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Friday, 2 July 1920

Mr HUGHES (Bendigo) (Prime Minister and Attorney-General) . - (By leave). - As I have said, the course proposed to be followed in connexion with this matter is a most unusual one. So far as I know, it is without precedent for a Government to table the secret correspondence that has passed between its various members in relation to public matters. But then the circumstances are unprecedented, too. Let me remind honorable members for a moment of what the position is. It is grave in the extreme. My late colleague went Home to deal with matters - to quote his own words - "of life and death." The financial circumstances of the Commonwealth at present are most embarrassed. I need not dwell on them for they are well known. I refer honorable members to the statements made by the ex-Treasurer in Parliament and outside. He went Home because it was considered impossible to grapple with the situation from a distance. A man on the spot was called for, and he, by virtue of his position as Treasurer of the Commonwealth, was by all sections of the House considered the proper man to go to London to deal with it. The most important and pressing object of the mission related to finance.

In addition, there were other matters to be dealt with, not less important, although, perhaps, less urgent. Amongst these were mattersthat arise out of the Treaty of Peace - Mandates, League of Nations, and War Indemnity. There was also the re-organization of the High Commissioner's Office in London, the question of a trade representation in England and elsewhere, and the question of immigration.

After the right honorable gentleman's departurethe Allied Powers decided to hold two Conferences of the first importance, one at Brussels to deal with finance, and the other at Spa to consider, and, if necessary, to revise, the Versailles Treaty. Mr. Watt was appointed the sole representative of Australia to both these Conferences.


Mr HUGHES - Yes; to-day we have neither any representative on these vitally important Conferences, nor any representative in London to deal with finance. Honorable members can readily appreciate what this involves. For example, the day before yesterday the time expired when it became necessary to find a huge sum of money in London. We had no one there to carry on the difficult and delicate . negotiations on the London money market, or to put our case to the British Government. The Brussels Finance Conference is coming on. We shall be unrepresented. The Spa Conference, at which the question of the war indemnity will be raised and important revisions of the Treaty of Versailles may be made, is shortly to be held. Australia will be without a representative to uphold her vital interests.

In the circumstances, therefore, the resignation of Mr. Watt creates a situation very different from that which would have arisen had he or I or any of my colleagues resigned in Australia. If a Minister resigns while in Australia he can be replaced. But by no effort is it possible for us to place a man 12,000 miles away in sufficient time to take up the threads of the mission with which Mr. Watt was intrusted. These considerations then, together with the request of Mr. Watt himself that the cables that passed between us should be published, are the reasons, or excuse, if honorable members prefer it, why I take this unprecedented course.

The cables that passed between Mr. Watt and myself were very numerous, and, in some cases, very lengthy. The whole of the file which the Leader of the Opposition (Mr. Tudor) asked yesterday should be published was laid before a Committee consisting of that honorable gentleman, the Leader of the Country party (Mr. McWilliams), and myself, and the cables were edited. There was no difference of opinion between us as to what should be excised. By general consent certain things were left out. I give the House and the country the assurance on behalf of myself, the Leader of the Opposition, and the Leader of the Country party, that nothing has been left out the omission of which could in any way affect Mr. Watt to his disadvantage or prejudice, and that all things left out have been omitted only in the public interests of the Commonwealth. I think it only proper to say further that Mr. Shepherd, the Secretary to the Prime Minister's Department, who has charge of all these files, and through whose hands all these telegrams go and come, and who ciphers and deciphers them, was asked by me in the presence of the honorable member for Franklin (Mr. McWilliams) and the honorable member for Yarra (Mr. Tudor) whether this was the complete file, and he said that, with the exception of two telegrams sent by the Department of the Treasury, atMr. Watt's request, to supply him with particulars about financial affairs in that Department, this was a complete file. The cablegrams referred to, I understand, were purely departmental, and have nothing whatever to do with the matter with which I am dealing. I have not got them here, and have not seen them, but I am prepared to show them to the honorable members to whom I have referred.

Sir JOSEPH COOK (PARRAMATTA, NEW SOUTH WALES) (Minister for the Navy) - They were simply giving Mr. Watt information for which he asked.

Mr HUGHES - Just so; but I am prepared to show them to the honorable members for Yarra and Franklin, and if they think that there is anything in them that concerns this matter, I shall have them laid on the table. With this pre amble, I will, without further ado, read the correspondence: - [Radiogram sent by the Prime Minister to Mr. Watt, passenger per Konigin Luise, 25th March. 1919.]

All well. Gratuity Bill being discussed. Tariff introduced. Kindest regards. [Telegram received by the Prime Minister from Mr. Watt,Konigin Luise, Perth, dated 26th March.]

Glad know things going well. Trip slow, but so far enjoyable. Feeling better. Best wishes self and colleagues. [Radio message sent to Mr. Watt,Konigin Luise, by the Prime Minister, dated 31st March.]

Cabled High Commissioner to-day approving extension to 31st May of employment Voss, Acting Australian Commercial Agent, Paris. Glad if you will look into matter and favour with your views.

Hughes. [Radio message received by the Prime Minister from Mr. Watt, s.s. Konigin Luise, dated 31st March.]

Have been expecting a telegram giving news of Australia, but (?except) for your telegram March 26th nothing reached me. Please instruct Shepherd to send me cables sent High Commissioner, and also report the result New South Wales elections, also any cables from Secretary of State which you have received since I left with reference to Mandate, League of Nations, &c. Everything well with me. Hope that same in your case. Kind regards to yourself and Cabinet. [Radio message received by the Prime Minister from Mr. Watt, s.s. Konigin Luise, dated Colombo, 9th April.]

Urgent. Disappointed that you have not, according to promise and my last telegram request, sent me latest confidential information reference Peace Treaty, League of Nations, and Mandate. Unless I receive advice as to developments these questions, it will not be possible for me to effect anything, and I shall not task (attempt the task?). Three telegrams received from you in overthree weeks only' deal with trade representation France and local Australian affairs. Regards. [Cablegram sent by the Prime Minister to Mr. Watt, s.s. Konigin Luise, Suez, on 15th April.]

Settlement Barrier strike expected. Wales Labour Government formed - Storey, Premier. Parliament resumed yesterday. Hughes stated Government's arbitration policy, also intimated would ask House express opinion paying travelling expenses Ministers. High Court case against Wool Committee and Prime Minister, Wool Sliping Company, dismissed. Thousand persons congregated Parliament House yesterday urging 50 per cent. cash war gratuity. Hughes refused. Queensland agreed amalgamate its Savings Bank with Commonwealth

Bank. Repatriation Bill introduced Representatives. Gratuity Bill Senate. Mr. Watt's family all well. Mr. Reid's family all well.

Hughes. [Extract from cablegram sent by the Prime Minister to Mr. Watt, s.s. Konigin Luise, Suez, on 16th April.]

Private. Your telegrams. Regret disappointing you, but as Shepherd sent you news cables, and I have had no further Mandate, Treaty, League of Nations telegrams since you left, I thought it best leave you enjoy your all-too-short rest in peace. I will, however, prepare and send you before arrival in London telegram setting out position, as I see it, on all these and other matters. Meantime, I hope you will not worry, for you have hard work . ahead. hughes. [Radio message received by the Prime Minister from Mr. Watt, s.s. Konigin Luise, dated Aden, 18th April.]

Cannot understand why you have not replied to my telegram April 9th. It is essential that I should receive, as you promised, prompt and full particulars concerning all communications between Imperial Government and you. Be good enough to inform me whether you intend do this.

Watt. [Cablegram sent by the Prime Minister to Mr. Watt, s.s. Konigin Luise, Suez, on 21st April.]

Among documents supplied to you by Shepherd when leaving Australia were telegram from Secretary of State for the Colonies, February 19th and March 6th, re International Conference to study financial crisis. Before departure, you minuted Treasury file to the effect that if Conference held during your stay Britain, you would attend on the receipt of telegram from me.

Cable now received from Secretary-General, League Nations, through Secretary of State, dated April 17th, stating Conference will be held Brussels about end May. Countries invited to send delegates include all British Dominions. United States also invited to send representative or be associated with work of Conference. Australia invited send not more than three delegates conversant public finance and banking, as well as with general economic questions. Council of League will nominate President of Conference and supply necessary personnel for Secretariat. - Exact date of meeting will be announced by SecretaryGeneral. In order to facilitate preparations for Conference, Council suggest that Commonwealth Government forward to SecretaryGeneral without delay any suggestions it may desire to submit to Conference for dealing with present financial difficulties, together with statement showing any action already taken to deal with situation.Proposed that general expenses in connexion with organization of Conference be met by League, and expenses and salaries of delegations by respective Governments.

Am advising League, through Secretary of State, that you will be Commonwealth Government's sole representative at Conference. Cable me any action you think fit regarding submission to Secretary-General of suggestions referred to above.

Hughes. [Extract from cablegram received by the Prime Minister from Mr. Watt, s.s. Koningin Luise, dated Port Said, 26th April.]

Urgent. Thanks your telegrams April 8th, 21st, received Suez. Will await your telegram on Treaty matters. I disembark Naples next Saturday. You had better send it to High Commissioner, London. Please tell me same time if anything new re renewal Anglo- Japanese Treaty.

Will attend Finance Conference, Brussels. Do not think it advisable forward any suggestion to Secretary-General.

Glad to know things going well. Kindest regards, best wishes to you and brother Ministers.

Watt. [Extract from cablegram sent by the Prime Minister to Mr. Watt, s.s. Konigin Luise, Naples, on 30th April.]

Suggest that you take full advantage opportunity see Continent now as in all probability you will not have chance later. Fewdays' delay reaching London should not cause any serious difficulty,and will give your health better chance.

Am sending cable London for you advising fully latest position re Brussels Financial Conference, Mandates, Anglo-Japanese Treaty, reopening of reparation question, &c.

Hughes. [Cablegram received by the Prime Minister from Mr. Watt, dated Naples, 2nd. May.]

Thanks your telegram 30th April. Expect arrive London 11th. Please telegraph me result Immigration Conference. All well. Regards to colleagues and yourself.

Watt. [Cablegram sent by the Prime Minister to Mr. Watt, London, on 4th May.]

As promised in my telegram to you at Naples, am giving you latest position following questions: -

Finance Conference, Brussels. - Secretary General, League Nations, telegraphed through Colonial Office, 22nd April, asking that answers be furnished not later than May 1st to series of questions relating to -

(a)   Budget and Estimates for present financial year, particularly as to direct and indirect taxes, levies on capital, loans, recurring and nonrecurring expenditure, and debt service.

(b)   National debt December 31st, 1918 and 1919, viz. - Domestic funded and unfunded, and foreign.

(c)   Details of foreign trade.

(d)   Statistics re gold and silver holding, circulation of home currency issues and bank notes.

(e)   Laws, &c, regulating operations for foreign exchange.

Reply prepared by Treasury Department was sent yesterday, and Colonial Office has been asked to furnish you with copies of cables exchanged immediately you arrive London.

Mandate. - Only communication from British Government re Mandate since your departure is telegram from Secretary of State, March 18th, received here too late to catch you Fremantle, giving text of draft convention relating to mandate for German New Guinea and adjacent islands. Proposed provisions of mandate as therein set out are practically same, except in verbiage, as text shown on pages 2 and 3 of statement .prepared for you by Shepherd headed " Mandates 'for former German Pacific Possessions," but the preamble is considerably amplified. Mandate not yet officially confirmed.

On April 30th I sent personal cable to Lloyd George strongly protesting against delay in issue mandate. 1 pointed out' that nearly twelve months ' have elapsed since Treaty was signed, providing in plain terms, not only for these mandates, but for conditions under which each class to be exercised; that mandates for South Pacific Islands are specifically mentioned as being in class over which mandatory has same power make laws as over own territory, and that it was definitely agreed when this clause in Treaty ' was being discussed that Australia was to have mandate and have it on these terms. I added that Supreme Council subsequently conferred this mandate upon Australia on these terms, and that attitude of Japan, who alone objects to giving effect to provisions of Treaty and commitments of Supreme Council, was as well known when Treaty signed as it can be now,

And that Peace Conference decided against Japan. 1 insisted that Treaty must be given effect to, and urged that mandate be officially given to Australia without further delay.

Anglo-Japanese Alliance. - Sent cable Secretary of State, April 22nd, asking to he informed whether any negotiations or conversations had taken place re modification, termination, or extension of alliance, and stating Commonwealth Government desires opportunity discussing alliance, not only as it may affect questions now pending between Australia and Japan, but also as affecting general situation in Far East and, in particular, its bearing upon racial equality amendment of covenant. No reply yet received.

Reparation and Indemnity Question. - I sent personal telegram to Lloyd George, April 29th, stating it was reported in press that San Remo Conference of Allied Prime Ministers had decided re-open reparation question and contemplated reducing amount Germany has to pay under Treaty (o) by May, 1921, (5) subsequently. I stated I did not know what truth there was in these reports but wished, on behalf of Commonwealth, to protest most emphatically against any amendments of Treaty either affecting reparation or other important clauses, unless as result of duly summoned Conference at which Australia represented and that, in any case, Commonwealth could not agree to any reduction of amount of indemnity agreed upon in Versailles Treaty, this applying both to Germany's payment by May, 1921, and subsequently.

I emphasized that it was not competent or proper for any Conference of Prime Ministers of Great . Powers to modify major terms .of solemn Treaty agreed upon and signed by all Powers at Versailles arid subsequently ratified by Parliaments of signatories and that this applied whether decisions of such Conference subsequently submitted to other signatories of Versailles Treaty for approval or not.

I reminded Lloyd George that in the case of the Conference preceding Armistice in 1918 Dominions were notified and asked to approve what was done, when neither disapproval nor protest of any avail, and I expressed the opinion that unless Versailles Treaty to be a scrap of paper it could only be modified as provided for in Treaty itself or by same representative Conference that made the Treaty.

Hughes.' [Cablegram sent by the Prime Minister to Mr. Watt, London, on 9th May, 1920.]

Congratulations safe arrival. Hope both well. Please do not see Chancellor or Secretary of State for Colonies re finance or wool until receipt cable from me. Have been very unwell.

Hughes. [Extract from cablegram sent by the Prime Minister to Mr. Watt, London, on 11th May, 1920.]

Personal and Secret. - Finance: Wool.-* Mature reflection on financial position only confirm conclusion we both arrived at before your departure. Wool is key to solution. Very much depends upon way in which matter is put to British authorities. Am convinced that way we agreed upon is one to follow. Position is that Commonwealth Government owes British Government for war expenditure, say, £40,000,000. Britain is strongly pressing for payment of 8$ million pounds at once, and for assurances re balance. That is one side. Now for the other: British Government owes Commonwealth Government- not owes woolgrowers, mark, but owes Commonwealth Governmenthalf profits all civilian wool. What this amounts to we cannot ascertain, although we have pressed for information repeatedly, but in my opinion our share is not less than £40,000,000.

The position being thus stated suggestscourses to be followed, and I know no one so. well fitted to do so with complete success as you. You are Treasurer: You come home naturally very anxious to adjust our financial relations and being quite unable to understand reasons for Chancellor's attitude. You cannot understand why British authorities have not long ago adjusted accounts. While admitting complexity and magnitude wool transactions, you cannot accept explanation that it has been impossible to pay over to us what is ours or even to' present statement of accounts. And as a step precedent to all discussion upon finance, settlement of our half profits on wool must be made.

Honorable members will understand that the above is what I am suggesting that Mr. Watt, should say. Now I proceed to tell Mr.Watt of my conference with wool men in Sydney: -

As upon the satisfactory sale of the new wool clip depends to a very large extent our immediate future financial resources, and anticipating the failure of the Wool Committee's scheme, I called a conference of leading men in Sydney last week, and put before them some facts relating to finance- Commonwealth and private - and the sale of the next clip. It was a small, but most representative, gathering. I put two schemes before them- one dealing with finance, the other relating to sale of new clip. I told them in strictest confidence of the purport of your mission, upon the success of which I said financial position of Commonwealth depended. I told them that the Commonwealth must have money. I explained effect the huge excess of exportsover imports must inevitably have upon Australian business.

Of course, British Government is not in any way concerned with all this. Under the agreement, Britain must divide profits with Commonwealth Government. What the Commonwealth does with these profits is between the growers and the Commonwealth Government, and has nothing at all to do with Britain. The great thing is for us to get them at once. That is your job.

Following is outline of. my proposals laid before meeting of wool-growers in Sydney: - " How great the accumulation of Australian money in England is, and is likely to be during next twelve months, can be gathered from the following figures: -


I interrupt this statement of my proposals to the meeting in Sydney to emphasize that I underestimated that lastmentioned total by £10,000,000 deliberately in order to avoid exaggeration. My outlined proposition proceeds -


Of this, there may be, say, £40,000,000 to be paid in England for interest on loan money, public and private.

It thus appears that the accumulation of money in London by June, 1921, will have amounted to £135,000,000 over the amount of exchange to be provided by imports of the same volume as at present.

It is necessary that I should mention that, side by side with this credit on private account, there is an indebtedness to the British Government by the Commonwealth Government which has not been funded or in any way provided for, of some £40,000,000.

If Australian wool can be procured only in Australia, it will force British banks provide necessary credit, and ensure that sufficient buying 'power is centred in Australia to lift 1920-1921 clip at present world's parity ruling in London.

Further Government interference in the course of business is undesirable.

I want to help and not to interfere.--

Will honorable members please understand that this is still the precis of my remarks to the Sydney Conference, as I transmitted them to Mr. Watt, in order that he might be fully informed of everything that took place. And I continue, addressing the Conference, as follows: -

I desire to suggest for your consideration a scheme which calls merely for a little co-operation between growers and others interested, and for some negotiations with the British Government. These negotiations I am prepared to undertake if required, as I feel sure that the action contemplated will be in the best interest, not only of Australian wool-growers, but of Australia generally. This scheme calls for no further legislative nor administrative action by the Government. The present Proclamations with regard to the export of wool would simply remain in force until November 1st next. The rest of the scheme depends merely upon agreement between growers and Australian brokers to defer opening sales in Australia for some six weeks or so, and negotiation with the British Government to induce it to suspend sales in London while 1920-1921 clip is being sold in Australia.

As I have told you, Government of Australia must raise at least £40,000,000. This money must be raised.

In the scheme suggested,I have provided machinery both for this and for payment to growers of their share of profits in Australia in the only way that seems to me to be a practicable one.

In accepting Australian bonds for their share of profits, wool-growers will not be making any real sacrifice. I fully appreciate that many graziers are having bad time with drought, an.d they have my deepest sympathy. I sincerely hope this trouble will soon pass away, but I say that, apart from the drought, wool-growers are in unique position. No other section of community will have anything like sum of £30,000,000 payable to it in London. No other section has before it possibility of realizing during next year even fraction of amount that wool-growers are likely to get for new wool clip if it is handled properly.

Whatever wool-growers as a body do voluntarily, they will not be called upon to do again in connexion with any call that may have to be made in same direction upon general community.

In order to refresh your memory, I refer you to original telegrams from Secretary of State for the Colonies, 14th November, 1916, which preceded wool agreement, and upon which agreement is founded. You will observe from that telegram, copy of which you have with you, that agreement was -

(a)   Result of negotiations by me when in Britain in 1916 (see third paragraph) ; and

(b)   that half profits are between the two Governments (see third last paragraph), viz.: - "In the event of profit being realized from the sale of any surplus which might remain over after military requirements of British and Allied Armies have been satisfied, His Majesty's Government would propose, after payment of all expenses, to share such profit with the Governments of Australia and New Zealand."

Hope you arc quite well. I am . still most unwell.

Hughes. [Extract from cablegram sent by the Prime Minister's Department to the High Commissioner for Australia, London (for Mr. Watt's information) on 12th May, 1920.]

Ballot wool control resulted rejection scheme. Favour 74.88 per cent.; against 25.12. Wool Council consider total votes polled not warrant proceed scheme. Prime Minister has submitted new scheme disposal next year's clip.

That is telling Mr. Watt again of this development. [Cablegram received by the Prime Minister from Mr. Watt, dated London, 12th May, 1920.]

Thanks your telegram 9th May. All well here. Regret learn your indisposition. Hope you have now recovered. Cordial regards you and all Ministers. Can wait two or three days before seeing Secretary of State for the Colonies and Chancellor, but it will be very embarrassing to postpone longer.

Watt. [Cablegram received by the Prime Minister from Mr. Watt, dated London, 13th May, 1920.]

Secret. Have just received your personal telegram of the 11th May.

Schemes outlined will have my early consideration, and I shall advise you my views tomorrow or Friday. Meantime I must say I am astonished that you should have expounded a scheme to outsiders, portion of which vitally affects my mission, without prior consultation with me. Times to-day publishes telegram from Sydney, dated 11th' May, outlining whole ( ?) scheme) which, it says, has caused consternation in wool circles, and this publicity a gravely embarrassing fact. You must see that it is impossible run business on these lines.

Hope you are better. My reception here all that could be desired. All well.

Watt. [Extract from cablegram sent by the Prime Minister to Mr. Watt, London, on 14th May, 1920.]

Wool. Secretary of State for Colonics in telegram dated 11th May, in reply to mine 19th March, copy of which you have, states British Government hopes shortly after your arrival satisfy you that it has no respect departed from stipulations of wool purchase contract and is ready now as ever to agree to any arrangements proposed by us within terms of contract which can be shown to be practically possible. ' Secretary of State adds that it is not true that British Government has up to present had immediate use large profits on sales wool since Armistice, and says no cash surpluses had accrued up to two months ago. Minister of Munitions, he says, is ready to discuss with you time and manner of placing at our disposal proportion of share of such cash surpluses as now arc beginning to result from sales wool.

That is my precis of the cable from the Secretary of State. My comment on it is -

This, of course, is not correct. I do not want any more trouble, but we must have the money, and at once.

Hughes. [Cablegram received by the Prime Minister from Mr. Watt, London, 16th May, 1920.]

Secret. In conversation with Secretary of State for Colonies yesterday, he politely introduced fact that he had not been officially advised that I would represent Australia in Imperial Cabinet. I have no complaint about the nature or manner of suggestion, but would be well if you would send me at once telegram that I can show him giving me Australian' Government's full authority to sit in Imperial Cabinet. All well.

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