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Wednesday, 29 April 1936

The PRESIDENT - The honorable senator has used a rather ugly term.

Senator LECKIE - I withdraw the words " funk hole " and substitute " wellcovered dug-out ", which means the same thing. I am amazed that the Tariff Board, which is supposed to be guided by scientific principles, is so ignorant of the actual working conditions in many factories. In saying that, I do not accuse it of intentional bias. The board has condemned industry generally for having too much plant, but any Australian manufacturer who had only sufficient plant to deal with a regular volume of business would soon be forced to the wall. He must make provision to meet rush periods and fluctuations of demand from day to day. A regular flow of business over a long period is unusual. On this subject I speak with some authority, for I am a manufacturer. I could do with about one-third of my present plant if the demand on the factory were regular, day after' day. The demand, however, is not regular, and there must be sufficient machines of various kinds to supply rush orders from customers who themselves are subject to a time limit. If I had not sufficient plant to deal with such orders, I should lose many customers.

Senator Arkins - The honorable senator must deal in perishable goods.

Senator LECKIE - What goods are not perishable? Cement, for instance, is a perishable commodity. If it were desired to store large quantities of cement, immense space would be needed. That storage would have to be dry, and to provide it many hundreds of thousands of pounds would have to be expended. The Tariff Board also seems to ignore the fact that in every factory there is an economic unit. That factor is not so generally recognized as it ought to be. Many years ago I was chairman of directors of a co-operative butter company. In the early stages of the company's development it found that a production of ten tons of butter a week was an economic unit. When the production reached thirteen or fourteen tons a week, the company found that it could not produce butter as cheaply as when the plant dealt with only ten tons a week, but when the output grew to 20 or 21 tons a week, another economic unit was reached, and the company found that production costs were les3 than when the factory produced ten ton» a. week. Larter, when the quantity of butter produced increased slightly, the company found that it could not produce it as cheaply as when the plant dealt with twenty tons a week. The reason is that when a factory is called upon to produce more than a certain quantity of goods, extra plant, accommodation, and supervision are needed, and extra shifts may have to be worked.

Those factors the Tariff Board appear to have overlooked. Let me for a moment again refer to cement. In the manufacture of that commodity it has been found that the economic unit is 60,000 tons. Were Tasmanian cement works confined to the 8,000 or 10,000 tons of cement required in that State they would have to close their doors. A market on the mainland for the balance of the 60,000 tons is essential to the continuance of those factories. I am afraid that if the recommendation of the Tariff Board in regard to cement be carried out, it will destroy the cement making factories in the smaller S'tates of the Commonwealth, leaving, possibly, only those in Victoria and New South Wales. Those factories would, in that event, be called upon to supply the whole of the Australian demand, with the result that the freight on cement from Victoria and New South Wales to other parts of the Commonwealth would be greater than the freight on cement from Great Britain. Generally, manufacturers in Victoria and New South Wales are delighted to see factories established in the other States, notwithstanding that in some respects such factories increase the competition. The reason ' for this is not altogether altruistic. They recognize that so soon as fair-sized industries are established in the smaller states, creating much employment, the people of those states begin to realize the value of such .industries in maintaining their prosperity and will support protection sufficient to safeguard their newly-established enterprises against the cheap labour products of other countries. The aim of this Parliament, as it is the aim of the manufacturers of Australia, should be to establish factories as widely as possible throughout Australia. Particularly should factories be established in the smaller or less populous states, as they are now established in Victoria and New South Wales.

The Tariff Board has assumed a number of functions which I do not think this Parliament or the people of Australia expected that it would assume. It has taken upon itself the responsibility of saying how much profit any industry should be allowed to make and also how much plant any industry should have. In adopting this course the board is playing directly, and surely, into the hands of big business, as such a policy results in the concentration of particular industries in a few factories. I remind honorable senators that the important industries of Australia grew practically out of nothing; for instance, such concerns as the McKay Harvester works, MacRoberston's confectionery factory, and some of the big factories now established in Sydney developed from very small beginnings. The tendency of the Tariff Board's recommendations is to concentrate industry in the hands of hig business, that is, in the hands of companies with capital amounting to hundreds of thousands of pounds. Consequently, such industries will be confined to a few factories, and these, I claim, will be much harder to control than, a large number of smaller factories spread over Australia. The board prescribes 10 per cent, as a reasonable maximum profit. That seems a very fair rate of profit, particularly on a capital of some hundreds of thousands of pounds but, if a man is starting in industry with a capital of from £1,000 to £5,000 will such a rate of profit be sufficient to enable his business to grow? Under this policy a small business must remain small; the only hope for any business to become and remain big is for it to commence on a big scale. This is harmful to Australia, as the tendency to-day is for the directorates of most of the big business concerns to be dominated by accountants or representatives of financial institutions. Thus, big business becomes soulless and gives scanty consideration to the old employees in any industry which it controls. To such directorates profits are the only consideration; they say that results are the only things that count ; they have no sympathy or consideration for the rights of old employees. I repeat that it is to the advantage of Australia to have manufacturing activities distributed as much as possible.

We have been told that the rejection of the recommendation of the Tariff Board to reduce certain duties will amount to an infringement of the Ottawa agreement. It is claimed that this Parliament is morally bound under the Ottawa agreement to carry out in toto the recommendations of the Tariff Board.

To my mind the benefits which have accrued to Australia as the result of that agreement appear to have been rather exaggerated. Such benefits have never been stated definitely in figures. We have heard vague statements as to the benefits that have accrued under the agreement, to the producers of Australia, but some of those benefits are imaginary. I cannot see that the producers of Australia have gained very great benefits as the result of the agreement. In support of that view I quote figures which 1 have taken from the London Times Trade and Engineering Review of March, 1935, contrasting the trade of Australia, Canada and New Zealand with the United Kingdom before and after the Ottawa agreement. The values quoted are all in English currency ; I shall not resort to the old trick of quoting imports in English currency and exports in Australian currency. The value of imports from Australia to the United Kingdom rose from £45,679,000 in 1931, to £50,061,000 in 1934, whilst the exports from Great Britain to Australia rose from £141,528,000 in 1931 to £26,251,000 in 1934.

Senator Sir George Pearce - The year 1931 was in the middle of the depression.

Senator LECKIE - That was about' the time when the Ottawa agreement was made.

Senator Guthrie - Does the honorable senator suggest that the Ottawa agreement has not been of enormous importance to Australia?

Senator LECKIE - That is exactly what I am suggesting. I wish to know in definite figures what advantage the agreement has conferred upon Australia. Canada, as well as Australia, suffered a depression and I direct attention to the figures relating to its trade with the United Kingdom. Great Britain's imports from Canada for the years I previously mentioned rose from £32,841,000 to £50,413,000, whilst the exports from Great Britain to Canada fell from £20,551,000 to £19,725,000. Similarly, Great Britain's imports from New Zealand rose from £37,775,000 to £40,445,000, whilst the exports from Great Britain remained practically the same. I point out that whilst Great Britain's imports from Australia increased by only 9^ per cent., its exports to

Australia increased by 801/2 per cent., whereas Great Britain's imports from Canada increased by 531/2 per cent., whilst its exports to Canada actually decreased. Yet some people have the cheek to pick out Australia as a country which has not implemented the Ottawa agreement. Those critics say not a word against Canada, South Africa or New Zealand in this respect. Particularly are they silent with respect to Canada, which has a population of 10,500,000, whose imports from Great Britain, so far from increasing have actually decreased. Taking all these factors into consideration it must be obvious that Australia has implemented the Ottawa agreement more loyally than any other dominion.

Senator McLeay - All the more credit to it.

Senator LECKIE - I am giving Australia that credit, but I emphasize that Australia is repeatedly singled out as the one dominion which has not implemented the Ottawa agreement. This allegation is groundless.

Senator Badman -What about the exports from Australia to other dominions as the result of the Ottawa agreement ?

Senator LECKIE - The total production in Australia in 1933-34 in the dairying, poultry and bee-farming industries was valued at £40,000,000, whilst the total exports of these products for the same year were valued at only £10,000,000. Therefore 74.6 per cent. of these products was consumed in Australia, showing that the home market for these products is three times more valuable than the export market. The only commodity in respect of which the value of exports has been greater than the value of produce consumed locally is wool. In 1933-34 production in Australia, exclusive of bullion and specie, was valued at £357,932,000, of which £112,000,000 -worth was exported, while the value of goods consumed locally was £241,000,000. Wool is the only exception.

Senator Sir George Pearce - What of wheat?

Senator Badman - About four-fifths is exported.

Senator LECKIE - These figures show that barley, bran, flour and rice valued at £24,000,000 were exported, but the value of wheat exports is not given. The advantages of the Ottawa agreement are somewhat problematical. Mr. Malcolm MacDonald, M.P., Secretary of State for Dominion Affairs, said: -

Great Britain had undergone a revolution, and had adopted protection as a National Policy. The first objective of the Ottawa Conference was to increase the prosperities of the countries of the Empire to establish two way traffic in goods within the Empire. The Ottawa Agreement did not establish Empire freetrade. That creed was associated with ideas which belonged to the ancient past.

These significant remarks were commented upon by the Minister for Trade and Customs (Mr. White) in the following words: -

For twenty-five years we have had a preferential tariff which had meant a great advantage to Great Britain. In the eleven years, 1922 to 1932 inclusive, the United Kingdom imported from Australia merchandise valued at £472,796,182. In the same period she exported to Australia goods produced in the United Kingdom to the value of £537,507,742, leaving a merchandise balance in favour of the United Kingdom of £64,711,560. In the same period Australia paid to the United Kingdom in the service of her overseas public debt £280,000,000.

During those eleven years we were at a disadvantage to the amount of £340,000,000, which was met by borrowing overseas. Exchange on the interest payableoverseas now amounts to about £5,000,000 annually. In view of the fact that for those eleven years there was a balance against Australia of £340,000,000 to £350,000,000, surely it is time we started to correct our trade balance. When there seems to be a slight balance in our favour it is not the time to make a fuss.Honorable senators are well aware that we have not reached the stage when our overseas trade balance is satisfactory. Even during a prosperous year the balance is unsatisfactory, and last year we had an adverse trade balance of about £10,000,000.

Senator Sir George Pearce - We have a satisfactory balance. Interest is not trade.

Senator LECKIE - How are these amounts paid?

Senator Sir George Pearce - By our favourable balance.

Senator LECKIE - We can buy only what we can pay for, and we can sell only those goods which we have to sell. I am unaware of a substantial surplus of Australian produce accumulating in this country. If weimport goods we have to pay for them in cash or with other goods, otherwise we shall be in an unsatisfactory position. If the balance of trade turns seriously against us, we must raise the exchange, ration credit in Australia, or ration imports. There may be one or two other methods, but the position has to be checked in some way. If we decide to pay for the excessive imports with money borrowed overseas, what becomes of Australia's credit, and how long will it be before the exchange rate reaches an uneconomic level? I have always been opposed to arranging the exchange rate at a fixed level. Exchange was intended to be a regulator of trade between countries, but when it is pegged, instead of regulating the trade it merely depreciates the value of the Australian currency. The only other way is by raising tariff barriers or by restricting imports. If we are to allow the exchange to rise to a higher rate, it may reach 150 per cent. instead of 125 per cent. as it is at present, and instead of paying £5,500,000 annually in exchange on interest commitments overseas, we shall have to pay £11,000,000. It is better to protect Australian industries and to provide employment for Australian workmen, than to make work for the operatives in Great Britain, Japan or other countries. We should not tax our own people to pay a further £5,500,000 for exchange on overseas interest. To show what the manufacturers in Great Britain think of the Ottawa agreement, I may say that the Executive Committee of the Federation of British Industries has sent a significant memorandum to His Majesty's Government in the United Kingdom. I quote a. passage from the British Export Gazette, of 1936, in whicha plea is made for a modification of the Ottawa agreement, of course, altogether in favour of British manufacturers. Strange to say, the extract concluded by advocating that duties be imposed against manufactured articles imported from the dominions. It stated -

The federation, therefore, urges that in order to avoid undue competition arising in the home market from these or other causes from any part of the Empire, whether dominions or Crown colonies, the Government should adopt the policy of affording effective protection to United Kingdom manufacturers, either by duties, quantitative regulation, or in any other way which may prove feasible.

Senator Guthrie - But Australia does not export manufactured goods.

Senator LECKIE - The British manufacturers object to the effective protection of Australian industries, but ask the British Government for effective protection of the manufactures of the United Kingdom.

At the last general election, the Commonwealth Government made certain professions of faith, 'and laid down a definite policy for the adequate protection of Australian industries. That credo was accepted in good faith, both by the people of Australia and the classes directly interested - the manufacturers and the workers - as being the considered policy of the Government. Now those sections of the community could very well be excused for thinking, in view of the reduction of duties on nearly 2,000 items, that that declaration contained more of a profession than of faith. I warn the Government of the growing trend of feeling against it throughout the Commonwealth.

Senator Sir George Pearce - Can the honorable senator name any one Australian industry which is showing signs of not receiving adequate protection?

Senator LECKIE - Certainly I could quote examples; the interjection of the Leader of the Senate is an old gag.

Senator A J McLACHLAN (SOUTH AUSTRALIA) - It is easy to generalize.

Senator LECKIE - That is exactly what the Government is doing; it is always taking the easiest path. There is always atime lag in the effect of duties.

Senator Brennan - This policy has been in operation for four years.

Senator LECKIE - Yes ; but only within the last eighteen months has the Government been reducing duties, except for the abolition of the Scullin Government's surcharges and prohibitions, which nobody wanted. Three members of the Government have made the astounding statement that the number of employees in Australian factories is greater than ever, and that the factories of Australia are prosperous, largely due to the tariff policy of the Government. Such an assertion is so ludicrous that one almost doubts the political sanity of the honorable gentlemen responsible for it. The declaration that the reduction of duties has brought prosperity to Australian manufacturers is so puerile that it cannot be regarded seriously. I agree that the general policy of the Administration - not its tariff policy - contributed to this prosperity. The Government restored confidence, which had been destroyed by the action of a previous administration and managed the finances of the Commonwealth in a highly creditable manner; the return of confidence, coupled with the increased prices for primary products, was responsible for the improved position of the manufacturers. But the statement that this prosperity is attributable to the tariff policy of the Government is so puerile that it will not be accepted by anybody with a knowledge of the facts. If the Government contents itself with claiming that the improved position of manufacturers is due to its general policy, I shall agree with it. I think that the Government has done excellently in that connexion. Owing to undue influence, it is adopting a wrong tariff policy at present, but I have no doubt that it will speedily discover its mistake. The most that the Government can claim for its tariff policy is that it has done no harm.

Senator Collings - But there are 15,000 fewer employees than there would have been if the duties had not been reduced.

Senator LECKIE - At one time Australian manufacturers were told "Make a success of your business or perish ". Now they are told " Make a success and die."

Senator Guthrie - But they are not dying?

Senator LECKIE - So soon as an industry becomes prosperous and gives extensive employment, it becomes a target for attack. If it be failing, no notice is taken of it. The Government claims that it has a moral obligation to implement in toto the Ottawa agreement. Doe? that moral obligation mean putting thousands of our people out of employment?

Senator Sir George Pearce - No.

Senator Collings - The Government has failed to give employment to thousands of men.

Senator LECKIE - Let me draw again upon the cement industry to illustrate my contention. There is on the water at the present time a shipment of " Tunnel " brand cement, consigned to "Western Australia by the Danish steamer s.s. Stanford. The consignor is AlfredField of London and the consignees are Brown & Bureau Limited, of Perth, who chartered the boat on behalf of certain "Western Australian interests. The original shipment of cement was 4,750 tons, the remainder of the cargo consisting of sulphur. But when it became known that the duty was likely to be lifted, the consignment of cement was increased to 6,000 tons.

Senator Guthrie - Are not Brown & Bureau Limited, the representatives of Australian manufacturers of cement?

Senator LECKIE - I am not aware of that, but the firm is agent for the " Tunnel " brand of cement manufactured in Great Britain. A week later a second boat with a cargo of 5,000 tons of cement is following. Therefore within the next three weeks 11,000 tons of British cement will arrive inWestern Australia. Honorable senators may be aware that it requires eight men working all the year round to produce 1,000 tons of cement; four men are engaged in the actual manufacture of cement, and another four men are required to produce coal and other necessary materials. The arrival of 11,000 tons of cement in "Western Australia in three weeks means that 88 men will be deprived of employment for twelve months and they will not get work that they otherwise would have obtained. Is that the moral obligation that the Government has undertaken in resolving to implement the Ottawa agreement? Never in my life have I heard anything so iniquitous. The Government has a moral obligation to put Australians into employment, not to give work to Englishmen. Does its mora! obligation in respect of the Ottawa agreement imply further that employment shall be withheld from Australians, so that the workers of Japan shall be given jobs? I have never heard of a moral obligation of this kind before. The factsI have cited are a concrete instance of what occurs when duties are lowered.

Senator Sir George Pearce - Those threats were uttered in connexion with the glass industry; but the fears were never realized.

Senator LECKIE - They were not realized because the demand for glass in Australia became greater and greater with the return of prosperity.

Senator Badman - What about the demand for cement?

Senator LECKIE - The demand for cement has not been so great.

Senator Guthrie - Perhaps that is due to the higher prices charged.

Senator LECKIE - No ; it is the result of the decline of building operations in the depression years. I have given the Senate a concrete example of the effect of the Tariff Board's recommendation with regard to cement and have shown that Western Australia will suffer heavily.

Senator A J McLACHLAN (SOUTH AUSTRALIA) - If the Government of Western Australia had not obtained that cement, work on the Canning Weir would not have been carried out, and a large number of Western Australian workmen would have been without work.

Senator LECKIE - The difficulty of securing cement was attributed to the shipping strike; but that was not correct, because there are cement manufacturers in Western Australia.

Senator Hardy - Does the honorable senator think that the cement companies have made only reasonable profitsin recent years?

Senator LECKIE - I do not wish to be drawn into a discussion of the profits of the various cement companies, but I know that the Goliath Cement Company, in Tasmania, for fourteen years made no profit at all, and at the end of that time had to write off one-third of its capital. During the last seven years it has paid on its reduced capital three dividends of 21/2 per cent., 10 per cent. and 15 per cent., respectively, or a total during the last seven years of 271/2 per cent., representing 4 per cent. on its reduced capital of 13s. 4d. in the pound. Over the whole period its shareholders have lost in capital 6s. 8d. in the pound, and have been paid in dividends 3s. 10d.

Senator Badman - May that be regarded as typical of other cement companies ?

Senator LECKIE - It may be taken as typical of many such companies. I am afraid that some honorable senators have a misconception of the dividends paid by cement manufacturers in recent years. They have failed to note that if dividends have been paid they have been paid not out of profits, but out of accumulated surpluses. During the depression many business firms had to write down their capital and draw on their reserves in order to give a return to shareholders. They were in a better position than primary producers, because they were able to place the position before their shareholders and obtain approval for proposals to write down capital in order to carry on, and have a chance to recover.

I was somewhat amused at the remarks of Senator Payne and other honorable senators concerning the effects of the tariff on the cost of living. Having been associated with industrial concerns for many years I know that following the imposition of the Scullin tariff, the costof living in Australia fell by 25 per cent. And what perhaps is more remarkable, since this Government reduced the duties on 2,000 tariff items the cost of living has gone up. This fact effectively disposes of the argument that the tariff affects the cost of living. In June, 1929, the cost-of-living index figure was 1,797. In1933 it had dropped to 1,332, and in March of this year it had increased to 1,427. In view of these figures it is absurd to claim that higher tariffs increase the cost of living. The explanation for the present higher index figure is to be found in the better prices being obtained in Australia by our primary producers for their products. We do not begrudge them this relief although it will affect costs in secondary industries.

I have endeavoured to place before the Senate, as clearly as possible my views on tariff matters generally, and shall reserve further remarks till we reach the committee stage of the bill. Australian manufacturers are not high tariffists, but they feel that they are entitled to ask for adequate protection against competition from other countries where wages costs are lower and working conditions not so favorable as in Australia. They do not believe in prohibition or surcharges. They all would be pleased if they could double their present volume of employment. I claim for them that during and since the depression they have stood up to their job. Factory employment has absorbed a very large number of skilled operatives. The present need is to find more work for unskilled labourers, who suffered most during the depression, largely because of the cessation of government works. Without casting any slur upon cement workers, coal-miners and the like, I say that a man does not require to be skilled in order to give satisfaction in such occupations, and it is to the interest of Australia to give tariff protection to all those industries which employ unskilled workers. I trust that, in anything that I have said this afternoon, I have not been unfair to the Government. I do not quarrel with its tariff policy so much as the attempt, which has been made to influence the debate in this chamber on the cement duties. That item should be discussed entirely on its merits. " There is no moral obligation resting on this Parliament to heed representations from outside and, by an alteration of the duty imposed on cement by the House of Representatives, cause thousands of Australian workmen to lose their employment. There is no reason at all why we should set back the economic clock in Australia in order that a greater measure of prosperity may be given to workers in another country.

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