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Thursday, 25 May 1939

Mr HOLT (Fawkner) (Assistant Minister for Supply and Development) . - The Government cannot accept the amendment of the honorable member for Martin (Mr. McCall). It appreciates the motive which prompted him to move the amendment, and it is entirely in sympathy with his desire to restrict the taking of exorbitant profits by any supplier of defence equipment to the Government. However, not only would the amendment not achieve that result, but also it is entirely impracticable of application. In the first place, it raises the question of the value of the assets employed in any business supplying goods to the Government. The making of such a valuation would be an extremely costly matter. It would require a great deal of time, and it is doubtful whether anything of real value would be achieved.

Mr Fadden - Then has the Government no intention to limit profits?

Mr HOLT - The inquiry proposed by the honorable member who moved the amendment would involve the separation of the assets used in the production of any particular product. It is probable that only a part of a great number and variety of assets would be used in the production of a great number and variety of products. To determine the time and extent to which each asset would be used in the production of a particular product would require a computation that would be entirely impracticable.

Honorable members have questioned the Government's sincerity regarding the limitation of profits. They have asked why does not the Government put in the bill a provision which would have the effect of placing an effective check on undue profit taking. The Government says in reply that it is taking plenary power in this bill to impose what checks are necessary. The responsibility will then devolve upon the Government to exercise that power, or if it does not do so in an effective and efficient manner, to take the consequences for its failure at the hands of Parliament. The Government will give ample evidence of its sincerity. If it was not sincere, there was no need for it to bring this bill before the House at all; there was no need to make any reference to the limitation of profits, and there was no need to appoint honorary advisers to an accountancy panel. The fact that it did those things is evidence of its sincerity. The honorable member for East Sydney (Mr. Ward) has suggested that, because the honorary panel will not be able to make a personal investigation of the many thousands of contracts that have already been let by the Department of Defence, it will not be able to serve any good purpose at all. It has been explained, however, that the functions of the panel are not to conduct minute investigations of every contract, but to investigate the present methods followed by the Government in controlling and limiting profits. If it is found by this qualified body, the majority of whose members are experts in cost accounting, that our methods are unsatisfactory - and we do not assert categorically that they are -not - the Government will then be in a position to consider the recommendations of the panel. I suggest that we can take no more practical step than to say that, although we are satisfiedthat the machinery now in existence has worked well for a number of years, we appreciate that the strain placed on it by the enormous expansion in the number of defence orders may have revealed some weaknesses. Therefore, we are asking this expertbody to make an investigation, and to recommend improvements. I think that honorable members are satisfied, in view of the detailed explanation by the Minister for Supply and Development (Mr. Casey), that, in respect of the overwhelming majority of defence contracts, an effective control has been exercised, and no possibility of excess profit-making exists. It seems clear that, so far as the annexe system is concerned, there is little likelihood of profiteering. Most of the criticism has been in respect of the supply of raw materials to manufacturers. In that regard, the Government does exercise a check, inasmuch as it has the cooperation of officers of the Defence Department, the Contracts Board, and the Trade and Customs Department. A very close check can thus be kept on prices of raw materials sold to manufacturers, and, in the past, this has proved very effective. Copper was mentioned by the honorable member for Balaclava (Mr. White) as providing what he considered a glaring example of fleecing the Government.

Mr White - I said that the Government had to explain the fictitious price at which copper was quoted.

Mr HOLT - I remind the honorable member that, when he was Minister for Customs, he tabled a report covering the investigation by the Tariff Board of the copper industry in Australia.

Mr White - And last night I read excerpts from it to the committee.

Mr HOLT - One of the disclosures made in that report was that the producers of copper in Australia were at a disadvantage in that, while they were paying award wages and observing Australian conditions of labour, they had to meet in open competition the product of the Belgian Congo and Northern Rhodesia, where coloured labour was employed. Despite that fact, however, and despite the fact that freight costs were worked out on the basis of the shorter journey from Africa to Europe, because the quantity of Australian copper was not sufficient to be taken into consideration, the Defence Department in Australiawas able to obtain copper at world parity prices. In fact, the honorable member for Balaclava recommended that a duty of £4 a ton should be imposed in order to protect the Australian industry.

Mr White - Yes, that is why the Australian producers are able to compete.

Mr HOLT - I suggest that if the suppliers of any commodity, such as copper, are charging unreasonable prices, the Government has a remedy in its power to remove the tariff protection which that industry enjoys. The honorable member specifically excluded the producers of steel from the charges he made. There is one other check : if it be found on analysis that any supplier of raw material is making an exorbitant charge, there is power under section 67 of the Defence Act compulsorily to acquire the commodity at a price fixed by an independent arbitrator. There again we have a definite check should we find any flagrant abuse in this regard. The Government is taking -full powers under this measure. As I mentioned earlier, there was no necessity for it to introduce a bill of this kind, or to include these particular powers.

Mr Archie Cameron - Well then, the passage of this bill is not vital to the Government ?

Mr HOLT - I do not say that at all. The Government's policy is to improve the existing administrative machinery in connexion with the supply of defence requirements, and it regards, as a very necessary part of that programme of improvement, the passage of a bill of this kind.

Mr Archie Cameron - But the honorable gentleman just said that there was no necessity for the Government to introduce this measure.

Mr HOLT - I said that if the Government's sincerity in the matter was questioned, the answer was that there was no necessity upon it in the first place to introduce this bill. I pointed out that, if the Government did not genuinely desire to improve the present practice, or to secure more effective control, there would be no necessity for this measure. The very fact that it is introducing the bill and taking these powers, is evidence of its good faith in this regard. I can only repeat that, in asking for full powers under this measure, the Government accepts full responsibility for the proper exercise of those powers, and will be prepared to stand up to any charge which may be levelled against it in the future that it has fallen down on that responsibility. The Government having accepted that responsibility, the committee should not weaken the very full powers which it seeks under this measure by imposing any arbitrary limitation, which might very well have an effect entirely opposite to that desired by those supporting the amendment. The wisest course for the committee is to leave the full powers in the hands of the Government, and charge the Government with full responsibility for the exercise of them.

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