4th Parliament · 2nd Session
Mr. Speaker took the chair at 3 p.m., and read prayers.
– Has the attention of the Minister of Trade and Customs been drawn to two paragraphs appearing in the Age of 1 8th instant under the heading, “ Australian Pork. Inspection again at fault”? The first paragraph reads -
The experimental shipment ofTasmanian pigs brought to London by the steamer Essex was successful, with the exception that five carcases were condemned on account of the presence of tuberculosis. Although the carcases carried the Commonwealth export certificate, the glands had not been cut. The London medical officer dealing with meat shipments states that in future he will treat Australian pork as being without a certificate.
It is further stated that -
It is strange that every condemnation of Australian meat in London finds immediate publicity. The Customs Department has evidence that meat exporters from other countries are not subjected to similar betrayal of secrets. It is admitted, however, that at several of the largest ports in Australia the inspection is lax. The Comptroller-General, Mr. Lockyer, stated last night that the Department’s first proceeding would be to sheet home the offence to the inspector. The inspection was now being tightened up, and an expert was being sent’ to London. One lax inspector could do enormous-
– On several occasions lately I have taken exception to the reading of long paragraphs by members wishing to ask questions of Ministers, and I am sure that the honorable member could frame his question more shortly. I ask him to put his question without reading further.
– I know that in the past paragraphs have been read to a “large extent. I am a young member, and have no desire to trespass. Iwish to know whether the attention of the Minister has been drawn to the paragraphs to which I have referred, and whether he is aware that there is lax inspection in regard to meat export in Sydney as well- as Tasmania.
– My attention has been drawn to the paragraphs referred to. I made a reply to the representatives of the press on the day on which they appeared, and there was a general statement in the newspapers yesterday. I understand that inspection in every part of Australia is better to-day than it has been, but there may be room for improvement.
– Will the Minister of Trade and Customs, before the session closes, give the House an opportunity to discuss the report issued by the Commissioner in regard to the payment of bounties to Messrs. Hoskins at Lithgow ?
– The report has been printed, and no doubt honorable members will find on the Estimates convenient opportunities for discussing almost every phase of the matter.
– Is thePrime Minister in a position to state whether’ immediate financial assistance is to be given to Tasmania ?
– I have nothing further to communicate to the House in regard to the matter yet. This Government intends to treat the Government of Tasmania liberally, when an application for assistance has been made in a formal way.
– I wish to know from the
Minister of Trade and Customs whether he has received a copy of the Cairns Post of 10th November, and whether’ he has read the statement that the acting secretary of the Amalgamated Workers’ Association applied to’ His Honor Sir John Gordon: for permission to have the association’ represented before the Commission by counsel, and was refused it? It is stated in the paragraph that -
It seemed extraordinary, in the face of that refusal, to see legal gentlemen of high standing in the Commonwealth following the Commission round:
I ask if it is true that Barrister Mitchell, Solicitor Braund, two sugar experts, and two shorthand writers, are following or accompanying the Royal Commission on behalf of the Colonial Sugar Refining Company? If it be the case, will the Minister make inquiries as to whether the presence of such a large representation of the Colonial Sugar Refining Company is deterring any sugar-growers from giving evidence before the Commission?
– I have not seen the paragraph referred to, but I saw a similar statement in the Age. The Commission treated the application of the Amalgamated Workers as it treated a similar application from the Colonial Sugar Refining Company. With reference to the second question, the matter is one for the Commission and not for the Government.
Uniformity - Claim Cards - Victorian Redistribution
– In 1906 a Conference was held between electoral officials of the Commonwealth and the States, and an agreement was arrived at for securing electoral uniformity: Will the Minister of Home Affairs again approach the Premiers, to see if another Conference can be arranged to obtain further uniformity in electoral administration?
– I shall look into the matter. I believe that there is uniformity so far as Tasmania is concerned. Mr. HIGGS asked the Minister of Home Affairs, upon notice -
– The answers to the honorable member’s questions are as follow: -
In a considerable number of cases the police officers have called several times before obtaining the signed cards. 3 Yes. The advantage of a card index maintained under n system -of voluntary enrolment would be limited, owing to the fact that a very large percentage of the electors neglect to transfer their names to the rolls on which they should appear when they have changed their places of living:
Mr. W. ELLIOT JOHNSON (for Dr. Carty’ Salmon) asked the Minister of Home Affairs, upon notice -
If he will make inquiry as to whether Mr. C. A. Topp is prepared to remain in Australia until the re-distribution of Victorian electorates is adopted ; and, if so, will he take advantage of the ability, integrity, and experience of that officer by placing him in the position he believed he would occupy, viz., Chairman of the Commission under the Electoral Act?
– The fullest consideration was extended to Mr. Topp, who, prior to the personnel of the Commission being decided upon, intimated that his projected departure for Europe would preclude his accepting a seat on the Commission under the conditions indicated by the honorable member. It is not now proposed to re-open the matter, nor is there any reason for believing that Mr. Topp has altered his arrangements.
asked the Prime Minister, upon notice -
– The answers to the honorable member’s questions are -
asked the Prime Minister, upon notice -
– Action has already been taken in the direction mentioned.
asked the Minister of Home Affairs, upon notice -
– The answers to the honorable member’s questionsare -
This was meant to cover labourers detailed to act as watchmen in connexion with buildings in course of erection ; but to remove any doubt, the Public Service Commissioner was asked, when publishing his annual list of such class exemptions, to specifically name such watchmen, which he did in Gazette notice of 31st May, 1911.
MINISTERS laid upon the table the following papers : -
Audit Act - Treasury Regulation No. 47 Amended - Statutory Rules 1911, No. 180.
Lands Acquisition Act - Land acquired under, at West Maitland, New South Wales - For Commonwealth purposes.
Seat of Government - Ordinance No. 2 of 1911 - Rates.
– I move -
That on each sitting day, until otherwise ordered. Government business shall take precedence of general business.
I think I may urge on the Opposition, and honorable members generally, that we have reached a stage of the session at which we should decide to set apart for the consideration of Government business the time usually devoted to private members’ business.
– This means that we shall prorogue by Christmas?
– The aim is to close the session as early as possible, at any rate before Christmas. We propose to set apart a day on which private members’ business may be considered, or votes taken in regard to it.
.- A motion of this kind is inevitable, and my only comment arises from the undertaking given by the Prime Minister that some of the more contentious propositions that have been placed upon the business-paper by private members shall be dealt with in one day. All of these motions have only been partially discussed, and several would require far more than the whole of that period if they are to be dealt with intelligently.
– We can take the sense of the House in regard to any motion as may be desired, and if honorable members desire to further discuss it, it will have to be passed on.
– That is fair. If we have arrived at a stage at which a division can be fairly taken on any motion, I am sure both sides will co-operateto. do so. But there are one or two important motions, as, for instance, that relating to the report of the Royal Commission on Postal Services, on which, although only a small number of members have spoken, nearly every honorable member feels strongly. To expect the debate on that motion to be closed, or a vote to be ta’ken, is quite impossible. On the understanding that the only questions to be decided by vote on the day to be set apart for the consideration of private members’ business shall be those which have been fairly discussed on both sides, we can all agree to this proposition.
.- Whilst I sympathize with the desire of the Government to push on with the business on their programme, I desire to call attention to the fact that very little time is set apart for the consideration of private members’ business, and that great inconvenience is experiencedin obtaining what is called a clear day to deal with any specific proposition. It will be remembered that the honorable member for Brisbane recently succeeded in a very thin House in carrying a resolution, which, in my opinion - and I believe that opinion is shared by others- is a grave reflection upon this Parliament.
– Order !
– I desired at the earliest opportunity to give honorable members a chance of reviewing that decision, and I therefore placed upon the businesspaper a notice of motion that the resolution be rescinded, or, failing its rescission, that certain steps should be taken in regard to other conveniences in this building. That motion is set down for discussion on the 30th instant, but if the motion now before the Chair be carried we shall not have an opportunity to deal with it this session. The result will be that in this particular regard we shall be unlike any other Parliament in the Empire. I do not desire that the present situation shall continue. 1 believe that the feeling of honorable members on both sides is that they should have an opportunity to declare their will upon that question.
– The honorable member must not discuss that matter.
– I wish only , to point out the gravity of the position, and I ask the Prime Minister to undertake to give the House an opportunity to deal with the matter at the earliest possible date. Unless that undertaking is forthcoming other steps will have to be taken which may encroach upon the time which the Government desire the House to devote to Government business. Some honorable members may not think this a very grave matter, but I take a different view.
Honorable members on both sides hold strong opinions in regard to it, and I ask the Prime Minister to give a specific opportunity for the consideration of my motion so that every honorable member may be in his place, and an expression of the true will of the House secured.
– Whichever side of the House I have sat on, I have always protested against the surrender of the very short time now at the disposal of private members. My plea that the rights of private members should be preserved should appeal to every member of the House.
– Did the honorable member not consistently vote for the gag in the last session of the last Parliament?
– Some of my friends told me that I did not consistently vote for the application pf the gag. There are from time to time brought before this House by private members motions which may be of much greater importance to Australia generally than is some of the Government business. There is on the notice-paper now a motion for the adoption of the report of a Royal Commission appointed by the Government themselves, and the House should have an opportunity of dealing with it. There may be a serious difference of opinion as to whether the attitude which the Prime Minister has taken up on that subject is correct, seeing that he is passing over the head of his own Commission entirely, and placing that matter in the hands of a State Government. It we carry this motion no opportunity will be given to the House this session of dealing wilh any matter which is not brought forward by the Government. Last session the honorable member for Capricornia had on the notice-paper a very important motion for the appointment of a Royal Commission to inquire into the Sugar Industry, and the Prime Minister, before leaving for South Africa, promised the honorable member that the House should have an opportunity of dealing with all private members’ motions then on the paper. In the afternoon of the very last day of the session those motions were called on, and member after member simply had to rise and ask that they be postponed. That was a breach of faith. We ought to have a distinct understanding that there will be no repetition of that fiasco this session. If the Prime Minister will sa Y now that an opportunity will be given to the House before the close of the session to deal with all the private members’ business on the paper. I should not object to the motion. Unless that promise is given, I shall have to vote against the supreme surrender by members to the Government of the whole of the time of the House. I have never been able to understand why, if Ministers find the time getting short, they do not ask Parliament to sit for the whole of the week. Why not sit on Mondays, and on Friday evenings? A number of members from other States have to iemain in Victoria for the week-ends throughout the session, and it is not asking too much of the members from New South Wales and South Australia to ask them to give up, towards the end of the session, the privilege of going home at every week-end. The motion practically means that ali private motions on the paper will be absolutely expunged. I hope the House, before allowing the motion to be carried, will obtain a distinct promise that every notice of motion on the paper will have an opportunity of being decided after reasonable debate.
.- In Federal politics a motion of this kind does not come so prominently before us as it does in State politics. I endeavoured once in the State Parliament to avoid the necessity of Ministers having to take action of this kind. My plan was to appoint one night in the session, to be known as division night, upon which any member could have a division taken on any question without debate. By that means as many as twenty divisions could be taken on important questions, and honorable members could then see if it was worth while for them to take up time by having any particular question debated.
– That could be done only by consent.
– I quite understand that. I have never yet heard a logical reason urged against the proposition. I understand that the passing of this motion will give the Government the only chance they will have of bringing in this session a Bill to rectify anomalies in the Tariff. Therefore, in the hope that that .Bill will be introduced this session I propose to vote for the motion. Knowing, however, that the Labour party, as a party, have always been willing to meet every month in the year if needed, I cannot see why, should we be unable to finish our business before Christmas, we should not have a special session, if only to rectify Tariff anomalies.
– As is usual when a motion of this kind is proposed, we all become perfect gluttons for work. I dissent from that proposition altogether. If the honorable member for Melbourne and the honorable member for Franklin believe in overwork, I do not. The best thing that could happen would be for us to ease off a little the work that is being done now, and give the country a rest.
– They say we have done nothing.
– The Government are doing nothing useful. That is why I suggest that the party opposite should cease from doing the foolish things in which they are engaged at present. I altogether dissent from the proposal of the honorable member for Franklin that the House should sit on Friday evenings and Saturdays, and I do not know on how many other days, to complete the work of the session. Parliament sits now one day a week more than any State Parliament, and four days a week is as much as any Parliament ought to sit, having regard to the responsibilities of the Administration. We had a taste last session of working twelve hours a day in the House; and the result was that we did not get any further forward with legislation, while the administration pf the Departments was very sadly neglected. The Government rightly said that they were, not able to keep pace with the growing administrative requirements, owing to their being tied to the House practically from getting up in the morning until all hours of the night; and I hope to see no repetition of that during the present or any other session. Of course, the sessions might be made a little longer; and that would be infinitely preferable - if we must have more legislation - to indulging in such legislative orgies as we have done on occasions during the continuance of this Parliament. The business in the name’s of private members is, I venture to say, of much more importance to the country - and that is the peculiarity of the position - than a great deal of the legislation in the name of the Government. There are several motions in the names of private members of outstanding importance; and on these we ought to have the mind of the Government indicated very clearly. Nothing could be more farcical than to postpone a number of motions of the kind till the last day of the session, and then vote without giving them the slightest consideration. For in stance, there is the motion in the name of the honorable member for Melbourne Ports in regard to the pay and pensions of the Defence Forces.
– That motion would necessitate more taxation.
– Then all the more need for a little consideration ; and I do not think that such, a motion ought to be summarily disposed of on the last day of the session, as though it were a matter of no consequence. Then what is to become of the motion of the honorable member for New England in favour of the nationalization of the means of distribution? Has that motion to be put to the vote on the last day of the session, or has it already served its purpose?
– Do not forget the Federal Capital Referendum..
– I mean, of course, the Referendum., That is a matter which, with the honorable member for Herbert, I think might be postponed for the next twenty-five years. There is, however, the question of the Customs leakage in Tasmania, and one or two other proposals for which the Prime Minister might very well provide opportunities for discussion. . Something ought to be done in regard to the Post and Telegraph Department this session - something must be done, though I do not pretend to say now in what direction. There is no more important question than that of smoothing away the difficulties besetting this much plagued Department, and placing it on a sound foundation. If all these motions are to be placed at the bottom of the list, does it mean that they must go over until next session? If so, let us understand what is being jettisoned by the motion before us. I hope, however, that the Prime Minister will contrive to find a day or two later on for the discussion of one or two of these important matters, so that they may be cleared out of the way. I shall not oppose the motion, which, I think, is a very proper one when the session is nearing its close. I think we might put on a little pressure in order to close the session as reasonably early as possible, but I hope there will be no attempt to dragoon the House, as previously, into working twelve or fourteen hours a day. That leads only to prolonged talk, and does not in any way lead to celerity in legislation; at any rate, that is my experience extending over a great number of years.
– I do not intend to oppose the motion, though I think the Prime Minister ought to arrange’, or attempt to arrange, business, so that we may have an opportunity to say something on the report of the Royal Commission regarding the Customs leakage and the finances of Tasmania. This Royal Commission was appointed by the present Government, and has presented a unanimous report; but the Prime Minister now tells us that before he does anything he desires to hear the Premier of Tasmania. When listening to the Prime Minister, it seemed to me that he thought the Tasmanian Premier-
– The honorable member must not discuss that question.
– If the Prime Minister thinks the matter over, he will agree with me that this House could discuss and deal with the matter without asking the chief representative of a State to send in a petition.
-Order! The honorable member must not discuss that question.
– I merely desire to say that the Prime Minister ought to try to provide a day when this question may be discussed, and to show the right honorable gentleman that he is going too far in asking the Prime Minister of Tasmania, in consideration of what has been done-
– Order !
– I am very chary indeed about giving up to the Government the time allotted to private members’ business. We ought to be very jealous of any invasion of our privileges ; and when such a request is made, it should be acceded to only when some particular urgency exists. I recognise, with other honorable members, that a number of the motions on the paper are of great importance. The honorable member for Riverina spoke, of one matter in particular which he was very anxious to see re-submitted to the House, with a view of obtaining a decision. He complained that the motion to which he referred was passed in a thin House. I was wondering whether he hoped that on the next occasion the motion would be dealt with by a full House ; because it would be a mast unfortunate thing for temperance men, in my opinion, if the matter were dealt with in a “full” House! I consider that honor- able members are right in insisting on the Prime Minister giving us some assurance of a more definite character, that time will be allowed for private members to bring forward their business. It will be within the recollection of honorable members that on a very recent occasion a similar request was made in regard to private members foregoing their business on a certain day, and they were promised that another opportunity would be given to them. But unfortunately, after the Government had taken up private members’ time, the whole of the time that should have been given to private members by way of compensation was occupied by Ministerial supporters. We do not want to be led into a trap of that kind again. I do not say that a trap was intentionally laid, but the opportunity was taken by Ministerial supporters to the disadvantage of the Opposition and of other private members. On another occasion, last session, when a promise was given that a day would be set apart for the consideration of private business, the day selected was the last on which the House sat. Naturally, every honorable member was anxious to get away, and there was no time for dealing properly with private busi-ness. We do not want that kind of thing to happen again. Members of the Oppo7sition, in common with other honorable members, recognise that it is necessary, at this late period of the session, that some sacrifice should be made in order to facilitate the passage of Ministerial measures. 1 would suggest that, as the paper is very much overloaded, the most sensible thing to do would be to jettison some of the Ministerial cargo. If we are to get through anything like the amount of business set down, there will be nothing left for next session. Therefore, the most business-like course would be to deal with one or two important measures that have a chance of being properly considered, and to allow the remainder to stand over. If that were done it would not be necessary either to increase the hours of sitting or to add to the sitting days or to interfere with private business. I trust that the Prime Minister will state specifically that he will give private members another day than the last of the session for the consideration of their business.
– I intend to oppose the proposal of the Government to take the time at present allotted to private business. While I am most anxious to assist the Government, and will do all I can to aid them in carrying through their proposals, nevertheless it seems to me that private members ought not to have their few privileges taken from them. The proposal simply means robbing them of the few hours that are allotted to them, whilst the time taken will be of very little use to the Government for practical purposes. In all probability we shall sit only five weeks longer. At the outside, four hours per week are allotted to private business. Consequently, the Government are proposing to take twenty hours. They can easily ask the House to sit in the morning on some days if necessary to help them to make up that time, and get through their business, t protest, however, against private business being set on one side altogether. Ministers ought not to propose to take from private members the few privileges which they possess in regard to submitting questions for discussion. Besides, there are certain matters contained in motions on the businesspaper that cannot be decided merely by taking a vote. It is neither fair to an honorable member who has charge of a motion, nor to other honorable members, to decide such questions without debate. I am prepared to say that the majority of honorable members are not prepared to vote concerning some of these subjects without explaining their position. We ought to be honest with ourselves, and say frankly that there are some questions in regard to which we are not prepared to be placed on record as voting on either side. A few motions will inevitably, under any circumstances, be talked out. I have no hesitation in saying that the motion of the honorable member for Riverina-
– Order ! The honorable member must not discuss that question.
– The honorable member can support that outside, but he must not support it here.
– There are certain motions- which I am prepared to stone-wall to the last ditch.
– There are other motions upon which I am prepared to vote straight away. But, in my opinion, nothing is to be gained by asking honorable members to give up the few hours that will be at their disposal during the remainder of the session. I shall vote against the motion if it goes to a division, but I shall support the Government if they ask the House to sit » few hours extra on any given day or days.
– I protest against this proposal to wipe out the privileges of private members with respect to their business. There are sixteen or seventeen motions upon the business-paper. Some of them are of the highest importance and interest. Not many opportunities have been afforded of discussing such questions this session. Private members’ day affords the only opportunity on which seventenths of the members of this House can bring forward any matter of public interest for discussion. Now the Government propose to restrict that opportunity. I fear that if we permit this kind of thing to- be done, the privileges of private members will be taken away from them altogether. Such opportunities become fewer and fewer every session. There seems to be no valid reason why a day should not be set apart for giving honorable members a reasonable opportunity for discussing resolutions, and taking votes upon them.
– There would have to be a time limit to enable that to be done.
– I have no objection to a time limit on debate for such a purpose. The Government have the sole right of putting business on the paper during the greater part of the time. They should be satisfied with that. I strongly protest against this proposal.
– In reply to the discussion I wish to say that I do not restrict the promise of the Government to giving the last day of the session to private members’ business, but will arrange some convenient date towards the close of the session.
– > The Government should get their own business through first. We are not going to keep a House for men who say they intend to “stone-wall.”
– We might find it convenient while Government business is under consideration in the Senate to take up private business here. Another point to which I think I should refer is that, as honorable members are aware, the House cannot be forced to take a division upon any motion submitted. At the same time, wherever practicable, the Government will welcome a decision upon any question.
Question resolved in the affirmative.
In Committee (Consideration of Senate’s amendments) :
Clause 12 -
Section twenty-four of the Principal Act is amended hy omitting from sub-section (2.) the words “ within a reasonable time, and the President so certifies.”
Senate’s Amendment. - Leave out all the words after “ amended,” and insert - “ (a) by inserting in sub-section (1.), after the words ‘ agreement between the parties ‘, the words ‘ as to the whole or any part of the dispute ‘, and “ (4) by omitting the whole of sub-section (2.), and inserting in its stead the following sub-section : - “ (2.) If no agreement between the parties as to the whole of the dispute is arrived at, the Court shall, by an award, determine the dispute, or (if an agreement has been arrived at as to a part of the dispute) so much of the dispute as is not settled by the agreement.”
– I move -
That the Senate’s amendment be agreed to.
The effect of the amendments is merely to extend to a part of a dispute the subject of, but not wholly covered by an agreement between the parties, the power which this House gave to the President of the Court in clause 12, in regard to the whole of the dispute. It has been found on various occasions that an agreement has been ‘made between parties with regard to a part of a dispute, but not with regard to the whole as the law stands. This amendment is. intended to give the President of the Court power in regard to that part which is not covered by the agreement. It is a necessary corollary of the amendment of the law already made in this House. It involves no new principle, and breaks no new ground.
.- The Senate proposes that the clause should read -
If an agreement between the parties as to the whole or any part of a dispute is arrived at-
Was it not just such an agreement that was arrived at between the wharf labourers and ship-owners in a very recent dispute? Is there any provision that will render the repetition of such a lawless breach as that, if not im possible, much more difficult than it is at present? If I remember aright, the AttorneyGeneral stated that the only remedy as against those who broke that agreement would be a personal action against each one of the strikers.
– That is so.
– I think the honorable gentleman will agree, after our experience, that this is an utterly insufficient guarantee. It is perfectly certain that the ship-owners, having given their guarantee, were subject to a control which could have reduced them at once to obedience had there been any attempt on their part to rebel or break away from the agreement. It is only fair that the same treatment should be allotted to both sides. The guarantees of the law should be impartially adjusted, so that there shall be an equal obligation on each party. I am perfectly aware that it is idle to ask the honorable gentleman to deal with this difficulty at this stage. It is a matter that requires consideration, and I do not desire to interpose it here; but I do think that this session ought not to close without some attempt being made to remedy the obvious defect of the law which has been disclosed by our recent experience in Sydney. Such a defiance of good faith should be provided against in future. I do not wish to revive any memories, or to take any political advantage, but to suggest that, as a matter of simple justice, we must do what is necessary to give effect in an equitable manner to the principles of our arbitration law. It is clearly futile to pass legislation unless the sanctions on the one side are equal in effect to those on the other. It is not a question of form. It would be easy to adopt, in regard to the settlement of such a dispute, a form which would weigh heavily upon the employes, and let the employers go practically free. That would be absolutely unjust. We have just discovered in our industrial machinery a defect of that type of a very serious character, and it ought to be repaired. What I ask the Attorney-General to do is to say that, before this session closes, the House will have an opportunity of seeing that the balance is adjusted with absolute equity between the parties to agreements of this kind. I not only admit, but assert, that of all the methods of settlement which we have provided, those which embody an agreement are the very best. They should be encouraged and fostered in every way. It would be an immense advance if, either with or without an appeal to a Court, agreements were entered into wherever possible. So that I am not directly or indirectly taking any exception to the principle of agreement. On the contrary, it is one of the very best principles in the Act. It is real conciliation and arbitration, and ought to be supported. Having made any misapprehension on that account impossible, I again ask the Attorney-General to take such steps before the session closes as will put those who sign an agreement, whether on one side or the other, under obligations which shall be not necessarily the same, but equally effective for the maintenance of order, thus preventing a lawless strike conducted by either side at the expense of the other.
– In reply to my honorable friend, I desire to say that the enforcement of an industrial agreement is provided for in section 78 of the principal Act. Under that section any breach or non-observance of the agreement is liable to a penalty not exceeding such amount as is fixed by the industrial agreement; and if no amount is fixed, to a penalty not exceeding, in the case of an organization, £500; in the case of an employer, ,£250.; and in the case of an employe, £10. I doubt utterly the scope of these industrial agreements. We do not know to what extent they are constitutional. Although the Act says that they are to be treated as awards, clearly they are not awards. They are attempts at the settlement of industrial disputes by conciliation and arbitration.
– The disputes referred to in section 78 are not those which are affected by the amendment under consideration.
– That may be. In the case ‘referred to by the Leader of the Opposition, in regard to the later ebullitions, the men declined, not only to obey the executive of the federation, but of their own union. In such a case, what could be done but proceed against individuals? Unless the whole dispute was covered by the agreement, there was no advantage to be gained by the agreement as to the part, and the Court had to inquire into the whole matter. It was very unfortunate, for, as I have said before, in my opinion, when an organization enters into an industrial agreement, it ought to do so with its eyes open. There is no obligation upon any union to enter into such an agreement. Unions do not- now occupy the position which they used to.’ occupy when they had to approach employers as suppliants, with cap in handToday, they are powerful organizations, and when they enter into an industrial agreement, they ought either to abide by it during its currency, or to move the Conciliation and Arbitration Court for its rescission. However, the amendment of the Senate does not touch that question, although its adoption will strengthen the hands of thePresident of the Court very materially.
.- I do not think that the proposed amendment touches industrial agreements at all. It merely seeks to make the effect of the clause, in respect of portion of an industrial dispute, the same as its effect in respect of the whole of a dispute.
.- My simple point is that, as it stands, the law is ineffective. The Attorney-General has indicated that when we are dealing with individual members of a union, the position becomes an extremely difficult one. But surely it is not beyond the scope of his ingenuity to devise a way in which those members can be dealt with in an effective fashion. For instance, it might be legitimately held that the members of a union who refuse to abide by an agreement intowhich the organization has entered shall cease to be members of such union, and shall thereby be taught one salutary lesson.
– With all deference to the honorable member, I think that that is a quesiton for the organization itself to decide.
– If there may be either a majority or minority of any union in open defiance of the’ union itself, or of an agreement into which it has entered, surely it is incumbent upon us to provide a remedy. The balance must be re-adjusted so that a sufficient restraint may be imposed upon the employes as well as upon the employers. There is no difference between the position of the two parties, either from the moral or legal aspect of the case. But we must face the difficulty of dealing with a number of men who are not really unionists, but merely use the unions for their own purposes, reckless of their agreements. Will the Attorney-General give the matter his consideration, and inform us at a later stage whether he can see his way to adjust the scales of justice evenly in this relation ?
Motion agreed to.
Resolution reported and adopted.
Debate resumed from 15th November (vide page 2662), on motion by Mr. Fisher -
That this Bill be now read a second time.
.- This is rather a dry Bill, but its importance justifies one in coming to close touch with some of the questions which are raised by it. I may say at once that I am not going to approach it from the point of view of economic theories, such as the legitimate limits of State interference, because most, if not all, of those theories are based upon data which are imperfect in their scope, or, perhaps, in our apprehension of them. In legislation, dealing as we do with the somewhat complex affairs of social life, we are necessarily more or less faulty in our methods, and in our means of accomplishing our desires. In public affairs, we are all, more or less, pragmatists, affected by the limitations imposed by birth or circumstances. The questions which we have to ask ourselves in regard to this Bill are, “ Is the bank which it proposes to create necessary, is it expedient, and- is it likely to be successful ? “ I do not think either that a very large knowledge, profound judgment, or exceptional ability is required on the part of a banker. But, just as is the case in other lines of activity, one must display some sort of expert knowledge, and possess some degree of special training, if he is to- approach with any prospect of .success the rather onerous duties which will certainly be cast upon him. For that reason I think that we ought to make our study of this question somewhat exhaustive. A well-meaning Minister, versed in the at- tractive plausibilities which recommend so many proposals to the House, and impelled by ambition or philanthropy to attain the end before he has had an opportunity of fully grasping the significance of the means, may not hesitate to act where experience has taught experts to proceed with more circumspection. This seems to be a case of one of those springs of knowledge of which -
Shallow draughts intoxicate the brain ; And drinking deeply sobers us again.
It is to be regretted that the Ministry have not displayed knowledge of what has been done in America in connexion with banking during the past five or six years. No doubt the Prime Minister is an exceedingly busy man, as his duties are onerous ; but it must be recollected that, this is a measure of such far-reaching scope and of such an exceptional character that it has no type in any part of the world. It might, therefore, have been just as well for him to have looked up the records of what has been done by the United States Government in connexion with banking during the period I have indicated. Even at this late hour of the session, perhaps, on the whole, the public interests would be best served if the right honorable gentleman, having introduced the measure in a temperate, but scarcely in an exhaustive speech, saw his way clear to defer its further consideration till the next session of Parliament.
– I am not able to do that.
– I do not think there is any urgent necessity for the Bill, even if there be any necessity for it at all. I have taken the trouble to look up a good deal of what has been said by the Banking Commission in America. That body has issued many voluminous reports, so that it is almost impossible for one to read the whole pf them. But I have perused some of its reports on the causes of the failure of the American system of banking, and read the comments made by expert writers upon the series of reports as they were published. Tn one of the articles in question it is shown that though there have been great banking failures in Europe, such as the failure of Overend and Gurney, in 1866, that of the Bank of Glasgow in 1878, that of Baring Brothers in 1890, that of the Union Generate in 1882, and others down to 1 901, there has not been an infectious panic or any general rout in which the innocent and guilty alike were crushed to death. There have been such panics and routs in America ; . years of exceptional collapses. The last was in 1893, when no fewer than 160 of the national banks failed. There was a currency crisis in 1907 ; it was not a year of collapse, because there were only twenty-one banks which suspended operations. That was no greater than the number of suspensions in years which were not marked by panics. But owing to the currency panic - it was chiefly a currency panic which affected hanking in 1907 - the United States Government decided to inquire into the causes of their legislative failure to regulate banking, and a Commission was appointed, which commenced its inquiry early in 1908, to investigate the banking conditions of other leading countries, and to report within six years. Several countries have been visited. I do not wish to mention in detail what has been done up to the present time. Referring to some of these reports, one writer says -
The publications of the National Monetary Commission furnish an unparalleled opportunity for a comparative study of conditions and experience here and abroad. . . . The public and Congress are equipped to-day as they have never been before in the case of any other great problem, with most of the expert knowledge which the world has to offer.
That is why I said it is to be regretted that we are not afforded, either by time or by anything else, an opportunity of bringing to bear on this far-reaching and anomalous proposal the light and the guidance which we may obtain for nothing by study of the reports of the American Commission. In America, to put it shortly, the banking system, as far as is known at present, has failed through the excessive legislation by Congress, and the lack of co-operation and co-ordination and leadership amongst the banks themselves. As I said, I cannot go much into the details of these questions, but in America there is, or until recently was, an independence as regards reserves between the various banks, an absence of co-operation, an impossibility of the reserves of one bank at a time of crisis being used to aid another’ bank, which has largely contributed to the suspensions and failures of that country, and the absence of which, in the case of Canada, has led to exceptional success. For though 1907 was a year of many collapses in business, particularly through mistaken currency bases or methods, as a matter of fact there was in America a greater sum total of gold than in the Bank of France, which, like the Bank of Russia, has a very large reserve. The available reserve in America in the banks was quite sufficient to meet all demands, but the banks were independent; there was a lack of co-ordination and cooperation, which, as I have said, was one of the elements that led to the failure of the banking system there.
– We want a National Bank - a steadying influence.
– I do not want to deal with phrases. In 1889 I was a member of a Banking Commission, and, not being altogether in line with some of the opinions offered, I made an independent study of the question, and wrote one or two short pamphlets, in which I pointed out that the vagueness with which phrases were used was very often the cause of the mistaken advocacy of some of the new methods of bringing about a reapportionment of wealth.
– Did not somebody say that the world is governed by phrases?
– No doubt it is. _ Men are prepared to accept phrases at their apparent, and not at their real, value, particularly in politics. The honorable member for Hindmarsh, who was a keen student at the time, and can speak from experience, will remember the conditions to which I referred in 1889.
– I recollect them well., Mr. GLYNN. - I remember pointing out then that -
The issue was not very clean cut by the terms of the Commission, and few witnesses were ad idem as to what the term State Bank means. Some understood by a State Bank an institution of which the proprietary would be the State, and carrying on the whole business of banking. Some took the term to mean a sort of Government mortgage agency business. There were those who considered that the functions of a State Bank should be limited to the issuing of notes; others who thought that a note issue was not essential ; and many who meant by a State Bank an institution, like the Bank of England, having a monopoly, under conditions, of the note issue, and doing all the Government business. The German Reichsbank, the Bank of France, the Bank of Java, the Riksbank of Sweden, the Savings Banks, and other institutions, were referred to as types of what a State Bank should be, while upon the points of management differences of opinion were almost as numerous as the witnesses. Even in regard to the basis and character of State note issue there was no general consensus.
So that it is necessary for one to be a little explicit when one is dealing with this rather important question of the institution of a State Bank. Such appears to have been the experience of America, which led to this inquiry in connexion with its 25,000 national banks. Referring to the matter in 1908, one writer, Theodore Gillman, said that the trouble in America was that they “ made banking a football for politics, instead of a practical banking proposition.” As the Bill before the House touches the question of issue, I shall say. a few words on the subject, though I do not wish to trespass upon ground which was so well covered from both sides of the Chamber last year in connexion with a note issue. What has been shown is that American troubles have arisen through ignoring what seemed fo be, as experience has shown, axiomatic truths. The great lines were laid down, in 1790, by Hamilton, who was a statesman, in his report on the bank. Had Hamilton been followed, and not deferred *to in words, but ignored in fact, as an authority by persons who, perhaps, never read his works, many of the crises in America would never have arisen, because his principle was that currency is really a matter subject to the law of supply and demand -
The prime essential in any sound currency system is that the volume of the currency be subject only to the influence of the natural operation of the law of supply and demand.
In other words, the volume of your note currency, like that of cheques and bills of exchange, which are generally referred to as deposits in the terms of banking, is determined by the commercial needs of a given moment, and the relation of the forms of a mixed currency to one another is determined by similar factors. We are told by writers, such as, I think, Herbert Spencer, that the balance of a mixed currency is necessarily self-adjusting. The trouble of the United States, as I have said, has arisen from the want of a proper appreciation of the significance of this fact. It may help honorable members if I refer to one or two authorities who have dealt with this matter recently. In one of a series of articles in the Annals of the American Academy of Political and Social Science, Mr. Melon E. Siles, a banker, who was formerly Assistant Secretary to the Treasury, says -
In the main the national system has worked well. It has unquestionably furnished a perfectly secured and a uniform bank note circulation, but it has failed in one important respect. Circulation has never been responsive to the business requirements of the country. It has almost invariably expanded when it should have diminished, and contracted when it should have expanded. Related as note issues are to Government bonds, circulation has followed the price of these securities in the market and not the volume of business.
Lack of elasticity is the vital effect of our bank currency. Chambers of Commerce, bankers’ associations, Congressional committees, controllers of the currency, and secretaries of the Treasury have for years sought the solution of this problem. The remedy is yet to be found. Perhaps the Monetary Commission will find it.
An expert writing in March, 1908, after the crisis, said -
What is wanted is not an increased issue of permanent inelastic currency, but the authority for banks to put into circulation, in response to the demands of trade, a bank note that will return to the bank of issue, and be cancelled as soon as the need is satisfied.
In other words, we ought to ‘fall back on the principle so freely stated by Hamilton, who showed that issue, whether a deposit or a note issue, was a function of banking. Although I have read authorities to the contrary, my conviction is that it is a great mistake to separate the note issue from the bank, as the Bill proposes. The nearest approach to anything that may be called a State currency is, I suppose, the currency of India established in 1861. There were only three banks issuing notes, banks doing business in three of the presidential towns, and, owing to the prejudice of the natives against bank paper, circulation was confined chiefly to those towns. Consequently there was great difficulty in transferring indebtedness from one place to another, and in making payments, because silver had to be dealt in largely. For one reason and another, the Government had to step in, the country being only partly developed commercially, and issue a currency with a circulation in defined circles. In that case you had a currency to some extent divorced from banking. Again, the Bank of Amsterdam and the Bank of Hamburg were institutions started as banks of issue. There was at the time a great deal of clipping and attrition of coin, and provision was made for the deposit of gold, for which, when it had been weighed, a certificate was given. These certificates became bankers’ money and bills of exchange were drawn very largely on banks of the class referred to, whose certificates were known to indicate a certain value, being based on the metallic contents of the deposits which they represented, which had a fair constancy for exchange purposes. It is only in countries qf imperfectly developed commercial) organization, or before banking had developed to its modern significance and complexity, that you find a Government issue independent of a bank, or an issue that is divorced from true commercial banking. If you make issue a function of banking, no special reserve is necessary. All that is needed then is a certain amount of fluid assets, of which the chief is gold or bullion, against liabilities on demand. Coming over in the train this morning, I was looking through some of the lessons of the financial crisis, in connexion with which the great name of Hamilton is referred to with very great respect. Perhaps I might read to honorable members what he said in his report on banking in general. Dealing with what issue really means, he showed that there is no difference between a note issue and deposits, bills of exchange, and cheques, which constitute 97 or 98 per cent, of the currency of London, and, I believe, a still larger percentage of that of Australia, where banking is very highly developed, and very sound. Hamilton said, in 1790 -
Every loan which a bank makes is in its first shape a credit given to the borrower in its books, the amount of which it stands ready to pay either in its own notes or in gold or silver at its option. ‘But in a. great number of cases no actual payment is made in either. The borrower frequently by use of a cheque or order transfers his credit to some other person to whom he has a payment to make. This man in his turn is as often content with a similar credit, because he is satisfied that he can whenever he pleases either convert it into cash or pass it to some other hands as an equivalent for it. In this manner the credit keeps circulating, performing in every state the office of money until it is extinguished by a discount with some other person who has a payment to make to the bank to an equal or greater amount.
For a State issue you must keep an artificial reserve, there being no other fluid assets to fall back on. Issue should be a matter of demand and supply from day to day over the counters of the bank, not a matter of ultimate solvency. The solvency of Australia can never be questioned. This is a country of marvellous powers of recuperation after any exceptional stroke of disaster. It is merely a question of meeting on demand the obligations imposed by the issue pf notes. For that you must, if you divorce issue from banking, hold an exceptionally large reserve. You must, in effect, have, as they have in Canada, gold certificates. We started by copying Canada. I throw out a word of caution to the Treasurer, if he intends, as it is said that he does, to ask Parliament to lower the proportion of our metallic reserves.
-Not to lower it, birt to withdraw thelimit.
– That comes to the same thing.
– The most experienced authority iri Australia says that it is the right thing to’ do.
– I donot pay much attention to the Views ofauthorities whose names I do not know, because they may be impelled by. a lively sense of favours to come.
– Absolutely, no.
– I do not, of course, refer to any honorable member.
– The remark does not apply to any one outside the House.
– Very often authorities have their opinions partly coloured by the intention to become candidates for certain positions.
– The authority I speak of has not.
– Does the honorable member wish to keep a sovereign in reserve against every note issued to an amount exceeding £7,000,000?
– No; but there must be an adequate reserve. What it should be is largely a matter of opinion. When you separate issue from banking, you go back to historical times, or to conditions of imperfect industrial development, such as those prevailing in India last century, and must then keep an artificial reserve which, under ordinary banking conditions, would not be necessary. According to the Budget papers the note issue in circulation on 30th June last was £8,031,217, and the gold coin held was . £3,352,281 ; so that, as a matter of fact, there is now no opening for reducing, within the limits of safety, if the Government desire to do so, any of the proportion of the reserve to the issue. I speak subject to correction when I say that the position does not seem to be one whit better, from the point of view of Australia, than it was before we issued our own notes.
– It is better.
– What is the amount that the Treasurer has got for nothing? About £4,600,000. We have also to allow for expenses in respect of distribution.
– That was the position up to an issue of £7,000,000.
– I am dealing solely with the figures that I have. If we take the volume of issue of the banks, before we placed upon their note issue a tax of 10 per cent., and the volume of circulation in Queensland, which was about £750,000, we find that there is no substantial difference, as a matter of profit and loss, between our present position and the position before our note issue was introduced. A few pounds either one way or the other amounts to nothing.
– We are earning double.
– But previously the power toimpose taxation was not exhausted.
– We are earning double with the same money.
– I do not think the Government are the Budget figures show the contrary to be the case. There was before a, revenue of over £100,000 in respect of the note tax.
– No; I think it was under
– I remember giving an estimate some time ago, and I think that the actual amount was ,£95,000 or £96,000.
– I think it was under that ; but I will accept the honorable member’s figures.
– We have to remember that at that time there was a tax of only 2 per cent, on the note issues. The Government might have added 50 per cent, to that, and have obtained exactly the result they have now, unless they mistake their position, and attempt to make currency a loan. The moment you begin to tamper with your reserves, you take a step in that direction. You need to keep your currency as currency; and you will find a great difficulty in making your artificial methods of doing this meet the requirements of banking from day to day. I hope the Government will succeed ; but do not let them think that currency is a means of obtaining loans from the people beyond the extent to which the banks got loans from their customers. I need not point out to honorable members that, under the change that has been brought about, the profits in this regard have been transferred from one organ of government of the people to another, from the State Governments to the Commonwealth Government. That fact is not always dealt with by people who appear on the platform and state that a lot of money has been made out of this Government issue. There has simply been a transfer from one organ of government to another, and the people in the long run must get the same result. The American imperfections are due to lack of co-ordination, and to want of elasticity - to want of capacity to extend and contract in proportion to the needs of commerce. The position is altogether different in Canada. There the Government issue is really a system of gold certificates. The bank issues are not affected; they have no reserves beyond a redemption fund of 5 per cent, upon the average circulation, which I think has never been called upon. Since Canada re-cast its banking system, in 1890, there have been no failures there of any importance. There are twenty-nine chartered banks, with 2,200 branches. As a matter of fact, there is, in Canada, a system of branches - not of banks with branches, but of banks of branches. That is an important fact in relation to the idea of a central bank, and the proposal to appoint one man practically to decide the operation of finance under the Commonwealth Bank
Bill. The central banks in Canada are advisory bodies ; in some cases they do not take deposits, and do not make loans. They are called the parent banks, and they simply advise and control. Such a scrutiny is necessary to the complex business of banking.
– Is there not such a thing as a bank of banks ?
– Yes; but without examining the details in each case, one may be deceived by the phrase. The Bank of England, the Bank of France, and the Bank of Russia are each known as a bank of banks, but they are different in their organization, and all of them are shareholders’ banks. The bank which Hamilton recommended in 1790 was a shareholders’ bank, and when it started operations, the Government, I think, advanced about two-thirds of the capital”.
– Does not the honorable member think that Hamilton had in mind the Bank of England ?
– I do not think so. The Bank of England had been formed a century before, although not as we know it now. Its charter and principle was recast about 1844.
– Was Hamilton’s scheme adopted afterwards by Madison?
– I believe that there was opposition to the renewal of the charter in 1810 or 181 1, caused by some imperfections in the banking system, which were departures from the enlightened wisdom of Hamilton. However, I have not looked up the matter very closely of recent date. To return to the point with which 1 was dealing when interrupted, let me say that in Canada there is also an association of banks formed under ‘the authority of an Act of Parliament. It does not interfere with, but it watches the issue of the private banks, and reports to the Government in regard to the volume of circulation. The Government, however, do not interfere with the volume of circulation; they are too wise nowadays to do anything of the kind. They do not think of controlling it, but they know from time to time exactly what is going on, and it is one of the objects of the Banking Association, formed in 1890, to supervise the issue by reporting upon it, and to form an expert banking opinion so that each bank may be guided by the united wisdom of all. I think that monthly reports are furnished. I do not propose to go into details, but it is a fact that since 1890 there have been only two banking failures in Canada. One of these was the failure of the Bank of Ontario, which took place in 1906, and was partly caused by the investment of a lot of capital in American securities, in Wallstreet. The bank gave notice of suspension one afternoon, and the Bank of Montreal, on behalf of six other banks, all members of the association, next morning took up all its liabilities. That is the effect of private co-ordination and cooperation in Canada - the system to which I have been referring. I would again ask the Prime Minister to give us an opportunity to gain the light of Canada’s experience, and the recommendations from the United States of America, before we deal finally with this proposal. 1 am not going to say that it may, or may not, succeed. It is our duty to make this institution as perfect as possible, if it is going to be a common one, and, whilst I have my own opinions against it, I recognise that a critic should be helpful. The second failure in Canada since 1890 took place in 1908. It was that of the Sovereign Bank, which was established in 1903, and was based upon an American principle. Twelve of the associated banks, however, took up all its securities, and paid all its debts. Nothing of that sort is possible in the United States.
– Then the honorable member argues that, under the present system of banking in Canada, there is hardly any prospect of failure in the ultimate stages.
– According to the most recent authorities on the subject that is so. My own impression is that many of the articles in the Annals of the American Academy dealing with banking, &c, have either been contributed by members of the Commission, or are almost verbatim extracts, and properly so, from the reports, so that they come with very great authority. In one article it is stated -
The history of currency legislation in the United States during the last forty years has not presented a’ story to which any well informed and intelligent American can point with pride. At the end of the Civil War we found ourselves encumbered with an inconvertible paper currency issued to defray the expenses of that great war, and for fourteen years, thereafter this currency circulated at a discount while successive legislatures proposed varying plans for its retirement and for the resumption of specie payments, only to modify and repeal them. It was not in fact until r879, or nearly a generation after the issue of the greenbacks, that the Government fulfilled its obligation and undertook their redemption. From that date for another generation successive Congresses dealt with the problem of silver coinage with equally inapt vacillation, and it was not until the year 1900 that the world was finally’ assured that this country would continue to use as its monetary standard the metal which had been the undisputed standard of all the other leading nations for a quarter of a century. We are confronted to-day with the third great currency problem of the last fifty years. We are looking for the means of improving our banking system so that we may avoid for the future the wide-ranging catastrophes with which American business has been periodically distressed, and through which the respect for this country abroad has been impaired. Having established our standard of value on the world’s basis, we are now trying to devise a banking system more worthy of our position in the world and better adapted to further the uninterrupted development of our great resources.
It is their wisdom that I ask that we should wait for a little longer, and apply. The Bill is undoubtedly, as the Treasurer mentioned, a Bill to carry on the whole system of banking. Let us inquire what the systems of banking are. I have referred to the money dealing principle, or what is called the scriveners principle, of merely seeking a profit between the rate at which you borrow and the rate at which you lend. That is the trust agency principle ; it is the commission business, and it is the principle on which most of our savings banks carry on their operations. This bank is not going to confine itself to that class of business, which is not very profitable. It is going to be a commercial bank, which is a business - a very risky one - that calls for great expert knowledge, and a profitable class of banking. In the little pamphlet which I have mentioned it is stated that -
At first bankers were dealers in capital ; mere intermediaries between borrowers and lenders, who looked for their profits to the differences of interest. Banking, as carried on in Australia, seems to be a cross between this principle and the perfect theory to which the English banks approximate, and which is clearly expounded by Macleod. It is by authorities of this class considered a fallacy to say that a banker is a dealer in money, an intermediary between the persons who want to lend and the persons who want to borrow, making his profits out of the differences between the rates at which he borrows and lends. Such men were formerly called money scriveners, but they are not true bankers. What a banker really does is to buy money with his own credit, so that when he takes deposits or discounts bills of exchange, he merely gives in exchange to his customers a credit in his books or a right of action for a sum of money. For this reason Macleod defines a banker as “ a trader whose business it is to buy money and debts bv creating other debts.”
Commercial banking is profitable for this reason, that it is really a form of insurance. It is known, as Macleod points out in his
Theory of Credit, that the demands from day to day in connexion with current accounts and other liabilities at call are a certain percentage of the total current liabilities. It is considered by him that in London one-tenth of the liabilities would be sufficient to meet the current demands from day to day, so that, if a deposit of £10,000 were made, it would be sufficient to keep £1,000 against it. But the banker does not carry on his operations in that way. What he does is to keep the whole £10,000, and to discount bills to the tune of- much more. He does not necessarily do it to the extent of ten times the £10,000, because, as in insurance, you do not always absolutely balance your risk with the payments, but keep a margin. Instead, then, of discounting £100,000 worth of bills, he discounts perhaps £50,000 or £60,000 worth, and he thus gets a big profit. He has received £10,000, and on that basis he discounts bills up to eight or even nine times that amount, because he knows that the £10,000 will be sufficient from day to day to meet the current demands. This, it is pointed out, is the method of commercial banking which is more or less carried out in Australia. A very large percentage - I do not know what it is, because I have not been able to find it out from any book - of the profitable business is that class of commercial banking, and it is practically the whole of banking in England, where, as a rule, they do not invest in “ dead “ securities - or much even in landed securities. So far, then, as to what we mean, and that is the measure to some .extent of the likelihood of success or failure. Now as to the powers. This commercial banking is a business. Have we the power to do it? Paragraph xm. of section 51 of the Constitution deals with more than’ the incorporation of banks. In America, where the Constitution is silent on the subject, it has been decided that Congress has power to incorporate a bank. Marshall declared that to be so in McCulloch v. Maryland in 1819. Hamilton foresaw it, because Marshall’s judgment was based largely upon the reasoning of that great man Hamilton. What Marshall said in effect was that, so long as the means is necessary and proper, and conducive to the end, and is not expressly or impliedly prohibited by the Constitution, it may be adopted, as an aid to Government, by Congress. The extent of the expediency or desirableness is a matter purely for Congress, and not for the
Courts. In his judgment in McCulloch v. Maryland he said -
The choice of means implies a right to choose a National Bank in preference to a State Bank, and Congress alone can make the election.
So long as the means is justified - and it must be necessary, and properly conducive to the end, the extent to which it is conducive being a matter for the Legislature - ‘ then you may, if you like, adopt that means. In America it was held to be valid to incorporate a bank. Our powers are more express, and, without labouring the subject or presuming to exhaust it, I think we are certainly entitled to establish a State Bank, if it can be shown to have any reasonable connexion with the governmental business - that is, if it can be shown to be to any extent an instrumentality of government. I do not mean merely one that is indispensable, but even one that is, to some extent, necessary, because a distinction is drawn between what is indispensably necessary and what is necessary and conducive to the end. This proposal, then, may or may not be valid; on the whole, I believe it is. The difficulty all arises from the fact that we are introducing the risky principle of commercial banking, and that, so far as I can see, has nothing to do with the instrumentalities of government. Assuming the Government can show the policy to be sound, my feeling is that they are at perfect liberty to take the risk as to its validity under constitutional law.
– -Is our Constitution not explicit on the point?
– The Constitution contains an express provision, but it is not quite so clear as honorable members think. We may, as in America, incorporate a bank; but the point is whether we can go into the banking business. To do that it may be necessary to show that it is required as an instrumentality of government. I do not say that that is so, but it may be; and I suppose the Government have looked into the question. In regard to the management, I do not know what the mind of the Government is ; but we have it given nominally by two men or, as one might say, one man in the person of the Governor. Clause 11 provides that the tank shall be managed by the Governor, while clause 12 says that the Governor and the Deputy Governor shall be appointed by the Governor-General. Clause 14 provides that the Governor and the Deputy Governor shall respectively have such powers and perform such duties “ as are prescribed by this Act or the regulations.” I am not quite sure what the Deputy Governor is to do. As a rule, a Deputy Governor is a man who represents the Governor when the latter is away for a time. Evidently what the Government mean is that the Deputy Governor is to be a continuous officer, performing practically identical duties with the Governor, but that the final word shall rest with the Governor as chief.
– Will not the Deputy Governor be a sort of assistant?
– He ought to be; but I do not think that the draftsman knew exactly what he was driving at; and hence my appeal for delay. For instance, the first provision is that the Governor shall be absolutely independent of political interference, and this is followed up by another that he shall hold office “ during good behaviour for a period of seven years.” Our High Court Justices do not hold office in this way. They are not so free from our control ; nor would the InterState Commission be, nor is the AuditorGeneral. In the case of the officers 1 have mentioned the term is during good behaviour, but the officials are liable to removal by a vote of both Houses of Parliament, which is practically the tribunal which decides when there is a breach.
– The Auditor-General is in a different position from that of any other public servant.
– I shall show the difference between the two.
– The Public Service Commissioner has a fixed term.
– What the Government have done - and I do not say they are not right - is to go to the very extreme limits of their power to secure the Governor’s independence.
– Which governs the clause - “ good behaviour “ or “ seven years “ ?
– It must be “seven 5’ears ‘ ‘ ; misbehaviour has to be proved before a court ; and that is not, I 4 think, the position in regard to the High Court. I do not wish to say that the position in the Bill is not as good or better; but the Government have, in this measure, expressed the opinion that the Governor should be an officer independent of political control ; the clause means that or nothing. The duties and powers of the Governor and the Deputy Governor are to be as prescribed by the Government over a large area. Thus we have independence in one clause, and, in another, subjection to Ministerial control. I know of no bank in which an official is invested with such powers as those proposed by this Bill. All great banks have directorates. The Aldrich Bank Bill, which was drafted, I think, by a private member, provides for a very large advisory directorate of forty-five, divided into sub-committees. In Canada there is an expert general manager, but he has associated with him a body of directors to whom he has to furnish periodical reports on the management, for their guidance. Further, every manager is helped by banking opinion as expressed by the Banking Association. In the United States Report, Vol. 36, page 31, we find the following reference to the Canadian system and the necessity for expert knowledge: -
The general managers are, without exception, men who have been in the banking business since .boyhood. They have worked their way up through all the grades of employment by the force of brains, industry, character, and good health. They know from experience the task of every employe^ and they know it is well done. They are, in other words, professional bankers. Untrained outsiders cannot break into the banking business as they do in the United States.
This is a matter which it would be just as well for us to consider. In France, for instance, there is a very important body to aid the Governor. The bank’s affairs are managed by the Governor, two subGovernors, nominated by the Government, and qualified by shares, fifteen regents, and three expert controllers, or, as they would be called in America, examiners. For this, there is no provision in the Bill before us. We are giving one man tremendous powers and responsibilities; but the Government do not give up their power to interfere with him. Under the circumstances, I do not know what is the Government’s idea, because it appears to me that both the ideas I have suggested are open under the Bill. TEe duties of the Governor and the Deputy Governor are to be such “ as are prescribed by this Act or the regulations.” Clause 64 is as follows -
The Governor-General may make regulations, not inconsistent with this Act, prescribing all matters which are required or permitted to be prescribed or which are necessary or convenient to be prescribed for carrying out or giving effect to this Act, and in particular for making provision for -
the issue, inscription, transfer, transmission, and redemption of inscribed stock of the bank, and all matter* incidental thereto.
In other words, there is very wide power for regulating the Governor and prescribing his duties not only as to matters specially set forth in some of the sections, but as to such as are considered necessary or convenient for the purposes of the Bill. That is a very wide power of political control. The honorable memBer for East Sydney mentioned the Auditor-General, whose duties are prescribed by Act. They are laid down definitely there; and I say that the duties of the banker, whether they are to be carried out independently by the Governor and his Deputy, or whether they are to be controlled by the Executive, ought, as far as possible, as a protection to the public against both, to be prescribed in this Bill. But that is not done. There are some other clauses which show what an absence of clearness of conception as to policy seems to have marked the draftsmanship of this measure. I find, for instance, in clause 34, that the bank may invest any moneys held by it -
In any Government security approved by the Treasurer, or on loan and on the security of land -
There is no direction from the Treasury there. The Governor of the bank can invest in any landed security he likes. I shall refer to the significance of that in a moment. or in any other prescribed manner.
That is, as the regulations may prescribe; and the Governor has an independent power which the regulations cannot touch under sub-clause 2 of the same clause.
Nothing in this section shall prevent the bank in carrying on the business of banking from making advances to a customer on any security which the Governor thinks sufficient.
That is to say, which the Governor of the bank thinks sufficient. So that, notwithstanding all these limitations through regulations, this power expressed in clause 34 gives an absolutely unfettered discretion to the Governor, which, I believe, we cannot interfere with, even by regulation, to advance the moneys of the Commonwealth - not the capital of the bank - the credit of the Commonwealth, on any class of security he likes. That is the position created by this Bill. The conception is too hasty. Hence the pertinence of my remarks as to proceeding without expert guidance. It is said that the Auditor- Genera I is to be an examiner.’ The functions of a bank examiner are, however, different from those of an Auditor-General. The Auditor-General is more or less of a high-class accountant. I do not remember whether, under our Audit Act, .he can advise with regard to policy ; in some States he takes it upon himself to do so. I do not think that, under this Bill, he is allowed to do anything with regard to policy.
– 1 think the Prime Minister intimated that the Auditor-General does not advise on questions of policy.
– However, the point is, that the position of the Auditor-General is different from the position of an expert inspector or the examiner of a bank. In proof of that, I would point out that it is shown by the reports of the Banking Commission that in the United Statesexaminers s ure experts in banking. Their qualifications vary in different States; but they generally include years of hanking experience, of accountancy, &c. ; and the Commissioner for Kansas, in a report on the subject, in 1908, says, as to their banking ability -
In short, judgment is the best asset of a bank examiner ; and the person who has sound judgment supplemented with experience as an examiner is the one whose services will become invaluable to a State, and such a bank examine] should be retained regardless of political affiliation.
We ought to remember, in connexion with, this defect, that we are not merely not providing a directorate, but not even an examiner, to check the operations of the bank. Nevertheless, very large powers are vested in the Governor. I have mentioned some of them. He has to establish agencies if he is to give those conveniences to the public which the present banks give throughout the length and breadth of Australia. He has to establish branches or agencies in England. He has to deal under this Bill with the redemption . of debts - not only of the bonds issued by the bank, but apparently - though the provision is halting - he has to deal with the redemption of State debts when the power of dealing; with State debts is handed over. Again - though this is not as clearly expressed as it should be - he will have no banking opinion to help him’. He may land the Commonwealth in indefinite liabilities. His capital! is not the measure of the liabilities he may assume, because he is a commercial! banker, and a million in commercial bank- ing -becomes a basis upon which the banker can operate his discounts, which is the profitable class of banking business, to the tune of, perhaps, ten or twenty times. Being a commercial, banker, when the public make their deposits, in proportion to the extent qf the deposit moneys in the bank, the power of the Governor to increase the liabilities of the Commonwealth is increased j and there is no provision in this Bill to show what those liabilities are. This is the man whom we are leaving with, absolute independence under one clause, and without any form of expert help or scrutiny. He is also to be the custodian of the redemption moneys - that is to say, the reserve funds for the purpose of redeeming Commonwealth or State bonds. Is that meant? Or, if it be meant, do we know what we really intend by it ? Are we justified, within five or six weeks of the prorogation, in establishing a bank on these lines, and can we do so without fearing that we shall take the risk indicated in a discussion in the Annals of the American Academy of Social and Political Science, where a bank cashier says that his experience shows -
That the most usual causes of fraud are the following - first, one man banking; second, corrupt politics; and third, excessive loans to directors.
We have the one man banking under this Bill. It is proposed to establish the second - the power to control through politics. I am showing how dangerous that is. If I were to cite the history even of the Bank of England or the Bank of Russia, the danger would be still more obvious. We are free from the third danger of course; but does it recommend this proposal to the House to say that after all it is not so bad as it might have been? We do not know really what the Ministry want, but they may mean that they want political control. While over a considerable area of banking operations they would have it under the Bill, for some purposes they would not have it. If you are setting up a man with such powers, you will want some control over him ; but my point is that we should not set up a man with such powers at all.
– What about the general managers of our present banks?
– They have Boards of Directors to control them.
– I know that they have, hut the general manager is the principal controlling factor.
– Very often it is so, I will admit. I have never been a banking director. My few guineas come from other sources. But the general managers of banks at present are controlled by their directors ; and while, of course, there may be directors who may exercise their functions perfunctorily, and who merely cursorily look! at the sheets presented to them and draw their guineas, nevertheless it will be generally admitted that those are the exceptions - the class of men who bring disparagement on the system of co-operative management. But you do not get rid of the bad effects of a good system by setting up a system without the good effects of any check at all, and that is what the Government propose to do by this one man business.
– What we want is a good inspector.
– I shall refer to the honorable gentleman’s banking proposals in a minute. I do not wish to labour the matter by referring further to political control, or to the consular reports as regards the political control exercised by the Government of Russia over the Bank of Russia. I refer to the consular reports of 1892, from which I quoted when discussing the Australian Notes Bill. I do say that the Government are in this Bill leaving a great opening to political influence. The position seems to be that the Governor of the bank is to be nominally absolute in the exercise of his discretion in most matters - he holds all the funds - but really there is a power, through regulations, of checking him by the Minister, and thus introducing political control. I refer honorable members in this connexion to clauses 14, 30, 34, and 64 of the Bill. The officers are to be appointed by the Governor, but who is to fix their salaries I do not know. They are, however, to be finally fixed, in case of a dispute, by the President of the Arbitration Court. Now, is that right? Is banking a class of business that we ought to have regulated by the Arbitration Court? I speak of that Court with the very greatest respect.
– Ask the employes of some existing banks
– I ask honorable members to look at the report of the American Commission as to the knowledge of the ability, duties, and efficiency of each of the clerks of a bank that a manager and the directorate through him ought to have. Why should we ask the President of the Arbitration Court to decide what each individual officer of a bank is earning? He would not in this case be dealing with a class. An industrial dispute is a dispute in relation to a class of employes, and there is in the settlement of such disputes a sort of common rule made in every case within the limits of our power. But here we are dealing with a number of men who come under one another as a pyramid spreads out from the top to the bottom. Many of them discharge duties which are not discharged by any one else, and it is only in the very lowest grades that an officer discharges duties the same or similar to those of some other officer. This would require expert knowledge of the duties of each officer, and we cannot assume for a moment that the President of the Arbitration Court would have a better knowledge of such matters than Parliament; or, at all events, the President or Governor of the bank should have.
– The same thing applies to almost any dispute.
– I tried to distinguish. The President of the Arbitration Court would not in this matter be dealing with a class of employes, as he would in the case of an industrial dispute.
– It was to the President’s lack of knowledge that I referred.
– Then it would be a question of degree, and not of principle. The President of the Arbitration Court may deal with engineers, fitters, and firemen ; three classes of employes, and there may be 10,000 or 500 in each of these classes. He may frame, within the limits of our constitutional power, a common rule applicable to each of these classes, but in connexion with this bank he would be dealing with something quite different. He would not be dealing with a large class of persons performing the same duty, and he could not be expected to have expert knowledge of the duties of each official that should be possessed by the Governor of the bank. I point out further, that he could not be informed of them to the same extent as the Governor of the bank without a breach of banking secrecy.
– The President of the Arbitration Court never assumes to assess the real value of any man’s services when he fixes an award.
– How on earth does that affect the point I have taken ? My point is as to the difficulty of framing a rule for every official of the bank, as though he represented a class. Coming over in the train this morning, I wanted some light reading. I had with me a pamphlet on banking by the Minister of Home Affairs, and Bergson’s Creative Evolution. It is difficult to read anything very heavy in a train, and I read portions of both these works. I wish to say that the Minister of Home Affairs, in his banking proposals, displayed a better grasp, in some respects, of what is required than the draftsman of this Bill, or the gentleman who inspired it.
– Is not this the Bill of the Minister of Home Affairs?
– I do not think so.
– I had my say in it.
– I am not going to give all my reasons for that statement. It is sufficient to give some. The Minister of Home Affairs, in his banking proposals, provided that one-half the capital should be subscribed by the States or the public, and, I think, for the transfer to limited transferees, since one could not transfer State issues to every one. He recognised also that the issue is a function of banking. I have been endeavouring to establish that. He provided for a Board of Management, and for co-operation with the Associated Banks. I do not know whether the lines of this Bill are those of the Minister of Home Affairs, or those of the honorable gentleman modified by’ others. Speaking upon his proposal, after a somewhat cursory glance at it this morning, I believe it has much more to recommend it than has the present Bill, from the points of view to which I have directed attention. The States’ co-operation is something. We are supposed to deal with the debts. And the manner in which we shall provide for the issue is something.
– Did the Minister of Home Affairs propose to give representation to the States on the management?
– I think so. The States through the redemption fund were to be connected with the management.
– Under my system, they would have had a representative on the Board.
– The sinking fund was to be invested in trustees, and, I think, the States would have had something to do with the sinking fund. The Bill, as I have said, leaves almost all matters to the Governor, and does not provide for any expert advice, or impose any limitations, for his guidance or restraint. Now, as regards the Savings Banks, this is the only part of the Bill in connexion with which we find provisions set out as to what is to be done. Strange to say, these provisions, excellent in themselves, were submitted to the House by the Prime Minister as recommendations of the Bill, but they are copied from State Acts, and the Government are not entitled to very much credit for introducing them. It is intended, as far as possible, through competition, to knock the existing Savings Banks on the head.
– This Bill will amount to that. It is proposed to adopt for the purpose of this Bill provisions which the evolution of the existing Savings Banks systems has shown to be necessary for efficient management. As regards the existing Savings Banks, I say that it can be shown that they are sound, and meet all the reasonable requirements of the public. Taking them as a whole, they are sound, lt is said that we require uniformity. I do not know what that means. What virtue is there in uniformity of management throughout Australia? Perhaps the uniformity mentioned may be the possibility “of drawing in. one State moneys deposited in another.
– I think the lack of uniformity was the cause of failure in the American system.
– We can do this at present under the existing Savings Banks system. It is possible by arrangement, and even by telegraph, to make deposits in Victoria to be paid in South Australia.
– But you have to pay for it.
– Everything in this world has to be paid for. Of course, a bank must be paid for its services. We shall by this competition be killing the mutual system of banking. We are going to compete with that which is not based upon profit, by introducing the principle of profitable Savings Banks, and to render the profits of the Savings Banks that are already in existence liable for the mistakes made by the Commonwealth Bank which it is proposed to establish under this Bill. I wonder did the public of Australia know enough about that before they gave this alleged mandate to the Government to deal with phrases that were never explained to them on the hustings ? Not only that, but a sphere of local government is a great safeguard of efficient management. If loans are sought within a particular State, a knowledge of the industries and conditions which obtain in that State is much more likely to be possessed by men who reside there than it is by a one-man government sitting in Yass- Canberra, which may have to determine the rate of advance on certain securities away in the north of Australia. Many great authorities in
America, not merely commercial, but constitutional experts, as well as English authorities, have lately uttered a warning note against this tendency towards centralization. I would refer honorable members to the recent work of Professor Royce on The philosophy of Loyalty, in which he says that what we really want to develop is a healthy provincialism in these matters. I would also refer them to the works of Professor Maitland, whose collected papers have recently been issued, in which he points out that we do want centres of local industrial government, as well as of parliamentary government, for effective business management, as well as effective Government control. The Athenaeum, in writ’ ing upon this question, points out that such centres are the very essence of effectiveness and liberty, and that if we are not cautious we may fail, as Rome did, from excessive centralization. In my opinion, the Bill is, if I may alter a hackneyed phrase, a step in the wrong direction. I have already mentioned that . the profits of the existing Savings Banks may be drawn upon to make good the losses incurred by the proposed Commonwealth Bank, if it sustains any. The Treasurer mentioned that in America there is a very limited field for the Savings Banks. His statement is not quite correct. This is what an article in the American Academy, page 640, says -
Probably, comparatively few of the readers of this newspaper realize the immense amount of money deposited in the Savings Banks of the United States. In addition to the institutions which are known as Savings Banks, a vast amount .of money is undoubtedly held by national and State banks in States where the mutual Savings Banks are unknown.
In Massachusetts alone there are about 180 Savings Banks, all of which are conducted upon the mutual principle. T. am aware that last year Congress passed an Act for the establishment of a Post Office Savings Bank. But that is not a Savings Bank in the ordinary sense of the term. The Prime Minister kindly handed me a copy of The Times, which makes reference to this matter. Since the Post Office Savings Bank system came into operation in America, on the 1st January last, the sum of about £400,000 has been deposited in those institutions. Money had been hoarded all over America since the financial smash there in 1907.
– The people do not trust the private banking corporations there.
– They are so frightened of legislative interference with the National Banks that they doubt the solvency - which is undoubted - of the Savings Banks.
– They prefer to put their money in State banks.
– The American report on the Canadian system shows that they prefer private banks to Government institutions.
– I take local experience, when trouble is impending, as my guide.
– In America the Postal Savings Bank system was introduced as a guarantee to those who were withholding their money from deposit in any bank. I think that only 2 per cent, interest is allowed upon deposits in these Postal Savings Banks. Surely that is not banking business.
– How much has been deposited in them up to the present time ?
-Very little; but the time has been short. A surprising fact is that in New York, and in some of the big centres, fair deposits were forthcoming. But that fact merely demonstrates that the Government guarantee has had the effect of causing money which had been hoarded in bags, coffers, &c, from the time of the financial smash, to be deposited in these banks.
– It is the only bank in which the people have any confidence.
– It is not a Government bank, but. an institution which is guaranteed by the Government.
– It is a Government Postal Savings Bank.
– lt is not, in the local sense. Postal facilities are undoubtedly afforded.
– In 1893, when the Victorian Government declared that they would stand by the existing banks, their guarantee made all the difference.
– Of course it did. It would make all’ the difference between succuss and failure in connexion with any private enterprise. But is that a wise method of conducting Government business? The Times says that the popularity of the Postal Savings Bank system can only be attributed to a general distrust of the ordinarybanks caused by the smash of 1907. Now, to come to our own Savings Banks. There are eight pf these institutions in the Commonwealth. They meet the requirements of depositors, and they advance money at reasonable rates.
– They do not meet the full requirements of the public.
– I do not know what are the “ full “ requirements. Many men might have the great expectations of Mr. Micawber.
– In Victoria a Savings Bank depositor cannot obtain interest on more than £250.
– Has the honorable member looked up the balances with a view to ascertaining how much money of that class is held by those eight banks? Mr. Scullin. - No.
– Well, I have, in the case of South Australia ; and I may tell the honorable member, though it combats one of my arguments, that I was first impressed with the fact that, by allowing interest, as the Government impliedly will allow, on moneys without limitation, they may impair the work of some of - the local banks, which make a profit on deposits exceeding £250 in South Australia, and certain sums in other States. But the noninterestbearing deposits are too small to affect the question. The existing banks meet the moderate man’s investments. I find that the average balance varies from £27 10s. in the case of Victoria to £54 7s. in the case of the Savings Bank of New South Wales, and that the proportion of the depositors to the population - which is. a very important fact from the stand-point of the public - varies from 19 in the 100 in the case of Queensland to 46 in the 100 in the case of South Australia. In other words, nearly 50 per cent, of the population of South Australia may be struck by this competition with their mutual Savings Bank.
– Struck in what way?
– By a competition which is not called for, by, as I said, the reasonable requirements of the public. The total fund of these Savings Banks is £54,587. 059-
– The honorable member knows all about South Australia; but-
– I hold in my hand the figures for all the States. I have merely taken the figures for South Australia as an example.
– Is not the Post Office Bank in South Australia guaranteed by the State?
– It’ is in Western Australia.
– It is not required in South Australia, and that, of course, shows the difference in the moral atmosphere. We have, of course, great exceptions as well as great expectations. However, the Commonwealth Bank has to start with a capital of £1,000,000. I think that it wants to draw its funds from the small investor, who at present deals with the Savings Bank, because the Savings Banks have nearly £55,000,000, according to my return, which was made up to September of this year. All the Savings Banks, I think, use the post-office agencies, but they are not to have the use of them in the future, I understand.
– What I said was that I thought it would be difficult for the two to work in the same building.
– I do not think that the Prime Minister knows his mind in this matter.
– I do.
– As far as the right honorable member does know his mind, and has expressed it, he means to take away these agencies. Let us see what he said last week. One of the recommendations for his Savings Bank principle is this -
The Commonwealth will have an advantage over all the States inasmuch as it has postal buildings where Savings Bank business can be carried on.
How can the Commonwealth have that advantage unless it is taken away from the States? As regards all Australia, according to Mr. Knibbs - the other figures are not his - 336 in every 1,000 of the population have deposits in the Savings Banks. In the case of South Australia, according to him, the number is 482. I ask : Are we justified in interfering with a success such as that, and risking a loss in rates and conveniences of the State mutual institutions? I do not think that we are. That affects over a third of the population of Australia, and very nearly 50 per cent, of the population of South Australia. As regards the cost of management, is there anything to complain of? The cost of management in South Australia is 6s. 4jd. per cent. ; in New South Wales it is 10s. 3d. per cent., which is the highest rate, and, strange to say, it occurs in the case of trie Savings Bank, which is most under Government management.
– Is that the rate for both institutions in New South Wales?
– No. The Government Savings Bank of New South Wales costs ros. 3d. per cent, for management, while the Savings Bank of New South Wales costs only 7s. id. per cent. The private management shows the better result. In South Australia the Savings Bank was managed, until a few years ago, when they brought in some political interference, which was quite uncalled for, on private lines, on the voluntary principle, as in most of the successful cases in America, by private individuals, without fee or reward. Latterly we have appointed men on the Board at a salary of £100 a year. But .1 do not understand that it has made any difference to the results beneficially. The bank is still a sound one; the proposed interference was never called for.
– What was the idea in appointing these men?
– I do not know.
– I was wondering whether there was a screw loose somewhere.
– There ‘was not a screw loose. One of the great facts shown by the South Australian Commission in 1889 was that the Savings Bank, unaided by the Government, conducted its business absolutely well. It never had a real loss. It had a property left on its hands. I forget the value of the property, but the bank got rid of it eventually.
– In South Australia, how was the capital provided?
– I am not quite sure, but I think that in 1857 a guarantee for £50,000 was given by the Government, though it was never called up. As regards mixing the two things up together, I wish to refer honorable members to the experience of America. There, in some States, they will not allow the mixing up of Savings Bank business either on the part of Government banks, or on the part of trust companies, which do general banking. The reports are against it. The laws in some of the States are against it. Owing to the experience of Massachusetts in this matter - the small investor being hit by blunders in relation to the large investor - it has a law to prevent it. Here is what a writer on that law says in the Annals of the American Academy of Political and Social Science for last December -
Segregation is, and probably will be for a long time, unpopular with the trust company or national bank man, the great majority of them looking upon it with distrust. I feel, however, had they viewed it rightly five years ago, that they would not have had the Postal Savings Bank forced upon them. I firmly believe, as was expressed in a recommendation of the Law Committee of the Savings Bank section of the American Bankers’ Association, of which the writer is a member, “ Savings deposits in all banking institutions should be segregated from commercial and other deposits, and vested in such classes of loans -and securities as experience has shown to be amply safe, and that such investments should be held for the special benefit of the savings depositors.
The profits in these Savings Banks are necessarily small. I shall take the experience of South Australia on that point, because that is the only case in which I have uptodate returns. Out of a total investment of £7,333,231, the amount on mortgage loans was only £1,630,362. Now, see the significance of that. Landed security gives the best results, and what are these trustees of the small earnings of the men of moderate means obliged to do? Owing to the lack - in the present state of ‘ development - of solid investments in land throughout Australia - I mean investments which they ought to take if they safeguard the interests of their depositors - they are not able to place the whole of their money on loan. They can place only £1,630,362 out of a total sum of £7,333>23IThe rest is at a lower rate of interest, on Government or corporation securities, or fixed deposits of the banks. Has the Government looked into the matter from the point of view of the opening that there is for a bank which is to be a borrower and a lender of borrowed moneys? The sphere is limited. The trust companies will tell you the same thing. There is a glut of capital seeking legitimate investment here. The Board of Trade, about twelve months ago, published a statement of the amount of our total indebtedness found by local lenders, compared with the amount ten years previously, which shows a large increase of local lending, and an increase in the money seeking investment. The difficulty is not to get money. Any one who has security, such as that of the Commonwealth, can get money; the difficulty is to do business, profitable business, with it. Some honorable members seem to think that a bank must succeed if it gets money, but it will succeed only if it can place its money in good and remunerative investments. The worst thing that could befall a Government bank would be to have money and be unable to find securities on safe lines. We have a plethora of capital at present, and the tendency hereafter may be to place it in doubtful investments to get a result. What else does political management mean ? The money lent to the bank must be got out.
– There could not be worse management than that of the banks prior to 1893.
– I do not altogether agree with the honorable member. The banks since then have profited through their purgation. The point I am now making is that there is no real scope for a Commonwealth bank as regards landed investments. If such an institution is to succeed, experience and a thorough knowledge of the complexities of commercial life are necessary in its management. To complete the last of my quotations -
I can conceive no better advertisement for Savings Banks than that the poor people’s money is safe any way regardless of what might happen to the bank.
The advice is to keep the funds of a Savings Bank clear from the funds of a general bank.
– That is proposed.
– The Prime Minister may have it in his mind, but it is not expressed in the Bill. He had better wait until next year .to find out what he wants.
– The honorable member is not usually so dogmatic.
– I have no wish to be offensive; I am merely putting my convictions with emphasis, to drive them home.
– It will be provided in the Bill.
– Then my statement was justified. I said that it is not in the Bill.
– I do not say that it is not in the Bill.
– At the present time the deposit rate is 3J per cent, for two years.; Does that show a very great opening for a new bank? I find that the percentage of advances Ito total deposits is declining, being, in 1901, 102.43; and in 1910, 74.74. A bank does not want large deposits unless it can place them remuneratively. The advances of the banks have shrunk, while the deposits have increased, because the money cannot be placed in the safest classes of investment. The position is quite sound, but our development has not taken place at the rate necessary to make further advances safe. Again, in 1889, there were twenty-nine banks, and now there are only twenty-two, some having had to close down or to amalgamate in consequence of the smash of 1893. If banking were very profitable, there would not be fewer banks now than in 1889. Further, the profits are only moderate in proportion to the risks. The Prime Minister picked out four banks of the twenty-two, and stated that they return, on the average, 1 6 per cent, on their paid-up capital. On their combined capital and reserves, they return only 9 per cent., though I shall not enter into a discussion as to whether the percentage should be taken on the paid-up capital or on the reserves. Probably both should be considered. If instead of taking four leading banks, you take all the banks, the percentage on the paid-up capital shrinks to 7.74. and according to an article in the Argus of nth of last month, taking into account the reserves, to £5 7s. 7d. per cent., which is not a large profit for a risky business. Furthermore, one of the banks referred to in the tables cited by the Treasurer is the Bank of Western Australia, which makes a profit of 20 per cent, on a paid-up capital of only £175,000. Thus an analysis of the figures does not support the contention that banking is very profitable. It must be remembered, too, that one of the leading banks mentioned by the Prime Minister was established as far back as 181 7, and, in banking, as in everything else, prosperity grows. I find that, according to the financial Review of last mail, the average dividend paid in 1910 by forty-six of the leading banks of the United Kingdom was 14^ per cent. That profit was made in commercial banking, pure and simple. We have in Australia nearly five times the banking facilities that exist in the United Kingdom. The actual figures are given by Knibbs. Another point to be remembered in considering the question of profits is that these dividends of 16 per cent, in the case of four banks, and of 9 per cent, in the case of others, have been declared in times of exceptional prosperity when we are on the very crest of the wave of industrial progress. But if we go back to the years succeeding the banking failures we find that the 16 per cent becomes 4.4 per cent, in 1894, 3 per cent, in 1895, 2-8I per cent- in 1896, and so on. These figures show how necessary it is to secure an average in respect of, not only all the banks, but of a decade if we are to have a comparison upon which we may rely.
– Surely we shall never get so deep in the mud again.
– I do not think there is any danger, but solvency does not touch the question of profits. Very often when the profits of a bank are large the bank itself is very shaky.
– The profits of the banks were large before the “ smash.”
– Yes, about £45,000,000 of loan money had been spent in Victoria alone within a few years, and that expenditure was followed by a land boom which caused the banks, like many other bodies, to speculate. But, as I said, they have had their purgation. I have no interest in the banks, save that I am a very small shareholder in one, but I venture to say, . from my own reading, that the banks of Australia are in as sound a position as that of any of the banks of Europe. Let us look at their position. If they still had a note issue, and it amounted to £8,500,000, their investments in convertible lands, municipal securities, and government securities alone, apart from other assets, would be sufficient to meet the whole demands of that note issue. Their note issue was a charge upon all their assets which amounted last year to £139,000,000, or £4,000,000 or £5,000,000 in excess of their liabilities. Let us look now at their power to meet demands at call. The coin and bullion, held by twenty of the typical banks on the Continent is about 54 per cent, of the liabilities at call ; our percentage is over 51 per cent., and, in America, it was something like 7 per cent., or 8 per cent., in 1906. In these circumstances where is the danger here - where is the necessity for Government interference? I do not know what will be the effect on the banks of divorcing from the functions of their business the function of issue. Their liabilities at call, in 1910, amounted to £58,982,000, and their coin and bullion to £30,149,000, or 51.12 per cent. We are now taking away their issue, and to what extent we shall affect the bullion basis for deposits, which is part of our currency, I do not wish at present to estimate. We should not have experimented in that direction in view of our perfect system of banking, and the fact that the result may be, as it will be ultimately, the transfer of the profits from the States to the Commonwealth. I do not know what the Government mean by a central bank. Unless the term is explained it has no’ importance. I have endeavoured to show that the central banks in Canada are the directors which control, as our bank will not, the operations of the branches. The Reichsbank of Germany is a central bank, but it is a private institution, and a bank of issue. The Government has given it the sole right of issue over the” whole Germanic Federation, whereas other banks have a right of issue within the limits of particular districts. In that sense alone is the Reichsbank a central institution. It does the business of the Government, and in that sense, too, may perhaps be called a central bank. The Bank of England also does so.
– Has not the German Government the right to issue notes through the Reichsbank?
– I think not; there is an amount up to which they can issue without cover ; but beyond that there is an emergency issue, which is seldom required, and which is restrained by a tax of 5 or 6 per cent, upon the amount of that issue.
– It is higher, I think.
– If so, it has been raised since last year. I would point out to the Prime Minister that, to the extent to which the Government has interfered in Germany, it has, in a sense, failed. A Committee last year presented a report in which it was pointed out that all their management does not always secure sufficient gold for their operations. It is unsafe to think that we politicians have all the wisdom of the universe.
– The tax on the emergency issue is, I think, so high as to be a penal impost.
– I am not sure of the amount; but they do tax the issue beyond a certain amount. That scheme, however, is not perfectly effective, because the German Banking Commission reported last year upon the irregularity with which gold goes in and out in proportion to the demand. However, the Reichsbank is not a State bank. It is stated by a writer that it was decided that the Empire should not put any capital into the enterprise. We have that statement, I think, in the report of the United States Commission. It is a central bank of issue only. As I have pointed out, the Canadian banks have an association, and the merit of that system is, not that it brings about a central bank, such as has been mentioned, but that it affords a joint security and joint advance. The American Annals states that if a Canadian bank fails to meet any liability as it arises, it -forfeits the right of independent management, and it is taken charge of by a curator appointed by the Canadian Bankers’ Association. The Bank of Montreal is the central bank, and it occupies that position simply because it does the biggest business, its volume of business being about 20 per cent, of the total of all the other banks. It is the depository of the Government funds, and amongst the people is commonly referred to as a Government bank. I do not know what this Government means by “ central bank,” because we are not to have a central bank of issue. Issue is to be divorced from it. We need more information. What are the average Government balances, and of what use are they to trie banks? We ought to have had a direct statement as to the conditions now prevailing and the conditions likely to prevail on the establishment of this bank. We should know what are the average balances, week after week, and what interest is paid upon them. I could not obtain any information in that regard from the Budget papers. They show that the balance of Government moneys at the banks amounts to £2,041,599. Is that the average monthly balance? We do not know.
– That is the balance on all accounts, here and elsewhere.
– We ought to know these facts.
– Since the honorable member has referred to the matter, I shall have a table prepared giving the necessary information.
– The real object of most of my criticism is to endeavour to get more information.
– The impression conveyed to outsiders by the honorable member’s remarks might be that these Government bank balances are not known. They can all be seen.
– They are not shown in the Budget papers. I do not wish to delay honorable members further, although I have not exhausted all the notes that I have made.
– This question of bank balances has nothing to do with the bank for which this Bill provides.
– It has to do with the policy of the bank which will depend on them for some part of its funds. Whoever conceived this institution ought to have thought of what factors would show the expediency of establishing it. I have endeavoured to touch on some; but I do not think the House has been given the data that it requires to decide this question. It is for that reason I have suggested that we should wait a little longer “before we launch on these unknown depths.
– What does Aldrich propose in the United States of America? Is it not rather a central bank?
– All sorts of central banks are talked of. He proposes, I think, to validate or copy the private banking association which was established in America in 1907, to have one central bank of issue, and to establish some method of having bigger reserves, or of interchange of reserves between the banks. As I mentioned at the beginning, at the smash in 1907 there were plenty of reserves to meet all liabilities; but, there being an independence of banking, the reserves of one bank could not be used to meet the necessities of another ; and England, Germany, and France came to the rescue, where isolated banking was ineffective to attain the same result. In that sense, Aldrich suggests a central bank, which, however, another writer regards as a public curse. I can refer the honorable member for Maribyrnong to another writer, who says that the central institutions must be ineffective in management, if they cover a wide or Continental field, and that they are a step back in efficiency by an abandonment of local government. These are the points that struck me in connexion with this measure : That the bank is an experiment without precedent in general banking. Of course, that is not final ; but when it is without precedent, there ought to be conclusive reasons before it should be established. The management is in the hands of one man without conditions, subject only to political control. There is no provision for expert inspection or examination, the functions of the Auditor-General being essentially different from inspection. To make substantial profits you must succeed in commercial banking ; otherwise the bank will be simply a mere money-dealer or investment agency. The bank is” not required, as banking is not a monopoly, and the present facilities seem to be more than adequate. So far as it affects the Savings Banks, the public may suffer, and must suffer, so far as the mutual principle is beaten in competition. The uniformity aimed at - I do not know what its limits are - is not required, because reciprocity in recent years has been established between the eight Savings Banks of the Commonwealth. All the funds are in the name of one man, and so is a very large part of the policy, even, it may be, in connexion with redemption. If bad seasons come, there may be loose in vestments, and the Government may be pressed or tempted to abate business demands. I could cite examples in recent years of that; but I have said sufficient upon the point by merely suggesting it. These are some considerations, not all, that struck me. All I would say to the Prime Minister in conclusion is this: I have endeavoured to help in the matter. 1 have put with the force of personal conviction some points. My whole desire is to point out that there is a danger in risking profitable commercial banking; that there is not a very substantial opening for the other; and that there is a very serious danger to about one-third of the population through the possible defeat of the Savings Banks in the competition that is opened up. If the bank is established, I hope it will be a success. I am not against it on any abstract principle of the limits of State interference. The question to me is one of power, common sense, and expediency. If I have, to any extent, helped honorable members to grasp the conditions of the problem, I shall be rewarded for the excess of trespass which I may have committed upon their attention.
– We are, I think, indebted to the honorable member for Angas for giving us a great amount of valuable information upon the subject which we are debating this afternoon. I am not at all surprised at the line of argument he has taken up, because many years ago, in another place, he held very similar opinions, and does not seem to have altered them in many directions. He never was in favour of the State banks, and he does not seem so to-day. In fact, the whole tenor of his remarks seemed to be that he has some hesitancy or doubt about the proposal, but that, after all is said and done, it is very possible that the Government policy might be right. I contend that the Government policy in this matter is right. I am not going to say that in a great and important subject like this there may not be matters of detail upon which it would not he just as well for the Government to modify their ideas. I do not say that we may not have to make amendments in the years to come.
– Or even in this Bill.
– But the question is, “Is there any necessity for delay?” The honorable member for Angas referred to the inquiry that has taken place in America, and the doubt that exists in many minds whether it would not be as well for us to leave the matter over until next year.
I am rather inclined to think that if there is any element of doubt in certain minds to-day, it will be there just the same next year. I look upon the suggestion that we should turn our attention to America with regard to banking as simply a monstrosity. The Americans never have tried to understand banking since the days of Hamilton. There is no doubt that Hamilton and those who agreed with him were on sound lines, and it would have been a happy day for our American cousins if they had decided to continue on the lines laid down by that great statesman. Compare the Bank of England with Hamilton’s bank, and you will find, as you will always find with statesmen all the world over, that Hamilton was building on a plan that he saw in England, but varying it according to the requirements of his own country. It does not require any explanation for honorable members to grasp the reason why the Americans did not want Hamilton’s system of banking.
– England is the world’s banker.
– But who made it so? That is the position with regard to America - the land of enterprise, the’ land of freedom, where roguery and enterprise are so close to one another that you cannot separate them. Is it at all likely that in that country they would be very anxious for a State bank, or any institution of that character? They never wanted it, and do not want it to-day. There may be a strong section of the American people who want banking placed on a sound footing, the proof of whichlies in the fact that the Congress Savings Bank has been ratified by the people. They had confidence in the Congress Bank, which gave them the guarantee of the American Union behind their money, and so they brought along their savings.
– And invested them at a lower rate of interest.
– That is so. I therefore take no notice of the American authorities, or American wisdom, or antiwisdom, in regard to banking, because they are out of the question altogether. There is, therefore, no necessity for us to go upon American lines. I admit, however, that Canada and Canadian experience does count. The Canadian system of banking is a good and sound one, and has been shown to be a great success ; and any country might do worse than follow its example. I hold that we are going on better lines. What do we all believe in? This may be looked upon as a party question. There are those who hold the opinion that I have held for thirty years - I have not just now awakened to the discovery. This is a policy I have advocated in season and out of season in another place; and a State Bank of a limited character in South Australia is the result, somewhat, of an agitation of myself and others. We have built up a National Government for Australia ; and, while we may differ on lines of policy, we are all working for the best interests of the Australian. If ever there was a day it is now, when the Australian nation is ten years old, that we should establish a National bank, which, in days to come, will do for Australia what the Bank of England has done for the Mother Country. I do not think that the proposed Commonwealth Bank is going to kill all the banks in the Commonwealth, because I fancy it will have a pretty ‘ hard row to hoe. ‘ ‘ It cannot be supposed that the present banks will treat the Commonwealth Bank with loving-kindness and generosity, but, rather, on the other hand, that they will do their best to “hammer” it. There is quite enough competition now ; and bankers, being like other people, are firmly convinced of the fact. I support the Bill, not because I believe there is any necessity for another bank, but because I believe there is necessity for a National Australian Bank, and that the sooner it is started the better. It could not be started in better times than to-day, when a wave of prosperity is passing over us. It does not seem to me right that we should have to go cap in hand to any banks to do our national financial business; and there is no doubt that we have great business to do. I suppose it is because I was born on “ the other side” that I feel there is no bank like that in Threadneedle-street. At Home, we have a proverb, “ It is as safe as the Bank,” - not a bank - and “the Bank” means the Bank of England. We learned that proverb as children, and we are taken and shown the building in the City of London, and informed of its great position in the nation. There is nothing to prevent our having a bank, not perhaps built on the same lines, but doing for Australia what the Bank of England has done for Great Britain. Unless the Commonwealth Bank does for Australia what the Bank of England does for England to-day, it will not satisfy me.
– The issue of notes?
– The Commonwealth Bank may issue notes so far as I am concerned. I am not going to ask the Government to alter their measure this afternoon ; but I feel satisfied that, before many years are over, we shall have the notes issued by the Commonwealth Bank.
– I am not averse to that, after the bank is established.
– I have no quarrel with the banks, but one of the strong reasons I had for supporting the Commonwealth note-issue was that, if there is such an issue, there must be a bank, and that, eventually, the notes must be issued by the National bank. Let us look at the history of such institutions, and see if there is any reason why we should not act on precedent, always, of course, considering our varied conditions. What is a bank? We have had several definitions ; but I have always understood that a bank is a dealer in credit. In the Roman, Greek, Assyrian, and other ancient civilizations, the banking business was as efficiently managed as it is to-day amongst ourselves ; wherever there is trade and commerce, the ingenuity of man is equal to the occasion. In olden days, in London, a man deposited his gold with the goldsmiths, and on their certificate he traded. The first bank, which was practically a State bank, did all that we desire the Commonwealth institution to do. That was the Bank of Venice, which issued certificates in the same way as did the gold- . smiths of London. I dare say, if we could ascertain the true cause of its failure, it would prove to be that the bank was not conducted on sound banking lines. There are certain principles in banking which have to be followed, and which, if followed, are bound to lead to success.
– The Bank of Venice never did regular banking business, as we understand if.
– I do not mean to say that the Bank of Venice did the uptodate banking business that we have been talking about this afternoon, but it is recognised as one of the historical banks.
– Oh, certainly; but its nature was quite different from our banks.
– A similar institution was the Bank’ of Genoa ; in fact, that bank did the very business we do in modern times. We know the history of the failure of that bank. It advanced tremendous sums of money to Philip II. of Spain, and his failure to repay burst up .the institution. We hear a great deal now about political in fluence and political control, but there was then neither. An ancient maxim of banking was, “ Never have anything to do with the King, or his paper, when he is on the. war rampage.” The Bank of Amsterdam followed on the same lines, we might say, as did the Bank of England. The latter was started by two sections pf the community. There were the merchants of the City of London, who saw the necessity of creating a bank similar to those ancient institutions to which I have referred. The Bank of England was started by Nonconformists of the city at an opportune time, because the Revolution took place in 1688, and it was impossible, for obvious reasons, to conduct a bank when the Stuarts were on the throne. Montagu was very anxious, for the purpose of carrying on wars and financing Government business, that the Crown should give to the promoters of the Bank certain concessions in return for which they were to make certain advances. When we are told that the Bank of England is not a State Bank, but a privately-owned institution, I ask, Why? Because in 1688 it could not have been started on other lines. I am quite willing to recognise that even to-day there are certain varieties of enterprise that may well be left in private hands. But to argue that, . because the Bank of England 200 years ago was built on such lines, therefore the Commonwealth of Australia in this age must build on no other, is neither logic nor common sense, nor does it pay any heed1 to the teachings of history. There is no need for us to copy the structure of the Bank of England in any respect, though we can copy it when we consider it to be advantageous to do so- It will probably be said that the Commonwealth Bank will have very little business to do. I do not care. I do not care if it does less business than any bank in Australia for the next twenty years. But it will grow. It will become the biggest banking business in Australia. The circumstances of the times are tending in that direction. I should like honorable members opposite to tell me why it is impossible that the Commonwealth Bank should succeed? Let them, with their learning and their great logical keenness, answer the argument that I am putting. Why can we not build a bank for Australia on the lines of the Bank of England, as far as stability is concerned? There is no reason that I can see why we should not. The Bank of France was created by the Emperor Napoleon, and the National Bank of Germany was established for national purposes. It is true that those institutions are built upon the lines of the Bank of England, inasmuch as they are proprietary banks doing the business of their respective nations. But why? Because the extent and scope of the instrumentalities of Government in those countries are less advanced than is the case in Australia. Some who have written on this subject have urged that it would be a good deal better for the Commonwealth Government to buy out a bank - to take it over - than to build up a new bank. There is something to be said for that idea, though I, for one, should not recommend its adoption. If we were out to make profits, if we were out to make this bank a paying concern in very quick time, I should say “ Yes; buy out ah existing bank.” But if we are not out to make profits in the first instance, I see no reason for taking the course recommended. As long as the bank is established on sound lines, there is no doubt that the prestige attaching to it as the bank doing the business of the Commonwealth Government will, in the nature of things, tell in its favour.
– I take it that the honorable member has at the back of his mind the idea that in establishing this bank he is going to accomplish a democratic reform of some kind ?
– That is where my honorable friend and I differ. I dare say that there are some people who believe that the Commonwealth Government intends by means of this bank to shovel money all round Australia.
– I am afraid that a number of people outside have that idea.
– Opposition supporters, I suppose.
– No; supporters of the Labour party at the last election. The Victorian manifesto said so.
– I do not know much about that, but I am quite certain that a great number of supporters of honorable members opposite have got it into their heads that if the Government start this bank their intention is to “ collar “ all the money in the country and run away with it.
-“ The banks are bleeding us to death,” the manifesto said. But now my honorable friend says that this bank will merely be a little harmless thing.
– I do not know about it being “ a little harmless thing.” I believe that it will be of great benefit tothis country, and especially to those who come after us.
Sitting suspended from 6.30 to7.45 p.m.
– There is another phase of the question which has been the’ subject of some criticism. I have no doubt it will be still further criticised before the debate is concluded. I refer to the proposal in the Bill for the establishment of a Commonwealth Savings Bank. We have been told by honorable members opposite that the proposal to tack on to the proposed Commonwealth Bank a Savings Bank will bring us into competition with the existing Savings Banks of the States. There may be some truth in that. But it is part of the price that Australians are called upon to pay for the creation of a National Government. According to its critics our National povernment will from time to time becompeting with the State Governments. That is inevitable in the circumstances of the case. However reluctant we may be to assume our responsibilities, we cannot avoid the necessity of creating a Savings Bank in connexion with our National bank. It may be a matter of opinion as to whether it should be dealt with in a separate Bill, or by a separate Department ; but I strongly favour the association of everything connected with our national banking. I do not mean to say that all the accounts should be kept in the same ledgers, and the business attended to in the same offices, but I think economy may be greatly studied by attaching the proposed Savings Bank to our National Bank scheme. This proposal is forced upon us. Honorable members have themselves forced it upon the Government. Not many days since, questions were asked from both sides in this House concerning the facilities afforded to employ6s in the Commonwealth Government engaged on the small public works we are undertaking in the Federal Capital. We have already committed ourselves to a policy of extensive public works in connexion with the Kalgoorlie to Port Augusta railway, and with the Northern Territory - that marvellous province, for the good government of which we are now solely responsible, and with which none of the States have any longer anything to do. When we begin the development of that Territory, we must provide facilities in the shape of savings banks. It surely will not be proposed that we should call upon any State Government to undertake work of this character to meet the just demands for ordinary facilities from Commonwealth employes and ‘ the people of a Commonwealth Territory.
– What are the Government going to do with the deposits in the Savings Banks?
– I cannot deal with everything at the same time. I am trying to prove first of all that it is absolutely necessary that we should undertake this work, i do not see how we can escape it, unless honorable members opposite suggest that we should go cap’ in hand to one of the State Governments and ask them if they will kindly undertake the work for us. I am not prepared to do that. I do not think the National Government of Australia was created for any such purpose. In my view, it is absolutely essential that we should make provision for savings banks, and it should be borne in mind that in making this provision we shall have the great advantage of the guarantee of the Crown behind the savings of the people in the proposed National Savings Bank. That guarantee is not given in the case of all the existing State Savings Banks. I think it would be unwise of us to enter into competition with the savings banks of the States. We should let the principle of the survival of the fittest operate to settle the question, as it certainly will in time. As I. pointed out earlier in my remarks, it is necessary to be very careful in dealing with this matter, because we are legislating, not for to-day or for a few years, but ‘for very many years to come. Legislation of this character must be judged by its ultimate utility as a part of our system of National Government. When it is known that the power of the National Government will be at the back of deposits in the proposed National Savings Bank, there will be an inducement to people, especially in States in which there is no Government guarantee behind the State savings bank system, to deposit their savings in this bank. The honorable member for Angas quoted figures very largely from the experience of South Australia, probably because he knows more about the Savings Banks in South Australia than about those of the other States. I admit that I know more about the South Australian Savings Bank than I do about those of the other States.
– If it is as limited in its operation as the Victorian Savings Bank it must be almost useless.
– It is one of the advantages of a National Parliament of this character that, composed as it is of honorable members coming from every part of Australia, it is in a position to estimate how a proposal will operate in the different States. Some years ago, when Sir Frederick Holder, the first honored Speaker of this Parliament, was Treasurer of the State, a proposal was made in South Australia to establish a Crown guarantee behind the State savings bank system, and had the people been left alone at that time they would have been prepared to agree to the proposal. There was a party hueandcry raised, and, as a result, the proposal was not given effect to, and there is at present no Crown guarantee behind the South Australian banking system. That cannot be regarded as a very satisfactory state of affairs. The Government of South Australia have, of course, admitted that if any disaster occurred they would be obliged to stand by the bank ; but, as a matter of law, there is no Crown guarantee behind the savings in the South Australian Savings Bank. It may be a matter of opinion whether it is desirable to leave the matter to the discretion of the manager, or to put a direction in the Bill limiting the amount of the savings of the people deposited with the Savings Bank, which may be invested on the security of houses and improvements upon land. The South Australian Savings Bank advances largely on small houses required by middle class people, and on some landed property with improvements.
– The nature of the securities is defined.
– That is so. It was utterly impossible with the limits imposed upon investments to make a profitable use of the funds, and three or four years ago the South Australian Savings Bank Act was amended in such a way as to confine the bank to lending money on Federal, State, and corporation securities. The object in view was that the money should be advanced, as far as possible, in South Australia. What I wish to point out to the honorable member is, that we cannot force more than a certain amount of money upon the community. Why? “Because a large sum of private money is being advanced upon similar security, and at the same rate as that which is charged by the Savings Banks. It is this fact which prevents the latter institutions from circulating more money in the direction I have indicated.
– That means that there is any amount of competition.
– It means that there is a fair amount of competition. Consequently, I cannot see any force in the argument of my honorable friend that a danger is to be apprehended from interfering with the Savings Bank in the direction to which I have referred. To my mind, it is not a bad thing that the National Government should have command of the savings of the people. I have always strongly held that view; and I am speaking now as a depositor in the Savings Bank. To me it does not matter two straws what becomes of my money, so long as I am paid interest upon it, and can withdraw it when I need it. The guarantee of the Crown insures me that position. If the Government can . utilize the Savings Bank deposits for national purposes, I have no objection to their doing so, and I would not tie their hands. There is an historical incident in this connexion which is worth recalling. It was in 1861 that Mr. Gladstone, England’s great commoner, established the Post Office Savings Bank in Great Britain. Since then that institution has grown, until to-day the masses of the people have many millions sterling deposited in it. Now the world has beaten a big drum, and journalists, when hard up for a job, have written leading articles with a view to showing what a great financier was Mr. Goschen. In fact, I wonder that they have not erected a monument to his memory for the marvellous feat he performed in connexion with the conversion of British consols. They forget that he was enabled to do what he did because Mr. Gladstone had established the Savings Bank. Had there been a general demand made for money at that time, it was the funds of the Savings Bank which would have met it. It was the knowledge of the existence of that reserve which caused the holders of British consols to take them up on the conditions which were imposed by Mr. Goschen. That circumstance should afford an object-lesson to all public men, and to every Chancellor of the Exchequer, and every Treasurer. They must recognise that a time may arrive when it may be necessary to renew great financial obligations, and that at such a time the existence of a bank of this character will prove of great value. Honorable members opposite may not relish the idea of the savings of the people being dealt with in that manner. But what ob jection can be urged to it, apart from a lot of abstract speculations that the money could be better utilized in other directions? It is not a difficult matter to ascertain who are in favour of establishing a National Savings Bank. If we do not adopt the course which I have suggested, we shall be shirking our obligations. The portion of the Bill which relates to this phase of the matter is, to my -mind, a very good one. In Committee we may be called upon to decide whether only a portion of the funds of the bank shall be used for the purpose of making advances on real estate. I have heard that some States of the Commonwealth are utilizing the savings of the people for the ordinary purposes of government. I do not know whether the statement is true; but if it be I doubt the soundness of the judgment of those who are responsible for such a course of action. The savings of the people have been of great service to the Mother Country, and can be made of great service to the Commonwealth Government under proper safeguards. Another point to which I desire to direct attention has reference to the relation of the proposed Commonwealth Bank to the Associated Banks. I think it would be a good plan if the former were to work in co-operation with the latter. I have previously pointed out that probably there will be an attempt on the part of the Associated Banks to give the Commonwealth Bank a bad time. I shall not quarrel with them for so doing, because I recognise the law of competition. Bankers are not persons who go about preaching. They are shrewd business men, who cannot have any love for a rival which enters the banking field. But that fact should not prevent us from co-operating with them as far as possible, because I believe that when the Commonwealth Bank becomes strong, it will be of great value to the Associated Banks during bad times. Let us go back to a page in modern history - to the banking crisis of 1893 - when a large number of our financial institutions were tumbling about our ears. Some of them weathered the storm ; but thousands of our best Australians lost their money, and went down the hill through no fault of their own.
– And they never got up again.
– Exactly. That was a calamity, and this Parliament will not be worth its salt if it does not endeavour to prevent a repetition of such an occurrence. I have no desire to reflect on the banks of Australia, but I am not quite sure that they do not deal too largely in dead securities, and, just in proportion as they do that, they must prove unsatisfactory to those who invest money with them. But taking the managers of the Australian banks as a body, I have a very great respect for them. I believe that they are a very able, honorable, and upright lot of men I wish that I could say the same thing about the directors of those institutions. I have a strong suspicion that if the history of these banks during the past thirty years were known, it would be found that the trouble which befell them was not due to their management so much as to their directorates. We have heard a good deal in regard to the evils which will follow the establishment of the proposed Commonwealth Bank. We know pretty well from history that if the directors of banks themselves did not get big advances on very flimsy securities, those who were associated with them did, and that accounted for much of the trouble that occurred. I do not believe that the bank managers of Australia were to blame for the crisis of 1893. I am speaking now on the authority of a retired bank manager, who had great experience, and who has passed away since he spoke to me on the subject. I told him on one occasion that I did not think very much of the judgment which was exercised in regard to the advances which were made by the banks. He replied, “ Mr. Archibald, it was not the fault of the Australian managers. The money came out from London, with instructions that we had to get it out. When protests were sent from here that the banks could not get out the money on safe lines, the managers were led to understand from London that if they could not get it out they must go.” Practically, they were told that they would be superseded if they could not carry out the instructions from London. -It is a matter of history that a tremendous amount was sent to Australia and advanced, but the people in England got frightened, and decided to withdraw it. .We know what resulted from the withdrawal. I had every reason to believe the statement of the retired banker, because he had had every opportunity of knowing the facts. He had been in the inner circles in Australia for about thirty years, and knew just as much of the game as any of the bank managers whom we had at the time. That accounts very largely for another of the causes which brought about the crisis in 1893. We all remember how, in Victoria and other States, the money was practically forced out in all directions. If that was the system on which banking was carried on in Australia, it could only work out in one way. A bank of the character which it is proposed to build up would have a steadying influence in the event of any crisis occurring, in that manner. What we really want in a time of crisis is a steady and cool head. If there is one man who saved thousands of families from ruin, and exerted a tremendous influence in steadying the crisis of 1893, it was the Premier of New South Wales, who, in addition to being a statesman, was a banker. The very fact that Sir George Dibbs proclaimed as legal tender the bank notes issued in New South Wales practically put those notes on a level with the notes of the Bank of England. His act saved the credit of New South Wales, and if his example had been followed in some of the other States, as it might have been, it would have materially saved the credit of those States, and done a great deal to avert the crash which took place. The necessity of having a steadying influence must be apparent. In a crisis we do not want to have to go to the Governments. The more we leave the Governments alone in these matters the better it will be.
– Sir George Dibbs was not a banker.
– Then I have made a mistake. But it does not matter very much what occupation Sir George Dibbs followed. All that he is worth in the argument is that, as Premier of New South Wales, he had the sagacity and the foresight to discern the best thing which could be done, and did it, to the benefit of the State. My complaint at that time against other statesmen in Australia was that, if they had taken similar action, much of the ruin which fell on many Australians would not have occurred. The object of my reference to Sir George Dibbs is not so much to recapitulate a chapter in modern history, but to bring home to the House the steadying influence which his act had. A Commonwealth Bank, having a steadying influence, would do similar good work if the necessity should arise, and the chances are that it will. I am not one of those who believe that, under existing commercial and capitalistic conditions, we are going to escape from periodical panics in the world. They must inevitably come. They are created by what is technically called “ overproduction.” When trade is brisk, business men and manufacturers see great opportunities of improving their positions and extending their trade. Credit is given, and presently the bankers begin to realize that they have given over-credit, and that there is a necessity for all concerned to be careful. Something occurs which the bankers begin to feel; there is a danger signal ahead, and they decide to draw in and notify that bank advances in the future will have to be of a very different character. That is generally the start of a panic. There may be other contributing causes, but panics have occurred over and over again, and are likely to recur. That is one of the reasons why we should be on our guard to have a steadying influence in the community to deal with a panic when it occurs. I do not worry very much about newspapers, but I noticed in a newspaper to-day a statement which, perhaps, it is worth while to refer to, as it may be mentioned in the debate. I believe that it would be an advantage if a bank of this character were associated with other banks. There is a good deal in the idea of the National bank associating with other banks, and having a steadying influence in the community. But I am not prepared to recommend to the House and the country that if the banks were tumbling down, as they did a. few years ago, the National bank should come to the assistance of all of them. That would be a very bad doctrine to adopt. What would it mean? The banks could practically go in for all sorts of reckless business if they knew that, in a crisis, they would only need to appeal to the Governor of the National bank to come to their assistance. There is no doubt that with a bank guaranteed by the Crown, and having the full power of the Commonwealth behind it, this Parliament would never allow a panic to do a very great injury in this community. The National bank could be of assistance to a bank which had been conducted on sound business lines, and found itself subjected to a rush and a panic. But that is a very different thing altogether from the proposition that, given a National bank associated with other banks, we should carry all the broken-down cripples we could find. If that is the idea entertained outside the House, I certainly do not think that it will have very much weight here. It is only worth mentioning to point out the utter fallacy of the proposition, not that I would assume for a moment that any honorable member would entertain an idea of that character. For the reasons I have given I do not think that we should do very much harm by establishing a. National bank. Its management will, I think, call for a great deal of serious consideration.
– It all depends on the management.
– Yes. The Bill provides that the bank shall be managed by a Governor and a Deputy Governor. It is not well to dogmatize regarding the details of the measure, which ought to be thoroughly thrashed out; but there is a good deal to be said for having the management of the bank in the hands of one man. There is, however, a danger in this course. In finance, as in other affiairs, there are men who possess great ability, and a very sound judgment on the average ; but occasions might occur when, if left entirely to himself, the manager of this bank might make a grave error of judgment ; while, were he able to consult with one or two others as able as himself, the chances are that things would be looked at from different points of view, and sounder results and greater security would be obtained . Therefore, unless strong arguments be advanced to the contrary, I shall support the government of the bank by a Board of three. Whoever is appointed manager must be paid on what I call union principles, that is, according to the standard rate of wages. For bank managers, as for boilermakers, the standard rate of wages should be paid; and if £2,000 or £3,000 a year is what a manager of a private bank is receiving, we should pay our manager as much. Indeed, we could not get a good man for less. I do not believe in cheap brain labour, any more than in cheap manual labour. What is spent in salaries to managers means little, because thousands of pounds can be made or lost by good or bad management. As to the objection that the bank will be politically controlled, that does not amount to much. The Bank of England is politically controlled, though the British Government have nothing to do with its management. The bank’s charter may be suspended by the British Government, and the bank authorized to issue as many bank-notes as the Chancellor of the Exchequer may give authority for. But there is no interference by the Government with the control of the bank. Of course, it cannot be doubted that matters are discussed, and that the Government know what is going on in the commercial world. I urge the association of the proposed bank with the note issue as soon as possible.
– They should be inseparable.
– I look forward to instituting in Australia a bank equivalent to the Bank of England, though, of course, not a proprietary institution. The credit of Great Britain and the stability of her trade and currency depend largely on the Bank of England. The bank is compelled to keep a certain amount of gold in its vaults to cover certain securities the British Government hold ; but the rise and fall of the bank rate of discount practically determines the currency. When money is tight, the discount rate goes up, and this rise and fall of the discount rate depends on the outflow and inflow of gold into the bank. Our Commonwealth Bank, managed by an up-to-date and live banker, who will know as much as any other banker in Australia, will be well-informed as to the value of the paper that has to be dealt with as to discounts and al] other matters, and will be ready to meet the demand likely to be made on it and its gold reserves. In connexion with this question we must be guided largely by the occurrences of modern times, and the financial history of Great Britain during the past twenty or thirty years, which we must assume will be repeated here to some extent. It is thought by some persons that it is not necessary to keep such large gold reserves as we have ; but, in my opinion, it would be better ‘to have a still larger reserve, until we know by experience what amount of gold we should keep. The position of the Old Country is altogether different from that of Australia, in that one can trade all day long in London and the whole metropolis and1, with the exception of those of the Bank of England, scarcely see a note. Cheques are largely used, but one does not see notes in circulation in the Old Country as they are in Australia. The banks have educated the people of Australia to the value of a note circulation, and it would be a good deal better for the Mother Country and the Bank of England if the note circulation there could be largely increased. If it were the incessant demand for gold, for which there is no real necessity, would be relieved. Two-thirds of the gold in circulation in London would be unnecessary if they had there anything like the note circulation we have in Australia. No one in either England or Australia can tell the exact balance between the note circulation and the gold which should be behind it, and some years of experience will be necessary to enable us to determine the exact proportion required. There was a good deal of force in the remarks made recently by an honorable member relative to the demand for gold for shifting the crop. Before Professor Jevons pointed to it, this tremendous demand for gold at the end of the autumn, when the shifting of the crop takes place, nearly misled the Governors of the Bank of England on more than one occasion. We must have in Australia a somewhat similar experience, and, no doubt, such a demand has occurred here. A note circulation such as we have at present should be associated with a bank, and the manager of that bank should best be able to tell, after a few years’ experience, the exact proportion that the gold reserve should bear to the note issue. There is a good deal of political bias on the part of our bankers. It would be a great deal better if bankers and merchants would confine themselves to their own business, and leave politics out of the question. We should like to have their opinions on a financial question, but we cannot help feeling that there is on their part a certain degree of unconscious bias. Bankers and those associated with them do not generally support our party.
– There is conscious bias on their part.
– I am inclined to be more charitable, and to say that it is unconscious. With the establishment of the Commonwealth Bank, these gentlemen ought to be able to guide us by their experience, instead of requiring us to gain practical experience in this connexion. I hope that the Government will see their way clear to allow the Commonwealth Bank to deal practically with the whole of their currency, their finances, and everything relating to banking business. The question of finance is one of the most important in all civilized communities, and one can well understand some fear being entertained by many persons regarding a novel proposal of this character. We have, therefore, to look very carefully into the whole matter. The honorable member for Angas doubted the wisdom of allowing employes of the Commonwealth Bank to come within the jurisdiction of the Conciliation and Arbitration Court. I have no fear in that respect. Certain honorable members opposite had something to do with the establishment of the Federal Conciliation and Arbitration Court, and assisted to give it power to inquire into.the industrial affairs of the community, with a view of insuring industrial peace. The State Governments have given similar tribunals the right to review the conditions of ‘their own employes, and I fail to see why we should deprive the employes of the Commonwealth Bank of the right to come under the same control. Whilst investors in banking companies have been doing remarkably well, there has been no corresponding increase in the prosperity of their employe’s. If bank clerks feel that they are too superior to come within the purview of the Court, well and good; but no harm can be done by giving them the right to approach the Court, so that they may exercise it if they desire to do so. The Court’ fixes a minimum wage, and it would have power to review from time to time the improved conditions of banking and the general prosperity of the country, as well as the fact that the salaries of the managers increase, whilst there is a tendency to decrease the salaries of those on the lower rungs of the ladder. That is the present position, and I do not think we should prevent bank employes from obtaining an award of the Conciliation and Arbitration Court.
– Surely Commonwealth public servants will be paid so well that they will not want to go to the Court.
– We do not desire to drive them before the Court. All that we propose to say is, in effect, “If you have a grievance, take it to the Court ; do not bother us with it. If you can satisfy the Court that your labour is worth more than you are receiving, then we are prepared to be bound by whatever award the Court may make.” There is nothing derogatory to any man in going to the Court in an honest way, so long as he is ready to be bound by the award which the Court gives. In that respect, therefore, I cannot agree with the remarks of the honorable member for Angas. In conclusion, 1 wish to emphasize one or two points to which I referred before. I do not expect honorable members on the other side to agree with me, but whatever may be the fate of this Bill, we shall be none the worse, and I do not think Australia will be any the worse for having a good debate on its merits. We all recognise that one of the best banks in the world - if not the best - is the. Bank of England. We are still creat- ing a system of national government for Australia, and I put it to honorable members : What is there to prevent us from seeking to establish a bank on similar lines here, not for the advantage which we may gain to-day, or six months, or ten, or even twenty years hence, but so that it may become a bulwark and strength to the nation of Australia long after we have passed away ? We should follow the lines of the Bank of England as closely as we can, because the closer we keep to it, so far as our existing conditions of industrialism and capitalism permit, the better. We cannot find a safer guide in regard to financial matters. Let us give our bank the note issue, and give it power to do all that the Bank of England has done. It is worth something to us to attempt this, and the Parliament that creates a bank of that character will have done much for Australia. I admit that the press, and the average member of the Australian public outside, will say, “ Oh, yes, they are wasting their “time there ; they are not doing much ; they are just referring to the question of a State Bank.” That is very true, and it is possible that when the Bank of England was founded there were men who said the same thing. In fact, we know that there were men who said that Parliament was wasting its time, that Montague was wasting his time, and that the merchants of Grocer’s Hill were wasting their time; but look at the result. It is . worth our while, then, to consider this proposal carefully. I hope that if any fair and reasonable proposition is made to bring the bank on to the lines I have indicated, the Government will be prepared to entertain it, so that this Bill may become an Act which will redound to the credit and honour of the National Parliament of Australia.
.- The honorable member for Hindmarsh began by saying that the honorable member for Angas had, all through his speech, been expressing doubt and hesitation, and was not sure of anything that he put forward. In approaching this subject, I should like to say at the outset that the deeper we go into it the more we read about it, and the more we study it, the more doubtful we shall be. I feel convinced that it is the one subject above all others in regard to which we should hasten slowly, and be sure of our ground in every possible way before we take any definite step. Into the great field of credit, of which banking is the living expression, it is impossible to. thrust any system which is antagonistic’ to the scientific principles upon which credit rests, without the most disastrous effects. Whilst I think, with the honorable member for Hindmarsh, that it is possible in Australia to build up a great bank, which shall be part of a wide scheme embracing the whole of the financial relationships of the Commonwealth, I do not believe that the project which the Government have put forward will accomplish what the honorable member desires. We should be very sure, in starting on the establishment of a National bank - if the need for such a bank can be clearly demonstrated - that, when established, it will commend itself to the financial authorities of the world. If it does not, it will not answer the” purposes for which the honorable member for Hindmarsh desires it to be set up.
Before I deal with the bank itself, I should like to refer to the Commonwealth Savings Bank which it is proposed by the Government to start. The Prime Minister, when introducing the Bill, endeavoured to show that the first advantage therefrom would be the securing of uniformity throughout Australia. I do not see where the advantage of uniformity comes in. I cannot understand how it would be of any benefit to a man in Western Australia to pay into a bank which he knew was conducted on exactly similar lines to a Savings Bank in Queensland. When it comes to the matter of exchange, which some honorable members mentioned to-day, it must be remembered that, after all is said and done, the working expenses of these institutions have to be met. Exchange is one of those very reasonable means to this end which banks, and even Governments, have adopted. The Commonwealth adopts it to-day in regard to money orders and postal notes, charging a small amount for transacting the business and facilitating the obtaining of money at the other end. After all, exchange is a reasonable payment for services rendered. 1 admit that when I cash a cheque in Melbourne I do not like to pay rs. exchange upon it, and would rather not. At the same time, when we remember the service rendered, it is only fair that we should pay for it.
– It is cheaper than 6d. on a note. .
– That altogether depends. We may get a £io-note, or a Minore, cashed for 6d. At present the banks do not charge’ exchange on notes ; but when they did there had to be a minimum, so that the charge had to be 6d. on either a £io-note or a £i-note.
– Why not 3d. ?
– Why not nothing? The Prime Minister seemed to indicate, though he did not state so very distinctly, that, in his opinion, a Commonwealth Savings Bank would afford the possibility of higher interest. In the Savings Banks of Australia at present there are 1,483,573 depositors - a large number, considering that our population is only 4,500,000 - and at the end of 19 10 the total amount to their credit was £53>i J”7>498-
– Are these all separate depositors and accounts?
– Separate depositors and separate accounts.
– Some depositors have three accounts.
– I am quoting from Knibbs. The Prime Minister seemed to suggest that, with one Savings Bank for the whole Commonwealth, there would be sufficient economy in the management to enable the payment of higher interest. I have calculated that an additional per cent, would necessitate a saving of £132,792; an addition of & per cent, would necessitate a saving of £66,396 ; and an additional I-I 6th per cent, would necessitate a saving of £33,198. We can, therefore, I think, dismiss altogether the idea that, by any saving in the management, it will be possible to pay the depositors a higher rate of interest. The honorable member for Hindmarsh expressed the hope that, if the Savings Bank grows, the whole of the moneys deposited will eventually be employed by the Government. That, in my opinion, would be very dangerous, and for several reasons. The principal reason is that the assets of the bank will not be sufficiently liquid to enable the Government to realize, in the event of their so desiring, a large sum of money at any particular time. I find that during last year no less than £34,025,000 was withdrawn from the Savings Banks, although that was a year when Australia was prosperous from one end to the other. There was more by £1,000,000 paid into the banks, but it will be recognised that there are very large operations in connexion with the Savings Banks’ accounts. And if the time arrives - and it is likely to arrive any day - when there is a period of great depression, we shall probably find that a very large proportion of the £53,000,000, if deposited in the Commonwealth Savings Bank, will be withdrawn. If the Government have used the whole of the money, how are they to meet the demand of the depositors? Honorable members must always bear in mind that such moneys are required always at a time when it is most difficult to get money at all.
– What about the Government printing machine?
– I do not think we need take that into consideration just now.
– The Commonwealth Bank would not be in any worse position than other banks.
– I think I can show that the Commonwealth Bank would be in a worse position.
– The credit of the Commonwealth would be behind the Commonwealth Bank.
– I would remind the honorable member that, in the possibility I have cited, credit is no good - it is money that is wanted.
– Who came to the rescue in 1893?
– I shall deal with that later on.
– It was Government credit then.
– That is another matter altogether. I am endeavouring to show that if the Government utilizes the whole of the moneys they will have to find coin somewhere when the pinch comes and the depositors make their demands.
– The Government do not propose to utilize all the moneys.
– I am dealing with the remarks of the honorable member for Hindmarsh. I pass on from that, however, to what the Prime Minister said when he was introducing the Bill - a passage which, I believe, gives the real reason for the proposed Commonwealth Savings Bank. The Prime Minister carefully refrained from telling us what the reason is, though I think it is disclosed in the following sentence of his speech : -
It will probably have a common stock; and in course of time, as the bank develops, interest-bearing debentures or bonds of every kind will probably be available in every part of the Commonwealth.
I read that sentence very carefully a good many times, and I am not sure now that I know what it means.
– Does he?
– Probably the Prime Minister knew what was in his mind at the time. It seems to me that he had an idea that eventually the Government were going to get the use of these moneys by inducing the depositors in the Savings Banks to invest their savings in bonds or debentures. If I am right, and debentures are issued at 3i Per cent., when the time of stress and trial comes, and the investors try to place their debentures on the market, they will not get £100, or anything like the £100 they paid into the bank. I am simply dealing with a conjecture. It appears to me from what the Prime Minister said that my assumption is correct. He said -
Interest-bearing debentures or bonds of every kind will probably be available in every part of the Commonwealth.
– Would it not be a good thing if they were available?
– I am endeavouring to point out that the Prime Minister is putting it forth as one of the advantages arising from this measure, that bonds or debentures will be available all over Australia.
– Was not the Prime Minister then dealing with the issue of debentures ?
– I will read the whole passage -
A Commonwealth Savings Bank, as compared with the State Savings Banks, will at least provide for uniformity, and also, I venture to think, for a cheaper exchange in every part of Australia.
Then he added -
It will probably have a common stock ; and in the course of time, as the bank develops, interest-bearing debentures or bonds of every kind will probably be available in every part of the Commonwealth.
If that passage bears the meaning which I place upon it, the depositors in the Commonwealth Savings Bank will eventually find that they have struck a very poor bargain indeed. Probably the Prime Minister hopes that the Commonwealth will be saved from going on to the London money market. I do not know whether that is what he is endeavouring to secure. But it looks like it. I venture to say, however, that in a great country like Australia, with an enormous amount of development in front of it, we should endeavour in all legitimate ways to extend our credit. I have before me a volume of the writings of Hamilton, containing a passage written when he was about to start a National Bank in America.
The United States possess an immense mass of improvable matter’; the development of it, continually making, may be said to enlarge the field of improvement as it progresses ; and, though the actual capital of the country has, no doubt, considerably increased, it is probable that it does not bear, at present, a much greater proportion to the objects of employment than it has done at any former period. Credit, upon this hypothesis, of every kind, is nearly as necessary to us now as it ever was. But, at least, it may be affirmed with absolute certainty, that, to a country so situated, credit is peculiarly useful and important.
I think that those words of Hamilton,, written towards the close of the eighteenth century, are particularly applicable to Australia at the present time. Whilst I do not advocate any wild and reckless system of borrowing, I do say that Australia should endeavour in every legitimate way to extend her credit. The credit of a country is, perhaps, the most sacred thing that a Government have committed to their charge. It should be their first care to see that our credit is good all over the world; and not only so, but that we make every legitimate use of our credit.
I will not deal any further with that point, but should like to direct attention to a few things in the Prime Minister’s speech in which, as it appeared to me, he made it perfectly clear that he, at all events, hopes that,the Commonwealth Savings Bank will eventually lead to the closing up of the State Savings Banks. He said -
I desire to say quite frankly that I think that the passing of this Bill will mean that there will be ultimately only one Savings Bank in Australia.
The Prime Minister is proposing to start this new bank, therefore, with the ultimate idea that there shall be only one Savings Bank for the whole of Australia. How does he propose to arrive at that? By withdrawing from the States the facilities which their depositors have at the present time to deposit money in .State Savings Banks through the post-offices. He was careful to say that he did not propose to close the State Savings Banks up immediately.
– Homoeopathic doses.
– Precisely ; the Prime Minister is going to “ deal it out “ to them, as my honorable friend suggests, in homoeopathic doses. He does not propose to do anything in a “jarring manner” ; and he did not say that he proposed to withdraw from the State Savings Banks immediately the facilities which their depositors at present have. But he stated quite frankly that, in his opinion, the State Savings Banks would be closed up. He said -
I think it is impossible for two Savings Banks to be carried on in the same post-office without some difficulty arising.
Once more, he said -
My own individual opinion is that the advantages of a Commonwealth Savings Bank will be such that probably, in addition to securing new depositors, it will obtain some of the money now deposited in the State Savings Banks.
I do not desire to say anything further on that point, except that it seems to me that it is the settled policy of the Government of the day to cripple the States financially. First of all the Commonwealth took from the States, to a very great extent, the opportunity of using land taxation as a means of revenue. Then we have taken from them the note tax. Now it is proposed to start this scheme, which the Prime Minister seems to hope will eventually result in depriving the States of those funds which they at present use to make advances to struggling settlers, enable working men to establish homes, and assist in the agricultural development of the States.
– Do they say that- the Savings Bank depositors will be any better off?
– I have endeavoured to deal with that point already. I do not think for a single moment that the depositors will have any more security than they have at present. If there ever comes a time in our history when the credit of our States is so bad that the depositors in the State Savings Banks will be unable to obtain their money, I venture to predict that the credit of the Commonwealth will then be no better than that of the States.
I wish to pass on now to the far more important matter of the establishment of the proposed Commonwealth Bank. So far as the principle of the Savings Bank is concerned, there is nothing to object to. Near the conclusion of his speech, the Prime Minister said -
This proposal deals with a matter of serious importance, and may affect our national life and progress more than we can see at present.
I thoroughly agree with the right honorable gentleman in that. I think that this is a matter of the most serious importance, and it may affect our national life and progress more than any of us can estimate at the present moment. Yet we are entering upon its consideration in circumstances very different from those in which any Parliament has previously been called upon to consider a question of such importance. Never in the history of the world has a Parliament sat to consider a great financial proposal such as this in similar circumstances. In April, 1909, a Conference of the Labour party met in Brisbane, and adopted a platform of nine planks, one of which was the establishment of a National bank. We are in this position to-day that, no matter what arguments may be adduced, or what reasons may be shown, why we should stay our hand at this time in regard to this particular subject, a majority of honorable members in this House are pledged, whether they like it or do not, to vote for this Bill. This is one of the extraordinary circumstances in which we are asked to enter upon the consideration of this great question. The Prime Minister was bound, whether he liked it or did not, to obey the orders of the Conference to which I have referred, and bring this proposal down to the House.
– I helped to put it on the Labour platform ten years before that.
– That does not affect my statement in the slightest degree. I say that, whether the Prime Minister believed in this particular proposal or did not, he was bound to bring it before the House, and every honorable member opposite is bound to vote for it whether he likes it or does not. I venture to say that there is no question upon which we should enter freer from party considerations than this. It is far too delicate a subject, if I might put it in that way, to be forced through this or any other Parliament. It may affect our progress and prosperity in a way that none of us can foretell. I have already stated that, in my opinion, the great system of credit rests upon an absolutely scientific basis. We cannot ruthlessly interfere with it or do anything which is not absolutely in accord with the scientific principles upon which it is based without Inevitably causing trouble, the extent of which may be infinitely greater than the actual disturbance of the system which is made.
– How will this proposal affect the principles to which the honorable member refers?
– I shall endeavour to explain that to the honorable member. I believe that in one fundamental and important particular this proposal does interfere with those principles. It is an important particular which it is perfectly possible for honorable members to alter, but it will involve the alteration of the whole structure of the system, and will make the widest possible difference when trouble arises. Though I have yet to be convinced of the necessity of this bank at the present time, I think that if it is altered it will make such a material difference that, in all probability, a very great deal of the opposition to this proposal, as we have it from the hands of the Government to-day, will disappear. However, that is anticipating. I do not believe that there is a subject with which we could deal that is more highly technical. It is exceedingly complex. To thoroughly understand it, one requires a knowledge of the most abstruse branches of law and of commerce. It requires a life-time of experience to put it into operation with safety to the depositors and the public. These are reasons why I think honorable members should, quite apart from any party obligations, consider the proposal absolutely on its merits. There are two questions which I think the Prime Minister might have answered in his speech, but on which, so far as I could discover, he gave us very little, if any, light at all. The first is: What is the need for this bank? and the second, What is it proposed to accomplish by means of the bank ? I think that to these two questions we should have had a full, clear, and explicit answer. In regard to the first - What is the need for the bank? - there are two things which the Prime Minister mentioned. The right honorable gentleman seemed to think that existing banks are making too much money. He mentioned the profits of four of our very large financial institutions, and gave us the rate of profit they made last year, taking the paid-up capital alone as his basis. He gave us, also, a full tabulated statement of the profits of these banks for twenty-six years. I have taken the trouble to very carefully prepare a statement showing the average profits on the average paidup capital over the whole of that period. First, I have taken into consideration the paid-up capital alone ; secondly, the whole of the shareholders’ funds - which, of course, represents the real capital invested - and, finally, the loss upon the total capital subscribed during that period. The results at which I have arrived are very peculiar. I find that the average paid-up capital during the period indicated was 1 7,660, 114, whilst the average reserve was 6,258,416. The average rate of profit on the paid-up capital was 6.87 per cent., but including the whole’ of the shareholders’ funds it was only 5. 11 per cent. I find, too, that whilst the paid-up capital invested in 1896 was £23,221,426, in 1905 it had decreased to £17,261,022,’ or a loss of £5,960,404. The reserves during the same time had decreased from £7,976,767 to £4,500,152 - a reduction of £3>476,6i5, making a total loss in capital and reserves of £9,436,019. If I allow only £6,000,000 of that loss to be debited to the capital reserves - because I do not know exactly how the reserves were handled, and, of course, everything depends upon that - it will be seen that the actual rate of profit made by our banking institutions during the whole of that period was 4.1 per cent. That is not very much. When we recollect the risks which are incurred in connexion with banking, it will be readily agreed that 4. 1 per cent, is not a very big profit for our financial institutions to make. That rate of profit, too, covered the early nineties - a period in the history of our banks when they were paying very large’ dividends indeed - dividends which were partially responsible, no doubt, for the financial crash which occurred in 1892 and 1893. Since then, our banks have learned wisdom, and, as a consequence, their dividends to-day are very much more within the limits Than they used to be. There is just one other point with which I should like to deal. I think the honorable member for Angas mentioned the number of banks that there are in Australia at the present time. There are 1,924 branches of ordinary banks, and 1,838 Savings Banks. It is now proposed to add to these a very large banking concern whose ramifications will spread all over the Commonwealth, and also to superimpose another Savings Bank on top of the existing Savings Banks. At the present time, there is one ordinary bank in Australia for every 2,273 persons, and if we include Savings Banks, there is one bank for every 1,363 persons. Now, in the United Kingdom, there is only one bank for every 5,015 persons. It will be seen, therefore, that Australia has nearly four times as many banking facilities as are possessed by the Old Country. In fact, I think I am right in affirming that the Commonwealth is, in all probability, the best equipped country from the standpoint of banks, in the world.
There were two other matters which the Prime Minister mentioned with a view to showing the need which exists for the proposed Commonwealth Bank. He said-
The slightest reduction in the rate of interest should, if properly applied, add to the productivity of the country, and, therefore, be of distinctive advantage to the Commonwealth. If dividends are reasonable all is well. I should now like to say a word about introducing the Bill at this time. This is the time to legislate - a time of prosperity and financial calm. We are singularly fortunate in that we are able to deal with a banking proposal of this kind under such conditions. This bank is to be conducted on business lines, as I have already told honorable members. There must be absolute security for all investment, and we propose to meet public requirements at the lowest rates of interest.
This matter of the possibility of reducing interest I leave on one side for the present. He also said -
The question has been asked of me, and I express the hope that while the bank may deal in land securities and other securities, it will in time grow to be rather a bank dealing in ordinary bills of exchange and liquid securities of the kind - that it will ultimately become the bank of banks rather than a mere moneylending institution.
Now, if the Prime Minister had had a little experience in banking institutions in this country, tie would know that one of their greatest difficulties is that there is not sufficient discount business to go round them. All through the piece, there has been an insufficiency of this class of business. The honorable member for Hindmarsh expressed the hope that the time will come when the proposed Commonwealth Bank will transact exactly the same class of business as is transacted by the Bank of England. But I would point out to him that we have not the field to enable us to do that. The Bank of England is an institution which deals pretty well with the foreign exchanges of the world. It does an enormous amount of discount business, and, naturally enough, it prefers to do that class of business. If our banks could transact a similar class of business, they would be only too willing to transact it, and no other. But they cannot do it, because it is not to be done. Though they all transact a certain amount of discount business, and a certain amount of London business, its volume is not sufficient to occupy their capital and resources. As a result, they are obliged to fall back upon other business. That is one of the reasons why they keep such a large gold and bullion reserve. They are obliged to do so, because their assets are not in a sufficiently liquid condition - a great deal of their money being invested in land - to enable them to carry on with the amount of gold with which the Bank of England can manage to carry on very well. There is one point in connexion with this measure which strikes me as rather peculiar, and it is that the Labour party should be the. party to endeavour to establish a bank to deal with the discount business. I have always understood that our honorable friends opposite were pledged to the nationalization of the means of production, distribution and exchange.
– Surely you did not understand that?
– I believe that it is on their platform.
– As citizens of the State.
– Of course, .as citizens of the State. I did not mean that it is on the platform of the Federal Labour party inasmuch as the Constitution does not give the power to nationalize the means of production, distribution and exchange. If it appeared on their platform it would be a mere placard, but it appears on the platform of the State Labour party, and I believe that my honorable friends opposite believe in the proposal. I have no reason to think that they do not. Every bank which deals successfully with this class of business is, to that extent, another rampart added to the fortress within which the capitalistic system is securely entrenched, and I venture to say, another insurmountable obstacle in the pathway of those who would march forward to the realization of the dream of the nationalization of the means of production, distribution and exchange. Because the moment that you set up the nationalization of those means your discount business will vanish into thin air. That must be perfectly evident to everybody. These are merely superficialities, if I may so put it, of a very big subject indeed.
– Consequently, for the present we shall be satisfied with discounting most of what you say.
– I did not mean, nor do 1 mean, that the matter of the nationalization of the means of production, distribution and exchange was a superficiality. I mean that the matters with which the Prime Minister dealt as showing the necessity for establishing this bank are the merest superficialities of a very great subject. I want to deal now wilh the system of credit, and to show why, in my opinion, the bank should not be started on the credit of the State. That is the fundamental objection which I have to the proposal.
– You do not believe in a State Bank?
– I do not object to honorable members calling it a national bank, or whatever they like. I do not object to the Commonwealth buying some of the stock of the bank, though, I think, as I shall be able to show directly, there are reasons why it is wisest not to do so. The bank, if established, should not rest on the credit of the State.
– Only for the credit of the States the private banks would have been in a peculiar muddle in the nineties.
– That is a very important point with which I shall deal later, and it is the reason, above all others, if I may so put it, why the bank should not rest on the credit of the State.
– Because it saved the private banks.
– There is a very wide distinction, and it is, I admit, one of those nice distinctions which abound right through this great subject, but one which makes all the difference in the world when the time of trouble does arrive. The first point I want to take is that we have had no inquiry. We are dealing with this great subject more or less in the dark, and though I, in common with a great number of honorable members, have, from time to time, read a very great deal about the matter, and dealt with it in various ways, the more we read, the more we realize that it is a subject of which we know very little indeed. That there is room for inquiry I am quite willing to admit. An era of great prosperity, such as we have in Australia at present, is probably the best time to think about, if it is possible, making all due preparation for a commercial crisis. 1 agree with the honorable member for Hindmarsh, that it is impossible to predict when a commercial crisis will arise. I have already stated in the House this session that, in my opinion, commercial crises are inherent in the system of credit. They will arise, no matter what we do. I have also stated, I think, the reasons why I believe it ‘is almost a necessary evil that, from time to time, commercial crises should arise, not only in Australia, but in all parts of the world. What we can do, what we should endeavour to do, is to prevent them from developing into monetary panics. A strong central bank may be the best means in our power of achieving that object. I admit frankly that I do not know. Australia has probably one of the soundest banking systems to be found in the world. Our banks are in a very proud position, taking them all in all, and they look strong enough to withstand almost any tempest which may come along. Again, I say that I do not know, but I do think that there is room for an inquiry covering the field of the actual need of the bank. I hope that the Government will see the wisdom of withdrawing the Bil] from the consideration of the House this session, and holding it over for a few months while an inquiry is held. Then, with all the advantage of the knowledge which we should gain in that way, the measure could be brought forward again. If an inquiry should point out to us an absolutely sound method of establishing a national bank, and also that its establishment is, if not actually necessary, advisable, I should give the Government every possible assistance to make the Bill perfect. But I contend that an inquiry is an essential before we commit ourselves to this or any other scheme. Let us, by all means, for the time being, hold our hands. There is no haste. In this matter, above all others, we should be cautious, and hasten slowly. From what I have read,’ there is a good deal to be said for the establishment of a bank here somewhat upon the lines of the Bank of France, though the circumstances of the two countries are widely different. France, for instance, has an enormous note currency.
– And an enormous reserve.
– Yes; though a large part of it is in silver, which is held at its full face value. The French note issue runs into many millions, while ours is very small; because our community is in the habit of ‘Using cheques, and is likely to continue to do so, it being handier to pay by cheques than to carry notes about. To the banks it does not matter whether they distribute their credit in the form of notes, or whether their customers distribute it for them in the form of cheques. There are uses for a note issue which, in my opinion, make it essential to the fulfilment of the true function of a bank; but with that I shall not deal now. While there is a good deal to be said for the establishment of a bank here on the lines of the Bank of France, I doubt the wisdom of associating the credit of the State with that of the individual. The closer the association of the State with the basic credit of the bank, the less secure the bank. We have had, in comparatively recent history, two occasions in which heavy strains have been placed on national banks, and I shall illustrate, by extracts, the manner in which the banks affected have met them. Every one will remember that, at the end of the Franco-Prussian war, France had to pay to Germany an indemnity of 200,000,000- francs. That gigantic operation was carried out by the Bank of France without shaking the” credit of the institution, without interfering with the development of the country - because France grew by leaps andbounds immediately after the war - and, so far as was possible, without any disarrangement of the money market. Pierre des Essars says, in his History of the Banking of All Nations -
The culminating stage of the career of the Bank of France was reached when it emerged from the trials of the Franco-German war with a clean credit, after the most formidable test that any institution of its kind had ever been forced to endure. Never before, in any country, had there been afforded a like example of an institution exercising such power, inspiring such implicit confidence, contributing so decisively to the recovery of a people that seemed crushed, performing more than its duty with impressive grandeur and simplicity. In that supreme struggle, a State Bank would not have been able to resist the exactions of the Government, and its credit would have become confused with the credit of the State.
That is an important point. In times of stress, if the credit of a bank is confused with the credit of the country, the bank must suffer. President Thiers said that the Bank of France saved France because it was not a State bank. That is an important point, as I shall show later. The other bank which has had to bear a national strain is the Bank of Germany, or the Reichs-bank. which is not entirely a Stateowned institution, although the Government controls it. In the case of the Bank of France, the Government is connected with the management, but the management is really in the hands of the shareholders. The Bank of Germany is entirely under the control of the Government. The Imperial Chancellor directs the administration, under the Rules of the Bank Act, precisely as our Prime Minister proposes to do under the Bill, some of whose clauses have been taken from the German Act, or, at any rate, resemble them very closely. The Imperial Chancellor publishes the directions for the bank directorate, and the rules and instructions for the bank officials. ‘ The wisdom of bringing in men who are in con- stant touch with the commercial life of the community is recognised, although these persons have not a direct “ say “ in the management of the bank. They form a committee, which makes weekly reports on discounts, loans, note circulation, cash in hand, deposits, sale of gold, bills, securities, distribution of funds, and bank officers. These reports are submitted regularly to the bank directorate, which is under the control of the Chancellor. Germany recently experienced a very mild crisis compared with that which France went through a good many years ago. There was a possibility of an outbreak of war between Germany and England and France, and almost simultaneously with the news getting abroad there was a run on the German banks. The reason for this was that the credit of the State and the credit of the banks were intermixed. The German banks, and particularly the Reichsbank, found themselves in such a tight corner that they had to discount in foreign countries German paper to the extent of £14,000,000, and to import that amount in gold to save the credit of the Imperial Bank. VVhere did they get the money ?
– From the Bank of England.
– Partly from the Bank of England, and partly from the Bank of France - from the two countries with which there was a possibility of Germany going to war. That is an illustration which deserves serious consideration. The Bank of France was able to meet the enormous payment of £200,000,000 without disturbing its credit, whilst it was at the same time assisting materially in the development of France; whereas when there was a possibility of Germany going to war with England and France, a German bank, more closely associated with the credit of the State had to go to England and France - the very countries with which there was a possibility of Germany going to war - to secure assistance to prevent, possibly not the closing of its doors, but a very severe strain being placed upon it. If honorable members take that point into consideration they will realize the danger of even associating the credit of the State-
– It shows that Germans had no faith in their own banks. They thought that the Chancellor was going to take all the money.
– Exactly. But the Germans are, probably, just as long-headed as are the Australians.
– There was never a run on the Bank of England during a war.
– I think there has been.
The honorable member has a rather exaggerated idea of the possibilities of the Bank of England. I would remind him that for twenty-two years it could not honour its own notes ; and that as recently as on the occasion of the Baring Brothers’ smash at Home it had to beg for gold from the Bank of France, as well as from the United States, and also, I think, Russia, to prevent its having to suspend payment at the time.
– The cause of that was that there was a lord on the management of the Bank of England ; worse luck !
– The Bank of England has certainly done valuable work, and is a marvellous institution.
– But it is not a Government institution.
– It is not; and I would remind the honorable member for Hindmarsh that it is not founded on absolutely scientific principles. I am not going to worry the House with my reasons for that statement.
– I should not if I were the honorable member. It might shake the credit of the bank [
– The honorable member will, find ample indorsement of my statement by practically every writer of note on the Bank of England.
– I do not know who they are.
– I shall content myself by mentioning one. The honorable member for Hindmarsh remarked very truly that practically every bank to-day was in relation to its gold reserves governed by the rate of discount, and the man who discovered that to be the correct means of regulating the gold reserves - McLeod - is one of those who says that the Bank of England is not founded on absolutely scientific principles. The association of private credit with public credit is far better than is only public credit for the establishment of a bank. Whilst I hold that view, I think at the same time that the fact that a bank rests upon public credit tends rather to weaken than to strengthen it.
– That is why the Bank of England is so weak !
– It cannot be said that the Bank of England rests on the credit of the Government. The British Government is heavily indebted to the bank, and is in no way associated with the credit of the institution itself. There is no Government guarantee. If the honorable member goes carefully into the position of the Bank of England he will find that there is plenty of room for improvement even in its case The honorable member smiles, yet that is not only my own opinion, formed after considerable research, but one which he will find amply indorsed by manywriters to-day.
– They have done very well up to date.
– They have, but I am not saying that the Bank of England is not a great institution; it is. All I say is that there is room for improvement. Let me quote a few passages from the writings pf Alexander Hamilton, a gentleman for whom the honorable member for Hindmarsh does not seem to have much respect, although I have.
– I said nothing against him.
– The honorable member seemed to think that, because Hamilton lived 130 or 140 years ago, his opinion was not worth much to-day. Certainly, when Hamilton wrote, the system of credit was not as clearly understood as it is to-day, but no one could read his works without being impressed by his wonderful foresight.
– He was the only American that understood anything about honest banking.
– I do not know whether that is so. I wish to quote his opinion as to the absolute necessity of associating private credit with the State credit for the stability of the bank.
– He was a great admirer of the Bank of England.
– Not altogether, for he points out faults which he sees in the Bank of England, and shows where the National bank which he was endeavouring to establish at that time in America would be an improvement upon it. At page 332 of volume 3 of 77/e Works of Hamilton there is this statement -
Mr. Law, who had much more penetration than integrity, readily perceived that no plans could succeed which did not unite interest and credit of rich individuals with this State; and upon this he framed the idea of his project.
And with regard to the National bank which he was advocating at that time, Hamilton said -
But when I consider, on the other hand, that the scheme stands on the firm footing of public and private faith, that it links the interest of the State in an intimate connexion with those of the rich individuals belonging to it -
At page 360 he states -
A plan must be devised which, by incorporating their means together and uniting them with those of the public, will,, on the foundation of that incorporation and union, erect a mass of credit that will supply the defect of moneyed capital, and answer all the purposes of cash.
Again he says, at page 378 -
The truth is, there is not confidence enough in any funds merely public.
All through it will be found that Hamilton impresses upon the Government, first of all in his letters and finally when he reports to Congress, and over and over again in his writings holds strongly and firmly, that if the bank is ever to be a success, if public confidence is to be retained, there must be the association of the credit of the individuals in the State with that of the State itself. At that time he was faced with a very peculiar state of affairs in America. Everywhere the credit of the State was, so to speak, discredited, and the moneys which the State had issued were at a very heavy discount.
– There is no analogy between that and Australia, is there?
– In principle, yes. He proposed that the old notes should be redeemed at the rate of forty to one of the new notes of the National bank, which, he said, would be issued on a sound credit combining the individual and the State. Those figures showed the extent to which’ the State currency of America had been depreciated. There is no necessity for me to deal to-night with the question of ‘nconvertible currency, but I desire to impress upon honorable members that this great financier, the man who saw through and through the whole system of credit in a marvellous way, and with wonderful foresight predicted things which actually came to pass afterwards, asserted at that time, when he insisted on the association of the credit of the State with that of the individual, principles which were finally proved only years and years afterwards. I wish to touch very briefly upon the question of the whole of the credit being that of the State. I have endeavoured to show that, by the mere association of the credit of the State with that of the individual as the foundation of the bank, the position is weakened in comparison to what it would be were the bank established on private credit, but it is made infinitely more weak when we establish the bank entirely upon the credit of the State, as we shall virtually do in this case. It is true that the Government will not own any stock in the bank as it is proposed to float it, but that does not alter the fact that the bank would have no credit whatever were it not for the credit of the State behind it, because it has no capital. We cannot dignify with the name of capital the Joan which it is proposed that the bank shall raise to carry it through its initial transactions. It is proposed to start the bank wholly and solely upon the credit of the State. Two or three honorable members have interjected during my speech references to what the Government did in 1893 to retain the credit of the banks. I admit that there is something in the contention, but it has nothing to do with the subject which I am endeavouring to put before the House. If the bank starts wholly and solely on the credit of the “State, and carries on ordinary banking business, it will be just as open to financial panic and rush as any other bank. There is no reason to suppose that, because it is a State Bank, it will be free from that loss of confidence which may attach to any banking institution. We have had ample evidence from time to time in the history of the world that once public confidence goes, it does not matter in the least whether a” bank is State-oWned or private. If such a rush is directed against a State Bank, who is going to restore confidence? After _ all is said and done, as the honorable member for Angas pointed out, banking is a species of insurance, conducted on die probability that all the depositors will not want t.heir money at once. Just as insurance is based on the probability that so many houses will be burnt down every year, so banking business is based on the probability that so much cash will be wanted every day. It is a species of insurance which rests absolutely on confidence; credit rests entirely on confidence, and banking rests entirely on credit. I ask again, if there is a run directed against the Government Bank, who is going to restore confidence?
– The public !
– But how?
– As they did in 1893 !
– No; and that is just why, in my opinion, it is unwise for the bank to be established on the credit of the
State. It is of no use to say that confidence will not be shaken in the credit of the State; because it has been shaken recently in Germany, and over and over again in different parts of the world. Even the Savings Bank in the State of the honorable member for Hindmarsh was subject to a run on one occasion. We can never say that, because a bank is established and owned by the Government, it is not going to be subject to a run.
– What does the Bank of England do when it is subject to a run ?
– If the honorable member asks that question a little later on, I shall answer it.
– My question is an answer to the question of the honorable member - there will be no run on the Commonwealth Bank.
– What I am endeavouring to point out is that we can never say that the proposed bank is not going to be liable to a run; and, if a run does set in, who is going to stop it ? Who is to come forward and establish the credit of the bank? The State cannot do so, for the simple reason that the State’s credit is involved.
– Pooh !
– What I state is a fact.
– The honorable member is talking like a child !
– I am perfectly certain’ that what i ain advancing is sound argument.
– A schoolboy could give an answer to the question the honorable member is asking !
– The honorable member may try to answer me later on. Once a run sets in on a State Bank, the State is not in a position, without practically doing, what amounts to repudiation, to assist the Bank in any way.
– Can the honorable member tell us what is likely to shake the credit of the State?
– Many things may shake the credit of the State, as I have already instanced in the case of the German bank.
– There is no danger of war with us !
– We do not know what is to happen in time to come.
– Why howl calamity?
– J am not howling calamity, but putting this proposal to a test which it may have to stand. If an engineer is building a bridge, he tests every piece of steel ; and on a great proposal like this, we should put the test of any reasonable strain it may have to stand. The reason why the State was able to come in and restore confidence in 1893 was that the State’s credit was not involved. All banking really rests on confidence.
– Does the honorable member suggest that private banks are able to withstand that nameless something which may shake the credit of the State institution ?
– It may be so; it al! depends on how the bank is managed. When a great financial panic takes place, in nine cases out of ten it is not because the banks are not solvent; it is not a question of whether the banks are solvent or not. The trouble is that in a country like Australia, where we cannot keep all our assets in liquid condition - where we cannot invest our money in that particular way - we are bound to tie it up more or less in the banks ; and the State Bank will be no exception to the rule. As I have said, the whole thing rests on confidence ; and if confidence be shaken, it does not matter whether the banks are solvent or not.
– Can the honorable member tell me what is that nameless thing which the private institutions can withstand, but which will shake the credit of the State?
– It may, or may not. Supposing that the private banks are solvent, but unable to meet the extraordinary drain put on them, all that is necessary to do is to restore confidence. I desire to make this point perfectly clear, because there is much misconception in the minds of honorable members about it. It is not a question of the solvency of the banks - it is a question of their being able at any moment to meet the particular demand. If any one can step in, and restore confidence, everything is all right, because the demand for money ceases. But if they cannot restore confidence, there is no saying how far the panic may extend. Practically every panic in the world has been arrested by some very simple expedient, which has enabled the bank to get money for the time being. But when the credit of the Government itself is involved in a bank, the Government is not in the same position to restore confidence. The honorable member for Hindmarsh asked me a little while ago what the Bank of England does when a run sets in, and how it gets out of the difficulty. I will quote what McLeod says on this point. He writes -
A Committee of the House of Commons was appointed, who reported that the sudden discredit of so large an amount of bankers’ notes had produced a most inconvenient deficiency in the Circulating Medium : and that unless a Circulating Medium was provided, a general stoppage must take place. They recommended that Exchequer Bills to the amount of £5,000,000 should be issued under the directions of a Board of Commissioners appointed for the purpose, in sums of /.-‘ ^50, and £20.
– What is the date of that incident?
– It occurred in 1784. In the several other instances since the Act of 1844, which the honorable member for Hindmarsh mentioned, the Bank of England finding itself in difficulties, the charter under which it was working had to be suspended by the Government of the day. The particular part of the bank’s charter under which the note issue is regulated, had to be suspended. In not one single instance has the bank beenable to carry on in the event of a run without the Government coming in and suspending the operation of the conditions regulating the note issue. By this means the bank has been able to issue notes over and above the actual amount of gold held in the issue department. That part of the bank’s procedure seems to me to be unscientific and to need to be amended.
I now wish to deal with the question of the reduction of the rate of interest. The Prime Minister, in his speech, said -
The slightest reduction in the rate of interest should, if properly applied, add to the productivity of the country, and, therefore, be of distinctive advantage to the Commonwealth. If dividends are reasonable all is well.
He also said -
There must be absolute security for all investment, and we propose to meet public requirements at the lowest rates of interest.
I do not know whether the Prime Minister will be successful or not in reducing the rate of interest. I cannot say. But it is doubtful whether cheap money would be in the interest of the people, and whether it would not encourage rash speculation. 1 am not dogmatizing on the point. I can only put my opinion forward with the knowledge that the subject requires the deepest investigation. But I should like to submit that it is worthy of the consideration of the House whether the low rate of interest at present ruling throughout the world has not an intimate connexion with the high prices which also prevail. Throughout the world to-day high price:, rule. The cost of living is going up. I think myself that it is highly probable that this is due, to a very great extent, to the low rate of interest at which money can be obtained. I venture to suggest that if the Commonwealth Bank were able to reduce the rate of interest much lower than the rate prevailing in Australia to-day, it might lead to a further rise in the price of commodities, the cost of labour, and so forth. The cost of living would be increased, and I doubt very much whether it would not lead to over-trading, rash speculation, and boom prices. To show honorable members what I mean, I shall carry them back a long way to the origin of money itself. As they are, no doubt aware, money represents debt. When, in early times, there was no money, ali exchanges were effected by barter. Eventually all the nations hit upon a system whereby they could have a universal exchangeable commodity, which we call money. When money is given in exchange for a commodity the exchange is not complete. That is to say, it is not complete until such time as that money is changed again for some other commodity. If honorable members will follow the line of thought they will see that the amount of money in any country represents the amount of debt in the country in whatever form the money may be. Nothing has an intrinsic value. The honorable member for Hindmarsh seems to doubt that the amount of money in the country represents the amount of debt.
– A lot of people are in debt who have no money.
– It represents it to this extent, that it always represents an unsatisfied exchange. Whatever amount of money we have in the country represents the total amount of a generally interchangeable commodity, which is there ready to be exchanged, for more commodities. I do not wish to labour the point, but I remind honorable members that inasmuch as nothing has an intrinsic value, and values are purely relative, if the amount of money in a country is increasing in greater proportion than the amount of commodities for which it can be exchanged, the tendency always is, and always will be to raise prices, and bring about in that way an equality of exchangable value. The greater proportion of currency to-day is non- metallic. I suppose that 98, certainly 95 per cent, of the exchanges in Australia to-day are carried out with non-metallic money, that is by means of credit. I have an idea that the tremendous increase in the amount of credit to-day accounts materially for the rise in prices. I may be right or wrong, but I point out that the Bank of France in the report for 1910 mentioned that it had been able to keep the price of money down very low in France for the last “few years, somewhere in the vicinity of 3 per cent., and that during that period prices had risen from 20 to 90 per cent. When we take that into consideration with the dear food riots that occurred recently in France, we can put two and two together, and I think honorable members will agree that it is quite on the cards that the rapidly-increasing volume of credit in the world to-day may be one of the causes bringing about the rapid increase in the cost of living. So I say we need to be very careful, because when it comes to issuing another great volume of credit on the credit of the State, through the establishment of a great banking institution, the effect may be, I do not say it will be, to materially raise prices in Australia.
– Then the honorable member suggests that this proposal will cheapen money?
– I do not suggest it. I am simply pointing out that the Prime Minister, in introducing the Bill, said there might be a possibility of reducing the rate of interest through this bank. I am not too sure, in my own mind, that that would be a good thing at the present time. I think that whilst the rate of interest should be kept down to the lowest useful limit, at the same time, it is possible for it to be too low for the good of the country. I am not at all certain that it would be wise, even if this bank were started, to attempt to cut down the rate of interest in any shape or form.. I do not think it will be possible to do it to any great extent. I had a number of extracts which I desired to quote from different authorities in support of this view, but I shall not weary the House with them at this hour, because I am very tired, and I have no doubt that honorable members are also tired. I should very much have preferred to be able to conclude my speech to-morrow. There is one other point in connexion with the reasons for a further inquiry into the whole scope of this question. I believe that the increase in the amount of credit which may be brought about by the establishment of a big bank, such as this, at the present time, might lead to the very thing honorable members opposite are so anxious to avoid, and that is a financial crisis. I think that is possible. Honorable members will recognise that we are probably on the top of a wave of prosperity. Things are booming. I do not know how soon this bank is going to be started. I do not know how much credit it will be able to issue. Probably it will be able to issue a very considerable volume of credit straight away, and I am not at all sanguine as to what may happen afterwards. In the first place, I do not think that booms .are started by banks. Speculation is not started by banks, and in a certain sense it is not aided by banks. I do not think that banks are really responsible for monetary panics. Rash speculation and booms always start with the public. When a man comes to him for an overdraft and offers him good security, a banker cannot possibly tell to what purpose his customer proposes to put the money. The latter may use it to buy property which will help to boom property alongside of him. He may use it for trading purposes. He may use it for a hundred-and-one different things. It is impossible for the banker to know what he intends to do with it. He may ask his customer to what use he proposes to put the money, and the customer may tell him, but, on -the contrary, he may not. This overtrading always starts with the public. The banks are not responsible for it.
– But bankers like to know the character of the man with whom they are dealing.
– They do, but that fact does not affect the possibility of the money advanced by them being used to bolster up a boom.
– But if one man takes money out of a bank, another individual puts it back.
– That circumstance does not affect the amount of credit.
– Still, the money is in the bank.
– But perhaps the money advanced by the bank has been used to increase prices.
– All trading is done with a view to making a profit.
– Of course it is. However, I have no wish to unduly occupy the time of the House. I would1 have liked another hour to-morrow in which to express my views upon this Bill, but I am too tired to continue my remarks to-night.
– It is not a question of: days, but of time.
– There is just one other point with which I intend to deal, namely,, the question of the control of the proposed bank. It is to be in the hands of one man, but I do not intend to discuss that. I shall deal only with the possibility of political influence being exercised in regard to its management. The Prime Minister, during, the course of his remarks, said -
In our case we have what is equal to a Board, but without the information. What I mean is that Parliament meets at least once a year.
– The Treasurer does not suggest that Parliament is to be a Board of Directors?
– I say that we have what is better than a Board of Directors. If any failure should occur through want’ of ability, or from some other cause on the part of the Governor of the bank, provision is made to enable Parliament to be informed, and Parliament can by legislation provide a remedy. It will be seen that the powers and duties of the Governor are prescribed by regulation.
– Will there be an annual charge for keeping accounts in the Savings Bank?
– That is a matter to be dealt with by regulation on the authority of the Treasurer, but were I in office I should veto such a proposal.
– Will the bank have to bear the expense of the Savings Bank business?
– How are we going to discriminate ?
– We hope to have a wise man at the head of this institution, and, though it seems unnecessary, I may say that, so long as there is a safe, steady party like our ownin office, there is nothing to fear.
That quotation shows that the Prime Minister anticipates that there will be a considerable amount of interference with the affairs of the bank by Parliament, by regulation, and by the Treasurer of the day. For myself, I am strongly of opinion that if the institution is to be a success it should be entirely divorced from political control. Its management should certainly not be in the hands of one man, but of several, and it should be altogether dissociated from political influence and control. There is one more quotation which I propose to make from Alexander Hamilton. It is a very significant one, and one which puts the case much more clearly than I could possibly put it. He says -
Considerations of public advantage suggest a further wish, which is - that the bank could be established upon principles that would cause the profits of it to redound to the immediate benefit of the State. This is contemplated by many who speak of a national bank, but the idea seems liable to insuperable objections. To attach full confidence to an institution of this nature, it appears to be an essential ingredient in its structure, that it shall be under a private not a public direction - under the guidance of individual interest, not of public policy; which would be supposed to be, and, in certain emergencies, under a feeble or too sanguine administration, would really be, liable to being too much influenced by public necessity. The suspicion of this would, most probably, bc a canker that would continually corrode the vitals of the credit of the bank, and would be most likely to prove fatal in those situations in which the public good would require that they should be most sound and vigorous. It would, indeed, be little less than a miracle, should the credit of the bank be at the disposal of the Government, if, in a long series of time, there was not experienced a calamitous abuse of it.
The writer very clearly expresses what I feel may happen at any time. If the proposed bank is to be practically under the control of the Treasurer of the day, the political exigencies of the moment may induce him to bring such pressure to bear upon the Governor of it, that the latter may give way at a time when every consideration of safety demands that he should stay his hand. If the bank is to be a success, I say again that it must be entirely divorced from political control. There is just one other matter that I will mention, in closing. It is an established principle in connexion with banking that a banker should never be a trader. Yet it is proposed that the Commonwealth shall go in for a good deal of trading of one sort or another. There is a possibility that that may be extended very materially in time to come. It often happens that the interests of the trading community and the interests of the banking community are diametrically opposed. The bank will probably be used for financing the trading operations of the Government; and there may come a time when the interests of the trading part of the Government business will be diametrically opposed to the interests of the bank. Just when, possibly, the trading interests require the greatest amount of assistance, it may be absolutely opposed to the best interests of the bank, as such, to grant that money. That. is an element of danger in the scheme which I see. I am sorry that, owing to the fact that I had to start my speech at a very late hour, I have not been able to deal with the subject as fully as I should have liked, and owing to the numerous interjections which have come from the other side, I have prohably strayed considerably from what I originally intended to say. But I do impress upon the Government that, before we are committed to thisscheme, for which there is no precedent in the history of the financial world, it would be advisable, in the interests of Australia, not to pass the measure into law this session. I have already stated that, in my opinion, it may be found needful to create a great central banking institution; I do not know. I do almost beg of the Government, before they finally commit themselves and the House to this particular scheme, to have a thorough inquiry made, because I feel sure that if it is made they will find good reasons for modifying their proposal. As the Prime Minister has pointed out, and as I indicated at the beginning of my speech, there are connected with the proposal questions the result of which it is impossible for us to foresee. We cannot tell when this may be found to be the worst possible proposal which Australia could have adopted.
– It cannot be. It must be for the benefit of Australia.
– I confess that I feel considerable doubt about it. I think that the basis of the issue of credit is wrong. I believe that the bank should rest purely on private credit, and not on the credit of the State. I do hot care if the capital is subscribed by the individuals. I would not object to see the interest on the shares definitely fixed. At the same time, I feel that, in starting the bank purely on the credit of the State, the Government are taking upon themselves the responsibility of initiating a scheme which, in all probability, will be found to be the worst possible one which could have been adopted. I do not know. I confess that I have very great doubts on the subject ; but I do ask the Government, in conclusion, before they pass the Bill through the House, to take time to consider the matter. Let there be a thorough inquiry made, and when the House has obtained definite information, given in the light of Australian conditions, on which so much depends - everything connected with banking varies in different countries - if it is found necessary, or advisable, to proceed, I, for one, would not be slow to support the Government -in any such scheme.
Debate (on motion by Mr. Kelly) adjourned:
House adjourned at10.50 p.m.
Cite as: Australia, House of Representatives, Debates, 21 November 1911, viewed 22 October 2017, <http://historichansard.net/hofreps/1911/19111121_reps_4_62/>.