4th Parliament · 1st Session
Mr. Speaker took the chair at 3 p.m., and read prayers.
Mr. GLYNN presented a petition from certain subscribers to the telephone exchanges in South Australia, praying the House to suspend the operation of regulation 7 a until the condition of the telephone service has been further considered, and the recommendations of the Postal Commission in regard to it have been placed before Parliament.
Petition received and read.
– The attention of the Postmaster-General must have been drawn to the utterances regarding him delivered last Sunday by the Rev. Mr. Worrall, and I ask him therefore if he does not think that the reverend gentleman desires to be brought before the bar of this House so that he may be regarded as a martyr?
– Honorable members should not ask questions of that nature.
MINISTERS laid upon the table the following papers : -
Public Service Act - Postmaster-General’s Department - Recommendation, &c, in case of promotion of £. P. Ramsay as Inspector, New South Wales.
Lands Acquisition Act - Land acquired under, at Richmond, New South Wales - As a site for a Field Ambulance Depot.
– In the absence of the Minister of Home Affairs, I ask the Prime Minister if it is correctly stated in the press that Ministers, will not allow the. negotiations with New South Wales in regard to the catchment area and other matters affecting the Federal Territory to interfere with the issue of the second proclamation, when in other respects the opportunity arrives?
– The negotiations do not affect our policy, but we hold very strong opinions about the necessity for having control of the catchment area.
– On Wednesday last, the honorable member for Cowper asked the following questions -
Inquiries were made with reference to the subject, and the following information has now been furnished by the Deputy PostmasterGeneral, Sydney : -
Wollongong Rifle Range - Rifle and
Ammunition Supplies - Small Arms Factory - Wire Drawing Plant
asked the Minister representing the Minister of Defence, upon notice -
– The following replies have been furnished : -
asked the PostmasterGeneral, upon notice -
– The answers to the honorable member’s questions are -
asked the Minister representing the Minister of Defence, upon notice -
– The answers given by the Department are these -
Debate resumed from 19th August (vide page 1844), on motion by Mr. Fisher -
That this Bill be now read a second time.
.- Those who have listened to the debate upon this important proposed change in our currency must feel pleased at the high level which has been maintained, the knowledge of the economic and historic conditions affecting the subject possessed by honorable members being undoubtedly very great. I am glad that the measure is one which we can discuss without being hindered by constitutional limitations such as have hampered the discussion of many of the other matters of importance which we have had before us. I agree with those who hold that it is the duty of the National Parliament to legislate in respect to currency. The Constitution empowers us to do this, and it is our duty to give effect to our powers at the earliest convenient moment. I have studied the proposals of the Government without party bias, and was pleased to hear the Treasurer in introducing them lay emphasis on the fact that the Bill is not a party measure. Most of those who have contributed to the discussion have accepted that view. While I have endeavoured to make myself acquainted with the historical and economic considerations involved, I shall not allow myself to be lured into the discussion of the currency of ancient and mediaeval nations, it being, I think, sufficient for our purpose to have regard to the history of currency since the passing of the celebrated Bank Charter Act of Sir Robert Peel in 1844. It is the period from that time onward which supplies us with all the really valuable data calculated to guide us in the proper consideration of this question, and in arriving at a sound determination. It was probably in 1844 that we first had established a thoroughly sound paper currency. Sir Robert Peel’s Act made it compulsory for the governors of the Bank of England to have in their issue department coin and bullion equal to the value for every note they issued. At the present time the Bank of England has in circulation notes to the value of£28,000,000, and that issue is backed by a coin and bullion reserve of ,£36,000,000. It is unnecessary to refer to the banking history of Great Britain prior to 1844. We know, however, that prior to that year the banking history of England had been strewn with the failures of private corporations, just as had the history of every other progressive nation, and that it required the force of legislation to bring about real stability in the national currency. Great Britain, in 1844, was nevertheless considerably ahead of every other nation in respect of its method of controlling its finance and commerce. It was indeed much further ahead of them than it is at the present time. The action that was taken by England in 1844 to secure by a gold backing the issue of its paper money, has been followed by every progressive nation. The two principal issues of paper money to which we find reference in history, and which have been most freely discussed in this- House, are the issue of assignats of France at the time of the Revolution, and the issue of greenbacks at the time of the American Civil War. As has already been said in this House, however, neither of those issues furnish us, in regard to our modern system of finance, with valuable evidence as to the value of State as against private issues.
– They were war issues.
– Both were war issues. They were issued in circumstances that were never known before in America or France. It was owing very largely to the fact that the Governments of both countries had failed to place their finances on a proper footing that it became necessary’ for them to issue paper money in large quantities. They had to meet a set of extraordinary circumstances. Another phase of the question that has not been sufficiently considered is that the establishment of a safe and ‘sound paper currency in all nations has been the result of growth and evolution. Only in modern times has it been found necessary in order to secure that safety to back up paper currency issues by proper gold reserves. Such a task was made much easier of accomplishment all over the world by the gold discoveries in California and Australia. Prior to 1850. the0 world’s yield of gold was from £4,000,000 to £5,000,000 per annum. With the discovery of the precious metal in California and Australia, however, the world’s annual output pf gold rose to from £20,000,000 to ,£30,000,000 per annum. That naturally gave a great impetus to various financial institutions, as well as to the Governments of progressive countries in establishing, as they have since done, gold reserves to back up their issues of paper money. Reviewing as succinctly as I can the history of State currency in progressive nations I find that it affords us valuable and cogent lessons in support of the position taken up by the Government. In Great Britain the Bank of England is in reality a Government institution. In France the Bank of France has complete control of the paper currency. In Germany the Imperial Bank issues its own bank notes, while in Austria’ the Government assume complete control of the note issue. The same law exists in Russia, while Switzerland, the little Republic which has supplied us with many valuable lessons, passed a law in 1907 making it compulsory for the State to assume complete and absolute control of the issue of paper money in the present year. The as signals of France and the greenbacks of America were issued for war purposes. The greenbacks were absolutely necessary to enable the American Civil War to be carried on, whilst the French assignats were issued to meet the exigencies of the French Revolution. Neither supplies us with reliable historical data upon which we might base any financial policy such as that now before us. Japan, however, has furnished us with a very valuable illustration of the evils of a paper money issue unbacked by a sound gold reserve. About 1867 a complete change- took place in the system of government that had long obtained in Japan. For probably 200 years before that date there had been in vogue there a system of paper money, and it had sunk to a very low level when the new system of government was established. There was for some time a silver backing, but the issue was generally without any gold reserve. The value of this issue sank very considerably, and at one stage it fell so low as to threaten the nation with serious financial difficulty. As a matter of fact, it destroyed the credit of Japan, in every sound financial country. . Japan had been very anxious to cut herself off from the rest of the world and to remain in a condition of isolation. It had been her policy for hundreds of years to remain in a state of insularity, and prior to the treaty negotiated by Admiral Perry, entered into by Japan about i860, she had been determined to keep herself free from intercourse with all other countries. It was owing to the discordant element which that treaty introduced that she was led to look beyond her own borders and to discover within herself the possibilities of greatness. The germs of her system of representative government commenced to fructify, and it was found necessary to change the whole system of commerce as it had obtained in that country for some hundreds of years. From that time the Japanese began to find that it was necessary to back up the paper issue, which had been circulating within their own borders, by a gold reserve. As the result of ingenious statesmanship, Japan with paper money purchased the productions of her own people, sold those productions to the people of other countries, and in return obtained gold with which she was able to establish a gold backing for her paper issue. She furnishes the best example we have of the danger, not of a State note issue, or of the national control of the currency, but of issuing paper money without a sufficient gold backing. As I have already said, I believe that history furnishes ‘ abundant evidence to support the nation taking over and controlling the national currency. No one can read the history of the development of banking, finance, and trade throughout the world without being convinced that, generally speaking, the financial crises that have arisen from time to time have been largely due to failure on the part of Governments to undertake the ‘ important work of controlling the currency in the interests of the financial stability of the country. I am, therefore, in sympathy with the principle of this Bill. It provides for the fulfilment of one of our powers, and I believe that the proper time to exercise such a power as this is when financial quietude and confidence reign, rather than during a period of panic. My objection to the Bill, however, is largely a fundamental one, my contention being that it does not provide for a sufficient gold backing to the proposed paper issue. The teachings of history are overwhelmingly in favour of the Government providing a far stronger gold backing than they now propose. In England, the Bank of England issues notes to the value of ^28,000,000, and has a gold backing of £30,000,000. And what is the position in Scotland? During this debate reference has been made to the Scottish banking system, which we have largely followed in Australia, and it undoubtedly forms an interesting page of history; but, just as the Queensland State note issue furnishes us with but little example of the stability of a national paper currency, since Queensland is only a part of Australia, so I believe that the experience of the Scottish system is by no means as valuable to us as it would be if Scotland were an independent nation, instead of being, as it is, part of the United Kingdom. After all, the financial hub of Great Britain is London. London very largely controls the financial destinies of the whole of Great Britain. In Scotland, however, there is a note issue of £7,500,000, backed by .£5,500,000 in gold coin and gold bullion. In Ireland, there is a note issue of .£6,500,000, with a backing of £3, 500,000 in coin and bullion.
– What are the proportions ?
– The backing of coin and .bullion in the case of the Scottish note issue is about 76 per cent., whilst in Ireland it is about 47 per cent., or one of the lowest 011 record. Probably more attention has been paid to Canada in discussing this measure than to any other country. The reason, no doubt, is that the conditions there approximate in many respects to the conditions existing in the Commonwealth. I take the figures for Canada for 1909. It is possible that there has been an increase in the note issue during 1910, but I think I shall be right in assuming that the proportion of reserve to the issue was about the same in 1909 as it is now. It was stated, I think by the AttorneyGeneral, that the gold reserve for the Canadian note issue is lower than what is proposed in this Bill. We were told that it represents only 15 per cent, of the value of the note issue. But if we take the whole of the conditions of Canada into consideration, we shall find that the Canadian issue has a backing of nearly double that proposed in this Bill.
– Is the honorable member referring to the issues by the Government and private banks?
– No, I am dealing now only with the Government note issue. At the end of 1909 there were £13,000,000 Dominion notes in circulation. That issue was backed up in the first instance by a reserve of 15 per cent, of gold and bullion. But, in addition to that backing, there was a backing of 10 per cent, of Government securities, or securities guaranteed by the United Kingdom. In addition to that. again, by the banking law of Canada, the private banks in the Dominion are compelled to keep in their coffers 40 per cent, of their reserves in Dominion notes. That is to say, 40 per cent, of the total reserves of the private banks of the Dominion must be held in Dominion notes. The private banks in Canada have a total reserve of £^14,000,000. They must keep 40 per cent, of these reserves, or £6,000,000 in Dominion notes. So that the Canadian note issue of £13,000,000 is backed up by a reserve of 15 per cent, in gold, 10 per cent, in Government securities, or £3,000,000, which, with the £6,000/000 represented by the 40 per cent, of the banks’ reserves, gives a backing of £9,000,000, or 65 per cent, of the State note issue.
– They must think a lot of the Government notes in Canada, if they require that a big proportion of the bank reserves is to be held in those notes.
– I have said that the State note issue amounts to £13,000,000, and it is backed up by the equivalent of a gold reserve to the extent of 65 per cent.
– The honorable member has just said that 40 per cent, of that is held in the notes themselves.
– I have said that the private banks are compelled by law to hold 40 per cent, of their total reserves in Dominion notes.
– And the honorable member is counting them as a part of the reserves for the Dominion notes.
– The point is that they cannot go into circulation.
– That is so. The only means by which it would be possible for the banks to obtain the use of the 40 per cent, of the reserves held in the Dominion notes would be by giving gold for them to the Treasury.
– What is the backing for the whole of the notes issued in Canada ?
– I have explained that it is equivalent to a 65 per cent, gold backing. Yet Canada has been quoted here as a country having a lower reserve for its note issue than is proposed in this Bill.
– Equivalent to gold is not gold.
– That is what we say.
– What I mean by “ equivalent to gold “ are securities that can be turned into gold. We know that the Canadian Government are satisfied with their investment, and regard it as equivalent to a gold reserve, since 40 per cent. of their notes cannot go into circulation. In Australia, we have notes of the private banks in circulation to the amount of ;£3j 500,000, with coin and bullion in reserve to the amount of £26,000,000. It is not necessary to refer again to the issue of greenbacks in the United States, but it may be said that there are £75,000,000 of greenbacks still in circulation there. The private banks issue notes to the amount of £125,000,000, and these are backed by securities deposited with the Government, representing a portion of their paid-up capital or reserve equivalent to the value of the notes issued. Against the issue of £125,000,000 in notes of the private banks, the Government hold securities equal to £130.000,000 and they hold a reserve against the £75,000,000 greenbacks still in circulation of £55,000,000 in coin. In France the Bank of France has the sole control of the note issue, amounting to £161,000,000, and this issue has a backing of ,£95,000,000 in gold, and £44,000,000 in silver. In Germany the Imperial Bank is compelled by law to hold a gold reserve of 35 per cent, of the total value of the notes issued. Usually the reserve is very much in excess of the minimum prescribed by law. The Imperial Bank has a note issue of £75,000,000 with a reserve in coin and bullion of .£40,000,000, and a further reserve of £50,000,000, making a total reserve of £90,000,000 against a note issue of £75,000,000
– It is against all other liabilities as well.
– No, it is not against other liabilities. I am not talking now of their liabilities in connexion with their reserves and deposits, but of the reserves they hold in coin and bullion against the note issue. In Russia, where a gold standard was adopted in 1897, the State assumes sole control of the issue of notes. The notes issued there amount to £200,000,000, and they are backed up by a gold and cash reserve of £250,000,000.
– On paper may be, but it is not a fact.
– The honorable member casts some doubt on these figures, but I remind him that, in the list appearing in Hansard and supplied by the Treasurer himself, he will find that the note issue of Russia for 1896 was backed up by a reserve of coin and bullion to the extent of 136 per cent. The figures I have quoted are later figures, but this should be a sufficient reply to the honorable member. Japan has ,£30,000,000 of notes in circulation, backed up by a paid up capital of .£44,000,000. Austria has the lowest backing for a note issue of any of the countries mentioned. The whole of the notes are issued by the State or central government, and the law requires that a” reserve of 40 per cent, shall be held in coin and bullion. The note issue there represents £75,000,000 and they have a reserve of ,£30,000,000 in coin and bullion to back it. In Switzerland in 1007 a law was passed compelling the private banks to relinquish the issue of their notes, and assuming the power to issue notes 011 behalf of the Federal Government. They were then issuing notes to the value of £9, 000, 000, and that issue was backed up by a paid-up capital of £8,000,000. At present, in 1910, the Government control the whole of the note issue of the country, and it is backed up by a reserve of almost 100 per cent, of securities. I have given the reasons why I think the Government of the Commonwealth should undertake the control of the currency. We have in Australia probably the soundest system of private banking in operation in any part of the world, and yet, in the face of the striking examples I have quoted from the world’s leading countries, it is proposed in this Bill, that that system should be replaced by one under which the Government undertake the whole of the note issue, and propose to back it up with the lowest gold reserve required anywhere. I think that would be a retrograde step, and one which should not be taken by this Parliament. I believe that in the interests of the future safety and stability of die country, the Government should undertake the note issue, but when we have probably the soundest system of private banking in existence, we should not change it for a State currency, unless with .a reserve which will compare favorably with that required in other countries.
– Would the honorable member change his attitude if the proposed State issue of notes were backed up by a State Bank?
– I am discussing now a State note issue and not a State bank, and, in my opinion, the two questions should be dealt with separately. I am speaking of insuring the national safety and stability in times -of panic and crises by the State undertaking the control nf the note issue, but urging that that should only be done with an adequate gold reserve. I quite appreciate the fact that the credit of the State must, necessarily be better than the credit of any single corporation - that, I think, is obvious to every patriotic citizen - and I quite understand that, even in times of panic, it is impossible for the State to, perhaps, allay certain fears that arise on the part of timid people. According to opinions expressed by some of the leading economists, the more highly complex our system of commerce becomes - the more we become traders, not only amongst ourselves, but with the leading countries of the world - the more liable is the community to become seized with financial panic, which may throw the whole system of commerce into a cataclysm for the time being. Under those circumstances, it would be impossible to carry on commerce in any part of the world were it not for that confidence which is so necessary in all business transactions, from those of the State down to those of the individual with the smallest commercial dealings. I do not think that there is anything to prevent, at certain periods, panics overtaking a community, and, perhaps, involving it in serious financial trouble; and that is one of the reasons why, I think, a State issue of notes is more calculated to preserve confidence and give greater financial stability than any control exercised by private corporations. But without expressing any hostility to the measure, which I have viewed with an open mind, I certainly think it is the duty of Parliament, when exercising its undoubted right to change the system of the paper currency - when taking it out of the hands of the present banking corporations which are in such an absolutely safe and sound position - to act according to the best traditions of the leading financial countries of the world. The question of a paper currency, backed up by a gold standard, is one, as I have already said, of evolution. It started in 1844; and we know now that every leading nation and every Government finds that the only safe plan* on which they can undertake the permanent issue of paper money is to have it backed up by a certain reserve of gold. It is only by a substantial gold backing that it is possible to retain the confidence which is absolutely essential to the carrying on of our commerce and the maintenance of that credit which we are proud to possess as a nation. I hope that when the Bill is in Committee the Government, with their great majority and power, will not retain the small gold reserve proposed, because it may have the effect of reducing the credit of the Commonwealth which stands so deservedly high in financial circles. I hope that the Government will see fit to substantially increase the proposed gold reserve, and if an amendment to that effect is not proposed by some one else, I shall propose one myself.
– There is an amendment in print on the table.
– At any rate, I hope the Government will see fit to preserve the credit we now enjoy, though increasing the reserve. A great deal of stress has been laid on the Queensland example as one we should follow ; but that State, in this connexion, does not supply any teaching of value to the Commonwealth in the proposed departure. It was after the crisis of 1892-3 that the Queensland note issue was instituted, and since that time, with the exception of 1902, we have had a period of reasonable prosperity. Our credit has been good, and our financial institutions have been gradually but surely strengthened. Queensland, again, is only a part of Australia, and that State, with a very poor system, might carry on, helped along by the great financial strength of the Commonwealth, without being really tested as the Commonwealth itself must be when it has control of this phase of commerce over the whole of the continent. We pride ourselves on being part of the Empire. We know that Great Britain has led the world in its system of finance, and is the leading financial nation at the present time. Since the wisdom of British statesmen laid down for Great Britain a sound financial policy, she has been an example for the whole world. We pride ourselves on being a nation of growing importance, and an integral part of a great Empire ; and, with that consciousness, we should be growing much more rapidly in strength than we are at present doing, and guarding the financial credit and reputation of the Mother Country as jealously as we should our own. We can only do that by following on the lines which, for hundreds of years, have been proved in Great Britain to be the only safe and sound policy to pursue. Under these circumstances, I hope that, in the matter of the gold reserve, the Government will be influenced by the present discussion, which has been conducted in a proper spirit, with a desire to improve the measure, and has been singularly free from any kind of partisanship. I hope the Government will be guided by the examples’ that the world affords, and jealously guard the credit of the country by materially increasing the proposed gold reserve. If that be done, I for one, although sitting inOpposition, shall give the Bill my hearty support.
.- I do not propose to detain the House long, because the question has been fairly well discussed; and the majority will, I think, be sufficient to carry the Bill. Of course, onsuch a question there are many divergent opinions; and I know no question so full of romance to any one who cares to study the books in . the Library as the question of money. But I was somewhat disappointed in my friend, the honorable member for Richmond, in that, as an old bank clerk, like myself, he did not tell us the misery he must have suffered in his junior days, when he had to count filthy and disease- laden notes.
– Is there any provision in the Bill for retiring spoilt notes ?
– In reply, I ask the Leader of the Opposition if there is anything in the Banking Act which prevents a bank from issuing unlimited millions of notes ? There are to-day in Australasia no fewer than fifty-two banks, thirty-eight of which issue notes. In New South Wales, of thirteen banks, eleven issue notes ; in Victoria, of eleven banks, ten issue notes; in Queensland, with eleven banks, there is one issue of notes, in South Australia, of seven banks, six issue notes; in Western Australia, the whole of the six banks issue notes; and in Tasmania all the four banks issue notes. I ask honorable members whether any one would not prefer one note issued by the Commonwealth. The honorable member for Richmond, as an old bank-teller, will agree with me that with thirty-eight banks of issue, the difficulty of detecting forgeries is increased thirty-eight times.
– I do not think there are thirty-eight issues.
– I am sure the honorable member will accept my word when I tell him I have here a Commonwealth return dealing with the banks of Australia and New Zealand, and that there he will find, for instance, that, in New South Wales, the only two banks which do not issue notes are the Bank of New Zealand and the Bank of North Queensland Limited. I presume that the Banking Acts of the various States are similar, and that every bank that has a branch may issue notes. Under the circumstances, if the Bank of New South Wales had a branch in each of the six States, it could issue notes in each State.
– The bank does so.
– I am merely pointing out the fact ; and that would account for six banks.
– But the banks are one institution.
– And the notes are the same notes.
– Not SO. only recently, an Inter-State charge of 6d. in the j£i was imposed. I have here a photograph of a note which was issued in that mighty debacle, the boom. The honorable member for Richmond knows that if a person alters the date; or the amount of money of, or the name of a branch in, a cheque he has to initial such alteration; but this photograph shows a note bearing six alterations by the bank of issue, and not a signature or initial to it. I do not blame the bank at such a time for bringing a number of notes from Sydney to Melbourne to send out as currency, and stamping “Victoria” and “Melbourne” on them. The notes thus stamped were not charged 6d. exchange, but all Inter-State notes not so stamped were. As an old bank clerk, I have a great regard for my first employer. I am, perhaps, the only member of- the House who stood before a body of men whose intention it was to rush down Collins-street and attempt to raid a bank during the land boom. The bank in question was the Colonial Bank, and the unemployed were sought to be used for this purpose by a man who held some of the bank’s notes and wished to have them exchanged. They said, “ We are going to have money for these notes, or we will proclaim that the bank is bankrupt.” The honorable member for Richmond will agree with me that in times of trouble and danger the holders of notes will be inclined to demand cash for them. He will also agree with me that if notes are issued only by the Government that will be one factor in relieving the crisis. Speaking with full respect for the banks as they are conducted to-day, I ask: What is there in their management to make them so safe that there can never be a crisis? This Commonwealth note issue will remove one danger. I wonder whether any honorable member has ever tried, by way of experiment, to ascertain whether persons holding notes knew what banks had issued them. Just lately I went round amongst the honorable members whom I met in this building and asked them whether they had any bank notes in their possession. I further asked others who said that they had whether they knew which banks had issued the notes. I found that none had taken the trouble to observe. At the time of the boom, in Melbourne, I went down Collins-street, and asked a number of men whom I met - ordinary men of business - whether they could tell me off hand what banks issued the notes in their possession. I met with only one man who could tell me, and he had quite recently obtained his notes from a bank. I resent strongly the statement that has been made that every bank holds ,£7 in gold for every note issued by it. That statement is a mere quibble, because, if in time of crisis a man having a current account with a bank went into the institution and drew a cheque for the amount of his account, the cashing of his cheque would take precedence of the cashing of any notes if he presented himself at the counter first. If a bank was unsound, how much gold would it have to meet its notes after its current accounts had been paid ? It must be remembered that banks are not disposed very much to help each other in time of crisis. When the house of Baring wanted only £4,000,000 to tide over a difficulty, did the Rothschilds or the Bank of England step in to save them? No; and the Barings closed their doors, and by so doing did injury to the commercial world to the extent of, perhaps, ,£500,000,000. Our banking system in Australia has certainly been purified as the result of the terrible experiences of the early nineties. I hold in my hand Vol. 5 of Horwitz’s Victorian Statutes, from which I shall quote. I have consulted Mr. Godfrey, a bank director of considerable experience, and he agrees with the view I take as to the section which 1 shall quote from page 345 of this volume. Tt is there stated -
No banking company, firm, or individual banker shall issue notes payable to bearer at sight or on demand unless such company or firm has a subscribed capital of not less than Two hundred and fifty thousand pounds, and a paid-up capital of not less than One hundred and twenty-five thousand pounds, or unless such individual banker has a capital of not less than One hundred and twenty-five thousand pounds, and any company, firm, or banker issuing notes contrary to the provisions of this section shall be liable to a penalty amounting to Twenty-five pounds per centum of the amount of the notes so issued, to be recoverable with full costs of suit by any person who may sue for the same.
It appears from that section that, in Victoria, any body of men with a capital of £125,000 could establish a bank and issue notes to the extent of millions of pounds ; and if they liked to mortgage their assets there would not be a penny piece to cover their notes. There was formerly in existence, in this State, a bank known as the Provincial and Suburban Bank. Only a week ago one of the notes of that bank was brought down to Melbourne from the backblocks of New South Wales. Of course, it was a worthless piece of paper. I have known notes of the same bank to be in circulation ‘during ‘the last thirty years. What were they worth? Nothing. But how many people have been wronged through their being in circulation? The Bank of England cancels notes that have been in circulation and have been returned to the bank. Consequently, no matter how clever a forgery may be committed it is discovered once the forged note reaches the bank. When the number is being called over for the purpose of cancelling the note the officials at once know whether anything is wrong. But what takes place in regard to Australian notes ? Let me give my own experience. I have been engaged in dealing with mutilated and old notes as a bank clerk. Perhaps I should be calling out the numbers to a fellow clerk. He might say, “ That last number has already been written off.” We might then look at the note with a magnifying glass, but all that would be done would be to make a memorandum on the margin, and it might be concluded that a mistake had been made by the clerks who had previously crossed off the same number. That is the difference between the Bank of England system and ours. It is absurd that there should be thirty-eight different kinds of notes circulated in Australia. Why should a State ever intrust to other people the right of issuing money ? A coin has not a value equivalent to that which it represents, unless it bears the authorized inscription of the State which has issued it as currency. To put that proposition to the test, let a coin be laid on rails so that it may be run over by a tram car or a train, which will beat out of recognition ‘the authorized inscription and image”. What would a half-a-crown be worth after having been so treated? The person owning it would be lucky if he got a shilling for it. Section 12 of the Victorian Act from which I have already quoted reads -
Notes payable to bearer at sight or on demand issued in Victoria by any banking company, firm, or individual banker in the hands of any bond fide holder thereof for value who has received the same in the ordinary course of business without notice that the same has been issued or dealt with contrary to the provisions of this Act, and has not subsequently dealt with the same otherwise than in the ordinary course of business, shall, in the event of such company being wound up, or such firm or banker being insolvent or bankrupt, be a fi ret charge on the assets in Victoria of such company, firm, or banker, not being the subject of any mortgage, pledge, lien, charge, or other security in favour of any other creditor.
I challenge any one to say that under that Act there was anything to prevent a bank from issuing notes to the extent of millions of pounds if it wished. When I was travelling in the United States I never saw gold in use as currency, except when I obtained six small dollars by way of curiosity. I have before me one of the first brochures on this subject ever published in Victoria. It was written by the late Dr. Crooke, who points out that the one dollar note is the standard currency of Canada. When I was in Canada the only gold coin I saw was a sovereign which I had in my own possession, and for which I obtained notes. What is money? Money is that which is stamped by a Government or a bank, and which is accepted on credit for purp’oses of exchange.
– But is not a British gold coin intrinsically worth the sum which it purports to represent?
– Yes, but let the honorable member permit a tram car to run over a sovereign and then see what he can get for it as old gold’. We know that money can be made from almost anything. For instance, on page 256 of volume 4 ot the Historical Records of New South Wales, I find a Government and general order on the subject of legal tender, which was proclaimed by Governor Philip Gidley King on the 19th November, 1800, and from which I extract the following passage
And that no one may plead ignorance of the rate or legality of this or any other of the coins circulating in this colony, of which it does not appear that any regular proclamation has ever collectively been issued, I have judged it most expedient herewith to publish the following table of all the specie legally circulating in this colony, with the rates affixed to each, at which they shall be considered and be a legal tender in all payments or transactions in this colony.
What were these coins? First of all, there’ was a guinea, valued at 22s. Then there was a coin, which I do not suppose any honorable member ever saw in New South Wales, and that is a half-Johanna, valued at £2. A Johanna was a coin which was first issued in Portugal in 1750; and which, therefore, must have been fifty years old when it was made legal tender in New South Wales. Its value in Portugal was about 36s. j therefore, the value of a half -Johanna would be 18s.
When a sufficient quantity of copper coin is received in the colony, of which notice will be given, no private notes or goods will be allowed lo circulate.
This supply of copper having been sent to relieve the inconvenience of persons requiring to make small payments, no persons are to collect the same for the purpose of making large payments, nor shall it be deemed a legal tender to offer the same in payment for any sum exceeding “Five pounds.
To those honorable members who speak of gold leaving Australia if this measure be passed, I commend the wisdom of the Governor of New South Wales in its early days, so far as copper coins were concerned. The quotation continues -
And it is hereby declared that the exportation or importation, except from His Majesty’s Treasury, of any sum exceeding Five pounds of the above-named copper coin, shall be punished by fine of treble the value, and forfeiture of the sum exported or imported.
J do not blame them in the circumstances. We know of the money current for a long time in England. I think that Henry 7. was the first sovereign to introduce the currency. He introduced the staff, or rod of wood, with peculiar markings thereon. The rod was split in half ; one-half, representing the amount which he had deposited, was given to the creditor, and the other half was put in the Treasury of the King, so that the two halves could be compared by putting them together. We know of the cowries of Africa. Leather money was in use in Russia up to the time of Peter the Great. The State can make money of anything. But this will be the first “time in the history of the world that a continent will have only one note circulating throughout the length and breadth of its territory. I do not want any one to construe my speech into an attack on any bank. I recognise that the banks are doing splendid work, but, in my opinion, they will do far better work when only a National note is in circulation. As the result of my reading on this subject, I have come to the conclusion that it would be far better for the Commonwealth to establish a standard currency, that is, to fix an amount below which the value of a note could never go. Suppose, for instance, that we fixed a currency of ,£4,000,000 notes for a population of 4,000,000. The notes up to that amount should be unredeemable except by the State, but all notes issued in excess of that amount should be redeemable. I think that a gold basis of 25 per cent, is quite sufficient for every purpose. That is the only little note of difference from the Treasurer’s scheme which I have to sound. Strange to say, by an edict of England, the Johanna was made currency in Ireland in 1725, and there, as in Australia, at an enhanced value. Whereas its value was raised from 36s. to 80s. in Australia, its value was fixed at 40s. in 1725. in Ireland. I hold in my hand a pamphlet which was published for private circulation only. I suppose that, at that time, the publishers thought that I was a fairly well-to-do man, and was therefore deserving of receiving a private communication of this kind. Any one who will look at the figures in the publication will find a post-mortem mark set against three banks, namely, the City of Melbourne Bank, the Federal Bank, and the Mercantile Bank. My desire is to insure the safety of the present private system of banking, and I believe that we shall achieve that object by withdrawing from them the right to issue notes. What was the result of introducing a State note in Queensland? The local banks were foolish enough to say that they did not want State notes, as they would pay in gold. With what result did they do so? I have here a return showing the value of the gold coin which was sent away from that State from 1879 to 1893, that is the year in which the banks made their boast. I shall not weary honorable members by quoting all the figures, but shall content myself with stating that the lowest amount was sent away in 1883, namely, 4,000 sovereigns. In 1879, 26,000 sovereigns were exported; in 1889, 100,000 sovereigns; in 1891, 161,000 sovereigns; and, in 1893, when the banks said that they did not want notes, as they would pay in gold, 435,000 sovereigns were sent away. I point out that, in that year, four times more gold was sent away than had been sent away in any previous year, except in two instances. In other words, 100 times as much gold was sent away in 1893 as had been exported in 1883. It is strange that the question of banking has concerned the most brilliant minds of all kinds during the last century or so. Henry Clay, the great American, made the statement that up to his time not a cent had ever been lost by a national bank. Let us take the history of the oldest bank in the world, namely, the Bank of Genoa, which, as honorable members know, advanced money all over Europe to carry on the Crusade in Palestine. It carried on its operations until Italy was conquered by France, and it only stopped payment then because it Was considered that its creditors should not have too much power. What did the proprietors of the bank do? In their hour of danger, when a terrible war arose, and the Austrian arms swept over Genoa and took the whole of the gold in the bank what happened? The bank did not do what nearly every bank in Australia has done. It did not ruin the men who had invested their money in shares in the bank ; it did not fine them and make them pay the fine. It consolidated the money which was owing, gave a higher rate of interest, made deferred payments, and paid every penny piece; yet it had not a basis of gold such as the Commonwealth notes will have, backed up by the national credit. Ask any man in the street which he would rather have : an unlimited issue of notes by a bank with only £125,000 paid in, or a limited issue of notes issued by the Commonwealth with a gold reserve of 25 per cent, backed up by the credit of every hill, valley, river, and mountain of our loved Australia? There is not a man who would not prefer the State note to the note of any bank. To-day three Melbourne charities are faced with the prospect of being robbed by the Assets Company of a bequest of £3,000 each. I allude to the Melbourne Hospital, the Alfred Hospital, and the Benevolent Asylum. What does the company care so Jong as legal technicalities are ‘ complied with. If it robs these charities, then we in Victoria will want to know why the act is permitted. I have suggested to the company that it should be content to take one-half of the money. How did that debt arise? A shareholder invested his savings in a bank’s shares; it failed, and made calls upon the man whose thrift had enabled him to buy the shares. If the Assets Company do the despicable deed which is threatened, I for one shall stamp them as usurers and demand a searching inquiry. I could speak at greater length, but I think that I have said quite enough* It seems to me absurd for any one tosuggest that we should go to the moneylenders of Europe for a loan. Why should we with our millions of broad acres go to the money markets of the world when land even in the presence of a crisis means a certain value. A crisis that will ruin one .bank may cause a loss of a quarter of a million, indeed, of half amillion. You can never tell when the end will be reached. You can never tell what little home or little farm may be sold. But land which is far more stable than the notes of any bank or any deposit receipts, or anything which man can make, would be the safest guarantee of our Commonwealth notes. If we want to make our community free from the possibility of reproach, we must handle the money question. Any one with a knowledge of banking knows that if the Rothschild family agreed to combine with Rockefeller and the Standard Oil Company they could smash up the Bank of England to-morrow; and if that were done, God alone knows the extent of the misery and the wretchedness and the bankruptcy which would spread through the world. Knowing that never has a State bank broken, that never have the creditors of a State bank been ruined, and that never has the State bank crucified thousands and thousands of men, women and children, I welcome this measure and its accompanying note issue. With that knowledge which comes only through the crucible of experience, I feel sure that the Government will be able even to extend the scheme after a few years’ experienceAfter we have had an experience of five, or perhaps ten, years, let us make that money so stable that, even though a bank might fail, the State notes will not be made a lever for bringing it about. I speak feelingly, because I have a vivid recollection of a crowd wishful to run down the street and cry out, “ We have notes, and are going to get cash for them from the bank.” The Bill if enacted will eliminate the possibility of such an event recurring. At present, in time of crisis a man who had an account might stand at the door of a. bank and cry, “ I have not got my money”; but it would be in vain. But, in the future, this will not happen. There will be no need for any of the old dodges, such as the heating of sovereigns, so that they would be too hot for men’s fingers to pick them up. The currency is the lifeblood of the community, and even the land question itself is not more vital than the money question. I ask honorable members to combine, not for any party advantage, but for the advancement of the welfare of Australia, which, I think, we all love. If we settle the money question properly, the Commonwealth will enter upon such a career of prosperity that her laws and her financial system will be an example to the whole world.
– I intend to curtail my observations on this important question, as on all others, to the minimum. Lest what I have to say may seem inadequate, let me make in advance an apology. In regard to the vital issues raised by the measure, effective action can be taken only in Committee, at which stage there must be a concentration pf considerations which will have been distributed through many speeches. Although this discussion has been protracted there has not been one speech too many, nor, allowing reasonable latitude of interpretation, has the patience of the House been at any time abused. Few, if any, questions are more abstruse than those with which the proposals of the Government are associated. Upon the world’s wide financial experience have been based a great variety of doctrines in regard to currency, banking; bi-metallism, and kindred subjects, which have afforded ground for philosophic discussions occupying many volumes, and are yet to occupy many volumes more. This is largely due to the fact that the application of even the most fundamental of these doctrines must vary enormously, according to the country, the age, and the people concerned. This is not a question of mathematics; we have not definite numbers, or particular units, to deal with. We are very much at large. Light ma.y be obtained from many quarters, and the discussion represents a perfectly honest endeavour on the part of honorable members to grapple with problems which have engaged the attention of the ablest intellects of many nations, and will continue to engage attention after we are gone. To this legislation we shall offer a new page of experience whereby those coming after us may test their theories, my one anxiety being that our experience may be purchased at the lowest price possible. The different interpretations which conflicting authorities have placed upon the same sets of incidents have been repeated by honorable members to such an extent that, were one to endeavour to canvass their arguments, even in outline, a sitting would hardly suffice. It is without deprecating the length of the debate, and the contributions to it, that I preface my remarks, being fully conscious of the magnitude of the task, and appreciative of the gallant attempts of honorable members tq grapple with it. If some are passed by, it is not because they are not pertinent to the matter in hand, or heed no discussion, but because, 6ft a’ matter like this, we should co-operate in contributing from different stand-points in the- endeavour to reach a satisfactory solution of a great national problem. If I put in the simplest form to which they can be reduced a few broad aspects of the question, setting on one side the appeals to experience already made by others, my endeavour will be to avoid the overshadowing of these relatively practical questions by the discussion of greater questions than it is necessary for us to resolve. I hope that this will not be misunderstood. I was a. member of the Victorian Parliament when it sat in this chamber, and questions like those now before us furnished the staple of discussion for a year or two. To that I may refer at another stage, mentioning it now to show that to some of us the present issues are not new. In the hope of sparing honorable members repetition, let me concentrate attention upon a few points which should at no time be lost to sight. It was fortunate that when the Prime Minister finished his introductory speech, my honorable and learned colleague, the late Attorney-General and member for Angas, was able at once to make a statement of the experience on this question which is generally regarded as authoritative, and of the principal doctrines that must be borne in mind. He has been followed by a number of speakers on both sides of the chamber, whose speeches have shown that this is not a new question to them; some have penetrated beyond the web “of theory into sundry of its practical aspects. But even these practical aspects are so numerous that the endeavour to simplify them discovers conflicting currents of thought and competing interpretations which may well induce an agnostic attitude in regard to the whole subject. Honorable members on this side, and on the other, too, have enjoyed, and have exercised, great freedom in dealing with this Bill. The subject appears to me a proper question for Parliament, and an inevitable one. To disregard it would have been equivalent to action. This Parliament, having teen specifically endowed with power, is responsible for what it omits and for what it does. It has been responsible,- by consent, for the existing currency for the past nine years. All responsibility for the future currency must rest upon the representatives of the people and those who elect them. The Constitution states as plainly as words can put it that this Parliament is authorized to act however it may think best in this matter.
– Such action might well have consisted in the strengthening of the securities of the banks.
– I was about to add that the words of the Constitution do not require the adoption of any scheme. We accept full responsibility for any measure of our initiation, or, negatively, for the continuance of existing conditions. Whether we remain active or inactive, our responsibility remains. That is an elementary point to be emphasized. Next we should note that this measure deals only with currency, though the last speaker and many others have discussed banking as distinct from currency. The two subjects are so interwoven that it is not easy to separate them. One of the elementary factors is that we are empowered, not by one section of the Constitution, but by several: There is, first of all, the obvious paragraph X1I. of section 51, by which the Parliament is empowered to legislate in relation to “ currency, coinage, and legal tender.” Those words are susceptible of being so construed, under American precedents, at all events, as to embrace nearly anything and everything of the subject with which we are dealing. In immediate juxtaposition, we have paragraph xiii., by which the Commonwealth Parliament is empowered to legislate with respect to banking, with certain qualifications and “ the incorporation of banks, and the issue of paper money.” Those, therefore* who have discussed banking during this debate have been perfectly in order, for the Commonwealth Parliament has power to legislate with respect both tobanking and currency.
– There is also section 115.
– That is rather a collateral provision, designed to complete the assertion of the Commonwealth’s power by a demarcation of the sphere of the States. Honorable members will also find that in paragraph xvi. of section 51, we are empowered to legislate in respect not only ta bills of exchange, but promissory notes.. And what is this Australian note issue bur a series of promissory notes, the only difference being that they are to be issued by the Government of the Commonwealth: instead of by some other authority? I am reminded that we exercised last year one of the powers conferred upon us by paragraph xvi. by passings Bills of Exchange Bill dealing with bills of exchange and promissory notes in general. If the constitutionality of this Bill were questioned on the ground that it extends beyond our power to legislate in respect of currency and, perhaps, banking, we might find the requisite power in paragraph iv., which authorizes the borrowing of money on the public credit of the Commonwealth. This is not only ai Bill dealing with currency and banking, and! providing for the issue of promissory notes, but it is in effect a loan Bill, and we have in paragraph iv. of section 51 a specific loan power. There is yet another section* with which I hope this legislation will never be associated. It has a grim, unpleasant sound, but the result of passing unwise, unsafe measures of this kind has beento bring many countries into “bankruptcy and insolvency,” in respect of which we have also power to legislate. I doubt if some of our critics have fully appreciated! either the many-sided powers that the Commonwealth possesses in this regard, or the many-sided character of the Bill now before us. It certainly is not a simple measure, that can be dealt with completely by the exercise of any one set of powers, and’ hence I have recited several in order to convey an impression of its extreme complexity. That complexity is partly inherent and’ partly attached to it, whether necessarily or unnecessarily, by Ministers. Thus, instead! of this being the transparent proposal that one would suppose, judging by platformutterances and certain criticisms in this House - instead of its being possible to deal with it in a single category - it will take those who make such an examination of it as it deserves into very different channels, and into some of their many branches. Then we ought now to turn to a very preliminary conclusion to be drawn from ihe evidence which has been generously and almost lavishly laid before us by a number of honorable members ? Some of them are deserving of a special expression of our indebtedness, but to single them out must appear discourteous to others, and my memory might cause me to do an injustice to one or two. A number of them have- laid before us all the illustrations that appear necessary to convince us of some of its essential aspects as a currency measure. One of these is that the experience of the world, from many countries and at many times, is that currency is not to be dealt with as an end in itself. Those who have attempted to imply that it is an instrument for the stimulation or control of any of the great social functions with which it is allied have invariably found themselves led to shipwreck. The function of currency is to minister to production, . trade, and exchange in all their operations, and its perfect success is achieved by its perfect ministration to these without obtruding itself. The easier it makes production or the freer and cheaper the exchange, the more it enables transactions to be conducted at a distance, for great matters, or in complex matters, and the less attrition there is, the greater the success. Currency serves best when it is least thought of. A country is financially in its soundest health when its people forget that there is any currency question, and have nothing to obtrude it on their minds.
– -It is very litwhat digestion is to the physical body.
– Very much. I shall not attempt to follow further the argument to which this is intended to relate. But quite a series of honorable members have spoken of the currency as if it were a tool to be used, so to speak, for some other end than that of an agency by which the. world’s commerce and business are carried on. That has been a fruitful source of error. Then’, again, we have constantly heard discussed the measure of risk that has been run by different enterprises, and the measure of risk we are about “to run in this note issue. The world’s experience, which has been cited by so many honorable members, proves, .if it proves anything, that the risk is not so measurable. We cannot name, with precision, a percentage, and say, “ So much reserve must be held in gold and then von will be perfectly safe.” The experience which honorable members have heaped before us goes to show, that whilst in ordinary times, in a healthy community, the percentage of gold that need be held against ;i. note issue may be inconsiderable, or fractional, that is only true, so long as there is no pressure.. The disasters that have been cited, have arisen from a want of knowledge of the fact that there is no average to be struck, and that, when the hour of emergency arrives, or is believed to be arriving, it can suddenly be raised. On the contrary, the world’s experience goes to show that the currency, if tested at all, is tested at a time when practically no proportion is sufficient. It is put to a real test only when there is a panic. And when it is put to a panic test, we appeal in vain to the judgment and reason of men for a fair consideration of the real resources of any institution or currency. There is a natural disinclination on the part of those, who have not sufficiently saturated themselves with this experience, to allow large quantities of gold to be idle, when they might be usefully and profitably employed. The historical citations made prove that, in this matter, there is no security, except an absolute security, in time of panic. A practically immediate value must be given, meeting the whole of the obligations represented by the issue of paper money.
– That could be done as in England by the suspension of the Charter Act.
– Quite so. Its wellestablished financial enterprises, and the mass of experience behind that bank nave served as a steadying influence, making England’s crises much less acute than they would otherwise have been, but I do not think that the honorable member would consider the interposition quite satisfactory. On more than one occasion there was much suffering and heavy loss.
– And the Government even in that case did not assume responsibility. The Bank of England had to pay the notes. There was not a Government guarantee.
– That is also true. If I have made my point sufficiently clear, perhaps, when we go into Committee, some honorable members may consider the question from this point of view, and refuse to be comforted by what appears to be in ordinary circumstances, an even exaggerated security. I hope that, in Committee, they will be induced to accept nothing less than an ample and absolute security for any issue for which the Commonwealth makes itself responsible.
– Does the honorable member distinguish between an ordinary financial crisis, and one arising from the struggle to preserve national existence?
– I do. Among the illustrations quoted, which appear to me to be separable on account of their conditions, were those of war loans. Of them I do not propose to speak.
– The American greenbacks and the French assignats.
– In those cases we had a nation with its existence at stake taking a certain course, forced upon it by calamitous circumstances - for even a successful war is a calamity - imposing upon it an enormous burden, threatening its national existence. What was done in those circumstances was to issue a large amount of paper money, with a comparatively slight security other than the promise to pay. I put such crises outside. Once the sword is drawn, the principles of ordinary financial security and humanity, together with many others that we value, are thrown aside for the time being - and dearly we pay for it. The simple point is that in time of panic the only test is cash. Unless enough cash is available any scheme must fail, excellent as it may be _ in all its proportions, and full of promise. Assuming that, or something like it, to be a fair statement of the case, what is our clear duty? Surely it is to nut any issue that bears the name of the Commonwealth beyond all question ; to take no risk ? It is not our business to take risks with the national currency. There is no need to take risks with it. It is not created for hazard. It serves quite other purposes. To take any other view would lead to a confusion of issues, belonging to another field, the banking field ; a consideration of accommodations, of dealings of various businesses and their support ; issues which are natural and proper to the banking parlour, but d” not attach to the simple needs, of a currency. We are here dealing only with the plain question of the currency, although the honorable member for North Sydney and others are making proposals - as will be seen from the constitution of the Commission which the honorable member for North Sydney has proposed - taking the issue out of the regions of pure currency. With all those matters we ought to have nothing to do. We have simply to meet the necessary demand of trade, commerce, production, employment, and exchange, and, having met that, we have fulfilled our duty. We have, with a currency, nothing more to hope for, and we should, and could, have nothing -whatever to fear, that is, if we confined ourselves strictly to an Australian note issue.
– And not to the raising of a loan.
– I shall come to that in a moment. In the first place, these Australian notes will be I.O.U’s from the Commonwealth Government, with the credit of the Commonwealth behind them. They will represent gold, and will be used1 instead of gold for greater convenience of transit and transactions. That is their purpose. Beyond that, it is a perfectly fair thing to say that an issue of the kind ought, at least, to pay its own expenses. It ought to be managed, and it can be managed very readily, so as to pay its own expenses. More than that, it is a proper thing in this connexion to buttress it by the establishment of what might be loosely termed a sinking fund, to be associated with it, and lending it even greater stability. But, with currency, beyond that we ought not in any circumstances to go. When we are considering the currency aspect of the question, an issue that pays for its own management, and builds up a national sinking fund, resting in and heightening the national credit on which it is issued, will completely fulfil all the purposes which, as currency, it ought to be asked to fulfil. If there, are any other objects aimed at in this Bill, they ought to be sought in another way and by other agencies. I am inviting honorable members to. separate the currency aspect of the question from all others, because the public outside are under the impression that the difficulties which embarrass us, and therisks we are fearing, arise out of our note issue. No such thing.
– It is as simple as “ A B C.”
– It is, but do people generally understand it? Let honorable members look at the criticisms of the proposals which have appeared, and then ask themselves whether the question is generally understood. In the establishment of a special medium of exchange, the paper money of the Commonwealth, there is nr> problem, and there is no risk except a problem we choose to create, or a risk we wantonly choose to make, for ourselves by attaching to our currency aims of another character, which are quite foreign to its purposes.
– Will the honorable member make more clear his reference to a sinking fund, which has never previously been mentioned in connexion with this proposal ?
– I may refer to it later; but should like now to finish my present argument. We are looking at this question and are entitled to do . so, in one sense, from a selfish point of view. We are considering schemes which must mean a loss to the States, and the States are Governments chosen by Australian citizens to conduct the. affairs of particular portions of Australia.
– The honorable member is speaking of a revenue loss.
– Yes, of a revenue loss to the States. I venture to say that this loss to them is one that we can regret. It is unfortunate that it should be imposed upon them. In addition to that, the banking institutions of this country will be placed in a position of some temporary difficulty owing to a change of system which will take from them their gold, or,- at all events, a considerable part of it, and transfer it to the National Government, against the notes it will issue. The weakening of the banks’ gold reserves is not a thing which we, as Australian citizens, need rejoice at, even though it should help the creation of a national gold reserve. These matters require to be recollected. It may be said that no course can be taken in this life to the advantage of one person that is not in some way or another to the prejudice of others ; but, as these considerations have been almost ignored during this debate, it seems worth while to mention them.
– But the change will be a big advantage to the public.
– That is the justification. But when we are aiming at doing something which ought to be of advantage to the public we may still recognise that we are injuring or weakening, to some extent, local agencies which we do not desire to injure or weaken if that could be avoided.
– We shall have the value just the same.
– Let me reply now to the interjection by the honorable member for North Sydney, with respect to a sink ing fund. The name was used because it should have that character. Whatever margin there is, between the gold which we think it necessary to hold, and our issue of paper money, represents, for the time being, a gift to the party issuing, whether it is a bank or the Commonwealth, and under this Bill it would be the Commonwealth. I have already indicated to what that should be applied.
– To increase the security.
– It appears to me that the total sum of the margin to which I have referred, instead of as this Bill proposes being placed at the disposal of Parliament for works or projects which we have yet to hear of, to authorize or to refuse, ought not to be put to any such purpose. From the very first this sum should be employed in the purchase of Commonwealth securities or debentures to be held as a sinking fund, and in trust as a support for this issue, and also as a means of improving the stability anl financial reputation of the Commonwealth.
– Anything else would be extra-currency.
– lt would be foreign to its purpose. Having limited our margin to a reasonable small amount, it will, in the process of time, become a very valuable public asset, increasing the reputation and stability of the Commonwealth, and giving to these notes a backing which would make them acceptable to the crustiest, most cautious, and timorous dealer in money the world has ever seen. Surely that is what we want? I hope I have answered the honorable member for North Sydney sufficiently.
– Hear, hear.
– That brings me to the end of the argument I have been following, which may be summed up in this way. First of all, there is a legal power to issue Australian notes having a currency throughout the Commonwealth. There is not only the right to issue them, but, in my opinion, there is cast upon us the duty of issuing them. Not only is there the right and duty to issue them, but they can be issued, by a practically unanimous House, if it be done on such lines as I have indicated, putting our currency in so impregnable a position that the shadow of doubt could never be cast upon the issue -in any respect. But do the public realize that? Do they realize that they can have their note issue at once with all the advantages attaching to it and absolutely without risk and without the possibility of danger under any circumstances and with guarantees and backing that make it practically impossible that any disaster can happen to it. If this were an Australian Notes Bill and only an Australian Notes Bill, we might establish under it an impregnable currency without taking a single ha’porth of risk in the whole transaction. The whole of the risks of this measure consist in an endeavour to attach to the Australian note issue and the gold reserve proper for the notes another purpose altogether. In other words, a note issue can, and may, be made impregnable, but the loan policy hidden in it in this guise carries all the ordinary risks of such a policy, and with them the risk at some future date of making possible a shipwreck of the Australian note currency. Have the public apprehended these points ?
Mr.G. B. Edwards. - They have never been put to the public.
– Have the public appreciated this fact? Will not honorable members find if they speak to the average citizen in the tram that the idea generally held is that it is the note issue that necessarily carries the risks. People are doubtful about the proposed note issue only because of the risk. If you explain the matter to the average citizen he will say that he is perfectly satisfied with the proposal. What he will continue to have grave and very reasonable and proper doubts about, is the making of our note issue or currency a means for raising a loan which, depriving the issue of its impregnable security, delivers us to the hazards of future panics. They may not come in our time; let us all hope they will not. They may not come for a long time, but come they will, unless this country is to have an experience differing from that of every other. What with the world changes at present taking place, the uncertainties of commerce and the uncertainties of our own seasons, there must be times of tightness, even in this favoured part of the world, and when panic comes the damage is for a long while irreparable. We have safety within our grasp. Why shouldweput it aside for any gain we are likely to make by grafting on to this currency a hybrid loan system?
– Is not the loan the real object?
– Suppose that it were?
– Honorable members have been told that this proposal was advocated seventeen years ago.
– I do not retort because I should like to see this regarded as one of those questions which are above party politics. That does not furnish any answer to the question whether it is wise that a loan should be attempted in this way. Are conditions which are sought to be attached to our national notes such as to make us safe ? That is what I am concerned about.
– There is no loan about this Bill.
– The honorable member can have no “loan” of us. I have been a little led off my track by interjections. The point I had reached was the Australian note issue, its value, and how to make it impregnable. There are, at least, three clear ways in which an Australian note issue could be obtained, and one of these I ought to have dealt with at an earlier stage. It was within our power, without taking a farthing of responsibility on ourselves, to pass an Australian Note Bill which would have imposed on the banks at present issuing their own notes all the safeguards which Parliament might think necessary.
– Not a bad suggestion!
– If any proposal were made with the narrow objects suggested by my honorable friends opposite, it would be for them to oppose and reject it ; but here, again, I am speaking of conditions which ought to be unanimously agreed on, that it would be for this Parliament to lay down. The note issue of the banks, which I believe to be safe as it stands, could be made impregnable, and impregnable it ought to be made, before it could receive the imprimatur of the Commonwealth and go out as an Australian note issue. The exchange on notes between the States was not only antiquated, but indefensible j but to transform the current bank notes into Australian bank notes needed simply such an Act as this Parliament has in its power to pass, affixing alt the necessary guarantees, and imposing them on the banks as a condition of the issue. The Commonwealth could retain against the issue cover which would make it safe. Any difference could be employed’ to pay the cost of the system, and provide a sinking fund as the Commonwealth would, though not in the same proportion, seeing that the standing of the Commonwealth is higher.
– :How could we do this without overhauling the whole banking system ?
– The Commonwealth has the power and the responsibility of dealing with banking.
– We will do that next year !
– The honorable member seems more hopeful about his banking account next year than he is now. Why? If he considers simply his personal interest he would see that the transactions of his banks were governed in such a way as to make it safe for him and every citizen to be a depositor and a customer. The proposal would not be to create a form of currency to be employed for private ends, or- merely on such conditions as the banks thought fit. If we were to have an Australian note issue, we should require conditions which would make it impregnable. We should require to face this problem from a standpoint which would differ from that of the Commonwealth, partly because the banks have a huge business already, with agencies in every direction, which could be directed to minister to operations in connexion with the currency, as well as in connexion with other matters. All that was possible, and that was one plain road we could have taken to give the Commonwealth an Australian note issue through the banks without incurring a penny of responsibility or a penny of risk, and, at the same time, “ relieving those who used the currency from any apprehension whatever. There is a second road we might have taken. I make no pretensions to be an authority on finance, but, naturally, it has been my duty and endeavour to learn as much as I could, and especially to listen to those who have experience and who .are specially competent to advise. On the last occasion when it was my official duty to be in London, I happened to be brought in contact with some of the principal financiers of the Mother Country, including governors of the Bank of England, from whom I sought advice and obtained it - advice which was perfectly dispassionate and uninterested - in regard to the financial future of the Commonwealth. The questions, of course, covered a fairly wide area. They began with the possibilities of Australian loans, either by way of redemption of State issues or in connexion with an agree ment with the States which would have covered all their loans, and also covered Commonwealth purposes. They passed from the consideration of loan business - the high costs that some of the States have had to pay on the London market, and the question of their reduction - to the possibilities of loan flotation in Australia itself, of our banks as agencies, by which this flotation could take place, and of questions incidental to the present note issue of the banks, and of a new note issue. It may be said, of course, that the Briton is conservative in his habits ; but to be conservative in matters of finance is recognised as rather a strong recommendation. Changes are viewed rather askance, because the beaten road has been proved and any new road requires to be carefully scanned. So far as I could judge, except in two or three instances, the men to whom I spoke, though themselves conducting large operations on the London money market, were quite free from special attachment to the Bank of England model. But the curious feature was that all the principal men were practically agreed that the best model Australia could take in launching any new financial adjustment would be the establishment of a bank in Australia fulfilling the same purposes that the Bank of England does for England, with the necessary changes to adapt it to Australian environment. They pointed out that by the chartering of a bank or group of banks under legal conditions, we could arrange for the new institution to take the Australian note issue under control, manage the flotation of our loans, and act as our financial agents generally.
– Where do the brokers come in?
– I do not say that the brokers should not come in, but certainly the interests of the country should be placed first, and the brokers should earn their money by serving those interests, and not at the expense of the country, as they sometimes do.
– As they always do !
– As they sometimes do. However, I do not wish to dwell on that point. The consensus of opinion was remarkable. They said, “ Our advice, from a study of the question, is not to establish a Government bank in the sense of a Government Department or of a body under political control or too closely in touch with the Administration; mix your politics and your finance and you injure, if not ruin, both.”
– That is a platitude !
– I do not think that a relevant interjection, but, never mind. They said, “ When you have your bank sufficiently dependent on its own. exertions to retain the value of that stimulus to energy which is possessed by an institution endeavouring to make a fair profit for its shareholders, and, at the same time, safeguarded in its responsibility to you, receiving no more than a fair remuneration for its labour, and, probably, saving you a great deal of money by acting consistently in your interests - instead of your employing agents from time to time, we do not see why you should not, perhaps, do even better than we do in England, where we have still some problems to settle. If you can have such a bank, you will obtain that union of forces which we have found immensely valuable under our circumstances, and which ought to be more valuable in a new country with its loans yet to float. You have £250,000,000 on the market now, and if that were in the hands of a single bank the result would be highly advantageous to you, for, in the hands of cempetent men, great gains must come to you though spread over a series of years.” The second course open to this House, therefore, was by some adaptation of the Bank of England relation to obtain an Australian note issue, and also a large measure, of financial administration. Personally, I was greatly impressed, . and see no reason to alter the opinion then formed that this offers the best road for Australia to follow.
– Did the honorable member’s advisers favour a national issue or merely national control?
– They favoured an issue under the control of an Act of Parliament, which should fix the amount and its conditions, but, that being done, and the safeguards obtained, it was suggested that the matter should be left in the hands of the banks.
– That is bolstering up the banks !
– Honorable members opposite misapprehend, I can assure them. This is a point I intended to touch on only in relation to the subject before us. The Prime Minister, when he visits the Mother Country early next year, will find those advisers just as accessible to him as they have been to any previous Prime Minister. He will obtain their advice and their assistance; they are men who have nothing to gain and nothing to ask, but who are only too happy to aid a Dominion of this kind to build up its financial stability. I can assure honorable members that the control of the Australian note issue, as they broadly outlined it, would not have permitted it to be used for bolstering up any of the banks’ bad bargains ; and they indicated, as I have said, certain alterations of the English practice as advisable on our account. However, when the Prime Minister has heard for himself, he will be able to form his own opinion. I now come to the third way, which, apparently, finds more favour on the opposite benches, and which I propose merely to mention. That is a Government bank, which would be practically a Government Department, to undertake the note issue and other financial business for the Commonwealth. This I believe to not only possibly involve extra financial risks, but to involve probably just that alliance of politics and banking to which I have already alluded.
– Is not the Bank of England in that position?
– The Bank of England is not a Government bank in that sense.
– Undoubtedly it is.
– To all intents and purposes, the Bank of England is a Government bank.
– Even the least informed of us, I think, has some knowledge of the extent to which the Bank of England is a public institution, and the extent to which it is a private institution. It is both ; and it carries on both its businesses under one roof. It conducts great private enterprises independently of the Government, and for which the Government have no responsibility; but by its means there are brought together, as governors, a body of men that it would be hard to match all the world over. Those men have intimate business knowledge of the finances of the world ; they are uniformly of great ability, holding commanding positions, and have the experience of a lifetime in all the kinds of financial business which is brought to London. It appears to me that no purely Government institution can hope to command that kind of experience, or to have it applied in that way. Unless you have some measure of personal interest, such as the governors of the Bank of England have in serving their private interests, as well as in conducting public business, the same successful results cannot be anticipated. It is so easy to make a State business run easily without involving loss, but at the same time without making those savings which sometimes it may be unpleasant to make, but which, when a bank is managed by men representing private as well as public interests, will undoubtedly be made. For these and other reasons the third mode to which I have referred does not happen to commend itself to me, and I say so plainly. I have pointed out how safe the note issue ought to be, and may be, made, and have called attention to the fact that it is not made safe merely because it is proposed to hold 25 per cent, of gold, the remaining 75 per cent, being in Treasury-bills to be sold to meet an emergency. I have my own ideas as to what would probably happen if an attempt were made to sell those bills to meet an emergency, but that is not the important point. So far as that part of the measure goes, it is a Loan Bill. The Prime Minister himself has told us that he expects the circulation of the Australian notes to reach £7,000,000.
– But they are to reach £7,000,000 early. I am taking the Prime Minister’s first statement, when he spoke of £7,000,000. That means that £1,750,000 are to be held in gold.
– .£2,000,000 for all practical purposes.
– Let us say that, for all practical purposes, ,£2, 000,000 are to be held in gold, and that £5,000,000 are to be placed in the hands of the Government, subject to the authority of this Parliament, to be expended on whatever purposes may be thought fit. That amounts to a loan of ,£5,000,000.
– I may as well relieve the honorable member’s mind by saying that I shall not ask for a penny of that money for Commonwealth expenditure.
– If the Prime Minister does not ask for the money for Commonwealth expenditure, he cannot ask for it either for State or private expenditure. This means that the £5,900,000 will not be spent at all.
– That is rather a loose way of stating the case.
– I am only trying to understand what is in the Prime Minister’s mind. What is this money to be’ devoted to?
– I asked the Prime Minister whether he would use the notes to pay for Federal obligations, and he said “possibly.”
– I do not want to pry ; I do not ask for the Budget in advance.
– I hope to be able to adjust the accounts at the end of the year with the money, and subsequently to use it by investing it in stock.
– The Prime Minister- is taking my criticism out of my mouth.
– So much was suggested a week ago.
– That may be so. The 75 per cent, is to be applied for purposes of investment, and thus to strengthen the stability of the Commonwealth. I have no argument to use against that course. I do not know what better use could be made of the money. If that course is to be followed, the rest of my criticism falls to the ground. I should not have been unprepared for such a statement if this Bill had not preceded the Budget. But I was about to ask what conceivable object of expenditure the Prime Minister and his colleagues could find for the application of this money? The present Government stands in a better position financially than any Government in the past. They are about to get an extra £1,000,000 from the land tax.
– £[2, 000, 000.
– I take the Prime Minister’s figures, because, at all events, they are a minimum, and I am not concerned to go farther with the argument I was proposing to pursue in this regard.; Nor shall I endeavour to determine what sort of surplus the Prime Minister must have expected if he intended to apply this sum to any purpose which appeared upon the horizon. Fortunately, however, it is not necessary to speculate on that subject now. Under the circumstances, I hope, also, that the Prime Minister will take a broad view of the proposed gold reserve; and will recognise that for some years to come, at all” events, by way of establishing the reputation of the Australian note and putting it beyond all challenge, as a mere matter of policy he should provide a large increase on the proposed cover of gold to be held. This would be in the interests of the Commonwealth as a whole, not so much for the immediate finances, but forecasting the next few years.
– That is provided for in the case of all issues over £7,000,000, which will be the. normal issue.
– For all issues above that amount I am aware that the backing of gold is to be £1 for £1. But I would press upon the Prime Minister that 25 per cent, is quite insufficient in itself as a reserve. Now we are launching a new system, we can afford to increase that cover in order to establish, once and for all, the reputation of the Australian note beyond cavil or question, even in times of panic.
– The Treasurer’s trouble is that there are so many people who are anxious to have our notes even now !
– Fortunate Treasurer - in many respects ! I believe that when the honorable gentleman’s statement, about investing the 75 per cent., is realized throughout the country, it will occasion a great sense of relief, and that the people generally will feel far more satisfied than will many of those enthusiasts-
– That statement was made a week ago.
– So much the better; it shows that even after a week’s reflection it has still held. The Prime Minister’s word is quite good enough for me. I look forward with interest to the education of the enthusiastic gentlemen who have been predicting from platforms outside, and who have even hinted inside Parliament, that we were going ‘to establish a golden age in this country - in one act - with other people’s gold ! - as a result of the present Government’s financing. That illusion is gone. With that out of the way, and face to face with our circumstances, it appears that the questions we have to discuss are whether we can conserve the interests of Australia best by launching our note issue through the banks, or by undertaking it through some institution on the lines of the Bank of England. I should say that either of those two courses is greatly to be preferred to a purely Government departmental bank, for which I foresee no success, no adaptability, no progress. That would be true, even if we were fortunate enough now and then, amongst those who would be charged with the management of the institution, to find some of those rare men who, being possessed of great financial ability, would be willing to apply it with the same sleepless earnestness, the same zest, the same foresight, and the same anxiety to effect small savings, in a public position, that they would show in the management of their own concerns. Because it is, we must remember, by the multiplication of small savings rather than by large dealings that those successful financial institutions have been built up. I have, however, trespassed quite long enough upon the time of the House, in the hope that a few of the aspects of the case that I have put might commend themselves to honorable members. I hope also that they may commend themselves to those public critics, many of whom, so far as I can judge, have much misrepresented the real bearing of the opportunities presented to this House by an issue of Australian notes.
– I think it must have become obvious to honorable members that interest in this debate has to a large extent gone out of the House. Those who have listened to the speech of the Leader of the Opposition, and watched the very scanty attendance of honorable members during its delivery, must have recognised that fact. But, notwithstanding, I think that the speech was a peculiarly useful and interesting one in this respect. Although it did not deal with any of the disputed points which have been so fully debated in this House, it was educational in presenting a bird’s-eye view of the risks and responsibilities which arise out of the measure. I am quite sure that those honorable members who sit on the Ministerial side, and who feel themselves bound to support this measure in all its details, will, nevertheless, if they have listened carefully to that utterance, have realized that, after all, this banking proposal of the Labour party is not one merely of “beer and skittles,” but one that involves a great responsibility, the seriousness of which few realized when they first embarked upon it as one of the planks in their platform’. I do not propose to follow other honorable members in dealing at length with what has been called the economic aspect of the question. But I wish to deal with what appear to me to be the practical aspects that have come into prominence during the course of the debate. I should like to preface the few observations I have to make by disclaiming sympathy with those critics who predict nothing but financial disaster as the necessary consequence of this measure. I do not think’ that it is indispensable that this Bill should be followed by financial disaster..
It depends very much upon the type of man who, in the position of Treasurer, and in the position of Prime Minister, has the determination and the administration of it. With the Prime Minister at present in office, I should have no fear of reckless conduct regarding its administration, such as might be expected from some other members of the Labour party; because, although he may have just as strong a desire as any of them to realize the rather fevered expectations of his party with regard to this branch of legislation, there is also a strong element of Scotch caution in the Prime Minister which would always save him from running into extravagance, even in dealing with a banking measure. At the same time, I think that the measure is entirely uncalled for ; and that the burden of proof is altogether on those who seek to interfere with the existing order of things, which have been conducted, at all events since 1893, without the slightest public inconvenience or danger. The burden is upon them to show that the bank currency of the country, apart from- any process of obtaining cheap loans, or the desire to interfere in the banking arrangements of Australia, is lacking something which can only be remedied by this proposed interference by the Commonwealth. I submit that that has not been shown by anybody on the other side. I have listened to all the speeches on this measure with great care, and I am willing to award to one or two of the speakers a meed of praise - for what it is worth - for the temperate manner in which they spoke, and the thorough manner in which they appear to have investigated the question before coming here as critics. At the same time, I hold that since 1893 the currency of this country has gone on so smoothly, with so little fault being found” on the part of the public, that there is a strong obligation on the Government, apart from their banking ambitions, and their desire to get a “loan for nothing or for very little. to show that the currency with which alone this Bill professes to deal, is so un: satisfactory that it is one of the urgent questions for the State to deal with. That is, I submit, the logical position in which this measure is placed before the House. Not only is the measure uncalled for, but in my opinion it is unnecessary, and it has within it - I speak with all care and responsibility - the germs of disaster if its administration should fall into the hands of a reckless or even careless Treasurer, or a careless Government. By passing the mea sure we shall be adding unnecessarily to the statute law, though that in itself is not of much consequence, and increasing the financial responsibilities of the Commonwealth. I feel sur2 that honorable members, whether they sit on this side or on the other side, will admit, as the result of their reading, and whatever may be their view of the wisdom of .passing the measure, that all deal ings with money on the part of a State, which means on the part of the Government already occupied with State affairs, party considerations, questions of expenditure in order to meet the approval of the public, all questions connected with money, whether it be with banking or with currency, are dangerous - more dangerous in the case of a State than in the case of private organizations, whose business it is, apart from all political considerations, to devote their whole attention to that one question, and to make that the object of their business lives.
– For their own profit, mostly.
– The honorable member has the old bee in his bonnet. I shall deal with that question in a moment, if he will wait, and shall show him, I think, that it is a complete misconception on the part of the Labour party that there is much, if any, profit being made out of the notes which the State ought to take out of their hands. I ask the House to consider what is the genesis of this measure. We all know that ever since the Labour party has been in existence it has talked of a State bank. And we know, from speeches which have been made by members of that party, and from articles which have appeared in the Labour press, that there has been a widespread belief that certain private individuals were making millions of money out of the system of banking and out of the issue of bank notes. That has been the popular “ Labour “ opinion ; and it is held by a number of honorable members here. The honorable member who has just interjected is evidently labouring under the opinion that the banks are making huge profits out of the present issue of £4,000,000 worth of notes, and that the sooner the State takes this function into its own hands the sooner will the banks lose this profit, and the sooner will the State acquire it.
– The honorable member is a very clever twister. I never said any- thing of the kind.
– That is the effect of the honorable member’s interruption. That idea is, I repeat, based on a complete misconception of the position of the banking business. I am not going into the question of banking itself, although honorable members are very familiar with the scores of Labour cartoons, in which banks have been represented, not as the property of mixed bodies of persons, of whom some are rich, some poor, and some with very moderate means, but as the property of certain very rich and vulgar persons who have no other object in life than to cheat the public in every possible way, and prey upon their means. I have here - and I always like to go to the journalistic fountain-head - an article which appeared in the Worker as far back as April.
– In which Worker?
– In the Brisbane Worker, which is the only Labour publication that I read. In my view it is the most clever Labour paper in Australia; and I read it more particularly because I think that whatever ability is displayed with regard to the Labour policy emanates from that source. A short extract will give to the House, and the public, some idea of the way in which the banking class are viewed by the rank and file of the Labour party, and even by one of its most influential journalistic editors. Speaking of what the Government are going to do, it says -
The establishment of a Commonwealth bank of issue, deposit, exchange, and reserve, would be a big step towards making the Australian nation master of its own currency and liberate its citizens from the talons of the Money Power.
That is an absolutely childish and ludicrous view of the whole banking business of Australia, because, in the first place, the share lists of banks, which can be inspected in every State on the payment of a shilling, include all sorts and conditions of men and women. The shareholders in banks are just as numerous and just as varied as are the depositors in the Government Savings Bank in the different States. Those who attended any of the meetings in connexion with the reconstruction schemes of 1893 were afforded a vivid illustration of the varied character of the shareholders. They represented every class of people - shopkeepers, merchants, clergymen, and women, and workmen. Yet, from time to time, the banks are personified, as represented in the cartoons, and as described in this newspaper, as a set of “ vultures “ who have no other purpose in life except to bleed the public of their honestly acquired means.
There is no doubt about it that this Bill iswhat is left - the mere rudiment - of that misconception of the robbery which is said to be going on by the banking class. It has been whittled down until we were told, that the Government were going to limit their Bill to a note issue. We know that only, so far back as the time of the Brisbane Conference there was a scheme brought forward, not merely for a note issue, but for the establishment of a State bank. That scheme was designed, I believe, by the honorable member for Darwin; and it provided among other things - and honorable members will see what a crude state its. designer’s mind must have been in at the time - that there should be no money to meet the notes, that they should only be met in one part of Australia, either by Commonwealth consols or by gold, at the option of the ComptrollersGeneral of the bank. I ask honorable members to consider for a moment what a tremendous transformation must have taken place in the corporate opinions of the Labour party since they approved of that scheme.
– It was approved of by the Conference.
– I have said so. This was a scheme which was actually approved by the Conference at Brisbane - although it was founded upon a proposal to ask the States to take shares, and the whole capital of the bank was to consist of 12,000 shares, of £100 each. An honorable member who is now a member of the Executive of this country conceived’ this childish, this silly, scheme for a national bank.
– Order ! I must ask the honorable member not to go into details.
– I shall not go into details, sir.
– Does the honorable member say that that Brisbane scheme was adopted ? ‘
– An honorable member who is now a member of the Government conceived this childish scheme, which was actually adopted by the Brisbane Conference only two years ago.
– And it is now working in Switzerland, from where it was taken.
– That scheme was to be introduced into Australia.
– Does the honorable member say that this scheme was adopted? Mr. 0’ Malley put it before the Conference, but it was not adopted.
– It received the imprimatur of the Labour Conference at Brisbane, in July, 1908.
– The general principles of it did.
– I am not entitled to go into details, and therefore I cannot follow the matter further, except to say that, however crude it was, its general principles received the imprimatur of the Brisbane Conference. It was designed by a gentleman who might have been Treasurer of the Commonwealth. This Bill is merely the rudiment of it. The national bank scheme has been put on one side, and although honorable members opposite talk confidently of our seeing very shortly a Bill to create a State bank, my own belief is that the Labour party already sees the difficulty, and almost the impossibility of establishing a State bank, and that we shall hear very little more about it. The whole scheme is then reduced to this proposal for a Commonwealth note currency. I desire now to quote the ideas of one of the leading organs of the Labour party as to a State issue - this same Queensland Worker. In the first place we were told that there was no need for a money backing, and that the Government were merely bowing to a “ gold fetish “ in providing for any redemption whatever. The same newspaper characterizes as “ a waste of money “ even the providing for 25 per cent, of the note issue. Honorable members will, then, see for themselves that within a very short period the Labour party have gone through some very interesting changes, beginning with this “ hifalutin “ scheme by which they were to make hundreds of thousands of pounds for the public. They have lately abandoned as impossible and impracticable a measure for a State Bank. They have come down now to this note issue, with a 25 per cent, gold backing, which backing one of their leading organs condemns as a waste of money. It is interesting to see the evolution of the measure ‘ when it comes before the House in this way. I should like to go from that to this general statement - and I think it will be supported by all who have studied this question - that banking in any shape or form is a business.
If there be any doubt on that point, I support my statement by reference to an authority who has already been very frequently quoted on both sides - Walter Bagehot - a banker whose experience extended over a lifetime, and who was regarded as one of the ablest thinkers in English politics.
– And one of the best writers on the subject, too.
– Yes, though I regard that as less important.
– His literary gifts enabled him to convey his views with wonderful clearness.
– That is so. In his book on Lombard Street, he has expressed opinions of very great value, and says -
Nothing can be truer in theory than the economic principle that banking is a trade, and only a trade ; and nothing can be more surely established than that a Government which interferes with any trade injures that trade.
When once we have recognised that banking is a trade, we see that it is very questionable whether a Government should enter upon any branch of it unless under the pressure of absolute urgency. If the currency of the country since 1893, a period of seventeen years, had not met all the needs of our commerce, the time would have arrived for the Government to interfere j but, recognising that banking is a trade and money a commodity, that a banker is merely a dealer in money, and that commerce has not suffered by reason of the present currency, we take upon ourselves a tremendous burden if we enter upon this trade in the hope of providing a better currency. If Ministers were to honestly declare that their object is to borrow without paying interest, which was undoubtedly the primary purpose of the measure, their position would be different. It will be remembered that the Prime Minister has told the House that he does not look for profit, and I shall demonstrate, by means of figures, not only that he will make no profit, but that what he proposes will involve the public in a monetary loss. The Bill was, as I have said, put on the Government programme with a view to raising a loan without paying interest, as is shown by a quotation from the Labour bible - >
The proposal of the Fisher Ministry is to issue up to £4,000,000 almost at once. . . . In this way the Government will obtain a £3,000,000 loan without interest.
– The honorable member must not read a newspaper comment upon a measure before the House.
– The primary object of the Bill was to enable the Government to borrow £4,000,000 without paying interest for it. If the Government has abandoned the hope of gaining in this way by the proposal, Ministers and those who support them have no right to disturb the currency, and involve the public in an actual money loss, which will come from mixing up with politics the business of banking, and which may involve serious trouble in future. Why should the Commonwealth embark upon this business of banking? There are wild spirits, like the Postmaster-General, who would like the Commonwealth to run a line of ocean steamers. Not long since he spent two hours in trying to persuade the House to approve of the establishment of a line of steamers to run in opposition to the Peninsular and Oriental Steam Navigation and the Orient Steam Navigation companies’ vessels.
– Why should we not run such a line successfully, seeing that we run railways successfully ?
– Unfortunately, “ there are no private railways in competition with the State railways, to show that greater facilities than are at present enjoyed in Australia might well be offered to our public at less cost.
– I hope to give the House information which will show that the steam-ship companies do not run their vessels in the best interests of the public.
– If the Labour party were to say, “ We intend to carry on the business of banking; and, by-and-by, to ta&e over the whole of the carrying trade of the Commonwealth,” my reply would be, “ You are consistent, but not very wise.” During the last” twenty years I have had a great many financial dealings of various kinds in this country, but have handled very few bank notes, and probably, during the last fifteen years, not one bank note has passed through my hands.
– That is because the honorable member’s cheques are so good.
– The honorable gentleman has a valuable point. The people of this country are extraordinarily favoured in regard to currency. Should a man have only j£i to his credit in a bank, he could draw four cheques for it; and the banks charge only 5s. a half-year for conducting their customers’ businesses. The banks charge only 5s. a half-year for conducting the business of men who keep very small balances to their credit. They accept theirclients’ cheques, cash them on order, take other cheques and collect them, supply cheque-books, keep a record of transactions which is equivalent to a cash book, if the customer makes out his cheques properly, all for the sum of 5s. a half-year ; and cheques may be issued for any amount. I know from experience that to use cheques is an excellent way to pay small accounts, because it enables one to largely dispense with coin, and to keep a record of every payment. In the course of a year, a man may sign hundreds of cheques, and every one who possesses a banking account has iri his .cheque-book what is equivalent to an unlimited supply of bank notes.
– In addition to charging 1 os. a year, the banks earn interest on the balances lying at the credit of their depositors.
– The honorable member may have such a large amount to his credit that his bank may make something by using it, but I leave so little in my account that it is of no value to the bank. Our banking system, therefore, affords; facilities for the using of cheques which is not given in any other part of the world. Many years ago when a student in England, I could not get a bank of any importance in London to keep my account, unless I would undertake to leave .£100 always to my credit.
– I never had £100 in all when in England, but I was able u> keep a banking account.
– In the Post Office Savings Bank, perhaps.
– No; I drew my money through the London and Westminster Bank.
– The facilities which Australians have for drawing cheques for small amounts meet the needs of the country so well that there are seldom more than .£4,200,000 in bank notes distributed among a population of 4,500,000. Since 1803 there has been no complaint about the currency, which makes all the greater the responsibility of the Government in proposing a change which contains the germs of serious trouble. I thought that the Prime Minister in introducing the Bill would have given good and valid reasons for its provisions, but his discharge of his obligations to the House was very hurried and half-hearted ; and although I listened to his speech with great care, I got little information from it. He complained that the issue of notes was not referred to in the Convention discussions. No doubt the members of the Convention thought that this subject could not be dealt with for many years, and the possibility of a situation like the present did not occur to them. The Prime Minister referred to the circumstances of 1893, as if they had a bearing on this proposal, but they have not. The trouble which occurred then was due to the action of the banks in putting out in advances a great part of £30,000,000 worth of deposits, for which they were liable to be called upon at any time. This money was lent largely to foster land investment and speculation.
– The policy was forced on the banks from England.
– That may be, and those in charge of the banks’ affairs may have been very indiscreet. But what happened was not connected with the note issue; and although one of the results of the closing of some of the banks pending reconstruction was the suspension of note payments, it was known that the note liabilities would be met in a very short time, because in some of the States, notes were a first charge upon the assets of the banks, whilst in New South Wales, where they were not, the position was even stronger ; since there was upon the shareholders an unlimited liability, over and above the subscribed capital of the banks, to meet that note issue. I heard the honorable member for Hindmarsh, in the course of his speech, ask, “ What is the good of that security if you cannot get your sovereign?” The honorable member knows very well that the holders of bank notes could easily have disposed of them, at a very small reduction, in the period during which payment was suspended. I think that the honorable member said that the holders of notes might have lost 2s. 6d. in the pound; but I have no experience of any one having suffered such a loss. No one but a simpleton would, and all the law in the world would not protect a simpleton.
– I was speaking, not of the simpleton, but of the poor man.
– Even a poor man might be a simpleton, and a simpleton might, at any time, part with a Bank of England note for a very small proportion of its face value if some one persuaded him that he would have to go to England to cash it.
– The honorable member for Bendigo admitted that he had had to part with notes at a loss. Does the honorable member consider that he is a simpleton ?
– I do not think that he is a simpleton; but even he might be under excitement. The disaster of 1893 had, as a fact, nothing to do with the note issue, although, as a consequence of the temporary closing of the banks, pending reconstruction, there might have been, for a short period, a slight depreciation in the notes. I date back, then, to 1893 the absence of any complaint against the banks on the score of their note issue, because of the temporary suspension which then took place, and which limited the value in certain cases, for a few days. 1 could, however, go further back and show that the only cause of complaint on this score was the failure of some small bank in Melbourne and the scattering of its* notes broadcast. Even Government issues, including those of the Argentine, America, Japan, France, and other countries, have failed; but they have very little bearing on this Bill. I insist, however, that the Government are taking upon themselves a great and unnecessary responsibility, containing in it the germ of possible disaster, in the future, in the hands of a reckless Administration, and they are unable h> show that the banks of the day have in any way failed to give the public that convenience of currency which it is said they are going to enjoy in the future.
– Did not the framers of the Constitution intend that this responsibility should be exercised?
– They said that it could be exercised. The Constitution doesnot hedge round these various powers with any conditions. This Parliament might exercise any provision of the Constitution in a dangerous form, and then say, “ The Constitution authorizesus to do this. We can do it as we are doing it.” What I am seeking to show is that the occasion for takingthis action has not arisen ; and I am going to point to what the financial result will’ be from the point of view of the public. In support of this measure, we have had from time to time references made to the-
Queensland National Bank. That, however, is not a State bank. There is no doubt that the bank and the Government have a financial connexion, but the bank itself is a money-making institution. It has shareholders, and pays dividends, and therefore comes under the “ fat man “ condemnation of the Labour party and the Labour journals. It so happens that the Government of the day found it convenient for the benefit of the people of Queensland to go to the rescue of the bank, and in that way there has been an intimate connexion between the Government and the bank, and the notes have been guaranteed by the Government. That, however, affords no parallel of what we are doing to-day. The administration of this Bill will be entirely in the hands of the Government of the day. Under it they will have power to put out future notes for the payment of debts, with no outside body, like a bank directorate, to manage the issue. It will be entirely in the hands of the politicians of the day, and primarily in the hands of the Treasurer and his Ministry. There is, therefore, no parallel whatever with the Queensland National Bank, to which reference has so frequently been made. I now ask the House to consider what is going to be the financial outcome of this Bill. It will be admitted at the outset that the question is not what the .Commonwealth, but what the people, will gain. The people of Australia at the present time are gaining £80,000 per annum from the issue of £4,000,000 of bank notes. Let me show the House, and especially those honorable members who constantly remind us that the banks are making a great deal of moneyout of their note issue-
– Who has said that they are?
– The honorable member, I think, said so once.
– I certainly ‘did not; I- corrected the honorable member.
– I have heard it said several times in the House - and it is a popular idea amongst the Labour party outside - that the banks are making a great deal of morley out of their note issue.
– Does the honorable member think that they are losing money by the transaction?
– I shall tell the honorable member; and if he will bring his practical mind to bear he will have to follow me in my figures. The banks are now paying 2 per cent, to the State
Governments for the privilege of issuing notes, and, as honorable members know, they pay only 3 per cent, on deposits for twelve months. They get hundreds of thousands of pounds at 3 per cent., without any obligation to issue notes or do anything in that direction. They give 3 per cent, per annum on money which is carried to, and left with, them for a fixed period, whilst, as I have said, they pay 2 per cent, for the privilege of issuing notes. Now I ask honorable members to think of what the banks have to do for the remaining 1 per cent. They must remember that bank notes have, to be carefully printed upon special hand-made paper, and that their printing has to be supervised, because they become very valuable documents. The actual cost of the paper and printing is said to be 10s. per £100 of notes.
– It is 12s. per cent.
– The honorable member, who is at the head of one of our large banking institutions, says that the cost is 12s. per cent. I take it at 10s. per cent. That brings the cost to the bank, including the note tax, up to t per cent. Then we have to remember that notes are carried from State to State; that they have to be recorded and brought back to the banks, and that gold has to be given to other banks in exchange for them. A record has to be kept of all these transactions with other banks in all the States, and all this has to be done out of the remaining 10s. per cent.
– It is like making bricks without straw.
– The honorable member’s remark shows that the common sense of this statement goes home to him. Seeing that the banks can obtain money on deposit for twelve months at 3 per cent., they are not deriving any great profit from notes in respect of which they have to pay a tax of 2 per cent, in addition to 12s. per cent, for the printing of the paper, and an average of 8s. for exchange in gold, and the cost of keeping a record of all these transactions. At present, then, they are making absolutely nothing out of their note issue. The Commonwealth is going to take over this work, and I want to know how it is going to make any money out of it for the people.
– Having regard to the honorable member’s argument, it is a wonder that the banks issue notes.
– So far as they are concerned, there is no profit in the note issue, although there was when they had not to pay the note tax of 2 per cent.
– Then why did they not abolish their note Issues on the imposition of the tax ?
-This is a serious question, and I Hope the honorable member will treat it seriously. The point I wish to establish is that under present conditions the banks are making no profit out of their note issue. The State is now going to take over the work, and we are told that it is going to set up a gold reserve of 25 per cent. Thus, with an issue of £4,000,000, the State will keep £1,000,000 in cash, leaving a balance of £3,000,000. What we have now to consider is how the issuing of these Commonwealth notes will compare with a straightout loan from the British people. Assuming that the Commonwealth would have to PaY 3h Per cent- f°r a l°an, although I do not believe that it would, it would thus be called upon to pay £105,000 a year for a loan of £3,000,000. It would have to retain ,£1,000,000 in order to fulfil its undertaking to have a gold reserve of 25 per cent., and it would have to go to the world’s market to borrow £3,000,000, on which it would have to pay £105,000 a year,, at the rate of 3
– One per cent.
– I have ventured the opinion that, even assuming that this measure was in every other way unobjectionable, the . Commonwealth will not make any profit out of it, and that there is every probability that it will make a loss. I have prepared two comparative statements, the first with regard to an issue of £4,000,000, and the second with regard to an issue of £7,000,000, and have compared the cost in each case with the cost of issuing a loan of the same amount. A loan of £4,000,000 at 3^ per cent, would cost the country .£140,000 a year. On the other hand, if the Commonwealth issues £4,000,000 by notes it has in the first place to keep £1,000,000 of gold in the Treasury. Calculating at the same rate of interest, there is a debit °f £35,000 a year through keeping that £1,000,000 idle. The people of the States, apart from Queensland, are now deriving a profit of £80,000 a year from the existing banks in return for the privilege given to them of issuing about £4,000,000 of notes. That £80,000, being lost, is the second item on the other side. Assuming that the Commonwealth has to pay for the printing of its notes, as it will have, and all the other incidental expenses, such as recording and issuing them, at the rate of 1 per cent., which is the price the banks charge themselves, the cost of this further item will be £40,000 a year. Those three amounts of £35,000, £80,000, and ,£40,000, total £155,000 a year, as against ,£140,000 a year, which it would cost to float a loan in the ordinary way at 3J per cent. Nor does that exhaust the debit. Whatever may be the opinion of honorable members opposite, I am satisfied that when the Commonwealth notes, which can only be paid for in gold at Melbourne, are issued in distant States like Queensland, Western Australia and Tasmania, the banks will revert to their old practice of making a charge for exchange, not on the whole issue, but on a small portion. Honorable members may say that the banks ought not to do it, but my answer is that as a business transaction they are perfectly entitled to make a charge. They have to keep a certain amount of gold in their coffers at every branch for their own purposes, and every time they exchange gold for notes they have by some process or other to move gold from the place at which the notes can be cashed. I am assuming that only half a million out of the four millions will be circulated in the distant States, and that only on that small proportion will the public have to pay the banks the regular charge of sixpence in the j£i. That amounts to £12.500 a year. We must also remember that, so soon as the right of issue of the Queensland National Bank comes to an end, the people of Queensland lose £25,000 a year. That is in addition to the £80,000 which will be lost to the people of the other States by the abolition of the State tax on bank notes. As the people, whether as citizens of the States or as citizens of the Commonwealth, are identical, whatever is lost to the Queensland Government and gained by the Commonwealth Government must be taken into the calculation. Taking, therefore, ^140,000 a year as the cost in interest of floating a loan of £4,000,000 in the ordinary way, you have on the other side of the ledger £155,000 plus £12,500, plus £25,000, which brings the total up to £192,000 a year, or a loss to the people of Australia, as distinct from the Commonwealth Government, of £52,000 a 3’ear through issuing notes instead of floating a loan. I pass now to an issue of ^£7, 000,000.’ If the Commonwealth Government were to float a loan of that amount in the ordinary way at 3J per cent., they would have to pay ,£245,000 annually. It is admitted that on an issue of ,£7,000,000 of notes, 25 per cent, of gold, or £1,750,000, will have to be kept idle. At the same rate of interest, therefore, that will cost the Commonwealth ^£62,250 a year. I take again the £80,000 and the ,£25,000 respectively as the loss of the people of the five States and Queensland, and put down £70,000 as the cost, at 1 per cent., of printing and recording the notes. The exchange charged by the banks on, say, £^1,000,000 out of £7, 000,000, is represented by ,£25,000, making a total annual cost of £262,250, as against £245.000 for a loan; equivalent to a loss of £17,250. I challenge honorable members to show that in any one of those items on the debit side I am calculating anything which is not a reasonable and probable expenditure. The only exception that may be taken to it is the assumption that the banks will charge exchange on a portion of the notes. Up to a short time ago they did charge on all notes cashed in the State other than that of issue. I assume that that practice will be continued ; but in my first calculation I estimate that the banks will charge on only .£500,000, out of a ,£4,000,000 issue, and, in my second, on only £1,000,000 out of a £7,000,000 issue. Honorable members may ask why the banks should make that charge at all. When the notes are cashed in any large quantity in distant States the banks must supplement their own gold stock by sending notes for an equivalent value to Melbourne and getting the gold to replace it. If that involves the actual physical movement of the gold, I do not think a charge of per cent, will cover it ; but I am assuming that some method of exchange may be adopted by adjacent States, which will make the cost less. 1 would point to the fact, and the banks will instance it as a justification, that if now you want to send .£1 from one State to another, and utilize the Savings Bank or postal-note system, you must pay, I think, id. for the order stamp and 3d. for the exchange, or a total of 4d. in the £1 It is not likely that the banks will constitute themselves philanthropists for the benefit of the people of Australia.
– According to the honorable member’s own showing, the bank charge is 50 per cent, higher than the Government charge.
– But the honorable member will recollect that the Savings Bank is the people’s bank, and it does not matter to the Commonwealth what they charge. The honorable member knows, to give an instance of the lax bookkeeping methods of the Commonwealth, that to-day the Government could not show us the state of the finances of the Postmaster-General’s Department by distinguishing the accounts of the telephone, telegraph, and postal branches. We hardly expect the Government accounts to be kept in the same way as the bank accounts, but the banks will not be guided by that. The mere fact that- the Commonwealth is prepared for the sum of 4d. to transmit £1 in gold from one State to another will certainly not bind the banks.
– They will be bound only by the principle of getting as much as they can.
– The honorable member, who is constantly interjecting, and who has made no calculation for himself, will see that I am assuming that only £500,000, and not the whole £4,000,000. will undergo this charge bv the banks. The Commonwealth, through its postal service, would charge on the whole £4,000,000, but I assume that the banks will have to charge exchange on only one-eighth of that sum; and in those circumstances the bank charge may well be 50 per cent, higher than the Government charge on postal notes. This, therefore, appears to be a complete answer to those somewhat windy advocates of this measure outside of Parliament, who are constantly telling us, as the Worker of Queensland does, that the Commonwealth is going to get a loan for nothing, and that there is no need for any gold reserve at all. I have tried to look at the question from a purely business point of view, and without any attempt at advocacy. One naturally asks oneself, “ Why is a House of Parliament, with its hands full of legislation, much of which is needed - because there are many measures, such as the consolidation of the insurance law, and the banking law, which are urgently demanded - postponing it indefinitely in order to discuss a Bill for the introduction of a substituted currency which will upset the existing currency, and add another function to the State, and a very dangerous function, too, to a political body like a Government? Great risks will certainly be run if the administration of the Act ever falls into the hands of less careful people than the present Treasurer. These figures should make the Government pause in their hurry to get the measure through. I should like to add a little to the flood of quotations already made, not on the point as to how large the gold backing should be, but on the general question of the wisdom of a Government entering into financial functions. I would mention Adam Smith, the pioneer and perhaps the greatest among political economists, as an authority on this very subject. His writings are very measured and careful, and the history of political economy has shown that his opinions are always worthy of consideration. Speaking of the banking conditions of the year in which he wrote - I think about 1776 - he said -
The profit of a public bank has been a source of revenue to more considerable States. It has been so not only to Hamburg, but to Venice and Amsterdam. A revenue of this kind has even by some people been thought not below the attention of so great an empire as that of Great Britain. Reckoning the ordinary dividend of the Bank of England at S2 Per cent., and its capital at Ten million seven hundred and eighty thousand pounds, the net annual profit, after paying the expense of management, must amount, it is said, to Five hundred and ninety-two thousand nine hundred pounds. Government, it is contended, could borrow this capital at 3 per cent, interest, and by taking the management of the bank into its own hands might make a clear profit of Two hundred and sixty-nine thousand five hundred pounds a year.
Honorable members will see that as far back as Adam Smith’s time there were people who thought that the State should take over the banking business of the Bank of England, and secure for the people the profits that were being derived from it. Adam Smith continues -
The orderly vigilant and parsimonious administration of such aristocracies as those of Venice and Amsterdam is extremely proper, it appears from experience, for the management of a mercantile project of this kind. But whether such a Government as that of England, which, whatever may be its virtues, has never been famous for good economy ; which, in time of peace, has generally conducted itself with a slothful and negligent profusion that is, perhaps, natural to monarchy ; and in time of war has constantly acted with all the thoughtless extravagance that democracies are apt to fall into; could be safely trusted with the management of such a project, must, at least, be a good deal more doubtful.
It will be admitted that that quotation gains weight by the measured nature of its expression. Adam Smith recognised that there were people then clamouring that the State should secure the profits that were being made by the Bank of England. He recognised, also, that in certain States in which a firm hand was kept on the finances, it had been shown that the State could undertake such business; but he thought it a very doubtful proposition that in any country like England such a function should be attempted by the Government. I propose now to quote from another writer who has not previously been referred to in this debate. I refer to Mr. Leone Levi, a well-known British writer on finance.
– He should be a good man on finance.
– He comes from a race that is credited with having good financial ability. At page 226 of his work, History of British Commerce, it will be found that he says -
To form, however, a correct notion of the working of any system of banking, we must not ignore the idiosyncrasies of the nation among whom it operates. Compare the cool, shrewd, calculating mind of the Scotch or the Dutch, with the impassioned go-ahead spirit of the American. The sime !:i.w mav operate very differently among the one or the other. Account also should be taken of the geographical condition of the country. A national bank moy be effective in England, which is intersected all over by railways, and is otherwise conspicuous for the unity of her institutions. But in the United States, where each State possesses a certain amount of autonomy, and where the area of each is so vast, no single bank, and probably no single system of banking, may be at all sufficient. In the Old World, moreover, we advance but slowly, and the wants of banking and finance may be calculated with sufficient accuracy. Not so in the new world, where progress is so rapid and intermittent. 1 submit that the distinction here drawn between the possibility of performing State functions in Europe and America applies with great force to Great Britain and Australia, which is equally go-ahead, and very much in the same position as America was in at the time when Adam Smith wrote. At page 231 of his book, Mr. Leone Levi quotes a very useful passage from Daniel Webster. He claims that Webster was “one of the most eminent statesmen of America, and held strong views on this subject.” He quotes him as saying -
I lay it down as an unquestionable truth, that no paper can be made equal and kept equal to gold and silver, but such as is convertible into gold and silver on demand. But I have gone further and still further than this, and I contend that even convertibility, though itself indispensable, is not a certain and unfailing ground of reliance. ‘ There is liability to excessive issue of paper while paper is convertible at will. Where, then, shall a regulator be found ? What principles of prevention may be telied on?By subjecting all banks to the rule which the most discreet of them all follow, by compelling them to maintain a fixed proportion between specie and circulation, without regard to deposits on one hand and notes payable to bearer on the other.
Honorable members will see that Webster is there approving a system such as that advocated by the Leader of the Opposition, that, instead of embarking upon a risky commercial function, or, as Bagehot calls it, a “ trade,” we should utilize our powers by altering the Commonwealth law in such a way as to compel the banks to conform to those practices with regard to the issue of notes which the most competent and most cautious of them now use. We could do that, and secure to the people of Australia a surer currency, which would meet every object we deem them to require, and, at the same time, avoid entering upon this very dangerous function - because every one must admit that it has within it the germs of ‘trouble if its administration be in the hands of reckless men. We might save the Government of Australia from having placed in their hands this very dangerous weapon, which might at any time prove a menace to the commercial and financial peace of the Commonwealth. I should like also to quote a short passage from Garfield, but not upon some of the aspects of the question which have been dealt with by other honorable members. On the question as to whether the Government should interfere in a matter of trade of this kind, Garfield says -
No Government can safely undertake to supply its people with a paper currency issued directly by the Government, because no human legislature can determine how much currency the wants of a country require, and because a State note issue does not possess the power of adapting itself to the business of a country.
Francis Walker, who has been quoted on another aspect of the question, and who is acknowledged to be one of the greatest economists America has produced, says on this subject -
I wish to say here that in our own country America, to-day - a region where more financial heresies grow and flourish than upon any other civilized soil - political economists in our great universities are overwhelmingly arrayed in opposition to the Government usurping the legitimate functions of the banks in attempting to provide paper money for the people.
Bonamy Price, who was formerly the Professor of Political Economy in the University of Oxford, says-
A Government is a bad direct issuer of paper currency, and every nation would do well not to fall into such a snare.
Then a French writer, Beaulieu, says -
A Government is ill-fitted and ill-equipped to maintain paper money in circulation, even if the paper is redeemable in specie. The redemption is in itself a great trouble and a great embarrassment, Facilities for protecting the metallic reserve are as completely lacking in the State as they are abundant in the banks.
Honorable members may, in a know-all sort of way, shake their heads at these authorities.
– Surely the honorable member would not call Richard Bonamy Price an authority.
– When men devote their whole attention to a science like political economy, and take into careful consideration the practical data supplied to them through literature from the whole world, there is not one of us in a position to sneer at the opinions of such authorities as if they were worthless. The honorable member for Hindmarsh should not forget that Bonamy Price, in this matter, does not stand alone. He has supporting him men like Garfield, Francis Walker, and practically also Adam Smith, Leone Levi, and MacLeod.I am not saying that these men are right. It may be that we have some latent economic genius on the other side who knows more than they do; but, as business men intrusted with legislation for the welfare of the people, we can none of us justify a sneer at the views expressed by some of the greatest authorities in the world on this subject. I have shown the House what is likely to be the financial result of this measure. The question is : What have we to gain by it?
– Can the honorable member show how the authorities he has quoted have been justified by the Queensland experience ?
– If the honorable member had been present, he would have known that I have shown that the Queensland National Bank, which has frequently been quoted to us as supporting this scheme, has nothing whatever to do with it. The Queensland National .Bank is a money-making institution.
– I did not refer to the Queensland National Bank, but to the Queensland Treasury note issue.
– -Can the honorable member say that the Queensland Treasury note issue has shown any better results than the note issues of the private banks? Can he show that there has been the slightest interference with the true currency of the notes of the banks of Australia since 1893? I have dealt with 1893 in what I have said, and if the honorable member cannot show this, why does he quote Queensland as justifying the introduction of this Bill ? All I am contending is that the Government are proposing that we should undertake an unnecessary branch of trade. I use the word “ trade “ because that is the word used by Bagehot, the authority I have quoted. Banking is a trade - a dealing in money. It is a difficult trade, and men to be successful in it require to give their whole lives to its study. Why do banks pay their general managers salaries of from £3,000 to £5,000 a year unless it be that they recognise that theyrequire at the head of such institutions men with a very rare fund of experience in dealing with, the difficult subject of finance? If honorable members opposite could show me that the Commonwealth is going to make money for the people by getting a loan for nothing, or that the currency of Australia has so failed that it has become necessary that the Commonwealth Government should substitute for it something which will give better results, I should be ready to be persuaded. But the figures I have quoted speak for themselves, and figures do not lie if properly handled. I have invited honorable members opposite to criticise the figures I have put before them, and show me how any amount on the debit side could be saved. I have shown that, whether we float a loan of £4,000,000 or £7,000,000 in the way here proposed, we shall be put to much greater expense than we should be by floating a loan of the same amount on the market in the ordinary way. I recognise that there are insuperable difficulties in the way of the adoption of the latter course by honorable members opposite. I recognise that objection to loans of all kinds is in the Labour programme. A national bank and a national note issue are in the Labour programme, and I admit that that makes it very uncomfortable, if not, impossible, for the Labour party to go back on these proposals. I am not twitting the Labour party, hut merely say they are in a difficulty ; and I am asking them to deal with the question in the light of the many educational speeches we have had on this side of the House. I venture to say there are very few who can honestly state that they know no more to-day about this question than they did a month ago. Honorable members on both sides have applied themselves to the literature on the subject; and, after all, the literature on political economy questions embodies all the practical experience that is regarded as having any bearing on the general principles applicable to public finances. If those facts are undeniable, there is no escaping from the logical conclusion that it is undesirable for the State to undertake this function. I desire to say one or two words about the speeches made on the other side; and honorable members will credit me with having taken some care to be present when they were delivered. I have already said of the Prime Minister’s speech that it practically gave no information to the House. It gave no idea of what advantage the Government expect to get from the Bill ; he spoke of no profit, and, in fact, said that profit was not its object. It is quite possible that the Prime Minister has worked the thing out, as probably the Treasury officials have done, and that he has found that, much as the bubble has been blown in the past, there is nothing in it when it is carefully examined. The honorable gentleman could not show that the people had been inconvenienced in any way in regard to the currency during the last seventeen years. As to the AttorneyGeneral’s speech, we all know that that gentleman is most at home when he is joking. I cannot say that I saw any indication of joking in the wording of his speech, but it sounded to me as if he delivered it with his tongue in his cheek. It seemed like a speech that had been prepared for the introduction of a Banking Bill, for it never touched the question of a note issue. The honorable member moved away from the latter question, and entered on a sort of general excursion into banking. He quoted from the Banking and Insurance Record facts relating to different crises, but, though I listened very carefully, I could not see that the quotations had any bearing on the question of a note issue. The two questions which have never been touched on, except by two or three honorable members opposite are: What is the advantage to be got from this proposal? and, will that advantage, if we get it, compensate for the risk we must run, not to-day, for I am not afraid of the present Prime Minister as Treasurer, but from future Treasurers?
– We shall have to wait a long time for future Treasurers !
– It may be a long time for the honorable member, but I speak from a more youthful point of view, and expect to see many Treasurers before I have done. We have to think of the future. It is all very well to say that in the hands of a cautious Treasurer no harm can be done. When a Government may get into financial difficulties, and find it has the power to use the money, it will be a great temptation. Even though there may be checks, as proposed in the Bill, we have seen in this House how much such checks are sometimes respected. We have had two instances, one of the present Government using the trust moneys without the consent of Parliament; and, though the emergency may have been very great, we must consider that similar emergencies may justify a Treasurer in issuing more notes than he has a legal gold backing for. The Prime Minister has told us that the immediate issue contemplated is only ^£4,000,000, but that there is power to issue £7,000,000, and he may go to £10,000,000 ! But why stop at £10,000,000, seeing that there is nothing about that figure in the Bill? W«e have the possibility of a future Treasurer using the power beyond the prudent stage. The honorable member for Calare made a long speech, to which I listened with great interest, but I am bound to say that I got no light at all from it. The two speeches that did indicate some research were those by the honorable member for Hindmarsh and the honorable member for Dalley. The speech of the honorable member for Dalley was the most argumentative on that side of the House, and it was made in a spirit I thoroughly appreciated. The honorable member did resort to authorities, and on those endeavoured, though I do not admit successfully, to show that they justified this measure. The honorable member for Hindmarsh dealt largely with his favorite author. I know that the honorable member has been nursing that author upon his seat for the last two or three weeks, and he quoted him largely.
– The honorable member’s author is the Queensland Worker!
– That is the Labour party’s author; and I do not know that I have ever quoted to approve of it, but have only done so to show the Labour policy in its wilder stages outside Parliament. The honorable member for Dalley dealt with a passage of John Stuart Mill, and tried to draw a distinction which would justify this measure. Honorable members will recollect that Mill puts two hypotheses; he says that if the banking function proposed to be treated by a Government is one of a “mechanical” character, there is no reason why the State should not undertake it; but that if it is one of an elastic character, requiring the exercise of judgment and discretion from time to time, it is undesirable that the State should undertake it. The honorable member for Dalley seems to think, and, in fact, expressed the opinion that this measure comes under the first hypothesis - that the note issue is a “mechanical process.”
– The honorable member gave me that impression, because I said at the time that he would find a second hypothesis in which the question is not a mechanical one, but one requiring judgment, caution, and modification from time to time, and that Mill deprecates the State taking that function into its hands.
– I agree with Mill, and I say that this Bill finally comes under both hypotheses.
– That is where we differ in the intellectual discussion. If we are to pin our faith to Mill, and I have as much faith in him as has any honorable member, this note issue is not a mechanical process. Honorable members must be aware that the issue of notes, ranging from £4,000,000 to a possible £^10,000,000, is a matter that will require a great deal of judgment and discretion on the Part of the Government. They will have to increase the gold backing from time to time, and get in their notes, and get them out again ; and this will require, as I say, a good deal of judgment. In the little book of Bagehot, Lombard Street, there is an interesting passage, which, though not conclusive either way, is very instructive. He points out, as the result of great practical experience, what a very elastic power this is, and how much judgment it requires to administer a function of this sort, so as not to produce evil results. In his chapter on 1 The principles which should regulate the amount of the banking reserve to be kept by the Bank of England,” which is not a fixed amount, he says -
There is a very common notion that the amount of the reserve which the Bank of England ought to keep can be determined at once from the face of their weekly balance-sheet.
Honorable members will notice that in clause 11 of the Bill it is provided that every month the public shall be informed by a statement printed in the Gazette how many notes are out, and how much gold there is in hand, so that it may be known from time to time exactly how the States stand in the matter of the currency. It will be remembered that under the Bill the statement is to be made monthly. Bagehot goes on to say -
It is imagined that you have only to take the liabilities of the Banking Department, and that a third or some other fixed proportion will in all cases be the amount of reserve which the Bank should keep against those liabilities. But to this there are several objections, some arising from the general nature of the banking trade, and others from the special position of the Bank of England.
Then there is an interesting passage showing what a number of vicissitudes and changes have to be taken into account by any one who undertakes to safeguard a currency and keep a sufficient gold backing. He says-
An old banker once told me : “ Sir, I was on Lord Althorpe’s committee which decided on the publication of the bank account, and I voted against it. I thought it would frighten people. But I am bound to own that the committee was light and I was wrong, for that publication lias given the money market a greater sense of security than anything else which has happened in my time. The diffusion and confidence through I.-omb:ird-street and the world is the object of the publication of the bank account and of the bank reserve.
But that object is not attained if the amount of the reserve when so published is not enough to tranquillize people. A panic is sure to be caused if that reserve is, from whatever use, exceedingly low. At every moment there is a certain minimum, which I will call the 1 apprehension minimum,’ below which the reserve cannot fall without great risk of diffused fear; and by this I do not mean absolute panic, but only a vague fright and the timorousness which spreads itself instantly, and as if by magic, over the public mind. Such seasons of incipient alarm are exceedingly dangerous, because they beget the calamities they dread. What is most feared at such moments of susceptibility is the destruction of credit; and if any grave failure or bad event happens at such moments, the public fancy seizes on it, there is a general run, and credit is suspended. The bank reserve then never ought to be diminished below the ‘ apprehension point.’ And this is as much as to say, that it never ought very closely to approach that point; since, if it gets very near, some accident may easily bring it down to that point and cause the evil that is feared..
– What has this to do with a note issue?
– A great deal, though the honorable member may not see it.
– Bagehot is referring to banking.
– He is speaking of a reserve against notes and deposits, and he says further -
There is no ‘ royal road ‘ to the amount of the ‘ apprehension minimum ‘ ; no abstract argument, and no mathematical computation will teach it to us. And we cannot expect that they should. Credit is of opinion generated by circumstances and varying with those circumstances. The state of credit at any particular time is a matter of fact only to be ascertained like other matters of fact; it can only be known by trial and inquiry. And in the same way, nothing but experience can tell us what amount of ‘ reserve ‘ will create a diffused confidence ; on such a subject there is no way of arriving at a just conclusion except by incessantly watching the public mind, and seeing at each juncture how it is affected….. Too much reserve only means a small loss of profit, but too small a reserve may mean ‘ ruin.’
That is to say, if we have a reserve of 30 per cent., it means a loss of profit. This has some reference to banking but primarily to the currency issued by the Bank of England, and these words, written by one of the most experienced bankers in England in his time, show that the function of issuing notes is not so easy as honorable members think. It is not that the Treasurer merely has to say, “ I have 25 per cent, of gold in hand, and, therefore, it does not matter how much in notes I put out “ j if he puts out more notes than the public require, they will come back very quickly, as all who know anything of the subject recognise.
– Is that not a safety-valve?
– Yes, if we have the money, but we may not have the money. Suppose there is a limit of £4,000,000, and the Treasurer puts out £7, 000,000, or goes to ,£10,000,000 in notes in order to meet some big obligation of the Commonwealth, and they come back into the Treasury unexpectedly, he will have to be ever on the alert to see that he has gold, not only to the amount of 25 per cent., but to a probably much larger amount, to meet notes which may come back. For it must be recognised that the practice of the banks has demonstrated that £4.000,000 in notes is- about what the people of Australia need for their commerce. If the Commonwealth put out ,£7,000,000 in notes, and a larger proportion than was anticipated came back quickly into the Treasury, it would not be sufficient to say to the people, “ Under the Act we had only to keep 25 per cent, in gold.” The Treasurer would have to provide probably the whole ,£3,000,000 to meet the difference between the £4,000,000 and the £7,000,000. And if I, by that argument, demonstrate that the Treasury cannot put out notes to suit themselves without considering what the people really want throughout Australia, I say that the process is not a mechanical one, and that it, therefore, comes under the second hypothesis in Mill’s work, as being a function which the State ought not to undertake.
– Was not Mill dealing with the suspension of the Bank Charter in 1844 ?
– I am not now dealing with ihe history of note issues, but with general principles; applicable to any time. I desire, -also, to say a word about legal tender. I have noticed from some remarks made outside - and from some of the speeches made here - that, when it is said of a note that it is legal tender, it is supposed that every one must take it. But that is not so. “ Legal tender “ does not mean that you can force notes upon people. “Legal tender” is only legal tender when there is an existing debt to be paid. If I make a contract with an honorable member opposite, he has a perfect right to stipulate with me whether the debt shall be paid in notes or in gold. I cannot contract with a person to build a house for me for ,£500 in gold, and pay him in notes, unless I have stipulated that I may do so. I can, however, legally tender notes in payment of an existing debt. A person has a perfect right to say, “ I will only build this house for you if you pay me in gold.” That is not contrary to the law. The honorable member for Werriwa, who is listening to my argument and has had a legal training, will bear me out in saying that legal tender applies only to existing debts. If there is the slightest doubt about these Commonwealth notes, they will not, except for an existing debt, be accepted . If the banks are going to charge commission on them equal to that charged by the Commonwealth on its postal notes, men will be wary of taking them at par. If workmen are paid in notes - as they may be, because, having done their fortnight’s work, there is an existing debt for which they are bound to take notes in payment - they may go to a bank, arid, if what I assume may be the case is the case, the bank, or a storekeeper, may say, “ Yes, I will take your notes, but I will take them less exchange.”
– If the man is in his debt the storekeeper will have to take the notes.
– The honorable member is quite right, but I am speaking of the class of men who are not in debt to storekeepers.
– There are very few.
– It is a libel on the working . classes to say that there are few of them who are not in debt to storekeepers. I am speaking of a working man who may go to a shop in Queensland, South Australia, Tasmania,’ or Western Australia. In such a case there would be no existing debt, and, as I have said, a bank would have a perfect right to demand exchange.
– There will be no such demand.
– The honorable member may think not. I do not wish to deal with the details of the Bill, but I must refer to one other provision in it, to the effect that there shall be an investment of the moneys earned. I asked the Prime Minister whether the moneys resulting from the issue would be used for discharging Commonwealth obligations. He said. “ Possibly.” This afternoon I heard him say, in answer to the Leader of the Opposition, that th& money earned or obtained under this Bill would be used for investments. Are we passing this measure, then, with th& idea that we are going to make money?-
Because I do not think that it will be palatable to the public of Australia to know that we are borrowing money from them -through this Bill for the purpose of investing money for the Commonwealth. What are the investments to be for?
– For the security of the notes.
– No, that cannot be, because it must be an investment in certain stocks which would or might not be “ liquid.” There is another feature -of the Bill that I do not want to discuss now, because we shall have an opportunity in Committee, but I want to mention it. There is a provision that every bank shall be compelled to pay over £25 in Com- mon wealth notes at any time when demanded. There is nothing to show how many times a demand may be made. Therefore, it is possible for a body of men to come along every few minutes and demand £25 in notes. It would be an obvious wrong to compel a bank to be ready at any moment to hand over notes to the amount of £25 at a time, as often as demanded, without limiting the period within which the demand might be repeated. To make a provision to that effect would be to give any person who chose to inconvenience a bank an opportunity to demand unlimited notes for gold. I also want the House to notice that the Government are not satisfied to pass the measure for the raising of this money, but that they have made provision by which they are to keep a quantity of Treasury-bills in their possession. I interjected in the course of the Prime Minister’s speech, and asked him of what use they would be in raising money in an emergency. He said, “ We could get money for them anywhere.” In the first place, I must say that, if there was an emergency in which the Treasury were short of money, the Treasurer would certainly not have time to send these Treasury-bills abroad in order to raise it; and, in the next place, if the Treasurer of the Commonwealth were in a difficulty, we may conclude that other people would be in a difficulty also. Is it likely that the banks would allow the Commonwealth to make a convenience of them, and in any moment run to them with Treasury-bills, and say, “ We are in a difficulty, and although you are in a difficulty also, we want you to come to the assistance of the Government and cash these Treasury-bills”? The banks are not under a necessity, and would not be under an obligation, to do so; and we shall be living in a fool’s paradise if we suppose that, in circumstances in which the Government might be in want of funds, relief could be given by authorizing the disposal of these Treasury-bills. I do not want to deal with any further details of the measure. I content myself in the first place by saying that we are not going to get any financial advantage out of it. I have demonstrated that, beyond power of contradiction. Then, it must be admitted, even by those who think it is desirable to do so, that we are undertaking a scheme which has in it the germ of difficulty if the working of it should get into the hands of incautious people. Further, I say that, seeing that the currency of Australia “is now in such a satisfactory condition, and that if there is dissatisfaction it may be remedied in a Banking Bill - and we are waiting in the Commonwealth for a Banking Bill which should deal with the whole banking system of the country - then we are undertaking a function which is, in the estimation of a considerable number, dangerous and most unnecessary. There is nothing to be made out of it in money for the Commonwealth, and no benefit to be gained for the people.
– I do not think that it can be contended that the Commonwealth, in legislating in this matter, is going beyond, not only its constitutional powers, but what it has a perfect right to legislate with respect to.
– I do not think that that has been contended.
– I do not see how it can well be contended. It seems to me to be obvious that when the Commonwealth established Inter-State Free Trade, and when it was sought to encourage the making of contracts between the citizens of the different parts of the Commonwealth of Australia, an essential part of a contract being the making of payment, it naturally followed that there must be some method of regulating the medium by which obligations incurred under contracts were to be discharged. We have already exercised part of our powers with regard to currency by passing the Coinage Act, defining the standard of our coinage, and also at the same time dealing with the question of legal tender, as far as gold and other coins are concerned. We have dealt in a comprehensive manner with the whole question of negotiable instruments, so that now a cheque drawn in this country is an Australian cheque, a bill is an Australian bill, a promissory note is an Australian promissory note. Having gone so far, it becomes obligatory upon us to see that the bank notes, or the State notes, or whatever they may be termed, which are mediums of exchange, shall also be put upon a Commonwealth basis. I cannot view with satisfaction the existence of six different sets of State laws dealing with a subject that is essentially Australian. We have already, as I have said, dealt partially with the currency, and I am inclined to think that no matter what Administration came into power, the obligation would be upon them to exercise National powers in relation to this subject. When we come to legislate upon such a subject, what should be the basis upon which our legislation should depend, and how far it should go, are questions of policy, and therefore we must expect divergencies of opinion. But as far as I personally am concerned, my view is that currency is essentially a matter for national concern, national control, and national legislation. Though other proposals might have been framed which might be regarded as wiser, the measure now submitted for our consideration has to be treated and discussed upon its merits. If it is right we should adopt it. If it is not perfectly secure we should strengthen it. If it is wrong, then, of course, we should oppose it altogether. A good deal of criticism has been directed against the measure, which to a certain extent has been wide of the mark. The proposed note has been attacked as if it were an inconvertible note. Arguments that apply to inconvertible notes have been applied to this proposed note. We are all agreed that the essential evil of inconvertible paper money is that it fluctuates in value, and vitiates the real meaning of contracts. If you have_ agreed to perform a contract, under which* a certain price is to be paid, and the obligation has to be discharged by payment in the form of inconvertible paper currency, and that paper currency depreciates in value, to that extent the contract is vitiated and wrong is done. But, of course, that is not the proposal. What is before the House is the question whether this particular form of convertible note is a system which we should adopt or not. I shall illustrate the remarks I have to make by a reference to the Queensland system. The Treasurer has stated very properly that he adopted his scheme from the one which was introduced, in 1893, by Sir Hugh Nelson when he was Treasurer of Queensland. In what circumstances did the latter introduce his scheme? On that occasion there was a very severe financial crisis. Eight out of our eleven banks had failed. The note issue in circulation in the State amounted to £600,000. The note issue of the banks which had kept open amounted to £134,0.00, and the note issue of those which had closed amounted to £414,000. There was in the community bank notes of a face value of £414,000, which were, of little value so far as trade and commerce were concerned at that particular time. Seeing that some banks had suspended payment the Treasurer felt that it was necessary to intervene with remedial legislation, and so he introduced four measures, namely, a Bill to amend the Stamp Act, a Bill to authorize the issue of Treasury notes, a Bill dealing with Treasury-bills, and a Bill to enable advances of Treasury notes to be made to banks. The first Bill imposed a tax of 10 per cent, on the notes issued by banks. Previously, Queensland had levied a tax of 3 per cent, on the note issues of the banks. Sir Hugh Nelson raised the tax to 10 per cent., and he did so with a deliberate object. He did not seek to prohibit the banks from, issuing notes, because to have done that would have been to interfere with their charters and statutes. He did not seek directly to interfere with their legal rights in respect to the note issues, but he got round their charters and statutes by introducing a tax of such a heavy nature that it prohibited the banks from circulating notes. The object, he said in introducing his measure, was to prohibit the notes from being issued, to create a monopoly in regard to the State notes. His view was that the State was entitled to step in and regulate the currency in the interest of the public. He also stated that, although the crisis was the occasion for the introduction of his measure, it was not introduced simply because of the crisis, but so far as it regulated the currency the intention was that the currency should form part of the permanent law of the Colony.’ The object of his second measure was to introduce a note issue similar to that which the House is now asked to sanction for the Commonwealth. It provided that notes might be issued, and that on issuing notes the Treasurer should always keep in reserve at least a fourth of their amount in gold. But in addition to that it provided that there should be Treasury-bills issued for the purpose of securing the retirement of the Treasury notes, and that they should be vested in certain trustees who were to be appointed under the Treasury Bills Act, and who were to be the President of the Legislative Council, the Speaker of the Legislative Assembly, and the Colonial Treasurer. The Treasurer did not, as in this Bill, merely take the power to issue Treasury-bills, but they were to be issued and absolutely vested in “trustees and kept by them. It was provided that the total amount of Treasury notes issued should not at any time exceed the amount of the coin held by the Treasurer in addition to two-thirds of the amount. of the Treasury-bills issued. That security is in excess of the proposal contained in this Bill. As regards the Treasury Notes Advances Bill, which Sir Hugh Nelson introduced, the intention was to advance the notes to the banks which had suspended payment, to enable them to withdraw therewith from public circulation their own bank notes. Treasury notes were to take their place, and there was to be a first charge on the banks for the amount of the Treasury notes so advanced. In that way the State was secured. The latter Bill was only of a temporary -character, but the real permanent structure as regards the whole of the Queensland note issue was contained in the first three Statutes which I mentioned. So far as the States are concerned in the future this class of legislation has in effect passed out of their hands. It is now provided that the States shall not coin money, nor -make anything but gold and silver coin a legal tender in payment of debts. The -power to create a paper currency and make it a legal tender has passed from the hands of the States and is now vested in the National Legislature. The Queensland Statutes were passed before the Constitution, and the system remains in existence. The other States could not follow in her wake. The Commonwealth power is, as I have mentioned, complete in this matter. I desire now to contrast the scheme which is submitted to the House with the Queensland legislation and administration. In the first place, we have to admit- that the Queensland Statute was experimental legislation. When he was introducing the Bill Sir Hugh Nelson said -
The system on which it was “ established is simply that the Treasury, on behalf of the people, takes the paper currency into its own lands. It was an experiment, it must be ad- mitted. It has not often been tried by Governments.
That is the proposition which he made. The Act has been in operation for a period of about seventeen years, and the question we have to ask ourselves is, Has the experiment succeeded or failed? So far as it has gone we cannot say that the Queensland system has failed. It has provided a currency which has commanded the confidence of the people of the State, and which, as I shall be able to show presently, has been sufficiently flexible to meet the requirements of trade. The true test, of course, which ultimately must be applied to the experiment, and which we never want to have applied, is how .it would shape under the conditions of a financial crisis. That test has never been applied. But, so far as the experiment has gone, it has given to the people of Queensland a satisfactory currency, and persons have been able to easily change their notes into gold in the State. We must admit that in passing the Bill before the House we are introducing an experiment into the Commonwealth, and one which to some extent has been tested in Queensland. But as regards its final success or failure, it has yet to stand the test of a great national crisis. Of course, when the crisis comes, it will affect, not only the nation, but every financial instistution. So far as our notes are concerned, what we have to do is to see that in framing our measure we give such security to the notes that public confidence will not be so easily shaken as it might be in the case of a private institution. That is the problem which we have to face. There are one or two points which I would like to refer to in connexion with the. Queensland Act as contrasted with this Bill. In the first place, it seems to me, on looking into the Queensland Act, that the desire of the Government was to create the feeling that the currency was something altogether apart from political interference, a desire to deal with the matter qua currency only, and not to blend it with any political consideration. It was claimed that it was a part of the currency only, and the legislation was merely introduced with a view to providing the people with a sound currency. If honorable members will contrast an early, section of the Queensland Act with clause 6 of this Bill, they will find that in Queensland the notes could only be issued by the Governor in Council. In this Bill we are asked to empower the Treasurer to issue” notes; but in Queensland, only the GovernorinCouncil could issue notes. That means that the Treasury officials would make inquiries as regards the necessity for issuing notes, that there would probably be a definite recommendation to the Cabinet or Premier, and that formal sanction would be given by the constitutional authority, namely, the Governor in Council. This Bill does not contain a similar provision, but leaves the notes to be issued at the will of the Treasurer. That is an important structural alteration, and one which we shall ask the Treasurer to justify when we get into Committee. The second change which I notice that he has made in the Bill is that the securities are not to be vested in a corporate body or trustees, as in Queensland.” I think that in that respect he is making a mistake.
– I have no objection at all to the Queensland provision.
– I am glad to hear the honorable member say that. I think he will find that in Queensland the provision was made for some very good purpose.
– I think that they were a little more timid then than they are now. That legislation was framed in 1.893. _
– The honorable gentleman must remember that the legislation was introduced in Queensland at a time when public confidence was shaken, and he is now asking us to pass a measure which may have to go through a similar crisis. The steps that were taken in Queensland to ensure public confidence should now be taken by us to preserve public confidence. As regards the deviation from the Queensland Act, I think that a mistake has been made, and I am glad to hear the Treasurer say that, so far as he is concerned, he is quite prepared to amend that provision.
– That is as regards the Treasury-bills and double cover.
– -Does the honorable member mean a certificate from *he AuditorGeneral ?
– Yes. Suppose that a crisis occurred, and there was a rush on the Treasury for gold. If there was a failure, the honorable ‘gentleman would have to issue his bills and immediately try to raise the money. But in Queensland that is not the way in which it is done. The Treasury-bills are issued and handed over to an independent body of trustees.
These are preserved by them. Then when there is a national emergency requiring them to be sold they are sold, and the proceeds applied to the redemption of State notes. These bills cannot be disposed of except with the express authority of the Governor in writing, accompanied by a certificate signed by the Under-Secretary to the Colonial Treasury, and countersigned by the Auditor-General, certifying the necessity of the sale to meet paymentsThere is a further defect in the Treasurer’s scheme. He has not provided for a sufficient amount of Treasury-bills. In that respect, again, he has departed from the Queensland system. The Treasurer of the day in Queensland pointed out that if there were a crisis, and money had to be raised, it would be necessary to have such an amount of Treasury-bills in the hands of the trustees that if it were immediately realized at a discount, the Treasury-bills would bring enough money to redeem the notes. He allowed for a discount of 33$- on the bills which are issued. The figures which he issued showed that with gold for a fourth of the value of the notes issued, and 66j per cent, supposed to be realized by Treasury-bills sold at a big discount, he would have more than enough to meet any demand that might be made on the Treasury in a crisis. I think that in this Bill the Treasurer is making a mistake in limiting the amount to the actual value of the notes issued. In Committee I shall urge that the amount be increased, because a note issue must be based on solid security. With a 25 per cent, gold basis, plus an increased reserve of Treasury bills, the issue will be in a strong position ; but I intend to ask the Treasurer to increase the gold reserveI am aware that the Queensland Act provides for a gold reserve of only 25 per cent., but in its administration, especially during the first few years, the Treasurers of the State have always kept a much larger reserve. Mr. Chalmers, in his Colonial Currency, makes a complete survey of the currency of the British Empire studied from the historical and economic stand-points, and comes to certain definite conclusions. He says, at page 36 -
It may be well to state the essentials of a sound Issue. Every note should be (a) secured, and lt) convertible; that is to say, a noteholder should know that the note he holds will exchange, not ultimately, but on presentation, for that amount of legal tender coin which is indicated by the note’s denomination.
In order to insure the convertibility of an Issue, it is not necessary that every £1 in notes should have a gold sovereign behind it; for experience shows that the circulation in noteusing communities never drops below a definite minimum. This minimum, representing an amount of notes which is never likely to be presented for payment may therefore be represented by securities, i.e., may be “fiduciary”; all notes beyond such minimum should be issued against legal tender coin. Until experience has shown what is the minimum Issue in a given Colony, investments (which should be in high class securities other than those of the Colony itself) should not exceed one-third of the notes in circulation, nor should they ever exceed onehalf. These stringent safeguards, which subordinate profits (beyond working expenses) to the financial security of the community point to Government Issues as the only practically sound system of paper currency. And it may be added that there is no more reason - in fact, less reason -why banks should issue notes at a profit than strike token coins at a profit. But, whether the issue be by the Government or by the banks it is of vital importance to a community that the notes in circulation should be so safe-guarded as to form, in no unsubstantial sense, “ the shadow of the gold.”
There should be a much larger reserve than the minimum provided for by the Bill. If this scheme is to be a success, it must command the confidence of the public, which means that the note issue must be based on the best security. Therefore, it would be better to increase the minimum reserve and the other securities, as suggested by the learned authority whom I have just quoted. The success of this scheme will depend greatly on the administration of the Act. To inspire the public with confidence, it will be necessary to publish returns showing that the administration complies with the spirit of the law, and demonstrating that the Treasury reserves are sufficient to redeem the notes should payment in gold be required for them.
– Does die honorable member think that any Treasurer would go to improper lengths in reducing the reserve ?
– I am merely laying down the rules which should govern administration. We should have monthly statements showing the amount of gold m the Treasury, the manner in which investments have been made, and the returns from investments. When the Queensland measure first became law, the greatest care was exercised to keep an ample gold reserve. In the year ending 30th June, 1894, £769,646 ros. worth of notes had been issued. £328,710 ros. being in actual circulation, but the Treasurer of the day kept in reserve, through advances to the banks, £379,666, and, in gold coin, £389,979, and made a temporary advance to the Consolidated Revenue Fund of .£50,000, so that he had a good reserve of sovereigns at call. Furthermore, he had a large amount of Treasury bills vested in trustees. That state of affairs was made known to the Queensland public, and naturally inspired confidence. The Queensland note issue was not made for the purpose of obtaining revenue, and in the first year only £7,885 19s. was gained by it. The first arrangement with the banks was to advance the notes at a charge of 4 per cent, on the value in circulation, no charge being made on those kept in reserve. This was altered, and it was arranged that the banks should agree to pay coin equal to one-third of the face value of the notes .advanced, and that the remaining two-thirds should be placed to the credit of the Treasurer at a deposit bearing interest at the rate of 2 per cent., payable half-yearly.
– Then the banks doing business in Queensland have to pay on the note issue of the State, whether it is in circulation or not?
– Yes. As I have shown, although, in 1894, the note issue was £769,646 10s., the value of the notes in circulation was only £328,710 10s., and a similar ratio has been preserved ever since. Last year the Queensland note issue represented a value of .£1,554,720, and the’ note circulation a value of £755,635. Only three of the banks in Queensland took advantage of the arrangement which the Treasurer was willing to make with them. All the others were prepared to pay gold, and to take their notes in return for gold. For the first seven or eight years the Treasurer, in administering the Act, took stringent care to see that the gold reserves in the Treasury were ample to inspire public confidence. It was only some years after the Act came into force that any portion of the reserves was invested, and the AuditorGeneral’s report for 1908-9 shows how those reserves are dealt with. The Treasury notes issued and outstanding on 30th June, 1909, amounted to £1,554,720, and this sum was covered as follows: - Advances to banks, under Treasurer’s arrangement, ,£388,333 ; exchanged for gold, and proceeds applied as follows : - Gold coin in Treasury strong-room, £536,000 ; silver coin in Treasury strong-room, £15,300; coin in charge of Treasury teller, £1,910; amount at fixed deposit with Royal Bank, £45,000; amount at current deposit with the Queensland National Bank, ,£40,000; and amount invested in Government debentures, including those for closer settlement and other purposes, £527,677. All these sums were over and above the Treasurybills in the hands of the trustees to whom I have referred. The Treasurer of Queensland has administered the State Act in such a way as of necessity to inspire public confidence in the currency. The Queensland note issue certainly brings in a revenue, that for last year amounting to ,£25,138 is. 8d., after deducting the cost of administering the Act, which was .£2,543 13s. 4d.
– And Queensland is not saying a word against the Commonwealth proposal?
– Neither are the local banks.
– I am not, in this debate, pitting rival systems against each other. I am simply showing that the Act has been so administered as to inspire public confidence, and sounding a note of warning to the Treasurer that, if he desires to inspire confidence, on the part of the people of Australia, in the Commonwealth note issue-
– The note issue will inspire public confidence.
– The honorable member’s mere assertion is not sufficient. The question of whether or not public confidence is inspired will depend on the methods of administration.
– The public had no confidence in the Ministry in office on 13th April last.
– I think that the honorable member has quite enough in hand to inspire confidence in himself. I do not wish to revive unpleasant recollections of Pleasant Sunday Afternoon statements.
– Tell the honorable member to use that scrubbing-brush on himself.
– I am using another key to open a different lock. Honorable members opposite will be responsible for- the administration of this measure, and they have imposed upon them a public trust. They have appealed to us in the light of the history of various currencies to support this Bill, and they have cited the Queensland note issue to substantiate their case. My reply to them is that if the Government intend to follow the Queensland sys tem, it will not be sufficient merely to place this measure on the statute-book. They will have, in addition, to inspire public confidence by administering it upon the lines that have been adopted in Queensland. I hope that in Committee honorable members, anxious, as I have no doubt they will be, to conserve the public interest, will do their best to strengthen and safeguard this measure. We are justified in legislating upon the subject of bank-notes because from their very nature notes, as soon as they are put into circulation, are practically forced upon the public. A man walks up to a storekeeper, and presents him, say, with a ,£1 note in payment of his account. The storekeeper has really no alternative but to accept it. In the circumstances, it is a note sanctioned by the community, and it becomes part of the currency. The storekeeper practically accepts it involuntarily, and, in the interests of the community, we ought to stand by the note whether it be issued by the State or by a private corporation. That being so, “we are perfectly justified in legislating to make the note safe for the individual who is really compelled to take this particular piece of currency. Dealing with the virtues of the proposed Australian note issue, the Treasurer claimed for it the advantage’ of convertibility. The Queensland note is convertible, and convertible at Brisbane. We are legislating now, however, not for the restricted area of one State, but for a continent. To tell a man in Western Australia that the Commonwealth note which he holds is convertible on this side of the continent, and that, therefore, it is just as convertible as any ordinary bank note, is at least to delude him.
– How many Queensland State notes have been converted during the last seventeen years?
– The honorable member might be surprised if he saw the figures.
– I have them.
– If the honorable member has the correct figures from the beginning, I think that he must be surprised at the number.
– What is the percentage?
– I am not in a position to give it. Even if only a ,£1 note is involved, every man has his rights. Honorable members cannot content themselves with the statement that they are going to legislate for a majority.
– We cannot legislate for one.
– We have no right to do a wrong to even one man if it can be avoided. What are the conditions in Canada, which, so far as area is concerned, is not very different from the Commonwealth? In Canada, according to the revised Statutes for 1906, the GovernorinCouncil may establish branch offices of the Department of Finance at Toronto, Montreal, Halifax, St. John, Winnipeg, Victoria, and Charlottetown for the redemption of the Dominion’s notes, or may make arrangements with the Chartered Bank at any of those places for their redemption there. What is to prevent the Commonwealth Government allowing these notes to be converted at all the State capitals?
– That may be done.
– I am glad to find the honorable member so responsive. Perhaps he is going to move an amendment on the lines 1 have indicated. What is there to prevent the Government making an arrangement with the banks by which the convenience of the public may be met in this way? Depots will have to be established in different parts of Australia where dirty notes or notes otherwise unfit for circulation may be exchanged for new ones. The Bill makes no provision for that. Surely such depots should be established in the far outlying portions of the continent.
– There are some other items that will also require attention.
– The honorable member will be able to mention them in Committee. I wish now to refer to what I may call the “ forcing “ clause, which has been criticised by several honorable members. The Treasurer very properly referred to wise remarks made by Sir Hugh Nelson in introducing the Queensland Notes Bill, but certain other remarks were made by that honorable gentleman which he might well have emphasized as to the danger of doing anything to force the notes upon the community. He emphasized that point in 3893, an<i again in 1902, when reviewing the whole measure from his presidential chair in the Legislative Council. Looking hack with a certain amount of natural pride upon the administration of the Act, he said -
There never has been any attempt to force the circulation. The thing must grow a natural growth. So long as the notes are payable on presentation there is no advantage to be gained bv forcing the circulation.
He stated again that the Act was never meant to bolster up the banks, and that it was never the intention of the Govern ment to force the notes upon the community. It was intended that the notes should flow naturally into circulation. The Government include in this Bill a clause which compels the banks to keep the notes ; they are forcing them on the community.
– But you cannot put any more into a pint-pot than a pint-pot will hold.
– That may be a verywise remark, and applicable to the particular circumstances to which it applies, but to say to the banks that you will compel them by force of a penalty to use the notes, and then to say that it makes no difference, because they can redeem them immediately in gold, is a contradictory position for the Treasurer to take up.
– Supposing we strike it out altogether, will that do?
– I am agreeable to that course ; and if the Treasurer intends to take it, I shall say no more upon the point. I simply emphasize Sir Hugh Nelson’s statement that the currency, if it was. to suit the needs of the people, must go naturally to the people, that if they wanted it they could use it, and if they did not want it they could leave it alone.; Experience in Queensland has proved that the people did want the notes, and that the notes did go into circulation. On going through the records for a large number of years, I found that the notes increased or decreased in number according to the natural requirements of the community. The system started with an issue of ,£769,000 in 1894, which grew to £971,000 in 1897; in 1900 is was up to £1,178,000; in 1903 it went back to £1,145,000; and in 1909 it was up again to ,£1,554,000. The Legislature made the necessary amendments from time to time in regard to the Treasury-bills to keep the security requisite for the increasing note issue. Those figures show that the system proved elastic, and adapted itself to the needs of the people, and in that respect the measure was justified. I have spoken to-night with a view to show that the scheme which has been submitted has to be dealt with on its merits, and that the Queensland experience, looking at it quite impartially, shows that the experiment was justified, but, of course, until it has gone through a crisis, it is rather early to dogmatize. Seeing that the Government are going on with the issue, it is necessary that our criticism should be directed to such parts of the
Bill as show its weaknesses. The response made on the other side to a few points I have mentioned shows, 1 think,that the House is quite prepared to make it a good and workable scheme ; but, above all, 1 would urge upon the Treasurer that it will be successful only if it is wisely and carefully administered. If the first act in connexion with its administration is to take the sovereigns that ought to be kept in the Treasury to meet demands for redemption, and divert them for ordinary revenue purposes, it will not inspire public confidence. If the money is to be used at all for revenue purposes, I hope that the particular measure of appropriation which brings that about will contain stringent clauses for the immediate repayment of the money out of revenue into the hands of the trustees, or whoever is charged with the administration of the Act. Then I should alsolike the revenue that,will be received from investments in securities, for some time to come, not to be paid into the hands of the Treasurer for the purposes of the Consolidated Revenue, but to be applied, if possible, to the buying of State securities, and so getting hold of State debts.
– When the States cease their borrowing.
– It does not matter whether the States cease their borrowing or not. I should like to see that revenue applied in the purchase of securities, to be kept as a further safeguard for the scheme which we have introduced. It would be unwise for many years to come to use the revenue from those investments for purely revenue purposes. I hope the Treasurer will carefully study the methods of administration in Queensland, and that his every action will be calculated to inspire confidence, and not to create distrust, in a measure which may in the end become most useful to the people of Australia.
Question resolved in the affirmative.
Bill read a second time.
In Committee :
Clauses1 and 2 agreed to.
Clause 3 -
In this Act, unless the contrary intention appears - “ Bank “ means a person or company carrying on the business of banking : “ Constable “ includes any member of the Police Force of the Commonwealth or of a State or of part of the Commonwealth : “ Treasury Bill “ means a Treasury Bill under this Act.
– I have circulated an amendment to insert the following definition - “ The Currency Commission” means a Commission constituted and incorporated for the purposes of this Act, to consist of the Treasurer of the Commonwealth for the time being and two persons to be appointed by the Governor-General representative of the financial and commercial interests of the Commonwealth.
My object is to obviate what I consider a deficiency in the Bill, by having two persons appointed by the Governor-General to co-operate with the Treasurer as a corporate body, to deal with the issue and control of the money, and the investment of what might be called the surplus arising out of the operation of the Act, so as to give the nation the assurance that the money will be invested and available as a security for the backing of the notes. Speaking on the second reading, I pointed out that, while I had the utmost confidence in the ability of the Commonwealth to see that the notes are stable from the time they are issued, the powers proposed to be placed in the hands of the Treasurer were such as should not be given to any one man, no matter who he might be. In saying this, I am not reflecting on past, present, or future Treasurers.
– I should like, if the honorable member for North Sydney will permit me, to move a prior amendment. I move -
That, after the definition of “ Bank “ the following definition be inserted : - “ Bank note ‘ means a bill or note for the payment of money issued by a bank and payable to bearer on demand, and intended for circulation.”
The reason for inserting this definition is that it has been pointed out that the existing definition of “ Bank note “ is insufficient. It is considered too wide and vague, and it should be more restrictive. The’ definition now proposed is believed to be, from a legal point of view, much better than that provided for before.
Amendment agreed to.
– I move -
That after the definition of “ Constable,” line 8, the following definition be inserted : - “’ The Currencv Commission ‘ means a Commission constituted and incorporated for the purposes of this Act to consist of the Treasurer of the Commonwealth for the time being and two persons to be appointed by the Governor-General representative of the financial and commercial interests of the Commonwealth.”
My object in the amendment to which I have referred is to have associated with the Treasurer two persons, to constitute with him a Commission, such persons to have special knowledge of the commercial and financial conditions of the Commonwealth, and to co-operate with him in regard to the issue of notes, the application of moneys and their investment and re-investment. I -think that the Government should have, in connexion with operations under this Bill, the advice and counsel of persons thoroughly versed in the financial affairs of the Commonwealth at the time when these matters were dealt with, and in whom the people would have more confidence than they might have in the Treasurer of the day. . I quite recognise that, to introduce such an amendment as I propose, would necessitate the redrafting of the measure. We should require to alter, not only clauses 8 and 14, but the division of parts. I am now seeking to test the opinion of the Committee as to whether it is desirable that these alterations should “be made. If the amendment is accepted by the Treasurer-
– No, I cannot accept the amendment.
– I am very sorry tr> hear the -Treasurer say so, because while it would not affect in any way the principles of the Bill, it would increase the confidence of the people in operations -under it. It is impossible to conceive that the present Treasurer could be so thoroughly versed in the necessities of the commercial and financial position of the Commonwealth from time to time, that, acting on his own knowledge, he could be with safety intrusted with the conduct of all the operations under this measure. We know that he would have to seek outside advice and assistance, and I think it is far better that this Committee should insist that, when a crisis arises, the Treasurer of the Commonwealth should have some persons, selected under normal conditions, to assist him in deciding what should be clone. The amendment would be of value chiefly in connexion with the investment of funds derived from the issue of the Commonwealth notes. It is most important that these moneys shall be dealt with in such a way as to inspire public confidence in the whole system. I am satisfied that it would create a feeling of great security if it were known that the Treasurer find associated with him in connexion with these most important and onerous duties, two other persons specially informed as to financial operations. I have been surprised to hear the honorable gentleman say that he will not accept the amendment, since it would in no way interfere with the object of this measure, which is to secure the control of the currency for the nation. Its acceptance would not deprive the Executive of the control of the currency, or of the advantages of funds raised under the Bill for the national welfare. I am supporting the Bill and, on the second reading, I intimated that there were one or two amendments which I desired to see made. I had then no forecast of the Treasurer’s stern opposition to this amendment. I understood the honorable gentleman to say that the matter would be open to consideration, and that he, for one, would not object to what I proposed. He has evidently altered his views on the subject, and I should like to say that, if he persists in his opposition to the amendment, seme very warm supporters of the Bill on this side may be converted into anything but friends of it. The powers given to the Treasurer are powers that neither this Commonwealth nor any other nation has ever given to any one man. 1 am simply asking the Treasurer to share the burden ot these onerous responsibilities with other parties, who have a wider knowledge of the subject than ever the present Treasurer can attain, or that we can expect in any of his successors. I shall not waste more time ; I have put the matter before the Committee in the hope that there are reasonable men on both sides who will co-operate to make this measure a success, and secure confidence in the future issue of national money.
– I am sure that the honorable member for North Sydney will recognise that he is slightly in error in saying that I ever agreed to the amendment.
– That was what I gathered from what the honorable gentleman said across the table.
– That was in reference to quite a different matter. According to the proposed amendment, how has this Commission to be constituted, and what has it to do? The Commission is to include two persons in addition to the Treasurer. By whom are they to be appointed ? By the Treasurer ; and they are to watch over the Treasurer. From that point of view, the amendment is exceedingly weak. Rightly or wrongly, responsible government is the basis of the Constitution, and, therefore, the Treasurer and the Government are responsible to this Parliament for all their acts.
– Oh, no !
– They are, and ought to be. At the best, this proposal includes two persons who have to be appointed by the Executive, and, therefore, the honorable member is only adding to the number without in any way strengthening the position. The desire of the honorable member is that there shall be more men to consult, but I do not think’ that the amendment’ will attain the aim he has in view. It is with great regret that I say that. I cannot accept the amendment, coming as it does from an honorable member who is so favorable to the Bill ; but I am sure he would not desire the Government to defer their judgment if they do not regard the proposal as of service.
– (Ballarat^ [9.45].- That seems an unfortunate conclusion. It must be admitted that there is a good deal of force in the Prime Minister’s argument. But what is that argument? It is that the amendment does not go far enough - that it proposes to associate with the Treasurer two persons, chosen, probably, by the Treasurer himself, or by the Government of -which he is a member - and he points “out that that is very little addition in the way of independent judgment. I agree that the amendment is worth having as it stands, but am willing to recognise the force of the argument of the Prime” Minister, and say that some more independent choice might be made in a matter of this kind. Ar all events, if honorable members run their eyes eve[ so lightly over the Bill, what do they find? They find that, for the purposes of the measure, the Treasurer is to become more than a Treasurer. I always regard the Prime Minister with great respect, but, as I look at him now, he seems to swell in his proportions. He is to become a “ corporation.” When drafting the Bill, it was evidently felt that the titles of the Treasurer did not appear quite impressive enough ; consequently, there is a special provision that he shall be turned into a corporation, in order that, “with this addition, he may as a small, but happily united family, arrive at certain decisions. But putting aside that rather curious feature, introduced, no doubt, for certain legal purposes, what has the Treasurer to do? He is to hold the money in gold, or use it in redemption of Australian notes, or invest it ; he may sell or dispose of any securities in which the moneys are invested, for which purposes he and his successors in office shall be deemed to be a corporation ; in addition, he may issue Treasurybills to such amounts as he thinks, fit within a maximum limit. How doesthe Treasurer accomplish work of that, sort ? There is in his office a gentleman, known as the Under-Treasurer, who devotes the whole of his time to the consideration of financial matters, and upon, whose recommendations the Treasurer, in many rases, will act without question, and in other cases will probably act after question. That officer fs already a busy and over-burdened man ; and this matter of thecurrency is not simply an annexe of the Treasury, but means much more. If this course is to be pursued, the only meansthat suggests itself to me by which trieTreasurer can make the control efficient isto have an officer of sufficiently large experience, and sufficiently free from other official obligations, to give the whole of his time and thought to advising the Treasurer on this matter. This will mean, of course; that that officer will be practically the effective person in such matters. The Treasurer must by now know the obligationsof his position, added to the burden of parliamentary responsibility, and to the duties to be discharged to the country in general - the administration of old-age pensions and other interests that have yet to be taken intoaccount. If he and his successors are invested with this power by the Bill as it stands, the Treasury will be forced to find some practical way out of the situation, some one supplying the requisite knowledge and attention, which the Treasurer, with hismultifarious duties, cannot be expected togive.
– In Queensland, the system runs like clockwork.
– Clockwork does not always run, and human clockwork has often to be repaired. I do not desire to elaborate the point, but think it will be found ot practical use and advantage for the Treasurer to relieve himself of some of his additional responsibilities, which, of course, will mean relieving the chief Executive officers, who will have to advise him.
– The amendment means divided responsibility.
– There is no proposal, so far -is 1 am aware, thai, the Treasurer shall be outvoted by anybody else. My idea was to associate with the Treasurer, in the discharge of his duties under this measure, . some special officer, if he will not have the independent advisers that I prefer. It seems to me that the Treasurer is overloading himself and his successors.
– The position is one that can always be vacated.
– But the incoming Treasurer then has to begin all over again.
.- I do not know that the amendment as it stands will attain the object in view. I am sorry that I was not able to make a few remarks before the motion for the second reading of the Bill was carried. I missed an opportunity of calling attention to a matter which I will now bring under the Treasurer’s notice. I think I can do so in an orderly manner. It relates to a question of administration. I do not know whether the Treasurer has fully considered all that is involved in this new departure. He has not only to deal with the issuing, registering, and cancellation of notes, but there is also a large amount of detailed work in connexion with their circulation that is at present done by the banks, entailing the services of a very large staff. The circulation of the notes is particularly important. Is it not worth the Treasurer’s while to consider how far he can make use of the existing machinery for the distribution of the notes through the agency of the banks ? In any case the banks must be the distributors, and their aid will be of infinite value to the Treasurer. I regret that there seems to be an erroneous view of the attitude of the banks towards the Government in this matter. The honorable member for Parkes has already mentioned some points in that connexion. I desire to show that we have it on record that, so far from the banks assuming an attitude of opposition to the view of Parliament, they have, on several occasions, made known their opinions officially, and have intimated their willingness to co-operate in the administration of a general note issue. As proof of what I say I may cite the report of a Victorian Commission, of which I had the honour to be a member, although I was not able to attend many of its meetings, in consequence of having to go to London. Some of the leading bankers, including the then head of the Union Bank, gave evidence, and stated most clearly that whilst they thought that the present system of administration gave every safety to the public, they were quite willing to fall in with the views of the Government if it were thought desirable to institute a State system of note issue.
– The honorable member will not be in order in making a second-reading speech at this stage.
– I am referring to a matter which has a bearing upon the point at issue It affects the administration of this measure in which the banks have intimated their willingness to assist. I do not know whether the Treasurer is acquainted with the report of the Commission to which I refer.
– I quoted from it.
– I do not think that the honorable gentleman alluded to the fact that in that report at page 461 it is shown that the’ banks of Australia, with the exception of three, came to a decision which is embodied in aproposal made by them in regard to the administration of a State law. Their recommendations were as follow : -
– The honorable member is now going beyond the scope of amendment.
– I am showing that a proposal has been made by the banks which would materially assist the Treasurer in carrying out this measure.
– If I wereto allow that latitude to the honorable member, other honorable members would expect to receive similar treatment.
– I rise to order. I submit, sir, that on this clause we are entitled to discuss any matter relative to the administration of the measure. This is one of those Bills on which debate cannot be strictly circumscribed in Committee. The appointment of a Currency Commission raises the whole question of administration, including the disposal of the money, the management of the issue of notes, the circulation, and everything else. I submit that the amendment covers the widest possible field.
– I think that I am strictly in order, because I am bringing under the notice of the Committee certain proposals which were made for the administration of a measure of this kind. I am reading the quotation with a view to showing the Treasurer that by co-operating with the banks, and forming a Commission somewhat on the lines which the honorable member for North Sydney has mentioned, he would be enabled to secure its success more effectually than he would by the Bill.
– The honorable member will be in order in making a reference to the report. He must see that, while the continuous reading of a report is quite proper on the second-reading stage of a Bill, it is out of order in Committee.
– The general purport of this part- of the report is that the banks will be prepared to co-operate with the Government on certain terms in the promotion of a State note issue. They suggest that from 25 per cent, to 30 per cent, should be kept in gold, that the balance be invested in securities, that the securities should be invested in a certain way, and the income therefrom apportioned in a certain way. I do not ask that the Government should adopt the ‘fifteen suggestions of the bankers, or any part of them. I am merely pointing out that, before proceeding further wilh this measure, they ought to consider the proposal of the honorable member for North Sydney, taken in connexion with the well-known fact that the banks will necessarily have to co-operate with the Treasury in carrying the scheme to a successful issue. I am very sorry that I missed the opportunity of speaking on the second reading of the Bill, when, of course, T should have had greater latitude to deal with the question. What I wish to impress on the Treasurer is that we desire to help l im to make the measure as perfect as possible in the public interest, to introduce the change with as little friction as possible, to secure the best means for distributing the notes, and entire co-opera- tion between the Government and the banks, which should be secured if possible. I trust that before we deal further with the Bill, 0 the Treasurer will consider this aspect of the question. I apprehend that what the honorable member for North Sydney wants to do is to insure that the issue of the notes shall be conducted by. a body which will not be under the control of the Government, but which, of course, will be subject to the Government” and the Parliament.
– 1 would point out to the honorable member for North Sydney and the honorable member for Mernda that the Treasury is entirely responsible for the silver issue at present. No one has suggested that it ought to have the assistance of outside persons.
– I have.
– There is no analogy between the two tilings.
– Up to a certain point the analogy is complete, and so it is, too, with regard to the copper coinage. I am in a position to say that the banks will cooperate with the Government under the Bill as it is drafted. No later than yesterday a banker said that he would be prepared to give the Treasury a quarter of a million in gold as soon as we delivered that value of Australian notes into his hands. Surely an honorable member who speaks about our getting the co-operation of the banks can be satisfied with that assurance.
– Would the banker do it for nothing?
– Why should the honorable member ask him to do it for nothing ?
– I would not be so rude as to question the bona fides of a. gentleman who knew exactly what he was saying, and who made that statement to me bv authority. As a matter of fact, the hanks, are anxious to receive more notes than we shall be able to deliver to them within a reasonable time. I ask honorable members not to assume, so late in the day, that there is any antagonism on the part of the banks. No one would be more pleased than myself to accept the amendment if I thought it were necessary. It would not improve the Bill in any way, and it is not necessary to further safeguard the interests of the Commonwealth.
– No one casts the slightest doubt on the bona -fides of the Treasurer or of the banks, and nobody would suggest for a moment that the banks would not cooperate with him, so far as the circulation of the notes is concerned. That is not the point at all. What the honorable member for North Sydney has in view, if I understand his amendment aright, is that in all matters relating to the issue of the notes - as to their number, their circulation and the investment of the funds which will accrue to the Treasury by means of their sale, indeed, all matters relating to the management of this currency - there shall be called to the councils of the Go- vernmeit independent financial experts. My honorable friend desires, first of all, that the best financial talent in Australia shall be provided for the assistance of the Treasurer in the performance of his very important duties under the Bill, which practically constitutes the Government a bank of issue for the Commonwealth, with functions like that performed by the Bank of England for the United Kingdom. It is proposed to issue notes to the value of £7,000,000, and we are told that the issue will probably be increased within a few years to£10,000,000. Sums like those cannot be regarded as a bagatelle. I cannot conceive of more important functions than those involved in the control of the rurrency, and it is no reflection on the Treasurer or on his officers to say that they have not the time or that intimate knowledge and experience of banking necessary to enable them to manage without assistance all the intricacies of a note issue. But above these considerations is the question, Shall the issue be subject to political control ? Ts the amount of the issue to be decided by the Treasurer or by financial experts removed from the temptation to consult the political exigencies of the moment? The public will have more confidence if the note issue is controlled by disinterested persons possessed of a knowledge of banking and circulation, than if we leave it in the hands of Ministers who may be moved by party considerations ? The Treasurer should be glad of the chance to exclude from the public mind all doubt as to the proper administration of this measure. He says that Parliament is the final court of appeal, which is true; but Parliament is not competent to manage a note issue, and should be the last body to be charged with such a duty. I hope that the Treasurer will reconsider his position, and take advantage of the opportunity to remove from himself and his successors temptation to make a political use of the powers given by the Bill. Independent trustees have been appointed in connexion with the establishment of sinking funds for the repayment of loans, which is a less important matter than the issue of notes. The AgentGeneral of W estern Australia, and one of the directors of the London and Westminster Bank have vested in them all matters relating to the management of the sinking fund established by the State Parliament for the payment of present and future loans.
– The national debt of Great Britain is managed by a Commission.
– Yes; and in the Naval Loan Act, lately repealed, this Parliament, on the motion of the present Prime Minister, provided for a sinking fund, to be controlled by the President of the Senate, the Speaker of the House of Representatives, and the Secretary to the Treasury, to prevent the possibility of party control. The issue of notes is a matter of much greater importance than the management of sinking funds, and what is suggested is that the Treasurer and two persons to be appointed by the Governor-General in Council shall form an independent Commission to deal with this matter. I heartily support the amendment, and hope that it will be accepted.
In Committee (Consideration of Senate’s message resumed from 19th August, vide page 1846) :
Clause 7 -
Section twenty-seven of the principal Act is amended -
by omitting therefrom the words “ or by leave of the President,” and by inserting after the words “counsel or solicitor “ the words “ or paid agent.”
Senate’s Amendment - At the end of clause add- “ and
by adding thereto the following proviso : - Provided that a bond fide member or officer of an organization or a bond fide employee of a party not being an organization, appearing in that capacity to represent the organization or party, shall not be deemed to be a counsel or solicitor or paid agent within the meaning of this section,’ “
Upon which Mr. Hughes had moved -
That the amendment be agreed to.
And Mr. Joseph Cook -
That the amendment be amended by adding thereto the words : - “ provided that he receives no fee, honorarium, or reward for such service other than the usual payment to him as salary or wages.”
– I was not in the Chamber when the honorable member for Parramatta moved his amendment on Friday last, and I should like to move, in lieu of it -
That the amendment be amended by adding thereto the words : - “ and that the other party may, by leave of the President, be represented by counsel or solicitor or paid agent in any case in which one party, by virtue of this proviso, is so represented.”
What is good for one party is good for the other.
– I should be willing to withdraw my amendment if I thought it conflicted with that suggested by my honorable friend. It seems to me that his proposal would be more fairly dealt with after that now’ before us has been disposed of.
– Are these amendments to be submitted in alphabetical order? We seem to be getting enough of them.
– I am surprised that the Government should have initiated this kind of thing in another place. The object of the amendment is, as I understand it, not to exclude any gentleman from appearing before the Court, even if he be a lawyer, so long as he is a bond fide member of an organization. That is a way of getting round what this House decided to do a few days ago. We then determined to exclude lawyers from appearing before the Court, except with the consent of both parties, and we proceeded, further, to exclude from the Court those who were designated “ lay lawyers,” or, in other words, “ paid agents.” That was the term suggested by the Attorney-General and accepted by us. The amendment as it comes from the Senate, would allow paid agents who happened to belong to a union to appear before the Court while excluding lawyers who were not members of a union. The mere fact that a person belongs to a union is no guarantee of special fitness to appear before the Court. If we are going to exclude lawyers, because of the technicalities that inevitably associate themselves with their pleadings, so likewise we should rigidly exclude the specialist class, who are without the training of the lawyer, and would lead to the same intricacies, and the same delay, expense, and general unsatisfactoriness.
– Would it not mean that some lawyers would join a trade union and others an employers’ union, with the result that we should be in our original position ?
– Some lawyers are already members of trade organizations, and some, I understand, are members’ of employers’ organizations, so that, to a cer tain extent, it would apply to both sides. But our idea was that we should exclude lawyers, unless both sides -specially asked for them. ‘ If we are going to exclude lawyers we should exclude as well the lay lawyer, who to-day receives fees for appearing before these Courts. In certains cases, I believe, some of them appear for a very small fee. We, on this side, therefore, in seeking to exclude lay lawyers from the Court, desire, amongst other things, to keep up the rates of wages. We do not wish to see any sweating even in connexion with the appearance of specialists before the Court. We say, “ Pay full fees, if you are going to have advocates, and get the best ability you can into the bargain.” The desire is to exclude lawyers and paid! agents, so as to simplify the consideration of cases before the Court, and, unless an amendment such as I have proposed be carried, we shall undo the provision which was inserted when the Bill was before us on a previous occasion. My honorable friend’s suggested amendment will come in if the amendment of the Senate is accepted. I agree with him that, if, under the Senate’s amendment, lawyers who are members of an organization are to be allowed to appear, the other side should have an equal chance. I admit that it should apply to both sides, but the idea at present is ‘ that both should be excluded, and my amendment is designed to carry out that intention.
.- I am rather astonished that we are asked to agree to the Senate’s amendment. I was under the impression that better counsels were going to prevail with the Government, and that they intended to resist it. The Senate’s amendment will benefit practically no one but those members of trade organizations who are at present making a very good thing out of representing those organizations before the Arbitration Court. The principle advocated by those who, when the Bill was originally before us, thought that paid agents should not appear for unions in these matters was this : That inasmuch as it is almost impossible, under the terms of the Bill, to decide when a bond fide dispute exists, or when a dispute has been engineered, to provide “ costs “ for the engineers, it was essential, in the interests of the Court itself, and th»t bond fide litigants should have anf onnnrtnnity to have their appeals heard, and that, so far as we could insure it. only hotia fide appeals should go before the Court, bv excluding “paid agents.” I, at all events, felt most strongly that if we allowed paid agents, representing unions, to appear before the Court, disputes very often would be deliberately fomented by those paid agents with a view of reaping pecuniary rewards in helping, later on, to settle those disputes before the tribunal created by this measure.
– They might resort to “” stonewalling.”
– What is to prevent their spinning out a case ad infinitum if they realize that they are to be paid by the unions they represent? It was put very strongly by the honorable member for Hunter that a number of gentlemen were quite competent to represent their unions in the Court ; that, although they did not happen to be privileged to . appear before the ordinary law Courts, they were qualified to deal with the business that from time to time crops up in Arbitration Courts. He held that, when these men represented their unions before the Court they were entitled to special payment for their services. All I have to say to that is that the honorable member’s argument strikes at the very bedrock of unionism, which, so far as I understand it, is that no particular class of men shall blackleg on any other class in order to get an immediate advantage, but that every man shall do what he is best fitted and trained to do, and allow other men to do that for which they are trained.
– That is a rather vague, and almost immoral utterance.
– My honorable friend is always ready to do everything in certain circumstances. I wonder if he would be willing to do everything in the Court if we disagreed with the Senate, and left the Bill in its previous form? The honorable member says that my statement as to the meaning of unionism is not fair or correct ; yet the Government now declare that outside of their hours of work the public servants shall not do anything to conflict with any -other body of men in the pursuit of their livelihood ! Why, then, should we have this special kind of advocate - a paid lawyer who is not really a lawyer, but who wishes to be considered qualified to do this highly-paid work? Why should we consider that special kind of professional litigant at the expense not only of bond fide. litigants coming before the Court, but of the unions called into being under the Act? The very fact that the Government have deliberately refused to give unionists the privilege of free Government audit makes it all the more necessary that we should safeguard the rights of the individuals composing the unions. We should make it absolutely certain that the unions shall not be exploited for the personal gain of this or that small section of the community. That is the principle underlying the amendment of the honorable member for Parramatta. It amazes me to find honorable members opposite, who pretend to be overburdened with- a desire to assist the workers, now preferring to sacrifice the interests of the workers rather than to prevent the class of men to whom I have alluded from continuing to live on the unions that they pretend to help. There are, of course, exceptions to every rule, and there may be self-sacrificing union secretaries - I should be the last to say there were not - each of whom is prepared to go into Court and deal with the union’s affairs simply because the union keeps him as secretary throughout the year, and because, as secretary, it is his business to concern himself with the union’s interests, lt is all the better if that is so, but if my honorable friends are satisfied that the organizers of their unions bear that high character, they should be the last to refuse to allow the Bill to stand as it previously left this Chamber. The issue is clearly defined. Honorable members will have to make up their minds whether they are to consider the interests of the men or the interests of the union bosses who, if the amendment now urged by the Attorney-General is passed, will reap a pecuniary benefit out of the men. That is the position in a nutshell, and I hope, for the sake of the good name of Australian unionism, that theSenate’s amendment will be rejected in its entirety. If it is not, an amendment such as that suggested by the honorable member for Angas is necessary in common fairness, but I am concerned now with trying to save the funds of the unions from the payment of special fees to incompetent persons who may possibly have been fomenting a dispute with a view to afterwards reaping some pecuniary benefit out of its settlement. Last Friday the Attorney-General proposed to pass this measure through its remaining stages, because he said it was urgent, and it was not fair to wait until Tuesday He was quite willing then, as I understood him, to accept the honorable member for Parramatta’s amendment, but only refused to do so on the ground of the urgent necessity of passing the measure into law. Why does he not take up the same attitude to-day ? The question of urgency no longer operates ! because we can disagree with the amendment, and the Senate to-morrow can ratify our decision, seeing that honorable members opposite absolutely control the Senate. No time will be gained by the Attorney-General’s present attitude. It is not in the interests of urgency, and it can be only in the interests of a small class of people, who will reap a pecuniary benefit at the expense of the men whom my honorable friends pretend to represent.
– We do represent them.
– Then give them this safeguard, and let them know what they are doing. If honorable members opposite do represent them, why did they refuse last week to give them a free Government audit? They have a right now to refuse to allow the men to be exploited by selfinterested persons, and if they wish to prove their bona fides let them act on that right, and disagree with the Senate’s amendment.
.- I would suggest to the Attorney-General that he reject, not only the amendment moved by the honorable member for Parramatta, but also the amendment made by the Senate, because the Government must have made up their minds as to the terms to be employed in the Bill, and the Senate’s amendment is nothing more than a definition of a provision inserted by the Committee after due consideration. A large amount’ of deference must, of course, be paid to the remarks of the honorable member for Wentworth, in view of the interest which he takes in Labour organizations and the welfare of the workers, and I recommend the Attorney-General to pay the honorable member’s views a considerable amount of attention, if only to please him.
:- On Friday last I advised the Committee to accept the Senate’s amendment, but in justice to myself I would point out that, not knowing the matter was coming on, I had the amendment put into my hands when the honorable member for Parramatta was speaking, and was perhaps more concerned in opposing his amendment, which made matters worse. After perusing the amendment of the Senate, I think it also should be rejected. In fact, both amendments should be rejected. The. words “counsel or solicitor” should be struck out of the principal Act, as, if not, we shall be in exactly the same position as when the Bill first came before the House. The Committee thought it necessary to exclude counsel, solicitors, and paid agents, but the Senate’s amendment prac tically brings them in again, because we cannot prevent any barrister or solicitor from becoming a bond fide member of an organization, and, therefore, he will be able to appear before the Court. In regard to the statement of the honorable member for Wentworth, that to permit laymen to occupy this position would strike at the DaS1C principle ot unionism, the honorable member does not realize that our object in advocating the exclusion of lawyers from the Court has always been to facilitate the hearing of cases and avoid the delay now caused by the raising of technicalities. That is our only object, and when the honorable rr.ember for Parramatta moved his amendment with regard to paid agents, my difficulty was that in many unions certain men who had been following their employment had been taken from it and put into these positions, and paid a salary, and itwould be a question for the Court, if the point was raised, whether they were paid agents or not, seeing that they no longer followed their employment. They were the only men available to deal with the cases coming before the Court. I urged the rejection of that amendment, and now the amendment carried in the Senate brings us back to where we were before. We should be stultifying ourselves if we accepted it. If it is accepted we should strike out the words “counsel or solicitor,” and then define what a paid agent is, so that the Court might know the intention of the Legislature. The honorable member for Wentworth will agree with me that no one could be better qualified than the officials of the unions to represent the men in this Court, which, after all, is a Court of equity and good conscience, and not one in which legal points are to be raised. .1. do not ask that any one should be given the opportunity to blackleg on the legal fraternity, as the honorable member for Wentworth has suggested, but I do ask that a provision should be included in the Bill under which officers of organizations will be able to represent them in the Arbitration Court. I think the Attorney-General would do well to accept the advice of the honorable member who preceded me.
– I think the Senate’s amendment should be rejected. I shall support the amendment proposed by the honorable member for Parramatta, but I am of opinion that the amendment I have suggested myself would be required to cover the ground, and I shall move it later. Under the Senate’s amendment an experienced lawyer who has joined a union could be engaged to represent it in the Arbitration Court. All that the Act provides for is a statutory number of persons as members of a union before it can be registered as an organization. These must be employes in the case of an employes organization. But, in addition, there may be members of a union who are not engaged in the trade at all. The effect of this amendment would be to bring professional men into the organizations to do the work. Then we should have one’ side represented in a dispute by lawyers and the other side not so represented, which would be grossly unfair. The clause as amended by the Senate would not help the employer at all. It applies only to members of organizations, and they are, as a rule, composed of employes. It is only by such bodies they could put fairly before the Court the solidarity of labour in relation to a particular demand. As a rule, also, it is individual employers who are brought before the Court. Whether it were a company like that at Broken Hill or single individuals or firms, as in the case of the Federated Sawmillers, there would be no right to representation by counsel under the Senate’s amendment. If the clause is to stand as amended by the Senate, I say that we should allow the President, where a lawyer appears for an organization as a member of the organization, to permit the other party to be also represented by a lawyer.
– That would bring it back to the position under the existing Act.
– We should not allow one side only to be represented by a lawyer. The honorable member for Herbert would not advocate that.
– Not at all.
– It would be grossly unfair for us to say that the rule which we thought itwell to lay down might foe broken by one side and not by the other.
– I think the difficulty goes deeper than has been suggested by the honorable member for Angas. This is one of those cases in which honorable members suffer an inconvenience in discovering what is intended by the Bill, because they are obliged to read with it the provisions of the principal Act. I shall quote the part of the section of the principal Act which affects this matter -
No party shall except by consent of all parties or by leave of the President be represented by counsel or solicitor.
We omitted the words “ or by leave of the President,” and added, after the word “solicitor,” the words “or paid agent.” The original provision was then amended to read -
No party shall except with the consent of all parties be represented by counsel or solicitor or paid agent.
That is how we dealt with the matter before the Bill was sent on to the Senate. Unless allparties agreed, there could be neither counsel, solicitor, nor paid agent representing them. Seeing that it is possible that some paid agents may be members of the Bar, or solicitors, the clause as amended by the Senate provides that, though they may be counsel or solicitors, they shall be deemed not to be counsel or solicitors. Certain honorable members, who are associated closely with unions, although they are lawyers, would be able to claim the right to go into the Court as agents, and ask that they be considered not to be members of the legal profession. That is the position which, I believe, honorable members opposite would not tolerate for a moment, because it would be playing into the hands of two or three men who happen to be associated with organizations. Why should they be given such an advantage? What it would lead to eventually would be that members of the Bar and solicitors would become members of employers’ organizations, in order to secure the same right, and we should have restored exactly the condition, of things that existed before the original Act was passed. The legal members of the employers’ organizations would have the same right asthe legal members of employes’ organizations to claim that they should not be regarded as barristers or solicitors. I am in favour of the provision that, unless the parties agree, there shall be nolawyers on either side ; otherwise, we are practically recreating the old evil, if it bean evil. The Senate’s amendment means that so long as a man is a paid agent, though a member of the bar or a solicitor, he is not to be deemed what he is.
– When that amendment was passed the Senate had been sitting all night, and senators did not know what they were doing !
– I understand that there is some suggestion that honorable members opposite are in favour of the Bill as it passed this House. If that be so I am very glad, because I recognise that there is a fear of a tendency to raise technicalities if professional men are engaged, and I am prepared to assist the Committee to restore the Bill to its original form.
– The Committee seem to be in a little difficulty as to the nature of the motion and amendments which have been foreshadowed. There is some apprehension that the effect of the Senate’s amendment would be to allow lawyers and paid agents to practice, although, when the Bill left this House, that was not the case. But, after all, what this proviso means is just what the honorable member for Parkes has said, namely, that if a person is a paid agent, and a member of a union, he may appear, but he shall not be deemed to be a paid agent or lawyer at that time. However, my own impression is that the clause as it now stands will permit a bond fide member and an officer of an organization to appear, quite irrespective of what he is. The case cited by the honorable member for Hunter has nothing to do with the question, because that is a matter for the union. Some unions provide that unless a man is following the occupation the union represents, he cannot remain a member, and, therefore, such a man could not appear because he was a paid agent. But if he be a member of the union, whether following the occupation or not, he could appear. However, the Government regard this amendment as quite unimportant compared with the vital principles of the Bill, and, as from the amendments foreshadowed, there is a probability of endless discussion, I shall be very glad to withdraw my motion, and move to disagree with the Senate’s amendment.
Motion and amendment, by leave, withdrawn.
Motion (by Mr. Hughes) proposed -
That the amendment be disagreed to.
.- The honorable member for Bourke was right in saying that the amending Bill, as introduced, contained the deliberate intention of the Government, but that deliberate intention did not include the words “ paid agent,” which were inserted at the instigation of the Opposition. Without the Senate’s amendment the Bill will absolutely prevent union secretaries from appearing in Court and conducting cases for their unions.
– The words “ paid agent “were suggested from this side, and adopted by the Attorney-General.
– If union secretaries are paid secretaries, they will, as “ paid agents,” be excluded from the Court.
– No; the words mean paid for the work in the Court.
– It was originally provided that no lawyers should appear except by the consent of the parties, or by leave of the President, but the words “ by leave of the President ‘ ‘ were omitted, and lawyers were permitted to appear with the consent of both parties. Paid agents are in the same position ; and if a union secretary is not an agent of the union, what is he ? If he is a paid secretary, he is a paid agent.
– But he is not paid to conduct the case.
– The provision says nothing about what he is paid for.
– Does the honorable member say that a paid secretary is a “ paid agent “ ?
– I submit that he is - that if he is paid a salary by the union, he is a paid agent. If the provision is not intended to apply to union secretaries, some definition of “paid agent” is required. This was recognised in the Senate by the Government representative ; but, while in the definition it is stated that an officer of the union is not to be deemed a paid agenr, the same also applies to a barrister or a solicitor, if he is the officer of a union. What is required is that the Senate’s amendment should be incorporated with the provision as it left the House, with the omission of the words counsel or solicitor,” so that it would then read - no counsel or solicitor or paid agent shall appear to conduct a case except by the consent of both parties, provided that a bond fide member or officer of an organization or a bond fide employee of a party not being an organization, appearing in that capacity to represent the organization or jjarty, shall not be deemed to be a paid agent within the meaning of this section.
If the clause came finally out of the Committee in that form we should have a counsel or solicitor or paid agent excluded from -the Court save with the consent of both parties, except in die case of bond fide officers of organizatians, who, not being legal men, would be exempted from the category of “paid agents.” That is whatis required. There seems to be such a desire to hastily dispose of the Senate’s amendment that I am afraid that a very important aspect of it may be passed over. I have pledged myself to my constituents to vote against legal men being allowed to conduct industrial cases except with the consent of both parties, and to see that bond fide paid officers of unionsshall have an opportunity to conduct cases.
– Does the honorable member mean to exclude a counsel or solicitor if he is a member of a union?
– Certainly. The objection to the admission of lawyers in industrial cases is that there is a tendency on their part to raise technicalities which obscure industrial issues. Whether a lawyer is a member of aunion or not, the objection applies just the same. If the words “ counsel or solicitor “ are retained, I feel quite satisfied that “ paid agent “ will be held to include a union secretary. In that case, both parties will be compelled to agree to the admission of lawyers.
– They will be on an equality.
– I admit that if lawyers are to be excluded there should be an equality on both sides, but unless there is a definition of “paid agent,” union secretaries will be excluded from the Court, and both parties will be compelled to bring in legal talent; so that, to all intents and purposes, lawyers will not be excluded. It would be much better to delay the consideration of the Senate’s amendment for a day, rather than to pass it in haste, and so tie up the unions with a double knot. I should certainly like to hear from the Government some statement which would satisfy the unions that the term “ paid agent “ does not include a paid secretary.
– I am quite sure that it does not include a secretary.
– The function of the Court is to interpret, not the intention of Parliament, but the words which it employs in the sections of the Act.
– What suggestion does the honorable member make?
– I suggest that a paid agent should be defined in some such words as those which are contained in the Senate’s amendment excluding the words “ counsel or solicitor “ as follows -
Provided that a bond fide member or officer of an organization or a bond fide employee of a party not being an organization, appearing in that capacity to represent the organization or party, shall not be deemed to be a paid agent within the meaning of this section.
– That will let in the lawyers.
– No; “it will shut them out.
– Is the honorable member aware that, although we are striking out the words “ counsel or solicitor,” a counsel or solicitor could appear as a paid agent. We could not stop them from appearing in that capacity. If you allow a paid agent to appear, why should you not allow a lawyer to appear as a paid agent?
– First of all, there is a prohibition placed on the admission of a counsel or solicitor except by the consent of both parties.
– But if a counsel or solicitor were a bond fide member of a union that would not apply ?
– If there is a prohibition placed on the admission of’ a counsel or solicitor he certainly ‘could not be brought in afterwards as a paid agent.
– If he were a member of a union he could.
– I submit that he could not. The definition which has come down from the Senate, and which was proposed there by a Minister will be all right if the words “ counsel or solicitor “ are taken out.
– That will’ make no difference. If you allow a paid agent to slip through then any person who is a paid agent can slip through.
– If you put a prohibition on the admission of the legal fraternity, and say that a paid agent who is a bond fide officer of an organization can conduct a case that does not override the prohibition.
– Under the clause as it left the House, a man who is a bond fide member of a union, can appear before the Court; but a counsel or a solicitor cannot appear. The ‘honorable member ought to be satisfied with that.
– Under the clause as it left the House, a bond fide member of a union who is a counsel or solicitor cannot appear before the Court. If it is now provided that such a man can appear in a case it will be an absolute farce, because any counsel or solicitor can join a union of employers or employes. Either the words “counsel or solicitor” should be taken out of the Senate’s amendment, or the words which the honorable member for Parramatta proposes should be added to it.
– I think that my amendment is necessary, in any case.
– The honorable member for !Angas ‘s desirous of .providing for the appearance of legal gentlemen. In the Bill, as it left the Committee, we excluded lawyers, the Senate’s amendment brings them in again, the proposal of the honorable member for Parramatta excludes them, and what the honorable member for Angas suggests would bring them in a second Time. I think it will be better to keep to the provision as we originally agreed to it, defining “paid agent” in such a way as will make it clear that the term does not include union presidents and secretaries.
– The more J look into the mattei, the more it seems difficult to achieve the objects we have in view. Section 27 says -
On the hearing or determination of any industrial dispute an organization may be represented by a member or officer of any organization, and any party not being an organization may be represented by an employe of that party.
Does the latter part ot that provision modify the earlier part of it? The first part would permit any member of an organization, be he trained lawyer or lay lawyer, to appear before -the Court. Apparently, we cannot keep the lawyers out, whatever we may do. I think that the suggestion of the honorable member for Cook is the best we can adopt. We should make the omission which he suggests, and define “ paid agent “ in the manner I have proposed.
.- I hope that the words “paid agent” will not be left without definition. I know that paid agents have appeared in the Arbitration Court, and have bungled cases, and certainly if barristers and solicitors are not allowed to appear, paid agents should not be allowed to do so. It is necessary to give union presidents and secretaries the right to appear, but I would not allow the right to any other paid agent. Does the Attorney-General think that the term “paid agents” would apply to them?
– I do not. A union secretary would be paid because of his position in regard to the union, not for acting as an agent.
.- It is held in the Industrial Court of New South Wales that a paid union secretary is a, “ paid agent.” If an employer infringes an award, the employe has to give to an agent authority to art for him in taking out a penalty summons, and, where that agent is the paid union secretary, he is regarded as a “ paid agent.” An agent is a person acting for another, and a paid union secretary appearing for some one must be a paid agent.
– ‘Would an agent be held to be a “ paid agent “ if he were not being paid for the work which he was doing as agent?
– Under the Bill the only persons who could appear before the Court would be honorary union officials.
– That is not the intention.
– That was the effect of the clause as it left the Committee ; it was amended by the Senate for that reason. The only fault is that the words “ counsel or solicitor “ appear in it.
– The Government inserted an amendment in the Senate, in order to meet the honorable member’s objections. When that amendment comes to the House from the Senate honorable members take exception to it.
– It was not introduced in the Senate to meet any objection of mine, as framed. I did not see it until it came here.
– It was introduced to meet the honorable member’s objection as much as that of any other honorable member. The objection was a very proper one, and I say that the clause as it stands does what the honorable member wants.
– If the amendment is intended to meet objections such as I am raising the word “ counsel or solicitor “ should be left out.
– Would a paid agent be a paid agent if he were not paid for the particular work with which this Bill deals?
– I submit that if one party appears in the Court on behalf of another party, he appears as the agent of that party. An agent is one who appears to transact business of another person or persons as representative.
– I take it that he must be a “paid agent” under this Bill, and not in respect of any other matter.
– He must be receiving a special fee.
– That is the honorable member’s opinion, but the Bill does not so provide. It says that in the conduct of an industrial dispute neither counsel nor solicitor nor paid agent shall appear except with the consent of both parties.
– A paid agent under this Bill.
– There is no definition of the words “ paid agent” in the Bill. If the question were argued before the Court the President would be guided by the wording of the section, and not by the Hansard report of the honorable member’s statement of his views as to our intention. However, the Attorney-General must accept the responsibility.
Motion agreed to.
Resolution reported ; report adopted.
Motion (by Mr. Hughes) agreed to-
That Mr. Anstey, Mr. Thomas Brown, and Mr. Hughes be appointed a Committee to draw up a reason for the House of Representatives disagreeing to (he amendment of the Senate.
Committee’s reason presented by Mr.
Hughes and adopted, as follows -
The proviso is calculated to defeat the pur- poses of the amendment made by section 7 of the Bill in section 27 of the principal Act.
House adjourned at 11:25 P-m*
Cite as: Australia, House of Representatives, Debates, 23 August 1910, viewed 22 October 2017, <http://historichansard.net/hofreps/1910/19100823_reps_4_56/>.