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Friday, 14 November 1930


Senator PAYNE - Whether that be so or not, the extract furnishes a complete refutation of the allegation that the banks are persecuting the people and are responsible for the existing acute financial position.

I.   shall touch on the reference in the financial statement to the expenditure of the Commonwealth Government in certain directions, and particularly to the claims that a large sum of money has been saved in the matter of departmental expenditure. T know that a goodly sum has been saved. But how has that been effected? There have been wholesale dismissals of a certain class of federal employee, those engaged in a temporary capacity, and particularly in the PostmasterGeneral's Department. A. large proportion of those unfortunates are returned soldiers, many of whom were maimed at the war and are partly incapacitated, but who arc 100 per cent. efficient in their work.


Senator Ogden - The difficulty is that it is impracticable to discharge permanent officials.


Senator PAYNE - Our first duty is to those men who fought for the country. I claim that this Commonwealth Government has been recreant to its trust. Promises were made that everything would be done by the government of the' day to ensure that our returned men would not suffer through having volunteered for active service.


Senator Ogden - Were all of the men who were dismissed returned soldiers?


Senator PAYNE - A question was asked the Postmaster-General in another place on the 5 th November, as follows : -

1.   How many employees have been discharged from his department since the 30th -Tune last?

2.   How many of such employees were returned soldiers?

3.   How many of such employees have been in the department for two years and over?

The answers read -

1.   2,1.02.

2.   1,420.

3.   1,144.

A few years ago, on the representations of certain honorable senators, and members of another place, the Public Service Act was amended to give returned soldiers on the temporary staff of Government departments an opportunity to gain admission to the Service after serving continuously for two years, without qualifying by the usual examination.


Senator Ogden - We already have too many public servants.


Senator PAYNE - That is beside the point. I personally know of more than one man who complied with those conditions to the best of his ability, but whose desire to enter the Service was thwarted. Immediately they approached the twoyear term, they were given a holiday for a few weeks, and their continuity of service broken.


Senator Daly - -That was under previous governments, not this one.


Senator PAYNE - I shall quote a case to show that this Government is an offender. I have a letter from a man who has served for eight or nine years in the Postal Department, Melbourne. He is a returned soldier who was badly maimed at the Avar and, . by almost superhuman effort, has mastered his physical injuries and made himself 100 per cent. . proficient at his work. Three times, through no fault of his own, his service was interrupted just as the two-year term was reached. Is that a fair way to treat such men? Now hehas been dismissed. I know that his superiors class him as 100 per cent. efficient. Yet he is to be thrown aside like a dirty rag, to be replaced by a junior mechanic, a single man. [Extension of time granted.]

I thank honorable senators for their courtesy. This man is one of the pluckiest that I know. He has a delicate wife and several children. He is thrown into the ranks of the unemployed, not' because of any deficiency on his part, hut. because has never been permitted to enter the permanent Public Service. He is only one ease out of scores which I could mention.


Senator Daly - Why did not the honorable senator bring up these complaints two or three years ago?


Senator PAYNE - Another which I wish to bring under the notice of honorable senators is that of a returned soldier with both legs amputated as the result of injuries received during the war. This man was working alongside the one to whom I have just referred'. He also has been dismissed recently and this is what he has to say: -

It is difficult to reconcile the admiration of our " gallant soldiers " as expressed by our Acting Prime Minister in his Armistice Day message with the callous action of his colleagues in dismissing the unfortunate married temporary employees in the Public Service.


Senator Daly - Does not the honorable senator realize that these dismissals are not due to any particular action by the Government but take place under statute? Does he suggest that we should dismiss members of the Public Service Board?


Senator PAYNE - There is special provision in the Public Service Act for the employment of this class of person and the Minister cannot deny that since the Government of which he is a member has been in office it has taken no action to give effect to the particular section dealing with that matter.


Senator Daly - We obtained the highest legal opinion available to see if we had any power, andwere advised that the authority of the Government was limited. Limbless soldiers have been dis missed for the simple reason that their continued employment was not possible.


Senator PAYNE - I cannot accept the Minister's assurance. It is common knowledge that this Government is at all times prepared to bow down to the great majority of the public servants. Recently executive officers of various public service associations declined to accept proposed reductions in salaries and this Government lacked the necessary courage to take a stand against them. If it had made reasonable reductions in public service salaries, the dismissal of these unfortunate temporary employees numbering 1,400 - men who were prepared to give their lives for the country - would not have been necessary. The Minister knows also that many of those who now refuse to accept reductions in salary were eligible during the war but did not respond to the nation's call.

I believe that a complete change in the outlook of the individual units in Australia is necessary before we can overcome our present difficulties. Action by Parliament will not, of itself, provide the remedy.


Senator Dunn - Suppose we submerge the country for 24 hours.


Senator PAYNE - I should not have any serious objection to that course if it wore possible, provided I could be assured that those who were worthy of Australia would come to the surface. 1 feel convinced that we shall not, as a nation, reach our true objective until there is a wider conception of the true meaning of the term " patriotism." Two years ago I had an opportunity to visit other parts of the world. I came back just as loyal to Australia as I was before I left these shores. But I should be a much happier man if I thought that individual Australians had a higher realization of the duty which they owe to their country; if there was more evidence of a determination to face the facts of life and work harder instead of a disposition to gratify the pleasures of the moment without regard to the future. I am convinced that, if Australians had a better outlook on life, it would not be long before this country emerged from its difficulties. During my tour abroad, I visited one of the provinces of Northern France, and one day was interested to see an elderly man working very hard in the fields. From curiosity I spoke to him asking why he was working so hard and I was very much impressed by his answer. - "Why," he said, "I am working for France!". The attitude of that man, I may add, is typical of the people generally in France. They realize that the more they do as individuals, the more they are doing for their country. Unfortunately for Australia, the contrary doctrine has been preached during recent years. The working classes have been told that the less they do as individuals, the better it will be for the Commonwealth. That is a most pernicious doctrine, which I hope to see reversed and eventually eliminated from our public and private life. I am hopeful that out of the adversity through which we are passing there will rise a new Australia, peopled by individuals with a proper appreciation of the results that must flow from hard work, personal sacrifice, and a conscientious performance of the daily task. Only in this way can we hope to make this nation worthy of its splendid inheritance.

I shall conclude my remarks by quoting from an address delivered by a young woman at a public gathering which it was my privilege to attend in Geelong, Victoria, a few months ago. I was so much impressed by the speech that I wrote to the young woman and asked her for a copy. The subject of her address was "Australia at War." This is what she said -

Australia is at war - at war with herself. She is in the throes of a great crisis, brought about, let it be clearly understood, by herself.

It is folly to blame conditions in the outside world. These may accentuate a crisis, but they cannot produce one in Australia, unless within Australia there are weaknesses to form congenial soil for their growth and spread- ing.

And because these weaknesses exist the crisis is upon us to-day. We stand face to face with two great alternatives - degeneration or re- generation. Choice is trembling in the b alance, and whether Australia goes forward on the pathway of regeneration, or blindly steps over the precipice, depends upon whether the average individual pulls himself together in a spirit of selfishness, or allows himself to drift in a spirit of easy-going, careless selfindulgence. Every force that can be brought to bear to lift Australia from the mire into which she is drifting should be exerted and stirred into greater activity.

The crisis of which I am speaking is given many names. It is called an industrial crisis, a financial crisis, a moral crisis, the general aftermath of war. But be its names what they may, is there not some root cause from which arises the crisis wheresoever it may develop ?

The answer to this question is, I believe, clear anddefinite. The underlying cause of this critical point in Australia's history is fundamentally due to the lack of virile, selfdetermined, idealisticyet practical individuality.

Were every Australian thus equipped, this crisis would cease to be. It exists because there is in this country no clearly defined purpose, no self-determination, no vision ardently pursued, because Australia lives from hand to mouth - buys what she cannot afford to buy - spends what she cannot afford to spend - indulges herself in that which she cannot afford to indulge- treads any by-path which happens for the moment to take her fancy, and improvidently seeks to doctor her ills at their surfaces instead of attacking them at their roots.

The crisis, however widespread and complicated it may be, will soon disappear if every citizen will remember amidst the pressing preoccupations of his daily life that the honour and the welfare of his country are in a definite measure in his individual keeping, and that he can do nothing in his own individual life, however exclusive to himself the action may seem, which docs not react upon that honour and upon that well-being. As is his honour, so is the honour of the country of his birth. As is his rectitude, so is the rectitude of this land. As is his prosperity, so is the nation's prosperity. His strength sustains Australia. His wisdom illumines her. His life energizes her, and his weaknesses devitalize her. If the individual be selfish and self-centred, Australia draws nearer - to dissension and quarrelling. If he be brotherly, she draws near to entry into a mighty national brotherhood. If he lives for her, Australia will begin to live for the world, setting a great example of reconciliation between the interests ofa nation and those of the world at large.

Is not, then, the crisis an individual matter even more than a collective one? Or, to put the question otherwise, is not the crisis to be overcome more by a change of attitude on the part of the individual even than by legislative and administrative processes? Granting the value of the latter, the former is a direct approach to the very roots themselves of the ills from which our laud of the Southern Cross suffers.

The tiling, then, that is most to be desired and fostered in this fair land of ours is a feeling of brotherhood, goodwill, courtesy, and supreme respect for law; then we shall go forward with eager hearts to make Australia that which she has been declared to be -a promised land.

Senator Sir HALCOLEBATCH (Western Australia)[11.43]. - It seems to me that any one reading the financial statement presented by the Acting Treasurer (Mr. Lyons) in another place a few days ago,- must be impressed by the extraordinary discrepancy between its first and second portions. The first half is evidently the voice, indicating the intricacies of the maze in which Australia has lost itself. The second half is the band that would lead us out of it. The voice is the voice of Lyons, and the hand is the hand of caucus. Because caucus has not listened to the voice of Lyons, the hand is leading us further into the maze - into the poisonous, stagnant pool that lies in its centre, instead of into the bright sunshine that awaits us outside.

I direct the attention of Government supporters to one or two remarks in the opening portion of this statement. If they will turn to page 6, they will find the Acting Treasurer explaining that our position as a nation would be benefited if we could satisfactorily fund our outstanding obligations abroad. Then follows a statement showing the extent to which Australia's stocks in the London market have depreciated in comparison with .New Zealand and South African securities. That i.3 a fairly clear indication of om- position. If honorable senators will refer to the next page, they will find a very frank, clear and truthful statement of the effect upon the community. Up to the present the chief sufferers are primary producers, the unemployed and those in receipt of incomes from business profits which have seriously declined or have entirely vanished. So says Mr. Lyons.

During the recent New South Wales election, I was induced - I admit to a large extent against my better judgment - to deliver one or two addresses in and around Sydney. The statement to which I have just referred was made by me time after time, but always received with jeers and hoots of derision from the supporters of labour candidates. They declared that the producers and business people mentoned by Mr. Lyons were not suffering at all, and contended that the so-called depression was something manufactured in order to reduce the standard of living of the workers.

On the same page we find the following paragraph : -

The people of Australia have accustomed themselves to a condition of prosperity due in part to high prices for our staple exports and to the heavy borrowings abroad.

That is a statement which I have 'made over and over again, but which honorable senators opposite will not accept as accurate. Finally I quote the following - this is where the voice ends: -

The community generally is at present in a state of inertia and is awaiting a lead from some responsible authority to restore con 1 deuce. That lead should undoubtedly come from the highest representative body in the community, which is the Commonwealth Government. Thu Government recognizes thisresponsibility. The first need in present circumstances is that the Government should take steps for the balancing of the budget.

I now come to the proposals of the Government which have been submitted as the best means to overcome our troubles. I do not intend to deal with them in detail; but 1 mention in passing the proposed increases in taxation. Apart altogether from the objections raised by Senator Sir George Pearce and Senator Payne, I contend that they constitute a flagrant repudiation of the arrangements made at the June meeting of the Loan Council and confirmed at a meeting of that Council in August. At the June meeting of the Loan Council the then Treasurer (Mr. Theodore) gave, a definite assurance that such additional taxation as might be necessary, in addition to the economies which would be introduced, would be effected without invading those avenues of taxation which must necessarily be left to the States to enable them to balance their budgets. The same attitude was taken up at the conference in August, and the Acting Prime Minister in the final statement issued, repeated in the same words the undertaking that such additional taxation as was necessary would be imposed without invading the revenue producing possibilities of the States. Not only has that very solemn undertaking been repudiated and departed from; but repudiated to such an extent that I think it will be quite impossible for the States to impose any additional taxation if these contemplated taxes are imposed. Therefore, it becomes quite impossible for the States to do what the Commonwealth says is the first essential in the matter of balancing budgets.

We have a repudiation of the undertaking which the Government recognized and which it declared was necessary if the budgets were to be balanced.

Reference has been made to the contemplated reductions in salaries. As far as the tax on the allowance to Ministers and members is concerned, I say at once, that it is wrong in principle and entirely inadequate. Instead of a tax which appears to be something of a temporary nature to meet the depression which some optimists think will disappear in the course of a year, there should be a frank recognition of the position in which Australia is placed, and of the long, hard road we shall have to traverse if we are to emerge with credit and honour and reach a state of prosperity. In my opinion there should be a permanent reduction in the allowances of Ministers and members, and, instead of it being 10 per cent., it should be at least 20 per vent.

Under the Government's proposals public servants receiving £725 a year or less are to he exempt from the salaries tax. I should like to tell honorable senators of a little incident that occurred a short time ago in Sydney when I was returning from the city on the last tram. I was the only passenger and the conductor entered into conversation with me. For some reason or other he thought I was a member of the New South Wales Parliament, and he asked me what the Government intended to do to relieve unemployment. I asked him what he thought of the position. He informed me that he had been rationed and his wages reduced by 13s. a week. He did not mind that because he recognized the difficulties confronting the authorities. He was better off, he said, than a good many other fellows, andhe would not mind the reduction in wages if it would help to overcome the unemployment trouble. He further informed me that he had a brother-in-law who had been out of employment for a great many months, and whom he had to assist. He was willing to do what he could to maintain his family, but found himself confronted with an additional difficulty when he learned that tea was to be taxed and that an additional impost was to be placed upon imported tobacco. He said that he did not know how the people would be able to carry these extra burdens. He further informed me that he was amazed to read in the newspapers that certain Commonwealth public servants, who have security of employment, long-service and generous annual leave, and a pension when they retire, were not to be asked to contribute anything, even though in receipt of as much as £14 a week. He did not, and I do not, think it fair that a vast majority of the public servants should be exempt from taxation in this way. I commend that opinion to honorable senators opposite. Most members of the Public Service, I am sure, think that their first duty and responsibility is service to the community, but a contrary view has been accepted by Ministers.

A further statement in this document reads -

.   . It would be quite impossible in a period of eight months to so reconstruct the budget that a balanced ledger could be secured for the present financial year.

At the beginning of August it was known by every member of the Commonwealth Government that it would be impossible in a period of ten months to make the necessary adjustments. In spite of the knowledge that the necessary adjustment could not be made within ten months, nearly three months delay occurred, when the task became even more difficult.

The only other direct reference which I intend to make to the Acting Treasurer's financial statement is in connexion with the proposed financial assistance to South Australia. That proposal will have my heartiest support, because I fully realize that notwithstanding the troubles which the other States are experiencing no other State is so deeply involved in difficulties that are not of its own making - I am not suggesting that South Australia is not in some sense responsible - as South Australia As this position has been brought about to some extent by the long continued drought, it is the responsibility of this Parliament to render whatever assistance it can to that State.

I do not think it is profitable at any time to try to place the blame on any particular shoulders, but I feel that we shall not get out of our present difficulties and set ourselves on the right track again until we fully appreciate what has brought about our present trouble. I do not intend to blame any particular government or political party, because all parties in power, both Federal and State - I willingly include myself as an exmember of a State Cabinet - are responsible. The twin policy that we have been adopting has brought, and, eventually, always will bring to a state of bankruptcy the country adopting it. That twin policy to which I refer consists of extensive borrowing abroad, combined with a high protective tariff. I intend to make the truth of that statement absolutely clear. I assert that, apart from world causes, no other single factor has contributed so much to the present unfortunate position of Australia, and done so much to damage our credit, as heavy borrowing abroad combined with high customs duties. It should be clear to every one that year by year we have been spending as revenue an enormous per centage of borrowed money. That policy was the direct cause of the collapse in Victoria in the early nineties. Victoria, was then operating under a high protective policy, and was also borrowing extensively overseas.


Senator Rae - What of the land boom?

Senator Sir HALCOLEBATCH.That was one of the consequences of adopting such a policy. In 1893 tlie Victorian correspondent of the London Times, who, by the way, Was a woman - Flora Shaw - pointed out that at that time Victoria was spending as revenue millions of pounds of borrowed money. Whenever a country spends as revenue large sums of money actually borrowed, there will be land and other booms, because when money is made plentiful booms always follow.

Three years ago, I was appointed a member of a commission to inquire into the working of the Commonwealth Constitution. One of my first efforts was to endeavour to ascertain the extent to which the practice, to which I have just referred., had been adopted. I was not concerned at the moment with its financial or economic aspects, but with the results as between the States from a pursuance of such a policy. I commenced the inquiry on the assumption that the older States of the Commonwealth had undertaken a good deal of their early develop mental work before high federal customs duties were imposed, and, therefore, when costs were lower. On the other hand, the newer States, particularly the State, which 1 have the honour to assist; in representing, had been compelled; to carry out their developmental' policy at higher costs, due to a. large extent to the protectionist policy of Australia, be that policy right or wrong. The first step I took was to endeavour to obtain front the Customs' Department a return showing the amount paid directly by governments as customs taxation on their own importations. 1 recognized, of course, that it would represent only a fraction of the amount of loan money taken annually into revenue account by the Commonwealth Government. But, curiously enough, although the royal commission pursued its inquiries in this direction with diligence for the best part of a year, it was unable even to find out how much the Commonwealth Government had collected through customs taxation from the State Governments, without any regard whatever to the amount collected from private individuals supplying material to those Governments for the carrying out of loan works. The fact that this information could not be obtained was to my mind an indication of the complete blindness of the authorities to this pernicious policy of spending as ordinary revenue a large percentage of loan money, the effect of which is not merely to increase the cost of work undertaken by the State Governments - and that increase does not by any means rest at the amount which the State Government has to pay in customs taxation - but also to increase the wages bill and everything else. The British Economic Delegation, which visited Australia towards the end of 1928, and submitted its report in February, 1929. made this observation : -

Loan moneys raised overseas can come only to Australia in the form of goods. These goods are subject to the customs duties provided for under the Common wen I til tariff on importation into Australia, and. are in this way taxed to an extent estimated at from 15 to 20 per cent, of their value. The result is that this proportion of moneys borrowed abroad for capital purposes comes to the Commonwealth as revenue and is spent accordingly. This diversion of capital funds to revenue is obviously bad fi nance.

Our annual borrowings of recent years have been, roughly, £40,000,000 per annum. Twenty per cent. of £40,000,000 is £8,000,000, 15 per cent. is £6,000,000. Taking the mean between the two, we find that each year for the last ten years no less than £7,000,000 of borrowed money has been taken into the ordinary revenue of the Commonwealth. For the whole period £70,000,000 of this borrowed money has been taken into Commonwealth revenue. No country can pursue such a policy without finding itself bankrupt.


Senator Barnes - But that happened under the Nationalist administration.


Senator Sir HAL COLEBATCH - My friend is so imbued with party spirit that he does not seem to be capable of considering a matter on its own merits. I prefaced my remarks by saying that I attacked no party. I even went so far as to say that, because I had been a member of a State ministry for seven years. I must be held accountable so far as that Ministry could be held accountable for what had happened. The present is no time for saying. "It was his fault, and not. ours." It is the time for looking at matters fairly and squarely to see where we have gone wrong so that we may not go wrong again.

It is an indisputable fact, to which the British Economic Delegation drew attention, and of which the creditors of Australia and investors abroad are fully conscious, that for ten years past we have each year taken into ordinary federal revenue no less than £7,000,000 of loan money and spent it as though it were revenue, with the result that we find the interest and sinking fund burden upon the loans we have raised almost beyond our capacity to bear. If we divert into ordinary revenue, and spend as such, 20 per cent. of the many millions we borrow, leaving only 80 per cent. for the works themselves - many of them sound, others perhaps subsequently found to be unsound, but which we expect to provide interest and sinking fund upon the amounts borrowed for their construction - is it not inevitable that after the lapse of years the burden of providing that, interest and sinking fund becomes extremely heavy? It was recognized that the crisis of the'nineties, which brought Victoria almost to ruin, arose from this cause. Yet the Commonwealth, refusing to learn from the past, has started off on the same policy. The other States were not in the same position as Victoria in the'nineties; they did not crash because they had not in operation the twin policies of borrowing abroad and spending loan moneys a?" customs revenue. I hope that the lesson we have had on this occasion will not he forgotten and that never again shall we carry on a policy which will permit of large sums of borrowed money being spent year by year as ordinary revenue. I have quoted the figures for the past ten years, but the practice has continued since the commencement of the federation under allGovernments.

In 1926 a pamphlet was issued in London and addressed to the Imperial Conference. Its authors attacked Australia's credit on three grounds. The first was that our borrowings were excessive in comparison with the increase in our population. To my mind that was directly attributable to the false policy we were pursuing; we were not as a matter of fact spending the whole of our borrowing on developmental work, 20 per cent. having gone into ordinary revenue. The amount borrowed was not having the effect it should have had in opening up opportunities for increased employment. The second ground of this attack upon Australia's credit was that too much of our borrowed money was being spent on State enterprises. The extent of that I think has lessened very considerably in more recent years. The third ground of this attack was that, as a whole, Australia, with the exception of Western Australia, had no adequate sinking fund, the investment of which was assured on the market in which the money had been borrowed. We have not yet rectified that position by establishing over the whole of Australia an adequate sinking fund, the investment of which is assured on the market in which the loan is raised. If we borrow money in America, the demand is made that our sinking fund in respect of the amount borrowed shall be invested in the loan itself. London has never asked for that to be done, but it has asked that an adequate sinking fund should be assured for investment on the market in which the money is borrowed. Although Australia, three years ago, stubbornly -refused to agree to that condition, because at the time it was thought that our greatest difficulty would be in meeting our heavy local obligations, I am convinced that one of the first steps towards the restoration of Australia's credit is that inthis respect we should do what London reasonably demands, and have a sinking fund in London that will always be available for investment on the market in which the loan is raised.


Senator GREENE (NEW SOUTH WALES) - It is a great pity that London did not insist on that condition from the first.


Senator Sir HAL COLEBATCH - I am entirely in accord with what the honorable senator has said. From that time London has practically insisted on this condition and it is because it is not being observed that our credit in London has come down. Two or three years ago I urged, in n pamphlet, that a great mistake was made in setting up a single borrowing authority instead of seven small borrower who were very much more acceptable to the London investor. There is, however, no need for me to repeat that argument now.

This policy of taking annually into revenue account £7,000,000 of borrowed money - it has seldom amounted to less - has also had the effect of putting up wages - not the real wages, but money wages - in order that the worker might live under the heavy cost of living thereby brought about. It has, therefore, had the effect of so increasing the cost of production that the primary producers at the present time are paralysed. I did not speak last night on the motion moved by Senator Lynch, because I was in hearty accord with it, and it seemed to be desirable to get a division on it, but if I had spoken I should have liked toimpress one thing upon honorable senators. For a great many years we have bacl good prices and, with the exception of South Australia, and portion of Queensland, good seasons for our agricultural industry; but it is a shameful commentary on the public policy of Australia that in the first season of adversity our primary producers are brought almost to the ground. Public policy has so in creased costs of production that even in years of good seasons and high prices our primary producers have not been able to accumulate any reserves, and have been compelled to live from hand to mouth. There should be in this a lesson for the future, that unless the primary producer can make good and substantial profits in seasons of good prices and favorable climatic conditions, he is bound to go to the ground whenever we have a. bad season' or low prices. It is utterly wrong that in the first season of trouble he should be in the position in which he finds himself to-day. But it is due to the false standard which has been set up, mainly by taking annually into revenue account £7,000,000 of borrowed money. If that had not been done during the last ten years the primary producers of Australia would have been able to get out of debt and accumulate such reserves that they could have regarded almost complacently one, or even two seasons of such bad prices that they could hardly get their own back again. No country can be said to be on anything like a stable basis if the first blast of adversity is likely to bring it to the ground. If we get through these present troubles we must bear in mind that our primary industries must not be forced to live from hand to mouth - they must be able to make progress and accumulate reserves - and until we reach that position neither our primary industries nor the country itself can be considered solvent.

I entirely agree with the inspiring address read to us by Senator Payne coming from a Geelong lady. It is altogether stupid for us to talk about our troubles being due to world causes. It is, no doubt, true that there is a worldwide depression, but that was inevitable. We could not have a war, almost worldwide, without some one having to pay for it. Our troubles are not entirely due to that cause, and we can best ascertain how we have contributed to them by comparison of our credit abroad with that of other countries. On the London market Commonwealth 6 per cent. stocks have fallen by £11 within the last couple of years, and of that fall they have dropped £5 15s. within the last month. At the. outset of my remarks I drew attention to the Acting Treasurer's reference to the great benefit that would result to Australia from the satisfactory funding of the £37,000,000 of floating debt in London. Is it not obvious that the possibility of making that satisfactory arrangement; has been desperately prejudiced by the fact that happenings in Australia have caused our stocks in London to fall by £5 15s. within the last month? I am taking no notice whatever of the sudden drop that occurred at the end of last week. Happily the position has recovered and is now what it was before that tragic drop took place. In the meantime, New Zealand's 6 per cent. stocks are quoted at £105 17s. 6d. on the London market, as against £91 15s. for comparable Australian stock. That is to say, an investor in London will pay £14 2s. 6d. more to obtain New Zealand stock than for Australian stock returning the same interest. If we go into the more minute details Ave shall find that there is a difference of 10s. ; but that does not affect the general position. In New York, on the 19th December, 1929 - about eleven months ago - Commonwealth 5 per cent. stock stood at £94. In the early part of last week - I am not referring to anything that happened towards the end of the week - those stocks stood at £72. A week earlier Canada had floated a loanof 100,000,000 dollars- about £25,000,000- at 4 per cent. with a small discount, making the cost to the country and the return to the investor £4 5s. per £.100. That means that American investors will pay £100 for a Canadian bond yielding him £4 5s. per annum interest, repayable in 30 years, while he will give only £72 for a Commonwealth bond paying 5 per centinterest and redeemable at the full amount of £100 in 25 years.


Senator GREENE (NEW SOUTH WALES) - Last week Australian4½ per cent. stocks sold in New York at £66.

Senator Sir HALCOLEBATCH.Those figures are sufficiently tragic to make us recognize the extent to which our own actions have damaged our credit, and the necessity for putting things right. I am not speaking of anything that has happened during the last week. It is true that there has been a big fall lately; but the genesis of the whole business is that investors abroad have at last awakened to the fact that an enormous proportion of the money borrowed by Australia during recent years has been regarded as ordinary revenue, instead of having been applied to the development of the country's resources. Within the last fewweeks South Africa floated in Londona loan of £5,000,000 at4½ per cent. at £95 10s.. showing an effective rate of from £4 15s. to £4 16s per cent, according to the date on which the loan is redeemed. At the same time. Commonwealth loans bearing a higher rate of interest were selling at £80 5s. That was the price before the last big drop - the price to which Australian stocks have since recovered. The latest quotation is from £79 to £82. The quotations appear in the press every Saturday morning. To-morrow's newspapers will probably show that on Thursday of this week, Australian 5 per cent. stock stood at £80 5s. A London investor is prepared to pay £100 for New Zealand stock which will return him £4 15s. interest, while we will give only £80 for an Australian bond, returning him 5 per cent, interest and repaying him a full £100 on redemption in anything from fifteen to 45 years at Australia's option.


Senator Thompson - Those other countries have not Labour governments in office.

Senator Sir HALCOLEBATCH.That is not an adequate answer. In view of the dominance which caucus is exercising over the Federal Labour Government. I. should be delighted to see some other government in power. Nevertheless, I do not think that the placing in power of a government representing a different political party would remove the deep anxiety now in the minds of investors abroad, an anxiety due to the knowledge that for many years Australia has been borrowing enormously and spending 20 per cent, of her borrowed money for ordinary purposes of revenue in order to bolster up a boom standard of living instead of developing the resources of the country. That is the root cause of our trouble. It is futile to suggest that the present Government is in any way responsible for that particular phase of the subject. Stocks have fallen steadily during the past two years. They have come down with tragic suddenness during the last two mouths because of a fear on the part of investors that Australia, instead of being controlled by a government, is controlled by some outside body. Generally, investors abroad are not con*cerned whether a Labour or a Nationalist Government is in office ; they are as ready to lend money to one as to the other. It is not the mere fact that a Labour Government is in office that disturbs investors; it is a fear that there is no government at all in office.

While these things have been, going on in Australia, what has been happening in the Old Country? A conversion loan of £.100,000,000 offered, recently at 4 per cent, was not only oversubscribed, but many tenderers offered a premium. That the loans floated by Canada, South Africa, New Zealand, aud the Mother Country met with such a good response from investors shows that the price of money on the London market is falling. It remains for Australia merely to re-establish her own credit to share in the benefits of that fall.

I have already indicated the effect of our present loss of credit on the funding of our £37,000,000 liability in the Old Country. The same argument will apply in connexion with our local debts falling due in December of this year. I join with other honorable senators in expressing both the hope and the belief that that funding operation will be successful. It is the duty of every citizen to help in that direction by showing the world that Australians have confidence in their country, and regard the loose talk of repudiation only as another instance of the British custom of allowing freedom of speech even to the point of license. We should make it clear to the world, that our national sentiment is such that repudiation has no permanent place in the minds of our people. Then there is the matter of meeting monthly requirements. Although during the last four months the position has become very bad, it will improve as the year goes on, because certain revenues are received in the second half of the year. Nevertheless, there is only one thing that can enable the Commonwealth and State Governments to meet their monthly obligations; and that is a return of public confidence. Nothing else will suffice. I can understand the attitude of the worker who is not particularly concerned about meeting our obligations in respect of debts contracted in the past. But I suggest that he is vitally concerned regarding Australia's credit in the future. What is to be the future of Australia if, by destroying public confidence, we drive away investors from abroad? I am not peaking so much of investors in public loans, because I hope that we shall never again he betrayed into so extravagant a loan policy as we have followed in the past; I allude more to the investment by private people in the development of the resources of our country. I say without hesitation that the development of those resources, the maintenance of the Australian standard of living, the increase of population to an extent sufficient to protect Australia in view of an overcrowded and dreadfully disturbed world, and the elimination of our unemployment problem, depend to a great extent on the generous investment of private funds from overseas. Unless we can restore confidence those investors are not likely to assist us. I urge the workers of Australia, as well as the Government, not to be greatly concerned with speculators and "boomers", but to consider the financial stability of the country from the point of view of its effect upon themselves. I remind them that unless confidence is restored to the extent, that private investors will be induced again to invest in Australian securities, it matters little what laws we pass to maintain our standard of living. Without a restoration of confidence the unemployed in our midst will not get back into employment. There is no future for this country, or for its working men and women, that is not dreadful to contemplate should that confidence not be restored.


Senator Barnes - We should be all right if we had confidence in ourselves.'


Senator Sir HAL COLEBATCH - It is tragic to reflect that because of the destruction of confidence we, in Australia, are doing less work and creating less wealth than at any stage of our history, notwithstanding the need for doing more. I agree that it is utterly futile for us to throw the whole of the blame on the workers. This rot has set in from the top; and it must he cured from the top. Money and brains are as necessary as is the free and friendly co-operation of the workers. Perhaps, the most tragic thing about the whole position is that in this time of stress our people are divided into two political camps, as though the legislation that helps one must necessarily injure the other. Surely, we can see that the prosperity of Australia as a whole is the only thing that will help either class. We must co-operate and work together or we shall go down together.

What is the alternative to the proposals agreed to at the Melbourne conference? 1 have no hesitation in saying that we should already be a good way out of our troubles had the resolutions of that conference been faithfully carried out. There would have been no difficulty iti funding outstanding liabilities in London at satisfactory prices if immediately at the conclusion of the conference the position had been honestly met. I direct attention to the statement of the .Acting Treasurer in which he emphasizes the great benefit which would accrue to Australia if those debts were funded. We can only hope that Mr. Scullin's influence in London will result in that being done even now. The financial statement before us sets aside the proposals which emanated from the Melbourne conference and substitutes alternatives. I notice in this morning's papers that the Government has removed the embargo which hitherto existed on Tattersalls sweeps. I do not know whether the Government thinks that the people of Australia can gamble themselves out of debt, or whether it is under the impression that people find it so difficult to send money to Tattersalls that by removing the embargo there will be more money to invest, more revenue for the country, and greater prosperity. Personally, I have very little confidence in expedients of that kind.

The other proposal is that there shall be a drastic alteration in the banking system of the country. I am aware that we shall have a more favorable opportunity to discuss the matter, but there are one or two observations that I should like to make. It was emphasized by Senator Barnes yesterday that almost every civilized country in the world has seen the necessity to adopt central banking legislation. Let me remind the honorable senator that other countries have done that for two purposes: first, to stabilize their currency, and, secondly, to prevent inflation. If we establish a central reserve bank, the possible application o/ which may be to debase the currency or to facilitate deflation, we must not delude ourselves with the idea that we are doing what other countries have done. We shall be doing the very opposite. Reference has been made to the banking experiments of Prance. We are told that they were designed to bring about an inflation in that nation's currency. My first visit to France occurred towards the end of 1923, and between that time and when I left England early in 1927, I visited Prance many times and witnessed what happened there. I saw the misery of the people during the period that a policy of inflation was in force. It was the custom of the wage-earner to spend his wages as soon as he was paid, because he was afraid that the value of his money might depreciate within an hour. In 1926, after the long period of inflation and refusal to balance the budget - the two go together - France had entirely destroyed the credit of the country, and brought about the debasement of the franc until its value was fast approaching vanishing point. One radical socialistic ministry after another was set up, only to crumble between the hard facts of an unbalanced budget and an obstinate party majority. Does that not contain some lesson for Australia? So long as those two things persisted, the position of France went from bad to worse. It is related that when the President of France greeted M. Herriot, who had been the first, and was destined to be the last of the Premiers of the Left, he said "Get it over quickly! M. Poincare is to follow !" He did. Within a few days Herriot's ministry had resigned. M. Poincare was appointed Premier, and he balanced the budget, stabilized the franc and opened the door to a prosperity such as France has not enjoyed for a long time. M. Poincare saved France from a tragically desperate position. By deflation, he improved the value of the franc from Id. to 2d., and, by stabilizing it, gave some permanent value to the currency of the country, with the result that France has started on the road to prosperity and security. I counsel honorable senators to profit from the experience ofFrance ; to draw the conclusion that we in Australia have a chance to do what France was persuaded to do only after she had suffered for years under a false policy, and brought the most extreme misery to her people, particularly to the wageearning classes. Australia has a chance to bring about the same result without enduring the hardship imposed on the people of France.

There is an old definition of a banker : " A man who takes care of other men's money, and lets them have it when they want it." I urge honorable senators to be very wary about setting up an institution which would involve an alteration of that definition so that it would read, " A politically constituted authority that takes the people's money and does what it likes with it." I would particularly ask what would be the effect on our credit abroad if there was a change in the monetary policy of the country replacing the original definition by the other, a change flying entirely in the face of the policy of countries which have established central reserve banks? Would it be to increase or to destroy confidence in our national stability? Again I counsel honorable senators to let their decision be guided entirely by their belief in that direction. If it is going to destroy confidence abroad, away with it, because it must hurt us. If it would do something to restore confidence in us abroad, let us have it quickly, because that is the only thing that can help Australia at this juncture.

I do not for a moment think that British investors have lost their confidence in the resources of Australia. Let us remember that they have put £600,000,000 into Austraiian securities - something like one-seventh of their total overseas investments. But they have last confidence in Australian policy. There is no question about that. We have pursued a foolish policy for a great many years, and the logical conclusion of folly is disaster. I believe that there is still time to restore confidence. But we mustact quickly. Already we are faced with a flight of capital from Australia. Already those who can are converting their liquid assets into cash, and, notwithstanding the high rate of exchange, are exporting that cash from this country. I know of instances where products have been exported without any intention of bringing the proceeds back to Australia.

There are two methods of overcoming that difficulty. One is the expedient usually adopted by governments which are afraid to face the facts; by placing a prohibition on exports. That necessitates the issuing of a licence to export, one of the conditions of the licence being that the proceeds must come back to the country. The adoption of such a policy would complete the flight of capital. It would depreciate the Australian £1 almost as quickly as would an extravagant inflation of our currency. There is the other method, which I urge the Government and this Senate to adopt. It is, by the pursuance of a sane policy, to strain every nerve to balance our budget, disregarding political advantage. That would restore the confidence of investors. If we can do that, those who have money invested in Australia will be in no hurry to withdraw it, for I believe the possibilities of Australia are unrivalled. I urge that we should adopt that policy, accepting all the sacrifices, the difficulties and the hardships that it would involve. But action must be taken quickly.

Which road are we to take? That involving the flight of capital from Australia, and the alarming depreciation of the Australian £1, or that which, by wise administration, will induce those people abroad who have capital to invest it inthis country? I remind honorable senators that the accumulation of capital for investment is growing daily. Let us instil in those abroad the belief that there is no better country in which to invest their wealth than a sanelygoverned Australia.

Debate (on motion by Senator Guthrie) adjourned.

Sitting suspended from 12.41 to 2.15 p.m.







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