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Wednesday, 25 September 1912

The PRESIDENT - Order ! I ask the gentlemen in the press gallery to kindly speak so that they cannot be heard all' over the chamber, otherwise the gallery will have to be cleared.

Senator Lt Colonel Sir ALBERT GOULD - As the people are charged higher prices for the goods they need, so they become less able to bear additional taxation. If the Government intend to cut down the revenue from £14,000.000 to £12,000,000, and have these enormousdemands, they will have to look round and see where they can raise additional taxation. Is it to be obtained by an increase of the land tax, or by the imposition of an income tax?

Senator de Largie - It is very simple.

Senator Lt Colonel Sir ALBERT GOULD - It is very simple indeed, they think, for "the have nots " to take from " the haves," but they find out afterwards that the whole thing reacts upon themselves. If my honorable friends want the country to be prosperous, to give inducements to people to be " haves " and not to be "have nots," I would remind them that taxation is not levied simply to bring the last sixpence out of the pocket of the taxpayer. If they destroy him by means of heavy taxation, they will destroy the country. It is the same old tale of killing the goose that lays the golden egg. Surely our taxation is sufficiently high. Last year we derived £1,400,000 from the land tax. By whom was it paid? By 14,000 taxpayers. Do my honorable friends intend to increase the land tax, or do they propose to take another course? Hitherto, we have had an exemption of , £5,000. Do my honorable friends mean to say that not only the State Governments, but the Commonwealth Government, are to operate within that amount ?

Senator Chataway - Senator Stewart expressed the hope that before long there would be no exemption.

Senator Lt Colonel Sir ALBERT GOULD - I remember that Senator Stewart expressed a wish that there should be no exemption. The honorable senator believes that if a man owns land it should be taxed according to its value without any exemption. We have at present an exemption of . £5,000 of value. Do the Government propose that it should be reduced to , £3,000, to , £2,000, or wiped out altogether; or do they intend to increase the tax from 6d. to9d. or a1s. in the £1 ? Do the Government intend to impose an income tax ? We know that in most of the States income taxes are collected at the present moment. I do not desire that any one should escape his fair share of taxation to provide the means for carrying on the business of the country, but on the other hand I do not wish people to be taxed to such an extent that they will be unable to bear it. Supporters of Socialistic taxation and land nationalization say that while they will not take from the people the land they have acquired they will impose taxation upon it to such an extent as to make it worth nothing, and to make its owners glad to get rid of it. They should know that one form of robbery is as bad as another.

Senator de Largie - Land never had as much value in Australia as it has to-day.

Senator Lt Colonel Sir ALBERT GOULD - The honorable senator said that by the imposition of the land tax we should burst up the big estates, and that the people would be enabled to acquire land cheaply, and now he says that land is dearer than ever it was.

Senator de Largie - I did not say it is dearer, but that it never had as much value as it has to-day.

Senator Lt Colonel Sir ALBERT GOULD - The value of land is what can be got out of it, and if one is selling it what can be realized for it. In dealing with taxation we have a very serious problem in front of us. Honorable senators must bear in mind that the question cannot be considered from the point of view of the Commonwealth alone. The States are levying taxation as well as the Commonwealth, and they are increasing their expenditure very much in the same way as the Commonwealth Government are doing. We find that wherever we go Labour finance is the same. Members of the Labour party when in Opposition talk about the extravagance of their opponents, and point out how money might be saved, but when they get on to the Treasury bench in matters of expenditure they outHerod Herod.

Senator de Largie - We do not need to pass loan Bills.

Senator Lt Colonel Sir ALBERT GOULD - The Government will have to pass loan Bills if they are to carry out the public works to which they are committed, and I remind them that unless we can persuade the people from whom we shall have to obtain the money that their interest and capital will be safe we shall have very great difficulty in getting the money when we require it'

Senator de Largie - Capital was never so safe as it is now in Australia.

Senator Lt Colonel Sir ALBERT GOULD - Some of it is safe to be removed. I am not prepared to go into the details of expenditure, and my criticism must be very general, because I have not the material which I should have were I in the inside running.

Senator Needham - What does the honorable senator mean by that?

Senator Lt Colonel Sir ALBERT GOULD - I mean if I had the information possessed by members of the Cabinet. I should like to refer to the Commonwealth note issue. By it the Government have obtained the control of something like £9,500,000, although I am aware that a certain amount is kept in the Treasury as a stand-by. On the last Monday in July, 1912, the reserve was 40.92 per cent, of the issue, or .92 per cent, over the amount which the Treasurer stated would be the minimum reserve retained until after the next general election, when the people will have an opportunity to state their views as to what the gold reserve held against our note issue should be. At the end of July our note issue represented £9>389>599- If honorable senators will look at the returns they will find that the highest issue was reached in December, 1911, when our notes in circulation represented £10,156,358. The value of the issue has gradually been decreased until it is now £9,389,599- This shows that the Commonwealth Government cannot rely on large sums of money coming in in return for paper money issued to the banks. This is, therefore, a source of revenue which, though it has been important, and no doubt is looked to as important for the financing of some of our projects in the future, is diminishing in quantity. It is absolutely incorrect to say that we have this amount in circulation. We have issued paper money to that amount, but the paper money in circulation to-day throughout the Commonwealth represents considerably less than £4,000,000, and the tendency is to keep the proportion lower instead of increasing it. We must not forget that in obtaining this £9,500,000 the Government have taken the money out of the ordinary circulation of the country. We have extracted £I 0,000,000 in gold from the banks, and this amount may be regarded as having been withdrawn from the people because the banks have had so much less to lend to the community. Every new country is largely dependent for its prosperity on the amount which may be loaned to settlers for its development. If settlers can borrow money at 6 or 7 per cent., and make 9 per cent, or 10 per cent, from it the transaction is profitable, and they are naturally prepared to undertake expenditure. The Government have taken £10,000,000 from the banks which otherwise would have been available for loans to settlers throughout the Commonwealth. Where has this money gone? It has been taken from the ordinary channels of use, and the Government have utilized a certain amount of it in loans to the States, and in fixed deposits with the banks.

Senator Needham - Who are the Government ?

Senator Lt Colonel Sir ALBERT GOULD - The honorable senator will not draw me away from the point. The Government have got hold of £10,000,000, and have dealt with it in this way: They have bought New South Wales funded stock to the extent of £1,000,000, Victorian Government debentures to the extent ot £980,000, Western Australian debentures to the extent of £650,000, and Tasmanian debentures to the extent of £500,000. Then there are fixed deposits. The New South Wales Government have about £1,000,000, the Queensland Government have another amount, the Melbourne banks have £200,000, the Brisbane banks £200,000, and the Launceston banks £25,000. All this money might have been available for loans to the customers of the banks. Some of it may be expended upon railway construction and irrigation works. These are no doubt valuable and useful works, but they are works for which money might have been obtained elsewhere. The Government might have gone elsewhere and have introduced this money to carry out such works, and we should then have had the £10,000,000 which they have received from the banks available for loans to settlers in the development of the Commonwealth.

Senator Needham - At what cost would the money have been obtained from abroad ?

Senator Lt Colonel Sir ALBERT GOULD - At the ordinary cost of borrowed money. What have the Government done in this matter? They have filched from the people £10,000,000 on which they pay no interest at all. They said that they required £10,000,000, and that the best way to get it would be to take it from the banks. After they did so, they found that they might make a little profit from the money they had taken from the people, and they are charging interest for it to New South Wales and the other States. If this money had been borrowed from the British money-lenders, it would have made no difference, so far as the people to whom it has been loaned are concerned. I find that the interest charged by the Commonwealth Government runs from 3 to 4 per. cent.

Senator O'Keefe - Would not the State Governments have had to pay as high a rate of interest if they had borrowed abroad, and would they not have received less than £100 for each £[100 they borrowed ?

Senator Lt Colonel' Sir ALBERT GOULD - Does the honorable senator fail to realize that if we introduced this capital, and paid interest upon it, we should have more of our own money available for the purpose of carrying out these developmental works?

Senator O'KEEFE (TASMANIA) - I realize that to get £100 for £100 is better than to get £96 for £100.

Senator Lt Colonel Sir ALBERT GOULD - The honorable senator apparently fails to realize that if this £[10,000,000 had been introduced and expended on reproductive works, it would have been a good thing for the country, and the banks would still have had the £[10,000,000 secured by the Commonwealth Government to lend to small settlers to develop their holdings.

Senator Needham - The honorable senator was a member of a State Ministry in New South Wales who borrowed money for unreproductive works.

Senator Lt Colonel Sir ALBERT GOULD .- New South Wales, at the present moment, has a debt of something like £100, 000, 000, but a very considerable portion of it was incurred by the Labour Government in office in that State to-day.

Senator Needham - The honorable senator, as a member of a Government, went to the pawnbrokers.

Senator Lt Colonel Sir ALBERT GOULD - No doubt I was very wicked, but many have followed my example. Senator St. Ledger referred to the effect of the Tariff upon our industries. He mentioned the value of the raw material used in our factories, and the added value given to it by processes of manufacture. He showed that about one-half of the profits from the operations of our factories went into the pockets of the workers. Some honorable senators appeared to think that the workers should have received a great deal more. They appear to be oblivious of the fact that the £[72,700,000 worth of raw material used in the factories had to be paid for, and that it is hot unreasonable to reckon interest upon that money.

Again, the land, buildings, plant, and machinery of the factories are valued at upwards of £29,000,000, and something should be allowed for interest on money invested in that way. When we come to analyze these figures we find that the value of the raw material used in 19 10 was £[72,722,000, that fuel and light represented £[2,634,000, salaries and wages £23,874,000, and all other expenditure, interest and profits, £[21,538,000. It will be seen, therefore, that, after deducting all these items, there was left a sum of approximately £21,500,000, with which to meet " all other expenditure, interest and profits." Out of that £21,500,000, interest had to be paid on raw material, which was valued at £72,700,000. Then interest should be allowed on the £58,000,000, which had been expended in buildings, machinery and plant, to enable the raw material to be turned into a valuable commodity.

Senator McGregor - But the expenditure of that £58,000,000 is spread over for ever and ever.

Senator Lt Colonel Sir ALBERT GOULD - If a nation borrows £58,000,000, interest must be reckoned upon it until the principal is repaid.

Senator McGregor - Depreciation has to be allowed for each year.

Senator Lt Colonel Sir ALBERT GOULD - Let us assume that the interest rate is 6 per cent., and that the raw material is turned over in the course of three months. I do not think that it is. But assuming that it is, the capitalists would have to pay the equivalent of i£ per cent, upon the value of the raw material, namely, £[72,700,000. We also have to consider the amount which is represented by depreciation, and by the cost of renewals. Indeed, there are a great many charges for which allowance must be made which are not apparent at first sight. The percentage of cost on the total value of the raw material amounts to 60.22, that upon fuel and light to 2.18, salaries and wages represent 19.77, and all other expenditure, interest and profits, amount to 17.83. That 17.83 per cent, has to bear interest on the cost of the raw material used, and also on the cost of the plant and machinery, besides paying for losses and depreciation. So that, in the end, there does not appear to be such an unfair division of the profits as some honorable senators opposite have suggested. Of course, we are only too pleased to know that our industries are. prosperous. Irrespective of whether a Free Trade or a Protective Government is in power we desire to see them prosper.

Senator de Largie - They were not prosperous under either a Free Trade or a Protectionist Government. Prosperity was a stranger to the land until the Labour party came into office.

Senator Lt Colonel Sir ALBERT GOULD - I do not wish to say very much more. I believe that the Government are to a great extent living in a fool's paradise, that they are leading us into all sorts of expenditure and difficulties, and that as a result we shall find ourselves very much handicapped before many years have passed. The tightness of money and the increased cost of living are matters which have a very material bearing on the capacity of the people to stand taxation. We must always recollect that we may tax the people up to a certain point, but if we go beyond that point we shall destroy the very sources from which we obtain our revenue. It is only by wise and careful finance that these difficulties can be overcome, and continuous prosperity assured to the country. Of course, if the Government will not see - and there are none so blind as those who will not see - so much the worse for the Commonwealth. So much more difficult will be the task of their successors in restoring prosperity to Australia. When that time arrives we shall either have to decrease our expenditure or increase our revenue.

Senator Stewart - We will find the money from the land tax.

Senator Lt Colonel Sir ALBERT GOULD .- We shall then find that the men who are so happy over this expenditure will be severely criticised because of the result of the seed which they have sown.

Senator Stewart - To what expenditure would the honorable senator put an end ?

Senator Lt Colonel Sir ALBERT GOULD - I will tell the honorable senator when the party with which I am associated regains the Ministerial benches. When the Liberal party comes into power it will be very careful not to commit the country to large expenditures unless it can see its way to meet them.

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