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Wednesday, 1 August 1906

Senator KEATING (Tasmania.) (Honorary Minister) . - I move -

That the Senate approves the agreement made and entered into on the 7thday of July, 1906, between the Postmaster-General, in and for the Commonwealth, and Sir James Laing and Sons Limited, for the carriage of mails between Adelaide and Brindisi, with the following modifications : -

Proviso to clause 3 -

Provided that, in the event of the PostmasterGeneral requiring the " period of transit"on the voyage from Brindisi to Adelaide to be reduced to 612 hours, the period of 612 hours shall thenceforth be deemed to be the " period of transit " for each voyage from Brindisi to Adelaide, and each such voyage shall be completed within that period. Proviso to clause 15, -

After the word " legislation " insert "directly" ; after the words "with the consent of" insert "or subject to approval by," and after " Parliament " insert "by resolution."

Honorable senators will, no doubt, recollect a somewhat lengthy debate that we had during last session on a motion for the ratification of the contract for the mail service between Europe and Australia, which is now in existence. In moving that motion, I took the opportunity of making reference to the provisions which had been in existence for a considerable period1 of years in connexion with the communication between Australia and Great Britain. It is, therefore, absolutely unnecessary for me, at this stage, to enter Into a consideration of those provisions. It will be remembered that at that time neither I nor any other honorable senator who addressed himself to the motion, or any of the amendments thereto, was able to give an unqualified approval of the terms of the existing contract. I think it was recognised on all sides that ithad been entered into under conditions which were very highly favorable to the contracting. company, and somewhat disadvantageous to the Government of the day. We recognised that that Government was in the grip of unfortunate circumstances. We found that, in response to the invitation for tenders, only one tender had been received ; that the amount then asked for carrying out the service was £170,000 per annum, and that in the course of negotiations it was reduced, first, to£150,000, then to £140,000, and, finally, to £1 20,000. It was mentioned at that time that in the course of protracted negotiations, the contracting company endeavoured to force other concessions which the Government could not see its way to make. ' And, realizing, as we all did, the difficult circumstances in which the Government was placed incarrying out the negotiations, an opinion was freely expressed all round this Chamber that, though we were ratifying the provisional contract, it was desirable that, before the end of January last, we should exercise our right to give the necessary notice of our intention to terminate the agreement. A further expression of opinion was given to the effect that a mistake had been made in connexion with that contract in not making it purely postal. The Queensland Government, recognising the fact that the contract, if it did not expressly provide for something more than a postal service, at any rate contemplated such, claimed that Queensland should receive certain consideration. Otherwise it was urged the Commonwealth Government would be dealing unconstitutionally with certain States - that is to say, it would be discriminatingin regard to one State disadvantageously in comparison with other States. In pursuance of that intimation, and in conformity with the wishes expressed both in the Senate and in another place, information was conveyed to the Orient Company of the desire of the Government to terminate theexisting contract on the 31st January, 1908. As soon as possible general conditions of tender were drawn up and' published, and tenders were invited for a new contract, which was to commence at the termination) of the existing contract with the Orient. Company, namely, at the end of January,. 1908. Honorable senators have had an opportunity - and doubtless they have availed themselves of it - of perusing in detail thosegeneral conditions. The efforts to secure a contract that would be advantageous to the Commonwealth both from a postal and a general point of view, have on this occasion, I think it will be admitted, been attended with considerably more success than were the efforts made a few years ago.. We have not had one tenderer only. Wehave had five tenderers. It will be seen from the papers presented that the tender which has been accepted is for a sum of £125,000 per annum. The tender nextabove that was one for £150,000 per annum ; and the next in order was a tender for £185,000 per annum for the same services.

Senator GUTHRIE (VICTORIA) - Under different conditions.

Senator KEATING - Under the general conditions of tender whichwere notified.

Senator Guthrie - The conditions were altered afterwards.

Senator Dobson - What was the amount of the tender that was received too late ?

Senator KEATING - That has not beenstated, and I do not know personally.

Senator Millen - Did the Orient Company tender?

Senator KEATING - It did, but washopelessly " out of it."

Senator Dobson - That was the " too late" tender, I suppose?

Senator KEATING - The existing contract with the Orient Company imposes upon us the necessity of paying a subsidy of £120,000 a year. The contract is for thecarriage of our mails fortnightly by theOrient Company from Australia to Europe, certain provisions being made for the disembarkation of a portion of the mail matter at Naples, and the carriage of the re- mainder by steamer from Naples to Great Britain. The Orient Company also carries mails from Great Britain to Australia at poundage rates. Its service dovetails in with a fortnightly service of the Peninsular and Oriental Company that is conducted under contract with the British Post Office for the conveyance of English mails to Australia; and the ships of the Peninsular and Oriental Company on their return voyage from Australia carry mail matter from this country to Europe at poundage rates. When we were dealing with the existing mail contract Vast year I pointed out what were the contract times in the case of the Peninsular and Oriental Company with Great Britain, and in the case of the Orient Company with Australia. We saw then that the Orient Company's contract allowed a period of transit some hours longer than did the con.tract with .the Peninsular and Orient Company.

Senator Drake - What was the period ?

Senator KEATING - The period in the contract with the Peninsular and Oriental Company was 662 hours, and the contract time with the Orient Company was 686 or 696 hours; but, although those were the specific periods of transit, in every instance the companies ran their boats in less time. I think that in the case of the Orient Company the average extending over ten or eleven voyages was shorter than the contract time by something like eleven hours.

Senator Drake - Sometimes the Orient Company's boats were late.

Senator KEATING - That may have been the case a year or two ago, but the Cuzco and some of the older vessels have since been replaced. As against the existing contract, that which the Senate is now asked to confirm, provides, not for a period of three years, but for a period of ten years, for the duration of the contract. The reason why ten years has ken adopted instead of the shorter term is because it was only by offering to the tenderers a period of at least the duration mentioned that they could be induced to embark their capital in the construction of the vessels that will be necessary for carrying out this enterprise. The amount of annual subsidy which we, shall have to pay is very little in excess of the subsidy which we are at .present paying to the Orient Company. It will be £125,000 per annum. The Mediterranean port and Adelaide will, for all purposes, be the terminal mail ports, because the port of Brindisi will be that at which the letter portion of the Australian mail will be landed, and Adelaide will be the terminal port at which the English mail will be landed, .the period of transit between the two ports will be 636 hours - a considerable reduction upon the present contract time of 696 hours. In regard to that reduction in the period of transit alone, I think we are making a very excellent bargain when we recognise that we have to increase our subsidy only by £5,000. Not only shall we be assured an accelerated mail service, but the contract gives to the Postmaster-General power to require the company during the term of the contract still further to accelerate the speed of its vessels, and to establish a transit period of 612 hours instead of 636. As the existing contract stood, some doubt was expressed a little time ago as to whether, when the Postmaster-General tendered a request like that, there would be any obligation upon the Orient Company to comply with it ; but one of the amendments added to the contract now under discussion will, at any rate, make it sufficiently clear that if the Postmaster-General does request a reduction in the period of transit to 612 hours, the tenderers will be under an obligation to comply. Of course, provision is made for increasing the ,£125,000 subsidy in such cases by the actual extra cost entailed upon the company by the increased consumption of coal and in other directions. The extra cost having been ascertained, it will be added to the subsidy paid by the PostmasterGeneral to the company. That extra cost, whatever it may be, over and above the £1.25,000, will not be fixed in an arbitrary manner, but will be ascertained by actual calculation. There is another provision which I may mention while I am referring to the period of transit, namely, that during a certain period of the year that is perhaps better known to the Western Australian senators than to others - the period of the south-west monsoon - the company shall be allowed an extra period of thirty-six hours.

Senator Dobson - How long does that period last?

Senator KEATING - I am not sufficiently familiar with the facts to know.

Senator de Largie - Three or four months.

Senator KEATING - Of course, it will be remembered that the vessels of the contracting company are to carry our mails once every fortnight ; and during the period of the south-west monsoon, they are to be allowed some latitude in respect of the time of transit. One of the conditions which the Orient Company endeavoured to have inserted in the existing contract was that all payments should be made in London, and that any further transactions that might from time to time take place between the Commonwealth and the company should be conducted in London. As compared with that request preferred by the Orient Company - which, of course, was not granted - the contracting company with which we are now dealing, has preferred to establish conditions in connexion with its business in Australia. It will contract that the vessels that are to be built - which, I may mention, are not to be of less than11,000 tons registered tonnage-

Senator Millen - Has the Government yet made up its mind as to what that means ?

Senator KEATING -I willcome to that point directly. The vessels are to be registered in Australia.

Senator Walker - In Adelaide, I suppose?

Senator KEATING - That is a point which, so far as I know, has not been definitely determined.

Senator Guthrie - It does not matter twopence !

Senator KEATING - It may not matter to the honorable senator, but at any rate it indicates a desire on the part of the company to make itself a real Australian Royal Mail Company. It will also, in its voyages between Australia and Great Britain fly the Commonwealth flag. Its ships will be constructed as soon as possible after the contract has been ratified by Parliament.

Senator Dobson - Are all the ships to be constructed or are. some of them in existence now?

Senator KEATING - They are all to be constructed. The plans will be submitted to the representative of the Commonwealth in London.

Senator Col Neild - Who is that mysterious person?

Senator KEATING - The present representative of the Commonwealth in London is Captain Collins.

Senator Col Neild - Is he the representative named in the contract?

Senator KEATING - No person is actually named. The representative of the Commonwealth in London is mentioned.

Senator Col Neild - Is Captain Collins that mythical personage?

Senator KEATING - Certainly not.

Senator Millen - Is Captain Collins' decision to determine the matter?

Senator KEATING - Senator Neild asked me who is the present representative of the Commonwealth in London. I have replied that he is Captain Collins. But that does not mean that Captain Collins will necessarily be the person delegated by the Government to act as its representative in this matter. The Government may delegate any individual whom it chooses to act as its representative for this purpose; and I presume that the Government will be seized of the importance of selecting some fit and proper person who will be capable of giving it sound advice in regard to the plans. Captain Collins, if I remember rightly, was an officer in the Royal Navy. But it is not necessary to discuss any individual in connexion with this matter.

Senator Col Neild - Is he the individual who holds the £25,000deposited by the company.

Senator KEATING - That bond, I understand, is held in London by one of the banks on behalf of the Commonwealth. I will obtain for the honorable senator alt the information which he desires.

Senator Millen - . After the vote?

Senator KEATING - No, before the vote.

Senator Col Neild - Has the honorable senator a copy of the bond?

Senator KEATING - No.

Senator Col Neild - Is there a copy in the Commonwealth ?

Senator KEATING - I cannot say that there is.

Senator Millen - It would meet all purposes if the honorable senator couldlav the deposit upon the table of the Senate.

Senator KEATING - No doubt it might simplify matters in more senses than one-. I have indicated already that the ships to be built will be each of 11,000 tons registered tonnage. Some question has been asked by an honorable senator opposite as to what is exactly meant by " registered tonnage."

Senator Mulcahy - We all know; it has been explained.

Senator KEATING - I understand that " registered tonnage " has been explained. I see that Mr. Paxton, who is a representative of the Chamber of Commerce in

Sydney, has indicated the three different kinds of tonnage that are recognised; and I presume that honorable senators,- who have a closer, and, certainly, a longer, acquaintance with shipping than I have, will take the opportunity afforded them in the discussion to enlighten the Chamber in this regard. All I know is that registered tonnage is the term that is used, and 11,000 is the figure that is fixed in respect of each vessel. I am given to understand, and I am prepared to believe, that, as a result of this stipulation, a larger and better class of vessels will necessarily have to be built under this agreement than are at present engagedin the mail service between here and Great Britain, either under the contract with this Government, or the contract with the British Government. There is a proviso in the contract that, with regard to the first six months, at any rate, the company shall have the right to use vessels of the Orient class so far as tonnage is concerned, always, however-, being liable, even while they are employing such vessels, to comply with the conditions as to the transit period.

Senator Mulcahy - What does the Minister mean by " Orient class " ?

Senator KEATING - I mean vessels of the tonnage of those employed under the existing contract. There is another very important provision to which, I think, I should direct attention. In case there is any loss of earnings, orany increase of expenditure, which either of them, or both taken conjointly, lessens the revenue of the company by £5,000 at least, and the loss is occasioned directly by the legislation of the Commonwealth in regard to shipping - directly in regard to shipping - it shall be competent for the Postmaster-General to Increase the subsidy by that amount.

Senator Mulcahy - Not exceeding

Senator KEATING - Not less than £5,000.

Senator Millen - That is, if the damage is not less, the company have a claim, but, I understand, there is no limit to the amount of the claim.

Senator KEATING - That is so, though, of course, the Postmaster-General is not absolutely bound to recoup the company to that extent, he having the option, subject. again, of course, to the consent or authority of Parliament, to determine the contract entirely.

Senator Guthrie - On what notice may the Postmaster-General determine the contract ?

Senator KEATING - The honorable senator will see that set out in the agreement.

Senator Millen - The notice is six months, I think.

Senator Guthrie - But the original agreement has been altered in another place.

Senator KEATING - The agreement has only been altered in this connexionby a provision that the determination shall be subject to ratification by Parliament. The provision is contained in the two paragraphs of clause 15; and the alterations made in another place are that after the word "legislation" the word "directly" has been inserted; that after the words " with the consent of " the words " or subject to approval by " have been inserted; and, after the word " Parliament " there . has been inserted "by resolution." This clause indicates the form in which the consentof Parliament shall be obtained to the determination of the contract.

Senator Mulcahy - But has the company any option, supposing Parliament will not consent to increase the amount?

Senator KEATING - Yes, according to clause 15, the contractor shall be at liberty at any time to determine the agreement on giving six months' notice in writing. There is an option given to either the contractors or the Postmaster-General, under defined circumstances, to determine the contract. I think I have drawn attention to whatmy be called the salient features of the contract.

Senator Mulcahy - The provision to which the Minister has just been, referring is very important.

Senator KEATING - It is; and honorable senators will recognise that in many respects the present agreement is an advance on the existing contract, and that the differences, are manifestly to the advantage of the Commonwealth. When the general conditions of tender were issued some time ago, the Government had the benefit of the advice of a large number of people in Australia. That advice, which, I may say, was altogether unsolicited and gratuitous, was to the effect that it was hopeless to consider that there would be any tenders under such conditions. But we find that notonly this company, but four other companies have tendered. The conditions have been complied with, and they are conditions which, I venture to suggest, no one in this or the other Chamber last year, when the existing contract was under consideration, would have dreamt of so soon obtaining. We all expressed the belief that better terms could be arranged than were then under our notice.

Senator Macfarlane - This is a longer period of contract..

Senator KEATING - Quite so ; we must give something if we are to get increased advantages. As I say, we all expressed the hope that a strong effort would be put forward to obtain better terms. The Government have endeavoured, so far as they could, in the interests of the Commonwealth, to secure the best terms in connexion with the conveyance of our mails to Europe. As Senator Macfarlane reminds me, the term in this particular instance has been extended to ten years; and by that extension, the Government are enabled to obtain advantages which no company would be able to afford if the period were three years, or much shorter than that of ten years. Reference has been made to the question of guarantees. On referring to the general conditions of tender, which are contained in the latter pages of the papers that have been circulated, honorable senators will find, according to condition No. 38, that the successful contractor is to be bound in a sum equal to one-fifth of the annual subsidy. As the annual subsidy is £125,000, one-fifth is £25,000, and the Government have an approved guarantee to that amount in London, and, further, a deposit of £2,500 in Australia. Honorable senators will see from the subsequent condition, No. 39, that the prospect of a company tendering which had no vessels, but would have to build them, was in contemplation. To provide for such a contingency, it was set forth that if the successful tenderer happened to be a person who would require to build the necessary ships, the Postmaster-General would have every opportunity to inspect the vessels while they were building, and that, if the Postmaster-General, at any time during the building;, was not satisfied with the progress made, or with the bona fides of the attempts to provide necessary and properly equipped ships, he would be empowered to ask for another £25,000 guarantee. That is to say, the PostmasterGeneral could raise the general guarantee from £25,000 to £50,000 if he saw fit.

Then honorable senators are well aware that in all such contracts, penalties are provided for the non-fulfilment of certain conditions. A few moments ago, I said that the contract time for the conveyance of mails from Naples to Adelaide by the Orient Steam Navigation Company is- 696 hours. We propose in this agreement to fix a period of transit which shall be at most 636 hours for each trip, with a. power to the Postmaster-General at anytime, should he so desire, to request the, company to reduce the time of transit to- 612 hours.

Senator Dobson - With an extension for the monsoons.

Senator KEATING - Always subject tothe exception for the south-west monsoonal period. If we get the term reduced to 612- hours, we shall make the necessary allowance of 36 hours for the monsoonal period./

Senator Macfarlane - On the voyagehome ?

Senator KEATING - Our contract isonly for the conveyance of mails from Australia to Europe. I was pointing out that in regard to the period of transit, penaltiesare always attached for the non-fulfilment of the conditions. In this connexion, weare in a most curious position at thepresent time. If the Orient Steam NavigationCompany happens to be one hour, twohours, or twelve hours late, there is nopenalty ; it is absolutely necessary at present, before penalties attach, that the vessels on the particular trip shall be at least" twenty-four hours late; in other words, penalties are provided for the number of days the vessels are late. ' In the general conditions of tender for the agreement under discussion, we seek to remove that disadvantage. I shall now indicate to honorable senators the provisions which deal' with this point. The provisions do not appear in the terms of the contract itself, but in the general conditions of tender. At the same time, these conditions are part and parcel of the contract, because the first part of the first article of the contract indicates that the general conditions of tender, except as modified by the specific provisions of the contract itself, shall be deemed to be part of the contract. In other words, these conditions are not repeated in the contract ; and I deem it my duty, therefore, to draw the attention of honorable senators to the fact. If honorable senators look" at general conditionNo. 25, they will see the penalties to which* the contractors may be liable under certain circumstances. Should the company, after the completion of the contract, fail to commence to carry out the provisions of it, they will be liable to a penalty of £500 for each day of such failure ; but they are not to be liable for any greater sum under such a heading, than £20,000 in the aggregate. Our existing contract terminates on the 31st January, 1908; and the company, under this agreement, will, on a certain date in February, have to commence operations in pursuance- of the obligations imposed by the agreement. If it is a day late in commencing its operations under the contract the company is to be liable to a penalty of £500, and a further penalty of £500 for every succeeding day during which the delay continues.

Senator Guthrie - No; the penalty is only £too for every succeeding day.

Senator KEATING - Clause 23 of the general conditions of tender says -

If the contractors shall fail to commence the performance of the services on the day of February, 1908, from Adelaide, and on the day of February, 1908, from

Naples, or other approved port, the contractors shall forfeit and pay the sum of ^,'500 for every complete period of 24 hours which shall elapse ^before the contractor shall commence the performance of such services.

But, in the whole, the contractor is not to be liable to a penalty amounting to more than. .£20, 000 in ..respect, of default in this particular.

Senator Guthrie - The penalty is to be only £100 if the boats do not put to sea on the proper day.

Senator KEATING - That is another matter. , I am dealing now with the penalty imposed for delay in commencing the services under the contract. As honorable senators are aware, in order that this contract shall be properly fulfilled, it will be necessary, not only in the interests of the contractors themselves, but also in the interests of the general public of the Commonwealth, that a schedule of times for the departure of the steamers shall be fixed. Such a schedule will be arranged, and in the event of the contracting company failing to provide a boat to sail from Adelaide or Naples, in accordance with the scheduled time, they will be liable to a penalty of £500, and a further penalty of £too . per day for every day during which such failure shall continue, but the aggregate penalty imposed for such a breachof the contract is not to exceed the subsidy applicable to that particular voyage by more than £1,000. That provision is limited to some extent. It does not apply in the case referred to in clause 20 of the general conditions of tender. That clause contains a provision to which I have not yet referred, and enables the PostmasterGeneral in certain circumstances, if he should deem it desirable in the public interest to do so, to vary the route. In addition to the penalties to which I have already referred, the general conditions of the tender provide for a penalty in the case of boats being late. I have just indicated that before we can impose a penalty against the Orient Steam Navigation Company under the existing contract, it is absolutely necessary that a boat shall be late to the extent of twenty-four hours. We have altered that condition in the general conditions of tender governing this contract, and we propose the imposition of a penalty regulated by the hour. We propose here the imposition of a . penalty of £5 for every hour occupied by a vessel in excess of the aggregate period of transit which the contract entitles the company to take in the voyage from Adelaide to Brindisi.

Senator Guthrie - Are these penalties ever enforced now?

Senator KEATING - 1 think they are. I think that Senator Drake, when acting as Postmaster-General, imposed a penalty sufficiently severe in the case of the Cuzco to cause the company to withdraw that boat from the service.

Senator Drake - I think that the penalty was imposed only once.

Senator KEATING - I do not think that the company used the Cuzco after that.

Senator Drake - No, I think not.

Senator KEATING - I believe that the penalty imposed in that case was sufficient to induce the company to replace the Cuzco by a vessel that could be depended on to run to the schedule time. We make provision that where the cause of delay is1 ; beyond the control of the contractor - the"' act of God, the King's enemies, and so on, in accordance with the usual provisions' - to be found in bills of lading and marine contracts - the contractor shall not be liable to the penalty. Although we make these very stringent provisions with regard to- ' penalties, it is also provided that they shall be liquidated damages, and recover-'' able as such bv the Postmaster-General. It is * further provided that, even although the penalties are enforced, the PostmasterGeneral shall not be deprived of his right to void the contract for a, breach of its provisions on the part of the company. I do not think that there are any other matters of importance contained in the general conditions of tender to which I need direct the attention of honorable senators.

Senator Mulcahy - Referring to clause 15 of the general conditions of tender, will the Minister inform the Senate what authority is to decide whether the earnings of the mail-ships have been diminished through the action of the Commonwealth in passing laws relating to shipping?

Senator KEATING - I am not certain for the moment whether that is specificallyprovided for. There is a provision by which, in the event of disputes under the contract not being determined by mutual agreement, recourse shallbe had to arbitration. That is dealt with in clause 41 of the general conditions of tender, which provides -

When any dispute or other matter authorized or directed by the contract to be settled by arbitration shall have arisen, then unless both parties shall concur in the appointment of a single arbitrator, each party, on the request of the other party, shall nominate and appoint an arbitrator, to whom such dispute or other matter shall be referred.

That clause indicates the proceedings in connexion with arbitration, where that form for the settlement of the matter in dispute is authorized under the contract. I am unable at the moment to say whether the matter dealt with in clause 15 is specifically provided for.

Senator Dobson - If such a claim were made, the contractors would have to produce their books.

Senator KEATING - Under any circumstances, it would be necessary for them to! satisfy the Postmaster-General, before he would agree to their claim.

Senator Mulcahy - Suppose they make the statement that, by reason of our legislation, the. earnings of their vessels have been decreased?

Senator Millen - Is not the contract ample to cover that? If people put in a claim under this orany other agreement, they must prove their claim.

Senator KEATING - They would have to 'prove their claim. To give an instance, I. will assume that the contract has been in force for three or four years. Some legislation is passed by the Commonwealth

Parliament in relation to shipping. The contractors come to the Post and Telegraph, Department of the Commonwealth and say, " In consequence of your legislation of last session we have had to increase our expenditure," or, " Our earnings havebeen diminished," or " As the result of increased expenditure and diminished earnings our revenue is now less than it was by £8,000." If the Postmaster-General were not satisfied with that, the resort of the company would be to take the matter to Court, where they would claim, that the Postmaster-General had broken his. contract, and was bound to pay the £8,000 They would then have to prove that theloss of £8,000 had actually occurred astheresult of additional expense and diminished earnings, and they would further have to prove to the satisfaction of the Court that that was due directly to the legislation of the Commonwealth in relation to shipping-' There are one or two other matters in connexion with the general conditions of tender to which honorable senators might direct their attention. One is that contained in clause 30, in which there is a. provision which is commonly found in contracts, and particularly in contracts involving a lease. It is provided in this clause that the contractor shall not assign or sub-' letthe contract without the consent in. writing of the Postmaster-General. As honorable senators will see, that is a very important provision". When, as I said be fore, the Government some little time ago> received from all sides gratuitous and unsolicited advice to the effect that these general conditions were such that there would" be no tenders at all, theyvery soon found after the result of the tender had beendisclosed, and the terms of this contract bad been made public, that informationwas forthcoming,in many instances from the samequarters. to the effect that it wasnotlikely that the contractors would be able tocarry out the contract.

Senator Pulsford - I presume that, as a matter of fact, there were no other tenders . at a price which the Government would have been prepared to accept?

Senator KEATING - I have already referred to the other tenders.

Senator Pulsford -They were at aprice which the Government would not accept.

Senator KEATING - Quite so.

Senator Pulsford -Then the fact that there were a number of tenders really amounts to nothing.

Senator KEATING - We have here a lender tor £125,000, with all these advantages over the existing contract.

Senator Millen - Does the honorable and1 learned senator refer to the ten years' period as an advantage?

Senator KEATING - Yes.'

Senator Millen - To whom ?

Senator KEATING - I suppose that the balance of that advantage lies with the contractors, but, as I have already said, we cannot expect to get everything and give nothing.

Senator Millen - I agree with the Minister as to that.

Senator KEATING - We cannot expect to be provided with a service of 11,000- t.on ships without an extended contract.

Senator Guthrie - The honorable senator has not yet told us what an 11,000- ton shin is.

Senator KEATING - The honorable senator knows. There is no member of the Senate who is in a better position to give information on that question than is the honorable senator. I believe that Mr. Paxton has intimated publicly that the Government have the choice of three classes of tonnage.

Senator Millen - And that we are at liberty to choose our own-

Senator Best - Surely that is not so?

Senator KEATING - I do not know. There are members of the Senate who have had long experience and close association with shipping.

Senator Millen - We are at liberty to interpret the contract as we like.

Senator KEATING - For the purposes of our own interpretation. There are members of the Senate who are much better able than I am to inform honorable senators what is meant by "11,000 tons registered tonnage." I was pointing out that we have reserved' to ourselves the right to consent to any assignment of the contract.

Senator Millen - Will not the Government state definitely which registered tonnage they understand the contract to mean ?

Senator Col Neild - No, which does Mr. Croker believe in?

Senator KEATING - I am pointing out in answer to the criticism that the contract is one which the contractors will be able to hawk about, that we have reserved to ourselves the absolute right to refuse to consent to any . assignment. That is provided for in the general conditions of tender, clause 30.

Senator Guthrie - The Minister agrees that the contractors can assign the contract.

Senator KEATING - With the consent of the Postmaster- General. I have already suggested that the Postmaster-General has power in certain circumstances to alter the route. When the general conditions of tender were first drawn up, Naples was fixed upon as the particular Mediterranean port at which the letter portion of the mail matter should be landed and embarked. At the same time, it is stated that any other approved port might be substituted. As the contract is now drawn up, it is decided that the terminal port in the Mediterranean, so far as the letter portion of the mails is concerned, shall be Brindisi. In other respects, the general conditions of the tender, so far as I can see, have been adhered to; but the' Postmaster-General has power, under clauses 19 and 20, to alter the terminal port on three months' notice, and also to alter the route on notice. It might be necessary in certain circumstances, in the public interest, that the route should be altered. It might be on account of complications caused by war, or on account of danger to the travelling public, or to the Commonwealth from the importation of any disease prevailing at a port of call. It would be necessary, in such circumstances, that there should be power to deviate from the route, and provision is made to enable the Postmaster-General in such cases to alter the route, and to make the necessary adjustments of payment which are to be settled by mutual agreement, and failing that, by arbitration.

Senator Dobson - Has the Minister said what is to happen in the sixth year of the contract?

Senator KEATING - I have not said anything as to what is to happen in the sixth year. The provision with respect to that is of considerable importance. Inorder that we shall not, at this juncture, absolutely tie ourselves to certain conditions in the face of the fact that improvements may take place during the period of ten years, we provide for fixing, the sixth vear as a determinant year, and that, if other companies have established communication between Europe and? Australia by a better class of shins than those which are contemplated by this contract, we may take certain action.

Senator Millen - To obtain a better class of ships.

Senator KEATING - No, the words " better class " are not used. We can call upon this company to provide similarly good means of communication. Perhaps if I read the words of the clause it may meet the convenience of honorable senators. It is as follows: -

That if during the sixth year of the fixed period of ten years mentioned in clause z hereof any competing line of mail ships shall then provide an improved and accelerated service from Europe to Australia, the contractor shall, if so required by the Postmaster-General, provide a service equivalent to such improved and accelerated service upon the following conditions : -

The general conditions of tender are in some respects similar to those which have been issued on former occasions. They have been improved, notably in the particular instances to which I have referred. The improvements have been effected by reason of past experience. I think that if honorable senators will give to the motion and to the contract their fullest consideration, they will realize that we are about to secure those better terms tor which we all expressed a wish when we were dealing, last year, with the provisional contract with the Orient Steam Navigation Company. I think it will be admitted that the Commonwealth is to be congratulated upon securing such advantageous terms, even though, in order to attain that end, it has been necessary to extendi the period of the contract from three to ten years. The contract into which we entered in conjunction with the British authorities for a mail service to and from the United Kingdom was for a period of seven years, so that, after all, this period of ten years is not a very great departure from the terms of pre-existing contracts. I think, too', that honorable senators will recognise that we have followed the right course in providing that, from the Commonwealth point of view, this shall be a mail contract and nothing else. We provide for the' subsidy, or subvention, to be charged against the Department of the Postmaster-General. It is only right and fair that it should be charged with nothing further than the obligation of transmitting, as speedily as possible, mail matter from Australia to Europe.

Senator Guthrie - We do not -want

IT,000-ton ships to carry mail matter.

Senator KEATING - It is obvious that any company which enters into a contract for such a period may at the same time take advantage of its means of communication to supplement the subsidy it receives solely for carrying mail matter by the freights it may receive for the carriage of produce and other articles to Europe.

Senator Stewart - That is a matter for the company itself.

Senator KEATING - Yes, as the contract recognises.

Senator Millen - If this is only a mail contract, why does1 the Commonwealth stipulate for II,000-tOn boats?

Senator KEATING - Because we get the advantage of the boats. »

Senator Millen - But the Commonwealth is called upon to pay for the service more than it would otherwise do.

Senator KEATING - I do not know that the Commonwealth will pay more for the service. If we were to get boats of half that size, but which had not. carrying capacity to enable the contractors to supplement the mail subsidy by the freights thev would receive, probably they would want a heavier subsidy.

Senator Millen - Then why stipulate foi 11,000-ton boats?

Senator KEATING - Because we can get the boats at the present time.

Senator Millen - Why did not the Government leave it open to the tenderers to say what size of boats they would provide?

Senator KEATING - So we did. If the honorable senator will look through the general conditions of tender he will see that there is no provision requiring the tenderer to supply boats of 11,000 tons.

Senator Fraser - Is there no tonnage provided for?

Senator KEATING - When, under the contract, the contractors are prepared to provide boats of that class, are we going to say that we do not want them? Under the present contract we have no provision as to the tonnage of the vessels, and the contractors are charging us £120,000 a year for the carriage of the mails. But here we are to get the service for £125,000 a year.

Senator Mulcahy - Are the contractors really offering these big boats as an inducement' to the Commonwealth to deal with them?

Senator KEATING - I presume that the reason why the contractors are putting on the big boats is because, by providing increased space, they hope to be able to take a considerable amount of freight from Australia to Great Britain. >

Senator Mulcahy - The Commonwealth did not stipulate that, but the contractors offered it.

Senator KEATING - Yes. We stipulated only for a mail service by a specified route from Europe to Adelaide.

Senator Dobson - The States asked the Commonwealth not to stipulate about cold chambers.

Senator KEATING - So far back as the20th April last the Prime Minister communicated with the different States on that subject. Perhaps if I read this letter honorable senators will see the exact position which the Commonwealth Government is taking up as to its responsibility in connexion with anything beyond the question of transmitting the mails.

Senator Guthrie - Yes; but can the Minister explain why the Government put in clause11 the provision that each of the mail-ships to be employed under the provisions of the agreement shall be at least 11,000 tons registered tonnage?

Senator Best - Because that is the stipulation of the tender.

Senator Guthrie - No, that is a provision in the contract. If the contractors do not send out such ships, they will break the agreement.

Senator KEATING - Senator Guthriewill see that the stipulation to which he refers is part of the contract. When we asked the world totenderfor a contract we had no stipulation" or condition as to the tonnage of the vessels to be employed!. This particular company offers to carry our mails, in ships of 11,000 tons. Are we going to be so blind to the interests of the States that compose the Commonwealth as tosay that we do not want them?

Senator Guthrie - Why put it in the contract then?

SenatorKEATING. - The contractors offered the boats, and we decided to take them.

Senator Guthrie - Suppose that they could render the service in the same time with other ships?

SenatorKEATING.- If we could get ships of 20,000 tons at the same price we would take them.

Senator Guthrie - Suppose that the contractors could carry the mails with 5,000-ton boats?

Senator KEATING - If it were to cost the Commonwealth the same price for using 20,000ton boats, as for using 11,000-ton boats, we would) take the former

Senator Guthrie - Then this is not a mail contract?

Senator KEATING - In the contract there is nothing with regard to anything but the transmitting of mails. We carefully refrained from introducing any provision of that kind. But so far back as the 20th April last, the Prime Minister addressed the following circular letter to the Premiers of the different States -

I have the honour to invite your attention to the proposal put forward by me at the recent meeting of the Conference of State Premiers to the effect that the AgriculturalDepartmentof the States urged to immediately communicate with the exporters of perishable products, or others interested in them, in order that we might arrange to guarantee either the whole or a certain proportion of the cold storage accommodation which will be provided by the steamers to be employed in the mail service between Australia and Great Britain.

2.   The matter is one of considerable urgency, as the Postmaster-General expects to receive the tenders for the mail service next month. Unless some early intimation is received through the State Governments of the wishes of the producers, it will not be possible to make this a condition of the contract with the successful tenderers, and an uniqueopportunity may be lost for making most favorable conditions for an Australian export trade of products for which the quickest possible transport is desired.

3.   Under the circumstances, may I ask that you will give instructions for the 'matter to be considered at the earliest possible date, both as to the quantity to be shipped, and the rates to be obtained ?

Senator Fraser - It would be very difficult to get them tocome into line?

Senator KEATING - It was difficult, as the honorable senator will see when I read the replies. The first reply was received from Tasmania. It conveyed from the Premier of that State to the Prime Minister a resolution from the Derwent Valley Fruit-growers' Association to the effect' that it - views with great concern the proposal of the Federal Government to arrange for the freight of fruit to England, and desires to strongly deprecate such proposed action.

A similar resolution was passed at Hobart, and the Premier of Tasmania said that it was undesirable to disturb the satisfactory arrangements which existed as far as its producers were concerned, and he regretted that his Government could not co-operate. The reply from the Premier of South Australia was that it was impossible to estimate the requirements, as so much depended upon how the season might turn out. From Queensland came a resolution of exporters to the effect that the mail service should provide refrigerating space available for each State of the Commonwealth. The Premier of New South Wales forwarded the report of an officer in charge of the Agricultural Department, which is summarized in these words -

The conditions in this State do not seem to be favorable to the taking up of freezing space on steamers by Government authority.

The Premier of Western Australia replied that Western Australia was not in a position at the present time to make any reliable estimate of cold storage which would be required. The Premierof Victoria replied -

This Government regrets it does not see its way to fill a certain quantity of space.

He suggested that they would favour a line giving special facilities at a slightly higher freight than that ruling under the existing contract.

Senator Dobson - Practically, they all said leave us alone.

Senator KEATING - Exactly. In the case of Victoria the Government added to the reply that -

It is felt that nothing can really be done in the matter until a definite offer has been received.

With reference to cargo steamers, apart from mail steamers, on the 30th April the Prime Minister forwarded to the Premiers of the States the following letter: - In connexion with my communication of the 20th inst., I have the honour to invoke your attention to the further suggestion made by me at the recent Conference of State Premiers with reference to the export of produce generally, and particularly of produce requiring cold storage.

2.   My previous letter dealt only with the mail steamers, butthere is another class of vessels in respect of which it may be possible for the Commonwealth to make arrangements which will offer better facilities to producers at lower rates than those to which theyhave been accustomed. Vessels of the type to which I allude would be capable of carrying far larger cargoes than can find space in the mail steamers, though their route will be longer. They have, or could provide, passenger accommodation, suitable for the conveyance of immigrants to Australia on favorable terms.

3.   It is possible, if the companies concerned can be assured of sufficient business, that they will provide steamers larger and of a higher class than have hitherto been employed in the Australian trade.

4.   What is asked byour exporters, both those who require the use of freezing chambers, and those who do not, is a reduction of freights, and this. I have reason' to believe, may be secured if shipping proprietors can be supplied with some assurance that a certain amount of space will be regularly taken. This assurance need not necessarily be in the form of a binding guarantee, butmight be rather of the nature of an undertaking to supply cargo filling a specified space for either a certain number of months or the whole of the year, on the voyage from Australia to England.

5.   The difference in the climatic conditions of the States, and the fact that unfavorable seasons rarely affect more than a part of the Continent, would enable the undertaking to be fulfilled much more easily and regularly if all the States were acting together. Arrangements could be made for the distribution among the shippers of whatever space is allotted ; which arrangements could be altered from time to time, according as the quantity of goods available for export increased or diminished in any particular locality.

6.   It would be an additional inducement if an approximation could be made of the number of immigrants who would be passengers on the return voyage.

7.   No definite suggestions can be made until I have further information from you, but I shall be glad if you will consider the matter, and favour me with your views, together with those of the producing and exporting classes or their associations, with' whom your Agricultural Department may be in touch, in order that if possible proposals of a Federal character can be prepared for submission to ship-owners.

8.   Even if no agreement be attained at once, an endeavour to induce the exporters of Australian produce to act conjointly for the furtherance of their common interests must have useful results in the future.

8.   The advantages of united action in this matter are so great that this Government cordially relies on the co-operation of all the States in the effort to secure them.

That letter was written ten days after the previous letter, and it refers purely to cargo steamers. The replies received with regard to the suggestions in that letter were similar to those which I have already read in connexion with the proposals as to mail steamers, with the addition of an intimation from the Premier of Victoria that " it is felt that nothing can be done in the matter until a definite offer has been received." Honorable senators will, therefore, see that the Government has been mindful throughout these negotiations of the necessity of entering into what is wholly and solely a postal contract; but, at the same time, it has recognised that it is at any rate possible, when arrangements are being made for a postal contract; to be able to assure to the contractors certain other possibilities, or certain conditions, which will enable them to provide a better class of vessel at much more reasonable cost to the Postal Department than ifthey had not those other sources of income to look to. I think it will be admitted that the Government was perfectly right in following that course. Now we are about to enter into this purely postal contract; and, although we stipulate for nothing further than that the voyage shall be from Adelaide in South Australia to Brindisi in the Mediterranean, we know, as a matter of fact, that, for its own convenience and profit, the company's vessels employed in fulfilling the terms of the contract, will go further east than Adelaide.

Senator Col Neild - Query !

Senator KEATING - Of course, merely from the business point of view, it is not to be supposed that these vessels will depend upon the income of £125,000 which they are going to receive from the Post and Telegraph Department. For that reason alone, it is evident that they will visit Melbourne and Sydney. Honorable senators will recollect, however, that the Premier of Queensland last year,, put forward a claim that the Commonwealth was discriminating as against his State, and it was urged that the Queensland people were entitled to have the mail boats calling at Brisbane fortnightly at the cost of the whole Federation. We have been mindful of our experience in this regard, and have, therefore, made the contract under consideration a purely postal contract. I think that honorable senators who have perused the papers will recognise that, although the amount of the subsidy is larger than that we are at present paying, we are securing terms and conditions that are distinctly superior, not only to those in the existing contract, but to anything that, twelve months ago, it was considered that we could hope so soon to obtain.

Senator Dobson - Can the honorable senator tell us what is paid under the poundagesystem to the Peninsular and Oriental Steam Navigation Company?

Senator KEATING - Speaking from recollection, we get poundage credit from the United Kingdom for mail matter coming to Australia for something like £25,000, whilst we pay in respect of the contract vessels of the British Government, namely, the Peninsular, and Oriental Steam Navigation Company's vessels, something like £15,000. The net balance in our favour comes to about£10,000.

Senator Best - Those were the figures quoted, in another place. I think.

Senator KEATING - I am speaking from recollection of the information supplied to me last year. In the course of the negotiations with the Orient Steam Navigation Company, which resulted in the existing contract, one of the conditions which the company wanted to claim from the Commonwealth Government was that it should receive the benefit of the poundage paid, and not the Government ; in other words, in addition to the £120,000 paid in subsidy, it was claimed that the company was entitled to get the benefit of the poundage paid to the Government. But the Government of theday would! not agree to that, and, as I said before, the net result, if my memory serves me rightly, is that there is a balance of £10,000 per annum in our favour.

Senator Dobson -In view of the fact that the bond can be increased from £25,000 to £50,000, have steps been taken to see that each surety is a substantial man ?

Senator KEATING - We have taken care of that. The sureties have been approved after the most careful inquiry.

Senator Dobson - Having in view the fact that the amount of the bond can be raised to £50,000?

Senator KEATING - Quite so.

Senator Clemons - Does the honorable senator know the distance from Adelaide to Brindisi that governs this contract?

Senator KEATING - I can furnish the honorable senator with that information in the course of the debate. I fancy it was stated lastyear, when we were discussing the mileage rate, and I can easily turn it up.

Senator Clemons - The contract indicates certain hours, but does not mention the rate of speed.

Senator KEATING - I think the rate of speed is 15 or 16 knots; but, so far as we have provided with regard to the time, it is the transit period that is mentioned. With these remarks - which have been to some extent disconnected, mainly by reason of the fact that many honorable senators have wished for different information at the same time - I think that I can safely commend to the kindly reception of the Senate the contract, the terms of which are now before it; and I shall now content myself with moving, in accordance with the notice on the paper, the motion standing in my name.

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