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Thursday, 25 July 1946

Mr DEDMAN (Corio) (Minister for Post-war Reconstruction and Minister in charge of the Council for Scientific and Industrial Research) . - Yesterday and to-day, I listened to three speeches by members of the Opposition' who, in the past, held the office of Commonwealth Treasurer, but who, I venture to forecast, will never again be permitted by the people of this country to hold that office. At a -later stage, I shall have some observations to make upon the remarks of the Leader of the Opposition (Mr. Menzies), but at the moment I pro- pose to confine my comments to the speeches made this afternoon by the honorable member for Warringah (Mr. Spender) and the Leader of the Australian Country party (Mr. Fadden). Both those gentlemen sought to establish the point that of the taxation reduction for the year totalling 17£ per cent., only half will become effective this year. That contention I most emphatically deny. When they were speaking T knew that they were wrong, but I took the precaution during the dinner recess to consult with Treasury officials and with the Treasurer (Mr. Chifley) himself. The Treasurer -has informed me that the statements made by the two members referred to are without .any foundation in fact. He assures me that businessmen and farmers will get the benefit of the proposed reduction of provisional income tax and social service assessments for 1946-47. These provisional assessments would normally be for the same amount of tax as was payable for the previous financial year, but because of the reduction of rates, the provisional tax will be reduced by approximately 11 per cent.

The Leader of the Australian Country party talked a lot of utter drivel about, deception. I ask the House, as I ' ask the listening public, what reliance can bo placed upon the utterances of those honorable members who make statements which I have proved to be utterly false and misleading? I wish to address myself primarily to the last paragraph of the Treasurer's financial statement which is headed "Production and Price Control ". In that paragraph all too brief a' reference was made to the phenomenal stability which has characterized the financial structure of this country. This brevity was due no doubt to the fact that the right honorable gentleman himself was the chief architect and builder of our envied and enviable financial stability. I make these observations because I believe it to be right to give credit where credit is so abundantly due, and. also because I wish to underline the lessons which have been learned during the five years that the' right honorable gentleman has been Treasurer. Those lessons still need to be applied. My first point is simply and shortly stated. The management of the financial resources of a modern industrial nation at war is a highly complicated task, involving anxious responsibility on the part of the Treasurer because of its crushing complexity and the endless insistent detail of the work required of him. Australia is accounted .fortunate that when the Japanese declared war this country found in John Curtin a leader who was able to rally the people in a united struggle for survival. This country was equally fortunate in thatJohn Curtin had by his side a trusted lieutenant who could so plan and administer the financial resources of this country as to enable it to make a war effort which General MacArthur declared to be a miracle. The right honorable gentleman not only supplied the sinews of war in unparalleled amounts; he also did it in such a way as to preserve the fabric of national financial strength which has enabled us to emerge into the transition period with a stability in our economy unequalled in any other country m the world. I make these observations because I consider I am well fitted to do. so. First as Minister for War Organization of Industry, and later as Minister for Post-war Reconstruction, I have had a great deal to do with the economic organization of the resources of this country. All Australians should be deeply thankful that this country had in its hour of need a Treasurer of the capacity of the right' honorable gentleman who is now also our Prime Minister. My second reason for enlarging on the final paragraph of the Treasurer's statement is because the lessons that we have learned during the five years in which the .right honorable gentleman has been Treasurer still require to be applied. The financial factors which he managed with such conspicuous ability still require delicate management. A study of the past affords an insight into the methods by which our financial resources were so well managed and gives us a guide as to what should be clone in the future. At the moment the whole world is viewing with alarm the repercussions which have followed the lifting of price control in the United States of America. Prices have skyrocketed in that country. Any one who has talked with businessmen and industrialists of this country who have travelled abroad in recent times will understand how fortunate this country is to be able to avoid the pitfalls that are besetting the people of the United States, and, to a lesser degree, those of Canada and even Great Britain itself. Prices" have soared in the United States of America. It may be well to give one or two examples of how these price movements affect the lives of the people of that country. Any one who has been abroad will tell us that he had to pay 15s. or £1 for the same kind of meal that could be obtained in this country for from 2s. 6d. to a maximum of 5s. Because of. the controls imposed by this Government, a charge may not be imposed in respect of meals in excess of 3s. for breakfast, 4s. for lunch, and 5s. for the evening meal. The honorable member for Ballarat (Mr. Pollard) told me recently that when he sent a telegram from San Francisco to Washington, a distance approximately equal to that between Sydney and Perth, he was charged about 30s. A similar telegram could be sent from one end of the Commonwealth to the other for the sum of ls. 6d. Of course, in the United States the telegraph services' are operated by private enterprise. I need not dilate further on this subject beyond saying that the stability which characterizes our financial' structure is ' responsible not only for the absence of price disturbances, but also for the high level of employment iri this country. There is less unemployment in Australia to-day than in any other country in the world. I regret to say that I read in the press only yesterday that in Scotland, which has a population of less than 5,000,000, there are 75,000 unemployed at the present time. In this nation of approximately 7,000,000 people the unemployment figure is in. the vicinity of 14,000 all told. Instability of economy in the United States of America undoubtedly will have its effect on the people of this country and on the peoples of Canada, Great Britain, France and all the continental countries. Honorable members are probably aware that Canada has had to alter its exchange rates as the result of price disturbances in the United States'. They will also know of the announcement from the United Kingdom that the British Government may not take up the 'whole of the loan recently' granted , by the United States of America, because costs would rise to such a degree in that country as to make it uneconomical for Great Britain to take full advantage of it. As a result of that, ip this country less' petrol will probably be available and there will be fewer goods in the transportation field generally than would have been the case had these price disturbances not taken place. The main effects of these price disturbances however, will be felt by the consumers in the United States of America itself. The premature wiping out of the price control in America and the price disturbances that have followed, and other causes which I shall presently outline, have brought untold hardship to the lower income groups in that country. And the working classes iri the United States will be those who will have to tighten their belts. The comparatively wealthy sections of the American community, the section represented in this country by honorable members opposite, will make no sacrifices. Out of their ready cash resources they will make high bids for the limited supply of goods and will bid them away from those who require them most. The fate of the masses means nothing to the big business interests of Wall Street and to the speculators and farm block isolationists of that country. This unevenness of the price movement is one of the things the Treasurer fought ceaselessly to avoid with every weapon at his command. There is a tendency to over-emphasize the efficacy of price control and the effects of increased production. Both of these factors are, of course, important, but neither of itself contributes to economic stability to anything like the degree that a sound financial policy does. Neither maximum production nor the most rigid form of price control will safeguard from instability the economy of a country which has adopted unsound financial practices.

I propose- now to make some observations upon certain remarks made by the Leader of the Opposition (Mr. Menzies), who flatters himself that he and his associates were the first to stress the need for increased production in this country. In a speech which I made in Tasmania as far back as 1942, not long after I had assumed control of the Department of War Organization of Industry, I. said -

In peace as in war the welfare of a nation depends, not on entries in bank ledgers, but on the strength and quality of its working people and the efficient production by them of the goods and services required to sustain life, liberty and the pursuit of happiness.

Ar.d those words have been the theme of every address I made to meetings, not only of trade unionists but also of chambers of manufactures and chambers of commerce,, when I was Minister for War Organization of Industry. The Leader of the Opposition and all honorable members opposite forget that in this House they represent a number of people, rentiers and others, who add nothing to the total production. Their productivity is, in fact, entirely nil. They also forget that while they exhort the working men to work longer hours and have no stoppages the big business executives go on their .'ong week-ends from Friday to Tuesday playing golf at exclusive clubs, but expect the workers to drudge from weekend to week-end in the factories. I and my colleagues and all members on this side have stressed time and time again in public utterances the necessity for increased production, but the stability of our economy is not so much due to rigid price control or increased production as it is basically due to the soundness of the financial policy developed and applied by the Treasurer, because, no matter how much is produced and no matter how rigid price controls are, if there is in the community a greater volume of purchasing power than there are goods to purchase inflation will occur. The Treasurer by the application of his policy throughout the war avoided inflation. One reason why other countries are striking trouble is that their financial policies were not so sound as that applied by the Australian Treasurer.

By 1944, the United States of America, which came into the war over two years later than we did, had issued £A.155 of bank credit per head of the population against only £A.47 per head issued in Australia. In the same period Britain issued £A.67 per head, Canada £A.72 and New Zealand £A.31. The two Labour Treasurers of the south-west Pacific dominions, .while they used the bank credit to ensure full use of the resources of their countries, at the same time avoided the over-use of bank credit, which would have led to inflation. The Australian Treasurer acted on the knowledge that it was correct to use bank credit to bring all our resources into play, but he recognized the dangers of inflation, dangers that are now becoming very much apparent in the United States of America and are latent in Canada and even in the United Kingdom. He courageously imposed high taxes. He drained off large sums of money by way of loans at . low interest rates. In fact, he achieved what I term a perfect balance between bank credit, loans and taxes to finance the war. The right honorable member for Yarra (Mr. Scullin) mentioned the proportions in which money was obtained from the three sources. In the first four years £350,000,000 worth of bank credit was used, but in the last two years, because of the dangers of inflation, the Treasury used no bank credit at all.

That the present Treasurer was confronted with a task in this field incomparably greater than his predecessors in the first two years of war is simply shown from, this table of the annual and progressive totals of Commonwealth war expenditure -


Two further insights into the monetary forces which the Treasurer still has to keep in check may be gained from figures of bank deposits and of gross national income in monetary terms : -

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