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Thursday, 26 November 1959

Mr MENZIES - That is a point that I would like to have a look at, Mr. Hiley. I see the argument that you are putting. It may be falsified in terms of years or in some other way, but I would like to have a look at it.

And I would like to ask the Treasurer (Mr. Harold Holt) whether the Government has had a look at it and with what result.

Mr Harold Holt - We have certainly had a look at it, but one fact that is glossed over is that most of the post-war State debt has gone into productive assets, whereas the Commonwealth war debt was nonproductive expenditure.

Sir WILFRID KENT HUGHES - I am merely saying that this is the fact.

Mr Harold Holt - Undoubtedly the movement is in the direction that Mr. Hiley mentioned. No one has contested that.

Sir WILFRID KENT HUGHES - Let me direct the attention of honorable members to page 12 of the printed Budget speech of the Treasurer. This is the final portion of statement No. 2, where the Treasurer sets out the total expenditure from Consolidated Revenue Fund as ?1,385,300,000. He gives ordinary expenditure as ?1,385,000,000, then deducts defence expenditure charged to loan fund, ?37,000,000, and to the result obtained he adds an amount of ?37,000,000 expenditure as appropriation to Loan Consolidation and Investment Reserve, and leaves the total expenditure at the original figure of ?1,385,300,000. In other words, it was decided that ?37,000,000 of defence expenditure was to be charged to loan fund, so we have taken ?37,000,000 of our revenue and put it in the Loan Consolidation and Investment Reserve. In spite of that we then say that we are going to have a cash deficiency of ?61,000,000.

The honorable member for Sturt (Mr. Wilson) pointed out in his speech in the Budget debate that this is a way of saying that we are in deficit this year because we have paid off a good deal of our debt that we owed on capital assets. On the same page of the printed copy of the Budget speech we see a summary of transactions outside the Consolidated Revenue Fund. Under cash receipts we find an amount of ?190,000,000 for loan raisings available for State works and housing programmes, and then a special loan which is shown as ?37,000,000. Then there is a section headed " other transactions to be financed ", under which we find an amount of ?37,000,000 for defence expenditure to be met from loan fund. In other words, we have taken £37,000,000 of revenue and appropriated it to the Loan Consolidation and Investment Reserve, and then we take £37,000,000 of treasury-bills in order to provide for the defence loan fund. I do not know the rate for the treasury-bills, but I presume it is very much less than the rate of interest paid on ordinary loan funds.

Mr Harold Holt - It is 1 per cent.

Sir WILFRID KENT HUGHES - While the States pay between 4 per cent, and 5 per cent, on all their loan funds. By using the treasury-bill system the matter does not come under the control of the Australian Loan Council, nor is any of our capital works expenditure under the direction of the Loan Council, while all the State loans are under such control. I am not complaining about that. I am just mentioning the fact because of Mr. Hiley's statement that we have been paying considerable sums of money out of revenue for our capital works, the figures being as follows: -

1950- 51- £173,000,000.

1951- 52- £155,000,000.

1952- 53- £145,000,000.

1953- 54- £141,000,000.

1954- 55- £127,000,000.

1955- 56- £140,000,000.

1956- 57- £146,000,000.

1957- 58- £153,000,000.

1958- 59 - £167,000,000, with £37,000,000 in treasury-bills. 1959- 60 - £178,000,000, with £37,000,000 in treasury-bills.

In other words we have been averaging well over £150,000,000 per year from revenue for our capital works.

Mr Harold Holt - We have been taxing people to get it.

Sir WILFRID KENT HUGHES - Quite so. I am not complaining about it.

Mr Harold Holt - The States have tax resources too.


Treasurer is making an AliceinWonderland statement when he says that the States have tax resources. The States' tax resources - let us be honest with ourselves - are so restricted that if they want extra money they must add an extra £1 to motor car registration fees. Since the advent of television even entertainment tax is worth very little to them. One of the best solutions to our difficulties at the moment with regard to State and Commonwealth finances would be to provide wider and more elastic taxation fields for the States, because at the present time they are very restricted.

As a result of the policy that is being perpetuated by this bill, the States are paying us interest and sinking fund charges on a large amount of their loan money which was under-written - and I congratulate the Government on under-writing it - by the Commonwealth because insufficient funds could be obtained from loans. Let us say that the States' loan spendings over the last ten years have averaged £200,000,000 a year, as against £150,000,000 a year that has been spent in the Commonwealth sphere, but taken out of revenue. If the spirit of the financial agreement was being observed by us to-day we would make some provision such as I am about to propound to honorable members.

Let us say that the ratio of State expenditure on capital works to Commonwealth expenditure is four to three. The Commonwealth should then say to the States, " We will pay three-sevenths of the interest and sinking fund charges on the total loan funds being spent by Federal and State Governments since we began paying for our public works out of revenue ". This would amount this year to £35,000,000, approximately. It would be somewhere between £30,000,000 and £40,000,000, which is the extra amount that we are paying the States this year over and above the amount provided under the formula. I do not think, therefore, that we are being very generous at the present time. If a portion of this amount, say half of it, were paid as an addition to the existing payments, all or the States would be out of their financial difficulties. We cannot say that those difficulties have been due to bad house-keeping on the part of the States as over the last ten years they have been mainly showing deficits. We are writing off annually an average of £137,000,000 of our public debt, and the Commonwealth Government "'ill have no public debt at all at the end of eight years. The money is there and the public debt is being written off all the time. Why should the Treasurer say that we have no money? It is stacked away in millions. I am not criticizing the Government for doing this because if all of it were allowed to flow out and we only repaid the public debt as provided by the National Debt Sinking Fund-

Mr Harold Holt - Where is it stacked away? If we repay a debt, that does not mean we have cash.

Sir WILFRID KENT HUGHES - No, but you are only required to repay your debt from the National Debt Sinking Fund over a period of 53 years. The Treasurer's Statement of Receipt and Expenditure for the year ended 30th June, 1959, at page 48, shows that the Loan Consolidation and Investment Reserve had a balance at 1st July, 1958, of ?299,000,000. Receipts were ?38,000,000 and expenditure ?100,000,000, leaving a balance at 30th June, 1959, of ?237,000,000. How has that balance been built up? It has been built up to a large extent from the interest and sinking fund payments made by the States on moneys given to them as loan money, although in fact the money came out of Commonwealth revenue. The interest and sinking fund payments go into the Loan Consolidation and Investment Reserve. As I say, although we may be temporarily short of cash, we are writing off our debt at a rate which will completely repay the whole of it within ten years.

Mr Harold Holt - Are you suggesting that we are repaying our debts before it is necessary to do so?

Sir WILFRID KENT HUGHES - If you are not, you are investing the money somewhere else, so that you have it in other funds.

Mr Harold Holt - The real point in the argument is whether the Commonwealth is reducing its debt more rapidly than its obligations require of it.

Sir WILFRID KENT HUGHES - If you have a look at the rate at which you are writing off-

Mr Harold Holt - That is not the point.

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