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Thursday, 26 February 1959

Mr BURY (Wentworth) .- Mr. Deputy Speaker,had the Speaker been in the chair I would have begun my speech by congratulating him. I informed him before he left that I would mention a certain report on the acoustics and lighting in this chamber, which he received some months ago but, apparently, has not yet been able to follow up.

Mr Cope - We can hear you all right.

Mr BURY - Thank you. The trouble is that although we can hear most honorable members opposite we do, unfortunately, suffer from one or two mumbling Ministers whom we cannot hear. Above all, there is the habit of the Leader of the Opposition (Dr. Evatt), when addressing this House, of presenting his back to us. I can appreciate why he does not present his back to his own followers, but his habit does, at times, make it difficult for us to hear matters which, occasionally, are of some importance.

I would urge you, therefore, Mr. Deputy Speaker, to stress to Mr. Speaker the1 desirability of doing something further about the acoustics, not for the frontbenchers who are seldom here except for the question hour or to deliver a speech, but for the sake ot those back-benchers who wish to hear what is said on both sides of the House on the front benches.

There is also the question of lighting. The report which was received indicated quite clearly that the present lighting does have a most slumber-inducing effect on members. There may be other causes as well, but this one is in the hands of Mr. Speaker and I suggest that he expedite the process of remedying it. 1 should like to congratulate the new members on their maiden speeches. They are now, of course, too numerous to mention individually but I was struck by the very right stress which the honorable member for Kalgoorlie (Mr. Browne) placed on the price of gold. He could have added that, throughout its years of office, this Government has done all it could in the councils of the world to increase the price of gold. It reversed the previous policy of forbidding premium sales and thus eased the position of gold producers. It has consistently, since, in conjunction with the representatives of South Africa, pressed for an increased price. However, I wish that I could feel that these representations will some day bear fruit in the treasury of the United States of America. Of that, however, I feel extremely pessimistic.

I should like, also, to congratulate the honorable member for Werriwa (Mr. Whitlam) on a very significant event - his election to the front bench. This has brought home to us that there are still a few flowers blooming in the desert opposite. It also suggests that when, eventually, time and common sense remove the divided, discredited and worn-out old guard, the Labour party will not be entirely without hope. In fact, one would have thought that a cleaner sweep would have been made. One would have thought that the party, if it were less concerned with its feuds and more with its future, would have made a clean sweep. Instead, it has repeatedly confirmed in office the electoral derelicts who clutter up its front bench and who are so useful to us. Their removal would hardly seriously affect the Labour party. Those who replaced them could not do worse and it is conceivable that they would do much better.

Mr Cope - You were lucky to make the grade on Labour's preferences.

Mr BURY - There were a few other things besides that. Leaving this matter of honorable gentlemen opposite, I should like to turn to the coming conference on State and Commonwealth financial relationships.

Mr Duthie - You will be better on that.

Mr BURY - Yes - and I dare say that the honorable member for Wilmot would be much better on many other things. I congratulate him on his survival, also. It was not achieved without certain difficulties.

As far as Commonwealth-State financial relationships are concerned, we are faced, and have been faced for some time, with this very dangerous divorce between sovereignty and financial resources. Once expenditure and revenue are no longer matched and are placed in different hands, irresponsibility develops. I remember the Prime Minister (Mr. Menzies) pointing out in a speech delivered when the uniform tax legislation was brought in that the States would, in due course, by this means, tend to die of inanition. Unfortunately, many of them are tending to die of irresponsibility.

The present arrangement is turning the States into irresponsible beggars and - let us face it - it does induce a high degree of waste in the Commonwealth, too. When large sums are being raised and passed on to the States, the Commonwealth slips in a few million pounds without its seeming to count very much. What comes easily to the Commonwealth comes with great difficulty to the States. The Commonwealth sketches out its demands and then superimposes over and above that as much as it thinks the economy can reasonably bear.

This is divided among the States. One thing that the Commonwealth should seek is to attain uniformity of capital expenditure and the considerations applying to it. For instance, the Postal Department has invested in it many hundreds of millions of pounds on which it pays very little interest. I think it pays under £2,000,000 a year in interest. If the State railways had to pay nothing for their capital, or if almost any business of any size in the Commonwealth could obtain capital for which it paid almost nothing from an accounting point of view, it would have no difficulty in showing a profit. The fact that some important undertakings pay interest and others do not means that the use of investment capital is not properly equated.

It is easy for the Commonwealth to find money for large modern jet aircraft. It is much more difficult for some of the railways to find money for diesel locomotives. Both, of course, are highly desirable. Of the two it is the diesels that are more fundamentally important to the Australian economy. We have spent millions, and are about to spend many more millions, on extending aircraft runways so that we can have the very latest jets. The same amount of money expended on the roads of Australia would make a very considerable difference to them.

Qantas, for instance, is now talking of building a large modern hotel in Sydney - a desirable thing to have. Such a hotel would, of course, have a virtually guaranteed clientele because of the aircraft passengers passing through. They can use a large hotel much more fully than private enterprise, but it means that the capital funds available for other public authorities are depleted. There ought to be some effective uniform basis of equating the expenditure of £2,000,000 or £3,000,000 on a big hotel against spending a similar sum on schools, universities and hospitals. The danger is that there is a kind of artificial split in the middle and separate considerations are applied on expenditure in the Commonwealth half and the States half.

The Australian Loan Council is not, of course, a works council, but behind its deliberations lie works and the use of capital. Capital is short in Australia and is likely to remain so and we need some effec tive means of equating the expenditure by the Commonwealth and the States through the medium of the Loan Council. Onethird of the total investment in Australia is made by public authorities. It is a vital , foundation for all the rest of the economy and it is high time that we reviewed the whole position and brought it up to date.

With the present position of the Commonwealth helping itself to sums to carry out objectives which are near to the hearts of Ministers and the administrators of the Commonwealth, we inevitably must rob more important activities elsewhere. On the State side, there is also widespread improvidence. New South Wales, which is the State that I know really well, has, in fact, spent its money badly. It started far too many works, stopped some and now tries to bring pressure on the Commonwealth for more money. But it has never properly planned in the first place. Too many projects are started; the planning is loose, and vast sums of capital are tied up in uncompleted public works. One of the things which we have to learn is the effective use of our very limited supply of capital so that it is not tied up for long periods in projects yielding no return. Instead these public works projects should be completed as quickly as possible.

The impending conference will have to be married in some way to the Constitution Review Committee. Undoubtedly, there is a very severe conflict between our legal conceptions of sovereignty and the economic and social realities of modern life. Since federation, our conceptions of legal sovereignty have remained almost where they were, but there has been an economic and social revolution. Unless we bring these two sectors into line, many of our governmental efforts are bound to be wasteful and abortive. Instead of marching forward to our desirable national goals we shall be forced to mark time in the sterile enclave of the law.

I turn now to another item in the Speech in which the Government affirms that it will hold a public investigation into Commonwealth tax laws. Many of these are now antiquated. The basic act on income tax was passed long ago. Since then it has had many amendments and its need for consolidation is extreme. It needs tidying up, but this exercise will take a very considerable time. In the meantime, I trust that attention will be given to a number of other tax matters which require more » immediate action.

One is the taxing of the undistributed profits of private companies. This heavy impost was brought in to prevent tax evasion by wealthy people, particularly by family arrangements. But it is, in fact, a severe handicap on a vital sector of our economy, the small private firm. Concerns of this nature are, in the aggregate, probably more important than the large ones and it is important that the small firms should be able to grow. When they are big enough to become public companies their troubles, in this respect, end. They can then plough back their profits, as any company must, to expand its operations in the future. This ploughing back of profits by private companies is especially important in an inflationary era. I suggest that this needs looking at. The new Treasurer (Mr. Harold Holt) will probably approach matters of this kind with a freshness of mind and a different view. We should not allow the stopping of the sin of tax evasion to crush out life which is essential to the expansion of small private companies.

This is important not only for our domestic situation but also in regard to attracting investment from overseas. There are various reasons why a number of overseas investors would rather form private companies of a fairly limited character than establish themselves here on a public basis which might be completely impracticable. Now, instead of leaving the profits of small private companies for re-investment and expansion, those companies are obliged to distribute them as dividends. This means that these profits are either taken out of the country or punitive tax is paid on them. Virtually, 10s. in the £1 has to be paid out in dividends to avoid punitive taxation - money that might well be re-invested and ploughed back into the economy.

There is also the question of withholding tax on dividends to residents outside Australia. This matter was first mentioned in the Budget speech of 1957 when the Government was studying it. The new Treasurer will come fresh to this subject but I suggest that it is time the issue was brought to a conclusion. Our rivals in the overseas investment field are, to a large extent, South Africa and- Canada. Both of those countries have a withholding tax system: The great advantage of it is that the flat rate of tax is deducted at the source by the company concerned and the remainder remitted. No taxation return or any other formality is required, and the balance of any tax liability is paid to the resident in the country in which he lives. This matter is particularly important in respect of the Government's policy of attracting as much overseas capital as possible for the purpose of developing Australia.

I shall now turn slightly away from the tax structure to taxation policy in relation to the wider financial and economic policies of the Government. There is a need, overall, in a fast developing country to keep down taxation to the lowest practicable level. High taxation deters savings and inhibits effort at all levels of society from the big companies down to the wage earner. The extraction from the pay packet of taxes on earnings from the increased overtime now being worked generally is a bar to the kind of rapid development we envisage.

There has been a. tendency on the part of the Government, when it is faced with an inflationary situation, to attempt to damp down demand by the use of tax increases', but, unfortunately, when it feels that some stimulus is required, its mind tends to run, not to tax reduction, but to increased government expenditure. Thus, gradually, by this process, we build in a higher level of taxation than would probably be necessary if the Government were continually wary of this particular aspect. I suggest that if in the near future the Government comes to the conclusion that a further stimulus to the economy is required, it give priority to considering a reduction in the level of income tax, which will have a widespread and immediate impact throughout the economy.

The Speech also states that the Government welcomes the recent move by the United Kingdom to widen the convertibility of sterling. I should like to join with that a welcome to the moves which have been made by the countries of western Europe, many of whom are our close trading partners, in the same direction. However, there is now something of a disability in being in the sterling. area, sterling being convertible into any currency by non-residents of the sterling area but not by those who live within it. Thus, we ought not to be so much concerned with welcoming the new move as with finding out what the Government intends to do about it, what advantage it intends to take of this new situation.

Most countries of the sterling area have been continuously and progressively scaling down their discrimination against goods from the dollar area, the object being to give importers and consumers a greater freedom of choice - a chance to buy more suitable goods in a cheaper market and increase the competition to supply the country concerned - and this reduces the price of imports and makes the country's foreign currency go further.

The United Kingdom has gone a good way further than we have in reducing discrimination against goods from the dollar area. As 'far as I have been able to ascertain - the facts are not easy to measure in any way precisely - Australia lags well behind the rest of the sterling area in freeing import trade from discrimination against American supplies, which in many cases are cheaper and more suitable for Australian purposes than those from elsewhere. There is, unfortunately, a tendency for the Department of Trade to lag behind in these matters. Because of the intensity of import licensing over the last .few years the department has tended to .mother every item of trade, and go into great detail about whether particular goods can really be more favorably purchased in the dollar area than elsewhere, and make the kind of decisions which ought to be made by the importers themselves. If our external position permits imports at a certain level it should be a major objective of the Government to provide, within that ceiling, the maximum freedom of choice.

I should like now to welcome the Government's announcement regarding oil. The Government has announced that it will increase by £1,000,000 the subsidy for oil search, which last year and this year was £500,000.

Mr DEPUTY SPEAKER (Mr Bowden - Order! The honorable gentleman's time has expired.

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