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Thursday, 25 May 1939

Mr BLACKBURN (Bourke) .- The honorable member for Martin (Mr. McCall) destroyed the whole of the case for his amendment by his closing sentences. This clause is a permissive clause. It does not compel the Ministry to do any of the things listed in it. Subclause 1 reads -

Subject to the directions of the GovernorGeneral and to the next succeeding sub-section, matters to be administered by the department shall be matters relating to-

There is no need for me to cite those matters. Sub-clause 2 reads -

The Governor-General may from time to time determine the extent to which or the conditions upon which any of the matters specified in this section may be administered by the department.

Sub-clause 2 sabotages the whole of the provisions of sub-clause 1 by providing that the Governor-General may in each case prescribe the extent to which and the conditions upon which these matters may be administered. It means that although the Governor-General has power to direct that prices shall be controlled and limited,, he need not exercise it. He may withdraw that matter from the con* trol of the Minister or impose such restrictions upon it as to make it unworkable and favorable to the manufacturers..

Mr White - We can deal with that later.

Mr BLACKBURN - The Acting Leader of the Opposition (Mr. Forde) has circulated an amendment which makes it imperative that in no case shall the Governor-General, that is to say the government of the day, withdraw from the scope of this legislation the power to limit and control profits. That means that, although the Governor-General may give a direction fixing the extent to which, or the conditions upon which, any other power may be exercised, he shall not be able to deny full exercise of the power to limit or control profits. The honorable member for Martin justified his amendment by saying that the Government need not put it into force unless it desired it. I do not see what advantage an amendment like that would be to the bill. Like every body else, I want to curb the profits made by the producers of munitions, but realize that we are largely in their hands. If this measure is at all necessary, the production of munitions is an urgent consideration for this country. The Commonwealth has not sufficient establishments to produce all of the munitions that the Government contemplates ; and it would be useless for the Government to establish a number of factories knowing that, if their need disappeared through war being over, it would be unable to apply them to the production of goods in time of peace. That was well settled in. the High Court's decision in the case The Commonwealth versus The Australian Commonwealth Shipping Board, which was decided in 1926. I shall read the relative passage from the majority judgment of four justices, on page 9 of volume 39 of the Commonwealth Law Reports. The justices said -

Despite the practical difficulties facing the Commonwealth in the maintenance of its dockyard and works, the power of naval and military defence docs not warrant these activities in the ordinary conditions of peace, whatever be the position in time of war or in conditions arising out of or connected with war.

The activity in which the Australian Commonwealth Shipping Board had tried to engage was the supply, erection and maintenance of turbo-alternator sets for the power house of the municipal council of Sydney at Botany Bay. The doing of that was challenged by the Attorney-General of the Commonwealth on behalf of private manufacturers ; that is to say, the validity of a Commonwealth administrative act was challenged by the chief law officer of the Commonwealth. The High Court held that, although, in time of war, the defence power was enlarged for the successful prosecution of the war, in time of peace the defence power shrunk to its former dimensions and forbade the Government to apply, for the production of peaceful commodities, a factory which had been erected in the exercise of the defence power. That, of course, makes it uneconomical to have a large number of Commonwealth-owned factories. We are thrown back, therefore, on the use of private agencies, and we are largely in their hands. If the- first consideration is the production of munitions, the limitation of profits can only be a secondary consideration. I do not think that even the honorable member for Darling Downs (Mr. Fadden) could state what should be the proper rate of profit. I cannot understand the basis of calculation suggested by the honorable member for Martin. I cannot understand why 6 per cent, should be based on the assets of the manufacturing company, and why it should not be based on the costs of production.

Mr Fadden - That would give a far greater measure of profit.

Mr BLACKBURN - I do not suggest that that should be the basis. But that does not make me understand why the rate should be based on assets. I cannot understand why it should not be based on costs. .What I understand by an attempt to regulate the price of a commodity, is a f formula which allows for costs of production and all other things, and then fixes the rate of profit. I have no capacity to say what should be a proper rate of profit, but my incapacity I share with every honorable member, with the possible exception of the honorable member for Darling Downs. I want to understand why it is proposed that the cost of any particular commodity produced by munitions factories, the cost of a gun for instance, should be based on a certain percentage of the assets of the company. It would appear that the cost would vary according to the resources of the factories.

Mr Fadden - It is profit, not cost.

Mr BLACKBURN - That means that the rate of profit would vary with the company. In each case the Government would have to ascertain what were the assets of the company before it could say what price the company could ask for its commodities.

Mr Fadden - I take it that the only assets concerned, would be such assets as were employed in tho manufacture.

Mr BLACKBURN - How is that going to be ascertained? It seems to me that the Minister is being asked to embark on an impossible inquiry. It seems comparatively easy to ascertain labour costs, material costs, overhead costs, allowances for depreciation and so on, and that, I understand, is the basis always used by costing accountants. But this business of determining the rate of profit on assets seems to impose on the Ministry a problem that varies with every particular contract and every particular piece of product.

Leaving the amendment for the moment, the position taken up by the Ministry, seems to be this : " There is no reason to suspect that the producer of munitions will seek to make a high rate of profit ". Experience indicates that such producers, in fact any persons who contract to supply the necessities of the Government in a time of need, take full advantage of the position. They will act up to that principle by getting as much profit as they possibly can. Full advantage of the necessities of this country will be taken by the people who produce commodities for the use of the Government. Then it is said that all that is necessary is a voluntary advisory panel of unpaid, patriotic person's. When I say that they are patriotic, I do not imply that they are unpatriotic. I think that it is a fine thing that they have offered their services, but it would be better to have a permanent staff whose only interests are the interests of the Government to supervise and check this matter. 1 believe that that will have to be done. If profits are to be restricted effectively there must be appointed persons whose sole duty it will be to examine all contracts made in order to ascertain the amount and rate of profit made in respect of every contract. That would be a tremendously difficult task. If the Government is determined to apply the principle of controlling and limiting profits made out of the manufacture of armaments and munitions, it will be necessary to have a permanent staff of officials whose duty it will be to concentrate on this work. It could not be done properly by persons working in an honorary capacity, or part time. I doubt that this Committee is competent to say what should be the maximum rate of profit, and to lay down once and for all an inflexible, Procrustean rule. It is not competent to determine the basis upon which profits should be computed, whether on costs of production or on the value of assets.

Mr Gregory - Could not the position be met by inserting a provision instructing the Government with regard to the matter ?

Mr BLACKBURN - The Acting Leader of the Opposition (Mr. Forde) has notified his intention to move an amendment to provide that in no case shall the Governor-General withdraw from the purview of the Minister, power to control or limit profits. That is the way I approach the issue. I may not agree with m: ny honorable members, but the view taken by the Opposition is that, but for the constitutional objections and the difficulties caused by the lack of sufficient time, the production of munitions should be a government monopoly: We realize that the shortness of time in the first place makes that difficult, and also that if a large number of Commonwealth defence factories were to be established, the Government would be imposing upon this country a dead weight of capital costs in respect of establishments which could not be employed economically at the conclusion of any war. Consequently, large staffs of executives and skilled workmen would have to be dispersed. Private manufacturers, on the other hand, have in existence the necessary establishments and labour staffs which are now engaged in the manufacture of peace time requirements. In time of war these could quickly be converted to the production of munitions and other defence supplies, and when the time of emergeney had passed, they could again be employed on peace time needs. Therefore, whether we like it or not, we are forced to enlist the co-operation of private manufacturers in order to ensure adequate supplies of defence equipment in a national emergency. But if we are forced into that position we say that profits must be controlled, and that the mechanism for the control of profits must be as flexible as possible. I repeat that the committee is not in a position to lay down an inflexible and unalterable basis for the computation of profits.

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