4th Parliament · 1st Session
Mr. Speaker took the chair at 3 p.m., Anr] read prayers.
SUPPLY BILL (No. 2.)
Sir JOHN QUICK presented a petition from certain subscribers to the Bendigo telephone exchange, praying the House to suspend the operation of regulation 7A until the condition of the telephone service has been further considered, and the re-, -commendations of the Postal Commission in regard to it have been placed before Parliament.
Petition received and read.
Similar petitions were presented by -
Mr. DEAKIN; from certain subscribers to the Ballarat exchange,
Mr. FAIRBAIRN, from certain subscribers to the Metropolitan exchanges, and others.
Mr. PALMER, from certain subscribers to the Shepparton exchange,
Mr. OZANNE, from certain subscribers to the Geelong exchange,
Mr. WISE, from certain subscribers to the Sale, Bairnsdale, Maffra, and Orbost exchanges,
Mr. PARKER MOLONEY, from certain subscribers to the Benalla, Dookie, Beechworth, and Wangaratta exchanges,
Mr. SCULLIN, from certain subscribers to the Camperdown, Colac, and Warrnambool exchanges.
Mr. BAMFORD. - I wish to know from the’ Minister of External Affairs if his attention has been drawn to a paragraph in last Saturday’s Age in .which Mr. Troy, a member of the Western Australian Parliament, complains of the Government of that State approaching this Government with respect to Asiatic labour for pearling, an industry employing 135 whites to 2,105 Asiatics, which in ten years has given the State only ,£6,863 in revenue? Mr. Troy remarked that he did not think’ that such an industry was worth having. Is the Minister aware that in Queensland the position is similar to that in Western Australia, the pearling industry there being almost wholly in the hands of Asiatics? What, if any, steps does the Government intend to take to place the industry on a White Australia basis?
Mr. BATCHELOR. - The honorable member for Herbert drew my attention to the paragraph which he has quoted. The conditions under which the pearling industry is carried on are the same in Queensland and Western’ Australian waters in so far that Asiatic labour is employed in both cases. But in - other respects there is a difference. It is possible, for instance, that the industry would continue to be carried on in Queensland waters if we refused to give permits to Asiatics to be employed in it; but I question whether it would continue to be carried on on the north-west coast of Australia if permits were refused. The whole matter is beset with considerable difficulty, and I may say that so Jar as the policy of the Government is concerned, we have under consideration the question whether it is possible to secure any improvement in the direction desired by the’ honorable member.
MISLEADING INFORMATION ON AUSTRALIA.
Mr. JOHN THOMSON.- I wish to ask the Minister of External Affairs if his attention has been called to the following cablegram from London, dated 5th of this month : -
Mr. T. A. Coghlan, the New South Wales Agent-General, has been employing his activities in examining the books dealing with Australian geography which are in use in the London County Council schools.
Forty books were examined, and Mr. Coghlan reports that the majority are misleading, and convey a very false impression. He says that it is almost useless to continue the press campaign to advertise Australia while school books are so defective.
Will the Minister, through his Department, take steps to correct these misrepresentations and see. that the young people in England who may later be desirable immigrants shall be given correct impressions of the geography and conditions of Australia ?
Mr. BATCHELOR. - The matter to which the honorable member refers occupied my attention only this morning in considering the preparation of an up-to-date map of Australia for supply to schools in the Old Country to give pupils more accurate information.
Mr. MATHEWS. - I ask the Minister of External Affairs, without notice, whether he has observed that it is not only in geographical and historical text books published in England that Australia is misrepresented, but that Conservative writers in Australia also misrepresent our conditions in the Old Country.
Mr. BATCHELOR. - If the honorable member will mention any specific case, I will undertake to make inquiries.
LABOUR MEMBERS AND OUTSIDE ORGANIZATIONS.
Mr. PALMER. - I wish to ask the Prime Minister, without notice, whether in view -of the pressure that is being brought to bear on Mr. Hannah, a member of the State Parliament of Victoria, to resign membership of the Political Labour Council, or retire from the Protectionist Association,’ similar pressure is brought to bear on members of this House who are members of the Labour party, to compel them to retire from organizations other than labour leagues ? ‘
Mr. FISHER. - Out of courtesy to the honorable member who asked the question, I invite him to inquire from each member of the party.
Mr. SINCLAIR. - I wish to ask the Minister of Trade and Customs, without notice, if he will furnish the House with st return giving the number and names of persons convicted under the Commerce Act since its inception, together with the amount of fines imposed ?
Mr. TUDOR. - I shall make inquiries on the subject, and if the return proves to be a light one, I shall comply with the honorable member’s request. But if its. preparation . involves any ‘ considerablelabour I’ shall ask the honorable member to move for it.
Mr. FULLER. - 1 direct the attention of the Prime Minister to the followingstatement, which appeared in the Sydney Morning Herald of last Thursday: - .
It is understood that the extension of the Federal Capital territory at Yass-Canberra for which the Commonwealth Government has applied to New South Wales will practically increase the site area from nco to about 1,000 square miles. The State Government has also been asked <> increase the grant of land at Jervis Day to about 10 square miles.
I ask the honorable gentleman whether any communication he has sent to the Premier of New South Wales justifies that statement ; and whether any action is being taken by him in the direction indicated?
Mr. FISHER.- I have not myself made any communication to the press regarding the matter. Communications are passing between the Commonwealth Government and the State Government .of New South Wales relating to the matters referred to. The negotiations are of-.- a friendly character, and there is no conflict of general policy on the subject.
Mi. FULLER. - Might I ask the Prime Minister whether the communications now going on between himself and the Premier of New South Wales, which, he says, are of a friendly character, deal with a proposed alteration of the schedule to the Seat of Government Art passed by this Parliament last session?
Mr. FISHER.- They involve the. clearing up of some doubt; and there is an intention, if possible, to secure for the Commonwealth the Molonglo catchment area. I am sure the honorable member knows all about it.
Mr. MATHEWS.- Has the Prime Minister received any letters lately from the Premier of New South Wales on the Capital Site question couched in the usual threatening terms of that gentleman?
Mr. Joseph Cook. - Will the Prime Minister help the honorable member to make a grievance?
Mr. FISHER. - I do not indulge in threatening letters myself, and I do not accept them from any one else.
– I wish to ask the Prime Minister whether he has anything to communicate to the House as to how far the preliminary steps referred to in His Excellency the Governor- General’s speech have progressed in connexion with the trans- Australian railway ?
– Such preliminary…sleps have been taken as every Government in similar circumstances would take, to ascertain how the work can best be carried out, and how it can be financed. The honorable member will hear something further on the subject later on.
– In view of the adverse opinion expressed by the Crown Solicitor of South Australia with regard to the route of the proposed Northern Territory railway, will the Prime Minister have die doubt removed before again submitting the Northern Territory Acceptance Bill to the House?
– I think I answered that question previously to the effect that I must take the advice of the Attorney-General on the question.
MINISTERS laid upon the table the following papers : -
Excise Act - Tobacco Regulation Amended (Provisional) No. 1 - Statutory Rules 1910, No.71.
Seamen’s Compensation Act - Provisional Regulations - Statutory Rules iqio, No. 70.
Defence Act - Military Forces -
Regulations Amended (Provisional) -
No. 71 - Statutory Rules 1910, No. 68.
No. 14 - Statutory Rules 1910, No. 69.
Financial and Allowance Regulations Amended (Provisional) - No. 98 - Statutory Rules 1910, ‘No. 67.
Post Office Clocks, Lighting - North Melbourne Post Office - Sale of Postage Stamps - Refreshment Allowances, Sydney - Letter Registration, Sydney Railway Station
– I notice in the press this morning that considerable expenditure has been incurred in increasing the effectiveness of the lighting of the Melbourne Post Office clock. Does that expenditure fall on the Post and Telegraph Department, and, if so, why is a distinction drawn between the clock in Melbourne and the post-office clock in other towns?
– The distinction between the Melbourne Post Office clock and other post-office clocks is that when the Commonwealth took over the post-offices, we undertook to maintain and keep lighted the clocks already in existence, but a rule was laid down that no more clocks should be provided or maintained at the expense of the Department.
– As the town clock at Hay was in existence in pre- Federation days, and an application has been made and declined for its effective lighting, will the Postmaster-General see that the Hay clock is put in the same position as the Melbourne clock?
– I shall be glad if the honorable member will give notice of that question.
– I wish to ask the Minister of Home Affairs, without notice, and with reference to my question of the nth August, in regard to the North Melbourne Post Office, whether he will state the present position in connexion with negotiations with the City Council ?
– The honorable member having notified me privately of his intention to ask this question, I have received the following report from the Director-General of Works, Colonel Owen -
I have looked at this building, and think it would be an advantage, from the Commonwealth point of view, if the portion in occupation for post and telegraphs be handed over to the municipal council. The rooms are not suitable for the purpose, and there is not any way of conveniently extending the post office. I consider the rent asked by the Council is excessive, “and, on the whole, advise that the Commonwealth should obtain the site and erect a post office on it.
– I wish to ask the Postmaster-General, without notice, whether he is aware that it is the practice at border post-offices to charge commission on the. sale of stamps of adjoining States. If I am correctly informed, will the honorable gentleman see that the practice is discontinued ?
– The practice of which the honorable member complains is followed not only in border post-offices, but in every post-office in the Commonwealth at which stamps of adjoining States are sold. I hope that on the1st January all these causes of complaint will be swept away.
asked the PostmasterGeneral, upon notice -
What sums of money were paid in the head office during last year for refreshment purposes to officers and employes in the following subdepartments : -
– The answers to the honorable member’s questions are as follow : -
asked the PostmasterGeneral, upon notice -
– The answers to the honorable member’s questions are as follow : -
asked the Minister of Trade and Customs, upon notice -
In view of the statement in the Age of Thursday last, headed “ Butter Export Trade- Hampering Shippers,” and the references therein to an official communication: - copies of which have been forwarded to butter exporters - from which it appears that, for the future a rigid observance of the letter of thelaw relating to the shipment of butter is to be insisted on; and in view of the statement made by Mr. Percy Wilkinson, Government Analyst, in 1904, published in the Age on 23rd June of that year- Will he have the analytical staff of his Department so perfected that there will be as little delay as possible, and the operations of shippers will be facilitated to the utmost?
– I have modified the regulation in question in cases, where, owing to late delivery of butter, the exporters are content to pay overtime charges for the services of the analyst when engaged after the usual office hours, and I propose also to arrange that, when desired by exporters, they may obtain and convey their sealed samples to the analyst. Every facility will be afforded to exporters, provided they comply with the reasonable requirements of the law, and we may avoid a repetition of the abuses occasioned by the shipment of butter prior to analysis. I may add that the Government Analyst, with further experience, has modified the opinions expressed by him in June, 1904.
asked the Minister of External Affairs, upon notice -
– The answers to the honorable member’s questions are as follow : -
– I move -
That the House, at its rising, adjourn until 10.30 o’clock a.m. to-morrow.
I do not think there will be any objection to this motion, which arises from the fact that the President of the Senate and Mr. Speaker are joining together to accord to honorable members the courtesy of asking them to dine in the evening. It is desirable that we should meet in the morning, and sit until, say, the evening dinner adjournment.
Question resolved in the affirmative.
– I move -
That this Bill be now read a second time.
I submit this motion with a feeling of hope’ that it will help to promote industrial progress, the social welfare of the people, and the safety of the Commonwealth. It is not a taxing measure, but one to give the Executive power to do certain things necessary to insure the payment of any lawful tax on unimproved land values which Parliament may in its wisdom from time to time impose. ‘ This is not the first time that this Bill has been before the House of Representatives. As some honorable members, at least, may remember, a similar measure was presented at the first sittings of the last session of the last Parliament; and I put the position mildly, when I say that that Bill had an exceedingly cool reception from a large majority of honorable members. The Government who dared to bring it forward were summarily dismissed for their temerity.
– The then Government were in a minority, and that is why they were dismissed.
– That was a time of sudden and great political changes of opinion, which by the operation of a wellknown law, caused some friction, and not a little heat. Since then an appeal has been made from the Parliament to the electors, in whose name alone we could come into this House, and pass laws for the good government of the people - with the result that one of the most notable political reverses known to history took place. Every seat in the Senate was won by candidates who supported the principle of this Bill. Every member of the Labour party who was in the last Parliament successfully appealed to his electors, and was triumphantly re-elected, whilst fifteen candidates supporting this policy captured seats from their opponents.
– Why revive these painful memories?
– That verdict of the people must be obeyed, and that is one reason why honorable members have to be reminded of it. I should like to do the Leader of the Opposition the justice of saying that I have never, to my knowledge, heard him denounce the principle of unimproved land value taxation in itself. I have read a number of eloquent speeches delivered by him during the Federal campaign, and at other times, and have found him always affirming the principle of unimproved land value taxation; but in this House he has qualified that affirmation by saying that the Federal Parliament, from his point of view, is not the most desirable one to impose it. Circumstances, however, have changed. He himself, if I correctly judge speeches made by him during the last Federal election campaign, pointed out that if the State Parliaments failed in their duty in this respect he was conscious of the determination of the people of Australia that it should be undertaken by the Commonwealth Parliament. If I can interpret his views correctly, it seems to me that, of recent years more particularly, the trend of his thoughts and convictions has been in the direction of asking the Federal Parliament to perform this necessary public duty in the interests of the whole of the people, and the protection of the general welfare of the Commonwealth.
– Does the honorable member think that that is a good argument to support his case?
– I do not wish either to quote or misquote any one for the sake of finding an argument to support my case. The principle of this Bill does not rest upon any argument that I might put forward. It has been affirmed, with one exception, by every State of the Commonwealth, and particularly by the Dominion of New Zealand. That being so, it cannot be said that the principle itself is at stake. As the right honorable member for Swan knows, his leader himself affirms it, and therefore it is only a question of how it may best be carried into effect. If we previously had any doubt as to the views of the Leader of the Opposition on this question, that doubt was entirely set aside during the course of the honorable member’s speech on the Address-in-Reply. In that speech, he really pointed out that the time had come when this duty had to be discharged by some one, and that this Parliament would have to undertake it. Further, by way of criticism of the Government’s inaction in this regard, he asked why this Bill was not made the first business of the Parliament. Obviously the first business of the Parliament had to be of another kind, for the financial measures were more pressing. The trend of the honorable member’s mind, however, is shown by the fact that he actually asked why the Government did not make this their first measure. I did not at that time - nor do I now - make any retort. It was not because of any fear as to the result that it was not given preference of all other Bills.
– Did the honorable member gather from the query to which he refers that the Opposition were anxious that he should bring forward this Bill, and pass it?
– That, at all events, was not my desire, nor do I think it was the desire of any other honorable member on this side.
– If -honorable members turn to the report of the Leader of the Opposition’s speech on the AddressinReply they Will find that he asked why this Bill was not proceeded with on the first opportunity. It is not my business, however, to arrange matters for- the Opposition ; if differing views are held by them, I am not responsible. It is hardly necessary to remind honorable members that practically the whole of the public estate is in the hands, and under the control, of the State Parliaments and Governments. That is an undeniable fact, and it is not for this Parliament to criticise in any way the manner in which the State Governments have carried out their functions. It is our obligation as the Parliament of the Commonwealth to guard the interests of the whole of the people, and if in the exercise of the powers given to us we are called upon to deal with this Bill, providing, as it does, for direct taxation - and, in my opinion, that power is specifically given to this Parliament- it is our public duty to do so. I, like many other honorable members, have been a member of a State Legislature, and those who have had a like experience will remember that, during the last twenty, and more particularly during the last ten, years, the State Governments have added to their Lands Departments a new branch. In other words, until some twenty years ago, the Lands Departments of the States were almost entirely engaged in disposing of the lands of the States to people who desired to obtain them in fee-simple. About twenty years ago, it was discovered by the statesmen of several States that, although the lands were largely in the possession of the people, or held under leasehold, the actual settlers1 were being dispossessed because of the monopoly of lands in the form of large estates. They then set up a department within a department. One set of officers dealt with the disposal of lands not yet sold, whilst others attended to the buying back of lands that had been sold. We find this anomaly in this young country of ours - that in nearly every State of the Commonwealth, a number of officers are engaged in disposing of Crown lands, whilst a number of others are engaged in valuing and buying back lands already sold by the State. The question is not what has been paid for the repurchase of these lands. What I want to bring home to myself and to honorable members is : Why should it have been necessary in a young country, so sparsely settled as this, for the State to recover for the use of its own people lands that were parted with only a few years before? The honorable member for Darling Downs will know that his own father, during his later career in the Queensland Parliament, was associated with me and others in fighting this question of the breaking up of some of the Darling Downs estates. Long before I came into existence, the late Mr. Groom had been fighting that battle, which to-day has still to be fought. I do not wish to traverse the domains of State action, but my trouble is tha’: the States have not ended their difficulty by repurchasing estates, breaking them up, and allowing them to be aggregated again.
– But the honorable member must admit that in the Darling Downs the breaking up of estates has been an immense aid to land settlement and progress
– The lands in the Darling Downs are pretty well broken up now, are they not?
– I think not. I do not want to go into details, but I may mention that in my own electorate - on the Burnett - more people have been settled on one bit of land along the Kilkivan-Kingaroy railway, in five years, than have been settled on ten times the area in the Darling Downs during the last twenty years.
– Still, the population of the Darling Downs has been trebled since the policy of breaking up estates was entered upon. The Prime Minister knows that.
– The population has certainly been increased, and all honour to those who took part in breaking up the estates. The honorable member is hardly old enough to remember, but he may have heard of the statement that used to be made by a distinguished representative in the Queensland Parliament about the Darling Downs, that the land there would never grow a cabbage. That, however, is another matter, and I do not intend to discuss it further, or I may be drawn aside into a general discussion of the land question, instead of simply explaining a measure containing machinery provisions to enable the Administration to collect taxation on the unimproved value of land. The same principle of breaking up large estates has been adopted in nearly every other State. In South Australia, from which some of our ablest representatives come, the Government has repurchased lands with the greatest advantage to settlement, as the honorable member for Angas will know. The same remark applies to the State in which ‘ we are meeting, although I believe that Victoria has been less successful in its repurchasing policy than have other States. New South Wales has been struggling with this question. My honorable friends from that State will recognise that that is the best term to use. In my opinion, New South Wales has not succeeded as she might have done.
– New South Wales has settled over five thousand families in about five years.
– I speak from what I . have read in the official papers. As far as I can make out, in New South Wales there are about ten times more people clamouring for small holdings than there are areas available upon which they can earn a living. The principal point to which I should like to invite the attention of honorable members regarding this policy of buying back estates is this : I have grave doubts whether it is desirable for the State Governments to become land agents for the re-purchase and re-sale of lands. This policy opens up a question of very grave difficulty, and a question of serious economic and political importance - as to whether gentlemen representing the public should use the public purse to go into the land market for the purpose of buying and re-selling, without making that necessary provision which would prevent not only monopolists, but boomsters from using the public credit and gaining personal advantage from the necessities of the people.
– The honorable gentleman is dealing with land policy now. and that is a matter which we cannot touch.
– I do not wish to dwell upon it, except to say this - the justification for this Bill is the necessity of the Government to have the machinery to enable them to impose any taxation they think desirable on the unimproved value of land. Incidentally I may express the opinion - it is a personal opinion, but it is an opinion that I believe every thinking man and woman in this country must hold - that the incidence and effect of unimproved land value taxation in every country where it has been applied, has been to make lands available on more reasonable terms for the people who desire to use them. If honorable members are in any doubt upon that point, they will be convinced if they look up the .official reports published in New Zealand, and even in some of our own States. This portion of my speech is in no way out of touch with the principle of the Bill.
– Have the conditions changed since last year, when the honorable member brought in the other Bill?
– I understand that the present season is a very good one. I hope that the conditions in Australia will never change except for the better. Regarding this measure and the lands over which we have taxing power, I think it is inadvisable for the National Parliament to shut its eyes to the facts of the case. Up to the present time there has been expended in the public interest ,£250,000,000, which has added to the value of the public estate. There has also been expended about £150,000,000 out of revenue derived from the sale of land. No less than £400,000,000 of public money has been so expended. In the meantime the public estate is being sold, and not only are future generations to be burdened with the payment of the principal and interest, but they are also to be deprived of their natural heritage. I hope that within a few years this Parliament will face this question in its broadest aspects, and see whether it cannot do something to prevent the unearned increment from falling into the hands of private persons, because, in my opinion, it belongs to the whole community. The Continent of Australia comprises practically 3,000,000 square miles. It is said that onethird of that area is practically in the temperate zone, that the rainfall is good, and’ that the greater part of the lands is passably good. Yet we find an exceedingly small number of persons settled on them. I have been over the semi-tropical and tropical portions in North- Eastern Australia. I know that while a great deal of that land is exceptionally good a large portion is passably good, with a fair rainfall.
– Very little of the land north of the tropic of Capricorn is alienated.
– The honorable member has got into his mind the idea that I am seeking to hit at somebody.
– Oh, no.
– I am not. I am dealing with a general principle. In all the settled parts of Australia the lands which are in private hands have been well chosen. It is no reflection upon our race to say that they know good land when they see it. It is not so much the area of land which has been alienated as the strategical points which have been secured which have caused the great difficulty in land settlement. But my theme at this moment is in another direction. I wish to indicate that not only have we a country containing good land and enjoying a fair rainfall, but that we have good land in latitudes which in other countries are practically unhabitable by white persons. We, in Australia, are fortunate in having one of the healthiest parts of the world, although it is in that zone. From time to time public men who have travelled through Australia have declared that it is almost marvellous that such is the case. It was reported in the press, only to-day, that Dr. Elkington, Chief Medical Officer in Queensland - a gentleman who used to be Chief Medical Officer in Tasmania, and who, above all persons, should be able to give an unbiased opinion - stated that he had just returned from the far North, where people were no weaker in stamina than those in the south of the continent, and where the youngest children were not suffering in anyway as the result of excessive heat. These remarks, of course, were made by Dr. Elkington in reply to Mr. Foster Fraser’s statement that Australianpeople were becoming decadent, and likely to become unfit to develop the country. My honorable friend, the member for Kalgoorlie, has reminded me that Dr. Elkington has recently been to Thursday Island, the most extreme north-eastern point which he could visit. From personal knowledge and statistics, I know that children born in our tropical parts have a better chance of life than have children born in the southern or temperate zones. - It all goes to show that this is a country which any native might reasonably be proud of, and which any body of men ought to be proud to become citizens of.. If, in carrying out the will of the people, we can bring these facts before the world, and do anything by our legislation and administration to induce persons living in. more densely populated countries to come here and throw in their lot with us, we shall do something worthy of this Parliament.
– The honorable member said that there are 700 applicants for one block of land now. How is he going toalter that?
– I did not say so.
– That statement was made by the honorable member for East Sydney.
– I should remedy that condition of things by having 700 blocksfor the 700 applicants. Honorable members are, of course, aware - indeed, alt men, whose opinions are worth having, de,plore the fact - that our towns have been, increasing in population at a greater ratio than the settlements in the country districts. In an exceedingly able and statesmanlike speech delivered by Mr. Watt, Treasurer of Victoria, in August last, when moving the second reading of -his Land Tax Bill, he pointed out that Victoria had during the last twenty-eight years, lost population by excess of emigration over immigration - that is, compared with the natural increase by excess of births over deaths. As regards the allotment of the increased population, amounting in all to 425,000, three-fifths, or 261,000, settled in the county of Bourke, that is, in and around Melbourne, a very startling fact, which gives us cause to be apprehensive of the future. In 1908-9, the population of New Zealand was 9.75 to the square mile, and that of the Commonwealth 1.47 to the square mile. In that year 37.2 per cent, of the inhabitants of New South Wales were living in Sydney; 43.2 per cent, of the inhabitants of Victoria in Melbourne ; 24.93per cent, of the inhabitants of Queensland in Brisbane; 44.52 per cent, of the inhabitants of South Australia in Adelaide ; 19.47 per cent, of the inhabitants of Western Australia in Perth; and 22.39per cent, of the inhabitants of Tasmania in Hobart. In other words, 36.35 per cent, of the total population of the Commonwealth was living in our six capital cities, while only 7.67 per cent, of the total population of New Zealand was living in Wellington.
– Why does the honorable member confine his comparison to Wellington?
– Wellington is not the largest city in New Zealand.
– I make the comparison with Wellington because it is the capital of the Dominion. In Germany, they are very careful to obtain correct statistical information, showing the relation of the population of the towns to that of the country, so that they may know what the trend of population is. We should take equal care to learn the exact facts regarding our population, so that we may draw right deductions. Of the total population of the Commonwealth in the year I speak of, 49.6 per cent, lived in towns having populations of 5,000 and upwards; 34.1 per cent, . in cities of 100,000 and upwards ; 8.3 per cent, in cities whose population was 20,000 but less than 100,000; 4.4 per cent, in cities whose population was 10,000 and less than 20,000, and 2.8 per cent, in cities with populations of 5,000 and under 10,000. Mr. Watt, in his statesmanlike utterance, gave a number of statistics which were very startling. According to him, in 1880 the agricultural holdings of Victoria numbered 47,050. Selection and alienation increased this number by 16,334, and closer settlement and re-purchase by 1,295, making it 04,679; but, because of the aggregation of estates, it was at the time he spoke only 56,065; that is, 8,614 estates had been swallowed up in the process of consolidation.
– Is the Government going to prevent that ?
– We must try to do so. We must co-operate with the States in the matter.
– Are the States cooperating with this Government in regard to the proposal under discussion?
– I hope so.
– In South Australia we tried, as far back as 1885, to prevent the aggregation of estates, and Mr. Mirams moved in that direction in Victoria.
– I know that the views of the honorable member for Angas on this subject are very broad. It is creditable to the people of South Australia that they dealt with this question a generation ago. Much of the prosperity of their State is due to their far-sighted land policy. They are not as greatly blessed with good land as are the people of some of the other States, but their policy has been a wise one, and they have benefited accordingly.
– Has not the use of fertilizers had something to do with the prosperity of the State?
– The engineer and the chemist now aid the agriculturist much more than was the case twenty years ago, and they will do so in a still larger degree in the near future. One of the captains of the American Fleet said, when at Albany, that the so-called sand-hills there would, when their nature was ascertained, be found to contain some of the most valuable land in Western Australia.
– That has already been proved to a large extent.
– I am glad to hear it. I have been over the country referred to, and had the opportunity to state, on the authority of an expert, that this so-called sandy, barren land would yet be as fruitful as much that is now thought to be better land.
– I hope that the Prime Minister will not create the impression that all the land of Western Australia is barren.
– It is too late in the day to reflect on the productiveness of the land of Western Australia.
– Or on that of any part of Australia.
– I do not say that. Had the honorable member been a member of a State Parliament when the renewal of leases was being asked for, he would have heard it stated that, in some localities, grass would not grow for periods of ten or fifteen years, though later, when such land was on the market, it might have been described as a Garden of Eden. Mr. Watt referred to the fact that during the period of which he was speaking, the railways of Victoria had been extended from a mileage of 1,052 to a mileage of 3,447 ; that is, the mileage had been nearly trebled, and he innocently expressed the opinion that that might have been expected to increase settlement, which, as a’ matter of fact, has decreased.
– The memorandum attached to the last Bill, which gives some facts of this nature, is not attached to the present Bill.
– I am sure that the AttorneyGeneral, who drafted it, is quite prepared to stand by it.
– It is not going to be reissued ?
– The elections are now over.
– If any honorable member desires it, the Government will see that the memorandum is re-issued; information such as it contains cannot be disseminated too widely.
– The fact that it has not again been published is not a repudiation of it? The Government have not abandoned it?
– Nothing could be better than the manner in which Mr. Watt put the facts with which he was dealing.
– He understood the question. Why was it taken out of his hands ?
– I hope that the honorable member will live to be capable of making a similar statesman-like utterance. I wish to read Mr. Watt’s remarks, because the Commonwealth Hansard circulates more widely than does that of the State, and what was said affects Commonwealth, as well as State, interests. Mr. Watt said-
The six States have sold up to within eighteen months ago 123,000,000 acres of land, and, strangely enough, they have got from the buyers ^123,000,000 in round figures, or an average of £1 per acre. Now, according to the very lowest calculation, which I shall have to deal with later on, the value of Victorian land, which represents only one-fifth of the quantity sold in
Australia, is much greater than the amount the States got for all the land that has been soldi since the British Government opened Australia. In other words, the figures may be put somewhat in this way : One hundred and twenty-three million pounds was the price paid for the whole of the land that has been sold in Australia; Victoria only represents one-fifth of that area, and yet her lands to-day are worth ^127,500,000 in unimproved value, or ^4,500,000 in excess of the price paid for the whole of the 123,000,000 acres sold in Australia.
Tt is perfectly clear from that statement that the unimproved value of land in Victoria amounted to ^4,500,000 in excess of the total amount received from the whole of the Crown lands alienated in the different States. I cannot pretend to be able to state the position more clearly and effectively than Mr. Watt has stated it in these remarks, and that is an additional reason for my quoting his observations dealing with Federal matters. But he went further in recommending his Bill to the Legislative Assembly of Victoria. ‘ He uttered a warning to the Legislative Assembly and to the Parliament. Hf? said in effect, “ Unless this Parliament is prepared to deal with a land settlement policy in some effective way, such as I have indicated in my Bill, I venture to say that another Parliament will be called upon to carry out that function of government. ;r I make no apology for the following further quotation from Mr. Watt’s speech, which will be found at page 859 of the Hansard of Victoria for 31st August, 1909. He said -
I say quite plainly that if the States of the Commonwealth do not make some attempt to gain population and to settle the large estates now practically untenanted, the Commonwealth will be justified in stepping in and doing the wor!: by direct taxation.
Nothing could be more omphalic and direct than that. Although Mr. Watt may have had in mind another Chamber of the State Parliament when he gave that warning to his own Parliament and the people of Victoria, that in no way affects the mandate this Parliament has to proceed with the settlement of this question. Honorable members are aware that notwithstanding that warning, the co- ordinate branch of the Legislature of Victoria put Mr. Watt’s measure on one side.. That is another reason why this Parliament should deal with the matter without further delay. There is a table which I should like to insert in my speech for the information of honorable members. It will be seen that it deals with the area of land in the Commonwealth alienated, in process of aliena- tion, under lease or licence, and unoccupied, and gives the percentage of the total area taken up. This is the table -
These figures will give honorable members some information as to how the lands of Australia are held at the present time, and will prevent the necessity of searching statistical records for the purpose of ascertaining the position. I have also the following information with respect to New South Wales-
During the period 1906-8 inclusive, large holdings in New South Wales(i.e., those of 1,000 acres and over) increased in extent at the rate of 1.3 per cent., and the smaller holdings at the rate of 5.8 per cent.
– The figures the honorable gentleman has given are of no use, because there are not 13,000,000 acres under agricultural settlement altogether in Australia. The figures quoted refer to different classes of land.
– That is quite true.
– One thousand acres is regarded as a very small area in some parts of New South Wales.
– I have this further information -
In Victoria, during the same period, the large holdings increased in extent at the rate of . 91 per cent., and the smaller at the rate of 2.4 per cent.
– Is the honorable gentleman speaking of freehold or leasehold land, or both?
– I am dealing With alienated land, and the figures are correct, but tor one slight adjustment which I shall explain later on.I speak from memory, but I think I am correct in saying that in New South Wales . 405 per cent, of the cultivated land is Crown lands.
– Does the honorable gentleman mean lands in process of alienation ?
– No; Crown lands held under lease; not land that has been alienated at all.
– And with no right of purchase?
– No; simply Crown lands. Honorable members acquainted with the position of affairs in New South Wales will know that a considerable area of river land is held under lease.
– Settlers often grow hay on leased land.
– Giving similar information for New Zealand, I find that -
The extent of large holdings of 1,000 acres and over decreased at the rate of . 4 per cent, during the period 1906-8 inclusive, while the small holdings increased at the rate of 5.3 per cent., pointing apparently to the influence of unimproved land value taxation.
That shows clearly the progress of land settlement in New Zealand since unimproved land value taxation was imposed there.
– How is it that the large holdings in New Zealand have not been broken up as rapidly as in Victoria if the land tax there has been a success?
– I was hoping that at least members of this House who represent Victorian constituencies would have read Mr. Watt’s speech in introducing his Land Tax Bill.
– I have read the speech, and have taken out the figures also. I shall be prepared to give them later on.
- Mr. Watt in his speech compared the development over a long term of years of New Zealand and Victoria, which are practically of the same area, and showed that the comparison was’ very unfavorable to Victoria.
– In what way?
– As regards increase of wealth, population, exports and imports, number of cattle and sheep, and everything that makes for wealth and prosperity from a national point of view.
– We can beat New Zealand in very nearly every respect.
– I give the following information with respect to land under cultivation -
In New South Wales the area under crop decreased from 2,840,235 acres for 1905-6 to 2,717,085 acres for 1908-9-
In Queensland there was a similar decrease from 566,589 acres for 1903-4 to 550,753 acres for 1906-7; and also to 535,900 acres” for 1908-9.
In South Australia the area under crop decreased from 2,369,680 acres for 1900-1 to 2,321,812 acres for 1908-9.
In Western Australia, however, the area of land under crop increased from 201,338 acres for 1900-1 to 586,489 acres for 1908-9.
The honorable member for Perth will no doubt be glad to note the figures for Western Australia.
– And we have only just started.
– I venture to say that honorable members are pleased to hear of abundant prosperity in any State. I am happy to be able to say that any report of the progress and prosperity of any part of .the Commonwealth has been received in this Parliament with the greatest pleasure by honorable members representing every portion of Australia. Perhaps it is not unfitting that I should here make one remark on this matter’ from a national point of view, and it is that I hope the time will soon pass when the various agents and Governments charged with the management of their own affairs will seek advantage for their own particular State at the expense of the good name of other States in the Commonwealth. I need not say more on the matter at this stage. I think the time has come when we should take a national rather than a provincial view of the affairs of Australia. Perhaps honorable members think that it is time I dealt with the provisions of the Bill, but I propose first of all to submit the following brief summary of information upon land taxation enacted or proposed : -
Commonwealth Proposals. - £5,000 exemption, then a graduated scale starting at id. ; £5,000 to £10,000 unimproved value, and rising by £d. up to 6d. on estates of £80,000 and above, with id. extra in all cases without exemption for absentees.
New South Wales. - Uniform rate of id. in £1 on unimproved value.
Victoria. - Uniform rate z£ per cent, on capital value, with 50 per cent, increase on absentees, but a Bill under consideration for a graduated tax on unimproved values starting at £d. in the £1 from £500 to £2,500, gradually rising until it amounts to 3d. on estates valued at £80,000 and upwards.
South Australia. - Graduated tax of £d. in £1 to £5,000, and id. above £5,000 on unimproved value - absentees 20 per cent, increase.
Western Australia. - Uniform id. in £1 On unimproved value of land not improved ; £d. in £/ on unimproved value of land where improved ; absentees 50 per cent, increase.
Tasmania. - Graduated tax of £d. in £1 on total capital value to £5,000, rising to id. in £1 on £80,000 and over.
New Zealand, - Uniform tax of id. in £1 on unimproved value, and additional graduated tax of 1-16th of id. £5,000 to £7,000, rising till it amounts to £2 10s. per cent, on estates over £200,000 ; absentees 50 per cent, increase.
These are the various taxing measures in existence and -proposed. In 1908-9 the tax collected in New Zealand yielded £604,900, and in the Common wealth*
States as follows : - ,
In 1904-5 the land tax collected in the Commonwealth was ,£599,554.
– Has the Prime Ministergot the amounts in the case of the municipalities where the rates are based on theunimproved value?
– I Have not all the amounts in connexion with local government taxation. In the case of Queensland thelocal taxation has been assessed on that basis since 1891.
– Can the Prime Minister give us the amounts collected in New Zealand?
– Yes. The following table will show the revenue derived from land taxation, and the total taxation, in theCommonwealth and New Zealand, in theyears 1901-2 and 1908-9-
I could, if I so desired, quote from official reports of New Zealand and other placesshowing that the effect of land taxation has not been to decrease employment or development and settlement, but really quite the reverse. I feel, however, that I am taking up too much time in this, perhaps, rather tedious introduction of the Bill.
– As the Prime Ministerdoes not appear to expect much revenue from this Bill, why not combine acreagewith value?
– I hope the honorable member is not under that delusion, because I do desire revenue, and I have never uttered a word to the contrary. Unimproved” value taxation is a sound principle, and. while the incidence will tend to break uplarge estates and help to develop the country from an economic point of view without any other embarrassing conditions, it is a- proper kind of taxation for the purpose nf raising Commonwealth revenue. Honorable members will see that the taxation applies not only to large estates, but to city and town areas, and, therefore, could not be justified alone on the ground of breaking up large estates. The object of the Bill is to provide machinery for a progressive tax on unimproved land values throughout the Commonwealth. Absentees will be penalized to the extent of a penny in the pound, with no exemption. Though the tax itself will be proposed in another’ Bill, it is well known what the intentions of the Government are, seeing that they were announced almost in their complete form at Gympie, and were discussed on every platform during the recent elections.
– Was the 6d. mentioned in the Gympie speech ?
– It was not.
– It was mentioned during ihe elections.
-At any rate, it is not disturbed.
– Fourpence was contemplated both in Mr. Watson’s scheme and in the Prime Minister’s scheme.
– I do not desire to involve Mr. Watson in any way with proposals made while he was out of the Commonwealth, because the responsibility rests entirely with the party now here. In clause 12 the following are exempt from the tax : - Charitable or public educational institutions, local or public authorities acting under a State Government, savings banks regulated by a State Act, religious bodies, public libraries, show grounds, public cemeteries, public gardens, recreation grounds, reserves and roads. Part IV. provides that returns are to lie furnished by taxpayers each year, and the Commissioner has power to make valuations, or obtain valuations made by a State, or authority under a State, and to make assessments. Clauses 24 to 26 deal with the ownership of land for taxation purposes as between owners of fret-holds and lessees, in order to prevent double taxation. Clauses 27 to 30 deal with mortgages, mortgagees, trustees, and equitable owners, and no deduction is allowed for mortgages, which are not liable, except in certain cases. Trustees are liable, hut are to he. jointly assessed for different beneficial holders. Owners of equitable estates or interest in land are liable to assessment, but legal owners are to be deemed the primary taxpayers, and -ihe equitable owners the secondary tax payers. It will be seen that there is not to be double taxation. By clause 51, married women are taxable, and husband and wife as joint owners of land owend by either. Cla.use 33 makes joint owners liable.
– What will be the position in regard to leaseholders?
– That is a matter which will be more properly dealt with by the Attorney-General from a legal point of view ; he, of course, will take a large part in the discussion in Committee, and I am sure that the legal members of the House will get every satisfaction from him. Clause 35 deals with land owned by companies, and clause 37 is important as providing for mutual life assurance societies and trustees for individuals, except in the case of land acquired under mortgageVarious provisions are made for the freeholder in a primary sense, the leaseholder in a’ secondary sense, and so on ; but on these points the Attorney-General will speak with more authority than myself. Part V. deals with appeals to the High Court against assessments by the Commissioner, and give the Justices power to make rules of Court regulating practice and procedure in relation to appeals, such rules to be gazetted and laid before Parliament. Part VI. gives the Commonwealth power te acquire land in the event of wilful undervaluation to evade taxation. For this purpose the Commissioner must apply to the High Court for a declaration, and upon such declaration the Commonwealth may acquire the land, subject to all leases, mortgages, and other charges, and compensate the owner. The State Government is to be notified of land acquired by the Commonwealth in this way, and if the State requires the land, it is to be conveyed, on payment of amount of compensation made to the owner, and all costs and expenses. If the State does not require the land, the Commonwealth may use or dispose of it. Part VII. deals with the collection and re-‘ coveryof the tax, which will be due and payable each year, on a date to be gazetted ; and, in default of payment, 10 per cent, will be added to the tax. The land tax is to be a first charge on land, and continues liable by any purchaser or holder, so long as it remains unpaid. This is provided for in clause 52. No charge is made against a bond fide purchaser, if due inquiry is made by him, and there is no notice of liability. Clause 55 makes the taxpayer, liable for any deficiency within three years; and by clause 56 the taxpayer is entitled to a refund of any amount paid in excess in the same period. According to Part VIII., a Commissioner, or an authorized officer is to have free access, at all times, to all lands, buildings, books, documents, registers of deeds, documents of title, and so forth, for the purpose of valuing, inspecting, or ascertaining ownership, and also to make extracts or copies if necessary. The Commissioner is empowered to call any personto attend and give evidence, verbally or in writing, on oath, and to produce books, and so forth. Under clause 62, the Commissioner may release a taxpayer, wholly or in part, in cases where it is shown to his satisfaction that the taxpayer has become bankrupt or insolvent, or suffered such loss that the exaction of the full amount of the tax would entail serious hardship. Penalties are provided in clause 63 for obstructing or hindering officers in discharge of their duties. For this particular offence the penalty is . £50. For refusing to attend and give evidence, or to produce books and documents, when required, or making false returns or false answers, there is, under clause 64, a penalty of£100. Then, according to clause 65, there is a penalty of £500 for understating the values of land, and, in addition, the offending taxpayer must pay an amount equal to treble the tax which would have been evaded if the understatement had been accepted. Where the value returned is less by 25 per cent., than the value as assessed by the Commissioner, this is deemed to be understatement with intent, unless the contrary is proved. For wilfully evading, or attempting to evade, assessment, the penalty is £500 and treble the amount evaded. For fraudulent evasion, lands may be forfeited by proclamation by the Governor-General. Clause 70 gives the usual power to make regulations. Of course, I may be asked what amount the Government expect to realize from this taxation. And, while that is not a matter which need be discussed on a machinery Bill, I may say that we anticipate receiving about £1,000,000 during the financial year, if the Bill passes.
– Will the tax be imposed as from 1st July last?
– Speaking from memory, I think that there is in the Bill a clause which provides that the tax shall be imposed as from 1st July.
– Retrospective legislation again.
– The right honorable member should be the last to say that.
– I say so deliberately.
– In nearly every case, legislation of this kind dates back from the beginning of the financial year in which it is passea.
-Nothat was not done in Western Australia. We began at the half-year.
– I reiterate my opening statement, that this Bill, if passed, as I think it will be passed, will lay down a foundation upon which we shall build legislation that will not victimize, or even seriously embarrass, large holders of land because they are large holders.
– Has the honorable gentleman incidentally mentioned the maximum rate to be imposed?
– I have.
– The tax is not retrospective, but the valuation is to date from the beginning of the financial year.
– In any case, I think it will be reasonable to start as from the beginning of the financial year. In answer to the honorable member for Ballarat, let me say that the maximum rate will be 6d. in the £1, and that that rate will not apply except to estates reaching up to the approximate value of £80,000. This Bill will lay the foundation of legislation which will not seriously interfere with large holders if they wish to continue as such. One of our great hopes is that it will convert the larger areas into smaller areas, and bring about closer settlement. The other is that it will help to raise the necessary revenue to enable the Commonwealth Government to carry on the great services with which they have been intrusted. Honorable members well know that, even if we derived from this tax £1,000,000 per annum, that amount will have been more thanswallowed up by defence expenditure this year. Provision has also to be made for the additional charge, which must, of course, be shared equitably, in respect of the increase in invalid and old-age pensions.
– Has the honorable member mentioned any rough estimate of the cost of administration and collection?
– I have not yet even a rough estimate that is worth putting before Parliament. I think that the cost will be exceedingly heavy ; but not so heavy as it would have been had the mea- sure been drafted in a different form. As the Attorney-General will point out, the Bill calls upon the people themselves to forward to the Commissioner their own valuations. That procedure will be subject to such gentle pressure as will be effective. In other words, my opinion, as a layman, subject to what the AttorneyGeneral may say, is that there is no compulsion, so long as the people do the work voluntarily. I have here an Imperial document, which I do not intend to quote, but which throws some light on the subject. The authorities of the States where land taxation measures were in operation were asked if holders had any difficulty in assessing the unimproved and improved value of their lands, and, speaking generally, according to this report, which was asked for by the Imperial Government, they have no serious difficulty.
– There is not the slightest difficulty in South Australia.
– We are glad to have that assurance from the honorable member.
– The difficulty of the Government will be due to the double taxation - that of the State and the Commonwealth - on the same lands.
– The burden of the statements in this Imperial report is that owners had little difficulty in stating the correct value of their land and improvements ; but that they had a tendency to place too large a value on the improvements. In the aggregate, however, they approximate to the actual value of the land and improvements for reasonable sale purposes. I have spoken far longer than I had anticipated, and I feel that I have delayed honorable members far roo long.
– This is a great subject.
– 1 agree with the honorable member that it is. The principle of the Bill, however, has been settled not only by a party, but by the country. Thai being so, the principle itself is beyond any serious controversy in this House. The only question relates to what is the best way to apply the policy that has been indorsed by the country. 1 repeat that it is well for us, as members of this Parliament, to remember that we are here, not because we are called “ Bill Sykes,” or “ John Smith,’’ but in the name of the electorates that we represent, and in their name alone can we speak. Since the vast majority in both Houses of this Parliament have been returned directly pledged by the electors to give effect to their own views in this direction, there is room, not for excessively lengthy, but merely for reasonable, discussion, and the only question in respect of which we may expectany controversy relates to the method by which the principle itself may best be applied.
Debate (on motion by Mr. Deakin) adjourned.
Debate resumed from 12th August (vide page 1530), on motion by Mr. Fishes -
That this Bill be now read a second time.
– The strong opinion I hold as to the unreasonableness of this Bill, and the scheme that it proposes to bring into operation, is my only excuse for making anything like an extended criticism of it. When the debate was adjourned on Friday last, I had completed a summary of historical cases derived from various countries in which experiments of a Government or a State note issue had been tried and found wanting, and had resulted in bitter experiences to the people, and national disasters to the communities which indulged in them. Those disastrous results were felt, not only in monarchical kingdoms on the Continent of Europe, but also in the Democracies of the West, and particularly in the thirteen original colonies of America. The experience of those thirteen original colonies, coupled also with that recorded in the history of the United States of America during the Civil War, affords much stronger proofs of the unwisdom of a paper currency than does the experience of other countries of non-British origin.
– Was their paper currency issued on the same basis as that of the Commonwealth will be?
– Substantially the same basis - the credit of the nation. My deep convictions on this subject originated in my studies of the state of those American, colonies before federation. The conflicts of State laws, and the disastrous results of paper money in those original States, were among the strong contributing causes to the establishment of the American Union, in which there were distinct prohibitions against the issue of paper money by the States, and an absence of anything like federal authority. I should like to refer to the dismal record, not only in John Fiske’s Critical Periods of American History, from which I made one quotation last week, but also in Bancroft’s famous History of the Constitution of the United Stales. In volume i, page 234, of that great work, Mr. Bancroft says that -
In the conflict, the arguments against paper money were stated so fully and so strongly that later writers on political economy have added nothing to the practical wisdom of the thoughtful men of that day.
I should certainly be prepared to give greater weight to the conclusions, studies, and results of historical experience, as expressed by Mr. Bancroft, than I would to many of the so-called illustrious and distinguished philosophers. History, when we come into close quarters with it, is capable of affording us a more valuable guide and warning than are the speculations of philosophers. At page 240, Mr. Bancroft says that during that struggle and controversy, “ the mind of the country bent itself with all its energy to root out the evils of paper money.” The people found that -
Paper money drives specie away ; that every new issue hastens its disappearance, destroying credit and creating a famine of money ; that every penalty for the refusal to accept paper money at par lowers its worth, and that the heavier .the penalty the more sure is the decline. They saw the deathblow that is given to credit, when confidence, which must be voluntary, is commanded by force. They saw that the use of paper money robs industry, frugality and honesty of their natural rights, in behalf of spendthrifts and adventurers.
Then again, in volume 2, page 135, Mr. Bancroft states that -
History cannot name a man who has gained enduring honour by causing the issue of paper money. Wherever such paper has been employed, it has in every case thrown upon its authors the burden of exculpation under the plea of pressing necessity. Paper money has no hold, and from its very nature can acquire no hold, on the conscience or affections of the people. It impairs all ‘ certainty of possession, and taxes none 50 heavily as the class who earn their scant possession by daily labour. It injures the husbandman by a twofold diminution of the exchangeable value of his harvest. It is the favourite of those who seek gain without willingness to toil ; it is the deadly foe of industry. No powerful political party ever permanently rested for support on the theory that it is wise and right. No statesman has been thought well of by his kind in a succeeding generation for having been its promoter.
In a footnote to that paragraph Bancroft writes -
This paragraph is a very feeble abstract of the avowed convictions of the great statesmen and jurists who made the Constitution. Their words are homely and direct condemnation ; and they come not from one party. Richard Henry Lee is as strong in his denunciation as Washington, Sherman, or Robert R. Livingston. William Paterson, of New Jersey, wrote in 1786 as follows : - “ An increase of paper money, especi-ally if it be a tender, will destroy what little credit is left; will bewilder conscience in the mazes of dishonest speculations; will allure some and constrain others into the perpetration nf knavish tricks; will turn vice into a legal virtue ; and sanctify iniquity by law.”
Those passages were written by a grave and thoughtful historian concerning the American experience.
– They are utterly absurd, as applying to this proposal.
– They are not. The paper money upon which this condemnation was passed was issued upon the faith and confidence of the whole community.
– What sort of paper money? We are proposing to issue paper money with a gold backing.
– I admit that it is a question of argument as to what would be a necessary safeguard and gold backing for the notes issued. But, at any rate, these notes were issued upon the confidence and security of what were then practically sovereign colonies, . which afterwards became. States of the Union. Yet these semisovereign colonies were not able to maintain the security of their notes which went forth into the community, and which led to such ruinous and distressing results. I will endeavour to distinguish, as far as I can, between the cases covered by those extracts and the provisions of the Bill before us. But I should like, at this stage, to deal with the justification founded upon alleged modern precedents derived from the Dominion of Canada and the State of Queensland. I remember that this agitation for paper money in connexion with Federal politics began with appreciation of the Canadian note scheme. But the Dominion note scheme has not been copied in the scheme under consideration. An entirely different scheme has been embodied in this Bill. Let us see, by a brief examination of the Dominion note scheme, how far it affords any reliable precedent or justification of this Bill. Under the Canadian note scheme, provision is made that Dominion notes may be issued to any amount, and that they shall be legal tender. Secondly, security for the redemption of the notes up to 30,000,000 dollars, equal to 25 per cent., in gold and Canadian bonds, is provided by the Government. Then the Dominion notes are brought into circulation in a peculiar way - through the agency of the banks. Provision is made that the issue and redemption of notes is to be carried out at branch offices at Toronto, Montreal, Halifax, St. John, Winnipeg, Victoria, and Charlottetown, or arrangements may be made with the chartered banks for such redemption. The question arises : How did the Government of Canada induce the private banks to take charge of the Dominion note currency? It is quite plain that some mandatory or coercive provision had to be devised to induce them to take paper currency issued by the Government and place it in the hands of the public. The Government could not have secured its purpose without the intervention of banking agencies or organizations. Accordingly, a section was inserted in the Act providing that chartered banks should hold not less than 40 per cent, of their cash reserves in Dominion notes ; and arrangements were made for the delivery of the notes to any bank in exchange for equivalent specie. That was a peculiar arrangement - a real stroke of genius - on the part of the Canadian Government, which, by so doing, withdrew the dollars that were held in reserve in the vaults of the chartered banks to meet their liabilities with their depositors and noteholders, and placed them in the custody of the Dominion. So that, instead of the banks holding 40 per cent, in dollars, the Government gave them Dominion notes; and these Dominion notes were to be held to be as good as gold for the purpose of security to the customers of the banks. The banks did not suffer pecuniarily by that transfer. They were not deprived of any of their assets, because they were allowed to substitute Dominion notes for dollars. Meanwhile, the Dominion Government had the advantage of the possession of 40 per cent, of gold in their Treasury, and were able to utilize this money for their own purposes. That is entirely different from this proposal, as I shall show presently. Then, as another means of placing the Dominion notes in circulation among the people of Canada, a section was introduced to the effect that any chartered bank, when making any payment, was, at the request of persons requiring payment, to pay the sum- that is, the whole sum, or part thereof not exceeding 100 dollars - in Dominion notes of the -value of one, two, or four dollars each, at the request of such person. Those were two methods by which the Parliament of Canada launched the Dominion note scheme. I apprehend that section 72 of the Canadian Bank Act which I have just summarized, has been introduced into this Bill by the Prime Minister for the same or a similar purpose. The result has been in Canada that a large number of Dominion notes have been issued from time to time. I believe that at the present time there are no less than £17,000,000 in Dominion notes outstanding. Of that sum between £14,000,000 or £15,000,000 are held by the banks under the 40 per cent, reserve condition, but only about £3,000,000 are actually in circulation among the public of Canada. The exact figures have been supplied to me by Mr. Knibbs, in a communication dated 30th April of this year. I will quote them. They are : Dominion legal tender notes, held by the banks, £^4,872, 7°i : in circulation, £3,023,699; chartered bank notes in circulation, £15,867,761. So that, notwithstanding the fact that Dominion notes are legal tender, and have been issued under the authority of the Canadian law, notwithstanding the fact that the banks are compelled to hand Dominion notes over the counter upon the demand of any customer, they are only in circulation among the people to the extent of £3,000,000 sterling, whereas the chartered banks have in circulation notes to the amount of over £15,000,000.
– Is there any tax on private notes in Canada?
– There is no tax under the Dominion law on the private circulation of the banks. That, undoubtedly, is a very important fact. But what I wish to draw attention to is this : Here, on the one hand, are Dominion notes backed up by all the resources of the Government of Canada, by the public credit, the taxation power, and the property and strength of the community, yet with all these securities the public have only accepted across the counters of the banks, and through the various channels of circulation, notes to the amount of £3,000.000 odd; whereas chartered bank notes which are not so backed up by the public credit, but only by the securities of the banks, are in circulation to the extent of nearly £16,000,000 sterling. It is the opinion, however, of many Canadian banking experts, that the stipulation of the Bank Act that 40 per cent, of the cash reserves of the banks shall be held in Dominion notes, is a serious blot upon the Canadian currency system. I could quote authorities adversely criticising the system. But I am not here to denounce the Canadian system. I wish merely to draw attention to the difference between the Dominion note system and the proposed system under consideration. The Dominion notes circulate concurrently with the notes of the chartered banks. The Dominion notes are not intended or designed to drive out of the market, so to speak, the notes of the chartered banks. There is a competition between the two kinds of securities, consequently we are enabled to see which class of security or notes the public prefer.
– The facts show which notes the banks prefer to put out.
– But the public have a right to demand Dominion notes over the counters of the banks.
– - I have had both.
– Dominion notes are regarded as no better than the notes of the chartered banks.
– They are both good.
– They are both good; and evidently the Dominion note has not been used for the purpose of establishing a Government note issue in order to monopolize the whole paper currency, but merely for the purpose of withdrawing the 40 per cent, of gold reserve from the vaults of the banks, and placing this money in the control of the Dominion Government, who may utilize it as they think fit. There may be some arguments, and strong arguments, too, in favour of that system. At any rate, there are many persons whose views and sympathies are in the direction of those of the Government and the Labour party, who prefer the Canadian system as a ready means of raising money for the : use of the Government to the scheme embodied in this Bill. I submit that whatever its merits or advantages may be from th.p. Ministerial point of view, this Bill cannot derive any substantial argument in support of it from the Dominion note ‘system. I now come to the second precedent which it is alleged affords support in favour of this scheme. It is said that it is founded on the Queensland Bank Note Act. It is claimed to be founded on the precedent which was established in Queensland in 1893, and which is still in force. I should like honorable members to note the difference between the Queensland system and that which is embodied in the Bill. The former is limited, to a certain extent, and the safeguard of 25 per cent. of gold backing is included within the four corners of the Act, but it was not formulated adversely to the banks. It vas brought into operation as an assistance and a relief to the banks. At that time the banks were, no doubt, in a very precarious condition, it may be, through injudicious management of inherent difficulties, or imperfections of organization. At any rate, the banks had got into difficulties, and the Government decided to come to their aid. They found that the best way to come to their aid, without wiping them out, was in the form of the scheme embodied in this Bill. The readiness with which the Queensland banks acquiesced in the scheme and assisted in bringing it into operation showed that they did not view it as having been launched adversely to their interests, or intended to obliterate them.
– The Government had to come to their assistance.
– Yes, but that was because of a peculiar stress of circumstances. At that time there was a struggle amongst the creditors of the banks as to who should share in the distribution of the assets. Unfortunately, according to the law of the day, the holders of bank notes had no priority or preference in the distribution of the assets, and it was a struggle for life on the part of note-holders. That was owing to the fault of the Queensland Parliament in not having made provision for the protection of bank note-holders, as provision has since been made by the Legislature of every State. At the time the scheme came to the assistance of the banks in Queensland, and it has worked since with their concurrence. But it is very different from this scheme in its relations to the banks. I experienced some difficulty in finding out the law and the practice, and, therefore, I sent yesterday a telegram to the Premier of Queensland. To-day I received a reply, which, I think, illustrates and explains the nature of the Queensland scheme. It reads as follows : -
Re Treasury notes when first issued, opportunity was given to banks to obtain notes to a limited amount based on their respective previous note circulation, on payment of one-third in gold, the balance being treated as fixed deposit bearing interest at 2 per cent. This was by agreement with the Treasury, not under any regulation, and only the three banks having head offices in Queensland availed themselves of the arrangement.
It would seem, therefore, that the State notes were not mandatorily imposed or en-. forced on the banks. An inducement was held out to the banks to take the notes and to utilize them for the purposes of circulation. The Government considered what was the average of paper in circulation, and decided, apparently, that they would only insist on the banks paying for the notes handed over to them to be placed in circulation to the amount of one-third in gold. The whole of the issue was not to be paid in gold, as provided in this Bill, but only one-third of the issue was to be handed over to the banks to be paid for in gold. The rest of the issue is taken over by the banks as a deposit, as though the Government were lending the money to them. It is treated as gold, and the banks pay interest to the Government to the small extent of 2 per cent., by agreement.
– It is treated as gold because it has Government credit behind it.
– Yes, the banks, in the meantime, have the distinct advantage of borrowing money from the Government at the small interest of 2 per cent.
– They will not use the notes.
– Apparently, the banks will not use the notes. They have got them cheaply enough.
– They will not use them.
– What the honorable member means, I suppose, is that the public do not use the notes.
– No; if a man wants notes, he must specially ask for them.
– At any rate, in Queensland the banks get notes equivalent to gold. That is a distinct gain to the banks. It is no wonder that they have shown no hostility to the scheme, because they get the money at 2 per cent., and place it in circulation, and, by so doing, of course, to a very large extent, co-operate with the Government in placing the State note issue on the market. There seems to be a reciprocity of advantage between the banks and the Government. In my telegram to the Premier of the State, I asked him to tell me the profits of the bank note issue, and in reply he said -
Profit about twenty-five thousand per annum derived from interest on notes so advanced and “interest on surplus gold invested in Government securities, less administration expenses, which amount to about two thousand eight hundred per annum. Average circulation about one and a-half million, issue last year for gold three hundred and seventeen thousand ; gross issue, including exchanges, seven hundred and seventy thousand.
That, I suppose, leaves a profit of a little over £22,200 on the issue, after paying expenses. The Queensland Act contains no section similar to the one in the Canadian Act which I read, making it mandatory on the banks to pay the State notes over the counter on demand. That is left optional. It is another concession to the banks. It is another reason, no doubt, why they cooperate with the Government to help to make the note issue a success as far as they possibly can, consistent with their own interests and the* Government’s. The banks ought to have the right, if they have any sovereigns in their coffers, to pay their customers in gold. Why should they be compelled to pay notes merely because such are demanded? They may be demanded for public convenience, I admit. If notes were demanded for public convenience, no doubt the banks would be quite willing to pay for notes to meet public convenience in the future as in the past. But the section which I referred to, and which is repeated in this Bill, makes it an obligation on the part of the banks, whenever a demand is made by -a customer, to pay over State notes, whether they may be accidentally short of them or not. Although the banks may be prepared to give gold and make other provision for the accommodation of the public, yet it is made in this Bill, as in the Canadian Act, a penal offence on the part of the banks if they neglect or refuse to pay notes across the counter on demand. I fail to see why it has been found necessary to include in the Commonwealth Bill a penal provision which is not contained in the Queensland Act. The Queensland note system is said to have worked successfully. It has resulted in the issue of a million and a half of State notes on the money market, and it has not been found to work adversely to the interests of the note issuer. Therefore, I think that there ought to be some explanation of the inclusion of this clause, which I am told will, if enacted, operate most adversely and most inconveniently to the various banks of Australia. It may operate on them very prejudicially by compelling them to keep large issues, not in order to meet average public requirements, but merely because some stray customer may come in and demand a certain number of notes. It is one of the most oppressive and burdensome clauses in the Bill. Certainly - and I assume it is not put there for the purpose of worrying and oppressing the banks - it ought to be modified before the scheme is sanctioned. Let me now point out some of the difficulties and expenses of a State note issue. According to the telegram which I read, the bank note issue of Queensland costs no less than £2,800 a year, worked in connexion with a public, Department. As the result of my inquiries, I am of opinion that a Government Department cannot manage a note issue as successfully or economically as the banks. No Government has the equipment, nor have Government officers the knowledge of trade requirements possessed by the banking institutions and those controlling them. Some bankers are of the opinion that the administration of the Commonwealth note issue will cost not less than 10 per cent, per annum on- the value of the notes in circulation, without taking into account the outlay on paper, engraving, and other expenses. It is thought by some that the cost of paper and engraving will be not less than 4s. per cent., or £8,000 a year on a circulation of £4,000,000, while others put the cost at 3s. per cent. It has been estimated that with a note circulation of £4,000,000, and a gold reserve of £1,000,000, the Government would gain, allowing 3 per cent, interest, £90,000 a year, but, according to competent judges, the cost of paper, engraving, outfit, safes, strong-rooms, books, clerical assistance, Sec., would in the first year amount to £16,100. One correspondent informs me that at the lowest estimate the expense would be £1.0.000, without taking into account the cost of strong-rooms, safes, stationery, and the especially careful supervision that would be needed. If the Government gained £90,000 by the issue of £4,000,000 notes, with a £1,000,000 reserve of gold, and the cost of controlling the issue was £16,100 for the first year, the net gain would be only £73,900. In the second year the cost of administration would be less - probably £14,000 - making the net gain £76,000, but, on the other hand, it must be remembered that in New South Wales, Victoria, South Australia, Western Australia, and Tasmania the banks pay taxes on their note issues to the amount of £70,598, while the Queensland Government makes a profit of £22,200 on its note issue, so that in all the people of the States gain £92,798 a year under the present system. If the Commonwealth substitutes for this system one under which the gain will be only £76,000, there will be a net loss of £16,798. These figures are based on information received from authoritative sources, and, I think, cannot be refuted ; I present them for considerationand criticism. Apart from the reasonswhich can be urged against the Bill regarding the possibility of danger in the future, there are practical reasons why weshould not make the proposed change. It is unthinkable that under present conditionsthere would be anything unsafe in a Commonwealth note issue. Our political institutions are working smoothly, our credit is good, and our finances are on a sound basis. But it may happen in the history of the Commonwealth, as it has happened in the history of the States, that bad timeswill come. I do not wish to utter Cassandra-like prophecies, but we must not ignore the possibilities of the future. War may arise, either in the distant or in the near future, or other causes may conspire to depreciate our currency. Should national disaster occur, the note-holders would at once present their notes to the Treasury, to demand gold in exchange, and it would be impossible for the Treasury to redeem more than one-fourth of them. It is not enough to have regard to the present state of affairs. A note issue should be backed up with a stronger gold reserve than 25 per cent. A paper issue secured and backed with only a small reserve in coin, in addition to the public securities and credit must in the course of years prove unstable and depreciate. The effect of making the notes legal tender will be to create two forms of legal tender, a gold and a paper, and in the competition between the two, should difficulties arise, the paper legal tender will depreciate. The best Government securities do not possess the value of gold coin, and only a gold coin backing can give a note issue full security and the confidence of the public. That proposition is supported by the fact that the value of all Government securities fluctuates. So-called gilt-edged securities, such as Government debentures, and even consols, fluctuate in value, because of the state of the market, but still more because of the international outlook.
– Does not gold fluctuate in value?
– Not appreciably; it stands like a rock unmoved by stormand tempest, because it has an intrinsic value apart from its currency value. All Government securities, however, are affected by financial and political considerations, and even consols, which have the credit of the Empire behind them, stand at nearly 20 per cent, below par. May it not there- fore happen that if we substitute a State note issue for a bank note issue, the notes may depreciate as even the best Government securities do? It is said that the Commonwealth notes will be backed with the resources of the Commonwealth, and, no doubt, while the outlook is peaceful, and our circumstances are good, everything will be well. But when in adversity the holders of these notes rush to the Treasury to obtain gold there will be financial crises. A paper legal tender can never possess the same intrinsic value as a gold legal tender, and in the competition between them the gold tender will appreciate and the paper tender depreciate. Furthermore, no law can compel the seller of a commodity to give the same -value for paper as he would give for gold. That has been the experience of all countries which have had paper currencies. The time may come when these Australian -notes, and it may be the Dominion notes, or the Treasury notes issued in Queensland, will, if the countries concerned have to go through the stress and storm of financial adversity, yield in value in the same way as the securities of private institutions have yielded, diminished, and failed. It is a surprising circumstance that, notwithstanding the teachings of history, and the bitter experience of other countries, we still find enlightened communities disposed and willing to enter upon dangerous experiments on -which others have been wrecked in years gone by. It is the duty of those who do not view this proposal with confidence to utter a word of warning, and to direct attention to some of the important considerations to which I have referred. Having done that, the responsibility will rest, not with us, but upon those who have command of the affairs of the Commonwealth, -and are at the helm at the present time. I hope that during the progress of the Bill through Committee, when attention is drawn to some of the clauses, such as that requiring banks to have a certain minimum of notes at all their branches, a disposition will be shown by the Government to consider the details of the measure in a fair and reasonable .spirit, and see whether something cannot be done to minimize the inconvenience, and to remove the serious hardship which I feel this measure is likely to place upon many of our financial institutions. As a matter of fact, I know that although banking and other financial institutions of Australia are openly and loyally acquiescing and showing every disposition to yield to the law of the land, there is in many quarters serious misgiving and distrust as to what may be the real effect of this system when brought into practice on such a large scale as is here proposed. It is to be hoped there will be found to be no justification for this misgiving and distrust, although we cannot but regard this proposal as a very big and trying experiment, and one which will tax the resources of banking institutions. They will have at once to pay off all their existing notes in circulation, and find the necessary funds to buy Australian^ notes from the Government, in order to introduce them into the currency. The demand upon them may to some extent invade the ordinary resources of the banks available tor their customers. The bringing of this scheme into operation, involving as it does the withdrawal of so much money from circulation and placing it in the hands of the Government for utilization in the form of a loan, in reality, although not in the legal sense of the term, must inevitably lead to a contraction of credit for some time, and to considerable financial trouble, if not embarrassment, to banking institutions, and those having financial relations with them. There are many members even on this side with whom I have the honour to agree on many subjects, who do not take so adverse a view of this Bill as I do, but it is the duty of each honorable member to unhesitatingly state his views upon so important a question. I think that this Bill involves a leap in the dark, and that it will lead to trouble, dangers, and disasters undreamt of and unexpected by its framers.
– It is not my intention to speak at any great length on this most, important question, because I fully realize that honorable members on this side are here not to talk out the measures of the Labour party, but to carry them into effect. The debate on both sides has proved intensely interesting to me. I have enjoyed it very much, and it has proved very instructive. It is clear that honorable members on both sides who have spoken on the question must have been at the pains of considerable research. The question is one to which I have given consideration for about twenty years, because I have always held that much depends on the control of the money volume of the nation. In. reply to the honorable member for Richmond, I should like to say that this is not a party question. We are free on this side to act and to argue as we please ‘upon it. In anything I say I shall express my personal opinions, without respect to the party to which I belong. I hope, therefore, that it will not be considered that in dealing with this question I am tied in any way by the decision of any caucus meeting as the honorable member for Richmond implied. One very important feature of the measure is that it proposes for the first time in the history of this Parliament a means of giving the Commonwealth a loan of from £4,000,000 to £7,000,000 . without interest. I make that admission freely. I am glad, and not ashamed, to be able fo make it, because I realize that it strikes at the root of the capitalistic system. Capital is of no use but to earn interest, which is merely rent on capital. In reply to what has been said by the honorable member for Bendigo, I may say that we have already in Australia borrowed about £251,000,000, and a measure of this description should enable us to make a considerable saving in interest. Every twenty-five years under the system hitherto adopted we have paid back the £251,000,000 in the shape of interest, and have still owed a vast amount. If we could raise some of the money we require without interest, we should remove some -of the burdens from the shoulders of the at present heavily-burdened taxpayers of the Commonwealth.
– Can we go on indefinitely securing money without interest?
– I do not say that we can. But as this great Commonwealth progresses we can continue the issue of Australian notes in larger volume, and thus secure the use of some money without having to pay interest for it. We could put this money to the credit of a trust fund for the purpose eventually of liquidating the State debts. The honorable member for Echuca, who is so anxious to interject, will have an opportunity to reply to me shortly. I therefore take no notice of his interjections, intended, as they are, to side-track me. I have no doubt that this proposal hits very hard the Rothschilds, Vanderbilts and Morgans of Australia, and that is why the honorable member desires to side-track me on this important issue. I think we shall be able to save the Commonwealth an immense amount of money by the adoption of this system of securing money without interest, and using it in the way I have indicated. I do not believe that it is the intention of the Government to use the money which will be at their disposal under this system for defence or public works. I am not in their confidence in the matter, but I hope they have no such desire. Another important aspect of the question is that the proposed increase of the currency cannot fail to open the channels of progress. It must provide a better medium between producer and producer, and between producer and consumer. We suffer at the present time from the small amount of gold in circulation, and the obstacles to the free interchange of products under the existing system. We know that the currency of the nation is its life’s blood. If it is limited, trade is restricted, and the restriction of trade brings about such disasters as we had to face in 1893, and in other periods of our history. We in Australia represent a debtor nation. Great Britain is our creditor. We have borrowed an immense sum of money amounting, as I have said, to about £251,000,000.
– An immense amount of credit:
– That is so, because we have received what we have borrowed in the shape of goods, and not in. the form of gold. Great Britain, however, insists that, so far as we are able, we shall pay back what .we have borrowed in gold, and shall pay our interest also in gold. This is the reason why it has been, so difficult for us to liquidate our. big interest bill. We should not mind the export of our gold, if we had left a medium < by which we could secure a free interchange of products. The proposed issue of Australian notes will supply us with that medium, and we shall not suffer as we have done in the past from the shipment of gold to the Old Country. - 1 notice that last year we shipped from Australia gold to the value of £15,000,000.
– It was shipped to pay interest.
– I am aware that the bulk of it was shipped for that purpose. I ask honorable members to imagine the folly of paying £10.000,000 in interest every year with gold shipped from this country, when, by the adoption ot such a system as that now proposed to be introduced, we might have so largely reduced our interest bill. Now, where is the vast amount of gold which we hear so much about us being behind the existing note issues of the banks? This is what
Mr. Knibbs says on the subject, on page 848 ot the Official Year Book of the Commonwealth -
Circulation of Specie. - Many conflicting estimates have from time to time been made as to the amount of coin in private hands. In 1892 the general manager of one of the Sydney banks estimated the coin in private hands in New South Wales at only £725,000, while the estimate of the Deputy-master of the Mint for the same period was £4,416,000, the truth lying, no doubt, somewhere between those two estimates. In 1906 the Deputy-master of the Perth Mint conducted an inquiry with the object of obtaining information on the condition of the currency in Australia. His estimate was : - Sovereigns, £2,500,000; half-sovereigns, £500,000; silver and bronze coin, £1,200,000. This estimate appears, however, very low, amounting only to a little over £1 per head of the population.
That is the wonderful gold backing that we have for the business carried on in Australia -
The coin in private hands amounts, however, only to a comparatively small part of the total coin in the country, the value of coin held by the banks during the quarter ended 30th June, 1909, being £24,943,910, of which amount, according to returns embracing more than three-fourths of the banks, it may be said that £23,738,000 was held in gold, £1,171,000 in silver, and £35,000 in bronze. To the active currency must be added the notes in circulation, which for the same period amounted to £3,510,629,, exclusive of Queensland .Treasury notes, £1,554,720, viz., £799,085 held by banks, and £755,635 in circulation.
Again, turning to Mr. Knibbs’ work, we find that the total amount of gold and bullion in the banks in 1908, for the whole of Australia, amounted to £24,931,560. With this amount of gold, the volume of business transacted at the Sydney banks’ exchange settlement, and the Melbourne Clearing House, at which institutions settlements are effected daily between the banks doing business in New South Wales and Victoria respectively, the total clearances in Sydney in 1908 amounted to £227,736,000, and in Melbourne to £221,354,000, or a total of £449,090,000. Where is the gold at the back of all this paper currency ?
– It is rot!
– Of course it is. The whole of that business is conducted on the faith of the people in those institutions, and on the faith of the people in each other. Where is the gold to give us, as one newspaper said, seven sovereigns for every note issued? MacLeod estimated that the credit resting on £110,000,000 of actual coin in Great
Britain amounted to £10,890,000,000, or about £100 of credit for each £1 of coin. Flurscheim, an up-to-date man from Germany, where there is a big State banking institution, who is accounted one of the best writers on the subject, and who has done so much for New Zealand, said that MacLeod made an over-estimate in these figures, and that the credit, instead of being as £100 was to £1, was about £20 to £1. Even on these figures, it will be seen that there is £20 of credit to every sovereign in existence. The Director of the United States Mint estimated the debts of the world, payable in gold in 1893, at £12,000,000,000, while the stock of the world’s gold amounted to £716,521,000. As I said before, this business rests on the good faith of the people in the banks ; and immediately that good faith is broken, we have periodical disasters under our present system. Much has been said, particularly by the honorable member for Bendigo, about the standard value of gold. As a matter of fact, as Flurscheim points out, gold has no standard value. That writer asks what we would think if, when a rich person entered a shop to buy a yard of cloth, the shopman at once stretched the yard stick. But that is precisely what takes place with regard to the gold currency. In the last thirty years, Flurscheim says, gold has appreciated in value by 100 per cent - every new machine, every means invented to make the production of one man easier, appreciates the value of gold. Yet honorable members opposite speak as if the value of gold was absolute, and, as if by following certain scientific precepts, it is possible for everybody to get gold and become rich. But, as Ruskinsaid - 0
Men nearly always speak and write as if riches were absolute, ai:d it were possible, by following certain scientific precepts, for everybody to be rich. Whereas riches are a power like that of electricity, acting only through inequalities or negations of itself. The force of the guinea you have in your pocket depends wholly on the default of a guinea in your neighbour’s pocket. If he did not want it. it would” be of no use to you; the degree of power it possesses depends accurately upon the need or desire he has for it - and the art of making* yourself rich, in the ordinary mercantile economist’s sense, is therefore equally and necessarily the art of keeping your neighbour poor.
That is the reason the Opposition are against the proposed note issue; they cansee that, by the monopoly in gold, the poor man lacks his share. I make no pretence tobe original in my opinions on these points,, and I present to honorable members the. words of the Slade professor at Oxford, as Mr. Ruskin then was. I could further support my case by quotations from writers whose opinions have been misrepresented by honorable members opposite. For instance, Mill was misquoted - he never meant to convey the meaning imputed to him by the honorable member for Richmond, when speaking of the elasticity of the currency. What intelligent man would contend that Government notes will not have all the elasticity of private notes? Immediately there was an over-issue the notes would return to the Commonwealth Treasury, and the Treasurer would thus know when to hold his hand ; in other words, the Government will have every power that bankers pretend to have. As to possible crises under a Government note issue, we know that, whenever there is a crisis under the present system, the Government has to come to the rescue of the private institution. In 1847 there was a terrible crisis in England, but it was stayed by the repeal of the Peel Act. All that was necessary was for the Chancellor of the Exchequer to issue £400,000 in notes, and the distrust came to an end. The people rushed the gold back into the banks, declaring that all they wanted was confidence in the institutions. In New Zealand, in 1900, advances were made by the banks amounting to £17,000,000, or, including the savings banks and the note issue, to over £22,000,000. On what was that paper money issued? According to Flurscheim, they then had in New Zealand £3,000,000 in gold, but the Bank of New Zealand was about to break when that statesman, Richard Seddon, came to the rescue. He lent to the bank £2,000,000, and, in addition, the Government and the public each took 500,000 shares at £1 each, and thus saved the situation. According to the returns, the Bank of New Zealand in July last paid a dividend of 10 per cent, to the Government and 12 per cent, to the outside shareholders, the Government, for a reason I do not know, being restricted to the smaller payment. The New Zealand Government insisted on this bank being practically managed by the Government, with the splendid results I have shown ; and I commend the facts to the honorable member for Bendigo, who expressed the opinion that a banking institution cannot be managed by a State. Japan, at the present moment, is carrying on banking business through the Government ; and we should do well to copy that country. In a book entitled The Uprising of the Many, by Mr. Charles E. Russell, we read : -
Hence it (the Government) arranged to keep in its own hands the control of the Japanese banking business. This is effected through three great institutions, all practically owned by the Government : the Central Bank of Japan (the leading bank of issue, and the Government’s financial exponent) ; the Hypothec Bank, whose function is to care for agricultural interests; and the Industrial Bank, whose specialty is to supply manufacturing concerns and to foster trade extension. Besides these, the Specie Bank of Yokohama has special functions in looking after foreign commerce. Through these institutions the Government has in its control the vital supply for every commercial interest of Japan.
Immediately the Government get control of the money volume, commercial institutions and business people are no longer at the mercy of a few private individuals, who, under the present system, are acquainted with the business of all other men. In Tasmania, recently, after I had spoken ob this subject at a public meeting, a gentleman said to me, “I am with you every time, though I was opposed to your party until I heard you on the banking question.” This gentleman went on to say that he had borrowed .£200 from a bank, and, for no reason that he saw, he was suddenly called upon to reduce it to £60. This he was successful in doing, thus showing that his credit was sound ; but ‘he did it at great inconvenience to himself. Is it good for a country that a power like this should be in the hands of the few? I think I have shown that we need not worry about the security of our notes, but I may mention a greater one. A man who does a week’s work for two one-pound notes, and a ten shilling note is adding to the true wealth nf the country, because, for every two pounds paid to him, he creates six pounds worth of wealth. According to Mr. Sidney Webb, the Lecturer on Political Economy, at the London College, the workman only gets one-third of the wealth he produces, though there are others who say that he only gets one-twentieth. American statisticians have gone very deeply into this question ; and, according to figures that have been presented to me, the wealth of the American nation, in 1850, was $8,000,000,000. The producers’ share was 621 per cent., and the nonproducers’ share 37J per cent. In i860 the wealth had increased to $16,000,000,000. The producers’ share, however, had fallen to 43I per cent., while the non-producers’ on the other hand had increased to 56^ per cent. This growth continued until, in 1900, it was estimated that the wealth of the country was $100,000,000,000. The producers’ share in that year had fallen to 10 per cent., and the non-producers’ share had gone up to 90 per cent. These figures will give honorable members some idea of what the control of the money volume means to the actual producer and the worker. I come now to what I regard as the unjust criticism that has been levelled at this Bill by references to the greenbacks of America. Why did not the Opposition refer to the bank established by Hamilton, and successfully conducted in America during a time of trial ? Instead of doing so they elected to point to the issue of greenbacks, which, by-the-bye, was designed to provide money for war purposes. We do not propose that our money shall be wasted in killing our producers. We have no such design. Another point which honorable members opposite have forgotten to mention is that the American greenbacks would not be accepted at the local Customs House, the reason for their refusal being that the authorities desired to obtain gold to pay for the gold they had borrowed abroad. It was that which led to the position which the greenbacks occupied, and I think it was most unjust for our opponents to make such comparisons. Then again, I would remind the House that the State note issues of other countries have been made at a time of great distress. France, for instance, was in revolution, and other cases in support of my contention could be readily quoted. The position in the Commonwealth is wholly different. Australia is in a prosperous condition, and I think that it Will be still more prosperous when we put this vast sum of money into circulation. In some of the States not only bank notes, but the cheques of certain people, are legal tender. I know of two gentlemen in Tasmania whose cheques are only presented to the banks when the writing upon them is becoming so indistinct or defaced that there is a likelihood of the bankers refusing to honour them.
– But they are not legal tender.
– They are practically legal tender, and the sound credit of the gentlemen concerned is the reason why they are. I am told also that in Queensland IOU’s, or what are known locally as “ shin plasters,1’ are passed from man to man. They are used as legal tender for the reason that there is not sufficient gold in the country to enable the business of the country otherwise to be carried on. The sooner we make ample provision for carrying on our trade and commerce the better for all concerned. I think that I need say no more on this question. Indeed, it is hardly fair that 1 should discuss it at greater length in view of the fact that so many of my own party wish to speak to it. I have said sufficient 1 hope to convince honorable members opposite that we know something of this question, or that we have endeavoured, at all events, to secure a knowledge of it before addressing the House. I have listened with great interest to the criticisms in which the Opposition have indulged, but have not yet heard any reason to change my mind with regard to tha desirableness of this Bill. The honorable member for Parramatta said of our party: “ There is not one of YOU over therecapable of running a bank.”
– I did not say anything of the kind. What I did say was, “You could all run a bank.”
– One need not work in a bank in order to obtain a knowledge of banking. All that is necessary is to secure an overdraft. It is in such circumstances that the knowledge is obtained.
– I am with the honorable member there.
– There is no doubt about it. I have behind me an exbank manager who is always prepared to supply me with information upon this question. He has stood by me well. We have often exchanged thoughts, and once, when I was on the wrong track, he put meon the right one. I shall always be thankful to him, and since he is now retired, I see no harm in mentioning this fact, although I shall not disclose my friend’sname. With all due respect to bank managers, however, let me say that a bank manager does not require to have such aknowledge of the commercial world as honorable members of the Opposition would’ imply. He needs only to know when to- “ pull the strings.” He must know towhom an overdraft may be safely given,, and he must be prepared to obey the instructions of his directors. When the Bank of Van Diemen’s Land failed, the trade of Tasmania was paralyzed, and I feel constrained to ask the honorable member for Richmond what becomes of the assets of a bank when it closes its doors? The assets of the Bank of Van Diemen’s Land have not yet been liquidated. In* many cases, as soon as the bank had closed its doors, farms were not worth the amount that had been advanced upon them.
– A bank would not be a bank if it could immediately realize its assets.
– Then, may I ask, what of this security of which we have heard so much? I can speak feelingly on this phase of the question, because I had in a certain institution that closed its doors every shilling that 1 possessed. I, like others, was left helpless, but the bank directors, who had large overdrafts, are walking the streets to-day as big as ever they were. Some of them did their best to defeat me at the last general election. The Bank of Van Diemen’s Land paid a dividend a few days before it closed its doors, and yet honorable members opposite insist upon talking of the safety of the note issues of the banks.
– Did the honorable member get his money?
– Not a shilling. I had placed it on deposit with the AngloAustralian Bank, and when it closed its doors I was practically penniless. At that time, after paying my way, I was in the” habit of allowing myself 2s. per fortnight as pocket money. On the Saturday before the bank suspended payment, I purchased a book for is. 6d., thus reducing my pocket money to 6d., and on the following Monday morning, when the bank closed, I found myself with only 6d. to carry me on to the next pay day. Can honorable members wonder why, in such circumstances, I should favour a Commonwealth note issue? “ In view of such an experience, they may well understand how I appreciated the references made by the honorable member for Richmond and others to the wonderful security which our banking institutions offer. Where was the security in the case of the Anglo-Australian Bank ? Where is it now ? That institution never paid one shilling to those who had placed all their hard-earned earnings on deposit with it. In the case of the Bank of Van Diemen’s Land, many people who had invested in its shares never got a penny for them.
– Did the honorable member get a higher rate of interest from the Anglo-Australian Bank than he could have got from a sound banking institution?
– I was induced to deposit my money with that bank because of the higher interest that it offered.
That experience, however, taught me a lesson on the interest-earning question that I shall not forget. I am not ashamed to make this admission. My eyes at that time had not been opened as they have been since by the reading of Labour literature. It was before the advent of the Labour party in Tasmania. Since then I have studied the banking problem, with the result that my eyes have been opened, and I am not likely to be caught doing the same thing again. Nearly every one now asks for a State Bank, in which he may deposit his money, and I hope the day is not far distant when we shall have one. This Bill, providing, as it does, for a Commonwealth note issue, is only the forerunner of a National Bank, and I hope that within the next three years we shall have one in existence, running side by side with our private financial institutions. The people will then be free to make their own choice, and I venture .to predict that they will unhesitatingly avail themselves of the Commonwealth Bank.
Sitting suspended from 6.26 to 7.45 p.m.
.- T. am sorry to see such a poor attendance on the Ministerial benches. I hoped that we should have present some of the leading authorities of the Ministerial party. But they are conspicuous by their absence. We must do as best we can without them. I congratulate the honorable member for Denison on having at any rate studied the question at issue. He gave us his views at considerable length. He has not only read considerably on the subject, but apparently has hail practical experience of a disastrous kind. He grappled with the subject in real earnestness. I was glad to hear him say that this is not a party question. I trust that that is a bond fide statement, and not merely a piece of claptrap. Certainly we are dealing with a most important question. I hope that honorable members opposite will look at it from an Australian point of view, and not purely from a party aspect. The matter lies at the root of all our prosperity. Any wrong which we may do will affect the credit of the whole Commonwealth. It is said that when his Satanic Majesty is out for real mischief he generally poses as an angel of light. That is just about what this Bill does, lt looks a Harmless, taking sort of measure, but I can assure honorable members, as one who has had considerable financial experience, that if passed in its present form it will do more harm to Australia than any measure that has been brought before this House. Therefore, I hope that when I make the suggestion that the Bill should be referred to a Royal Commission, to be inquired into thoroughly before anything is done to saddle Australia with an experiment which has broken down in every other part of the world, the proposition will be favorably received. There has been a feeling in the minds of all of us perhaps - I entertained such an idea myself until I looked into the matter carefully - -that the currency is a sort of royal prerogative. But when I came to study the subject, I found that what really happened was this : When civilization was in its primary stages, barter was the only method of carrying on business between man and man. A person would, for instance, give a pig in exchange for a suit of clothes. Later on it was found more convenient to exchange commodities for a certain amount of metal. The metal, of course, had to be weighed and assayed by the individuals giving and receiving it. A further step was taken when it was discovered to be more convenient for the ruling authority to put a stamp on a piece of metal to certify it as being of a certain weight and value. That is the way in which the metallic currency became part of the Royal prerogative. I desire to quote a passage from a leading authority on this question. Tooke, in his History of Prices, volume 5, section 8, brings out an aspect of the question that is worth thinking about from an educational point of view. I do not know that it is possible for us to educate honorable members opposite on this subject, but we may as well try to throw a little light upon it.
– We are trying to educate the Opposition.
– Not in finance, I hope ! This is what Tooke says -
It has been contended that the function or business of issuing notes is the indefeasible attribute and prerogative of the Sovereign or State. This dogma proceeds on the ground, that inasmuch as the coining and the issuing of metallic money is an attribute, or province, or privilege of the State, so also bank notes, being, by the definition of the school (Currency School), held to be money, the creation and issue of them ought, by parity of reasoning, to be considered as “coming under the province of the Government. . Now, for this assumption there is not a shadow of foundation. The function of the Government in regard to the coinage, as conducted by the Mint, is simply to certify to the correctness of the piece of metal submitted. The Government does not issue the coin in any proper sense of the word issue - it does not create. The province or function of the Government in regard to coinage, as conducted by the Mint in obedience to the prescribed regulations, is simply to certify by a stamp, bearing the effigy of the Sovereign, the weight and fine, ness of the piece of metal to which it is applied.
That passage contains a very sound definition of a metallic currency. The Government undertake the coining of metal for the convenience of the public. Of course, whenever the Government can do anything for the convenience of the public it is proper that they should do it. If any honorable member can prove to me that a Commonwealth issue of bank notes would be for the convenience of the public I shall gladly give way. At present I am of the contrary opinion. I believe that it will not suit Australia in any way for the Government to issue notes. It ought to be the function of the Government to control the bank note issue and so see that it is safeguarded. But that is not the proposition now before us. MacLeod, another very eminent authority, in his Theory and Practice of Banking, says -
The stamp on the coin is the guarantee that it contains a certain weight of bullion. It is clear that the sole object of coining was to save the trouble of weighing, and that though the prices of articles were estimated in figures, it was the essential part of the understanding that these figures denoted certain specific quantities of pure metal.
That passage explains how Governments came to take charge of the metallic part of the currency.
– That observation does not apply to silver.
– It applies ‘to silver as token money to a certain extent. Everyone knows who takes a silver coin with the King’s head stamped upon it, that the coin contains a certain amount of pure metal, and represents a certain value in exchange.
– The honorable member does not ,say that a sovereign contains nothing but pure metal, does he?
– No. A sovereign is not pure gold, but is a certificate of value. Pure gold would be too soft to use for currency purposes. I cannot help thinking that the system at present prevailing in Australia is working remarkably well. The Prime Minister, when launching this Bill, said that he was not going to attempt to justify the proposed new system on a profit-making basis - that the Government did not expect that the Commonwealth would make much, if anything, out of the issue of notes. I entirely agree with the honorable gentleman. We must remember, of course, that in Australia the people receive through their State Governments, £80,000 per annum from note* taxation. If we add to that the cost of issue and distribution, it will be found that there is very little, if anything, in notes from a commercial profit-making point of view. Of course, it “must not be forgotten that this proposal would give the Commonwealth Government £5,000,000 to handle. That is to say, it is expected that the total note issue will be £7,000,000, less £2,000,000 coin kept in reserve. In other words the Government will have £5,000,000 to play with. But we must set against that the tremendous deteriorating effect that this proposal is likely to have upon our credit. Australia, as honorable members opposite have admitted, is a borrowing country. We must be exceedingly careful of our credit. Already the Times, the great London journal, has pointed out in a somewhat alarming manner that Australia is launching out on a very dangerous course. We must bear in mind the effect that such warnings will have upon the holders of Australian stock all over the world, and chiefly in Great Britain. This experiment is likely to have an exceedingly injurious effect upon future loans. Within the next twenty years Australia has loans to the amount of about ^£200,000,000 coming due. We have to settle that account. Another thing to remember is that if we are going to make anything of Australia, and settle ten or fifteen million of people on our soil, we must borrow a tremendous amount of money. Our present system of legislation deprives private enterprise of many opportunities that are open to it in other countries. That means that the Governments, Federal or State, will have to build railways, construct waterworks, and do most of the other things that are necessary for civilizing this country, and making it fit to be occupied by a large population. We cannot carry out all these works from the proceeds of taxation. If we attempted that, private enterprise would be still further restricted. If we are going to settle a large population in Australia within the next ten or fifteen years, we shall have to borrow a good deal of money somehow. Privately or publicly, loans will have to ‘be raised. We are not an old country, but a young one. Anything which damages the credit of Australia in any way must have a disastrous effect upon our prosperity. From that point of view alone the most serious consideration should be given to this proposal. Although honorable members opposite may think that it is easy to take this loan of £5,000,000 for nothing - because, after all, it is a loan - I am convinced that it would be far better for us to go straightforwardly to the Mother Country and borrow £5,000,000. We do not know what mischief may underlie this method of borrowing. The proposal of the late Government was to borrow £3,500,000, with a 5 per cent, sinking fund. That would have wiped off the debt in sixteen years. We do not know where we are likely to stop when we adopt this method. At present the Government are going to obtain £5,000,000. But they may not stop there. I am afraid that there will be fresh issues of paper currency in times of crisis. That is the great difficulty. I have already said that, in my opinion, the present system is- and I think that history justifies the statement - absolutely safe. The Prime Minister stated as one of his objections to that system that in the. great crisis of 1893 a few notes were sold by persons who were in a panic at less than their face value. That is the only time in the history of Australia when there has been any default by a bank.
– What about the Government assistance to prevent further panic ?
– I intend to deal with that point later. I think it an entirely proper thing for the Government to do. In the great crisis of 1893, people got frightened of their own shadow, and exchanged their notes for sums which were entirely below their face value. When the Prime Minister was submitting the Bill, he asked, “ What about the deposits at call ; would not the deposit-holders have the same claim as the note-holders? “ We all know that at present there is between £20,000,000 and £30,000,000 worth of gold in the banks to secure note issues of a little over £4,000,000,’ so that of course, in normal times, the notes are absolutely safe. The Prime Minister pointed out that in a crisis the depositor with money at call would come in and swoop away the gold, leaving the note-holder unsecured. In the first place no respectable bank would allow a crisis to run so far as to jeopardize its note issue; it never has been done.
– What about the crisis in America?
– It never has been done, and it never would be done. The banks have been, and are now, willing to make a further provision.’ In 1901 the Australian Bankers’ Conference submitted to the Treasurer of the Commonwealth some suggestions. Their first suggestion was -
The banks to issue their own notes under a uniform Act, Treasury notes in Queensland to be discontinued.
Maximum of notes to be limited to the amount of coin and bullion held by each bank in the Commonwealth.
– But they went . further than that.
– I intend to quote the other suggestions. In 1901 the bankers said, “ We will hold a pound’s worth of gold for every £i note that we issue.” They felt so secure of their position that they said, “ If a great crisis comes, as it came before, and we are compelled to shut our doors, we shall have enough gold in hand to pay the notes at once.” That suggestion on their part ought to have received far more serious consideration than it did. Their second suggestion was -
Notes to be a first charge.
Of course, that idea is pretty well carried out in the legislation of most of the States. In Victoria, for instance, an Act was passed in 1887, and re-enacted in 1890, as the Banking and Currency Act No. 1164. Section 12 of part 2 of the Act says -
Notes payable to bearer at sight or on demand issued in Victoria . shall in the event of such company being wound up or such Arm or banker being insolvent be a first charge on the assets in Victoria of such company . . . not being the subject of any mortgage pledge lien charge or other security in favour of any other creditor.
– That relates to Victoria only.
– Yes. There is a similar enactment in each of the other States, but I have not had time to refer to the Statutes.
– The New South Wales Act is even stronger, because the note is better than a first charge. It is an unlimited liability on shareholders outside the assets.
– We are now dealing, I take it, with a suggestion to better the currency, and I am putting forward an alternative suggestion which was made in 1901 by the bankers to the Commonwealth Government. Their first suggestion was to keep a sovereign for every £1 note which they issued, so that if a bank issued one million £1 notes, it would have a million sovereigns against them by contract with the Government, and when its coffers were reduced to a million of coin it would have to close its doors if such a horrible event ever occurred. Their second suggestionwas to make the notes a first charge on the assets, and I have been able to show what the first charge, in effect, is in Victoria. The third suggestion which the bankers made to the Commonwealth Treasurer was -
The notes of all banks to be exchangeable for gold at par at the chief banking office of any bank in the capital city of each State, and tobe free of exchange at any banking office in the Commonwealth.
– That is the Canadian system.
– The banks have been greatly twitted with the fact that until recently their notes have not been free of exchange between one State and another.
– That is quite true.
– That has been the case until recently.
– Until the Prime Minister delivered his speech at Gympie.
– No, before that time.
– In Victoria exchange hasbeen demanded within the past two months.
– I think that honorable members will admit that that was not altogether the fault of the banks. I wassurprised to find that their very liberal suggestion was made so long ago as 1901.
– They have talked a lot, but done nothing.
– No. The banksmade some suggestions to the Commonwealth Government, but the latter took noaction. Their fourth suggestion was -
Guarantee fund to be established under trust. Each bank to contribute 5 per cent, on its circulation. The funds to be invested in Federal securities, and income, less expenses, to be paid to the contributors for amounts respectively contributed.
– That is the Canadian provision.
– Evidently the bankers founded their suggestions a gooddeal upon the Canadian system. I cannot understand why a guarantee fund over and above the gold which they were to keepshould be required, but they offered to provide it. Their fifth suggestion was-
Banks to pay 2 per cent, per annum on their average note circulation.
The State Governments did not forget that little suggestion. I think that they haveall come down upon the note circulation! for 2 per cent. I do not think that anybody has an objection to that. The issue of notes is a prerogative which the banks have no reason to expect to enjoy except in respect of the benefit which they do to the people of the States.
– But the public pay the duty.
– Of course the public do everything j we understand that. At any rate the banks do not expect to get any profit out of the note issue. And, as I have shown, they do not. The Prime Minster stated that this is not a profit-making Bill ; that the points to be kept in view are that the public will be convenienced to a greater degree, and that great safety and security will be insured under this scheme. What I am trying to show is that the existing system is infinitely more convenient to the. public and infinitely securer than the system covered by the Bill. Another suggestion which I think it is not out of place to mention here, as we are dealing with the currency question, is the following, which is contained in the letter sent to the Government by the bankers in 1901 -
An emergency Act to be passed for making notes throughout the Commonwealth legal tender for a period not exceeding six months at any one time. The Act to be dormant till called into force by the Governor-General in Council at the request of a majority in number of the banks.
Now many honorable members opposite have been making a great deal of the fact that in a crisis the Government have always to step forward and save the banks. The great crisis of 1893 was allowed to proceed to greater length than would have been permitted in any other civilized community. In that year the Government practically stayed the crisis. That, in my opinion, is always the proper action for a Government to take. It is the only authority which can effectually so act. I am not against the intervention of the Government in such circumstances. But we have to bear in mind what happens at such a time. The banks have a great number of deposits at call, and some deposits are continually maturing. Suppose that a large number of individuals suddenly lose confidence in an institution. They do not apprehend, perhaps, that if the institution is a good one, they will eventually lose their money. What they are afraid of at the moment is that some persons may get ahead of them, and obtain their gold, and that they will have to wait for months, perhaps for years, before they can secure gold or get any substantial payment. At the time of the great crisis the idea was very well put in the press in this way : “ If a great number of persons are assembled in the town hall, every one of them has tlie right to go out, but they have not all the right to go out at once. If they all attempt to go out at once there will be a catastrophe, and a panic.” So in the case of a financial panic we find the whole of the people wanting to’ get their cash at once. Everybody is aware that the banks must invest money for long periods. It is not possible for depositors to get their money all at once, and therefore a panic occurs. Everybody rushes to get out his money, and who is going to say when a panic shall cease? The only possible authority to do so is the Government. I recommend the suggestion I quoted, to the serious attention of the Prime Minister. ^Having had a little banking experience, I expected that one of the first things which the Commonwealth Government would do would be to introduce legislation dealing with panics.
– In my speech I stated that that matter related to banking, and that later a Banking Bill would be brought in.
– I am glad to hear that statement, because it is a matter which needs to be considered very carefully. In order to safeguard the public, I further suggest that any bank requiring this assistance from the Government should be required to have had for at least three years prior to that date a Government audit, so that the Government’ may know when it is asked to extend this great consideration to a bank, that it is dealing with a solvent concern. The great curse to the better class of banks in the great trouble of 1 893 was that, while some of them were not solvent, others worked out disastrously for the depositors. It was held at the time that if the panic had been stayed earlier many of the banks would have been saved, and a great deal of suffering would have been prevented. The subject should be dealt with in any comprehensive banking measure. If honorable members think that the notes issued by the private banks are not properly secured, they have only to ask the banks to properly secure them. The banks are prepared to keep a gold sovereign for every £1 note issued, and we shall be to blame if the bank note issue is not made absolutely safe. Except for what the Government may gain from the handling of some seven millions of money, I cannot see any proposal in the Bill which will benefit Australia, while many of its provisions will do injury. In the first place, the Government note issue will lack elasticity. The Government will issue notes to an arbitrary amount, some £7,000,000 worth, and £7.000,000 worth of gold will be withdrawn from circulation to pay for them. The banks will have to give a sovereign for every £1 note they take. The present note system is elastic. The average circulation of bank notes is about £[4,000,000. A great many notes are issued at busy times, such as harvest time, and sent into the country to the branches of the banks. The money is needed there then, and there is less temptation to steal notes than to steal gold. As the notes go out of use, they get back to the banks, and are withdrawn. This arrangement suits the public well. Until the Prime Minister had bi& interview with the bankers, I do not think that he knew that his proposal would deprive the banks, and therefore the public, of about £3,000,000 of what is called “ till money.” His first proposal was that there should be an issue of £[4,000,000, but I think he did not know about the need for till notes until he had met the bankers.
– The honorable member is in error. I have understood this system since 1893.
– The Prime Minister did not learn anything from his meeting with the bankers.
– I should not like to think that. I find that I can always learn something from my interviews with others, though occasionally it is to my disadvantage.
– I told the bankers that the issue would go up to £10,000,000 within a few years. 1 said that without any one asking me.
– I was frightened of that. The admission is a very noteworthy one. We are on the road to ruin, but I did not know that the end was so near. If the Prime Minister did not learn anything from his interview with the bankers, he may learn something from the experience of other countries. I shall not wander through long records, but shall content myself with two or three extracts. In France, according to Conant, the issue of paper money has cost the people about
– Since when? Since the revolution ?
– That is what has been written off French bank notes in perhaps 150 years. Now the issue of notes is done through the Bank of France, which many persons regard as a State institution, though it is no more a State institution than is any of our banks. Its shares are held by private persons, and its profits are received by them, though the bank is under Government control. I have no objection to the Government controlling the bank note issues ; in fact, to do so is within the province of a Government, and Commonwealth banks wish it done. They would like it to be insisted that a sovereign should be kept for every £1 note issued. They also desire that in times of panic their notes should be made legal tender for a period not exceeding six months. According to the Prime Minister, the Commonwealth is to issue £10,000,000 worth of notes in no time.
– I said within a few years.
– The issue will amount to £100,000,000 before we are much older.
– We are asked now to sanction an issue of only £7,000,000.
– Let me read what President Garfield said regarding paper currency -
Legal tender notes are the devil manifest in paper, for no ms.n can foresee what mischief they may do when they are once let loose. . . There never did exist on this earth a body of men wise enough to determine by any arbitrary rule how much currency is needed for the business of a great country.
Then on the 7th June, 1870, he said -
In the first place, it is the opinion of all nations, and it is the almost unanimous decision of all statesmen and financial writers, that no nation can safely undertake the supplying of its people with a paper currency issued directly by the officers of the Government. And, to apply that principle to our own country, let me ask if gentlemen believe it to be safe to subject any political party who may be in power in the Government to the great temptation of overissues of paper money in lieu of taxation? In times of high political excitement, and on the eve of a general election, when there might happen to be a deficiency in the revenue of a country, and Congress were called upon to supply that deficiency by additional taxation, the temptation would be overwhelming to supply that deficit by an increased issue of paper money. Thus the whole business of the country, the value of all contracts, the prices of all commodities, the wages of labour, would all depend upon a vote in Congress. For one, I dare not trust the great industrial interests of this country to such uncertain and hazardous chances.
– Paper money won the battle of Waterloo for England, and the battle of .Gettysburg for Lincoln.
– I am surprised at the statement, because I have always looked upon the honorable member as a man of light and leading on financial questions. I could read similar extracts by the hundred, and I challenge honorable members to cite any favorable experience with State paper currencies. Queensland has a population of about 500,000, and her note issue goes back only a few years.
– Besides, Queensland is not an isolated country.
-No. A rotten house can be kept standing if it has good buildings all round it. If the note issue of the State were doubled or trebled, there would probably be trouble there like there was in the Argentine. Reference has been made to Canada. I shall not quote figures, merely wishing to point out that the Canadian issue was not made voluntarily, it being forced on the Government. The bank note issue was in a rotten state, trade was stagnant, wages were down to next to nothing, and the population was starving. Therefore, the Government had to interfere. What it should have done was to say to the banks, “You must either get proper security for your notes, or go out of business.” That is what we should do. The Canadian note issue has been only partially’ successful. The people are not satisfied with it, and eventually, no doubt, what will be done will be to require the auditing of the books of banks desiring Government protection in times of crisis, and to allow such banks as may be considered reliable to issue notes against gold.
– The honorable member keeps coming back to what the Government should do.
– The Government of a country is, after all, established for the benefit of its people.
– And so is the currency.
– That is so. Any other statement would be ridiculous. What we are asked to consider is whether the public is better served by the present note issue than it would be by that proposed by the Government. The need for the elasticity of a note system is a difficult thing to grasp thoroughly, but I think I have shown that there can be no elasticity with the Commonwealth issue, whereasthere is great elasticity with the present issue, under which, when notes are nolonger required by the public, they disappear. Under this arrangement the people are not robbed of their gold. The honorable member for Denison said that there is not nearly enough gold in the country to do its business. Well, the proposed issue of Commonwealth notes would make things worse, because it would keep a large amount of gold out of circulation. Now when a note is redeemed the sovereign which protected it goes into circulation. The subject is one which requires a lot of thinking, and the advantage which itselasticity gives the present system is onewhich should not be lightly passed over. I wish now to refer to the question from, the point of view of the civil servantsThere is no doubt that the civil servants: will be paid in these Australian notes, and if they should become depreciated they may have to be content with 15s., or, perhaps, only 10s., for their £1.
– The credit of the country must be very poor if the honorable member thinks he is justified in crying stinking fish in that way.
– I challenge the honorable member to mention any country in the civilized world where a paper currency has not depreciated.
– The Queensland Treasury note has not depreciated.
– I do not wish to depreciate this country - no man less. I am a loyal Australian to the backbone,but I do wish to warn my fellow countrymen and women against this terrible sacrifice of the credit of the country. The civil servants will be paid in these Australian notes for certain ; they cannot refuse them, because they will be legal tender, paid by their employers. They must take them whether they are good or bad. I am often twitted with the fact that the great primary producers of meat, wool, hides, and1 tallow, in the Argentine, are placed at a great advantage as compared with Australian producers, since they pay their employes in the depreciated notes of the country, and in silver, and receive gold for their produce. It has always seemed to me that, from the employers’ point of view, that is a splendid thing; but what about the poor worker? The honorable member for Flinders has just reminded me that the salaries of members of Parliament will be paid in these Australian notes which may “become depreciated. The Argentine is a rich country, and we should not hesitate -to learn a lesson from it. I do not spurn the experience of other countries as some honorable members do. The premium on gold in the Argentine is something like 400 per cent., and workers there are invariably paid in depreciated notes, whilst the producers get gold for their produce. They are thus able to produce with what is practically sweated labour much more cheaply than can the primary producers in a country where business is done on a gold basis. Though I am a primary producer in Australia, I hope that that kind of thing will not occur here, and that every man who does a pound’s worth of work in Australia will receive a sovereign for it. The system of currency we have in operation at present, properly safeguarded by Government control, with which I entirely agree, is the best system to adopt. I should like to direct the attention of honorable members to what happened to the Indian pensioners. They had a contract with their Government, and one would think that nothing could be more sacred, which stipulated that they should be paid in rupees. The rupee was at the time worth 2s., but its value has since fallen to is. 3d. or is. 4d., and,, as a result, these Indian pensioners, who after bearing the heat and burden of the development of the country expected to pass their declining days in peace and comfort, receive only is. 3d. or is. 4d. for every 2s. which is due to them.
– As the result of a metallic depreciation?
– Is the depreciation of gold utterly impossible?
– Is not a paper currency much more likely to depreciate than a silver currency? I mention the case of Ihe Indian pensioners as a striking example of what we may expect from this proposal.
– Might I say that our silver is in exactly the same position.
– That may be so, but the honorable gentleman is aware that, In Australia, silver is only legal tender up to a very small amount.
– Up to £2.
– Yes, and that is what protects us. Spain has an unenviable reputation in connexion with its currency, and if we are to adopt the Spanish system of finance we shall have troops of speculators coming here from all parts of the world to take advantage of it. I beg honorable members to pause, and think seriously about the proposal now made. We have a currency which has done splendid work in Australia. We have an offer from the banks to secure that currency on a gold basis of pound for pound. The only advantage to be derived from the proposal now before the House, though I do not regard it in that light, is that the Government may be able, under it, to secure some £5,000,000 to play with.
– That is all we are asking; we will hold the reserves.
– The Government would do much better if they adopted the straightforward course of asking for a loan. It is expected that Australia will continue to be a borrowing country for generations to come. The spirit of our people is well known; and we can employ, not only our own money, but the money of other countries. I ask honorable members to consider the enormous accumulation of wealth in older countries which must be put to use somewhere. If those accumulated funds do not come here to stimulate our industries, they may go to the Argentine, to America, or to Canada. If we shut out that money we shall be shutting out people as well, because people must follow . capital.
– Capital follows people.
– The honorable member is at liberty to put it any way he likes. If these accumulated funds are not invested in Australia we shall not only lose the benefit which must follow from the spending of the money here, but must put up with the drawback of its expenditure in countries which are our competitors in the markets of the world. We shall be in the position of an army cut off from its treasury chest, because competing countries are our enemies in trade. It cannot be doubted, that if the accumulations of wealth in the older countries of the world are invested in countries which are our competitors it will have a very prejudicial effect upon ours. If has been said that this is not a party question, and I agree that it was not made a party issue at the last elections. I can say that I never heard about it at all during the elections. I do beg the Government to take the matter seriously into their consideration, and to agree to appoint a Royal Commission to look into it. Do not let us do this thing in a hurry. Surely Australia is not in urgent need of £4,0.30,000 or £5,000,000. A man of the commercial experience of the Minister of Home Affairs should be able to get Australia round a little corner like that. This proposal involves a great change of principle and a change from a system which has served Australia well, and which might be made under Government control to serve Australia much better in the future. We are in this measure taking a leap, I cannot say in the clark, because we have the light of the experience of other countries to guide us, and it shows that disaster has followed the adoption of similar proposals elsewhere. I again ask the Government to give the matter further consideration, and have the question thoroughly considered by a Royal Commission before this Bill is taken to a further stage.
– I hope that the House will not deal with this question from a party point of view : at any rate to the extent of misleading the public outside. The currency, both metallic and paper, is certainly one of the most important matters with which Parliament can deal. The history of our own country has shown - and we do not require much proof of it - that it .is the working classes who suffer most from any tampering with the currency which has injurious effects. We are credited by honorable members opposite with knowing very little about the subject we are debating to-night. All I have to say in reply is that, it would be singularly unfortunate for the Labour party in Australia to hold any unsound principles of finance, because it is the workers upon whom they depend who would suffer most as the result. But, instead of having any fear in that direction, I am prepared to support the Bill with a very light heart feeling as convinced as I am that I am speaking that Australia has nothing to fear, and everything to gain, from it. The last speaker qquoted from the late President Garfield. What I protest against in this debate is the practice of quoting from the speeches of public men and writers without giving the full text of their observations, and without reference to the circumstances in which they were made. President Garfield, for instance, when he made the remarks which have been quoted, was speaking at a time when there was a very strong feeling as to whether a gold or a silver standard should be adopted in America. The silver gang were anxious that the silver standard should be adopted, whilst sound men, as they have been all over the world for the last 600 years, were in favour of a gold standard. The gold men won, to the honour and credit of the United States. The late President Garfield was at the time referring to the paper issue which had been in existence in the United States, and which he condemned, the inconvertible paper currency - the American greenback. In reply to the statement that paper currencies have always broken down, let me say that I know of only three instances in which that has occurred. The first was at the time of the French Revolution, when the assignats were backed with the property of the aristocracy of France. That was the main security behind the inconvertible paper then issued. But let us have a little charity in referring to these things. We should ask ourselves what France had to go through during that terrible trouble. 1 should give very little credit to any man who would point the finger of scorn at the French in such a terrible misfortune. It was not surprising that, in the circumstances, the French should have made a big mistake in the issue of paper money. If we take again the instance of the United States of America, honorable members opposite have little to be proud of in their references to the paper currency of that country. Will they _tell me how the Federal Government of the United States could have carried on that four years’ war, or how they could have won at Gettysberg, Vicksburgh, and Fort Hudson, and driven the Southerners back, without their paper issue ? Let us take pleasure in the fact that in our own country we have never had to face a disaster so terrible. God grant we never will, for I do not know what our statesmen would do in such circumstances. We should judge by the circumstances of each case; and the American greenback has no more to do with the question before us than has the man in the moon.
– The greenback preserved the Union !
– Quite so- it put the Southern insurrection down.
– And the French assignats saved the liberties of Europe !
– I quite agree with the honorable member. But my argument is that these were exceptional cases, brought about by great convulsions ; and honorable members have no right to speak to the people of Australia of a possibility that they may suffer because it is now pro- posed to have a Government note issue. Whatever side of politics we may be on, we have no right to use language or make speeches calculated to induce our countrymen and countrywomen to feel that any weakness in our financial institutions, or the proposals of the Government, are likely to cause the loss of their small earnings and investments. There ought to be some things above party warfare, and this is one of them. I do not speak with much authority as to the Argentine note, but from what I have read that note is practically issued by land syndicates and made a legal tender. It is utterly impossible to have a note issue based on land or anything else but gold, and I have no doubt that, if we knew the truth, the Argentine note is a swindle, as land jobs generally are. And we need not go to the Argentine to find land swindles; we may find them nearer home. I dare say that many honorable gentlemen opposite would be quite prepared to let the Govern - ment, or anybody else, bring out a note issue in support of a land transaction ; but, in any case, such notes have nothing to do with’ the subject before us. The best argument of honorable members opposite lies in their question, why we desire to make an alteration now when, as they say, everything is going smoothly and we are all happy. I am rather inclined to think, however, that things in Australia are not so satisfactory as they ought to be ; and, because of that, I am prepared to support this Bill. There is one fact that appeals, riot to rich merchants, great commercial men, or traders, but to thousands and thousands of men and women who work all over this country. Until the Prime Minister made his Gympie speech, the banks charged 2J per cent, for cashing their own notes - a piece of barefaced plunder.
– It is exchange.
– The honorable member calls it “ exchange “ !
– The Commonwealth itself charges exchange on a postal note - exchange for carrying the gold.
– I am not” now debating the advantages or disadvantages of postal notes ; but it would appear from the (interjections that I am “getting home.”
– It is not fair to say that the charge is i per cent.
– I have been charged 6d. on a £1 Adelaide note in Melbourne, and the same in Sydney.
– It is even charged in the parliamentary refreshment room.
– I have known 5 per cent, to be charged on notes.
– It is worse than I thought.
– The banks will charge 5 per cent, on one’s own cheque.
– Is this anything but impudent, barefaced robbery ? It is because the Government have given certain power into the hands of the banks that we are at the banks’ mercy. They have the currency practically in their own hands, though it is sanctioned by the King’s Government. The note issue is purely a banking control, and workmen who have to travel from State to State have to pay this charge, although the notes are the banks’ own. Honorable members opposite have said, “ Do not forget what you are losing; if you pass this Bill the States of Australia will lose £80,000 a year.” It strikes me, however, that the banks get that £80,000 out of the public before they pay it over to the States. This plunder of ?l per cent, has nothing in common with the exchanges between country and country ; no honorable member on the other side will tell me that it is anything like the exchange in high commerce; indeed, high commerce could not bear it. It may further be asked, why make a noise about this charge of t. per cent, when it Has disappeared? But why did it disappear? It disappeared simply because of the Prime Minister’s Gympie speech; and we have no guarantee whatever, if this Bill were withdrawn and a Royal Commission appointed, that it would not be re-imposed to-morrow or next month. So far as 1 am concerned, I shall give the banks no chance to re-impose this charge; I believe, with Bismarck, that the best policy is to hold our position strongly, and not give the “ other fellow “ a chance. That is my chief reason for supporting the Bill.
– Is that all ?
– No, it is not. It is very desirable that, as the Crown holds the metallic currency, it should also hold the paper currency. I can see no reason for a distinction; and when the Government are backing up the paper currency with a 25 per cent, gold reserve-
– It is not sufficient.
– Before I sit down I shall quote an authority, who holds that the gold reserve should be 33 per cent., or one-third, but I have no doubt that 25 per cent, is ample on a note issue of this character. Our friends opposite ask why we should interfere with the banks when they are perfectly sound and everybody is prosperous. But I do not know that everybody is prosperous.
– The Prime Minister says so.
– Then I hope the Prime Minister is correct. There are certain fixed principles in this world ; and, though we may change our language and our civilization very largely, and do a great many things, banking we shall always have with us. Right down to the earliest times we find, in every civilization, some’ system of banking. What is the principle of banking? A banker is a dealer in credit, and he must not deal in dead securities. That principle was true of the Bank of Venice, of the Bank of Genoa, and of the Bank of Amsterdam, and it is true of the Bank of England today, and should be true of every bank in Australia. Do the Australian banks deal in dead securities, or in live securities? I do not know, but I do know that before 1893 they dealt in a good many dead securities. There arc very large land and financial associations and companies in Australia - there are some in my own State - the organized capital of which exists for the purpose of dealing in dead securities ; and I ask whether there is not keen competition between these companies and the banks. Are there any of the more spirited of the banks that are not dealing very largely in dead securities? To what extent is that going on? I do not know. The honorable member for Fawkner said he was very anxious there should be a Government audit of the books of the banks, and so am I. If I had my way, I should not allow a bank to trade that was not subject to a Government audit. I have no objection to private, independent auditors being employed as well ; but the people of this country ought to know, as it is their only security, that there is a genuine and not a sham audit. I make no charge against the banks. My position is that I do not know. Honorable members opposite - the honorable member for Parkes and the honorable member for Fawkner - may be able to tell me to what extent Australian banks deal in dead securities. In proportion as they do so deal, they are not as stable as they should be. We know that the banks have iri the past dealt in dead securities; they may do so again, and it is the duty of this Parliament to give the most effective guarantees to the people of Australia against a panic such as occurred some years ago. We cannot, of course, prevent a panic, but we can takemeans to very quickly bring it to a close. There has been a great deal of talk about the present bank notes being a first chargeupon the banks. Of what value is that te* a poor man with a bank note in his pocket and the bank door shut? The honorable member for Fawkner would say, “My. good man, do not worry, the. notes are a first charge on the bank.” “But,” theman says, “ I want to change the note”; and to this the honorable member replies, “ Just you wait.” During the waitingthere is always some spirited enterprising-, individual who comes along and is ready .tooffer 1 8s. for the note. Honorable members opposite-, when they deal with a subject of this character, show that they arenot acquainted with the real factsconcerning the lives of the working people of Australia, who . largely haveto do with the creation of thewealth of the country. Of course, thenote is ultimately redeemed ; but so long: as we have banks issuing notes, so long will it be possible for people to be placed in theposition I have indicated. And I contendthat the Federal Parliament has no right toallow such a state of affairs to prevail. That is the strongest argument in-, favour of a Government note issue. What will be the effect of that issue?The effect will be that, throughout the length and breadth of the land, Australian notes will supersede the private bank notes, and the Australian noteswill be legal tender, with no fear of depreciation. I was not only surprised, but pained, at the remark of - the honorable member for Fawkner that public servants might be paid in £1 notes, which would fall to the value of 15s. What could so depreciate the notes?’ Why do honorable members make such assertions? Let them give us some proof of their statements ? Let them show us why these notes, having behind them the security, integrity, honour, and prestige of the King’s Government in Australia, together with a gold backing of 25 per cent.,, should fail ? Surely the honorable member for Fawkner, who has a reputationas a commercial and business man, cannot believe that it is possible for such notes to depreciate? What would an over-issue-‘ of notes mean? It would mean that they would simply be returned to the Treasury. On the other hand, if there were an over- “ issue of gold it would disappear. Thebullion dealers would obtain possession of it and export it. Gold, when converted into sovereigns, is a standard and a measure of value; but it is also a commodity just as lead, wheat, or any other product of this country is. I could understand the contentions of some honorable members opposite if it were proposed to have an inconvertible paper currency. It is beyond the ingenuity of any man to ascertain the amount of an inconvertible paper currency that any country could absorb; but a State note issue with a gold backing is bound to work according to the principle to which I have referred. The older I get the more convinced I am that there is nothing new under the sun. When something that is believed to be new is proposed, we make a great noise and indulge in much beating of drums, as if it involved the coming of the end of the world, and yet when we inquire we find that that of which we are frightened was adopted perhaps hundreds of years before, and that nothing serious happened. No one is asking the banks to circulate notes at all. There is nothing in this Bill requiring them to do so. lt is open to them to issue gold. They will be under no penalty - and I would be the last to suggest they should be - for doing all their business upon a gold basis. If they wish to deal in notes, what will they have to do? They will have simply to go to the Treasury with a thousand pounds in gold and purchase notes to the extent of £1,000. That, we are told, assumes the force of law. I do not think it does. What is the difference between what the Government is proposing to do, and what the goldsmiths of London, of the Netherlands, and the Low countries did in the middle ages before banks had commenced operations? In those days it was neither convenient nor safe to walk about the streets of London, or of any other big city with a quantity of gold in one’s possession. There was not the efficient police force we have to-day, and the man who did such a thing ran a good chance of receiving a crack on the head and being robbed of his gold. In such circumstances, therefore, men took their gold to the goldsmiths, who issued certificates to them, with which they were able to trade. The certificates of the goldsmiths of the Netherlands were good in London, just as the cheques of a wellknown firm, or the notes of the Bank of England, are.
– Or a bill of exchange.
– I do not know so much about bills of exchange. Everything depends upon whose they are. There is really no difference between these goldsmiths’ certificates and the notes which the Commonwealth proposes to issue. We have practically been travelling in a circle since those days. This practice on the part of the goldsmiths was really the origin of the banking institutions. The Venetians saw that they could do as the goldsmiths did in issuing certificates. They therefore accepted their customers’ money, traded with it, and whenever their customers wanted it,, it was there for them. It was, in reality, a banking principle, and a principle that still holds good. I can see no objection,, but one, to this Bill. There can be nodoubt that the real reason for the objection of the Opposition to it springs largely from party considerations, and from what I describe as the conservative instincts of the British people. We get into a certain groove and find it hard to leave it. Our fathers were in the same groove and we have followed them. It may be clearly demonstrated to the people that they can do better by taking a new course, but they do not like to get out of the old rut. We on this side know, for instance, that a proposal may be made to interfere with the customs and habits of the working people, and that although there is not very much in it, the very fact that it will mean a change of custom will cause those who make the proposition to experience far more trouble in carrying it into effect than they would have in bringing about a change of a more serious character. You may tax the people indirectly to the extent of ros. per head, and they will not make one-tenth of the noise that they will do when you propose to interfere with one of their settled custom’s. We have become accustomed to a banking system which is part and parcel of bur Australian life. The banks, of course, have been issuing notes for benevolent reasons ! They are very benevolent institutions ! I have not had any practical experience, but those of my friends who have do not tell me ti at they found them benevolent. Honorable members opposite, however, say that the banks have been flooding Australia with their notes, and have lost money in doing so. They say that the note issue has been a nuisance to the banks-
– Yet they do not like losing it.
– And yet they do not like losing it. I am inclined to think that it has been a very good business line for them; that it has paid them well, and their noise to-day reminds me of the complaint of Demetrius the silversmith, and the cry, “ Great is Diana of the Ephesians.” I hope honorable members of the Opposition will take up my challenge, and point to any country having a note issue similar to that proposed by this Government - a note issue with a gold reserve behind it- that has suffered from such a system..- I am not referring to an issue of inconvertible paper money. It is not to our credit to refer to our neighbours who have had the misfortune to have to face such an issue. What I ask honorable members opposite to do is to quote a parallel case to our own, and give any sane reason why a similar note issue should depreciate to 15s. in the £1. I know of no such case, and I do not think that any honorable member of the Opposition is prepared to take up my challenge. . Many authorities have been referred to during this debate, of certain of whom I do not think much. ‘In fact, I am inclined to believe that some of those who quoted them are greater authorities than the authorities they quoted. I take this opportunity, however, of calling attention to a passage from a work by Thorold Rogers, the Oxford professor of political economy who enjoyed the distinction of being a Radical, and lost his chair because he was. He was succeeded by another man, but Oxford found it necessary to ‘reinstate him, because a better man could not be secured. He is the only political economist of whom I know who puts labour first and capital and land second. I have been familiar with his works for a- greater number of years than I should like to mention, and I have never seen anything that he has written challenged or refuted. I wish that the young men of Australia would undertake to make themselves familiar with the works of Thorold Rogers. If they did so, they would lay down for themselves a foundation of knowledge that would be useful to them in every walk of life, and they would at least have the pleasure of holding sound views on important questions of to-day. It is a mistake to imagine that principles are not enduring. Undoubtedly principles are lasting. It is only when ohe gets away from them and comes to questions of expediency that one goes astray. The principles relating to the question with which we are dealing - the principles underlying currency and banking- are as true to-day as they were a thousand years ago. I quote the following from the chapter on “ Paper Currencies,” in Professor Thorold Rogers’ work, The Economic Interpretation of History -
The ingenuity of modern society is turned in all directions towards making its metallic currency as efficient as possible, and it strives with’ equal assiduity to make its paper currency as efficient as possible. Tt follows, therefore, that bankers cannot put more paper money into circulation than the public need. If they make an excessive issue, the excess comes back instantly to themselves, as the parties responsible for the engagement which the note implies. Again, if the community requires more paper currency than the banks are able or willing to give, either by legal restraint or by caution, the community will discover some paper substitute, which it will employ in lieu of notes. Thus, fifty years ago, bills drawn by the Manchester house of Jones, Loyd, and Co., on the Lon-, don house of Jones, Loyd, and Co., performed all the functions of a note currency in Lancashire, and brought no small profit to the ingenious firm, of which the head was the late Lord Overstone.
It. is sometimes alleged that paper currency has as effective an influence over prices as a metallic currency is admitted to have. But this is an error. Gold and silver influence prices when they are adopted as co-ordinate currencies in proportion to the cost at which they are acquired, the cost of acquisition being also affected by the cost of their production, when that cost conforms to the ordinary conditions under which industry is carried on. But neither cost of acquisition nor cost of production affect, to any sensible degree, the value of a note. Notes arc the representatives, the reputed equivalents of metallic money, and their acceptance and circulation at the full value of what they represent, depends on the conviction that they can bechanged into money at the pleasure or convenience of the holder. If they cannot be so converted, and still keep up their full credit, as happened during the first eight or ten years of the Bank restriction of 1797, it is due to the fact that the public knows them to be amply covered, and, therefore, agrees to use them as currency at their full nominal value. If such an issue is in excess, or is not sufficiently covered, the note is sure to be discounted, as happened during part of the last ten years in which the restriction endured.
But it is said, by virtue of discretionary power ci issuing notes, a bank can practically coin money, and so by supplying an excess of money, give occasion to wild speculation. This is a confusion between money, paper and metallic, and credit. If a bank could coin metallic money, it could as soon create an excess as it could by issuing notes. It would do nothing by such an act. If the money were in excess it could go out of the country. If the notes were, they would come back to the bank which issued them. No power can make any people take and circulate more money than they want. Of course, I do not mean that bankers should be allowed to circulate what paper they please.
Banks can assist rash speculation by granting indiscreet credit, though there is less likelihood that they will do so than other traders will, foi it is a fundamental rule in banking to deal with easily convertible securities only. Thus a bank will discount a three months’ bill having known names on it, because the security is short ; it will not advance money, if it be wise, on the mortgage of real estate, however ample the security is, because the term is indefinite, or, in banker’s language, a mortgage is a dead security. But banks may be deceived by fraudulent bills, or may be under the impression that the return will be quick, when it turns out to be delayed, or they may give credit to those whom they believe to be solvent, when they are not so. Credit may then raise prices, but it does so only because it is believed to be money, or to have money behind it. Generally, however, if not universally, the rising market precedes the indiscreet grant of credit, for the prospect of exceptional profit must needs go before the attempt to gain it. I do not deal with the cases in which credit is continued, after it is shown to be undeserved or incautious, where, I mean, the banker thinks that he can by timely help recover what is in danger. The effort is seldom successful, and is technically called throwing good money after bad. Nor do 1 deal with fraudulent banking on the part of the banker. This is a crime, though it is not punished always as it deserves to bc. I am speaking of business carried on by honorable and prudent men.
Neither note issues nor credits can be based on anything but money, or upon securities convertible into money with the least conceivable delay. Suppose, for example, that a bank has liabilities in the shape of customers’ balances, and notes to the extent of a million. It should have one-third of its liabilities ready at hand, in the shape of money, of Bank of England notes, or of deposits similar to those of its customers in the Bank of England or at call. It may have another third in Government stocks, on which it can borrow if it needs, or sell. It may have advanced the residue on commercial bills, which, in a strait, are also negotiable, though not as speedily or as safely as the securities which I have referred to.
What I desire to point out in regard to that passage is this : Here is one of the greatest authorities who has written on this subject stating that the necessary reserve against a note issue should be not less than 33 per cent. I give due weight to that authority, but, at the same time, point out that it is held by many persons having practical knowledge that a reserve of 25 per cent, is ample. In fact - I have not the quotation with me just now, but I have been blessed with a good memory - Sir John Lubbock, now Lord Avebury, some ten years ago said that only 3 per cent, of gold was necessary for carrying on the normal trade of England. In other words, 97 per cent, of the transactions of England can be conducted with not more than 3 per cent, of gold. To be fair to the House, I have quoted the opinion of
Thorold Rogers putting the margin at 33. per cent., but nevertheless I feel convinced that 25 per cent, is ample security. There is one matter which I should like the Government to take notice of. As the honorable member for Fawkner has suggested, there may be times of crisis and panic. I hope we shall never see such times again in Australia. But still they may occur. What is possible then? In such an emergency the Government would easily be able to get over the difficulty that occurred if there were a section in the Act such as the Prime Minister has promised to consider and deal with later on. I hope that he will deal with it speedily. Personally, I think that no harm would be done if such a provision were placed in this Bill. There should be power for the Governor-General, after the Treasurer of the Commonwealth had consulted with two or three of the leading bankers, to declare Commonwealth notes legal tender for three or six months. If this power ought to be intrusted to the Government, why should we leave it to be dealt with later on? We never know when unfortunate events may happen. A crisis might occur when Parliament was in recess.Of course, if Parliament were sitting, I have not the slightest doubt that a Bill would be put through as speedily as possible. But it is not wise to take the risk of having to collect members of Parliament from all parts of Australia to deal with an emergency. We have an example in the case of the Bank of England. The Bank of England is looked upon - and rightly - as one of the greatest and soundest . banks in the world. I thoroughly believe that it is so. I have always pinned my faith to the Bank of England. It may be regarded as being partly a State bank, though it is really under the control of a’ number of proprietors, who draw ample dividends from its trading. To all intents and purposes it is in a real sense what its name implies - the Bank of England. Its Governors have on all occasions given wise counsel to various Chancellors of the Exchequer, and it has always been an advantage to them to be able to consult with the managers of this great institution. What has been the case in regard to bank notes in Great Britain? I will not go into ‘the history of Peel’s Act, but honorable members may know that Sir Robert Peel acted upon the advice of Lord Overstone in framing that measure. Lord Overstone mixed up the cheque system., which he had originated-, with the note issue of the bank. T suppose it was feared that there might be an overissue of notes, and therefore the note issues were restricted. The power to issue notes was taken from country banks and intrusted to the Bank of England. AH the banks that went out of trading, so far as their right to issue notes was concerned, handed over to the Bank of England the right to take up the notes which they had been in the habit of issuing before they closed down that part of their business. Power was also given to the Chancellor of the Exchequer to suspend the bank charter and to allow other things to be done with the approval of the Government, in order to meet a financial crisis. Such a crisis, and this is within my recollection, occurred in 1859. Another crisis occurred, as I recollect well, in 1867, when the. banking firm of Overend, Gurney, and Company smashed. Those who were born in London and were living and working there at that time, well know what panic and disaster occurred. At that time Mr. Gladstone gave authority to suspend the charter of the Bank of England. He authorized the issue of£1,000,000 in notes, with the result that the rush was stopped. Within three hours after the news was circulated the panic was at an end. That shows the advantage of a power of this character. We had experience of a similar kind in Australia in 1893. Fortunately, at that time, one of the States of Australia, New South Wales, had a statesman and not a fool at the head of its affairs. Sir George Dibbs’ action in dealing with the crisis saved the credit of New South Wales, and, I may add, had the effect of saving the credit of other States as well. I, at any rate, know of one State to whose affairs a considerable difference would have been made had it not been for the energetic action and the statesmanship that actuated Sir George Dibbs at that time.
– In propping up a private issue.
– The fact that a private note issue was sustained is not the point. The saving of the credit of the State prevented an immense amount of suffering to comparatively poor people. It is no doubt true that the proprietors of the banks were for the most part rich men. I do not wish it to be understood that I desire rich men to lose their money, but 1 do say that the loss of a thousand pounds to a rich man is not more than equivalent to the loss of a pound to many a poor man. It is the poor who suffer most in times of financial crisis. The workers feel the pinch. I ask the Prime Minister and the Attorney-General to look carefully into this matter before the Bill goes through. The Government know that I am not an alarmist. I do not say that any crisis is likely to happen. But I should like to safeguard the interests of the people in a matter of this kind just as if we were actually faced by a crisis. I intend to support the measure. I give a hearty support to it. The only other point which I have to make in regard to it is that, in my opinion, the Government will find that there is an element of weakness in their proposal, inasmuch as a currency of this kind should be attached to a bank. I believe that the Government are strongly in favour of the establishment of a Commonwealth bank. But I venture to say that, whether they like it or not, the very fact of the issue of these notes will compel them to take steps in that direction.
– We are pledged to do so.
– The pledge is right enough; I have no doubt that our party is pledged. But we all know that a Prime Minister, having before him a programme like that of the present Government, has to put certain measures in front. Some must, therefore, be crowded out. But in the very nature of things, this matter of the establishment of a Commonwealth bank cannot be crowded out for very long. I trust that honorable members opposite will not say anything in the course of this debate that will have a tendency to cause a fright amongst the working people of the Commonwealth with regard to the solvency of the Commonwealth notes when they are issued.
– In rising from this side of the House to give my hearty support to the measure now under consideration, I desire to say that themain principle underlying it is one to which I can give complete adherence. I can do so in full consistency with views that I have previously expressed in this House and elsewhere, and also in consistency with views that I expressed before the electors. My only regret is that the extension of my support to the Bill brings me out of accord with my own party. But it is one of the glories of our party that we can differ as to details and yet work together for a common end. The Bill before us is one of the measures which, whatever Government were in office, would have had to be enacted. Its aim is to secure national control over the currency of the country. As to the exact means by which this control should be exercised there may be a variety of opinions. Upon the details of the Bill itself I hold the right to differ from the Government. But as a matter of .principle, I hold that the Government of the Commonwealth ought to control the currency ; and if there be any profit - though the Bill is not introduced for that reason - it should belong to the Commonwealth. It is the duty .of the Commonwealth Government to take this step in the interests, and for the protection, of the people, and to enable the commercial operations of the whole community to be carried on with safety and confidence. I believe that no man in this House has a greater right to call himself a Nationalist than I have. It is sometimes claimed by ‘honorable members opposite that it is their distinction to be Nationalists. Perhaps there is something in that contention. I have had to regret that the party with which I have been associated in politics have inclined too little towards Nationalism in their view of some questions which must necessarily come before this Federal Parliament. In defining my own Nationalism I take the Constitution that has been given to us by its framers, the fathers of our Federation, and I say that, within the ambit of that Constitution, I am prepared to exercise every right which it confers upon us. Not only would I do so much, but I think it distinctly necessary that we should. The framers of the Constitution had thoroughly considered what they were doing. They allotted certain powers to this Parliament. It was not intended that those powers should remain in the Constitution without ever being exercised. Therefore, I fully approve of the Prime Minister’s brief statement, that the Bill is well within the four corners of the Constitution, and that it had evidently been intended by the founders of the Federation that this particular power should be exercised at some time. I ask myself this question, “ Can it be considered that the Government are acting too hurriedly, if nearly ten years after the Federation was inaugurated they come to the Parliament and ask for wide powers to institute a. national currency and take control of it?” And I am forced to admit that if it was ever intended to exercise the power, and I believe that it was, the sooner it is exercised the better for us, and, as I hope, before I sit down, to be able to show, the better for the banks, too. I have to admit that, theoretically, I go almost further than the most advanced member of the Labour party in my notions about money. I am a paper man. I believe that paper is the money of civilization, that the higher the civilization the more paper it will use, and that the highest civilization will use nothing but paper. At the same time, I recognise that in the case of many theories which we have it is not expedient, probably not safe, to put them into execution before the world is ripe for them. I feel very certain that this question of paper money is becoming more and more important, and that the world is growing gradually more and more willing to listen to the arguments of those great thinkers who have been pressing it upon its consideration. The whole question is undergoing a rapid transition. There are many theories of currency which are now developing, and which may shortly be expected to crystallize, into generalizations of law, and on these we can found by deduction from history, experience, and commerce, legislation which will enable us to use only paper money, and yet be thoroughly sound. The argument of my honorable friends on this side is that all history is strewn with the wreckage of many currency systems based upon paper. That is only too true; but if we went on a railway line and saw a . lot of wreckage, would we condemn the system of railway travelling? On the contrary, would we not ask, “ Has there not been some defect in the locomotives which produced this disastrous effect ?’ ‘ So it is with regard to paper money. The honorable member for Fawkner has given a number of historical instances where paper money has been unsuccessfully used. He has given, or briefly referred to, other instances where it has been unsuccessfully used at a period in a nation’s stress, when it had to be used for national preservation. I shall be able to show that without its use it would have been impossible to preserve the union of the mightiest Federation that speaks our tongue. But we must not “take the defects of a system for the system itself, and we must ask whether the laws which the advocates of paper currency point out must be observed have been observed in those instances where the currency has notoriously failed. I take it to be almost axiomatic that a paper currency without an ounce of gold backing, made a definite legal tender, and not issued in excess of the requirements of the community for whose service it is issued, can never fail, and that the reason why paper currency has failed, as it has notoriously failed, has been that in nine cases out of ten it has been issued in excess of the requirements of the country - through the exigencies of unwise or unjust Governments - and so has brought disaster. But, in any case, we can get a good system of currency in a variety of ways. This evening the honorable member for Fawkner pointed out several ways by which we could make an arrangement with the banks to get a thoroughly sound system of currency, and said that the banks were ready to meet us and make some such provision. In the Library I can find works by very able, general writers on this subject, who point to the fact that, in the world, there are fourteen or fifteen- different systems of currency based upon this or based upon that - two metals, one metal - and all of them operating with fair success. It is not in these differences that we can find any assurance of the success of a currency. But we can find it in the honesty of a Government, and while the failure in the past has been notoriously attributed to the dishonesty of Governments, in my opinion we are approaching in the world’s history a period when we can rely upon the honesty of a Government to control this great engine of commerce, and to make it safe and firm for all the purposes of- modern civilization. If it is stated by the speakers from this side that the banks can regulate the currency of the nation better than can the National Government, why should not the banks, as the last speaker asked, control the metallic currency ? In a minor degree the same circumstances exist. They say that there is a large profit on the paper currency. There is a considerable profit on the silver currency, which I had to fight for years in this House to get. It is only a question of degree whether we should take the profit of a forced loan on the silver currency or whether we should take the profit of a forced loan on a paper currency.
– After all, there is no forced loan. We cannot get enough silver for the people’s requirements.
– I am using words which have been used in argument against the Bill. If the banks can control the necessary paper currency, so much better than can the National Government, then certainly the former can control the metallic currency better than* can the latter. I had the pleasure of seeing with you, sir, the other day, the famous Mitchell Library, a treasure house of all the important documents and articles which refer in any way to the history of Australia.’ In that magnificent and rich collection, bequeathed to the nation by one of its most patriotic citizens, there is a number of old colonial tokens, nearly 300 of them, and many of which I remember using. In the far away days of my boyhood those copper coins were legitimate currency. -We accepted them one from the other, they passed like wildfire amongst us, and served the purposes of currency very fully. But there came a time when a panic set in about these tokens, and the Government had to step in and stop the issue of them. Now they would have been as sound as gold or paper so long as the national faith in them had been kept up. Again the very cause of their downfall was the over-issue of them, and just as the private tradesmen in over issuing copper coins brought them down like a house of cards, so any Government which over-issued paper could bring clown that system. If we were to adopt some of the suggestions made to us by the. opponents of the Bill, and simply seek to leave the benefits of the paper currency with the banks, we could arrange, as they suggest, with the banks to give so much a year to the Federation for the right to issue the paper money, subject to such control as the Government or the Legislature chose to impose. But, then again, if that is sufficiently good, why not sell the right to issue the metallic currency ? I undertake to say that no honorable member on either side of the House, and no member of the community, would agree to the nation handing over o< the banks the control of the metallic currency which is already exercised by the Federal Government. Now the authorities in favour of State control are not so few as some of my honorable friends think when they quote the names of this, that, and the other great writer and politician in favour of it- Mr. Gladstone, than whom I should say we could not have a better authority, was not only a great thinker, but the most practical statesman whom- England has seen for the past century, at any rate, in dealing with State financial and banking questions. When the bank charter was being revised. in 1866, Mr. Gladstone said distinctly -
All the profits of the bank-note issue belong to the State, and, what is more important than the profits, the responsibility of issue belongs to the State.
I had marked a long passage by John Stuart Mill to quote, but the honorable member for Richmond saved me the trouble by reading it the other afternoon in a speech to which, by the way, I should like Lo bear my testimony of appreciation, although I differ from his deductions. It was a splendid speech coming from a new member, and the House is to be congratulated upon having as one of its members, a gentleman who displayed such a wide knowledge of his subject and dealt with it so ably. . In reading the passage to the House the honorable member set forth how Mill admitted that the convenience of this system of paper credits was so growing that the profit from it was great and likely to be greater. Mill went on to say that that being so, he thought that the profit should belong to the State, and later he modified that opinion somewhat by the statement that if in the multitude of the very onerous duties which Governments find themselves compelled to discharge they found sufficient time to deal with this matter, he thought that they ought to do so. He made that qualification, and also a further suggestion, similar to the one which lias been made from this side, that the Government might go to a bank and say, “ We give you power to issue so much paper money under certain restrictions as to reserve and so forth, provided that you give us £14,000,000 without interest.” That, however, was only one way of getting both control and profit, but the honorable member for Richmond drew the deduction that Mill’s whole argument was in favour of the latter course. I say it was not, because Mill states that if the Government, with its multitudinous and onerous duties, thinks it right to take the matter up, it should do so. I. should like to point out the real political character of Mill. He was the chief exponent of the laissez-faire system, and when a man, who wishes to restrict government action in all directions, says that the Government may do this, it is fairly safe to assume that he really means- that the State ought to take the matter up. The honorable member for Richmond, who spoke of the honorable member for Calare cutting his quotation .too short, did not notice a further reference to this question, in which Mill, after pointing- out the success which had attended the’; operation of the Scottish banks - a system somewhat similar to the Australian - and saying that if they could get that system in England it would be much better than the one then in force there, added that the experience in England of the working of these joint stock banks showed it to be so notoriously rotten that he hesitated to say whether they would be found safe enough south of the Tweed. I have not given Mill’s own words, because the extract is very long, but that is absolutely their effect. I think, therefore, it will be seen that Mill took up the position that it was a matter for grave consideration whether the whole control of this question should not .10 over to the State, but that it was a matter for no consideration whatever that the whole of the profits and the indirect control, at any rate, should be in the hands of the State. The movement of all political and philosophical thought since Mill’s day has certainly been in the direction of enlarging, rather than restricting, the functions of government. I could go to other authorities, such as Ricardo, McCulloch, and Thorold Rogers, who was referred to by the honorable member who preceded me, but I should like, to quote an authority nearer home, in Mr. Russell French, one of the gentlemen engaged in the management of these very banks. In 1897, very shortly after the big bank crisis, Mr. Russell French said, among other things -
When abnormal conditions, such as periods of crisis, supervene, the Act of Parliament by which the issue is authorized has to be suspended in order to do away for the time being with the rigid regulations which prevent expansion.
He then advocated the issuing of Federal notes, to become part of the securities held by the banks, and said further -
Such a note, having Federal sanction, and resting, apart from the coin basis, on the credit of the whole Federation, would be a wholly satisfactory circulatory medium in ordinary times and for ordinary purposes of business, and would serve as a bulwark of no insignificant strength to resist and overcome the results of panic. . . . And as a practical consideration, it can scarcely be denied that a uniform note system common to the federated colonies, would conduce in some degree to the convenience of the public, and would be much more cheaply administered in the matter of working expenses.
That is a big admission to get from one of the most prominent banking officials in Australia. Although I cannot find in our own Library the report of the Conference of Australian Chambers of Commerce at which this speech was made, I found, on looking it up at the Chamber of Commerce to-day, that while Mr. Russell French admitted that the banks had, against apparent reason, been successful in the past while carrying on business under State divisions, he foresaw that that success could not be expected in the future. He looked forward, like the rest of us outside, -to a time when Federation would come, and we should have a note common to the whole of the States, and means whereby the banks could use this note and still be in as satisfactory a position after they had lost the control of the currency as before, by reason of the other advantages obtained from Federation. I should like, in justification of my contention that this reform would be better for the banks in the long run, to refer to a work called Rational Money, by Professor Frank Parsons, of the Boston University. This very informative work was written at the request of certain thinkers in the United States, who were interested in the question, and its author, in addition to being Professor at Boston, was also Professor of Political Economy in Kansas, and the author of several works, well-known in America, on currency and banking. Dealing with the various schemes of currency reform and - other propositions that have come before the public, he says -
There is another movement more to be regretted than either of those just named. I mean the movement to retire the national notes and give the whole money field to the banks.
Some people in the United States are contemplating a removal of the present national note, which is only a limited one, and the handing of the note issue over to the banks - the reverse of what the Prime Minister is doing here -
The people are asked to retire completely from the money question.
He objects to that, and says -
Indeed, it may be confidently affirmed that if the people are to realize the fullest benefits of a wise monetary system, the banks must become public as well as the management of the money-volume. It is not absolutely essential to control credits in order to control prices, for the expansion and contraction of credits can be counteracted and overcome by a sufficient change in the money-volume. But it would be of great advantage to the people if loans and credits were managed in the public interest as well as the money-volume.
But the chief extract I wish to make from this work is -
Our banks are organized for private profit, not for the public weal. In times of rising prices they naturally issue notes and extend credit to the extent of their power, thereby increasing the boom.
I contend that that applies absolutely to Australian conditions to-day, applied to them just prior to 1893, and will apply for all time to them if the present circumstances continue, and prior to every panic -
In times of falling prices they naturally withdraw their notes and credits in self-protection, thereby producing- or intensifying depression and panic. They aid the rise of speculative excitement, and then in times of danger and collapse they withdraw their assistance from the people just when they need it most. To diminish public money and government action, and increase bank money and bank action, is to increase the instability of the money system, intensifying both speculation and panic, emphasize the evils of rising and falling prices, and place the entire control where it will be used for private gain and not for the public good. The whole machinery and management of money and credit constitute a most vital national interest, and should be put into the hands of trained public servants,, acting under careful regulations for the people’s benefit. Even an ordinary government system would make loans and discounts more difficult or contract them in times of speculative tendency, and in case of stringency would extend their loans instead of calling them in. In England and France the great quasi-public banks have adopted this policy to some extent with most beneficial results.
I contend that if the power of issuing paper money is assumed by the National Government, in the long run the banks will benefit. Private banks should exist. I differ on this question from honorable members opposite, holding that currency and banking are separate, and that it is not necessary for the Government to engage in banking business. Banking exists for dealings in credit, which affect individuals mostly, and private institutions are the best for such purposes. When a run on a bank occurs during a financial crisis, it is not a question of getting 20s. for the -Qi note. The run commences with a demand for the repayment of deposits, and when the panic has lasted for some time, the note-holders become anxious, and begin to ask for gold for their notes. The banks, to preserve their prestige and solvency, must always protect their notes, but this lowers their chance of staving off a financial crisis in respect to other greater and more important liabilities. We should relieve them of the duty of finding currency, leaving them free to keep up the ordinary credits required for the transaction of the commerce of the country, and able to exercise their necessary powers when they are most required, instead of restricting them. This has been found to be necessary in the case of the Bank of England. In an effort to remedy matters, the bank was divided into an issue and a banking department, but, as many financial writers have pointed ‘out, things are now worse than ever, because the credit of two institutions has to be propped up with such variable reserves as each may have. The soundest position is for the nation to look after its currency,. leaving its banks to look after the credit of its commerce and the advances which are necessary therefor. The history of the Bank of England, the Bank of France, the Bank of Queensland, the Bank of
New Zealand, and other institutions shows (.hat the tendency of the Government to take control of the currency is steadily growing.
Let me make a brief reference to an outline of the history of the Bank of England. given in a lecture on the subject by a banker -
On the 27th of July, 1694, a charter was granted to the “ Corporation of the Governor and Company of the Bank of England,” the management of the company being in the hands of a governor, a sub-governor, and twenty-four directors. The original capital of the company (£1,200,000) was subscribed by forty merchants of the City of London, and the whole of it was lent to the Government at 8 per cent, per annum. The bank also received an annual allowance of £4,000 for administration expenses. In these days, when the Government can borrow ;at 2^ per cent., this 8 per cent, looks a high Tate of interest; but in 1694 the Government had, when borrowing in the City, to pay from 10 to 15 per cent., besides paying a big commission. This loan of a million was the start of the National Debt, which stands lo-day at over £750,000,000.
The charter of incorporation was granted to the company for a period of ten years, and gave the bank the right to issue bank notes, payable on_ demand, to an amount not greater than its paid-up capital. The charter has been renewed from time to time, and the powers of the company have been var.ied.
At the commencement the bank had nothing behind it but the credit of the nation, and was, .to all intents and purposes, a Government institution. As time has gone on, its charter has been extended and amended, and more and more control has been exercised by the State. The bank has served its purposes well, but at its initiation had nothing behind its notes but a debt due by the Government.
– That is a very solid capital.
Mr.- G. B. EDWARDS.- If a Government could be trusted by a bank, I should say that it could be relied upon by a people. The Bank of England is one of the most magnificent institutions of modern civilization, yet it has had to suspend payment, not once but several times, when the
Government have had to come to its assistance, either at their own initiative, or at the request of the directors, and make its notes, not legal tender, but nonconvertible. This has been done from time to time illegally, and some honorable gentlemen propose that the same thing should be done here. Some of those on this side think that, to prevent panics, the Government should provide that bank notes should at any time, for a period not exceeding six months, be non-convertible, while honorable members opposite wish to apply those conditions to the Commonwealth notes. ‘ I do not consider that that is necessary. If we have not a currency which can be relied on to meet the ordinary needs of our commerce and trade without such methods, we should devise some other system. I believe that with the present system we can obviate some of the difficulties which honorable members foresee. At the present time the reserves of gold in the Bank of England fluctuate between £38,000,000 and £40,000,000, including the reserves of most of the banking institutions of Great Britain. The liabilities of these banks are roughly estimated at £1,000,000,000, showing how the gigantic operations of commerce are based upon a foundation of credit or of simple trust. We have a like position in Australia. Our paper currency, exclusive of the Queensland Government note issue, amounts to between £3.500,000 and £4,000,000, and our bank gold reserves to between £26,000,000 and £28,000,000; while there are from £43, 000,000 to £50,000,000 on deposit at call, and other deposits, and liabilities accruing amounting to £70,000,000. Yet we are told that there are six sovereigns behind every £1 note issued by the banks. It is ridiculous to talk in that way. Such a reserve is not needed, and does not exist. The credits in commerce and trade, and the operations of a paper currency, are based on these gold reserves which have to support the two. If we have a simple, workable proposition, and an honest Government, we do not require any protection beyond the ordinary protection of convertibility, for purposes of expansion, provided for in this Bill.
– You have, as against the deposit, bills discounted, and I remind the honorable member that they balance.
– I know that they must balance, but my point is that deposits at call must first be met if there is a run on a bank.
– The call in England is about one- tenth.
– I am speaking of deposits at call, and the honorable ‘ member should not forget that I have separated the two things. I say that deposits at call are the first charge on the gold reserve of a bank. That cannot be denied, because it is not until after a rush has set in that the general public begin to lose faith in the notes of a bank. I shall not weary honorable members by going over the arguments which have been used against this proposal. The Argus, for instance, refers to the fact that a man does not want a promissory note for £1 for its own sake as a piece of paper, but because it represents a sovereign payable on demand. I say that he does not want the bank note because it represents a sovereign payable on demand. It is not the gold, silver, or copper money at the back of the paper which makes its possession desired, but it is the faith that its possessor will be able to pay for commodities and to meet debts, dues, and taxes up to its face value. I say that if we had a currency wholly of paper governed by such safeguards and limitations as I have suggested for an ideal system - that it must not be in excess of requirements, and must have the power of the Government behind it - we should have a system which the people would always have faith ‘in, and its current value would be the value of ‘gold at the time, because it would always be used instead of gold. I say that in such circumstances, even a reserve would not be necessary. It would be unnecessary to have any gold reserve, if we had these severe restrictions and an honest Government. Wool, leather, timber, iron, any one of these would be as good as gold, and together would be better than gold, because they would be more realizable at times than gold. Peculiar positions arise sometimes, and we know that only a few months ago it was impossible to get cotton for gold. Although the world had cotton, it was not available even for gold. Speculators had cornered cotton just as on other occasions they have cornered wheat, and it has been almost impossible Jo buy it until the cornering operations are concluded, and the goods have been released for purchase.
– Does the honorable member say that he could get for notes what he could get for gold ?
– I do not say so. I say that although we have not yet realized it in Australia, and the world has not become conscious of the danger which lies in that direction, people in America have had their eyes opened to the fact that it is possible to corner gold. That is going to be one of the great troubles of the world before very long. Some of these gigantic financiers and multi-millionaires will get their heads together at some time, and so rig the money market that the price of gold must go up« They will reap millions out of it, then release it, and reap millions more. I have been arguing for a paper currency simply for internal currency purposes, and not for the ideal position, when gold must take its proper place as a mere commodity. I should like to direct the attention of honorable members to the fact that, while gold is worth, roughly speaking, £4 an ounce, every ounce of gold won in the world costs nearly £6 to get. It is all a worthless expenditure of human effort, energy, brains, time, and money, because gold, at that price, as a medium of exchange, is given a fictitious value, and if we ceased to use it for internal currency, its price would depreciate to probably lower even than that of silver, because it would then command value only for its use in the arts. I say that an ideal civilization will have all paper money for its internal currency, and its external exchanges will be effected by goods and commodities, of which gold will only be one.
– Has the honorable member anything in mind to take the place of gold?
– Yes, paper, with the authority of the Government behind it, and issued only in severely limited volume, proportionate to the needs of the currency. 1 do not say that I would advocate the adoption of that ideal system straight away, or that it would be possible to carry it out at or,re.0 1 think that the provision in the Bill for a reserve of 25 per cent, of gold is absolutely required, and I shall tell the House why. The system must be made elastic in some way. We could have no fixed system of currency upon a calculation that the needs of Australia would be £5,000,000, £7,000,000, or £10,000,000, waiting for a few years to see how things would develop, and whether we should rot require to provide for a few millions more. There are times when an expansion of the currency is absolutely necessary. These periods are differently described. They are known as “ quarter days “ in the Old Country, in America as “ the moving of the crops,” and here as “ harvesting time.” There is bigger need of money then than at other times, and we must have some simple and automatic way of swelling the volume of the currency during the period of its greatest need, that the operations of the market and exchange may be carried on without interruption. Provisions for expansion are easy to make, but expansion does not give elasticity. Elasticity does not mean merely expansion, it means the power to expand and contract, and I say that, in the Bill before us, with its provision for a 25 per cent, reserve of gold, and notes convertible into gold at the Treasury, we get the two forces at work which provide elasticity. The Treasury is naturally anxious to issue these notes through its public servants, and in public expenditure for national works. On the other hand, the banks, when they find they have too many of them, will be equally desirous of passing them back to the Treasury. These two forces working together
Will give the elasticity in the currency that is demanded, but whether they will give sufficient elasticity or not I am unable to :say. I think it can be made to serve the purpose of expanding the currency at the demand of people desiring counters in the game. That is really all that the currency amounts to. The keeper of the gambling saloon issues to the players a number of chips, and when the game is running high, more chips are required and applied for, but one after another of the gamblers retires, and gives in his chips to the keeper of the bank in exchange for gold. Without ex-‘ posing too much the secrets of the charnel house, I would say that the principles followed in ordinary private gambling operations are those which we need to apply to the national currency j that is to say, we need to be able to expand and contract it to meet the needs of the moment. The Argus tells us that history is full of warnings for us of what is going to happen if we adopt, not a particular form of paper currency, but any form of paper currency at all. They ‘have gone beyond the first picture which they drew of the At torney-General turning a mangle to make the paper, and the Prime Minister turning another to print the notes. This was the more or less ridiculous way in which the proposition was first received. As time goes on, however, the attitude, not only of the leading newspapers, but of honorable members themselves, has changed. In this very debate we have seen many of these notions passing out of the minds of honorable members, who are looking at this question more as one to be seriously considered ; and, I venture to say, that many of them are finding that some of their objections to the proposed system are vanishing. The Argus refers us to history, and tells us that the world is full of examples of the evil consequence’s following on the issue of paper money. I cannot at this time turn to the many historical references I have here, but I should like to direct attention to some of the American examples. It has been said that paper money caused wreck and ruin in America ; and undoubtedly some of the early colonial issues were disastrous for reasons I have given. But the biggest “ disaster “ in America, if it were a disaster - the greenback - was absolutely necessary for national purposes. Again, what was known as continental money in the early days, when America was fighting Great Britain, was necessary to the Americans in wringing their freedom from the Motherland. It is an historical fact that a great deal of the depreciation of this old continental money was due to the hostility of England, exhibited in a most unscrupulous manner. Thousands and thousands of these notes were printed in England, surreptitiously introduced into America, and sent broadcast amongst the people in order to depreciate the currency. In fact, General Clinton wrote to England a letter saying that he had done all he could in this direction, but even that had not resulted in beating the colonials, who were surviving in spite of all his efforts. The fact remains that it was this paper money that enabled America to successfully fight Great Britain - it was the greenback, bad as it was, with its train of evil consequences, that preserved the Union. Then, as I interjected when the honorable member for Hindmarsh was speaking, it was the assignats of France that enabled the freedom of western civilization to be established on a higher plane than it probably would have attained for another half century. These are not the only ways in which debts are created by necessary or unnecessary wars. Our own national debt represents” a pretty tidy sum that can be set against the abuses of those forced national issues of paper in times of great and dire national disaster. But it is not to these forced issues that we must look for some guidance as to how paper money can be worked. I should like to take honorable members back to very ancient history and show them the success of money issued in paper form with nothing at the back of it. The original form of money was probably cowries and cows. We have been told of one money driving another out of existence j and we may be sure that the cows used in Massachusetts to pay the taxes were all the poorest, the good ones having been eaten. These cows and cowries were probably succeeded by hides, tiles, iron plates, bronze plates, and so on to coined money. An early form of money was stated by Ruskin to have been a piece of an ox hide ; and I am reminded that the very word pecunia refers to the oxen from which this early money was made. Probably, as the whole hide would be too big to cart about, a piece was cut or punched out in a peculiar way, and passed as representing the credit for that hide. The man, when he went to claim that hide, would fix the piece in, and thus be able to recognise his own. The first use I have heard of money made out of leather in a more artistic form was when blind old Dandalo, the Doge of Venice, was making an attack on Constantinople. I think he had with him the third crusaders, who had promised him a lot of money for ships in which to make their voyage-; but these crusaders, as we know, were always short of money, and when they got on the high seas they were unable to pay, so that the old Doge couldnot pay his men, or buy stores for the ships. He, therefore, stamped out pieces of leather with his own coat of arms, and gilded them, and these passed through the fleet, and all over that portion of the East where his operations extended. They were accepted by the old feudal knights who had set out to fight for the Holy Cross ; and. when they got back to Venice, a considerable time afterwards, the whole of these little bits of gilt leather were redeemed. This opens up a novel question. In the early history of the world paper money was impossible, because Govern ments were not honest enough. Venice stood out peculiarly as the most honest of all known communities. The Venetianswere bad enough, perhaps, in their private- lives, but in regard to their city, they were patriotic, self-denying, and straightforward ; and their reputation as merchantsthroughout the world stood high. In the twelfth century the Venetians had another occasion to make an attack on Constantinople, and, they had been in so many warsrecently, they had no money in their Treasury. The Fathers of the city invited the citizens to subscribe to a public loan, for the purposes of an expedition for an assault on the Emperor Manuel. This loan was subscribed liberally, and it was irredeemable, but bore interest at 4 per cent. Themoney was paid into the bank to the credit of each man, and certificates given ; and this formed the Bank of Venice. That money was never paid back. More money came in, and the total was swollen from year to year ; and the position was so satisfactory that the Government refused to pay any more interest. They told the people that they must place their money in. the bank without interest, and irredeemable at that. That seems inconceivable ; but money was paid in by thousands of pounds. Honorable members have been asking tonight whether we know of any paper money that ever held its value against gold ; and I tell those honorable members that the paper money of the Bank of Venice was invariably above par - as much as 40 per cent, above the price of gold.
– That was because they had a mixed currency.
– In Venice they had the whole currency of the world, but still they, by some means - and they were shrewd enough - roughly ascertained the value of the various gold pieces, and the gold pieces were stated in terms of value relatively to those paper credits. As T have said, those credits always stood at a par with gold, and, in some instances, rose as high as 40 per cent. over. Why It was because of the justification the people had for believing that this institution only existed for currency. The Government, when they had too much, paid off their depositors, and when they wanted more they invited fresh deposits. This bank was the forerunner of the Bank of Genoa, the Bank of Amsterdam, the Bank of the Netherlands, and the o_ other banks mentioned by the honorable member for Hindmarsh, and the founder of our system of commercial credits. This was done without one ounce of gold reserve, without an asset of any sort, and simply on the faith of the people in the Commonwealth and in the city where it was started. That very institution went as far as England, for its paper money was used in making settlements under such a rough clearing-house system as was then in operation there. Those of us - not many, I hope - who are acquainted with the three balls that hang over those places of business to which we have occasionally to go to raise a little money will recognise in them the arms of one of the Venetian founders of these old money-lending institutions. That is, briefly, what I wish to give of the history of the foundation of this credit system. While banks and paper currency systems of mushroom duration in America and the southern republics of South America have, for one reason or another, fallen to ruin in all directions, this bank without any assets behind it, without any gold reserves, existed for 500 years. It might have been existing to-day but for Napoleon, who had it abolished. This is ancient history, but it is history extending over a period of 500 years, and is incontestible. There is only one little matter of modern history to which I care to refer at this late hour, and some honorable members will think it a rather childish argument to introduce into this debate. I have, however, my own views, and this case will illustrate my faith in providing for the necessities of the State with paper money. The little island of Guernsey has a Legislature of its own. The community there is very small, and one can trace the operations in such a community with far less mental effort than is necessary to trace a similar operation in a larger community. Guernsey, which had a Parliament of its own, as well as an Executive, and all the paraphernalia that we have for administering the affairs of this Commonwealth, felt the need of a new market. It was found that it would cost £4,000 to reconstruct the old building for the purposes required, and the Government said, “ We cannot raise the money.” A man named John Jacob, however, came to them, and said, “ I will show you how to find it. Issue £4,000 of paper currency, pass a law to make the notes legal tender, pay your workmen and buy your materials with that £4,000 of legal tender paper currency, and you will succeed. All the people will take the paper, for they want to secure this market.” His advice was followed, and in twenty odd years the notes were all paid off from the rents of the market. The market was built, the paper currency was retired, and the people had the satisfaction of securing market buildings, and of obtaining from them a revenue for all time. I ask the critics of paper currency to point to a flaw in that operation. Certain Americans, given to the consideration of this question, and applying to it keen minds and close scrutiny, have said that it would have been possible for the Government of the United States, by the adoption of the same system, to have built the transcontinental railway, so that it would not have cost the American people one cent. I am afraid I have exceeded the bounds of ordinary patience, but I rose late in the evening, and I have vet to refer to one or two features of the Bill itself. I do not. think the Bill wilt give to the nation any of the vast pecuniary advantages that either its promoters or its opponents appear to anticipate. I think we shall get some advantage from it, but I am supporting it simply because it will give us the necessary national control over the whole currency.
– I said that it erred on the side of caution.
– Some parts of it probably err, not on the side of caution, but from a mistaken notion as to what their effect will be. Clause 11, for instance, is very objectionable. It contains a principle to which I think it will’ be permissible to refer at this stage. I cannot understand the intention of the Government in inserting it. It is needlessly irritating. It puts upon the banks a veryonerous task, when the Government should’ be endeavouring to secure their co-operation, and it is not required for the purposes of the Bill.
– I do not feel very stronglyon it.
– I read that the honorable gentleman said that he proposed to amend it, but I think that inmoving the second reading he might haveintimated in what direction he proposed to* amend it.
– I did.
– I believe inmaking these notes legal tender, but clause; 1 1 goes beyond that. It means an enforced currency. In effect, it says to the banks, “ You shall not .pay gold if you wish to do so. You shall pay notes if they are demanded by the applicant or the client.” The only other objection that I really have to the Bill is the immense power taken under it by the Treasurer. I am not speaking of the Treasurer personally, but the Bill gives to the Treasurer of the day powers that I would not vest in any Treasurer. Under it the Treasurer will be formed into a limited company- of one with control over the whole system. We could scarcely find a man fit to be trusted with such powers. I hope that before the Bill passes through Committee the Government will see the wisdom of associating with the Treasurer, representatives of, say, banks and chambers of commerce, to work with him as a Board for the regulation of the issue and the restriction of the currency from time to time, as well as in connexion with the investment of the funds. The provisions made for checking this currency are one of the extraordinary features of the Bill. The destruction of notes under a large currency proposal is one of the most important and laborious undertakings of the system. Yet the checking of this business is left in the Bill to an officer to be named by the Treasurer when it should be entirely in other hands. What is our AuditorGeneral for if he is not to check such operations as are here provided for? Finally, as to the investments of these securities, the Government have given no indication of what form of investment they propose. They take power to invest the money in various ways, but I hope that this Legislature will see the wisdom of restricting the investment to the buying up of State debentures. Let us make a beginning there, rigidly stand to it, and we shall pave the way for the solution of great problems that are yet before us. It is the best investment we could make with this money. It would give the people a security for their notes that they might not feel they had in any other direction. At all events, it would give them much greater security than they could have from any bank.
– I am glad to hear the honorable member say so. I have said the same thing.
– Notwithstanding all that has been said to the con trary, I believe that this Bill will give the people a note issue that is sounder and more stable than the banks are giving, or could give us at any time. The people will have behind these notes, not only the proposed gold reserve and the investment in, I hope, the public debts of the Australian States, but the full credit and power of the Government. . They will have further the greatest security of all : the power of the Government to tax the people. That is the amplest security for the whole system. Some men talk of the Government of the Commonwealth not having, as compared with the States, this or that power, but its power of taxation is a greater security than the States have in all the material properties for which they have paid with borrowed money. Then, in addition to giving stability, by the operation of these two virtues of convertibility and issue, working one against the other, we shall have a greater degree of elasticity than we have under the present banking system. Bankers admit that the present system is not sufficiently elastic. I hope that this new system, after we have had some experience of it, will be found to be more elastic than the present, and that with a little further experience we may modify it, so as to make it still more elastic. It has the further advantage that it will give us a common medium of exchange for all Australia. With the tenshilling note it will also give’ us one of the most convenient forms of currency that I am acquainted with. It is becoming quite usual even now for people to pay the few half-pence required to purchase postal notes for ten shillings, and to carry them about in their pockets to be used for purposes of currency. It is a pleasant thing to have these nice little crisp notes in one’s pocket. They can be carried about without any trouble. In the same way the ten-shilling note will give us an exceedingly handy form of currency. The Commonwealth notes can range in value from ten shillings to ten thousand pounds ; and I hope we shall have many of the latter, because they are the best form of reserve for financial institutions. I trust that this Bill will have a rapid passage through this House, and that such amendments as I have indicated will be made in it.
Debate (on motion by Mr. Atkinson) adjourned.
House adjourned at 10.36 p.m.
Cite as: Australia, House of Representatives, Debates, 16 August 1910, viewed 22 October 2017, <http://historichansard.net/hofreps/1910/19100816_reps_4_56/>.