Senate
15 November 1951

20th Parliament · 1st Session



The President (Senator the Hon. Edward Mattner) took the chair at 11 a..m., and read prayers.

page 2051

QUESTION

CANBERRA

Senator HENTY:
TASMANIA

– By way of explanation of a question that I shall ask the Minister representing the Minister for the Interior, I point out that each morning an employee of the Housing and Commissariat Section, Department of the Interior, hoses down the verandahs of the Hotel Kurrajong. On the verandahs are a number of tubs containing shrubs, all of which are dying through lack of water. Apparently the shrubs are under the jurisdiction of the Parks and Gardens Section of the department, and therefore may nol be watered by that employee. Will the Minister make representations to the appropriate trade union to obtain permission for him to hose the shrubs, when necessary, without losing status under the union’s rules? Will the Minister explore the possibility of a mixed functions clause being added to the award, in order that the employee may water the shrubs? Alternatively, could he be transferred to the Parks and Gardens Section for five minutes, twice a week, whilst he hoses them ? If these suggestions would bc unworkable, will the Minister see that the shrubs, when finally dead, are embalmed in red tape and suitably buried, so that they will not feel out of place in the hereafter?

Senator O’SULLIVAN:
Minister for Trade and Customs · QUEENSLAND · LP

refer the honorable senator’s question to my colleague when next I see him.

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QUESTION

EMPLOYMENT

Senator BENN:
QUEENSLAND

– I preface my question, which is directed to the Minister representing the Minister for Labour and National Service, with the statement that occasionally reports are published in the press of the number of vacancies that exist in industries throughout Australia. On some occasions, it is stated that there are 125.000 vacancies, and later it is reported that the figure has either decreased or increased. Will the Minister request the Minister for Labour aud National Service to appoint a parliamentary committee to investigate tho method that is adopted by the Department of Labour and National Service to record vacant positions in trades, professions and callings? Will he explain that method to the Senate ?

Senator O’SULLIVAN:
LP

– In the absence, of the Minister representing the Minister for Labour and National Service, I shall reply to the question. There is no need for such a parliamentary committee to be appointed. Very excellent and efficient service is being rendered by the Department of Labor and National Service in this connexion. If the honorable senator is eager to learn the details of the method that is adopted for the recording of vacant positions in industry. I shall be happy to obtain the information for him.

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QUESTION

INFLATION

Senator ASHLEY:
NEW SOUTH WALES

– Will the Minister representing the Prime Minister say whether the Government has given any consideration to the disaster that threatens Australian secondary industries owing to the accelerated momentum of the inflationary spiral and the consequential increases of wage rates that has dissipated the advantage in relation to production costs that, Australia enjoyed until the Menzies Government assumed office? As wage rates have increased by 30 per cent, in Australia and by only 10 per cent, in the United Kingdom and the United States of America, will the Minister say what action the Government proposes to take to protect Australian secondary industries against competition from imported secondary products which, if the present inflationary trend in this country continues, will otherwise inevitably destroy many of those industries?

Senator O’SULLIVAN:
LP

– It is true that when the Menzies Government came into office there was in this country a tidal wave of rising prices and rising costs. That was a heritage from the Chifley Government. Unfortunately, it is also true that, on a quantitative basis. there has been a serious recession of commodity production. Under the wise administration of this Government, those matters are being rectified.

page 2052

QUESTION

STEEL

Senator ARNOLD:
NEW SOUTH WALES

– The Newcastle steel-works of Broken Hill Proprietary Company Limited have been working at less than two-thirds of full capacity for the last twelve months or longer, due solely to lack of coal. Will the Minister for National Development inform the Senate of the steps that the Government proposes to take to ensure that more coal shall be supplied to those works? Will he investigate the desirability of taking coal from less essential industries in order that the works may be enabled to function at 100 per cent, of their capacity ?

Senator SPOONER:
Minister for National Development · NEW SOUTH WALES · LP

– I do not think it is true to say that the steel-works to which the honorable senator has referred have been unable to function at full capacity only by reason of a lack of coal. It is short of thousands of workers. Two matters must be taken into consideration. They are the inadequate supply of coal and the labour shortage. Although the production of coal has increased to a material degree, the increased production comes almost entirely from the open-cut mines. As honorable senators are aware, open-cut coal is not coking coal and is therefore not suitable for use by steelworks. Of course, the fact that the total volume of coal production is on the up-grade means that coking coal, which previously had perforce to be used for other purposes, is now becoming increasingly available to steel works. I have not the figures in front of me, but I am able to state that during recent months steel works have received substantially greater supplies of coal than they had been receiving for some time previously. To that extent, a great deal of progress has been made. I hold the view that in some way or other we must take advantage of the deposits of coking coal which exist in Queensland and make those deposits available to the steel industry. Another factor concerned in the problem of coal production is that the coke works throughout Australia are not as efficient as they should be and are not producing the quantities of coke that might be expected from them. All three matters that I have mentioned are within the province of my department, and I can only say that my officers are devoting a great deal of time and attention to them. I have no doubt that a solution will be found, but of course that is not sufficient. It is most desirable that the solution should be reached as quickly as possible.

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QUESTION

CURRENCY

Senator MORROW:
TASMANIA

– Can the Minister representing the Treasurer inform me of the number of businesses at present operating in Australia which are financed by American money? Will he also inform me of the names of such firms and also the names of firms, if any, which have transferred their profits to the United States of America? Will the Minister also state the names of the firms which have transferred money to that country, and the amounts involved. If that money represented profits, can the Minister state whether it was transferred in dollars or in sterling? If it was transferred in sterling, was it debited against the dollar pool ?

Senator SPOONER:
LP

– I am not able to give an undertaking to supply the information for which the honorable senator has asked, because I very much doubt whether it could be readily obtained or, indeed, obtained at all. Many American firms operate in Australia. For my part, I have no inhibitions in the matter, however great the number of such firms may be. I should like to see more American firms operating here because I consider that we need all the capital and all the “ know how “ that we can get in order to develop this country. A standard procedure has been laid down for the transfer of profits. In all instances in which American business concerns desire to extend their operations to Australia, I understand that they are informed that whilst the Government will not give any definite undertaking and will not pledge itself to the policy to be adopted in the future, no Australian government yet has placed on such extensions, exchange control which would result in the prevention of profits earned in Australia from being transferred to the United States of America after the payment of Australian taxes on such profits. I do not wish to burke the question, but at the same time I consider that it is not entirely fair to ask that a mass of detail should he obtained when it is doubtful whether it is possible to obtain it.

Senator WRIGHT:
TASMANIA · LP; IND from June 1978

– Will the Minister for National Development make sure, before supplying details, that the question was not inspiredby, and that the answer will not be communicated to, Moscow?

Senator SPOONER:

– I ask for notice of that question.

page 2053

QUESTION

HOSPITAL ACCOMMODATION

Senator MORROW:

– Will the Minister representing the Minister for Health say what is the estimated shortage of hospital beds in each State? What is the estimated shortage of nurses, trained staff, doctors, other staff and hospital equipment in each State? Is it true that some public hospitals are imposing their own means test on patients, and are refusing to treat those earning over £12 a week?

Senator COOPER:
Minister for Repatriation · QUEENSLAND · CP

– The Commonwealth contributes so much for each occupied hospital bed, but the hospitals themselves are under the control of the State governments, which also have the right to apply a means test if they so desire.

page 2053

QUESTION

IMMIGRATION

Senator O’BYRNE:
through Senator Ashley

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

  1. Is it a fact that there are at present in Australia declared war criminals who have come here as displaced persons under the immigration scheme?
  2. Is it a fact that one such migrant, Milarod Lukic, was in the service of the gestapo in the Nuremburg prisoner-of-war camp spying on and denouncing prisoners of war, and has been declared a war criminal by the Yugoslav Government ?
  3. Is it a fact that another migrant, Mihailo Rajkovic, also a gestapo agent and spy amongst prisoners of war, has now applied for Australian citizenship under the Nationality and Citizenship Act 1948?
  4. Is it the policy of the Government to allow Australia to become a dump for European war criminals, and is it a fact that local authorities in Europe are using the migration scheme to get rid of their undesirable elements who are frequently appearing before the courts of this country on grave charges?
Senator SPICER:
Attorney-General · through Senator O’Sullivan · LP

– The Minister for Immigration has furnished the following answers : -

  1. No displaced person against whom war crimes have been proved has been permitted to come to Australia under the displaced persons’ migration scheme. Both this Governmentand that which preceded it have been fully aware of the possibility that war criminals might seek refuge in Australia, and, special measures have been taken to prevent this occurring. There should be no need for me to comment at any length upon the very strict security check made in Europe on prospective migrants before their selection is finally approved. The facilities available for this screening process are recognized as being the most thorough which can be devised and their effectiveness has been reported upon in most favorable terms by a number of independent observers who have closely investigated the whole selection procedure. For the information of the honorable senator, however, I refer below in more detail to the actual procedure involved in the security check.
  2. Milorad Lukic came to this country, accompanied by his wife and daughter, under the displaced persons’ scheme in October, 1949. He was formerly a lieutenant in the Royal Yugoslav Army and when Yugoslavia was overrun by the Nazis in 1941 he was interned in a prisoner-of-war camp, where he remained until 1945, when released by the Allies. He remained in Germany, where, under licence from the British occupation authorities, he edited the Yugoslav language newspaper Sloga. The tone of this newspaper was critical and Lukic was frequently attacked in the Belgrade press. In the three years 1940 until 1949, when strong action was being taken throughout Europe against those who had collaborated with or otherwise assisted the Nazis, no claim was made that Lukic had been guilty of war crimes. His name was not included in any list of declared war criminals published by the Yugoslav Government over the period, although it is to be assumed that his existence must have been known. When Lukic came to Australia, after meeting Australian selection requirements and passing through the usual security screen, he was allocated to employment in Western Australia, where he came into contact with Mr. N. Marish, an Australian who had served in World War I., and who had been appointed Honorary Consul for Yugoslavia in 1929. Consequent upon this meeting, Mr. Marish approached the Department of Immigration for permission to publish a Yugoslav language newspaper in Western Australia under the name of Sloga, with Lukic as editor. It was clearly stated in the application that the policy of the paper was “ to publish matters of vital interest for all those coming from any part of Yugoslavia so that they will soon become conversant with the work, duty, life and general conditionsof Australia . . . but … it will strongly expose and counteract communism or any otherundemocratic ideologies “. Lukic’s ser vices were to be voluntary. The application was considered and the credentials of the perons concerned investigated, permission for the publication finally being granted. The newspaper has been printed weekly and has a wide circulation throughout Australia. The tone has been persistently anti-Communist. We have no desire to harbour war criminals, but it is no part of the policy of this Government to expel any person against whom nothing has been shown. A full investigation has been made into Lukic’s activities, both in Europe and in Australia, and on the evidence which has so far been obtained it would appear that the allegations against him do not result from his war-time activities. No evidence has come to hand which would suggest that he was in any way associated with the gestapo, the Australian military intelligence officer associated with the Australian Migration Office, Cologne, reporting that Lukic was - (i) not a known member of the Nazi party or its affiliates; (ii) not a known member of the Abwehr (the German Intelligence Service); (iii) nota known member or informant of the gestapo: (iv) interned by the Germans and remained an internee or prisoner of war from 1941 to 1945 ; (v) a member of the Ljotich (anti- Communist) Group in post-war Munich. A telegram has been received from Mr. Lukic indignantly denying the allegations made against his character and stating that he is willing to undergo any public or secret investi- gation which will remove the unjustified slur that has been cast upon him. Mr. Lukic has since requested by letter a complete investigation of hiscase so that the false impression publicly circulated about him may be contradicted, and concludes with the following statement: -

I think it extremely unjust that an Australian senator, from the security of his high position, should have attacked my character publicly, in such a manner, without giving me any chance to defend myself, and without his having any knowledge of the facts of the case.

  1. Mihailo Rajkovic came to this country in November, 1948, under the displaced persons’ scheme, and was allocated to employment in Western Australia. He was selected at El Shatt in Egypt in 1948 upon demobilization from the Royal Yugoslav Army under British command and his commanding officer at that time reported -

This is to certify that Second Lieutenant Rajkovic, presently on the strength of this unit, has served with Royal Yugoslav Army (Middle East) ever since January, 1944, up to the date of his demobilization. During his service he was always of very good conduct and was unpunished.

The political outlook of Second Lieutenant Rajkovic is that of pro- Western democracy and an ardent anti-Communist. He was always considered a serious worker and of an intelligent character.

Rajkovic was security checked in Egyptat selection and resultant upon an application recently received for naturalization, no evidence to support the contention that he was a gestapo agent and spy amongst prisoners of war was revealed. It is considered that, in the light of the evidence available, the allegations are unfounded and result from his association with Milorad Lukic in the production of Sloga, an anti-Communist Yugoslav language newspaper edited by Lukic in Western Australia. ‘J.he officer who interviewed Rajkovic at selection reported that he and his family were of the types that we want and his application for naturalization is now under consideration. The allegations against both Lukic and Rajkovic which are contained in the honorable senator’s questions are similar to accusations which appeared in the Jewish newspaper The Australian JewishNews, No. 55, of 21st September, 1951. In a. letter which has just been received from Mr. Rajkovic.he refers to this article and says -

With disgust and contempt I deny that I was a Fascist. I am a man who ga ve the whole of his life and youth to service of the Kingand my Country.

Referring to his association with Milorad Lukic in the production of Sloga, Mr Rajkovic adds -

For thisIcame in personal conflict with some of the Communist?

For these reasons and only these they are besmirching me through the Australian Jewish paper.

I wouldsuggest that the questions asked in regard to both Lukic and Rajkovic are of the kindwhich can do irreparable harm, not only to migrationgenerally but to the individuals concerned. Particularly is this so when the allegations are found to be unevidenced, as in these two cases, and to have been based on reasons which at the very least could be defined as being irresponsible.

  1. As I mentioned earlier, the system of security screening is designed to prevent persons undesirable on either political or criminal grounds from being selected for admission into Australia. The comprehensive procedure which was available for the screening of displaced persons involves a minute security check by trained Australian security officers posted in Germany for that purpose, who have complete access to the records held by the Allied occupation forces and who work in close collaboration with the intelligence and security services of the occupation forces. This procedure, with additional safeguards added since the present Government took office, is identical with that of the Labour Governments immigration procedure and the same facilities are available to ensure a strict security check of those prospective German migrants whose admission by private arrangement is being sought by firms and organizations in Australia engaged on projects of national importance. In Italy, our own highly trained security officers are undertaking security screening of all presented, in collaboration with experienced British authorities. It may be a fact that some local authorities in Europe would like to use the migration scheme to get rid of their undesirable elements, but Australian selection standards are high and the checks imposed are effective. The honorable senator may be assured that if the rate of presentation of the undesirable element were at all marked, the rate of rejection by the Australian selection teams would he as equally marked. The incidence of crime amongst new Australians is at present under investigation by a committee specially set. up by me for the purpose. Evidence so far available from police commissioners, however, is to the effect that this incidence amongst migrants is proportionately lower than in the Australian community.
Senator O’SULLIVAN:
LP

– On the8th November, Senator O’Byrne asked the following question : -

In view of the large and growing number of crimes of violence being committed by immigrants from Europe - New South Wales detectives estimate that one in four serious crimes are the work of new Australians - it is becoming apparent that the screening of immigrants is not efficient. Will the Minister for Trade and Customs consider appointing a parliamentary committee representing the Senate or both Houses, to investigate the incidence of crime amongst immigrants and to check up on the inefficiency of the screening organization ?

In my interim reply I stated that I would discuss the matters raised in the honorable senator’s question with my colleague, the Minister for Immigration. The Minister has now furnished the following reply to the honorable senator’s question : -

The statement which Senator O’Byrne has attributed to detectives of the New South Wales police force is at variance with the facts and figures furnished by the Police Commissioner of that State.

In the course of recent inquiries, departmental officers conferred with police authorities in Now South Wales and Victoria, the States with the largest alien populations, and once again it was revealed that the record of our alien population compares favorably -with that of any similar proportion of the Australian community.

It was found in these two States that of the total number of persons charged with offences of a serious nature, only approximately 3 per cent. were aliens. Furthermore, the percentage of crime amongst new Australians is . 378, as against a comparable figure in the Australian population of . 437. It is quite apparent, therefore, that the impression that there is a high incidence of crime amongst new Australians is attributable to over-emphasis of the cases in which they arc concerned.

These facts confirm the assessment of the position given by the Chief Commissioner of Police in Victoria, Mr. Duncan,when he publicly stated that the number of offences committedby new Australians was no greater in proportion than that committed by Australianborn people.

The figures show also that the Acting Police Commissioner in New South Wales, Mr. McCarthy, was speaking with a knowledge of facts when he said: “We cannot blame the crime wave on any particular nationality. Serious crimes have been committed by people of different nationalities, including Australians “.

However, as the type of publicity to which I have referred continues to cause a good deal of misapprehension, I have deemed it desirable in the interests of all concerned to set up a committee of members of the Commonwealth Immigration Advisory Council to investigate the incidence of crime amongst migrants who have been brought to Australia under our post-war migration schemes. The committee comprises -

Mr. W. R. Dovey, K.C.

Mr. T. Dougherty, federal secretary of the Australian Workers Union.

Mr. J. C. Neagle, general secretary of the Returned Servicemen’s League.

Mrs. J. G. Norris, National Council of Women.

As a number of statements on this subject would appear to have been inspired by political motives, I felt it essential that the committee undertaking this investigation should be non-political in character. The constitution of the committee is such that it will enable the true position to be established by an independent and representative group of citizens, including one (Mr. Dovey) who has had an extensive legal experience.

As regards the screening of migrants, I invite attention to the detailed information on this matter furnished in reply to another question asked by the honorable senator on the8th November.

page 2055

QUESTION

FERTILIZERS

Senator PEARSON:
through Senator Annabelle Rankin

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

In view of the shortage of superphosphate in Australia which seems inevitable following the likelihood of further reductions in sulphur imports, can the Minister indicate what steps are being taken to develop the several deposits of pyrites which are known to exist in Australia?

Senator COOPER:
CP

– The Minister for Defence Production has supplied the following answer: -

As soon as the world shortage of sulphur threatened our supplies the Government as a matter of urgency requested acid manufacturers to convert their plants to the use of local sulphur-bearing materials, chiefly pyrite, and the producers of pyrite to increase their output. As a result plans have been made and arc being put into effect to increase substantially pyrite production in Australia both from sources which have been supplying pyrite for :/id manufacture for many years and from a new deposit in South Australia which it is hoped will be producing in two or three years time. The established producers such as Mount Lyell, Tasmania, Lake George Mines, New South Wales, Norseman, Western Australia, and Mount Morgan, Queensland, are expected to increase output over the next three or four years when the combined production should be sufficient to meet the requirements of sulphuric acid plants which are being converted to use pyrite in place of imported sulphur. The development of new sources of supply is being investigated. There are problems to be overcome, however, such as rail and sea transport, which are currently being examined with n view to finding solutions. The Government is keeping closely in touch with developments and will continue to do whatever it can to assist in overcoming the serious problems facing the country as a result of the worldwide shortage of elemental sulphur.

page 2056

QUESTION

METHYLATED SPIRIT

Senator DEVLIN:
VICTORIA

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

I.. Is it a fact that there is a serious shortage of methylated spirit in Victoria; if so, what ip the reason for this shortage?

In view of the fact that methylated spirit is largely used in hospitals, by the medical profession generally, and also in certain industries, what action can be taken to have supplies increased?

Senator COOPER:
CP

– The Minister for Defence Production has supplied the following answers: -

  1. There has been a shortage of methylated spirit in Victoria over the last two months.

However, the principal renner, the Colonial Sugar Refining Company Limited, Melbourne, has continued to supply the full requirements of all major drug houses and essential industry. The reason for the shortage of methylated: spirit was originally a mechanical breakdown of the ship which normally carried molassesfrom Queensland to Victoria. Molasses is themain raw material used in refining methylated spirit. The quantity of molasses has been insufficient to enable all demands for methylated spirit to be met.

  1. As advised above the medical professionand essential industry’s requirements have been: met. The shortage has been felt mainly by firms who bottle the commodity for retail sale.The Colonial Sugar Refining Company Limited to offset the shortage of molasses has lately been using substitute materials. This action is expected to relieve the present shortage of methylated spirit. The company hopes in about six to eight weeks to be able to meet all needs.

page 2056

QUESTION

PUBLIC SERVICE

Senator PALTRIDGE:
WESTERN AUSTRALIA

asked the Minister representing the Prime Minister, upon notice -

  1. How many employees of the Commonwealth Public Service in each State (a) havebeen retired; (6) have resigned, and (o) havebeen served with dismissal notices since theGovernment’s policy to reduce the number of Commonwealth public servants by 10,000 was put into effect?
  2. Of the number of employees served with dismissal notices, how many (») have applied for unemployment benefits; (5) have sought employment elsewhere through the Commonwealth Employment Bureau?
Senator O’SULLIVAN:
LP

– The Prime Minister has supplied the following: answers : - l.-

The foregoing figures cover the period from the 1.7th August, 1951, the date upon which the Government’s decision was given, to the 30th September, 1951.

The information required by Senator Paltridge is not readily available. The Commonwealth Employment Bureau has a large number of unfilled vacancies and consequently has little difficulty in placing persons offering for employment.

page 2056

QUESTION

QUESTIONS

The PRESIDENT:

– In collaboration with Mr. Speaker, I have made arrangements for a document to be published’ each week in which will be printed questions upon notice and replies thereto. Copies of the document will be circulated! to all honorable senators.

page 2057

TARIFF BOARD

Reports on Items.

Senator O’SULLIVAN:
LP

– I lay on the table reports of the Tariff Board on the following subjects : -

Woven Upholstery and Woven Furnishing Fabrics

Fork Lift Trucks: Elevating Platform “Trucks of the types used in Factories, Warehouses and Wharfs.

Record-changing Devices.

Magnetos and Magneto Parts

Fish and Fish Products

Balls of Ferrous and Non-Ferrous Metals for Ball Bearings

Pipe-cutters and Bolt-cutters.

The recommendations of the board have been adopted in each instance. Copies of the reports are not yet available for circulation to honorable senators.

Ordered to be printed.

page 2057

WHEAT INDUSTRY STABILIZATION (REFUND OF CHARGE) BILL 1951

Bill returned from the House of Representatives, without amendment.

page 2057

SALES TAX (EXEMPTIONS AND

page 2057

CLASSIFICATIONS) BILL 1951

Bill received from the House of Representatives.

Standing Orders suspended.

Bill (on motion by Senator Spooner) read a first time.

Second Reading

Senator SPOONER:
Minister for National Development · New South Wales · LP

.- I move-

That the bill be now read a second time.

A substantial proportion of the additional revenue required for the purposes of the budget is to be derived by way of increased sales tax. In association with other steps taken by the Government, the increased rates of sales tax are expected to allow material and labour to be diverted from less essential purposes to the production of goods required for defence and essential development.

It is proposed to increase the sales tax rates to a degree that will enable approximately £35,000,000 additional revenue to be raised during the current financial year. The field of goods covered by the sales tax has been very comprehensively reviewed, with the object of ensuring that the increases shall apply as equitably as possible. A great deal has been said about heavy taxes on luxury goods, but few people would venture to lay down a definition of such goods. The fact is that there are very few classes of goods which can, without qualification, be classed as luxuries. It follows that, even if it were possible to effect a satisfactory segregation of luxury goods, the additional revenue that would be gained from the imposition of sales tax upon those goods alone, even at a rate of 100 per cent., would be relatively small.

Therefore, the sales tax increases must inevitably apply to numerous classes of goods which are not classed as luxuries. The basic needs of the people in the form of food, clothing and medicines are already exempt from sales tax. There are otherclasses of goods which, although they may be classifiable as essential, may be said to have different degrees of essentiality. The Government, although it has determined that certain goods which are regarded as being in the less essential categories shall bear higher rates of tax, wishes to make it clear that those goods are not necessarily branded as luxuries. The Government freely admits that many of them serve very useful purposes. Nevertheless, it has been found necessary, in the light of current economic conditions, to make them subject to higher rates of sales tax.

Of the additional sales tax revenue of £35,000,000 to be raised in the current financial year, approximately one-half will be secured by increasing the general rate of sales tax from 8 per cent. to 12½ per cent. Other goods will be subject to rates ranging from 20 per cent. to 66 per cent. The new maximum rate will apply to jewellery, imitation jewellery and fancy goods, cut glass and crystal, ornaments and vases, plated ware and fur garments. These goods have hitherto borne tax at the rate of 33 per cent. The rate of 66 per cent. will apply also to watches ornamented with jewels or imitation jewels, which are regarded clearly as a luxury line. Watches without such ornamentation will remain subject to the present rate of 33 per cent.

The rate of tax on toilet preparations and cosmetics is being raised from 33$ per cent, to 50 per cent. There has been some criticism of the rate of tax applied to these goods on the ground that it constitutes unfair discrimination against the feminine section of the community. It has been urged that it is unfair to tax the toilet requisites of women at a higher rate than the toilet requisites of men. Complaint has also been made that razor blades and other shaving accessories have been taxed at the general rate only. In order to remove what is apparently regarded by some persons as unfair discrimination, it is proposed to include safety razors and razor blades, shaving brushes, shaving soaps and shaving creams among the toilet requisites which will be subject to the rate of 50 per cent.

Tax at the rate of 33$ per cent, will be payable in respect of wireless sets, radiograms, gramophones and gramophone records, which previously have been taxed at the rate of 25 per cent., but musical instruments generally remain subject to cax at the present rate of 25 per cent. Equipment for sports and games, toys and associated articles which have hitherto borne tax at the general rate will also be subject to the rate of 33$ per cent. Motor cars will be taxed at the rate of 20 per cent., instead of 10 per cent. The rate of 20 per cent, instead of the general rate will apply to confectionery and ice cream. Full details of the goods affected, and of the new rates applicable thereto, will bo found in. a statement which has been circulated for the information of honorable senators. It may be mentioned that no change is being made in the rate of tax applicable to photographs, cameras; travelling bags, handbags, baskets and fountain pens. These goods remain subject to tax at the rate of 33$ per cent.

The bill makes provision for a limited range of further exemptions of a minor character. These are designed mainly to widen the scope of certain existing exemptions, with the object of removing anomalies. The consequential loss of revenue will not exceed £16,000 in the current financial year. The most important of the amendments relating to exemptions is that which extends to private hospitals conducted by non-profit organizations the exemption from sales tax already enjoyed by public hospitals in respect of goods for their use. This concession is being allowed in conformity with a proposal to amend the Income Tax Assessment Act, upon the recommendation of the Commonwealth Committee on Taxation, to allow concessional deductions in respect of gifts to such private hospitals.

Exemption is also being granted in respect of certain goods of a kind designed for the use of blind persons. These goods are braille writing frames, braille playing cards and “talking book machines “ which are specially constructed gramophones designed to play, at a very slow speed, records of stories or books, as a substitute for reading for the blind. Previously the exemption from sales tax of certain classes of educational films has been limited to films imported into Australia. Similar films are now made in Australia to a limited degree, and it is proposed that they also shall be exempt from sales tax. The exemption will be limited to films which are certified by the Commonwealth Film Censor as being of an educational character, and will be subject to the further condition that the films shall not be screened for commercial purposes. Examples of the classes of films affected are those dealing with industrial processes, soil erosion and other subjects of national interest and importance.

Provision is also made in the bill to extend the exemption from tax of passengers’ furniture and household (roods which are imported into Australia by persons arriving here from overseas. This exemption, which is based on a corresponding exemption from custom? duty, is limited by the existing law to goods to the value of £125 a person. Ou and from the 8th December, 1950, the exemption from customs duty was raised to £400 a person. It being clearly desirable that there should be a uniform range of exemption for the purposes of duty and sales tax, the Commissioner of Taxation sought and obtained the Treasurer’s approval to act in anticipation of a corresponding amendment of the sales tax law to take effect on and from the 8th December, 1950. The bill now ratifies the action taken. The increase is, of course, of particular importance to the many thousands of immigrants now coming to Australia with, in most instances, all their worldly goods.

Details of the other amendments relating to exemptions are shown in the explanatory statement which has been made available to honorable senators. In accordance with the usual practice, the amendments operate on and from the 27th September, 1951, which was the day following the date of introduction of the amending legislation.

Opinions will, of course, vary considerably concerning the weight of tax which may or should be imposed in respect of various classes of goods. Not unnaturally, manufacturers of some goods are prone to consider their own interests only, and to urge that the burden should be placed on the shoulders of others. The duty of the Government is to examine the economic situation as a whole, and, in the light of the best advice obtainable, to formulate proposals which it is considered will be in the best interests of the community generally. The necessity for increased taxation is greatly regretted, but the needs of the nation under present conditions must be the paramount consideration. It is in these circumstances that I commend the bill to honorable senators.

Debate (on motion by Senator Armstrong) adjourned.

SALES TAX BILLS (Nos. 1 to 9) 1951.

Bills received from the House of Representatives.

Motion (by Senator O’Sullivan) put -

That so much of the Standing Orders be suspended as would prevent the questions with regard to the several stages for the passage through the Senate of all or several of the Sales Tax Bills (Nos. 1 to 9) 1951 being put in one motion, at each stage, and the consideration of all or several of such bills together in committee of the whole.

The PRESIDENT:

– There being an absolute majority of the whole number of senators present, and no dissentient voice, I declare the question resolved in the affirmative.

Standing Orders suspended.

Bills (on motion by Senator Spooner) read a first time.

Second Reading

Senator SPOONER:
Minister for National Development · New South Wales · LP

.- I move-

That the bills be now read a second time.

The purpose of these bills is to authorize increases in the rates of sales tax as indicated by me in connexion with the bill to amend the Sales Tax (Exemptions and Classifications) Act, which has just received the attention of honorable senators. It is proposed that the goods specified in the new second schedule to that act shall bear tax at the rate of 20 per cent. The goods specified in the new third, fourth, fifth and sixth schedules will bear tax at the rates of 25 per cent., 33 per cent., 50 per cent, and 66 per cent., respectively. The goods affected arelisted in the explanatory statement which was circulated among honorable senators in connexion with the bill referred to.

The general rate of tax, which applies to the general field of goods which are not specified in any of the schedules, is to be raised from 8 per cent, to 12½ per cent. The new rates operate on and from the 27th September, 1951, which is the day after the date of introduction of the amending legislation. The details of the proposals and their object have already been fully explained to honorable senators.

Debate (on motion by Senator Armstrong) adjourned.

page 2059

INCOME TAX AND SOCIAL SERVICES CONTRIBUTION BILL 1951

Second Reading

Debate resumed from the 14th November (vide page 1979), on motion by Senator Spooner -

That the bill be now read a second time.

Upon which SenatorO’Flaherty had moved, by way of amendment -

That all words after “ Bill “ be left out with a view to insert in lieu thereof the following words: - “be returned to the House of Representatives requesting that -

the provision for ten percentum increase in tax be deleted;

provision be made to enable primary producers to elect to continue under the five years income averaging plan in respect of the income year 1951-52 “.

Senator CRITCHLEY:
South Australia

– When the debate on this measure was adjourned last night I was pointing out that unfair comparisons were sometimes drawn between taxation in Australia and in other countries. According to the November issue of Bank Review, wages in the last eighteen months have increased by 30 per cent. in Australia, whereas in the United Kingdom wages have increased by only 10 per cent. Therefore, no effective comparison can be drawn between conditions in the United Kingdom and in Australia. I have admitted that, because of the economic situation here, it would be difficult for any government to avoid increasing taxation. We do not want to be accused of criticizing the Government just because we are in opposition. We realize that stringent measures may be necessary, but we object to some of the methods by which the Government proposes to raise more revenue. The Government has been reluctant to give information about its budget proposals. For instance, the budget provides for the expenditure of £181,000,000 on defence, and we admit that it is necessary to make defence preparations. However, when we asked whether it would be possible to expend the whole of that amount on defence preparations in this financial year, or whether some of the money would be used for productive purposes, we could get no satisfaction from Ministers.

In his second-reading speech on this bill, the Minister for National Development (Senator Spooner) said that it was a matter of concern to the Government that many aged people were required to pay tax on incomes which were no greater than the age pension. It is proposed to grant certain concessions to such people, and I agree that concessions are long overdue. However, the Government does not seem to realize that even since it considered its budget proposals there has been an alarming increase in the cost of living, and that further relief measures have become necessary, particularly for age and invalid pensioners.

I remind the Government of the appeal which Senator Maher made yesterday on behalf of the primary producers, a section of the community with whose needs and problems he. is familiar. Now, for the first time after many years of struggle, primary producers find themselves with credit balances, and the Government proposes to take their money away from them. I hope that the honorable senator’s appeal will not fall on deaf ears. It is freely admitted that the cost of living will go on rising, and that there will have to be further increases of the basic wage. Therefore, more revenue will come to the Commonwealth Treasury than the Treasurer has estimated in his budget. It is clear that the Government’s budget proposals are not in the best interests of all sections of the community, including pensioners, housewives, and persons engaged in primary and secondary industries.. Therefore it is with the utmost sincerity that I support the amendment moved by Senator O’Flaherty and I trust that the Government will not use its weight of numbers to reject it summarily. May I conclude by quoting a parody on the lines of the author of The Scarlet Pimpernel,. which typifies the attitude of this Government -

They tax us here, they tax us there;

They tax our food, and what we wear;.

Are we in heaven, are we in hell.

With this Government, most unliberal?

Senator GORTON:
Victoria

– I can give my support to neither of the propositions set out in paragraphs (a) and (b) of the amendment moved by Senator O’Flaherty. The second proposition is that the bill be returned to the House of Representatives requesting that -

Provision be made to enable primary producers to elect to continue under the five years income averaging plan in respect of the income year 1951-52.

Apart from any other objections, I regard that portion of the amendment as having been extremely carelessly worded. Provision already exists for the majority of the primary producers to elect to continue under the five years income averaging plan. If Senator O’Flaherty’s amendment means what I think he intends it to mean, that portion of it should read, “ Provision be made to enable primary producers who earn more than an average of £4,000 a year to elect to continue under the five years income averaging system . . . “.. If the amendment had been so worded we could have viewed it from a different aspect. We have heard a great deal about the averaging of incomes. The objections to it by Opposition senators have already been adequately and simply answered by the statement that the system applies only to primary producers whose average income is in excess of £4,000 a year and that it is only right that they should be placed in the same category as other income tax payers who earn similar incomes. Although I fully agree with the proposal to repeal the averaging provisions as they apply to primary producers who derive large incomes, I realize that some taxpayers in the very high income brackets last year will be financially embarrassed, not so much as the result of the abolition of the averaging system, but because of the assessment of provisional tax. Some taxpayers, because of the large income they received last year, will be called upon to pay in provisional tax this year considerably more than their total income. It is true that they will receive the benefit of that payment later, but for the time being they are likely to be financially embarrassed. I suggest that in such cases the Government should make it possible for them to obtain credit from the banks in order to meet at least their tax commitment in excess of their incomes. Next year they will receive refunds of the excess tax they have paid and accordingly they will benefit, but for at least a few months some of them will be financially embarrassed, not because of the abolition of the averaging system, but because their incomes have dropped by, perhaps, 50 per cent, or more.

The other proposal in the amendment is that the provision for a 10 per cent, increase of tax be deleted, or in other words, that the Government should raise less money by way of income tax. Opposition senators have not told us what expentiture cut the Government should make to counterbalance the loss of revenue that .would result from the acceptance of that proposition. Surely, side by side with a suggestion that revenue should be reduced there must be a suggestion of the means by which expenditure can be similarly reduced. No such suggestions were made by Opposition senators. On the contrary, they talked only of increasing expenditure - of the necessity to provide more money for the States, of increasing the rate of pensions and of repatriation benefits. If the proposition submitted by Opposition senators is, as it must be, that we can cut income and increase expenditure at one and the same time, I should be glad if they would indicate how we should go about it.

I cannot but feel that this amendment was not submitted seriously. It is a melancholy fact - and it will bother us for some time - that taxes will remain extremely high until production has been increased. Only by increasing production can taxes be reduced. Sufficient goods must be produced and placed in circulation to match the amount of money in circulation. I know that that is a trite statement, which has been made over and over again, but whenever it is made some honorable senator opposite invariably asks, “Who has too much money? I have not too much money. Who has it ? “ I, myself, have not too much money with which to meet my needs, but it is undeniably true that there is in circulation so much money and so few goods that at the present prices of goods there is more than enough money to buy the goods that are available - not the goods that are wanted but the. goods that are available. Only by an increased flow of goods in circulation can the position be rectified. As I have said on other occasions when dealing with the subject of income tax, the Treasury has come out into the open and said that it is its function to close the inflationary gap between goods and money - to make one match the other. The only way it can do so is by taking money out of circulation, and the only way the people can do it is. by putting more goods into circulation. When that has been done there will be no necessity for taxes to remain at their present high level.

We are still inclined to think in terms of £1 ;and 10s. notes. What is important is not that we are giving the States £160,000,000 in £1 notes to meet their requirements, but that we are giving to them steel, cement, houses, and manpower which, at present prices, cost £160,000,000, and that we are denying that steel, cement, and man-power to the population which would otherwise use them for its own needs. What is important is not that we are providing £180,000,000 in £1 notes for defence requirements, but that we are providing steel ingots, coal and electric power for defence purposes which would otherwise be used by the people. It is obvious that if the people are to purchase a reasonable supply of commodities production must be increased. The increase of production is in their own hands and when that increase has been achieved I shall gladly support a proposal to reduce taxes. In view of the circumstances that now prevail, the amendment moved by Senator O’Flaherty cannot be countenanced.

Senator BYRNE:
QUEENSLAND · ALP; QLP from 1957; DLP from 1968

– When we consider what is proposed in this bill and in the amendment submitted by the Opposition, we approach one aspect of the budget proposals, that is, one of the specific methods being adopted by the Government to raise revenue. At a later stage we shall consider the methods adopted by it in allocating the revenue so raised. This legislation involves two main principles. One of them in particular has received the close attention of the Senate during this debate. I refer to the abolition of the averaging system in respect of the incomes of certain primary producers. The other principle is the imposition of the 10 per cent, special levy. We are strongly opposed to that method of increasing taxes because it is a departure from traditional income tax practice in Australia. Our income tax system under which taxes are imposed in accordance with capacity to pay, has received the approbation of most advanced countries in the world. The graduated scale of taxation complies with the general principles of equity but the imposition of a flat rate increase of 10 per cent, is a departure from those principles, and will undermine what hitherto has been a sound system of taxation. We protest strongly against this alteration of procedure.

The abolition of the averaging system is even more sinister because it involves discrimination against a particular class in the community. I admit that the introduction of this system originally was, to some degree, discrimination in favour of that particular class, but there were special circumstances which justified its application, and to abolish the system now will involve severe discrimination against some primary producers. Some extraordinary arguments have been adduced by honorable senators opposite in support of this proposal. Apparently there is some conflict of opinion within the ranks of Government supporters but we have heard some extraordinary examples of special pleading in defence of this legislation. I refer particularly to the remarks of Senator Wright and Senator Reid. Senator Wright’s approach to the problem was purely academic. He was prepared apparently to advance the most extraordinary arguments in support of the Government’s proposal. To buttress his case he quoted extensively from the report of the Royal Commission on Taxation which sat during the 1930’s. I wish to be quite fair to the honorable senator. When listening to his remarks, I felt that there were some relevant sections of the report to which he had not referred. I was not in the chamber during the whole of his speech, but I was here when he was quoting from the report of the Royal Commission on Taxation. He quoted paragraphs 635 and 636, but, so far as I am aware, he did not quote paragraph 639, which contains a considered opinion of the commission opposed to the proposition that Senator Wright advanced. Paragraph 639 states -

The primary producer, however, is in a different position. His income is affected by seasonal conditions that cannot be predicted or controlled. If he sustains a loss he will, of course, have the right to carry it forward in common with other taxpayers. But if his income fluctuates considerably without resulting in a loss he would, if averaging were abolished, .pay considerably more tax than a taxpayer who receives the same aggregate income during the same period in reasonably even instalments. This case is not met by the right to carry forward losses, and for that reason we think that the income of the primary producer should be .assessed at an average rate as it is at present.

In pursuance of that opinion, the commission recommended in paragraph 641-

We recommend -

1 ) That the averaging of incomes for the purpose of determining the rate of tax to be applied to the income of the year preceding the year of assessment be abolished in respect of all taxpayers other than primary producers who ordinarily carry on primary production as their sole or main business.

That the same basis of assessment of primary producers be adopted by the States.

do not think that Senator Wright quoted that recommendation. He submitted that in equity primary producers should be called upon to make a sacrifice because other sections of the community, including individuals whose financial circumstances cannot be compared to those of graziers, are making sacrifices. We know, of course, that, over the years, the Australian Country party has pleaded most vociferously and enthusiastically on behalf of wool-growers and primary producers generally. Since [ have been a member of the Senate, I have heard constant pleas for the protection of the primary producers and for special consideration of their interests and welfare. Now we find the Government deserting the principle that it advocated strenuously for so long. We have all heard the expression that Australia climbs to prosperity on the sheep’s back. Senator Wright’s speech on this measure disclosed little or no working acquaintance with the problems of primary producers as they were outlined by Senator Maher. Senator Wright dealt only in legalisms. He confined his attention to the fluctuations of the incomes of wool-growers caused by variations in overseas market prices for wool. The point that he overlooked is that fluctuations of incomes in the wool industry are attributable to a number of causes. The wool-grower may have a good season and poor prices. He may have a poor season and good prices, or he may have a poor season and poor prices. Those factors were overlooked by Senator Wright, although Senator Maher had given them a startling significance in his protest against the proposal to abolish the averaging system in respect of incomes exceeding £4,000 a year. In an endeavour to inject some colour into the cold intellectualism of his approach, Senator Wright said that, in equity, primary producers should have to make some sacrifice in view of the sacrifices that are being made by the working man. Strangely enough, only a few days ago, speaking on the Commonwealth Employees’ Compensation Bill, the honorable senator protested vigorously against what he alleged to be the reprehensible principle that an employee is entitled to workers’ compensation if he is injured while travelling to or from his place of employment. That was my understanding of the honorable senator’s remarks, but there again I speak subject to correction. If that was, in fact, what the honorable senator had in mind, it is strange indeed that, yesterday, speaking on this measure he represented himself as the defender of the working man. Apparently that speech was just another example of special pleading. In fact, with the exception of Senator Maher. all honorable senators opposite have given a magnificent exhibition of special pleading in their remarks on this measure. Senator Maher showed the proposal in its true light. Senator Wright thinks it only just that the wool-grower should make this sacrifice. Senator Reid, on the other hand, adopted the attitude that under this legislation, the graziers would not be making any real sacrifice, but would, in fact,be better off than ever. There was a complete internal contradiction between the two honorable senators. They should put their heads together first and emerge with a common plan and a common purpose. Then they would have a consistent approach to the subject. This measure goes beyond the actual principle involved. It is an indication of the fact that the Government does not know from day to day where it is going or what it is doing. It is almost impossible for a coalition government to operate along a consistent path and with a consistent plan.

The only way for a coalition government to work, if it can work satisfactorily, is that the two forces - to use a simile taken from the law of mechanics - must resolve themselves into a resulting force moving consistently in one direction. But no coalition government can operate in that way, because at one moment there are violent stresses in one direction, and the next moment the stresses are in the opposite direction. There is no definite approach along a particular line. As a result, in Australia to-day the national economy is reeling along the road like a drunken man, staggering from side to side. It goes to one side, when pressure is applied by the Australian Country ‘party, and to the other side when pressure is applied by the Liberal party. That is unfortunately evident from the wool sales deduction legislation. In the internecine fight in the ranks of the Government about the revaluation of the £1, these tremendous stresses and strains are being applied, and the Australian economy is being torn asunder. This legislation is indicative of the general attitude of the coalition in relation to the Australian economy.

I shall make a passing reference to the dismissal of Commonwealth employees, which was another indication of the Government’s tendency to do something on the spur of the moment. It lashes out furiously, without having any plan to meet a circumstance as it arises. Ultimately the Australian economy must suffer a violent reaction. Apparently the Government’s direct and indirect taxation proposals are based on laws of orthodox economic thinking. But an important school of economists consider that the Government is experimenting in the most frantic way with the Australian economy, with an assumed air of confidence that its supporters cannot possibly feel within themselves.

I have taken out a few figures to show the relationship of taxation to national income. I had hoped to have a further authority before me, because the authority, from which I shall quote makes only passing reference to the relationship. In The Life of J ohn Maynard Keynes, R. E. Harrod states - ‘

Keynes propounded the view, of which Mr. Colin Clark has recently reminded us, that no nation will endure paying more than a given percentage of its national income in taxation, and if it has to carry a greater load it will almost automatically find escape from its plight by inflation.

Senator WRIGHT:
TASMANIA · LP; IND from June 1978

– What was the (percentage %

Senator BYRNE:
QUEENSLAND · ALP; QLP from 1957; DLP from 1968

– The reference was to Mr. Colin Clark’s article in the Economic Journal of December, 1945. I have tried to obtain it from the Parliamentary Library, but it is not available. However, from my personal recollection of a conversation that I had with Mr. Colin Clark some time ago, the percentage was 25 per cent. I am subject to correction in that respect.

Senator WRIGHT:
TASMANIA

– Is the honorable senator seriously basing an argument to the Senate upon an unremembered percentage ?

Senator BYRNE:
QUEENSLAND · ALP; QLP from 1957; DLP from 1968

– I am not quoting it ex cathedra, but I remember that the figure was in the vicinity of 25 per cent. Certainly our taxation grossly exceeds that percentage of the national income. The increasing incidence of taxation in relation to national income is alarming. In 1949-50 direct taxation, that is income tax, pay-roll tax, land tax, estate duty and entertainments tax, amounted to £39 10s. 4d. a head of population. It increased to £59 14s. 6d. a head in 1950-51, and is expected to amount to £74 lis. lid. in this financial year. Income tax alone amounted to £34 14s. lOd. a head of population in 1949-50, and is expected to yield £67 4s. 8d. a head during this financial year. The total of direct and indirect taxation in 1949-50 was £62 13s. 2d. a head of population. It is expected to yield £112 4s. 6d. a head in this financial” year.

I shall place before the Senate relative figures that I have extracted from the pamphlet on national income and expenditure that was circulated to honorable senators when the budget papers were presented. In round figures, our national income was £2,019,000,000 in 1947-48. It increased to £3,593,000,000 in 1950-51. In 1947-48 income tax collections aggregated £233,000,000. During this financial year it is expected that income taxation will yield £572,000,000. Our national income in 1950-51 was 78 per cent, higher than it was in 1947-48, while the expected yield from income taxation in this financial year will be 145 per cent, higher than were the collections in 1947-48. These figures show that the Government is mak.ing an alarming intrusion into the pockets of the people. In 1950-51 our national income was £3,593,000,000, and the actual revenue received, in that year was £718,569,909, or 23 per cent, of the national income. I estimate that the national income during this financial year will be £300,000,000 greater than it was last financial year.

Senator WRIGHT:
TASMANIA · LP; IND from June 1978

– What was the increase last year ?

Senator BYRNE:
QUEENSLAND · ALP; QLP from 1957; DLP from 1968

– The national income during the last financial year was 19 per cent, greater than it was in 1949-50.

Senator WRIGHT:
TASMANIA · LP; IND from June 1978

– How many hundreds of millions of pounds?

Senator BYRNE:
QUEENSLAND · ALP; QLP from 1957; DLP from 1968

– It was about £800,000,000. It is expected that during this financial year taxation collections will reach the astronomical figure of £957,300,000, so that the percentage of taxation to national income will be 27.1 per cent. As I have mentioned before, Mr. Colin Clark has stated that 25 per cent, is the dangerous maximum. It is not a safe figure, but even at that stage it is a dangerous percentage. We have been on the borderline for some years, and now the Government is going to take the extremely dangerous step of increasing the percentage of taxation to national income to 27.1 per cent. This matter calls for a very careful consideration of the risks and dangers involved.

As I have already pointed out, this Government has no consistent approach to the economic problems of the day, as has been shown by the legislation that it has introduced since it has been in office. Problems of political significance have not been considered, in relation, to the whole economy. To-day our economy faces complete destruction because the Government still has no clear approach to the problems confronting it.. To survive, a nation must have clarity and consistency of action by its government. People who are not well informed and highly intelligent will take anything from a government. But the Australian people are- intelligent, and should be taken into the confidence of the Australian Government. They may not have a technical knowledge of economics, but their instinct tells them what should be done. The working men, the businessmen, and the primary producers are faced with great uncertainty. If the Government is to be able to combat the present inflationary tendency in this country, it should seek their co-operation. Senator Gorton has referred to the necessity to handle the inflationary position from two sides, that is, by taking money out of circulation, and by increasing production. Personal production depends on the degree of confidence that is inspired by the Government. The honorable senator believes in incentives. But what incentive is the Government giving to the woolgrowers to increase production?

Senator WRIGHT:
TASMANIA · LP; IND from June 1978

– What about the export market ?

Senator BYRNE:
QUEENSLAND · ALP; QLP from 1957; DLP from 1968

– The honorable senator is not taking the whole position in relation to the primary industries into consideration, and the Government is not taking the whole of the position in relation to working men and women of this country into consideration.

Sitting suspended from 12.45 to 2JS0 p.m.

Senator BYRNE:
QUEENSLAND · ALP; QLP from 1957; DLP from 1968

– I direct the attention of the Government to a long-range effect of the present inflationary conditions and of the imposition of heavy direct and indirect taxes. In any community, it is important that the people shall be encouraged to save. It is also important that they shall be given the opportunity to do so in order that they may make provision for their welfare, especially in the later years of their lives. We have a limited social services system, because we have not yet been able to abolish the means test. As the result of the present inflation, there will in the future be an increasingly large section of the community which, because it has not had an opportunity to save, will be dependent upon social services benefits. Even if the means test is not abolished, we can expect that, in the comparatively near future, owing to the effects of inflation and high taxes, the demands made upon the. National Welfare Fund will increase. That will have an important effect upon our economy, which the Government cannot afford to disregard’. There is always a danger that a government will, as I have accused this Government of doing, consider only the immediate effects of its policy and will give no consideration to long-range effects. Therefore, I have felt it proper to direct attention to these matters. The ultimate effect of the present inflationary conditions must be taken into consideration. It may be that in years to come we shall have to make a complete re-adjustment of our internal economy in order to meet die demands of the increasingly large number of people who will be dependent upon social services benefits.

I direct the attention of the Government also to the parallel between inflation and the measures that are being taken to counter it. Inflation, reduced to its simplest terms, is a condition in which costs and prices are having a race. The effect of the Government’s antiinflationary measures has been to cause a similar race in relation to the works and services of the States. Yesterday, the Brisbane press published a report of an application r,o ihe Queensland Industrial Court by the Australian Workers Union for an increase of the basic wage by 10s. a week, irrespective of quarterly adjustments. The Public Service Commissioner said that such an increase would impose upon the State - that is, the Crown and private employers - an additional burden of approximately £6,000,000 a year, and would cause the State Government’s wages bill to rise by approximately £1,000,000 a year. As a result of the last quarterly adjustment, the basic wage was increased by 14s. a week. The next increase may be £1 a week. Honorable senators can calculate the effect of such an increase upon the finances of the States. The Commonwealth would derive additional revenue from the income tax that it levied upon increased incomes, but the States, under their present budgets, would be unable to continue with their works and services. They would be forced to prune electricity and irrigation undertakings. That would result in a decrease of production. The methods that are being adopted to cure inflation will defeat their own ends. I direct the attention of the Government to that because, as I have said before, the Commonwealth to-day is the repository of the very existence of the States. If federation is to continue, the Central Government must become increasingly conscious of its’ national responsibilities.

The conclusion to be drawn from that very short analysis is that the budget proposals in relation to both taxation and expenditure disintegrate, as it were, immediately they are propounded. One part of the Government’s financial policy is defeating the other. What is happening now ,can be likened to a man drawing a square and almost immediately putting it out of plumb. I fully appreciate the problems with which the Government ifc faced. The fact that we have a single taxing authority and that most of our works and services are undertaken by the States, which are not taxing authorities, does not make it easy for the Government to formulate an effective antiinflation policy, but the difficulty of the problem does not justify failure to formulate such, a policy. I believe that the Commonwealth must devote itself primarily to ensuring that federation shall continue.

I oppose the bill and support the amendment because I consider, first, that the proposed increases of tax are excessive; secondly, that the additional revenue from them will come from the wrong source; and thirdly, that the bill will give a spurt to inflation. Whatever may be the long-range effect for which the Government hopes, the immediate effect of this measure will be to stimulate inflation. It is quite possible that the short-range and immediate effect will be to destroy any possibility of the long-range effect ever being achieved. I urge the Senate to agree to return the bill to the House of Representatives, where the financial proposals of the Government could be reconsidered in the light of the facts to which the attention of honorable senators has been directed.

Senator PIESSE:
Western Australia

– This bill has already been thoroughly discussed. I have no intention to repeat what other honorable senators have said, but there are one or two points to which I want to direct attention. The averaging system has been discussed fully. Honorable senators may recall that I spoke upon that matter when the budget was debated in this chamber. I shall not repeat what I said then. All that I want to say now about the averaging system is that the great majority of primary producers will still have the right to elect whether they will continue under the system. The only primary producers who will be excluded from the system will be those whose annual taxable income exceeds £4,000. There are approximately 32,000 primary producers in that category. When I discussed the averaging system previously, I had not been in Western Australia since the budget was presented. I was there a fortnight ago, and I took advantage of the opportunity to ask one or two pastoralists from the north-west of the State what were their reactions to the proposal to modify the averaging system. Honorable senators will be interested to learn that they said that, the proposal suited them.

Senator Benn:

– Did the honorable senator speak to two or 2,000 pastoralists ?

Senator PIESSE:

– I spoke only to two. Unlike Senator Benn, I cannot speak to 2,000 in a short time. I am delighted to learn from what has been said in the course of this debate that the primary producers and the pastoralists of Australia have the support of the Labour party to-day and may look forward to having it in the future.

Honorable senators opposite have not mentioned the benefits that will accrue to the primary producers who will be excluded from the averaging system. If they were not excluded from the system and if their income tax were assessed upon the basis of their average income for five years, for four of those years they would feel the effect of what is considered by most people to have been a peak year for wool-growers. I admit that, under the new system, some primary producers may find it difficult to meet the commitments into which they have entered. Generally the wool clip is sold between August and March. Doubtless many primary producers calculated their income tax liability before the budget was presented, and after the presentation of the budget found that their tax was to be assessed under a new system. It may be difficult for them to find the extra money that they will need to pay their income tax. However, I am certain that the Commissioner of Taxation will consent to extra time for the payment of tax being given to any primary producer who needs it.

I believe that the payment of provisional income tax will cause some trouble. The Income Tax Assessment Act prescribes the manner in which provisional income tax shall be raised. Generally speaking, it provides that the tax shall be raised on the assumption that the taxpayer is likely to have the same income as he had in the preceding year. The Commissioner has no power to vary the amount of the provisional tax, but he may grant an extension of time until the lodgment of the return for the year concerned.. Naturally, he cannot for practical purposes grant an indefinite extension, and in all cases he demands that the return shall be lodged within a very short space of time following the 30th June in each year. Although the Commissioner will know that wool prices have fallen, he will assess the provisional tax payable by wool-growers on the basis of their incomes for last year. I understand that the Commissioner of Taxation has the power to suspend payment of tax, including provisional tax, in special circumstances. I am sure that if he looks closely at complaints which may be made as a result of this legislation he will regard them as arising from special circumstances. I also understand that where primary producers have experienced financial difficulties because of fires, floods, and other contingencies, the Commissioner has for many years exercised his power to extend the time for payment to meet the circumstances that had been encountered. I ask the Minister in charge of the bill to ask the Treasurer (Sir Arthur Fadden) to bring this matter to the notice of the Commissioner, because I am confident that a number of complaints will crop up during the next twelve months. If primary producers are treated in the manner that I have indicated, any harm that might otherwise be done will be nullified.

I wish to deal with only one matter to which reference has been made during the debate on this measure. When Senator Wright was speaking last night, he compared the rate of tax which was in operation during World War II. with that which will operate when the budget proposals are put into effect. Honorable senators opposite have claimed that the comparison was not a fair one and have suggested that the rate that will apply when the budget proposals begin to operate should be compared with that which was in operation when this Government came to office. I ask them how it is possible to compare present-day conditions with those of 1949? I was interested to hear Senator Critchley honestly express his opinion that times are now very difficult. Apparently he appreciates that conditions have changed during the last two years.

Senator Critchley:

– It was apparent in 1949 that conditions would change; nevertheless, the Government parties said that they would reduce taxation.

Senator PIESSE:

– I point out to tha honorable senator that necessity is the mother of invention. Honorable senators opposite speak as though we on this side of the chamber are eager to increase taxes. I do not think that there is one honorable senator who is not eager to reduce taxes, and certainly no one could be more desirous of doing so than I am. I have said previously in this chamber that I believe that the most effective incentive that may be given to the producers and workers of this country is a reduction of tax. I have always endeavoured to work towards that end. I admit that I said to the electors, two years ago on the hustings, that I hoped that taxation would be reduced, but I am now prepared to face them and say that it has not been possible to do so for special reasons. The people have been told by honorable senators on this side of the chamber of the reasons for increased taxes. They appreciate that defence is a most important matter and that the amount of money that is being expended on it to-day is a great deal more than the expenditure of two years ago. It is better to face the electors and say, “ We are endeavouring to do what we think is best for Australia. We are trying to make the country safe for those who will follow us. If we must pay to do that, now is the time to do so “.

As far as the 10 per cent, increase of income tax is concerned, I am confident that the persons on smaller income appreciate that by paying more tax they will be doing their share, in a small way, to defend the country. They will also appreciate that those on the higher incomes will pay more. We are all in this. Last Sunday night a call to the nation was made over the radio by members of the community who are not members of Parliament. I was delighted to hear it. Two years ago I stated that we must face facts and endeavour to be honest with ourselves. If, during the coming year or so, by paying increased taxes, we reap the reward for which the Government hopes, we shall be able to look for a reduction of taxes and perhaps see an Australia which is in a far safer position than it is at the present time.

I cannot support the amendment. I believe that Senator 0’Flaherty. who moved it, did not really want it to be adopted in its present form, because, as was pointed out this morning, it provides that provision should be made to enable primary producers to elect to continue under the five years income averaging plan in respect of the year 1951-52. I point out that the bulk of primary producers already have such right of election, and that those outside the system number only 32,000. I support the bill.

Senator COURTICE (Queensland) [2.50”1. - I am sure that no one has been astonished by the concluding remarks of Senator Piesse. In common with all honorable senators opposite, he has made up his mind to support the bill and nothing that honorable senators on this side of the chamber may say will alter those opinions. The Opposition appreciates that the amendment is not likely to succeed, but it has been moved because that is the only way of protesting against the Government’s financial proposals that is open to it.

I appreciate that budgets and financial proposals, regardless of the political colour of the Government which introduces them, are seldom palatable, but I have never struck anything as nauseating as the budget now before the Senate. Throughout the country it is difficult to find a person who is prepared to support the present financial proposals of the Government. I appreciate that it is faced with a difficult situation. Whilst I do not object to taxation, I -consider that it is the responsibility of the Government to ensure that the incidence of taxation is spread fairly over the community and that the burden of taxation is borne by those who are best able to bear it. It is also the responsibility of the Government to ensure that taxation is imposed for the purpose of strengthening the economy. I have listened to most of the speeches that have been made during the debate, on this measure, and it occurs to me that only Senator Gorton has mentioned increased production, although much has been heard of that matter in the past. The honorable senator stated that increased production is the only way to bring the country out of its present difficulties and the only means of improving our financial and economic position and combating the inflationary trend which is having such a disastrous effect upon the people.

I consider that although the imposition of an additional 10 per cent, of income tax may be legitimate, it is somewhat paradoxical in view of the fact that the Government has budgeted for a large surplus. It has done so at a time when costs of production and living costs are higher than they have ever been in this country. If the Government had in mind some other proposal for the prevention of the harmful results of the present economic trend, there might be some hope for the success of the budget proposals. The Governments of the United Kingdom and the United States of America are endeavouring to curb expenditure, costs and prices, but this Government apparently does not recognize that those matters constitute problems. The budget will surely mean higher costs of production, which in turn will mean higher prices and wages. The result will be that the inflationary spiral will continue upward. If the economic position continues to develop drastic methods will be needed to deal with it. The Government should be prepared to take drastic steps now in order to prevent the situation from becoming worse than it is at the moment. The cost of living affects particularly those people who, during the evening of their lives, find that their savings are in great jeopardy. The savings which they have put by at great sacrifice and by means of thrift and careful husbanding of resources are now, because of the present high prices and inflationary conditions, of little worth. Inflation is exacting from the best of our people a toll which no government, no matter what its political colour may be, should permit while it sits smugly by. The people of this country have always responded nobly to a call for sacrifice which they believed to be in the best interests of the nation, but I ask the Government whether it considers that there are in Australia to-day any people who are satisfied and content and who feel inspired by the actions of the Government. Are not the Australian people dissatisfied with the Government, and is there not a general feeling that it is destroying all incentive and all public confidence? If prices continue to increase, the economy will eventually reach the stage of disaster. The Government should take the bit between its teeth and prevent inflation from going any further.

I am disappointed with the attitude of the Australian Country party, especially in regard to the Government’s financial proposals. The alteration of the averaging system in respect of certain primary producers is sharp practice. The primary producers fought for years in order to achieve that system. I appreciate that Senator Maher spoke yesterday not only from his head but also from his heart. Perhaps he will not be so seriously affected by the Government’s financial proposals as others will be, and I have no doubt that he is well able to meet his tax liabilities, but it is apparent that he knows that in Queensland there are serious fluctuations of the incomes of primary producers. In that State primary producers can look back on harsher conditions than those that have obtained in any other State, with the exception of “Western Australia. At the present time, serious droughts and bush-fires in Queensland are interfering greatly with the operations of primary producers. It does not matter how carefully a farmer may plan for his future; if a drought or a bush-fire is visited on him it creates tremendous hardship. I was associated with the agitation in 1927 or 1928 for the adoption of a method whereby a fair tax would be levied on the incomes of primary producers. The averaging system was the result. Now, because this Government finds itself in financial difficulties, it looks about for a means of getting over those difficulties. It did not mention such difficulties to the electors at the last general election, although the members of the Government have referred over and over again to a “ mandate “. I suggest that it received no mandate to take more than £100,000,000 from the wool-growers. Because it is now obliged to pay back to the wool-growers some millions of pounds, the Treasurer (Sir Arthur Fadden) looks about him and says, “What can I do ? “ He explores various avenues and finally decides to interfere with the averaging system. The principle of the system was either a good one from the point of view of primary producers, or it was a bad one. Senator Piesse has stated that only 27,000 people will be affected by its abolition. I suggest that that is indicative of the attitude of the Government. It seems that if only a few people who are not very important will be affected by proposed legislation, they can be ignored. I am amazed that the Australian Country party should accept the policy of the Government on this matter. Its attitude will disappoint the primary producers throughout Queensland, at any rate. I consider that it would be far better for the Government to strive for a fair percentage of tax from the incomes of all sections of the people. If we have obligations to meet, let us meet them fairly and squarely and not adopt the kind of sharp practices which the Government proposes to adopt by means of this budget. Their adoption will be bad for the future of the country and will constitute a precedent which some later government may perhaps emulate and carry to further lengths.

Senator Wright began his speech yesterday by saying that the Government needs to raise money for defence purposes, and he suggested that we were opposed to that.

Senator Wright:

– The honorable senator’s leader said last week that he did not know where there was a war.

Senator COURTICE:
QUEENSLAND

– I am convinced that Senator Wright, as a. member of the profession to which he belongs, is quite capable of misrepresenting what my leader said. Senator Wright insinuated that all the patriotism was on the Government side of the chamber, and that we on this side were not concerned with the welfare of the nation. I ask honorable senators to carry their minds back to the beginning of the last war. There was then in power a government somewhat similar in character to the present one, and it was led by the same Prime Minister. The situation was very grave, but what was the attitude of the Prime Minister and of members of the Australian Country party? Every honorable senator knows what happened. Members of the Australian Country party spent most of their time trying to find a leader. Two candidates each received an equal number of votes, and the present Treasurer (Sir Arthur Fadden) was elected as a stop-gap leader because the party could not agree on any one else. The government of that day had a majority in both Houses of the Parliament, but it fell down on its job. It was unable to govern, and had to make way for a La’bour government which enjoyed the confidence of all sections of the community, even of the Liberals, who supported it for the first two years of its existence. The people of Australia supported the Labour Government during the war, and continued to support it after the war until its political enemies said that it had been in power too long. They told the people that if they deposed the Labour Government and put into power an anti-Labour one it would restore the incentive to produce.

The PRESIDENT (Senator the Hon Edward Mattner:
SOUTH AUSTRALIA

– Order! I suggest that Senator Courtice should either support or oppose the proposal before the Chair.

Senator COURTICE:

– What is the proposal ?

The PRESIDENT:

– I have been sitting here for quite a long while, and I confess that I am beginning to wonder what really is before the Chair. I have allowed a good deal of latitude, but I now ask the honorable senator to come back to the bill.

Senator COURTICE:

– The main function of government is to get the best from the people. It is necessary that there should be greater production in Australia, but the people are discouraged. When these taxation proposals are given effect, the position will be made more difficult for the great bulk of the people, who are not able to bear new burdens. I refer particularly to indirect taxation, which we shall have an opportunity to discuss on another measure. All the Government’s financial proposals have the same objectionable characteristic: they are not calculated to win the co-operation of the people in a worthwhile national effort.

I deny the assertion of Senator Wright that the Labour party is not fully convinced of the need for adequate defence preparations, but I cannot support the Government’s defence proposals. If Australia is to become an important unit of the United Nations, we must be prepared to defend ourselves. We must also develop the country. Certain developmental projects have been planned, and should be completed. What is the attitude of the Government towards dollar expenditure? Is it establishing reserves of petrol for use should war break out? Is it taking measures to ensure that transport arrangements will not break down? Obviously, nothing is being done. Wealthy people are allowed to drive around the country burning up petrol that should be stored for use in the event of war. This Government had excellent prospects when it assumed office. The economy of the country was sound. The Government won its way to office by making promises, but it has done nothing to honour those promises. Senator Wright seems to attach very little importance to that fact. Against the charge of breaking election promises, he defends the Government in the same nonchalant way in which he would defend a man in a Tasmanian law court on a charge of failing to honour promissory notes. However, the honorable senator will not succeed in obtaining an acquittal for the Government on the charges that have been laid against it.

The Government cannot afford to allow the situation to drift. As Senator Byrne pointed out, the cost of living is still rising, and there are bound to be further increases of the basic wage. How great must the increase be before the Government will act? It is now obvious that the budget will not produce the economic effects which the Government claimed for it. Its only effect will be to make the position worse for those on small incomes, and for them the position is already bad enough. However, time passes quickly, and I am sure it will not be long before we shall, be able to convince the people that the Government has failed, and should be removed from office. Australia is a great country, and the people, if properly led, will work and make sacrifices for it.

Senator ARMSTRONG:
New South Wales

– The outstanding feature of this bill is that it cuts right across some of the most solemn promises made by the leaders of the present Government during the 1949 election campaign, and repeated during the campaign this year. Government supporters have risen one after another and tried to justify the Government’s action in breaking a whole series of election promises. I wonder what, is in their minds. They cannot, of course, deny that their leaders made certain promises, aud’ those promises seem to have been broken deliberately. In a democracy, the people should be able to trust the government. If a party makes promises, it should, if it becomes the government, do everything that it can to honour them. Democracy is under assault all over the world, and if the people begin to lose confidence in democratic government, those who are opposed to that form of government will have won a notable victory. The record of this Government during the last two years has caused more injury to the democratic principle in Australia than anything that was done during the previous twenty years. It is now clear that Government leaders never meant to fulfil the promises that they made during the election campaign. The leader of the Labour Government, Joseph Benedict Chifley, had done a wonderful job, and the first thing his enemies had to do was to destroy his reputation and then, by making promises to the people, induce them to vote for the anti-Labour parties. Therefore, the leaders of those parties promised that they would, if they came to power, eliminate controls, reduce taxation, and restore free enterprise, but none of those promises has been kept. We are now dis.cusing a piece of legislation which represents a glaring failure on the part of the Government to honour its promises.

The Treasurer (Sir Arthur Fadden) brought down a strangulation budget, the full effects of which have not yet been felt by the community, and have not been realized by the Government. Some of the effects, however, have already been felt in the capital cities. In Sydney and Melbourne there have been large-scale dismissals of workers. So far, only a few industries have been affected, but the movement has begun, and where will it stop? This is a problem for the entrepreneurs. In normal times high wages are added to production costs and passed on to the consumer, and employees are retained irrespective of how high wages may go. Those conditions do not prevail in industry to-day. The problem that faces manufacturers and industrialists to-day is not only to manufacture commodities but also to sell them. Our circumstances have changed so greatly in the last few years that I do not think any economist could give us a clear picture of all the factors that now affect our economy. Six months ago I should have said that our economic problems were fairly straight-forward. Most businessmen and industrialists then knew where they were going and how they were going; now, primarily because of the impact of this budget, the confidence of the business community in the National Government has disappeared. It seems not unlikely that the next quarterly adjustment of the basic wage will result in an increase of at least £1 a week. When the impact of that increase is felt in industry the community will be staggered by the result. Industry will pass on the added cost if it can do so, but small manufacturers will not be able to meet the higher wages costs and will be forced out of business. I do not think that the Government realizes the severity of the measures which it is taking in its so-called attempt to halt inflation. A company earning a profit of £5,000 a year will in future pay in income tax 9s. instead of 5s. in the £1, or an increase of 80 per cent. I wonder whether the Government realizes the possible effects of such an increase. What will be the future of a company of that kind that has to meet ever-increasing wages costs and, in addition, an 80 per cent, increase of income tax? As a first step it will reduce its staff as the easiest means of reducing production costs. The dismissal of staff having begun, it will spread rapidly, and wholesale dismissals will quickly follow. I do not know whether the Government will be able to stop that down-hill rush to a depression as easily as its advisers seem to think it will be able to do so. The headlong down-hill rush to unemployment and depression will be even more rapid than has been the upward surge of inflation. Indeed, the pool of unemployment, about which we have heard so much, may not be so far away as some people appear to think it is. Already, there is a tendency for industrialists to displace labour. At present displaced labour is rapidly being re-absorbed in other industries, but how long will that re-absorption continue when the crushing burdens of increased taxation are felt by individuals and companies? A company earning a profit of £20,000, and distributing onehalf of its profits in dividends, will have to pay this year increased income tax equivalent to 45 per cent. What company can carry such a burden without severe internal reorganization ?

I am very concerned about the developments that are taking place in the economic sphere and the- fact that we appear to be rapidly moving down hill. Something must be done to arrest that movement. High taxes and severe restrictions on capital issues are forcing even very large and influential companies to postpone the payment of their normal monthly accounts. Whether the Government is aware of that fact, I do not know. In the great capital cities the commitments of large companies are not being met on the due date. Essential purchases of plant, equipment and other machinery have been postponed because of the restrictions imposed by the Capital Issues Board on the issue of new capital. Sufficient money is not available to many of our industrial concerns for normal expansion purposes, and, as a result, their position is desperate. Unless steps are taken to free credit at this stage many industrial concerns, both large and small, but particularly small concerns, will face bankruptcy in the immediate future. That such a state of affairs exists cannot be denied by any one who has made a study of the conditions that now prevail in industry. It exists in every State of the Commonwealth and it is particularly noticeable in the major capital cities. When firms and companies whose financial reputation for soundness is beyond compare, and whose assets are valued at millions of pounds, deliberately delay the payment of their accounts, it is apparent that the Government is falling down on its job. The banks have carried our business firms so far but will carry them no further. More capital is needed for business expansion, but because their applications to the Capital Issues Board are refused many industries are facing Strangulation. The position has become very serious indeed. Once industries begin to go to the wall the swing will be so rapid that we shall be in serious difficulties before many months have passed. The impact of this budget on the business community has brought about these dire results. No positive attempt has been made by the Government to halt inflation and thus stabilize the basic wage at its present or a lower level. The Government has made a negative approach to this problem. Our only chance of salvation is to increase production, both primary and secondary, and to offer some encouragement to those who are in a position to bring about increased production. That is the first battle against inflation that the Government should wage. Within the next six or twelve months the Government will be forced to control profits and prices as a means of stabilizing the basic wage. Only by the adoption of such a policy will we have any real chance of increasing production. When the non-Labour parties were in Opposition they constantly repeated the charge that incentive to produce was being destroyed by the high taxation imposed by the Chifley Government. They claimed that industry could not carry the burdens that that Government had imposed upon it. I venture to say that industry would be very happy to-day if it could return to the conditions that operated in 1949 under the treasurership of the late Mr. Chifley and if the controls that were then in operation were re-instituted. Although this Government was pledged to reduce taxation, it has increased them and in addition, it has multiplied controls.

This budget was deliberately manipulated so that the Government would be able to claim that a vast amount of money is needed for defence purposes. When we are discussing the Appropriation Bill later we shall point to the many items that now appear under the defence votes but which were formerly included in the votes of other than the service departments.

Every effort should be made by the Government to restore the value of the £1. It can count on the support of the Opposition for any measures that are designed to achieve that end. The effect of this legislation and of subsequent legislation that we shall be asked to consider, and which also arises out of the budget, will be to make the shilling buy less in future than it will buy to-day. Does the Government think that by causing the prices of milk, bread and other necessary commodities to rise, and by imposing vicious sales tax increases on the fundamental requirements of the people, it will defeat inflation and put value back into the £11 Our economic position has become involved and efforts should be made to straighten it out before it gets completely’ beyond control. An indication of how the confidence of the people has diminished in the last few months is provided by the fact that a block of land which was worth £500 three months ago will not bring more than £300 to-day. That is the normal course of deflation. In a period of deflation money becomes of greater value and will buy greater quantities of goods and commodities if they are available. To-day money is plentiful but goods and commodities are scarce. People who have assets to sell, such as land or property, receive less f or it than they would have received six months ago, but the money that they receive will not buy what it would have bought three or four months ago because the purchasing value of the £1» is’ diminishing. Our money is becoming cheaper instead of dearer. I have taken the opportunity to discuss these matters during the consideration of this bill because I am very concerned about the position that has developed, particularly about the plight of industrialists, manufacturers and workers generally. Unless steps are taken to halt inflation, the basic wage may well be increased to £15 a week within the next eighteen months. If it is the intention of the Government, as it appears to be, to establish a pool of unemployment, of which we have heard so much, as a pre-requisite to the restoration of the value of the £1, why does it not honestly say so? Let it be honest and state its intentions frankly. Unless appropriate remedial action is taken a pool of unemployment will undoubtedly be established within the next few months.

When this Government assumed office, knowing the personalities of the members of the new Cabinet, except that of the Minister for National Development (Senator Spooner), who, for all I knew may have been a “Phar Lap “ or merely a pacer, I had little confidence in its ability to honour its promise to put value back into the £1.

Senator Wright:

Senator Wright interjecting,

Senator ARMSTRONG:

-.- The honorable senator was another unknown quantity. I thank him for his interjection because, as on other occasions when he has interjected, he has helped me. Knowing the brain-power of most of the members of the new Cabinet, I had little hope that its members would take positive steps to restore the economy of Australia to an even keel. I was almost certain that we would be . faced with the situation that has now developed, but I little thought that the Government, by its incompetency, could bring about such a drastic change in our economic position within two short years. Although I was pessimistic I then thought that the decline would be spread over a longer period. It is amazing what irresponsibility, sheer incapacity and lack of courage can achieve in the community in such a short period. My final thought is that I wish I had the power of an Argus or a Franquin, so that I might be able to see behind the smiling faces of the members of the Government and read what is in their minds as they seek to justify their failure to honour their promises.

Senator Robertson:

– The honorable senator is a super pessimist.

Senator SHEEHAN:
Victoria

– Apparently honorable senators opposite are no longer able or willing .to defend this legislation. One would imagine that, if Government supporters were really wholeheartedly in favour of the proposals that we are now considering, they would have no hesitation in springing to the defence of the Administration, but apparently they are most reluctant to do so. I believe that Senator O’Flaherty’s amendment should be carried in order that this bill may be’ reconsidered by the Government. Since the measure was introduced in the House of Representatives, continuous criticism has been levelled at it, not only by the Labour party but also by responsible individuals outside the Parliament. Obviously, many business men are apprehensive of the future. For evidence of that, one has only l,o read the daily newspapers. Reporting yesterday’s transactions on cbe Sydney Stock Exchange, the Sydney Morning Herald states that there was a wholesale decline of the price of shares. Apparently many investors, who only a short time ago had great confidence in Australia’s economic stability, are now rushing to dispose of their share-holdings. They are alarmed by the prospects for the future, and are trying to- cut their losses. That is occurring in all the capital cities, and it is due largely to the Government’s budget proposals, particularly those relating to taxation. In recent months, the Government has failed to induce th» investing public to subscribe to Commonwealth loans. That clearly shows lack of confidence on the part of Australians in this Government’s ability to maintain financial stability. The Treasurer (Sir Arthur Fadden) himself has said that future loans will meet a similar fate in spite of increased interest rates. It is clear that many people who, in the past, have been sufficiently confident of Australia’s future to invest in Commonwealth loans have now lost a considerable proportion of their capital. At one time, prospective subscribers were told that they could invest in government securities in the full knowledge that bonds could be sold on the market at their face value at any time. There is no such assurance to-day. Investors are finding that they ure losing their capital.

Senator Guy:

– They have not lost their capital. It is still there.

Senator SHEEHAN:

– They have lost it if they want to use it. The Government has virtually repudiated its debts and that seems to me to be a strange way indeed to curb inflation. In fact, it is a dishonest way. We have been told by the Minister for National Development (Senator Spooner), who represents the Treasurer in this chamber, that this bill is an anti-inflationary measure. The theory apparently is that if the Government takes money from individuals and from companies, inflation will be reduced. I should like honorable senators opposite to explain just how the taxes proposed in this measure will reduce inflation. For years, the parrot cry of members of the present Government parties was that increased production was necessary to curb inflation. The most juvenile student of economics knows that, when there is a super-abundance of spending power in the hands of the people and a scarcity of consumer goods, inflation must result. Accepting as an economic truth the claim that lack of production is a major factor in inflation, what will the Government’s taxation proposals do to stimulate production ? What incentive will the worker have to work harder? Prior to the 1949 elections, honorable senators opposite claimed that workmen were reluctant to work overtime because of the punitive income tax. Some even went so far as to urge that overtime earnings be exempted from income tax. Apparently honorable senators opposite believed that by advocating such a proposal, mamworkers could be induced to change their political beliefs and vote against Labour. In fact, it was claimed subsequently that an anti-Labour government was elected in 1949 because of the support given to it by workers who believed the Prime Minister’s story about the need to reduce taxes. To put the taxation picture in its proper perspective, we must go back to 1949 because, by that time, the Labour

Government had reduced income tax rates in five successive years. In spite of those reductions, and in spite of the then Government’s commitments to the community during the transition from war to peace, members of the Liberal party and the Australian Country party were loud in their condemnation of Labour’s alleged failure to reduce taxes sufficiently. The joint manifesto of the Liberal party and the Australian Country party claimed that only the pressure of public opinion had, forced the Chifley Government to reduce taxes at all. The people of Australia were told that a further reduction of taxes would stimulate production. The primary producers were told that the Labour Government was taking too much money away from them in taxes. That propaganda taught the primary producers of Australia some bad habits. I have no doubt that some of them would like to return to the old days when they did not have to pay any income tax at all, but I remind them that, in those days, every square foot of land that could be used was kept in production. Unfortunately, many primary producers listened, to spokesmen for the anti-Labour parties, who asked, “ Why should you work hard and pay so much of your earnings to Chifley?”. Now they find as Treasurer of the Commonwealth an honorable gentleman who is far more avaricious than any Labour Treasurer in our history knew how to be. In spite of defence demands, no Labour government ever budgeted for such colossal expenditure as this Government now envisages, or for such a huge surplus as this budget seeks. Let us suppose that the dreadful calamity of war which seems to be so near were to fall upon us, and that we were called upon to play our part, as we have done in previous conflicts. How could this Government raise the money that would be necessary in the event of such a calamity occurring? The Government has divested the workers, the captains of industry, and the primary producers of all incentive to increase production in order to be able to deal with such an emergency. What encouragement is the Government giving to our primary producers to heed the appeal that has been made by the new Government in Great Britain? There is no gainsaying the fact that the newspapers are giving greater prominence to the problems of Great Britain since the change of government in that country. The captions on newspaper articles in that connexion are now much more prominent than they were during the regime of the Attlee Government in Great Britain. Mr. Churchill has made an appeal to Australia to increase its production of food. However, this Government’s taxation proposals will discourage our primary producers to increase production.

I congratulate Senator Maher for having had the courage of his convictions. He explained clearly and fairly to the Senate the position that is developing in relation to our primary industries. Some supporters of the Government have asked why the Labour party is taking an interest in the primary producers, and why it has pleaded the case of the wool-growers. It is true that many woolgrowers have never supported the Labour party, and are unlikely to do so in the future. But the Australian Labour party is keenly interested in the welfare of many ex-servicemen who have settled on the land under the re-establishment scheme. Many of them have had to buy their sheep at high prices, but they considered that those prices were justifiedin the light of prospective returns.. During the war period many graziers were unable to maintain their properties adequately because of shortages of materials. When the price of wool rose they hoped that from the increased returns they would be able to develop theirholdings on a more reproductive basis. Doubtless many of them considered that it would be to their advantage if they could get rid of the Labour Government that was then in office, and the controls that were operating. Spokesmen for the political parties opposed to Labour told them that many of the disabilities from which they were suffering were due to Labour’s administration. To-day, however, they realize that they were better off under a Labour government, and that they should not have bitten the hand that had fed them. They now realize that people that they thought were their friends were in fact their enemies. They now have no confidence in the Govern- ment that they elected to replace the former Labour Government.

Although the Government has made specious pleas to the workers to increase production, taxation is being increased. It is true that the workers are receiving higher wages and salaries than they were formerly, but since this Government has been in office the purchasing power of money has declined. The basic wage has been increased to more than £10 a week. If the purchasing power of money was approximately equal to what it was before the war, the Government’s proposal to increase taxation would be justified. But the workers are being caught both ways. Increased wages have placed them in higher taxation groups, and they are therefore liable to pay additional taxes. At the same time the purchasing power of their wages has decreased considerably. Instead of being able to face the future with confidence, the workers are becoming very discontented.

It is axiomatic that taxation should be levied on the sections of the community that are best able to pay. Senator Armstrong very lucidly reviewed the incidence of company taxation. T believe that, in the past, by the employment of skilled accountants, many public companies have concealed the true extent of their profits, and thereby evaded tax. By their unwillingness to reduce their profit rates, in order to absorb increases of wages granted by the Commonwealth Court of Conciliation and Arbitration, many public companies have contributed to the inflation that exists to-day. Maintenance of high profit rates has been responsible for the terrific increase of the cost of living. As honorable senators are aware, after many months of consideration the court decided that industry could bear the additional burdens of a reduction of working hours to 40 hours a week, and an increase of the basic wage by £1 a week. When the Government parties were in opposition, and the former Labour Government sought by referendum to obtain from the people power to continue to control prices, their spokesmen advised the people to vote against the proposal. The opponents of Labour realized at the time that it was constitutionally impossible for the Parliament to deal effectively with the inflationary trend, yet they persuaded the people to reject Labour’s proposal. At that time, any one who had any imagination, and who had paid any attention to the great problems of government and the difficulties that had preceded the last boom period, would have known that, as surely as night follows day, there would be an inflationary period, and that, because of the short-sightedness of the founding fathers, the Commonwealth was not clothed with sufficient power to enable it to deal with the problem. The disastrous conditions that exist to-day are directly attributable to the defeat of the referendum. If it were possible for the Commonwealth to control prices effectively and to limit company profits so that the increased costs that I have mentioned could be absorbed by industry, perhaps the Government’s proposal to draw off surplus wealth would be justified. Unfortunately, however, the Government is not dealing with the monopolies. In effect, it is killing their competitors. In the event of an emergency arising, both the people and the Government will have to beg of the monopolies to come to the assistance of the country. Therefore the Government’s proposal in relation to taxation is a fraud, a sham, and a delusion. The debates that have taken place both in this chamber and in another place since the budget was brought down have revealed to the people what is afoot. They have caused the reaction on the stock exchanges, to which I have already referred. Lack of confidence stalks the land. If the people were confident of the ability of the Government to handle the situation they would buckle in and help Australia to surmount the present crisis. But the spokesmen of the Government parties are doing nothing to arrest the fears of the people.

Senator Wright:

– The honorable senator is doing all that he can to generate those fears.

Senator SHEEHAN:

– On the contrary, I am doing all that I can for the people of this country. I am convinced that, in view of the false promises that were made to the people by the Government parties during the general election campaign, at the first opportunity the people will return Labour to office. That is the position, and the people must be made aware of it. During my experience as a member of the Senate, I have never seen more crestfallen supporters of a government than those who have been facing me since this debate began. Honorable senators opposite know in their own hearts that the proposals will be fatal to the economy of this country. I do not know what they have done at their own party meetings. I have read press reports to the effect that they are very concerned about their political future and are apprehensive that the actions of the Government will result in their defeat at the polls within two or three years. Such apprehension is only natural on the part of men and women who have been elected to a chamber such as the Senate. Honorable senators do not represent safe Labour party, Liberal party or Australian Country party constituencies. The swinging vote has a great effect upon the representation of a State in the Senate. As I have said, I understand why honorable senators opposite are apprehensive about what may happen in two or three years’ time. I suggest to them that, in the councils of their party, they stand up for this country.

I .do not know whose brain conceived the Government’s economic proposals. We have been told that they have emanated from various people. I do not know whether that is so or not. I have not been able to discover the name of the bright individual who is responsible for the measures that the Government is putting into operation in its attempt to combat inflation. I know that honorable senators opposite will vote blindly against the amendment that has been moved and will accept this bill, even though they disagree with what is contained in it. Let me remind them that the day of reckoning is coming. I hope that, in the councils of their parties, they will attempt to persuade the Government to take steps to prevent Australia from slipping into the position into which not only the members of the Labour party but also many supporters of the Government parties believe it will slip.

Senator SPOONER:
Minister for National Development · New South Wales · LP

– The purposes of this bill are to increase the income tax payable by individuals by 10 per cent., to increase the rate of tax imposed upon public and private companies by 2s. in the £1, to require public companies to pay 10 per cent, of their annual tax liability in advance, and to exclude from the averaging system primary producers whose annual taxable income exceeds £4,000. That may appear to some honorable senators to be a strange way in which to begin a speech in reply to this debate, but it does not appear strange to me because I have had to listen to the remarks that honorable senators opposite have made. I have reminded the Senate of the purposes of the measure because it is fair to say that very few members of the Opposition have referred to the measure or to its purposes. Instead of debating the issue before the Senate, they have, by and large, ranted and raved as if they were speaking in the Domain or on tho Yarra Bank. They have done scant justice to their positions as members of the Senate. I do not include all honorable senators opposite in those remarks.

I ask Senator Sheehan to say what bearing his remarks had upon the measure. The speech that he delivered in this debate might well have been delivered when the Estimates and Budget Papers were under consideration. It had no relevance to the measure. Although I am a comparative newcomer to the Senate, I say with respect that if we conduct our debates upon the basis that we should indulge merely in political excursions, we shall not increase or even maintain the prestige of the Senate. Hardly a word of the speech delivered by Senator Courtice was relevant to the bill. I have a great respect for him, but T think that as the months go by he feels more keenly his position as a member of the Opposition. He has not that suave control of himself that he had a few months ago. It is a bad thing when honorable senators do not attempt to debate a measure that is under consideration and regard it only as affording an opportunity for a ding-dong political argument.

The amendment that has been moved by the Opposition proposes the omission from the measure of the clauses relating to a 10 per cent, increase of income tax and to the exclusion of some primary producers from the averaging system. Perhaps I have interpreted the amendment incorrectly, but I believe it to mean that the Opposition approves of the proposed increases of the rates of company tax and of prepayment of tax by companies. As I read the amendment, all that the Opposition disagrees with are the proposals to increase income tax by 10 per cent, and to exclude some persons from the averaging system. I have risen mainly to state formally that the Government will not accept the amendment. Had it not been that 1 wished to reply to some statements, that is all that I should have done, because I believe it can be said fairly that honorable members opposite have not criticized these proposals. I do not suggest that they like them or that they will support them, but either they were singularly incoherent and could not advance arguments against our proposals, or they did not care to do- so*. ‘

Senator Courtice:

– What does lue Minister say is the effect of the proposals ?

Senator SPOONER:

– I explained the effect of the proposals in the speeches that I delivered upon the Estimates and Budget, Papers. That was the appropriate time at which to explain the proposals and to reply to criticism of them. They form a part of a general financial scheme. I do not pretend to be an expert upon these matters, but I think that the debate upon this measure should have been directed to the effect of these provisions upon particular companies an’d particular individuals. ‘ 1 want to reply to the series of statements that have been made by honorable senators opposite to the effect that the Government parties gained power as a result of fraud and misrepresentation. Statements of that kind reflect no credit upon the Opposition. They can be described as Domain and Yarra bank tactics. I do not believe that respectable and responsible people in Australia, who comprise 99.9 per cent, of our population, will be taken in by spurious and larrikin-like statements. It has been said that we have run away from our promises . in . regard to taxation. . I have in my hand a copy of the policy speech upon which we were elected. There is nothing in that speech that can be construed as a promise to reduce taxes. There is not one word in it about taxation. It is the speech that was delivered to the public, and the speech upon which the Government parties were elected. Attached to the speech are supplementary statements. I shall not attempt to walk away from those statements, but I say that there is a great deal of difference between a policy speech and supplements i-y statements made afterwards. It is most dishonorable to say that a supplementary statement made after a policy speech ranks as high as does the speech itself. What we said about taxation during the 194.9 election campaign is contained in five paragraphs, the main one of which reads as follows: -

W’o still believe that rates of tax must bc steadily reduced as national production and income rise, and as economies an; effected in administration.

That was a temperate statement. If anybody says that we were returned on that part of our policy speech, he is talking with his tongue in his cheek. Any fair minded person must admit that taxation played a very minor part in the general election campaign of 1949. We said that we would overhaul the taxation laws and do other things. I believe that, by and large, having regard to the difference between the circumstances that existed then and those that prevail now, we have done what we promised to do. In our first budget, we liberalized taxation concessions at a cost to the revenue of approximately £15,000,000 a year. I do not say that we have done all that we hoped to do. Do not let anybody imagine that I do not still believe that taxation should be reduced as soon as national circumstances permit. It is rank nonsense to talk in November, 1951, in the same way as in 1949. Since 1949, the war in Korea has broken out. There is a world-wide inflationary movement. We must prepare for war. All that I wish to say upon that matter is that if the Opposition thinks that it will persuade the Australian people to believe that if it were in power it would be more lenient regarding taxation than this Government has been, it must have the courage of a lion.

Senator Sheehan:

– We did not deceive the people. ;

Senator SPOONER:

– When the joint policy speech is examined it will be seen that no attempt was made to deceive the people. The only deceit involved is on the part of honorable senators opposite when they try to establish that the Government parties promised something which in fact they did not promise. I have not heard the statement contradicted in this chamber that no country in the world, with the exception of the United States of America, enjoys a higher living standard than that which exists in Australia.

The only other point that I wish to make is that never, throughout the debate, has the schedule that has been circulated to honorable senators been challenged. That schedule shows how fortunate the people of Australia are in relation to tax liability when compared with their kinsmen in New Zealand and Great Britain. The Opposition does a sad disservice to the Australian nation when it tries to prove that Australians are treated badly in that connexion. We are not a nation of “pikers”. We take what is coming and we do what must be done. That is the atmosphere and the spirit in which this Government presents the budget to the people. The members of the Opposition delude themselves when they say, as Senator Courtice said, that this budget is unpopular throughout Australia. There was an initial reaction against it. The fact that the Parliamentary proceedings are broadcast is a good thing in that the people of Australia now listen to the debates. They have been able to hear the “ piking “ of the Opposition in its cheap and nasty attempts to make political capital of the problems which confront the nation. The people have made their own assessment of the insincerity of the Opposition. They know that, with few exceptions, the arguments that have; been advanced by honorable senators opposite have been directed towards the attainment of power and have not been made because of any desire to help the nation. The recent debates in the Senate have established in the minds of the Australian people the fact that whatever may be the shortcomings of the Government, it has acted honestly and sincerely in presenting its budget proposals. Because ithas done so, it has earned the respect of the people. Indeed, it has earned much more respect than I thought possible, having regard to the severity of the proposals contained in the budget. The Australian people are sensible and intelligent. They are also sportsmen. The Opposition will gain nothing politically by attacking the Government in an unfair manner.

Question put -

That the words proposed to be left out (Senator O’Flaherty’s amendment) be left out.

The Senate divided. (The President - Senator the Hon. Edward Mattner.)

AYES: 20

NOES: 29

Majority . . . . 9

AYES

NOES

Question so resolved in the negative.

Amendment negatived.

Question put -

That thebill be now read a second time.

The Senate divided. (The President - Senator the Hon. Edward Mattner.)

AYES: 29

NOES: 21

Majority . . . . 8

AYES

NOES

Question so resolved in the affirmative.

Bill read a second time.

In committee:

Clauses 1 to 4 agreed to.

Clause 5 (Imposition of Income Tax and Social Services Contribution).

Senator MAHER:
Queensland

– I ask the Minister to consider the position of those primary producers whose provisional tax payable in 1951-52 will exceed their tax assessment for 1950-51. That is a pertinent question, because many graziers in my State will find themselves in that position. I quote the following from the Brisbane Courier Mail of the 31st November last -

“STAGGERING” TAX FOR QUEENSLAND GRAZIER.

A Queensland grazier, who earned £28,000 in 1950-51will receive a staggering taxation assessment of £40,000.

The assessment will he for income tax on that year, and provisional tax for the current year.

This case was cited yesterday by the United Graziers’ Association president (Mr. W. A. Gunn) in commenting on the Commonwealth’s decision to modify averaging provisions retrospectively to the income year ended June 30th, 1951.

Mr. Gunn said the grazier would have to “ foot the bill “ from current income. It would be impossible to meet the assessment if there was a sudden fall in wool values.

Coming on top of last year’s high wool prices, modification of the averaging system would, in most cases, mean that primary producers affected would have to pay more than 20s. in the £1 and, in many cases, higher than 25s. “ Trading banks have been instructed not to advance money against taxation commitments, unless on substantial grounds “, Mr. Gunn said. “ It is a taxation burden which must restrict production and development “.

Provisional tax is a debt due to the Crown, and may be sued for and re* covered through the courts. The taxpayer may apply for an extension of time in which to pay, but if his application is to be successful he must show that, owing to’ a definite change in the circumstances during the current year, his income is bound to be greatly reduced. I am certain that there will be an avalanche of applications from taxpayers who will be seriously embarrassed by the application of this new provision. They will all be seeking an extension of time in which to pay their provisional tax. “ There is no guarantee that the Commissioner will grant an extension of time, but even if he does, it will merely put off the evil day, and the taxpayer will still have to find the money. The grazier whose case has been mentioned had an income of £28,000 in 1950-51, whereas his tax assessment for 1951-52 will amount to £40,000, which includes provisional tax, plus an impost of 10 per cent. Unfortunately, the miracles of the loaves and the fishes cannot be repeated in the sinful world of finance, in which the grazier is expected to stretch an income of £28,000 to cover a debt of £40,000 owing to the Taxation Branch alone. Just to make things harder, his income will be reduced by 50 per cent, compared with the previous year because of the decline of wool prices, whilst all costs associated with the pastoral industry, including wages, prices, and the cost of services, have increased heavily. Even if we add the whole of last year’s income amounting to £28,000 to his estimated income of £14,000 for this year - the decline being due to the reduced price of wool - and then subtract the cost of running the property during both years, the total income available to him will still be short of the £40,000 owing to the Taxation Branch. Under the credit restrictions, the. trading banks have been instructed not to advance money against tax assessments except upon very good grounds.

Senator Critchley:

– Who issued the instructions ?

Senator MAHER:

– I do not know, but I understand that that is the position. If the grazier has not the money to pay his tax, and the banks will not lend it to him, what is his alternative? He will have to sell some of his stock in order to raise the money, and if graziers are compelled to do that we cannot hope for increased production of wool, beef and mutton. Are these graziers to be crucified because of credit restrictions which prevent them from borrowing money with which to pay their taxes? It is not much help to the men concerned to tell them that although they must pay the tax this year, there will be a rebate in some future year. The problem confronting them is to get the money with which to pay the tax now.

Senator GORTON:
Victoria

.- I cannot supply the answer to the questions posed by Senator Maher, but there are some other aspects of this matter to which attention should be drawn. One of them is that the situation in which some of the graziers may find themselves is common to others besides primary producers. It applies to business men and professional men who, because of a big rise in income, followed by a considerable decline, are committed to pay in tax on last year’s income, and in provisional tax an amount which approaches the total income they have made, and that has nothing to do with the averaging system or its modification.

Another statement with which I disagree was that if a grazier or wool-grower had to borrow money in order to meet his tax commitment he would merely postpone the evil day of settlement. The refund of provisional tax paid by a woolgrower in a large wool income year will be sufficient to enable him to pay his following year’s tax in advance. This is a problem of short duration with which I should like the Minister to deal when he replies.

Senator WRIGHT:
Tasmania

– As the speeches that have just been made have focussed attention upon a most anomalous situation, I desire to make a brief statement before the Minister replies. The evil to which attention has been directed arises not in the slightest degree out of the averaging adjustment but out of the system that was foisted upon the people of Australia at the height of the war emergency, ft provides for the levying of provisional tax in anticipation of the following year’s income in addition to the tax levied in respect of the current year’s income on businesses, including both primary and secondary industries, on the principle of pay-as-you-earn. I should not urge the abolition of that system this year because it would, I believe, constitute a very dangerous situation at a time when the efforts of all public agencies should be directed to the stemming of inflation. I rise to direct the attention of the Minister, and through him, of the Government, to the need for serious consideration to be given at the appropriate time to a reversion to the simple payment of one tax in one year of income because, when provisional tax is added to current tax in years of rising income, the tax is doubled on every occasion on which there is an increment of income. I believe that that system constitutes a great deterrent to those persons whose stimulation to produce is provided by the thought that they will benefit from increased production.

Senator SPOONER:
Minister for National Development · New South Wales · LP

– To deal adequately with th.; point raised by Senator Wright would be too great a task to essay during the committee stage of the bill. Like him, I view with some dismay the payment of provisional tax for the net advantage that my heirs, executors and assigns will not have to meet my tax commitments in the event of my leaving this world. I shall be quite happy to pass that responsibility to them so that life may be a little happier for me while L remain here.

Senator Maher launched a fullscale attack on the averaging provisions. The honorable senator owed it to the chamber to state the position fairly and accurately - to state his case in moderate terms and not to indulge in political clap trap.

Senator Grant:

– If the Minister does not believe in political clap trap he should sit down and not insult other honorable senators.

Senator SPOONER:

– I do not accept the situation that a taxpayer who has an income of ?2S,000 in a year - -

Senator Maher:

– In a lucky year; perhaps one in 100 years.

Senator SPOONER:

– It may be a lucky year. If anybody wants to wish me bad luck they may wish me an income of ?28,000 a year. It is nonsense for Senator Maher to make the extravagant statement that a person who is fortunate enough to earn an income of ?28,000 a year is in danger of being crucified by the banks. Extravagant statements of that kind do not help his case. As the position of such a taxpayer has attracted a good deal of notice the taxation officers have given some consideration to the claims that have been made. If the effect? of taxation on primary producers are to be viewed in true perspective, it is necessary to examine the amount of tax payable on the incomes they derived in the four years preceding 1.950-51, and the tax payable on the income of that year. Let u3 consider the case that has been cited - that of a grazier who earned ?28,000 in 1950-51. Such a grazier will receive an assessment of ?40,000 for 1950-51. If his income in the preceding four years followed the general trend of the incomes of graziers throughout the Commonwealth, he would have received in income approximately ?2,800 in 1946-47, ?5,600 in 1947-48, ?7,000 in 1948-49, and ?21,200 in 1949-50. It is completely false to talk about an income of ?2S,000 without looking at the background of other years. Owing to the application of the averaging provisions he would have paid on the incomes of those four years a total tax of ?11,216. On the same total income a taxpayer not engaged in primary production would have paid £14,7S7. The tax saving to the grazier as the result of averaging would thus have been £3,571. My heart does not bleed over the plight of such a grazier. Provisional tax on the 1949-50 income and payable for the 1950-51 year would have been £4,99S. That amount would be quite inadequate to meet the commitment of £19,122 payable in respect of the income of that year. Such a grazier would have had the added advantage of the use of that money for twelve months or more.

A consideration of this subject would not be complete without an examination of the cash position. Over the five years, from 1946-47 to 1950-51, the grazier would have derived an aggregate taxable income of £54,600, and would have been called upon to pay £30,338, leaving a residue over the five years of £24,262. Having regard to the system under which graziers are taxed, it is futile and misleading to argue that assessed tax and provisional tax based on the 1950-51 income would amount to more than 20s. in the £1. It has also been asserted that the provisional tax for the current year may be excessive as the income of such a grazier this year may be smaller than that of last year. The levels of the 1951-52 incomes are unpredictable at present, except in special cases where losses have already occurred owing to an adverse season or other causes. It cannot be established at this stage tha), the provisional tax based on the 1950-51 income will be more than sufficient to meet the tax on the income of the current year 1951-52. “Where it is clear that the provisional tax assessed exceeds the tax which is estimated to be payable by a taxpayer in respect of the income of that year, and the taxpayer can establish thai his financial circumstances are such that insistence upon payment would place an unfair burden on him, an application may be made by him for an extension of time for the payment for the excess provisional tax. Such applications are considered on their merits and if a case oan be established by the taxpayer, payment of excess provisional tax is deferred until his return of income for that year has been assessed. The provisional tax paid by the taxpayer’ is then offset against the tax actually payable on his income and any. .difference is adjusted between the taxpayer and the Taxation Branch. That statement sets out the position clearly and sufficiently replies to Senator Maher’s criticism of the Government’s proposal. I do not think that it is fair for the honorable senator to talk about taxpayers being crucified for the payment of income tax. The Taxation Branch is not easy to deal with when one owe3 money to it, but it does not make harsh and oppressive demands. If the taxpayer can satisfy the taxation officers that there are variations from the normal, he is always given just treatment.

Senator McKENNA:
TasmaniaLeader of the Opposition

– I understand that in the instance quoted by the Minister, he said that the provisional tax assessed on the 1949-50 income of the mythical taxpayer with whom we have been dealing would amount to £4,998, and that that would be inadequate to meet the tax assessment of £19,122 levied on his 1950-51 income. Does the £19,122 include provisional tax for 195.1.-52, or is it merely the tax assessed on 1951 income?

Senator Spooner:

– It is the tax on the 1950-51 income only.

Senator McKENNA:
TASMANIA · ALP

– If that amount represents the tax assessed for 1950-5] on £28,000 alone it is likely that the provisional tax assessed for 1951-52 would be approximately an equivalent amount. If that is so, the taxpayer would be involved in the payment of £38,000 in that one year. I suggest that that bears out the point that was raised by Senator Maher. I question the accuracy of the Minister’s statement that, in claiming that such a taxpayer would in those circumstances be called upon to pay more than the actual income he derived, Senator Maher had made a fantastic and extravagant statement. I put it to the Minister that on the basis of his own figures the tax on an income of £28,000 in 1950-51 would be £19,122 and that the provisional tax assessed would be a relatively equivalent amount, making a total of approximately £38,000, or £10,000 in excess of the taxpayer’s total income for the year. I question the accuracy of the Minister’s statement, if I heard him aright, that nobody could imagine a situation in which the total amount of tax payable by a taxpayer in one year could exceed the amount of his income in that year.

Senator WRIGHT:
Tasmania

– I cannot remain silent when I hear one of those who were responsible for the introduction of this vicious system of taxation criticizing it as the Leader of the Opposition (Senator McKenna) has done to-day. Surely this is a striking instance of “ Old Nick “ rebuking sin. The honorable senator knows quite well that on a taxable income of say £28,000, the tax liability is approximately £19,000. He knows, too, that, under the system which was foisted on the country in the depths of the war by the Chifley Government, a taxpayer who earns £28,000 i3 required immediately to pay provisional tax of £19,000, making a total of £38,000. Had the Leader of the Opposition been frank with the committee, he would have admitted that by the time the taxpayer receives this double assessment, his next year’s wool clip is in his own sheds or perhaps in the sheds of his broker. Therefore, by the time he has to meet his tax liability of £38,000, he has not only his £28,000 from the sale of wool in January, 1951, but also £50,000 or £60,000 gross from the sale of wool in January, 1952. E condemn in the strongest terms, not only the provisional tax system of which the Leader of the Opposition was one of the authors, but also his misrepresentation of its operation.

Senator MeKENNA (TasmaniaLeader of the Opposition) [5.3]. - I am surprised at the amount of heat that has been generated in Senator Wright by my simple question to the Minister for National Development (Senator Spooner). I have merely sought to clear up a misstatement that I consider was made. The failure of the present Government to abolish the provisional tax system suggests that Senator Wright has given his unqualified blessing to it. Honorable senators should remember that wage and salary earners and many business men pay as they earn. The honorable senator’s claim that taxpayers who are subject to the provisional tax scheme receive their assessments late in the year when much of their income has already been received, is not denied. The honor able senator merely set up an Aunt Sally that he himself could knock over. Again I ask the Minister whether he said in his original statement that the position could not arise in which more than one year’s income could be demanded in taxes.

Senator SPOONER:
Minister for National Development · New South Wales · LP

– I am not quite sure whether I. did make the statement to which the Leader of the Opposition (Senator McKenna) has referred. In any case, the problem must be examined in relation to cash outgoings and income tax liabilities. Taking provisional tax into consideration, I do not deny that it is possible for cash outgoings to be greater than income in one year, but the Leader of the Opposition knows that, taking tax liability as a relative figure, it is not possible for income tax to exceed income. The tax liability of £38,000 that the honorable senator mentioned is approximately the figure of £40,000 that I calculated. All the figures that I gave were relevant to the question that the honorable senator asked about the tax liability of £19,122.

Senator MAHER:
Queensland

– I should like to clarify the matter which has been the subject of the amiable interchange of opinion between the Minister for National Development (Senator Spooner) and the Leader of the Opposition (Senator McKenna). In the case that I cited, a grazier would have to find £40,000 on an income of £28,000 in 1950-51. With a drop of 50 per cent, in wool prices - that is not merely a matter of speculation but is a hard fact - his wool clip this year will realize only £14,000. Therefore, the combined incomes of 1950-51 and 1951-52 will be required to meet his assessment of £40,000, representing tax on his 1950-51 income, plus provisional tax for the current year. Whether a wool-grower is wealthy or poor; the basic injustice is the same.

Clause agreed to.

Clauses 6 to 8 agreed to.

Clause 9 (Additional tax and contribution payable by persons other than companies).

Senator MeKENNA (TasmaniaLeader of the Opposition) [5.8]. - The net effect of this clause is, of course, to impose a 10 per cent, special levy on individual taxpayers.. Lest it be thought that the ‘Government made no specific promise to reduce taxes, I propose to refer to exactly what was said in the joint policy speech of the Prime Minister (Mr. Menzies) and the Treasurer (Sir Arthur Fadden), in 1949.

Senator Wright:

– I rise to order; I submit that the- honorable senator’s remarks are not relevant to the clause, but are propaganda of a kind that should not be permitted’ in our committee deliberations; The honorable senator should be required to speak directly and precisely on the clause now under discussion.

The CHAIRMAN:

- (Senator George Rankin). - The point is well taken. The Leader of the Opposition cannot refer to the second-reading debate.

Senator- McKENNA. - I have made no reference whatever to the second-reading debate, nor do I intend to do so. This clause provides for an increase of income tax on individuals, and surely it is relevant for me to show that the Government which is sponsoring this measure, promised to reduce taxes. I should like the Minister for National Development (Senator Spooner) to reconcile certain statements contained in the 1949 policy speech of the then joint Opposition parties with the action contemplated by the Government in this clause. I submit, with great respect, that that matter is completely relevant to the clause.

The CHAIRMAN:

– Yes, so long as the honorable senator does not refer to the second-reading discussion.

Senator McKENNA:

– I do not propose to refer to the second-reading, debate at all. I give the Senate that assurance. I merely propose to point out that this clause imposes additional taxes on individuals in this country although, in the 1949 policy speech of the present Prime Minister - and not in the supplementary statements attached to it - the right honorable gentleman promised to reduce taxes. On page 12 of the policy speech appears the following statement : -

A resolute reduction ill the burdens of government and, with it, in the rates of tax, will mean reduced costs- of production. . . . We will attack all these problems with vigour and imagination.

There is a complete and specific promise to reduce taxes. That promise was re-affirmed specifically in March and April of this year. The present Treasurer and Deputy Prime. Minister said, in 1949-

If the Socialists are defeated, therefore, rates of taxation, both direct arid indirect, can and will be steadily reduced. In short, our policy is a progressive reduction of taxation on individuals and the community in. general, commensurate with national economic and financial policy.

Can the Minister reconcile the action that the Government is now taking with that statement made in November, 1949 ? Is the Deputy Prime Minister’s statement being repudiated? Lest there be any doubt about the Government’s promise to reduce taxes, I refer honorable senators opposite to an advertisement bearing Senator Wright’s photograph that appeared in a Tasmanian newspaper.

Senator Wright:

– I rise to order. I submit that the remarks of the Leader of the Opposition are completely irrelevant to the clause now before the committee, and that arguments of this kind should be vehemently rejected.

Senator McKENNA:

– I regret that my remarks have made the honorable senator himself rather vehement. The advertisement states -

THIS is OUR Policy.

A steady reduction of the rates of taxation. A review of indirect taxation. Increased tax allowances for medical and’ dental purposes.

Does the Minister repudiate the statement appearing on page 12 of the Prime Minister’s 1949 policy speech, the 1949 statement by the Deputy Prime Minister, or the advertisements of which I have given an example? Will he explain why, in the light of this specific promise, the Government now finds it necessary to increase taxes? I invite the Minister to consider particularly the last three lines of the clause. The clause provides -

In the case of a person who is liable to pay income tax and social services contribution . . . there is imposed upon the taxable income, in addition to the tax and contribution so ascertained, income tax and social services contribution at the rate of ten per centum of the income tax and social services contribution which would, but for this section, Iia ve been payable in respect of that taxable income if there hud not been allowed or allowable from that tax and contribution any rebate or credit under any provision of the Assessment Act. 1 have not given great consideration to r.he clause, but the last portion of it leads me to ask the Minister for National Development (Senator Spooner) whether there will be a net increase of the present rates, or whether a gross amount will be determined, to which the 10 per cent, will be applicable. What rebates or credits are in contemplation?

Senator SPOONER:
Minister for National Development · NEW SOUTH WALES · LP

– The main rebate is the rebate of 2s. in the £1 in respect of interest that is received on Commonwealth loans. [ congratulate the Leader of the Opposition (Senator McKenna) on his successful research work. He has found one sentence in the joint policy speech of the Government parties on which to hang something. The joint policy speech of the Government parties, which occupies 25 printed pages of a booklet, contains the sentence -

A resolute reduction in the burdens of government and, with it, in the rates of tax, will mean reduced costs of production.

Does he really believe that that was the plank in our policy speech on which we won the election? The sentence appears under the heading “ Full Employment “. There is no section headed “ Taxation “. All that we had to say about taxation was said following the policy speech, and was more or less a sideline. Does the Leader of the Opposition really think that that particular sentence is significant? As I have pointed out before, having regard to all the changes that have occurred, we have made an honest endeavour to do all that we said we would do. Indeed, we have kept very closely to our promises, taking all circumstances into consideration. The policy speech of the Treasurer (Sir Arthur Fadden) has been mentioned. The right honorable gentleman stated -

If the socialists are defeated, therefore, rates of taxation both direct and indirect can, and will be steadily reduced.

That is where honorable senators opposite usually terminate the quotation. I am guided by a very old principle that my mates are always right. The right honorable gentleman continued -

In short, our policy is a progressive reduction of taxation on individuals and the community in general, commensurate with national, economic, and financial policy.

That is the salient sentence. Could anybody who was dealing with this matter honestly and sincerely leave that qualification out of his consideration? Of course he could not! I cannot answer for the newspaper advertisements, any more than the Leader of the Opposition would be prepared to answer for what Senator Morrow said on the platform in Hobart, and what Senator O’Flaherty said on the platform in Adelaide. Many things are said during a campaign, but it is the policy speech, which is similar to a second-reading speech, that counts.

Senator MeKENNA (TasmaniaLeader of the Opposition) [5.22]. - I should not have risen on this clause again had not the Minister for National Development (Senator Spooner) asked whether I considered that the sentence of the policy speech that has been mentioned was a major one. The Minister has referred only to one sentence; I referred to two sentences. Immediately following the suggestion that the rate3 of tax would be reduced is the statement -

We will attack all those problems with vigour and imagination.

If the Government parties had intimated to the people that, if returned to office, they would increase taxes, particularly of the nature of those that are contained in the legislation before us, the result of the general election might well have beer different. The Opposition regards this pledge to the people as a major pledge. Unquestionably, the Minister is relying, with far too much emphasis, upon the words “ commensurate with national, economic, and financial policy “. The Treasurer’s statement was completely unqualified. It meant that the quantum of the reduction would be commensurate with national, economic and financial policy. The right honorable gentleman made a completely unqualified promise of reduction.

Clause agreed to.

Clauses 10 to 18 agreed to.

First to Sixth schedules agreed to.

Title agreed to.

Bill reported without requests; report adopted.

page 2087

COTTON BOUNTY BILL 1951

Bill received from the House of Representatives.

Standing Orders suspended.

Bill (on motion by Senator O’Sullivan) read a first time.

Second Reading

Senator O’SULLIVAN (Queensland-

Minister for Trade and Customs) [5.30]. - I move-

That thebill be now read a second time.

The purpose of this bill is to give effect to the Government’s decision to assist the Australian cotton-growing industry by guaranteeing, for a period of five years commencing on the 1st January, 1951, an average annual net return to cottongrowers of 9½d. per lb. for all seed cotton of grades higher than strict good ordinary.

The history of cotton-growing in Australia indicates that some form of government assistance is necessary, if production is to recover from the present low levels. For instance, production of cotton has declined from a. peak of 17.471 bales in 1934 to only 522 bales in 1949. and806 in 1950. A decline in production was evident during the war years, but that wasunderstandable because labour for primary industry was scarce and the labour that was available concentrated mainly upon food production. However, in the post-war years, cottongrowing did not recover as was expected. The acreage under cotton decreased to a degree that threatened the industry’s existence in this country. In 1949 the industry sought a guaranteed return of 9½d. per lb. for seed cotton. The request was referred to the Tariff Board, which recommended against the guarantee. The board considered that the only measures that could be justified were the continuance of the existing protection afforded by the tariff, and the relief of the Queensland Cotton Board from its liability of £68,798 to the Commonwealth Bank. The government of the day adopted the board’s report.

Early in 1950, the cotton industry renewed its request for a guaranteed return, and the present Government undertook to review the matter. After considering all factors associated with the request, the Government decided to grant a guaranteed return of 9½d. per lb. In doing so, it did not limit its consideration entirely to economic factors, with which the Tariff Board is solely concerned. The Government took the view that cotton-growing on a large scale in Australia is desirable for the diversification of the economy and Australia’s full industrial development. Cotton is one of the few primary products for which there is a large domestic demand that is unsatisfied by local production and that has an important defence potential. Recent overseas advances in the mechanization of cotton-growing have increased the possibility of the industry being established on a sound and efficient basis, provided that some stability can be assured during the developmental years. The guaranteed return envisaged in the bill is intended to provide that stability.

As honorable senators are aware, cotton has been produced in Queensland over the 20 or 30 years during which a bounty in some form has been in operation. Consequently, the development of cottongrowing has been of particular interest to the Queensland. Government. The Australian Government, in agreeing to provide a guaranteed return to the cotton-growers, has taken into account assurances by the Queensland Government that it will pursue a comprehensive extension programme directed to the development of a sound, balanced farming economy, embracing the use of the cotton grassland rotation in the many districts where cotton can be successfully grown; the development of cotton-growing in the most appropriate irrigation projects; and the institution of research work with the object of further improving the efficiency of cotton production through plant breeding, entomological control and the adaptation of mechanization.

The Commonwealth has received advice that the Queensland Department of Agriculture and Stock, in an endeavour to increase the efficiency of mechanical harvesting, ia conducting investigations, the objectives of which are to determine the best types of plants for machine harvesting, tie most suitable methods of growing them -with and without supplementary irrigation, and the merits of chemical defoliation of the plants prior to harvesting them mechanically. It is also examining the possibility of growing cotton in the northern districts during the winter and spring, so that the operations of the mechanical harvesters can be extended over a considerably longer period, thereby markedly reducing fixed overhead harvesting costs as well as obtaining greater production of cotton to reduce ginning and marketing costs per pound of cotton. In this direction, growing cotton with supplementary irrigation in the Burdekin Valley is showing such promise as to arouse the interest of farmers, and it is expected that an appreciable acreage will be given over to this crop in that area during the coming season.

Some cotton has been grown under irrigation in Queensland for many years, but the proportion has always been very small. However, investigations have shown that the use of irrigation can increase the yield considerably and provide a much higher quality cotton. There is an added advantage in that irrigation areas are of a compact nature, and this would materially assist the further development of mechanical harvesting by reducing overhead costs. Irrigation, of course, generally involves major developmental work, and the bringing of further areas under irrigation is necessarily a gradual process. It is expected, however, that the Queensland Government will proceed with further irrigation projects that will substantially increase the area of land under irrigation, a considerable portion of which will be potential cotton producing land.

A bounty on cotton has been in operation for many years. The act which it is proposed to repeal by this measure provided for a guaranteed return of 15d. per lb. on raw cotton. That act was passed at a time -when world cotton prices were much lower. The guaranteed return of 9$d. per lb. seed cotton provided in the bill is -equivalent to from 27d. to 30d. per lb. raw cotton. When seeking the guarantee the industry asked for it to be expressed in terms of seed cotton, as that is the commodity with which growers are familiar, and because the raw cotton basis has in the past proved confusing to them.

It is possible that the bill will not involve, for some time, any expenditure by the Commonwealth. As is well known, there has been a world shortage of cotton, and its price, like that of many other commodities on the world market, has been much above previous levels. In October, 1947, the price of i-in. middling raw cotton was quoted on world markets at a price equivalent to approximately 25d. Australian currency, whereas at theend of September, 1951, the quote for this type of cotton was 41. 5d. However, the 1951 world cotton crop has been one of the best on record, and, if world production continues at or about such a level, it would not be unexpected if the world price receded to some degree. If the price of cotton declines sufficiently to make it necessary to pay a bounty, the bounty will be paid to the processor, that is, the ginner of raw cotton, for distribution to growers. Under the system operated by the Queensland Cotton Board, the ginner acquires seed cotton from growers, processes it into raw cotton and disposes of the raw cotton and any by-products. The proceeds, less costs of ginning and administration, are available for payment to growers. Under this bill, if this total amount distributed by the processor does not return an average over all to growers of 9 1/2 d. per lb. seed cotton, the amount of the difference required to bring the average to that figure will be paid by the Commonwealth for distribution by the processor. It will be noted that the bounty is limited to grades above “strict good ordinary”. This is to be done in order to encourage the production of better types of cotton.

The return the grower receives for his seed cotton is primarily dependent on two factors - the price received by processors for the raw cotton and by-products, and the cost involved in the ginning process. An increase of ginning costs would reduce the growers’ return which, in turn, would increase the amount that the Commonwealth would be required to pay in bounty. It is therefore necessary for the Commonwealth to examine the cost of ginning operations, as it could otherwise’ be placed in the position of undertaking to underwrite ginning costa without limit. The bill, therefore, contains a provision which, in effect, authorizes the Minister, if satisfied that costs of ginning and administration are beyond a reasonable amount, to reduce the amount of bounty.

The announcement that the Government would grant the industry’s request for a guaranteed return to growers of 9 1/2 d. per lb. seed cotton was made in August,. 1950, and it had the effect of increasing cotton plantings for the 1951 crop. However, insufficient time then remained for the full effect of the announcement to be realized. In spite of that fact, production from the 1951 crop is, estimated at 1,100 bales, compared with 8.06 bales from the 1950 crop. Production, was originally estimated at 1,500 bales,, but dry weather conditions, while benefiting the quality of the main crop, adversely affected, the quantity of the late crop. It is not yet possible to give any estimate of the. 1952 crop, as plantings took place only recently. However, as I have, mentioned previously, the Queensland Department of Agriculture and Stock has reported increased interest in cotton-growing, and its reports are confirmed by advice from the Queensland Cotton Board.

I need hardly point out the benefits that will accrue to Australia generally as a result of the expected expansion in cotton-growing. Not only could this result in the production of a greater quantity of the raw cotton required by the cotton spinning industry, the requirements of which are now from 70,000 to 80,000 bales a year, but the by-products obtained from the cotton seed would be of importance in industries that are already established here, and in industries that could be established if such by-products were available. Cotton-seed oil is used in several food processing industries, and cotton seed meal is one of the best protein-rich concentrates for feeding to dairy herds. I point out also that development of the cotton industry will tend to lessen our dependence on imported cotton and will assist, either directly or indirectly, in saving dollars. The guarantee of the cotton producers’ returns is given on the understanding that those associated with the cotton-growing industry will . make every endeavour to place the industry on a sound and efficient basis. With the development programme of research and mechanization currently being undertaken, and the enthusiastic support of those engaged in the industry, the Government can see no reason why the industry should not be successful and become an asset in Australia’s economy.

Debate (on motion by Senator Courtice) adjourned.

Sitting suspended from 5.45 to 8 p.m.

page 2089

STATES GRANTS (SPECIAL FINANCIAL ASSISTANCE) BILL (No. 2) 1951

Second Reading

Debate resumed from the 14th November (vide page 1945), on motion by Senator Spooner -

That the bill be now read a second time.

Senator McKENNA:
Leader of the Opposition · Tasmania

– The measure before the Senate is necessary because of the inadequacy of the grants payable under the States Grants (Tax Reimbursement) Act. That act laid down a formula in 1946-417. The formula, when first applied, provided an amount of £40,000,000, with which the States were satisfied, but their needs this year will call for a grant of £120,000,000, which is three times the amount that was fixed as recently as 1946-47. This measure does not specify the exact amount that is to be appropriated, because the exact amount cannot be determined until the figure that will be payable pursuant to the formula is ascertained. The amount is estimated at the present moment at £86,443,000. The Government has decided to make a total payment to the States of £120,000,000 so that this measure represents authority for the appropriation of the difference of £33,557,000. The total payment made pursuant to the formula, plus the special grant this year, totalling £120,000,000, contrasts with the total grant of only £90,000,000 last year, when the formula provided for grants of £70,398,000, to which were added two special grants, one of £5,000,000 and the other of £15,000,000, making a total of £90,398,000. That, of course, is a vast increase in the short period of one year. The additional £30,000,000 is necessary to enable the States to function at a reasonable budgetary standard. The necessity for the increase has been occasioned largely by the inflationary trend, by increased social services expenditure, by losses on transport undertakings and by many other factors which are not relevant at the moment and which I do not propose to detail.

The whole subject of Commonwealth and State financial relations is a vastly important one and an exceedingly fascinating one. Honorable senators who were present in the chamber last year about this time will recollect that I spoke at considerable length during the debate on similar measures which were before r,lie Senate. I then reviewed the history of Commonwealth and State financial relations from the inception of federation. 1 refer to that fact now because I do not propose to embark upon that course this evening. Last year I stated that no formula would ever be adequate to cover the field of Commonwealth and State financial relations, because the changes that take place from year to year in the affairs of a State and in the overall economy of the Commonwealth ure so violent and fluctuating that they do not remain static for a sufficiently long period to conform to any formula that the best minds of the best men can evolve. I think the whole matter must be looked at year by year as an ad hoc problem, for no predetermined formula can be expected to do justice, for any length of time, to such complex relations.

When the Minister for National Development (Senator Spooner) replies to the debate! I should like him to say something concerning the conference that the Prime Minister (Mr. Menzies), intimated in September of last year would be held with the States for the purpose of reviewing the overall position and to consider all the grants that are made by the Commonwealth to the States, not only by way of special grants through the Commonwealth Grants Commission under section 96 of the Constitution, but also by income tax reimbursement grants, payments under the Commonwealth and State Financial Agree- ment, the grants made pursuant to the roads aid legislation, and the various other heads under which the Commonwealth assists the States. All those grants were to be reviewed at a conference which, more than a year ago, the right honorable gentleman undertook to convene. It was decided that a preliminary conference of representative officers of the Commonwealth and the States should be held in order to clear the ground for the main conference. I notice that in March last the Prime Minister adverted to the proposal concerning that conference and intimated that it would soon be held. I appreciate that the sudden and somewhat unexpected intervention of a double dissolution may have thrown those plans awry, hut I should like to know whether the Government still contemplates the holding of such a conference between the Commonwealth and the States. I should also like to know what progress has been made by the officers of the respective governments in preparing the ground for such a conference. I repeat that I do not consider that any formula is likely to be evolved which will remain static for any lengthy ‘period. However, in view of the criticism which is constantly emanating from the States concerning Commonwealth and State financial relations, it is desirable that such a conference should be held, at least in order to clear the air.

The ‘proposed payment this year of £.1.20,000,000 to the States is, of course, an acceptance by the Australian Government of the principle of uniform taxation. I should not expect that in any circumstances the Government would agree to vacate that field. The principle has ills from the viewpoint of State sovereignty and also from that of the broad principle that those who expend the money should have the responsibility of collecting it, but, as in nearly every governmental matter, there are pros and cons, and one must weigh them one against the other, and determine where the balance of good and evil lies. When that test is applied to uniform taxation, having regard to the great benefits which it confers upon individuals and business undertakings, and bearing in mind the vast new needs of the Australian Government, my own view is that there is an unanswerable case for the continuance of uniform taxation. After two years of office, that view appears to be subscribed to by this Government.

My final comment on this measure, which the Opposition freely supports, is that the additional £33,557,000 which will be paid pursuant to section 96 of the Constitution is to be paid without conditions. The amount of £86,443,000 is paid subject to the condition that the States do not enter the taxation field. With those comments, and with the hope that the Minister, when replying to the debate, will say something concerning the projected conference to which I have referred, I conclude my remarks by tendering the support of the Opposition to the measure.

Senator HANNAFORD:
“South Australia

– I remember clearly the debate which took place when a similar measure was before the Senate at this time last year and’ to which the Leader of the Opposition (Senator McKenna) has referred. I can also recall his statement to the effect that the formula had not been effective in connexion with the allocation of specific sums to the various States. I agree with the honorable senator that the sum of £40,000,000, which was arrived at by the application of that formula in 1946-47, seems small in comparison with the very large sum of £120,000,000, the payment of which is contemplated by this legislation.

I do not wish to deal at very great length with the pros and cons of this measure. As the Leader of the Opposition has pointed out, it is very difficult to evolve a formula which will be satisfactory in every ‘respect. It is sufficient to say that a formula is used, and that from time to time additional sums of money are allocated in order to supplement the amounts that are arrived at by the application of the formula. As the honorable senator has pointed out, this year £86,443,000 will be distributed to the States under the formula, plus an additional amount of £33,557,000.

This is a non-contentious matter and [ am glad to hear that the Opposition does not intend to oppose its passage. I appreciate that under the system of uni form taxation it is absolutely essential that the financial assistance which this bill seeks to authorize is made available to the States. We all recognize the responsibilities of the States under the federal system and the need for them to have sufficient funds with which to finance’ their public utilities, social services and other matters of governmental importance. I was interested to read some time ago a report of a speech which was made by the Premier of South Australia, Mr. Playford, during the budget debate in the State Parliament. The honorable gentleman was dealing with the financial position of South Australia, the State which I have the honour to represent in this chamber. In general terms, he stated that South Australia had made great progress during the last fifteen years, but that that progress had involved the expenditure of large sums of public money. I understand that the allocation of grants to the States is made on an equitable basis throughout the whole of the Commonwealth. Mr. Playford is reported to have said - and his remarks have particular point when it is remembered that the principle of uniform taxation was initiated in 1942 - that it would be possible for South Australia effectively to carry on and gradually to increase its productivity and financial stability were it not for the fact that the Australian Government collects all income tax. In other words, his opinion was that the State would be able to finance effectively its operations from its own resources. The words he used were -

On the basis of average income per head we are probably above the average, falling little short of the richly endowed State of Victoria, but comparing favorably for second place with New South Wales. Both primary and secondary industries have made their valuable contributions to this remarkable achievement, and I am more than ever convinced that had the State been able to retain its pre-war share in the income tax field, now monopolized by the Commonwealth, it would be entirely free from the necessity of receiving financial assistance from the Commonwealth.

I believe that the honorable gentleman made that statement with a full knowledge of the facts. In a survey of the economic position of South Australia before the Commonwealth Grants Commission, which met at Adelaide, the State Premier said that there was a change of emphasis in the development of South Australia. He pointed out that the principal concentration in recent years had been in the industrial field, but without neglecting rural development. Now the trend has been reversed. Without neglecting secondary industries, the State Government intended to concentrate on the development of primary industry, including the bringing of new land into production as well as of the increasing of production on established properties. He mentioned the high cost of rural development at the present time, and pointed out that it required more capital to place 100 men in primary industry than was needed to place the same number in factories. The Premier also said that if, in the future, the additional revenue accruing from developmental projects should go in the form of income tax receipts to the Commonwealth, whilst the State had to meet the cost of providing public utilities, the State would necessarily continue to seek reimbursement from the Commonwealth. He went further, and said that there might be need for increased reimbursements, despite the growing strength of the State’s economy. I believe that the Premier of South Australia made his statement with a full knowledge of the facts. It was most unforunate, he said, that the revenues, which would have been sufficient to place the State budget on a sound basis, had been taken over by the Commonwealth under the uniform income tax system. He made it clear to the commission that if the State had been able to retain the income tax raised within its borders, there would be no need to seek Commonwealth aid.

I know that the subject of Commonwealth and State financial relations is a complicated one. Prom time to time, there have been conflicts between the Treasurers of the various States and the Treasurer of the Commonwealth. It is urgently necessary that a convention such as that advocated by Senator McKenna, and promised by the Prime Minister (Mr. Menzies), should be held as soon as possible. The Commonwealth suffers the odium of raising by taxation revenue which the States disperse. It is only right that the States should accept some responsibility for the raising of the money. The instrumentality that expends revenue should not be relieved of the responsibility of raising it.

I am glad that this bill will not be opposed. It is necessary to make to the States the grants provided for in the bill, and the Commonwealth is to be congratulated upon agreeing to a figure which should prove satisfactory to the States concerned. I hope that at some time in the future a more satisfactory method of financing State activities will be devised.

Senator BYRNE:
QUEENSLAND · ALP; QLP from 1957; DLP from 1968

– My attitude towards this measure is very similar to that of Senator Hannaford, but I speak as a senator who represents Queensland. When the Queensland Treasurer brought in his budget on the 4th October of this year, he passed strong strictures on the method adopted by the Commonwealth in distributing revenue to the States, which reacted detrimentally to Queensland. The total amount received by Queensland from the Commonwealth last year was a little over £14,000,000. The total amount paid to the States by -the Commonwealth in 1950-51 under the Income Tax Reimbursement Act was just over £70,000,000, of which Queensland’s allocation was £11,000,000. At the conference of Commonwealth and State Ministers held in September, 1950, an endeavour was made to obtain a substantially increased distribution, but the Prime Minister (Mr. Menzies) agreed to increase the amount by only £5,000,000, which increased the total to £75,000,000. Queensland’s share was raised to £12,000,000. In the second half of the financial year, Commonwealth Treasury officials examined State budgets, and it was found that all State governments were finding it increasingly difficult to carry on. Therefore, the Commonwealth granted an additional £15,000,000 to the States. That amount was not distributed according to the formula, but upon a more or less arbitrary basis. Queensland received £2,000,000, but had the formula been applied, it would have received £2,443,000. The loss was important to Queensland, as it would have been to any State faced with financial stringency. I draw attention to these matters in order to emphasize the need for the holding of the conference of State and Commonwealth representatives, to which Senator McKenna referred, to amend the formula under which revenue is distributed to the States. Queensland, like some of the other States, has suffered because the present formula is out of date.

Senator WRIGHT:
Tasmania

– I propose to offer a few observations on the subject of the financial relations of the Commonwealth and the States, because it is of great importance, and should be of great interest to members of this chamber. I have just been perusing the columns of the Hobart Mercury, which gave space to some superficial and critical remarks by the honorable member for Wilmot (Mr. Duthie) in regard to the special grant of £876,000 made by the Commonwealth to the State of Tasmania. The attitude of mind illustrated by that criticism could well paralyse the development of Tasmania. It is my pride to be here as a supporter of a government which has, in this much maligned budget, made a magnificent contribution out of revenue, and by way of capital expenditure, for the maintenance of State services, and particularly for those of Tasmania. Members of the Liberal party will not stand by while State rights and State powers are whittled away. I propose to show briefly how, in my opinion, the Menzies Government has contributed magnificently to the support and maintenance of the States.

I remind honorable senators that, as long ago as 1927, re-adjustments were found to be necessary in the field of State and Commonwealth finance when, under the Financial Agreement, which was subsequently ratified by referendum, action was taken to rescue the States from their loan commitments, and to place future borrowings under the control of the Loan Council. Since then, regular payments into a sinking fund have taken care of State commitments. [ We should not forget that this year the budget provides for the underwriting of State capital requirements by the amount of between £100,000,000 and £120,000,000. The exact amount will depend upon the yield of the loan market. Let it not be forgotten that the maintenance of State capital works this year is guaranteed out of revenue raised by the Commonwealth. Those who are very ready to criticize the budget are equally quick to forget that if those capital undertakings of the States were to be closed down as soon as present loan funds are exhausted, the repercussions on the economy of the country would be disastrous. The Commonwealth has promised to underwrite loan raisings for State capital works. If the loan raisings fall short of the total required, as is expected, the difference will be made up out of Commonwealth revenue, and the Commonwealth must thereby wear the obloquy of raising such revenue by taxation. Let Tasmania, through my voice at any rate, recognize the generosity of this gesture of the Commonwealth. We know that there are in progress in Tasmania some very important undertakings, such as the hydro-electric scheme begun by the Australian Aluminium Production Commission, and two other projects conceived by the State HydroElectric Commission, all designed to increase the supply of power that is au much needed at the present time. Hydroelectric projects were sadly mismanaged by the State Government between 1940 and 1950, but they are now being rescued by the skill of the commissioner. The prosecution of those hydro-electric undertakings is now guaranteed because the Australian Government has arranged to underwrite the expenditure of the State upon them. In the light of that situation how contemptuous it was for the Hobart Mercury to devote a stream of printers’ ink to a criticism of the Commonwealth for making what it described as “a miserable grant of £140,000” to Tasmania this year.

So much for the capital position. I come now to the current revenue position in which the Leader of the Opposition (Senator McKenna) would have us believe he takes some interest. The honorable senator, the former Prime Minister, the late Mr. Chifley, and the present Leader of the Opposition in another place (Dr. Evatt), were the super financial architects of the uniform income tax scheme. We speak not in terms of legal technicalities but in terms of real business facts. The essential consequence of that scheme was that the States were deprived of their income tax revenues. Notwithstanding the fact that the Chifley Government had promised that at the cessation or hostilities the income tax revenues would be returned to the States, the socialist financiers gathered together and said, in effect, “ Having enjoyed the ‘fruits of uniform income tax for two or three years, we are loth to relinquish them”. It is interesting to learn that as long ago as 1947 at a conference of Commonwealth and State Ministers, Mr. Chifley spoke in comprehensive terms of the inflationary danger that beset Australia. Indeed, he relied upon the inflationary danger as an excuse for the continuation of the uniform income tax system. At that conference the Labour government of the day was fortunate to have by its side the representatives of several Labour satellite States. Mr. Chifley made a gesture that seems pigmy in the outlook of 1951 and fixed £40,000,000 as the amount which the Australian Government should pay to the States as recompense for the forfeiture of their income tax revenues.

This year in the budget the Menzies Government has assumed the burden of reimbursing the States to an amount of £120,000,000. Those figures should be placed in parallel columns as an index of relative values in Commonwealth and State finances between the years 1947 and 1951. They appear not in the profit and loss account of a company or the statement of account of a private individual or a grazier, but in the books of account of public agencies, the State governments on the one hand, and the Australian Government on the .other. With that amount of money the States were expected to carry on their public services, finance their public works programmes, and meet all the payments to which they were committed. The first comment that I want to make about that basis is that that arbitrary figure of £40,000,000 was adopted by that magnificent financier of the day as a basic concept of the formula upon which future reimbursements to the States should be founded during the ensuing ten years. Taking the figures for only two States, New .South Wales was to receive £16,477,000, and Tasmania £1,220,000. The Chifley Government decided that foi the ensuing ten years the revenue derived from income tax would be distributed between the States in accordance with those figures and that at the end of the ten-year period the amount which the Commonwealth allocated to the States would be divided between them on a basis proportionate to their adjusted populations.

La3t year, when the Commonwealth Arbitration Court made its now famous, or should I say, infamous, arbitrary award of £1 a week in addition to the then current remuneration payable to workers employed under its awards, the Australian Government was obliged to supplement the formula payments to the States by £15,000,000, and later, by an additional £5,000,000, making a total of £20,000,000 for the year. I pause to try to make the point that that radical, abnormal development within the processes of the court was responsible for throwing out. of gear the formula that had been established by the Chifley Government and made necessary the addition to the formula of £20,000,000 in one year. That occurred in the first year of administration of the Menzies Government. This year the formula would have provided for the States a total of £86,000,000. The representatives of the States met in Canberra a few months ago and submitted a bid for approximately £135,000,000. “No”, said the Prime Minister, “we cannot give you that amount; we shall not be niggardly nor shall we indulge in an auction. We will be generous to you and add to the Chifley formula of ‘.£86,000,000 a further £34,000,000, so that the total payment by way of reimbursement of income tax will be £120,000,000 this year.”

The second point I wish to make in relation to this matter is that Tasmania’s formula payment of £2,800,000 was raised to £4,000,000 - an increase of £1,200,000 in one hit! No publicity was given to that fact by the Senate Opposition yesterday. Indeed, the Opposition has been completely silent about the additional amount granted to Tasmania. Its criticism was focussed rather on the fact that the Commonwealth Grants Commission had recommended a reduction of grants to the States in accordance with the provisions of section 96 of the Constitution by a mere £130,000. No mention was made of the fact that that figure was subject to readjustment when the report of the commission had been made available. As the commission’s report has not yet been submitted the grants to the States are only tentative. The Australian Government can rejoice in the fact that it has done justice to the States. I point out that its assumption of this additional responsibility has made necessary the introduction of a budget to gather together the necessary revenue, yet the budget has been the target of much irresponsible criticism by honorable senators on the Opposition benches.

That is the current position on a cash basis, as I see it. I propose now to say a word or two about the position from the point of view of principle. I have referred to these factors because, I submit, they underline very emphatically the irresponsibility that has been manifested by some persons in regard to Commonwealth and State financial relations. We have reached the situation where the States are dependent for capital and revenue requirements upon decisions of this Parliament. That is a most intolerable position for the States having regard to their constitutional position in a federal set-up. The Chifley Government promised to give attention to this matter in 1947. In January of that year Commonwealth and State Treasury officers met in Melbourne and formulated a report upon it. Therefore, it ill becomes those who have recently been restless in the Opposition party to urge the Government to summon a conference to provide a ready solution to this very vexed problem, which has been made all the more turbulent as the waves of inflation have gone back and forth in such an unpredictable way as they have done during the last two or three years in the period that Mr. Churchill has so graphically described as the “ dark aftermath of devaluation”.

The only glimpse I have been able to obtain of the inscrutable deliberations of the Commonwealth and State Treasury officers was obtained from the valuable report that was prepared by Mr. El. G. Binns, the economic adviser of the Government of Tasmania, and presented in

July, 1948. Mr. Binns discussed not only the situation that has arisen in Dominion and Provincial financial relations in the Dominion of Canada but he also applied the experience that he gained in that Dominion to a discussion of the position as it affects Australia. The first proposition that is posed in a consideration of this question from a point of view of principle is whether it is essential to the independence of the States that the States should regain their right to levy income tax. It is interesting to remind ourselves that at the recent conference of Commonwealth and State Ministers, the proceedings of which I have had an opportunity to read in full, the reports of two great States of the Commonwealth faced a barracking when they asked for a return of the right of their respective State governments to collect income tax. They were the reports of New South Wales and Queensland. I emphasize that action by Mr. McGirr and Mr. Gair because it is so directly opposite to the submission of the Leader of the Opposition that the uniform tax system should be retained. It is significant, however, that the Premier of Tasmania was not prepared to make any such claim. In fact, it was quite obvious from his attitude at the conference that he was unwilling to accept the responsibility of requesting the return to the States of their taxing authority. The Commonwealth’s dilemma can be readily understood. The States cannot agree amongst themselves. Obviously there must be some other solution of the problem, and I make no apology for once again bringing to the attention of the Senate the work of Mr. Binns, a thoughtful economist who has given close study to this problem. Canada’s experience under federation parallels our own and Mr. Binns suggests that serious consideration be given to drawing a line of demarcation between the fields of taxation of the States and those of the federal authority. He points out that in 1947, officials of the Commonwealth and State treasuries suggested that the fields of taxation which might well be handed to the States include the payroll tax, the entertainments tax, probate and succession duties, and the land tax. I am not pre,sumptious enough to intrude any opinion of my own, but I offer the solution advocated by Mr. Binns and the Canadian Treasury officials as a possible means of determining this vexed question. It is essential in the interests of the finances of the States and the Commonwealth that an early attempt should be made - by “ early “ I do not necessarily mean this month or even this year - after careful deliberation to define the fields of revenue that should be the exclusive right of the States, and those that should be the exclusive right of the Commonwealth. My time has been too brief to permit real justice to be done to the subject, but I hope that my references to the dependence of the States on the Commonwealth for capital expenditure, and the indebtedness of the States to the Commonwealth for their current revenue, will be of some assistance in reaching a solution of the most difficult problem of Commonwealth and State financial relations.

Senator CRITCHLEY:
South Australia

– Measures of this kind have been coming before the Commonwealth Parliament for some years and, at least during my membership of this chamber, they have been passed through all stages without acrimony or undue delay. Speaking on behalf of the Opposition, the Leader of the Opposition (Senator McKenna) intimated that the bill would not be opposed. I have no doubt that the honorable senator has good reasons for wishing to expedite its passage, but I know too that he is well aware of the imperfections of the uniform tax system. I compliment Senator Hannaford upon his statement of South Australia’s position and I agree with him that the bill should be treated on a non-party basis. The uniform tax system is far from perfect, but Senator Wright’s provocative remarks might well have led to an acrimonious debate had the Opposition not undertaken to refrain from opposing the bill. He trailed his coat and invited us to jump on it. Although there were many sound ideas in his speech, he was over enthusiastic in his praise of the Government’s generosity to the States. I should not like to be misunderstood on that point. So far as I can gather, the conference at which the grants provided for in this measure were decided upon, was the most harmonious of its kind ever held. I recall the days when, at the onset of the depression in the late 1920’s, and before the introduction of the uniform tax system, the then Liberal Premier of South Australia Sir Robert Leighton Butler, attended similar conferences and argued the claims of his State. I agree with Senator Hannaford that, as the result of Commonwealth assistance and, in some instances, the sound co-operation of all parties in the South Australian legislature, the Government of that State has been able to embark upon a developmental programme that is second to none in the Commonwealth. In that connexion, I compliment the Premier of South Australia, Mr. Playford, who, at the risk of being branded a socialist, is prepared to foster undertakings that are in the interest of the people of that State.

Senator Wright was eloquent in his praise of the grants that are being made under this legislation. I do not propose to deal with his lengthy speech in detail. He was pugnacious and threatening and, as I have said, he might easily have prolonged the discussion. I point out, however, that in 1946-47, the total of Commonwealth revenue from taxation was £383,000,000 of which the Chifley Government allocated £40,000,000 or 9.6 per cent, to the States under the uniform tax scheme. In 1950-51 revenue from taxation amounted to £893,000,000, of which the allocation to the States is to be £120,000,000 or 7.4 per cent. Those figures hardly substantiate Senator Wright’s claim that the grants provided for in this measure are generous. However, as the grants have already been accepted by the States, there is no reason why the measure should be debated at length, but I warn Senator Wright that the time is fast approaching when his claim to be the supreme authority on every subject on which he addresses this chamber will be summarily rejected.

Senator O’SULLIVAN:
QueenslandMinister for Trade and Customs · LP

in reply - I appreciate the reception that the Opposition has given to this bill. Probably no matter is more properly the prerogative of the Senate than the financial’ relations of the Commonwealth and the States, and the Senate has no greater responsibility than to ensure that those relations shall be equitable. The very essence of our federation is in the financial independence of the States. The States cannot remain sovereign authorities unless they are financially independent, and the sovereignty of the States is the very foundation of our federation. The Leader of the Opposition (Senator McKenna) asked whether the conference on Commonwealth and State financial relations which was scheduled to he held early this year, would ultimately take place. Honorable senators will recall that the conference was to be held in April, but that there was a double dissolution of the Parliament and an eletien about that time. The conference was postponed, but I understand that departmental officers have the matter well in hand and it is hoped that the conference will take place without further delay. Again I thank honorable senators for their reception of the measure.

Question resolved in the affirmative.

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

page 2097

STATES GRANTS BILL 1951

Second Reading

Debate resumed from the 14th November (vide page 1946), on motion by Senator Spooner -

That the bill be now read a second time.

Senator McKENNA:
Leader of the Opposition · Tasmania

– This measure is supplemental to the one that ^ has just been passed by the Senate. Under that measure £120,000,000 was appropriated for all the States. The measure now before the chamber has application only to the States of South Australia, Western Australia and Tasmania. The total amount that will be appropriated pursuant to this bill is £10,522,000, the amount payable to each State being: South Australia, £4,558,000; Western Australia, £5,088,000; and Tasmania, £876,000. When speaking to a similar measure last year, I spoke at length on the principles and practices of the Commonwealth Grants Commission, on whose report such bills are based. I do not propose to review them at all on this occasion’. However, as a representative of one of the applicant States-

Senator O’FLAHERTY:
SOUTH AUSTRALIA · ALP

– Not mendicant States?

Senator McKENNA:

– No ! I am surprised that Senator O’Flaherty should make such a suggestion. I departed from the word “ claimant “ that is often used by the Government, and, I think, by the Commonwealth Grants Commission also, when referring to the States of Western Australia, South Australia and Tasmania. I think that it is more important and proper to refer to them as applicant States. I am sure that Senator O’flaherty was speaking facetiously. However, he has given me an opportunity to object to the use of the word “ claimant “. I think that the correct term is “ applicant States “. The plight of Western Australia, South Australia and Tasmania was foreseen by the founders of federation when they framed section 96 of the Constitution.

Senator Hannaford:

– What is wrong with the term “claimant”?

Senator McKENNA:

– Section 96 of the Constitution provides that the Commonwealth may make grants to the States with or without conditions, and applications are made by those States for grants, pursuant to that section. I do not like the word “ claimant “ ; I prefer the word “ applicant “. Honorable senators may have their own choice of words, but I am touchy about the word “ claimant “. I pay tribute to the non-applicant States for the readiness with which they join with the applicant States in passing measures of this nature.

It is traditional that the reports of the Commonwealth Grants Commission have been adopted. It is traditional, too, that the non-applicant States concur very readily in making available portion of their revenues to enable their sister States to function at a budgetary standard somewhere near the level of their own. On behalf of Tasmania, at least, I am glad that those States have invariably adopted that attitude. As the report of the Commonwealth Grants Commission is available to us, we are able to take a keener interest in the measure before us.

The report which is at the commission’s usual high literary standard, presents a great deal of very useful statistical information. The commission is now functioning under the new system, whereby the grant is divided into two parts, one representing an adjustment of the budget of two years ago, and the other making a broad approach to the amount that is required in the current year. I am not hypercritical, nor I do not intend to be really critical when I say that in connexion with the second portion of the grant the commission could not do better than to make an independent guess about the requirements- of a State. I pay a tribute to the accuracy of the commission’s guess on the last occasion, because, in grants last year totalling about £12,000,000, it estimated the actual requirements of the three States to within about £500,000. The approach under the second branch of the grant was made with a high degree of accuracy. In these unpredictable days, that is a matter of congratulation to the commission.

I shall refer very briefly to two aspects of the report, and particularly to the comment in relation to administrative costs. Paragraph 112 of the report reads -

Tasmania again claimed a favourable adjustment on account of the relatively low cost of administration in that State, and submitted data of expenditure from Console dated Revenue in each State on salaries in a number of administrative departments, and on superannuation contributions. This information has assisted the Commission in its own examination. There are several obstacles in the way of a purely statistical solution to the problem of comparing administrative costs in the various States, and the Commission will have to seek further information.

The commission then points out the difficulties that it has encountered, and states that it hopes to be able to reach conclusions before its next report is ‘presented. All that I say about that comment is that I have heard that one before. That statement has appeared in several of the latest reports, and I join very strongly with the commission in the hope that it will reach conclusions, and that it will make adjustments on account of relatively low cost of administration as between the various

States. This has operated in favour of Tasmania in the past, and I have a lively expectation that it will operate in the future.

The other comment relates to subsidies from consolidated revenue in Tasmania to the Hydro-electric Commission. Paragraph 113 reads, in part -

Tasmania has encouraged wide-spread use of electricity, so as to develop primary industry, and to provide amenities in rural areas comparable with those provided in urban areas.

Subsidies were paid to the Hydro-electric Commission in that State so that electrical services could be provided in fairly remote parts of the State. This is a matter that the State government is quite competent to determine for itself, but in making budgetary adjustments for comparison with- the budgets of the nonapplicant States, the Commonwealth Grants Commission disallowed the sum of £23,000 that the State government so paid. Paragraph 114 of the report reads -

Subsidies of this kind involve consideration.which arc fundamental to the commission’s work. The commission is directly concerned with the amount of financial assistance required by the State, and the subsidies formed part of the State’s revenue deficit on which its claim for financial assistance was based. The correction to the published deficit was made because the Hydro-electric Commission is inherently a profitable undertaking, and it appeared that, from the viewpoints of financial need and reasonable effort by the State, allowance of the subsidies was n>>1 justified.

I rather cross swords with the view of the Commonwealth Grants Commission, in view of Tasmania’s budgetary position. The commission apparently is adamant in the matter. It bases its objection to the allowance of those amounts upon definite need - and I confess that I do not see the true relevancy of that - and reasonable effort by the State. I think it rather a pity that the commission applied those two considerations. They do not seem to me to be complementary or relevant. I should have thought that broad financial need and reasonable effort required by the State could have been determined apart from any relation to one broad head of expenditure. That ought to be more or less a matter of judgment and consideration. Subject to these two comments, I see nothing to criticize from Tasmania’s point of view. I am not expressing any views on behalf of the other applicant States.

As the Opposition has done invariably in the past in connexion with such measures, it supports the bill. The total grant for the year is lower than it was last year, but as the commission points out, the fact that bigger amounts were due to Tasmania under the formula has been taken into account. The Opposition has no desire to delay the passage of this measure, and cordially supports it.

Senator VINCENT:
“Western Australia

– The provisions contained in the measure before the chamber are very important to what the Leader of the Opposition (Senator McKenna) has called the applicant States. This subject is one that is dear to my heart, and to the hearts of all Western Australians. I sincerely trust that the bill will be debated fully, because while it is not contentious from a party political point of view, it raises certain important aspects of Commonwealth and State financial relationships. I would welcome an expression of opinion on behalf of both the claimant and nonclaimant States. In reviewing the principles upon which the payments are based, I shall seek to establish two propositions which I consider are fundamental to the vital subject of Commonwealth and State financial relationships. I shall endeavour to show first that the amounts that have been recommended by the Commonwealth Grants Commission for payment to the claimant States are totally inadequate, and, secondly, that the principle, or the basis as it is referred to by the commission, that is used in making these recommendations, requires immediate consideration and substantial modification. It will not be out of place if, before I develop my arguments, I refer to the historical background of CommonwealthState financial relations, with special reference to State grants.

This is an old problem. The first State grants were made between 1901 and 1910 under section 87 of the Constitution, which is called the Braddon clause. That section states that during a period of ten years after the establishment of the Commonwealth, and there after until the Parliament otherwise provides, the revenue of the Commonwealth from customs and excise duties shall be divided’ between the Commonwealth and the States in the proportions of onequarter to the Commonwealth and threequarters to the States. The next stage in the history of Commonwealth-State financial relations is the period between 1911 and 1927. During that period, the States received what were called per capita payments of 25s. a head of population. After the first world war, the value of the Australian £1 depreciated considerably and, therefore, the value of the per capita payments depreciated also. In 192S, the Financial Agreement Act was passed and subsequently a consequential amendment of the Constitution was made by the insertion of section 105a which provides, first, for the Commonwealth to take over the debts of the several States ; secondly, for the payment by the Commonwealth of a fixed annual sum in respect of interest upon such debts; thirdly, for the indemnification of the Commonwealth by the States in respect of debts taken over from the States; and, fourthly, for the borrowing of money by the States, or by the Commonwealth, or by the Commonwealth for the States. Those provisions are still in force.

I turn to another aspect of CommonwealthState relations - the aspect that is dealt with in this bill. Section 96 of the Constitution reads as follows: -

During a period of ten years after the establishment of the Commonwealth and thereafter until the Parliament otherwise provides, the Parliament may grant financial assistance to any State on such terms and conditions as the Parliament thinks fit.

The words “ on such terms and conditions as the Parliament thinks fit “ mean, in effect, that the Parliament may grant financial assistance to any State for any purpose without being compelled to grant it to other States. Doubtless honorable senators will agree that that is a very wide -provision. I need hardly remind the Senate that since 1911 section 96 of the Constitution has been used, and rightly so, for the purpose of granting to individual States financial assistance in special circumstances. At this stage, it is proper to enquire what those special circumstances, have been. Usually, they have been the difficulties that the States have encountered as a result of federation. The basis upon which this Parliament grants financial assistance to the States under that section of the Constitution is clearly set out at page 65 of the report of the Commonwealth Grants Commission in the following words: -

Special grants are justified when a State through financial stress from any cause is unable efficiently to discharge its functions as a member of the federation and should be determined by the amount of help found necessary to make it possible for that State by reasonable effort to function at a standard not appreciably below that of the other States.

That is the principle or- the basis upon which the Commonwealth Grants Commission makes its recommendations about what should be paid to the claimant States. I point out that that by no means exhausts the power of the Parliament to grant financial assistance to the States.

I think I have said enough to show that the Parliament has at all times recognized that the position of certain’ States is different from that of other States, and that undoubtedly there is a well-established principle that financial assistance shall be granted to States that have suffered as a result of federation. In developing my proposition that the special grants made to the States are inadequate, I shall deal specifically with Western Australia. I refer honorable senators to paragraph 75 of the report of the Commonwealth Grants Commission, which deals with the claim made by Western Australia. It reads as follows : -

A detailed statement of claim was not submitted. The State’s representatives intimated that if the then prevailing trends in revenue and expenditure continued, a special grant of £8,500,000 would be required to enable the State to balance its budget in 1951-52.

Paragraph 77 of the report states -

At each of the State hearings, the State representatives emphasized the difficulty of specifying a precise amount of claim for 1951-52, because, in circumstances of continuing inflation, it was impossible to- make any reliable estimates so far in advance of the year of payment.

Western Australia claimed £8,500,000 as the sum necessary to enable it to balance its budget, but it has received or will receive only approximately £5,000,000. Surely I am correct in saying that the grant to Western Australia is inadequate. Let us look at the picture from a different angle. In the year 1938-39 the grants made by the Commonwealth to the. claimant States amounted to 10 per cent, of the total payment to the States. That was also the position in the years 1939-40 and 1940-41. Since 1940-41, the percentage has progressively decreased. This year, the grants to the claimant States will represent only 6.5 per cent, of the total payments to the States. Let me put the matter in another way. Last year, the grants made to the claimant States amounted to £12,175,000, or 1.5 per cent, of the total Commonwealth revenue as disclosed in the budget for that year. This year, they will amount to approximately £10,500,000, or 1 per cent, of the estimated Commonwealth total revenue. It can be said that the claimant States receive from the Commonwealth other moneys under the income tax reimbursement formula and the Commonwealth Aid Roads and Works Act, but I point out that the other States also receive moneys under those provisions in accordance with a welldefined formula. My point is that it is only under Section 96 of the Constitution that the claimant States can hope to be granted, hmm the vast resources of Commonwealth (revenue, assistance that is denied to the non-claimant States. I think I have established that the assistance given by the Commonwealth to the claimant States under Section 96 of the Constitution is dwindling, and that, at least in the case of Western Australia, the assistance that is given is inadequate.

The Commonwealth Grants Commission recommends that -certain sums shall be paid to the claimant States in order to assist them to balance their budgets. That brings me to my second proposition. With the greatest respect, I submit that the principle or basis that is used by the commission requires immediate modification. I shall refer the Senate again to the last few words of the passage on page 65 of the commission’s report that I read a few minutes ago. They are as follows: -

The amount of help found necessary to make it possible for that State by reasonable effort to function at a standard not appreciably below that of the other States.

The important words are “to function at a standard “. The commission recommends that payments shall be made to the claimant States to enable them to function, not to enable them to do anything else. I can put my point in another way. All that the commission does is to recommend that the claimant States shall be assisted to balance their budgets. Let us be quite clear about why the claimant States receive this assistance. They do not receive it because they cannot balance their budgets. None of the States can balance its budget. The claimant States always have difficulty in doing so because they still suffer from the effects of federation. That is so because they are ill-developed in relation to the nonclaimant States. My point is that the claimant States will remain undeveloped in relation to the rest of Australia unless the more populous States do something to improve the position. At the present time, New South Wales, Victoria and Queensland are developing at a rate far greater than that of Western Australia. There can be no two ways about it. Those States were a lap ahead of Western Australia when the race for federation began, and now they are two laps or even more ahead. In Western Australia there is nothing to compare with the Snowy Mountains scheme of the eastern States. We should welcome a comparable scheme to develop some of the millions of acres of very good virgin country that is capable of growing a great deal of food.

I propose to read to honorable senators an extract from a very interesting document which was prepared in Western Australia in 1934. The extract comes from “ The Case of the People of Western Australia “ in support of secession. Some honorable senators appear to be amused. I emphasize before I begin to read that I am not now advocating secession; what I intend to read substantially covers the case for secession that was made in 1934 and still applies, as far as that State is concerned, in relation to the problems which arise from federation. The case for secession was summed up at page 485 of the publication in the following words : -

So long as she continues within Federation, Western Australia will ever present the picture of a community obliged to earn in the unprotected world market the credits with which to pay for the goods purchased in the highly protected Austraiian market; of a community whose primary industries bear the full force of the burden of protection, but whose manufacturing industries derive’ none of the compensating benefits for which a policy of protection is invariably designed; of a community which is at once subjected to a “protection” which does not protect and a “free trade” that is neither free nor fair . . .

The burdens, direct and indirect, which have been placed upon the staple industries of Western Australia by the Commonwealth fiscal policy of protection, have so increased the cost of production in those industries that they cannot be carried on profitably. If these industries fail - and fail they must if they cannot be carried on profitably - then the whole economic structure of Western Australia falls with them. Such is the outstanding disability of Western Australia within the Federation.

The case concludes with this very significant statement: -

Prosperity cannot come to this great island Continent - with its area of more than threefourths of the whole area of Europe - by the aggrandisement of a few highly industrialized cities on the eastern seaboard, but can come only by the equal and orderly development of Australia as a whole.

Senator McCallum:

– New South Wales will give East Sydney to Western Australia.

Senator VINCENT:

– We would not take it as a gift. I am not arguing the case for the secession of Western Australia from the Commonwealth. My proposition is that the arguments which I. have cited still apply as far as Western Australia is concerned, and I suggest that they also apply to Tasmania and South Australia. We must face the fact that the present basis of payments to the States bears no actual relationship to the necessity for an accelerated rate of development of the claimant States. All that the “present basis is designed to achieve is to balance the budgets of the claimant States. They could continue to balance their budgets along those lines in perpetuity. They could keep on functioning under the terms of the principle enunciated at page 65 of the report of the Commonwealth Grants Commission ad infinitum, but they will never develop unless more assistance is given to them by the other States. Therefore, I say that the principle as enunciated by the Commonwealth Grants Commission should be immediately reconsidered and modified. The place for that modification to be made is this Parliament, because, as I pointed out earlier, the principles underlying the recommendations of the Commonwealth Grants Commission are flexible and entirely at the discretion of this Parliament. I suggest that the Parliament consider an addition to the principle as set out at page 65 of the commission’s report so that the principle should read as follows : - “ In addition to the above principle, special grants are justified for the purpose of enabling the accelerated development of the staple industries of claimant States, so as to ensure the orderly development of Australia as a whole “. The effect of such an addition would be to permit claimant States to claim assistance for purposes of development. If that principle were included in the basis of the commission’s recommendations, ultimately the claimant States would become non-claimant States. They can only do so by the adoption of the measures to which I have referred.

Balancing our budgets yearly will not assist us in development. We must have something in addition to that assistance. If we are to regard the Commonwealth Grants Commission as a body that has been set up purely for the purpose of balancing the budgets of certain States, as far as Western Australia is concerned the commission has failed. I consider that it should do something more than that. It is the responsibility of this Parliament to decide the policy under which the commission acts. I do not suggest for a moment that the total amount of Commonwealth money that is now being paid to the States should be increased. Far from it. I entirely agree with Senator Wright that the overall sum of £160,000,000 is a very substantial and handsome amount to be paid by the Commonwealth to the States. Rather do I suggest that thé method of allocating that money should be reviewed, so that the claimant States shall receive a greater proportion of it for the purposes of development. I consider that that is the only way in which they can cease to be claimant States. The granting of sums for the purpose of balancing their budgets will never rid them of the stigma which some people are happy to place upon them when they refer to “ mendicant States”, an expression that is obnoxious to the people of Western Australia. The claimant States have a moral right, apart from any constitutional consideration that may be involved, to develop at the same rate as the nonclaimant States. They are not doing so because they are not receiving adequate assistance from the non-claimant States.

At the beginning of my remarks I suggested that every senator might well take part in this debate, because although the subject is not party-politically contentious it is a most important one. At some stage or another the claimant States, which are now undeveloped in relation to the other States, must face this issue. When the question is boiled down, it is really a moral issue concerning the development of the rest of Australia. I consider that each honorable senator has a moral responsibility to consider the principles underlying section 96 of the Constitution, and that this Parliament must do some thinking about the matter. I support the bill.

Senator BENN:
Queensland

.-

I believe that Senator Vincent is never heard to better advantage than when he is discussing a bill such as that now before the Senate. I remember very well his remarks last year in connexion with the States grants legislation. They contained a good deal of weight. I have followed his arguments to-night with great interest because I have views similar to those which he has expressed. However, before the honorable senator resumed his seat I expected that he would submit to the Senate a concrete proposal for overcoming the necessity to make grants to the three claimant States, South Australia. Western Australia and Tasmania. I thought that he would have in his mind a proposal to improve the economy of the three States in order to terminate the necessity for the making of grants. I also expected him to make the point that the three claimant States contribute to the sum which is later distributed amongst them. They do that in the ordinary way. They have contributed their share of the £10,522.000 which will be allotted to them under this legislation.

Senator Scott:

– He has a solution.-

Senator BENN:

– I have no doubt that he has, but I should have preferred him to submit it to the Senate.

Senator Scott:

– The honorable senator would not have understood it if he had done so.

Senator BENN:

– When I do not understand a matter I always have Senator Scott to rely upon. If I am confused about anything and desire to become properly muddled I approach the honorable senator and seek his counsel.

This bill fits squarely upon a plank of the Australian Labour party platform, although it is probable that the Government was not aware of that fact when it introduced the measure. I propose to read to honorable senators clause 7 of the Australian Labour party platform, which is in the following terms: -

Adequate, financial compensation to the States to recompense for loss of revenue from Commonwealth customs and tariff control, and the introduction of uniform taxation, with special financial provision to meet the disabilities of the States of Western Australia, South Australia and Tasmania.

From that statement it appears that the three States that have been mentioned arc fully protected as far as their future financial difficulties are concerned. First, there is protection provided by section 96 of the Constitution, and, secondly, there is the platform of the Australian Labour party. Perhaps it will not be very long before a Labour administration is once again in control of the treasury bench. I have no doubt that it will see to it that the States are fairly treated.

Senator Vincent gave reasons for the bad budgetary condition of the States, which forces them to seek financial assistance from the Commonwealth each year, and it is perhaps not necessary for me to cover that ground again. All honorable senators no doubt believe that, over the years, the various State governments sincerely do their best to improve the economy of the States which they govern. T believe that they do so irrespective of the polities that they espouse. In times such as these, however, they are faced with considerable difficulties. Technical staffs are required for various projects, skilled workmen are needed, and many other classes of workmen are necessary for the successful carrying out of their works programmes. Apart from that, the States are experiencing difficulty in obtaining sufficient equipment, and there as the ever present bugbear of finance. The State governments deserve our sympathy. Senator Vincent made a good point when he asked whether the Commonwealth was to go on perpetually granting financial assistance to some of the States, and he implied that we should do something to improve their economy so that they would not have to receive financial help. That is an excellent idea, but how is it to be given effect? The position seems to bo getting worse rather than better. During the last six years, the Commonwealth has paid in special grants to South Australia £17,300,000, to Western Australia £20,106,000 and to “poor little” Tasmania £5,406,000, making a total of more than £42,000,000. If it wore possible to make a grant to South Australia of £17,000,000 this year the Commonwealth might be relieved of the need for giving further financial assistance for that State. I am not talking politics when I say that

I believe that the Government of South Australia would, if it received a grant pf £17,000,000, be able to find a way to improve the economy of the State so that it would no longer need to come to Canberra with cupped hands asking for help. South Australia has an economy peculiar to itself. The economy of Queensland is based on sugar. New South Wales has a different economy again, as has Victoria. Western Australia presents a problem. In area it is the largest of all the States, and its population is increasing at a greater rate than is that of any other State. There is a possibility that, if its population continues to grow, it will get beyond the need for Commonwealth help. South Australia has an area of 3S0,000 square miles and a population of 712,000. In its secondary industries 78,000 persons, or

II per cent, of the population are employed. If we compare the economic development of South Australia with that of the other claimant States, it would appear that South Australia may well be the first of them to attain financial independence. The prospects before Tasmania are not so bright. Its population is not increasing rapidly, although, strange to say, the populations of the three claimant States taken together are increasing at a more rapid rate than are the populations of the three non-claimant States. If the mineral resources of Western Australia could be developed, including its iron ore deposits, the economy of the State would be improved.

Senator McCALLUM:

– Where does the honorable senator think Broken Hill Proprietary Company Limited is getting its iron ore now?

Senator BENN:

– There is no reason why there should not be developed in Western Australia an organization similar to Broken Hill Proprietary Company Limited, and if that could be done Western Australia might no longer need to seek financial assistance from the Commonwealth. I regret that Senator Vincent did not put forward any concrete proposals. Perhaps next year, when this subject again comes up for discussion, he will have some suggestions to make. Is the Commonwealth to continue indefinitely making grants to the States ? The report of the Commonwealth Grants Commission now before us is the second with which the Senate has dealt since I have been a member, and it seems to me that it is more or less a copy of last year’s report. I do not wish to disparage the work of the commissioners, but I cannot see that we are making any progress. I suggest that the Government, appoint a committee to investigate the whole problem of the economic development of the claimant States. The committee might consist of three persons, an engineer, preferably with experience of hydro-electric projects as chairman, a technical officer in the employment of a State Department of Agriculture and Stock, and an officer of the Commonwealth Treasury. Such a committee could suggest how the economy of the three claimant States could be improved so as to make further Commonwealth assistance unnecessary

Senator LAUGHT:
South Australia

– I support the bill, and as a representative of South Australia, I express appreciation of the action of the Government in making available a grant of £4,558,000 to that State, Section 96 of the Constitution provides that -

During a period of ten years after the establishment of the Commonwealth and thereafter until the Parliament otherwise provides, the Parliament may grant financial assistance to any State on such terms and conditions as the Parliament thinks fit.

From the beginning of federation there was doubt about how the assistance should be given, whether on the basis of the contribution of the various States to Commonwealth revenue, or on the basis of population. Then, in 1933, the act was passed which established the Commonwealth Grants Commission, and in this jubilee year it is appropriate that we should pay a tribute to the work which the commission has done. We have before us the eighteenth report of the commission, a document of 127 pages, which contains an amazing collection of data. I can truthfully say that the report is the finest official document that it has been my privilege to read since I have been a member of the Senate. The Commonwealth Grants Commission consists of Mr. A. A. Fitzgerald, chairman, Professor G. L. Wood, of the Melbourne University, and Mr. J. J. Kenneally. The commission has not confined its investigations to the three claimant States, but has pursued its inquiries into affairs of the other three States as well. In paragraphs 206 and 207 of their report the commissioners state -

The Commission expresses its appreciation of the valuable assistance which has been given to it by the representatives of the Governments of all claimant States and of the Commonwealth. As this report shows, the scope of the Commission’s work is expanding, and it has been necessary to re-examine basic aspects of that work in the light of current trends’ in State finances. The co-operation of all representatives at the public hearings and in other discussions is gratefully acknowledged.

The Premiers and Treasurers of the claimant States assisted the Commission in every way possible, both by personal attendance at the hearing, where they gave much valuable information, and during regional inspections.

It is evident that the commissioners have applied their minds closely to the problem of State finances. I do not agree with Senator Vincent that the proposed grant to Western Australia is inadequate. Having regard to the assistance which the Commonwealth gives to the States in other forms, I believe that the special grant to Western Australia, which has a population considerably smaller than that of South Australia, shows that it has done very well. I offer no criticism of the report or of the apportionment of the grant to the States. The commission has demonstrated its very clear understanding of the problems of the claimant States.

I propose now to discuss one or two aspects of the relations between the Commonwealth and the States that were not covered by previous speakers. I invite the attention of honorable senators to the appendices attached to the commission’s report. Appendix No. 2, which appears on page 102 of the report, reveals some very interesting figures in relation to land tax. After 50 years of federation we should turn our attention to the possibility of effecting economies in public administration. The commission has evolved a formula for the subsidization of the less populous States to compensate them for disabilities resulting from federation. If some States are wasteful, in governmental expenditure, or if the Commonwealth itself is wasteful, or if there is duplication in Commonwealth and State functions, the subsidies paid to the claimant States must necessarily be greater than they otherwise would be. I invite the attention of honorable senators to the fact that land tax is at present collected by three governmental agencies. Each State government has a Land Tax Department, the Commonwealth has a land tax section of the Taxation Branch and each municipality levies taxes upon landholders within its own borders. Thus, the same land is taxed by three separate bodies, each of which issues separate assessments and keeps separate books of accounts. For dealing with taxpayer appeals against such assessments three separate procedures have been evolved. The details set out in Appendix No. 2 of the report reveal that in New South “Wales only £2,000 was collected in land tax for the year 1949-50. Collections in the other States ranged from £97,000 in Tasmania to £368,000 in Queensland. Over the whole of the Commonwealth State collections of land tax amounted to only £.1,201,000. Having regard to. the vast amount of recording involved in the assessment and collection of such a comparatively small amount of revenue it appears that there is scope for con sideration of the abolition of State or Federal land tax. In the same year the, amount collected by the Commonwealth from that source amounted to only £4,000,000. The Commonwealth issues separate assessments and keeps comprehensive records covering the same land as is covered by the record of the States and local-governing authorities. This unnecessary duplication of effort could well be avoided.

The Commission’s report reveals other instances of the duplication of functions by the Commonwealth and the States. For instance, in each State a department deals with probate and succession duties and a Commonwealth department deals with estate duty which becomes payable upon the death of a citizen. Only the one man dies and he is buried in one coffin by one undertaker, but two taxing authorities go through the details of his estate and make separate assessments- of his respective liability to the Commonwealth and the State. That appears to be au unnecessary duplication of effort. The Commonwealth Grants Commission might very well be asked at some future date to inquire into and report upon the duplication of Commonwealth and State functions. The Commission consists of three very learned gentlemen who are rendering magnificent service to the nation. Their attention might well be drawn to the desirability of conducting an examination into the overlapping that exists in Commonwealth and State departments. They might go further and report upon those functions that can best be left to the Commonwealth and those that can best be left to the States.

It is obvious that the collection of customs and excise duties can be handled better by the Commonwealth than by the States. We have also become accusturned to income tax being handled exclusively by the. Commonwealth. Those functions should continue to be exercised by the Commonwealth, but there is immense scope for the avoidance of overlapping in other directions. Land tax is based on records that can best be kept by the governmental authority that operates nearest to the land subjected to the tax. Each of the States has its own Titles Office and Lands Department, and, having regard to the comparatively small amount of revenue collected .by the Commonwealth in land tax, there seems to be no reason why the collection of land tax if that source of taxation is to be maintained, should not be left exclusively to the States.

Senator Courtice:

– The Commonwealth entered that field in order to break up large estates rather than to exploit an additional source of revenue.

Senator LAUGHT:

– Entertainments tax should also be left exclusively to the States. The States register places of public entertainment and should exercise sole responsibility for the collection of entertainments tax. I venture to suggest that sales tax would also be better bandied by the States than it is by the Commonwealth.

One fantastic fact that is revealed by this report is that Commonwealth pay-roll tax is levied upon State instrumentalities and local governing bodies. I was amazed to read in the report that no less than £115,000 was’ charged to one of the State railways for pay-roll tax. Could there be a more stupid example of the futility of taking in. one another’s washing than is manifested by that charge? The Commonwealth collects the tax from the State railways authorities, places the proceeds in Consolidated Revenue, and subsequently pays back the money to the State in the form of a grant which is arrived at in accordance with very complex mathematical calculations evolved by the Commonwealth Grants Commission. It is high time that the position of the Commonwealth and the States in the taxing field was subjected to close analysis. If such a task must be undertaken on a precise, scientific basis, it might well be given to the Commonwealth Grants Commission which has an appropriate organization for performing it. The time may not be far off when we shall be forced to undertake a review of the Commonwealth Constitution. Valuable preliminary work might be undertaken by the commission to assist in such a review.

I take this opportunity to refer to the commission’s report on South Australia. We have heard a good deal to-night from Senator Vincent about the problems of Western Australia and from Senator

Benn about the problems that beset the States in general.

Senator O’FLAHERTY:
SOUTH AUSTRALIA · ALP

– We also heard something about Tasmania.

Senator LAUGHT:

– That is so. South Australia is making great efforts to overcome its disabilities. A great spirit of co-operation is manifested by the major political parties in that State. I pay a tribute to the Premier of South Australia, Mr. Playford, and the Leader of the Opposition in the House of Assembly, Mr. 0’Halloran, for the manner in which they have co-operated in the interests of the State which they represent. Indeed, the spirit of cooperation that they have manifested might well be emulated in the Commonwealth sphere. The grant made to South Australia is being well and wisely expended. Paragraph 30 of the Commission’s report, which deals with develop- ments in South Australia, contains the following statements : -

Encouraging progress is being made with State developments. Expansion of operations at Leigh Creek coal-field is continuing. Production in 1950-51, including fine coal, was 394,000 tons . . . The war service land settlement scheme is developing satisfactorily, and, so far, no capital losses have had to be met. Tn the south-east, a programme of agricultural improvement, of drainage, and “ of development of sand-soils is being put into effect and is expected to result in a substantial gain in production in that area.

There are other matters to which I could refer, but I do not propose to do so at this late hour. Again I assure the Senate that South Australia appreciates the grants that it receives from the. Commonwealth, and spends them wisely.

Senator SEWARD:
Western Australia

– I welcome this opportunity to pay a tribute to the work of the Commonwealth Grants Commission, and to testify to the great assistance that the commission has been to Western Australia. 1 am pleased to say, also, that relations between the commission and the Government of Western Australia are happy indeed. This measure is linked with the one that preceded it. We cannot hope for an end of the special grants to the claimant States until those States are enabled once more to raise the revenue that is necessary for them to carry on their administration. It is quite impossible for the Government of Western

Australia to get anywhere near meeting its commitments. I remind honorable senators that Queensland, New South Wales and Victoria together are only slightly larger than Western Australia. To develop that vast area, there is a population of 600,000 people. The vast distances make the provision of services such as education and transport extremely expensive. Consequently, until Western Australia can be developed it must depend, not on the other States, but on the Commonwealth, for assistance. Western Australia does not want Victoria or any other State to contribute to its development, but it has a right to expect Commonwealth assistance. The Commonwealth has deprived the States of their right to levy taxes, but the problems that we now face cannot be remedied, as some people would have us believe, simply by restoring taxing authority to the States. Some attempt will have to be made to define the fields of Commonwealth and State taxation. Under the Constitution, the Commonwealth has u prior right to levy taxes, and even if the taxing powers of the States were restored, the State governments would be in a hopeless position. A conference must be held with the object of putting Commonwealth and State financial relations on a stable basis. Otherwise, all hope for the termination of special grants must be abandoned.

Senator Benn said that it would be necessary to find some minerals in Western Australia. Apparently he-overlooked the, fact that Western Australia has, at Cockatoo Island and Coolan Island, possibly the best iron ore deposits in the world. Japan was most anxious to gain access to those deposits before World War [I., but fortunately that was prevented. Unfortunately the deposits are thousands of miles from the centres of population in Western Australia and to develop them is beyond the financial capacity of the State. Nevertheless, in other fields, Western Australia is progressing rapidly, as the Commonwealth Grants Commission will testify. The production of meat, wheat, wool, and dairy products has increased substantially since 1939. Not only has total production been increased, but the yield per acre has improved sub stantially. Although the development that has taken place in Western Australia in recent years has far exceeded that of the other States, there is still a long way to go. Nearly 1,0()0,00Q acres of new land is being opened up in the already populated agricultural areas. That indicates the vast amount of land that is awaiting development in Western Australia. We have minerals other than iron ore. 1 am informed that the chances of finding oil are better in Western Australia than they are in any other State. American interests are already carrying out exploratory work, and a Western Australian company is also in the field. I venture to predict that if oil is to be found in Australia, it will be found in Western Australia. There are substantial mineral deposits in the huge area of 204,000,000 acres in the north-west of the State where only a handful of people live. Those minerals include tin, blue asbestos, gold, and tantalite. To give “ an idea- of the remoteness of this region, I point out that one man who has spent £20,000 on the development of a mine, is so far from the centre of population that his - only means of communication is a pedal* wireless. He is seeking for concessions to attract more people to that region. Those are some of the difficulties that are encountered in Western Australia. Already we have established a charcoal iron industry and the establishment of a steel industry in the near future is a possibility. Unfortunately, Western Australia is a weak link in. - the defences of the Commonwealth, and until the State has been developed, is will continue to be a weak link. The money required for developmental purposes is so great that, it cannot possibly be raised by the small population of Western Australia. One difficulty under which Western Australia labours is that every year the Treasurer has to bring down his budget before the report of the Commonwealth Grants Commission has been issued. Consequently, he has to guess what Western Australia’s allocation will be. That is a most unsatisfactory position, and again I express the hope that the holding of a convention to discuss the financial relations of the Commonwealth and the States will not be long delayed.

Debate (on motion by Senator O’Flaherty) adjourned.

page 2108

QUESTION

NEW BUSINESS AFTER 10.30 P.M

Motion (by Senator O’Sullivan) put -

That Standing Order68 be suspended for this sitting to enable new business to be commenced after 10.30 p.m.

The PRESIDENT:

– There being an absolute majority of the whole number of senators present, and no dissentient voice, I declare the question resolved in the affirmative.

page 2108

STATES GRANTS BILL 1951

Second Reading

Debate resumed.

Senator O’FLAHERTY:
South Australia

.- When the Leader of the Opposition (Senator McKenna) was speaking, I made the jocular interjection that the three States to which grants were made were mendicant States. In a similar vein, the honorable senator took exception to that statement, but the pleas since put up by the representatives of those States in this chamber appear to justify my interjection. The purpose of the special grants provided, for in measures such as this is to enable the States that suffer disabilities under federation to balance their budgets. It is suggested in some quarters that the Commonwealth Grants Commission should inquire into such matters as the land tax, but I assure the Senate that the commission is already busy all the year round. The blame for any deficiencies in the grants to States is not attributable to the commission. The fault lies mainly with the manner in which the claimant States present their claims. Some claims are faultless, but others are open to criticism. For instance, one honorable senator mentioned to-night that a payment of £23,000 had been made by the Government of Tasmania to a hydroelectric authority. Because that payment was in the form of a subsidy, it was regarded by the Commonwealth Grants Commission as part of the revenue of the State, with the result that the Commonwealth grant was reduced proportionately. That was the fault of the State, and not of the commission or of the Common wealth. The commission is a statutory body. It is bound by conditions which were agreed to by the States.

Debate interrupted.

page 2108

ADJOURNMENT

The PRESIDENT:

– Order! In conformity with the sessional order relating to the adjournment of the Senate, I formally put the question -

That the Senate do now adjourn.

Question resolved in the negative.

page 2108

STATES GRANTS’ BILL 1951

Second Reading

Debate resumed.

Senator O’FLAHERTY:

– Following the abolition of the old method of returning certain revenues to the States in accordance with the provisions of the Constitution, the Commonwealth Grants Commission was established. The amounts of grants that have been recommended by the commission for payment to the applicant States have no relation to grants that were approved in other legislation that was passed by the Senate this evening, as those grants represented reimbursement to the States pursuant to the adoption of the system of uniform taxation. Some of the States considered that it was wrong in principle that they should receive only certain reimbursements by the Commonwealth. The Commonwealth recognized the justice of that claim and agreed to the introduction of the formula, under which a substantial amount is reimbursed to the States annually. The amount recommended by the Commonwealth Grants Commission is indicative of the disability suffered by that State.

The present Government in South Australia, on attaining office, continued the policy of development that was inaugurated by a former government. South Australia was able to settle more people on the land because more Crown land was available for the purpose in that State than in some of the eastern States. In addition, in co-operation with the Commonwealth, South Australia has pursued a policy of developing secondary industries. The result was that the budgetary position in South Australia worsened year by year, until ultimately that State was unable to meet its commitments. For many years the Commonwealth Grants Commission was unsympathetic to South Australia. Ultimately, however, it recommended that larger grants should be made to that State. In turn, that caused a certain amount of jealousy on the part of some of. the other States. South Australia is now developing more rapidly, and the grants sought by that State are now smaller than formerly. All of the applicant States are confronted with difficulties as a result of their policy of development of secondary industries and expansion of land settlement. If they had not obtained appropriate grants in the past they would now have had to seek increased grants.

Senator Wright referred sneeringly to the part that Mr. Chifley played in connexion with the introduction of the formula. The honorable senator would not have been fit to wipe the boots of that right honorable gentleman. Had it not been for the reimbursement of taxes underthe formula, it would have been necessary for the applicant States to apply to the Commonwealth Grants Commission for increased grants. Several honorable senators have suggested that grants under the formula should be progressively increased, so that ultimately it would be unnecessary for the applicant States to make further applications for grants. The commission has approached this matter on the principle of balancing State budgets. The old system was altered as a result, probably, of the advocacy of a Tasmanian senator. It was not altered as a result of Senator Wright’s views, because he was not than a member of this chamber; he was probably then quarrelling in the State sphere. As budgetary equilibrium is approached in the States, smaller grants are recommended by the Commonwealth Grants Commission. As a supporter of the Government has mentioned, certain difficulties have arisen in connexion with the obtaining of budgetary equilibrium in the States consequent on basic wage increases. For some considerable time the position has been that if the States did not obtain sufficient money by reimbursement of taxes by the Commonwealth, the Commonwealth Grants’ Commission’ has recommended grants to enable them to’ make up the leeway.

Question resolved in the affirmative.

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

page 2109

STATES GRANTS (ADMINISTRATION OF CONTROLS REIMBURSEMENT) BILL 1951

Second Reading

Debate resumed from the 14th Novem ber (vide page 1947), on motion, by Senator Spooner -

That the bill be now read a second time.

Senator McKENNA:
Leader of the Opposition · TASMANIA · ALP

[10.44] . - This is the third measure to provide financial assistance to the States that has been before the Senate this evening. The bill contemplates a payment of £819,000 to the States, which are administering the control of prices and rents. This is done pursuant to an arrangement that was made in 1948 by the then Labour Government. When the Commonwealth relinquished control of prices the States continued the control under an arrangement by which the Commonwealth reimburses them their costs of administration. It is interesting to comment that, although the Government opposes the control of prices by the Commonwealth, per medium of this measure it is lending support to State control of prices. The unfortunate aspect from the point of view of the Opposition is that we believe that control of prices by the Commonwealth would be much more effective than is the State control of prices. That view is supported by many of the State Premiers. I think that it is correct to say that a majority of the States would be prepared to refer power to the Commonwealth to control prices, having regard to their great difficulty of administration. There are several examples of the inadequacy of State control of prices. Recently, when the price of butter was frozen in New South Wales, butter took flight from that State, but miraculously re-appeared when the price was increased. That is an outstanding example of the inadequacy of prices control by the States acting separately, no matter how high a degree of co-operation they seek to maintain between themselves. When the Labour party was arguing in favour of federal prices control, it predicted that if there were a variation of the price of a commodity between States, that commodity would take flight to the States where the highest prices prevailed.

Senator Gorton:

– What happened in New South Wales may have been due to the stupidity of the Premier of that State.

Senator McKENNA:

– At the moment I am not discussing the propriety or otherwise of the action of the New South Wales Government. What happened then proves that no State, acting in isolation, can deal effectively with an Australiawide problem. It was an adequate demonstration of the validity of the arguments that were advanced by the Labour party in 1948.

Although we believe federal prices control to be essential, we do not regard it as a panacea. It must be coupled with many other controls that I outlined in my speech on the budget. Wo say, not that federal prices control will cure inflation of itself, but that it will be infinitely more effective and efficient than is a system under which prices are controlled by six separate State administrations that cannot deal with a situation such as that to which I have referred. I suggest to the Government that serious consideration be given to seeking from the States power to control this very important facet. As the Commonwealth is expending money upon prices control, it might as well expend that money upon an effective system rather than upon one that is admitted by everybody to be completely inadequate and inefficient. I realize that, if all the States were not prepared to refer the necessary power to the Commonwealth, it would be useless to take it only from some States. A refusal by only one State to refer the necessary power would wreck the whole proposal. If all the States were not prepared to refer power, the Government should hold a referendum and, I suggest, should give consideration to seeking at the same time power to impose other necessary and possibly drastic controls that are obviously needed for the purpose of stemming inflation.

Senator Seward:

– What about a temporary delegation of power?

Senator McKENNA:

– I believe that, most of the States are prepared to refer to the Commonwealth, either temporarily or permanently, power to control prices, but federal prices control could not be effective unless all the States referred the power in exactly similar terms. The alternative to a reference of power to the Commonwealth by all States, either permanently or temporarily - and I know there is difference of opinion about whether it is constitutional to refer powers temporarily - is for the Commonwealth to hold a referendum. If the Government addressed itself seriously to the problem of halting inflation, it would be prepared at that referendum to ask for authority to impose other basic controls. I invite the Government to take serious notice of that suggestion.

Senator Vincent:

– What about wagepegging?

Senator McKENNA:

– I do not shirk that issue. , The trade union movement has expressed alarm at the “present trends1.’ There is no joy in trade union circles over basic wage increases. Trade unionists realize that they are losing all the time. There is real alarm in the community about those increases. Although one would have hesitated to suggest wage-pegging a little . time ago, T believe that recent increases of the basic wage have made the people aware of the present dangerous trend and have caused them to be fearful of where it will end. The Government must take its courage in its hands sooner or later. The Opposition feels that this, country is heading towards a most dangerous state of affairs, and that drastic” steps .”must:- be taken. I invite the Government to seek power to control prices. Once it was seen by the trade union movement that the Government was in earnest about effectively controlling prices and keeping an eye upon profits, there would be no difficulty in obtaining the powers necessary to halt inflation. The Australian people are alarmed at the present trend of events.

As the Government is expending money upon prices control, why should it not make an effort to make prices control efficient at the federal parliamentary level. ? I do not suggest that federal prices control would, do very much by itself, ,but it would be an indispensable adjunct to more basic and drastic controls. I invite the Government to consider the pattern of controls that will be. required. If the Government were to present to this Parliament a pattern of the controls that it wished to exercise, even for a limited period - and a proposal to exercise them for only a limited period would, I think, improve their chance of being accepted in the electorates - I have a strong feeling that the Opposition would support such a bold and drastic approach to the problem.

We have no desire to delay the passage of this measure, which is designed to honour an arrangement that was made by a Labour government. We support the measure, and leave with the Government the thoughts that I have expressed.

Senator WRIGHT:
Tasmania

– If I may, without offence to the admirable Crichton and his colleagues, offer a few observations upon this bill, I shall follow a line of thought different from that which was followed by the Leader of the Opposition (Senator McKenna). Owing to the Commonwealth’s lack of power to control prices and rents, a previous federal Administration thought it proper to abandon those controls rather precipitately and to leave the administration of them to the States. It offered to the States the bait of reimbursement of administrative expenses. I pause to point out, and I hope that my remarks will not be misunderstood or misconstrued on this occasion, that in the year 1948-49, which was the first year in which the States were reimbursed in respect of their administration of these controls, they received from the Commonwealth a sum of approximately £6,000. Next year the sum rose to £706,000. In the following year, it was £703,000, and this year it will be £819,000. That is an indication of the escalator progress of the prices level in this country.

This year, a sum of nearly £1,000,000 will be expended from Commonwealth revenue upon the maintenance of a system of State control of prices and rents which the Leader of the Opposition has described as one that is admitted by everybody to be completely inadequate and inefficient. The honorable senator summarized in those words a succession of public statements that have been made during the last nine or twelve months by the State Ministers who are responsible for prices control. Those Ministers have had proved to them by bitter experience the truth of a statement that the present Prime Minister (Mr. Menzies) made three or four years ago. The right honorable gentleman said then that an arbitrary and artificial system of price fixation was no solution of the problem that was then developing in Australia. The States have discovered that an authoritarian control of an economic factor is not sufficient to enable them to stem the upsurge of prices.

The members of the Opposition, if 1 may criticize them mildly at this hour, persist blindly in clinging to the stump of the old dead gum tree and in advocating federal prices control. What virtue does federal prices control possess that is not possessed by State prices control? Honorable senators opposite have argued that State prices control is qualified by the restrictive influence of section 92 of the Constitution, which requires absolute freedom of interstate trade. That argument entirely ignores the fact that that section of the Constitution applies just as much to the Commonwealth as it does to the States. In the tones of sweet reasonableness that the Leader of the Opposition feigned to employ, I urge that, instead of saying that the antithesis of federal prices control is State prices control, we should accept the economic truth that prices control in Australia is inadequate and inefficient as an economic restraint.

No party represented in this Parliament has yet publicly advocated the placing of the slightest restraint upon the price of wool. Having regard to the great importance of wool to Australia, I submit that it is not only short-sighted but also completely inequitable to suggest that the prices of the products of subsidiary industries should be artificially controlled by governmental authority and that wool prices should be allowed to run free. I suggest that the time has come when this Government, which has accepted the responsibility of reimbursing the States for the expense that they incur in maintaining their inadequate and inefficient system of prices control and rent control, should specify a date upon which those reimbursements will cease, in order that the commercial community may be enabled to plan for the establishment of a system under which trade and enterprise will be free from the restraint of those controls. I submit that that is based upon sound reasoning, despite the fact that we are at present in an inflationary period and the further fact that it is the purpose of the budget now before the Parliament to stem inflation through financial measures. I believe that we must rely on that influence, and that the intervention of this inequitable, inefficient and inadequate system of State prices control is so crippling some industries, whilst allowing others to bulge, that we are developing a lop-sided internal economy that will be very dangerous in the future. The Australian Parliament is responsible for imbalance that is the result of the continuance of an inadequate and inefficient system. I suggest that we should look forward to the day, and resolutely face it, whether it be in June, 1952, or in June, 1953, when we shall say, “ This £1,000,000 is not going to be made available from the federal exchequer. The States must take responsibility, both financially and politically, if they wish to continue this internal and inefficient system of prices control hereafter “. I do not put forward that view in an atmosphere of irresponsibility. I have listened to the connexion which the Leader of the Opposition saw fit to make between the contents of this bill and the basic wage. I also intended; to suggest that that is a thought which is relevant to this measure, and now that he has connected the two matters, I hope that it will not be thought that I am endeavouring to introduce irrelevant matter to the debate if I also discuss that connexion. Rather than cling to the hollow stump of federal prices control, and rather than resort to what I suggest would be a political impossibility in two directions - giving to the Australian Government control over prices and then over wages - I suggest to the Senate that we should be very profitably employed if we gave mature consideration to the proposal that, complementary of freeing our commerce fromprices fixation by the States, we focus our attention upon the machinery of the basic wage itself and its automatic increases. . I entirely agree with the Leader of the Opposition that it has been because the quarterly increases of the basic wage are governed and measured by retail prices of articles which are covered by the “ C “ series index, that the community has been educated to the necessary connexion between prices and wages.

We have set up a certain system. The only power which the Australian Government has in regard to our industrial machinery is to set up a tribunal whose functions are to arbitrate and conciliate in industry. That tribunal, having been set up, it has itself erected machinery whereby the basic wage is adjusted periodically in accordance with increases of prices of articles covered by the “C “ series index. That machinery has led even governments to scrutinize the articles that constitute the “ C “ series index, and if one dares to suggest that an increased price of, say, potatoes, is necessary in order to pay the producer a true economic price,the scream goes forth that the basic wage will be increased. If the price of bread must be increased in order to pay the wheat-grower a proper price for his wheat, it is immediately said that by doing so the basic wage will also be increased. There is, therefore, a very relevant and direct connexion between the subject of prices control and the automatic adjustment of the basic wage.

Having regard to the powers of this Parliament, I suggest that, complementary to freeing commerce of artificial prices control of this kind, the Parliament should look for a better basis for the fixation of the quarterly adjustments of the basic wage and, indeed, of the basic wage itself. At the present time the machinery by which that wage is measured is merely a clock. According to the number of hours between signing on and signing off, industry pays, regardless of the quality of the effort put forward during that time. I urge that the basic principle to be laid down for the functioning of the Commonwealth Court of Conciliation and Arbitration should be one that is designed to assess the proper payment, not merely according to time, out also according to the productive effort of the employee who is to be remunerated. I know that this is a contentious issue with many sections of industry, but I am emboldened to place the matter squarely before the Senate for its consideration, especially because of a thoughtful article that appeared in a recent issue of the Journal of the Institute of Public Affairs, which our worthy friend, Senator Cameron, is wont to quote in this chamber. I speak from memory, but fairly reliably, of the contents of the article which was to the effect that the system to which I have referred underlies 90 per cent, of the remuneration in industry in the United States of America. Although prices and wages in that country in respect of “ figure finance “ are on a level far in advance of ours, the productivity of that country is the envy of the world. I believe that one of the sources to which that great productivity may be attributed is the fact that the principle of paying according to time worked is anathema to the whole American outlook. I suggest that payment related to productive effort should be one of the basic principles upon which .the Commonwealth Arbitration Court assesses wages. If that principle were adopted, I believe that there would be a great measure of improvement in the economic outlook of this country. If increased wages were then matched by increased supplies of goods, the balance which is required between costs and goods would be restored, and the imbalance which we are pleased to call “ inflation “ would disappear.

I have risen at this hour to obtrude upon the Senate the thought - I hope not without some interest - that the time has come to fix a deadline for the discontinuance of the present inadequate and inefficient system of prices control. I use the description that has been adopted by the Leader of the Opposition. Exercising the powers which the Parliament enjoys, and complementary to that fixation of the deadline, it should make use of its opportunities to ensure that one of the foundational principles which the Commonwealth Arbitration Court should employ shall be payment for production and not exclusively for time worked.

I wish to add one further subsidiary thought which relates specifically to rent control. I have been somewhat jealous of the outlook of the advocate who has been able to stand up on the Opposition side of the chamber during the last few days and bleat out his heart for the woolgrowers. I propose to present a worthier plea to honorable senators. A widow who has been bequeathed a couple of houses in the hope that the rents from them will pay her living, still subsists upon the exiguous rents that prevailed in 1939. The total farm incomes of the country in that year amounted to £44,000,000, whereas last year they amounted to £809,000,000. I make no disparagement of any section of the community. I wish to see every possible reward and measure of applause accorded to each of them, according to their efforts. But when one section improves its position almost twenty times over while another section is forced to subsist on 1939 rentals plus, in some States, an increment of 20 per cent., I am not abashed in the slightest degree at this stage of the inflationary spiral in coming here and saying that those people who have invested their money in house and commercial properties in the cities should now be relieved substantially of the restraint which is doing them a terrific injustice. As the Australian Government finances this system of prices control, I hope that it will offer a word of advice to the various State governments with a view to having that injustice remedied. I am not unconscious of the existence of the grasping landlord, and I believe that some measure of control should be retained in order to compel him to be reasonable and just. I am speaking on behalf of those whose restricted rents, which they jealously look to as their independent means of maintenance, should be brought up to date in order that they may be provided with something like a proper income. At the present time I suggest that to paint a house would cost the owner, on the ordinary basis of costs, two years’ rental.

Because of the existence of State prices control, real interference occurs with interstate trade. That interference cannot be detected by ordinary judicial processes. An excellent example of that is provided by recent events concerning -the potato trade. According to reports that have appeared in the Sydney Morning Herald during the last few months, there has been much support for an increase of the price of potatoes in that State. In Tasmania potato-growers are being asked to exist upon a price that has been fixed by the Premier of New South Wales, Mr. McGirr, chiefly in the interests of the basic wage earners of Sydney^ and also with a view to preventing a rise in the nominal cost of living. The price of wool is not fixed, a fact which must have a bearing upon the production of potatoes. In the north-west and the central highlands of Tasmania potatoes are grown, and the industry is of importance to the State. The Government of New South Wales, by manipulating the price of potatoes, is interfering with Tasmania’s inter-state trade, and the Commonwealth is paying the costs incurred by New South Wales in the administration of prices control. I expect the Commonwealth to invoke section 92 of the Constitution to prevent this interference, and to ensure that one State is not permitted to manipulate prices to the disadvantage of the trade of another State.

Senator O’FLAHERTY:
South Australia

– Commonwealth control of prices was not relinquished precipitately, as Senator Wright suggested. It was done only after the people, influenced by the propaganda of the then Opposition, had refused the Labour Government’s request for increased power. We believed that the States could not control prices effectively, but the antiLabour parties told the people that they could, and the people evidently believed them. Nevertheless, the Labour Government agreed to defray the cost incurred by the States in administering prices control. Senator Wright now admits that the States cannot do the job properly, and he used about fourteen adjectives to emphasize his contention. Of course, prices control by the States cannot function effectively. The Leader of the Opposition (Senator McKenna) suggested that the Government should seek to obtain power to control prices, together with certain other powers.

Senator Wright seems to be 150 years behind the times, as was indicated by ‘his talk about free enterprise, and the desirability of letting the people do what they like. He spoke of payment by results, but’ I remind him that the Commonwealth Arbitration Court in granting the last increase of the basic wage took into consideration the ability of industry to meet the extra charge. The fixing of wage rates by arbitration tribunals represents control of the price of labour. There can be no argument about that. Senator Wright said that the court had set up its own machinery. Of course it has, because it was given power under the Constitution to do so. The court first fixed the-.basic wage, and then fixed margins for skill. The quarterly adjustments of the basic wage are based on the price of commodities in the “ C “ series index, and the adjustments are always two months behind the price variations upon which they are based. We have always maintained that prices control represents a way of pegging wages, as was proved during the war. When prices were controlled, wages remained stable. During a period of six years wages rose by only an infinitesimal amount. After that, wages began to rise, and they have gone on rising because prices have increased. I am not concerned about inflation now. That is something else, like the control of rent about which Senator Wright spoke with the tears coursing down his cheeks. The sooner the Government takes action to stabilize prices and costs, the sooner will it be possible to stabilize wages. We ask the Government to seek from the States power to control prices. If all the States will not co-operate, then it should seek this power from the people by referendum, together with certain other necessary powers. If the Government will cooperate with the great Labour movement, I have no doubt that it will be possible to stabilize the economy of the country.

Senator O’SULLIVAN:
Minister for Trade and Customs · Queensland · LP

. - in reply - The hint of cooperation from the great Labour movement, political and industrial, in dealing with these issues which affect us all, is very encouraging indeed, and 1 look for some overt act as evidence of the sincerity of the offer. It would certainly he most welcome. Prices control alone would be just as effective in dealing with rising costs as would be the placing of a bandage on a malignant cancer. Senator O’flaherty said that wages did not rise during the war because prices were controlled. That is absolute nonsense. Wages did not rise during the war because wages were pegged. Of course,- the fact that prices were controlled ensured that little or no hardship was inflicted by preventing wages from rising.

Question resolved in the affirmative.

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

page 2115

REPATRIATION BILL 1951

Bill returned from the House of Representatives with an amendment.

In committee (Consideration of House of Representatives’ amendment) :

Clause 12.

House of Representatives’ amendment:

Omit the clause, and insert the following clause: - “12. - (1.) The amendments effected by sections ten and eleven of this Act apply in relation to the instalment of pensions which fell due on the twenty-fifth day of October, One thousand nine hundred and fifty -one, and to all subsequent instalments. “ (2.) The amendments effected by sections six to nine, (inclusive) of this Act_ shall apply in relation to the instalment of pension* failing due on such date as the Minister specifies by notice in the Gazette and to all subsequent instalments.”.

Senator COOPER:
Minister for Repatriation · Queensland · CP

.- The purpose of the amendment is to enable the Government to pay increased war and service pensions on a date earlier than that provided in the bill as it was originally drafted. That course has become necessary because of the period of time that the bill has been under discussion in both houses of the Parliament. The new rates of war pensions will become payable as from the 25th October, the last pension day in that months and the ^increased rates of service pensions and those pen sions which fall into the same category as age- and invalid pensions, will be paid as from the 1st November, I move -

That the amendment be agreed to.

Senator McKENNA:
Leader of the Opposition · TASMANIA · ALP

[11.35]. - Although the Opposition expresses its disappointment that the increase payments were not made retrospective to an earlier date it does not oppose the amendment. When the bill was previously before this chamber - it was initiated here - the Opposition urged that it be redrawn and redrafted to provide increased pension benefits for all classes of war pensioners. I do not propose to re-open that subject other than to express the keen disappointment of the Opposition that ite suggestion was not adopted by the Government. It would be useless to repeat it because it has already been rejected here once and a similar suggestion by the Opposition in another place has since been rejected. The Opposition has collaborated with the Government in sitting late to-night so that the increased payments may be made at the earliest possible moment.

Senator COOPER:
Minister for Repatriation · Queensland · CP

– I thank members of the Senate for facilitating the passage of the Repatriation Bill and thus making it possible for the increased payments to be made as from next Thursday.

Question resolved in the affirmative.

Resolution reported; report adopted.

page 2115

SPECIAL ADJOURNMENT

Motion (by Senator O’sullivan ) agreed to -

That the Senate, at ite rising, adjourn to Wednesday next, at 3 p.m.

page 2115

ADJOURNMENT

Immigration

Motion’ (by Senator O’SULLIVAN proposed -

That the Senate do now adjourn.

Senator GORTON:
Victoria

– Last night, certain allegations were made in this Senate by Senator O’Byrne, who, I regret to see, is not here now, in connexion with two Yugoslavs who had come to Australia and settled in Western Australia with the intention of becoming Australian citizens.. Those accusations were of the most grievous kind. This morning we received an official report from the Minister for Immigration (Mr. Holt) which completely, specifically and absolutely denied the truth of the allegations. I believe, however, that the matter should not be allowed to rest there, because, if the accusations that were made by Senator O’Byrne are true, there are among us men who are guilty of high crimes against humanity and ‘ are a menace to this country. On the other hand, if the accusations made by Senator O’Byrne are not true, there has been perpetrated on two men the cruellest injustice, and this Senate has been made an accomplice in and a shield for that injustice. Let me recapitulate briefly the history of this matter. About a week ago, Senator O’Byrne asked a question in the Senate in which he specifically named two individuals, and in which he linked the men who bore those names with allegations of having been employed by the Germans to spy on their fellow prisoners of war. A question of that kind is sufficient to do most grievous damage to any citizen even if the accusations that it contains prove unfounded. One would think that before asking such a question, an honorable senator would approach security and immigration officials and find out whether any evidence had been adduced or could be adduced in support of the charges. Apparently no such approach was made by Senator O’Byrne, and the reputations of these men were lightly, even frivolously, attacked. Yesterday, before a reply to the questions could have been expected - they obviously required the most minute examination - Senator O’Byrne dropped the role of interrogator and assumed the role of accuser, fie made the flat statement that the men were guilty, that they had spied upon their fellow prisoners, and that they should be returned to their own country to be tried by a people’s court. He accepted the grave responsibility of the accuser, judge, and, quite literally, becoming the executioner’s assistant. He made his damaging statements in this chamber, from which they could be disseminated throughout the country; yet he offered not one shred of evidence to support them. The statements were not even founded on the honorable senator’s own knowledge. They were founded on information given to him by the Communist Vice-Consul for Jugoslavia, a man who, it is well known, is the bitter political opponent of the two accused persons, because he is a Communist and they are fighting communism. I believe, therefore, that the position has been reached in which justice to those two men, the security of this country, and the dignity of this Parliament, demand that Senator O’Byrne be asked whether he has any evidence to support his charges, and if so, that he produce it to the Senate so that we may make inquiries and take steps, either to punish the men whom he has accused of working for the Germans, or punish those who have accused them. If Senator O’Byrne has no evidence, but has relied solely on information supplied, he should be asked to bring his informants to the bar of the Senate so that we may ask them what evidence they have to offer in support of their charges, or if they have no evidence, question them on their motives for making a baseless attack. If the attack is baseless, and the representative of a foreign country has furnished an honorable senator with untrue statements, he should be asked to return to his own country, and his government should be requested to send in his place a representative who will not import into this land his own political vendettas. If Senator O’Byrne cannot produce evidence in support of his charges, and cannot produce his informants, he should, at the very least, withdraw his charges and apologize and make such peace as he can with himself for his attack on these men, who have been guilty of no crime but have been his companions in arms against a- common enemy.

Senator McKENNA:
TasmaniaLeader of the Opposition

– I shall see that Senator Gorton’s comments are brought to the notice of Senator’ O’Byrne. I regret that Senator Gorton embarked on his statement when Senator

O’Byrne was not present. I do not question Senator Gorton’s motives in raising this matter, but he said that the allegations might not be true. I have no opinion to offer as I have not considered the matter, but Senator O’Byrne will be fully advised of what Senator Gorton has said. Again I regret that Senator Gorton did not seek an occasion when Senator O’Byrne was in the chamber..

Senator O’SULLIVAN:
QueenslandMinister for Trade and Customs · LP

. - in reply - In fairness to Senator Gorton, I point out that some considerable time ago, I informed Senator Critchley, who is the Labour party Whip, that Senator Gorton would probably speak on this matter to-night and I suggested that he ask Senator O’Byrne to be in the chamber.

Senator CRITCHLEY:
South Australia

.- It is true that the Minister for Trade and Customs (Senator O’Sullivan) did inform me that Senator Gorton would probably speak on this matter to-night and asked whether it would he possible for Senator O’Byrne to be in the chamber. I made inquiries and found that Senator O’Byrne had left Canberra. He had a long start on me, and even the fastest means of travel available would not have enabled me to overtake him.

The PRESIDENT:

– When the Minister for Trade and Customs (Senator O’Sullivan spoke in reply, the debate would ordinarily have been closed, but I considered that, in fairness, Senator Critchley should have an opportunity to state his position. . That is why I permitted this departure from the normal practice.

Question resolved in the affirmative.

Senate adjourned at 11.48. p.m.

Cite as: Australia, Senate, Debates, 15 November 1951, viewed 22 October 2017, <http://historichansard.net/senate/1951/19511115_senate_20_215/>.