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Wednesday, 16 September 1942


Mr CURTIN (Fremantle) (Prime Minister) . - The right honorable gentleman who has just resumed his seat has treated us to very much the same sort of speech as he delivered a year ago. It has been full of the evils of inflation. He prefaced his remarks in that connexion with what I regretted to observe was an attack upon an honorable member for having indicated, very clearly and specifically, the reasons for the vote that he intends to give.


Mr Abbott - About as clear as mud.


Mr CURTIN - They were good reasons.


Mr Abbott - The right honorable gentleman was not here at the time.


Mr CURTIN - I was here. I have been here practically the whole of this evening. I confess that if I wished to relax from the strain of the present era 1 should regard this as probably the only place in which I could comfortably do so. Taken as a whole, I feel quite confident that the right honorable member for Kooyong (Mr. Menzies) would not have delivered the speech that he has delivered to-night, or that which he made a year ago, had he sat on this side of the Chairman of Committees. To-night, the right honorable gentleman said that, inflation having started, it is impossible to arrest it I remind him that the budgets that have been introduced into this Parliament since the war commenced have been budgets which laid down three sources from which revenue was to be derived in order to meet war expenditure. These were taxation, loans, and central bank provision. That has been one of the principles of each budget statement made to this committee. The objection to the present budget is that it provides for a war expenditure that is so considerable that the total amount of taxation which is considered fair and reasonable, plus the total amounts of loans which can be raised according to any principle, either voluntary or compulsory, would still leave a deficiency on the total expenditure which the Opposition has accepted as proper.


Mr Spender - Where does the right honorable gentleman get that idea?


Mr CURTIN - From an analysis of any speech that has been made either in the Parliament or out of it. I say quite frankly that the £24,000,000 which the right honorable gentleman who now leads the Opposition proposed to raise by means of post-war credits, in the budget which he introduced last year, has already been absorbed into the revenue by means of the direct taxes which this Parliament has imposed, and by the incidence of the indirect taxation that has been levied. Therefore the total tax levied by this Government during the time it has been in office has exhausted the field of postwar credits which the budget statement of the right honorable the Leader of the Opposition envisaged.


Mr Menzies - So this Government is limiting the amount then stated.


Mr CURTIN - If we look at the facts we shall find that the last Government proposed in its budget to raise £25,000,000 by post-war credits. The present Government has actually imposed new taxes to the amount of approximately £75,000,000. Whether the moneys required be taken by post-war credits or taxation, this Government has collected for the purpose of war by its taxation policy three times more than the sum which the Leader of the Opposition proposed to get by post-war credits.


Mr Fadden - But on a different basis.


Mr CURTIN - I am dealing with what is called the gap. Taxation, loans and central bank credits were the three sources from which the two previous Governments and this Government have had to obtain the money needed to meet the war expenditure. The last budget submitted by the Leader of the Opposition would have yielded £74,000,000 less tax than this Government has imposed, but post-war credits which this Government did not impose would have yielded £25,000,000. There is a difference of about £50,000,000. But it should be remembered that this Government raised enormously increased sums by loans over the amounts contemplated by the Leader of the Opposition.


Mr Fadden - Why?


Mr CURTIN - Never mind why. We are dealing with facts. With more than £100,000,000 of increased war expenditure, this Government has met the problem of finance in the last year with approximately the same use of central bank credits as the previous governments proposed. I invite representative members of the Opposition to have that argument out with me in a place where the umpires can deal with it, the umpires being those who have had to find the money.


Mr Spender - This is the place to have it out.


Mr CURTIN - Honorable members opposite have had the argument, and I say to the country most positively that this Government, in the last financial year, found £100,000,000 to meet increased war expenditure without any exceptional drain on central bank credits over and above that contemplated in the budget statement of the Leader of the Opposition when he was Prime Minister and Treasurer. 1 invite contradiction or challenge on that statement. It is perfectly true that the Treasurer contemplates the use of central bank credit in dealing with the gap in this budget. Is he the only Treasurer who has to deal with this tremendous burden of expenditure in that way? It is most extraordinary that not one criterion of comparison has been put forward by the Opposition in this regard to show that this Government is doing something which is unprecedented. What it is doing is not unprecedented, but is a commonplace of national finance in every country that is at war.


Mr Spender - The right honorable gentleman would not get anywhere with that argument.


Mr CURTIN - The former Treasurer took special pains in his budget speech to justify the use of central bank credit when the expenditure on war was comparatively modest.


Mr Spender - When there was a large amount of unemployment.


Mr CURTIN - It is true that there was unemployment, and why? It was because governments of that type had been in office too long. I have before me a table dealing with the gap for the 1942-43 financial year, and showing war expenditure, non-war expenditure, total expenditure, revenue on the basis of 1941- 42 taxation and post-war credits, balance to be financed by additional taxation and loans, &c, increases in taxes in 1942- 43, increases in post-war credits in 1942-43, and the amount to be financed by loans, &c. This table deals with Australia, the United Kingdom, Canada, New Zealand, and the United States of America. The amount to be financed by loans in this country is £300,000,000. Honorable members opposite say that that is impossible, and that it will mean inflation. Could the money be raised compulsorily ?


Mr Menzies - A great deal of it could.


Mr CURTIN - How much?


Mr Menzies - That is not for me to determine.


Mr CURTIN - I say to the right honorable gentleman that the amount which it would be reasonable by any system of duress to levy compulsorily is approximately the amount which it is expected that this country will provide voluntarily, and that the effect of the gap on the loan provision, as estimated by the Treasurer, is approximately the same whether compulsion or the voluntary principle be used. In the course of the speech of the Leader of the Opposition on this budget, the honorable member for Warringah (Mr. Spender) asked me how much we expected to get in voluntary loans, and I said about £200,000,000. Under what general plan of compulsion could we get £200,000,000 by way of loan, in addition to the incidence of direct and indirect taxation in Australia this year? Can any member of the committee representing the

Opposition work it out? The right honorable member for Kooyong, directing attention to the general impact on personal incomes, said that during the present financial year it would be difficult for a great number of people to contribute. He said that their patriotism, however great, could not withstand the strain of the taxes imposed on them and their other obligations. Citing his own case, he said that he would have difficulty in subscribing to loans as freely as he had done hitherto. The right honorable member is not an exception. There will be thousands of men like him in Australia, and does he, who cites his own case in this Parliament, suggest that, under a system of compulsory loans, he would be able to do better this year than he is able to do under the voluntary system? Surely that is not so.


Mr Menzies - Does the Prime Minister deny that, by a system of compulsion, it would be possible to get better results than under a voluntary system?


Mr CURTIN - I say' that the Treasurer expects to raise approximately £300,000,000 by loan, of which we feel quite certain that at least £200,000,000 can be raised from the public. I am convinced that .any system of compulsion thatsought to obtain a total of more than £200,000,000 this financial year, in addition to what the people will contribute in direct and indirect taxation, would be at once rejected by the right honorable member for Kooyong, as placing an intolerable burden upon the taxpayers. I have not been so stupid as to have failed to discover for myself what would be- the net gain to the Treasury from a system of compulsory loans.


Mr Menzies - Surely the right honorable gentleman sees that the deficit of £100,000,000 must be met by somebody?


Mr CURTIN - We recognize that the gap is there, and it occurs, in the first place, because of the time lag between the issuing of the money to the public and the getting of it back to the Treasury in one form and another. In the second place, it occurs because expenditure for war purposes is immediate. Honorable members know that new projects are put forward from month to month, and sometimes from day to day. Emergency expenditure of all kinds must be undertaken. Large additions to the fighting services have to be provided for. Much of the expenditure is of a capital nature, such as that on munitions annexes. That is why there has been a steep increase of expenditure amounting to £100,000,000 more than the estimate, consequent upon Japan's entry into the war. Let us presume that the budget provided for the expenditure of £100,000,000 less than we now estimate. There would then be no gap, and every body would be pleased. However, if to-morrow, or the day after, it was found possible to put 100,000 mort men into the Army, and to equip them without imposing an intolerable strain upon the civil population and on our resources, we would do so. What would be the effect on the budget? The cost would be in the vicinity of £37,000,000. Expenditure on pay, rations, clothing and camp expenses would be £32,000,000, and maintenance of equipment, &c, another £5,000,000. Does the right honorable member for Kooyong say that, because we had made no provision for such expenditure in the budget, we should, therefore, refrain from putting those men into the Army? Of course he does not. Let me give another example. I have told the House and the country that if we could obtain increased naval power in this theatre of war it would be an invaluable contribution to our security. We have asked other countries to assist us - that is no secret. Let us presume that the Government of the United Kingdom, which has graciously given to us a ship to replace H.M.A.S. Canberra, were to give us a whole squadron. A ship of the Canberra class costs £750,000 a year for pay, provisions, clothing, repairs, oil fuel, armament and other stores. The cost of a squadron would, of course, be very much greater. Would the right honorable member for Kooyong say that, because of his fears of inflation, and because it might b& necessary to make a greater use of central bank credit than the budget had prodded for, we should therefore refuse the offer of the squadron? Of course, he would not. Honorable members know that the war is fought with battleships, soldiers, guns and munitions, and they know that all this talk about a gap in our finances is beside the point. Every country in the world is faced with a gap in its finances. Some honorable members would have us believe that a country's capacity to wage war is limited by the amount of money which it can take from its 'taxpayers. Last year the right honorable member for Kooyong said that inflation threatened Australia, and that the value of the pound would depreciate. The Treasurer has said that the outpouring of money in excess of the total of goods and services must necessarily result in there being an excess of money in circulation, and that this can be avoided only by the exercise of proper control. If that control be not exercised, inflation will follow. Everything that the right honorable member has said about the ultimate consequences of not taking money from the public is true, and the Treasurer and the Government admit it.


Mr Menzies - 'But what is the Government doing about it?


Mr CURTIN - I have already said that the amount of money which the Government proposes to raise by taxation and voluntary loans is as great as could be raised by taxation and compulsory loans.


Mr Fadden - "Will the Prime Minister say that the whole of the taxing field has been adequately tapped?


Mr CURTIN - I do not, but I say that we have, as the result of a major reform of taxation policy, secured for the Treasury £17,000,000 of revenue over and above what it could otherwise have obtained. One of the obligations that we entered into was that we would stand to the direct income tax schedules submitted to the Premiers. We had been met repeatedly with the statement that the schedules of uniform taxation which we had circulated had not been seriously circulated. We were accused of having put in those schedules only in order to get the bill through, after which, there was little doubt, taxation would be increased substantially.


Mr Fadden - Will the right honorable gentleman give an undertaking now to increase the rates in the future?


Mr CURTIN - I say to the Leader of the Opposition and to the country that when the Treasurer, in his budget speech which was carefully prepared after a full examination of all the circumstances, said that the Government was determined that the amount of money required, as set forth in its estimates, should be extracted from the public, he expressed the policy of the Government.


Sir Frederick Stewart - Does the right honorable gentleman regard £200,000,000 as the limit?


Mr CURTIN - No ; I hope to do even better. But £200,000,000, added to the amount to be received as taxes, will represent a substantial recruitment to the revenues of this country. Four or five years ago, when" the honorable gentleman himself was in office, his Government was not game to venture on the road to inflation in order to give jobs to starving men.


Mr Spender Mr. Spender interjecting,


Mr CURTIN - The honorable gentleman knows well that whatever be the extent of the structure, the principles of this budget are identically the same as those upon which he, as Treasurer, formulated his war budget.


Mr Spender - They are implemented differently. If £300,000,000 is required and only" £200,000.000 can be raised by loan, that means that the currency will be depreciated for every £1 above £200,000,000.


Mr CURTIN - On that reasoning, the depreciation of the currency commences when £20,000,000 is taken from the central bank.


Mr Spender - Why £20,000,000?


Mr CURTIN - According to the honorable gentleman's present argument, any transfer from the central bank involves a devaluation of the £1 in that it is the commencement of the road to inflation. I laugh, as I always laugh when I hear the prophecy of ruin facing us. Thirty years ago the people were told that the country would be ruined if wages were increased. because its industries would be incapable of meeting competition from other countries. Again, when, it was suggested that the working week should be 48 hours, or 44 hours, we were told that it would mean ruin. Every proposal which has been different from the " stand pat " orthodox conservatism of honorable gentlemen opposite has always been described as the forerunner of ruin. Some sections of the community have never been able to keep abreast of progress. Yet they say that we on this side adapt ourselves to the requirements of the present era - that when in opposition we advocated certain things which, as a government, we have not done. That is perfectly true.


Mr Stacey Mr. Stacey interjecting,


Mr CURTIN - If the honorable member for Adelaide (Mr. Stacey) lived for 1,000 years, he would not change his present opinions. He is an excellent example of the mind that can never go forward. If there be any capacity for mental movement on the part of members of the Opposition, it always operates in a backward direction; they can never go forward. I admit that the present Government - grappling with tremendous problems, facing a situation which, while we regarded it as a possibility, we hoped would not become a reality; called upon to bring into the forces thousands of men, and to organize industries, intensify production, gather strength not only from ourselves but also from others - has done things which, in all probability, many of its supporters do not approve. Many probably believe that we have gone too far, have put the pressure too heavily on the public, have called on men to make sacrifices beyond all reason. I acknowledge that, because it is a fact. We have not hesitated to impose burdens, not only upon companies in respect of taxes, but also upon trade unionists to "stay put". We have pegged wages and jobs.


Mr Spender - That is something new ; wages may be pegged, but allowances are granted.


Mr CURTIN - We have made provision for the automatic application of fluctuations of the cost of living. The honorable gentleman, when a Minister, was a member of a government which increased the wages of certain classes of workers by giving to them a war loading without reference to any tribunal. His Government did not peg wages. It merely said, "What do you want?" and when a proposal was submitted, answered, " Right ". That is what happened. The first political, non-judicial, decision in respect of wages since the war commenced, was made by the Government which preceded the present Government.


Mr Stacey - And the right honorable gentleman did not object.


Mr CURTIN - We were not consulted. Since we have been in office we have pegged wages and jobs. We have compelled men to " stay put ". We have taken men away from their employment and have sent them into the wilderness under all sorts of conditions, at times without giving them much opportunity to say good-bye to their wives. Not only have troops been called up in that way, but also thousands of men have been called up for civil construction jobs. We have done things which trade unionists and citizens generally could properly describe as tyrannical. I feel a responsibility for what we have done; but the Government believed that its primary responsibility was to get the country so placed defensively that its soldiers could fight most efficiently.' We have made positive decisions. I offer no reproach about the past other than to say that the honorable member for Warringah and his colleagues had numerous discussions, many talks, much consultation, and prepared all kinds of outlines of a total war effort - but they never advanced a yard towards it.


Mr Spender - Yet the right honorable gentleman has on several occasions referred to the good work done by the previous Government.


Mr CURTIN - I said just now that the honorable gentleman and his colleagues had never advanced a yard towards a total war effort. I hope that I shall not be misunderstood. The previous Government certainly grappled with the problem of putting the industries of the country in a position to supply requirements, and it organized the Australian Imperial Force for service overseas; but in respect of the ability of Australia to defend itself against an invader - a problem which required immediate attention when Japan declared war on us-


Mr Harrison - The foundations of the work, which the Prime Minister is now capitalizing, were laid by the previous Government.


Mr CURTIN - There has never been a government in the history of the Commonwealth that did not contribute towards making the problems of its successors a little less difficult. I am certain that when at some distant date, honorable gentlemen opposite transfer to this side of the chamber, they will place on record their deep gratitude to this Government for the manner in which it has guided the country in these critical times.


Mr Menzies - And they will set an example in generosity.


Mr CURTIN - This is the fourth budget that has been introduced since the outbreak of war. The first was accepted without demur. As for the second, the then Treasurer (Mr. Fadden) introduced it, but I carried it.


Mr Menzies - The Prime Minister; who was then Leader of the Opposition, submitted an amendment to that budget.


Mr CURTIN - I still say thatI carried it.

Progress reported.







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