Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Thursday, 16 August 1906

Mr GLYNN (Angas) .- -The honorable member for Kooyong is to be complimented upon the careful research that he has evidently given to the financial questions with which he has dealt, and I am sure that, when he presents his memorandum honorable members will be only too glad to give it their best attention. I have been looking through the Budget papers, and I should like to give honorable members the result of an analysis of some of the figures, which may throw some light upon the alleged extravagance of the Commonwealth. We have heard much about the great incubus which' the Federal Parliament and Departments are proving. People who talk gliblyabout Federal extravagance -forget that machinery had to be provided for an expansion of population. For instance, in the United States, machinery was provided in the beginning which has practically remained unaltered. In the first instance, the representation provided for was in the ratio of one member to 30,000 electors, whereas, through the automatic operation of the provisions of the Constitution and the increase of population, the representation in 1894 was in the proportion of one member to every 195,000 electors. Similarly, we began with machinery that was, perhaps, too large for our population at the time, but, in view of the fact that written Constitutions are more or less rigid, we had to provide for the growing necessities of a young community. I find from the figures supplied by the Treasurer that last year the revenue amounted to £1^897,343, and the expenditure to £4,494,841, whilst the amount returned to the States was -£7.-384>5°2. Now, I shall deal with the expenditure which is sometimes referred to as indicating Federal extravagance. That is owing to the fact that it is not subjected to the analysis it ought to receive. Last year the " other," or new, expenditure amounted to £827,355. I have seen it mentioned in the public press that this is the expenditure that is caused by Federation. The words "other" expenditure, however, are used to cover three classes of expenditure, and that is how the mistake arises. One class of " other " expenditure amounts t0 £5o8>000> whilst £318,488 is provided for new works, rifles, &c, items of expenditure which, under the old State system, would have been debited to loan, but which, under our healthier system of finance, have to be paid out of revenue. Therefore, even if we divide the other expenditure into these two parts, we must reject £318,488 as not being included in the cost of the Commonwealth. If we further analyze the figures we arrive at this position : £318,488 was devoted to new works, &c. ; then policy, and not machinery, was accountable for an expenditure of the £154,706 which was devoted to the payment of sugar bonuses. Non-recurring expenditure amounted to £25,000, and the balance of £309,161 represented the actual cost of the Federal machinery. If the electors are not satisfied with the total of "other" expenditure, they have the remedy in their own hands, except as regards £309,000. They can, by deciding to adopt a different policy, do away with the rest of the expenditure. But, it may be said that next year there will be a very large increase upon the :amount expended last year. It is estimated that £1,197,147 will be expended, and I find that £376,895 may be regarded as representing the cost of Federation. At the outset that appears to be a rather large increase upon the actual expenditure for 1905-6, but an examination of the estimates shows that there is a very large item of non-recurring expenditure under the heading of electoral expenses. £50,000 is provided to defray the cost of the Federal elections as against an actual expenditure of £1,925 last year. Then the expenses expected to be incurred under the Electoral Act amount to £21,000 as against an actual expenditure of £16,256 last year. Census and statistics account for £8,700. Thus, in the Estimates for the current year we have non-recurring expenditure totalling £79,000 as against £18,000 last year. I do not wish to quote the figures, but, comparing the revenue and expenditure for 1901-2 with the revenue and expenditure for 1905-6, and noting the amounts returned to the States in the respective years, we have not retrograded. There has been an increase of revenue, but not a corresponding increase of expenditure. There has been a slight increase, but not so great an advance as the net increase of revenue would justify, in the amount returned to the States. A much larger amount would have been returned to the States if we had adopted a wiser policy. Here, again, the result is not due to the machinery of Federation, but is capable of being controlled by the electors. If we were to cut down the loss which we annually incur by paying a bounty to the sugar industry, and if we refused to waste money ' upon the Post and Telegraph Department merely to bring kudos to a particular 'Minister, we might be afforded an opportunity - without resorting to additional taxation - to make provision for the payment of old-age pensions. If we acted in the way I suggest, we should bring about a healthy state of affairs, because a good many of the items of expenditure during the past three years are of a nonrecurring character. They really represent capital expenditure which under the old system would have been taken out of loan moneys. For instance, I find that in 1904-5 the Defence vote included a capital outlay of £200,259; in 1905-6, it was £171,572; while during the current year the amount is estimated at £182,177. All that expenditure is non-recurring. It represents a special expenditure which was made upon the recommendation of Major-General Hutton. I think that up to the end of June, 1905, something like £400,000 has been expended in that way.

Mr Fisher - The honorable and learned member^ will find that it is not nonrecurring expenditure. It recurs every vear.

Mr GLYNN - -I think that I am fairly justified in saying that it is non-recurring expenditure. Of course, the one Department about which a person may justifiably be sceptical is the Defence- Department. I do not know how we stand in regard to it. One Minister of Defence appears to know everything about defence matters - if we are to judge by his pronouncements in this House, and in the press - but his successor at once reverses his policy. In the same way the commanding officer of our Military Forces believes in reliance on a land force for the defence of the Commonwealth, whereas our Naval Director entertains an entirely contrary view. For instance, Captain Creswell, on 10th November, 1905, recommended the construction during the course of seven years of three cruiser destroyers, sixteen torpedo boat destroyers, and nilsen torpedo boats at a cost of £1,768,000.

Mr Kelly - His calculations have been found to be based upon a very much under-estimated expenditure.

Mr GLYNN - Within a period of four years he had completely reversed his policy, and he now has in the hands of the Government a report upon which they seem afraid to act.

Mr Kelly - His scheme has been condemned in the most unqualified way by the highest expert body in the Empire.

Mr GLYNN - Lt.-Col. Bridges, in. referring to Captain Creswell's scheme in December, 1905, said -

It is difficult to know whence the crews are to be drawn, and if torpedo boats and destroyers are not to fight it is difficult to know what they are for.

In view of the policy which has been adopted during the past five years, and of the conflict of opinion which exists between the Military and Naval authorities, it behoves us vo be a little cautious when Ministers come down with elaborate estimates of expenditure. I have already mentioned that if we did not waste money in paying a bounty to the sugar industry

Ave should occupy a much stronger position than we do. I take the Estimates of the present year to illustrate my point. The bounty to be paid to Queensland represents £240,000, and that to New South Wales £38,500, or a total of £278,500.' But we have to add to that sum the difference between th.e revenue which was derived from the industry in 1902-3 and that which it is estimated will be received during the current year. The position is that in 1902-3 the revenue received from this source was £780,448, whereas during the present year it is calculated that it will amount to only £628,000. In other words, there will be a shrinkage in our revenue of £152,448, which, added to the £278,500 outlay upon the bounty, will make a total loss in connexion with our policy of offering special treatment to the sugar industry of £430,948. I wonder how the electors of Australia will appreciate that policy when the position is properly put before them, as I hope it will be within the next few months. I hold that we are absolutely wasting money in this connexion. What justification is there for paying New South Wales £38,500 a year, seeing that in 1901 89.7 per cent, of the acreage under cane cultivation in that State employed white labour, as against only 90 per cent, in 1905-6.

Sir John Forrest - Under the Constitution we could not discriminate.

Mr GLYNN - Do the Government urge that? Is that the way in which our constitutional power is interpreted ? Are we to lose £38,000 yearly owing to the bungling of Ministers? The idea underlying the interjection of the Treasurer is that, in giving effect to a uniform policy, we cannot avoid incurring that loss. But I would point out that what we are required to do under the Constitution is to have a law uniform in application, but not necessarily in effect. I suggested at the time this question was under consideration that the law should provide that the bounty should be paid only in cases where white labour had been substituted for black labour. Unfortunately, we have a Government in office which is incapable of seeing that that is the true solution of the sugar problem.

Sir John Forrest - It is very easy to be wise after the event.

Mr GLYNN - I beg the Treasurer's pardon. I tabled an amendment to that effect at the time the sugar bounty was last under consideration, but I could not induce the House to agree to it. I pointed out that uniform bounties merely necessitated a general law, and not a general effect of that law.

Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - 'But we should have had to adopt a dividing line - some degree of latitude, for instance - under the honorable member's proposal.

Mr GLYNN - Not at all. All that we had to do was to declare that only in cases where white labour had been substituted for black after the passing of the Act should the bounty be paid.

Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - Does not the honorable and learned member see how unjust that would have been to some growers, who had of their own initiative attempted to introduce white labour?

Mr GLYNN - Does the honorable member think that a few cases of that sort justify us in incurring ar. annual loss of £38,000? The fact that in 1901-2 white labour was employed upon 89.7 per cent, of the acreage under sugar cultivation in' New South Wales, and that in 1905-6 the acreage which employed that class of labour had only increased to 90 per cent., is sufficient justification for my criticism.

Mr Mcwilliams - Ninety per cent, of the bounty which is paid to New South Wales growers is a free gift to them.

Mr GLYNN - I now come to the debts question. One would imagine from the utterances of honorable members that the problem presented in connexion with this scheme had not previously been faced. But as a matter of fact there is not a difficulty with which we are now confronted which was not touched upon by members of the Federal Convention. For instance, it was pointed out that without the consent of the States the Commonwealth would not be able to take over the debts which accrued after1901. I emphasized the fact that even debts that were subsequently converted could not be taken over. But nothing was done. The public were told that within a few years after the establishment of the Federation a tremendous saving of interest would be effected on account of the reputation which the Commonwealth would have gained for its solvency. Personally, I have never heard of a saving of any magnitude having been made except where debts were maturing. In 1888 Mr. Goschen introduced two big conversion schemes, aggregating about £600,000,000, but about half of the amount represented securities which were redeemable at once, and the balance was redeemable at twelve months' notice. The merit of his policy was that he risked the possibility of the market being against him. and of the bond-holders asking for cash, when he gave notice of redemption, and was successful. In the Federal Convention I pointed out that there was nothing to be gained through (consolidation of the debts. I said -

For the first five or six years the Federation will undoubtedly be on its trial. Before it can gain a reputation for solvency it must do something to justify it, and honorable members are mistaken when they think that the English creditors are going to jump at a Federal security until they see how the forces operate in the Federal Parliament.

They are not going to jump at it. Reference is sometimes made to the position of. Canada, whose 3 per cent, bonds stand at about £98.

Sir John Forrest - Canada does not owe very much. Her railways and other great public works are constructedby private enterprise.

Mr GLYNN - That is the whole point The Dominion debt amounts to about £76,000,000, and about one-fourth of its annual expenditure in respect of its indebtedness is placed to the credit of a sinking fund.

Sir John Forrest - The Government uses its large sinking funds in buying its own bonds.

Mr GLYNN - Yeait is that which causes the appreciation which is going on in the Canadian 3 per cents. I would like honorable members to say how it is that the unitary system of France shows a better result than does the Federal system in Germany ? If a Federal system, apart from the result of proper financing, and because of the stability of its assets, appreciates its securities, it is extraordinary that, so far as its 3 per cent, bonds are concerned, Germany is in a worse position than is France. In 1904-5 the right honorable member for Balaclava confirmed the remarks which I quoted just now. He said -

My confidential advices lead me to the conclusion that unless the British creditors are satisfied that the Commonwealth has priority of security it cannot get much, if any, better terms than the States.

That is about the present position. What should be done? Honorable members talk gliblv about the Commonwealth taking over the whole of the States debts. What saving would be effected by the adoption of that course? What we really need to do is to follow the advice which was pressed upon the delegates at the Convention. At that gathering I pointed out -

What you can do is to get over one difficulty. You can at all events absorb the whole surplus . . . . and the question now remains whether it would not be better for the Commonwealth to assume liabilities corresponding approximately to the aggregate of the surplus, and thus get over the difficulty of making periodical payments to the States, and whether you would or not by doing that remove any timidity from the minds of the States Treasurers as to their liabilities for public debts.

With all due respect to the growing wisdom of the last five or six years, I venture to assert that the words then spoken were true, and are equally true to-day. The problem we have to face is not such a transfer of the total indebtedness of the States as is contemplated by some honorable members, and which could not result in any saving even if it were possible.

Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - We could not make such a transfer at the present time.

Mr GLYNN - I do not think that we could, but what we ought to do if we abolish the "Braddon blot" is to throw upon the Commonwealth - the collector and receiver of revenue - the responsibility for as much expenditure as is possible. We can do that by taking over when the opportunity arises, a proportion of the States debts that will be sufficient to wipe out the surplus returnable to them.

Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - Accepting responsibility for a proportionate amount of interest.

Mr GLYNN - We should strike a fair average of the amounts returned in respect of past years, and make a fair allowance fpr an increase. I do not see why we should return to the States a fixed sum based upon an average of what has already been returned to them. Our population must increase. If the Customs revenue largely expands - and if must grow - is the Commonwealth to return only a sum based upon past results? Surely the people are 1.0 be considered in their State as well as in their Federal relations? Great credit is taken by the Commonwealth for the fact that it returns every year a large surplus to the States. One would think that it was intended that the Federation, the moment it was established, should absorb the whole of its possible share of revenue. Surely it was not anticipated that we should do anything of the kind?

Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - Nor should it be anticipated that we shall do so in the future.

Mr GLYNN - I am glad that the honorable member for North Svdney shares my view. I would not offer to return to the States a fixed sum based on the bald average of the last six years ; I should rather allow some elasticity, so that the States would be entitled to a proportionate share of the increased revenue which the Treasurer seems to admit will be obtained in the future.

Mr Mcwilliams - A fixed amount would give the Commonwealth the benefit of any increase in the revenue returns.

Mr.GLYNN.- That is so. As a memberof the Convention. I tabled, not only a motion relating to this question, but one designed to remove the difficulty in regard to the transferred properties, by proposing that we should take over a corresponding proportion of the debts of the States. At the time Sir Edmund - then Mr. - Barton seemed to favour the proposal, and called upon the leading financial authorities - the then Treasurers of the States - to express an opinion upon it. If I remember rightly, however, almost every one of them declared that it was not a good one. But what is the present position? The very principle that I then enunciated is embodied in the Property for Public Purposes Acquisition Act. It is true that it has not been put into operation owing to the disinclination of the States to accept such a solution of the difficulty, but the fact remains that, although the principle was objected to by the so-called financial experts of that time, it is now embodied in Commonwealth legislation.

Mr Fisher - lt is a perfectly sound principle.

Mr GLYNN - I think so. What folly it is to suggest that we should cause a valuation of , the transferred properties to be made, and hand over their capital value to the States. Surely, as regards payments, they will have to be dealt with eventually on theper capita principle. Our position is very like that of a partnership in which men with different aggregates of capital come together, and all that remains to be done is to adjust the difference. If we do not accept that solution, we must take over a part of the indebtedness which will wipe out at all events a portion of the values to be credited to each of the States, in respect of the transferred properties. If we do this, and also take over a proportion of the indebtedness of the States, the interest on which will be. sufficient to absorb the surplus returnable, the system may not at first work perfectly, but it will, at all events, rid us of the timidity of the States Treasurers in regard to their liabilities.

There is only one other matter to which I desire to refer. An effort was made in the Convention to bring the per capita system of distribution into force, if not on the expiration of the bookkeeping period, at 'all. events at the expiration of ten years from its initiation. If I remember rightly, I tabled a motion at the sitting of the Convention in Melbourne, but, unfortunately, it was dealt with at 3.30 a.m. It was then decided to trust to the Federal Parliament the solution of the difficulty. The time must come when we must apply the surplus on the unitary principle. There must be at some time or other an inequality in the distribution, but what has been the position with regard to Great Britain and Ireland? For many years, there was in force what I may be permitted to describe as a system of bookkeeping finance, and a portion of that system was continued until l8S3- Afterwards, there was, to a large extent, an amalgamation of the finances, although Ireland has been paying per capita a far larger share than is justifiable according to the capacity to pay of the component parts of the Union.

Mr Fisher - And Scotland is in an even worse position.

Mr GLYNN - I do not wish to introduce this consideration in order to disturb the component parts of the old country, but even there they did apply under conditions which seem to have less justification for it-

Mr Higgins - Does not the honorable and learned member think that the States are fast approximating to an equality per capita ?

Mr GLYNN - The honorable and learned member has hit the point which bears out my contention. I wish to refer briefly to the figures presented by the Treasurer. In the excellent appendices that have been placed in our hands, he shows that the receipts from Customs and Excise average £2 4s. 2d. per head of the population, but the position in regard to Western Australia is a source of trouble. It is estimated that the receipts from Customs and Excise in that State, leaving out, of course, the returns under the special Tariff which expires at the end of this year, average £3 :14s. per head.

Sir John Forrest - The special Tariff is not included in this calculation.

Mr GLYNN - Quite so, and they cannot disturb future calculations. I think, however, that a return was presented to the

Convention showing that in 1896 the receipts from Customs and Excise in Western Australia were equal to £8 6s. 7d. per head of the population. We know, too, that in 1900 they were equal to £5 6s. 3d. per head, whilst to-day they are only £3 14s. per head.

Sir John Forrest - They could not, I think, have been as high as the honorable and learned member suggests.

Mr GLYNN - I think I am correct in stating that in 1896 they were equal to about £8 per head.

Mr Higgins - And they have been falling .away ever since the Treasurer left the State Parliament.

Mr GLYNN - No doubt. The solution suggested at the Convention, is applicable at the present day. If we desire to rid ourselves of the difficulty in regard to the per capita system, why should not the distribution be for some time per head of the male population ?

Sir John Forrest - What is the need for hurrying this matter?

Mr GLYNN - Surely the right honorable gentleman does not think that we are to keep up for all time the present artificial system? Why did the Convention pre scribe that, the bookkeeping system should be compulsory for a period of five years, and that it should thereafter be dealt with according to the wisdom of the Parliament? Surely it was thought that at the end of the five years period we should have sufficient data to enable us to adopt a. system which would be contemplated as final.

Sir John Forrest - Scarcely. It was specially enacted that it should continue until Parliament otherwise provided.

Mr GLYNN - If we attemped a distribution per head of the male population I think that we should overcome the difficulty, but if we did not adopt that system we might, as suggested by the honorable member for North Sydney, make a per capita distribution, with an allowance for some time to Western Australia to cover possible loss - an allowance based upon the average for the last few years. During the first year of the operation of the Customs Tariff did not Tasmania suffer a loss of something like £161,000? Do not the figures show that Western Australia is vicariously suffering for the benefit of the Federation? Did not Queensland suffer a loss ?

Mr Fisher - More than all the others put together.

Mr GLYNN - But she has been fairly well compensated by special grants.

Mr Fisher - She receives no special grant.

Mr GLYNN - I mean that the Government policy has largely affected Queensland. She may have lost in one wav. but her sugar industry has been considered in another direction.

Mr Fisher - Not at all.

Mr GLYNN - I do not wish that consideration, however, to affect my argument. Tasmania in the first year of the operation of the Commonwealth Tariff suffered a shrinkage of about £161,000 in her revenue, and, although we might introduce a system that apparently might not do perfect justice to one of the Statesf or a few years, we ought to remember that the Tariff for the last five or six years has been unequal in its incidence upon the component States of the Union. I do not wish to trespass further on the time of the Committee. 1 have simply presented a few figures, which it occurred to me during a rather hurried perusal of the Treasurer's papers ought to be impressed upon those who seek to discount the good work done bv the Federation.

Suggest corrections