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Wednesday, 17 December 1941

Mr SPENDER (Warringah) .- One is reluctant to speak at length upon this particular financial measure. It h obvious that the Government is faced with the responsibility of raising further money. But it is not inopportune to draw attention to the fact that the Government has adopted many of the principles advanced by the last Government, which Labour sternly resisted when in Opposition. Nor is it inopportune to refer to the speeches made by, for example, the Prime Minister (Mr. Curtin), the Attorney-General (Dr. Evatt) - who, in his first speech upon finance, enunciated the most amazing ideas as to how money could be procured through the Commonwealth Bank - the Minister for Home Security (Mr. Lazzarini) - whose ideas upon finance hardly square with anything that the Government has brought forward to date - and the Minister for War Organization of Industry (Mr. Dedman), who from time to time has delivered lofty lectures upon the subject. The Government has shown that it learns very slowly. It is clear that in the seat of responsibility it has realized, even though belatedly, that before a war can be properly financed it is necessary to apply taxes to the lower ranges of income. Only on the 1st October of this year, the Prime Minister, then the Leader of the Opposition, said, " When a government begins to tax incomes of £150 for the purpose of financing the war, it is beyond all doubt taking everything that tlie people in receipt of those incomes have". Honorable members will recall that that was an occasion when the budget proposals of the then Government were challenged, because the Opposition considered that to adopt them would mean disaster to the people. When I said that that was purely a political pretence adopted in order to enable the Opposition to gain power, my statement was hotly resented. Yet now we find that those very things which we were told would bring disaster upon' the country are being done by our opponents after only ten weeks in office. What reason is advanced by the Government for this voile face? It is, that meanwhile expenditure has increased by £40,000,000. We were entitled to receive, in general outline, particulars as to how that increase had occurred, but not one word upon the subject has been vouchsafed. If it be right now to go into the lower ranges of income, as I claim that it is. it was right ten weeks ago.

Mr Conelan - Has not the position changed in the last ten weeks?

Mr SPENDER - It has, by reason of the fact that Japan has come into the war. Rut I have always assumed that we were putting forward our maximum war effort long before then. The suggestion now advanced is of no moment; it simply indicates that the Government bit by bit has adopted the financial policy laid down by the present Opposition when it was in power. Examples of this tardy realization of inescapable consequences are to be found in the recent statement of the Prime Minister regarding reduced spending - ia suggestion advanced some months ago by the Government of the day - the use of women in war, and now the taxing of lower incomes. Thus the Government, which, ten weeks ago, was accused of introducing a rich man's budget, has been vindicated by the acts of those who then resisted its proposals. I let the matter pass with the comment that the members of the present Ministry have always been apostles of easy finance. Some members of the Government have made speeches which cannot bo reconciled with what is now being done. For example, the Minister for Home Security has made some stirring speeches indicating bow the Commonwealth Rank could advance money and the poor could escape taxation. We listened patiently to a lot of such drool and drivel. Now, those men are silent. It seems to me that the Government is dealing with this matter in piecemeal fashion. Finance is just as vital a part of the war organization of this country as are the fighting services. The financial programme of the Government gives no evidence of co-ordination with the general war effort. What lead, for example, has been given to the people in respect of luxury goods? We have been told for weeks past by the Prime Minister that the purchase of luxury goods should be avoided. The question arises, what are luxury goods? Has any lead been given by the Government in this regard? None whatever, and the reason is that the Government is reluctant to face the sectional opposition which it would meet were it to say that goods of this or that class must not be purchased. However, it must face the situation eventually.

How are we to achieve the real purpose of war finance, namely, the diversion of effort from peace to war activities? The Government has imposed very heavy taxation on incomes of more than £1,000, and particularly on those between £1,500 and £2,500. I make no plea for the nian of property, who must necessarily contribute to the defence of the country in accordance with hi* ability to pay. He has a greater stake to defend than has the man without property, but I appeal to the Government, when considering further taxation measures, to make them bear some relation to the amount of wealth which the taxpayer possesses. Any one who examines the Government's taxation proposals will admit that they bear very heavily on the professional and executive classes. We say that this is a land of opportunity in which a boy with no money behind him may, in the course of years, advance himself and accumulate property. That is an essential feature of democracy, and young men should be encouraged to advance themselves in this way. However, a professional man cannot, by virtue of his position, accumulate substantial resources. As his income increases, lit* properly and necessarily incurs commitments. He purchases a home in keeping with his income, and he takes out insurance policies for the protection of his wife and family in the event of his sudden death. Thus, when heavy taxation is imposed on him, he has not the same resources to meet it as has the man who has a similar income from property. I am not criticizing the Government captiously, but I do suggest that, in respect of the professional and executive classes, consideration should be given to the recurrent commitments of those who do not possess property.

At a time like this, it is necessary to take steps to avoid the dangers of inflation. I define inflation as the result of over-spending - spending which is excessive in relation to the available supplies of goods and services. Additions to the volume of credit for heavy war expenditure or for financing the Government's book deficits so as to balance budgets, are fruitful causes of inflation. I do not say that the mere increase of credit necessarily constitutes inflation. I liken it rather to inflammable material; if proper control is not exercised, then the result is fire. There is danger of spontaneous combustion if credit is extended beyond the point of safety. I suggest that inflation can be avoided in three ways: first, by increasing the volume of goods, but honorable members will agree that we have long passed that position. The volume of goods for ordinary consumption is diminishing, and must continue to diminish the longer the war lasts, [f it does not, then the war effort will be retarded. The second method is by a reduction of spending which, in turn, involves price control and rationing. Already we have price control; the next step, which is one of great importance, is the introduction of rationing. The third method to avoid inflation is the direct control of money by taxation and public borrowing. These, however, arc not selective. They constitute a blunt instrument which cuts across the purchasing power of the community, but which is not sufficient in itself. The introduction of a selective method is necessary to control the purchasing power of the community. Therefore, in addition to taxation and public borrowing, there must also be rationing. Rationing itself may be considered under two headings: First, curtailment of civilian production directly by order, and by means of priorities ; and, secondly, by the direct rationing of the consumer in respect of both essential and non-essential goods. The Government has not. yet evolved any proper scheme for dealing with these matters. I know the Prime Minister has said that they are under consideration, but the time is overdue for action to be taken, lt is impossible to make the necessary war effort in the time at our disposal unless rationing be introduced immediately, and the purchasing power of the community controlled in this way.

The Opposition does not resist this measure, but we believe that it is insufficient to tax lower incomes at the low rate proposed by the Government. Unless the rate bc increased, and unless a rigid system of rationing be introduced, the threat of inflation which now faces us will become a reality, with disastrous effect upon our war effort.

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