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Wednesday, 22 November 1905

Senator STEWART (Queensland) - I agree cordially with the concluding remarks of Senator Pearce. The Senate ought to have an opportunity to deal with this Appropriation Bill at a much earlier period of the session. It has always been my experience, not only here but in the State Parliament of Queensland, that the most important business - the business of finance - is usually dealt with at the very close of each session, when every parliamentary representative' is anxious to get to his electorate. Any movement of the kind hinted' at by Senator Pearce, will have my most cordial co-operation if I am here next session. The subject of finance is the most unfortunate that the Senate could be called' upon to debate. It is admitted on all hands that there is need in Australia for a verv much more pronounced defence policy, and. further, we are pledged to the electors toadopt some national old-age pensions schemeThere are a number of other administrative matters which very shortly. I believe. wil be brought within the jurisdiction of the Commonwealth authorities. In connexion with every one of these subjects, we are continually brought face to face with the fact that no one seems to know where the necessary money is to come from. If we talk about establishing a proper system of defence, or laying the foundations of an Australian Navy, we are told that we are too poor, and that there is no way to raise the money - that if we want more revenue, we must impose taxation sufficient to raise four times the necessary amount. As matters stand at present, all that is very true, but, in connexion with this subject, we ought to begin at the beginning. It is always best to begin, if we can, at the foundation of a matter. We ought to start the discussion by asking ourselves whether the present system of finance is a false or a sound system. If, on examination, the system is found to be false, the soonor we change it the better. In my opinion, the present system, which has been carried on from the inception of responsible government in Australia, is a false one. An exceedingly large proportion of the taxation levied throughout Australia is derived from the Customs. Probably, I suppose, about three-fourths of the entire taxation of Australia is drawn from the people through the Customs. That is to say, the people are not taxed in accordance with their capacity to pay, but upon what they eat, drink, wear, and use. I submit that that is altogether an unsound system of taxation. What is taxation? Why do we raise, money by means of taxation ? In order to defray the cost of Government. Why have we a Government ? To maintain order - to see that the laws are fairly and equitably administered, in order to protect life and property. As a matter of fact, taxation may be placed in exactly the same category as insurance money. When a man pays his taxes, he is paying insurance ; he is contributing to a fund which is spent in the defence, so to speak, of his life and property. What should we think of an insurance company which, when taking a risk,, did not hold the value of the property to be insured as the basis of the risk, but subjected the insurer to an examination as to what he ate, drank, wore, and consumed generally. The whole thing would be ludicrous from that point of view ; and yet that is exactly the position we are in with regard to taxation. When an insurance company accepts a risk, it charges very much more for a ^3,000 policy than it does for, a ,£100 policy ; it differentiates according to the risk. The premium is large or small, as the risk is large or small '; and I submit that that principle ought to be adopted with regard to taxation. If a man's property, within the Commonwealth, reaches the value of, say, ^10,000, he ought to contribute very much more largely towards the cost of government than does a man whose property amounts to only £100 in value, the risk of the former in the Commonwealth being very much larger than the risk of the latter.

The PRESIDENT - Does the honorable senator think that his remarks are relevant to this Bill, which is to appropriate money to certain 'services ?

Senator STEWART - I take it that we are now discussing what is practically the Budget.

The PRESIDENT - We are discussing the Appropriation Bill, which provides certain moneys for certain services ; it does not impose any taxation.

Senator STEWART - That is so; but surely we may be permitted, on a Bill of this character, to discuss ways and means ? We have no other method of dealing with ways and means.

The PRESIDENT - The honorable senator had am opportunity, on. the motion for the first reading, to discuss all these matters. I am not going to stop the honorable senator, but I ask him to consider whether his remarks are really relevant to the Bill.

Senator STEWART - I shall be as brief as possible; but I think the subject of so much importance that a little time devoted to it ought not to be grudged. We have spent hours and hours on many occasions in discussing subjects of really no importance. The Federal Parliament ought to endeavour to put the finances of the Commonwealth on a sound basis. We are in the position that we raise a certain amount of revenue annually through the Customs, and three-fourths of that revenue we are compelled under the Constitution to hand back to the various States. The Commonwealth expenditure is strictly limited to one- fourth of the revenue ; and, that being so, when Ave propose to establish proper defences for Australia, we find ourselves without funds. And so with the establishment of old-age pensions, we find the one-fourth of the revenue reserved to us insufficient for the purpose. Senator Pearce suggests that the Commonwealth ought to impose direct taxation. I have no objection to direct taxation, but I think that, for some time at any rate, that method ought to be left to the States.

Senator Mulcahy - Why ?

Senator STEWART - I shall give the honorable senator a number of good reasons for my opinion. In the first place, it is extremely desirable that Commonwealth finances shall be entirely separated from State finances - that the authority which levies taxation shall be responsible for spending the money. I know that that is a position which cannot be attained for a very considerable time yet; but I think every honorable senator will agree with me that it is a most desirable position to arrive at. We find that, even now, the States Treasurers complain bitterly of the fact that, while the Commonwealth raises as much or as little revenue as it pleases, the States have the responsibility of spending the money - that they incur the odium of spending it.

Senator Trenwith - The States do not mind the odium of spending the money; their trouble is that they are not sure how much they will get.

Senator STEWART - I was just about to say that the States never know whether they will receive sufficient revenue to meet their demands, or whether they will be faced by very large deficits. As a matter of fact, the whole position bristles with difficulties for both Commonwealth and States. However, the present position must continue fora given period, and may and will continue after that, unless Parliament otherwise decides. That is to say, the Braddon section will continue to operate up to a certain point, and, unless Parliament otherwise decides, it will continue to operate. When the operation of the Braddon section expires is the time when the Commonwealth authority may lay the foundation of separate financial systems for Commonwealth and States.

Senator Mulcahy - Trusting to what the honorable senator has termed the inequitable system of raising revenue through the Customs?

Senator STEWART - We cannot all at once abolish the system of raising revenue through the Customs; that must be done gradually over a long period of years. Personally I should be willing to begin now to abolish a large proportion of our Customs revenue by the inauguration of a protectionist Tariff.

The PRESIDENT - I must really ask the honorable senator to confine himself to the Bill, which in no way proposes to raise money or to impose taxation.

Senator STEWART - The Bill proposes the spending of money.

The PRESIDENT - The Bill provides for the expenditure of money which has already been raised by taxation.

Senator STEWART - It will be impossible for me to deal with this question in an intelligent fashion unless I endeavour to make it very clear what I think on the subject of taxation.

The PRESIDENT - Does the honorable senator not see that the question is one of the appropriation of moneys out of the consolidated revenue for certain purposes - that the question of a land tax, or of protection and free-trade, has nothing to do with the measure?

Senator STEWART - I see that quite clearly.

The PRESIDENT - I think the honorable senator made a long speech on the first reading to the same effect as the speech which he is making now.

Senator STEWART - In any case, I am satisfied that the matter is of so much importance that one cannot go back upon it too often.

The PRESIDENT - The honorable senator has already made a long speech on this question on the first reading, and the debate on the second reading mustbe relevant to the Bill. I have given the honorable senator every latitude, but really I think we must draw the line somewhere.

Senator STEWART - I am quite sensible of that, and I am very sorry--

The PRESIDENT - Iam sorry also. The honorable senator's remarks are very interesting, and would be appropriate to the discussion of a new scheme of taxation.

Senator STEWART - I suppose I shall be compelled to take some other opportunity to deal with the question, because I think it of such pressing importance that the sooner it is dealt with the better for every one concerned. I find that the Government have no financial policy whatever, if it is not one purely of drift. One would have thought that before now some arrangement wouldhave been made with regard to the transferred properties. Nothing, so far as I have been able to ascertain has been done. We reallydo not know how we stand with regard to our Post and Telegraph Department. Of course, we lose a large sum every year in connexion with the

Department, but it is extremely desirable that we should know exactly how much, and we cannot get that information until some arrangement has been made with the States in connexion with the transferred properties. The matter should be one easily solved, that is if the States and the Commonwealth are each actuated by a spirit of fairness. But if the States wish to impose upon the Commonwealth, as I am afraid some of them do, the matter becomes one of very much more difficulty. I think it could easily be settled by the States submitting a statement of the cost to each of them of the properties transferred. The actual cost of those properties would be a very fair Oasis, and one which should be satisfactory to both parties. I understand that the States, or some of them, wish to value the properties as they stand now. To my mind, that is an exceedingly unfair method. In most cases, the land on which our post-offices, and other public buildings which have been transferred to the Commonwealth, have been erected, cost the States nothing, and it would' lae exceedingly unfair on their part to charge the Commonwealth with the present values for that land. The only result which an arrangement of that kind could possibly have would be to increase unduly and unfairly the expenditure of the Commonwealth and circumscribe more and more our onefourth share of the Customs revenue. I trust that the Government will try to come to some arrangement at an early date with the States upon this matter, so that we may be in a position to learn exactly how our Post and Telegraph Department stands, how much it loses every year, and whether we are able to adopt the system of penny postage which has been advocated in many quarters.

Senator Mulcahy - We caw always learn that. We can see what are the receipts and expenditure of the Department.

Senator STEWART - We can see how much the Department is losing so far as the difference between ordinary expenditure and revenue is concerned, but Senator Mulcahy must be aware that a very large amount of the money borrowed by each of the States, has been invested in post-offices, the building of telegraph lines and such works, and the Commonwealth ought to be liable for the interest on that expenditure. Before we can ascertain how much we are actual I v losing every year in connexion with this Department that interest ought to be charged against the Department. It would be so charged in the case of any ordinarybusiness. Not only that, but there should also be something allowed for depreciation and other charges. I trust the Government will endeavour to bring the' matter to a conclusion at an early date. It is extremely' desirable also that the Government should formulate some policy with regard to the taking, over either of the whole of the States debts or of a portion of them. We know that a conference held some time ago in Hobart dealt with this subject, and perusing- the reports of its proceedings. I came to the conclusion that the Treasurers of the various States were trying all they knew to get the better of the Treasurer of the Commonwealth.

Senator Walker - And vice versa.

Senator STEWART - No, I think that the Treasurer of the Commonwealth was exceedingly fair in his proposals. Indeed I must say that I was astonished at his moderation. To my mind, he made very equitable proposals, which I am very sorry indeed the States Treasurers could not see their way to agree to. But, unfortunately for all concerned, each one of the States Treasurers seemed to be overpowered by a desire to " get at " the Commonwealth. I am very glad that they did not succeed. The Government should have some clear ideas on this question, and should take Parliament into their confidence at the very earliest opportunity. I can quite understand the little scheme which is in the minds of the States Treasurers. They wish us to take over the States debts, or a proportion of them, and so make the interest on the debts a perpetual charge upon the Customs. I hay that that would be financing of the most unsound character. What have the Customs to do with the interest upon States debts? A very large proportion of the money borrowed has been spent in the improvement of the public estate, in building railways, in making roads, and in developing, our resources, and the interest on that money, to my mind, ought to be made a charge, not upon the Customs revenue, but upon the works on which the borrowed money has been expended. That is the view of the question which I take, and I submit it with! all deference to the Senate. The various States Treasurers desired that the Commonwealth should take all responsibility, so far as the payment of the interest on the debts is concerned, whilst they appear to be anxious to retain full control over the assets. I appeal to Senator Walker, as a banker, to say whether any banking or money-lending institution would carry on business on those lines? If a banking institution advances money to a private individual, it secures some hold upon the assets of the individual, and places itself in the position of having some control over his business. But here we should have practically no control whatever if the States Treasurers' proposals were carried out. I trust that if the States insist upon their debts being taken over the Commonwealth Government will also insist upon securing a reasonable control over the assets which should be held responsible for the payment of the interest on those debts, and ultimately for the redemption of the indebtedness.

Senator Guthrie - - The honorable senator will not trust them.

Senator STEWART - I do not see that it is a question of trusting at all. It is purely a matter of business. Does not Senator Guthrie see the involved condition into which the Commonwealth finances might get unless a policy of this kind were pursued? Of course {he Commonwealth has always power to impose direct taxation, but I set. out by saying that, to my mind, it was absolutely essential that Commonwealth finance should be separated from State finance. If we have the Commonwealth levying Customs taxation and also land taxation, States and Commonwealth finance will become inextricably mixed up together, and the present state of confusion will become worse confounded. One thing which we should try to bring about in connexion with the relations between the States and the Commonwealth is the entire separation of their financial transactions. I wish now to refer to the question of the Federal Capital. I am sure that we are all disappointed that something definite has not been done. Of course, we realize that the Government of New South Wales has taken up a most un-Federal attitude, and placed every obstacle in the way of a settlement of that most important question. So far as I can gather from the correspondence on the subject, the Government of New South Wales takes up the position that it has the right to choose the territory within which the Capital city shall be situated. That, I am sure, never entered the minds of the people of the Commonwealth. If it had been mentioned for a moment that New South Wales would have the privilege of choosing the territory, they would not have agreed to federate. I may be right, or I may be wrong, in regard to my reading of section 125 of the Constitution. Its wording is rather obscure. When we reflect that some of the brightest men in Australia were members of the Federal Convention, we must confess to a little astonishment at that obscurity.

Senator Pulsford - That is probably the reason.

Senator STEWART - There may be something in that suggestion.

Senator Trenwith - It is very hard for a man, be he brilliant or simple, to always put into terse language precisely what he means.

Senator STEWART - It is exceedingly difficult, and, therefore, I take what was the commonly-expressed opinion when the Constitution Bill was submitted for acceptance. The Capital city was to be situated in New South Wales, and outside the 100-mile limit', and the choice of that territory was to lie with the Parliament of the Commonwealth.

Senator Trenwith - And there is no doubt that that is clearly enough expressed in the Constitution, too.

Senator STEWART - I think it is, but I may be wrong. If that be not a true reading of section 125, and if after a case has been submitted, the High Court should decide in favour of the Government of New South Wales, I would suggest that the Government take steps to alter the Constitution. I am sure that the people Of Australia would never willingly agree to allow New South Wales to choose the Federal territory. This is a most unFederal act on her part.

Senator Walker - New South' Wales would not have joined the Federation, except on that condition.

Senator STEWART - No one wishes to take the Capital city away from that State.

Senator Walker - Is the honorable senator quite sure of that?

Senator STEWART - Not unless it could be established in Queensland^, but that course is practically hopeless. What we object to is that the Government of New South Wales arrogate to itself the right to choose the territory.

Senator Walker - Let the High Court settle the point.

Senator STEWART - If the High Court should read the Constitution in the same way as the Government of New South Wales, the evident duty of the Commonwealth Government would be to take steps to secure an alteration thereof. In any case, I think that something definite ought to be done at an early date. Individually, I am not in a hurry to leave Melbourne; but I recognise that the longer a final settlement of this question is delayed, the greater will be the danger of something happening, for which probably we have not bargained. The Government ought to press for a solution of the difficulty as early as possible.

Senator Guthrie - Let us stop where we are.

Senator STEWART - Yes. I would rather stay here than accept the dictation of New South Wales.

Senator Walker - The honorable senator is more comfortable here than he would be at Dalgety.

Senator STEWART - I do not know. The climate of Dalgety is probably better than that of Melbourne. In any case, the former place has been deliberately chosen by this Parliament, and New South Wales,if she were governed by what is known as the Federal spirit, and not by a narrowminded selfishness, would accept that choice. The subject of defence is pressing itself upon the attention of the people of Australia more forcibly every year. We realize that we cannot afford to live very much longer in a fool's paradise. We hear of war going on in various quarters of the globe. We recognise that the pressure for territory is becoming greater and greater every year, and that our only safety lies in an adequate system of defence. I am disappointed that the Government has not come down with a clearcut and definite policv. Evidently, it does not know its own mind on this subject. It has been said bv an honorable senator that, as it is now constituted, there is really no hope ofl the Government ever formulating a definite defence policy. I hope, for the sake of Australia, and of the Government, that that is not the case.

Senator Walker - They are not sufficiently independent, and therefore the honorable senator cannot expect them to do that.

Senator STEWART - Why should the Government be independent ?

Senator Walker - They should have a sufficient majority of their own.

Senator STEWART - Does the honor-, able senator desire the Government to be independent of Parliament ?

Senator Walker - No; but Ministers should be independent of the party that bosses them.

Senator STEWART - The party that bosses the Government will never vote for anything of which it does not approve. It votes for a measure because it believes in its enactment, and not for any other reason. Does the honorable senator see anything wrong or immoral in that?

Senator Walker - No; but the Government cannot afford to be independent of its other supporters. We know well enough that one or two Ministers are not in touch with the Labour Party at the present time.

The PRESIDENT - I ask the honorable senator not to make irrelevant interjections.

Senator STEWART - What I am complaining of is that the Government apparently have no policy.

Senator Walker - But the honorable senator supports the Government.

Senator STEWART - I do; because I believe that the present Government is very much better than the one which the honorable senator would like to see in power again, and which, when it was in power for some months, did not formulate a defence policy. Each Minister looked upon every colleague as his sworn brother. There were no differences of opinion. We know how very much more uncertain the support of the third party was to that Government than it is" to the present Government. The party which is supporting the present Government is at least politically honest. I question very much whether that can be said of-

Senator Drake - Which?

Senator STEWART - Honorable senators can choose just as it may suit them. Public opinion in Australia has given a very clear lead, so far as defence is concerned. The people believe in a citizen army - not in professional soldiers, but in men who, from patriotic motives, qualify themselves for defence purposes. I do not find that the Government has been encouraging our volunteers.

Senator Mulcahy - Occasionally some of them make a bit of a row if they do not get enough money.

Senator STEWART - They ought not to get much money. It is not possible to work the volunteer and partially-paid system side by side. One or other must go. The volunteer looks at the partially-paid man and sms " Why should I give my time to this business of defence and get nothing out of it. when my friend over there does not give any more of his time or' energy to defence than I do, and yet is paid ?" That aspect of the question must, I think, be clear to any one who sees how the Volunteer Forces have dwindled during the last year or two. The Government might very well do a great deal more to encourage the Volunteer Forces. It might foster rifle shooting by giving free ammunition and' offering prizes, and also encourage rifle clubs and cadet corps.

Senator Playford - So we do.

Senator STEWART - With reference to our defence by sea, we are not in a position to establish a Navy. As has been pointed out already, we are hot in the possession of sufficient revenue to establish a large Navy. But we ought to do all that is possible. We ought to begin by providing for harbor defence, and by placing all our capital cities and the larger 'ports in as complete a state of defence as is possible for us with our limited means. That would be a very good beginning. We should then establish a small Navy of our own. I have no sympathy with those who think that we ought to leave our naval defence to Great Britain. That is an entirely mistaken line of policy. If we really love Great Britain we ought to relieve her of some share of her very great responsibilities by providing for our own sea defence in as large a measure as we can. I am not prepared to enter into this aspect of the question at length, but I think that if we examine the whole subject we shall find that the question of cost after all is not so serious as it appears to be. Victoria alone is paying as annual tribute to the landlords about ,£7,000,000 per annum. If we could divert half the annual tribute that is now being paid to the owners of land all over Australia to the purposes of defence, we should be able to put Australia in practically an impregnable position.

Senator Pulsford - Does " divert " mean " steal " ?

Senator STEWART - Steal ? Nothing of the kind. Unfortunately, I am not permitted to discuss this question as I should like to do, but I hope some day to have an opportunity to place my views fully, freely, and fairly before the Senate. I can assure Senator Pulsford that if I thought there was the slightest semblance of confiscation, or anything of that kind, about my proposals, I should be the last man to put them forward. Hitherto certain individuals have been permitted to draw huge revenues, which in all fairness and equity ought to have gone into the public Treasury.

The PRESIDENT - Is there any line in the Appropriation Bill concerning that question ?

Senator STEWART - I was merely proceeding to point out how the money for a system of defence might be obtained. Our great trouble is the lack of cash. We want an Army. We want a Navy. We want an old-age pension- scheme. But we cannot get the money, simply because our system of financing is unsound from top to bottom. I think I have said enough to indicate what my views are - at least, in a limited way. I trust that we shall very soon have some definite declaration of policy with regard to the transferred properties and the State debts. We should like to know what the Government means to do as to the taking over of the States debts, and also what is proposed with reference to " the Braddon blot." The Treasurer in making his Budget speech .said that he was prepared to wipe out that section of the Constitution. Very well ; we should like to know whether the Government supports that view or not. In short, we should like to have a declaration of policy upon all these matters. T trust that we shall have it, if not this session, at least early in the coming session.

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