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Thursday, 13 September 1928

Mr BRUCE (Flinders) (Prime Minister and Minister for External Affairs) . - I have listened attentively to the speeches that have been made during this debate; but there has been in them very little for me to answer on behalf of the Government, notwithstanding that there is a deficit on the transactions on the year just closed of some £2,600,000. I shall, however, reply to a few of the statements that have been made about our financial administration.

We all recognize the Leader of the Opposition (Mr. Scullin) as one of the keenest debaters in this chamber. He possesses an extraordinarily analytical mind, and has a peculiar flair for finance and all cognate subjects, so that even before he obtained his present position he was always the member chosen by his party to discuss such matters. Therefore, when he addressed himself to the financial proposals of the Government I listened with the closest attention to what he had to say. As the head of the Government I was much gratified to find that he was quite unable to make out any particular case against us, and that he had to stretch almost to bursting point many of his alleged facts in order to get any ground at all for his criticism. He began his remarks by drawing attention to the deficit. He said that when this Government came into power in the year succeeding that in which I had been Treasurer of the Commonwealth in the administration of the right honorable member for North Sydney (Mr. Hughes) it found itself in the fortunate position of inheriting a surplus of some £7,400,000; but that now, at the end of the financial year 1927-28, there is a deficit of £2,600,000. He made the most of the contrast between those two situations. Notwithstanding that we had come into office when there was an overflowing Treasury, we had, he said, frittered away the whole of it in five years, and had also involved the country in a deficit of £2,600,000. He ended his statement there, as an indication of the hopelessness of the Government's financial policy, leaving it to be inferred that we were to be utterly condemned for having so mishandled the finances of the Commonwealth.

I suggest that the honorable member, who is a master of figures, might at least have given the people the facts, and let them judge whether the Commonwealth finances had been mishandled. He quite omitted to mention what had been done during our term of office. He did not tell his hearers that £7,500,000 had been used for debt redemption; that a naval construction programme costing £7,400,000 had been provided for without the imposition of a single farthing of additional taxation upon the people of Australia; that an amount of £1,250,000 had been appropriated for main-road development and paid to the States. He totally ignored the fact that £350,000 had been found out of surpluses for the Council of Scientific and Industrial Research, and there are many other smaller payments out of revenue that he failed to mention. There was the vote of £200,000 for ''civil aviation, the money used for the purchase of radium, for geophysical surveys, and for prospecting for oils and precious minerals. Those were some of the services which were paid for out of the revenue which he suggested we had frittered away. If we leave out of the calculation the last-named items, and take merely the redemption of debt, the naval construction programme, the main-road development, and the expenditure on the Council for Scientific and Industrial Research, we account for no less a sum than £16,500,000. The burden of the criticism of the honorable member was that £10,000,000 had disappeared, and there was nothing to show for it. That was the ground on which he said the Government should be severely censured by the people of this country. In view of the facts to which I have just drawn attention it will be seen how hard, pressed the honorable member was to find grounds upon which to condemn our financial administration. Indeed, it was evident that he could not make out a case at all if he made known to the people the facts, and he accordingly curtailed this part of his speech to a considerable extent.

The next complaint of the Leader of the Opposition was that we had a deficit, and had done nothing to provide for it. He did not say what he thought we should have done; he merely said that we had done nothing. I was greatly pleased to hear his case completely answered by the newly-elected member for Martin (Mr. Graham Pratten), who, in an admirable maiden speech, on which I think we all desire to congratulate him, compared the present position of Australia with that of a company which, after enjoying a period of prosperity, had come to a crisis in its affairs, and was making little or no profit. The honorable member for Martin pointed out that the directorate administering affairs of such a company would not take the drastic step of immediately stopping dividends or making economies which would disorganize the running of the business. He suggested that when a well-managed company experiences a temporary check it falls back on its reserve funds, and uses them to carry on until conditions improved. We propose to take a similar course. There are only two ways in which this deficit could be got rid of. We could make drastic economies and reductions throughout the Public Service, and curtail expenditure in regard to some of the various policies to which we are committed. The deficit could be completely cleared off by departing from policies that we have hitherto pursued, or by making such drastic cuts in the administration of our ordinary services as would bring about complete disorganization. Another method would be to increase taxation so as to bring in the additional revenue needed to wipe out the deficit. We should have been extremely ill advised had we pursued either course. It is most undesirable that there should be a large increase of taxation in Australia a.t this moment. We hear from honorable members, from the press, and from many other quarters that an increase of taxation would be one of the worst things that could happen in Australia at this juncture. The cry of most people is for the reduction of taxation. In these circumstances it is the wisest course to leave the position as it stands. I urge honorable members and the public generally not to become rattled because of a period of temporary depression, as I believe this will prove to be, and to give the country a chance to recover itself without disorganizing our expenditure to an extent that would cause serious alarm. This would not assist the country, but would further retard its progress, and cause greater trouble than we are nowexperiencing.

The Leader of the Opposition could make no suggestions for dealing with the problem ; he merely declared that it should be dealt with. As I have said, I think that the course we have taken is, in the circumstances, the wisest one.

The honorable member then spoke of what must happen if we are to obtain the revenue that we need, and remarked upon the quantity of imports that would be necessary to produce that revenue. The figure he took was £12,000,000, and he said that to raise such an amount would cause nothing short of a tragedy to the Commonwealth. In dealing with the Customs tariff, he again took a point which he has often taken, and which has become very nearly an obsession with him : he said that any increase in our imports would inevitably indicate that the country was going back. The honorable member should remember that the prosperity and wealth of Australia have been increasing of recent years, and that even in countries which are highly protected, when prosperity increases, requirements increase concurrently. Even a country which is providing the greater part of its requirements by its own production, will in such circumstances increase its importations from other countries. The greater the prosperity of a country the greater its imports will be, because as its wealth increases its requirements are augmented. Therefore, that part of the honorable member's criticism did not cause me the slightest anxiety.

Seeking another position from which he could attack the Government, the Leader of the Opposition repeated a statement which he had previously made many times, and which, T remind him, was answered with the utmost clarity in the budget speech.

He claimed that taxation per head in Australia had increased by 4s. since 1922. He left it at that, considering that the mere mention of the figure constituted a condemnation of this Government. But lie did not place the whole of the facts before the committee. As it is dealt with so clearly in the budget speech, I shall refer to only two aspects of the matter. The first is that the payments to the States, over the period dealt with by the honorable member, increased by £4,000,000. That increase was due to the natural increase in the population of the States, and to the adoption of the Federal Aid Roads policy and the Financial Agreement. ^ Had we not increased our payments to the States, we should have repudiated the' per capita payments, to which we were committed by statute. The second increase, about which the honorable member said nothing, amounts to £4,620,000, and represents the additional payments made during the period for old-age pensions. No one in this chamber has more strenuously advocated and supported the increases in old-age pensions which have been proposed by this Government than the honorable member. Those two items alone account for an increase of £8,620,000. Had they not been made, instead of our taxation increasing from £9 0s. 4d. to £9 4s. 4d. per head of population, it would have been reduced to £7 16s. 8d.

Next the honorable member dealt with periods of years, and figures so tremendous as almost to stagger the imagination. He contrasted two six-year periods, the six years preceding the regime of this Government, and the last six years, during most of which time this Government has been in office. He pointed out that, this Administration had received in revenue during the last six years £100,000,000: more than was received by the governments in power during the preceding six. years. The honorable member regarded: that as another indication of the extravagance of this Government, and as ground for the wholesale condemnation of our financial stewardship. But, in fairness to the public of Australia, the honorable member should have gone further, and should have placed the completed picture before them, so that they might form an impartial judgment. The honorable member should have pointed out that in the first year of the first six-year period, away back in the days of the war, the amount paid out of revenue for war services was £8,400,000; whereas in the last year of the second six-year period the amount paid out of revenue for such services was £29,000,000. If there is anything to be deduced from that, it is that the Government is entitled to a very considerable measure of credit for meeting such a large part of our war obligations out of revenue, whereas the previous administrations had met such obligations mostly out of loan money. Probably; had those previous governments possessed more courage, and met a greater" part of those obligations out of revenue many of the problems with which we are now faced would not exist. Thehonorable member also failed to mentionthat old-age pension payments for the first year of the six-year period amounted to- £3,450,000, whereas for the last year of the last, six-year period they amounted1 to £9,800,000. Surely it would have been but fair on the part of the honorable member to give those facts to the people of Australia, so they could better judge . whether that £100,000,000; had been, wisely spent. Still dealing: with the two/- periods which he mentioned, I shall instance four other items apparently overlooked by the Leader of the Opposition. This Government, during the second period of six years, spent upon old-age pensions £20,000,000 more than was spent by other governments in the first' six-year period. It also spent out of revenue for war purposes in the last period £44,000,000 and on defence £13,000,000 more than was spent in the first six-year period for the same purposes. Further, it advanced £13,000,000 more to the States in the last period than was advanced in the first six-year period by other governments. Those payments account for £90,000,000 out of the total of £100,000,000 referred to by the honorable member. I suggest that his case must have been a very poor one, indeed, when he had to stretch his facts so far, and was not prepared to tell the whole story.

The honorable member also got on to another of his favourite topics, the adverse trade balance of Australia; but he did not deal with it very exhaustively on this occasion. He really only introduced it, to demonstrate how extremely wrong I was in a statement that he said I had made in regard to Great Britain. The honorable member - quite unwittingly, I am sure - did me a considerable injustice when he claimed that I had referred in a former speech to the adverse trade balance of Great Britain. He then proceeded to explain that Great Britain was a creditor nation, and told the committee that a gentleman who spent £12 a week, but who earned £10 a week, and received £2 in interest on his investments, was leading a perfectly respectable financial existence. But, if the honorable member will take the trouble to peruse the speech to which he referred, he will find that I did not in it speak of the trade position of Great Britain. I am aware that Great Britain is a creditor nation, with great investments abroad, and what are known as invisible exports. But the countries to which I referred were the United States of America, Germany and Canada. I suggest that the honorable member was a little hard pressed to establish a case when he had to, put into my mouth words which I had never uttered, alleging that I had drawn comparisons with a country to which I had never referred.

The next subject dealt with was the sinking fund. The Leader of the Opposition tried to suggest that the Government had not done anything at all in establishing a sinking fund. Apparently all the reductions which had been made in the national debt are entirely due to some policy which the Labour party of a previous day had put into operation. There are two comments which I wish to make in regard to that. The first is that I do not see what grounds the Leader of the Opposition and his friends have for taking credit for anything which the old Labour party might have done. The second is that the honorable gentleman's argument was contradictory, because he drew most glowing pictures of the benefits derived from the policy initiated by a former Labour party, and the reduction of the national debt thereby, but he entirely disallowed our claim for credit for reducing the debt by a much greater amount. He cannot successfully maintain that this Government has been idle in the matter of debt redemption. Let me remind him of the Sinking Fund Act passed in 1923, a measure entirely different from any sinking fund provision operating in this country prior to that time. That act was forecast in the budget of 1922. Let me also remind honorable members of certain discussions which took place on the budget of 1922 when the present principle of debt redemption was adopted. That principle has received commendation in every part of the world where it has been considered, and particularly in the great financial centres, because it is a combination of a sinking fund and. a redemption fund, with the best characteristics of both. The Leader of the Opposition suggested in the course of his speech that the funds for debt redemption were being obtained out of the profits of the Commonwealth Bank.

Mr Scullin - I did' not. The Prime Minister should read my speech again.

Mr BRUCE - The honorable member suggested that an important contributing factor to the redemption of the debt was the profits of the bank. Assuming that these funds have played a considerable part in debt redemption, I would remind the honorable gentleman that it was entirely due to the action of this Government that they became available for that purpose.

Mr Scullin - Half the profits of the bank always went to the redemption of the national debt.

Mr BRUCE - The honorable member is quite wrong. Prior to 1923 it was provided that half the profits of the bank should be available for the purpose of redeeming debentures issued by the bank, and that, in the event of the funds not being utilized for that purpose, they should be available for the redemption of the national debt. But the bank all along took up the attitude, and no one was able to induce it to depart from it, that notwithstanding that there were no debentures to redeem, it would not give up half its profits. The difficulty was overcome by the definite action of this Government, and ever since then half the profits of the Commonwealth Bank have gone to the redemption of the national debt of this country. The other source referred to as providing money for debt redemption was the profits derived from the note issue. Three-quarters of the profits from this source, amounting in all to £800,000 a year, are being paid to revenue and may be regarded as devoted to this purpose. That sum represents rather less than one-sixth of the total amount made available each year for debt redemption. It is a mere caricature of the facts to suggest, as the Leader of the Opposition has done, that the greater part of the money which this Government has devoted to debt redemption has been obtained from the Commonwealth Bank profits and the profits of the note issue.

The other point with which the Leader of the Opposition dealt was the Government's borrowing policy, a topic in the discussion of which he always contrives to get into a state of considerable confusion. He makes any number of speeches condemning the borrowing of money, but he will fight with all his power against any reduction of expenditure. As soon as the Government shows any indication of putting into operation the policy which he has advocated, he becomes a strong supporter of. an entirely different policy, and urges that money be freely spent. The only way to obtain money for public works, if we are not to borrow, is to find it out of revenue. The Leader of the Opposition has never had the courage to say that he would have found £10,000,000 out of revenue in order' to finance the public works of the country. I do not think that he is likely to advocate such a policy, because he recognizes how disastrous would be the effect on the community if, instead of borrowing money for capital works, what was required was obtained by increasing the taxation of the people. Thus he finds himself in a hopeless difficulty. He must advocate the spending of money to keep employed those who are already working, and, if possible, open up new avenues of employment for those out of work. But he cannot reconcile that with his avowed policy of ceasing to borrow money, and with his criticism of the Government for what he describes as its extravagant policy of borrowing. '

The Leader of the Opposition then dealt further with debt redemption, but he did not preface his remarks by pointing out the very satisfactory work that had been done by the Government in this direction. He made no mention of the great amount of debt redeemed; but dwelt upon the policy of borrowing overseas. It is right, therefore, that I should point out just what has been done in the way of debt redemption. The position is clearly set out in the budget speech of the Treasurer, which shows what has been done in regard to both war debts and ordinary debts. On the 30th June, 1922, the Commonwealth owed as its deadweight war debt £333,000,000, and on the 30th June, 1928, £294,000,000, a reduction over that period of six years of £39,000,000. The debt for works in June, 1922, was £32,000,000, and in June, 1928, was £79,000,000, an increase . of £47,000,000. Setting off the decrease in war debt against the increase in the ordinary debt, Australia's debt in this period of six years increased by approximately £8,000,000. We must remember, however, that the deadweight debt which has been redeemed is represented by no assets at all. There is nothing to support it. With regard to the £47,000,000 which has been borrowed during the period under review, and which has resulted in an increase of £8,000,000 in the total national debt, the whole of that amount has been spent on reproductive works, no less than £24,000,000 of it being spent on capital works for the post office. On the whole of the £24,000,000 thus spent for the post office, the revenues of that department are sufficient to pay not only the interest, but also the sinking fund for debt redemption on the basis of 1£ per cent. In fairness to Australia, the Leader of the Opposition should have made some reference to the extraordinarily good position which has been brought about by the redemption of £39,000,000 of deadweight debt, and the substitution therefor of £47,000,000 of debt represented by reproductive assets. We must also remember that these operations have had an effect on the total indebtedness per head of the people of Australia. From the 30th June, 1922, to the 30th June, 1928, the war debt per head dropped from £60 9s. to £47 ls. 3d., and the debt for works increased per head from £5 15s. 3d. to £12 14s. 7d. But the total debt per head was ' reduced from £66 4s. 3d. in 1922 to £59 15s. lOd. in 1928, a decrease of £6 8s. 5d.

I come now to the gravamen of his complaint, which is that the Commonwealth has obtained the major portion of its loan requirements in the overseas market. What the honorable gentleman ought to have done when he laid emphasis on this phase of our financial policy was to point out that not only the Commonwealth, but also the several States had loan requirements to be met, and that as a deliberate act of policy it was agreed by the representatives of the Commonwealth and the States that the Commonwealth Government, during the period under review, should seek its loan requirements overseas, so as to leave the Australian market open to them. The Leader of the Opposition should have told the House that if the Commonwealth had been, a competitor in the Australian market there would have been disastrous competition between it and the States for any moneys available in Australia, and that the effect of this competition would have been to increase the interest rate, and consequently the taxation burden placed upon the people. All these facts should have been set out in the clearest language possible by the honorable gentleman if he had wished to place his case fairly before the people of Australia.

Having dealt with the matters to which I have alluded, the honorable gentleman proceeded to discuss what he suggested was a challenge which I had issued, that in dealing with the finances of the country he should dispense with criticism in general terms, present a specific suggestion as to what should be done, and explain in what way Commonwealth expenditure could be substantially reduced. I would remind the honorable gentleman that I have always dealt with Commonwealth finance along those lines. I have emphasized that the bulk of our expenditure may be placed in certain great divisions. There is war expenditure, defence expenditure, expenditure under special appropriations, expenditure on additions and new works, and the ordinary departmental expenditure. I have on several occasions in this House emphasized that the ordinary departmental expenditure represents only a small portion of our national outgoings, being about £3,000,000 per annum out of a total of a little over £50,000,000.' I have said that whilst departmental expenditure may be reviewed, and possibly reduced, any economies effected in it could not materially affect the financial position of the Commonwealth, or bring substantial relief in taxation. But I have made it perfectly clear in every speech which I have delivered, that I would be glad to receive suggestions from the Government's financial critics as to specific items in which considerable economies could be made. The honorable the Leader of the Opposition, in his speech of the other day, made no attempt to indicate how reductions could be made in our war expenditure, in the interest upon our war loan, or the contributions to our sinking fund, or our pension payments amounting to about £29,000,000 a year; nor had he anything to say concerning our defence expenditure, which is about £5,000,000 a year. He did not attack expenditure under special appropriations, which cover a number of items such as payments for invalid and old-age pensions, maternity bonus, and certain bounties, running into something like £13,000,000 or £14,000,000. He had nothing to say with regard to expenditure on additions and new works. Yet he devoted more than one-half of his time to criticizing a number of items in the Department of the Prime Minister. I propose to deal with what was said concerning the Prime Minister's Department when the Estimates for that department are under review, and I suggest that it would have been more appropriate if he had deferred his objection to those items when we were dealing with them, instead of singling them out for special attention in the general budget debate. I was surprised that, in a speech upon the general financial position of the Commonwealth, he should have concentrated his attention on a number of petty details, involving payments of comparatively small amounts, and even payments to one individual. His speech in this respect was one of the most extraordinary utterances to which I have ever listened. But I cordially welcome his criticism, and, when we are dealing with the individual items, I shall explain the whole of them, I hope, to his satisfaction.

I turn now to another criticism of the budget. I had an opportunity to read to-day, the report of the speech delivered by the right honorable member for Balaclava (Mr. Watt) in Melbourne lastnight. As honorable members are no doubt aware, the right honorable member never favours us by addressing his criticism of the Commonwealth financial policy from the floor of this House, where we would have an opportunity to deal with any points which he could raise; he retires to his constituency in Victoria, and delivers his criticism of Commonwealth finance at public meetings. . We could afford to ignore that criticism but for the fact that he was once a Treasurer of the Commonwealth. Probably, because he held the portfolio of Treasurer, more importance is attached to his observations than they would otherwise receive. For my own part I am not much concerned with what he may say, because when I was the Treasurer in a Government led by the right honorable member for North Sydney (Mr. Hughes), the right honorable member for Balaclava saw fit to attack me in the same way as he has attacked every other Treasurer of the Commonwealth. On that occasion he went a little bit too far. He challenged certain figures which I had given in the budget, and declared that I was wrong by millions of pounds. It would be rather startling if the Treasurer of the Commonwealth, assisted as he is by the most competent body of officers with whom I have been associated, could be millions of pounds out in his budget figures. Nevertheless, the right honorable member insisted that my figures were altogether misleading and wrong. I need hardly say that we made a careful check of the figures before I made another speech, and ascertained there could be no doubt at all as to their accuracy. Shortly afterwards, I had occasion to go to Sydney and, in a speech which I delivered there, I dealt with his criticism, and pointed out that there was no justification whatever for his attack, or for the suggestion that the budget figures were inaccurate. The right honorable member had nothing to say in reply, so when I returned to Melbourne I said it all over again, and added that as he had not seen fit to substantiate his statement, I could only come to the conclusion that he was not the financial genius that we had all imagined him to be, and had been entirely mistaken in his figures, or, alternatively, that he knew that he was wrong, and was endeavouring to deceive the people. I left it to the right honorable gentleman to tell the people which conclusion was the correct one. From that day to this we have never heard a word from him on the subject. I think I am safe in saying, after that experience, that we know exactly how much importance to attach to any criticism he may have to offer concerning Commonwealth finance. Consequently, I do not propose to deal with the speech delivered by him in Melbourne last night, except to say that having read it I have definitely come to the conclusion that he is no more competent to criticize the finances of the Commonwealth to-day than he was in 1922, when I issued a challenge to him. '

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