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Thursday, 15 September 1949

Mr BURKE - The article is headed, " Government Spending No Answer to Slump " and I take it that it expresses the views of the honorable member for Fawkner.

Mr Holt - It is a summary of an article by me.

Mr BURKE - I shall quote only a short passage from the article. Then the honorable member may indicate whether or not the views expressed are his. I am dealing with the criticism of indirect taxation that was offered by the honorable member for Warringah. The article states -

Possibly the answer would be found in financing social services on a contributory basis and maintaining indirect taxation at a fairly high level. The income tax rates on the brackets from which investment principally derives must be lowered to more acceptable levels.

I take it that that statement expresses the views of the honorable member for Fawkner because it has been published in an article which purports to express his views. The honorable member expressed more fully than did the honorable member for Warringah the traditional policy of the Liberal party when he said that a good deal of the cost of government should be financed from the proceeds of indirect taxes. The honorable member for Warringah criticized such a policy to-day. I agree with him that indirect taxation is a bad form of taxation. I go further, and say that this Government has achieved a great deal in reducing the proportion of indirect taxes in the total taxes levied on the people. Prior to1 the advent of Labour governments in this country, approximately 60 per cent, of the revenue of the Commonwealth was derived from indirect taxes and 40 per cent, from direct taxes. To-day, the proportions are almost reversed. This Government has relied much more heavily on direct taxation and much less heavily, proportionately, on indirect taxation. lt is true that the amounts have varied from year to year as total taxes have been increased, but the proportions to-day compared with pre-war years are as I have indicated.

The honorable member for Warringah has cited statistics to show that production in overseas countries is relatively greater than it is in this country. Production statistics have always been an unreliable basis upon which to determine the prosperity of a country. Many important factors must be taken into account. The United States of America has vast mechanical ability and a great industrial system which were developed over the war years. America has become the bastion of the democracies, not only militarily, but also industrially. The vast industrial potential which was developed in America during the war has been turned to peace-time pursuits and has enabled that country to achieve remarkable results. In Australia production has suffered because we have not been able to obtain the mechanical aids which America has at its disposal.

The honorable member for Warringah has also said that the Government's sole concession in the field of income tax consists of an increase of the maximum amount in respect of which rebates may be claimed for insurance premiums and superannuation payments, and that this concession bad been granted solely to benefit members of the Parliament. That statement wai unworthy of the honorable gentleman. I shall be interested to learn whether he fails to claim a rebate for the maximum amount when he submits his next income tax return. If my memory serves me aright the proposal for increasing the maximum amount in respect of which rebates may be claimed on this account was submitted by the honorable member for Fawkner. Certainly the first occasion on which I heard the matter raised was when the honorable member for Fawkner drew the attention of the Treasurer to the increasing cost of a variety of services which, he claimed, made the maximum amount of £100 unrealistic.

Mr Holt - In his reply, the Treasurer stated that a number of honorable members had raised the matter with him. He mentioned, among others, the honorable member for Griffith (Mr. Conelan).

Mr BURKE - That is so, and I think, also, the honorable member for Hindmarsh (Mr. Thompson). I draw attention to this matter merely to show that this was a most unworthy and unjustifiable statement. Things have come to a pretty poor pass in this Parliament when statements, of that kind are made by honorable members opposite. Doubtless some newspapers will high-light the honorable member's statement that this concession is intended to benefit only ourselves and has not been granted to meet a demand throughout the community generally. As a general rule I do not favour concessions of that kind. I believe that they are inequitable in application because they benefit most those on the higher ranges of income and provide little or no benefit for those in the lower income ranges. Such a concession has, however, been sought by members of the Parliament and by people generally for a long time. I have been reliably informed that organizations of public servants have strongly pressed for the granting of such a concession. They have claimed that public servants make heavy contributions in insurance premiums and superannuation payments for which they have not been able to claim rebates. I leave the matter at that point, because I do not think it is worthy of further comment.

The honorable member for Warringah dealt with the Government's proposals to cushion the effects of a possible recession. The memory of the depression of recent years is still fresh in the minds of the people of Australia and of other countries. We remember, not only the human suffering involved, which was tragic enough, but also the loss of productivity resulting from the unemployment of great masses of the people. Those losses can never be recovered. Men and women throughout this country have resolved that such an economic waste will never again be tolerated. It is true that the human f actor in the depression was of the utmost importance, but so also was the fact that men and women were idle when vast public works still awaited completion. To guard against the recurrence of a similar state of affairs the Government has prepared a public works programme on both a short term and a long-term basis. Honorable members opposite have criticized that programme on the ground that it must involve the direction of labour. Our answer to that contention, if an answer be needed, is that we had real direction of labour during the last depression. Sheer economic circumstances compelled the direction of labour and would again if a similar situation should arise. But what honorable members opposite fail to realize is that modern times have produced the answer to the problems that arise from a recession. If governments introduce public works programmes, or if they maintain a policy of full employment, it will not be necessary to direct labour. Intelligent employers and far seeing governments realize that the provision of adequate compensation for the hardships of unemployment, and of reasonable conditions of labour will enable us to avoid directing labour should a recession come upon us.

The honorable member for Warringah also referred to the Government's commitments in respect of international conventions, agreements and organizations. He referred specifically to the International Monetary Fund, claiming that Australia's participation in that fund had been resisted by the Opposition. If my memory serves me aright, the sole opposition in this House to the proposal that Australia should become a member of the International Monetary Fund and Bank came from the honorable member for Reid (Mr. Lang) and the honorable member for Bendigo (Mr. Rankin). By and large, Opposition members supported that proposal and gave it their blessing. The honorable member for Warringah has changed hia attitude. Now he claims that because of that agreement we cannot obtain an increase of the price of gold to-day. I point out, however, that when the International Monetary Fund fixes the price of gold to-day it does so as the result of a vote of its members, although I admit that the United States has a substantial influence when any such vote is taken. If the price of gold' were not decided by the International Monetary Fund the matter would be left solely to the United States of America. The present organization takes from that country some of the control that it formerly had and confers the power of control on a new organization. The honorable member also repeated' what he had said last night, namely, that the Government had done nothing to stimulate the production of gold. The fact is, however, that the Government has done a great deal to encourage the production of gold. Through its immigration policy it has provided additional man-power for the gold mines of Western Australia. The Government has sponsored a scheme to provide additional man-power for Currawong, the local forestry area which provides timber for the mines in Kalgoorlie, on which so much of Australia's gold-mining production depends. Other migrant labour is also being made available to Kalgoorlie by the Government. The limiting factors that restrict gold production to-day are man-power and machinery. As I have pointed out, the Government has made direct efforts to overcome the scarcity of man-power and machinery. It has co-operated with the management of the gold mines and with those State governments that are interested in gold-mining, and has done a great deal indeed to encourage the industry. As I pointed out last night, the principal reason for the decline of gold production lies in the fact that because gold mines give up they must of necessity, in time, give out. There is not an unlimited quantity of gold in the earth. Huge quantities of payable gold have been won from the gold-fields, and it is inevitable that the supply of payable ore must diminish. The production of gold is also limited by the high cost of working to-day.

I think that my remarks dispose of the major criticisms of the Government's financial policy uttered by the honorable member. His speech was not so much criticism of the budget as it was a splenetic attack on what he chose to call " socialism " and " socialist government

As I said previously, the real test of the Government's policy will come at the next general election, when the issues will be placed squarely before the people, and they will have an opportunity to express their opinion on the conduct of the nationalized or socialized industries of the country. The budget gives many indications of the solid achievements of the Government. The front page of the printed1 budget speech contains a formidable list of its achievements. Progressive reductions of taxes that have been made since the war amount to the equivalent, in current monetary value, of £200,000,000. To have reduced taxes to such a degree in a period of only approximately four years is a highly creditable achievement. Turning now to the actual incidence of income tax, I point out that individual taxpayers in the middle and lower income groups have received very considerable financial benefits. For proof of that we need only to compare the tax paid by taxpayers in the lower and middle income groups with that paid by them to the Commonwealth and State Governments before the war. It will be seen that, with the possible exception of Victoria, in most States people are paying less than they did before the war. The successive reductions of tax made by the Government are all the more remarkable because of the very considerable expenditure which the Government incurred during the prosecution of the war, the financial consequences of which still have to be encountered. The Government has provided £108,000,000 for repatriation and re-establishment of ex-servicemen. Because of the extraordinary prosperity that the community has enjoyed people have received high incomes, and in consequence the state of the national revenues has enabled the Government to set aside £184,000,000 for interest and sinking fund on debt arising from the war. It has made gifts to Great Britain totalling £35,000,000. It has also made direct contributions of £35,000,000 to relieve distress in other countries in Europe and elsewhere. I think that the magnitude of those contributions adequately disposes of the criticism made by the honorable member for Warringah this afternoon that the Government is not playing its part in international affairs. The expenditure on the provision of social services has increased from £39,000,000 annually to approximately £81,000,000, and the National Welfare Fund has been built up to nearly £100,000,000. The criticism made by the Opposition of the reserve in the National Welfare Fund reveals a serious conflict not only between various members of the Opposition but also between the two political parties in opposition. On the one hand, the honorable member for Warringah, who is a prominent member of the Liberal party, claims that the reserve of nearly £100,000,000 which has been accumulated by the present Government would disappear rapidly under the stress of adverse economic conditions. He contends that the total reserve is not sufficiently high. On the other hand, the Leader of the Australian Country party (Mr. Fadden) has repeatedly asserted that the National Welfare Fund is nothing more than a secret reserve established by the Government for some ulterior motive, and the right honorable gentleman is emphatic that the fund should not be nearly so great as it is. Supporters of the Government are quite satisfied, however, that by establishing and accumulating such a substantial fund the Government has made a most substantial contribution to the economic security of the nation.

Turning to the payments which have been made to State governments, we find that those payments have increased, and will continue to increase. In 1949-50 it is expected that approximately £101,000,000 will be remitted to the States. For some time the opinion was expressed in this House, and also in the States, that uniform taxation should be abolished and that we should revert to the former dual system of taxation. However, I do not think that that view now finds favour with any substantial section of the community, and even if Labour were not returned to office at the next elections I do not think that the present Opposition parties would favour a reversion to the old system. For one thing they realize that taxpayers generally would be called upon to pay more in taxes than they do at present. To-day taxpayers are receiving a bigger return for their taxes than was ever envisaged before uniform taxation was introduced, although, of course, that may not be true of taxpayers in every State. However, it is certainly true of the three claimant States, which obtain the benefits of the financial prosperity of the more populous and more highly developed States in eastern Australia.

In other respects the Government also has a fine record. One of the most important improvements in our financial position made by Labour has been the reduction of loan indebtedness. Until the outbreak of World War II. our economy, under successive non-Labour administrations, functioned on the old principle of borrow, boom and bust. Under that system we were saddled with a huge public debt. Even in periods when incomes were high borrowing went on apace. Of course, the inevitable consequence was that when the national income was lowered we still had to meet huge commitments on. a great national debt. Because Australia may have to encounter a recession1, at least of the prices of its primary produce, if not of general economic conditions, the Government has restricted loan borrowing to an absolute minimum. By doing so, the Treasurer (Mr. Chifley) has earned the gratitude not only of the present community but also of future generations of Australians. In the course of his budget speech the Treasurer stated -

During the year, loans! raised in Australia for State works programmes, Commonwealth advances to the States for housing, and redemption of unconverted securities resulted in cash subscription's amounting to more than £127,000,000.

That simple statement shows that there has been no net addition to the national debt since last year, which is a fine achievement. However, it has not received the commendation of the Opposition or of the press. In fact, the decision to pay the sums involved from the Treasury instead of borrowing money to finance them was made in the teeth of the Opposition and the press, which have argued long and loudly that the Government should borrow more extensively so as to reduce the immediate burden of taxation. That contention is too frightening even to contemplate. The adoption of such a policy would be stupid even if we had not the experience of conditions after World War I. to guide us. In the circumstances, responsible members of the Parliament and newspapers which advocate that we must again pursue that policy reveal either a lack of ability to learn the lessons of the past, or selfinterest in the matter. I think that you, Mr. Temporary Chairman (Mr. Sheehy), in conversation with me put your finger upon the consideration that really counts. You said that an individual member of the community could not borrow indefinitely for the purpose of financing his current costs and remain solvent. In other words, the average citizen must meet his current costs from current income. That argument is equally true when it is applied to the finances of a nation. I believe that the Australian Labour Government, through the Treasurer, has done a fine job in that respect, and, as I stated earlier, it deserves and will receive the gratitude of this and succeeding generations.

The honorable member for Warringah dealt at length with prices. I do not propose to rehash the story because every honorable member is thoroughly conversant with it. Honorable members on this side of the chamber did their best to preserve in peace-time the system of prices control that the Commonwealth had exercised in war-time. Several years ago, every honorable member on this side of the chamber echoed the statement of the Prime Minister that, in the post-war period, the prices of commodities would certainly rise. He said that, as man-power controls were relaxed and as the volume of income from the high prices ruling for our export commodities increased, it would be almost impossible to keep prices static. The right honorable gentleman also declared that by employing uniform methods throughout the country the Commonwealth could control prices more effectively than could six independent States. The Prime Minister said that if the States were not prepared to refer the necessary powers to the Commonwealth, the Australian Government would conduct a referendum in an endeavour to obtain the approval of the people. For reasons best known to themselves, members of the Opposition urged the people to vote against the Government's referendum proposals. They claim that they will be returned to the treasury bench at the next general election. Had the power to control prices been vested in the Commonwealth, the Opposition parties, as the new government, would have administered it.

Mr Archie Cameron - We shall be returned.

Mr BURKE - I am merely saying that the evidence at the time of the referendum, and since the referendum, shows that the Opposition parties are not confident that they will be returned to office. Their actions provide clear proof that they realize that the Labour Government will be returned to the treasury bench. During the referendum campaign, Government supporters pointed out that by uniform action throughout the Commonwealth a single federal organization could control prices more effectively than could six independent State authorities. The Commonwealth was denied the power. Honorable members on this side of the chamber have never " squealed " about the people's decision, or claimed that they were wrong in rejecting the referendum. We say that the people have a perfect right to be wrong. However, members of the Opposition are not entitled to complain about increasing prices. Even if the Commonwealth had continued the war-time controls, prices might have risen; but since the Commonwealth vacated the field, they have risen sharply and steeply until to-day they provide the major problem that confronts this country. As I have stated, we on this side of the chamber do not criticize the people because they refused to vest the Commonwealth with power to continue prices control. We made our decision, and asked the people to approve it. We were rebuffed, but in the circumstances, we contend, with justification, that members of the Opposition have no warrant to assert that prices should not have increased. Honorable gentlemen opposite did their utmost to ensure that the prices structure of the country would break down, and, therefore, to the degree that the general increases of prices could have been prevented, the responsibility rests squarely upon their shoulders. They can argue if 'they phase that the action of the Commonwealth in withdrawing subsidies is the principal cause of the steep increases of prices, but that contention will not cause even a ripple on the pool of public opinion. Before the referendum campaign, the Prime Minister warned the people that, if the Government's proposals were defeated, the Commonwealth would withdraw the subsidies. The people were also informed that if the Commonwealth were denied the power, the prices of similar goods might vary in the several States and that, in such a situation, the Commonwealth could not possibly pay subsidies. I doubt whether, on constitutional grounds, the Commonwealth would be able to pay a varying subsidy on goods in the respective States. I leave the problem at that point.

The honorable member for Warringah did not refer to immigration but he addressed some remarks to the committee on the subject of development. He alleged that the Government had not given any encouragement to private enterprise to develop Australia. The reverse is true. The Government has given every possible encouragement to private enterprise to develop industries in the Commonwealth, and its efforts have been crowned with marked success. The only limiting factors are man-power, materials and machinery. Because of the great demand for industrial plant and premises, the Government cannot allow all the businesses that desire to begin operations in this country to make a start at the present time. The honorable member for Warringah also said that the exercise of controls by the Government is restricting the development of the country. I remind the honorable gentleman that many of the war-time controls which the Commonwealth exercised have been transferred to the States. The Liberal Government of Western Australia is the only State administration to continue the control of the issue of permits for the purchase of new motor vehicles. That Government may be wise in doing so, and, of course, it is in a position to judge whether the retention of that control- is necessary. In addition, the Liberal Government of Western Australia has imposed a more stringent control of building materials than has any other State administration.

The development of Australia is closely related to our population problem. The Australian Labour Government has a fine record with respect to immigration. Members of the Opposition and the press will doubtless continue to draw attention to particular incidents in the administration of immigration and will overlook, except when they are forced to take account of it, the fine work of the Minister for Immigration (Mr. Calwell). Our population has increased substantially as a result of immigration. By that means, we are making provision for a vastly increased population for developmental purposes and for possible defence requirements. Immigration is providing man-power for essential industries that will assist to overcome the existing shortage of materials. The Prime Minister has pointed out that under the immigration programme, the Government expects that 220,000 financiallyassisted new settlers will have arrived in Australia by the 30th June next, and of that number, some 130,000 will be available for employment. That is an excellent programme, and is an example of the vision that is displayed by this Government.

I do not propose to deal at length with international trade and payments. That subject is one of the most vexed problems of modern times, and the solution is not easy. The position has developed because of the sudden emergence of the United States of America as the financial centre of the world. After World War I., the financial centre of the world appeared to be shifting from the United Kingdom to the United States of America. Almost in a night, that process was consummated ,by World War II. The United States of America is the greatest creditor nation, and has replaced the United Kingdom as the greatest international lender and the market for finished products. The American people have been amazingly generous since World War II. They have made substantial payments not only to the devastated countries of Europe but also to Great Britain and other nations. I do not believe that the United States of America has yet realized that it is the greatest creditor nation, but as such, it must accept the position that has been forced upon it almost against its will. In other words, America must import as well, as export goods. The situation of the United States of America is vastly different from that of the United Kingdom when the last-named country was the banker of the modern world. Great Britain needed to import goods in order to sustain its people and to provide raw materials for its manufacturing industries. When those raw materials had been manufactured, they were sold to other countries. America needs imports far less than did Great Britain, but as time goes on it will realize that, with imports and exports, it can build a standard of living that will indeed be the envy of the world. For a short-term settlement of the dollar problem, of course, we look hopefully to the outcome of the recent conference between representatives of Great Britain, the United States of America and Canada. I do not subscribe to the general view that we can find a short-term solution of our dollar problem by persuading the United States of America to increase its imports. I refer to only one item alone in order to explain my belief. Our wool is demanded by the whole world to-day. Because of the war and the poverty that exists throughout the world, vast numbers of people are still badly clad. If the necessary purchasing power existed, we could sell our total wool clip easily anywhere in the world. If the United States of America were to buy it for stock-piling, as is frequently suggested, our wool would be denied to the people in other countries who need it. The same thing is true of all the other items that normally we would export to the United States of America. I do not subscribe, either, to the view that at the present stage we should divert a large volume of manpower to industries that might earn additional dollars for us. If we took that step now, when manpower is scarce, we should reduce the production of commodities that are essential to our well-being and vital to other people throughout the civilized world. We must make a new approach to the dollar problem. American gifts, great as they have been, must be even more generous. However, I do not think that we are entitled to suggest that to the United

States of Am erica unless we do likewise. We have amassed a substantial balance in the United Kingdom. I do not agree with the honorable member for Warringah !.hat we ought to give away that balance. As a creditor nation, we cannot afford to do so. In the event of a future recession, a catastrophic fall of the prices of primary products might affect us very seriously again if we did so. However, as a lead towards the solution of the world's problems, foremost of which is the dollar problem, we might well say to the United States of America and other countries that, for a period of one or two years, we will give our surplus exportable commodities to some organization to be distributed as and when they are required.

I have not at hand the total of the surplus of our exports over our imports in recent years, but I assume that the amount is of the order of £30,000,000. I believe that, in order to solve the dollar problem, the United States of America must give way a large volume of its surplus products to other countries that need them. If we urge that policy upon the United States, we should be willing to undertake to do likewise. Therefore, our representatives in the councils of the world should be empowered to say that for a period of one or more years - I suggest one or two years - Australia will give its surplus products to some organization in order that they may be distributed to the countries that need them. In that way alone, I believe, can we solve the existing dollar problem. Of course, in any such scheme, whether worked out individually or collectively, the United States of America must be the major contributor.

I have dealt sketchily with the budget. It is a voluminous budget and a very creditable one. It is not a votecatching budget. The Treasurer could very easily have succumbed to the temptation to offer substantial benefits to the Australian people. Many of us would probably have fallen victims to the temptation to say that we would increase social services in all fields, and perhaps extend child endowment to the first child in every family, and then allow the antiLabour parties, if they were returned to office, to carry the baby of the vast addi- tional expenditure. However, the Treasurer resisted that temptation and I believe that, because of that and becauseof the work that he has done, the Government is assured of success at the election.

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