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Wednesday, 14 April 1915

Senator PEARCE (Western Australia) (Minister of Defence) . - I' ask the permission of the Senate to read a statement relating to the administration of the Government during the adjournment.

Leave granted.

Senator PEARCE - On the 18th December last, when moving that the House should adjourn until to-day, the Prime Minister stated that, whilst he hoped Parliament would not have occasion to meet before that date, the critical situation of -war might render an earlier meeting necessary. I am glad to say that such a course has not been necessary. The Empire has now been at war for eight months. We have seen many changing phases of the greatest struggle of history. There is no cause for dissatisfaction with the record to date. During these eight months the Navy has realized our highest hopes. Great Britain has succeeded in asserting an almost complete command of the sea. Britain has pushed forward great preparations for a land campaign in Europe. The military resources of the Empire have proved far larger and more quickly available than were thought possible. We have held during a terrible winter an important portion of the French lines in the West, and indeed have made progress; we have achieved considerable local successes in other parts of the world; we face the opening of spring with the highest hopes for success in this great struggle for freedom.

Australia has not been neglectful of her duty to the common cause. It may be that the immunity afforded Australians by the command of the seas possessed by the Allies has perhaps prevented our people from realizing to the fullest extent the terrible nature of the struggle in which they, with all other parts of the Empire, are engaged. But we must remember that they have been called upon to face, besides the war, the trials of an unfavorable season. Notwithstanding this, Australia has despatched for service at the front and has in camp preparing for active service there a grand total of 70,101 troops of all ranks, comprising 2,074 officers and 68,027 men of other ranks, with 30,946 horses and 3,098 vehicles. Of this total 43,146 men of all ranks have already been sent abroad; 24,976 are preparing to leave; 1,522 have already seen service in German New Guinea, where a garrison of 457 still remains; and I am more than pleased to be able to announce that approximately 80 per cent. of the forces sent abroad have been Australian born. I regret to say that the forces have suffered slight loss. There have been ninety-nine deaths in the force sent abroad and twenty casualties in the force of occupation in German New Guinea. I attach a table showing the position in detail.

Australian Imperial Force. The following units and reinforcements have been despatched for service in Europe: -


The casualties have been, to date, ninety-nine deaths.

Now in training in camps: -


Australian Naval and Military Expeditionary Force. This force was raised and despatched for service in German New Guinea. It consisted of: -


The above served from 15th August, 1914, to 4th March, 1915, and is now disbanded. The casualties were: -


German New Guinea is now occupied by a later unit, despatched on and after 28th November, 1914, consisting of : -


The unchangeable policy of the Government is to train, equip, and transport to the seat of war every available man fit to help defeat our enemies.

The equipment of such an army has naturally been a task of the greatest magnitude, calling for every ounce of energy that can be exerted. In the matter of woollen materia] and blankets, practically the whole of the output of the woollen mills throughout the Commonwealth is required to equip the Expeditionary Forces. Twenty-two mills have been requisitioned and are working up to their full capacity, and in many instances overtime is being worked in the endeavour to execute orders at the earliest possible date. Orders are now running with the different mills for altogether over 2,000,000 yards of cloth for jackets and greatcoats and cord for breeches, for over 1,250,000 yards of flannel for shirts, &c, and for nearly one quarter of a million blankets.

These supplies are required before the end of the current year to equip the Expeditionary Forces, together with reinforcements and replacements.

With regard to clothing, applications have just been invited throughout the Commonwealth from firms willing to make up material into garments for the Department, and orders have been placed with, altogether, 124 firms for a total of 636,210 garments of various kinds.

Arrangements have been made for the supply of nearly 1,000,000 pairs of boots by 31st December, 1915, distribution being made amongst firms throughout the Commonwealth, while master tanners have been required to guarantee sufficient supplies of leather for all military purposes.

This effort on the part of Australia in the short space of eight months is a subject for gratification. It stands on a parity proportionate to population with what is being accomplished by our great sister dominion of Canada.

But this is not all. The Royal Australian Navy has continued to perform the good work which it has carried out since the outbreak of war. The Prime Minister had the pleasure, when in New Zealand recently, of hearing everywhere expressions of appreciation at the part played by the Australian Navy since the outbreak of war, and of thankfulness for the protection it afforded to New Zealand in a time of great danger. It is a fact that the superior naval force presented by the Australian Fleet Unit was to a considerable degree responsible for driving the German Squadron from the Pacific to its doom at the Falklands, in the Atlantic.

The Australian Navy has done effective work, and the Government have been at all times in close touch with the Admiralty. The officers and men are generally fit and well, and it is a remarkable tribute to the efficiency of the ships and the care bestowed on them by the crews that since the outbreak of war they have never been in dockyard hands for any serious defect.

Fifty-three vessels have been taken up as transports by the Government; six interned German steamers have also been utilized as transports, and officers and crews provided for them by the Naval authorities. Twelve interned German steamers have been requisitioned for use as cargo ships, and full crews provided for them. These cargo ships, which are controlled by the Navy Office, have done much to relieve the congestion consequent on the requisitioning of so many steamers for military purposes.

In order to protect trade routes and to embarrass the movements of enemy vessels, the Government were reluctantly compelled to impose considerable restrictions on coal export. This has entailed some hardship on the coal trade, which, however, has generously responded to the requirements of the situation.

Work is proceeding at Henderson Naval Base, where 217 men are engaged. At Flinders Naval Base 333 men are employed. Engineering data is being obtained at Port Stephens and Albany. At. Cockatoo Island, works authorized in Estimates are in hand. It is expected that the Brisbane will be launched this year, and the destroyers fully completed this year.

Railways. It is estimated the EastWest Railway will bc completed in less than two and a half years' time, and there Are reasons to believe that the same gauge from Kalgoorlie- to Perth will be in existence before that time has elapsed. The Government have had under consideration the question of a strategic railway for greater security and defence, which, joining the East- West Railway in the neighbourhood of Port Augusta, will link up the capita cities of Adelaide, Melbourne, Sydney, and Brisbane. They have made arrangements for a preliminary investigation of a proposed route. As soon as the report is received, Parliament will be advised.

Financial Position of the Commonwealth. - In the Budget speech of 3rd December, 1914, the financial position of the Commonwealth was dealt with at length. It seems desirable, however, that a further statement should be laid before honorable members, showing the action which has been taken up to date, and summarizing the position. It will be remembered that the estimate of expenditure out of revenue totalled £37,583,715, including special expenditure consequent upon the war, amounting to £11,742,050. The Treasurer proposed that the expenditure should be provided for as follows: -

Ways and Means. Surplus brought forward from previous years, £1,222,401; estimated revenue of 1914-15. including revenue under the new Tariff and increased land tax, as well as new probate and succession duties, amounting in all to £23,273,000; Treasury-bills to be issued for war purposes, £1.2 '2 050; Treasury-bills to be issued for other revenue purposes, £1,346,264; loan from British Government for war purposes, at £1.500.000 monthly, for seven months, £10,500,000. Total of estimated expenditure provided for, £37,583,715.

Receipts. - The following is a comparison of the receipts for the year, and the actual receipts up to 28th February, 1915: -


There were unusual difficulties in framing the Estimates of revenue, but I am pleased to be in a position to state that, according to present indications, the Estimates of revenue for the year will be found satisfactory on the whole, because, though there probably will be a shortage, its amount i8 not likely to cause serious embarrassment.

The Customs and Excise revenue to 31st March, 1915, amounts to £11,181,000, which may be compared with £11,353,000 received in the same period of the previous year. We estimated that in the whole year we should receive £717,000 less than in the preceding twelve months, but in the nine months the decrease has been only £172,000. While it is too early, as well as unwise under present circumstances, to commit oneself to a definite forecast, it may be stated that the estimate of Customs and Excise revenue for the year is likely to be exceeded ; but, even so, the excess will not be as much as has sometimes occurred under less disturbing conditions.

We expected the Post Office to return in the whole year £55,000 more than it did in the previous year. Up to 31st March, 1915, the total revenue was £3,423,000, being an increase of £37,000 above the amount collected for the same period in 1913-14. It seems, therefore, that Post Office revenue is coming in at about the expected rate.

Up to 31st March, 1915, we collected probate and succession duties amounting only to £804. For manifest reasons it is almost impossible to make a reliable estimate of revenue from this source. As the Commonwealth duties are levied on the estates only of persons who died after 21st December, 1914, and as some time necessarily elapses before the amount payable in any case can be ascertained, it was not expected that prior to 31st March there would be any considerable revenue. From information now in our possession, however, it would seem that the estimate of £1,000,000 for this financial year waa too high, and we do not expect to collect, before 30th June, more than £100,000.

The land tax this year promises a larger amount of revenue, but it is doubtful if the estimate will be realized.

Expenditure. The following was the state of the Expenditure Accounts on 28th February last: -


Since the Budget Estimates were framed, no further estimate of expenditure has been made, but it is known that the war expenditure will exceed the estimate. Such excess will be met out of the proceeds of an additional loan granted by the British Government. To this loan further reference will presently be made.

As already stated, the total receipts for the eight months are £20,987,057; and the expenditure for the same period is £21,836,070. From this it will be seen that we have expended in excess of the receipts in the eight months the amount of £849,013. We were able to pay away more than the actual receipts of the period because we began with a surplus brought forward amounting to £1,222,401.

In framing the Budget, it was found necessary to raise money by the sale of Treasury-bills in order that the estimated expenditure might be met. The estimated requirements were: -


On 28th February, 1915, we had already sold Treasury-bills amounting to £2,995,000 to cover the deficiency referred to. The Treasury-bills were bought by the Australian Notes Fund ; that is to say, funds were created by the issue of notes, and these funds were used for the purchase of the Treasury-bills. The amount is in excess of the estimate of £2,588,314, but an improved financial position has since enabled us to reduce the amount of Treasury-bills outstanding to £2,795,000, and when the land tax is received at the end of the year we expect to reduce it further.

In the estimated total expenditure of £37,583,715, already referred to, provision was made only for the services which are usually paid for out of revenue. In addition, the Treasurer estimated that he would spend in the year the amount of £2,162,580 on the Transcontinental Railway, land in the Federal Territory, conduits, and other services which are usually paid for out of loan funds. Up to 28tn

February, 1915, there was expended on these loan services £1,301,482. In order to raise the necessary loan funds, the Treasurer sold to the Australian Notes Fund, Commonwealth Inscribed Stock and Commonwealth Treasury-bills.

Imperial Loan. The estimated receipts during this financial year include £10,500,000, being seven monthly instalments of the £18,000,000 which the British Government has agreed to lend to the Commonwealth. This loan was granted in order that war expenditure might be met. The first instalment was received on 15th December last, and in each month since an instalment has been paid, making a- total to date of £6,000,000. The Commonwealth is to pay to the Imperial Government on the £18,000,000 the rate of interest at which that Government itself has borrowed. The period of the loan is indefinite, the date of repayment being a matter which is to be agreed upon between the Chancellor of the Exchequer and the Government of the Commonwealth. It is understood that tho British Government is making the loan to the Commonwealth out of the proceeds of a loan of £350,000,000 raised by the British Government. This loan is repayable between 1st March, 1925, and 1st March, 1928. The price of the issue was £95 per cent., and the rate of interest 3£ per cent. Until the date at which the Commonwealth has to repay the loan has been fixed, it is not possible to calculate the effective rate of interest. Since the date of the Budget, it has been decided to increase the strength of the Expeditionary Forces, and the amount of £18,000,000 will not suffice. The British Government has, therefore, agreed to lend us a further amount of £6,500,000 for war purposes, making a total of £24,500,000 to be received by the Commonwealth up to 31st December, .1915. In addition, the British Government has agreed to lend us before the date named the amount of £3,500,000, in order that Commonwealth works already in progress may be continued.

Assistance to States. Before the British Government agreed to lend the amount of £18,000,000, it was the intention to meet the war expenditure out of the Australian Notes Fund, but money for the war having been obtained in the manner previously referred to, we were able to use the resources of the Notes Fund for loans to the States for public works. Accordingly, on 5th November, 1914, tho Commonwealth Treasurer en tered into an agreement with the States that the Commonwealth should lend and the States should borrow the following sums : -


The money is to be available in London and in Australia, and the amount borrowed is to bear interest at the rate which it costs the Commonwealth of Australia to raise money for its own purposes, but such rate is not to be less than 4 per cent, per annum. In tha agreement the States engage not to borrow otherwise during a period of twelve months from the date of the agreement, except for renewals of existing loans falling due; but the States are permitted to sell Treasury Bonds over the counter to an amount not exceeding sales in a normal year.

Senator MILLEN (NEW SOUTH WALES) - Within what period is this money to be advanced to the States ?

Senator PEARCE - To December of this year.

As the precise rate of interest payable by the Commonwealth to the British Government is not yet known, we cannot at present state exactly what interest the loans to the States will bear. It would seem that the amount will be slightly more than 4 per cent. Each monthly instalment of the loan to a State will be repayable by the State to the Commonwealth two years after the date at which the instalment was paid to the State.

The Commonwealth Treasury is making its advances to the States out of the Australian Notes Fund on or about the loth of each month. Each monthly instalment amounts to £1,500,000, and the first instalment was paid in December. Previously Victoria had received £350,000 and South Australia £100,000; but the sums will be deducted from the instalments payable to these States in a future month.

Agreement with Banks. The Australian Notes Fund could not have been used in the manner indicated without the assistance of the banks, which have agreed not to present notes at the Treasury for gold until the close of the war. The right is reserved to the banks, however, to make use of the Australian notes for banking purposes. The agreement does not compel any bank to hold any particular amount of Australian notes. It may pay the notes away to its customers or to its other creditors. The Treasurer on his part has agreed with the banks that the increased issue of Australian notes is to be considered an emergency issue, which is to be redeemed in gold at the close of the war. The banks have further undertaken to lodge gold in the Commonwealth Treasury amounting in all to £10.000,000, and to take Australian notes in exchange for the gold. "Up to date, the Treasurer has called upon the banks for 3,000,000 sovereigns, which have been placed in the Treasury vaults, and are now part of the reserve for the redemption of Australian notes.

The agreement with the banks provides further that the Treasurer shall, if required, make advances to the banks in Australian notes, the banks to deposit in gold one-third of the amount of the notes advanced, and to give a deposit receipt at 4 per cent. per annum for the balance. Deposit receipts are to be payable in twelve months after the end of the war, and the banks have the option of redeeming the same at any time before maturity. Deposit receipts amounting to £241,000 have been received from the banks under this arrangement, and the banks have exercised their right to redeem the deposit receipts to the extent of £40.000, the amount outstanding being £201,000.

Australian Note Issue. On 12th April, 1915, the Australian notes in circulation in the hands of the banks and the public amounted to £26,664,329; in addition, up to that date, the Treasury had received interest on investments of the notes moneys. Such interest, after deducting all expenses of the note issue, amounted to £601,460. The total Note Funds at that date, therefore, amounted to £27,265,783.

These Funds, on 12th April, 1915, had been disposed of as follows: -


Loans to States, being instalments of total loan of £18,000,000, viz. : -


CommonwealthEmployment. - During the recess, the Ministry have given special attention to the necessity for providing relief to the labour market, both skilled and unskilled labour, owing to the increase in unemployment, consequent upon the closing down in certain directions of private industries. With this object in view, practically the whole of the works voted by Parliament were put in hand immediately the Estimates were passed, including alarge number of drill halls, rifle ranges, military depots, and additional buildings in connexion with the Aviation School at Point Cook, additional buildings at the Royal Australian Naval College, Jervis Bay; at the Royal Military College, Duntroon; and at the factories for the equipment, and manufacture of munitions of war.

On the east-west railway, where the road-head is now at 216 miles 66 chains in the west, and at 232 miles in the east, approximately 3,000 men are employed in construction, traffic, &c. Drought conditions, and consequent shortage of water, prevented even larger operations.

The Defence Department is employing no less than 1,922 temporary men.

In the Federal Capital Territory, approximately 650 men are employed, and it is expected the number will be increased very shortly by another fifty, or more.

On the Pine Creek-Katherine River railway, some 340 men are employed.

On Federal works in Victoria, approximately 1,160 men are receiving employment; and on Federal works in New South Wales, approximately 1,300 men.

We have made a start with construction of works by day labour under our own supervision in Queensland, and will soon be employing quite a number of men.

In South Australia, Western Australia, and Tasmania, Federal works are being pushed on with under State supervision, and as much employment as possible is being given.

Commonwealth Bank. The Commonwealth Bank has been of great service to the Commonwealth during the war crisis.

It granted to the Government an overdraft in London during August last of £100,000; and during September, £130,000, at a time when all the banks in England, except the Bank of England and the Commonwealth Bank of Australia, were observing tho moratorium.

At the request of the Minister of Defence, the Bank also arranged to provide funds to pay for purchase of horses for the Expeditionary Forces throughout Australia, pending the passing of a Supply Bill, which arrangement enabled the departmental officers to immediately proceed to purchase and pay for horses, without waiting for Supply to be passed. At the same time, the Commonwealth Bank agreed to assist the State Governments in London with their financial arrangements. The Bank also assisted four banks in three different States in Australia, and in London, and arranged to assist another if necessary.

At a time when the other banks in London were strictly observing the mora torium, the Commonwealth Bank did not do so. It assisted a large number of Australians resident in England, and visiting there. Passengers who have since returned are loud in their praise of the action of the Bank during the crisis. It need hardly be added that the prestige of the institution has thus been considerably strengthened.

The Bank continued uninterruptedly to negotiate in London bills on Australia, and many merchants in this country were glad of its assistance in transferring funds to London.

The Bank has on behalf of the Treasury continued to redeem Australian notes and silver in London, and owing to the despatch of the Expeditionary Forces, this phase of its transactions has assumed comparatively large proportions. It has, during the war, and still can, help stranded Australians at almost all places outside the actual theatre of war, a fact which may be interesting to many of our people in this country.

I am glad to pay tribute to the excellent work of the Bank's Governor in the crisis. He rendered good service in the negotiations for assisting banks, Savings Banks, and States, and is still assisting the Treasurer with these and similar matters.

I should like to refer to the assistance rendered by this institution to Government and semi-Government bodies in Australia at low rates of interest during the past twelve months, when the money market had become restricted owing to the war and other conditions. Since the 30th June, 1914, the Bank has made the following advances: -


All these loans have either been made, or are in course of payment, and nearly the whole amount has been lent at a maximum rate of interest of 4£ per cent., and in the case of municipalities, &c, is generally repayable by half-yearly instalments of principal and interest, covering periods of from ten to thirty years.

At the same time the Bank has continued to deal with applications for advances from constituents throughout the Commonwealth on normal lines, and practically every application has been granted where a proper and ample security has been forthcoming. The rate of interest charged on ordinary overdrafts has been kept at 6 per cent. throughout, whilst for advances to churches, charities, societies, and unions, &c, who do not distribute their profits amongst their shareholders, the rate is 5 per cent.

On the 1st March, 1915, the Bank had 924 overdrawn accounts in the Commonwealth, of which 740 had balances under £1,000, and 184 over £1,000. These advancesare distributed over the whole of Australia and Tasmania, and are all amply secured. In addition to its own staff, the Bank has, by arrangement with the Federal Land Tax Commissioner, the assistance of the Federal Land Tax appraisers and valuers throughout the Commonwealth, in arriving at the proper valuation of securities offered.

In order that the Commonwealth Bank may develop in accordance with the ideas of business which have been found peculiarly adaptable to Australia, it is necessary that it should be represented by direct branches in as many centres as possible throughout the Commonwealth, and this may be accomplished either by opening new branches as desired - which is an expensive and slow process - or alternatively absorbing another bank or banks. The Bank at present has branches at the following centres: -

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