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Thursday, 16 November 1939

Sir FREDERICK STEWART (Parramatta) (Acting Minister for Supply and Development) . - by have - In the general review of the transfer of the defensive machinery of the Commonwealth from a peacetime to a wartime basis, it is my duty to place before honorable member;ft statement of the steps that the Department of Supply and Development has taken in that, regard.

The activities of the department cover a wide range, including munitions supply from Government factories and armament annexes, contra.ct purchases running into many millions of pounds, aircraft construction on a scale and of a form not hitherto attempted in Australia, and plans for the maintenance and control of supplies of essential commodities, both of raw materials and of manufactured good fi.

While I propose to deal with those subjects in some detail, I should like to remind honorable members that in the time at, my disposal it is possible only to pick out. the high lights. There are also certain particulars of armaments and of production figures which it is obviously inexpedient to discuss. I therefore ask honorable members to bear in mind that thi* statement does not purport to give a complete and detailed account of the extensive operations which the department has completed during the ten weeks that have elapsed since the outbreak of war. Tt will, however, reveal that these opera tions have been of such a magnitude and such complexity as completely to justify the decision of the Government earlier in the year to place the function of defence supply under the control of a separate department, working on foundations which were soundly laid in past years by the Department of Defence.

At the outbreak of war the Government munitions factories were filling the requirements' of the defence services for the reserve stocks of munitions necessary to. pluto thom on a sound footing to meet the first shock of a war, and to enable hostilities to be maintained while the productive resources of the country were being organized. It was intended in the development programme of the time that this objective should be reached by June, 1941. The number of employees was. then about 6.000 and the weekly wages bill was £26,000. Generally* the operations were being conducted upon a single shift basis.

Immediately war commenced, the manufacturing programme was accelerated. In most of the factories, two or three shifts are now being worked, and additional shifts are being established wherever practicable. In the institution of second and third shifts, the necessity for additional supervisory staff and manufacturing plant is a limiting factor. This staff is being engaged and trained, and large orders for machine tools, placed both locally and abroad, are greatly increasing the manufacturing capacity. Since the Srd September, additional employees directly engaged for munitions factories have numbered more than 2,000, with a consequential increase of thewages expenditure to £3.6,000 weekly. Many more have obtained employmentthrough the purchase of machines and materials. One result of the war demand has been that various stores and materials which it, would not have been economical to manufacture in -Australia in. pence time are now being produced hero as the result of negotiations with manufacturers. It is hoped that this will in the permanent establishment of new industries in Australia.

Apart from the extensive purchases of stores and materials on account of current production orders in government factories, the -Government, has authorized the expenditure of a very large sum on reserve stocks of materials, so that there in ay be no Stoppage of production through interruption of supply. The influence of these purchases has been reflected through a wide range of industry, from textile and leather goods to steel, copper and zinc products.

It will be obvious that the increased productive capacity of the Government's munitions factories and the associated armaments annexes cannot be given in any detail, but in the ten weeks of war the variety of manufactures has increased greatly, and the volume of output has increased several times compared with the pre-war figures. That is only the beginning. Factories ave still being built. Authorizations already in hand for munitions will exceed £6,000,000, and others have been notified which will bring the total up to £8,000,000 or more. Probably three-fifths' of that amount will be spent directly in wages in the munitions factories and annexes, about one-fifth in stores and materials, most of which will also go into wages, and the remainder in overhead expenses and services, such as power and lighting; most of which also will ultimately be expended. in wages.

Among the developments in munitions, production which might be disclosed is that of a modern and powerful type of anti-aircraft gun. This weapon is being manufactured in quantity at the government ordnance factory, and is rapidly approaching the finishing stage. There is so much confidence in the quality of this product that an order has been received from overseas foi- a substantial quantity. We are also making anti-tank guns and trench mortars at that factory. This work is additional to the lighter type of anti-aircraft guns previously manufactured at the factory, Of which there is a quantity now in service.

At the Small Anns Factory, we arc making three types of machine guns, including a large order for overseas, and also an extensive range of Lewis gun components. A big overseas order has also been placed for rifles. It is expected that employment at Lithgow, already approaching the 1,000 mark, will be appreciably increased during the next few 'months. Bren gun production is also being accelerated as fast as possible.

Unfortunately, we have had to draw on British sources for a number of gauges to complete this work. Urgent representations have been made to ensure that these essential gauges shall be sent out as quickly as possible.- At the small arms ammunition factories, hundreds of additional employees have been engaged during the last ten weeks, and the output has been greatly increased. All the standard types of small arms ammunition are being produced, as well as three new ones. Plans are being developed for several additional types.

Similar progress is being made in regard to the manufacture of gun ammunition. Our own production of fuses and Other brass components of gun ammunition has been greatly increased; we are also getting assistance from several commercial firms.- That also applies to the production of shell and shell forgings.

In all cases where private firms are engaged in the production of munitions components, including those operating armaments' annexes, a. system of costing is being worked out by the department in consultation with the Advisory Panel of Accountants. This will ensure that the rate of profit-- or the management charge as it might well bc termed- -will he kept down to a minimum. This system will be found to meet tho undertakings in this regard previously given by the Government. The department maintains a Staff of costing experts for this special purpose acting in collaboration with the advisory panel.

I should like to take this opportunity to pay a very sincere tribute to the gentlemen composing the panel, who are serving in an honorary capacity at considerable sacrifice to their own professional and business interests.

At the government projectile factory, no less than 35 different varieties are being manufactured, including aircraft bombs, trench mortar bombs and hand grenades. Several commercial establishments are working on shells and bombs. The explosives and filling factories are particularly active. In some sections, output has been increased to ten times the quantities obtaining a year ago, and production is constantly being increased.

Honorable members are of course aware that, under the development programme launched by our predecessors in 1937-38, a sum of £3,000,000 was set apart as capital expenditure for increasing the productive capacity of the government munitions factories. The works were to be completed by 1941. In the brief time that this Government has been in office, it has speeded up the construction programme. It provided another £2,000,000 to strengthen the manufacturing capacity soon after war broke out, and proposals to make further extensions to the munitions factories involving an expenditure of another £1,000,000 are under considera-tion. Thus, within ten weeks, the Government has doubled the authorized expenditure upon munitions factories as contemplated a couple of years ago.

The new works already undertaken under the expanded programme include considerable increases of the productive capacity of all the established factories, so that not only are the quantities of output being increased, but also facilities are being installed for production of some important new types of armaments not hitherto undertaken in Australia.

New munitions factories already approved include a second factory for production of cordite and T.N.T. in Victoria, a second small arms ammunition factory in Adelaide, >and a second factory at Albury, New South Wales, for filling explosives into ammunition.

What has been done and is being undertaken gives effect to the Government's policy of munitions production. Such a policy is necessary, unfortunately,, but it has a certain degree of economic merit apart from defence, since it retains money in the country and provides employment. Lately there has been a demonstration of its value from another aspect, a highly important one, too - that of Empire defence. For some years we have been receiving moderate orders for munitions from other dominions. We have sold these munitions at prices satisfactory to them and to ourselves, and we have reason to believe that they appreciated the facilities we were able to offer. Not the least gain was the engendering of confidence in the quality of munitions produced by government factories in this country.

A few days ago we received an effective tribute " to that confidence through my colleague, the Minister for Supply and Development (Mr. Casey), who advised me from London that he had obtained orders from the British Government for various types of munitions amounting in value to several millions of pounds, with prospects of more to follow.

The filling of these orders will be carried out at .various factories in the Commonwealth and will result in an increase of the number of munitions factory operatives, now standing at 8,000, to about 12,000 within the coming twelve months.

Thus not only is it accepted that the quality of our munitions is good but also our policy of developing our own resources for munitions production has been justified by this recognition that we are a factor in Empire defence.

The cordial relations already existing with the unions whose members are employed at the munitions factories have been maintained. An agreement has just been concluded with all of the unions concerned respecting wages and conditions in the Victorian Factory Board establishments.

There Ls every reason to believe that work at munitions factories is carried on under conditions which are appreciated by employees. This, of course, is conducive to harmonious relations and wholehearted co-operation. No better example of this need be mentioned than the action of the girls in the ammunition factory who voluntarily offered to sink, for the time being, their opposition to night shift in order to enable adequate reserves of small arms ammunition to be obtained. The Government appreciates that gesture as an indication of the spirit in which munitions production is being undertaken by the employees.

It was realized some months ago that war conditions would create a demand for tradesmen in metal industries which would be difficult to fill. As the result of a. series of meetings of experts and a careful analysis of requirements, it was decided to take steps immediately to increase the number of skilled workers by 500 tool-makers and 2,000 metal tradesmen.

Mr Beasley - What experts were eonsuited? Were representatives of the workers included among the experts?

Sir FREDERICK STEWART - Yes ; Mr. Roberts, the representative of the Australasian Council of Trade Unions, was consulted.

The facilities and staffs of the State technical colleges and schools will be utilized by arrangement with the State authorities concerned. An advisory committee has been appointed, together with a director who will co-ordinate the requirements of the armed services, munitions factories, aircraft construction branch, &c, and will arrange suitable allotment of trainees to the several States.

Tool-making equipment is being purchased, and applications are being invited for tool-maker trainees immediately. The Air Force and Army have already commenced enrolment of pupils at technical colleges,' and it is expected that the scheme will shortly enable us to cope with the increasing demands for skilled men.

I turn now to armaments annexes which are 'being established in order that the output of ammunition components from the government factories proper may be supplemented to equal the quantities which it is estimated may be required. The great bulk of the plant and equipment required is now on hand; in some cases it has been or is being installed ; in others it is awaiting the completion of the buildings. Eight of these annexes have been proved and are in a position to fulfil orders, and ten more should be ready for the " try-out " of plant by the end of this year.

Acting under the powers conferred upon1 it by the Supply and Development Act, the department has undertaken a wide survey of Australian industry. A very complete census is being taken of in'dustry and of merchant stocks, the form of which was determined in consultation with the Advisory Panel on Industrial Organization and representatives of individual industry. This will not only enable the Government to determine the productive capacity of the Commonwealth but will also provide an accurate estimate of the requirements of industry in raw materials for 'both war purposes and essential civil needs.

The advent of war has, of course, produced a crop of problems connected principally with short supply of materials and commodities,, owing either to interruption of the supplies from overseas or to the heavy demands suddenly made to meet the needs of the fighting services. Some dislocation was inevitable, yet, although the burden of work on the staff in my department has been! extremely heavy, dislocation has been surprisingly small. ' The assistance rendered to industry generally has been appreciable and appreciated.

I cannot pass from this subject without expressing the very sincere appreciation of the Government of- the work so ably and willingly done by the members of the Advisory Panel on' Industrial Organization. In! the inspection and selection .of workshops for the establishment of armaments annexes, in the drafting of the industrial questionnaire, and in very many other directions, the ability and experience of these gentlemen, voluntarily placed at the disposal of the Government, has assisted very materially towards the realization of one of the cardinal articles of its defence policy. I refer to the association of private industry with Government instrumentalities in the production of munitions, in such a manner as to secure against any possibility of the growth of a private armaments trade.

In the means adopted to implement this policy, namely, restriction of profits, supervision1 and control over every stage of manufacture, limitation of private manufacture to unassembled ammunition components and, in the majority of cases, government ownership of plant and buildings, the Government has been supported most ably by these representatives of private industry, In the outcome it has been .possible to combine all of the advantages of public ownership of munitions plant with the experience and efficiency of highly developed private industry.

In addition to looking after the needs of our own services, we have received requests for requirements for other parts of the Empire, and wherever it has been within the capacity of the country to make the items available, supply' has been undertaken. The requests have been directed principally to foodstuffs and requirements for field and structural engineering work. In some cases quantities despatched have been relatively large. The policy adopted by my department in regard to overseas orders is to ensure that the needs of our defence forces and of the Australian civil population are given' precedence. Consistent with these requirements, every assistance has been and will be accorded to other parts of the Empire requiring supplies from Australia. Honorable members will, of course, appreciate that I am unable to quote specific instances in this regard.

The sudden and enormous requisitions received from defence services to meet war-time requirements necessitated a re-organization of the Central Contract Office, which has been sec- tionized, each section being placed in charge of an officer long experienced in the purchasing of departmental requirements. In order to handle the increased business, it was necessary to augment the staffs in the central and State offices. The central staff in Mel-, bourne was increased from 32 to 80 and that in Sydney from 12 to 32. Increased staffs were also provided in the District Contract Offices in other .States.

The Contract Board was reconstituted, and a business adviser, Mr. E. V. Nixon, C.M.G., was added to its personnel. The Contract Board has also had the benefit of consultation with Mr. Norman Myer in regard to textiles and clothing. Mr. Nixon has already given valuable service as chairman of the Advisory Panel of Accountants, and his acceptance of the heavy duties which have been placed on him as an honorary consultant to the Contract Board is deserving of the highestcommendation. The assistance and advice of both of these gentlemen, so generously given, has earned the gratitude of both the board and the Government. These arrangements were speedily completed, with the result that the details involved in transacting business in a huge volume under the markedly changed war conditions were soon well in hand. The Contract Board has functioned effectively and smoothly.

Complaints have been received, and impatience expressed in certain quar- ters, regarding what some consider to bc unnecessary delays. The critics overlook the time-lag involved in negotiating with industry to make types of articles in which many of tha factories concerned are inexperienced, and the period required to get production under way. In certain of its transactions, the Contract Board has found difficulty in arranging with industry to produce supplies at rates which the board regarded as reasonable. The board's aim has been to keep costs at pre-war levels, consistent with unavoidable increases, such as are due to advanced costs of materials. For the period from the 1st September to the 13 th November, 1939, the purchases by the contracts organizations of the department represent an expenditure of more than £3,000,000. Whilst the transactions involving the largest expenditures Iia ve been arranged by the Centra] Contract Board, the District Contract Boards in the various States have also placed large orders. A detailed list of the transactions would cover many reams of paper, and. therefore no attempt has been made to give an indication of the range of supplies or services arranged. Some particular instances may be given of ' the extent of these orders. Extensive mechanization of the Army has called for the purchase, from various sources, of 4,000 motor vehicles of all types, ranging from heavy lorries and artillery tractors to motor-cycles. The total cost of these purchases has not yet been determined, hut honorable members will recognize that this is a business transaction on a .scales surpassing anything that has ever been attempted in the automobile industry in this country. Contracts have been negotiated for the purchase of huge quantities of clothing and personal equipment, cither by the method of impressment, or through the normal contract channels.

The first problem was the task of obtaining sufficient quantities of materials for the clothing which was immediately required by the naval, military and air services. Peace contracts were inadequate to meet the needs of the manufacturing programme of war requirements. In regulation woollen clothing alone, 11,000 uniforms were required each week. This, with a margin of safety, necessitated the woollen mills manufacturing a Minimum of 60,000 yards of woollen materials weekly. In addition, cloth had to be provided for such items as caps, water bottles, bottle covers, and gaiters. The department, therefore, aimed at a weekly production of 100,000 yards of piece materials, including flannel for heavy shirts and singlets. The number of blankets required amounted to 240,000. Although certain peace-time contracts were in operation, it would have been beyond the capacity of these mills, even if they concentrated their entire plants on defence work, to have produced anything like the quantities of textiles and blankets required. In order to meet the situation, the department 'convened a conference of representatives of the woollen mills throughout the Commonwealth, with the object of allotting these large quantities of cloths, blankets, &c, to the various manufacturers according to their capacities. At this conference orders were immediately placed for the total requirements. Where mills were current contractors, arrangements were made for them to increase their output to the greatest possible degree. Arrangements we're made for new firms, not previously experienced in manufacturing service cloths, to be assisted by the department's previous contractors. Weekly delivery rates, and dates upon which contracts were to commence, were fixed. Unfortunately, many of the new firms have not been able to adhere to those dates. In the majority of cases, however, their initial difficulties have 'been overcome, and indications are that the textile industry will shortly be manufacturing :j3,O00" blankets and 100,000 yards of woollen piece materials weekly. The gross total of these orders exceeds 1,000.000 yards. In the meantime, large deliveries have come to hand from those firms which had already mastered the technique of producing these supplies.

Arrangements were also made with several of the Australian cotton mills to increase their production of cotton cloth such as drill and jean to approximately 70,000 yards weekly. These materials are used for the production of working dress uniforms and shorts, also for linings and trimmings for the woollen uniforms. The total orders placed for such cotton piece goods approximate 1,000,000 yards.

The next step was to arrange for the materials to be converted into articles of uniform. The total requirements of the combined services aggregate 200,000 woollen uniforms, 120,000 greatcoats and approximately 250,000 cotton garment f of different types. As in the case of the woven materials, the department called a conference of clothing manufacturers at which arrangements were completed for the production of woollen garments at the rate of 4,500 greatcoats and 11,000 uniforms weekly. These were additional to large contracts which were in existence for the manufacture of working dress uniforms, shirts, overalls and other miscellaneous items. Contracts for clothing have been lei with 50 firms, the majority of which have now commenced production. It is hoped that within a very short period the various services will be receiving deliveries at a rate which will not only be sufficient for their requirements but will also enable reserves to be built up against future needs. The total expenditure on clothing alone has been over £600,000.

In order to ensure the greatest number of felt hats being available within the shortest possible time, the department called all Australian hat manufacturers into conference and arranged for them to take up contracts in quantities which had relation to their outputs. These discussions resulted in arrangements being made for approximately 70,000 hats to be supplied within a comparatively short period. Some of these firms held contracts at 'the outbreak of war, but they increased their deliveries, and immediately these contracts are completed they will continue with the production of the additional requirements.

The board is also purchasing throughout the Commonwealth all requirements of foodstuffs for the three defence services at sea, in military camps or in Air Force units. These transactions have run into many hundreds of thousands of pounds. Large quantities of foodstuffs are also being purchased for shipment to other parts of the Empire.

Ail urgent requirement in tents for camps was met by organizing the tent manufacturers throughout the Commonwealth. In addition, provisional arrangements have been made to purchase and hire large-size tents, such as marquees, and store tents from public bodies and private persons until the canvas goods trade is in a position to undertake manufacture. The aid of the various State railway departments has also been enlisted.

Large demands from the navy, air, and military services for cutlery, crockery and mess utensils have been met.

Footwear orders were recently placed for approximately 129,000 pairs of boots and shoes for the fighting services. Considerable difficulty attended the placing of these orders, owing first, to the dislocation of the hide and leather markets consequent on the outbreak of war, and, secondly, to the fact that the Boot and Shoe Manufacturers Association of Victoria and New South Wales met and fixed prices for service footwear which were considerably in advance of current quotations. Most of the manufacturers in those two States, when tendering, adhered to the prices so fixed, with the result that not one pair of boots was ordered from New South Wales, and relatively few from Victoria. The price fixed by the manufacturers conference was almost 40 per cent, in advance of the immediate pre-war tenders. On being advised of this, I gave instructions that this attitude should he rigorously combated, even if it involved the use of our power of factory requisition. Such action, however, proved unnecessary, as we have been able to place orders for the whole of our requirements of 129,000 pairs at an average price of 3s. 3d. a pair lower, than that demanded by those manufacturers to whom I have referred. Had we not been able to combat successfully the price rise to which I have referred, the cost of this single item would have been £20,000 greater than the tenders which we have arranged. I make no apology for publicizing this incident, as I wish to give the most emphatic warning to all potential suppliers of defence requirements that the power to ensure the protection of the national resources - and these powers are not altogether anaemic - will be used without hesitation, and without discrimination as to individuals or State location.

Defence requirements of jute goods have been difficult to meet owing to the fact that local stocks could not satisfy the combined needs of both defence and civilian requirements. Despite this fact, 190,000 sandbags, 60,000 palliasses and other hessian goods have been purchased. To relieve the strain on local stocks of hessian, 60,000 of the total of sandbags purchased have been obtained by buying once-used sugarbags and converting them into sandbags. Every effort has been made to prevent dislocation of essential civil needs. With the object, both of ascertaining precisely the destination and ultimate use of hessian coming into Australia, and of - meeting urgent defence needs, a shipment amounting to 557 bales of hessian arriving in Australia was temporarily impressed and full particulars were obtained as to the purpose of the individual consignees. All hessian destined for essential civil nec, ds was immediately released, but those importers who had purchased merely for casual resale were given the opportunity to sell the material to the Department of Defence at a reasonable price, or to manufacture it into palliasses and sandbags. In addition, action has been taken to order from India 550,000 yards of hessian, and to assist the authorities in India in their efforts to steady the jute market in Calcutta. Purchase and shipment have been left in the hands of the Government of India. The civil supply section of the department has also taken effective measures to meet a threatened shortage of cornsacks.

Less spectacular than munitions supply perhaps, but certainly of equal importance in the prosecution of the war, has been the work allotted to the civil supply section. Maintenance and, where necessary, control of essential commodities, have occupied a great deal of attention by this section. The department has received from the British Ministry of Supply authority in Australia for priorities for export from the United Kingdom. On its recommendation priority certificates will be issued in the United Kingdom. Already many applications for such certificates have been made and granted.

As soon as an import licensing system is introduced by the Department of Trade and Customs, this department will put into operation a system appropriate for priorities of essential goods from the United Kingdom and elsewhere. This system will be in many respects similar to that conducted with such success in the last war by Mr. (now Sir Walter) Leitch.

Although the Government has not found it necessary to introduce a system of petrol rationing, steps had already been taken, before the outbreak of war, to prepare a complete scheme for rationing, should circumstances so demand.

Many conferences have been held with representatives of industry, such as timber and paper-making. These have dealt, with the provision of locally produced substitutes for imported commodities, as well as the relative importance of different uses of imported goods. It has been the rule, wherever practicable, to use the administrative machinery of the State Governments to dealt with these questions.

The civil supply section has also dealt with a large number of miscellaneous inquiries from manufacturers and distributors in Australia regarding supplies of raw materials and manufactured goods. Threatened shortages of commodities, such as chemicals for manufacturing purposes, furred skins for hat manufacturing, various metal manufactures, including wire, galvanized iron, steel, and the like, have been investigated. In most instances it has been possible to place the inquirers in touch with potential suppliers to enable a business to be carried on. Where the goods have to be imported from overseas, detailed inquiries regarding relative urgency have been made before making any recommendations for export permits in the country of origin.

The department has also received many inquiries from overseas for the supply of all kinds of goods produced in Australia. These inquiries have been dealt with, having regard to Australia's own requirements for defence and civil use.

One of the outstanding achievements of our war effort is to be found in the development of Australian aircraft manufacture. Arrangements commenced on the 1st July for the manufacture of Bristol-Beaufort aircraft are proceeding satisfactorily. The United Kingdom Air Mission recommended in March, 1939 -

(1)   that Beaufort aircraft be manufactured in Australia for the

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