Westralian Worker, 10 July 1931 pages 1 & 3
THE "REHABILITATION PLAN": Mr CURTIN'S DEVASTATING SPEECH
Speaking on the motion for the second reading of the Debt Conversion Agreement Bill in the House of Representatives on June 24, the member for Fremantle (Mr J. Curtin) contended that the plan agree upon at the Premiers' Conference could have no beneficial result and that it was entirely at variance with the former policy of the Federal Ministry. The whole question of the plan is one that demands the closest attention of Laborites, and in order to give our readers an opportunity of acquainting themselves with the views of one of the outstanding members of the Federal Legislature, and one who has given a lifetime of brilliant service to the Labor Movement, we print Mr Curtin's speech in full. Mr Curtin said:
"I find that these proposals, in essence, reverse the previous conception of the Government that national rehabilitation was to be pivoted upon industrial restoration, in that it now declares that the process of such restoration is to be the balancing of governmental budgets. I shall not weary the House with an extended reference to the views previously put forward by the Government. I accept the statement of the Prime Minister (Mr Scullin) that, in submitting this plan, he made no effort to justify what he has previously said regarding the present crisis. My objection to the plan is that it seeks to isolate Australia's problems from the world situation. It entirely overlooks the fact that the difficulty is essentially a monetary one. On June 22 the "Sydney Morning Herald" published the views on the world economic crisis of Lord D'Abernon, Britain's celebrated war ambassador to Berlin, and head of the British Trade Mission which thoroughly investigated the South American market problem last year. I place his views in the forefront of my observations concerning his plan because they seem to go to the heart of the problem, whereas the plan does not. Lord D'Abernon said:-
Every month evidence accumulates showing that this main cause for the trouble is of a momentary nature, and that the remedy can only be found in measures of monetary reform.
This plan abandons the Labor policy of monetary reform. It assume that the difficulties of this country are to be met by measures other than those which involve the reformation of our monetary system. In that essential aspect of the case the plan cannot but be condemned, unless one is to confess that the attitude which the Government has exhibited towards the problem for nearly nine months is also to be condemned. The essential difference between the Government's policy as previously advocated, and the policy now proclaimed, is that the previous policy declared that one of the fundamental conditions of recovery was, not only the attainment of price stabilisation, but also the improvement of the internal price level. Regarding unemployment, I have said before, and I say again, that there can be no very effective reduction in the number of workless people in Australia, nor any clearance of accumulated stocks in Australia's warehouses except as the result of an impetus given to recovery by an improvement in the price level.
Unemployment and Price Levels
All over the world, in every period of crisis, the process of recovery, nationally and economically, has coincided with an improvement in price levels.
Mr Theodore: That will be one of the results of this plan.
Mr Curtin: It is extraordinary that the Treasurer should expect prices to recover in Australia while he declares to the great mass of the consumers of Australia, who are either workers for wages or recipients of old-age, invalid or soldiers' pensions, that their capacity to buy in the market is to be lessened instead of increased. There seems to be an essential contradiction in a policy that expects an improvement in the price level to coincide with an aggravation of the deflation process. I need not tell the Treasurer, because he has himself declared it again and again, that the national income to be expected under the operation of this plan is to be less than that for the year 1931. The Prime Minister stated that our national income had fallen substantially in comparison with that of the year before last, that it was still falling, and that under this plan might be expected to fall still more. If I may enlarge further upon the interpolation of the Treasurer, who seems to expect that the Government's plan will result in the absorption of the unemployed, let me point out that the report of the experts directs attention to the fact that it will be necessary under the plan to provide £3,000,000 more during the coming year for the relief of unemployment than was provided last year. In this respect, the report of the experts seems to be destructive of any expectations which the supporters of the plan may entertain.
Labor Executive's Declaration
The Labor Executive's declaration of hostility to parts of this plan seems to me to be decisive, because the rejection of any of the conditions of the plan necessarily involves the rejection of the plan itself. This plan, not only as stated to the country by the Prime Minister, but as formulated by those associated with its proposal, is contingent on the reduction of wages, pensions and social services. Unless those reductions are effected, the whole plan falls to the ground. Therefore, when the Federal Labor Executive declared its definite opposition to a particular part of the plan, it must have intended to signify its rejection of the whole plan, because it was previously acquainted with the essential conditions of the scheme.
Mr Guy: Then why did the Executive allow members a free hand?
Mr Curtin: In order to make it clear that, in spite of the decisions of the majority of the Parliamentary Labor party which, in ordinary circumstances, would have been binding on all members of the party, members who felt disposed to oppose the plan were to be free to do so. This plan has been put forward within a month of what we were told will be certain Government default unless the plan is adopted. The reasons for this certainty of default, we are told, are to be found set out in the memorandum which Sir Robert Gibson forwarded to the Loan Council, and to the Treasurers of the States, under date of April 2. I remind honorable members opposite, and some on this side also, that a month after the receipt of that letter in which Sir Robert Gibson intimated the extent to which the banks would come to the assistance of governments in meeting their current liability, a motion of want of confidence was moved in this House by the Leader of the Opposition. That gentleman contended that unless drastic reductions in governmental expenditure were affected – and he enumerated the particular heads of expenditure to be reduced – it would be impossible for Australia to meet her obligations. The items of production which he enumerated now form the basis of the economics set forth in the plan which we are considering. The case put forward by the Leader of the Opposition was answered by the Prime Minister who, on May 8, rejected all the implications contained in Sir Robert Gibsons' letter of April 2. I am compelled to remark – and I do so with all respect – that if on May 8 the Prime Minister and the Government, in their capacity as leaders of this country and of this party, did not realise the full significance of what was contained in Sir Robert Gibson's communication., it is a reflection on their statesmanship. If they did realise it, I find myself incapable of understanding why the Labor party at that time presented to the country a policy it knew it could not carry out, with the certain knowledge that drift was inevitable, and default the inevitable consequence of drift. Thus, not only does the plan involve the violation of everything the Government put forward as its basic policy, but, worse than that, it involves leaving the Labor movement, and those pledged to its principles and policy, in the position of having in one month defended before the country that which was impossible of attainment, and of having in the next month to explain evasively that they did not know the difficulties confronting the country, or, knowing them, were engaged in stating an entirely false presentation of the case. I know that these are hard words. I am using language that I regret it is necessary to use but all of us have our responsibility, not only to the parties we support, but also to the constituencies we represent. As public men we are bound to stand by the declarations we have made to the public, and it comes about that we are compelled to acknowledge that we have been wrong, those of us who have been misled, should place the responsibility on the right shoulders.
A Violation of Labor's Policy
This plan is, in its essence, the plan of the party opposite. The Deputy Leader of the Opposition (Mr Latham), addressing the Nationalist Convention in Sydney yesterday, claimed that in substantial measure at least, the Government's plan represented the policy of the party opposite. I do not admit that simply because he said it, but I recognise many identities between this plan the one which honorable members of the Opposition have advocated for months past, and which I, as a loyal member of the Labor party, have felt it my duty to oppose.
Reduction of Interest
Mr Theodore: Does the honorable member say that the Leader of the Opposition or his supporters ever advocated the arbitrary reduction of interest?
Mr Curtin: I shall not shirk that pertinent question. I believe that the public generally, and certainly all honorable members of this House, will recognise that the claim of the Opposition was that once Government budgets were being put into such shape as to show even at some definite, distance time, a probability of attaining equilibrium, confidence in Australia would be restored, and it would then be practicable for proper steps to be taken to reduce interest rates. I hope that "I have never misunderstood the Opposition policy, and I believe that I have stated it fairly. I understood what they advocate clearly enough but I never believed that they would be able successfully to carry it out. I shall show later that this proposed reduction of interest rates, even though it is arbitrarily effected, will not – having regard to the particular nature of Australia's difficulties – provide that measure of relief which its sponsors expect.
I wish now to refer briefly to the Government's proposals for the reduction of interest rates. If a comparison is made of the average pre-war rate of interest payable by Australian Governments, and the basic wage paid in Australia before the war, with the average rate of interest that will result from the adoption of this plan, and its effect on wages, it will be found that the proposed reduction in interest increased the return to Australian bondholders by 10 per cent and reduce wages by 10 per cent. That is one fact which I present as unmistakable evidence of the unfairness of the plan.
Purchasing Power Affected
Under this plan it is proposed that the Commonwealth Government shall pay to Australian bondholders £2,400,000 less, and to other recipients of Commonwealth money, £6,141,000 less than they are now getting. But that is not all. The plan not only reduces the payments to those receiving money, other than interest, from the Government, by £6,141,000, but also contemplates a drastic reduction in State governmental expenditure. This will affect the purchasing power of the Australian people, but will not alter, by one iota, the internal national economy, except by an all-round deflation of values. And while it does that, it contradicts its own premises by adding £6,400,000 to the indirect taxation of the consumers. In effect, it provides that the wage-earners, whether employed by governments or by private employers, shall receive less because the Government policy will be reflected in the life of the community as [?] inevitably that must be so. It has been declared that the influence of the drastic reduction in interest rates affecting governmental transactions will be reflected in interest rates generally. It is proposed to effect the rehabilitation of Australia by reducing the payments which the Government makes to the people and by increasing the obligations of the people who make payments to the Government. The more one examines this plan the more evident that becomes. A reduction of £1,000,000 is to be made in "miscellaneous services," which will further affect the consuming, and consequently the spending, capacity of the people. Under the plan earnings are to be reduced by £8,500,000 and the cost of living is to be increased by £7,500,000. Relief to the extent of £16,000,000 is to be obtained by reducing the payments which the Government will make to the people by £8,500,000, and by demanding £7,500,000 from them. This is to be done at a time when it is admitted that the national income has been enormously reduced, and when we are certain that the capacity of the people to pay taxation in 1932 will be considerably less than during the present financial year. The essential fallacy of this plan is manifested by the effect it will have upon interest rates. In 1929, according to official estimates, our national income was £645,000,000, while the interest payments in that year were roughly £55,000,000. That is to say, in that year nearly one-eleventh of the national income was required to meet governmental interest charges. The national income for 1932 is estimated at 450,000,000; but in that year, after allowing for the relief which the Government expects by virtue of the proposed reduction of interest rates, £53,500,000, or practically one-eighth of the national income, will be required to meet governmental interest charges under this plan of national rehabilitation.
If we add £10,000,000 to cover exchange on governmental interest obligations overseas, approximately one-seventh of the national income will thus be absorbed. It is the proportion of payments to resources which determines whether the strain is reasonable or excessive. Having regard to our capacity to pay under the proposal, there will be an enormous increase in expenditure next year as compared with 1929. The saving in interest is £6,500,000, but exchange will cost £10,000,000. When the whole plan is in operation, and everything expected of it by its authors is realised, the Governmental deficits will be £14,000,000, of which £10,000,000 will be represented by exchange payments.
The Motive of the Plan
That brings me to the point that the whole plan, irrespective of its origin, and regardless of its sponsors, discloses the fact that it has been submitted in order to avoid any possibility of failure to meet our obligations to our overseas bondholders. It is on that that the plan is pivoted. Regardless of the sacrifices demanded in Australia, and the necessary readjustments of our economic life, the motive is, not to secure national rehabilitation and the balancing of governmental budgets, but to prevent our position becoming such that we cannot meet in full our overseas obligations. I do not say whether or not that is not a proper motive; but I believe the country should know that that is the Government's objective in submitting the plan.
This plan envisages, it is said, complete national rehabilitation and, we are told, contemplates absolute equality of sacrifice. Yet, if we search the plan from beginning to end, and closely examine every measure which is to be submitted to this Parliament to implement it, we shall find that although sacrifices are to be demanded from practically every citizen of this country, there is no suggestion that those persons outside Australia to whom the people of this country pay enormous toll will be expected, let alone asked, to make any contribution towards Australia's relief in its time of crisis. The honorable member for Wimmera (Mr Stewart) dealt with what he considered omissions from the plan. I direct attention to a cardinal omission. Although one-half of the public debt is domiciled, and, consequently one-half of the interest obligations of this country are payable, outside Australia, these overseas bondholders are not to be asked to contribute in any way to the restoration of national equilibrium.
Mr Archdale Parkhill: What does the honorable member suggest should be done?
To What Have the Banks Agreed?
Mr Curtin: One of its purposes is to fix an interest rate of 4 per cent for all government stock, and the State Parliaments are to be asked to pass legislation fixing an average rate of 5 per cent, or thereabouts, for private mortgages, but how can these rates be maintained? How can we be certain that for 30 years or any other period, the money market will remain in such a condition that 4 per cent will be a fair return in interest. There can be no assured declaration that such a rate is a fair return on government securities. There is to be no variation in the price of money under this plan, although all other factors are variable. What will happen if the whole of our internal indebtedness is converted into Commonwealth bonds? "This Parliament is undertaking the definite obligation of unification without enjoying any of its benefits. There is no suggestion of a reconstruction of the constitutional relationships between the Commonwealth and the States, although, under the plan, it is proposed to convert all existing securities into Commonwealth securities. IN reply to a question, the Treasurer (Mr Theodore) dealt with the whole question of Commonwealth securities. What will be the position if they go to £80 or £90 or if they fall from par at all? It will be impossible for the States, under their legislation to enforce a fixed rate of 5 per cent for ordinary accommodation, such as is required for the development of farms, factories, or workshops. How are we to maintain the rate of interest at 4 per cent? It can be done only by the banks agreeing to support the market. I do not know whether or not the banks have undertaken to do that. If they have – and this plan is not enforceable unless they have – it means that they have agreed to do what they have systematically and definitely refused to do in connection with any previous underwriting of Australian loans. The discussion – to use a mild term – which the honorable member for Wilmot (Mr Lyons) had with his colleagues when he sat upon this side of the House concerning the £28,000,000 conversion loan, arose out of the desire that the banks should support the market in connection with it. The honorable member for Wilmot said that they would not do it; and they did not do it. This plan will not work unless the banks agree to do now what they refused to do then. It is pertinent to ask why the banks have agreed to make this remarkable change. A further point is that the banks cannot go to the support of the market under these circumstances unless they resort to the creation of bank credits. Furthermore, they have undertaken to meet next year, Government deficits that are now estimated at £14,000,000; and at the same time they will have to come to the rescue of Government bonds in order to keep them at an interest of 4 per cent. It is not certain that the deficits will be only £14,000,000. If the income expectation next year is not borne out of any more faithfully than the income estimate for the year which is now closing, those deficits will be very much greater than £14,000,000. Therefore, implicit in this plan is the willingness of the banks to resort to bank credit inflation. I agree that they can do that without an inflation of the note issue. Under the measure that recently passed this Parliament, it is within the competency of the Commonwealth Bank to have a note issue of approximately £90,000,000 for a period of three years, which is the period envisaged by this plan. Taking the plan in conjunction with that legislation, it is quite obvious that any price recovery such as that which the Treasurer a few moments ago interpolated that he expected to see, would be the result of an inflation of credit and not the effect of the operation of this plan in the direction of an improvement of the industrial structure.
Opposed to the Plan In Its Entirety
I am opposed to the plan in its entirety, because the variations of interest rates are contingent upon my acquiescence in the reduction of payments to old-age, invalid, and war pensioners, and because implicit in the plan is an abandonment of the whole conception of the Labor movement in regard to the reconstruction of society. Although the plan professes to be a complete plan, it leaves untouched the top-heavy political system of this country; it takes no cognisance of the enormous opportunities for economy that have been presented to statesmen for nearly a generation; and in effect it says to me, "Go out and justify the taking of 2/6 a week from the income of an old-age pensioner, while at the same time it is proposed that we shall continue to maintain the panoply of six sovereign States, with six agents-general, six governors, and all the pomp and ceremony of thirteen chambers connected with the political mechanism of this country."
I say, too, that one of the cardinal omissions is that the plan leaves entirely unaffected the whole of the liabilities of policy-holders in insurance companies in Australia, of whom there are thousands. The honorable member for Maribyrnong (Mr Fenton) last night referred to the contributions that insurance companies had made to Australian loans, and emphasised the contention that those companies were, for the most part, the repository of the savings and the securities of the poor, the thrifty, and the moderately well-to-do. What is to happen to the man who, in the last eight or ten years, undertook, to pay £25, £30, or even 40 by way of premium to an insurance company in order to make some provision for his old age, or for his dependants in the event of his death? The incomes of these men are to be deflated. This plan represents a complete surrender to deflation. It is an abandonment of every effort to prop up the internal economy of Australia on the basis of the average of prices from 1925 to 1929; yet it leave hundreds of men and women with the obligation to discharge next year, on greatly reduced incomes, the liabilities that they have incurred in order that they might make provision for their old age. There is a fundamental difference between a policy-holder in an insurance company and a depositor in a savings bank. If the policy-holder does not continue his payments he loses the whole of his savings; whereas if a man cannot continue adding to his savings bank account, he does not lose anything.
Price Level Will Fall
Summarising, I say that this plan involves a falling price-level, aggravating the unemployment problem –
Mr Theodore: No
Mr Curtin: How, then, can the honorable gentleman account for the additional £3,000,000 which the experts say that governments will have to provide for sustenance next year? The plan further involves a restricted demand, making business conditions more difficult than ever. These difficulties will not be offset by any advantage to the wage-earner; owing to wages falling with the cost of living, the wage-earner will be able to reap no advantage. A further consideration is that, ultimately, bondholders and receivers of interest will make no real sacrifice, because the adjustment of the price-level will make the purchasing power of their 4 per cent as great as that of the interest which they previously received. That is the case which has been put up to them.
Mr Theodore: How can that be so if prices increase?
Mr Curtin: I say that prices will fall. The reason that I have given for my attack upon the plan is that it constitutes an abandonment of the policy that this Government previously put forward, which had for its purpose the restoration of the price level to the 1924-29 average. I say that one of the effects of this programme will be a fall in prices. If they do not fall, how in the name of conscience can this Parliament justify 20 per cent cuts in wages, pensions, and all other governmental expenditure? Therefore, I say that wage-earners will get no benefit from this plan because falling wages will keep at par with prices on the new deflated basis; whereas the handholders will gain, because with every fall in prices the purchasing power of their 4 percent will become greater. I say, further, that, with the exception of importers and certain exporting firms, the trading businesses will probably share heavily in the sacrifices that are to be made. I do not represent the trading business of this country, but one must endeavor to visualise the plan as a whole and to calculate its consequences. This declaration of mine will probably be borne out. Wage-earners, the majority of salary-earners, and primary producers will be the hardest hit, because, if this plan has realisation ahead of it, exchange will have to drop. One of the purpose, surely, should be to abolish the exceptional charges on account of exchange that are now imposed upon Australian Governments. The deduction of over £3,000,000 from pensions is an exaction from the poor relatively greater than then £6,500,000 which is to be taken from the bondholders. I place that in the forefront of my opposition to the plan.
Weaknesses of the Plan
It is a matter of certainty – I speak now to the country rather than to the Parliament – that the plan will provide the basis upon which the banks will enable the Government to avoid default for the months that are immediately ahead. Thereupon it will be found that certain parts of the plan, particularly those relating to finance – governmental and private mortgage rates, and bank rates generally – are not workable or enforceable. There will be discovered constitutional or other impediments, leading to a radical recasting of these sections. The only permanent sections are those relating to the contraction of governmental expenditure. On that aspect I need do no more at this stage than direct attention to the very notable speech delivered by the Deputy Leader of the Opposition (Mr Latham) in relation to the constitutional weaknesses of the plan.
Labor Faced with a Crisis
The Labor movement is faced, in connection with this plan, with what I recognise as a great crisis in its history and its structure. I believe that, even if every honorable member who sits upon this side supported the plan, the organisations of Labor, and the men and women who are units in the movement, would leave the movement rather than support it. That is my confident expectation. I believe, too, that they can have no respect for a party, certainly not their own party, if, in a time of great national crisis, it can see no alternative but to carry out and apply the policy of its opponents. Surely, if the programme of the Premiers' Conference is a right programme for a Labor Government to put forward, it carries upon its face the admission that the static policy of the Government either is useless or cannot be put into practice; and any policy, that, in a period of national difficulty, cannot be put into practice, is one that a party might as well not possess.
What was required in this crisis was positive action. I think that I am entitled to remind the House that some three or four months ago, long before the 30th of June was in sight, and when time permitted for one or the other of two plans to be put in operation, I suggested to the Government, and to the party to which I belong, that it had to face up to the issue; that it had either to find ways and means of putting its own programme into operation, or else permit its opponents to give effect to their programme. I said that matters could not be allowed to stand where they were; that we were between two opposing principles; that the time was past for the negation by the Government of the Opposition's plan, and by the Opposition of the Government's plan and that the country was in too dangerous a state for this warring of factions to remain in an indecisive state. I did not object to the disputation between the two policies or the two parties, but I asked for a decisive ending of the struggle. I declared that either this Government should go to the country and put its fortunes to the test, or permit the Opposition to form a government and put its policy into operation if it could do so. I have been told that was merely a gospel of perfection, that it suggested a cowardly running away from the obligations of government. I do not consider that it did. There is no cowardice in giving due recognition to the realities of a situation.
Mr Archdale Parkhill: is not the Government doing that now?
Mr Curtin: It is, upon the basis of the policy endorsed by the honorable member's party. The right people to carry out that policy are those who have been sponsoring it for the past year. Those who do not believe in it are confident that it will fail, that it will produce all sorts of reactions; and they should at least be free, when the time comes, to declare that they are in no way responsible for it.
Mr Theodore: There are many who would wash their hands of all responsibility.
Mr Curtin: I am not one who would do so. I refuse to be guilty of what is worse than the surrender of a political faith. When a person surrenders, he gives up his sword, and ceases to be a combatant. But this Government has not surrendered its sword; it is continuing to use it and to use it against the interests of the very people in whose interests Ministers were put into power. I would not complain, even if pierced to the heart, if it were done in clean and open combat with the political sword of honorable members opposite; but I more than object to an assassin burying his dagger in my back, and a poisoned dagger at that. That was an action of which even Brutus was incapable.
Mr Theodore: The honorable member is becoming drunk with his own rhetoric.
Mr Curtin: As the honorable gentleman challenges me, let me say that I voted for his reinstatement in office because he fought the process of deflation and the even then drastic economies which some were endeavouring to force upon the Labor party. Furthermore, the honorable gentleman was associated with the formulation of the policy which this party advocated all through the Parkes by-election, a definite and positive programme which was capable of application had the Government and the party proceeded to carry it through to the last of their resources. The programme then enumerated by the honorable gentleman won my vote for his reinstatement to the treasureship. I said to myself, "At last, this Government will fight for something." The honorable member for Maribyrnong (Mr Fenton) knows that that is so. The personal or private transaction of any honorable member do not influence me in the least. I believed that this country had to choose between two policies that were opposed to their aims. Perhaps I was wrong. It may be that that programme would have failed. But, at least, I was prepared to fight for it, and, if necessary, go to my political destruction, in supporting the faith that was in me.
We have now gone down on that policy, and the worst feature is that we have done so, not by the votes of the Opposition, but by the passive acquiescence of this Government. Now the honorable the Treasurer will stake his political existence to carry into effect, the policy that was formulated by the Melbourne Premiers' Conference and will even cause the resignation from Cabinet rank of tried, loyal, Labor supporters in doing so. But he will not do that in respect to the idea which he put forward, and which led to his reinclusion in the Government. I tell those who oppose this plan, and who will do so when they go before their constituents, that they will at least live as supporters of the Labor movement.
Plan of No Service to Australia
If I thought that the interests of the country would be served this plan I would support it, but I believe it will do Australia disservice. It will bring about the demoralisation of the Labor movement and render a service to its enemies which will give them an era of political mastership that will continue for many years. It will make the Labor movement something of which those who believe in it will despair, and cause them to refrain from putting their trust in it in future. Previously, whether the Labor movement was in power nor not it was at least noted for its consistent adherence to its principles; it was recognised as the party that preferred to be defeated at the polls on a straight-out issue rather than mislead the people. I believe that the faith that it has built up in the minds of its supporters will be destroyed. Were I a young man whose ideals had not been clouded by the confusion of political experience, I should almost despair of the Labor movement for having in this crisis robbed its supporters of that splendid tradition of readiness to do or die, of acceptance of victory or defeat, that has hitherto won the respect even of its opponents.
I oppose this plan in its entirety, because I believe that its ultimate consequences will prove of no service to Australia. I am confident that I will make the existing situation worse for the masses of the people, and more particularly during the next six months. I am of the opinion that those who have foisted the plan upon the Australian people will have to reconcile what they now do with its consequences, and as to the result will find it impossible to satisfy a disillusioned community.