12th Parliament · 1st Session
The President (Senator the Hon. W. Kingsmill) took the chair at 3 p.m., and read prayers.
SenatorRAE (.through Senator Hoare) asked the Minister representing the Prime Minister, upon notice -
Has his attention been called to a statement appearing in the Sydney Morning Herald of the 27th October, 1931, to the effect thatseventeen children, reported to be the final batch for 1031, sailed from London by theBallarat to join the Fairbridge Farm School in charge of Colonel J. Waley Cohen, London representative of the Fairbridge Perth Committee, who is believed to have made an extensive tour of Western Australia, at his own expense, in order to be in the best possible position to advance the school’s interests when he returns?
If this statement is correct, by whose authority are these children brought to Australia, and by whom are their fares paid?
How many ofsuch children were imported for this school before the “ final batch “ referred to, and what are their ages?
What are the conditions under which this Fairbridge Farm School is conducted, the hours of labour and wages (if any) paid to student!) ?
What are the qualifications and credentials of Colonel J. Waley Cohen for the position of manager or controller of this school?
I haveseen the press report referred to.
These children arc brought to Australia on the requisition of the Government of Western Australia, and their fares are paid jointly by the British and Commonwealth Governments. The Commonwealth Government’s migration responsibilities under the£ 34,000,000 migration agreement were suspended in 1929, except in so far as the. Commonwealth is bound to continue to accept, in response to State requisitions and nominations, a limited number of boy farm-learners, domestic workers and persons involved in the reunion of families. Negotiations for the cancellation of the agreementare at present in progress.
Since the date of commencement of the
Commonwealth’s contribution to the scheme, viz., 1st July, 1922, 507 children from Great Britain have been admitted to the school. Their ages on arrival ranged from eight to eleven years.
asked the Leader of . the Government in the Senate, upon notice -
Was a copy of the South Australian Worker newspaper removed from the file in the Parliamentary Library some weeks ago by the Library staff, acting under instructions ?
– I have been furnished with the following reply by the
Parliamentary Librarian, at the direction of the Chairman of the Library Committee : -
The South Australian Worker newspaper has not been removed from the files of the Library. It was, however, taken from the newspaper desks in the reading room on account of the congested condition of the flies of South Australian papers, and filed in the newspaper room in the basement. Copies have, at all times, been available to members on application. Owing to the limited desk accommodation for newspapers in the reading room, it has been necessary to adopt this practice, especially in the case of weekly newspapers, in order that all the daily papers may be available hi the rending room.
asked the Minister representing the Minister for Home Affairs, upon notice -
– The answers to the honorable senator’s questions are as follow : -
Matron and S uteris ten dent.
asked the Minister representing the Minister for Home Affairs, upon notice -
– The answers to the honorable senator’s questions are as follow : -
The following papers were presented : -
Arbitration (Public Service) Act - Determination by the Arbitrator, &e. - No. 27 of 1031 - Australian Postal Electricians Union.
Commonwealth Inscribed Stock Act - Regulations amended - Statutory Rules 1931, No. 129.
Transport Workers Act - Regulations amended, &c. - Statutory Rules 1931, No. ISC-No. 127.
Seat of Government Acceptance Act and Seat of Government (Administration) Act- Ordinance No. 20 of 1931 - Mining.
– by leave - On the 29th October Senator O’Halloran and Senator Rae paired with Senator Millen and Senator Plain respectively on Senator Colebatchs motion in connexion with the sugar Agreement. I regret that in recording the pairs in the pair-book, I inadvertently . showed Senators . O’Halloran and Rae as having been in favour of the motion, and Senators Millen and Plain against it. Senators Millen and Plain should have been recorded as being for the motion, and Senators O’Halloran and Rae against it. The error will be corrected in the second edition of Hansard. The fault is entirely mine.
– While the Senate can have no cognizance of pairs, I think if is well that the honorable senator has made his explanation, since it will clear away any misapprehension in regard to the attitude of the honorable senators concerned.
Debate resumed from 29th October (vide page . 1289) on motion by Senator Barnes -
That the bill be now read a second time.
Senator Sir GEORGE PEARCE (Western Australia) [3.12]. - Last week, 1 asked the Government certain questions regarding the attitude of the State Governments respecting the subject-matter of this bill) which concerns the States as well as the Commonwealth. The particular point on which I sought information was whether the governments of the States had agreed unreservedly to the proposals embodied in the bill, and the answer that I received was that the agreements given by the States were without reservation. I am informed, however, that in the case of one State, at any rate, a reservation was made, and since the Senate is, in a special sense, the guardian of the States, and should have regard to any reservations which State Governments may make with respect to legislation submitted to this chamber, I have to-day given notice of a question requesting that the replies received from the States be laid on the table of the Senate or the Library. My question will appear on the notice-paper to-morrow.
Leave granted, debate adjourned.
Debate resumed from 29th October (vide page 1304) on motion by Senator Daly -
That the bill be now reada second time.
.- No doubt honorable senators were very disappointed with the manner in which the bill was introduced by the- Assistant Minister (Senator Daly), whose absence to-day, and particularly the reason for it, we all regret. In the introduction of a measure dealing with a matter of such vast importance as the customs tariff, one expected that the Government, through its mouth-piece in this chamber, would, at all events, attempt to make out a case in favour of the second reading of the bill. When the Assistant Minister was introducing this measure he remarked that the Government intended to take up, not, the defensive, but the offensive, and I expected this doughty general to make an attack on those whom he presumed would be in opposition to the Government on this matter. But, after a few more or less important remarks - some were unimportant - in a speech extending over eight minutes, he retired to his dug-out, evidently preferring to wait for those who were prepared to criticize the Government’s action before he made his attack. In my whole career as a member of this Parliament, I have never previously known a Minister to introduce an important measure without fully explaining its object. In the present case, however, the Minister contented himself by saying that, in his opinion, the fiscal policy of the Government during the last two years had saved Australia. Then he retired, and waited to see what kind of defence he would have to make.
– Did he say that that policy would solve the problem of unemployment ?
– No. I propose to consider the fiscal history of Australia during the last ten years. Many honorable senators were here with me in 1921, when the tariff was fully debated in both branches of the legislature, which came to the conclusion that no attempt should be made to alter it until a full and complete inquiry had been made by a boardthat was to be established under a measure then under discussion. I intend to quote some of the comments made on that bill by a number of public men who held a fairly high place in the esteem of the public at that time.
In discussing the second reading of theTariff Board Bill on the 6th July, 1921..
Mr. (now Senator) Greene stated, as reported in Mansard, page 9721 -
Clause 14is, perhaps, more important than any other. 1 wish honorable members to observe how that’ clause, which deals with the reference of certain matters to the board, is drawn, and the effect of it. The clause begins: “ The Minister shall refer to the board for inquiry and report the following matters.” Then these matters are enumerated, and the first paragraph concludes, “and shall not take any action in respect of any of these matters until he has received the report of the board.” This is a very drastic provision; it makes it mandatory on the Minister, in respect to the matters mentioned, to refer to the board before taking action.
Mr. Watt, as reported at page 9886, referred to this vital clause, and spoke of “ this compulsory form of reference, which is obligatory on the Minister.” Sir Robert Best is also reported at page 9893 as having remarked -
As regards the imposition of new, increased, or reduced duties, the only power which the board will have in the matter will be to report, for the information of the Minister . . .
The honorable member for Maribyrnong (Mr. Fenton), referring to that clause, said that he hoped that, in this instance, the word “ may “ meant “ must “. He did not, mention clause. 15, which obliges the Minister to refer proposed duties to the Tariff Board, and await its report before taking action; evidently it met with his hearty approval. The second reading of the bill was carried by 26 votes to eleven, and clause 15 was passed in both chambers without, a division. In this chamber Senator Pratten, who laterbecame Minister for Trade and Customs, moved. the insertion of the word “may” in lieu of “ shall “ but the amendment was negatived on the voices. That, briefly, is the history of this crucial portion of the Tariff Board Act.
– No inquiry, no alteration !
– That is the intention of the act. Yet in November, 1929, the present Government, through it,3 then Minister for Trade and Customs, tabled in the House of Representatives a schedule of 220 items, involving alterations, additions, and new duties without prior reference to the Tariff Board.
SenatorO’Halloran. - What happened between 1921 and 1929?
– The honorable senatormay ascertain that, by reading Hansard for those years. I am drawing attention to what the law is, and I charge this Government with having flagrantly violated one of the most important laws on the statute-book, thereby imposing a heavy burden upon the people, hampering industrial development, and materially accentuating the Unemployment problem. Some time ago I asked the Minister representing the Minister for Trade and Customs if he had considered the legality of his action in ignoring section 15 of the Tariff Board Act. His reply was -
The Minister is. quite satisfied of the legality of his action, provided Parliament ratifies same.
Thai is an admission of the violation of the law. I protest against a Minister of the Crown acting illegally. Members of Parliament, and particularly Ministers of the Crown should set an example / to the rest of the community; we make . the laws, and it is our duty to see that they are observed. What will the people think of a government that deliberately violates an important statute framed to safeguard the economic interests of the Commonwealth, and prevent the fiscal policy from being altered without notice at the whim or caprice of the government of the day? Even Parliament must not interfere with the tariff until a board of competent men, appointed for this special purpose, has made full inquiry into the proposed alterations. I speak, not as a freetrader or a protectionist, hut as one sent here by the people to assist in framing laws for the benefit, of the community.
The Customs Tariff Act of 1921 specified the procedure to be followed in regard to deferred duties. Section 11 reads -
If the Tariff Board certifies to the Minister that any goods in the schedule, upon which a deferred duty is imposed, will not be made or produced in Australia in reasonable quantities and of satisfactory quality on or immediately after the rate specified in the schedule for thecollection of the duty, the Minister may, by notice published in the Gazette, defer the duty from time to time until the date specified by the Tariff Board as being the date by which in its opinion the goods will be made or produced in Australia in reasonable quantities and of satisfactory quality.
The clear intention of that is that, before a deferred duty operates, the Tariff Board must have indicated to the Minister that the industry concerned will be capable of producing goods in reasonable quantities and of satisfactory quality. ‘ In 1926, Parliament decided that a deferred duty, six times as great as the duty then operating, should, after a certain date, apply to plain sheet glass. Before the date fixed for the operation of this deferred duty, the Minister found it necessary to defer it for another twelve months, and at the end of that period, no information having been received from the Tariff Board that the industry had been established, the duty was further deferred until August, 1930. At the annual meeting of ‘the Australian Glass Manufacturing Company, in 1929, the chairman stated that the company had not then commenced the manufacture of window glass, and that there was no possibility of this work being undertaken for at least twelve months. From that statement it was reasonable to anticipate that the duties would be deferred for another six months, but in June, 1930, the Minister, by resolution in another place, imposed the duty although, at that time, not an ounce of window glass had been manufactured in Australia.
– Had the Tariff Board made a recommendation with regard to the deferred duty?
– I understand that it had not. In the meantime, merchants had accumulated huge stocks of windowglass, and as soon as the duty was imposed, the price was substantially, increased. I made it my business, when in Melbourne at about that time, to get local price lists for June and July, 1930, and learned that following the imposition of the duty, the price had increased in July by £1 acase. Subsequently, in the Senate, I asked the Minister representing the Minister for Trade and Customs to furnish information as to the difference in prices in July as compared with June. The reply indicated that, in Sydney also, the price for window glass had been increased by 15s. a case. This meant that the action of the Minister, in imposing the duty as from the 1st July of last year, put thousands of pounds into the pockets of glass merchants who had accumulated large stocks of imported glass.
– What was the amount of duty imposed?
– The British preferential duty was 2s. per 100 square feet; now it is1½d. per lb., which is equivalent to 12s. 6d. per 100 square feet. Bates on foreign glass are, of course, higher.
– Is window glass being manufactured in Australia now ?
– I heard, the other day, that a start had been made, but the point I wish to emphasize is that, since it was common knowledge that merchants had accumulated huge stocks, and that the Australian Glass Manufacturing Company was not making the glass at the time, the Minister must have been aware, when lie imposed the duty, of its probable effect upon prices and its advantage to glass merchants. This duty is imposing a hardship upon a considerable number of primary producers. I have had letters from tomato-growers in Victoria complaining of the higher prices now charged for glass for the protection of tomato plants.
– The honorable senator is now discussing the effect of a particular duty. That is not in order at this stage of the debate.
– I shall refer, in more detail, to this subject, when we are discussing the particular item. It will be difficult for the Minister to justify these two flagrant violations of the law.
The Senate is now asked to validate the tariff. I do not feel disposed to do that because if I, by my vote, validated this tariff, I should bo validating what I regard as an absolutely illegal action on the part of the Minister. We should recognize that no country can live entirely to itself, and that in tariff matters we must take a reasonable view. Following the war, in which Australia played such an important part, the Commonwealth was advanced to the status of a nation. Unfortunately, certain, sections of our people appear to lose sight of the fact that our acceptance of the status of a nation carries with it certain responsibilities, one ofwhich is that no country can ignore the effect of its policy upon the people of other nations. This tariff schedule evidences a selfish disregard on the part of the Government for the effect of its policy upon the people generally. I have often wondered how it was framed. The Government was returned with a large majority in October, 1929. Three weeks later, an extensive tariff schedule, comprising over 220 items, was tabled in another place. No one could suggest that, in the time available to it the Government, or its departmental officers, could have drafted a tariff schedule that differed so widely from the then existing schedule. We are, therefore, entitled to ask who was responsible for it. I have tried to ascertain, as I should like to know. I am confident that no Minister of the Crown could have give,1 the time necessary to bring about such a wide variation in our tariff items in the interval that elapsed between the holding of the last election and the time when the new Government met the House.
– The Government has some rapid and capable workers.
– I do not think that the Government did the work. I believe that it was given to somebody else to do, and I know that I am not alone in that opinion.
Time after time the Government has declared that it desires to give effect’ to British preference, to help the Old Country, to give trade to our kinsmen, instead of the Japanese, Germans, (and Frenchmen. The so-called British preference that has been adopted by this Government is embodied in this measure. In the majority of cases, it would be a fallacy to term it preference. The Minister for Trade and Customs (Mr. Forde) knows that it is not preference. Yet when one makes a protest he is met with the rejoinder, “Can’t you read? Are there not three columns, which provide for ‘ British ‘, ‘ intermediate ‘, and general ‘ tariff ?” Of course there are, but usually it is as impossible for the British manufacturer to climb over the tariff wall that we have raised as it was for Phar Lap to win the Melbourne Cup yesterday with his great’ impost of 10 st. 10 lb. I have ascertained that one particular item which is wholly British in origin costs 6s. 9d. a dozen in England. After paying the terrific customs duty demanded in Australia, its landed cost-here is 28s. 6d. a dozen. Even before the imposition of the 1929 duties, Australian manufacturers were able to manufacture and sell the same article at 10s. 9d. a dozen. That i3 termed British preference ! It is neither more nor less than prohibition. I might add that the Tariff Board did not report on this item. In another instance, the rate of duty on an entirely British article has been increased by 240 per cent., making the present ad valorem rate 325 per cent. Yet the Government has the audacity to call that British preference! When that article is imported from foreign sources, and has to come under the general tariff, the increase in the rate of duty represents 1,000 per cent.! The, goods to which I refer are worn particularly by one section of the community, the working class, upon whom the burden is placed by a Government that professes to be its representatives. The wealthier classes do not feel the imposition. I know working men very well, because I have always been a worker, and I have more friends among that section of the community than among any other class. I am therefore very indignant that the Government should burden them in this fashion.
At the time when the Senate dealt with the last important alterations to our tariff schedule, a certain item was admitted duty free. After inquiry, the Tariff Board made a recommendation to the Government, which was accepted, and the item was subjected to a very heavy duty, because four Australian mills claimed that they could manufacture the commodity in sufficient quantity to fulfil Australian requirements, and of a satisfactory quality. They could do so - at a price. I went to the trouble of visiting the four mills concerned - incidentally, I happen to be a shareholder in one, and was therefore interested in the new department. Their managers asked me what I thought of the locally made article, and I admitted that it was a very fine imitation of the British product. The trouble was that it cost 2s. 6d., as against the previous price of ls. 4d. for the British product. I then set about inquiring what that additional impost meant to the working class. I ascertained from the British manufacturers how many girls they would employ to turn out the Australian requirements of this article. I then allowed double that number, not because our girls are inefficient, but because they are inexperienced, and fixed their rate of wage at 50s. a week, which is considerably higher than the award prescribes. After allowing for packers, pressors, and folders, I found that, at a conservative estimate, the increased cost to the working man of every pair of trousers made of this material would be 3s. 9d., while the most that could be added to the wages paid in this country would be £60,000 a year. By increasing the price of trousers by 3s. 9d. a pair, the extra cost on the annual consumption for Australia would be £337,000. On the basis of 2s. 6d. more for each pair of trousers, the extra cost to the workers would be £225,000. I should not have mentioned this matter, were it not now proposed to increase the duty still further. The Tariff Board at page 12 of its report, issued on the 30th June, 1931, states -
As the reports submitted by the board on some of the eases dealt with have not yet been made available for general information, the board is not at liberty to give details in this report. However, one case worthy of mention here, in a general way, is that in which it was found that the labour costs in producing the goods in Australia represented wily one-fourth of the duty requested,, and which the applicants admitted would need to be fully used in fixing the selling price of the local product.
Here is what the Tariff Board has to say en the danger of prohibitive duties, and these are not my words, but the statement of men competent to express an opinion -
In dealing with requests for the imposition f new or increased duties, the board has sought to ascertain the protection which, if Imposed, would be justified by the value to Australia of the industry when established. A duty out of proportion to the wages that would be paid by an industry is liable to abuse and may bo unduly costly, either in causing loss of revenue or in adding to the cost of production of both primary and other secondary industries. Excessive duties are dangerous for the following reasons: -
They may shelter industry unduly and tend to lack of efficiency or to undue profit. In certain types of manufacture this effect is largely safeguarded against by local competition, but with a limited market such as exists in Australia, there is frequently room for only one or two factories capable of largescale production. When this is the case prohibitive duties either result in lack of com- petition, with the grave risk of excess profits, or the installation of more plant than is necessary to cater for the requirements of the market.
There is undoubted evidence of the danger of encouraging the establishment of plant over and above what is actually justified by the market available. This tendency f.or prohibitive rates to encourage too much factory capacity is illustrated in the hosiery industry. During the inquiry held by the Tariff Board into an application for an increase in the duties on cotton yarn, Mr. Gr. G. Foletta, General Manager, Prestige Limited, made the following statement : -
The knitters, to their sorrow, have had far too much protection. .That is the trouble, or the biggest part of the trouble, in the knitting industry to-day, and has caused great economic loss to Australia, because we have imported quite 50 per cent, more knitting machinery into this country than can ever be used. What is far more serious is to think that we should have trained thousands of hands who Wi) have no opportunity of ever getting back into the knitting trade. All this was due to a greater degree of protection being given that was needed. This has come about because every one said: “This is a good thing, let us get into it”, and they were ofl’ before we knew where we were.
That statement has been proved up t© the hilt. Honorable senators will remember that the present Minister for Trade and Customs (Mr. Forde) made a boast in another place some time ago that the imposition of these prohibitive duties on hosiery would result in the employment of thousands of extra workers, and would lead to a revival of industry which would materially help the country. The duties were imposed by resolution, without the Tariff Board being consulted at all. What was the result? Within three months factory after factory closed. To my own knowledge, over 300 girls were put off in one week in Brunswick. I saw a stock of hosiery bought by a large Melbourne retail firm from a Sydney factory which had gone into liquidation, being sold over the counter at 50 per cent, below the mill price. The reason, of course, waa that the knitting business had been overdone. Every one rushed into the industry when the high duties were put on, and too much hosiery was produced. In the end, large amounts of capital were lost, and many employees thrown out of work.
– That does not apply to the woollen industry.
– We shall see about that when we come to that item. The Board’s report continues -
The board’s report continues -
Further, prohibitive duties tend to seriously disrupt trade generally. It is important in fiscal and other governmental action to disturb the natural channels of trade as little as possible. The disruption of trade frequently brought about by the sudden imposition of a prohibitive duty tends to throw many out of employment until such time as the business adapts itself to the new conditions . . All these disadvantages, together with the loss of revenue previously obtained from the duties collected on the imports, must be set against the benefits to be obtained from the establishment or extension of any industry in Australia . . . The board holds that the community in general is best served by the imposition of a duty sufficient to enable an efficient manufacturer to develop his business and secure the trade. This method tends to promote efficiency and economic production, and is much less disruptive in its operation than are prohibitive duties.
That is a definite and conclusive statement. Then the board, in pointing out the need for the expansion of our export trade, stated - .
Export industries can chiefly be helped by making possible a reduction in operation costs. The risk of increasing costs to the great primary industries has been constantly before the board, for it is obvious that Australia cannot regain her prosperity until export industries are able to produce and sell at a profit.
The board further said -
One of the most pressing problems of the day is that caused by the very serious extent to “which unemployment exists in Australia. Theboard has kept this matter consistently to the fore during the whole year, and has recommended increased duties wherever it has considered a net increase of employment will result.
In conclusion, the board mates this pertinent statement -
The foregoing review of the board’s work for the year emphasizes the necessity for public inquiry before any request for amendment of the customs tariff is acceded to, in order to safeguard against the granting of assistance to one industry at the expense of another, or at too high a cost to the community generally.
The board in that statement bears out my contention that a full inquiry should be made before any alteration in the tariff is made. It is the height of folly to do otherwise. A manager of a business who effected a. radical alteration in its conduct without first having made a complete investigation as to its result, would be considered a madman, and his business would inevitably fail. The board’s report continues -
It also points to the urgent need for a systematic investigation of the existing tariff in order to ascertain what duties, if any, are imposing undue burdens upon industry generally, and ultimately on the consumers.
We are not the chosen people of the earth, able to live our own lives without regard to the people of other countries. We have to rely upon other countries for the sale of our wool, wheat, hides, skins and dried and tinned fruits.
– They buy our goods because it pays them to do so.
– We are not the only people producing those commodities.
– We grow the best wool in the world.
– Let me show how this policy of exclusion will inevitably lead to our ruin.
– The honorable senator should now say something for Australia.
– I am anxious to have built up in Australia a community of virile men and women who will not be afraid of reasonable competition.
– The honorable senator wants competition to the detriment of the Australian worker.
– There is no worker better than- the Australian worker, provided that he is allowed to use his best efforts in the occupation which he is following. Unfortunately, he is now not allowed to do that. The tendency for years lias been to force up the cost of production in Australia.
– Who has been responsible for that?
– The honorable senator himself has had a good deal to do with it. A little while ago I went to the trouble of obtaining figures relating to our trade with other countries. I shall quote the figures for 192S-29, because in 1929-30 the purchasing power of the community fell considerably, and it would not be fair for me to quote figures for thai year. However, in 1928-29, we imported from Belgium £910,000 worth of goods, and that country bought from us £9,044,000 worth of goods. Belgium, therefore, in that year, bought from us ten times as much as we bought from it. By one stroke of the pen we have told that country that we do not want any more of its goods.
– Nonsense ! Belgium only bought from us what it wanted.
– In 1928-29 we imported from France £3,700,000 worth of goods, and sold to it £15,141,000 worth of goods. We imported £4,500,000 worth of goods from Germany, and sold to it £9,750,000 worth of goods. We imported from Italy £1,449,000 worth of goods, and that country bought from us £5,169,000 worth of goods. Honorable senators have said that these countries buy our goods because they want them. Let me refer them to the following statement, dated 23rd October: -
Private advices received in Sydney state that a duty of 500 francs (about £4) n ton lias been imposed on Australian rice imported into New Caledonia. Sydney exporters declare the impost to be prohibitive. Trade between Kew Caledonia and Australia had (en increasing recently, and evidently this has stirred the French authorities to action. They are not to be blamed, considering the enormous tariff which Australia has built up against the importation of all French goods. It is only another example of the effect of Australia’s fiscal asininity. She put on an absurd tariff, and promptly lost the valuable New Caledonian trade, which was
Bt one time worth £500,000 per annum to Australia. For a time it looked as if Australia might recover this trade with rice. But now rice goes into the discard in New Caledonia, along with Australia’s other primary products.
Recently merchant’s here tried to dispose of Australian flour in China, but that country refused to take it. Since then France has refused to huy our -hard wood sleepers. The injury that we have done to our best customers by placing excessive duties and prohibitions on their goods must lead to some retaliation ou their part. I do not like the word “ retaliation “. I was taught, if I were smitten on one cheek, to turn the other. We are blessed with a country that is capable of producing the needs of a large portion qf the world so far as primary products are concerned. Other countries have been so placed by Providence that their only means of providing a livelihood for their people is by manufacturing. Did the Creator intend that manufacturing countries and producing countries should always live apart? Did He not intend that we in Australia should help to feed the people of manufacturing countries, and that they, in turn, should help to supply our own needs?
I am surprised to find that the present. Government is so obsessed with what it is pleased to believe is necessary for Australia, in the matter of imposing heavy duties, despite their burden on the community, that it has referred to the Tariff Board for inquiry matters in which the board could hold no inquiry. I quote the following: -
There is at least one Australian industry which can stand on its own feet.
It is the boot polish and metal polish manufacturing industry which to-day, at the Tariff Board, demonstrated its independence by giving no support to a proposal that the duties on boot polishes, inks, leather dressings, knife and metal polishes be increased.
No manufacturer responded to the invitation of the chairman (Mr. H. Guy) to come forward and give evidence in support of the proposal.
As a rule, the board is inundated with data from manufacturers whenever it opens an inquiry.
After the board’s inquiry to-day had lapsed for want of evidence, manufacturers of these lines told the chairman that instead of looking for new duties they were looking for new markets overseas.
Here is a newspaper paragraph concerning another matter referred to the Tariff Board for investigation, which evidently was not at the request of any manufacturer -
The Tariff Board has been asked by the Minister for Customs (Mr. Forde) to consider the question whether the proposed increased duty on piece goods of artificial silk is necessary. The matter was to have been considered by the Tariff Board yesterday, but as no evidence was offered in support of the proposed duty, it was Adjourned to a date to be fixed. Several witnesses attended the bearing, but they were all opposed to an increase.
The chairman (Mr. H. McConaghy) said that the inquiry was to have begun in Sydney, but no evidence in support of the increased duty was placed before the board. For the reason that the board was aware of the existence in New South Wales of a company producing artificial silk piece goods, which was entitled to give evidence in favour of the proposed increase, and which had expressed its intention of offering evidence, the board did not consider it desirable to take evidence in opposition to the duty. To do so might place the opponents to the duty at a disadvantage in not knowing what they had to answer.
I could quote numbers of instances in which, through the imposition of prohibitive duties, goods have had to be re-shipped to other countries without a customs entry being passed with regard to them. It is a nice state of affairs when we turn away good money that is available to us. I content myself by giving one instance. It occurred in South Australia, and is as follows: -
A Japanese steamer, Kamo Maru, arrived at Port Adelaide with a. cargo which included eight cases of cotton tweed of a special type used in the making of strong shirts for workmen. While the steamer was ploughing its placid way round the coast the tariff workers were busy. At Sydney and Melbourne similar goods were discharged upon payment of a duty amounting in all to approximately 33 per cent, of their value.
After the ship had left Melbourne, however, the high tariff enthusiasts amended the duty, so that the importers were liable to pay into the revenue more than four times the value of the goods. In other words, the duty on these particular cases of cotton tweed, which, including the cases themselves, were valued at £229 9s. 7d.. war. increased overnight from £73 7s. to £1,15316s. 10d.
The goods are still in bond. If the Customs Department insists upon imposing this extraordinary duty they probably will be shipped straight back to Japan. People who are aware of those facts wonder whether the Federal Government thought of the prospective buyers of the workmen’s shirts when it approved this increase in duty.
In a letter sent to the High Commissioner for Australia, Champion, Druce and Company, manufacturers of white lead, commented as follows: -
We are given to understand that the present increases are partly necessary for additional revenue. We beg to point out that in the event of this source of revenue from the customs collection -disappearing, owing to a cessation of imports, it will result in a loss of about £30,000 a year to the Minister for Customs. We cannot help feeling that had the Federal Ministry been guided by the com mendations of the Tariff Board the excessive increase in the rate of duty on white lead would not have been put forward. Is it possible that the Ministry’s action has overridden the constitutional usage, and that a decision was arrived at without reference to the Tariff Board ?
I could quote dozens of cases similar to that. [Extension of time granted.’]
I quote another case, which occurred in Victoria -
A striking illustration of the loss and wastage that is involved in this cast-iron procedure of the customs authorities is afforded by a shipment of domestic articles of the freeonboard value of about £120, on which a prohibitive duty was imposed after they had been shipped from the home port. The consignment comprised -
The duty demanded on these articles was 4d. each, so that the total amount of duty payable was £307 4s. Because of this exorbitant impost the goods were abandoned by the importer and were sent into the King’s warehouse. The Customs Department held its usual clearing sale, and the goods, with an f.o.b. value of £120, were sold for £5. The merchants concerned in this transaction state that even at the small amount of the purchase money it would not have shown the purchaser a profit if he had paid the duty on them and sold them in Victoria. It is intended, therefore, to have the goods shipped to South Africa in bond.
A short time ago a Tasmanian. merchant directed my attention to an article invoiced at Great. Britain at 4s. a dozen, landed in Australia at 5s. 6d. a dozen up to 1928, and sold at 9d. each, upon which the duty is now 3s. each.
I have never yet deserved the suggestion thatI am a freetrader. I believe in protection. I believe that there are certain secondary industries in Australia that have justified their establishment, and have been of very great assistance to Australia, but I realize there are also a large number of small secondary industries in this country which have been, and always will be, if they are maintained on the present artificial basis, an intolerable burden to the community. Instead of being an assistance to the country, especially to its wage-earners, they have just the opposite effect.
– Can the honorable senator name any of them?
– I invite the honorable senator to read the reports of the Tariff Board, and he will see that individuals have asked for considerable increases of duties on certain goods which the Tariff Board ascertained afforded employment to only about twenty persons. The duty burden on the community would have amounted to ten tunes the amount of the wages of those employees.
– Everything must have a beginning.
– It is very easy for a country with limited population to overproduce. Certain industries arc not suitable for Australia. We can manufacture anything because we have the brains to do it. But at what cost? We have the rest of the world competing against us. Factories which have been in existence for a century in Great Britain, and in other parts of the world, are turning out in large quantities the requirements of the people of the world. How could Australian factories hope effectively to compete with them, except by the imposition of absolutely prohibitive duties. We are dependent on the retention of the goodwill of other countries for the disposal of our primary products. I know that honorable senators say that the people of other countries must come here for their wool requirements, but there are certain classes of wool which they may be able to buy elsewhere.
– They buy wool here, because it suits them to do so.
– I ask the honorable senator if he can reconcile the fact that while the duty on certain classes of textile fabrics is only 25 per cent. British, if those fabrics contain only onehundredth part of wool, the duty is equivalent, to 300 per cent. That is not scientific tariff making.
– Two wrongs do not make a right.
– I agree with the honorable senator. I have attempted to give the reasons for my opposition to this extraordinarily prohibitive tariff, and *ia committee I hope to have the opportunity to prove by ocular demonstration that my remarks on the second reading have beet more than justified.
– I commence my few remarks upon the note with which Senator Payne concluded his admirable speech by saying that I am not a freetrader; but. taking this tariff schedule by and large, J believe that it is very much too high. I realize that without protective duties, we should never bo able to start industries in Australia; we should always be at the mercy of countries with standards of living very much lower than our own. But one would imagine that when manufacturers have- their factories built, their machinery installed, their workers trained, and their market established, lower duties should be sufficient to enable them to compete with the outside world. In actual practice, exactly the opposite obtains. I think that instead of directing our attention to the demand for ever-increasing duties, we should attempt to hold the scales fairly between the manufacturers and the importers. Duties should be high enough to enable the manufacturers, if they are efficient, to produce goods for the Australian public, and low enough to enable people in other countries with standards approximating our own, Great Britain and Canada for instance, to export to us on a competitive basis. Thus we should afford protection to the public, as well as to the manufacturers. Under our present scale of duties, sufficient consideration is not given to the consuming public. We are told, over and over again, that an increase of duty will bring about a reduction of prices, but in practice it. does not work out that way. When duties are increased, the opportunity is nearly always taken to raise prices, and the raising of prices necessarily brings about an increase of the cost of living. . We may be told, in answer to that argument, that the cost of living is coming down ; but it will be found that the commodities that have fallen in price are those which are produced without tariff assistance. Take bread, for instance. The price has dropped probably 30 or 40 per cent., but this is due to the fact that the primary producers have been forced to accept’ a reduced price for their wheat. The cost of meat is down considerably, owing to the fact that the price of stock has dropped.
– The price of meat is not down sufficiently to suit the consumers.
– It could fall more, with advantage to the public, but the primary cause of the drop in the prices of these commodities is that the primary producers have had to accept less for their output. Butter has dropped in price probably 30 or 40 per cent., and there, again, the primary producers have had to suffer in consequence. When we turn to the manufacturers, however, we find that, where their prices are lower, their goods have fallen off in quality.
– In some instances, the prices are much lower.
– That is so; but, without doubt, the quality has fallen ofl’. Wages have been fixed in Australia^ according to the cost of living. The” tariff put up that cost, and the result was a demand for increased wages, and, consequent upon higher wages, there was a clamour for additional tariff protection. We have now reached a stage at which, through economic causes, wages, as well as the prices of commodities, have fallen. With duties increasing, the prices of the commodities required by the workers high, and wages going up, the country was filled with unemployed. It was said two years ago that the tariff brought down by the present Government would relieve unemployment, but we now find an alarming increase of unemployment. I have said on previous occasions, and I say with equal emphasis now, that the time has come when we should call a halt with regard to our fiscal policy. I admit that we must afford ample protection to the manufacturers,, but we must give other sections of the community a chance to live.
Another objection I have to the tariff is that it is absolutely unfair in its operation as between the States. The three big cities benefit tremendously under it - Melbourne, with its population of over 1,000,000, and Sydney with its population of nearly 1,500,000, making it’ the second largest city in the Empire. Western Australia, South Australia, and par ticularly Tasmania, suffer enormously on account of the tariff. Under the present law, there seems no way of giving adequate consideration to the claims of the smaller States in regard to fiscal matters. I realize that the States are represented in both branches of the Commonwealth legislature, and that in this chamber they have equal representation ; but any government can bring down a tariff schedule that imposes exorbitant duties, which remain in operation for the whole period of a parliament, without the representatives of the people having an effective voice in the matter. The present tariff schedule, for instance - or, at least, some of it - has been in operation for nearly two years. There must be something wrong in such a system. Surely this Parliament should have the right to decide the duties to be imposed upon, the people; hut the Government representing the majority in another place has brought down a tariff, and the Parliament, as a whole, has not been permitted to determine whether or not the duties imposed are equitable. This is the first opportunity that this chamber has had of saying whether it agrees with the tariff that is in operation. We have a Tariff Board composed of highly trained nien who, probably through their industry and general capacity, have made their mark in the Public Service; but the Government, apparently, takes little notice of their recommendations. I throw out the suggestion that, in place of the Tariff Board, there should be a body composed of six members, one to be appointed by each of the State Governments. We should amend the Customs Act so that no tariff could be submitted without a majority of the members of that board agreeing to it.
– A kind of Interstate Commission ?
– I would not mind what it was called, but it would at least provide for State representation, and would enable the opinion of the States to be expressed before a tariff was brought before the Parliament. That would mean that four of the States would have to agree to it before it could become law. It would prevent the hig cities from exerting undue influence in tariff matters. The cities of ‘Sydney and
Melbourne threaten soon to have a majority of the representation in another place, and the increasing influence of those big cities is detrimental to the interests of the rest of Australia, more particularly the smaller States of Western Australia, South Australia, and Tasmania, the majority of whose citizens have to till the land and market primary produce in competition with the world without’ tariff protection. If that suggestion were carried out I believe that it would benefit the people generally.
Why do we need such high duties as are now operating in Australia? In some cases they are greater than those in force in any other country. We have some- of the best land in the world, and we have endless varieties of soil. We have coal in abundance, and if is described as being as good as any obtained elsewhere.
– Being close to the surface, it should be cheap.
– Yes, it should not be costly to mine it. Some of our deposits of iron, ore are regarded as the most valuable in the world. We produce metals of all lands. Last, but not least, we have the men. Nobody will say that Australian workers, on the whole, are worse than those of any other country; most of us think that they are probably better. The manufacturers declare that their factories and their operatives are efficient; but, despite their being sheltered by a Himalayan tariff wall, primage duties, and 30 or 40 per cent., and, in some cases, 50 per cent, exchange, they claim to be unable to compete with the rest of the world. Requests for additional tariff protection pour in, and they say that unless these are granted they will have to close down their works. I point out that the wool industry was developed as the result of hard work. Our pastoralists had to go into the bush, clear and fence the land, and provide water, buildings, machinery, &c. They had to develop a type of sheep suitable to the Australian clime, and now they produce the best merino wool in the world. They have also developed British breeds of sheep, which thrive in the wetter parts of Australia. Australian wool is sold in competition with the rest of the world. Of the wheat-grower, a similar story may be told. He* took off his coat, went into the bush, and cleared his laud. In parts where it was thought impossible to grow wheat, he evolved dry-farming methods, with the aid of suitable fertilizers. Now our farmers have produced a number’ of varieties of wheat to suit different climatic conditions in this country. Their industry is efficient and up to date, and they compete successfully with the rest of the world. Precisely the same may be said of the dairying industry. Stock of various breeds are produced to suit different parts of the Common wealth.
– We are not so efficient in regard to dairying.
– No industry is so efficient that there is no room for improvement, but the strides that this industry has made in the last four or five years are most creditable.
– Under high protection.
– I shall come to that point. The fruit industry receives no tariff protection. Take the meat industry: Beef from Queensland, and mutton and lambs from other parts of Australia, are sold in the world’s markets. Yet, in regard to the factories in the cities, where the employees go to work regularly at a certain hour - about 8 o’clock - knock off at a comfortable hour, under factory regulations and Arbitration Court awards, with no work on Saturdays, we are told that these industries cannot exist unless we give them tremendous duties. There is not sufficient difference between the primary and secondary industries to justify us in. saying that the former should stand on their own account, and receive no help whatever, while the secondary industries, which are controlled by the big cities, must have enormous duties or else go out of existence. That argument does not seem to me to be substantiated. The workers in the factories of Australia “are not much better off than those in other parts of the world. Factory employees in Canada receive just as good wages as those in Australia. I suppose the English workers receive lower pay, but their standards of living approximate ours. Owing to the vicious circle of increased wages, increased duties, and ever-increasing cost of living, we” have reached the stage at which the present system is breaking down of its own weight.
Those who are hardest hit by this schedule are the farmers. They have no say in regard to the price of anything they buy or sell.
– What about butter?
– There is an import duty of 6d. per lb. on butter to prevent dumping by a sister dominion, but does Senator Hoare believe for a moment that such protection is necessary to keep New Zealand butter out of Australia? Our dairymen sell their butter in the English market in competition with the greatest butter producing countries in the world. The only help which they receive is that which they give to themselves by the Paterson scheme. They levy upon themselves to the extent of 1¾d. per lb. on the total production, and receive a bonus of about double that amount on the quantity exported. When only about one-third of the butter production was exported, this bonus amounted to 2d. or 3d. per lb., but as the proportion exported increased, the bonus decreased, and eventually will probably disappear entirely.
– -As the secondary industries develop, the duties will cease to be necessary.
– During the last three months, our dairymen exported £1,500,000 worth of butter. Only when the highly protected secondary industries are exporting on a similar scale will they be comparable with the primary industries.
– The Australian people are paying for butter about £4,000,000 more than they should.
– They are not paying more than they should. If the Australian dairyman and his wife and children were working under arbitration award conditions, the price of butter would be 3s. 6d. instead of1s. 6d. per lb. I live in a dairying community, and I know the long hours worked by the farmers and their families. Labour members say that butter should be cheaper.
– We do not say that it should be cheaper.
– If the dairymen worked the same hours as factory employees, no butter at all would be produced, because the cows would become dry. The prices of all things which the farmer buys are fixed. He has to pay for all his requirements that are produced by labour in accordance with conditions determined by the Arbitration Court. The prices of machinery, fertilizers, bags, food, clothing, and all the other requirements of the primary producer are increased by customs duties, primage duty, and sales tax, until the costs of production are raised to an exorbitant level. But for his own produce, he has to take what the buyer will offer. If there is a glut he receives little; only during periods of temporary scarcity does he get fair prices. I am not a freetrader, and I have always understood that the tariff is a subject to be dealt with on its merits, and not as a party issue. The schedule includes many duties which I shall support, but, by and large, the protection afforded by the schedule is too high and must be reduced. Pastoralists and agriculturists have developed their industries without help from any other section of the community, but they are asked to contribute unreasonably towards the support of city industries. The Minister for Trade and Customs (Mr. Forde), in a statement published in the Sydney Morning Herald yesterday, referred to the benefits conferred upon the farmers. He cited the duty of £60 a ton on butter. I repeat that the dairymen, so far from fearing . the competition of butter produced in other countries, are exporting extensively, and their product is competing in the markets of the world. When the secondary industries are able to show a similar record, when they are pulling their own weight, they will have greater claim upon our sympathy. Mr. Forde referred also to the import duties of £3 10s. a ton on maize, and £2 4s.10d. a ton on wheat. I cannot imagine why a duty is imposed on wheat ; it must be a relic of the dim past. We are selling our wheat in the overseas market and the price we received is governed by London parity. The duty on fresh meats, Mr. Forde points out, is £23 6s.8d. a ton.
– The wholesale price is less than that.
– Australia annually sends millions of carcasses to the other side of the world. The Minister mentioned also, the import duty of £54 10s. a ton on dried fruits.
– We are exporting all the commodities mentioned by Mr. Forde.
– That is so; therefore, these duties are not of any assistance to the farmer. To illustrate the benefit which the protective policy has conferred on the farmers, Mr. Forde said that the price of the stripper harvester had been reduced from £158 13s. 6d. to £145. Perhaps, the explanation is that the manufacturers find that they cannot sell at the higher price, but how do even the reduced prices of machinery compare with those in Canada. Canadian manufacturers pay, probably, higher wages than are received by Australian workmen, their employees are not more skilled, they have not superior coal or iron; yet stripper harvesters are sold in the dominion at, probably, 50 per cent, less than in Australia. Honorable senators may well apply themselves to ascertain the reason for this anomaly. Why must our manufacturers be buttressed by exorbitant duties that increase the prices of the implements of production 50 per cent, above the levels in Canada, where the standards of living are at least as high as in the Commonwealth? I believe that if an inquiry into our secondary industries were conducted by a Tariff Board representative of all the States, new light would be thrown on this subject. The present tariff makes conditions easier for the man in the city and harder for the man who follows the plough. I am particularly concerned for the primary industries, and I ask honorable senators to direct their attention to them, with a view to rendering assistance to the man on the land.
– Already this debate has resolved itself into a discussion of the relative advantages of freetrade and protection. Both the honorable gentlemen who have spoken this afternoon began by apologizing for their attitude and assuring the Senate that they are not -freetraders, although they are opposed to the schedule now before us; they declare that they believe in giving some protection to our secondary industries, but they have not indicatedwhat it should be.
– We want fair trade, not freetrade.
– We all recognize that undue interference with the freedom of trade and commerce is uneconomic and. unsound. But in most countries - and the United Kingdom is the latest to recognize the fact - some form of protection is considered necessary.
– But not nearly as high as in Australia.
– Australia is a young and sparsely populated country, but we believe that if its industries are scientifically protected our people can become industrially self-reliant and independent. Those industries which are necessary to our national existence cannot be established without protection which may be to some extent uneconomic, and we have also to encourage the development of natural, national industries. Whether the policy of tariff protection has been in some instances carried to excess, is debatable; the duty of the Senate is to decide what duties, if any, are excessive, and the extent to which they should be reduced. It is. difficult to lay down any hard and fast rule. Reference has been made this afternoon to protective duties that have not given the results that were reasonably anticipated when they were imposed. Some of the previous speakers referred slightingly, I think, to the part played by Australian workers in our secondary industries. Before I resume my seat, I hope to be able to prove conclusively that, in both primary and secondary production, they have done their full share.
– That is not denied.
– It may not be denied in so many words, but thesuggestion is made that it is economically wrong to adhere to our present system of wage fixation, and to arbitration court awards for the regulation of industry. If this policy is seriously contested, the only alternative is direct action, and I doubt that our position would then be improved.
– Payment by results is the only sound economic doctrine.
– I thought that we had heard the last of that theory, the falsity of which has been demonstrated over and over again. Shortly after the war, the people of Australia were called upon to “produce, produce, produce,” the assumption being that increased production would put us on the high road to permanent prosperity as a nation. Largely as a result of over production in countries like Australia and under consumption in other lands, we have “ produced “ ourselves out of jobs, and all countries, irrespective of- their fiscal policies, are now faced with very grave unemployment problems. This is not a party issue. As a South Australian, I appreciate the remarks of the honorable senator who has just resumed his seat (Senator J. B. Hayes). I admit that protection does not necessarily help the State of which, for the time being, I am one of the representatives in this chamber, because it depends largely upon primary production, whereas New South Wales and Victoria have natural advantages and are equipped for more intensive development of secondary industries. But this is an Australian Senate, and I am looking forward to the time when the imaginary lines which divide the States will have disappeared, and when Ave shall take an Australian view of the Commonwealth Government’s tariff policy.
It has been urged that protection is detrimental to the interest of the smaller States from the point of view of population. This chamber should not allow that aspect of a tariff to be a deciding factor. Since this debate has been launched, the people of Great Britain have decided, by an overwhelming majority, in favour of protection. We shall watch with interest the progress of events in the Mother Country, and see how a British tariff affects our economic position. Nobody will deny the advantages of a well-considered policy for the development of empire trade. But, on the other hand, no one will contend that a 100 per cent, empire trade policy will solve all our difficulties. The production of all things necessary for human existence has long since transcended the boundaries of individual States and even of empires. It calls for international co-operation. And because nations have disregarded these fundamental economic considerations, all are in practically the same position. The
United States of America, with the greatest home market in the world, an exceedingly high tariff wall, and record gold holdings, has also the record number of unemployed. The trend of world events in recent years has proved conclusively that neither protection nor freetrade can be regarded as the beginning and end of a nation’s policy. We must trade internationally if we are to apply an effective check to the maladministration of the world’s economic resources, and the mal-administration of the existing monetary system. The worldwide depression has hit Australia perhaps more than many other countries, because we depend for our prosperity upon the sale overseas of a limited number of staple commodities in the production of which we ‘excel, a.nd, as we have good reason to know, the maladministration of the existing monetary system has, to use a well-known phrase, knocked the bottom out of the world’s markets. Mr. A. Loveday, the head of the economic section of the League of Nations, in his latest book, Britain and World Trade, states -
England can scarcely feed one person in ten of her population : she is dependent upon foreign sources foi- a very large proportion of her raw material requirements. Her imports of foodstuffs in 1028 amounted to £53 .1.000,000. and of raw materials to £33o’.000,000’, a total of £800.000,000, while the value of her total exports was only £724,000,000. She is dependent, not for her prosperity, but for her existence, on the sale of her manufactures abroad. She is dependent, therefore, on a changing foreign demand, over which she can have no control, for which she can find no substitute.
That seems also to be the position of Australia. We suffer through overseas influences over which we have no control. Since these influences govern the world’s prices for our commodities, we must give our attention to tariff legislation, and endeavour in that way to safeguard the interests of this young and growing nation. Some of these proposals run counter to Labour’s policy, and as . a true member of the party, I endeavour to adhere as closely as possible to its declared objective. While on this point, I remind the Senate that 30 years ago when I first knew the right honorable the Leader of the Opposition (Senator Pearce), he was a confirmed freetrader, yet he was, for many years, a prominent member of the Labour party which then, as now, stood for protection. I mention this to show that although Labour’s policy is protectionist, there have been, in the ranks of the party, members holding other views - members with a sincere belief in freedom of trade, or tariff reform.
The problem that confronts Australia is international in its scope. Dr. J. H. Richardson, of the Leeds University, states -
A comprehensive programme of economic disarmament, based on the recognition of the economic unity of the world, would increase the general prosperity of all peoples. It .would make a contribution to world peace by widening the basis of human relationship, and by preparing the foundations for a political system which would co-ordinate national with world citizenship.
That seems to be a fairly sound sentiment and the expression of a high ideal. We may not be able to convert the people of Australia to this view, but it seems to me that the pressure of world affairs generally, and the unregulated methods of production which are responsible for over-production in some countries and under-consumption in others, must inevitably bring us again to a chaotic position from which we ure now endeavouring to emerge. Whether we approve of socialism or capitalism we should endeavour to agree upon some “ ism “ which will foster natural and national industries, and prevent the workers from being compulsorily idle - in short, a policy that will discourage one section of the people from indulging in everything which they desire, while other sections who are anxious to produce are prevented from doing so.
Coming closer home, I do not think that many people in Australia realize the grave position into which this country was brought by the previous administration. During its six years of office our imports of foreign merchandise totalled £982,000,000, while our exports of merchandise amounted to only £832,000,000, so that while we were enjoying a period of apparent prosperity, the adverse trade balances iu those six years aggregated £60,000,000.
– There was very little unemployment during that period.
– I shall deal with that aspect of the subject before I resume my seat. When the Bruce-Page Government took office it had at its disposal in London funds totalling £24,000,000. When it was defeated it left a deficit in London of £73,000,000. Obviously, we were on the wrong track before we were struck by the economic blizzard from which we are now suffering. It is- equally obvious that, when the present Government took office, the situation demanded drastic changes in Australia’s fiscal policy. We were on the brink of national default. Our credit had gone. And because this Government courageously decided upon drastic and unpopular tariff and other charges, that were essential if the interests of the nation were to be safeguarded, its opponents now desire to sweep away entirely the protection which it has given to secondary industries.
– Nobody desires to sweep away the whole tariff.
– For some time there has been a well-organized press propaganda, intended to persuade the people that they are being robbed, through the tariff and that our primary producers are being called upon to bear unfair burdens. But, as I have stated, when this Government took office, the situation of the Commonwealth was so desperate that people of all shades of political thought were convinced that drastic remedies, in the form of higher protection or prohibition, were absolutely essential if national default were to be avoided. Although we have passed that stage, I do not think we have yet reached the point in our economic rehabilitation that would justify drastic reductions in the tariff schedule now under consideration. As a citizen of South Australia I admit that this tariff does not help the people of that State very much, but I feel sure that the majority of its people, being good Australians, are prepared to regard the tariff as a national instrument, to be used in the interests of the Commonwealth as a whole, rather than from the point of view of a primary-producing State.
– Does the honorable senator consider that the time for the reduction of the tariff will ever come?
– At the outset of my remarks, I stated that any interference with the free flow of trade and commerce was uneconomic and unsound.
– Then the honorable senator is a freetrader?
– I do not wish to qualify that observation in any way. nor do I feel called upon to apologize f’-r tha views which I hold. Our fiscal policy has for its objective the maintenance of Australia for the white race. We may be called upon to do many uneconomic things in order that the handful of people who- are in possession in this. the finest country in the world, may bold if for the white race.
The Leader of the Opposition, in an otherwise excellent speech, was distinctly unfair to this Government and its supporters when he suggested that the present fiscal policy is the price paid for financial support given to it by certain sections of the community during the last election campaign. I. was glad to notice that Mr. Gordon Bennett, the President of the N*“w South Wales Chamber of Manufactures, promptly denied that his organization was a party to such an arrangement. We all know, from the letters and circulars addressed to us during this tariff debate, that various interests are engaging in propaganda. There is nothing wrong with this procedure so long as it is done honorably. It is the duty of every government to pass legislation which, in its opinion, is necessary in the interests of the nation.
We are told that costs of production must come down. That has been the theme of every argument against this Government’s tariff policy. The wages of the workers are coming down.
– Is that not the fc<:y to the whole position ?
– Although wages have come down the costs of production have not fallen- appreciably. It is claimed that, as a result of our tariff, other countries will take retaliatory measures against Australia. If so, Britain is in for a full dose of retaliation for its contemplated tariff action. We shall see what happens. The Leader of the Opposition (Senator Pearce) enumerated three points as being essential for consideration when determining our tariff policy - first, the promotion of Empire trade, second, the fostering of trade relations with countries with which Australia has a favorable trade balance, and, third, adequate protection of Australian industries when the interests of the community justify that action. I think that the order should be reversed, and that our first objective should be to give adequate protection to Australian industries,, where those industries and the interests, of the community justify it. If we can justify our action, it does not seem to me to matter much whether the Tariff Board recommends that, procedure^ or otherwise.
Many complain that the tariff has been the most serious burden placed upon the backs of our primary producers. In South Australia and Western Australia the majority of the- people are primary producers, and one of their greatest difficulties has been to meet interest payments, incurred in connexion with financial accommodation that has been granted to them. That is a matter that is not affected by tariffs.
– I think that it is.
– I do not think that interest rates fluctuate in sympathy with the tariff; but it may be so. The difficulty is certainly not associated with wages. In South Australia, a primary producing State, wages are lower than in any other part of the Commonwealth, ordinary and company taxation is higher, and the incidence of unemployment is also higher than elsewhere. What is the explanation ?
– Half of the people in that State live in Adelaide.
– It may be said of any other State in the Commonwealth that half of its people live within a 10-mile radius of the capital’s post office. There is nothing wrong with that. It speaks volumes for the growth of our secondary industries, and is not brought about at the expense of the primary industries.
– It speaks volumes for the privileges that are accorded to our secondary industries.
– It is also indicative of their growth. Indifferent organization certainly has an adverse effect upon costs. A firm which began manufacturing motor bodies in South Australia erected a huge four-storied building on a block in a main street of Adelaide, which must have been valued at between £40 and £50 a foot. The raw material necessary for the process of manufacture had to be conveyed from the port several miles away, and, as twothirds of the company’s business was done with other States, the finished product had to traverse those miles back to the port prior to being shipped. Obviously, that was an uneconomic system, and finally the factory was shifted nearer to the port. Whenever a business depends upon interstate or overseas trade, it is necessary to have the factory as near as” possible to a port. The population will soon follow.
This tariff has stimulated the growth of manufacturing industries in Australia, to the great benefit of the nation.
– It has strangled half of our primary industries.
– If that can be proved to be true, I suggest that . the honorable senator should indicate the remedy. Senator Colebatch has written an introduction to a book entitled, The Australian Tariff Delate, which has been circulated among honorable senators. The book is part of the un-Australian, anti-protection propaganda with which we are so familiar. In this introduction the honorable senator stated -
Any public iiih.ii who takes a stand for tariff reform is pilloried as a traitor to his country, and infamously traduced as one who would undermine the living conditions of the people.
That is an exaggerated opinion. There is nothing unpatriotic about advocating tariff reform; but when we talk about reforming our tariff wc should be prepared to get down to details, and demonstrate when a tariff has gone far enough. In the same article Senator Colebatch indulges in the usual arguments, some of which are threadbare, in favour of freetrade, although he describes it as moderate protection. The Premiers’ plan is described as inadequate, and it is solemnly said that -
Unless the cause is removed, the drastic action agreed upon by the Premiers plan will bo unavailing, for matters will go from bad to worse, and a second economy plan will probably become necessary at no distant date, involving further sacrifices.
That is a cheerless, hopeless sort of outlook after all the travail through which we have gone during the last twelve months or more. The booklet mentioned that, “ The survival of the fittest is the law of human nature, upon which all progress is based “. In keeping with this jungle law, it is suggested that arbitration and such methods should be abolished. I respectfully differ from that view. The national sequence of resort to jungle law would be a reversion to the open go, to direct action. Every man would take what he could get; “devil take the hindmost”. It would result in victory for the sweater, and the cheap, shoddy manufacturer. It is because we have built up social and industrial legislation in Australia that the law of the jungle is not allowed to have free play here. I hope that whatever may be the requests made by the Senate with regard to the tariff, we shall keep in mind the position of the nation as a whole, and not the position of one or a few industries.
In that same booklet it is claimed that the cost of production must come down again. It i3 very easy to say that. During the past twelve months, wages, the most important factor in price levels, have come down. ‘Recently demonstrations have been held in Adelaide nearly every day of the week because .men, women and children are unable to exist on the rate of wages now being paid in that State. Wages have fallen, prices are falling, purchasing power is falling, and employment is falling. That, surely, is not the survival of the fittest. The more we cut, the more we bleed. All over the world it has been contended that our economic recovery will be achieved, not by pulling things down, but by building them. up. Professor Keynes, who was a member of the Macmillan Commission-
– Did he say one word in favour of the tariff?
– At the moment I am concerned only with the economic position. I am aware that an argument may be advanced for all sides of the question. It is my task to put my argument; the honorable senator may put his. This eminent economist points out that if prices, costs of production, and everything else comes down, and we carry “ economy “ to its logical conclusion, we shall find that we have balanced the budget’ at nought on both sides with the people exhausted and nothing being bought or sold. While, rightly or wrongly, it is urged that wages and costs of production must come down, it seems to me that that argument does not get us any further. We have had two years of falling prices and wages, and we know what the result is so far as the workers are concerned.
The logical conclusion of the withdrawal of protection and the exposure of Australia’s industries to the competition of the world, is that you might as well have the people from overseas, irrespective of their colour, as have their products here. We do not want that. We must fix some standard of protection which will safeguard the interests of the nation and preserve a White Australia for us.
Senator Pearce specifically singled out the metal industry when speaking on this bill. If that trade received no protection, 130,000 Australian workers, receiving £30,000,000 a year in wages, and producing commodities to the value of £100,000,000 annually, would be thrown out of work. Iron and steel would be bought from Belgium and Germany, wireless sets, refrigerators and accessories from the United States of America, pipe fittings from Sweden and Germany, split pulleys from the Continent, factory equipment from Germany and elsewhere, kitchenware from Japan, wheat and butter from Russia, and sugar from Java. I do not think that any of us want that. Another point to which we pay little attention is that the local consumers in Australia purchase £53,000,000 worth of our agricultural, £38,000,000 worth of our pastoral, and £41,000,000 worth of our dairy and farmyard products annually, so that 70 per cent, of our primary products is consumed or used in Australia largely by people engaged in secondary industries. The two industries are interdependent, and cannot be separated. We could not live in Australia without our splendid primary industries, nor could we become a nation if all were bewers of wood and drawers of water.
– Whoever suggested anything of the kind?
– That is the trend of the propaganda that is being circulated. I have not found anybody willing to draw the line between what constitutes reasonable! and unreasonable protection.
– The Sydney Chamber of Manufactures recently did so.
– I have a communication from that body which justi ces the action of the Government, taking into consideration the extraordinary position in which it found itself, and the position of Australia generally. There are now 22,000 factories in Australia. They are not increasing in number, but they arc in size, which indicates additional efficiency. Those factories employ 461,000 hands, the average being 100 for each.
– I believe that the honorable senator refers to the factories when they were working at full pressure. What is the date of his statistics?
– They are the latest available for the year 1928-29.
– Four hundred thousand of our people are now out of work.
– If we had not. protection our unemployment figures would be double what they now are, because they could not find employment in our primary industries. Of that number 330,000 are males and 117,000 females. Our secondary industries use 1,600,000 horse-power engines, and their total output is valued at £420,000,000 per annum, which includes the raw material used, valued at £238,000,000. The value added by the process of manufacture is £167,000,000, which is greater than the value of the products of any other separate industry.
– That is an inflated value.
– If so, the same remark applies to other industries. I understand that that is the wholesale value.
– It is the value that results from the operation of the tariff.
– If it is an inflated value, I hope that we shall discover how far the inflation goes, and then resort to deflation to get -back to where we should stand, given a fair measure of protection. The raw material used by our secondary industries is valued at £230,000,000, while light and fuel account for £13,000,000. Much of the raw material is primary produce used for the manufacture of food and drink products. The secondary industries provide a home market for primary products for which there would otherwise be little or no market. I agree, of course, that there ought to be a distinction drawn between those industries which hurt primary production, and those which help it. During the last five years our secondary industries have used’ £1,100,000,000 worth of primary products. The average wage paid to the workers in factories is £210 a year, including juveniles and females. The average wage for males is £247 a year, and for females £110 a year. There are approximately 461,000 persons employed in factories. The tendency is to increase the number of female employees in all factories, due to the installation of improved machinery, &c. The workers who receive, on an average, £210 a year, turn out products each year to the value of £372. Senator Colebatch interjected just now that this represented an inflated value. Obviously, there is a big margin between £210 and £372. After paying £238,000,000 for raw materials, £90,000,000 for salaries and wages, and £13,000,000 for light and fuel, there remains a margin of £76,000,000 to cover expenses and profits in connexion with Australian manufactures. If that margin is too great, we should turn our attention to having it reduced. In five years the margin between what it has cost the manufacturers in secondary industries for raw material, wages, light and fuel, and what they receive for the manufactured articles’ was over £380,000,000.
In a debate of this kind we cannot go into these matters fully enough to establish who is receiving too much or too little, but it must be evident that the workers are pretty well down to bedrock. As a matter of fact, they cannot carry on as things are. They cannot pay for their homes; they cannot pay their rates and taxes; they cannot pay their dues to friendly societies or to their churches.
– Then it does not look as if the policy is working out very well.
– If some one is getting too much out of industry we ought to find out who it is. To do that it is necessary to take the industries one by one and analyse them carefully, but this is not the place to do that. I touch on the matter now so that I may point out that it is not fair to say that the secondary industries are flogging the primary industries ; that the workers must do more and take less, as’ they are doing in Canada, or somewhere else.
Raw material represents 50 per cent, of the cost of the manufactured goods, and most of the raw material is primary produce. Light and fuel represent 3 per cent.; wages, salaries, &c, 21 per cent.; while expenses, profits, &c, represent 18 per cent. Is raw material costing too much?
– The coal mines are charging too much for coal.
– I shall come to that presently. . The value of plant and machinery is £239,000,000, this value having been increased, either on paper or in fact, by £5,000,000 yearly.
– Machinery costs too much.
– I am endeavouring to put the position fairly, and, if possible, to counter the broad, slashing statements that our secondary industries are a burden on the country, or that the demands of the workers are making them uneconomic.
– Have such statements been made here?
– I think soat least by suggestion. One hundred and fifty factories are engaged in the manufacture of agricultural machinery in Australia. They employ 5,000 workers, and each year use raw material worth £1,250,000. Salaries, &c, amount to £1,200,000, and the value added by the process of manufacture is £1,800,000,- making the value of the output £3,000,000.
– They are not worth £3,000,000; that is what is charged for them.
– I am giving the official figures. If the workers in the factories worked for nothing, the reduced cost of agricultural implements to the farmers would represent only lid. per bushel on an average yield; while if the machinery were given to the farmers free it would represent only 4½d. per bushel, or the amount of the bounty which it is now proposed to pay them. We should lay all the cards on the table, and try to discover which industries are profiteering; which are inflating values, and becoming a burden on the primary producer. Let us single them out, because it is not fair to cast a slur on all of them, or on the workers engaged in them.
The value of the products turned out in the butter and cheese industry is £26,000,000, and the value added by manufacture is £3,000,000. In the meat and fish preserving industry, the value of the primary produce used is £5,000,000, to which £1,000,000 is added by process of manufacture. The bakeries take from the primary producers £5,600,000 worth of produce, mostly flour. After it has been manufactured, it’ is worth £9,800,000, or £4,200,000 more than the raw material. That, in my opinion, is an unduly large margin. This matter was referred to earlier by Senator Sir George Pearce, who said that the cost of bread was not governed by the cost of production, but largely by the cost of distribution. For instance, it costs 2d., it is claimed, to deliver a loaf of bread which costs 3d. to make. The leakage is accounted for, not by the cost of production, not by wages, but by the uneconomic system of distribution.
– That comes back to the matter of wages again.
– Yes, wages, but not the rate of wages. It is due to half a dozen bakers delivering bread in the one street. The newspapers alone conduct their deliveries on an economic basis, having the cities zoned. It is impossible, however, to get the bakers to agree to a similar system. We have tried to do it in Adelaide, but have been unsuccessful.
– If the zoning system were introduced, it would reduce the number of bread carters.
– I am not so much concerned with employment’ as with having the job done on an economic basis. I make no attempt to justify doing for £1 work which can be done for half that amount more efficiently and under better conditions.
– Let the honorable senator go to Sydney and tell that to the Bread Carters Union.
– I have told it to the bread carters in other cities. The only solution seems to be to have such work done by some social service organization. Under the capitalist system, it cannot, or will not, be done.
The flour mills use £14,000,000 worth of raw material, and add £2,000,000 of value to it. The woollen mills use £4,000,000 worth of raw material, pay salaries, &c, to the value of £1,700,000, and their finished product becomes worth £7,400,000, an added value of £2,800,000. It can be shown in every case that the wages bill is not an important part of the cost of the finished article. The cost of distribution is nearly as great” as the cost of production, and that is obviously wrong. It should not be necessary to reduce wages even in the distributing industries, but it should be possible to introduce improved methods. We hear a great deal of talk about competing with other countries, but we cannot hope to do so as long as we stick to our present obsolete methods. I do not advocate any violation of the principle of a fair return to the manufacturer, fair wages for the workers, and proper working conditions.
Let us examine the position in the electrotyping, stereotyping, and printing and publishing industry, which is probably one of the most important secondary industries in Australia. The raw material used is worth £6,000,000 ; wages amount to another £6,000,000, and the value of the finished article is £16,000,000. That is to say, the raw material - paper, ink, metal, &c, to the value of £6,000,000 is, by process of manufacture, turned into goods worth £16,000,000. If we dissect the figures we shall probably find that the high cost of the finished article is in large measure due to some of the businesses concerned - big newspaper organizations, for instance - being over capitalized, so that they have to put up their charges to the public in order to pay dividends to their shareholders. The high cost of the finished article cannot be attributed to the cost of labour.
Then let us consider the motor industry which vitally affects the primary producers.Raw materials for use in this industry are valued at . £3,500,000; salaries, &c, at £4,000,000; while the value of the output is £10,000,000.
– Does that represent profit?
– It represents other expenses, not necessarily profit. These expenses are heavy because of the uneconomic system of distribution. Motor salesmen travel throughout the country selling motor cars and accessories.
– On time payment.
– Exactly. The system is uneconomic. All these expenses are charged up to the industry, and when a slump comes the industry cannot bear them. With respect to the Light and Power Works of Australia, the Commonwealth statistics show that the cost of raw material is £2,700,000, wages and salaries, £.1,600,000, the value of the output being £9,000,000.
– Is the honorable senator making any allowance for interest ?
– Yes. The value of the output includes interest and other charges.
– Chiefly interest.
– That may be so.
– What capital is involved ?
– The value of the plant is £22,000,000, and, obviously, interest must be added to that. Most of the light and power works of Australia are owned by big companies and may be over-capitalized, and if they are, they have to make extortionate charges to enable them to meet their liabilities.
– Those works cannot be over-capitalized, because most of them are government undertakings.
– That may be so much the better for Australia. In this industry there are fewer than 6,000 employees, and each employee on a wage of from £210 to £240 produces annually £1,000 worth of the commodity.
– All those calculations are useless, because everything depends on the simplicity or complexity of the operation.
– That may be so. More machinery is needed in the manufacture of light and power than in some other industries. The raw material used in the manufacture of gas and coke costs £4,000,000, the value of the total output being £8,000,000. The wages paid in the industry amount to £1,300,000, yet only 5,000 men are employed in it. On the figures there is evidently a big margin for profit and other expenses. We should analyse these industries and treat them fairly.
– Do the balancesheets of these companies show the absurd profits which the honorable senator has mentioned ?
– I am not suggesting that they are absurd profits. I am quoting the figures of the Commonwealth Statistician which are, no doubt, supplied by the undertakings themselves. We should prevent any industry from making absurd profits at the expense of another industry. When the British Economic Mission was here, we had several conferences with its members. They were, of course, largely against the Australian protective policy, but they said that if we determined on protection in keeping with our national ideal, it should be effective. Our object is to make it effective.
– Does the honorable senator regard the present tariff aseffective ?
– The Leader of the Opposition knows full well that we are. faced with an abnormal position, brought about largely by the extravagance of the previous Government. As a result, this Government had to take drastic action to rectify the trade balance. The Prime Minister (Mr. Scullin) a few days ago stated in another place that so soon as our financial position improved these anomalies would be removed.
– Would this tariff be too high in normal conditions?
– That is admitted.
– Is it an emergency tariff?
– That is all that is claimed for it. The embargoes and surcharges are part and parcel of the scheme of rehabilitation. Take the attitude of the Chamber of Manufactures in New South Wales. That chamber denied that it had made any request for embargoes, surcharges, &c, but it pointed out that out of 125 items in regard to which its recommendations had been adopted, either wholly or in part, the wholesale prices of 67 items have been reduced since this tariff item came into operation. The Tariff Board has stated that it is satisfied that the secondary manufacturers arc endeavouring to maintain a high standard of efficiency, and, in the main, succeeding, while, generally speaking, those who applied for increased duties were not making excessive profits. Mr. Keith Bainsford, the president of the almond section of the South Australian Fruitgrowers and Market Gardeners Association, says -
The adequate customs protection recently given by the Commonwealth Government has greatly stabilized the almond-growing industry in Australia, and a much increased acreage will be required to be planted to provide sufficient nuts to meet the demand.
Despite all this talk about the fiscal policy, we must admit that !thc most serious problem with which we are faced is that’ of unemployment. We have to consider whether we are likely to find employment for more people by importing goods or by manufacturing them ourselves.
– This tariff policy has thrown a good many people out of work.
– About 70,000 children leave our schools annually. We cannot place them, on the land, so we must build up our secondary industries in order to absorb them. It is not fair to engender in the mind of a man the feeling that he is getting a rough spin in order to benefit another man. The worker in the primary industry should work side by side with the worker in the secondary industry. They should work in each other’s interests. That is essential to the welfare of the nation.
– Why not give both of them a fair deal?
– That is what we are trying to do.
– That is not the motive behind this tariff.
– As the Prime Minister has said, the Government was compelled to take this drastic action in order to save the nation from default.
If there are anomalies, and there must be anomalies in this tremendous tariff, we should be prepared to deal with them, having regard to their incidence upon different industries.
– Does the honorable senator suggest that we should now deal with them?
– Has Australia reached a normal position ?
– No. Mr. T. B. Ashworth has circulated among honorable senators certain propaganda, in which he, as a representative of the employers, condemns everything that this Government has done to rehabilitate this country. He contends that the Premiers’ plan does not go half far enough, and that wages and salaries should have been further reduced. He takes up an extravagant position. [Extension of time granted.] If we made such, extravagant statements on the public platform we should be called soap-box orators and red-raggers, but nothing i3 said when a representative of the employers speaks of the inadequacy of the Premiers’ plan, tears it to pieces, and makes other absurd statements at a meeting of the National Council of Women of Victoria.
– He spoke, not as a representative of , the employers, but in a private capacity.
– That may have been so. But, if we attempt to chop everything down, as advocated by Mr. Ashworth, we shall soon become nationally impoverished and able to do nothing at all.
I have previously referred to the international aspect of the tariff. Our policy, to some extent, must be controlled by oversea influences. In past seasons, we were troubled with what was likely to happen in the event of Russian wheat coming into the world’s market. Last season we learned how seriously it could affect the price of Australian wheat. Now we learn by cablegram that no wheat is to’ be exported from Russia next season. It all shows how dependent we are on international forces. For instance, we have been hopeful that the Chinese would change their diet from rice to wheat. According to details published by the Times’ Trade and Engineering Supplement) a ten-year plan is being inaugurated in China to establish primary and secondary industries in that country, largely with the aid of British capital.
– Is this matter relevant to the bill?
– Yes. It is claimed that, but for an excessive tariff, the primary producers of Australia would be in a better position to accept world’s prices for their commodities. But I am pointing out that, whereas we have been looking to China for a possible outlet for Australian wheat, arrangements are being made to spend £5,000,000 on the production of rice, and £25,000,000 on the production of wheat in China.
– An excessive tariff puts up the cost of production in Australia.
– Yes ; but the tariff is not the sole difficulty of the Australian primary producer. If there were no tariff, he would still be dependent on overseas prices, ‘ and the prices of imported articles would rise. He is, therefore, considerably affected by international developments. In a few years, in China there will be _ a considerable production of some of the produce we export and the goods we manufacture. A solution of the problem is, therefore, beyond our immediate ken. Of the 700,000,000 acres of land in China, only about onequarter is ‘ actually under cultivation. After opening up the sparsely-populated territory in the north-west, and reestablishing prosperity in those provinces which have been stricken with famine, it is estimated that the area of arable land under cultivation can be increased to 500,000,000 acres. Wide stretches of country in North China are suitable for the introduction of modern mechanical methods of large-scale farming, by the aid of British machinery and capital. China’s production, therefore, must ultimately affect the position of Australia.
Honorable senators have also received a batch of correspondence from the Henry George League. One of the captions of this league is that “ No person is morally entitled to charge another for the use of the earth.” It is an old doctrine. St. Ambrose, in the third century, wrote -
The land was made for all and why do ye rich call it your property? Nature knows nothing of rich men. Nature bore us all poor.
And in the fifth century, St. Gregory, who’ was largely responsible for the conversion of Britain, wrote -
We must make them- clearly understand that the land which yields them income is the common property of all men and for this reason the fruits of it are for the common welfare.
Idealism, no doubt, and sound; but it seems1 to me ‘that, after we have had a full-sized shot at the tariff, we shall find that we are dependent on international forces. Although the success of the policy of the British Government is not a matter with which we are intimately concerned, I hope that that Government will take a national and, if possible, an international view of tariff matters. Not long ago, any mention of international affairs was sufficient to brand one as unpatriotic, but Great Britain’s position to-day has been forced upon it by external causes, and its rehabilitation will, to a large extent, depend on international causes.
Debate (on motion by Senator McLachlan) adjourned.
Debate resumed from page 1416.
Senator Sir GEORGE PEARCE (Western Australia) [6.0].- - Since I spoke at an earlier hour of the day, I have had an opportunity, through the courtesy of the Government, to peruse the correspondence between the Commonwealth Government and the State Governments, and I find that the information . which was given to me to the effect that one State Government had made reservations, was not correct. I could find nothing in the correspondence that could properly be called a reservation, and I must, therefore, assume that the State Government in question has agreed in effect to the proposals contained in this bill.
I have to complain of the lack of information in the speech pf the Leader of the Government when introducing this bill. As I did not wish to do him an injustice, I had a look at the Hansard report of his speech. It confirmed the impression I had formed that the speech contained little or nothing in the way of information. Tor instance, a very important factor in connexion with this bill is the time when debts owing to dissentients in the recent conversion appeal are due for repayment. That information was not supplied in the Minister’s speech, but I have since obtained it from him, and I propose to give it to honorable senators. Of the £16,655,769 representing the amount owing to dissentient bondholders, £4,273,872 falls due in 1931. £2,940,321 in 1932, and £2,386,211 .in 1933. Of the total amount £9,600,404. falls due by February, 1933. Of the balance, £1,051,506 is due in 1934, £2,341,217 in 1935, £431,334 in 1936, £1,26S,626 in 1937, and £1,962,682 in 1938, and thereafter.
Senator Sir GEORGE PEARCE.No, but it is obvious that those who dissented were the holders of the shortdated securities falling due in the next few years, and consisting almost entirely of Commonwealth securities. The holdings of dissentients have been analysed as follows : -
I interpolate here that these figures show that more than £10,000,000 out of the total of £16,655,769 was held in amounts of £5,000 or less-
Senator Sir GEORGE PEARCE.That is so.
Senator Sir GEORGE PEARCE.Yes, but the figures I have given have an important bearing on the matter. It is now November, and next month the Commonwealth would have to raise £4,273,872 if this bill were rejected. In what way could that liability be met ? The Opposition has not the responsibilities of government upon it, and it is not for us on this side to bring proposals before the Parliament for meeting these liabilities. The Opposition in the Senate has, at various times, taken a negative action, which has been of the utmost benefit, and, in my judgment, has, on more than one occasion, saved this country from disaster. For instance, when this chamber refused to agree to the Government’s proposal for a fiduciary note issue to the extent of £10,000,000, there was no necessity at the time to submit an alternative proposal. When we declined to allow the export of all the gold required for backing the Commonwealth note issue, the alternative was well known to everybody; it was obvious even to the Government. On each occasion when .the Senate has taken action which has had the effect of keeping this country solvent, there ha3 been no need for it to put forward alternative proposals; but, in the present case, to be honest with ourselves and with the country, if we reject this bill we must be prepared to offer an alternative.
Senator Sir GEORGE PEARCE.Not at all. If, at the financial conference held in Melbourne in August, 1930, and attended by Sir Otto Niemeyer, the Government had had the courage to implement the promise there made by the Prime Minister (Mr. Scullin), and had put into immediate operation the proposals made at that conference, Australia would not have been in its present parlous condition.
Senator Sir GEORGE PEARCE When we review the unfortunate circumstances out of which this bill has arisen, we find that an amazing series of events occurred in the nine months immediately following the Melbourne conference of August, 1930 - the Prime Minister and two of his colleagues in England, members of his party in Australia openly advocating repudiation, Ministers vainly attempting to get their supporters to implement the decisions of the Melbourne conference, a rebellious caucus resolving in favour of the inflation of the note issue by £28,000,000 for the purpose of undertaking a programme of public works, the subsequent revelation of the cablegrams that passed between the Prime Minister and his colleagues in Australia, in which the latter informed their leader of the manner in which the caucus was bolting down the steep hill of inflation, the return of the Prime Minister to Australia, and the re-admission to the Cabinet of the chief apostle of inflation, followed by the retirement from the Government of the two Ministers who had endeavoured to honour the promise which the Prime Minister had given to the State Premiers and the people of Australia. . Having regard to these astounding occurrences, the wonder is, not that our credit has been injured, but that a vestige of it is left. For these things the members of the Opposition have no responsibility. We had no part in them, and, therefore, did not. create the psychology of to-day which has led to the introduction of this bill. The whole responsibility lies with the Government and its supporters. I ask those honorable senators who may dissent from my attitude to-night to have regard to the recent historical facts which I have just mentioned. What, then, are wc to do? It is obvious that the obligation about to mature cannot be met from the sinking fund. The trustees of the sinking fund have conferred at the request of the Government, and the maximum amount they can make available to meet cases of hardship arising under the conversion scheme is £2,000.000 in the current financial year. Obviously, that is of little use in respect of £4,273,000 of obligations falling due next month, and nearly £3,000,000 maturing in December, 1932. It is equally obvious that because of the injury to the national credit it is impracticable at this juncture to raise a loan to pay off these debts. From the present market quotations of Australian stock, it is evident that if Australia -were to go on the money market to-day the best terms it could get would be a 4 per cent, loan at an issue price of £87 10s. If we decided to raise a loan on those ruinous terms it . is quite probable that the dissentients for whose benefit the transaction was undertaken would take up the new stock and make a clear profit of the difference between the issue price of £87 10s., and the £100 at which the maturing stock would be paid off. What arc the other possible alternatives? One is an inflation of the note issue. If the Senate were to reject the proposal now before it, does any honorable gentleman believe that the unrepentant Labour party would not seize the opportunity to revive the proposal for an inflation of the note issue? If the caucus was prepared to vote for the inflation of the note issue by £28,000,000 for the purpose of new works at this time of financial stringency, it certainly would not baulk at a smaller measure of inflation to meet an immediate liability. The other possible alternative is the postponement of our obligation in respect of the maturing loans, but if an element of compulsion in connexion with the conversion is a form of repudiation, so also would be a deferment of payment. Our contract with the bondholders is to pay, on the due date, £100 in cash for every £100 bond, and the postponement of redemption would be a breach of that contract. I ask those who may criticize the attitude which some of us will adopt towards this bill to explain what other alternative is open to us. I can think of none; but those who call upon the Senate to reject this bill have an obligation to point out another practicable course. Inflation would deal a deadly blow at our credit, and militate against that economic recovery, the first signs of which are already apparent. The second alternative I have mentioned is open to the same objection, but, in addition, it would depreciate seriously the value of existing Australian securities, including the stocks of those who patriotically, and, in many instances at great sacrifice, voluntarily converted their former holdings.
Another aspect of this matter should be put before the people. We are told that the passage of this bill will cast a slur on the honour of Australia. Let me compare the procedure proposed with the principles which are regarded as honorable in private business. If a merchant finds that he is unable to meet his obligations he convenes a meeting of his creditors and places before them his financial position. He says to them, “I am temporarily embarrassed. . I am unable to meet my obligations on the due dates. Here is a statement of my assets and liabilities; obviously, I cannot pay 20s. in the £1. If my assets are- realized now they will probably yield so much; if you will allow me further time you will probably fare better “. ‘This frank disclosure is regarded as the proper procedure for an honest man. The creditors, after considering the debtor’s position, decide what action they will take. Nobody will say that the Commonwealth bankruptcy law was framed to protect the dishonest debtor. If the proceedings are taken under that law the minority of the creditors are bound by the decision of the majority; if the majority decide to accept a composition of 15s. 6d. in the £1 the minority must fall into line. It was impossible for Australia, owing to the circumstances I have mentioned, to meet its maturing obligations. It could not call a meeting of its creditors, but it consulted them in the only possible way. An appeal was made to them to convert voluntarily their old securities into new stock bearing interest at 4 per cent. Ninety seven per cent, of them responded to the appeal; 3 per cent, dissented, but, in accordance with the principles that govern private trading relation amongst honest citizens, the 3 per cent, must bow to the decision of the majority.
Senator Sir GEORGE PEARCE.It could not be, because nobody could foresee at that time the subsequent developments. When a trader obtains a supply of goods from a merchant, he does not say, “ I ask you for credit, but I warn you that twelve months hence I may not be able to pay “. He intends to pay, and hopes to pay, but when he finds that he is unable to do so, he frankly takes his creditors into his confidence. At the time of the conversion loan, although certain damaging events had occurred, notably the decisions of the Labour caucus, there was still confidence that Australia would pull itself out of its difficulties -and meet all its obligations. The conversion loan was an appeal to the patriotism of the people, and the success of it was, in my judgment, a demonstration by the people in the most practical and effective way of their opposition to the fantastic financial proposals of the Government, and the talk of repudiation by irresponsible ministerial supporters. Would a similar appeal to-day be equally successful? I am sorry to say that it would not, and one reason is that the Labour Government is still in office, and is likely to remain there for some months. I find myself in a difficult position. I have no enthusiasm for the bill, but I realize that, if I counsel honorable senators to vote against it, there rests upon me the responsibility of suggesting an alternative. If I knew of an alternative, I would prefer it to this bill, but I can see none.
– I can well understand the inability of the right honorable the Leader of the Opposition (Senator Pearce) to work up
Any enthusiasm for the bill. I suggest that no member of this chamber can do that. If a person commits a wrong, and does not place all his cards on the table, the time of reckoning, which is inevitable, will find him confronted with a much more difficult and complicated position than if he had faced the facts at the time. The prospectus issued in connexion with the recent conversion loan made definite provision f6r those who dissented. Although there was, at that time, an alternative to conversion, the dissenters were not told what it was; they were kept absolutely in the dark. Obviously, those who dissented could not expect to be placed in a better position than bondholders who converted. It was generally understood that they would be liable to taxation of an amount equal to, if not greater than, the loss of interest, to be suffered by bondholders who agreed to the Government’s conversion proposals. The bill now before the Senate for the compulsory, conversion of securities held by dissenting bondholders is a regrettable conclusion to a very fine achievement. As the Leader of the Opposition has stated, 97 per cent, of the old securities were converted into the new securities, leaving only about 3 per cent, of the bonds unconverted. Specious as may be the arguments of those who intend to support the bill, no one can deny that it is a repudiation of a government contract, and that its effect upon the invest.ing public will be very serious for many years to come. Those who gave notice of dissent were led to believe that they would be subject to a special rate of taxation.
– That was sheer speculation.
– I think not. In any consideration of the decision of the Premiers to compel dissenting bondholders to convert, the moral wrong which it is proposed to do must have first place. At the same time, the legal aspect of the proposal cannot be disregarded, because the Commonwealth Debt Conversion Act provides that, when dissent has been expressed, the existing securities shall be exchanged for Commonwealth Government inscribed stock “ conforming to the conditions of the existing securities in respect of duration, redemption, rate of interest, and in all other respects.” The Commonwealth and State conversion agreement acts give legislative force to the agreement, and contain these words: “Conversion to apply to all securities, the holders of which do not dissent.” It follows, therefore, that, if this proposed coercion of the dissenting bondholders is not to be illegal, as well as immoral, every parliament must pass amending legislation. Hence this bill.
The breaking of a solemn pledge given by the Government to a few people is as profound a wrong as is the breaking of a pledge to a multitude of people. To me, it is regrettable .in the extreme that the Premiers Conference should have decided to adopt Prussian methods by compelling dissenters to convert. This course is excused on the plea that necessity knows no law. But, is this a case of absolute necessity? The ‘Leader of the Opposition (Senator Pearce) has told us that he knows of no alternative ; that the passage of the bill is absolutely necessary because it is impossible to redeem securities amounting to £4,273,872, which mature at the end of next month. I do not know about that, but I should like to have an assurance that the Government explored every possible avenue before introducing this bill. We should have had this explanation from the Minister in charge of the measure. I do not know if every avenue has been explored, or if there is no alternative. Nevertheless, I believe that if the Government had the right spirit and the will to pay off the dissenting bondholders, it could do so. We should have the greatest regard for the sanctity of contracts - especially contracts between the Commonwealth Government and the people of Australia. Official figures show that,the invitation to convert voluntarily was declined by 30,000 bondholders, the majority of whom are small holders. This means that 30,000 holders of government bonds, after considering the difficulties of the Government and their own position, simply ask the Australian people, through their governments, to keep faith with them.
What are the underlying principles of this measure? The plain unvarnished truth, which no sophistry can hide, is that compulsion means that governments of Australia deliberately break their contracts and levy forced loans from certain of their citizens. Honour takes no account of numbers. It is claimed that the Premiers’ decision was unanimous. Does that make their case any better? I submit that it makes it rather worse. To me it is deplorable that not one voice in that assembly of Premiers of different political complexions was raised to defend the principle of sanctity of contracts. Apparently, they fell back on the expedient that necessity knows no law.
Every argument that was raised some months ago against the policy of repudiation holds good to-day. The Commonwealth and State Governments entered into a solemn contract with lenders to pay them certain rates of interest for the use of their money for stated periods. Now, these governments inform those lenders, who do not wish to vary the terms of their contracts, that they will be forced to accept new and less favorable terms.
Might is not right. That was demonstrated most conclusively in the Great War. Might will never be right while honest men survive.
It is no defence to plead that the dishonour is small - that only 3 per cent, of the bondholders are to be coerced. Nor does it gloss over the ugly fact o£ repudiation to urge, on insufficient data,, that the 3 per cent, of dissenting bondholders dissented, from reasons which might be regarded as selfish or discreditable. That does not help us in this matter. Apart from honesty being the best policy, we should consider carefully the effect of this bill on overseas investors. I am certain that its effect will be bad. When first the proposal was mooted, the Australian press printed cabled extracts of comments from the big London dailies, particularly the Morning Post and the Financial News. They deprecated this proposal of the Premiers as inevitably tarnishing a very fine and magnificent effort by the Australian people. With a knowledge of all the facts available, I cannot do this dishonorable thing. The Conversion Loan of 1930 was a brilliant, patriotic achievement. Do not let us mar it by immoral coercion. Let us keep faith. If this Senate persists in coercion, as outlined in this bill, those politicians who have all along exalted expediency and sneered at honesty will be permitted to gain an infamous triumph. Compulsion, in my considered judgment, is neither reasonable nor just. It is a shortsighted policy, ai]d terribly dangerous. One has only to sit down quietly, and write down the pros and cons to see the position in its true light. The passing of this measure will damage our credit irreparably. I feel that it is a two-edged sword. Hypocrisy can go no further than this: to pass a law telling bondholders that their notices of dissent shall be taken as applications to convert. I believe that if we pass this bill, 1931 will go down in Australian history as the black year, commemorating the time when Australian governments turned their backs ou honesty.
Senator Sir HAL COLEBATCH (Western. Australia) [8.34]. - I do not intend to oppose this bill; At the same time, I am not prepared to take the risk of a silent vote in its favour being interpreted as an intimation of approval either of the measure, or of the happenings that have led up to it. I find myself in general sympathy with the remarks of Senator Sampson. There are one or two features of the case in connexion with which I shall not go so far as to disagree with him, but which, I think, are worthy of consideration. There can be nothing much worse than a conversion loan masquerading as voluntary, and being, in fact, compulsory. I find it rather difficult to understand the attitude of those who supported the appeal as a voluntary one, and who now support this element of compulsion. Personally, I am at liberty to support this element of compulsion, because I take the view, for reasons which I shall endeavour to make clear, that the whole loan should have been a compulsory one. To approve of the loan in the first instance as a purely voluntary one, and then support this measure of compulsion does not appear to me to be very heroic. It looks to me as though the Government thought that there was some danger in attacking bondholders when they numbered hundreds of thousands, but that it was a much safer proposition to attack them when they numbered only a few thousand, with the possibility of hundreds of thousands of those who have already converted approving of the action of the Government. I maintain that if something of this nature was necessary, the conversion should have been compulsory. First of all, on ethical grounds; if you are going to do anything unorthodox, particularly in regard to public finance, you must do it straight’ out. There must be no pretence about it.
One or two features of this case which we ought to take into account, might modify to some extent the view expressed by Senator Sampson. What was the cause of the large -local investment in Australian loans? For that we have to go back to the war. We remember that at that time there was a very considerable clamour for the conscription of wealth. Most of us had to meet that clamour in one capacity or another, and I think it likely that the great majority of honorable senators on this side opposed the idea. 1 know that I did, because what little “knowledge I had of similar demands in other parts of the world led me to the conclusion that the conscription of wealth would mean the destruction of wealth, that for war purposes, our country would have greater resources if it eschewed that practice. Whether rightly or wrongly, the idea of conscription of wealth was abandoned in Australia. As an alternative, we did what was done by every other belligerent country. Unable to pay the expenses of war, we borrowed in excess of our ability to pay, and both directly and indirectly we inflated our currency. Has it not occurred to honorable senators as curious that, during the war period, when our production was necessarily lower than in other times in recent history, because of the absence of so many producers at the war, and when our costs were so much greater than at any other time because of the expense of maintaining our armies, a great many fortunes were made in Australia? That was chiefly because we adopted as an alternative to the conscription of wealth the twin policies that were adopted in every other country that was at war - big borrowing and the inflation of currency. It was that which really created spurious money, a large amount of which went into our loans.
When all those facts are considered, it is impossible to escape the conclusion that the local investor in our loans was not only a creditor, he was also a shareholder in the concern. From that point of view, I consider, his position is entirely different from “that of the outside bondholder. I contend that, as a shareholder, he is bound to take the good with the bad. I take it that people who invested their money in every other form of security have suffered depreciation to a far greater extent than government bondholders, and, while I am entirely in accord with what has been said of the danger and wrong; of the State breaking its obligation, even to its own people, I do think that those who have invested in the securities of their country must recognize that their investment is safe only when their government is good; that, if the Government indulges in false financial practices, which involve the country in trouble, they must stand by it.
They cannot regard themselves entirely as investors. They are also shareholders in the concern.
I do not approve of the method by which this compulsion is being brought about. I do not think that the best plan has been adopted. However, we cannot consider that at the moment. I agree entirely with Senator Pearce that, had the whole position been tackled twelve months earlier, not only this’ but mally other unpleasantnesses might have been avoided; for instance, salary cuts might have been much less. But we have to take the position as it was when the Premiers decided on this course of action, not what it might have been had other things been done. At that time, as was indicated by Senator Pearce, something of the sort was necessary, as much in the protection of bondholders as anybody else. Had we gone deeper into the mire, with the result that the Government was unable to meet its obligations, the position of the bondholders would have been much worse than it now is. It has been said, and I do not think cynically, that that which is economically essential - I emphasize the word “ essential “ - cannot be morally wrong. That is a clear statement of fact. If this course was essential, it would have been far more honorable, and in the long run would have created a better impression at home and abroad, if the conversion had been made compulsory, and perhaps arranged on a slightly different basis, so as to inflict less hardship in some cases. It was never a voluntary conversion loan. It merely masqueraded under that name. I have no hesitation in Saying that a large number of people who converted did so willingly and freely, out that possibly a larger number did so because they were told, in so many words, that, if they did not do it voluntarily, they would be compelled to do so. The intention to apply compulsion was evident from the outset. As was stated by Senator Pearce, it was inevitable. The fact that putting it up as a voluntary instead of a compulsory loan cost this country £50,000 in expenses, nearly all of which might have been saved, is, to my mind, the least objectionable feature of the business.
Something has been said about meeting cases of hardship. I do not know how that is to be done. I do not know whether it ought to be done. If it is to be done, those who voluntarily converted are just as much, or even, more, entitled to relief than the persons who converted compulsorily.
– That is intended.
– -I have read the bill, and I think thai the intention is clearly expressed. It is essential that the consideration of cases of necessity should be carried out by some tribunal entirely free from political influence. Senator Pearce referred to the report of Sir Otto Niemeyer. More than twelve months have elapsed since he presented his report, and I invite my friends on the opposite side of the chamber to read that report again, and to say whether they can find in it one paragraph that is not absolutely true in the light of subsequent events. Sir Otto Niemeyer stated that Australia, fortunately, had two years iu which to put its house in order. Many people, quite wrongly - even stupidly, I might say - interpreted that as meaning that the depression would last for only two years, and that we should then return to prosperity. What he really meant, of course, was that we had two years before our heavy overseas commitments fell due. Twelve months have passed since the making of that report, and we have done mighty little to put our house in order. This legislation does not help to any great extent; all it does is to transfer a considerable sum of money from the pockets of private persons to the coffers of the Government, and I cannot see how we are going to help the country very much in that way. We shall have to meet our obligations overseas. In respect of those obligations, we stand in the relation of debtor to creditor; it is not a matter of liabilities which we have to meet as shareholders. I hope that the Government will complete the task of putting its house in order before those debts fall due.
– I regret exceedingly the necessity for introducing this legislation. Belonging to the legal profession, I naturally take a very serious view of the obligations arising under contracts, and of the sacredness of contracts, not only legally, but morally. Every form of religion, every known system of law, regards contracts as sacred things. The Koran, I think, expresses the matter vividly in these words, “ Oh yon faithful, keep your covenants “. It is with bent head that I participate in .. the discussion of this legislation here this evening. The circumstances leading up to the introduction of this legislation have not been stressed by the Government representatives. That necessity arose out of what I should describe as the absolute ineptitude of those who have been controlling Australia’s finances. It was due to the lack of confidence of the public in the Government of the country. But for that absence of confidence, there would have been no need for this legislation, or for that appeal to the public to convert their holdings. One cannot but admire the spirit of the people who rose to the, occasion as they did, but there would have been no need for such an appeal if the Government had had the confidence of the public.
– The public did not have much confidence in the previous administration either.
– This Government has wrecked everything it ‘has put its hand to: Because it had forfeited public confidence, it was unable to secure that financial accommodation which would have enabled it to carry on in the good old British way, and meet its obligations, as they fell due. Because of its fiduciary note issue .proposal, its attempt to extract money from the air, it lost the confidence of investors, and at the last hour it called the Premiers Conference, which evolved the financial emergency plan. A group of schoolboys could have evolved a plan as good. I ask honorable senators, if they would be convinced of the utter incapacity of the Government to handle the financial affairs of the country, to read the report of that conference, a report which, I regret to say, has been committed to print. The Government has now brought down this proposal, and has submitted it for our approval. We must pass it or offer an alternative. What is the relationship between the Government and the bondholders? I cannot subscribe to any other view than that it is the ordinary relationship existing- between debtor and creditor. There is this distinction, perhaps: It is an inherent right of any legislature to levy such taxation as it sees fit on the interest payable on government securities. - It may be said, and there is some justification for it, that if this plan had not been adopted, the bondholders could have been, taxed to the extent of 4s. 6d. in the £1., which would have been equivalent to the present reduction of 22$ per cent, in interest rates. I should have infinitely preferred that course. Our default - and I cannot but admit that there has been default - lies in this: We are not meeting our obligations at the proper time; we are not fulfilling our obligations in the terms of the contract with the bondholders. To that extent there is no doubt regarding the breach of our moral and legal obligations, and we are seeking to cover that breach by this legislation.
Let us consider the practical effect which this legislation may have upon Australia in the future. I must confess that, believing as I do that all the governments of Australia have borrowed too lavishly and too imprudently in the past, one of the effects of this legislation will be of benefit to Australia. Until the investors, both in Australia and abroad, see evidence of a decided change of heart in those controlling the political affairs of the country, they will simply refuse to lend any more money to Australian Governments. From that point of view, good may flow from the evil we purpose doing this evening. Reference has been made to the differentiation between bondholders overseas and those in Australia. I can recall to mind the solemn words which Sir Robert Gibson uttered in this chamber when he was called to give evidence upon another matter. He said that if there was to be default, he preferred tha* we should default to our own people than to our creditors overseas. Evidently, he did not think that the moral obligation t’o our own bondholders was so great. I subscribe to that sentiment, which furnishes practically the only justification for the present legislation.
It has been suggested that this is a necessary measure ; that the highest law of the Commonwealth - the safety of the people - has to be considered in relation to it. I cannot admit that argument, except to say that this legislation may be necessary now ; but there would have been no necessity for it if the Government had acted upon the advice tendered to it’ by financial experts. It may be’ that, as with the gold reserve, we have landed ourselves in such a fix that no other action than that proposed by the Government is open to us ; that we simply must break faith with the bondholders. There are, however, various practical aspects to be considered. Something has been said about relieving cases of hardship, but I remind honorable senators that cases of hardship may exist among those who have converted, just as well as among those who have not. It is probable that some bondholders, swayed by patriotic motives, have really done more for their country than they ought to have done. They may have placed themselves in the position of not being able to fulfil their own obligations. The passage of this bill may inflict hardships upon a very deserving class of the community. I hold in my hand a letter from a man who, over a .period of years, accumulated the sum of £1,000. By no stretch of the imagination could it be said that he acquired this money through the war-time boom. He saved itwhile holding quite a humble position in the Civil Service of one of the States. He writes -
That £1,000 I placed with the South Australian Government in 1926 for six years. It is due next May, and I must have it in order to enable me to educate those children. Are they to be sacrificed in face of the fact that I have been a whole lifetime saving up in order to save them from such a debacle?
I do not propose to read all that this man says. In his letter he has laid his soul naked before me; he has revealed his hopes and aspirations. He tells how, in his earlier days, he rode a bicycle from Mount Pleasant to Cockburn and back from Lyndhurst Siding to Mount Pleasant, in the course of his work. He is seeking from the Government neither bounties nor benefits; he is merely asking for his own. It seems to me to be a most pathetic appeal. He is prepared to pay for what he wants, but the Government will not allow him to get. his own money. That is his complaint. I have received numerous other letters of a similar character. I deprecate the fact that this measure makes no provision for affording relief to many who arc absolutely in need of it. There are companies which have obligations to meet, in respect of which the directors stand as trustees for certain classes of policy-holders. Investments have been made by the more prudent of these companies - though whether they will be regarded as prudent after the passage of this legislation, I know not. Relying on the integrity and good faith of the Government, they made investments in securities which would mature on certain dates, so that the money would be repaid at a date to coincide with the falling due of . obligations which had to be met. Now they are told that they cannot get their money, and the Commonwealth Bank will not finance them because, no doubt, of the strain on the bank’s own finances, due to government demands. Therefore, unless some better provision is made for the relief of such cases of hardship, the Government will be faced with the necessity of dealing with a crisis in the affairs of many of these small concerns.
This crisis affects, not only the individual companies concerned, but also hundreds of other people who expected to receive moneys on the maturing dates of their bonds. The Government, in taking this course, has shown a lack of foresight in regard to its financial affairs. It claims to be the heaven-bom saviour of Australia from a debacle, but it has saved its own skin by remitting £32,000,000 of our gold overseas in order to stave off a crisis which should have been faced immediately it arose. The Government is to-day resorting to an action which does not in any shape or form commend itself to me. I shall cast “my vote in favour of the bill simply to save the honour of Australia from being further besmirched. We have been told by the Treasurer (Mr. Theodore) that it is impossible to do anything else; that the National Debt Sinking Fund Commission cannot meet not only the obligations to which Senator Pearce has referred, but also our obligations to the investors of trade money, about whom some members of the Government appear to be so solicitous. I have more sympathy with the man who invested his money in Commonwealth bonds, as the writer of the letter to which I have referred did, than
I have with those who invested trade moneys. At the time they were glad to invest their money in Commonwealth bonds. A special provision has been inserted in the bill to give relief to those investors, yet other investors, perhaps more deserving, including companies who have to make provision for many humble people, a’re to be penalized. The bill is incomplete, because, as Senator Colebatch has pointed out, there is absolutely no provision, in it for definite relief. It is suggested that the National Debt Sinking Fund Commission may, if it thinks fit, do certain things. That commission was appointed to act in the interests of this country, and to buy stocks when offering at favorable prices. It should be free entirely from political influence. It is quite improper to throw upon that body obligations which, should have been placed upon a judicial body or a board appointed by the Government. I shall support in committee any amendment moved in the direction that I have indicated, because I feel that, although we are here in the interests of the States, we perhaps are not so alive as we should he to the difficulties of some of the people in this country who have invested in Commonwealth bonds. Something was said about setting aside a sum for the purpose of meeting these obligations, but there is no such provision in the bill. Clause 5 makes no provision whatever for any specific amount. Any relief is left entirely to the National Debt Sinking Fund Commission, and if it has insufficient funds, nothing can be done for unfortunate bondholders who have already converted their holdings. I think that justice should be done to them just as much as to those who dissented. Some people were driven to dissent, not because of any disloyalty to this country, but because of sheer necessity, and while something should be done for them, others who made the sacrifice should also receive assistance. No distinction should be drawn between them. It is calamitous that this action should be forced upon us by the ineptitude, inaction, and vacillation of those who at present sit on the treasury bench.
– A situation such as this should never have arisen, but, having arisen, it- is not for us at ‘ this time to recall the causes or to inquire into them. All we have to do is to face the situation squarely and do our best for Australia in view of the unprecedented circumstances in which Ave find ourselves. I have heard the declaration of Senator Sampson that it is wrong and unforgiveable to break a bargain, that the sanctity of bargains must be observed though the heavens fall. May I remind him that there are even worse things than the breaking of bargains, bacl as that is, and one of them is national ruin or national degradation. The loss of national credit was plainly imminent, and were it not for the 97 per cent, of our bondholders who helped this country in a period of dire distress, we should have been ruined. We have now to deal with the recalcitrant 3 per cent, of bondholders.
– I should not call them “ recalcitrant “.
– Apparently we are now7 to lavish sympathy upon them.
– The honorable senator does not know the circumstances of the 3 per cent, of bondholders who dissented.
– The Government, to its credit, is willing to take into consideration the circumstances of indigent bondholders. That should dispose of any opposition to this .measure. Some of the dissenting bondholders hold £50,000 worth of bonds, which return to them an interest payment of £2,000 per annum, yet when this country, which has been so kind to them, enabling them to grow rich and prosperous, was in dire distress, they would not lift a finger to help it. Why should we now throw a mantle of protection over them? There are bargains that need to be observed, but if the observance of them means the. accomplishment of the nation’s ruin, then those bargains must he broken, cruelly unpleasant as that course is. After all, the breaking of .a bargain is of minor importance compared with national ruin. What would have been the position of Australia had not the majority of the bondholders come to its assistance? It would inevitably have been unable to pay its way. It would have been bankrupt. Fortunately, to the everlasting credit of the Australian bondholders, 97 per cent. of th em came forward and helped their country. There is not much talk about what they did, but a lot has been said in this chamber on behalf of the 3 per cent, of dissenting bondholders who did not lift a little finger to help this country which has been so kind and good to them. Have not others suffered? ls not every section suffering, the poor especially? What did the country, from which we have all sprung, do at the expense of many of its citizens? The British Government went off the gold standard and suspended the banking act to enable Great Britain’s credit to be expanded. What has been the result? We read in the newspapers that the £1 sterling is now worth 15s. in the United States of America. Therefore, the British citizen who has to meet debts in America is being penalized to the extent of 25 per cent, by virtue of a British act of Parliament. I mention that to show that other nations have had to do unpleasant things to bring about national stability. What did Prance do? It cut the franc into five, and as a result the creditor class in that country was robbed of four-fifths of its worldly possessions. Germany has acted similarly on two occasions, and so has the United States of America. To the extent to which Great Britain has debased its currency, its citizens have been robbed. We in Australia likewise have had to do unpleasant things to maintain our integrity. We have now to deal with the 3 per cent, of dissenting bondholders. They deserve little sympathy, because they refused to assist this country in its time of trouble. The breaking of a bargain may be hateful, find, perhaps, detestable and revolting, yet our main consideration must bc the maintenance of our national stability. It is all very fine to talk about bargains. We are just as anxious to preserve the sanctity of bargains as honorable senators who talk so much about it. We, as sensible men, recognize that there is no alternative to the action now proposed by the Government, and that we cannot give special protection to people who are really not entitled to it. I support the bill.
– I regret, to some extent, the attitude adopted by Senator Lynch. We all admire the tenacity and vigour with which he fights a cause, but it appears to me that a tax placed upon the small percentage of dissenters might press heavily upon some persons whose conduct in not converting their bonds might have been dictated by the greatest of all forces - the force of circumstance. With the conclusion at which he has arrived I entirely agree. , It is a conclusion which, apparently, has been arrived at by every honorable senator who has so far addressed himself to this question.
I should not have spoken but that I, like every other ‘honorable senator, have been receiving lai-ge quantities of literature urging and almost pleading with me to do my little part in the rejection of this bill. I should quite willingly have been one of those who would have rejected it. I could speak very strongly upon the shortcomings of the measure, and would find it very much easier to wax eloquent in the strains of Senator Sampson, but in the long run, I should find myself in the position put, by the right honorable the Leader of the Opposition (Senator Pearce). I feel that if we were to reject the bill there would be an obligation on the Senate to suggest some alternative to it. I am unable to do that. I agree entirely with the observation of Senator Pearce that the only alternatives to the acceptance of the bill are the two which he has suggested, and they are fraught with much greater possibilities of harm to this country than is the proposal just now before the Senate. 1 do not at. all minimize the seriousness of the step that we have to take; no person regrets it more than I do. But it is easy to be destructive; it is very difficult in a case of this sort to be constructive. To be constructive is an obligation which rests upon the Government, and presumably it has taken the best step it could take in the circumstances which, to a very large extent, are of its own creation. There is only one word I would say, and it deals with a question of terms. Senator Sampson, waxing eloquent upon the subject, has said that this is disclaiming a liability, is deliberately breaking a contract and is repudiation. I object to that expression.
– What would the honorable senator prefer?
– As I understand the meaning of terms, it is not repudiation, and believing that it was not, I hastened out of the chamber while the honorable senator was speaking, and consulted a dictionary. I find that “ repudiation “ is defined as “ an unprincipled method for the extinction of a debt by simply refusing to acknowledge the obligation “ which has been adopted notoriously by many of the Southern States of the American Union. We do not distinctly deny our obligation. On the contrary, we fully admit that it is an obligation, but we say in the words of Senator Colebatch, “ You have been citizens of this country, you have shared in its prosperity, you have helped to shape its policy and now, much as we regret it, we must ask you as shareholders in this concern to accept some share in the process of rehabilitation through which we must go “. As it happens, the only way in which we can ask them to share is by the breaking of a bargain. I admit it. I do not deny the seriousness of the step we have been compelled to take. It is, I suppose, something we shall have to face in the years to come. I hope we shall live it down, but as I have already said, while I do not minimize the step which the force of circumstances has compelled us to take, I do not admit, in fact, I deny, that it is in any sense an act of repudiation on the part of the country.
– Having opposed the Premiers’ plan, it would not be consistent on my part to give a silent vote on this bill. I feel that, if I had supported the plan, I would have stood up to it in all that it entails. But, apparently, there is a desire to manufacture excuses for passing this unsavoury piece of legislation. On pages 136 and 141 of the Melbourne May-June conference, will be found some remarks by Mr. Lyons and Senator Pearce. Mr. Lyons said -
The Prime Minister said that there should be the reservation of power to insist that the burden should be equitable, that nobody should shirk his responsibility, and that those who patriotically joined in a voluntary conversion should not suffer. I point out that the Commonwealth Parliament has that reservation of power now. No matter what happens in respect of the conversion loan, the Commonwealth Parliament would have the power to do what it liked at a later stage.
Senator Pearce said
I visualize myself on the platform with the Prime Minister appealing to the people. I would point out that I represent one section of the Opposition, and that I have committed myself to a conversion loan, the new stock carrying 4 per cent, interest. I would then say to the people that I believe that they would convert voluntarily, but if they did not do it voluntarily, Parliament would have to consider what other steps it should take.
Parliament is considering those steps to-night. There is ample evidence in the report of that conference to show that, while the people were to be misled into the belief that this was to be a voluntary loan, and that arrangements would be made to enable those who did not convertto dissent, it- was clearly intended, that there should be no dissentients.
The matter was raised again at the Melbourne September conference, and the Commonwealth Ministers carried the following resolution : -
That in view of the fact that holdings of 97 per cent, of government securities have been voluntarily converted, the conference agrees that the small proportion of securities which have not been converted, be converted on the same terms as the others, and that legislative action accordingly be taken.
This is the bill agreed to by all the State Premiers. I have contended throughout that the wrong course was being taken; but nothing is to be gained by blaming one party or another. We have been invited to read the plan submitted by Sir Otto Niemeyer at the Melbourne August conference, and it has been said that, if the Commonwealth and the States had carried out the policy adopted by the Premiers in August, 1930, we should not have come through the crisis more easily than wo are doing.
– The ship of State was sinking all the time.
– Of course it was. It had begun to sink before Mr. Scullin put his feet on the bridge. At any rate, the Niemeyer plan, when applied by some of the States, so failed that the Premiers had to meet and decide to alter it, and now we are told that the present plan will not meet the situation, and that other steps will be necessary. It is a most interesting position.
We are asking 30,000 people in Australia who lent money to the various governments, on certain terms, to regard themselves as having consented to the conversion of their stock, although they were expressly invited to notify their dissent from its conversion. To say that there is no other course open is to beg the question. The matter has been under consideration in South Australia for months and months. A manifesto, issued by the whole of the churches in South Australia, reads as follows: -
Wo arc concerned with the moral and spiritual, as distinct from the political, issues involved in the actions of some of our governments at this time; the avowal of repudiation, and the gross lowering of the standards of public life.
If governments arc free to call black white, the citizens arc directly encouraged by such leadership to do the same.
People are sent to gaol for things much less criminal than what this bill proposes. One of the fighting planks recently adopted by the Nationalist party is the “honouring of all public obligations,” but because the holders of 3 per cent, of Australian stock have not converted voluntarily, it is proposed to make them convert. Honorable senators opposite say that it is not for them to find any alternative; but, as Mr. Lyons, Mr. Latham, and Senator’ Pearce were at the conference at which this decision was reached, it is useless for them to say that they are sorry that the position has developed, and that they cannot see any way out of it. I am acquainted with many poeple who consented to the conversion of their stock.’ They are in a most unfortunate position. They are probably suffering as much as others who have dissented. I have received a letter from a public servant in South Australia, whose money was due for repayment next year. He wants it for domestic use.
– He will be specially dealt with, I presume.
– There should be no presumption about it. Here is a letter I have had from one man who converted a portion of his holdings, and dissented in regard to the balance. He says -
I have been out of work since February, 1930. Have only earned £12 myself, and my two sons are only earning very little, not enough to keep themselves, and one on half time, and two going to school. With rates and taxes, and mortgage to meet, it is impossible to carry on and meet the extra surcharge on the taxes. Within the next three months there are inscribed amounts due, and I have dissented for the three amounts for £900 falling due between now and December, but they tell mc that I will have to convert them. I have already converted £1,290, and the Government have run it out to the 1961 limit. So I ‘ will be pushing up daisies by then. It was due in 193S. I have not paid the income tax yet, and cannot do so unless I get some relief of my cash. I cannot get rations. I made inquiries, and was told so. The interest on our home is falling due, and the mortgage also. I want the cash to pay off mortgage and pay rates and taxes on same.
Some would say that he could sell his bonds, but he would have to do so at a discount of 20 per cent. At any rate, there are 30,000 people in Australia who found that they could not afford to convert, and it is decidedly unfair to say to them now that, because 97 per cent, of the bondholders converted voluntarily, they must also convert. It is an argument which cannot logically be supported. If it were not for this conversion loan Australia’s indebtedness in Australia and overseas would have matured as follows : -
Up to the year 1938, under ordinary conditions, we should have had to meet Commonwealth, State, and overseas loans amounting to £312,000,000, and, if further action is not taken, the burden will become intolerable. In Australia, £323,000,000 has been borrowed on behalf of the Commonwealth, and £313,000.000 for the States- a total of £636,000,000. In regard to loans floated abroad, £218,000,000 has been borrowed for the Commonwealth, and £412,000,000 for the States- a total of £630,000,000. Approximately half the loans which mature during the next seven years will have to be redeemed or renewed, and we still have loans falling due overseas.
– Has not the recent conversion operation eased the position ?
– It has put off the evil day; but, in my opinion, we are not justified in passing such a deceitful piece of legislation as this bill. Why did we tell bondholders that, if they dissented from conversion, their claims would be considered, and then refuse to honour the agreement made with them? It is not truthful to say that provision cannot be made for meeting the claims of dissentients. There was no hesitation in finding £3,000,000 for the farmers. If we can find the money to provide a bounty of £3,000,000 on wheat, we ought to be able to raise £4,000,000 to meet the bonds falling due at the end of this year. Are not the farmers to be given £3,000,000 by a process of inflation?
– The wheat bounty will not amount to nearly that sum.
– But provi-. mon has been made for the payment of that amount. The figures submitted this afternoon by the Leader of the Opposition are interesting; but surely they do not form an insuperable obstacle to preserving national honour. It seems to me that, even at this late hour, the Government could arrange to meet these liabilities as they fall due.
– The Treasurer said in another place that it could not be done.
– Yes ; but some time ago he said that it could be done. It is no use honorable senators opposite trying to blame the Scullin Government for the present position. We are asked to commit an act of injustice which will redound to the discredit of the Parliament for many years. To say that the National Parliament is unable to meet its obligations will not help us in any way. How can we expect investors to lend money to the Government in the future? Action such as it contemplated under this bill will destroy the foundations of national morality. I do not wish merely to indulge in destructive criticism; I desire to be consistent.
Those who framed the financial rehabilitation plan foresaw the present position, and it was arranged that bondholders who dissented from conversion should not have compulsion brought to bear upon them. If the present Government had been permitted to carry out its financial policy, this position would not have arisen. In the interests of the wheat-farmers, for whom I have every sympathy, the currency is to be inflated to the extent of £3,000,000, so that bounty may be paid to them on their production. We should do something on similar lines to help those who have dissented from the conversion of their stock, and, therefore, I oppose this bill.
– No member of the Senate will be able to look back with feelings of pride or satisfaction at the result of the passage of this bill. When the Debt Conversion Agreement Act was under consideration, many of us objected to some of the provisions of the measure, and I am satisfied that a great mistake was made in not making the position perfectly clear to the bondholders at that time. While they were led to -believe that the measure provided for a voluntary conversion, they should have been toM plainly that it was really to be a compulsory conversion.
– Does not the honorable senator think that they sensed a probable loss of capital?
– Yes. They were given to understand that, while some disability would be imposed on those who dissented, yet provision would be made for dissent. It seems te me that it was improper to lead them to believe that provision was being made to allow dissent from conversion. I have no alternative to offer to this bill. I recognize the difficulty that would be found in applying the alternative of taxation, because many of the securities fall due shortly, and little tax could be collected on them. The Treasurer said in another place that provision would be made to meet cases of hardship.
– There are many cases of hardship among those who converted their stock.
– Quite so. I desire to know whether the assist- ance is to be extended only to the 3 per cent, of the bondholders “who have dissented. Responsibility for action in the matter rests, of course, with the Government. The Treasurer has assured us, in the course of his remarks in another place, that the loans shortly falling due cannot be met. If the solution suggested by Senator Kneebone, for the inflation of the currency, were adopted, it would amount to a measure of repudiation, and, no doubt, the losses of the bondholders would then be much greater than they will be under this bill. No member, as I have said, will be proud to have supported this measure, which, I think, will seriously reflect on the Government for all time, because it involves a breaking of a contract entered into between the bondholders and the Government.
SenatorFOLL (Queensland) [9.45].- I too regret the need for a bill of this character. With Senator Sir Hal Colebatch, I agree that there should have been no humbug about a voluntary conversion. The people should have been told frankly that owing to the decline in the prices of our exportable commodities, and the consequent shrinkage of the national income, the country would be unable to meet its obligation on the due date, and that a oompulsory conversion loan was necessary. The 97 per cent, voluntary conversion was a magnificent achievement, but we have to remember that many millions of pounds’ worth of trust funds were converted by trustee companies and insurance companies, without consulting the people to whom the money belonged. On the other hand, it is obvious from the large number of bondholders concerned in the £16,000,000 of unconverted money, that the majority of the dissentients are investors of small means. There cannot be many of the type referred to by Senator Lynch - persons who invested £50,000 in government stocks, and refused to come to the aid of the country in its hour of need. Many of the dissentients probably took money from the savings banks, or mortgaged cottage properties to invest in government stocks, possibly in response to the special appeal made by the Government early this year, and now they need their capital to purchase the bare necessaries of life. I hope that money will be found for the relief of all necessitous bondholders, whether they assented to or dissented from conversion. It is futile for ministerial supporters to attempt to evade the blame for the present financial circumstances of the nation, and the repudiatory legislation that has become necessary.. When the Prime Minister (Mr. Scullin) left for England last year, he was assured that there would be no talk of repudiation, and no insane financial proposals by his own supporters. I was in London when he and his two colleagues arrived there, and I know that the reception accorded to him by the press almost assured the success of his financial mission. The right honorable gentleman would admit, if he could do so without appearing disloyal to his supporters, that every door was open to him when he reached London, and remained open until the passing of the resolution of the Labour caucus in Australia to compel bondholders to retain their maturing stock for another twelve months.
– He practically said so in one of his cablegrams.
– He has never made a public statement to that effect, but in cablegrams which passed between him and Messrs. Lyons and Fenton, he stated that the attitude of ministerial followers had seriously prejudiced Australian credit, and jeopardized his financial negotiations. That that is so, can be proved by reference to the quotations of our stocks on the Londonand Australian markets prior to and after the financial resolutions of the Labour caucus.
Much of our present difficulty is due to the exorbitant rate of interest paid by successive governments for public loans. To my mind, there . was never justification for paying in respect of government stock interest up to 6¼ per cent., in addition to taxation concessions. Only a few years ago, 3 per cent, and 3½ per cent, was considered a fair rate of interest for government securities, and it should have been obvious that the competition of Australian governments in the money market would lead to disaster sooner or later. Because the conditions were so attractive, money was freely obtained, and the high rate of interest . plus the taxation concessions placed an intolerable burden on the taxpayers. Moreover, government borrowing took out of the market money that would have been available for industry and other forms of investment, and thus industrial development was hampered. “Whilst a good deal of sympathy has been expressed for those bondholders whose income from interest has been compulsorily reduced, the fact must be remembered that the person who invested his money in government stocks is infinitely better off than many who invested in other directions. Many of those who put money into real estate have lost half their equity; indeed, some have lost all their equity to the mortgagee. Investors in industrial stocks have watched their securities sink lower and lower, until their market value is to-day only a quarter of the amount invested. Even though government securities are quoted at 12 per cent, and 13 per cent, below par, the bondholders are in a comparatively fortunate position.
– Should not that fact be remembered by them?
– That it was remembered by them is demonstrated by the remarkable achievement of a 97 per cent, voluntary conversion. It is unfortunate that we are not able to redeem the holdings of those people who, on account of the unproductiveness of their investments. in other securities, require urgently the few hundreds of pounds put into government loans. The most regrettable feature of this debate was the attitude of Senator Lynch whose remarks would lead to the belief that the persons who dissented did so from unpatriotic motives. 1 believe that if the circumstances of the dissentients .were analysed, fully, 90 per cent, of them would be found to be in difficulties, and in urgent need of their capital. We know that when the Australian people were asked to save the good name of their country by subscribing to the conversion loan of £2S,000,000 at the beginning of this year, many responded in the belief that their capital would be refunded in two years, and they made arrangements for its reinvestment or use in the payment of other obligations. This bill would not have been necessary if at the time of the May-June conference in Melbourne the leaders of all parties had taken the people into their confidence, and stated candidly that compulsory con version of the internal debt was necessary. Had that been done, the people would have admired parliaments and governments for their honesty.
– If we were able te foresee coming events, we would act differently.
– Undoubtedly many bondholders who voluntarily converted feared that a big stick would be applied to those who dissented. I see no alternative to this bill, because funds are not available for the redemption’ of the £16,000,000 of maturing liabilities. I hope, however, that this experience will be a lesson to Australian governments not to indulge again in a mad orgy of borrowing at fancy rates of interest. For the time being, borrowing in Australia is impossible; but no government should again be guilty of offering 6£ per cent, for loan money with the additional concession of immunity from State taxation. Future borrowing should be at reasonable rates of interest within the country’s capacity to pay.
– All honorable senators who have spoken to this debate have offered apologies for their support of the bill. They adopted the same course when the measures embodying the proposals of the Premiers’ plan were under consideration. If they consider this bill to be morally wrong in principle, how can they justify their support of it ? If they really believe that a moral wrong is being done to the dissenting bondholders they should oppose the bill. I believe that it is morally wrong to compel dissenting bondholders to convert and, to be consistent, I intend to vote against it. Senator Brennan went to some trouble this evening to convince the Senate, and especially Senator Sampson, that this bill does not mean repudiation of a contract. Very well, let us apply a simple test. Not long ago certain people lent their money to the Govern-, ment for a period of two years at 6 per cent. They have since been told that the return from their investment will be, not 6 per cent., but 4 per cent., and that the maturity date will be seven years instead of two years. Is not that repudiation of a contract? Many dissenting bondholders depend upon the interest return for their livelihood, and they declined the Government’s offer to convert because they did not wish the money to he tied up beyond the maturity date of the existing security. Senator Herbert Hays offered a number of excuses for his intention to support the bill. The honorable senator admitted that the principle of the measure was not right; nevertheless, he intends to support it. To be consistent he must vote for the bill, because he supported the Premiers’ plan, of which it is a part. Although the people were told that the recent conversion loan was on a voluntary basis every one knew that dissenting bondholders would be compelled- to convert subsequently. Many holders of securities who depend upon the interest for their livelihood asked me what would happen to them if they failed to convert. I told them that the one thing they could be 3ure of was that they would be compelled to convert by some means or other, whereupon they said that they would stand out from the conversion loan and see what happened. Since this is part of the Premiers’ plan, every honorable senator who supported it should also vote for this bill. I intend to vote against it because it is wrong in principle.
– The honorable senator would pay off all dissenting bondholders in so much wallpaper.
– -I would pay them with notes backed by the credit of the Commonwealth - the currency with which it is now proposed to pay a bounty to our wheat-farmers. I imagine the honorable senator has no fault- to find with that form of payment. If the Government’s financial proposals had been adopted, there would have been £6,000,000, absolutely free of interest, available for our wheat-growers, but under the latest proposal the interest charge will be a burden upon the taxpayers of the Commonwealth. I shall vote against the bill.
– The position in which Australia finds itself to-day is most regrettable.
– Another apology for supporting the bill!
– There will be no apology from me. I intend to vote as I speak. We should never have been in our present difficulties if the advice of Sir Otto Niemeyer had been taken fifteen months ago, when he visited the Commonwealth, at the invitation of the Government, to advise upon the measures necessary for the financial rehabilitation of Australia. Instead of accepting his advice supporters of the Government, and even some members of the Ministry, openly insulted him.
– No guest was ever treated so badly.
– That is so. I may add that no other man had come to Australia with better credentials. Sir Otto Niemeyer is acknowledged to be one of the leading financial experts in the world. Our present position -would not have been so difficult if there had not been so much stupid talk about a fiduciary notes issue and “ repudiate and be damned “. All this wild talk by supporters of the Government, and even by Ministers, did irreparable damage to Australia’s credit. The prospectus of the conversion loan stressed its voluntary nature and the response of the bondholders was truly magnificent, 97 per cent, of the investors agreeing to convert their holdings into new securities, having later maturity dates, and returning lower rates of interest. The voluntary conversion of nearly £550,000,000 in a young country like Australia was something to be proud of. My complaint now is that, in this bill, the Government is endeavouring to prove black to be white, because the measure provides that dissentient bondholders are to be legally regarded as having assented to the Government’s recent appeal to convert. No one can persuade me that this is not morally wrong. For this reason I intend to vote against the bill. After all, £6,500,000 of this money is held by people who are in comparatively straitened circumstances. Many of the small investors obtained the money which they subscribed to the loan by mortgaging some of their possessions. They were actuated by patriotic motives. I am particularly sorry for those elderly people who expected to draw their capital when the bonds matured, some in December next. The interest is insufficient to supply them even with the bare necessaries of life. It has been hinted that necessitous cases will receive consideration ; but that promise is a very vague one. The bill does not disclose how and when that relief will be given. There are necessitous cases among those who voluntarily converted, as well as among dissentients.
I view this matter very seriously from the moral point of view. The passing of this measure will do Australia incalculable harm, and make it very difficult for the nation when it is next forced upon the markets of the world. Investors will not respond with anything like the same spirit that they displayed in the past. They will remember that the Government broke its contract. I cannot read anything into the bill but an endeavour to call black white. I regard it as an attempt to repudiate the word of this nation, and I shall vote against it.
– I do not care to give a silent vote upon this important matter. I feel that it is essential that every honorable senator should state the reasons which govern his attitude. I have considered carefully what will bc the probable result of this legislation, if passed. In arriving at my conclusions, I am guided almost entirely by the provisions of the Commonwealth Debt Conversion Act that was passed by this Parliament in August last. Subsections 3 and 4 of section 12 of that act read -
The holders of securities were definitely told that if they, dissented their bonds, if not inscribed stock, were to be sent to the
Commonwealth Bank, and there converted into inscribed stock, which conformed in all respects with the conditions of their existing securities. Nothing could be more conclusive than that provision. There was no suggestion that unconverted loans would be compulsorily converted at a later stage. If there had been, my opposition to this measure would have been removed to a large extent. Now we are asked to pass a measure sanctioning compulsory conversion on the same terms as those who voluntarily converted.
I shall not now go into instances of hardship or attempt to differentiate between one type of necessitous case and another. It would be difficult to ascertain what proportion of those who have not converted are original subscribers. It would also be difficult to discover what proportion of those who dissented bought their bonds at the low rates which prevailed immediately prior to the conversion. However, I am strongly averse to the Government breaking a sacred contract into which it entered with personswho provided the money to enable the Commonwealth to carry on. Especially do I object to this proposal when, in addition to the provision that I have read in the Commonwealth Debt Conversion Act, it was plainly stated in the loan prospectus that those who did nol. convert would receive in lieu of the bonds they held, new inscribed stock which conformed in all respects with the conditions “of their existing securities. In view of that fact, I am surprised that the Government asks us to-day to do something which is contrary to the intention of the act passed in August last. For those reasons I cannot support the bill.
.- The Government has been accused of a great deal for which it is not responsible, particularly in regard to the present economic condition of the country. I am sorry that that matter has been obtruded into the discussion, especially as those persons who blame the Government for loss of public faith are themselves very largely responsible for that loss. The plain fact is that the Bruce-Page Government could not “ raise the wind “ any more than thin
Government can, and they were quite glad to get out. That administration would have had to face the task which this Government has faced, and had it been in power things would have been even harder on the people of Australia. Despite what has been said, I think that the people appreciate what this Government has done. The Government had to tackle the situation. It had to reduce old-age and invalid pensions; yet honorable senators opposite never raised their voices against those reductions. Many wage-earners had invested the whole of their savings in homes, but when their wages were reduced they were unable to keep up their payments, and they lost their homes. The bondholder should think himself very lucky to have his capital intact, and I feel sure that most of them do. All the bondholders who dissented are not suffering hardship. Many of them had already converted big holdings and entered dissent merely in respect of the tail-end of their securities. All cases are being dealt with on their merits. Senator Foll advanced a very sound argument. He said that people whose affairs were being managed by trustees were not consulted as to whether their holdings should be converted ; yet there may be cases of greater hardship among them than among those who dissented. Honorable senators know that unless they are prepared to inflate the currency, to make fresh credits available, there is no possible hope of obtaining money to redeem the bonds. We must tell the people the truth. This conversion has been a glorious achievement for the Government; one of the greatest achievements of any government. There can be no cases of hardship among the dissenting bondholders equal to the hardship of the pensioner who has to live on 17s. 6d. a week, or to that suffered by the man who has lost his employment through depression. Why do the hearts of honorable senators bleed for the person who has invested money in government bonds, but remain entirely unaffected by the losses of those who have invested money in property, or by the sufferings of those who have had their pensions reduced? No doubt there is some reason for it. It may be a form of propaganda for the next election.
I can see no other purpose which they can hope to achieve. They must know that there is no hope of borrowing money, and that there was none when the Government took office. The Senate would not agree to the Government’s proposal for releasing credits in order to meet the situation. As a matter of fact, the banks have already released quite a lot of credit to keep the governments of this country going. The responsibility for that does not lie on the Scullin Government. Any other government which had been in power would have had to rely upon the same method of finance.
– Has it been ascertained what proportion of the dissentients may be described as necessitous cases?
– It has. Every case has been dealt with on its merits. The Treasurer has even gone to the trouble of calling dissentients before him, and thoroughly examining their cases. He has found that in many cases, as I have pointed out, the dissentients had already converted a large proportion of their holdings, and required the rest of their bonds to be redeemed, so that they might have the ready cash, but they were not really in need. The Government is satisfied that the bondholders are being given as fair a deal as it is possible to give them.
– After full consideration of the measure now before us, and the principles Underlying it, I see no necessity to offer any excuse for the vote I am about to give in support of the bill. I do confess, however, that I am somewhat surprised at the multiplicity of reasons, and the diversity of arguments, which have been advanced by honorable senators to-night in condemnation of this proposal, though most of them have intimated that they intend to support it. The Leader of the Opposition (Senator Pearce) quoted figures showing the total amount falling due by 1933, approximately £9,500,000, which will have to be paid by the Government if this measure is not passed. He very properly pointed out the difficulty which the Government would have in raising that sum under existing conditions. He then wont on to mention the various units involved, and the amount represented by those units. I suggest that no examination of these figures will disclose the true position, and if it were possible to secure a proper analysis of the figures relating to those who have converted, and compare them with those bearing upon the position of dissenters, it would probably be found that there is a higher percentage of hardship among those who converted than among those who did not. The figures indicate that over 30 per cent, of the amounts involved in the bonds held by dissentients represent holdings of substantial sums per unit, but there is no certainty that comparatively small holdings of bonds are not held by people with other means. Some dissentients with comparatively small holdings may be in a better position to accept the consequences of this measure than many bondholders who have converted. like other honorable senators, I have been approached by people in my own State, some of whom are genuine cases of hardship, but I am satisfied that under the provision of this bill a solemn duty is imposed upon the commissioners responsible for the administration of the national debt sinking fund, so far as the resources at their disposal permit, to ameliorate any cases of hardship. It is the confidence which I have in the ultimate resources of this country to meet cases of hardship at the earliest moment which impels me to support the bill. We have been told by some honorable senators that had it not been for certain action on the part of the Government, this measure would not have been necessary. We have also been told that the Scullin Government destroyed the credit of Australia. I venture to say that a careful and dispassionate analysis of the position Wil convince any unbiased person that the credit of Australia was exhausted long before the present Government took office. An examination of the result of the last loan flotations embarked upon overseas during the regime of the previous Government, will convince honorable senators of the truth of that statement. In March, 1928, there was a cash loan of £8,000,000 at 5 per cent, offered to the public in London at £98, and 84 per cent, of it was left on the hands of the underwriters. In July, 1928, there was a cash loan of £7,000,000 on a similar basis, and 87 per cent, of it was left on the hands of the underwriters. In
January, 1929, there was a loan of £8,000,000, and 84 per cent, of it was left on the hands of the underwriters. In May, 1929, there was a loan of £12,408,000, at 5 per cent., offered to the public at 97 per cent., and 48 per cent, of it was left on the hands of the underwriters. Those figures show that the credit of this country was exhausted long before the present Government took office.
– The percentage left on the hands of the underwriters may have been sold at a premium.
– An examination of the quotations of Australian stocks on the London market at that time will prove that that was not so. I agree with the remarks of Senators Foll and McLachlan, who referred to the financial difficulty, so far as revenue and loan expenditure is concerned, confronting the Australian governments at the present time. I hope, with those honorable senators, that this difficult period through which we are passing will be a permanent lesson to the future governments of Australia. When Ave look back upon what has occurred in recent years, we can readily realize’’ why it is that Australia is in financial difficulties. Compare the years 1912 and 1931. In 1912 the annual interest bill of all the governments of Australia Avas £10,465,966, or £63 5s. 8d. per head. In 1931, the annual interest bill Avas approximately £57,000,000, or £177 lis. 4d. per head.
– What do those figures convey?
– They convey the fact that, regardless of war expenditure, Australia amassed a huge debt for works of convenience, and passed the obligation on to posterity of interest and sinking fund payments. We form portion of the posterity which has to bear the burden. I quote those figures to show the extent to which the available money markets of the world have been exploited. It Avas that exploitation by successive governments, and the expenditure of the money derived therefrom on works of convenience, and not of reproduction, which brought about the financial crisis.
– South Australia must be included in that category.
– I accept full responsibility for the actions of
South Australia, but we are riot discussing the disabilities of that State, or its unwise expenditure. We are discussing a means for overcoming the consequences of that unwise expenditure. Reference has been made to cases of hardship, but there are similar cases among those engaged in every class of business and every form of industrial or productive activity in Australia. If we were to allow the small percentage of dissenters to escape, the burden which has been placed upon bondholders who have already made a great sacrifice, both in capital and income, would be accentuated. That would be unfair. Failure to pass this measure would be an injustice to the great body of patriotic bondholders who converted their holdings of a value approximating £560,000,000. For those reasons I have no compunction in supporting the measure, and I trust that it will have a speedy passage.
– There are one or two statements of honorable senators to which I must reply. The Leader of the Opposition (Senator Pearce) said that he regretted that the Leader of the Government, in his first-reading speech, did not give more information to honorable senators. He complained about a matter which was evidently so well known to every one who is aware of the circumstances of Australia that it seemed to me unnecessary to mention it. Certain things have been said to-night. Other things which obviously could have been said have remained unsaid. When the Commonwealth and State Ministers met from the 25th May to the 11th June last, Senator Pearce attended the conference and said -
Air. Lyons said that if we were in this thing we were in to the end. That means something. It means that the Opposition as well as the Government would be committed to seeing the plan through. Surely that is a sufficient guarantee that if the effort is not a success, we can be called together again, and can then decide what we are going to do in the circumstances that then obtain.
Again he said -
Sacrifices have to be made. I only wish to say that I feel that if you associate any element of compulsion with the conversion, you might as well go the whole hog and bring in a compulsory conversion scheme straight out, because your appeal to the people to convert voluntarily would be a mockery; it would not be sincere, and would not carry weight. A voluntary conversion loan backed by the whole of the political forces of Australia in every Parliament, and by organizations outside, would have every prospect of succeeding. If it were not successful, we could be called together again to take whatever action we thought necessary in the altered circumstances. I do feel that we should be more likely to ensure success by acting in that way. I endorse what my colleagues have said. I want to add just one word about the taxation bill now before the Commonwealth Parliament, and which was referred to by the Prime Minister. That measure has not been accepted by Parliament.
That conference was followed by the September gathering of Commonwealth and State Ministers at which the following motion was carried : -
That in view of the fact that holdings of 97 per cent, of government securities have been voluntarily converted the conference agrees that the small proportion of securities which have not been converted be converted on the same terms as the others and that legislative action accordingly be taken.
Honorable senators have quoted various authorities. The action taken by the Commonwealth in regard to the conversion of securities held in Australia brought world-wide comment upon what further steps would be taken by Australia, and upon this point I shall quote the Sydney Morning Herald, of the 16th October.
– Has the Herald turned yellow?
– From what is the honorable senator; quoting ?
– I am quoting from some remarks made a few days ago in another, place.
– The honorable senator knows perfectly well that he is not permitted to quote from the current issue of Hansard.
– I shall endeavour to give the quotation from memory. It was used in another place. The financial editor of the London Times, speaking in regard to the conversion loan of Australia, said, in effect: “It is a magnificent thing that Australia has done, and it is not right that 3 per cent, of the people of Australia should swing 97 per cent.” Remarks have been made to-night with regard to destruction of the credit of Australia. I need only mention the attempts to float loans in 1928 and 1929 prior to the coming into office of the present Government. Those attempts showed that Australia’s credit had apparently been destroyed even in those years. Why, therefore, should honorable senators rail about the destruction of Australia’s credit at such a late day as this?
– Why refer to it?
– I am on the defensive, and, of course, am obliged to say something to defend the bill.
– The Leader of the Government will run a danger of losing the bill by talking it out.
– I had no idea there were so many of Byron’s ladies about who “ whispering, ‘ I will ne’er consent ‘ - consented “. I could say a lot more, but seeing that the Senate is prepared to agree to the bill I do not propose to delay it any longer.
Question - That the bill be now read a second time - put. The Senate divided. (President - Senator Hon. W. Kingsmill.)
Majority . . . . 8
Question so resolved in the affirmative.
Bill read a second time.
Clauses 1 to 3 agreed to.
Clause 4 (Certain existing securities deemed to have been converted into new securities).
– What is the position as regards the various State securities and the State Governments? This is a Commonwealth measure, and it can only affect contracts relating to Commonwealth securities. Am I to understand that complementary legislation is to be passed by the States to give effect to this measure as regards State securities?
– In the bill which will follow this measure, provision is made to meet the point raised by the honorable senator.
Clause agreed to.
Clause 5 (Power of National Debt Commission to purchase new securities).
– This clause provides that the National Debt Commission, if it thinks fit, may purchase new securities at a price in excess of the market price, not being above par, with a view to preventing undue hardship. How is this provision to be operated? Will some report be made to the Debt Commission, or must an examination be made in each case? My recollection is that an assurance was given in another place which satisfied those who were critical of this portion of the bill, and I should like to know the nature of that assurance. This clause is most vague. Apparently, it does not provide for the appointment of a hardship board at all.
– Many representations have been made to the Government as to the hardship that would be imposed under this bill, and these have been carefully and sympathetically considered. Payment is required by dissenting bondholders chiefly for maintenance and living expenses, and other commitments, principally in regard to their housing. The scheme is not to be limited to dissentients, there being cases of hardship also among those who have voluntarily converted their stock. Generally speaking, redemption of bonds falling due is not desired in lump sums, but in small periodical payments to meet the needs of bondholders from time to time, and their requirements for maintenance must take precedence. The principle to be followed is that each case will be dealt with on its merits. The proposal is to make available from now up to the 30th June next, £2,000,000 to meet necessitous cases. I understand that the matter has been discussed fully with the Commonwealth Bank, and the necessary money will be available.
– But who will adjudicate regarding individual cases ?
– The Commissioner, who now deals with similar cases that come under the notice of the Treasury, After the 30th June next, when the £2,000,000 has been exhausted, £1,000,000 will be made available each year for several years for a similar purpose. Honorable senators need have no fear as to provision being made to meet the pressing needs of necessitous bondholders, with some of whom I am personally acquainted.
– What authority will adjudicate on the applications for relief?
– The details of the arrangement between the Government and the Commonwealth Bank have npt yet been completed.
Clause agreed to.
Preamble and title agreed to.
Bill reported without amendment; report adopted.
Standing and Sessional Orders suspended, and bill read a third time.
Senate adjourned at 11.4 p.m.
Cite as: Australia, Senate, Debates, 4 November 1931, viewed 22 October 2017, <http://historichansard.net/senate/1931/19311104_senate_12_132/>.