15th Parliament · 1st Session
Mr. Speak er (Hon. G. J. Bell) took the chair at 3.30 p.m., and read prayers.
Mr.MENZIES (Kooyong- Prime Minister). - by leave - I have to inform the House that the Government has decided to establish a Ministry of Information. The new administrationwill come into practice as soon as the organization is complete. It is to be regarded as a wartime instrument, and will be dissolved at the return of peace.
A Ministry of Information has in recent years come to be recognized as a most helpful auxiliary to governments engaged in war. It is being mobilized at this moment,and indeed is already functioning, in the United Kingdom, and the House is aware that under one name or another a similar department has for some years been functioning in a number of other countries.
I wish to make it clear at once that this new Ministry will not be in the faintest degree a party institution. Its sole purpose will be to serve the Australian people in the widest sense. It will be the duty of the new Ministry to assemble and distribute over the widest possible field, and by every available agency, the truth about the cause for which we are fighting in this war, and information bearing upon all phases of the struggle; also by its many agencies, to keep the minds of our people as enlightened as possible and their spirit firm. I emphasize that precious word “ truth” now in some countries becoming obsolescent so far as international affairs are concerned, because I am convinced that the only propaganda which in the long run is profitable and useful is soundlybased upon truth.
The Ministry of Information will issue news and notices of a war nature from government departments to news agencies, the press and broadcasting stations. It will in a general way supply information, so far as is safe and desirable, of government wartime activities of every kind, including the various industrial enterprises. It will supply particular information for publicity purposes upon individual request. Likewise it will encourage and facilitate the taking of cinematograph films for public exhibition.
The new Ministry will serve as a clearing house in respect of information passing between the many departments of the Commonwealth which must now, upon a rapidly progressive scale, be engaged upon war work. The quick collection and distribution of this material should have a marked effect in speeding up the activities of all departments. The organization as it is developed will, it is hoped, prove a ready source of information upon all phases of the Commonwealth’s war activities, and so prove a very necessary aid to all members of this Parliament and to innumerable other individuals and organizations outside.
One of the most important activities of the Ministry of Information will be wartime censorship, the administration of which will be taken over from the Defence Department, and so afford a most desirable measure of relief to the Minister for Defence and his hard-pressed officials. This transfer, however, will not mean that the censorship will be divorced from very close contact with the Defence Department. Already the Defence Department, in accordance with the War Book, has established a more or less complete organization covering the whole field of censorship. This organization, including of course continuous liaison between the Defence Department and the Ministry of Information through representatives of the Minister for Defence, will be transferred as it stands, and built up until it is a complete running machine.
The Ministry of Information will not add to the present number of Ministers, but will be entrusted to the Minister for External Affairs (Sir Henry Gullett), who will also continue in his present position.
Iam confident that the new Ministry will, at no great cost, serve a useful and indeed an essential service to the Commonwealth.
– I should hesitate to engage in an argument about words. In one sense the dissemination of all information may be regarded as propaganda. The only guarantee that I can give that it will not be used as a vehicle for false propaganda is my own assurance, and the character of the Minister who will be entrusted with the understanding.
– Party propaganda?
– Oh, no!
– Will the information to be supplied deal exclusively with the international situation, and such part of it as may be represented by the contribution of this country towards the efforts that are being made by Great Britain? Is any other form of domestic policy covered by the proposal?
– It will include also a statement as to the activities of our departments so far as they can be made public - what is happening in regard to defence and supply ; information of a kind that is related to ourwar-time activities.
– Having regard to the uncertainty and conflict of information received from overseas in relation to the international situation, will the Prime Minister take into consideration the advisability of asking the High Commissioner in London, who has many channels of information available to him, to send a daily budget to the Government, from which information could be made available to honorable members, thereby enabling them to keep in touch with the progress of events?
– I have already made arrangements along the lines indicated, but as to how far I can announce any information that I shall obtain will depend on the nature of the information received.
-Is the PostmasterGeneral aware that some broadcasting stations, particularly small stations in country districts, are sending out strange and, in many instances, inaccurate reports about the war operations in Europe, and will he say whether notice is being taken by the censorship of the activities of broadcasting stations in this connexion; ifso,what is the form of that supervision?
– I am not aware that strange or inaccurate reports of war operations are being broadcast by small country stations. On the contrary, all B class stations throughout the Commonwealth are working under a direct agreement with regard to the dissemination of news. They are permitted to read the news given to them by the censors together with such British official news as they, may pick up during the day.
– Has the Government been advised that two ship-loads of Australians, consisting of hundreds of persons, are stranded in Bombay, and that so far no steps have been taken to secure their return to Australia ? Some of them are reported to be in desperate straits financially, and more ship-loads are due. Information of this nature has appeared in the afternoon press of the capital cities. If the Prime Minister has had any advice, will he state what the Government proposes to do?
– I have heard something of that suggestion in a general way, and I shall have inquiries made into it. I shall advise the honorable member as soon as I can do so.
– I ask the Minister for the Interior whether or not it is a fact that the unemployed of Canberra have been informed by the Department of the Interior that, up to Christmas, they may look for only one week’s work in every four weeks? If that be so, can the Government not give them fairer play?
– I shall make inquiries into the honorable member’s question, and advise him later of the position.
– With reference to the remarks made by the Leader of the Opposition in the House of Representatives yesterday, concerning works reported on by the Parliamentary Public Works Committee upon which no action has been taken, will the Minister for Health inform the House as to what has been done by him and his department upon the recommendations of the Parliamentary Public Works Committee in respect of the Community Hospital at Canberra? This hospital is urgently required. Special reference is made to this fact in the report of the committee, and the matter is certainly entitled to immediate action.
– As I indicated in this House a few weeks ago, this matter has been and is being treated as one of great urgency. Final plans along the lines of the recommendation of the Public Works Committee have just been completed, and I am hopeful that at no distant date we shall be able to proceed with something tangible in that direction.
Broadcasts by John Brownlee and Peter Dawson.
– The Melbourne Herald has reported that John Brownlee, the distinguished Australian singer, has said that the Australian Broadcasting Commission had suggested that it should broadcast five or six of his concerts, but the terms offered were not worth considering. The Melbourne Sun News Pictorial also published a statement that Mr. Peter Dawson had said that the Australian Broadcasting Commission seemed to have a foreign artist complex; and he added, “Why did it not engage English singers and more Australians?” Receptions were arranged for them, and each city made much of them. Australians, such as himself, had had very different treatment.
– Order ! The honorable member is quoting the opinions of certain people. He is not in order in doing so.
– I merely used those expressions to preface my question. I ask the Postmaster-General to explain why foreign artists apparently receive preferential treatment over distinguished Australians, especially as those Australians are acclaimed throughout the world?
– No doubt the honorable member and other honorable members are aware that there are always two sides to a question. It is sufficient for me to say that an arrangement has been made in regard to Brownlee, not in the terms . he had set out but in terms which seem to be quite satisfactory to him. In regard to other observations concerning imported artists, I point out as I have pointed out to the House on other occasions, that 90 per cent. of the fees paid by the Australian Broadcasting Commission are paid to Australian artists.
– Can the Minister representing the Minister for Commerce inform the House as to whether or not any price has been arrived at for the purchase of Australian wool, and, if it has, what that price is?
– Up to the moment, finality has not been reached in that matter, which is still the subject of negotiation.
– Can the Minister for
Defence state whether any decision has yet been arrived at as to where the dry dock for capital ships is to be established ? If so, can he give the location?
- Sir Leopold Saville is now on his way back to England. He has not yet completed his report. Consequently I am not in a position to give any information on the matter.
Price to be Paid by Britain.
– Can the Prime Minister state whether arrangements have been completed with Britain in regard to the price to be paid for the Australian butter production?
– Finality has not been readied, although the negotiations are at a fairly advanced stage. A statement in relation to the matter will be made as soon as possible.
– Yesterday I asked the Minister for Social Services a question relative to a promise that he made to me that he would endeavour to lay down a policy in respect of housing before he vacated his present .position. He said that he had no recollection of such a promise having been made. Will he turn up Hansard of the 4th May last, page 89, read the reply that he gave to a question that I asked, and endeavour to give me an answer next week?
– Obviously, in answer to a question without notice, no Minister can make a declaration as to Government policy on any matter. I do recall having expressed the hope that this Government would be able to do something in connexion with the matter of housing as well as all other matters affecting the intimate domestic life of the people of Australia. I do not retract that wish one iota.
– Recently the menace of margarine to the butter industry was the subject of discussion at a meeting of the Australian Agricultural Council or a Premiers’ Conference. Will the Minister representing the Minister for Commerce state what is the latest position in respect of the negotiations between the Commonwealth and the States in relation to the matter?
– I shall make inquiries of the Minister for Commerce, and communicate the result to the honorable member.
– Because of the mental unrest among thousands of reputable alien citizens of Australia by reason of the fear of internment, can the Prime Minister say whether it is the policy of the Government to intern all alien citizens merely because they are aliens, or only those with respect to whom there are special circumstances that warrant the taking of such action?
– The only class of alien liable to internment, in fact, is made up of those aliens in respect of whom information is held which indicates some subversive activities. Aliens, enemy aliens or not, in Australia who are not engaged in subversive activity and are prepared to live peacefully in this country, and to observe our laws, have nothing to fear from either the Government or the people of Australia.
– Is there any holdup in the naturalization of aliens, other than aliens of enemy nationality?
– With the qualification that applications are first being submitted to the Department of Defence, I understand that, apart from enemy aliens, the work is going on as usual.
– Is the Minister for Defence aware that a German national at Port Kembla who has been eight years in Australia, and is married to an Australian wife and is rearing an Australian family, has been interned in the gaol at Wollongong, and that his employers have applied for his release? This man is respectable, and I should like to know whether his internment is not a miscarriage of the intentions of the department.
– As the Prime Minister has stated, nobody has been interned unless there is a dossier concerning him in the possession of the authorities. If the honorable member will give me the name of the individual concerned, I undertake to have his case investigated and to inform the honorable member of the result.
– I ask the Prime Minister what has been done by the Government with regard to the wives and children of aliens who have been interned ? I ask this question for humane reasons, and also because of the fact that many of the wives and children of aliens who have been interned are Australianborn.
– On Tuesday next my colleague the Minister for Defence proposes to make a statement on the whole of that subject-matter which has given rise to many queries.
– Has the Minister representing the Minister for the Interior any information to present to the House concerning the admission of refugees? I understand that many applications are yet being received.
– Naturally, the admission of refugees will be curtailed for two reasons. First, many of them are refugees from enemy countries, and, secondly, as I pointed out yesterday, passenger accommodation on the vessels coming to Australia will be limited.
– Has the Prime Minister noticed the conflicting form of newspaper reports in Australia concerning the course of events in the European fields of war? Has the Government received any official information to indicate that these reports are substantially correct? If so, will the Prime Minister inform the House as to the actual nature of the Government’s information?
– I have, of course, received some information in regard to these matters, though the supply of information is, for various reasons, not very great; but what information is available to the Government indicates that many of the reports that have appeared must be regarded as rumour rather than fact. The Prime Minister of Great Britain, Mr. Chamberlain, made a statement of a general kind with which honorable members are already acquainted, but at a time like this it is inevitable that there must be many rumours broadcast from various sources, all of which represent legitimate sources of news for various newspapers, some of which cannot be verified subsequently. One of the functions of the new Ministry of Information will be the winnowing of reports that are received to enable reports on a solid basis to be given to the people.
– Will the Minister representing the Minister for the Interior tell me whether the work at the Rathmines seaplane base is to be carried out by contract or day labour?
– I understand that the work is to be done by day labour.
– In view of the slow progress that has been made in some directions in carrying out works, particularly works of defensive character, owing to the fact that the architectural section of the Department of the Interior is overworked, will the Minister representing the Minister for the Interior ask that Minister to take into consideration the employment of private architectural firms or private architects to expedite the preparation of plans and working drawings?
– I shall direct the attention of the Minister for the Interior to the suggestion made by the honorable gentleman.
– In view of the fact that during the Abyssinian crisis Italy employed subterfuges to evade the sanctions, and in view of the fact that there are many German firms in the world to-day masquerading as British, will the Minister for Trade and Customs keep a very close watch on exports of wolfram, tantalite, mica and other mineral products from Central Australia in order to ensure that those exports do not hare a final destination in Germany?
– The matter referred to has already received the attention of the Government?
– Will the Minister for Repatriation examine the desirability of placing on record, at least in departmental files, the reasons actuating repatriation tribunals in arriving at decisions on applications for pensions?
– That is a matter to which I have already given consideration. I propose to go further into it with the Commissioner at a very early date.
– Can the Prime Minister inform me whether, in pursuance of the policy to carry on all essential services as far as possible, the Government proposes to go on with the establishment of a mortgage bank?
– That is a matter whichaffects the general business with which we have to deal, and it has not yet been determined. I shall be in a position to inform the House on Tuesday of what we intend to do.
– Has the PostmasterGeneral any information to offer the House with regard to the removal of the surcharge on interstate telegrams?
– I answered a question on the notice-paper about that yesterday. I stated that the policy of the Government was still as it was, and that consideration would be given at an early date to the removal of the surcharge.
– I ask the Prime Minister whether at the Premiers Conference to-morrow the question of semigovernmental bodies will be considered? I ask the question because, in recent years, the expenditure of semi-governmental bodies on public works has exceeded that of the State governments. It is very desirable that those bodies, if there is to be any change in the present position, should be informed.
– The problem of finance as it affects the Commonwealth and States is one of the items on the agenda for the Premiers Conference.
– Can the Minister for
Trade and Customs indicate when it is likely that he will introduce the bill necessary to implement the decision of the Government to pay a subsidy in respect of the building of ships in Australia?
– No decision has yet been reached as to the precise date on which the legislation will be brought down, but I hope that it will be early.
– Has the Government had opportunity to deal with the Tariff Board report on the tinned plate industry? If so, when are we likely to get some idea as to what is to happen?
– The Tariff Board’s report on prospects to establish the tinned plate industry is still receiving the consideration of the Government.
– Can the PostmasterGeneral tell honorable members why the surcharge has so heavily been increased on overseas air-mail matter, and who is to benefit from that increase?
– I refer the honorable gentleman to the statement made recently by the Prime Minister with regard to that matter in which he stated that owing to the restricted nature of the services in the present crisis it was necessary to increase the surcharge in order that there would not be an excessive demand for space for mail matter necessitating the use of additional aircraft on the service.
– Will the Prime Minister, when considering the position of the wheat-farmer during the week-end, take into consideration the fact that a very large number of men who have large areas are under stay orders, and at the same time are receiving bounties? Will the Prime Minister make arrangements to see that such persons do not “ get it both ways “ ?
– I shall be glad to take into consideration the suggestion made by the honorable member.
– In view of the considerable controversy as to whether the sporting activities should be carried on during the crisis - I cite Sheffield Shield cricket and horse racing for example - will the Prime Minister make a statement that it is the desire of the Government that sporting activities should continue ?
– That is a matter on which I should be allowed to think over the week-end. I shall answer it on Tuesday.
– In view of the fact that, owing to the difficulty that will arise in obtaining various supplies from overseas, many industries in Australia will be contemplating the local manufacture of those supplies, will the Minister for Trade and Customs, in these special circumstances, arrange to facilitate any inquiries regarding the tariff position of the articles concerned?
– I shall endeavour to do as the honorable gentleman suggests.
– In view of the possibility of a shortage of wool packs and other forms of jute, will the Minister for Trade and Customs see that every care is exercised to prevent the sale of these goods to people outside Australia ?
– A proclamation was issued yesterday forbidding, as from 9 o’clock this morning, the export of wool packs and corn sacks from Australia.
– Has any official information been received as to the correctness of the statement in the press that the German freighter Lahn was arrested by an Australian cruiser yesterday in the Tasman Sea and is being brought to Sydney ?
– I can only regret that there is no truth whatever in the report.
– With regard to the proposal to assist in the cost of ships up to 1,500tons, and in view of the fact that shipping is likely to become scarce, will the Minister for Trade and Customs consider the alternative schemes of assistance which were suggested in the reports receivedby his predecessor and grant assistance up to 1,500 tons in respect of ships of any size, so that larger ships also may be constructed in Australia?
– I can give an assurance thatthe Government will consider alternative schemes.
– Is the Postmaster-
General able to give an assurance that there will be no curtailment of the works at present being undertaken in connexion with the Postal Department and other departments which he administers?
– I cannot give any such assurance as the whole matter will have to be considered in connexion with the country’s defence.
Order of Call
– In view of the fact that I have risen about 21 times ahead of other members who have received the call, I desire to ask you, Mr. Speaker, what order of call is being followed and whether it is alphabetical, commencing with the last letter of the alphabet?
– The call to-day has been given strictly in accordance with the order in which honorable members have risen. I have not given a second call to a member who has already asked a question when another member who has not received a call has been on his feet.
– In view of the recommendations that I made to the Minister for the Interior on the day that he accepted his present portfolio, that civil works in the Northern Territory be carried out by consultative engineers, subject to an overriding supervision by the Works Department - a policy similar to that in operation in New South Wales - can the Minister representing the Minister for the Interior say when the department will take action in carrying out civil works in the Northern Territory under that system?
– I shall refer the honorable member’s question to the Minister for the Interior, and furnish him with a reply next week.
– In view of the probability of progressive doubts confronting prospective lenders of money on fixed securities, and the consequent contraction of lending, and also of the possibility that the banks will desire to confine overdraft lending to investments of a more liquid nature, can the Prime Minister give an assurance that the Government will protect farmers and pastoralists by establishing a land mortgage branch of the Commonwealth Bank?
– I have already indicated that I shall make a definite statement on that subject on Tuesday next.
– Will the cost of air raid precautions taken by local authorities and other bodies be a charge against the Defence Department ?
– I shall be glad if further questions, without notice, be postponed until the next day of sitting.
Messages reported transmitting Esti mates of Revenue and Expenditure and Estimates of Expenditure for Additions, New Works, Buildings, &c, for the year ending the 30th June, 1940, and recommending appropriations accordingly.
Ordered to be printed, and referred to Committee of Supply.
.- This is the first budget that I have had the honour to present to this Parliament, and I wish that it could have been presented in different circumstances. Indeed, the circumstances in which I do present it to the committee are such as to render it quite inevitable that the budget itself, and also the Estimates upon which it is based, must be subject to revision, perhaps very drastic revision, during the course of the financial year. It is, perhaps, indicative of the extraordinary changes that have taken place in our conception of the functions and responsibilities of government, and in the burdens which are imposed upon governments at a time of trial like this, that whereas Gladstone, who presented no less than thirteen budgets to the British Parliament, had to wait, so to speak, until near to the end of his career to present to the Parliament his first £100,000,000 budget, I have the unhappy distinction this year of presenting to the Commonwealth Parliament a £100,000,000 budget for the first time in the history of the Commonwealth, and that in relation to a country whose population is a mere fraction of the population of Gladstone’s England. That extraordinary development - and, of course, it is a development that has taken place all over the world, because the British Chancellor of the Exchequer this year presented to the House of Commons a £1,000,000,000 budget - is not, if I may say so, in spite of some carping critics, entirely due to the extravagance of politicians. I have no doubtthat we are not immune from the common disposition to be generous with other people’s money - it would be foolish for us to deny that charge - but, at the same time, the real and overpowering reason for the growth of budgetary expenditure is undoubtedly to be found in two things. First, there has been a revolutionary change during the last generation in the view which prevails as to the obligations of governments towards the aged, the sick and the poor - in other words, a revolutionary change in our sense of obligation for what we call social services. In the second place - and this has been increasingly true in the last few years - it has been due to the rapid mounting of defence expenditures in the forcing house of international fear, and, at present, international violence. Those two great factors have, I venture to say, been the real explanation of what might otherwise be regarded as a most inexplicable growth of government expenditure. The budget which I have the honour to submit was prepared while this country was still at peace. It is true that it was prepared in face of a vast defence expenditure, but the fact remains that, having been prepared in a time of peace, it is being delivered in a time of war, and that, accordingly, as I have already indicated, it must be regarded as having an extremely tentative character. Indeed, Ihesitated for a while as to whether it would not be wise to postpone the budget and simply proceed at this stage with the introduction of certain taxation measures; but, on reflection, it seemed undesirable to pursue that course. After all, honorable members will realize to the full that scarcely any estimate prepared in the present circumstances, and particularly in the circumstances of a fortnight ago, can hope to stand. During the course of the year there must inevitably be a great expansion of expenditure in some departments, and there may very well ako be, in other departments, a contraction of expenditure below the amount which has already been tentatively set out in these Estimates. Lt is quite impossible at this stage to tell with any certainty what the final proposals for the year are likely to be. In the circumstances, therefore, I decided to go ahead and deliver the budget, and at the same time give a plain indication to honorable members that the figures must be regarded as tentative. I am afraid that the last has not been heard from me respecting either expenditure, or taxation, or financial proposals generally for this year.
Financial YEAR 1938-39.
I shall now refer briefly to the financial results of 1938-39, leaving out of my figures the odd hundreds. My predecessor, the right honorable Minister for Supply and Development, estimated achieving a surplus of £26,000 on a revenue of £93,000,000. The revenue and expenditure were both greater than the estimate. The excess of revenue for the financial year was £627,000 in a total revenue of £95,000,000. That amount will be carried forward into this year’s accounts to help to meet defence expenditure. Certain factors which gave rise to the upward changes in both revenue and expenditure should be mentioned. The postponement of national insurance effected a saving on the original Estimates of £950,000. The increase of revenue over the estimate from customs, excise and sales tax amounted to £715,000. On the other hand, additional estimates were introduced for defence requirements. The increase of expenditure due to the expansion of the militia force totalled approximately £1,000,000. One new item not mentioned in last year’s budget was the flour tax, which produced This was, of course, balanced on the other side because the whole of the proceeds of the tax were paid to the States in accordance with the arrangements made under the wheat assistance scheme approved by Parliament last year. Details of the actual revenue and expenditure for the past year are given in
Table 1 among the figures I am laying on the table and they can be compared with the budget estimate.
Our total expenditure on defence in 1938-39 (including .£8,854,000 from revenue) was £14,000,000, and was very much larger than any previous peace time expenditure that this country has incurred, but relatively it is small compared with the defence expenditure for which the Government is now budgeting, and even that amount will need to be considerably increased before the end of the financial year. We expended £14,000,000 on defence in 1938-39, and we are estimating to expend a little under £34,000,000 under this heading in this financial year. I mention these facts quite early in my speech because inevitably a great deal of criticism has been directed to the defence service and the expenditure of the defence department. Honorable members will surely realize, however, that when a great business undertaking has to expand its expenditure quite suddenly in the course of twelve months some criticism is inevitable and . some mistakes will surely be made. This must be expected. Notwithstanding the skill of expert officers, errors will certainly be made. Personally, however, I marvel at the extraordinary degree of efficiency that has been exhibited by our defence and supply organization in the expansion of their activities to meet the abnormal strain that has been placed upon them. Our loan expenditure in 1938-39 was budgeted to reach £6,400,000 of which £2,000,000 was required for farmers’ debt adjustment purposes and £4,400,000 for defence. In point of fact our loan expenditure totalled only £3,912,000. The amount for farmers’ debt adjustment remained constant at £2,000,000, but the expenditure for defence totalled only £1,912,000. This very considerable difference between the estimate and the actual expenditure is due to the fact that on the 30th June many defence works were still uncompleted. The subject of defence works has engaged the close attention of various Ministers during the year. I confess quite candidly that delay has occurred in connexion with these works, and some ineffectiveness has been apparent in their organization. We should approach this problem quite frankly and I have no desire to hide any failure that has been discovered in the machine. My colleagues, however, have had the advantage of very valuable advice from an honorary panel of building advisers, the members of which have placed their services freely at the disposal of the Government. Consequently J am able to assure honorable members that they may expect a more rapid and effective works expenditure in 1939-40.
I shall say a few words about the public debt. Various transactions during the financial year have affected the position. For example, the great cash and conversion loan operation during the year involved an amount of £71,600,000, which included £4,000,000 for defence and £67,600,000 for conversion. The loan 1,vas offered to the public for £3 17s. 6d. per cent, at par. The result can be described as a great triumph, not .for the Government so much as for the soundness of Australia’s financial structure. The holdings converted amounted to £53,000,000, public cash subscriptions including £5,650,000 from the Commonwealth Bank, £16,000,000, and £2,600,000 was provided by sinking fund. This was without doubt an astonishing result, and I take the opportunity to say that it must be a matter of no small satisfaction that a country like Australia, which needs cheap money and must inevitably resort to borrowing, has been able to secure the financial accommodation its governments have needed in all the years since the depression at rates which have always been under 4 per cent. At the same time, we have been able to avoid any rapid rise or spiraling in costs. This is no small achievement. Two other public loans raised for the Commonwealth and the States during the year amounted to £13,250,000. In addition, a short term loan of £3,000,000 for the States wa3 provided by the Commonwealth Bank on satisfactory terms.
On the London market we raised in June of this year a £6,000,000 loan for defence which was issued at 4 per cent, at £98 10s. As honorable members know the market was extremely adverse ‘ just before that loan was raised. In fact, the whole -Lon don money market at that time was engaged in what might be described as minor convulsions. Consequently it was necessary to issue the loan in circumstances that were far from normal, but we could not wait. An honorable member asks “ Why I “ The position is that entry on the London market is very strictly controlled. The opportunity to go on the market must be seized when it is offered. This involves, in practice, almost day-to-day judgment. It may be decided only on a Monday, for example, what the terms and conditions of a loan are to be, yet the prospectus may be issued on the Tuesday and the loan opened and closed by the Wednesday at lunch time. The circumstances of the London money market are fundamentally different from the more leisurely circumstances which we know in Australia in relation to public loans.
Our sinking fund has continued to operate during the year, and it represents quite a bright factor in government finance. During 1938-39 over £11,000,000 was applied from sinking fund to the redemption of Commonwealth and State debts. For the current year, it is estimated that receipts from this source will total £11,672,000 of which £5,290,000 will be payable for Commonwealth purposes and £6,382,000 for State purposes. The net result of debt transactions of the past year was that the increase in the total public debt of the Commonwealth and the States was £20,000,000. The Commonwealth debt increased by £6,400,000 and the State debts by £13,600,000.
At the last meeting of the Loan Council a very considerable step forward was taken in the co-ordination of government borrowing with semi-governmental borrowing. We established the precedent of considering the semigovernmental and government programmes as a whole, and, at the same time, the Council passed two very important resolutions with the object of giving complete supervision and control to the Loan Council over all borrowings, including semigovernmental borrowings for public purposes.
I turn now to a consideration of other circumstances which affected the economic position of Australia during the year.
In his budget speech last year my colleague, the Minister for Supply and Development, was able to make a favorable comparison between the recession that was going on abroad and the degree of resistance that was still to be found in the Australian economy. That resistance continued during 1938-39 notwithstanding a most disastrous series of circumstances which attended some of our important primary industries. Although the employment position during the year was not all that we could have desired, it was by no means as unsatisfactory as the fall in our export values might have been thought to indicate. Trade union unemployment, as reported, increased from 8.5 per cent, to 9.4 per cent, during the year, but this was still well below the average rate of 10.6 per cent, for 1936-37. Some decline occurred in factory employment, the number of persons engaged falling from 559,000 in 1937-38 to approximately 551,000 in 1938-39. Nevertheless factory employment remained 5 per cent, above the average for 1936-37, although our income from exports was 14 per cent, below the 1936-37 level. I am sure that honorable members, in reflecting on these figures, will agree they are very significant.
The maintenance of employment in this manner in the face of a really disastrous decline of our income from abroad is gratifying, and clear proof of the vastly improved balance that has been established in the Australian economy, indicating as it does the increased capacity of our secondary industries to provide resiliency in the presence of a check brought about by a decline in the value of our exports.
The value of recorded production declined in 1938-39, but that fall was, for reasons with which we are familiar, almost entirely in primary industries. The position in total was not altogether unsatisfactory when we consider the adverse factors that affected our primary products, and I refer not to price only, but also, in regard to wheat at any rate, to the decreased volume brought about by a disastrous drought which affected many parts of Australia.
In the construction industries, the volume of activity was very well main- tained. The total value of building permits issued for the year was £54,000,000, which compares well with a total of £53,000,000 for the previous year, and is six times as great as the amount for 1931-32, when we were in the depths of the depression.
The price level of exports declined during the year in continuation of the downward trend which had .begun in the middle of 1937. Compared with the financial year 1937-38, average export prices had declined by 16.6 per cent., and compared with the level of 1936-37, the total decline was no less than 27 per cent. This constitutes a remarkable decline in the value of export products, a decline which, subject to conditions provoked by the war, must continue to affect our economic position.
Since the outbreak of the war, the British Government has been in negotiation with the Commonwealth Government regarding the purchase of certain export commodities. In the case of wool, the British Government has decided to purchase the whole of our exportable surplus. Prices and other details have not yet been settled, but it is, I- suppose, permissible to anticipate that, as the result of a wholesale purchase of this kind, a greater degree cf stability- - subject to the continuance of satisfactory transport arrangements - will be brought into the industry. The same applies to other primary products, some of the surplus of which will be acquired by the British authorities. As I have said, assuming that shipping services are able to cope with the. situation, we may reasonably anticipate an increased degree of stability. At the same time, 1 point out to honorable members that, while the price at which goods are to be sold to Great Britain at a time when its need for those goods may be progressive, should nOt, be an (exploiting price, it is to be a fair price to the man who produces the’ goods, and who, in many instances, has gone without a fair price for a long time. It must also have some relation to the fact, in which we take great pride, that we are members of the British family, and are united with that family in this time of stress.
I have said something about the total decline in the value of exports. I do not need to go into details with honorable members, who are familiar with the nature of the decline in regard to wool and wheat in particular, but the effect of the decline can, perhaps, be most clearly stated by citing the total overseas trade figures. In 1937-38, the total value of our exports including gold production in sterling was £122,900,000., while last financial year the total had declined to £108,300,000 sterling. The value of imports fell heavily from £111,800/000 sterling to £99,500,000 sterling, so that the favorable balance of trade, including gold production, was £8,800,000 for the year.
Inevitably, there will have been reduction in the volume of London funds at the close of 1938-39 as the result of the oversea trade figures, but it must be remembered that, in June of last year, London, funds were high, and the investment of capital in Australia from overseas has continued. Moreover, we recently took, with the approval of all honorable members, emergency steps to conserve our oversea funds by the control of exchange. Because of those factors, no serious concern need be felt about our position in London, though, of course, it will continue to engage the attention of both the Government and the central bank authorities.
– I think it may very well be that there will be a substantial contraction as a result of the war, though that is still a matter of speculation. The Commonwealth Bank authorities have been alive to all these economic trends. They have kept a close watch over the liquidity of the trading banks, which has a good deal to do with the trading facilities of ordinary individuals, and I am glad to be able to say, from my own experience, that there has been a real measure of co-operation during the year between the central bank and the trading banks.
There is one other matter I should like to refer to. We have a general financial problem at any time. We have at this time a special financial problem in dealing with rapidly mounting war-time costs. Whenever a Treasurer approaches that problem he has to ask himself whether, in any proposal he puts forward, he is preserving a just balance between the taxpayer on the one hand, and the general credit resources of the country on the other - between the man who will pay currently, and the man who will pay in the future. A proper balance must always be maintained in these matters. There is inevitably a temptation to pass on the burden, either to that completely intangible thing known as the credit of the country, or to that equally intangible, but perhaps better understood thing, posterity. I was interested to read the budget delivered on the 25th April of this year, by the British Chancellor of the Exchequer, Sir John Simon, and to learnfromit that, in 1938-39, British defence expenditure amounted to £400,000,000, of which £272,000,000 came from revenue. For the year 1939-40, the Chancellor, budgeting in April - who knows what vast sum must now be added - estimated defence expenditure at £630,000,000, of which £248,000,000 was to come from revenue. That shows, of course, a growing proportion of loan expenditure on defence account but, at the same time, it does indicate a determination to impose a substantial portion of the burden on the taxpayer ofthe moment. I refer to that because I have applied a similar principle to this budget. As honorable members will observe in due course, the proposal of the Government is that, of the defence expenditure as at present estimated, something over £12,000,000 shall be taken from the budget, £2,000,000 from balances in Trust Fund, and about £19,000,000 from loan. It would be an impertinence on my part to endeavour to treat the committee to a theoretical address on the principles of finance which should be applied to problems of this kind, but I crave the indulgence of honorable members to offer one or two general observations on the matter. I do so because I have been increasingly conscious of. late, as have all honorable members, of the growth of a tendency in the minds’ of many people which may be put in this way : somewhere there is a hidden spring of wealth. It is called the credit of the community. All you have to do is to tap it. Be bold enough to put enough taps into it and draw off enough, and all your problems will be solved. I wish it were as easy as that. If it were, it is inconceivable to me that no Treasurer or central bank has put the scheme into operation before this.
– It is quite true that the history of war is a history of credit expansion, ‘but post-war history has always been a record of economic crisis and suffering. The fact is that, for every undue expansion you must pay the price. It may be that undue expansion is forced on governments during a war. At such a time, when our very existence is threatened, it is not possible £f> dwell upon fine points of financial orthodoxy, but we must subsequently pay the price for every extension that goes beyond certain sound limits.
– That is a question that has yet to be decided.
– Honorable members will have abundant opportunity to offer criticism of the budget m due course, and I should like to be permitted to continue my own observations. I should like to make a reference to one view which has been very much argued in Australia and has even received some countenance in the last few days by a resolution passed in a State parliament - namely, that this country should, in some undefined way, draw upon what are referred to as its credit resources. A great deal of the agitation is founded upon a quotation of which all honorable members have heard, from the report of the Royal Commission on Banking. After referring to the power of the Commonwealth Bank to create money by printing and issuing notes as legal tender, paragraph 504 of that Report goes on to state -
Because of this power, the Commonwealth Bank is able to increase the cash of the trading banks in the ways we have pointed out above. Because of this power, too, the Commonwealth Bank can increase the cash reserves of the trading banks; for example, it can buy securities or other property, it can lend to the governments or to others in a variety of ways, and it can even make money available to governments or to others free of any charge.
That most satisfying statement is torn from its context and presented to us, and then we are asked in effect: “What sort of people are you? You have been told by a Royal Commission that you can obtain any amount of money without charge. Why don’t you get it ? “ The belief, apparently, is that if we did get money in this way, the result would be that we would have no taxes, no public borrowings, and , to put it in the old phrase, “ everything in the garden would be lovely “. Of course, there is no exercise better understood, even here, than the exercise of taking a statement out of its context. That iswhat has been done in this case, because if honorable members will read on in the Report, they will find an amplification of that statement which, of course, exposes its limitations as clearly as can be. I do not propose to read the exact passages in the Report, but I commend to honorable members the succeeding paragraphs down to paragraph 513. The position, of course, is that exactly the same kind of limitation exists upon the power of the Commonwealth Bank to inject credit into the financial structure, as exists in relation to its power to print notes and make them legal tender. When the point of prudence is passed then prices and costs are increased, and the value of the money in circulation is diminished. Consequently, what any central bank has to do in any country, is to adjust its credit policy to what it believes to be the economic circumstances of the moment, always keeping in mind the position of the trading banks; the position of credit facilities in the community; the degree to which there may be an excess of unemployment over what might be described as the irreducible minimum; and the extent to which prices are moving up or down. When it does all these things, then, if it is a good and competent central bank, it can be. trusted to exercise its powers in such a way as to iron out both the acute booms which occur from time to time, and those serious depressions from which we periodically suffer.
With regard to unemployment, if I may say so, we all have a vital interest in. the avoidance of rapid fluctuations in tha economic structure. Nothing is more certain to precipitate a future crisis than a present boom; and so far from central banking policy in this respect being divorced from the realities of life, so far from its being a cold-blooded and detached thing that takes no account of unemployment, unemployment is one of the most important factors which it must watch closely if it is to exercise its judgment correctly.
– That judgment has not been very good in some cases.
– I feel quite certain that, if the honorable member were aware of the action taken by our central bank -the Commonwealth Bank of Australia - during the past twelve months -I speak of the period of which I have had first-hand information - and of the judgment which it has exercised, he would agree with me that there is no central bank in the world that has shown a more intelligent, more flexible, and more civilized understanding of its functions than has the Commonwealth Bank of Australia. It is, of course, well known that at whatever earlier point the limit of central bank action may be reached, it is undoubtedly reached when the resources of man-power, material and equipment are as fully engaged as is practicable. If that point is passed, there will simply be a recurrence of what we have seen in some other countries, namely, a rapidly-rising level of costs and a rapidly-diminishing standard of living. There are still some people in Australia who imagine that a higher level of money wages is intrinsically a good thing, and that a higher level of money prices is also intrinsically a good thing. The fact is that unless credit in a community like this is handled with great judgment and good sense, then it provides the most effective way in the world of reducing the Standard of living.
In relation to the year 1939-40, upon which we have already entered, there are some factors . which I have already referred to, and which may tell in the direction of improvement. It may very well be that we may expect a rising price for the commodities which we export, but, on the other hand, it may very well be that we may experience some difficulties, at some stage or other, in the transport of those commodities overseas. That is a position which will disclose itself as we go on. During the last two years, we have been engaged, financially speaking, in combating what would otherwise have been deflationary forces. For all I know, in the course of the next few years we may have to encounter inflationary forces, and we may have to devote ourselves to the combating of financial tendencies opposite to those which we have witnessed in the last two years. Incidentally I referred to one of these in my statement yesterday on profiteering. That is only one aspect of this problem. It is just one of many possibilities that exist in relation to a period which possesses so many imponderable elements as that which we are now contemplating. This problem will be attacked by the Government with vigour and, I hope, with intelligence; because it is very desirable, as I have already indicated, to avoid extreme courses if we are to preserve the maximum standard of living for the ordinary men and women of Australia. It will require co-ordination between the Commonwealth and State Governments. Having regard to the vastly mounting defence expenditure, it will probably involve some decrease in the ordinary governmental loan expenditure, but action of this kind will depend upon a consideration of many factors, including the very important factor of employment. On the other hand, of course, we have to consider those difficulties which are particularly related to our oversea markets and the ways and means of reaching them. Bur, on the whole, although these present an important and increasingly present prolem of great magnitude, I believe that the economic structure of this country is fundamentally sound, and that, with that as a foundation, and a calm and resolute people living and working in this country, we may look forward with some confidence to whatever the future war may bring to us in an economic sense.
From that, with apologies for the length of that review, I turn tothe estimates of expenditure for this year. Honorable members will realize that these estimates, under such circumstances, must be of a very tentative character. In some cases they may be revised upwards while, in other cases, they may be revised downwards.
First, in the Defence services I include the Department of Supply and Development in order to give the full picture. As I have said, last year’s total expenditure from all sources on defence and supply was just under £14,000,000,’ of which £8,850,000 came from the budget. This year there is an increase to £33,137,000. Even before I have spoken the words, I know that it has passed the £34,000,000 mark. It is to be financed thus -
So that, in summary, we shall take from revenue sources, both present and past, £14,000,000, and from loan fund £19,000,000. Undoubtedly, as I have said, there will be supplementary expenditure, of which we shall hear more anon.
– I can quite see that there may be - no doubt there inevitably will be - an increasing resort to loan account in relation to supplementary expenditure; but I do not exclude from consideration the possibility that, in the course of this financial year, there will be supplementary taxation proposals. My colleagues, the Minister for Defence (Mr. Street) and the Minister for Supply and Development (Mr. Casey) will be able to supply at a later stage certain details in relation to expenditure and activities in their departments.
Civil aviation is a matter which has been responsible for very rapidly increasing expenditure. I am fortunate in having as a colleague as Minister for Civil Aviation a gentleman whose knowledge of the subject none will cavil at. If he were here, he would be able to tell honorable members that, as Treasurer, I have occasionally had to raise a warning finger on the cost of civil aviation; because, if I may say so, we in Australia have done ourselves pretty well in relation to civil aviation. In this matter, as in many other matters, we have been inclined to act upon the principle that we are at once entitled to all the amenities for which we would ask if we had four times our present population. I just offer a word of warning, namely, that in circumstances of great stress and danger to Australia, it may by no means be possible to go along that primrose path.
Last year the expenditure on civil aviation was £73*6,000. In respect of 1939-40 we are budgeting for £1,435,000, which represents a doubling of the vote in one year. That is made up of ordinary services £598,000 and new works £837,000. The net charge to the budget, after making allowance for balances in the trust account, is £1,203,000.
We have, as honorable members know, announced a scheme for the training of reserve pilots. That necessitates an extra appropriation of £45,000 on this year’s accounts. Increased provision has had to be made for aeradio equipment on a large number of aerodromes. My colleague, the Minister for Civil Aviation (Mr. Fairbairn) will give particulars of those matters at a later stage.
Other expenditures may be mentioned quite briefly. Invalid and old-age pensions are estimated this year to cost £16,700,000, an increase of £708,000. There is an expected increase in the number of pensions of 12,000, and the average, pension is £50 ls. per annum.
War pensions are estimated this year to. reach a record of £8,287,000. The pensions in respect of war disabilities, as originally provided for in the case of war pensions,, are diminishing, but the “service” pen. sions approved by Parliament some two or three years ago are increasing with the increasing age of those who become eligible for them.
Repatriation services are estimated ta cost £1,034,000, an increase of £40,000, For scientific and industrial research an additional £49,000 is provided, bringingthe total to £244,000, which will be applied to very good purposes. So that on all of these and other items we have increases of what might be called the nor-, mal votes, quite apart from the special new war expenditure that we have to. confront.
In relation to national insurance, to. which I previously made a passing refer.,ence, the position has been this - I want to, say this because some criticism, no doubt of a very light and friendly kind, has been directed to my colleague, the Minister- for Social Services (Sir Frederick Stewart) in connexion with the matter - the fact is that my colleague hae devoted a great deal of time and energy, not merely to talking about national insurance, but also to the formulation in great detail of liberal plans in relation to it. These matters had already received a considerable degree of attention from the Government itself; but the outbreak of war has, of course,, given rise to problems of immense urgency in Australia which may very well interfere, for the time being at any rate, with the plans that have been in hand.
– The Minister for Social Services claimed that social services should not be seriously affected.
– I am very familiar with the views of my colleague, and I say without any reservation whatever that he is entitled to great credit - and as Leader of the Government I give him great credit - for the work that he has put into this matter and the efforts he has made to bring it to the point of success. But it would be mere folly for us to pretend that, spending as we are now spending, with all the possibilities that exist in relation to our economy, both external and internal, we can consider these problems in quite the same light as that in which we might have considered them before. The result is that I must introduce into the consideration of the matter an element of uncertainty which, as every honorable member will realize, may produce a postponement of ideas that otherwise, I am quite sure, would have been attractive to honorable members of this House.
On the public works side, we last year expended £5,216,000. This year, including £2,000,000 from Loan Account for postal works, we shall spend £6,304,000. Postal works are budgeted for at £4,000,000. In 1935-36, the figure was £1,900,000, and last year it was £3,700,000. The figure £4,000,000 is tentative; ray colleague, the PostmasterGeneral (Mr. Harrison) may find that his estimates will have to be varied. I merely take the opportunity to point out a fact which is not sufficiently understood in the public mind. It is this, that expenditure on postal works is about the best kind of loan expenditure that one could find in Australia; it is reproductive. Postal expenditure of a capital nature pays interest and sinking fund, and returns a profit. Details of Public Works items will be found in Table 2.
The Payments to the States, apart from the normal payments made under the Financial Agreement, will this year be varied, pursuant to the report adopted by the Government and tabled by mo to-day. The recommendation of the Commonwealth Grants Commission is that South Australia should receive £995,000, which is £45,000 less than last year ; that Western Australia should receive £595,000, which is £25,000 more than last year; and Tasmania should receive £430,000, or £20,000 more than last year. In respect of the grant for Western Australia the figure I have quoted - £595,000 - is the net figure after the deduction of a special advance of £136,000 which was made in 1937-38 on account of drought in that State. The normal grant - if I may use that expression - recommended for Western Australia on this occasion is £731,000, which is £117,000 more than the normal grant of last year, which was £614,000. The difference between what I have called the normal grant and the actual grant that is made, is brought about by repayments of the nature to which I have referred.
In respect of the wheat industry : - The flour tax, as I have already indicated, last year yielded £1,809,000. We anticipate that it will be more this year, the estimate being between £3,000,000 and £4,000,000. How much we shall obtain is, of course, impossible to prophesy. One can only state what would normally have been the position, and seek later to estimate what changes have been brought about by altered circumstances. When the flour tax was imposed by this Parliament, the price of wheat was extremely low, but hopes were entertained in some quarters that there might be an improvement before long. The fact is that there was no improvement, but on the contrary a steady deterioration of the wheat position, until the occurrence of the rather unusual circumstances of the last few days, to which one can attach no permanent importance until the problem clarifies itself. Having regard to the position and to the importance of the wheat industry, the Commonwealth Government devoted “a lot of attention to the formulation of proposals for the giving of further assistance to it. I do not want to occupy time at this stage by going through those proposals in detail, but honorable members will recall their general outline. They were presented to a conference of State Premiers and were discussed by them. In point of fact, they were the only really constructive proposals presented to that conference, and a majority of the State Premiers accepted them. The proposal in a word was that a scheme of stabilization should be designed to produce a price of 3s. 4d. f.o.r. ports, but with the limit on the total financial obligation in any one year of £3,500,000, of which the Commonwealth said it would be prepared to find up to £2,000,000. That involved a contribution on the part of the State governments and in the case of Queensland, New South “Wales, South Australia and Western Australia, each State government agreed that it would participate in that scheme and that it would make its appropriate contribution to the cost of it. The State of Tasmania, if I may say so, has a relatively small interest in the problem because wheat production in Tasmania is small, but Victoria, which is a large wheat-growing State, refused., through its Premier, to participate in the scheme or to contribute towards its cost, and in those circumstances the scheme propounded by the Commonwealth became impossible. You cannot have a stabilization scheme without effective regulation of production. You cannot have effective regulation of production except by State legislation and, consequently, for any one State to stand out was to bring the whole scheme down and consequently that stabilization scheme has been for the time being rendered impracticable. Since then, war has occurred and we do not know at the present what drastic changes may take place. We do not know what the effect on the price of wheat will be, nor yet what the effect on the marketing of wheat will be. It is clear, however, that the circumstances in which this problem was discussed a week or two ago are fundamentally different from the circumstances in which it is to be discussed now. Nevertheless, immediately after the failure of that conference I stated that the Commonwealth Government was prepared to maintain its offer to provide up to £2,000,000 for 1939-40, as either a contribution to an agreed and effective stabilization scheme, or, if it became necessary, as a straight-out bounty with a price limit of 3s. 4d. f.o.r. ports. Rut as I have said to honorable members, while that offer was made and while that offer may be treated as standing, the fact remains that we must be prepared entirely to reconsider the situation of wheat in the light of what we discover to be the circumstances in the next week or so.
If one takes the whole of the items of expenditure - they are in table No. 3 which will appear in the report, by reason of the leave that has been given - to which I have referred and adds them together, one will see that we have an actual expenditure for 1938- 39 of £94,437,000 and an estimated expenditure for 1939-40 of £101,916,000. If we take from that the self-balancing flour tax item then the estimated expenditure will be £98,316,000, which is an increase of £5,688,000 over the corresponding expenditure of last year.
– I get the century only by a little indulgence on the part of the umpire as my honorable friend, the honorable member for Reid (Mr. Gander) would say. The main items making up this increase may be summarized thus:-
The amount of £1,000,000 for assistance to the wheat industry represents roughly half of the total amount. It is necessary to provide half of the amount this year and half in the first portion of the next financial year. The summary continues -
That is a total increase of £7,688,000, or less the £2,000,000 for postal works transferred to the loan fund, £5,688,000.
On the other side the Estimates, of
Revenue for 1939-40, based on existing rates of taxes, are £96,030,000, details of which are given in Table 4. That estimate was made on the assumption that normal conditions would continue. It assumes there will be a decrease of customs and excise revenue of £1,633,000, a decrease in income tax of £483,000, and an increase in sales tax of £392,000. Unfortunately, of course, normal, conditions cannot now be reckoned on. Now it is quite certain fiat we must for the whole of this financial year cope with abnormal conditions of a greater or less degree of intensity. Consequently, for example, estimates of customs and excise receipts may be completely falsified and may need sharp revision.
Between that normal revenue of £96,030,000 and the estimated total expenditure of £101,916,000 to which I have referred, there is a gap that has to be bridged of £5,886,000. The Government has naturally given full consideration to the problem of bridging this gap before entering upon taxation proposals. Added taxation is necessary to bridge the gap because, although very great efforts were made to prune the expenditure of the normal departments in order to diminish the amount of increased taxation, it was still necessary to increase taxation.
The increases are proposed in this manner :We propose to increase this year our receipts from income tax of all kinds by £2,360,000, sales tax by £1,420,000, and customs and excise duties by £2,130,000, giving a total increase of £5,910,000.
So far as income tax is concerned we propose in the first place that there shall be an increase of 10 per cent. in the rates of income tax of individuals on income derived from personal exertion or property. As honorable gentlemen know, the rate is rapidly increasing. The result will be to throw, consistently with the policy of the past, the increasing burden on the people best able to bear it. In the second place we propose an increase in the rate of company tax from the prevailing rate of1s. 1.8d. to1s. 7.8d. in the £1 - in other words, an increase of 6d. In relation to all taxation proposals that, Iput before the committee, he would be an optimist indeed who would anticipate that we have heard the last of increased taxation in Australia. But it is very important that we should have something left that we can tax in the years that are in front of us in this struggle.
In the third place, we propose to abolish the tax rebate in respect of the dividends received by absentee holding companies from companies operating in Australia.
Honorable Members. - Hear, hear !
– The Government considers that it is not unreasonable to require that these companies should contribute to the defence and development of this country. Such companies will in future pay the company rate of tax on the dividends they draw from Australian companies. These three proposals are expected to produce increased direct taxation of £2,360,000.
I turn from that to the sales tax. Two methods of dealing with sales tax presented themselves broadly to the Government. One was to eliminate some or all of the exemptions that now exist. As honorable gentlemen know, speaking broadly, but with substantial accuracy, exemptions now exist and existed in the original legislation in respect of foodstuffs, articles used by the pastoral and agricultural industries, and other articles have from time to time been added to the list until the fact is that only one-third of the total transactions of sale in Australia are subject to sales tax. Consequently, one obvious way to deal with this problem would be to eliminate in whole or in part those exemptions. That would enable us to get a substantially greater revenue from a possible lower rate of tax. The other course was to preserve the exemptions as they stand and increase the tax. At this stage, at any rate, the Government has decided to follow the latter course, and, therefore, to increase the rate of sales tax (leaving the exemptions as they stand) from 5 per cent. to 6 per cent., an increase of 1 per cent. It is expected that this increase will bring additional revenue this year of £11,300,000. I want to insinuate into the minds of honorable gentlemen that, if this crisis continues and if we have occasion from time to time over the next two or three years to come back to this Parliament and ask for more revenue, we may reach the time when the choice is a high level of tax or an extension of the range of the tax and so an easier rate. If that time comes the Government will not hesitate to ask Parliament to support appropriate steps in that direction. But at this stage our proposal is to increase the rate of the tax as I have said.
The Government proposes to amend the relevant act as to the method of calculating the sale value in respect of imported goods, by providing that the value for duty shall be expressed in terms of Australian currency. This is estimated to produce about £120,000, bringing the total additional revenue from the sales tax proposals this year to £1,420,000.
As far as customs and excise is concerned, we propose to raise, over the balance of this twelve-month period, the sum of £2,130,000 by certain increases of customs and excise duties, which will be made known to honorable members shortly when my colleague the Minister for Trade and Customs (Mr. John Lawson) tables the appropriate resolution. “We carefully considered the items of customs and excise to which we should resort in order to finance additional expenditure. We did so, of course, in the light of the principle that we should spread the burden of taxation so that as far as possible all sections of the people should contribute to it. I think that honorable gentlemen will themselves note that in the proposals laid before them that principle has been adhered to.
The budgetary position, as I can summarize it at this stage, is this: That the total revenue based on the present taxation is estimated at £96,030,000 and that the additional taxation proposals are estimated to provide £5,910,000. That gives a total estimated revenue of £101,940,000 and a total estimated expenditure of £101,916,000, or an estimated surplus of £24,000 for the year, All that can be said at this stage is that it looks very creditable, but circumstances beyond our control have made it incapable of achievement.
As to loan expenditure for this year, I have already indicated that the estimated expenditure on defence amounts to £19,072,000. For postal works the sum of £2,000,000 is being provided, and there is also a similar amount for farmers’ debt adjustment, in respect of which over £6,000,000 has already been paid. If we take all of these sums into account, the estimated loan expenditure for 1939-40 will be £23,072,000, as compared with £3,912,000 last year. The difference is explained by the fact that defence expenditure, which last year accounted for £1,912,000 of loan ‘ money, will total £19,072,000 this year ; and that postal works, all of which were carried out from revenue last year, will involve an expenditure of £2,000,000 from loan thi3 year. The estimated expenditure of £2,000,000 from loan in respect of farmers’ debt adjustment is the same as was expended last year.
I have already indicated that the Government has instituted a system of exchange control, the terms of which are already sufficiently familiar to honorable members, and therefore I shall not say anything more about it at this stage.
I am afraid that I have spoken at undue length; I did not anticipate that my remarks would occupy the attention of honorable members for so long. From what I have said, it will be evident to all honorable members that the Government intends to ask many people in Australia to pay, and to keep on paying, for the security of this country, even to the point where payment will cause some real hardship to the individual. Nevertheless, if we in Australia continue to exhibit cool heads and resoluteness of mind and heart in our present trouble, and conduct ourselves in as normal a fashion as is possible, realizing that unnecessary abnormality always hits the person in the community who is least able to help himself, then I believe that there is no reason why we should not see this trouble through and emerge in a state of soundness and security which may very well be envied by many millions of our fellows in the British community of nations. After all, we do well occasionally to remember that, compared with those who are living in Great Britain and France, we in Australia are most favored indeed. “We have the opportunity, which is largely denied to them, te preserve not only our existence and security, but also to guard our economic structure from undue injury. If we remember that, I believe that we shall be able with resoluteness, and even with relative cheer fulness, to approach whatever in the way of financial problems the next year or two may bring to us, and if we approach them in that spirit, we shall undoubtedly overcome them.
I move -
That the first item in the Estimates under Division 1 - the Senate - namely, “ Salaries and Allowances, £8,040”, be agreed to.
The following paper was presented -
The Budget 1930-40. - Papers presented by the Right Honorable R. G. Menzies, M.P., for the information of honorablemembers on the occasion of the Budget of 1939-40.
Ordered to be printed.
SALES TAX BILLS (Nos. 1 to 9) 1939.
InCommittee of Ways and Means:
. - I move -
Honorable members were informed in the budget speech of the proposal of the Government to raise portion of the additional revenue required in this financial year by an increase of the rate of sales tax. They were also informed that this decision was arrived at only after alternative proposals for obtaining the required revenue by reducing the exemptions had been seriously and earnestly considered.
It would not be inappropriate, I think, to traverse briefly the history of the rate of sales tax since its inception in 1930. When originally enacted by the Scullin Government in 1930, the sales tax legislation imposed a tax at the rate of 1 per cent. That rate remained in force only until the 11th July, 1931, when the same government was forced to increase the rate to 6 per cent., in order to meet the financial situation created by the world depression. The rate remained constant at 6 per cent, until the 26th October, 1933, when the Lyons Government made its first reduction to 5 per. cent. A further reduction to 4 per cent, was made by that government on the 11th September, 1936, but that reduction could be maintained only until the 21st September, 1938, when the rate was again raised to 5 per cent. It is interesting to note that throughout the whole period during which the rate of 6 per cent, operated, the existing exemption list was not only maintained, but also was greatly enlarged. The list of exemptions is now formidable. Exclusive of goods valued at £150,000,000 which are exported from the Commonwealth each year, it covers a field the sale value of which is estimated at £350,000,000 per annum. It has, however, been evolved carefully in accordance with a definite plan the primary objective of which is to exempt from the tax goods which are purchased as prime necessities of life by those persons who are least able to pay heavy taxation. The secondary objective of- the plan is to grant assistance to industries which, for various reasons, require encouragement and support from governments. Finally, its purpose is to free from the tax goods used in the furtherance of education, science, religion and the like. Strong representations have been made to the Government, that it should obtain any additional revenue required from sales tax by bringing back within the taxable field goods which at present enjoy freedom from tax.- The representations have covered a wide range of suggestions. The proposal which seems to have most support contemplates the complete withdrawal of all exemptions excepting those covering; foodstuffs and exported goods. ‘It is claimed for that proposal that it would result in the required revenue being obtained from a much larger number of taxpayers, thus spreading the burden, and enabling a reduction of the rate to beeffected. This proposal, if adopted, would, of course, achieve the results claimed for it; but it would involve the destruction of some of the principles upon which the list has been compiled. I refer to the principle of ability to pay.. the fostering of institutions whose aims are educational or charitable, and the assisting of certain industries, particularly primary industries. Under thepresent proposals goods such as I have referred to, namely, goods for export, primary products, certain prime necessities of life, aids to education, science and religion, which now are exempt, will continue to enjoy freedom from tax.
It is proposed that the new rate shall come into operation as from to-morrow. This proposal accords with the procedure ordinarily followed when a change of rate is contemplated, and is designed to prevent the dislocation of trade which would, inevitably occur should there be any delay between the date of the announcement of the Government’s intentions and the date when those intentions become effective.
The existing law contains machinery which will fully protect the vendors of goods who are required to pay tax at thehigher rate of tax as from the commence ment of business to-morrow. When the bills become law vendors will be able to recover the additional 1 per cent, tax from any customers who have not paid. Should the bills not become law, the vendors will be able to obtain refunds of the additional tax paid by them
Goods sold on or after the 9th September, under agreements entered into prior to the 9th September, 1939, will be subject to tax at the higher rate, but vendors are authorized to recover the additional tax from their customers by virtue of existing provisions which deem agreements to be altered accordingly. Builders and similar contractors whose contract prices are based on the 5 per cent. rate will be similarly authorized to increase their contract prices by the additional 1 per cent. tax reflected in the cost of taxable materials purchased by them on and after the 9th September, 1939. The new rate will apply to all taxable transactions and operations in goods effected or done on and after Saturday, the 9th September, 1939, and will apply also in respect of goods imported on and after that date.
.- I move - [Customs Tariff Amendment (No. 8).] (1.) That the Schedule to the Customs Tariff 1933-1939, as proposed to be amended by Customs Tariff Proposals introduced into the House of Representatives on the third day of May, One thousand nine hundred and thirty-nine, be further amended as hereinafter set out, and that, on and after the ninth day of September, One thousand nine hundred and thirty-nine, at nine o’clock in the forenoon, reckoned according to standard time in the Australian Capital Territory, Duties of Customs be collected in pursuance of the Customs Tariff 1933-1939 as so amended. (2.) That, without prejudice to the generality of paragraph (I.) of this Resolution, the Governor-General may, from time to time by Proclamation declare that, from a time and date specified in the Proclamation, the Intermediate Tariff shall apply to such goods specified in the Proclamation as are the produce or manufacture of any British or foreign country specified in the Proclamation. (3.) That on and after the time and date specified in a Proclamation issued in accordance with the last preceding paragraph, the Intermediate Tariff shall apply to such goods specified in the Proclamation as are the produce or manufacture of a British or foreign country specified in that Proclamation. (4.) That any Proclamation issued in accordance with paragraph (2.) of this Resolution may, from time to time, be revoked or varied by a further Proclamation, and upon the revocation or variation of the Proclamation, the Intermediate Tariff shall cease to apply to the goods specified in the Proclamation so revoked, or, as the case may be, the application of the Intermediate Tariff to the goods specified in the Proclamation so varied, shall be varied accordingly. (5.) That in this Resolution, unless the contrary intention appears - “ Proclamation “ means a Proclamation by the Governor-General, or the person for the time being administering the government of the Commonwealth, acting with the advice of the Federal Executive Council, and published in the Commonwealth of Australia Gazette ; “ the Intermediate Tariff “ means the rates of duty set out in the Schedule to this Resolution, in the column headed “ Intermediate Tariff “, in respect of goods in relation to which the expression is used.
[Excise Tariff Amendment (No. 4).]
Cite as: Australia, House of Representatives, Debates, 8 September 1939, viewed 22 October 2017, <http://historichansard.net/hofreps/1939/19390908_reps_15_161/>.