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Tuesday, 8 March 1932

Dr EARLE PAGE (Cowper) .- I thank the Government., which controls the business of the House, for making this early opportunity to discuss the tobacco duties. This action is justified by the fact that during the last two years the tobacco industry has been the best antidote to unemployment. In many districts, including Shepparton, Wangaratta, Ashford, and Inverell, the local unemployed have been absorbed, and I understand that of 153 heads of families or single men at Attunga, who, eighteen months ago were on the dole all but three are now fully employed. Therefore this industry deserves prompt attention when action has been taken which is calculated to jeopardize its expansion and even continuance. I have no hesitation in recommending the encouragement of the industry, because it fulfils all the requirements to be expected of an industry which is receiving support from the Government by tariff or bounty. It is increasing its efficiency. Even the Minister for Trade and Customs (Mr. Gullett) stated that the quality of the locally-produced tobacco leaf is steadily improving, and that a substantial proportion of the crop is of the finest bright leaf. Moreover, the industry is not exploiting the public under cover of the protection afforded by this Parliament. Australian tobacco is being sold at from 4s. to 5s. per lb. less than imported tobacco. In that respect, the industry differs from the galvanized iron industry, which is taking from the public the maximum that the protective duties allow. The tobacco-growers are returning to the public almost the full equivalent of the assistance they receive in the lower price, as compared with the imported leaf.

Mr Marr - That is a new argument.

Dr EARLE PAGE - A comparison of the prices of 100 varieties of Australian and imported tobaccoes shows that the average prices for a 2-oz. tin are 1s. 4d. and1s. 10d., respectively, a difference of 3d. an ounce. The Australian article is selling at about 10s.8d. per lb. as compared with 14s. 8d. for the imported. The maintenance of that margin is one of the principal reasons that will ensure the con tinual expansion of the demand for Australian leaf, and if that margin is not destroyed, a public taste will be cultivated which will eventually enable the whole of the local requirements to be supplied by our growers, with the exception of a relatively insignificant quantity needed for blending. The Government, however, has imposed an additional excise of 2s. 2d. per lb. on Australian tobacco, while leaving the indirect customs duties unchanged, which means that the whole of the additional taxation comes from the Australian industry. Beforelast Thursday week, the duty on imported tobacco was 5s. 2d., and the excise duty 2s. 4d., making a total of 7s. 6d. To-day, the duty is 3s., and the excise duty 4s. 6d. on the same total of 7s.6d. The charge of 2s. 4d. on Australian tobacco has been increased to 4s. 6d., the Government aiming to obtain the additional revenue it requires wholly at the expense of the local industry. The Country party admits the desirability of obtaining revenue to enable the budget to be balanced; it concedes also that a luxury is undoubtedly an appropriate item for additional taxation. But it supports the contention of the growers, that a reasonable and just method would be to increase the charge on Australian tobacco by1s. per lb., and on imported tobacco by 10d., thus distributing the burden equitably between the two. I appreciate the Government's difficulties. The Minister for Trade and Customs has declared that additional revenue is essential to enable the budget to be balanced, and the Premiers plan to be implemented.

Mr Gullett - The Government is trying to retain its present revenue.

Dr EARLE PAGE - That is a laudable endeavour, but the Government's action may possibly result in a decrease rather than an increase of revenue. Since the former Government imposed a duty of 5s. 2d. per lb. on imported tobacco, increasing the total charges by1s.8d., the amount of revenue received has diminished considerably. In 1929-30 the revenue was approximately £6,600,000, and last year, during only seven months of which the increased charges operated, £6,149,000. The Tariff Board's report points out that one of the causes of the loss of revenue is the decrease in the consumption of highpriced tobacco.

Mr Scullin - Unemployment has been a factor, too.

Dr EARLE PAGE - Undoubtedly it is another factor. But if the taxation of this luxury be carried too far, the yield will begin to diminish, as has already happened in connexion with certain other taxes. We shall then have to look elsewhere for revenue. But granting that it is possible to secure additional revenue from the tobacco industry, let us compare the Government's method with the alternative submitted by the growers. The Government's duties are expected to return £6,750,124. The proposal of the Country Party would return £6,785,000. The Minister for Trade and Customs has said that if the local production this year is about 6,000,000 lb., the revenue which the Government is seeking will be obtained, but that if the production is increased to S.000,000 lb., the revenue will diminish by £200,000. Which of the two proposals is more equitable and likely to produce the required amount of revenue? We are told that the Government has followed the recommendations of the Tariff Board. That is not so; it has adopted only a portion of the board's report. The alternative proposals of the Country party and the tobacco-growers also are based on a Tariff Board report of 1927, in which the board stated that the right method of encouraging and improving the tobacco industry was to differentiate between the excise duties on imported and Australian tobaccoes. Therefore, if this House is to follow slavishly the Tariff Board's reports, the two methods of taxation now under consideration have in this respect equal authority. The Minister has stated that the policy of the Government is designed to keep the industry from growing too fast. That is the most extraordinary reason ever given by a government for a tariffproposal. This is the first occasion on which I have heard a Minister express concern lest the investors in an industry might lose their money.

Mr Gabb - It is a pity that that atti tude was not adopted in the past.

Dr EARLE PAGE - It may be proper; I am pointing out merely that this solicitude for the investor is a new phase of tariff policy.

Mr Gibson - Does it apply to secondary industries, too?

Dr EARLE PAGE - I wonder? The Tariff Board, in reporting on refrigerators, referred to the possibility that nineteen out of twenty firms which engaged in the manufacture of these machines would lose their capital. But I did not hear any of those who are now supporting the Government, or the last Government for that matter, suggest that that was a good reason why this Parliament should stay its hand. In passing, I may say that I am not concerned with the quarrel between the Government and it's predecessor in regard to the responsibility for acting according to the findings of the Tariff Board. If action in accordance with a report of the board is wise, it needs no apology; if it is not wise it should not have been taken. I am surprised that the Government should be apologizing for its policy, and attempting to shift to the shoulders of the previous Government the responsibility for initiating the latest inquiry by the Tariff Board. The former Minister for Trade and Customs (Mr. Forde) also apologized for having started the investigation ; but if it should lead to wise action, nobody need apologize for it.

Mr Scullin - We have not apologized for having referred this matter to the Tariff Board ; that was the obvious duty of the Government of the day.

Dr EARLE PAGE - The matters referred to the Tariff Board were - 1.The amount of protection necessary for the economic development of the Australian tobacco leaf growing industry so as to protect the revenue, while at the same time giving adequate protection to the Australian tobacco-growing industry.

2.   The alteration (if any) which may at once be necessary in the rates of duty on tobacco leaf and tobacco manufactures (including cigarettes) at present operating under the customs and excise tariffs.

In dealing with question No. 2 it is desired that the Tariff Board should consider the desirability of recommending a sliding scale of customs and excise rates of duty which will as the production of Australian leaf varies -

(a)   give the Australian grower adequate protection ; (b)main tain the revenue us Australian production of tobacco leaf increases; and

(c)   add as little as possible to the price now paid by the Australian consumer for manufactured tobacco and cigarettes.

The alternative proposals that were submitted to the Government last week by the Country party are in closer conformity with the issues that the Tariff Board was asked to determine than are the proposals of the Government. It cannot be claimed, with accuracy, that the new duties give the Australian grower the effective protection that previously existed. There is no doubt that the revenue would be maintained under the suggestions that have been made to the Government by the Country party and the growers, and that the proposals will " add as little as possible to the price now paid by the Australian consumer for manufactured tobacco and cigarettes ". The existing excise duty of 2s. 4d. per lb. on Australian tobacco is being increased to 4s. 6d., whichapproximates 1¾d. an oz. That must be carried by somebody, and I maintain that, substantially, it will be carried by the growers, for in anumber of places the report of the Tariff Board insists that the price of tobacco should not be increased.

I have already pointed out that the margin of difference between the price of Australian manufactured tobacco and the imported article is 3d. an oz., or 4s. per lb. The Government proposes to take away 2d. of that 3d. margin. Honorable members know that, before our industry can reach the proportions we desire, it is necessary to overcome the predilections and prejudices that have grown up over a number of years. That can be done onlyby maintaining a substantial difference between the prices of the two articles. It is ridiculous to suggest, at a time when the crop is being harvested, and no more seed can be planted until September or October next, that the removal of the duty can alter the output of Australian tobacco this season. It takes six months for a crop to mature, so that it will be next March or April twelve months before a further harvest is made. In the circumstances, the alteration of duty must in evitably act as a deterrent against the production of Australian tobacco.

Mr Maxwell - Does not the right honorable gentleman consider that it would be a good thing if the duties acted as a deterrent to Australian production?

Dr EARLE PAGE - The whole tenor of the report of the Tariff Board is that, within a reasonable number of years, Australian tobacco should capture practically the whole of our market, and in addition that there should be some for export. The Minister himself expressed that hope.

I should like to deal with the suggestion that the high duties that are being superseded brought about an exploitation of the public by the tobacco industry and a huge increase in the value of land used for tobacco-growing. The greatest expansion that has taken place in the industry has occurred at Mareeba, in Queensland, where tobacco is grown on Crown land which is made available to those who desire it at, 2s. 6d. an acre. I admit that when the industry received its stimulus some two years ago, the Government of the day was dilatory in opening up available Crown lands which, as the 'honorable member for Kennedy (Mr. Riordan) pointed out, was useless for any purpose other than tobaccogrowing. During the time that the Government refused to open up these Crown lands, a certain amount of speculation in. private lands went on, but now that that country is available there can be no exploitation of the public. The great bulk of the land that is suitable for tobacco-growing in Australia has not enhanced in value. I am aware that in Texas, where I have had some personal experience, tobacco lands bring from £10 to £12 an acre, but they include some of the best grazing flats belonging to different sheep and cattle stations and arc contiguous to water. The exploitation was on the part of city investors and big speculators who issued attractive prospectuses, and I am glad that some of those go-getters are at present cooling their heels in gaol.

The opening up of this country for tobacco-growing has given a stimulus to other industries. Many hundreds of tons of galvanized iron have been purchased for the new holdings, and considerable activity has been shown in the irrigation plant business. The boom costs that are referred to by the report of the Tariff Board are really the £28 and £29 a ton that is charged for galvanized iron, which can be bought overseas for £13 a ton.

Mr Gullett - And tobacco leaf can be purchased in the United States of America for 6d. per lb.

Dr EARLE PAGE - It is quite impossible for the honorable member to camouflage the position. Had there not been a shortage of tobacco revenue we should not have had an opportunity to deal with the position so expeditiously, and there would have been no alteration of the tariff schedule. Tlie tobacco industry is being used as a revenueproducer, and rightly so, but I refuse to be persuaded that the mere juggling with customs and excise figures, leaving an indirect charge of 7s. 6d. per lb. of tobacco whichever way it goes will do anything vo establish or disestablish the revenues of Australia generally.

I make no apology for defending an industry of this sort. I never hesitate to support any worth-while industry, be it primary or secondary, although some of my calumniators maintain that I am a freetrader. I am prepared to encourage the establishment of any industry, primary or secondary, if it has a chance of exporting its products, and if it will increase its efficiency and output per worker. I believe that there are great possibilities for the tobacco industry. I have always supported the establishment of our iron and steel industry, which I regard as a national basic industry worthy of encouragement, and which, if my policy wore adopted, -would also be exporting. For the information of honorable members I quote the following extract from the speech that I made in Sydney on the 30th November last, expounding the policy that resulted in the election of members of my party to this chamber. It reads -

The Country party's fiscal policy oan be summed up as " Sane protection for sound primary and secondary industries ". Where it is proved that reasonable . protection is necessary to retain or establish primary and secondary industries which are necessary to the prosperity of the community we shall unhesitatingly support it. This' has always been our policy, as evidence in the dairying, maize, tobacco, and dried fruits industries, all of which absorb a large rural population.

I go further and say that, after a careful survey of the industries of Australia I am satisfied there are only two hig industries in sight which bid fair to absorb, without any excessive expenditure of additional capital, many of our unemployed. They are the tobacco and dairying industries. That will be done not merely by providing employment in the fields, but by creating work for carpenters and artisans generally, in erecting sheds and so forth.

Mr Maxwell - Will the proposals of the honorable gentleman afford the same high degree of protection as was given by the duties introduced by the Scullin Government?

Dr EARLE PAGE - They will have an identical effect, for they will preserve the margin that exists between the price of local and American leaf. The report of the Tariff Board summarizes the history of the tobacco industry in Australia, and emphasizes the necessity for some protection which the industry has never exploited. It points out that for many years the duty was 2s. a lb., and that, with that protection, the annual production rarely exceeded 2,300,000 lb., and after the war tended to decline. Even when the duty was made 3s. a lb. in 3929, the total amount of tobacco produced in Australia was less than 1,000,000 lb., and fell short by 20,000,000 lb. of our requirements. When the duty was 3s. a lb. the price given by buyers for approved leaf was ls. 6d. a lb. When the duty stood at 3s. 6d. the price for the leaf was ls. 9d. a lb. Now, when the duty is 5s. 2d., the average price given by the buyers in Australia is 3s. It is rather extraordinary to find that the Tariff Board report claims that the right way to make certain that the tobaccogrowers will not plunge headlong into ruin is to reduce their protection against imported tobacco leaf, while, it also claims that the right way to prevent tobacco manufacturers overproducing and bringing down the price is to increase the protection that is given to imported manufactured tobacco. That, surely, is a. most contradictory argument at tin* moment when there is an opportunity to develop the industry to produce for

Empire as well as for Australian use, it is suggested that we should neglect it. The Tariff Board report points out that i he total amount of Empire tobacco used in Great Britain is about 20 per cent, anc! that it has gradually grown from 3 per cent, in 1921. That is largely because of the duty of 9s. 6d. a lb. that is imposed under the general tariff, and a preference of 2s. a lb. that is granted to the dominions. Under that preference our sister dominion. New Zealand, which does not enjoy any better conditions for producing tobacco than we do, has been able to establish a fair export trade to Great Britain. The Tariff Board envisages our selling a material amount of our tobacco in Great Britain in the future.

Mr Hughes - At what price must the tobacco be sold in England in order to compete in the market ?

Dr EARLE PAGE - It already enjoys a preference of 2s. per lb. At. the present time American fine, bright leaf is selling at ls. per lb., so that we ought to be able to get 2s. or 8s. per lb. I trust that, when the Acting Treasurer (Mr. Bruce) is in Ottawa he will be successful in having the British preference to Empire-grown tobacco increased. This industry provides a great deal, of employment, and inexperienced men can be trained quickly in it. Much of the work required can be done under the supervision of the man actually running the farm. It has been said that one man can handle five acres under tobacco. That is absurd. Any one who has seen tobacco being grown and harvested by the new flue-curing methods, knows that one man alone cannot, manage five acres. It would be nearer the mark to say that one man can look after two or two and a half acres. When reports are published in the press once in a while to the effect that a tobacco-grower has received a return of £30, £40. or £50 an acre from his farm, some people talk as if he had discovered another Klondyke

Mr Thompson - He might not, get a penny an acre the next year.

Dr EARLE PAGE - That is so; tobacco is a most uncertain crop. Tobacco in this country is affected by a disease known as blue mould. In the United States of America np to the present the growers have not been troubled with this pest, although, fortunately perhaps for Australia, but unfortunately for the American growers, it is reported to have made its appearance there now. Owing to the ravages of this disease and of a multitude of other pests, re-planting is frequently necessary, and I have heard of an instance in which a crop was re-planted twelve times. Circumstances seemed entirely favorable at the beginning of- this season for a big production, but during the last three months exceptionally dry weather has prevailed throughout, all the tobaccogrowing districts from Mareeba in Queensland, to Wangaratta and Shepparton in Victoria. As a result, many of the growers who, on the advice of the Agricultural Department and of the manufacturing companies, planted their tobacco on light, sandy ridges in order to produce the desired quality of leaf, are threatened with the entire failure of their crop. The estimate of the growers that this years crop will be 5,000,'000 lb. is much nearer the mark than S,000,000 or 10,000,000 lb., which has been frequently mentioned. It is easy for the Customs officials to be misled when forming an estimate. When the growers are circularized at the beginning of the season, they put down an acreage usually beyond that, which they ultimately harvest, because they make allowance for failure. One can usually divide the Customs estimate by two, and then be fairly near the mark.

The proposal of the Government is that the duty on imported leaf shall be 3s. per lb. The Minister has said that if this amount of protection proves insufficient he is ; prepared to impose an embargo or a partial embargo, to ration imports and to fix the price of tobacco in Australia. I am surprised that the Minister should choose such a complicated way of protecting the industry when he might have followed the simple, businesslike method of protection through the customs. The Minister's proposal, if followed, would involve the setting up of most complicated administrative machinery, and will involve the creation of price fixation, and appraisement boards, and ultimately, in effect, a compulsory pool. [Leave to continue given.]

The Minister has declared that the industry is already being protected to the extent of 600 or 700 per cent., but even he still seems doubtful whether that degree of protection will be sufficient, judging by his accompanying statements. He has said that if it does not prove sufficient, the Government is prepared to grant protection, not to the extent of a mere 600 or 700 per cent., but to the extent of imposing an embargo, which is an infinity of protection. I fear that if the Minister's alternative is adopted, and the price of tobacco has to be fixed and continually discussed in this House, this industry will become more and more the pawn of politics. Tariff items are sufficiently troublesome when they have to be considered only every four or five years, but if they come up for review every six or nine months the situation will be impossible. It seems to me that the Government would not only have to fix the price, but would have to arrange for the formation of a compulsory pool as well, when the supply has grown considerably, and that is something which the Government and its supporters never contemplated with equanimity or enthusiasm.

The Country party's proposal would enable the ordinary customs machinery to be used as at the present time, and the price of local tobacco would fix itself according to the law of supply and demand. I may say here, that I do not join in the general condemnation of what some honorable members call the " tobacco combine." From my perusal of the Tariff Board's report, and of the evidence presented to the select committee on tobacco growing, I am forced to the conclusion that the BritishAustralasian Tobacco Company has tried to deal in a generous way with the growers, and to encourage the development of the tobacco-growing industry in Australia. The company even went to the length of paying a special bonus of1s. per lb. for leaf of the best quality. It paid 2s. per lb. for ordinary leaf, and 3s. for the fine, light coloured leaf. For some time past it has been paying 3s. per lb. for good, average quality leaf. I admit that there may be some difficulty under our proposal in regard to the differentiation between the excise duty on locally-grown tobacco, and the import duty on foreign tobacco. This may require the setting up of special machinery, but the Government, even under its own proposals, will create a situation in which special administrative machinery will be required. The board has recommended that all tobacco should be allowed into Australia at a flat rate of 3s. per lb., but the Government proposes that the duty on pipe tobacco shall be 3s. per lb., and that on cigarette tobacco 5s. 2d. per lb. In order that the customs may not be defrauded, the department already finds it necessary to have in each big manufactory its own customs officers. The officers being already there they may, without much difficulty, extend their activities to differentiating in the matter of excise between Australian-grown and imported leaf.

Mr Thompson - It can be done.

Dr EARLE PAGE - I do not think that there is any insuperable difficulty. It is evident that the Government had in mind that it would be necessary, in order to safeguard the revenue, to make the excise duty and the import duty approximate each other. It asked the Tariff Board to arrange a sliding scale of duties. We propose that, as production increases - and it will increase by probably 3,000,000 to 4,000,000 lb. a year at the outside - the excise duty on locallygrown leaf should be gradually increased so as to approximate the duty on imported leaf. I move -

That the amendment be amended by omitting all the words after " that ", first occurring, with a view to insert in lieu thereof the following: - "in the opinion of this House the Government should reconsider the proposals submitted by the tobacco-growers that the rates of excise duty should be, on

(a)   Tobacco manufactured from Australiangrown leaf, per lb., 3s. 4d.

(b)   Tobacco manufactured from imported leaf, per lb., 5s. 4d.

Sitting suspended from 6.11 to 8 p.m.

Dr EARLE PAGE - The Government should reconsider the suggestion of the tobacco-growers that the rate of excise duty should be 3s. 4d. per lb. on tobacco manufactured from Australian-grown leaf, and 5s. 4d. per lb. on tobacco manufactured from imported leaf. I ask for support for this proposal because it would be essentially just and fair to both the local' arid- importing interests. It would preserve the present selling margin between the imported and local tobacco, and also observe that spirit of caution in any changes of tariff which was mentioned in the Governor-General's Speech. It would permit Australian tobacco to be sold to- the consumer at about Id. an oUnce less than is possible under the Government's proposals. It would thus not only be of real advantage to the consumer as well as to the grower, but would also enable the greater revenue that the Government considers necessary to be obtained. It would permit the easy increase of the excise as production expands and improves. Our suggestion is that, as the Australian production approximates the total consumption there should be a continual increase in the Australian excise to' ensure that the necessary revenue is obtained. If the statement of the Tariff Board that the' manufacturers can absorb some of the increase in excise is correct, then tinder my proposal the increase iu the price of tobacco produced from either Australian or imported leaf would not be more than -Jd. an ounce. It is possible that there might bc rio increase in the price of either local or imported tobacco, and if that were so, the necessary revenue would be obtained for certain from the tobacco industry because consumption would hot be impeded. It is worth mentioning that the Tariff Board recommends that while the margin of protection to the growers should bc reduced by 40 per cent., the margin of protection afforded the tobacco manufacturers, which is an increase of 280 per cent. on the tariff schedule of 1921-28, should be retained. I shall quote two paragraphs of the board's report, dealing with the protective duty on cut manufactured tobacco as distinct from that on imported tobacco leaf. In 192S the duty was 5s. 7ci. per lb.; to-day the proposed duty is 93. '3d. The board states-

Tlie actual margin of protection against imported manufactured tobacco if the board's recommendation is adopted, will, however, bc considerably more than ls. Od. pdr lb., been use it is assumed the local tobacco manufacturers will use a large proportion of Australian leaf, and that it is unlikely that the price paid for such leaf will be anything like equal to the Cost of American leaf plus duty, lii actual practice it will probably be found that local manufacturers will have a margin of protection against imported manufactured tobacco, somewhere' near 3s. 6d. per lb. . . . The extension of the margin of protection from ls. 3d. to approximately 3s. Gd. per lb., and thus the removal of the possibility of any appreciable overseas competition, would appeal at first sight to improve the facilities for local manufactureers to earn unduly high profits. The board has already pointed to the desirability f6r manufacturers reducing their scale of profits, and it considers that the altered local conditions will supply a pressure in this direction which will for the time being be more effective than the pressure of outside competition.

It will, therefore, be seen that what I said earlier is correct, that the board's remedy for any possible exploitation of the protective duty, so far as the manufacturers are concerned, is to impose a still higher duty. But protection is being denied the grower because of the fear that he may exploit it. In regard to the future' position, the board says that there is likely to be a large and rapid expansion unless three things occur. The three suppositions are set out on page 6 of the report, and are as follow: -

Unless something is done to rectify the position or unless disease attacks the crop, or adverse climatic conditions are experienced, it appears certain that there will very soon be serious over-production of leaf, arid a heavy loss to many growers who have been tempted to expend money in the cultivation of tobacco under conditions which cannot be regarded as economic.

Serious climatic conditions have already been experienced during this present year, and have been responsible for the great diminution of the total crop. I am certain that many inexperienced growers who have suffered the vicissitudes of this industry will practically cease cultivation after this year, and only experienced and keen growers will remain in it. I urge the Government to accept my amendment. I find difficulty in supporting the amendment of the Deputy Leader of the Opposition (Mr. Forde), because it is too general in its terms, and if adopted might hot yield the revenue that the Government desires. The amendment that I have moved will enable that revenue to be obtained. If the Government will not accept my amendment, I trust that it will at least do something to protect the growers who have already produced their crop, because there will be little possibility of marketing it at a profit if the protection that the grower has en joyed is diminished to any extent during the next two or three months. Tobacco is harvested from February to May, and is planted in September or October. Therefore nothing in the world can alter the production of the present season. The Government, whatever it may do, should protect the growers who have grown tobacco leaf on the understanding that they would obtain a certain amount of protection. Their crop has already been harvested, and is still to be marketed.

Mr Thompson - I second the amendment of the right honorable member for Cowper (Dr. Earle Page)pro forma, and reserve the right to speak later.

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