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Tuesday, 19 September 1972
Page: 1586

Mr DAVIES (Braddon) - Before the suspension of the sitting we were debating the Loan (War Service Land Settlement) Bill 1972. I am pleased to know that the problems of Kangaroo Island, where I have many friends, are to be tackled. This programme will comprise initially scientific investigation of pasture problems that have been encountered, partial rental remission, credit for fodder conservation facilities, recasting of settlers' accounts in appropriate cases, and provision to pay out stock mortgages for credit worthy settlers. I can only hope that any reconstruction work done will not become an added book entry in the debt structure of the settlers concerned. A few years ago the settlers on King Island accepted several million dollars to write off some arrears and to have extensive redevelopment work carried out on their properties. Their incomes had been affected by regrowth of rushes and titree on properties that had not been adequately cleared and prepared before the settlers had been placed in control. We were told at the time, both by the then Minister for Primary Industry and by the settlement authority, that this cost would not be taken into account. But the settlers are convinced that in the valuations which they have received now they are paying for the earlier errors of the settlement authority.

A similar position exists at the Togari settlement south of Smithton in Tasmania. The Government installed a water scheme costing $64,000 and demanded that the settlers pay in full. The settlers maintained that some of this was included in the option prices from the Commonwealth, but the Commonwealth disputed this claim. We know that it was included in the State valuation figures, as indeed it should be, because a farm - especially a dairy farm - is useless without a water supply However, the Commonwealth later admitted that $33,000 of the cost was included in the total option prices as the water content. The Government is now demanding that the settlers pay the remainder of $31,000 plus $2,000 for improvements - a total of $33,000 - over a period of years, with interest charges. Ned Kelly was a babe in arms compared with the settlement authority, lt tried to get away with $64,000 as the cost of the water scheme, and then loaded $33,000 in the option prices, so that in all it expected to receive $97,000 from the scheme. Again I hope that any costs incurred on Kangaroo Island will not be inbuilt by devious means into the debt structure of the farmers who are there.

I turn now to an item that appeared earlier this year in the 'Australian' newspaper. It referred to the fact that 100 soldier settlers near Greenways in the south-east of South Australia will not have to pay $100,000 back rent they owe to the Federal Government. The article pointed out that the money was a backlog of payments caused by an increase in rental fees which the Government imposed 9 years ago and which the farmers refused to pay, claiming the increases were illegal. The settlers said that the Government realised after 9 years that the increases were unjust. This was brought about by the case of Heinrich v. Dunford in the Supreme Court of South Australia. It arose because of a blanket increase in the rents imposed in 1963. Mr Justice Bright found for the settlers. He said that the rents were to be 2i per cent either of productivity valuation or of the cost. The South Australian Government then proceeded to implement the court's findings.

I want to clear up any doubts which honourable members may have about which section of the settlers was to benefit, in case there are some who still believe that it applies only to those who had refused to sign their leases. On 13 th October last year the South Austraiian Minister for Lands wrote to the settlers outlining the proposals to reduce the rentals. He said:

I had also advised the settlers of the following adjustments with which the Commonwealth was prepared to agree. Settlers still in occupation who had already signed their leases would participate. This arrangement would also apply if a property had passed to the family of a deceased settler.

I emphasise that the reduced rentals were to apply to conform with the judgment handed down by Mr Justice Bright and that the Commonwealth agreed that these proposals would apply also to those settlers who had already signed their leases. I simply point out that if the reduced rentals are to apply also to those who have signed their leases in South Australia, there is no reason why the same justice in adjusting valuations and rentals cannot apply to settlers in Western Australia and Tasmania where the Commonwealth has an overriding authority. There seems to be no reason why the judgment in South Australia should not flow on to settlers in the other agent States of Western Australia and Tasmania.

On 12th April this year I asked the Minister for Primary Industry (Mr Sinclair) whether this could be done. He replied that a committee had been set up to report on this matter. He also said that once a policy had been formulated in respect of the findings of the select committee of the Legislative Council in Tasmania he would let me know of the decision. As time had elapsed, I wrote to the Minister to ascertain whether anything was to be done. I do not know who handles the Minister's correspondence - I see that he is busy talking now and I would appreciate his interest - but somebody certainly made a blunder in this matter. I received a letter from him dated 8th June 1972 in which he stated that, because of the dual involvement of both Commonwealth and State governments in the existing financial arrangements for the conduct of war service land settlement, it seemed most desirable to him that agreement be reached between the Tasmanian Minister and himself before any announcement was made. Anyone would take it from that letter that there were to be further consultations between the Commonwealth Minister for Primary Industry and the State Minister for Agriculture in Tasmania. This letter was dated 8th June 1972. However, I understand that on the day before that, 7th June, the Minister for Primary Industry had written to the State Minister for Agriculture flatly turning down the recommendations of the select committee of the Legislative Council.

Settlers in Tasmania consider that they have a very just cause, and if the recommendations of the select committee are not implemented they will certainly put one of their settlers into court to challenge the Government and the administering authority in respect of the method by which both rentals and valuations have been determined. Legal opinion has been obtained, and there is no doubt that the settlers will succeed in their challenge in the courts. However they are reluctant to do this. They hope that common sense will prevail and that the Commonwealth authorities will accept the recommendations of the select committee of the Legislative Council. Those recommendations have been accepted by the Tasmanian Government. It is now a Labor government, but the recommendations were also accepted by the preceding government, which was a Liberal government. The recommendations with respect to the Commonwealth are dealt with in sections 1, 2 and 4 of the committee's conclusions, and for the sake of the record I quote them:

1.   That in all cases where the cost of a holding exceeds the market value at time of allotment, a new option price shall be determined from the capital value of the holding as assessed by the State Valuation Branch by the nearest valuation prior to date of offer of holding.

The State valuation of structures, together with advances for improvements at time of allotment, shall be deducted from the State valuation to determine the net option price. The second recommendation states:

That all rentals on the above holdings be recalculated at an annual charge of 2½ per cent of the new option price determined as above and that the reduced rentals apply retrospectively to the date of allotment of the holding.

Recommendation No. 4 states:

That all debts owing to the Board at 30th June 1969 be written off if these can be shown to be due to any clauses referred to in No. 1 of the Conclusions, provided that any credit under the reduced rentals be offset against such debts.

I have been advocating for many years that the Commonwealth should accept State valuations with provision for structures and so on, instead of the phoney figure which the authority has determined, and that the rental should be 2i per cent of this figure. I am naturally very pleased that the select committee has more or less justified the stand that I have taken in this Parliament for many years. I point out again that the court case in South Australia resulted from a blanket increase in rents and that the same conditions prevail in Tasmania. The select committeewas very critical of the attitude of the then Director of War Service Land Settlement on the witness stand and for his lack of frankness. The members pointed out that they were frustrated and at various times confused by the lack of co-operation received from the Commonwealth Director. The committee questioned him for some time on the basis of the fixing of rents, but he failed to inform it of the change that had taken place in Tasmania similar to the change that had taken place in South Australia. It was only by acccident that the committee discovered that a change had been made, and it is certainly not to the credit of any Commonwealth officer that it discovered this change. On page 15 of its report the committee states:

Your committee is convinced that a mistake was made when the Commonwealth scale was adopted in 1956 and that the rents demanded since that time are excessive.

Because of this I contend that there should be a flow-on of the benefits gained by the South Australian settlers through their court case, and I sincerely hope that it will not be necessary for the Tasmanian settlers to take a case to court. As I pointed out, there is no doubt that they would win, bearing in mind the judgment in South

Australia together with their own legal opinion and the findings of the select committee in Tasmania. I point out in all fairness that the Tasmanian authorities attempted to resist in 1956 the Commonwealth moves to increase rentals, but the Commonwealth wielded the big stick and imposed a new set of rentals. This imposition resulted in a great deal of unfairness and great variation in the rentals changed, even for properties in the same districts. Rental for a dairy farm on King Island carrying 57 milking cows increased from $366 a year to $470 a year. Six dairy farms in one district on King Island were assessed as having a carrying capacity of 57 dairy cows, yet the rents varied from $270 to $415.

Even the then Minister for Agriculture, Mr Beattie, could not tell us why dairy farms with the same assessed carrying capacity and therefore with a similar income earning ability should have widely varying rates of annual rent. Even the Minister could not get through the smokescreen thrown up by the then Commonwealth Director. So the House can see why the Director hedged on the witness stand. He was severely reprimanded by the select committee, which was not at all happy with his performance. It is quite clear now why this Government rejected the requests by the National Executive of the Returned Services League for a royal commission. In a letter dated 3rd December last year, Mr Beattie advised us that he was unable to offer reasons for the different levels of rentals in the same area. Sheep properties with higher carrying capacities on King and Flinders Islands were worst affected, and their rents increased substantially because of the change made in 1956 by the Commonwealth. I have always maintained, and this has been substantiated by the select committee report, that the rentals were increased as much as possible and I suspect that this was done under instructions from the Treasury to reduce as much as possible the write-off consisting of the difference between the cost of the holding and the capital value. 1 refer now to the question of valuations and option of purchase prices, which is the subject of the amendment moved by the Opposition. The method of fixing these is nothing short of a scandal. In the earlier days of the settlement the capital value of the holding was assessed in a very strange manner. The officers estimated what profit a farm was considered capable of making and, after providing for the various commitments on advances made to the farmer and a living allowance for him, they took the balance and considered this to be the rent. The rent was then capitalised at 2i per cent. So, for example, if a farm had an assessed rental of $600 the capital value was given as 40 times this figure, or $24,000. This method was changed in keeping with the findings of what was referred to as the Payne report, and it is no wonder that this report has never been published and is still marked 'confidential'. As disclosed on page 36 of the report, the select committee found that the amount that could reasonably have been expected to be available from the income of dairy farmers to meet commitments with the settlement authorities was $200 a year. Even if we do not allow for a figure to meet the advances made to the settler and accept this as the basic rental figure for the scheme used by the Commonwealth Department, the capital value of these farms would have been $8,000.

When we look more closely into this it is easy to see why all the procedures were changed in an attempt to minimise any further write-down. I could best explain this by pointing out that, where the cost of the farm exceeds the capital value as determined by the budget method that I have mentioned, the excess cost of development is written off. The loss incurred in this is shared between the Commonwealth and the agent State in the proportion of threefifths to two-fifths. The capital value as determined by the budget method served no other purpose than to come up with a figure for the amount to be written off. However, as the committee points out, a high level of rents became a very important factor in increasing capital valuations and reducing the loss on development costs and the subsequent write-off. So later, when the valuation officers set an option of purchase price, we notice that there is a very close relationship between the option of purchase price and the rental based capital value determined by the budget method. The higher the rent that could be demanded, the higher the capital value and the lower the loss on development and consequently the lower the write-off by the Commonwealth and the State.

The Commonwealth Treasury had a vested interest in maintaining high rentals under the method adopted by the Commonwealth of fixing capital valuations from rents. Right from the start the authorities adopted as a level of rentals 2i per cent of capital value. They should have calculated the capital value by accepted valuation procedures, then deducted the cost of the structures and taken 2i per cent off this as rent. However, they chose to work in the reverse manner, much to the detriment of the settlers and the farmers. As the select committee points out, this method cannot be condoned. Whereas we had 170-odd people on King Island in the good days of settlement, now we have barely 70 people in the settlement areas. Even the valuation officers themselves realised that the malpractices were taking place once their reports reached Canberra and this is referred to in a letter on file in the Tasmanian Branch of the Returned Services League. There is no doubt that the legal right to determine the option prices rests with the State Government. There is every evidence to point to the fact that the Commonwealth Government acted illegally in demanding that the option prices should go to Canberra for determination and approval.

When questioned on this matter at a State Congress of the Returned Services League in Devonport, Mr Wherret, the Acting Director of War Service Land Settlement in Tasmania, said that he did not see the option of purchase prices at all because they had to go to Canberra. The implication is that they had to go to Canberra for adjustment. We believe that the only fair method to be adopted now in order to clean up the whole sorry mess is for the Government to accept the State valuation nearest to the date of occupancy. This figure is available and from it we should take the book entry for the advances for improvements and for the value of the structures on the farm in order to determine the option price available to the farmer.

The annual rent should then be recalculated at 21 per cent of the option price and the reduced rentals should apply retrospectively to the date of the allotment of the holding to the settler. I have given in this House numerous examples indicating how the settlers have been so unjustly discriminated against under the system used by the Commonwealth. Recently I was very pleased to receive a submission from an eminent barrister drawing attention to this matter and I shall refer in detail to some of the cases that he has investigated. He has taken the option price set by this Government together with the structure conversion figure. This is essential to get a fair comparison with the State valuation figure that I will cite and that which is based on the farm as a complete unit. In the first case the Commonwealth value as the debt to the settler amounts to $34,812. The State valuation figure is $25,200. The variation in favour of the Commonwealth is $9,612. In the second case the Commonwealth figure is $34,812, the capital value set by the State is $22,000 and the variation in favour of the Commonwealth is $12,812. In the next case the Commonwealth figure is $34,623, the State valuation is $25,000 and the variation in favour of the Commonwealth is $9,623. We maintain that these figures have been dummied up to suit the conditions imposed by the Treasury.

I return to the question of rentals and valuations. As one of the Commonwealth valuation officers revealed, the rentals and the valuations were corrupted by Commonwealth officers to suit the demands made by the Treasury. Years of investigation by us, backed up by the court case in South Australia and by the Select Committee in Tasmania, support these charges. Only one course is open to the Government.

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