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Tuesday, 8 March 1932

Mr GULLETT - Will the honorable member say that if production were raised to 14,000,000 lb., comprising not more than 35 per cent. of bright leaf, the whole of it could be consumed locally, and that the yield to the treasury would not diminish ?

Mr Thompson - A bsol utely .

Mr GULLETT - Any sudden and violent change in the quality of the tobacco offered to the Australian smoker would be followed immediately by a decrease of consumption. For a time, at any rate, the tobacco could not be sold, and the Commonwealth would lose a substantial amount of revenue.

I come now to the reasons why the Government cannot accept the alternative proposal suggested by the right honorable member for Cowper (Dr. Earle Page). I am. sure, and I have advised the Government accordingly, that the Tariff Board's prediction that 6,000,000 lb. of manufactured tobacco will be produced this year is an under-estimate. The production is more likely to be about 8,000.000 lb. The Leader of the Country party has represented that an excise duty of 3s. 4d. on a production of 6,000,000 lb. will yield approximately the same revenue as the Government is now expecting. But if the production should go to 8,000,000 lb., the revenue will decline by over £100,000. The Government cannot possibly risk such financial insecurity. Turning to next year's prospects, assuming that the crop will reach at least 16,000,000 lb., the excise rate on the quantity consumed locally must be over 6s. per lb. A rise from 3s. 4d. to 5s. in one year would be too sudden. The Government considers that it would be wiser to advance the excise in stages, and therefore proposes 4s. 6d. this year. As the bulk of the local production increases, there will be little difficulty in raising the excise to a rate which will maintain the revenue at approximately its present level.

Apart from revenue considerations, the industry will be heading for disaster if its progress is not restrained and the recent improvement in the quality of the Australian leaf is not continued. I submit that a duty of 3s. per lb. will leave an ample margin for the growers, and place the industry in a more profitable position than any other minor rural industry. I do not pretend to say what the price will be, but with a protection of 3s. per lb. a highly satisfactory price to the growers will be assured. A member of the Queensland deputation which waited upon me on Saturday morning, said that 700 lb. of tobacco at 2s. per lb. would give a gross return of £70. He was satisfied with the Tariff Board's estimate of £35 for working expenses; therefore, the net return would be £35 an acre. But to the owner of a 5-acrc block, the working expenses would represent wages, over and above which lie- would make a profit of £35 an acre. I do not know of any other rural industry, minor or major, which, year in and year out, yields a return, nearly so good. The price for tobacco leaf during Inst season was 3s. The chief speaker at Iiic main deputation on Friday was Mr. Temple Smith, who for many years was iiic tobacco expert in the employ of the Victorian Government. He, and many other growers, are now saying that they must have a protection of 5s. per lb., or, at least, 4s. But a prospectus issued two years ago by a company of which Mr. Temple Smith was a director, stated that, with a duty of 3s. per lb., a return of 28 per cent., after making generous allowance for reserves, and an annual profit of £53 an acre were anticipated. Before honorable members decide to oppose the recommendation of the Tariff Board, I appeal to them to measure the profits of the tobacco industry with a protection of 3s. per lb., against those of any other primary or secondary industry in the Commonwealth. Is there one other that yields so handsome a return?

Mr Prowse - I could mention half a dozen.

Mr GULLETT - Compare the returns from tobacco with those from other minor industries. In 1929 the profits per acre derived by 91 citrus-growers were, according to a return prepared by the Development Branch - Swan Hill, £5.47; Barham and Nyah, £13.6; Goulburn Valley, £30.51; Murrumbidgee, £30.54; Curlwaa, £38.01; Cobram, £40.24; Mildura, £40.64; and Renmark, £63.82. The return from the citrus crop is not nearly so great as that from tobacco, with a protective duty of 3s. per lb., but compare the capital cost of the two industries. The citrus-growers are on expensive irrigated land, and the growers have to wait years for their first return. Since 1929 prices of citrus fruit have fallen and the profits earned by citrus growers would be considerably less to-day than those I have just quoted. The comparison I have made with the citrus-growers extends to the other irrigated industries, including the production of dried fruits and dairy farming. All arc protected industries, but to none of them has Parliament thought it desirable to grant protection nearly so great as the 3s. per lb. duty on imported tobacco leaf, which, according to the Tariff Board's computation, i.« equivalent to from 300 to 600 per cent.

I remind those country members who are protesting against the reduction of the tobacco duty of the protection give?) to some of the secondary industries cuncerning which they have made much com plaint, in this House. On galvanized iron, for instance, the ad valorem equivalent of the present duty is 38£ per cent., as compared with the protective duty of from 300 per cent, to 600 per cent, on tobacco. If the Leader of the Country party (Dr. Earle Page) votes against the reduction of the tobacco duty, how will he ever be able to oppose any protection proposed for a secondary industry? [ Leave to continue given."] Wo have heard a great deal about fencing wire, and we shall hear a great deal more on that subject. The present duty on that, item ranges from 16 per cent, to 22 per cent., which is an impost that the tobaccogrowers 'have to bear. We ako heard much about agricultural machinery. The ad valorem equivalent of the present duty on a reaper and binder is only 27-1 per cent, to 28i per cent. The. Government is determined to make a great, and I hope a sustained, effort to bring about, economic sanity in Australia. Through the tariff, and indeed through all its legislation, it will endeavour to effect a better cost level, particularly in the interests of primary export industries.

I have submitted quite a limited tariff schedule to this House, in which nearly every item that is dealt with is reduced.

The Government has conformed with the desire of honorable members who constitute the corner party, and I have no doubt that those gentlemen will applaud practically every one of those reductions. Certainly they will approve every one that is associated with secondary industries. They cannot have it both ways. The Government is now bringing ina duty which represents a protection of something like 300 per cent. to the growers. The tobacco industry is in an extraordinarily progressive and profitable condition, and the Tariff Board has submitted a convincing report urging a reduction of duties, not to the galvanized iron basis of a miserable 38 per cent., but somewhere in the vicinity of 300 per cent. Yet the action of the Government meets with the objections of honorable members opposite. If honorable members will not support the Government in a tariff reduction such as this, the country may well despair of ever bringing about anything in the nature of sane tariff reform.

The case for the growers is not being enhanced by the exaggerated presentation of their case. I have been told again and again during the past fortnight that Australia sends millions of pounds a year to the United States of America to purchase tobacco. Actually that country will receive for this year's total consumption of pipe tobacco in Australia approximately £416,000! Therefore, I hope we shall not hear any more about the Government's policy of letting " millions " go to the United States of America to pay for tobacco.

Then there is the claim that the Australian tobacco industry employs some thousands of farmers, a large number of share-farmers, and about 10,000 employees.It is alleged that our tobaccoindustry maintains some 15,000 persons. The estimated area of crop planted is 20,000 acres, which would mean that threemen are employed to every four acres. It may be assumed on a couservative basis that one man can handle five acres of tobacco, except at planting and harvesting time. It is, therefore, safe to say that the presentcrop does not give an average of full-time work to more than 5, 000 hands. So that, taking the Australian crop at . 6,000,000 lb., and the revenue that the Government loses at 5s. 2d. per lb., which represents £1,500,000; the Treasury is subsidizing every man in the industry at the rate of £300 per annum !

Mr Scullin - Why is the Government in favour of a change-over from American to Australian-grown tobacco?

Mr GULLETT - The Government is not in favour of an unconditional changeover. It advocates a change-over subject to the production of leaf of good quality, capable of yielding to the Treasury an amount of revenue similar to that which it is now yielding.

Mr Scullin - The honorable gentleman is making a case against the Australian industry.

Mr GULLETT - I have kept the House quite a long time, and I shall only add at this stage that the Government is convinced that this change is indispensable to the preservation of our revenue, and it is in the very best interests of the growers themselves.

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