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Thursday, 25 May 1939

Mr JENNINGS (Watson) .- It was expected that this hill would arouse a great deal of interest and lead to a keen debate in this Parliament, because in all countries which, to-day, are engaged in the production of armaments, legislation of a similar form is receiving attention.

Clause 5 contains the most vital provisions. It deals with the functions of the new Department of Supply and Development and specifies the various matters to be administered by it in time of war or in a time of emergency such as we are now passing through. The new department will undertake the supply of all essential defence requirements. In order that profits made by private manufacturers of munitions may be adequately controlled, .the bill makes provision for the setting up of an accountancy panel to advise tie Government on the control of prices and profits. It is to this particular aspect of the measure that I wish to direct attention. When this legislation was being drafted, the Government sought the advice of many industrial leaders and men prominent in scientific :and commercial spheres. No doubt it was the sound advice given by thos© people which prompted the Prime Minister (Mr. Menzies) to say, in the Course of a speech delivered in Sydney recently, that if he could only have at his command half a dozen of the 'best business brains available in Australia, he would feel quite happy in carrying on as leader of the Commonwealth Government.

The Government has brought down this important legislation to ensure the safety of the nation. Its provisions, as I say, include a proposal for the setting up of an accountancy panel to advise the Government in regard to the making of profits by private manufacturers of munitions and other war supplies in a time of emergency. I emphasize the word " advise " because that was the word used by the Minister for Supply and Development (Mr. Casey) in his second-reading speech, and because the accountancy panel will not itself undertake the actual work of checking. At least I presume that that is so because of the remarks made by the honorable member for Lilley (Mr. Jolly) and the honorable member for Darling Downs (Mr. Fadden), both of whom have reputations as public accountants.

Members of the Opposition have referred to several gentlemen who will be members, of the advisory bodies, such as the accountancy panel, as being representatives of big business interests. I suppose that that in a sense is true. Even the ' honorable member for Indi (Mr. McEwen), in his speech on the second reading, referred to certain powerful interests which were not too remote from the Government, as if he feared that some unholy influence might be exercised on the Government in connexion with the letting of contracts for the manufacture of munitions. I do not subscribe


to these fears, but I believe it to be in the public interest that we should do our utmost to prove them groundless. I go further and say that, in view of the existence of those business interests, we should take every possible step to prevent any undue influence from being brought to bear, any undue prices from being charged, and any undue profits from being made.

The Government is wise, in my opinion, in not desiring to expand its munitions factories more than is absolutely necessary. We all know that once a government associates itself with anything actively, it is very difficult to break that association. Of what use would be the expansion of government munitions and military clothing factories entailing the engagement of a large number of additional employees if all our fears about war should prove to be groundless? Obviously we should have incurred the expense of installing new plant and producing new equipment for nothing. I therefore suggest that it is far better to make arrangements with private industrial undertakings for the establishment of annexes in order to contribute to the country's requirements in case of need. The demand for some of these requirements - for instance, aeroplanes and, probably, motor cars - will," no doubt, continue to increase with the years, but we all fervently hope that the necessity to manufacture large quantities of munitions of war will not continue. However, certain experimental orders have been given to private manufacturers, and we cannot yet say how many more order will follow, or whether they be for complete articles or for parts.

In several States there are large engineering industries engaged in the manufacture of parts, for assembly in Sydney and Melbourne. Also associated with this work are vast industrial organizations and subsidiary undertakings engaged in the production of raw materials and in turning out manufactured goods. How is it suggested that work in these workshops in all parts of the Commonwealth would be policed? Obviously this work could not be done solely by an advisory panel. How are we to arrive a't a fair profit basis? Referring to this matter last night, the

Minister for Supply and Development spoke of the work of the Contracts Board.: I believe that the system of inviting tenders for all government requirements is satisfactory to the departments, and fully protects the taxpayers. The Minister told us that, according to a departmental estimate, 60 per cent, of the amount paid for items bought by tender is paid away in wages, and 20 per' cent, is expended on the purchase of materials, leaving a balance of approximately 20 per cent, to cover taxation, insurance, interest, charges for premises, depreciation and profit. That seems to me to be a very fair estimate. I agree with the honorable member for Darling Downs that the procedure in connexion with the letting of contracts by the Government is sound for the taxpayer. Costs are brought to such a low level that many firms are unwilling to quote, and in some instances will not offer a price at all.

Dealing with the question of annexes, the Minister said that in the assessing of profits, the following items were not to be taken into consideration as overhead charges: Interest on capital, selling expenses, advertising, bad debts, income taxes, debenture interest, reserves, commissions and insurance premiums on life policies.

The right honorable gentleman said that profit was to be based on the cost of production, which in turn would be computed only on direct wages, direct materials and direct expenses. He also suggested that profits should be on the basis of <£ per cent., which was equal to the interest payable on Commonwealth bonds. This seems to me to be a very fair basis on which to work, and I am prepared to accept it.

Now in regard to the question of checking costs as the honorable member for Lilley pointed out, there are many accountants who specialize in work of this kind - public accountants who are familiar with the ramifications of big business enterprises and their subsidiary organizations. If the Government desires a proper check to be made, thus ensuring that no profiteering is carried on, specialists of this kind . should be employed. It is possible that some of these men would be prepared to act in an honorary capacity, but in my opinion nobody should be asked or expected to undertake this work without payment. Like any one else, these men have to make a living and, moreover, I think the' taxpayers would prefer that they bo paid. Then it could not be suggested that undue influence was being- exercised. _ If government officials could act in conjunction with these specialist accountants so much the better. I make the suggestion, not because I doubt, for one moment, the bona fides or the patriotism of those who control Australian industry to-day, but because its adoption would allay any possible suspicion on the part of members of the Opposition and would, I believe, give general satisfaction to the taxpayers' of the Commonwealth.

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