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Tuesday, 22 November 1938


Mr NOCK (Riverina) . - I express my pleasure that the Treasurer (Mr. Casey) was able, in presenting the budget, to announce another surplus of £3,494,000, in succession to the surpluses announced in the six previous budgets. It is gratifying to note also that the national debt has been reduced during the regime of the Lyons Government by more than £7,000,000. I think, however, that every honorable member is just as sorry as the Treasurer is that it is compulsory this year to increase tho rates of taxation. If there be one thing which the people view with alarm it is the over-increasing amount which is taken from their pockets to meet governmental expenditure. In 1930-31, the total of Commonwealth taxation amounted to £50,421,000; in 1932-33, £56,151,000 ; 1934-35, £58,773,000 ; 1930-37, £62,773,000; and the estimate for 193S-39 is £71,560,000. Although the rates of tax have been progressively reduced since the Lyons Government took office, it must be recognized that an ever-increasing amount of -taxes is being taken from the people and from industry. The effect is detrimental to those who conduct industry. It must also be remembered that, in addition to the taxes that will be collected this year, contributions in respect of national insurance by employers will mean a further £5,000,000 into the Government coffers. It matters not that .we regard the contributions by employees as a premium for insurance, the money which will be taken from the employers cannot be regarded as anything other than an additional tax. The amount of £5,000,000, in respect of national insurance collections will bring the total amount collected by the Commonwealth Government from the people in the current year to about £76,000,000. In addition, the State governments will take a further £40,000,000 from the people, making a total contribution to the governments of nearly £120,000,000, all of which must como out of the total wealth produced. The more that is taken away from private industries, the less there is left for expansion and the provision of work. More than £1 out of every £4 - 27 per cent, of the wealth produced - will, this year, be taken by the governments of Australia. It is dangerously near to the 31 per cent, in the depth of the depression.

It is fortunate for the Treasurer that the war clouds on the horizon have put the people into a stoical frame of mind to accept the increase of taxation which ha3 been made necessary by the expansion of defence. The people recognize that it is the obligation qf the Government to ensure their safety, and all recognize the need for heavy expenditure on defence as the result of increased needs and the rapid obsolescence of ships, aeroplanes. guns and other munitions. But we must also recognize that there is no justification for the Government to heap up a mountain of debt for posterity, and I think that the Government has taken the right line of action in spreading the burden on the community, the greatest proportion falling on the shoulders of the present generation. The people want safety and must pay for it. The Treasurer is fortu- nate in being. able to transfer £2,500,000 of the surplus last year for the purpose of defence measures and to be able to look forward next year to a further £1,000,000 from that surplus for expenditure in the same direction. I submit, however, that there is an obligation on the Government to take action to reduce the accumulated deficit of £17,000,000. There is no justification for the Government to apply a different policy for government finance from what would be applied in private business.

I should like to share the optimism voiced by the Treasurer in making his Estimates for 1938-39, but I cannot.- The Treasurer has admitted that the" value of exports last year decreased by £4,500,000. He knows that wheat and wool prices are almost down to the levels reached in the depth of the depression in 1931-32. "Without being a pessimist, I would remind the honorable gentleman that, in spite of satisfactory building and factory activities and employment, there are other facts which it is impossible to .overlook. The first is that the value of the unshipped wool and wheat on the 30th June last was £4,500,000 less than in the previous year. Reserves of fodder were depleted by at least £8,000,000, and 20,000,000 head of stock perished during the recent drought. In addition the season's lamb drop is poor. The Treasurer should note the fact that within the last year internal commodity prices have increased by 6 per cent., while the value of export commodities has decreased by over 20 per cent. The value of the wool clip decreased from £62,000,000 two years ago to £46,000,000 last year, and, although approximately the same quantity of wool has been sold this year as. in the corresponding part of last year, the proceeds from the auctions amount to £3,500,000 less. On the present rates, with 300,000 bales less from the clip, there will be a further reduction of £3,000,000 in the proceeds of the remainder of the clip. Thus, in the .aggregate, the return for our wool this year will be about £6,500,000 less- than for 1937-38.

The wheat position is much worse. In the coming season, the crop will bo about 60,000,000 .bushels less than last year, and, accordingly, there will be 60,000,000 bushels less available for export, which means, with the reduced prices that are operating, that the value of the wheat exports this year will bc £17,000,000 less than they were a year ago. We can safely assume from those two items that the total value of our exports this year will be £25,000,000 less than it was last " year. Concomitant with a reduction of the value of production, there must be reduced prosperity. I submit that the velocity of that £25,000,000 decrease of the value of our exports for this year must have its repercussions on business and employment, from one end of Australia to the other.

I agree that the Treasurer's proposals for " bridging the gap " are wise. It is wise to spread the burden over the community with the heaviest portion placed on the shoulders of those best able to carry it. I do think, however, that the Government, which has expressed opposition to the land tax and .described it as an uneconomic tax on capital, should have avoided an increase of the rate of that tax. There is no more justification to tax a grazier's property than there is to tax a factory or the plant in a factory.


Mr Scully - The factories do not escape the land tax.


Mr NOCK - But the plant and equipment do. Tho land tax is an unjustifiable, discriminatory tax on capital. Banks, insurance companies, big warehouses and factories have properties which bring them within the range of the land tax, but none of their equipment comes within that range.


Mr Scully - There is an exemption on £5,000 of unimproved capital value.


Mr NOCK - Yes. But the tax is still a tax on capital used in the production of income. Most landholders have mortgages which often represent ' the value of their properties. They are required to pay tax on the unimproved capital value of their land over a limit of £5,000 and the Commissioner of Taxation pays no heed to the mortgage. In view of the fact that the Government has expressed its opinion that the land tax is uneconomic, that it is a tax which some can pass on and others cannot, it is unfortunate that the Government found it. necessary to increase the tax.

The Treasurer anticipates less income from customs, but an increase of £1,400,000 in receipts from income tax; I fear that he is a super-optimist. I admit that, on the profits shown by certain companies last year, the Treasurer can thi3 year expect a greater collection of income tax from this source; but, at the same time, I fear that the Treasurer may be £1,000,000 short at the end of the year, because of reduced incomes in other fields.

One of the greatest anomalies in our income tax laws is the fact that many companies, some of which are making very big profits, pay only ls. in the £1 tax, which is the flat rate for companies. If the dividends go to Australian shareholders, the Commissioner of Taxation follows them, and, if the recipients are in the taxable field, the amounts they receive in dividends may be further taxed. There are other companies, however, which have made profits running into millions of pounds whose profits pass to holding companies and thence overseas No additional tax can be levied on them. A definite effort should be made by the Treasurer and the Commissioner of Taxation to remove this anomaly. Those who make big profits out of the Australian people under tariff protection which is given to them by these same people should contribute more to the revenues of the country. I have a list showing the profits made by some Australian companies. I find that during last year General Motors-Holden's Limited made a net profit of over £1,000,000, which would allow the payment of a dividend of 81 per cent. We know that ls. in the pound will be paid in the form of a company tax, but doubtless a large proportion of this profit was re-invested, or it was transferred to holding companies overseas and escaped any further tax. During, the same year, Dunlop Perdriau made a net profit of over £400,000. It would be interesting to know if more than the ls. rate of tax Avas paid on that amount. The Colonial Sugar Refining Company and the

Broken Hill Proprietary Company Limited are also in the million-profit class. The Australian Glass Manufacturing Company made a profit of 28 per cent, on ids subscribed capital, while Australian Paper Manufacturers made a net profit of £33S,587. Other profits were: Anglo-Swiss Milk Company, £176,672; Amalgamated Wireloss (Australasia) Limited, £124,794; and Taubmans Limited, the paint manufacturers, £S4,214, the last-mentioned amount providing a dividend of 15 per cent. These profits have been made under the shelter of our protective tariff. Surely there would be no injustice if companies with profits of over 10 per cent, had to pay an extra ls. in the pound as a defence tax towards the cost of protecting their valuable factories and assets. There is also a definite obligation upon the Government to keep a watchful eye on a tariff which permits such, huge profits to be made. The Country party appreciates very much the work which has been done in this way during the past seven years. The rapid expansion of Australian industry has increased the number of factory employees from 337,000 - that was the number six years ago - to 554,000. This increase has occurred despite the fact that there have been 1,400 reductions of customs duties on British imports and 6S0 reductions on foreign imports. This is a tribute to a very careful review of customs duties. When the ex-Minister for Trade and Customs (Mr. White) resigned so dramatically the week before last, he said that he had done so because he was not satisfied to leave Australian industries at the mercy of a party of six senior Ministers. The Prime Minister (Mr. Lyons) however, reminded the House that a Minister for Trade and Customs is not responsible for the Government's tariff policy, and that the Government itself is responsible.


Mr White - That is news to me.


Mr NOCK - There should be a limit to any increase ,of duties, say beyond 20 per cent.., unless submitted to the Tariff Board. Complaints were made by members of the Country party and others concerning the policy that was in operation seven or eight years ago when duties were increased without reference to the Tariff Board. The supporters of the Government condemned the action then taken as strongly as did the members of the Country party; but recently this Government adopted the policy which it previously condemned. The PostmasterGeneral (Mr. Archie Cameron), when Assistant Minister for Commerce, said to a gathering of fruit-growers at Batlow, " You cannot have one-way trade. If you want to sell, you must buy ". He further said that continental countries would be glad to buy Australian fruit if we would purchase more Europ?an goods. A fortnight ago, the Minister for Trade and Customs tabled a report of the Australian Wool Board in which there was a further suggestion that the Government should try to encourage the extension and expansion of our trade with Germany and other continental countries. Here again is the difficulty of one-way trade. The German people cannot buy unless they can also sell. The German Government has arranged to trade with South Africa on the barter system. I do not suggest that we can operate on that basis, but the Government should investigate the possibilities.


Mr White - It has done so.


Mr NOCK - It was reported quite recently that the representations made to the Minister for Trade and Customs by the German Consul were held up in the office for six months, and that he eventually received a curt reply that the matter could not be further considered. There should not have been such a long delay before a reply was sent, and when a reply was sent it was signed not by the Minister or by the Comptroller of Customs but by a junior official.

For years we have had an unsatisfactory position between New Zealand and Australia because of a quarantine embargo against New Zealand potatoes. The hypocritical quarantine exclusion has been removed, but instead of a reasonable tariff, an embargo still remains. For some months the result has been that thousands of persons in Australia have been unable to buy potatoes because of famine prices, while our cherry-growers and producers of other fruits were unable to do business with New Zealand owing to its retaliatory policy. The Government should not allow itself to be charged with being sectional in its policy.

I now wish to refer to the trade diversion policy. Honorable members will recall that this policy became operative on the 22nd May, 1936, and that the United States of America was particularly affected. Even permits to import parts needed for American machinery already in use in Australia were refused by the Minister, and traders were told to try England and the Continent. Within certain limited possibilities this was done until the 5th May, 1938, when the Government's policy was again changed. The embargo was removed and we were informed that the Government had decided to substitute a policy that would provide adequate protection for Australian industries and that licences - with a few exceptions, including motor chassis - were to be dispensed with and a new schedule was to be adopted. There was no Tariff Board investigation, and some rates were increased to an exorbitant level. . Wo were told that it was a matter of temporary expediency, and that the rates would be referred to the board. It is six months since the schedule was tabled in Parliament, and 1 suppose that it will be another six months before the report of the Tariff Board is made available to Parliament. I cite two specific instances to show the haphazard way in which this matter has been handled, and how essential it is that the Government should study carefully all the details. These cases relate specifically to goods shipped from Germany, but the same general tariff rate would apply had they been shipped from France, Italy or Japan, and, since the 5th May last, it has also applied to the United States of America. It is futile to criticize economic nationalism in Europe if we adopt the same practice ourselves. The first example is four cases of singleaction spring hinges. Before the change of policy the rates were -

The rates on the same goods after the change of policy were -

Government imposts amounted to almost 300 per cent. of the value of these goods, and the tariff was nearly four times the original rate. The exchange rate of 25 per cent., and the shipping costs increased even this extreme protection.

Sitting suspended from 6.15 to 8 p.m.


Mr NOCK - My second illustration, which is even more telling, deals with six cases of double-action spring hinges, a common necessity for doors, gates,&c., particularly on farm buildings. Comparative details in connexion with this consignment are as follows: -

 

 

The protection at present on these goods is therefore 365 per cent. This is more than four times the original rate. To this must be added exchange at the rate of 25 per cent., the cost of packing, and overseas transport.

The Country party takes exception to these heavy charges, particularly in view of the Government's frequent declaration that it stands for an inquiry by the Tariff Board before introducing increases of duties. It is extraordinary that, in the face of this policy, conditions such as I have related can still exist. When the embargo was imposedthore was a semblance of fairness to importers in that shipments on the water were allowed entry at the prescribed rates, but even this disappeared when the embargo was removed and thenew rates, described by the Minister as " adequate to protect Australian industry", were imposed.

Buyers of goods from continental countries found that they were obliged to pay the new imposts on goods then within fourteen days of Australia or else let the goods rot in a bond store. I have bills for the charges in respect of this particular shipment of goods now in bond. The goods and freight have been paid for by the importers, but cannot be cleared because, if the importers took delivery, they would not even get back the tariff duty on them. This is most unfair, seeing that the goods were bought in pursuance of what was then Government policy. Surely the Government's retrograde action in this connexion should be reviewed without delay.

I could refer to other cases, but at the moment I shall merely mention the position in regard to cement and galvanized iron.

It is not long since the situation in respect to cement was hotly debated in this chamber. The Government was condemned roundly for its attitude in adopting the Tariff Board report and moving that British cement should be allowed in free. The dispute was settled by compromise, postponing the time at which free entry should commence. The works, did not close as prophesied; the local companies go sweetly on their way, still paying regular 10 per cent, dividends.

To-day the position in regard to galvanized iron is unsatisfactory. For some years the Government paid a bounty of £4 10s. on production, although this figure at times exceeded the total wages bill of the manufacturing works. To-day the duty is £4 10s. a ton, British and £6 10s. a ton foreign. Yet we found that during 1937-38, when periodically British shipments were admitted duty free to supplement our inadequate supplies, the import cost of the British galvanized iron was pounds a ton above the cost of the Australian article. On two or three recent occasions, it was shown definitely that galvanized iron could not be imported from Great Britain and sold in Australia at less than £3 a ton above the price of the locally manufactured article. It is a tribute to the efficiency of the local manufacturers that they can put their article on the market at a lower rate than- that asked for the British product. But does not this very fact show that there is no necessity for us to retain the duty of £4 10s. a ton against British galvanized iron? I submit that to let it remain is an invitation to the local manufacturers to maintain high prices and exploit the Australian people. To-day we ought to be able to compete, merely with the natural protection of transport and exchange, with the British manufacturers, for we have the spelter in Australia whereas the British manufacturers have to import their spelter from this country. The steel bars from which galvanized iron is made are actually 26s. a ton sterling less in Australia than in England, and the ratio of the position to-day compared with that existing when the last Tariff Board inquiry was held shows an advantage of £A7 13s. lOd. in favour of Australia in the cost of the bar steel. This industry is long since out of its swadling clothes and, as we now have cheap raw material in this country, we should be able to dispense with this duty. These facts should te given most careful attention by the Government, and it should call upon the Tariff Board to make another investigation into the galvanized iron manufacturing industry. The efficiency of our factories and the prices of their raw materials are such as to justify the hope that the British duty may be completely lifted.

I wish now to deal for a few moments with our debt redemption. The Treasurer (Mr. Casey) has told us. that since the National Debt Sinking Fund was established by the then Treasurer (Sir Earle Page) in 1923 nearly £80,000,000 has been provided for debt redemption. We are glad to hear this, but that statement does not fairly or fully represent the position to our people, who are entitled to know that, although the Commonwealth debt is £7,000,000 less than when this Government took office, it now aggregates £390,845,000, or £41,000,000 more now than in 1923; of course there are millions of pounds worth of extra assets. The ordinary citizen feels reassured to know that overseas borrowing was discontinued for a considerable period, and is to-day only being renewed in a small degree for defence purposes. But it could not be said that any credit should be given to, say, a farmer for discharging a mortgage on his farm by increasing his bank overdraft for a greater amount than the mortgage. We appreciate what the Government is doing in regard to debt redemption and the. provision of an adequate sinking fund, but I suggest to the Treasurer that he should take the public more fully into his confidence. I hope that next year he will furnish us with a simple national capital account showing the assets and liabilities of the Commonwealth. This, I believe, would be reassuring and the public would have a clearer understanding of the real situation.

In connexion with overseas funds there is abundant justification for a request for a clearer statement of the situation. Foy instance, the public should be informed of such details as the following: -

 

Those figures show a nominal reduction of £12,800,000 on a normal year's operations against which governments and other public bodies have borrowed £5,500,000, leaving an actual decrease of London funds for the year of £7,300,000. Whatever may be the situation this year, I ask what is likely to be our position next year when it is estimated we shall receive £25,000,000 less in respect of our exports of wool and wheat in consequence of the reductions of their volume and value? It is necessary to exercise every possible economy in respect of our overseas funds in order that our position may be kept secure. The people of Australia are vitally interested in these matters and they are entitled to be assured, first, that the Government is doing all that is necessary for national safety; secondly, that the country is not being rushed headlong into debt; and thirdly, that our London funds are in a satisfactory condition.

I wish now to touch on the Ottawa Agreement. Considerable satisfaction was expressed among our primary producers whenthey were informed that our overseas delegation had secured a renewal of " all the preferences ofthe Ottawa Agreement", but a good deal of alarm was caused by subsequent rumours that all was not well. Details recently given in the press show how the advantages of the Ottawa Agreement have been whittled down. In fact, the worst fears ofthe primary producers were confirmed. I direct particular attention to the removal of the duty of 2s. a quarter on foreign wheat. It has been stated that that duty is of no use whatever to the Australian wheat-growers. I say very definitely that there are times when it is, and times when it is not. In 1932, when it was introduced, it gave the Australian wheatgrowers a preference in the British market. It was then no longer necessary for them to chase round the world finding buyers for their wheat. It was taken by the British buyers. But, subsequently, the stocks of wheat in Canada and other dominion countries were so great that the advantage of price was not obtainable. There may be no monetary advantage obtainable to-day because of the big Canadian crop, but there certainly was until recently, as shown by the cabled reaction in the Winnipeg Exchange and the Chicago Pit. The following report appeared in the Sydney Morning Herald of the 1st October last: -







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