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Thursday, 25 February 1932

Mr GULLETT - I shall he pleased to consider that suggestion before the committee is asked to deal with the schedule.

This is not the time to speak in detail of the tariff and other changes now submitted to the committee. Briefly, the proposed alterations are: - Customs duties, 11 increases and 69 reductions; excise duties, 2 increases and 4 reductions; special duties, 19 items repealed out of a total of 74 items ; prohibitions, 43 items repealed out of a total of 78; primage duty, a few lines have been added to the exemptions.Full particulars of the alterations are shown in printed statements which have been circulated among honorable members. To-day, I intend only to touch upon a few of the most important items, but, before I do that, perhaps I may be allowed to set out again the tariff policy of the Government, for it is in close accordance with that policy that the changes are being proposed.

The Government stands, first, for an adequate measure of protection for the maintenance or establishment of industries for which Australia offers reasonable economic opportunity. We look with disfavour upon duties of a prohibitive nature, as we believe they are calculated to create local monopoly and to provoke retaliation from foreign countries which are valuable customers for our primary products. In amending or extending the tariff, particular concern will be paid to the cost of production in primary industry. Drastic changes to the existing schedules will not be made upon ministerial initiative. The Government will work through investigation by the Tariff Board, and in broad principle will follow the recommendations of the board. It is scarcely necessary to say that the Go- vernment will co-operate in every way open to it to promote preferential trade within the Empire.

This policy is so clear that it calls for no elaboration. I would, however, emphasize the Government's belief in the supreme importance of this Parliament taking every action within its power to bring about a reduction in the cost of living burden, and the cost of production burden, of those engaged in primary industries. If the depression has served one useful purpose, it is that it has convinced every thinking Australian, in every walk of life, that the first condition to our national prosperity, and our capacity to employ our people, is the building up and preservation of the largest and most profitable export trade that is attainable. The value of our exports is the sure index to our capacity to employ, and to the income and spending power of every section of the community. That statement may not be applicable to all countries, but it is certainly true of Australia. If the wool clip, the wheat harvest, and the dairy output are heavy, if costs are right, and if the profit to the producers of these great primary lines is satisfactory, then every other industrial activity and every commercial and financial activity rejoice in the sure reflection of the rural prosperity. Prosper the farmer and the pastoralist, and we prosper every factory, every warehouse, every business, and, in short, every sort of employment.

During the depression, rural production has happily been abnormally heavy; but prices have been lower, perhaps, than at any other time in our brief history. It is true that the nation as a whole has profited by primary production during the past two or three years of low values. Had it not been for the grand industry of the men on the land during this crisis, nothing could have saved us as a nation from a total financial collapse. If this sustained rural production, in the face of adversity, has saved the nation, it has been unprofitable to the great majority of our men and women on the land. There is no promise of a substantial early recovery in- world values of basic commodities, and there is a limit to the capacity and disposition of wheat" and wool growers to produce without profit, or at an actual loss. If prices are not substan tially to improve, there is only one way in which rural and general disaster can be warded off. Cost of production must be brought down. It is not within tho power of this Parliament to raise values ; but it is within our power to reduce costs, and in our tariff deliberations and action, that should be our constant aim. It is definitely the aim of the Government. At this moment in Australia the man on the land, who is engaged in the export trade - and upon whose prosperity the prosperity of all Australians depend - buys all the necessaries of life and production in what is one of the dearest, if not actually the dearest, market in the world, and sells his products in the cheapest markets of the world. Practically all that 'he buys is the product of the highestpriced labour in the world; all that he sells in the open market overseas is sold in competition with the cheapest labour in the world. While, during the depression, the prices for wool and wheat have slumped almost to vanishing point, the prices of manufactured commodities have remained more or less stationary. Surely our endeavour in all economic legislation, and especially in tariff-making, must be to bridge the wide difference between the price levels of the various commodities the farmer is obliged to buy, and the produce he has to sell.

ITo miracle in rural production costs will be brought about by the tariff changes now submitted to the committee. I suggest, however, that these changes are a move in the right direction. In the great basic iron and steel industry, important reductions in raw materials and in some finished products, have actually been brought about by the Government. Generally speaking, however, all that we have been able to do in the six weeks during which we have been in office is to propose changes which, although not insignificant in themselves, are in the main little more than a disclosure of the trend of the policy we intend to follow. The basis of each of these changes is a recent Tariff Board report. There is only one notable exception to this, and that is in the case of the duties on iron and steel.

Briefly, the procedure f followed in making these amendments has been this : We had the Soullin Government's amending schedule which, owing to the defeat of that Government, had not passed through both Houses of the Parliament. That schedule was validated in the closing hours of the last Parliament until Monday next, the 29 th February. With many items of that schedule we are in disagreement, both because of the manner in which amendments were made, and because of their prohibitive and monopoly-making character. The late Government, after arbitrarily and heavily increasing many of the old duties in the 1921-28 schedule, referred a great many of the amended items for inquiry to the Tariff Board. In order to aid our deliberations we have turned to the reports which have reached the Customs Department as the result of those inquiries. In no case, however, have we acted upon a report of date earlier than December, 1929.

Particular care has been taken, even in considering reports dated December, 1929, and onwards, not to propose amendments based upon reports dealing with industries in which economic changes, due to the depression, threw doubt upon the value of the board's recommendations. We have been cautious throughout to avoid serious disruptive changes, and have taken all possible care not to endanger employment. The committee will bear in mind that my references to primary industries were confined to those great industries which play so important a part in our export trade. The Government is as definitely opposed to excessive duties for primary industries as it is to excessive duties for manufacturing industries. I wish to make this clear, because some of the proposals I am now submitting make important amendments to tariff items which provide duty for certain primary industries catering only for the Australian market.

There have been interesting developments in connexion with the iron and steel industry. The committee will observe that the Government' proposes to return to the 1921-28 tariff rates on pig iron, ingots, blooms, slabs, billets, puddled bars and loops, merchant bar, rods, including wire rods, wire in coils, angles, tees, scrap iron and steel and structural steel. Here we had no recent' Tariff Board report to guide us, but honorable members will be pleased to learn that the reductions have been made after consultation with the two great iron and steel producing firms, Broken Hill Proprietary Company Limited and Australian Iron and Steel Limited, and with their complete concurrence. This, I think, breaks hew ground in the way of tariff-making in Australia.

Moreover, as has been publicly announced, these two companies, together with Messrs. Lysaght Brothers and Company Limited, Lysaghts (Newcastle) Limited, and Rylands Brothers (Australia) Limited, have also agreed, in response to a friendly suggestion from the Government, to make reductions in their selling prices. The reductions range from £1 a ton on pig iron, bars, ingots, structural steel and fencing wire, to £2 a ton upon wire netting and galvanized iron, and will represent a saving to the community in general, and to the primary producer in particular, of £160,000 per annum, based on the considerably reduced output for last year. As everybody knows, these companies have been suffering the full effects of the depression, and are enjoying anything but full prosperity at the present time. They have made the reductions, however, in a spirit of helpfulness to the Government in its endeavour to bring down industrial costs generally within the Commonwealth, and I take this opportunity, on behalf of the Government, of thanking them for their public-spirited action. Some of the companies were actually carrying on at a loss when prices were reduced. One company has not paid, a dividend for two years. As the companies have done this unprecedented thing, the committee ought, I think, to show some little generosity of disposition towards them. Honorable members will, at least, agree in this: The companies have set an admirable example to the great manufacturers of this country, an example which, I trust, will be generally followed. I express the hope that the advantage which is being given by reduced prices at the source in the iron and steel industry will be passed on by way of reductions in the selling price right through the engineering trade. Already, we see the effect of the reductions in connexion with fencing wire which has been reduced by £1 a ton, and wire netting which has been reduced by £2 a ton. If industrial conditions in New South Wales, where these industries are located, were comparable with those in industrial Victoria, if labour and other costs were as low, these reductions would have been larger, and the workers of New South Wales and of Australia generally would be better off.

Mr Beasley - Does the Minister believe in low wages?

Mr GULLETT - I do not, but no one can say that wages areon a low level in Victoria, and unemployment in that State is substantially less than in New South Wales. It is well known that the manufacturers of Victoria are in a fair way to capture a great deal of the New South Wales trade.

Now I come to the controversial question of galvanized iron.

Mr Gabb - Why not stick to the board's report?

Mr GULLETT - If the honorable member will possess himself in patience for a moment, I shall explain why the Government has not, at this stage, thought fit to adopt the Tariff Board's report. Some honorable members may be disappointed that the resolution" does not cover a reduction in the duty upon galvanized iron. This duty now stands at £5 10s. a ton, British, and £7 10s. a ton, foreign. It will be recalled that the Tariff Board, in a recent report, recommended that the duty be reduced by 20s., and that it should not apply if the firm of Lysaght, which is the sole manufacturer, increased its gross selling price above £25 a ton. Naturally, I gave particular attention to this recommendation. I found, however, that the factors upon which the Tariff Board based its fin dings had changed to such an extent during the past twelve months that I did not feel on safe ground in adopting the report. Briefly, I feared that the adoption of the report might lead to heavy imports, with considerable unemployment, not only at Lysaght's where at present some 600 or 700 men are engaged, but also at the Broken Hill Proprietary's works which supplies the raw iron, and employs a greater number of men in the manufacture of thebar iron for Lysaght's than Lysaght's do in the manufacture of the galvanized iron. Indirectly, employment inthe coal-mining industry would also be adversely affected by the importation of galvanized iron. I therefore endeavoured to bring about a reduction in the firm's selling price of galvanized iron, with a view to allowing the present duties to stand Until the matter could be again referred to the Tariff Board upon the new facts. Lysaght Limited reduced the gross Selling' price of galvanized iron from £28 10s. a ton, at which it stood when the Tariff Board submitted its report, to £27 10s. a ton upon the first of this month. As a result of our further negotiations, I am now able to announce that the price will be reduced by another £1 a ton as from Tuesday next, the 1st March. This brings the gross selling price to £26 10s. a ton, and I am hopeful that further negotiations which are proceeding for a voluntary reduction in the Australian price of spelter, will lead to' a further reduction of about 10s. a ton of galvanized iron which would give us a gross selling price of £26. It may be added that Lysaght Limited have placed returns before the department showing that the selling price which will operate after the 1st March will not return any profit or margin for depreciation. The company has offered the fullest accountancy investigation into its affairs. Further, reference was made in the debates last year - I made it strongly myself - to the £500,000 of paid-up capital which appeared in the share statement of the company. That sum is not included in this calculation. I therefore ask the committee to accept this position until the matter has been dealt with by the Tariff Board.

Dr Earle Page - How long will that be?

Mr GULLETT - As soon as the inquiry can be brought about. The board's recommendation, which I was reluctant to pass by, was based upon an anticipated annual output at the Newcastle works of 60,000 tons per annum. The output for last year was approximately 33,000 tons, and the present rate of output is slightly in advance of that figure. The English price, which was the competitive price upon which the Tariff Board based its measure of protection, has fallen by £2 a ton during the past twelve months.

Still another factor throwing doubt upon the present value of the board's report was that the Australian price of spelter had increased since the board held its inquiry, owing to exchange, by £3 8s. 6d. a ton, which added 10s. 4d. to the cost of each ton of Australian-made galvanized iron. Under all the circumstances, I venture to think that the compromise is one which should commend itself to the committee.

I come now to the proposed duty reductions affecting primary products. The most important of these relates to tobacco leaf. It will be remembered that the late Government increased the import duty by successive amounts, from the rate of 2s. Sd. to 5s. 2d. per lb. With the excise at 2s. 4d., that represents a total impost of 7s. 6d. The imported leaf pay3 both duty and excise, so that the import duty represents the measure of protection enjoyed by the locally-grown leaf.

Mr Thompson - That is not correct.

Mr GULLETT - The last Government increased the protection from 2s. 8d. to 5s. 2d. per lb. At that stage the matter was referred by the then Minister for Trade and Customs to the Tariff Board, which seemed to indicate that he desired an impartial review of the position. It was quite a voluntary reference, like all the references of the late Government to the Tariff Board.

Mr Forde - It was impossible to refer all proposals to the Tariff Board before taking action.

Mr GULLETT - The honorable member signed this reference to the Tariff Board, which seemed to indicate that the Government wished to have an. impartial review of the whole situation.

Mr Forde - The Minister knows that we were not bound to accept the report of the Tariff Board.

Mr GULLETT - The honorable member must not blame my initiative for these changes. He must blame his own initiative in making this reference to the board.

Mr Scullin - That is ridiculous.

Mr Forde - Surely the Minister is prepared to take responsibility for . the action he is now taking.

Mr GULLETT - I do, but it is based on the reference that the honorable member gave to the Tariff Board. The present proposal is to reduce the import duty to 3s. on leaf used in the manufacture of tobacco, and increase the excise on Australian manufactured, tobacco to 4s. 6d. j

Mr Forde - It is a scandalous imposition on the tobacco-growers of Australia.

Mr GULLETT - The committee will, at an early date, have plenty of opportunity to debate this subject. This proposed change will not disturb the total impost of 7s. 6d. per lb. for revenue and protective purposes.

Mr Martens - It will kill the Australian industry.

Mr GULLETT - It will do nothing of the kind. The Government will not allow that. This proposal will not disturb the total impost of 7s. 6d. per lb., but will have the effect of reducing the margin of protection to the Australian tobacco-grower from 5s. 2d. to 3s. per lb. The average f.o.b. value of imported leaf last year was ls. per lb., whilst to-day good quality Virginian leaf is being quoted in America at approximately 7d. per lb., so that it can scarcely be said that the industry is not even now heavily protected. This change has been recommended by the Tariff Board, and I believe it is in the best interests of the growers themselves. Tobacco-growing has made remarkable development during the past two seasons, and there has also been a gratifying improvement in the quality of the leaf grown. In the past the indifferent quality of the bulk of the locally.produced leaf was the main reason for the lack of expansion in the industry. The success in the future depends absolutely upon a constant further improvement in the average quality of the product. With a protection of 5s. 2d. per lb., the inevitable disposition of the growers would have been to rush in great additional areas of tobacco with relatively little attention to quality. The protection of 3s. will, it is believed, prove highly profitable to those who are proceeding along careful expert lines. In the opinion of the tobacco manufacturers it will prove amply sufficient to ensure the consumption of the big crop of 6,000,000 lbs. now maturing, and will encourage a steady increase in the local production.

Mr Thompson - That is absolute nonsense.

Mr GULLETT - Although, the honorable gentleman belongs to a party which is always crying out against high duties, he now urges the retention of a duty which affords protection of between 600 and 800 per cent. He cannot have it both ways.

Mr Thompson - The Prime Minister has broken his election promise.

Mr GULLETT - Another factor which has greatly influenced the Government is the revenue position. With the import duty at 5s. 2d. and the local excise of 2s. 4d., which were the rates in the the last year's schedule, the Commonwealth would have been faced with a loss of approximately £1,000,000 sterling in revenue from this source in the coming financial year. This could not possibly have been allowed with our finances as they are. I ask the Leader of the Opposition (Mr. Scullin), who was recently on the treasury bench, whether he could have faced such a loss with any equanimity?

This revision of duties is being made in accordance with a report of the Tariff Board which is one of the most complete of its kind that I have handled, and could not be lightly turned aside.

Mr Forde - The revenue position could have been met in some other way.

Mr GULLETT - I shall move at an early date for the printing and distribution, not only of this report, but of others which have a bearing upon the subjects with which I am dealing.

The Tariff Board has also recommended changes in the import duty on tobacco for the manufacture of cigarettes which, in effect, would have reduced the total impost by 2s. 2d. per lb. The revenue result, if this recommendation were adopted by the Government, would result in the sacrifice of something like £400,000 which is at present being collected. The Government could not see its way clear to accept this recommendation; the present rates of duty on this class of tobacco are, therefore, being retained.

I wish to make it clear, however, that we do not regard these rates as a final adjustment of the customs and excise duties on tobacco. The whole position will be kept closely under review, and if there appears to bo any danger of Australian leaf of reasonably good quality not find- ' ing a market, consideration will be given to the practicability of rationing imports. The Government is very deeply con,cerned about the welfare of the Australian tobacco industry, and will take every step that is necessary, not only to maintain the industry upon its present basis, but to ensure its steady expansion.

Attention has also been given to the cotton industry. The cotton yarn duties are being amended to conform with the recommendation of the Tariff Board. The rates under the previous schedule were 6d. per lb. and 35 per cent. British preferential, and 6d. per lb. and 55 per cent. general. Under the new schedule the fixed rate of 6d. per lb. is deleted, but tho ad valorem rates of 35 per cent British preferential, and 55 per cent, general are retained. I remind honorable members that in addition to . these duties substantial bounties are being paid on seed cotton and cotton yarn. The ad valorem equivalent of the total assistance given by the previous Government by way of bounty, including bounty on seed cotton and duty, amounted to 174.7 per cent, on 16 count combed cotton yarns and 189.2 per cent, on 16 count carded cotton yarns. The cotton yarns being manufactured in Australia are mainly of the carded type.- I do not say that the cotton spinners are taking full advantage of the present position, but it is not right that such an exorbitant measure of protection should be afforded an industry manufacturing a basic raw material such as cotton yarn.,.

Cotton clothing of various kinds could, under a reckless protective system, have a heavier bearing upon the cost of living, and in consequence upon wages and the cost of production, than any other single commodity. If we continued to develop the yarn industry under an ad valorem assistance of 189 per cent, it' would mean that the clothing industries using cotton yarn as a raw material would require protective duties ranging from 200 per cent, upwards. It would be quite impossible to encourage the expansion of either .cotton-growing or cottton-spinning under conditions so oppressive to the general community.

When the Government assumed office there were in force 78 prohibitions against, particular imports, and 74 50 per cent. surcharge items. . It has been emphasized again and again by the previous Government that these prohibitions and surcharges were imposed as a financial emergency measure with a view to the adjustment of the balance of trade. Many honorable members, including myself, who are now on this side of the House, supported the policy of the Scullin Government in this respect, although we vainly endeavoured to persuade the Minister for Trade and Customs of the day to place a time limit upon the restrictions. All the prohibitions and surcharges have been closely considered by the Government, and it has been decided, as honorable members may have seen from to-day's Commonwealth Gazette to remove the prohibitions against 43 kinds of imported goods.

The list of goods now prohibited is as follows : -

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