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Wednesday, 15 August 1906

Mr DEAKIN (Ballarat) (Minister of External Affairs) . - The Chairman of. the Tariff Commission has told us why that body recommended that the import duties, on spirits should not be increased, and gave what may be taken to be in part an explanation of that recommendation. Having regard to the circumstances of the local distilling industry,, their recommendations in regard to Excise duties are only natural ; but their estimates of revenue put before us seem to have been largely affected., if not entirely brought about, by the need for justifying the postulate upon which the Commission started, that there should be no increase ' in the Customs duties. That is no increase of import duties. Commencing with a proposition, of that kind, it is easy to see how the recommendations of the Commission were agreed to, but I submit that their calculations are to some extent biased. With them revenue was the last consideration.. When the Government took up the proposals of the Commission, their first concern, naturally, was the effect which the acceptance of these proposals would have upon the revenue. I have taken the precaution to look through the figures which the honorable and learned member for Bendigo has put forward in support of the contention that the adoption of the scale of duties advised by the Commission would not involve any -materia? decrease of the revenue, and must say that they carry no conviction to my mind. He points to aw » increase in the local production of spirits, more particularly of the cheapest kinds of spirits from molasses, and contends that the reduction of all the Excise duties will be more than compensated for by the great increase in the quantity produced. Put in that bald way, I take it that this is sun. unconvincing statement. I should be very sorry to see a greatly increased consumption of spirits in the Commonwealth, but, leaving that consideration on one side for the moment, would point out that there is nothing to lead us to suppose that the increased local production would be so great as to make up for the inevitable loss of revenue that would result from the substitution of Australian spirits subject to the payment of Excise duty for imported spirits, which bear a much higher impost.

Mr Poynton - The experience of Victoria shows that a great loss resulted from the increase of the duty upon imported spirits.

Mr DEAKIN - That is the only experience of the kind that can be quoted, and in the light of my knowledge of the circumstances, it has no weight, with me.

Mr Poynton - In 1897, we increased the import duties in South Australia, with the same result.

Mr DEAKIN - Possibly. I am not acquainted with the circumstances of SouthAustralia, nor with the extent to which the revenue declined in that State; but I am acquainted with the circumstances of Victoria when the revenue derived from spirit duties fell off., and know that a similar decline could be shown to have taken place in respect to all luxuries and to a considerable degree in respect to necessaries also. The circumstances of the time were severe and unprecedented, leading to a remarkable effort - which was superbly successful - madeby the whole community to economize at every point in order that liabilities might be discharged and obligations might be met. . There was consequently an immense falling-off in the revenue.

Mr McWILLIAMS (FRANKLIN, TASMANIA) - Not many persons retrenched so far as the consumption of spirits was concerned.

Mr DEAKIN - They did- they retrenched in every respect.

Mr Kelly - There was not the same falling-off in the revenue of New South Wales at the same time.

Mr DEAKIN - The circumstances of the two States were not similar. The land boom in New South Wales collapsed at an earlier date than did that of Victoria, and the banking crisis in New South Wales was met in another way. Having the direct personal knowledge of one who lived through that period of trial and stress in Victoria, the falling-off in the revenue to which reference has been made conveys to me no such lesson as is sought to be deduced from it. I have made inquiries, and find that the experience of Victoria in that connexion is the only one of the kind that can be quoted. We have to remember that at the time Federation was brought about, two States were levying a duty of 15s. per gallon upon imported spirits, and that Western Australia was collecting a duty of 16s. per gallon.

Mr Fowler - In the latter State, an allowance was made for under-proof spirit, which brought the duty down to about 14s. per gallon.

Sir John Forrest - I do not think that any allowance was made for under-proof spirit.

Mr DEAKIN - I may point out, further, that New Zealand still retains a duty of 16s. per gallon upon imported spirits.

Mr Poynton - That Colony has . no local production of spirits.

Mr DEAKIN - New Zealand still retains the import duty of 16s., and her revenue has not been reduced.

Mr Poynton - Her case is very different to that of South Australia. There was a very great falling off in South Australia owing to the increase of the import duties.

Mr DEAKIN - That was because of the difference between the Excise and the import duties. It was because of the wide discrepancy there between the two duties that the local spirit distilling industry was fostered. Where there is no local distillation,' as in the case of New Zealand, the same comparison cannot be made. High duties, such as we propose, prevail in South Africa and elsewhere, and I have yet to find a well established authentic case in which such an increase of the import duty on spirits has led to a decline in the revenue. It is only an advance of 7 per cent. Therefore, I have no reason to suppose that the proposed increase will have any such effect. I am not offering my own opinion, but have read the papers placed before meby the officers of the Treasury and Customs Departments, which support the view that the increase of the importduty to 15s. will not have the result predicted. Moreover, after having made an independent examination as well as a joint examination of the whole case, and having reconsidered the whole matter, the officers of the Departments mentioned assure me that they are more confident than ever that the acceptance of the proposals of the Tariff Commission to reduce the Excise duties, while retaining the present import duties, would result in a loss of from £60,000 to £90,000 per annum. It is estimated that this loss would result from the substitution of locally manufactured spirit for imported spirit. On the other hand, they think that any change that might take place under the Government proposals would be of a gradual character, extending over a considerable term of years. I need not remind honorable members of the serious effect that any reduction in the revenue would have upon the finances of the Commonwealth, and also at present upon the finances of the States.

Mr Robinson - The effect would not be nearly so bad as that which would be brought about under the Government proposal to give away £200,000 per annum in ' connexion with the penny postage system.

Mr DEAKIN - I do not wish to argue that question, merely pointing out that in the reduction of the postage, we should get a substantial return, whereas we should obtain no recompense for the reduction of duty. That constitutes the difference between the two cases.

Sir John Quick - By making the proposed reduction we should afford protection to local industry?

Mr DEAKIN - Yes; and that is very valuable. Our object, however, should be to protect local industry without incurring any loss of revenue.

Mr JOSEPH COOK (PARRAMATTA, NEW SOUTH WALES) - Is the Prime Minister anxious to foster the establishment of grog shops, in our midst ?

Mr DEAKIN - No, I am not.

Mr Conroy - The Prime Minister must be, because that would be the direct result of the Government proposal.

Mr DEAKIN - No one with even an elementary sense of chemistry or logic - of which the honorable and learned member is so fond of speaking - would make such an assertion. I should be very loth to support any proposals of a financial or other character that would lead to an increase in the consumption of spirits. I prefer a policy which, while the present consumption is maintained, will cause a larger proportion of the spirits to be supplied by local producers, thus maintaining the revenue at its present standard. If we accomplish that, we shall have done all that we can expect. The figures supplied have been sifted over again from a fresh point of view, and further questions have been submitted to the Customs and Treasury officials. Having recast their calculations, and investigated the matter from a different point of view, they are quite clear that, putting aside any extraordinary and unforeseen departure one way or .the other, and assuming that trade will follow its natural course, the proposals made for reducing the Excise duties would involve the grave loss to which I have already referred - from £60,000 to £90,000 a year. This would be a very serious loss for us to incur at this, or at any other time. I do not wish to enter into other financial questions, but may point out that the Budget this year not only excluded from consideration the possibilities of any alteration in the revenue, arising from the adoption of the recommendations of the Tariff Commission, but also omitted the cost of any new proposals in connexion with a report of the Imperial Defence Committee laid on the table to-day, or any other proposals in connexion with-the Defence Department. With the probability of these additional undertakings demanding immediate attention, making,,' a further inroad upon our funds, and with the possibility that there may be other unforeseen calls upon us, it would be in the highest degree unwise to pass measures which would involve such a huge reduction of the revenue as would be forced upon us if the proposals of the Commission were carried into effect.

Mr Page - What about the loss that will be incurred in connexion with the penny postage proposals ?

Mr DEAKIN - As I have already stated, I think that in that case we shall receive a quid pro quo, whereas we shall have nothing to gain by the reduction of the duties proposed by the Commission. I had before me this morning the very figures which the honorable and learned member for Bendigo has. just quoted, and most of which are included in his valuable report. I have examined the explanation which is given of the reasons for the proposed decreases of Excise, and they appear to be very, reasonable. I see no- thing in them, however, to. support the theory that the great change proposed can be made without a very serious loss of revenue - a loss against which we ought to protect ourselves. On the other hand, we believe that if we retain the proportion which the Tariff Commission has recommended between the Import and Excise duties, while increasing both classes of imposts, we can fairly expect to hold our own. We might fall a little short, or we might obtain an extra ,£20,000 - the latter is a sanguine estimate. So far as the officers of the Departments can judge, it is not likely that, with the duties we propose, we shall realize ' more than £20,000 under favorable circumstances, or that we shall lose more than ,£20,000 under unfavorable circumstances. Examined from all points of view, the calculations made by the officers appear very fair. We have tested the matter by working out the figures on various assumed increases and decreases of Excise and Import duties, and in every case the same result has been arrived at. If honorable members resolve to make this very serious departure, I hope that they will do so with their eyes open. They may feel called upon to sanction it - they may think that the benefits to be gained from it are such that the immense sacrifice is justified. But I do not think that they can afford to set aside the warnings of both the Customs and the Treasury Departments in this connexion. After the fullest inquiry, the opinion of the expert officers of. those Departments is that the sacrifice which the proposal would involve is very great - so great that I db not think honorable members would be justified in authorizing it. I hope that upon consideration, even those who realize - as the Chairman of the Tariff Commission does - that the imposition of the increased import dutyproposed will complicate the existing relations between the wholesale and retail dealers, and to some extent affect the dealing of the retail publicans with their customers, will recognise that these things must be faced, rather than that we should suffer such a dangerous depletion of our Commonwealth revenue. My honorable colleague, the Treasurer, in his Budget statement, estimated the surplus that would be returnable to the States during the current year at ,£310,000. If that amount be reduced by* ,£90,000, we shall only be able to return to them a little more than £200,000.

Mr Bamford - The adoption of the recommendation of the Commission would involve a loss of only half of ,£90,000.

Mr DEAKIN - Even ' a loss of half that sum would be a serious matter. Before the session closes, there are other matters which we shall require to take into account involving expenditure. Under these circumstances, I ask honorable members whether - in order to place the Excise duties upon a fairer footing relatively to the import duties, as the Commission's recommendation certainly does - it is wise to make this great sacrifice? It appears to me that the members of the Commission have discharged their duty 0 very thoroughly by taking fiscal questions into consideration. They seem to have worked out the chief problems submitted to them very carefully, and the Government in their proposals are preserving the same proportions throughout. But to say that in order to obtain the end in. view we ought to part with ,£60,000 during the first year of the operation of the new duties-

Mr JOSEPH COOK (PARRAMATTA, NEW SOUTH WALES) - The members of the Tariff Commission do not think that the revenue would lose that sum.

Mr DEAKIN - We have had* the estimates of the Commission, such as they are, carefully checked by our expert officers, and, of course, the latter's calculations were made very much mere close Iv than were those of the Commission. The Commission, having decided that they would not recommend any increase in the import duties upon spirits, and realizing what ought to be done to relieve an industry which had been injured by the operation of the Commonwealth Tariff, naturally looked with a favorable eye upon anything which confirmed their theory that the alteration recommended could be effected without very great injury to the public. I cannot get away from the revenue aspect of this matter. I am sure that to take the step which has been proposed would constitute an act of extravagance in which we are not warranted.

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