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Wednesday, 29 April 1936

Senator E B JOHNSTON (Western Australia) . - I welcome this bill because it gives to our primary producers a small measure of relief from the excessive burden of the Australian tariff. My only complaint is that the steps taken by the Government towards tariff reduction are altogether too short, slow, and faltering. However, so far as the measure has a downward trend, it has my whole-hearted support.

A good deal has been said about the protest of the British Government in regard to the implementing of the Ottawa agreement. I am amazed that that protest was confined to cement, because it appears to me that, in regard to primage duties, that Government has cause for complaint. Under article 14 His Majesty's Government in the Commonwealth of Australia undertakes, in so far as goods the product or manufacture of the United Kingdom are concerned, to reduce or remove primage duty as soon as the finances of Australia will allow. I congratulate the Government on having substantially reduced the primage duties. Nevertheless it is estimated that from that source the revenue will benefit this year by £1,000,000. In view of the fact that the Government received £4,500,000 over its estimated revenue for the first eight months of this year, and expects the year to end with a surplus of over £5,000,000, the time is opportune to remove the primage duty altogether from imports from Great Britain. If that were done, it would give much greater relief to the producers and consumers of Australia than would a removal of the duty on British cement. This action should he taken at once if we are to keep faith with Great Britain under the Ottawa agreement.

As I listened to the protests of my highprotectionist friends, including those of the Labour party, I wondered what they would permit to enter this country. They object not only to cement, but also to other items being imported. "Western Australia has no local market for its main products, hut must sell practically all of them abroad. In normal seasons 85 per cent, of the wheat grown in that State, and practically all of its wool, is sold overseas. Yet on item after item the Labour party has shown a desire to keep out of this country goods made in other countries. The farmers and producers of Australia who receive low prices for their exported products are unable to pay for empty ships to come here to take away their wheat and wool. The people of Western Australia, at all events, want two-ways trade with other countries.

Senator J V MACDONALD (QUEENSLAND) - They want cement brought in as ballast.

Senator E B JOHNSTON - The only chance of obtaining reasonable freights on the things which we have to export, because there is no market here for them, is to allow the ships which are to carry them to come here laden with other goods. So far as this bill will reduce the incidence of the tariff, it will have my full support. I shall support every tariff reduction contained in the Schedule; I say that after careful consideration of the items. There are, however, some items of the greatest importance, of which agricultural machinery is a notable example, on which this Government has not made the reductions in the general tariff recommended by the Tariff Board. In fact, in regard to agricultural machinery and many other items, it has made no reduction of duty at all in the general tariff.

At one time we used to import much agricultural machinery from Canada. This was an important item in interdominion trade, but, unfortunately, Canadian machinery does not come, under the British .preferential tariff. In dealing with items of this kind I think the Government should carry out to the full the recommendations of the Tariff Board. Already in this debate we have heard a good deal about the need for strict adherence to the impartial recommendations of the Tariff Board. Assertions have been made to the effect that as the board is the body that has the right and the requisite knowledge to deal with such matters, its recommendations should in most instances be accepted as a guide. That is the attitude of supporters of the Government in regard to the Tariff Board's recommendations dealing with duties on cement; it is my attitude, not only with regard to cement, but also many other matters, particularly the important items of agricultural machinery. I wonder if any farmer in Australia, when he hears from the Government the cry, "Hurrah for the Tariff Board", when the Parliament is considering duties on cement, would be pleased to find its supporters, when dealing with duties on agricultural machinery, which are of much more importance to our producers, completely ignoring the recommendations of the board? I admit that the board's recommendations have been carried into effect in regard to agricultural machinery imported from the United Kingdom, but I point out thai Great Britain does not use, or manufacture, agricultural machinery of the types used by Australian producers; that class of machinery is produced extensively in Canada and the United States of America. Thus, when the Government says in relation to cement: "Hurrah for the Tariff Board," it must, to be consistent, give similar weight to the recommendations of the board in regard to duties on agricultural machinery. I propose to ask the Senate to carry out fully the recommendations of the Tariff Board in respect of these duties, and also in respect of the duties on motor bodies and panels. To date these recommendations have been ignored by the Government.

As Western Australia depends mainly on primary production, the existing tariff oppresses every section of its people because such duties tend to increase the cost of production. This has been proved by tribunal .after tribunal appointed by different Federal Governments, and by the Committee of Economists appointed by the Bruce-Page Government to report on the economic effect of the tariff. That committee, which consisted of Professors Brigden, Copland and Giblin and Messrs. E. 0. Dyason and C. H. Wickens, reported that the subsidies paid to protected Australian production through the operation of the tariff amounted in 1926-27 to £36,000,000, or, approximately £6 a head of the population of that date. This amount distributed among the States in proportion to the volume of protective production represented a cost of £2 4s. per capita in Western Australia more than the people of that State received as the result of all tariff protection. This committee also reported that the burden of the tariff feil much more heavily upon Western Australia than upon any other State. This is due to the enormous size of Western Australia, to the fact that the people of that State are almost entirely dependent upon primary production and, further, to the fact that they are scattered over a very wide area. In addition the cost of the tariff to Western Australia is increased through the operation of the Navigation Act as Western Australia is situated a great distance from the centres of the big industries established in the Eastern States. In this connexion I refer particularly to the prices of agricultural machinery. Giving evidence before the Royal Commission which inquired into the operations of the Navigation Act, Mr. McKay, of the McKay harvester manufacturing firm, said that he was very sorry that the average price of agricultural machinery in Western Australia was from 10 per cent, to 12-J per cent, more than in Victoria, but that this could not be avoided, because of the very heavy freights and the distance over which the machinery had to be transported. On the mean population in 1926-27, the net burden of the tariff on Western Australia, according to the expert committee to which I referred, was no less than £926,000. This figure has never been seriously challenged and, of course, coming from such a capable and unbiased source, it could not be challenged. Yet Western Australia has had very little relief. Even the State Grants Commission has said that it cannot take the tariff into consideration as it is not one of the disabilities suffered by Western Australia under federation which it is permitted to assess under the terms of the commission's appointment. Despite this fact, the best commission which has yet been appointed to inquire into the disabilities of the States under federation - that headed by Mr. W! G. Higgs, an ex-Treasurer of the Commonwealth - said that Western Australia's main disability under federation was the burden and incidence of the tariff. This burden has increased out of all proportion to what it was at the time the Higgs commission made its report in 1925. The difficulty of apportioning the burden of the tariff in respect of the other States of the Commonwealth is very great, although it is clear that the tariff confers great benefits on Melbourne and Sydney at the expense of the rural industries of the Commonwealth. Only two States, Western Australia and Tasmania, keep complete and accurate records of their trade with other States. Owing to their isolation, it is easier for these two States to keep such records than it would be for Victoria, for instance, to keep records of its trade with, say, New South Wales and Queensland. The Western Australian disabilities committee in preparing the case for Western Australia for submission to the States Grants Commission this year, made a special inquiry into the cost to Western Australia of tariff protection and the incidence of exchange during the year 1933-34. I shall refer to some of its conclusions. It had been suggested that in spite of the higher tariff rates operating the actual amount of protection used by Australian manufacturers to-day is less than in 1927, the year covered by the Bruce-Page Government's economic inquiry. In reply to this statement I point out that the South Australian disabilities committee found that in 1932-33 the cost of protection of Australian production was £29,900,000, irrespective of the protective incidence of exchange, a factor which did not operate in 1926-27, when the cost was assessed by the committee of economists at £36,000,000. Furthermore, the South Australian commission assessed the net burden of protection to Western Australia for that year at £1,298,252 or £2.97 a head of the population, as against £2.4 a head in 1926-27. Thus as late as last year we find a South Australian committee pointing out that Western Australia to-day is paying much more towards protection than it did in 1926-27, when the Bruce-Page Government appointed its committee of economists.

Working on the recorded figures of interstate trade the Western Australian disabilities committee assessed the burden of the tariff on Western Australia at £1,187,899 or £2.7 per capita, a figure which approximates that arrived at independently by the South Australian committee. In its summary of this matter, the Western Australian disabilities committee said -

Summarized, the net subsidy paid by Western Australia to protected industry in the other States of the Commonwealth was as follows : -


To obtain these figures the committee conducted a most exhaustive inquiry, and in considering every commodity imported, assessed the extra cost on a conservative basis. It went on to state -

Our researches into the three phases of Commonwealth-State inter-relationship covered by this inquiry lead to the following conclusions : -

(1   ) During the year ended June, 1934, the net cost of tariff protection to Western Australia was £1,187,899.

(2)   The net benefit from the rate of exchange ruling was somewhere in the vicinity of £600,000.

(3)   The contribution to the Federal Treasury on account of customs and excise was £424,881 greater than the sum actually collected in, and credited to, Western Australia, and £219,407 greater than the average for all States calculated on a per capita basis.

The Disabilities Commission pointed out that in the Commonwealth figures quoted by it in respect of Western Australia's position, no adequate allowance has been made for £424,000 contributed to the Federal Treasury on account of excise paid on goods in the eastern States which were afterwards shipped to Western Australia for consumption. On page 68 of the report the following summary appears : -

The following table shows the aggregate value of each of the groups into which the various items of interstate imports were divided for assessment, together with the excess cost and the exchange incidence calculated thereon: -


Before allowing for the extra cost of imports, the commission gave the Commonwealth the benefit of the exchange. The Senate should realize that these figures show conclusively the burden which the protectionist policy of the Commonwealth imposes upon the primary industries of Western Australia. These figures have been challenged by some accountants and economists in Western Australia, including Mr. H. K. Watson, a public accountant of high repute, who contends that the committee adopted a conservative basis in its calculations, and that the real burden imposed upon Western Australia is infinitely greater than is disclosed. I agree with that opinion. The figures show that that State suffers more from the protective policy of the Commonwealth and receives less benefit than any other State.

I now wish to deal briefly with the duties imposed upon agricultural machinery. These duties have remained stationary for many years, except in respect of the new British preferential duties. The only comparison needed is between the duties imposed in 1933 and i hose in the schedule now before the Senate. It is as follows: -


The Tariff Board recommended that the general tariff, which includes the new intermediate duties, should be reduced to 15 pei- cent, on the first seven of these items, namely, 161 to 167, and to 25 per cent, on those under item 171 a, h, c and d. The most important recommendation under the general tariff for the relief of the users of agricultural machinery has been entirely ignored by the Government. The board stated that its recommendations which are based in each case on the existing rate of exchange, but exclude primage duties, provide reasonable and adequate protection. The

Senator B.B. Johnston. existing duties were brought into operation on the 29th March, 1935, so that the Australian industry has received natural protection under the exchange rate ever since it was increased. It will be noted that the board's recommendations in respect of the British preferential tariff' have been accepted almost invariably, but its findings in respect of the general tariff have been ignored. From the point of view of the farming community, the reductions made in the British preferential tariff are of very little advantage, as the importations of implements from Great Britain have been small. The British. manufacturers did not even consider it necessary to take advantage of their rights under the Ottawa agreement by tendering evidence before the board. In this respect they have been given something for which they did not ask, and judging by importations the concession is of little value to them. It is a matter of whether the primary producers, who depend upon their ability to sell at a profit at world prices should be compelled to pay inflated prices for their tools of trade. I contend that they should not do so. Other items covering what might be termed tools of trade for secondary industries are admitted either free of duty or at a very low rate. Why should not the machinery required by the great agricultural industry be placed on a similar basis? We should accept the recommendation of the Tariff Board.

Senator Collings - Is there any scarcity of agricultural implements in Australia?

Senator E B JOHNSTON - No, but owing to the prices charged there is a scarcity of buyers. Many farmers require a great deal of new machinery as their plant has not been renewed during the depression, but they are quite unable to buy it at the present prices of machinery and wheat. I do not suggest that the Australian agricultural implement manufacturers are taking full advantage of the duties at present operating under the general tariff, but, considering the cost of manufacture in Australia and in the two particular competitive countries, Canada and the United States of America, the Australian selling prices are not so low as they should be. While I do not think that the Australian implement manufacturers take full advantage of the protection afforded, the fact that implements in Western Australia are 10 to 121/2 per cent. dearer than they are in the eastern States, places the farmers in Western Australia at a great disadvantage.

Senator Collings - Are the shipping freights too high?

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