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Wednesday, 16 December 1914

Debate resumed from this day (vide page 1973).

Senator ALBERT GOULD (NEW SOUTH WALES) - Colonel O'LOGHLIN (South Australia) [4.55]. - We have before us by far the biggest Budget ever presented in Australia, the expenditure having gone up by thirteen or fourteen millions, mainly on account of the war, but, as Senator Millen says, it has been obvious for the last year or two that our revenue and expenditure would not balance . It is arguable whether we could not have balanced them without fresh taxation, except the revision of the Tariff, but for the war. Seeing that the deficit would be only £1,300,000, it is quite possible that a revision of the Tariff and the transfer of some expenditure on public works to Loan Account would have been sufficient to carry us through without resorting to extra taxa tion. We may fairly claim, therefore, that the extra taxation imposed is due almost entirely to the outbreak of the present calamitous war. Complaint has been made that, in their efforts to meet the deficit, the Government have encroached upon the taxation domain of the States. Every form of taxation is covered in some way by the States. What particular form is left exclusively to the Commonwealth ? Honorable senators will probably say the Customs and Excise duties, and if these were left entirely to the Commonwealth we would have ample funds to meet all requirements, including the interest on the war expenditure, and plenty to spare; but ever since the inception of Federation large sums of money from that source have been returned to the States. At this moment we are returning to them a large sum under the 25s. per capita arrangement. When the progressive land tax was imposed by the Commonwealth a few years ago, there was a general outcry from the States that we were encroaching upon their domain of taxation. The same cry is heard now in regard to the probate and succession duties. The State Treasurers are urging that the Commonwealth has no business to encroach on what they regard as their rights. If a line of demarcation is to be drawn, then the States have no right to receive anything from the Customs and Excise revenue. Some reciprocal arrangement on those lines would be a good thing. I do not say that we should attempt to repudiate the honorable arrangement made by Statute in 1910 - in fact, it could not be broken without the consent of both parties - but in the present crisis, with the general spirit of conference and compromise engendered by it, if the States informed the Commonwealth that they would be satisfied with, say, 12s. 6d. per capita, there would be placed at once at the disposal of the Commonwealth about £3,000,000, which would be sufficient to tide the Government over the present difficulty, and the Government, in their turn, could guarantee not to impose probate or succession duties and not to increase the land tax. If the States complain that the Commonwealth encroaches on their privileges, the Commonwealth can claim that the Customs and Excise duties ought to be used entirely for Commonwealth purposes, or that at least sufficient to meet all Commonwealth requirements should he retained before any part goes to the States.

Senator Bakhap - The Constitution did not originally contemplate the Commonwealth retaining all the Customs and Excise revenue.

Senator Lt Colonel O'LOGHLIN - A specific arrangement was made, by which for ten years three-fourths were to be returned to the States, and, as a matter of fact, over £6,000,000 more than the three-fourths was returned to them during that period. The doublebanking of taxation by the States and Commonwealth is most vexatious and annoying, and it would be a good thing if each Government could be confined to its own taxing domain. But one serious difficulty is that the States are, unfortunately, governed by Legislative Councils which have always opposed any form of taxation touching the property of the particular classes of which they are the special representatives.

Senator Millen - It is not so in New South Wales, which has the highest death duties-

Senator Lt.-ColonelO'LOGHLIN.But there have been difficulties between the two Houses in New South Wales, although not, perhaps, to the same extent as in the other States. New South Wales has a nominee Upper House, whilst most of the other States have Upper Houses which are, unfortunately, elected on a restricted franchise. The result in my own State is that two-thirds of the people have no voice in electing the Upper House. If land taxation was left entirely to the States, they would, therefore, not impose a progressive land tax. The Government of which I was a member in South Australia passed a progressive Land Tax Bill through the Lower House by overwhelming majorities on four different occasions, but on each occasion it was rejected by the Council, and that rejection continued until the Commonwealth, with the advent of a Labour Government, imposed a progressive land tax. Those who obstinately, selfishly, and conservatively opposed the imposition of a State progressive land tax now find themselves much worse off. They would have escaped with a rate of 2d. or 3d. in the £1 at the hands of the State. They now have to submit to a rate going up as high as 9d. in the £1 at the hands of the Commonwealth. The difficulty, therefore, is that the States dominated by the Legislative Councils would resist any system of taxation that would fall adequately and justly on the propertied and privileged classes, which the Councils represent and uphold. There are defects in the additional taxation imposed by the Commonwealth in that, while the landed classes have a pretty heavy impost to bear already, and justly so - land being a particularly fair object of taxation, because it benefits more than any other form of property by the advance of civilization and settlement and the expenditure of public money - another large class of capitalists, who ought to pay something extra in this time of emergency, are touched neither by the land tax nor by the probate and succession duties, unless they happen to die. If further expenditure is necessitated by the war, it may be necessary to impose a Federal progressive income tax, with an exemption of £300 or £400, to reach the class who do not derive their income from land alone, and who, under the present scheme, are making nothing like an adequate contribution towards the extra cost of government.

As an Australian, I wish to protest against the impression conveyed by Senator Millen, and shared by a large number of people - it finds expression, also, in Admiral Henderson's report and most other reports that have come from over the sea, and has been apparently indorsed by many military authorities here - that if once we lost the command of the sea, which God forbid, Australia would be in an entirely hopeless and helpless position.-

Senator Millen - I said nothing about the command of the sea by itself. I said that if Great Britain was beaten in the war, and Germany was the victor, Germany would insist on taking Australia as a prize.

Senator Lt.-ColonelO'LOGHLIN.Do you think Germany could do so?

Senator Millen - I do.

Senator Lt Colonel O'LOGHLIN .- I do not. I protest against this degrading estimate of the manhood of Australia. I do not subscribe to the assumption that if Germany succeeded in the war this continent, containing 5,000,000 of people, would be entirely at her mercy. My honorable friend must know that, on either Continent, there are scores of nations with far less population and resources than Australia has.

Senator Millen - And less sea to protect t

Senator Lt Colonel O'LOGHLIN .- I do not know. It may be regarded to some extent as a weakness, but it is, to a very large extent, a source of strength, because an invading force which attempted to attack Australia might effect a landing in some out-of-the-way place.

Senator Millen - Do you think that if they did we could turn them out?

Senator Lt Colonel O'LOGHLIN - Yes. I think that the parts of Australia which are vulnerable would not support a large invading army for a long time, and, therefore, they would have to draw their supplies from outside, which they would not continue to do for long. I believe that a nation of 5,000,000 people could, in the case of an invasion, put 1,000,000 armed men in the field within six months - that is, a fifth of the total population.

Senator Millen - How could that be done if we cannot arm more than we propose to send away?

Senator Lt.-ColonelO'LOGHLIN.We have not been put to the test yet. But suppose that I reduce the proportion and say a tenth of our population, which is a small* estimate of the effective strength of a nation at a time of invasion.

Senator Millen - We cannot arm 500,000 men.

Senator Lt.-ColonelO'LOGHLIN.We could arm them if we were put to the test.

Senator Millen. - No

Senator Lt.-ColonelO'LOGHLIN.How are we, in Australia, more helpless in this respect than are scores of nations with less population and resources which have maintained their independence for generations? Look at the example of the last South African war. The, British Empire, the strongest in the world, with command of the sea, and of the whole littoral of the southern part of that Continent - not in the position that we are in, but having command of the ports-

Senator Bakhap - The Boers had command of a very large revenue when they started to make provision for an encounter with the British.

Senator Lt.-ColonelO'LOGHLIN.The total population of the two Republics was under 300,000.

Senator Bakhap - Do not forget that gatling guns went into the country under the guise of pianos.

Senator Lt Colonel O'LOGHLIN .- I know that, but I do not see why we should not be just as well prepared for that as were the Boers. It took the strongest Empire in the world, with command of the sea, of the coast, and everything else, one might say, over two years to subjugate that country. Our inaccessibility is one of our strongest points of defence. Here we are some 10,000 oi 12,000 miles from the nearest nation of any strength which could possibly attack us. I think that the Minister and the ex-Minister who had to grapple with the great difficulty of transporting some 20,000 men from Australia to the Continent of Europe, with our full command to the sea, can imagine what an extraordinary problem would confront any nation which attempted to invade Australia. They would have to put at least 500,000 men on our coast before they could do anything effective. I am not at all disposed to minimize the great advantage - and it is the key to the position in regard to this great war - which is given to us by the command of the sea. I think that our position in Australia is very much enhanced because of that. We are not in a hopeless, or entirely hopeless, position, even should, unfortunately, that advantage be lost, which there is no prospect of happening.

That is all that I have to say in regard to the Budget. First, I wished to point out that the States which complain of our encroachment on their sphere of taxation must remember that they are getting very large assistance from the Commonwealth ; and, secondly, I desire to protest against the idea that Australia could not possibly defend itself for any length of time if it was thrown entirely on its own resources.

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