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Wednesday, 24 May 1939


Mr FADDEN (Darling Downs) . - Following the explanations given by the Minister for Supply and Development (Mr. Casey), I propose to make one or two observations in connexion with this important clause. In the first place, I congratulate the Government on being able to enlist the professional .advice and aid of the men who will comprise the Accountancy Advisory Panel. Some of these men, whose names were announced by the Minister, are known to me personally, and their professional ability and reputation are beyond doubt. However, I am at a loss to understand why the Government should enlist the services of outside accountants in an honorary capacity when it has so many efficient officers to draw upon its own Public Service. No government, particularly a national government, should expect the services of professional men in an honorary capacity. I have had sufficient experience of the Commonwealth Public Service to know that it contains officers of outstanding experience, ability and integrity. I have drawn men from that Service to manage my accountancy businesses, and my experience has been that the training which they received in the Service has proved of great value, not only to myself, but also to clients. For this reason I am surprised that the Government did not rely on officers in its own Service to do this work, particularly as the Minister emphasized, practically throughout his whole speech, the experience which had been gained by the

Contracts Board in connexion with the handling of contracts for defence supplies. Like the members of that board, many other members of 'the Commonwealth Public Service have . gained unique experience in this field, a class of experience which overshadows that of the members of the Accountancy Advisory Panel, excellent though the latter might be. The Minister stated that by virtue of rules and regulations every safeguard has been provided to prevent undue profit-making. If that be the case, I cannot understand what advice the Government will require of this panel. The Minister said that the advice of that' body would be sought, but he failed to tell honorable members, who represent the people of Australia, exactly by what means and what safeguards the .Government intends to provide against profiteering in connexion with our defence expenditure. No formula has been set out. The Government has an obligation to tell this committee just exactly what it intends to ask the advisory panel to do in order to prevent undue _ profit-making and what its own views are. Surely it is not going to ask honorable members to entrust to this panel, working in an honorary capacity, the formulation of the basis and method of profit-finding, and of profit limitation in this connexion. Every honorable member will agree that that is the responsibility of this Parliament, and that such a matter should be debated fully here. The Government should inform us what it considers to be a fair and reasonable profit-earning capacity in connexion with these activities. The Minister has given every reason as to why he and the Government should be in a position to advise this Parliament as to the limitation that should be imposed on profits. .The right honorable gentleman has expressed the view that the desire of certain honorable members for safeguards against profiteering, indicate lack of confidence in the integrity of the manufacturers of Australia. That is far from being a fact. The aim of those honorable members is to see that every possible safeguard is observed in connexion with expenditure from the public purse, with a view to sustaining the integrity of .the manufacturers to whom the right honorable gentleman has referred. We have a definite responsibility in this matter, and it is useless to accuse any one of doubting the integrity of the manufacturers. The Prime Minister (Mr. Menzies) himself in Sydney, on a quite recent occasion, in his first broadcast address to the people of Australia, stated that one of the definite objectives of the Government in connexion "with defence would be to .see that no avenue was left open to the profiteers. It is futile for any one to ignore the fact that profiteering is practised in 'the manufacture of munitions. We 'are well aware of the profits that have been made throughout history from wars and rumours of wars, and it is our responsibility to ensure that nothing is left undone to safeguard the public purse. During the last war, the government of the day found it necessary to impose a wartime profits tax. The Minister has stated that the contract system provides the necessary safeguards. He has pointed out that experience and close observation prove that 60 per cent, of the expenditure incurred by the department in connexion with defence contracts represents a wage cost, material represents 20 per cent., and overhead expenses, including depreciation and profit, the remaining 20 per cent. I submit, therefore, that these contracts provide a basis for a formula which would lay down what is a fair and reasonable profit. The Government could ascertain what proportion of the 20 per cent, might reasonably be allowed for depreciation, and thus determine the percentage of profit. A firm in Adelaide, he stated, was encouraged by the Government to install certain plant to provide material which otherwise would have to be imported, on a given basis of cost plus a reasonable percentage of profit. The Minister did not mention what the profit is, but we have been told that the cost to the Government worked out at less than the price of the imported article. This experience should guide the Government in its determination of what is a fair and reasonable profit. Because of the knowledge gained by the Contracts Board, it should be possible to exercise full and proper control in respect of raw materials. The contract system imposes a definite check on costs, and could furnish safeguards against profiteering. It has been stated that too great an expenditure would be incurred in ascertaining what would be a proper cost. What has been the cost of the investigation necessary to obtain the experience so far gained by the Contracts Board? The Contracts Board will continue to function under the Advisory Board, but it will still be guided by the experience it has gained. What instruction does the Government propose to give to the five honorary accountants as to what is to be regarded as a fair and reasonable basis of profit? We have been told that no proper basis can be laid down. My rejoinder to that is that a formula can bo found and that the basis was ascertained in the two cases that I have cited ; if it was not, what can the Advisory Panel do?

Then there are the annexes, in respect of which the Government has laid down a formula which will give a return over cost on a prescribed basis - the ordinary technical basis for the ascertainment of cost - plus 4 per cent., which, in the circumstances, is 4 per cent, on turnover. For some years, certain State governments have limited the profits of utility companies, ' such as electricity and gas companies, in order to prevent them from profiteering unduly at the expense of those who are obliged to use their product. Definite conditions are imposed, which for very many years have benefited alike the consumers', the companies and the governments concerned. The formula applied makes allowance for a definite cost of production, plus a specified rate of depreciation on the ascertained value of the assets, and a return varying from 6 to 7 per cent, on the capital invested in the undertaking. The Government should indicate what formula it intends to place before the advisory panel for the limitation of profits and the consequent prevention of profiteering. I suggest that, having fixed the cost of production, including depreciation, the allowable profit should not exceed 6 per cent, on the ascertained value of the assets actually employed. That value could easily be ascertained. The cost of production should be that fixed by the advisory panel and/or the Contracts Board. I understand that the honorable mem- bev for Balaclava (Mr. White) is willing to withdraw his amendment in favour of one along those lines to be moved by the honorable member for Martin (Mr. McCall). I cannot see why the Government should not accept such an amendment, if it is sincere in regard to the. practical application of this clause, in order to limit the amount of profit to be allowed, should Australia unfortunately he subjected to the disastrous costs and repercussions of war. It is hoped that the Minister will accept such an amendment as a constructive suggestion so that the people may .have confidence that the mandate given to the Government is being properly carried out.







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