Senate
10 December 1930

12th Parliament · 1st Session



The President (Senator the Hon. W. Kingsmill) took the chair at 3 p.m.,. and read prayers.

page 1188

REPORT OF PRINTING COMMITTEE

Senator THOMPSON brought up a report from the Printing Committee and -by leave - moved -

That the report be adopted.

Motion agreed to.

page 1188

QUESTION

GLASS

Importation and Price

Senator BARNES:
Assistant Minister assisting the Minister for Works and Railways · VICTORIA · ALP

– On the 5th December, Senator Payne asked the following question, upon notice -

  1. What increase in the priceper case of glass used by tomato-growers hasbeen charged by merchantsas per their pricelists since the deferred duty on this glass was imposed in June last?
  2. What quantity of this class of glass was in stock in Australia when the duty was imposed?
  3. What quantity of this glass has been imported into Australia for the months of July, August, September, October and November of this year?

As the answer, which is now available, is lengthy and involved, I ask leave to have it incorporated in Hansard without having to read it.

Leave granted, the answer beingas follows : -

1.-

The PRESIDENT:

– As it is becoming the practice for honorable senators to ask leave to have returns, letters and so forth embodied in Hansard without reading them, and as there is thus a danger of objectionable matter being included in Hansard, which ought, not to appear in it,I ask honorable senators to use the utmost care to see that nothing which by any stretch of imagination may be regarded as contrary to the Standing Orders is contained in any paper or return which they ask leave to have incorporated in The Parliamentary Debates.

page 1189

QUESTION

ABSENCE OF SENA T OR DALY

Senator LYNCH:
WESTERN AUSTRALIA

– In view of the fact that this chamber has been subjected to the extraordinary, I cannot call it lack of courtesy, but at any rate treatment of having only one Minister present to carry on his shoulders the burden of all the business, I should like to know if the Government will seriously consider the withdrawal of that single Minister so that there will be no Minister in the chamber ?

Senator Sir GEORGE PEARCE:

by leave - I should not be acting fairly to the Leader of the Government in the Senate if I did not explain that Senator Daly spoke to me before the meeting of the Senate, and informed me that he could not be present at question time because he would be engaged in an important conference with the Acting Prime Minister.

page 1189

QUESTION

MINERS’ OFFICIALS

REDUCTIONOF SALARIES.

Senator COOPER:
QUEENSLAND

asked the Minister representing the Prime Minister, upon notice -

  1. Has the attention of the Government been drawn toa report appearing in the Melbourne Argus of Monday, 8th December to the effect that the salaries of officials of theNor- thern Miners’ Federation of New South Wales have been voluntarily reduced by 121/2 per cent.?
  2. If the report is correct, is it a fact that this action has been forced upon the management committee of this great industrial union by the economic pressure of the present hard times?
  3. If so, will the Government, with a view to keeping its promise given at the Premiers Conference held in August, consider following the lead sot by the Northern Miners’ Federation in endeavouring to balance its accounts?
Senator DALY:
Vice-President of the Executive Council · through Senator Barnes · ALP

– The answers to the honorable senator’s questions are as follow: -

  1. I have seen a report in the newspaper referred to that the management committee of the northern branch of the Miners’ Federation has decided that the salaries of the executive officers shall be reduced by 12½ per cent.
  2. I have no information as to the reasons for the action referred to other than what appears in the newspaper report.
  3. See answer to No. 2.

page 1190

QUESTION

TASMANIAN GRANT

Senator J B HAYES:
TASMANIA

asked the Min ister representing the Treasurer, upon notice -

  1. Is he prepared to make a statement as to whether the Government intends to make an additional grant to Tasmania, as recommended by the Public Accounts Committee?
  2. Will the matter be considered by Parliament this session?
Senator DALY:
through Senator Barnes · ALP

– In view of the serious state of the finances of the Commonwealth, consideration of those recommendations which involve further financial responsibility on the Commonwealth, is being deferred until the budget for next year is under review. Other recommendations which affect the Commonwealth are receiving consideration.

page 1190

QUESTION

PREFERENCE TO RETURNED SOLDIERS

Senator HOARE:
SOUTH AUSTRALIA

asked the Minister representing the Minister for Home Affairs, upon notice -

  1. How many returned soldiers are employed in Canberra by the Federal Capital Territory Administration, showing - (a) exmembers of the Australian Imperial Force;

    1. ex-members of British Imperial Forces?
  2. Does the principle of preference to returned soldiers operate in the interests of Imperial Service men over Australian citizens who were not members of the Australian Imperial Force?

Senator BARNES:
ALP

– The answers to the honorable senator’s questions are as follow : - 1. (a) 96; (b) 34.

  1. The preference which operates in respect of returned soldiers is that provided for in clause d of section 7 of the Commonwealth Public Service Act which extends preference to “ Any person who was born in Australia or resided in Australia within six months prior to enlistment, and who, at any time, during the war, served with satisfactory record in a naval or military expeditionary force raised in the United Kingdom or in any British dominion “.

page 1190

QUESTION

FEDERAL CAPITAL

Upkeep of Gardens and Plantations

Senator OGDEN:
TASMANIA

asked the Minister representing the Minister for Home Affairs, upon notice -

What is the total annual cost, including all charges, of the upkeep of gardens and plantations within the Federal Capital area?

Senator BARNES:
ALP

– The provision for this financial year is £2,300 for the maintenance of plantations, and £26,000 for the maintenance of parks and gardens. Expenditure to date for this financial year is £1,387 12s. 5d; for the maintenance of plantations, and £10,159 19s. 3d. for the maintenance of parks and gardens, including Yarralumla nursery.

page 1190

QUESTION

DEFENCE

Commonwealth Militia

Senator SAMPSON:
TASMANIA

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

  1. What was the establishment of each infantry battalion in the Commonwealth Militia as laid down at 30th September, 1930?
  2. What was the actual strength of each infantry battalion in the Commonwealth Militia as at 30th September, 1930?
  3. What plans, if any, has the Minister for stimulating recruiting in the infantry army?
  4. Is it correct that the Government, on the score of economy, has decided to abandon camps of continuous training during 1931?
Senator BARNES:
ALP

– The information will be obtained, and a reply will be furnished to the honorable senator as soon as possible.

page 1190

QUESTION

TASMANIA’S DISABILITIES

Report by Public Accounts Committee.

Senator SAMPSON:

asked the Minister representing the Prime Minister, upon notice -

  1. Has the Government considered the report of the Joint Committee of Public Accounts on the general question of Tasmania’s disabilities ?
  2. If so, what action does it propose to take with regard to the committee’s recommendations, numbers 1 to 13?
  3. Has the report been pigeon-holed and forgotten ?
Senator DALY:
through Senator Barnes · ALP

– The answers to the honorable senator’s questions are as follow: - 1, 2 and 3. In view of the serious state of the finances of the Commonwealth, consideration of those recommendations (which involve further financial responsibility on the Com- mon wealth) is being deferred until the budget for next year is under review. Other recommendations which affect the Commonwealth are receiving consideration.

page 1191

QUESTION

WHEAT GUARANTEE

Senator E B JOHNSTON:
WESTERN AUSTRALIA

asked the Minister representing the Prime Minister, upon notice -

  1. Is it a fact that at a very large and representative . meeting of farmers, convened by the Primary Producers Association of Western Australia, and held in Perth on the 28th ultimo, the following resolution was carried by a large majority: - “ This meeting declares against further production of wheat until a definite understanding is given by the Federal and State Governments that the demand for a bonus of 4s. per bushel is granted, or an equivalent is paid. An executive committee to be formed to organize the wheat-growers of Australia on the lines of ‘ No adequate payment for this year’s harvest, no further production ‘ “ ?
  2. If so, what action does the Federal Government intend to take in regard to granting the request of the meeting for a bonus on wheat production as expressed in the resolution?
Senator DALY:
through Senator Barnes · ALP

– The answers to the honorable senator’s questions are as follow: -

  1. The resolution referred to by the honorable senator does not appear to have been officially communicated to the Government.
  2. The question of granting assistance to the wheat-growers of Australia is receiving careful consideration.

page 1191

QUESTION

AUSTRALIANFISHING INDUSTRY

Senator DUNCAN-HUGHES:
SOUTH AUSTRALIA · UAP

asked the Minister representing the Minister for Trade and Customs, upon notice -

  1. Has the Government given any consideration to the question of assisting the development of the fishing industry in Australia?
  2. If not, will the Government do so at an early date, and make available to those interested the result of such consideration, and the extent of the assistance that may be given by the Government?
Senator BARNES:
ALP

– The answers to the honorable senator’s questions are as follow : -

  1. The industry was exhaustively investigated by the Development and Migration Commission, and the results of that investigation have been made available for public use. The Government is at present giving consideration to the question of the development of a comprehensive scheme of fisheries research.
  2. See reply to No. 1.

page 1191

QUESTION

WHEAT INDUSTRY

Relief to Growers

Senator LYNCH:

asked the Leader of the Government in the Senate, upon notice -

In connexion with the question of giving relief to the wheat-growers of the Commonwealth, has the Government given consideration to the need for helping them to put in next year’s crop?

Senator DALY:
through Senator Barnes · ALP

– The question of granting assistance to the wheat-growers of Australia is receiving careful consideration by the Government.

page 1191

QUESTION

SALES TAX ON FLOUR

Senator CHAPMAN:
SOUTH AUSTRALIA

asked the Leader of the Government in the Seriate, upon notice -

  1. Is it correct, as reported in the press, that the Government has definitely rejected the sales tax on locally-consumed flour?
  2. Is it correct that the “Big Five”, appointed by the Bruce-Page Government to inquire into the effects of the tariff, found that the increased cost of goods manufactured in Australia paid by the Australian public was £26,000,000 annually?
  3. Will the Government immediately reconsider the proposal for a bounty on wheat, in order to help the wheat-grower in this time of stress?
  4. Does the Government consider that, if the wheat-grower goes insolvent, other sections must follow, and disastrous unemployment must ensue?
Senator DALY:
through Senator Barnes · ALP

– The answers to the honorable senator’s questions are as follow: -

With reference to parts 1, 3 and 4, the Government is giving earnest consideration to the question of granting assistance to the wheat-growers of Australia, and is examining every proposal which may help in the solution of that problem.

With regard to part 2 of the honorable senator’s question, it appears that the answer to this part would merely take the form ofa quotation from a report prepared by Professor Brigden and four other gentlemen. Copies -of the report, which represents the views of those gentlemen, have been circulated widely, and it would seem that no useful purpose would be served in quoting from it.

page 1191

TARIFF

Timber Duties

Senator CHAPMAN:

asked the

Minister representing the Minister for Trade and Customs, upon notice -

  1. Is it correct that the Government intends to reduce the duty on baltic flooring.?
  2. Will the Government reconsider the question of reducing the recent increase of 4s.6d. per 100 super, feet onoregon?
  3. Is it correct that strong representations have been madeby timber merchants and others, and members of every party, asking for this?
Senator BARNES:
ALP

– The answers to the honorable senator’s questions are as follow : - 1.No.

  1. A TariffBoard inquiry was held on the subject.
  2. The Government is reconsidering the matter.
  3. Yes,and many representations to the con trary.

page 1192

INCOME TAX BILL (No. 2), 1930

Bill received from the House of Representatives, and (on motion by Senator Barnes) read a first, time.

page 1192

NORTHERN TERRITORY ADMINISTRATION BILL

Bill received from the House of Representatives, and (on motion by Senator Barnes) read a first time.

page 1192

INCOME TAX ASSESSMENT BILL (No. 2)

Second Reading

Debate resumed from the 9th December (vide page 1137), on motion by Senator Barnes -

That thebill be now read a second time. ‘

Senator DOOLEY:
New South Wales

– When the debate was adjourned last evening, I was dealing with possible alternatives to the measure. Although Honorable senators opposite appear to be disinclined to vote against the bill, they express dissatisfaction because of the incidence of the taxation proposed by it. The Government gave serious consideration to the possibility of imposing undue hardship on property-owners, and this measure is the outcome of mature deliberation. It is necessary tobe very careful before penalizing peoplewith small incomes. I have in mind particularly the case of a widow whose husband may have left her one or two properties, upon the income from which she depends for her living. It will be generally conceded that a gross income of £300 and under per annum from property

Senator Guthrie:

– Nobody has advocated that course.

Senator DOOLEY:

– Because of the widespread unemployment, applications for old-age pensions are increasing daily. Many persons who, in other years, were able to secure employment, are now out of work, and are turning to the old-age pension fund for relief.

Senator Lynch:

– The Nationalist party increased old-age pensions on many occasions.

Senator Guthrie:

– And a Nationalist Government passed the bill under which old-age pensions are payable.

Senator DOOLEY:

– It is a fact, nevertheless, that the Nationalist party of today stands for a reduction of old-age and invalid pension payments as part of its general economy plan, which we contend will merely result in more unemployment.

The Government believes that the remedy does not lie in all-round wage reductions in the hope that Australia would be able to compete in overseas markers, which are already glutted with the products of lowwage countries.We contend that this measure is one contribution of a practical nature to the solution of our difficulties.

Senator Payne:

– In what way will it solve our problem?

Senator DOOLEY:

– Itwill,at least, bring in more revenue.

Senator Payne:

– But it will not solve the problem of unemployment.

Senator DOOLEY:

– It will be a step in that direction. The Leader of the Opposition (Senator Pearce) said yesterday that we, on this side, regarded the bill as a blow at the bloated capitalists. I can assure him that it was not intended as such, for we realize that all forms of taxation are passed on to the consumer. But as regards the friends of honorable senators opposite, it is unfortunate that they will not have the same opportunity to pass on this tax, because the worker is not now in employment, and, therefore, is unable to bear any share of the burden. The present difficulty is not of this Government’s making. No one, by any stretch of the imagination, can hold this Government responsible for the taxation which it is now necessary to impose on the people. Its difficulties have been accentuated by the sharp decline in the national income, due to the rapid fall in the price of our primary products, and the closing of the overseas money market. The Government will,I am sure, welcome any concrete proposal to help them in the present situation.

Senator Ogden:

– We made many suggestions yesterday.

Senator DOOLEY:

– The only suggestions were to reduce public servant’s salaries, and to curtail old-age and invalid pensions.

Senator Ogden:

– We did not urge a reduction in old-age pension payments.

Senator DOOLEY:

– Perhaps not in so many words, but clearly that was the inference to be drawn from the remarks of honorable senators opposite. I have no desire to prolong the debate, because I am sure the measure will be carried.

Senator McLACHLAN:
South Australia

– The pace at which this

Government has been levying taxation almost leaves one breathless. Only the extreme urgency of the nation can justify the imposition of this extra burden.I should like to contrast, for the benefitof the last speaker (Senator Dooley), the incidence of this measure as it would apply to taxpayers who are obtaining income from property, with the position of taxpayers in receipt of a greaterincome from employment in the Public Service. Public servants in receipt ofa salary of less than £725 a year will escape altogether any taxation in the shape , of a reduction of salary, whereas a person with an income of £600 derived from property will be called upon to pay £67 9s. 2d. The Government is imposing such heavy taxation on incomes derived from property to satisfy certain sections of its followers who wish to get at the bondholders. There are some who derive income fromGovernment bonds and inscribed stock, on which income taxation is paid; but only about one-half of our national indebtedness is held in Australia. If the Government wishes to strike at, the bond or inscribed stock holderitshould remember that under these proposals only, those resident in Australia will be affected, while bondholders resident outside Australia will escape. In. effect, the Government is aiming at the crow and hitting the pigeon, which is already well plucked by other forms of taxation imposed, not only by the Commonwealth Parliament,but by the States. The extraordinary partiality of these imposts makes one stand-aghast. From the schedule supplied by the MinisterI took out a few instances showing the effect of this taxation upon those receiving income from property and those receiving income from personal exertion. For the edification of honorable senators opposite I shall quote one or two. A bookmaker or showman making £600 per annum from personal exertion will, under this measure, pay a tax of £818s. 2d., while a widow deriving £600 a year from property would pay £67 9s. 2d. Is that the way in which even-handed justice is to be meted out by the Government in its endeavour to balance the budget? This measure will produce numerous similar anomalies and will result in the Government being faced with a very difficult position. A widow receiving £250 per annum would pay £9 2s. in taxation, or 3s. lOd. more than a bookmaker receiving £600 per annum. That is the position, and I state it so that he who runs may read. A Commonwealth public servant in receipt of £700 per annum will pay £15 3s. 3d., while a widow in receipt of income from an investment in Governmnent stocks or some other such security will pay £82 15s. 6d. That is the incidence of these taxation proposals which the Senate is asked to pass. While I realize the difficulty in which the Government is placed, I feel that I should not allow the measure to pass without directing attention to the effect of its provisions. If it is an attempt to penalize the bond or inscribed stock holder, it has failed, as overseas bondholders will not have to contribute while some within Australia will be severely taxed, and others will not contribute anything. The Government would be well advised if it sought some means to. tax bearer bonds at their source and thus prevent the evasion of taxation which at present is possible. An extraordinary position emerges between local and overseas investors. A person in England who invests £100 in Government loans receives that amount for £91, so that his return, including exchange, is something over 11 per cent. It is time that the Government took stock pf what it is doing. It is striking at the thrifty and allowing those earning income from personal exertion, who disclose ho evidence of thrift or engage in any form of production to escape while property-holders, particularly small property-holders, are heavily taxed. The amendment of which I have given notice, and which I understand I shall be able to move after the second reading has been carried will, I think, meet with the approval of the Government. It is obvious that a mistake has occurred in the principal act, because it throws upon the purchaser of a lease, who subsequently spends money on improving it, the burden of income taxation, if he re-sells the lease, not only with respect to what he receives for the re-sale, but also in respect of what has been realized for .his actual expenditure in improving- it. I express my strong dissatisfaction at the incidence of the measure, and my disappointment at its severity. I trust that those factors which I have mentioned will be considered by the Government when it has sufficient leisure to deal with its taxation proposals on a scientific basis, and that it will endeavour to rectify some of the anomalies which the bill contains.

Senator CARROLL:
Western Australia

– During the debate on this bill various uncomplimentary titles have been suggested for it. It has been described as being confiscatory in character and still other designations, which might also be applied to it, would receive my cordial approval. I feel that it has been introduced simply because the Government failed to do its duty under another taxation measure which was passed yesterday. It is not a pleasing task for any government to have to retrench or to impose additional taxation. Both are objectionable courses to adopt ; but, like a great many things in life, whatever the consequences may be, they are at times inevitable. We are now considering -an alternative proposal. It has repeatedly been stated, and the truth of the assertion cannot be denied, that this measure, while striking a tremendous blow at the thrifty section of the community, allows the spendthrift simply . to carry on and enjoy all the advantages which the thrifty should expect. The spendthrift is able to say, “Let us have a good time while we can, because if anything should happen we always have the old-age pension to rely upon. Consequently they make no effort to save. In later years the Government of the day is practically forced to confiscate the savings of those who have denied themselves pleasures in order that it might assist those who freely enjoyed such pleasures, and, because of their early improvidence, have become a burden on the State. That is the position which confronts us to-day. Governments supporters claim that the Government is faced with a situation not of its own creation. No reasonable man would charge either the present, or the previous Government, with having been responsible for the country’s present unsatisfactory position. The Government for the time being in office can always claim that its predecessors were improvident,, reckless and extravagant; it is a good excuse. I have heard of one Treasurer who was thankful that -he left the treasury empty for his successor. If we could charge the previous Government with having caused the tremendous fall in the prices of wool and wheat, there would be some justification for saying that it was responsible for the present unsatisfactory financial position of the Commonwealth. During this debate the effect of the fall in the prices of those two commodities has scarcely been mentioned, notwithstanding that that fall is mainly responsible for our present difficulties. If wool and wheat were again suddenly to realize the prices obtained for them twelve months .ago, the Government would be relieved of much which now embarrasses it. Unfortunately, certain happenings recently have tended to aggravate an already serious position. I refer particularly to the recent strike of slaughtermen in Sydney. It is significant that those slaughtermen carried on under an agreement until the commencemen.t of the lamb export season, when they decided to stop work. Their action has resulted in the loss of over £200,000 to Australia - money badly needed at this time. The farmers and graziers of Australia have been robbed of that amount, and Commonwealth and State Governments deprived of revenue which they had reason to expect.

Senator Guthrie:

– The price of meat was increased to the consumers.

Senator CARROLL:

– That is so. A good deal has been said during this debate regarding the standard of living. One is tempted to ask, whose standard? The standard of living in Australia will unquestionably be lowered if this measure becomes law, for it will rob many a man of the ability to employ some one who is sorely in need of employment. If a man has to pay out his money’ in taxation, he cannot use it to employ labour.

Yesterday Senator Rae complained of the way in which the Labour caucus was being attacked in this chamber and elsewhere. I have a good deal of sympathy with the honorable senator. I ‘have nos, quarrel’-with any political party discuss: ing its proposals in private before they are brought before Parliament. ‘ It is evident ‘thai Senator. Rae is acquainted with that’ proverb of Solomon; “ In the multitude of counsellors there is safety.”

Another factor which has an important; bearing on this subject, is the economy in administration promised by the Government. Particularly in times of financial stress, when incomes “are reduced all round, it is the bounden duty of any government to explore every avenue by which expenditure might be reduced. When honorable senators in Opposition urge a reduction of expenditure it is wrong to assume, as Government supporters have done, that they mean only a reduction of salaries and wages. A mere reduction of the salaries and wages of public servants will not do much to balance the budget. Any Government which ‘‘attempts to retrench its public service finds itself in a difficult position. The matter is not so easy as many outsiders believe. In my opinion, no Government in Australia really governs. In the final analysis, the Public Service governsthe country and, indeed, controls governments. The question we should consider is not whether public servants should be paid £3 or more a week, but whether there is need for a drastic reduction in their number. I am not charging public servants with disloyalty. After all, they are only human and naturally look after themselves. But I say that the Public Service of Australia is out of all pro-, portion to the population, and that its cost is more than the people can bear. I am not asking for a reduction of 6d. or ls. a week or, as Mr. Lang is proposing in New South Wales, ls. in the £1. I am asking that the larger question should be taken in hand as some day it will have to be. I protest against the imposition of a tax which, while doing tremendous injury to the people of Australia, will prevent the finances of the country from being placed on a satisfactory basis. This bill places a premium, not on thrift, but on extravagance, spendthriftness and profligate living. It is destructive to, people who are anxious, that their country shall be respected among the nations of the world.

Senator CHAPMAN:
South’ Australia

– At the outset let me say that I am bitterly opposed to this bill, which Iregard as one of the most iniquitous that I have had to consider, either in my State experience or in the Federal sphere. It is class taxation of the worst kind. Further than that it is a tax on the thrifty people of Australia, inasmuch as it taxes those who, instead of spending their money, have saved it and put it into house property. It leaves in a precarious position the widow of the man who during his life saved and invested his savings in a home for his wife arid family, and in other houses whose rents would provide them with a small income: Why should the Government discriminate between the man who has invested his money in property, and the man who has invested probably more money in some other direction? Many homes are mortgaged and rents have fallen. After paying this exorbitant tax, municipal rates, the cost of repairs and interest on mortgages, property-holders will have practically nothing left. The following table shows how the tax on income derived from property has been increased : -

Hilder the amended proposal of Mil Lyons in (his bill the tax on an income’ of”’ £350 is £29 Ss. id, at present it is £2 4s. 6d. In Adelaide there has been a considerable depreciation in the value of property, even to the extent of £500 oil property valued previously at £1,300. This confiscatory tax will mean ruin to those who are heavily mortgaged. Iri many cases the rents will not meet’ interest; rates and taxes. A tax of £2.7. will wipe out capital values of £378 if capitalized at 7 per cent. It is practically confiscation. Li South Australia, farmers and country storekeepers are,, going insolvent, and .one wholesale house has already closed its doors. Yet the Government brings down a bill, the effect of which must, be to accentuate this financial catastrophe, and spread ruin arid unemployment.

The Senate has given the Labour Government a great deal of latitude.- It has certainly stood firm, risking a double dissolution, in regard to a couple of bill?, but generally it has taken up the attitude that it will help the Government in its efforts to balance the budget. The Melbourne agreement contained the following paragraph : -

That the several, governments represented at this conference declare their fixed determination to balance their respective budgets for the financial vear, 1930-31, and to maintain a similar balanced budget in future years. This budget equilibrium will be maintained with the repayment or conversion in Australia, of existing internal debt maturing in the next few years. Further, if during any financial year there are indications of a failure nf revenue to meet expenditure, immediate further steps will be taken during the year vo ensure that the budgets shall balance.

I am prepared to tax the people of Australia to honour that agreement and to balance the budget, but I want the necessary taxation to be just and equitable. The proposal before us cannot be so described. Simultaneously with the resolution passed by the Melbourne conference, the Acting Prime Minister (Mr. Fenton) said that the budget would be balanced by a. reduction of expenditure amounting ito £4,000,000. But instead of reducing expenditure by £4,000,000, the Government is spending about £4,000,000 a. year more than was spent by the BrucePage Government. I think we are justified in asking the Government to economize to the utmost limit before imposing such unjust taxation as is imposed by this bill. In the financial statement delivered by the Acting Treasurer (Mr. Lyons) we find that the new taxation outlined by the Government was : -

! feel that, I have two courses open to me with regard to these taxation pro.posals, either to disagree to the passage of , this iniquitous measure, and thereby, assist to bring about a double dissolution, or to ‘agree, .-to it in an endeavour to balance the budget. I refuse to agree to the Central Reserve Banking Bill in its original form, and am prepared to precipitate a double dissolution rather than allow it to pass as then drafted.

The measure affects the welfare of the whole of the people of Australia; even a governmental expenditure of over £100,000, and the heavy private expenditure that would be involved in a double dissolution are preferable to the acceptance of that bill as it was originally presented to the Senate. In this instance, I feel that I must acquiesce in the penalization of deserving and thrifty people, rather than plunge Australia into the throes of a double dissolution, with tremendous expense to the nation and dislocation of trade. The people have returned a Labour Government to the treasury bench, and that Government must take the whole of the responsibility for this bill. I have here a letter, which I received from theReal Estate Institute of South Australia. (Incorporated), which gives substantial reasons why the measure should be strongly opposed. It reads -

It is felt by the members of our institute that while all sections of the community have to-day to bear their share of taxation, the proposed further property tax is most unfair in its incidence, and that it would press unduly upon a very large number of people. There are thousands of property-owners, both small and large, whose incomes to-day have been reduced in some cases, almost to the point of extinction through the existing depression which is responsible for a large number of houses becoming vacant.In addition to this, which is a direct source of loss of revenue and income, returns from their property have been materiallyaffected for the following reasons : -

The inability of tenants to pay rent.

A large number of tenants leaving without paying, involvingheavy loss to the owners. 3.The necessity from a humanitarian point of view of letting tenants, who are out of employment and consequently unable to pay any rent, remain in possession at possibly a nominal rental or no rent at all.

The excessive cost of repairs generally.

The continuing high municipal and water and sewerage rates.

In addition to the above, property is already bearing a special tax on income as distinct from income derived from personal exertion. For the above reasons, we wish to express the hope that when this matter comes before the House you will give it your most earnest consideration, not from the point of view of excluding property from taxation, but from the angle of whether the owners, who are suffering to-day to a previously unknown extent, should be so drastically harassed as will be the case under the proposed taxation.

SenatorRae has attributed the necessity for this taxation to the alleged heritage of debt that was bequeathed to its successors by the Bruce-Page Government. The financial administration of that Government has already been dealt with in this Senate. I have referred to the budget figures more than once, while Senator Pearce quoted them recently. SenatorRae has those figures before him., and may see the position for himself. His canard has been circulated throughout Australia, evidently for political purposes, and the honorable senator still persists in. misrepresenting the position. I shall rebut some of his misstatements. From 1921-22 to 1928-29, the Commonwealth debt increased by £12,781,982, while during the same period, the States debt increased by £207,000,000! Our war debt, during that period, decreased by £45,000,000, while the Works debt increased by £89,000,000, of which a mount £33,000,000 was expended in postal works and war service homes, which paid full interest and made provision for a sinking fund.We also have assets for the balance of that amount. All that was accomplished with less taxation than the present Government proposes to impose, which proves conclusively that with economy and proper administration this property tax would have been unnecessary.Further, the present Government is making a raid on the sinking fund to the tune of about £2,000,000 a year. Had the Bruce-Page Government adopted similar tactics, it would have had, during the seven years that it occupied the treasury bench, an additional £14,000,000, so that the increase of £12,000,000 in the national debt would have been obviated and a decrease of £2,000,000 would have been the result. It, can in no way be claimed that, this taxation is necessary because of the action of the Bruce-Page Government.

Question resolved in the affirmative.

Bill read a second time.

Senator McLACHLAN:
South Australia

– Pursuant to contingent notice, I move -

That it be an instruction to the Committee of the Whole on thebill to consider amendments to section16 of the principal act.

Question put.

The PRESIDENT:

– There being more than the requisite number of senators present, and no dissentient voice, I declare the motion carried, under Standing Order 332.

In committee :

Clause 1 agreed to.

Senator McLACHLAN:
South Australia

– I move -

That the following new clause be inserted:- 1 a. Section 16 of the PrincipalAct is amended by inserting in the first proviso to paragraph (d), after the word “ licence”, first occurring, the words “ or if that lease is a lease of land, in effecting any improvements on the leased land.”

When Parliament passed section 16 of the principal act it omitted to take into consideration the case of a man who bought a lease and spent money on it in effecting improvements, which is capital expenditure. No provision was made for the deduction of that expenditure when a resale of the lease was effected. I understand that the Minister is prepared to accept an amendment in the form moved by me.

Proposed new clause agreed to.

Clause 2 -

Section twenty of the Principal Act is amended by inserting in sub-section (4.), after the word “tax” (first occurring), the words “ for any financial year prior to that commencing on the first day of July One thousand nine hundred and twenty-three “.

Senator Sir GEORGE PEARCE (Western Australia) [4.18]. - Will the honorable Minister in charge of the bill explain to the committee exactly what is the effect of this amendment? Sub-section 4 of section 20 of the principal act reads -

Where a company has paid income tax on undistributed income and that income is in any year subsequent to that in which it was derived by the company distributed to the members or shareholders of the company, a member or shareholder who is a taxpayer shall be entitled to a rebate in his assessment of the lesser of the two following amounts: -

the part of the tax so paid by the company which bears the same proportion to the total tax so paid by the company as the amount so distributed to the member or shareholder bears to the total amount so distributed to the members or shareholders of the company; or

the part of the tax payable by the member or shareholder in his individual assessment which bears the same proportion to the tax payable by him on his income from property as the amount so distributed to him bears to his total income from property remaining after allowing all the deductions allowed by this act from that income, except the deduction under section 24 “.

The amending clause appears to me to make this section of the principal act retrospective to 1923. Is that so ? If so, what is the effect of that retrospectivity ? Will it cause to be brought up for reassessment, assessments made in the intervening years, which come under this category, or will it affect only future assessments? If it is not to be retrospective, why has the alteration been made?

Senator BARNES:
Assistant Minister · Victoria · ALP

– The object of the amendment is to prevent shareholders from obtaining an unnecessary rebate of the proposed special tax of1s. 6d. in the £1 to be paid by companies on property incomes. The rebate is unnecessary, because the tax on property incomes does not apply to dividends paid to shareholders out of property income upon which a company pays the special tax. Sub-section 4 of section 20, which this clause amends, only remains in the act to allow rebates to shareholders where a company distributes dividends out of income on which it paid tax Under the old system of company taxation in force prior to 1923, that is, when companies were taxed at a high rate on undistributed income only. The clause merely limits section 20 (4) to the only purpose for which it was intended.

Senator McLACHLAN:
South Australia

– I must confess thatI have been unable to follow the explanation of the Minister, and I should like to have my mind quite clear before I vote for this clause, which deals with a highly technical branch of income taxation. Sub-section 4 of section 20 states that, where a company has paid income tax on undistributed income, a member or shareholder who is a taxpayer shall be entitled to a rebate in his assessment. This amendment, as I read it, will limit that benefit to a shareholder to all the years prior to the 1st July, 1923. Why should it be so limited?

Senator Barnes:

– The provision in sub-section 4 has not been applied for many years.

Senator McLACHLAN:

– But surely the will of the legislature is at times carried out ? If, as the Minister has said, thisprovision has not been applied, why is the amendment necessary? I say that it did have general application; but now it is to be limited for a period of time anterior to the 1st July, 1923.

Senator BARNES:
Assistant Minister · Victoria · ALP

– In 1923 section 20 was substituted for section 16 b of the principal act, and sub-section 4 has not been operated since that year.

Clause agreed to.

Clause 3 (Special deductions).

Senator PAYNE:
Tasmania

– I do not know if the Minister will heed my appeal; but I suggest, in all earnestness, that some relief be given to a very deserving section of the community by increasing the exemption from £200 to £300. This request is a reasonable one in view of the fact that, at a later stage, we shall be discussing the Rates Bill, under which the tax will be fixed at1s. 6d. in the £1, in addition to the 15 per cent, increase included in a previous bill. In the circumstances, I hope that the Ministry will consider the advisability of restoring the exemption to the former limit, so that income from property and investments may be on exactly the same level as regards exemption, although the levy on property will be higher. I am sure that the Assistant Minister (Senator Barnes), personally, does not wish to inflict an injustice upon anybody. I believe that, if he had his way, he would urge the rejection of the measure. I, therefore, hope that he will agree to the postponement of the clause so that he may confer with his colleagues with the object of inducing them to increase the exemption to £300.

Senator BARNES:
Assistant Minister · Victoria · ALP

.- I cannot accept the suggestion of the honorable senator. The Government, in another place, made concessions in regard to this matter at the request of the Opposition.

Senator PAYNE:
Tasmania

.- I do not agree with the Minister that the Government has made any concessions at the request of the Opposition. The original provisions appear to have been conceived in a spirit of bitter enmity towards a very deserving section of our people. The Government fixed the exemption in respect of property income at £100, but when it was pointed out that this would penalize a large number of comparatively poor men and women who were in receipt of incomes of £150 or £200 from property in which they had invested their life savings, the Ministry agreed to increase the exemption to £200. I ask honorable senators to contrast the position of these taxpayers with that of taxpayers in receipt of incomes of £500 from personal exertion. In the case of the latter, the exemption is £300. Surely the Government will agree to some modification of this clause so as to relieve the thrifty persons in our community from such a heavy impost.

Clause agreed to.

Clause 4: Persons to furnish returns.

Senator Sir GEORGE PEARCE (Western Australia) [4.33].- This bill will impose taxation on persons hitherto untouched by our taxation legislation, and the penalty for failing to furnish returns is a very heavy one. In view of the fact that this new class of taxpayers may be ignorant of the provision requiring them to furnish returns, I suggest that the Government adopt means other than an advertisement in the Commonwealth Gazette to acquaint them of their obligations under the law.

Senator BARNES:
Assistant Minister · Victoria · ALP

– The practice always has been to give as much publicity as possible to these matters. The newspapers invariably inform their readers when taxation returns have to be made. In addition to advertisements in the Commonwealth Gazette, notices are posted at all post offices throughout the Commonwealth, and, I believe, on other public buildings as well.

Clause agreed to.

Clauses 5 to7 agreed to.

Title agreed to.

Bill reported with an amendment; report adopted.

Third Reading

Motion (by Senator Barnes) pro posed -

That the bill be now read a third time.

Senator PAYNE:
Tasmania

.- I take this opportunity to express my great disappointment at the refusal of the Assistant Minister (Senator Barnes) to accept a proposal which I submitted in committee. I suggested that in view of the terrible imposts to be placed upon a very deserving section of the community, the Government should so amend thebill that the special taxation of1s. 6d. in the £1 would not be imposed on incomes of less than £500, and that the exemption should be increased to £300. I am indignant to think thatthe Government is penalizing the thrifty section of this community on which the prosperity of Australiahas depended and will always depend. The thrifty in our community have atall times been the backbone of our industrial life, and the day will come when the Government will realize that this and other of its acts have seriously endangered the industrial stability of the Commonwealth. The imposts embodied in this measure are so extreme as to warrant every honorable senator, even at this late hour, voicing his strongest possible protest .

Senator BARNES:
Assistant Minister · Victoria · ALP

– Surely the honorable senator whose indignation is uncalled for realizes that the Government is at its wit’s end to balance the budget and is compelled to obtain revenue from every possible source in order to carry on the work of this country. The incidence of this and other taxation will in some cases be severe; but the Government has been compelled to look in every hole and corner, so to speak, for revenue with which to carry on the services of the Commonwealth. The measure as first drafted was even more drastic than it now is, but the Government having given way as far as was possible it cannot now allow those who are able to contribute in some form to escape.

Question resolved in the affirmative.

Bill read a third time.

page 1200

CENTRAL RESERVE BANK BILL

Second Reading

Debate resumed from the 10th July (vide page 3966) on motion by Senator Daly-

That thebill be now reada second time.

Senator Sir HAL COLEBATCH (Western Australia) [4.42]. - The debate on the second reading of this bill was postponed to allow a select committee of the Senate to conduct an inquiry into the desirableness of establishing a Central Reserve Bank in Australia, and to report to the Senate. I trust that I will be pardoned if I transgress for a moment to refer to what, to my mind, is the inconvenient practice we are at present compelled to follow in regard to the appointment of select committees. A select committee appointed to deal with the question of standing committees has submitted two reports to the Senate in which certain issues are raised, but which I cannot refer to at present. I throw out the suggestion that the Standing Orders Committee might consider the advisableness of remodelling the Standing Order relating to the appointment of select committees to deal with bills so that the procedure shall be clarified, and we shall know exactly the course we are to take.

The inconvenient result of the present, procedure is this: The reference of a bill to a select committee has either to be moved early in the secondreading debate, or a majority of the members of the Semiteare debarred from speaking on the second reading after an investigation by a select committee has been conducted. In this instance the honorable senator who moved for the appointment of the select committee automatically became its chairman. He conducted the investigation, and is chiefly responsible for itswork, yet is prevented by our Standing Orders from speaking on the motion for the second reading after the report has been presented. The Leader of the Government in the Senate (Senator Daly) likewise is prevented from speaking, although he has the right to reply to the debate. Senator Pearce, who also spoke on the second reading, is now debarred from taking any part in the debate.

Since the chairman of the select committee is not permitted to speak again on the motion for the second reading of the bill, the responsibility, shall I say, of explaining to the Senate the recommendations of the committee and enlarging upon its report rests with the other members of that committee.

In its first progress report the select committee intimated that it, had considered the subject chiefly underthree headings - (1) Is the establishment of a central reserve bank in Australia desirable? (2) Is the time opportune for the establishment of suCh fin institution? and (3) Is the bill as presented to the Senate suitable to the requirements of Australia? All of these questions were exhaustively dealt with in tlie final report of the committee. The first question as to whether the establishment of a central reserve bank in Australia is desirable is answered, as it was in the preliminary report, in the affirmative. Tlie committee is of the opinion that the establishment of a central reserve bank on sound lines would be a useful adjunct, to our financial structure. Regarding the second proposal as to whether or not the present is an opportune time for the establishment, of such an institution, the committee has endeavoured to set out quite impartially the advantages and disadvantages likely to arise from the adoption of such a policy. As to the third question, whether the bill as presented to the Senate is suitable to the requirements of Australia, the committee answered it very definitely in the negative. It litis given its reasons, which are set out in some detail, so far as principles are concerned, and the amendments that would be necessary to make it suitable to the needs of this country. My own view, which I advance with great, diffidence, is that there can be no doubt, that the establishment of a central reserve bank on the lines provided iti the bill would do an infinite amount of barm to Australia, and would prove more destructive to our credit that any other action that has yet been taken by this Parliament. But while I am convinced that nothing is to be gained by haste in the establishment of a central - reserve bank, even on the soundest possible lines, and that the service of such a bank, if established at. present, would bc very small, indeed, I still think that the sooner it is established in Australia, on sound lines, the better it will be for this country.

I take it that the purposes of a central reserve bank are fairly well understood. They are set. out. fairly fully, and, I think, accurately in paragraphs 23 to 27 of the committee’s report. They tire also tersely set out in paragraph 15, which st ti tes that a central reserve bank is intended’ to- “-centralize, regulate, and protect the banking and currency reserves of a country. The difficulties attendant upon the establishment of a central reserve bank in times of crisis are set out in paragraph 28, in which it is pointed out that tlie measure of assistance that, a central reserve bank can give in time of crisis largely depends upon the strength of its own position, lt must be obvious to every one that the assistance that such a bank can give to any one. depends upon its own strength. The benefits of a central reserve bank in times of stress arise’ chiefly from the strength it has accumulated in times of prosperity. That, has a very important bearing, not only upon whether a central reserve bank should now be established, but also upon the type of bank required. A central reserve bank established in time of crisis has no reserves to contribute to the common fund; it must depend upon the reserves accumulated by other institutions. That being the case, it requires no argument to demonstrate that unless it is established on the soundest possible lines, instead of conserving and using those reserves it will dissipate them.

It has been suggested that during recent years the banks in Australia have accumulated reserves greater than they should have done with their limited capital; that their profits have been too large. 1 shall not enter into a long argument along those lines, but shall content myself by saying that the one saving feature in Australia’s financial position to-day is that the trading banks have those reserves. If, as is suggested by those who contend that the reserves and profits of the banks have been too large, the business had been conducted by some government institution, which had so carried on its affairs that those profits had not accumulated and there were no reserves, the position of Australia to-day would be pitiable indeed.

Against the objections to the immediate establishment of this bank, two considerations are submitted by the committee. The first is that most of the more recently established central reserve banks in other countries have been imposed upon those countries -in times of crisis. That means that they have been imposed by influences outside the country. Those influences provided the money that was necessary to stabilize the currency of those countries, and they took control of the banks. The central reserve banks in those countries are controlled from outside. If it is at all possible, it would be preferable that Australia should set up- its own central reserve bank rather than that it should be set up and managed from outside. The second consideration submitted by the committee is that in the Australian crises of 1843, 1866, and 1893, expert investigations were carried out by different authorities - authorities appointed, in some instances, by Parliament - and the experts in each case recommended the establishment is Australia of a national bank. Central reserve banks were unknown in those days; but any one reading the reports of those experts can come to noi other conclusion than that they had in mind an institution very much along the lines of the central reserve banks which have since been established in many countries. What is the comment on those recommendations? As they were put forward in a time of crisis, political opinion said that the time was inopportune, and that nothing must then be done. Directly the crisis was over, the recommendations were forgotten. I am . reminded of a story of a farmer who had a splendid catchment - the roofs of his house and his sheds, and a large underground tank. But he never had any water, because he failed to connect his house and sheds with the underground tank. His excuse for not doing so was that in fine weather there was no water to catch, and that when it was raining it was too wet to do the job. We do not want to imitate that foolish farmer. Whether we finally decide that the time is ripe to take some preliminary steps towards the establishment of this bank or not, let us try to avoid repeating what has happened in the past. In the three previous crises through which Australia has passed, we have realized the necessity for such an institution, but with the passing of the crisis, the need has been forgotten.

In’ my opinion, the most important reason for some early - though I emphasize that it must not be hasty or illconsidered - action, is the possibility of co-operation with similar organizations in other parts of the world. That is the thing to which we ought to devote our chief attention, for in that direction we have most to gain. However much opinions differ as to the nature, causes, and cures of the present economic depression, we are all agreed that it is world-wide. It must therefore be world1 wide in its causes and its cures. In 1922, an economic conference was held in Genoa. That conference failed for the reason that, while most of the important countries hastened to perform its first recommendation - that they should establish their internal currency on a gold basis - the second and complementary resolution of the conference for the coordination of gold, so that the holding of gold might be suited to the demands of the currency, has not yet been implemented. In fact, many countries have acted in an entirely opposite direction to the second resolution of the conference. That does not say, however/ that a world remedy will not be found. The work is still going on. The gold delegation of the financial committee of the League of Nations submitted a report a few months ago. I was supplied with a confidential advance copy of that report; but as I naturally was not at liberty to make use of it, I have been trying for some time to secure a published copy. I now have one, which I understand is the only copy in the possession of the Library. I am informed by the Librarian that, to the best of his knowledge, there are only two other copies in Australia. The report is dated Geneva, 8th September, 1930. I desire to read two paragraphs from that report in order to indicate the course which I think we in Australia ought to take at the present juncture. Near the bottom of page 17, the report states -

In recent years an unusual movement of gold has taken place. Thus, in 1929, Prance and the United States of America together increased their reserves by some 540,000,000 dollars, of which probably about 140,000,000 dollars were withdrawn from commercial banks and from private hoards. Ten countries acquired 1,055,000,000 dollars during the three years ending 31st December, 1928 - a sum equal to nearly 90 per cent, of the total amount of new gold mined during this period.

To some extent the acquisition of gold by a relatively small number of countries represented the exceptional movement of gold to reserves which, for one reason or another, had become depleted during or after the war; to some extent it was the inevitable result of the general economic disequilibrium from which the world has been suffering: We cannot shut our eyes to the f act that the question of the most effective distribution of gold is likely to become of steadily increasing importance in future years as the supplies of new gold become smaller. It may, however, be expected that the special causes which have determined the gold movements of the last few years will gradually work themselves out and that the possibility of an optimum distribution being achieved later by means of intelligent cooperation will steadily increase.

In view of all the circumstances to which attention has been drawn above, the probable trend of prices in the future must obviously give rise to some anxiety. We wish, therefore, at once to record our opinion that, if the need is recognized, remedial measures can be found which may be expected, for at any rate the next decade, to correct the consequences wo fear. We proceed to suggest some directions in which these may be sought apart from the problem of distribution, a matter with which we shall deal in a subsequent report.

The subsequent report to which reference is made, has been completed.

Senator Sir HAL COLEBATCH.The confidential report to which I have referred was dated June, 1930, whereas the printed copy did not leave Geneva until the 8th September. In view of the great importance of the matter I should not be surprised if there was. also considerable delay in the publication of the other report. The point I make is that these investigators say that a remedy can be found - an international remedy dependent on international co-operation - and that they intend to set out that remedy in a report which will be available next month.

On several occasions reference has been made in this chamber to a memorandum by Sir Henry Strakosch entitled “ Gold and the Price Level”. I propose to refer to it for two reasons. The whole of the report is devoted to insistence on the international character of any remedy that may be applied. Over and over again it emphasizes the great harm which must result to any country that sets out on a lone course in a matter of this kind. As the trouble is international, so the remedy must also be international. In the closing paragraph of his report, which was written some time before the document to which I have just referred was published, Sir Henry Strakosch said -

We can only hope that the inquiry into the gold question, which is at present being carried on by a delegation of the Financial Committee of the League, will achieve results no less effective than those yielded by the Report of the Brussels Conference, and that the Bank of England will once more lead the other principal central banks along the path of intelligent co-operation towards the common objective - economy in the use of gold, which alone can obviate the otherwise inevitable recurrence of disturbances such as those which are so grievously afflicting the world to-day.

Many of us, including myself, would be inclined to lose faith altogether in the League of Nations if it proved incompetent to suggest some remedy for our present difficulties. Many of them are the outcome of the great war. Payment of the cost of the war in some form or other is inevitable, even as payment for any loss or destruction is inevitable. Most of us are agreed that the difficulty of paying the cost of the war has been greatly intensified by the attempt of some countries to evade payment by inflating their currency. That such attempts have been made is beyond question. But I refuse to accept as inevitable economic conditions which impose, in almost every country in the world, unprecedented unemployment at a time when the one thing necessary is that every person everywhere shall be hard at work in order to repair and restore the material wealth thatwas destroyed during the war. We have to pay for the war, but there must be something wrong with economic conditions which appear to make it compulsory in almost every country in the world, that just when everyone ought to be at work in order to restore the losses of the war, there is absolutely unprecedented unemployment. This is nothing new. It is well to keep in mind that exactly the same condition of affairs prevailed after tlie Napoleonic wars 100 years ago. It is, however, a pity that the world has not grown wiser and that the co-operative spirit which has been developed since the close of the last war cannot find, not a means of escaping payment for the war, but a means by which all of us can get to work to repair the losses that inevitably rose out of it.

J.u the nature of things, there cannot be any quick or complete cure for these economic conditions. Any one who trys a quick cure will only get into trouble. The currency inflation practised in various countries has been a quack remedy. Quick remedies and quack remedies are almost synonymous terms. The cure must be international and all the evidence that the select committee has been able to accumulate on this point, all the authoritative works that it has had an opportunity to study, indicate that when an international remedy is applied it will be by the co-operation of central reserve banks all over the world.

This conviction forces me to two conclusions - that the sooner .Australia has a central reserve bank the better, and that the constitution of that bank must be such that it can readily co-operate with similar organizations elsewhere. The latter requirement is essential. Without it, we should be better off without, such a bank. This similarity for the purposes of cooperation does not necessarily imply rigid uniformity - there is no reason why local conditions and local ‘requirements should not have the fullest play - but there must be a measure of uniformity of purpose and in basic principles, which is totally lacking in the present bill. It, is from that standpoint alone that I intend to attack its leading provisions. Whilst every other central reserve bank, without a single exception, has been established to protect, and, in some cases, to restore, the currency of the country and. prevent inflation, this bill would facilitate the debasement of the currency and make easy the practice of inflation. The bill says nothing about it, but we cannot disguise from ourselves the fact that the frankly expressed motive of those who are urging the immediate passage of this bill is that it shall be used for the purpose of inflation. In that fact we have the outstanding and irreconcilable difference between the avowed purpose of this measure and the accepted and universal purpose of every central reserve bank. An institution set up for a purpose diametrically against that” of any other central reserve bank in the world, would be incompetent to co-operate with other institutions in any international movement.

This bill offends against the guiding principle of almost all other central reserve banks. I shall refer more fully to the few and partial exceptions from that principle, which is that in their management and their policy it is essential that they shall be free from government control and the influence of politics, so that their policy shall be continuous. They cannot chop and change with every shift of the political wind. There cannot be a bank of one type with a’ certain government in office and a bank of another type when another government is in power. That difference alone, apart from any other, would make the co-operation of such an institution with central reserve banks in other parts of the world entirely impracticable. The bill, as it stands, contemplates a purely government-controlled institution and would make easy the exercise of political influence. In its relationship to the Government, it departs from the accepted traditions of central reserve banking and from the policies of central reserve banks in every other country in the world, with no exception. Its provisions in relation to the making of advances to governments are unique; they have no precedent. There are a few cases to which I shall refer directly of central reserve banks coming, more or less, under government dominance: but it is beyond dispute that in no single instance is the bank subjected to the unrestricted control of a government as is con- templated by this bill.

Regarding this as the most serious defect in the measure, the committee hits cited examples from many authorities. It has failed to find one dissenting voice on this point. In its report it shows that in Great Britain a committee, recentlyappointed by the Labour Government to report upon banking, in the main emphasized the necessity for an organiza- tion that would co-operate with central reserve .banks in other parts of the world. Tlie two most distinguished members of the British Government, which appointed that committee, the Prime Minister, Mr. Ramsay MacDonald, and the Chancellor of the Exchequer, Mr. Phillip Snowden, both emphasized the necessity for keeping the bank entirely free from political influence.

The four main points affecting tlie relationship between the State and the bank, are ownership, management, or control, the power to make advances to the Government or to subsidiary authorities established under laws passed by the Parliament, and the amount and nature of the reserves to be held against the issue of notes. The fourth point is one of r,ne most important. For the convenience of honorable senators an appendix has been included in the report of the select committee on pages 25, 26, 27 and 28, giving the provisions in relation to these four matters of no less than 30 central reserve banks. So far as I have been able to ascertain, there are only 34 central reserve banks in the world. In addition to those mentioned in the table included in the appendix, there will be found on pages 19 and 20 of the evidence given before the committee, details of the reserve requirements against notes, of four other central reserve banks in regard to which, no other particulars were available. I take it. that these four are not banks of the highest importance. They are located in Albania, Ecuador, Egypt, and Uruguay.

The measure of gold reserve against mote issue, in connexion with, the relationship of the bank to the Governanent, should be stressed with the strongest (possible emphasis. On page twelve of its report, paragraph 19, the select committee quotes for the second time, a (paragraph which it included in its first report, and for the sake of giving it emphasis, and in order that it may be included in Hansard, I read it again. It is as follows: -

There can hu no question that thu power nf -Government to force increased loans from the Bank of France intensified the depreciation of the franc and contributed to the financial crisis that culminated in 1926. Such extreme -abuse* nf Government power are, of course, only possible when a. country has ceased to bc on the ;gold basis. As long as convertibility is main tained, the worst evils resulting from Government intervention in bunking and currency control are avoided. Doubtless ibo Governments which have laboriously dragged themselves out of the morass of inflation will not readily slip back; nevertheless if the control of the operations of thu central reserve bank lies directly or indirectly with the Government, it ‘ becomes fatally easy for the Government to finance itself for the time by means of book entries, a course which is the first step towards currency inflation and inconvertibility.

The position of Australia to-day is that Ave are no longer on the gold standard, inasmuch as holders of our currency cannot demand and obtain gold for the settlement of our overseas debts. That is what is meant by a country having a gold standard. Our notes are not convertible in the true sense of the term; therefore, as set out in this paragraph of the committee’s report, .there is nothing in our present Australian position to prevent the worst evils resulting from Government intervention. ‘When a bill amending the Commonwealth Bank Act was before the Senate twelve months ago, the suggestion was made, impudently I venture to say, that, we were copying the practice of the Bank of England, whereas on the contrary, we were departing a great deal from, it - we were, setting up an entirely opposite practice. In the case of the Bank of England, no person can go into the bank and demand a sovereign in exchange for his note, a wise arrangement in order to prevent, an altogether unnecessary domestic use of gold, but any person desirous of satisfying overseas obligations may take the currency of the country to the bank and demand his requirements in gold for export purposes. Under the pretence that we were copying tlie practice of the Bank of England, we set up a. practice which of course is not and could not bc carried out, under which any individual having a fi note can go to the Commonwealth Bank and demand a sovereign - exactly the opposite to thu English practice - but no person with overseas debts to settle can take his £4,000 or £5,000 in notes to the Commonwealth Bank and demand to be supplied with an equivalent amount in gold in order that he may send the gold away in settlement of those debts. “We thus look ourselves completely off the gold standard, and it may be within the recollection of honorable senators that the letter from the Chairman of Directors of the

Commonwealth. Bank, which was read in the Senate to induce honorable senators to pass the amending bill, emphasized that he would not in any circumstances, urge a departure from that standard. The effect is that we have departed from the gold standard, that our notes are inconvertible, and that we are to-day in a position to permit the worst possible abuses in the event’ of the establishment of a central reserve ‘bank under government control. Returning for a moment to the tables which appear on pages xxv. to xxviii. of the report, I invite honorable senators to consider first the question of ownership. Of the 30 banks whose constitutions are ‘analyzed in the return, sixteen, or more than half, are entirely owned by shareholders or legal persons, nine others are owned by shareholders and the Government, the interests of the shareholders predominating, and five only are owned by the State, those in Bulgaria, Finland, Latvia, Sweden, and Russia. Later, I shall make further reference to the fact that, even in the case of these five nations, not one contemplates, or would permit, the relationship between government and bank that would be set up by this bill as originally drafted.

The committee feels that it has adopted a sound course in recommending that, if and when this central reserve bank is established, it shall be on the intermediate principle - ownership in part by the Government and in part by the shareholders - and that it shall be provided, ‘as is provided in every instance on record in which such banks have been established’, that the shareholder influence shall predominate. That provision is necessary if we intend to eliminate political control and secure the continuity of purpose and policy of such a bank. The committee regards this principle as fundamental, and as bringing at once into the foreground the whole ‘ question of the ownership of money.

That money can be created by a government, or’ that money is the property of a government, is a purely -communistic conception which tlie committee has rejected, and which this Senate will reject, unless I am very much mistaken. The purpose of a central reserve bank is not to finance the’ Government, or to provide easy methods to meet the expendi- tures of governments. It is not to make possible by devious methods the transfer of private wealth to the Government. Any such policy would surely mean the dissipation of the reserves of the country. 1 think that I mentioned once before in this chamber, and I venture to repeat it, that there is an old definition of a banker which has stood the test of time. It is, “ A banker is a man who takes care of other people’s money, and lets them have it when they want it.” This bill would set up a new definition, “ A banker is a politically-constituted authority that takes the people’s money, and does what it likes with it.” That is something t© which, I fancy, this Senate will not consent. At the present time, if the Government wants the people’s money it can get it by borrowing it, or by taxation. The purpose of a central reserve bank is to conserve the reserve wealth of the community, to ensure its employment in a manner best calculated to serve the permanent interests of the entire country. Consequently, the aim in providing for the ownership of a central reserve bank must be to prevent sectional control. For this purpose, whilst there may be individual shareholders, the extent of their holdings must be strictly and very definitely limited. With the committee, I see no reason whatever why any bank, as a bank, should be a shareholder in an institution of this kind. Nor is the purpose of a central reserve bank to make profits for its shareholders. It has been very aptly stated that the bank does not exist for the benefit of its shareholders. The shareholders are there for the interest of the bank, to give it strength and independence. If any other method can be devised by which a central reserve bank can be secured against political control and political influence, I shall be content if the shareholders are wiped out altogether. The committee has failed, as have the people who formed central reserve banks all over the world, to find any means to prevent pernicious political influence, except by giving the balance of power and the management and control of the bank to shareholders. No one would suggest for a moment that the profits of the note issue should go’ to the shareholders. The profits of the general operations of the bank cannot be regarded as subject to unrestricted distribution among shareholders. In any circumstances the act should set out the maximum dividend that the shareholder can obtain from the bank, and it should be no more than an investor in Government stocks might expect to obtain in normal times. The first purpose of the hank is to build up reserves, and even the limited distribution of interest on his shares should not be paid until ample reserves have been accumulated.

If after building up all the reserve that is considered prudently necessary, and paying the shareholder the amount of interest that he would have obtained had he put a similar sum into Government securities, there is any balance, it is the property of the people, and should be put into the revenue of the country. So that, in making this suggestion of a shareholder bank, there can be no idea of providing means for people to make money out of the institution.

SenatorRae. - There would not be much inducement for investors to participate in the scheme.

Senator Sir HAL COLEBATCH.The capital of these institutions has been subscribed in other countries of the world. My honorable friend appears to think that a man with money has no other purpose in life except to increase it. Does he not realise that most people who have interests in the country have toiled hard to build up a comfortable provision, not only for themselves and immediate descendants, but also for the country? Is he prepared to suggest that such people are not eager that the finances of the country should be on a thoroughly sound basis, and, that to attain that desire, they are not prepared to invest a certain amount of their wealth in public funds, in a way that will bring to them a reasonable return for their investment? Does he contend also that, when the country is in need of financial stability, such people are not prepared for the time which is occupied in building up the necessary reserve to accept small returns, or even no return at all? There would be no difficulty in finding the comparatively small capital necessary for establishing an institution such as this. In the bill presented by the Government the total capital was stated at £2,000,000 - a comparatively small amount.

I shall pass to the second point, that of control and management. It should follow that of ownership, for the reasons that I have already given, two-thirds of the directors being appointed by the shareholders, and one-third by the Government. Continuity of policy should be preserved by providing that one-third of the total number of directors should be retired every second year, and by making the removal from office difficult. Clause 16 of this bill is, I think, without precedent in any other similar legislation. It reads -

Notwithstanding anything contained in this act, the Governor, a Deputy Governor and a Director shall holdoffice only during good behaviour.

And there it stops. There is no provision such as is made in the case of a Chief Justice, the Auditor-General, and others. If the bill had been passed in its original form the judge of “ good behaviour “ would be the Government. I am afraid that many of the Government supporters incline to the view that certain of the directors of the Commonwealth Bank are to-day behaving very badly. I should be extremely sorry if the directors of the Commonwealth Bank were subject to a clause of that kind, and their behaviour was to be judged entirely, and without appeal by the Government of the day, with power to act accordingly.

Perhaps the most important feature of the tables to which I have referred is the connexion of the bank with the Government, and the power of the bank to make advances to the Government. If honorable senators turn to clauses 8 and 9 of the bill, they will read that -

  1. The Reserve Bank shall . . . have power - and then they must turn to paragraph (i) which reads - to make advances to the Government of the Commonwealth or of a State or to any authority constituted under the law of the Commonwealth or of any State.

There is absolutely no reference to security, or to the amount or period of the advance. The intention is made clear in clause 9, which reads -

The Reserve Bank may not -

  1. make unsecured loans or advances except to the Government of the Commonwealth or a. State, or to any authority constituted under the law of the Commonwealth or of any State, or to any corporation carrying on the business of banking.

Those two’ clauses read together make clear the intention that the bank shall have authority to make advances to governments and subsidiary bodies formed under the laws of the Commonwealth or a State without security, without any limited time, and without limit to the amount.

I refer the Senate again to the dangers of such a position as set out in the quotation, to which I have referred, at the top of page 12 of the report. Australia is in exactly the position that is visualized there. It is off the gold standard, with an inconvertible note, a position which is aptly described by this authority when lie says, “ it becomes fatally easy for the Government to finance itself for tlie time by means of book entries.” It is worth while referring for a moment to a point discussed in paragraph 29 of the report, where reference is made to the existing Commonwealth Bank. The committee did not for a moment consider the bill to amend the Commonwealth Bank Act, which has been introduced in another place. I do not know how far the discussion has proceeded; but we cannot be blind to the fact that that bill was intended to be complementary to the one under discussion. Its declared purpose was to permit, the Commonwealth Bank to function freely as a trading bank - that it should reduce interest rates to extend advances. .Rend in conjunction with the closing line of clause 9, paragraph flr, “Any corporation constituted under the law of the Commonwealth or a State for the purpose of carrying on the business of banking,” this bill would enable the central reserve bank to make unsecured advances without limit as to amount or period to any corporation carrying on the business of banking. It would mean that the reserves of the private banks might and I venture to say would, if this bill were passed in its present form, be required to bolster up a government banking institution - a policy which would lead quickly to the elimination of those reserves, with most unfortunate results to Australia as a whole.

I now invite honorable senators to turn for a moment to the appendix dealing with the powers enjoyed by other central reserve banks in the matter of making advances to governments, and to com- pare such powers with those contemplated under this bill. Let us consider, first of all, the position of the purely State banks - those in which there is no shareholding control. The first to which I direct attention is the National Bank of Bulgaria. That bank may discount State orStateguaranteed bonds maturing within three mouths .and discount for the temporary requirements of state as authorized by budget bills of not more than threemonths, and totalling not more than 400,000,000 levas. It- may not make ad varices to other public bod ies. For the information of honorable senators, I may add that, although 4.00.000,000 levas mayappear to represent it large sunt of money, actually it amounts to about £750,000. because the value of the leva is about 670 to the £1 sterling. The powers of the next of these government banks - the Bank of Finland - tire not very definitelystated. lt is provided that, the board shall act in such a way that the currency shall maintain its value established by law. The bank must redeem its notes on demand in Finnish gold coin, gold ingots or cheques made out in foreign gold currency payable at sight at the current rate of exchange, but not, exceeding parity by more than 1 per cent. The issue may be 1,200,000,000 marks in excess of ‘ the aggregate gold reserve. There you have in the provisions for lending, and as to the gold, reserve, a very substantial and complete check against unlimited lending bv the bank to the Government. Another example is the Bank of Latvia. Its power to make advances is limited in such a way that the currency must bc maintained at par established by law. That is to say, the bank must redeem its notes on demand in gold coin. It is specifically provided that deposits with the bank cannot be used to cover the expenditure of the State. Substantial gold reserves are required, namely 50 per cent, of the first. 100,000,000 lats- which are about on a par with the old French franc 25.22 to the £ - 75 per cent, of any excess of “100,000,000 lats up to .150,000,000 lats, 100 per cent, of any excess over 150,000,000 lats. In other words, any excess over £6,000,000 must be covered by 100 per cent, in gold. Then we have the State bank of the Russian Socialist, Federal

Soviet Republic. .lt may grant credits to such government undertakings as are not financed by budget grants. Loans in bank notes made to the Commissariat of Finance are to be secured by precious metals as to a minimum of 50 per cent, of the face value and as to the remainder, by interest-bearing bonds of the Commissariat of Finance. It is required to have a minimum reserve of 25 per cent, of the note issue in gold, precious metals or stable foreign currency. In connexion with this particular bank, I would point out that although hy law there is supposedly absolute protection against inflation or destruction of the currency, the bank is entirely under the control of the State, and the law has not protected the currency.

On this point I refer honorable senators to certain comments which appeared in the London Times of the 1st November, 1930, which came to hand after the committee had prepared its report. [Extension of time granted.’] The Times states -

Thu figures of currency in circulation issued bv thu Statu Bank of thu Soviet Union in its Economic Surrey, aru as follow: -

Tin: only later figures are for the treasury note, silver and copper part of the . currency which appear in tlie newspaper, Economic Life. These show, in mie month, an increase nf 240,000,000 roubles in paper (an increase of I5i per cent, in thu month) and an increase in silver and copper of 140,000,000 roubles (155 per cunt.). Figures of the bank note issue aru not given; but if these have increased proportionately, as has lately been thu case, thu total increase in thu currency between the 1st August and the 1st September has been 890,000,000 roubles, bringing the total in circulation to 4,750,000,000 roubles which means that the currency in circulation lias been nearly doubled in twelve months.

The table included in the Times comment shows that the currency in circulation on the 1st October, 1924, had just about doubled at the corresponding date in the following year. Then it took. three years to again double itself, and at the 1st August, 1930, it had .reached nearly 5,000,000,000 roubles. Officially the exchange is still quoted at nine and a half roubles to thu £.1, but on the 1st November, 1930, its internal purchasing power was down to about one-tenth of its liar value equivalent outside of Russia. The Times comment continues -

On the 1st September inflation was proceeding apace. Whether the authorities will again attempt to stum the outward torrent of currency paper, and temporarily succeed, as they did in thu early part of the year, remains to lie seen. It is believed by many in Russia (and the hoarding of silver coins and foreign currency is a visible effect of some such belief) that by next spring the rouble will be worth only its weight in waste paper, and the country will be again on a. permit and barter currency.

The reason for that is not far to seek. The depreciation of paper currency has various economic and psychological results. The psychological effect cannot be calculated. When people realize thatpaper currency is going steadily down in value, and that they can no longer depend upon any stability between the money value and goods which they have to buy, the psychological effect, is such that it may be likened to the disaster of a bush fire. Mr. J. M. Keynes, who is frequently quoted by those who advocate a “little” expansion of the currency, and as an opponent, of the immediate return to the gold standard by England in 1925, rnakes interesting comments on the psychological effect, of inflation. His remarks are worth noting by all those who favour an inflation in the currency in Australia. Referring to a previous crisis in Russia, Mr. Keynes states -

In Moscow the unwillingness to hold money except for the shortest possible time reached at one period a. fantastic intensity. If a grocer sold a pound of cheese, he ran off with thu roubles as fast as his legs could carry him to thu Central Market to replenish bis stocks by changing than into cheese again, lest they lost their value before he got there; thus justifying the prevision of economists in naming the phenomenon “velocity of circulation”! In Vienna, during the period of collapse, mushroom exchange banks sprang up at every street corner, where you could change your krone into Zurich francs within a few minutes of receiving thom, and so avoid the risk of loss during the time it would take you to reach your usual bank. It became a seasonable witticism to allege that a prudent man at a cafe ordering a bock of beer should order a second bock at the same time, even at the expense ‘ of drinking it tepid, lest the price should rise meanwhile.

The only other State-owned bank in the world is the Bank of Sweden. In that country the national debt office may be granted a credit not exceeding 1,500,000 kroner without security. The exchange value of the kroner is eighteen to the £1, so the actual amount of the credit is under £100,000. It may issue notes to the value of about £7,000,000, and it has to hold double the metallic reserve, which may not be less than 75,000,000 kroner, for any additional notes it issues.

In all of the State-owned banks to which I have referred there is provision for drastic protection against the banks being made a convenience of by the Government. Obviously, this safeguard is necessary, because a government might come into power on a chance victory at the polls, and if it had authority to make a central reserve bank do its bidding and inflate the currency, the results might conceivably be most disastrous. In effect this authority over a central reserve bank would make the monetary system of a country subservient to the Government of the moment. Thus a government could destroy, and if the Commonwealth Goment operated the system in that way, as it has operated in other countries, it would destroy the value of all investments in government stocks, in savings banks and life insurance societies.,

I do not think it necessary, and I have not the time to review the provisions with respect to the making of advances to governments by the banks that are not under State control. But it may be worth while to point out one or two. For instance, the Austrian National Bank, which is controlled by shareholders, may not grant loans or credit to the State, but it may discount federal treasury-bills up to 75,000,000 schillings - as there are 34£ schillings to the £1, the total amount is about £2,000,000 - if tendered by solvent persons other than the federation, the provinces or their undertakings. The National Bank of Belgium may discount treasury bonds not exceeding ‘ 100,000,0.00 francs. The position with respect to the National Bank of Copenhagen is worthy of con- sideration. The main object of the bank is to establish and maintain sound finances in the country, and through loans and discounts to improve the circulation of money for the facilitation of production, trade and exchange and by receiving deposits to keep funds liquid. No order from the government of that country shall either, directly or indirectly, interfere with the bank’s management or shall any encroachment on the means or money held by the bank be committed. A reference to the central reserve banking system in other countries shows, in case after case, that every central reserve bank has been established with the object of protecting the currency of the country in the interests of the people. This bill contemplates the establishment of’ a central reserve bank in order to make governmental finance easy.

Paragraph c of sub-clause 1 of clause 33 of the bill relating to paper currency, brings me to the fourth point which I wish to make concerning the reserve against paper currency. That paragraph reads -

  1. – (1.) Australian notes may be issued in any of the following denominations, namely, five shillings, ten shillings, one pound, five pounds, ten pounds, or any multiple of ten pounds, and shall -

    1. bear the promise of the Reserve Bank to redeem the notes in gold coin (or, in the case of a single five shillings Australian note, in silver coin) on demand at the head office of the Reserve Bank.

That paragraph shows cynical, indifference to existing circumstances; it provides that the bank shall be compelled to print on its notes the promise to redeem them, upon presentation, in gold coin. The framers of the bill knew perfectly well that such a thing was not contemplated and could not be carried out. As a matter of fact, if it were a bona fide undertaking that could be relied upon, the danger of the association of the Government with the bank would be largely removed. The bank could not issue notes to the Government because it would know that they would come back, and that it would have to meet them. It is not intended to be a bona fide undertaking, and if it were, it would be foolish. It is an archaic notion dug up from some banking system that did not realize the stupidity of allowing gold to be dissipated in domestic circulation. What would happen if the notes of the Commonwealth Bank were truly convertible?

Senator Sir HAL COLEBATCH.Yes. The purpose of a reserve is to secure the convertibility of notes. In Australia, that system has -broken down. A comparison with other banks shows that the Australian gold reserve is lower than that of other countries, with the sole exception of Russia, which has also a reserve of 25 per cent, such as we have. Some countries have a reserve as high as 60 per cent., whilst the general standard aimed at seems to be 33-J per cent. In the interim report, which has just come to hand, of the gold delegation of the Financial Committee to the League of Nations, we find the following: -

Tlie amount of cover against notes and sight liabilities which any country needs is determined’ by a number of different factors.

In another portion of the report it is made quite clear that the committee regards 33-J per cent, as generally satisfactory, although it strongly urges every country to keep a margin of 40 per cent. The report continues -

An agricultural country or a country whose exports are confined to a small number of commodities, the prices of which are liable to wide variation, will necessarily want a larger proportionate reserve than one which enjoys the more varied economy of a strong creditor position.

It shows quite clearly that a country like Australia should have a larger gold reserve than other countries; but it is proposed that our reserve should be lower than that of any other country except Russia. In most cases a portion of the reserve may be held in foreign exchange, and that is the practice recommended by the select committee in paragraph 45 of its report.

I invite the Senate to make a comprehensive comparison between the central reserve bank proposed in this bill and similar institutions elsewhere. Of the 30 odd central reserve banks, it would be one of six owned and controlled by a Government.’ It. would be absolutely the only bank - not excluding any one of the other five Stated-owned banks, not even excluding Russia, with power to advance to governments without security or limitation in time or amount. It would have the lowest reserve against notes held by any country. Two conclusions are inescapable: (1) That such a bank would be a source of national weakness and not of strength. Its only effect would be to dissipate existing reserves; and (2) - which is equally important - that such fundamental differences of purpose and of principles must preclude possibility of co-operation with other central reserve banks in any scheme of international rehabilitation that may be devised.

Another important point that should be borne in mind is that the present crisis in Australia is not a banking crisis. It is a government crisis. We hear no talk nowadays of the Government coming to the assistance ‘of the banks. It is the banks - because of the policy they have adopted and the reserves which they have accumulated - that are coming to the assistance of the Government. They are assisting the Government in every way they possibly can. That contention is supported by the statements of the Acting Treasurer (Mr. Lyons), by the directors of the Commonwealth Bank, and it can also be supported by every one who has a knowledge of the position. Instead of the Government coming to the assistance of the banks, as was the case in previous troubles, it is the banks which, fortunately for Australia, are able and willing to give all the help they can to the Government. The shareholders in these banks are numerous. They are not all wealthy people; the bulk of them are small shareholders, and the banks’ reserves represent the thrift of the general community, conserved by the banks and made available for the service of the community. To convert these reserves to the uses of the Government would inevitably mean their rapid destruction. A bank formed to bring about such a conversion could not by any stretch of the imagination be regarded as a central reserve bank. The tendency indicated in the bill, and elaborated in speeches by those who are anxious for its immediate passage, is to treat Australia as an isolated economic unit. We are asked why we should allow -ourselves to be inconvenienced because other countries are hampering tlie p roper operation of tlie gold standard. To argue like that is to blind ourselves to the facts. Our troubles are duc to the fall in the values of commodities in tlie world’s markets, and any attempt at independent adjustment WON ld mean nothing, perhaps, but a different distribution among sections of our community - taking from one and giving to another. Already we are hopelessly in excess of the general world price level, and only harm can come from accentuating that position. Sound currency and a sound financial policy are essential to any country. The only remedies for our ills tire internal and external. The internal remedy is to decrease the cost of government and of production, so that we can compete in the markets of the world. We have the natural advantages which will enable us to compete with other countries. Senator O’Halloran said the other day that no country could produce wheat at present prices. That is true, lt is also true that, under a sound policy. Australia can produce wheat as cheaply as tiny other colin try. That is our internal remedy. The external remedy must depend upon international action. “We must endeavour to put ourselves in such a position that we can play our part - a small part so far as the rest of the world is concerned, but big so far as we are concerned - in such international action as. is decided upon to remove the present, difficulties. I believe that, following upon the investigations of the financial section of the economic committee of the League of Nations, and the realization by America, France, and, in a minor degree, other countries, that it. is suicidal from their own point of view to continue to hoard up gold that, is earning nothing - that by doing so they are only imposing a. burden upon themselves and bankrupting and destroying their customers - a means will be devised of mitigating the present crisis in world affairs. It seems clear that the instrument to be used in applying the remedy that i? devised will be central reserve banks, ti system already widelydeveloped throughout, the world. This Parliament should, if not immediately, in the very near future, con-

Senator Sir Hal Colebatch. sider the lines upon which such an institution might be set up in Australia, always remembering that it must be so constituted as to be able to co-operate with similar institutions elsewhere. For this purpose it must be free from political pressure. Its purpose must not be to make government finance easy, or to transfer to governmental use the savings of the community. In the main, the savings, as I have already pointed out, are the small accumulations of the many, whether they appear as reserves in the private banks, as deposits in the savings banks, or as policy holdings in insurance companies. To protect these to the people who own them, and at the same time to ensure their best use in the interests of the trade and commerce of the country, should be” the main aim of the bank.” I think that if the bill is amended in the direction suggested by the committee, and passed into law only after ample opportunity has been afforded for criticism inside and outside of Parliament, such a bank would be an instrument of good in Australia:

For these reasons I intend to support the second reading of the bill ; but I urge that, before any definite steps are taken, or before we commit ourselves in any way, we should await the final report of the gold delegation of tlie financial committee of the League of Nations to which I have already referred. A central reserve bank will not be of any use to Australia unless it can co-operate with similar institutions in. other countries. Of course, I know there are some persons who profess to completely understand the present, economic muddle: but my experience has been that it is only the entirely ignorant and uninformed who are confident in a matter of this kind. The best authorities in the world are still seeking diligently for a remedy. We all hope that they will find it. The remedy is not in the bill now before the Senate. I submit that we should be entirely false to the obligations we owe to the people of Australia if we permitted a drastic change in finance and currency, and in the whole credit structure of the country to be made without giving. them an ample opportunity to consider it. For that reason, while I support the second reading of the bill, I urge that, in the interests of Australia, this legislation be not enacted until there has been a. full opportunity for its provisions to be considered, not only in Parliament, but throughout the country. We should remember that we are sitting in an isolated spot here in Canberra;we are entirely out of touch with the world of affairs. It is difficult for public opinion to bo brought to bear upon this Parliament. We owe it to our constituents not to do anything that will vitally affect them without first giving them an opportunity for comment. There is this further important reason for a brief delay - I suggest no more than that - that within a month further valuable information will be available to us. We should not act without it.

Senator RAE:
New South Wales

– Unlike Senator Colebatch, who has given such an illuminating resume of this measure, I do not profess to be a financial expert; but having studied the report of the committee and compared it with the clauses in the bill, it seems tome t hat there are other aspects of this matter than those which have been presented in the one-sided criticism of the measure which we have so far heard.In saying that, I hope that I speak without offence. Senator Colebatch quoted an old witticism concerningbanking when he said that a banker is a man who takes care of other people’s money and lets them have it when they want it. I have a vivid recollection of an occasion when a number of bankers in Sydney took such good care of other people’s money that when they wanted it, they could not get it. On that occasion only four of the banks then doing business in New South Wales remained open. Under the existing system there is no guarantee that the bankers will return the money entrusted to their care. On the memorable occasion to which I refer, many of the banks locked up for 32 years money which their clients had left with them on fixed deposit for a year or two.

Senator H E ELLIOTT:
VICTORIA · NAT

– That was because the Government of New South Wales acted.

Senator RAE:

– The Government came to the rescue of the banks and enabled them to continue on the condition that the money deposited with them was locked up for a number of years. The result was that those who had money with the banks on fixed deposit received a lower rate of interest for it than they had to pay to other banks for the accommodation they required to carry on.

Senator H E ELLIOTT:
VICTORIA · NAT

– That was due to action taken by the Government of the day; it was not the fault of the banks.

Senator RAE:

– The Government assisted the banks by passing legislation to make their notes legal tender. There was then no national note issue; the banks issued their own notes. The Government also assisted the banks by introducing legislation providing for their reconstruction on conditions which withheld for a generation money which had been left with the banks for a year or two.

Senator Thompson:

– Was not reconstruction better than liquidation ?

Senator RAE:

– The banks were granted a moratorium; but there was no moratorium for those who suffered because their greed and over-speculation had brought disaster.

Senator Reid:

– Was it not overspeculation, rather than greed, that caused the disaster?

Senator RAE:

– Over-speculation is founded on greed. The banks lent money on poor securities, and thus encouraged the gambling spirit of the people.

I desire to refer to some of the clauses in the committee’s report. In paragraph 9 the committee asks three questions -

  1. is the establishmentof a central reservebank desirable?
  2. Is the present time opportune for the establishment of such an institution; and
  3. Is the bill, as presented in the Senate, suitable to the needs ofAustralia?

Senator Colebatch said that, in the opinion of the committee, the present time is inopportune for the establishment of a central reserve bank.

Senator Carroll:

– In the opinion of the witnesses examined by the committee.

Senator RAE:

– The opinion of the members of the committee was fortified by that of the witnesses it examined. Before the Select Committee was appointed, its members expressed, in this chamber, similar opinions to those contained in the report. The evidence they elicited corroborated their own opinion.

Senator H E ELLIOTT:
VICTORIA · NAT

– That shows that their views were sound.

Senator RAE:

– Not necessarily. Sometimes the cutting down of wages is . rereferred to as rationalization. Rationalization is the tendency of all human beings to find support for their pre-conceived opinions; it is the persuading of oneself that one’s opinions are right by supporting them with the opinions of others. That tendency is often only too evident in religious, political, and other spheres. We are apt to listen only to those whose opinions support our - prejudices. That universal tendency has been exemplified in the case of this Select Committee.

Senator Reid:

– The committee invited all shades of opinion, including representatives of the Trades Hall.

Senator RAE:

– I am not particularly blaming the committee for having collected evidence in support of its own views. I have merely said that it has exhibited a tendency which is universal.

Sitting suspended from 6,15 to 8 p.m.

Senator RAE:

– - The select committee states that the present time is inopportune for the establishment of a central reserve bank; yet it shows that in three separate instances, when it would have been most advisable had such an institution been established, the occasion was deliberately passed over on the ground that the time was not opportune, during the existence of a crisis. Paragraph 30 of the committee’s report says -

During the Australian crises of 1843 and 1866, and in 1893 there were strong expressions of expert opinion in favour of the establishment of a truly national bank for purposes closely allied with those for which central reserve banks have since come into being in many countries. In each case political opinion seems to have determined that the time was inopportune. The crisis passed, and with it the recommendations of the experts were forgotten.

Senator Colebatch emphasized that point when he told the Senate of the man who did not want to bother about getting water when it was raining, and could not get any when it was not raining. Despite the reputations of the financial geniuses of honorable senators opposite, I take leave to doubt whether their report does not negative the conclusions at which they have arrived in this respect.

In another part of their report they state that the Commonwealth Bank is functioning at the present time very largely as a central reserve bank. It is only necessary to separate from the Commonwealth Bank the particular functions appertaining to a trading bank, and it will become a central bank. That is exactly what the bill does. It practically takes from the Commonwealth Bank functions now being adequately performed by it, and attaches them to a central reserve bank. It really amounts to a change of label from “ Commonwealth Bank “ to “ Central Reserve Bank.” In other words we have a central reserve bank which is functioning incompletely, and the bill merely proposes to complete the work that is now going on.

The committee states that the requirements of a central reserve bank are fully set out by Sir Ernest Harvey, Deputy Governor of the Bank of England. We can claim that in all but two minor respects the bank proposed to be set up by this bill would fulfil the requirements laid down by Sir Ernest Harvey. One requirement was that a central bank should not take money at interest on its own account, whereas the bill provides that the central reserve bank may take monies on interest, but only from the Commonwealth Government or from State Governments, a departure which was deliberately made. For many years past Australian Governments have been in the habit of obtaining interest from their bankers on their surplus balances, and if the central reserve bank is not allowed to give these governments equally good terms it will militate against its rapid growth and success. There is no grave danger in allowing interest on the surplus balances of governments. It cannot be regarded as competition with ordinary trading banks.

The other requirement laid down by Sir Ernest Harvey was that a central bank should not draw or accept bills payable otherwise than on demand. A departure has been made in the present bill in this respect, owing partly to Australia’s geographical position, and because of the requirements of various Australian Governments. In the past these governments have on many occasions purchased from the Commonwealth Bank drafts on London at 30 days or 60 days, and by doing so have saved considerable sums to the taxpayers. If, however, it be deemed desirable to accept the principle laid down by Sir Ernest Harvey, the disadvantage will be to the governments, and not to the bank. The provision could be omitted from the bill without interfering with the functions of the bank, although it might bring some inconvenience to Australian governments.

Senator Sir Hal Colebatch:

– Has the honorable senator noticed the second condition laid down by Sir Ernest Harvey ?

Senator RAE:

– Yes, that which reads -

A central bank in its management and policy should be free from government control and the influence of politics.

I have not yet had an opportunity to give the report of the committee a close study, but I gather that it shows that central reserve banks in some countries are owned by governments, and that nearly every government is more or less interested in its country’s central reserve bank. It seems to me that the united wisdom” of our financiers cannot be very great when they can devise no better method of avoiding political control than the clumsy expedient of creating bodies of private shareholders. I take it that the committee does not mean that a central reserve bank should be entirely divorced from parliamentary control, but that it means that precautions should be taken to prevent a government from getting itself out of a difficulty by manipulating the governing principles on which a central bank is established. It is, however, impossible in any country with parliamentary government to prevent Parliament from saying what shall be done with any bank. Parliament can prescribe whatever conditions it thinks fit .in regard to private trading banks, and, in the last analysis, no financial institution can be divorced from political control. Devices for attempting to do so are always overridden when, in the opinion of the majority in Parliament, the emergency is. grave enough to justify it. Artificial restrictions are useless when, in -times of emergency, when they ought to be most necessary, they can be overridden by. any .party that has the power to do so, and’ the safeguard which is sought to be woven round a central reserve bank for Australia is, therefore, hollow and imaginary. Already, in regard to the Commonwealth Bank, we have practically made the governing body in a sense superior to Parliament; but it is always possible for Parliament to alter the conditions under which the board functions. All that one Parliament can do is to put difficulties in the way; but it cannot prevent a future Parliament from ultimately removing any obstacles that may be set up against imaginary dangers by those who are wedded to old-fashioned methods and ideas of banking.

Banking was at one time largely a matter of individual effort. At the present time various banks are called by the names of those who founded them; but to-day they are practically all joint stock companies. Conditions necessary in the days of family banks are not applicable to-day. Senator Colebatch has expressed the fear that the central bank, as proposed in this bill, may result in a kind of communistic ownership of money and the currency of the nation ; but I venture the opinion . that, if there is one reason more than another why a bank of this kind should not be owned by private shareholders, it is the fact that it is to have the sole control of the note issue. That note issue belongs to the nation, and not to individual shareholders, firms or companies. Several honorable senators opposite assisted in abolishing private note ownership in Australia, and setting up in its place a note issue collectively owned by the people. It is still controlled by the Government of the country. Private shareholders have no right, through an institution such as this, to have any voice in controlling the note issue, other than in their capacity of private citizens.

Senator Reid:

– It was a tory. politician that introduced the treasury note in Australia.

Senator RAE:

– I venture to predict that no party dares to advocate a return to the old principle. A step was taken towards indicating that the people of the country own its currency, and that it is the collective credit of the people that creates the foundation upon which every bank is instituted. All the private banks require to have a considerable amount of paid-up capital before1 any citizen will trust his deposits or business arrangements with them. Yet the Commonwealth Bank began from scratch, with no capital beyond the credit of the country, and in a few years it has grown into a large and important institution. It wouldhave been the most powerful structure of its kind in the southern hemisphere had those in control allowed its activities free rein, and fair play during the past three years. Previous governments have done their utmost to hamstring and hobble the bank, and to hand it. over to the vested interests of the country. The Commonwealth Bank has paid into the coffers of the nation millions of pounds that would otherwise have passed through the associated banks, to the enrichment of private individuals.

Senator Colebatch said that a certain section of the people was objecting to the big reserves that have been built up by the private banks. I have not heard that criticism.What I have heard and stated myself is that, despite the necessity for them to place huge sums to reserve, the private banks have built up huge profits, and distributed them in the form of dividends to their shareholders, even in times of national disaster, when the majority of our citizens were suffering hardship.

Senator Payne:

-What eventually became of the big dividends? Did they not help to establish industry ?

Senator RAE:

– That is an absurd question. Frequently big dividends are squandered,as are other sources of revenue. I know a great many pastoralists in Australia who, though now howling about the bad times, the low price of wheat and wool, and the unenviable character of their industry, squandered money lavishly when times were good. It is all nonsense to say that big dividends inevitably go towards fostering industry. They may and they may not.

Senator Payne:

– In any case they were spent in Australia.

Senator RAE:

– I do not care whether they wore spent in Australia or Gehenna. I do not believe that the prosperity of a country can be built up merely by spending money in it. The whole point is whether the money is spent wisely. If not, its disbursement may help to destroy rather than build up industry. I contend that the provisions of the bill do not violate more than two out of the thirteen functions of a central reserve bank as set out at page xi. of this report, and then it is only in matters of minor importance, to which the Government is justified in adhering by reason of the peculiar circumstances of the country.

There is another point upon which Senator Colebatch laid great stress, and, with all due respect to his usually logical utterances, I cannot admit that he made good his case.I refer to his argument that, if we are to act internationally we should establish our central reserve bank fundamentally on the same footing as the central reserve banks of other countries. The honorable senator pointed out,I think quite justifiably, that as finance is so international in its character, and financial ruin so widespread, it is only by acting internationally that we can do anything substantial towards remedying existing evils. With that I agree. But when the honorable senator claims that our central reserve bank must be established practically along the same lines as every other central reserve bank, or we shall be incapable of operating with them, he overdoes his case. The report of the committee indicates that the central banks of the various countries differ in many ways. Some function entirely as government institutions, some as onethird government and two-thirds private, others as two-thirds private and one-third government, and still others as completely privately owned institutions. Those banks vary tremendously in the degree of accommodation that they afford to governments or to institutions connected with governments. As there is no similarity between the banks that are already functioning, it is not a sound argument to assert that Australia should establish a bank on the set lines adopted by any other country. Surely the variations that exist in other countries justify the variations proposed in the bill.

The select committee, in stating that a central reserve bank is for the purpose of regulating and controlling the currency of the country, has laid down a proposition which must be held to apply to the proposal embodied in the bill before the Senate. Such a bank must regulate and control the currency of the country, and the reserve which will be built up under the provision by which the private trading banks must lodge a certain percentage of their deposits with the central reserve bank. All that goes to strengthen the financial position.I have made it plain on more than one occasion that the present capitalistic system is doomed to collapse, and that in the not distant future. I have also stated that we should do whatever we can to patch up the rotten system that exists. It is ridiculous to await the coming of an era when everything will have recovered without our intervention, before we establish a central reserve bank. The time to do that is when the institution is most wanted. Surely, when the’ financial authorities upon which honorable members opposite more or less rely point out that this depression will continue for years, or perhaps for a generation, we should not wait until some miraculous intervention of Providence puts us on the high road to prosperity. We should adopt the commonsense attitude and initiate machinery which is calculated to avert the worst features of the depression. Senator Colebatch delivered a more able speech than I expect from any of his colleagues on the subject, because he has studied it intensively, but he indulged only in sophistry and specious reasoning against the immediate establishment’ of a central reserve bank in Australia. According to this report, only very slight changes in the Commonwealth Bank’s constitution would suffice to clothe it with all the functions of a central reserve bank. The bill merely creates special machinery for the purpose, and I suggest that it is purely party spirit that induces honorable senators opposite to believe that they are serving the interests of the nation by postponing the creation of such an institution. Their own. report states that it should have been established on three separate occasions in the years that have passed, and that it was only because of the lack of statesmanship on the part of the government of the day that the opportunity was allowed to pass. There is every reason why the second reading of the bill should be carried, and why the bill should not be subjected to any substantial amendment. I am confident that the Government would not object to any amendment of a minor character, designed to make the measure safer and more workable, provided that its essential characteristics are preserved. Even if honorablemembers opposite do their worst,and succeed in crippling or destroying the bill, they must realize that a wide extension of the Commonwealth Bank proper is bound to come in the near future, and that, if the forces of reaction stubbornly prevent its coming by degrees, they will come with a rush on some distant day and entirely overwhelm honorable senators opposite and their adherents.

Motion (by Senator McLachlan) proposed -

That the debate be now adjourned.

Question put. The Senate divided. (President - Senator the Hon. W. Kingsmill.)

AYES: 22

NOES: 7

Majority . . . . 15

AYES

NOES

Question so resolved in the affirmative.

Debate adjourned.

page 1217

BILLS FROM THE HOUSE OF REPRESENTATIVES

The following bills were received from the House of Representatives, and (on motion by Senator Barnes) read a first time : -

Australian Soldiers’ Repatriation Bill.

Sales Tax Assessment Bills.Nos. 1a to 9a.

page 1217

PATENTS BILL

Bill returned from the House of Representatives without amendment.

page 1218

NATIONAL DEBT SINKING FUND …… BILL

Second Reading

Debate resumed from the 9th December (vide page 1139), on motion by Senator Barnes-

That the bill be now read a second time.

Senator Sir GEORGE PEARCE (Western Australia) [8.45].- As it is my desire to assist the Government to dispose of the business now before the chamber by the end of this ‘week, my remarks on this measure will be brief. A great deal could be said concerning it, but, in the circumstances, I’ think it wise to refrain from expressing my opinion at any length. Honorable senators on this side of the chamber, however, find in the ‘bill an act of tardy justice to the late Government in that it shows that during the six years it was in office it paid into the national debt sinking fund, £14,000,000 in excess of what was necessary to extinguish our national debt within the statutory period. Honorable senators opposite, who have frequently referred to deficits of the late Government, have now to admit that the amount paid into the national debt sinking fund by that Government was largely in excess of the statutory requirement. If the bill serves no other purpose, it will prevent them from harping on the 3ame string in the future.

During the debate on this bill the Leader of the Government in the Senate ( Senator Daly) said that one of the decisions reached - I think he said by the Cabinet, after the Melbourne conference - was that £2,000,000 of the £4,000,000 which the Government announced it intended to be saved, would be by way of this diversion from the national debt sinking fund. An extract from a report which appeared in the West Australian of the 3rd October, 1930, reads -

Canberra, 2nd October.

After a meeting which lasted two days, tha Federal Cabinet to-day decided that the special economy session of Parliament, necessary to enable the Ministry to balance its budget for the current financial year, should begin on Thursday, 30th October. A meeting of the parliamentary Labour party .is to be held on Monday, 27th October, to consider the recommendations of Cabinet. The decision whether these’ will be submitted to Parliament will be left to the caucus. “ s >

After referring to the delay which occurred in consequence of the New South Wales elections, the paragraph continues -

Cabinet will recommend for the consideration of the Labour caucus: Reduction of Commonwealth expenditure at the rate of approximately £4,000,000 a year, during the remainder of the financial year.

It then goes on to refer to a plan for the promotion of approved new works, a reduction in Ministers’ salaries by 15 per cent., private members’ salaries by 10 per cent., of federal public servant’s salaries on a graduated scale ranging from 2^ to 15 per cent., and increased taxation on incomes from property. It is clearly set out that savings were to be effected in expenditure to the extent of £4,000,000; but it does not say that £2,000,000 is to be taken from the national debt sinking fund.

Senator Sir GEORGE PEARCE.The newspaper correspondent had some difficulty in locating Senator Daly in an endeavour to ascertain whether he was supporting the moderates . or the extremists in the Labour party. The correspondent eventually discovered that he was speaking in support of Mr. Lang at Queanbeyan, and, therefore, he can be regarded as an extremist. The official statement reads -

The Acting Prime Minister (Mr. Fenton) this afternoon made the following announcement: “.Cabinet met and discussed the whole financial position. The proposals to balance the budget submitted by the finance subcommittee were discussed and were’ approved substantially as presented. It was agreed that expenditure must be reduced at the rate of approximately £4,000,000 a year.”

That is Mr. Fenton’s statement. It continues -

It was further agreed that the Parliamentary Labour party should meet on the 27th r October, and Parliament on the 30tb October. J->

The paragraph then refers to the appointment of a sub-committee to deal with unemployment. After Cabinet rose on the same day the Acting Prime Minister issued a third statement, which reads -

The recent decline in market prices of Government stock show that nervous holders are selling securities through fears that are quite unwarranted, and the Government fully recognizes that these fears must be removed at once. The Government, therefore, takes this opportunity to inform the public that its proposals will include reductions and economies in expenditure at the rate of £4,000,000 a year.

In the first statement a saving of £4,000,000 is specifically mentioned,but no reference is made to taking £2,000,000 from the National Debt Sinking Fund. In the two previous statements of the Acting Prime Minister - one before and one after the Cabinet meeting - he said that a saving of £4,000,000 in governmental expenditure was to be effected. A diversion of sinking fund payments into Consolidated Revenue cannot be a saving in expenditure.

Senator Sir GEORGE PEARCE.That is a most peculiar wayof saving expenditure. It was understood by the public that a saving of £4,000,000 was to be made by reducing governmental expenditure. This significant paragraph follows -

Figures placed before his fellow Ministers by the Acting Treasurer (Mr. Lyons) show that the balancing of the budget would be impossible unless salary reductions were decided upon.

I leave the matter there. It is unreasonable that the Government should say that it is honoring a decision of Cabinet to reduce expenditure by £4,000,000 when £2,000,000 represents a diversion of payments from the sinking fund into Consolidated Revenue. It is a hollow pretence which the people will not accept for a moment.

Senator Sir GEORGE PEARCE.It is not a saving in the cost of government. It is the reverse from a saving, as a sinking fund is established to save expenditure. The larger the amount placed in the sinking fund the greater will be the amount saved in interest charges. If we decrease the amount paid into the sinking fund, obviously annual interest charges must be increased to that extent.I am sorry that the Government has submitted this measure. It would have been infinitely better to have reduced governmental expenditure by £2,000,000. I do not wish to labour the matter: Having stated the facts, I shall not delay the passage of the bill, which it is not my intention to oppose…….

Question resolved in the affirmative.

Bill read a second time, and reported from committee without amendment or debate; report adopted.

Standing and Sessional Orders suspended and bill read a third time.

page 1219

INCOME TAX ASSESSMENT BILL

(No. 2).

Message received from the House of Representatives intimating that it had agreed to the amendment made by the Senate in this Bill.

page 1219

REPRESENTATION BILL

Second Reading

Senator BARNES:
Assistant Minister · Victoria · ALP

– I move -

That the bill be now read a second time,

The first census taken after the commencement of the Representation Act, 1905, was in 1911. Under the provisions of the act an enumeration day should have been fixed in 1916, but an act identical in terms with the present bill was passed postponing enumeration day, because it was considered that, owing to the war and the unsettled state of the population, the figures as to population could not be relied upon.

A similar position has now arisen. Owing to the fact that no census will be taken next year, we shall have no accurate particulars as to distribution of population. The quarterly return of estimated population made on the 30th June of this year shows the quotas of the various States to be as follow: -

Western. Australia and Tasmania would not be affected by any slight inaccuracy, as each of those States is entitled to a minimum of five seats. New South Wales and Victoria are also clearly entitled to 2S and 20 seats respectively. It would take a gross error in the estimate to deprive either of those States of a representative. On the above figures, Queensland would be entitled to an additional seat, but it is a border line case as the figures are only .059 above the quota. South Australia’s margin is even more precarious, it being only .006 above the figure necessary to maintain that State’s present representation. The uncertainty inherent in any estimate of population is accentuated at the present juncture by the large number of men moving from place to place in search of employment. It is proper, therefore, to postpone enumeration day until reliable figures can be obtained. That will be in 1933 when the next census will be taken.

Senator Sir George Pearce:

– Can there be no redistribution until after the enumeration ?

Senator BARNES:

– The bill affects only the taking of the census which is of value, not only to Australia, but also to other countries. I hope that the Senate will agree to it.

Debate (on motion by Senator Sir George Pearce) adjourned.

SALES TAX BILL (No. 1a) 1930. Second Reading.

Senator BARNES:
Assistant Minister · Victoria · ALP

– I move -

That the bill be now read a second time.

When the Sales Tax Assessment Bill No. I was introduced, it provided that the sale value upon which the tax so imposed should be levied and paid should be the amount for which the goods were sold. During the consideration of the bill, the Government agreed that manufacturing retailers should be placed on t.h’e same footing as manufacturing wholesalers, namely, that they should be taxed on the fair wholesale selling value of their products. An amendment was accordingly inserted in the bill, the effect of which was to authorize the levying of tax on the fair wholesale selling value of goods manufactured in Australia’ ‘-and treated by the manufacturer as stock for retail sale. A complementary amendment should have been made in the Sales Tax Bill No. I; but, in the pressure of business, it was overlooked. As the Sales Tax Act No. 1 merely imposes a tax upon the sale value of goods manufactured in Australia and sold by the manufacturer, there is considerable ground for doubt whether or not the sales tax has been effectively imposed on goods treated by the manufacturer as stock for retail sale, notwithstanding that the amendment purported to authorize the levying of that tax. So far, the sales tax has been successfully collected on the basis of the amendment which was inserted in the Sales Tax Assessment Bill; but the legality of the collection has been questioned in certain quarters. This bill will place the validity of the collections beyond question. It is considered desirable to amend the long title, as well as section 3 - the imposing section - of the Sales Tax Act No. 1. I commend the bill to the Senate.

Senator PAYNE:
Tasmania

.- It is exceedingly difficult to follow the operations of a sales tax. Although I listened carefully to the Minister, I was unable clearly to understand the provisions of this measure; but, from what I could gather, the amendment proposes to add to the title of the Sales Tax Act No. 1 of 1930, after the words “Manufacturer “, the words “ or treated by him as stock for sale by retail.” That means that a manufacturer who is also a retailer will bo called upon to pay sales tax as a retailer on the total value of the articles sold by retail. That is a departure from the original intention. Let us take the case of a retail tailor. The original act provided that the sales tax shall apply only to importers and manufacturers. The retailer had nothing whatever to do with the sales tax except to pay it to the manufacturer when he bought his goods; or, if he imported goods directly from overseas, he had to pay the sales tax on the value of such goods. We are now asked to agree to an amendment by which a tailor who purchases goods from a manufacturer or imports material from the Old Country, not only pays sales tax on the value of those goods; he pays also on the value of the suits he- makes1 to order out of those materials.

  1. claim that it was never intended that lie should be taxed on his own labour.
Senator Guthrie:

– He pays twice.

Senator PAYNE:

– No; but he is called upon to pay sales tax on the labour be puts into the making of the suits.

Senator DALY:
ALP

– Does that not apply to every manufacturer?

Senator PAYNE:

– No. A tailor should not be treated as a manufacturer. That is merely a device to obtain further revenue. I have received the following letter on this subject from the Victorian Chamber of Manufactures: -

On behalf of the tailors of Victoria, 1 desire to draw attention to a very great disability with which our industry is burdened under tlie provisions of the existing Sales Tax Act.

Unlike other industries, we are called upon co pay sales tax on the full retail price of our gondii, for the reason, it is held, that we do not come within the scope of section 18 (2) nf the Assessment Act No. 1.

At present, a tailor manufacturing garments of a class known as “ ready made “ pays tax on the wholesale value, whilst tailors making “suits to order” out of the same material pay tax upon the full retail price.

Under the amendment, a tailor will be called upon to pay sales tax on the full retail price of goods manufactured by him. Parliament intended that the sales tax should apply only to the wholesale value of goods, or to the value of goods when imported.

Senator Daly:

– Would not a furniture manufacturer be in the same position?

Senator PAYNE:

– Furniture manufacturers are wholesale traders. The goods they manufacture are sold by them to retailers, who, in turn, sell them to the public at a profit. A furniture manufacturer is not asked to pay sales tax on the difference between the wholesale price of the timber in, say, a table, and the price received by the retailer for the article so manufactured by him, but a tailor is asked to do so.

Senator Daly:

– He pays sales tax ou the manufactured product.

Senator PAYNE:

– A tailor will be called upon to pay sales tax on the retail price, whereas the vendor of furniture will not. A retailer who is a tailor will be called upon to pay the sales tax on the retail .price of the suit he makes for a customer. The bill makes an invidious distinction.

Senator Sir WILLIAM GLASGOW (Queensland) [9.12]. - The position” is as set out by Senator Payne. A tailor pays -sales tax, not only on the material used in the making of a suit, but also on the cost of his labour. A plumber who doeswork for a householder would pay sales tax only on the material he supplies; he would not pay sales tax on his own labour. But a tailor pays the tax on both material and labour. I am not so much concerned with the effect of this legislation on the tailor as with its effect on the purchaser of the suit he makes. It will have the effect of keeping up the cost of clothing. If the bill is agreed to in its present form, tailors will be justified in selling to their customers the material used in the making of suits, and then charging so much for their labour. I hope that it will be found possible to grant some relief to these people.

Senator DALY:
Vice-President of the Executive Council · South Australia · ALP

– While I appreciate the point raised, I remind the Senate that the sales tax is a’ tax upon the sale of personal property. I may buy a plumbing fitting and have it installed in my house, in which case I should pay sales tax only on the cost of the article. In addition, I would pay something for fitting it. Under the sales tax a charge is made only in respect of personal property.

Senator Sir William Glasgow:

– If a tailor sells the material and gets some one to supply the labour for making the cloth into a suit, would he not be able to avoid sales tax on the value of the completed suit ?

Senator DALY:

– Yes, because he would cease to be the manufacturer of the article. The distinction drawn by Senator Payne in regard to the man who sells a table is not applicable,- although the principle is the same, because one is a wholesaler and the other a retailer. In the cost of the table a certain amount is allowed for the wood and a certain amount for the labour, but, when the table is sold, sales tax is paid on the completed article. If the Senate is prepared to allow the Government to adopt the principle of a sales tax, unless it is willing to amend the existing act as proposed, the anomalies referred to by honorable senators must continue. The manufacturer of the table will continue paying ;sales tax on labour plus wood, but the tailor would pay tax on the cloth only.

Senator Sir William Glasgow:

– Is not the tax paid on the last wholesale sale?

Senator DALY:

– Yes; but in this instance it is a retail sale. In principle there is no distinction between the labour which is employed in the manufacture of a table and that which is employed in making a suit of clothes. I agree that it is an anomaly that the labour required for putting plumbers’ fittings into a house cannot be charged with sales tax, whereas the labour employed in the making of a suit of clothes is to be taxed under this bill; but the point is that after weeks of administering this class of taxation the Taxation Department has advised the Government of the anomalous position which has been created in the tailoring trade. The tailors consider that they are entitled to pay sales tax on the cloth only. If I walk into a retail establishment and buy a ready-made suit for £5 5s., I pay the equivalent of the sales tax on £5 5s.

Senator Sir William Glasgow:

– No.

Senator DALY:

– I do not pay it directly to the retailer, but that retailer has paid sales tax on buying from the manufacturer, and, as has been pointed out, will pass it on to the consumer. I am therefore paying sales tax indirectly for a ready-made suit, whereas at present if I buy a madetoorder suit I pay sales tax on portion of it only. It seems to me necessary for the department to have this extra protection in order that the revenue that the Government expected to obtain by this form of taxation may be collected.

Senator E B JOHNSTON:
Western Australia

.- I regret that the Government has not gone further and dealt With some of the extraordinary anomalies associated with our sales tax legislation.

Senator Daly:

– After we adjourn the Government proposes to review the whole of the sales tax legislation.

Senator E B JOHNSTON:

– I am pleased to have that assurance, but I wish to draw attention to two anomalies which should have been covered by this bill. They apply to the mining industry.

The PRESIDENT:

– Are they covered by this bill?

Senator E B JOHNSTON:

– No; they occur in the principal act.

The PRESIDENT:

– I think I am right in saying that there are nine principal acts.

Senator E B JOHNSTON:

– The anomalies occur in the schedule of each act. For instance,oregon for mining purposes is exempt. The Western Australian mines use sawn jarrah and sawn karri, on which sales tax has to be paid, whereas the Oregon used by Broken Hill mines is exempt.

Senator Daly:

– On a point of order, I draw attention to the title of the bill, and ask whether a general discussion on items covered by sections and schedules not proposed to be amended by this bill is in order?

The PRESIDENT:

– The honorable senator must confine his remarks to the provisions of the principal act proposed to be amended by this bill.

Senator E B JOHNSTON:

– I am sorry that the Minister did not allow me to continue my remarks.

Senator Daly:

– The honorable senator can speak on the adjournment.

Senator E B JOHNSTON:

– I shall certainly take another opportunity to discuss the matter, but it could have been better dealt with on this bill.

Senator Sir GEORGE PEARCE (Western Australia) [9.23]. - After listening to Senator Payne, Senator Glasgow, and Senator Daly, it seems to me that there is an inconsistency in this bill, but not sufficient to justify the extreme step of rejectingit. By doing so we should probably get into just as inconsistent a position. I understand that sales tax is charged on the material and labour in a ready-made suit, but that, if the bill is not agreed to, it cannot be charged on the labour employed in making a madetoorder suit. It is the wealthier people in the community who generally buy made-to-order suits, and if the bill is not passed we shall continue the anomaly of imposing a higher tax on the ready-made suit, which is usually bought by the poorer section of the community. The object of the bill is that a tailor, although a retailer, shall pay sales tax on the full cost of the made-to-order suit.

Senator Daly:

– That is so.

Senator Sir GEORGE PEARCE:

– I think it is a reasonable proposal. Other- wise, we should differentiate in favour of the suit -worn by the wealthier man as against the suit purchased by the poorer man.

Question resolved in the affirmative.

Bill read a , second time.

In committee:

Clause 1 - (Short title).

Senator Sir George Pearce:

Senator Payne, I rise to a point of order. You are, I understand, one of the panel of temporary chairmen, and I ask if it is possible for you to take the chair whilst the Chairman of Committees is in the chamber. I understand that a temporary chairman can occupy the chair only . when ‘ the Chairman of Committees is absent.

The- TEMPORARY CHAIRMAN (Senator Payne). - The President’s warrant appointing temporary chairmen calls upon them. “ to act as temporary chairmen when requested so to do by the Chairman of Committees”. Standing Order 28a also provides for the appointment of a panel of temporary chairmen to act as chairmen “when requested so to do by the Chairman of Committees “. The Chairman of Committees has requested ihe to take the chair.

Clause agreed to.

Clauses 2 to 4 agreed to.

Title agreed to.

Bill reported without requests; report adopted.

Standing and Sessional Orders suspended, and bill read a third time.

‘ADJOURNMENT.

Absence oe Minister from Senate: - Christmas Vacation - New South Wales Wage Tax- Sales Tax - Duty on Glass.

Senator DALY:
VicePresident of the Executive Council · South Australia · ALP

.- -I move-

That the Senate do now .adjourn.

I should like to explain that my absence from the chamber at question time to-day was not calculated to be an act of disrespect to the Senate. Whatever may be our political’ differences in this chamber, I think that honorable senators will agree that, so far as I can, I study their convenience. I’ ‘conferred1 with , the Leader of the Opposition ..(Senator Pearce) who very courteously told me that the

Opposition was prepared to expedite the handling of the Government’s business. I do not suppose that, since federation, a Government has been in a more awkward position than this one in conducting the ministerial activities of the Senate. Generally, when Ministers are absent from the country, and others are acting for them, Parliament is in recess. The present is a special session, and I am in the unique but rather awkward position of being the Acting AttorneyGeneral. As I have no desire to see the light in this chamber turned out, I have to keep the fires burning in another place. At different times, and more particularly just before another place begins to meet, I am called into conference with Ministers. I explained the position to the Leader of the Opposition who was satisfied to leave it at that, knowing that during my absence from the chamber the business of the Senate would be in the capable hands of the Assistant Minister (Senator Barnes).

Senator LYNCH:
Western Australia

, - It would appear that my remarks at question time to-day caused the Minister to make his explanation. Although I recognize that the Leader of the Senate is over-loaded with work almost beyond human endurance, and that Senator Barnes is also over-burdened with ministerial duties, it is necessary, to consider whether this chamber is being fairly treated. Is it not being subjected to discourtesy? Senator Daly will admit that. Under every other government the ministerial section of the Senate has been amply manned. In the circumstances, my complaint is fully warranted. Let it be taken to the source of the trouble. A certain place persists in regarding the Senate, if not with disrespect, then with undisguised indifference. The injustice is so patent that I do not desire to labour the point. The situation is unique in the history of the Federal Government that one man should have imposed on him the task of doing what seven or eight Ministers do in another chamber. ,

Senator Sir GEORGE PEARCE (Western Australia) [9.38]. - Perhaps, by failing to make it clear that Senator Daly had, conferred. with me, I was responsible for Senator Lynchs opening this subject at an earlier hour of the day. When the matter was raised I explained the position. I quite agree with Senator Lynch as to the under-manning of the ministerial side of the Senate, but as I have previously dealt with that anomaly, I shall not pursue it now.

I should like to know whether the Leader of the Government (Senator Daly) can give honorable senators an indication whether they will be able to get away on Friday evening. It is necessary for those of us who live in distant States to have reasonable notice so that we may make our travelling arrangements. There are only three trains to Western Australia each week, and honorable senators from that State do not wish to be travelling during Christmas time. I am sure that the Leader of the Government will agree that, while honorable senators on this side may differ from him politically, they have not interfered with the conduct of government business.

Senator Rae:

– If the right honorable senator will let the Government have the Bank Bill he will be able to get away.

Senator Sir GEORGE PEARCE.The Opposition had a legitimate reason for postponing the debate on that measure. The report of the select committee was distributed only this morning, and even Senator Rae admitted that he had not had time to consider it. There is no justification for saying that the Opposition has interfered with the progress of government business. In every way it has assisted the Government, and the occasion calls for reciprocity. Very little business remains on the Senate business-paper. The eight or nine Sales Tax Bills can be dealt with to-morrow almost in half an hour. In another place the business-sheet is practically exhausted. In’ the circumstances, the Government should be able to indicate when Parliament will adjourn, so that honorable senators may make the necessary arrangements to return to their homes.

Senator DUNN:
New South Wales

– As a representative of New South Wales, I rise to correct a statement which was made by the Leader of the Opposition yesterday, and which may give rise to misinterpretation if allowed to go unchallenged. Senator Pearce was kind enough to give me an advance copy of his remarks on the subject. He stated -

The wage-earners of New South Wales have recently been called upon by the Lang Government to pay ls. in the £1 which, in the case of a man on the basic wage, represents about £10 per annum.

Senator Dunn:

– Is it a fact that that has been done?

Senator Sir GEORGE PEARCE:

– The proposal to impose the tax has been announced in the press, and has not been denied.

Senator Dunn:

– Has the proposal become law ?

Senator Sir GEORGE PEARCE:

– I am not aware that it has. I know that in certain cases the tax has already been collected by order of the Government of New South Wales. This has been done in anticipation of the legislation being passed. It would be easy to multiply instances of this nature.

After receiving a copy of the honorable senator’s remarks I immediately wired the” Premier of the New South Wales Labour Government on the subject, and received this reply: -

In reply your inquiry, New South Wales State Government has not collected any shilling tax. Only reference been in newspapers that Government intends introducing tax. (Sgd.) Quinlan, Premier’s Department.

Senator Sir GEORGE PEARCE (Western Australia) [9.44]. - I desire to make a personal explanation. The reason why I made that statement was that a colleague on this side of the chamber showed me a return of a dividend payable to him, iu which there was super-imposed the intimation that ls. in the £1 had been’ taken from the dividend in payment of this tax.

Senator E B JOHNSTON:
Western Australia

.- When the Sales Tax Bills were under consideration earlier this evening, I desired to bring under the notice of the Government some of the anomalies which are harassing the mining industry as a result of that legislation. It seemed to me to be the opportune time to take such action, but the Standing Orders did not permit me to do that. I understand that, within the next day or two, we shall be called upon to consider seventeen bills to amend our sales tax legislation, and I suggest to the Minister that advantage be taken of that opportunity to correct a number of anomalies. For example, Oregon for mining purposes is on the exempt list. This timber is largely used in the eastern States ; but in Western Aus- tralia sawn jarrah and sawn karri are considered to be better for mining purposes. Consequently, they are more generally used than is imported Oregon. 1 fail to understand why Oregon for mining purposes should be exempted, while karri and jarrah arc not. As this legislation was rushed through in the closing hours of last session, it is not surprising that certain anomalies should arise in its administration. I hope that the Government will, in the amending bills, provide for the exemption of both jarrah and karri. Aero-cyanide, an imported flotation reagent, is on the exempt list, but cyanide is not, although it is largely used in “Western Australia for the extraction of metals, and particularly for the extraction of gold. Cyanide is imported almost exclusively from Great Britain, while aero.cyanide comes from North America. I am not blaming the Ministry for these mistakes, because, as I have stated, the bills were passed with such haste that it was impossible to give them the consideration which their importance demanded, lt was at my request thru the Government placed notation reagents, including aero-cyanide, on the exempt list, but I could not persuade the Ministry to include cyanide. The exemption of aero-cyanide ‘ is of considerable assistance to the mining industry in Western Australia, and particularly the Wiluna Company, and I hope that the Government will now add cyanide to the list of exemptions.

Senator PAYNE:
Tasmania

.- This afternoon I received from the Assistant Minister (Senator Barnes) replies to certain questions which I addressed to him on the 5th December relating to the increase in the price of glass used by tomato-growers, as compared with the prices ruling prior to the operation of the deferred duty in June last. Honorable senators will, perhaps, remember that statements which I made at the time were not accepted by the Minister, bo I asked him the following question : -

What increase in the price per case of glass used by tomato-growers has been charged by merchants nB per their price lists since the deferred duty on this glass was imposed in June last?

The Minister this afternoon stated that the price per case ruling prior to. the 20th

June, 1930, was 23s. 9d. and the price per case ruling to-day on glass, dutypaid prior to the 30 th June, was 33b., an increase of 9s. 3d. per. case. For larger sizes 26-40, the price was 25s. lid., and now is 36s. per case, while for still larger sizes, 61-70, the price waB 28s. Id., and now is 39s. According, to the admission made by the Minister this afternoon, the average increase is about lis. per case. Price-lists which 1 have received from two reputable firms of glass merchants in Melbourne show that the price in July, very shortly after the duty was imposed, increased by 15s. per case. I also asked the Minister what quantity of this class of glass had been imported since the duty had been made operative, and to-day I was informed that, for the four mouths from July to October inclusive, £11,000 worth had been imported. I asked, further, what was the estimated quantity in stock in Australia when the duty was imposed, and I was told to-day that the estimated quantity in stock iu New South ‘ Wales and Victoria was 6,489,700 square feet of plain sheet glass. I stated some time ago that the people who were asking for this deferred duty would not be in a position to manufacture glass for another twelve months, and that there was in Australia sufficient to supply all requirements for the period mentioned. My statements were not accepted. The Minister allowed the deferred duty to become ‘operative, with the result that tomato-growers’ are now compelled to pay an additional 15s. per case for glass, and every, person using’ window-glass is also penalized. ‘ I mention these matters now, because’ it is thu only opportunity which T shall have, before the Senate rises, to protest against the action of the’ Government. This Ministry professes to be mindful of the interests of the consumers; but, strangely enough, by its tariff administration, it allows wealthy merchants and manufacturers to moke additional profits at the expense of the general community. It is some satisfaction to me to know that the replies which I received this afternoon bear out to. the full the statement which I made a month or two ago in this chamber.

Senator DALY:
Vice-President of the Executive Council · South Australia · ALP

. -I saw the Acting -Prime Minister Mr. Fenton) to-day with reference to legislation which the Government intends to send up to the Senate, and from the list with which I was supplied it looks as if honorable senators will be quite safe in making their arrangements to leave on Friday. I know of no alteration in the programme since I saw the Acting Prime Minister. With referenceto the matters mentioned by Senator Johnston, the Government feels that the sales tax legislation will have to be reviewed in the near future. Experience of its working indicates that the exemption of certain goods should be withdrawn and other articles included in the list. I anticipate that, early in the new year, the Senate will have an opportunity to discuss the incidence of the several sales tax measures.

Senator E B Johnston:

– I hope that, in the meantime, the Government will consider the points whichI have raised.

Senator DALY:

– The whole incidence of the taxes will be reviewed. From the point of view of my own State, the act is working unfairly. For example, briquettes from Victoria, and coal from New South Wales, are on the exempt list, while firewood cut in South Australia is not. Honorable senators will recall that it was mainly owing to the persistence with which Senator E. B. Johnston pressed for certain exemptions that, in the closing hours of last session, certain goods were added to the list. I gave way on the question of Oregon, because it was subject to a heavy duty, whereas jarrah and karri, being local timbers, made no contribution to the revenue. On that occasion, I was influenced by the difference between the duty on the American and British products, and, because I did not wish to break faith with honorable senators who had arranged to leave by train that evening, I gave way.

I can assure Senator Payne that the matter he has brought under my notice will receive the serious consideration of the Government. The honorable senator will have an opportunity to discuss glass and other duties when the tariff is before the Senate, which I trust will be early in the new year.

Question resolved in the affirmative.

Senate adjourned at 10.1 p.m.

Cite as: Australia, Senate, Debates, 10 December 1930, viewed 22 October 2017, <http://historichansard.net/senate/1930/19301210_senate_12_127/>.