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Wednesday, 16 September 1942

Mr COLES (Henty) .- I congratulate the Treasurer (Mr. Chifley) upon having placed before the committee a forthright and simple story in his presentation of the largest war-time budget this country has ever had, and far larger than anything ever forecast. Associated with it are certain pleasant circumstances. The most pleasant is that the Leader of the Opposition (Mr. Fadden) has stated that it is the intention of the party that he leads to co-operate with the Government in its attempt to raise the money that it needs to finance the war.

The other pleasing thing about the. budget is that nearly all the increased expenditure is for war purposes. Civil expenditure has been kept down to a minimum, and last year was £3,000,000 below the estimate. Let us hope that a similar result can be achieved this year.

It is true that the estimate for civil expenditure is £8,000,000 higher than last year, but practically all of that is represented by expenditure on social services, to which Parliament has agreed. The major criticism that can be levelled against the budget is that there is a gap - the Leader of the Opposition (Mr. Fadden) calls it a dangerous gap - of £300,000,000 between the estimates of receipts and expenditure.

Mr Anthony - How is it proposed to bridge that gap?

Mr COLES - Finance in war-time is a different matter altogether from finance in peace-time. The Government, in time of peace, can expand credit for expenditure upon the purchase of consumable goods. The whole process becomes practically a business transaction, and the money flows back into the Treasury. In time of war, most of the national expenditure is devoted to the production of goods which are destroyed. They do not go on the market to be bought by the public. Nevertheless, the money finds its way into the hands of the people. Unfortunately, the belief seems to be gaining ground that the war can be financed by central bank credit without taxation. The Treasurer has said that in that way lies grave danger. The Government finances the war by the issue of treasurybills, which are discounted by the Commonwealth bank. The money finds its way to the manufacturers for the purchase of war goods, and to the people in the form of wages. Unless that money returns to the Treasury, we shall have inflation, pure and simple, and it can return only in the form of taxes, or of loans - either interest bearing or noninterest bearing. The best method, and the one which would leave no future debt, would be to get the money back in the form of taxes. The second best way would be to get it back in the form of interest-free loans, whilst the third method, which is the one generally followed, is to get it back in the form of interest-bearing loans subscribed by the people. This is the method which the Government has chosen to follow.

Mr Spender - The honorable member does not expect that the Government will be able to raise all that money.

Mr COLES - The Government has said, through the Treasurer, that it is determined to get the money. In those words lies the safety of Australia. The record of this Government shows that whatever it has determined to do it has, in fact, done. Although the raising of so much money seems to be an impossible task, I should not be surprised if the people rose to the occasion. After all, what is it they are being asked to do? They are not being asked to subscribe £300,000,000 this year; it is more like £180,000,000 or £200,000,000. The Government releases the money, and there must be some lag before it can return. Any one who tries to show that Australia is in a dangerous financial position because use has been made of the national credit in war-time, is an alarmist who is endeavouring to injure his country. Let us consider the spending power of the Australian public over the last few years. In the first year of the war. 1939-40, the aggregate personal income of the people of Australia was £745,000,000. About £120,000,000 was collected in State and Commonwealth taxes, leaving £625,000,000 in the hands of the people. Last year, 1941-42, the aggregate personal income of the people was £852,000,000. Taxation amounted to £210,000,000. leaving £642,000,000 for expenditure by the public. Actually, therefore, there was more spending power in the hands of the people this year than two years ago, except for the fact that the people were asked to subscribe more to loans. In 1939-40, they subscribed £38,000,000. The following year the amount was £60,000,000, whilst last year it increased to £110,000,000, and the loans were over-subscribed by £20,000,000. This indicates that the spirit of the Australian people is right. They have accepted every burden that has been placed upon them since the war broke out.I have advocated compulsory loans in the past, and I shall be very interested to see whether the Government can this year raise the amount of money which is necessary.

Mr Spender - Why is the honorable member departing from his principles this year?

Mr COLES - I am not doing so. I believe that, in order to distribute the burden equitably over the people, compulsion is the fairest way, but no country has been prepared to adopt compulsion in everything. There is no reason to suppose that the people will not subscribe £180,000,000 this year out of a total income of £900,000,000 which, after the deduction of taxes, will leave about £500,000,000 in the hands of the people. I am not taking such charges as land tax,. &c, into account, because they are constant. Thus, the amount of spending power left with the people represents a reduction of only about 15 per cent., plus the rising cost of living. I do not say that the burden is being spread evenly. In the first place, it has been placed upon the higher incomes, but in time of war we must consider the total national income, and raise the revenue as best we can. If the people fail to subscribe to the loans, I accept the word of the Treasurer that the money must be found.

Mr Anthony - Can the honorable member point out to me the passage in the budget speech in which the Treasurer said that the Government was determined to raise the money needed ?

Mr COLES - Yes, the passage is: -

The Government is determined on this, and will take such measures as are necessary to impose it? will.

I believe that the Government enjoys the confidence of the people, and it has already taken positive action in many directions to give effect to its will. For instance, it brought about man-power registration.

Mr McEwen - The Labour party opposed the national register.

Mr COLES - The people of Australia have been provided with identity cards, and that could not have been done except by means of a national register. It has been stated that war is not waged with money, but with men and resources, and until man-power was regimented it would be impossible to prosecute the war effort in an intelligent way.

Mr Fadden - The honorable member will agree that the emergency created by the entry of Japan into the war was partly responsible?

Mr COLES - I advocated the registration of man-power before Japan came into the war. The Treasurer has stated that 50 per cent, of the man-power of the Commonwealth is now directly engaged in war activities. That could not have been achieved if the Government had not compiled the register. The Government also unified the command of the fighting forces in the south-west Pacific area. That was of vital necessity.

Mr. Spender__How did the Government do that, and when did it happen?

Mr COLES - Last December; and the name of the Commander-in-Chief is General Douglas MacArthur

Mr Abbott - He was not appointed in December last.

Mr COLES - He was appointed since the present Government took office.

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