3rd Parliament · 4th Session
Mr. Speaker took the chair <it 3.3a p.m., and read prayers.
– It is alleged that serious delay in connexion with the delivery of mails has occurred at Fremantle by the manner in which recent quarantine regulations were enforced;.’. The following letter contains a statement of the occurrence out of which the complaint has arisen : -
The news of the arrival of the Osterley was received on board the Swan River steamer Zephyr at a quarter to1 o’clock p.m. on the date mentioned - half an hour, by the way, before the signal was hoisted at the Town Hall. On arrival of the Zephyr at Fremantle at halfpast 2 o’clock, the mail steamer was anchored off the entrance of the harbor, and was flying the quarantineflag, meaning that she had not yet been passed by the local doctor. It was half-past 5 o’clock - three hours afterwards - when she was hauled alongside the quay, and at 6 o’clock when the Zephyr left for Perth, the mail train had not started from Fremantle. The consequence was that the Gold-field’s mails missed the Kalgoorlie express, and merchants’ mails were not delivered until the following morning, although the mail steamer was at Fremantle shortly after mid-day on Friday.
In this morning’s Melbourne Argus the opinion of the local manager for the Orient Steam Navigation Company at Fremantle is published that the regulations were drawn up by medical men in Melbourne without regard to the practical conditions under which they’ would have to be applied. Will thePostmaster-General,. in conjunction with the Minister of Trade and Customs, investigate the marten forthwith, in order that some solution of the difficulty may be arrived at?
– If the facts are as stated, it must appear that the administration of the regulations, to some extent, has delayed the discharge and delivery of the mails. I am obliged to the honorable member for having called my attention to the facts. Acting on his suggestion, I shall place myself in communication with the Minister of Trade and Customs, to see whether arrangements can be made for expediting the delivery of mails withoutin any way lessening the necessary precautions for the preservation of the public health.
Assistant Returning Officer, Kalgoorlie subdivisional returning Officers.
– Has the Minister of Home Affairs any objection to laying on the table of the House, or of the library, the papers relating to the removal of Mr.’ Green from the position’ of Assistant Returning . Officer, Kalgoorlie?
– I shall lay them on the table of the library to-morrow.
– The Minister of Home Affairs, in reply to a question which’ I put to him a few days ago, gave me . to understand that be has raised the fees payable to divisional returning officers to a more satisfactory figure than those paid to them some time ago. Will he go a little further, and increase the fees paid to subdivisional returning officers? I have a letter here in which the complaint is made that too much work is thrown on the postmasters who act as subdivisional returning officers.
– I shall look further into the matter, and give the honorable member an answer in the course of a few days.
– Has the Minister of Home Affairs any information to give to the House regarding the negotiations with the Premier ‘ of New South Wales about the Federal Capital site?
– I hope to make a definite statement to the House within two or three days as to the procedure to be followed in this important matter.
Married Men’s Allowance
– On the 8th September I asked the Minister of Defence the following question : - :
In further reference to question asked on 1st September, 1909, will he grant the same allowance to men of the R.A.A. who are married’ and permitted to “live out of barracks but are not on the married strength, when they are ‘ temporarily absent from their homes on duty, as those who are on the married strength?
Is the honorable gentleman yet in a position to answer it?
– The allowance referred to is’ to cover any mess charges not exceeding 2s. per diem, and instructions will be given that all married men permitted to live out of barracks may be paid such amount, not exceeding2s. -per diem, as will cover the extra expense thev incur through having to be away from their usual headquarters.
asked the Minister representing the Minister of Trade and Customs, upon notice -
– The answers to the honorable member’s questions are -
askedthe PostmasterGeneral, uponnotice -
What is the position at present in connexion with the Telephone Exchange, Macarthur, Victoria ?
– The Deputy Postmaster-General, Melbourne, reports that it is expected that the work will be commenced in a fortnight’s time.
asked the Postmaster-General, upon notice -
– The answers to the honorable member’s questions are -
– During the debate of yesterday on the ‘motion for leave to introduce the Constitution Alteration (Finance) Bill, the honorable member for Robertson read certain figures which he has submitted to me in the form of tables. I find that he quoted nearly the whole of them, and it will be more convenient that they should appear in tabular form. Therefore, following the practice that I have adopted in similar cases, I have instructed the Hansard staff to include them in that form in the official report of the debate.
Debate resumed from 29th September (vide page 3913), on motion by Mr. Deakin -
That leave be given to bring in a Bill for an Act to alter the provisions of the Constitution relating to finance.
– I was dealing last night, when the House adjourned, with the question of the probable future buoyancy of Customs revenue consequent on development through the extension of settlement and increase of population in the various States. I think it is necessary, in considering the returns upon which honorable members have based certain conclusions, that we should remember that we have been experiencing a period of almost unparalleled prosperity in all the States, and that we must be prepared in the future, as we have been in the past, for recurring droughts and reverses. On the other hand, Australia’s recuperative power is simply marvellous, and I do not know that our primary producers, broadly speaking, are subject to more serious reverses than are those of other countries. No one desires to depreciate Commonwealth functions, but we must admit that they do not so closely or directly affect the development of the country as do the State functions. The Commonwealth Government, for instance, may introduce an immigration policy and bring immigrants to Australia, but the States must direct the energies of the new-comers into profitable enterprises. The idle lands and the idle hands of Australia must be brought together, and that is the work of the Executives of the States. From every point of view, the probable needs of the States will, I think, increase at a much greater ratio than the probable needs of the Commonwealth, always excepting, of course, unforeseen disasters- This suggests the necessity and. wisdom of the continuance of financial safeguards. Some honorable members seem to imply or indicate in their speeches a fear that if this per capita distribution should be provided permanently the result may be ‘ to force upon the Federal Parliament the imposition of land taxation. Other honorable members take the opposite view, but there is no doubt that, whether or not this agreement be accepted by the Parliament, and ultimately by the people, there will be necessitated a thorough re-adjustment of financial conditions and taxation methods so far as the individual States are concerned. Many, if not all, of the States realize to-day that they have to face that position. It has been insinuated by some speakers that the States are not accepting those burdens ot direct taxation which they ought reasonably to undertake, but desire to secure from the Commonwealth as big a contribution as possible in order to avoid any increase of those burdens. The statements made by several honorable members, as applied to their own States, go to show that the burdens of direct taxation already imposed are very considerable, but those which exist to-day will undoubtedly have to be increased. The incidence of taxation in Australia does not press, as some have suggested, on the poorest of the people. It presses in exactly the opposite direction. The methods which are being proposed in the Imperial Parliament by Mr. LloydGeorge, and arousing such opposition, are simply initiating in Great Britain the very principle which has obtained in Australia for a very long time past - the principle of apportioning the burdens of taxation according to the ability of the taxpayer to. bear them - and I take it that there is no disposition in this Parliament, and little, if any, in any of the State Parliaments, io follow any other course than that which has been recognised in this country for years past. I wish to refer briefly to the bogey which has been raised regarding Protection on the one .hand, and .’Free Trade on the other. I was interested and amused to hear one honorable member, who all his life has been a persistent Free Trader, earnestly appealing to another honorable member, who is equally strong on the Protectionist side, to beware lest the cherished principles of his life-time should be undermined. The question of Free Trade and Protection does not come into this matter at all. If further revenue is required, the present Tariff is capable of adjustment, without violating the principles of Protection, and of producing thereby anything up to .£2,000,000 or £3.000.000 additional, as the necessities of the Federal Treasurer may demand. I consider that that question is simply a red herring drawn across the track. Not only in the House, but outside it, and particularly in this city, people who are endeavouring to make a great amount of capital out of this particular point, a few years ago strongly advocated the Braddon section in its original form. Yet those very individuals are urging today that Protection is at stake, and cracking the whip over Protectionists of the Commonwealth Parliament, imploring them to stand by their cherished principles, which they deem to be in danger if this agreement be sanctioned. Let me refer for one moment to the existing liabilities of both Commonwealth and States. The Commonwealth has taken over from 25 per cent, to 30 per cent., of the expenditure of the States, but it has taken over also 70 per cent, to 75 per cent, of the revenue ; and if we bring this calculation right up to date, and include prospective liabilities for old-age pensions and defence, we still have represented only 37 per cent, to 38 per cent, of the expenditure. That, in my opinion, is a most conclusive argument that the greater needs of the future must be with the States and not with the Federation. There is another value, which should not be under-estimated, attaching to this agreement, and that lies in the fact that it gives absolute freedom’ to both Commonwealth and States. It is a fair bargain, which recognises the liabilities on both sides. Both Commonwealth and States are told that, so far as’ future needs are concerned, they will start from the same mark, each exercising its own functions, and making provision in its own way. -I also desire to refer briefly to the question of referring the agreement to a referendum. I do not like the expression “ for all time,” but ‘much prefer the term “permanent.” There is really no provision made in the Constitution “ for all time “ ; the provisions continue simply until, by the will of the people, expressed in a constitutional way, they are re-adjusted. I remember that the Leader of the Labour party, throughout his speech, and particularly in the concluding portion, admitted practically that he had no material, if any, objection to the agreement - that his objection was simply to its suggested permanence; he desired a limitation, I think, for five years, but was prepared to accept a compromise of ten years. The honorable member objected altogether to the referendum, as several honorable members opposite have done; and it is a little peculiar that the initiators of the referendum principle should be adverse to its application in this instance. As little attempt as possible should be made to interfere with or alter the Constitution. I quite admit what several honorable members have expressed- that the Constitution should be regarded as sacred from every point of view, and that a change should be proposed only when it is most urgently demanded. In the present instance, however, the proposed change simply completes a portion of the Constitution which was unfinished when the Convention framed it for Australia. It is a Constitution of which we may well be exceedingly proud. It has been characterized by distinguished British statesmen as the finest instrument of government of which the world has any knowledge. I hope, therefore, that, for all time, alterations will be suggested only when the strongest need exists. The principle of the proposed dual referendum has been objected to, but I consider the objections altogether frivolous. Of course, coming from those who are opposed to the agreement, the objection is quite natural, and. the advice to the Government to bring the two questions under the same referendum is advice which 1 am pretty well satisfied the Government will respectfully decline. I should consider that the Government did not know much about their business if they were to jeopardize either one proposal or the other, by submitting the two in such a form that the rejection of the one would involve the rejection of the other. Another point is the willingness of some honorable members, who are opposed to the agreement, to accept a provision for a time limit of, say, five years. I stated, at some length, yesterday, my objections to a time limit, pointing out the necessity for permanence in the interests of the States, not from a parochial roads-and-bridges point of view, but from the point of view of financial stability. This is the point which, I take it, will be continuously fought by the States. Not only is there the element of uncertainty to be objected to, but some honorable members,, by interjection, have suggested that the States have no right or standing to demand any consideration. Legally speaking, the States have no right, but morally speaking, they have every right ; and I cannot help thinking that with some honorable members, who desire to fritter away the value of the agreement to the States,’” Nationalism “ spells “ Unification,” in big letters. It is the fear of unification which will undoubtedly lead the . States to regard this as one of the main, if not the main, question for determination at the next general election for the Federal Parliament. There is a value in the referendum, not only from the point of view of the member, but from the point of view of the State, or district, in that it keeps the consideration and settlement of the question entirely away from the election itself. The rejection or acceptance of a particular candidate will not be necessary in order to secure this agreement, which the people, from one end of Australia to the other, undoubtedly desire. The other provisional proposal is that relating to the transfer of the State debts. Some’ honorable members profess to favour this agreement, provided that it can be coupled with one for the transfer of the State debts, and that both can be carried concurrently. I am confident that if a satisfactory scheme for the transfer of the debts were formulated and submitted to the States they would readily agree to it.
– A scheme is not necessary. The debts have only to be taken over.
– Quite so, but the transfer of the State debts is entirely dissociated from this agreement, so far as its acceptance or rejection is concerned. The one does not affect the other.
– They are absolutely inseparable.
– They are not, so far as the necessity to secure the passing of both concurrently is concerned. If a Board consisting of the best available financial experts - of men outside Parliament, and free from political bias or trammels - were appointed, and could show the States a means of securing considerable savings on their debts, while at the same time conferring upon them distinct advantages
in borrowing it is hardly conceivable that they would offer any objection to their transfer. Such a scheme would, in my opinion, be gladly received.
– We could not have a better scheme than one to take over the debts; the Commonwealth would take all the risk.
– It would not ; the States would still have to pay the interest on the transferred debts, and the proposed per capita payment of 25s. per annum, instead of being handed over to the Slate Treasurers, could be credited against the liability of the States for interest on the debts taken over. There is possibly in the minds of some of the State Treasurers an objection to the transfer of the whole of the debts. Probably there would be a general agreement on their part to a proposal that the Commonwealth should take over all loans floated by them on the London market, allowing the debts represented by local borrowing to remain with them. I cannot conceive that this Parliament would offer any objection to the States being given freedom, not only to control their own future borrowing, but Jo engage in borrowing on the local market without the intervention of the Commonwealth Board of Experts.
– The States would have no power to interfere.
– They would not desire to interfere. I have only to say, in conclusion, that I believe that there is 110 disloyalty to Federation in any part of the Commonwealth. Federation up to date may not have justified all expectations; but there is on the part of the people of Australia a spirit of expectancy and a belief that eventually the Union will develop on the broadest national lines ; that the National Parliament will take the widest possible survey of the necessities of the Australian people; that it will, promote perfect freedom of commercial intercourse from one end of the Commonwealth to the other, and that it will for ever stand as the guardian of the liberties of a peaceful and prosperous community.
– I confess that the importance of the subject before us is to me almost so overpowering that I tremble to follow the great financial experts in this House who have so far addressed themselves to it. We have before us the greatest question that has yet been submitted to our consideration, and honorable members are now afforded ari opportunity to prevent a great constitutional transgression. Tariff Bills and measures relating to defence, coinage, and land taxation are undoubtedly important, and deserve careful consideration, but they are, after all, only instruments and means to the efficacy of government. Whether they are passed or rejected, the machinery of Government will not cease to revolve- the Commonwealth will not cease to exist. But it is otherwise with the imminent question before us, involving as it does national supremacy in finance, the peace, good government, and prosperity of generations yet unborn, and our good name in history for all time. Two years ago I presented to this House a scheme for the settlement of the financial relations of the States and the Commonwealth.
– Was that the Brisbane Labour Conference scheme?
– No, I opposed that scheme.
– The honorable member’s party did not oppose it, and he will have to support it at the next general election.
– Rubbish !
– My scheme is to me what the first-born is to every mother. Every mother thinks her firsttorn is the greatest child on earth, and T have the same opinion with regard to the scheme I have formulated. I would direr* the attention of honorable members to the early history of the American Constitution, and would ask them what would have happened if the amendment proposed by one of the delegates from South Carolina on behalf of the Southern State Righters had been accepted. That amendment proposed that the Federal Government should make to the States for all time a per capita payment of 5 dollars per annum. If Alexander Hamilton - who, bythebye, was a Britisher, born in the West Indies, and was one of the greatest financiers the world has ever seen - had not opposed that amendment, it would have become part of the Constitution, and the United States of America would now be paying out of her annual income of £120,000,000 .£90,000,000 to the States. The Federal Government would thus have had only ^30,000,000 to pro- vide for the carrying out of its national functions. Although I am an uncompromising, dipped-in-the-dew and dyedinthewool Radical, I admit that history shows that the Conservatives of more than one country have come to the rescue of its Constitution at its last gasp. Hamilton and Washington framed the American Constitution, and I believe that the honorable members for Flinders, Mernda, and Parkes will save this Constitution, although it is at its last gasp. A week or two ago I saw it dying, now I see it living; I saw it being taxed, not out of its existence, because that cannot be done, but out of its vitality - the national supremacy of finance gone. Now I see hope. “ Listening love hears the rustle of its wings.” I am pleased that we have members great enough, notwithstanding their surroundings, to do their duty. In this case it is a great duty. We are legislating for the countless multitudes of future generations, who may either bless or curse us. My honorable friends opposite, for whom I have no ill-will, propose that the arrangement contained in the agreement with the Premiers shall be put into the Constitution. They say that if afterwards it needs alteration, the Constitution! can be amended. Had such a provision been put into the American Constitution how could the Northern States have successfully put down the rebellion of the Southern States ? I remember when they were hanging negroes to the lampposts in the streets of New York, at the time of the income tax being put on. Abraham Lincoln issued his proclamation declaring the State of New York to be under martial law, but Governor Seymour said that the people would not pay a penny of the tax, because it was unconstitutional. Had the Northern States been considerably hampered for want of money, what hope would they have had of putting down the rebellion? There is no difference between us and the people of the United States. We both spring from British loins. _ At the time of the war nearly all those in the United States were of British descent. When families come to fight about money matters, they fight more fiercely than strangers. When the validity of a will is disputed in the courts of law, it is wonderful how hard the. children swear that something was wrong. If this provision: is put into the Constitution, an evil will grow out of it as the slavery evil grew in America. When George Washington, Jefferson, and others freed their niggers, the people said that it was of no consequence; but when, in 1806, Whitney invented the cotton gin, making cotton, and, consequently, negroes, valuable, slavery got a strong hold upon the country. We know how English artisans suffered by the closing of cotton factories during the war. Never settle a question on a wrong basis. If it is settled rightly, it will be settled for ever. If the proposed arrangement is put into the Constitution, we shall ultimately have a fight, not on the question of slavery, but in regard to money. The insertion of this arrangement in the Constitution will mean the laying of a foundation for the dissolution of the Union. It will not affect me personally, but it will affect the children of honorable members,, none of whom desires that his posterity should curse the day when he entered this Parliament. The proposed arrangement would reduce the Commonwealth to the level of a paltry corporation like the Hudson’s Bay Company. It would weaken the National Government and strengthen the State Governments. Before I tackle this question in dead earnest, let me say that I am a State Rights man. But I am also a National Constitution Supremacy man. It is wonderful how much better a little experience is than theory. Ability which in the abstract is wonderful, in the concrete nearly always fails. Experience is the unerring test of the wisdom of human undertakings. When a man has lived under a Federation, and watched the battles in which, sometimes, the National Government has been the aggressor, and, sometimes, a State Government, and has carefully studied in such circumstances economical, social, and financial conditions he must feel that the delegated powers of the National Government should not be diminished. The Commonwealth exercises certain powers delegated to it by the Constitution, which was framed by a Convention elected by the people. These powers are set down in black and white. All others remain with the States. The Commonwealth, however, is supreme in regard to finance. My honorable friends opposite propose to take from the Commonwealth that supremacy, giving it to the States. In borrowing £202,000,000 prior to Federation, the States pledged their Customs and Excise revenue to the money lenders of the world, and in borrowing some ,£48,000,000 since, they have similarly pledged their three-fourths share under the Braddon section. The party with which I am connected recognises that. The bondholders, sellers of exchange, and lenders of credit, have accepted this as part of their security. But it is not necessary for us to give the States a perpetual and expanding mortgage on the assets of the Commonwealth. That is where I differ from the Government. This is a Protectionist country. We were elected as Protectionists. The people have decided that the policy of the Commonwealth shall foe a Protective policy.
– They have decided for the new Protection.
– Even the honorable member for West Sydney, if he said in caucus that he was going to run Free Trade, would meet with a riot. We are Protectionists. The Labour party can talk Free Trade, and have their say, but, after all is said and done, we are Protectionists. We are in favour of protecting, not only the manufacturer, but also the man who works for him. We wish to protect the oppressed and down-trodden of the earth. It being admitted that the policy of the country is Protective, we cannot allow it to be destroyed by accepting an arrangement requiring the imposition of a revenue Tariff. I admit, with the honorable member for Balaclava, that the Commonwealth possesses all the powers of taxation. But if a man had ten children, nine of whom were earning10s. a week, and the tenth £1, the total of their earnings would be £510s. The father might have all the powers of taxation, but how could he make his children come up to the scratch when they had so little? If the States go on taxing the land and the people, what will be left for the Commonwealth? We do not wish to be thought pirates, taking the last penny. I am strongly for a judicious land tax which will require equality of sacrifice. But it is the tenant, not the landlord, who pays a land tax. I have never known a law which can protect the tenant from the landlord. I look upon a per capita distribution of revenue to the States, as I told the Brisbane Conference, as the rallying cry of the enemies of the Constitution. I do not think that honorable members realize what a wonderfully sacred thing the Constitution is. Next to the Bible, I regard it as the most holy instrument we have. Before they determine to transfer the financial supremacy to the States, let them consider what the financing of the States for the last fifty years has been. Have the State Governments managed their finances with the ability and judgment which a private citizen would show in the conduct of his business?- Some of the financing of the States would bring a blush to the face of a New Guinea missionary eater. I find that some of the States sold millions of pounds worth of Crown lands, and treated the proceeds as revenue.
– They are doing that now.
– I thought they had reformed. If they have not reformed, it makes it all the more awful to think that this House is prepared to give them power to continue that system of infamous finance. Not onlythat, but to avoid legitimate taxation they have paid out of loan funds, expenses that they ought to have paid out of general revenue. They have, to a certain extent-, destroyed the inalienable inheritance of posterity on the one hand, and pileid up ‘a Himalayan mountain of debt on the other. Yet, my honorable friends on the Treasury bench say that those are the financiers to whom we ought to intrust the Commonwealth revenues ! In my opinion, the financial policy of some of the States for the past fifty years has been either dishonest or incompetent. I prefer to call what has been done bungling incompetence. Their methods have paralysed the public conscience of Australia to such an extent that if you talk any system of financial reform, or advocate the adoption of a better method of running the country, people reply, “We are too poor,” and yet Australia is the wealthiest country on the face of the earth in proportion to its population. If there is to be any reform in the way of establishing a first class system of financing, we shall never be able to bring it about by handing the control back to States, which have shown themselves as destitute of financial knowledge- as Hell is of vegetation. In such circumstances, we must, not put the words ‘“per capita” in the Constitution. I find from Knibbs that the public debt of Australia is now about £270,000,000, including municipal loans and loans of other public and semi-public bodies. About £60,000,000 of that is invested in public works that yield no income, and that are never expected to yield any. That expenditure should be charged against ordinary revenue. I have gone carefully through the directions in which that huge amount of public debt has been spent. Some of it has gone for State aid to religion - preachers’ salaries and the like. Some has gone for ammunition, part of which was fired away in saluting Governors coming from the Old Country, in salutes when- Parliament met, or when a general has been sent out here. In fact, a good bit of it has gone in saluting. Some has been spent on public education, and of that 1 approve, for education is the grandest asset that a nation can have. Some has been used for mining and agricultural subsidies, and some again for street and road repairs, and the like. . I find that the States have carefully charged up State aid to religion in the ledger as a reproductive and permanent work. It may be, but would the British investor regard it as a good asset ? . I have never found him prepared to take anything except a real security. A vast amount has gone in the repurchase of land. I want to look carefully into this matter, because there has been so much talk about the incompetence of the Commonwealth and the competence of the States, to whom we are asked to hand over this trust. A vast amount, then, has gone for the repurchase of land for various purposes. That is to say, the States have sold land at a low price and treated the proceeds as revenue, and then they have bought the land back at a high price out of loan funds !
– And they are also treating the revenue from that as ordinary revenue.
– And they treat the return from the repurchased lands as ordinary revenue. I can assure honorable members that if an Eskimo Indian or an Apache chief ran his finances like that, he would be considered by his brethren fit to be sent to a lunatic asylum. That system has been going on for years in the Australian States, and no one has looked into it, and yet the States say that the Commonwealth Parliament is extravagant. I am not opposing the States. I simply say that it is a misfortune that such men were ever made Treasurers. Nearly £15,000,000 of the funded and floating debt has been actually put into revenue to make good deficiencies, t suppose that is called a splendid reproductive asset. That course was taken because the Treasurers had not the courage to resort to direct taxation to meet their ordinary expenses out of ordinary revenue.
Another .£1 5,000,000 of borrowed money has been utilized on works which were at. one time reproductive, but which are no longer so, because they are virtually worn out, and there is no repair or renewal fund to replace them. I find that another £15,000,000 was actually borrowed for the purpose of paying interest on debt. Moreover, in fully seven cases out of ten, the States floated their loans at a rate of interest which their unorganized credit did not warrant, and consequently had to float them at a huge discount. When a State floats its loan at a lower rate of interest than its unorganized credit warrants, it must submit to a huge discount, and that discount becomes a part of the interestbearing permanent debt. If a State whose unorganized credit will float a loan of £2,000,000 at 3^ per cent, par, floats it at 3 per cent., it creates a liability of £2,000,000, and receives only £1,860,000 cash. It then pays £3 4s. 6d. per cent, on the £1,860,000, and 5s. 6d>. on the other ,£140,000 that was added to the debt. That makes the loan a 3^ per cent, one, and yet I have heard honorable members boast about borrowing at 3 per cent. You do not get more than if per cent, on United States bonds to-day, but they are at ,£112 and £115, and why? Because they are consolidated. This country will never have its credit or its power recognised in any part of the world, or even within its own borders, until its debts are consolidated. A vast sum has been spent for works which were good and reproductive works in their day, but which have now depreciated in value, and as there is no sinking fund, or depreciation or renewal fund, to replace them, you might justly cast them aside on the scrapheap. I sometimes sympathize with honorable members when I hear them denounce any attempt to put Socialism into full force, but the sort of thing of which I have been speaking is not real Socialism. Real Socialism would select for the management of its affairs competent men. I believe in paying the highest price for men- with brains. The Creator planned properly when He meant that the strong should bear the burdens of the weak - that the great should look after the small - and that the industries of the world should be organized in Order to give work to those not capable of looking after themselves. When the States borrowed money did they create any funds for repairs or renewals?
When bridges were worn out, others took their place, also provided with borrowed money.
– A little while ago money was borrowed in New South Wales io buy a hearse!
– A hearse! Well, well ! When an old wooden wharf, erected out of loan funds, tumbled into the water, another was erected out of loan funds. When the old, unpaid-for telegraph poles and wires were exhausted, new ones were found also out of loan funds. This is what is called financing.
– ‘ ‘ High finance ! ‘ ‘
– Exactly ; !1 high finance. “ In America I have seen ne’er-do-weels, who, so long as they could raise a loan from their neighbours, did nothing for themselves ; but, who, when they were sent by their fathers to the west, had to make a start, and did well ; and I have yet hope for the States - hope that something will happen to cause them to select good men to look after their finances. At present, as locomotives wear out, others are provided for out of loan funds; and, in Sydney, the old steam trams, which were built out of loan funds, and never paid for, have been cast on one side, and new electric trams, also unpaid for, have taken their place. The more we look into the question, the more we are forced to the conclusion that the Federal Parliament should be medically examined rial power to the States. There have been loan funds under several heads. Money has been borrowed not only for unproductive works, but also to inflate the revenue. The latter in Australia is described as “ eking out the revenue “ ; but it is known in America as inflation. As nearly as I can gather, £75,000,000 out of the £270,000,000 borrowed, has been lost in financing - has gone in commissions, brokerage, underwriting, and in selling stocks below par. However the money has gone, the people of Australia to-day have to pay interest on £75,000,000 which they never had an opportunity to handle in any. shape or form. In all seriousness I ask whether, after this experience of the financing of the States, we ought to hand over the management of the Commonwealth finances to the same authorities. In other words, is it thought that the Commonwealth ought to become the agent for the States? The other day the honorable member for Parkes said that £170,000,000 of borrowed money was invested in railways; and I asked one of the Commonwealth Statistician’s best men to find out whether such was the fact. I find that the total amount invested in Australian railways and tramways is £144,118,857, and I have had prepared tables dealing with the expenditure of all borrowed moneys. I shall not read every item, but ask permission to have the tables inserted in Hansard. The tables, supplied to me by the Government Statistician’s Department, are as follow : - if ever it thought of handing over its finan-
It will be seen that the amount of the public debt per breadwinner is shown, because I regard that as affording the true information required. Why should we apportion the Public Debt amongst children, who, though twenty or thirty years hence they may be producing agents, are at present, to a certain extent,, only destructive. The annual net earnings realized in respect of the public works and purposes for which the loan expenditure of the State Governments of Australia have been incurred may be set down approximately at £7,250,000. This would represent interest at the rate of 4 per cent on an outlay of £181,250,000. The annual interest payable in respect of the Public Debts of the State Governments as existing on 30th June, 1908, was £8,732,647. After deducting the total amount of interest on reproductive public works, we have to call upon the taxpayers to provide £2,436,250. I propose now to refer to another table, which has been prepared for me by the Commonwealth Statistician, in regard to the proposed -per capita payment of 25s. Assuming that the Customs and Excise revenue of the Commonwealth per head of population declines uniformly from £2 10s. 9d. for the financial year 1908-9 to £1 9s. for the year 1950-1, the revenue per head from these sources would be £2 4s. 6d. for the year 19 20-1 ; £1 19s* ‘4d. for the year 1930-1 ; and £1 14s. 2d. for the year 1940-1. On the assumption that the rate of increase in the Commonwealth population experienced during the ten years 1899-1908 will continue, the population on 31st December of the following years will be: - 1920, 5,144,000; 1930, 6,001,000; 1940, 7,001.000; and 1950, 8,167,000. On these two assumptions the distribution of Customs and Excise revenue between the Commonwealth and the States, on the basis of the agreement now before us, would be as follows : -
I propose now to refer to the scheme, which I prepared nearly two years ago, for the settlement of the financial relations of the States anil the Commonwealth ; and in which I proposed that we should take over debts amounting to £i74>558>795The only objection that can be levied against it is that it was rather ahead of the times. In other words, honorable members were not then prepared to have the question investigated on its merits. I invite honorable members to compare the figures given at page 5 of the memorandum in regard to the agreement before us with those appearing at page 7 of my financial scheme. The following table prepared by the Commonwealth Statistician compares the estimated return to the States under my scheme with the amount which would be returned under this agreement -
Although in the .memorandum in regard to the agreement now before us it is stated that .under it Tasmania would receive £240,000, we have to deduct from that amount her moiety of the special payment to Western Australia, and it is in that way reduced to £234,589. Under my scheme, Tasmania would have received £258,261, or £23,672 more than she will receive if this agreement be accepted. I would ask the representatives of Tasmania and Victoria whether they realize what they are proposing to do by voting for this agreement. They must remember that both Victoria and Tasmania are settled States, and that no matter what land taxation may be resorted to, or how the lands may be subdivided, they will never secure a big population unless they draw it from the back-wash of the other States. If Queensland and New South Wales enter upon a boom policy, and bring out thousands of immigrants, they will have to build more railways into the interior, and provision will have to be made there for more postal buildings, new telegraph lines, and increased services generally. Young men in Victoria and Tasmania will not Pay £5> £6> 01 £7 per acre for land there when they can obtain equally good land in Queensland for £1 per acre.
– In Western Australia land is obtainable at 10s. per acre, and a block of 160 acres may be secured free of charge.
– I am aware of that. What has happened in America will happen here. Some of the New England States have not increased their population for forty years. Many of their young men and women some time ago took up land in the Western States and settled there, leaving the old men and women behind. Tasmania and Victoria will have a similar experience. As it is, their population comprises more old “men and women and children than does that of any of the other States. While their population remains stationary they will be called upon to bear their share of the cost of providing additional services for the increasing populations of the other States. Under this agreement, they will not be benefited by a Protectionist policy, although they certainly would have to pay duties under a revenue Tariff. I fail to understand, therefore, how- a Protectionist can vote for this agreement. It suggests to my mind a conspiracy. I do not think that the Government are mentally responsible for this proposal. We know that there comes a time to every man when, for some unaccountable reason, he is led to do something which he afterwards regrets During the last ten years, the increase of population in Victoria has been only about 8,000 a year, which, at 25s. per head, would give the State a return of ,£10,000. But, under this scheme, her people will be called upon to pay for the public works constructed in the States whose populations are growing rapidly. I should not object to that were the arrangement a fair and square one, but it is not. It is a constitutional outrage. The people of Victoria and Tasmania make a great mistake if they think they will greatly benefit by it. I hear it said that if a land tax were imposed which would have the effect of cutting up the large estates in Victoria, a huge population would settle there. But Vermont has not a huge population, although its Government would almost tax your nose off your face. Neither has Maine a big population. But the Western States, whose land is cheap, are adding to their populations by millions. Oklahoma, the new State which has just entered the Union, has a population of over 1,500,000.
– It was formerly Indian territory.
– Yes. At the time when I left America, one could not cross its borders without being stopped by United States soldiers. The States of Vermont and New Hampshire have contributed healthy young men and women to build up that new State. Similarly, a considerable part of our vigorous population will leave Victoria and Tasmania, and move to the larger States, where land is cheap. Twenty or thirty years hence, there will be a backwash, but while land is ‘ cheaper elsewhere than it is in these States, population will not greatly increase here. I am amazed, therefore, that the representatives of Victoria and Tasmania should be ready to vote for the agreement. I hardly know what to call it - the compact forged in a secret conclave of the enemies of the Commonwealth, or the proposal of the special representatives of Australian combines and rings and trusts. At any rate, the danger signal is flying. Under my- proposal the States would receive yearly £6,109,564.
– That is too much.
– It is not more than the States are entitled to. Under the proposal before us, the States would receive yearly only £5j543>75°> t0 which must be added another £’125,000, making in all about £5,668,750. If that sum is deducted from the £6,109,564 which I would return to the States, the difference amounts to only £440,814. Under the Premiers’ scheme, however, there would be an expanding mortgage on the Commonwealth assets, and its sovereign national financial powers would be mortgaged to the States. In addition to paying to the States annually £6,109,564, my scheme contained this proposal -
In recognition of the fact that the increase in the population of the Commonwealth and the further development of its resources will entail upon the Governments of the settled States increased expenditure in connexion with the functions of government retained by them, while such increase and development will produce a concurrent increase in the revenues derivable by the Commonwealth, in respect to Customs and Excise duties, it is proposed that the surplus Commonwealth revenue resulting in any financial year from the excess of revenues received in that year over the expenditure which takes place therein, shall, in the first instance, be applied to the liquidation ‘of any Commonwealth revenue deficit which may have accumulated, and that the balance shall be distributed amongst the States on a -per capita basis.
Not only would I return to the States £6, 109,564 a year, but I would give them a perpetual interest in any surplus above the Commonwealth requirements. The delegates’ of the Southern States of America made a mistake in not insisting on a perpetual interest in the national surplus - the amount remaining after national needs had been provided for. Many a time the Federation has had a huge surplus which might well have been handed to the States, and would have helped them in many ways. I also proposed the establishment of a national postal banking system, which would enable the Commonwealth to finance its requirements. If, two years ago, . £174,588,795 of the State debts had been transferred to the Commonwealth, the taxpayers of Australia would now be saved . £436,397 in interest per annum. I proposed that, in addition to taking over so much of the debts, and paying the States £6,109,564 a year, a sinking fund of , £870,000 a year should be established, which, invested at 3½ per cent, would pay off the transferred debts in sixty years. It is useless now to speak of getting money at 3 per cent. Only great nations like the United States and Great Britain can do so. Germany and Japan cannot. The balance of the debts was to be financed by the national bank. If the debts were transferred to the Commonwealth, under the scheme of the honorable member for Mernda, Victoria would be made responsible for , £18,000,000 more than she now pays interest on, which would increase her annual interest payments by , £692,000, and her per capita indebtedness by . £14. Similarly, New South Wales would be made responsible for an additional £3000,000, and Tasmania’s responsibility would be increased; while Queensland, South Australia, and Western Australia would gain at the expense of the other three States. Under my scheme, Victoria would not be responsible for more than she has borrowed. She has not been as much a spendthrift as the other States. Why, then, should she be called upon to pay part of the debt into which Queensland was thrown? Although not a parochialist, I wish to be fair. I would, transfer to the Commonwealth only so much of the debts of the States as they would have revenue to pay for, and, as the loans fell in, would replace the State with Commonwealth stock. In sixty years the sinking fund of which I have spoken would wipe out the debts transferred to the Commonwealth, and the States would then be paid their share of the revenue directly. I should like to- ask honorable members why they have not looked into and examined my scheme, and what it contains. It is as follows : -
The essential features of the present scheme of adjustment are : - (i.) The cessation of monthly payments of surplus revenue by the Commonwealth to the States, (ii.) The assumption by the Commonwealth of full responsibility for such portion of the debt of each State as would involve for interest and sinking fund an annual payment equal to that State’s fair proportion of the average three-fourths of the net Customs and Excise revenue of the Commonwealth, such average three-fourths to be based on the results for the six and a half years ending 30th June, 1907, and to exclude the revenue collected under the special Western Australian Tariff.
That is based on the Braddon section, which we are going to dispense with now, in order to take on either the Wade or the Deakin blight - (iii.) The establishment of a National Bank of Deposit, Issue, Exchange, and Reserve, for “the purpose of carrying out with facility and economy the financial transactions of the Commonwealth and States Governments. (iv.) The establishment of a Sinking Fund in connexion with all Public Debt for which the Commonwealth becomes responsible. (v.) The appointment of Sinking Fund Trustees, whose position shall be such as to prevent the misappropriation of the fund by an impecunious Treasurer.
Every one is aware that in this country, when State Treasurers have found themselves short, they have put out both hands, grabbed whatever sinking funds they could get, and utilized them to inflate their revenues. Under my scheme, I propose that trustees shall be appointed who will be independent of Parliament, and free from the influence of the Treasurer of any impecunious Government - (vi.) The inauguration of the scheme to take place . on 1st July, 1908, or, if that be unconstitutional, at the expiration of the Braddon clause.
III.- Assumption of Responsibility for Portion of State Debts.
I come now to the bank. This is very important. What has amazed me is that the States, In all the years that they have been piling up debts, have never tried to get the benefit of an institution that would enable them to organize their credit. We have now reached a time when, if the Commonwealth or the States do not organize some sort of financial system that will enable them to utilize their credit, John Bull, or John Bull’s investor, will tell them that they have reached the end of their tether. I can see that coming. It came in all the South American States ; it came in Mexico ; it came in the Central American States ; and it will come in Australia. I have, therefore, had this banking scheme carefully drafted upon a financial basis. All finance rests upon some fundamental basis, and the people that deviate from that basis must become bankrupt.
– Even a national bank wants a basis.
– Exactly ; and I have laid it down in my scheme, because I am a banker. If I did not understand it, and if I had not had experience among some of the cleverest financial men that America has ever produced, I should not have presumed to submit a scheme to the House. It would have been an impertinence. My proposals, then, in regard to the National Postal Bank, are as follow : -
In order to . facilitate and economize the carrying out of the financial transactions of the Commonwealth and the States, and especially those connected with the conversion, redemption, renewal, and issue of loans, it is proposed to establish a National Bank of Deposit, Issue, Exchange, and Reserve.
Honorable members will see, therefore, that while I have great confidence in members of Parliament as politicians, I have not the same confidence in them as bankers’ - (ii.) That it shall be so constituted as to possess all the powers and immunities requisite to its security, to the recovery of its debts, and to the disposal of its property, (iii.) That its capital shall be represented by 12,000 shares, of £100 each, of which at least 6,000 shall be in the hands of- the Commonwealth Government, and that of the balance no State Government shall hold more than 1,000 shares. (iv.) That the shares of the bank shall be transferable only to the Governments of the Commonwealth and the States; that the failure of any or all of the States Governments to subscribe shall not prevent the bank from commencing operations ; and that in the event of a State Government desiring to dispose of shares in the bank, the Commonwealth Government shall have the first option of purchasing. (v.) That the Commonwealth and State Governments holding shares shall be jointly and severally liable in respect of all transactions of the bank. (vi.) That the bank shall act as the agent for the Mint in the purchase of raw gold and silver and the issue of coin.
I emphasize that paragraph because I have heard it said that I wanted to flood Australia with paper money. I have never proposed to do so. I want the money issued by the National Bank to be guaranteed by gold or by Australian bonds. I want to know when I have it in my pocket that it is valuable. (vii.) That the bank shall be empowered to issue notes which shall, throughout the Commonwealth, be legal tender at all places except the head’ office of the bank in each State ; and that at such head offices payment of the value of notes presented may be made in gold or Commonwealth Consols, at the option of the Comptroller-General of the bank.
Some exception has been taken to the power I propose to give the Comptroller-General to redeem notes in Commonwealth consols ; and I desire to show the House the reason for the suggestion. Many years ago, in America, when specie payments were resumed, several of the large brokers of Wallstreet, and, I am sorry to say, several bankers, combined to make the United States pay heavily for the resumption. They demanded all their payments in greenbacks, and, when they had secured about $250,000,000 worth, they demanded gold from the Sub-Treasurer. Of course, the Sub-Treasurer did not have that amount of gold, and a contract had to be given which enabled those men to float gold bonds, with the result that half-a-dozen syndicates made a profit of several million dollars.
– But suppose that under the honorable member’s proposal a demand were made on a branch bank.
– The branch bank would send the demand on to the head office. The reason I select the post- office as the centre, is that we own the postoffice lands ourselves. If, for instance, it was desired to start a branch of the bank at Sale, and there was not room in the present post-office, all that would be necessary would be to run up a little brick building at the back, and hire a manager from one of the banks in the place. I do not propose that the National Postal Bank shall be run by civil servants who are not trained bankers; because a man cannot run a bank any more than he can a law office or a store without training. If a number of unpatriotic men in Australia decided to close up the National Postal Bank-
– They could not do it !
– I have been- “ through the mill,” and I shall show that they could, by asking all their customers to pay them in Commonwealth notes, so that, on a certain day, one man could go to the bank, and demand so many millions. We know that a bank never has millions, but operates on a 15 per cent, or a 20 per cent, margin of gold. If such an attempt were made, under the scheme I propose, it would be met by the provision in the paragraph VII. I have just read. I do not propose to have a politician at the head of the bank, but, preferably, a hardfaced Scotchman. Under the system, if a farmer wanted £200, or, it may be, £500, he would be able to go to the’ bank, and under a mortgage obtain the exact amount he required, instead, as under the present system, of being compelled to take a certain amount, and allow the unused balance to remain in idleness. The farmer would go to the bank with his securities, possibly his deeds ; and there would be a simple form of mortgage transferable by the manager, the borrower getting a credit in the ledger of the bank, and paying interest of 4 per cent, or 5 per cent, on his balance.
– On his overdraft.
– Quite so; it is called a balance” in America.
– What would be the security - collateral,, or a fixed mortgage?
– It could be collateral security, or he might have guarantors. For instance, the Bank in New York wilt not do business of the kind unless the client can get two guarantors for $10,000 ; and guarantors are all that is required. A farmer might, of course, be able to lodge the deeds of his farm or other collateral security ; but other people’s money cannot be lent without security. There is no love in the matter; the only difference would be that a borrower would get an overdraft at 4 per cent, or 5 per cent, instead of 7 per cent, or 8 per cent. If a borrower pays 5 per cent, or 6 per cent. , he doubles his interest every twelve years, and if he pays 8 per cent., he doubles it every nine years, and so on ; all the system does is to give the farmer the advantage of the difference in time. This proposal for a National Postal Bank, if not carried now, will have to be carried at some time: Perhaps when I am gone, some man will arise, and see the scheme through ; at all events, Australia must have a banking system. It is not proposed to in any way hurt private bankers, but rather to help them.
– That must be a defect in the scheme !
– At any rate, the scheme will help private bankers in times of crises, because, as was the case in Japan, they will be able to rediscount their good securities at the National Bank. If there had been a National Postal Bank in Australia in 1893, the private banks would, in the way I have indicated, have obtained sufficient money to tide over the temporary public alarm. Trade and commerce, and confidence and credit, are one and inseparable. (viii.) That the bank shall become the repository for the payments from time to time in respect of the Consolidated Revenue, Loan, and Trust Funds of the Commonwealth and State Governments, and the funds of municipal bodies, and shall pay interest on the daily balances thereof.
Do honorable members, who have credit banking accounts, get one penny of interest on their current balances ? No ; they haveto pay I OS. a year to private banking corporations for keeping their accounts, and yet those corporations, by utilizing the current balances, amounting to millions annually, make splendid profits.
– It is a very unjust charge on the part of the banks !
– It is an unChristian charge !
– I do not think that the honorable member is justified in going too far into the question of charges that are made by private banks under ordinary conditions.
– The next paragraph is - (ix.) That the bank shall provide for temporary advances by -way of overdraft to Commonwealth and State Governments and municipal bodies.
This is where the proposed Council of Finance fails. If Victoria, New South Wales, and other of the States required money, for instance, for railway construction, the Council of Finance would be in London investigating the whole matter; and the States would have to go on the market, and compete with each other, seeing that they could not delay the work. But under the system I am advocating a State Government could go to the National Postal Bank in the State, and get a credit on the ledger, just in the same way as the British Government have a credit on the ledger of the Bank of England, and as the municipalities have credits. The National Postal Bank would operate for the States until the bank itself, and not the States in open competition, could float the loan. The Council of Finance is a proposal for State Socialism which must mean failure; indeed, I call it anti- Socialism, because any one who desired to make Socialism a success would never have submitted such a proposal. Under my scheme, it is further provided - (x.) That the bank shall, in other respects, carry on an ordinary banking business, receiving from the public moneys on current account or fixed deposit, and making advances on good security. (xi.) That the bank shall carry out the inscription of all Commonwealth and State Inscribed Stock, and make all arrangements necessary for the conversion, redemption, renewal or issue of Commonwealth, State, and Municipal Loans. (xii.) That the Board of Management of the bank shall consist of a ComptrollerGeneral, representing the Commonwealth, and- one representative from each of the subscribing States.
Honorable members will admit that that is a fair proposal, and that each State ought to be represented on the Board of Management - (xiv.) That the Treasurer of the Commonwealth shall be entitled to attend all meetings, and inspect all proceedings of the Board . of Management, (xv.) That all payments to be made in London by Commonwealth or State Governments shall be made through the medium of the bank.
Have honorable members any conception of the savings which the Commonwealth, by means of this system, would effect in Lon don in regard, not only to exchange, but brokerage commission and underwriting? - (xvi.) Thai the General Post Office in each capital shall be the head office of the bank in that State, and that any postoffice within the Commonwealth carrying on the business of a money-order office may be constituted a branch of the bank. (xvii.) That the bank shall be a bank of reserve for the deposit of reserves of the banking companies operating in the Commonwealth, (xviii.) That the regulations requisite for controlling the bank reserves shall be drawn up by the Board of Management of the bank and the Council of the Associated Banks of -Australia, and approved by the GovernorGeneral in Council. (xix.) That a branch of the bank shall be established in London. (xx.) That at the London office, and at the head office of the bank in each State, Commonwealth Consols shall be obtainable in sums of £10 and upwards.
– Sinking Funds.
Chairman. - The ComptrollerGeneral of the National Postal Bank.
The Chief Justice of the Commonwealth.
The President of the Senate.
The Speaker of the House of ‘Representatives.”
The Chairman of the Associated Banks.
This would not foe a labour bank, nor a bank for aristocrats. I have tried to bring in all classes, and it would be a people’s bank for all Australia - (iii.) That all moneys received for Commonwealth Consols sold over the counter by the National Postal Bank shall be placed to the credit of the Sinking Fund Trustees. (iv.) That, in so far as they are not required for the purposes of immediate redemption, conversion, or renewal, the sinking fund moneys shall be mainly invested in the purchase of such State securities as the Commonwealth has accepted the responsibility for, and as may from time to time come on the market. (v.) That temporary advances may be obtained by the Sinking Fund Trustees from the National Postal Bank for the purpose of facilitating the redemption, conversion, or renewal of loans.
I propose that the States shall have perfect freedom to borrow, either locally or on the London market, but they would not require to go outside the bank in order to raise a loan. If we shut them out, and forced them to borrow locally, half-a-dozen Australian brokers might unite to raise brokerage and underwriting charges in such a way that the States would be sacrificed. On the other hand, if they were free to borrow money on the London market, they would be able to float their loans either through this bank or independently of it, and would save thousands of pounds. If they were tied to the Australian market, the local brokers would no sooner dispose of a loan than they would sell it in London. I would let the States borrow where they like, and as they please, and under my scheme they would not have” to make any sacrifices for the benefit of the Australian brokers. If by means of the National Postal Bank System they could float their loans at a quarter, or a half, per cent, less than they could float them independently on the market, they would not desire to go beyond it. Then, again, if they were able to obtain from the bank an overdraft to enable them to carry on their local activities, they would not need to go into the market to borrow money. The States, go on to the money market now because they have no option. They cannot ask a banking corporation for an overdraft of £500,000 or £1,000,000, and. therefore, they are forced to float a loan on the public money market when they are in need of additional funds to carry on their undertakings. I come now to the statistical tables given in the appendix to my scheme. They are as follow -
See Quick and Garran’ s Annotated Constitution, p. 822. Complete valuation particulars not yet available.
To my proposals for adjusting the financial relations of the Commonwealth and the States, I append addenda containing the reasons for which I think they are to be supported. Regarding my provision for the division in perpetuity of the surplus revenue of the Commonwealth, I say -
In recognition of the fact that the increase -in the population of the Commonwealth, and the further development of its resources, will entail upon the Governments of the several States increased expenditure in. connexion with the functions of government retained by them, while such increase and development will produce a concurrent increase in the revenues derivable by the Commonwealth in respect of Customs and Excise duties, it is proposed that -the surplus Commonwealth revenue resulting in any financial year from the excess of the revenues received in that year over the expenditure which took place therein, shall in the first instance be applied to the liquidation of any Commonwealth revenue deficit which may have accumulated, and that the balance shall be distributed amongst the States on a fer capita basis. “As to the liquidation of Government liabilities to the National Postal Bank by the proceeds of the issue of Commonwealth consols, it is proposed that -
In the event of the National Postal Bank requiring repayment of the overdraft of the Government of the Commonwealth, or any State, the Federal Treasurer may, at his discretion, authorize the issue of Commonwealth consols to the value of the repayments so required, and utilize the ‘proceeds in liquidating the liability to the bank. The repayments subsequently made by the borrowing Governments shall be paid to the Sinking Fund Trustees for investment in Commonwealth and State securities.
The National. Postal Banking system will eventually became the clearing house for the Commonwealth, the States, and the municipalities of Australia.
I have also added notes on the necessity for establishing a Commonwealth National Bank, which I desire to read, in ‘ order that they may be embodied in the Hansard report. I say that -
The supreme question in an industrial country is where should the control of the money volume rest ? In whose hands can this omnipotent financial power be trusted ?
Every writer on political economy, from Aristotle to Adam Smith, from Ricardo to Calhoun, concedes that a change in the money volume alters the price of every ounce and yard of goods and every foot of land. Whom can we (rust with this financial despotism? At present, the managers and directors of the private banking corporations and other fiduciary institutions wield this power. They possess the yard measure, and can lengthen or shorten it as they please, and when they will. They control the pound-weight, and can make it heavier or lighter as they choose. This explains the puzzle so mysterious to ordinary people, why those who deal in money always get rich, while many of those who trade in other commodities go through the bankruptcy courts.
The great question now is, “ Shall the Commonwealth establish its own national postal banking system and manage its own finances through the regulation of its own money volume, or continue under the benevolent guardianship of capitalists^ - lambs in the keeping of wolves?”
Bank managers and directors now possess this power.
The men who increase and diminish at their pleasure the currency (not bank-note currency merely, but discounts, cheques, credits, promissory notes, drafts, letters of credit, and coin), possess the power to change prices at their will.
No one will deny that the managers of the banks can make or break a town. Honorable members must recollect how, during the crisis of 1893, small communities were made to suffer by the closing of banks. At the present time, a few men in the great cities could ear-mark every £ they lend, and have telegrams sent to the country banks, saying, “ Stop discounting for a few days,” when the producers and traders of Australia would be crippled. They would be told by the branch managers, when they had obligations to meet, that money was tight; although there might be more money within the control of the banks than ever before in their history. I shall presently show that the Yankees, in trying to get control of the meat business of the Argentine, have com.menced by starting a bank. To continue my notes regarding the necessity for establishing a Government national bank -
In 1874, the New York city banks increased their money volume £600,000 in one month, causing prices to rise, and in March, 1875! decreased it £1,000,000 in one week, causing prices to fall, thus changing the value of every commodity in that city. The “ British Bullion Committee “ of 1810, recorded an emphatic statement, that, in the presence of a panic, it is the duty of the Bank of. England to lend money freely to all solvent parties. In 1825 the Bank, at the request of the Government, lent money even on goods to merchants. In 1857, its loans on private securities went up to £55,000,000 in a few months.
– I think that the honorable member is getting wide of the question, and is now dealing rather with the banking system than with the financial relations of the Commonwealth and the States.
– I propose the institution of a Government national bank for managing the finances of the Commonwealth and the States, and received the assurance of the Prime Minister that, on this motion, I could discuss that proposition. The notes which I am now reading support the proposition. Later, I shall move an amendment substituting my proposals for those of the Government.
– The honorable member may not refer, other than incidentally, to banking operations as they affect private interests. If I were to allow him to do so, we might have a debate on banking generally, which is not within the scope of the motion.
– I have no intention of interfering with the existing banks ; but the notes which I wish to have inserted in Hansard support my proposal for a national bank. If they are not incorporated in my speech, my proposition will not be completely set before the House.
– Without the establishment of a national bank, (he honorable member’s scheme would fall to the ground.
– Without the establishment of a national bank there would be no scheme.
– As to the insertion of unread matter in Hansard, it is my intention to allow it only in regard to tables of figures and other statistical information which cannot advantageously be read. 1 cannot allow the insertion of ordinary written or printed matter which has not been read to the House.
– I propose to read what I wish to have inserted.
– The honorable member may read any matter, the quotation of which he can show to be relevant to the question before the Chair.
– I think that it will be seen that what I am reading is relevant. To continue what I have read regarding the action of the Bank of England in lending money -
In the crisis of 1866 it had only £29,000,000 cash, but loaned £65,000,000 in the first few days of the panic, the Government assisting. In 1890 the Bank again came to the rescue of embarrassed commerce. Our private banking corporations are more apt to encourage the panics than to allay them. In the panic of 1893 the banks, instead of relieving the money famine, actually contracted their loans by millions in the worst of the crisis, and forced the debtors least able to pay, to sacrifice all their property, although their cash resources had increased by millions.
If that is so, and the private banks are not able to carry on the financing of private corporations and business men, how are they going to help this Commonwealth or the States when a great crisis approaches? That is why I want to prove to the House this afternoon the necessity of establishing a banking connexion by means of these proposals.
– Otherwise, we shall be at the mercy of the private banks.
– I am not condemning the private banks, because in some ways they have done a lot of good, although in other ways they have hurt a lot; but I am most anxious to obtain this banking system in place of a Council of Finance. A Council of Finance, which is the proposition of the Government, is only a farce- -
The fundamental principle of the importance of controlling the operations of the money volume- in the public interest, is admitted by all recognised economic thinkers. The way to prevent a speculative disaster or shrinkage of credit from developing into widespread distress called panic, is to expand the money volume by easy loans or otherwise. That expansion is the proper medicine for the prevention and cure of panics, is recognised by the Bullion Committee, Bagehot, Summer, Professor Walker, and all the other financial doctors. But the private banking corporations refuse to administer the prescription because it is dangerous to their monopoly. For an ordinary bank to increase its loans to its customers in the face of a panic would be regarded by other bankers as midnight madness. But the Commonwealth is big enough and strong enough to loan money to producers and business people in time of stringency, with the certainty of averting loss from itself, instead of bringing loss on itself. A moderate increase of the money volume when the movement of crops creates a special pressure on financial facilities would be extending justice to the agriculturists.
When the crops are being planted there is always a scarcity of the medium of exchange, and when the crops are being harvested every business man knows that he must carry his customers, although that is the very time when he finds it difficult to finance his own business, because there is a scarcity of currency. If we had a national postal banking system, the National Bank would expand its currency on those occasions -
The operation of the price average is principally influenced by the movements of money volumes, credits, and production. The easiest of these to control is the money volume, and the control of this confers the power to govern the movement of prices, because the influence of any change in credits or production can be overcome by sufficient expansion or contraction of the money volume.
Cannot honorable members see how important it is that we should have a national banking system in connexion with these financial proposals - a system that will put us beyond the possibility of going as beggars to the shareholders of private banking corporations? I submit that this is a question which the House ought to look into and express an opinion upon. I shall have a test vote upon it, even if I vote alone. I am never frightened to be in a minority if I am right -
The movement of the money volume is the vital monetary problem - the master-key to the financial situation. Through the control of this movement prices may be made to rise or fall or remain substantially steady. This means control of justice or .injustice, prosperity or panic, wealth diffusion or wealth congestion. Power to dominate the operation of the money volume is power to do justice or injustice between debtors and creditors, employes and employers, purchasers and sellers, landlords and tenants, money-lenders and borrowers ; power to increase the weight and value of every debt - public or private - in the Commonwealth, power to generate prosperity or panic, power to regulate industry and determine the distribution of wealth. Such power is an attribute of sovereignty, the prerogative of the King, and ought to belong to none but the sovereign people exercised through His Majesty’s Parliament and Government in the interests of the whole people. At present the vicissitudes of mining speculations, management of private banking corporations and the blind chance of monopoly determine the movements of money.
The private banking system of the Commonwealth is only a legalized monopoly for the gathering of wealth from the many, and its concentration in the hands nf the privileged few.
The private banking corporation system rests on a credit given by usage to bank notes, for which the Australian people provide the security in their indorsed promissory notes, bonds, and mortgages. The legal representative possesses no value in itself ; it is based on actual wealth, the land of the Commonwealth and its productions, and not upon the inherent value of its material. The question is why the Commonwealth and States cannot operate a banking system on a sounder security, and gather the profits for the public benefit, instead of em- powering a special privileged few to become wealthy by private banking.
By increasing the rate of interest, both the principal of the money and the interest upon it have an increased power over property.
The value of money depends upon its power to accumulate value for its owner by interest.
Money could not be the object of a medium of exchange unless it were necessary to part with it to make it valuable. For this reason it possesses no power to accumulate by interest in the possession of its owner, for, if it accumulated, it would be legally equivalent to an interest bearing bond or mortgage or productive property, and its owner would not need to dispose of it to make it productive.
All goods, wares, and merchandise, although they may be exchanged for money many times, soon find a place where they are consumed, but money never reaches a point where it can be used except for exchange. If money be capital seeking investment, it is always seeking investment without ever being invested, because when it has discovered one investment it is as much a seeker after a second and third investments as if it had not been invested at all.
Money is a combination of legal powers, expressed on metal, paper, or some other sub- stance; its value is the standard or determiner of the value of all other things, and it serves as a public medium of exchange for land, labour, and all commodities.
When the abolition of simple barter occurs the power to inflate begins. This power must always exist in nations which have abandoned barter. The only vital question is where shall it be trusted ? Under the present financial system it rests in the keeping of the directors and managers of the private banking corporations, who operate for the benefit of their shareholders.
The men who increase and diminish at their pleasure the currency (not bank-note currency merely, but discounts, cheques, credits, promissory notes, drafts, letters of credit, and coin), possess the power to change prices at their will. Now the directors and managers of private banks possess this power, which is an attribute of sovereignty, and should only be exercised by all the people through the Government.
The largeness of the public debt, the enormous business transacted by each State, and the huge amount of interest that must be paid annually by all, appear sufficient to impress a full conviction of the utility of a Commonwealth banking system, operated in conjunction with the postal system, not only in relation to the administration of the national finances, but in the general system of political economy.
The Commonwealth banking system, linked with the Postal Savings Banks throughout Australia, will control the movement of the money volume, credits, and production, in the interest of all the people. All private profits on the circulation of bank notes will cease, and the postal banking system will be so safe and sound through the confidence reposed in Government institutions, that it will absorb as deposits all the money now hoarded.
This fact, together with loans at low interest, and the facilities and safety of transmitting money through an institution with an office in every village and town, and possessing the entire wealth and power of the Commonwealth back of it, would forever prevent panics.
The cost of war should be deeply emphasized. The total .debts of the nations of the world amount to more than £7,000,000,000. The interest on the debts, largely created by war, plus the annual appropriations for military purposes, calls for an outlay every year in times of peace of fully £625,000,000.
The total gold in the world available for currency amounts to about £1,210,000,000. It is evident that nations cannot fight without borrowing.
The world’s supply of gold does not express the wealth of the nations.
The Trade of the Great Nations and the
Amount of Gold in each.
The trade of the chief countries of Christendom last year reached a total of £4,000,000,000, an increase of £275,000,000 over last year. The countries with the largest shares in this total are the following : -
The directors of the Mint, U.S.A., estimate the stock of money in the world at £2,938,000,000, 82 per cent, of gold being held by eight countries as follows : -
Over 56 per cent, of the stock of silver was held by the same countries, the United States leading again with £143,800,000. In 1890, Mulhall estimated the world’s banking power at £3,289,000,000, of which the United States was credited with £1,060,000,000. Since that year the banking power of the United States alone has increased to £2,608,000,000, over 146 per cent., . that of all the other countries has increased only to £3,333,000,000 - the banking power of the United States being thus little less than one-half that of the entire world.
These are deposits due to the Australian public, against which there exists no gold nor paidup capital, but simply the promissory notes, mortgages, bonds, and other securities held by the banks. The national postal banking system will, in addition to possessing security of equal value, also be guaranteed by the collective wealth of the whole of the Australian nation.
Falling prices are unjust to debtors : Their debts remain the same, but their means of payment shrink, the paper instruments call for as many sovereigns as ever, but the number of bushels of wheat, or bales of wool, or tons of potatoes that must be sold to get these sovereigns is double what it was when the money was borrowed and the notes written.
Many a man whose assets are far greater than his liabilities is ruined for the want of a few pounds in cash at times, because it is impossible for him to collect the amounts owing to him in time to meet his own obligations.
The spasmodic rise and fall of general prices is one of the greatest evils that can possibly afflict an agricultural, industrial, and commercial people. Industry is liable to be unduly inflated by rising prices, and so demoralized by their fall, that great depressions and panics result. The operation of prices changes the distribution of wealth, alters the proportion that belongs to labour, capital, and management ; gives great value to hoarded money, and lightens or intensifies .the burden of debt. D purchases a farm for £6,000, and borrows £3,000 to help pay for it. In a few years the fall of prices, through ‘ rise of interest, brings his land down to a value of £3,000, but the debt has not shrunk, and the creditor takes the whole farm for a loan that was worth but half the farm at the time it was made. At the same rate the money-lenders loaning throughout the country would acquire the Commonwealth in return for loans amounting to half its value.
It is estimated by a careful financial statistician that the “fall of prices since 1873 has given the world’s creditor class, at the expense of debtors, an unearned increment of £600,000,000 sterling per annum, and this vast value has been paid by debtors in addition to the principal and interest they stipulated to pay. This injustice has been inflicted on debtors by the manipulation of the money volume under the controlling influence of the financial magnates governing the present banking system. Under the regime of the National Postal Bank, we shall possess a great financial system consisting of bank credits having the power, by authority of law, to pay debts all over the Commonwealth. All the people of the Commonwealth who do business with the National Bank, through each keeping an account there, will enable the bank to make all reciprocal payments without moving a shilling of their money.
Foreign exchange is a system by which commercial nations discharge their debts to each other. Practically the whole of our foreign commerce is carried on by means of bills of exchange. Balances are settled with commodities. When gold is used it is utilized as a commodity, not as money ; as bullion, not as coin. If it could not be found in Australia a cargoof wheat, meat, wool, or other commodity could be sent to Europe, sold for coin or bullion or bills, and the debt settled with that. Such shipments of commodities are the fundamental facts in international commerce. It is upon such facts that bills of exchange are based.
International trade is an exchange of commodities, not a direct barter, but an indirect one.. It would make no difference in the foreign trade of any nation if it did not possess an ounce of gold or of silver, or whether its money was gold, silver,’ or paper. The rates of exchange are not determined by the nature of the currency, but by the relative amounts of the settlements to be made in each” direction between the two countries. If France and America had the same currencies as England and Australia, it would still happen as now, that bills on Paris, London, or New York would be at a discount or a premium. The amount of money wishing to go to London, New York, or Paris, and the amount wishing to come from Paris, New York, or London, would then, as now, settle how much was to be paid in London for bills on Australia, and how much was to he paid in Australia for bills on London,. Paris, or New York.
With any kind of money our foreign exchanges would be conducted just as they are now. The value of each commodity would be calculated on the basis of its real value, first in the money of its own country, and ‘ thentranslated into the other, according to the exchange value, which is governed by laws of comparative values, and is never difficult to discover. Bills of exchange are emitted by dealers in foreign exchange on the basis of the comparative value of the two mediums, each in its own country. Our money of whatever kind is worth in a foreign country just what it is worth here, less brokerage and transportation.
If more money is paid away by a Government in its ordinary expenses or for special public improvements than is received from taxation, the volume of the currency is increased and prices raised. While on the other hand if the taxes are made greater than the expenditure, the volume of money “is decreased and prices lowered, or a rise counteracted. However great the natural resources of a nation, however genial its climate, fertile its soil, ingenious and enterprising its citizens, or free its institutions, if its money volume is manipulated by private capitalists for selfish ends, its credit shrinks and prices fall. Its producers and business people must be overwhelmed with bankruptcy, its industries will be paralyzed, and destitution and poverty prevail.
A few great failures from wild speculation, a contraction of the money volume, an adverse balance of trade, a foreign financial crisis, large sale of Australian securities held in foreign hands, heavy purchase of gold by foreign governments or banks, any drain of gold to foreign nations, a corner on gold in America, or a rapid withdrawal of loans by concerted action of great banking corporations and unscrupulous capitalists, destroy confidence, produce financial stringency, and bring the producing and commercial classes face to face with ruin.
The burdens of the producers increase with the scarcity of money and fall of prices. Their debts and taxes remain the same, while their labour and property decrease in value. Their property being at last exhausted, without liquidating their debts, they become the slaves of the money lenders. All incentive . to energy is destroyed, agriculture decays, industry is paralyzed, the producers reduced to miserable dependents on capitalists, while the ruling classes are enervated by idleness and luxury born of unearned wealth.
The National Postal Banking System would prevent panics. A panic is the product of fear. Something makes business men suspect credit, and it shrinks. Cash instead of circulating more plentifully than usual to take the place cf the departed credit, takes flight itself- to the vaults of the banks. It becomes difficult to borrow money at outrageous rates of interest to pay debts, business men slaughter prices, and widespread ruin follows the fall. We all know the trouble. It is lack of elastic money that turns the failures of a few speculators into a national panic. The National Bank will stand ready at all times to prevent panics. There will be no money famine while the private banks are full of money, no big interests, no need for business people, really sound, to sell at a loss. The very knowledge that the Com. monwealth will issue funds and lend money at a low rate of interest in any reasonable quantity on good security will prevent the fear and distrust of the future which forces men to rush into the market and outvie each other in selling goods at a lo°s It will benefit all classes of the community except the wreckers and parasites. It will fulfil the constitutional mandate, annihilate a dangerous special privilege, and return to the sovereign people as a real posses- sion one of the most important of sovereign powers - the power of issuing and regulating the money volume of the nation. It will be as ready to finance the Commonwealth in time of war as in peace, without demanding usurious rates of interest. It will not lend money to the foreign enemies of Australia for higher interest than the Commonwealth can afford in time of danger, but it will equip the army, and send it to the front of the tight. It will free our financial system from the blighting influence of foreign disturbance. Not only would we be safe from foreign panics and the vicissitudes of foreign mining speculators and markets, but the ups and downs of foreign legislation would affect us but slightly as compared with the present. It will operate as a beneficent influence in the regulation of industry and the distribution of wealth. Neither landlord nor tenant, labourer nor employer, capitalist nor magnate would be deceived nor defrauded.
It would not encourage business men in times of prosperity to borrow and engage in commercial enterprises, and on the first sign of dulness demand the decrease of their overdrafts, selling their securities for less than half the value at the very time that the banks should protect them. It would beget neither feverish excitement nor despair, but the calm serenity that comes with certainty of provision. The men of enterprise could invest their money, arrange for overdrafts, employ their workers, and make their contracts with an assurance that their calculations would not be brought to nought and their enterprises wrecked by an unforeseen change of the mind of the bank manager, influenced by the directors of competing monopolies.
The regulation of the rates of interest by the National Postal Banking System will determine what proportion of their earnings the country producers and business people shall pay for the use of money.
Producers possess no means of resisting the overwhelming power of accumulation given to capital, except by the establishment of a National Postal Banking System, and the maintenance of a just rate of interest. Then the inequalities of birth and economic condition will be greatly diminished, and none of the agriculturists can be kept for any length of time the slaves of city capitalists.
It is not in the power of humanity to continue a more effectual form of concentrating property in the hands of the few than the high rates of interest charged by the present banking system. This method works rapidly and securely because it extorts consent as it operates. The wealth of the Commonwealth like the wealth of other countries is rapidly accumulating in the hands of a comparatively few people in the large cities. Still it is indisputable that cities are large consumers of wealth whilst very small producers.
A moderate amount of work readily produces an abundant supply of human necessaries, but the present system of the distribution of these products is such that a large number of the hardest worked producers receive a very small share of the products, whilst the big share goes to those who never do an honest day’s work.
The value of money is determined by the interest that it will accumulate, and the value of all property is determined by the rent that can be obtained for it. The market value must conform to the legal standard.
If the rent of any property be not sufficient to gather a sum equal to the estimated value of the property itself in as short a time as money loaned, the property will fall in price until the rent bears the same proportion to the Value of the property that the rate of interest bears to the principal.
It is perfectly legitimate that the interest on money should regulate by its own percentage the rent of all property, because money is the legal representative of all property, and the standard by which its value is estimated.
This interest is of the same quality and value as the principle loaned, and the percentage on property must be made conformable. If percentage be in the proportion of 1 to 100, the tenant of 100 acres of poorly cultivated land must pay as rent a sum in money equal to the value of 1 acre of land of the same quality. If he improves the farm and makes it produce -double the crop, he must pay the value of i acre of improved land lor the use of the improved 100. He pays more value, but no greater percentage on the value of the land. Money is the legal standard of value. If the percentage interest on it be fixed at a just rate, it will equitably regulate the rent of all property, and also secure to the workers the legitimate fruits of their toil.
The value of all property depreciates in proportion to the increase or the value of the sovereign that measures it; Whenever the value of money increases by a rise of interest there is a corresponding fall in the value of all property. When interest on money rises all property falls in price so that one sovereign in money purchases two, three, or five times more property than it did before the rise. Enough property must be added to make the rent equal to the interest on money ; for no financier will invest money in property unless the property returns as good an income as the money he pays for it. Therefore the value of property must fall whenever the interest on money increases that the incomes from property and from money may be equal. Money earns for its owner by an accumulative power, by a power to secure commodities already produced and not by a natural power of growth like that contained in the germ of grain. Where this power to accumulate by interest is made greater and more rapid than the natural production by labour this law of interest becomes a gigantic engine of evil. It gathers into the hands of a few capitalists the productions of labour “ and often deprives the producers of the necessaries of life. It is absolutely impossible for the producers and business people of the Commonwealth to continue to pay high rates of interest for the use . of money, and also supply themselves with the comforts and conveniences of life. All the percentage collected for the rent on property, or as the interest on money, must be paid by sales of the yearly productions of labour, which remain over and above the SUDPOrt of the producers. If a very few wealthy men in any civilized nation should live frugally and their posterity should do the same, in t>e course of a few generations they would reduce to poverty nearly all the other people of the nation. Consequently, under present economic laws, extravagance in the rich, and the frequent inefficiency and imbecility of their children, are great advantages to producers. The second evil is, therefore, necessary to modify the overwhelming power of the first.
In the Commonwealth the National Postal Banking System will so greatly reduce interest rates that useful productions will increase by leaps and bounds. Wealth, instead of accumulating in the hands of the few, will be distributed among producers. A large proportion employed on relief works, building up cities, will be expended in cultivating and beautifying the country. National improvements will be made to an extent, and in a perfection unexampled in the history of the world. Agriculture, manufactures, inventions, science, and the arts will flourish in every part of the nation. Those who are now non-producers will naturally become producers. Products will be owned by those who perform the labour,- because the standard of distribution will nearly conform to the natural rights of humanity.
Taking an average of the whole amount of the commercial and financial transactions of the Commonwealth it is probable that not one sovereign in joo is paid in specie. A small amount of money is always capable of balancing or paying a large amount of promissory notes, bonds, and mortgages, and also of buying every description of property. The money which pays for one farm may also pay for a second, a third, and fifty, the same day.
Banks gain as much by the deposits as they would by the circulation of an equal amount of bank notes. They pay no interest on current account deposits, and they lend their deposits to depositors and others, and charge interest on them. In cities all business mcn keep a banking account. Suppose 1,000 business men keep deposit accounts of £200 each in the same bank, the total will amount to £200,000. The bank will loan this sum to the depositors themselves, and make them pay interest on it. The money may be paid out over the counter many times during the day, but before three o’clock, when the bank closes, it will return in deposit, and be ready for use the next day. Some of the depositors’ accounts may be reduced to a few pounds, while others may be increased to thousands, yet the average balance in bank will vary but little. Each depositor must pay £1 annually to the bank for keeping the account.
The quantity of money used in business is very small compared with the amount of business transacted, for it is only the average balance kept on hand. If a business man receive £20,000, keeps it one hour, and then pays it out, he uses the money only one hour. A man may he worth £100,000 and transact a business of half-a-million annually, and vet his average balance not exceed £1,000. The bank, where he keeps his balance, lends it to other depositors.
The amount of money which can be kept in active circulation is comparatively small.
Interest on money is a standard or governing power which forces all the producers of the Commonwealth to contribute their proportion of the products required to maintain all the non-producers, and most of the capitalists of foreign countries. A large percentage must be taken from the price of their products by the traders in order to enable ‘the latter to pay their interest and live by the production and sale, and for the same reason, when they buy, a large percentage is added to the price of every article they require. This difference in price must be sufficient to maintain all who live on income from interest without work.
In conclusion, I wish to read an extract on “ the Government National Bank of Switzerland,” from the Age, of 7th May, 1908. 1 took it from the Age, because the Age is now the great national paper, and we turn to it as we turn to new mown hay for our horses. I hope honorable members will bear with me, because I can assure them that it has taken me forty years to think out and write what I have laid before the House this afternoon. Before I give the quotation from the Age, let me read the following conclusions -
Every banker, and every man familiar with economics, is aware of that fact ; and it shows why property in the United States is never looked upon as a good asset.
I shall now read what the Age of 7th May, 1908, said of the National Bank of Switzerland -
The absence of monetary difficulties in Switzerland during the troublous times of1907 is attributed to the new central bank of issue, which started operations in that country under the title of the S wiss National Bank. The capital of this organization was fixed at £2,000,000, of which £1,200,000 was subscribed by the cantons and existing banks of issue. The latter were so eager to participate that they applied for over three times the number of shares available.
My own impression is that once a National Postal Bank is started, every private banking corporation in Australia will back it up, because it will be a bank of rediscount, which, in time of trouble, will be of great assistance.
– Then, this is really a proposal to bolster up private enterprise?
– Certainly; I am a believer in private enterprise, and only desire to utilize the powers of the State in order to help it.
The object for which the National Bank was founded was to control the paper currency of the country, and three years were allowed for the transfer of the note issues from the existing banks to the new central institution. But shortly after the latter opened no fewer than nine banks of issue renounced their privilege, which thus accrued to the National Bank. By the end of 1907 more than half the note circulation emanated from the National Bank, to which fact is due the increase of its influence on the discount market. Although the proportion of coin reserve was fixed by law at a minimum of 40 per cent, of the whole circulation, the quota retained by the National Bank has ranged from 50 to 75 per cent., and to the improvement in this respect is due the steady growth of confidence in the sufficiency of the currency when the crisis in other centres became acute. According to the Economist, “the great advantage of the new central bank over the former system of competition in banking lay in the larger choice of bills. Two principles have been maintained by the directors throughout : only the official bank rate has been applied and only real trade bills have been discounted. The exclusion of finance bills from discount reduced the area of speculative engagements, and thus prevented the world-wide crisis from assuming appreciable dimensions in Switzerland.
Surely, what is good for Switzerland ought to be good for a debtor country like Australia? I am prepared to help honorable members on the Government side to found a national bank ; and if they know a better scheme than I have suggested, I any quite willing to abandon mine in favour of theirs.
The use of cheques and clearing houses has greatly increased since the establishment of the Swiss National Bank, which in the first six months of its existence saved cash payments of no less than £200,000,000. Unlike ‘the Germans, the Swiss people seem to have accepted the new methods with alacrity, greatly to the advantage of the trade of the country.
I now come to a proposal which I in no way bind the House to carry unless they so desire, because it is my own private suggestion. We have had certain experiences in Australia; and I shall shortly quote some figures which will astonish honorable mem- bers. When it is stated that Englishmen are afraid of the few Labour men in this country, I can only say that it is probable Englishmen generally never heard of those Labour men. It is only the men in the financial centre who are concerned ; and I shall give figures to show the capital which they have shut up here in Australia. My suggestion is contained in the following : -
In case of suspension of any private bank, it is proposed that the Comptroller-General of the National Postal Banking System shall be empowered to levy contributions on all the private banking corporations for the protection of the depositors, thus extending to the depositors of each bank the collective financial strength of all the banks.
Supposing one of the private banks closed its doors, as did the Federal Bank, or the Bank of Van Diemen’s Land a few years ago, when thousands of people were ruined, why should not the ComptrollerGeneral have power to make the sound banks’ provide sufficient to pay all depositors ?
– Make the people richer by putting money from one pocket into the other.
– We are the same people and the same depositors ; and, that being so, why are certain banks not willing to come to the rescue of other banks?
– The honorable member would rob Peter to pay Paul?
– As 1 say, we are all one people.
– One people, one bank !
– Quite so. The following is a summary of the main advantages of my scheme for adjusting the financial relations of the Commonwealth and the States : - (i.) That it involves a minimum of interference with State rights and privileges. (ii.) That it effects a complete separation of State and Commonwealth finance. (iii.) That such separation takes effect at once. (iv.) That it provides machinery for greatly facilitating the financial transactions of Commonwealth and State Governments, both internal and external, (v.) That it deals equitably with all the States. (vi.) That it does not impose an unduly heavy burden upon the Commonwealth. (vii.) That provision is made for the satisfactory settlement of the question of transferred properties. (viii.) That allowance is made for the exceptional position of Tasmania. (ix.) That adequate sinking fund provision is made for Commonwealth loans. (x.) That provisions are made to secure the integrity of the sinking funds. (xi.) That it will result in extensive savings in connexion with the flotation, renewal, conversion, and redemption of loans. (xii.) That under it considerable reductions will be effected in the charges made for discount, exchange, brokerage, commission, &c.
I find that if we take over the whole of the debts under the proposal of the honorable member for Mernda, we shall, on the £250,000,000, save¼ per cent., or £625,000 a year; and that on the amount of the debts that I propose to take over, namely, £174,558,975, we shall save £436,397 per year. I desire now to give a few figures relating to the financial position in Victoria. In 1891-2, the suspension of the banks in Victoria locked up £11,000,000 of capital. In 1893 thebanks which suspended held £68,000,000 of the people’s money ; and of , £51,500,000 of fixed deposits, £17,000,000 was due to British depositors, and £34,500,000 to Australian depositors. 1 quote these figures to show why Britishers stopped depositing in Australia - why British capital stopped coming here. If we had a national banking system in full operation, I feel sure that the London branch would not be able to hold the money that would be offered by depositors at 3 per cent, or 3½ per cent, interest. This money could be brought to Australia, and there is always use in this great Commonwealth for money at 3½ per cent. What would be the functions of a national postal banking system in connexion with the proposals I have been making this afternoon? First of all, the medium of exchange is the most potent force in the progress of production, trade, and commerce. The ultimate object of all trade and commerce is to exchange commodities for commodities - and what, may I ask, is Australia but a . great trading concern ? When commodities are exchanged for money, the process of trade and commerce is only half completed. The great function of banking is to supply a power for the production and transportation and distribution of commodities of general utility, following them from the original producers to the ultimate consumers. If,, then, the Commonwealth and the people of Australia are intrenched within the great ramifications of finance - if they must depend upon banking institutions to increase their power of production and exportation, and so to increase the balances which will come back ultimately to Australia to meet their obligations - is it not advisable to consider whether we should not be justified in establishing a national banking system instead of the Council of Finance proposed in connexion with this scheme? Whatever assists to facilitate commerce during the interruption of the ordinary instruments of exchange, becomes a temporary medium of exchange, and, to all intents and purposes, fulfils the functions of money. We are constantly being told that money is the medium of exchange. That, however, is an economic mistake. Money is in reality only a small medium of exchange. The real medium is fortified credit. Money is useful for paltry and petty transactions ; but in all great financial and commercial operations, the medium of exchange is not money, but fortified credits. Fortified credits are created by purchasing for the purpose of selling ; and they expand or contract in proportion to the expansion or contraction of trade and commerce.
– In dealing with the question of exchange, I think that the honorable member is anticipating other business on the notice-paper.
– I am dealing, sir, now, with the banking phase of this question, and “am speaking as a banker.
– The Bills of Exchange Bill, which has been received from another place, is on the notice-paper ; and I think that the honorable member is now pursuing a line of argument which may be frequently followed when that measure is before us. I ask him to connect his remarks with the motion before the Chair.
– I propose to do so, sir. I wish to talk to the House as a banker; but find it hard to do so, since so few honorable members ever enter a bank, save to ask for an overdraft or to make a deposit. I am endeavouring to show the reasons why we must have a national banking system ; and I think, sir, that you misunderstood my reference to the question of exchange. I am talking, not of exchange bills, but of that medium of exchange which enables nations to sell their products to each other, and has to do with the methods by which they settle their balances. I view this financial question from a different stand-point from that adopted by other honorable members; I regard it from the stand-point of a man who has helped to run the system which runs the country. I appreciated the speeches made by other honorable members ; but they dealt with the question purely from the point of view of the States and the Commonwealth, and without any reference to the establishment of a national banking system. I, on the contrary, am dealing with State and Commonwealth interests, founded on a national bank. I wish to show that a national banking system is absolutely essential.
– Would it help us to return more to the States?
– It would, in a sense, because the bank would enable the States to make, profits which they cannot otherwise obtain, and it would transact for them business which they themselves cannot manage. In this morning’s issue of the Age there is an interesting cable message as to the efforts of the American Beef Trust to control the Argentine. Mr. J. Ogden Armour, head of the meat packing firm of Armour and Company, is a director of the National City Bank, which is now virtually the National Bank of America, and it is reported that the treasurer of the company is shortly to become vice-president of that institution. Branches of the bank have been opened in South America, and it is thought that this step is being taken to enable the Beef Trust to control all the credit power there. Commerce follows, not the flag, but the credit of a nation. In 1893, we had in Australia a national crisis, which resulted in as great a wreckage of the fortunes of the people as would have happened had the army of an enemy trampled down the ripened grain.
– It was not a national crisis*
– It was a national financial crisis ; and, but for the action of Sir George Dibbs, who, as Premier of New South Wales, made banknotes a legal tender for six months, every bank in Australia would have closed its doors. At that very time, however, there was more money in the banks than ever before. But their credit was gone. The people will always have confidence in a national’ bank, as they have confidence in their nation, because it is immortal. In 1803. this country suffered a greater loss fromthe action of the banks than it would have suffered had an invading army set fire to its buildings. I am not abusing the private banking corporations of Australia; but they are responsible for what occurred then. When the Bank of Van Diemen’s Land closed its doors, several good old ladies whose husbands had left them stock in it, had to go to the benevolent asylum. Am I, an independent man. to be prevented from making these things known?
– Would the public servants like to be paid in bank-notes?
– If a national bank were established, I should appoint for its management capable men now employed by the private corporations, and should pay the employes generally good salaries, so that they would be able to get married when they became of marriageable age. I would not start the bank with unskilled men. M> contention has always been that knowledge must be paid far. That is why I tried to get the salaries of the members of this Parliament increased. I felt ashamed to be receiving what we used to get. Some persons think that the Bank of the United States failed ; but that is not so. Let me read a passage from The Dictionary of American Politics, by Everit Brown and Albert Strauss, regarding the American national banks -
There have, in the history of this country, been two such’ banks, the first from 1791 to 181 1, the second from 1816 to 1836. The incorporation of the first of these was a part of Hamilton’s financial scheme, and it aroused great opposition.
I am the Hamilton of Australia. He was the greatest financial man who ever walked this earth, and his plans have never been improved upon. Honorable members can read his history and his books in the Library -
Jefferson, Madison, and others that subsequently formed and became the leaders of the Republican party were foremost in the opposition, which was based on the lack of power on the part of Congress to charter any such institution. The attitude of public men on this measure was among the first indications of the direction in which party lines would tend. Jefferson and the future Republicans demanded’ a ^strict construction of the Constitution, and denied the grant of any such power to Congress in that instrument. Hamilton maintained that the right to charter a corporation was one of the inherent privileges of a sovereign power, that the Federal Government was a sovereign power, and need not therefore have such authority specifically granted, and that the step was “ within the sphere of the specified powers” of the Government enumerated by the Constitution. The Bill incorporating the bank became law in 1791. The bank was to continue for twenty years, its capital was to be $10,000,000, of which $2,000,000 was to be subscribed by the government. In return the government was to receive a loan of $2,000,000, repayable in yearly instalments of $200,000. Congress agreed to charter no other bank within twenty years. The public subscriptions were to be payable one-quarter in coin, and three-quarters in three or six per cent, national debt certificates. The bank was authorized to establish branches, and its noteswere to be received in payments to the United States. Although Jefferson had originally opposed the bank on the ground of the unconstitutionality of its charter, he nevertheless, while President, recognised its constitutionality by signing various acts affecting it, and in the Courts the legitimacy of its existence was never questioned. Its efforts to obtain a renewal of its charter from the United States at the expiration of its existence in r8n were unsuccessful, as were the efforts to prolong its life by a Pennsylvania State charter, and so it went out of existence. The head office of the bank was at Philadelphia. The Government stock in the bank was sold to English bankers in 1802 at a premium of fifty-seven per cent. The bank had paid dividends averaging over eight per cent, per annum ; while in liquidation it was bought out by Stephen Girard, of Philadelphia, one of the stockholders, and continued by him as a private institution.
Any honorable member who has been to Philadelphia must remember the college founded by Stephen Girard, which no clergyman may enter -
In 1816 the second Bank of the United States was incorporated. Public sentiment had been inclined in favour of such a renewal by the financial difficulties attending the war of 1812, but although the subject .was broached as early as 1814, it was two years later before the Act passed.
I want to put our bank beyond the control of the politicians. I would place it in the hands of a despotic Scotchman.
– Why a Scotchman?
– Because a Scotchman is the only person who can make money without money. Hebrews cannot live in the Texas towns where the Scotch have possession -
This time it was the Federalists that were opposed to it, and by in turn supporting and opposing each of two rival plans, they had compassed the defeat of both. The powers of the bank were much the same as those of the first. Its capital stock was $35,000,000, payable onefifth in cash and four-fifths in government stock.
Does not history repeat itself? Only a few months ago those who are now Ministerialists were fighting for the supremacy of the National Constitution. I used to listen in spiritual ecstasy to the Prime Minister’s marvellous declarations in its favour. Now, alas, he is going in the other direction. The American experience should determine us 10 establish a national banking system which cannot be attacked. The book from which I have quoted is one of the greatest authorities in America upon all questions of finance, and I am quoting it to show how history is now repeating itself. Nothing saddens me more than to see the great Nationalists of this House turning away from national greatness, and descending to the flats of State Rights Conservatism -
It was to have the custody of public funds, and five of the twenty-five directors were to be appointed by the Government. Mismanagement brought the bank into a precarious position -
There was the big mistake - when the politicians came in. This was the second time the bank was established. On the first occasion it was run by thoroughly trained financial men, with Hamilton, who was one of the greatest financiers of the world, at their head - and the new bank president was obliged, as a matter of necessity, largely to curtail its loans. The stringency thus created awakened considerable feeling against the bank. The first information of any connexion of the bank with politics was the demand of certain of President Jackson’s political friends for the removal of the president of a New England branch, who was politically obnoxious to them. The president of the bank, Nicholas Biddle, refused, denying any connexion of his institution with politics. President Jackson was opposed to the bank, and his messages to Congress in 1829, 1830, and 1831 expressed strong dislike of the institution. In 1832 a Bill to re-charter passed both Houses, but was vetoed by the President, and failed to pass over the veto.
Even the politicians passed it, but the President vetoed it. If a Bill is vetoed in the United States, it must pass over the President by a two-thirds majority, or it is inefficacious.
The elections of that year produced a House, a majority of which supported the President. On the plea that the bank was not safe, the President now removed the Government deposits, And placed them with State banks, which were called banks of deposit, and nicknamed “ Pet Banks.” In this he was supported by the House, which decided against a renewal of the charter, and ordered an investigation of the bank. Of this nothing came. The bank was chartered by the State of Pennsylvania, and thereafter known as the Nicholas Biddle’s United States Bank. Only one more attempt to establish such a bank was made. This was in 1844, while Tyler was President. Two Bills having that end in view passed Congress, but they were both vetoed.
Sitting suspended from 6.30 to 7-45 p.m.
– I draw attention to the state of the House. [Quorum formed.~
– T have tried to impress upon honorable members the desirability of creating a national financial system that would enable thé Commonwealth, the States, the municipalities, the shire councils, and various other public bodies, to finance themselves independently of floating loans in the open market in competitions like publicans and sinners. I have put a banking scheme before the House, but I desire to give some reasons for the faith that is in me. After all, the whole thing rests upon faith - the faith of the community. Nearly all our borrowings, and nearly all our business, rests upon confidence. It is all a matter of the faith that one person has in another. I want to show that many misconceptions exist owing to the improper use of the words “ deposits “ and “loans.” When the newspapers announce that the deposits of the banks have increased during the last year by so many million pounds, the general public believe that that means an increase of real wealth in the community. I want to show honorable members that that is fictitious. What is meant by an increase of deposits in the banks is that the producers and the traders, and other business people in the community, have enlarged their indebtedness, and that that indebtedness has been transferred into bank fructified indebtedness, or bank fortified credits, so that it is this increase of indebtedness, and not an increase of real money, which is available as a fortified and transferable medium of exchange. If we consider the deposits of all the banks in the aggregate, it is evident that, as the loans increase, the deposits increase, and it is clear to a.ll thinkers that the deposits increase only in proportion’ to the increase of the loans. Let me illustrate that. I want honorable members to begin to study and investigate these financial problems.
– But a man must have the instinct for them.
– The honorable member is right ; and he is one that has that instinct. It always gives me great pleasure to talk upon this question! when the honorable member is here. This is the question of questions, because I think it was the* Prime Minister who said that finance is government, and government is finance, although men who lived hundreds of years before the Prime Minister existed said the same. The fundamental essence of finance is some sort of exchangeable function. The function of banking rests first upon its power of maintaining legitimate credits. Let me examine this question for a few moments, because T claim that the Commonwealth of Australia cannot continue this slipshod, incompetent, bungling, unnatural, and unprogressive method of finance. We have six States watching each other in the market, and when one sees the slightest possibility of getting a loan on to the market before the others, it jumps in and mops up all available money seeking investment, to the injury of the others. That is why we find different rates of interest, and different discounts for different States. Not long ago, New South Wales, the biggest State, financially and in population, in our Union, made a tremendous loss below par in floating a 3J per cent, loan in London. And yet the London County Council, two days afterwards, came into the market and floated a loan £2 above par. That means that the London County Council got £1,020,000 for each £1,000,000, while New South Wales got £60,000 below each £1,000,000; in other words, the London County Council floated its loan £80.000 on the £1,000,000 better than did New South Wales. Will any one say that the London County Council has better security than New South Wales, with her mighty forests, prairies, and rivers, her agricultural lands, farms, and factories - her millions of sheep and cattle on a thousand hills? It simply means that New South Wales has to go to London, with an unorganized credit, while the London County Council has an organized credit through the Bank of England.
– New South Wales is in the hands of financiers.
– Of course. With a national, postal banking system such as we desire - I say “ we” - to create we should be out of the hands of bankers, brokers, and all those who live by commission. Last year our Savings Banks had deposits amounting to £46,147,289, and the banks of issue had. deposits amounting to £111,760,364, with notes in circulation valued at £3,590,092. The notes in circulation simply mean so ,much coin power of the deposits of the bank ; it is the power the bank exercises in coining so much of the gold that it holds in its vaults. The Treasury notes of Queensland held by the banks amounted to £812,773, and those in circulation to £718,029, or a total of £1,530,982 ; so that the deposits in the Australian banks amounted to £163,028,227. Yet, how much gold have we in- the Commonwealth? We had £24,022,848; and if we deduct that amount from the deposits, we have £i39,500,879, against which there is not the colour of gold. I am told, in the face of all these facts, that finance in Australia rests on gold. But, sup- posing that the £24,000,000 of gold were dropped into the sea to-night - that the bottom fell out of the banks - would the trade and commerce of this great Commonwealth cease to exist ? Would the business of the Commonwealth stop ? Certainly not. When we have £139,000,000 of deposits, and there is no money to meet those deposits, how is the matter settled? In banking phraseology, we settle it bybalancing paper instruments against paper instruments, until we reduce the liabilities to “the amount of the gold in the bank ; the matter then settles itself. A very small amount of money will purchase a vast amount of property. With the same money that purchases one property at 10 o’clock in the morning, fifty properties may be purchased before 3 o’clock in the afternoon.
– Will the purchaser get his deposit back each time?
– No; he pays in his deposit; and another man buys a property with it, issuing a cheque against the same amount ; and it keeps circulating by debits and credits, until by 3 o’clock in the afternoon it has exchanged fifty properties, and the banker has it in the bank to let out again at 10 o’clock next morning.
—But the same man does not get all the property.
– The same people, because it is all a matter of exchange. I thought we were one taxpayer - one people, with one hope and one aspiration. 1 was under the impression that the majority on the Government side held that we are one taxpayer with one pocket, and one system of finance ; but I now hear from the honorable member for Lang that that is not so.
– I do not say so.
– What I am saying is in the best spirit. This is no party matter ; I am not speaking as a Labour man, or as a Government man, but as an Australian for the whole Commonwealth, in order to see if we cannot devise some scheme that will overcome the complexity of modern finance with benefit to the people. I should like to show what part gold plays in the great trade and commerce of the world. In 1905 the Australian banks of issue had deposits amounting to £101,658,585, and held £24,043,119 in gold. From 1905 to 1908 the deposits increased to £111,760,000, while the gold decreased to £24,022,364; in other words, the gold decreased by £,22, 27 1 and the deposits increased by over £10,000,000. Will any honorable member tell me how it was that the Empire did not burst - did not go into old night and chaos? Yet, when I talk to the untrained in this question, they always tell me that the Empire rests on gold. Napoleon was not crushed by gold, but by paper money. I am not advocating paper money ; but I do not forget that gold is our worst enemy ; it never made a bargain it did not break, or a friend or an alliance it did not betray. I am always being asked how we are to get capital to operate a national postal banking system. Are my honorable friends aware that the whole of the paid-up capital of all the banks in Australia is only £18,000,000, and that last year, on that capital, the banks made a net profit of £2,423,568 ? I take these figures from the Australasian Insurance and Banking Record of 21st January, 1909. That profit was over and above all expenses, and represents 13^ per cent. net. Who paid that interest ? The producers and traders of this country. I venture to say that if the producers and traders of Australasia could get money on overdraft at 4 per cent, or 5 per cent, on good security, production and exportation would be doubled, and that the immense balance, after paying interest to the English bond-holders, would make a vast difference in the health, prosperity, and hopes of the Australian people. For that reason I ask honorable members to bear with me while I endeavour to place before the House some of the reasons why the financial scheme of the Government must prove an utter failure, unless there be a banking system in connexion with it. I do not’ care whether the period be five years, ten years, or twenty years, or whether we adopt my scheme, the scheme of the honorable member for Mernda, or the scheme of the Treasurer, it is bound to be a failure unless there is a banking system behind it. It is the universal belief that the sequence of banking is, first, deposits, and then loans, and that the amount of the loans must always be restricted by the amount of the deposits. Let us investigate these apparently selfevident, but delusive, propositions. I wish to show how this affects the proposed adjustment of the financial relations of the Commonwealth and the States. Let us suppose that an honorable member to-morrow morning borrows from a bank £50,000. The moment that he does so the bank’s deposits increase by ,£50,000. In other words, that transaction immediately increases the loans and the deposits of the bank by £50,000. Would that be an increase of actual wealth? It would require a great deal of evidence to convince me that it was ; but it is to that point that I desire to direct special attention.’ The position would really be this : the honorable member would have exchanged his securities, as legal evidence of his indebtedness to the bank, in return for a ledger credit, as legal evidence of the bank’s indebtedness to him. It would be only an exchange of indebtedness. The bank would have exchanged its fortified credit for that of its customer. Although the honorable member had borrowed £50,000 from it, the bank would have no less money than it. had before, and he would have no more than he had when he passed through its’ doors. Both would be as they were before. The bank would simply have lent him £50,600 of credit on the ledger of its establishment. . We have no public institution in Australia that can lend the people or the State credit, or can help the State in a time of trial.
– It is the people who give the banks the confidence of which the honorable member speaks.
– I agree with the honorable member. But to proceed with my illustration. The honorable member who had raised this sum could, by cheque, transfer the indebtedness that very day. His cheque would be deposited with some other institution, and his security for £50,000 would remain with the original bank as part of the deposits until the indebtedness was cancelled by redemption. The whole transaction would be operated upon credit, and when the amount had been paid off, the bank’s deposits and assets would have decreased by £50,000. The bank itself, however, would not have sent any money out, and the customer would not have taken any out of it.
– It would be simply a matter of confidence.
– Exactly. In trade and commerce confidence and credit are inseparable. They go hand in hand. In agitating for the establishment of a Commonwealth postal banking system, I have undertaken a proposal which, perhaps, will not be carried out in my time, although I have no doubt that such an institution will eventually be established. By the transaction to which I have just been alluding, the bank would have increased its deposits by £50,000, and if all the de- posits of all the banks in the country be taken, it is evident that in the aggregate they increase in proportion to the increase of their loans. Bankers in America would say, if they heard me, that I was giving away their secrets, and my uncle, had I made this speech whilst in his service, would have dismissed me on the spot. But how was it that he went into the banking business with a capital of $10,000, and when he died was worth $15,000,000? How do bankers make such huge fortunes?
– Because the ether fellows are foolish enough to let them make them.
– Quite so. The Commonwealth and the States are blundering along like a horse blind in one eye and wearing winkers. The States are always going to do something, but they never do anything. They view these matters only from the blind side. All transactions between banks are purely the exchange of the fortified credits of. the banks for the fructified indebtedness of the people. The principal deposits are created by the principal loans, and by a system, of bookkeeping both deposits and loans are swelled in equal amounts at the same time. In the mainand this explains how my proposed national bank would secure its capital - the whole of a bank’s deposits are practically produced by the exchange of its credits for promissory notes, mortgages, and other securities - the legal instruments or liens upon property that are handed over to the bank. It is in this way that banking business is carried on. It is true that small streams of money regularly flow in and out of these institutions, but the inflow and the outflow are so nearly equal that the difference, in the language of the classics, “ cuts no economic ice.” A bank’s money is like a metal column with a slight ripple on the surface. The chief tipple on the surface of the Australian reserves is to be seen at clearing time. If we had in Australia a national postal bank system, the whole of the business of the ‘Governments of the Commonwealth and the States, as well as that of the municipalities, could be transacted without the use of a shilling, save in paltry or -petty transactions, such as when a man gives his wife a little money to go out and buy a hat or a pair of boots. The daily balance at the great London Clearing House, involving millions ot pounds annually, is settled without the use of a shilling. Modern banking institutions with which I have been connected devote their attention now chiefly to the investigation of credits - just as the Commonwealth bank would do for the benefit of the people - and to the extension of the satisfactory credits on their books. To say that banking is purely money lending is to degrade its noble and exalted functions to the level of those ‘of a gutter-sparrow pawnshop.
– There is a great deal of truth in that, but that is what the banks .in Australia are doing.
– I wish to lift up the banks. I have no grievances. The world has dealt well with me, and if I am hereafter only as happy as I am now, I shall do very well. Having analyzed the chief aspects of the functions of banking, I desire now to investigate the causes of the great financial crises which took place in Australia in 1889, 1890, and 1893, with a view of showing the evils which then beset the Commonwealth owing to the non-existence of a national postal banking system. The development of credits has reference to production and their payment to consumption. There must always be an indefinite period between production and consumption. Consumption cannot be definitely accelerated, and the power to purchase once having been issued, cannot be withdrawn until the products of the producers have been demanded for consumption. Under such conditions there must always be a mighty Armada of credit floating in the sea of trade and commerce. As production and consumption are perpetual processes, as is also the banking function, the institutions which refuse to exchange their credits with the producers and traders during the interregnum between production and consumption inflict irreparable injury on the community, and neglect their sacred function. We have seen the wrecks of Australian financial crises tramping the roads with their swags on their backs.
– The last crisis was caused by the inconvertibility of securities.
– If the people have confidence in their banking institutions, that does not matter. But at times of great financial crisis the people doubt their soundness and stability. The standard value of commodities can be maintained by the producers and traders only with the help of the banks. But do the banks help the producers and traders when misfortune overtakes them?
– Do they do so in America?
– Americans know nothing about banking. That country is 2,000 years behind, so far as finance is concerned. It started right, and then Mr. Boodleier got control. Now the country is in the hands of the boodleiers.
– Then the honorable member left.
– Not because I could not make money there. When the banks refuse to help the producers and traders in the small settlements, these are forced to discontinue producing, and this discontinuance decreases the volume of trade. Not only does it do that, but they are forced into the market to sacrifice their stored commodities, in order to secure a sufficient amount of currency to enable them to meet their maturing obligations. As consumption generates the demand for commodities - and it is a slow process - there must be depression when these men are refused overdrafts. Protection is denied to them at the very time when they need it most. These producers and traders may unload their commodities on others, but they do not reduce the volume of outstanding credit. They do not lessen the great sea of debt by transferring their burden to others. There will be no change in these matters until we have the courage to establish a financial system of our own. The ruin of producers and traders puts hundreds and thousands of men out of work. That reduces the volume of consumption, and thus others are ruined. The man who is unemployed needs as much as he did when employed, but he must limit his purchases to the amount of his cash. Ruin is the inevitable end, and the banks which first stop credit find themselves involved in the cataclysm which follows. Thousands become tramps, property is reduced in value, and interest rises, the desolation and hopelessness which eventuates being the result of bad banking, or the want of a good system of banking. In 1893, a gulf opened and swallowed millions of the people’s assets. Hundreds of men who thought that they had put aside enough to be independent and live in the sunshine for the rest of their lives found themselves, poverty-stricken. The Australian boodleiers opened their maws and swallowed everything they had.
– It was a terrible tragedy.
– The pages of history will never explain it until they are written in the blood of the boodleier In I&93> the banks possessed millions more than they had ever possessed before. Yet their assets were reduced by millions of pounds. They became frightened, and called in their deposits, as soon as a few large depositors withdrew their balances. They commenced to call in loans, and to refuse overdrafts. The crisis was occasioned, not by the people, but by the paralysis which overtook the directors of banks.
– It commenced with the banks closing down on the building societies.
– We have now a chance- to do something, and may. never have a similar one again. Honorable members opposite may prevent us from saying anything on this subject on any future occasion. During the crisis the decrease of deposits was equalized by the decrease of loans, and that of loans by the decrease of deposits, the difference between the two being trifling. The reason of the enormous shrinkage of the available medium of exchange, or the vast decrease in the credit deposits, and the consequent destruction of normal values, was the direct action of the banks in contracting their currency, .or their loans. In those days, managers were frightened to see men enter their premises. They regarded them almost as burglars.’ That private banking corporations should stumble, falter, and cease exercising their functions at the first obstacle, is inevitable. We have not a real banking system in Australia. A banking system means a whole plan or scheme, consisting ‘of many parts, and united in such a manner that it produces an endless cable of indestructible mutual dependencies, supplied by a financial reservoir of inexhaustible power. Have our private banking corporations such a scheme or plan? Do they help each other when trouble comes? No. When difficulty arises, each scrambles to accumulate reserves, and to increase its own at the expense of the others. The same thing has happened in Australia. ‘The banks have to do this because of their isolated weakness. David H arum gave as the modern edition of the golden rule, “ Do unto other banks as you know they would do unto you, but do it fust.” This unnatural scramble for reserves will cease when we have a national postal banking system, which will be like the Bank of England, able to go into the market without competition. I would suggest that the other banks should keep their reserves with the national bank. I would also suggest that a national postal banking system, if exercising its proper functions, would enable the private banking corporations, should a crisis ever come, to take their best securities to it, have them re-discounted, and get cash to go on with. Had there been such a system here in 1893, run by the States, we should never have had the crisis which ruined thousands of people, and broke up the banks themselves. Are honorable members aware that a man can go to the remotest corner of France, and get an amount as low as $8, or 30s., discounted by the Bank of France, or its branches ? But what hope has the small man in Australia ? How can he carry on his small business ? He is hustling from Monday morning until 3 o’clock on Saturday afternoon trying to get together a little currency to keep his banking account going, and he is called in al the very time that he ought to be encouraged. It reminds us of our experience as children, when they used to shove us to bed in the evening when we were not sleepy, and pull us out in the morning when we were. When we have’ a national postal banking system in full operation in the Commonwealth, connected through the Post Offices, so that each branch will constitute a mutual dependency, each helping all, and all helping each, we shall never see another financial crisis in Australia, nor shall we ever again see the Commonwealth wanting £1,200,000, and not knowing where to get it. In England - and the reason 1 go back to England every time is that she is ever the same old country, slow in some things, but very swift in banking, and I must confess that in America we have no national banking ‘system - in England, then, the Bank of England holds the gold reserves of all the other .’banks, and of the Government of England. Those reserves are only a credit on the ledger of the Bank, of England. If any bank in any portion of England wants gold, that gold is withdrawn from the Bank of England, and after circulating in the course of trade and commerce, gets back to it. The only leakage in the reserves is for exportation, when the conditions of foreign ‘exchange are adverse. The whole of the management of the foreign exchange of England is delegated solely to the Bank of England. Give me a bank in this country like the Bank of England, and I shall be satis fied. The Bank of England is not a public bank in fact, although it is to all intents and purposes. It is managed with all the responsibilities of a public bank. It has great traditions behind it, and every man connected with it is proud of its position as the English bank. The Bank of England is not compelled to keep any reserves against deposits. There is no banking law in England, except that which makes the Bank of England hold a certain minimum reserve against its outstanding note issue. To all intents and purposes, the banks in England are as free as other joint corporations, except with regard to the minimum reserve that they must hold. The Bank Act of 1844 compelled them to name a minimum reserve requirement. This was expected to correct all the great financial evils of England ; to stop speculation, and prevent further bank failures. In fact, it was going to right all wrongs, but what happened? Within three years it produced every economic explosion that it was expected to prevent, including a national currency famine. When the legal mini- mum of the reserve was reached, the banks stopped discounting, and in 1847 the greatest crisis known in the history of England occurred. Business men walked the streets of London at midnight, trying to sell their commodities, but found no buyers. Consols and Exchequer bills were offered at any price, with no takers. Ex- travagant rates of interest were offered For money, but there was no one to take them up. Then the very Government which had procured the passage of the law ordered the banks to disregard the’ law, whereupon the Bank of England began discounting again, other banks followed suit, and in three days the crisis was- over. Producers and traders who had been clamouring for loans refused them when offered, and men who had withdrawn borrowed money, thinking that they ‘ were going to make a lot out of their fellowcitizens, returned it and begged the Banks to accept it and cancel the interest. That was in 1847. Again, in the great panic of 1857, the total aggregate gold reserve of the Bank of England and its branches was reduced to only £358,208. That meant the total aggregate gold reserve of all the banks of England, because the Bank of England held the reserves of all the other banks. After business hours on the 12th November, 1857, on a petition signed by tens of thousands of people, the Government allowed the Banks to disregard the law. The Bank of England started discounting, and in the remaining sixteen days of the month of November discounted £8,000,000 ‘ worth of English paper, in addition to. renewals. The other banks followed suit, and expanded their loans. That is to say, with £358,208 worth of gold reserves, the Bank of England in sixteen days expanded its loans or. its credits by £8,000,000, and destroyed the crisis that was brought on by the minimum reserve requirements of the law. Is not this something well worth deeply reflecting upon ? Yet honorable members say to me, “ We must have the gold.” The Bank of England, while discounting that £8,000,000, increased its gold reserve every day, and, at the end of the sixteen days, had over £1,000,000, instead of £358,000. That proves that a restrictive policy of banking is a dangerous policy, and brings thousands to ruin, and that the expansive policy of banking - not the policy of stopping as soon as people have their first trouble, and beginning to crush them, of winding their businesses up and sacrificing all that they have got - is the salvation of every country. If we had a national postal banking system operating through the post-offices, there would be no danger of people being crushed in that way. In the Australian banking crisis in the nineties, millions of the credit loans, or credit assets, or credit deposits, were wiped out in one or two days. It was done in fear, because the people had no confidence in the institutions. Millions of pounds were withdrawn as soon as the people could get it, and they rushed to the Savings Banks guaranteed by the State, because they had confidence in them.
– Why not embody the Belgian system?
– I went into the national banking system of Belgium, but I am not going to dictate to honorable members so long as they give me some system. I shall not be wedded to any particular system. The Bank of France will do rae. or give . me the Swiss system, or the Berlin system, where the bank is owned by private individuals, but is operated by the German Government, with officials representing the Government. When that terrible crisis overtook the people of Australia in 1893, those classes of property which possess intrinsic value, such as the homes that furnish shelter, the farms that produce food and raw materials, the manufacturing plants and buildings in connexion with trade and com merce, became practically of no value in the open market. Labour, the basis ,of all wealth, was in a state of semi- starvation. Those who invested their money in equities were utterly ruined, and hundreds of thousands of strong men and women were walking the streets of the great cities and the roads of the, country, with swags on their backs, looking for employment. It was hot then a question of drink, but a question of “ tucker.” What brought all this about but the want of a good banking system? Yet there was never a time during the whole crisis when all those houses would not have been occupied, and the factories turning out their products, if the workers had been in good employment. But the people were unable to purchase, and the great instruments of trade and commerce were rusty, and unable to revolve. This was all due to the absence of a good banking system ; and yet we were told it was caused by overproduction. Thousands were ready to consume ; men’s ribs were beating together with starvation, their backs were bare, and they were walking about with soleless boots ; and yet we never heard a suggestion of under -consumption. This was the result of unduly restricting the function of supplying the medium of exchange ; and there are no classes in the world so deeply interested in the establishment of a national banking system as the debtor classes and the workers. The creditor classes need not care ; according to the Honorable William Wynne, one of the greatest American statesmen, in consequence of the fall in prices and the rise in interest since 1873, the creditor classes have gained, at the expense of the debtor classes, £600,000,000 per annum in unearned increment throughout the world ; . and this the debtor classes have had to pay in addition to the principal and interest agreed on.
– That is why the debtor classes are always in slavery.
– Yes j and it is a more subtle slavery than that of the negroes in the South. Permanent wealth is produced by a slow and laborious process of industry, with skilful manipulation of capital ; while fog wealth is produced bv the rapid process of placing one piece of paper in ‘ the possession, of a fiduciary institution as collateral security for four or five other pieces of paper, which are well watered, and passed off to a credulous public. Some of this fog wealth will sooner or later collapse, and then there will be consternation in the Commonwealth. If we had a national postal banking system, which would enable us to maintain the legitimate credits of the Commonwealth, there never could be a return to the awful crises we went through a few years ago.
– We require a Federal banking law, in any case.
– I do not deny that ; but I am looking ahead to what will come. I regret that, in some instances, it seems impossible to get honorable members to investigate this’ question ; but I am glad there are a few who have risen high enough intellectually to look into it, in order to see what can be done. In Australia we have suffered from financial crisis after crisis. Thousands of people are poor to-day who a few years ago were well off ; and it was not they who caused the loss, but the institutions to which they had intrusted their money. In 1825, a Parliamentary. Commission in England proved that, in the panic of 1793, over 100 English banks failed, and that in the seven years from 1810 to 1817, 600 banks failed. In the panic of 1825, up to the time of the inquiry, twenty-six banks failed, and paid but a small percentage of their indebtedness. In the great panic of 1837-8, in America, more than 1,000 banks closed their doors - practically all the banks in the country. In the panic of 1856, every bank in America put up its shutters, and few of them ever resumed ; and, in 1893, most of the Australian banks got sleeping sickness, and suspended, pending reconstruction. In my opinion, a national postal bank, suitable to the people of the Commonwealth, should have its head office in the Post Office of the chief commercial city, with all the other post-offices as branches, thus constituting the head and the backbone of the system. This central bank should hold the reserves of all other banks, and those reserves should constitute a credit on the ledger of the national bank ; and under such an arrangement there never could be another crisis in the Commonwealth. The people of every village and town throughout the Commonwealth would enjoy, at a low rate of interest, the facilities of a strong sound national banking system. Farmers, producers, traders, and small business people could go to the bank in their own towns and villages, and, if they had security, could have their credit entered on the ledger, stick a cheque-book in their pocket and go about their business - they need not carry any money at all. If one bank in Australia had an account opened with every business man in the Commonwealth, the whole of the business of the country could be carried on without exchanging one penny of cash, because the banks are only clearing houses, clearing the business of the producers and traders byoffsetting the indebtedness. Banking is the fundamental essence of finance, and finance is a Government institution. Banks should be sympathetic co-workers with producers and traders. A banking system possessing the capacity to continue exercising the banking function during worldwide disturbances would make it impossible that we should ever have a crisis in Australia. A system with such potential powers, in connexion with the talent for production, trade, and commerce possessed by the Australian people, and with the boundless wealth surrounding Melbourne and Sydney, would eventually make those cities, instead of London, the chief exchange centres of the world, and make Australia, instead of England, the creditor nation. A creditor nation is not a matter of superior wealth, currency, capital, or geographical surroundings. Nobody claims that little England has more capital or more wealth than has the United States ; and it is all a matter of banking organization. Let me give an illustration that I have given several times before. Suppose that my friend, the Attorney-General, and myself had £50,000, and that we put up a sign advertising that the firm of O’Malley and Glynn were prepared to lend money. We could only lend until our actual capital ran out ; that is, when we had lent our £50,000, we should have to stop unless we had received back some of the loans. But if we exercised the banking function, with our capital of £50,000 we might draw interest on millions ; that is; we could lend a capital of millions, so long as people had confidence in us. I know one banking company in Australia that, with a paid-up capital of £2,500,000, has deposits amounting to £27,000,000 or £28,000,000, and is thus drawing interest on over ten times the capital. The firm of O’Malley and Glynn could thus carry on business, if they exercised the banking function, because we would exchange the fortified credits of our bank for the fructified indebtedness of our customers. At present, England, as I pointed out, is the banker of the world, and collects tribute from most of the nations of the earth in the way of interest, not for capital or for tlie use of money, but for the use of her fortified credits, lt is because of the unique position of the Bank of England as the leader of English finance that England is able to collect interest on millions of indebtedness from other nations. When a nation, a people, or an individual, is able to collect interest it is in a healthy state, and that is the position of England, lt is that which makes England the creditor nation, and London the exchange city of the world. How can a nation’’ like Australia, which has no national banking system, and which, if it desires an overdraft, must, like any private individual, obtain it from a banking corporation, compete in the open markets of the world with the producers and traders of a nation like England, which can afford to lend as much as she owes? It is not more capital, or more wealth, that we require to make this country a great financial centre. What we need is a thoroughly organized national banking system. The capital used in banking in England is far less than that used in America. In 1895, the paid-up capital of all the joint-stock banks of England, Scotland, and Wales, including the Bank of England, was only £70,000,000, while the’ capital of the National Banks of America, excluding the State banks, and the great trust companies, was £130,000,000. But, whereas the medium of exchange produced by the banks of England was £775,000,000, the national banks of the United States could issue a purchasing power of only £530,000,000. Owing to the leadership of the Bank of England the banks of Great Britain, with approximately one-half the capital of the national banks of the United States, produced double the amount of the medium of exchange. This is an illustration of the difference between the organization of the joint-stock banks of England, and that of the banks of the United States of America. That organization is wholly in favour of the English banks. We have been told by our greatest statesmen and philosophers, in days gone by, that the nation which controls the shipping of the world will control the trade and commerce of the world ; and, having secured the trade and commerce of the world, will command the wealth of the world, and, therefore, the world itself. A nation may own ships that sail on every sea ; it may have an army capable of carrying the symbol of its power to the loftiest peaks of the highest mountains ; it may have a navy strong enough to plant its flag on the remotest island of the oceans, and to keep it there ; but if it has not established a national financial system, whereby it is able to control its foreign exchanges, and to preserve a fairly low and uniform rate of interest at all times, it will never secure the trade and commerce’ of the world. It will never command the world itself, nar yet the wealth of the world, even though it flies its flag on every ship that sails on every sea. Trade and commerce does not follow the flag. That, after all, is a fallacy. It follows the fortified credits of the world, and the fortified credits of the world follow the lines of banking. Trade ‘ and commerce follow “ boodle.” They follow the bills of exchange and the time drafts of the world. Let me ask the wise men of the House, who believe that the fastening of a certain flag to the stern of many ships will change the mighty course of trade and commerce, at what price bankers in Boston, New York, Savannah, Mobile, New Orleans, Galveston, Vera Cruz, Rio Janeiro, Buenos Ayres, Monte Video, Birmingham, Edinburgh, London, Hong Kong, Hamburg, Rotterdam, St. Petersburg, or Frankfort, would purchase bills of exchange or time drafts on Melbourne, Sydney, Brisbane, Perth, Adelaide, Hobart, Launceston, Burnie, Zeehan, or Queenstown, against commodity consignments, if they believed that by the time those instruments reached those cities, for re-discount, the local rate of interest might be anywhere between 10 per cent, per annum and 3 per cent, per month? How would those foreign bankers re-imburse themselves the money they had laid out, by selling to merchants instruments on frightened Australian banks? Could they sell them to importers? The suggestion, is ridiculous. If honorable members had had a banking training, they would not object to the establishment of a national institution, in which foreigners would have confidence. What was the position of Australians who found themselves stranded in San Francisco with Australian letters of credit at a time when Australian banks had gone across the Jordan for a couple of months ? Their letters of credit were not worth a snap of a finger. What do my honorable friends opposite propose to do when the next great Australian financial crisis takes place?
– When will that be?
– I can see it coming. It will come, not immediately, but a few years hence. Will they ask the present Prime Minister, if he is in power, to issue a proclamation to all nations that a great financial crisis has taken place in Australia, that most of the banks have suspended payment, pending re-construction ; that those which have not suspended are so paralyzed by fear that they will be unable to do business for a few years, but that he hopes that the business people of Europe will continue to send their commodities to Australian merchants, and that they will make their drafts, or bills of exchange, on the Bank of Japan, which is a Government institution? A country becomes the chief market-place of the world in trade and commerce, not because a certain flag is fastened tothe stern of many ships, but because every banker, broker, and seller of exchanges in all parts of the world knows at all times, within 1 or 2 per cent, per annum, the intrinsic value of a draft or bill of exchange for re-discount at its banks. It is not its flag or its ships that causes a country to become the chief market-place of the world ; and I hope I shall drive that fallacy out of the minds of the people. The untrained, uneconomic man, who knows nothing of finance, is like a bob-bull in clover. He is always jumping from one thing to another when the bees are on him. A national postal banking system is absolutely essential to finance. It is the duty of the Commonwealth to help to decrease the great debt of the States, to use the national power for the benefit of the individual, to help those who go into the back-blocks - the strugglers of this great country - to save a little interest. To-day, the national public and private debt of Australia amounts to £600,060,000. If those Christian people who love Australia were to reduce the interest rate by 1 per cent., they would save the people of Australia £6,000,000 worth of produce, which must now be raised and sent to the markets of the world to be sold there to meet that liability. Were they to reduce it by 2 per cent, they would never miss the difference. They would have just as many meals, wear as many diamonds, go to as many theatres,, buy on time-payment as many motor cars, and run them on borrowed spirit. They would be as well off as they are now, and the Australian producers would save £12,000,000. But they will not do it. Yet they call themselves Christians, live in a Christian land, go to church, and say ‘ Amen ‘ ‘ in the right corner. I am sorry that our great Prime Minister has turned from Nationalism to parochialism. No words of mine will ever utter unkind thoughts of that great man, and I hope, with the prayers of the people, to bring him back to Nationalism. I remember when, like a mighty giant, he bore away on his broad shoulders the pillars of the temple reared with the errors and delusions of provincialism. Escaping himself, he left the provincialists overwhelmed amidst the ruins. I was proud of him then, and sent money from Kalgoorlie to Sydney to help Sir Edmund Barton during the first referendum. Afterwards the Prime Minister went to London, and when he returned, he handed back part of the sum which had been granted to him for expenses.
– He showed himself a great financier there.
– At any rate, he was careful. I thought, “ This is - not the Jefferson, because Jefferson was a State Rights man - but the George Washington of . Australia.”
– What does the honorable member think now?
– I do not think less of him, but I am sorry. I hope that some day he will return to Nationalism. At that time he erected for himself what I regarded as an enduring monument, testifying to . his belief in National financial supremacy. Inscribed on its marble were the words, “ Commonwealth union, one and inseparable, now and for ever.” It is with pain and regret that I have seen that great man fall from the lofty peaks of the mighty Himalaya of Nationalism away down among the flats of State Rights. I look upon the measure which it is proposed to introduce as a Bill of abominations. I do not blame the Prime Minister, but he has made a mistake. Hamilton and Washington were opposed by Jefferson, Madison, Mason, and all the southerners, who fought for State Rights. The compact which we are asked to confirm was framed in secrecy, in the caverns of darkness, in wilful ignorance of economic facts and National constitutional rights. It will be the crowning infamy of its sponsors. I believe that if ever it is put into the Constitution, it will sit, like the Old Man of the Sea in the Arabian Nights tale, on the necks of those responsible for it.
.- The debate - particularly some of the remarks of the last speaker - has shown the wisdom of the Conference in meeting in secret. Had its members tried to arrive at their conclusions while subjected to the advice and criticism of persons who thought they knew more about the matter than they did, no agreement would have been come to. The Premiers and the Commonwealth Ministers with whom they conferred were the elect of Australia. They met to make the best bargain possible in the interests of the whole people, and the result proves that they were the right men in the right place. I always thought that if the right men came together with the intention, not of fighting each other, but of promoting an amicable settlement, we should get the best possible financial proposals. The opposition to the agreement is based mainly on the fact that it was made during secret sittings. Many of the newspapers have voiced that criticism, because they felt that, by being prevented from reporting the proceedings, they were losing profitable reading matter. Some honorable members appear to be in mortal fear of what the newspapers say. Many of the newspapers wish to rule Australia. It must not be forgotten that, after all, a newspaper is merely a money-making concern. We have all of us read leading articles which must have been written by men ignorant of the real facts about which they were composed. On one occasion, when I pointed out to a gentleman who now holds a very high position on an Adelaide newspaper that his statement of facts was quite wrong, he said, “I am glad that I did not know it at the time, because then I should not have written so good an article.”- Within the last few weeks one of our largest newspapers told the people that the Braddon section would cease to have force at the end of 1910. The writer did not know then that it will be terminable at the will of this Parliament. There is a great difference between an agreement terminating on a certain date and one terminable, on that date. I consider that the financial scheme which has been put before us is the best that can be proposed. Little or no new matter has been introduced ir» the speeches upon it. The Prime Minister, in opening the debate, instanced New Zealand statistics to substantiate his statement that our Customs and Excise revenue would not decrease, and may increase as population grows. In my opinion, the increase of the New Zea land Customs and Excise revenue is due to her industrial legislation. According to the Prime Minister, it was, in 1899, 56s. per head of population, and had risen in 1907-8 to 70s. per head. The honorable member for Flinders said that the New Zealand Customs and Excise returns have been abnormally inflated within the last few years, and suggested that that might be accounted for by the expenditure . of loan money. In my opinion, experimental industrial legislation and the raising of wages has increased the cost of production. Thousands of men have been thrown out of work by the stoppage of industries, and have left New Zealand within the last twelve months or two years. The artificial conditions created by Acts of Parliament have injured, instead of helping, industries, until at last the people realized that they could not afford to buy New Zealand products, and began to buy imported goods. There is another inference to be drawn. We often hear that the working man has to pay the bulk of the Customs and Excise revenue; but if there are thousands out cf work, surely the working man is not paying it all ! . Thousands of people in New Zealand could not book their passages fast enough to get away, and yet at the same time the Customs revenue was increasing. Surely men who were leaving the State through want of employment, and, therefore, necessarily from the want of money, could not be paying that increased Customs and Excise revenue. I have here an article upon New Zealand Labour legislation, from which I should like to read extracts. It says -
More than ten years have passed since New Zealand gave the world a lead along the path of that particular form of class legislation which is nowadays styled labour and socialistic legislation….. It is argued, however, that such class legislation confers great benefits upon the working classes, and that it is thereby justified, no matter how expensive it may be to the community, seeing that the working classes largely outnumber all other sections of the community
– I rise to order. Is the honorable member in order in reading that document, seeing that it has no bearing on the subject now under discussion ?
– I understand that the honorable member is reading an extract from some publication, in order to show that the Customs revenue of New Zealand has risen from a certain cause. I think the honorable member is in order in doing so.
– The article continues- that in fact it must be in the long run beneficial to all, inasmuch as it makes for the greatest good to the’ greatest number. Such an argument is specious, but, unfortunately for those who use it, it is demonstrably untrue. New Zealand, as the first country to apply these legislative nostrums to the supposed maladies of industrialism, has naturally been the first to realize that they have not profited, and cannot profit, the very classes whose welfare they were designed to promote. Three years ago the late Mr. Seddon, after making the damaging admission “ that the industries of the colony had now more than they could carry, and that New Zealand’s trade was languishing and going back,” was also constrained .to confess that, in spite of all the labour legislation passed in New Zealand, “ the workers were no better off.” About the same time the Secretary of the Department of Labour in New Zealand showed in an official report that the workers were actually worse off than they had been ten years before.
– How does the honorable member connect this with the matter before the Chair?
– The argument has been used in this debate that we shall progress in the same ratio as New Zealand has done. I want to prove that New Zealand has not progressed at all, and that its progress, or want of progress, is altogether foreign- to the financial question with which v/e in Australia have to deal. I have only a little more to read -
Arbitration Court awards, he said, had considerably increased the wages paid to workmen, but at the same time the cost of all necessaries of life had increased in a still larger proportion. Again, only in June last, Mr. Campbell, of the Trades and Labour Council of Canterbury, told the Sydney Labour Council that the experiment of raising wages by legislation in New Zealand had been a failure. Better wages, and in some cases shorter hours, had been obtained, but the extra cost of living and increased rentals left the workers where they were before. In Australia, too, the cry is now constantly heard that workmen reap no benefit from their artificially increased wages, and this is regularly brought forward in Arbitration Courts as an argument for yet further increases.
That comes from the secretary of the biggest Labour organization in New Zealand, and yet, while I have been reading it, its accuracy has been questioned from the Opposition benches. I claim that the Customs revenue of New Zealand has been inflated through an excess of industrial legislation. The amount received per capita in _ Customs and Excise .revenue in the United States has been mentioned ; but I fail to see that that constitutes any argument. It has never been mentioned in this House that a big percentage of the 80,000,000 inhabitants of the United
States are coloured people. The per capita basis has been taken over the lot; but surely it would never be argued, even by the Opposition, that a coloured person pays as much to the revenue as a white person?
– Why not?
– That is foreign to anything I have heard the Opposition state before. I have never heard them say that a coloured man would be as good a citizen or pay as much in taxation as a white person. I understand that the coloured population of the United States is from ten to fourteen millions. That should satisfy honorable members that comparisons between our Customs and Excise revenue and those of other countries have really nothing to do with the financial proposition now before us. I think we must build up something purely on our own account to suit our own circumstances. We have a wealthy country, which is well worth looking after. The honorable member for Gippsland, when speaking on the AddressinReply, on 20th February, 1907, said, as reported in Hansard, vol. xxxvi., p. 30 -
There will be … . questions of magnitude . . and the necessary funds will have to be obtained either by the floating of loans….. or by increasing taxation.
He then recognised that the money required for schemes of magnitude, such as he now mentions, would, I presume, be raised by loan ; but, when speaking yesterday, he suggested that money would be required by the Commonwealth for such schemes as providing water for Tanami, and for goldfields in central Australia. That is a wildcat theory to put forward here as part of a financial scheme. I cannot imagine a map who poses as such an authority on everything, as the honorable member for Gippsland does, expecting any Commonwealth Government to make provision in their financial schemes for water for unknown or prospective gold-fields in central Australia.
– That was a good scheme in Western Australia.
– When the Western Australian scheme was carried out, the gold-fields were assured.
– Kalgoorlie was not known when it was begun.
– Surely the honorable member for Gippsland was not in earnest when he made that suggestion in regard to fields in central Australia, to which it is hard to take even a camel, to see if there is really any gold there. .We are not certain that the gold that was brought in came from any particular place. The.” find” might have been a “ storekeeper’s rush, ‘ ‘ or something - of that sort ; and yet one of the severest critics of the scheme put forward by the Government, asks the highest Parliament in the Commonwealth to consider a water scheme for central Australia ; and the Age has taken the honorable member seriously, and quoted him. I have had some experience in inland towns, and was”, at Coolgardie years before the water scheme was ever thought of. I drove up there before the railway was made, and I can assure the honorable member for Gwydir, who interjected just now, that Kalgoorlie had a population of over 20,000 people before the water scheme was thought of, and millions of pounds worth of gold had been produced, millions more were in sight, and large sums of money were being paid to condense fresh water from the saltest water known to the world, containing, as it did, 26 per cent, of solids. I should know, because I have built the condensers and done the condensing. The value of the Kalgoorlie mines was assured at that time, and people lived there for years before the scheme was completed. If there is gold in central Australia, the people will go there for it. They will not want to be bolstered up by the Commonwealth Government, or to be helped by any financial scheme. The honorable member for Gippsland evidently considers that the Government proposal for dealing with the financial relations of the States and the Commonwealth will ruin the Commonwealth ; and has revolution and disaster ‘depicted in his mind. He terms our scheme a shackle on the Commonwealth, and states that we have gone back upon the proposals of the Fusion. I claim that the scheme was carefully considered, and that the States accepted a smaller amount than many of us, and man) of the financiers of Australia, expected. We never thought that they would so quietly accept 25s. per capita. The Commonwealth Parliament stands in the same relation to the States as the directors of a company stand in to a company. We have the management of certain functions- intrusted to us. We were created by the States to carry out those functions, and it was never suggested that we should grab all the additional powers we could. The people trusted the Federation, and the State Parliaments are really our works managers. On them rests the responsibility of opening up this great country, and we must provide the necessary money. The development of a country like Australia is one of the big gest propositions on earth, because there is none that demands such pluck and energy, or will so well repay the efforts of those who are prepared to work and not merely talk. I know of no man willing to “goout back” and do something for himself who has not been successful; and, as a matter of fact, we do not yet know the possibilities of this country. We are possessed of all climates, and we have yet to learn the. extent of our mineral deposits and of the productiveness of the soil. When I first went to Western Australia, in 1893, it was thought that the agricultural area was confined to the neighbourhood of Northam and by the Great Southern Railway line; but now agriculturists, 120 or 150 miles east, are growing the finest crops in the .world. My own opinion is that in Western Australia this year, on what was regarded as desert ten or fifteen years ago, will be produced crops even finer than those in Canada. Certainly, the climatic conditions here are much superior to those in the Dominion, seeing that our lands are more easily cleared, and that, as the cattle have not to be housed during the winter, work can be carried on all the year round. These facts show that Australia stands in a better position than any other country in the world, although, if we listen to our critics, even in this House, it would seem that we ought to be fearful of the future. What is a payment of 25s. a head to the States? Personally, I would go so far as to offer even more than 25s. a head for every settler on land north of a certain parallel. In Western Australia, adjoining the Northern Territory, there is, as I am assured by surveyors who know, a plateau of some of the finest land,. teeming with wild-fowl, kangaroo, emu, and other game. -Surely this is a good indication of fertility, seeing that this game must relyon surface water; and yet we hear people talking about the arid regions of Australia. Both the Treasurer and myself have been in places popularly regarded as uninhabitable, but where hundreds of aborigines are living without trouble; and it will not be said that white people cannot make a living where black people can. We have all the latest modern appliances for boring and conserving water, and we ought to be able to manage this great country without the least fear concerning the satisfactory solution of a little financial problem such as that now before us. The transaction may be of a magnitude appalling to some people, but I feel sure that, on this side of the House at any rate, there is the business knowledge and ability of Australia, and some honorable members to whom the business must appear as- of an ordinary character. Since I arrived in Australia, Broken Hill, Mount Lyell, Mount Morgan, and Kalgoorlie have all been discovered, with the result that millions have been added- to the wealth of the country and, therefore, of the community. Where is there an6ther country in which such propositions have been found? The working men of Australia have had the same chance of discovering gold-fields as have the capitalists ; and, indeed, many of the prospectors and discoverers were working men.
– No one is finding fault with the country.
– But there seems to be a fear lest we should be unable to settle a little financial proposal. As yet, we have only touched the fringe of the fertile country, and there is room for fifty Kalgoorlies and Mount Morgans in parts which have not yet been explored. I am not conceited enough to think that we have as’ yet found the best, which may be a work for future centuries. Kalgoorlie was part of the desert when the Treasurer first explored the country, but it has produced £42,000,000 worth of gold, while Western Australia, as a whole, has produced £82,000,000 worth. At an agricultural dinner at Guildford, in 1894, I heard the Treasurer say that he expected Western Australia that year to produce £500,000 worth of gold, and a lot of old residents shook their heads in doubt ; but the honorable gentleman proved more than right. Most of the first gold found at Kalgoorlie was in alluvial form, and has gone to enrich the working men of the country ; and from that field alone over £18,000,000 have been paid in dividends, while the whole of the mining in the State has paid £20,000,000 in the short term of about fourteen years. , Why should we be afraid, or cry stinking fish? Have we not the pluck to face a little financial problem? As I said before, we, as yet, know little or nothing of the country ; the proposed railway to Western Australia is practically a coastal line. We have, also, a fine territory in the north, and, as time goes on, the people of Australia may become acclimatised and settle in that part of the Commonwealth. It is certainly going to be populated by white people, and will become a great and glorious country. Many of those honorable members who are criti cising this scheme; - and who are really depreciating Australia by doing so - have never travelled beyond the coastal fringe of the Continent. They have never been far away from a running stream of water. They stick to the home comforts. Yet we often hear them complaining. The men who have the pluck to go out back are not the growlers. The scheme submitted by the Government is approved of by those who are, I claim, the backbone of Australia. I have never heard a complaint about it from one individual in this country who is doing anything to build up our prosperity.
– The honorable member himself keeps pretty close to the coastal districts.
– The whole of my interests are in the backblocks, and I have lived there as much as I could. To substantiate what I have been saying with regard to the prosperity of Australia, let me quote a few figures. The Commonwealth Year-Book for 1908, at page 599, shows that the total trade of Australia, in 1892, was £92,130,183; in 1907, it had reached £124,633,280. Surely figures like those should cause honorable members not to be afraid to face a payment of 25s. -per capita from Customs and Excise. What right have we to assume that that rate of increase will not continue? The assumption is too ridiculous. Australia must go ahead. The last figures that I have quoted will be doubled in a few years, and I hope to live to see the day when that will be the case. The excess of our exports over imports, in 1907, as shown by the Year-Book, page 619, amounted to £18,007,467. Those figures leave out of consideration goods not produced in Australia. Our total exports were £72,824,247. Our total trade increased in five years by £30,000,000. What is the use of listening to people who are afraid - for the future of Australia when our prosperity is advancing at that rate. It is not the people who are talking who are creating this prosperity, but those who are at work ; and they are the people whom we want to help by returning 25s. per capita to the States. If these people are successful in their enterprises, the Commonwealth need have no fear of receiving plenty of revenue. I am pleased to see the honorable member for Robertson in his place, because I wish to pay a little attention to him. He made a wild attack on Western Australia. He asked why that State should receive special treatment. I claim that Western
Australia is entitled to special treatment, because our contribution to the Commonwealth taxation through Customs and Excise proves clearly “ that we are entitled to it. At page 804 of the Year-Book, it is shown that, in 1907-8, the Customs and Excise collected in New South Wales amounted to £2 17s. 7d. per capita. Deducting 25s. per capita, we find that New South Wales, under this scheme, would have contributed to the Commonwealth revenue £1 12s. 7d. per capita. The Customs and Excise revenue in Victoria amounted to £2 us. 6d. per capita; deduct £1 5s., and the per capita returned to the; Commonwealth would have been j£i 6s. 6d. per capita. In Queensland, £2 15s. 4d. per capita was collected; deduct 25s., and the Commonwealth would have received £1 10s. 4d. per capita. In South Australia, £2 us. 6d. per capita was collected; deduct 25s., and the Commonwealth would have received £1 6s. 6d. per capita. In Tasmania, £2 4s. 6d. per capita was collected; deduct 25s., and the Commonwealth would have received 19s. 6d. per capita. In Western Australia, however, the amount collected was £3 16s. 5d. per capita; deduct 25s., and the Commonwealth would have received £2 us. 5d. per capita. Those figures show that the average contribution of the four large States, New South Wales, Victoria, Queensland, . and Tasmania, to Customs and Excise would have been £1 9s. per capita, whereas Western Australia would have contributed £2 .ns. sd. That is to say, Western Australia would have contributed £1 2s. 5& more to the Commonwealth revenue than the average of the four principal States. The population of Western Australia is given in the Year-Book for 1907 as 261,563. Multiply £1 2s. sd. by the total population of Western Australia, and the amount is equal to £283,162. Western Australia is paying through Customs and Excise more per annum than the four wealthiest States of the Commonwealth, and that is why I think that the special allowance of £250,000 per annum is little enough. I desire now to show the honorable member for Robertson that Western Australia is of some value to the Eastern States. During the last fifteen years she has sent to the East through the money order office alone over £1,000 for every working day. It is a reasonable presumption that that money has been transmitted, not by’ the wealthy classes, since they would use the banks and other financial agencies, but by the humbler sections of the community. I’ desire now to deal with!another phase of this subject as it affects New South Wales and Western Australia. At page 161 of the Commonwealth Year-
Book, it is shown that the population of New South Wales in 1907 was 1,568,942, and I desire to prove to the honorable member for Robertson, who has expressed regret that it should be proposed under this agreement to make to Western Australia a special payment, that New South Wales has gained more from Federationthan has any other State. In the first clear year, after the establishment pf Federation, namely, in 1901-2, the New South Wales State revenue was £11,007,356, and in 1902-3 it amounted to £11,296,069, an increase of £288,713. In 1903-4 the State revenue as compared with that of the year 1901-2 had increased by, £240,972 ; in 1904-5 it had increased by £329,562 ; in 1905-6 it had increased by the enormous sum of £1,275,726; in 1906-7 the increase over that of 1901-2 was £2,385,079, and in 1907-8 it was no less than £2,953,407. In other words the total increase in the revenue of the State between 1901-2 and 1907-8 was £7,473,459. If we add to that amount the increased revenue which New South Wales received during the same period from the Commonwealth, amounting to £3,365,674, we have a total increase of £10,839,133. The honorable member for Robertson, in a good humoured way, sought to show that Western Australia should not receive the special treatment proposed, and I think therefore that these figures should be of special interest to him. Western Australia was the only State which entered the Federation with a surplus. New South Wales joined with a big deficit, but that deficit has been wiped out, and she has enjoyed an increased revenue since 1901-2 of £10,839,133. On the other hand) Western Australia’s surplus of £198,023 at the inception of the Federation has been turned into a deficit, which, in June last, amounted to £312,643. While New South Wales has been enjoying a splendid increase of revenue, Western Australia has accumulated this deficit, notwithstanding that she had the benefit of a special Tariff which, during the five years’ period, yielded £868,963. The population of Western Australia is about one-sixth that of New South Wales, and if her revenue had increased in the same proportion as did that of New South Wales, she should have gained over £1,500,000. The representatives of New South Wales should be the last to object to this scheme, which is intended, to benefit Australia as a whole. We must look for the development of the Commonwealth to those States which have not yet been fully opened up, and it is only fair that they should receive a little more than is given to th« States that are thickly; populated. A per capita return of 25s. per annum must be of more value to Victoria and New South Wales than to Western Australia or -Queensland, since it would go further in the execution of works in Melbourne and Sydney than_ in the backblocks. The cost “Of opening up a country is greater than is that of carrying out works in thickly populated States. The honorable member for Robertson recently expressed views which were quite contrary to those to which he gave utterance in this Chamber last night. Speaking on the 1 8th September, 1908 - honorable members will find the speech reported in Hansard, vol. xlvii., page. 180 - he said -
The railways and land should be taken over and controlled by the Commonwealth. ‘
– I think so still.
– The honorable member for Hume interjected, “ I do not think so,” but the honorable member for Robertson continued -
Unless we obtain control of them we must return to the States at least £9,000,000 per annum.
Why has the honorable member changed his view?
– I have not done so.
– Then the honorable member must still think that we should return to the States “ at least .£9,000,000 per annum.” Yet last night he objected to the proposal to return a little over- £5,500,000, on the ground that it was too much. We should be able to claim his vote in support of the scheme. The honorable member for Gippsland also expressed last night opinions contrary to those which he had formerly expressed. In 1907 the honorable member for Flinders spoke on the finances of Australia, and was followed by the honorable member for Gippsland. I remember that the. latter then stated that, in his view, the States should receive, not only three-fourths of the Customs and Excise revenue, but £500,000 in addition. I could not sleep until I had found the passage. The speech was delivered on the nth September, 1907, and is to be found in Hansard, vol. xxxviii., page 3120. He mentioned that- the honorable member for Flinders had referred to the Braddon blot. The honorable member - for Riverina interjected, “ The State Treasurers do not call it the Braddon blot now.” The honorable member for Gippsland then said -
It is to be regretted that Sir Edward Braddon is not alive to-day to receive the praises of the people who, in the first instance, so loudly condemned his proposal. In regard to the formulation of a scheme in substitution for the Braddon section of the Constitution, I admit that I favour the suggestion of the honorable member for Flinders. He holds that we ought to guarantee the annual return to the States of a fixed sum such as he conceives was in the minds of the framers of the Constitution - an amount equal to the interest payable upon the debts which were in existence at the time Federation was accomplished. Such amount represents about £500,000 in excess of their three-fourths of the present Customs revenue.
I do not know how the honorable member proposes that the Commonwealth shall raise enough revenue to make such payments.. He went on to say -
In my judgment there is a great deal of merit in that proposal. It would permit of all the State Treasurers knowing exactly what they were to receive from the Commonwealth, and it would render our finances independent of the finances of the States.
That is what we are trying to do.
– -We do not propose to offer the States anything like so much.
– No; because we cannot afford to do so. But the objection of the honorable member for Gippsland to the present scheme is that it would give the States too much. Honorable members know how much value to attach to the opinions of one who changes his mind in so short a space of time.
– Many on this side who are prepared to see the States fairly treated are not ready to make the agreement perpetual. The honorable member . for Gippsland might be willing to pay to the States more than 25s. per capita, but not under an arrangement which must endure for ever. . .
– Apparently he wished the Braddon section to be continued indefinitely.
– Yes. He made no qualification in that regard. If the States received from the Commonwealth threes fourths of the Customs and Excise revenue raised in 1907, plus £500,000, they would get £91356,905 ; whereas under the proposed scheme, to which their Premiers have agreed, they would get only £5,600,000, a difference of £3,746,000. That represents a saving which ought to convert even the honorable member for Gippsland. According to the Year-Book, page .710, at the present rate of increase in our population, it will be 1950 before we shall, have to return to the States, under the proposed agreement, the amount which the honorable member was prepared to return to them last year. Our population by 1950 will be something less than 8,000,000. Even if our revenue from Customs and Excise declines considerably, as some of the critics of this scheme predict, that fact will not affect the value of the money that is in Australia. Further, if the money be not collected in the form of Customs and Excise, it must be in the pockets of the people. We should never collect more revenue than we require, because, if we do, we shall impoverish our people. In spite of the criticism which has been levelled against the proposed agreement, I consider that the best has been done in the interests of all. Under that agreement, the people will simply pay over a certain sum annually to themselves. If I were to pay money from one pocket into another, my financial position would not /be affected. It is very- difficult to get some persons to understand the true position. In this connexion, I cannot do better than instance what happened to me when I paid a visit to Bendigo some four years ago. Having been accustomed to the labour-saving methods adopted in the Kalgoorlie mines, I was surprised to find that the fuel supplied, to the mines there was carted in. waggons which would ‘ not shoot up. As a result, a big able-bodied man had to be employed in putting the wood into stacks 10 feet high, and apparently his object was to see how little he could put into a stack. When I observed this, I inquired of the manager : “ Why do you not weigh the wood, and shoot it up?” He laughed; and replied: “The carting of the wood makes no difference to us. The man who supplies it is paying for that.” -I then asked: “Who is paying him?” The reply which I received was: “ You have me there. . I believe that we are paying him.” Similarly a lot of unnecessary fuss is being made in reference to the proposed agreement, but I think that, despite that fuss, the best has been done in the interests of the people of Australia. I trust that the motion will he agreed to, and that the Bill will be introduced and passed.
Debate (on motion, by Mr. Coon) adjourned.
House adjourned at 10.40 p.m.
Cite as: Australia, House of Representatives, Debates, 30 September 1909, viewed 22 October 2017, <http://historichansard.net/hofreps/1909/19090930_reps_3_52/>.