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Tuesday, 17 June 1902

Sir WILLIAM McMILLAN (Wentworth) - I cordially agree with honorable members who have stated that this is one of the. most important measures that has yet been brought under the notice of Parliament. It would be a strange thing indeed if a Bill of this kind were not fully and drastically discussed, and, if necessary, criticised most completely. I purposely abstained from speaking earlier in the debate because I was anxious to hear the views of honorable members, as one or two of them seemed to entertain very extreme opinions upon this question. But, in listening to the discussion, I did not find that any speaker went sofar as to argue that under no possible circumstances should the Commonwealth raise a loan. That brings me to the fact that this series of Bills has been put before us in rather a disconnected way. I think it is unfortunate that we are not now discussing this Bill in conjunction with the schedule of works. I suggest to the Treasurer that, before making his speech in reply, the debate should be adjourned and that we should proceed with the discussion upon the Bill covering the appropriation. Then, if honorable members will allow the second reading of the Loan Appropriation Bill to be passed,so that we can getinto committee, the Treasurer will have an opportunity of explaining, item by item, his reasons for including them in the Bill, and the principle underlying them. If the whole schedule be vetoed, of course the measure which we are now discussing will fall to the ground. Similarly, if two-thirds of the items are vetoed, the Treasurer may conclude that in order to provide such a small amount as £100,000 or £200,000 it will not be necessary to go upon the money market.

Mr JOSEPH COOK (PARRAMATTA, NEW SOUTH WALES) - Will the Treasurer consent to have his Bill emasculated in that way ?

Sir WILLIAM McMILLAN - I think that the method which has been adopted is scarcely fair either to the House or to the Treasurer. Many honorable members disagree with certain items which are embodied in the loan proposals, but there may be works, which, after further explanation from the Treasurer, may fairly and reasonably be constructed out of loan account. Having made this suggestion, I should like to offer a few remarks in connexion with the Bill itself. Honorable members naturally feel that as this is thefirst Loan Bill which has been presented to them, the whole principle of borrowing ought to be thoroughly criticised. But I think some imagine that we are absolutely untrammelled in dealing with loan expenditure. Really, we are not. This is not a Government which is starting with an absolutely clean sheet, free from all responsibilities. The Commonwealth Government has had to assume control of certain transferred services, and whether we pay for the public buildings connected with those services - which represent a value of £10,000,000 or £12,000,000- by accepting, an equivalent portion of the States debts, or merely by discharging the interest upon them,we are practically initiating a loan policy. The interest upon that debt will constitute a very large amount, because in many of the States interest was not charged upon the expenditure involved in these buildings. Therefore, when we take them over, either upon a valuation or under whatever terms may be agreed upon, the Commonwealth will have to pay the full interest owing upon them. Consequently we start, to a large extent, with a policy which has been handed to us. I was really surprised at the peculiar intellectual finessing of the honorable and learned member for Northern Melbourne, when he declared that in the aggregate we had paid in interest an amount equal to the whole of our loans, a fact which evidenced that if we had repaid the loans year by year, we should have been in a much better position. No doubt we should but we could not do it. The Commonwealth Government, therefore, does exactly what the States Governments are doing. They take over a certain amount of business and certain responsibilities connected with the carrying on of that business. If the business of the post and telegraph office andthe railways had not been projected years ago, we should have had no income and no services. It is absolutely absurd to talk about a policy under which we never should have borrowed. We had not the necessary money, because large amounts derived from the sale of land in the different States were used for developing the country and rendering it possible of habitation.

Does not the very prosperity of Australia at the present time give the lie to the pessimistic views which are entertained by many people ? We talk about a loan fund. In 1900 the various States had incurred a loan expenditure aggregating £180,000,000. Of that amount, however, £140,000,000 was absolutely reproductive. It had been spent upon railways, telegraphs, and in connexion with water, sewerage, and other services, leaving only £40,000,000 to be accounted for. When one considers that a large amount of that £40,000,000 has been expended in the erection of post-offices, by which the States now save the rent of those premises, and iri other works which are either directly or indirectly reproductive, I think it will be seen that we can fairly face the world. I doubt very much whether we could not getrid of the whole of the railways of Australia at the present time for the amount which stands against them. Honorable members talk about the per capita of debt, but forget the enormous services which those debts have promoted. When we talk about our indebtedness we should remember that the trade and business of Australia are -something phenomenal in the history of the world. At the present time the trade of the Commonwealth represents £16 1,000,000 annually. We have an external trade -amounting to £80,000,000 annually. When one recollects that we are merely a handful of 4,000,000 of people, these figures altogether put out of consideration ' any ordinary comparisons. At the same time, I think that we should be careful in considering our loan policy. There were two weaknesses in the finances of the States. One of these has been prevented in our finances by the admirable Audit Act which we passed. That was the danger of putting the expenditure of a year into the year afterwards, and thus creating fictitious surpluses. There was also the question of the loan account. Honorable members who have been in the State Parliaments recollect that the loan account was almost the last measure of the session, and that it was rushed through when members wanted to get home. The only cure for the evil we are facing to-night is conscientious and careful consideration of every item the Treasurer puts before us in the loan account. It is no use laying down a broad rule to never borrow. It is of no use earmarking or taking any such artificial and absurd steps. We have to recognise the fact that, in certain large services taken over as a matter of public necessity and convenience, there are works of an absolutely reproductive and interestbearing character, which are permanent, at any rate, to the extent of 30 years, and with which it would not be fair to burden the current revenue. On the other hand, as we make the period of our loans 30 years, any work that will stand only ten years ought not to be included in the loan account ; above all, what we call renewals ought not to be paid for out of loans. We ought to err on the side of revenue, and not on the side of loan expenditure. If we make any mistake, it ought to be in defraying out of revenue, works which might possibly be defrayed out of loan, and not in defraying out of loan those which might be defrayed out of revenue. These are the only principles I know of to guide us. The danger of our action to-night lies in the fact that we have before us a Loan Bill, by which the Government propose an expenditure of £1,000,000, which is authorized in detail in another Bill. Should weve to the second residing of the Loan Bill without considering in detail the items of works in another Bill? We must not forget that the States are watching our financial operations. Several of the States know that they are on the verge of very large deficiencies, and if it goes before the world that we will have nothing to do with loan accounts - as might be deduced from many of the speeches to-night - there may be even more discontent with the Commonwealth than there is at present. It would be better for us to show the country, not that we do not believe there are items to which the loan account could be properly applied, but that we believe that the items making up the £600,000 are not such as ought to be paid out of loan account. Or on the other hand, we could show that we believe there is a. sufficient surplus arising out of our present Customs revenue to justify our postponing the consideration of a loan .to a more necessitous time. I do not want the public to be deceived as to the attitude of the House. It is very reasonable to say that a large number of these items, such as renewals, ought to be paid out of revenue. It is reasonable to say that with our large Customs revenue we have an ample margin to enable us to meet the expenditure out of revenue, or, at any rate, that we intend to do so this year. But it is not reasonable to say that under no conditions are we going to excercise the right we have of raising loans. We are in a much better position to safeguard loans than are members of the State Parliaments. The loans we raise will be practically under the advice of the Executive of the Commonwealth, and they will be chiefly in connexion with the Post and Telegraph service. That service will, I believe, not be interfered with except to a small extent by honorable members. We have to deal with quarantine, lighthouses, and defence, and there is scarcely one of the items which will bring in the machinations of what we used to call " the roads and bridges member." Very little personal influence or kudos will be obtained by members through the raising of any loans by the Commonwealth. We need not be fearful about the future if we carefully and calmly, without any party spirit, consider every item the Executive lay before us. There is not the same reactionary feeling there might be in a State Parliament. We are simply keeping up certain services which are absolutely necessary. In the great department of defence, it would be the wildest folly to carry on any " cheap-jack " policy. I am speaking of loans applied to fortifications and works of that kind, which must be dealt with absolutely by themselves. We do not know to what extent we may have to renew these works. We may at any time have to make a large expenditure for the public safety ; and that alone shows how difficult it is even in the matter of renewals to lay down any rigid rule. There is one matter on which I should like to say a word to the Treasurer. I cannot see what necessity there was for the Treasurer, without, at any rate, some consultation with this House, to pay over his surplus revenue. Section 87 of the Constitution is as follows : -

During a period of ten years sifter the establishment of the Commonwealth, and thereafter until the Parliament otherwise provides, of the net revenue of the Commonwealth from duties of customs and of excise, not more than onefourth shall be applied annually by the Commonwealth towards its expenditure.

Sir George Turner - The honorable member must not forget section 89, which ties my hand absolutely.

Mr Thomson - The Treasurer could have appropriated the money.

Sir George Turner - I could have spent it, of course.

Sir WILLIAM McMILLAN - Section 89 provides -

The Commonwealth shall pay to each State, month by month, the balance (if any) in favour of the State.

Sir George Turner - I must pay over every shilling.

Sir WILLIAM McMILLAN - I do not think that was intended. I do not know what is the absolute law, but if there was this danger, and the Treasurer thought, as he must have thought, that there would be some difficulty over the question of loans, it would have been better to bring the matter up earlier. The Treasurer knew that there were certain services connected with the post-office which have been carried on under the loan account in the States ; and he must have known that these liabilities would have to be met.

Sir George Turner - The States, with the exception of Queensland, have met these liabilities.

Mr McCay - If this and all the other Bills ought to have been brought up earlier, what would have been left to bring up later ?

Sir WILLIAM McMILLAN - There are certain financial matters which, to my mind, take precedence of all else. The Treasurer must have known that in the first year there would be a large number of liabilities. I take it that the States paid up only to the 31st December previous to the foundation of the Commonwealth.

Sir George Turner - The States paid up to last December. I made arrangements with the States that until a loan could be raised, they should pay for works out of loan funds, and that these moneys should betaken into consideration when fixing the value of the buildings transferred.

Sir WILLIAM McMILLAN - It come to much the same thing, but that is a matter about which I have not much to say. Our main object is to deal with the principle of loans. While I think the sinking fund is a very good proposal if kept under proper check, and it is clear that we shall not have deficiencies side by side with it, there ought to be some principles laid down with regard to loans in the future. It is difficult to fix a line ; it is difficult to say what works should be put in the loan account, or to decide whether a work will be sufficiently permanent to last 30 years. It is sometimes difficult to say whether a work is really productive, but we must have some understanding on our own part, as a sort of traditional guide to the Treasurer. We might lay it down as a rule that, as our loans are floated for 30 years, anything not sufficiently permanent to last that period must be paid for out of revenue. We could certainly lay down an absolute rule that, all renewals shouldbe paid out of revenue. If I may refer to the schedule of another Bill, I must say I am surprised that the Treasurer, with the surplus he has, should include any items approaching renewals.

Mr Macdonald-Paterson - What does the honorable member mean by " renewals ?"

Sir WILLIAM McMILLAN - Renewals of switch-boards, for instance.

Mr Thomson - Switch - boards which have been paid for out of loans current.

Sir WILLIAM McMILLAN - As has been said to-day, a telegraph post which is replaced ought certainly to be paid for out of revenue. These are simple principles which anybody can understand.

Mr McDONALD (KENNEDY, QUEENSLAND) - Paterson. - That has already been done in several States.

Sir WILLIAM McMILLAN - Nobody can tell, from a superficial reading of the schedule, whether certain matters are or are not renewals.

Mr Macdonald-Paterson - Why this suspicion?

Sir WILLIAM McMILLAN - We have only that suspicion which is very healthy in members of Parliament who desire to understand everything brought before them. If I understand the Treasurer aright, he has paid out of revenue for similar services about £180,000.

Sir George Turner - The charge against revenue this year is £120,000, and next year it will be £180,000.

Sir WILLIAM McMILLAN - But the question is whether the Treasurer has carried out the principle as far as possible. I certainly agree that if we are not going to allow, at any rate one-half of the Treasurer's proposals, it will be scarcely worth while going to the money market. The Treasurer is not now in the position to which he has referred. If we liked to operate at once with the whole of this amount as ordinary revenue, the Treasurer would not have to return it to the States. I take it that this amount could be distributed. In other words, the Treasurer need not take the money out of the States all at once. He could take the money as required. But, having taken over the services, we are certainly not justified in refusing to keep them in a proper state, and to develop them, whether out of revenue or lean account. I hope that the Treasurer will not neglect to get this money which is absolutely necessary. The telephone system apparently is going to be an enormously expensive one ; but I hold that it is better, perhaps, that it should be dealt with as part of the Postal and Telegraph department than by the States. Of course, we must be careful in dealing with a service like that from a loan standpoint. We might have a number of small items in a large service which in two or three years would aggregate a very big amount. But, on the other hand, very small items may properly be charged to capital expenditure, and, therefore, it is not reasonable always to consider that, because an item is comparatively small, it ought not to be debited to capital account. But it makes it all the more necessary that in any loan schedule which we may have before us, we should have as full details as possible, and the fullest explanation from the Treasurer. I should like again to suggest tomy right honorable friend that it would be well to postpone this debate, and allow the House to deal with the Loan Appropriation Bill. I would strongly recommend honorable members, whether they intend to oppose these items or not, to deal fairly and generously with the Treasurer, as we generally do, and to allow him to go into the schedule of that Bill, so that he may have an opportunity of explaining the items. After that explanation, if we are still ofopinion that it is unreasonable to place these items in the loan account, we can negative the schedule. In that event, of course, both the Loan Appropriation Bill and this Bill would fall to the ground.

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