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Tuesday, 2 May 1961

Mr CHIPP (Higinbotham) .- As I rise to speak to-day I am conscious that this is virtually the first real speech to be delivered by me in this House because, as other honorable members will agree, the maiden speech that one delivers here is inevitably delivered in a semi-conscious or fully unconscious state, and one hardly knows what one has said. 1 am very pleased to make my first real speech on this particular subject, which I regard as vitally important. Indeed, there could be nothing more important to the future development of our country - which is something that this bill aims at in a very practical and direct fashion.

So far, this debate has been remarkable because our friends on the benches opposite have expressed general agreement with the principles of the bill, with one main qualification - that it does not go far enough. This leads one to ask: How far is far enough for the Labour Party? One comes to the inevitable conclusion that the only distance far enough for the Labour Party is the complete nationalization of insurance and other industries.

In the short time I have been a member of this House a feature of the debates on almost all the subjects introduced has been the plea by members of the Labour Party for the early nationalization of this nation's industries. This surprises me, because 1 would have imagined that, being able to observe the results of the tragic socialist experiments in the United Kingdom, New Zealand and other places, our friends opposite would have been more temperate in their claims for the complete nationalization of industry. In my early days here - in fact, on the second day after my arrival - the honorable member for Melbourne Ports (Mr. Crean), a gentleman whom 1 admire very much and whose speeches are always well worth listening to, very clearly expressed the socialist policy when saying that there was a basic cleavage between the philosophies of the various parties in the Parliament. I could not agree more. There is a great cleavage between the philosophies that we on this side hold - of freedom and choice of business for the individual, indeed, of freedom of living itself - and the Labour philosophy of compulsion, confiscation, and confining controls. I have noted sadly this unbridgeable gulf which lies between us.

I have noted also that another feature of debates since I have been here - and I say this rather sadly and perhaps in a naive sort of a way - is the manner in which some honorable members opposite attempt to make political capital out of all issues introduced in the House. I know that this is an election year, and we have heard the rumour that our friends opposite have been advised accordingly to be political all the time. Trying to be a political realist, I cannot in all conscience blame them for attempting to gain political victories in this House on appropriate matters; but on a bill such as this, whose basic principles they say they approve, we should not see such a deterioration of debate as we have seen in speeches such as that of the honorable member for Reid (Mr. Uren), who delivered a eulogy of the Soviet Union, and that of the honorable member for Blaxland (Mr. E. James Harrison), who alleged with doubtful taste that the excellent speech delivered by my friend from Swan (Mr. Cleaver) was written by a Treasury official.

In summing up, one might well say that in general terms the members of the Opposition agree with the principles of the bill, with the qualification that it does not go as far as they would like. The only voices that I have so far heard raised in disagreement have been the voices of two honorable members on this side of the House - the honorable member for Bradfield (Mr. Turner) and the honorable member for Mitchell (Mr. Wheeler). Although I admired the thoughtful and very sincere way in which both of these honorable gentlemen delivered their speeches, I must say that I find myself in complete disagreement with their conclusions. Indeed, one of the refreshing influences in this place - and they are said to be few, Sir - is the freedom of speech and the freedom of criticism which are open to honorable members on this side of the House. I now take upon myself the privilege of being critical of my very good friends, the honorable member for Bradfield and the honorable member for Mitchell - I hope in a constructive way.

The main objection by the honorable member for Bradfield to the bill seemed to be that he believed that a principle of compulsion had been established. He concedes that the compulsion is very mild in form. His main fear - and the great point of his remarks - was that this precedent would make it easier for a future socialist government to nationalize and to interfere with the rights of individual companies. I cannot agree with this conclusion for two reasons. First, I do not see in this measure any compulsion in the real sense. I feel that it is based on gentle persuasion - a very clever and ingenious form of persuasion - by the use of the tax instrument to divert funds into the very sadly neglected public sector of the economy. If one wanted to go on and make an analogy about compulsion, one could say that a civilized society should be organized, and if one pursued that to its logical conclusion one could say that there is a form of compulsion in traffic regulations and the like. As a precedent for the use of the tax instrument to divert funds for a specific purpose, one might well cite the provision in the tax laws which affords certain concessions to primary producers.

The second reason why I cannot agree that this bill is a dangerous precedent is that I cannot believe, in all my naivete, that the Australian Labour Party or its representatives who sit opposite would need a precedent for the nationalization of an industry, and especially of insurance.

My main criticism of the speech made by the honorable member for Bradfield is that I believe he ignored the chief reason for this bill. That reason is the tremendous need for the diversion of funds into the public sector of the economy for the development of this country. We all know that private enterprise and the private sector cannot expand unless there is, on the other hand, an expansion of public works. Industries cannot be established or progress and new towns cannot be built without corresponding development of roads and the other public amenities that are so necessary to development in the private sector. The honorable member for Bradfield said -

I know, of course, that we have a special problem of development, and I do not overlook it. . . .

Later, he devoted a small portion of his time to dealing with it, but in my opinion he really did overlook this basic question of development and rather criticized per se the precedent created by this measure.

What alternatives have been given by the critics of this bill? We all recognize the need for the diversion of funds into the public sector. When we think of taxation, we all see ourselves as paying a tremendous price in this generation on behalf of posterity. More than 60 per cent, of our capital works are financed out of tax revenue. Does anybody suggest that this percentage is too low?

What is the reaction to this bill by the insurance companies, for which my honorable friends fear so greatly? There has been no violent reaction. I believe, as the honorable member for Sturt (Mr. Wilson) stated so clearly, that this bill will greatly assist the life companies. Indeed, why should there be any reaction? The provisions relating to people who wish to take out life insurance and the provisions relating to the companies themselves are more favorable than is the law in any other country, according to the manager of a Birtish life company with whom I talked the other day.

Let us look at the position of the life insurance companies briefly. In the ten years to 1959, the total assets of the life companies increased, as we know, by £562,000,000, of which only £81,000.000, or 14 per cent., was invested in public securities, and only £4,000,000, or less than 1 per cent., in government securities. This Government's measures over past years in providing for the deduction up to certain limits of insurance premiums paid by individuals have encouraged thrift. I believe that this Government has encouraged people to think in terms of their old age and to put away something for it. This encouragement and the provision of opportunities for the deduction of premiums have increased the prospertity of the life insurance companies. We must always remember that, for these reasons, they are custodians of public funds.

What is this pernicious thing that the honorable member for Bradfield suggests we are doing to these companies? As the honorable member for Sturt has explained, this bill will be of great benefit to the life companies. Nobody has suggested - and in my interpretation of the repeated statements made by the Treasurer (Mr. Harold Holt) on this question I have never implied that he suggested - that the life companies were guilty of any wickedness or had been doing the wrong thing. Being free agents, they have invested in the ways which they consider best for their policy-holders and for themselves the wealth that they have acquired over the years as a result of this Government's policies.

Some people - and notably the honorable member for Mitchell, who mentioned it very briefly - have suggested that one alternative might be the use of the bond rate to solve this problem. History makes it very clear that increases in the bond rate as such can by no means be assumed to increase institutional investment in Commonwealth securities. For example, since 1949 the bond rate has been increased in steps from 3i per cent, to 5% per cent. In about the same period, the total assets of the life companies increased by £562,000,000, of which only 14 per cent, found its way into government securities and less than 1 per cent, into Commonwealth Government securities.

The counter argument which has been put, of course, is that the bond rate has not been raised high enough. Despite the increasing publicity which has been given recently to the value of the 2s. in the £1 income tax rebate on interest obtained from Commonwealth loans, there seems to be no general realization that even though the rates offered in the current loan range from 5i and 5i per cent, they are the equivalent of interest rates ranging from 6 per cent, to lh per cent, on fully taxable securities. Thus, a life company paying tax of 7s. in the £1 would need to obtain a yield of 6.2 per cent, from a fully taxable security in order to obtain a net yield the same as that obtainable from the new 5f per cent, securities maturing in 1981. There are not many countries in which governmentguaranteed investments with yields of this sort are available. It is good to remember the point of view of the borrower. Who are the main borrowers? A 1 per cent, increase in interest rates would cost the various State governments more than £4,000,000 this year and if continued into the future could cost, say, £8,000,000 next year and £12,000,000 the year after, as more loans mature and more money is raised.

I find this bill to be an extremely clever and ingenious piece of legislation which will benefit the life offices, be of long-term and lasting beneficial interest to policy holders and will divert vital funds into those channels which provide the life blood of our nation's continuing development.

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