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Thursday, 17 March 1932

Mr CASEY (Corio) .- I add my protest to the many made by those who sit on this side of the House, with regard to the assertion that we gained our seats by reason of the undue optimism of our statements to our constituents in respect of the relief of unemployment. I do not think that any member of this party gained his seat by making any foolish promise or pledge on the subject. Even my principal opponent, Mr. Lewis, the late member for Corio, had no complaints to make of me on that score, although he warned me that when we began to tackle the problem of unemployment we would find ourselves " biting on granite ", a picturesque description of the difficulty possibly not far from the truth. Personally, I think I treated the subject fairly. I did not attempt to saddle the responsibility on the late Government. I showed that the depression, which has brought unemployment in its train, has been caused by two things: First, the cessation of loan moneys from abroad, and, secondly, the catastrophic decline in the prices of our principal exports.

We have been told, until we are tired of hearing it, that our national income has declined, approximately, from £650,000,000 to £450,000,000, and we also know how much unemployment has been caused by the lack of loan moneys for the construction of public works. The reasons for unemployment may be stated in this way: Employment directly depends upon production - the sum total of the industrial activities in this country - which in turn, depends directly on consumption, or the total purchasing power of the community. That again depends on the size of our national income. Our national income declined in a brief period by some £200,000,000. There are now in this country 300,000 or 400,000 men who are without work. About one-third of that number were previously employed on public works, and about two-thirds in private enterprise. In normal times about SO per cent, of the people, we are told, are employed in private enterprise. It was these facts which led the Prime Minister (Mr. Lyons), and those associated with him in the framing of the election policy of this party, to declare that the cure of unemployment, so far as we are able to effect it, would come chiefly from the lifting of the burdens that have been placed on private enterprise.

Unemployment provides a problem that cannot be tackled by itself. Its solution, and the return of prosperity, are matters which are- not, to any considerable extent in our own hands. They depend on the amount of loan money obtainable, and on the prices of our principal products in the world's markets. We can mitigate unemployment to some extent, and the Commonwealth and the States should do everything within their power to that end. I have listened with considerable interest and profit to what has been said by almost every section of this House this afternoon, and I propose to use what little time is at my disposal to look at the subject from what might be called a purely federal point of view.

There are two aspects from which it may be considered, the short range andthe long range aspect. The short range aspect consists of the provision of moneys for the prosecution of public relief works, which, of course, must be sponsored by this Parliament; the long range aspectconcerns matters whichI wish briefly to mention and which are particularly the responsibility of this Parliament. There is, first, the financial question, the provision of funds for the relief of unemployment. We know that the Commonwealth and the States have leaned on the Commonwealth Bank, and, through that institution, on the trading banks to the extent of something like £85,000,000 in treasurybills and overdrafts, both in this country and in Great Britain. The magnitude of that figure must make us pause before we enter upon any reckless extension of our unfunded debt. It has not, I think, yet resulted in any inflation of the currency or a great extension of credit, but that is solely clue, I believe, to the existence of what may be regarded as a gentleman's agreement between the trading banks and the Commonwealth Bank to the effect that treasury-bills, once discounted by the trading banks, will not be presented for rediscounting to the Commonwealth Bank, at any rate for some time ahead. This means that although inflation has not existed, and is not existing, we still have it hanging over our heads, because the time must come when the trading banks will be unable to carry the existing load of treasury-bills any longer, or, at all events, will be unwilling to accept any more. They will then present their bills for rediscounting to the Commonwealth Bank' which will be unable to refuse the request, and will have to provide credit which will eventually result in increased currency.

Mr Scullin - There is a remedy for that.

Mr CASEY - I do not think that the Commonwealth Bank could resist the demand.

Mr Scullin - No, but the Commonwealth Parliament could pass banking legislation.

Mr CASEY - That would be discrimkiatory legislation against the trading banks, because it would force them to hold a completely frozen asset instead of a temporarily frozen asset.

One. of the principal considerations of the present Government should be the degree to which we can increase the floating debt with safety; that is, without creating a situation in which we defeat our own object. If we produce inflation by milking the Commonwealth Bank and the trading banks to too great an extent we increase the cost of production within Australia. I think we must admit that there is a maximum, but as yet unknown, amount of treasury-bills which the Commonwealth Bank can accept in any given year, to be used for the meeting of deficits and for the provision of funds for public works, and it is obvious that the more we require to meet a deficit the less there is available for public works. That emphasizes the need for keeping our deficits within the smallest limit. This can be done by decreasing public expenditure and/or by increasing taxation, though both courses are for various reasons impracticable, and, in any event, would affect the situation only in a very small degree.

The next matter of major consideration is the tariff. There are those who regard the tariff as the sole and only solution for most of our troubles, on the ground that the higher the customs wall, the fewer our imports, and, therefore, the more work for Australian hands to do. One has not the time to pursue the effect of the tariff in relation to unemployment, but I am much impressed with the argument that the natural resources of a country impose a limit beyond which increased protection interferes with primary production, and offsets many of the benefits of protection.

In any broad consideration of the unemployment problem we are obliged to give some attention to the standard of living. I mention this, not because I think a reduction of the standard of living would necessarily make any contribution to the solution of our difficulties, but because I believe we must take cognizance of it even in a short conspectus of the situation such as I am now attempting. We wish our standard of living to be as high as possible, for social and for humanitarian reasons, and also because with a high standard of living and good wages we get the biggest possible home market for our primary products, and our primary producers, create the basis of our national income, although their own standard of living is governed not by any artificially imposed standard, but solely by their own labour, and the chance of the seasons.

Another subject which is possibly too large to discuss in the few minutes available to me, but which I submit for the consideration of the Government, is the relation of fixed money claims to the purchasing power of the community, through the medium of a weighted index figure. To a great extent, the budgetary difficulties of this and most other countries are due largely to the non-observance of that principle. Debt service and other such charges on the community, fixed at a time when gold is low in value, become intolerable burdens when gold values are high. The difficulties in the way of tackling this problem are considerable; but they are not insuperable.

The control of exchange is essentially a federal matter, and one which must be considered in relation to unemployment. We have to try to strike a happy mean, or the least unhappy mean. Exchange lower than its proper economic level induces deflation, and consequent increase in unemployment, and if it is too high it will produce a rise in prices in this country, in addition to an increased burden on our budget in the service of our overseas debt.

One of the preoccupations of the Commonwealth Government should be the watching of the exchange rate to see that it does not affect adversely any of the considerations I have mentioned.

Whenever a member on this side of the House uses the word" confidence " a lack of enthusiasm is shown by honorable members opposite. Yet this word was extensively and effectively used by us during the last election campaign. The people of this country now have a Commonwealth Government in which they have complete confidence. But that is not the complete story, because confidence does not rest solely upon a sound Commonwealth Government. That is one factor. The Government of New South Wales is another potent factor, and is being dealt with, as we know.Confidence of the business community in the stability of prices and conditions overseas has not yet been restored, and this is, unfortunately, not in our power to effect.

I have tried very quickly to cover some of the principal factors that are the preoccupation of the Commonwealth Government from the purely federal aspect of unemployment. These are what might be called the long range aspects of the subject. The conference of representatives of the Commonwealth and State Governments to be held within a few weeks in Melbourne will be required to consider both the short and the long range aspects of the subject, the short range aspect being the provision of relief work of a more or less reproductive character, and the long range aspects being the other considerationswhich I have mentioned.

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