Second Reading
Database House Hansard
Date 30-11-1971
Source House of Reps
Parl No. 27
Electorate Braddon
Page 3861
Status Final
Speaker DAVIES, Ronald
Stage Second Reading
System Id hansard80/hansardr80/1971-11-30/0085


Mr DAVIES (Braddon) - The Bill before the Parliament provides for additional finance, totalling $4m, for war service land settlement in the agent states of South Australia, Western Australia and Tasmania. The scheme has dragged on and on and makes a mockery of the prediction by a former Minister in charge of war service land settlement, the later Sir Wilfrid Kent Hughes who in 1954 said, when introducing a Bill such as the one now before us, that the scheme would end in 5 years. Despite this prediction, the scheme has dragged on beyond 1959 for a further 12 years - 17 years in all - and the deception practised in setting rentals and valuations has gradually emerged until it is now crystal clear and warrants the inquiry sought by the Opposition.

Each year we go through this routine of reviewing the progress made under the scheme and over the years we have been able to get the Government to accept some recommendations, such as re-development, which have been of some assistance to the settlers concerned. Over the years, too, I have been an advocate for the release of option of purchase prices, long before redevelopment, because I have maintained time and time again in this House that this would have meant the 'green light on the hill' for the settlers. They would have known where they stood instead of being crippled with the burden of high rentals and annual commitments year after year while the option of purchase price was deliberately withheld from them. I hope to indicate as I develop this theme that it was deliberately withheld from the settlers.

In the debate on the Loan (War Service Land Settlement) Bill last year, I referred to a committee of the Legislative Council which had been set up by the Tasmanian

Parliament last year to inquire into war service land settlement with the following specific terms of reference:

1.   The administration of war service land settlement in Tasmania in relation to the amount of rent and other commitments demanded from settlers and the option of purchase price of properties.

2.   The responsibility for and the basis upon which opinion prices should be determined.

3.   Whether the basis of fixing option prices preserves sufficient equity to settlers, having regard to the effluxion of time since holdings were occupied.

The committee was indeed well qualified for the job. The Chairman was Hon. C. B. M. Fenton, a member of a pioneering farming family in Circular Head, Tasmania, with properties in the Smithton district and at Temma on the west coast, and a person well versed in the problems of war service land settlement, because the main problem areas of Preolenna, Mawbanna, Togari and King Island are within his electorate, as indeed they are mine. The other members of the committee were Messrs Dixon and Hodgman, 2 prominent lawyers, qualified to study the legal ramifications of the war service land settlement agreement between the Commonwealth and the State of Tasmania; Mr Foot, a qualified accountant, to probe the bookkeeping methods employed by the Authority; and Messrs Shaw and Cairns, 2 successful farmers, with Mr Cairns holding the post of chairman of the butter producing factory in his area and being head of the local government organisation in Tasmania.

Before dealing with the committee and its findings, I wish to refer to an earlier committee on King Island, which up until now has been treated as 'Confidential'. However I am advised that the ban now has been lifted and that the Select Committee of the Legislative Council, in its report tabled in August 1971, refers to this earlier committee. This earlier committee consisted of a chartered accountant, the Principal Research Officer of the Commonwealth Bureau of Agricultural Economics, the Assistant Under-Treasurer o.' Tasmania, a representative of the King Island Settlers Association and the Accountant from the Agricultural Bank of Tasmania. Honourable members will agree thai it is quite an impressive line-up. The committee found, after analysing the average costs and returns of dairy farms for the years 1957-58 to 1961-62 - I should like honourable members to take particular note Of the commencing year 1957, because that was when Tom Colquhoun put it over the State of Tasmania - that the average settler had, after providing for a living allowance of $2,534, a balance of, $80 a year from which he was expected to pay rent, interest and capital repayments to the Authority over the 5-year period, with payments of $308 during the last 3 years of the period to meet these commitments. These findings are set out on page 36 of its report, which is marked 'Confidential' but from which, as I said, the wraps have been lifted.

In ils findings, the committee reported that settlers on dairy farms on King Island could reasonably have been expected to pay only $200 a year to the Government for the 5 years from 1957 to J 962. Now we know why the report was classified as Confidential'. lt was because the Government warned it hushed up. The Government had no intention of reducing rentals to an economic figure., despite the findings of the competent group of experts to whom 1 have referred. The Tasmanian Government had vested control of war service land settlement in the Closer Settlement Board and it asked the Board to comment On the committee's findings in 1964. The Board recommended that rentals be adjusted >u a more equitable scale, but thu Commonwealth authorities just were not interested. They had other plans in mind. We naturally ask: Why was the Common.wealth not interested? For years now, I have maintained that the Commonwealth has insisted on high rentals and commitments in order to reduce the 'write-off' and I am pleased to note that this is borne ou! by the findings of the Select Committee of the Legislative Council.

Under the scheme, the excess cost of development was written ofl', if the cost of development exceeded the capital value of the farm. This excess or loss was to be shared as to 3/5 ths by the Commonwealth and as to 2/5 ths by the agent State. The bill to be borne by Tasmania as its share of the loss is now $ 12.7m. I agree with the Select Committee that the high level of rents insisted on by the Commonwealth was an important factor in increasing capital valuations and reducing the loss on developmental cost and subsequent write-off. I maintain that in order to satisfy any criticism by the Treasury of the everincreasing amount of *write-off' the Commonwealth, through its Authority, kept insisting on higher and higher rentals. One has only to consider how the Commonwealth set the rents. It looked at the farm and worked out a budget. It estimated the profit that the farm was capable of making and after providing for commitments on advances and a living allowance for the settler it considered that the balance should be available as the rent for the farm.

The Authority then took this rental figure and multiplied it by 40 to give the capital value. If the rent or the balance was $600 the capital value became $24,000. The higher the rents were fixed - that is the amount that was left over after the settler received his living allowance and so on and these were set by the Authority on its budget figures - so the higher the capital value and the less the write off value. Honourable members can see why the earlier report was hushed , up. The Committee found that these settlers between 1957 and 1962 had only $200 over. When that figure is multiplied by 40 the farms on King Island would have had a capital value of only $8,000. The influence of Treasury can be seen much clearer later - as I have stated before and will repeat again tonight - in trying to have the option price related to this inflated rental based capital value in order to avoid a further write off.

If an inquiry was needed before then there is a pressing need for one now. I must agree with the Select Committee of the Legislative Council when at page 10 of its remarks it staled:

As a level of rentals of 21 per cent of capital value of a holding was adopted by the authorities, the normal and equitable method of calculating the amount payable on this basis should have been lo rim! the capital value of the holding assessed by accepted valuation procedures, deduct therefrom the cost of structures and take 21 per cent of the result as rent. Working in reverse, to calculate capital value from an arbitrarily assessed rent may he an easy system of determining the write ofl' of development losses, but when its unrealistic impact affects the settler unfairly, this method cannot be condoned.

Surely in view of this indictment by a competent and impartial inquiry, instituted by an agent State, the Commonwealth must now set up a select committee to investigate the basis of rentals charged in the past, whether these were reasonable and, if not, the extent to which reduced rentals should apply retrospectively to the date of the allotment of the farm to the settler. I refer those who wish to check this method of fixing rentals to page 22 of the transcript of a judgement given earlier this year by Mr Justice Bright in the case of Henrich v. Dunsford in South Australia. After considering the new set of conditions sent to South Australia by the Commonwealth Minister on 30th July J953 His Honour summed up the position as follows:

So the real was to be 2i per cent of the capital value based on productivity with some prescribed deductions and additions.

I have outlined the basis of fixing rentals on the budget basis. T now turn to the change in fixing rentals as demanded by the Commonwealth authorities on 9th March 1956. This is what I meant by the interjection which I made when the honourable member for Dawson (Dr Patterson) was speaking. Despite strong opposition from the Closer Settlement Board in 1956 and final acceptance, reluctantly, only after several months of correspondence, the new increased scale based on per cow equivalent in. the case of dairy farms or fat Iamb equivalent in the case of sheep properties was finally agreed to. The closer settlement Board maintained, in fact, that the rentals should have been reduced to what is known as the third valuation or $198 per cow equivalent for the calculation of capital value from which rental was assessed as 2i per cent of that capital value. To illustrate this situation and the effect on rentals I point out that a dairy farm on King Island carrying 57 milking cows at a No. 3 valuation of $99 per cow equivalent paid a rental of $366. At the No. 4 and No. 5 valuation of $110 per cow equivalent the rental was $405. The new 1956 scale arranged by this Authority and by the Commonwealth and forced on to Tasmania increased the rental to $470. For a dairy farm with a carrying capacity of 57 dairy cows, the rental was increased from $366 to $470. The Committee drew attention to the inequalities in this plan. It stated:

The variations in basis of calculation that have been imposed have created undesirable and unfair discrepancies between settlers, sometimes in the same settlement.

For instance, it must surely be unfair that dairy farms, with the same assessed carrying capacity and therefore income earning ability, should have widely varying rates of annual rent.

Six of the dairy farms on Pegarah Estate al King Island are assessed at 57 dairy cows and replacements, and have annual rent;, ranging from J270 to $415.

I would like the Minister to give me an explanation. Here we have 6 dairy farms side by side, with the same carrying capacity of 5," dairy cows, and their rents range from $270 to $415. Where is the equality or justice in this? The same inequalities can be found in the case of sheep properties.

This is not confined to the State of Tasmania. I refer to the case earlier this year of Henrich versus Dunsford in South Australia and to the judgment of the Honourable Mr Justice Bright. Mr Henrich was a soldier settler, and in 1954 his rental was fixed at $400 per year. In 1963 the agent State, no doubt under instructions from Canberra, raised the rental from $400 to S962 per year. Mr Henrich made a declaration 'that the latter fixation, $962, was invalid and that the proper rent was $400, or if not, was a sum to be determined by computation either according to a method set forth in the petition or alternatively, according to a method as shall be thought just and in the latter event, he seeks an inquiry'.

I refer to the finding by Mr Justice Bright which is in keeping with the findings of the Tasmanian Select Committee. Mr Justice Bright said:

J find that the proper method of fixing the rental for the petitioner's land was to assess the value in terms of para. 5 (in other words, capital value) and to take 2i per cent of that figure with the adjustments provided therein.

In referring to valuation - I want to quote this very specifically - he said: 1 cannot find expressly lhat the valuations made were improper. It may be that they are completely just and proper. It is obvious that I cannot adjudge what is a proper rent. But is not clear that the valuations are proper and I am justified in directing the attention of the Crown to this matter.

I ask the Minister: What has he done about this case? The judgment refers to other irregularities His Honour continued:

I am therefore left quite uncertain whether the rent has ever been properly fixed and 1 am clear that it has never been property notified.

He went on to say, however, that he had no power to direct the Minister or to order an inquiry. But surely after the comments made by Mr Justice Bright and the report by the Tasmanian Select committee, an inquiry of this Parliament s'-ould be held, particularly in relation to valuations and rentals. J have referred to the change in fixing rents which was introduced in 1956. The Select Committee is critical of the former Commonwealth Director, of War Service Land Settlement, Mr Colquhoun who appeared before the Committee for 2 days. 1 want to make it clear that the Commonwealth Director was in the witness box for 2 days and he made no reference to the change in rentals upon which he insisted. The report states that he 'failed to inform the Committee that since 1956 all rentals have been determined from a set scale of rentals applying to carrying capacity levels'. The report continues: lt should be slated here that the efforts of the Committee to obtain a clear picture of the basis upon which rents were calculated in the various ureas and at various limes were frustrated and confused by the apparent Jack of frankness by ihe former Commonwealth Director of War Service Land Settlement. f ask the Minister, who in the Department still confuses him regarding the setting of rentals and the basis on which they are set? I have a letter here dated 17th September 1971 in reply to a letter in which I asked ihe Commonwealth Minister how the rents were fixed. I want the Minister to listen to this. This is the basis on which they were set right up to 1956. The letter states:

In practice, a budget is prepared on the estimated returns and the cost which would be expected to apply to a holding, commitments which had to be met on borrowed capital and a reasonable provision for living expenses. The surplus of the budget would be the sum a settler could afford to pay in rent.

The Commonwealth Minister is still being advised by the Commonwealth Department - because he wrote the letter - that this is the way in which rentals are being fixed. But the Minister for Agriculture in Tasmania knows different. He knows that the former Commonwealth Director of War Service Land Settlement put the boot down in 1956 ami because of changing economic circumstances on farms - I hope to have a chance to deal with this later - the method o! assessing rentals was changed completely The Munster for Agriculture in Tasmania knows this, but the Commonwealth Minister for Primary Industry does not. In a letter dated 4th November 1971, the Tasmanian Minister for Agriculture says:

In regard to determination of rentals since 1 956, these are calculated on the assessed carrying capacity of each holding at the maturity of the planned work, based on the average settler management.

This assessment is then applied to a scale of rentals per Fat Lamb Ewe Equivalent, Dry Sheep Equivalent or Dairy Cow and Replacement Equivalent, prepared by the Bureau of Agricultural Economics and supplied by the Commonwealth War Service Land Settlement Authority.

So the Department told the State Minister for Agriculture one thing and the Commonwealth Minister for Primary Industry another. This confusion has existed from the date when the method of determination of rentals was changed under pressure from the Commonwealth in 1956. When the Select Committee placed the Commonwealth Director of War Service Land Settlement in the witness box last year - he was there for 2 days - he did not advise the members about the change. The Committee had to drag from some other witnesses the evidence that there had been this dramatic change in the method of assessing rentals. The budget method of determining rentals was scrapped in 1956 because there had been good seasons until then and the profitability level enabled the Authority to get the maximum rental possible. But it set the budget, there was a fair bit over, it took that as the rent, multiplied it by 40 and got a very high capital value for the farm. So the Authority was able to push the capital value up close to the development cost and there was less write-off to satisfy Treasury demands. But when conditions changed mid rising costs, falling prices and lower levels of profitability would have revealed in a budget the inability to pay the higher rents, the method of fixing rentals also charged, despite very strong opposition from the Tasmanian authorities. The rentals were pushed up, despite declining farm income, in an attempt to reduce the write-off and make things look better than they were.

I turn now to the value or option of purchase prices. There can be no doubt now that the allegations of dummying the figures are correct and no Minister can sit back and close his eyes now.

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