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Wednesday, 5 October 1927

Senator J B HAYES (Tasmania) . - I congratulate the Treasurer on the clearness of his budget statement. It contains many things that call for more than passing comment. The outstanding feature is the financial agreement between the Commonwealth and the State Governments. For many years the problem has engaged public attention throughout the Commonwealth. It would be difficult to find two people with exactly the same opinion as to the best means for its solution ; but by his tactand courage the Treasurer has been able to settle it once and for all. If the several

State Parliaments agree to the arrangement and if this Parliament ratifies it, the difficulties in connexion with the financial relationships between the Commonwealth and the States will be a closed book which need never be reopened. If this Government had achieved nothing more than the completion of this financial agreement satisfactory to the Commonwealth and the States it would have done good work.

SenatorFoll. - And yet the Leader of the Opposition made no reference to the agreement.

Senator J B HAYES - That is not so. He said he preferred the per capita payments.

Senator Foll - That is worse than saying nothing at all about it.

The next feature of the budget which strikes one is the surplus of over £2,000,000. This was criticized by the Leader of the Opposition (Senator Needham). I admit that surpluses are a potential source of danger; yet we all look for them, and hope that they will continue. I trust that our good fortune in that respectwill not turn our heads and cloud our judgment in relation to future works. There is a great deal too much extravagance, both public and private, in Australia. We have no control over private extravagance, but we have over national expenditure. The expenditure of loan moneys especially would, I think, bear keen criticism. Senator Needham took the Government to task because loan expenditure had been increased by something like £100,000,000. He altogether ignored the fact that during the period covered by those figures Australia was engaged in war, and it was absolutely necessary to borrow money overseas. The honorable senator further criticized the Government for having borrowed £64,000,000 overseas since the termination of the war. My complaint against the Government is that it borrowed too much locally.What would have been Australia's position had the £64,000,000, to which the honorable senator referred, been taken out of local industry ? The expenditure was ear-marked, and it was the duty of the Government to decidewhere the money should be borrowed. Very great care should be exercised in exploiting the local market for loan moneys, because of the scarcity which confronts private enterprise to-day. Many industries would have been obliged to shut down had the bulk of our loan money been drawn from local sources. A man would be devoid of common sense if he failed to realize that there is on every hand a leaning towards unwarranted expenditure at the present time. Australia barely escaped a devastating drought. If the splendid rains that we have had in the last week or two had been deferred for another month a crisis might easily have occurred.

Senator Reid - In portions of Queensland drought conditions have prevailed for the last two years.

Senator J B HAYES - Fortunately the climatic conditions differ so greatly in various parts of Australia, and the resources are so tremendous, that adverse conditions in one portion do not seriously handicap the remainder. It is extremely unfortunate that some Queensland people have had to suffer such hardships. Doubtless their misfortune has been reflected to a certain extent in other portions of the continent; but general drought which was so close to our doors would have made the suffering much more widespread, and might easily have brought disaster.

There are two or three features of the budget which are exceedingly welcome, One of the first is the proposal to reduce income tax, and alter the incidence of the tax so as to relieve a section of the community which does not always get as much consideration as it deserves. I refer to the primary producers. They will be allowed to deduct from their taxable income the amount spent on improvements in the direction of fencing, clearing, and similar items. That reform is long overdue, and will be very acceptable. I should like to see the Commonwealth retire wholly from the field of income taxation, because I believe that it is solely the function of the States to levy such a tax. A gratifying feature is the gradually diminishing field in which the Commonwealth is operating. The budget figures show that the amount now being collected is little more than one-half of what it was six or. seven years ago. That is, evidence that great care has been exercised in the handling of the finances. The Leader of the Opposition admitted that in the last five years the war debt had been reduced by £36,000,000, by the creation of sinking funds. That is a fact which ought to be more widely advertised. It is an achievement of which the Government and Parliament should be proud. I cannot follow the argument of the honorable senator that we are just as badly off because an additional £38,000,000 has been spent out of loan money in that period. The expenditure has been upon developmental works.

Senator Sir William Glasgow - It is giving a good return.

Senator J B HAYES - If a business man could extend his business and increase his assets, whilst at the same time keeping his overdraft at the same amount, he would consider that he was placing himself in a very sound financial position. I attach no importance to the borrowing of that £38,000,000, provided it has been wisely spent on reproductive works.

Senator Sir William Glasgow - The expenditure on postal works is returning sufficient to meet both interest and sinking fund payments.

Senator J B HAYES - Money has also been expended on railways that will return revenue.

The government further proposes to reduce the land tax by 10 per cent, and improve the incidence of the tax. I should like to see it, too, wiped out. I have never believed that it is a fair tax. The land is the machinery by the use of which a farmer makes his living. He is the only producer whose machinery is taxed. A manufacturer may have a much larger sum invested in machinery in his factory, but no one would dream of taxing it.

Senator THOMAS (NEW SOUTH WALES) - Is the farmer the only person who pays land tax?

Senator J B HAYES - He pays the bulk of it.

Senator THOMAS (NEW SOUTH WALES) - Oh, no!

Senator J B HAYES - Apart altogether from that aspect of the matter, it is a double tax and should not be collected.

Senator Thompson - Who introduced it?

Senator J B HAYES - I understand that it was introduced by a Labour Government in 1913 with the object of breaking up big estates. It did not have that effect. Frequently men are taxed even though they have only an equitable interest in their land; they are not entitled to claim a remission on account of mortgages. That is unfair. Admittedly land tax returns a considerable amount of revenue, and, consequently, the government cannot agree to remit it wholly ; but I hope the time will soon come when that will occur.

Another matter to which I wish to refer is the increase in the amount spent under the Rural Credits Act, which was passed three or four years ago. The benefit which that act: has conferred upon the primary producer is shown by the fact that last year rural credits to the extent of £8,000 were made available to assist in the export of produce.

Senator Needham - What did it cost the farmers to get it?

Sentaor J. B. HAYES.- I do not know ; presumably 6 per cent. When the act was before this Chamber, I suggested that it should apply to not only exportable 'produce, but also produce for sale on the local market. It may have been impossible to give effect immediately to that suggestion. Probably the majority of the farmers in Australia grow exportable produce, such as wheat, wool and butter; but there is a large number who do not, on account of the geographical and physical features of the country they are farming. I refer to those who hold land in heavily timbered country such as Gippsland, and Tasmania chiefly. The credits made available through the Rural Credits department of the Commonwealth Bank are not of as much assistance to them as they should be. The government has endeavoured, and is endeavouring, to assist farmers in Tasmania. Through the Development and Migration Commission. One of the best methods is to provide for the orderly marketing of their produce. A scheme along those lines could easily bs devised. After each harvest produce is quoted at a very low price. The reason is obvious; as soon as tho average man gathers his crops he has to sell. The stores become filled, and there is no readiness to buy. Later in the season prices rise. I am quite aware that the present is an exceptional year. I have seen good, bright oaten chaff sold for £4 a ton. The price has since risen to £8 10s. or £9 a ton in the same market. And so with other crops. Men who obtained advances by which they were able to hold their crops, realized good prices. That position arises to a greater or less extent every year. I hope that the Government will take this matter into consideration and give some assistance to those farmers who do not grow exportable produce.

Senator Ogden - Is the honorable senator asking that the Federal Government should do so?

Senator J B HAYES - Yes. The machinery is already in existence. Last year the Commonwealth Government advanced £8,000,000 to assist in the export of Australian produce. By extending the machinery a little, other farmers could also be assisted. I suggest that a farmer should be able to take his produce to a reputable merchant, have it examined and branded, and a sample taken, and receive from the merchant a storage warrant marked with the value of the produce on the day it was delivered. By taking that storage warrant to the Commonwealth Bank he should be entitled to draw up to 75 per cent, of the value marked thereon. Later, when the market was no longer glutted, he could instruct the merchant to sell his produce, when he would repay the money advanced to him and receive any balance due to him. By that means he would be able to take advantage of the higher prices offering.

Senator Reid - Who would pay the storage charges?

Senator J B HAYES - They would not be great. Some merchants would be willing to store the produce for the right to handle it; merchants will often give free storage for three months. My suggestion, if carried out, would only mean the extension of a principle already in operation. It would apply to farmers operating in districts such as are found in Tasmania and parts of Victoria. A good deal has been said of the desirability of making provision for times of drought. The system I have suggested would enable farmers in productive districts to make provision for the lean years. I commend the suggestion to the Government.

I understand that the Government intends to set in motion, at an early date, the housing scheme promised in the Prime Minister's policy speech. The scheme is a good one ; but the greatest care will have to be taken in its administration, or we shall have a recurrence of the troubles connected with soldier settlement. Land in Melbourne and Sydney, and, indeed, in all our cities, is very much over-valued today. A period of lower values is inevitable soon. Should land be purchased at high prices, and a slump follow, trouble will be experienced with some of the people who have obtained homes on a deposit of 10 per cent. I have no doubt that with the experience of the past to guide them, the Government and its officers will avoid many of the mistakes made in the past. The scheme should be extended to include the purchase of farms. If it is right to advance money to pay off an existing liability on a house, it is right to make advances to discharge mortgages on farms. I do not advocate that money should be lent on bad securities, but many farms offer good security for loans of £1,500 or £2,000, which amount would be of great assistance to farmers. The amounts now spent by many farmers in the extra payment of interest on borrowed money and expenses for renewals of mortgages from time to time would more than meet th» requirements of an adequate sinking fund. The scheme I advocate is similar to the Credit Foncier system now operated by the State Savings Bank of Victoria, under which money is advanced on long terms, with a sinking fund provision of 1£ or 2 per cent. Instead of a farmer getting deeper into debt every year, such a scheme would enable him to reduce his liability from time to time.

Senator Ogden - Is not that which the honorable senator suggests a State function?

Senator J B HAYES - It is sometimes difficult to say where a State function ends and a Commonwealth function begins. The several States already have housing schemes in operation; now the Commonwealth Government is embarking on a similar enterprise.

Senator Reid - Only to help the States.

Senator J B HAYES - Does any honorable senator suggest that, should the Commonwealth with its greater fin- ,ancial resources engage in a housing scheme, it would be usurping a State function ?

Senator Ogden - I do. The Commonwealth should confine its activities to its proper sphere.

Senator J B HAYES - In the financial statement before us reference is made to a conference which took place between the Commonwealth and the States with reference to losses on soldier settlement, and to the undertaking of the Commonwealth Government to review the matter of losses when, the revaluations were completed. No final agreement has yet been reached. I was a member of the second and subsequent conferences in 1916 when soldier settlement was initiated, and it was recognized by all present that the war' and its attendant liabilities was a Commonwealth liability. The States undertook soldier' settlement only because they had in existence all the necessary machinery to do so. Apart from that, there is no more reason why soldier land settlement should be a State responsibility than that liability in respect of war service homes or war pensions should be accepted by the States.

Senator Reid - The Commonwealth found the money for soldier settlement.

Senator J B HAYES - In some cases, but not all. I know that, in the first instance, the Tasmanian Government purchased some estates ; but, later, money for that purpose was found by the Commonwealth.

Senator Reid - Some of the States in making purchases exhibited carelessness.

Senator J B HAYES - The States were not so careless as some people would have us believe. Honorable senators should remember that the various State Governments were urged by an intensely loyal and sympathetic, but irresponsible public to purchase estates on which returned soldiers could be settled. In consequence of the demand for land, prices rose. Produce at that time was also extremely dear. Wheat brought as much as 10s. a bushel, and oats 6s. or 7s. a bushel; milking cows cost from £14 to £20, and calves which would not bring more than 25s. to-day, were sold for £5. All this had the inevitable effect of increasing land values. The States certainly made mistakes, but many keen private business men also made mistakes in buying estates and stock. While many men made fortunes, others lost thousands of pounds. I am convinced that had the Commonwealth Government controlled soldier land settlement, more money would have been lost than actually was lost by the States. Now that we have returned to normal times I trust that our returned soldiers will be given a chance to make good, and that thereafter businesslike methods will prevail in all transactions with them. All is not well with our soldier farmers. I hope that whatever remissions are made to them will not be in the nature of deferred payments. Any concessions made should be regarded as a further war liability. Let us give the soldiers a fair start. Let us value their land afresh, give them a fair start in that way and then treat them as ordinary civilians.

SenatorFoll. - What would the honorable senator do in cases where poor land has been sold to the soldiers?

Senator J B HAYES - I can speak only of instances that have come under my direct notice. It is so long since land of this class was selected or taken up by soldiers, and subsequently abandoned by them, that much of it has gone completely out of occupation.

Senator Foll - But the Commonwealth has not been paid.

Senator J B HAYES - The Commonwealth must bear the loss if certain land has gone out of cultivation. In Tasmania, and also in parts of Gippsland, Victoria, and, I have no doubt, in other States also, second-class land was cultivated when everything was on a lower basis, and labour was cheaper. That land was producing quite a lot of butter, and root crops. But when the boys went to the war there was no one to work it. The bracken grew up, and the rabbits came in, with the result that it went absolutely out of use. Two or three weeks ago I looked at some land in Victoria upon which financial men, in good faith, had advanced a large amount of money. That land has gone out of use. No doubt, schemes will be evolved to bring it back into use, but it is a big problem to say what should be done with land abandoned by the soldiers and now out of cultivation. I think that the Commonwealth will have to bear the loss. In any case, the percentage of losses on this score will not be any greater than has been the percentage of losses incurred by private individuals.

SenatorFoll. - What are the prospects of the same thing occurring under our scheme of settling immigrants?

Senator J B HAYES - I do not know. I take it that in the process of getting back to normal conditions we are likely to exercise more care and to buy land that will stand present-day high costs. It all depends upon the physical features of the land. Wheat land bought at a comparatively low price can lie abandoned for twenty years and yet be cultivated again with little expense; but some land in Gippsland and Tasmania is covered with ferns after a year, and might as well be let go altogether after being left unoccupied for two or three years. I hope that under the overseas settlement scheme people will be placed on some of our rich chocolate soil or on land that will stand heavy farming costs. They should certainly be placed on land that will pay to keep in good order, or land on which large implements can be utilized . with a consequent minimum expenditure on labour.

I am somewhat diffident about referring to the request for duties on timber and potatoes, because the matter is subjudice. The Tariff Board has had the position of the timber-cutters and potatogrowers under consideration. When we were sitting in Melbourne, I understood that the board was just about to furnish reports on a request for higher duties on timber and potatoes, and I think the Government should by now have had time to consider those reports and give' effect to them. I hope that in both cases there will be an increased duty. The timber industry in Tasmania is now at a very low ebb. The machinery in many mills is rusting, and the timber is rotting in the bush. There is plenty of it available, but it cannot be cut at the present cost of production. We certainly have an embargo against the importation of potatoes from one country, but embargoes do not last for ever, and the growers would know better where they stood if an increased duty were imposed. I should not advocate import duties on timber or farm produce if it were not for the fact that the extraordinarily high duties on other articles have so increased the cost of production that the primary producer is seriously handicapped. First we have the tariff, bringing in its train a high cost of living. A high cost of living leads to high wages, and these in turn call again for a higher tariff. And so the whole thing goes round in a vicious circle. But the farmer does not come into that circle. He has to take whatever he can get for his produce. The miller, likewise, has to take whatever he can get for his timber. It is disheartening to the timber-millers to have to shut down their mills. There are more mills shut down in Tasmania to-day than there are working.

Senator Reid - That applies to all the States.

Senator J B HAYES - I have not the slightest doubt it does. There seems to be no reasonable hope of reducing the cost of production. The timber areas in Tasmania do not lend themselves to large operations. Several large companies have established mills, but they have not proved very successful, because the timber, although plentiful, is scattered. The small mills seem to do best ; but even they have been compelled to close down because they cannot make ends meet. Apparently there is no immediate prospect of reopening them. I hope the Government will see its way to give the timber industry, and also the potatogrowing industry, a little more help. Even if the assistance given does not serve to increase the price of the products, it will at least keep the mills going, and enable the capital invested in them to earn some little return.

The Treasurer proposes to spend a large sum of money on the exceedingly laudable object of developing our air services. No one will complain of expenditure to increase the usefulness and popularity of air travel, but I was somewhat disappointed when I read in this connexion the words, "probably to Tasmania." If there is one State more than another that should be connected by air with the other States it is Tasmania. We already have air services between places on the mainland that have a splendid rail service, whereas Tasmania sometimes is cut off from the mainland, and the mail service is hung up by strikes. It would be only fair for the Commonwealth Government to say that as Tasmania is separated from the mainland, and has not a reliable sea service, it should be the first to be served by an air service. I know that it is an expensive matter to provide an air service over water, because better engines must be provided than are necessary for an air service on land, but on no part of a trip from Victoria to Tasmania would an -aeroplane be more than 25 or 30 miles from land, and that at only one spot. In most cases no aeroplane would be more than fifteen miles from land. I hope that the Government will decide that Tasmania shall be served by air. Several companies are willing to provide the service if they have a suitable Government subsidy.

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