House of Representatives
7 November 1957

22nd Parliament · 2nd Session

  1. House of Representatives
  2. 22nd Parliament
  3. 1957

Mr. SPEAKER (Hon. John McLeay> took the chair at 10.30 a.m., and read prayers.

page 1927

QUESTION

NORTH-WEST OF WESTERN AUSTRALIA

Mr WEBB:
STIRLING, WESTERN AUSTRALIA

– About three weeks ago the Prime Minister advised me that, following representations by the all-party committee of the Western Australian Parliament, certain submissions in regard to the development of the north-west of that State had been prepared, and would shortly be discussed by the Cabinet. Has this urgent matter yet been discussed by the Cabinet? If it has, when will a report be made to the House? If it has not, when is such a discussion likely to take place?

Mr MENZIES:
Prime Minister · KOOYONG, VICTORIA · LP

– I am very sorry that an answer on that matter has not yet been given. I will see that the honorable member receives one at the earliest possible moment.

page 1927

QUESTION

WATERFRONT EMPLOYMENT

Mr ERWIN:
BALLAARAT, VICTORIA

– Can the Minister for Labour and National Service say whether there has been an improvement in the turnround of shipping in Australian ports, and industrial relations generally, since the passing of the Stevedoring Industry Act?

Mr HAROLD HOLT:
HIGGINS, VICTORIA · LP

– There has undoubtedly been a substantial improvement in performance and turn-round on the Australian waterfront since the Stevedoring Industry Act was passed by the Parliament. I do not claim that it has been attributable entirely to the new provisions operating. A number of factors have operated to bring about an improvement.

Mr Whitlam:

– Such as import restrictions.

Mr HAROLD HOLT:
HIGGINS, VICTORIA · LP

– They have been operating for many years. The honorable gentleman must have overlooked that fact.

Mr Whitlam:

– They have been operating with greater severity in the last year.

Mr HAROLD HOLT:
HIGGINS, VICTORIA · LP

– They have been less severe in the last year than they were at an earlier point of time. I have no doubt in my own mind that we now have much more effective legislation and administrative machinery for the control of the waterfront, and that the work of the judge in that jurisdiction has also contributed to an improvement. As for industrial relations generally, the new legislation had made a valuable contribution here also. If one measures the improvement in terms of working days lost, one sees that, to the end of last August - the last set of figures that has come to my notice - there were rather less than one-half the working days lost in the first half of this year than in the comparable period last year, which was by no means an abnormal year from the point of view of industrial losses. I feel that indications of this character justify one claiming that there has been a useful improvement in this field. Indeed, the co-operation shown on the Ministry of Labour Advisory Council provides further evidence of an improving industrial relationship in this country.

page 1927

QUESTION

ST. MARY’S FILLING FACTORY

Mr WARD:
EAST SYDNEY, NEW SOUTH WALES

– Will the Prime Minister, in view of his action in producing a confidential document, signed by Major-General Legge, during the debate on the St. Mary’s Munition Filling Factory project, state precisely his objection to producing all the documents relating to that project, particularly those sought by the Opposition?

Mr MENZIES:
LP

– I dealt with that very matter in my statements to the House.

page 1927

QUESTION

RAIN-MAKING

Mr HOWSE:
CALARE, NEW SOUTH WALES

– My question is directed to the Minister for Labour and National Service in his capacity as Minister acting for the Minister in charge of the Commonwealth Scientific and Industrial Research Organization. Is it a fact that rain-making experiments by the C.S.I.R.O. have been limited by a lack of finance? If more money were available, could other suitable aircraft be purchased and more scientific staff engaged? Will the Minister ask his colleague to give sympathetic consideration to treating rain-making experiments as urgent and to provide more finance if it is needed?

Mr HAROLD HOLT:
HIGGINS, VICTORIA · LP

– In the short term, the limitation has not been due to a lack of finance. Some time ago I discussed with the Treasurer a proposal to make more aircraft available for these experimental purposes, and he concurred in that proposal.

Then I discussed the matter with the Minister for Air, who controlled the only suitable aircraft in Australia which could be made available at that time. He made two additional aircraft available. Other limiting factors were shortages of equipment of the types required and a lack of trained personnel. However, we made available for this purpose such aircraft, adequately equipped and with the personnel required to operate them, as we found to be within our reach.

Taking the longer view, the question arises whether aircraft could be specially purchased for this purpose and additional personnel and equipment made available. That is a question of policy, as I think the honorable gentleman will appreciate. So also is the question of how far the Commonwealth Government should meet the full cost of these experiments when it is receiving so many requests from different States for these services. As the honorable member is aware, I am only acting as Minister in charge of the Commonwealth Scientific and Industrial Research Organization at this time. When my colleague returns this week-end, I shall take an early opportunity to convey to him the question that the honorable member has asked, so that the policy aspect of the question may receive his personal consideration.

page 1928

QUESTION

COMMONWEALTH HANDLING EQUIPMENT POOL

Mr GEORGE LAWSON:
BRISBANE, QUEENSLAND

– I direct a question to the Minister representing the Minister for Shipping and Transport. Has the Government arrived at a final decision in respect of the disposal of the Commonwealth Handling Equipment Pool? Tenders for purchase of the equipment closed in June last. Have the tenders been considered by the Government? If so, what is the result?

Mr BEALE:
Minister for Supply · PARRAMATTA, NEW SOUTH WALES · LP

– I shall bring the honorable member’s question to the attention of the Minister for Shipping and Transport and see that he receives an answer.

page 1928

QUESTION

MILDURA AIR PAGEANT

Mr TURNBULL:
MALLEE, VICTORIA

– I ask the Minister for Air: Is it a fact that the Royal Australian Air Force has refused to send planes to take part in Mildura’s mammoth air pageant next Saturday? Does the Minister know that

Mildura is Victoria’s most important decentralized area, where an aero club and an air-training corps are receiving strong local support, and that the public relations value of a visit of R.A.A.F. planes on this occasion would be considerable? Will the Minister make investigations with a view, even at this late stage, to making planes available as requested?

Mr OSBORNE:
Minister for Air · EVANS, NEW SOUTH WALES · LP

– I am aware of the two matters to which the honorable member has referred, first, that the Royal Australian Air Force has, with regret, declined to send aircraft to the air display at Mildura on Saturday; and secondly, the importance of Mildura. It would be purposeless for me to go into this matter again, because the decision was made after careful consideration. The R.A.A.F. receives an enormous number of requests to take part in displays of this sort, but its training would be seriously interfered with if even a small proportion of the requests were acceded to. These displays invariably take place at weekends, generally on Saturdays, and highly trained personnel would necessarily be involved if the display were to be carried out effectively. This would result in a serious disruption of service training. The R.A.A.F. is well aware of, and appreciates, the interest of the public and its pride in the activities of the R.A.A.F., but that pride arises from a knowledge of the traditions of the R.A.A.F. as a fighting force. Its present efficiency would not be served by taking part in displays but by devoting flying time and the activities of the personnel to its very serious purpose. I can understand the honorable member’s regret, but I am sorry to say that the serious training requirements of the R.A.A.F. cannot be served by acceding to the request he has made.

page 1928

QUESTION

PHARMACEUTICAL BENEFITS

Mr THOMPSON:
PORT ADELAIDE, SOUTH AUSTRALIA

– My question to the Minister for Health relates to the supply of free medicines. I refer to the case of a couple who are age pensioners. The husband has been suffering from Parkinson’s disease for many years, but after the various medicines in the free list failed to improve his condition his doctor ultimately prescribed pagitone hydrochloride, which is a drug supplied by the Eli Lilly Company, of the United States of America. When treatment with these drugs ceased, the patient’s health deteriorated again. The man’s wife has been treated with Benadryl capsules. These are not on the free list, and they cost her 6s. 6d. a fortnight. If the Minister cannot give me any information about the two drugs I have mentioned, will he have investigations made to see whether they can be placed on the free list?

Dr DONALD CAMERON:
OXLEY, QUEENSLAND · LP

– No drugs can be placed on the pharmaceutical benefits list unless they are approved by the Pharmaceutical Benefits Advisory Committee. The Minister has no power to place drugs on the list, and I am sure the honorable member will agree that that is a sensible provision, because only people who are expert in these matters and in touch with current practices are really qualified to evaluate and decide which drugs should be on the free list. No Minister, whether he is a do:tor or a layman, would be capable of doing that. The act very sensibly provides that, until the Pharmaceutical Benefits Advisory Committee recommends the inclusion of a drug, it cannot be included. Representations to the committee can be made by anyone, either through the Minister or through the Director-General.

If the honorable gentleman would like to write to me, setting out the particular circumstances of the people he has mentioned and giving me the names of the drugs, I will see that his representations are brought to the attention of the advisory committee, but, of course, having a matter of this nature considered by the committee is quite a lengthy process. If the committee recommends the inclusion of a drug, some time then elapses before the requisite notices can be sent out, regulations approved and so on. If the honorable gentleman will give me the full particulars, I will see that they are placed before the advisory committee.

page 1929

QUESTION

PUBLIC TELEPHONES

Mr HULME:
PETRIE, QUEENSLAND

– I address my question to the Postmaster-General. Within the Brisbane metropolitan area, a large number of approvals have been given for the installation of public telephones. In some cases delay of three years occurs without the facility being installed, generally because of lack of telephone cabinets. Is the delay in providing cabinets due to lack of funds or to inability to find contractors prepared to undertake the work? If the latter is the reason, does the department set a ceiling on the price it will pay for the cabinets? Will the Minister himself discuss this matter with contractors with a view to overcoming the problem, and so providing in many areas the essential service of a public telephone?

Mr DAVIDSON:
Postmaster-General · DAWSON, QUEENSLAND · CP

– Delay has occurred in the Brisbane metropolitan area and in other areas in the provision of approved telephone cabinets. In the Brisbane area, that has arisen in the past because the department has been faced with a large programme of more urgent works. That position, however, has been rectified. The cabinets required for the installations are on hand and my latest information is to the effect that the installations in which the honorable member for Petrie is interested should be effected within the next few weeks - possibly, I might say, within a month. The supply of cabinets is now being met by the department’s workshops and. therefore, outside contractors are not involved. We have found that, as a result of building up the work of the department’s workshops, they can compete on favourable terms with outside contractors, and the demand is at present being met from the workshops.

page 1929

QUESTION

COMMONWEALTH SCIENTIFIC AND INDUSTRIAL RESEARCH ORGANIZATION

Mr BIRD:
BATMAN, VICTORIA

– My question is directed to the Minister acting for the Minister in charge of the Commonwealth Scientific and Industrial Research Organization. Is it a fact that Australian industry spends only about £3 per £1,000 of turnover on research compared with £15 in the United Kingdom and £20 in the United States of America? If that is so, is the reason that industry, both primary and secondary, is leaving research in the hands of the C.S.I.R.O. and is prepared to sit back and await results from this Government instrumentality? If these are facts, will the Government urge industry to play a bigger part in its own specialized research and leave the C.S.I.R.O. free to concentrate more on fundamental research?

Mr HAROLD HOLT:
HIGGINS, VICTORIA · LP

– My colleague, the Minister for whom I am merely acting at this time, has more than once publicly expressed his disappointment because more research is not being done by private industry in Australia. It may very well be the fact that proportionately we are spending far less than the highly industrialized countries mentioned by the honorable gentleman. I think, however, that some other explanations should be borne in mind. One is that Australia does not have the considerable number of very large establishments which, from their own financial resources, are able to maintain big research programmes. 1 think it is true that about 90 per cent, of Australia’s manufacturing industries have less than 50 employees. A unit of that size, of course, cannot maintain an effective research programme except in the most exceptional cases. I shall see that the comments which the honorable gentleman has made come to the notice of my colleague on his return. I am sure that he will welcome the interest of the honorable member in this very important question.

page 1930

QUESTION

PUBLIC SERVICE

Mr BURY:
WENTWORTH, NEW SOUTH WALES

– I ask the Prime Minister whether it is a fact that the CommonWealth Public Service Board recently awarded an extra day’s holiday over the Christmas period for the whole of the Commonwealth Public Service. Was this an act of an autonomous character on the part of the Public Service Board outside the normal working of the Government? Secondly, has the right honorable gentleman any information to indicate whether, when awarding this holiday,, the Public Service Board considered the other possible demands for similar treatment which might arise in the States, where the circumstances of employment and the needs of the public might be entirely different?

Mr MENZIES:
LP

– I made some inquiries this morning about this matter, which has received some attention. The position appears to be that, under the Public Service Act, there are to be certain statutory holidays and, in addition, four other days may be taken in circumstances to be determined by the board. That is apart altogether from annual leave. This seems to me to represent a problem to which the Cabinet Committee, in its review of the Public Service, might very well direct its attention; but as for the present position, the immediate decision in question, I understand that the facts are that the last time that

Christmas Day fell on a Wednesday, precisely the same provision was made for the following holiday, so that it is not entirely novel. It is not always possible for the Commonwealth Civil Service to be completely in line with the arrangements in each. State, because the arrangements in the individual States may vary, but it is quite plain that this is a problem that requires immediate consideration. I fully appreciate the difficulties that may arise, and have in fact arisen in the case of one State, from the present practice. I am, therefore, referring this matter to the relevant Cabinet committee for examination.

page 1930

QUESTION

HOG CASINGS

Mr DALY:
GRAYNDLER, NEW SOUTH WALES

– Is the Minister for Trade aware that the Hog Casing Importers Association has written to the Department of Trade in the following strain: -

There is quite a lot of merit in the case for the local beef casing manufacturers, and in view of the serious effect on local industry, hog casing imports should still be limited to a definite quantity each licensing period.

In view of this submission, and having in mind the certain reduction of export income that will be caused by the drought and falling wool prices, will the Minister consider removing hog casings from the sales replacement category immediately, as the unrestricted imports being made at present will result in an expenditure of at least 3,000,000 dollars per annum?

Mr McEWEN:
Minister for Trade · MURRAY, VICTORIA · CP

– I am not aware that such a letter has been written, but I shall take steps to ascertain whether it has arrived at the department. If it has, I shall study it.

page 1930

QUESTION

BUTTER

Mr ANTHONY:
RICHMOND, NEW SOUTH WALES · CP; NCP from May 1975

– I direct a question to the Minister for Trade. Is it a fact, as I have heard, that the New Zealand Government, at the United Nations Food and Agriculture Organization conference in Rome, is protesting against the dumping of subsidized European butter on the British market? If this is true, does the Australian Government intend to support these objections for the purpose of protecting the Australian butter industry?

Mr McEWEN:
CP

– I thank the honorable member for the interest that he has taken, and for directing my attention to what is undoubtedly a very important matter. I have read that New Zealand intends, at the F.A.O. conference, to protest against the dumping in the United Kingdom of butter from European countries. Having confirmed the facts of the situation, the Australian delegation certainly would associate itself with such a protest, because it has been the consistent policy of the Australian Government to argue at every level, at international conferences and in discussions with the representatives of individual countries, that our trade ought not to be subjected to unfair trading practices, such as dumping. Indeed, since the re-negotiation of the old Ottawa agreement, a provision has been included in the United Kingdom-Australia agreement to the effect that each of the two countries shall enact legislation capable of being invoked to protect the products of the other, in the respective markets, against unfair trade practices or dumping. I intend to study the facts of this situation immediately.

page 1931

QUESTION

LORD HOWE ISLAND

Mr MINOGUE:
WEST SYDNEY, NEW SOUTH WALES

– I address a question to the Treasurer. When will the Government consider the request of the electors of Lord Howe Island, which is in the electorate of West Sydney, for the building of an airstrip on the island? I understand that the New South Wales Government is willing to bear a part of the cost of the airstrip. If the Government does not intend to help the residents of the island in this way, why does it collect from them income tax and pay-roll tax while giving nothing in return?

Sir ARTHUR FADDEN:
Treasurer · MCPHERSON, QUEENSLAND · CP

– This is the first time I have heard anything about the subject-matter of the honorable member’s question. I will have inquiries made and give the honorable member an appropriate reply.

page 1931

QUESTION

DUTCH NEW GUINEA

Mr ASTON:
PHILLIP, NEW SOUTH WALES

– My question is directed lo the Minister acting for the Minister for External Affairs. As the campaign conducted by the Indonesian Government for the right to include Dutch New Guinea in its territory is increasing in tempo, will the Minister assure the Dutch Government and the Australian people of our continuing support of the Dutch Government’s trusteeship of the area? Has the Australian Government protested to the Indonesian Government against the irresponsible actions of Indonesians who defaced the walls of the Australian Embassy at Djakarta? If a protest has been made, has a reply been received? If a reply has been received, is the Government satisfied with the contents of it, and is it in the form of an apology?

Sir PHILIP MCBRIDE:
Minister for Defence · WAKEFIELD, SOUTH AUSTRALIA · LP

– I think the Australian policy of supporting the Dutch occupation of a portion of New Guinea is well known. We have, in season and out, lent our support to the Dutch people on this matter. Only recently - yesterday, I think - Mr. Luns, the Netherlands Minister for Foreign Affairs, and I issued a joint statement pointing out that it was the intention of the Dutch Government and the Australian Government to develop their territories on parallel lines, in the best interests of the people of those territories. As to the other portion of the honorable member’s question, when I saw a report of the matter to which he has referred I had inquiries made. I am informed that during the demonstrations in Djakarta last week over the Netherlands New Guinea issue crowds of youths painted anti-Dutch slogans on a considerable number of foreign-owned, principally Dutch-owned, buildings. Slogans of this character were painted on the walls of the Australian Trade Commissioner’s office and the residence of the counsellor of the Australian Embassy. The slogans were anti-Dutch in character and were in no way directed against Australia or Australians. As the incident appeared to be the result of excessive enthusiasm by a band of irresponsible young hooligans, the Australian Ambassador considered that the situation would be met by making an oral protest to the Indonesian Foreign Office. The Foreign Office expressed deep regret at the incident, and the Ambassador was assured that the painting of slogans on embassy property had been carried out by youths who were unaware that the buildings were in fact Australian. Subsequently the chairman of the committee which organized the demonstration apologized to the Ambassador and undertook to have the offending slogans removed. In the circumstances, the Ambassador is of the opinion that no further protest is warranted.

page 1931

QUESTION

PUBLIC SERVICE

Mr BRYANT:
WILLS, VICTORIA

– I preface my question to the Minister for Labour and National

Service by saying that a question directed to the Prime Minister this morning by the honorable member for Wentworth indicated that a good deal of- pressure is building up to interfere with the holiday rights of public servants. Will the Minister assure us that when the forthcoming inquiry into the Public Service is held, he will use all his influence to see that there is no interference with existing holiday rights and working conditions of public servants?

Mr HAROLD HOLT:
HIGGINS, VICTORIA · LP

– I do not think I can usefully add anything, at this time, to the comprehensive reply which the Prime Minister has just given.

page 1932

QUESTION

DEFENCE POLICY

Mr TURNBULL:

– I ask the Minister for Defence whether his attention has been drawn to a recent statement by the honorable member for Darebin to the effect that the Prime Minister has made so many defence statements since 1955 that we have almost a “ change daily “ defence policy. He suggested also that when the Australian Labour party was in office before 1950, it at least had a five-year defence plan and the services knew their commitments for a particular year well in advance. I ask the Minister: With changing world conditions and, following scientific discovery, the continual change in defence strategy, what would result from a policy with a five-year set plan encompassing yearly programmes for our defence services?

Sir PHILIP McBRIDE:
LP

– I did not see the statement attributed to the honorable member for Darebin, but it is perfectly obvious that in this very rapidly changing world, no plans can be arranged to provide for the changes that could take place over a five-year period. It is true that when the Labour government was in office it instituted a five-year plan and carried it out to a certain extent. But the fact is that unless the present Government had done a great deal in addition to the Labour government’s plan, Australia would not have been able to give assistance as quickly as it did in the Korean campaign or carried out its commitments undertaken since that time. Consequently, it is a matter of continually reviewing plans so that at least we can be up to date in the position of our defence forces.

page 1932

QUESTION

CANBERRA TELEPHONE SERVICES-

Mr J R FRASER:
ALP

– I ask the PostmasterGeneral whether staff economieseffected in the Postal Department at Canberra have resulted in a lessening of the services available at week-ends to telegraph and telephone users. Is it a fact that notelegraph or telephone technician is on duty from 1 p.m. on Saturday until 8 a.m. Monday? Does this mean that when failures occur in teletype, teleprinter or overseas communications services, extra delay is caused while an off-duty mechanic is recalled?’ Does it mean, also, that correction of telephone’ faults is limited at weekends to subscribers who are considered tobe conducting essential services? Is it proposed to discontinue the present all-night technician service at the Canberra telephone exchange?’

Mr DAVIDSON:
CP

– I hope that the honorable member for the Australian Capital Territory will agree that if the constant review which is carried out in the department indicates a need for some staff economies, they should be proceeded with as a matter of general policy. However, it is not. the practice of the department to institute economies which would in any way seriously prejudice the provision of proper services for the people generally. I am unaware of the details mentioned in the honorable member’s question, but I will look into them and give him the detailed reply which the several matters raised call for.

page 1932

QUESTION

BROADCASTING

Mr SWARTZ:
DARLING DOWNS, QUEENSLAND

– Can the PostmasterGeneral indicate whether the public inquiry by the Australian Broadcasting Control Board into the use of frequency modulation by Australian radio stations has yet been concluded? If so, has any decision yet been made regarding the introduction of this technique into general broadcasting in Australia?

Mr DAVIDSON:
CP

– The inquiry by the Australian Broadcasting Control Board into the possible introduction of frequency modulation in Australia has not yet been completed. The board has held hearings in both Sydney and Melbourne and has taken a considerable volume of evidence from interested parties. Quite recently, however, the board received a request from the Federation of Commercial Broadcasting

Stations to allow that body to postpone giving, evidence until after its annual conference, which is to be held in a few weeks’ time. The federation would then be able to present evidence which would be of value to the board. As there is no immediate urgency to complete this- inquiry, the board quite rightly agreed to this request. Consequently, further evidence will be taken after the annual conference of the federation. After that, the board will present its report to the Government.

page 1933

QUESTION

CIVIL DEFENCE BOOKLET

Mr MORGAN:
REID, NEW SOUTH WALES

– I address a question to the Minister for the Interior. Has a decision yet been reached on the proposed distribution of a booklet on first aid which was recommended many months ago by the Director of Civil Defence, and about which I questioned the Minister- earlier this year? As this booklet would be a useful publication for peace-time purposes as well as in the emergency of war, as it would not be a costly undertaking - I understand the cost would be about £10,000 - and as provision for this work was included in last year’s Estimates, what is the real cause of the delay? Is the reduction of the civil defence vote for this year by more than that amount an indication that the Government has abandoned the proposal?

Mr FAIRHALL:
Minister for the Interior · PATERSON, NEW SOUTH WALES · LP

– The reduction in the civil, defence vote for this year has nothing to do with the provision of equipment or publications of that kind. It merely mirrors the fact that certain capital expenditures on the. establishment of the Civil Defence School were met in the last Budget and are not necessarily provided for in this one. The booklet is not available for distribution. The booklet is ready for the printers, but as it is not considered, advisable to issue one booklet in isolation, it must await decisions on the question of policy.

page 1933

POSTAL DEPARTMENT

Mr-. CLEAVER. - I direct a question to the Postmaster-General. I point out, by way of preface, that complaints have been reaching me from my electorate of Swan about the restriction in services offered by the Postal Department, particularly in connexion with earlier clearances- of letter receivers, and 1 understand that no receiver is to be cleared later than the hour of 8.30 p.m. Can the Postmaster-General con. firm whether this instruction is correct? If it is correct, will he reconcile this restriction in services with the assurance given to the public when postal rates were last increased of a wider and more helpful service?

Mr DAVIDSON:
CP

– I do not know the details of the suggested alterations to which the honorable member for Swan refers, but I assure him that I shall have the matter looked into, find out exactly what the position is and communicate with him again.

page 1933

QUESTION

HOUSING FINANCE

Mr KEARNEY:
CUNNINGHAM, NEW SOUTH WALES

– Can the Treasurer tell the House whether it is a fact that the chairman of the Commonwealth Bank Board, Dr. H. C. Coombs, has announced that a substantial increase in bank credit for home building is to be made? Will the Treasurer provide information on this subject, including reference to the extent of the increase and the conditions under which the additional credit is to be made available? Will he agree that, having regard to the serious shortage of houses in Australia, the demand by migrants for homes and the increasing number of Australians in the marriageable age group, the housing situation is desperate and calls for positive action by the Government to ensure the release of adequate bank credit as an urgent necessity?

Sir ARTHUR FADDEN:
CP

– I shall treat the question as if it had been placed on the notice-paper and furnish the honorable member with whatever information is available.

page 1933

QUESTION

DESALINATION OF WATER

Mr FORBES:
BARKER, SOUTH AUSTRALIA

– I address a question to the Minister for Labour and National Service in his capacity as Minister in charge of the Commonwealth Scientific and Industrial Research Organization. Can he say whether the Commonwealth Scientific and Industrial Research Organization has investigated the new process, known as dialytic membrane desalting, for producing drinkable water from water with a salt content? May I say, by way of explanation, that this process, which is based on the principle that when salt is immersed in water separate elements became- negatively and positively charged, has been found to be economical in Britain and, if suitable for Australian conditions, should be of immense benefit to the country, particularly for the desalination of underground water?

Mr HAROLD HOLT:
HIGGINS, VICTORIA · LP

– The question raised by the honorable gentleman is obviously one of very great importance to Australia and however lacking in feasibility this proposal may have appeared at an earlier point of time, with so many scientific marvels occurring around us in this day and age we might yet live to see the period when science will have successfully accomplished this process at an economic cost. Australia, through the C.S.I.R.O. and the Department of National Development, has joined with several other countries in supporting research on the desalting of water by electrodialysis. This is being carried out in Holland by the T.N.O., which is the Dutch equivalent of C.S.I.R.O. This programme will be completed about April, 1958, and full information on it will be available to Australia. The C.S.I.R.O. is keeping in touch with other developments throughout the world on desalting.

Mr J R FRASER:
ALP

– Another prepared answer!

Mr HAROLD HOLT:
HIGGINS, VICTORIA · LP

– It is intelligent anticipation. This matter has been receiving attention for some time. Small desalting plants are now being offered in the United Kingdom by William Boby and Company Limited, following the lines of the T.N.O. design. The smallest of the plants, for which prices are available, is one for treatment of 1,000 gallons per hour and the cost is between £8,000 and £10,000 in English currency, excluding the cost of equipment for the supply of electric power.

Mr Ward:

– Does the Minister want an extension of time?

Mr Bryant:

– I rise to order. Is it in order for the Minister to advertise this equipment over the air?

Mr SPEAKER:

– There is no point of order.

Mr HAROLD HOLT:
HIGGINS, VICTORIA · LP

– At a time when this country is gravely troubled by the possibility of an extension of the drought this -matter is one of first-class importance to many people.

Mr Ward:

– Why does the Minister not bring it up at the right , time instead of monopolizing question time?

Mr HAROLD HOLT:
HIGGINS, VICTORIA · LP

– The honorable member for East Sydney monopolizes most of the time that we have available late at night. Smaller plants would not cost proportionately less in those areas of Australia where electric power from mains supply is not available. Electrical generating plant would be required in addition to the water purification unit.

Mr Ward:

– How many more pages has the Minister to read?

Mr SPEAKER:

– Order! The honorable member for East Sydney will remain silent.

Mr HAROLD HOLT:
HIGGINS, VICTORIA · LP

– Running costs, excluding labour for the plant, are claimed to approximate between 10s. and 25s. in Australian currency per 1,000 gallons, depending on the cost of electric power.

page 1934

QUESTION

ST. MARY’S FILLING FACTORY

Mr CURTIN:
KINGSFORD-SMITH, NEW SOUTH WALES

– I ask the Minister for Supply whether it is a fact that all earthmoving equipment hired from Tutt Bryant Limited, Thiess Brothers Proprietary Limited, Le Tourneau Westinghouse Proprietary Limited, and the British Standard Machinery Company Limited for the St. Mary’s project was required to be reconditioned and overhauled before being returned to the various firms. If so, is it a fact that many highly skilled tradesmen were constantly employed in reconditioning equipment that was not even used, due to its condition on arrival at the job, and that it was rebuilt by the use of spare parts procured at the expense of the Government? Could the Minister advise as to the cost of reconditioning this second-hand equipment?

Mr BEALE:
LP

– I gave a fairly full and adequate reply on this matter some time ago. The honorable gentleman has a very fertile imagination and a very unreliable one. That was demonstrated during the debate on the St. Mary’s project some days ago. I advise him to stop interjecting and to devote a little spare time to reading the report of that debate. I am sure that that will improve what he is pleased to call his mind.

page 1935

QUESTION

WHEAT

Mr DRUMMOND:
NEW ENGLAND, NEW SOUTH WALES

– I desire to ask the Minister for Primary Industry whether his attention has been drawn to the fact that the flour-milling industry and associated industries which use wheat and wheat products are seriously concerned as to the uncertainty of their supplies and the basis of the cost at which those supplies will be made available. Having regard to this uncertainty and its impact upon the policy which might be adopted in respect of internal prices in Australia and external prices for exports to countries receiving our dextrose and similar by-products, can the Minister inform the House whether any final determination of policy regarding the cost of wheat in New South Wales has yet been arrived at?

Mr McMAHON:
Minister for Primary Industry · LOWE, NEW SOUTH WALES · LP

– As to the first part of the question, about 8,000,000 bushels of wheat are at present in store in New South Wales. The crop is expected to be about 5,000,000 bushels. I have noticed in to-day’s paper that that crop might even increase moderately. Already seven shipments of Western Australian wheat are on the way to New South Wales under arrangements made between the New South Wales Government and the Australian Wheat Board. So it is hoped that there will be an adequate supply of wheat in New South Wales, for the time being at least.

As to the second part of the question, that problem is now being dealt with on an administrative basis, and I earnestly hope that a decision will be announced on it quite soon.

page 1935

COAL INDUSTRY BILL 1957

Motion (by Mr. Harold Holt) agreed to -

That leave be given to bring in a bill for an act relating to the Coal Industry Tribunal.

page 1935

NATIONAL HEALTH BILL 1957

Motion (by Dr. Donald Cameron) agreed to -

That leave be given to bring in a bill for an act to amend the National Health Act 1953-1956.

Bill presented, and read a first time.

Second Reading

Dr DONALD CAMERON:
OXLEY, QUEENSLAND · LP

– by leave - I move -

That the bill be now read a second time.

The main purpose of this bill is to give effect to the proposal announced by the Treasurer (Sir Arthur Fadden) in his Budget speech for an increase in the rate of Commonwealth additional hospital benefit. I would like to refresh honorable members’ recollections by explaining two terms used to describe hospital benefits. The term “ Commonwealth benefit “ means the 8s. per occupied bed per day paid by the Commonwealth as the result of an agreement with State governments, and the term “ Commonwealth additional benefit “ means the amount paid through hospital benefit organizations to persons who insure themselves with those organizations.

At the present time, the rate of Commonwealth hospital benefit is 8s. a day, and the rate of Commonwealth additional benefit is 4s. a day. The increase proposed is to the additional benefit, and it is a substantial one. Commonwealth benefit is deducted from the hospital accounts of all patients, both insured and uninsured. Additional benefit is, as I have said, paid to the persons who are members of hospital insurance organizations registered under the National Health Act. This bill provides that the rate of additional benefit will be increased to 12s. a day for persons who are insured with registered hospital benefit funds for a fund benefit of 16s. a day or more. The Commonwealth additional benefit rate of 4s. a day will be retained for persons whose insurance premiums entitle them to a fund benefit of at least 6s. a day, but less than 16s. a day. It will be entirely a matter of choice for contributors, but I would like to point out that a great many are already insured for 16s. a day or more. It will be apparent that this increase will be a great help both to members of hospital insurance funds and to all concerned with the problems of financing hospitals throughout Australia. I want to remind the House that the principle of the Commonwealth additional benefit is to help those who help themselves, to assist individuals to make provision for expenses they may incur. This was clearly stated when the scheme was first introduced. It is in fact subsidized insurance, a partnership between the government and the people. The Commonwealth additional benefit is designed to help individuals to handle their problems of living and to make their way in this developing country.

This scheme has been an outstanding success. The -number of persons covered by ^registered hospital insurance organizations has increased from 1,900,000 in January, 1952, the year in which the scheme was introduced, to nearly 6,000,000 to-day. Approximately 61 per cent, of the Australian people are now covered for hospital insurance. Many others are taken care of by direct government aid, e.g., pensioners, repatriation patients and others.

Commonwealth ordinary benefit of 8s. a day for every hospital patient is now being paid at a rate of more than £6,000,000 a year to public hospitals and £2,000,000 a year to private hospitals. The total value of this direct aid to hospital patients and hospitals throughout Australia .has totalled over £37,000,000 over the last five years.

Commonwealth additional benefit of 4s. a day to insured persons is now being paid at a rate approaching £2.000,000 a year. Payments of this benefit .have been worth nearly £7,000,000 to patients during the last five years. The same patients have also received, by way of fund benefit, something like £20,000,000 over the last five years, and these payments of fund benefit are currently being made at a rate of £7,000,000 per year. These are very large sums of money, and they speak for themselves as to the benefits flowing to hospitals and hospital patients as a result of the Commonwealth hospital insurance scheme. This amendment will produce further benefits.

In passing, Mr. Speaker, it is appropriate to point out that :these two benefits are not by any means the only assistance provided by the Federal Government to the Australian hospital system. Another instance of which I wish to remind the House is the fact that the Commonwealth provides all the .capital expenditure for chest hospitals, and nearly all the maintenance expenditure. As a result .of this, such buildings as the thoracic blocks at Royal Prince Alfred Hospital, the Royal North Shore Hospital and St. Vincent’s Hospital in Sydney, the large hospital being completed at Chermside in Brisbane, another large chest hospital in Perth, and many others throughout the Commonwealth have been erected without cost to the States, who will make full use of them.

It is considered that this increase in the Commonwealth additional benefit Tate will only be completely effective if it is accompanied -by something like a corresponding increase in the payment of fund benefit. It is for this reason that the bill provides for the 12s. a day Commonwealth additional benefit to be payable to persons who are insured .for a fund benefit of 16s. a day or more. The premium for a fund benefit of 16s. per day is about ls. 6d. a week (family rate).

I am .sure all will agree that the benefits to be derived from such a low premium are now most attractive, and that contributors who are insured for a lower amount have every reasonable incentive to transfer to a 16s. a day or higher rate table and so qualify for 12s. a day Commonwealth additional benefit. In common with all other hospital patients, these contributors will also have the Commonwealth benefit of 8s. a day deducted from their accounts, making, with the fund benefit, a total of at least 36s. a day available towards the cost of their hospital expenses. It may be, however, that some contributors will prefer to remain in their present tables, e.g., 6d. a week for a fund benefit of 6s. a day, or ls. a week for a fund benefit of 12s. a day. For these persons, the present Commonwealth additional benefit of 4s. a day will be retained.

Up to the present, Commonwealth hospital benefits have always become payable immediately upon a contributor joining a registered -insurance organization. The organizations themselves find it necessary to provide for a waiting period - generally of about two months - after joining an organization during which fund benefit is wot payable. With the introduction of a new Commonwealth rate of 12s. a day, the Government thinks it is reasonable that there should be a waiting period for Commonwealth additional benefit in conformity “with the practice of hospital benefit organizations. This bill, therefore, provides that as a general Tule Commonwealth additional benefit will not be payable at either the 4s. or 12s. rate in respect of hospital treatment given during the first two months after a person “becomes a contributor. An exception will be made in cases where the organization pays fund benefit in accordance with its rules, for example, accidents “which occur after a contributor joins a fund. The waiting period-clause will* not debar payment of benefit in cases where the contributor transfers from one registered organization to another, or in- cases where a contributor transfers from one benefit table to another within his own organization. Those already insured will, of course, be unaffected. This is consistent with the Treasurer’s announcement in his Budget speech.

There is, moreover, an. important reason for this waiting, period. As. the Commonwealth additional benefits are now substantial, it would be quite possible to defeat the principles of hospital insurance by short-term insurance so that contributors obtained only temporary cover and’ ceased to pay contributions as soon, as they left hospital. It is obvious that this could have widespread effects of a most undesirable nature. I need hardly point out that the institution of a waiting period makes it all the more advisable for those contemplating hospital insurance to effect it as early as possible, especially as it is expected that the benefits provided by this bill will be made available for hospital treatment received by insured’ persons on and after 1st January next.

As a consequence, of the. increase in the rate of benefit, this bill includes a number of clauses to effect necessary amendments to. machinery provisions of the. hospital benefit sections of the act.. I will. be. pleased to explain these amendments in detail and to provide honorable members with any additional information they require during the committee stage of the bill. In addition to the increase in Commonwealth additional hospital benefit rates already referred to, it is proposed by this bill to correct- a number of anomalies and inconsistencies in the- amounts of medical benefit? specified in the schedules to the act. Numerically, these amendments are fairly extensive; but no general increase in the rates of. benefit is involved. Many of the medical services concerned, are new medical techniques,, or treatments, which have come undeR notice since the schedule was last revised. A statement giving full particulars of these amendments is. being circulated for the information of honorable members.

The- opportunity is also being taken to effect a complete revision of the format of the schedules of medical benefit. This revision has been undertaken at the request of medical benefit insurance organizations, who are experiencing certain mechanicaldifficulties in processing claims under the existing schedules. This revision involves a- re-arrangement and’ renumbering- of the1 items in the .schedules, but the changes in amounts of benefit or the substance of the items in the schedules are negligible. The statement circulated to members fully explains- the nature of the changes being made to the schedules.. These, alterations, are also expected to be- effective from 1st January, 1-958.

This bill will provide very substantial1 benefits for the community. The value, of the increase in: rate of Commonwealth additional, hospital benefits, is estimated to be about £3,000,000 in. a full year. The. medical benefits; amendments are mostly by way- of minor adjustments b’“.t are estimated to. be worth, about £105,000 in a full year., I therefore hope that the bill will receive the fulL support, of all honorable members.

Debate: (on motion by Mr-. Calwell), adjourned.

page 1937

AUDIT BILL 1957

Second Reading,

Sir ARTHUR FADDEN:
McPhersonTreasurer · CP

– I move -

That the bill be now read, a second time.

As I explained during the course of mysecondreading speeches on the banking measures that I introduced on- 24th October, the establishment of a new banking structure will necessitate consequential amendments to a number of other acts of Parliament. The acts in question do not themselves deal with banking- as such, but’ contain certain banking references’ which will be affected by the new banking legislation.

I might say that the establishment of the Reserve Bank of Australia as. the central bank in place of the Commonwealth Bank of Australia will not mean thai all actscontaining references to the Commonwealth Bank will have to be- specifically amended, so as to alter the references to the Reserve Bank. There is a provision in the Reserve Bank Bill that, except in specified- cases> where it would be inappropriate to do so; all references in Commonwealth laws to the Commonwealth Bank are to be read as. references to the Reserve Bank. The acts, that- are being specially amended are those requiring amendment in other respects as a consequence of the new banking legislation.

The bill now before the House relates to the first of the ten acts that have to be specially amended and its purpose is to make a consequential amendment to the Audit Act 1901-1955.

Under section 70b of the Audit Act 1901-1955 the Treasurer has power to guarantee repayment to the Commonwealth Bank or to the Commonwealth Trading Bank of loans made for the purposes of the Commonwealth by either of those banks.

By the amendment now proposed, the Treasurer will be empowered to guarantee the repayment of such loans to the Reserve Bank, the Commonwealth Trading Bank or the Commonwealth Development Bank. The Development Bank is being added since loans made at present by the Mortgage Bank or Industrial Finance Departments of the Commonwealth Bank for Commonwealth purposes may be guaranteed by the Treasurer, and under the new banking legislation the Development Bank will be taking over the functions of those two departments. It will be seen that the amendment is of a purely machinery nature, and I commend the bill to the House.

Debate (on motion by Mr. Calwell) adjourned.

page 1938

COMMONWEALTH EMPLOYEES’ FURLOUGH BILL 1957

Second Reading

Sir ARTHUR FADDEN (McPherson-

Treasurer) [11.34]. - I move -

That the bill be now read a second time.

The Commonwealth Bank has always operated its own scheme of long service leave benefits for its officers and employees, and consequently when the Commonwealth Employees’ Furlough Act was enacted in 1943 officers and employees of the Commonwealth Bank were excluded from its operation. This bill merely serves to continue the present position. The Reserve Bank and the Commonwealth Banking Corporation, like the Commonwealth Bank before them will operate their own long service leave schemes, and the purpose of the bill is simply to provide for this by excluding persons to be employed under the Reserve

Bank Act and the Commonwealth Banks Act from the operation of the Commonwealth Employees’ Furlough Act.

Debate (on motion by Mr. Calwell) adjourned.

page 1938

CRIMES BILL 1957

Second Reading

Sir ARTHUR FADDEN:
McPhersonTreasurer · CP

– I move -

That the bill be now read a second time.

The purpose of this bill is to make a minor amendment to the provisions of the Crimes Act 1914-1955, which is the act relating to offences against the Commonwealth. The Crimes Act at present defines “ Commonwealth officer “ to include any person in the service of any public authority under the Commonwealth, and specifically to include an officer of the Commonwealth Bank. It also defines “ public authority under the Commonwealth “ to mean any authority or body constituted by or under any act, and specifically to include the Commonwealth Bank. It is, of course, intended that officers of the two new staff services for the Reserve Bank and the Commonwealth Banking Corporation will continue to be Commonwealth officers for the purposes of the Crimes Act, and that the authorities constituted under the new legislation will continue to be public authorities under the Commonwealth for the purposes of the act.

The appropriate amendment to the Crimes Act is to omit from the act the references to the Commonwealth Bank in the definitions of “ Commonwealth officer “ and “ public authority under the Commonwealth “, and this is what the bill proposes. It is not necessary to substitute for them references to the Reserve Bank, and the Commonwealth Banking Corporation and its three affiliated banks, because all of these institutions will unquestionably be authorities constituted under an act, and as such will automatically be covered, together with the officers employed by them, by the definitions in the Crimes Act without express mention of them in the act.

The opportunity is also being taken to amend section 2 of the Crimes Act so as to include references to section numbers in the explanation of the division of the act into parts. This amendment gives effect to standard procedure that has been followed in other acts, and is purely machinery in nature.

Debate (on motion by Mr. Calwell) adjourned.

page 1939

GOLD-MINING INDUSTRY ASSISTANCE BILL (No. 2) 1957

Second Reading

Sir ARTHUR FADDEN:
McPhersonTreasurer · CP

– 1 move -

That the bill be now read a second time.

This bill proposes amendments of a purely formal nature to certain provisions of the Gold-mining Industry Assistance Act 1954- 1956 as a consequence of the main banking measures. References in that act to provisions in the present Banking Act are being altered to references to the corresponding provisions in the proposed new Banking Act, and a reference in the Gold-mining Industry Assistance Act to the Commonwealth Bank of Australia is being changed to a reference to the Reserve Bank of Australia.

The amendments clearly do not give rise to any issues of substance, and do not affect the conditions governing the payment of subsidy under the act on the production of gold in Australia and the Territory of Papua and New Guinea.

Debate (on motion by Mr. Calwell) adjourned.

page 1939

INCOME TAX AND SOCIAL SERVICES CONTRIBUTION ASSESSMENT BILL (No. 2) 1957

Second Reading

Sir ARTHUR FADDEN:
McPhersonTreasurer · CP

– I move -

That the bill be now read a second time.

The chief purpose of this bill is to give effect to the intention, which I explained during my second-reading speech on the Commonwealth Banks Bill 1957, of making the Commonwealth Trading Bank liable to income tax from the beginning of the financial year in which the new banking structure comes into operation. The bill provides that, as from that time, the Commonwealth Trading Bank will pay income tax at the rates applicable to a public company - that is, on the basis of proposed rates for the current financial year, at 6s. 6d. in the £1 on the first £5,000 of taxable income, and 7s. 6d. in the £1 on the balance.

The central aim of the banking legislation is to create a central bank which is not directly associated with the conduct of banking business in competition with the private banks, and it is obviously an important corollary of that central aim to ensure that the Commonwealth Trading Bank takes its place in the competitive trading bank system on an equal footing with the private trading banks. Since the private trading banks are liable to income tax as public companies, it follows that the Commonwealth Trading Bank, also, should be so liable.

I might mention that the principle involved has already been approved by Parliament in the case of the Australian National Airlines Commission and the Australian Coastal Shipping Commission, both of which are required by act of Parliament to pay income tax on the same basis as their private enterprise competitors. The position of these two commissions vis-a-vis their private enterprise competitors is on all fours with that of the Commonwealth Trading Bank under the new banking structure vis-a-vis the private trading banks.

I expect it to be said that it is unfair to subject the Commonwealth Trading Bank to income tax in addition to continuing to require it to pay one-half of its net profits to the Commonwealth. Some will no doubt argue that, since income tax represents the only payment made by the private banks to the Commonwealth, the Commonwealth Trading Bank should be treated in the same way and should not be required also to pay to the Commonwealth a proportion of its profits after tax. But that kind of argument is quite fallacious. lt ignores the fact that the private banks, like all other companies, distribute a substantial proportion of their net profits after tax to their shareholders. The Commonwealth stands in the same relation to the Commonwealth Trading Bank as the shareholders in the private banks stand in relation to the private banks. It would be patently wrong in principle to permit the Commonwealth Trading Bank to retain all of its profits after tax, since to do so would confer an unfair advantage on the Commonwealth Trading Bank as compared with the private trading banks.

As I indicated when introducing the Commonwealth Banks Bill 1957, itis not proposed to make either the Commonwealth Savings Bank or the Commonwealth Development Bank liable to income tax, and accordingly the provisions in the bill now before the House do not affect either of these banks. After careful deliberation, the Government has decided that it would not be appropriate to subject the Savings Bank to income tax in addition to requiring it to pay one-half of its net profits to the Commonwealth. The Savings Bank is a very special kind of national institution in that it is the depositary of the savings of millions of Australian people, and it is being given a statutory duty to encourage saving and to promote the interetsts of its depositors. The Government believes that it would be inconsistent with the conception of the Savings Bank in the new banking structure to make it liable to income tax. It has, moreover, to be remembered that, under the terms of agreements with the States of New South Wales, Queensland, and Tasmania, the Savings Bank is required to pay to the States concerned one-half of the profits it earns on its business in those States, and the Savings Bank would be placed in an unduly onerous position if it had to pay income tax in addition to the payments it is required tomake to the States and to the Commonwealth.

The Government has decided, also, that it would not be appropriate to require the Commonwealth Development Bank to pay incometax. The Development Bank will have specialized functions in assisting primary and secondary industry, and the Government considers that the bank should be permitted to retain any profits it earns, as a means of strengthening its capital structure and enabling it to expand the facilities it will be providing for the assistance of primary and secondary industry. Retention by the Development Bank of its profits will continue the position that has hitherto obtained in the case of the Mortgage Bank and IndustrialFinance Departments of the Commonwealth Bank.

Finally, I should perhaps mention that clause 4 of the bill proposes a minor amendment to section 23c of the income Tax and Social Services Contribution Assessment Act. This section relates to the exemption from tax of certain income derived by a company from the sale of gold, and the amendmentthatis proposedis purely consequentialon the establishment of the Reserve Bank as the central bank as the successor ofthe Commonwealth Bank.

Debate (on motion by Mr. Calwell) adjourned.

page 1940

NATIONAL DEBT SINKING FUND BILL 1957

SecondReading.

Sir ARTHUR FADDEN:
McPhersonTreasurer · CP

– I move -

That the bill be now read a second time.

This bill is designed to amend section 6 (1.) of the National Debt Sinking Fund Act 1923-1950 by substituting the Governor of the Reserve Bank for the Governor of the Commonwealth Bank as a member of the National Debt Commission. The amendment is intended to operate from the day on which the proposed Reserve Bank Act 1957 comes into operation and is, of course, purely consequential upon that act.

Debate (on ‘motion by Mr. Calwell) adjourned.

page 1940

NORTHERN TERRITORY (LESSEES’ LOANS GUARANTEE) BILL 1957

Second Reading

Sir ARTHUR FADDEN (McPherson-

Treasurer) [11.46]. - I move -

That the bill be now read a second time.

This is a further bill that is consequential upon the proposed banking legislation. The Northern Territory (Lessees’Loans Guarantee) Act 1954 empowers the Treasurer to guarantee repayment of a portion of a loan made by a bank to the holder of a pastoral homestead lease or an agricultural lease in the Northern Territory for the purpose of financing the improvement ofhis property. The banks at -present “specified under the scheme are the Commonwealth Bank, the Commonwealth Trading Bank and the private trading and savings banks.

The effect of the proposed amendment is toremove the Commonwealth Bank and to add the Commonwealth Development Bank and the Commonwealth Savings Bank to the specified banks. TheReserve Bank is not being included because it will function only as a central bank and will not be making loans of the type in question. The addition of the Development Bank is proposed because, as successor to the Mortgage Bank

Department of the Commonwealth Bank, the making of loans by it to Northern Territory pastoralists will be entirely consistent with its functions. The Commonwealth Savings Bank is being included so as to place it in the same position as the private savings banks, which are already eligible banks for the purposes of the scheme. Again, no issues of substance arise under the proposals in the bill.

Debate (on motion by Mr. Calwell) adjourned.

page 1941

OFFICERS’ RIGHTS DECLARATION BILL 1957

Second Reading

Sir ARTHUR FADDEN:
McPhersonTreasurer · CP

– I move -

That the bill be now read a second time.

This bill proposes two routine amendments to the provisions of the Officers’ Rights Declaration Act 1928-1953. The general purpose of the Officers’ Rights Declaration Act is to .preserve the existing and accruing rights of officers of the Commonwealth Public Service who are appointed to positions with statutory authorities of the Commonwealth.

The first of the proposed amendments is to delete from the act a reference to Commonwealth public servants who became officers of the Commonwealth Bank prior to 1928. There ar.e no longer any officers of the Commonwealth Bank in this category, and consequently there is no need to retain the reference in question. The second of the proposed amendments is to delete from the act a reference to persons employed under the Commonwealth Bank Act 1911-1927. There are specific provisions in both the Reserve Bank Bill 1957 and the Commonwealth Banks Bill 1957 preserving the existing and accruing rights of ex-Public Service employees of the Reserve Bank and the Commonwealth Banking Corporation, and it is not necessary to make express provision for these employees in the Officers’ Rights Declaration Act. The procedure being followed in this respect is consistent with standard procedure which has been followed in the case of other statutory authorities of the Commonwealth.

The two proposed amendments have no policy significance, and I recommend their adoption.

Debate (on motion by Mr. -Calwell) ‘ adjourned.

page 1941

RE-ESTABLISHMENT AND EMPLOYMENT BILL 1957

Second Reading

Sir ARTHUR FADDEN:
McPhersonTreasurer · CP

– I move -

That the bill be now read a second time.

The purpose of this bill is to make a -machinery amendment to section 98 of the Re-establishment and Employment Act 1945-1956. The Re-establishment and Employment Act is the act that relates to the re-establishment in civil life of members of the forces. Division 3 of Part VI. of the act provides for the making of reestablishment loans to discharged members of the forces, and section 98 provides that agreements may be made with specified authorities for the performance by the latter of functions under Division 3.

The specified authorities referred to in the present section 98 include the Commonwealth Bank and the Commonwealth Trading Bank. The effect of the proposals in the bill is to delete the Commonwealth Bank as a specified authority and to substitute for it the Commonwealth Development Bank. The existing reference to the Commonwealth Bank contemplated the performance .by the Mortgage Bank and Industrial Finance Departments of the Commonwealth Bank of functions in relation to the making of re-establishment loans, and, since the Commonwealth Development Bank is to take over these departments, it is appropriate that the reference in section 98 to the Commonwealth Bank be changed to a reference to the Commonwealth Development Bank.

The amendment is, of course, a purely routine consequence of the proposed establishment of the Commonwealth Development Bank, and has no other significance.

Debate (on motion by Mr. Calwell) adjourned.

page 1941

SALES TAX (EXEMPTIONS AND CLASSIFICATIONS) BILL (No. 2) 1957

Second Reading

Sir ARTHUR FADDEN:
McPhersonTreasurer · CP

– I move -

That the bill be now read a second time.

The effect >of the proposals in this bill is to exempt the Reserve Bank from the .payment of sales tax on goods used by it. The

Commonwealth Banking Corporation and its three affiliated banks will, however, be subject to sales tax.

Under the present Sales Tax (Exemptions and Classifications) Act, goods produced by the Commonwealth Bank are exempt from sales tax, but goods purchased for the use of all institutions in the existing Commonwealth Bank group are subject to sales tax. These provisions are out of line with accepted principles relating to the payment of sales tax by statutory authorities of the Commonwealth, and require amendment in the light of the proposed new banking structure.

The normal principle is that a statutory authority which does not conduct a business undertaking in the sense of producing goods or services for sale is not required to pay sales tax. Authorities in this category perform functions of a governmental nature, and, in common with government departments, no good purpose would be served in requiring them to pay sales tax.

On the other hand, a statutory authority which operates a business undertaking supplying goods or services for sale, whether in competition with private enterprise or not, is normally required to pay sales tax on all goods used by it that are ordinarily subject to sales tax. It is, of course, only proper that any business undertaking of this kind, whether public or private, should have to pay sales tax as an ordinary item of operating expenditure.

Application of these principles to the banks referred to in the proposed new banking legislation means that the Reserve Bank should be exempt from sales tax and that the Commonwealth Banking Corporation and its three affiliated banks should be subject to sales tax in the same way as other banks. The bill now before the House embodies proposals to this effect.

The practical significance of the proposals is small. The Reserve Bank will be exempt from sales tax on all goods and equipment used by it and not only on goods produced for its use in its Note Printing Branch. As far as the Commonwealth Banking Corporation group is concerned, the only practical effect of the proposals is that any printing work done for the group in the future by the Note Printing Branch of the Reserve’ Bank will, instead of being exempt from sales tax, be subject to sales tax at the rates ordinarily payable on commercial printing.

Debate (on motion by Mr. Calwell) adjourned.

page 1942

STATES GRANTS (SPECIAL FINANCIAL ASSISTANCE) BILL 1957

Second Reading

Debate resumed from 4th September (vide page 278), on motion by Sir Arthur Fadden -

That the bill be now read a second time.

Mr WEBB:
Stirling

– The Treasurer (Sir Arthur Fadden), in his second-reading speech, estimated that the tax reimbursements of the States this year would amount to £166,200,000. He also pointed out that the Premiers conference in May last agreed to supplementary grants which would bring the total amount available for 1957-58 to £190,000,000, the difference between the two figures being £23,800,000. I want to point out to the committee that this amount is not enough to meet the requirements of the States. As every honorable member knows, the population of this Commonwealth is growing. This necessitates increased expenditure on the part of all the States on such services as education and health. In addition, the developmental programmes of the various States necessitate the provision of an increasing amount of finance. I am quite satisfied that the amounts made available to the States under the tax reimbursement formula ‘are quite inadequate for their purposes. The Australian Loan Council is becoming a farce. It is supposed to be a national body representing the States and Commonwealth with the responsibility ot arranging the nation’s finances. In actual fact, it is nothing of the kind. It is an organization in which the States have to fight very hard indeed for the finance they need, and in the final analysis it is the Commonwealth which decides how much money the States will have. When the voluntary loan Council was formed in 1923 the then Prime Minister, Mr. Bruce, gave an assurance that there would be no dictation by the Commonwealth to the States. When the Australian Loan Council was formed in 1929 a similar assurance was given. Of course, much more comprehensive machinery was involved in the new setup, but there was still to be no dictation by the Commonwealth. And what do we find? On this council the Commonwealth has two votes to the single vote of each of the States and, when the voting is even, has a casting vote. The effect of its possession of these three votes is that the Commonwealth can dictate its own terms to the States.

Sir Arthur Fadden:

– Against the six votes that the States have among them?

Mr WEBB:

– I shall explain that in a minute. The position simply is that the Commonwealth has three votes, including its additional casting vote which it may use when the voting is equal after it has already cast its two primary votes. The strength of the Commonwealth in the Loan Council is, of course, reinforced by the votes of the claimant States which, in order to get the finance they need, have to support, in the long run, the Commonwealth’s decision on how the available finance is to be allocated. The Commonwealth needs the support of only two States in order to impose its decisions on the Loan Council.

To emphasize my point in that regard, and in answer to the interjection made a moment ago, I direct the attention of the Treasurer to the Budget papers this year, which contained the following statement: -

At a meeting in June, 1956, the Loan Council approved a resolution providing for a governmental borrowing programme of £210,000,000 for Slate works and housing in 1956-57. The Commonwealth did not support this resolution but indicated that it would be prepared, subject to certain conditions, to make monthly advances to the States at an annual rate of £190,000,000 for the first six months of the financial year, after which time the position would be reviewed and the extent of the Commonwealth assistance to the Loan Council programme determined.

In October, 1956, the Commonwealth agreed to make available to Western Australia from its own resources an additional amount of £2,000,000. This increase, which had been agreed to in principle by the other Premiers at the June meeting of the Loan Council, raised the annual rate at which the Commonwealth was making advances to the States to £192.000.000.

After reviewing the position in January, 1957, the Commonwealth informed the States that it would be prepared to continue making advances for the remainder of the financial year at the annual rate of £192,000,000. At a meeting in May, 1957, the Loan Council decided that the approved borrowing programme for 1956-57 should be £192,000,000.

If my memory serves me correctly, the two States that came into line with the Commonwealth were the claimant States,

South Australia and Tasmania, whose votes with the Commonwealth carried the decision. So, in effect, it is the Commonwealth which determines what the amounts allocated will be. We find, therefore, that the loan allocations to the States depend on the political opinions of the Federal Government. If the Federal Government is opposed to an extensive policy of public works in the various States .its opposition is paramount, and the State governments are deprived of the right to act as elected governments. Labour governments in the States believe in carrying out developmental works, but they can be prevented from developing their States in the direction they desire by the Commonwealth’s simply refusing to give them the necessary finance. As a matter of fact, the Prime Minister (Mr. Menzies) wants to go further than that. During the 1954 general election, he said -

Just as we claim no right to interfere in State affairs, so do we say, that if we, the Commonwealth, are to assume the burden of finding foi State works many millions out of the taxpayers’ money, we have a duty to the taxpayers to see thai the selection of works to be done should be guided by their true order of national importance. We will therefore ask the States to co-operate in the creation of a small advisory body of highly expert persons to serve as a national development Commission, acting in association with the Department of National Development, to report to both Commonwealth and States upon the economics and relative importance of particular proposals.

The States, of course, quite rightly refused to surrender their sovereign rights; but they have lost them anyhow, because while the Commonwealth cannot direct the States how they will spend the loan moneys they receive, it can limit these moneys. Consequently, the Commonwealth is gradually strangling the States until, eventually, they will have to fall into line with the Commonwealth’s policies. The States are being kept poor. They have continually mounting deficits, while the Commonwealth becomes richer and has increasing surpluses. Surely, that is not a sane method of controlling the finances of this nation. Commonwealth revenue collections have increased rapidly since the war, due to inflation. The taxpayer, although he is not getting more in actual value in his pay packet, finds that the amount of money he gets, which has a depreciated value, puts him into a higher income group than he was in before, with the result that he has to pay more in taxes. Because the earnings, in inflated currency with less value; of so many taxpayers bring them into higher income groups for tax purposes, the Commonwealth is able to reap more money from taxpayers. I emphasize that in 1955-56 income tax collections amounted to £997,200,000- two and a quarter times more than the figure at the end of the war. Of this sum, 94 per cent, came from customs, excise, sales and in? come taxes, a .field in which, of course, the Commonwealth has a monopoly. In the same year, the States raised £74,200,000. I’ suggest to the Treasurer that the Commonwealth’s approach to tax reimbursement is well out of date, that the formula that is being applied is, figuratively speaking, crying out for a change and’ should be reviewed at the earliest possible moment.

In 1938, the Commonwealth received£11’,500,000 by way of income tax- collections. The States received £30,000,000 from the same source. In 1957-58, according to the latest “Treasury Information Bulletin “, the Commonwealth expects to receive £675,000,000 in income tax alone. The States will receive £226,700,000 from the Commonwealth’s total revenue of. £1,321, 700,000. The Commonwealth is repeatedly boasting about its big-heartedness, but in reality it is far from big-hearted. It has developed the habit of raising millions of surplus revenue and lending portion of it back to the States at 5 per cent, interest. From the same source as it gets its surplus revenue, it finances its own public works free of interest.

Recently, I asked the Treasurer -

  1. What was the amount of loan interest paid by the Commonwealth Government for the years 1949-50 and 1956-57, respectively?

The reply was to the effect that for 1949-50 the figure was £57,421,000 and for 1956-57, £60,980,000- an increase of £3,500,000. The second part of my question was -

What was the amount cf loan interest paid by the State Governments?

The answer was to the effect that for 1949-50 the figure was £27,733.000, and for 1956-57 £68,009,000. Honorable members will see that the interest paid by the States increased by more than £40,000,000, while that paid by the Commonwealth increased by only £3,500,000. The States are paying two- and a half times as much in terest as they were in 1949-50. That shows how they are suffering as a. result of the financial policy of this Government.

I should- like to draw attention to the fact that there’ is a substantial’ number of unemployed persons in the community. It has been estimated that the figure is between 60,000 and 80,000. I am not following the figures quoted by the Commonwealth Employment Service, because they relate only to those who have registered for employment. Honorable members are aware that every one who is out of work, or is off for a few days, does not necessarily register. A generous estimate would put the figure for the Commonwealth as somewhere between 60,000- and 80,000-. This, is surely the time to finance a public works programme from surplus revenue, by public borrowing or through the Commonwealth Bank.

Since the war- nearly three-quarters- of Commonwealth public works have been financed from surplus revenue, so we need have no great worry about the national debt. We find that in 1938-39 the net interest paid by government authorities represented 51 per cent of the gross national product. The present figure is 1.7 per cent. - one-third of what it was. Therefore; there- is ample scope- for government expenditure, on public works, in order to relieve the. present serious unemployment position.

One could mention many important projects that should be proceeded with urgently One- of these is the- standardization of rail’ gauges throughout Australia. The work being done between Melbourne and’ Wodonga- is very important, but other rail links have an equal claim for priority. I refer to the line - between Broken Hill and Port Pirie, and to that between Kalgoorlie and Fremantle, the standardization of both of which was recommended by the transport committees appointed from both sides of the chamber. The Premier of Victoria has stated that work on the MelbourneWodonga link has been proceeded with urgently in order to relieve unemployment in that State. The Government members’ transport committee said that the KalgoorlieFremantle link also should be proceeded with, if for no other reason than a* relieve unemployment in Western Australia, which is greater, in proportion to population, than it is in any other State. I suppose that honorable members woul’d freely admit that more hospitals and schools are needed and that, generally speaking, there are immense avenues for development. We are justifiably proud of the Snowy Mountains hydro-electric scheme, but other less ambitious, but equally important, schemes could be got under way with the aid of additional’ finance. For instance, the damming of the Ord River, would do much to assist the irrigation of the north-west of Australia. Many similar projects are envisaged. To-day, I reminded the Prime Minister **(Mr. Menzies) that the Cabinet was supposed to be considering the request of an all-party committee of the Western Australian Parliament that certain work, such as road and jetty building, should be undertaken to develop the north-west. I hope that honorable members receive the reply that the Prime Minister has promised, and that we shall be able to greet it with jubilation.

The latest figures reveal that unemployment is greater than it was at this time last vear. There is a possibility that it may become even greater next year. Is it not reasonable to suggest that the Commonwealth should get on with the job of providing finance, both for its own public works and for those of the States, so that the unemployment situation can be relieved and preparations made for the commencement of further projects? We know from experience that it is easy to say that we shall do a certain job, but that preparations always take a long. time. I have in mind the delay that has occurred in the. provision. of new studios for the Australian Broadcasting Commission in Perth. In March o£ this year, the Public Works Committee reported that the matter should be treated as urgent. Six months later, the PostmasterGeneral (Mr. Davidson), having, considered the report of the committee, said that the work would be given a special priority. Every one immediately thought, “ Good gracious- This work must be going to start within the next few weeks “. Later, the Minister had to admit that it would take at least eight months to prepare the plans, and we have not yet received an. assurance that, provision for the work will be made in the next Estimates. I merely mention that in order to show that the planning of these urgent works- should be undertaken now, and’ not left until later:

Adverting, again to Western Australia’s special needs, I direct the attention of the House to the fact that this year that State is merely sharing loan funds and tax reimbursements proportionately with the other, States, in accordance with the formula. The Treasurer will remember that last year an additional grant: was recommended to meet special needs. Western. Australia asked for £4,000,000. We were told that the Premiers conference had agreed that that amount should be advanced, but six months later Western Australia received only £2,000,000.

I point out- to the Treasurer that unemployment in Western Australia is- greater now than it was at this- time last year. In September 19-56, 1,871 persons in Western Australia were receiving unemployment benefit, but in September of this year the number was- 2,120. I think the positionimproved last month, according to figures, supplied by the Minister for Labour and. National Service (Mr. Harold Holt), but the proper basis for comparison is to take the figures for a certain period in one year and, compare them with those for corresponding, periods in either the year before or the year after. The figures show that unemployment is gradually building up. At present, 4,758 persons in Western Australia are registered as unemployed, but we know that the number of unemployed is greater than that. I know of unemployed people who do not register. They look for work themselves. They get a few days’ work here and a few days’ work there, and they do not bother to register, but I always tell them that they should register.

The fact, is that unemployment is more serious in Western Australia than in any other State of the Commonwealth. The’ proportion of the population unemployed is greater in Western Australia than anywhere else in Australia. It is estimated that at present 2i per cent, of the total work force of the State is unemployed.

Mr Mackinnon:

– That is because Western Australia has a Labour government?

Mr WEBB:

– The position would be the same, whatever government was in office. There are special circumstances which affect Western Australia. It is not a highly industrialized State. When the Commonwealth Government restricts credit, increases interest rates, or does not make available sufficient funds for works of development, naturally a State that is not highly industrialized suffers more than other States. The argument, of course, is that the Commonwealth should not look only at the economic position of Australia as a whole, but should consider also the position of individual States, and, if one State needs additional finance, the Commonwealth should provide it.

Another point is that the development of Western Australia has been mainly in the field of primary production. It has a large surplus of imports over exports in its trade with other States, the adverse balance last year amounting to £53,000,000. Money from Western Australia helps to keep people in employment in the eastern States. On the other hand, Western Australia has a favorable overseas balance of trade, which amounted to £21,600,000 in 1956-57. That is due to the fact that it is a primary producing State. Western Australia comprises one-third of the area of the Commonwealth, but has a small population, which means that costs of government and development are high. That is only natural with a small population scattered over a wide area. Western Australia has a small local market, which means that opportunities for industrial expansion are limited.

I repeat that the Commonwealth Government is wrong in applying the same economic policy to Western Australia as it applies to the more industrialized States. I ask again that special consideration be given to Western Australia’s problems. The economy of the State is vulnerable, because it depends largely on the movement of international prices for primary products. Even though there may be high prices at particular periods for primary products exported from Western Australia, a big proportion of the benefit it should be remembered, goes to the eastern States because there is an increased demand in Western Australia for goods that cannot be manufactured locally.

Broken Hill Proprietary Company Limited is paying ls. 6d. a ton for iron ore from Western Australia. The McLarty Government entered into an agreement to supply iron ore from Yampi Sound at 6d. a ton, but the price was subsequently increased to ls. 6d. Western Australia could obtain £6 to £7 a ton if it were allowed to export the iron ore overseas, but the ore goes to the eastern States and helps to provide employment there. I am not objecting to that, but I am pointing out how it places Western Australia at a disadvantage.

I suggest to the Treasurer and other Ministers that the Commonwealth should give more consideration to the problems of Western Australia. More Commonwealth public works should be undertaken there. For instance, work on the Australian Broadcasting Commission’s building in Perth, which was supposed to be given special priority, should be speeded up. Constructional work should not be left in abeyance for eight months while plans are being prepared. The construction of the new Commonwealth Bank building should also be speeded up. Consideration should be given urgently to the needs of the northwestern area. I hope the Prime Minister will very soon be able to pass on favorable information in that regard. I was pleased that the Minister for the Navy (Mr. Davidson) gave an assurance the other day to the honorable member for Canning (Mr. Hamilton) that the story about the naval base was incorrect and that we still have hopes of obtaining a naval base on the west coast.

Mr Davidson:

– I made it quite clear that no decision had been reached.

Mr WEBB:

– I am making the point that the Minister said that he did not say that there would not be a naval base in Western Australia. He was incorrectly reported by the press of Western Australia. I am pleased to know that no final decision on that matter has been made. The works to which I have referred, although they are primarily of importance to Western Australia, would help to balance the economy of the Commonwealth. The Snowy Mountains hydro-electric scheme, to which I have already made reference, has been allotted sufficient funds to allow the project to run two years ahead of time. I approve of that, as do all honorable members on this side of the House, but the point is that, although the funds for the Snowy Mountains scheme come from all over the Commonwealth, the States which will mainly benefit are Victoria and New South Wales. Of course, the whole of the Commonwealth will benefit to some extent. The point I am making is that finance should be provided urgently for the claimant States as well. There is scope for very important developmental works, not only in the eastern States, but also in Western Australia and other States.

Sir Arthur Fadden:

– Is the honorable member in favour of the States having their taxing powers back?

Mr WEBB:

– No, I am not, and neither is the Treasurer. Otherwise, he would have done something about it. The States are all experiencing difficulties with their railways. Western Australia’s deficit on its railways amounts to nearly £7,000,000. If the problem of State railway deficits could be solved, all the financial problems of the States would be solved. My suggestion is that the Commonwealth should enter into negotiations with the States with the object of taking over the State railway systems and running them more efficiently than can the respective States. Less expense would be involved. For instance, there would be only one commissioner, a central commissioner, with deputy commissioners in the various States; one chief civil engineer, with deputy chief civil engineers in the States; and one chief mechanical engineer, with deputies in the respective States.

Apart from that, under Commonwealth control there would be a greater possibility of obtaining gauge standardization quickly. Gauge standardization, the use of dieselelectric locomotives, and the extension of the pick-a-back service and the container system mentioned in the reports of the Government and Opposition committees would help, not only to solve the financial problems of the States, but also to lower transport costs in Australia, which, as everybody knows, are excessive. It has been estimated that transport charges account for one-third of our gross domestic expenditure. In 1953-54, the total expenditure on transport was £1,305,000,000, representing onethird of the gross domestic expenditure That could be reduced by an efficiently co-ordinated Commonwealth-controlled transport system - and I do not mean only railways. A reduction of one-third would mean a saving of £435,000,000, but whilst that figure would still be double the cost in comparable countries it would have an amazing effect on the economy of the Commonwealth. In Canada, for instance, the next highest country, total expenditure on transport represents 10 per cent, of total domestic expenditure.

Honorable members must have been astonished to learn of the proposed importation of wheat from Canada and the Argentine at a freight cost lower than that involved in transporting it from Western Australia. That is a shocking reflection on our transport costs, and this Government should seriously investigate the problem. Commonwealth control of railways would reduce costs in many ways, for instance, in the bulk production of railway rollingstock. I do not need to emphasize that. Honorable members know that 100 wagons can be produced at one centre much cheaper than twenty wagons at two or three different places. The same principle would apply to other requirements. In addition, if we had a standard railway gauge, less rollingstock would be needed for the transport of freight interstate. Instead, we have the 4-ft. 8-in. gauge on the Central Australian system cut off from the same gauge in New South Wales. Honorable members will agree that rail transport is national in character, and should be Commonwealthcontrolled in the same way as TransAustralia Airlines, the Post Office and the Department of Health, which are rendering such efficient service.

Mr FREETH:
Forrest

.- It would be quite unnatural for any State government to thank the Commonwealth for making additional money available to it. It seems these days that the ordinary politeness that exists between civilized human beings does not extend to politics. Apparently, it would be taken as a sign of weakness if the Western Australian Government were to express any degree of gratitude for the additional grant of money made to it this year. The honorable member for Stirling (Mr. Webb) is well aware of that increased grant. He is most notorious in this House for jumping on every bandwagon that is offering. In a long and rambling speech to-day he covered a great variety of subjects which have not very much to do with this particular bill. I shall not follow him through that variety of subjects, but shall point out his unrealistic approach to many of these matters.

He was merely seeking to catch some popular appeal in Western Australia. For example, he talked about a standard railway gauge. Every one knows that is an objective greatly to be desired, so he stresses the need for the Commonwealth to do something now about it. Very conveniently he overlooks the fact that the Western Australian Government has not shown the slightest interest in converting the existing gauge between Kalgoorlie and Perth to standard gauge. In fact, that Government does not know even to this day where the line would have to be placed if to-morrow the Commonwealth were to offer to build a standardgauge track. The State Government does not know the area around Perth where the line would be laid, nor has it made the slightest attempt to survey the area. A great deal of responsibility rests with the Western Australian Government to bring that State up to a standard at which it will no longer be a claimant on the generosity of the taxpayers of the eastern States.

The plain fact is that over the last few years Western Australia has lapsed regrettably into economic stagnation, and the blame for that fact cannot be sheeted home to the Commonwealth. Since 1953, when the Hawke Government took office, Western Australia has been hostile in its legislation to big business and industrial concerns, .and although it has said time and time again that it wants industries to go to that State, it has done nothing to attract any largescale industry. I remind honorable members that the Kwinana refinery, the largest enterprise in recent years to be established in that State, was in fact opposed by members of the Hawke Government when they were in opposition. While that attitude persists one cannot wonder that Western Australia is not making progress.

Considerable sums of money, which are more than proportionate to the general growth and development of Australia, have been made available to Western Australia. The honorable member for Stirling knows it is much more popular in Western Australia to .demand more money from the Commonwealth - and it would be surprising if it were not - but I wonder what the situation would be if the Western Australian Government were compelled to raise .its own revenue. The citizens of that State would then be faced with a taxation assessment necessary to provide the sort of thing the honorable member is now demanding. To put the matter into perspective, I refer to the White Paper on National Income and Expenditure 1956-57, which shows that the

State governments by and large have had a proportionate increase in relation to expenditure on public works and their other functions in excess of the growth of wages, salaries and personal incomes. In other words, as the community has grown economically the amounts made available to State governments have grown far more proportionately. During the period from 1948-49 to 1956-57, the value of the gross national product grew from £2,278,000,000 to £5,643,000,000, wages and salaries increased from £1,076,000,000 to £2,807,000,000, and company income increased from £214,000,000 to an estimated £545,000,000. Those figures indicate a two and a half times increase. Turning to State and Commonwealth public works, the expenditure on railways in the same periods grew from £13,000,000 to £38,000,000.

In education, which has been a very sore point with very many people, expenditure on schools in 1948-49 was £3,000,000, and £20,000,000 in 1955-56, the last year for which figures .are available. That is a growth of some six times in the amount of expenditure. Salaries and ordinary current expenditure on schools, maintenance of buildings -and the like increased from £27,000,000 in 1948-49 to £94,000,000 in 1 956-57. Other figures relating to fuel and power, water supply, sewerage, irrigation and hospitals are of a comparable nature. They show that the State governments have received an -increasing .amount to spend on those items as national income has increased. Indeed, it would be surprising if that were not so, -because the formula for tax reimbursement takes into account changes in money values and in population. If the formula for tax reimbursement was satisfactory to the States when they first entered into the agreement, then it should still be satisfactory to them.

The Commonwealth has recognized the disabilities of Western Australia. The honorable member for Stirling quite correctly mentioned the large areas of land and the small and scattered population in Western Australia. But he quite forgot to say that the Commonwealth Grants Commission bad considered all those matters and had decided that £9.000,000 was reasonable compensation this year. The honorable member for ‘Stirling did not produce any reasoned arguments or analysis to support a suggestion that £9,000,000 was unfair. He simply said that it was not enough. He had no analysis to show what would be enough. I imagine that no matter what figure this Government suggested, it would never be enough so far as he was concerned.

Mr Webb:

– lt is not enough while there is unemployment.

Mr FREETH:

– The honorable member for Stirling talks about unemployment. I suggest that the Western Australian Government has a great deal of responsibility to carry for the unemployment in that State. The honorable member knows very well the. situation which caused unemployment there.

Mr Webb:

– Credit restrictions; interest rates.

Mr FREETH:

– The honorable member says interest rates. He knows that the first signs of unemployment were evident in Western Australia only when, for political purposes, the Western Australian Government over-spent its money on building in a few months and then shut down on all State building. As a result, building workers were thrown out of employment and the employment situation is only now beginning to recover from that tremendous set-back. The State government’s action started a reactionary trend throughout the building industry and industries associated with the building industry in Western Australia. The areas where unemployment is ^greatest and the kind of workers unemployed can be traced right back to the beginning when the State government took that pernicious political action for the sake of winning an election. The unemployed in Western Australia are concentrated almost entirely in the metropolitan area of Perth and Midland Junction, with a few in Kalgoorlie. This is so because almost all home-building done by the State Housing Commission was in areas around Perth, and very little was done in country areas.

Returning to the problems of Western Australia, .1 suggest that we will never overcome the terrific difficulty of arriving at a fair figure for the State governments to .receive from the Commonwealth until we devise ‘some means ‘Of allowing the State governments to impose a degree df taxation which will raise a larger proportion of their requirements. Until that :is done, no State government will “have a sense -of responsibility in the demands made on the Commonwealth. The Commonwealth is charged with the overall responsibility of seeing that the economy runs on a fairly even keel. It is charged with the responsibility of seeing that the individual citizen has enough left, after paying ‘his living expenses and his taxation, to he able to invest and save a little money for himself. If that .responsibility is not discharged, no .inducement will fee offered ;to achieve the increased productivity which Australia needs so much. If M*ie Commonwealth were to yield to the demands of the -States, which are made quite irresponsibly and without - regard ‘to the overall economy, the burden of taxation on the average citizen -would be so heavy that this country would quickly go /down .the drain.

Mr Webb:

– Do you believe the Commonwealth should charge the States 5 per cent, interest?

Mr FREETH:

– That is a case in point. The ‘honorable member for Stirling makes that accusation, ‘but he overlooks the fact that this arrangement suits the State governments because the Commonwealth contributes to the interest and sinking ‘fund on -the debt redemption. If the States were simply given a hand-out of revenue from the Commonwealth, their demands would be even less restrained than they are now.

Mr Bryant:

– Do you say that the States are irresponsible?

Mr FREETH:

– Quite so.

Mr Bryant:

– Do you think-

Mr ACTING DEPUTY SPEAKER:
Mr. Lawrence

– Order!

Mr FREETH:

– The States would be made responsible if they had to raise by taxation a certain part of their requirements. The justification for a particular tax or -a particular rate of tax would then become a matter of argument in each State. It is well known that the capacity of Western Australia to pay taxation may not be a< high as the capacity of other States. Tha capacity varies considerably between States and from year to year. If Western Australia has -a good season in one year and other States have a bad season, the capacity of Western Australia to pay taxes may be somewhat higher, That argument is often used to support the contention that the Commonwealth should impose all income tax and the States should not impose any. But the plain truth is that the cost of living is different in each of the six States. Expenses and standards are different in each of the six States. The only way in which State governments can be brought to some sense of responsibility in aiming at improving their own standards is to make them liable for raising some taxation.

I believe that this matter is vital to the existence of our federal system and that it could be done by the Commonwealth Government. Obviously, agreement will never be reached between the six States on the system that should be imposed. However, the decision of the High Court, which confirmed the right of the Commonwealth to make taxation reimbursements to the States on condition that they did not impose any income tax, would equally confirm the right of the Commonwealth to make some payments to the States on condition that they imposed income tax within certain limits.

Sitting suspended from 12.44 to 2.15 p.m.

Mr FREETH:

– Before the suspension of the sitting,I was developing the proposition that it would be quite practicable for the Commonwealth to prescribe the limits within which State governments could impose taxation on personal incomes. I said that, as the High Court had confirmed the right of the Commonwealth Government to make payments to the States on condition that they imposed no taxation on incomes, it would be equally valid for the Commonwealth to make some payments to the States on condition that the States themselves imposed a limited tax on incomes within the limits laid down by the Commonwealth Government.

It is interesting to note that, in the current year, it is estimated that some £465,000,000 will come to the Commonwealth Treasury from taxes on personal incomes, and that the repayments to the States, including special grants, will amount to approximately £190,000,000. If, in addition to that sum, we take into consideration the amount which the Commonwealth will find to supplement the loan programme, it could be calculated that at least half of all the taxes on personal incomes which are raised by the Commonwealth are required for the purposes of the States. If an arrangement could be made whereby the Commonwealth made a relatively small payment to the States and let the States impose taxes, using the Commonwealth assessment act, and within the limits laid down by the Commonwealth, so that there would be an overall supervision of the economy, I think that there would be a far greater realization by the individual taxpayer of the fact that the State governments have a much bigger responsibility for wise financial expenditure than the average citizen of the States appreciates to-day.

Western Australia, whose difficulties have been stressed by the honorable member for Stirling (Mr. Webb), actually has fared very well at the hands of the Commonwealth. An analysis of the payments made by the Commonwealth to Western Australia reveals that, in the current year, that State will receive approximately £48 per head of population in grants and tax reimbursements from the Federal Government. That is by far the largest sum per capita of any of the States. In Victoria, where, quite understandably, there is often some objection to the amount of money paid to Western Australia, the payment per head of population is only about £20.

Mr Webb:

– Does the honorable member think that Western Australia is getting too much?

Mr FREETH:

– The honorable member for Stirling should not try to put words into my mouth. I am merely pointing out that this Government has a great consciousness of the need of Western Australia for development, and I have tried to convey to the honorable member - I hope that he, in turn, will convey it to his friends in Perth, Mr. Chamberlain and Mr. Hawke - that the Western Australian Government has a far greater responsibility than it now exercises to bring the State up to the standard of the eastern States, and to make sure that it ceases to be a claimant State. This year, for example, Western Australia will receive additional money for its water scheme. We hope that it also will receive money for the development of the dairying industry. It is to get assistance in connexion with Wittenoom Gorge, and for the air beef scheme. Western Australia is receiving special assistance from the Commonwealth in a hundred and one different ways, and I think that it ill becomes the honorable member for Stirling continually to try to blame this Government for a lack of appreciation of the developmental needs of that State.

As I pointed out earlier, the Government of Western Australia has allowed activities in the State to stagnate, and it is significant that the legislation introduced by the State government to control profits has, in fact, resulted in no major industrial enterprise going to Western Australia in recent years. Opinions may differ about the deterrent effect of that legislation, but the plain fact remains that a Mr. Reddish, who is interested in cement companies, has quite plainly stated that that legislation definitely has turned his organization aside from investing more than £1,000,000 in Western Australia, while Laporte Chemicals (Australia) Proprietary Limited, which we hoped would go to Bunbury and develop the titanium industry there, has not done so. It has not stated any reason for not going there, but we can only infer, when we see the great enthusiasm for foreign investment in Victoria, New South Wales and South Australia, that there is in Western Australia a deterrent which resides in the government of that State.

While I agree with the honorable member for Stirling that Western Australia has special needs, I say, as he failed to do, that this Government is conscious of those special needs and is continually trying to help Western Australia to achieve a reasonable standard of development. The Commonwealth Grants Commission has done a very good job in assessing the possibilities of Western Australia. The plain fact is that no State thinks that it is getting sufficient money, which is natural enough, since the States have no responsibility for raising the money that they spend. The truth is, of course, that as the Commonwealth is developing very rapidly, we find that a bigger proportion of the gross national product is being put aside for developmental purposes and expenditure by State and Federal governments. That is a state of affairs which must be restrained if the economy is not to be lopsided. It is all very well for the honorable member for Stirling to demand that a public works programme be put in hand to provide employment. He should realize that 85 per cent, of all employment is provided by private industry, and that the more money we take by taxation to provide employment on public works, the more we destroy the chances of industry to invest in expansion programmes. To that extent, at any rate, we destroy the chances of private industry to provide additional employment in the community. I think that, to some degree, the honorable member has overlooked the fact that it is not possible to have a great programme of government expansion unless, at the same time, it is possible for industry also to expand.

The other point that I wish to make is that the demands from both State and Commonwealth sources for public expenditure arise, not from the rate of development of the Commonwealth, but largely because of war-caused deficits. It is not generally recognized to-day, at this interval of time since the end of the war, that for a period of eight years or so practically no essential public works programme was carried on, and that during those eight years this country fell behind in all the services which are so necessary, such as railways, roads, water supplies, sewerage works, schools and hospitals. An analysis of the annual expenditure in these directions shows that expenditure has more than kept pace with the growth of population, with the rising standards of the community and with our ordinary development, but we have not yet eliminated the tremendous deficit caused by the war. Quite obviously, no government could expect to eliminate the lag resulting from the war in one, two, five or even ten years. The deficit, however, is being eliminated, and I say to the people of Western Australia and of the other States that at the present rate of progress, with the present steady expenditure on public works, Australia should, within the foreseeable future, or within the next four or five years, largely eliminate the lag in the provision of schools, hospitals and other public utilities caused by the cessation of building activity in those directions during the war. Although we have this incessant clamour from the States for more funds to be provided by the Commonwealth Government, there is the significant possibility that the more urgent needs of the States will be progressively satisfied in the years to come.

Mr WHITLAM:
Werriwa

.- The States Grants (Special Financial Assistance) Bill gives us the most concentrated opportunity of the year to criticize the administration; of State governments to which we- are opposed and to praise the administration of those which we support. The only novel feature of to-day’s debate is that> it is the first one to have taken place since the High Court, largely composed of new members, re-asserted the war-time decision that the Commonwealth could validly impose uniform income tax and; presumably, any other kind of uniform tax that it desired. Since I hear some heads wagging, let me say more precisely that the High Court decision enables the Commonwealth, to make reimbursements of moneys raised, by uniform taxation - income or any other kind - under section 96 of the Constitution on, whatever terms the Commonwealth determines.

Before proceeding on general lines in this debate, I feel that I should comment briefly- on the matters raised by the last two speakers. The problems of Western Australia were put before us by the honorable member for Forrest (Mr. Freeth), who largely concentrated on them, and by the honorable member for Stirling (Mr. Webb), who referred to them several times. It is not sufficient, when speaking of Commonwealth assistance to any State, or of Commonwealth participation in the affairs of any State, to refer only to the amount given by way of tax reimbursements under the formula, or optionally by way of additional grants, or by way of loan allocations. Ohe must refer also to the Commonwealth’s indirect expenditure. Without criticizing the Government for it, or without expanding the criticism that has already been levelled, I direct attention to the fact - it may be inevitable - that Western Australia and Tasmania, and, to a certain extent, South Australia and Queensland, enjoy less of this indirect expenditure by the Commonwealth than do the welldeveloped and less vulnerable States, economically and strategically, of New South Wales and Victoria. The great providoring departments of the Commonwealth, the Departments of Defence Production, Supply and Works, and the Postmaster-General’s Department, place almost all their orders in the south-east area of the continent, in our most fertile crescent. Whether Western Australia is in a position to benefit from this- kind: of expenditure may be open to question, but the fact is that if certainly does: not benefit. If it were possible to work out the expenditure per capita in the various States by the Commonwealth departments I have mentioned, one would certainly find that Victoria benefits most of alf, that New South Wales receives the next greatest benefit, that Tasmania benefits least of all and that Western Australia receives very little more benefit than does Tasmania.

Quite apart from this indirect expenditure, very little of which, unquestionably, is made in the areas contained by our western and northern boundaries, there are direct grants. It is true that this year, under this bill, Western Australia, like all the other States, will receive a larger amount than it has received in previous years. A great deal of the increase over the years has been due to the operation of the formula, which has remained unaltered for ten years.

Mr Snedden:

– The formula has been changing each year.

Mr WHITLAM:

– It was laid down in 1945 and was altered in 1947. I think that if the honorable member looks at the statute he will see that the formula has remained unchanged since 1947.

Mr Snedden:

– It has been a sliding formula.

Mr WHITLAM:

– I think I can clear up the honorable member’s difficulties with regard to this matter. If he looks at Item No. 18 in the notes to the Treasurer’s Budget speech, or if he looks at the answer given by the Treasurer to a question asked by the honorable member for Melbourne Ports (Mr. Crean), appearing in “ Hansard “ of 5th November, he will see that the formula was laid down in 1947, and that the period of sliding adjustment under that formula has now come to an end It came to an end after ten years. From now onwards the reimbursements, under the formula, of income tax raised by the. Commonwealth will depend upon the adjusted populations of the States - that is to say, upon the populations of the States adjusted according to the number of children between the ages of five and fifteen years and the sparsity of population. The increase which the States have received over the years under this act and its predecessors has been mainly due. to the automatic application of the formula.

In addition, there have been supplementary grants each year. These are listed also in ;the Treasurer’s Budget speech, and they are itemized in a more helpful fashion in the answer which the Treasurer gave to the honorable member for Melbourne Ports.

The criticism that can be offered of the supplementary grants is twofold. First, they are completely at the option of the Commonwealth. There is no agreement between the States and the Commonwealth on any formula in respect of the supplementary grants. The Commonwealth makes grants or withholds them at its own wish, at its own option, at its own caprice. The States regard that procedure as obnoxious, and if 1 were a State-righter I would think that there was very much support for their point of view. The second criticism that can be offered of “the supplementary grants is that they fluctuate. Honorable members will see clearly how they have fluctuated by looking at the answer which the Treasurer gave to the honorable member for Melbourne Ports. They have -fluctuated in every State.

Mr FREETH:
FORREST, WESTERN AUSTRALIA · LP

– But the fluctuations have been upward movements.

Mr WHITLAM:

– It is true .that this is the third successive rise. I was not .proposing to give all the figures, since they can be verified by looking at page 1855 of “ Hansard “, but let me concede straight away that the figures for this year in all States will be higher than they have been for the last few years, although they are still lower than they were a few years ago, early in the Treasurer’s term of office. Since Western Australia has been dwelt on by the -previous speaker, let me give the figures for that State. This year the supplementary grant to Western Australia, apart from the amount which it will receive under the formula, will be £1,876,000. In 1951-52, however, the amount was £2,390,000, and in 1952-53 it was £2,110,000. Admittedly this year’s supplementary grant will be greater than any other grant in the intervening years since 1952-53, but .there is surely a legitimate basis for criticism by the States of the fluctuations in these grants. How can they be expected to .budget for their activities when the Commonwealth decides, .by its own whim, how much they will, get?

Mr Freeth:

– It would be far better if they raised their own taxes. ‘

Mr WHITLAM:

– I am .coming to that point, because -that is really what I want to deal with. I completely agree with the honorable member for Forrest (Mr. Freeth) that it is necessary to have a greater sense of responsibility in public administration in Australia. I adhere to the general principle that the people who spend the money should raise it, but I state the corollary that the people -who raise the money should spend it. There are two ways of approaching this problem in Australia. The one which is always propounded by Government members, and which was propounded in some detail by the honorable member for Forrest, is that we should equate State taxation to State expenditure. That is, if the States are going to spend a certain amount of money, they should raise it, or most of it. I should think an equally logical approach - and the only feasible approach - is to equate .Commonwealth responsibility to Commonwealth taxation.

Let me .develop that theme. I think that the States of Australia, being unequal in their population, productivity and fertility - I use that term in relation to the land - are unequal in their taxability. Reports were made to the Premiers’ conference in 1947, 1951 and 1953 by Commonwealth and State Treasury officers. The 1’953 report is available, but I do not think those for the other years are. Anybody reading the 1953 report will see, quite clearly, that the opportunities to tax individuals and companies vary very greatly from one State to another. Since income tax on individuals and on companies is the basic and most remunerative tax in Australia - according to the ideas of honorable members on -this side of the House it is also the fairest form of taxation - it should become more ,and more .the sole form .of taxation in Australia. If we ase to develop the whole of Australia, not -in State compartments but according to where we need the development, then the Commonwealth, and the Commonwealth alone should raise that revenue, and, the Commonwealth, more and more, should spend that revenue.

That applies not only to income tax - thanks to the decision of the High Court in two successive decades - but also to most indirect taxes.

Fortunately, the Constitution guarantees that the Commonwealth, and the Commonwealth alone can impose customs and excise duties, our principal indirect taxes. It excludes the States from raising these taxes. But even if the States were permitted to levy excise duty - and it has sometimes been suggested that they should be able to raise petrol tax - I do not think the States should demur when the Commonwealth, as it has done for many years, levies petrol tax and distributes it according to a formula which takes into account the needs of the continent as distinct from the people who pay the tax. It would suit Victoria - and Tasmania and New South Wales, for that matter - to have petrol tax spent on roads in the State where the people paid the tax. But there is no doubt that the whole of our vulnerable and undeveloped areas would suffer as a result. That is a clear case where governments, irrespective of their political complexion, have all practised the principle of uniform indirect taxation.

It is true that the States are left with restricted opportunities for raising taxes. Whenever they want to raise taxes they are in the invidious position of having to do so by way of stamp duties or by taxing people’s gambling or drinking propensities. Any State government, Liberal or Labour, which raises revenue by legalizing some hitherto illegal activity and then taxing it, is always chided with encouraging gambling or drinking or other forms of relatively public vice. The Commonwealth escapes that embarrassment, although it raises much more revenue by way of excise tax, say from drinking, than do all the States combined.

Let us look at the picture of the revenue which is raised in Australia. I will not give the latest figures for the Commonwealth, although they are available, because I want to compare State and Commonwealth figures. The last State figures which appear in a comparative form can be seen in the report of the Commonwealth Grants Commission which honorable members received within the last month. Honorable members can compare 1938-39, the last full pre-war year, and 1955-56. The amount of taxation raised by the States in that period doubled, from £51,797,000 to £103,021,000. The amount of taxation raised by the Commonwealth and retained by the Commonwealth duodecupled. it increased twelve-fold, from £72,228,000 to £840,318,000. The total taxation raised by Commonwealth and States has increased ninefold, from £124,025,000 to £1,100,264,000.

Mr Snedden:

– What is the word for “ ninefold “?

Mr WHITLAM:

– I think it would be nonupled. The States now spend threefifths of their expenditure from Commonwealth sources- £156,925,000 in 1955-56, and only two-fifths from their own taxation, revenue. The whole position is fundamentally unbalanced. The amount of revenue raised by the Commonwealth has. gone up incomparably more than the amount of revenue raised by the States, and now the States rely on the Commonwealth for most of their expenditure. I believe that the solution is that the Commonwealth should take over the most expensive functions of the States. It is a truism that the State deficits would disappear if, as the honorable member for Stirling (Mr. Webb) advocated this morning - citing chapter and verse in a field in which he is particularly well-informed - the Commonwealth ran the State railways. That would seem to be a completely reasonable proposition. At the time of federation most railway transport, both of passengers and goods, was within the borders of a State. Now, more and more goods - which is the most profitable part of railway business - are transported interstate. The prosperity of the railways depends more and more on how much long distance freight they can get to take from one State capital to another State capital - that is, between the large manufacturing cities in Australia.

I would go further and say that whilst the Commonwealth would relieve State deficits by taking over their railways, the real solution to the problem of Commonwealth and State financial relations, the key to administrative and governmental responsibility in Australia, is for the Commonwealth to run the other most expensive functions of the States. These would be hospitals, universities and secondary schools. I do not suggest all schools, although that might be a logical outcome; but the Commonwealth should look after at least technical and tertiary education, and also housing. If this were brought about, a proper balance would be achieved and the Commonwealth would, in fact, be spending the money it raised. Under that system the States would spend the money they raised, and we would put an end to this position in which the States are always complaining about the inadequacy of the Commonwealth’s grants for their purposes.

We on this side realize - actually it might even have dawned on some honorable members on the Government side - that there is always the cry that these- matters are given to the States by the Constitution. The real fact, of course, is that the Constitution nowhere mentions health, education or housing. The reason is that at the time of federation those activities represented the smallest expenditures by the States instead of being the largest, as at present. It would be an illuminating exercise for honorable members to obtain from the library annexe the budgets of all six States for the year 1900-01, the last prefederation year. If they examined those budget papers, they would see that expenditure by the States on education was very small. At that time also, there was virtually no expenditure on health, and there was no expenditure whatever on housing.

All those activities have become governmental responsibilities since federation, and, in the case of housing, since, the war. They are going to bulk larger and larger and it is not sufficient merely to quote expenditures by the States on those purposes and compare them with the increase in our population, or with the increase in our population plus the decline in the value of the £1. We have to realize that the cost of these things has increased not only quantitatively but qualitatively. Technical, agricultural and tertiary education costs much more proportionately than those forms of education at the time of federation, or even immediately before the war. Secondly, the increases in hospital costs, the methods of treatment, drugs and machines used and even the fees of specialists now amount to much more than a comparison with the C series index indicates. The same applies to housing. Housing now costs about five times as much per square as it did pre-war, but that is not just because of increases in the ordinary costs we refer to. The fact is that we are now getting better houses by any standards. They are healthier, better lighted and sounder houses.

In all those respects, the States spent almost nothing at the time of federation. Now the States spend the greater part of their budgets on those activities, and they expect the Commonwealth Government to raise the money to finance them because the forms of taxation left to the States will not finance them. They cannot be financed from drink, gambling or stamp duty. The only way to raise adequate moneys for these purposes is to levy them on those parts of Australia which are best developed. If Australia is to be developed as a whole, this is the only parliament with the incentive to ensure that there is balanced national development. If we go back to the times of State income tax, to which some honorable members still seem nostalgically to wish to return, Australia will become mort’ and more unbalanced in its development and more and more vulnerable in its strategic situation. I suggest that those activities should be taken over by the Commonwealth, for that is the only feasible solution.

Mr Hulme:

– Why not abolish the States altogether?

Mr WHITLAM:

– I should think that is the ultimate objective.

Mr Snedden:

– At the beginning of your speech you sought to protect the States; now you say the Commonwealth should take them over.

Mr WHITLAM:

– I am not wanting to protect the States; I am wanting to protect the activities which the people get from the State governments. 1 should say that such activities as education, health, transport and housing which the State governments carry on, with money which we are expected to provide, and which we increasingly provide, are as fundamental to the Australian people as any of the activities which this Parliament or which local government provides. What I do worry about is that there is not the balanced development, the national view taken of the various activities which all elected bodies carry on. Australia will grind to a halt and Australian civilization will fall if, for instance, local government falls down on the provision of such services as electricity and water, or if the Commonwealth fails to provide for defence or telecommunications, or if the States fail to provide education, health, transport and housing.

But all the costly State activities affect all Australians alike. One does not compartment such things in State boundaries. These State boundaries were never decided by the Australian people; they were decided at Whitehall 100 or more years ago, and they happen to suit the commercial and. political! interests which are.- now concentrated in. the State capitals; But if, as. I hope,, and as most honorable members opposite say they hope,, we are. to have, governmental responsibility in Australia,, the way. to get. it is. not by requiring’ the States,, with their unequal opportunities to raise taxation, to pay for those activities which, in- the last 50 years, have become their principal activities. The. way to get. it is to allow us who raise the money for those activities, to be responsible for them. In that way, we shall get responsibility.

Look at it this way. We already spend on health by appropriations from this Parliament directly to hospitals, patients, doctors and so on, fully as much as all’ the- States combined, spend on it. We spend as much on university education as all the States combined. We are the only people who spend any money on housing. Yet we cannot administer any- educational institutions except those in. our own Territories; we cannot administer any hospital except repatriation hospitals and those in our own Territories; and we cannot administer any housing except war service homes and housing within our own Territories.

Let us be practical about this matter. If we really want’ government responsibility, if we really want fiscal responsibility in Australia, there is only one solution to the problem. If we are to have fiscal responsibility in the interests of the development of Australia as a whole, and in the interests of all the people in Australia, wherever they happen to live, we shall get it not by harking back to the pre-war system that has gone overboard, thanks to a wise High Court decision, but by giving to the national Parliament full authority to finance and coordinate those activities which have become the biggest governmental activities in Australia and which are completely beyond the financial resources of the various States.

Mr Hulme:

– I should hate to agree with you.

Mr WHITLAM:

– lt would hurt the honorable member,, as. a matter of fact, but I do not think he would ever look glummer than he does now. The real solution of the problem of administration in Australia is for State functions to devolve to local government and to the national Parliament.

Those things which- concern, everyone, in Australia:, such- as those upon, which: I have-, concentrated-, should be co-ordinated by this Parliament, as they are already solargely financed by it; and. the matters which, concern people in the areas where: they reside - matters such as. the administrationof the law, water, services, land use and- so on. - very properly should be in the hands of. local government. State- governments are too big to look after those local issues and too small to: look after, the national ones. Until we work for, advocate, and accept responsibility on a national basis for those things which concern all. Australians alike and which they expect from public funds, we shall only exacerbate those irresponsibilities which we get in all State Parliaments and in, this. Parliament alike, and which, of course, we see in its finest flower during, this annual debate on the States Grants (Special Financial Assistance) Bill.

Sir WILFRID KENT HUGHES:
Chisholm

– I have been very interested in the only two speeches for which there has been time, so far, from the Opposition side of the. House. The honorable member for Stirling (Mr. Webb) indulged in a lot of political propaganda by producing a number of fictitious figures on- unemployment out of the hat. The honorable member for Werriwa (Mr. Whitiam) made a very interesting contribution to the debate; He started off in such a way that 1 thought that we would get something of real value from the honorable and learned gentleman’, but he finished by reminding, me of that verse out of the Bab Ballads which reads -

We are the true selected few,

May all the rest be damned.

There is only room for me and you,

We can’t have heaven crammed’.

In other words, Opposition members might say that they cannot have Canberra crammed because they are unificationists and do not believe in- the States. Both honorable members said, in effect, “ Let us take over from the States all their expensive institutions and instrumentalities which they cannot afford to run. They cannot afford to run them because we have more or less sent them bankrupt- by reducing their remittances “. Obviously, Labour policy is to. go on keeping these remittances so small that the Commonwealth will have more and more excuse for taking, over more and more State functions. On the- other hand, we on the Government side of the House call ourselves “federalists “; we believe in the federal system.

Mr Webb:

– I thought that the honorable member was going to say that they called themselves a government.

Sir WILFRID KENT HUGHES:

– I said that the Government and the members on the back benches who support it believe in the federal system. Is the problem of Commonwealth and State financial relationships so insoluble as it has appeared to be over the last ten years? I ask all honorable members on this side of the House, including myself, “ When we say that we are in favour of the federal system do we mean what we say; or do we lack the capacity to put our policy into operation? “ Have we, perhaps, become tired at the top and disinterested at the lower level? Or do we really say one thing and mean another? So far, there has been very little action.

This afternoon I want to put forward one or two suggestions with regard to this problem. I have said before, and I say again, that I am one of the few in this House who have sat at the table of the House at a Premiers conference, representing a State government. The late Mr. Chifley said on one memorable occasion, which, is illustrative of what has happened since and probably what had happened before, “ Gentlemen, the vote is in the affirmative and the answer is in the negative “. In other words, he said, “You might just as well not come here. You are only voting on something on which somebody else has already made a decision “.

I would appeal to honorable members to take a little more interest in State affairs because many of us do not seem to know even the approximate boundaries of State and federal jurisdictions. Even in another place which is supposed to be a States’ house, its members do not seem to be interested in State problems at all. I had hoped that they would set up a select committee on problems of this nature some time ago. However, in L953 we decided to go places. We decided that we would do something. We decided that we would make decisions. I think that most honorable members know of the report by Commonwealth and State Treasury officials on the resumption of income tax by the States. It starts off with a statement by the right honorable the Prime Minister (Mr. Menzies) as follows: -

Our first problem concerns the validity of the present financial system under which we work. That has been challenged from time to time by New South Wales.

It has also been challenged recently, by Victoria. I cannot read the whole of this report, but I do not want to be accused of tearing sentences out of their context. I am afraid that I may perhaps fall into that error, but I think that I shall convey the main sense of the report. The Prime Minister, in the course of the statement to which I have referred, also said - f say at once that, as a government, we agree that this is a thoroughly unsatisfactory state of affairs, and that, in principle, it would be most desirable for the States to be in command of their tax revenues. Therefore, I tell all the States here represented that the Commonwealth Government is abundantly and promptly willing to discuss with them the return to the States of their taxing power.

When the Victorian Premier, in speaking to the Victorian budget, referred to the return of taxing powers to the States, he said, in regard to financial relationships generally and the effect of the High Court judgment -

T recently asked the Prime Minister to convene a meeting of Premiers for this purpose but he has informed me that he is not prepared to do this.

I do not know whether that statement is right or wrong.

Mr Hulme:

– A meeting had been held earlier.

Sir WILFRID KENT HUGHES:

– Yes. But this request was made after the High Court judgment had been delivered. One reason that was given for the earlier delays was that Victoria, I think backed by New South Wales, had taken the matter to the High Court. Consequently, it was said that the matter was sub judice and that nothing could be done about it. This is one of the reasons why I feel that it is necessary for a conference to be held now that the judgment has been given.

The Prime Minister said, in the statement to which I have referred, “What position are we in to determine what State expenditure ought to be? “ I think that this applies to every member in this House. The Prime Minister also said - 1 think it will be agreed, for example, that last year we made a very handsome addition to the formula figure; but how am I to know whether the figure that we have in mind is correct or not unless I am prepared to tell a Premier what should be done in the way of expenditure in his State?

That is all very true. Other statements which were made in this document are well worth reading. The Prime Minister also said -

My Government believes that the present position is completely unsatisfactory and that we should do our best to resolve it.

As a result of that opinion, a committee was appointed which I think reported after about eight months. But since then, perhaps due to the legal challenge, nothing seems to have been done. 1 think that the Institute of Political Science had a special seminar or whatever they call it on the subject of taxation. One cannot call a gathering a “ conference “ or “ session “ nowadays; it has to be a “ seminar “ or some other fancy name. I think one of the recommendations of that seminar was tha: before any review was made either of the formula or of the question of returning taxing powers to the States, the Constitution should be reviewed.

A review of the Constitution started last year. I suppose that we are now not doing anything about ‘ Commonwealth-State financial relationships because the Constitution Review Committee is reviewing the Constitution. So we go on and on. We are either tired at the top or disinterested at other levels. We seem to let this thing run on. The appointment of committees only seems to cause further inaction. In fact, -.if we are really honest with ourselves in this House we might say that we listen to the tired State waves vainly breaking, hoping that they will become more tired and that finally the storm will blow over and leave the financial sands to continue to be dominated by our advisers who have been trained in the London School of Economics and who, like the Labour party, do not believe in federalism. That is one of the reasons why we get nowhere. They are not federalists. There is nothing sinister about this but they quite frankly and openly believe in complete control, as unificationists. Either we agree or we disagree. That is obvious in the banking legislation now before the House. The honorable member for Stirling and the honorable member for Werriwa want to take over the railways because they do not happen to pay, or the -universities because they are expensive.

Others want to assume complete control through the new Commonwealth developmental bank of the State agricultural banks - whether we call them rural finance organizations or agricultural banks - thereby gaining complete control of closer settlement in every State. The Commonwealth would again be taking over another State function. I do not want to say anything further on the banking legislation to-day; I merely mention it as an instance of what is happening. We must make up our minds whether we agree or disagree, or else play the same game as Nehru plays with regard to the Kashmir problem.

Recently the Treasurer (Sir Arthur Fadden) paid a visit to New Guinea, and he later made what I thought was a very good statement on what we are doing in New Guinea and the finance required there. What the right honorable gentleman said in that statement on New Guinea can be applied almost 100 per cent, to the States. I hope that the Treasurer will pay a visit to Victoria and make a similar statement after seeing that State.

It is easy to put it that way, but these things are not simple. If we still believe in the federal principle, then let us cease treating the States like “ Little Lemon “, the “ Sputnik “ dog, which is apparently kept alive by feeding it small rations of vitamins now and then. It is eventually hoped to bring the animal safely back to earth. Whether it does return safely or not is problematical, and whether the States remain alive or not on their present financial rations is also problematical, but it seems that they will not be able to survive with the finance at present allotted to them. If this Government refuses to do anything to review the position, then I suggest that all the States should go to the Grants Commission. Let them forget about this psychological term, “ mendicant State “. lt does not mean anything. The Commonwealth Grants Commission is supposed to give justice to three States because they have various handicaps in overcoming their particular problems of development. The commission takes notice of what is happening in the taxation and administrative fields with respect to Victoria, New South Wales and Queensland, and endeavours to equalize the position in the other three States. In my view the only way that Victoria, New South Wales and Queensland will ever get proper consideration of their problems is to go to the Commonwealth Grants Commission themselves. I do not think that any federal government has yet failed to give to the States what has been recommended by the commission - not of recent years, anyway. I think that the commission, either in its present form or in some future form, has a very valuable part to play. I think we would all agree that the basis of any review must be that we have to do one ot two things. As both the honorable member for Forrest (Mr. Freeth) and the honorable member for Werriwa have said, the Commonwealth must either return to the States some of their taxing powers or continue with uniform taxation. I do not propose to go into that subject in detail. It is a very complicated matter, but that is one form that any review might take. Personally, I favour uniform taxation.

The second suggestion made by the honorable member for Werriwa was that there should be a revision of the formula for the distribution of revenue to the States. It could be put on a per capita basis, as has been asked for by Victoria. If it was on a per capita basis, Victoria would not be this year budgeting for a deficit of £3,500,000, but instead would be balancing its budget. Education, hospitals, transport, and similar services can be judged on a per capita basis, and I think that the original distribution should be made fundamentally on that basis. Then bodies such as the Commonwealth Grants Commission could review the disabilities of one State compared with another and make a recommendation for additional finance to be given to that State to help it to overcome its disabilities. In other words, by that means, if there were a shortage of loan funds, what the honorable member for Werriwa calls a balanced national development may be achieved.

Another factor that might be taken into consideration, which was not present when the formula was originally put into operation, is the number of immigrants going to each State. Victoria has been under a big handicap in that regard, because the children representing the natural increase do not suddenly want to go to school when they are a day, a week or a month old. They do not suddenly want a new house, and I hope they do not immediately want hospital attention. The increase in population through immigration is much more expen sive than the natural increase for the reason, that immigrants have immediate needs. Originally, Western Australia had the greatest percentage increase per capita from immigration, although it may have dropped back since Kwinana was finished. Victoria now absorbs between 45 per cent, and 50- per cent, of immigrants, and it is thereforeunder a greater handicap than any other State. Of what use is it for members of this House to turn round and criticize theStates for their wasteful expenditure when in the Budget this Government admits that an additional £87,000,000 is going into its coffers this year? Of that sum, the Stateswill be given £22,000,000 and the Commonwealth will spend the rest. No wonder the Commonwealth Public Service can go on raising salaries higher than the State servicesand thereby take people away from the States and upset the whole of their administration. I have had three or four years’ experience of what happens along those lines; I arn not just stating something fictitious in order to put in a plea on behalf of the States.

The honorable member for Werriwa pointed out that the supplementary grantsin addition to the formula, which we are now discussing, have been decreasing. Two> years ago the sum was £27,000,000; now it is £23,000,000. Yet the difficulties of the States are increasing. I have in my hand’ a copy of the Victorian Budget. This, of course, relates to Victoria, but the same thing probably happens in other States. In hisBudget Speech this year the Premier and Treasurer of Victoria said -

This year we have been able to see the real pressures which are operating on the State Budget. These pressures all stem rom the same source, namely the demands imposed by an expanding, population. In the two years since my Government was returned to office the population of Victoria has increased by 150,000 people, or 6- per cent.

Provision must be made for this increase of population. It is estimated that the total expenditure this year in Victoria will be morethan £7,000,000 greater than last year, of which salaries, wages, and pay-roll tax account for almost £3,000,000, interest and debt charges for more than £3,250,000, and’ hospitals, and charities and health servicesfor more than £1,000,000. The increased’ provision for salaries results, not from salary increases, but from the appointment of additional teachers, additional members– of the police force, and other services, who are required to carry on the ordinary functions of the State. If you have a look at the size of the classes in schools in New South Wales and Victoria, you will agree that they are much too big. It is not a good thing to have small children sitting on cushions because there are no desks for them, but that is the only way the schools can get them in. A child of the third generation of my family is doing just this at the present time. The Victorian Budget speech continued -

Interest and debt charges on new loan expenditure and the effect of maturing loans being converted at higher interest rates represent a particularly heavy burden on the State’s finances.

Dealing with this loan problem, the Premier said -

While the State has to meet debt charges on all its capital expenditure, the Commonwealth, through its monopoly of major taxation fields,-

Which is quite correct -

  1. . has been able to meet the whole of its capital expenditure from revenue on which no debt charges are paid. In addition it lends to the State some of its surplus taxation moneys and charges interest and sinking fund contributions on them. In the Estimates for 1957-58, we have had to provide a total of £4,500,000 to meet debt charges on surplus Commonwealth tax revenues which have been made available through the Loan Council in recent years.

We are raising forced loans because we take so much money in taxes that people have not the savings to put into loans, or are not too keen to invest in them because of the decreasing values caused by creeping inflation.

The practice of making the States pay interest and sinking fund charges on moneys which come from revenue is making a farce of the original Financial Agreement, which was, I think, the Financial Agreement passed in 1927, the first year that I was elected to a State House. Under the agreement, in return for the States giving up certain rights, the Commonwealth offered to pay for the States a certain percentage of their sinking fund commitments. The Commonwealth is still doing that, but it is not itself paying interest and sinking fund charges on money used for its capital works. Therefore, as I said before, the Commonwealth Railways are able to say, “ What good boys we are! Our expenditure is less than our revenue.” This is easy enough when you do not have to pay interest and sinking fund charges on more than one-third of your capital. If we have to go on with this practice of forced loans, why cannot the States, in proportion to the amount of .loan money they use, receive their fair share of this money, free of interest and sinking fund charges? I know that if that were done we would have to raise extra revenue, because we would not be getting the same sum in interest from the States. But why should the Commonwealth make its Budget look very good by using for its capital works money on which it pays no interest and sinking fund charges, while making the States pay those charges on money used for their capital works?

All in all, it is perfectly obvious that we have reached the stage when we should have a review of the Commonwealth-State financial relations. The need for such a review must be admitted to be pressing and immediate, unless we are in accord with the Opposition’s policy of abolishing the State Governments. I do not think that the Government or any member on this side of the House is in favour of such a policy, but there are more ways than one of killing the cat. If we go on causing the death of one after another of the States’ instrumentalities or functions by slow financial strangulation, we might as well give up the idea that the Constitution is based on federal principles. We might as well have one national Parliament and say to the States, as the honorable member for Werriwa (Mr. Whitlam) suggested, “ Let the local government boys operate locally, and we will take over the rest.” I do not believe in that. In spite of the number of times in the past that we made promises but took no action, in spite of legal challenges, and in spite of committees on constitutional reform, I hope we will remember that the States perform an important function under the Australian Constitution and play an important part in the economy of Australia. They are closer to a lot of problems than are many of the members sitting in this chamber. They are much closer to such problems as closer settlement. Administration from afar is a very bad thing indeed, and that is another reason why I believe the States are of great importance. I am sorry that during the time I have been in this House, including the time I was a Minister, all we seem to have done each year has been just to give an extra twist to the financial cords round the throats of all State governments.

Mr BEAZLEY:
Fremantle

.- I think the honorable member for Chisholm (Sir Wilfrid Kent Hughes) might have carried his analysis of federalism further. It is quite clear from his speech that to-day the centres of protest against the present financial arrangements between the Commonwealth and the States are in Victoria, in particular, and in New South Wales. The honorable gentleman implied that before the war federalism worked to the contentment of the nation. The facts are, of course, that before the war the centre of protest against the way in which federation was working out was in the lesser States. There was a secession movement in Western Australia, which culminated in 1933 in a two to one vote to withdraw from the federation. It is very easy for the present Premier of Victoria, when he concentrates on what he now regards as the over-centralization of financial power in the hands of the Commonwealth Government, to forget that it was the pre-war position of Victoria and New South Wales which led to the lesser States having the point of view which now leads them to support the centralization of financial power in the hands of the Commonwealth, and only to demand greater and greater grants from the Commonwealth. If they get those grants, they are perfectly satisfied with the uniform taxation system.

The honorable member for Chisholm should remember that federalism never really worked, although its injustice was better concealed before the war than it is to-day. The tariff policy of the Commonwealth created the industries of Victoria and New South Wales, but the tariffs imposed immense burdens on the lesser States. If you read the evidence of the late Sir James Mitchell before the Royal Commission on the Constitution in 1929, you see that when the minor States imported, mostly from the United Kingdom, locomotives, railway lines or any of the capital goods they needed to develop their large areas, they had to pay a heavy Commonwealth tariff on what they imported, and that put up the burden of interest borne by all their undertakings. The Commonwealth tariff policy created in Victoria and New South Wales large incomes for the Governments of Victoria and New South Wales to tax, because the higher incomes followed this concentration of industry, but that same tariff policy increased the burden on the lesser States. What happened under uniform taxation was that the Commonwealth, having by its fiscal policy created industries in New South Wales and Victoria, proceeded to tax them and then to disburse the proceeds evenly. Before the war, our industries were concentrated in Victoria and New South Wales. The high incomes were there, but never was any of the revenue derived from taxation on them expended in the agricultural States, which gained no benefit whatever from the tariff policy of the Commonwealth.

Mr Hamilton:

– The agricultural States bought their machinery from the industrial States.

Mr BEAZLEY:

– I do not suggest that this is an interstate question. The farmers of New South Wales took exactly the same view as was taken by farmers in the predominantly agricultural State of Western Australia. That view is the historical root of the New States Movement in New South Wales in 1933, which coincided with the secession movement in Western Australia. Primary producers were totally dissatisfied with a tariff policy that completely discriminated against them and nurtured secondary industries. The primary producers in New South Wales regarded Sydney and Newcastle as the villains, whereas, in Western Australia, the tendency was to regard the whole of New South Wales as the villain of the piece. But the point was that the fiscal policy of the Commonwealth before World War II. created such dissatisfaction that this powerful secession movement arose in Western Australia.

If we intend to abolish uniform taxation, we have still to ask ourselves whether, if the Commonwealth’s tariff policy favours the development of industries in certain areas, the State governments administering those areas will say that they have developed those industries by their own enterprise, aided by Commonwealth policy, and, therefore, that they owe nothing to the other States. They were content to take that attitude for twenty years, and the Victorian Government was content to reap the benefit of a Commonwealth tariff policy that caused great industries to develop in Victoria, while the lesser States were left to limp along, as the evidence given by Sir James Mitchell before the Royal Commission on the Constitution showed clearly.

I think that the position taken by the honorable member for Chisholm is absolutely logical for a convinced federalist, and that he is almost as convinced a federalist as is any State Labour premier, though Labour has a unification platform. But, to take the matter to its logical conclusion, we have to get over the decision given by the High Court of Australia in the Engineers’ case, in 1920, and say that we will have a doctrine of the immunity of instrumentalities, such as existed before that case. Under that doctrine, if the States imported locomotives, railway lines, or anything else, for their railways, the Commonwealth could not touch those imports, because they were brought in by State instrumentalities. That, I think, is logical federalism, but it was destroyed by the High Court decision in 1920.

I do not think that one could honestly accuse this Government of being less generous to the States than its predecessors were. The statistics show that, in the financial year 1946-47, the Commonwealth grant to the States totalled £42,000,000 whereas it now totals £190,000,000. If we take the present value of money as one-third of the value of ten years ago, a grant comparable with that of £42,000,000, in 1946-47, would now be £126,000,000. However, the grants now total £190,000,000; so that there has been a great advance. Therefore, I think that the States have no reason to complain about the amount that they receive, and that complaints of the kind made by the honorable member for Chisholm are not based on a sound analysis of the position.

Mr HAMILTON:
Canning

.- I am sorry that the honorable member for Fremantle (Mr. Beazley) found himself unable to continue his remarks, and I hope that he will have an opportunity to complete them later. I rise to answer some of the comments that were made earlier by the honorable member for Stirling (Mr. Webb).

Mr Roberton:

– He was only joking.

Mr HAMILTON:

– I should be glad to hear that, if it came from the honorable member himself. He told the old, old story that the States were not receiving enough money. That was the tenor of his remarks in opening the debate on behalf of the Opposition. I recall similar remarks made by honorable members in this place, and by members of the State parliaments, over the last eleven years. The story has always been the same old one, and however those who tell it are questioned - whether by interjection, or in any other way - they never suggest any means that could be tried in order to obtain more money foi the States if, as is said, they are not getting enough.

The honorable member for Stirling well knows that the financial relationship between the Commonwealth and the States has changed since the present Government has been in occupation of the treasury bench, because it has completely vacated the loan field and left it exclusively to the States. It has gone even further, and, where it has been impossible to raise sufficient loan funds for the works programmes of the States, which have sometimes been almost fantastic, it has provided funds from its own resources, and taxed the people in order to augment the yield of the loan market, and, at the same time, has undertaken its own works out of revenue. But the Opposition will never come into the open and announce by what means it proposes to obtain additional funds, if, as it says, and has said repeatedly, the States have been continually starved of funds since this Government took office. We cannot get from Opposition members any direct statement of their proposal for the introduction of capital issues control, which would result in the control of all investment throughout the country. It would provide one means by which moneys could be channelled into the services of government. No Opposition member has proposed . control of hirepurchase transactions. The Opposition knows full well that it is doubtful whether the Commonwealth legally has power to impose controls in those two fields, which are the prerogative of the States. Opposition members do not suggest heads of Commonwealth expenditure under which reductions could be made in an effort to provide more money for the States.

I must admit that, in his remarks to-day, for once, the honorable member foi Werriwa (Mr. Whitlam) did not offer many criticisms about the financial relations between the Commonwealth and the States. Most honorable members know, of course, that he was leading in another direction altogether. But the honorable member for Stirling, who led for the Opposition in this debate, was most critical of the Government in this connexion. He then proceeded to discuss the formula under which the grants are disbursed. You, Mr. Acting Deputy Speaker, may recall that, by interjection, I asked him what the formula was, and that he made no response. I do not know whether the honorable member for Werriwa was in step with the honorable member for Stirling when he said, later, that the formula had not been altered since 1947. If the matter is dealt with forensically. the honorable member for Werriwa may be right up to a point. But I think that he knows well that the formula is a sliding one that takes into account changes in the populations of the States year by year, and increases in costs, particularly in labour costs.

Mr Whitlam:

– But the “slide” was determined in 1947.

Mr HAMILTON:

– The “slide” was determined in 1947, and I suggest to the honorable member that it altered, not the application of the formula, but the result of its application.

Mr Cairns:

– It altered the result.

Mr HAMILTON:

– It altered the result, because the formula itself was altered when the figures on which it was based were altered. The honorable member for Werriwa cited “ Hansard “ of last Tuesday. He will find there at page 1855, in an answer given by the Treasurer (Sir Arthur Fadden) to a question asked on notice by the honorable member for Melbourne Ports (Mr. Crean), the following clear statement: -

In 1957-58, and each year thereafter, the whole of the tax reimbursement grant will be distributed in proportion to the States’ adjusted populations.

I took it from the comment made by the honorable member for Werriwa that the grants were to remain static from now on. I do not subscribe to that view. While the formula takes cognizance of increases in population, and in wages, in the financial year previous to that for which the grant is being made, the formula, in effect, does not remain static.

Mr Whitlam:

– My point was that the States knew what they would get under the formula but they did not know what they would get by way of supplementary grant.

Mr HAMILTON:

– I shall deal with supplementary grants in a moment.

Sir Arthur Fadden:

– The States did not know what the gifts would be!

Mr Whitlam:

– That is right.

Mr HAMILTON:

– That also covers the point that was raised by the honorable member for Chisholm (Sir Wilfrid Kent Hughes). I hope that I do not do the honorable member for Chisholm an injustice when I remind the House that he said that no cognizance was taken of the increase in population as a result of the migrant intake. The Treasurer, in his reply to the honorable member for Melbourne Ports, said quite plainly that the grant was to be distributed partly in proportion to the States’ populations as adjusted for numbers of children aged between five and fifteen years and for relative sparsity of population.

Sir Wilfrid Kent Hughes:

– But migrant increase is much more expensive than is natura] increase.

Mr HAMILTON:

– That may be so, but in regard to reimbursements, provision is made in the formula all along the line to meet that increase in population irrespective of whether it consists of men, women or children, or whether they be black, brown or brindle.

I am glad that the honorable member for Werriwa reminded me about supplementary grants. I again direct the attention of the House to the reply of the Treasurer to the question asked by the honorable member for Melbourne Ports. I advert to it only to establish the fact; my recollection was that the position was as stated in the reply. If we look at the reply, we notice that from 1946 to 1949, when Labour was in office, none of the States, irrespective of their financial position, received any supplementary grants.

Mr Webb:

– But Labour introduced them.

Mr HAMILTON:

– The honorable member for Stirling says that Labour introduced supplementary grants. He is partly correct, because they were introduced in the financial year 1949-50; but the honorable member knows that they were forced out of the Treasurer of the day because of the disability the States were suffering as a result of the disastrous coal strike in that year. I attended some of the Premiers’ conferences before that time, and I know that, when the Premiers asked the Commonwealth Treasurer of the day for a little more money, the answer was “ No “. There was no amplification of that answer; the States just had to take it. If we look at the reply of the present Treasurer, to which I referred earlier, we note that since this Government assumed office the supplementary grants have been considerable.

As I said earlier, the Commonwealth also completely vacated the loan field in favour of the States. That policy was adopted in order to allow the States to have whatever finance was available from that source. The Commonwealth also saw that the States shared the desire of the Commonwealth that advantage be taken of the opportunity available in such prosperous times to develop the country. I do not think anybody can lay against this Government a charge of having treated the States in a niggardly way since it assumed office.

Some comments have been made on the return of taxing powers to the States. No one wishes to see those powers returned to the States more quickly than I do, but I have noted repeatedly that, on every occasion on which it has been suggested all the State Premiers, with the exception of the Victorian Premier, have run away from the suggestion, despite the fact that they have been loud in their condemnation of Commonwealth and State financial relations.

I think it is common knowledge that, not long after the States were first offered the return of taxing rights, the Premier of South Australia said, “ Yes, we will take back our taxing powers if the Commonwealth will vacate the field of taxation to the extent of £250,000,000 “. Speaking from memory, I believe that the tax reimbursement grants in that year were of the order of £70,000,000. How very nice that would have been for the Commonwealth, which has the difficult task of financing repatriation services and a host of other things! I understand that another Premier had the audacity to say to the Commonwealth, “We will take back our taxing powers on the condition that the Commonwealth taxes all incomes of under £600 a year and leaves the balance to us “.

How very nice! I am prepared to say here and now that, if the States were offered a return of rights in relation to taxes that are a little pin-pricking to the people, they would run away from the offer just as they ran away from the first offer that was made.

The States must remember that there are two sides to every discussion, and they must be prepared to accept their fair share. 1 do not intend to deal with the matter at length, because the various aspects of it have been mentioned here repeatedly and I do not think that this measure should be used as a vehicle to advance the case for a return of taxing rights to the States. I well recall the Prime Minister (Mr. Menzies), in 1950, making an offer in this chamber to the Premiers to get down to some sensible arrangement with respect to their developmental works programmes. He said to them - and the Treasurer heard the statement - “ Gentlemen, I would like you to go away and consider some form of priority within your own States in regard to your works programmes “. He added, “ I would like you to come back here and pool your suggestions. Then we could form a committee to work out a sensible arrangement for the whole of Australia so that we would not be pulling against one another when everybody wanted to get on with the job “. The Premiers accepted that proposition.

Within a very short space of time, they again met here. When the Prime Minister called on the various Premiers to state their case, as is usual in such discussions, the comment of the first Premier who spoke was, “ I will have no other State interfering with anything that I want to do in my State “. It was never intended that there should be such interference. The idea was to try to get some order into the arrangements to finance the various developmental programmes. As far as I could see, the only Premier who accepted any advice, shall we say, was Mr. J. B. McDonald of Victoria. He had three water supply problems on his hands. There was the one at the Eildon Weir, one on the Upper Yarra, and another somewhere else. He eventually realized the nature of the situation. He took men away from two of the projects and concentrated on one and finished it.

Sir Wilfrid Kent Hughes:

– We still have not the water channels to take the water away.

Mr HAMILTON:

– I am not talking about the actual administration of the project; it is the principle that concerns me. Until the States arrange a priority system for such works, there will always be this argument about finance. I am fast being driven to the conclusion that this Government is making a rod for its own back by continuing to pander to the States.

It is well known that there is a legal doubt as to whether this Government has any control over capital issues, that is, over ordinary investment. It has very little control over hire purchase.

Mr Whitlam:

– It has none.

Mr HAMILTON:

– I think that is the position.

Sir Wilfrid Kent Hughes:

– Yet it carries on hire-purchase activities through the Commonwealth Bank.

Mr HAMILTON:

– I do not think that goes very far. But the Commonwealth has no control over the vast hire-purchase business outside. I am not opposed to hire purchase. I am being told repeatedly by State legislators that they are advising their relatives and friends not to invest in Commonwealth loans but to put their money into hire-purchase activities where they will get a bigger return. They turn to members of this Parliament and say, “You fellows must get into the market and pay for your money the same as everybody else “. Then they come along to the Loan Council, and let me say here that the representatives of the six States on the Loan Council are the ones who determine the interest rates on Commonwealth loans.

When State legislators advocate this sort of thing in their own States, and at the same time kick up these rows against the Commonwealth, I think the Commonwealth should say to them quite plainly, “ If you are going to permit this sort of thing to happen in your individual States we are not going to bother much about supplementary grants. We will take advantage of the Financial Agreement, take our 20 per cent, at least to do our part of the works and you can raise taxes for your own needs “.

The Prime Minister and the Treasurer, as everybody knows, suggested to the States a couple of years ago that they refer to the Commonwealth their powers over hire purchase. What have the States done about that? Not a thing! It would be no good if some States acted in this matter in one way and others acted in another way. They must act in unity as, otherwise, capital will be driven from one State into another. But the States have made no attempt to tackle the problem. I am not opposed to hire purchase in principle, but I am opposed to what is going on at present and to some of the returns that various people are getting out of hire purchase. The day must come, and the sooner the better, when the Commonwealth will tell the States that the picnic is over and that they must get down to sensible financial relations with the Comonwealth. I do not know whether or not it is true, but I read in the press a report that a prominent member of a State parliament had told people to “ spend, spend, spend “. That man supports the brand of politics that I support, and I was astounded that a man of the same political persuasion as myself would line himself up with the Deputy Leader of the Opposition (Mr. Calwell) who in 1950 told the people to “ spend, spend, spend “ because the Government in power would take all their money from them anyway. I think every honorable member remembers the making of both of those statements. While the States adopt these attitudes I think the Commonwealth should wake up and have something to say.

Mr Webb:

– They would certainly have got value for their money in those days.

Mr HAMILTON:

– When?

Mr Webb:

– In 1950.

Mr HAMILTON:

– Let the honorable gentleman look at the statement that appeared over his signature, and came from the trades hall in Perth during the 1954 election, a copy of which I have in my office, and which I shall be delighted to show him if he wishes to see it. The statement compared what the £1 could buy in 1947, with what it bought in 1954.

Mr Webb:

– I am talking about 1950.

Mr HAMILTON:

– You can have it either way, if you like. You went on to say that the Chifley £1 was worth more than the Menzies £1; but you cunningly failed to indicate the difference between the basic wage in 1947 and the basic wage in 1954. If the honorable gentleman cared to work out the difference he would find that the people in 1954 had more money left in their pockets after they had bought these goods than they would have had left after having bought the same goods in 1947, 1948 and 1949. We all know- and it was made quite clear at the last Premiers conference - that the States have complete freedom in the spending of their own money. I do not blame them for wanting such freedom, but sometimes when the Premiers go away from here with the money that they asked for, or perhaps somewhat less than they asked for, we see money that was provided for war service land settlement, for instance, being spent by the States on something entirely different. In Western Australia, perhaps, money that was obtained ostensibly for a water scheme, electric light services and hospitals, is spent on the building of ten-story flats in Subiaco or somewhere else. These things are going on all the time. But as soon as there is a little bother, the States come back to the Commonwealth for help. As soon as they cannot complete a culvert or a level crossing they come to the Commonwealth for help.

Mr Turnbull:

– What about the Narrows bridge in Perth?

Mr HAMILTON:

– It is being built, and I invite the honorable gentleman to come and see it. He will think he is on Sydney Harbour. I think the States are doing very well out of these grants. Their increases in population and their increases in costs, particularly costs directly concerned with wages, are catered for within the tax reimbursement formula. In addition, they have these supplementary grants.

I support the legislation and I congratulate the Treasurer and the Government on the supplementary grants which it has made to the States year after year since the Treasurer has been in control of this country’s finances.

Mr CAIRNS:
Yarra

.- Every year, when this kind of bill is discussed, the whole field of Commonwealth-State financial relationship seems to be covered. Since I have been listening to, or taking an interest in, the debates in this Parliament, the division of those who participate in these discussions seems to be between members on the one side who claim to be federalists, and members on the other side who are accused by the federalists of being unificationists. Yet if the speeches of the members who make these allegations or are so labelled are analysed one finds it extremely hard to fit any one in particular into those categories in accordance with his policy. The honorable member for Chisholm (Sir Wilfrid Kent Hughes) claims to be a federalist and claims at the same time that the supporters of the Government are all federalists. We have just had a speech from the honorable member for Canning (Mr. Hamilton) who seemed to me to be anything but a federalist. He said, “ The Government is continuing to pander to the States “. He said that the Commonwealth Government had no power over some very essential economic activities which would be necessary if the aims of development and the aims of the Commonwealth Government were to be secured. He said also that the Commonwealth must tell the States that the picnic was over, lt seems to me that these are the sentiments of a unificationist. I do not know whether the honorable member for Canning would regard himself as a federalist, but he seems to me to be taking a very strong line in support of the further development of the powers of the Commonwealth Government.

The case advanced by the honorable member for Chisholm left unanswered the question of why he and other supporters of the Government should be federalists. There are well known arguments in respect of this, and I think that this is an opportunity for our giving some little consideration to those arguments underlying the belief in federalism. The first one is that in a country such as this there are matters which can be administered on a national scale only, these include postal services and defence. Therefore, these powers should lie with the central government. Then, on the other hand, there is the argument that certain things can be much better administered by State governments and local governing bodies. I think we are wasting a great deal of time in this debate by assuming, on the one hand, that the State governments are better than the Commonwealth Government, or on the other hand that the Commonwealth Government is better than the State governments. This argument is very often put forward by people if the State government happens to be made up of the party to which they belong, and vice versa. I do not think that there is anything to choose between the record of the State governments and that of the Commonwealth Government, irrespective of the party in control of the government. Likewise, it is very unrealistic to believe that State departments are better run, better administered or more efficient than Commonwealth departments, or vice versa. My experience has been that there is little to choose between the two. Certain Victorian State departments that I know of are better run than some Commonwealth departments that I know of. On the other hand, there are certainly some Commonwealth departments that are better run than some State departments. Consequently, I do not think that there is any justification for holding the view that, by its very nature, a State department necessarily will be more efficient or responsible than a Commonwealth department.

There is, I suggest, another reason which influenced many people to be federalists. Those who favour State governments are often prompted to do so for the reason that in the Legislative Councils of the States there must be inevitably - unless the franchises are changed - a conservative element in control. When one realizes how conservative are many Government supporters, is it not reasonable that they would look in kindly fashion upon the States, where conservatism in the Upper House is secured by a limited property franchise? It is quite a logical thing for them to do.

It is also pretty clear that those conservatives who drew up the Commonwealth Constitution, which underlies this bill, might have been misled when they selected a Senate which was supposed to be a State House, rather than one which had a property franchise. It would have been much more in the interests of conservatives if they had taken the latter course. I suggest that had they done that and secured an Australian Senate with the same kind of restricted franchise that applies in the Victorian, South Australian, Western Australian, or Tasmanian Upper Houses, we should not now find this tendency for conservatives to be federalists. The conservatives would not look quite so much to the States if, in this Parliament, there was a body which corresponded to the Upper Houses of the States.

Moreover, the federalists are being a little unreal, and are ignoring many of the things that have, in fact, happened. They are ignoring something that Alfred Deakin recognized in 1909 as inevitable. He recognized that the circumstances of Australia’s development were such that the States would inevitably be tied, financially, to the chariot wheels of the Commonwealth. The remarks of the honorable member for Canning (Mr. Hamilton) were perfectly consistent with that view and, indeed, confirmed it. No one seriously believes that any State government wants to get its taxing powers back. No one seriously believes - if he thinks about the matter at all - that nothing more is involved than a mere transference of taxing powers. As the honorable member for Canning has pointed out, the real problem is the division of the proceeds of taxation. It is a problem which confronts the financial administrators of this Commonwealth whenever they think in terms of returning the taxing powers to the States. They must always think in terms of the proportion of revenue to be returned to the States and the proportion to be reserved for the Commonwealth. This question of the division of the proceeds of national taxation is the real problem underlying the matter. It is useless to talk in terms of returning tax powers, or of federalism.

Then there are the underlying problems that were outlined by the honorable member for Fremantle (Mr. Beazley). The honorable member for Chisholm (Sir Wilfrid Kent Hughes) tended to speak as though it was not until recent years that the Commonwealth Constitution had not worked well. It has never worked well, because it was a bad document to begin with. The kind of bad working that we see to-day is just a different kind from that which was evident before the second world war. The honorable member for Fremantle pointed out that it was the small States - the “ claimant States “ as they are now called in the bill - which, before the war, were dissatisfied with the Constitution. They were dissatisfied because the working of the Constitution - especially the tariff provisions - had led to the much more rapid economic development of Victoria and New South Wales. It had given them a greater taxing capacity, and they spent the revenue in their own States. As a result, the small States, with their much lower taxing capacity, were not equally situated. This is the very foundation of the legislation that we are discussing to-day. Each year the report of the Commonwealth Grants Commission tells us that underlying differences in resources and economic conditions occasion greater budgetary difficulties in some States than in others.

Under uniform taxation, strong and resolute Treasurers such as the late J. B. Chifley, and the right honorable gentleman sitting on the front bench, have used the full taxable capacity of the Commonwealth to gather revenue which, as the honorable member for Canning has pointed out, they have spent for the greater relative development of the small States. My own view, as an Australian, is that that is a very good thing, and that the economic resources and capacity of Australia, concentrated so much in Victoria and Tasmania, should be shared to assist in the development of the States which are less economically sound. In that way, uniform taxation has had beneficial results. Although this has been a beneficial result of uniform taxation, these things must be offset against the views put forward by the honorable member for Chisholm. The honorable member came to the conclusion, one to which I think we should all come, that despite periodical changes - some of which have been improvements - the constitutional situation is still bad. That difficulty must be resolved if we are to obtain the best results for the community. The honorable member for Chisholm pointed out that this problem has been recognized for years, and that suggestions for the review of the Constitution had been put up, discussed and put aside. He suggested another one, but it seemed to me to be rather unrealistic. We ought to ask why it is so difficult to change the Constitution. I suggest that the answer lies in the influence of those who are essentially conservative. They do not want to change the powers of the Commonwealth because they fear that the new powers might be used to their own disadvantage. And those who are conservative do include those who have a very great affection for section 92, which protects their economic interests.

Mr Whitlam:

– The exploiters’ charter!

Mr CAIRNS:

– As the honorable member for Werriwa (Mr. Whitlam) reminds me, it is the exploiters’ charter. The conservatives may also include a good many other people who have a natural tendency, if they are reasonably well off, to prefer to vote “ No “ rather than “ Yes “. Sometimes they have nothing to fear but fear itself.

I believe that the honorable member for Canning has indicated some of the basic elements of an examination of bills of this sort. It is not much good our continuing to tolerate the conditions which cause economic inequalities between various sections of the Commonwealth and make it impossible or difficult to achieve our national economic aims, and to think that we shall alleviate the position by transferring a few million pounds to the States by way of a special grant, in a bill of this kind. We should come to grips with the situation and recognize that no government with such inadequate powers can achieve the objectives that have been sought by this Government - and I imagine that any government, irrespective of party, would have acted similarly - in the last eight or nine years. I refer to such economic aims as an immense immigration programme, and rural developments on the scale that has been indicated by the Prime Minister on several occasions. In considering this question of adjusting the inequalities between the various parts of the Commonwealth and of achieving the admitted aims of the Government, it is interesting to bear in mind that the Minister for Labour and National Service (Mr. Harold Holt), during the greater part of his term of office as a Minister, has had the job of running the immigration programme. He surely must recognize that the existing economic conditions, the conditions of inflation, have endangered that programme and have caused a reduction of the intake of immigrants during the last eight or nine years. It is not much use to ask some one to run an immigration programme unless he can rely upon some other member of the Government to be able to regulate the economic development of the Commonwealth in accordance with the immigration programme.

These things, I think, are fundamental. When we are talking, as we inevitably do talk in these discussions, about all the economic problems associated with the development of the States, these are things that we should take into account. We should cease trying to classify people as federalists or unificationists. Let us talk about the matters actually involved.

Sir ARTHUR FADDEN:
McphersonTreasurer · CP

– in reply - I desire to make one or two observations on some of the remarks I have heard during the debate on this bill. The purpose of the bill is to supply out of the Consolidated Revenue Fund various sums for the purpose of granting financial assistance to the States. The measure is based upon decisions made at a Premiers conference held for the purpose of deciding the amount of the reimbursement grants to be made under the income tax legislation, as well as any other special grants the Commonwealth might be inclined to make to the States over and above their legal entitlement to tax reimbursements.

I want to give the House a little of the history of tax reimbursement grants - to explain how the formula was established and how it has operated ever since. When the uniform taxation system came into existence, the then Treasurer had a conference with the States, and a formula was agreed between the States and the Commonwealth for tax reimbursement grants on the basis of the taxation revenue of the States at the time when uniform taxation was introduced. That formula was operated for some considerable time, but then the States realized, and impressed their realization upon the then Treasurer, that that formula was totally inadequate as a fair basis of compensation and as a means of enabling the States to supplement their own taxing powers.

The formulae governing the level and distribution of income tax reimbursement grants were introduced in their original form in the States Grants (Tax Reimbursement) Act of 1946. The formula governing the level of the grants was amended in 1947 and again in 1948. The States Grants (Tax Reimbursement) Act 1946-1948 provides that the aggregate grant in each year shall be equivalent to the amount of £45,000,000, adjusted in proportion to the variation in population between 1st July, 1947, and 1st July of the year in which the grant is made, and further adjusted by the percentage increase, if any, in average wages per person employed between 1945-46 and the year preceding the year of payment of the grant. The formula also provides that the aggregate grant in each year should not be less than £45,000^00.

Under the distribution formula, the aggregate grant was to be distributed among the States according to an arbitrary schedule in each of the years 1946-47 and 1947-48. In subsequent years the grant was to be distributed partly in proportion to the distribution in 1947-48 and partly in pro* portion to the States’ populations asadjusted for numbers of children aged between five and fifteen years, and for relative sparsity of population. Each year the’ proportion of the grant distributed on an adjusted population basis was to be increased by 10 per cent. In 1948-49, for example, 10 per cent, of the grant was to be distributed on an adjusted population basis and 90 per cent, in the same proportions as the grant payable in 1947-48. In 1957-58, and each year thereafter, the whole of the tax reimbursement grant will be distributed in proportion to the States’ adjusted populations. The existing legislation does not set any limits to the duration of the present methods of calculating the aggregate grant and its distribution.

That formula, and all that it implies, was agreed upon unanimously by all the States and the Commonwealth government of the day, meeting under the chairmanship of the then Treasurer, the late Mr. Chifley. There has been no variation of the formula since that time. To my knowledge, no one has asked, during the nine years that I have been the Treasurer, for the formula, which has been written into the law, to be amended. It prescribes the maximum legal entitlement of the States as far as tax reimbursement grants are concerned.

Mr Crean:

– That is the legal entitlement?

Sir ARTHUR FADDEN:

– That is the legal entitlement.

Mr Crean:

– Not the moral entitlement?

Sir ARTHUR FADDEN:

– It was also the moral entitlement, according to the assessment of Mr. Chifley, as I shall prove. Under the formula, the States should have received £70,000,000 in 1950-51, the first year of office of this Government, but, as a matter of fact, they received £90,398,000. Mr. Chifley held the States down, without relaxation, to their legal entitlement until the year 1949-50, when circumstances forced him to make a grant over and above the legal entitlement. Those circumstances were the disastrous effects of the Communistinspired New South Wales coal strike. In order to assist New South Wales during that period of industrial disruption, to compensate it for the loss of revenue caused by the strike, he wanted to increase the grant to New South Wales, but, of course, he had to deal with all of the States. He could not deal with New South Wales in isolation. He had to take into consideration the position of all the States in order to give New South Wales approximately the extra -£3,000,000 he wanted to give for the reason I have outlined. That was the first “time since the formula had been adopted that any payment above the formula payment, or the legal entitlement, was made by the Chifley Government.

It might be of interest to the honorable member for Stirling (Mr. Webb) to know that of the £8,000,000 supplementary grant to the States at that time, Western Australia was given only £661,000, whilst New South Wales received £3,261,000. In order to compensate New South Wales for the coal strike, Mr. Chifley had to give the other States a hand-out. What a hand-out he gave them! However, that is a matter of history. The honorable member for Stirling complained that this Government had starved the States, particularly Western Australia. I remind him of the financial starvation and malnutrition that the States suffered at the hands of the previous Treasurer.

Mr Bryant:

– The Commonwealth placed a greater interest burden on them.

Sir ARTHUR FADDEN:

– I will deal with that. Taking the broad position, this Government ever since it has been in office has given the States more than their legal entitlement under the formula; and up to the year 1957-58 the sum aggregates £181,092,000. That is how we have starved the States. This year they will receive £190,000,000. which exceeds their legal entitlement to which they unanimously agreed, compared with £70’537,000 they received in the last year of the Chifley Government.

Mr Webb:

– Do you think they are getting too much?

Sir ARTHUR FADDEN:

– No State thinks it is getting too much. I want to nail down the lie that this Government is starving the States. If it is starving them, goodness knows what malnutrition they suffered under the previous Government. The prosperity of the Commonwealth to-day is emphasized by the fact that on the formula, which is based on population and wages, the entitlement of the States when this Government took office was £62,537,000 whereas for the current year it is £166,200,000, over £100,000,000 more. That is undisputed evidence of the effect of this Government’s financial policy - prosperity, expansion and development - because the elements of the formula, population and wages, are exactly the same to-day as they were in 1949, yet the increase has been from £62,537,000 to £166,200,000.

Honorable members opposite have said we are starving the States. I point out that the Commonwealth’s financial assistance to the States does not stop at the tax reimbursement grants or the special grants associated with them. In addition, an amount of £77,000,000 is set aside in this Budget to provide aid and financial assistance to the States. That amount includes a sum of not less than £12,500,000 representing our contribution towards alleviation of the indebtedness of the States by way of interest and sinking fund payments. We have given the States £33,000,000 for roads generally, a special grant of £3,000,000 by way of diesel tax, £1,450,000 for mental institutions, £127,000 towards encouragement to meat production, and £2,300,000 for universities, making a total of £77,000,000 over and above the tax reimbursement grants and the special grants associated with them.

I turn now to the overall position of the States in their loan programmes. From 1951-52 to 1956-57, the States have spent an amount of £1,175,882,000. Where did that money come from? The States obtained it because we left the whole of the loan market, both internal and external, to them. In addition, in order that they could obtain the maximum amount to finance what we considered were their inescapable developmental programmes, we paid out of revenue, by unorthodox methods so far as accountancy principles are concerned, for the whole of our capital works and services, postal services, the Snowy Mountains scheme, war service homes, war service land settlement and so on. But who carried the stigma for raising that revenue? Why was it raised? Why did we adopt that particular method? The loan market could lot yield the requirements of the States. The amounts raised were less than were necessary for their indispensable and inescapable loan programmes and, being the National Government with a national outlook and a national responsibility, we could not allow the States to stagnate. So we had to come to the party to the extent I shall point out in a moment, and we had courageously to adopt politically unpopular methods in order to help the States. Despite the fact that we left the loan market to the States and that the whole of our capital expenditure was paid out of revenue, the Australian and overseas loan markets yielded only the sum of £587,000,000. Who supplied the remainder? The Commonwealth found the huge sum of £588,351,000, or practically half the total amount of £1,175,882,000. Yet honorable members opposite say we are starving the States and have no regard for them.

This Government has done all the unpopular things, yet the States have been the beneficiaries. What thanks have we had from any State as a consequence? But that has not deterred us. We have a national outlook and realize that the people of any State are Australians. This Government in its broad fiscal, domestic and economic policy does not consider artificial boundaries. We consider the Australian people as a whole, and our actions have proved the extent to which we have faithfully and in a practical way adhered to that policy.

Honorable members opposite have said that the Commonwealth charges the States interest on loan moneys. I want to put the record right. Honorable members will agree that had the loan market available in Australia and abroad been able to yield the £1,175,000,000, the States obviously would have had to pay the bond rate of interest on the total amount, but because, the Commonwealth provided half that amount the States have the audacity to think they should have the money free of interest. This Government actually paid the amount by cross entry because it is taken into account in arriving at the special grant which, this year, amounts to £23,800,000. The honorable member for Chisholm (Sir Wilfrid Kent Hughes) said that the special grant this year was less than that for the previous year. I point out that the grant for this year is £4,500,000 more than that for last year, and is £8,500,000 more than the grant for 1955-56. The States would be on a lovely wicket if the loan market failed to such an extent that the Commonwealth would need to find more than £588.000,000 and if interest was not charged on the amount made available to meet the deficiency. In those circumstances, the States would encourage the maximum amount of deficiency. What sort of co-operation to obtain the maximum amount from the loan market could we expect if that situation existed? That is the psychological effect of charging interest.

This matter has been debated quite frequently in recent times, and I assume that honorable members are familiar with the various points made in support of and in opposition to the present procedure. For example, it can be argued that, as the bulk of the State works programmes are of a productive character, interest is a cost which it is proper to take into account. In submitting their programmes for inclusion in the overall Australian Loan Council programme, the States do so, have always done so and have never denied doing so, on the basis that they are willing to meet the debt charges involved. The States argue at the Loan Council meetings that loan money can be raised to meet the cost of their programmes. If that is so, surely it means that they are prepared to pay interest on the money that they say is available to meet their requirements. But when the loan moneys fall short of the amount required, the States say that they should not pay interest on the money made available by the Commonwealth. The interest paid by the States is taken into account in assessing the reimbursement grants, but for the principles and for the reasons that I will outline, we continue the method that we have adopted. The States make their approach to the Loan Council on the basis that they are prepared to meet the debt charges involved. From that point of view, the sources from which the loan raisings are derived is scarcely a relevant consideration. In this connexion, however, the fact is sometimes overlooked that the Commonwealth, rather than see a substantial reduction in the volume of State works, has been prepared to levy additional taxation in order to ensure that essential works can still be carried out. That accords with what I said previously about our broad national outlook and our acceptance of responsibility for it.

I do not wish to weary the House with a recital of the various arguments that have been advanced from time to time in support of the present special loans procedure. I should like to draw attention, however, to one point which does not receive public mention, that is, that so long as the States pay interest on these moneys-

Mr Whitlam:

– I rise to order. Much as I and all honorable members would like to debate the loan policy of the Government, surely such a debate is out of order on a bill which is purely-

Sir ARTHUR FADDEN:

– Goodness gracious, after your speech!

Mr Whitlam:

– I did not refer to loan policy. The honorable member for Canning did, but I did not like to pull him up. This is out of order in considering a bill which deals with the reimbursement of taxation revenues for current purposes. The bill does not deal with loan policy at all. I should have liked to deal with loan policy, but I could not.

Mr ACTING DEPUTY SPEAKER:

– Order! When this debate opened, the first speaker for the Opposition was the honorable member for Stirling. He devoted the first ten minutes of his time to nothing but the loan programme. The Treasurer is in order in replying to what the honorable member for Stirling said.

Sir ARTHUR FADDEN:

– Thank you, Sir. If the honorable member for Werriwa (Mr. Whitlam) considers that this is not associated with the conditions and circumstances taken into account in arriving at the special grants, which are the subject of the bill, I have little regard for his constitutional knowledge.

I should like to draw attention to one point which does not receive public mention. It is that so long as the States pay interest on these moneys, they are in a much better position to maintain independence in rotation to the determination of the manner in which their loan moneys are expended. Naturally, no responsible Commonwealth government would be prepared to give this money interest-free to the States unless it had some say in determining the order of priority of the works on which the money would be expended. The method we have adopted is a sound method in the interests of the States and preserves their sovereign rights and responsibilities. I am sure that honorable members will appreciate that, if the Commonwealth were to begin making interest-free advances or grants on a large scale for State capital works, the day could speedily arrive when the States would find it very difficult, if not impossible, to maintain their independence in relation to the composition of their works programmes. Any such development would, of course, conflict with the desire of Australians and of this Government that Commonwealth-State relations should be developed on a partnership basis.

Interest is chargeable only on the difference between desired borrowings and actual loan raisings. We do not get any pleasure - nor do we get any credit - for finding the huge sum on which we must charge the States interest. That sum constitutes the deficiency between the loan programmes, described by the States as indispensable, and the money available from the loan market. We have no pleasure in becoming a creditor. We would prefer not to have to find the money at all. As I said, interest charges paid by the States are considered in assessing supplementary tax reimbursement grants.

A case has been amply made out for charging interest and I think I have proved without any shadow of doubt the extent to which this Government has given sensible and practical consideration to the States in the overall programmes. We have done that to the maximum extent possible. Out of our own resources - politically unpopular resources on more than one occasion - we have found money to finance half the programmes of the States from 1951-52 up to and including this year. We have given the States £181,000,000 more than they are legally entitled to receive under the act that they agreed upon and that they unanimously adopted. That was done voluntarily. It was done with a view to assisting the general economic position of the States and

Commonwealth. In addition, we have given £77,000,000 in special grants to the States. What more can be expected of us? We have also financed our own works and services programmes by the unorthodox but unavoidable method of using revenue. We hear much about our budget surplus. Various amounts are mentioned from time to time. But that surplus is used entirely to finance the States and is part of the £588,000,000 that we have found out of our own resources since 1951-52. If the States are starved now, they had no physical capacity, ability or nutrition before this Government came into office.

Question resolved in the affirmative.

Bill read a second time, and passed through its remaining stages without amendment or debate.

page 1973

COAL INDUSTRY BILL 1957

Bill presented by Mr. Harold Holt, and read a first time.

Second Reading

Mr HAROLD HOLT:
Minister for Labour and National Service · HIGGINS, VICTORIA · LP

– by leave - I move -

That the bill be now read a second time.

This is a very short measure which has quite simple purposes, the principal one being to enable us to make an additional appointment to the Commonwealth Conciliation and Arbitration Commission. The Government decided recently to appoint an additional presidential member to that commission. It has become apparent in recent months that, with only four presidential members, there are risks that important matters, which require the attention of presidential members of the commission, will be delayed. An example of this occurred recently when the Government met the wish of Mr. Justice Foster to be granted a period of absence. The fact that three of the presidential members are assigned to work in particular industries also means that there can be some clash between the competing requirements of work needing their individual attention and work needing the attention of two or more presidential members in a full commission. In other words, if full commission work is to proceed without delay, there may be delays in dealing with work relating to individual industries, such as the stevedoring and maritime industries.

I am pleased to announce, on behalf of the Government, that the appointment to the commission which we offered to Mr. Justice Gallagher, who is a member of the New South Wales Industrial Commission, and who is also the Coal Industry Tribunal, has been accepted by him. I am also glad to be able to announce that the New South Wales Government has expressed its concurrence in Mr. Justice Gallagher, as a member of the Commonwealth Conciliation and Arbitration Commission, continuing to be the Coal Industry Tribunal. It is rather interesting to recall that, in 1955, when the New South Wales Government proposed his appointment to the New South Wales Industrial Commission, we concurred in his continuing as the Coal Industry Tribunal while being a member of the New South Wales Industrial Commission. On this occasion, when I indicated to the Premier of New South Wales, Mr. Cahill, our wish to appoint Mr. Justice Gallagher, the Premier, while loth, for understandable reasons, to part with such an able member of his commission, very readily agreed that he would not stand in the way of Mr. Justice Gallagher and, at the same time, expressed the hope that Mr. Justice Gallagher would be able to continue his work as the Coal Industry Tribunal. That was also our desire, and so the two governments have agreed on this important aspect.

The Coal Industry Act, in section 30, provides that the Coal Industry Tribunal shall be deemed to have vacated his office if he engages in any paid employment outside the duties of his office, or if, except on leave granted by the Governor-General, or by the Governor of New South Wales, he absents himself from duty for fourteen consecutive days, or for 28 days in any twelve months. When Mr. Gallagher - as he then was - was appointed to the New South Wales Industrial Commission in 1955, by agreement between the New South Wales Government and the Commonwealth Government, as I have already mentioned, the Commonwealth Coal Industry Act and the New South Wales Coal Industry Act were amended to avoid the necessity for him to vacate his office as the Coal Industry Tribunal.

To give effect to the arrangements which have now been made with the New South Wales Government, under which, as a member of the Commonwealth Conciliation and

Arbitration Commission, Mr. Justice Gallagher will remain the Coal Industry Tribunal, amendments of the Commonwealth and New South Wales Coal Industry Acts, along the lines of the 1955 amendments, are necessary. In short, the bill now before the House makes mainly the same provision as was made in 1955. I should point out also that, as in 1955, when the two governments agreed that the coal industry should have priority of attention by the judge, so again it has been agreed that he shall, so far as is practicable, give priority to coal industry matters in the future.

One additional matter should be referred to. The bill now before the House also makes a minor amendment to the Judges’ Pensions Act. As a member of the New South Wales Industrial Commission, Mr. Justice Gallagher is entitled to the benefits of the New South Wales legislation which deals with judges’ pensions. Incidentally, in some respects that legislation is rather more advantageous than is the Commonwealth legislation. Without the amendment of our Judges’ Pensions Act which is now proposed, Mr. Justice Gallagher would be very much worse off in relation to his pension entitlements under the Commonwealth act than he is under the New South Wales act. The Commonwealth act counts judicial office under a State as service for the purposes of the Commonwealth Judges’ Pensions Act, subject to a maximum of ten years. What the bill now before the House provides is that service as Coal Industry Tribunal shall count as judicial service under the State.

The Coal Industry Tribunal functions under Commonwealth and State legislation, and while the work of the tribunal is not judicial in character, the qualifications for appointment as Coal Industry Tribunal are the same as those for a justice of the High Court, or a presidential member of the Commonwealth Conciliation and Arbitration Commission. Mr. Justice Gallagher has been the Coal Industry Tribunal for slightly more than ten years, so the effect of the amendment contained in this bill will be that, on appointment to the Commonwealth commission, he will be deemed to have had ten years’ service for the purposes of entitlements under the Judges’ Pensions Act. I should add that, even under these arrangements, Mr. Justice Gallagher will not be so favorably placed under the Commonwealth act, in relation to his pension entitlement, as he would have been under the State act.

Mr Whitlam:

– Is he going to be appointed to the old court?

Mr HAROLD HOLT:
HIGGINS, VICTORIA · LP

– I was about to come to that, because when the honorable member for Werriwa (Mr. Whitlam) recently asked me some questions which, apparently by some foresight on his part, related to this situation, he asked whether the appointment would be one to the former Commonwealth Court of Conciliation and Arbitration. The answer to that question is “ No “. The Commonwealth Court of Conciliation and Arbitration has, under section 95 of the Conciliation and Arbitration Act, power to interpret awards, to determine questions of law referred to it by the Conciliation and Arbitration Commission, and to exercise power conferred on the court by any other act. In view of the decision of the Privy Council in the Boilermakers’ case, the court’s powers to give an interpretation or determine a question of law cannot be exercised. In fact, they are exercised by the Commonwealth Industrial Court. The only act that immediately comes to mind which confers jurisdiction on the court is the Re-establishment and Employment Act, for example in relation to disputes over preference, and there has been very little work under that act. The existing members of the court are the four presidential members of the commission, who were previously members of the court. In short, there has been no appointment to the court under the 1956 legislation, nor is it intended to make any new appointment to that court.

I think those remarks cover the points raised by the honorable member for Werriwa the other day. I commend the bill to the House.

Debate (on motion by Mr. Clarey) adjourned.

page 1974

INCOME TAX AND SOCIAL SERVICES CONTRIBUTION BILL 1957

In Committee of Ways and Means: Consideration resumed from 5th November (vide page 1812), on motion by Sir Arthur Fadden -

– (1.) That, in this Resolution . . . (vide pape 1635).

Mr CREAN:
Melbourne Ports

.- The resolution before the committee embodies the rates of income tax on individuals and on companies that shall be applicable for the financial year which commenced on 1st July, 1957. These taxes will raise, in this financial year, revenue amounting to £675,000,000 of which £465,000,000 will be contributed by individuals and £210,000,000 by companies. The rates for individuals are similar to those that were in force last year and, I think, the year before that. There have been certain changes, however, in rates of company tax. The Opposition does not intend to debate the resolution at this stage. We will wait for the debate on the bill which will shortly be introduced as a result of this resolution.

Question resolved in the affirmative.

Resolution reported.

Standing Orders suspended; resolution adopted.

Ordered -

That Mr. Harold Holt and Mr. Davidson do prepare and bring in a bill to carry out the foregoing resolution.

Bill presented by Mr. Harold Holt, and read a first time.

Second Reading

Motion (by Mr. Harold Holt) proposed -

That the bill be now read a second time.

Mr CREAN:
Melbourne Ports

.- As was indicated earlier, this bill sets out the rates of income tax that shall apply in this financial year to individuals and to companies. I think the opportunity should be taken to amplify some of the matters that were raised yesterday when we were dealing with the obverse of this question, the subject matter of taxation itself, rather than the rates of tax that shall apply, which is the matter with which we are now concerned.

As I have indicated, this is a very significant tax. It takes nearly one-eighth of the total national income of the Australian community and its incidence can have significant effects on the daily lives of all persons in the community. I ask honorable members to look at the first schedule, which appears at the end of the bill and which deals with the rates of tax that shall apply to individuals. It will be seen that the rates are fixed on a kind of step and stair system. The taxpayer does not pay a flat rate on every £1 of his income. Once he has a taxable income various sections of it are subject to tax at different rates. No one in this country pays income tax unless his income exceeds £104, but once he has a taxable income the whole of it comes into the tax field, and on the first £100 he pays tax at the rate of Id. in the £1. This means that on the first £100 of income everyone in the community who has a taxable income pays 8s. 4d. tax, whether his total income is £500, £5,000 or £50,000. On the next £50 of income the rate is 3d. in the £1, which means that on the next £50 of income after the first £100 the taxpayer pays 12s. 6d. in tax. For the income between £150 and £220 the rate increases to 7d. in the £1, making another £1 9s. 2d. in tax on this section of the income. Between £200 and £250 the income attracts tax at the rate of 1 Id. in the £1, which means that another £2 5s. lOd. is payable on this £50 of income. For the income between £250 and £300 the rate is ls. 3d. in the £1, or £3 2s. 6d. in tax for that amount of £50. This means that every taxpayer whose income exceeds £300 must pay income tax of £7 18s. 4d. on the first £300 of income.

From time to time the suggestion has been made in this chamber that it should be possible to revise the whole tax structure so as to provide greater allowances for persons with dependants, because, with inflation and the rise in the cost of living, the concessional deductions that have applied for a long time are no longer related to present-day family commitments. In this regard one need only consider the amendment that was passed by this Parliament last night, under which the concessional deduction for a wife now becomes £143 a year, or about £2 15s. a week, while the deduction for the first child is £91. The suggestion has been made from time to time by honorable members on this side of the Parliament, and also by other persons in the community, that a married taxpayer receiving the basic wage, which at present is over £12 a week but which, for purposes of convenience, we will consider as £600 a year, should not pay any tax at all. I suggest that proposals such as this would not be difficult to implement, with our taxation structure in its present form. Generally, the explanation is given that the whole tax structure would need to be recast, and I concede that point. But if a certain body of income from the tax field is exempt altogether and it is necessary to raise the same sum of revenue from the remaining income - it may not necessarily be from the same people; it may be from more or fewer people - that remaining income will have to pay the tax at a different rate. If this kind of structure were introduced, in my view it would give greater justice to those sections of the community with family responsibilities. We have heard a great deal about this but not much of a practical approach has been made to it. I suggest that the Treasurer (Sir Arthur Fadden) should give some consideration to the suggestions that have been made here. It is impossible for any one, without having greater facilities than the statistics which are available, to know what the precise cost would be, but I suggest that it is not a difficult thing to do, and that some approach ought to be made to it.

My first suggestion in this direction is that no taxpayer in the community ought to pay any income tax whatever unless his actual income exceeds £300. I take the sum of £300 as being, roughly, half the basic wage. The basic wage is supposed to be the minimum sum sufficient to provide a living for a family unit. Half of that sum is the minimum amount, theoretically, on which a person can live, and in my view, it should not be subject to any tax whatever. If persons whose actual income is less than £300 a year were exempt from income tax, according to the figures published in the last report of the Commissioner of Taxation, about 400,000 people would immediately be eliminated from the taxation field. According to the latest figures available those 400,000 persons pay £1,500,000 in income tax. That would not be a great loss, because the average assessment of income tax for each of those people is less than £4. If the statutory exemption for each single person were raised to £300, it would follow that the taxable income of persons with a higher income should be correspondingly reduced.

I am speaking in round figures. I find from the Commissioner’s report that the aggregate number of taxpayers in the year ended June, 1954, was 3,600,000. Irrespective of whether a taxpayer’s income is £500 or £5,000, under the present rate, the first £300 bears tax at an aggregate amount of £7 18s. 4d. If the first £300 were exempt from tax there would be an immediate loss to revenue of £7 18s. 4d. from 3,200,000 taxpayers, that is a sum of £25,000,000. The next step would be to give a further exemption of £300 for married persons, which would mean that the first £600 of income of a married couple would bear no tax. The effect of that would be to eliminate another 100,000 taxpayers from the tax field. At the present time income tax revenue derived from these people amounts to approximately £2,000,000. At present, according to the schedule of income tax rates, every person with a taxable income of £600 pays, in addition to the £7 18s. 4d., a sum of £31 15s. in respect of income between £300 and £600. If the second £300 exemption were allowed for every married taxpayer the loss to revenue would be a further £40,000,000, calculated on the existing rates.

If a further £100 were allowed as a minimum deduction for each child, a married man with one child would have an exemption of £700 from income tax. That would mean that a further 100,000 taxpayers would be eliminated from the tax field; and based on present rates of taxation, the revenue would be reduced by £4,000,000. The amount of tax paid on income between £600 and £700 averages £14 3s. 4d. for each taxpayer. So that every married taxpayer with one child or more, under this exemption would not have to pay that £14 3s. 4d. There are approximately 900,000 such taxpayers, and the loss to revenue in respect of them would be approximately £13,000,000.

It is difficult to proceed with any great accuracy from this point because the statistics of the Commissioner of Taxation do not indicate whether a taxpayer has three, four, five or six children. They show only whether he has more than one child, and consequently, it is difficult to get precision. But if an exemption of a further £100 in respect of each additional child were allowed, 200,000 more taxpayers would be eliminated from the tax field. Those persons now pay an approximate aggregate amount of £10,000,000 in tax. Other tax lost - which can be only an estimate - would be of the order of £12,000,000. At this stage the direct number of taxpayers eliminated from the tax field would be 800,000, which would be almost a quarter of the total number of taxpayers at the moment, and the loss to revenue, at the first impact, would be about £17,500,000; and the reduction in tax at this stage to the remaining taxpayers who were given the same concessions - a statutory exemption of £300 for each single person, a further exemption of £300 for married persons and a concessional allowance of £100 in respect of each child - would mean an approximate loss to revenue of £90,000,000.

Assuming that the same tax revenue has to be raised as before, the problem that would face us would be what sort of rates would have to be imposed. I ask honorable members to bear in mind that the only direct benefit so far given is the £17,500,000 as a result of exempting the 800,000 taxpayers first mentioned. The other £90,000,000 is derived under the existing rate structure from the remaining 2,800,000 taxpayers. So, the real problem would be to evolve a rate structure in order to extract the same aggregate amount of income tax revenue as is collected at present. I am endeavouring to show that the adoption of the changes I suggest presents no insuperable administrative, social or economic difficulties and that if adopted, the changes would do considerable justice to those people whose incomes exceed £700, £800 or £900 a year, according to whether they have one, two or three children. The concessional allowances carried through to them by the proposed new tax structure would effect a better distribution in the imposition of income tax as between those without dependants and those with them. That seems to me to be a just social principle.

I have merely given a brief outline of the scheme. Year after year, such propositions are made in this House in passing, and nothing concrete ever seems to be done about them. The proposal, in brief, is that every individual, whether single or married, male or female, will pay no income tax whatever on the first £300 of income. A married person will get a further exemption of £300 plus an exemption of £100 for each child. That is to say, a married man with one child will pay no income tax unless his actual income exceeds £700. If he has two children, he will pay no income tax unless his actual income exceeds £800. If he has three children, he will not pay any income tax unless his actual income exceeds £900, and so on. If this scheme were adopted, we should have an equitable income tax structure. The theoretical advantage of income tax is that it is a progressive tax, but, because concessional rebates have not risen as fast as incomes have risen, the real value of those concessions to taxpayers has declined over the years, with the result that in practice income tax has become a less progressive tax than it ought to be.

I have made those suggestions as a first approach to this problem. I have taken the figure of £300 because it is a round figure to begin with. It is near enough to the equivalent of £6 a week, and, as the grades of income given in the report of the Commissioner of Taxation are cast in hundred pounds, it is easier to give the figures in that form for the purposes of this analysis.

As I said earlier, income tax is at present responsible for the collection of £465,000,000 from the community. It seems to me that people in the categories I have mentioned - the single persons in receipt of less than £300 a year, married people on incomes of £600 and less and men with families who earn less than £700, £800, £900 and so on a year, according to the number of children - are unjustly contributing something like £17,500,000 a year to the income tax revenue of this country. I say “ unjustly “ because they are less able to pay than are other taxpayers. In those circumstances, it would be more equitable to remove these people from that field of revenue and to distribute responsibility for payment of the £17,500,000 which they now contribute over the remaining taxpayers.

Another effect of adopting the changes I suggest would be to remove the burden from the shoulders of the family man to those of the more fortunate sections of the community who enjoy higher incomes and who have no family responsibilities. This would be a good change to make in our taxation law.

The other half of the proposition before us relates to company taxation. Here again, we are faced with a social problem, the implications of which are not always realized at first sight. It is estimated that the amount to be collected in this field for this financial year will aggregate £210,000,000. That is less than the sum collected last year because it is proposed to reduce the rate of the upper limit of taxation from 8s. to 7s. 6d. in the £1. This proposed reduction has been hailed by Government supporters as a progressive move. For this financial year, I think it will mean a reduction of approximately £15,000,000 in company taxation. It is sometimes assumed that this benefit will be shared equally by all companies, but those persons who hold that view ignore the economic fact that there are differences between the institutions which are called companies. There are very many companies in the community. For example, the Commissioner of Taxation, on page 95 of his report, distinguishes between private and public companies. The report shows that for the year ended 30th June, 1954, there were 20,016 private companies and 5,492 public companies paying company tax. In his report, the Commissioner for Taxation also divides the companies into two sections, those earning a profit up to £50,000 a year and those earning a profit exceeding £50,000 a year. No doubt honorable members know that private companies are relatively small undertakings. Of the 20,016 private companies paying tax in Australia, 19,521 earned a profit of less than £50,000 for the year. Only 495 of them had taxable incomes in excess of £50,000. Of the 5,492 public companies, 4,299 had incomes of under £50,000 and 1,193 had incomes in excess of that figure.

But this does not disclose the true situation. It is necessary to go further up in the income scale to see the true social significance of the large public companies in our community. As I shall show in a moment, it is largely such companies that reap the greatest benefit from the concessions that are to be bestowed by the legislation under consideration.

Let us now consider the big public companies in Australia whose taxable income exceeds £500,000 a year, which is a quite considerable sum. For the year ended 30th June, 1954, taxable incomes of between £500,000 and £1,000,000 were earned by 72 public companies while in that same year 53 public companies earned taxable incomes of over £1,000,000. Of the 5,492 public companies, only 125, or 2.3 per cent, earned 47 per cent, of the total taxable income earned by all public companies for that year.

It means, in effect, that the major benefits of this legislation are not dispersed among the community at all. The great advantage is given to those 125 giants in the community which have profits in excess of £500,000. Those 125 companies will derive roughly £8,000,000 between them from the taxation reductions that are embraced in the resolution now before us. From figures that I have concerning the rate of depreciation I also submit that it is they who will be the greatest recipients of the depreciation concessions which, in this financial year, will be worth about £14,000,000 to companies. I suggest, here, that we have reached a point at which we need to consider the incidence of company taxation as well as the incidence of individual taxation.

A considerable degree of monopoly control is growing up in this country. In my view, that control is aided and abetted by the company taxation structure. I would suggest, again, that there should be an alteration in the graduation of company tax. When the Opposition raises certain arguments on the subject of excess profits tax honorable members opposite say, “ You do not take into account shareholders’ capital in connexion with the imposition of the tax “. The present rates of company tax do not take into account shareholders’ capital, either. The only thing that they take into account is whether or not the profit of the company, if it is a public company, is over £5,000. If it is over £5,000, whether it is £15,000 or £1,500,000, it bears the same flat rate of 7s. 6d. in the £1.

Despite the sentiment which has been poured out by Government supporters on behalf of shareholders, there is not any doubt that a company which derives a profit in excess of £500,000 - and in the case of 53 companies a profit in excess of £1,000,000 - is a very different economic entity from a small private company or a small public company, perhaps deriving a profit of £15,000 or £50,000, or less than £5,000. The whole purport of company taxation in Australia is to treat big and small alike. If we were to assume that we wanted to raise the same amount of company revenue as before, there would be quite a good case for lowering taxation on small companies and increasing the rate of taxation on large companies. But because some of these concerns are very large, despite the theoretical argument on the other side, they are virtually able to fix their own prices without limit. They fix those prices high enough, not only to cover taxation and depreciation, but also to allow themselves to re-equip their establishments.

Because of the nature of our company taxation structure, the pattern of future investment in this country is largely in the hands of a very few giant companies. That may not always be for the best economic health of the Australian community. I suggest, again, that the social instrument of income tax should be used to do some redistributing and, perhaps, to alter the pattern of economic growth in Australia. We have not capital issues control in this country. In my view, our economy is the worse for that. But at least what we cannot constitutionally do by means of capital issues control we could consciously do with a better use of the machinery of company tax. With the consent of the House I shall incorporate in “ Hansard “ two tables of statistics for public companies. The figures ‘have been taken from the 35th Report of the Commissioner of Taxation. I think that they would be of some benefit to the committee later on. The tables are as follows: -

I thank the House for its consideration and for the courtesy of the hearing that honorable members have given me on this matter which cannot be illustrated except with copious figures which I have tried to condense as much as possible. But I felt the opportunity should be taken to indicate that, in some respects, our taxation structure is not serving the social needs of the present time.

Mr HULME:
Petrie

.- In the last few minutes we have listened to a very interesting discourse by the honorable member for Melbourne Ports (Mr. Crean) on proposals for the adjustment of income tax rates. Of course, a good deal is controversial in the claims that he has made, and one cannot be expected to make an analysis of his opinion in a few moments, nor at a moment’s notice. But I shall try to examine one or two questions that arise from the statements that he has made.

If I may deal first with the last matter, which concerns companies, I would point out that there can be a misconception in relation to the tax which is paid on profits made by companies themselves. It is very good to look at the Budget papers and see that companies pay £210,000,000 in tax. But the fact is often overlooked that when dividends are declared out of profits made by companies they are taxed in the hands of shareholders. Therefore, a very substantial part of the profits which are made by companies finds its way to the Treasury, not only in the form of company tax, but in the form of income tax, paid by individuals. This is something for which we must have regard when we look at this great problem of adjusting our rates of taxation.

The honorable member advocated giving greater consideration to the smaller companies than to the large companies. At all times, we must have regard to the relationship of profits to capital investment. Time and time again, over a period of eight years, I have heard members of the Opposition raise this particular issue with a complete disregard for that aspect of the matter. From my own experience, I know very many companies which make large profits which represent a very small percentage of the invested capital. On the other hand small companies - those with a small capital structure - make a profit which bears a very high percentage to the capital invested. So I do not believe that there is any out of hand way in which you can deal with this particular problem.

I want to say a few words in relation to the proposals which have been made with regard to the taxation of individuals. The honorable member for Melbourne Ports suggested, in the first place, that there should be a statutory exemption up to £300, and in the case of a married couple, up to £600. I think honorable members are entitled to look at this proposal. Does the honorable member for Melbourne Ports mean that a married couple should be treated as such whether they are both working or only one of them is working?

Mr Crean:

– Refinements of that kind would need to be looked at.

Mr HULME:

– I think that one is entitled to draw the attention of the House to some of these difficulties, which are obvious when one attempts to analyse the statements which have been made by the honorable member for Melbourne Ports. If we look at the people whose income does not exceed £300, I suggest to the House that in the great majority of cases they are single people. There are no married people in that group. Therefore, the honorable member is suggesting that single people who receive up to £6 a week should pay no income tax whatsoever.

Mr Calwell:

– They are receiving only half the basic wage.

Mr HULME:

– lt is not a question of receiving only half the basic wage. Some of these young people are only 16, 17 or 18 years of age, and they are not entitled under any award to receive even half of the basic wage. There should be an obligation on these people to pay tax. The whole burden of taxation should not be imposed on people in the middle income and upper income groups. That is what is suggested finally by the honorable member for Melbourne Ports - taxation relief to the lower income workers in the community. Of course, by doing that, the Labour party endeavours to create the impression with these people that it is on their side, and that it wishes to shift the taxation burden on to those who have a slightly higher income and who come within the middle income and upper income groups.

Having regard to what this Government has done in relation to the age pensioners, people whose incomes up to certain limits are excluded completely from taxation, one may find that 60 per cent, of the taxpayers in the community are in this particular class of single people. I think that honorable members are entitled to look at the proposals that have been advanced by the honorable member for Melbourne Ports. If they are accepted, revenue of £90,000,000 or £100,000,000 must be obtained in some other way. Presumably, the honorable member believes that those on the higher incomes, and the big companies, so-called, should make good the revenue that would be lost to the Government through the adoption of his proposals. I definitely resist the suggestion that is inherent in the comments that have been made by the honorable member for Melbourne Ports this afternoon.

Mr CALWELL:
Melbourne

.- I only want to say a few words on this matter. What the honorable member for Melbourne Ports (Mr. Crean) is pleading for is a better deal for the married man earning little more than the basic wage, and a better deal for basic wage workers who have children. The proposals put forward by the honorable member merit consideration, and I hope that the Leader of the House (Mr. Harold Holt) will have the proposals examined by the Taxation Branch. Will the right honorable gentleman inform the House of the cost to revenue that would be involved in acceptance of the proposals, the categories of taxpayers who would pay less tax, and those that would have to pay increased tax because of the remissions? Since this Government came into power, the burden of taxation has been shifted from the wealthy people - who bore it when Labour was in office - on to the lower paid workers. In Labour’s day, the married man supporting a wife and two children on the basic wage paid no income tax at all. The Opposition wants that relative situation restored.

Question resolved in the affirmative.

Bill read a second time, and passed through its remaining stages without amendment or debate.

page 1981

LOAN (WAR SERVICE LAND SETTLEMENT) BILL 1957

Second Reading

Debate resumed from 18th September (vide page 719), on motion by Mr. McMahon -

That the bill be now read a second time.

Mr R W HOLT:
WANNON, VICTORIA · LP

.- The object of this bill, as already outlined by the Minister for Primary Industry (Mr. McMahon) in his second-reading speech, is to provide funds amounting in all to £8,000,000 for the purpose of land settlement, arising out of the commitment accepted by this Parliament to settle exservicemen of the last war on the land.

As I pointed out during the debate on a similar measure last year, for the purposes ot the war service land settlement scheme there are what are called agent States and principal States. It is to the agent States, in the main, that the greatest amount of Commonwealth contribution is made. The Minister stated that, of the total of £8,000,000 being provided, approximately £3,000,000 would be made available to New South Wales and Victoria, and the balance to the agent States - South Australia, Western Australia and Tasmania. Money is made available to the principal States on the basis of a Commonwealth contribution of £1 for every £2 of loan funds devoted to the scheme by those States. This arrangement was entered into in 1953 at a conference held in Canberra, which I attended as Minister for Lands for Victoria. In the absence of the Minister who was then administering the scheme, through sickness, the present Minister for Defence (Sir Philip McBride) presided. It was agreed in order to assist the States, particularly the principal States, to adopt the £l-for-£2 formula and to limit the maximum contribution by the Commonwealth to £2,000,000 to any one State. By this decision, the maximum amount payable to the two principal States, Victoria and New South Wales - I think Queensland withdrew in 1954 - would be from £5,000,000 to £6,000,000 a year for three years. That was for the years 1954-55, 1955-56, and 1956-57, so that arrangement will expire at the end of the current year. Just what arrangement the Government will make in the future will depend, I suppose, upon the stage which soldier settlement has reached in the various States. Victoria, which is, naturally, the State concerning which I know most, has reached the stage where soldier settlement is tapering off. This is not by virtue of the fact that the State has not sufficient applicants, but simply because the economics of soldier settlement and rising costs make it impossible for this type of settlement to be carried out on the basis that was envisaged originally in 1945.

I shall give the House an instance of how increasing costs are causing soldier settlement in Victoria to flatten out or taper off. A grazing property, carrying a ewe or oneandahalf dry sheep to the acre, cost about £14,000 or £15,000 four or five years ago. Now the same property costs about £21,000 in Victoria and £25,000 in New South Wales. The properties around Hamilton which were acquired by the Victorian Go- ernment and allocated to ex-servicemen by 1950 cost about £9,000 at the most. I refer to “ Ardachy “ and similar properties near Branxholme in the western district of Victoria. That land was acquired in 1946, 1947 and 1948, and the allotments were finally made available, with improvements such as dams, fencing, houses and woolsheds or dairies as the case may be - in this instance, woolsheds - for £9,000. Today properties of that description would cost £25,000 in New South Wales and £21,000 and upwards in Victoria. That additional cost is the big limiting factor.

A few years ago there were 12,000 ex-servicemen requiring settlement in Victoria. Of that number, 6,000 have been settled on the land, but the remainder either have grown tired of waiting or, having been told that it is very unlikely that they will receive any consideration at the present rate of settlement and at present costs, have sought to rehabilitate themselves elsewhere. Of course, many men submitted their names on the chance that they would get a block but proceeded with their ordinary vocations, whatever they may have been. However, the figures disclose that roughly 6,300 men have been settled in Victoria. That number is approximately one-half the total for the whole Commonwealth.

I want to point out, by way of developing that statement, that 2,500 of the 6,500 have been settled under the single-unit farm scheme, to which the Commonwealth Government has not contributed anything. That was settlement similar to that carried out under the old section 14 of the first soldier settlement acts, passed after the first world war. Under that scheme, a farm which had run down, or the owner of which had died or left the industry, became available to a soldier settler if he had sufficient money to put a deposit on it. The State then lent him the rest of the money, in Victoria at 2 per cent, interest. The State had to finance the whole of this subsidized interest rate. It borrowed at a rate of about 31 per cent. - now 4 per cent. - and had to finance the subsidized interest rate. That imposed a considerable burden on the revenues of the State. This subsidy cannot be paid out of loan funds, but has to be paid from the State’s own revenue. I think that the Commonwealth Govern ment should give consideration to relieving the Victorian government of this burden.

The scheme for the settlement of exservicemen on the land was not designed to be a means of developing our lands. We do not propose to use ex-servicemen to develop our country by putting them on the land to do the hard work. The object of the scheme is rehabilitation. The object is to put certain ex-servicemen on the land as quickly as possible, not to reward them for services rendered, but to compensate them for their years of military service, during which, normally, they would have been free to follow farming pursuits.

Victoria has been able to settle more than 6,000 ex-servicemen for much the same cost as New South Wales has been able to settle about 2,800. I think that that deserves some recognition from this Government, and I ask the Minister for Labour and National Service (Mr. Harold Holt), who is at the table, to place before Cabinet the suggestion that Victoria receive some consideration by way of reimbursement of revenue expended on subsidizing the interest rate. It is a federal responsibility that the State has been called upon to discharge. It is true that Victoria elected to act as a principal State.

Mr Hamilton:

– Not only did it elect so to act, but it refused to accept any other offer.

Mr R W HOLT:
WANNON, VICTORIA · LP

– That is a very sweeping statement. The honorable member says that Victoria refused to accept any other offer. I do not know what he refers to, but Victoria certainly would not entertain an offer to act as an agent State. Such an offer was made, but the terms were prohibitive. They would have entailed the abolition of freehold tenure, the substitution of perpetual leases, and the like.

As I want to emphasize the relatively low cost of soldier settlement in Victoria, the interjection of the honorable member for Canning (Mr. Hamilton) was most timely. When we compare the cost per head of soldier settlement in Victoria with that in Western Australia, we find that the cost in Victoria is exactly one-half the cost in Western Australia, the honorable member’s State. In Western Australia the work has been carried out on an agent State basis, using undeveloped lands which, by pasture improvement, were converted from areas of -native scrub to grazing propositions after two or three years, or longer. The reason why the scheme was so successful in Victoria was that we threw off Commonwealth control right at the beginning. The Victorian State Labour government in 1945 said to the Victorian Soldier Settlement Commission, “ Do not bother about consultation with the Commonwealth. We have not got enough time. Go ahead and buy the land while it is cheap. Let us have no argument now. We shall argue with the Commonwealth officers after we have the land “.

Mr Hamilton:

– Who was the Victorian Premier who handled the negotiations with the Commonwealth?

Mr SPEAKER (Hon John McLeay:
BOOTHBY, SOUTH AUSTRALIA

Order! I ask the honorable member for Canning to observe silence.

Mr Hamilton:

– I just want to get the record straight.

Mr R W HOLT:
WANNON, VICTORIA · LP

– So much land was acquired by the Labour government of Victoria in 1945, 1946 and 1947, at the 1942 values then prevailing, that we were able to economize effectively in the buying of land. As a result, we were able to place more servicemen on the land far more economically than was possible in Western Australia, from where the honorable member for Canning hails, and he knows it. 1 can understand his touchiness on this score after all these years. It is all very well to be wise after the event, but, thanks to the foresight of the Labour government in Victoria at the time, we were able to show just how economically sound such land acquisitions could be made. In 1945, we had the spectacle of returned soldiers from World War II. sitting in Parliament and legislating to provide land and services for closer settlement for their comrades from that war, when it all should, and could, have been done between 1942 and 1945. However, little purpose could be served by labouring that point now. We must bear in mind that, if similar circumstances should arise in the future, through some misfortune, we all should be sufficiently well informed to know that the acquisition of land when prices are low, long before it is needed, will enable soldier settlement to be undertaken much more effectively and economically.

Soldier settlement in the principal States has been undertaken very cheaply indeed for the Commonwealth, because the funds made available by this Parliament for the land settlement of ex-servicemen, as I said earlier, are in the main made available to the agent States. The Minister for Primary Industry, in his second-reading speech on the Loan (War Service Land Settlement) Bill 1956, as reported at page 1377 of “Hansard” , of 11th October. 1956, gave the figures relating to the funds expended by the Commonwealth and the States, respectively, and the number of farms allotted. Up to 1955-56, New South Wales had spent a total of £38,608,168 - the total would now be approximately £41,000,000, because a little more than £2,500,000 was spent last financial year - and only £3,963,522 was spent by the Commonwealth in that State. The total of State expenditure in Victoria was £38,111,415, or about £41,000,000 up to 1955-56, but only £4,799,783 was expended by the Commonwealth in that State. We can see that the principal States have done the job more efficiently, and more economically, and that, in effect, it has cost the Commonwealth far less up to date than is the case in the agent States.

The Minister said, in his second-reading speech on this measure, that the Commonwealth has advanced to the States a total of nearly £61,000,000, of which £12,000,000 was provided from revenue prior to 30th June, 1950, £39,000,000 from loan funds after 1st July, 1950, and £10,000,000 from repayments by settlers, and sales of surplus lands. As I have said, that applies, in the main, to the agent States, and the loans concerned are largely loans that have to be repaid at some time. This does not compare at all favorably with the total of State expenditure in New South Wales and Victoria, which, at the conclusion of this scheme, will be approximately £100,000,000. Those States have financed soldier settlement, and have carried out a federal obligation, mainly from their own resources, and with very little help from the Commonwealth.

I think that, now that war service land settlement in the major States is tapering off, it is time to consider what will happen in the future. I am sure that honorable members on both sides of the House would be interested to know what plans this Government has for extending the war service land settlement scheme into a closer settlement scheme once the commitments for the rehabilitation and settlement of returned soldiers have been met. There is now a demand for the improvement of Crown lands for the settlement of young settlers. I assume that, say, 50 per cent, of this land would be made available to returned soldiers or ex-servicemen and 50 per cent, to young Australians, including new Australians, to be chosen by open ballot, on the basis of efficiency, or ability to farm, that being the sole criterion. ] think that the Government could well consider adopting the suggestion made by honorable members on both sides of this House, and by members of the State Parliaments, since 1945, and no doubt before, of establishing a rolling fund from which advances could be made as repayments were effected. Such a fund could be used for the development of Crown lands in the various States.

I have in mind some excellent land at Yannaki, on Wilson’s Promontory, in Victoria, which was investigated in 1953. It is now available, and it has turned out to be very good land. At Cobboobonne Kentbruck, Heytesbury, and other places, in Victoria, likewise, there is land that would be excellent for farming, and particularly for dairying. It carries heavier scrub, and naturally more work would be required on it than at Yannaki. There is scope for soldier settlement at Yannaki because it is one of the few areas in Victoria in which virgin land can be made available in time to meet the needs of the war service land settlement scheme.

It is to Western Australia that I think the young men should look in the main. There is scope for development there, and I know that, in Western Australia, there are good reasons for the high costs that I have mentioned, particularly for irrigation farms. But a much better arrangement than the agent States arrangement would be needed if closer settlement were to be undertaken efficiently and economically. The constitutional bar against the Commonwealth is such that it cannot effectively undertake such settlement, and the States having no financial responsibility - that rests with the Commonwealth - the success of the scheme depends entirely upon the co-operation between State and Commonwealth authorities. I know that, with the best of intentions on both sides, the Commonwealth has not co-operated effectively with New South Wales and Victoria. There have been far too many arguments, far too much discussion, and far too much beating about the bush. Decisions have not been made promptly, but have been shelved, simply because one of the authorities concerned has not been au fait with local conditions as the State authorities were. One set of officers watches the expenditure purely from the viewpoint of the expending authority while another set is eager to get as much as possible from the federal coffers and to do as good a job as they can. So they watch one another, and there is not that harmonious co-operation that should exist.

I am eager to hear from the Treasurer what plans the Government has in mind for replacing the present scheme involving the principal States and the Commonwealth, whereby the Commonwealth contributes £1 of loan funds for every £2 raised by the States. If it is intended that that scheme should cease to operate in relation to the land settlement of ex-servicemen, the Opposition would like to know what plans the Commonwealth has for expanding the soldier settlement scheme into a closer settlement scheme and for giving, at the same time, adequate opportunities to exservice personnel who still desire to go on the land and whose degree of preference must be maintained in any future closer settlement scheme that may supersede the scheme for the settlement of ex-servicemen.

Debate (on motion by Mr. Fairbairn) adjourned.

Sitting suspended from 5.57 to 8 p.m.

page 1984

RESERVE BANK BILL 1957

Second Reading

Debate resumed from 24th October (vide page 1773), on motion by Sir Arthur Fadden -

That the bill be now read a second time.

Mr SPEAKER:

– Is it the wish of the House that the subject-matter of all the banking bills be debated on the motion for the second reading of this bill?

Dr Evatt:

– I take it, Mr. Speaker, that the debate will range over the four principal bills and that what is done in the succeeding stages will be considered in committee.

Mr SPEAKER:

– There being no objection, the procedure that has been suggested will be followed.

Dr EVATT:
Leader of the Opposition · Barton

– The importance of all of this proposed legislation is obvious. The bills before us constitute, I think, one of the most important series of bills that we have had to consider in recent years. The proposals consist of two main parts. The first concerns changes in the structure of the Commonwealth Bank, which are, I believe, revolutionary in character. There are none of the elements of the integrated Commonwealth Bank that are not seriously affected by these measures. There is the central bank, which has always been called the Commonwealth Bank of Australia. It has a proud name, and the deeds of the bank are well-known to the people of this country, as is the leadership that it gave in financial, economic and banking operations of governments and of other banks and the people during the two world wars. Then there is what is now called the Commonwealth Trading Bank, but which was formerly the General Banking Division of the Commonwealth Bank when the bank was still one bank. It is seriously affected - very detrimentally affected, in my submission.

Then there is the Commonwealth Savings Bank, one of the greatest institutions of its kind in the world. It is affected. None of those parts of the whole organism - the integrated organism - has been left alone. One of the matters for the House to decide is why the legislation is being brought down at all. I say that, because part of our case is that the legislation is entirely unnecessary, that it is being brought down at the behest of the private trading banks of this country, and for no other purpose. It is not the will of the Treasurer (Sir Arthur Fadden) that it is brought down, because we know his general attitude, since he played a prominent part in the establishment of these vital controls on banking during the great crisis of World War II., in association with Mr. Chifley. That was the period in which the right honorable gentleman brought them down without their having enforced provisions in the first instance, but still, the object was the same - to prevent inflation which would have ruined this country during the war, and to see that the private banks did not repeat in World War II. what they had done in World War I., when their actions were characterized by selfishness and a desire to profiteer which was only then restrained, to some extent, by the Commonwealth Bank of those days.

The structure of the Commonwealth Bank includes, as I have said, the Commonwealth Savings Bank, with its enormous assets. Even that is not to be let alone. There is interference with that and, in addition, with the board. The central bank, the Commonwealth Bank of Australia - and this is utterly confusing - is to be called the Reserve Bank of Australia. Certain people do not want the former name to endure. The Reserve Bank is even to be taken away from the building which, as the central bank, it has occupied for so long.

Some of the things that are done in the name of banking legislation are so petty, miserable and unnecessary that really it is shameful that they have to be analysed and exposed. But that is not all. The Trading Bank, which was the General Division of the one Commonwealth Bank of Australia, and which had important departments associated with it dealing with advances to industry, and mortgages, is to be taken out of the integrated bank. The Rural Credits Department, a magnificent organization - magnificent because it was integrated - is also affected. And all this has been done solely because the private banks have demanded it from this Government, and for no other reason! Why? I hope to show that the reason has nothing to do with public interest at all. It has to do with their own selfish purposes; and it is a very bad thing when so difficult and so technical a subject, but one involving the people, is approached in that way.

Without dealing further with the fabric of the Commonwealth Bank, Mr. Speaker, I say that there are changes made which are of a revolutionary character. There are special provisions dealing with the statutory reserves, by which the Reserve Bank can exercise control over the advances policy of banks - not the private banks alone, I should like to say, but extending to the Commonwealth Trading Bank also.

Mr Hulme:

– Hear, hear!

Dr EVATT:

– The honorable gentleman says “ Hear, hear “ as though it had not been done before. It has always been done, It was done voluntarily by the private banks before there was any legal obligation to do so.

Mr Hulme:

– On the same basis.

Dr EVATT:

– lt was done in exactly the same way and, in fact, the Central Bank imposed restrictions on the Commonwealth Trading Bank during recent years more onerous than were imposed on the private trading banks, and they were cheerfully accepted. So it will not do the argument of honorable members opposite any good for them to say that there has been favouritism. I know that one of the catchcries in regard to this matter is that the legislation is designed to prevent discrimination. There has been discrimination, I must admit. There has been discrimination against the Commonwealth Trading Bank and a number of studies to-day, notably Professor Arndt’s studies, make that clear beyond doubt. A little study of that subject will prove what I have said to be absolutely correct.

At first sight the portion dealing with the statutory deposits seems to provide more power for the Reserve Bank, the new name of the Commonwealth Bank, than did the special accounts provisions as they were left in 1953 after amendment by this Parliament at the instance of the present Government. But the point is that the slightly greater power is obtained by a system in which there seems to be possibilities of great delay. If there is to be an increase in the ratio of the amounts that have to be deposited to the total deposits, then there are many occasions when there has got to be a delay of 45 days before that can be done. One does not know exactly what the policy is to be, but if there is a fear of inflation through money coming into the banking system from large returnsfrom our export trade or in any other way, it is quite obvious that 45 days is far too long a period. Action must be taken promptly. I think it would be agreed that one of the advantages of the special accounts system established, as I said, by Mr. Chifley as Treasurer in the Curtin government, following the action of the present Treasurer as Treasurer in the Menzies government, was to get the deposits put into the account, not merely for the purpose of taking them from the banks but to prevent secondary inflation, because the possession of these credits would have enabled the banking system to enlarge the whole structure of debt in this country so that inflation might have overwhelmed us. We all know the propaganda which went round - that money was being taken from the banks. They got a small interest payment in respect of the balance of the deposit, but its primary purpose was as I have indicated. Later, of course, it was changed. That has happened since the war. For a while we did not have an inflationary period. Indeed, there was a time of temporary recession.

I do not think that we should be satisfied with the 1957 arrangement because it appears, at first sight, to be stronger than that of 1953. It may be that a statutory reserve deposit is better in some respects than the special accounts procedure, but the point is that the 1957 reserve system is not satisfactory. It is obviously designed to delay reserve bank action, despite the urgency of dealing with sudden inflationary or deflationary situations. That is established. The Treasurer referred to correspondence with the private banks. I tried to get that correspondence but, of course, he described it as confidential. I think that its substance is contained in a statement given to the press by the Commonwealth bankers who conferred with the Treasurer and the Prime Minister on 12th February last. That document, which I shall not read, indicates that there is a kind of “ emergency “ element in regard to the use of statutory reserve deposits. Unfortunately, power is not given, to any extent, to act in an emergency - if there is an emergency - and thus guard against some threat to the banking system and to credit generally. On a declaration of emergency being made, there must be, in certain circumstances, this delay of 45 days. It seems to be absurdly excessive, because the situation contemplated by the bankers who made representations to the Treasurer was of an emergency character.

I turn away from that for a moment. The second part of the legislation is more significant. It affects the structure of the whole Commonwealth bank organism. It is, I think, the third step that has been taken to separate, complicate and weaken the trading section of the Commonwealth Bank. I greatly fear that the fourth step will be the introduction of private investment into the Commonwealth Trading Bank. There is a lot of ground for believing that that might happen. Articles on the subject have been written by the private trading banks. Ultimate intentions are not always apparent in the beginning; they are often masked to some extent. The Minister for External Affairs (Mr. Casey) introduced the same sort of proposal in 1938, but the House would not hear of it, and it was summarily withdrawn. It related to the mortgage branch of the Commonwealth Bank, and it sought to open the way for investment, just as if it were a private company - the very thing that would have ruined the whole Commonwealth banking system. The Commonwealth Bank is a great public utility dealing with the priceless asset of credit created by the nation. Such a responsibility can be assumed only by a bank that is carrying on its business, not for profit, but solely in the interests of the people. If private financial investment in the Commonwealth Bank were permitted we should have something quite contrary to the whole notion of a proper banking system. Indeed, if it were permitted, we would almost be able to forecast the order of events.

Such a course of action usually ends in a sell-out. We have had some experience of that during the last few years. I need only mention the disposal of the people’s interest in the Commonwealth Oil Refineries Limited, an organization which is now completely owned by interests outside Australia. Half of it was owned within Australia, but when that interest was disposed of the name was changed. The word “ Commonwealth “ disappeared. It was our one means of keeping in touch with the oil problems and prices of the world. Mr. Bruce, when Prime Minister, stated that on a number of occasions the information available to the organization had enabled the Government to prevent increases in the price of oil and petrol in this country.

Amalgamated Wireless (Australasia) Limited has similarly gone to the winds. It was very important to Australia from the point of view of scientific research - itself obviously a matter of Commonwealth Government concern, yet it was sold out. I could give further illustrations. There was also the Glen Davis shale oil project. It was not successful, but the President of the United States of America has laid it down that, in that country, such fuel must be conserved. It did not matter, he said, whether the organization producing the oil was, for the time being, operating at a profit or not. Perhaps the worst example of all, and the most recent, was provided by the sale of the assets of the Australian Whaling Commission in Western Australia. There has also been the disposal of much of the handling equipment owned by the Government. Now valuable coal mines, which have been operated profitably by the Commonwealth and State Governments through the Joint Coal Board, are to be sold out - not because they have been a failure, but because they have been successful. Senator Spooner, the Minister for National Development, has said, “ They are so good, so well run, and the profit is so big, that I am going to see that private enterprise gets them “. He has said this, although the two governments, working together, have operated the mines successfully!

The Government must not be surprised if, after doing that kind of thing year in and year out, the situation in banking - which is the most important field of all - is looked at closely. What is being done is analogous to what the Government did when it bolstered Australian National Airways Proprietary Limited to weaken TransAustralia Airlines, on the pretext that there had to be fair competition. We know what happened. A similar thing, to a large extent, is happening in connexion with the Commonwealth Trading Bank. The particular attack on T.A.A. failed but, of course, it is being renewed. As long as one is up against a government enterprise, owned by the people, it does not matter whether it is successful or not. Then competition is regarded as being very important. But when the Commonwealth

Trading Bank outdistances its rivals, and provides competition in the banking field it must, the Government considers, be weakened. Successful competition against private enterprise is not permissible in that instance! The only competition offered can be that of the private monopolist. Apparently that is regarded as quite all right.

The present legislation must be classified as a deliberate shifting away of power from the Australian public to private financial interests. It is not complete, but the powers exercised by the private trading banks through this Government are nevertheless, extraordinary. The Commonwealth Trading Bank still lives, though no doubt the private banking combine would like to get rid of its rival altogether. That is evident in every interview, every speech, an:! every comment in the press which emanates from banking quarters.

All this is clear enough from the reasons given by the private banks and the Government for the legislation. Those reasons should be looked at carefully. They are not only unconvincing; they are also a sham. They are not real reasons at all. Of course, the Treasurer does not say that he agrees with them. He is putting forward, quite frankly, the view of the private banks. No Government legislation - and this is the false pretence - could legally or morally use the power of the special accounts or reserve deposits to put private banks out of operation. Yet that is the cry that the private banks have used. They say that they want the act amended so that they will not be put out of existence. They claim that this would be done not by legislation, but by some preferential, or differential, discriminatory treatment against them by the use of the special accounts. That is one of the shams that these people have endeavoured to perpetrate. Any attempt of the kind would obviously lead to a financial and banking crisis. While section 92 of the Constitution operates to protect the banks - because of the aspect of interstate trade - any such action for the purpose described would be illegal. It would be condemned by a court of law on the instant, because the nationalization of the private banks of this country would require an alteration of the Constitution, approved by the people at a referendum.

Sir Arthur Fadden:

– You found that out.

Dr EVATT:

– We found it out, but perhaps it was not a discovery in that sense at all. By saying that, the right honorable gentleman admits by implication, that my statement is correct. Therefore, he should never again put forward the view that the statement is not correct. It is not the advocate that matters, but the judgment.

The private banks and the Government must have another motive, if the banks have got that legal protection. It is clear from the legislation now proposed that the plan of action against the Commonwealth Trading Bank includes, first, complete separation of the Trading Bank from the Reserve Bank, and secondly, placing the Trading Bank in a weak capital position. The source of its capital accretion is to be limited to net profits. One-half of the net profits is to go to the Commonwealth and taxation is to be paid from the other half. So, in effect, 73 per cent, of the profits of the successful trading bank of the Commonwealth will be denied to it as a source of capital. Access by the Trading Bank to central bank sources is cut off by the 1953 and 1957 legislation, although such access is admitted in the 1957 legislation to be necessary for the new Development Bank, which will serve rural and industrial interests and, perhaps, big business interests. The Development Bank will still have access to the central bank. What, then, becomes of the argument of the private banks that the central bank must stand alone, not associated with any other bank? It will have dealings, in the shape of borrowings, with the Development Bank. A part of the central bank organization will be the Rural Credits Department, which has nothing to do with central banking. That is a sham too.

The Government is aiming, not at the Rural Credits Department, but at the banks that will come under the jurisdiction of the new body, that is to say, the corporation governing the Commonwealth Trading Bank, the Commonwealth Savings Bank and the new Commonwealth Development Bank, which will take over some of the functions previously exercised by the General Division of the Commonwealth Bank.

There can be no doubt that the Trading Bank will find itself short of capital. This will justify the corporation in curtailing or delaying the development and expansion contemplated by the existing laws. There will be a corporation consisting of eleven people, eight of whom will represent outside interests or some people we do not know, and three of whom will represent either the employees or the managers of the banks. There will be a managing director and a deputy managing director of the corporation, but it will be under the control of people who cannot be associated with these banks, or be directors of any other bank, or be members of the Public Service. The three banks will be handed over, in that sense, to the control of an outside body, the composition of which we do not know. The legislation says nothing about the qualifications which members of the corporation must possess.

I say that we are taking a tremendous risk which should not be taken. We are absolutely opposed to it. I have referred to the probability of a shortage of capital for the Trading Bank. Such a shortage could be used to justify a move to obtain private capital, and at worst - for the private banks - there would be a gradual transformation of the bank to a “ tame cat “ lender at overdraft rates alone. This would be associated with the transformation of the private trading banks to high interest, flat rate lenders through hire-purchase channels - something very different from what we have had in Australia until the last few years.

The whole course of credit operations in this country is changing before our eyes. The private banks are endeavouring to enter and, indeed, to monopolize the field of consumer credit. It is not direct hire-purchase in which they are engaged. That, possibly, would be outside their jurisdiction. They come into the hire-purchase companies, are shareholders, controlling the bulk of the capital of those companies. In that way, they are getting control of the great consumer credit organizations. Those remarks apply to every private trading bank in Australia, save one. The profits are huge. The limitation of returns in the shape of interest in other fields has always been noticeable, although there have been substantial increases in interest rates during the last few years, at the instance of the present Government, but the returns from hirepurchase operations are extraordinarily large.

The private banking system is doing something that was never contemplated by the

Royal Commission on Banking. The private banks are beginning to operate savings banks. That, according to the views of the royal commission, was a phase of banking which should be conducted and which, as a rule, has been conducted in this country by governments. In England, the Post Office operates a savings bank which accepts small deposits and is not associated with general banking at all. The savings banks that are being formed by the private banks of this country are, as is common knowledge, endeavouring to take savings accounts from the Commonwealth Savings Bank. Has anybody ever heard before of so anomalous and so preposterous a position? Would not it be right for these bodies, if they have enough public spirit, not to seek to make profits from the ordinary savings of the people? Rivalry in this field should really be eliminated. There is no theory involved in that. It is a plain, practical approach to the question.

This legislation is, in a sense, a part of the dear money policy of this Government. I have referred to what is happening in our banking system. The Government bond rate was increased. People who invested in war loans or post-war loans at an interest rate of 3i per cent, or a little higher, if they wanted to redeem their bonds to pay a deposit on a house or buy a small business, were able, throughout the long period of the life of the Chifley Government and during a part of the life of the present Government, to obtain the full face value of their bonds. That position has changed. That is not the theory accepted by this Government. Its theory is that inflation will be intensified if the Commonwealth Bank supports the bond market. The Government’s policy in this respect might be in the interests of money-sellers seeking the highest price for their money, but it is against the interests of ordinary people, who need money at the cheapest rate. They are the people who put money into war loans to help the country and then found, when they came to sell their bonds, that instead of receiving £100 for a £100 bond, they could only obtain £91, and in some cases as little as £88 and £87. They were very seriously disadvantaged.

The Commonwealth Bank Act of 1953 provided that the profits of the Commonwealth Trading Bank were to be divided, one-half to the bank’s general reserve and one-half to the National Debt Sinking Fund. In effect, one-half of the bank’s profits went to the Commonwealth Treasury for public purposes. No one wants to compare the bank in that respect with an ordinary company, but in fact the amount going to the Commonwealth Treasury was equivalent to or greater than the company tax that would have been payable, had it been a private company. In addition, this bank although it is legally exempt from local rates and taxes in Australia, performs a public duty and makes ex gratia payments to all local authorities. Under the present bill, income tax is imposed for the first time on the net profits of the Trading Bank, and after provision for such tax one half of the remainder is placed to the credit of the Commonwealth Trading Bank Reserve Fund and one half to the Commonwealth. Under the new bill the Trading Bank is to be supplied with additional capital of £2,000,000. Considering that it is the duty of the Trading Bank, both at present and under this bill, to “ develop and expand its business “ which is that of “ general banking “, this additional capital contribution is utterly inadequate and, when compared with the terms of the Commonwealth Development Bank, some animus clearly is being exercised against the Trading Bank.

On the other hand, the private banks are in an enormously better position. I am speaking of their capital structure in connexion with the general trading of bankers. They have fully subscribed capital and reserves and also large capacities to increase capital as and when required from shareholders to whom the profits of the bank are channelled. The Trading Bank, however, is in an entirely different position. I shall quote some figures which illustrate that. In the case of the major private banks the shareholders’ funds as at June, 1956, consisting of paid capital and reserves, amounted to 7.7 per cent, of their deposits. That shows the relationship between the available money for capital purposes and the deposits. In the case of the Commonwealth Trading Bank the percentage of deposits represented by capital was only 4.4 per cent., showing that the capital available was much less. In spite of that, however, the activities of the Commonwealth Trading Bank were excellent and the results were supremely good, but the necessity for additional capital to expand and carry out the statutory duty is obvious.

The fact is that the general banking business of the Commonwealth Bank was conducted up to the period of the second world war with no regard whatever to the expansion and development of a trading bank competing with private banks. It is known as part of the history set out in the report of the Royal Commission on Monetary and Banking Systems that it did not compete. The policy was not to compete except in very special circumstances. In his report Mr. Chifley said that he knew of no case where it did so. But since the 1945 act when a statutory duty was incorporated into the legislation by the Chifley Government, a duty to expand business, the deposits of the Commonwealth Trading Bank increased from £50,000,000 to approximately £200,000,000, by far the largest percentage increase in deposits amongst all trading banks in Australia whether conducted by the Commonwealth or by a private concern. So far as loans to the public are concerned, the increase has been eight-fold showing expansion in accordance with the bank’s statutory duty.

In 1956, the Commonwealth Trading Bank’s customers numbered not fewer than 500,000, and they were increasing at the rate of 40,000 a year when the present legislation was announced. Does any honorable member think this new legislation was introduced because the bank was doing poorly? If the Commonwealth Trading Bank had been struggling, this legislation would never have been conceived. It is again the old desire to get rid of successful competitors, a doctrine for which the Minister for National Development (Senator Spooner) stands in relation to the two coal-mines to which I have referred. I have not any accurate figure as to the number of its customers at the present time, but I believe it has practically as many as any other trading bank in Australia. It must be remembered also that the bank has only been pushed to compete as a result of the 1945 legislation. Until 1945, there was no real competition at all, but it has undoubtedly increased in recent years. There has been efficient management, and public opinion in this country has been convinced of the energy and initiative of the men engaged in the Trading Bank who are discharging their statutory duty in the public interest without, in their transactions, any motive of private profit but solely for the welfare of their customers and the general public. Yet it makes and always has made, substantial profit, which is the proper course for such a bank to adopt.

When one sees the successful operations of the bank and hears the laudation by the Treasurer of the Central Bank - indeed he does not attack any of the banks - I am puzzled as to why there should not be any association of the Commonwealth Trading Bank and other Commonwealth banking instrumentalities with the Central Bank. They must not talk to each other and they must not meet, apparently because they were associated for so many years. What is the principle behind so absurd a doctrine? Why cannot the private banking combines keep their hands off an institution which has been so outstandingly successful? I have proved their success. The reasons advanced by the Treasurer should be closely analyzed. When studied, the reasons which are not necessarily those of the Treasurer but those of the private trading banks, expose themselves to condemnation and even to ridicule.

I propose to take a few examples because this matter must be driven home to the people of Australia who are those most concerned. According to inspired press statements, the Treasurer appeared to regard what was being proposed over the last twelve months as something in the nature of a “ sell-out “. It would help me much more if the Treasurer had said that. I do not want to ask an unfair question - we on this side of the House know the general approach of the Treasurer to these matters - but I should like to know the true reasons for the vicious dismemberment of the great banking institutions belonging to the Australian people. The argument has been stated, and this is the key to this debate. Let us see if there is any substance in the argument. It is said that experience has shown that the central bank, that is, the Commonwealth Bank of Australia - one always becomes confused and feels that nothing in future will be called the Commonwealth Bank of Australia except the bank building itself, and it will probably be given another name such as “ Private Bankers’ House “ or something of that kind - must be separated from the Commonwealth Bank Group, including the

Commonwealth Trading Bank and the Commonwealth Savings Bank. The Treasurer said -

There cannot be full harmony within the Australian banking system . . . unless and until this separation is effected.

Harmony is what the Treasurer desires. He wants the competitors fighting for business in this field, the Commonwealth Trading Bank and the private banks to be harmonious, all jolly good fellows together. What does he mean by so broad a statement?

The central bank has exercised policy control over the Commonwealth Trading Bank - and I emphasize this - in exactly the same way as it has exercised control over the private trading banks. It is stated in authoritative books like Arndt’s “ Special Account Procedure “. lt has been given no preference of any tangible character; on the contrary, it has been discriminated against. The Commonwealth Trading Bank made its appropriate contribution to the special accounts system long before it was under any legal obligation to do so. Later, when a tight rein had to be held by the central bank upon advances, for fear of greater inflation, the Commonwealth Trading Bank was given less freedom and was more restricted by the central bank than its rivals who are the major trading banks. That is undisputable. In other words, that restriction throws light on the genuineness of the reason for dismembering the bank belonging to the people. I submit that there is no genuineness in it.

The only reason for a lack of harmony is that the Commonwealth Trading Bank, without any substantial assistance from the central bank, which at times seemed to lean over backwards to assist the private banks - I suppose that was to prove that it was fair - beat its rivals in the race for custom, carried out its statutory duty under the act, and ever since it was allowed to compete with vigour and resolution, defeated its competitors by fair and open method. Jealously and malevolence in the relations between the individuals who run these institutions would not produce harmony.

How did the competitors respond? The directors of the private banks represent the vested interests of this country. They represent the great monopoly groups. No monopoly group is without representation on the directorates of the private banks. Many of the directors are distinguished citizens, but they are on the boards of the private banks, which are run for profit, because they come from organizations which are run for profit. The profits made by most of these organizations become even greater because they are monopolies. The Commonwealth Trading Bank meeting the private banks is like the amateurs meeting the professionals. All the gentlemen are players and all the players are gentlemen; but you have to pick out which is which.

As I said, the Commonwealth Trading Bank was beating its rivals. The private banks are great advocates of competition and free enterprise, and always say, “ Let competition prevail “. However, they do not follow that course with their own monopolies. They gain control of the market, and competition ceases. Then they become the price fixers for their products. Only the Commonwealth Government cannot fix prices in this country. It has no power to do so. But these institutions fix their own prices. They have succeeded through their power over anti-Labour governments. The presence of representatives of vested interests on the Commonwealth Bank Board - I am now covering a long period of history - almost paralysed the general banking functions of the Commonwealth Bank. The Commonwealth Bank did not compete.

Evidence given before the Royal Commission on Monetary and Banking Systems is most fascinating to read. Mr. Chifley played a tremendous part in the royal commission, and one can see now the great wisdom he displayed long before he was Treasurer. His knowledge of banking affairs was responsible for the important legislation which we introduced. As I say, the private banks paralysed the general banking business of the Commonwealth Bank. Sir Ernest Riddle was questioned before the Royal Commission. He could not point to one instance where a person who wanted to open an account with the Commonwealth Bank was not crossexamined as to why he left the private banks. The onus was on a person seeking to open an account to show why he had left the private bank. The result was that very often an account was not opened.

The central banking functions of the Commonwealth Bank did not exist until the war. Sir Ernest Harvey, who was an expert, came out from England to give advice on this subject. The bank had no power of any kind, except the power of persuasion. Mr. Chifley felt that some one should control advances and banking policy, and that that should be done by a central bank. He armed the bank with that power. The central bank could control advances if no agreement was reached and if, in the opinion of the central bank, dangerous pressures of inflation or deflation existed. The evidence before the royal commission showed a completely insolent attitude by even the Commonwealth Bank itself towards its own general banking business. The same point of view can be found to-day in the publications of the private banks.

Professor Giblin, one of Australia’s most brilliant economists at least in relation to the banking system, has shown how before the outbreak of World War II the trading banks fought ferociously against any effective central bank supervision. More recent studies by Professor Arndt give cogent reasoning corroborating the general inferences drawn by Professor Giblin. In the 1955 annual report of the Bank of New South Wales, the president of that bank demanded what was, in effect, a complete separation of the governor and the board of the central bank from the Commonwealth Trading Bank. He referred to a conflict of purpose. He did not mean a conflict between his bank and the Commonwealth Trading Bank; they were competitors. He pointed out that, while the central bank sought to apply the brakes firmly - and I shall use his words - “ the Government Trading Bank has been a very powerful factor in the total expansion of advances “. He referred to divided loyalties in the board of the central bank.

That charge by the president of the Bank of New South Wales has been completely falsified by the facts revealed in Professor Arndt’s recent study of the Australian trading banks. That study shows beyond doubt that the board of the Commonwealth Bank ordered the Commonwealth Trading Bank not to increase its share of total advances further, although its share of deposits had steadily increased. Professor Arndt also points out that the Commonwealth Trading Bank steadily gained deposits relatively to the private banks and, to quote his words “ was therefore able to expand advances more rapidly than some of the latter while being subjected to the same special account policy and adhering strictly to the agreed LGS ratio “. I do not want to go into technicalities, but the LGS ratio is the ratio of liquid assets and government securities to total deposits. Throughout that period, the Commonwealth Trading Bank maintained a higher liquidity than the private trading banks. The liquidity ratio of 25 per cent, of deposits in either liquid assets or government securities had been agreed to by the private banks and the central hank. The Commonwealth Trading Bank adhered to nhat agreement voluntarily

It appears that in 1954, with boom pressure of demand for advances, most of the trading banks repudiated the agreement with the central bank and .simply allowed their liquidity to fall below 25 per cent. There was no means of enforcing the agreement and the trading banks allowed their liquidity to fall. Only .two trading hanks in Australia kept their ratio of .liquidity, which is a vital factor from the point of view of inflation, at or above the agreed level of 25 per cent. One was the Commercial Banking Co. of Sydney Limited and the other was the Commonwealth Trading Bank, which again went further than was required and fully honoured the 25 per cent, liquidity arrangement tin a spirit of loyalty to central ;bank policy for the ‘benefit of the community. The Melbourne banks, particularly the two London head .office banks, went further in .allowing advances’ to rise at the expense of liquidity. The English, Scottish and Australian Bank Limited in June, 1955, had a ratio of liquid assets and government securities to deposits of 6.4 per cent., when the arrangement was that it should be 25 per cent. That was .a disgracefully low figure. In the words of Professor Arndt, the central bank’s “ attempt to reconstitute central banking in Australia on the ‘basis of voluntary .co-operation by the trading ‘banks through adherence to a conventional liquid asset ratio had signally failed “. The private banks would not -play. They would not co-operate. They agreed to do so, but they could not be trusted to do so. Only two of them did what -they had agreed to do. One was the -Commercial Banking

Company of Sydney Limited and the other was the Commonwealth Trading Bank. So much for their patriotism and the way in which these people running the private trading banks honoured their obligation for the benefit of the community!

The brutal fact is that the majority of the private trading banks, for purposes of private gain, refused to follow the central bank policy of holding the fort against most dangerous inflation. They considered nothing but their profits. They put the whole community at risk. The -Governor of the Commonwealth Bank tried to get an agreement at 25 per cent., and undoubtedly an agreement was reached, but, as I have said, only two banks honoured it. It was like Giblin* s famous story of the ’30s. The fight of the private hanks against effective control of their credit policy by the central bank was continued, although the best interests of Australia imperatively demanded control. That is the situation. Yet those banks have been able to come to this Government and get it to do the things that they want it to do, not on any tangible evidence of discrimination against them, but because they want harmony. I -suggest that “ harmony “ .in this case means that the other fellows must come and join the band and play the music that you want.

This repudiation of the 25 per cent, .that was required by public interest and agreed to in .principle shows how shallow have been so many of the pretentions of the private trading .banks. J-et me give another illustration, because this is really .the essence of the problem in this case. The Government has said, “Well, .the private banks have asked for this, and we are going to oblige them “. We shall see later why the Government wants to oblige them. As a matter of fact, the chairman of the National Bank of Australasia Limited said in 1949 that his bank had never directly or indirectly .attempted to .attack the 1945 act. He also said that his bank agreed that it was the .duty of the central bank to give leadership -to the financial system, and that it was the duty of the financial system to accept such leadership and abide by it. Fine words! They were all right while the Chifley Government was .in power, but as soon as the government changed, the whole tone of the statement changed, too. It is clear that after the Chifley Labour Government was defeated in 1949, the chairman of the same bank sang a very different tune and immediately demanded revision of the statutory special accounts system, although in 1949, only the year before, he had said that he would accept it.

As a matter of fact, the charge made by the president of the Bank of New South Wales against the Commonwealth Trading Bank, of excessive advances, to which I have referred, was the very opposite of the true position. Another bank chairman also made similar criticisms. The Prime Minister announced in March, 1956, a substantial increase in the rates of interest chargeable by the trading banks. The right honorable gentleman said that the purpose was to combat inflation. That was quite astonishing. I know that, theoretically, if you put up the rate of interest, inflation stops. But the rate of interest was put up and inflation did not stop. The chairman of the Australian and New Zealand Bank said -

A further important factor in the upward movement of interest rates was the withdrawal of the central bank from the bond market where for some time it had been providing substantial support.

Of course, the chairman of that bank condemned the cheap money policy and attacked the central bank. Hundreds of thousands of small investors had subscribed to the war loans at low rates of interest, being confident that they could get the money back. That period of confidence lasted until this Government withdrew support from the bond market. That support should have been maintained, because its withdrawal did not have any substantial effect on inflation.

The strange story of the planned move to force down the market value of the small investors’ securities was referred to by Dr. Coombs in a lecture. He took the view at that time that it would be a mistake to bolster the Government’s security market and so add to the mounting inflation. That meant that he wanted higher interest rates. We put forward our views on that matter to the House and criticized Dr. Coombs’s opinion, and I think we were completely right in doing so. Because the securities of the small investors were permitted to collapse, they lost as much as 10 per cent, or 12 per cent, of the face value. When investors desperately wanted money for the purpose of making a deposit on a home or a small business, the private banks went on with their plan and the people could not get sufficient money because of the decline in the market value of the bonds. But the private banks were on velvet. Their interest increased. They added to their portfolio of government securities, and they made large profits both in income and by way of profits on capital accretion.

A short reference to recent published accounts and studies has shown that the private banks have made spectacular increases of profits as a result of higher interest rates. Professor Arndt, in his book, refers to the changed status of the trading banks. He says that they are virtual public utilities which really have to be guaranteed by governments and that the shareholders carry few of the normal risks of what he calls “ entrepreneurship “. Nonetheless, the disclosed bank profits have fluctuated cyclically. But in 1955 their net profits were an all-time record. Bank profits, being largely derived from interest income, are instantly reduced in an era of cheap money. Therefore, it does not matter to them whether it is necessary for the community to have cheap money and a low rate of interest - their rate of interest is the highest possible rate.

Further, two important features in the measuring of bank profits are insisted upon. That is to say, the statement of bank profits usually refers to published profits. There is undoubtedly understatement of bank profits, as the Royal Commission on Banking and Monetary Reform discovered, because of inner reserves and transfers to and from inner reserves. The royal commission had illustrations of that where the value of the assets of the banks - their branches and agencies - had been estimated at a figure which was only a fraction of their true value, the real assets of value to the bank being constituted in a reserve. The profits are therefore understated in the published accounts. In 1952-53 and 1953-54, taxable income exceeded published profits by no less than £3,000,000.

I turn now to another aspect of the argument of the Treasurer in attempting to justify this legislation which seeks openly to weaken the Commonwealth Trading Bank and the Commonwealth Savings Bank by direct interference with their management and structure, and also to disturb and disrupt the whole of the Commonwealth Bank service. That is an enormous service. It is called the Commonwealth Bank service, and what the Government is doing in this instance, simply because of a request of the private banks, is to divide the service into two parts. There is to be a selection committee to decide who is to go to the Reserve Bank and who is to remain, instead of having one service, so that officers may be trained in both reserve banking and trading banking and, perhaps, also be acquainted with savings bank procedure. That will not be possible after this change takes place and the Reserve Bank has had to quit the premises.

The Treasurer has said that the private banks have stated to the Government that-

They recognize the need for a strong central bank and they say that, if it functions as a true central bank they are prepared to accept its leadership.

The right honorable gentleman read those words with a serious face. He said that that was what the private banks had put to him, but he did not say that it was correct. It was a monstrous suggestion, and I say that the right honorable gentleman was both insolent and impudent to put it forward. Is it not true that a strong central bank, for which the private banks say they recognize the need, and whose leadership they say they are prepared to accept if it functions as a true central bank, cannot be strong unless it has definite authority or power?

It is right that the central bank should at times consult with the private trading banks and keep them fairly informed. If, however, this fails and the central bank is convinced that its duty is to declare a policy, say in regard to advances, either to encourage them in periods of recession or to restrict them in periods of dangerous inflation, then clearly the bank must issue a directive in accordance with its powers. Its powers include statutory power in relation to advance policy. If the central bank issues a decision which it regards as just and necessary, the private banks should not only yield, but should make every endeavour to co-operate in the carrying out of the decision. But they will not do so. They want to revert to the position that obtained before World War II, when the private banks determined what was to be done, and, as one of the bank governors said, banking policy was a matter for each bank to decide. Of course, if you have one bank making advances and another obeying a direction to restrict advances, you have an intolerable position, and the whole banking system is then in a dangerous state of instability.

I do not dispute the proposition, and nobody would dispute it, that the Parliament can determine disputes between the trading banks and the central bank. The Parliament is the only body that can or should do so. After the decision is made by Parliament, the private banks should abide by it. But they are not prepared to do so. They say that they are prepared to accept the leadership of the central bank if it functions as a true central bank. I have given the illustration of the understanding that was arrived at with regard to liquidity ratios, when only two out of the ten banks in Australia abided by what was agreed to. Professor Arndt has said that this shows beyond any doubt that co-operation between banks has practically become impossible.

The report of the Royal Commission on Banking set out this fundamental principle: -

The efficient operation of a central banking system requires some limitation upon the powers of the trading banks in the general interests of the community.

That is what the private banks will not tolerate. The report went on: -

It may be in the interest of any trading bank to expand or contract credit at a time when the general interest requires different action. It is not to be expected that a trading bank will take action entirely opposed to its own interest. . . . It is for the Commonwealth Bank to regulate credit in such a way as to make the interest of the trading banks conform to the general interest.

The proposition is as simple as that, but the private banks will not accept it. I could quote other passages to the same effect from the report of the Royal Commission on Banking. Although the Treasurer put to the House the views expressed to the Government by the private banks, I think he would agree that those views are mere nonsense. He did not analyse the argument, but simply quoted the expression of the representatives of the private banks. He then gave us the second proposition that was put to the Government by the private banks. He said- and this is priceless -

They do not object to .the competition of the Commonwealth Trading Bank as long as it is fair competition.

Is that contention to be regarded as naive? It seems naive and ignorant, but if it is not, it emanates from sheer .arrogance. For who is to be the judge whether the competition of the Commonwealth Trading Bank is or is not fair? If the methods of competition adopted are contrary to law or are overruled by higher authority, then, of course, the objection of unfairness is justifiable. But the claim of the private banks, as expounded by the Treasurer, would mean that those banks would denounce competition from the Commonwealth Bank as unfair whenever that bank made definite progress. The private banks would then say, “ This is not fair. The Commonwealth Bank is getting more business than we are “. Does the Government want to divide up all the banking business in the way that it tried to divide up the air-freight business between Trans-Australia Airlines and Australian National Airways Proprietary Limited?

There is no evidence that the Commonwealth Trading Bank has ever indulged in improper banking practices. I do not think the same can be said of private banks. One would not expect it of them, because their objective is solely to make profits for their shareholders, and if they do not try to make those profits they are neglecting their duty to their shareholders. On the one hand we have the private banks, well organized, controlled by experienced bankers, and on the other hand we have the Commonwealth Bank, which, although it makes quite large profits, does not seek profits. There is an enormous difference between the two approaches to the matter.

I mentioned earlier the activities of private banks in capturing consumer credit companies and running them in order to get the highest rates of interest from their assets. I might also mention their attempts to injure the Commonwealth or State savings banks, of which some of my colleagues will tell the House later, by organizing transfers of accounts. Above all, I should mention the continuous use by the private banks of political pressure and agitation to cause a drastic legislative change which will destroy the basic organization or structure of the Commonwealth Bank. When they are defeated by fair .competition, they accuse their rivals of using their own .tactics.

There is a third objection which the Treasurer put on behalf of the private banks. He said -

They [the private banks] do consider the Trading Bank to gain unfair advantages from its connexion with the central bank and they fear the use that might be made of a trading bank, so linked with the central bank, if a government hostile to their interests came to power.

That is how the argument was put. The private banks said that they would be satisfied if this legislation was passed, but we must decide whether they are entitled to have it passed, because the only reason given for it is that it has been requested by the private banks. I suggest that this third complaint has no validity. The trading bank has not gained unfair advantages from its connexion with the central bank. I have given illustrations of the way in which the central bank has been strict in its control of the trading bank.

Mr Cramer:

– The right honorable gentleman has not mentioned the bills yet.

Dr EVATT:

– I have mentioned the subject-matter of them from beginning to end of my speech. The general trading activities of the Commonwealth Bank of Australia actually preceded the establishment of the Commonwealth Bank of Australia as an effective central bank by at least twenty years. But the real argument is that wrong uses, as the phrase has been used, might be made of existing legislation. The Treasurer has not done more than describe what is in the legislation. He says - and this is the very gist of his case for accepting the contentions of the private banks -

By degrees we have come round to the belief that only by completely separating the central bank from the rest of the Commonwealth Bank group will the source of friction be eliminated and the way opened for a lasting settlement of the issue.

He says, “ We must yield to them because it will settle the issue if we give the Commonwealth Bank away “. I suggest that the Treasurer does not believe the case he has presented. He is yielding to the private banks now, but other things he has said in his long career as Treasurer contradict the views that he has been forced, in effect, to accept now. As a matter of fact, in earlier years no one was more insistent than the Treasurer that the private trading banks must yield lo the control of the Commonwealth Bank. 1 want ;to know why the Treasurer has changed those views, because -his present argument as self.destructive

If the central bank is to be completely -separated from the rest of the ‘Commonwealth Bank group, why is -ft proposed that the Rural Credits Department shall continue to be associated with the central bank? lt is a separate department carrying out important transactions and with entirely distinct accounts, lt has nothing to do with central banking. And why change the name of the central bank What of the permitted association of the new Development Bank with the central bank. Three separate and distinct Commonwealth Banks are to be established, yet the Rural Credits Department is to remain with the central bank. 7 am not desirous of preventing that in any way, but I am saying that, because of it, the whole basis of the argument must fall to the ground. In truth, the arguments are merely dogmatic assertions based on plans directed against the independence and integrity of the Commonwealth banking organizations, the Trading Bank and the Savings Bank.

I have already referred to the combined entry of private banks into the savings banks field, but there is one important matter that should be specially considered by the House. 1 refer to the interference with the Commonwealth banking service by the splitting lap of the staff. Officers will be allocated initially to the Reserve Bank and then segregated from the other officers. This constitutes an interference with efficiency. The Treasurer says, of course, that a pang of regret will be felt by those officers who find, after a short time, that they are finally allocated to, say, the Reserve Bank, and separated from the Test of the organization. It is true that a “ tradition “ of efficient and loyal service was built up in the Commonwealth Bank as one great service. Why can that not be maintained so that there is no post in the bank, whether in the lowest division or >up near the office of the Governor of the bank, that is not open to every banker who studies all aspects of the problem?

It is to be stressed that this legislation will effect a notice to quit to the Reserve Bank to leave premises it has occupied for many years. This is a crude and childish requirement, based on a theory that there is -some danger of association if ‘the employees in the bank are allowed to associate with other -banking -institutions. They cannot be in the same building as those who nave been their colleagues in the ‘Commonwealth Bank service ‘for, perhaps, many years.

The new organization called the Commonwealth Banking Corporation is simply something that must break down. It will

Comprise three institutions, the Commonwealth Trading Bank, the Commonwealth Savings Bank and the new Commonwealth Development Bank. The organization for these institutions will create confusion and overlapping, and this must lead to inefficiency. Each ‘of the three institutions will have what is called a general charter of its own. Each will have a general manager with a satutory appointment. At the top there is to be one board for the three organizations. That is to say, it will be a .general board of the corporation. Eight of the board members will come from outside with no necessary experience of banking. This board may very well represent the type of vested interests which we see on the boards of the private banks. .But in addition, ‘each bank will have a separate executive committee of the board to handle the affairs of the bank. So that for each bank .there will be an over-riding board of eleven members. There will be an executive board of five members. The Treasurer says that these arrangements are designed to achieve a balancing of interests and to ensure that while working together, each institution will be able to pursue its own well-marked purposes without the risk of becoming merged with, or being dominated by another.

I say that that proposition is simply absurd. To whom will the man in the country town look? Whom will he recognize as the manager? There will be a manager and assistant manager, a managing director of the institution and an assistant managing director of the institution, and above all a local board with five members, and the supreme board. J say that the unjustified demands of the private banks have made the Government yield and carry out this childish proposal in the case of these three banks. It simply will not work.

Mr Calwell:

– I would call it a criminal proposal.

Dr EVATT:

– The truth is that the whole unnecessary and unjust division of the integrated Commonwealth Bank of Australia represents a form of political demand by the private banks which is certain to be followed by further demands under the cloak of a desire for frank and friendly co-operation with the central bank. That is what they mean by friendly cooperation. They got what they wanted in 1951, and asked for more. This was granted in 1953, and they still wanted more. When they found the Commonwealth Bank competing so vigorously with them they wanted to clip its wings, and that is the real object of this legislation. The view taken on this legislation, outlined in the book on banking which I have quoted, is this -

Much as one would wish to see frank and friendly co-operation between the central bank and trading banks, one cannot close one’s eyes to the fact that the trading banks have raised the price of co-operation each time their demands were met.

It is a form of blackmail. They want more. They say to the Government, “ If you do this, it is all right for the time being”. They promise their co-operation, but before long they want more. The present legislation is a response to their demands. The Government should, have stood firm and refused their demands until they would prove their case. Legislation of this character should be rejected.

It was the Australian Labour party that established the Commonwealth Bank of Australia, and it is justly proud of its association with the record of that bank, especially in the two world wars. Under the 1945 statute of Mr. Chifley, it was the duty of the board of the bank, and now it is the duty of the Reserve Bank, to ensure that certain objectives were carried out, one of which was the maintenance of full employment in Australia. But in the proposed charter for the three new banks - the Trading Bank, the Savings Bank and the Development Bank - that objective has been altered and there is a complete omission of the undertaking to maintain full employment. I should like to know the reason for that alteration. I do not think that the Treasurer mentioned it in his speech.

I ask in what respect is the legislation wanted? Does the Governor of the bank want it? Is it not right that he should say something about this? I think that it is the duty of the Governor to speak out, because he knows more about it than all the Ministers put together. He is familiar with the actual working of the bank. What are his views about it? In a situation like this, the House is entitled to be fully informed before a fundamental change in banking policy is made.

Why has the bank’s policy to maintain full employment been changed by omitting’ this objective. When Dr. Coombes was advising Mr. Chifley, he was as keen as anybody on the inclusion of the objective of full employment and he was partly responsible for the White Paper on full employment. 1 do not think that this legislation is wanted by the Governor. Is it wanted by the board? There is no evidence that it is. Is not the board entitled to put its views before the Parliament? Does the staff want it? I think I can answer that. I think that the staff is almost overwhelmingly against it. It will do grave injury to the Commonwealth Trading Bank, the Commonwealth Savings Bank, and the central bank.

I believe that the public will not support the private banks in their aggressive search for changes which might give them greater profits. If the Treasurer would tell the House the full story and produce the correspondence with the private banks, for which I have asked, we would understand why this legislation is being pushed through. At the end of last year the accepted position was that this legislation would be abandoned. My colleague, the honorable member for Hindmarsh (Mr. Clyde Cameron), referred to the 1949 elections. I, for one, will never forget what Mr. Chifley said in this House when the Commonwealth Bank Board legislation was being considered. He said that he had positive evidence in his possession of the enormous contribution made to the parties in the present Government by the private banks in 1 949. He said he could prove that statement and not one member rose to query it. They knew that Mr. Chifley was well able to do what he said.

What reason has been given for accepting this legislation? What will it do? I have not gone into every clause, because that will be done at a later stage. What general reason is there for agreeing to these measures? All that the Government has put forward is this silly argument of the private banks that if the central bank will agree with what they want, then they will accept what the central bank says. The Government’s case is as foolish and ridiculous and naive as that. They are the parties who are asking this Parliament to upset the structure of the Commonwealth Bank, which is so vital to its existence, and to interfere with the Trading Bank in the way that I have described. As the Commonwealth Trading Bank is passing the private trading banks in the race for business in this country they want to interfere with the other Commonwealth Bank organizations. The Opposition is against the legislation. The Government has made no case for it. It is unnecessary, and therefore we oppose it.

Mr FAIRHALL:
Minister for the Interior and Minister for Works · Paterson · LP

– I think the House will be particularly grateful to the Leader of the Opposition (Dr. Evatt) for not having pursued the bill through all of its clauses. For 75 minutes the House has been regaled with a lecture flavoured with cliches and the usual slogans and complaints of conspiracy, accompanied by the parrot cries from the back-benchers of the Opposition of “ Hands off the people’s bank “. It is quite plain that the leader of the Opposition, together with the party which he leads in this House in rough fashion, would certainly deny anything like a fair go to the competitive private banking structure in this country.

He complains, first of all, that there has been discrimination in the special accounts provision in heretofore existing legislation. He rather inverts his argument and says that there has been discrimination against the Commonwealth Bank. In these circumstances, I should have thought that the right honorable gentleman would have been grateful for the modifications which are being made in this series of bills. He is making a great complaint that there could be, or there would be, delay in the upward adjustment of reserve deposits in the event of a financial crisis. Once again, it is quite clear that the Leader of the Opposition would deny to the private banks the right to adjust their business reasonably according to the day-to-day requirements of their service. All in all, we have had the same old repetition of the same old complaint, and a belittling of the magnificent service which men whom the Leader of the Opposition is prepared to call outside men have given to the banking structure of this country.

Mr Calwell:

– Was it not they who caused the last depression?

Mr FAIRHALL:

– I hear the same old cry again. The right honorable gentleman talks airily about the plan against the Commonwealth Bank as though this is a conspiracy; and in that he is carrying out the tradition he has established.

If it is suggested that there is any plan by this Government to weaken and belittle the Commonwealth Bank, an examination of the figures relating to past performances might go some distance towards indicating the facts. If honorable members will examine the figures relating to the Commonwealth Bank, I think they will get a true appreciation of whether or not this Government is proposing to destroy the Commonwealth Trading Bank. For instance, between September, 1945, and December, 1949, deposits with the Commonwealth Trading Bank, which was then the General Banking Division of the Commonwealth Bank, increased by £27,000,000, under, of course, a Labour government. In the four years which followed, between December, 1949, and December, 1953, after the present Government took office, the Commonwealth Trading Bank’s deposits increased by no less than £78,000,000.

Mr CLYDE CAMERON:
HINDMARSH, SOUTH AUSTRALIA · ALP

– That proves you failed.

Mr FAIRHALL:

– That is an odd claim. The honorable member suggests we have failed because we have been able to double the deposits of the Commonwealth Trading Bank in the same period of time. In the whole period since the present Government took office, the Commonwealth Trading Bank’s deposits have more than doubled - having increased from £80,000,000 to £196,000,000. My good friend the honorable member for Hindmarsh (Mr. Clyde Cameron) seems to interpret this as failure on the part of the Government to protect the Commonwealth Trading Bank.

Mr CLYDE CAMERON:
HINDMARSH, SOUTH AUSTRALIA · ALP

– No, as failure to enable it to carry out the purposes for which it was intended.

Mr FAIRHALL:

– There are some other very interesting figures. In September, 1945, deposits of the General! Banking Division of the Commonwealth Bank were £.3 per cent, of the total deposits of all major trading banks. In December, 1949; under a Labour government, the proportion actually dropped to 8.1 per cent. Within four years after the present Liberal-Country party government came into office that figure had increased to 10.9 per cent, as at December, 1953, and to-day it stands at 12.7 per cent. So the whole history of the Commonwealth Trading. Bank under the control of this Government is of an everincreasing expansion of the business of that bank, yet, in some strange fashion, this is supposed to indicate that we are- sabotaging the so-called people’s bank.

Those figures hardly indicate an attitude of hostility by this Government towards the Commonwealth Trading Bank. On thecontrary, they disclose a record- of remarkable and continuous progress which can only come from support and faithful service to the people of this country by- this Government through the Commonwealth Bank. Of course, the trading bank will retain its charter to expand and develop its business. There is an obligation written into the current acts to do so> and the bank will, on examination, prove to be a more formidable competitor to the private trading banks than it has ever been up to date.

Mr Bird:

– - You do not believe that!

Mr FAIRHALL:

– We shall see. The only attack which the Labour party is able to make and sustain on this series of bills to re-arrange the affairs of the group of Commonwealth banks is against the proposals to abolish the possibility of discrimination against private trading banks through the special account or reserve deposits provision. Consequently, the only attack of this kind which is sustainable is against that thing which every decent, fairminded Australian will demand for the private trading banks - a fair go. That is the commodity which this banking legislation aims to preserve.

There has been a good deal of talk this evening about the private banks entering the hire-purchase business. The Leader of the Opposition (Dr. Evatt) speaks as though the hire-purchase business were being dominated by them. But if we examine the figures again, the strange facts emerge that the bank which was first in the hire-purchase business and the bank which has the greatest interest in the hire-purchase business is, in fact, the Commonwealth Trading Bank, through the Industrial Finance Division. That, of course, was arranged in the 1945 banking legislation by a Labour government. So if anybody invented, the idea of trading banks getting into the hire-purchase business, it was the Labour party that did so.

Are we to take it that the Labour party, through the Leader of the Opposition, presumes to see evil in something done by the trading banks which was really invented by a Labour government, not controlled at that time by the right honorable gentleman, but a government of which he was a member? The Commonwealth Bank to-day holds an interest worth £16,000,000 in the hirepurchase business while the interest held by the private trading banks is roughly. £1-1,000,000. Private investment in the hire-purchase business might well reach £300,000,000. It will be seen from, this that the interest of the banks in the hirepurchase structure is an infinitesimal proportion, of the total investment in hire purchase. At the same time, the Leader of the Opposition infers - indeed, this is the tenor of the whole of the Labour party’s propaganda - that the private banks are channelling into hire-purchase moneys which ought to be out on loan to industrial development.

Opposition Members. - Hear, hear!

Mr FAIRHALL:

– It is a great pity that there cannot be a law which says that critics ought to know what they are talking about before they presume to criticize. Everybody knows that the trading banks must maintain reserves; and the investments of the trading banks in the hire purchase structure are derived, from their reserves and capital side. As anybody who knows anything at all about banking will know - that certainly does not include my friends on the back benches of the Opposition - the moneys which lie in the reserves of the trading banks would never under any circumstances become lendable funds, so that, regardless of whatever interest the banks may have in the- hire purchase structure, not one penny is being extracted from lendable funds for that purpose. Every one knows, too; that; if this amount of. money from the reserves and capital structure of the private banks were to find its way into some other form of industrial investment, not a word would be said; but it is popular to level this charge against the private banks, a charge which under no circumstances can be intelligently sustained.

The Leader of the Opposition, with that inability to understand simple things which sometimes- characterises his utterances in this House, has sought to convey that he does not quite understand why there is any need to alter the provision dealing with relations between the central bank and the private banks. I do. not think there should be. any difficulty about understanding that matter. As we all. know, he has overlooked the. fact that the special accounts provision in the, 1945- legislation grew out of the. wartime, period, when the private banks themselves quite voluntarily, as a patriotic gesture against inflation which was arising at that time, agreed - I repeat, voluntarily: - to. place a percentage of their, deposits under the control of the central bank.

It was not very long before what had originated as. a voluntary proposal by the private banks became a statutory demand at the hands of the Labour Government which was even then planning the nationalization which it had attempted to bring into force in 1947. It became an obligation under the 1945’ banking legislation which set up an extremely dangerous position for the private banks. Their uncalled’ liabilities mounted, steadily so that, at any time, they could virtually have been crushed by a government which later proved that it was not in sympathy with private trading banking in this country. The present bill will dispose finally of this unhappy situation by putting the Commonwealth Trading Bank on all. fours with the private trading; banks. It provides for the central bank, unlimited power to call up the funds of the private banks and. the Commonwealth Trading Bank. It is theoretically possible to- call up 100 per cent, of the. trading banks funds, but since that would mean the extinction of the trading banks, it is never likely to happen.

The Leader- of the Opposition even complained that the banks are to be given six weeks’ notice when more than 25 per cent. of their deposits arc to be called up in an emergency. Surely, if the private banks are to be called upon to re-arrange almost the whole of their banking business, the six weeks’ notice” for which provision is’ made in this bill is little enough indeed. Yet, it is a situation- which is thoroughly acceptable to the private banks, who- do not worry particularly about having a little more formidable competition in the banking field provided, that they have some assurance against* the depradations and vandalism of’ another Labour government, which, unhappily, will return to the treasury bench at some time.

The Leader of the Opposition, with his tongue in his-‘ cheek, came into this House to-night and- suggested’ that no government would1 ever try to- nationalize banking by subterfuge. He said that it would even be necessary to hold a’ referendum to change the- Constitution- in order to nationalize banking. Nobody, knows that better- than does the Leader of the Opposition, because he learned it the hard way. He tried, to nationalize banking, and it did not come. off1. His government was rebuffed by theelectors in 1947, as it would be rebuffed by the electors at any time that it. again attempted to advance that, sort of proposition;

Of course, there is a very great difference in the attitude of private banks when there is a change of government. For the last eight years, the private banks have not been, particularly concerned over, their affairs in. this connexion because they know that they are under- the control of a government which believes- in private enterprise and which believes in private enterprise extending into the banking structure. But they have; very tender memories, of what happened from 1947 to 1949: Does anybody suppose that the private trading banks would be foolish enough to sit down and quietly await a: change of government, which undoubtedly will occur at some, time, when they would, be steam-rollered, by a government which has. not forgotten its socialist aspirations?

Whilst the Opposition has criticized this measure and. proposes, I understand, to oppose every provision of the bill, the. Leader of the Opposition has been very careful not to make any suggestions as to what the Labour party would, put in its place. So members of the public of this country can be pardoned if they have a great fear that the alternative to what we now propose would be, once again, the threat of nationalization which we had from 1947 to 1949. The public remembers very well what happened in 1947. It is not likely to forget. I can assure the Opposition that we on this side of the House are never likely to allow them to forget. Does anybody not understand the sort of damage that was done to the Australian economy by the efforts of the Labour government to nationalize banking? [Quorum formed.]

May I quote the statement of the manager of a very prominent Australian company which illustrates better than anything else that I know of, the sort of damage that was done to the Australian economy because of the proposals of the Labour government for bank nationalization in 1947. The managing director of Ampol Petroleum Limited, in January, 1954, said -

The nationalization policy of the Australian Government seven years ago delayed the discovery of oil in Australia. In 1946 we did not have the amount of risk money or the knowledge to search for oil in Australia. A Californian company was on the point of providing money when the Australian nationalization policy became news. The Californian executive immediately drew out, saying he had lost 20 million dollars through nationalization in Mexico. We could not interest American, Canadian or British companies in the Exmouth Gulf prospects.

At that time, when we were trying to persuade overseas capital to come to Australia and develop this country, the threat of bank nationalization produced, not so much a flight of overseas capital, but a most effective barrier against any prudent investor from overseas bringing into this country the capital that we demanded. Yet, in the first few years in which this Government was in office, so much had confidence been restored in the integrity of the banking system in Australia, that £80,000,000 or £100,000,000 flowed into this country for the establishment of a series of oil refineries which have been of magnificent benefit to us ever since.

The Leader of the Opposition, in addressing himself to the 1953 banking legislation said that “ politically, legally, and practically the nationalization of private banks was a dead issue “. One would presume that that sort of remark came out of his painful experience in 1947 and the more painful experience in 1949. But, in the course of the same statement, the righthonorable gentleman also stated -

All this talk of indirect nationalization of thebanks is a smoke screen, deliberately used by trieGovernment to disguise its real purpose whichis to sabotage the people’s bank . . .

The right honorable gentleman, like theparrot, cannot get away from the regular cry. Whoever will examine carefully the provisions of this series of banking billswill see that, in every provision, the whole structure of the Commonwealth Bank, group has been strengthened.

I want to get back to the subject of” nationalization. The people of this country ought to understand quite clearly that therecan be only very limited protection against bank nationalization by legislative processes. What we are able to do by legislation, another government may be able to undoby legislation. However, we can make it as difficult as possible for another government to interfere with the banking structure of this country. That has been don& in the arrangements provided in this series of bills. That is the best possible answer in the world to the demand of the Leader of the Opposition to know why this rearrangement was necessary. This Government is determined that it will protect Australia against the vandalism of Labour if it ever regains office. There can be noabsolute protection against the nationalization of banking, but what we can do is so arrange affairs that before there can be any further attempt at nationalization, either by frontal attack or by infiltration - which the right honorable gentleman said nobody would try - the attempt must signal itself to the Australian people, and once again public opinion would have the opportunity to become vocal and active, as it did in 1949.

The progress - so called - of socialization in other countries has proved that it is a pretty dead sort of philosophy, and we in this country want no part of it. I am certain that the Australian people will tell the Labour party just that if ever again it tries to nationalize banking.

I have not dealt in very great detail with the provisions of the banking legislation, but I want to say that there is a series of very good reasons for the introduction of this legislation at this time. The present -‘Liberal-Australian Country party Government is determined to preserve and -strengthen the Commonwealth banking -structure, to ensure that it remains a virile -competitor for private banking interests. At the same time, the Government insists that -there shall be fairness in competition in a free enterprise economy.

The Leader of the Opposition had the audacity to say that this Government bolstered up Australian National Airways Proprietary Limited in order to defeat TransAustralia Airlines. I shall not recapitulate the airlines struggle. We have had that ad nauseam. The plain fact is that this Government determined to counter the overwhelming benefits, the overwhelming priority, and the overwhelming preference which Labour had shown towards TransAustralia Airlines, with the idea of driving private businesses out of competition.

Mr Curtin:

– What about Commonwealth Oil Refineries?

Mr FAIRHALL:

– If it comes to Commonwealth Oil Refineries, whaling, or anything else, the philosophy of this Government is that we are here to govern and not to trade. The Government has no function in trade, and wherever a government trades it finally starts to prostitute its legislative powers in order to protect the business which it has no right to be in, anyway. I know of no government ever having gone to the people and sought approval to use their money for competitive business.

There is one very important channel through which the Government can fulfil its rightful function in business, and that is, by being a force to assist new business to commence in this country. The Government is choosing that opportunity through the provisions of the proposed Development Bank. This proposal puts the Government in its rightful place in the business structure. It puts it there as an initiator and supporter, but not as a direct participant. The Development Bank will go far in this country towards expanding the opportunities for private enterprise. It will boost private enterprise. The history of almost every worthwhile industry in this country is the history of an idea in the hands of a man who usually began with nothing more than a stout heart, an opportunity, and a hope of success. Most big business in Australia to-day had a humble beginning at the hands of men who were prepared to plough back into their business the hard-won profits of personal effort and private enterprise. With the development of technology, the day has passed when anybody can start almost any kind of industry with only a small amount of capital. To day, reasonable capital is required before any idea, no matter how good, can develop into an active and functioning business. Under present taxation rates, unhappily, it is not possible to plough profits back into a business at a rate sufficient to maintain the business in operation. But through the Development Bank, there is an opportunity for the Government to give impetus to worthwhile ideas.

I remember an experience I had when I was trying to promote a business in the 1930’s, a time when money was really tight. In those days, if you went to people who were supposed to have money to lend, no matter how good your idea was, they were apt to pat you on the back and ask whether anybody else was going to support you. If you said that nobody else was supporting you, and that you had come to them first, they would tell you to go away; that when you had found half a dozen other people to support you, they would then lend their support. In that sort of climate, many a worthwhile idea was stillborn. That is the kind of proposition that the Development Bank will take up and, perhaps, turn into brilliant success.

During wartime, I had experience of all sorts of manufacturing businesses, and I was impressed with the number of men who were able to produce good ideas which would have turned into sound businesses had they not lacked, first of all, the opportunity to provide finance from their own resources, and secondly, the sort of business guidance which the Development Bank will provide. As a result, they allowed their opportunity to slip by. If there is anything that characterizes Australian business, it is a great reservoir of skill, versatility, and initiative. If we want to develop this country, it is time we took that great reservoir and converted it into active business. The way to do that will be through the assistance of the Development Bank. There is some fear that the Development Bank may even, funder ‘certain conditions, outshine the Trading Bank. “I think that ns highly unlikely, it as la:king over the capital and .reserves of the .Industrial Finance Department :and of the Mortgage Bank .Department, lft is to have £5,000,000 of .additional capital. If anything is likely, it is that the -Development Bank will run short :of capital -before toolong, because the whole of the capital and reserves that it will be taking over ane already fully committed. -However, here is a magnificent idea which adds ito the strength of the general hanking structure for the benefit of Australian :enterprise. It .is quite a monumental piece of legislation which reorganizes (the ‘.banking system in Australia into a more efficient system, capable of greater service to the Australian public. Contrary to Labour’s claim that it will destroy the Commonwealth .hanking .structure, it will .provide more virile competition with complete fairness, give greater protection by the .central bank to the economy, and provide this great influence towards national development.

T hope that the passage of this legislation, for which I invite the -support of the House, will take banking out of the field of political disputation for a long time to come, so that a very .competitive Australian banking system, including both government and private banks, will be able to continue to work in harmony for the national benefit.

Mr MAKIN:
Bonython

.- The Minister for the Interior (Mr. Fairhall) expressed no view and submitted not a single fact that even begins to contest the trenchant criticism by the Leader of the Opposition (Dr. Evatt) of this banking legislation. I am positive that the Australian nation has been stirred by this magnificent declaration by Labour’s leader, which demonstrates our determination to resist this legislation. The Leader of the Opposition called upon the nation to resist this proposed invasion of our rights and the threat to the Commonwealth Bank, which is the corner-stone of the banking structure and the economy. We all are affected by this legislation - the humble worker and the businessman alike. Labour will resist this threat to the Commonwealth Bank to the utmost of its constitutional powers. There are three aspects of this legislation with which the Leader of the Opposition -has .dealt .and which I wish to emphasize further. i[]he proposal of the Government is .to (divide ;the Commonwealth Bank. That is the thought underlying all of this ‘legislation. The proposal is to divide the Commomwealth Bank into -new sections and to place those ‘sections :under a new form ;o’f administration. This is .a case of -dividing and conquering. There is no doubt that the -objective is so to weaken ‘this great institution that it will ‘be -easy for the Government ‘to make further depreciations and ultimately to sacrifice the bank to certain private interests that are making claims -on ‘the Government.

The second feature of this legislation is that what is proposed is, not mere revision, but a major change of the financial structure .of this country, dictated by the private banking corporations. This .legislation will destroy the Commonwealth Bank as a coordinated and integrated entity, which, in its present form, consists of a central bank, a trading bank, and a savings hank, all working in the interests of the financial stability of the nation. That structure is to -be substantially altered.

That being so, I want to bring to the notice of the people of the nation the fact that this legislation has been prompted and initiated by the private banking corporations. It is evident that the members of the Government had no thought of a scheme of this kind until recently, when the private banks came forward and insisted that effect be given to the claims that they made. Therefore, it is no wonder that the Prime Minister (Mr. Menzies) said a little time ago that when this legislation had been given effect to, he hoped that the private banks would take a political holiday. I repeat that the private banks were responsible for the legislation.

It is remarkable that these fourteen bills deal only with the structure and organization of the Commonwealth Bank. Not one of them deals with the structure and organization of the private banking institutions. It is a fantastic position when private institutions in the community come forward and ask that consideration shall be given to proposals which they make to defeat the purposes of a competitor, whilst those proposals leave their own affairs untouched. It will be impossible for members of the Government to justify their actions. It has been proved that they are seeking to serve the interests only of an extremely wealthy but numerically small section of the people and, in so doing, are prepared to sacrifice the interests of the nation as a whole.

I ask the House to consider whether the Government has produced the evidence that we require to support a proposal for a major change of the structure of the Commonwealth Bank. When I study the history of this country and learn something of the attitude of the members of the parties represented by honorable gentlemen opposite to this great banking institution, I realize how slight is their desire that it shall succeed. Rather than assist the Commonwealth Bank, they seek in every way to defeat its purposes and curb its operations. When the legislation establishing the Commonwealth Bank was introduced, the man who uttered the expressions of greatest derision was the leader of the Liberal party at that time. He threw up his hands and said, “ Sovereigns for everybody!” The derision and contempt with which that legislation was received then by those who represented the classes of people represented now by the members of the present Government show that the Commonwealth Bank has no friends, sympathisers or supporters amongst the members of the parties on the other side of the House.

We must bear in mind, in considering this legislation, that a grave threat is being offered to the effectiveness of the Commonwealth Bank. I ask myself: What is the purpose of the legislation? I come to the conclusion that many other people have reached - that is, that the private trading banks desire, if possible, to put out of business the trading sections of the Commonwealth Bank so that some extra advantage will come their way. The private banks are so avaricious, and they make such insatiable demands upon the public, that it is clear they will go to any lengths in order to destroy the government-owned bank’s effectiveness, and the people’s assets, when the people’s bank happens, in some way, to compete with private interests. Therefore, this banking legislation does not deserve the support, or even the consideration, of those who honestly wish to serve the best interests of the nation. When the

Commonwealth Bank of Australia was formed, with a savings bank section, along with a trading section, the cry from people of the ilk of Government supporters was, “ Hands off the people’s savings! “ 1 say now, in my turn, to those who have initiated the banking legislation now before the House, which threatens the effective operation of the Commonwealth Bank, “ Hands off the people’s savings, and the people’s bank! “

The Commonwealth Bank has given wonderful service to Australia. From 1911 to the end of the period covered by the latest returns available, it made profits totalling £88,964,648, which, with the profits totalling £94,976,841 made on the note issue, make a total of £183,941,489. How the private banks would like to get their hands on that money! They are envious of the success of this great national institution that has proved itself so profitable and effective, and they desire to deny to the nation the benefit of the service that this bank can give. The tremendous sum represented by the total profits of the Commonwealth Bank belongs to all of the Australian people, not to just a few, or to one section of the people. It belongs to every man, woman and child in this great country. Out of the profits that it has made, the Commonwealth Bank has contributed £28,909,000 to the National Debt Sinking Fund. What private bank makes any contribution to that fund?

Sir Philip McBride:

– What about taxation?

Mr MAKIN:

– If the Minister examined the Commonwealth Bank’s balance-sheets, he would find that it pays into Consolidated Revenue a considerable amount in lieu of income tax and other charges. In the light of those facts, Government supporters cannot score by interjections like that made by the Minister. The facts indicate that the private banking institutions do not make any payment that in any way resembles the contribution made by the people’s bank towards the liquidation of the public debt.

Mr McMahon:

– What about the taxation that is paid by the private banks?

Mr MAKIN:

– I have indicated the true position, but, evidently, the Minister was not listening. He seems to be rather poorly informed, although I have explained to him the circumstances of the private banks. Of course they contribute to Consolidated Revenue -by the taxes that they pay. But, as I “have indicated, the ‘Commonwealth -Bank ma’kes payments to Consolidated Revenue in lieu of -taxes and other charges. In addition, it pays one-half of its net profits to the National Debt Sinking Fund for the liquidation Of the public debt. The private banks do nothing of the kind

Government supporters attempt to justify the Government’s banking legislation by claiming that the -central bank should be separated from the -other operations of -the Commonwealth Bank, so that private information that the private banks make available to the central bank shall not be known to the people’s trading bank, which might derive advantage from such knowledge. It is remarkable that, if the Government seeks to justify its banking legislation on that ground, it should allow the proposed Reserve Bank of Australia to administer the Rural Credits Department. I assume, and hope, nhat .that department will compete with the private banks in the class of business that it will undertake. If it is considered proper that the trading bank should be divorced from the central bank, why should not /the Rural Credits Department be divorced from the Reserve Bank? I am satisfied that I can offer the correct explanation. This (has been done purposely in order ito .placate members of the Australian Country party, who, we know, >do not favour .some .of the proposals now being submitted to the Parliament. It has .been necessary to placate one section of the Go- vernment’s supporters. In -addition, some Government back-benchers -seem to fee rather restive -about certain aspects .of the legislation. It is said, of course, -that the Government wall mot .consider their .ideas.

Surely major legislation of this description, which will have such a profound effect upon our -economy, should have been subjected to some form of examination “by a parliamentary committee or some other authority equipped Jo inquire more fully hrt® the possible effects of these measures and the reasons for -the .changes that are being sought The Government .has not been able to satisfy the House in that regard. lt is impossible to persuade the Government to see reason in this matter. Therefore, it is necessary for Opposition members -to speak ‘to the country as a whole so that the people may better understand what is involved in ‘these banking proposals. Members of the Labour movement, both in the Parliament and in the great outside organization, will combine with all their strength to defeat what the Government seeks to visit upon the country.. These measures, which have been produced at the instigation of -the private banking institutions, prove once and for all that the private banks .are politically partisan. They cannot be excused for having sought to interfere with the present banking system, not merely to make their own financial affairs or structural arrangements more secure, but to weaken and destroy a competitor which serves .the community.

I say to honorable members opposite that we on this side of the House and all whom we .represent will pursue Government supporters to the electorate on this particular issue. Furthermore, .let it be known to the private banks, that, although .they feel that the ‘Government’s banking proposals will afford them immunity from possible future events, a .future parliament need not be guided or .governed by what is done by this Parliament. Fairness will always govern the considerations of the Labour movement in its .dealings with those who represent private interests and those who -seek to serve the public interest. Labour will -do its utmost to ensure that a sense of justice .and fairness prevails and that the banking system remains an effective expression of the wishes of the community. 1 offer no excuse for the very definite feelings that J express on this subject and which are in keeping with the feelings that have already been expressed by the Leader of the Opposition, who assured the people that in the future they may expect further consideration of these vital matters. We hope that, if not in this place, certainly in another place opportunity -will be afforded to defeat the purposes of -the Government and to -reduce its proposals to a form that will express public opinion. Honorable members will -realize that many facets of these proposals need to be scrutinized closely, and 1 ‘hope that, as a result of our examination of them, public opinion -will be fully roused as to their -significance.

I should like to mention that, at the expense of the public institution, the Government has extended special consideration to the private banking institutions by giving to them a special licence to engage in savings banking business. The result of the Government’s action has been that last year two private banks made a profit of £61,830. That money should have gone to the government institution and, in turn, have been used to the advantage of the public iD liquidation of the public debt and in the provision of an asset for all the people and not just a privileged few.

Debate (on motion by Mr. McMahon) adjourned.

page 2007

ADJOURNMENT

WorM Peace.

Motion (by Mr. McMahon) proposed -

That the House do now adjourn.

Mr WENTWORTH:
Mackellar

– Mr. Speaker, to-day humanity stands divided into two camps with a great gulf fixed between. On one side stands the free world, and on the other side stands Soviet Russia. In a sense, there is a stalemate in the conflict between them. Each side has the power to destroy the other; neither has the power to protect itself from destruction. Events of the last few weeks have indeed served to highlight this fact, although I think that state of affairs existed independently of those events.

In a sense, co-existence becomes a necessary condition of survival, yet co-existence cannot continue indefinitely. The thread upon which our lives hang cannot remain under tension indefinitely without snapping. If it snaps, humanity dies. Both sides, then, need for survival a means to end the conflict, and that need is made more urgent by the dissemination into more hands of the means of world destruction. Both sides equally require a means of resolving their ideological differences - a means whereby one side may be converted to the views of the other or both made to come together at a mid-point. The impossibility of either side obtaining survival through physical conflict mates it more urgent for both to find a battleground upon which the ideological conflict can be fought out when brought to an issue. Both sides, therefore, equally require an area of contact, and the speech of Khrushchev yesterday would seem to indicate that at long last even Russia is coming round to acknowledging this.

Such is not unreasonable. A Marxist has nothing to ‘gain from annihilation, an atheist nothing to hope for from it. If now we look for some resolution of our dilemma upon the -ideological rather than the atomic plane, then let the scales in this ideological conflict be fairly held. Let us devise equitable rules for the contest. We can impose such equitable rules even upon those on the other side, for they need contact equally with us, and if they are themselves convinced of the fundamental lightness of their cause as we are of ours, then they will not refuse to accept such equitable rules for the transitional period.

It is not within our compass to set down these rules all at once, or to work them out in their final form. But, as the first approach, let me suggest three fundamental principles First the renunciation of aggression; secondly, the right of free emigration; and thirdly, the equality of political organization. I >take these in their order.

First, .as to the renunciation of aggression, I emphasize that we, at least, have no aggressive intentions, and Russia specifically disclaims -them. No difficulty should be experienced in reaching a formal agreement, therefore, .on this ground. If such agreement were to be broken by either side then the ultimate sanction must still be available; but neither side wishes this. Is it too much to hope it-hat clear lines can be .drawn and a legal authority constituted whose decision would be conceded by both sides, each side knowing that to reject that decision would open the door to the ultimate sanction which each wishes to avoid?

The second principle is the right .of free emigration. No country has the right to constitute itself a prison house, and to retain individual citizens within it against their will. Whilst .this would not invalidate the right of a country to refuse -to receive .those whom it regarded as unwelcome, it would mean the .end of forced restraint of those on -either side -who find their country’s rule intolerable and to whom harbour is elsewhere available. How can either side, if it believes in -the -essential justice of its cause, refuse this right of free .emigration -to its own citizens?

As to the third principle - equality of political organization - we should accord Communist organizations in our midst exactly the same rights, neither more nor Jess, as are accorded -to anti-Communist organizations in Russia. Conversely, (let

Russia accord to all anti-Communist organizations there exactly the same rights, neither more nor less, as are accorded Communist organizations on our side. This is, thus, a principle which can be applied unilaterally. We, for our part, would wish the level of freedom on both sides to be as high as possible. But, in the meantime and until Russia accords more freedom to anti-Communist activities it is necessary for us to match Russia in restrictions; otherwise, history becomes a ratchet process, a mechanism which does not always move, but, when it moves, moves only in the one direction.

Russia, for her survival, needs contacts among us just as much as we need contacts within her borders. It is only by using our power to see that the scales are held fairly - and we can do this unilaterally - that we can force her to give us these contacts.

I do not pretend that these three principles are the complete answer, but at least they form a reasonable starting point, and they are a reasonable response to Mr. Khrushchev’s speech yesterday. Is there anything unfair in them? Is not each one of them essential to the fairness of the ideological conflict to which we are challenged? Would not the- rejection of any one of them by Russia be evidence of bad faith?

Perhaps the only reason for hope of good faith from Russia is that, in the last analysis, she is now in a position where bad faith would not pay. In the long run, if she remained intransigent then she has the capacity to destroy us, but only if she involves herself in that same destruction. Of course, if that is what she aims at, humanity has passed beyond hope. If, on the other hand, we can find - and I use the phrase literally - a modus vivendi then there stretches out before humanity a vista of progress and prosperity never before conceived. Will Russia condemn both us and herself never to enter this nowvisioned land? Can we not now transpose this atomic conflict into a conflict of living standards, of rival ways of life and of real human values. Hold the scales fairly and let the best human system win! Only hold the scales fairly and I have no fear of the outcome! With the advance of science, the limits of the world have contracted. Humanity lives now only in one house. A house divided against itself cannot stand forever or, I fear, for very long.

Mr HAYLEN:
Parkes

.- I hope that the Prime Minister (Mr. Menzies) will say something more enduring about coexistence than the first speaker - an unfortunate choice - had to say on a subject of the gravest importance to the whole world. I believe that what the honorable member for Mackellar (Mr. Wentworth) said was complete hypocrisy. Last night in this House he could not carry the doctrine of co-existence even to his fellow-Australians. He assaulted the character of public servants both in the Department of External Affairs and elsewhere, and libelled the administration of a Minister. He also made some references to the staff of the Leader of the Opposition (Dr. Evatt) in the same manner in which he has done for so long. If, now, there is to be a case for co-existence, surely it has to be put up by a more responsible person, a person with a greater insight into the problems of humanity. I take it that that is why the Prime Minister himself is at the table to-night.

It is all right to watch, as one can in this House, devious political moves, but when hypocrisy is so blatant it horrifies people in this chamber, particularly myself at the table and those on the Labour side. The honorable member made oleaginous references to some sort of a badly written charter of human rights - and there has been a good one for him to read and study and believe in - and suddenly all his paranoic anger against communism drifted away. Is it because the second “ Sputnik “ has terrified him? Is is because he feels there is some weight against his coruscating anger al everything that has represented socialism or communism? Why has he suddenly decided that the olive branch must be extended? ls there a proposal by the Australian Government for a co-operative movement throughout the world? If there is, the Prime Minister should tell us about it. Is it a move to be made by the British Government or the United States Government? If there is, 1 am all for it, because “ co-existence or no existence “ is not a slogan, it is a hard solid fact of the life we lead and the circumstances in which we find ourselves.

It was very unfortunate indeed that the honorable member for Mackellar was chosen to read a prepared statement, which does not convey anything new to us and is entirely insincere. This is more the honorable member for Mackellar than anything else. I remind him that the McCarthyism he practises is the very same McCarthyism which, in the United States, eventually prevented American scientists from having the first satellite in outer space, because the intelligent and finely sensitive scientists who were subjected to gruelling scrutiny under the Kleig lights at McCarthy’s inquiries gave it away. They went back to the Ivy League colleges, they went back to jobs in science foundations, they went back to their universities and there was a vacuum, as it were, in the progress of United States scientific investigation which, up to that stage, had been paramount in the world. The honorable member for Mackellar shares, in a minor and infinitesimal way, the blame that we attributed to the late Senator McCarthy, of the United States of America, for putting us, as democracies, in the position in which we find ourselves to-day. How horrible it is for ordinary Australians to hear this smooth, oleaginous proposal, “ We must get together and prepare our demands. We demand the right of free emigration “, and so on! We are in no position to demand anything, least of all through the honorable member for Mackellar. I say this with some sadness because I believe that the hour has struck for us to make some sort of a deal with the whole world, so that we may continue to inhabit the world. That fact has been driven home time and time again by the Leader of the Opposition (Dr. Evatt), whose loyalty to the United Nations cannot be challenged. Despite what the Government may say about him personally, or in his political capacity, he has been the genuine - sometimes the only - advocate in this country for peace, on a level that is understood by the rest of the world.

The piffling nonsense that we have heard from the honorable member for Mackellar absolutely reeks with insincerity and hypocrisy . It is more like him to say, “ I believe that treason is being practised in the Department of External Affairs “. He was referring to the department of one of his own colleagues. His remarks are recorded in “ Hansard “. He also said, “ I believe that somewhere else in Australia, in a public department, there is treason “. This is the man who gathered together a strange collection of members of this Parliament called the Foreign Affairs Committee. His first act as a member of that committee was to attempt to have Dr. Burton indicted for treason. There was no genuine study of the facts. This is the man who puts forward this proposal to-night! I cannot understand why he was allowed to stand up before his Prime Minister and deliver this affront to the Government and the Australian people. He is a rabid and paranoic hater of the people with whom he now says we should get together. He adds, of course, that if we do get together he wants the right to order their lives. He wants to be able to say, “ Clause 1, this should be done. Clause 2, this should follow. Clause 3, this is the development of my idea “. He is guilty of attempting to gain cheap notoriety. His proposal is completely out of character, and cannot fail to prove disgusting to honorable members and to the Australian people generally. We now await a solid and valid statement from the Prime Minister himself on this matter of co-existence.

Mr MENZIES:
Prime Minister · Kooyong · LP

– It is certainly not my intention, on the motion for the adjournment of the House, to promote a full length debate on foreign affairs. I had been informed that the honorable member for Mackellar (Mr. Wentworth) proposed to raise the question of the latest communication from Khrushchev. I therefore came in to hear it - with interest.

Mr Curtin:

– Did you not know about it?

Mr MENZIES:

– I did not, but I have heard it with interest, and in my case with a certain amount of understanding. I regret that the concrete suggestions - whether one agrees with them or not - which have been made by the honorable member for Mackellar should have given rise to nothing so far except controversy about the honorable gentleman’s character, or about that of some one else in this House. That kind of debate will not help very much the solution of the great problem that is now before the world.

Mr Cairns:

– What a change in tune

Mr MENZIES:

– I am not changing my tune at all. I have said, and said repeatedly, that the great problem in the world is to deal with the differences between the Communist powers and the powers of the free world. Everybody will begin a consideration of that matter by saying that he hopes that soon, and not late, counsels of reason will be substituted for threats in. the cold war. That, I think, represents the. common view of everybody in this House, and certainly of everybody else in this country. Of course we ought to be willing to discuss matters with the Soviet Union. Of course the Soviet Union ought to be willing to discuss matters with us. But before discussions occur, we must feel reasonably sure that they are bona fide’ discussions, and not merely a demonstration of another item in the cold war technique, from which the world has suffered during the last ten years.

On that point, I merely want to say this: There are ample- opportunities for discussion to-day. The honorable member for Parkes (Mr. Haylen) referred to the United Nations. There are ample opportunities for discussion either in the Security Council, or in the General Assembly, of the United, Nations. If, in the course of such discussions, there were a frank presentation of views and of difficulties, and a frank setting down of the- points which create- tension in the world, we might hope to have such a wealth of world opinion expressed- about them as would put its own pressure on. those from whom movement was expected. But what has happened in the United. Nations? The Soviet Union itself has, by its almost indiscriminate exercise of the veto in the Security Council, rendered the proceedings of that council immeasurably less significant than they were two years ago.

On the other hand, the prestige of the United Nations General Assembly has increased. More and more, important matters have come before it for discussion, and although it has no power of decision, it has, as in one or two recent cases, rather conspicuously used its power to recommend. What does the Soviet Union do? What do its satellites in the General Assembly do? Have they shown themselves willing to discuss these matters, of which the honorable member for Mackellar has given us two or three instances? Not at all!

One of the great things that the world has been looking at for some time now is the question of disarmament. A disarmament committee comprising representatives of all the great powers, in the world has attempted to find out whether- it could arrive at ways and means of reducing world tension by reducing nuclear and conventional armaments. After a good deal of discussion, during which proposals, which can hardly be challenged: in this place for their fairness and propriety, were put forward by the democratic powers of the world, the Soviet Union’s representative said, “ We wash our hands of these disarmament talks “. This very power has said, “ We are not going to discuss- disarmament, except so that it may be a matter of debate, and not of decision. We will be prepared to have it discussed by the whole of the 82 nations in the General Assembly, but not by some chosen, small and workable body which can really get down to the problem and arrive at some conclusion “. It is a very depressing thing that a nation which itself has said a great deal about peaceful co-existence should, by its action in relation to disarmament, strike a deadly blow at peaceful co-existence.

There are other matters which represent issues in this world. They are very great matters, to which we cannot shut our eyes at all. What is to be done about the freeing of nations - ancient nations - now in captivity? What about East Germany? For all practical purposes, East Germany is still a slave community. If Khrushchev would make some proposal about the freeing of East Germany, and the establishment of a genuinely independent self-governing unit in that country, it would be a token of a genuine belief in peaceful co-existence - a token that the world would welcome. What is to be done about the freeing of Hungary? I do not want to dwell on that. The memories of Hungary are too vivid in the minds of everybody. What about the freeing of Poland? What about the pacification of the Middle East, which, as I said only a few days ago, contains as many explosive elements to-day as did the Balkans in 1914? To adopt the phrase that was employed by the honorable .member for Parkes (Mr. Haylen), we want to see an olive branch offered on these matters, but the olive branch surely must come from the aggressor, from the country which has swallowed up these people and taken away their freedom.

If, in fact, the Soviet Union, flushed by its success in space, encouraged by the reaction of many people in the world to its experiments, feels that the time has come to make the peace and to keep the peace, then it has the greatest opportunity ever presented to a- country in our time. It can. say, “ We want peace; we have no feeling of aggression; we are prepared to enter into agreements for non-aggression. As the best proof that we abandon aggression, we will abandon our continuing aggression against, the freedom of those countries that have become our slaves as a result of our actions since the world war ended “. [Extension of time granted.] I thank the House. I do not propose to detain honorable members for very long, because it is late. I should like to remind the House that in the Middle East, about which all of us- have felt such anxieties- in the last few weeks, the position is that there are tensions, some of them in the very nature of things, but some of them deliberately encouraged. By us? By any of the Western democracies? Or by the Soviet Union? If it can be shown in frank and full discussion that any improper act committed, consciously or unconsciously, by the Western world’ creates an avoidable, tension, in the Middle East, we should be prepared, to look at it, face- it and acknowledge it. But at the same time it must be perfectly clear that those causes of tension which are- the- direct product of Soviet intervention must equally be brought to light and abandoned. For myself, I have not the slightest doubt that the responsibility of the Soviet in this matter is overwhelmingly the major responsibility. I would,, indeed, go so< far as to say that it is the sole responsibility.

For a nation, through its present leader, to be saying to the world, “ We want peace; we are making a gesture of goodwill “, while at that very moment it is arming Syria, encouraging Egypt, seeking to isolate Turkey and stirring up trouble between the Arabs and the inhabitants of Israel-, is on the face of it, arrant humbug. This is not a problem of words. It is, as the President of the United States of America has more than, once pointed out, a problem which can be solved only by deeds. The deeds ought not to be difficult for a great nation that genuinely desires peace. All it has to do is to set people free and to cease to meddle with the affairs of nations for which it has no responsibility and in which it has no legitimate interests of command or authority.

I believe, and I think every responsible leader in the world believes, that much good, would come from a top-level meeting which meant business - a. top-level meeting founded on good faith all round. But a top-level meeting just for the sake of a meeting, held in an atmosphere of threat, would be a meeting doomed to failure. Nothing, could do more harm to the peace of the world than to have the spectacle of a. meeting of that kind that ended in utter and confessed failure. That would produce a degree of pessimism and gloom in the world which would not encourage our hopes of peace. But a successful meeting, a meeting proceeding genuinely from an honest desire to arrive at a peaceful and fair conclusion, would give new hope to the world. All these things are so true that they hardly need to be stated.

It is perfectly true that the three matters referred to by the honorable member for Mackellar (Mr. Wentworth), and a dozen other matters all lend themselves to discussion and, as we. would hope and pray, lend themselves to agreement. But, facing the facts of life on this matter, I cannot myself feel unduly impressed by a speech, made by the ruler of the Soviet Union in which he talks peace, while at the same time offering threats of war and the imposition of slavery on millions, of people in the world. The matter being one of intense and practical importance, we must, in order to keep the balance of this matter, remember, with great satisfaction that only in the last week or two. there has been a getting together in a spirit of co-operation and” interdependence between Great Britain and the United States. This, I believe, may well mean a new chapter in the history of the world.

Mr SPEAKER:

– Order! The right honorable gentlemans time has expired.

Mr MENZIES:

– If I may add one sentence, it is only by such combined resoluteness and co-operation that we shall ever be able- to negotiate, not from weakness, but from strength.

Dr EVATT:
Leader of the Opposition · Barton

– This is an old problem taking a slightly different form. The cold war has been with us now for probably nine or ten years. I am very impressed with a suggestion, no matter who puts it forward, that a further attempt should be made to solve this problem by conciliation. It is not so much a matter of a particular proposal as the general idea of a further meeting between the great powers. I was surprised last week when the Prime Minister (Mr. Menzies) put forward views on the Middle East which were very similar to the views the Opposition has held for a considerable time. I thought that was something of value.

I put to the House the view that all these separate problems are virtually insoluble unless an attempt is made to solve the larger problem. The smaller disputes cannot be solved, although they are important, until you try to solve the big dispute, and the big dispute at the moment is the cold war itself. Every Middle Eastern dispute is of that character. To find a fair solution of the problem presents no difficulty, but once the line-up takes place and one nation goes with the West and another nation goes with the Soviet Union, it is impossible to arrive at a settlement. That is true of the dispute between Egypt and Israel, and the dispute between India and Pakistan; and that is true of the dispute in relation to the future government of places like Cyprus and Algeria.

None of those disputes can really be solved unless the leaders of the nations meet at the highest level, as they did in 1955. The leaders of the successful allies in the second world war - Churchill, Attlee, Truman and Stalin - met at Potsdam in 1945, but in my opinion one of the great disgraces in international affairs is that there was no meeting of them again until 1955. At that time Churchill had left the Prime Ministership and Eden held thai position. Important progress was made by their very meeting in Switzerland. That was a summit conference, and I am entirely in favour of another such conference now, but not on the condition that “ We will not go unless you are going to be good and agree with this, that and the other “. That is no good at all. Those matters should be thrashed out at the conference. The honorable member for Bendigo (Mr. Clarey) has settled industrial disputes of a far more difficult nature than these socalled great international disputes. If a fair solution is to be found it is no use pretending otherwise. Intractable industrial disputes are at times almost insoluble, and I say the same kind of approach should be made in the international field as in the industrial field. It is no use leaders of the nations, before going to a conference, saying they want this, that and the other. No self-respecting nation would agree to that. Australia would not agree to it. We would not go to a conference, for example, to discuss the attitude of Indonesia if that country insisted on certain conditions before the conference was held. Why do we expect the Soviet Union to agree to similar requests? It has its own status.

I make the practical suggestion that the leaders of the nations should confer and, if necessary, they should be pushed into a conference. That is where they ought to be. They should not try to impress on anybody how strong their particular country will be in the event of war. If war comes, there will not be any historians of that particular war; yet, the fate of mankind rests with those who are the leaders of the countries for the time being. That is the direction in which I would endeavour to employ my efforts if I had my way in this matter, and I think that would be the general view of honorable members on this side of the House. Let us have a meeting. Let us suggest it. At the moment, nobody is suggesting a meeting except Khrushchev. I suppose that because he suggests it, it is immediately rejected. If Khrushchev is willing to meet the leaders of the other nations, why not meet him and find out whether there is something upon which agreement can be reached? It does not mean there must be agreement upon every element in dispute, but if you get an area of agreement, so much the better, as the area of disagreement is so much smaller.

The United Nations tells us that we must do that. There is nothing new about it; but nobody will speak up for the United Nations. It is very refreshing for me to hear a good word said on the other side of the House on behalf of the United Nations. During the last four or five years, especially during the period of the Suez crisis, there were nothing but attacks on the United Nations. The United Nations lays down the code of international conduct, and in the end it is necessary either to come to an agreement or make an arbitration, but the Security Council has to be in agreement, while, so far as the General Assembly is concerned, there has to be a recommendation. The United Nations is the one body where all points of view are thoroughly discussed, but there are certain matters of such supreme importance that the leaders of the great powers must be got together. I see many difficulties in the way of such a conference, but I do not like this continual assumption that all the goodies in the world are on our side and all the baddies are on the other side. We refer to the free world. Look at the list of nations in the so-called free world. Of the 50 free nations, twenty have not any basic institutional freedom at all. LatinAmerican countries, European countries and Middle East countries are dictatorships, some of which still practise slavery. Do not let us pretend otherwise.

By all means, attend a meeting of the great three, four, five or six leaders, but do not delay another disarmament meeting by saying it is to comprise not more than six members. I have never heard of anything more ridiculous, but I think a meeting of 80 members is equally ridiculous. Do not let us say that six members may attend the meeting, five of whom will vote one way and one the other way. I do not think the hope of disarmament should be abandoned. Agreement on this question, with which Mr. Stassen was concerned, was very near until the arrival in London of Mr. Dulles.

Mr Graham:

Mr. Graham interjecting,

Dr EVATT:

– There is the old McCarthyism coming out again; it always comes up in some shape or form.

This is my frank submission to the Prime Minister, because it depends upon him and not upon a debate in this House - to support a meeting without conditions being laid down in advance. State the points that are considered important, but not as conditions for having a conference, because in that event there may be no conference.

I believe the recent stupendous scientific discoveries have stirred the hearts of the people of the world in a generous impulse. I believe these discoveries - they will be repeated in other countries; they are not simply Russian discoveries - only serve to show mankind that unless it uses them for the benefit of humanity the result will be disaster. I apologize, Mr. Speaker, for trying to elaborate the point. I sum up by saying there should be a top-level conference without preliminary conditions being laid down, an all-in conference to discuss the matters that divide the nations. When human beings meet together the opportunity of arriving at a successful solution is always present, but if the leader of any nation refuses to attend such a conference at which these great disputes can probably be settled, he will never forgive himself. When great disputes can be settled at that level, the Middle East and other disputes will almost settle themselves. I welcome this discussion and look forward to a fuller debate in the House, which has already been substantially promised on the return of the Minister for External Affairs (Mr. Casey).

Mr KILLEN:
Moreton

.- Mr.

Speaker-

Motion (by Sir Philip McBride) put -

That the question be now put.

The House divided. (Mr. Speaker - Hon. John McLeay.)

AYES: 53

NOES: 28

Majority 25

AYES

NOES

Question so resolved in the affirmative.

House adjourned at 11.4 p.m.

page 2014

ANSWERS TO QUESTIONS

The following answers to questions were circulated: -

States Grants

Mr Crean:

n asked the Treasurer, upon notice -

  1. What amount as a special grant under section 96 has been paid to the claimant States in each financial year since the establishment of the Commonwealth Grants Commission?
  2. What proportion did this amount bear in each year to (a), the total revenue of all the claimant States, apart from business undertakings, (b) the total revenue of all States, apart from business undertakings, and (c) the total revenue of the Commonwealth, apart from business undertakings and excluding income tax reimbursement to the States?
Sir Arthur Fadden:
CP

– The answer to the honorable member’s questions is as follows: -

The following table shows, for each of the years 1934-35 to 1955-56, i.e. since the establishment of the Commonwealth Grants Commission, the total amount of special grants under section 96 of the Constitution, paid to the claimant States, and the proportions these grants constituted of (a) revenue, from sources other than business undertakings, paid to the Consolidated Revenue Funds of the claimant States, (b) revenue, from sources other than business undertakings, paid to the Consolidated Revenue Funds of all States, and (c) revenue, from sources other than business. undertakings, paid to the Commonwealth Consolidated Revenue Fund, less income tax and entertainment tax reimbursement grants and special financial assistance grants to the States and expenditure under Part5 of the Estimates - self-balancing items.

In addition to the revenue paid to the State Consolidated Revenue Funds, the States received substantial amounts of revenue which were paid to special funds. Such revenue was not taken into account when calculating the proportions shown in the table. During the period covered by the table there were a number of changes in the administrative and accounting arrangements of the States and the Commonwealth. These could affect the level of revenue paid to the Consolidated Revenue Funds and consequently the comparability of the percentages shown in the table.

Suites. Grants and Income Tax Reimbursements

Mr Crean:

n asked the Treasurer, upon notice -

  1. What amounts have been paid to the various claimant States in each financial year since the establishment of the Commonwealth Grants Commission?
  2. What proportion has the amount received by each claimant State in each financial year borne to the total revenue, apart from business undertakings, of the State for that year?
  3. What has been the total revenue, apart from business undertakings, of each State in each year since the commencement of the formula which now governs the reimbursement of income tax to the States?
  4. Of these amounts, what sums were derived in each case from (a) income tax reimbursements, (b) special grants under section 96, (c) other Commonwealth sources and (d) amounts directly raised by the State?
  5. What proportions did the amounts received in each year in these categories bear to total revenue in that year?
Sir Arthur Fadden:
CP

– The answer to the honorable member’s questions is as follows: -

The following tables show, for each State, the total revenue, from sources other than business undertakings, paid to the State Consolidated Revenue Fund for each year of the period 1934-35 to 1955-56 for the claimant States and the period 1942-43 to 1955-56 for the non-claimant States, i.e., since the establishment of the Commonwealth Grants Commission, and since the commencement of uniform income taxation, respectively. The tables also show the amounts and proportions of this revenue derived from (a) income tax reimbursements, (b). special grants under section 96, (c) other Commonwealth sources, and (d) amounts directly raised by the States. Tn addition to the revenue shown in these tables, the States received substantial amounts of revenue (including some revenue from Commonwealth sources), which were paid to special funds. Such revenue is excluded from the tables because it is not possible to compile satisfactory aggregate statements from the information available. The nature and the proportion of revenue paid to special funds varies from Stale to State and, because of this, precise comparisons of the figures shown in the accompanying tables for one State with those shown for another cannot be made. Further, changes in administrative and accounting arrangements in any State during the period covered by the tables could have affected the comparability of the annual figures for that State. The figures shown for revenue from Commonwealth sources include only (a) payments to the States under Part IV. of the Estimates, and (b) payments from the National Welfare Fund where such amounts are paid to the State Consolidated Revenue Funds. Other Commonwealth moneys paid to the State Consolidated Revenue Funds (which in general were relatively small) have been included with revenue from State sources. This has been necessary because of the difficulty in tracing a number of these items in the State accounts. The proportion of revenue from Commonwealth sources paid to the State Consolidated Revenue Funds varies from State to State.

Cite as: Australia, House of Representatives, Debates, 7 November 1957, viewed 22 October 2017, <http://historichansard.net/hofreps/1957/19571107_reps_22_hor17/>.

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