Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
 Download Full Day's HansardDownload Full Day's Hansard    View Or Save XMLView/Save XML

Previous Fragment    Next Fragment
Tuesday, 22 September 1942

Dr PRICE (BOOTHBY, SOUTH AUSTRALIA) .- At this stage of the debate, when many aspects of the budget have been thoroughly discussed, I approach the subject from a fresh and important stand-point, by considering whether or not the Government and its advisers are acting prudently in the light of overseas developments in war finance. In his speech on the budget, the Prime Minister (Mr. Curtin) wisely stated that Australia was passing through the same financial war problems as overseas countries, and then, perhaps equally wisely, he threw his papers on the table. If the statistics in those papers were international comparisons properly presented they showed that this budget lies between the very satisfactory budget which was passed in Great Britain in April and the very unsatisfactory and dangerous budget which is causing much anxiety and worry in the United States of America. In the light of overseas finance, there are four main faults in this budget. They are, first, insufficient taxation, and a total neglect of post-war credits to reduce consumption at a time when civilian production is decreasing; secondly, a wholly disproportionate reliance on voluntary loans, the probable success of which the Prime Minister himself admitted in this chamber to be doubtful: thirdly, the extension of rationing under confused ideas, in which rationing due to shortages of goods is muddled up with monetary rationing to reduce consuming power; and, fourthly, an almost certain extension of credit to augment the increase in 1941-42, which was very much higher proportionately than the British rate. Fifty-five per cent, of this budget consists, perhaps appropriately to Australia, of great open spaces to be filled by voluntary loans, or, as has been hinted, by compulsory loans or a release of credit. The Prime Minister made the dangerous admission that he laughs at threats of ruin from credit release. The millions of Austrians and Germans who suffered disaster and starvation in the great credit release that followed the war of 1914-18 learned not to laugh at ruin by credit release. The world can indeed be thankful that the United States of America has a President who has not such a perverted sense of humour as to laugh at ruin by credit release. Even the honorable member for Henty (Mr. Coles) admitted, from that Tower of Babel where he now sits, the advantages of taxation as a means of war finance, and the Prime Minister himself conceded that the budget does not cover the whole field of taxation. Therefore, I was horrified to see in the budget three great faults as regards taxation. The first is a wholly insufficient proportion of taxation as compared withother revenue, the second is an insufficient amount of new taxation, and the third is the failure of the Government to use taxation in order to reduce the consuming power of the lower incomes, which control 70 per cent, of our national income. This budget proposes to secure only 45 per cent, of our expenditure from taxation and from departmental receipts, and, if war expenditure increases, as seems probable, that proportion may very easily fall to 40 per cent. Canada, including its purchases for Great Britain, is financing over 50 per cent,of its war expenditure by taxation, and one report states that, if purchases for Great Britain are excluded, that dominion is financing 78 per cent, of its war expanditure by taxation. According to the Chancellor of the Exchequer, Great Britain is financing 53 per cent, of its war expenditure by taxation and by post-war credits, which are classed as taxation. The United States of America is aiming at securing only 40 per cent, of its war needs by taxation. That is regarded as insufficient and likely to cause a very dangerous inflationary trend. As regards new taxation, Great Britain is imposing taxes at double the rate of Australia. It is levying £186,000,000 of new taxation, which is equivalent to £4 per capita, as against £14,000,000, or £2 per capita, in Australia, according to the Treasurer's budget statement. I realize that the problem of taxing the lower incomes, which control 70 per cent, of the national income, is extraordinarily difficult, but I believe that many honorable members on the Government side of the chamber really see, like the British and the Americans, that we cannot avoid taxing those incomes because, in war-time, we must reduce their consuming power. In Great Britain prior to the war, fewer than 1,000,000 workers were taxed an amount of £2,500,000. The 1941-42 British budget provided for taxing 5,500,000 workers an amount of £125,000,000, including £60,000,000 of post-war credits. In addition, these people have been taxed an enormous amount by means of increased indirect taxation. The British recognize, like wise people, that if they do not do that, the lower incomes will suffer much more through a process of inflation. The Americans also realize that they must follow this same sad course. President Roosevelt is loudly demanding increased taxation. The Yale Review, which is one of the most reliable newspapers in America, had this to say on the subject -

It will be necessary to tap the great increase in spending power of the lower income groups much more severely than either the present tax programme plans to do, or the war saving bond campaign can hope to do on a voluntary lending basis.

Those words apply with equal force to the financial policy of Australia. Unfortunately, neither this country nor Great Britain can obtain any appreciable extra amount from the higher and middle income groups. The Chancellor of the Exchequer said that, in Great Britain, the higher and middle incomes could do no more, and he pointed out that 85 per cent, of the British national income was in the hands of the people earning less than £500 a year. I believe that in Australia the upper and middle income groups must still contribute more towards the nation's finances. In fact, it has been said very unkindly, that Commonwealth Ministers, high government officials, members of the Common- wealth Parliament, and even some of our economists, might carry a considerably heavier burden of taxation. The fact remains that, even if we confiscated all personal income in excess of £400 a year, we should still have to exact a very heavy tribute from the lower incomes in order to bridge this tremendous gap of £300,000,000. Nevertheless, in the face of a position like that, this Government has just been bowing for political applause on the ground that it has reduced the burden of taxation imposed on over 70 per cent, of Australian taxpayers. I ask the country whether this is austerity, sincerity, what the Prime Minister designates " stripping ourselves ", or what he terms " getting ourselves down to bare subsistence level " ? I leave it to the people of Australia to judge the difference between the deeds and the words.

Mr Brennan - Docs the honorable member recommend getting down to bare subsistence level?

Dr PRICE (BOOTHBY, SOUTH AUSTRALIA) - Yes. This country would be much better off, particularly after the war, if it faced up bravely to the necessity for increasing taxes. According to expert evidence heard by the Joint Committee on Profits, the total of incomes of from £250 a year to £400 a year has increased more than any other income group. For instance, the committee was given statistics of the earnings in a representative selection of Victorian and New South Wales factories. The number of employees had increased by 20 per cent., earnings per capita had increased by 25 per cent., and total wages had increased by 53 per cent. The Prime Minister spoke about the lag experienced in the collection of taxes. The British and the Americans realize that in war-time they must have quick-operating taxes, such as pay-roll taxes, sales taxes and special taxes on consumption goods, which bring money in quickly. The honorable member for Robertson (Mr. Spooner) assured this House that the Government could secure an additional £100,000,000 by means of post-war credits. I say emphatically that the Government is running a grave risk in refusing to introduce a system that has been extremely successful in Great Britain.

I have dealt with taxation, so I now turn my attention to Labour's pathway through the great open spaces - the policy of voluntary Joans. On the eve of the Japanese attack last year, I criticized the Chifley budget on the ground that it was primarily a voluntary budget. It proposed to raise £138,000,000 of new money by voluntary means, and only £22,000,000 by compulsion. I forecast that the success of that budget would depend on whether or not Japan attacked us. I said that, if war came in the Pacific, and that if our coastal cities were bombed, half of the people who were asleep would be ready not only to lend but even to give their shirts to the Government. This Government knows only too well that my forecast was over-optimistic as regards finance. Japan did attack, only five weeks after I spoke; but, in spite of the appalling danger and in spite of the infinitely greater need, this Government did not make the voluntary system a success. Although it made frequent appeals for loans and subscriptions to war savings certificates, it secured only £130,000,000 of the £138,000,000 demanded by the first Chifley budget, and, in spite of two or three very big increases of taxes, the Government had to release credit to an amount of £70,000,000 or £80,000,000. When we remember the desperate battle for the second Liberty Loan, the eloquent appeals of the Prime Minister, and the reduced sales of war savings certificates, we must confess that, even with Japan at our doors, the voluntary system of finance has not been successful. It is very difficult to compare the contribu-tions of the British people with the contributions of Australians, but the Treasurer (Mr. Chifley) said that, if we multiplied, sales of war savings certificates six or seven times, we should then equal the British rate of contribution. Last year in this chamber I drew attention to gambling, liquor, and other abuses which are interfering with our war savings, hut the Government has not yat faced up to this problem. For instance, it has not supported the very fine efforts that have been made by the Premier of South Australia in this connexion. The Prime Minister's decision, which he announced last week, to continue to make available postal and telephonic facilities for gambling, is another example of what the Americans aptly call " egg walking " - a practice indulged in when an election may be near and there maybe a danger of losing votes.

In spite of the pressing dangers of the present-day situation, and in spite of the Prime Minister's eloquent warning, we find that this budget relies mainly upon voluntary effort for an increasingly difficult task. The budget provides for the raising of the huge sum of £549,000,000 - more than half of our national income, or £78 for every man, woman andchild in Australia. Of that £78 the Government proposes to raise £42 by voluntary loans, which means that every man, woman and child, including members of our fighting forces, will be called upon this year to lend £42, or £168 for an average family of four persons. Speaking of war savings certificates, the Prime Minister said that every person must contribute at least 3s. a week; but to that 3s. must be added 13s. for voluntary loans, making 16s. for every individual, or 64s a week for a family of four persons. In spite of the many appeals made for subscriptions to the second Liberty Loan, only 191,000 people out of 3,100,000 income-earners in this country contributed, and as they contributed an average of £220 each, it is quite obvious, as has been pointed out in financial circles, that the success of the Government's loan policy still depends upon the large financial institutions, and a comparatively small number of patriotic citizens. The same criticism may be offered in respect of war savings certificates, the sales of which fell from £13,000,000 last year to £9,000,000 during the year that this Government has been in office, yet the Treasurer says cheerfully that he proposes to raise sales of war savings certificates to the British level. One must admit quite frankly and fairly that the Government's handling of the voluntary system, and its loan programme, has been a record of bad psychology and bad management. Whilst the Government has relied largely upon the voluntary system, it has done its utmost to ruin what- ever chance that system had of succeeding, by its absurd actions in freezing capital, and proposing to limit profits to 4 per cent. - a proposal which the Prime Minister, himself, admitted was unworkable and unjust. The Government has frightened the thrifty sections of the community more than they have been frightened by any government since the regime of Mr. J. T. Lang, an ex-Premier of New South Wales, and it is not obtaining the support of its own political adherents who are reaping the financial benefit. The failure of the voluntary principle in this country is very closely akin to a similar process which is going on in the United States of America. In the words of the Christian Science Monitor -

The billion dollar a month war bond goal is not being reached. Departmental store volumes are soaring. Mail-order firms report new records. Congress toys with a tax bill but is loath to pass one which will really mop up surplus earnings.

Whilst I make these criticisms of the voluntary system,I assure the Government that if this budget be passed, I shall do all I can as a private member, both on the platform and over the air, to help to make a " silk purse from a sow's ear ", that is, to get all the finance we possibly can under this budget. Press reports indicate that it is the opinion of American experts that Japan is preparing for a direct attack upon Australia. That opinion was also expressed by the honorable member for Barker (Mr. Archie Cameron) this afternoon, and his warning, blunt as it was, was not couched in terms that were too strong. Therefore, I believe that if Parliament does pass this budget - even with only a bare majority - we must all do our best to make the voluntary system as big a success as possible.

I turn now to my third criticism of the Government which relates to the question of rationing. With insufficient taxation and with what the Government admits may be an optimistic loan programme, the Government is placing its faith in a system of rationing as a means of reducing consumption. Here, unfortunately, the Government is mixing up the British system of rationing to save shipping and to increase the output of munitions, with a very cumbersome monetary policy aimed at reducing consumption, which could be accomplished much more effectively, simply, and rapidly, by direct methods. Owing to the shortage of certain commodities rationing is necessary, and it should be fairly simple to cover essential goods, Rationing to reduce consuming-power litis certain advantages of social justice, it is true, but the same result could be achieved with equal justice by a properly graded system of income tax and post-war credits. Professor Giblin summed up the matter when he made the following statement in the course of evidence given before the Joint Committee on Profits: -

Considering the difficulties we have had over ii simple matter like petrol, you can imagine the trouble there would be in carrying the rationing scheme further. The prospect of its adoption to any large extent makes my blood run cold.

Honorable members will admit that' that was a good prophecy of the Mother's Day muddle. Professor Isles, of the University of Adelaide, exposes the fallacies of rationing from another viewpoint. He is a very practical man who was brought back to Australia hy the University of Adelaide because of the services which he had been rendering to the British Government in relation to the re-establishment of depressed industry. I am afraid that when the Minister for War Organizaton of Industry has completed his work in this country, an expert on the restoration of depressed industry will be a very valuable asset. Recently Professor Isles published a study of rationing in South Australia which shows the weaknesses of the system. He writes as follows : -

The efforts of the Government to secure the release of the man-power necessary for the execution of the defence programme - especially the efforts of the Department of War Organization of Industry as the coordinating body - seem to be hampered by a failure to conceive the problem and the various methods by which the release of man-power from civil employments can be. effected - in their proper perspective. Rationing of consumers would be an ineffective way of dislodging the man-power required from civil occupations, and if the execution of the programme in South Australia, and later in other States, is riot to be seriously held up. both civil and defence industries must be deliberately rationalized and rationalized at once.

Even in its existing scope, the rationing policy of the Government - particularly in relation to the wholesale rationingis already threatening grave hardships and injustices, especially in -respect of small businesses. In that regard I speak with knowledge of South Australia, but from what I have read, it seems clear that the policy threatens to drive a great many small businesses in Victoria into a morass.

I turn now to the last and probably the strongest of my four criticisms of the budget. It is on the question of credit release. With inadequate taxation, no provision for post-war credits, and admitting also the improbability of securing the full amount sought by way of voluntary loans, the Government must fall back upon credit release at a time when that policy is apt to be particularly dangerous because the unemployed have been absorbed into industry, and civil production is on the decrease. Moreover, the Government admits tha.t it has already released £70,000,000 or £80,000,000 in the form of treasury-bills. In addition, the note issue has been increased by £32,000,000 since this Government assumed office. Already there is great discontent and alarm at the rising prices in this country. Our prices have now risen 18 per cent, since the outbreak of war, and it is interesting to note that in the United States of America prices have risen 17 per cent, a fact which is causing considerable anxiety. Americans estimate that their price rise, which is about equal to ours, constitutes a tax of approximately 9 per cent, to 15 per cent, on lower incomes. Another effect ha3 been a considerable depreciation of the capital that people on smaller incomes have invested in life assurance policies and deposits in savings banks. In the words of the New York Times of 29th July last - ls this the kind of taxation we want now? If we do not, then we had better settle down seriously to a taxation programme designed to remove excess purchasing-power in an equitable manner, before inflation devours that excess purchasing-power in a manner without any fairness and beyond any one's control.

The Yale Review which, as I have said, is one of the most reliable papers in the United States of America, makes this statement in its last summer number -

The factors operating in the present situation, which threatens serious inflation, are much more clearly visible than is usually the case. At the present time, mainly because of the growth of war expenditure by borrowing, the money incomes of the civilian population are increasing while the production of civilian goods on which those incomes can be spent, is decreasing. This excess of civilian spendingpower must in one way or another be tapped by direct controls; otherwise the possibilities of inflation will be unlimited.

The comparison with Australia is excellent. So far both countries -have been able to release credit to enable idle factories and unemployed persons to undertake war work, but clearly the situation is changing dangerously. Unfortunately, our leader laughs at inflation whereas the President of the United States of America has found that the inflationary measures which were adopted, in that country after the great depression ten years ago brought the United States of America out of its difficulties far more slowly than was the case with our system of combining deflation and inflation by what was known as the Premiers plan. To quote the New York Times, the President lias taken " command of the fight against inflation " and is battling against a politically-minded Congress to save the country from the dangers into which this country is rushing. I do not condemn a policy of credit release in all circumstances, for there may be circumstances in which that policy would be valuable and safe; but J believe that in both the United States of America and Australia at present government policy may be creating grave difficulties both for the war period and the subsequent reconstruction period. The following observations of the American Economic lie-view of last June apply to both countries: -

The tax revenue contemplated in the January budget message should be increased significantly if inflation is to be avoided. Price control and rationing are inadequate substitutes for anti-inflationary fiscal policies. Direct controls can be expected to forestall inflation only if the pressure against which they have to operate is held within rather narrow limits, and, only in this event, can we hope that the task of post-war construction will not be seriously aggravated by the aftermath of war finance.

I commend that statement to the careful consideration of all the members of the Joint Committee on Social Security.

The position, is much more satisfactory i.n Great Britain than it is in either the

United States of America or Australia. It is true that during the early months of the war Great Britain released an enormous amount of credit, and prices rose alarmingly; but prices in that country are not increasing to any great degree at present, and it appears as though inflation has been checked. According to the Economist, Great Britain's financial figures show no inflationary gap for 1941-42, although other calculations indicate that there is the possibility of a gap of about £500,000,000, or about one-ninth of the national expenditure. In Australia, on the expenditure of last year, the gap is between one-fifth and one-sixth. Yet. the authorities in Great Britain are fully alive to the danger of inflation, as is shown by the following extract from the Economist -

Since the war began a further problem has arisen, and that is how to ensure that the real savings of the people, invested in Government war loans, may be adequate to cover the gap between estimated revenue and estimated expenditure. If this gap cannot be covered, inflation is inevitable.

As honorable gentlemen opposite do not appear to be happy in listening to these remarks, I shall not speak at much greater length. I recognize the difficulties of the Government. I also recognize that, in relation to such contentious subjects as credit release, there is room for a variety of opinions, and for considerable doubts, concerning ultimate results; but weighing the matter in the light of the overseas evidence and experience, I consider that this second Chifley budget is unworthy of our danger, unworthy of the austerity campaign, unworthy of the exhortations of the Prime Minister that we should strip ourselves to the stark level of subsistence, and certainly unworthy of the financial sacrifices which our British cousins are making, not only for themselves, but also for us. I wonder what the historian will say of this budget when the war clouds roll away, when the tumult and shouting dies, and when the reek of party politics subsides. I think that he may say that in the supreme crisis of our history, the Curtin Government ran true to Australian traditions and tried to get easy money by an immense gamble - by staking the financial stability of the country on a voluntary effort. If that gamble succeeds the historian will no doubt pen glowing sentences to the effect that the people of Australia rose to the occasion and justified democracy by their patriotism and unselfishness. I hope it may be so. But if the gamble fails, I fear that that historian may pen a sad condemnation of the weakness and lack of financial leadership of the Curtin Government. He may well write an epitaph in the glorious words of Milton -

I cannot praise a fugitive and cloistered virtue which slinks out of the race when the immortal garland is to he run for, not without dust and heat.

Suggest corrections