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Thursday, 18 February 1932

Mr LYONS (Wilmot) (Prime Minister and Treasurer) . - No leader of a government could possibly find fault with the spirit in which the Leader of the Opposition (Mr. Scullin) has criticized the policy of this Government. However much we may differ in our views of the important questions which will be placed before this Parliament from time to time, it is right that we should approach consideration of them in a genuine public spirit. We are all in duty bound to deal with these subjects in the spirit which the Leader of the Opposition has displayed this afternoon.

Before I proceed to answer such criticism as he has directed to the policy of the Government, I add my congratulations to those which he has offered to the mover and seconder of the adoption of the Address-in-Reply. It is a fine thing that young men are coming into the political life of this country. I believe that there is a more general public interest taken in political matters throughout Australia to-day than ever before in our history. The younger generation of Australians, of whom the mover and seconder of this motion are typical, are bringing to bear upon our problems a fresh thoughtfulness which must beneficially influence the proceedings of the National Parliament. I congratulate both these honorable gentlemen upon the ability with which they have placed their views before us, and prophesy for them a long life of political usefulness.

The Leader of the Opposition offered very little criticism of the Government's policy, and, indeed, until the details of that policy are made known, no other, kind of criticism was possible. I believe that the party which he leads is just as greatly concerned as the party which I have the honour to lead about the two outstanding questions with which we have to deal, government finance and unemployment. The Government has said, through His Excellency the GovernorGeneral, that one of the first things to which attention will be given is the maintenance of financial stability. The Governments of the Commonwealth and the States are passing through very difficult times, and they realize the necessity for cutting down expenditure and living, so far as possible, within their means. They have, speaking generally, entered into an undertaking that they will adhere to the plan of national rehabilitation which has been adopted. This Government will carry out that policy to the best of its ability. The Leader of the Opposition has said that the Commonwealth will be just about able to balance its budget this year, allowing for the rebate of payments which it will obtain as a result of the Hoover plan. That is scarcely accurate. The

Government will not be able absolutely to balance its budget this year; but it will very nearly do so. But I have said in reply to requests that have been made to me for relief from taxation in certain directions, that, in view of the situation which confronts us, we cannot at present give much relief. There is every indication that in this financial year it will be extremely difficult for the Commonwealth and the States to carry out the undertakings and the plan agreed to at the Premiers Conference. At this stage it is just as well for me to warn honorable members and the country generally that the Commonwealth and the States may, if we are to adhere to the Premiers plan, have to perform further unpopular acts in the direction of reducing expenditure. Unless we are prepared to keep to the word which the Leader of the Opposition (Mr. Scullin) when Prime Minister gave on behalf of the Commonwealth to the Premiers of the States, greater trouble will arise, and financial disaster will follow. We shall have still more unemployment and distress if confidence in the words of governments is destroyed. Therefore, at the Premiers Conference, we made it perfectly clear that we would adhere to the plan agreed to by our predecessors, so far as the actual finances of the Commonwealth were concerned, and that we would, so far as it was within our power, see that the States carried out their undertakings. The Leader of the Opposition has, in respect of unemployment, said that he does not expect us to wave a magic wand and restore employment immediately. He has quoted an appeal that I made in a broadcast speech for increased employment.

Mr Scullin - It was an appeal at the. elections.

Mr LYONS - What the right honorable member has quoted is perfectly true, and let me say that the figures in respect of the dole in some of the States, at any rate, indicate that there has been an improvement consequent on the appointment of this Government. We shall endeavour to carry out honestly the undertakings that have been given to the States. We are certainly taking steps to lessen unemployment, but I take no responsibility for the action of the New South Wales Government and its effects upon other parts of Australia. So long as that State continues its present policy of breaking its undertakings, there can be no real hope for the rehabilitation of Australia's finances.

Mr Ward - What undertakings?

Mr LYONS - I am referring to the undertaking of New South Wales to give effect to the Premiers' plan for reducing expenditure and meeting interest payments. The Premier of New South Wales definitely stated that he would accept the liability for the payment of interest so far as that State was concerned. But as that is a matter to be dealt with by legislation, I shall not discuss it now. The effect of the general policy of New South. Wales has been to injure the prospects of Australia generally. The Premiers plan provides that no particular section of the community shall benefit at the expense of another. Yet, to-day, an effort is being made in New South Wales to keep workers in employment at wages far in excess of those paid to the workers in any other part of the Commonwealth. As a result, unemployment and misery are increasing far more rapidly in New South Wales than elsewhere, which is something to be deplored by every individual and any government.

Mr.Rosevear. - Does the Prime Minister (Mr. Lyons) wish to reduce the Australian worker to the standard of the coolie ?

Mr LYONS - We have no such intention, and the honorable member knows that perfectly well. We can no longer hope to continue the past practice of employing a large proportion of our workers on government undertakings. Our unhappy financial position is largely due to the attempts of governments to provide employment on works constructed out of borrowed money, the interest of which has to be paid by the taxpayers of this country. Too many millions have in the past been expended on unproductive works, which have robbed existing works of their reproductive capacity by coming into competition with them. Such is the competition of roads with railways, both works having been constructed out of borrowed money. If we follow that policy we shall sink further into the financial mire. The only way to increase employment is to improve conditions in private enterprise, thus enabling our unemployed workers to return to their former vocations. It will also be necessary for private enterprise to provide employment for a substantial proportion of our workers who were previously employed by the Commonwealth and the States on works constructed out of borrowed money.

Mr Ward - What are the conditions referred to?

Mr LYONS - I refer to conditions under which private enterprise will be able to operate on a profitable basis in respect of both primary and secondary production. We cannot look to the restoration of employment while the present conditions make it impossible for private enterprise to employ our people, and while the unemployed are dependent upon the dole. The Government will aim at the restoration of prosperity in industry - the prosperity that Australia knew in other days. Until that is accomplished it will be utterly impossible to improve our financial position. The Leader of the Opposition (Mr. Scullin) has indicated what his Government did or tried to do in the direction of providing work for the unemployed. He stated that this Parliament destroyed his proposal for the issue of fiduciary notes to the amount of £18,000,000.

Mr Scullin - My proposal was to give the right to the Commonwealth Bank to issue fiduciary notes.

Mr LYONS - The object of the proposal was to expend that amount of money, or the bulk of it, upon the construction of public works.

Mr Scullin - About £12,000,000.

Mr LYONS - The Leader of the Opposition has admitted that his proposal, if adopted, would have brought about inflation. I have always been opposed, not tothe inflation of world's prices for the purpose of restoring employment, but to anything in the nature of inflation that would increase the cost of production and make the position in Australia infinitely worse than before. If our primary producer is to compete in the markets of the world, his costs must be reduced. I would welcome any improvement in world's prices, provided that it was not brought about by the issue of fiduciary notes or the releasing of any other kind of credit, the result of which would be to increase production costs in Australia and to add still further to the burden of our producers.

Mr Scullin - Are not the proposals to balance the budget a form of inflation ?

Mr LYONS - That may be so; but the more we inflate, the worse will become our position. Any money that we borrow must add to the responsibility of the Government. We have to pay interest upon loans, and that adds to the burden of taxation, which is something that we must avoid as far as possible. In saying that, I do not wish it to be understood that I am opposed to the construction of reproductive works out of loan moneys. What I say is that works which we sometimes regard as reproductive are not reproductive in the true sense of the word. Some works that are carried out by municipalities appear to be reproductive because those bodies have power to levy taxes on the community with which to meet interest and sinking fund obligations. Unless a scheme definitely adds new wealth to the community, it cannot properly be called reproductive.

Mr Scullin - Is it not true that if we increase the number of workers wo must increase production in order to meet their requirements?

Mr LYONS - I admit that there would be a demand for increased production as a result of increased employment on public works, but if the contention of the Leader of the Opposition were correct, we should need only to borrow millions of pounds on a much greater scale than before to employ our people and bring about an increased demand for production in order to supply their needs. That contention is untenable. The Leader of the Opposition has generously offered to co-operate with the Government in evolving a scheme of unemployment relief. I accept his offer, and shall have no hesitation in conferring with him and putting before Parliament proposals designed to increase employment. Unemployment directly affects the States, and that is why we have asked their representatives to meet us in conference. In view of the misery that will be suffered by the people during the coming winter as a result of unemployment, we must do all in our power to give them some relief. But let me repeat that, however determined we may be to keep to the undertaking given by our predecessors and the State representatives to live within our means, we cannot attempt to balance the budget while so many of our people are out of employment and living on the dole.. The two things have to be taken together; neither can stand alone. If unemployment such as exists to-day is to continue in the future, we had better give up all hope of balancing the national budget, or the budgets of the various States.

The Leader of the Opposition is concerned about the possibility of our interfering with the protection that has been afforded to various secondary industries in Australia. The policy that was outlined before the people of this country by the party on this side of the House, was that adequate protection would be given to Australian industries, and I repeat that assurance here to-day. What we do in regard to those industries we shall do, only after the closest investigation, and after consultation with and reference to the Tariff Board. We have said that we believe that tariff building has been too rapid recently, and that protection has reached too high with regard to certain industries. We have said that the whole matter calls for reconsideration, but we have made it quite clear that we do not believe that political action, nor anything which can be done by a particular Minister, should take the place of full and careful consideration of all the circumstances surrounding the industries to be protected. Although it is impossible to be more explicit at this stage, honorable members will later be afforded an opportunity of learning what the Government proposes to do in regard to the tariff, and of discussing in detail the Government's proposals.

The Leader of the Opposition stated that he disagreed with the action of the Commonwealth Government in not immediately paying the interest in regard to which the New South Wales Government had defaulted. He suggested that we have done some damage to the credit of Australia. But the credit of Australia is higher now than it ever was during the term that the present Leader of the Opposition was in charge of the Government; and it will remain so because, by our actions, Ave shall show that we are determined to maintain the reputation of Australia so far as our own responsibilities are concerned, and that we shall insist upon other Australian governments doing the same. I commended at the time what the Leader of the Opposition did when he was Prime Minister in regard to meeting the obligations of a defaulting State. He did the right thing. I point out, however, that he had a number of days in which to make up his mind, and to consider the situation before New South Wales defaulted. We, on the other hand, had not more than a day to consider what should be done when, at the last moment, the Premier of New South Wales intimated that his government would not meet its liabilities.

Mr Scullin - We had ten days; the present Government has had several weeks.

Mr LYONS - Before the default actually occurred we had only one day, whereas the previous Government had ten days.

Mr Scullin - Several weeks have passed since the New South Wales Government defaulted, and the money has not been paid yet.

Mr LYONS - We believe that, by our action, wo vindicated the honesty and integrity of the Australian people, and, at the same time, emphasized the default of New South Wales.

Mr Riley - By allowing the Commonwealth to default also.

Mr LYONS - No ; not by allowing the Commonwealth to default. We had to make certain investigations, and obtain certain information from the Premier of New South Wales, and now that the information is to hand, we are in a position to act in the best interests of the people of Australia. Moreover, when we have submitted to Parliament the proposals we have in mind for the enforcement of the financial agreement it will be seen that we intend to insist that in future all States shall honour their obligations as the Commonwealth has to do.

Mr Scullin - Does the Government propose to afford honorable members an opportunity of discussing the appointment of a permanent Minister in London ?

Mr LYONS - It is not proposed to depart permanently from the established practice. We propose to take the step of sending a Minister to London, because we realize, as does the Leader of the Opposition, that there are difficult financial problems to be solved in Great Britain. We feel, therefore, that, instead of selecting another High Commissioner, we shall do better by sending to London a responsible Minister who is in close touch with the policy of the Government. The saving which will be effected also weighed with the Government.

Mr Riley - Are we to have an opportunity of discussing the change?

Mr LYONS - There is no need to discuss it, because it is not a permanent departure from the established practice. It is an emergency step to tide us over a few critical months, and no one who realizes the gravity of the position will cavil at sending abroad a responsible Minister associated with the Treasury, to carry on financial negotiations on the part, of the Government.

Mr Makin - We shall be governed from the London end.

Mr LYONS - That is not so. The honorable member has read that in the Labor Daily, and repeats it parrot fashion. We shall continue to be governed from here, but the Minister whom we send to London will be in close touch with the Commonwealth Government in regard to financial matters.

The Leader of the Opposition (Mr. Scullin) asked what was the Government's policy in regard to our overseas commitments. Were we, he asked, proposing to negotiate a conversion loan in Britain? He asked me for an assurance that the claim I made in Adelaide some time ago would be backed up by some action in London. I remind him, however, that when I made that statement there was every prospect of carrying the proposal into effect. The Leader of the Opposition knows very well that, even when he was in London, he thought that something definite could be done in the way of obtaining financial relief, but there were happenings in Australia which destroyed all possibility of carrying his proposals into effect. The failure of the previous Government to take the necessary action during those two precious months following the Premiers Conference of August, 1930, lost it a golden opportunity, because, in the meantime, the financial position of Britain herself was becoming so much worse from day to day that our chance of obtaining relief became slender, indeed. No one can suggest that the financial situation in London is as favorable now as before Britain herself came up against financial difficulties. In spite of that, I believe that we should have asked the overseas bondholders to make a sacrifice in the first place, and then have come back to the Australian bondholders. The Leader of the Opposition pointed out that we reversed that procedure. Well, I have no fault to find with that, but everything the Government' can possibly do to obtain some relief in regard to our overseas obligations ought to be done.

Mr Blakeley - Does not the Prime Minister think that there would be a better chance of obtaining relief overseas if we could show that we had put our own house in order?

Mr LYONS - The honorable member should have insisted on that when he was a member of the Government. We are sending the right honorable member for Flinders (Mr. Bruce) to London to explore every possible avenue in an endeavour to obtain relief for the Australian taxpayers. Honorable members know that as a result of the conduct' of New South Wales, the credit of Australia overseas is always in danger of being damaged. In November of this year, £13,000,000 will fall due in London, and that is a New South Wales loan. The Commonwealth must negotiate for its redemption or renewal, and it is desirable that we should be directly represented in London so as to secure the best possible terms.

Mr Scullin - We agree with that, but why appoint a permanent Minister?

Mr LYONS - It is not proposed that the Minister shall remain in London for a fixed term. When his duties are discharged he will return to Australia, and whether it is advisable to keep a permanent Minister in London instead of appointing a High Commissioner is a question yet to be discussed. Before any action is taken, honorable members will be given every opportunity of discussing the proposal. I hope that the matter will not be discussed in a party spirit, but that honorable members will deal with it as the Leader of the Opposition to-day has done.

The Government will follow the policy outlined to the people during the last election campaign. We did not tie ourselves down to specific details; we outlined general principles, and asked the people to trust us to meet changing circumstances as they arose. The people have given us that mandate. They have given us the opportunity to face the problems of the day, and to apply such remedies as we think proper, rather than obey the behests of some tribunal behind the Government. We are free to accept the co-operation offered by the Leader of the Opposition to-day. We do accept it, and we believe that the position will improve as time goes on, so that when the Government comes to the end of its term it will be able to" tell the electors that it has kept the undertakings which it gave.

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