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Tuesday, 17 June 1902

Mr JOSEPH COOK (PARRAMATTA, NEW SOUTH WALES) - Unlike the last speaker, I do not think that the Commonwealth is approaching bankruptcy, or that the Australasian States are likely to imitate those of the Argentine. I deprecate as much as possible any remarks of that kind. Surely we may discuss what the honorable member for Bourke has been pleased to term "high finance," without lugubrious references to bankrupt countries, whose productions failed, and whose people generally are in a bad way. I speak the more strongly upon this matter, because, like the honorable member, I have come to the conclusion that at this stage of our national career, we ought to draw a very tight rein as regards borrowing. But it does not assist discussion to predict that red ruin stares us in the face unless we peremptorily discontinue the flotation of loans. On the other hand, I think it is quite time that we decided what course the Commonwealth shall adopt in regard to the future incurrence of debt for enterprises such as the Treasurer has outlined upon the present occasion. Personally, I have had some difficulty in making up my mind upon this question, because, unlike the last speaker, I do not think that the construction of some of the works enumerated in the schedule can be deferred. I have no fault to find with that schedule. The works are most pressing and important. Of my own knowledge, the telephone system of the continent urgently needs revolutionizing. Since the adoption of the electric tramway system in Sydney the telephone service of New South Wales has become completely disorganized-. I am aware that the same condition exists in a less degree in the other States. Something must be done immediately to put the New South Wales telephone system upon a more satisfactory footing. A few years ago it was admitted by all our experts to be the best in Australia, but since the introduction of electric tramways it has got into a completely disorganized mess. It is of the utmost importance, therefore, that relief should be afforded as speedily as possible. I do not quarrel with the schedule of this Bill. The misgiving which I entertain is in regard to the means to be employed for raising this loan. The question which presents itself to me is whether we ought, at the beginning of our federal career, to lay down "the principle that we will for all time raise money for constructing perishable works by means of borrowed "money. That these works ave shortlived will be readily admitted. We have been told that electricity is assuming new forms. Science is absolutely revolutionizing the old systems, and we must resolve to adopt new systems so far as the application of that subtle force is concerned. The question that suggests itself to me is whether, in making readjustments in our electrical systems, we ought to go to the loan markets of the world for the wherewithal, and particularly whether we ought to do so at the present time. The honorable member for Bourke said that, to some extent, the old, wild, boom borrowing in Australia had been stopped. I wish I could believe that.

Mr HUME COOK (BOURKE, VICTORIA) - I did not say that. I said that if we were to continue our present policv, boom-borrowing would be stopped.

Mr JOSEPH COOK (PARRAMATTA, NEW SOUTH WALES) - I am not so sure that we are not borrowing wildly. Recently I read an article in the Age - which, by the way, has occasional lucid intervals - pointing out that during the past two and a-half years Australia has borrowed £27,500,000. That is an alarming sum.

Sir George Turner - Some of those loans were simply conversion loans.

Mr JOSEPH COOK (PARRAMATTA, NEW SOUTH WALES) - I dare say a little of that total represented conversion loans.

Sir George Turner - A great deal of it.

Mr JOSEPH COOK (PARRAMATTA, NEW SOUTH WALES) - I doubt whether there was a great deal of it.

Sir George Turner - There was nearly £5,000,000 in connexion with Victoria alone.

Mr JOSEPH COOK (PARRAMATTA, NEW SOUTH WALES) - The article did not give any particulars. I have no doubt that all the States are borrowing pretty freely. They are getting just as much money as the London market will permit them to obtain at a reasonable rate of interest and upon favorable terms. It is not at all a popular policy - as the Treasurer has discovered before to-day - to discontinue borrowing and endeavour to bring our expenditure within reasonable dimensions. The old couplet applies to nations equally with individuals -

The devil was sick, the devil a monk would be ;

The devil grew well, the devil a monk was he.

We do not think of the consequences of borrowing. The moment our circumstances are bad we rush round in an hysterical manner to ascertain if we cannot discontinue that policy which in former times we have been prone to adopt. Ought we to pursue a policy which can certainly yield no enduring results in regard to our future relations with the States ? I should not have so much hesitation in voting for the Government proposals if I could see the slightest intention to economize on the part of the States. But New South Wales continues to borrow at an alarming rate. The simple question which I put to myself is - " Ought I to pile up the Commonwealth indebtedness, concurrently with the piling up of State obligations?" I have come to the conclusion that I ought not to do so, particularly in regard to the State which I represent, where there is a huge surplus of revenue which ought to be drawn upon for the construction of necessary public works. I realize the difficulty which has been pointed out by the Treasurer. I know that some of the States could not possibly stand the strain of constructing these works out of their ordinary revenues. They affirm that their revenues are depleted by our federal finances ; but, upon the other hand, ought we to impose obligations upon the whole of the States because a couple of the small ones find themselves in temporary financial difficulties? It appears to me that that is the question which we ought very seriously to face. In New South Wales we have already submitted to having a revenue foisted upon us which we did not require, and to which we strongly objected, because the small States needed it for their own solvency. Are we to perpetuate the same system in regard to the loan expenditure of the Commonwealth? In New South Wales the revenue, if carefully husbanded, would easily enable us to construct these works without piling up more indebtedness. If the small States cannot pay for works which may be undertaken within their own borders out of revenue, can they not replenish their revenues out of State loans ? Works representing an expenditure of £600,000 are included in the schedule to this Bill. Of that amount, £400,000 relates to works which it is proposed to undertake in the two large States.

Sir George Turner - Victoria could not possibly construct out of revenue the works proposed to be undertaken in this State unless additional taxation were imposed.

Mr JOSEPH COOK (PARRAMATTA, NEW SOUTH WALES) - Is that an absolutely insuperable objection? Are there no resources in Victoria which can be drawn upon for this particular purpose ? I cannot believe that this State is at the end of her financial tether, and cannot bear an additional expenditure of £120,000 for the purpose of constructing necessary public works.

Sir George Turner - The works proposed represent a good deal more than that.

Mr JOSEPH COOK (PARRAMATTA, NEW SOUTH WALES) - But I draw a distinction between perishable works and those of a more enduring character.For example, there is a sum of £71,000 included in the schedule which comes within the purview of the Minister for Home Affairs. That amount is for buildings, tunnels, &c. These works are of an. enduring character, and I see no objection to paying for them out of loan moneys. But the other items, aggregating £112,000 in the case of Victoria, and £221,000 in the case of New South Wales, ought to be paid for out of revenue. If the word " renewal " had been used, it would have more clearly indicated the nature of the works. The old idea when these works were first constructed out of a loan was that all replacements would be paid for out of revenue ; but here in the schedule of a Loan Bill we see £30,000 for a new switch-board in Sydney, and a large amount for a similar work in Melbourne. Because science has rendered the old switchboards obsolete, it is proposed that we shall go again to the London money lender in order to pay for what are really renewals. The Sydney switch-board is by no means an old one. It has not been installed more than three years, although it is six or seven years since it was first ordered, the balance of the time having been occupied in constructing it, owing to the initial difficulties which are met with in all large undertakings. The switch-board, when first ordered, was not expected to last more than ten years ; and honorable members must not run away with the idea that frequent renewals and replacements mean inherent structural defects. To-day, in Sydney, the board is full of subscribers, and only the other day I saw the Postoffice officials enlarging it. So rapid has been the growth of the telephone system that it has overtaken the capacity of the switch-board, the original cost of which was £15,000. This plan of paying for renewals out of loans has been followed in all the States, and no provision is ever made for repayment to the loan funds. The bulk of the money in the schedule is for short-lived works of the kind I have indicated. The construction of telephone and telegraph lines or poles means, in many cases, merely replacing the old, worn-out works, and, as I said before, it would be better if the word " renewal " had been used.

Sir George Turner - This expenditure is not intended for mere renewals.

Mr JOSEPH COOK (PARRAMATTA, NEW SOUTH WALES) - I have no doubt that some of the proposed lines are new ; but in most instances they mean the replacing of old lines with new ones.

Sir George Turner - Renewals will have to be paid for out of revenue.

Mr JOSEPH COOK (PARRAMATTA, NEW SOUTH WALES) - All these services are very short-lived. When we ai-e told that the works ought to be constructed out of borrowed money because they are for future generations, the answer is that the works will probably cease to be of use long before the present generation has passed away.

Sir William Lyne - In New South Wales, when the honorable member was in office, £100,000 a year was voted for the extension of telephones.

Mr JOSEPH COOK (PARRAMATTA, NEW SOUTH WALES) - That £100,000 was for the construction of new lines and tunnels, and I arn not now arguing that permanent works and buildings ought to be paid for out of revenue. The £70,000 which appears in the schedule against works in the department of Home Affairs may very properly be paid for out of loan. My present arguments are against loan expenditure on short-lived, perishable works, which . in a few years leave no asset against the money borrowed. These remarks apply to nearly £500,000 of the proposed expenditure.

Sir William Lyne - For the Post-office 1'

Mr JOSEPH COOK (PARRAMATTA, NEW SOUTH WALES) - Most of themoney is for the Post-office. The life of a telephone is a very few years at most : and if we accept the theory that these instruments should be replaced out of revenue, why should the first cost not come from the same source, seeing that it takes precisely the same amount to renew as to purchase at the outset ? We ought not to begin in theCommonwealth the policy of constructing such works and renewing them again and again out of loan money. The switchboards afford us a concrete instance of the undesirability of such expenditure. We are told that the Commonwealth finances will not stand this expenditure out of ordinary revenue ; and as to that the Treasurer might have tabled an estimate of the excess revenue which he has paid to the States over and above the Braddon requirements. I believe that the amount so paid, but which he need not pay, is about as much as the total estimated expenditure on the worksunder this Bill ; that is to say, the Treasurerhas not used up one-fourth of the total revenue by £500,000 or £600,000.

Sir George Turner - If we deal with the whole total that probably is so, but wehave to deal with individual States. It would be all right for New South Wales and Western Australia, but all wrong with the other States.

Mr JOSEPH COOK (PARRAMATTA, NEW SOUTH WALES) - Then how far ought we to go in the direction of helping the smaller States in their temporary difficulties 1

Sir George Turner - If the revenue were divided on a population basis therewould be no trouble.

Mr JOSEPH COOK (PARRAMATTA, NEW SOUTH WALES) - If we had a good sound Commonwealth financial scheme there would be no trouble. For my part, I think that the smaller States might very well be allowed to replenish their resources from their own State loans, rather than that the larger States should be compelled to pile up their debt. I see no insuperable difficulty in the course I suggest, and it ought to be adopted in common fairness to the States which have abundance of means and desire to spend their revenue in the directions indicated. This matter is so important as affecting my own State that I do not think I ought to vote for the second reading of this Bill, in view of the State borrowing which is going on, and of the overflowing revenue. I say again I have no quarrel with the schedule. These works are absolutely necessary ; and something must be done to place the telephone services on a firm and lasting basis. The metallic circuit is another instance of using loan moneys to replace works. That circuit is intended to supersede the old earth circuit, the latter of which I suppose will become utterly useless. It has been said that one reason why we cannot undertake these liabilities outof revenue is that there are some functions which have not yet been taken over by the Commonwealth. The honorable member for North Sydney pointed out, as an instance, that we have not yet paid for certain buildings which we have acquired, and that we have not as yet assumed control of the light-houses or of quarantine. All that is very true ; but we ought to look forward in the near future to a break up of the drought, and a more hopeful financial condition throughout Australia. Those altered circumstances may be regarded as a set-off against the obligations to be assumed when we take over all the federal functions. The Treasurer has told us that he has a surplus of £500,000 or £600,000, on which he can operate next year, amounting in the aggregate to the total involved in this Bill. I think that there is the fund to which we should look for the financing of these works, instead of continuing to pile up the indebtedness of the country. Under these circumstances I feel compelled, as a protest against a system which has operated in the States for many years, and in connexion with which I am afraid we are all somewhat to blame, to vote against the Bill. I think that under our new conditions we might very well make a new departure, even if it should involve a little trouble at the outset.

Mr. BATCHELOR(South Australia).The honorable member for Bourke has complained of 'the apparent want of interest shown by honorable members in this Bill, although, after a session has lasted for thirteen months, it is only natural that there should be a want of interest in any measure brought forward. I am very glad, however, that all who have spoken up to the present time have opposed the Bill. I hold that to be a good augury for the future treatment of financial questions by this Parliament. I take it that the members of this Parliament do not intend to pass loan Bills without the closest scrutiny, and that some attempt will be made, if not to stop borrowing altogether, to at any rate very much curtail the rate of borrowing. No doubt the States have borrowed to a much larger extent than other nations have done in proportion to population. But the fact that in Australia, to a much greater extent than elsewhere, the Governments are realty huge industrial concerns is very often overlooked. . The objects for which money has been borrowed by the States are very different from those for which most other national debts have been floated. We have borrowed practically nothing to buy powder and shot, and, indeed, we have a splendid asset to show for nearly the whole of the £400,000,000 which we owe. Of course, in some cases we have borrowed at higher rates of interest than we should pay now, and we have no doubt borrowed more than we required, and have lived at too great a rate ; but most of the works upon which the borrowed money has been spent are earning interest. The indebtedness of South Australia is £32,000,000 - an enormous debt per head of population - but 2|- per cent, is being earned by the works upon which more than £26,000,000 of the amount borrowed was spent.

Sir William McMillan - And the South Australian railways supply the needs of a population larger than that of the State.

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