12 September 1939

15th Parliament · 1st Session

The President (Senator the HonJ. B. Hayes) took (he chair at 3 p.m., and read prayers.

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Assent to the following bills reported : -

Trading with the Enemy Bill 1939.

National Security Bill 1939.

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SenatorFRASER. - I ask the Minister representing the Minister for Supply and Development, in view of the decision of the Government to marshal the resources of Australia, what steps the Government proposes to take to develop the iron-ore deposits at Yampi Sound?

SenatorFOLL. - That matter is receiving attention. Recently the Government approved proposals to extend the existing survey of iron-ore deposits in Western Australia.

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Senator CAMERON:

– I ask the Minister representing the Treasurer whether, in connexion with the Government’s scheme for the control of commodity prices during the war, it intends to take any action against any person or persons controlling industry suspected of, or known to be, responsible for deliberately restricting the production of commodities with the intention of increasing prices or of maintaining already high prices? Also does the Government propose to have the prices of commodities fixed from time to time during the war in order that producers may be protected from the competition of those who employ cheap sweated labour, and consumers from producers who control monopolies?

Senator McLEAY:
Minister for Commerce · SOUTH AUSTRALIA · UAP

– I direct the attention of the honorable senator to the instructions printed on the back of the Senate notice-paper relating to the form of questions allowed. I also remind Mm that it is not customary to make statements of Government policy by answers to questions.

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asked the Minister for Commerce, upon notice -

  1. Has the attention of the Minister been drawn to a cablegram published in the Canberra Times of the 8th September, stating that the British Government has fixed the price for wheat afloat and forward shipments until further notice as follows: - Manitoba No. 1, 28s. per quarter; Manitoba No. 3, 253. 6d.; South Australian, 21s. 3d.; Western Australian, 21s. 3d.?
  2. Can the Minister give any explanation of the basis on which these prices are arrived at, and particularly the difference between Manitoba No. 3 and Australian wheat?
Senator McLEAY:

– The answers are as follows: -

  1. Yes.
  2. It has been ascertained that the report is incorrect.

I know that Senator Johnston and many other members of this chamber are particularly interested in the wheat problem. Up to the present time the Government has not received from the British Government information as to the price to be paid for wheat which it proposes to buy from Australia. As soon as we get details,I shall inform the Senate.

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asked the Minister for the Interior, upon notice -

What is the total cost, including any outstanding claims for payment, of the recent inquiry into the letting of the contract for the construction of. thenew Sydney General Post Office?

Senator FOLL:
Minister for the Interior · QUEENSLAND · UAP

– The extended total cost, including any outstanding claims for payment, of the recent inquiry into the letting of the contract for the extension of the Sydney General Post Office was £2,324.

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Senator AYLETT:

asked the Minister representing the Minister for Defence, upon notice -

Does the Minister for Defence consider that the defences at present in Tasmania are adequate to meet any emergency in the case of invasion?

Senator FOLL:

– The Government’s proposals with regard to the Defence of Tasmania are related to the defence of Australia as a whole. I suggest to the honorable senator that the asking of such a question at the present time is unwise.

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Number of Growersin Australia

Senator McLEAY:

– On the 7th September, Senator Cameron asked the following questions: -

  1. How many wheat-growers are there in Australia holding acreages between 600 and 1,000 acres; between 1,000 and 2,000; between 2,000 and 3,000; between 3,000 and 4,000; between 4,000 and 5,000; between 5,000 and 6,000; between 6,000 and 7,000; between 7,000 and 8,000; between 8,000 and 9,000; and between 9,000 and 10,000 acres?
  2. To what extent have wheat-growers in Australia been subsidized or assisted financially by the Federal and State Governments each year since 1932, and upon what basis?
  3. How many wheat-growers are there in Australia holding an acreage of 1,000 acres and more who also grow wool?

I am now in a position to supply the following information : -

  1. The last season for which figures were tabulated in this regard is 1935-36. For that year, the following groupings are available covering holdings and growers for four States : New South Wales, Victoria, South Australia and Western Australia ( figures are not available for Queensland and Tasmania) : -
  1. Financial assistance to wheat-growers ‘ by the Commonwealth since 1931-32 in the way of acreage and bushelage payments, has been as follows:-

For 1938-39 harvest, the home consumption price legislation is expected to provide about £3,600,000.

The States have borne the cost of distribution of these funds amongst wheat-growers. New South Wales has also supplemented its allotment of the Commonwealth grant from these funds to the extent of £443,546 in 1932-33 and for 1938-39 it is providing £187,000.

Wheat-growers have also been assisted substantially through funds provided under the Commonwealth Loan (Farmers’ Debt Adjustment) Act 1935-36. State Governments have further assisted them in other directions.

  1. Statistics are not available to relate size of wheat-growers holdings to sheep or woolgrowing.

In 1935-36 there were 51,529 holdings growing wheat for grain in New South Wales, Victoria, South Australia and Western Australia. Of these holdings, 30,017 hadsheep to a total of 26,000,000, which represented 29.93 per cent. of the total number of sheep in those four States.

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Bill brought up by Senator Collett, and read a first time.

Standing and Sessional Orders suspended.


Senator COLLETT:
Assistant Minister · Western Australia · UAP

– I move -

That the bill be now read a second time.

The object of this bill is to amend sections 36a, 42, 46, 48, 53, 55, 64 and 73 of the Commonwealth Public Service Act, 1922-37. Under clause 2, it is proposed to amend section 36a of the principal act, which relates to the appointment of university graduates to positions in the third division (clerical) of the Commonwealth Public Service. Pursuant to section 36a as it now stands, where the Public Service Board holds an entrance examination for appointment to the third division, persons who are, at the date of the examination, graduates of an Australian university, may apply to the board for appointment to that division. Representations have been made in regard to young men with good scholastic records in Australia, who have proceeded to Great Britain to continue their studies, and have obtained degrees at British universities. These young men are not coveredby the provisions of section 36a of the act, and cannot, therefore, be considered for appointment to the Public Service with those who graduated in Australia. It is thought that the scope of the section should be widened in order to permit consideration to be given to applications from bona fide Australians who have obtained university degrees in other parts of the British Empire. Accordingly, provision is now made in clause 2 to extend this concession to graduates of a university in any part of the British dominions, outside Australia, who were born in this country, or were resident here at least for twelve months immediately prior to leaving Australia for the purpose of entering that university.

In regard to clause 3, I point out that section 42 of the principal act provides that if the Public Service Board is satisfied that it is desirable in the interests of the Commonwealth, appointments may be made to the Commonwealth Service, without examination or probation, of officers of the Territorial Service, Commonwealth Railways Service, and the Australian Capital Territory Police Force. Under this bill, it is proposed that eligibility for appointment under section 42 of the principal act shall now be extended to members of the permanent Naval, Military or Air Forces of the Commonwealth. I remind honorable senators that the clause, if agreed to, will merely confer eligibility for appointment to the Commonwealth Service, and that, before any such appointment can he made, it will be necessary for the Public Service Board to satisfy itself that it is desirable in the interests of the Commonwealth that the appointment be made.

Clause 4 contemplates the extension to persons of not more than 50 years of age who have retired, or who may retire, from the permanent Naval, Military or Air Forces of eligibility, as provided in section 46 of the principal act, for appointment by the Public Service Board to the Commonwealth Service without examination, and, if the hoard thinks fit, without probation. It also makes clear that the persons eligible for appointment under section 46 are those who have retired from any permanentoffice, as distinct from a salaried office in any of the services mentioned in the section.

Clause 5 contains proposed amendments of section 48 of the principal act. Amendments a, d and e are consequential on the acceptance of amendments b and c. With regard to amendment b, I point out that section 48 (1) d of the existing act provides that where a personbecomes an officer in the Commonwealth Service and his service in the Commonwealth Service is continuous with, inter alia, service in a permanent capacity in the Naval or Military Forces of the Commonwealth, his prior service shall he reckoned as service in the Commonwealth Service. The effect of the amendment is to place members of the Air Force on the same footing as that of members of the Naval and Military Forces. Amendment c, paragraph e, covers the cases of officers appointed to the Common-wealth Public Service from the Council for Scientific and Industrial Research, Repatriation Commission, War Service Homes Commission and High

Commissioner’s Office, London. Officers employed with these bodies were accorded superannuation rights and eligibility for furlough by Parliament in 1937, and it has been represented to the Government that, in view of the status thus conferred, steps should be taken to ensure that, should any such officer foe appointed to the Commonwealth Public Service without any break in his employment, his service with the former body shall he regarded as service in the Commonwealth Public Service for purposes of furlough and sick leave. The Government considers it equitable that this provision should be inserted in the Commonwealth Public Service Act. It is not anticipated that there will be many cases coming within its scope. No alteration of the existing practice governing eligibility for appointment to the Commonwealth Public Service of officers of the Commonwealth bodies mentioned is toeing made. Et is thought desirable, however, to .provide for any case which may arise, and to ensure that any officer appointed to the Commonwealth Public Service from any of the bodies mentioned shall carry with him his permanent service with the f owner body. The addition of paragraph /, amendment c, is necessary consequent on the passing of the Supply and Development Act. The purpose of the amendment is to confer on persons employed permanently under the provisions of that act rights similar to those conferred by section 48 (1) c on persons employed permanently in a civil capacity under the Defence Act. Under those rights, the prior service of a person who, without any break in employment, becomes an officer of the Commonwealth Public Service, would he regarded as service in the Commonwealth Public Service for the purposes of furlough and sick leave. As honorable senators are aware, many persons previously employed under the Defence Act are now attached to the new Department of Supply and Development.

Clause 6 provides for an amendment of section 53 of the principal act relating to the examinations which must be passed, or of qualifications which must be possessed, by officers as a condition of their advancement in the service. The Crown law officers have advised that, in order to comply with section 53 as it now stands, the Public Service regulations should specify the examinations to be passed or the qualifications to be possessed for each position concerned. This would involve the making of lengthy regulations specifying the details of examinations, and probable frequent amendments of those regulations, and as it is considered undesirable to overburden the regulations in this manner, it is proposed to relieve the board of the necessity for doing so. Under this hill the board will be empowered, where it thinks fit, to refrain from including the actual details of examinations, or qualifications, in the regulations, and, instead, to make known those details to officers and departments by other means, such as publication in the Gazette.

The amendment of section 55 of the principal act contemplated by clause 7 is merely to clarify the drafting of the section. Paragraph a of sub-section 3 of section 55 of the principal act provides that an officer may be charged with an offence by the chief officer, or any other officer prescribed as having power to lay a charge, and may, if the charge be considered of such a serious nature that the charged officer should not continue in the performance of his duty, be suspended by the chief officer or, in emergent cases, by any other officer having power as aforesaid. Under that paragraph it is necessary for the chief officer, or other prescribed officer, before suspending an officer, to consider the nature of the charge and whether the charged officer should continue in the performance of his duty. I point out that paragraph b of the subsection provides, however, that suspension may be effected prior to the laying of the charge. Honorable senators will agree that it is difficult to reconcile the terms of these paragraphs. It is therefore proposed, under clause 7 of this bill, that paragraph a of the sub-section be amended by omitting the word “ charge “, second occurring, and inserting in its stead the word “ offence “ and by omitting the word “ charged “, second occurring. Paragraph a will then read -

The officer may be charged by the chief officer, or any other officer prescribed as having power to lay a charge, and may if it is considered that the offence is of such a serious nature that the officer should not continue in the performance of his duty, be suspended by the chief officer, or, in emergent cases, by any other officer having power as aforesaid.

A matter of considerable importance is involved in clause 8 of the bill, under which it is proposed to repeal section 64 of the principal act and to insert in place thereof a more comprehensive section. Section 64 empowers the paying officer of a department, on the receipt of a certified copy of an unsatisfied judgment against an officer for the payment of any sum of money, to deduct from time to time from any money due to the officer such sums as are, in the opinion of the paying officer, necessary to enable the judgment to be satisfied. It is provided that in no case shall the deduction reduce the amount to be received by the officer to less than £2 a week, or to less than onethird of the amount otherwise payable to the officer. It has been represented to the Government that that section has enabled officers to borrow money from money lenders merely on the security of future payments of salaries, and that the inducements held out by money lenders have led to exploitation of officers and have encouraged the latter to run into debt.

As indicative of the increasing extent to which officers’ salaries have been garnisheed for the payment of debts, the following particulars of the number of judgment orders issued against officers in the Postmaster-General’s Department will doubtless be illuminating: -

The number of judgment orders for all departments in 1938 was approximately 2,800.

The amounts involved in individual cases vary from a few pounds to substantial sums, and many officers have several orders against them. It is estimated that approximately 75 per cent. of the judgment orders are given in favour of money lenders. The number of officers from whose salaries deductions are being made at the present time in respect of judgment orders is approximately 900 and the amount involved is about £90 each pay.

In addition to the probability of embarrassment being caused to officers themselves by reason of their indebtedness, honorable senators will, I am sure, be not unmindful of the possibility of an unsatisfactory position arising where some of these officers occupy positions, the duties of which involve the handling of public moneys. The Government, therefore, believes that steps shouldbe taken at least to minimize this unsatisfactory state of affairs. Moreover, it is considered that the Government should no longer continue to act, free of charge, as a collecting agency for persons to whom officers of the service are indebted. Accordingly, under clause 8, it is proposed to amend section 64 of the principal act to the extent that it shall not be permissible for an officer’s salary to be garnisheed in any case in which any portion of an amount due under a judgment is in respect of money borrowed from a money lender, unless the chief officer of the department, after full examination of all the relevant circumstances, considers it desirable that such action should be taken. It is also proposed now to include in the section a provision that in cases in which the paying officer is authorized to make deductions from an officer’s salary in respect of an unsatisfied judgment a charge of 5 per cent. shall be made for the collection by Commonwealth departments of any moneys so deducted, the charge to be borne by the judgment creditor.

It has been found necessary specially to define the term “ money lender “. In this connexion I should mention that there is no provision for the registration of money lenders in Tasmania and the Northern Territory. In the proposed new section, all registered money lenders will be regarded as money lenders for the purpose of the section, together with certain other classes of persons coming within the terms of the definition. It is not proposed that child endowment shall be considered as part of an officer’s salary for the purposes of the new section.

Clause 10, sub-clause 1, makes provision for continuation of the appointments of departmental paying officers made under section 64 of the principal act. Under sub-clause 2 of clause 10 it is proposed that judgment creditors who are money lenders shall not be affected by the provisions of the proposed new sub-section 1 of section 64 so far as concerns judgments already lodged with paying officers. The proposed commission of 5 per cent., will, however, be payable in respect of future deductions from salary in cases in which judgments have been served on the paying officer prior to the coming into operation of the amended act, as well as in respect of judgments served in the future.

Clause 9 is intended to cover the cases of certain officers, numbering about 49, who were at one time employed under the Defence Act and who, by virtue of their temporary service under that act, were eligible for furlough but who upon the coming into operation of the Commonwealth Public Service Act on the 19th July, 1923, and the transfer of these officers under its jurisdiction, were deprived of such eligibility for furlough owing to the fact that the Commonwealth Public Service Act precluded the recognition of temporary service for the purposes of furlough. The Civilian Staff Regulations under the Defence Act provide that temporary employees who commenced employment under those Regulations prior to the 2nd J lily, 1924, shall be eligible for the grant of furlough under the conditions and scale prescribed for permanent officers, such conditions and scale being identical with those prescribed under the Commonwealth Public Service Act. The officers to whom I have referred come within this category. When they were permanently appointed under the Commonwealth Public Service Act, it was found impracticable, as I have previously explained, to conserve to them eligibility for furlough by virtue of their service under the Defence Act. Clause 9 will, if passed, restore to the officers concerned that eligibility. This measure will have an important . effect upon the Commonwealth and upon the welfare of Commonwealth public servants, and I commend it to the Senate.

Debate (on motion by Senator Collings) adjourned.

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Appointment of High Commissioners

Senator McLEAY:
Minister for Commerce · South Australia · UAP

by leave - I desire to inform the Senate that the Government has been in communication with His Majesty’s Government in Canada with regard to means of ensuring all possible co-operation between the two dominions, in view of the difficult period which lies ahead for the whole of the British Empire.

The Government of Canada has suggested, and the Commonwealth Government has cordially agreed, that a material contribution to this end would be made by an exchange of High Commissioners between Ottawa and Canberra. The Government of Canada has notified us that df the Commonwealth Government is agreeable it proposes to appoint a High Commissioner to Australia. In reply, the Canadian Government has been informed that such an appointment would be warmly welcomed by the Commonwealth Government, which for its part would foe ready to make a reciprocal appointment to Ottawa as soon as the necessary arrangements vould be completed.

An announcement of the Canadian Government’s intention to appoint a High Commissioner in Australia is being made in the House of Commons at Ottawa to-day.

It is the intention of the Commonwealth Government to proceed with the appointment of an Australian High Commissioner in Canada as soon as possible.

This step, I have no doubt, will have substantial advantages during the period ahead, but it is not to be regarded as resting solely upon war-time needs. Honorable senators will be aware that the exchange of High Commissioners between dominions has been from time’ to time suggested as a regular practice and as a natural corollary, in the present structure of the British Commonwealth, to the exchange of High Commissioners between the dominions and the United Kingdom. There is good reason to suppose that this conviction of the desirability of much closer contact between the governments of the British Commonwealth outside the United Kingdom as a normal practice has also been present in the minds of other dominion governments, and the Senate will be aware that there are in Ottawa already a High Commissioner of the Government of Eire and an accredited representative of the Government of South Africa.

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Senator FOLL laid on the table the report and recommendation of the Tariff Board on the following subject: -

Mineral lubricating oil.

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Senator McLEAY:
South AustraliaMinister for Commerce · UAP

– I lay on the table -

Estimates of Receipts and Expenditure and Estimates of Expenditure for Additions, Kew Works, Buildings) &c, for the year ending the 30th June, 1940.

The Budget, 1939-40 - Papers presented by the Right Honorable R. G. Menzies, M.P., on the occasion of the budget of 1939-40. and move -

That the papers be printed.

Introducing the budget for 1939-40 in the House of Representatives on Friday last, the Prime Minister and Treasurer (Mr. Menzies) said that the budget had been framed before war had come upon us, and he wished it to be understood that in the altered circumstances in which we are now placed, these budgetary proposals cannot be taken as providing fully for the requirements of the ensuing year. The budget will necessarily have to be re-adjusted and supplemented to meet further inevitable needs in the days that lie ahead. An economic review of the year just closed shows that although unemployment had not been all that could be desired, the position was by no means unsatisfactory. The percentage of members unemployed among reporting trade unions increased from 8.5 per cent, in 1937- 38 to 9.4 per cent, in 1938-39, but it had remained well below the average percentage of 10.6 for 1936-37. The average number of persons employed in factories declined slightly from 559,000 in 1937-38 to approximately 551,000 in 1938- 39. Nevertheless, factory employment remained 5 per cent, above the average for 1936-3T, when export income was 15 per cent, above its 1938-39 level. The value of recorded production in 1938-39 is roughly estimated at about £448,000,000 as compared with £487,000,000 in 1937-38 and £457,000,000 in 1936-37. The fall in the total value of recorded material production was due almost entirely to the substantial decline of the value of production in primary industries and that decline was due to factors which do not reflect in any way upon the efficiency of industry. Australia suffered most during the year by a continued downward trend of export prices which, beginning to fall in 1937, continued to decline throughout almost the whole of the past year. The average prices received for Australian exports in 1938-39 were 16.6 per cent, below those in 1937-38, and as much as 27 per cent, below those ruling in 1936-37. The value of wool produced in Australia declined from £54,000,000 in 1937-38 to £44,000,000 in 1938-39, and the value of the wheat crop fell sharply from approximately £37,000,000 in 1937-38 to £19,000,000 in 1938-39. The effect upon the wheat industry has been disastrous and the economy of the nation has been adversely affected. However, the British Government is at present negotiating with the Commonwealth for the purchase of large quantities of our primary products, and the result should be of considerable advantage to this country. The severe decline of the Australian export price level, together with drought conditions at home, reduced our total export income, including gold production, from £122,900,000 sterling in 1937- 3S to £108,300,000 sterling in 1938- 39. The value of imports also fell heavily from £111,800,000 sterling to £99,500,000 sterling, so that the year ended with a favorable commodity balance of trade, including gold production, of £8,800,000 sterling. It is satisfactory to know that there has been no slackening of the tendency towards the replacement of imports by local production at reasonable costs. At the close of 1938-39, London funds will show some reduction when the figures become available for publication in December. In view of the high level of London funds in 1938, however, the continued investment of overseas capital, and the emergency measures recently taken consequent upon the outbreak of hostilities, no serious concern need be felt. The Commonwealth Bank has taken steps to maintain the liquidity of the trading banks, and this in turn will affect the level of employment and production in Australian industries.

The 1938-39 budget was framed to balance with the aid of additional taxation estimated to produce £3,210,000. The year’s accounts closed with an excess of revenue of £627,000, the total revenue received being £95,064,000.

Additional expenditure during the year, for which provision had not been made in the budget, amounted to about £1,000,000 for defence. Against this, a saving of £950,000 was made by the decision of the previous Government to postpone national insurance. Customs and excise returned £507,000 more than the estimate. The net result was as I have indicated.

This summing up of the results ignores one important item which was not taken into account in the budget estimate - the flour tax. This tax was not imposed until last December, and produced £1,809,000, which was set aside in full for payment to the States for the relief of wheat-growers. So far as the budget is concerned, this is, therefore, a selfbalancing item, and did not affect the net result.

The Government proposes to use the excess revenue of £627,000 towards meeting defence expenditure in 1939-40. Loan expenditure budgeted for in 1938-39 was £6,400,000, £4,400,000 being for defence, and £2,000,000 for farmers’ debt adjustment; but the actual expenditure was only £3,912,000, the difference being due to the fact that certain defence works were uncompleted at the 30th June. With the recent appointment of the honorary building panel of advisers more rapid and effective works expenditure has since been brought about.

During 1938-39 over £11,000,000 was applied from the sinking fund in redemption of Commonwealth and State debts. This year £11,672,000 will be used for that purpose, of which £5,290,000 will be found by the Commonwealth sinking fund, and £6,382,000 by the sinking funds of the States.

The outstanding public debt operation for the year was the cash and conversion loan in December last. This loan, which included £67,600,000 conversion and £4,000,000 for defence, was floated at £3 17s. 6d. per cent, at par, and constituted the biggest operation conducted by the Loan Council on the Australian market since the national debt conversion of 1931. Maturing securities to the amount of £53,000,000 were converted into the new loan, £2,600,000, was provided from the Sinking Fund for redemption purposes, and £16,000,000 was subscribed by the public in cash, including £5,650,000 provided by the Commonwealth Bank.

Two other public loans were raised locally during the year - one for £8,500,000 at £3 17s. 6d. per cent, at par, and a later one for £4,750,000 at £3 17s. 6d. per cent, at £99. In addition, a short-term - four years - loan of £3,000,000 was provided by the Commonwealth Bank under private arrangements, the terms being per cent, at par.

During the financial year 1938-39, two loan operations were carried out in London. The first was a small conversion loan of £2,518,000 at 4 per cent, at par in December, 1938, and the second was a defence loan of £6,000,000, which was floated in June, 1939, at 4 per cent, at £98 10s. As the loan market had been adversely affected by the international situation just prior to this loan, the terms, in the circumstances, were satisfactory.

The estimated expenditure for 1939-40 is £101,916,000, a net increase over last year of £5,688,000. The main items making up this increase are -

The estimated defence expenditure for this year is £33,137,000, which is £19,300,000 in excess of last year’s expenditure. In round figures, £14,000,000 is to be found from revenue sources, both present and past, and £19,000,000 from loan fund. In the light of financial difficulties, the

Government feels that it would toe a serious mistake to increase the charge to revenue substantially beyond £14,000,000. Unfortunately, with the outbreak of war, increases of defence expenditure generally are inevitable.

Expenditure of the new Department of Supply and Development, which has been included with the cost of defence services above, is estimated at £3,917,000. The sum of £1,141,000 will be provided from revenue, and practically the whole of the balance from loan fund.

The sum of £1,435,000 is estimated as the expenditure on Civil Aviation for the current financial year. Expenditure on new works will amount to £837,000, including provision for the improvement and extension of aerodromes and aeradio equipment. The sum of £45,000 is also being provided for the purpose of assisting with the training, during the coming financial year, of reserve pilots.

For thisyear, £16,700,000 has been provided for old-age pensions. This represents an increase of £708,000 over last year, it being assumed that 12,000 more pensions will be paid.

Expenditure on war pensions is set down at £8,287,000, which is £60,000 more than was paid last year. Although expenditure on pensions for war disabilities is now commencing to decline, this is more than offset by the increase of service pensions, that is, pensions to ex-soldiers and nurses whose earning power is gone. The estimated expenditure on general repatriation services is £1,034,000.

The Government has continued to explore the question of national insurance, and the Minister for Social Services has devoted much time to the preparation of revised proposals. Whether it will be possible to proceed with any scheme of national insurance will depend upon future circumstances. For the moment, all that can be said is that there is no immediate prospect, having regard to the national emergency, of any scheme coming into force.

Expenditure from revenue on public works is estimated at £4,304,000, which, with £2,000,000 from loan for postal works, will make £6,304,000 for the year, an increase of £1,088,000 over last year.

Post office works will absorb £4,000,000, Civil Aviation £605,000, Australian Capital Territory £543,000, Northern Territory £388,000, and other miscellaneous works £768,000.

Other expenditure for the current year includes -

The Government has decided to adopt the recommendation of the Commonwealth Grants Commission, under which the special grant to South Australia will be £995,000, to Western Australia £595,000, and to Tasmania £430,000, being a total of £2,020,000. Whilst the total is the same as last year, the grant to South Australia is £45,000 less, and the grants to Western Australia and Tasmania £25,000 and £20,000 more, respectively. Regarding the grant of £595,000 to Western Australia, it is to be borne in mind that this is a net figure, after deducting a special advance of £136,000 made in 1937-38 on account of drought, and to be deducted this year. The normal grant recommended for this year is therefore £731,000, which is £117,000 more than last year’s normal grant of £614,000.

In the present financial year it is proposed to provide £2,000,000 for financial assistance to the States for farmers’ debt adjustment. This is the same amount as was provided last year, and brings the total provision for this purpose to £8,317,000.

The provision of this sum will bring the estimated loan expenditure for 1939-40 to £23,072,000, compared with £3,912,000 last year, the respective items being -

The total revenue estimated to be received in 1939-40, based upon the present taxation, is £96,030,000. As the total expenditure is estimated at £101,916,000, steps must be taken to bridge the gap. For this purpose it is proposed to raise additional revenue amounting to £5,910,000 as follows: -

The amount of £2,360,000 sought to be raised from income tax is to be obtained from three sources: -

  1. By an increase of 10 per cent. in the rates on individuals in respect of income derived from personal exertion or from property.
  2. By an increase of the rate of company tax from the prevailing rate of1s. 1.8d. in the £1 to1s. 7.8d.; in other words, an increase of 6d.
  3. By the abolition of the tax rebate in respect of the dividends received by absentee holding companies from companies operating in Australia; in other words, by lifting the present exemption from absentee shareholders of absentee holding companies.

The Government proposes to increase the sales tax from 5 per cent., the existing rate, to a new rate of 6 per cent., which was the rate existing in 1933, and also to amend the Sales Tax Acts in respect of the method of calculating the sale value in the case of imported goods. It is estimated that from these two proposals £1,420,000 will be received.

Other taxation, which is estimated to yield £2,130,000, will come from customs and excise. Details of these proposals will be disclosed later.

The budget may be summarized thus -

In view of the international situation, the Government decided, as a precautionary measure, to bring into operation emergency regulations under the Defence Act in connexion with all oversea transactions, the object being to conserve the oversea resources of Australia.

The regulations were gazetted on the 28th August, and give to the Treasurer control over all oversea exchange transactions, the control being exercised through the Commonwealth Bank. The trading banks have been appointed agents of the Commonwealth Bank for the purpose, and dealings in oversea exchange, except through the banks, are now prohibited.

In addition, regulations were gazetted prohibiting the export of gold or notes, and the issue of oversea money orders has been restricted to £5 a week for any one person.

In conclusion, I express my conviction that the people of Australia will overcome the difficulties which lie ahead, and will meet, unflinchingly, any additional demands which may be made upon them.

Leader of the Opposition · Queensland

– The statement which we have just had from the Leader of the Senate (Senator McLeay) is a very important one. We are told, and we fully understand the reason, that the Budget and Estimates now before the Parliament are tentative, and will have to be reviewed later in the financial year. I think we all appreciate the need for this revision in view of the disturbed condition of world affairs. I contend, however, that this is a compelling reason against the Government’s proposal, as announced in the discussion of other measures that have been before us, to have long adjournments of Parliament during the war period, in order that Ministers may get on with the business of defending Australia. The people of Australia are well aware of the attitude of the Opposition to this suggestion. We declare that the stupendous task which faces us should be carried out in the ordinary constitutional way in which British Parliaments usually function. The magnitude of the budget and the reasons for the vastly increased expenditure are ample support for our claim that Parliament should continue in session, in order that the Government’s administration may be reviewed in the full light of public criticism, and in order that the representatives of the people may have an opportunity to take their share of the responsibility devolving upon the Government.

Senator MCBRIDE:
Minister without portfolio assisting the Minister for Commerce · SOUTH AUSTRALIA · UAP

– All money to be expended must be appropriated by Parliament.


– I am well aware of that. I also know how often things are done before the Government gets the approval of Parliament for the appropriations. I also have some knowledge - probably the Minister is too young to know it - of the fight to secure for British Parliaments control of the King’s expenditure. We on this side shall never approve any course that will lead to the abrogation of that right.

As I have said, we understand that, as time goes on, the budget will have to be very drastically altered. The Treasurer (Mr. Menzies), in introducing the budget iri the House of Representatives last week, delved into history. He said that the Right Honorable William Ewart Gladstone, who was Prime Minister of Great Britain for so many years, presented thirteen budgets before he brought down one involving the expenditure of £100,000,000. From the manner in which the Treasurer referred to the matter, one would imagine that the late Mr. Gladstone regarded the presentation of a £100,000,000 budget as his life’s ambition. I dp not think that we should allow the implication to pass unnoticed. When the late Mr. Gladstone presented his £100,000,000 budget, the population of Great Britain was 37,500,000. Gladstone’s legislative career came to a close in 1893. I was old enough to remember many of the political happenings of that time. The Chancellor of the British Exchequer is now accustomed to presenting budgets involving an expenditure of £1,000,000,000. The fact that the Commonwealth budget has reached £100,000,000 is an eloquent reason for a drastic review of the Government’s financial policy, especially in view of the fact that our population is only slightly over 7,000,000.

Senator McLeay:

– The honorable gentleman does not, I hope, suggest that we should be guided, in our financial policy, by Senator Darcey.


– I knew that the Leader of the Senate would have something to say about my friend Senator Darcey, and I shall have something to say in reply as I proceed.

I am directing attention to the fact that the Commonwealth budget has reached £100,000,000 for a population of just over 7,000,000, and I submit that because of the large area of Australia there is great need for more expenditure on national development, and we cannot go on much longer following the orthodox methods of government finance and banking policy.

Senator McBride:

– What does the honorable senator mean by “orthodox” methods of finance?


– This Government, because of its constituent parts. - and the same could be said of preceding governments in recent years - is definitely condemned for ever never to depart in the slightest degree from the present thieving methods for financing the needs of the country. This Government is accessory both before and after the fact, not because of any innate desire to be predatory, but because ignorance prevents Ministers from seeing the advantage of any change of method. Although I do not agree with all that my colleague, Senator Darcey, so frequently and eloquently has to say on this subject, I and this Labour Opposition have a full realization of the predatory methods of private financial operations in this and every other country. We say that, such methods must cease if civilization itself is not to be destroyed, As a preliminary I lay down that general principle. If we had our way, and if there were a Labour government in power, we would take adequate measures to eliminate private profit from our banking and borrowing policy. We claim that both must be progressively developed solely in the interests of the nation, in peace and war. We were pleased to hear the Prime Minister (Mr. Menzies) declare that the Government was determined to check profiteering in this country. But no one on this side was deceived to the extent that we believed that the Government intended to attack profiteering where it is seen at its worst, and where it does its most nefarious work. The Government does not intend to prevent profiteering in finance, because, owing to its personnel, the Ministry, either knowingly or unknowingly, occupies the treasury bench for the express purpose of doing the bidding of the great financial interests and bleeding the people of this country white in the process.

Senator Dein:

– If the honorable senator thinks that, why did not his party take its share in the responsibility of administration?


– I knew that Senator Dein, by way of interjections, would have something to say on that subject. Therefore, I have devoted a special page in my notes to the question which he has asked, and if he will restrain himself until I reach that portion of my speech, I shall answer in a way which I know will hurt him.

I desire to direct attention to a phase of Commonwealth finance which is not referred to in the budget speech - the public debt of the Commonwealth. I know that this is an unpleasant subject. But when this skeleton in the cupboard wakes up and rattles its bones, it is the duty of the Opposition to see that it is not hurriedly rushed back to the cellar before people can have a look at it. The public debt- Commonwealth and State - at the present time is no less a sum than £1,275,000,000. Of that amount £391,000,000 represents the debt of the Commonwealth. It has had but 38 years to do that, so that it has travelled fast. The public debt of the States amounts to £884,000,000. The interest payable by the Commonwealth amounts to £12,250,000 each year, whilst the States have to meet an annual interest payment of £33,250,000. That is a total of £45,500,000 payable by this country every year as interest on the public debt. The average rate per cent, is £3 16s. Id. Put in another way, those figures mean that every day Australia has to find £124,575 in interest. That money cannot be conjured out of the atmosphere; it can be obtained only by the application of human ‘ labour to raw material. Every penny of that huge sum has to be extracted from the labour of men and women who do the work of this country, including primary producers in country districts and employees and owners of factories in the cities. Australia’s total population is about 7,000,000 persons, but if from that number we take the women and children, as well as aged and invalid persons who produce no wealth, and also those employed in parasitical industries such as Parliament, which although necessary under existing conditions, is still parasitical in the sense that it is nonwealthproducing, there is left only a comparatively small number of able-bodied male producers of wealth. Out of their toil, the immense debt of this country has to be met. Those figures testify that we must stop the predatory financial interests, which bleed every nation and control the policy of every government, including the Commonwealth Government. This must stop if civilization itself is to survive.

Senator McBride:

– The honorable senator says that the interest cannot be conjured out of the atmosphere, but he suggests that no difficulty exists in regard to the principal.


– I regret that I cannot get down to the intellectual level of that interjection, and therefore must be excused for not answering it now. I shall be happy to do my best in a private talk if that is desired.

In the House of Representatives, the Treasurer (Mr. Menzies) said that he had heard a good deal of talk of credit expansion. He went on to sneer at the suggestion that somewhere there was a hidden spring of wealth, and that by placing a tap here and a tap there the spring could be drawn upon at will. No one has ever said anything of the kind. But I tell the right honorable gentleman that there is something more than a suggestion of a hidden spring of wealth. Every member of the Opposition knows that there is a hidden spring of wealth which can be, and ought to be, tapped in the interests of the nation. “We do not suggest that it is possible - and even if it were possible, it would not be advisable - to divide the wealth of the country among its people. It is charged against the Labour party that, if it had its way, there would be an apportionment of the wealth of the country, so that every man would get his share on Saturday night, and then everything in the garden would be lovely. No person connected with the Labour movement has ever said so. The desks and the books in this chamber represent some of the wealth of this country, as do also its tramlines, its ships and its trains. What a nice job I would have walking home on Saturday night with my share of the Howard Smith Line of Steamers! No one but a lunatic would suggest that the wealth of the country should be divided among its people. In this connexion, I point out that the most dangerous lunatics are not in asylums, but outside them ; some of them are in responsible positions in this country. Even if wealth could be so distributed, that would not be desirable, because by Monday morning some smart Alec would have got most of my share. A division of wealth is ridiculous. But if civilization is to be saved there must be in every country an entirely new and equitable division of the national income. That is a different thing altogether. We know what this country can produce of wool, wheat, meat, sugar, butter, cheese and all the things that are necessary for a happy and contented human existence. We know that if that wealth belonged to the nation, instead of to a few private individuals, things would not be as they are. Even now, this country is not producing all that it is capable of producing, for there are tens of thousands of potential producers in the ranks of the unemployed. If our social organization allowed us to do all that we could do, there would be sufficient for every person in the community to live in comfort, instead of, as now, a few individuals in luxury and others in the direst poverty. In a time like the present, we should put the patriotism of the unduly rich savagely to the test, in order that the unduly poor might not have their poverty increased. If I cannot prove that this budget will have the effect of increasing the riches of those already rich, and making poorer those who are poor, I shall not attempt to prove anything else.

The Leader of the Senate (Senator McLeay), who read the financial state ment on behalf of the Treasurer, referred to the Government’s loan policy. In June last the Government floated a loan of £6,000,000 at 4 per cent, at £98 10s. That means that for an investment .of £9,850 - a small amount to some of the subscribers–

Senator McBRIDE:

– The Government did not float a loan in Australia in June of this year.


– No, but it floated one in London. A person who invested £9,850 in that loan will receive as interest £400 a year for the duration of the loan, winch really means for all time, because notwithstanding the provision for a sinking fund, nine out of every ten loans that are floated are never paid off. The person who will receive that amount of interest contributed nothing to the welfare of the nation.

Senator McBride:

– Not even the £9,850 that he invested?


– Even if we admit that he contributed the money, he did not do so with any intention to increase the national wealth, but only in order to secure a dividend of £400 a year. Not only he, but also his heirs, successors and assigns, will be paid £4tJ0 a year indefinitely. It has been said that the circumstances associated with the floating of that loan were abnormal, that the market - that indefinite something behind which any one can shelter who wants to excuse .this financial conjuring - was unfavorable. Particularly in times like the present, the market requires careful watching day by day. Does not that very fact prove that there is no patriotism in finance? The financiers are not concerned that the various members of the British Commonwealth of Nations are at war. They will still wring from the people the uttermost farthing. It is not a matter of what the country is prepared to pay, but what those who lend the money demand. At times loans are floated on what is termed a favorable market; at other times, the market is said to be abnormal. Day by day, and night by night, these people have to be watched, for the only thing that concerns them is how much they will get out of the transaction. Yes, there is a hidden spring of wealth, which tax collectors acting on behalf of the Government should tap. I know that honorable senators on the Government benches will say that I have been brutal in my criticism, and guilty of extravagant statements. The truth of my remarks is demonstrable. When I sit down, my statements will be at the mercy of the financial and intellectual giants on the other side of the chamber. At the moment, the members of the Cabinet are supposed to represent the cream of the Government party, but we do not know what the juggling of the next few days may produce. If Ministers know that my statements are challengeable, they should not have bowed down before mammon so readily. The god that rules in this country is the god of profit. Indeed, it is because throughout the world that same god has been worshipped that Europe is in its present state. While we ‘believe that the present war is being waged between those who believe that might is right and those who believe that right is might, in the final analysis it will be impossible to avoid wars in the future without a drastic change of the existing economic system.

Senator McBRIDE:

– Does not the honorable senator think that human nature has something to do with the present struggle ?


– When I was a boy of eighteen years, I started to enunciate the policy that I am trying, however, poorly, to enunciate this afternoon. Through all the intervening years human nature has been blamed for the troubles that have come upon the world by those who oppose all reform. I shall let honorable senators opposite answer for their human nature; hut we on this side believe that, if given a chance, there is something in men which makes them potential angels - not the potential devils which are the natural product of the existing rotten economic order.

It is claimed that the statistics of employment and factory output are good. The position is not good ; it is alarmingly bad. But with their customary complacency honorable senators opposite are not interested in studying the figures, so long as they can throw dust in” the eyes of the people. They are satisfied so long as they can say that the percentage of unemployment for last year was so and so, and now it is less ; that it is not too bad, and certainly not so bad as it was some years before. That , being so, they can sleep soundly with their consciences untroubled. Notice should ‘be taken of figures made available to this Parliament. I submit that an intelligent Treasurer would not present to this Parliament a budget which simply says, in effect, “Although things might be better, they are not too bad, and we are perfectly satisfied with the position “.

Senator McBRIDE:

– Can the honorable senator point to any statement in the budget that the Government is perfectly satisfied with the position?


– I am suggesting that the Government should not use figures in such a way as to lead one to that conclusion, when the facts are entirely different. I point out that the percentages of unemployment on which the Statistician’s figures are based are only a basis for comparison ; they are not actual, because they take account only of unemployed members of trade, unions. Such records do not embrace a considerable number of men who have never ‘ had a job and, therefore, have never qualified to join a union. Thus, such figures do not reflect the actual situation. Consequently, these should not be used lightly or complacently. The statement in the budget to which I refer reads, “ Although employment during the year was not all that could be desired, it was by no means unsatisfactory “.

Senator McBRIDE:

– The honorable senator used the words “ entirely satisfactory “.


– If it is by no means unsatisfactory, it must be satisfactory. If it does not mean that, I do not understand the English language. I submit that the figures relied upon by the Government do not disclose the facts. They are published officially, but when we refer to them they give the lie to such statements as I have just read. The Government should not be guilty of that kind of thing. Honorable senators opposite continually boast of the money which the Government is spending on defence.

Should not that expenditure definitely result in a decrease and not an increase of unemployment? Yet figures supplied to me by Ministers in New South Wales and Victoria, and supported by the quarterly returns of the Commonwealth Statistician, show that unemployment in those two States, the most densely populated in Australia, is rising rapidly. They reveal that at present at least 50,000 able-bodied willing workers in Victoria are out of work.

Senator Foll:

– Increased expenditure for defence does not necessarily mean that unemployment will be decreased.


– If additional millions of pounds are being expended on defence an immediate and substantial decrease of unemployment should result; in fact, honorable senators opposite stalled us off with that very contention when we were discussing this expenditure last session.

Senator Foll:

– I would sooner expend the money on development.


– Honorable senators opposite should be politically honest. If they were they would not make interjections like that. On each occasion last session when we on this side asked for definite assistance to the unemployed, we were told that the Government intended to spend a very large amount of money on defence works, and that as the result the unemployment situation would be eased considerably. Further, they said - and this is much more reprehensible - that the relief of unemployment -was the responsibility, not of the Commonwealth Government, but of the States. I submit that it is the joint responsibility of the. Commonwealth and the States. I am also reminded of another important phase of the matter, namely, sweating in the clothing trade in Victoria. This evil is a very fertile source of unemployment, misery, destitution, and malnutrition. Only a few weeks ago, the Government promised that it would take steps to remedy this evil, and actually got down to a conference on the job. However, nothing has been done in that respect. The unemployment rate is increasing in spite of the millions of pounds that are being expended on defence. The Government may say that unemployment has been reduced to 9 per cent., but if I happen to be one of the unemployed, it is useless for the Government to tell me that it is spending millions of pounds on defence, or that the unemployment figures are slightly better this year than last year. Assurances of that kind are no consolation to the man who is unemployed. If I am unemployed my position cannot be worse; so long as I am unemployed, the nation has no interest in me. In spite of the Government’s slogan, “ Business as usual “, business is not proceeding as usual. Unemployment is increasing, and already many big firms are sacking numbers of employees. In a recent issue of the Sydney Morning Herald, the Retail Traders Association of New South Wales, in a full page advertisement, containing photographs of the Prime Minister of Great Britain and the Prime Minister of Australia, sent forth the following message to the nation: -

At a meeting of the management committee of the Retail Traders Association of New South Wales, the following recommendation to members was unanimously adopted: - That irrespective of trading conditions members are recommended to assure their employees that their staff will be kept at present strength for the ensuing four weeks.

What a wonderful proposition! Business as usual - do not get a grouch - do not shut down on your purchasing power - do not worry yourself or your wife about your employment - do not prepare for the worst; Ave shall keep you going for the next four weeks ! Such a pronouncement almost makes a man incapable of language, and the position is aggravated when we see honorable senators opposite sitting in their places so complacently and sneering at the remarks of honorable senators on this side.

The rate of income tax is to be increased by 10 per cent. I submit that a flat rate increase of income tax is a most unfair method of raising additional revenue in a time of crisis. Apart altogether from the fact that for years past this Government has been remitting millions of pounds to payers of land tax, a concession which will be of permanent advantage to those concerned until the full tax is re-imposed, I point out that land tax is not payable on a property unless it be of an unimproved value of £5,000 or over.

Senator Gibson:

– No one on the basic wage pays federal income tax.


– I am aware of that fact, but the people on the basic wage would have been better provided for if the Government had not made remissions of land tax. So great have these remissions been that to-day revenue from this source is only half of what it was when the tax was first imposed many years ago. If the Government had not made those remissions its financial outlook to-day would be very different indeed. I emphasize the iniquity of a flat rate increase of income tax. What really matters is not the amount of tax a man pays, but what he has left after he has paid his tax. A flat rate increase of income tax leaves the man on £300 to £500 a year infinitely worse off than the man on £10,000.

Senator MCBRIDE:

– In each case the taxpayer has exactly the same percentage of income left.


– Yes, but the honorable senator would not contend that the wealthier man finds it so difficult to carry on as does the other man; the wealthier man does not find it more difficult to give to his wife and children sufficient to eat. This Government and all governments of its kind refuse to place the burden of taxation on the shoulders of those best able to bear it.

Senator Gibson:

– In the case of a flat rate increase, one man pays £1,000 of additional tax, and the other pays £1.


– And the man who pays ,£1,000 of extra tax has £4,000 left. If I had my way I should in a time of war reverse the process, and take £4,000 from him by way of additional tax and leave him with £1,000. In seeking additional revenue from taxation, I can imagine the Treasurer putting the problem to himself in this way : “ We have to raise so many millions of additional revenue. What will a flat rate increase of the rate of income tax by 10 per cent, produce”? Apparently that is the way in which this Government has approached this problem. The principle pf a flat rate increase of income tax is not fair; in a time of emergency those enjoying the greatest measure of prosperity should be obliged to carry a corresponding share of the burden involved in raising increased revenue. If the wealthy man’s income is taxed in proportion to its size, no danger will exist that he will be unable to provide his dependants with the necessaries of life. No danger will arise that the standard of physical health in the community will suffer because he cannot feed his family. But those are aspects which must be taken into consideration when the Government proposes to increase the taxes payable by persons whose incomes are relatively small. Senator Gibson interjected that the proposed increase would mean that the man on the basic wage would pay only £1 of extra tax. I believe the exact increase in that case would be 19s. Id., but that man would need every penny of that amount not for some luxury but for some necessity for the breakfast table. Furthermore, the incidence of the increased tax will place many other penalties on the man in receipt of a low salary. I shall have something to say on that aspect a little later.

The company tax also is to be increased. That would be satisfactory if the increase were made in the way in which it would be made in Queensland, and not. in the way in which it is usually made in the other States.

Senator Foll:

– And drive companies out of business.


– The Minister knows that the companies in Queensland were never more prosperous than they are to-day. I have facts to prove that the Minister’s statement is inaccurate. In that State companies are taxed somewhat severely, but only on the profits which they make. There is also to be an increase of the sales tax, which opens up the whole question of direct and indirect taxation, a subject with which I have insufficient time to deal this afternoon. Even in respect of the sales tax the Government is acting wrongly. The Treasurer stated that there are certain exemptions. In some quarters it was suggested that these exemptions should be abolished : but the Government decided that it would be preferable to allow the exemptions to stand and to increase the rate of tax. Those commodities which have been exempt are to a degree the necessaries of life, and the people on lower incomes are grateful for the exemptions; but by no stretch of imagination can some of the exempt commodities be said to come within the category of necessaries of life. I know that the Government’s taxation policy is wrong, but because of the political “ pull “ of certain interests, the Government does not dare to remove the exemption from some of the goods. All these taxes are going to be passed on by every one but the wage- and salaryearners, . and the primary producers who cannot pass them on. Every other section of the community can and does pass on the tax to a degree which I shall indicate later. What does it mean? In the last analysis the persons on the lower rates of income have to pay the tax, while those on the higher incomes pass their share on. Fully 75 per cent, of the consuming public who will be affected severely by the Government’s proposals in this respect is composed of those with the lower grade incomes.

The Government says that it is going after the profiteer. I believe that it desires to do so. I admit that it is after some of them. I have before me a paragraph from the Canberra Times reporting a statement by the Prime Minister which shows that the Government is after the profiteer. But the Sydney Morning Herald, which is an organ not of the Opposition but of the Government, reports -

An immediate increase of 25 per cent, in overseas shipping freights was announced yesterday by the Overseas Shipping Representatives Association. The association stated that because of the outbreak of -war all forward quotations, bookings and freight contracts were cancelled, and schedule rates of freight for all vessels sailing from Australia were advanced 25 per cent.

That is an act of treason against this nation and will seriously affect primary producers. The Government will not go after those profiteers. It has not any intention to do so, but honorable senators in opposition can show the Government how it should act in the matter. On one occasion we showed what could be done by providing a Commonwealth line of steamers, which after rendering good service to the nation was sold to the political friends of a later Government and the price of the ships has never been collected from the purchasers. The Prime Minister stated -

It was recognized that altered conditions abroad and indirect taxation increases would inevitably lead to some increase in prices, but it was the desire of the Commonwealth to limit increases to the operation of these influences which included increased customs and excise duties.

What does that mean? The excise on beer has been increased, and the price of beer will rise; the retailers will reduce the quantity to “be supplied by decreasing the actual size of the glass or by increasing the cavity at the bottom of the glass. As I have been a lifelong abstainer, it does not affect me personally, but I cannot believe that profiteering is to be checked when nothing is to be done in respect of those who are obviously passing on to the public all increased costs. The Prime Minister further stated -

Higher overseas prices for materials, increased charges for shipping freights, depreciation of Australian currency in non-sterling countries, local manufacture at higher cost of formerly imported commodities and recovery of prices of export commodities under the stimulus of increased world demand. Stocks of goods not subject to these conditions should be sold at prices ruling at the outbreak of war. In cases where there was a shortage of supplies it might be necessary to ration them pending resumption of normal supplies.

The prices ruling at the 31st August last are not to be increased. Is the Government unaware that profiteering commenced twelve months ago? Is it unmindful of the fact that unnecessarily high profits have been made during the last twelve months ? Certain business interests in this country have been anticipating the possibilities of profiteering, because they were aware of the imminence of a general international upheaval on the other side of the world.

Senator McBride:

– That is not reflected in the prices.

Senator - COLLINGS.- I direct the attention of the Assistant Minister to the following paragraph, which appeared in the Canberra Times of the 6th September : -

While, outwardly, there is public confidence and enthusiasm in Australia, there have been deplorable tendencies in the business world.

Wholesalers arc endeavouring to profiteer in the most shameless fashion. In Sydney, some suppliers have increased prices, by 100 per cent, in certain industrial supplies.

Senator McBride:

– The honorable senator was speaking of. an increase of prices during the last twelve months.


– It was reported in the press that in Sydney some suppliers had increased prices of certain industrial supplies by 100 per cent. The Assistant Minister quibbles. Did not the New South Wales Government appoint a royal commission to inquire into the price of ‘bricks, and did not that commission report that for some years excessive profits have been made by the brick manufacturers? The commission also reported that the brick combine had closed down brickyards and paid those controlling them their quota of profits on bricks which were never produced. In these circumstances, can the Assistant Minister say that profiteers were not at work before the 31st August last?

Senator Dein:

– What happened to the price of bricks?


– The Commissioner found the case proved against the brick combine and promptly reduced the price. The , brickmakers in New South Wales are now disputing the legality of that reduction, and want to know whether the reduction will stand under the Commonwealth control of commodity prices. I am citing these instances to show how these so-called patriots have been exploiting the people. They exercise every opportunity to batten on the needs of the people, and they are particularly anxious to do so during this time of stress. If the Government is sincere it will control, by legislative enactment, every commodity required in the Commonwealth for war purposes, and ensure that there shall be no profiteering. That is the way that the Labour party would do the job. The Government cannot leave these people iu possession any longer.

Senator McBride:

– That is the honorable senator’s idea.


– Of course, oven the Assistant Minister, with all his ability, cannot do more than express his ideas, and that is what I am doing.

I now direct the attention of the Senate to the fact that, on the 4th August last, the Prime Minister announced his decision to ‘ introduce a bill daring this session to provide for the payment of a bounty on vessels built in Australia. The proposal was to pay in bounty up to £50,000 a year on vessels over 100 tons and not exceeding 1,500 tons gross register. It is not known what the Government’s intention is in view of the altered financial position, hut I should like to direct attention to two features which require consideration if the scheme is to be proceeded with, as it should be. We ought to give to this country an opportunity to develop ship-building on a large scale, and we should also deal severely with alleged patriots such W. R. Carpenter and Company, the Colonial Sugar Refining Company and companies that could be mentioned, which, while making their money in Australia, purchase the ships they require- overseas. These are the organizations that 1 would have in mind when an endeavour is made to check profiteering. In the first place, it is claimed by those interested in the industry that the range over which this bounty is to be granted is inadequate, as the figures supplied ‘by the Customs Department show that the majority of the vessels imported and registered here between 1932 and 1938 exceeded 1,500 tons register. The second feature is that it was also” proposed as part of the scheme, to admit from the United Kingdom, free of duty, and at 15 per cent, from foreign sources, machinery, boilers and auxiliaries required in the construction of vessels eligible for the bounty, and to fix the rate of duty on vessels of the type eligible for the bounty at British preferential, free and general tariff, 15 per cent. It is claimed that the removal of the protection will do much to neutralize the effect of the bounty.

I suggest that shipbuilding is a means by which we can help to make Australia self-contained and able to defend itself. Last week I asked whether it was a fact that land had been purchased from certain estates at Wagga Wagga for the purpose of a flying school for the Royal Australian Air Force. I asked for the names of the owners of each block, the original prices asked by the vendors, and the prices finally agreed upon. The total price asked was £19,000, and the land was finally purchased for £12,000. That figure works out at £16 an acre, and furnished further evidence of how patriots behave in a national emergency. The Government has the power under the law of eminent domain to acquire the use of land at a time of national emergency and to pay the owners a peppercorn rental.

Senator Foll:

– The owners have been making their living off that land.


– If the Minister wishes to argue that the land is worth the price agreed upon, I ask how much added value has been given to it by reason of governmental expenditure on the Burrinjuck Dam. From day to day and from year to year, the party opposite continues to grease the fat pig. Money is expended to increase the value of a national asset, and the profits are allowed to go into the pockets of private exploiters.

At an earlier stage of my remarks I intended to refer to an action on the part of the Government which has given me great satisfaction. Although I saw displayed a full-page advertisement in the Sydney Morning Herald showing that the Prime Minister’s slogan was “ Business as usual ‘’, some of us were staggered when we discovered that 180 single men in Canberra had been discharged because of the need to conserve all money for defence purposes. I am glad to be able to announce that other arrangements have now been made, and that these men will be put back into employment, and kept on full time until Christmas. That is an action which the Opposition appreciates.

Should not the burden of financing the war be accepted willingly and graciously by those who will receive the greatest protection during the trying years ahead? I say definitely that those who will receive the greatest protection are those who have the most valuable assets to protect. Members of the class which the Opposition represents in this chamber will probably be asked, although I hope not, to give their lives in the defence of their country. They will do that willingly, if necessary, for in no country will the young and middle-aged men respond more readily to the call of the nation in its time of need - and voluntarily at ‘that - than in Australia. I am not unmindful of the fact that among the number will be many who cannot be classed as wage workers, but 75 per cent, or 80 per cent, of them will be of the class that has no income other than a weekly wage. Admittedly, we have something very valuable at stake, because our liberty and freedom are threatened; but, under existing conditions, even our liberty is being slowly reduced to a negligible quantity. I realize that I have the liberty to express my dissatisfaction with economic conditions, and that if I stand upon a soap-box and do so I shall not, in ordinary circumstances, be interfered with. [Leave to continue given.”] As a boy I knew something about the Irish Coercion Act. In those days we regarded that as the most savage menace to human liberty ever conceived; but it is an innocent document compared with section IS of the National Security Act, which was passed by this Parliament last week - by means of the “guillotine”, too. The Government should have been ashamed to take the power conferred by that measure. It enables the Executive to abrogate any law on the statute-book. The measure was passed in this chamber by eighteen votes to fifteen. By the slender majority of three, an act was placed on the statute-book under which the Government can take from a citizen his electoral privileges or his right to speak as I am speaking this afternoon. The Government is prepared to take away the valuable heritage of liberty from those who may be asked to sacrifice their lives. The Opposition does not cavil at the proposed expenditure for defence purposes - it has not done so at any stage - although it may offer criticism of the way in which some of the money is proposed to be expended. We say that the Government should know what is the best thing to do in the circumstances, but we also contend that the expenditure should be subject to review by the Parliament, and, therefore, we ask that the Parliament should be kept in session. We are faced to-day with a budget which the author himself admits is only tentative, and will have to be reviewed from time to time in the light of events overseas. That is a further reason why the Parliament should continue in session.

I protest against the way in which development in Canberra is to be held up because of the war. The Eight Honorable S. M. Bruce, who is not a Labour man, stated at Geneva about three years ago that the problem of defence was inextricably bound up with that of social services. If the Government intends to shut down all other activities on account of the increased need for defence expenditure, if it is prepared to expend money lavishly for purposes of destruction without coincidentally making money available for constructive works, it will reduce, not only the morale of the people, but also, finally, their physical capacity to defend this country efficiently. Nothing should be permitted to prevent the development of Canberra, and the Government should not fail to put into effect in the Australian capital city the Prime Minister’s slogan, “Business as usual”. I always appreciate the leading articles in the Canberra Times. Apparently they have not yet been censored, and I think that they are more honest than those of most other newspapers. Yesterday this journal made the following statement in its leader: -

In any purpose of conducting the war with Commonwealth control situated in both Melbourne and Canberra, there is danger. The promptest steps must be taken at whatever cost to locate at Canberra the heads of every service department. The actual work of departments may be capable of being carried on by decentralization of staffs, but it is imperative that every responsible officer whom the Government may desire to consult shall be at the Seat of Government ready at every hour of the war. We must have maximum organization in Australian Government and there is no room for any possible weakness.

If I have attempted to do anything this afternoon, I have tried to reveal weaknesses, and to have them remedied, if possible.

I now desire to review the financial structure in Australia, and to show how it. operates, because it is a most ingenious and insidious device. The Government of the Commonwealth is represented on the Australian Loan Council, and it also appoints the Commonwealth Bank Board. The Loan Council consists of the Premiers of the various States sitting in con- ference with a representative of the Commonwealth Government - usually the Treasurer. The ‘States say what sums of loan money they require in order to maintain their usual works programme and, as far as possible, reduce unemployment to a minimum. There are also semigovernmental instrumentalities which go upon the loan market without ..the permission of the Loan Council, although their intended borrowing is reported to the council. When the Commonwealth Bank Board decides that the Loan Council shall not have all of the money for which the State Premiers ask in order to carry on their normal activities, all that the Loan Council has to do, and does, is to tell the Bank Board how much of the money it will make available is to go to each of the States. I make the promise now that if the Labour party ever has an opportunity to change this state of affairs - and I believe that that time is not far distant - the Bank Board will not last 48 hours. We shall not have a financial oligarchy dictating to the various parliaments and governments and to semi-governmental instrumentalities as to how much money shall be made available to them. At the moment the policy of the Bank Board is to make money available almost exclusively for defence purposes.

Senator McBride:

– There is a loan programme of £41,000,000, in which the States will participate.


– But the capacity of the governments of the States to carry on their normal activities is being restricted, and the excuse is given that, as far as possible, only works having some relation to defence needs must be financed. M;* argument is unimpeachable, because the Premiers of the respective States have gone back from the meetings of the Loan Council downhearted. The Government seems to fail to realize that, if all ordinary public activities are starved for finance, the nation cannot be adequately protected.

The Labour party has been challenged because it has refused to join a national government. We have given our reasons for taking up that position. Our reasons have been plainly, definitely and honestly stated. We declare that we believe that we can better serve the Government and the nation in this, our hour of trial, by remaining a separate entity, giving, as far as in us lies, intelligent consideration to measures that come before us, and constructive criticism if we think criticism is desirable.

Let us now look at something else that is going on in this Parliament, and in which Senator Dein and his friends are very deeply and seriously involved. Let us look at the sordid struggle that has been going on for months between the Country party and the United Australia party for portfolios in the Government.

Senator Dein:

– There is nothing sordid about it


– We of the Labour party said that we would not join the Government because we believed that we could serve the Commonwealth better as an independent opposition. What did some members of the Country party say ? They said, “ We will not take part in the government of this country except at our price, and our price is three seats in the Cabinet “. That is the attitude of the “ patriotic “ Country party in this crisis ! These are the men who, on occasions sneer at Labour members of this Parliament and dare to question our. loyalty and doubt our patriotism. Does any one believe that in the Labour party there are not men who feel that they have the ability and qualifications to become Cabinet Ministers and discharge the duties of that high office with distinction to the party and satisfaction to the people? But, as I have said, we believe that we can better serve the nation by remaining the official Opposition in this Parliament. For this decision we are twitted with lack of patriotism, and our attitude to defence is questioned. While all this is being said of Labour members in this Parliament, in another part of this building a sordid intrigue is going on day and night. When the telephone rings members jump. Those who are afraid of the sack want to know what is happening, and those who are hopeful of promotion are anxious to know what the ring means. This, I repeat, is a picture of the sordid struggle that it going on while the guns are thundering almost at our gates, while the flags are flying, and while an appeal is being made to young people to enlist and protect this nation. When we realize all that is going on we feel ashamed, but it makes us prouder of our decision to resist inducements to become members of such a government.

Senator DARCEY:

– I congratulate my leader (Senator Collings) on the capable review which he has just given us of the financial position of Australia. I have on other occasions referred to the extraordinary methods adopted by the Government for the purpose of raising money. I do not know whether some honorable senators realize even now that the financial system to whichthis Government seems to be committed for the raising of money for war purposes will cost the people of this country 4½ per cent., whereas the methods which I have so consistently advocated in this chamber would enable the Commonwealth to get all the money that it requires free of interest.

Senator McBride:

– The honorable senator’s leader is not in agreement with him on that point.

Senator Collings:

– We do not stand for all that Senator Darcey advocates.

Senator DARCEY:

– It is true that my leader has said that he does not follow me all the way along the path to financial reform, but I feel sure that there is not more than 3d. difference between us in our views on the system of public finance.

The Prime Minister (Mr. Menzies) declared in the House of Representatives last week that the Commonwealth Bank was functioning splendidly as a central bank. I wonder if many honorable senators remember the precise purpose for which this bank was established. It was created for the purpose of functioning, not in the interests of the private banks, but inthe interests of the people of Australia.

In my first speech in this chamber, I described the banking legislation introduced by the Bruce-Page Government in 1924 as the greatest political treachery that was ever perpetrated against the people of Australia, and I had the pleasure of repeating that statement to Mr. Bruce not so long ago when he was in Hobart. I have made frequent references to the report of the Royal Commission on

Banking and Monetary Systems. That commission was appointed by the late Mr. Lyons in fulfilment of a promise which he gave to the people of Australia in a speech delivered at Deloraine in Tasmania. He said that if his Government were returned to power, it would appoint a commission to inquire into the banking system. The appointment was made about eighteen months later, and when the report of the commission was presented, Ministers got the shock of their lives. They did not believe for a moment that a commission presided over by a judge of the Supreme Court of South Australia would reach such a conclusion as that contained in paragraph 504 of the report to the effect that the Commonwealth Bank could lend interest-free money to the Government, and that if there arose a difference of opinion between the Bank Board and the Ministry of the day, the Government, being the Executive of Parliament, could direct the bank to give effect to government policy. Why does not the Government adopt the recommendation of the commission ? I have mentioned this report on several occasions and I regret to state that my remarks have, for the most part, been received with jeers from those honorable senators who lack knowledge of the effect of the present system of finance on the people, and apparently have no desire to learn.

In 1936, the total income of the Commonwealth was about £90,000,000, of which £61,000,000 was required to pay interest on past loans. How long can we continue at that rate? Mr. Spender, the Assistant Treasurer, in a statement which was reported in the Sydney Morning Herald in July, admitted that the Commonwealth debt had increased by £19,000,000 over the total of the previous year, and that the only way in which the Commonwealth could carry on was by continuing to borrow for its defence needs, which means, of course, continual increase of taxes in order to meet the charge for interest on the borrowed money. We have been told that it is proposed this year to raise an additional £6,000,000 by loan to meet defence needs. There are in this country very many wealthy men earning big incomes, but it will be found that as individual incomes increase, so also do in- dividual expenditures. Consequently, although tens of thousands of people in Australia may be in receipt of large incomes, many are living up to, and, perhaps, beyond their incomes. Last year there was an increase of 15 per cent, of the tax on incomes from personal exertion. The budget this year provides for a further increase of 10 per cent., making a total increase of 25 per cent, in two years. The increase this year will mean to some taxpayers more than 10 per cent, because they will be in the higher range, and the rate of tax will be higher. In some cases, no doubt the increase in two years will be more than 25 per cent.

It is worth remembering that a government cannot borrow money from the people without decreasing their purchasing power. It is also an axiom in economics that prices of commodities are governed by the volume of money in circulation. If there is not an adequate supply of money in the hands of the people, prices for commodities decline and then follows business regression.

This year the Government is budgeting for an expenditure of slightly over £100,000,000. The defence expenditure may rise to that amount ; it certainly will not be less than £70,000,000 or £80,000,000 before the war is finished. Consequently, the tax hurden will be greatly increased, and with disastrous results to business. The method to be employed to raise this money is of supreme importance. It is a fundamental principle in finance that banks do not lend money. That is not their province. Mr. Hawtrey, a former secretary of the British Treasury, in an article in the British Encyclopaedia Britannica on banking, states that banks are institutions for the creation of credit. He states further that they create credit out of nothing.

I have experienced a great deal of difficulty in obtaining from Ministers answers to questions on this phase of banking. Not long ago I asked what proportion of the recent loan of £8,000,000 floated in the Commonwealth was subscribed by the private banks, and I was told that the amount was £3,750,000. In other words, the private banks were allowed to create credit which cost them nothing. They did not lend real money to the Government.

Senator Allan MacDonald:

– Private banks sometimes lend gold.

Senator DARCEY:

– No.

Senator Allan MacDonald:

– The honorable senator has something to learn.

Senator DARCEY:

– The only gold ever lent by the Bank of England to the British Government was an amount of £12,000,000 in 1694.

Senator Allan MacDonald:

– I am talking about the Australian banks.

Senator DARCEY:

– Five of the Australian trading banks are British owned and the bulk of the dividends go out of Australia.

Some people appear to be surprised that the- banks do not pay bigger dividends. No doubt they are ignorant that the rate of dividend is a matter of banking policy, which is determined by the directors. They are unaware of the “rigging” that goes on in the share market, and that banks are able to place hundreds of thousands of pounds to secret reserves without disclosing this fact in their balance-sheets, thus making it impossible to ascertain definitely what profits are made.

Senator Dein:

– The honorable senator ought to be able to find out.

Senator DARCEY:

– I gave the honorable senator an hour and a half of my time on the train one night explaining to him some of the intricacies of the present banking system. Apparently it was time wasted. The honorable gentleman is merely an interjector; he is without a constructive idea.

A few years ago the people of Western Australia carried a referendum in favour of secession from the Commonwealth. The former Prime Minister (the late Mr. Lyons) visited Perth about that time, and in an address to the people he told them that if Western Australia seceded from the Commonwealth it would lose the Commonwealth Bank, also that if it had not been for the Commonwealth Bank and the national credit which stood behind it, the private banks would have been obliged to close their doors during the depression. Six weeks later . Mr.

Lyons was in Sydney, and in an address at the Royal Show luncheon he declared that his Government stood four square behind the present banking system, adding that but for the assistance given by the banks during the depression, there would have been widespread unemployment in Australia.

In December last I. asked if an opportunity would be given to honorable senators to discuss the report of the royal commission to which I have referred, and I was told that there would be a chance before we adjourned for the Christmas recess. That promise was not fulfilled. I emphasized that the commission, in one of its findings, declared that if at any time there arose a difference of opinion between the Government and the Commonwealth Bank Board as to the financial policy to be pursued by the bank, which the present Prime Minister says is a central bank, though it is nothing of the kind, a free and frank discussion should take place between the Government and the board. Should their differences still be irreconcilable the Government could take the full responsibility of instructing the board as to the policy it should pursue. Without any new legislation at all, the Government has the power to instruct the Commonwealth Bank to issue sufficient money for national defence, free of interest. Why is that not done? I have challenged the Government over and over again to controvert the statements that I have made regarding the finances of Australia, but no one has accepted the challenge. Instead, I get only inane interjections from one who was tutored by me and, therefore, should know better. Unfortunately for the good of Australia, the Senate, which should be a States House., is a purely party House. The function of this chamber is the review of the legislation brought here from the other branch of the legislature. Only if that legislation is in the interests of the people of Australia, should it be passed, and become the law of the land. No member of the Senate has any obligation to vote for a measure merely because it has passed through the other chamber; yet that is what happens time after time. The Senate is not discharging the functions intended by the framers of the Constitution.

Senator Dein:

– The Opposition votes solidly as a party on most measures.

Senator DARCEY:

– All governments, both Commonwealth and State, are increasing taxes. The taxpayers of New South Wales are complaining, and the Premier of that .State says that he has not been given a chance. Every month the number of unemployed persona in New South Wales is increasing. I was glad to hear the Leader of the Opposition (Senator Collings) say that action had been taken to re-engage men in Canberra whose services had been dispensed with, notwithstanding that 300 more houses are needed in the city. The royal commission appointed by the Government reported that the ‘Commonwealth Bank could issue as much money as it liked.

Senator Dein:

– The report of the commission does not say that.

Senator DARCEY:

– It does. The fact is that banks do not lend money; they only create credit. The amount of credit is limited by their deposits; they can lend eight or nine times the amount deposited with them. When a loan is floated . by the Government, no money comes to the Treasury. Even if the banks put in £3,750,000, that money does not go to the Treasury. It is not money, but merely bank-created credit. All that the Government gets is the right to draw cheques against the banks. The banks do not lend any money, for the good reason that they have not more than 2s. in the £1 to lend. When challenged, the banks say “ Look at the money invested by the shareholders “. Andrew Mellon was considered to be the third richest man in the United States of America. When he died, he left £48,000,000 sterling, all of which he had made in his lifetime. He had a son in the Hoover Administration - I think that he was Minister for Commerce. The son was also a banker. The Government of the United States of America assessed his income at #600,000, and when he protested, the case went to the court. The Attorney-General, who appeared on behalf of the Government of the United States, said that he understood that the greater part of the income in question was made out of the bank, and. asked what was the paid-up capital of the bank. That question was a poser, but as the witness was on oath, he had to answer it. He replied that his bank had no paid-up capital other than his father’s good name. Those who understand banking, as I claim to do, know that when he opened his bank, all that he did was to ask for deposits. The name of Mellon was a name to conjure with.

Senator E B Johnston:

– A hank cannot be started in Australia under those conditions.

Senator DARCEY:

– A bank cannot set up in business in Australia unless the other banks let it do so. Even if a company with £10,000,000 proposed to establish a bank, it could not do so unless the other banks agreed to clear its cheques. A firm from the United States of America which desired to establish a bank in Sydney was unable to do so, because the other banks announced that they would not clear its cheques. The same thing happened when the Commonwealth Bank was established. For a time the other banks would not co-operate. Eventually, the Bank of New South Wales agreed to clear the cheques of the new institution and then the Commonwealth Bank was able to function. The existing banks are not keen on admitting competitors into the banking business. What happens when loans are converted? One big transaction which was undertaken by the High Commissioner in London on behalf of the Commonwealth, cost this country nearly £3,000,000 for commission. Every loan conversion represents a huge sum to the underwriters. The cost of raising loans is tremendous. I have previously told the Senate what happened when Mr. Higgs was Treasurer of the Commonwealth in 1916. He wanted to raise a loan of £4,000,000 in London, and approached Nivison and Son in connexion with it. That finn, which had been Australia’s London brokers for a number of years, advised that the loan be issued at 3^ per cent, at £99. Fortunately, Mr. Higgs had some backbone, and he told Nivison and Sons that the loan was to be issued at par. His decision meant that that firm did not make a profit of £40,000 which it anticipated. I have stated these facts before in this chamber and they have not been denied. Mr. Higgs is still alive in Melbourne, and can substantiate what I have said. We were told that the loan of £6,000,000 raised in London this year was issued at £98 10s. That represented a loss of £1 10s. on every £100 raised. Most of that loan was left to the underwriters, the reason given being that Australia’s credit on the British market was low, but, in fact, the underwriters were glad to get Australian securities at £98 10s. for every nominal £100. On a loan of £4,000,000, a discount of £1 means £40,000, and in addition there are flotation charges. I told honorable senators last year that the raising of that loan through Nivison and Son instead of through the Commonwealth Bank meant that Australia lost £774,000, which was paid in commission. The flotation costs were £3 7s. 5d. per cent. Nivison and Son underwrote the whole amount; but when they put it on the London market there was an immediate appreciation of 5s. per cent. That is the kind of finance that the present Government stands for. It will not even consider any other method. I ask it to do so. As I believe that it is the duty of honorable senators to support only those measureswhich are financially sound, I distributed to each of them a copy of a book entitled Money.

Senator E B Johnston:

– I have read the book.

Senator DARCEY:

– This is a matter of prime importance, because we cannot adequately defend Australia by borrowing money at 4 per cent. That interest charge represents an intolerable burden on the taxpayers of this country for which there is no necessity. Why should we not use the national credit, as Hitler did two years ago? In fact, it was the use of the nation’s credit and the money that he obtained from the Bank of England that made the rearmament of Germany possible. Hermann Bergmann, an eminent economist, said that if it had not been for the deliberate debasement of the German mark, dictated by high finance, which brought about the degradation of the German people, there would have been no basis for Hitlerism., and the present upheaval would have been avoided. I have said before, and I repeat now, that governments do not govern. Lenin was able to finance the Russian revolution, which cost 30,000,000 Russian lives, because of an arrangement with Kuhn Loeb and

Company, the New York bankers. There was a time when a revolution could be started fairly easily, but a revolution on the scale of that which took place in Russia needs money. The authority for my statement in relation to the Russian revolution is a report issued to the Government of France by the secret service of the United States of America. The French Government lost hundreds of millions of francs by Russia’s repudiation of its debts after the revolution. As payment for its assistance in the revolution, the firm of Kuhn Loeb and Company was given the sole right to finance Russia’s “ five-year plan “ which has since developed into a ten-year plan, and will develop into a fifteen-years plan. That firm has the Russian Government in its grasp. Some time ago when it was suggested that a pact would be made between Russia and England, I said that no such pact would be made, because Russia would prefer a coalition with the strongest government under the thumb of high finance. I” have also quoted in this chamber the opinion of Gustav Cassel regarding the present financial condition of the world. It is well known that the only way to start a depression is to call up overdrafts and refuse credit. The banks have the sole right to control credit, and 99 per cent. of the world’s business is done on credit. They determine how much credit shall be released; and prices are determined by the amount of money in circulation. The banks have the power not only to seize property, but also to destroy prices. In 1924 the Commonwealth Bank financed the primary producers of Western Australia, but in the following year it cost £7,000,000 more to ship produce from Western Australia to England. That shows how we are in the grasp of the financiers and proves my assertion that the Government does not govern. There are in this Parliament 110 men who think that they are governing Australia, but we on this side know that there is a higher power which is actually in control. Some timeago when there was trouble in financial circles, the then Treasurer (Mr. Casey) found it necessary to consult with the banks. They told him what they wanted, and he complied. Under the present system that is inevitable. If the banks will not lend the money, where can money be obtained ? When we float a loan of which only oneeighth is subscribed by the public, we cannot carry on if the banks do not put up the remainder of the money. Under the orthodox system of finance, governments are obliged to be continually borrowing. That is why our national debt to-day amounts to the huge sum of £1,200,000,000. The banks hold the whip over governments. Why does not this Government use its power under the Constitution to raise the money it requires for defence through the Commonwealth Bank by utilizing the national credit? It need not .borrow from the banks, when it has behind it the national credit which is estimated at £7,000,000,000. Why should we not utilize that credit? The Premier of Tasmania, Mr. Dwyer Gray, told the Premiers Conference last year that the Commonwealth Bank could issue £100,000,000 free of interest to the Commonwealth Government if the latter wished it to do so. Mr. Dwyer Gray was then Treasurer of Tasmania, and, holding such a responsible position, he would not make such a statement unless he knew what he waa talking about. I am getting tired of speaking in this strain to honorable senators. Some of them are inclined to smile at me, but this is a serious matter not only to me but also to the taxpayers of Australia. As representatives of the people we must protect their interests. I have shamed many people into doing their duty, but I hope I shall not be obliged to shame the Government into protecting the taxpayers in the raising of this money for the defence of Australia. Were I to continue for another hour on this subject, I doubt whether I should convince honorable senators opposite. I realize that in this chamber I am up against the conservative mind, and nothing hurts the conservative mind so much as a new idea. It gets into a groove and follows that groove to perdition. If this Government persists in its present groove it will lead Australia to perdition. In my first speech in this chamber, I quoted George Bernard Shaw’s definition of political economy: “Political economy is the art of spending the nation’s income in such a way as will bring happiness and prosperity to the greatest number of people “. According to that definition it cannot be said that this Government is working on sound lines. It is doing the greatest good for the smallest number of the people, whilst poverty and degradation is the lot of the greatest number. Hardly a health officer in Australia has failed to draw the attention of the authorities to the evils of malnutrition among our children. Let us i see what is done under the present economic system. In the United States of America, surplus milk was poured into rivers in such quantities that the fish were poisoned, and producers were penalized for growing more than a certain quantity of foodstuffs. The reason for these restrictions was that the purchasing power was insufficient. For how long will this Government stand for that system of economics? Twelve months ago I predicted that, the present orthodox system of finance would result in a war which would probably spell the destruction of our civilization. Unfortunately, that prediction now appears to be coming true. To-day powerful nations are at war. In view of these facts shall we still stick to the orthodox system of finance? Only a year ago the Prime Minister of Great Britain, the outstanding leader of the British Empire, on which the sun never sets, was forced to go on his knees at Munich to Hitler and beg for peace. Under such a system as the present we shall again be reduced to similar straits. I say without reservation that if the Government persists with the present financial system it will bring ruin to Australia. Nor will it be able to defend Australia adequately, because it will not be able to secure sufficient money to do so. Yet tomorrow, if it wished it could secure through the Commonwealth Bank £100,000,000 free of interest for defence purposes.

Senator Dein:

– Why stop at £100,000,000?

Senator DARCEY:

– By utilizing the national credit through the Commonwealth Bank, the Government could raise £200,000,000. Let us examine financial transactions under the present system. When the Government pays a sum of £20,000 in respect of a contract it simply writes out a cheque for that amount. No. money changes hands.

Senator Dein:

– Is not the cheque cashed ?

Senator DARCEY:

– Yes, but does a man collect the £20,000 and carry it round in his pocket? He deposits the cheque in the bank, which knows very well that he will not collect the money; there is no money in the transaction.

Senator Dein:

– That is nonsense; I have cashed many cheques.

Senator DARCEY:

– I do not say that small cheques are not cashed, but in respect of big sums, the depositor’s account is merely credited with the amount of the cheque. That is why I say that the banks do not lend money; they do not need to. This system of finance was inaugurated 200 years ago. Professor Reddaway of the Melbourne University, an authority on finance, who at one time was employed by the Bank of England, has said that when the Government floats a loan in England the trouble is not to get the money but to get into the loan. For instance, if a loan of £20,000,000 were to be opened to-morrow, the underwriting bank or firm would take up as much of the amount as it wanted and would telephone to allied financial institutions and brokers to ascertain how much each would take up. The loan would be subscribed in half-an-hour. A group of financiers on the London Stock Exchange who are known as “stags”, and who apply under different names as subscribers to the loan, is responsible for this system. In spite of these facts we are often told that the Government cannot get money for defence. On this subject, I have quoted the highest financial authorities including Gladstone and William Jennings Bryan. I am not merely giving my own views on the matter. However, I do not seem to be convincing honorable senators opposite.

Senator Dein:

– Nor any of the honorable senator’s own colleagues.

Senator DARCEY:

– The retort has been made to me frequently, but I pointout that all I have said is in agreement with the first plank of the Labour party’s platform. For a long time I was doubtful of converting any members of this Parliament, but a week ago I noticed a report in the Canberra Times that the honorable member for East Sydney (Mr.

Ward) was stealing my thunder. No body of men can disregard the truth. Ignorance is some excuse but once we realize the truth we are bound in conscience to act upon it. In this respect, it would appear that this Government is determined to use Parliament for a purpose for which it was never intended. Any tax levied in order to pay interest on government loans will be paid in perpetuity. People have said to me that we shall never be able to pay off our national debt. Similarly, it has been said that all money borrowed must be repaid. But the point is that no money is involved in this kind of finance. The Royal Commission on Monetary and Banking Systems, for instance, reported in 1936 that of a revenue of £90,000,000, the Commonwealth Government had to pay £61,000,000 in interest. All the banks want us to do is to borrow money, and to pay interest. That was the basis of Sir Otto Niemeyer’s mission to this country some years ago. He told us that we should have to take up another hole in our belt because we had a large bill for interest falling due. When the Scullin Government assumed office it found an empty treasury and an adverse trade balance ‘of £30,000,000. Furthermore, the London money market was closed to the Commonwealth. Such circumstances account for the origin of the sales tax by which to-day we are raising £10,000,000 annually. It must be clear that we cannot carry on under the present financial system except by continually raising loans and continually raising the taxes in order to be able to pay the interest. In New Zealand the Savage Government has a Minister to socialize credit. However, in order to raise money to wipe off the indebtedness incurred by its predecessors it recently sent its Finance Minister, Mr. Nash, overseas to convert a loan of £16,000,000. In view of the Savage Government’s unorthodox policy - it purchased the Central Bank in New Zealand - that accommodation was refused. Some years ago Sir Otto Niemeyer and Mr. Guggenheim Gregory suggested that the Government of New Zealand should have a central bank. The Government agreed to put up £1,000,000 of the capital whilst £500,000 worth of shares was to be sold to the public, which meant the hanks. Under the original arrangement the Government was given no control over that hank. It was even decided that the manager of the bank, who was appointed at a salary of £10,000 a year, was to be exempt from income tax. That episode gives an indication of the terms which the bankers can impose on governments. It is obvious that the deeper one gets into debt the less liberty he enjoys. That is true of governments as well as of individuals. If a business man gets into debt his wholesalers eventually tell him what he shall buy and from whom he shall buy. Should he refuse to come to an arrangement on such terms he will be forced into bankruptcy. I repeat that there is only one governing power in the world. It is the unscrupulous money power which has brought us to the present state of affairs. In the last war the chief financial adviser to the Kaiser was Max Warburg, whilst his brother Paul was financial adviser to President Wilson. Both were partners in the firm of Kuhn Loeb and Co. Their father was President of the Federal Reserve Bank of the United States of America. Thus, whichever side won the war they were sure of being on the winning side. Up to 1870 no government in Europe could wage a war without the consent of the Rothschilds. When Germany imposed an indemnity of £200,000,000 on France in that year, the Government had to use the Rothschild organization in order to raise money on the first bonds issued by a government. Governments cannot carry on unless they are prepared to borrow continually. Thus they place themselves in the hands of the bankers, who are the people who really govern. To-day a call is being made to the democracies to fight Hitler but in fact there is no democracy. I again urge the Government to finance its defence expenditure through the Commonwealth Bank by utilizing the nation’s credit.

One evening shortly after the Senate adjourned I met in the Kings Hall an honorable senator opposite, who, in the course of conversation said, “When are you to give us another talk on finance”? I replied, “Are you not aware that the chamber of which you are a member has just passed a bill to appropriate £10,000,000 for defence purposes, and on it I spoke for 25 minutes”. He informed me that he must have been playing billiards. I am now looking at the honorable senator who made that admission. That is an indication of what is going on.

Senator Dein:

– I was not the man.

Senator DARCEY:

– The honorable senator had his lesson on one occasion when travelling between Canberra and Goulburn, but he does not appear to have benefited. Senator Dein entered the chamber a few days later in company with the gentleman who was in the billiard room while £10,000,000 was being appropriated on which 4 per cent, will have to be paid-

Senator Herbert Hays:

– The honorable senator should not be personal.

Senator DARCEY:

– I am making a truthful statement. Are honorable senators opposite aware that the nation is at war?

Senator Cooper:

– Listening to the honorable senator, one would not think so.

Senator DARCEY:

– As this is the first occasion on which Senator Cooper has interjected when I have been speaking T shall deal leniently with him. I never interject when another honorable senator is addressing the Senate, because when a senator receives the call he should be permitted to speak without interruption. If I ever interject it will be to correct a misstatement or to enlighten honorable senators. I have spoken at length and perhaps with some heat because we are at war”. It is no laughing matter, particularly as the taxpayers will have tei pay 4 per cent, in perpetuity on £100,000,000 when there is a great source of wealth which could be tapped if the Prime Minister would only act. The Government has done its best by making the Commonwealth Bank a central hank, but it has not quite succeeded. A few months ago when I met the present Minister for Supply and Development (Mr. Casey), who was then Treasurer, on the train, I said, “You have endeavoured to raise £9,000,000 by loan but you have obtained only £4,800,000. If that amount had been real money subscribed by the public and lodged in the Treasury you could have advanced ?40,000,000 in the form of credit for the benefit of the Government “.

Senator Dein:

– That is not done.

Senator DARCEY:

– No, because the Government will not do it. If the Commonwealth Bank creates money it is all right, but if it issued ?50,000,000 of credit that would be denounced as inflation. The word “ inflation “ is used ruthlessly, but it should be used reasonably and only in conjunction with two other words, “ of prices “. If there is no increase of prices, there is no inflation; that is axiomatic. I was trained in economics by men who are now holding high positions.

Senator McBRIDE:

– But they later disowned the honorable senator.

Senator DARCEY:

– When I was being trained by Professor Copland he was receiving ?600 a year, but he has now been appointed to a position under the Commonwealth Government at ?1,750 a year. He has benefited under the orthodox system; but I have told him, as I have told others, that he is willing to teach a lie for a living. No one has been able to deny the accuracy of my statements with respect to finance. If I have misled the Senate honorable senators opposite should prove where I am wrong. I was told by one honorable senator that I came here to teach them. It is fortunate that I studied political economy before I became a member of the Senate, because the subject is not understood by honorable senators opposite. I have some very backward pupils, but I intend to persevere.

Senator McBRIDE:

– The honorable senator has not even convinced those with whom he is associated.

Senator DARCEY:

– Honorable senators on this side of the chamber are allowed to specialize, and to speak on behalf of the party.

Senator McBride:

– The honorable senator’s leader does not agree with the views that he expresses.

Senator DARCEY:

– The Leader of the Opposition is entirely with me; in fact when he was speaking to-day, I feared that little would be left for me to say. In conclusion, I again express the hope that the Government will realize the great responsibility that is upon it. If we cannot charge world conditions to world governments, to whom can they be charged ?

Western Australia

– It is to be regretted that the budget which the Senate is now considering is”, incomplete, ‘hut in the circumstances it is quite impossible to present a complete financial statement. The budget is purely provisional because many other items will have to be included, particularly in connexion with the colossal sum to be appropriated for defence purposes, included in which must be a contribution towards the cost of an expeditionary force. According to the records published shortly after the commencement of the Great War, it would appear that a further ?10,000,000 will probably have to be appropriated to provide for an expeditionary force, such as Australia sent overseas during the last war, and I trust that the Government will not delay unduly in coming to a decision in that respect. If the indication given by the British Government be correct, that the present war may last several years, the sooner Australia realizes its responsibility the better it will be, not only for the people of Australia, but also for the Empire.

I notice that the Government propose to increase the sales tax, and in common with all other honorable senators I agree that taxes must be increased to meet our war expenditure. Foodstuffs and clothing required by the workers which are not now subject to the tax should remain exempt, and I trust that the Government will continue to exclude all those commodities required by the working man and others in receipt of small incomes. The flour, beer and tobacco taxes are sufficient commodity imposts to ‘be paid by the workers.

Senator Darcey has to day repeated his references to the brutal, fiendish banks those awful excrescences on our financial structure which, according to the honorable senator, do not render a service to any one. He speaks of honorable senators on this side of the chamber as men possessing conservative minds, but he fails to realize that we possess fair minds. He delivered a continuous diatribe about the sins of the associated banks which he says never loan money to any one, but he overlooked the fact that during the early weeks of the last war the private banks of Australia made available to the Commonwealth Government not £10,000,000 worth of credit, but gold of that value, free of interest, for twelve months. That statement is made, not on the authority of some Illinois or Chicago university professor, but on the authority of responsible Australians.

Senator Cameron:

– What authority is the honorable senator citing?


– I am speaking from memory at the moment, but I suggest that if the honorable senator will refer to Hansard published in the early part of 1914, he will find that a Labour Minister for Defence made the statement in the Senate in Melbourne.

Senator Cameron:

– Did not the banks get three £1 notes for each sovereign?


– No ; the associated banks loaned £10,000,000 in gold free of interest for twelve months, and the only security was £10,000,000 worth of Australian notes, which are only pieces of paper.

Senator Collings:

– They are just as good as sovereigns.

Senator ALLAN MacDONALD.They never have been.

Senator Collings:

– In Australia they are.


– No, nor in any other countries. Senator Darcey invited us to correct him on any points, and I submit that the correction I have made was necessary. I urge the Government to be careful, in regard to the present exemptions from the sales tax, that no undue burden shall be placed on the workers in order to meet the huge war expenditure which, I am afraid, will be greater still in the near future.

Senator CAMERON:

– Honorable senators are at a considerable disadvantage in discussing this most important subject without having reasonable time to study the case presented by the Government. I suggest that it is impossible to do justice to the budget at such short notice. One does not desire to misrepresent one’s political opponents, or to deal mainly in generalities, and it seems to me that the papers just circulated in connexion with the budget should have been placed in our hands at least 24 hours ago. The Prime Minister (Mr. Menzies), in the course of his speech, said -

I have the unhappy distinction this. year of presenting to the Commonwealth Parliament a £100,000,000 budget for the first time in the history of the Commonwealth.

That statement is misleading, because the thing that we call value is measured in terms of gold, whether we are on the gold standard or off it. If I have a sovereign, why can I receive for it £2 6s. 7d., or perhaps £2 8s. ? The purchasing power of the £1 note has been reduced 57 per cent, below that of the sovereign, and, therefore, we should distinguish between price and value if the real position is to be understood. Gold has not increased in value, but it has in price. The way in which the price of gold has soared in the last few days proves that the Government, possibly in collaboration with the private banks in England-

Senator McBride:

– The private banks have not any gold.

Senator CAMERON:

– I simply direct attention to the fact that the currency has been depreciated in value by 57 per cent. This is an expedient resorted to to-day by financiers, in collaboration with their political henchmen, to mislead the people regarding the extent to which they are being fooled, ruled and robbed, from the cradle to the grave, through the medium of manipulated currency. Actually the so-called £100,000,000 budget, measured in terms of gold, is one of between £45,000,000 and £33,000,000, as compared with the Gladstone budget referred to by the Treasurer.

Sitting suspended from 6.15 to 8 p.m..

Senator CAMERON:

– In our analysis of the currency position, stated in terms of money, we must keep in mind the value of gold, otherwise we may be misled, as a great number of people are being misled to-day. Take, for example, the attitude to the basic wage. In 1907 the basic wage was £2 2s. a week. At that time the sovereign could be purchased for a £1 note. That is to say, the purchasing value of a £1 note was equal to that of a sovereign. If the basic wage to-day were assessed in terms of gold, instead of being £41s. a week in, say, Melbourne and Sydney, it would be about £5 a week. In other words, if the basic wage of to-day had the same purchasing power in terms of gold as it had in 1907, instead of receiving £41s. a week, workers would be getting £5. The unsophisticated worker, knowing very little of the “way in which currency is manipulated - inflated, deflated and re-inflated -knowing very little of these tricks and the colossal fraud that is perpetrated by people in high responsible positions, believes that the present basic wage of £41s. a. week is nearly double what he received in 1907. There is not, on the part of the workers, the mental resistance that there would be if they had a clearer understanding of what is being done by governments and banks. But there are coming into being schools of thought, with which we are now familiar, to challenge, as never before, the present banking system and the activities of manipulators of finance. “We know perfectly well that the people are being robbed through the operation of the existing system.

Gold is the measure of value in all international trade. Recently I asked the Minister representing the Treasurer to what extent the purchasing power of the £1 note had been depreciated, as compared with the sovereign, up to date. That was a pertinent and sensible question, and merited a sensible answer. The reply which I received was in the following terms -

The sovereign has not been in active circulation for many years.

I did not ask whether it had been or not.

Any comparison of the purchasing power of the sovereign (based upon the present value of gold in terms of Australian currency) with that of the £1 note has therefore no significance.

My comment upon that answer is that either the Minister was ignorant of his own ignorance, or his answer was knowingly incorrect.

Senator Wilson:

– That does not follow.

Senator CAMERON:

– The Minister knew, or he should have known, that the purchasing power of the sovereign has significance in relation to the currency, because, as I have said, it has significance in relation to international trade. If not, why is the Commonwealth Bank mobilizing gold? And why have regulations been issued prohibiting people from holding more than 25 sovereigns? This action has been taken simply because the Government realizes that the purchasing power of the sovereign has significance. In the light of these facts, I have good reason to be dissatisfied with the answer which I received from the Minister. Misleading answers are not calculated to inspire us with confidence in the reliability of Senate Ministers.

This afternoon Senator Allan MacDonald said that during the last war the private banks lent to the Commonwealth Government £10,000,000 in gold, free of interest. When I asked the honorable gentleman for his authority he replied that he relied on his memory of the transaction in question. I have since looked the matter up and I find a confirmatory statement in Dr. Jauncey’s Australia’s Government Bank. He is a reliable authority, and I believe that what he says is borne out in Faulkner’s History of the Commonwealth Bank. This is what Dr. Jauncey says -

When the new Labour Government took office in 1914 the Commonwealth Bank authorities on 2nd October of that year borrowed £10,000,000 in gold from the banks.

Then he goes on to say -

After the banks had loaned £10,000,000 in gold they could get the benefit of the three to one provision that the liberal Treasurer inaugurated.

That is to say, the banks could get three notes for every sovereign which they lent to the Commonwealth Bank. The ordinary citizen was not so fortunate. When, as the result of the Government’s policy for mobilizing gold, he placed his sovereign on the bank counter, he received a credit entry of £1; but when he drew out his £1, he received a £1 note worth only 6s. 8d. Thus the banks benefited enormously from their deal with the Commonwealth Bank, and their transactions with the public. Insurance companies operating at the time benefited similarly.

In his budget speech on Friday last, the Treasurer (Mr. Menzies) said, among other things -

There has been a revolutionary change during the last generation in the view which prevails as to the obligations of governments towards the aged, the sick and poor. In other words, a revolutionary change in our sense of obligation for what wo call social cervices.

I deny that. I say that all that has happened is that governments in Australia, as well as in England, have stabilized poverty. There has not been the slightest revolutionary change for the better in the attitude of governments to their social obligations.

Last week, when I spoke to the motion for the printing of the White Paper relating to the war in Europe, I stated that conditions among the poor people in the “ black “ areas in England were as bad as conditions in some centres of Asiatic countries. Senator McBride interjected that my statement was nonsense, and the Leader of the Senate (Senator McLeay) asserted that I had no authority for it. I would like honorable senators to understand that I do not make statements lightly or without facts to support them. I read now from the report of a committee of inquiry which investigated antituberculosis service in Wales and Monmouthshire; this report was printed under the authority of the Ministry of Health this year: -

We measured one house. The living room was 11 feet x 7 feet x 8 feet high, and the bedroom 10 feet x 6 feet x 8 feet high. The bedroom contained two double beds. In that house up to March, 1938, ten persons lived - a man, two women and seven children. . . .

We are of the opinion that Dr. Emrys Jones did not overstate the condition of the house when he said, “I think you will agree that the overcrowding in that house was worse than anything one could find in the native quarter of Shanghai “.

This further statement is, I consider, apropos of the position in some parts of Australia : -

Forty or 50 years ago and more, the a verage country labourer would have his homecured ham hanging in the house, he cultivated a vegetable garden which provided fresh vegetables and potatoes for his family and ensured adequate supplies of vitamins. His wife prepared wholesome porridge, nourishing soups and stews. Milk was freely consumed and butter-milk formed an important, cheap and valuable food, containing as it does proteins, sugar and salts of milk, as well as being also a refreshing drink. Now buttermilk is unobtainable.. Ordinary milk is often difficult to procure in country districts and is high in price. Home-cured hams are rarely seen, porridge almost entirely neglected, and few housewives take the trouble to prepare different varieties of soups and stews so familiar formerly in Wales. Instead, the staple food is bread and butter or margarine with or without jam, supplemented by prepared foods of various kinds.

From this it will be noted that the present position of the workers in England does not compare favorably with conditions that obtained 50 years ago. In my speech I said that similar conditions prevailed in parts of Australia. I shall read from the Melbourne Age of the 15th June -

Disputing the figures contained in the investigatory report of the Education Department, (schools’ medical section) relating to malnutrition, the City Health Officer (Dr. J. Dale) said yesterday that probably nearly ten times the number of children were affected by malnutrition than the report showed. It was quite definite, he said, that more than 3.8 per cent, of children were the victims of an inadequate diet. If an additional 32 per cent, were added, it would be nearer the correct figure. The ages of the children concerned ranged between 6 to 14 years.

The table of heights and weights at the end of the report reveal the startling fact that the children of inner industrial suburbs are to-day on the average many pounds lighter and inches shorter than the children in outer suburban areas, said Dr. Dale. The parents of these children are excellent stock, so what is the reason for the “ industrial pallor “ of a large percentage of children in the inner suburbs? Are they of another race? Inquiry would show that the parents of most of these children arc on sustenance, and that their families do not get the right kind of food.

Dr. Dale occupies a responsible position, and has a reputation to maintain. He is, therefore, not likely to exaggerate. I have already quoted from the report of the select committee appointed by the Government of Victoria to inquire into the effects of malnutrition. I shall now give to the Senate some extracts from the evidence of Dr. Howard Williams relating to the Children’s Hospital, as reported in the Age of the 3rd August -

Dr. Williams went on to say that 54 per cent, of the children, and 46 per cent, of the families, attending the Children’s Hospital out-patients’ department were below the subsistence level. An accurate diet survey of children admitted to the hospital suffering with rheumatic fever showed that only 18.5 per cent, were receiving an adequate diet, and of the remaining 81.5 per cent. 37.5 per cent, received a grossly deficient diet. Many of the children attending the hospital with minor grades of ill-health were badly fed, and these children usually improved rapidly in health when given no treatment other than an adequate diet.

Rheumatic fever was a disease . in which nutritional fever played a very important part. It was a disease rare among well-fed and housed children, but was common among the poorly fed and housed classes. There was good reason to believe that the disease would cease to be a serious menace if the community in the industrial areas was adequately fed. Appreciation of the serious nature of the rheumatic fever problem would be gained when it was realised that approximately onehalf of the medical beds provided for the larger children at the hospital were occupied throughout the year by children afflicted with this disease.

Mr. Holland, M.L.A. : Do you think that adulteration of tin foods has much to do with malnutrition ?

Dr. Williams: That type of food is cheaper to buy than essential foods, such as milk, eggs and vegetables.

To the Chairman (Mr. Cremean, M.L.A.), Dr. Williams said bread and jam was the common diet for poor people, and that was deficient in several most important calorific elements. It was impossible for poor people to buy butter, eggs and vegetables.

In the face of these reports, the Treasurer in his budget speech said that as the result of the revolutionary change that had taken place in social legislation, the poorer sections of the community are being cared for better than ever before. The fact is that 50 years ago the poorer sections of the people in this country, as in England, were better fed than they are to-day.

Senator McBride:

– Nonsense!

Senator CAMERON:

– All statements of fact are nonsense to those who cannot, or will not, understand. Moreover, the number of persons permanently unemployed in Australia is greater than at any time in this country’s history. These people, who are forced to live on an inadequate diet, are expected to rear children and fight the nation’s battles. I repeat that these statements are the sworn evidence of medical men in the witness box. Surely they are better qualified to speak on this subject than is the Treasurer. There is not an atom of truth in the Treasurer’s statement.

Senator McBride:

– There is not an atom of truth in the honorable senator’s statement that people were better fed 50 years ago than they are to-day.

Senator CAMERON:

– The Assistant Minister was not in the chamber when I referred to the report on conditions in England. The honorable gentleman deliberately shuts his eyes to the facts, because he agrees with a policy of inaction.

Senator McBride:

– The honorable senator is deliberately trying to mislead the people of this country by his statements.

Senator CAMERON:

– I have cited the evidence of reliable men who are qualified to speak on the subject. I would also cite the evidence of many others equally qualified, if time permitted.

The Treasurer also told us that the flour tax had already yielded £1,809,000. That means that by reason of a restriction of their purchasing power the poor people of this country have been deprived of food to that value. Now that there is a prospect of disposing of Australia’s wheat crop at remunerative prices because of the war, the Government should abolish the flour tax which hits the poorer sections of the community severely. I trust that the Government will do the right thing.

The budget speech also contained references to the expenditure on defence. In this connexion, I enter my emphatic protest against the Government appointing men to positions carrying high salaries. To-day, I asked a question relating to the reported appointment of Professor Copland as Prices Controller. I asked whether he was to receive any payment for his services, and, if so, whether such payment would be in addition to amounts paid to him as Dean of the Faculty of Commerce at the Melbourne University, Economic Adviser to the Victorian Government, and a contributor to the daily press. The Leader of the Senate refused to answer the question, which I submit was a proper one, and should have been answered. The only construction I can put upon the Minister’s refusal to answer my question is that the Government is afraid to allow the facts to be made known. It is afraid to let the people know that certain prominent persons are capitalizing the nation’s danger in order to increase their salaries and prestige. That is a policy which cannot be justified. I admit that Professor Copland is an able man, who possibly is qualified to carry out the task that has been allotted to him, but the payment to him of £1,750 per annum for his services, in addition to other emoluments, is not justified. Other appointments have been made to positions carrying high salaries. Some of them are not justified. Some members of the Government urge the introduction of conscription in order to force men to fight merely for rations, but its political friends are appointed to positions at high salaries. In many instances the pay is more than the country can afford. I take this opportunity to record my protest, and I promise to draw attention to the Government’s action as frequently as possible.

The Treasurer also referred to the public debt, and stressed the necessity for borrowing money. I submit that there is no need to borrow money, because all the money that we need can be obtained without borrowing. The borrowing of money would increase the interest bill and make it impossible to pay to the soldiers and workers the rates to which they are entitled for services which they render. Unless there be a scarcity of material resources, there need not be any scarcity of money. As the result of the application of labour power to material resources credit can be issued. I do not suggest that this is merely a matter of issuing paper and receiving material goods in return for it. A sound monetary system for financing the whole of our defence expenditure couldbe devised on the basis that real wealth be produced to the equivalent of the credit required.

Senator Herbert Hays:

– Did not the party of Australians who endeavoured to form a colony in Paraguay some years ago try out that very scheme? The honorable senator should read Where Socialism Failed.

Senator CAMERON:

– The title of the book would cause me to challenge it because socialism has never really been tried. Where the means of production are privately owned, or monopolized, there you have capitalism; where the means of production are collectively owned by the people you have socialism. Honorable senators will realize that socialism has never been tried in this country. We do not suggest for one moment that we should merely print notes and receive in return services and goods but that is exactly what the Government is doing to-day. Were a man to forge, say, £2,000,000 worth of notes and succeed in putting them into circulation he would receive in return wealth to the value of £2,000,000, but the result so far as the community was concerned would be that prices would soar sky-high. Ultimately, the notes would not be accepted as currency, and those people who owned material wealth would be the best off and those who sold it would be the losers. However, that is exactly what the Government is doing. It has depreciated currency by more than 57 per cent. for the purpose, of obtaining real wealth for pieces of paper.

Senator McBride:

– The Government has no control whatever over the exchange rate.

Senator CAMERON:

– The Government is a party to what is being done. Mysuspicion of it in this respect is confirmed by the fact that I cannot get a clear and truthful answer to questions which I have asked on this matter. That fact is evidence to me, at any rate, that the Government is participating in one of the most colossal frauds that have ever been perpetrated on the people.

Senator Gibson:

– The honorable senator should withdraw that remark.

The PRESIDENT (Senator the Hon. J. B. Hayes). - I ask the honorable senator to withdraw.

Senator CAMERON:

– In deference to you, Mr. President, I withdraw. I know of no policy that has such an injurious effect on the people as that with which the Government isnow identified. Governments have no need to borrow money. The then Government was able to carry on during the last war for a period without borrowing because when it was unable to borrow it simply expanded credit in a ratio of 3 to 1 on the lines which I have indicated. In a booklet published recently, The Story of the Commonwealth Bank, Mr. D. J. Amos, E.A.I.S., writes-

During the war, the private banks had been granted the privilege of getting three £1 Australian notes for every £1 in gold they deposited with the Treasury, so that they were thus enabled to increase their cash reserves by three, and therefore their loans, which were based upon their cash reserves, by a similar figure. The private trading banks, I might mention, do not lend out their cash deposits at interest. They keep them to meet any demands for cashmade upon the banks, and give credit for from nine to twelve times the amount of these cash deposits. Therefore, if the private banks got £300 cash in Australian notes for £100 in gold, they could give credit for about £3,000 instead of £1,000, andso earn three times the amount of interest they were doing before - a very profitable arrangement for the private banks. ‘ The additional £2 was treated as a loan to the banks (at rates varying between 3 per cent, and 4 per cent.) and was repayable not later than twelve months after the end of the war.

The reason why the Government is so anxious that loans should be floated is that it desires to give effect to the policy of the private banks, which, as was the case in the last war, is to mortgage the nation up to the eyebrows so that they may secure to themselves the right to demand and receive a perpetual tribute. The defence policy of this Government is defence plus profits and high salaries wherever profits can be made and high salaries paid.

Referring to our present economic position, the Prime Minister, in his budget speech, said -

Although the unemployment position during the year was not all that we could have desired it was by no means as unsatisfactory as the fall in our export values might have been thought to indicate.

As the Leader of the Opposition (Senator Collings) has pointed out, the inference to be drawn from that remark is that the Government regards the unemployment position as satisfactory. In an article published in the Catholic Worker of the 5th August, Mr. H. H. Lees, who for the last eight years has been employment officer of the Trades Hall Council, Melbourne, wrote -

The number of unemployed in the State of Victoria is increasing alarmingly. Since the 18th Mardi, 1039, there has been an increase of 2,800, or at the rate of 700 per month. The total number of the registered unemployed on the loth July, 1939, was approximately 20,000. of whom about 16,000 were in receipt of sustenance. Eighty-four per cent, of those in receipt of sustenance were called upon to work in return for such sustenance.

The Commonwealth Statistician estimated that the number of males unemployed in the State of Victoria through scarcity of work was, on the 31st December, 1938, the latest date to which the figures were available, 37,503. Since that date there has been an increase of 3,000 mate unemployed, which brings the total number in the State of Victoria to-day to approximately 40,000. This figure can be accepted as the true position of the unemployed in this State to-day.

With regard to unemployed females, the Commonwealth Statistician estimated that at the 3.1st December, 1938, there were 14,215.

The average unemployed family in this State is a man, wife and two children. There are, therefore, approximately 134,216 persons in the

State of Victoria directly affected by unemployment, to say nothing of the thousands who are merely casually employed.

Mr. Lees, who is a chartered accountant, is a retired Commonwealth officer. During the last war his duty was to examine the books of shipping companies, coalmine proprietors and others with a view to discovering what profits they were making. In an article appearing in the same publication of the 2nd September, Mr. Lees wrote -

The present policy forces them (young men) into a life of idleness which must inevitably lead to disastrous results and ultimately have its repercussions upon future generations, lt is not only an act of injustice, but also indicates a lack of proper statesmanship, to place the prospective fathers of the future in such a perilous, and dangerous position. . . .

No feature of our present civilization is more alarming. Already the demoralizing effects of juvenile idleness have appeared in our midst. Juvenile crime and the break-up of home-life trace their origin to juvenile unemployment.

Very little is being done under the Unemployment Relief Act for unemployed single mcn, who constitute one of the problems of the day. There are approximately 13,000 of them in this State. The administration of the act by regulation seems to differentiate against single men adversely. It is most difficult for a single man to receive sustenance and in the matter of relief work the Government has not established a single men’s relief camp for approximately two years.

That is the present position with respect to unemployment, and the Prime Minister would have us believe that it is satisfactory. These articles are sent to any newspaper wishing to publish them, and we accept full responsibility for the statements which they contain. Every one of those unemployed persons would be in work if they could be employed at a profit; they are idle solely because, they cannot be employed profitably. It pays financiers, private banking institutions, and others to pay a premium in the form of taxation to maintain them on sustenance rather than that they should be employed. There is no scarcity of work, material resources, machinery or man-power, yet thousands of adults in every State of the Commonwealth are living in a condition of semistarvation, and children are suffering in homes and in hospitals as a result of malnutrition. This is because the Government is not prepared to re-organize the economy of the nation so that all able and willing men, and women too, can produce wealth for the nation. Because the Government will not do that, we are faced with the problem of unemployment.

Senator Herbert Hays:

– Why do not the unions establish industries?

Senator CAMERON:

– The union leaders realize that whatever is done must be done through the proper authorities. No union is in a position to undertake work of that description, and the reason must be perfectly obvious to honorable senators. The average unionist receives not what he earns, but wages based on the cost of subsistence. He has no capital, but sells his labour power in order that he may receive a wage sufficient to maintain himself and his wife and family. He has no margin. The whole of his surplus is absorbed in rent, interest and profit, and his aggregate as well as his relative wage is a diminishing quantity. The basic wage to-day in terms of gold is at least 19s. below what it was in 1907, when it was £2 2s. a week. Owing to the ingenious system under which workmen are robbed, they are not in a position to re-organize the economies of the nation on the lines suggested by Senator Herbert Hays. Realizing that, they do the next best thing and ask their representatives in Parliament to do the job for them. As a result of the experience which the workers are now gaining, the position of honorable senators in this chamber will soon be reversed, and we shall then be able to do what a Labour government is doing in New Zealand. Extension of time granted.] The statement of the Prime Minister (Mr. Menzies) on the subject of prices, like most of his statements, is not very convincing. The subject is one in which we are all interested, and it is much misrepresented. Prices in respect of commodities are the monetary expression of value and prices fall as a result of the reduced cost of production. Prices can be maintained at a high level only by restricting production or by depreciating the currency. Those controlling monopolies such as the sugar industry and the tobacco industry can keep up prices. Prices fall only where there is no monopoly control, and when there is intense competition they fall to zero. Prior to the declaration of war the price of wheat was very low; but if the production and sale of wheat could be controlled as the production and sale of sugar and tobacco are controlled, the price of wheat would not be low. There are three reasons why the price of wheat in Australia has been low. Various State governments have encouraged people to go on the land and to improve farming methods so that the cost of production could be brought down to the irreducible minimum. The next step is to eliminate the small growers and starve them out as they have been starved out, particularly in Western Australia, South Australia and Victoria. With wheat at1s. 6d. a bushel, the small growers are reduced to the level of a basic wage-earner or a person on sustenance. As a result of agitation throughout Australia, meetings were held tin various centres and the Commonwealth Government offered to guarantee to the growers 3s. 4d. a bushel, although they demanded 4s.

Senator McBride:

– The Commonwealth Government never undertook to guarantee to the growers 3s. 4d. a bushel.

Senator CAMERON:

– The Prime Minister said that it did. I do not know whether the Assistant Minister regards himself as a higher authority than the Prime Minister. Had war not been declared, the financial interests concerned would have established a wheat monopoly in Australia, and the small wheat-growers who had not already been starved out would have been bought out or given jobs where they would not cause much trouble. The Prime Minister’s statement on finance proves that he realizes the growing strength of these people who are challenging private control of banking and of our financial system generally. If the challengers constituted an irresponsible body of whom no notice was taken, the Prime Minister would not give them a second thought; but, because they are growing in strength, the Government realizes that something is fundamentally wrong. He realizes that he must say something either to placate them or to prove that he is right and they are wrong. He referred to them as the people who said that somewhere there is a hidden spring of wealth; but it is not hidden. The material resources of this country, which constitute the natural wealth of this nation, are waiting to be used. The right honorable gentleman then referred to a subject to which Senator Darcey frequently directs our attention, and cited the following paragraph in the report of the Royal Commission on Banking and Monetary Systems: -

Because of this power, the Commonwealth Bank is able to increase the cash of the trading banks in the ways we have pointed out above. Because of this power, too, the Commonwealth Bank can increase the cash reserves of the trading banks; for example, it can buy securities or other property, it can lend to the governments or to others in a variety of ways, and it can even make money available to governments or to others free of any charge.

His contention is that that statement has been torn from its context, but I do not agree with him. When we say that wo can make money available free of cost we mean, not that it should be given away, but that it should be at the cost of administration to those who require it.

Senator Dein:

– Lent to whom?

Senator CAMERON:

– To those who can offer the necessary security and who can satisfy the lending bank that it will be used in a proper manner and repaid by the borrower. The Prime Minister has said that, although war has been declared, business should be carried on as usual; but I contend that that is impossible and that conditions have changed. Many men will go out of business, and those engaged in the import trade will be unable ito employ their usual staffs. The Government must be prepared to deal with the altered situation, and, as the number of unemployed increases, the Government should help them to secure employment. There is work to do for all, and all should be given the opportunity to do it.

Last year I referred to the unfortunate position of the South African war veterans, and I regret that the efforts of Senator Brand and others to have the grievances of those men redressed have had no effect. Regarding this matter, a deputation waited upon the Minister for Repatriation (Mr. Harrison) on Thursday, the 8th June. The various States were represented as follows: - Queensland, Mr. George Lawson, M.P. ; New South Wales, Major Coulter and Mr. J. Jennings,

M..P. ; Victoria, Senator Brand, Senator Cameron, Mr. M. Blackburn, M.P.; South Australia, Senator Brand; Western Australia, Senator Allan MacDonald ; Tasmania, Colonel G. J. Bell, M.P. The Federal Executive of the Returned Sailors and Soldiers Imperial League of Australia wa3 represented by Mr. A. E. Jackson. The object of the deputation was to urge the Government to grant service pensions to South African war veterans on the same conditions as they are granted to certain ex-service an en who fought in the Great War, and to provide medical treatment for Australian soldiers who are receiving British pensions because of their service in the South African war. On numerous occasions members of both branches of the legislature have pressed for the granting of service pensions to approximately 250 South African war veterans who are distributed throughout Australia, and are in necessitous circumstances. They are unemployable, because of advanced age and mental and physical incapacity due to the rigours of active service. They are a lost legion.

During the South African war, which extended from 1899 to 1902, each State raised by public subscription varying sums of money known as patriotic fund’s, and considerable amounts were paid to the dependants of those who were killed or to those who needed help. Members of the deputation pointed out that during the Great War the balances in the three State funds were handed over to certain organizations formed to help the personnel of the Australian Imperial Force. In Victoria the procedure was different from (that in the other States. The money raised by the Lord Mayor of Melbourne during the South African war was called the Empire Patriotic Fund, and subscriptions and interest totalled £64,702. The last payment was made to accepted applicants for relief in December, 191S. The balance of £40,000 was remitted to London to augment the Imperial Transvaal War Fund. It may be asked what the Commonwealth Government has to do with that. The reply is that it might urge the British Government to incur the expense of treating Australian veterans on British pensions at repatriation clinics or hospitals. There are several Victorians on Imperial pensions whose war wounds necessitate hospital treatment. If they had served in both wars, they would have been accepted and treated. As far as I am aware, nothing has been done for the 250 necessitous South African war veterans since the deputation in June last. Is it surprising that the Opposition is critical of the Government for allowing this state of affairs to continue? These men have rendered the greatest service to the British Empire that could be given to it, and are they not entitled to some small measure of relief? If honorable senators opposite were sympathetic and prepared to do the right thing, they would join those associated with this request, and bring sufficient pressure to bear upon the Government to enable the claim of these ex-soldiers to be satisfied. The way in which they have been treated is a standing disgrace. Nobody in Australia has attempted to do more for them than has Senator Brand, and I am sure that he would not associate himself with a request that he could not justify. I conclude by appealing to the Government to give a practical demonstration of its patriotism by doing .-justice to these men.

Senator BROWN:

– I had hoped that a member of the Government would have risen to clarify some of the issues that have been raised. Ministers smile and interject as though they had a reservoir of information, but one notices great reluctance on their part to join in the debate. I also speak with reluctance, because of the clouds of war, and the great issues that are being decided overseas. This Parliament could at least be of some service to the community by ensuring that the grave mistakes made from 1914-18 are not repeated during the present crisis. I admire SenatorDarcey because of the serious manner in which he presents his views on finance, and also because of his pertinacity.

Senator McBRIDE:

– Does the honorable senator agree with him?

Senator BROWN:

– I do in the main. Much of what he has said is borne out by the following statement made by the Leader of the Country party (Sir Earle

Page) on the second reading of the Commonwealth Bank Bill on the 13th June, 1924- ‘

At this early stage of war finance, a step waa taken which never has been explained fully. I refer to the fact that the Government gave to’ the banks the right to get three pounds in notes for every sovereign presented by the banks at the Treasury. Two out of every three pounds of notes so issued were treated as a loan to the banks, which were required to pay interest at the rate of 4 per cent, per annum and to repay the principal not later than twelve months after the end of the war. The reasons for granting these rights to the banks are not recorded, and no good purpose would now be served by surmising what the reasons were. Without being unduly critical of action taken during a period of great anxiety, however, I am permitted to say that this three to one arrangement Was more doubtful in character than any other act of war finance. The grant by banks of accommodation by way of overdraft or otherwise makes money available for credit to current accounts and fixed deposits in banks. That is to say, increase of advances entails increase of liabilities. Banks usually keep on lending money until their liabilities are four or five times as much as their cash reserves, but here ive see that the banks were given the power, first to multiply their gold reserves by three, and then to keep on lending until the multiplied reserves formed the base of liabilities equal to twelve or fifteen times as much as the original, holdings of gold.

That is an exposure of one of the greatest ramps in war finance ever put over the people of Australia. It shows how the private banks were able to use the social credit of the community for the purpose of extending their operations and increasing their profits. I stand by that statement. Sir Earle Page regarded it as a most doubtful transaction. We all remember, of course, that the present Minister for External Affairs (Sir Henry Gullett) many years ago described Sir Earle Page as Australia’s tragic Treasurer. In his budget speech, the Treasurer (Mr. Menzies) said -

It would be an impertinence on my part to endeavour to treat the committee to a theoretical address on the principles of finance which should be applied to problems of this kind, but I crave the indulgence of honorable members to offer one or two general observations on the matter. I do so because I have been increasingly conscious of late, as have all honorable members, of the growth of a tendency in the minds of many people which may be put in this way. There is a hidden spring of wealth somewhere. It is called the credit of the community. All you have to do is to tap it. Be bold enough to put enough taps into it and draw off enough, and all your problems will be solved. I wish it were as easy as that. If it were, it is inconceivable to me that no Treasurer or central bank has put the scheme into operation before this.

I invite honorable senators to read that paragraph in conjunction with the statement made by Sir Earle Page on the 13th June, 1924. The trading banks of Australia certainly tapped this hidden spring of wealth - and need I add that they used a pretty big bung-hole and a big tap? By the arrangement which I have described., they tapped a spring of social credit that could have been tapped by the Government had it been courageous and intelligent enough to do so.

Senator McBRIDE:

– They paid 4 per cent, interest for the money.

Senator Dein:

– In what year was this tapping done?

Senator BROWN:

– The exact hour and minute do not matter.

Senator Dein:

– A Labour government was in power in the early period of the war.

Senator BROWN:

– I am not concerned about that. I want to be fair to the honorable gentleman and to Sir Earle Page, who said in his speech on the date mentioned -

It is to the lasting credit of the banks that they used their power sparingly. So much so that the loans made to them in accordance with this arrangement at 4 per cent, never reached as much as £2,000,000.

My attention was drawn to that plausible statement by Senator Courtice, and I remind him, as well as Senator Dein and Senator McBride, that at about that time there were a number of conferences between the Tory government of that period and the trading banks. The banks insisted on the right to draw millions of pounds in notes, even though, as Sir Earle Page, said, they actually drew notes to the amount of only £2,000,000 ; hut the point is they did insist on the right to draw, and on the strength of that right they issued credit upon which they charged interest. They did not draw notes beyond the amount stated; and they did not themselves pay any interest.

Senator McBride:

– They did not issue credits against the notes.

Senator BROWN:

– They did not draw the notes, but they issued certain threats against the Government, and after meeting in Melbourne for two days behind closed doors they told the Ministry that if they obtained, an increased right to draw notes they would reduce the price of money, which would then become plentiful. On the strength of those representations, and on the exhibition of their strength, they compelled the Government to climb down and grant to them the right to draw more notes. Although they did not exercise that right, they were able to increase the outflow of credit on the strength of the right, and as the result they increased their profits. They lent money to certain approved clients. For every £10 of real money put in they lent those clients £90, in order to purchase government bonds. They charged their clients at the rate of 3^ per cent., or perhaps 3f per cent., and told them that they could lend the money, which really never left the bank, to the Government and get 5 per cent, for it. That was where the trickery lay.

Although I speak with some diffidence, because I do not think that the Opposition can do much in this period of stress, I urge the Government to take cognisance of the ramp that operated during the war years and afterwards. The Government should learn from, the experiences of the past and use its undoubted power to institute a system of war finance that will not impose a burden on the people in the years to come.

Senator Dein:

– The printing press!

Senator BROWN:

Senator Dein, the world’s best interjector, speaks of the printing press. We know that the printing press is being used all the time. A few days ago when I went to a bank to draw some money I received some nice new notes - ample evidence, I think, that the printing press is kept busy. The point I wish to make is that the reservoir which was tapped by the private banking institutions during the war was created by the close economic association and activity of the men and women of Australia. Honorable senators on this side contend that the day has arrived to take out of the hands of private banking authorities that great power to issue credit which they do not use very wisely. If they did use it wisely they would be limited by the ambit of a system which does not permit them to use their finance in the best interests of the people.

In a speech I delivered in Rockhampton I illustrated the effect of private control of credit. I said to my audience - “ You citizens of Rockhampton would not allow the directors of McLachlan’s brewery to own and control the reservoir which supplies you with your water. Let us suppose, however, that you did allow that to be done, and the heavens opened so that the reservoir was filled to overflowing. Suppose further, that when the reservoir was filled, the directors met and decided that as they had had a successful year, and had produced too much, they would turn off the taps until some of the water had evaporated. That is exactly what is done with the credit of the community. “We allow that wonderful reservoir of community credit to be owned by private banks, and when they decide to turn off the taps of credit, the flow stops, with the result that people are bankrupted, thousands of men are thrown out of work, and there i3 a depression in the land “. That is a simple illustration of the wrong done to the community by leaving the reservoir of social credit in the hands of private banking authorities, who control it, not in the interests of the entire community, but primarily in their own interests.

I admit that there is no easy or royal road to the solution of our difficulties in peace or in war, but in time of war our problems are undoubtedly solved more readily than they are in peace. It is an anomaly, but, as I pointed out in a short speech the other day, if the war lasts long enough unemployment problems will gradually be solved. Our problem of marketing wheat, wool and other commodities can be solved in war time but not in time of peace.

When mention is made of the enormous national debt of this country, I try to see it in its proper light. Some time ago I read a book by George Bernard Shaw entitled The Intelligent Woman’s Guide to Socialism. It is one of the best books on the subject that I have ever read. In it the writer deals with war finance, the issue of war bonds, and the national debt. He mentions that his wife invested some thousands of pounds in war bonds, and that out of his income he had to pay a fairly large sum of money to the Government each year to meet the expenses of government. The Government itself does not produce any wealth, and therefore it has to levy taxes on the community in order to meet its expenses. Bernard Shaw points out that his wife receives from the Government interest on her war bonds, and that he pays a similar amount into the Treasury as taxes. He goes on to say that by a cancelling arrangement both debts could be paid. Under the existing system, he sends a cheque to the Treasurer, who, in turn, sends a cheque to his wife. The same thing applies in respect of the national debt. Whatever the amount of interest on the national debt may be, that money has first to be taken from the community before it can be paid to the persons who have invested money in government bonds. I am not so frightened of the bogy of the national debt as some people are. As a minor student of economics, I recognize that whatever the debt may be, the money to meet it must come from the people. But we on this side contend that under that system money may be taken from producers and workers and given to idlers, or, at least, to parasitical individuals. The greater the debt of the community, the greater the danger of the money being paid to parasitical members of the community, to be used in a manner that is not in the best interests of the community. Money could be taken from, say, a producer of wheat like Senator Johnston and given to people who have invested money in government stocks, and, instead of putting it back into industry, use it to increase the financial power of the parasitical class which gives employment only to flunkies. That is what is happening in the world to-day. Producers are paying taxes in order to pay interest to persons who render no service to the community. It is because we on this side object to that being done that we oppose the increase of the national debt.

I see no magic alchemy, no philosopher’s stone, in taxation, notwithstanding that many people imagine that all sorts of difficulties can be solved by the impostion of taxes. Ob. the other hand, there are many who believe that taxes should be abolished altogether in favour of a scheme of social credit. It is possible so to tax the community as to make the position worse than it was. There is no advantage to the community if a man who needs his money for the development of his own business has to pay it to the Government in order that its commitments in respect of interest on war bonds may be met. I admit that, under the present financial system, taxation is necessary, but in times of rapid development, or when a nation is at war, increased taxes will not solve a country’s problems because it means that money is taken from the community when it should be available for the development of industry. Senator Darcey will agree that there should not be excessive taxation. Money taken each year from the community in taxes is not available for investment in other directions. Instead of limiting the amount of money that is made available to meet the needs of industry, the amount should be increased. That is a point that is missed by many politicians and others who have not studied these matters. I pay my tribute to the earnest men who have brought light to bear on these matters. They have shown clearly the need for new methods, and the necessity to avoid the pitfalls and the stupidity of the past. Every honorable senator will agree that there is need for a definite system which will allow the greatest productivity within the limits of the nation’s man-power and machine-power. I agree with the Treasurer that the limit of a central banking system is reached when the reserves of man-power, material, and equipment are as fully engaged as practicable. I prefer however to substitute “ possible “ for “ practicable “. The Labour party is anxious to implement a system of finance which will place in employment every able-bodied man and youth, and employ all the modern machinery that we can command for the purpose of providing the community with all that is essential for its well-being. Modern financial methods do not do that. Throughout the budget speech there is evidence of a thin red line, or, perhaps, I should be more correct if I said a broad red band, of orthodoxy.

It is true that the Treasurer’s budget speech shows that there is no guarantee that there will not be a change of outlook, or of the methods that have been adopted in the past by every tory treasurer that this country has known. If we are to prosecute the war successfully, we must depart from the orthodox method of finance; the financial powers- of the community must be organized and co-ordinated in such a way that there shall be no limit, except the limit imposed by the man-power and the materials of Australia. We do not want any one to sneer at our policy; we want the intelligent men on the other side to realize that we advance our arguments in all sincerity. We want to put into operation the policy in which we believe. If that were done there would be a possibility of Australia utilizing its powers to the full.

Senator Cameron:

– War will force us to do it.

Senator BROWN:

– I admit that, as the war proceeds, the needs of the nation will become greater, and all of the powers of darkness will not avail against those needs. It will be demonstrated before many moons have waxed and waned that in this country, and in Great Britain, finance must become the servant of the people. To-day, as in the years from 1914 to 1918, it is their master. Although, after 1914, currencies were inflated and millions of pounds of bogus money was issued, the financiers later demanded that that bogus money be made real in order that they might be enabled to exploit the community. The people will again be exploited in that way unless governments remodel the present financial system. I urge the Government to approach the practical suggestions made by honorable senators on this side with an open mind and to give to them careful consideration.

Senator McBride:

– Practical ?

Senator BROWN:

– Yes. If it was practical for the banks to act as they did during the last war, it is equally practicable for the Government to-day to adopt similar methods in the interests of the community. The Government has the power to organize the community in order to enable it to produce to its fullest capacity, and it can finance that production without placing any burden on the community. I challenge the Government to produce any of its experts to refute my contentions on this point. Indeed, instead of making stupid interjections it would be more appropriate for honorable senators opposite to get on their feet and attempt to show where the Opposition is wrong.

I propose now to deal with taxation. The Government has boasted of its orthodox methods, and has claimed that it has reduced taxes. Figures have been produced in support of that statement. Of course, owing to the threat of war it has been obliged recently to increase taxes. Both in this chamber and in the House of Representatives, the Opposition during the last few years has supported increased expenditure on defence. That cannot be denied. I propose, however, to submit some figures in order to show that, whilst indirect taxation has been increased enormously, direct taxation has remained practically at the same level. The figures are as follows: -

The figures for 1939-40 represent the highest amount received by a Commonwealth government from taxation, although on two occasions greater revenue was received from income tax, namely, £14,351,000 in 1920-21, and £16,791,000 in 1921-22. Whereas direct taxation today is the same as it was in 1931-32, indirect taxation has increased in that period by £26,000,000, and the total taxation has increased by £26,000,000. For the six years, 1932-33 to 1937-38, the ap- proximate value of concessions by way of remissions of taxes to land and propertyowners, life assurance and shipping companies, was as follows: - Land tax, £8,800,000; property tax, £16,000,000 company tax, £5,600,000; life assurance companies, £4,500,000; and shipping companies, £150,000; making a total of £35,000,000. Thus, in this period, indirect taxation has been increased by £26,000,000 whilst concessions to the value of £35,000,000 have been given to the wealthy sections of the community. Indirect taxes fall most heavily on the poorer people, and tend to reduce their standard of living. Particularly in a time of war those sections which- have the biggest stake in the country, should be compelled to pay their fair share of emergency taxes. We find that sales tax, which was introduced as an emergency measure during the depression, yields approximately £8,000,000 annually. Last year that tax was increased from 4 per cent, to 5 per cent., and this year with a further increase of the rate, the Government proposes to collect over £11,000,000 from that source. Each year we see clearly how the incidence of taxation falls most heavily on the workers, resulting in a decrease of their standard of living. Speaking in the House of Representatives on the 16th November, 1927, Sir Henry Gullett said -

The Treasurer’s claim that he has reduced taxation since he has been in office is one of the most fantastic ever made in any parliament. It is true that he has reduced taxation of a particular kind - that he has collected less direct taxation from certain classes in the country - but at the same time, he has steadily increased the flow of money into the Treasury and has actually collected more both in the aggregate and from each individual taxpayer. He has merely shifted the load on income from the top to the bottom, and has not actually relieved those people whom he has sought to help by the remission of direct taxation.

That observation can be aptly applied to the present situation. This Government, while remitting taxes to the wealthy sections, has been placing heavier burdens on the workers generally by increasing indirect taxes. Over a period of years the workers receive only sufficient to keep them on a certain standard of living, but even in better times taxes can be manipulated by an antagonistic tory government in order to reduce the standard of living of the wage-earners. It may be that as the result of agitation by trade unions the standard of living can be restored, but in the meantime the effect of indirect taxes is to reduce it. I invite honorable senators opposite to dispute that statement if they can. As the Leader of the Opposition (Senator Collings) has pointed out, it is not the amount of tax that matters, but what is left to a taxpayer after he has paid his tax.

In his budget speech the Prime Minister, dealing with the economic situation, said that owing tothe fall of prices our national income had declined. In passing, I might say that I find it difficult to understand how in any country any change internally of a currency system can offset the reductions of prices abroad. I am willing to sit at the feet of Senator Collings, or Senator Darcey, in order to have this point explained. I realize that much can be done internally by the development of a modern system of finance within the borders of a country, but if this country effected such a reform, what would be the effect upon the nation’s income should prices overseas fall? I realize, I think, the impossibility of offsetting a reduction of prices for our exports merely by changing our currency or our monetary system.

Senator Darcey:

– The amount of purchasing power is in the hands of the people, and the banking institutions determine how much money shall be in circulation.

Senator BROWN:

– I always endeavour to give a simple illustration to satisfy myself as well as others. For instance, many Tasmanians produce apples for export, and for them may obtain in return, say, diesel engines; but owing to the price of apples falling, the number of diesel engines received in exchange is reduced. In those circumstances the income of the exporters is reduced to the degree that the number of engines supplied has been reduced, although the quantity of apples exported may have been the same. Although the growers have exported the same quantity, or indeed a larger quantity, their return is less because of the fall of prices overseas.

Senator Darcey:

– That applies also to wool.

Senator BROWN:

– I am endeavouring to ascertain how that difficulty can be overcome by any change of our monetary system. We can produce large quantities of wheat, wool or any other commodity, but if the market overseas is unsatisfactory and our own population is insufficient to absorb the production, any issue of credit against the unsaleable or excess quantity cannot increase the wealth of the community. These are simple facts on which I should like some enlightenment.

A few months ago this Government endeavoured toraise a loan in London, and I suppose it will pursue a similar policy in the future. The Labour party is opposed to such a policy.

Senator McBride:

– But the Labour party in Queensland once raised a loan in New York.

Senator BROWN:

– A Queensland Government did raise a loan on the New York market, but that was because of the tactics of the tories associated with the “stinking fish” party who sent their representatives overseas to ruin the credit of Queensland. Had that not been done there would have been no need for Mr. Theodore or Mr. Fihelly to apply to the New York market.

Senator Collings:

– The Queensland Labour government did not borrow in the first instance. An anti-Labour government borrowed the money, and the Labour government had to borrow in order to repay it.

Senator BROWN:

– As was stated by Senator Darcey, the private banks of Australia are part and parcel of the British banking system, and a delegation to Great Britain was responsible for damaging the credit of Queensland. The banking institutions were willing to advance money if the Labour party in Queensland would alter its land policy. The policy of this Government in borrowing overseas imposes a heavy debt upon the community, and also compels hundreds of thousands of workers to produce commodities with which to pay tribute to the Old Country. The following table, showing a so-called favorable trade balance, gives the excess of exports over imports, and the net exports of gold in excess of current production from 1930-31 to 1937-38 inclusive:-

[Extension of lime granted.]

In consequence of the borrowing policy which has been adopted, Australia is being drained of millions of pounds annually, for which we receive nothing in return. I know that I shall be told that we borrowed the money and must pay interest, but over a number of years we shall pay in interest more than we have actually borrowed, and shall continue to do so as long as the system lasts. If this policy be continued and intensified it will mean that instead of the men and women of Australia being organized to develop this country internally for Australians, thousands of workers will be employed to provide persons in the Old Country with commodities for which we receive no return.

Senator Dein:

– We shall still have our railways.

Senator BROWN:

– The railways represent internal development, and, as I have already pointed out, money used internally assists the development of Australia, but interest paid overseas places an undue economic strain upon the nation. I sincerely believe that in continuing to borrow overseas, the Government is adopting a wrong policy, because it results in an increased economic strain which is already too heavy for a young community to bear. The remedy is to organize our economic and financial resources, so that our people will be producing not in the interests of overseas countries, but for the benefit of the Australian community. We should legislate in the interests of our producers and not on behalf of interest-mongers.

Senator Leckie:

– That would be repudiation.

Senator BROWN:

– No. Does the honorable senator suggest that because a community reaches a stage in its mental development where it declares, through its elected representatives, that it is going to adopt a policy of useful cooperation rather than one of financial exploitation, it is guilty of repudiation? Does the honorable senator deny that this Government has the right to exercise powers granted by the people to change its economic policy? Hitler and Mussolini have altered the financial policy in the countries which they control because they had the power to do so, but we have no desire to adopt their methods. It is, I believe, the desire of the people to alter the financial and economic policy under which we operate, and it can be done without adopting a policy of repudiation as suggested by Senator Leckie.

I hope that honorable senators will take the opportunity given by the motion to give us the advantage of their knowledge on questions raised by members of the Opposition.

Debate (on motion by Senator James McLachlan) adjourned.

page 386


The following papers were pre sented : -

Navigation Act - Regulations amended - Statutory Rules 1939, No.68- No. 69.

Seamen’s Compensation Act - Regulations amended -Statutory Rules 1939, No. 67.

Northern Territory Acceptance Act and Northern Territory (Administration) Act-

Ordinances of 1939 -

No. 13 - Dangerous Drugs.

No. 14 - Mines Regulation.

No. 15 - Birds Protection (No. 2).

No. 16 - Public Service (No. 2).

No. 17 - Criminal Law Amendment.

No. 18 - Evidence.

No. 19- Health.

Buffaloes Protection Ordinance - Regulations.

Passports Act - Regulations - Statutory Rules 1939, No. 47.

Nauru- Ordinances of 1939 -

No. 2 - Appropriation.

No. 3 - Nauruan Royalty Trust Fund Appropriation.

Report of Committee appointed to survey the possibility ofestablishing a combined Administration of the Territories of Papua and New Guinea, and to make a recommendation as to a Capital Site (1) for the combined Administration if that is favoured, or (2) for the Territory of New Guinea if the retention of separate Administrations is recommended - August, 1939.

Senate adjourned at 10.16 p.m.

Cite as: Australia, Senate, Debates, 12 September 1939, viewed 22 October 2017, <>.