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Wednesday, 17 September 1958


Mr WEBB (Stirling) .- In his second-reading speech on this bill, the Treasurer (Sir Arthur Fadden) estimated that the amounts payable to the States under the tax reimbursement formula would be £174,600,000; and to bring the amount up to the total that the Commonwealth Government decided to make available to the States, special financial assistance totalling £30,400,000 would be required. The total would then be £205,000,000, The. amounts will be allocated to the States as follows: -

 

The Opposition does not oppose this measure, but it certainly criticizes the amounts that are to be made available, because it believes they are inadequate.

I emphasize that on this occasion all the States are again budgeting for deficits, because the finance available to them from their own, and from Commonwealth resources combined, is insufficient to meet the increased expenditure required by an increasing population. It is necessary for the States to provide additional facilities for education, health and development. In addition, the Commonwealth's policy in regard to immigration plays a big part in the States' financial position, and the Commonwealth should bear that in mind when allocating amounts to the States.

I should like to emphasize the inadequacy of the amount of supplementary assistance being provided on this occasion, by comparing it with the amount made available in 1951-52, when we were going

 

through a> period of economic crisis somewhat similar to that through which we are going now. In that year supplementary assistance amounted to £33,577,000, or £3, 177,000' more than is provided by this measure. When> we examine the States' total revenue, ignoring revenue from business undertakings, we find that the percentage of supplementary assistance has dropped considerably. The figures are -

The table shows that the percentage which supplementary grants form- of the total revenue of the States, ignoring revenue from business undertakings, has been gradually reduced.

Let us consider the total income tax reimbursements, including special financial assistance, together with special grants under section 96 of the Constitution. In New South Wales, in 1952, these amounts received from the Commonwealth represented 63.3 per cent, of the States' total revenue, excluding revenue from business undertakings. In 1955-56 the percentage had dropped to 60.5 per cent. In Victoria, the corresponding figures were 62.4 per cent, in 1951-52, and 54 per cent, in 1955-56; in Queensland, 61.7 per cent, in 1951-52, and 58.6 per cent, in 1955-56; in South Australia, 65.3 per cent, in 1951-52, and 56.3 per cent, in 1955-56; in Western Australia, 70.9 per cent, in 1951-52, and 68.6 per cent, in 1955-56. Tasmania was the only State where the figures showed an increase. In 1951-52, Tasmania received 50.4 per cent, of its total revenue from the Commonwealth, and in 1955-56, it received 56.2 per cent. I emphasize that the figures for 1 955-56 are the latest figures that can be supplied by the Treasury. I use them to illustrate that the States are now really getting a smaller proportion of their total revenue from the Commonwealth, and I stress again that this year supplementary grants amount to £3,177,000 less than they were in 1951-52, when we were passing through a similar period of economic disturbance.

Inflation, of course,, has caused Commonwealth revenue to jump considerably since- the war years. Although- the taxpayer is getting no more in actual purchasing power in his pay packet, he finds that the depreciated money that he is receiving is putting him into a higher income tax bracket. Consequently, he pays more in taxation, and as a result the Commonwealth Government has been able to reap. more from the taxpayer. I shall- quote one or two illustrations, to illustrate that this is sq. Let us consider, the case of a man, wife, and two dependent children, receiving £150 a year over the basic wage. That man paid £12 in tax in 1949, whereas, to-day he pays £.30 17s an increase, of £1,8 17s., although he. is not, able to purchase with his- money as- much- as he. could., purchase previously. The position simply is that the amount in the pay packet has- been increased. The same considerations apply to those persons who are. receiving higher margins over the basic wage, such as £200, £250, and- £300 per annum. In the lastmentioned instance, the family group consisting of man, wife- and' three children paid £25; 12s. in tax in 1949, and £41 14s. last year,- an increase of £16. 2s.

I emphasize these points to show that more, is being taken, from the taxpayer. This simply, means, that the Commonwealth is in a better position to meet its payments to the States. In 1955-56, Commonwealth tax collections amounted to £997,200,000, or two and a quarter times the collections at the end of the war. In the same year, the States raised £74,200,000. In order to illustrate how the position has changed, I point out that in 1.938 the Commonwealth raised £11,500,000 in income tax, and the States raised £30,000,000 from the same source. This year, Consolidated Revenue is expected to amount to £1,302,100,000, over £610,000,000 of which will be from income taxation. From that amount, the States will receive £287,500,000.

It, will be. seen that the expenditure of the Commonwealth is out- of all proportion to the amount that is. allocated to the States in. various ways. The method of financing the States is. crying out for. a change. The position simply amounts to this: The Commonwealth has been raising millions, of pounds of surplus revenue, lending portion of it to the States at 5 per cent, interest, and from the balance financing its own works free of interest. In October of last year I asked the Treasurer (Sir Arthur Fadden) what amount of. loan interest, was paid by the Commonwealth Government in the years 1949-50 and 1956-57: His answer was that in 1949-50, the Commonwealth paid in interest an amount- of £57,421,000. In 1956-57 it was £60,980,000, an increase of £3;500,000- in actual amount over that period of years.

The second part of the. question was

What was the- amount- of loan interest paid by State governments?

The- answer- showed; that in 1949-50 the States paid £27,733,000, but by 1956-57 it had risen to £68,009;000. That was a- rise of over £40,000,000, or two and a- half times as: much, compared with- the Commonwealth increase of- £3,500,000. This comparison shows what is happening in that, regard.

This. year, the States are. receiving £210;000,000 for public works. Some of this amount will be paid from loans and some from Commonwealth funds, but. the States will be required, to. pay. 5 per cent, interest, which- will amount to about £10,000,000. It has already been pointed out that about half the interest bill will be paid to the Commonwealth. The £L10,000,000 which the Commonwealth proposes to borrow by. way of treasury-bills will carry 1 per cent, interest, so that the Commonwealth's^ interest bill will rise by about- £1,000,000. The. Commonwealth will off-set this by lending money to the States at 5- per. cent. The Commonwealth will receive about £5,000,000 in. interest from- that source. On that- little transaction the Commonwealth, will show a profit, at the expense of the States, of about £4,000,000!

I suggest that where public works are financed from surplus revenue the States should not be charged interest at all; and where the public works are financed by way of treasury-bills at 1 per cent., as appears to be the intention on this occasion, no more than, that rate should be. charged to the. States.. I cannot understand, when we are all: part- oft one family, why the Com,monwealth should be crippling- the States- in this way;

According to the latest issue of the " Australian Financial Review " this increase in the interest commitment by the States to the Commonwealth wipes out a large part of the increased grants to the States from the Commonwealth. Between 1951-52 and 1957-58 the total gross interest payments made by the States rose from £56,000,000 a year to £119,000,000 a year. Over the same period, grants from the Commonwealth Government rose from £162,000,000 ot £272,000,000. About half of the increase in the States' interest commitments was due to the Commonwealth and the rest, of course, went to the public in respect of loans. Therefore, while the gross increase in Commonwealth grants to the States over the period was £110,000,000, the net increase was probably little more than £70,000,000 because the rest of it was swallowed up in increased interest payments which the States had to meet.

It appears to me that the Australian Loan Council is becoming a farce. It is supposed to be a national body representing the States and the Commonwealth, with the responsibility of arranging the nation's finances. But actually the States fight very hard for the finance they need, and the Commonwealth decides just what they will have. When the council was formed in 1923, the then Prime Minister, Mr. Bruce, said that there would be no dictation on the part of the Commonwealth. A similar assurance was given in 1929 when the Australian Loan Council was re-formed on a different basis. But the Commonwealth, at meetings of the council, has two votes and each State has one vote, and when the voting is even, the Commonwealth has a casting vote. The position is that, in actual fact, the Commonwealth has three votes and needs the support of only two of the States if it wants to get any particular matter carried. This was emphasized in Part C of the Statement of Financial Results attached to the Budget speech of 1957, when the Treasurer (Sir Arthur Fadden) said -

At a meeting in June, 1956, the Loan Council approved a resolution providing for a governmental borrowing programme of £210,000,000 for State works and housing in 1956-57. The Commonwealth did not support this resolution but indicated that it would be prepared, subject to certain conditions, to make monthly advances to the States at an annual rate of £190,000,000 for the first six months of the financial year, after which time the position would be reviewed and the extent of Commonwealth assistance to the Loan Council programme determined.

In October, 1956, the Commonwealth agreed to make available to Western Australia, from its own resources, an additional amount of £2,000,000. This increase, which had been agreed to in principle by the other Premiers at the June meeting of the Loan Council, raised the annual rate at which the Commonwealth was making advances to the States to £192,000,000.

After reviewing the position in January, 1957, the Commonwealth informed the States that it would be prepared to continue making advances for the remainder of the financial year at the annual rate of £192,000,000. At a meeting in May, 1957, the Loan Council decided that the approved borrowing programme for 1956-57 should be £192,000,000.

That shows that although the Australian Loan Council had determined that the amount should be £210,000,000, finally the Commonwealth had its wish and that as the result of getting two of the States to come around to its way of thinking, it was able to reduce the amount which the States considered was essential to enable them to carry on.


Mr Roberton - But the loan market often decides that.


Mr WEBB - The loan market does not necessarily decide it at all, because the Commonwealth provides additional funds where necessary to build up the amount, as it has done in the past and is doing on this occasion. But the point is that the amount which the States are receiving is not sufficient. Loan allocations depend actually on the political opinion of whatever federal government is in office. If it is opposed to an extensive programme of public works, that view is paramount, and the States are denied their sovereign rights - that is, State governments are unable to act as elected governments.

The policy of Labour governments is to develop public works in order to relieve unemployment wherever possible. But this government's policy is against that. It simply tightens up the amount of funds to be made available to the States. The unemployment that exists at the moment clearly indicates, in my opinion - and I think it is the opinion of honorable members who really appreciate the position - that the States require more funds. The existing figure of registered unemployed is 62,975, but at this time last year it was 51,262. If we compare the two periods, the figures show that during the intervening twelve months the number of unemployed has increased by 11,713. It is true that there was a drop on the July figures, but if we analyse the figures year by year we find that there is always a drop in the months of August, September and October after the passing of the winter slack period, which is really the bad time through which we go. From then on the figures continue to improve, but they get bad again at the end of November. I should not be surprised if this is the reason why the Government has decided to hold the elections on 22nd November before the employment figures for that month are published. When they are published, I feel certain that the people of Australia will get a shock.

But what I am emphasizing is that the comparative figures for the specified period this year, the year before and the year before that, show that the unemployment position is getting worse each year. That is why I suggested to the Minister for Labour and National Service (Mr. Harold Holt) that the monthly report containing figures of those registering for employment, those receiving the unemployment benefit, and vacancies should show a comparison with the figures for the corresponding month of the previous year. That is the only way of making a true analysis of the trend of unemployment.

Surely the time has come when the public works programme should be financed to take up the slack of unemployment. The loan programme this year, as I have already mentioned, involves a sum of £210,000,000. The amount provided in 1951-52 for the loan programme was £223,700,000, which was greater than the amount being provided for the loan programme in this year. I am making my comparisons with 1951-52 because the situation now is similar to that which existed in 1951-52. If we are not prepared to do something about the growing unemployment in our midst, as we did in 1951-52, then we are not doing the job that we should be doing.

Since the war, nearly three-quarters of the Commonwealth's public works programme has been financed from surplus revenue. Consequently, we have no real worry about the national debt if we want to develop a more extensive public works programme now. In 1938-39, the net interest paid by Government authorities represented 5.1 per cent, of the gross national product. In 1957, net interest was 1.7 per cent, of the gross national product, or a third of the percentage in 1938-39. It is true that under this Government's management the loan market is not what it should be; it has been destroyed to a large extent. However, steps should be taken to revive it, and if that is done we will have ample funds for government expenditure on public works.

There is no shortage of jobs to be done. I have emphasized before in this chamber the importance of the standardization of rail gauges. It is true that this Government at long last is doing something about it. I am very pleased to know that the WodongaMelbourne section is well under way. However, other links can claim equal, if not a higher, priority. For instance, the Broken Hill-Port Pirie link is very important and should be started as quickly as possible. Similarly, a start should be made with the Kalgoorlie-Fremantle link. That would give us a standard 4-ft. 8i-in. rail gauge linking all capital cities right across the continent. Work on these links was recommended by the transport committees from each side of the House. When the Premier of Victoria pushed for the WodongaMelbourne link to be started, he said that he wanted the work to commence so that unemployment in that State would be relieved. In its report tabled here some twelve months ago, the government committee said that the Kalgoorlie-Fremantle link should be proceeded with to relieve unemployment, because unemployment was pretty bad at that time. If something could be done to start work on this link, the serious unemployment position that has developed in Western Australia would be relieved.

Rail standardization to my mind is one of the most important public works that we have, and it should be proceeded with very quickly. Apart from that, of course, we need more hospital accommodation, more schools anc? more roads. I direct attention to an extract from the "Australian Financial Review" of 11th September, 1958. Dealing with State and Commonwealth financial relations, the following comment was made: -

These profound and harmful difficulties which haunt the financial relations of the Commonwealth and the States are partly the reflection of a deeper problem.

While it seemsthatwe can always find finance for cars we cannotfind themoney forthe roads thecars are to be driven on. While there is no shortage of finance for refrigerators, children have to go to school under the trees or in cloakrooms. Household appliances can be had on no deposit but thereis a grave shortage of available credit to finance the houses where the appliances are to be used.

The Commonwealth should do more to assist the States, particularly as the populationhas increased greatly. There , are also other bigger avenues of development. I do notsay that they are onthe same scale as the SnowyMountains scheme, but they are of a similarkind. One that I have mentioned repeatedly in thisHouse is the Ord River development scheme. To complete it would not take asmuch money as is expended on the Snowy Mountains scheme in one year.

Unemployment is greater now than it was last year, and I fear that if this Government is returned to office unemployment willbeeven worse next year. It is reasonable to expect theCommonwealth to provide sufficient finance to increase both Commonwealth and State public works programmes in orderto relieve unemployment. A programme for the future should be laid down.Blueprints shouldbeprepared, because a public works programme cannot be started unless much preliminary work is done. We should look ahead.

I want to say a word about the special needs of Western Australia. The latest report on unemployment submitted by the Minister in the last few days shows that the percentage of unemployed persons to the work force is greater in Western Australia than in any other State. Western Australia is sharing in the loan funds and tax reimbursements proportionately with the other States, in accordance with the formula. Two years ago, Western Australia received an additional grant of £2,000,000 to meet its special needs. Unemployment is worse now than it was then. At the end of August, according tothe Minister, the registered number of unemployed was 6,497.


Mr Thompson - In Western Australia?


Mr WEBB - Yes. The figure for August, 1956, was over 5,000. At the present time, benefits are being paid to 3,219 unemployed persons in Western Australia, compared with only 2,000 in August, 1956. That indicates that the position is worse now. If we look at the figures recorded in the review of the employment situation, we find that in New South Wales the number of persons registered for employment represented 1.6 per cent, of the work force. The percentage in Victoria was 1.4, in Queensland 1.5, in South Australia 1.4, in Western Australia 2.3 and "in Tasmania 1.7. Those figures establish that the position in Western Australia is worse than in other States. This warrants special assistance being granted to that State. Reliable authorities in Western Australia say that 3.5 per cent, of the work force is unemployed. Special circumstances apply in that State. It is not a highly industrialized State, like the bigger eastern States, and consequently the policy of credit restrictions, increased interest rates and lack of funds for development affects it more than it does the other States. Development in Western Australia has been mainly in the field of primary production. In trade with other States, it usually has a surplus of imports. In 1956, the surplus was £53,000,000 in favour of the eastern States. This means that money from Western Australia helps to maintain employment in those States. At the same time, Western Australia usually has a favorable overseas balance. In 1956, the overseas balance in Western Australia's favour was £21,600,000. That, of course, assists Australia's exports generally.

Western Australia is the largest State in the Commonwealth, comprising about onethird of the total area of Australia. It has a small population, and therefore the costs of government and development are very high. The small population means that there is a small local market. That is one reason why industry is. not developed there to the extent that we would like it to be developed. However, it is the responsibility of the Commonwealth to see that no State suffers in comparison with the other States. There should not be any greater percentage of unemployment in Western Australia than there is in any other State. Really, there should not be any unemployment at all, but the fact that Western Australia has the biggest percentage of unemployment shows that this Government is not playing the game as far as that State is concerned. Western Australia's economy is vulnerable. Being a primary producing State, itsfinancial position depends largely on the movement of international prices for primary products. If there is a further fall in overseas prices, Western Australia will ; be hit still harder. Surely nobody can say that that : is the fault of the Western Australian Government.

One matter that I want to stress is the need to solve the problem of railway deficits. If this problem were solved the financial problems of the States would be largely solved. The Commonwealth should enter into negotiations with the States with the object of taking over the State railways systems. If railways throughout Australia were a 'Commonwealth concern, run as efficiently as the CommonwealthRailways are run, there would be one Commonwealth Railways Commission, with deputies in each State, one chief civil engineer with deputies in each State, and one chief mechanical engineer, with deputies in each State. There would be a greater possibility of an early reaching of our aim of a standard gauge throughout Australia, greater use of diesel-electric locomotives, and an extension of the pick-a-back and container services, which mean more efficient railway transportation. Bulk loading wagons would greatlyhelp in cutting down rail transport costs. Less rolling-stock would be required. With a standard rail gauge throughout Australia engines, carriages and trucks would pass across theborders of the States instead of having to stop at the borders. At present the Central Australian Railway system is completely cut off from the 4-ft. 8½-in. gauge system of New South Wales. The Wodonga-Melbourne standard gauge link, whichis under construction, simply means that the break of gauge will beat Melbourne instead of Wodonga until the other non-standard gauge lines are standardized.

An important factor to which we should be turning our minds is that a unified railway system will enable usto lower transport costs, which recent figures have shown to represent one-third of our gross domestic expenditure. In 1953-54 the total expenditure on transport in this country was £l, 305,000, 000. That amount could be reduced by an efficient, co-ordinated Commonwealthcontrolled transport system. I mean transport not only by railbut also by sea. What Australia needs is transport co-ordination. Ifwe could only reduceour transport costs by one-third, on the basis of the total cost in 1953-54, we would save £435,000,000. Even then our transport costs would be double those of the highest comparablecountry, which is Canada, where transportcosts represent 10 per cent. ofthe grossdomesticexpenditure. A reduction in our transport costs would have a most important effect on our economy.

This is a national problem that is crying out for a national solution. If we could only solve it we would solve many of the States' difficulties. Apart from that, I feel that there must be a better understanding of the States' financial difficulties, and an early and urgent move made to bring about better financial relations between the Commonwealth and the States. All the States are now mendicant States. They have to go cap-in-hand to the Commonwealth to get the finance that they need. In effect, they have lost their sovereignty and become the puppets of the Commonwealth. I do not think that they or the people will be prepared to put up with that position for much longer.







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