Transcript
Page 1: THE AUSTRALIAN WAR ECONOMY, MAY-OCTOBER, 1944

THE AUSTRALIAN WAR ECONOMY, MAY-0 CTO B E R, 1944

I. Introduction. 11. Production and Supply Problems.

111. Finance and Prices. IV. Planning for the Post-war Period.

I The period since the last review of the Australian war

economy (see Ecommic Record, June, 1944) has been marked by one outstanding event, the referendum on the Constitution Alteration (Post-war Reconstruction) Bill, and the persistence of a number of harassing economic problems. The rejection of the Powers Bill, as it was generally called, was a serious setback to the Commonwealth Government, particularly after its over- whelming success a t the general elections just a year before. This is not the place to discuss the reasons for this rebuff from the electorate, but merely to note the effects of this decision so fa r as it will affect the Commonwealth's power to carry out economic reconstruction after the war, and to bring about a smooth and orderly transition from war to peace. Even the Leader of the Opposition, Mr. Menzies, agreed that some transfer of powers from the States to the Commonwealth was desirable, but he claimed that his opposition to the bill was because of the nature and extent of the powers asked for. He admitted Ihat i t would be necessary for the Commonwealth to have power in the years immediately after the war to continue control of prices, investment, essential materials, and rationing, but held that there was sufficient power under the National Security Act to do this. One may be excused, however, for thinking that. these powel's are doubtful and inadequate. The problem of effective coutrc! :n the post-war period, therefore, still remains to be solved. Theoretically it can be done by agreement between the States and the Commonwealth; but it would be unwise to rely on that possibility. A better way, which may be more feasible, is that the Federal Government and the Opposition leaders should draw up an agreed minimum of powers which the Commonwealth ought to have, to embody them in a bill, and then seek the approval of the electors a t another referendum.

So fa r as the Australian economy is concerned, for a t least eighteen months it has probably been making its maximum contribution to the war effort, with the labour and material resources a t its diq)osal. With price stabilization since April,

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1943, and a labour force growing only very slowly, national income has remained’ fairly steady over the last twelve months. The problem has been to maintain an adequate volume of production for ‘the needs of the services and the civilian population. The wholesale call-up of men of military age that took place during 1942 and 1943 seriously impaired the productive capacity even of essential industries, and made it extremely d s c u l t to maintain the previous level of output. The recruitment of women for the auxiliary services added to this difliculty. Accordingly it became necessar; once the danger of invasion was past, to remedy the balance between those in the services and those in essential industry. The transfer of 20,000 men from the army to the economic front, begun in October, 1943, was completed according t o plan by 30th June, 1944, so Mr. Forde stated on 24th July last. Meanwhile, the tide of war moved further away from Australia, RS the American command began to bring overwhelming numerical forces and material into action against the Japanese in the South-West Pacific. It became ever clearer that Australia could best help in this campaign by increasing her supplies for the mainten- ance of the United Nations forces in this area, even if this should entail some diminution of the number of men in her armed services. This conclusion was strengthened by the pro- gress of the European war, and the accumulating evidence that Germany will be defeated by 1945. On his return from Britain and America, Mr. Curtin said in the course of his speech to Parliament on 17th July last, “Mi. Churchill discussed the part to be played by British forces in the ultimate defeat of Japan. Though the transfer of the main British effort must await the defeat of Germany, large and powerful forces will become available this year, and the planning of the British effort is being vigorously pursued.” In so far as these British forces will also look to Australia as a base and source of supplies, it became evident that me must bend every effort to increase our productive capacity, while maintaining the greatest military effort compatible with this r6le of supplier, particularly of foodstufEs. So it was no surprise when the Prime Minister announced to Parliament on 30th August that the Government had decided to release 30,000 men from the Army and 15,000 men from the Air Force by 30th June, 1945.

I n spite of Army releases, and in spite of the relaxation of some import controls, problems of production and supply have continued to worry the authorities. The coal industry has con-

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tinued to be the chief cause of anxiety, and food production has probably been the second most important source of concern. In the coal industry strikes and absenteeism .have been the main causes of failure to obtain the output desired, while in food production adverse weather conditions over almost the whole of southern Australia have been mainly responsible. In attempts to meet our export commitments to Britain, a reduction has been made in the butter ration. But despite this, and the introduction of meat rationing at the beginning of the year, it seems likely that we will not be able to send to Britain the amount of food we hoped to export in 1944. We seem, in fact, to have entered upon a rather dificult phase of our war effort. On the one hand the removal of the immediate danger of a Japanese invasion has caused a sense of relief, some relaxation of controls, and the lifting of the depressing lighting restric- tions. But it has done little or nothing to relieve the shortage of supplies, and there have been further restrictions of trans- port, while the housing shortage remains very acute. The working population is tired, and feeling the strain. Also, most people probably feel that now the war is going well, civilian conditions should be easier, and many are less willing to work overtime and forego holidays. It was easier to endure sacrifice when a Japanese invasion was imminent. Now the war effort has entered a steady slogging phase; it is difficult to maintain our energy for the required effort. Yet a steady, and even an

I‘ increased production is required, if we are to finish the war as soon as possible. It is not surprising that the Prime Minister, harassed by these problems, has suffered a breakdown in health, and, a t the beginning of November, was ordered a month’s rest. Several of his colleagues have also been feeling the strain, and the rest of the population in varying degrees.

I1 (a) Manpower. Continual efforts have been made to re-allot

the country’s labour resources so as to obtain the best result for the prosecution of the war. On 4th May the Minister for the Army stated that “during the six months ended 3ht March, 1944, some 44,000 discharges were made from the forces. These includd discharges for normal wastage as well as special releases to industry. . . . The numbers employed in the munitions and aircraft bloc were reduced by about 12,000 from September, 1943, to March, 1944. Over the same period, the strength of the Allied Works Council was reduced by 12,500.”

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But in spite of this diversion of labour, the shortage throughout industry has remained acute. For a brief period at the end of May, 1 9 4 , the Commonwealth’s power “to direct persons to work for private employers” was called in question by a d‘ecision of the Supreme Court of New South Wales on 25th May. But on appeal the High Court of Australia unanimously upheld the valid5ty of the disputed regulation on 8th June, 1944. The danger that to a labour shortage would be added lack of control over the existing labour resources was thus averted.

Upon the return of Mr. Curtin on 26th June from his visits to Washington and London, the situation was examined again in the light of decisions reached with the American and British Governments. The Prime Minister announced in Parlia- ment on 30th August that “agreement was reached as to the lines our effort should take in the shape of fighting forces, the economic basis of the direct military effort, and the contribution to be made tovards the maintenance of forces in the Pacific and the provision of food f o r Britain.” The total demands for labour for high priority work was estimated at 96,000 men and women, but since all these demands could not be met, tlicy were scaled down to an absolute minimum of 52,000. Since the Government estimated that not more than 13,000 of these could be obtained by natural increase and diversion of the labour force, it decided “to release 30,000 men from the Army and 15,000 men from the Royal Australian Air Force by 30th June, 1945.” On 24th October, Nr. Funnell, who has succeeded Mr. Wurth as Director-General of Manpower, announced that planned programmes mould require a minimum of 155,000 men and 37,700 women up to 30th June, 1945. It was estimated only 117,000 men and 26,000 women were available from the various sources, leaving a total deficiency of about 50,000. Mr. Forde announced the following day that the situation mould be reviewed again before the end of the year.

(b) Coal Procluctwm. Perhaps more serious than the general shortage of labour has been the difficulty of maintaining a sufficient output of coal. By virtue of its powers under the Coal Production (War-time) Act, the Commonwealth Govern- ment has brought t w o collieries under the control of the Coal Commissioner. The Coalcliff colliery was taken over in March, and the Commonwealth No. 2 colliery in May, 1944. Although these steps led to greatly improved production from these two mines, the general position still remained unsatisfactory. Dr.

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Evatt pointed out on 1st May, in his capacity as Acting Minister for Supply and Shipping, that “too many stoppages occur without any justifiable reason.” A few days later Dr. Evatt maintained that prosecutions and h e s for breaches of discipline had not proved successful; as a result “the Coal Commissioner was given power to remove persons from the industry, whether employees or officials.” In order to increase production, machinery is being installed on fields as fast as possible, and “open cut” methods used wherever they are suitable. In spite of these measures, and the release of several hundred miners from the forces, the situation still remained unsatisfactory. Mr. Forde, as Acting Prime Minister, pointed out on 20th June that production in 1944 promised to be no better than in 1943. -

Soon after his return from abroad the Prime Minister addressed himself to the problem. The growing scale of operations in the Pacific called for increased production. Representatives of coal-owners and miners met with the Prime Minister and the Coal Commissioner late in July for discussions. The conference fixed a target of 1,200,000 tons of coal a month. As the Prime Minister said, “the target is not impossible-it has been exceeded many times. It could be achieved by a 50 per cent. reduction in strikes and a 10 per cent. recluction in absenteeism. ” In return the Prime Minister undertook, if this target mas reached, to introduce a Commonwealth insurance fund for miners’ pensions. But on the 22nd August, less than a month later, the Prime Minister felt obliged to write to the president of the Miners’ Federation and say “that as the amount of coal produced is fa r less than contemplated, and as the reduction is due to strikes in defiance of the needs and interests of the nation, and in violation of the purposes and spirit of the recent conference, I will advise my colleagues in the Government that my undertaking has been vitiated by the conduct of members of the federation. Therefore, no Common- wealth scheme of pensions will be introduced.” On the same day, steps were taken to ration the supply of coal. to industry, reducing consumption in accordance with the supplies available. This has entailed further reductions of coal supplies to transport systems throughout Australia, and further reductions in trans- port services. On the 31st August, Mr. Menzies, as Leader of the Opposition, moved a vote of censure on the Government for “its failure to maintain adequate supplies of coal. ” Though the subsequent debate added to public information on the

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subject, the Opposition was unable to suggest any new steps that would be effective in increasing coal production; the motion was easily defeated in the House. The debate, however, seemed to stimulate the miners into improving output for a short period. In the course of the debate, Mr. Curtin pointed out that “one-half of the absenteeism in the industry is unavuid- able.” But, on the other hand, “there were 17,000 employed in 1942; 17,800 are employed this year. More men are employed in 1944 than in 1942, and less coal is being produced.” (The year 1942 saw the record output of coal of 14,966,000 tons.) By the end of October, however, the miners’ leaders seemed to feel that the Commonwealth Government was not giving the men a fair deal. They proclaimed their intention of having a “show-down” with the Government, and tried to obtain the support of the Australasian Council of Trade Unions. The A.C.T.U., huwever, while very willing to mediate between miners and Government, urged the miners not to interrupt production. The illness of Mr. Curtin immediately afterwards has so far prevented a conference of the various parties. The problem of how to obtain the wished-for output of coal still remains unsolved.

Minister for Commerce and Agriculture, reviewed the labour situation iii rural industries, the production achieved in 1943, and some of the objectives set for 1944. The labour shortage had been slightly relieved by Army releases, and by the use of prisoners of war. However, it is quite clear that, because of the greater demands that mill be made on Australia for food supplies, very much more labour will be needed for farm work. Meat production in 1943 was 1,045,000 tons, which was 46,000 tons in excess of the target set; it was also 90,000 tons greater than the output of 1942, and nearly equal to the pre-war record output. Production of canned meat was 85,000 tons compared with a pre-war output of 15,000 to 20,000 tons. The demands for meat in 1944, however, are still higher, but the abnormally dry season over almost the whole of southern Australia in 1944 is going to make it difficult to reach the targets set. On 24th May, Mr. Scully announced that for security reasons he could not give the exact export figures since the introduction of meat rationing at the beginning of the year. He claimed, however, that “shipments of meat from Australia against the British contract had increased by 118 per cent. over the corresponding months of 1943.” This of course tells us nothing about

(c) Food Prodzzcth. I n February last, Mr. Scnlly, the ’

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whether the targets set were reached or not; we may conclude that while it shows an improvement on the figures for 1943, it fell short of the full objective.

There have been no official announcements about the progress of dairy production in recent months, but it is well known that the drought wi l l make it very diEcult to reach even last year’s output, let alone increase exports. The increased subsidy given to the riairy industry in April last was devised particularly to increase production in the autumn and winter months. A t the same time, attempts were made to increase production of stock feeds by guaranteeing prices to growers; prices were also fixed for buyers-another form of subsidy to farmers. I n May, schemes for priority distribution of milk were introduced in Sydney and Melbourne, and authorized for other centres when necessary, while in July the winter price of whole milk was increased in all the capital cities by action of the Prices Commissioner. On 30th Au,gust, Mr. Dedman, Minister for War Organization, announced that Production Executive had set a target of 1,210m. gallons of milk for all purposes; the average production of whole milk for the five years ended 1943-44 was 1,146m. gallons. With favourable seasons this goal may be reached, but so f a r the season in southern Australia has continued to be abnormally dry.

I n other respects food production seems to have been satisfactory. Though a shortage of potatoes for civiliaii con- sumption occurred in October, the new crop is now coming in, and next season’s acreage is being greatly increased. The target is 278,000 acres compared with 190,000 in 1943-44, and 98,000 acres in 1938-39. The prodnction of vegetables other than potatoes has been very satisfactory. Mr. Scully announced on 5th June that we are now able to produce all the vegetable seeds necessary to sow the acreage aimed at. He contemplated a sown area of 290,000 acres for 1944-45, as compared with the 1943-44 target area of 251,700 acres. A month later, however, Mr. Dedman announced on behalf of the Production Executive that the target area for 1944-45 had been fixed at 246,000 acres, approximately the same area that was sown in the previous seasons. Apparently the demand for vegetables from all sources is being fully met, and we are this year canning more than twelve times the amount processed before the war. The expansion of egg production seems to have been equally satisfactory. The production of 88m. dozens for the year ended 30th June, 194-4, was a record, exceeding the

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previous year’s figures by 7m. dozens. These figures do not include output from producers with less than 40 laying birds, who are not reckoned as commercial producers. Prospects for the sugar crop in Queensland appear satisfactory, and in the last cutting season men were made available from the Army to make up the labour shortage. The wheat and flour situation has been easy throughout the war, and despite the poor harvest of 94m. bushels in the last season, stocks of wheat increased from 158m. bushels in 1943 to 212m. bushels this year. The prospects for the 194445 s e w n are much worse than last year, and it is estimated that the harvest will probably be about 60m. bushels. Disastrous though this may be for wheatgrowers, it will still leave us with wheat sufficient for our own needs and a surplus of about 30 million bushels fur export. A bill was passed at the end of March last, raising the guaranteed price for wheat from 4/- to 4/1* per bushel a t sidings, up to 3,000 bushels from each grower. Outside this quota the wheat is also acquired by the Commonwealth and sold through the Wheat Pool. The ,qaranteed price was raised to cover an increase in harvesting costs; for the first time harvesters’ wages have been made the subject of an award by the Commonwealth Arbitration Court, which has increased the rates.

(d) Supplies and Rationimg. There continue to be short- ages of various articles of civilian use and consumption, though it can hardly be claimed that these impose severe hardships on the community. The wurst shortages are probably in housing and transport facilities, and all public transport systems are severely overtaxed. The shortages of civilian commodities are being met as best they can be with the resources a t our disposal. Some relaxation of import controls has taken place; for example, in April last, in order to remedy the shortage of cooking utensils. Further relaxations were made in May and June in order to obtain other goods or materials in short supply, such as sausage casings, corks and cork wood. Certain other imports were brought under control because it was neces- sary to procure them through government channels, quotas having been established for the Australian market by exporting countries j corset materials, heating elements, cutlery and a number of other items came in this category. Considerable sup- plies of textiles are being imported from America under lend- lease arrangements, whilst Britain and India are allocating a portion of their annual production of textiles to Australia. A further relaxation of import licensing restrictions was

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announced by Senator Keane on 14th August, 1944, affecting electrical apparatus, machinery, refrigeration equipment, and certain chemicals. Further relief for consumers was promised when it was announced by the Prime Minister, on 1st Septem- ber, that surplus stores of war supplies, worth several hundred million pounds, would be released to the public by a Common- wealth Disposals Commission. “One of the first duties of the Commission,” said Mr. Beasley on the same day, “will be to see that some of the accumulated goods no longer required for war purposes and in urgent demand by civilians are released immediately. ” Actually during the present year, though there have been shortages of certain goods, there has been no worsen- ing of the general position, and now there seem to be definite prospects of improvement. Consequently it has not been necessary to extend rationing to a wider range of commodities. The introduction of meat rationing in January, and the reduc- tion of the butter ration in June from 8 to 6 oz. per week, were not due to any decline of supplies, but t o the increase of Allied and British demands which we feel we should meet if possible. Actually an increase of 50 per cent. in the tea and sugar ration ‘was made for people in remote country areas from the beginning of the new rationing year in June last.

I11 (a) Zi’inance. The final figures for Commonwealth war

expenditure in 1943-44, and the budget estimates for 1944-45, indicate that we have reached our maximum war effort. So fa r as our military espenditure is concerned they shorn that we have passed the peak, and that we cannot maintain the armed forces a t their previous strength and also meet the other demands upon our resources. The construction of military works in Australia and adjacent territories has now been nearly completed, and men are now being released from the Allied Works Council for other more important work. Mr. Forde announced on 20th June that “there had been a reduction in the personnel of the Civil Construction Corps from 58,000 to 21,000.” These facts are all reflected in the public finances of the Commonwealth. War expenditure in 1943-44 was approxi- mately h . 5 4 4 , a decrease of Sm.17 compared with the previous year,” Mr. Chifley pointed out in his budget speech last September. Mr. Chifley went on to explain, however, that budget expenditure does not fully measure the amount of all Australian resources used for war purposes; on a full reckoning

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our expenditure would be Sm.558 as against Sm.530 in the previous year-actually an increase of Sm.28. However, the direct war expenditure fell in 1943-44, and a further reduction is budgeted for in 194445, the fibonre being put a t Sm.505. Mr. Chifley remarked in his budget speech on 7th September that “the reduction in no way implies any diminution of effort but rather a re-orientation of that effort, due to two main factors. In the first place the war has reached the stage where the necessity for new capital works of various kinds has decreased . . . In the second place, demands on Australia’s productive capacity by the United Kingdom and Allied Governments have strained that capacity to the utmost, and some diversion of manpol-er from the armed forces to production is necessary if those demands are to be met. In the circumstances, and with the full concurrence of the Allied Governments, the total strength of the services will be less during this financial year than in the year just concluded.” The total expenditure budgeted for in 1944-45 is 5m.653, and revenue is estimated at Sm.325, leaving a deficiency of Sm.328 to be financed by loans, and other means. Last year loans and war savings certificates amounted to Em.265-a record figure. The Treasurer hopes to raise at least an equal amount from the same sources during the present financial year, and to reduce the reliance on Treasury Bill finance to a minimum.

By 30th June, 1944, the aggregate public debt of the Commonwealth and States amounted to Sm.2,367-the Com- monwealth debt increasing by Em.369 in the course of the year. On the other hand, the buoyant position of Commonwealth fnnds in London enabled the Government to repay a loan of Sm.12 stg. raised in London in the year 1940-41. The gap between the increase in pnblic debt and the amounts raised by loans and mar savings certificates has been met by the issue of Treasury Bills. By 30th June, 1944, Treasury Bills issued for v a r purposes amounted to Sm.343. The Treasurer pointed out that “the effect of these Bills, together with the influence of the large espenditures in Australia by our AJlies, is that excess spending power in the hands of the public has increased greatly.” He hoped as a result that the general public would subscribe more to public loans in the current year. The Second Victory Loan, which opened on 26th September, aimed at raising 5m.160-Sm.47 for conversion of two loans maturing on 15th October-within five weeks. The Treasurer’s hopes, however, were not realized. By extending slightly the period‘ of snbscrip-

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tions the record total of Sm.160 was fully subscribed, but the number of subscribers was less than the record fi,pre of 567,700 for the Fourth Liberty Loan.

(b) Price Control. I n another par t of his speech the Treasurer emphasized the danger of the excess spending power in the hands of the public. “The danger of price inflation,” he said, “has not lessened but has increased, and consequently the necessity for measures for combating inflation-price control of all kinds, rationing, and control of supplies-has also increased. These measures have been operated up till now with a very fair measure of success.” The Treasurer also pointed out that the cost of the Price Stabilization Plan had been reason- able; expenditure on stabilization subsidies for the last year was Sm.7, and for the current year it is estimated a t Sm.12. It is plain, of course, that a certain amount of “black market’’ activity still goes on, and there is a continual battle of wits between the Attorney-General ’s Department and the Prices Commission on the one hand, and unscrupulous traders on the other. Some courts still seem unduly tender towards private enterprise that is indistinguishable from sharp practice, and there was some provocation for Senator Keane’s remark that the Chief Justice of New South Wales “was inclined to shorn overmuch sympathy with ‘black marketers ’-parasites exploit- ing the public.” But the value of, and the necessity for price control is not generally questioned. On 31st August, the Prime BIinister announced that Professor Copland, Commonwealth Prices Commissioner and economic adviser to the Government. was about to visit the United States, Canada, and Britain to make inquiries into questions of price control and other econo- mic problems.

(c) LenaLease and JIwtud Aid. The AIIied Nations haw continued to further the common war effort by providing gooclv and services under Lend-Lease and Mutual Aid arrangements. In his budget speech Mr. Chifley gratefully acknowledged ‘ ‘thin substantial aid which Australia continues to receive from the United States under the Lend-Lease Act.” To the end of 1 9 V this was estimated by the United States Government a t approxi- mately $m.741. During the past year Australia has also benefited from Canadian Mutual Aid, though the agreement with Canada was not signed until 9th March, 1944. The valur of this aid to 31st March, 1944, was estimated at 28m. Canadian dollars. On the other hand, as the Treasurer said, “Reciprocal Aid provided by Australia to the United States Forces in

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Australia and in the South-West Pacific Area increased very considerably during 1943-44. Expenditure totalled Sm.110 as compared with dim.59 in the previous year . . . this expenditure represented approximately 20 per cent. of our war expenditure. ” An earlier statement by Mr. Forde as Acting Prime Minister, on 29th June, gave the details of the enormous amounts of food and clothing supplied to United States Forces under these arrangements.

Tv As suggested in the introductory section, the result of the

referendum on 19th August seriously impairs the confidence with which the Commonwealth can prepare economic plans for the future, and particularly in the post-mar years. The final figures for the referendum mere: “Yes,” 1,963,400 votes; “No, ”

2,305,418 votes. Only two States, South Australia and Vestern Australia, recorded a majority for “Yes, ” but Victoria was almost evenly divided ; actually Queensland and New South Wales together provided slightly more than the net majority of 312,000 “No” votes. In spite of this verdict, however, the Commonmealth has continued to make its plans for the future, as well as for the period of the war itself. During the last six months there has been considerable discussion a s to what should happen to Commonwealth miinitions factories after the mar. The question inevitably became closely linked with the referendurn, since the Commonwealth’s freedom t o enter the field of production is limited by the division of powers between the States and the national Government. The most important statements on this subject were made first by Mr. Makin, on 18th .July, and then by the Prime Minister on 1st August. Mr. Makin stated that the Secondary Industries Commission mas collecting detailed information about the conversion of munitions plants to peace-time production. He went on to say: “I believe that at the end of the war there will be a great demand for manufactured goods here and in countries adjacent to Australia, also that the demand for such goods for some time at least will be beyond the capacity of existing commercial industry to produce. I give as examples the refrigerator or radiator, but many other types of requirements can be called to mind which it would be intolerable to deny to people just because a govern- ment factory mould have to be employed in making them. But, of course, they cannot be made in a government factory until the people give the power to enable them to be made.” This statement naturally evoked strong opposition from many spokes-

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men of private industry, and was much used in the referendum campaign. The Commonwealth, it was argued, was seeking greater powers in order to enable it to carry out a programme of socialization. There was little warrant, however, for this view ; this vas clearly shown by the full and balanced statement made by the Prime Minister on 1st August. He pointed out that “Government factories have cost the people of Australia more than h.75. They contain some of the finest equipment in the world. . . . These things must not be wasted.” (In a later statement he specified that there were 41 Government munitions factories, and the number of annexes managed by private enter- prise but assisted by the Government to the extent of Em.20 was 400). Some of these factories were adapted only f o r the produc- ’

tion of munitions and would be kept for that purpose; others ‘which were essential to munitions production, such as general engineering plant, “may well be kept under government control for basic defence reasons.” “But,” Mr. Curtin said, “a large number is capable of being used for the production of civilian goods. These are the real bone of contention. Some persons would have the Government dispose of these plants for a song to private speculators. ” The Government’s plan, however, was that each factory or industry should be viewed on its merits. It was perfectly ready to sell or lease factories if satisfactory offers were made, but not to knock them down at bargain prices. It would consider operating some of them in conjunction with private enterprise, as is done in the case of Amalgamated Wire- less (A’sia) Ltd. and Commonwealth Oil Refineries. It might decide to operate some itself, but in such cases it would not aim at entering a field already provided for by private enterprise, but might enter upon new fields of production. “The Govern- ment recognizes that while there is a place for the expansion of public enterprise in industry, it must look in the post-war period primarily to private enterprise to provide for industrial development aud to give employment to the industrial popula- tion.” The Prime Minister made it plain that the Government considered that its function would be mainly to assist private enterprise by helping to obtain capital, by scientific and indus- trial research, and by helping to provide technical training. In all these ways it has already given substantial assistance. The Government did consider, however, “that it must have power to control the price policies of monopolistic firms.” But this reasonable attitude did not prevent the rejection of the referendum, though it may be considered that the vote was

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determined by issues other than this particular one. It would seem that as a result the Government’s power to enter into the production of goods for civilian consumption is limited to collaboration with private enterprise as in A.W.A. and C.O.R. In a number of statements, members of the Government have made it plain that they consider that the main function of government in industry is to provide a framework of economic planning and controls, within which private industry may operate to provide a high level of welfare and employment. Where private enterprise falls short or does not provide what is required, or does not provide it efficiently, there public enter- prise should step in. Statements to this effect were made by Mr. Dedman on 8th April, Mr. Forde on 1st May, and Mr. Curtin on 7th and 11th July, and 1st August. The referendum defeat makes this desirable goal much more dif6cult to reach.

I n the provision of war requirements the Government has continued to develop aircraft production. The Minister, Senator Cameron, on 5th April last, outlined the steps taken by the Government since 1939 to manufacture Beaufort aircraft in Australia. These plans had to be modified considerably in the course of the war, but the current cost of J;w,OOO per aircraft compared well with the original estimate of €39,000 when it is remembered that the desi,q has been considerably altered and the weight increased by about two tons. It was estimated that they would be produced after the war a t less than 240,000 per aircraft. The announcement that Lancaster heavy bombers were to be produced in Australia, on 7th June, was followed next day by the news that production of the Mosquito fighter- bomber had reached an advanced stage. It is intended that Australia shall build her own aircraft, and fly them and service them herself. But as far as international services are concerned, Mr. Curtin stated at Washington on 24th April that “Australia favours an international civil aviation authority after the war. Australia is quite ready for a reciprocal policy in respect of civil aviation bases, but it has to be reciprocal.”

Besides the production of aircraft there has been consider- able discussion about the manufacture of a complete motor car in Australia after the war. In 1940 the Commonwealth passed an Act to enable it to enter into an agreement with a company established by Australian Consolidated Industries to manufac- ture motor vehicles. No agreement was executed under the Act, however, a? the course of the war made it desirable to use resources for other purposes. But in August last, Cabinet

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appointed a sub-committee to make recommendations on the subject. In September, Cabinet accepted these recommendations and decided to invite all interested parties t o submit proposals fo r the Government’s consideration. In the event of these proposals not being satisfactory, it is probable that the Govern- ment wil l enter into partnership with private enterprise to do the job. Since there is no specific agreement with any company to make motor vehicles, the field is now open to all who are interested. It has been suggested that artificial silk is another new industry which may be established after the war, while the continuance of many others developed during the war is certain.

In addition to expansion of post-war industry the Govern- ment has continued to plan for public works through the National Works Council and the Co-ordinator General of Works, Sir Harry Brown. A meeting of the Council on 25th August “approved in principle’’ the programme of works included in whole or in part by priprity A (i.e. “urgent and important”). This programme is estimated to cost some Sm.154, and covers many necessary developments which have been held up by the war. There is a great deal that is urgently needed, but developments that are desirable but not essential might be held up for a few years as parti of employment policy. In the immediate post-war years, private enterprise should be a t a high level of activity; but as supply overtakes demand, the value of public works to maintain employment will be a t its maximum. Maybe the unification of Australian railways falls most clearly into this category. Plans for this work are being prepared by Sir Harold Clapp, Director General of Land Transport, for the Government; the decision to proceed with the work was taken by Cabinet on 14th March last, when it approved the three-stage programme submitted by Mr. Ward as Minister for Transport. On the 24th August, a restricted programme of essential works and building by the States for civil needs was approved by the Loan Council, totalling Sm.16.6 for the year 1944-45. The chief item of expenditure is provision for war-time housing to cost €m.9. This has been made necessary because of the acute housing shortage in al l States, and will be the first small step towards meeting a very pressing need. The work is to be carried out by the States, but the Commonvealth is to share the cost by a rent subsidy for the lowec income groups.

(b) Social Security and Health. In this field some further advances have been made towards carrying out the Govern- ment’s policy on social security. The Widows’ Pensions Act

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204 THE ECONOMIC RECORD DEC.

was amended in March to prevent any reduction of pension by adjustment to the reduced cost of living. This brought widows’ pensions into line with invalid and ola-age pensions. On 14th July, the Commonwealth Hospital Benefits Scheme was approved by Cabinet, for submission to the State Governments. It was proposed that the Commonwealth should pay 6/- per day to the States in respect of all patients occupying beds in public wards “on condition the States agree to suspend the means test pro- visions of their Hospitals Acts, thus giving every person a right to a public-ward bed without charge to himself.” It was estimated that this will cost the Commonwealth Sm.4.4 in the first full gear. At the same time, a proposal was agreed upon to subsiiiize the States on a Sl for E l basis to the estent of S100,OOO a year, for the campaign against tuberculosis. These proposals were put before the States at a conference of Com- monwealth and State ministers on 26th Au,wt. After the usual objection on the part 03 Victoria, the proposals were accepted. These schemes will come into effect from the beginning of 1945, together with the pharmaceutical benefits provided for earlier in the year. The latter are estimated to cost Sm.2-2 in a full year, and provision for all these has been made in this year’s budget. The payments into the National Welfare Fund, from which these benefits will be met, amounted to 527,889,000 in the year 1943-44; in the current year these payments are expected to reach the statutory maximum of dzm.30. Unemployment benefits have been calculated t o cost Sm.2.2 for every 1 per cent. of nnemplojinent. In addition to these provisions, Parliament set up on 20th July a joint committee to inquire into and report upon ways and means of improving social and living conditions in Australia, and of rectifying any anomalies in esisting legis- lation.

(c) Irctema.tionaZ Co-operation. Australia has continued to co-operate in international planning f o r reconstruction and economic stability, and to promote economic and social welfare. The Commonwealth has agreed to contribute to the relief of liberated countries through the United Nations Relief and Rehabilitation Administration (U.N.R.R.A.) . The 44 nations represented in this organization have iiecided that “each country should endeavour to contribute for relief purposes 1 per cent. of its national income as estimated for the financial year 1942-43.’’ Australia’s share is thus estimated at Em.12, and this has been budgeted for; a bill has also been introduced to ratify Australia’s membership in the organization. Australia’s

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membership of the International Food and Agriculture Organ- ization, formed “ to maintain adequate nutrition standards and to increase the e%ciency of world agricultural production, ’ ’ may also involve her in financial liabilities. But these are not expected to be large, while the benefits may be very considerable.

At the I.L.O. Conference in Philadelphia in April last, Australia was represented by Mr. Beasley (G-overnment), Mr. Crawford Condi (employers j , and Mr. Clarey (employees). At this conference the Australian delegation played a prominent part and was able to obtain the passing of a resolution that there should be a further conference at an early date “to consider an international agreement on domestic policies of; employment and unemployment. ” The Australian delegation stressed throughout that full employment mas the first essential in plans for reconstruction;, the lowering of trade barriers and the growth of international trade depends on this, and upon rising national incomes. These views received a striking endorsement in the British White Paper on Employment Policy issued sliortly afterwards in May, 1944. An Australian ilelegation also took part in the United Nations Monetary and Fiiiancial Con- ference held at Bretton Woods, U.S.A., in the month of July. The members of this conference agreed on proposals for submis- sion to their respective governments. They suggest the setting up of an International Noiietary Fund, and an International Bank for Reconstruction and Development. These proposals have not yet been discussed by Parliament. It may be espected, however, that while the Cornmonwealtli Goveriiinent will be anxious to see that the proposals do not conflict with Australia’s national interests, i t will shorn the same readiness to co-operate in this field as it has already shown in other spheres of inter- national action.

HERBERT BURTON. University of Xelbourne.

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