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Tuesday, 22 November 1938

Mr JOLLY (Lilley) .- I realize that owing to the magnitude of the task which faces the Auditor-General it is not possible for him to have his report ready early in the financial year, but as the Auditor-General is in a sense the guardian of the public purse it is the duty of the Parliament to give some serious consideration to any recommendations that he may make in regard to the public accounts. Therefore, I regret that it is not possible for his report to be made available in time for consideration in connexion with this budget. Since I have been a member of this Parliament, no opportunity has been provided to discuss any report of the Auditor-General, or to give consideration to his recommendations; nor have we been furnished with any explanation why recommendations that he has made from time to time have not been put into effect. Although his report cannot be made available in time for consideration with the budget, I suggest that a special opportunity should be afforded honorable members to consider it on some other occasion. It is paradoxical that, whilst the law com pels public companies to present an auditor's report in connexion with their annual accounts, no such compulsion rests upon the Treasurer of the Commonwealth to submit the Auditor-General's report in connexion with the accounts that he presents to Parliament from time to time.

Parliament should exercise a much more elective control over public expenditure and a much closer supervision of public accounts than it does at present. Unfortunately it is not possible, .in the course of the budget debate, for honorable members to scrutinize public expenditure closely. For one thing, time does not permit it to be done, and, for another, essential information is not available. As a matter of fact honorable members have to take a great deal for granted when they discuss the estimates of expenditure.

I am somewhat concerned about the steady mounting of expenditure on public departments in the last ten years. I refer only to the ordinary departments, and specifically exclude the Defence Department and the business undertakings. I find that in 1928-29 departmental expenditure totalled £2,987,000 whereas in 1938-39 it is estimated to amount to £3,784,000. This is an increase of approximately 25 per cent. The ten-year period that I have in mind includes the depression years. For that reason I have made my comparison from 1928-29, which was before the depression occurred. It is somewhat startling to discover that departmental expenditure is estimated to be 10 per cent, greater this year than last year. This is extraordinary seeing that we have such heavy defence expenditure to face iri this financial year. Honorable members are entitled to be given some reasons for this substantial increase. I shall direct attention to particular items of increase which justify a request for a detailed explanation. The estimated expenditure in respect of the Department of the Interior shows an increase of £162,800 over that of last year, and the Estimates include an amount of £180,000 to provide for temporary casual employees. In connexion with the Government Printing Office, an amount of £26,400 is provided for salaries of permanent employees, and an amount of £46,850 is set down for temporary casual employees. I trust that before the discussion concludes the Treasurer will explain the reason for this remarkable state of affairs.

Reference has been made by some honorable members to our accumulated deficit. 1 consider that in our prosperous years a much more serious effort should have been made than seems to have been made to liquidate this deficit. It may be that reductions of taxation were made, without due consideration. It would be in the best interests of the nation, and of public finance, if during prosperous years strenuous efforts were made to conserve our resources so that times of emergency, such as we now face, could be covered without undue strain.

I am strongly of the opinion that the Standing Committee on Public Accounts should be reconstituted, for it would be in a position to make a complete examination of all phases of public finance, including expenditure, and to recommend means of raising the necessary revenue so as to ensure that the incidence of taxation would bear equitably on all sections of the community. The Public Accounts Committee of the British House of Commons is representative of all parties, and has been in existence for many years. It is generally admitted that it has rendered very valuable service in keeping Parliament advised on public accounts. Our act, which is now in suspense, provides for the appointment of a Public Accounts Committee. It should be amended to give the committee similar powers to those exercised by the Public Accounts Committee of Great Britain.

The time has come for a re-adjustment of the financial relations of the Commonwealth and' the States. I hold the view that the Commonwealth Government should retire from the field of direct taxation and leave this source of revenue entirely to the State governments. If that policy were adopted, tho Commonwealth Government should be relieved of the obligation to make heavy payments in respect of grants to and for the States, with the exception of special grants made to the smaller and necessitous States. According to this year's Estimates, the Commonwealth Government will receive from direct taxation £13,800,000 from the following sources: Income tax, £10,700,000; land tax, £1,300,000; estate duty, £1,S00,000. Payments made to and for the State governments, apart from the special grants to the three smaller States, will amount to £13,500,000, which is approximately equal to the estimated revenue from the direct taxation levied by the Commonwealth Government. . I fully realize that this proposal would not result in any material reduction of the total amount of taxation, but the system would avoid duplication of returns, and permit a reduction of administration expenses. The chief objection to the practice of the Commonwealth Government of raising a considerable amount of revenue by direct taxation for the purpose of making grants to the State governments is that it .is opposed to a fundamental principle of public finance, which is that the public body which expends money should be charged with the responsibility of raising the necessary revenue by way of taxation. This provides a healthy check on the extravagant expenditure of public funds.

I was deeply interested in the proposal made last Friday by the right honorable member for Yarra (Mr. Scullin) for the holding of a special session of the Parliament to consider constitutional reform, and also in the able summing up of the position by the Attorney-General (Mr. Menzies) to-day. I am convinced that some reform of our present unwieldy system of government is urgently necessary. As has been pointed out during this discussion, there is overlapping and conflict of authority, involving not only the Commonwealth and State Governments, but also local governing bodies, particularly in such important matters as health, arbitration, transport, migration and company law. This was emphasized by the Attorney-General to-day. It is the duty of the national Parliament to place the position fully before the people of Australia at an early date. It must be quite clear to every student of national economy that if no action is taken now, the financial burdens placed upon the people will force the issue before many years have elapsed.

The Treasurer stated in his budget speech that the 10;n indebtedness of the Commonwealth and the-

States had increased in seven years by £92,000,000. It is impossible, however, to obtain a true statement of the public debt of Australia without taking into consideration the loan liabilities of local government and semi-government bodies. Recently I drew attention to the ma>rked increase in recent years of the borrowings of semi-governmental bodies. The amount of such borrowings has doubled in four years and is now about equal annually to 'the amounts raised by the Loan Council for the State governments. As in the final analysis most of the local government loans are guaranteed by the State governments, they become the responsibility of the Commonwealth. This being the case, the Commonwealth Government should know the extent of these liabilities. I realize that this is a very delicate matter, but if the present state of affairs is allowed to continue it will defeat the object for which the Loan Council was established.

I trust that in any proposals for constitutional reform, provision will be made for an effective system of local government, which is essential to the sound development of the country. Under a new order, the powers and functions of these bodies could be extended, and the field of direct taxation on land could be reserved entirely for the local government bodies. Existing conditions are making the position of local government bodies increasingly difficult. They have been called upon to provide the improved ^ facilities which modern civilization demands, although their source of revenue is limited owing to the heavy impost made by the Commonwealth and State Governments in the way of land tax. I know something of the responsibilities and limitations of local government bodies; and I emphasize that in making provision for a new form of government for Australia, serious consideration be given to the organization of a sound system of local government.

I shall not further delay the committee. I wished chiefly to draw attention to the fact that Parliament is not afforded a proper opportunity to review and investigate public accounts. I trust, first of all, that some special opportunity will be given to honorable members to consider the Attorney-General's report, and, secondly, that early action will be taken to reconstitute the Public Accounts Committee, whose reports would be of great assistance, not only to honorable members, but also to the people generally.

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