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Thursday, 10 November 1938

Mr FORDE - The Prime Minister has said frequently that the provision of houses for the working people is very near to his heart, but there is no evidence of that in the budget. No proposals are brought forward with regard to water conservation and irrigation for country districts. Youth employment and other social problems in which the Government professed to take a very deep interest are also omitted. A promise was made that £20,000,000 would be provided for farmers' debt adjustment. After four years only £4,000,000 has been expended. It is now proposed to appropriate a further £12,000,00. Of an estimated total expenditure of £93, 136.000, an amount of £8,492,000 is to be expended upon defence. The remainder of the total defence provision of £16,796,000, we are told, will be drawn from trust accounts and loan funds. The Federal Parliamentary Labour party does not object to adequate provision being made in the budget for the defence of Australia against possible foreign aggression; as a matter of fact, (hat party definitely stands for the adequate defence of Australia. My criticism is that the Government has failed to utilize the money provided in the best interests of the defence of Australia. So that there may be no misunderstanding, I quote the platform of the party decided upon at the last Federal LabourConference -

(a)   The Australian Labour party expresses its greatest abhorrence to war and Fascism, and urges that the Commonwealth Govern ment should endeavour to establish and maintain friendly relations with other nations.

(b)   That the complete control of the production of munitions and war materials of all kinds should be vested entirely in the Commonwealth Government.

(c)   That preparation to counter any possible foreign aggression be made, by the establishment of a defence scheme commensurate with Australia's ability to maintain it, and adequate for our needs.

That shows clearly that the Labour party stands for the adequate defence of Australia against possible foreign aggression.

Mr Holloway - Not at the expense of internal standards.

Mr FORDE - No, we stand for the maintenance of internal standards. We wish to improve the standards of living, and to make Australia a much more attractive country, so that the masses of the people will feel a special pride in it and desire to subscribe to a policy of defence against foreign aggression. Our argument is thatthe expenditure should be purely for defence purposes, and that the greatest proportion of it should bo upon the provision of equipment, aeroplanes, roads and aerodromes in this country, so that the maximum degree of employment might be provided for our people.

Looking at the subject of taxation, we must be amazed at the stupendous increase of the collections by the Commonwealth Government. This raises the point that there is a limit beyond which taxes cannot be increased. We must not lose sight of the fact that in 1937-38 the tax collections of the Commonwealth and the States reached a new record of £118,700,000, an increase of £10,500.000 in comparison with the. collections in the preceding year of that increase, the Commonwealth was responsible for £6,274,000 and the States for the balance of £4,236,000. We should bear in mind that the debts of the Commonwealth and the States at the 30th June, 1938, amounted to £1,182,566,000. an increase of £92,460,000 compared with the year ended the 30th June, 1931. The annual interest bill of the Commonwealth and the States aggregates the colossal figure of £45,000,000.

Mr Paterson - The debt of the Commonwealth has been reduced, while that of the States has been increased.

Mr FORDE - The net increase of the national debt has been £92,46.0,000.

Mr Paterson - The States' debt has risen by £99,000,000.

Mr FORDE - This Commonwealth Parliament must consider how far it can impose on this national capacity to carry the burden of taxation and indebtedness. There are two outstanding factors which cannot be disregarded in any review of our economic and financial position: First, the burden of interest will eventually crush the nation if it continues to mount; and, secondly, we are not working to full capacity in wealth production with over 150,000 of our people out of employment. The interest position is one which the Commonwealth will have to consider very seriously in the near future.

The Federal Labour party stands for the national control of interest rates. Labour's monetary policy provides for the national control and utilization of credit for the nation's needs.

Mr Casey - Douglas Credit.

Mr FORDE - There is every justification for a policy of credit management at the present juncture, in order to ensure its adequacy and to increase employment. That is not Douglas Credit, as the honorable gentleman suggests. He endeavours to brush aside any suggestion of monetary and banking reform or of credit management, by describing it as Douglas Credit, because he himself is bereft of any ideas except those which he gleaned from a conference he recently admitted having had with bankers "with a view to informing his mind ". His mind is informed only by Sir Alfred Davidson and other orthodox banking magnates. The Royal Commission on the Monetary and Banking System, at paste 196 of its report, under the head " Central Bank Credit ", referring to the functions of the Commonwealth Bank, said, inter alia -

It can lend to the governments and to others in a variety of ways, and it can even make money available to governments and to others free of any charge.

That is a very important statement by a royal commission appointed by the Lyons Government. I believe that, within definite limits, the Commonwealth Bank can make sums available every year for great reproductive and national works in Australia, not at exorbitant interest rates, but at the cost of issuance and administration, in accordance with the view of the royal commission, from whose report I have just quoted.

Mr Casey - That is a point in the scheme of Douglas Credit.

Mr FORDE - It is the view of a royal commission appointed by the present Government at a cost of over £20,000. Because the friends of the honorable gentleman, whom he consulted " with a view to informing his mind " said that he must not proceed with the implementation of the recommendations of that commission, he is dumb when asked to state when he proposes to introduce legislation along those lines. Mr. J. M. Keynes, the noted economist, in a special article published in the New Statesman and Nation, said that he wanted the state to control the supply of money and the rates of interest.

We cannot expect any such reform from the present Treasurer, or from the inner group dictatorship of this new-old Government, which has no policy on banking except that of the private bankers.

A good deal has been said concerning the conversion of Australia's indebtedness overseas. Certainly, the present High Commissioner in London has been responsible for negotiating the conversion of certain loans that have fallen due; but those loans expired, and had to be converted on the best possible terms, and there is still unconverted an amount of over £200,000,00. The conversions made by this Government were a mere bagatelle compared with those made while the right honorable member for Yarra (Mr. Scullin) was Prime Minister of Australia. The whole of Australia's internal indebtedness was then converted, at an annual saving to this country of approximately £6,500,000.

Mr Casey - With the assistance of the Opposition.

Mr FORDE - Under the leadership of the right honorable member for Yarra (Mr. Scullin). Certainly the Opposition

Lad sufficient intelligence to recognize a wise financial policy, when enunciated so convincingly as the right honorable gentleman was able to do it.

Mr Casey - Those days are past.

Mr FORDE - But the credit must rest with the men who showed foresight and statesmanship in initiating that internal conversion which has resulted in a tremendous annual saving to the taxpayers of Australia. Of the overseas loans that have not been converted, over £180,000,000 bears interest at 4 per cent, or more, of which about £125,000,000 carries an interest rate as high as 5 per cent. It was stated that, when the Lyons Government came into power, there would be an abundance of cheap money, and that loan conversion would be easy. " The financiers would be literally eager to help them out of their difficulties ", said the Prime Minister ; yet we find that £200,000,000 of overseas loans has not been converted. In facing the present serious situation, we must utilize to the full the whole of the resources of the nation and the productive power of the people. Any improvement of trade or increase of employment that has come about since the appointment of the present Government to office has occurred, not on account of legislation initiated by it, or its administrative acts, but in spite of its lack of encouragement of industry. Second in command in the United Australia party we have a Minister who says that what Australia is most suffering from to-day is lack of leadership.

Mr Holloway - Yet it is called the United Australia party.

Mr FORDE - It is merely alleged to bo a united party.

The Government cannot derive satisfaction from the present tendency towards increased unemployment. With 150,000 of our people out of work, Australia is not in a safe position to meet the financial and economic strain that will probably be imposed on it in the next couple of years. The case for the absorption of the unemployed, undoubtedly strong as it is from the humanitarian and social points of view, is strengthened by the national need for greater effort to defend this country against a possible future attack. We must, therefore, increase our wealth production and the purchasing power of our people. We must improve our standards of living, and the Commonwealth Government must give a lead to the governments of the States in evolving great national works to put into employment many thousands of the 150,000 who are out of work to-day. We must employ our man-power to the full, and finance defence and national reproductive works without piling up crushing burdens of debt carrying high rates of interest. For far too long has financial control been left in the hands of a few companies, whose main incentive is profits and dividends. For far too long has the human element been subordinated to the rapacity of private financial institutions. What is wrong with Australia to-day ?

Mr Stacey - Nothing.

Mr FORDE - The honorable member smugly replies "nothing", expressing, of course, his own satisfaction with recent events. The worst drawback is the Government which is in control. For some time there has been lack of co-operation between the Commonwealth and the State Governments for the purpose of finding solutions of many pressing problems.

There has been a lack of planning on tho part of the central Government which has a dominating influence on the Loan Council, by virtue of the fact that the Treasurer of the Commonwealth, as chairman of the Loan Council, under the Financial Agreement, exercises two votes as against one by the representative of each State. Progressive State governments are chafing under the restrictions of the Loan Council. Long-range financial planning can be carried out effectively only with the concurrence and support of the Loan Council ; that body has the power to consider long-range financial planning, and a lead should have been given by the Commonwealth Government to the conference of Commonwealth and State Ministers. Each State government should. have been asked to formulate schemes and should have been assisted financially to carry them to completion without interruption. All of the States would have been better able to direct their public works expenditure towards definite objectives, such as the permanent relief of unemployment and the diversion of labour to rural development, if they could have been assured over a period of years of a definite annual allotment of money for their public works programme. The Commonwealth Government had . an obvious opportunity to break away from the old financial traditions and devise means by which, even if only for the term of its mandate from the electors, the interests of the Commonwealth could be met in a manner commensurate with its wealth production and the capacity of its people ro discharge their obligations.

A proper system of financial planning and a long-range public works policy should be formulated by the Commonwealth Government, and submitted to the Premiers of the various States in conference. The States have in mind important works which could be undertaken, such as increased land settlement, developmental schemes for water conservation and irrigation, the building of main roads, more liberal assistance to the mining industry, the making of advances on more liberal terms to farmers and others engaged in rural activities, housing schemes for the eradication of slum areas and more liberal advances to local governing authorities to enable them to carry out necessary water and sewerage schemes and works for the supply of electric light and power. The Lyons Government said, in effect, that the obligation in regard to unemployment rested upon the States; but. if the Commonwealth Government, through the Commonwealth Bank, could find the money for these schemes over a period of years at the cost of issuance and administration, the result would be increased employment, increased production, and an increase of the value of the assets of the States and the Commonwealth.

Greater use, I submit, should be made of the Commonwealth Bank in financing developmental and reproductive works, and there should be greater co-operation than there is at the present time between that bank and the Loan Council. If war broke out to-morrow, no doubt £100,000,000 could be found immediately for defence purposes. Why should we not provide £30,000,000 over a period of years for land settlement, development and a great national water conservation and irrigation .scheme? Owing to lack of finance, it has become increasingly difficult to develop many of our primary industries, and thus to increase the population. Of all the continents in the world, Australia has the lowest average rainfall. Two-thirds of it is arid, because many of the rivers seep to the artesian basin, which, is receding at the rate of three inches a year. The drying up of this artesian basin is one of our greatest problems at the present time. The problem of water conservation must be tackled in a national way, and a lead should be given by the national government.

The Government is obviously reluctant to give effect to recommendations of the royal commission on banking, although, to do so, would be to go a long way towards making available the funds which are necessary for the proper development of the country. Last January, the press reported that the proposed banking bill would provide for the setting up of a mortgage bank, and proposals were put forward to strengthen the Commonwealth Bank as a central bank. A month later, the press reported that the Commonwealth Bank and the trading banks had been invited by the Government to submit reports and comments on the findings of the commission. A further press report stated that tlie banking bill would contain no variation of the present relationship between the Commonwealth Bank Board and the Government, and jio alteration that would give effect to the proposal that the governor of the bank .should also be chairman of the board. There has been a barrage of propaganda against the findings of the royal commission, particularly from the newspapers, which have benefited from the substantial advertisements inserted by the trading banks.

In July, 1937, Sir Earle Page announced that action would be taken shortly by the Federal Government to give effect to at least some of the recommendations of the royal commission on banking. He said that long-dated loans would be provided for the farmers, which was a necessary reform, and he said that this would be brought about "in a few weeks' time ". That promise was made before the last federal elections, but it lias been treated with the same indifference as the pledge given by Mr. Lyons before the preceding election, that £20,000,000 would be made available for a national housing scheme.

The royal commission on monetary and banking policy made several interesting recommendations, one of which was -

The licensing of private banks, and the giving of power to the Commonwealth Bank to call on private banks to make certain deposits with the Commonwealth Bank.

That was a majority decision of the royal commission, but it was absolutely disregarded, and no action was taken by the Government. Other recommendations of the commission were -

Permanent machinery for the Loan Council which would enable the Loan Council, the Commonwealth, the State Treasurers and the Commonwealth Bank to establish and maintain close contact with one another.

Better use of the Australian note issue.

Better use of the gold or sterling used as a reserve for the Australian note issue.

Authority for the Commonwealth Bank to carry on trading activities in a proper manner.

A special mortgage branch of the Commonwealth Bank to assist the farmers and other users with long-termed loans.

Provision for the Commonwealth Bank and the governments to supply capital for small secondary industries. No action has been taken in regard to any of them. Evidently the private banks objected, and the Government has done nothing. Twelve months ago, the Government promised to bring down legislation to give effect to the recommendations of the commission, but it has continued to shelve the matter from month to month, and it is now quite clear that it does not intend to do anything at all. In this regard, the Government has a shocking record of inaction.

In his budget for 1938-39, the Treasurer estimates a deficit of £3,184,000 for the year, and to make up this shortage he proposes to secure additional revenue from the following sources: -


In this budget, the Treasurer has adopted the unusual policy of making provision for future budgets. Never previously, to my knowledge, has the Treasurer used part of a surplus to relieve a future budget, and then taxed the people for the current year to make up the amount set aside. Last year, there was a surplus of £3,495,000. The Government has decided to use £2,494,000 for defence purposes this year, and to use the other £1,000,000 for defence purposes in 1939-40. Had the whole surplus been used for defence purposes this year, it would, not have been necessary to increase the sales tax from 4 per cent, to 5 per cent.

A perusal of the budget figures indicates that the Treasurer indulged in some strange reasoning to arrive at his estimates of increases and decreases of revenue as compared with the last financial year. The estimates of increases are : -


The estimated decreases are : -


It is hard to understand why, if the Treasurer expects increases of revenue from the Post Office, railways, &c, he should estimate such a huge reduction in other directions. It is also difficult to understand why he should budget for an increase of £167,000 from excise on spirits, and budget for a decrease of £43,000 on excise from beer.

The estimated decrease of £189,000 in connexion with the note issue is mainly to be accounted for by the action of the Government in raising a loan of £7,000,000 overseas, and liquidating £5,000,000 of treasury-bills, a matter to which I shall refer later. In arriving at its estimate of revenue for 1938-39, the Government had the receipts for more than two months to work on, and as the returns for those two months showed a surplus of over £335,000 over the budget estimate, and in view of the Treasurer's own statement that inquiries indicated that traders generally anticipated no decline of business activities for the rest of this year, it is hard to understand how the Government arrived at the conclusion that it would receive £1,700,000 less from customs this financial year that it did last financial year. For the three months ended the 30th September, the excess of receipts over expenditure was £334,000. According to a statement issued by the Treasury, the actual revenue for the three months exceeded the budget estimate by £662,000.

Had the Government used the whole of the surplus last year for defence purposes, and not set aside £1,000,000 for defence expenditure for the year 1939-40, there would have been no need to increase the sales tax this year from 4 per cent, to 5 per cent., thereby taking £1,300,000 by indirect taxation out of the pockets of the working people.

When the budget was introduced, there was considerable comment from certain quarters regarding the proposal to increase the land tax by approximately 11 per cent, to return an additional £140,000 a year. One might be pardoned for thinking that the land tax was paid by the struggling primary producers, the men from the wheat-growing areas, who have to come to the Government for assistance. Actually, two-thirds of the land tax is paid by city land-owners, and the other, third is paid by large land owners in the country, there being an exemption of £5,000 before any land tax is paid on country property. The accumulated remission of land tax since 1932-33 amounts to approximately £7,600,000. Who are the people who have received the benefit of these remissions? Are they the struggling primary producers? No; let us relate how some of the big vested interests in the cities have benefited. The Bank of New South Wales, over which Sir Alfred Davidson presides, benefited to the amount of £64,500, the English, Scottish and Australian Bank by £37,500, David Jones Limited, by £21,000, and the Union Bank by £27,000. I could cite many other big city concerns which have benefited very considerably from remissions of Commonwealth land tax. But the primary producers have received no benefit at all in this respect. At the same time this Government has not hesitated to increase indirect taxes. It has imposed a flat rate tax on incomes with the result that the burden falls just as heavily on lower incomes as on higher incomes. Whilst it raises an extra £2,700,000 annually by this means it asks the rich landowners to provide only £140,000 of additional revenue.

In his budget speech, the Treasurer (Mr. Casey) said that since 1932-33 the Government had consistently reduced the burden of income tax and, at the same time had reduced indirect taxes, principally sales tax, proportionately. That statement is misleading, because whilst it is true that the Government has reduced direct taxes during its period of office it has, at the same time, enormously increased indirect taxes. The facts in regard to taxation generally are that in 1937-3S the revenue from taxes was the highest recorded in any year since federation. In 1935-36 it amounted to £63,600,000, whilst it is estimated that it will reach £71,500,000 in 1938-39. The largest previous yield from taxes was £5S,900,000 in 1926-27. In 1931-32 indirect taxes totalled £36,800,000 and for 1938-39 they are estimated to amount to £56,200,000, whilst direct taxes over the same period decreased from £17,100,000 to £15,300,000. In the same period indirect taxes per capita increased from £5 12s. lOd. to £8 4s. 4d., whilst, combined direct and indirect taxes per capita increased from £8 5s. 4d. to £10 ls. 2d. Although from 1931-32 to 1937-38 direct taxes decreased by £4,500,000- income tax by £4,000,000- indirect taxes increased by £19,600,000, or' a. net increase of £15,100,000. Direct taxes increased by 15s. 8d. per capita, and indirect taxes by £2 lis. 6d. per capita, making a total increase per capita of £1 15s. lOd.

Mr Martens - It is easy to see who pays the bulk of indirect taxes.

Mr FORDE - Referring to the budget the Melbourne Herald stated -

Increased indirect taxation makes life harder for families with small or moderate incomes and is responsible for putting much more on to prices at different stages of production than accrues to the tax collector.

The honorable members for Swan (Mr. Gregory) and Forrest (Mr. Prowse) have suggested, by interjection, that a party which stands for protection stands also for increasing indirect taxes. However, the Labour party, as a protectionist party, advocates the imposition of duties sufficiently high to keep out imports with the object of developing manufactures in this country. It does not agree with the tariff policy of this Government, which, in effect, amounts to the imposition of import duties for purely revenue purposes This Government, in order to maintain its revenue from indirect taxes, imposes duties just high enough to allow of the continuation of imports, although by so doing it at least retards, if it does not jeopardize, the development of secondary industries in this country. The Treasurer's statement that reductions of indirect taxes equivalent to those of direct taxes have been made is absurd in the light of the figures which I have just given. The total revenue from all taxes, and that collected in indirect taxes in "1937-38, were the highest since federation, whilst taxation per capita and indirect taxation per capita in that year were also records. Despite these facts, this Government claims that it is a business government. It is of the same ilk as the Bruce-Page Government which piled up »n adverse trade balance of £70,000,000 over a period of seven years, and thus brought Australia to the verge of financial disaster. I remind honorable members that the Minister for Commerce (Sir Earle Page), as Treasurer in that Government, earned the opprobrium, and condemnation of every impartial student of political economy in Australia. That Government left to its successor the task of stemming the tide of imports and of restoring Australia's economy to an even keel. The Scullin Government accomplished that task by converting an adverse trade balance of £30,000,000 into a favorable balance of £31,000,000, and thereby laid the foundation for the tre mendous development which subsequently took place in our secondary industries.

I propose now to deal with overseas loans. The Treasurer referred to an overseas loan of £7,000,000 which was arranged in London in May, 1937, £2,000,000 being required for the purchase of defence equipment in Great Britain, .and £5,000,000 for the redemption of Australian treasury-bills held by the Commonwealth Bank in London. The Government is to be condemned for reverting to this suicidal policy of borrowing overseas. We do not want a repetition of what occurred in this respect during the regime of the BrucePage Government. The overseas loans transactions of this Government will cost the Australian people approximately £2,000,000 during the next two years. The funding of this £5,000,000 meant the transfer of a debt from the Commonwealth Bank to the public of Great Britain. The rate of interest paid on the treasury-bills is £2 5s. per cent., whereas the rate paid under this loan, which is for a period of eighteen years, is £3 16s. 6d. per cent. Calculating the additional interest that will have to be paid during that period, the cost of raising the loan, and exchange on the additional interest, this £5,000,000 will cost Australia £1,845,000. I point out. that this loan was a failure, as approximately 66 per cent, was left in the hands of the underwriters. Naturally, the Government can offer excuses for this failure, but it was, undoubtedly, a blow to the prestige of a government which always maintained that, because of the so-called restoration of confidence it could always raise money on the English market, despite the fact that it was a. government of the same ilk as the Bruce-Page Administration, which lost the confidence of overseas investors and. could not raise one penny in Britain in 1929. In addition to this extra amount that Australia will be called upon to pay, we now find that the revenue from the note issue will be less this year than in previous years. The reason given by the Treasurer for this reduction is that the redemption from the proceeds of the recent London loan of Commonwealth treasury-bills held by the note issue fund has reduced the interest income of the fund.

I shall now deal briefly with the internal loan position. Quite recently the Government raised a loan of £10,250,000 of which £4,000,000 was required for defence purposes. Although this loan was fully subscribed, the Treasurer refused to state the amount provided by the Commonwealth Bank. There appears to be no doubt that had the Commonwealth Bank not subscribed heavily - it is said to have contributed £5.000,000 - the loan would not have been a success. So rauch for the boast that complete confidence has been restored, and that we are in Easy Street for raising loans while this Government is on the treasury bench ! Although a portion of this loan was required for defence purposes, it is amazing that large financiers, financial institutions, and the like, would not subscribe to it. It did not matter to them that a portion of the money was for the purpose of defending their own wealth. The Government should have called upon those people to pay a great deal more towards defence 'expenditure by way of direct taxation. Apparently, these financial authorities are interested in getting as high a rate of interest as possible for the money they have to invest.

The trade balance of the Commonwealth should provide honorable members of this committee with food for thought. The Commonwealth Bank Board in its report of June, 1936, stated that although London funds were then sufficient for normal requirements, they were not sufficiently high to provide an adequate reserve against adverse circumstances. The report stated -

We should aim at a favorable balance oi overseas payments for a number of years with a view to building up our London funds and maintaining them at a. higher level.

A similar statement has appeared in several reports by the board. Last year our London fund reserves were £71,000,000. Although that is an increase of the total for previous years, it is still not so high as that of pre-depression years. In 1927 - 28 our London funds stood at £102,800,000. During the last five years our trade balance has done very little to strengthen our London fund reserves, as the following figures show -

Anti-Labour governments have been noted for their indifference, or their lack of ability, to deal with Australia's trade balances, as never once have they taken any action to correct our trade balances or to ensure the strengthening of our London fund reserves.

Mr Barnard - I rise to a point of order. Has the Government resigned? There is not a Minister in the House.

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