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Thursday, 10 September 1942


Mr CURTIN - Will the Leader of the Opposition tell me who made that suggestion ?


Mr FADDEN - The suggestion appeared in the press, and I repeat it as a warning.


Mr Chifley - It did not emanate rmm me.


Mr FADDEN - The principal reason was to prevent a secondary expansion of credit. If the belief is accepted and acted upon by the Government, that these special war-time deposits of the banks with the central bank afford a basis for further Government borrowing from the central bank, the whole object of the scheme .will be rendered null and void. The inflationary orgy will exceed even its present bounds, because the Government will be indulging in not only a primary, but also a secondary expansion of credit.

I shall now refer to the operations of price-fixing and rationing. It is generally agreed that the Prices Commissioner and his staff have performed useful service in preventing profiteering and in regulating the increase of prices, which has occurred since the war began. Index numbers are far from perfect, but they are the only available record of price movements. For the pre-war year of 1938-39, the weighted average for the six capital cities of the retail prices of " food, rent, clothing and miscellaneous " was 894. In July of this year, the relative figure was 1,050. This means that in July, retail prices, according to the price index, were over 17 per cent, higher than they were in the last pre-war year.

By comparison with prices movements in other countries, this represents a considerable achievement by the Prices Commissioner. However, he cannot correct the faults of financial policy. If the Government will not do the obvious thing, and remove the excess of money incomes over the available civilian goods, the Prices Commissioner must go warily in limiting price increases. Otherwise, he is likely to drive essential industries out of production by making it impossible for them to cover their increasing costs.

It is evident that while only a few items are rationed and a banked-up flood of spending power remains, the flood will flow towards the goods and services that are not rationed. Production will be diverted to these goods; even the consumers may not really desire them. While the Government leaves taxable capacity untouched and persists with excessive credit expansion, it is driven towards greater and greater regimentation of every part of our lives in order to avoid the catastrophe of uncontrolled inflation. We have witnessed the process day by day, and now we are being threatened by the Prime Minister that if we do not respond to his appeals for austerity, the Government will proceed to " ration everything ". We are in grave danger of becoming not only the arsenal of democracy in the South-west Pacific but also an " arsenal of bureaucracy", to use the phrase that an American writer applied to his own country. The Opposition joins issue with the Government regarding its interpretation of the functions which rationing should fulfil in our war and post-war economy. J. M. Keynes, the English economist, has described the object of a well-conceived policy of rationing as follows : -

Its purpose is not to control aggregate consumption, but to divert consumption in as fair a way as possible from an article, the supply of which was to be restricted for special reasons.

If the article is not a conventional necessity or one of general consumption, the end is reached most easily by allowing a rise in the price of the article, the consumption of which we wish to restrict, relatively to other articles. But if this article is a necessity, an exceptional rise in the price of which is undesirable, so that the natural method of restriction is ruled out, then there is a sound case for rationing.

Honorable members on this side of the House are as anxious as the Government that the poorer man shall not receive less of the necessaries of life than his rich neighbour. We whole-heartedly approve the degree of rationing which ensures this. Keynes further states -

Shop shortages and queues lead to great injustices of distribution, to an abominable waste of time and to a needless fraying of the public temper. If by a miracle the method was substantially successful, so that consumption was completely controlled and consumers were left with a significant fraction of their incomes which they were unable to spend, we should merely have arrived by an elaborate, roundabout and wasteful method at the garni' result ae if that fraction of their incomes had been deferred from the outset.

This sums up perfectly the attitude of the Opposition towards the Government's financial policy. However stringent may be the direct controls, the excess of spending power remains. This invisible inflation represents . a deadly menace to Australia in the post-war period. The prolongation of unnecessary restrictions upon our lives after the war, through a failure to face and solve our war problems as we go along, would be intolerable. As the result of its approach to the financial problem, the Government is storing up trouble for the future and is in a real sense making posterity pay for the present faulty financial policy. Surely every Australian civilian is prepared to pay a safety insurance premium to cover his very existence, and all his possessions. As the Treasurer (Mr. Chifley) has said -

Effort and sacrifice of comfort by civil population is the least part of t'he price. Many in the forces, many of the nation's sons, pay the supreme price of war. No financial price compares with that. i

Surely no civilian will begrudge provision of some of the finance necessary for the proper equipment of our fighting men. Surely, too, the people are eager and willing to take up the burden of finance which may arise from concessions and exemptions to our fighting forces. But what do we find? So little does the Government appreciate the patriotic feeling of the great mass of our people, and their willingness to pay the financial price, that it is not even asking the most numerous section of the population to pay the insurance premium by way of a direct contribution to the cost of the war. The Government's timidity and lack of offensive spirit is out of harmony with the fighting temperament of the great majority of Australian people. Figures that I gave to the House last year showed that wage and salary earners had received marked increases of income, particularly the group earning up to £400 per annum. When the income of a. man in these lower ranges increases he is fortunate enough to receive a marked increase of net income, and does not feel the burden of taxation very greatly. Many young men and girls, who have been technically trained by the Government, have moved up from the class of unskilled to that of skilled workers, and get commensurate increases of income. They are not asked to contribute anything by direct taxation. In this, the fourth year of the war, tens of thousands of people have greater net incomes after they pay their taxes than they had when the war began. In Australia to-day, 2,780,000 income earners, with incomes up to £400 per annum, receive in the aggregate £590,000,000 out of a total of £850,000,000 received by all income earners. Those are the minimum figures. I have requested the Taxation Department and the Treasury to supply me with up-to-date statistics on the subject. I do not accept them as correct, because, if the figure used by me two years ago, namely, £800,000,000, was correct, there must have been an increase of more than £50,000,000.


Mr Paterson - Is that the taxable income ?


Mr FADDEN - No, it is the income of the people and it is entirely distinct from the national income. The Prime Minister has used the figure more than once and I used it when I said that the wage fund in Australia had increased by £150,000,000 since the outbreak of war. I do not know how that figure can be reconciled with the increase of only £50,000,000 that I am asked to accept. However, for the sake of presentation, it is accepted, but it can be regarded by the House and the country as the minimum. This represents approximately 70 per cent., according to an official estimate, of the total taxable income of Australia. Yet, the income-earners receiving up to £400 per annum are being called upon to pay only 3.9 per cent, of their income by way of direct taxation. The figure of £590,000,000, which is the aggregate of incomes received by this class, represents a very large proportion of the national production, or of what amounts to the same thing, the national income. In terms of resources, 70 per cent, of national income represents a vast field of labour and materials which can be drawn upon for national defence. Yet,

I repeat, only 3.9 per cent, of these resources is being taken by direct taxation, leaving a balance of 96.1 per cent. The Government, through uniform taxation, has actually reduced taxation payable from these lower incomes, a field which the States, even before the war, had the courage to tax to a greater extent. At the same time, the Government has conferred additional benefits mainly on this class by more liberal social legislation. The Government has let the moneybirds out of the cage by uniform taxation, and is now chasing them back through the austerity campaign. My proposal to apply a national contribution scheme would not have let this revenue escape. Nor would residents of the States have suffered. They would have had a nestegg for the post-war period, backed by the whole of the financial resources of Australia, as are the bonds the Government is now selling, and the £60,000,000 worth of war savings certificates that it hopes to sell, and this nest-egg would have been made available to them probably long before the maturity date of long-term loans. The Government has not hesitated to tax severely other ranges of income which represent the use for consumption of a much smaller aggregate of labour and materials available for war purposes. Incomes of £1,500 and over in Australia aggregate £69,000,000 of income. Out of this the earners must pay under uniform taxation 52.9 per cent, in direct taxation, leaving a balance of 47.1 per cent. Incomes of £1,001 to £1,500 per annum in Australia aggregate £31,000,000. Of this the earners must pay 25.8 per cent, in direct taxation, leaving a balance of 74.2 per cent. The 270,000 incomes of £401 to £1,000 per annum aggregate £160,000,000. Of this the earners must pay 15 per cent, in direct taxation, leaving a balance of 85 per cent. If the whole of the remaining net income of persons earning over £1,000 a year were taken from them, only £55.5 million would be raised. Even if only half of their remaining net incomes were levied, it is extremely likely that their taxable capacity would be greatly reduced and much less than £27,750,000 would be raised. Whichever way the situation is looked at, the groups receiving incomes up to £1,000 a year and particularly the group receiving incomes up to £400 ia year, are the repositories of the remaining taxable capacity, and the greatest consumers of the remaining labour and materials which can be diverted to war purposes.

A striking difference in the distribution qf direct taxation is revealed by comparing these 'figures with those for the United Kingdom to which we look for assistance. A single .man in Australia with an income of £200 pays a tax of £7 18s. per annum. In Britain, a man on a similar income pays more than four times as much tax, namely, £32 10s., of which £10 16s. 8d. is a post-war credit. In Australia, a single man earning £4!00 per annum pays £57 6s. as ta'x, whilst in Britain a man on a similar income pays nearly twice as much, namely £111 2s. 6d., of which £23 6s. 8d. is a post-war credit. The tax payable in Australia by a single man earning £3,000 a year is £1,599. In Britain a single man on the same income pays £1,462, including £60 postwar credit. Prom these comparisons, it is clear that the severity of Australian taxation exceeds that of the highly taxed British people in the higher ranges of income. In the lower ranges of income, however, Australians pay much less than their kinsfolk overseas. There is need for a clearer recognition of the unpalatable fact that the sacrifices of total war cannot be avoided whatever financial shifts be employed.

Make no mistake about it, the Government's (financial and other policies involve sacrifices for all groups of incomeearners, even though it may choose surreptitious means to disguise them. My proposal to come into the light of the day and apply these sacrifices more through direct contribution by the earners of lower incomes is very much to their advantage. Their real sacrifice will be more, equitably spread than under the Government's policies, and they will benefit no less than will other sections of the community by the avoidance of a chaotic: situation which involves great peril ro Australia, not only during the war, but also in the period of reconstruction which must follow the war. In these days, when all available man-power should bf directly applied to war purposes, the roundabout policies of the Government are absorbing too much of the time and energies of members of the Government, their advisors and the growing staffs of public servants which are needed to administer and to police their measures. Once again, I must emphasize the superiority of the method of national contribution over the alternatives applied by the Government. The advantages in favour of national contribution' may be summed up as follows : The necessary finance is secured directly from current incomes. We are using resources , now to fight for war, and we must draw off incomes now in order to pay for the, use of these resources. It is not sufficient to draw upon the money savings made in some past period; this, as I have already indicated, can result only in inflation. National contributions can be levied exactly and equitably on the people who are best able to bear them. They do not require thu hectic stimulus of inflation for their success. In addition, national contributions ensure that the people who will most need savings to tide them over the difficult period of reconstruction after the war shall be provided, when the time comes, with the savings they need. Moreover, when the stimulus of war production is removed, spending by the people from these savings will help to ensure that we shall not emerge from the war into a period of economic stagnation. The Government, during the course of the debate on my budget a year ago, demanded to know how the national contributions which I proposed could possibly be repaid. Surely, it cannot now believe that it is impossible to repay them, when it is seeking through voluntary loans an amount which is twelve times as great as the national contributions then proposed. In just the same way as government loans are backed by the whole of the financial resources o;f Australia, so the lenders of national contributions acquire one of the soundest, if not the most sound, investments in the country. The refusal of the Government to accept t,he method of national contribution can be ascribed only to political considerations. It opposed the method in the oast, and now it is afraid to admit its mistake, and to introduce the method into its financial policy. The principle underlying national contributions is fully conceded by the Government in the crediting of deferred pay to soldiers. If it is necessary to treat our soldiers in this way, why is it not sound to apply the same principle to our civilian population that is not now contributing its fair proportion, and is not subject to the same dangers and sacrifices as are our fighting men? The Government avoids the use of a novel method of finance fully adapted to the needs of modern war and designed to share the burden equitably. I predict that sooner or later, and probably much sooner than many people imagine, the Government will be driven by the pressure of events to have recourse to a national contributions scheme. In contrast, the Government is floundering up to its neck in inflation, while crying plaintively for austerity.

Before I conclude, something must be said about the vague proposal in the budget to go to the country on a referendum to transfer greater powers to the Commonwealth in order to assist in the task of post-war reconstruction. The inclusion of reference to this in the budget scarcely seems any more relevant than some of the other " padding " which has been used to disguise the budget's main deficiency - the yawning gap, or "the Great Australian Bite" of £300,000,000 to which I have directed attention. Much more evidence than is given in the budget is required to convince us of the urgency of the proposed referendum. The Government is not putting first things first, if in this, Australia's most critical hour, it devotes valuable time to a constitutional issue affecting the period of reconstruction, when we have not yet done all that is necessary to ensure security from foreign aggression. If the Government were to pay half the attention to its financial policy that it appears to be giving to controversial constitutional issues, it would do much to alleviate the post-war difficulties which its constitutional measures seek to remedy. No doubt constitutional and many other changes will be required in order to safeguard post-war reconstruction, but there is a time and place for everything.

This budget is a failure, because it lacks the spirit of offence, without which we cannot throw back the enemy. It grossly misjudges the willingness and ability of the largest section of the Australian community to accept cheerfully the sacrifices required' for a successful all-in war effort. It endangers the whole structure of Australian economy, and jeopardizes the prospects of post-war reconstruction. Never before in the history of Australia has it been so necessary as it is at present to sink all differences and join hands in a common effort. To this end there must be a pooling of resources, a sharing of knowledge, and the closest possible team work.

Three years of war have imposed a particularly severe strain upon Australia. There is little likelihood that this strain will he eased or relieved. On the contrary, it is likely to become more severe. Intensification of the Strain of war must be accompanied by an intensification of the strain imposed upon the government of the country. More than that, the responsibilities of government increase enormously. And there is a growing feeling that, if this war is to be prosecuted with the 'maximum degree of efficiency, all sections in the Parliament should share in that increasing responsibility.

Nine months ago- shortly after Japan entered the war and long before the international . situation wa,s anything like so critical as it is to-day-^- I emphasized that no one party could possibly do all that was requisite to be done in the interests of Australia in the conditions in which we found ourselves. To-day, with a full recognition and appreciation of the services the Prime Minister has rendered to Australia during the most critical period in its history, I say that no one party can speak for a united Australia and give the requisite all-in war effort, particularly having regard to the financial policy that we are asked to accept. The Prime Minister has been insistent in his appeals for unity in the fight against the enemy. I fully endorse that appeal. At the same time I am firmly of opinion that the people should be given a lead in this Commonwealth Parliament. The gravity of the war situation is such that the Government of Australia should consist of the best brains available, irrespective altogether of party political considerations. "What matter." to-day is not political parties or consequences or repre- cussions, but the winning of the war. Therefore the administration in control of the affairs of the Commonwealth has a responsibility to make certain that everything possible is done to give the nation a 100 per cent, all-in Avar effort in order to hold the title deeds of this country. There can be no weak links. If there are, and these links are allowed to remain, or are not strengthened, we shall surely pay the price. What has to be borne in mind is that the Government in power in the Commonwealth Parliament at the present time represents approximately fifty per cent, of the population of this country. Is the remaining fifty per cent, to be denied a voice in the war-time administration, and to be deprived of proper trusteeship and guardianship in its hour of need ? Therefore, 1 say most emphatically that no one party is qualified to govern this country in the circumstances that confront us. What is wanted is ah all-party war administration. Its political composition could be forgotten, and every member of it could concentrate wholly on winning the war.

With such a government in power, the people could be assured that the finance necessary to fight this war would be raised by equitable means, and that their future, especially financially, would thereby be secured and assured. Furthermore, such a government, composed as it would be of men with experience in industry and of men from the other side of the House with experience in industrial affairs, would be able to formulate and implement an effective war-time policy. I have discussed this budget on a. non-party basis, and I hope in a not ungenerous manner. For the sake of Australia I urge the Government to give close consideration to the dangers which are inherent in the budget. This is no time for saving face or for stubborn resistance to measures designed to assist ' the war effort and the task of reconstruction. We should get together and co-operate in the interests of Australia, of our Allies, the people we are fighting with and fighting for, before the day grows too late and the night too dark.







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