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Friday, 23 July 1926

Senator DUNCAN (New South Wales) . - The motion for the printing of the budget papers gives honorable senators an opportunity to discuss quite a number of matters referred to in them, and to express their opinions upon the operations of the past twelve months. It also affords them opportunity to say what they think about certain proposals in regard to which legislation will be introduced in the immediate future. I have very little to say about the actual form in which the budget has been presented. As a matter of fact, the alterations made by our present Treasurer (Dr. Earle Page) make the financial position much more easily understood than did the budgets of years gone by. The Leader of the Opposition (Senator Needham) has spoken very fully upon that aspect of the question, and I am in agreement with a great deal of what he has said; but I do not think that he has entirely realized the true position of affairs, more particularly in relation to last year's expenditure. For instance, he referred to the increased expenditure as if there were no justification for it, and, to a certain extent, he sought to blame the Treasurer for it. According to the budget papers, the chief increases in the actual expenditure 1925-26 over the estimate are as follow : -


Whilst there may be individual items on which it might be possible to say that slight economies could be effected, the fact remains that, as both sides have agreed to a good deal of the increased expenditure, we cannot very easily criticize it. I feel sure that the Leader of the

Opposition (Senator Needham) does not object, for instance, to the increase in connexion with invalid and old-age pensions, or the interest and sinking fund on our war loans, pensions, and other war services. The ordinary votes of departments to meet increased salaries cannot very well be objected to, because with greater departmental activities larger staffs are necessary. The other increases are in connexion with minor matters, which do not affect the total to any great extent, and which, I think, are justifiable.

There is one aspect of the speech of the Leader of the Opposition which I would like to comment upon for a few moments, and that is the record of the two parties now -comprising the composite Government. A good deal more could, I think, be said upon this matter than was mentioned by the honorable senator. For some time prior to the war, when the difficulties were infinitely greater than those which any other government has had to face, a Nationalist Government, under the leadership of the right honorable member for North Sydney. (Mr. Hughes) had been in office; but, in spite of its magnificent record of work in the interests of the people of Australia and of the Empire, it went to the electors and was defeated. Although its political opponents were not returned in sufficient numbers to enable them to form an administration, the party led by Mr. Hughes had not sufficient of its own members to enable it to govern. That administration was defeated, not because of its record, but by reason of the fact that the minds of the electors were in a disturbed and unsettled state. This was occasioned, not by any inherent fault of the Government, but in consequence of the attacks and insinuations which had been made by their natural allies - the members of the Country party. The most bitter attacks were made upon the financial administration of the nationalist government by the present Treasurer (Dr. Earle Page), the Leader of the Country party. Not only was the Hughes' administration charged with being extravagant in the extreme, but direct insinuations were made concerning the honesty and rectitude of those charged with the high and responsible duty of administering the finances of the Commonwealth.

The Leader of the Opposition has referred to several of the catch cries of the natural allies of the National party, some of -which were repeated from time to time by Dr. Page and other members of his party. One was " Switch on the light, the burglars are about." It was also said that some were getting away with more than they should and should " drop the . loot." In view of these and other alarming utterances, the minds of the electors were unsettled to an unusual degree. Such statements suggested that something despica'ble and dishonest was being done; and it was generally expected that if the Leader of the Country party had the opportunity, he would immediately reveal the actual position. I do not think that I am stating the case unfairly. As a result of the election to which I have referred the Hughes' administration was forced to resign, and the members of the Country party, as the Leader of the Opposition said, joined the Nationalist party for the sake of office. The stipulation, however, was made that the great spending departments, such as the Postmaster-General's Department and the Department of Works and Railways, should be under the control of Ministers who were members of the Country party.

Senator Chapman - Does not the honorable senator think that some of the portfolios should be allotted to the members of the Country party?

Senator DUNCAN - Certainly ; but that party so mistrusted the Nationalists that it stipulated that the great spending departments should be under its control

Senator Chapman - They were only advocating economy.

Senator DUNCAN - As an additional safeguard it insisted that its Leader should be the Treasurer, in order that he might control the finances.

Senator Thompson - As it is a very good working arrangement, why criticize it?

Senator DUNCAN - I am not criticizing the arrangement, but the action of certain members of the party. Ever since a government consisting of members of these two parties has been in office, tho electors have been waiting in vain for the light to be switched on. As this is not the first budget delivered by the present Treasurer, it is time the statements he made during the election campaign were either denied or substantiated. He has not, however, done so, and wo are, therefore, justified in assuming that he has become an accessory after the fact - that he is equally guilty of the actions of which he accused his predecessors, or that he has ascertained, as a result of experience, that what he said was untrue. The Leader of the Government in the Senate (Senator Pearce) and the present Prime Minister (Mr. Bruce), who was then Treasurer, were members of the Nationalist Government, concerning which Dr. Page made his alarming statements, and, if he were animated with at least a degree of fairness, he would either admit that the financial and moral rectitude of these and other men should not have been assailed, or prove what he said. If he made a mistake, he should tell the Parliament and the people, and thus clear the reputations of some of the present members of the Cabinet and of others who are not now in Parliament. The stigma still attaches to them. Judging by the budget, he has, doubtless, realized that his statements were without foundation, and as a fair man, as I believe he is, he should admit his error. lt is only fair that he should do so. I do not believe it is yet too late for justice to be done to those who were grossly maligned during the campaign.

Senator Chapman - Even some of the Nationalists are, to-day, making unwarranted statements concerning the Country party. ,

Senator DUNCAN - That may be so.

Senator Chapman - Why refer to what has passed?

Senator DUNCAN - T am not attacking the honour and probity of any member of the Country party. I believe they are beyond reproach, but I am asking that certain members of that party be fair to' their associates.

Senator Chapman - The Treasurer did not attack the honorable senator.

Senator DUNCAN - No; but he attacked the members of my party, and his statements are a reflection upon its members.

Senator Thompson - Hard things were said by members of both parties.

Senator DUNCAN - Perhaps so, but in mentioning this matter I am not in any way attacking the Treasurer or casting a reflection upon the Country party. Members of the late administration, despite their good name, have been maligned in the eyes of the people of Australia, and should be cleared of the imputation of the Leader of the Country party. The charges to which I have referred were mere figments of the imagination; but they remain in the minds of people throughout Australia, and they should be removed.

Senator McLachlan - Has the honorable senator ever known that to be done in polities?

Senator DUNCAN - Perhaps not to any extent. 1 pay a high compliment to the Treasurer, and the members of the Country party, when I say that I expect they will do so if they are reminded of the necessity for it.

SenatorFoll. - -Many lambs and lions are now lying down together.

Senator DUNCAN - That is so; but the lambs are inside the lions. I am not quite sure which are the lambs, but it looks' as though they are members of the National party. The Hughes Government, having been charged by the present Treasurer with financial extravagance, it is not to be wondered at that the people of Australia have been expecting great changes under his administration. Slight reductions have been made in taxation; but, to view them in their proper perspective, we must consider the whole of the circumstances. Since this Government has been in office, Australia has had abundant seasons and bounding revenues. No previous Treasurer, in the effort to balance his accounts, has had an easier task than the gentleman who now occupies the position. In those circumstances, the fact that surpluses have been shown on the financial operations in successive years is not a matter for self-congratulation on his part. It would have been impossible for even the most profligate Treasurer to show other than a surplus. If the Government had failed to do so, it would not have been worthy of remaining on the Treasury bench for five minutes. Surpluses can result from one of two causes, and in some instances from a combination of both. Either they are the result of the careful administration of a mini mum revenue, or they are brought about by taking out of industry capital that should be permitted to remain in it, and expand in accordance with the growing requirements of a people. Which of those factors caused the present surplus, that is really greater than is apparent?

Senator Thompson - The honorable senator's voice was not raised against the very high duties that were imposed recently.

Senator DUNCAN - Those duties. were imposed with the object of reducing: our imports. What other object is there in adopting a policy of protection? Does my honorable friend say that they were imposed for the purpose of raising revenue? They were not. The manufacturers of Australia showed that the existing duties were notsufficiently high, and urged the Tariff Board to increase them. If the arguments which were adduced by the Government were correct, the only effect should be to block imports, and, in consequence, reduce the revenue that is derived from the Customs.

Senator Thompson - Does the honorable senator believe that it is good business to keep out imports?

Senator DUNCAN - To a certain extent, I do. I am a protectionist.

Senator Thompson - The honorable senator ought to be numbered amongst the members of the Opposition.

Senator DUNCAN - This Government boasts of the fact that it is a protectionists' Government.

Senator Thompson - Within reasonable limits.

Senator DUNCAN -Senator Thompson is assisting to keep in office the Government that was responsible for the imposition of the duties to which he objects. Evidently he has some qualms. I have not. I supported the tariff. It is he who should be on the other side of this chamber, because he disagrees with the Government's protective policy. .

Senator Thompson - The party that sits opposite believes in high protection. I do not.

Senator DUNCAN - Only two causes are responsible for the obtaining of a surplus. I want to ascertain from which of those two the present surplus has resulted. He would be a bold man who would say that the affairs of this country have been administered on a minimum revenue, or that any commendable economies have been effected. Minor economies may have been brought about, but they have had little bearing on the general :result. I remind Senator Thompson that the immediate predecessor of the present Treasurer was the right honorable gentleman who is to-day the Prime Minister of Australia. Will he or any supporter of the Nationalist party allegethat the administration of the finances of the Commonwealth by that right honorable gentleman was extravagant, and that it was possible for any succeeding Treasurer to effect considerable economies? That is not my view. The figures that appear in the budget papers prove that great economies have not been effected.

Senator Thompson - Does not the honorable senator think that the Prime Minister exercises a healthy supervision over the finances?

Senator DUNCAN - I believe that he does. That buttresses my argument that the attacks which were made upon the administration, in which he held office as Treasurer, were without foundation. Passing events can be judged only in the light of history. Comparing tho administration of the present Treasurer with that of his predecessor, we realize that he has not tremendously improved the control of the finances. Examining the circumstances that have led to the obtaining of this surplus, we find that it has resulted from the imposition of taxation altogether disproportionate to the purposes of government. I do not think that that will be denied by any honorable senator. The obvious remedy is to reduce taxation and afford relief to the taxpayers. The people of Australia expected to obtain that relief. In proof of that statement I quote 'the following resolution which was passed by the executive of the Association of Accountants of Australia, a body that is composed of financial experts : -

That this council deplores tho. fact that, although the Federal Treasurer's budget shows a surplus of approximately £2,750,000, no provision has been made by the Federal Treasurer for reduction of taxation. Further, this council views with dissatisfaction the increased taxation mooted, and regards as misleading the statement that the war indebtedness of the Commonwealth had been reduced, inasmuch as such a statement did not clearly convey the fact that the national debt had been lately added to at high rates of interest.

Senator Thompson - Does not the honorable senator think, that the Governments of the States would have offered a better field for such representations?

Senator DUNCAN - Of course, they would. But we are not now considering the budget of any State. The fact that the States as a whole have been extravagant, and that some have shown deficits, is not an excuse for the Commonwealth continuing to impose high taxation. If the States find it necessary te increase taxation to enable them to balance their ledgers, and the Commonwealth also keeps taxation at a high rate, the lot of the taxpayers will not be a very happy one. Not only is there to be 6o reduction, but actually increases are proposed along lines that can be regarded only as grossly inequitable and unjustifiable. It is proposed to levy a tax upon motor users in general, and petrol users in particular, ostensibly for the purpose of providing revenue for the construction and maintenance of main roads. The Minister for Trade and Customs (Mr. Pratten) recently made the following statement in Sydney: -

The principle th|at the road users should pay for their upkeep -was equitable, and, as motor traffic formed the greatest volume of traffic on the roads, it was fair and reasonable that road taxation should be levied on motors.

All the petrol consumed is not used by motorists, and certainly not by motorists who run their cars upon the main roads of the Commonwealth within the meaning of the act. That act provides that the moneys raised under it cannot be made available for the construction or maintenance of main roads in metropolitan areas or in towns with a population of 5,000 people and over. Thousands of cars and lorries never go outside our metropolitan areas, yet their owners will be taxed, not to repair damage which they do, but to build and maintain roads which they may never see. Even the men who fly aeroplanes away in the north-west of Australia, as well as fishermen and other persons engaged in industrial occupations, if they use petrol engines, will have to pay this tax. Is there to be no discrimination?

Senator McLachlan - Even the man who cleans clothes with petrol will be taxed.

Senator DUNCAN - Exactly. Motorists are not the only people who use our roads. In certain respects the drivers of heavy road vehicles, other than those driven by petrol, do infinitely more damage than motorists to our roads. The primary producers are going to be hit very hard by this impost. I notice that a member of another place, who until yesterday was a member of the Country party, has stated that one of his reasons for objecting to this proposed tax is that it will be an unfair tax on the primary producers.

Senator Thompson - He forgets the good roads they will get.

Senator DUNCAN - These good roads have not been provided yet. Meantime, the petrol tax has to be paid.

Senator Crawford - Who is paying the tax at present?

Senator DUNCAN - I know, from personal experience, how much resentment was occasioned by the levying of rates upon the whole of the residents of North Shore, in Sydney, to pay for the harbour bridge now in course of construction. It is pretty certain that they will have to go on paying this taxation until the bridge is completed, and forever after. In that case, and the same may be said of this petrol tax, the people are being taxed, not for a present service, but for a service which they hope to get in the course of a few years. Can those honorable senators who approve of this petrol tax say how long it will be before the main roads are made out of the money to be obtained under this scheme?

SenatorFoll. - They have not started to pay the tax yet.

Senator DUNCAN - But they will have to pay it.

SenatorFoll. - We do not know.

Senator DUNCAN - At all events, they will have to pay it if effect is given to the Government's proposal. It is possible, of course, that this Parliament may not endorse it. I hope that it will not. I am opposed to the scheme lock, stock, and barrel. I say this with regret, because, naturally, I do not like to oppose the Government, and also because I am strongly in favour of providing good roads, which are one of the greatest assets of modern civilization.

Senator Reid - Who should pay for them?

Senator DUNCAN - They should be paid for, not by a section of the people, but by the whole of the people, out of the general revenue. There is not a man, woman, or child in the community who does not benefit in some way by. the construction of good roads, although all do not use them to the same extent.

Senator Crawford - Is it not a fact that all the people contribute to the construction and maintenance of roads through municipal taxation ?

Senator DUNCAN - Not entirely, but, indirectly, every one contributes to Government expenditure provided for out of the general revenue. I do not wish to discuss this matter at any length, because I shall have another opportunity later to do that. We know that the provision of money for main roads was part of the Government's policy, and I endorsed it; but it was generally believed - certainly I believed - that the expenditure would be met, not out of money obtained from the imposition of new duties, but out of existing duties on motor cars, motor accessories, &c.

I pass now to another matter. The budget brings before the Senate the Government's proposal with regard to assistance to the States. Had the original intention of the Ministry been adhered to and the per capita payments cut off, as it were, instanter, I should have been compelled to oppose it. Now it is proposed to give the scheme a twelvemonth's trial. For that reason, it will be ever so much more acceptable, because it should be possible at the end of that period to determine the equity or inequity of the Government's proposals. We are told that in lieu of the per capita payments the Commonwealth intends to vacate the field of land taxation, entertainments tax, estate duties, and so much of the field of income taxation as will allow the States, if they desire, to collect 40 per cent. of the tax now collected by the Commonwealth. In addition, certain temporary payments are to be made to assist the finances of two of the States. Without exception, the States are opposed to the proposals. The State Treasurers have challenged the accuracy of the figures prepared by the Treasurer, and claim that if the per capita payments are withdrawn suddenly their finances will be seriously dislocated. The Commonwealth Treasurer, on the other hand, contends that, with the single exception of Victoria, the States will be better off financially under his later proposals. There is a definite clash of opinions between the two parties. Who is right? Again, I turn to the teachings of experience, because I am convinced that only in that way is it possible to determine who is likely to be right in the present instance. I recall another financial proposal placed before the States by Dr. Earle Page, and I remember how the Treasurer of New South Wales (Sir Arthur Cocks), drawing upon his great wealth of financial experience, was able to disclose faults,, which completely shattered it. Finally the Commonwealth Treasurer withdrew his figures for the purpose of substituting other proposals. On that occasion we were told that the Treasurer's figures were irrefutable ; but, as I have stated, Sir Arthur Cocks blew them to " smithereens." As a result, those proposals were abandoned. We have been told that the figures relating to the present scheme were very carefully prepared and thoroughly examined; but since the same claim was made for the earlier proposals to which I referred, there is room for doubt whether the present scheme is financially sound. I remember another instance, which I have no doubt will be recalled also by my honorable friend Senator Thompson. A year or two ago, the Treasurer went before the New States Commission that had been appointed by the New South Wales Government, to inquire into the proposal for the formation of new States. I am a supporter of that movement. Dr. Earle Page presented a financial statement of the probable revenue of' the proposed new States; but after examination, his figures were proved to be so hopelessly wide of the mark, that he asked and obtained permission to withdraw them.

Senator Thompson - He is on- surer ground now.

Senator DUNCAN - That remains to be proved. As I said, Dr. Earle Page withdrew his first set of figures. Subsequently, he presented another set, which he claimed had been exa,mined by departmental officers and found to be quite correct. Unfortunately for him, those figures proved to be equally unreliable. In the circumstances, I submit that the States can be forgiven if they question the accuracy of the figures now presented by Dr. Earle Page in connexion with his latest financial proposals.

Senator Thompson - They should be correct, because they are Commonwealth figures.

Senator DUNCAN - I hope they are. Indeed, I believe they are ; but, as I have pointed out, they are questioned by the financial authorities of the several States. Only yesterday the right honorable the Leader of the Senate (Senator Pearce) was able to show that the objections raised by Western Australia were groundless, and that the Commonwealth figures would stand investigation. I hope it will be possible to say the same of the figures relating to the other States.

Senator Thompson - They should be, because they are our figures, and the States have not the same access to them.

Senator DUNCAN - Nevertheless, the States have challenged their accuracy, and I should say that twelve months' trial of the proposals will reveal whether they are right or wrong. For this reason, the Government's latest proposals are more acceptable. I mention the matter in this way because I wish to impress on the Government the need for caution, and on the Senate the need for careful consideration of the position. This is a States House. The framers of the Constitution never contemplated. that the Senate would be a party House. Unfortunately, in many respects, it has become a party chamber. I remind honorable senators that, as representatives, not of electorates, but of the States, we are charged with a definite responsibility to watch the interests of the States. That should be our first consideration. Party interests should not weigh with us. If the interests of the State which we represent conflict with the interests of the Commonwealth, we should be prepared to is. what is best for the general com.munity. It has not been shown that these proposals are essential to the Commonwealth; but it has been shown that continued financial assistance for the States is essential to their existence. Many of the States to-day are in financial difficulties. Even the wealthy

State of Victoria showed a deficit in the operations of the financial year that has just closed. No one can tell what the financial position of New South Wales will be at the end of the year. Queensland's finances are not healthy, and those of Tasmania are in a shocking condition. All the States are more or less similarly situated.

Senator Crawford - Tasmania showed a surplus of £120,000 last year.

Senator DUNCAN - We all know the financial position of Tasmania. All the States are in a parlous position financially. The Minister knows that were it not for the assistance which they receive from the Commonwealth, they would not be able to balance their ledgers.

Senator Thompson - Would the honorable senator prefer Mr. Lans: to Dr. Page as Commonwealth Treasurer?

Senator DUNCAN - Certainly not. Senator Thompson does not appear to realize the import of my remarks.

Senator Thompson - I gathered from them that the honorable senator would prefer Mr. Lang to Dr. Page as Commonwealth Treasurer.

Senator DUNCAN - The honorable senator's interjection is evidence that some people will never comprehend the trend of another's remarks, even though they be repeated time after time. I feel certain that Senator Thompson is the only honorable senator who is in that unfortunate position; the others understand my meaning. It is not good for Australia that the Commonwealth Treasury should be overflowing, while in the States there is financial uncertainty. The Senate has been constituted to protect the interests of the States. I admit that, with the exception of the first Senate, that ideal has not always been reached, that in recent years the Senate has become the mere plaything of governments. It is time that we took stock of the position. I want to consider the interests of the State that I represent.

Senator Thompson - Does the honorable senator think that the Government is unmindful of the interests of the States ?

Senator DUNCAN - I am not inferring anything of the kind; but I want to be certain that the States will not suffer unduly by these proposals. They feel that they will; the Commonwealth Go vernment assures us that they will not. The twelve months' trial which is now proposed should show who is right. I. hope that the Commonwealth will beproved to have been right. In that case,, we could proceed with the proposal to abolish the per capita payments and vacate in favour of the States certain fields of taxation.

Senator Crawford - The Premier of Victoria said that the difficulty in that State was the Legislative Council.

Senator DUNCAN - Should it be shown that the Commonwealth figures are wrong, I hope that the Commonwealth Government and this Parliament will be big enough to admit it, and to do justice to the States.

Senator Payne - It is simply a matter of the estimates being realized.

Senator DUNCAN - That is so. We in this Senate are not in a position to judge between the two conflicting sets of figures.

Senator Thompson - At the end of the twelve months we shall have the actual figures.

Senator DUNCAN - Yes ; we shall then know who was right. The whole proposal is based on estimates, which we know are often far from correct. The previous budget contained the statement that in all probability the revenue of the Commonwealth would decline. Reference to Hansard will show that at tha.t time I challenged the statement, pointing out that conditions overseas rendered it necessary for other countries to find markets for their products, with the result that our revenue, instead of declining, would increase. My prediction was realized; our* revenue did increase. I do not set myself up as an authority in this matter; the officers of the department know more about it than I do, but they sometimes make mistakes. I repeat that these proposals are based on estimates, and that in the past estimates have frequently been far from correct.

Senator Sir Henry Barwell - The Government has given up the cry that the Customs revenue must decrease. .

Senator DUNCAN - Yes; but that view was held for years. I have said that the Treasurer proposes to wipe out the per capita payments, and to substitute other arrangements for them. According to the Treasurer, the States will be able to collect £1,527,000 more than they now collect from the Commonwealth, or if they so desire, will be able to save the taxpayers that amount by not collecting it. The States could retort that Dr. Earle Page could save the taxpayers of the Commonwealth that amount by continuing the per capita payments and remitting 15 per cent, of the income tax.

Senator Givens - Why should the Commonwealth be the taxgatherer for ;he States?

Senator DUNCAN - I do not agree that it should be. I am only concerned that the proposals should be fair to the States. It is absurd that the Commonwealth should collect the money and hand it to the States for them to spend. As a Nationalist and a supporter of the Government, I strongly resent any suggestion that the Commonwealth should impose heavy taxation on the people, and accumulate huge surpluses, only to hand them to the State Governments to be expended in various socialistic enterprises. I want, however, to be certain that the arrangement will be fair. The Treasurer estimates that the Commonwealth will collect this year in income tax £10,506,000, of which £4,056,000 will be handed to the States, together with £2,111,000 to be received from land tax, £300,000 from estate duties, and £320,000 from death duties. Fifteen per cent, of the income tax represents approximately £1,5*00,000. If the Commonwealth Treasurer were to retain these taxes and reduce the income taxation by 15 per cent., he could continue to make payments to the States on the present basis without placing either the Commonwealth or the States in a worse position than at present, and at the same time save the taxpayers 15 per cent, of the taxation on their incomes. We should consider these things. The interests of the taxpayers should be our first consideration.

Senator Givens - We are not responsible for what the States may do.

Senator DUNCAN - No; but we are responsible for what we do. It is proposed that we, not the States, shall do this thing.

Senator Crawford - The honorable senator is no doubt aware that the State Premiers refused to discuss this question with Commonwealth Ministers.

Senator DUNCAN - The Minister must know that that does not state the position exactly. I know that the State Premiers and Treasurer did not approach this matter in the right spirit. I am not excusing them.

Senator Crawford - They spoke of moral rights.

Senator DUNCAN - They were wrong; but that does not absolve us from our responsibility. Personally, I do not believe in Premiers' Conferences at all.

Senator Givens - Neither do I.

Senator DUNCAN - I believe Premiers' Conferences to be a sore on the body politic. They do no good; they only create trouble. Why was the Senate constituted if not to look after the interests of the States? That is the reason why the Constitution provides that each State shall have equal representation in this Chamber. The Senate is the body that ought to be making representations on behalf of the States in this matter. Yet it is ignored, and Premiers' Conferences are held. Are we not considered competent to do the job? Are the State Premiers and Treasurers the only men who know what the States want ? Premiers' Conferences are justified as a means of ascertaining the States' point of view upon matters affecting the States only, but matters affecting the relations of the States and the Commonwealth should be dealt with by the Senate.

Senator Givens - The honorable senator's contention is sound.

Senator DUNCAN - These proposals have brought a storm, of execration upon our heads. How different would the position have been had the Government's proposals included the reduction of income taxation by 15 per cent. We should then have been hailed as statesmen. As it is now, the States will be forced to increase taxation. [Extension of time granted.] I desire to quote the following from the Sydney Morning Herald of the 17th July, 1926:-

In his latest issue of public -finance the Acting Government Statistician of the State of New South Wales, Mr. T. Waites, has prepared a table showing the proportion of revenue obtained by the States to the total revenue, excluding the receipts from the business under- takings. As he says, from this table it is clear that if the Commonwealth payments were reduced materially the States could balance their accounts only by severe economy or by heavy increases in taxation. That table is as follows: -


Here it will be seen that over IS per cent, of the governmental revenue each of New South Wales and Tasmania is derived from Commonwealth payments, and the lowest proportion of that revenue to total revenue is found in the case of Queensland, which derives more from its land revenue than any other of the States. The proportion of revenue derived from taxation is greatest in Tasmania. For all States the proportion of payments by the Commonwealth to the total revenue averages 17.3 percent. In the case of New South Wales, were it determined to spread the additional revenue needed evenly on all taxation, each tax giving its due proportion to the Consolidated Revenue Fund, it would be necessary to' increase all taxes by 34$ per cent. - income tax, stamp duties, probate duties, and betting and racecourse taxes. That is what the first proposal of the Commonwealth Ministry would have entailed. The outcry appalled the Treasurer or some of his colleagues, and the new scheme has been put forward with the intention of persuading the people that they will not suffer any further taxation, but that they are only changing taxing masters. What is not stated; but what the taxpayer should understand, is that the essence of the scheme is no reduction of taxation.

Senator Crawford - The Commonwealth proposal is merely to place the responsibility for taxation on the right shoulders.

Senator DUNCAN - I do not know that ir. is. I admit that it appears to be what the honorable senator says it is ; and as I have already said, I cannot endorse the proposition that the Commonwealth Government should continue for all time raising revenue for other governments to spend.

Senator Givens - Have we not done it already far too long?

Senator DUNCAN - I think so, but the question is whether we are doing the right thing in the right way, and whether the scheme we are imposing on the States, as we have every right to do, will not mean increased taxation on the taxpayers of the States who are also taxpayers of the Commonwealth. The figures disclosed in the budget show that we could reduce taxation and still continue making payments to the States if we wanted to do so, but the Government proposes to force the States into accepting, its scheme, while at the same time it transfers certain fields of taxation to the States. I sincerely hope that the twelve months' trial now agreed upon will show that' the Commonwealth is right, but if it does not, I trust that we shall be big enough to go back on our tracks and consider the whole business in a proper way and in a proper spirit. And I hope that we in this Senate will see that the Government of the day deals with the matter in a proper way, and in a proper spirit, in the interests of the States we represent.

Senator Givens - Do we not also represent the interests of the Commonwealth ?

Senator DUNCAN - Of course; but the honorable senator is not here as a representative of Australia; he is here as a representative of the State of Queensland.

Senator Givens - Yos; but I was sent here to legislate for the whole of Australia.

Senator DUNCAN - The honorable senator has evidently lost sight of the reason for the existence of this chamber. There is no warrant for the existence of the Senate if it does not fulfil its purpose - that of representing the interests of the States.

Senator Crawford - But we represent our constituents, the people, not the State Governments.

Senator DUNCAN - It is true that we are not representing the State Governments, and I am not now making representations on their behalf. But we represent the States, and it is our duty to see that they are not unduly hit by the Government's financial scheme.

Senator Payne - We have to consider Australia's interests through the States.

Senator DUNCAN - That is so. We cannot injure the States without injuring Australia. If the States are plunged into financial difficulties, the Commonwealth is also plunged into difficulties.

Senator Guthrie - Is there any suggestion that the - States will be plunged into financial difficulties?

Senator DUNCAN - It is evidently the opinion of the Governments of the States that if this scheme is forced on them it will have that effect. I hope that it will not, and I am not saying that I endorse their opinions; but, as a representative of the State of New South Wales, I feel that it is my bounden duty to place before honorable senators the opinion of those who are in control of the State. The Opposition in the State Parliament is equally opposed to the Commonwealth Government's scheme, and the public of New South Wales are also opposed to it. Therefore, I should be lacking in my duty as a representative of the State if I did not adequately place before the Senate its hostility to the Government's scheme.

Senator Thompson - The honorable senator does not suggest a better scheme.

Senator DUNCAN - It is not my responsibility to do so; but I think that, instead of paying money to the State and allowing it to be spent on all sorts of schemes, many of which we. may not approve, it would be better to come to an arrangement with the States to take over a certain proportion of their debts. We could then use the money we now pay to them in meeting interest on State debts taken over, and in providing an adequate sinking fund for their ultimate extinction. I believe that such a scheme would meet with more general approval than this is likely to receive.

Senator Givens - If the Commonwealth took over the State debts, would it also take over the assets represented by those debts?

Senator DUNCAN - It could not do so. At present we are paying money to the States and getting nothing in return. A scheme on the lines I have just suggested would relieve the people of the States of a considerable portion of their accumulated debts, and I am sure its adoption would be very much better for all concerned. The solvency of the States cannot be ignored by the Federal Parliament. Therefore, the State debts are our business to a certain extent. I am sorry that time will not permit me to deal further with this important subject.

There is one other subject to which I wish to refer; and that is the question of the general defence of Australia. It is one of the first duties of an Australian Parliament to make adequate provision for the defence of the country. We can go on building up the very highest possible degree of civilization, and laying down for our people all kinds of paths which they may tread until we see the millennium ahead, but unless we are prepared to make adequate .provision to defend our country from possible aggression all our aspirations and all our work may be in vain. We are nearly all laymen in this Parliament, and, consequently, are obliged to depend upon others for information and guidance. For that reason we 'agreed to the appointment of an InspectorGeneral of our Defence Forces, and after the claims of all those who were available had been examined, General Sir Harry Chauvel was selected for the position, because of his outstanding ability and because he is a man upon whom we can absolutely rely to do the right thing in the right way. It is the duty of Sir Harry Chauvel to submit to Parliament an annual report upon the defences of Australia. He has just submitted an annual report, and any true citizen of Australia with a real love for his country must stand -aghast at what it reveals. '

Senator Thompson - Rubbish!

Senator DUNCAN - Perhaps the honorable senator is a greater soldier than Sir Harry Chauvel.

Senator Thompson - That is not the question.

Senator DUNCAN - I do not know whether Sir Harry Chauvel is right or wrong in what he says. I am merely quoting his opinion. With his knowledge of the organization he controls, supplemented by information he has gathered from conferences with his officers throughout Australia, he ought to know what is required, and how much money is needed to provide an adequate defence system for Australia. In his report he says that there has been on the part of Parliament and the Government a grave dereliction of public duty. He does not mince his words. He says that we are merely playing with the defence of Australia, that the money we are spending is not being spent on the right lines, and that we are not spending nearly enough to provide Australia with an adequate system of defence.

Senator Thompson - I ask the honorable senator to establish his statement that the country is standing aghast at the Inspector-General's report.

Senator DUNCAN - The Sydney Morning Herald says that Sir Harry Chauvel has painted a very dismal picture of Australia's utter unpreparedness in military matters. Sir John Monash is another great soldier upon whom Senator Thompson will not reflect.

Senator Thompson - I am merely reflecting on the honorable senator's statement that the country is standing aghast.

Senator DUNCAN - So it would be if it realized the import of Sir Harry Chauvel's remarks. Speaking of the- shortage of staff and of the refusal of the Government to take Steps to remedy that shortage, Sir John Monash said -

What we are doing is not merely destroying our defence, hut destroying our means of restoring ifr- a grievous and important thing. We should take upon ourselves the responsibility of training a sufficient and adequate nucleus of trained commanders and staff. Instead, they are being reduced every day.

Those words are as true to-day as they were when uttered. Of Australian defence generally Sir John Monash declared -

The whole thing is going to pieces owing to the pitiable amounts made available for defence purposes..... I have severed my connexion with the defence forces of Australia because I feel that there is no longer any room for me. The Australian Imperial Force used to listen to me. I hope the people of Australia will do so.

In his latest report Sir Harry Chauvel emphasizes the dangerous position of defence affairs in Australia, and repeats in almost Sir John Monash's words that if larger financial provision is not made the power of the Commonwealth in time of danger will be gravely impaired. Again and again he stresses the difficulties and dangers of the position, and the Sydney Morning Herald declares that if the Government refuses to take the action which his words prove to be necessary, it will do so at its own risk. A very serious condition of affairs is revealed in the report of Sir Harry Chauvel. I know that the Government realizes that the general opinion is that there has been a surfeit of war expenditure and that economy must be exercised in certain directions; but it cannot reasonably be asserted that a reduction should be made in the expenditure which should be incurred for the maintenance of a staff of trained officers to conduct a campaign. We can economize in other directions; but unless we have a staff of properly trained officers, we shallbe in a most parlous position.

Senator Thompson - We can do as we did before.

Senator DUNCAN - The circumstances are different. It is true that we can train soldiers, and Australians in' particular, within six or twelve months, to effectively compete with those of any other nation; but officers cannot be trained in three, six, or twelve months: Their training must extend over a lengthy period. Senator Thompson suggested that we should do as we did on a previous occasion; but he should consider the circumstances. At the outbreak of the great war we had a number of highlytrained Citizen Force officers at our disposal such as the Minister for "Home and Territories (Senator Glasgow)- one of the outstanding successes of the war - and Senator Thompson, who rendered excellent service. The experienced men arenow passing on, and we are not training! others to take their place. '

Senator Thompson - We are training officers.

Senator DUNCAN - But not in sufficient numbers. To reduce expenditure in this direction is, as has already been pointed out in this Chamber by another, distinguished soldier - ex:Senator DrakeBrockman - false economy. As the recommendations of the Inspector-General of the Australian Military .Forces have not in the past been acted upon, I trust that closer attention' will be given to the report which has just been presented, which demands the most earnest attention. I hope that this Government willrealize, more than any other, the necessity of making the funds available,- almost irrespective of cost, in order to. adequately: defend this great Commonwealth. There are other matters upon which I should like to speak, but time does not permit. I felt it necessary, however, to express, as I have endeavoured to do, the view-point of the States, particularly of the State I represent, on some of the Government's proposals, not that I entirely agree with their opinions, but because I should be lacking in my duty if I did not place the view-point of the States clearly before the Senate.

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