, that has been paid in bounty to different firms: -
lt will be seen that the two firms whose names I have mentioned have decreased to a remarkable extent their exportations of wine. I give these figures not only to show that these two firms are now interested only in the Australian market, but also so that the honorable member for Gippsland (Mr. Paterson) may know what the position is with regard to exports. I hope that he will be satisfied that there was every need for increasing the bounty. The figures should convince the honorable gentleman that the bounty of ls. a gallon was not sufficient to encourage many firms to export. In the year prior to that to. which the first list refers, Penfolds were offering for grapes, in some cases, from £2 to £3 a ton less than the price fixed by the Government, . and in the year which preceded that, he commenced to bring down the prices that were paid to the growers. Some honorable members may wonder why that was done. The reason is that this particular firm has its capital invested mainly in plant and tied shops. A decrease in the price of grapes, and a crash that brought in its train a decided drop in the value of vineyards, would have little or no harmful effect upon it. In fact, the policy of the firm seems to be to smash down the price of grapes. The other firms with which it is competing in the retail market in Australia, however, particularly Seppelt’s, have extensive vineyards. Seppelt’s have somewhere about 2,200 acres of vines. A drop in the value of vineyards is to Penfold’s advantage, because it lessens the value of its competitors’ assets, and consequently improves its own prospects of securing a monopoly of the Australian market.
This bounty is necessary not for the purpose of developing a new industry as is the case with the cotton bounty, but to salvage one that has been established to a certain extent. I hope, however, that the increase will not result in additional areas being planted with vines. On the public platform I have endeavoured to warn growers against the danger of planting further areas until they have seen that the bounty has had the intended effect of opening up markets on the other side of the world. If the strike or lockout by the wine-makers has not warned the growers, it should have had that effect. The wine-makers at all times have their hands on the throats of the grape-growers, and they need only exert sufficient pressure to place them in the uncomfortable position that they imagined they occupied on the 19th March last. Any industry that is working under a bounty, even if this amounts to only 3d. a gallon, is not on a sound basis. If the existing British preference be withdrawn, even if the effective preference be only 3d. a gallon as has been contended, their position will be an unenviable one. I remind the growers, also, that they have a serious competitor in the industry that is established in South Africa. They need to remember that black labour in that country costs only about 30s. a month. The report of the Federal Australian Viticultural Council for 1928 contains the following passage : -
The difficulties regarding over-production will be realized when it is stated that the acreage under grapes increased from some 07,000 in 1917-18, to approximately 115,000 in 11(27-28, while the wine production increased during the same period from 0,805,000 gallons to over 20,000,000 gallons last year. Such a marvellous development in ten years must inevitably be accompanied by serious problems such as face the wine industry today.
I further remind the growers that a large amount of British capital is invested in the wine industry in both Spain and Portugal, and that the “thin red line “ of kinship fades away in the presence of gold. There is also competition from synthetic wines, or British wines. One company that handles these wines paid in one year a dividend of no less than 48 per cent. That is evidence of the profits that can be made out of them. I join issue with the honorable member for Gippsland (Mr. Paterson) in regard to the proportions in which blending takes place; it is a ease, not of one to one but of three to one. This blending is making both Portugal and Spain a serious competitor of Australia on the British market in spite of British, preference.
I warn the growers of these facts because, unhappily, I have not the certainty of the Minister or of some of the officers of his department in regard to the efficacy of the bounty. I regard this as our only chance to save the industry; and it will be saved only if the grapegrowers are sufficiently wise to refrain from the planting of wine-producing grapes for at least the next two or three years.
Mr. HAWKES, (Wakefield) [8.10 1. - I support, the general principles of the bill, but, regret that it was not introduced prior to the Easter adjournment, so that it, could have been circulated among winemakers and grape-growers throughout Australia, and thus have enabled them to bring forward criticisms of its details. Until it was introduced last night, no person, except the Minister and the departmental officers, was acquainted with its contents. The Minister certainly was courteous enough to indicate that it. was to be introduced, and this foreknowledge made it. possible for what is probably the wealthier section of the industry to send a representative to Canberra to watch its passage. The grape-growers and cooperative wine-makers, however, have not been able to do that. The associations of growers and the co-operative wine-makers in South Australia will not receive copies of the bill until the end of this week. I hope that a reasonable interval will be allowed to elapse before the committee stage is proceeded with, so that those sections of the industry may be able to make known their views upon the bill.
Although I support, wholeheartedly the general principles of the measure, I have considerable criticism to offer regarding the manner in which this matter has been handled by the present Government. I would not have referred to its vacillation but for the criticism that has been directed against the late Minister for Markets (Mr. Paterson), the suggestion being that he had educated the wine-makers to adopt the policy of direct action, by making concessions to them, and that it remained for this Government to refuse to make any concessions. Throughout the handling of the problems that have been connected with the wine industry the action of Commonwealth Governments has not been all that could be desired. There has been a wealth of good intention ; but from time to time also a considerable amount of blundering.
The suggestion that another minister, or another government, made substantial, concessions whenever direct action was threatened, and that the present Government had a sufficiently high moral sense to offer a firm resistance, is not, in accordance with .the facts. The present Government has shown to the manufacturing millionaires in this industry the leniency that has characterized many phases of its fiscal policy. The name of Mr. John Wren has been mentioned to-night by an honorable member who sits opposite. The extent to which that gentleman’s firm benefited as a result of the recent alteration to the excise duty on whisky is well known. The chief ‘benefit from the concessions which the Government, has recently had extorted from it was received by some of the ‘biggest and richest manufacturers of wine in Australia. I do not wish to mention names, and I am not in possession of exact figures. Yesterday I asked the Acting Minister what would he the total amount of duty remitted to wine-makers as a result of the decision not to collect the additional 5s. excise for the trust fund on wine held in bond from vintages prior to 1930. I also asked how many winemakers would benefit to the extent of £10,000, and how many by £25,000 or more. The Acting Minister was unable to give me the information I sought. .V previous speaker on the other side of the House has formed an estimate which i.? somewhere near the mark. It is certainly somewhere near the figure which local gossip in wine-making districts has fixed on as the extent of the benefit received by one particular wine-maker. The figure mentioned by the previous speaker was £50,000. I have a cutting from the Adelaide News of Friday, the 27th March, in which this wine-maker is reported to have said -
The Federal Government is attempting to make private enterprise pay the cost of its political promises.
This wine-maker indulged in much bit,t,jv criticism of the Government, and, indeed, led the attack against it. He visited Canberra, and, as a result, undertook to d’j what the other makers had been all along prepared to do, namely, to pay a fixed price for the grapes he was going to buy.
Probably, as a return for that, he received this concession, estimated by honorable members on the other side of the House to be worth about £50,000 to him. Within a few days - certainly within a few weeks - of that concession being granted he was addressing meetings in South Australia in support of a Labour candidate in the State election campaign. There is an example of mutual helpfulness following upon the granting of a very substantial concession by this Government to a person who, if there are any millioniares in the wine-making industry, is certainly one of them !
– I rise to a point of order. The honorable member said that because a certain manufacturer of wine received a concession worth £50,000 he took the platform in support of Labour candidates in South Australia. That amounts almost to a charge of bribery.
– The honorable member merely recounted the facts.
– I see no. reason why the statement complained of should be withdrawn. I do not. think that the honorable member, in making it, contravened the rules of debate.
– I merely stated the facts, which are that the gentleman to whom I. referred received this valuable concession, and immediately changed front. I should not have drawn attention to the matter at all if it had not been for the criticism which has been directed against the honorable member for Gippsland (Mr. Paterson). I felt that it was due to him to say something in support of his action in the past.
Over 2,000,000 gallons each year since 1927, and the change in bounty payments in Australia do not appear to have affected them to any great extent. The question immediately arises then whether any increase of bounty would be likely to lead to any very sudden expansion of our English market. I have been informed by many interested persons that the expansion of our overseas market has been very seriously restricted by the uncertainty of the Government support which may be expected, ‘ and the serious alterations of Government policy from time to time. These conditions were responsible for the fact that the English market was supplied with Australian wine practically on a hand-to-mouth basis.
The officials of the newly-established Wine Export Control Board are hopeful that if the bounty is increased for a period a fairly steady increment will follow in the consumption in Great Britain of Australian wine. In that way the ‘bounty may probably be the means of finding an outlet for another 500,000 gallons of Awstralian wine, if not immediately, at least within a few years. If the present British preferential duties on Australian wine are continued for a few years, we should be able to increase our exports to Great Britain by 500,000 gallons per annum or more. It should also be possible for us to expand our wine trade with Canada. The figures quoted by the Acting Minister last night indicated that although the consumption of Australian wine in Canada had increased, it is still only about 1,500 gallons . per annum. Possibly Mr.
McGregor, the new Trade Commissioner to Canada, will be able to do something to increase our business in this regard as the Minister suggested. The quantity of Australian wine consumed in the sister dominion is so small that if Mr. McGregor himself is added to the Canadian consumers of it, there would be a noticeable increase. We might also be able to develop a trade in wine with some of the northern European countries.
Even with the relatively generous increase in the bounty, it is by no means certain that the whole of the Australian vintage for this season can be absorbed immediately. For that reason 1 agree with the concluding remarks of the honorable member for Angas (Mr. Gabb), in which he referred to the danger of extending the area of wine grapes.
The principles upon which the bill rests are sound. I am glad, for instance, that a special trust fund is to be created for the express purpose of assisting the marketing of Australian wine overseas, and that this will be provided by contributions from the Australian wine consumers, and not from the Consolidated Revenue. Many taxpayers object to the principle of paying a bounty out of revenue, and the policy outlined by the Government will avoid that practice.
– The effect will he much the same, for the consumers will provide the money.
– But consumers and non-consumers alike would provide it if it came out of Consolidated Revenue.
– That is so. Also, under this scheme, the Australian wine consumers will be able to ascertain the exact amount that they are contributing to assist the export side of this industry.
I regret that there is not a provision in the bill to limit the planting of new areas. The industry is in difficulties at present because it expanded too rapidly for the markets that were available for its products. The result has been that first the general taxpayers, and now the consumers, have had to be taxed to prevent a large number of grape-growers from becoming bankrupt. Notwithstanding the increased bounty that is now being provided, the industry must remain in a somewhat precarious position, because of the uncertainty of the continuance of the imperial preferential policy. We have not clone very much in Australia to encourage a continuation of British preference for Australian commodities. .Although the present British tariff is effective to the extent of only 3d. a gallon in respect to the poorer qualities of Australian wine which compete with similar products of Spain and Portugal, it is worth much more than that in respect to our higher quality wines, which enter into competition with the Taragona wines. Should anything be done which would have the effect of reducing the preference that our wines now enjoy in Great Britain, this industry would again be placed in the difficult position in which it found itself at the end of last year and five years ago.- 1 trust that the Government will do everything possible to ensure the cooperation of the various State Governments and those engaged in the industry to prevent the planting of new areas, for to increase the area under vines would tend to make the industry a purely parasitic growth on the Australian consumers. I shall support the increased bounty, which will enable those at present engaged in the industry to maintain their operations on a reasonable basis.
I do not know whether the five-year period fixed in the bill is sufficiently long to enable the industry to stabilize itself. Possibly when the various co-operative wine-making concerns throughout Australia have had an opportunity to consider all the provisions of the measure, they may ask for an extension of the period and for other amendments. I should like to see a limit placed upon the quantity of wine upon which the. bounty will be payable, for that would discourage the planting of new vineyards.
I believe that all sections of the industry are in accord with the general principles of the bill, which I trust will be acceptable to both Houses of the Parliament.
– I congratulate the Government upon having provided for an increase in the bounty on fortified wine for export from ls. to ls. 9d. per gallon. The honorable member for Wakefield (Mr. Hawker) rightly said that all sections of the industry are satisfied with the measure. It seems to me that the only persons dissatisfied with it are some honorable members opposite; and they are dissatisfied only because those engaged in the industry are satisfied.
I listened with pleasure to the remarks of the honorable member for Angas (Mr. Gabb), who evidently speaks his mind irrespective of the consequences. His speech reminded me of the words of Tennyson -
And; because right is right, to follow right Were wisdom, in the scorn of consequence.
I admire the honorable member for the stand that he took. He apparently did not care whether his remarks cost him his seat or not.
The honorable member for Gippsland (Mr. Paterson) charged the Government with changeableness, but I submit with confidence that honorable members on this side of the chamber have been absolutely consistent on this subject. The Government of which the honorable member for Gippsland was a member could properly be charged with having ruined the prospects of the industry by so frequently changing the conditions under which assistance was granted to it. In 1924 it provided a bounty of 2s. 9d. a gallon with a drawback of ls. 3d. Three years later it reduced the bounty to ls. 9d. a gallon and one year later to ls. a gallon. The result was that the industry did not know where it stood. On the other hand, honorable members on this side of the chamber have consistently supported a bounty of ls. 9J. a gallon.
The Government is to be congratulated upon having fixed a term of five years for the payment of a bounty of ls. 9d. I am glad to see in the bill a provision that the bounty shall not be paid in respect of any fortified wine which is not of good and merchantable quality. So far as I know that is a new provision in measures of this kind, and it will ensure that only matured wine will be exported. Everyone knows that the longer wine is kept the better it becomes. The legislation foi1 which the previous Government was responsible provided for the payment of the bounty irrespective of whether the wine was good or bad. Three months’ notice was given of the reduction of the bounty from ls. Del. to ls. a gallon, and in that time a tremendous quantity of inferior wine was exported in order that the higher bounty might be secured. Immediately the reduced bounty came into force a noticeable slump occurred in our wine export trade. The result was that the wine began to accumulate in the cellars because export at the reduced rate of bounty was not profitable, and the growers were faced with the prospect of not being able to sell their grapes. After the war many returned soldiers were encouraged by the Slate Governments to settle on the land and to cultivate the doradillo grape. When the bounty was reduced by the BrucePage Government they saw a possibility of their grapes rotting on the vines because the wine-makers, with their cellars already overstocked, would not purchase them. This Government acted wisely in increasing the bounty to ls. 9d., enabling the exporters to clear their cellars and the makers to purchase the product of the growers. State and Federal Governments have a moral obligation to the returned soldier growers, and the present Federal Government is doing its part to fulfil it. The quantity of wine exported in .1924-25 was SS1,46S gallons, valued at £327,922. By 1927-2S the exportation had increased to 3,769,257 gallons, valued at £1,062,40S. The bounty was responsible for that remarkable expansion of the export trade, and had. the late Government made earlier provision for the establishment of a Wine Export Control Board the glut that occurred on the London market last year would have been obviated. One of the arguments advanced by the last Government to justify the reduction of the bounty from ls. 9d. to ls. was that the industry had not organized its marketing. That criticism no longer applies, and the existence of a marketing organization is a strong justification for the restoration of the bounty to ls. 9d. That Australia is able to produce large quantities of wine the figures I have quoted prove, but when we were faced with the consequences of overproduction the Bruce-Page Ministry, instead of trying to expand the foreign market, reduced the bounty, thus preventing export at a profit. One of the largest wine-makers, Mr. Penfold Hyland, has been referred to frequently during this debate. He caters almost exclusively for the Australian market, and therefore is not compelled to pay for grapes the prices fixed by the Government. Consequently the growers are at his mercy. Those wine-makers who produce for both export and the home market are compelled to pay the fixed prices for all the grapes they purchase, and are at a great disadvantage when competing with a man who makes only for the home market. This bill, however, will ensure that those who make for the Australian market only, and therefore are not compelled to pay for grapes the prices fixed by the Government will contribute towards the cost of stimulating the export trade. That, is a fair provision.
The honorable member for Gippsland (Mr. Paterson) appealed for a fair deal all round. I agree with him. The winemakers are to be protected by the payment of a bounty of ls. 9d. a gallon of wine exported. The growers will be protected because they will receive for their grapes the prices prescribed by the Government. The grape-pickers and other workers in the vineyards are not so fortunate. The honorable member for Gippsland took exception to the protection of the workers, although provision of that kind is not. unusual in connexion with bounties and customs tariffs. Certainly, the bill enacts that any claimant of the bounty will be required to certify as to the conditions of employment and the wages of the employees; but the exporter may not employ any labour ; he may only buy from other makers, and there is no provision in the bill to protect their employees. At the committee stage I shall move an amendment to rectify that, omission.
I have already said that the last Government were scared by the success that attended the payment of the original bounty of ls. 9d. In colloquial language it “ kidded “ the growers and winemakers up a tree, and then cut the tree from under them. Some honorable members have advocated a restriction on the further expansion of vineyards. The bill already contains ample provisions to prevent the further planting of vines, for it enacts that no bounty shall be paid on fortified wine unless it is the product of areas planted with vines prior to 1928.
Growers who plant additional areas will do so at their own risk. That clause should prove a sufficient check on further planting. Under the stimulus of the original bounty of1s. 9d. the wine industry made rapid strides, but since the bounty was reduced to1s. it has been almost stagnant. The proposals contained in this bill will restore it to a sound basis. Mention has been made of the extent to which Mr. Penfold Hyland gained by the Government’s decision that fortified wine in bond on the 13th March might be removed at the old rate of excise duty. The extent of that benefit has been assessed by one honorable member at £47.000 and by another at £50,000. Whatever may have been his gain the Government did not discriminate in his favour. All wine-makers who had wine in bond on the 13th March were allowed toclear itat the old rate of duty, on undertaking to pay for grapes during the next twelve months the prices fixed by the Government. I am surprised that members of the Country party should object to an increased bounty given for the purpose of assisting a primary industry. If they refuse to support a bill of this kind surely their party is misnamed.
– Who spoke against the bounty?
– I understood from the tenor of the honorable member’s speech that he was against the bill. I asked him two or three times whether he was opposed to the increased bounty, but he did not answer.
– I stated that I had no objection to a bounty based on money collected from the industry itself. If the amendment which the Minister foreshadowed appears suitable, I shall support the bill.
– That is conditional support.
– I certainly could not support the bill as it stands.
– I am surprised that a member of the Country party should object to legislation the object of which is to assist a primary industry.
– Even the Ministry is not supporting the bill in its present form. Does the honorable member support the bill its it stands?
– I have already intimated that I have one or two amendments to move with the object of tightening up the conditions, and of protecting the men who work in the vineyards, whose interests have evidently been overlooked by the honorable member for Gippsland. I want the wine exporter to flourish, the grape-grower to receive an adequate return for his product, and the man who works in the vineyard to get a fair day’s pay for a fair day’s work.
– That suits me admirably.
– I trust that the bill will receive the unanimous support of. the House. The Government is making an earnest attempt to assist a deserving industry, and I am fairly convinced that the sooner the Export Control Board gets to work the sooner will the industry be placed on a sound footing.[Quorum formed.]
.- Various circumstances have led to the introduction of this and similar legislation in this Parliament, and it may not be out of place in discussing the wine industry to delve a little deeper into the subject to discover in what way this pressing problem has arisen. I was a member of the. Government that first introduced legislation providing for a wine bounty, and the Government was then impelled to its action by representations made on behalf of the grape-growers, and particularly the soldier settlers on the river Murray. The State Government, in their repatriation policies, had developed large areas of vineyards, and in so doing had brought about the problem of over production of wine grapes, particularly doradillos, which are not suitable for other purposes. The Commonwealth Parliament has consequently been faced with the difficult and complex task of solving the problems confronting the wine industry, purely because of the haphazard action of individual States which, without any co-ordination whatever, went ahead with local developmental schemes, taking no heed apparently of the cumulative effect of the production in the various States. This has happened in the case, not only of the wine industry, but also of the canned fruits and dried fruits industries. The dried fruits industry presents serious problems. Already those engaged in the industry are making requests for assistance, and the Government is now considering how to overcome the problem of over-production. We must also consider in what way we can place a check on the land settlement policies of the States, bow we can prevent these babies from being left on our doorstep, as it were, which rightly belong to the State Parliaments.
– Were returned soldiers placed in the canned fruits industry?
– Yes. There is a fair proportion of returned soldiers in the Leeton irrigation district and the Murrumbidgee area of New South Wales, and also in the Goulburn Valley district of Victoria. We have to consider not only the soldier settlement problem, but also that of the settlement of migrants. Our obligations arising out of the haphazard land settlement policy of State governments have cost the Commonwealth Government hundreds of thousands of pounds. We give a great deal more in assistance to the fruit canneries than is actually received by the soldier and other settlers for their products. In this instance it is costing the Commonwealth Government more in the way of a bounty than it would cost to purchase the whole of the grapes and to give them free to the wineries. That is rather an extraordinary position. The ostensible purpose of this legislation, as stated repeatedly “by the late Prime Minister (Mr. Bruce) is to help the growers of grapes; but it seems to me that in this, as in other instances, the secondary industry is getting the cream and the grower the skimmed milk.
– Out of a bottle of wine costing 6s. 6d., the grower gets 2d.
– That is the position. The assistance that we give to the industry should be more direct. I am not blaming this or the late Government for the position in which the industry finds itself. We have made a mistake, and I believe that we are making a further mistake on this occasion. The bill provides for a bounty for five years, but I suggest that at the end of that period the in dustry will still be dependent upon the bounty, and the clamour for assistance will be just as loud as it is to-day. This legislation offers no permanent solution of the problems of the industry. The grower has always been made a stalking horse by those engaged in the secondary industry.
– Surely the honorable member is not contending that the grower has not been benefited by the bounty?
– The grower has been benefited, but he could have been benefited to a much greater extent had the assistance been given in a more direct form. Undoubtedly this bill is better than nothing. I have on more than one occasion advocated the formation of an agricultural committee of this House, and at this juncture I again make that plea. Had Ave such a committee investigating problems of this character, visiting the various districts and taking evidence from those concerned in industry, there would not be the mistakes which have been made in the past, and which, I greatly fear, Ave are making under this bill. Had Ave an agricultural committee somewhat on the lines of the Public Works Committee and the Public Accounts Committee, composed of competent members of this House, Ave would have better legislation and more members with a first-hand knowledge of the problems confronting our industries. The dried fruits industry has complex problems, and even those of us who have some knowledge of the industry and represent many of the growers, have difficulty in grasping all its aspects and details. I believe that the Government is making an honest attempt to assist those engaged in the wine industry, but I have an uneasy feeling that some better method of assisting the grower could be devised. I support the bill without enthusiasm.
.- A large number of settlers, many of them returned soldiers, were induced, because of the granting of a bounty, to engage in this industry, but Ave find that the experiment has failed after an expenditure of over £1,250,000. I contend that there is an obligation on the part of the Com- monwealth Government to come to the rescue of these men.
– There is also an obligation on the part of the State Governments who put these men on the land.
– I do not think that once this bill is passed the States are likely to undertake any further responsibility. This Parliament must consider its own obligations, but that does not affect the general principle underlying the establishment of industries, such as the wine industry, by artificial means. This is a clear illustration of the wrong principle upon which the governments of Australia have been proceeding for some years. The honorable member for ‘Wimmera (Mr. Stewart), who is thoroughly acquainted with this matter, and who was a member of the Ministry that inaugurated the practice, has given the strongest grounds that could be given for a government refraining in the future from bolstering up industries in this manner. He has shown that the bounty paid on wine exported from Australia has not cured the troubles that have faced the industry. I have not the slightest doubt that the industry would now be in a healthier condition, and that no expense would have been incurred by the people of Australia, if the Commonwealth Government had not adopted this method of spoon-feeding that has had an unfortunate result whereever it has been tried. I place the wine bounty in the same category as other large bounties. The bounty given to the sugar industry has cost the people of Australia many millions of pounds, and they are now paying for their sugar twice as much as they should be charged.
– Is not, the honorable member a supporter of the proposal to pay a bounty on the production of gold ?
– There are many different features associated with that proposal.
– Because it would benefit, the honorable member’s State.
– There is a market and a fixed price for every ounce of gold that is won. The gold-mining industry is, perhaps, the only industry the exploitation of which may provide a sure means of rectifying the exchange position of this country. If it were exploited sufficiently to produce £650,000,000 worth of gold, Australia would be able to convert, its external debt into an internal debt. That feature does not apply to the wine industry. In the iron and steel industry we have had perhaps our worst experience of the effects of bounties. Over £1,000,000 a year has gone to that industry by way of bounty; yet within the last two or three months hundreds of men have been dismissed from their employment in it.
The doleful story of the wine bounty has been related to-night by those honorable members who have agitated for the extra amount provided in the bill; and I am quite sure that we shall be obliged to listen to an equally doleful story in regard to the cotton industry so soon a? we have had an opportunity to see how the bounty that the Government proposes to give to that industry works out. The best feature of the present proposal is that it is to operate for only a limited period. I agree that those who are engaged in the wine industry should have some certainty of tenure, and that therefore it is desirable to state a definite period during which the bounty shall operate. The honorable member for Angas (Mr. Gabb) has said that, at the end of five years, there will be justification for the continuance of the bounty. I have not the slightest doubt that there will be a clamour for its continuance. That is this trouble with this form of assistance, that the more “ dope “ industries get, the more they want. There is not one instance of an industry being placed upon its feet by a bounty and able to continue without additional government assistance. I trust that this will be the last of such bounties.
– There are only a few industries left; we may as well treat them all alike.
– Yes, when every one has had a plum out of the cake the people may come to their senses.
Honorable members have good grounds for complaint regarding the manner in which this bill was introduced. Some time elapsed before it was found that the bounty would have to be paid by the consumer. The excise on fortifying spirit used in the manufacture of wine was nearly doubled. It was then found that the amount of revenue which the excise would return would be very much greater than would be necessary to pay the bounty. The logical action was to reduce the excise to a level that would produce only sufficient, to pay the grapegrowers. The ‘Ministry, however, raised the amount of the bounty. Prior to that the sum of ls. 6d. a gallon was decided on, and the grape-growers were satisfied with it. But because the excise duty was excessive, another 3d. a gallon was added to the bounty. That additional amount may be neither here nor there; but the vacillation shown by the Government proves that, little attention was given to the preparation of the measure before it was brought, down to this House.
T have another complaint to make against the Acting Minister (Mr. Forde). During the course of his second-reading speech I asked him if he would tell us the export value of the wine on which over £1,250,000 had been paid in bounty. In a paternal fashion he said “ The honorable member will get that information in due course”; but he sat down without supplying it. I therefore placed a question on the notice-paper, and the reply that I received was that the information would be obtained ; proving that when the honorable gentleman said that the information would be given in due course his statement was sheer bluff. I do not expect, such bluff from a member of Hie Government. If the honorable gentleman was not in possession of the information, I would have been content with a statement to that effect, but to be treated in so unceremonious a fashion is not appreciated by any honorable member.
– I support the bill. It appears to me that no matter what action the Government had taken it would not have pleased honorable members who sit opposite. They complain of its proposal to pay a bounty on wine that is exported from Australia; but if it had failed to bring down a bill to pay a bounty they would have been equally vociferous in their complaints.
I agree largely with what the honorable member for Wimmera (Mr. Stewart) has said respecting the unsoundness of the policy that is being adopted in the payment of bounties upon the production of certain commodities in Australia. To my mind the sole redeeming feature of this measure is that the Government has been wise enough to make a radical departure from the policy that was adopted by the previous Administration. The bounty which that Government made available to the wine industry was paid out of the ordinary revenues of the Commonwealth. This Government has seen fit to alter that principle radically. It proposes to make the industry itself bear the whole of the cost, by raising the excise on fortifying spirit used in the manufacture of wine. For that action it is to be commended. It is placing the industry upon the same footing that is occupied by the dairying industry under the Paterson stabilization scheme. That industry has to make good the difference between the export parity and the local price of butter.
– That is not strictly accurate. The consumers of the product of the industry have to make good the difference.
– That is so. The same principle will apply in this case. Because of the increased excise, those who consume wine in Australia, and they only, will have to make good the bounty that is to be paid, to keep the industry going, in that respect the Government is adopting a very sound principle. I do not know what the honorable member for Perth ,(Mr. Nairn) would have said, had he been in this House when the previous Government introduced its Wine Bounty Bill. Probably he would have acclaimed it. To-day, however, he has indulged in strictures of this measure, but has made no suggestion as to how the difficulty can be otherwise overcome. In the light of the fact that honorable members opposite have no constructive suggestions to offer, their criticism of the measure is a waste of both time and effort.
.- The Government has received the hearty congratulations of certain honorable members, but particularly of the honorable member for Angas (Mr. Gabb), for standing firm in relation to this subject of the wine bounty. I take this opportunity to add my congratulations to the
Government upon its remarkable performance in standing firm in so many different attitudes in relation to this subject. I have neither seen nor heard of a Government standing so firm in so many different ways within such a limited period. The story begins with the payment of a bounty of ls. a gallon on wine exported. Under that arrangement things were getting along fairly well, and the industry was settling down.
– It was settling down all right - down and out!
– Not at all. It was the opinion of many engaged in the industry that it would be able to establish itself successfully, having regard to the preferential treatment accorded by the British Government, and the bounty of ls. a gallon paid by the Commonwealth Government. I do not say that there was no difference of opinion, or that there was not room for such difference, but there was a reasonable prospect that a bounty of ls. a gallon would be ample. At this time an election was pending in the State of South Australia. It was important, therefore, that the Government should study carefully its attitude on the subject of the wine bounty, and that once having made up its mind it should stand firm. So it finally announced that there should be a bounty of ls. 6d. In arriving at that decision it must have examined the needs of the industry. It must have inquired what the industry really needed in order that it might carry on satisfactorily, having regard to all the interests concerned. After such a complete examination the deliberate decision was reached by the Government that a bounty of ls. 6d. a gallon would meet the circumstances of the case. In order to provide this ls. 6d., the excise was increased by 5s. on fortifying spirit. The attitude of the Government seemed to be perfectly clear. It had a policy; it had clear views and definite intentions. The 5s. increase in excise was to provide the money for the ls. Cd. a gallon bounty. The Government was standing firm. But a simple arithmetical calculation soon showed that the excise increase of 5s. a gallon provided a much greater sum than was needed to pay the bounty of ls. 6d. One would have thought that the Government, having already determined that a bounty of ls. fid. was all that was needed by the industry, would have reduced the excise increase to less than 5s. when it was found that something less would be sufficient to provide the money required. As explained by the honorable member for Corio (Mr. Lewis) the whole theory of the thing was that the industry should provide its own bounty, but not more than was necessary for the payment of the bounty. The Government, however, evidently thought that it must find another position on which it could stand firm. Its next stc]) was to increase the proposed bounty from ls. 6d. to ls. 9d. a gallon. If the Government had made a full inquiry into the industry it must have been obvious that the extra 3d. was unnecessary. It was both unnecessary and unjustifiable from the point of view of the public, or in the interests of the industry, unless the Government had made a serious mistake in arriving at the original figure of ls. 6d. However, it then appeared that an increase of 5s. a gallon in the excise would produce more than even the bounty of ls. 9d. can absorb, and the Government had to find still another position on which to stand firm. The AttorneyGeneral at that time happened to be in South Australia and was reported in the press to have stated that the additional money would readily be absorbed as the area of vineyards was extended.
– In what newspaper did that statement appear?
– It was published in the Melbourne press. Only this afternoon, however, we were informed by the Prime Minister that the Government did not propose to favour any extension of the area under vines, and that the bounty should be employed for the benefit of those engaged on the areas already planted. Up to the present the Government has made three or four unfortunate mis-steps in the process of standing firm. But there are still other facts which illustrate the clear views of the Government, its sound grasp of policy and the great care which it exercises before determining its policy. On or about the 12th March, the excise resolutions were introduced in Parliament. They provided that the increased excise was to be paid on all spirit removed from bond after the 13 th March. But, if you please, on the 26th March a new resolution was brought down, and the Government altered its position in relation to this phase of its policy by making an exception in favour of spirit already in bond. As we have heard, that exception was worth over £40,000 to one gentleman who attracted the enthusiastic criticism of the honorable member for Angas (Mr. Gabb) who actually complimented the Government for standing firm in its dealings with that gentleman. To congratulate the Government on standing firm in view of the facts which have come to light, demands a degree of political loyalty upon which I, in my turn, must congratulate the honorable member himself. However, we have not yet completed the tale. There is in the bill a clear provision providing for the disposition of what is described as the surplus in the trust account. If this matter had been handled in accordance with the principles laid down by the honorable member for Corio (Mr. Lewis) there would be no surplus in the trust account at all. The money received from excise duty would do no more than provide for the bounty payments. However, the question arises, what is to be done with this surplus. The bill lays it down that the money is to be applied in the prescribed manner. That leaves the matter fairly open, but it is further stipulated that the money shall be devoted to the marketing overseas, and the encouragement of the export of Australian wines. The honorable member for Gippsland (Mr. Paterson) asked what that meant, and it was learned that apparently the Government intended that a portion of the drawback on exported wine was to be paid out of the trust fund. The hill does not provide for that. . This is evidently another change of step in the process of standing firm in many different positions. The Government seems to have changed front in regard to every phase of its policy. I trust that when the honorable member for Angas next uses the phrase “ standing firm “ he will have a better set of facts to which to apply it.
– The Leader of the Opposition (Mr. Latham), in the speech which he has just concluded, said that under a bounty of ls. a gallon the wine industry was settling do wm. If he meant that the wine industry was being settled altogether he was probably speaking the truth, because it was evident from the representations which were made to the Government that the industry was in a very serious condition. The representatives of the grapegrowers and of many of the wineries had waited on the Government; others had communicated with me as the Minister, and they all pointed out that some of the wineries would not be able to re-open if the bounty were not increased so as to give an impetus to the export of wine. It was stated that a large percentage of the 27,500 people who were dependent on this industry would in that case be without a means of livelihood. The Federal Viticultural Council, representing 98 per cent, of the wine-makers of Australia, waited on the Government and tendered convincing evidence of the unsatisfactory condition of the industry, and demonstrated that ruin was facing them if the Government did not increase the bounty from ls. to ls. 9d. a gallon. The Federal Viticultural Council, the wine-makers and the grape-growers asked for this increase. The Government, guided by the facts placed before it, considered that a bounty of ls. 6d. a gallon would be a fair compromise, but I make no apology for the Government because, after hearing additional evidence, it decided to increase the bounty to ls. 9d. The Leader of the Opposition must remember that when Mr. Bruce was Prime Minister he frequently altered the nature of legislation, even when it was before the House, after receiving representations from outside sources. In some instances he dropped bills altogether; in others he introduced numerous amendments and in some cases he changed the programme for the session. The Leader of the Opposition said that important wine-makers had stated that a bounty of ls. a gallon was sufficient. There are certain traders in the wine industry who control the Australian market, and would be glad if there were no bounty at all. In that case the export trade would collapse, and these traders would be able to buy at a price which would enable them to force their smaller competitors out of business. That is a point which the Leader of the Opposition overlooked. When the Government decided to allow the wine-makers to lift the wine in bond at the old rate of export duty it exacted an undertaking from the principal winemakers that they would pay a fixed price for grapes - equal to that which would have to be paid to growers in order to receive the export bounty. The wine-makers were not obliged to pay a fixed price for the grapes they required for making wine for the Australian market, but they entered into an arrangement with the Government which resulted in the payment of from 10s. to £2 pelton more for grapes than would otherwise have been paid. That was another definite step forward, which was of substantial advantage to the grape-growers, and therefore to all the persons employed in the industry in Australia. Subsequently the wine-makers advised the Government that not a single pound of grapes would be left to rot this year.
When one wine-maker in particular closed his wineries, and threatened that lie would cause all the wineries in Australia to be closed if the Government did not take a certain action, the Prime Minister stated in this chamber that he would not be dictated to by any one, and that the wineries must be re-opened before the matter could be further discussed. The wine-makers waited upon me in regard to the matter, and I gave them the same reply. The Government could not possibly discuss this matter while a pistol was being held at its head.
No doubt certain honorable members opposite were disappointed when the wineries were re-opened, for they hoped that the Government would be embarrassed and that the grape-growers would accuse it of having ruined the industry. By insisting upon the reopening of the wineries and exacting a promise from the wine-makers that they would buy all the grapes required for making wine for the local market at the price that was paid for grapes for [as] making wine for export, the Government did a great deal for the grape-growers.
By allowing the wine-makers to lift the wine in bond at the old rate of duty, the Government did not reduce the revenue, for it was agreed that the amount of difference involved would be paid out of the trust fund. The Leader of the Opposition did not mention this important fact.
The Government was influenced in its decision to increase the bounty by reason of the fact that many returned soldiers were encouraged by various Commonwealth and State Governments to become grape-growers.
– We shall hear about the returned soldiers tomorrow.
– I do not know what the honorable member means; but it is undeniable than many men who were away on war service for several years were advised to plant vineyards, although no steps had been taken to ensure a market for their products. The Government could not stand by and see these men ruined. Another important consideration is that the bounty will be provided by the industry itself. I believe that that policy will receive the approval of at least 90 per cent, of honorable members. The honorable member for Gippsland (Mr. Paterson) asked from what fund the drawback of 2s. 4d. would come. One shilling and threepence of it will come out of Consolidated Revenue, and ls. Id. of it out of the trust fund. In committee I shall move an amendment which will definitely provide for this. The honorable member also referred to the payment of the bounty on wine exported to Canada. The amount involved in this connexion will not be more than £50, and the only two exporters engaged in the trade have given an undertaking that they will not claim any more than ls. 9d. a gallon on the wine that they export to that dominion. It is not necessary to put a provision in the bill to safeguard this position.
Honorable members opposite omitted to mention in their speeches that the Bruce-Page Government did the greatest possible harm to the wine industry in 1927 when it reduced the bounty from 2s. 9d. to ls. 9d. a gallon, and gave three months’ notice of the reduction. Yet they have criticized this Government for giving what was tantamount to a week’s notice of the alteration that it intended to make after obtaining a definite undertaking from the wine-makers that they would buy the whole of the vintage at the fixed price for grapes. The result of the Bruce-Page Government giving three months notice of the reduction in the bounty was that the wine-makers exported every gallon of wine that they could get hold of to England irrespective of its age or quality. This caused a glut of Australian wine on the London market, and led to hawkers carting our wine round the streets and selling it at cut-throat prices. A great injustice was thus done to the industry. The effect of that policy is shown in the quantities of wine exported. In 1927-2S we sent 3,215,612 gallons of wine to England, and in the next year we sent only 1,261,000 gallons there. It can be definitely stated that the previous Government greatly injured the industry by giving such a long notice of its intention to reduce the bounty.
The honorable member for Wakefield (Mr. Hawker) suggested that the fiveyear period was not long enough for the industry to stabilize itself, but I remind him that it is two years longer than the period of the last bounty. The industry need have no fear about the future. Although this Government cannot bind a government that may be in office five years hence, I think it can be said fairly definitely that if the industry itself is prepared to provide the money for the payment of a bounty at the expiration of the five-years period there will be no objection to its doing so. Any representations that may be made with this object in, say, three or four years’ time, will doubtless receive very sympathetic consideration.
The same honorable member suggested that there should be a limit to the quantity of wine on which the bounty should be paid, but it would he difficult to fix such a limit without inflicting hardship upon the small wine-makers. The object of the Government is to have as much Australian wine as possible exported, so that the glut on the local market might be ended and our adverse trade balance, to some extent at least, corrected.
The honorable member for Perth (Mr. Nairn) complained because he had not been furnished with a reply to a question he asked me as to the value of the wine that has been exported from Australia in the years in which the bounty has been operating. I assure the honorable member that no discourtesy was intended. As soon as possible after he asked the question telegrams were sent to the collectors of customs in the different States to secure the information that he desired. I hope that I shall be able to give him the particulars he wants within the next few days.
This bill has been introduced with the object of assisting the wine industry to rehabilitate itself. The Government felt that it had to deal justly with the 27,500 persons who are dependent upon the industry, either directly or indirectly, for their livelihood. We believe that it should be possible for us to provide at least 5,000,000 gallons of the 10,000,000 gallons of sweet wine consumed in England annually. If we could increase our exports to even 4,000,000 gallons it would mean a great deal to the industry. It would clear the local market of the present glut and provide much additional employment for our people. We hope also that it will be possible to increase our trade with Canada. The new Canadian Trade Commissioner will do his best to pave the .way for a more favorable reciprocal arrangement with that country with regard to wines. He is going to Canada well equipped with all necessary information, and is optimistic that he will be able to improve our position on the Canadian market. The object of the Government is to help Australia to produce more, export more, and import less. This measure will do much to further that policy.
Question resolved in the affirmative.
Bill read a second time.
Clauses 1 to 3 agreed to.
House adjourned at 10.2 p.m.
Cite as: Australia, House of Representatives, Debates, 1 May 1930, viewed 22 October 2017, <http://historichansard.net/hofreps/1930/19300501_reps_12_123/>.