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Tuesday, 10 December 1912

Senator MILLEN - Why is this more» a reproductive work than were other land purchases made by other Governments and by this Government for precisely similar purposes?

I propose to show that this proposed purchase will be reproductive in a sense in which other land purchases could not be said to be reproductive -

The capital cost of the premises is, in round numbers, £166,400; .£153,000 provided by this Bill. When the whole capital cost has been paid, the charge for interest thereon may be taken at 3 per cent., making the annual charge for interest £4,980.

The present rents derived from leased properties amount to £9,500 per annum, and thus, on that basis (when the .land is paid for), the Commonwealth will be receiving £4,520 Per annum more from rents than the amount chargeable as interest on capital.

Assuming that the General Post Office will be built on the proposed site at once, it lilli not be necessary to disturb any leases for construction, but an expenditure of about £1,000 would be required to replace portions of premises.

The opening of the new road a year hence will, however, disturb several premises, the rent now received from which aggregates £3,215 per annum.

Senator Millen - Is any allowance made for compensation to tenants?

Senator PEARCE - No, because none of the tenants will be turned out. The tenants are now in possession of the front- ages to Murray-street and Wellingtonstreet, and it is not proposed to disturb them. The post-office is to be placed somewhere between Murray-street and Wellingtonstreet, and a new street is to be opened up between the two streets. In the construction of this new street some of the tenants will be disturbed -

If only such disturbance is effected as is necessary to make the new road (but without disturbing property on the south-east of that road) the situation when the General Post Office is completed will be -


But the Commonwealth would then be relieved of an annual payment of£2,625 for the present General Post Office, valued at£75,000. The Commonwealth would also receive rents on undisturbed properties yielding, at present rates (which, however, will increase with improvement to locality), , £6,285 per aniium. Thus the situation would be -


1 he proposal is, however, that the Commonwealth, after opening the new road, will, in 1915, terminate all leases to the south-east of that road. The further reduction of rents (therefrom) will be ; £1,080 per annum.

The Commonwealth would, however, then have at its disposal frontages of 74 feet to Murraystreet, 300 feet to the new road, and 74 feet to Wellington-street. The rentals for those frontages are estimated at£3,500 per annum ; thus the Commonwealth would lose the existing rentals of £1,080 per annum, and re-let for £3,500 per annum, or an increased revenue of £2,420 per annum. The situation would be : -


It will thus be seen that, as far as the honorable senator's references to this work are concerned, it is an easy matter to demonstrate that it will be absolutely reproductive work.

Senator Shannon - -You cannot get money at 3 per cent, to-day.

Senator PEARCE - That remains to be seen.

Senator Millen - One per cent, is not enough to allow for depreciation on buildings..

Senator PEARCE - Even if½ per cent, is added to the interest charge, the work will still be reproductive. The honorable senator, on finding that the Labour platform did not help him, because it did not bind us to oppose borrowing, had recourse to cutting out portions of speeches made by members of the Labour party, stripping them of their context, and, irrespective of the subjects to which they referred, applying them to this subject as if they were made on proposals such as those set out in this Bill. He quoted the Prime Minister as having said -

They are not justified in altering the policy of the country because they find themselves in financial difficulties. If that were permissible, then, I presume, responsible government, as we understand it, would be at an end. The fact that the electors confirmed the action of the Parliament in 1902 in refusing to adopt a borrowing policy was a direction to all Com- monwealth Ministries that the settled policy of the Commonwealth should be to abstain from borrowing until a contrary direction had been given by the people.

Now let us look at the position to which these remarks apply. They referred to the Loan Bill introduced by Sir George Turner in . 1902. The proposal to borrow was made at a time when the Commonwealth Government had a surplus revenue. The surplus in the financial year 1901-2 was£888,741. This was the amount available to be paid over to the States in excess of the three-fourths of the Customs and Excise revenue to which they were entitled.

Senator Shannon - The Minister is making no allowance for the interest on the transferred properties to which the States were entitled.

Senator PEARCE - That would not have represented more than one-fourth of the total amount.

Senator Shannon - But that amount should be deducted 'before any excess is taken into account.

Senator PEARCE - Sir GeorgeTurner's proposal was brought in at a time when we were returning to the States, . on the average. £1,000,000 per annum in excess of the

Customs and Excise revenue to -which they were entitled. Here is Sir George Turner's proposal -

2.   The Governor-General may borrow on the public credit of the Commonwealth money to an amount not exceeding One million pounds for such public works buildings and undertakings and matters connected therewith as the Parliament authorizes by any Act and for repaying into the Commonwealth Consolidated Revenue Fund any sums before or after the commencement of such Act expended on any such public works buildings or undertakings or matters connected therewith.

Practically, a blank cheque was to be given, and the Government were to be authorized to spend money on any kind of work - defence works, postal works, or land resumption.

Senator Millen - A schedule was given indicating that a great deal of postal work had to be carried out.

Senator PEARCE --If the honorable senator will look at the Bill he will find that it has no schedule.

Senator Millen - Particulars were given by Sir George Turner when introducing the Bill.

Senator PEARCE - Later on, when the Budget was submitted, members of the House of Representatives found that certain works had been excluded from the ordinary Works Estimates, because it was intended to provide for them by means of this Loan Bill, and .when that position was put to Sir George Turner, he defended his action by pointing out that several of the States had deficiencies, and he actually proposed that the Commonwealth Government should borrow money so that they might return a larger amount to the States, and save them from having deficiencies. That was the proposition to which the Prime Minister took exception, and any honorable senator on this side of the House would attack a proposal of that kind. Senator Millen said -

It seems that it was entirely wrong foi Sir George Turner to borrow for postal works, but that it is entirely right for Mr. Fisher to borrow for the same thing. Mr. Fisher went on to say - " I hold the strongest views on this question, and am in no doubt regarding my own position as to the wisdom of a non-borrowing policy-. We took a wise step in refusing to borrow in the early days of Federation, and I hope that we shall continue to do so."

These remarks were made in connexion with the second loan proposal of the Commonwealth Government - the Government of which the honorable senator was a member. A Naval Loan Bill was introduced in 1909, and the Prime Minister's remarks had reference to that measure. There is absolutely no comparison between proposals such as that referred to by Mr. Fisher and the present proposal, because they were in no way reproductive. Senator Millen quoted Mr. Thomas as saying, on the 30th November, 1909 -

There is something to be said for the policy of raising money by loans to provide for reproductive works, although, personally, I am opposed to such a policy.

Mr. Thomasalso said ; " So soon as a loan policy is initiated in connexion with the construction of reproductive works, there sets in a certain measure of extravagance."

Mr. Thomas'statement there is again made on the Naval Loan Bill, and in what position do we find the Government was in then? On the 30th June, 1908, there was a surplus of .?330,000, and in November, a few short months after that surplus was declared, they, brought in a loan proposal for ?3,500,000 for absolutely unproductive works.

Senator Millen - Did Mr. Thomas proclaim himself as opposed to borrowing, even for reproductive works?

Senator PEARCE - Yes, .he did. Speaking for myself, I would have been opposed at that time to a Loan Bill, even for reproductive works. I should have said to the Government, " The financial year has just closed with a surplus of ?330,000. Where is your justification for going on the money market to borrow when you have a buoyant revenue and a surplus to play with?" The position now is that there is no surplus for the present year, that these are necessary works as well as reproductive works, and therefore the Government are justified in doing what we would not have been justified in doing had we a surplus.

Senator Millen - Does the Minister say there was a surplus then?

Senator PEARCE - There was a surplus on the 30th June, a few months before that statement was made.

Senator Millen - The honorable senator said that when we left office there was a deficit.

Senator PEARCE - There was after you had been in office long enough. Then Senator Millen quoted the following statement by Mr. Watson -

As far as I am concerned, any proposal for loan expenditure, unless the occasion be urgent, and unless the purpose be very important indeed, will meet with strenuous opposition. Every effort that I can put forth to prevent Australia in engaging upon a borrowing policy will be put forth upon this and every other occasion when I have the opportunity in Parliament. There is always a much greater disposition to be careless about expenditure when we have not to bother ourselves about taxation in the meantime.

Let us look at the circumstances under which Mr. Watson made that statement. I have already stated that on the 30th June, 1908, there was a surplus of ?330,000. Mr. Watson made those remarks when speaking on the Budget in August, 1907, and was replying to an interjection made during his criticism of Sir John Forrest's proposal to extend the Braddon section. The interjection was made by. Mr. Poynton, " We are paying for public works out of revenue"; and following that interjection Mr. Watson made those remarks. We have to remember that the Commonwealth policy enunciated by Sir John Forrest was to extend the Braddon section, and to continue to pay the States after the ten-year period three- fourths of the Customs revenue. Mr. Watson, speaking with the knowledge that we had already disposed of one proposal to borrow for the benefit of the States, was pointing out that already under the Braddon section the Commonwealth had scarcely sufficient revenue in the coming year to meet its liabilities. He pointed out what would happen if Sir John Forrest's proposal was indorsed - that the Commonwealth would be forced to take up a general borrowing policy for all its public works. He was urging that there should be a revision of the Braddon section, and he made those remarks in order to show the people of Australia that if the Braddon section were extended, the Commonwealth would have no resort but to take up a general borrowing policy, and so he voiced his hostility to a borrowing policy.

Senator Millen - To any borrowing policy, especially for such works as the Northern Territory Railway.

Senator PEARCE - You cannot take remarks like that without due regard to the situation which was then being dealt with. Senator Millen further quoted Mr. Watson -

While the right honorable gentleman - [referring to Sir John Forrest] - was out of the chamber, I said that, although he seemed to appreciate the immense obligations which confront Australia from a national stand-point, he altogether failed to explain how he proposed the money should be raised to carry out those great projects consistently with his proposal to extend the Braddon clause.

I would point out that the entire position is varied by the fact that the Braddon section was not extended -

Sir JohnForrest. Which project?

Mr. WATSON.; The opening up of the Northern Territory, provision of an adequate local defence, and railways - to the west and the north.

Sir JohnForrest. Carry them out by means of loan money.

Mr. WATSON.;Certainly good old policy of borrow and burst. Let us get back to loans, the never failing resource of the spendthrift politician.

Senator Millen - T am so glad you quoted that.

Senator PEARCE - I never intended to leave it out, because it is so pertinent to the point at issue, and that is, that the whole of Mr. Watson's remarks were directed' towards the impossibility of continuing the Braddon section, and that the consequence of continuing it would be that the Commonwealth must take up a general borrowing policy. He instanced particular works, including defence, to show that if the Braddon section were continued those works would have to be provided for out of loan. Again, on the 30th December, 1902, Mr. Watson made these remarks -

I maintain that the pay for the various necessary works out of loans is against the best interests of the people. In my view, loans always lead to false notions as to the value of economy.

Those remarks were made on the Supply Bill. The surplus at the end of June, 1903, was ?1,145,234, and yet the proposal at that time was that we should borrow . *

Senator Millen - For necessary works.

Senator PEARCE - The only justification given for borrowing was to increase the amount which would be handed back to the States. There was ample money for all the works required by the Commonwealth, and the Commonwealth is suffering to-day, and has been suffering for years, from the policy which Sir George Turner and his Government carried out of handing back those huge surpluses to the States, instead of' spending them on the post-offices. Senator Millen referred to what the State Government in his own State had done. In that I do not propose to follow him at all. I have no doubt there is a complete reply to everything that he said in regard to the New South Wales Government, but I do not think it is the province of this Chamber to discuss that. Senator Millen said -

Western Australia has ever borrowed for roads and bridges, and in answer I say that I have shown that there was never a Loan Bill introduced in any part of Australia for such an unwarrantable purpose as the purpose for which this Bill has been introduced.

I have already shown that so far as the returns from the postal lands in Perth are concerned, we show not only a return of interest, but also a profit. We shall ultimately require much of that land, and we should be foolish to buy a small piece of land in a rising city like that, and afterwards be compelled to acquire other land at an enormous cost.

Senator Millen - Why do you not do that in every other city of the Commonwealth ?

Senator PEARCE - We would if we could. I do not know that there is not good justification for doing that in the capital of the honorable senator's own State. Now I come to another proposal in the Bill, and that is to borrow £375,000 to redeem loans on the Northern Territory and the Port Augusta railway. Those loans carry interest at the present time at the rate of £3 12s. 3d. per cent. Under this Bill the Commonwealth will pay 3J per cent, on the money raised.

Senator Millen - The Minister will recollect that I advanced no opposition to that portion of the Bill.

Senator PEARCE - The honorable senator advanced a sweeping charge against the whole Bill; he never qualified it. I Shall quote the senator's own words -

I have shown that there never was a Loan Bill introduced in any part of Australia for such an unwarranted purpose as the purpose for which this Bill has been introduced.

The saving on those two loans will be 2s. 3d. per cent.

Senator Stewart - When do those loans fall due?

Senator PEARCE - I cannot say offhand. If the honorable senator will refer to the Budget he will find when they fall due.

Senator Stewart - I have looked at the Budget, and I cannot find it there.

Senator PEARCE - The saving on those particular loans of .£375,000 is £420 per annum. It is only a small amount, but capitalized it reaches a pretty substantial amount, and at any rate it is a saving. I ask Senator Millen, how many of the States have effected a saving by the redemption of their loans"? The honorable senator will find that on very few redemptions has a saving Been effected. Senator Millen further stated -

The facts are that, so far as Labour Governments are concerned, there has been more money lent to them by the people of Australia than to all the other Governments put together.

I asked Mr. Knibbs, the Government Statist, to supply me with the figures, and he has furnished me with the following particulars. It is headed Particulars of loans by State Governments during last three years. Figures have been taken from the last three annual statements made by the respective State Treasurers referring to loans floated in the financial years 1909-10, 1910-11, and 1.911-12." The following are the particulars : - Labour Governments, 1909-10, not in power; 1910-11, New South Wales, £6,331,713; 1911-12, New South Wales, ,£4,864,634; Western Australia, £2,587,070; South Australia, no loan floated, but sales of stock and Treasury Bills were made at the Treasury from day to day. Other Governments : 1909-10, New South Wales, £10,723,523.

Senator Millen - Were those renewals?

Senator PEARCE - They are loans. I am dealing with the honorable senator's general statement as to borrowing.

Senator Millen - Is the honorable senator dealing with loans floated or loans redeemed ?

Senator PEARCE - I am dealing with loans floated during the year 1909-10, and I am replying to the honorable senator's statement that more money had been borrowed by Labour Governments than by all other Governments put together.

Senator Millen - I repeat the statement.

Senator PEARCE - The honorable senator is a very bold man in view of these figures.

Senator Millen - They do not include loans drawn from Savings Bank deposits.

Senator PEARCE - Why did not* the honorable senator say so on Friday? He never made any qualification of his general statement.

Senator Millen - I make the statement now.

Senator PEARCE - It is rather belated. I am dealing with the statement made on Friday, and which went into Hansard. In the same year, 1909-10, Victoria borrowed £594,658; Queensland, £10,301; South Australia, £2,101,612 ; Western Australia, £1,342,000; Tasmania, £689,449. Total for all States under Liberal Governments, ?15,461,543. In 1910-11, the figures are - New South Wales, ?400; Victoria, ?3.907.3i4-

Senator Millen - Does the honorable senator say that New South Wales only borrowed ?400 in that year?

Senator PEARCE - No; the Labour Government only borrowed that sum. Queensland borrowed ?305,800: Western Australia. ?650,000; Tasmania, ?756.584Total for all States. ?5,620,098. In 1911-12, the figures are: Victoria, ?3.497; 168 ; Queensland, ?977,809; South Australia, no loan floated, but sales of stock and Treasury bills were made at Treasury from day to day; Tasmania, ?850,992. Total, 'all States, ?5,325.969The total borrowed during the last three years by Labour Governments was ?13,783,417; by Liberal Governments, ?26.407,500, or twice as much.

Senator Millen - Those figures are absolutely incomplete.

Senator PEARCE - They are the figures given to me by Mr. Knibbs, the Commonwealth Statistician, as to the borrowing of the respective States during those years.

Senator Millen - If the honorable senator wants the truth, he can ascertain it from the Statistician.

Senator PEARCE - Does the honorable senator mean to say that I asked the Statistician to supply me with something that was not the truth ? I have given the loans floated, and it was to them that the honorable senator referred. If he was not including money borrowed from the Savings Banks, why did he not say so? The object of his remark was to give the people outside the impression that his figures. related to money borrowed by Labour Governments.

Senator Millen - I will repeat the statement outside and- justify it.

Senator PEARCE - Dealing with borrowing for the purpose of lands, Senator Millen attempted to make the people believe that because borrowing has been resorted to for the purpose of purchasing this particular piece of land in Perth, it was intended to borrow for all lands required for post-office sites. But I only need to point out that this site has been dealt with in a particular way because there are particular features about it. It is not proposed, nor has it ever been suggested, by the Government that we should borrow for post-office sites throughout the Commonwealth.

Senator Millen - Why this one, then?

Senator PEARCE - The honorable senator quoted Mr. Knibbs - to whom, it appears, he has resort for information when it suits him - to the following effect: -

The Trust Funds have at various times enabled several State Treasurers to tide over awkward financial positions, but the propriety of allowing deficits to be frequently liquidated in this manner is worthy of very serious consideration.

Upon that Senator Millen commented -

I need only to alter one word of that quotation. The Trust Fund is to-day being used by the Commonwealth Treasurer to tide over an awkward financial position.

The Vice-President of the Executive Council interjected -

Would the honorable senator put the money in a box and keep it there uninvested?

Senator Millensaid ;

No. I should not do anything of the kind. I may ask Senator McGregor whether the Government are using these funds for the purpose of earning interest. If so, they could get interest from the State Governments or from the banks. They are not bound to buy a block of land in Perth in order to find an investment for these funds.

What was the honorable senator's purpose in making that observation? Was it not to make the people believe that there was some danger in the proposal made by this Bill - that, in some way, we were going to make an illicit use of the Trust Fund? Otherwise, what was the object of the quotation from Mr. Knibbs? The passage quoted referred to the State Treasurers, who had at times seized Trust Funds ear-marked for specific purposes.

Senator Millen - As yours are.

Senator PEARCE - What is the bank notes trust account ear-marked for? It is ear-marked, of course, for a specific purpose. But let us see what that purpose is. Section 8 of the Australian Notes Act reads as follows : -

(1)   The moneys derived from the issue of Australian notes and any interest thereon shall be placed to the credit of an account called the Australian Notes Account, which shall be a trust account within the meaning of the Audit Acts 1901-1906.

(2)   Part of the moneys standing to the credit of the Australian Notes Account shall be held by the Treasurer in gold coin for the purposes of the reserve provided for in section g of this Act, and the Treasurer may invest the remainder or any part thereof.

(u)   Or deposit in any bank, or, (*) in securities of the United Kingdom or of the Commonwealth or of a State.

What this Bill proposes is that money shall be invested for the specific purpose set out in the schedule. Where is there anything illicit in that? The law provides for it, and was designed for that very purpose. It was always understood that the money would be used for such purposes.

Senator Millen - Does the Minister say that this amount will come out of the notes issue reserve?

Senator PEARCE - It will come out of any Trust Fund which it is desired to make earn interest. But Senator Millen endeavoured to make out that some illicit use was to be made of the Trust Fund. He quoted the Fleet Trust Account, and pointed out what would happen when we wanted money for naval purposes. He said that the money would have been invested, and would not be available for those purposes. Nothing of the sort can happen, or will happen. Nothing of the sort is intended to happen, because we have ample money in the Australian Notes Account for meeting the demands upon us when due, and no further proposal for borrowing for that purpose will be necessary.

Senator McColl - By depleting the reserve.

Senator PEARCE - No; not only is there a balance to the credit of the Australian Notes Account, but the moneys lent to the States are lent on short-dated loans, which will come back to the Commonwealth Treasury long before the purposes for which the other Trust Accounts are allocated will require the money in them to be used. Senator Millen also said -

As the Government are lending their trust money at 3^ per cent., and the New South Wales Government cannot borrow under 4 per cent., I am entitled to say that it is foolish, in dealing with this transaction, to estimate that the interest will be ' less than the lower of those sums.

The honorable senator was not accurate even there. As a matter of fact, the rate of interest obtained by the Commonwealth on loans to the States is not $\ per cent., but £3 8s. per cent.

Senator Millen - The Government lent that money some time ago, when money was cheaper than it is to-day.

Senator PEARCE - When the honorable senator was dealing' with facts, he might as well have given facts; and he did not say that he was dealing with the money which the Government are now lending. He said that we had lent money at 3J per cent. It is not so.

Senator Millen - The £3 8s. per cent, is the average. The last loan was at 3^ per cent.

Senator PEARCE - The honorable senator went on to say -

A further sum of £750,000 is needed in connexion with loans floated by South Australia, which will mature during the next three years. These commitments, .which total nearly £10,000,000, we shall have to face during the next few years, and the most with which we shall have to meet them is the £7,000,000 provided by the notes issue.

There the honorable senator was trying to make out a case to the effect that we shall be committed by this Loan Bill to a general loan policy. On that point, I only wish to say that if the worst comes to the worst - if we have to redeem these loans, as the honorable senator indicated, by further borrowing - provided that we can always do what we have done in this case, we shall have made a good bargain for the Commonwealth. If we can always effect a saving of J per cent, interest we shall have done good business, and, so far from being blamed for that, we ought to be commended. I have nothing more to say on this Loan Bill, except to add that the two vital points relate to the post-office in Perth and the redemption of loans in the Northern Territory. As to both of them, I have shown that the Commonwealth makes a profit by the transaction, and benefits considerably ; and that so far as the honorable senator's sweeping statement goes with respect to the borrowing of Labour Governments compared with Liberal Governments, it is clear that Liberal Governments have borrowed twice as much as Labour Governments in the same time.

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