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Wednesday, 24 May 1939

Mr MCCALL - Of that aggregate purchase of £2,000,000, what percentage is finished goods ?

Mr CASEY - The Contracts Board purchases all the raw materials for the government munitions factories, and also all the finished, goods required for defence purposes other than those produced by the munitions factories. The third method of manufacturing munitions, which will come into operation shortly, is by industrial annexes. The complete list of these is as follows: -


This list was published in Hansard on the 19th May in reply to a question asked by the Leader of the Opposition (Mr. Curtin). Unfortunately, the name of the Commonwealth Steel Company Proprietary Limited was inadvertently omitted. I take this opportunity to repair the omission.

Mr Forde - How many of these annexes are at present in operation?

Mr CASEY - None is actually in operation at present; but two will come into existence in the next two months, fifteen in the course of the calendar year, and the remainder in the early part of the next, financial year. Each of these annexes is the subject of a separate contract between the parent firm and the Commonwealth Government. The annexes will, in practically every case, remain the property of the Government. As the annexes are provided and equipped with machinery, they will be given a trial order by the Department of Supply and Development on behalf of the Defence Department, in order to ensure that the personnel is acquainted with the method of manufacture. In the meantime, of course, every assistance will be given by the experts of the existing munitions factories, so that trained personnel will be available in every case. After the trial order has been delivered satisfactorily, the machinery in the annexe will be greased and the plant closed down until it is needed in a time of emergency. The parent company will be under a contractual obligation to man the factory with trained personnel and bring it into operation at very short notice when required to do so by the Government.

Mr Beasley -Will the Government pay rent for these annexes?

Mr CASEY - No. In every case, the land has been given free by the parent company.

Mr Beasley - And the building too?

Mr CASEY - The conditions vary in relation to buildings. In some cases the parent company has provided the land and the building. In one or two cases companies have provided the land, building and full equipment. In general it may be said that the land has been provided free, but, with certain minor exceptions, the Commonwealth Government has supplied the buildings and equipment.

Mr Badman - Are annexes connected with any railway workshop?

Mr CASEY - Yes; five railway annexes are in course of construction.

Mr McHugh -Will they alsobe the property of the Commonwealth Government ?

Mr CASEY - The annexes will be the property of the Commonwealth in every case but one, in respect of which the parent company has provided the land, buildings and equipment.

Mr Lazzarini - Has the freehold of the land been transferred to the Commonwealth?

Mr CASEY - I cannot answer that question in detail.

Mr Lazzarini - Unless the freehold of the land has been transferred to the Commonwealth it cannot be said that the property is government property.

Mr CASEY - The annexes will remain the property of the Commonwealth Government and will be at its disposal, except in one instance. These annexes can be used only for purposes approved by the Commonwealth. Those purposes will, ofcourse,be the provision of munitions in time of emergency.

I come now to the provision and cost of materials. This has been the subject of close study by the experts of the Supply Department, the Defence Department and the parent companies. The cost is to be based on a very strict calculation of direct labour cost in turning out munitions, direct material costs, and direct overhead costs based on an exact method of determination. Honorable members generally, particularly those acquainted with industrial practices, are aware that it is in relation to overhead costs that the largest opportunity occurs too make excess profits. In connexion with these annexes it has been agreed between the parent companiesand the Commonwealth Government that the following items shall not be taken into account as overhead in determining the costs and profits : -

Profit as between various departments or sections of departments.

Interest on capital.

Selling expenses.

Advertising expenses.

Bad debts.

Income tax.

Debenture interest.

Financial or other reserves.


Insurance premiums.

These items will not be considered in determining the cost of the munitions which emerge from the annexes, and all other overhead costs will be calculated strictly in relation to the degree of production from the annexes compared with that from theother parts of the parent company's establishment.

Mr Green - It sounds almost too good to be true!

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