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Tuesday, 30 September 1902

Mr HIGGINS - I never did.

Sir George Turner - No ; but the great majority did.

Mr HIGGINS - In those days, when I found the Treasurer straying from the right path of public policy, I attacked him occasionally - I hope not too bitterly. I regret that the debate should have taken place at this stage without notice. Perhaps, however, that was a wily design of the Treasurer to cause the speeches to be short.

Sir George Turner - I gave notice through the press that I intended to bring on this matter to-day. I forgot it when the adjournment took place on Friday, but I got a paragraph put in the newspapers.

Mr HIGGINS - This is no doubt one of the gravest subjects that has occupied the attention of this Parliament. Other subjects have been grave, but this question of the financial position of the Commonwealth goes to the very root of our policy ; and I think that honorable members have not gone too far in applying to this pressing problem their best theories. At the same time I feel that upon the whole rather too much theory has been advanced this afternoon. We have an urgent problem of practical government that has to 1 be solved, and solved very quickly. The honorable member for South Australia, Mr. Poynton, who has spoken so well for his own State, has looked at her position solely, and urges that it would be more convenient for the South Australian Treasurer to continue to borrow than to impose more taxation. I consider that it has been quite proper for honorable members to look at the wants of the Treasurers of their several States. The matter becomes -one of balancing practice and theory ' Everybody appears, curiously enough, to be, in theory, against borrowing. «

Mr L E GROOM (DARLING DOWNS, QUEENSLAND) - Not against borrowing, absolutely, but against borrowing for unreproductive works.

Mr HIGGINS - The Acting Prime Minister's argument, which was very nice and pleasant as usual, really came to this : Borrowing is a very bad thing - let us do it now, and possibly not do it again. The Acting Prime Minister referred to the hard times. These are hard times, but I never knew a Treasurer or a Minister yet who

Gould not point to something hard in the times when it was sought to justify the borrowing policy. If people want to borrow they can easily find something' in the times hard enough to justify it. I was not impressed by ' the distinction which the Acting Prime Minister drew between the first ten years and the after time, because, although there is no rigid limitation, yet after that period has expired, the duty will still remain as stern and uncompromising as ever for the Commonwealth to finance the States and keep them solvent. There is no doubt whatever that this is one of the defects of our Constitution - a defect of which, with my poor power of foresight, I. am unable to see the ultimate solution. It is one of the great defects that our States should have to depend upon the Commonwealth for their solvency, and that while for the first ten years or so we have to return to each State its own surplus, when the ten years are up the balance has to be re- I turned to the different States as Parliament may direct. We are getting on pretty smoothly at present, but when it comes to be a question of grab between the different States after the ten years have expired - a question as to how much each State shall get - I do not view the prospect with anything like pleasure or equanimity.

Mr Wilks - The "federal spirit" will come in then.

Mr HIGGINS - I hope the honorable member will develop more of the federal spirit and exhibit it. The question here is - Are we to borrow £500,000 or so for the proposed public works ? If one looks at these works, what are they 1 I find here the item " common battery switchboard."

Mr Watson - That has been withdrawn.

Mr HIGGINS - There is also an item for the construction of telegraph lines. Then there is the line -

Sydney General Post-office, additions thereto, and works in connexion therewith.

Sir George Turner - Those works were going on when federation took place.

Mr HIGGINS - It is delightfully vague, of course. There is also the item -

Alterations in connexion with new telephone s witch board.

Sir George Turner - That is an alteration of the building to enable the switchboard to be erected.

Mr HIGGINS - Is it to be paid for out Of loan money ?

Sir George Turner - Yes.

Mr HIGGINS - Then there is-

Proportion of cost of constructing telephone lines between Sydney and Melbourne, £34,000.

Erection of public and private telegraph and -telephone guarantee lines, £8,500.

Common battery switchboard, £30,000.

Sir George Turner - The last item is on the revenue Estimates now.

Mr HIGGINS - I am very glad that we have succeeded in shifting some of these items on to the revenue Estimates.

Mr Watson - Yes, considering that the switchboards were to replace other switchboards paid for out of loans.

Sir George Turner - Not in Victoria ; we paid for them out of revenue.

Mr HIGGINS -Then the schedule speaks of -

Construction and extension of telegraph and telephone lines, cable, instruments, and material, £10,000 for Tasmania. These are samples of the kind of work to be done. The particulars with regard to buildings are most delightfully vague as to whether what is proposed is in the nature of additions, or is intended to replace older buildings. If there is one thing upon -which the best thinkers on public finance agree more clearly than another, it is that such things as these should not be paid for out of loan money. There is no provision for any sinking fund to .meet the repayments. Here is what Professor Bastable has said at page 550 of his Public Finance -

Outlay on public works is not, of itself, and apart from the revenue to be thence derived, different from the cost of war or other unproductive expenditure. No readier or more dangerous mode of increasing debt can be found than the execution of works which are not economically productive. - He explains "economically productive" as " yielding interest " -

Vague assertions of indirect benefits should not be allowed to conceal the fact that " improvements " of this . kind should be paid out of income, and cannot be regarded as investments in the proper sense of the term. - That is only one of a number of statements from eminent thinkers which are of the same purport. What, after all, is the object of borrowing in place of paying out of -revenue? The object is to relieve the taxpayers of the current year- - to prevent -tie taxpayers .from having to pay too large a proportion during the current year. That policy has been a ghastly failure, even for its professed purpose. Of course, as the -honorable member for South Sydney - whom we might call the member for Posterity - has said, all this burden falls upon those who are to come after us. Rut even : as regards the present generation of taxpayers, the borrowing policy is very bad policy indeed. When I was in the Victorian Parliament, I got from the Treasurer a return of the interest .and expenses in connexion with Victorian loans up to the 30th June, 1898. At that time the Victorian public debt was about £49,000,000 ; but 'the interest that had been paid was almost exactly £.40,000,000 ; and the expenses amounted to .£507,356. In " expenses" -were included all discounts, commissions, and so forth. There' .have been four years since then, during -which time Victoria -has been paying in interest at the rate of £2,300,000 per annum.

Mr L E GROOM (DARLING DOWNS, QUEENSLAND) - Does that return show the money received from the works upon which the loans have been spent 1

Mr HIGGINS - No. We have been spending at the rate of about £2,300,000 a year, and the result now is that the interest which has been paid by the taxpayer is about equal to the full amount of the public debt.

Sir George Turner - Could the country ever have been developed if thismoney had not been borrowed for railways and other works ?

Mr HIGGINS - There may be a good deal said from that point of view. I am only showing that even as regards reproductive public works, it is by no means clear that the borrowing policy is a sound one in the public interest.

Sir George Turner - The honorable and learned member leaves out the money received to help to pay the interest.

Mr HIGGINS - That does not interfere with what I am saying.

Sir George Turner - The honorable and learned member forgets that we have received large sums of money.

Mr HIGGINS - The position is, however, that the country could have got the profit from public works, like railways, by taking from the taxpayers exactly the same sum as it has borrowed.

Sir George Turner - But the country had not the necessary income.

Mr HIGGINS - Assuming that the £49,000,000 expended upon public works had been taken out of revenue, we should have had all the profit from those public works which we have now, and we should not have had the capital debt which we have now before us.

Sir Malcolm McEacharn - The works would not have been built.

Mr HIGGINS - That may be. I am putting forward a very simple proposition. I am very glad that the motion against the proposal to borrow money has come from the labour party which has been so much accused of extravagance. I have conceived that the accusation is wholly unjust. I might use a very strong word, and say that it is impudent. The party of extravagance is the party of borrowing, and the party of borrowing is the party thatwishesto sendup the prices of the lands of this country. Booming and borrowing go together. It is, to my mind, a very hopeful sign that themovement against borrowing has come from those who are most accused, and most unjustly accused, of extravagance. The huge interest payments which we have to make are the real cause of our extravagance. We have in Victoria an annual expenditure of between £6,000,000 and £7,000,000, and one-third of that amount - £2,300,000- represents payments for interest alone.

Sir George Turner - £1,900,000.

Mr HIGGINS - Not at present. I have seen the returns, and the amount is what I have stated. Of course the right honorable gentleman ought to know more about the matter than I do.

Sir George Turner - It is only £1,900,000.

Mr Poynton - Has not the expenditure of the principal moneys created avenues of employment for thousands of people?

Mr HIGGINS - I sincerely hope that it has. What I was saying was that if the whole £49,000,000 which we have spent out of loan moneys had been taken from revenue we should have had the same advantages the same opening up of the country, the same advantage from profitable lines that we now enjoy. We should have had less cost, and no capital debt. This system of borrowing is the real cause of our economical and financial difficulties. The result of borrowing is to hamper and cramp us in our annual expenditure of the moneys requisite for the purpose of furthering social development, and to advance all civilization. I admit that there would not be very much harm in having recourse to loansif our population were increasing. I think that in this House I referred not long since to an article by Sir Francis Dillon Bell, then Agent-General for New Zealand, which was published about twenty years ago in an . English review. In dealing with the borrowings of the colonies, he said in effect in chat article - "I expect that by the year 1900 Australasia will have borrowed £200,000,000. But there will be no harm in that. By that time the population of Australasia will be 25,000,000." Wehave borrowed the £200,000,000, and more, but we have not the population of 25,000,000. It is about time for us to take some care in regard to the system of borrowing when we find our population increasing so slowly, if at all ; when we find the manhood of our States flocking over to South Africa in large numbers, and when we find that Australasia has borrowed something like £260,000,000,while the total population is only about 5,000,000.

Mr MACDONALD-PATERSON (BRISBANE, QUEENSLAND) -paterson. - We do not borrow on the security of the population, but on the security of our public lands and works.

Mr HIGGINS - If the population left Australia we should be able to test the value of our public lands as a security. I would remind my honorable and learned friend of a story by Max Adler, in which he describes a town, called Goldtown, that was raised in one of the western States. Upon the discovery of gold in the district a big rush took place. At first there were tents, then houses, and then streets. Next there came a corporation and a mayor, and then the coporation began to borrow. They caused splendid bonds to be prepared, with the names of the mayor, aldermen, and councillors of Goldtown emblazoned amid big flourishes upon them. The bonds were sent to Holland, where they were eagerly taken up, somewhat at a premium. By-and-by, however, the gold gave out, every one gradually went away, and the only one left to pay off the huge debt due under the magnificent bonds was an old negro resting on a stump. If the State of Queensland is to follow the advice of the honorable and learned member for Brisbane, it will find that a blackfellow resting on a stump will be the only person left to pay. It is not safe, to go on borrowing unless the population increases. I might remind the honorable and learned member for Brisbane that the most progressive little country in the world is Japan. Of late years it has been called upon to meet modern conditions, but it has a debt less than that of Victoria, although most of its railways are public property.

Sir Malcolm Mceacharn - All its railways are not public property.

Mr HIGGINS - There are some privatelyowned lines, but, at all events, the Japanese Government do construct railways. Within the last 33 years they have paid off £11,000,000, although during that time they have had a . most expensive war. There is no war so expensive as a naval war, and some few years ago Japan had to go to war with China with a full equipment of ships.

Mr Poynton - There is a slight difference between the population of Japan and that of Victoria.

Mr HIGGINS - Although Japan has such a large population, it has a very small public debt.

Mr Poynton - There is also a difference' between' the way in which tho respective populations live. '

Sir Malcolm Mceacharn - The people of Japan are perfectly happy.

Mr HIGGINS - I should like to sum up what I feel with regard to this proposal. I think first that ' that organization should borrow which needs to borrow. The Government are doing a great deal of harm to the Commonwealth, in the eyes of public men and financiers, in proposing to bring down a Bill to provide for a loan of £500,000 when they have not even spent the income which they have in hand. Injury has been inflicted already, but we shall be injured to a still further degree if the Bill is passed. What a pawky, miserable, niggling thing it would be if, after all the blowing and flourishing of trumpets which have taken place, the Commonwealth were to ask iu London, or even in Australia, for a loan of £500,000 ! It injures a body which desires to raise money if it begins to borrow in this niggling way. Secondly, I consider that the present is a distinctly bad time for borrowing. The Victorian Government recently borrowed money, and obtained only about £92 per £100.

Mr Poynton - Upon another occasion it obtained only £82 10s.

Mr HIGGINS - The honorable member was once a Victorian, and the borrowing happened a long time before he left this State.

Mr Poynton - No.. It was after my departure.

Mr HIGGINS - The system of borrowing in a small way is very injurious to outstanding. We should nurse our credit as a sacred treasure for use in extreme emergency. I take it that we shall have some of these days great ' use for borrowed money. Among other works which we hear discussed is the building of the federal capital.

Mr Poynton - And a trans-continental railway.

Mr HIGGINS - Yes. It is also said that there must be a High Court, which I do not think is necessary at the present time ; and an Inter-State Commission is also proposed. It is a rather unpleasant prospect, but I can clearly foresee that next year the federal expenditure will be more than it will be for the present year. We ought not lightly to handle the credit . of Australia. We should not handle it except for great purposes. I take it that if we are to make a new departure, now is the best time to do so. I know very well that to say there shall be no borrowing is very hard upon those who have to struggle to make the State expenditure and revenue balance at the present time, but there is a greater consideration to put before us. In starting the Commonwealth we are instituting precedents, and we do not want to have it said that the first Parliament borrowed money for the purpose of putting down telephone wires between one city and another. To any one who takes the trouble to look into the matter it must appear very bad to be talking of raising this loan when we have not spent our income. Such a person would say at once - " You have not spent the one-fourth of the revenue to which you are entitled."

Mr Poynton - According to the honorable and learned member's argument, it would be a virtue to borrow £10,000,000, but a sin to borrow £500,000.

Mr HIGGINS - I have not said that it would be a virtue to raise any sum. I have said that when we do borrow it must be because of some great pressure, and for a great sum. If it came to a question of national defence, we should be justified in borrowing to the very end of our credit, in order to be in a position to defend ourselves. We should not borrow except in extreme cases, and, above all, we should not appear before the money market as making our first application for its favours in respect of a sum of £500,000.

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