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Wednesday, 19 October 1904


Mr JOHNSON (Lang) - No one will deny that there are practically unlimited deposits of iron ore throughout Australia, and that they should be utilized, if it is practicable to utilize them. But there axe differences of opinion as to the best methods to adopt to bring about their utilization. Like every other project that has for its object the diversion of the proceeds of taxation from its legitimatepurpose, that of ministering to public needs, into the pockets of certain persons for purposes of private gain, this is based mainly upon the plea that it will afford a large amount of employment. We do not hear anything as to the large extent to which the dividends of the lucky shareholders will be swollen. I have no objection to the establishment of the iron industry on a legitimate basis, but I recognise that we are now being asked to put our hands into the public purse, and to apply moneys contributed by the taxpayers, not to some public purpose, but in such a manner as to swell the dividends of investors in a private enterprise. I have a strong objection to that kind of thing. I am averse to the proceeds of taxation being diverted from legitimate public purposes at any time. It may, perhaps, be advisable in some cases to offer bonuses with a view to promoting national interests, but I do not regard this proposal as coming within the category of such cases. I believe that the honorable member for Eden-Monaro is actuated by the worthiest motives.I believe that he has not any personal ends to serve, but is prompted by a spirit of patriotism. But in my opinion his point of view is a mistaken one. He stated that the bonus was intended merely to give the industry a start, and that when it was fairly placed upon its legs, the Australian iron would, no doubt, be sold at a cheaper rate than the imported article. He said further that the bonus was required to protect the Australian wage-earners. Just so. Against what are the wages of the Australian worker to be protected. Against competition. What competition? Continental competition chiefly. What need is there for us to protect our workmen against continental competition when we know that the wages paid to continental workmen are much lower than those prevailing in Australia? The bonus, according to the honorable member, is expected to bring about an increase in the wages of the Australian workman-, and to, at the same time, enable the Australian product to be sold at a price cheaper than that asked for the imported article. How could these two objects be simultaneously achieved by such a means? How could it raise the wages of the workmen, and at the same time cheapen the local product ? A great measure of protection is already afforded to the iron industry naturally by the cost of conveying iron from Europe and America to Australia. . That should be sufficient. I am satisfied from independent inquiries I have made that the iron industry could be profitably engaged in without any protective duty, or bonus, or other artificial aid. Why should the public be called upon to contribute to an enterprise in which they are not to be partners? It has never been denied that the whole of the profits derived from the industry will be absorbed by those who invest their capital in it. If they are going to take all the profits, let them also accept all (.he risk of loss. If we are to bolster up the iron industry by means of a bonus, which, according to several experts, will be ineffective unless fol- lowed by the imposition qf protective duties, why should we not give the. same support to every other, industry ? Where are we to draw the line? It has been pleaded that this is a national industry, but I would point out that all industries are more or less national .in character, because they all represent some elements of wealth production, afford employment to the people, and yield a return upon the capital invested in them. Thereby they contribute not only to the profit of the individual, but to that of the nation at large. Therefore, if we are to grant a bonus to the iron industry, why should we not extend the same consideration to others. Our wool growers, coal-miners, and stock-breeders, and others, would have quite as' strong a claim upon us. It has already been indicated that this proposal is to be only the beginning of a system of granting bonuses. The honorable and learned member for Darling Downs made that sufficiently clear, and expressed a hope that we would recognise the propriety of offering a bonus for. the encouragement of the cotton growing industry in Queensland. If this kind of thing is to go on, the time may come when it will be regarded as perfectly legitimate to devote, the greater portion of the money raised by taxation to the purpose of increasing the gains of private individuals. I know that both protection ists and free-traders may conscientiously support the granting of certain kinds of bonuses. There are, however, bonuses and bonuses, and some of them are distinctly protective in their incidence. I. grant that bonuses possess one advantage over protective duties, inasmuch as we can ascertain the exact extent to which the public are asked to contribute under them. Under a system of protective duties we can never tell how much the public are required to pay. It has been, admitted that the bonus itself will not be sufficient to establish the iron industry. At the end of the bonus period, it is proposed to levy protective duties, ranging from to .20 per cent. So that those who believe in the doctrine of free-trade are being asked to commit themselves to the payment of bonuses, with the full knowledge that such bonuses are to be followed by protective duties.


Mr Higgins - Does the Prime Minister agree with that view?


Mr Reid - I agree with a good deal that the honorable member has said.


Mr Higgins - But does the right honorable gentleman agree that protective duties must be imposed after the bonus period has expired ?


Mr JOHNSON - I say that it is clear from the statements of honorable members and from the evidence given before the Bonus Commission, that protective duties are expected to be imposed after the bonus period expires. I believe that the whole proposal is unnecessary, and that the iron industry could stand by itself without artificial aid of any kind. I say, further, that if investors do not find sufficient inducement to carry on the industry upon ordinary commercial lines, we should not permit the Commonwealth Treasury to be used to bolster it up. I have never heard of . any protective system, or of any system of bonuses that has resulted in permanently raising the wages paid to the workmen in any industry. The honorable member for Southern Melbourne told us that the proposed bonuses and protective duties were intended, primarily to bring about an increase in the wages of the men employed in the industries affected, and he claimed, further, that the establishment of the iron industry would solve the unemployed problem. This is the same old story that has been told from time immemorial, and proved since the beginning to be an utter delusion and a snare. Whenever an application is made for support for any particular industry we are told that it is intended merely to give it a start. I would ask honorable members, who has ever heard of any industry started under such conditions reaching a stage at which it could afford to dispense with State assistance ? No such case has come within my knowledge. Therefore, I am justified in supposing that we shall be called upon to grant more and more assistance as time goes on. We cannot take up a newspaper in Victoria to-day without seeing some reference to the languishing industries of that State. These industries are said to be languishing after upwards of thirty years of "coddling" by the imposition of artificial restrictions upon trade. Wherever such restrictions are imposed the same thing occurs.


Mr Higgins - If this proposal will assist any State, it will assist New South Wales.


Mr JOHNSON - The protective system in Victoria was established for the avowed purpose of giving industries a "start." Yet, periodically, during more than thirty years of its operation, pleas have been advanced for increasing the duties upon the ground that industries were tottering. The more State assistance was extended to them, the more they tottered. As a result, we have seen the flower of the manhood of Victoria leaving this State for other lands for a period extending over a number of years. That is the strongest possible condemnation of this proposal.


Mr Austin Chapman - If legislation of this character had been operative, those persons might have remained here.


Mr JOHNSON - Certainly not. Such legislation not only was powerless to prevent it, but was directly responsible for a large proportion of the exodus.It was in Victoria that we first heard of the appointment of Wages Boards and Sweating Commissions. We have merely to look to any protectionist country in the world to find that the unsatisfactory conditions which surround the worker in lands where a low Tariff prevails, are accentuated in countries where a high Tariff is operative. The last census returns of the United States contain a declaration that in New York city alone there are tens of thousands of unemployed and destitute persons. Moreover, out of every twenty persons employed in American factories, seventeen are foreigners. The artificial method of raising wages by dipping into the public Treasury for the purpose of enriching certain manufacturers, has had, the effect of driving American workmen out of the most highly protected industries in that country, and of putting foreigners in their places. It is in the free-trade industries that the greatest number of Americans are employed.


Mr Mauger - What industries are those ?


Mr JOHNSON - Many of the great natural primary industries. In this connexion, it must be remembered that there is absolute free-trade between the whole of the States of the Union. I wish now to refer to the report of the Royal Commission, which recently investigated this matter. We have heard a good deal from the honorable arid learned member for Darling Downs concerning certain paragraphs, in what he chooses to term the "majority" report of the Royal Commission. I should like to point out that the report in question is not a majority one. The Commission consisted of twelve members, six of whom reported in favour of the bonus and an equal number against it. The only way in which it can be claimed that a majority were in favour of the proposed bonus is by counting the casting vote of the Chairman, in addition to his deliberative vote. The report of the six members who are opposed to the granting of the proposed bonus is unanimous, whereas that of those who favour it is not absolutely unanimous.


Mr Higgins - Those who favoured the bonus wished the industry to be controlled by the State.


Mr JOHNSON - That is not stated in the report. Those members of the Commission who reported in favour of the bonus, were not absolutely unanimous, because the late Sir Edward Braddon made a very important reservation. He approved of the report " except as to paragraph b of section 20, from which I dissent." The paragraph in question reads as follows : -

Your Commissioners recommend that provisions should be inserted in the Bill. ...

(b)   Securing to the Commonwealth, or to the

State in which the work for the earning of bonus is being chiefly carried on, a right of purchase of the undertaking after a fair interval at a valuation.

That is a very important reservation.


Sir William Lyne - That provision is contained in the Bill.


Mr JOHNSON - But I am dealing now with the Commission's report. I repeat that the six members of the Commission who reported against the payment of a bonus were absolutely unanimous. Consequently, if it can be urged that there was a majority either way, it seems to me that those who were opposed to the granting of a ' bonus constituted that majority. I now propose to read one or two extracts from their report - extracts which speak for themselves) .and which occasion surprise in my mind that this matter should have been again brought forward at the present time. Paragraph 3 of the report of the members of the Commission who object to the granting of the proposed. bonus states -

The Bill provides for the payment of ^324,000 of the people's money to private individuals engaged in an enterprise for their private gain.

There is no ambiguity about that statement. It continues - .

There can be no guarantee that the bonus, as proposed, would permanently establish the industry, though it is probable the inducements offered might be instrumental in forming speculative companies.

Paragraph 4 reads -

One of the witnesses, Mr. Sandford, managing director of the Eskbank Iron Works, New South Wales, stated that he had* made an agreement with an English syndicate to spend £250,000 in extending the Lithgow works if the Bill passed. In answer to another question, Mr. Sandford said that to make pig iron he wanted a plant involving an expenditure of from ^100,000 to ^'25,000. This estimate is less than half the sum proposed to be paid in bonuses.

I should like honorable members to ponder over that statement, and to realise its full significance. It is a case of greasing the fat pig all the time. It is not a question of providing work for the unemployed. That cry is raised merely for the purpose of playing upon the sympathies of honorable members. The unemployed are being used as a shield to cover the real design of those who are in a position to make large dividends by investing in an enterprise of this character without any State aid whatever. The honorable and learned member for Darling Downs has spoken, in eulogistic terms of the experience of Canada. I have looked tip . that experience, and I find that it is far from encouraging. Instead, it is of a character that should make us very chary about attempting to follow the example of that country. The report of the Commission also refers to the experience of Canada. Paragraph 5 states -

The Canadian experience is not encouraging. The bonus system for iron production was first instituted there in 1883. Subsequently a Bill was passed in 1897 further continuing the system.

The bonus there was granted for the purpose of starting the iron industry, and yet we find that after it had been in operation for fourteen years, it had to be extended for a further term. The paragraph continues -

Another Bill was carried in 1899, providing for the diminution of the bounties Dy a sliding scale expiring in 1907. In July of this .year the Dominion Government decided to postpone the operation of this sliding scale for one year, which practically means a further increase in the bounties paid.

So this process continues. Where, I ask, will this system of propping up industries end? The practice of diverting 'public money into the pockets of private individuals is absolutely wrong. Paragraph 6 states -

Nearly ail the witnesses examined before the Commission agreed that the payment of bonuses would be useless unless followed by a duty. Ex'perience shows that if the payment of bonuses be commenced the liability of the Commonwealth will not be limited to the sum proposed under the Bill, but that further Government aid will be sought.

That confirms my statement as to the want of finality in regard to proposals of this character. Paragraph 7 says -

The evidence failed to show that there was any commercial necessity for the bonuses proposed. Mr. Sandford said he could produce pig iron at Lithgow under 35s. a ton. Allowing for freight to Sydney, Melbourne, and other ports of the Commonwealth, he could, on this showing, compete favorably with any imported pig iron. Other witnesses, who, however, had less experience than Mr. Sandford, doubted the correctness of his estimate of cost. But, on the supposition of his having made an under estimate, he would still, even without a bonus, be in an excellent position as compared with the imported commodity.

Those statements are based upon the evidence tendered before the Commission. Paragraph 8 reads -

No effort was made to bring forward witnesses against the Bill. Notwithstanding that fact, the evidence given failed to establish a case in its favour. Several witnesses thought the establishment of iron works in the Commonwealth premature, and much of the evidence was strongly against any attempt by the Government to establish the iron industry by the payment of bonuses.

In the light of this report, which is fairly strongly worded, and speaks for itself, I fail to see how honorable members can with their eyes wide open conscientiously give their adherence to a principle of this character. There is another point to which I should like to call attention, as it is one of verygrave importance. I refer to the principle involved in a private member bringing forward a measure of this kind.


Mr Higgins - That is the fault of the Government.


Mr JOHNSON - It is only indirectly the fault of the present Government, for the practice was not initiated by them. But whatever Government may be responsible, the fact remains that the principle is unwise, and should not be persevered in. In expressing this opinion, I desire it to be distinctly understood that I do not wish in the slightest degree to reflect on the integrity of the honorable member, who is in charge of this measure. There is not even the faintest suggestion of suspicion attaching to the action of any honorable member in connexion with this Bill, and we may discuss it free from any suggestion of the kind. It must be patent, however, to any one who gives even a few moments' consideration to the question, that, sooner or later, serious consequences may result from a system which permits measures involving large expenditure of public money to foe introduced by a private member of the House, under the aegis of the Government of the day. Rightly or wrongly the adoption of such a practice may give rise to the suspicion in the public mind that there is something more than mere patriotism in the background. It is undesirable that any action on the part of the Parliament should give rise to such a feeling. I am happy to say that, so far as this Bill is concerned, no such suspicion exists.


Mr Ronald - Then why suggest it?


Mr JOHNSON - I have been led to mention it because of the feeling that if the practice foe adopted it may in future cases give rise to such a suspicion. I would point out the desirableness of avoiding such a possibility. I know, of course, that the present Government occupied a peculiar position in regard to this Bill, and were bound, as a matter of personal honour, to adopt the course which they have pursued.


Mr Thomas - Were the.y bound in honour to do wrong?


Mr JOHNSON - I do not say that they have done anything intrinsically wrong in this case ; but 1 hope that their action in allowing a private member to take up this measure will not be regarded as a precedent. I would repeat that there is no suggestion of suspicion attaching to the action of the honorable member for Eden-Monaro in bringing forward this Bill. My sole reason for urging that such a practice should not be followed is the belief that we should avoid giving rise to even the suggestion of suspicion in the public mind. Every honorable member has the fullest confidence in the integrity of the honorable member in charge of the Bill ; but it occurred to me at the outset that this was a matter that certainly deserved very serious consideration. The final point which I wish to emphasize is that we have to recognise that whilst the Commonwealth is being asked under this Bill to pay a large sum of money into the pockets of a private syndicate, that syndicate will reap all the profits of the transaction, without being exposed to any of the risks which men who embark in other undertakings have to incur. If the profits will be as large as have been represented in some quarters, then those who desire to enter upon the industry should consider it quite good enough to take the risk. They should be able to make their calculations as to the probable profits, on the same basis as do other men who ordinarily embark upon other industries for their own private gain. If we are to assist the iron industry in the way proposed, why should we not also assist a widow who desires to start a laundry, or a man who wishes to open a shop, or is about to undertake any other business ? If the principle be right in this case, it must be capable of application in every direction. We cannot draw any hard-and-fast line. The principle involved is either good or bad, and I assert that with certain limitations, it is bad. There may be certain special cases in which it might be desirable to grant a bonus, but this case, in my opinion, is not one of them. The Bill deals after all with what is a purely commercial speculation, and should be treated as such. Let those who desire to engage in the industry secure the benefit of any profit they may be able to derive, and take the risk of any loss that may attach to it. We have no right to dip our hands into the public Treasury, and to say to any syndicate, " We give you this sum, which is not ours to give, for your own personal good, and desire nothing in return. We hand it to you, simply as a. guarantee against possible loss in the first instance, and if you do not incur any loss, it will go to swell your already assured profits." That is a principle to which I have a strong and deep-rooted objection, and in view of the facts which I have put before the House, I have only to say that, whilst I give the honorable member in charge of the Bill every credit for purity of motive, I hold that the principle of the Bill is a most pernicious one, and must therefore oppose it.







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