Issued by the Dominions Office. REPORT OF THE BRITISH ECONOMIC MISSION TO AUSTRALIA | NOMINATED BY HIS MAJESTY'S GOVERNMENT IN GREAT BRITAIN AT THE REQUEST OF HIS ‘MAJESTY'S. GOVERNMENT - IN THE COMMONWEALTH OF AUSTRALIA 7th JANUARY 1929 LONDON: PRINTED AND PUBLISHED BY HIS MAJESTY'S STATIONERY OFFICE, To be purchased directly from HLM. STATIONERY OFFICE ‘at the following addresses Adastral House, Kingsway, London, W.C.2; 120, George Street, Edinburgh: Vork Street, Manchester; 1, St. Andrew's Crescent, Cardiff; 185, Donegall Square: West, Belfast; or through anv Rookseller. i QO Price 2s. 6d. Net Dominions No. 2 TOe223.2 Issued by the Dominions Office. REPORT OF THE BRITISH ECONOMIC MISSION TO AUSTRALIA NOMINATED BY HIS MAJESTY'S GOVERNMENT IN GREAT BRITAIN AT THE REQUEST OF HIS MAJESTY'S GOVERNMENT IN THE COMMONWEALTH OF AUSTRALIA 7th JANUARY 1929 Tix ae a i a er NTT LONDON: PRINTED AND PUBLISHED BY HIS MAJESTY’S STATIONERY OFFICE, lo be purchased directly from H.M. STATIONERY OFFICE at the following addresses Adastral House, Kingsway, London, W.C.z; 120, George Street, Edinburgh; York Street, Manchester; 1, St. Andrew’s Crescent, Cardiff: 15, Donegall Square West, Belfast; cr through any Bookseller. [G20 Dominions No, 2 70-222-2 Price 2s. 6c, Net CONTENTS. Page. Part I. Introduction ... oe Part II. Main Problems — Part III. Summary of Conclusions and Recommendations Part IV. Supplementary Memoranda and Conclusions... 3 3 27 an Supplementary Memoranda— A. Transport pom B. Taxation ... ‘ee C. Banking ... D. The Development and Migration Commission, the Council for Scientific and Industrial Research, and Economic Research 50 E. The Pastoral Industry ... -— ve 51 F. Marketing and Distribution ... i .. 55 G. Reciprocal Trade between Australia and Great Britain = ... 56 H. The Civil Services ... ... BO Appendix— Redemption of Commonwealth Debt Redemption of State Debts 81 B62 REPORT OF THE BRITISH ECONOMIC MISSION. TO AUSTRALIA. T'o the Rt. Hon. S. M. Bruce, C.H.,,M.C.,, M.P., Prime Minister of the Commonwealth of Australia, Canberra. F.C.'T PART I. INTRODUCTION. 1. At the time of the Imperial Conference held in the autumn of 1926, the Prime Minister of the Commonwealth of Australia raised the question of sending a mission of four independent business men from the United Kingdom to Australia. It was subsequently arranged, at the request of His Majesty's Government in the Commonwealth of Australia, that the personnel of such a mission should be nominated by His Majesty’s Government in Great Britain and should proceed to Australia with the following terms of reference :— ‘ To confer with the Commonwealth and State Governments, with the Development and Migration Commission and the leaders of industry and commerce in Australia on the development of Australian resources and on. any other matters of mutual economic interest to Great Britain and the Commonwealth, which may tend to the promotion of trade between the two countries and the increase of settlement in Australia.’ 2. We were nominated accordingly by His Majesty's Government In Great Britain; our selection was approved by the Commonwealth Government ; we sailed from Marseilles on the Slst August, 1928, and landed at Fremantle on 25th September. Since that date we have visited every State of the Commonwealth and have travelled some 20,000 miles within Australia. We have seen areas of primary production and industrial centres and have held over a hundred conferences with Governments and their officials, with representative public bodies, with labour organizations, and with associations of producers and traders of every kind concerned both with primary and with secondary industries.” In addition we have, as individuals, met and conferred with many of the leading citizens of the Commonwealth. 3. None of us had previously visited Australia, but we appreciated that Australia presents the only example in the world of one people possessing and controlling an island continent; that, owing to its size and geographical position, Australia covers a large range of climatic conditions; and that a great part of Australia is situated in what is known to geographers as the arid belt of the Southern Hemisphere. We knew that the development of Australia had proceeded from harbour settlements, through pastoral settlements Appointnent and jerms of reference. Preliminary ybservations. 1 4G9 An on the fringe of the continent, and that later on mineral discoveries, paricularly discoveries of gold, and the pursuit of agriculture had resulted in a large increase of population, followed by the development of secondary industries. We knew that these had been fostered by various means to meet a natural desire for independence of other countries in the matter of the provision of the necessaries of life for the Australian people and for the provision of employment for a growing population. We knew that these developments had resulted in the establishment of a great Dominion of the British Empire, consisting of a people almost entirely of British descent and numbering over 6,000,000 persons, whose record of achievement as pioneers, administrators and soldiers, stands as high as any to be found in the history of the world. But it was evident that if we were to do justice to our task we must acquire a knowledge of Australia much more intimate than any general acquaintance with the outlines of her history can give. 4. Our itinerary has been lengthy and our investigations varied. The effect produced by them on our minds has been, in many cases, intensified by going over much similar ground and being confronted with similar problems in each State. 5. The opinions we express are based on the evidence which has come before us In various ways, at our numerous conferences, and in official reports and other literature which has been furnished to us. In the time at our disposal it is obvious that we have been unable to conduct a detailed scrutiny into this evidence. Our report should be looked at as representing the judgment of four business men on the data placed before us after a brief but comprehensive survey of the conditions of the country. We realize that others have had greater experience in Australia than we can pretend to. We are indeed struck with the ability of the reports of Royal Commissions and other enquiring bodies in the past, and with the scope and thoroughness of the evidence furnished to them. We are aware that our own enquiries on specific subjects may have been less exhaustive than theirs, and that our knowledge is less profound than that of many able writers and thinkers on political and economic subjects in Australia; but their knowledge, in so far as it is recorded, has been before ns when we have formed our judgment. 6. Our terms of reference, it will be observed, lay emphasis on the problems of the promotion of trade and commerce between Great Britain and Australia and of the increase of settlement in Australia. It early became clear to us that these problems should be approached from the point of view of what is best for Australia herself in the belief that the increase of Australia’s prosperity and productivity is an essential condition of increased trade with Great Britain. Given the maximum possible prosperity and wealth production in Australia, the ties between Australia and Great Britain are sufficiently close and the sentiments of common loyalty which bind the one to the other are sufficiently strong to secure that the maximum commercial intercourse will follow. Given the maximum possible power of absorbing population in Australia her determination to remain the most British community in the world is sufficiently strong to secure that it will be from Great Britain that the flow of immigration will come. But if the desired conditions of Australian prosperity and power to absorb population are not present, artificial means of promoting trade with and migration from Great Britain must fail. We have no shortsighted idea of attempting to induce Australia to carry on more trade or to take more migrants from Great Britain at the cost of lasting economic sacrifice on her part. We believe that any such effort would be bound to defeat itself. We have, therefore, to consider whether there are any modifications of Australia’s financial and economic- practice, which, if adopted, might, by enhancing her own prosperity, conduce to the realization of the objects envisaged bv our terms of reference. PART II. MAIN PROBLEMS. 7. We turn first to Australian finance. Of this subject possibly the best general conspectus can be obtained by considering the extent of the combined Commonwealth and State budgets for a period of years. By this means it is possible to visualize the relation of Australia’s borrowing to her ordinary year to year revenue and expenditure. We therefore give in the following tables the revenue, expenditure, surpluses and deficits of Australia during the last six years, shown as a total, and per head of population. From these it appears that during that period Australia balanced her budget to within 0.73 per cent., and that the average annual deficit per head of population was 4s. Finance, revenue, anc expenditure. CONSOLIDATED REVENUE AND EXPENDITURE THEREFROM. COMMONWEALTH AND STATES COMBINED. I. Amount. Year ended 30th June. 1921-22 1922-23 1923-24 1924-25 (925-26 1998-97 ose BY ooo es ae “ne aes ave sae arn ses are are oe ee Total for six years Revenue 1 000.000. 143.0 45.7 151.8 60.3 166.1 (RO BH Q47 A Expenditure, £1.000.000. 145.6 144.8 154.5 160.2 170.8 78 8 | O54 R Surplus, | Deficit, £1.000.000. £1.000 000 2.6 2.7 ; 5 0 70 14Q9 II. Per Head of Population. Public debt. Year ended 30th June. Revenue. Expenditure. Qurvlus. Deficit. 1921-22... o 1922-23 ... wee 1923-24... nol 1924-25 ... wey 1925-26 ... 5 "Q9R._97 i aa a £8 a. 25 19 3 25 17 5 26 7 11 75 9 ww 14 4 29 11 0 cs d. % 8 7 25 14 0 26 17 4 27 hb 7 28 9 11 2 4 7 s. d. 3 5 os Pa s. d. 9 4 os 5 7 1 10 Average for six years »7 8 RAR ' 27 7 A” These figures are satisfactory enough, but we cannot feel the same degree of satisfaction in regard to Australia’s public indebtedness, though there is no doubt of her amvle power to discharge her obligations. 8. The public debt of the Commonwealth and States for the six vears to 1928 is shown hereunder :— AUSTRALIAN PuBric DEBT. Total Debt on Account of — 30th June. 1922 soe 1923 a | 924 - 1925 we 1926 i wi 1927 se vey 1998 . Jommonwealth, £1.000.000, 364.8 358.5 242.0 32.1 AT 364. F AT States, £1.000.000 319.6 47.0 388.3 301.0 r92q, 1 677.1 792 () Commonwealth and States combined. £1 000.000. 384.4 905.5 950.3 963.1 V4.0 042.7 NGF KR Combined Debt per Head of Population. £ 159 159 164 162 167 169 174 9. For the redemption of the debt of both Commonwealth and States an annual payment on a compound interest basis is being made to a sinking fund, which will redeem the whole of the existing debt within the next 58 years, and will provide for the liquidation of any new loans over periods ranging from 30 to 53 years from the dates of flotation.* 10. The amount of the combined debts of the Commonwealth and of the States, and the frequent recourse to the loan market which has taken place in the years since the war has to some extent * The arrangements at present existing for the redemption of Australia’s debt are shown in an Appendix to this report. damaged Australian credit, but in our judgment the mere magnitude of the debt is not in itself evidence of an unwise borrowing policy. 11. In a new country, still largely undeveloped, where the recognized scope of the activities of Governments is as wide as it ls in Australia, it may be quite proper that large sums of capital for development should be raised by means of public loans; but It is essential that the development schemes, financed by means of them, should be self-supporting within a reasonable measure of time, which we recognize may be longer in the case of a Government than in the case of a private undertaking. By this we mean that within such measure of time they should, either directly, or indirectly through the increased taxable capacity of the community and the enhanced value and price of Government-owned land attributable to them, provide at least their own working costs, interest on the loan capital invested in them, and a sinking fund sufficient to provide for its repayment when it falls due. To the extent to which they fail to do so they involve the State im loss, and to the extent of that loss inflation takes place, the dead weight burden of debt on the State is increased and the rest of the community are, in effect, paying to the persons served by them a subsidy which will be reflected in a general increase in the costs of living and production. We are led to the conclusion that the Australian community is suffering heavily from troubles of this kind. 12. According to figures with which the Treasurer of the Commonwealth has been good enough to furnish us, the respective positions of the Commonwealth and of the States as regards their indebtedness at the 30th June, 1922, and at the 30th June, 1998, were as shown in the following tables *—— In Australia| Overseas Total Per head of Population. 30th June, 1922— Commonwealth Debt... States’ Debt ... ... Total ... ves x 250,000,000 299.000.000 £L 115,000,000 297.000.000 £ 365,000,000* 519.000.0000 £ 66 93 172.000.000 £12 000 000 R84 000.000 159 30th June, 1928— Commonwealth Debt... States’ Debt ,., .. Total ... van 219,000,000 339'000.000 53,000,000 391 000.000 372,000,000* 793.000.000 59 {15 551.000.000 | 544.000.000 295.000.0000 174 Objects of Australian borrowing. Comparison >f the position of the Commonwealthand of ihe States as regards public debt. Exclusive of loans raised for the States. 13. Of the total Commonwealth debt at the 30th June, 1928, £293,000,000 was deadweight War Debt and £79,000,000 was for works such as Post Office works, Commonwealth Railways and +499 AA War Service Homes. The corresponding figures for 1022 were £333,000,000 and £32,000,000, respectively, so that during the six years from 1922 to 1928 deadweight War Debt was reduced by £40,000,000 and Works Debt was increased by £47,000,000. Tt is, of course, only the latter that the community can expect to be represented by self-supporting undertakings providing their own interest or by assets giving a service equivalent to the corresponding interest paid in respect of them out of the proceeds of taxation. The States have no War Debt, for though it may be true that their post-war resettlement schemes were a direct consequence of the war, they were, at least in their inception, intended to be self-supporting. The total debt of the States in 1922 was approximately £519,000,000, and has, therefore, increased by some £204,000,000 in the six years from 1922 to 1928. The position as regards the interest payable, the amount thereof available from revenue-producing assets and the balance which had to be covered from taxation, in respect of the Commonwealth and the States’ debt respectively, for the years 1921-22 and 1926-27 (the latest year for which figures are available), is set out in tabular form hereunder :— 1921-22— Commonwealth oe States ... ven Total .. 1926-27 — Commonwealth Qtates ... Total Interest Payable. Amount Available from Revenuenroducinge Assets Balance Covered by Taxation. 18,976,803 20.807 026 x 876,202 15,038.350 £ 18,100,601 5.768.676 29.783.829 15.914. 552 23.869.277 20,749,118 |, 2,768,467 31.373.271 | 91661.522 £9 199 384 21499.089 | 97892.395 14. Tt will be seen that while the total interest charge in respect of the Commonwealth debt increased by about £1,800,000 during the five years, the amount of it which had to be provided by taxation, notwithstanding the change referred to above in the relation between deadweight War Debt and Works Debt, was reduced only by about £120,000. 15. The position is more serious in regard to the combined debt of the States. The proportion of the interest payable which was available from revenue-producing assets fell and, correspondingly, the proportion covered by taxation rose by 3.2 per cent. during the five years. The amount covered by taxation rose by 68 per ~ent. (from £5.786.676 to £9.711.749). while the total interest charge rose by a little over 50 per cent. (from £20,807,026 to £31,373,271). The inference, which is confirmed by such observations as we have been able to make, is that this position results from heavy expenditure of loan capital by the States on developmental undertakings which have not proved to be self-supporting and have imposed a heavy burden on the general community and consequently on the cost of living and production. 16. It is at present a matter of great difficulty to ascertain the exact financial position of each object or undertaking on which loan moneys have been expended in Australia, though we are very glad to note that the Commonwealth Budget papers are now being prepared in a form which goes far to remove the difficulty so far as the Commonwealth is concerned. The same is now true in conspicuous degree of New South Wales, and of South Australia as regards its States Railways, concerning which an admirably clear statement by the Railway Commissioner shows, for the year ended 30th June, 1928, a deficit on revenue account of just under £1,000,000 and an accumulated deficit of just over £8,000,000. We would respectfully suggest that the other States would do well to follow these examples, so that the public may be better able to understand clearly how its funds are being spent and with what result in each direction. 17. Certain other examples of heavy loan expenditure seem to us to be worth citing. 18. Capital expenditure on the Murrumbidgee Irrigation Scheme in New South Wales to the amount of over £9,000,000 had been incurred to the 30th June, 1927; on group settlement in Western Australia to the amount of nearly £5,600,000 to the 30th June, 1928; and on the Murray River Scheme, including the Hume Reservoir, to the amount of over £6,000,000 to 30th June, 1928, while it is estimated that a further £4,000,000 will be required to complete the Hume Reservoir. These figures of capital expenditure are exclusive in all cases of the amounts advanced to persons served by the schemes referred to. On Closer Settlement in all States over £12,200,000 had been advanced as at the 30th June, 1927, of which nearly £8.600,000 was then outstanding. On Soldier Settlement, of which, however, it is fair to remember that a main motive was the discharge of a debt of honour to the returned soldiers, over #£45,500,000 had been advanced, of which Just over £36,000,000 was then outstanding. 19. We are not in a position to estimate the extent to which these advances and these capital expenditures, with the interest thereon, may be ultimately recoverable. But when, for instance, We are told that out of a total expenditure, including advances to Settlers, of nearly £8,000.000 on group settlement in Western Form of public accounts. Examples of heavy loan axpenditure. 15 Causes of anprofitable sxpenditure. Che Murray River Scheme. Australia, a large proportion may have to be written off as lost; or when we are told that of the irrigable land made available by the Murrambidgee Scheme only about one-third is being used for its intended purpose, and that only a fraction of the interest allocable to that one-third is being received, we cannot avoid the apprehension that a very heavy and permanent load is being laid 1pon the community. 20. Among the causes which have led to unprofitable expenditure we are led by much evidence that we have received to believe that an important element is the undertaking of schemes, such as railway schemes, under the pressure of section interests, without due regard to their financial and economic justification, that is fo say, without due regard to the interests of the community as a whole. 21. Further, in some cases where Governments have undertaken schemes of development with the best intentions and motives they have, we believe, undertaken them without adequate preliminary investigation and without sufficient use and co-ordination of the expert scientific and technical knowledge which might have been made available to them from the resources of their own departments. We have, for instance, come across cases where an area has been laid out for an irrigation scheme without a preliminary soil survey to make sure of the suitability of the ground for the purposes for which the irrigation has been provided. Again, where schemes have been undertaken which should have mvolved the co-operation of more than one State, as, for example, the scheme involving the use of the waters of the Murray River, they have been started without such co-operation and without a combined survey of the probable markets for the produce which it was contemplated would result from the use of the waters. The authorities concerned, namely, the Governments of New South Wales, Victoria, South Australia and the Commonwealth, are indeed now striving in concert with one another to rectify the past; but their difficulties, which are undoubtedly great, would have been less if there had been combined investigation by them all of the possibilities of the scheme and of its probable financial results, in the light of a co-ordination of all the expert and scientific knowledge available to them, before any considerable expenditure was incurred by any of them. . 22. The Murray River Scheme is indeed a good illustration of the causes which have led to much of what we feel to be unsatisfactory in the present position of Australia as regards her public debt. As we understand it, there is at present no intention of proceeding further with the original plan for the construction of locks; and the weirs which have been made are to be used for irrigation purposes, the existing locks serving to allow local river transport to pass between them. 23. It has, we understand, been decided to complete the Hume Dam at an estimated cost of £4,000,000 to its full height as recommended by the engineering advisers of the Governments concerned ; and meanwhile the Murray River Advisory Committee has been sntrusted with the by no means easy task of advising on the question to what purposes the new areas of land, which will be made irrigable by means of the Hume Reservoir, can be profitably put, having regard to the difficulty of disposing of the produce from the irrigation areas already existing, and on the extent to which any profits which may fairly be anticipated from the new irrigable areas will outweigh the loss which must be occasioned by the submerging of valuable land already in use above the site of the Hume Reservoir, when the dam is completed. We cannot avoid the conclusion that much loss, now inevitable, would have been avoided if the whole series of problems involved in this scheme had been more exhaustively investigated at the outset. Even now it would seem worth while to consider whether the risk of loss involved in suspending the completion of the Hume Reservoir until the investigation now proceeding is finished may not be less than she risk of loss which would occur if the Reservoir should be completed and it should be found impossible to recommend any ase to which the waters conserved by it could in present circumstances be profitably put. It might, for instance, be found to be wise, once the foundations have been installed of a character capable of carrying the dam to the full height ultimately contemplated, to finish off the dam temporarily to a lesser height, and thus to save considerable sums of money while providing for the conservation of a water supply sufficient for all purposes which tan at present be foreseen. 24. A further general observation suggests itself. Ioan moneys raised overseas can only come to Australia in the form of goods. These goods are subject to the Customs duties provided for under the Commonwealth 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 ‘unds to revenue is obviously bad finance. 25. We conclude then that while of course the Australian Governments must continue to borrow for the completion of schemes on which they are already embarked (excepting such, if there be any, as on a careful review of them do not appear likely to yield a fair return when completed on the fresh capital needed bo complete them), they should proceed very cautiously in the matter of the initiation of new schemes involving the expenditure of borrowed money; and should submit them before initiation to the most rigorous scrutiny from the point of view of their prospects Diversion of loan money to revenue. Suggested Jorrowing policy of being self-supporting at a reasonably early stage. We have no doubt that the resources of Australia are amply sufficient to support a prudent borrowing policy of this character, the adoption of which would in itself do much to strengthen Australia’s credit. 26. Generally, we are so much impressed with the financial and sconomic risks surrounding Government borrowing for purposes of development that we are moved to suggest that Governments should restrict the sphere of their activities in this direction and in shat of business undertakings and should leave the field more widely open than in the past to private enterprise, possibly adoptng the method indicated below in paragraph 28. 27. The sphere of Government activity in Australia must, in any case, be large, and things have gone too far for us to discuss to-day such matters as the construction of railways or works for he conservation and distribution of water by private enterprise. But a very wide field remains open which Australian Governments have, to a great extent, entered, and here we think that these Governments would be wise to go no further. Within this field we think that private enterprise, with no public purse to fall back upon in the event of failure, exposed to no political pressure to embark apon unprofitable courses, and stimulated by the hope to gain to the maximum of economy and efficiency, would produce results more beneficial to Australia as a whole than the present system is calculated to yield. Progress might indeed be slower than in the case of successful Government action, but it would be more sure, and the risks of loss and failure which entail not progress but regression would be greatly diminished. - 98. A middle course between purely governmental and purely private enterprise might be found in appropriate cases if the capital for development were found by companies formed for the purpose, to the extent of not less than one-half in the shape of ordinary shares issued for cash, and the remainder in the shape of vreference shares or debentures, the interest on which might be yuaranteed by the Government for a limited number of years. The risks of loss would then fall primarily on the holders of the ordinary shares, while all profits realized after payment of preference or lebenture interest would accrue to them. 99. We realize that a curtailment of loan expenditure by the Australian Governments must involve the inevitable concomitants of deflation. Deflation nevertheless remains the course of wisdom if it be true, as we think it is, that free expenditure on schemes very doubtfully remunerative has contributed to produce an inflated sosition. The temporary apparent prosperity which such a posiion creates cannot in any case be lasting. If it is sought to pro-‘ong it, it brings with it its own inevitable nemesis. Conclusion 30. Our final conclusion in regard to Australia’s finance is that 230 linn her creditors have no cause whatever for present anxiety, because ATO. she is still borrowing well within her actual and potential resources, Restriction of objects of Government borrowing, Private anterprise. Possibility of sombined Government and private snterprise. Consejuences of surtailed oan sxpenditure. but we are of opinion that she has not in past years always borrowed wisely, and that she has pledged to too great an extent those future resources, and mortgaged too deeply that future prosperity upon which she can reasonably reckon, thus throwing the burden of her borrowings upon future generations who will have their own needs to meet. 81. We venture to quote an opinion expressed by two eminent citizens in a recent report to the Government of South Australia :— ‘“ We have the greatest possible confidence in the resources. of Australia. As soon as statesmen and people realize that, while we owe money abroad and require to sell our products abroad, our standard of Government and private expenditure must be in relation to our position in the world’s affairs, then will our real prosperity be established. No Act of Parliament can alter this basic truth. That a new country is justified in borrowing money for reproductive works has always been recognized, but results must be achieved and production must advance in proportion to the public debt incurred.” 32. A less ambitious borrowing policy such as we have outlined above can be contemplated with confidence. In the first place we cordially welcome the unanimous acceptance by the States of the Financial Agreement under which the Loan Council is established and the overwhelming majority obtained at the recent referendum for the necessary amendment of the Constitution to enable the Commonwealth Government to validate the Agreement. It now remains only for the Commonwealth Parliament to authorize the conclusion of the Agreement, and our knowledge of the London money market enables us to say with confidence that the sooner that final step is taken the better it will be for Australian credit. The conclusion of the Agreement will mark the definite end of a condition of affairs when seven different Australian Governments, sach acting independently of the other, entered the loan market with no regard for, and indeed, to the prejudice of, each other’s mterests. Collective borrowing by the Commonwealth on its own and on the States’ behalf will mean cheaper borrowing than would otherwise have been possible. The provision of a regular sinking fund both for existing and for future loans will be heartily welcomed in London; and if the objects of the loans are such as we have attempted generally to indicate above we have no doubt of their favourable reception. It is true that the Loan Council will not 5e empowered to deal with the merits of the loan programme of the Commonwealth and of the individual States, but only with the total amount that can be borrowed in any year. Nevertheless we teel certain that the discussions which will take place in the Council will conduce to prudence in the objects of public borrowings as well as to moderation in their amounts, and that mutual consultation in this, as in many other spheres, can be productive only of good. [he Financial Agreement wind the Loa Council. ynsultation ith Banks. he eveloplent and ligration ommission. figration. 33. When loans have to be placed it is in our judgment essential shat the Banks and other financial authorities, and particularly in the case of loans placed in London the Bank of England, should be consulted, sufficiently long in advance, as to the time at which and the terms on which they should be raised, and that the objects of sach loan should be fully explained in the prospectus of it; but we do not apprehend that there can be any obstacle to compliance with ‘hese conditions. 34. In the second place we welcome the creation of the Developnent and Migration Commission and of the Council for Scientific ind Industrial Research. So far as borrowing by the States is conerned, the Development and Migration Commission has a definite ‘ocus standi only when it is proposed that a loan should be raised ander what is known as the £34,000,000 Agreement, to which we shall have occasion to refer again hereafter, because the Development and Migration Commission is a body created by and responsible to the Commonwealth Government, and it is only when State loans are raised under the £34,000,000 Agreement that the Commonwealth Government is directly concerned in them. Nevertheless there is, naturally and properly, a strong inducement afforded to State Governments wishing to borrow for schemes of development to bring their schemes within the scope of the Agreement because of the material assistance given under it by the British and Commonwealth Governments; and the machinery provided through the Development and Migration Commission for the preliminary investigation of such schemes is well calculated to ensure that they shall be of the character which we have indicated above as being, in our opinion, necessary. The Development and Migration Commission is in a position not only to bring its own critical faculty to bear on the projects laid before it and to give its valuable services for their perfection, but also, working as it does through Committees established in each State, to secure that collection and co-ordination of available knowledge before schemes are undertaken which, as we have said, has too often been lacking in the past. The Development and Migration Commission is, in short, the nucleus of combined and co-ordinated effort for prudent development ; and for the work which it has done upon the subjects especially referred to it by the Commonwealth Government, as well as for what has been done in consequence, we have nothing but praise to offer. We hope that the example set by it in the sphere in which the Commonwealth is directly interested will be increasingly followed in the field of individual State action. 35. The Commission, however, owes its origin to the interest taken by both the British and the Commonwealth Governments in the problem of migration from Great Britain to Australia. This problem of migration requires special attention at our hands. We appreciate the aim of the British Government and we applaud the offorts which are being made to further it through divers agencies. ‘A particularly in regard to the migration to Australia of children, young people, and women for domestic employment. We are satisfied that Australia, enthusiastically devoted as she is to the British connection and boasting as she rightly does of a population 98 per cent. British, desires nothing more than such migration; but we are faced with the fact that, while Australia’s door remains wide open to any British subject who cares to pass through it, the total numbers of assisted migrants have in recent years shown a sensible decline. The figures are as follows :— Assisted Migrants from British Isles. Year. Requisitioned. Nominated. Total. 1923 ce er ce [924 wn _— 5s 1925 J. er ces 926 - _ ve 1927 wh hp soe 1928 (estimated)... oe. 15,496 12,611 10,131 7,884 7,309 glE 1.015 2-95 106 7¢ ha F< 26,511 25.036 24,827 31,260 30,125 29.999 36. This diminution is variously accounted for.. The fiscal and financial system and the industrial conditions of Australia, to which we shall have occasion to refer later, and the high level of prices resulting from them, may not be conducive to migration. Droughts in recent years affecting the primary production, and consequently the prosperity, of Australia may have contributed to increase the difficulty. Some recent diminution in the previously contemplated rate of expenditure of borrowed money by the States would seem to have brought with it the inevitable consequences of deflation, necessary as such deflation undoubtedly is, in the shape of unemployment in the large cities; and, though the Australian statistics in this matter are not compiled upon the basis of wholly satisfactory data, so that the latest figure given to us of unemployment, viz., 11.4 per cent. of the working population, may not mean the same thing as a similar figure would mean in Great Britain, there is no doubt that unemployment in Australia has of late been upon the increase. The circumstances of the time are thps not ‘avourable to migration from overseas, and when, as has recently been the case in Western Australia, there appear to be good openings for new settlers, these openings are rapidly filled by persons coming from the Hastern States. 37. There are, therefore, great difficulties in the way of the successful operation of the £34,000,000 Agreement. An agreement which starts by laying on the table, if we may use the expression, a very large sum of loan monev and contemplates that the manner Causes of diminution of assisted migration. The £34,000,00 Agreement Che ifficulty of. quiring the ‘tates to ceept secific uotas of ssisted nigrants. in which it shall be spent by the States shall be considered afterwards 1s in any case open to serious. criticism from the point of view of its tendency to encourage the proposal of schemes not fully matured, particularly when the operation of the agreement is confined within a limited period of time. The Development and Migration Commission is using every effort to prevent this danger, and we are not prepared to say that the new schemes for the approval of which it is directly responsible, as distinguished from schemes which may be described as legacies from the period prior to the Commission’s appointment, are likely to be unremunerative. But in present circumstances the field within which schemes such as the Commission is likely to be able to approve can be put forward is comparatively narrow. It is confined, practically entirely, to the field of more intensive primary production. It does not include large scale cattle ranching or the establishment of further extensive sheep stations, which in any case do not appear to be capable of much expansion, and covers wool production only so far as that can be combined with agriculture and the raising of fat lambs for the meat market. Now almost the only commodities the production of which seems likely to be enhanced by schemes approved by the Development and Migration Commission, and which are to-day being exported and sold at the world’s prices without the direct assistance of protective customs duties or some form of bounty, to say nothing of such forms of indirect assistance as railway carriage paid for in greater or lesser degree out of the taxation of the people generally, are wheat and the products of the sheep in the form of wool, meat and skins. We are therefore, we *hink, justified in describing the field as comparatively narrow. 38. From the point of view of migration a special difficulty oresents itself. Under the £34,000,000 Agreement each State indertaking an approved scheme binds itself to accept a certain wumber of assisted migrants proportionate to the capital expendi-“ure incurred in the scheme. This obligation to take a specific juota of migrants in respect of each approved scheme is apt to cause embarrassment to the States, though we have no doubt at all of their complete desire to fulfil it. We have already observed that the opportunities for migration offered by recent developments in Western Australia have been taken advantage of by persons arriving from the Eastern States, whose settlement in Western Australia the Government of that State is of course powerless to prevent, even if it wished to do so. Similar effects would be likely bo follow from similar causes in the other mainly primary producing States. Moreover it has to be borne in mind that the immigration which follows from the successful extension of primary production is caused in part directly and in part, perhaps in the main, indirectly. The immigration directly caused comes to the locality where the extension of primary production is taking place. It sets up an increased demand for the products of secondary industries. and the immigration indirectly caused results from this demand. The secondary industries are mainly established in the great manufacturing States of New South Wales and Victoria, so that it is to be anticipated that the successful development of primary industries in the other States will, so far as its indirect results are concerned, be reflected in increased immigration into New South Wales and Victoria. It follows that the primary producing States are likely to have difficulty in absorbing their prescribed quotas of migrants, though the obligation to do so will remain upon them, while on the other hand the manufacturing States being able to point to the increased immigration within their borders will be able to satisfy their obligations in the matter without difficulty, really as the result of what has been done in other States. 39. These considerations lead us to suggest that it might be well if it were possible to secure the concurrence of all the Governments concerned, that is to say, the British Government, the Commonwealth Government and the State Governments, in such an amendment of the Agreement as would provide that the funds made available under it might be used not only for schemes involving the acceptance of specific numbers of migrants by the individual States, but also for work calculated to promote migration into Australia generally. 40. This question raises a subject which appears to us to be of the greatest importance and to go far beyond the implications of the £34,000,000 Agreement itself. We have been much struck by what we have seen and heard of the comparatively small degree to which intensive use is made of the land already in occupation in Australia. Schemes are being projected for extensive development by pushing railway and road construction at heavy capital cost into territory as yet unsettled, while it would seem that more Intensive use of land already settled or partially settled might, at far less cost, be productive of a greater increase in population and in wealth production than the extensive schemes are likely to yield. 41. We enter here upon the wide field of scientific research and of the increase of technical knowledge as applied to wealth production. We have already said that we cordially welcome the establishment of the Council for Scientific and Industrial Research in this sphere. Like the Development and Migration Commission in its sphere, the Council for Scientific and Industrial Research with its able and energetic personnel is capable of being a nucleus for the combination and co-ordination of the scientific and technical knowledge already available in many quarters in the different States of Australia and a potent force for the increase of the sum of that knowledge through the work of its several scientific sections, “ach under a highly qualified head and each acting in harmony With all other existing institutions having the same object, such a8 the State Departments of Agriculture, the Universities and the Possible ymendment of the Aoreement. Intensive as against axtensive levelopment, Che Council ‘or Scientific and Industrial Research ind the nerease of echnical znowledge. admirable Waite Institute at Adelaide. The sum of that knowledge and of the knowledge gained in other parts of the world through other institutions, with which it will be the duty of the Council for Scientific and Industrial Research to keep in touch, can be brought to bear on the practical problems of Australia’s development. Ch ifl eq ta oe De 11 88 nie 42. The possible opportunities for the results of scientific study in many fields, such as those of agriculture and dairying, with a view to the increase of productivity and the diminution of costs, are incapable of measurement; and we feel that the work of the Development and Migration Commission and of the Council for Scientific and Industrial Research, working, as we hope that these bodies will work, to one end, in ever closer co-operation with one another and with all the other institutions in Australia with which they have connections, will lead to that more intensive use of the already partially developed resources of Australia which we believe to be among Australia’s principal needs to-day. From that, rather than from specific schemes for new extensive development, we delieve that a natural stream of migration from Great Britain to Australia will flow, having its source in the increasing produciivity and consequent absorptive power of the Dominion. We would therefore suggest as a first step towards that end that, without prejudice to any specific schemes which the Development and Migration Commission may be able to recommend under the £34,000,000 Agreement as it now stands, the scope of that Agreement should be enlarged so as to permit of the funds made available under it being used in other ways and, in particular, to assist the work of scientific research through subsidies to appropriate institutions, by facilitating large scale experiments and the like, without attaching to the expenditure of moneys for these purposes the condition that any specific proportionate number of migrants nust be received in Australia. 43. We also consider that the present time limit to the Agreenent might be extended if in practice it should prove impossible within that limit to decide upon proper uses to which the whole of the funds made available under the Agreement should be put, ind that, assuming that the Agreement as amended works satis. ‘actorily, the British Government might consider the provision of further sums after the present provision is exhausted. Given ihat the British Government is disposed to continue to spend money to promote migration, and given that the prudent expendisure of such money 1s properly safeguarded, we are unable to suggest a better use which could be made of it. The protec- 44. But all measures designed for the increase of Australia’s iive tariff wealth production and power of absorbing new population tend oe the to be defeated if there are strong forces within her which operate Avia 80 to raise her costs of production that she cannot sell her products in the markets of the world, and is restricted within the limitasions of her own home market. Here we approach the most vexed, and the most important of all Australian questions, that of the sombined effects of the protective Customs Tariff and of the legislative enactments, both of the Commonwealth and of the States, for the fixing of wages and conditions of labour, which we will rall, for brevity, the Arbitration Acts. 45. We could not fail to be impressed, throughout our travels n Australia, with the fact of which we were continually reminded, ‘hat, notwithstanding the magnitude of the interest on her 2xternal debt and of her imports for which payment can only be made In goods or services or, temporarily, by fresh borrowing, Australia exports only an almost negligible quantity of the products of manufacture, unless we include therein minerals such as lead, silver and zine ; while, broadly speaking, the only primary products which she exports in important quantities and which are not directly assisted by tariffs or bounties, though they may be assisted ndirectly by Government expenditure from taxation on roads, railways, water schemes and the like, are wool, hides and skins, meat and tallow, wheat and timber. Of these, wool and wheat ire by far the most important, and it has often, though somewhat loosely, been said to us that the primary industries concerned with these products are the only industries in Australia which stand on their own feet and sell their goods at the world’s price; or ven, still more loosely and with a change of metaphor, that all Australia is riding on the sheep's back. Without committing ourselves to full acquiescence with these broad expressions of opinion, We may say that we have been strongly disposed to the view that the combined operation of the tariff and of the Arbitration Acts has raised costs to a level which has laid an excessive and possibly *ven a dangerous load upon the unsheltered primary industries, which, having to sell in the world’s markets, cannot pass on the burden to other sections of the Australian community, and, consequently, as between the various States, upon those, notably Western Australia, South Australia and Tasmania, which are poor 1 manufactures and are principally concerned with primary production. These States, and Tasmania probably most of all, are ‘urther handicapped by the high costs of freight in interstate trade which result from the operation of the Navigation Acts along with ‘he other causes which we have mentioned.* 46. These causes collectively have at least contributed in large Neasure to a state of things in which manufactured articles Effect upon axport. The “vicious pirela _* We are aware that the disabilities under which these States suffer are recog-Lised by the Commonwealth Government and that substantial subsidies are paid by the Commonwealth to Tasmania and Western Australia, while the question of 8ranting a similar subsidy to South Australia is under consideration. These Subsidies, however, can only be regarded as palliatives of a system with which there 8 somethine amiss. 20 generally, and such commodities as sugar, cotton, dried and canned fruits, wine and butter are either not being exported at all or are only being made exportable by means of a subsidy in one form or another from the public. We have felt much force in the oftrepeated complaint that successive increases in the tariff which affect prices and the cost of living, following upon, or being followed by, successive advances in the cost of labour as the result of decisions under the Arbitration Acts have involved Australia in a vicious circle of ever ascending costs and prices, and that this condition of affairs is crippling Australia’s progress and her power of supporting increased population. There lies no task before the Australian people more urgent than that of in some way breaking the vicious circle and of bringing down costs of production, as is veing done in the other industrial countries of the world, without owering the standard of living of the workers as measured not by money but by real wages, which are the reward of labour in the form of goods and services. Dbgervations 47. Qur views have merely been strengthened by our study of of the Tariff he reports of the Commonwealth Tariff Board, who, we observe, ’ in their report for the year 1925-26, say that they are— *“ strongly of the opinion that the industrial unions of the Commonwealth should be induced to realize the critical position into which the Commonwealth is drifting and the absolute necessity for preventing the wages gap from becoming still wider between the United Kingdom, the Continent of Europe and the Commonwealth, otherwise, the Tariff Board, placed as it is in the position to take a comprehensive and ‘ntimate view of all Australian industry, can see nothing but economic disaster ahead, and that at no very distant date *’ in their report for the year 1926-27 that— ! . + . . in some industries it is apparent that protection is failing to protect. In so far as recent increases in Customs Revenue have been due to the collection of higher duties imposed with the object of discouraging the importation of the appliances or commodities on which such duties were imposed, the increased amount collected represented, in the case of goods used in manufacture, an addition to the cost of production, which indirectly increased the cost of living ; and to the extent that any such increased revenue was due to the imposition of duty on commodities imported in the form in which they are consumed it represented a direct increase in the cost of living. Such additional revenue is undesirable and the sums involved would be far better in the hands of the indirect taxpayers—whether State Government activities or undertakings conducted by private enterprise—or the general public,” and in their report for the year 1927-28 that— . + + +. . One of the most serious difficulties which Australia has to face at present is the high cost of production > of ‘goods in the Commonwealth. For many years the cost of production generally has been increasing, and unfortunately these increases appear to have been maintained. “ If Australia were entirely isolated from oversea sources of supply and independent of them, and if it were also independent of overseas markets for the disposal of some of its products, high cost of production would matter less to its people. Seeing, however, that Australia is not isolated and is dependent to a large degree upon overseas markets, the seriousness of the position lies in the fact that the cost of production in competing countries has declined while costs in Australia generally have risen—thus increasing the already wide margin of difference between the costs in overseas countries and those in Australia.” 48. The Customs duties are not all definitely fixed by statute. They are elastic in that they may be increased to prevent dumping, and within the limited range of deferred duties may be imposed suddenly by administrative action. We do not say that the powers thus entrusted to the Government have been capriciously used, but there is a danger that in imprudent hands they might be so used; and if they were trade would be seriously hampered. What virtually amount to administrative additions to Customs duties through special preferences given by authorities undertaking public works to the products first of their own and next of other States as against imported products, even though the latter when charged with the duties prescribed by the tariff may still be cheaper, are gravely to be deprecated. Action in this direction is in effect an arrogation of powers which by the constitution are entrusted to the Legislature and Government of the Commonwealth. 49. We realize that the objects of a protective tariff are not surely economic, and that a protective policy may be adopted, in part at least, on other grounds. A young nation may feel that it 1s due to herself to have a proper share of that diversity of occupations and industries which characterizes the older peoples of the world, and that her national life would be one-sided and even starved without it; and she may feel that from the point of view of the dangers to which she may be exposed in case of war she cannot afford the risk of being deprived of essential commodities by Interruption of oversea communications, or, if the war be one in which she is herself engaged, of being without the industries Indispensable for the production of armaments. She may be Prepared to pay for these objects through economic sacrifice; but if this be necessary it is important that she should make the sacrifice with her eyes open and be ready to count the cost. 50. It is with the economic aspect of the protective tariff, therefore, that we are mainly concerned, and not with any abstract controversy on the respective merits of protection as such and of the rival svstem of free trade. We recognize that protection is Alteration of luties by administrative action. Objects of a protective tariff. [ts economic aspect. )y Difficulty of applying a policy of rotection. the settled policy of Australia; that it would be idle to suggest its abolition even if we thought that such a course would be expedient ; that we must deal with Australia as she is and realize that changes oy way of reduction of the tariff may lead to loss of capital and the discharge of workers from industries already built up under the tariff shelter ; and that while the undoubted effect of protection in the diversion of production from its natural course must have resulted in some cost, it is not certain that if the natural course of production has been continued it would have maintained the present population without some reduction in income per head, due to pressure upon inferior or less accessible land and to lower prices ‘or a greater volume of exports. 51. But in the carrying ouf in detail of a policy of protection, 1» task of immense difficulty, there is much room for human falli-»ility. Protection, as its very name implies, is designed for the veak, and the weakness may be that of infancy, that of temporary rvilment, or that of inefficiency. It may well be expedient to give artificial assistance from the public to a promising infant industry, though, since its output must necessarily in the early stages be small, such assistance is in our judgment better given oy way of bounty, the cost of which can be exactly measured, than by way of a protective customs duty which will raise, to an extent difficult to compute, the cost to the community of the whole of its supplies of the commodity which the infant industry is designed but is not yet able sufficiently to produce. But it is to be observed shat infant indusiries are apt to take a long time to grow up and to be ready to dispense with their swaddling clothes, and the process of reaching maturity tends to be further delayed when the costs of the products of other industries required by the infant industry are increased by measures similar to those which have veen adopted in its own case. It behoves the State, therefore, to teep a very careful watch upon the whole range of protected industries, and to be sure that protection or bounties are not continued so long or given so freely that their cost outweighs the oenefit to be derived by the community from the establishment of the industries in its midst. 52. An instance of temporary ailment would be afforded if an established industry were assailed by a campaign of dumping from overseas. In such a case it would be reasonable to afford protection while the trouble lasted, but the protection might well be reconsidered when the cause for it had been removed. 53. The protection of the inefficient is something which, we imagine, no one would be prepared to defend, but it is in practice not easy to avoid it; for the case for a measure of protection for an industry is apt to be based on what is needed to keep the weaker of those engaged in it alive. And protection itself tends to have, though it does not always have in fact, a debilitating ‘nfluence and to promote habits of dependence upon Government assistance rather than of reliance upon individual energy and effort; while Governments, always exposed to interested political pressure, are prone to give that assistance rather than to see industries disappear, their capital lost and the workers engaged in them forced to seek other employment. Thus protection tends to grow and to cover an ever wider field, its own growth being productive of the very conditions which lead to its further growth. Something of this kind has, we think, taken place in Australia. We believe that the policy of protection has, in some respects, been unscientifically carried out; that it has been extended to cover some interests at least which do not deserve it ; that the total burden of the Tariff has probably reached the economic limits, and that an increase in this burden might threaten the standard of living. 54. The case for protection is strongest in regard to those industries which can claim that, having the home market. secured so them and mainly using home produced commodities as their raw material, they can and do supply the community with their goods at a price equal to or not malerially greater than that at which similar goods could be imported from overseas without a duty, but that the protection is necessary because, but for it, powerful combinations of oversea producers could, by undercutting their prices, drive them out of business, and having done so could for the future charge as much as the Australian consumer sould be forced to pay. This is a case which commands all possible respect, but the corollary of it is that the measure of the extent bo which it can be made out is the measure of the extent to which protection is, on pure economic grounds, justifiable. We are thus provided with a working canon of efficiency and may say that those industries are efficient which can supply or which are likely within a reasonable measure of time to be able to supply their goods at a price not greatly exceeding the cost of similar goods imported free of duty, and not in any case exceeding that cost hy more than the community is prepared, with its eyes open, on other than pure economic grounds, to pay for the maintenance of the industries in Australia. Efficiency in this sense should, we think, be generally the condition of protection. Other things being equal, those industries are most likely to be efficient which, producing goods comparatively simple in character and in wide demand, tan obtain the benefits of mass production for the Australian market ; but mass production is not everything, and it may well be that a small industry producing a commodity for which there is only a limited demand may be able, by the vigorous application of brains and energy to its task, to supply Australian requirements at a reasonable price and thus prove itself a worthy object for Protection. 55. A further condition of protection should be that every recipient of it should be liable at any time to be called upon to furnish the Government with the fullest information as to the costs of his products, the prices at which they are sold, and the Efficiency as vcondition f protecion. [Information regarding wrotected in-Justries to be supplied to-Government Necessity for Full scientific snquiry. Avoidance of ncreases of duties pendng enquiry. Protection when given i0 be effecve Reductions of duties and sffect on British reference. The task of he British nanufacturer. conditions of his industry generally. The recipient of protection is obtaining a benefit from the public and should be required in return to give to the trustees for the public all the information necessary to enable them to satisfy themselves that the benefit is not being abused. 56. We should not be justified by the extent of our knowledge in pursuing the matter in further detail. We are aware that much of the information necessary for a scientific revision of the Tariff is not available anywhere, but we are confident that it is argently necessary that a full scientific enquiry and investigation should forthwith be instituted by the Commonwealth Government into the wide question of the economic effect of the tariff and the incidence of its duties, with the particular object of furnishing veliable advice to the Government as to the removal of any extravagances and anomalies which it may be found to contain, as to the confinement of its benefits to industries which may reasonably be regarded as efficient, and as to the reduction of ts total cost to the community. 57. We consider that while the investigation is proceeding egislative or administrative action to increase duties or impose leferred duties should, so far as is consistent with the continued Affective working of the existing tariff, be avoided, in order that he investigaton may proceed so far as possible untroubled by disurbing changes in its subject matter. 58. We think that the protection which it may ultimately be lecided to afford to efficient industries should be high enough to be ‘ully effective so long as the condition of efficiency is satisfied. This may mean in some cases even higher duties on imports than are imposed at present, with consequent encouragement to oversea manufacturers to bring their capital and skill to Australia to assist n local production. 59. In some cases investigation on the lines we recommend, ‘ollowed by appropriate governmental and legislative action, may mean reduction of duties. We realize that reduction in the rate of duty on an article in regard to which preference is accorded to Great Britain may sometimes mean a reduction in the amount of the preference. But if the reduction of the duty is to the economic advantage of Australia and calculated to enhance her prosperity that, as we hope we have sufficiently indicated already, is, to us, the important thing. Great Britain has more to gain in the long run from that source than from any amount of preference wceorded to her own as against foreign products, valuable as the tariff preferences which are granted to her in Australia undoubtedly are. 60. For the rest it is for British manufacturers themselves, if they desire to take advantage of the opportunities of Australian trade, to bestir themselves energetically in the matter by establishing branches of their business in Australia where the goods of the <ind which they supply are effectively protected, by acquiring snowledge of the openings which exist for them through visits to Australia of the heads of firms or responsible representatives, by the employment of competent and well-paid agents and travellers, and by using to the full the services of the admirable organization astablished for their benefit in Australia under the British Trade Commissioner. 61. We have observed in an earlier passage in this report that the effects of the protective tariff and of the wages and conditions of labour fixed by decisions under the Arbitration Acts are intimately infer-related, and it is incumbent upon us to offer such dbservations as we have to make upon the latter subject. 62. In every capital city of Australia we have had the advantage of meeting the leaders of the Trade Union movement. We have been much struck by the strength of that movement, reinforced as it doubtless is by the homogeneity of the people and by the active and intelligent interest which they take in all matters affecting their welfare. We have had frank and interesting discussions with the leaders of the movement; and we have found that practically on every occasion the subject of the Arbitration Acts and of the Courts established thereunder has come up during the course of these discussions. By workmen's representatives, not less emphatically than by representatives of the employers, it has been consistently represented to us that the Arbitration Courts are not achieving their purpose and that a system designed to arrive by judicial decisions at fair and prompt settlement of industrial disputes such as could be freely accepted by both sides must be held ‘o have failed. 63. The most important of the reasons which have been advanced for this view are that experience has shown that there arises between the two parties who appear before the Arbitration Court Judge or Arbitrator the spirit of antagonism inseparable from litigation, and that the object of prompt settlement is defeated by the delay occasioned by the necessity for the collection and presentation of detailed evidence in a form acceptable to a Court. [t is complained that the procedure of the Court occasions the expenditure of much time and money by the litigants and involves very long absences from their ordinary occupations for a large number of persons whose time might be more profitably employed ; that the subject matter of the questions which are brought before she Courts is not of a nature with which judicial tribunals, necessarily unversed in the practical problems of industry or in the sconomic questions to which they give rise, are best fitted to deal; and that the overlapping jurisdictions of the Federal and State Arbitration Courts have led to an almost inextricable tangle of conflicting decisions so complicated that large staffs have to be maintained to keep track of them and to endeavour to guard against involuntary contravention of any of them in the course of everv-dayv business. The Arbitration Acts. The basic wage. 64. The indictment of the system of the Arbitration Courts which we have heard is a heavy one; and we feel that it is well founded on many grounds, and particularly on the ground that the system has tended to consolidate employers and employees into two opposing camps, and has lessened the inducement to either side to resort to round table conferences for that frank and confidential discussion of difficulties in the light of mutual understanding and sympathy which is the best means of arriving at fair and workable industrial agreements. 65. A change in the method prevalent in Australia of dealing with industrial disputes appears to us to be essential, and we hold that there should be a minimum of judicial and governmental interference in them except in so far as matters affecting the health and safety of persons engaged in industry may be concerned. 66. If the settlement of industrial disputes must continue to be referred to Arbitration Courts, we think that the faults of the system will continue to be intensified unless an end can be put to overlapping and conflict between the spheres of Commonwealth and State jurisdiction, and the Courts themselves are laid under an unqualified statutory instruction to have regard to the economic affects of their awards both on the industry with which the awards may be immediately concerned and on other industries which may be indirectly affected by them. We think, too, that it should be a condition of access to an Arbitration Court that the parties should rst have made a bona fide attempt to arrive at a settlement of their dispute by way of conference with each other, and that a full statement of the points in regard to which they have failed to arrive at an agreement should be laid before the Court. This prosedure should secure that if either side has shown itself unreasonible the Court shall be made aware of it. 67. Further, a system of wage fixation resting upon a basic money wage which rises or falls with a varying index figure of the cost of living is open to the gravest criticism, as tending to deprive employees of any interest in the prosperity of the industry with which they are connected. ILiet us assume that by better, more energetic, and more willing work on the part of all concerned from the highest to the lowest, the output of Australian industries were increased with no increase in overhead cost. The natural economic affect would be that prices all round would fall and that consumption and profits would rise ; but as the cost of living would fall the basic wage would also fall, and with it all wages fixed by the Arbitration Courts in relation to the basic wage with margins for special skill and the like. Thus the system is such as to give the worker in industry no interest in a cheaper cost of living, and no inducement to that increased efficiency which would tend to bring t about. Tn such a case as we have imagined it would be only right that wages should rise and that the workmen should share in the increased prosperity so largely attributable to them. It is only if all concerned in industry genuinely feel that their own fortunes are bound up with its success or failure that that solidarity in industry which is essential to its prosperity can be achieved. 68. Our Mission was honoured by two of its members being asked to take part in an Industrial Conference held in Melbourne during December last. At that conference the necessity for closer and more friendly relationship between all concerned in industry was fully recognized by the delegates present, and the discussions were of so frank a nature that at subsequent meetings there should be no obstacle to the candid exposition by all the delegates of their difficulties and their aspirations. We hope and believe that from future sessions of the conference there will result the formulation of agreed alternative methods for fixing wages and laying down conditions of employment, which may render the present functions of the Arbitration Courts unnecessary, and substitute for them a system of settlement of industrial problems by industry itself on practical and acceptable lines in an atmosphere of mutual confidence and goodwill. 69. We even venture to hope that the spirit generated from this conference will be such as to facilitate the task, which after investigation such as we have recommended we trust that the Government will undertake, of tariff revision. The problem of the tariff is, as we have said, closely interlocked with that of the fixation of wages and a happy solution of the latter problem should do more than anything else could to make possible the solution of the former under the indispensable conditions of freedom from class or political strife and bitterness. The Industrial Conference. PART III. SUMMARY OF CONCLUSIONS AND RECOMMENDATIONS. 70. We would summarize as follows the conclusions to which we have been led by the considerations set forth in the foregoing pages ‘— (1) The indispensable condition of the promotion of trade between Great Britain and Australia and of the increase of settlement in Australia is the prosperity and absorptive power of Australia herself. (Para. 6.) (2) The present financial position of Australia is sound in the sense that her national income and sources of public cevenue are amply sufficient to pay for her Government and to provide for the service and repayment of her public debt. ‘Para. 7.) But (8) Australia has, in past years, spent too much unprofitably on development schemes which have been undertaken either sithout sufficient regard to their probable financial and od sconomic results or without adequate preliminary investigation of the schemes themselves. She has been mortgaging the future too deeply and would do well to restrict her expenditure of borrowed money for development, notwithstanding the inconveniences that must follow from deflation, and to leave the field more widely open to private enterprise. (Paras. 8 to 31.) (4) Public accounts should be prepared in such a way as to make clear what is the exact financial position of each Government undertaking. (Para. 16.) (6) A proportion of loan moneys raised overseas accrues to the Commonwealth as revenue and is spent accordingly. This is bad finance. (Para. 24.) (6) We believe that there will be substantial improvement in the future arising from— (a) The validation of the Financial Agreement and the sgtablishment of the Loan Council; and (b) from the work of the Development and Migration Commission and of the Council for Scientific and Industrial Research. (Paras. 82, 34 and 41.) (7) Banks and other financial authorities, and particularly, in the case of loans placed in London, the Bank of England, should be consulted in advance as to the time at which and the terms on which loans should be raised; and the objects of each loan should be fully stated in the prospectus. (Para. 33.) (8) Present circumstances in Australia are not favourable to migration, and recent figures of assisted migration show a sensible decline, but good work is being done to promote it, especially in regard to the migration of children, young people and women for domestic employment. (Paras. 35 nd 386.) (9) The scope of the schemes likely to be approved under the £34,000,000 Agreement is comparatively narrow, and those States in particular which are mainly concerned with primary production are likely to be embarrassed in fulfilling their obligation to accept a specific quota of migrants in respect of sach scheme. (Paras. 87 and 38.) (10) We consider that the Agreement might be amended and the period of its operation extended so that the funds available under it might be used for work calculated to promote migration into Australia generally, without conditions as to specific numbers of migrants into any State, e.g., for scientific research and for large scale experiments to test its “esults before they are adopted. (Paras. 39, 42 and 43.) (11) The more intensive use of land already in occupation in Australia is a matter of the greatest importance. This should be promoted by scientific research and will increase she country’s wealth more surely and rapidly and more cheaply than further extensive development is likely to do. (Paras. 40 to 42.) 19) Most vexed and most important of all Australian questions is that of the cost of production with its effect upon export industries and of the combined effects of the Tariff and the Arbitration Acts. (Para. 44.) (13) Their effects and that of the Navigation Acts have laid an unduly heavy burden on the unsheltered primary industries which have to export at the world’s price, and on the States principally concerned with such industries, viz.: Western Australia, South Australia, and Tasmania. (Para. 45.) (14) There is ground for the common complaint of a vicious circle of ‘increased prices due to the Tariff, and of increased costs of labour due to Arbitration Awards, and it is urgently necessary to break the vicious circle without lowering the standard of living, i.e., real wages. (Paras. 46 and 47.) (15) The power to alter the Tariff by administrative action must be prudently used if it is not to hamper trade. (Para. 48.) (16) The merits of a policy of protection are not in question. It is the settled policy of Australia and may have been adopted on non-economic as well as on economic grounds. Both grounds may be sound, but it is important that it should be possible to count the economic cost of the sacrifice. (Paras. 19 and 50.) (17) It is a policy difficult to carry out in detail. There 's rigk of error in the way of giving excessive or too prolonged assistance to infant industries and in the way of protecting nefficient industries, and the total burden of the tariff has orobably reached the economic limits. (Paras. 51 to 53.) (18) Efficiency should be a condition of protection, and protected industries should be liable to furnish the Government with the fullest information as to their prices. costs and ~onditions generally. (Paras. 54 and 55.) (19) A full scientific enquiry and investigation should forthwith be instituted by the Commonwealth Government into the whole question of the economic effect of the tariff and the incidence of its duties. Pending this enquiry there should se no avoidable increase of duties. (Paras. 56 and 57.) (20) Protection when granted should be effective. Reduction of duties may mean decrease in the amount of the British Preference, but if reduction be to the economic advantage »f Australia, Great Britain has really more to gain from that source than from preference accorded to her. (Paras. 58 and 59.) (21) The system of settlement of industrial disputes by awards of the Courts set up under the Arbitration Acts has tailed, has involved overlapping jurisdiction and conflicting Jaeisions and has tended to divide emplover and employed into Rit two opposing camps. There should be the minimum of judicial and governmental interference with the relations between employer and employed; and industrial disputes should be settled by way of -discussion and frank interchange of views between the parties concerned. (Paras. 61 to 66.) (22) The system of fixing wages by reference to a basic money wage which rises and falls with a varying index figure of the cost of living is open to the gravest criticism as giving no interest to the workers in the reduction of the cost of living. (Para. 67.) (23) We hope for the best results from the Industrial Conference which has been begun in Melbourne ; and we look forward to suggestions from that body for the solution of the problem of fixing wages and settling the conditions of employment. The solution of the closely related problem of tariff revision should thereby be greatly facilitated. (Paras BS and 69) PART IV. SUPPLEMENTARY MEMORANDA AND CONCLUSIONS. 71. We need scarcely refer to the magnitude of our task. It is self-evident from our terms of reference, and has been enhanced, though pleasantly, by the extensive programme arranged for us. Short as our time has been in Australia, we have been shown so much, and have gathered so much information, that the very extent of the field covered has somewhat embarrassed us in the compilation of our report. Had we had more time to devote to its preparation we should no doubt have amplified it, though we do not think that we should have amended it in any material particular. We have to go back to England by different routes, and on our return there must inevitably be greatly occupied with our personal affairs and businesses, so that we have had to make a choice between an immediate, shorter, and less complete report, and a longer document prepared at some future time. We have decided that we should best fulfil our task by presenting now a report containing our views on what appear to us to be main issues, together with supplementary memoranda on the subjects of — A. Transport. B. Taxation. C. Banking. D. The Development and Migration Commission, the Council for Scientific and Tndustrial Research. and Economic Research 3 E. The Pastoral Industry. F. Marketing and Distribution. G. Reciprocal trade between Australia and Great Britain. H. The Civil Services. 72. These we submit herewith and would summarize the effect of them as follows :— A. TRANSPORT. Railways. (1) That no further construction of State Railways should be undertaken except after a full investigation, and after consideraof the alternative method of road transport. (Para. 7.) (2) That the State Railways should be placed outside the sphere of political influence and made to pav their way as railway undertakings. (Para. 10.) (3) That the result of working branch lines, known to be uneconomical as railway propositions, should be separately shown in the accounts. (Para. 10.) (4) That an investigation should be made as to whether it is not expedient to proceed at once with unification of the railway gauges. (Para. 16.) (5) That it should be considered whether the £34,000,000 Agreement should not be extended, both as to time and amount, in order to cover some portion of the capital reauired for such unification. (Para. 17.) Shipping. (6) That light and harbour and other dues should be imposed only to the extent necessary for the purpose of providing the services rendered, and that no attempt should be made to obtain Government revenue from such sources. (Paras. 23 and 24.) (7) That the State of Tasmania should be specially considered, in connexion with the Navigation Acts and with the view of, if possible, giving it further benefits in regard to navigation. (Paras. 28 and 29.) (8) That ships’ stores, brought by overseas vessels for the purpose of running the ship. should be free of Customs duty. (Para. 30.) Roads. (9) That the sums made available for transport purposes from the Commonwealth should be placed at the disposal of the States for the purposes of transport in general. (Para. 35.) Aviation. (10) That it is difficult to over-estimate the benefit to be derived from the development of this service: it should gradually become self-supporting, at which stage the present Government subsidy should be withdrawn. (Para. 40.) Transport Generally. (11) That co-ordination of transport authorities should be underjaken in all the States, and that by some means co-ordination of iraffic for the whole of Australia should be achieved. (Paras, 41 ta 483) B. TaxaTion. (1) That there should be uniformity throughout the Commonwealth and States in calculating income for income tax purposes, and that the combined tax should be paid as one tax in two instal ments. (Para. 2.) (2) That a similar course should be taken in regard to calculating nheritance duty. (Para. 7.) (3) That the principle of averaging or of allowing a set-off for losses should be fully recognized by the Australian Governments in making assessments for income tax. (Para. 3.) (4) That land tax if charged should be at an even rate on all land values. (Para. 8.) (5) That in consultation with the shipowners some more equitable scheme of imposing income tax on shipping profits than that now existing should be arranged. (Para. 5.) (6) That the profits of non-Australian Companies trading here should be fullv assessed. (Para. 6) C. BANKING. We think that it is a matter for consideration :— (1) Whether the Directors of the Commonwealth Bank, if that Bank is to be (as it naturally would be, and indeed is proposed to be) the contemplated Reserve Bank, should not oe appointed otherwise than by the Government. (Para. 5.) (2) Whether its Branches, in so far as they are ordinary trading branches, should not be entirely divorced from the Bank acting as a Reserve Bank. (Para. 6.) (3) Whether in order to afford proper opportunities for the issue and negotiation of trade bills, which facilitate the business of a Reserve Bank, the stamp duty on bills of exchange should not be verv much reduced. (Para 4) D. Tas DBVELOPMENT AND MIGRATION FOR SCIENTIFIC AND INDUSTRIAL RESBAROH. CoMMISSION, THE COUNCIL RESEARCH AND FcoNoMIC (1) That the work of the Development and Migration Commission and the Council for Scientific and Industrial Research should be assisted by further trained staff, as necessary. (Para. 4.) (2) That closer co-ordination should be effected between these wo bodies. (Para. 5.) Led (3) That it would be greatly to the advantage of the commercial and manufacturing prosperity of Australia if there were added to she present activities of the Council for Scientific and Industrial Research the sphere of work which deals with the standardization ind simplification of manufacturing processes. (Para. 8.) (4) That an Economic Service should be set up as a separate organization. (Para. 7.) (5) That for the general co-ordination of the three bodies, the Development and Migration Commission, the Council for Scientific and Industrial Research, and the Economic Service, a Committee should be formed consisting of the heads of the three bodies as members with the Commonwealth Minister, to whom they report, as Chairman, and with some outstanding man as Vice-Chairman. (Para. 9.) EE. Tae PASTORAL INDUSTRY. (1) The direct profits from wool grown on the sheep stations show a tendency to decline. (Paras. 2 to 4.) (2) Security of land tenure is necessary, and we favour freehold tenure or, alternatively, very long leaseholds. (Paras. 5 to 8.) (8) We consider that systems of taxation should not differentiate in favour of leasehold as against freehold land. (Para. 9.) (4) The size of areas granted for sheep raising should be determined by the consideration of the maximum wealth production of the land, not by the consideration of the minimum area on which an individual can make a living. (Paras. 10 to 18.) (5) The arguments for security of tenure, if possible freehold, are even stronger in the case of large scale cattle ranching than in that of sheep raising. (Para. 14.) (6) The number of existing meat export works is uneconomically large and ought to be reduced. (Para. 15.) F.. MARKETING AND DISTRIBUTION. (1) Australia must look for her future development in great measure to remunerative exports. (Para. 1.) (2) High costs of production limit remunerative export mainly 0 wool and wheat. (Para. 2.) (8) The home market has been artificially retained for agriculural products, and there is difficulty in marketing a surplus, which lifficulty is intensified as the surplus grows. (Paras. 3 and 4.) (4) Co-operative handling of products retains all the profits for the co-operators but is not always efficient. (Para. 6.) (6) An export market cannot be built up by looking primarily 0 the home market. Quality rather than quantity of products [409 should be studied and both should be kept constant for the export market. (Paras. 8 and 9.) (6) Great Britain being the best market for Australian products the best possible selling organization should be set up there. Other nearer markets should be exploited, but a real export business depends on the cost of production being brought down to world orices. (Para. 10.) C4. RECIPROCAL TRADE BETWEEN AUSTRALIA AND (GREAT BRITAIN. (1) Reciprocal trade between Australia and Great Britain should be fostered by all practical means. (Paras. 2 to 5.) (2) The respective fiscal systems of the two countries cause Jifficulty in the matter of reciprocal trade preferences, and suggestions are made for overcoming it. (Paras. 7 to 12.) (8) Industrial and personal relations are more important than oreferences or bounties. (Para. 13.) (4) The closest touch should be maintained between British and Australian industrialists. The formation of a TFederaton of Australian Industries is suggested. (Paras. 14 and 15.) (5) An illustration is given drawn from the motor car manufacturing industry. (Para. 16.) H. Tue Civin. SERVICES. (1) We think that the Civil Services would be greatly strengthened by & more adequate remuneration of the higher posts, and by the introduction of a ‘‘ cadre ”’ of men of higher educational qualificasions than those possessed by the present recruits to the Service, with a view to the performance by them of the higher duties of the Service, and by interchangeability of officers as between the services of the Commonwealth and of all the States. (Paras. 1 to 4.) (2) An end should be put to the conflict of authority over the Civil Services of the Public Service Commissioners and of the Arbitration Courts. (Para. 5.) 78. Tt is possible that after our return to England we may think it desirable to submit further memoranda, and if there are any special subjects on which it may appear to the Commonwealth Government that we may be able usefully to make observations we shall be most happy to meet their wishes to the best of our ability. We trust that we need not regard our connection with Australia as ceasing with our visit to her shores. If, in regard to matters of the kind with which we have had to deal, concerning her in relation to the British Government, to the leaders of ‘ndustry in Great Britain and to the financial world of the City JO of London, it is thought that any services of ours: can ‘be of use to her, it will be a privilege to us to be enabled to give them and we shall regard the giving of them as but a partial'return for the way in which we have been received in this courttry. - tl 5 BF 74. In concluding our Report we desire to express out" ¥ery real gratitude for the unfailing courtesy and kindness which we have experienced on all hands in Australia. Most complete arrangements have been made by the Commonwealth and State Governments to enable us to comply with our terms of reference : the staff whose services they have made available for us have worked for us with admirable willingness and fidelity; and all sections of the community have combined to make our sojourn in Australia pleasant and interesting to us and to enable us to obtain the maximum of information in the time available. ARTHUR DUCKHAM HUGO HIRST. ERNEST CLARK. D. O. MALCOLM. 7th January, 1929. OQ : 3 SUPPLEMENTARY MEMORANDA. A. TRANSPORT. also seen representatives of the interstate and overseas shipping interests, and, owing no doubt to the importance of the subject, and its vital effect upon \ustralian conditions, we have had uggestions made to us on very many ccasions in regard to it by the repreentative bodies and citizens with vhom we have been brought into conact. Although, therefore, our general wrvey of the economics of the consinent has not permitted us even to ouch upon the details of this vital -ubject, we are constrained to submit aur general conclusions on the evidence vhich we have received. This nemorandum . is in the briefest pos sible terms, sufficient only to make inselligible the recommendations and suggestions which we put forward for consideration. Railways. 4. In spite of the competing services if sea and road transport, it remains rue that railways are the most suitble means for the haulage of heavy roods and for carrying passengers for ong-distance journeys, especially vhere shipping does not afford a suffijently rapid means of transport, and t is worthy of remark that Australia as more railways in relation to popuation than any other country in the vorld. 5. Practically all the railways in Australia belong to and are worked by he Commonwealth and State Governments. The statistics relating to them are: — 1. Adequate and cheap transport is of paramount importance to Australia’s welfare and future development. So fully was this recognized in the past that, when the necessary capital could not be attracted for her railways, they were provided by the Government; and during the post-war period the experiment of running her own ships was also entered upon as a State undertaking in the hope of giving better service to Australia at lower freights. 2. In order to realize the extent of Australia’s problem of transport, it is only necessary to remember that she ships from overseas between 5,000,000 and 6,000,000 tons of cargo each year, and sends away a similar amount, that her interstate shipping amounts to more than 6,000,000 tons annually, that she has 25,000 miles of Government railways,* whose cost of construction and equipment has been £303,000,000, that there are approximately 80,000 miles of properly made roads, and that the total length of surveyed roads in Australia probably exceeds 400,000 miles, that she has 645 miles of tramways, which have sost £265,000,000 to construct, that today there are nearly 600,000 motor vehicles registered, i.e., nearly one to every 11 inhabitants, and that there are in use some 90 aeroplanes, which in the year 1928 carried over 40,000 passengers, and flew over 1.100.000 miles. 3. Tt would be idle for us to pretend to be able to deal in any detail with such a vast and complicated subject as this of Australian transport. To do so effectively requires the services of skilled technical investigators for a long period; but, fortunately for us, such investigations have been made in the past and have been available to us, and we have, in the course of our itinerary, interviewed Ministers in charge of transport, Railway Commissioners, Road Commissioners, and the Committee of the Development and Migration Commission which is dealing with motor transport. We have * There are also 3,143 miles of privately-owned railwavsa. Year ynded 30th Tune. Mileage open, | Cost of Con~ struction and Equip-~ ment. Net Earnings. {Gross Revenue, less Working Expenses.) A mount. [Per cent. on Cost. 1017 1018 919 920 921 922 n22 924 925 926 108. 21,642 | 22,180 | 22,647 28,147 13,296 23,602 23,881 24.484 24.844 25,378 | DE EID 00. ©. 214-8 6:1 | 2:8 220-3 6:7 | 80 224-9 6-3 2-8 281-1 73 32 235-9 6-0 2-5 Add 3-4 3-4 58°5 10:0 4-0 266+ 2 105 © 40 276°1 11-9 | 4-3 988-4 | 64 | 22 BAQ.O Q.0 ~~ ts 6. It is apparent from these statistics that the capital employed, judged by the earnings, which, during the past five years, have on the aver age only provided about 3% per cent. interest on it, cannot be considered ag worth its nominal amount as an income-earning asset. On the other hand, it is only fair to bear in mind hat more than two-thirds of the ‘cost of construction was incurred prior to the increase in the general level of prices consequent upon the war, and that, therefore, the capital value of the railways to-day is probably higher than the amount expended in their sonstruction, even after making due allowance for depreciation. It is well, also, to remember that at the time of the construction of the majority of the railways, neither the present coscs of labour nor the present rivalry of motor services could reasonably be anticipated. Further, it is necessary to remember that in the development of a new country with distances so vast as those in Australia, railway construction may have been in the past iustifiably undertaken as an alternative to road construction, i.e., as a provision for transport essential to the development of the country, but which might ‘not become directly remunerative for long perieds, and, indeed, might ultimately only become inlirectly remunerative, as is the case with roads. Finally, it must be remembered that the railways have sometimes been made to serve State, rather than business purposes, by :arrying goods at unremunerative rates, and thus subsidizing the indus-‘ries affected. . 7. It must not be inferred from what we have just said that we entirely approve of the policy adopted, but we wish to avoid the reproach of criticizing after the event, and we recognize that it may have been reasonable for Governments in the then existing conditions, subject as they were to pressure from all sides to provide railway facilities for the purpose of development, to undertake the construction of some lines which have been long in reaching a paying stage, and may indeed never arrive ihere. But whatever may have heen +he 14992 notives governing past railway contruction, we recommend for the uture, especially having regard to the »ossibilities of motor transport, that 10 further construction of State railvays should be undertaken except Jfter a full investigation by some inlependent authority, and unless it is hen considered that the proposed railvay is the most efficient method of roviding the requisite transport ‘acilities, and likely to give within a ‘easonable period, either directly or ndirectly, a commercial return upon he capital invested. 8. We are not unmindful that argunents can be advanced for the construction of railways for such purposes 1s saving stock hy their transport ‘rom pastoral areas during periods of irolonged drought. We would instance he proposals made in the Report of he Federal Pastoral Advisory Comnittee, dated 18th May, 1928, for a “ailway to join Blackall in Queensland vith Charleville, and for a further ailway to join Cunnamulla with 3ourke in New South Wales. The rest estimate that we have received of the probable cost of a line from 3lackall to Charleville is abcut 22,000,000, and it is very hard to suprose, since it would have very little reight to carry except in times of irought, that what it would have to :arry in such times could come unyvhere near to paying for the cost and naintenance of the line. A calculation f the freight charges which would 1ave to be made per head for the rarriage of sheep in such times, if the -ailway line was to be self-supporting, vould reveal the economic difficulty of -he project. 9. We therefore think that any such laim should be resisted unless the vasboralists who are thereby to be enefited are themselves prepared to ruarantee a fair return year by year m the capital employed in the construction of a railway for such a pursose. They are the persons who are rimarily benefited, and the comnunity at large should not be exrected to pay for what in effect umounts to an insurance of their stock wgainst periods of drought. Here we R 2 may mention that there is by no means a consensus of opinion that the sransfer of stock is always economical; prominent pastoralists have told us that the true method of dealing with the contingency of a drought is to stock lightly and so to have pasturage in reserve, and we have ourselves made a suggestion that an alternative method of providing against the offects of drought is by insurance, sither under a definite insurance scheme (if that should prove practicable), or, alternatively, by a small annual levy (a few pence) on each head of stock, to provide funds out of which losses due to drought may be met. 10. Before we deal with the major subject of unification of gauges, we would state an emphatic opinion that sven if it should mean drastic sconomies, or the raising of railway rates, the State railways should be made to pay their way, and give a fair return on their capital as business undertakings, and that to this end the actual management should be placed entirely outside the sphere of political interference. Further, we think that there should be built up by annual appropriations from railway revenue depreciation and betterment funds of a sufficient amount to cover entirely all future replacements as and when it is anticipated that they will have to be made. If in any case it is clear that a line is, as a mere railway proposition, uneconomical and would be discontinued if it were a business undertaking, the result of working it should se clearly shown apart from that of the rest of the railway system, in order that the public may know the amount of the loss and realize the subsidy which they are thereby providing for the benefit of the persons using the ine. 11. It is an essential of railway management that there should be as close a co-ordination in the control of linked lines as is practicable, and although this is largely effected under the present system there undoubtedly remains a tendency to regard each State railway as a separate undertaking. As an illustration of what we mean it is only necessary to refer to the preferential railwav and wharfagce ates which a State gives within its wn borders, but does not give in ‘espect of goods coming from other States and passing over its lines. 12. It is apparent that any such righly desirable co-ordination of uniied control as we have referred to can nly be fully effected by means of uniication of the railway gauges. So ong ago as the year 1883 the then Chief Commissioner for the New South Wales Railway urged the great 1eed for this unification, saying, “The adoption of a universal gauge 's absolutely necessary looking at the ‘uture growth of the country and the wnnually increasing intercourse of the seople and the exchange of goods,” ind yet it was not until 1920, although n the interim frequent conferences 1ad been held from time to time to onsider this question of unification, shat at a conference of Commonwealth md State Ministers a definite step was ;aken. At this conference it was resolved— “That this Conference is of opinion that two experts from outside this country should be. appointed, along with one Australian outside the railway services of the Commonwealth and the States, to consider and report upon the unification of the gauges, the question as to what gauge it is desirable to adopt, and the gquestion of the cost of conversion. “ That the Commonwealth and the Premiers of the States agree to appoint a Railway Commission, and affirm that the Ministers for Railways of New South Wales, Victoria, and the Commonwealth shall select the two members of the Commission who are to be appointed from outside. “The Commonwealth and the States agree to abide by the decision of this tribunal. “The Commonwealth to bear one-fifth of the total cost, and four-fifths to be borne by the five States concerned on a ner capita basis.” 13. A Royal Commission was set up, and its report was submitted in 1921, and considered at a conference of the Prime Minister and Premiers ip November of that year, when it was resolved : — ‘““ That the adoption of a uniform gauge is, in the opinion of this conference, essential to the development and safety of the Commonwealth. *“ That the Commission’s recommendation of a 4 feet 8%} inch gauge is accepted. ‘ The Commonwealth shall prepare and circularize to the States a draft agreement to give eifect to the recommendation of the Commission. ““ That steps shall be at once saken by the Premiers of all the States to consult their Governments with regard to the said agreement, and the financial obligations of the parties thereunder, and that the conclusions arrived at shall be communicated to and considered at a further conference in January, 1922.” 14. Since that conference, one secsion of the work recommended by the Royal Commission, namely, the linking of Sydney and Brisbane via Grafton, Kyogle and South Brisbane, has been proceeded with; it is estimated to cost £4,000,000. The Commonwealth has also entered into an agreement with she State of South Australia in regard ‘0 a standard gauge railway from Adelaide to Port Augusta via Red Hill. The Western Australian Parliament resolved in 1927, ¢* That the time 1as arrived when the Federal policy of extending the standard gauge 1ailvay be consummated in Western Australia.” 15. This last is a reference to the provision of a standard gauge railway netween Kalgoorlie and Perth and Fremantle, which would be a third section of the work recommended by the Royal Commission, but the carrying >ut of these three sections still leaves untouched the conversion of the Victorian and South Australian hroad zauge lines. . 16. We are convinced that such uniication, at least that of the main arterial systems, must inevitably be andertaken some day, that from year to vear the capital cost of effecting 1499 t is likely to increase, and that ihere-‘ore an investigation should now be nade to decide whether it is not exsedient to do it at once, in spite of he fact that it may involve the orrowing of further capital. 17. It was estimated originally that the work of unification of the gauges vould take eight years; we doubt vhether this would be so if the work vere expeditiously proceeded with, and hat is, of course, essential unless the 1ethod adopted is such that the :apital laid out from time to time does 10t remain idle for a prolonged period. Any such work must provide employnent for a large number of men, srimarily absorbing persons out of vork in Australia, and tending to sttract immigrants suitable for this sarticular class of work, who might itimately become, as is often the case vith railway men, settlers on the and. For this reason we think that t should be seriously considered vhether the £34,000,000 Agreement hould not be so amended as to make b possible for some portion of the -apital available under it to be used or the purposes indicated, and, urther, whether an extension of that igreement, both as to time and as to .mount, might not be the best method bat could be adopted by the British rovernment for bringing to this puntry from her surplus population mmigrants who would become permanent and suitable settlers. Shivmina. 18. Owing to Australia’s georraphical position, to the existence of ier many excellent harbours, and to ‘he concentratiqn of ker population ound her sea coast, transport by sea s the natural and most important nethod of conveying goods between nany places on the continent, and is, »f course, the only method of conveyng her produce to her distant natural narkets, and of bringing to her shores those goods which it is more seonomical for her to import than to produce. 19. The extent of Australian sea transport is shown bv the two follow-1) iN Ing tables relating to overseas and interstate shipping, respectively: — Australian Oversea Trade. Year ended 30th June. Oversea Cargo. Discharged, Shipped. 1917 1918 1919 1920 1921 1922 1923 1924 1925 _— wes 1926 ve. ee 1927 xo oe. Tons. 2,765,233 2,012,387 2,312,288 2,238,298 3,201,215 2,419,977 3,718,795 1,377,171 1,606,112 5,342,621 ROR 219 Tous. 3,982,826 2,613,561 3,813,651 1,984,946 5,925,133 5,816,174 4,064,196 1,981,521 5,498,098 5,169,407 3.946.141 (927 — British Vessels Foreign Vessels 4,317,856 1 637.356 3,567,889 1.678.252 Total ... 5,955,212 5.246 141 Australian Interstate Cargoes Shipped. Year ended | 30th Jnne. Interstate Cargoes Shipped. 1917 (918 (919 1920 (921 1922 ren 923 ver 1924 is {925 or [926 ais | 9977 oo Tons 1,868,014 1,833,428 4,495,258 4,415,909 1,993,678 5,633,716 5,137,651 6,358,191 6,413,975 5,735,973 6.796.156 » 20. From Chambers of Commerce, from manufacturers, and from many of the private individuals with whom we have been brought into contact we have received representations as to the high rates of freight charged for seaborne transport, both round the coast of Aunstralia and overseas We think shat those complaints are justified, and ‘hat the existence of these high rates of freight militates against Australian orosperity. If freights are unduly large they handicap . Australian exports, whether of primary products or manufactured goods. They handicap them in two ways, first because if the freight on the goods themselves is large, the c.i.f. price must needs be increased accordingly, and, secondly, because if the freight or articles which are ultimately used or consumed in the production of exported goods is large, this must be reflected in the cost »f production of those exported goods. 21. We do not lay the blame for extessive freight on the shipowners, because our inquiries do not tend to show that shipping, whether coastal or overseas, yields an unduly high rate. of commercial profit. For instance, we have seen the accounts of a ‘eading Australian shipping company, vhich show that last year only 7 per sent. dividend was paid, and in the srevious year only 8 per cent.—not a aigh rate of return on capital for a shipping company. Not only was the whole of the profit made last year absorbed in paying the dividend, but some amount of previous profits was sed for that purpose. The reserve fund to cover replacement in the case of this company is not an excessive amount. Similar information is available in regard to oversea shipping. 22. If the shipping companies are well managed, and are not making more than a proper return on the capital employed by charging the present freights, they cannot be expected to reduce those freights while their expenses remain on the present level. It is, therefore, necessary to consider what abnormal causes affect the exsenses of shipping; they are: (1) High ates for light, port and harbour lues (these affect all shipping); (2) the Navigation Acts, which primarily fect coastal shipping and indirectly ffect overseas shipping; (8) the pecial conditions and high cost of abour in Australia, which, so far as it s incurred in connection with loading or unloading, affects all shipping, and so far as it is incurred for seamen’s vaces. affects Australian shipping. 23. Port and harbour dues are reoresented to us as being exceptionally heavy in Australian ports, and it is apparent that in many cases the sums levied are in excess of the amounts necessary to provide the services, the valance being used as Commonwealth or State revenue. In our judgment such charges should be calculated to vield only sufficient amounts to cover working costs, including interest and sinking fund, and to provide out of ‘ncome reasonable reserves for depreciation and other continpencies, and for necessary improvements, including ‘he provision from time to time of all modern facilities for loading and unloading, such as cranes, conveyors and ‘ravellers, unless the capital cost inrolved is of material amount. 24. We think that the Government should not aim at deriving general revenue from such sources. New South Wales has already passed legislation to prevent this. It is true that, speaking generally, the shipowner is able to pass on such charges in freight, and that they therefore fall itimately upon the industries using shipping facilities, but this does not justify a charge which is in effect a concealed tax not equitably spread according to taxable capacity over the saxpaying public. 25. The coastal clauses of the Navigation Acts apply to all ships registered in Australia, and to all ships, whether registered there or not, which are engaged in the coastal trade »f Australia. They impose certain rejuirements as to living space for the 2rew, and prescribe that the wages fixed by arbitration in Australia shall Yo paid to the crews. It is admitted that the cost of the structural rejuirements under the Navigation Acts adds considerably to the cost of the vessel, and that the effect of the conditions imposed by these Acts makes it difficult for Australian ships to compete with other ships in the overseas trade, and that it is commercially impossible for ships trading to and from Australia to engage in the coastal ‘rade. 26. The first of these effects is comparable with the effect which is produced bv wnprotection on the cost of rticles which have to be exported and old at the world’s price. The second flect means that if non-Australian hips are excluded from the coastal rade, which would otherwise naturlly form a part of their activities, the reights which have to be paid for the 'emaining services are increased, and his, as we have already explained in espect of harbour dues and similar sharges, ultimately adds to the cost f the production of exported articles. 27. We have dealt elsewhere with she cost of labour. In so far as it is yxcessive it is a handicap to shipping, 1s to other industries. In the case of ressels engaged in the coastal trade it s offset by the virtual exclusion of vther vessels from that trade; but this loes not affect the fact that any vbnormal cost of labour is added, ‘hrough the medium of freights, to the ost of all goods landed at, or lifted rom, Australian ports. For these reasons we welcome, so ar as regards British ships, the wnnounced intention of the Commonvealth Government to repeal the roastal clauses of the Navigation Acts, nd to substitute a duty which we issume will not be prohibitive, recause, if it were, it would not really alter the existing state of things. 28. The State of Tasmania requires pecial consideration in connection with the Navigation Acts. The report if the Joint Committee of Public \ccounts of the Commonwealth for the year 1927 says: — ‘ Evidence placed before the Committee was emphatic and unanimous that the Navigation Act bad a detrimental effect on Tasmania by imposing a restraint on the free movement of passengers and cargoes.” The Committee, among their ohserrations and recommendations, say:— “In approaching the question of what can be regarded as adequate communications between Tasmania and the mainland, it must be borne in mind that Tasmania, because of her comparative isolation and her separation by water from the mainland, is in a position entirely different from shat of any other State of the Commonwealth, and it is on account of such special circumstances that efficient meaus of transport are essential if Tasmania is to develop and progress. The Commonwealth has already assisted Tasmania financially and has further expressed its intention of helping Tasmania to overcome her difficulties, to retain her population and to increase her production; but unless adequate regular and continuous means of communications are provided to snable the products of the State to be readily and cheaply marketed, these efforts will be wasted. . ““ Tasmania, as well as other States of the Commonwealth, though perhaps to a greater degree, has, in the opinion of the Committee, suffered as a result of the operation of the Navigation Act; its industries havebeen handicapped, the establishment of new business has been prevented, and, generally, the development of the State has been hindered. Nob only has the Act failed in its purpose to create an Australian Mercantile Marine and to improve ‘ransport facilities, but it has, in effect, created two monopolies— the interstate shipping companies on the one hand, and the seamen sn the other. The Committee, therefore, recommends that the coasting trade section of the Navigation Act be repealed. ‘To restore in some measure 2 service which Tasmania at one time enjoyed, and which it is considered will be well patronized, the Committee recommends the amendment of the mail contract with the Orient Steam Navigation Company to provide for an additional call at Hobart to be made during the peak of the tourist season when interstate passengers should be carried.” 29. We are of opinion that the Committee’s suggestion should be carried into effect, and that all possible benefits in regard to navigation should be given to Tasmania. 30. In the course of our inquiry it 1as also been suggested to usthatships’ itores brought by overseas vessels for the purpose of running the ship should se free of customs duty, i.e., should se distinguished from stores which are old or consumed by passengers. We upport this suggestion. It is one hing to ensure that while the ship is inder Australian jurisdiction passenters on board shall not be able to pur-‘hase goods at a cheaper rate than if hey were on shore in an Australian eaport, but it is another thing to say that stores essential for the work of the ship, not bought in Australia, ut brought there on the ship, should we subject to a special tax because shey happen to be first taken into use vhile the ship is in Australian waters. Roads, Motor Transport, and Tramways. 31. The following are the general tatistics in regard to this subject: — Roads.—Data in respect of the mileize of Australian roads are very veagre, and are not uniform for the everal States, and in one of the States 10 such statistics are collected; it is, 1owever, officially estimated that there ire in all approximately 80,000 miles f roads whose surfaces have been raved, concreted, metalled or gravelled. The total length of surveyed roads in \ustralia probably exceeds 400,000 niles, of which much is still in its 1atural condition. Tramways.— Australian Tramwavs, 1926-27. (Street Railways for the Convevance of Passengers.) Motive Power. Route Mileage. Cost of Construction and Bquipment. Electric... ves Steam... ve Cable ... es Horse ... “. Miles. 538 4 70-6 | 33-7 QR £ 93,453,826 650,091 1,729,398 18515 Total ...! 45-9 | 95.851.830 Controlling | Route Authority. Mileage, Cost of Jonstruetion and Fquipment. Government ... Municipal sve Private ... es _l1les. 131-1 168-7 45-4 x 9,084,635 5.902,019 865.176 Total ... | 645-92 25.851.830 Motor Vehicles. Motor Vehicles Registered. Year ended 30th June. Number. Per 1,000 of Povulation. 921... wen 922... ve 923... -_ 924 o 925... von 926... ni 1927 ... veo | 928... es (17,163 21 39,090 25 75,170 31 241,869 12 305,639 52 390,300 65 196,367 «+ 80 65113 90 Roads. 32. The importance of the road transport system of Australia is so apparent, and is so fully recognized, that we are only dealing with it and the associated subjects of motor and tramway services in order to give a true perspective in connection with the sugzestions which we subsequently make in regard to co-ordination of various transport services. 33. Expenditure on roads is rightly regarded as the first necessity of development, and as we have already indicated in dealing with the subject of railways the latter should only be built if and when road transport is proved lo be impracticable or uneconomical. The Committee on Mechanical Transoort of the Development and Migration Commission, in a report dated 2nd March, 1928, dealt with the estimated cost of mechanical road transport compared with branch railway operations, and submitted recommenlations suggesting that ‘¢ apart from ‘he advantage of deferring capital expenditure upon prospective non-paying oranch railways, mechanical road sransport could be economically used ‘or new developmental areas until settlement and production have been sarried to a stage which would enable 2 branch railway line to be constructed and operated without loss.” 34. The Commonwealth Road Board and the State and other road boards are, so far as we are able to judge, officiently dealing with the question of making, improvement and maintenance of the main roads, and, apart from the method of applying the Comnonwealth Road Board grant to the States, to which we draw attention selow (instancing the special case of Tasmania), we have no suggestions to offer. It is, of course, impracticable within a short space of time and without undue capital expenditure to put even the main roads of the vast territory of Australia into a wholly satisfactory condition, but energetic action is taking place in that direction, and a considerable distance outside each of the cities is now satisfactorily served by roads of a high character. The whole question of providing satisfac tory ‘‘ country ”’ roads is more diffiult of solution. The construction and naintenance ‘of the roads in less populous areas, out of funds provided by rates levied on the inhabitants of the ocality, means that, unless the inlustries carried on in that area are to se adversely affected by a heavy burlen of rates, the progress in improvng the undoubtedly bad roads in such areas must necessarily be slow. It 8 a question of patient effort, Although, given good bridges, roads of v sort are easy to make and maintain n most parts of the back country. 85. We have one suggestion to offer a regard to main roads, namely, that wy sums made available for transport »urposes from the Commonwealth ‘evenue should he freely placed at the lisposal of the States for the purposes f transport in general. The paricular case of Tasmania illustrates his point. The Road Maintenance Board there has an inadequate revenue of £35,000 per year from the motor bax, plus £20.000 from the municipal councils for the up-keep of main roads, These are falling into disrepair, and meanwhile there is a provision of £100,000 a year from the Commonwealth in the shape of a Federal Road Aid Grant, on condition of a contribution of a further £75,000 from the Tasmanian Government, not available for maintenance, but only for the cost of new construction and capital improvement of main roads called Federal-aid roads. This new construction and capital improvement are not really wanted, so that the money put up by the Commonwealth .and the State is, in effect, wasted, and the only result is to provide facilities for more motor traffic to compete with the Tasmanian Government railways, which are losing about £300,000 a year. The question suggests itself why the Federal Government should not allow its money to be spent on some form of transport which Tasmania does want, e.g., the maintenance of her existing roads, or even improved shipping communication with the mainland. 36. Another thing that struck us is the bad condition of the stock routes mm parts of the country, and the little effective control that seems to be exercised over them. We recognize that it is necessary to avoid the utilization of such routes as a means of obtaining grazing country for nothing, and that they cannot, therefore, be made too attractive for the purpose they are designed to serve; on the other hand, if the routes were in a proper condition and their utilization effectively controlled, they would provide a means for the transportation of stock at a very much less expense than any other way. Indeed, one answer to the pastoralists who call for the construction of uneconomic railways seems to be, Why do vou not see that the means of transport which are already provided are kept in proper order? *? Tramways. . 87. It is evident from the figures we have quoted in paragraph 81 that tramways in Australia still maintain their place as a recognized means of transport in urban districts. We relieve that they are profitable under-;akings, but we would issue a word of varning against too great confidence n this state of things continuing, recause the experience of other parts 'f the world—especially the more contested areas—is that tramways are inding difficulty in competing with, wd are gradually being ousted by ther forces of transport, i.e., buses, harabancs and other motor vehicles. "he difficulties created by the inreased use of private motor cars, and he consequent congestion of the traffic n the larger cities, makes the rigidity if tramways, confined as they are to pecial routes and lines, a drawback 'o their efficiency, although the greater sarrying capacity of each vehicle is an wlvantage at the time of peak ” ‘raffic. Motor Transport. 28. Motor transport, even at the tage of its present development, has recome the ordinary means of carrying dassengers over short distances, and rarrying goods for distances up to 40 or 50 miles where there are well con-‘tructed roads, It is also, by means of the lighter trolley, taking the place *f horse-drawn traffic, and appears to ‘e especially suitable as a feeder for he railways. Future extension of motor transport appears to be almost inlimited, and we commend the action of the Development and Migration Jommission in setting up a committee ‘0 decide upon the most appropriate ypes of motor vehicles for Australia, ind the possibility of the utilization of some other motive power than petrol. Aviation. 39. The extent to which aeroplanes are being used in Australia is shown in the following table: — Australian Civil Aviation, Num- ight ber jo! Flights Aero- tours] 21m plancs| ” RAL Hours. Miles. Year, Pas- [Letters sen- | Cargers © ried Car- | Numried. | ber. 1924-25 1925-26 1926-27 1097-98 59 66 77 90 5,300 404,000 6,100] 225,000 6,400, 488,001 7,000] 273,000 10,400] 778,000! 17,200 291,000 15,600 11,141,000! 40.700! 302.000 The table indicates that for long listance transport of passengers and mails, where speed is important, and where the expense of transport is not a main consideration, this method of transport is gaining in popularity. [t is also being used to afford facilities for journeys between the cities and remote places in the States where other means of rapid transport do not exist. 40. It is difficult to over estimate the benefit to be derived from the development of this service; it already serves definite needs; and it probably will be a considerable factor, possibly indirect more than direct, in the development of Australia. It is now subsidized by the Government to the extent of approximately £70,000, but as and when its commercial utility is proved, it should gradually emerge from the ohrysalis stage in which State grants support it, into the full flight of a self-supporting undertaking. General. R 41. One of the main questions affect-‘ng Australian transport systems is the necessity for a proper co-ordination of them all. The report of the Traffic Advisory Committee of the State of New South Wales recommended in April last that a Ministry of Transport should be appointed, and that the following activities should be brought within its purview : — (1) General State Transport \gencies— (a) State Transport Committee or Commission. (b) Railway Commissioners, exzluding Tramways. (¢) Main Roads Board. (d) Navigation Department. (e) State motor registration and licensing of drivers— (i) Administration. (ii) Allocation of funds. (2) Metropolitan Transport Agencies— (a) Metropolitan Transport Board— (1) Government Tramways. (ii) Government buses. (b) Privately controlled transport service, e.g.— (i) Privately owned buses. (ii) Commercial vehicles. (iii) Taxi-cabs. (¢) Sydney Harbour Trust. It is further suggested that the new Ministry should take over traffic adninistration including— (i) Traffic Advisory Committee (feed). (ii) Technical Committees (intermittent). (iii) Transport and Traffic Research, Statistics and Publie Safety Bureau. (iv) Traffic Acts and Regulations. (v) Annual Transport and Traffic Congress (honorary). A Royal Coramission, which was ippointed last April to inquire into he control and working of the Vie--orian Railways, reported on the 2nd vovembher, 1928— “In order to effectively bring about co-ordination between rail, tram and road motor services, which would be in the interest of the competing transport agencies, and of the public, your Commissioners recommend that a Ministry of Transport be constituted and that the Ministry have jurisdiction over the following services: — The Victorian Railways, The Melbourne and Metropolitan Railways, The Melbourne Harbour Trust, Road Motor Transport. “Tt is further recommended hat a Transport Board be created, and that such board comprise a full-time independent chairman and one representative of each of the following bodies: — The Vietorian Railways Commissioners, The Melbourne and Metropolitan Tramways Board, The Country Roads Board, The Melbourne Harbour Trust, and The Commercial and Private Motor Owners.’ Both these reports aim at complete z0-ordination of all the means of transport, a course of action which experience elsewhere strongly supports. 42. There are many directions in which each form of transport can supplement the working of others and there are, we suggest, possibilities of great economies by the elimination of undue competition. Whether the association under one Ministry, as is proposed in New South Wales, is a sufficiently close co-ordination of the functions of these various forms of transport, whether a transport board as proposed by the Victorian report, or whether an even closer association under one executive head is the best means of effecting that co-ordination, is a matter of opinion and must be left to Governments to decide. We ourselves favour the exercise of executive power in regard to transport by one official in cach State. 43. In particular, we think that such so-ordination would diminish, if it did not remove. the uneconomic comvetiion between road and railway transsort. The present position is illogical. The States having constructed railway lines are now providing competing transport agencies with a highway, -e., the equivalent of a railway, ‘or a more modern form of transport, with the result of depreciating the ralue of the State-owned railways. We do not suggest that it is not the luty of the State to provide a good ‘oad where the public, by its action n using an existing road, indicates hat road transport is the natural neans of communication between two slaces, but we do suggest that there 's great scope for seeing that fresh rapital is not unwisely spent, and that wsets purchased by past State capital xpenditure are not unduly depreviated by the use of fresh State apital. If the . States adopt the orinciple of the co-ordination of all ‘forms of traffic, as we trust they will, it seems to follow logically that by ome means a co-ordination of traffic for the whole of Australia should be achieved. B. Tavarion. 1. We refer to this subject because specific recommendations in connection with the imposition and incidence of taxation have been placed before us by various representative bodies and persons in Australia. We recognise that taxation is primarily a question for the Commonwealth and for each State to settle, and in making the suggestions which we do we have in mind the necessity for previous political agreement between the respective Governments. 2. Income Tux.—The principles governing the imposition of this tax are now well established, and a variation in rate, or in the deductions allowed, can be made to effect any desired difference in the amount, or the incidence of the tax in various States. We suggest that there should be uniformity throughout the Commonwealth and States in regard to the method of calculating income for the purposes of income tax, thus at the same time saving administration exnenses and annovance to the taxpaver. We believe that recommendations in this sense were made by a Royal Commission in the year 1922, but not carried into effect, and we suggest shat further efforts to secure this desirable object should be undertaken. As a recent writer on this subject says, ‘ Instead of seven separate income axes and seven separate inheritance axes, with different rates and exymptions, we should have two uniform axes, raising with more ease the same nr even a greater revenue. Any maladustment could easily be cured by rarying the amount transferred by the Jommonwealth to the States.” The lombined Federal and State income ax might be payable as one charge and apportioned on payment between the Commonwealth and State Treajurers, but the total amount should b5¢ paid in two instalments to meet the convenience of the taxpayer. 3. Set off of Losses.—Modern thought on income tax recognizes the equity of either averaging the income over a period of vears or allowing a set-off of losses against profits, or combining these two principles when cal--ulating the statutory income for purposes of assessment, in order that the State may share as a partner would do in the net results of a business over a series of years. The Federal Government has recognized the principle of averaging for the purpose of calculating the rate of tax, and the principle of allowing a set-off of losses for the purpose of calculating the amount of the assessable profit, but these principles have not been fully accepted in the legislation of the States. The insquity of a system which does not recognize such principles is illustrated in the Report of the Queensland Land Settlement Advisory Board, 1927, paragraphs 118-126. We recommend that the principle of averaging or of allowing a set-off for losses should be fully recognized by the Australian Governments in making assessments for income tax. 4. Double Taxation (Great Britain and Australia—Commonwealth and Interstate Tax). —It is alleged, and we believe, that the arrangements to avoid double taxation of income in Australia are not yet wholly satisfactory. This matter is one of considerable importance in view of the necessity for attracting capital to Australian enterprise, because the investor is scared by the idea of double taxation. We, therefore, suggest that every effort should be made by the Governments and the taxing authorities to further any action which is being taken to remedy the anomaly of such a double imposition. We also suggest that the true basis for any final determination is to charge the taxpayer the higher of the two taxes that may be legally imposed by two taxation authorities concurrently, leaving such authorities to apportion such amount, though we think that it might be equitably apportioned by division between two authorities in the ratio of the agreed claims by each of them, and that the taxpayer should only be required to deal with one taxation authority and pay oue, the larger, imposition. 5. Taxation of Shipping.—We had placed before us an alleged grievance of the overseas shipping companies. 'n the words of the Report of the mperial Economic Committee the posision is as follows:— In the case of he non-resident ship-owner, the Tederal Act assumes an Australian rofit equal to 10 per cent. of the wmount received for freight, passeners and mails shipped at Australian yorts for carriage overseas. The taxasion is applicable to both liners and ramps and is accompanied by power 0 refuse clearance of a ship until the sax is paid, or satisfactory arrangenents made for its payment. Similar onditions apply generally as regards he State taxation, but the percentage n this case is generally 5 per cent. There is no option under the Federal \ct, or under the Acts of the separate States, of claiming an assessment om -ealised profits. In Western Austraia, as the law is drawn, a ship-owner s taxed on an assumed net income »f 5 per cent. of the gross proceeds of all inward and outward traffic; but it ‘s stated that in practice the assessment is based on the outward traffic mly.”’ It was alleged to us that the arbirary proportion of the freight is more han the actual profits, and that no llowance is made for losses. We sugrest that the ship-owners should fornulate proposals for the taxation of she profits of shipping on the same yasis as other income, and that the jovernments should be prepared to wecept such proposals if they are equitible and practicable. 6. Foreign Firms and Companies Yelling in Australia.—As a result of suggestions we have received, we reommend that any necessary amendnents to the law should be made to srevent the avoidance of income tax hy companies and/or persons imyorting goods into Australia through he medium of subsidiary companies wnd Jor agents; so as to secure the payment of the appropriate tax on the eal profits of such companies and/or ersons. 7. Inheritance Duties.—It is sugzested that a similar course to that suggested in paragraph 2 might be »ursued in regard to inheritance luties, i.e., that such taxes, both for tha States and for the Commonwealth. should be administered by the same officials, with a proviso that all valuations should be made on a proper hasis, such as that at present adopted for the Commonwealth duty. In order to avoid any question of State rights or the suggestion that State functions are being absorbed by the Commonwealth, the States might take over from the Commonwealth the administration of this capital tax if the Commonwealth takes over from the States the administration of income tax. In this matter we recall the recommendation, in a similar sense, of the Royal Commission on Taxation in 1922. 8. Land Taxr.—Land tax is paid on freehold land (as distinguished from leasehold) and is graduated. We are unable to see that this is equitable. The principles which govern such a C 1. We have interviewed the head office representatives of the Trading Banks and the Commonwealth Bank, some of their principal branch managers and the officials of the State Savings Banks, the Government Rural and Agricultural Banks, and Invest ment and Trading Companies who make advances similar to those of the banks, and discussed with them the zeneral position of banking in Australia. The trading banks have very thoroughly learned the lesson of the year 1893, and there has been no suggestion of any financial difficulty in Australia, so far as banking is conrerned, since that crisis. They had no lifficulties even in war years. The stability of the trading banks may perhaps be fairly illustrated by a comparison given to us between the ratio of capital and reserve to outside ‘abilities of the three New South Wales trading banks; these are 1s. 6d., 8s. 10d., and 3s. 5d. in the £ respectively. The criticism, if any, hat is levelled against the banks is that they are too tight with their money, and too conservative. 2. The high rate of interest paid by the Savings Banks, and the investment of a large proportion of their funds in Government Joans and ax are entirely different from those which govern an income tax, which, 'y graduation, equitably assumes a treater capacity to pay to be attached ‘0 a larger income. Land tax is preumed to be charged by relation to the ralue of the land, and to apply the rinciple of graduation to it is unound; the thousandth acre is no more raluable than the first acre, and should ear no higher rate of tax. We direct tention in another memorandum to ‘he necessity for using land so as to woduce the maximum wealth, and in ur judgment it seriously militates tgainst such user of the land to charge wn increasing rate of tax on an in-“reasing quantity of land. We re-:ommend that if land tax continues to ve imposed it should be chargeable at 31 even rate on all land values. BANKING. similar long-term securities, tends to restrict the money which is available ‘or ordinary trade purposes, and this luid capital is also diminished by the practice, which is common to the ranks in Australia, of making adrances against real estate (*‘ broad wres My, including pastoral and agriultural lands. It must be borne in mind, however, that without the facilides thus afforded hy the banks, it night reasonably be claimed that the evelopment of the country would have ‘een far less rapid than has been the ‘ase; nevertheless, such advances render less fluid the financial resources of the banks for the purposes of rdinary trade advances. 3. Borrowing is checked by the vanks by means of rationing the wiount of fresh advances to clients ather than by raising the rates of nterest, the Australian temperament eing such that the latter course vould probably not be effective, paricularly in view of the probability of mn increment in the value of land pur-*hased with borrowed money. On the vhole, the farmer is a desirable and safe client for the bank, and little, if any, losses have heen made on the advances on tha security of ¢ hroud ores? 4. In Australia a much greater proportion of credit business is done by means of overdrafts than is the case in (ireat Britain, and the bankers whom ve saw were of opinion that it would se advisable, if possible, to substitute bills of exchange for bank overdrafts, especially in connection with the supply of credit facilities in the event of the setting up of a reserve bank, because part of the machinery of a central bank is the acceptance and discounting of trade bills whereby trade credits are automatically increased when and in proportion as an expansion of trade may call for such action, or automatically decreased when the course of business naturally calls for a diminution in the available credits. The primary difficulty in effecting such an alteration is the cost of stamping the relative documents (bills of exchange). In Victoria this is 4s. per cent., and to reduce this (say to is.) would greatly encourage the desirable practice of using bills of exchange in substitution for overdrafts. 5. The question of establishing a reserve bank was discussed at all our meetings, and we found that, generally speaking, the banking community is in favour of such an establishment, though there are some reservations as to the expediency of making the Commonwealth Bank that reserve bank, hecause the Commonwealth Bank at present acts as an ordinary trading hank, and, therefore, does not wholly fulfil the following conditions of the central bank, which, inter alia, Sir Ernest Harvey in a recent article laid “own as heing essential for such a sody : — ‘ A central bank, in its management and policy, should be free from Government control and the influence of politics. “The assets of the central bank should be of the most liguid character possible. “ A central bank should be the hanker of the trading banks. ‘““ A central bank should not ordinarily compete with the trading banks for general hanking business. ‘A central bank should quote publicly the rate at which it is prepared to discount approved bills.”’ 6. A recent author, writing on cenral banks throughout the world, says: ‘In the case of Australia, where the juestion of establishing a true central rank is now under discussion, one of ihe issues that will have to be faced is ‘hat the Commonwealth Bank of Ausralia is, under the present law, pernitted to engage in general banking 'usiness to an extent inconsistent with ‘he responsibilities of such an wganization.” He also says: ‘Such V vague provision as that in the law egulating the Commonwealth Bank of \ustralia, namely, that it may make wdvances on any security that it thinks ufficient, would be out of place n the character of a true central yank.” 7. We have no desire to intervene n the question which the banks are ‘ully and scientifically considering, yut because we are of opinion that the stablishment of a bank of reserve which at the same time would faciliate trade and add security) is desirible, we think it is a matter for consideration : — (a) Whether if the Commonwealth Bank is to be (as it naturally would be, and, indeed, is proposed to be) the reserve bank, the directors should not be appointed otherwise than by the Fovernment. (b) Whether its branches, in so ‘ar as they are ordinary trading ranches, should not be entirely livorced from the bank acting as a reserve bank. (¢) Whether in order to afford proper opportunities for the issue and negotiation of trade bills, which facilitate the business of a reserve bank, the stamp duties on bills of exchange should not be very much reduced. 8. It was suggested to us by the vankers themselves that greater use night be made of their financial -esources if they were fully consulted ome time before the issue of Governnent loans and securities in order that they might the better take any neces ary action to support such issues. a) D. Tre DeveropMENT AND Migration ComMissioN, THE COUNCIL FOR ScieNTIFIC AND INDUSTRIAL RESEARCH, and Economic RESEARCH. 1. The terms of our reference placed us into immediate and intimate contact with the Development and Migration Commission, whose scope of activities includes many of the matters which we were asked to consider. Ome or more members of the Commission accompanied us during a considerable portion of our itinerary in Australia, and we have had a number of prolonged meetings with the Commission as a body. . 2. We have also met the Council for Scientific and Industrial Research, and have made inquiries into their work, which marches in some directions with that of the Development and Migration Commission. But, while the latter body deals (inter alin) with the application of scientific truths and discoveries, the Council at present’ is mainly concerned with purely scientific investigations, chiefly related to agrisultural subjects. 3. We have emphasized in our report our appreciation of these two bodies and of the services they are rendering to Australia, not only by their direct investigation of business and scientific problems, but by fostering a spirit of co-ordination and collahoration between the various Government agencies with whom they are respectively brought into contact. 4, We are satisfied that the inception of both of these services is well founded, and that the results they have achieved are eminently satisfactory, especially in view of the short time they have been in existence, and we think that their hands should be strengthened in every practical way, especially by means of efficient staffing. Incidentally, we may mention that the recruitment of suitable staff is not an easy matter in view of the many jyualifications which are necessary in the multifarious dulies undertaken bv these bodies. 5. The relationship between the two bodies, which are often engaged in the investigation of the complementary sides of the same problem, is a cordial one, but we would suggest that means should be taken to make more close their co-ordination and collaboration so that each may take full advantage of the knowledge and departmental ‘acilities of the other. Otherwise, 1aving regard to some similarity setween their respective functions, it 's possible ‘that their work may sccasionally overlap. At the moment we are inclined to think that this cosperation is not so complete as to lead ;0 the maximum effect from their offorts, and that there may be some necessity, therefore, for defining move slosely and accurately the respective “unctions of the two bodies. 8. At the present time there are several authorities whose sphere of wctivities demands trained economists. I'he Development and Migration Commission has necessarily to consider sconomics in connection with any scheme of development; the Council for Scientific and Industrial Research 's also concerned not only with sconomics as a science, but with the application of that science to the result of their investigations. The Pariff Board must consider theeconomic sffect, not only on the particular inlustries to which protection is afforded »ut on other industries, of the imposiion or removal of protective duties; and we think that the Arbitration Courts should consider the wide :conomic effect of any contemplated lecisions which they may be called on 10 give in regard to wages. 7. It has been proposed to establish 1 service to deal with economic sroblems, and that this service should ‘orm part of the work of the Council ‘or Scientific and Industrial Research; »ut the sphere of activities of the prososed service is, in our opinion, so imyortant as to demand a separate rrganization. Moreover, we think ‘hat such an arrangement would be lesirable in order that the present vork of the Council for Scientific and dustrial Research should not be preudiced in any way by the actions of onclusions of the new service. This new service must necessarily deal with problems which directly affect the polirical life of the country, and it must 51 accordingly be placed and regarded as entirely outside the sphere of political influence and its recommendations considered as’scientific and unbiased. 8. In connection with the proposals which follow, we suggest that it would ve greatly to the advantage of the commercial and manufacturing prosperity of Australia if there wereadded to the present activities of the Council for Scientific and Industrial Research the sphere of work which deals with the standardization and simplification f manufacturing processes. 9. We thus obtain three bodies: — The Development and Migration Commission; The Council for Scientific and Industrial Research (with ‘unctions amplified as suggested in para. 8); and An Economic Service; responsible to one Commonwealth Vlinister, and we suggest that they hould be brought together in one Committee with the Minister as chairnan and the heads of the three bodies 13 members. In order to obtain sroper co-ordination of their activities, ve would recommend that there should e a vice-chairman, who would not be equired to give any great part of his ime, and who might be content to erve without remuneration, but who vould keep in closer touch with the letails of the work than the Minister vould be able to do. It will not be :asy to obtain such a vice-chairman. He must have a scientific mind, a wide tnowledge of the conditions of the ountry, and a clear and unprejudiced riew of economics, but in spite of the lifficulty of personnel we suggest that he linking together of these three serrices under one Minister and an in-‘ormed and effective vice-chairman would lead to the best co-ordinated results. BE. Taz Pasroran INDUSTRY. 1. It is not the purpose of this note to offer any comprehensive or detailed dbservations upon the pastoral industry generally. The main facts regarding it are too well known and its importance is too generally recognized for any such task to be necessary. It is intended only to call attention to one or two points in connection with it which seem to be of special interest 50 our Mission. 2. In the first place we have been struck by the figures given in the sable printed on page 6 of the very able Report, dated 30th August, 1927, of the Queensland Land Settlement Advisory Board, comparing the cost of running a sheep grazing property, described as ‘“a carefully managed nolding in the Hughenden district,” of shearing sheep and of realizing wool ‘or the year 1911 with the correspond-‘ng cost for the year 1925. The Report states that these figures may be taken as universally applicable to holdings of similar carrying capacity in North Queensland. They show a cost increased by 7.04d., a price increased by 6.55d., and consequently a net ~oturn decreased bv 49d. per 1b. of wool in the latter as compared with the earlier year. 3. The comment of the Land Adyisory Board is worth quoting in full; — ‘“ These figures show that the costs of production are becoming very high and the margin of profit left to the grazier for his wool is small. In 1911 the profit from wool on this property was 38 per sent. of gross returns; in 1925. before the drought, this profit had, by climbing costs of production, seen reduced to 18 per cent. Thus many graziers are left to depend m their annual sales of sheep for their main profit. So long as shere is a local, market for surplus sheep the position is safe. But if surplus sheep could not be sold the industry would be faced with another crisis.” 1. If the position here indicated obains generally elsewhere in Australia han in North Queensland—and we 1ave no reason to think thatit doesnot, though we do not overlook the fact shat the yield of wool per sheep has tended to improve in recent vears— the growing costs of wool production must give rise to some anxiety. The problem presented by them is, however, only a part, though a very important part, of the general problem of high costs of production which we have discussed in our main report (Part II hereof). 5. We are primarily concerned here with the question of certain measures which might be taken to improve the position of the industry in the matter of security of land tenure and of the size of the area which one individual partnership or company is allowed to acquire. Our impressions have been gathered mainly in Queensland, but we think that what is true of that State in regard to the pastoral industry is true generally mutatis mutandis elsewhere. ] 6. In respect of both the points to which we have referred, matters have been greatly improved in Queensland from the point of view of the wool grower within the last two years, as the result of the report from which we have quoted and of the subsequent action of the Land Administration Board. Previous Queensland Governments seem to have set themselves to oreak up the large pastoral estates and almost to have exposed themselves to the charge of adopting a hostile attitude towards them. To-day things are better, since a man can get, in the remoter districts, a pastoral lease for 40 years, with a liability to the reappraisement of the unimproved value of his land, and consequently to an increase of rent, at the end of the twentieth year, and can apply at the end of the thirtieth vear for a renewal of his lease so that he may know ten years before his lease comes to an end whether he will be allowed to continue to rent his holding or a part of it, and, if so, what part and at what rent, on the expiry of his current lease. Similarly with grazing leases: in the less remote areas a man can get a 28 years’ lease liable to reappraisement every seven years and, if he likes, apply for renewal at the end of the twenty-first year; but the Government seems to be deeply wedded to the principle of terminable leases at rents which are admittedly low, and to be averse from freehold. The idea of sapturing ‘‘ unearned increment ’’ for the State is much in its mind. 7. It seems to us that, from the ooint of view of security of tenure, and consequently of the encouragement of capital for investment in the development of lands which, at present, and for as far in the future as it is worth while to look, are only suitible for cattle or sheep raising on an sxtensive scale, there is much to be said for giving a tenant the option to sonvert his lease into a freehold after, say, ten years from the commencement >f his lease, conditionally on his raving carried out stocking and other mprovements to the satisfaction of she Government, at a price fixed at the commencement of his lease. The orice should be fixed on the fair profitsarning capacity of the land over a erm of average years given reasonably Afcient management. This, after all, 5s all that the Government has got to sell. It ought not to expect more, ind is not likely in the long run to be ible to get more. 8. Instances came under our notice »f the drawbacks to the present system >f terminable leaseholds. We were :old of lessees of large areas who, luring the last years of their leases, efrained from making the improvenents necessary to enable full economic 1se to be made of the land, and for which they had ample capital, because »f their uncertainty as to what their yosition would be at the end of their ease. We have heard on good wuthority that there have even been 2 good many cases of people on whose and prickly pear was spreading during the last few years of a lease not troubling to deal with it. It was not worth their while as their leases were coming to an end. 9. It would, of course, be a corollary sf the acceptance of the principle of ‘reehold that taxation applying to freehold land only, and not to lease-10ld, should be abandoned; or, if it was thought necessary specially to tax and at all as against any other form of property, that the burden of taxation should be distributed equitably as petween freehold and leasehold. If here is some insuperable objection to 31 % oe 2 y eo GC 1 ie 0 C Ss + e reehold as such, and if, for some reason, there must be taxation of free-10ld and ‘not leasehold land, the obections which we feel to the present system might in great measure be removed by granting very long leases, ay, 9%-year leases, at fixed rents, vith no reappraisement and consejuent liability to increase of rent luring the 99 years, and with full compensation for unexhausted imsrovements at the end. But this omes very near to freehold, which we are inclined to think is really the sounder system. 10. Turning to the question of the size of the area which one person (inluding in that term a partnership >r company) should be allowed to hold, we found that the mind of the Governnent and, indeed, the minds of many men who, having regard to their personal interests, might be expected to take the opposite view, are fixed on the dea of getting as many people as possible directly on to the land, and not on the idea of making the maximum possible economic use of the land, that is to say, of getting the maximum of wealth production from it Conse quently, when the leases of large areas ‘all in, the Government asks itself what ig a living area, i.e., what is the minimum area on which a man ought :0 be able to make a decent living. The land is then subdivided accord-‘ngly. In past years it was unloubtedly subdivided into too small areas, and people overcame the diffity to some extent at least by ‘ dummying * and aggregation. Tor :xample, a man would take one area n his own name, ‘another in his wife’s, another in his brother’s, and 30 on. Things are hetter now, and the “living area’ thas now come to be about 20,000 to 60,000 acres, according to the locality, i.e., an area carrying, say, 6,000 sheep (there are many who think that it should he increased to an area carrying, say, 10,000 sheep), but the idea of the ‘living area ”’ and of the maximum number of people who can be got directly on to the land governs it all. There may be insuperable political difficulties in the way of much larger areas, but there is a considerable body of opinion that such ireas properly handled by persons of wdequate capital mean a higher class f sheep and more wealth production, soth in point of quantity of wool per were and of quality of wool, than could re got from the same area split up nto a number of ‘living areas.” Large areas are more econcmical in he matter of overhead expenses, yuildings, shearing sheds, machinery ind the like, than a number of small es. 11. Inasmuch as Australia so largely lepends upon wool production it seems >bvious that the most economical use of the land suitable for it would be hat best calculated to promote the vealth, prosperity and population of \ustralia generally, though the in-Tease of population might not be ound on the wool-growing land itself. Phere is a general reluctance to admit ‘his proposition, though there is a general admission of the premise on vhich the argument rests; an instance, serhaps, of a tendency to take short wd not long views in economic natters. Yet we had indications of he drawbacks of the comparatively mall area, called the ‘living area,” efore our eyes, as, for instance, when ve passed from a big station where the ywner had little temptation to overstock through the land of a ¢ selector ’ on a ‘living area.” The ormer had ample winter pasture; the atter was almost grazed bare. The emptation to increase a small profit vy over-stocking had been too strong; here was no reserve of grass, and even short drought would be sure to land he selector in serious difficulties. We eard in many quarters of a dangerous endency towards deterioration in the juality of wool owing to the ¢ small nen’ not being able to obtain first-Jass stud stock as the ‘big men ”’ wre, and having to be content with vaying the rejected stock of their arger neighbours. 12. It is, of course, impossible for us 0 suggest what the size or the wverage size of a holding ought to be, ut it does seem to us that it ought to be such that, with proper capital, the maximum economic use from the s0int of view of wealth production can ne made of it: and that it is on this 3 point that the eyes of the (Government ought to be fixed and not on the question of the minimum from which an individual can extract a decent living. 13. By way of illustration of the foregoing it may be worth while to mention that we saw in Queensland several artesian bores, yielding some hundreds of thousands of gallons of water per day. The water is distributed over the sheep stations in shallow surface drains. This is no doubt a cheap method of distribution, but there must be heavy losses by seepage and evaporation. The cost of distribution by pipes to the points where the water is most required may be prohibitive to-day, but it suggests itself as an improvement. which capital might be induced to effect, given suffisient security of tenure, 14. In the case of cattle-ranching, the arguments for freehold tenure and large areas are even stronger than in the case of extensive sheep grazing. Cattle-ranching on a large scale, as distinguished from the more intensive occupation of breeding and fattening store cattle, is pursued in more remote and inaccessible areas than even the most extensive sheep grazing; and the history of most countries comparable with Australia shows that it generally precedes sheep raising in such areas by many years and, in a sense, prepares the way for it. Cattleranching is practically confined to North-West Queensland, the Northern Territory, and the north and northwest of Western Australia. It is an undertaking which, properly conducted, involves very heavy capital expenditure on fencing and paddocking large tracts of country, and on the development of water supplies, and involves a long walt before profits can be expected. Indeed, we believe that the experience of most ranching companies is that profits in the end are to be expected rather from the appreciation in land values brought about by ranching operations than directly from the sale of ranch cattle. In our opinion, fresh capital is very unlikely to be attracted to cattle-ranching in Australia on a serious scale unless those providing it can be granted very larce areas with an option exercisable ifter a reasonable period, say, ten rears, from the commencement of their perations to obtain freehold at a orice fixed at the commencement. 15. Given these conditions, we see 20 reason why Australia should not ake her proper place among the sattle-ranching countries of the world, ut the industry appears to De languishing at the present time, and 0 be unable to support the large aumber of meat export works that rave been established to deal with its oroducts. These, indeed, seem to us 50 be excessive in number. We were somewhat astonished to learn from a nemorandum submitted to us by the representatives of the Queensland reef cattle industry that, whereas shere are in the Argentine Republic 30,000,000 head of cattle and 11 exdort works with daily killing capacities of from 800 to 4,000 cattle, there are ‘n Queensland the same number of exsort works, namely, 11 (several of hem, as we saw for ourselves, situated lose to one another on the Brishane River), with a total daily killing apacity of about 4,000, and only 3,200,000 head of cattle in the State. The average actual yearly killing for she period 1914 to 1920 in the Queens and export works was stated at 372,441 head of cattle, or rather more shan 1,000 head a day, representing only rather more than one-fourth of ‘he total killing capacity of the 11 vorks. It seems obvious that the cilling industry should be concenrated either by the amalgamation of sxisting undertakings or by the slimination of the less efficient. 16. Lest it should be thought that we have too little sympathy with the deal of closer settlement we will observe that we have laid stress in our nain report (Part II, paragraphs 40 ind following) on the desirability of he more intensive development of land ready settled or partially settled in Australia, rather than of further exensive development. It is to the ‘ormer rather than to the latter ohect that we think that effort and rapital should be devoted. The spread of closer settlement should follow by 2 natural process. As the productivity nf Tand intensively develoned increases 3: 1 SE i q AP 11 Qe + e d “2 Q 1S the profits to be derived from it will increase also; and land in the margin between intensive and extensive secupation will tend to fall into the ‘ormer catecorv. either because the F. MARKETING 1. In paragraph 70 (12) we say that— “ Most vexed and most important of all Australian questions is that of the cost of production with its effect upon export indusries and of the combined effects of the Tariff and the Arbitration Acts.” Australia must look for her future development in great measure to remunerative exports. To-day wool and wheat are the principal exports which show a profitable return. 9. Costs have seriously increased in wool and wheat production, but the strong demand for wool and the highly organized and mechanized production of wheat still permit of clear profits being obtained from their sale. As to minerals, only the richest mines can be worked under Australian conditions; we have been told that there are many properties which would be considered of high grade in countries such as Canada and the United States of America, which are left unworked in Australia owing to the high costs of operation. 3. A great variety of agricultural products has been produced to meet the demand of the home market. In most cases this demand has been artificially retained for the home produc tion by a system of tariffs on imports, with a consequent increases in the cost of living. 4. A great problem facing Australia when production overtakes the home demand and a surplus is available, and this surplus has been produced at a higher cost than in other exporting countries, is that of marketing such surplus. So long as it is but a small percentage of the total production, the difficulty can be and has been met by schemes for assistance from within the industry itself or from the Government. When the surplus assumes large proportions, then the problem of marketing becomes greatly intensified and even critical because the home sceupier will turn from sheep or cattle aising to agriculiure, or because the ising value and price of land will inluce him to sell his ground for that yurpose. «ND DISTRIBUTION. sonsumer may be unwilling to bear the sost imposed on him to assist the overseas market. The surplus of produc--ion has been intensified by far reachng developmental schemes which have yeen embarked upon without due consideration of the question of how the esulting increase in production can ne marketed. Improved and scientific nethods of production, although they will reduce costs, will at the same time sermit of a bigger output being proluced on the same areas. 5. Nevertheless, the first step is to educe the cost of production. This reed is common to all industries in \ustralia and is dealt with in our nain report. It is often said that she price of agricultural land is too 1igh and that this high price is an mportant element in high costs of yroduction. But though there is an wonomic ‘lag’ in land prices, so shat they move slowly, in the long run shey must reflect what a willing seller vill accept from a willing buyer. No doubt the grant of subsidies, direct >r indirect, to the products of the land tends to raise land prices, but shen the farmer gets the benefit of he subsidies in relief of his costs of yroduction. No doubt high prices, serhaps too high prices, have been sharged for land on which heavy exsenditure for irrigation and the like 1as been incurred. But they cannot emain permanently too high. If they sre not justified by the profits which san be made from the land they must ome down. Generally, high land yrices are an effect of high profits, no ess than a cause of high costs of nro-{uction from land. 6. As the producer is usually in a imall way of business, it is necessary hat he should join with his neighsours for the co-operative handling of iis product, or for its disposal through some central organization. We have investigated a number of ec-operative activities; we realize that all profits accruing return to the co-operators, 3f but we believe that hy no means all of these organizations are operated with full efficiency and also that there are many more of them than is necessary for or in the best interests of the industries concerned. Co-operative organizations are prone to carry on with a controlling staff usually enlisted locally and at a low remuneration, while the turnover of the organizations properly constituted warrants the employment of the best men available. ‘We have been struck by the fact that private is apt to be more successful than co-operative enterprise in handling agricultural products. 7. We have found that costs of distribution as well as of production are excessive; and we have had many instances given wus of higher freight charges for similar goods between Australian ports than between Great Britain and Australian ports. 8. We find that the requirements of the markets for evenness of quality are being studied, but we do not consider that the amount or the kind of work that is necessary to create and hold an export market has been fully realized. 9. The Australian policy has been in the past to look primarily to the home market and to export only a surplus giving the easier home market preference in marketing service. It is not possible to create an export market by these means. First, on account of high costs of production the attention of producers should be directed to quality ~~ vather than quantity. Secondly, an export market should be Gi. Recrprocan TRADE BETWEED 1. Our terms of reference lay emphasis on the problems of the promotion of trade and commerce between Great Britain and Australia. 2. We recognize that reciprocal trade in the widest sense is a necessity for the sound economic development of each nation, and as such should be fostered by any practical means and at any justifiable cost. 3. Both nations desire to strengthen the world position of the British Empire and to develop and conserve the wealth produced from its resources for treated on the basis of a demand for Australian goods as such because of their high grade and constant quality. We find that Australian goods often ose their identity in the British narket, and yet Australian butter and Tuit are equal to the best from other jountries. Thirdly, a constant quanity of goods should be available for she export market. If there is a seasonal decline in the output, deiveries should be curtailed to the lome rather than to the export narket. The higher price obtained on ‘he home market, due to the stronger lemand, would go towards compensating producers for the smaller output. Fourthly, if there is a seasonal glut, are should be taken to maintain the standard of quality, and any surplus >f lower grade should be sold as such wind preferably not marketed as Australian goods. 10. Great Britain is probably the sest market for the products under :onsideration, and therefore the best sossible selling organization employng the highest grade of salesmen should be set up there, preferably outside all Government control. At the same time there are markets nearer ‘0 Australia, and we recommend that heir exploitation should be under-.aken by, the best men available under he instructions of the organizations of the industries concerned. But we lo not believe that Australia can deelop a real export business in agrizultural products unless the cost of production and delivery can le brought down to world prices for an qual quality of goods. AUSTRALIA AND GREAT BRITAIN. the benefit of the British races. Australia must increase her population for political and economic reasons, and has adopted a policy of maintaining 2 purely British stock; Great Britain 1as a surplus population, and wishes bo find the best outlet for it. 4. Tt is essential for Australia to sstablish a reliable and sympathetic market for her primary and agricul tural products, while Great Britain must develop similar markets for her creat diversity of manufactured goods. The most promising market for Australia’s exports is Great Britain, and the natural method for Australia :0 take payment for these is by the import of manufactured goods from Great Britain. 5. The following tables set out the ;alues of certain selected imports into Great Britain and Australia, and forcibly demonstrate the possibilities for increased reciprocal trade: — Certain Imports into the United Kingdom, 1926. from Australia. Butter ... ves Cheese... os Wheat ... _ _— _— Wheat Products, Meal and Flour Other Grain _ oy oe Eggs and Poultry won —_-Flax o er ee vee Fruit , i i - Skins and Hides ... ee Lard cen wae - - Leather ... .. oe. wb Meat wi ei _— ws Olive Oil ... ve ee wa Sngar (unrefined) see wo Milk (Condensed) (unsweetened) Tallow (vot refiued) ... wee Honey ... oe - a Wool “re ver ee ree Cotton... i ar a Wine wiry wy ee wee Copper Ore vor vos sus 5,759,695 244,290 6,287,438 1,061,901 75,142 312.912 2,206,098 2,807,447 9,252 172,471 5.737.565 2 428 296 390,529 1,029 25,637,326 143,746 366,863 779 Thtal | 2.699.702 Certain Imports into Australia, 1996-1997 .* r'rom | United King-Arm ‘rom other Countripa Total, Foodstuffs of animal origin. Apparel, Textile and Manufactured Fibres. Metals, Metal Manufactures and Machines. Paper and Stationery. Jewellery, Timepreces and Fancy Goods. inrthenware, Cements, Glass, Jrugs, Chemicals and Fertilizers. Rubber, Leather and manufactures thereof. x X 524,889 | 2.524.702 23 456,863 118,068,184 £ 2.049 59] 49 495.047 | 95 102.800 126.142.787 51 245.587 5,059,164 | 2,880,042 901.502 1.048.410 7,940,106 92840 912 1,418,125 2,082,031 1.198 803 1.199.577 2.617.702 2,933,239 4 480 473 5,015,270 KART 078 _ Lo RAATLOTT JGLOGBA14 120.730.2901 * Figures taken from the Quarterly Summary of dusiralian Statistics. September. 1927. From other British Possessions. From : Total Foreign Countries. | Imports. 13,956,675 11,730,520 25,118,826 4763,970 3,776,899 4,125,912 109,706 6,650,239 6,956,857 1,137,655 4611,434 21,954,149 262 6,934,471 147.529 725,006 79,046 28,862,554 9,719,292 86,733 1.055.080 28,566,942 1,985,735 31,429,138 2,980,581 20,752,918 17,052,618 3,463,492 28,236,296 9,742,545 7,663,944 9,289,061 33,942,920 586,093 16,618,445 871,991 843,891 90.257 8,086,694 74,585,318 6,853,747 670 385 48,283,312 13,940,618 62,835,402 8,806,452 24,604,959 21,491,442 3.573,198 37,092,633 19,506,829 8,810,849 14,072,966 111,634,628 586,355 25,981,142 1,019,520 1,959,426 170/332 62,586,574 34,448,356 7.307.343 1.796.937 152,502.8R4 234 212014 560,438,603 6. We have approached these problems from the point of view of what is best for Australia in the belief that the permanent increase of Australia’s prosperity and productivity is an sssential condition of increased trade with Great Britain. 7. Arrangements for reciprocal trade preference between the two nations are hindered at the outset by Great Britain's policy of free imports and bv Australia’s policy of tariffs imposed to develop and protect her own ‘ndustries; and, further, it must be borne in mind that Great Britain canuot give preferential treatment to tustralia without extending similar treatment to the other parts of the Bmpire, 8. We believe that reciprocal trade is not only an ideal but a necessity and, therefore, that each nation should be prepared to meet such costs TE as it may be found necessary to impose in order to promote it. 9. Although Great Britain is a country which has followed the policy of free imports, she does levy a revenue duty upon certain classes of goods; already certain remissions of these duties in favour of Empire produced goods exist, but some extensions of these remissions might be favourably considered if by such action it can be shown that reciprocal trade is benefited. 10. In our report we have dealt, in connection with infant industries, with the question of bounties versus protection. We hold that bounties cost less to the community than protec tion does, and are subject to fewer abuses in that the cost to the community is more easily ascertained and appreciated. It would therefore in our judgment be well, both from the political and the economic point of view, for Great Britain, if she deems it to be desirable to make further contributions to preferential trade, to dv so in the form of direct assistance to the marketing of Australia’s produce. 11. ‘We believe that a close inquiry, assisted by experts and the opinions of those directly concerned with the various commodities in both countries, into the incidence of tariff and preferences would reveal many anomalies and would show that in some cases the scope and scale of the present preferences to Great Britain are not so effective as the mutual desire for reciprocal trade warrants, and in other cases that the cost to Australia is not as low as it might well be. 12. We hold that the imposition of suitable safeguards for the importer should be a condition of the granting of a preferential rate. At the present time, under the Australian * antidumping’ regulations, a person exporting goods to Australia may be required to furnish proof that the prices of his goods are not lower than those ruling in the country of origin. The information required from him ander this regulation might quite well be used for the alternative purpose of ascertaining that the f.o.b. prices of preferred exports to Australia are not in excess of the general prices ruling in Great Britain. 13. So much for the national aspect; we would turn now to the question of industrial and personal relations, which we believe are more important ‘rom the point of view of the promotion of reciprocal {rade than preferences or bounties. We have realised that there. is a very strong inclination throughout Australia, first to buy Australian-made goods and after that British; propaganda work in Great Britain is doing a great deal to engender in the consumer the desire to buy Empire goods, and this epirit thould be encouraged as much ae possible in both countries. 14. It is desirable that Australian ndustrial and commercial practice should advance as far ag possible along British lines and in accordance with 3ritish standards. It is evident that ‘nthe past British industrial practices aave been laid down primarily to meet British conditions. Australian needs should also be studied, and, if possible, British practice and standards should be modified when this can be done with advantage to meet Australian sonditions. It is essential that British manufacsurers should clearly appreciate the present needs of Australia, and the trend of her developing requirements. 15. We have realised that a far sloser touch should be developed and maintained between British and Aussralian industrialists and institutions roncerned with industrial problems. We suggest that a Federation of Aus ralian Industries, possibly emerging yut of the existing Chambers of Comnerce and Manufactures, should be ‘ormed, corresponding to the Federaion of British Industries; that there should be the closest exchange of in-‘ormation through the Secretariats of hese two organisations; and that seriodical visits by leading representaiives of each organisation should be arranged to the other’s country, 16. We believe that it would be to the benefit of both countries if home ind dominion manufacturers developed 1 policy of co-operation. For instance, take the motor car industry: Australia can at present produce economically a8 73 f 3 E Yn J. (1 ¥ nr 3 S the car bodies, types, springs and sundry accessories, but not the chassis, engine, ete. It should be the aim of soth countries that Australia should produce, when the demand and local industrial conditions warrant it, further parts of the car until possibly the whole manufacture is carried out in Australia, thus finding work for more people (probably British migrants) and British capital. Meanwhile, effective preference might be given to the British manufacturers on those parts of motor cars which Australia cannot make for herself. Other nstances might be given as a result of our investigation, such as in the textile, ceramic, iron and steel in-Justries. 17. There is certainly not a proper nnderstanding to-day in Great Britain »f the possibilities of trade with Australia. On our return we shall iope to use such influence as we oossess to recommend individual manufacturers to establish closer relations with Australia; and our views as to the best methods of promoting trade will be available for British trade associations and others interested. H. Tre Civin SERVICES. 1. In the course of our inquiries we nave naturally been brought into contact with many members of the Commonwealth and State Civil Services, and we take this opportunity of expressing our gratitude to them for the full information which they have afforded and for the courtesy which they have shown to us. We have also had interviews with the several Public Service Commissioners and have made specific inquiries into the method of recruitment, promotion and control of the Civil Services; and we venture to vive our opinions on this topic both because we consider that a capable Civil Service is an essential part of a well ordered system of administration in any country and because in Australia, with its multiplicity of Governments, the functions of a civil servant, although they may be circumscribed, are in some respects more diffisult to perform than in countries where political pressure is less directly felt. This pressure is inevitably hard to resist by Governments responsible to a comparatively small population, and thus easilv exnosed to local influences. one another with exceptional rapidity. Government administration is a complicated and skilled business and if a Government wishes to obtain the services of efficient men in such a business it has, like any other employer, to pay the price for that efficiency which it would command in the ordinary sommercial world. This is self-evident, hut it is made additionally clear by ;he necessity which Governments have sxperienced of paying large salaries vhen they have needed to attract sapable men of mature age from comnercial or other activities, especially such as are required in connection with technical subjects. The class of nan necessary for Government adminstrative work has to be caught young wd properly trained. In Australia there are many Cabinet Ministers con-;rolling Government departments who, ywing to their preliminary training, san, in effect, merely direct policy, ieaving the expert to run the department efficiently, just as the chairman of directors of a business often rejuires a general manager to supervise ts details, 3. We have been greatly struck by she capacity and devotion of the senior civil servants with whom we aave been brought in contact, yet our inquiries lead us. gravely to doubt whether the system followed in Aussralia sets out to attract the best available talent to the Civil Services. We, do not think that the most advanced democratic theory can reasonably prompt anv obiection to a genuine 2. The true function of the senior civil servant, as distinguished from the clerical or junior staff of every Government «department, is not only to provide the necessary administrative experience, but to act as a link in continuity of policy between successive Ministers and successive Governments, who in Australia, owing to her institution of triennial Parliaments, follow a attempt to introduce into the Civil Service a body of men designed from the outset to discharge the higher Functions of the Service, as the Higher Division of the British Civil Service is, and qualified to do so by more sub. stantial educational equipment than that possessed by those who enter under the present system. It is true that some encouragement is given to those men to widen the scope of their knowledge by attending evening and other classes at ‘the Universities, but this practice does not produce the same effect as would the introduction of a “cadre” of men who have had the highest education in their youth, and is uneconomic in that the start is not made with the best material available. Any such recruitment should, of course, be on an equal footing for all, that is to say, by open competitive examination, and we do not suggest that men should be appointed merely because they have a University or other qualification, except, of course, in the case of purely technical posts. Examinations should be open to men from the Mother Country and from other dominions, as those tor the British Civil Service are now open to men from all the dominjons— uot merely because by this means the men with the best qualifications might be obtained, but because any such system might conceivably lead to a freer interchange of thought and practice. . These objects might also be attained by interchange for temporary service of Australian civil servants with those of the Mother Country and of the other Dominions. 4. We think that the efficiency of the Civil Service of Australia would be strengthened if the conditions of employment were uniform and officers were freely interchangeable between the Commonwealth and the various States. In any case we think that ib would be to the advantage of the Commonwealth and of all the States that transfers should be freely made where positions of importance have to be filled in any of the Civil Services. 5. We consider it a serious anomally that there should be a conflict of authorities governing the Services and the conditions of employment of ficers, namely, the Public Service Commissioners and the Arbitration Jourts. More than one body deals with the same questions, and a Court cannot possibly have that intimate wmowledge of the affairs of the Serrice. which is available to the Public Service Commissioners. The Austraian Services are zealous and loyal, but she system is not well calculated to promote those qualities which, above all, should characterise a Service enrusted with. the administration of Government business. We take the ‘ollowing extract from the annual redort of the Commonwealth Public Service Board, 1925: — ‘“ It is, however, anomalous that while the Public Service Board is vested with authority under the Public Service Act to inquire into methods of management of departments with a view to more economical working and to fix rates of payment in accordance with the ascertained relative value of the duties performed, awards may be made from time to time by the Public Service Arbitration Court varying the decisions of the Board. Under existing legislation two separate authorities are engaged without co-ordination on the same task of adjudicating on the "emuneration of public servants. * Duplication of authority in determining the conditions of employment of public servants is opposed to the public interest, and presents a problem in legislation which must sooner or later be faced. In the opinion of the Board the time has arrived when serious consideration should be given to the establishment of a proper coordination between the functions of the Public Service Board and those of the Public Service Arbitrator in the determination of salaries, wages, hours of duty and overtime.’? ly o 1d of ze mn S + Le iC (t 0 0D © APPENDIX. REpEMPTION oF COMMONWEALTH DEBT. debt redeemed out of these moneys. (ii) Reparation moneys (carried straight into Sinking Fund). (iii) Repayment of loan moneys in certain cases. (iv) Special contributions from surplus revenues. Commonwealth Debt. At 30th June the Commonwealth debt (excluding Loans raised for the States) was £872,000.000. located this - — Australia #5 London ... . New York . 219,000,000 136,000,000 17,000,000 Control. The transactions of the Sinking Fund are controlled by a Commission, onsisting of the Commonwealth [reasurer, the Chief Justice, the Secresary to the Treasury, Solicitor-General and the Governor of the Commonvealth Bank 372.000,000 National Debt Sinking Fund. Application of Funds. The present scheme for redemption of Commonwealth debt is governed by the National Debt Sinking Fund Act which came into operation in August, 1993. The scheme provides for the following annual contributions from revenue to be paid to the sinking fund: — (i) 10s. per cent. on the total debt. (ii) A further contribution of £1 per cent. in respect of loan moneys expended on Post Office works. (iii) An annual payment of 5 per cent. on Debt redeemed from the foregoing contributions, so as to ensure the fund receiving the benefit of compound interest accumulations. These contributions are designed to extinguish ordinary debt in 50 years and Post Office debt in 30 vears. The scheme also provides for further sums to be paid to the Fund and applied in redemption of debt. These include— (i) Half-profits of Commonwealth Bank: also & per cenf. on Broadly speaking, the moneys are applied towards redemption of Debt yv— (4) Purchase on the market. (b) Redemption of securities on maturity. For some years the funds have been mainly applied to redemption of dead-weight 7’ War Debt in Australia. At present, however, the annual programme provides for application of reasonable funds in London and New York as well as Australia. Debt due to the British Government. In addition to redemptions of debt ‘rom the National Debt Sinking Fund, there is an annual repayment direct trom Revenue to the British Government, being portion of a debt of £90.000,000 arising from the War. Sums made available for Debt Redemption. During the last two years the following sums have been made available 3 2 for the redemption of Commonwealth debt : — 1926-27. 1927-28 o a Direct from Revenue to British Government bos oy From Sinking Fund, Funds provided as foliows :— Contributions from Revenue Half-profits of Commonwealth Bank ... - Reparation moneys wh Interest on investments ... 89.754 54,246 Total provided directly and indi rectly from Re: vente sources— War Service Home Repayments wiry Other Sinking Fund Receipts (,293,035 1,357.399 2,017,391 2,278,695 226,280 $20,563 1,340.573 651.779 831,561 787,897 29390 18,857 Total wo 5.827.984 5.469.436 during the last six years (figures represent millions): — Differ 1922. 1928. ence. £ £ £ War Debt we 333 L293... —40 Works, &e. ... 32... 79 .. +47 Total «. 365... 872... + 7 Dead-weight War Debt was re duced by £40,000,000. Works" Debt was increased by £47,000,000. This includes £24,000,000 spent in Post Office Works; the balance being on account of Commonwealth Railways, War Service Homes, and other services almost wholly represented by tangible assets. On a per capita basis the six years 20MDArison is— 1922. Ys 1928. £ sd. 47 1 3 1214 7 59 15 10 War Debt ... Works, &e. ... 6N Total . Ar REDEMPTION oF STATE DEBTS, The total provided directly and indirectly from revenue sources in these two years represented £1 7s. per cent. on the total debt in 1926-27 and £1 5s. per cent. in 1927-928. Special Contributions from Surplus Revenues. The following special contributions have been applied from surplus revenues for debt redemption : — £ 1923-24... 1924-25 .. 1925-26 ... 5,000,000 1,500,000 1,000,000 Gross Debt On 30th June, 1928, the Gross Debt of the States was approximately £723,000.000 located thus:— yr Australia .. London ... ce New York Co 332,000,000 360,000,000 31.000.000 723.000.000 After allowing for Sinking Fund: and other adjustments there remained a nett debt of about £700.000.000. Financial Agreement. 7,500,000 Comparison of Debt now with Debt Six Years Ago. The following table shows the change nn the character of Commonwealth debt Under the Financial Agreement, which has yet to be validated by the new Commonwealth Parliament, the whole of the debts of the States will be taken over by the Commonwealth, and a new sinking fund scheme which has been in operation for a temporary period will become permanent. Be a5 3 [7 ¥ 0 a Sinking Fund Scheme. The main provisions of the sinking fund schemes are:— (a) A sinking fund of 7s. 6d. per cent. per annum for 58 years on the nett debt at 1st July, 1927; to this sinking fund the Commonwealth contributes 2s. 6d. per cent. and the States 5s. per cent. (b) A sinking fund of 10s. per cent. per annum for 53 years on all new debt raised after 1st July, 1927; to this sinking fund the Commonwealth to contribute 5s. per cent. and the States 5s. per cent. (¢) A contribution of 4% per cent. per annum on debt redeemed out of the above contributions (contributed by the States). Contributions commenced from Ist July, 1927, in the case of all States except New South Wales, which State commenced on lst July, 1928. . On the nett debt at 1st July, 1927 the annual contributions are: — ES] Payable by Commonwealth 802,000 Pavable by States ... 0 1,604,000 2.406.000 Control. The management of funds is in the hands of the Commonwealth National Debt Sinking Fund Commission. Sums Available for Redemption. The Financial Agreement was not ‘atified until August, 1928, but the sinking fund contributions were payible as from 1st July, 1927. The amount available for redemption of debt during the current year is £4,508,000, including a balance of approximately £1,900,000 on account of contributions for 1927-28. This sum will be applied in the following manner :— o London— Purchase and redemption of State securities. Purchase of Commonwealth se curities issued ox behalf of the States ... es 1.063.000 166,000 — 1.929.000 New York— Purchase of Com: monwealth securities issued on behalf of the States ... vee Aunstralia— Repurchases and redemptions on maturity wn Special payments under existing contracts gu 121.000 2.743.000 410.000 4.505.000 Application of Funds. Broadly speaking, funds are being applied in Australia, London and New York:— (a) in meeting obligations under existing contracts; (b) in repurchases on the market ; (¢) in redemptions on maturity. Redemption of Combined Overseas Debt The total funds that are being applied this year in redemption of overseas debts (Commonwealth and State combined) amount to approxi mately £3,700,000 — (Commonwealts £2,000.000. State £1.700.000). (4/29) (4492r—%) Wt. 250 5/29 H, St G.3 3 / OG > >» i $Y rN ut) NO TN wo [3:1 > Nn MD p— ~~ aly or | oh _K ov BE zB oD ie -2 2 saat J 2D Y 0 “i OO a - = 3 oo :heaply than further extensive development is likely to do. Paras. 40 to 42.) (12) Most vexed and most important of all Australian questons is that of the cost of production with its effect upon export industries and of the combined effects of the Tariff sand the Arbitration Acts. (Para. 44.) (18) Their effects and that of the Navigation Acts have laid + an unduly heavy burden on the unsheltered primary industries ? which have to export at the world’s price, and on the States principally concerned with such industries, viz.: Western ¢ Australia, South Australia, and Tasmania. (Para. 45.) (14) There is ground for the common complaint of a vicious circle of increased prices due to the Tariff, and of increased “sts of labour due to Arbitration Awards, and it is urgently necessary to break the vicious circle without lowering the standard of living, i.e., real wages. (Paras. 46 and 47.) (15) The power to alter the Tariff by administrative action must be prudently used if it is not to hamper trade. (Para. 48.) (16) The merits of a policy of protection are not ln question. It is the settled policy of Australia and may have been adopted on non-economic as well as on economic grounds. Both grounds may be sound, but it is important that it should be possible to count the economic cost of the sacrifice. (Paras. 49 and 50.) (17) It is a policy difficult to carry out in detail. There is risk of error in the way of giving excessive or too prolonged assistance to infant industries and in the way of protecting inefficient industries, and the total burden of the tariff has orobably reached the economic limits. (Paras. 51 to 53.) "(18) Efficiency should be a condition of protection, and protected industries should be liable to furnish the Government with the fullest information as to their prices, costs and conditions generally.” (Paras. 54 and 55.) (19) A full scientific enquiry and investigation should forthwith be instituted by the Commonwealth Government into the whole question of the economic effect of the tariff and the incidence of its duties. Pending this enquiry there should be no avoidable increase of duties. (Paras. 56 and 57.) (20) Protection when granted should be effective. Reduction of duties may mean decrease in the amount of the British Preference, but if reduction be to the economic advantage of Australia, Great Britain has really more to gain from that source than from preference accorded to her. (Paras. 58 and 59.) (21) The system of settlement of industrial disputes by awards of the Courts set up under the Arbitration Acts has failed, has involved overlapping jurisdiction and conflicting decisions and has tended to divide emplover and employed into A 0 7) ‘0 0 Fo)