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Thursday, 17 November 1910

Senator RAE (New South Wales) . - I move -

That, in the opinion of this Senate, any Constitution framed for the government of the Federal Capital Territory should provide -

(a)   That under no circumstance should any of the lands granted by the State of New South Wales or hereafter acquired be alienated in fee-simple, but a leasehold tenure established providing for all increments in land values being appropriated by the Government for the benefit of the people of Australia for all time.

(b)   That all lands in the Federal Capital Territory now privately owned should be acquired by the Commonwealth with the least possible delay.

In submitting this motion, I do not intend to speak at any great length. I should be only too pleased if it received the unanimous support which was accorded to the proposal presented by Senator Millen. Although honorable senators upon this side of the Chamber differ from honorable senators opposite upon many important matters, and, perhaps, to some extent upon the principle underlying this motion, such special circumstances surround the Territory in which the Federal Capital is to be established that even my honorable friends opposite may concede that the adoption of special methods for dealing with the lands of that Territory are justifiable. Personally, I am a believer in the nationalization of land, and I have never hesitated, even when mixing with the most conservative class of land-owners, to advocate that principle. I believe that when it is advocated honestly and straightforwardly the vast majority of those who own and cultivate land will be found to agree with it. Time after time I have heard opponents of the leasehold as against the freehold system of tenure admit that if the former had been adopted when this country was first settled it would have been a splendid system. But they asserted that as freehold rights had been acquired it was not now advisable to disturb those rights by attempting to introduce a new system. Whatever weight may be fairly given to such an argument with regard to the land of the various States does not, speaking generally, apply to the Federal Territory. It must be admitted that there are special circumstances and conditions attaching to the Territory which do not apply to the same extent to other parts of the Commonwealth. I am verypleased to know that the necessity for this motion has been, to some extent, obviated by the fact that the Government have consented to a clause in the measure recently passed providing for the provisional government of the Territory to the effect that no land therein shall be sold. But, nevertheless, I think that no harm can be done by emphasizing this principle as one standing apart from all other matters connected with the Territory. The ordinary growth of a town or city may be roughly spoken of as very much dependent upon commercial and other interests, whilst the creation of a Federal Territory is the deliberate act of the whole of the Australian people. When an ordinary town springs up, it is not usually known to what dimensions it will grow. We cannot in any way foreshadow when a settlement is established in any particular district whether it will remain a village, or whether in a short time it will develop into a large and important centre. It is, therefore, impossible for us to lav down special plans and provide special conditions with regard to such a township. But when we are deliberately choosing a certain area for the purpose of establishing a Federal Capital for the Australian continent, the case is entirely different. I can well understand the position taken up by those who assert that, no matter what site we choose, the Federal Capital can never be more than a mere official centre; that you cannot create a commercial centre ; that you cannot deliberately choose a place which will spontaneously develop into a large and important city ; that you can do no more than make it an official centre around which will gravitate those interests which are immediately concerned with politics. But, while there may be a certain amount of truth in that argument, yet it depends very much on the site chosen as to whether other circumstances may not be quite sufficient - when added to the start that such a city will get by being the chosen home of the nation - to render it a matter of certainty that at no distant date it will become a place of considerable importance. It is clear that when a settlement of any kind arises in a large State, the extent to which the influence of that centre will radiate cannot be foreshadowed. We do not know to what distance from the city or settlement its growth may add to the value of the surrounding land. A small centre in a large State may have very little influence indeed in the determination of land values. But when we find that the whole supreme power of this Commonwealth will be centred in one spot, we can readily admit that a certain amount of value must necessarily attach itself to the lands within that area. It is, therefore, clear that if that land were to remain open to be obtained in fee-simple an opportunity for speculation would at once be created. Persons who perhaps had no notion of becoming residents of the Federal Capital would at once commence to traffic in the lands thrown open. They would buy those lands with the object of selling them at a profit. This buying and selling would continue as long as it remained profitable. While only those who were able to indulge in such speculations would profit thereby, the vast majority of persons whose circumstances compelled them to live in or near the Federal Capital would have to pay for the privilege of living there, although their residence would determine the price at which the land was sold. Therefore, the operations of a few speculators would have the effect of levying a perpetual tax upon the vast majority of the people living within the Federal area. Practically tribute would be levied upon them and their successors for all time. That process would be of no advantage to the Commonwealth, or any part of it. It would merely add to the profits of a few speculators. It is clear that as soon as the Federal Capital site is definitely decided upon - as soon as a space is marked out for the building of the Capital, some millions of money must,- in the course of a few years, be expended. First of all, the site must be surveyed. Then the city must be designed. The necessary works for the formation of streets, roads, and squares must be entered upon. The planting of trees, and the laying of foundations for the erection of parliamentary and other buildings, and for the head-offices of the Federal Departments must be commenced. We hope that that city will be possessed of architectural beauty, that it will be designed so as to be the fitting political home of the people of a continent. Consequently, the number of persons employed must be considerable. The number of officials whose homes must be centred in the city will, be very large. Everything that can be done by art to aid nature must be resorted to, in order to make this place, as far as public expenditure can make it, a fitting home for the Australian people and the model city of the Empire. If that idea is in any way realized, the expenditure of public money will add enormously to the value of lands which are at present no more than a wilderness, worth no more than what is termed " prairie value." I think that honorable senators on all sides of the Chamber must admit that, as considerable public expenditure will be incurred by the whole of the people of Australia, those people have the right to the added value. It therefore becomes necessary for us to devise methods by which that added value can- be appropriated by those to whom it rightly belongs. Under the freehold system, it will inevitably go into the pockets of a few speculators.

Senator Stewart - It need not.

Senator RAE - It must inevitably do so.

Senator Stewart - With a land tax?

Senator RAE - My honorable friend's interjection touches an important phase of the subject, concerning which he has very strong opinions. Senator Stewart's idea is that, if the freehold is held by individuals, whilst the Government imposed a tax upon the land, the whole of the increment of value created by public expenditure could be appropriated by the public in the shape of the proceeds of a tax. I shall not dispute that position. I concede at once that were the land disposed of in fee simple, it would be possible to impose a tax that would appropriate the whole of the unimproved rental value of the land for public purposes. But, while that is possible, I do not conceive that it is workable. I believe that we could not, without raising an outcry which, sooner or later, would cause the break-down of the system, impose a measure of taxation in regard to the Federal Territory differing largely from the taxation levied in other parts of the Commonwealth.

Senator Stewart - How does the honorable senator propose to accomplish his purpose ?

Senator RAE - I propose to accomplish it by substituting for freehold a leasehold tenure. Senator Stewart would reply to that - as I have heard him reply before by interjection - that under a leasehold tenure it is quite possible for many of the abuses which exist under the freehold system to arise. I cheerfully admit that if the Government gives ii leasehold tenure extending over a very long period, it is quite possible that enormous increments of value may occur, that land may be trafficked in, and that private individuals may reap an enormous proportion of the increment that rightly belongs to the people. I remember a case in point. I happened to be present in the House of Representatives in New Zealand when Sir John McKenzie introduced his perpetual leasing law, which proposed to len se land for a period of 999 years. I asked him, " What is the difference between that and freehold? What benefit is it to the people of New Zealand ? You state that you are preserving to them their ownership of the land if you give an individual a 999 years' lease. But is not that the same as giving him the freehold?" Sir John McKenzie said to me, "Ali, my lad, I am going to reserve the right to tax the leaseholders." But later on I found to my amazement that the Act did not preserve the right to tax those who had obtained land on peppercorn rentals. I found that he had misled the House and myself. The persons who had secured land at these nominal rentals soon commenced a persistent agitation to obtain freehold titles.

Senator Lt Colonel Sir Albert Gould - Hear, hear !

Senator RAE - There is really nothing for the honorable senator to cheer in that statement. The fact that human nature is so greedy that when a man has a certain amount he tries to get more is nothing to cheer. I see no reason for cheering landowners who bring pressure to bear upon Governments to obtain better terms, which may be good for them, but inimical to the general welfare.

Senator Lt Colonel Sir Albert Gould - The honorable senator thinks that a subject for jeers, not cheers.

Senator RAE - No, I say merely that I recognise that there is nothing to be proud of in it. It is just what we might expect of human nature. I have a little piece of land myself, and the day after I took if up it occurred to me that my .selection would be more convenient and profitable if I could get the block adjoining it. I am not blaming or praising that common trait in human nature. But it is one thing to say that one will neither praise nor blame such a trait in human nature, and quite another to say that one is not prepared to adopt safeguards to prevent the exhibition of such a trait to such an extent as to be inimical to the general welfare. Whils't I should not blame any man who would . speculate in Federal Territory lands if he got the opportunity, I should very severely blame members of this Senate, who are here to conserve the public interests, if they did not try to prevent him doing so.

Senator Stewart - How does the honorable senator propose to prevent men doing that?

Senator RAE - A man holding at one time a very high and responsible position in the New South Wales Parliament - I refer to Sir Joseph Carruthers - some years ago introduced the homestead selection system of land tenure in that State. I am sorry to say that he remained in power long enough to go back upon the splendid principle he had done much to forward, and later introduced a measure to enable the homestead selections to be converted into freeholds. Under the Homestead Selection Act of New South Wales the selector was called upon to pay an annual rental of 2 J per cent., or 6d. in the j£i, on the unimproved capital value of the land. 11 For the first five .years the selector was asked to pay only half that amount, or 1¼ per cent, on the capital value. These details, however, are not important, and the principle adopted was that the unimproved capital value of the land was as,sessed, and the annual rental based upon that, and any improvements effected by the tenant remained his property.

Senator Stewart - What happened as the- capital value increased?

Senator RAE - It was subject to reassessment every" ten years.

Senator Stewart - That is too long.

Senator RAE - I may inform the honorable senator that the Labour party in New South Wales have asked that the term should be extended.

Senator Stewart - It ought to be reassessed every year.

Senator RAE - I think the honorable senator must admit that if the unimproved capital value of the land were to be assessed every year, it would become an annual lease. However theoretically or academically correct such an idea may be, in practice it is unworkable.

Senator Lt Colonel Sir Albert Gould -Why was the change made? Who were responsible for converting the homestead leases into conditional purchases?

Senator RAE - The reason, I think, was that there was an outcry on the part of those who held Selections under, that tenure that they should be converted into conditional-purchase selections, in order that, they might more readily obtain monetary advances from financial institutions.

Senator Lt Colonel Sir Albert Gould - They were the people who called for the change ?

Senator RAE - I admit that they were to a large extent. But I am bound to say that I think it was brought about -through the cowardice of some politicians in giving in to that cry on the part of some of the homestead selectors, and was not due to any very general demand. I held one of these selections at one time, and I ani able from personal experience to say that the statement continually made, "that no man has any incentive to expend his capital or energy in building a home, unless he can get the freehold of his land, is pure fiction. In the district in which I lived there were six or seven homestead selectors surrounding me, and individually and collectively we spent more in developing our holdings in clearing, grubbing, and fencing than was spent >by a similar number of conditional-purchase selectors.

Senator Chataway - This question is very interesting, and I think we should have a quorum present. There are only seven honorable senators in the chamber. [Quorum formed.]

Senator RAE - The reason for the expenditure by the homestead selectors is not far to seek. They knew that they had security of tenure, and might hold their land so long as they complied with the conditions, and that they had a tenant right in their improvements. A freehold would have given them no greater advantages unless they desired to sell, and they might then obtain a speculative value. Instead of having to plank down the whole or a large proportion of the capital value of the land, in order to secure the freehold, they were called upon to pay a comparatively infinitesimal amount as an annual rent, and could devote the balance of their capital, as they did, to the making of improvements on their land. That is what happened in the district in which I lived, and in every part of New South Wales where land was taken up on the same system. To show Senator Gould that it is only human greed that is at the bottom of the desire for a freehold, I may tell him that one of my neighbours, who strongly urged that the homestead selections should be converted into conditional purchases, while paying a rent of only 7½d. per acre for his homestead selection, was renting land half-a-mile away from a squatter at the price of half of his crop, and paid the owner of the land in wheat to the value of 14s. an acre. I do not wish to enlarge upon this matter, but whether we adopt a system of perpetual leaseholds .at a peppercorn rental, and the right to levy a tax - and that is the system advocated by some, and which is in operation in some countries - or go in for a system based on the homestead selection principle to which I have referred, I believe that the great weight of public opinion throughout Australia is strongly in favour of the Commonwealth retaining for all time the ownership of the land comprising the Federal Territory. It is generally recognised that it will ( be a national heritage which will increase in value by public expenditure, and that that immensely added value should not be given away to any particular set of favoured individuals who might have the luck to get in first as purchasers, if the lands were dealt with on the freehold system. I believe that the principle of collective or public ownership of land is growing in favour all over the civilized world. It is being realized more and more that the land question is at the root of most industrial troubles, and that to retain the ownership of land in the hands of the people is the only effective way to secure for them social and industrial justice. I realize that the area comprised in the Federal Territory is not so large that the whole economic condition of the nation would be materially affected by the system of land tenure adopted there. But the desire with which we have been twitted by Conservatives in this Parliament, and in the New South Wales Parliament, to make this Federal Territory a place for experiments in State Socialism, is a very commendable desire on our part. In view of the unique conditions under which we shall occupy that Territory, we shall, I think, be justified in undertaking experiments . which it might not be desirable to undertake in the different States. But let me say that we need no experiment to be satisfied as to the value of the public ownership of land. Every honorable senator is aware that an individual possessing neither brains nor energy, but the good fortune to have a little available capital, may acquire land which later may become the site of an extensive settlement, and that the growth of that settlement will create a large fortune for him, and a perpetual income for his successors. The fact that the ownership of land is the safest and best way in which an individual can invest his savings places the matter beyond the region of experiment, because it is clear that the State may reap the same advantage by adopting the same course. There are some who assert that the individual can best engage in enterprises involving commercial knowledge and skill, and that the State must be under many disadvantages in undertaking similar enterprises. That contention is arguable, no doubt, but no ability is needed to own land. All that is needed is that a man should have the capital, and the luck to secure a piece of land in the right place, and he has then only to hold fast to it.

Senator ALBERT GOULD (NEW SOUTH WALES) -Colonel SirAlbert Gould. - Capital is rather hard to get sometimes.

Senator RAE - That is so, but it is quite beside the question. I say there is no ability required to own land.

Senator O'Keefe - A man may have luck.

Senator RAE - That is not ability. I admit that a man may, or may not, show ability in choosing where he shall invest his money in a land speculation, but, so far as the ownership of a good site is concerned, no ability is required. There can be no risk in the Commonwealth adhering to an area which is sure, by the expenditure of public money, to grow into enormous value, at any rate near the centre. And that value will probably radiate not only to the confines of the Federal Territory, but even far beyond -them. I believe it was a fair demand that a very much larger area should be surrendered to the Commonwealth. I do not wish to further enlarge upon the question. I believe that the many advantages which are attached to a leasehold system as against ownership in fee simple are so obvious that the common-sense of the Australian people indorses that point of view, and a large majority of honorable senators are prepared to respond to the wishes of their constituents. I only desire to mention one other advantage which leasehold possesses over other forms of tenure. If you create a freehold tenure, and it be found to be unworkable, or inadvisable, necessarily you -must compensate those whom you dispossess. You cannot change from a freehold to a leasehold tenure without much cost and friction. But if a leasehold system be adopted, it can, at any time, be abandoned in favour of a freehold system. Therefore, on the ground of prudence, added to the other advantages which I have indicated, there can be no doubt that a leasehold tenure is the safest as well as the best generally. The second part of my motion requires very little elaboration. It merely proposes that all land owned privately in the Federal Territory shall be acquired as promptly as possible. I think it is obvious that in justice to the present owners, and to the people, that that should be done, so that the values which will accrue to the land when it is developed in the way intended, shall, as soon as possible, become public property. I believe that the expense of laying out the Federal Capital, and building the Houses of Parliament, and other structures necessary, will be more than met ultimately by the rental value of the land in and around the Capital. Instead, therefore, of the creation of a " bush " Capital, as it is jeeringly termed by many newspapers and politicians, being a bad move; instead of it involving any expense to the Commonwealth, it is, on account of the cheapness of the land, a most economical method of establishing a Capital, and ultimately it will be found more than ordinarily profitable from the fact that the ever-growing land values will be the property of the whole people, when otherwise they would, as I have indicated, fall into the hands of a few fortunate private individuals. I trus't that the motion will be passed unanimously.

Debate (on motion by Senator Findley) adjourned.

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