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Thursday, 25 July 1946

Mr SPENDER (Warringah) .- It is, perhaps, not easy to turn from pigs to finance, but within the limits of my ability I shall endeavour to do so. This debate originated on a financial statement brought before this chamber by the Prime Minister and Treasurer (Mr. Chifley), which, I assume, was intended to review the financial operations of the Commonwealth over the twelve months ended the 30th June, 1946, and to give some indication of the financial problems which will face this country during the next twelve months. It seems to me that the statement is open to much criticism, particularly upon the ground that it neither gives sufficient facts upon which honorable members may debate the matter, nor places before the country the real nature of the economic problems with which we are confronted. There has been far too great a tendency in recent budgets and financial statements merely to set figures before honorable members, which they themselves cannot unravel, because they are without the necessary information which gives them significance. My first point is that thisstatement shows no real appreciation of our economic problems. I should have thoughtthat the two major problems which confront Australia to-day are, first, man-power and, secondly, decreasing output in a working week. The conjunction of these two factors really lies at the very base of the resolution of the problems that will confront us during the next twelve months. I emphasize the point, which I have made on other occasions, that in discussions on finance it is much more important sometimes to abandon mere figures and concentrate on the basic factors operating upon our economy. The Government shows no recognition of the fact that, in order to solve our economic problems, it is necessary now to change from the approach which was made when our economy was shifted from peace to war. When we changed from peace to war there was a grave and urgent need for the imposition of higher taxes and financial controls, and for an increase of public borrowing. In short, there was need to change the emphasis from civil consumption to war needs. And so all the financial controls inherited by this Government from the government which I supported were designed to taper off all demands other than those which were purely essential for civil production, so that the resources of the country could be available for war. As a corollary to that objective, it was necessary to impose heavy taxes because taxes had to be viewed, not so much as a need to find money, but rather as an instrument of economic policy. Accordingly, taxes reachedthe very high levels that the war demanded so that people would not have in their pockets money which , could compete with governmental demands upon the economy of the country. And for the same purpose, every effort was made to' increase savings by the people, not only in their banking accounts, but ako, and preferably, in subscriptions to government loans and war savings certificates. By that mechanism the spending power of the people was greatly lessened. Now, however, the time has been reached when the policy must be pursued in reverse, consistent, of course, with the problems which, I am not unmindful, face any government, and when every encouragement should be given to civilian production to enable the scarcity of civilian demands to be quickly satisfied. That the Government is pursuing a policy of high taxation is evidenced in this financial statement, despite the rather minor reduction of £17,000,000 in a total budget of over £500,000,000. It is necessary now for the Government to realize that the problems of the country can be solved only if we acknowledge the urgent need to increase production. I do not desire to repeat what has already been very well said by honorable members on this side of the House in respect of that matter; but as a general observation I stress the need to indicate with greater clarity than so far has been exhibited the character of the problems which confront the country, the kind of economy which this Government proposes to support, and the means by which it proposes to resolve the difficulties that confront' it. The policy and the objects of a government's financial' and other controls should be clearly stated to the community as- a whole. They are not stated to this House because honorable members, even with all of the material available to them, are not in a position to understand clearly what they are. For instance, I do not yet know whether the Government intends to encourage private industry. I have a shrewd suspicion that there is a cleavage iD the Government's own ranks; there are those who adhere to the old ideas of socialism and are not prepared to give up that concept as a panacea for all our economic ills, and there are others who realize that only by encouraging private industry and individual effort can we hope to solve our problems. From time to time the Government compromises with the adherents of these two camps. The immediate aim for Australia is, as has been said by the Leader of the Opposition (Mr. Menzies), increased production. As every one here knows, we cannot reduce the taxes to their pre-war rates any more than we can hope to have budgets comparable to pre-war standards. So it seems that the emphasis must be placed upon increased production. Only in that way may the burden of taxation be really lightened. We should be conscious of the fact that the problems which confront the country, irrespective of what government may be in power, are tremendously aggravated by the decline of production, by the huge banked-up savings of the people, which are now over £600,000,000 more than they were pre-war, and by the acknowledged shortage of civilian goods and services. I realize that it is not possible to reduce taxes with the rapidity that all of us no doubt would like, but my proposition is that the Government could have done much more to encourage production in this country than it has. It could have adopted more scientific methods of reducing taxes, particularly, by reducing the sales tax on capital goods, a matter that I desire to develop later, and by reducing the excessive company tax. Increased production is the goal towards which all Australia's economic activities must be directed. When that goal is reached, the major evils of scarcity, high prices and inflation will ultimately disappear. Increased national production implies increased national real income, and I stress that, because it is important to realize that with a budget which, I should think, cannot be reduced below £300,000,000 this year and will always be hardly less than £275,000,000 a year, the key to the solution of the pressure of taxes on the community is heightened production so that, by the increase of the value of goods and services in the community, the proportion that taxes bear to the total national wealth should be reduced. So I say that increased national production implies increased national real income upon which the living standards of the community ultimately depend. Of direct significance is the fact that the harshness of taxes will decline as the national real income: that is the purchasing power or real value of the weekly wage, increases, and it follows, as I have said, that, since raxes cannot he reduced to the pre-war level, national production must be increased far above the pre-war level. In other words, I see the problem of the country not so much as the amount of raxes that is being, extracted from the people as the proportion that those taxes bear to the national income, and I think that is the real approach to the problem. But behind the figures lies the economy of the country. Figures only reflect a particular condition of the nation. For some time I have thought that there is a need to place before the Parliament, in addition to the financial budget, what might be termed a man-power budget. Such a procedure has been adopted in some other countries. After all, the wealth of the country depends solely upon what man can produce, and one cannot get a correct picture of the internal economy without having some idea of the man-power and of how it is directed in the economy. I realize that, at this stage of transition from war to peace a decision has to be made on whether taxes shall be reduced more rapidly or whether taxes shall be retained at a high level for the principal purpose of preventing inflation. There is a school of thought that hold's .the view that inflation is discouraged by continuing to drag from the total national income a largo amount of money by high rates of tax; but my contention is that, whilst that seems to be theoretically attractive, in practice it will prove the .reverse, because high rates of tax' at the moment are depress;ve in character .when the taxation policy should be directed to encouraging production. It is only when you ' encourage production and in fact raise it up to the same level as money demanding an outlet in goods and services that you overcome the evil threat of inflation. By no artificial methods of price control, rationing, or taxes can the Government refuse ultimately to face that issue. So I criticize the financial statement for not' placing before this House and the people the true problem with which we are confronted in turning our economy from war to peace.

My second comment is that the financial statement fails to reveal the true financial situation of the Commonwealth or to record sufficient data from which it can be deduced. I shall make only two or three observations that I think will pertinently establish what I have in mind. The statement consists of nine' pages of narrative and four tables, and I propose' to direct myself first to " Table ' No. 1 - Main Heads of War Expenditure 1944-45 and 1945-46 ". There are certain items in that table that call loudly for explanation because, try as I may and with what ever facilities are open to private members, I am unable to follow their significance. I first direct attention to the fact that the total expenditure in 1945-46 before certain credits are taken into account was £452,000,000 - J leave out the thousands - compared with £516,000,000 in 1944-45, when the war was substantially at its zenith; but from that amount of £452,000.000 three items are deducted. The first is a credit of £62,000,000 under the heading "Miscellaneous ". When one has regard to. the facts that the first £100,000,000 budget was introduced into the Parliament in 1939, and that most .pre-war budgets provided for revenue and expenditure of about £60,000,000 a year, it is extraordinary that in thi3 table one finds under the unexplained heading "Miscellaneous " . the amount of £62,000,000. No explanation has been offered. Honorable members have not been informed where they can discover the details of how the amount is made up. It is impossible for us to consider any one of the items in Table No. 1 without knowing to what item or items,, if any,, the amount, of £62,000,000 under the heading " Miscellaneous" refers. We cannot know whether it refers to any one of the items in " Service Departments ", " Production. Supply and Shipping Departments ". ' Reciprocal Lend-Lease " or " Other War Services ". The information placed before the chamber is quite valueless, since we cannot appropriate any portion of the figure of £62,000,000 to any one of the items contained in Table No. 1.

Mr Fadden - They might belong to previous years.

Mr SPENDER - No one knows. How can it be said -that honorable members are competent either to debate or understand the ' financial or economic position of the country if we are not given any information about a lump sum -of £62,000,000. It is a large amount, and any portion of it may be attributable to any one of the items under the headings I have mentioned. Im addition, this amount exceeds by £37,000,000 the estimate which the Treasurer gave in his previous statement. Surely we are entitled to know how that occurred? "What were the transactions which . resulted in this huge figure ?

The matter does not rest there. .Another item is. " Disposals, £15,635,000 ". Here again, I direct attention to certain facts which require explanation.' The budget estimate for " Disposals " -was £28,000,000.- It was announced in the press from an official source that to a date just before the 30th June last, the actual revenue from " Disposals " exceeded £42,000,000. Yet the amount of £15,635,000 bears no relation either to the estimate given or to the statement made regarding "Disposals" before the 30th June. I should like to know, first, how the amount of £15,635,000 is made up; secondly, in what way it is related to the estimate of. £28,000,0.00-; and thirdly, is it not a 'fact that an official statement was made that prior to the 30th June last .the amount represented by "'Disposals" was £42,000,000? If those are facts, why is it that only £15,635,000 is shown as a credit to this war expenditure ? I do not desire to appear suspicious in examining these 'accounts, but it does seem to me that in this Financial Statement, the Government has sought toreveal not so buoyant a picture of our financial position as in 'fact exists., so that when we come to the next year, we shall have a substantial degree of buoyancy which really should be brought into account this year. If my observations are . correct, it means that a credit for £15,635.000 has been given under our war expenditure when, in fact, realizations were £42,000,000. I should like to know what has become of the difference.

The next item to. which I shall refer is a small debit. It is not easy to understand how .a debit item can -be included under the heading of " Credits ", but I suppose that the accountants will solve that matter. The three items under the heading of "Credits" are "Disposals" £15,635,000 "Miscellaneous" £62,174,000, and " Other Administrations (net) debit, £3,664,000 ". Here again, there are some strange features. At the end of March last, the Treasurer announced that the Commonwealth bad received from thi British Government £27,600,000 on account of services rendered. I assume that those services were rendered during the war. But I find no place in these accounts where the credit is revealed. Now, we have .a debit of £3,644,000. TJ.p to March last, we were in. credit by more than £27,000,000. Where has that amount gone? Has it been transferred to some suspense account and in that way not brought into the accounts of this year ? On those three items alone, I have indicated sufficient to show that this financial statement is not, as the right honorable ' member for Yarra (Mr. Scullin) described it, a frank and full statement of the financial position of the Commonwealth. On the contrary the statement conveys to this 'chamber only the barest minimum of information that the Government 'thinks it can "get away with ".

Either war expenditure cost much more in the last .financial year" than is revealed, or revenue was much more buoyant than is revealed-. That fact is inescapable. My contention is reinforced when we turn to the statement of 'Commonwealth revenue -contained in Table No. 2. 'I shall deal first with the item " Income Tax - Individuals, Companies and Social Services Contribution, £214,593,577 ". The Government' has made a great show of reducing the total budget figures by -£17,000,000. The Leader of the Opposition (Mr. Menzies) stated that by a strange coincidence that 'reduction represented the exact amount by which the Estimates were exceeded by the actual receipts. When the Treasurer was abroad a few. months ago, a Minister stated that no tax reductions could be contemplated.

Mr Dedman - That is quite untrue.

Mr SPENDER - I read that as a statement by the honorable gentleman. Before members of the Labour party considered thematter, many inspired statements were published to the effect that no reduction of income tax could be contemplated. When caucus assembled, members of the Labour party declared that taxation must be reduced. They emphasized that the Liberal party had made it clearthat reductions could be made. Then, sure enough, a reduction was granted ! What was the amount of the reduction? I shall show that the Treasurer made no scientific approach to this matter. When the war ended in August, 1945, the budget was supposed to have been recast on a peace-time basis; of course, the idea was quite fantastic, notwithstanding the moving statement by the right honorable member for Yarra last night that when the people were celebrating the end of the war, the Prime Minister and 'his advisers were in his office calculating how Commonwealthexpenditure could be reduced. I am reminded of the stories we used to read in 1943-44, inspired by press relations officers, that Ministers were so overworked that they had to nibble a sandwich in the middle of the night in order to maintain their flagging vitality. It is obvious to any one who has examined this statement that there have been no really scientific readjustments of budget finances and that we are now reaping the consequences. We pointed out when the last budget was before the House that if expenditure were not pruned so as to meet a peace-time economy, departments would be encouraged to spend up to the hilt, and that is exactly what has occurred. It is, as I have said, a strange coincidence that the so-called tax reduction of £17,000,000. happens to be the exact amount by which revenue has exceeded the budget estimates. The Government is repeating its practices of last year. If a man happens to pick up an article in a shop once, it may be put down as a bad habit; but if he happens to do the same thing twice, it can hardly he accepted as a strange coincidence.

I refer again to the amount of £214,000,000, and ask why the three items which I have mentioned have been aggregated in this figure. Perhaps I can give an answer to my question. ' It has been suggested that £17,000,000 will be the amount of tax concession that people will enjoy in this financial year. I dispute that statement, for reasons which I shall now proceed to' state. Of the total of £214,000,000, which was in excess of the estimated revenue for the year, £150,000,000 represents income tax paid by individuals. Of that amount approximately £75,000,000 only is represented by pay-as-you-earn receipts, which are provided by people who make their contributions week by week or at other periodic intervals. The concession which is said to be given by this statement will not be enjoyed until the financial year 1946-47 by those who do not periodically pay their taxes under the pay-as-you-earn method, for the reason that they will not receive their assessments in respect of the financial year ending the 30th June, 1946-47, until the financial year 1947-48. I believe that the amount of tax reduction which will be enjoyed by the community in this financial year will be much less than £10,000,000. It is proper that this should be said frankly and fairly, but it has not been disclosed. I reiterate that the socalled tax concessions to be granted to those I have mentioned in this financial year will be less than £10,000,000.

I also draw attention to an extraordinarily' buoyant position in our finances which has not been revealed in the financial statement. Is it not a fact that about £42,000,000 has been carried forward into this financial year in respect of uncollected taxes already due?

Mr SPEAKER - The honorable member's time has expired.

Motion (by Mr. Fadden) put -

That the honorable member for Warringah be granted an extension of time.

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