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Wednesday, 24 August 1960

Mr Clyde Cameron (HINDMARSH, SOUTH AUSTRALIA) . - This Budget shows quite clearly that the Government is now afraid of the consequences of its own maladministration of the country's affairs. This, I think, was made quite apparent by the Minister for Trade (Mr. McEwen), when he said recently that the country's economy was balanced on a razor's edge. No truer words were every spoken by any Minister. The Minister for Trade, who should know better than any one else the state of the country's economy, says that now, after eleven years of Liberal-Australian Country Party administration, after years of record prices and record crops and seasons, the economy is balanced on a razor's edge.

The Minister gave point to his remarks when, addressing the recent Country Party conference, he said that our export income would have to increase by £250,000,000 a year during the next five years if we were even to maintain, much less improve, existing living standards, and maintain our present rate of development. What are the prospects of increasing our export income by £250,000,000 a year? We will have to consider this question first, because until we examine the prospects of increasing our export income by the amount that the Minister said is necessary, we cannot say whether it will be possible to maintain existing living standards or our present rate of expansion and development. If it can be shown that we will not increase our national income by this amount, it means, of course, that the rate of development must be slowed down and our living standards still further depressed. It is important in this Budget debate, therefore, having regard to the remarks of this prominent Minister, to examine very carefully our prospects of increasing our export earnings.

We can begin, surely, with an examination of the prospects in the field of primary industries. Can we rely upon greater production? Frankly, I do not think we can. Production in primary industries to-day is only 25 per cent, greater than it was before the war - and with reduced acreage. Oddly enough, or unfortunately enough, we have a smaller acreage in production of wheat and other primary commodities at the present time than we had before the war. Honorable members opposite appear to doubt this statement, but it is a statement that has been made by the Minister for Trade himself.

Mr Hamilton - Do not forget the increase in the number of bushels per acre.

Mr Clyde Cameron (HINDMARSH, SOUTH AUSTRALIA) - I spoke of the number of acres under production. I said, and I repeat, that the number of acres under production to-day is smaller than it was before the war. Production, however, has increased because of the adoption of more scientific methods and, to some extent perhaps, because of the wider use of mechanization. But there is a limit to the amount by which we can increase our production by the use of scientific methods or mechanization, and when one considers that there are 100,000 fewer people employed in primary production than there were before the war one has some idea of the possibility of increasing production to any great extent.

The fact is, of course, that the primary industries of Australia are decaying as a consequence of large areas of farm lands having been consolidated into fewer and fewer holdings, and not being used to their full advantage. Fewer and fewer men are being employed in primary industry. This is surely a serious trend and one that should be halted. I suggest that steps should be taken to rectify this dangerous position.

The Minister for Trade, when addressing the Country Party conference recently, said that farm incomes had decreased during the last four years by 1 1 per cent. This is a statement by the Leader of the Australian Country Party, by a Minister who is in a position to know the correct state of affairs. It is, surely, an alarming circumstance when the Minister, having said that we must increase our exports by £250,000,000 a year in the next five years if we are to maintain our present living standards and rate of development, is forced to admit that the primary industries, far from increasing their earnings, have found that incomes have decreased by 11 per cent, in the last four years.

Mr Pollard - The income is down, but the production is up, so the more you export the less you get.

Mr Clyde Cameron (HINDMARSH, SOUTH AUSTRALIA) - The honorable member for Lalor has hit the nail on the head. Production has increased, but the income has fallen, and the Minister was speaking in terms of income when he mentioned the amount of £250,000,000 extra that we would have to obtain from exports overseas. The point is, of course, that if the increase in, production is insufficient to cancel out the effect of decreases in prices of the commodities produced, you must end up with a lower income.

Can we possibly achieve the objective set by the Minister, of an extra £250,000,000 a year, by receiving higher prices for our goods? Obviously we cannot. The fact is that prices are going down instead of up. I see that the honorable member for Maranoa (Mr. Brimblecombe), who is so disgusted with the way this Government has carried on that he has decided to retire from the Parliament in order to register his disapproval, agrees with everything I have said. The price of wool has shown a decline of from 5 per cent, to 7£ per cent, at the sales that have just opened. Every Id. per lb. reduction in the price of wool, when spread over the production of 1,500,000,000 lb. a year, represents, if you like to work it out with a pencil and paper, £6,250,000 less in national income.

We know also - and these are figures that have been given by the Minister for Trade - that wool production has actually fallen by an estimated 5 per cent, during the last twelve months. When we take into account the decline in production and the fall in price we can comprehend the total effect on our national earnings. The secretary of the Australian Woolgrowers Council, Mr. Chislett, said only recently that the wool industry is rapidly approaching the stage at which it will have to seek financial assistance from the Government. The wool industry, let me remind the Parliament, is one of the industries on which we will have to rely, more than on others, to obtain the extra £250,000,000 in overseas earnings that the Minister says will be necessary to maintain our existing living standards. What is the position with regard to meat - another important earner of export income? The position there is not hard to imagine. This Government has already agreed to a reduction in the price of meat under the United Kingdom meat agreement. How can we possibly expect to increase export earnings from meat when the Government has already been forced1 to agree to a further reduction in the price of meat sold to the United Kingdom?

Prices generally are not rising; rather, they are decreasing, largely as a consequence of the flooding of certain markets by Canada and particularly by the United States of America with products that are surplus to their requirements. Some of the countries receiving those surplus products previously bought our products and others would be potential buyers of our products but for the United States dumping.

What is the position with wheat - another of our main income earners? The fund under the wheat stabilization scheme has now practically been exhausted and it is estimated that this year the Government will have to find some £7,000,000 to keep the wheat-growers solvent. This is not a good picture. It is not a good start to the job of increasing our overseas earnings by £250,000,000 a year, which the Minister said was essential to maintain our existing living standards. What are the prospects of markets in countries that we have not yet entered? They are getting worse instead of better, largely because the United Kingdom may join the European Common Market. If it decides to do this - the present indications are that it cannot very well afford to do otherwise - the United Kingdom, which is the best buyer that we have, will be forced to buy more and more primary products from European countries with which it is associated in this scheme. This is not a happy picture. It is not a picture that would give a government the right to relish the future. I do not relish the future. With this Government's policy and with these prospects staring us in the face, we must expect a reduction in living standards and a slowing down of national development. This is a serious development in a country which is bringing in about 100,000 migrants each year and which has boys and girls leaving school and entering industry at a rate of 60,000 or 70,000 a year. How can we find jobs for these young boys and girls and for the migrants if our national income is reduced as a consequence of shrinking markets and falling prices?

That is the situation abroad. But the position of the home markets is just as bad. They are being seriously hit by the Government's decision, willy-nilly, to lift completely the import restrictions that previously protected them from overseas competition. The Tariff Board is unable, or unwilling, because of the cumbersome procedure and1 red tape strangling it at the moment, to give assistance to local industries. It takes from sixteen to 32 months to complete the hearing of a case and it will not begin a hearing until the industry concerned has been operating for twelve months.

Mr Anthony - Eight months.

Mr Clyde Cameron (HINDMARSH, SOUTH AUSTRALIA) - Very well, eight months, but that does not make a vast difference. Instead of a total of about 48 months, it means that a hearing can be completed in about 44 months. Let us consider the position of the Japanese Trade Agreement. The Government made an agreement with the Japanese Government on trade, and this has had a serious effect upon Australian industries. Its effect can be measured by figures given by the Minister. Since the agreement came into operation, Japanese imports have increased by 245 per cent. In 1956-57, Japanese goods represented 1.8 per cent, of our total imports; they have now risen to 5.2 per cent, of our total imports. Mr. R. W. C. Anderson, a director of the Associated Chambers of Manufactures, recently said that Japan presented a frightful threat to Australian industry.

Sitting suspended from 6 to 8 p.m.

Mr Clyde Cameron (HINDMARSH, SOUTH AUSTRALIA) - When the sitting was suspended I was examining the prospects of achieving the goals set by the Minister for Trade. He had said that unless we could improve our export income by no less than £250,000,000 a year and reach that figure within the next five years, we would see a reduction in our living standards and a slowing down of our development programme. I showed that we could not expect to reach this figure by means of increased production, because production in some fields was now actually less than formerly. I showed also that although in some instances production of some commodities was greater, the prices of them had fallen to such an extent that the goal that we had to set ourselves was becoming more difficult than ever to achieve.

We cannot very well expect to increase our national income through exports from secondary industry. In 1952-53 we had an export income, from manufactured goods, of some £55,000,000 and that increased to £ 1 1 1 ,000,000 in 1 959-60. That represented an increase of £56,000,000, of which no less than £16,000,000 was from oil refined in Australia and exported to New Zealand and various Pacific islands. We have to remember that Russia is now entering the oil market and is already a very serious threat to suppliers of crude oil. If Russia had its way it would have entered the Australian market, offering oil at lower rates than those at which we could possibly refine it or purchase it overseas; and it is certain that some of the customers now purchasing refined oil products from Australia and thereby making up this income of £16,000,000 are not going to be so considerate towards the American, Dutch and British oil interests as we were. If these buyers can obtain Russian oil much cheaper than they can purchase it from Australia it is certain that they will do so and, if they do, then to that extent our income from that source of secondary industry will be reduced.

Therefore, it is clear that it is not possible for us to increase our overseas earnings by any appreciable extent. Indeed, export restrictions by overseas investors are actually imposed upon this country in some fields in which we could have obtained increased earnings in our overseas markets. For example, the Minister for Trade said that some overseas companies were actually prohibiting their Australian subsidiaries from exporting, except to limited overseas markets. He said that the practice is regarded as being regrettable, and so it is. Take the Mount Isa mining company as an example. The parent company is the American Smelting and Refining Company of the Morgan group. This parent company in America gave instructions to the Mount Isa company that it was not to export any more lead because, if it did, that would represent a serious threat to lead being produced by other companies owned by the parent company in other parts of the world. So without any say on the part of this Government overseas interests were enabled to reduce our overseas earnings when the parent company's directorate ruled that we were not to send overseas the lead that we were producing. Therefore, in some instances, this Government is powerless to increase our earning capacity abroad because of the direct control which parent companies overseas have.

Something should be done in regard to profits. The Treasurer said, in his Budget speech, that prices and costs have risen sharply over the last year, and so far the rate of increase does not seem to be slackening. He said that the price level does not rise of its own accord, but rises because people raise prices, and he is correct in that regard. Prices are raised to the maximum that the purchaser can, and will pay, and everybody knows that no one with anything to sell will sell for a lower figure than he thinks he can force the buyer to pay for that article. It is not governed by the cost factor. Anybody who thinks that prices are governed by cost factors knows nothing about human nature or about how monopolies operate. The prices of things are governed only by what the consumers can and will pay for them. The pegging of wages in 1953 proved that pegged wages did not keep prices down, because those who had commodities to sell continued to charge the consumer the maximum amount that he was able to pay and was willing to pay, regardless of the fact that the wages content of the cost structures of the particular items had not risen for more than three years.

Let me refer now to the effect of unpegged wages. Every State award in New South Wales is subject to a quarterly cost of living adjustment. Many industries there operate with an unpegged basic wage governed by the " C " series index which fluctuates each quarter. In spite of this, the increase in the cost of living in New South Wales in the last quarter was very much below that in South Australia, where the wages under federal and State awards are pegged. So it is clear that increased wages are not causing prices to rise but merely reflect the effect of price rises and are necessary in order that a given standard of living may be maintained having regard to the increased prices which prevail at the time.

People on fixed incomes, such as pensioners and the like, are the ones most severely struck by rising prices. I believe that this inflationary trend which is doing so much to whittle down the living standards of the people must be attacked at the source. The sources of high prices or the inflationary trend are the artificial and unnecessarily high prices being charged by the producers of goods. I believe that one of the things the Government ought to do in this matter is to impose a capital gains tax that will take from public companies the benefit that they now get by ploughing back profits as undistributed profits rather than paying them to their shareholders so that the shareholders will have to pay income tax on them.

Let us see what has happened. It is safe to say that the capital gains in Australia last year were no less than 200,000,000, because that was the amount that was ploughed back in the form of undistributed profits. The people who benefited thereby paid absolutely no income tax upon the money and yet their capital gains were just as real as though the money was received in the form of income. Let us look at some of those who benefited. Of the main shareholders of the Broken Hill Proprietary Co. Limited the Baillieu family had 143,000 £1 shares which cost £2 3s. in 1954; and the holders were able to make a total capital gain of £735,000 from 1954 to 1960. Howard Smith's shareholdings in the B.H.P. represented a capital gain of £2,616,000. The Darling family had a net gain of £1,818,000. The Palfreyman family had a capital gain of £197,000. The Fisher family had a gain of £196,000 in the six-year period and paid no tax upon it. In McPherson's Limited the McPherson family made a net gain of £154,000, upon which it paid no tax during that period. The family of Taylor, through the shares it holds in McPherson's Limited, made a net gain of £202,800.

The shareholdings of the Beaurepaire family in Olympic Consolidated Industries are such as to give that family a net capital gain of £978,000 during this same period. The Manifold family made a net capital gain of £38,000 during that period. North Broken Hill Limited, which has capital in Associated Pulp and Paper Manufacturers, made a net gain of £1,543,000. Broken Hill South Limited made a net gain of £1,496,000. Thomas Owen and Company Proprietary Limited made a net gain of £591,000. The Baillieu family, again with capital in this company, made another net gain of £136,000 without having to pay a single penny in tax on it.

One could go through company after company giving instances of enormous profits which have been made. Those profits have been ploughed back as undistributed capital only to increase immediately the share value of the stocks held by shareholders, so that if they sold these stocks on the market to-morrow morning they would have gained over the period this enormous income, upon which not one penny of tax is paid. The Riley Dodds company was able to increase its capital over the period from 1952 to 1959 by 1,198 per cent. H. G. Palmer Proprietary Limited was able to increase its capital over the same period by 1,181 per cent., the Carrier Air Conditioning Company by 969 per cent., South Australian Rubber Mills by 806 per cent., and Ampol by 720 per cent.

I believe that if we were to impose a capital gains tax at least equal to the tax paid by public companies on over £5,000 profit - which is to be 8s. in the £1 - we would be able to raise in additional revenue a sum of no less than £80,000,000 a year. There would then be no room for anybody to say that the Government could not afford to increase child endowment, because by means of that extra £80,000,000 a year in revenue, as the result of a capital gains tax - which would hurt only the very wealthy and would only take back from them that which they cannot spend anyway - the Government could double the child endowment paid to the mothers of Australia and still have some money left over. According to the Treasurer, child endowment could be doubled at a cost of only £74,000,000 a year, which would leave the Government a balance of £6,000,000 from the yield of the capital gains tax. With that £6,000,000 the Government could, also according to the Treasurer, double the amount now paid in sickness and unemployment benefits.

So there is the answer to those who ask, " Where is the money coming from to double child endowment and sickness and unemployment benefits? " The Government could double the expenditure on all those things simply by imposing a capital gains tax of 8s. in the £1 on those who now have more than they should have, on those who at the moment are collectively earning more than £200,000,000 a year on which they pay absolutely no tax. I believe that this is one of the things this Government ought to have a look at.

It is not a novel idea that I suggest. It is something which operates already in many of the most advanced countries of the world. Indeed, it is a proposition which was put forward by the Prime Minister himself in 1951. The Prime Minister said then that this ought to be introduced. He went further, and said there ought to be capital issues control. I agree with him there- The Treasurer of that time said, at about the same time as the Prime Minister made his statement, that there ought to be an excess profits tax. None of those things has been done.

If only we faced the facts, if only we faced up to the present situation, when we have companies charging ever so much more than they need to charge, with prices for many things absolutely exorbitant - with sellers charging extortionate prices - we could, without hurting anybody who could not afford to be hurt, raise another £80,000,000 a year. We could use that extra revenue to double child endowment, double the sickness benefits, and double the unemployment benefit. We could also give to the dependent wives of pensioners who, at the moment, get no more than 35s. a week in allowance, an allowance of £4 7s. 6d. a week - the same amount as is now paid to B class widows. All of this could be financed by one tax - a tax on capital gains.

Surely there is no argument against that. Surely the mothers of Australia need increased child endowment more than the Baillieu family needs the exceptional profits it is now making from capital gains. Surely dependent wives of pensioners need extra money above the 35s. a week they now receive, more than the Darlings, the Baillieus and the Beaurepaires need more wealth. Surely that is also true of those who cannot get a job, or who are sick. Are they not more in need of some assistance than the families which would have to pay the tax that I recommend should be instituted.

One has only to go through the official figures disclosed in Wheelwright's book on capital gains in the various companies to see the extent to which certain companies have benefited from capital gains. Have a look at the position of the Dunlop Rubber Company of Australia, principally owned by the Dunlop Rubber Company (United Kingdom) Limited, which has 600,000 shares. During the last six years it made a capital gain of no less than £733,000, and did not pay a penny of tax on it. One of the shareholders in Colonial Sugar Refining Company Limited and the Perpetual Trustee Company (Limited) during the last six years has made a total net capital gain of £1,864,000.

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