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Wednesday, 15 August 1906

Mr KENNEDY (Moira) .- I am sure that the Committee are indebted to the honorable and learned member for Werriwa for his very able exposition of the component parts of spirit. The members of the Tariff Commission must feel the loss which they have sustained in that the honorable and learned member was not a witness before them to add to the information which they have presented to the Committee. I desire to expressmy appreciation of the labours of the Commission as evidenced in the report which has been submitted upon this question. At the same time, I hope that they will not resent criticism of the conclusions at which they have arrived. Hitherto, they have almost conveyed that impression.

Mr Fowler - Not in the least ; we welcome criticism.

Mr KENNEDY - When we come to deal with subsequent reportsby the Commission, a doubt will necessarily arise as to the particular set of recommendations to which we should pay most regard. I trust, therefore,, that the members of that body will not take offence if some of us differ from them in regard to matters of detail. I fully appreciate the labourand industry which they have brought to the discharge of their onerous duties. But upon same questions, which are comparatively matters of detail, I hold opinions which are not quite in accord with their - recommendations. I trust that the Govern ment, before they ask us to support an increase in the Customs duty upon spirits, will give us a little more information than has been vouchsafed.

Mr Deakin - At present, we are dealing only with a proposal that imported spirits shall be matured in wood for two years before they are permitted to pass into general consumption.

Mr KENNEDY - When the Minister of Trade and Customs submitted these resolutions yesterday, the Committee were fairly entitled to more information than he gave them. Of course, if the Government can support their proposal to increase the import duty upon spirits. I shall have no objection to offer. They are in a position to know to what extent the revenue would be affected by any such action. But I wish to direct special attention to one matter which has caused a falling away from grace on the part of some freetraders. Only to-day, we have heard certain honorable members admit that there are conditions under which differential fiscal treatment should be accorded to some of our products. I was more than delighted to hear the honorable and learned member for Angas express that opinion ' yesterday. But the point to which I wish specially to address myself has reference to the rates of Excise duty which it is proposed to levy upon different classes of spirit. The conclusions of the Tariff Commission have proved that there was warrant for the assertion which has so frequently been made that the Commonwealth Tariff has destroyed some of our industries. The very first statement contained in the report of that body reads: -

Since the passing of the Commonwealth Tariff there has been a total cessation of distillation in Victoria.

Mr Fowler - We do not say that that is the result of the Tariff. We point out elsewhere that it is probably due to another cause.

Mr KENNEDY - I did not say that it was the fault of anything in particular.

Mr Henry Willis - The honorable member was making a point of that.

Mr KENNEDY - I intend to continue making a point of it, notwithstanding the speeches which have been delivered between the interjections which I have been permitted to make. I repeat that in the Commission's report is to be found ample justification for the statement that, since the passing of the Commonwealth Tariff industries have been strangled in Victoria. Mr. Henry Willis. - Those engaged in the trade in Victoria have obtained their spirit from those employed in the same industry in New South Wales.

Sir John Quick - Read the conclusions of the Tariff Commission.

Mr KENNEDY - I will. The Commission says -

Since the passing of the Commonwealth Tariff there has been a total cessation of distillation in Victoria, resulting in the closing of very large and important distilleries in which capital to the amount of£235,000 has been invested, and in throwing a number of hands out of employment.

That statement, I contend, warrants the conclusion that an industry has been strangled.

Mr Henry Willis - The same number of men were employed to carry on the same amount of trade in New South Wales as were engaged in the industry here.'

Mr KENNEDY - I will challenge the accuracy of that statement later on. The Commonwealth Tariff alone may not be responsible for that condition of affairs. But I venture to say that it was one of the causes. The report of the Commission continues -

One cause of the stoppage of the Victorian whisky distilleries has been the relative increase of excise duties and consequent reduced protection by 3s. per gallon on malt whisky, and1s. per gallon on blended whisky. Another factor has been the increased production of n.e.i. spirit in New South Wales and Queensland, much of which has been transferred to Victoria.

Mr Henry Willis - There is the reply to the honorable member's previous statement.

Mr KENNEDY - It is part of the reply.

Mr Henry' Willis - The spirit used was brought into Victoria from another State.

Mr KENNEDY - Yes, spirit which was produced from inferior materials. I have no objection to the distillation of that particular class of spirit, but I wish to direct special attention, to the diminished production of spirit from malt. If it were merely a question of the distillation of the cheaper class of spirit - in the production of which there- is no considerable quantity of labour employed - I should not worry about the continuance of the industry. But, seeing that the production of spirit from grape wine necessitates the employment of considerable labour the matter is well worthy of our attention. The Commission appear to have been convinced that, in order to re-establish the production of malt spirit in Victoria, it is necessary to differentiate between the Customs and Excise duties upon malt spirit, to the extent of 4s. per gallon, and upon the blended article to the extent of 3s. per gallon. I do not think that the Commission, in, their recommendation, have differentiated sufficiently as between the spirit which is distilled frombarley malt and the blended article. They have allowed a difference of only1s. a gallon between the Excise rates upon these articles. In my judgment there was warrant for the finding of the Commission in regard to the difference which it has seen fit to make between the import duty upon malt spirit and the Excise duty upon it. But I do not agree with the conclusion of its members that there should be only1s. per gallon difference between the Excise duty upon spirit distilled from grape wine, and spirit which is distilled partly from grape wine and partly from other materials. I am inclined to think that the recommendations of the Commis-' sion, if adopted, would prejudice the production of grape spirit in Australia.

Mr Johnson - There can be very little doubt of that.

Mr KENNEDY - I claim the support of members of the Commission even to the extent of reconsidering their determination in this connexion. They have realized the necessity for re-establishing the industry so far as the production of malt spirit is concerned. Hitherto we have produced brandy, whisky, and gin of a character calculated to build up a reputation abroad, We have the most satisfactory evidence that under what are regarded as almost lax conditions, there is being' produced in Australia to-day a brandyequal to almost any produced elsewhere. I would remind" the Committee that in the production of grape and malt spirits a great deal of labour is involved, and that we are warranted therefore in giving the local industry the fullest encouragement. The only case in which a reduction of the Excise should be made is in relation to grape spirit. It is said that such a reduction might lead to a loss of revenue, but I do not think that there is any warrant for such an assertion. In pre- Federationdays the Exciseduty on grape spirit under the Victorian Tariff was, I believe, 8s. per gallon, whilst the import duty was 12s. per gallon. The quantity of imported and locally-produced spirits consumed here then increased practically only in proportion to our population, and under the Commonwealth Tariff we have had practically a like experience. It may appear at the first blush somewhat strange that in the three States which have given some attention to the cultivation of the grape we have had under the Commonwealth Tariff an increase in the production of brandy from grape spirit. But under that Tariff grape spirit has had a preference of 2s. per gallon over blended spirit, and my desire is that that preference shall be continued. I should like some further information in regard to the contention that that should not be done. According- to the evidence taken by the Commission, grape spirit costs something like 4s. per gallon to produce, grain spirit about 2s. 9d. per gallon, and malt spirit about 3s. 6d. per gallon--

Mr Fowler - Molasses spirit is cheaper than any of those spirits.

Mr Johnson - lt costs only 6d. per gallon to produce.

Mr KENNEDY - According to the report of the Commission it costs is. 6d. per gallon to produce, whilst sugar spirit costs only is. per gallon.

Mr Johnson - The manager of the Colonial Sugar Refining Company stated that it cost only 6d. per gallon to produce molasses spirit.

Mr KENNEDY - The figures I have quoted are taken, from the evidence given by Mr. Henry Arthur Preston. In view of these facts, I think I am justified in asking that the difference in the excise on brandy manufactured from grape spirit and blended spirit should be greater than is recommended by the Tariff Commission.

Mr Fowler - Has the honorable member considered whether those who buy blended spirit ought to contribute a disproportionate amount to the revenue?

Mr KENNEDY - I am not questioning the findings of the Commission with regard to the rate of duty that should be imposed on blended spirit ; on the contrary, I am adopting them as a basis for the proposal that I am now putting forward. The Commission propose that blended spirit shall have a preference of 3s. per gallon over the imported spirit, but they recommend that grape spirit shall have a preference of only is. per gallon over blended spirit. I do not think that that preference is sufficient. Honorable members should not forget the advantage to the Commonwealth which would flow from the expansion of the production of grape spirit.

Mr Henry Willis - The industry is native to the soil.

Mr KENNEDY - That is so. There is no comparison between the labour involved in the production of grape spirit and that necessary to the production of potato or molasses spirit. According to the evidence given before the Commission, something like -/"i, 000, 000 has been invested in the grape spirit industry in South Australia. Those figures do not cover the labour involved in distillation.

Mr Hutchison - They cover all the* vineyards.

Mr KENNEDY - There is a possibility of a much greater development in the production of grape spirit. On the other hand, molasses spirit is only a by-product of sugar.

Mr Johnson - If the honorable member turns to page 26 of the Digest of Evidence, he will see that, according to Mr. Knox, the manager of the Colonial Sugar Refining Company, molasses spirit can be distilled at a cost of less than 6d. per gallon.

Mr KENNEDY - That is the cost of distillation, whereas the figures I have quoted cover the cost of the material, as well as that of distillation. That would account for the disparity. I come now to the production1 of malt spirit, the encouragement of which is just as desirable as is the encouragement of the manufacture of grape spirit. In the early days of the malt spirit industry in this State, 125,000 bushels of barley were used in one year. That quantity would represent a good yield from 5,000 acres, and would involve the employment of considerable labour. In these circumstances we ought surely to consider whether it is not worth while encouraging the manufacture of spirits which have their origin, so to speak, in the products of our soil, and can be made under conditions that will enable us to place a very superior article on the markets of the world. Although this may not be the proper stage at which to discuss this phase of the question, I draw attention to it now in order that the Government', as well as the members of the Commission, may be prepared, later on. to show whether there is any material objection to granting further encouragement to the production of pure grape and malt spirit.

Mr McCay - The honorable member means to suggest that he desires to increase the difference between the Excise and import duties on pure grape brandy to the extent of more than 4s. per gallon.

Mr KENNEDY - Yes, that is the.only way out of the difficulty. I was under the impression that we should be able to reestablish the local manufacture of blended whisky and brandy by allowing a preference of only 2s. per gallon over the imported article, but I gather from the evidence, and the statements .made by the members of the Commission, that it would be impossible to do so. In these circumstances, I have been forced to accept the recommendation of the Commission that a preference of 3s. per gallon be allowed. But I invite the Committee to say whether a further reduction of is. per gallon should not be granted in, respect of the Excise duty on grape spirit.

Mr McCay - If that were done what ad valorem duty would it, approximately, represent ?

Mr KENNEDY -- It would not be as high as the ad valorem rate in respect of blended spirit. It has also occurred to me that it is desirable to require an increase in the proportion of grape spirit used in blended spirits. I should say that in blended brandy the minimum quantity of grape spirit should Le 50 per cent., whilst there should be a minimum of 50 per cent, of malt spirit in blended whisky. If such a provision were made, it would increase the use of natural products of our soil, and at the same time I think it would also tend towards the production of a better spirit.

Mr HENRY WILLIS (ROBERTSON, NEW SOUTH WALES) - Why does the honorable member suggest that we should have a blend ?

Mr KENNEDY - The Tariff Commission deals with the question ; the requirements of the people demand it.

Mr Henry Willis - It is for the sake of cheapness that a highly rectified spirit is used.

Mr KENNEDY - I have no quarrel with the Commission, in respect of their recommendations; but I do not think that from the stand-point of revenue any objection can be taken to my proposal. If it were adopted, it would increase the possibilities of an expansion of production, and increase the use of a natural product of our soil.

Sir John Quick - The honorable mem. ber does not desire to reduce the proposed protection ?

Mr KENNEDY - No, I think that the Commission are in a better position than I am to arrive at a conclusion on that point.

Sir John Quick - It would be useless to reduce the protection.

Mr KENNEDY - In the face of the evidence taken by the Commission, I do not ask the Committee to do so. But, seeing that under, the Tariff which has just been altered a differentiation of 2s. was made in favour of grape spirit, and the increase in the distillation of such spirit has been only slow, I think that an injustice will be done to an industry existing on the use of a natural product if the differentiation is reduced to is. I know the conditions which prevailed in Victoria prior to the imposition of the Federal Tariff, and those which have since prevailed, and I therefore . ask the Committee to reconsider the matter, because honorable members desire the development of our natural industries, and I believe that the concession sought for, while benefiting the industry on whose behalf I speak, will not prejudice any other. I hope that, as time goes on, our pure brandy and pure malt whisky will acquire a world-wide reputation, and the manufacture of such spirit will do the least amount of harm, and the greatest amount of good to the community.

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