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Tuesday, 17 June 1902

Mr HIGGINS (NORTHERN MELBOURNE, VICTORIA) - That is exactly what I say. The whole system of borrowing for works of the sort is a mistake. Of course, it is said that we are a new and progressive country, and that it is, therefore, impossible for us to avoid borrowing. ^ But I suppose it will be admitted that for the last 30 or 40 years Japan has been a progressive country, which, in addition, has had to meet the expenditure of a big war. Japan has had to build a large navy, and in modern times there is nothing so expensive. But how does Japan stand ? In that country there are 44,000,000 people, and their existing debt, including that of the war, is £50,000,000. During the last 32 years Japan has repaid £11,000,000 of the principal of their debt, and of the remaining debt some £20,000,000 is represented by remunerative works. We, apparently, never think nowadays of paying back any principal. In Japan the people are lightly taxed ; there are small taxes on wine, spirits, and tobacco, but none on tea, silk or beer.

Mr L E GROOM (DARLING DOWNS, QUEENSLAND) - Where " does Japan get her revenue 1

Mr HIGGINS - Japan gets revenue without that kind of taxation. The claim that a young country must borrow is not justified by facts or experience. Canada is quite as progressive a ' country as is Australia, and the public debt of the Dominion is hardly equal to that of Victoria alone, namely, about £50,000,000.

Mr Conroy - The cost of the railways must be deducted from the public debt of Victoria.

Mr HIGGINS - There are hosts of matters to be considered.

Mr Thomson - Does the public debt of Canada, as mentioned by the honorable and learned member, include the States' debts 1

Mr HIGGINS - It is the whole of the Federal debt.

Mr Thomson - But the States' debts.

Mr HIGGINS - I am simply dealing with the debt of Canada as a whole ; but honorable members will find that the States' debts in the Dominion are far less in proportion than those of the Australian States. I have looked into this matter somewhat closely, and I find that all financial writers agree that there is no country in the world with such a heavy debt in proportion to population as has Australia. Even after allowing for all the public works, it is found that Australia is the most heavily burdened country in the world in proportion to population.. Of course we have to take facts as they are ; but I did hope that when we started federation we should refuse to pursue the same old thriftless, shiftless course which the States have followed. No one will deny that there have been good works carried out by the States.

Mr Poynton - Has the Commonwealth Government of Canada to hand back threefourths of the revenue to the States?

Mr HIGGINS - Of course not.

Mr Poynton - That makes a difference.

Mr HIGGINS - I hope I shall be allowed to follow my own track of argument, whether it be right or wrong. I have not had time to get all the figures here necessary to answer every question, but if we take the public debts of Canada, both Dominion and State, we shall find that her liabilities per head are nothing compared with those of the Australian States.

Mr Watson - Does the Canadian debt exclude the cost of the railways ?

Mr HIGGINS - Yes; the State railwaysThe question now before us seems to me of infinitely more importance to our future than that of the Tariff. The Tariff is very important to individual industries, and to the flow of trade ; but this Bill, which we are apparently asked to pass without much debate, involves a question which transcends in importance, all other questions, including that of the Tariff. The theory is that this borrowing is for the relief of the taxpayer - that the present taxpayer ought not to be compelled to bear the whole burden of that which is of permanent use to the country.

Mr Bamford - Does the honorable and learned member mean that the maintenance of public buildings ought to be made a burden on posterity ?

Mr HIGGINS - I do not think that posterity ought to pay for the maintenance of public buildings, and the honorable member has hit one of the main flaws in the Bill. These proposals, if we only grasp exactly what they mean, are really maintenance proposals. No doubt they are proposals for the improvement of buildings, but, at the same time, we can improve a building in a way which really saves us the cost of repairing it, and enables to throw on loan moneys burdens which ought to be borne by revenue. Good work has been done inV ictoria in regrading the railways out of loan moneys, and the way in which that was done saved the year's revenue from liability for maintenance, the regrading including the keeping of the rails and the permanent way in good order. As I was saying, the whole theory is that this borrowing is a relief to the taxpayer. But even supposing that all the works which have been done out of loan money had been done out of revenue, the taxpayer would not have paid one penny more, and we should not have had any debt. I had the advantage a few years ago, through the kindness ofthe present Treasurer, of having a statement laid before the Victorian Parliament showing the interest and expenses in connexion with our Victorian debt up to the end of June, 1898. At that time the Victorian debt amounted to about £48, 000, 000, and about£40,000, 000 had been paid in interest upon it, while the expenses of flotation, including brokerage and discount, had amounted to over £500,000. Now, however, the amount of the Victorian debt is actually less than the amount of interest which has been paid upon it, so that the poor taxpayers, whom it was proposed to relieve, have had actually to pay more interest than the principal which has been borrowed, and, to put an extreme case, if we had paid for all our works and built our railways . with revenue, we should have had no more to pay, and we should not be owing the amount which we are now owing.

Sir William McMillan - But the public works have earned the interest upon the debt.

Mr.HIGGINS. - I am sorry that the orthodox parties in this House do not seem to realize our financial position. Though we all deprecate borrowing, and are very sorry that loans have to be raised, we still give our consent to them. It is now proposed to borrow £1,000,000. Having regard to the present state of the London money market, it is probable that, while we give bonds for £1,000,000, we shall receive only £940,000 in cash, and we shall have to pay 3 per cent., or £30,000 a year as interest in perpetuity. There area host of requirements for which, as a civilized community, we should provide, but we are unable to do so because so much of our revenue goes to pay interest. I do. not know how it is in other States, but I know that in Victoria there is a strong movement in favour of better technical and other education. Still, as we have not sufficient revenue, we must cut down our expenditure in those directions. We should also do something in the matter of prison reform, but we have not the money. No matter how useful a thing may be, we are told that there is no money for it, and the revenue is more and more reduced by the piling up of interest as new loans are floated. The argument that has been advanced is that it is not just and fair for the present generation to bear the cost of permanent public works. But that argument was used twenty or thirty years ago, with the result that they spent the money that we are earning now, and we are proposing to forestall and to spend what will be earned by people living twenty or thirty years hence. I feel that the argument has been pushed too far, and I want the House to recognise that many of the works for which we are borrowing are not permanent, though they may be quasipermanent, in the sense that there will always be something of the kind in existence. The courseof modern improvement is so rapid now-a-days that that which is useful to-day has become antiquated to-morrow. If we spend money on switchboards to-day, boards of an improved character, or, perhaps, an entirely different device, will be necessary a few years hence.

Mr Tudor - The report of the experts admits that one of these boards, which has been in use for only four years, is already old.

Mr HIGGINS - Quite so. The system of borrowing tends to prevent us from adopting new improvements. When we have spent loan money upon a particular asset, we do not feel justified in wiping out that asset to adopt an improvement, whereas if we had spent only revenue upon it, we should not have that scruple. Thus the borrowing system is a drag upon our progress, and prevents the adoption of improvements. The Treasurer, to make this pill as sweet as he can, has told us that he intends to establish a sinking fund. I like the idea of sinking funds, if they are likely to remain sinking funds ; but the Treasurer knows that £50,000 was, by the Ministry which succeeded his, taken out of the sinking fund which he established in Victoria three or four years ago.

Sir George Turner - That money was not taken from the sinking fund. It was money which had been put away to pay off trust funds which had been improperly used.

Mr HIGGINS - I understood that £130,000 had been set apart by Act of Parliament to liquidate a principal debt, and that £50,000 of the amount was taken to meeta deficit from revenue.

Sir George Turner - To meet liabilities falling due in two or three years time.

Mr HIGGINS - If the loan is raised, I shall support the sinking fund proposal for all it is worth, though I have very little faith in it. So long as you have a body which can borrow, and which can, by Act of Parliament, lay its hands upon a sinking fund, it will do so whenever it is in need. Even if the sinking fund is to be faithfully administered, it will not repay the principal until after 30 years, and in the rapid development of inventions, and in the changes which are likely to occur in a country like this during that period, the works for which the money has been borrowed will become out of date and unsuitable, and we shall have to borrow more to replacethem, and then to borrow again to replace them a second time, until we shall have three or four loans for the one asset. This subject opens up a great variety of questions. It opens up the whole questionof taxation. One cannot enter upon its consideration without looking all round about. A host of things have to be considered. For instance, we have to consider whether we shall place Queensland in a difficult position if we refuse to borrow. I believe that Queensland has been the most extravagant of the States in the amount of her borrowings per head of population.

Mr Macdonald-Paterson - That is a crude way of calculating the debt of a State. A more useful way is to estimate it according to the number of sheep carried, or to the miles of railway opened for traffic.

Mr HIGGINS - Taking the number of sheep depastured in Queensland just now, I should think that the debt of that State is even bigger still. I have nothing to say against Queensland ; I am simply mentioning a fact.

Mr Macdonald-Paterson - The practice of referring to a debt in relation to population has been abandoned even in London.

Mr HIGGINS - In the March number of the North American Review, a London writer of great ability still uses it.

Mr Macdonald-Paterson -People who speak in that way forget the territorial area.

Mr HIGGINS - I think that the money borrowed by a State should have relation to the size of its population rather than to the area of its territory. I have said that the orthodox parties do not appear to appreciate the danger of this borrowing system.

Sir William McMillan - No one has spoken yet.

Mr HIGGINS - The honorable member for North Sydney has given utterance to views which I suppose are those of his party.

Mr Thomson - No ; they are my own.

Mr HIGGINS - The honorable member's view is, practically, that there should not be any borrowing, but that he will vote for the loan.

Mr Thomson - I have not said so.

Mr HIGGINS - I feel convinced that the party that will take up the finances of the Commonwealth, and work to establish a true financial system, will have a great future in our political history.

Mr Thomson - Can the honorable and learned member show how that can be done in view of the Braddon clause ?

Mr HIGGINS - Braddon clause or no Braddon clause, I say that this Bill ought to be rejected. The only party that shows the slightest appreciation of the danger of our present system of borrowingis the labour party, against whom all kinds of sneers are directed. I have seen one of the programmes of the labour party in Victoria, in which they declare themselves against borrowing, although, perhaps, not so strongly as I could wish. Sufficient attention has not been paid to the dangers we are incurring, and to the bad repute in which we stand in the financial markets of the world. I direct the attention of honorable members to what has been written by thoughtful men in London and America regarding the unsoundness of our financial system. According to a calculation made by Mr. Harold Cox, one-third of our revenue from taxation has to be devoted to the payment of interest on loans spent in works which were expected to be reproductive. As a Commonwealth, we have before us some very large undertakings. We have to create the federal capital, and a large demand will be made for money to pay the owners of . the land comprised in the site, and for the purpose of erecting the necessary buildings, and perhaps for creating a harbor. We also have to pay for the buildings which have been taken over from the States in connexion with the transferred departments. We shall have to take over some of the States' debts, and eventually the railways will fall under our control. Great financial operations will have to be carried out in one form or another, and we may require to borrow £5,000,000, £8,000,000, or even £10,000,000 for the purpose of erecting the federal capital. I am speaking only of probabilities. If we acquire a large area for federal purposes, as we can do and ought to do, we shall probably construct a harbor, and the expenditure will be huge.

Mr Watson - The work would be very gradually carried out.

Mr HIGGINS - Yes ; but we have to prepare for all these things. It would be quite sufficient if the Treasurer were to come down with proposals for borrowing in connexion with large operations of that kind, and not for finicing works such as those which it is now intended to provide for. The fact is that we appear to be like a number of men who have borrowed as much as they can as individuals, and who have formed a limited company so that they may issue more debentures and go on borrowing. By our federation we have created a new borrowing machine over our heads.

Sir William McMillan - Have not we taken over certain services ?

Mr HIGGINS - Yes, we have. We have to consider the fact that the population of Australia, as a whole, is not increasing to the extent expected. I read recently a prophecy which was made by Sir Francis Bell before the Royal Colonial Institute, in London, in 1882. That prophecy has not been fulfilled. Sir Francis Bell thought that within twenty years from that dateby about this time - we should have had a loan indebtedness amounting to £200,000,000. So we have. He also thought that we should have about six times the population that we have. If we were sure that the population of Australia would increase in the ratio expected by Sir Francis Bell there might be some reason in borrowing, but Australia is increasing her population more slowly than almost any other new country in the world.

Mr BRUCE SMITH (PARKES, NEW SOUTH WALES) - Everything is done to discourage an increase of population. Canada sends over to England for people.

Mr HIGGINS - I admit that pulling up is a painful operation, but we must pull up at some time, and the sooner the better. We are in the position of a man who has had too much liking for drink. He has to be pulled up sooner or later, and the sooner the better. >I do not know of any time better than the present for the Commonwealth. There is no financial authority in the world who does not laugh at our financial position. If he is friendly he shakes his head.

Mr BRUCE SMITH (PARKES, NEW SOUTH WALES) - They gave New South Wales the money she wanted ten times over last month. I do not know whether that is laughing.

Mr HIGGINS - They gave her the money at a considerable discount.

Sir William McMillan - At one-half per cent, less than the rate of the greatest borrowing power in the world.

Mr HIGGINS - Honorable members must see the absurdity of speaking like that. If the New South Wales loans are so very desirable why did they not fetch a better price ?

Mr BRUCE SMITH (PARKES, NEW SOUTH WALES) - My statement was made in answer to the honorable and learned member's remark that the financial authorities of the world were laughing at us.

Mr HIGGINS - They may not laugh at our loans, but they laugh at our financial system. I think the honorable and learned member will agree with me that our financial system is' not sound.

Mr BRUCE SMITH (PARKES, NEW SOUTH WALES) - Hear, hear - I quite agree with the honorable and learned member.

Mr HIGGINS - The sooner we stop borrowing the better. No one wishes to embarrass the Treasurer or to cause inconvenience to the States, but the question is how are' we to best, provide for the future ? It would be much easier for us to go on borrowing for present purposes as long as we could obtain money. It would be much more comfortable for us to give £1,000,000 worth of bonds and receive £940,000 in return, but having regard to the future of the Commonwealth and of the States, it would be well if the House were to determine that we should not raise any loans for the present. I intend, therefore, to vote against the second reading of the Bill.

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