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Wednesday, 30 November 1927

Senator ELLIOTT (Victoria) .- 1 1 add my congratulations to the Government on its policy of reducing taxation, particularly income taxation, and bringing in certain reforms that are most necessary. I specially refer to the policy of allowing for the losses experienced by taxpayers. In the past a person might have sustained very heavy losses, as often happens in the pastoral industry, for two or three successive years, and might then be taxed up to the hilt on his return for the following season, no regard being paid to his heavy losses in previous years. That method has been altered, and for that reason alone the Treasurer and the Government are to be complimented. There are other desirable reforms, however, which the Treasurer appears to have overlooked. Some time ago a system was adopted whereby if the company did not distribute .among its shareholders at least two-thirds of its taxable income, the commissioner might determine whether a further sum should have been distributed. We have seen the disastrous effect on companies that have failed to make provision for bad times. One of our largest manufacturing concerns threatens to go into liquidation, because it has not sufficient money in hand to carry it over the present lean period. A system of taxation such as this, which gives to the commissioner arbitrary power to say whether a company has distributed a proper proportion of its profits, is an encouragement to unsound finance. The provision as it stands is objected to because it is a direct incentive to the improvident distribution of the earnings of companies. It frequently operates inequitably. Responsible directors, who hold their positions on account of their expert knowledge, claim that they are not able to give effect to their financial policy because a departmental officer has 'this overriding power to practically tell them that they do not understand their business. It is a serious matter for a departmental officer to inform directors of companies that they are not distributing a sufficient proportion of their profits. Apparently the provision was placed in the act because a few proprietary companies were tying up profits in reserve funds so that they might escape taxation. It should be possible to prevent by other means the adoption of any system which would enable the Government to be defrauded. The policy of building up reserves has a vital bearing on the soundness of many companies and the security of their shareholders. The directors are usually the best judges of what should be done in a time of financial stringency, uncertain seasonal prospects, and trade fluctuations. I have heard of cases in which the profit was purely a paper one, due to the natural increase that had taken place in the flocks. Obviously it could not be distributed; yet the Taxation Department arbitrarily assessed the taxpayer on the basis that it should have been.

The Leader of the Opposition has criticized the defence policy of the

Government. He quoted statements by Sir Harry Chauvel, Sir John Monash, and General Drake-Brockman, but he utterly failed to prove that any of those statements were condemnatory of the policy that is being pursued by the Government.

Senator Needham - That does not come within their province.

Senator ELLIOTT - They have not said that we should abolish our light horse, or cut down any particular arm of defence and substitute others. The whole of their criticism has been directed to the fact that the Government has not spent sufficient to make that force adequate to the defence of Australia.

Senator Needham -What I said was that the Government has not a defence scheme that is commensurate with the amount that has been spent since peace was declared.

Senator ELLIOTT - That is not what these gentlemen have said. The last report of Sir Harry Chauvel contains a reiteration of statements that have been made over and over again.

Senator Needham - General DrakeBrockman said that we would not be able to hold out for 24 hours.

Senator ELLIOTT - He said that our munitions supply was not sufficient to enable us to carry on operations for 24 hours on the scale at which they were carried on in France. I remind the honorable senator that each shell costs a considerable amount of money, and if it is stored for any length of time it deteriorates and has to be destroyed. I do not think the honorable senator will suggest that supplies of the magnitude of those that were stacked in dumps in France should be accumulated in Australia in times of peace.

Senator Needham - I suggest nothing. I have merely quoted the opinions of experts.

Senator ELLIOTT - That is unsafe, unless the honorable senator has a knowledge of the subject with which these experts are dealing. It is quite right for Sir Harry Chauvel to inform the Minister of the conditions that exist; but it is for the Government to say whether those conditions are perfectly safe in the light of the knowledge which it possesses of world affairs. We are all familiar with the system of fire insurance. In the insurance world it is recognized that it is possible to over-insure. It would not bo right, in the present state of the finances, for the Government to have our forces fully equipped for war, and brought up to war strength, as if war was about to be declared by an enemy nation. Whether the knowledge which the Leader of the Senate (Senator Pearce) gained at the League of Nations will change the views of the Government, remains to be seen. He may now regard as insufficient our present state of preparedness. The mere fact that Sir Harry Chauvel, Sir John Monash and General Drake-Brockman have said that our forces are not on a war footing does not prove anything. I am inclined to the view that the nations of the world suffered so greatly both during the war and since that they should be very chary about starting another. The Government is, however, making a determined effort to see that Australia is selfcontained in the matter of defence. The Minister for Defence (Senator Glasgow) has made it perfectly plain that we can turn out not only machine guns, but also 18-pounders and howitzers. We have not yet reached the stage at which we can turn out the heavier artillery. During the last war we were not able to turn out a single machine gun or equip ourselves with anything in the nature of field artillery. In calculating the amount that is spent on defence, it is necessary to keep in mind the trust funds and see that from time to time they are replenished, so that we can continue to manufacture weapons and munitions of war without waiting for the passage of the Estimates each year. The Government has proved that up to date it was a good prophet when it assumed that there was no need to maintain our forces at war strength.

But it has been pointed out by several speakers, including Senator Sampson, with whom I am in agreement, that the time is rapidly arriving when the Government will have to pay less attention to the munitions side and more to the training of personnel. The remnant of the Australian Imperial Forces is becoming old, and in a few years will not be available as a reserve. If it is intended to have a fighting force comparable with that which we had in pre-war days, it will be necessary to revert to the system that was then in operation. Personally, I do not attach very much importance to the training of the rank and file. Such training is useful in the main for the purpose enabling officers and noncommissioned officers who would be called upon to lead the fighting forces in the event of an outbreak of war to get actual experience in training and handling troops in the field. Those officers and noncommissioned officers get the best foundation for their own training by means of schools and courses- which, I am glad to say, are now coining more into vogue. The rank and file are certainly displaying a revival of interest in their training. At 'the conclusion of the war there was undoubtedly a disinclination on the part of the trainees to go into camp and undergo a course of training. That spirit has disappeared, and we are recovering some of the old voluntary 'spirit which was the foundation of our forces in pre-war times.

While congratulating the Government generally, I am by no means sure that the people of Australia have been given value for the money that has been spent in the Federal Capital. The amount involved in the provision of temporary accommodation for the Governor-General is so large as to suggest that, if corruption has not been practised, at least we have approached very close to it. Otherwise I cannot understand how the sum of £70,000 could have been expended on those buildings. The Government would be well advised if it suggested that the Public Accounts Committee should make an investigation into the matter. I am not sure of the figures, but I understand that it will be necessary to employ between 200 and 300 men to keep the Canberra public gardens in order. If that is so, and if the unfortunate citizens are to be compelled to contribute to the maintenance of the gardens out of the rates, they will have a pretty bad time. On the other hand, if the gardens are to be a permanent charge on the public funds, it is. also a serious matter.

Senator Grahamcriticized the Government for not proceeding at once with a child endowment scheme, alleging that during the last election campaign the Prime Minister (Mr. Bruce) had definitely promised that it would be in the Government's legislative programme. I have no recollection of any such promise. What the Prime Minister said was that he would convene a conference of State Premiers, and endeavour to find a solution of the problem that would be acceptable to the States. It was obvious that if State railway and tramway employees were to come under the scheme, the States should be consulted, particularly if it was contemplated that the cost of the scheme should be made a charge upon industry. That conference was convened, and it is worth noting that the Labour premiers were reluctant to commit themselves definitely to the scheme. It is still under consideration.

Senator Hoare,in the course of his remarks criticized the Government for raising loans overseas.

Senator Needham - And quite right, too.

Senator ELLIOTT - The honorable senator's arguments were not conclusive. He quoted Mr. Watt in another place as saying, in 1915, that if the first war loan of £20,000,000 were raised in Australia, industry would suffer, and then he went on to argue that since about £308,000,000 had been raised during the war without causing dislocation in industry, it should be possible for the Government to continue indefinitely raising money within Australia for all its requirements. Actually the floating of Government loans on the Australian market has had the effect of raising the interest rate from 4 per cent., and even 3 per cent, in the case of Victorian Government loans to its present high level,, with the result that instead of a mortgagor being able to obtain advances up to 60 per cent, of the value of house security at from 4 per cent, to 4£ per cent., he is lucky now if he gets an advance of 50 per cent, of the value of his investment at under 6$ per cent, In many instances 7 per cent.,- -7$ per cent., and even 8 per cent, is demanded.

Senator Hoare - The same conditions obtain in other countries.

Senator ELLIOTT - That is because during the war those countries also raised large sums of money which were absolutely blown away in the form of shot and shell.

SenatorNeedham. - The profiteers did not suffer.

Senator ELLIOTT - I do not deny that there was a good deal of profiteering during the war, because the munitions had to be obtained, and large bodies of men had to be equipped and maintained in the field. For this purpose it was necessary to raise immense sums of money. As a result, there has been a serious dislocation of industry in all countries. But that is no reason why we should aggravate the position in Australia by continuing along those lines. To-day it is very difficult indeed to obtain finance for industry from the banks, because the money is not available. Immediately it is whispered that the Government intends to float another loan, the banks impose restrictions on credit in order to take up the new issue. Business concerns that are anywhere near the border line, finding their credit restricted, go out, and their employees are thrown into the ranks of the unemployed. There is only a certain supply of money in the market. This is well understood by the financial advisers of the several States. Hence the formation of the loan council. Whenever a Government proposes to borrow money, the loan council surveys the market and ascertains from the banks how much money is likely to be available at any particular time. If we attempt to extract an undue amount from the available reserve, the effect on the money market is instantaneous, and unemployment results.

Before I resume my seat I should like to refer briefly to the position of public servants in the mandated territory of New Guinea and in Papua. I understand that they are not under the jurisdiction of the Public Service Board, and that there has been no classification since their appointment. Consequently there has been no increase in salaries.

Senator Sir George Pearce - There have been increases in salaries since those officers were appointed.

Senator ELLIOTT - My information - and it is confirmed by Senator Payne - discloses that there is serious dissatisfaction in the mandated territory.

Senator Sir George Pearce - Salaries in New Guinea are higher than in Papua.

Senator ELLIOTT - I do not know if the public servants in Papua are under the Commonwealth Public Service Board.

Senator Sir William Glasgow - No.

Senator ELLIOTT - It is high time that the officers in both services were brought under that board, so that they might have an opportunity to get their grievances remedied.

Senator Sir William Glasgow - The Papuan service is a very capable and contented one.

Senator ELLIOTT - There seems to be no reason why the two services should not be amalgamated. The officers would then be interchangeable, and there would be more chance for promotion. Possibly a number of the trained officers... in the Papuan service could be made available for service in the mandated territory.

Debate (on motion by SenatorKingsmill) adjourned.

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