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Friday, 26 July 1946

Mr CHIFLEY (Macquarie) (Prime Minister and Treasurer) . - in reply - Having regard to the fact that honorable members have been indulgent enough not to prolong unduly the debate on the Financial Statement presented by me as Treasurer, I would not now prolong the debate, did I not consider it necessary to reply to some points raised, particularly by the Leader of the Australian Country party (Mr. Fadden). Time and time again he reverted to the investment by savings banks in public loans. So frequently did he stress the subject, that it seemed to be an obsession with him. Indeed, in less polite circles, it would probably be said that he had a " bug " about it.

It ought to be placed on record, that during the time the Labour party has been in office, a total of £1,006,000,000 has been raised by loans, and of this total no less than 46 per cent. was subscribed by companies other than life offices, firms and persons. While previous war-time governments were in office a total of £115,000,000 was raised, but of this only 41 per cent. was subscribed by companies, firms and persons. Of the £1,006,000,000 raised during the term of office of the Labour Government, not any represented central bank credit, and not any was subscribed by the trading banks. However, during the ' raising of the amount of £115,000,000 by previous war-time governments, the trading banks were free to subscribe and, indeed, did subscribe. Moreover, in connexion with the raising of £1,006,000,000 by the Labour Government, the making of advances by the trading banks to persons for investment in the loan was severely limited, thus avoiding the danger of secondary inflation.

During the earlier loan raisings by this Government the Leader of the Australian Country party gave generous assistance, but. he suddenly decided that he would no longer help, his stated reason being that he objected to the Government's financial policy. Later, I regret to say, the Leader of the Opposition (Mr. Menzies) also decided that he would not be able to give any more active assistance in loan-raising. However, after the Leader of the Australian Country party withdrew his support, we did rather better than before, and it is an amazing fact that in the principal towns of his own electorate public subscriptions to the loans which he refused to support constituted a record.

I have read criticisms in the press of the Government's financial policy, and it is evident to me that some of the critics lack even, a rudimentary knowledge of finance and national economy. There seems to be a suggestion that the savings banks, whether Commonwealth or State, should not contribute to Commonwealth loans. Could a safer investment for their funds be imagined? Subscriptions have always been made to the loans, not only by the Commonwealth Savings Bank, but also by the State savings banks which are in no way subject to Commonwealth influence. It is interesting to read some of the observations of a former Treasurer, Mr. Casey, on this subject. In 1938, the late Prime Minister, Mr. Curtin, who was then sitting in opposition, asked whether the Commonwealth Bank had subscribed substantially to internal loans. Mr. Casey, who was then Treasurer in a government supported by the Leader of the Australian Country party (Mr. Fadden), replied -

It is normally the habit of the Commonwealth Bank and the Commonwealth SavingsBank to make quite substantial contributions towards public loans they underwrite.It is true that, on this occasion, they also made substantial contributions.

Not only did the Commonwealth Savings Bank make contributions to loans raised by .governments supported -by honorable members opposite; the Commonwealth Bank also did so ; but during the regime of the present Government, there have been no contributions to Commonwealth loans by- the central bank. However, I see nothing wrong in the Commonwealth Savings Bank and the State savings banks investing the people's savings in Commonwealth loans.

Mr Fadden - Except that the Treasurer has used their contributions to deceive the people into believing that the loans were invariably a great success.

Mr CHIFLEY - No attempt was made to deceive the people. The Government floated loans and invited subscriptions. . It denied to the trading banks and the 'Commonwealth Bank the right to subscribe to them, but it left the savings banks, both Commonwealth and State, completely free to invest in them if they wished. Internal loans raised by this Government totalled £1,006,000,000 of which -46 per cent, was subscribed by persons, firms and companies. The previous governments raised loans totalling £115,000,000, of which 41 per cent, came from the same source.

The honorable member for Warringah (Mr. Spender) said that the tax reductions proposed in the Financial Statement would give no benefit to other than wage and salary earners until after the 30th June, 1947. That statement is 'grossly inaccurate. The provisional assessments being sent out this year under the pay-as-you-earn system will be based on the income received last year, and provisional tax will be assessed at the reduced rate. That " debunks " the statement made by the honorable member.

The Leader of the Opposition complained that I did not supply sufficient information relating to goods which Australia received under the lend-lease settlement. I offer him my apology for not having furnished to him the additional information supplied to the Leader of the Australian Country party (Mr. Fadden) at his request. As was pointed out by the right honorable member for Yarra (Mr. Scullin), most of the American war material remaining in Australia at the cessation of hostilities was of no value, but there was a residue of durable goods suitable for peace-time use, and it was decided that this should be purchased for use in this country.

Mr Menzies - The right honorable gentleman is referring to items such as heavy equipment.

Mr CHIFLEY - Yes. The settlement provided for the purchase from the United States of lend lease capital equipment suitable for civilian purposes for $20,500,000. A large portion of the equipment taken over' consisted of machine tools, non-combat aircraft, mining plant, locomotives, motor vehicles of civilian type, tractors, steam wrecking cranes, and cargo handling plant. In addition, surplus property held by the Americans in Australia, including earth moving equipment, warehouse handling equipment and radio and signal equipment, valued at $6,500,000, most of it of durable quality suitable for peacetime purposes, was taken over. The bulk of the goods supplied by Australia to the American Forces consisted of consumable goods. Apart from these payments, the lend-lease settlement washed out all other transactions.

Mr Fadden - How much was received from disposals last year? To what accounts were the proceeds credited, apart from the £15,000,000 mentioned in the right honorable gentleman's statement?

Mr CHIFLEY - The Estimates included £40,000,000 as the amount expected to be received from disposals. Of that, £28,000,000 was to have been credited to war expenditure and £12,000,000 to trust accounts. The right honorable gentleman will remember that some of the articles disposed of or to be disposed of were or are the property of departments other than service departments - the Department of Munitions, for instance - and, of course, when they are disposed of, the money received for them must be credited to those departments. Only £16,000,000 was credited to war expenditure and only £9,000,000 to trust accounts. Instead of receiving £40,000,000, we received only £25,000,000. Delivery to purchasers has not yet been made of a great number of goods recently sold by the Disposals Commission. There were also large amount outstanding from overseas . administrations. So, we are considerably behind in actual collections.

The honorable member for Fawkner (Mr. Holt) interjected during this debate that Australians were the most heavily taxed people in the world. Only a few weeks ago, when I saw similar statements appearing in the press, I distributed to the newspapers a comparison of income tax at the rates then payable in Australia, Great Britain and New Zealand, but, as far as I know, only two published it. To a great degree it contradicted the claim made by them and echoed by the honorable member for Fawkner, that Australians are more heavily taxed than any other people. The statement showed that, at the existing rates, the taxes payable on an income of £150 were £9 in Australia, £19 in New Zealand and £16 in the United Kingdom. On an income of £300, the Australian taxes were £46, whereas the New Zealand taxes amounted to £54 and the United Kingdom levies to £55. In the case of a taxpayer earning £400, the statement showed that the taxes payable were £82 in Australia, £85 in' New Zealand, and £95 in the United Kingdom. The comparative table contained in that statement is: -


It is in the higher incomes that the half-truth on which the newspapers have based their assertions becomes apparent. It is true that persons with incomes of £1,500 a year or more are more highly taxed in Australia than in Great Britain or New Zealand.

Mr Holt - Has the right honorable gentleman made a similar analysis of indirect taxes?

Mr CHIFLEY - No, because the charge was that income tax was heavier in Australia than elsewhere, and it was to that I was replying.

A lot has been said about extravagance and wasteful expenditure. I take this opportunity to place on record some cold, hard facts. A couple of years ago, honorable gentlemen opposite declared that excessive use of treasury-bills would lead to inflation because they inflated the purchasing power of the people and thereby created a false economy and a false sense of prosperity. They claimed that unless the issue of- treasury-bills were checked dire financial chaos would result. In the last two years, not one- additional treasury-bill has been outstanding at the end of the financial year, although treasury-bills may have' been used temporarily during the year. No central bank credit has been, used, and no subscriptions from private banks have been received for loans.

Mr Fadden - Do not say that!

Mr CHIFLEY - I am saying it.

Mr Fadden - Then why have the holdings of securities of the trading banks increased from £56,000,000 to £122,000,000? How did that arise?

Mr CHIFLEY - I could give the honorable gentleman a lengthy explanation, but I do not think that the trading banks would appreciate that. .Since the Labour party has been in office, not one public loan has been subscribed to by the private banks.

Mr Fadden - "Where does this security movement come from, then?

Mr CHIFLEY - It is perfectly true that at their request the trading banks have been permitted to purchase sonia securities that have been available in the market. That is the answer. They were permitted to do so because otherwise they would not have been able to maintain a reasonable profit rate. Unless they had been allowed to operate on the market in the same way as other institutions are allowed, their profits would have fallen very low. I should have been grossly unfair if I had withheld that permission.

Since hostilities ended, 480,000 service personnel have been demobilized, and 200,000 persons have been diverted from the manufacture of war materials to civil production. In other words, approximately 680,000 persons have been transferred in twelve months from activities associated with the conduct of the war to the production of civil goods. Despite that unprecedented change-over, less than one-half of 1 per cent. of Australian workers is unemployed. No other country bas a better record regarding demobilization and the placement of ex-service personnel in civil employment than has Australia.

I desire now to expose a fallacious argument which the Leader of the Australian Country party used in reply to a statement by the honorable member for Fremantle (Mr. Beazley). The honorable member had pointed out that since the end of the war the production of civil goods had greatly increased. In an endeavour to refute that statement, the Leader of the Australian Country party declared that receipts from the pay-roll tax, which were the real guide to increased production, had not increased. Of course, the explanation is that salaries and wages are being paid to increase the production of civil goods, whereas they were previously paid for the manufacture of war materials. Civil production did substantially increase after the end of the war.

Mr Fadden - Then why is not the increase of civil production reflected in larger collections from the pay-roll tax?

Mr CHIFLEY - Instead of being engaged in" the production of arms and munitions, which are not profitable to the national economy, whatever their value may be from a security stand point, large numbers ofpeople are now producing civil goods. Although receipts from the pay-roll tax may not be greater, the civil goods that the workers are now producing have increased.

Mr Harrison - The Prime Minister stated that, since the end of the war, 680,000 persons have returned to the production of civil goods. Surely that fact must be reflected in increased receipts from the pay-roll tax.

Mr CHIFLEY - A big proportion of the people demobilized became employers, or workers on their own account. A lot more went to jobs in rural industry. Of the balance, a big proportion found jobs with small employers from whom no pay-rail tax would be collected, whilst of those in respect of whom payroll tax would be collected, few, if any, worked for more than a part of the financial year. I remind honorable members that never before in the history of Australia has there been so much economic activity in the community as there is to-day. We have heard complaints about the Tasmanian shipping service. Are honorable members aware that the shipment of goods from Tasmania has increased by 50 per cent., compared with the quantities before the outbreak of World War II. ? We also hear complaints about the shortage of coal causing industry in Victoria to stagnate. I do not propose to deal at length with that subject now, but I point out that, although Victoria has substantially built up its production of light and power from brown coal, it is getting an additional 350,000 or 400,000 tons of coal, compared with the quantity received before the outbreak of World WarII. Despite those demands, so great is the economic activity in the community that production cannot overtake the demand for consumer-goods. Every businessman in Australia will agree that, despite many difficulties, production has increased enormously. Never before has the economic activity in Australia been so great as it is to-day.

Question resolved in the affirmative.

Sitting suspended from 1245 to 2.15 p.m.

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