STATEMENT BY THE PRIME MINISTER,
THE RIGHT HONOURABLE SIR ROBERT MENZIES, M. P.,
IN THE HOUSE OF REPRESENTATIVES, THURSDAY 26TH AUGUST, 1965.
THE DROUGHT
As Honourable Members will know the Government has for some
time been giving attention to the drought situation in Central Australia
and parts of Eastern Australia. We have had representations from the
Premiers of New South Wales and Queensland, including proposals that
the Commonwealth provide special financial assistance towards certain
schemes of drought relief being undertaken by the States. There have
also been representations from various interested organisations and
individuals. The Government has given consideration to these matters
and I should like to inform the House in general terms of the action
that has already been taken in the Commonwealth sphere and to indicate
some further steps the Government proposes to take.
SIn this statement I am referring primarily to the drought
in New South Wales and Queensland, and not to the drought that has
persisted for a number of years in Central Australia. Although some
of the measures to which I shall be referring are applicable equally
to the two States and to the Northern Territory, the Commonwealth's
position with regard to drought in the Territory is a special one
arising from its direct responsibility for Northern Territory matters.
My colleague the Minister for ferritories will be making a separate
statement dealing with the question of the drought in the Northern
Territory, Naturally, in our approach to the whole matter we have had
well in mind the consequences of the drought for the nation and,
more particularly, the plight of those who are suffering from the
drought in a direct and personal way.
The drought has had serious and widespread effects and some
of these will continue. However, provided the drought does not
extend into the coming season, the indications are that it should
not have a seriously adverse effect on the overall economy in terms
of loss of total rural production and export proceeds from primary
products. Fortunately, the drought has already broken in certain areas,
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particularly the dairying areas along the coast but even in those
areas the aftermath of the drought will have severe consequences
for individual farmers. A serious position remains in inland
sheep and wheat and cattle areas of northern New South Wales and
southern Queensland despite some partial relief rains. The position
could further deteriorate in those areas if the drought continues
during the coming spring and summer with further heavy losses for
the individual primary producers concerned.
The provision of assistance for drought-affected primary
producers is, under the constitutional division of responsibilities,
essentially a matter for the State governments concerned. The
State Governments of New South Wales and Queensland have introduced
various special measures of assistance such as the provision of
special loans at concessional rates of interest and freight
concessions on the carriage of fodder and livestock, and have asked
the Commonwealth to participate in the financing of these measures.
Proposals for Commonwealth participation in drought assistance
schemes for the benefit of individual primary producers have also
been put before us by a number of organisations.
The provision of assistance such as this is properly a
State responsibility and the States have the administrative machinery
to handle it. After careful consideration, we have decided that it
would not be appropriate for the Commonwealth to participate directly
in the financing of such measures nor do we think it would be a
proper function for the Commonwealth to participate in making loans
to individuals or providing other forms of direct financial
assistance, to those who may be having difficulty, for reasons such
as drought, in financing their business activities.
At the same time, we are very conscious of the strains
that special drought measures might put on the finances of the two
States. When the new financial assistance arrangements for the next
five years were evolved at our meeting last June with the Premiers, 3
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it was accepted that the arrangements would stand unless there was
a major change in the financial position of a State through
circumstances beyond its control. If, as a result of action related
to the drought, the States of New South Wales and Queensland find it
necessary to meet abnormally large calls on their budgets that are
established to be beyond their financial capacities, we will be
prepared to consider assisting them by means of general purpose
assistance grants. I am advising the two Premiers in these terms.
There are two matters which do lie within the Commonwealth's
particular sphere of responsibility and which have a bearing on the
position of those suffering from the drought. I refer to taxation
and the question of access to trading bank finances. In our
consideration of both these matters we have been concerned to do
whatever we reasonably can to help primary producers affected by
the drought, in relation to both their needs for carrying on until
the drought breaks and the problems they will encounter in
rehabilitating their properties, especially by way of re-stocking,
to get them back into shape for the resumption of normal production
operations after the drought breaks.
In the consideration of taxation measures, we have found
that the present provisions of the income tax law, and the
administration of that law by the Commissioner of Taxation, already
go a long way towards meeting the taxation problems of those affected
by the drought. It needs to be borne in mind that, by and large,
taxation concessions are neither direct nor immediate in their
effects on tax-payers' incomes and that being related to income,
their benefit is greatest to those primary producers with large
incomes, paying high rates of tax, and least to producers with small
incomes, paying low rates of tax. There is thus limited scope for
taxation concessions as an appropriate means of helping droughtaffected
primary producers.
With regard to profits arising from forced sales of livestock
because of the drought, a matter which has been the subject of
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numerous representations, the law already gives the primary producer
the right to elect to have those profits spread over five years,
over the period during which in more normal circumstances they
might be expected to arise. A producer who makes such an election
would be liable to tax on only 1/ 5th of his additional profits in
the year in which such profits arise. Subsequently the profits so
spread must be applied wholly or principally to purchase replacement
livestock. Expenditures on replacements being themselves deductible,
the amount of abnormal profits carried over into the second and
succeeding years need not, depending on re-stocking rates, involve
any addition to a primary producer's tax liability in those years.
In addition, of course, if a primary producer considers that the
provisional tax notified in his assessment is too high, he may seek
adjustment of that tax on the basis of his estimate of his current
year's taxable income.
The cost of purchasing fodder used to feed livestock, which
has also been the subject of several requests, is already deductible
in the year of acquisition, so that primary producers who are forced
to buy-in additional fodder to maintain their stock may deduct as
normal practice, the whole of the purchase price. Similarly, the
cost of producing or purchasing a reasonable quantity of fodder for
stockpiling against emergencies is deductible for income tax purposes.
Concern had been expressed in several quarters at the
possible inability of some drought-affected producers to meet their
tax liabilities by the due date. The Commissioner of Taxation, who
is responsible for the administration of the income tax law, has
discretion under the law to grant extension of time for the payment
of tax, and has assured the Government that he applies this discretion
sympathetically when considering individual applications by primary
producers in financial difficulties because of the drought.
A particular problem that has arisen concerns the position
of primary producers who, because of the drought, have shorn their
flocks twice within the 1964-65 income year. As the law now stands,
woolgrowers so placed are required to account for the proceeds and
expenses of two wool clips in their 1964-65 income tax returns; there
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is no provision in the law whereby proceeds of the second clip,
net of direct expenses, can be transferred to the 1965-66 income year.
To meet the situation, the Government has decided to
introduce an amendment of the law so as to permit primary producers
concerned to elect to reduce their 1964-65 income by the amount of
the net proceeds of the second clip and to carry that amount forward
into the 1965-66 income year.
I turn now to the question of access to trading bank
finance. The Reserve Bank has kept itself closely informed of
developments in the drought situation, particularly with regard to
the demands of primary producers affected by the drought for finance
from the banking system.
Preferential treatment is extended to the rural
industries under the traditional policies of both the Reserve Bank
and the trading banks, and the trading banks have assured the
Reserve Bank that the demands for bank finance arising from the
present drought are being dealt with sympathetically. As the
implications of the drought became clearer, the Reserve Bank informed
banks that in providing necessary finance for purposes arising
from the drought, additional lending might be undertaken outside
the general limitation on new lending commitments.
The trading banks have been asked to continue to keep the
Reserve Bank informed of the extent of demands for drought finance
upon them. The Reserve Bank is closely watching the situation,
including the trading banks' continuing ability to provide
additional loan finance to drought-affected clients.
We recognise of course that the measures of drought relief
which the States and ourselves have introduced or contemplate do
not deal with the long term problem of drought mitigation measures.
The unfortunate consequences of the present drought have
served to stimulate an awareness of the ravages that droughts in
this country can cause, from the standpoint of both individual 6
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primary producers and the nation as a whole, and there is general
acceptance of the need for further action to mitigate the effects of
droughts that will, inevitably and unhappily, continue to occur from
time to time in the future. Already, following discussions in the
Australian Agricultural Council, the the Bureau of
Meteorology and the Bureau of Agricultural Economics are undertaking
investigations into drought mitigation. We further intend to put
to study the question of the role the Commonwealth and its agencies
might play, within the sphere of Commonwealth responsibility, in
the devising and execution of measures to mitigate the effects of
future droughts.