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Wednesday, 30 September 1936

Senator E B JOHNSTON (Western Australia) .- As I shall have another opportunity to discuss certain aspects of the budget, I intend this afternoon to confine my remarks to certain features which, in my opinion, call for immediate comment, namely,the Government's proposals affecting the finances of Western Australia and the wheat-growing industry in that State. But before directing the attention of honorable senators to these subjects I invite attention to the budget provision for tax relief. From this point of view the budget is certainly the most notable that has been delivered by any Commonwealth Treasurer for several years. The substantial instalment of tax reduction is highly appreciated by those sections of the community who will benefit from it. I hope that the reductions of emergency taxes which were imposed during the depression years may be regarded as an indication of the Government's intention, in accordance with its pledge, to give still further relief from year to year until the whole of the emergency imposts are abolished. When we remember that last year there was a surplus of over £3,500,000, the relief from taxation now afforded, though welcome, is not over generous. In view of the fact that the anticipated tax collections for the coming year, after allowing for the proposed remissions, will exceed £61,000,000, or £8,000,000 more than the average collections of the predepression decade, 1921-29, one is forced to the conclusion that the Government has not yet fully utilized its capacity to reduce the tax burden on the people without in any way interfering with the revenue required to carry on essential and social services. The emergency taxes still in operation are expected to produce this year £12,500,000 from two sources alone - £8,000,000 from sales tax, and £4,500,000 from primage.

Senator ALLAN MACDONALD (WESTERN AUSTRALIA) - Is that the estimated revenue from those emergencytaxes after allowing for exemptions included in this year's budget?

Senator E B JOHNSTON - Yes ; the figures are supplied by the Treasurer in the budget, so it will be seen that the burden of emergency taxes upon industry is still a heavy one. The enormous tax burden laid upon the people is clearly set out in the following table: -



taxes, whilst at the same time extracting an ever increasing total amount of revenue from the pockets of the Australian taxpayers. This would suggest that progressive reduction of taxes is good policy. The figures indicate that it is working satisfactorily - that the reductions of taxes are stimulating industry, and giving employment to large numbers of people.

The worst feature of the budget is contained in the Government's attitude to States grants. Western Australia will receive this year £500,000 as against £800,000 last year, a reduction of £300,000, or 37½ per cent. The reduction, I contend, is altogether too drastic. The financial position of the State is such that there should be no reduction at all. Furthermore, it was made without prior notification to the State Government. The State Treasurer had actually framed his budget in anticipation that the Commonwealth grant this year would be not less than the amount received last year.

Senator Dein - If the amount of grant were fixed, there would be no need for the Commonwealth Grants Commission.

Senator E B JOHNSTON - One of the arguments used when the commission was appointed was that there should be stability in the amount of grants to the States in order that State Treasurers would know for some period of years how much revenue could be expected from this source. The Commonwealth Grants Commission has been functioning for some years at considerable expense to the taxpayers, and still the position, as regards States grants, is unsatisfactory. The basis upon which the Common wealth Grants Commission operates has been objected to by the Government and the people of Western Australia; that objection was urged even when the grant was increased. The grants recommended by the commission should be for a term of years, so that claimant States would know the amounts to be received annually. Although the BrucePage Government did not give the full amount of £450,000 recommended by the first Disabilities Commission, it fixed the grant for a period of five years. I protest vigorously, because the Governments of Western Australia and South Australia did not know until nearly three months of this financial year had passed the amount of the grants to be paid. The grant , to South Australia has been reduced from £1,500,000 to £1,330,000, whilst that to Tasmania has been increased from £450,000 to £600,000. The Western Australian Government and the leading Western Australian newspapers have objected to the policy of the commission, even when, following the secession referendum and the welcome Cabinet meeting in Perth, which were vital factors, the grant to my State was increased by £200,000. This year the policy has been even more unsatisfactory, and the amount is to be reduced to £500,000, which is less than Western Australia has received for several years, even before the Commonwealth Grants Commission was in existence. The reductions to Western Australia and South Australia are due to the policy adopted by the commission. Speaking on the Western Australia Grant Bill on the 23rd October, 1935, T said-

The Commonwealth Grants Commission has adopted a different policy which will react seriously against the three claimant States. Paragraph 73 of the commission's second report reads -

Some States are certainly in serious financial difficulties. It must be made possible for them to function as States of the Commonwealth at some minimum standard of efficiency. It rests with the Commonwealth tomake that standard as low as it pleases, to impose a task on the States as severe as it. thinks proper.

That is the present policy of the commission, which provides that sovereign States, instead of receiving a generous measure of assistance from the Commonwealth for disabilities proved to exist as a result of federation, are placed in the position of suppliants for a charitable dole.

Senator Dein - Why was the grant increased last year?

Senator E B JOHNSTON - I cannot go into that matter fully at this juncture, but the secession referendum and the visit of the Commonwealth Ministers to Perth to attend a Cabinet meeting were substantial factors in the increase.

Senator Collett - Is that not a reflection on the commission?

Senator E B JOHNSTON - That view has been widely expressed in Western Australian newspapers, and has my support. The quotation from my previous speech continued -

Paragraph 69 of the commission's report states -

The only ground for this assistance is the inability of the State to carry on without it. lt follows, then, that the adverse effects of federal policy - even the net effects- are not in themselves ground for assistance to the Government, any more than they are to the people of a State. If in spite of the effects of federation the State can continue to function at what has been decided on as the minimum standard, there is no ground for assistance.

That is the policy of the Commonwealth Grants Commission, but it was not the policy of the Prime Minister (Mr. Lyons), who introduced the bill providing for the appointment of the commission. The Government has a right to refuse to be guided by the recommendations of a commission which has shown so clearly that it is acting very harshly, and in a way which is wholly unjustifiable. I went on to say -

I contend that the policy laid down in those two paragraphs of the Commonwealth Grants Commission's report is extremely important. lt is opposed entirely to the conceptions of those who advocated federation, and I feel sure that if prior to their acceptance of the Commonwealth Constitution the people had thought that such a policy would be adopted by the Federal Government federation would not have been accepted by the smaller States. I ob ect to this change of policy towards the smaller States; this Parliament and not a commission should decide whether such a change should be made.

Although the policy of the commission that year provided for a substantial increase of the grant. Western Australia is, under that policy - as I have cited it - compelled to receive assistance in the form of a charitable dole. The basis upon which grants are made has been altered without any authority from Parliament, and is contrary to the opinions expressed by the Prime Minister when introducing the bill under which the commission was appointed and when speaking on the public platform.

I do not agree with the Leader of the Opposition in the House of Representatives (Mr. Curtin) who said that this is a rich man's budget. It is a rich State's budget with remarkable geographical incidence in that the further the people are away from Canberra the less consideration they receive. Of course the budget is popular in Canberra, where there has been restoration of salaries. All parties in the Western Australian Parliament are protesting against the treatment extended to Western Australia, particularly in the matter of the grants to be paid.

Senator ALLAN MACDONALD (WESTERN AUSTRALIA) - Only in respect of one item.

Senator E B JOHNSTON - Yes, that is the very important item of State grants, with which I have been dealing. I have referred briefly to the policy of tax reduction and have expressed my hearty approval of the remissions made. I am now dealing with the harsh treatment of the people and Government of Western Australia by an unsympathetic and biased commission, which has recommended a reduced, grant - a mere dole - which is supposed to compensate that State for some of the disabilities it suffers under the federal system. In Canberra we find that, amongst others, Ministers and members of Parliament are to receive substantial concessions in the matter of salaries and allowances, and that public servants' salaries have now been fully restored. Every honorable senator is pleased to learn that the state of the Commonwealth finances permits a restoration of public, servants salaries, but the Government deserves nothing but censure for restoring a further portion of the salaries of Ministers and the allowances of members while, at the same time, it is effecting drastic economies at the expense of two of the less populous States which are dependent on primary production. Increases, including tlie restoration of ministerial salaries and the allowances of members, amounting to £470.000 a year, have been made at the direct expense of Western Australia and South Australia-

Senator Dein - The honorable senator is rather late in making his protest against the partial restoration of the allowances of members of Parliament.

Senator E B JOHNSTON - I have opposed such increases every time I have had an opportunity to do so.

Senator Dein - Why did not the honorable senator take advantage of the opportunity afforded to him recently?

Senator E B JOHNSTON - I have voted against every increase of parliamentary salaries, and I shall object so long as I can to the injustices imposed upon Western Australia and South Australia under this budget and in other ways. I know that the Government will say that the reductions were recommended by the Commonwealth Grants Commission. That is my complaint. I am opposed to the basis upon which the grants are made, as laid down by the commission.

Senator Herbert Hays - Did not the Western Australian Government expect a reduction?

Senator E B JOHNSTON - It did not. It had introduced its budget before it was advised by the Commonwealth Government that the grant was to be reduced. It expected that with a grant similar to that received last year it would show a surplus of £5,000, but the grant having been skittled its budget will show a deficit of £294,326.

Senator Foll - Why does not Western Australia keep itself as the other States do?

Senator E B JOHNSTON - Because it is bled white by the actions of the Commonwealth Government, and not the least by the enormous tribute which it pays through the sugar industry to the State so capably represented by the honorable senator. I know that the Leader of the Senate (Senator Pearce) will say that the reductions were recommended by the Commonwealth Grants Commission. It is true that they were, but that is no reason why the recommendations should have been accepted by the Government. It must take full responsibility for them. We have had a large number of recommendations lately from other royal commissions and other bodies which this and previous Federal Governments have been so fond of appointing, but many of them have not been accepted. For instance, the Royal Commission on the Wheat Industry recommended the adoption of a rural rehabilitation scheme which would provide for the financing of farmers to purchase new p' ant, horses, machinery and stock. But that recommendation was not given effect, though it might well have been included among the Government's proposals in this budget. It also recommended the establishment of a compulsory wheat pool, but that recommendation, too, was rejected. Two commissions have lately recommended alterations of the boundaries of federal electorates in Western Australia, and in both cases the recommendations were rejected by the House of Representatives without opposition by the Government. Why, in these circumstances, should the recommendations of the Commonwealth Grants Commission alone be regarded as sacrosanct?

If it thought as I do, that the recommendations of the Commonwealth Grants Commission were wrong, it was the duty of the Government to refer back the report, with a request that the commission should take into consideration, first, the real disabilities of Western Australia and South Australia under federation, and, secondly, the real needs of those States. The difficulties of Western Australia were accentuated in every direction by the wor3t drought in the history of its widespread pastoral areas, and by a drought last year in the north-eastern wheat belt. This year it is feared that even larger areas of the north-eastern and northern wheat areas will be subjected to drought conditions. This budget gives to Western Australia another bitter disappointment in regard to the federal dole policy of grants to States. The last report of the Commonwealth Grants Commission is amazing in its inconsistent arguments. The impression left on my mind after a careful perusal of that document was that the commission had first decided to cut to the bone the grant to Western Australia, and then had attempted to justify its action by a number of inconsistent and entirely conflicting arguments. The commission as it is now constituted certainly has proved itself a failure so far as Western Australia is concerned. The first commission to inquire into the disabilities of Western Australia under federation, which was presided over by Mr. W. Higgs, an ex-Treasurer of the Commonwealth, was, in my opinion, the only one which lived up to the federal ideal. That commission recognized the numerous disabilities under which Western Australia laboured, particularly in respect to tariff and the Navigation Act. The Commonwealth Grants Commission, however, refuses to make any allowance for disabilities imposed by federal policy, and does not recognize its obligation to compensate the smaller States for the loss of the important field of customs revenue. The commission condemned the policy of Western Australia in regard to land settlement, and attributed Western Australia's inferior financial conditions " to the losses arising from the reckless financing of wheat settlement, and the attempt at dairying settlement in the high rainfall areas of the extreme south-west of the group settlements ". I do not defend the administration of the groups, nor do I deny that mistakes wore made, but honorable senators should not forget that this settlement was part of the Empire, migration" agreement to which the Commonwealth and the Imperial Governments were signatories. It is most unjust that the Commonwealth should now not only fail to share the losses resultant from that scheme, but also penalize its weaker partner because those losses were incurred. But Western. Australia is penalized, not only for its failures, but also for its successes. That the goldmining industry is prosperous is urged as another reason for reducing the grant. Still another reason advanced for the reduction is. that for the first time in ten years the State Government has achieved a small surplus, though this was done by the imposition of a drastic financial emergency tax of 9d. in the £1, which yielded £850,000 last year, and by increases of taxation which -the commission itself admits brings the Western Australian rate up to the normal Australian basis. Western Australia, then, is penalized for widely differing reasons; on the one hand, for its alleged extravagance in regard to group settlement, and, on the other, because, having increased taxation to the normal Australian basis, it was successful in achieving what was the first surplus for ten years, and only the sixth surplus since the inception of federation. No consideration was given to the fact that Western Australia had suffered a severe drought in the northeastern wheat belt; or to the fact that the pastoral areas are to-day experiencing the worst drought in the history of the State. In passing, may I say that present seasonal indications give every reason to fear that the State may in the near future have to face much heavier demands for drought relief than were made last year. It is regrettable that while both South Australia and Tasmania have representation on the Commonwealth Grants Commission, no Western Australian has been appointed to it, nor was one appointed to the previous tribunal which inquired into the disabilities of Western Australia under federation. It is an unfortunate fact also that Mr.

Eggleston, to whose ability and versatility I pay tribute, had severely criticized and condemned the financial policy of Western Australia before his appointment to the chairmanship of the commission. In any case, that gentleman entirely misunderstood his position. The commission poses as a tribunal set up to inquire into the past activities of State governments rather than as a commission of inquiry into the disabilities suffered by claimant States as a result of federal policy. In my opinion it is quite outside the province of the commission to penalize the Government of Western Australia for losses arising out of its share in the Empire migration agreement. The Commonwealth Government itself was a partner in the scheme of group settlement, and though to-day it is escaping the losses incurred by the minor partner in that scheme it is imposing penalties on those who suffered most from it.

Senator Foll - Did the Commonwealth have any voice in the selection of the land to be settled?

Senator E B JOHNSTON - No ; hut the Commonwealth knew the part of the State in which settlement was to take place, and it assisted in paying over a term of years the interest on the money utilized in opening up that part of the State. Few people will suggest that that venture was not well worth while. It will ultimately be successful in providing homes for a large number of settlers in districts blessed with a good rainfall and an equable climate. In order to show that there is strong feeling in Western Australia against the drastic reduction of the grant, I. shall read a protest made to the Prime Minister "by the Deputy Premier of that State on the day that he received word of the reduction.

Senator Dein - Was a similar protest made last year?

Senator E B JOHNSTON - Last year the basis laid down by the commission for the making of grants was strongly objected to. In his communication to the Prime Minister, Mr. Troy said -

Received your telegram advising the amount oi Grants Commission's recommendation and aru astounded at the amount recommended. If no more than the reduced grant is paid by your Government, it will be impossible to finance our minimum revenue requirements without recourse to loan funds. In view of the stringency of the loan market, such a course would seriously curtail the already reduced amount available for unemployment relief work. On account of the drought last year we are still committed to heavy relief expenditure on settlers in the affected areas. Water supplies have not been supplemented this winter and the greater portion of the wheatbelt is involved. In the pastoral areas great loss of stock has occurred and the position is very acute. The present seasonal outlook in the wheat areas is unfavorable, but even if late rains bring partial relief we will still have to provide water to many districts for the coming summer. It will be necessary not only to install pipelines but to rail water at great expense. The budgetary position, on the same plan as last year, is difficult even without a reduction in the grant below last year's amount, and if the reduction is made our position will be critical. I desire to lodge the strongest protest and, to request that the amount of last year's grant be continued fur this financial year pending further consideration.

Interviewed on the same subject, Mr. Troy stated - lt is difficult to say what the Grants Commission has based its calculations on in assessing the grant, but it is a very disastrous thing for this country. It docs not seem the proper thing for the Commonwealth Government to be reducing taxation and making concessions when the State, through no active maladministration, is facing serious burdens The telegram which I am sending to the Prima Minister does not in any way exaggerate the position, but is a plain statement of fact.

Mr. Troypointed out that a reduction of the amount of the grant by £300,000 would affect the budget position of tha State for 1936-37, as proposed in the Estimates introduced into the Legislative Assembly on the previous Tuesday, by converting an estimated surplus of £5,674 to a deficit of £294,326, and would react on the loan fund. That reduction was particularly unfortunate in that it came at a time when the Government was trying to improve the lot of the unemployed.

I.   associate myself with that official protest from the Government of Western Australia, which in every respect is true and correct.

Senator Duncan-Hughes - Is there not a Labour government in Western Australia?

Senator E B JOHNSTON - At the moment, I do not care what government it is, so long as it is doing its duty toward the State. It was the duty of the Government of Western Australia to object not only to the drastic reduction of the grant, but also to the way in which it was communicated to the State, and I support its protests on both these matters. The report of the Commonwealth Grants Commission is dated the 16th July last. No doubt the Commonwealth Government long ago decided to act upon its recommendation; but it did not convey its decision to the State until after the Commonwealth Treasurer had introduced his budget on the 10th September.

Senator Duncan-Hughes - That was most unfortunate.

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