12th Parliament · 1st Session
The President (Senator the Hon. W. Kingsmill) took the chair at8 p.m., and read prayers.
– Is it the intention of the Government to appoint the member for the Northern Territory in the House of Representatives as Administrator of the. Northern Territory?
– So far as I know, nothing has been done in the matter.
– I ask the Minister representing the Prime Minister the following questions, without notice: -
– It is notusual to state government policy in reply to questions.
Cost of Collection
– On the 2nd July, Senator the Right Honorable Sir George Pearce asked the following questions, upon notice : -
The answers to the right honorable senator’s questions are as follow : -
The following paper was presented: -
Customs Act and Commerce (Trade Descriptions) Act - Regulations amended - Statutory Rules 1931, No. 82.
asked the Minister representing the Minister for Trade and Customs, upon notice -
– The answers to the honorable senator’s questions are aa follow : -
asked the Minister representing the Prime Minister, upon notice -
– The answers, to the honorable senator’s questions are as follow : -
Bill received from the House of Repre.sentatives and (on motion by Senator Barnes) read a first .time.
Standing and sessional orders suspended.
.- I move-
That the bill be now read a second time.
This bill is ibo legislative consequence of the decision reached at the recent conference in Melbourne to effect “ a reduction of 20 per cent, in all adjustable Government expenditure, as compared with the year ending 30th June, 1930, including all emoluments, wages, salaries and pensions paid by the Governments, whether fixed by statute or otherwise, such reductions to be equitably effected “.
Reference to clause 3 of the bill will show that the various subjects of economy have been divided into seven main groups, comprising’ parts 2 to 8. Additional economies which do not require particular statutory action are revealed in the budget which- will shortly be under discussion.
Section 4 of the Ministers of State Act, .1917, provides for an appropriation of £15,300 for salaries to be paid to Ministers of State. It is proposed to reduce this amount by 22£ per cent, to £11,857 10s. The following reductions of parliamentary salaries and allowances are also proposed: - £1,000 and under. 20 per cent.; exceeding £1,000, but noi more than £2,000, 22^ per cent.; exceeding £2,000, 25 per cent. For the purpose of calculating the amount of these reductions, salary and allowance, if any, are to be aggregated.
With respect to Commonwealth employees, the graph which has been circulated shows that salaries between £250 and £500 account for 90 per cent, of Government expenditure of this nature. The graph conclusively shows that the imposition of a heavier burden on the more highly-paid officers would not result in savings sufficient to make any effective alteration in the reduction proposed to be made in the case of low-salaried officers. The proposal is to make an adjustment to correspond with the fall in the cost of living and, in addition, a percentage deduction on a graduated scale. A table, which has been prepared to illustrate the operation of this cut, shows it to be 20 per cent, in the great majority of cases. For example, a man receiving £300 per annum on the 1st July, 1930, will lose £34 cost of living deduction, plus a 9.77 special deduction amount- £60 per annum. The table is as. ing to £26, that is, a total deduction of follows: -
There are very many Commonwealth employees, such as, for instance, members of the naval and military forces, whose conditions of employment are not governed ‘by the Commonwealth Public Service-Act, but they receive various payments such as active pay, deferred pay, special allowances, free quarters and rations. Again, other employees have their rates of pay fixed by the Arbitration Court awards.
It is practically impossible to deal specifically with all the various cases in the bill, which has been prepared very hurriedly on account of the urgency of the case. It is thought best, in order that reductions shall be equitably spread, and to enable anomalies to be rectified, that power to deal with these special problems should be vested in a Minister, aided by a committee consisting of the Public Service Arbitrator, a member of the Public Service Board and a third person appointed by the Governor-General. The basis of the reductions “will be that pre- scribed for the Public Service generally - that is to say, 20 per cent.
Clause 17 is designed to preserve public servants from a double sacrifice. Any heavy increase in State taxation would bear harshly on the employee who has to give up 20 per cent, of his emoluments. It is proposed, therefore, to limit the amount of taxation which a State may impose on salaries or wages paid by the Commonwealth. It is proposed to reduce the pension payable to judges on retirement by 20 per cent. A similar reduction in the amount of contribution by the Commonwealth under the Superannuation Act is also provided for.
The number of units of pension for which an officer of the Public Service is eligible to contribute is determined by bis salary. “With the reduction of salary officers would become ineligible to contribute for their present number of units. It is proposed to amend the law so that officers may, if they so desire, continue their contributions as at present.
The maternity allowance is proposed to be reduced from £5 to £4, and to be restricted to those cases where proof is shown that the total income of the claimant and her husband during the preceding twelve months did not exceed £260.
Part V. of the bill deals with invalid and old-age pensions. The maximum pension will be £45 10s. per annum instead of £52 per annum and the limit of income, including pension, will be £78 per annum instead of £84 10s.
Part VI. relates to war pensions. The original proposals have been amended in accordance with the suggestions submitted to the Government by representatives of returned soldiers’ organizations who have been sitting in conference. The bodies represented were the Returned Sailors and Soldiers Association, the Limbless Soldiers Association, the Blinded Soldiers Association, the Partially Blinded Soldiers Association and the Partially Incapacitated Soldiers Association, and the recommendations of the conference were unanimous. The following table shows various classes of pensioners, pensions payable and suggested reductions : -
It will be seen that the reductions amount to £1,018,230, and a subcommittee is making further investigations with a view to increasing this amount by £281,770.
By restricting the places of sitting of the High Court in its appellate jurisdiction, a considerable amount of travelling expense would be avoided without undue inconvenience to litigants. It is, therefore, proposed to take this course.
It is intended also to reduce bounties, other than the gold bounty, by 20 per cent. The latter bounty is to be variable, according as the rate of exchange varies in respect of any period after the 30th June, 1930, the minimum bounty being at the rate of 10s. per ounce of fine gold.
For the half-year ending the 30th June, 1931, the full rate of bounty will be payable.
Senator Sir GEORGE PEARCE (Western Australia) [3.20]. - I do not know the views of .other honorable senators, but, personally, I do not propose to ask for any adjournment of the debate on this measure because, unpleasant as it is, I desire to see it placed on the statute-book as early as possible. In the present stare of the Commonwealth finances, the provisions of this bill, unfortunately, appear to be inevitable.
I desire to draw attention, briefly, to one or two features of this measure. The table which has been circulated by the Minister shows that the total salaries payable by the Common wealth amount to £8,184,429 per annum. Of that amount, £7,375,764 represents the salaries of officers in receipt of less than £500 per annum. Generally, the State Premiers are proposing to carry out the agreement entered into at the Premiers Conference held in Melbourne recently; but one of them- - Mr. Lang, the Premier of New South Wales - proposes to do so in a very peculiar way. According to statements in the press, Mr. Lang proposes to reduce all salaries in excess of £500 per annum to £500 per annum. Were the Commonwealth Government to follow that lead, it would not give effect to the Melbourne agreement, because the total saving which would be effected thereby would amount to only £808,665.
– Mr. Lang proposes that the reductions shall apply to all incomes, not only those of public servants.
– 1 have not yet had an opportunity to study the table which the Minister asked to be incorporated in Hansard, but I have seen the figures given in the press, and also the report of the Melbourne conference. Under the arrangement there agreed to, there will be a saving of over £1,000,000 in respect of Commonwealth salaries. The application of Mr. Lang’s idea to the Commonwealth Public Service, although revolutionary, would not effect so large a saving as will be made by these proposals, which give substantial effect to the undertaking given by the Commonwealth at the recent conference. Mr. Lang’s proposal does not give effect to that agreement. Revolutionary and fantastic as is is, Mr. Lang’s proposal will not have so great an influence on the expenditure of New South Wales as the proposals in this bill will have on theexpenditure of the Commonwealth. To that extent, I submit that Mr. Lang is departing from the undertaking given at the Melbourne conference.
– No one who knows Mr. Lang thought that he would honour his undertaking.
-Another proposal contained in this bill to which I desire to draw attention, is contained in clauses 18 and 19. By an act of this Parliament passed in 1904, members of the Federal Parliament and of the Commonwealth Public Service were made liable to pay taxation imposed by a State. Under the provisions of this bill no State will be able, so long as this legislation is on the statute-book, to increase its taxation upon such persons beyond the rates in existence at the time of the passing of this measure. From a selfish point of view, that arrangement might appear to be satisfactory.
– Especially to those who reside in New South Wales.
-Assuming that federal salaries are to be subject to State taxation - and we have accepted that principle iu an act already passed by this Parliament - what justification have we for differentiating between salaries paid by the Commonwealth and other salaries paid within a State?
– We are not justified iu making any differentiation.
-The bill makes that differentiation.
– Otherwise it would destroy the principle of the effective incomes being the same in the various States.
-That applies to any taxation imposed on public servants and other persons in the community. Seeing that this Parliament has agreed that Commonwealth salaries shall be subject to State taxation, it seems rather unwise to pass a law which differentiates between Commonwealth salaries and salaries paid within a State. I could understand federal salaries being exempted from State taxation, because it has been held that the Constitution made provision accordingly in order to meet the case of a State which, being hostile to the federation, might bring federal activities within its borders to a standstill, and practically rob federal officers of their incomes by imposing special taxation on federal salaries.
– I have said that it is the intention of the Government to prevent that from being done.
Senator Sir GEORGE PEARCE. So far, no State has shown any desire to act in that way. This bill goes further than to provide merely that federal salaries must not be taxed at a higher rate than other salaries within a State are taxed; it provides that federal salaries shall not be taxed at higher rates than now apply, lt is possible that many of the States will be compelled to alter their rates of income tax in the future, thus imposing on other salaries paid within the State higher rates of taxation than now exist. In that case, two classes of taxpayers would be created - the first including those persons subject to further taxation, and the other, those persons who, by federal law, were exempted from any increased State taxation.
– That would be the position if public servants were taxed by the State and also by the Commonwealth.
– They are subject to both taxes now, and have been ever since this Parliament passed an act making Commonwealth salaries taxable by the States. Previously, it had been held that the States had not the power to tax federal salaries. Now we are asked to legislate to provide that, whereas a State may increase the taxation payable by the general community, certain persons shall not be called, upon to pay more than they are now paying.
– In those days there was no danger of a State passing excessive taxation.
– The principle contained in this bill is hard to defend.
Senator Sir GEORGE PEARCE.[t is. The proposal is both dangerous and objectionable. By deleting this provision we may suffer personally, but that should not deter us from doing what we believe to be right.
I also direct the attention of honorable senators to the provisions in this measure in regard to the decrease in the gold bounty. I strongly object to the treatment meted out by the Government to those members of a deputation which recently waited upon the Prime Minister in reference to this matter. With a number of others, I waited upon the Government to oppose what appeared to us to be a differentiation in the rate of decrease in the gold bounty as compared with the reductions in other bounties. We spent a good deal of one afternoon in urging upon the Prime Minister the necessity for some relaxation, and met with a great deal of resistance. The Prime Minister put up a good fight for the retention of the reduction as announced by the Treasurer, but when we received the newspapers next morning, we learned that before the deputation had waited upon the Prime Minister, the PostmasterGeneral (Mr. A. Green), who represents the electorate of Kalgoorlie, in Western Australia, had already obtained from the Treasurer a certain concession, which is now embodied in this bill. If the Postmaster-General had already accomplished what the deputation sought to accomplish, why were not the members of the deputation so informed when it met the Prime Minister ? Why were we kept there arguing with and pressing the Prime Minister for some concession, when, according to a statement which was then actually in the press, a concession had already been obtained by the PostmasterGeneral? I should like to comment upon the somewhat significant happening of a member of the Cabinet which - I presume the action was taken by the Cabinet - reduced the amount of gold bounty payable, and who therefore was a party to the crime, if I may so term it, claiming at the same time to be the gentleman who was able to get a mitigation of the crime. Apparently the Postmaster-General was anxious to obtain whatever credit was possible out of a crime of such a character.
– A reduction in the sentence for good behaviour!
Senator Sir GEORGE PEARCE.I am not aware of the motive; but it is a peculiar way for a government to treat members of Parliament.
– It is extraordinary.
– It is.
– An announcement appeared in the Melbourne newspapers several hours before the deputation waited upon the Prime Minister.
Senator Sir GEORGE PEARCE.Yes. At the time the deputation was strenuously opposing a reduction in the gold bounty, a statement concerning the concession granted at the request of the Postmaster-General was already in the press. I hesitate to suggest it, but it appears to me that the Prime Minister himself did not know that the concession had been granted. If he did, is it believable that he should keep us there arguing, pleading, and pressing when a concession had already been given? The Prime Minister was either having a joke with us, or he was unaware of what had been done. One can scarcely think that the right honorable gentleman was not aware that a concession had been made, and yet the other alternative that he was having a joke with us is almost unthinkable.
As regards the ‘bill us a whole, I only wish to say that the members of the Opposition have been pressing for quite a while for economy in government expenditure, and have said that if these economies had been made earlier the rate of the reduction would not have been so drastic as is now proposed. It is the delay which has augmented the drastic nature of the cuts. But the members of the Opposition wish to be quite clear in this matter. We have never said that these proposals alone will rehabilitate the economic position of the Commonwealth. They are a step in the direction of rehabilitating government finance, and as a part of our policy of national economy, will do a great, deal in rehabilitating governmental finance. But they do not do anything to assist the economic rehabilitation of the Commonwealth. This measure deals only with the financial position of the Government in Australia, and does not touch its financial position overseas. I am of the opinion - I do not wish to do the Government an injustice - that our desperate position overseas is largely duo to two things. It is due to the rabid and stupid statements made at various times by honorable members supporting the Government concerning inflation, repudiation and matters of - that kind, as well as the doctrine preached by the Premier of New South Wales (Mr. Lang), and also to the vacillation and procrastination of the Government. These have caused loss of confidence in the Government, and I am doubtful whether the steps that have now been taken, can, in the matter of finance, rehabilitate confidence in this Government overseas. The record of the Government is disastrous. We remember that when the Prime Minister was leaving these shores for England, he had scarcely left the port of Fremantle before the members of his own party in the Federal Parliament were talking infla- tion and repudiation. These statements were cabled by newspaper correspondents across the seas, and we had the testimony of the Prime Minister himself when he returned, that his attempt to fund the floating debt overseas was destroyed by the rash and ill-considered statements of members of his own party.
– By members of the Cabinet, too.
– Yes; in some cases. I give credit to the Government for having at long last and when right up against the position of default, taken this action. If action had been taken earlier the reductions now proposed would not have been so drastic. Because of the deadly blow dealt to our credit overseas by the action of the Government itself, and the loose and ill-considered statements made by members who supported it, this measure is now necessary. No one has any pleasure in supporting this bill, because, as we all are aware, it will inflict hardship upon a large number of people, but its inevitability compels us to support the second reading.
– Like the right honorable the Leader of the Opposition (Senator Pearce), I must say that one cannot have any pleasure in supporting a measure of this description, inflicting as it will, considerable hardship on a large section of the people of Australia. But we have to face the fact that it is due to circumstances largely beyond the control of this Parliament or of the present Government. The Leader of the Opposition would have the people believe that if action had been taken earlier the provisions of this measure would not have been so drastic. One might retort that had the Senate dealt more kindly with some of the legislative proposals of the Government, and had some of the financial institutions in Australia given the Government that full measure of co-operation which it was entitled to expect from them in its efforts to rehabilitate the industries of this country and to restore its people to employment, it would not have been necessary to make the provisions of this measure so drastic.
I understand that it is the desire of the Government to complete the consideration of another measure, which is on the notice-paper, so that supplementary legislation may be passed by the different State Parliaments. I refer to the Commonwealth Debt Conversion Bill, which, I believe, really implements the agreement that was arrived at in Melbourne by the conference of Premiers. I am informed that the Parliaments of the respective States arc awaiting final action upon that measure by this Parliament, so that they may pass supplementary legislation in relation to the matters that come within their jurisdiction. To meet the convenience of the Government, I ask leave to continue my remarks at a later bour this day.
Leave granted ; debate adjourned.
In committee: Consideration resumed, from the 10th July (vide page 3765).
Clause 2 (Commencement).
Senator Sir GEORGE PEARCE (Western Australia) [3.43]. - Can the Minister give us some idea of the date which is to be fixed by proclamation for the commencement of the act? I understand that the Government has come to some determination on the matter.
Clause agreed to.
Clause 3 agreed to.
Clause 4 (Creation of new securities).
– At the second-reading stage of the bill I referred at some length to the position that is likely to be created in connexion with the 6 per cent securities. I understand that the Minister in charge of the measure is able to furnish me with some particulars regarding what is intended.
– This clause authorizes the issue of new securities in the form of inscribed stock, treasury bonds, treasury-bills, debentures, and other prescribed securities. The method of dealing with the matter laid down in the bill was formulated by a committee consisting of the Under-Treasurers of all the States, the Assistant Secretaries of the Commonwealth Treasury, and three economists. Two of- the members of the committee were actuaries. The methods formulated by the committee were adopted, in principle, by the Premiers Conference.
Under the plan, the period yet to elapse before the maturity of existing securities is taken into account in determining the actuarial equivalent of the new securities. To show how the plan operates, I take two 6 per cent, securities, one maturing in 1932, and another in 1938. The 22£ per cent, reduction in the interest rates brings down the rate of interest in each case from 6 per cent, to £4 13s. per cent. As the new securities are to carry interest at the rate of 4 per cent., it is necessary to make an adjustment in the capital amount of those securities. This adjustment must be sufficient to make good the difference between 4 per cent. - the actual rate of the new security - and £4 13s. per cent., the reduced rate of the old 6 per cent, securities. To make this capital adjustment, the present value of the difference between 4 per cent, and £4 13s. per cent, must be calculated. What that value is, naturally depends on the length of time for which the existing bonds run; the longer the period, the greater the premium. Thus the premium for the 1938 bonds is greater than that for the 1932 bonds. The justification for this lies in the fact that the holder of the 1938 bonds was entitled to his high rate of interest for a longer period than the holder of the 1932 bonds. It is obvious that some term of years must be taken into account in determining the present value of the difference between the 4 per cent, and the £4 13s. per cent, interest rates. If some arbitrary period were adopted - say, a period somewhere between the longest and the shortest date of existing maturities - the result would be advantageous to some holders and disadvantageous to others. It must be remembered, too, that the adjustment of interest is made, and the rehabilitation plan based, on the proposition that it is necessary to bring down interest and other charges - such as salaries and wages - to a lower level than that at present existing. If interest rates are to be lower iu the future, the bondholder with a high rate of interest for a long periodhas a better contract than a bondholder with the same rate of interest secured, however, for only a short period. The former bondholder, on taking a new 4 per cent, bond, thus gives up more in interest rights than the latter. To compensate him for this, he is entitled to a higher premium in the capital amount of his new securities.
Let us now consider how securities bearing interest at less than 4 per cent, will be affected under the plan. Where a low interest-bearing security matures at an early date, it is, in present circumstances, a better security than one bearing the same rate of interest, but maturing at a much later date. The firstmentioned holder has the prospect of getting a higher rate of interest long before .the last-mentioned. If, in the case of low interest-bearing securities, the premium were to be calculated on the basis of the longest-dated securities, holders of short-dated securities with a similar interest would be unfairly treated. On the other hand, if, in the case of high interest-bearing bonds, the longest period were made the basis for calculation of the premium, those holding shortdated securities carrying the same interest rate would get an undue advantage. The method proposed by the expert Treasury officers and the actuaries is the only practical method for calculating the actuarial equivalent in new securities. It takes into account the terms of existing securities, both as to rates of interest and dates of maturity. Any other plan would give results which would be unfair to some bondholders and unduly beneficial to others.
. - The Minister’s explanation sounds logical and the arrangement seems to be equitable, but there is no avoiding the fact that 6 per cent, stocks falling due in 1932 will certainly be mulct in a reduction which is nearer 33-J per cent, than 22^ per cent. However, I expect the holders of 6 per cent, stock will rise to the occasion, accept the position, and assist to make this conversion a success. At any rate, after hearing the Minister’s explanation, I do not propose to submit any amendment.
.- This clause provides -
The Governor-General may authorize the Treasurer from time to time to make out treasury-bills, debentures and such other securities as are prescribed.
According to the definition clause - “ New securities “ means Australian consolidated inscribed stock and Australian consolidated treasury-bonds and treasury-bills, debentures and other prescribed securities issued under this act.
Can the Minister give us an indication of what is the intention of the Government in regard to prescribed securities? In other words, what form of securities is intended to be covered by the regulationmaking power given in clause 4?
– I understand that the States have various kinds of stock, but just what is intended by the provision referred to I cannot explain off-hand. I have already noted several points raised by honorable senators, and I shall also make inquiries into the point raised by the honorable senator, and inform (he committee upon it at a later stage.
Clause agreed to.
Clauses 5 to 11 agreed to.
Clause 12 (Cases in which dissent is signified).
Amendment (by Senator Dooley) proposed -
That the following new sub-clauses be added : - “(5.) Commonwealth Government inscribed stock for which existing securities are exchanged under either of the last two preceding sub-sections, and Commonwealth Government inscribed stock in respect of which dissent is signified in accordance with this act, shall not, except as prescribed, be exchangeable for bonds or any other form of security. “(6.) Commonwealth Government inscribed stock for which existing securities are exchanged under sub-section ( 3. ) or sub-section (4.) of this section shall not be deemed to be new securities within th’e meaning of this act.”.
Senator Sir GEORGE PEARCE (Western Australia) [3.55]. - I think that the committee is entitled to some explanation why these sub-clauses are to be added. These amendments were circulated among honorable senators Only this afternoon, and a hurried glance at them has not enabled me to realize their significance. Are they included because of an oversight when the bill was going through committee in another place? Or have they been found necessary since the bill has come to this chamber? Proposed new sub-clause 6 provides -
Commonwealth Government inscribed stock or which existing securities ure exchanged under sub-section 3, or sub-section 4, of this section, shall not be deemed to be new securities within the meaning of this act.
Surely they are new securities. I should like an explanation on that contradictory point. I do not think that amendments of this sort should be sprung on the committee without any explanation as to their effect or purpose.
– I am almost at the same disadvantage as the right honorable the Leader of the Opposition (Senator Pearce) ; but I understand that proposed new sub-clause 6 relates to bonds which will not be converted.
– In a case where the bondholder has dissented ?
– Yes. These are really machinery clauses; but I haveno objection to having inquiries made and clearing up the point raised by the right honorable senator.
Clause13 - (1.) The equivalent amount of new securities to be exchanged for an amount of existing securities shall he based on a reduction of the interest rate on existing securities by twenty-two and one-half per centum, and shall where necessary be determined by actuarial calculation in the manner set out in the schedule to this act:
Provided that where the holder of existing securities bearing interest at the rate of three and three-quarters per centum per annum or less satisfies the Treasurer that he acquired the securities before the fourth day of August One thousand nine hundred and fourteen, the rate of interest on con version of such securities into new securities shall not bc reduced below the rate of three per centum per annum.
Senator Sir GEORGE PEARCE (Western Australia) [4.2]. - I move -
That after the word “ he “, in the proviso to sub-clause 1, the words “or the person whose executor, administrator or trustee he is “ be inserted.
This clause provides for an equivalent amount of new securities being issued for old securities. Take the case of a person who acquired securities before the 4th August, 1914, and, subsequently, died, his estate being held by a trustee in trust for beneficiaries under the will, and not yet distributed to those beneficiaries. My amendment is to enable the benefit acquired to be carried on to the trustee who holds the estate in trust for the beneficiaries until it has been distributed. It is only fair that a trustee should be in the position of the person who actually acquired the security before the 4th of August, 1914.
-Is it held that a trustee is not in that position ?
-I understand that the clause is to apply only to the person who really acquired the securities before the 4th of August, 1914, but in the event of his death, not to the trustee of his estate. My intention is to place the trustee in the position of the person who actually acquired the securities. I agree that if the securities have been distributed to beneficiaries, a new position would arise.
– The point raised by the right honorable gentleman was discussed fully at the Premiers Conference, and I am advised that the view taken was that a trustee would be in the position of a person who acquired securities by deed of gift. To meet this objection the clause was drafted in the present form. Accordingly, the amendment is not acceptable to the Government.
Senator Sir GEORGE PEARCE (Western Australia) [4.8]. - I assume that most honorable senators have read carefully the report of the Premiers Conference. I have done so, at all events, and I cannot recall reading of any discussion upon this particular matter. The objections raised by the Minister donot appear to be adequate. In the case of securities acquired before the 4th of August, 1914, the trustee of an estate should have the same rights as the person who acquired the securities would have. My amendment will not benefit persons who acquired securities by deed of gift. It is limited to the securities acquired by a person who has since become deceased and whose trustees have not wound up the estate.
– Would not a trustee have that right in any case?
– I am advised by a high legal authority that he will not be in that position. I do not wish to embarrass the Government, but unless a more adequate reason is advanced against my amendment, I feel disposed topress it to a division.
– I have no desire to force an issue on this clause. I did not receive a copy of the amendment until this morning.
– I circulated it last week.
– I am instructed that it is not acceptable to the Government, but as I wish to satisfy the right honorable gentleman that the reasons for objecting to his amendment are sound, I shall agree to postpone further consideration of the clause until I get the necessary information.
Clause 14 -
For the purposes’ of the last preceding sub-suction the original period of duration shall-
Amendment (by Senator Dooley) agreed to -
That the words “ if any, so specified “, subclause (2), paragraph (6), be left out with a view to insert in lieu thereof the words “ upon which they are redeemed “.
– I move -
That after the word “ stock “ sub-clause 5 the words “ and shall not be exchangeable for bonds or any other form of security “, bc added.
The intention of the amendment is to prevent the defeat of the provision with regard to restrictions upon inscribed stock, by the operation of the Commonwealth Inscribed Stock Act, if the exchange would otherwise be made.
Senator Sir GEORGE PEARCE (Western Australia) [4.13]. - The securities dealt with by this clause are to be taxfree up to the date upon which they were to have been redeemed, after which they are to be taxable. I assume that the purpose of the amendment is to prohibit such securities from being exchanged for bonds, in order to prevent an evasion of taxation.
– That is the intention.
Amendment agreed to.
Clause, as amended, agreed to.
Clause 15 -
.- This clause provides that new securities issued in exchange for existing securities held by a Government Savings Bank shall mature upon the original date if the Treasurer of the Commonwealth or the Treasurer of a State and the savings bank so agree, otherwise such securities shall be subject to the provisions of this bill. Honorable senators will notice that the clause refers only to the securities held by government savings banks. There are other savings banks in the State of Tasmania, namely, the Hobart Savings Bank and the Bank for Savings, Launceston. These original savings banks were established under an act passed in 1848 when Tasmania was known as Van Dieman’s Land. They were established at the instigation of a number of leading citizens who were anxious to give persons of industrious and frugal habits an opportunity to obtain some interest return upon their savings. That was the beginning of the savings bank movement in Australia. These institutions are still in existence; indeed, they are exerting a greater influence than ever.
They occupy a prominent position among the financial institutions of Tasmania. From their funds they have contributed largely towards loans floated by the Commonwealth. On the 31st August, 1929, the Hobart Savings Bank held Commonwealth Government securities valued at £654,270, and the Bank for Savings, Launceston, held similar securities to the value of £542,393. In addition, the former bank held Tasmanian Government securities valued at £479,400, while the latter institution held similar stock to the value of £322,000. Under the Loan Council agreement, Tasmanian securities were merged into Commonwealth securities. The Hobart Savings Bank now holds Commonwealth Government securities valued at £1,103,071, and the Bank for Savings, Launceston, similar securities to the value of £859,866, a total of nearly £2,000,000. My object in giving these particulars is to urge that these two institutions should be granted the same privileges as, under the bill, will be given to government savings banks.
– Do they deal in building society business?
– Under their constitutions they are entitled to lend money only on government securities and real estate. The act constituting them is fairly rigid ; it requires them to build up a reserve fund, which, however, must not be increased beyond a certain amount. Any surplus must be returned to the depositors in’ the shape of interest. From time to time the rates of interest have varied slightly in consequence. I emphasize that these banks have no shareholders other than their depositors ; nor do they pay any salaries excepting to the members of their staffs. They are controlled by committees of about 25 leading citizens of Hobart and Launceston respectively, all of whom give their services without remuneration.
– “Who elects the committees?
– The original act provided for their appointment by the local authorities. I have not the amended act with me, and cannot say how they are at present elected. The point that I wish to emphasize is that the whole of the money held by those banks belongs to their depositors, and is liable to be called up at any time. In that respect, these institutions are similar to State savings banks. The trustees of these banks are anxious to have the bill amended to protect them from the possibility of disaster. These institutions have done magnificent work, and they should be given every consideration. They .have invested large sums of money in government securities.
– The Government Savings Bank of New South Wales had to close its doors, because its funds were largely tied up in government securities.
– It might interest honorable senators if I were to state the amounts held by these banks on behalf of various classes of depositors. The Hobart Savings Bank has had deposited with it in ordinary accounts £2,566,370; penny banks account for £4,102, and school banks for £10,055. The Bank for Savings, Launceston, in its ordinary department holds, on account of depositors, £1,624,205; the deposits by school banks and thrift clubs amount to £5,489 and £556 respectively.
During the past year the people of Tasmania have been so faced with adversity that their withdrawals from these banks have exceeded their deposits. The trustees, consequently, desire to be placed on the same footing with State savings banks. If that is done, they will still have to accept the general reduction in interest rates on their existing securities.
– Even if the amendment foreshadowed by the honorable member is agreed to, will not the Commonwealth Treasurer still hold control?
– No. This clause provides that these new securities shall mature upon the dates of maturity of the existing securities if the Treasurer of the Commonwealth or the State concerned, and the savings bank, so agree.
– The banks would have to satisfy the State Government in this connexion.
– Yes. I desire to read a letter which I have received from the Hobart Savings Bank.
May I bring under your notice what we consider an injustice done to this bank, and to the Bank for Savings, Launceston, both of which work under the same act, and that is in leaving us out of clause J 5, sub-section 2 of the new Commonwealth Debt Conversion Bill.
We are savings banks equally with the State Savings Banks and should have the same consideration shown us.
I have already applied to the Secretary of the Treasury, Canberra, and have got our Premier to apply to him also, but have had replies to both, stating “ they cannot concede to us the same terms regarding conversions, as those provided for State Savings Banks. These latter have lent moneys to governments under special conditions and at concession rates, and are iu a different position to trading banks and private savings banks, which have lent on similar terms to the public”.
Well, I cannot think that many of the State Savings Banks have lent money to their governments at anything below the current market rates.
However, the fact remains that if the Government does not give us this concession, it means that, in our case, 42 per cent, of our assets, amounting to £1,103,071, are absolutely frozen for seven years at least, and, in the case of the Launceston Bank, it will mean that 54 per cent, of their assets, amounting to £85!>.880, are in the same plight. As you know all our money is at call, so that it places us in it very awkward and unfair position.
Can I, therefore, on behalf of our banks, ask your assistance in endeavouring to right ill is wrong.
Prom the Bank for Savings, Launceston, the following letter has been received : -
Referring to the proceedings and decisions of the conference of Commonwealth and 5tate Ministers, my executive committee is seriously concerned with regard to the conversion proposals, as, apparently, no thought has been given to savings banks apart from State Savings Banks. I am enclosing you a copy of a letter I am sending by this mail to the Commonwealth Treasurer on this matter, asking that similar privileges be accorded to this bank as to the State Savings Banks, and would enlist your active support towards this end.
Tlie fullest financial support has always been accorded the Government, and it is owing to all investments in State stock having matured and the amounts converted into federal stock, that there is such a large holding of the latter by this bank at present.
Savings banks in Tasmania, as you Byre aware, distribute no profits, pay no emoluments of any kind, or salaries to other than the permanent staff, the services of the executive committee being purely honorary, for the furtherance of thrift in the community and it is inconceivable that such institutions should be taxed as ordinary trading institutions, instead of being exempt like tlie State Savings Banks, seeing that they are performing the same work and rendering equally good service.
A copy of accounts for the last half-year is enclosed.
– Is not the Minister prepared to accept the amendment suggested ?
– He will not if the honorable senator continues his speech much longer.
– I am sorry to hear that interjection. As a matter of fact, I understand the Minister is not prepared to accept it.
– Let the Minister have an opportunity to say what the Government is prepared to do.
– I am giving these particulars, not for the benefit of Tasmanian honorable senators, who know all about these private savings banks, but for the information of honorable senators representing other States. The following table, taken from the balance-sheet of the Bank of Savings, Launceston, shows the number of small depositors who have invested their savings with the institution : -
I move -
That the word “ Government “, sub-clause (1), be left out.
The honorable senator has exhausted his time.
.- In 1914 the business of the State Savings Bank of Tasmania was taken over by the Commonwealth Savings Bank; but the two private savings banks mentioned by Senator Payne continued to function. They are still rendering to the people of Tasmania the same service as the State savings banks render elsewhere. I emphasize that these private, banks pay no profits to shareholders other than depositors; that they are controlled by honorary trustees, and that they hold on account of depositors about £2,000,000. It may interest honorable senators to know that, recently, some persons, who had accounts with the Commonwealth Savings Bank in Tasmania. withdrew their deposits and placed them in. these private institutions, thinking that they were safer. If we tie up deposits amounting to nearly £2,000,000 for seven, ten, or twenty years, the position of these private savings banks will be serious indeed. I trust that the committee will agree to the amendment.
– This clause should be altered to provide that the Treasurers of the Commonwealth “ and “ - not “ or “ - the States concerned, and the savings banks may agree regarding the dates of maturity for existing securities. The Treasurer of the Commonwealth would then have some control of the position. Under the clause in its present form the State Treasurers alone may agree with the banks which would mean that the money would have to be found by the Commonwealth Treasury. As demands may be made upon the Commonwealth at a very inconvenient time the Commonwealth should be the controlling factor. An amendment on. the lines suggested would permit the two banks mentioned to act with other banks of a similar character. The State Treasurers and the Savings Bank could control the position, but residual control should rest with the Treasurer of the Commonwealth. I am ‘ willing to include the two Tasmanian banks mentioned or any other banks in a similar position.
, - I regret that the Government cannot accept the amendment, moved by Senator Payne. This clause deals with arrangements made between State Governments and State savings banks for domestic finance. These special securities are really loans to the State at low rates of interest. This provision permits internal arrangements to suit the convenience of the State and the banks in regard to the dates of maturity. The two banks mentioned cannot expect treatment different from that meted out to others.
– They are not asking for it.
– The whole scheme has been carefully considered by a committee of experts and the proposal as embodied in this clause is part of the general financial plan adopted at the Conference of Commonwealth and State Ministers. The Launceston Bank for Savings and the Hobart Savings Bank claim that they should be placed on the same basis as regards the conversion loan as the various Government savings banks in Australia. Clause 15 of the bill gives the Treasurer of the Commonwealth or the Treasurer of the State concerned the right to enter into* an arrangement with the savings banks in regard to maturity dates of new securities issued on conversion. An arrangement of this kind can provide that the original date of maturity of the existing securities shall be maintained. The chief reason why this provision has been made is that the moneys lent to the various Governments by the Government savings banks have, in the main, been lent on special terms arranged directly between the Government savings banks and the Treasurers concerned. In most cases, the Government savings banks have lent their money to the Governments on concessional terms, particularly as to interest. There has always been very close relationship between the Government savings banks and the Government Treasuries, and the lending of moneys by the savings banks to the Treasuries has usually been the subject of a special arrangement under which the terms were better to the Treasury than the terms on which the Treasury was, at the time, borrowing from the public. It is most desirable that these close relationships which have been so advantageous to the Treasuries should be continued, and that the Treasuries should in the future, as in the past, be at liberty to make special arrangements with the Government savings banks in regard to the borrowing of money and the renewal of loans. The Launceston Bank for Savings and the Hobart Savings Bank are not in the same close relationship with the Tasmanian Government or the Commonwealth Government as the Government savings banks. These Tasmanian institutions have lent considerable sums to the Government of Tasmania and have invested large sums in Commonwealth securities. Their investments in government securities, however, have been made on the same terms as the investments of the general public. They did not grant concessional terms as to interest, as did the Government savings banks. In view of these facts, the Tasmanian institutions have no better claim to the maintenance of the existing maturity dates of their securities than have the trading banks or the general public. The trading banks have already suggested that they should be given the same rights as the Government savings banks, but their claim has been refused. Their request could not, however, be denied if the Tasmanian institutions’ request were granted. Any amendment of the clause designed to extend its scope is therefore unacceptable. All that the clause does is to make it possible for the Treasurers to make special arrangements with the Government savings banks in the future, as in the past.
.- The Assistant Minister (Senator Dooley), has, perhaps unintentionally, refrained from giving certain information to the committee. Some of the State savings banks in Australia are holding the same class of Commonwealth securities as the Hobart Savings Bank and the Launceston Bank for Savings. Existing securities are defined in clause 3, and I maintain that those held by the banks I have mentioned are exactly the same as those held by other savings banks. In these circumstances the Hobart Savings Bank and the Launceston Bank for Savings should in the matter of securities have exactly the same treatment as State savings banks.
Question - That the word proposed to be left out be left out (Senator Payne’s amendment) - put. The committee divided.
Majority . . 14
Question so resolved in the affirmative.
Amendment agreed to.
– As I said a few moments ago, I consider that the Treasurer of the Commonwealth should occupy a controlling position in this matter. I therefore move -
That the word “ Treasurer “, sub-clause ( 1 ) , be left out, with a view to insert inlieu thereof the word “ Treasurers “.
– This amendment will destroy the spirit of the clause.
– To my mind, the clause will be improved. No matter what government is in power, the Treasurer of the Commonwealth will be in a position that he ought to occupy, because it will he his duty to find the money.
– It might be loaned to a State government.
– The amendment is in the interests of the Government, and I should like to know what views it holds with respect to it. Should the Government not be keenly alive to what is in its own interests, I do not feel called upon to proceed With the amendment, even though, in my opinion, it would improve the clause.
– The Government views this amendment in the same light as that which has been moved by Senator Payne. I cannot accept responsibility for any departure from the clause as drafted.
– As the Government is not desirous of making this, to my mind, vital improvement, Ishall not persist with it. I ask leave to withdraw the amendment.
Amendment - by leave - withdrawn.
Amendment (by Senator Payne) proposed -
That the following words be added to subclause 2 : - “ the Hobart Savings Bank and the Bank for Savings, Launceston “.
– This will tend further to destroy the Premiers’ plan, which has been agreed to by the Premier of Tasmania, among others, and will probably be accepted by the Parliament of that State.
– This matter was never discussed at the Premiers Conference.
– It strikes me as rather strange that the representatives of Tasmania should desire to make to the plan this and other alterations which, in my opinion, are absolutely destructive in their nature. When the plan was completed it was essential that it should be given legislative effect with as little alteration as possible by the Parliaments of all the States. The remark was made to-day on another measure that these proposals are distasteful to everybody. This is not a party matter; bitterness accompanies the swallowing of the proposals by members of all parties. If it be right to give a concession to savings banks that are run for the benefit of individuals in Tasmania, why should not trading banks, which also have depositors, and insurance companies, in which ‘ private individuals are interested, receive a similar concession? These institutions are in exactly the same position as insurance companies. The committee will make a great mistake if it agrees to this amendment, which I consider aims a very grave blow at the success of the plan. The committee cannot afford to tinker in any way with the plan. These institutions have no right to claim favours that are not offered to other similar bodies. I question the wisdom of differentiating between individuals in Tasmania and in the other States of Australia.
– The Minister is labouring under a misapprehension. All that we ask is that the same consideration be given to these institutions as is given to the State savings banks and the Commonwealth Savings Bank. The amendment does not touch any individual investor, but relates to the same class of investment as is made by the State savings banks.
The Minister has alleged that the effect of the amendment will be to destroy the plan, to which the Premier of Tasmania has assented. Owing to an oversight, this matter was not considered by the Melbourne conference. Had it occurred to the Premier of Tasmania at the time, he would have raised the question, and this concession - if honorable senators wish to call it such - would have been embodied in the plan with the consent of the Commonwealth Government. It is quite unfair of the Minister to suggest that Tasmanian members are doing something that will destroy the plan. I remind him that when the vote was taken the other day on the motion for the second reading of the bill, only one member of the Government supported it, while two of its supporters voted against it, leaving the votes of five government members unaccounted for, despite the fact that this measure constitutes the framework of the whole plan. No stronger evidence of insincerity could have been afforded than the absence of five government members from the chamber at the time when, they might reasonably have been expected to be in their places to support what they claim has their approval. It cannot be said that we have any desire to destroy the plan. The committee would do wrong if it failed to repair what was an oversight.
Senator Sir GEORGE PEARCE (Western Australia) [5.2]. - I confess to a feeling of considerable doubt regarding the wisdom of this amendment. When I received a letter from the chairman of the board of the Bank for Savings, Launceston, I was impressed with the argument advanced. At first sight, it appeared to me that there was an unfair differentiation against these institutions; but upon a further investigation of the matter, I am not at all satisfied that that is the case. The last speaker said that these banks fulfil functions identical with those of government savings banks in relation to their respective State Governments. I do not think that that is quite the case. Honorable senators are well aware that a State savings bank is practically directed by the State government of the day. The State Treasurer is in very intimate relationship with such institutions, and in practically all cases their funds are invested in State securities. For example, the State Savings Bank of Western Australia very largely lends its surplus funds to the State Government and not to the Commonwealth Government. I understand from the statement made by Senator Payne that the Hobart Savings Bank and the Bank for Savings, Launceston, have invested upwards of £2,000,000 in Commonwealth Government securities.
– Some of it has been invested in local inscribed stock.
– Almost half of it has been invested in State securities.
Senator Sir GEORGE PEARCE.The relationship of these institutions to the Government, whether it be that of the Commonwealth or the State, is not of the same intimate character as is the relationship of, say, the Government Savings Bank of Western. Australia or the Government Savings Bank of Victoria to the Governments of those States. These banks are administered, not by a government or by appointees of a government, but by committees appointed by their depositors. The objection raised by Senator Thompson struck me at once. Why is the consent of the State Treasurer necessary? Why was not the clause, drafted to provide merely for the consent of the Commonwealth Treasurer? It has been drafted to provide also for the consent of the State Treasurer because of the intimate relationship between State savings banks and State Treasurers. The savings banks of Launceston and Hobart are in no different relation to this conversion loan transaction that any other trading banks. They may have invested their funds in Commonwealth or State securities, but the controllers of that action are not the State Government nor the State Treasurer, but committees representing their depositors. Although I should like to support the Tasmanian senators in this matter, I cannot do so because I doubt the propriety of carrying the amendment. If it were carried a peculiar position would arise in regard to the question of deciding on the maturity dates of the original securities. The State Treasurer of Tasmania and the savings bank at Launceston or Hobart would decide the matter without the Commonwealth Treasurer having any voice in the matter.
– Only in regard to locally inscribed stock, but not in regard to Commonwealth bonds.
Senator Sir GEORGE PEARCE The words in the clause are, “ If the Treasurer of the Commonwealth or the State concerned “, and in this case the Treasurer of the State concerned would be the Treasurer of Tasmania. The point raised by Senator Thompson is that under the clause as it stands the consent of both the Commonwealth Treasurer and the State Treasurer is not required. The Treasurer of the State might agree with the request of the bank thai its securities, which might be Commonwealth securities, should mature on the original date of maturity. Senator Payne tells us that the savings banks of Hobart and Launceston have £2,000,000 invested in Commonwealth and State bonds. Three-fourths of this amount may be invested in Commonwealth securities, yet if the State Treasurer of Tasmania agreed with the savings banks of Hobart and Launceston that these securities should be discharged on the existing date of maturity, the Commonwealth Government, upon whom the responsibility of meeting the obligation would lie, would have no voice in the matter at all.
– That would be no great evil.
Senator Sir GEORGE PEARCE.I do not like the Commonwealth Treasurer’s chance of making arrangements at the present time or for some time in the immediate future to raise £1,500,000.
– He will be obliged to make those arrangements in the case of government savings banks.
Senator Sir GEORGE PEARCE.In that case, we will be dealing with State institutions that have lent their money exclusively to State Governments.
– Do they riot also lend money in a general way?
Senator Sir GEORGE PEARCE.Their money is lent almost entirely, if not entirely, to the Governments, Commonwealth or State. It has been the practice of every State Government to lay hold of every pound the State’s savings bank has had available, and to pay a lower rate of interest upon it than has been payable upon other money it has borrowed. The amendment has such a far- reaching effect that I am hesitant about it. I think the Government of Tasmania must have realized this, otherwise it would have raised the point at the Premiers Conference.
– It was overlooked.
Senator Sir GEORGE PEARCE.In addition to the State Treasurer, the State Under-Treasurer was at the conference, and was also on the committee of experts which drafted the plan. I think we can take it that the Treasurer and the Under-Treasurer of Tasmania were well aware of the circumstances of these institutions in Hobart and Launceston, and of their relationship to the State Government. In any case, is there any likelihood of difficulty arising in regard to these banks if the amendment is not made? In common with all other savings banks, they will have to reduce the rate of interest paid to their depositors, possibly to 3 per cent.; and when their loans to the Government mature, the worst that could happen to them is that they will get new securities on which they will realize 4 per cent, instead of the 5 per cent, and 5½ per cent, which they are now paid. The 4 per cent, will give them a margin of 1 per cent, on which to carry on, and there is, therefore, no possibility of these institutions being ruined. I do not wish the Senate to send an amendment to another place which it cannot support on good grounds. I feel that our position if we agreed to the amendment would be too insecure; and, although I was prompted by the desire to help honorable senators, and would have liked to vote with them, I have not yet been able to dispel the doubts I have upon their proposal. I know that the relationship between a State Government and a State Savings Bank does not exist between the Government of Tasmania and the savings banks of Hobart and Launceston.
.- Senator Pearce has missed the point; State savings banks of Australia hold existing securities as defined in the interpretation clause - they may be Commonwealth inscribed stock or war bonds - and the Tasmanian savings banks hold the same class of existing securities. They claim, therefore, to have applied to them the same conditions that are to be made in respect of State Government savings banks in the other States. What justification is there for suggesting that provision should be made that Commonwealth bonds held by a. government savings bank shall be met on the date of maturity subject, from now till then, to a lower rate of interest, but that the same privilege shall be denied to the Hobart and Launceston savings banks ? All these institutions are to be called upon to make a. sacrifice in regard to the rate of interest, but one section of savings banks is to have the privilege of having its loans paid at the maturity date of the original stock, while the Hobart and Launceston savings banks, unless my amendment is carried, are to be compelled to convert over the whole period provided for new stock. It must be borne in mind that the money advanced by the Tasmanian savings banks is at call, and is the property of small depositors who will be embarrassed if the banks cannot realize, at the original date of maturity, on securities obtained by the use of their money.
– By how much would the amendment injure the plan?
– The plan would not be injured at all, or at any rate, not to more than a minor degree. I have perused the report of the Premiers Conference, and I find that it contains no reference to the savings banks of Launceston and Hobart. The committee of experts was dealing solely with State savings banks, and evidently overlooked the two pioneer savings banks of Australia, located in Launceston and Hobart. I have moved the amendment to rectify this omission. In any case, the principle has already been agreed to, and the amendment now before the committee is purely consequential.
– It seems tome that there is some difference of opinion about the meaning of the clause. I take it that “ State concerned,” means the State by which the security is held, and that the reference is not to the Treasurer of the State in which a particular savings bank is located. If the funds of the Launceston and Hobart savings banks have been advanced to the Commonwealth, I do not think that any State Treasurer can exercise any authority in the matter. It seems to me, however, that the meaning of the clause should be made a little clearer. Possibly it would be as well to postpone its further consideration. My vote shall go in ‘ favour of putting the savings banks of Tasmania in the same position as the savings banks of other States.
– There is a vast difference be; tween a savings bank backed by the whole of the resources of a State and a savings bank backed only by individual depositors.
– The Tasmanian savings banks are backed by an act of Parliament which provides certain conditions.
– Parliament may lay down certain conditions governing a private savings bank, but it assumes no responsibility for the bank itself. In all the States, except Tasmania, the savings banks have the resources of the States behind them, just as the Commonwealth Bank has the whole of the assets of Australia behind it. The savings banks of Launceston and Hobart are no different from private institutions. They cannot claim a concession that is justified in the case of a government-controlled savings bank. As for the remark of Senator Herbert Hays that Government support for the bill was somewhat limited, I may explain that I was ill in bed, and therefore was unable to attend earlier. Another Government supporter, who is ill in a distant State, expects to undergo an operation shortly. He was paired. If I had thought that there was any necessity for me to obtain a pair, I should have done so, but I do not know with whom I could be paired. For the reason that private banking institutions, such as those in Tasmania, are entirely different from State Government Savings Banks, the Government believes that they should not be included.
– “We have reached a stage when we must either go backwards or forwards. It appears to me that having agreed to the first amendment, the committee should not now reject this amendment which is purely consequential, otherwise the clause will .have to be recommitted and the earlier amendment disallowed. The Leader of the Senate (Senator Barnes), made some reference to the party spirit in the division. I disclaim the slightest suspicion of party spirit- in this matter. I was induced to vote for the amendment on the representations of the Tasmanian senators, and in the belief that the Tasmanian savings banks were, by some oversight in the drafting of the bill, omitted from this provision, but if the Treasurer who, no doubt, is thoroughly conversant with the whole of the provisions in the bill, can advance good reasons for the omission of the Tasmanian banks, I shall not offer opposition to the matured views of those who understand the plan much better than I do. If the Leader of the Senate can show that the adoption of this amendment is likely to imperil the plan or in any way harm it, I shall not support it, but I think that the Treasurer should reconsider this matter in the light of the arguments that have been adduced iu this chamber. I desire now to call attention to what I regard as a grammatical error in the drafting of sub-clause 1. It provides that the new securities shall mature upon original dates “ if the Treasurer of the Commonwealth or the State concerned “ so agree. I suggest that the word “ of “ should be inserted after the word “ or “.
.- The Leader of the Senate (Senator Barnes) appears to have an entirely erroneous idea concerning the function of these private banks, and has suggested that because they are not State institutions, they ought to be destroyed, and the depositors lose their money.
– I do not want to see them destroyed.
– At all events that was the inference to be drawn from the honorable senator’s remarks. I am not supporting the amendment in the interests of the banks, but on behalf of the depositors. It is a serious matter to alter the maturity date of securities, which may be four or five years hence, and fix it at 30 years. The whole of the liabilities of these banks are at call. The right honorable the Leader of the Opposition (Senator Pearce) stated that the State savings banks have no investments in Commonwealth securities in the ordinary way. I am under the impression that, apart from loans to State Governments, many of them have invested in Commonwealth stock and bonds in the ordinary way. If they have, then their depositors are to have a much better security than can be claimed for the depositors in the Tasmanian private savings banks, although the functions of the latter are identical with those of State savings banks. Insurance companies are in an entirely different position. Their liabilities mature at certain fixed dates, whereas the liabilities of savings banks are at call.
Senator Sir GEORGE PEARCE (Western Australia) [5.30]. - I wish to clear the point that was raised by Senator Brennan. If honorable senators will turn to page 110 of the report of the conference proceedings, they will find that this matter was discussed upon paragraph 15 of the report of the legal subcommittee, which submitted the draft of the proposed conversion loan. The report reads -
Paragraph 15 -
Government securities held by State Savings Banks. - Dates of maturities of securities held by the State Savings Banks to stand, if so desired by the Treasurer of the State concerned, on same conditions as conversion issue.
Mr. Scullin. Does the conference agree to that paragraph?
Sir James Mitchell. It will all depend on the scheme for the reduction of interest whether the State Governments will be able to secure such consideration.
Mr. Scullin. The paragraph has the words “ If so desired by the Treasurer of the State concerned “.
Mr. Theodore. Otherwise, these securities would come into the scale of maturity dates set out in the plan itself.
Sir James Mitchell. Then this will be optional.
Obviously, the clause was so drafted because of the intimate relations between State savings banks and State Governments.
Question - That the words proposed to be added be added (Senator Payne’s amendment) - put. The committee divided.
Woes . . . . 7
Majority . . . . 11
Question so resolved in the affirmative.
Amendment agreed to.
Clause 15 also consequentially amended, and, as amended, agreed to.
– I move -
That the following new clause be inserted: - “ 15a. New securities issued in exchange for existing securities held by a life assurance company shall mature on the original date of maturity of the existing securities, but not earlier than the fifteenth day of December, 1936 : “ Provided that in the case of a life assurance company that has not attained a state of actuarial solvency such new securities shall mature on the original date.”
The Leader of the Senate (Senator Barnes), speaking to the amendment to clause 15 moved by Senator Payne, said that it might as well apply, also, to insurance companies. Representations have been made to me by an insurance company that this clause should cover insurance companies as well assavings banks. Some life insurance companies will be placed in a very difficult position by this bill. I have received a communication from the actuary of one insurance company in which he points out that 2,324 ordinary industrial policies will mature between 1931 and 1937. Without bonus additions, the face value of those policies is ?80,723. As under the debt conversion scheme the first maturing date will be 1938, the liability of the company will probably amount to ?100,000 before it can have any of its investments refunded. Insurance companies, with policies maturing in the meantime, will have to meet them as they fall due. As they have made large investments in government stocks, they might not be able to realize on their assets, and consequently be unable to meet their liabilities in respect of those payments. 1 am assured that, on account of the depression, some life insurance companies are not writing a great deal of new business, and consequently their anticipations in respect of new premiums will not be realized. Although many of the older insurance companies have also invested largely in government stocks, they arein a more secure position, because their investments have been more widespread. The newer companies, however, whom my correspondent represents, although solvent, have not all reached a state of actuarial solvency. They cannot realize on their assets promptly. If this bill becomes law they may easily be placed in the position of finding it impossible to carry on business at all. The outlook for both the company and its policyholders is grave. I submit that the claim which I now make on behalf of this company, and also of other companies, is only reasonable. Many persons who have taken out, life insurance policies in order to provide for their old age will be seriously handicapped if, because of this legislation, the companies are unable to honour their obligations to them.
– Is the company mentioned by the honorable senator a public company or a mutual company?
– It is a public company;but my remarks apply to all companies.
– It will have its premiums coming in.
– Some companies may find it difficult to meet their obligations by means of premium payments. I urge that special consideration be given to this and similar companies.
– When the Senate agreed to exempt certain private savings banks I anticipated the amendment which Senator Duncan has moved. Once we depart from the plan to the extent of exempting certain institutions from its operations, it is difficult to say where the exemptions will end. We have already exempted certain banking institutions in Tasmania; now we are asked to exempt certain insurance companies; next we shall proba’bly find that some of the trade unions or friendly societies will apply for an exemption. They would be as much entitled to it as is any insurance company. Once we commence to make exemptions we may expect to receive applications for similar exemptions on behalf of all sorts of organizations. I trust that the Senate will not agree to the amendment.
Senator Sir GEORGE PEARCE (Western Australia) [5.46]. - I am unable to agree that insurance companies should be exempted. The amount of money invested by insurance companies in Commonwealth securities is £71,000,000.
– My amendment limits the insurance companies to which the exemption would apply.
– Once we differentiate between various classes of companies, we are on shifting sands. On page 150 of the report ofthe recent Premiers Conference, appears a letter from a number of life insurance companies, in which they state that they were consulted regarding these proposals. The following companies indicated their assent to the scheme: - The Australian Mutual Provident Society, the Mutual Life and Citizens Assurance Company Limited, Assurance and Thrift Association Limited, Australian Metropolitan Life Assurance Company Limited, Australian Provincial Assurance Association Limited, Commonwealth Life (Amalgamated) Assurance Limited and the Provident Life Assurance Company.
– Those companies accepted the scheme conditionally.
– The only condition was that the other parts of the scheme - the economies which willbe effected under this bill - should be put into effect simultaneously.
– One of the recommendations in the scheme was a reduction of the tariff.
– I think not. The scheme which they accepted was the one submitted by a subcommittee, consisting of Mr. Hill, Mr. Jones, and Sir James Mitchell.
– The conference accepted the scheme submitted by a committee of economists and undertreasurers.
– The scheme put forward by the three Ministers whom I have mentioned was the one which came before the conference.
– Having listened to the Leader of the Opposition, I find that included in the list of companies which gave their assent to the plan is the company on whose behalf I have spoken this afternoon. In the circumstances, I ask leave to withdraw my amendment.
Amendment - by leave - withdrawn.
Clauses 16 to 19 agreed to.
Clause 20- (1.) Notwithstanding anything contained in the Taxation of Loans Act 1923 or in any other act or State act, the interest derived by any person in any financial year from new securities exchanged for existing securities (other than interest which in accordance with the provisions of section fourteen of this act is free from Commonwealth and State income tax) shall be free -
– I move -
That after sub-clause (1.) the following subclause be inserted: - “ (1a.) In determining, for the purposes of this section, the amount of income tax which would be payable in respect of interest to which this section applies, the rate of tax shall be applied to the whole amount of that interest included in the income of the taxpayer without any deduction except such part (if any) of the deductions allowable from the income of the taxpayer derived from property as, in the opinion of the Commissioner of Taxation, is properly attributable to the interest.”.
This amendment is necessary to enable the Commissioner of Taxation to make a fair apportionment between interest and other income of a taxpayer. When the taxable income is less than the actual income by reason of the deductions, it is desired to spread the deductions equitably.
Senator Sir GEORGE PEARCE (Western Australia) [5.51]. - I am not quite satisfied with the explanation given by the Assistant Minister (Senator Dooley). The clause, as I understand it, provides, broadly, that interest from new securities shall not be liable to any income tax. The amendment provides that any deduction made shallbe such a deduction from the income of the taxpayer derived from property as, in the opinion of the Com missioner, is properly attributable to the interest. Why is any discretion to be left to the Commissioner of Taxation? Why is it desired to spread the deductions equitably? The amount received in interest is a simple question of fact, and not one which should be determined by the Commissioner of Taxation. If an amount is properly deductible, why should any discretionary power be left with the Commissioner? We are either exempting this interest from income taxation or we are not. If we are, why should any discretionary power be left with the Commissioner? If we are not, why do we not say so?
– Should not the amount he taken into consideration in allowing the deductions?
Senator Sir GEORGE PEARCE.The question involves not the amount which the Commissioner may determine, but the amount actually received as interest on securities.
– I take it that this amendment is being inserted for the purpose of making the rate of an individual taxpayer work out on a higher scale?
Senator Sir GEORGE PEARCE.Yes, and to bring in tax-free incomes in order to make them taxable. I should like the Assistant Minister to explain why this discretionary power is left in the hands of the Commissioner.
.. - The only explanation I have to offer is that this position gives the Commissioner discretionary power similar to that contained in the Income Tax Assessment Act, section 23 of which provides -
Where by this act any sum is allowed to be deducted from any taxpayer’s total assessable income and the total assessable income consists partly of income from personal exertion and partly of income from property the sum may in the first place, subject to section twenty-four of this act, be deducted -
b ) in the case of the remaining deductions - from that class of income to which it, in the opinion of the Commissioner, relates, but if the income of the class from which the deduction is in the first place to be made does not amount to the sum to be deducted, the difference shall be deducted from the income of the other class.
Senator Sir GEORGE PEARCE (Western Australia) [5.58]. - I am not satisfied with the explanation given by the Minister. I should like to know why it is necessary to insert this provision, in this clause where it appears to be out of place. If an amendment is necessary it should be made in the Income Tax Assessment Act. I cannot understand its connexion with this bill. Why is this discretionary power left to the Commissioner ?
– As I do not wish to press the amendment without supplying sufficient information I shall agree to the postponement of the clause until I have further particulars.
Clause 21 agreed to.
Where the conversion of existing securities into new securities would result in the issue of au amount of new securities not being a multiple of Ten pounds, any fraction of Ten pounds shall be paid oil’ in cash:
Amendment (by Senator Dooley) proposed -
That the word “ shall “ be left out with a view to insert in lieu thereof the word “ may
.- As the clause stands it is mandatory upon the Treasurer to pay any fraction of £10 in cash. Why is it proposed to substitute the word “may” for “shall”?
– I understand that it is desired that estates in broken amounts shall not be disturbed. It is therefore proposed to make it optional and not obligatory upon the Government to pay these broken amounts in cash.
– I have no objection to the amendment, but I should like to know if Peace Saving Certificates are to be treated in the same way as ordinary bonds with a currency spread over 30 years?
– I understand that they are not.
– How are they being paid?
– The existing conditions will not be disturbed.
Amendment agreed to.
Clause, as amended, agreed to.
Clause 23 agreed to.
Clause 24 (Acceptance of securities in payment of estate duty).
.- At the second-reading stage of the bill, I asked the Minister (Senator Dooley) to confer with the Treasurer (Mr. Theodore) to see whether that gentleman would entertain the proposition that new securities bearing interest at the rate of 4 per cent, or 37/8 per cent, would be accepted by the Commonwealth at par as payment of income tax as well as of estate duty. That appears to me to be a reasonable proposition. It is understood that the Government is desirous of reducing its loan liability as speedily as possible; and this is a way in which that may be done. It is reasonable to suggest that if a mau holds government securities to the amount of £100 and owes £100 to the Taxation Department, the Government should accept those securities as payment of the tax; otherwise, there would be repudiation of the bond, which should be worth its face value to the department. The debt owing to the Commonwealth, would be reduced by £100. Therefore, what objection could be offered to my suggestion?
– I trust that the honorable senator does not seriously iutend to persist to the extent of moving an amendment embodying his suggestion. This matter has been exhaustively investigated by the drafters of the bill, and cannot, in any circumstances, be agreed to.
.- I had no intention of moving an amendment; but I ask the Government to give favorable consideration to my suggestion should the finances improve considerably during the next year or two.
– I assure the honorable senator that that will be done.
Clause agreed to.
Amendments (by Senator Dooley) agreed to -
That after the word “ Commonwealth “, first occurring, sub-clause (1) the words “or in any part of the Commonwealth” be inserted.
That after the words “ authorized by “, subclause (3), the words “or under” be inserted.
That the words “ any director or officer of any such company and any person acting in any fiduciary capacity”, sub-clause (3), be left out with a view to insert in lieu thereof the following: - “(a) any director of, and any member of the council of management or governing body of, and any person charged either alone or with others with the management or government of, and any liquidator of, any such company as aforesaid or any other company; and
That the following new sub-clause be added: - 4. This section shall not be construed as affecting the validity of any State act (whether passed before or after the commencement of this act) which authorizes or empowers trustees to convert, or to withhold signification of dissent from the conversion of, any existing securities into new securities, and which is not in terms inconsistent with the provisions of this section.
Clause, as amended, agreed to.
Registries of stock shall … be closed
Amendment (by Senator Dooley) agreed to -
That the word “ Registries “ be left out, with a view to insert in lieu thereof the word “ Registers “.
Clause, as amended, agreed to.
Sitting suspended from 6.15 to 8 p.m.
The Governor-General may make regulations, not inconsistent with this act, prescribing all matters which by this act are required or permitted to be prescribed, or which are necessary or convenient to be prescribed, for carrying out or giving effect to this act.
Senator Sir GEORGE PEARCE (Western Australia) [8.0]. - I move -
That the following new sub-clause be added : - “ (2) Where in any session of the Parliament either House of the Parliament disallows a regulation made in pursuance of this section, any regulation made in that session and the same in substance as the regulation so disallowed shall be void and of no effect.”
This bill leaves some very important powers to be prescribed. For instance the words “ as are prescribed “ occur throughout clause 4; and in quite a number of cases it is provided that certain things shall be as determined. In all probability regulations will be issued to determine the points that may arise. Honorable senators are aware that this regulationmaking power of the Executive is a delegated power, and until recently it was felt that either House of Parliament could have confidence in the Executive with regard to its exercise, but the course followed by the present Government in regard to regulations under the Transport Workers Act has been such that this chamber has lost its constitutional control over the making of regulations. In the circumstances, I feel that we should not allow this bill to become an act, giving the Government power to make regulations under it unless some control is retained by the Senate over those regulations. I do not move the amendment willingly, because I would far rather the Government observed the usual procedure; but I regard it as necessary to do so. In the reply given by His Excellency the Governor-General to the address tendered to him by the Senate, upon the Government’s disregard of the Senate’s disallowance of regulations under the Transport Workers Act, is the following:
The power to make the regulations is contained in these words - “ The Governor-General may make regulations not inconsistent with this act.” By force of the Acts Interpretation Act 1901-1930, sections 17 (f), 33 (1) and 33 (3) those words - there being nothing to the contrary appearing - are to be read in full as: - “ The Governor-General, acting with the advice of the Executive Council may from time to time, as occasion requires, make regulations not inconsistent with this act, and rescind, revoke,amend or vary such regulations.”
I am unable to see how I can justifiably introduce a limitation on the Executive power which Parliament itself has not seen fit to insert, namely, a limitation of the nature of the rule of Parliamentary practice referred to. Such a limitation, as it appears to me, would cut down the words agreed upon by the two Houses of Parliament-“ from time to time, as occasion requires” (a matter for the political consideration of Ministers) by, in effect, inserting at the request of one of the Houses the words “ but not during a session in which regulations, being the same in substance, have been disallowed by either House of Parliament.” No constitutional precedent of which I am aware would warrant me in taking such a step.
It will be seen from those words that the amendment I am moving is in strict conformity with the advice tendered to His Excellency by his Ministers. The amendment will enable us to express in this bill our intention to maintain an effective control over the regulation-making power of the Government. If it be agreed to, and either House should exercise its power to disallow a regulation made under the act, two courses will be open to the Government. It can legislate upon the matter dealt with by the regulation, and if it has a good case, should have no difficulty in pushing a bill through both Houses to give effect to what the regulation was intended to. achieve. I am’ doubtful about the other course, but our Standing Orders provide that any resolution passed by the Senate may be rescinded. The Government may be able to show good cause why a regulation which has been disallowed should be re-enacted, and may succeed in having the resolution disallowing the regulation rescinded. It will then be for a lawyer to say -whether that step would bring the regulation once more into effect. I move this amendment in order that the Senate, or the other House, may have a real and effective control of the regulation-making power of the Executive as it is exercised under this bill when it becomes law.
– The right honorable senator is endeavouring to insert in this bill an amendment which would find a better place in the Acts Interpretation Act. The merits or demerits of giving the Executive power to advise His Excellency the Governor-General to frame a regulation do not come into the question, but notwithstanding the right honorable senator’s reference to recent happenings, I can assure the committee that the present Ministers have no inten tion of doing anything under this bill which need cause honorable senators to have the slightest fear. The proper method of seeking to curtail the powers of the Government to make regulations is to secure an amendment of the Acts Interpretation Act.
– If I understand the amendment, its purpose is to reserve to either House the right conferred upon it by the Constitution, whose framers provided that when Parliament found it inconvenient to express, within the four corners of a bill, all that was intended to be done the Executive should have the right to make certain regulations not inconsistent with the measure. Unfortunately, not only here, but in Great Britain as well, governments have made use of this regulationmaking power all too liberally. Parliament is supposed to be the only authoritative mouthpiece of the nation, and when an executive, which is composed of a section of the Parliament, sometimes seeks by a regulation-making power not to give faithful expression to the intention of Parliament, success in that direction means that the rights of Parliament are slowly filched away. It is unnecessary to remind students of history of the long hard-fought fight to wring from people of despotic sympathies and inclinations the right which was finally reposed in the Parliament of Great Britain. We have been told by no less an authority than the Lord Chief Justice of England in his work, The New Despotism, that even in the Mother Country the rights of the people are being slowly taken away from them by means of the power of the Executive to make regulations. It is, therefore, no wonder that the Leader of the Opposition now stresses the need for the Senate to jealously preserve the rights given to it under the Constitution. We all have fresh, in our minds the recent activity of the Government in re-enacting, time after time, certain regulations the same in substance as those disallowed by the Senate, and no one will deny that the intention of the Ministry was to read into an act passed by this Parliament, a provision vesting in the Executive authority to do certain things that are not specifically included in that measure. The Senate is now entitled to see that the proper remedy is applied, so that governments in future shall not be permitted to re-enact regulations that have already been disallowed. If we do not take this step, our system of parliamentary government in this particular will be reduced to a farce. This Government, as we know, in defiance of the Senate, issued no fewer than seven separate regulations, all substantially the same in substance, but differently worded. Finally it succeeded in its purpose by providing that licences issued in pursuance of such regulations should be given only to a certain privileged body of workmen, and no other. But the flaw which I see in the amendment is that it does not prescribe what authority shall determine whether regulations that may be re-enacted by a government are similar in substance to regulations that may have been disallowed byone branch of the legislature.
– The High Court will determine that.
– Possibly it will, but some one must first move the High Court.
– The Opposition in this chamber must have believed that the High Court would uphold the action of the Government, otherwise it would have tested the position before that tribunal.
– If some future government is as obstinate as this Government has been lately, and ignores the Senate, it may, in similar circumstances and behind the back of Parliament, achieve its purpose, because of the disinclination to move the High Court. For this reason I am afraid that the amendment will not achieve its purpose. But. I would appeal to honorable senators from a higher stand-point. Do not they consider that it is their duty, as members of the Senate, to conserve its interests, its power, its dignity, and its authority in the legislative sphere? Do not they realize that while governments may come and go, the Senate must remain to fulfil its purpose?
SenatorO’Halloran-We believe in the rights of the people.
– The rights of the people be hanged! I hasten to add that by this I mean the rights of the “ people “ represented by Senator O’Halloran, who want to smash the Senate- the “ people “ as represented by the modern tailors of Tooley-street. The Senate is the custodian of the rights of the people. It is the grand palladium of the nation, and the guardian of the people’s liberty. Constituted as it is, under the freest system of selection in the wide world, the Senate stands above all governments, and the member of it who would support the Government against this chamber, as has been done lately, is abusing the trust reposed in him by the electors of the Commonwealth. The Senate is on the mountain top, andwill remain in spite of what bogus democrats may say or try to do. Governments, as such, compared with the Senate, are like ants, running to and fro on an ant bed, living a precarious existence. I regret to say, some Ministers and their supporters are basely endeavouring to undermine this glorious structure, this finest flower of the creative legislative genius of mankind.
Question - That the amendment (Senator Sir George Pearce’s) be agreed to - put. The committee divided.
Question so resolved in the affirmative.
Amendment agreed to.
Clause, as amended, agreed to.
Postponed clause 12 (Cases in which dissent is signified).
The CHAIRMAN (Senator Plain).Senator Dooley has already moved -
That the following new sub-clauses be added: -
– This clause was postponed in order that further information concerning it might be obtained. Persons “who apply for conversion and persons who do not dissent from conversion are to get new securities, and no interest is to be paid on the old securities for any period after the 31st July, 1931. It is, therefore, necessary that the old securities held by these persons shall be surrendered, and new securities issued. It is also necessary that the securities, in the form of bonds, of dissenters shall be surrendered, otherwise the bank at which the coupons are tendered would not know whether they were tendered by bona fide dissenters, or persons who had been deemed to have converted. It is, therefore, proposed that all the holdings of dissenters shall go into inscribed stock, and remain as inscribed stock, so that the Treasury may pay the interest as it falls due. The securities are not new securities, as they bear the original interest rates, and mature on the same date, as originally.
Amendment agreed to.
Clause, as amended, agreed to.
Postponed clause 13 - 13.- (l.) . . .
Provided that where the holder of existing securities satisfies the Treasurer that he acquired the securities . . .
Upon which Senator Sir George Pearce had moved, in the proviso to sub-clause 1, by way of amendment -
That after the word “he” the words “or the person whose executor, administrator, or trustee he is “ be inserted.
– Having had an opportunity to study the effect of the amendment, I offer no objection to it.
Amendment agreed to.
Clause, as amended, agreed to.
Postponed clause . 20 (Interest on new securities to be free from further taxation).
– Senator Dooley has already moved -
That the following new sub-clause be inserted - “ (1a.) In determining, for the purposes of this section, the amount of income tax which would be payable in respect of interest to which this section applies, the rate of tax shall be applied to the whole amount of that interest included in the income of the taxpayer without any deduction except such part (if any) of the deductions allowable from the income of the taxpayer derived from property as, in the opinion of the Commissioner of Taxation, is properly attributable to the interest.”.
– The reason for inserting section 20 in this bill is that the freedom of new securities from increased income tax is an important condition of the conversion. But, because of the complicated provisions of the income tax law, and the graduated nature of the tax, this freedom from increased taxation is very difficult to express in words. The clause, as it stands, deals with a taxpayer’s assessment for, say, the year 1938. It has regard to the interest on bonds which forms part of his income, and compares the amount of tax which would be payable in respect of that interest at the 1938 rate with the amount which would be payable in respect of that interest at the 1930 rate, and it reduces his taxation by the difference between the two amounts. The question arises as to the exact amount of tax payable in respect of the interest. The act imposes taxation, not in respect of particular items of his income, but in respect of all his assessable income in two classes - income from property, and income from personal exertion. A taxpayer is not taxed on the whole of his income, but on his taxable income - his income less the deductions - and the problem is to apportion the deductions to the different items of income. It is not a matter of simple proportion, because some deductions are properly referable to a particular item of income. For instance, the depreciation of plant is referable to the earnings of the plant, and no portion of it ought to be referred, say, to bond interest. Letus take a simple illustration. Suppose that in 1938 the rate applicable to the taxpayer’s property income were 15 per cent., and the rate applicable to the same income in 1930 was 10 per cent. Suppose also that his total property income was £1,000, derived wholly from interest in new securities, and also that he is entitled to deductions therefrom of £200, for insurance, gifts to charities, &c. The taxpayer is entitled to a rebate of 5 per cent, of the amount payable in respect of that interest. But he is taxed not on £1,000 interest, but only on £800 ; so that the rebate is not 5 per cent, of £1,000, but 5 per cent, of £800. If the taxpayer has different sources of income, the question of apportionment of the deductions comes in. That question is so complicated that it is impossible to lay down a definite formula which will be just in all cases. Far the most satisfactory method is to leave it to the commissioner to work out on the facts of each case. This is what was done in section 26 2 b.
.- It is difficult to follow the Assistant Minister’s explanation of the amendment, which seems to embody a new method, under which income in the form of interest on new securities is to be calculated. I think that the committee should have further opportunity to consider the amendment before coming to a decision. I do not know if the Leader of the Opposition is satisfied with the Assistant Minister’s explanation.
– It merely gives the Commissioner the right to determine the rate of tax.
– I am satisfied with the Assistant Minister’s explanation of the point I raised when the clause was previously before the committee.
– The position seems complicated ; but, in the circumstances, I suppose the committee must accept it.
Amendment agreed to.
Clause also verbally amended and, as amended, agreed to.
– In discussing the schedule, I direct the attention of honorable senators to table 1, which shows the effect of a reduction of 22½ per cent, in interest rates. A serious anomaly exists in the case of a person who has to depend upon the interest derived from Commonwealth securities as a means of livelihood as against a citizen who earns a regular income of £260. During the secondreading debate I mentioned the case of a man who had invested £1,900 in Commonwealth bonds, and who at present is receiving 43s. a week on his investment. According to my calculations, he is receiving approximately £5 16s. per cent., but if this measure is enacted, he will forfeit 22½ per cent, of his income of 43s., which is, roughly,11s. a week, or £29 a year, whereas a person earning £260 a year will not pay anything at all. There may be two members of a family, one of whom having invested his life’s savings in Commonwealth bonds will be taxed to the extent of £29 a year, and another receiving £260 a year in wages will not be taxed at all. Something should be done in the interests of those thrifty persons who, by investing their money in government bonds, have been of great assistance to the country. Under the Goschen conversion loan in Great Britain in 1888, the rate of interest was reduced from £3 to £2 10s. per cent. At that time the credit of the British Government was so sound, as Goschen stated at the time, that the Government could go on the market and borrow, as it actually did, by issuing treasury-bills at 35s. per cent., instead of over £6 per cent, as was recently paid by the Commonwealth. Under the Goschen plan the rate of interest was reduced from £3 to £2 15s. for fifteen years, and was then automatically reduced to £2 10s., where it remains to-day.
– I rise to a point of order. Is the honorable senator in order in delivering a second-reading speech on the schedule?
– The whole scheme is set out in the schedule, in which ‘provision is made for a reduction in the interest rates. For instance, paragraph 3 relates to the rate of interest on existing securities which shall be deemed to be reduced in accordance with the provision of sub-section 1 of section 13 of the bill. As Senator Lynch is dealing with the rates of interest, I submit that his remarks are in order.
The schedule relates to the method of determining the actuarial equivalent of new securities to be issued in lieu of existing securities. I ask the honorable senator to connect his remarks with some particular paragraph of the schedule.
– I am giving reasons why I consider certain portions of the schedule should be amended. I do not see why the interest of those whose only source of income is interest on bonds should be reduced from £6 per cent, to £4 13s. per cent., or a clear reduction of 27s. per cent., or from £5 per cent, to £3 17s. 6d. per cent., or a reduction of 22s. 6d. per cent. I realize that it is obligatory upon this Parliament to accept the plan ; but, at the same time, I do not wish an injustice to be done .to those who have assisted the country in the past. As the Government proposes to consider the amendment put forward by Senator Payne. I seriously suggest that it also give the closest possible attention to the position of bondholders of slender means who have helped, the country in the past, and who are to be asked to bear a reduction far beyond what they can possibly stand. In considering my request, the Government should study the policy adopted by the British Government in .1888 in order to relieve poor people of the necessity of submitting to a drastic reduction. Could not this Government reduce the amount by one half, as was done in Great Britain ? In. a sense I have a slavish, almost a superstitious, respect for the plan ; but, if its adoption will result in undue injury to a very deserving section of the community, I shall have to carefully consider what course I should adopt. I appeal to the Minister to study the point I have raised, and to see if such a drastic reduction as proposed cannot be avoided. These bondholders, who have invested their hard-earned savings over a number of years, have not even the oldage pension to assist them. I am not making an appeal for those who can look after themselves, but for those persons of slender means who will be seriously affected by this measure.
– I appreciate the force of the remarks that have fallen from the honorable senator. But it must not be thought that the Government has not given due consideration to the suggestions that he has made. Not one aspect of that matter has been overlooked. The honorable senator’s heart may bleed for the bondholder who has been thrifty, but he must also realize that there are other persons in the community who are losing nearly their all. They have been just as thrifty as those who have put their money into gilt-edged government securities, but having invested their savings in industry they have lost practically everything. The bondholder is in a much better position than those persons, because his capital is intact and may become enhanced in value. The property owner and the mau who has invested ft industry have lost 50 per cent., and in many cases, 100 per cent, of their capital. There are many pitfalls against which the Government has had to guard. It desires to spread the sacrifices as evenly as possible, although it realizes the impossibility of obtaining an absolute equality. The old-age pensioner and the returned soldier will suffer more than the man who is receiving £500 and £600 a year. The Government can only do the fair thing to all concerned. If the honorable senator has a practicable alternative to offer, the Government will give it every consideration.
– The method of dealing with new securities is to place them all in inscribed stock. Thus a great deal of work will be involved in the different registers. I should like to know from the Minister whether any charge will be levied against the bondholders for inscribed stock, and the subsequent transfers that are bound to result from sales.
– The only charge will be that of the. reduction of ‘interest.
Schedule agreed to.
– I move -
That the following words be inserted after the word “ payable “ : - And Whereas an agreement has been made between the Commonwealth and the States with respect to the said conversion “.
The intention is to link up this measure with the Conversion Agreement Bill. The agreement has not yet been signed, but ite terms have now been settled. Care will be taken not to present this bill for the Royal assent until the agreement has been made.
Amendment agreed to.
Preamble, as amended, agreed to.
Title agreed to.
Motion (by Senator Dooley) proposed -
That the bill be reported with amendments.
Amendment (by Senator Payne) agreed to -
That clause 19 be reconsidered.
Clause 19 (Currency of new securities) :
.- This clause passed without discussion, at a moment when, unfortunately, I was absent from the chamber, and I understand that no explanation of its provisions was given by the Minister. Honorable senators will see that it sets out the various dates on which the new securities will mature. Towards the end there is a proviso which reads -
Provided that, in the case of the conversion by any otic holder of any amount of existing securities not exceeding £1,000, or on the conversion of securities held by trustees, the Treasurer may approve of the issue of securities being allotted over a less number of maturity dates.
That is a very vague proviso. The maturity dates number ten; but in the case of small holders the Treasurer might approve of the issue of securities being allotted over nine dates instead of ten. I understand it to be the intention of the Government to give the small bondholders an opportunity to obtain a return of their capital at the earliest possible date, which is 1938. One can easily visualize thousands of aged people who will not enjoy the use of their capital during their lifetime unless they can secure the face value of their bonds within a few years. I have in mind the submission of an amendment ; but if the Minister can satisfy me that it is the intention of the Government to make these bonds mature on the earliest date possible, I shall refrain from moving it.
– It is the intention of the Treasurer to deal sympathetically with the bondholder, and to make it easy for him to convert into securities that will have the shortest possible term. He may feel justified in placing within the seven-year period a man who holds £300 worth of bonds, and within a longer period those who hold a greater amount. The matter will be one for negotiation between the bondholder and the Treasurer. It is not the desire of the Government to cause undue hardship to the small bondholder. If he desires to be given a security that will mature within a short period, that opportunity will be afforded him.
– :Will the Minister act on the suggestion that all these small holdings shall mature in 1938!
– I do not know that the Government is in a position to do that. The honorable senator will have to trust the Government to do the fair thing to the bondholder.
– Will the Minister say that it is the intention of the Government to see that, if the funds are available, these small holders will be given securities that mature on the first or the second date specified ?
– That is the intention of the Government.
– I am satisfied with that statement.
Clause agreed to.
Bill reported with amendments; report adopted.
Motion (by Senator Dooley) proposed -
That the bill be now read a third time.
Senator Sir GEORGE PEARCE (Western Australia) [9.14]. - I have received a telegram that ought to be incorporated in Hansard, so that the Government may give consideration to it. I understand that Tasmanian senators have received a similar message. It has been sent from Launceston to-day, and reads as follows : -
Arrangements made by Hobart Savings Bank and this bank with State Treasurer for latter to wire Federal Treasurer asking that he agree to place Tasmanian Savings Banks on the same footing as the Commonwealth and State Savings Banks re conversion to the extent that if necessary funds be available to them at maturity dates of their existing securities sufficient to allow these banks to retain a ratio of 20 per cent, of liquid assets to the amount held by them on account of depositors.
Institutions wish to assist to utmost of their ability, but interests of depositors must be their first consideration. Trust this suggested compromise may be acceptable if the fuller measure cannot be granted.
Launceston Bank fob Savings.
– The Government has had no opportunity to consider the amendment carried by the Senate.
– I suggest that when the Government isconsidering the amendment it will be well for it to have the terms ofthat telegram before it.
Question resolved in the affirmative.
Bill read a third time.
Debate resumed from page 3773 on motion by Senator Dooley -
That the hill be now read a second time.
– I did not intend to debate this bill, but, unfortunately, I missed the opportunity to discuss the plan agreed upon at the Premiers Conference upon the motion for the printing of the report. It has been impressed upon us, particularly by the majority of the Australian newspapers, that the plan agreed upon at that conference is one and indivisible, and that we must not even dare to criticize it without running the risk of being looked upon as unpatriotic, if not hostile to it. I do not think that criticism, especially if it be friendly and constructive, should be stifled. It is absurd to regard the plan which the bill before us is designed to bring into effect, as a perfect piece of work. A factor which has contributed mostly to its introduction was the last election in Tasmania. That election compelled the Commonwealth Government, at long last, to face the position as it should have been faced eighteen months previously, or go out of office.
As a nation we have a lot to unlearn. Bad habits must be broken, and bad habits cannot be broken without many a wrench and many heartburnings. No one who studies this bill can have any great love for if, but we should have had itor something similar, before us twelve months ago, when the medicine the country has now to swallow would not have been so nauseous. I can see no alternative to the plan at this stage. There seems to be no other means of preserving pensions or public servants’ salaries, or of even securing reduced rates of interest. The medicine is distasteful to every one, yet were there no national economy, all governments in Australia would shortly be insolvent. Our problem is rendered more difficult, because we are faced with a heavy expenditure to cope with the frightful curse of unemployment. It is an expenditure which is bound to grow heavier.
The present crisis may, perhaps, teachus a lesson. For years we have been rolling our tongues round that dreadful word, “potentialities”. On every political platform and at all sorts of functions there has been neverending talk of the unlimited potentialities of Australia, and, on the strength of that talk, we have been able to borrow freely. Our chickens are now coming home to roost and very sorry birds they are; but we must do the best we can with them. Credit has been so alarmingly stretched in this country that any further attempt to stretch it would bring about a crash.
As I said recently, in. discussing another bill, when the position of the country is at stake, party political strife is repugnant to intelligence and patriotism. Any one can see that cuts in expenditure are unavoidable; but, if these economies are to be put into effect, not only will the Government need to devote its full energies to the matter, it must also be backed up by a very healthy public opinion in all ranks of society. The plan will not succeed unless there is a union of public opinion to stiffen the Government in the complex task in which it is engaged, and to which at long last it has been forced to set its hand. Before we can hope to get back to sanity and all-round prosperity, there is much to be done besides effecting cuts, imposing taxes and converting bonds to a lower rate of interest. These are merely the initial steps. A reduction of expenditure within a reduced income is merely a negative phase of reconstruction. There is also a positive task ahead, and that is to expand incomes once more ; but we cannot reach, that stage until we abandon such things as tariff prohibitions, rationing of imports, and extreme protective duties, some of which verge on fiscal madness. By the removal of prohibitive duties, we would at once create, a much better feeling for ourselves overseas, where we have to find markets for the bulk of our produce.
Another step to be taken is to reduce the cost of living and production costs. The plan proposes a step forward towards that end; but it also proposes two steps in the other direction. It proposes to raise the primage duty from 4 per cent, to 10 per cent., and to double the sales tax. We are thus to have a reduced spending power accompanied by increased costs of living and production. To double the sales tax and increase the primage duty from 4 per cent, to 10 per cent, at one full swoop is to nullify the benefit that may follow a reduction of interest rates, and to add tremendously to our already high costs of living and production. Australia’s external obligations can be discharged only by selling its produce overseas at the world’s prices, and it is amazing to me that anything should be proposed that is likely to hamper its efforts to do so. I notice that Mr. Pitt, the Under-Treasurer for Victoria, and Mr. Strutt, the Under-Treasurer for Tasmania, dissented from the proposal of the other experts to increase the sales tax and primage duty; but, although they talked about a prospective fall in prices and in cost of living, their protest was merely negative; they submitted no alternative. In my opinion, a reduction of wages would not matter much provided costs of living and production were reduced. We should still be relatively as well off.
But I rose particularly for the purpose of addressing myself to the Government’s proposal to reduce war pensions. For the second time since 1914 there is a call to our citizens to make sacrifices in the interests of their country. This time the peril is not from foreign foes. It is an economic danger which, at the moment, appears to be almost insurmountable, and the call now is to all of our people. We are told that in the struggle which is ahead of us, the principle to be observed is equality of sacrifice. I submit that under this or any other plan, the position of our ex-soldier pensioners is totally different from that of ordinary citizens. Seventeen years ago the young manhood of Australia made a magnificent response to the nation’s call. Over 60,000 of them paid the supreme sacrifice, leaving dependants to the care of the Commonwealth Government. Others again, returned to Australia battered, and maimed in body, many with minds unhinged. These also are a just charge on the nation. The war disabilities from which they suffer will affect them for the whole of their lives, and must lessen- their earning power until they, too, rejoin their fallen comrades. When equality of sacrifice is being considered we should remember those who have suffered in this way from their last sacrifice before they are asked again to take the front line in the sacrificial ranks. When I think of the sad plight of my unfortunate comrades, all this talk about equality of sacrifice leaves me cold. No pension can adequately compensate so many thousands of our ex-soldiers for the mental and physical torture which they have endured, and are enduring because they placed their poor bodies between this country and the worst things that might have befallen us. No monetary compensation, however, magnificent the scheme, can adequately repay them for their suffering. What member of this Senate would be prepared to sacrifice his sight, his health, his strength, his limbs or mentality for the highest compensation payable under the schedule ?
– Not one.
– Of course not. Nothing that this Government can pay to our war pensioners can compensate them for war-damaged bodies. War pensions are based upon actual disabilities arising from the war, and, therefore, are a most solemn charge upon the Government. They have no relation whatsoever, as other pensions have, to charity disbursements. This is a point which is sometimes overlooked in these discussions. The soldier pensioner stands alone, and if his contract is not on parchment, morally at all events Lis pension is a tax-free bond, inconvertible save through death, and sacrosanct as far as anything can be so in public affairs. Our soldiers have made their sacrifices. They are still paying; and now there is a call to them to make a further contribution to the safety of the nation. It is as well to remember that not even the cost of living variation can be applied to war pensions, because while wages in industry have increased since 1920 by 22 per cent, or 23 per cent., and invalid and old-age pensions by 30 per cent., there has been no increase in the rate of war pensions paid.
The placing of war pensions on the same basis as social services or business investments must be repugnant to every citizen with a reasonably developed moral sense. I hope that the Government will not lose sight of this fact in its desperate and somewhat belated attempt to preserve national security. Our soldier pensioners have earned and deserve the highest consideration of the nation, and now in their decreasing numbers and declining health, the nation’s obligations to them should not be lightly disregarded as, I regret to see, they are being disregarded in many quarters. “ Necessity knows no law “, was the excuse of the German Chancellor of seventeen years ago when justifying certain action taken by his government. The Commonwealth Government is also in a desperate plight to-day, and makes the same excuse, and, unfortunately, war pensions, as well as other social services, have to go into the melting pot. “What emerges will depend to some extent upon the influence which we can bring to bear upon the Government on behalf of our war pensioners. Every member of the Australian Imperial Force, without regard to the walk of life from which he came, proved himself to be a splendid citizen of Australia. Our men were on active service in that long, bitter, and monotonous struggle for four or five years - I was away for five years myself - and although so many of them came back maimed in body, suffering in health, they are still good citizens of the Commonwealth. “When this proposal to reduce war pensions by 20 per cent, was, I believe, reluctantly considered by the conference, we who were watching the interests of all ex-service men, and particularly our war pensioners, believing that a reduction of war pensions was inevitable, offered to formulate proposals which would not press quite so harshly upon the most deserving of our war pensioners. “We contend that a pension, even at the full rate provided in the schedule, is quite inadequate to compensate any man who has sacrificed so much for his country; but, as I have said, we were prepared to place before the Ministry alternativesuggestions. We did so, and I am very glad to say that the Government accepted our proposals. I think most honorable senators are fully conversant with their nature. We were confronted with a difficult problem, but we were determined to, if possible, relieve the most deserving and distressful cases among our war pensioners from the hardship which a full 20 per cent, all round cut would undoubtedly have inflicted upon them. All things considered, the committee has done exceedingly well. It is now negotiating with the Government in regard to another phase of this subject, and I understand that there is every likelihood of its representations being favorably considered.
Five or six years ago, when the subject of assessing pensions was under discussion, we were told that the peak period for war pensions would probably be in 1932. So far as we can judge, the peak period is with us now. Largely because of deaths, the number of returned soldier pensioners is decreasing each year. As the years roll by they will leave us and pass on with ever-increasing rapidity. The following statement is interesting in that it shows the position with regard to war pensioners since 1920: -
The returned soldier war pensioner himself, mainly due to the incidence of death, is becoming a fast diminishing charge on the nation. In 1020, the peak year, 90,389 soldiers were in receipt of war pensions, and in 1923 the number had dropped to 72,128. The fact that soldier pensioners in 1930 numbered 74,578 - the highest figure for any year since 1923 - is explained by the’ advent of the independent appeal system from decisions of the Repatriation Department. The average fortnightly rate to each soldier pensioner for 1930 was £1 17s. 9d., as compared with £2 7s. iri 1916, so it seems that the economic factor has long since weighed in the determination of war pension rates.
I do not wish to say any more now with regard to war pensions, because the proposals with regard to them are set out in the bill before us. I think that the com- mit teewhich is dealingwith war pensions will bo able to convince the Prime Minister and the Treasurer that the saving which would have been effected by a general reduction of 20 per cent, all round will be reached by other means that will involve the least degree of hardship. Cases of hardship will be inevitable, but the blow will be softened. The job has not been a pleasant one; but it has been undertaken cheerfully and manfully by those “ diggers “ to whom it was entrusted, because, being good citizens, they are out to help their country. They are doing their utmost to distribute the blow as equitably as possible. Indeed, the returned soldier pensioners generally are again doing their utmost to assist their country in its time of need. The part that they are now called upon to play is no small one. I emphasize that war pensions are an attempt to compensate for war damage, and have no connexion whatsoever with any charitable claim. This hill, which outlines the plan agreed upon by the Premiers at the recent conference, must he passed by this Parliament. But it needs more than that. It is now almost too late to put matters right; but in its belated attempt to do so the Government must have the backing of the people. I trust that those other problems which I mentioned earlier will be tackled valiontly; otherwise what we are now doing will be in vain.
Debate (on motion by Senator Hoare) adjourned.
Motion (by Senator Barnes) proposed -
That the Senate do now adjourn.
– To-day we have listened to many tales of woe. I wonder whether the Leader of the Senate (Senator Barnes) is able to give us a ray of hope by enlightening us regarding the details of the trade treaty with Canada which has been announced in another place.
.- SenatorR. D. Elliott was good enough to inform me of his intention to refer to this matter. I had hoped to make a statement in reply, but I am sorry that I am unable to give him any information on the subject at this stage.
Question resolved in the affirmative.
Senate adjourned at9.54 p.m.
Cite as: Australia, Senate, Debates, 14 July 1931, viewed 22 October 2017, <http://historichansard.net/senate/1931/19310714_senate_12_130/>.