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Thursday, 18 February 1932


Mr SCULLIN (Yarra) .- I hope that I shall not be suspected of patronage if I compliment the mover and seconder on their maiden speeches in this National Parliament. Both the arrangement of the matter and the manner of their speeches were excellent, and they have initiated this debate on a high level.

At the recent election, the people declared in favour of a change of government, and it is not for us to challenge their decision. As democrats we accept the verdict of the people; if we think they have made mistakes, our duty is to point them out. In the meantime we must do our duty in a period as critical as any in the history of this Parliament. Upon, the Government and its supporters rests the primary responsibility for administration and legislation. But every honorable member has at this period more than at any other, a grave responsibility; and it is the duty of all of us, regardless of the parties to which' we belong, to assist in solving the problems of the nation. Criticism will be essential; constructive criticism will be most helpful, but at times destructive criticism may be necessary - indeed, 1 prophesy that it will be required sooner or later in this Parliament - but whether our comment be constructive or destructive, it should be legitimate, fair, and honest. That will be the attitude of myself and my supporters - a small band, it is true, but representing a great cause, that will assert itself again in Australian politics.

I agree with the opening statement in the Governor-General's Speech that the matters of transcendent importance at this juncture are the establishment of sound finance and employment for the workless. The two- problems thus presented are interwoven; they react on each other, and have a definite bearing on many others. In a general declaration they are placed in the forefront of the Governor-General's Speech, but apparently we must await the future action of the Government to learn what it proposes to do. The Speech gives us no indication of how these two important subjects are to be approached, but the Prime Minister yesterday stated in reply to a question that unemployment will be discussed at the next Premiers Conference. I agree that it is a problem which affects all the Governments of Australia, all industries, and all sections of the community. For the last two years Commonwealth and State Ministers have been in almost constant conference on finance and unemployment. Seven groups of Ministers, representing Governments of different shades of political opinion, met with their advisers at the conference table, and seriously sought for a solution or partial solution of this most acute and pressing problem. Knowing how difficult it is, and the responsibilities that rest upon the Prime Minister and his colleagues, I am not going to pretend that they can solve the problem overnight, or by merely waving a wand. I know that they cannot do that, although such an impression was created amongst the people during the election campaign. The discussions at successive conferences of Commonwealth and State Ministers revealed that Australia was in an appalling position, and getting deeper and deeper in the mire. Perhaps I shall assist the House to get this matter in proper perspective, and afford some guidance for future action if I review briefly what occurred during the two hectic years in which I was Prime Minister. The mover of the motion rightly said that this National Parliament must tackle the problem of unemployment free of party considerations.


Mr Beasley -. - And, therefore, we should not wait for the Premiers Conference.


Mr SCULLIN - We should not wait for anything if immediate action is possible. I agree, however, that representatives from all Australian Governments meeting in conference may be able to do much. I am concerned, not with the slight delay that may take place before such a gathering can assemble, but rather to learn what constructive proposals the Commonwealth Government will place before it. All State Governments have, during the last two years, been doing their utmost to cope with a critical situation, but with the exception of a few relief works they could do no more than provide mere sustenance, and a pitiable sustenance at that. Yet sustenance and the expenditure on relief works are costing State Governments about £12,000,000 annually, and the present outlook is that that amount will be increased. The Commonwealth Government during the two years in which Labour was in office, granted direct to the States for relief works £2,500,000, and, in addition, expended about £250,000 on works in federal territories. Simultaneously, old-age and invalid pensions increased by £2,000,000 a year. People who previously were too independent to apply for a pension, or could be maintained by their families, were compelled to seek this aid because their sons and daughters were out of employment. The consequence is that notwithstanding the reduction in the amount of the pension, the Commonwealth is paying during this financial year £2,000,000 more than was expended on pensions in any previous year. Yet this expenditure on sustenance, relief works and pensions was but as a drop in the ocean when compared with the appalling extent of unemployment. I do not agree with the implication in the Governor-General's Speech that the restoration of employment is to be effected by private enterprise almost exclusively. It is true that the majority of those who are out of work were formerly in private employment, but we must not overlook the fact that approximately 100,000 of them were in government employment three or four years ago. Approximately £30,000,000 of money borrowed overseas was being spent annually by governments, principally State Governments, on public works which gave employment' to about 100,000 men. That expenditure' was reduced first to £15,000,000, and this year to £9,000,000; what it will be next year, who can say? In addition to the discontinuance of public works, factories were closing down or reducing hands because of the volume of imports. The Government amended the tariff to remedy that state of affairs, and the present schedule is only now beginning to yield results, the warehouses having disposed of their accumulated stocks. When, however, the manufacturers were in a position to supply the market with the goods that formerly had been imported, the demand had decreased, because of the diminution of employment. There were unemployed who needed those goods and were willing to buy them; who were willing to work in order that they might do so, but to whom the opportunity was denied. My Government sought a remedy. It approached the manufacturers, the bankers, and every other representative section of the community. The manufacturers and traders indicated that they were willing to put the wheels of industry in motion, but that they wanted customers to whom to sell their goods. They were not prepared to manufacture goods merely on the speculation that if people were placed in work they would become customers.

My colleagues and I arrived at the decision that it was the duty of the Government to give a lead, and the Commonwealth Government urged the State Governments to put in hand public works. It was not proposed to return to the extravagance of the past. I remind honorable members that the rapid recovery that took place after the smash of the 'nineties was directly attributable to the expenditure of money on useful public works. The Premiers prepared a list of such works, designed to increase future production. Then arose the question, "What about the money?" We approached the private banks and the Commonwealth Bank. The private banks stated that they could not advance any more money, and showed us figures disclosing their advances against deposits. They made out a very good case. They emphasized that if the Government would undertake to curtail State and Commonwealth deficits, money would be made available for private enterprise, hut insisted that neither the Commonwealth nor private banks would longer finance the recurring deficits of the Commonwealth and State Governments. In 1930-31, the' Governments had a deficit of £20,000,000, and were faced with a deficit of approximately £40,000,000 for the current year. So, arising out of the necessity of the circumstances, the Premiers' plan was born. Every government in Australia participated in it, and deficits were cut down. I believe that, with the addition of a few million pounds representing reduction of interest, the Commonwealth will probably balance its budget at the end of this year. Some State Governments have done very well; others not so well. There was not the slightest doubt in the minds of every Premier who attended that conference that when the governments asked public servants, pensioners, bondholders, and every other section that received government payments to accept a reduction, there would be a release of credits which would be diverted to useful public works and the relief of unemployment. We took the matter up with the banks, to see what funds they would make available for this purpose, and to start enterprises. The result was unfavorable. We then discussed the problem with the management of the Commonwealth Bank, and the explanation that we received from that source - it was legitimate, and I am not now criticizing it - was that it was tied down by legislation passed by this Parliament, and particularly by an amendment that was made in another place to a bill brought down by my Government', which insisted that the Commonwealth Bank should not only retain a gold reserve, but that it should revert, in a short period, to a gold reserve of 25 per cent. That tied the hands of the management of the bank, and left it with but a small margin of gold - approximately £15,000,000- to be held against possible demands upon the bank - at a time when banks throughout the world were tottering; when some banks in Australia were closing their doors.

We then approached this Parliament with a proposal that had been carried by a majority at the Premiers Conference - the Fiduciary Notes Issue Bill. In that measure was a provision that the Commonwealth Bank should make advances, and protect itself against any possible run on its resources by having the authority to issue additional notes to the extent of £18,000,000. It was never intended that, those notes should be issued, except under exceptional circumstances. I admit that that was no sovereign remedy, but it was put forward in an endeavour to smooth the way, and to place 40,000 persons in employment. It was estimated that, as a result, employment would be provided for a further 40,000 within twelve months. That project was rejected in another place. The Government then modified its proposals. It had been the intention to allocate £6,000,000 of that £18,000,000 to relieve wheat-farmers, and to expend the remaining £12,000,000 on relief works at the rate of £1,000,000 a month for twelve months. Again the Premiers were consulted, and they were unanimous in urging that the Commonwealth Government should ask the banks to provide £8,000,000 for the purposes that I have outlined. The banks agreed to provide £3,000,000 to 'the wheat-growers, and to advance some money to carry on loan works in hand to the end of the year, but they refused to provide any money for new works to absorb some of our unemployed. That was the position in which my Government found itself, and that was the action taken and the efforts' made. I now ask this Government whether it has any alternative to the scheme that my Government proposed to the Premiers Conference. The problem still awaits solution. On the 4th December last the Prime Minister declared -

By a change of Government every nian out of work -will at once bc brought' nearer to re-employment.

He also stated -

Restore confidence, and the money will flow into industry. Men will begin to be employed, and the whole thing will grow like a snowball.

I quote those words in the hope that the Government will devise means to carry out those assurances. If the Prime Minister can solve the problem in the main, and bring to fulfilment his eloquent promises to relieve the distress of the unemployed, I am content that he should remain Prime Minister for life. I pass over the fulsome assurance that re-employment would be found for all " at once." That phrase is capable of different interpretation by different people. I urge that this Parliament should be taken into the confidence of the Government, so that the adminstration may have whatever little wisdom there is on this side added to the collective wisdom of those who sit on the Government benches.

The proposals of my Government were denounced as inflation. Technically and actually they were a form of inflation, but inflation becomes serious only when it makes prices soar unreasonably. At all times I have determined that while [ ha ve responsibility I shall never consent to Australia following the lead of some other countries by adopting a policy of inflation that will wreck its financial structure. I realized the consequences. I saw the effects of inflation during the war, which was financed on a policy of inflation. I know that if there is wild inflation there must be a period of deflation. You cannot climb the hills without also going down the valleys. But there is a vast difference between wild inflation and a scheme of sound finance intended to stimulate industry and to prevent our remaining for ever in the valleys. Commonsense is the governing factor. I see greater danger in allowing things to continue in the depths of degradation than in trying to stimulate trade and lift matters to a normal standard, as is now being attempted by other countries.

What are the proposals of the Government, not only with regard to the Premiers Conference, but with regard to the forthcoming conferences overseas? The right honorable member for Flinders (Mr. Bruce) is to be our representative abroad. I wish him all success at Ottawa and hope that he will do the best for Australia. A very important problem is involved. We have to consider a monetary problem which is more international than national. I should like to hear from the right honorable member for Flinders what he is going to do when he appears before those conferences. I am aware that he must keep some matters confidential. But there are others upon which he can enlighten us. The monetary problem is the basis of our trouble. We have no other problem, no problem of production. That which confronts us is of distribution, of finding sufficient means of exchange to buy the goods that this country is capable of purchasing. I should like to know what will be done. My Government had not control of the Federal Parliament. This Government has control of both Houses. A lead has been given. Great Britain has departed from the goldstandard. Everybody cheered. Yet everybody denounced my Government when it put forward a similar proposal. Sterling has fallen considerably, Australia- has benefited thereby, because the departure from the gold standard by Great Britain has raised internal prices, including those that we are receiving for our exports. So we too, cheer. Yet this is inflation. It has not brought ruin to Great Britain, because the inflation is controlled. Great Britain has increased its fiduciary issue of notes recently. A week ago I read that the Government of the United States of America contemplates introducing to Congress a measure for the extension of credit to the amount of £500,000,000, together with a reconstruction scheme involving £400,000,000 designed to help that country out of its financial crisis. Of course, it may be said that America has hoarded gold and can safely take such a step. That might make it apparently easier, but gold is not the great necessity that some people imagine. We in Australia have already parted with a lot. of gold and nobody has missed it. Undoubtedly, gold is an important commodity to hold in reserve when a country is prosperous, in order to adjust its international trade balances when it experiences bad times.

To hold gold while people are going hungry, and not to use it for the purpose for which it is intended, is not a sound practice. It is not essential that gold shall be held against a note issue, for a note issue can be regulated and controlled by statute just as effectively, and, in some instances, more effectively, than by the holding of a fixed gold reserve. It is possible to have the wildest inflation and yet to have a big gol'd reserve. There can be too much restriction of the currency with a gold reserve. We know very well that far-reaching movements are taking place in finance all over the world; but 1 have not time at my disposal at the moment to elaborate this point. I suggest that the Prime Minister and Treasurer should indicate clearly the views of the Government upon the whole subject of government finance, state the definite ways in which it proposes to put its policy into effect, and give the fullest opportunity to the House to discuss the whole subject.

The Leader of the Government, and his supporters, told the people during the election campaign that the policy of my Government was not sound, and the people accepted his view on that subject. Having taken the responsibility of condemning the soundness of the policy advocated by the previous Government, this Government must now also take the responsibility of submitting its alternatives to that policy. So much at least can bo asked and expected of the Government. We should be told definitely how it intends to endeavour to solve, at least partially, this terrible problem of unemployment.

It is true, as the Prime Minister has said, that private employers provided work for the majority of the people who are to-day out of employment; but a lead must be given to them to re-employ these men. A start must be made somewhere. Large public works could be put in hand which would assist future production and provide useful public utilities. It is true that the smash of the 'nineties was not world-wide as this one is. It is also true that we cannot solve all the problems that face us in this country. But we can at least do something to reduce the misery and alleviate the suffering of the people. Seeing that the Government has control of both Houses of this Parliament, it is not too much to ask of it that, working in conjunction with the State Parliaments, it shall begin a period of definite reconstruction within the nation, pending international reconstruction. I do not, for a moment, suggest that we should return to the policy of borrow, boom and extravagance, which has brought us to our present position, and for> which we are now paying so dearly; but we can do something.

In the " City Notes," published in the London Times of the 21st December, 1931, some comments were made on the gold standard. Referring to the world's economic troubles, the writer of that article said -

Supplies of wealth are ample, actually and prospectively; scarcity only applies to the medium by which they are exchanged or distributed.

The writer went on to say that -

The quantity of money must be increased in order to raise prices sufficiently to lighten the burden of debts.

That can be described as inflation just as fairly as any proposal put forward by the Government which I led for two years. Private enterprise can absorb many of of the people who are to-day out of work. I, therefore, urge the Government most earnestly to live up to the cautious words which appear in the Governor-General's Speech with respect to the tariff. I ask it to act cautiously, and not to break down the protective wall which has been built round Australian industries. If it removes that protection, private enterprise will not only not be able to absorb any of the people who are at present out of work, but it will be forced to reduce still further the number of persons employed, and throw them on to a cold world. There can be no denying that effective tariff protection is essential to enable private employers to find work for our people.

But there is another thing that we need in addition to tariff protection, and that is peace in industry. The Government should have hesitated before it cancelled the regulations controlling work on the waterfront, which had been formulated by my Government after many months of very careful consideration of the whole situation. Those regulations were devised with the object of preserving peace on the waterfront, and they achieved that purpose. They also made the work on the waterfront much more efficient than it was formerly. The Government should have left things as they were, at least until it had thought of a better solution for the problem than that which we had applied to it. By its action it has caused chaos on the waterfront, and interfered seriously with the efficiency of the service performed there.

I wish now to refer to the announcement of the Prime Minister, that the Assistant Treasurer (Mr. Bruce) is to go to London after he has attended the Ottawa conference, and remain there permanently as a resident Australian Minister. I hope that an opportunity will be given to Parliament to discuss this very important change before the right honorable gentleman leaves our shores. I say, definitely, that I do not agree with the principle of this proposal. I have not time on this occasion to discuss the subject fully, but I ask the Government to allow Parliament to discuss it before the proposed step is taken. I agree that it is wise for us to be represented at the Ottawa conference, and that a member of the Government should visit London, and, possibly, New York, to discuss and deal with the financial business that must be transacted in those centres in the near future. We have a number of loans falling due in both England and America, and it is wise, I think, that the conversion negotiations should have the attention of a member of the Government. But that is a very different thing from appointing a permanent resident minister in London. There is, of course, need for us to give the closest attention to the overseas loans falling due, and to consider the possibility of a general overseas conversion loan. I am emboldened to suggest that a general conversion loan could be floated in London, because we have already shown the practicability of such a thing in Australia. Having secured the approval of our local bondholders to such a proposal, I think that we have every justification for asking our overseas bondholders to follow their example. I am also emboldened to express this view because of a statement made by the Prime Minis ter in a speech he delivered in Adelaide some little time ago. He was reported in the Adelaide press to have stated -

That ho would have no hesitation in saying that he could go to London, and not only clean up the deficit there, but carry through a large conversion loan at a substantially reduced rate of interest.

The honorable gentleman also said -

I can then come back to Australia and appeal to the bondholders on patriotic grounds for a loan at a lower rate of interest.

What the honorable gentleman put second my Government put first. We believed that we should put our own house in order before appealing to the bondholders overseas, and we gave successful effect to that policy. One part of the proposal of the Prime Minister in his Adelaide speech has thus been put into effect. I should like to know whether it ia the intention of the Assistant Treasurer to attempt to put the other part of it into effect when he goes to London.

I wish to emphasize one matter referred to in the Governor-General's Speech. It was said by His Excellency that if we are to place our finances on a sound footing, it is essential that we adopt a programme which will restore confidence, and put our people back to work. But we must also restore confidence overseas. We were told during the election campaign that it was essential that a change of government should be made if confidence were to bc restored. It was also said that if we had honest government confidence would be restored immediately. We have had a change of government; but I suggest that one of the first administrative acts of the new Government struck a most deadly blow at the confidence which overseas people had in Australia. Shortly after this Government came into office it defaulted; for the first time in the history of the Commonwealth. This default, which was due to an administrative act of a Government which has paraded its honesty, dealt a heavy blow at Australia's credit. I do not intend or desire to lift from the Government of New South Wales the responsibility for its default. That Government defaulted when my Government was in office, and we paid the interest due on its account on the date upon which it fell due. We did not parade our honesty, or our desire for a restoration of confidence; but we took every care that there should be no default. I can see no reason why this Government should have allowed default to occur. Why was not the money paid when it fell due, seeing that it was available? It has been suggested that the default was permitted in order to teach the Government of New South Wales a lesson. But that Government did not need any lessons on how to default. It had defaulted previously. I understand that we shall have an opportunity to speak further on this subject at a very early date, and I shall not say any more about it at the moment except that the action of this Government in allowing the default to occur was a most regrettable blunder of the first magnitude. I do not suggest that the Government will not pay the money that is due, for I know that it will do so; but if it can pay the money a few weeks after it became due why could it not have done so on the due date and instituted afterwards proceedings against. New South Wales for the recovery of the amount? If it had done that, it would have preserved the national honour of this great country.

During the election campaign high hopes were raised in the breasts of our people. It was placarded all over the country that " a steady job for all " would be found. There are 350,000 Australian citizens now waiting for the fulfilment of that promise. Seeing that the Government has control of both Houses of the Parliament, and claims to have the confidence of the financial institutions, I urge it to make an immediate move to carry out its promises. It will receive our support and commendation for every sound action that it takes to relieve unemployment in Australia.







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