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Wednesday, 19 November 1941

Senator ARNOLD - I do. A taxpayer living in New South "Wales whose income is £250 a year has £244 10s. left after paying Federal and State income tax; a man on £300 a year is left with £288 8s. That is not a large amount on which to keep himself, a wife and one or more children. I submit that it is more difficult for a man on £5 a week to adjust his financial commitments than it is for a man who has £25 a week left after paying taxes.

Senator McBride - The Labour Government of New Zealand did not think so.

Senator ARNOLD - I am referring to the Labour Government of Australia, which has its own programme to carry out.

Senator McBride - It is the only Government that is not in step with other governments.

Senator ARNOLD - No great sacrifice is demanded of a man, who, after paying his taxes, still has £25 a week with which to carry on his normal life. Apparently, the Opposition thinks that a man on £2,000 a year is called upon to make too big a sacrifice when he is expected to pay £542 towards the country's war effort. A citizen of New South Wales who is in receipt of £3,000 a year has £1,476 left after paying State and Federal taxes. In other words, even in this critical period of the nation's history, he is left with £28 10s. a week. I suggest that he is not called upon to bear any undue sacrifice. If there be any person in this country with an income of £40,000 a year-

Senator McBride - That is a mythical figure.

Senator ARNOLD - I should be grateful to that man who, out of an income of £40,000 a year, paid £34,000 towards the country's war effort.

Senator A J McLACHLAN (SOUTH AUSTRALIA) - The Taxation Department is unable to find a man with that income.

Senator ARNOLD - I am grateful to those persons with big incomes who contribute large amounts to the revenue of the Commonwealth. I am equally grateful, also, to the man on £250 a year, who pays £5 10s. a year in taxes. Each of those individuals will receive the maximum protection that the armed forces of the Commonwealth can provide for them. Each enters this country on an equal footing, but owing to the inequality of the distribution of wealth one is better off financially than the other. It is necessary for the Government to protect one section of the people by fixing a minimum wage for those in the low income group. Other sections of the community are more fortunate; some are still able to live in luxury. In this war, all of our cherished rights, privileges and traditions are at stake, but I would remind honorable senators the people in the higher income groups have the most to lose from a national defeat.

It is contended in some quarters that companies are being taxed unduly. In normal times, an additional tax on profit of1s. in the £1, bringing the rate up to 3s. in the £1, might be regarded as a harsh imposition, but I remind the Senate that the old standards by which profits were measured are gone. In peace-time it was possible to measure the probable dividend by the degree of trading risk involved, but now it must be remembered that if the British Empire and its Allies do not win the war, not only will dividends disappear, but also the assets on which those dividends are now paid will be lost. As another honorable senator stated, companies, which are aggregations of individual shareholders, are merely paying a reasonable insurance premium against defeat by an enemy.

Senator Spicer - The shareholders themselves also pay tax.

Senator ARNOLD - That is so.

Senator McBride - What about private companies?

Senator ARNOLD - I shall not enter into a lengthy discussion of that subject at present. The armed forces of the Empire are protecting the wealth as well as the lives of the people. They are protecting our liberties, and I suggest that, if some of our men are called upon to risk their lives in order to ensure the safety of the nation, it is not too much to ask companies and individuals who can afford to do so to assist the Government financially in order to win the war.

I have no particular animus against bankers. I believe that the banking system of Australia has grown into a fairly solid organization, but if the private banking system be left uncontrolled, it can become a serious menace to the economic life of the community. Banking affects every citizen in the community because by the release or the restriction of credit it exercises a considerable control over industry. The banking system so controls our economic life that it in a large measure determines the lives of our citizens. In peace-time, we have been able to carry the burden of a private banking system without any very great effect on the national life.

Senator McBride - The honorable senator believes that it is a burden?

Senator ARNOLD - I believe that it is a burden because, unless properly controlled, it can do an immeasurable amount of harm to our economic system. In war-time, it would be suicidal to leave the control of the banks in the hands of individuals. When deposits are placed in a bank, the banks are able to lend over and above the amount of such deposits.

Senator McBride - Has the honorable senator observed that from a study of their balance-sheets ?

Senator ARNOLD - I am not particularly interested in their balancesheets, but what I have said is a fact. The Macmillan Committee onFinance, whose report was published just after the last depression, set out clearly that it was the practice of the private banks in Great Britain to lend nine or ten times the amount of money deposited in their vaults. If the amount of credit passing into the banks is allowed to flow out in further credits it will lead to inflation. With cheap money and plenty of credit available, it would be possible for a speculative period leading to inflation to occur. The Royal Commission on the Monetary and Banking Systems recommended a system of bank control which should have been instituted four years ago when the report was submitted. I should like to see that control continued after the war, because I believe that in the post-war era there is likely to be a period of deflation. If left uncontrolled, the banks will bring about a deflationary period because of the necessity to protect their securities by calling in overdrafts.

Senator McBride - Deflation destroys their assets.

Senator ARNOLD - That happened in 1931, and it will happen again. The bankers have taken no real objection to the budget proposals with respect to banking. They have very good reason for that; they know that under the control of this Government, the Commonwealth Bank will become a central reserve bank.

Senator Spicer - I thought the party to which the honorable senator belongs wanted the Commonwealth Bank to become a trading bank?

Senator ARNOLD - I believe that it should be a trading bank. However, the point I make is that the regulations which the Treasurer is bringing in will make the Commonwealth Bank a central reserve bank and place the banking system of Australia on such a foundation that the Commonwealth Bank will have to carry any burden that may result. It is not my intention to pursue that subject any further. The budget sets out to organize a full war effort, and I believe that it contains proposals which offer the best means of achieving that end.

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