4th Parliament · 2nd Session
Mr. Speaker took the chair at 2.30 p.m., and read prayers.
– In the event of a treaty of reciprocity being entered into with the Government of New Zealand, will the Prime Minister give the House an opportunity to discuss the matter?
– If the Government made such a treaty, it would stand or fall by it, and the treaty would have to be laid before Parliament for ratification.
– Will the Minister of Trade and Customs, in the event of any proposal for reciprocal trade with New Zealand, lay on the table a statement of the wages paid and hours worked in connexion with the production of commodities in regard to which preference will be proposed?
– I shall be pleased to lay on the table any information that will assist honorable members to arrive at a correct decision.
– In arranging a treaty of reciprocity with New Zealand, will the Prime Minister give full consideration to the dairying interests and the general producing interests of Australia before coming to any agreement?
– Ministers will, to the best of their ability, give full consideration to every interest in Australia. I do not know that New Zealand is likely to do us any harm.
– Will the Minister of
Trade and Customs, prior to any proposed amendment of the Tariff, have prepared and laid on the table a statement showing the wages actually paid in various employments and manufactures, so that honorable members may be in a position to determine what rates of duty should be imposed on imports?
– I shall be pleased to supply honorable members with all the information available, but it will be impossible to get what the honorable member asks for. Such’ information is obtainable in America, but there the Bureau of Statistics is further advanced than here.
– Has the Minister of External Affairs yet received from the High Commissioner particulars regarding the proposed site of the Commonwealth Offices in the Strand, London, inspected by honorable members who visited England at the time of the Coronation?
– Do the Government propose to submit the matter to Parliament this session?
– It is the intention of the Government to submit a motion this session.
– Is it a fact that the Chief Electoral Officer of the Commonwealth has been appointed Chairman of the Commission for the re- distribution of Victorian electoral divisions, and that the Chief Electoral Officers for the States have been appointed for the re-distribution of the divisions of other States?
– The Chief Electoral Officer of the Commonwealth is one of the Commissioners for the Victorian re-distribution ; but I do not know whether his fellow Commissioners have made him chairman.
– Is the State Electoral Officer also one of the Commissioners?
– The Commissioners for Victoria are, the Chief Electoral Officer of the Commonwealth, the Chief Electoral Officer for Victoria, and the. Victorian Surveyor-General.
– Is it not a fact that the Commissioners’, Teport will have to be submitted to the Chief Electoral Officer of the Commonwealth, and does the Minister not think that that may place the officer in a rather awkward position?
– If the honorable member will give notice of the question I will look into the matter.
– Has the Minister of Trade and Customs yet received a statement from the High Commissioner of the grievances under which those who representin London the butter-makers of the Commonwealth, labour? I asked a question on this subject last week.
– I ask the honorable member to give notice of the question, as I have not ascertained whether the statement has been received.
-When does the Prime Minister intend to lay on the table the papers he promised, in reference to the transfer of the site of the Naval College from Burraneer Bay to Jervis Bay ?
– The reports are confidential, but I do not know that there is any objection to laying them on the table. I shall give an answer later.
– Will the Prime Minister supply to honorable members, before the debate on the Commonwealth Bank Bill closes, the particulars in regard to the balances of the banks which he promised?
– I shall make inquiries, to ascertain if that can be done.
asked the PostmasterGeneral, upon notice -
– The answer to the honorable member’s questions is as follows : - 1 and 2. So far as I can ascertain, there has been no re-adjustment of the aerial cables in the metropolitan district of Sydney; but I am advised action was taken some time back to lower some of the cable clips next to poles and attached to suspension wires with a view to the better maintenance of the cables. In addition to this, steps have been taken in certain cases to replace aerial cables by underground cables.
asked the PostmasterGeneral, upon notice-
– Inquiries are being made, and the desired information will be furnished as early as possible.
Question - That Mr. Speaker do now leave the chair, and that the House resolve itself into Committee of Supply - resolved, in the negative.
Mr. KING O’MALLEY laid upon the table the following paper: -
Meteorology Act - Regulation re sale of publications. - Statutory Rules 1911, No. 193.
Debate resumed from 22nd November (vide page 3058), on motion by Mr. Fisher -
That this Bill be now read a second time.
Upon which Mr. Deakin had moved -
That all the words after “That” be left out, with a view to insert in lieu thereof the words “ the Bill be referred to a Select Committee for full inquiry into its provisions, and more particularly into the need for a Federal Government Savings Bank.”
.- This debate on one of the most important measures that have come before us, has extended to a considerable length. A number of the clauses will require to be dealt with in Committee, and, therefore, it is not my intention to take up much time in discussing the general principle. The historical ground has been sufficiently covered, I think, by the two first exhaustive contributions to the debate. It is the duty of the Federal Parliament to undertake the establishment of a Commonwealth Bank as the Constitution allows; and I am a believer in the exercise of that power. When the Commonwealth Notes Bill was before us I held that it was the duty of the Parliament to deal with the paper currency. It is generally admitted that the credit of the Commonwealth is greater than the credit of any section of individuals within the Commonwealth. The teachings of history are very clear that the strength and legal authority of the Government has been necessary over and over again in order to avert financial disaster ; and, approving as I do of the principle, the only question is as to the character of the measure. The Prime Minister says that this Bill was not one of idealism, but rather one of business, and, in view of that plain truth, which we all indorse, it becomes our duty to see that the Bill is based on the soundest principles of banking that the teachings of history and experience can afford. It was the introduction of trade and of barter into early civilization that gave the impetus to progress. The higher the development of civilization, the higher is the development of trade, and the higher the development of trade and commerce, the more complete is the system of banking. In the leading countries of the world we have the highest type of civilization, and commercial, trading, and banking systems afford us the best guide on the present occasion. We are fortunately part of an Empire which’, in the Bank of England, supplies the best illustration of financial and commercial stability. In Australia there are banks of which we all should be proud, and those banks were never in so sound a position as now. Although we are a sma]) population, we cover an enormous territory, and have a large commerce. This is the proper time to inaugurate an institution of the kind which will be prepared, at least, to do the great business which the Commonwealth is undertaking, and will have to undertake in increasing volume. An institution of this kind is of the greatest importance in relation to the business of the Commonwealth itself. We are committed to enormous works, and, later on, we shall have to undertake the important duty of the consolidation of the State debts. In all this the Commonwealth Bank can assist in such a way as to make considerable savings to the Commonwealth, or, in other words, yield considerable profits. Just as I believe the note issue is a proper function for the Commonwealth on sound principles, so I believe that, under proper conditions, a Commonwealth Bank can be made one of the most useful instruments in our efforts to retain economy and efficiency. There is the objection which has been fully voiced by several honorable members opposite, that we have thrust on us the whole onus and responsibility of the management of this bank. This proposal has been placed before the House without any precedent. The Prime Minister, in moving the second reading of the measure, could name no country where the conduct and management of a great institution of this kind had ever been undertaken under the same conditions. As the Prime Minister stated, this is a business matter, and not one of idealism, but in another part of his speech the right honorable gentleman said that the measure meant a great experiment in banking. He is not justified in introducing a piece of financial experimentation in connexion with a great measure of this kind, which will be a kind of pivot on which our future financial stability will turn. Seeing that the Prime Minister laid it down that the first principle of the measure was business. it was his duty to place before the House a scheme founded on the best experience of the leading financial nations of the world. That eminent authority, Alexander Hamilton, whom the Minister of Home Affairs, is constantly quoting, at no time proposed such a measure as this.
– Surely he lived in a different time.
– I am simply stating that this scheme is without precedent. We have in our midst the best financial institutions that have existed at any period in any part of the world, but we are not taking them as an example. It is hard to find in the pages of history any precedent that will justify the Prime Minister, as the responsible head of the Government1, in bringing down a measure which proposes the experiment of .vesting the sole control and management of a great financial undertaking in the hands of one man. In the circumstances, he would be well advised to listen to the convincing unassailable arguments that have been put forward from the Opposition side against one-man rule. Vast powers are given to the Governor of the bank with respect to its officers. I do not know whether that is a wise proceeding, or whether the appointment of officers should not be vested in that independent authority .who already controls the Public Service of the Commonwealth. As all the clauses of the Bill have to be dealt with, in Committee it is not my intention now to criticise the measure at great length, but I should like to. discuss the proposal of the Government to establish Commonwealth Savings Banks all over Australia. The Prime Minister forecast that this would mean the .death of the State Savings Banks in every one of the States. One of the greatest facilities offered at present by the States to people of small means to invest their savings is in connexion with the postoffices. Figures have been quoted already to show that there are over sixty separate Savings Banks doing business in Victoria, and over 300 post-office agencies. Applying the same ratio to the whole of Australia, we can safely say that five out of every six Savings Banks in operation at the present time are already conducted by means of the Commonwealth post-offices. That means that if the Commonwealth utilizes the postoffices for the purposes of a Commonwealth Savings Bank, the State Savings’ Banks will soon cease to exist except in large centres where they have their own estabments. Side by side with the Savings Bank system in Victoria we have had the Credit Foncier system of lending money to farmers, and, more recently, to householders. I believe that during the last few years it was possible, owing to the cheap money available in Victoria, for people with first-class securities to obtain loans through private channels at probably as low a rate of interest as they could bv means of the Credit Foncier, but I am in a position to state that the operations of the Savings Banks during the past few years have had the effect of steadying the rate of interest charged by the private financial institutions to Victorian agriculturists. By “ steadying “ I mean reducing the rate. We have had a splendid record in our Post Office Savings Banks. They have been one of the most valuable institutions established under State control. They have already lent over j£j, 000,000 to farmers, mostly small men. During the last year or two in Victoria they have been lending freely to householders, enabling them to obtain homes of their own. This Parliament has absolutely no warrant to pull down ruthlessly, and without rhyme or reason, such an institution at this stage. This is an unwarrantable interference, and no reason can be. advanced to justify this Parliament in destroying it and substituting for it a kind of. national system that would take -away all semblance of local control. One of the best features of the existing Savings Bank system throughout Australia is that it operates with purely local money invested by local people, controlled absolutely by Commissioners elected from their own States, and advanced to people who require it within their own States. It is thus a purely local system. A comparison of the figures relating to our banks of issue with those of the Savings Banks, considering that the Savings Banks in most cases pay interest on investments only up to .£250, reveals the enormous proportion of the population of Australia who have invested their savings in these safe institutions. The total assets of our banks of . issue amount to ^138,758,266, and their liabilities to ^135,031,491. As indicated by the honorable member for Angas in his erudite contribution to the debate, the proportion of deposits to the advances by the various banking institutions increased considerably during the last few years. It is interesting to note that the deposits in our banks of issue increased from. £117,758,255 in 1909, to £129,891,136 in 1910, or an increase of £12,132,881 during the twelve months. The advances during that period increased from £94,607,742 to £97,080,221, an increase of £3,672,469. In other words, we had, during that one year, an increase of deposits as against an increase of advances of £9,3611392. It would be difficult to assign the reason for that extraordinary increase in deposits, and the comparatively small increase in advances ; but it must be due, either to a want of enterprise on the part of the people, or a want of faith in those investments which mean the opening up of our resources and the development of the country.
– It is an indication that the people are paying off their mortgages.
– That remark would apply, not so much to the banks, as it would to mortgages in respect of money lent by private institutions and private individuals.
– But the people whose loans have been repaid are putting the money in the banks.
– Instead of investing it.
– That is so.
– And the banks are not getting it out again.
– Exactly. I do not know whether this want of faith is due to the existence of a Labour Government, to certain Labour legislation, or to the failure of the present Ministry to revise the Tariff so as to encourage industries which ought to be manufacturing millions of pounds’ worth of goods that are now. being imported. As an indication of the prosperity of the people of Australia, it may be stated that Knibbs, taking the adult population at 2,300,000, estimates the total wealth of Australia at £172,500,000, or an average of £375 per head. That is a very substantial sum per head. It is a tribute to the thrift of the people - and it illustrates how easy it would be to establish a scientific system of providing for old age and sickness - that 1,483,573 persons are depositors in our Savings Banks ; the total deposits in which amount to something like £53,000,000.
– The depositors include others than adults.
– Quite so, but more than one-half of the total number of adults in Australia, or over one-third of the total population, are depositors in the Savings Banks.
– The figures are not a reliable indication of anything, because very often four or five children in one family are depositors with a Savings Bank.
– The fact remains that over one-third of the population of Australia are already depositors with our Savings Banks, the average per depositor being £36 1 6s. id., or an average of £12 per head of the whole population.
– Is the honorable member proving that the people believe in Government Savings Banks?
– I am setting out to prove that the State Savings Banks have proved such an unprecedented success - that they have used the money invested with them so wisely, and have been of such valuable assistance to our agriculturists, more especially to the small farmer - that the Government is absolutely unjustified in making a raid upon them, and setting up a rival institution to wipe them out of existence.
– That is not what we are doing.
– The Government proposal can have no other effect. The Prime Minister himself said that, although it was not the desire of the Government to wipe out the State Savings Banks, the creation of the Commonwealth Savings Bank would eventually have that effect.
– Did he say it would make a raid upon them?
– It will make a raid upon them in the sense that it will mean the transfer of money from the Savings Banks of the States to the Commonwealth Savings Banks.
– Use the Prime Minister’s own language, and say it is going to disadvantage them.
– That is the position.
– It is a wicked abuse of language.
– Used in a vulgar sense, the word “raid” might mean “ stealing,” but there is no doubt that the setting up of the Commonwealth Bank will cause the transfer of the great bulk of the enormous deposits already invested with the State banks. The success that has attended the establishment of the State Savings Banks has been largely due to the facilities given by them to the people of nearly every town to invest their small savings. The wide distribution of facilities and opportunities for investment has been responsible for their magnificent success.
– Will they not have the same opportunities?
– No. The honorable member for Kooyong told us last night that in Victoria the Savings Bank has over sixty branches, and more than 350 postoffice agencies; that is, its branches are only a sixth as numerous as the agencies of which it will be’ deprived when the Bill has passed ; because, of course, the Commonwealth Government will use the post- offices to further the business of the Commonwealth Savings Bank. The position of the Victorian Savings Bank in this regard is typical of that of the Savings Banks of the other States. I have heard no justification for substituting for the State Savings Banks a Commonwealth Savings Bank. The Commissioners of the Victorian Savings Bank are in a better position to deal with investments, especially on landed security, than the Commissioners of the Commonwealth Savings Bank, whose operations will extend all over Australia, will be. Victoria cannot progress unless she settles her land more closely. The great bulk of the land has been alienated, and the State will have to re-purchase much of it for the purposes of subdivision, to provide for closer settlement on terms and conditions which should be so easy that the man of energy and industry will be able to use it, even though he may possess no capital. The proper administration of the Lands Department, and of the Savings Bank, will have everything to do with our future progress. The Credit Foncier system is intimately, and almost organically, connected with our land policy. I hope that in Committee wise counsels will prevail, and that the Savings Bank provision will be eliminated.
– The Bill does not provide for the substitution of a Commonwealth Savings Bank for the Savings Banks of the States.
– That will be its effect.
– Would the honorable member refuse to allow the Commonwealth to establish a Savings Bank in the Federal Territory ?
– That is a matter which should be dealt with separately, as should also the proposals for the development of the Northern Territory.
– Why, in the honorable member’s opinion, are the Savings Banks of the States doomed ?
– Because the postoffices, which provide the chief facilities for the making of deposits and the transfer of money, will be used to further the business of the Commonwealth Savings Bank. Nothing is to be gained by the proposed change. Honorable members opposite, notwithstanding their penchant for unification, would not propose the abolition of municipal councils, because those bodies manage local affairs more efficiently than they could be managed by a Commonwealth authority. Similarly, the Commissioners of the Savings Banks of the States manage their business better than it could be managed by Commonwealth authority.
– The present system is almost a Commonwealth system.
– It provides all the convenience of a Commonwealth system, besides giving the advantages of local knowledge and control in administration. I am in favour of the Commonwealth having a bank of its own.
– Would the Bill be complete if a Savings .Bank were not provided for?
– I see no need for the Savings Bank provision. In no part of Australia have Savings Banks been of greater value than in the younger States. In Western Australia, under State administration, their funds have been liberally loaned to settlers, advances being given on improvements and stock, with the result that the settlement of the State is fifteen or twenty years ahead of what it would have been had a less liberal policy been followed. No fault has been found with the management of the State Savings Banks, whose accumulated funds now amount to about ,£53,000,000, of which £7,000,000 has been advanced in small loans to settlers of £50 upwards, the repayments amounting to about £3,000,000. Money is lent in a way in which it is not lent by private financial institutions, and assistance is afforded when it is most needed. The management of the Savings Banks is independent and sound. Facilities are provided everywhere for the making of deposits and withdrawals, and a fair rate of interest is paid on credit balances. Finance is government, and government is finance. The Savings Banks of the States have materially assisted development, and the establishment of that sound credit which has so much to do with a country’s success.
– I shall not go into ancient history, as has been done by honorable members opposite, nor shall I detain honorable members very long in what I am going to say. Members of the Opposition, in their long treatises on banking generally, have forgotten to say anything about the Bill. That was particularly the case with the honorable member for Angas, who made a great many quotations from Macleod and Hamilton, in which he was followed by the honorable member for Richmond, and told us a good deal about the opinions of authorities long since dead, but forgot to treat of the provisions of the Bill. I shall not follow my honorable friends in their excursions into ancient history, but shall confine my brief remarks to one or two matters which, it appears to me, concern the people of Australia at the present time. I propose to point out the advantages that must accrue to the people of Australia from the adoption of this measure. Why do we require a bank of this kind? Is there any necessity for such a bank ? Having satisfied ourselves on these two points, we have to ask whether this bank can be successful in such a way as to benefit the people of Australia. What is the. present position of banking here? How are the finances of Australia controlled? The figures in the Commonwealth Year Book are so plain that he who runs may read. There are twenty-two banking institutions ; and of all the money with which they trade, only £19,500,000 is represented by paidup capital. Deposits at call, or current accounts, represent £55,000,000 ; in other words,that is the money which the people of this country give the banks to trade on, and on which not a farthing of interest is paid. Further, the people are charged by the banks for the keeping of the accounts.
– Is the honorable member sure that all this is money?
– It is fortified credit.
– We know that this is not all represented by money, but it is the same as money. The banks are using credit, which, after all, is merely public confidence. Fixed deposits represent £74,000,000, on which the people receive very little interest. We have thus £129,000,000, of which . £55,000,000 is given as a present to the banks, and £74,000,000 carries very little interest.
– Will the Commonwealth Bank be able to pay more interest than the current rate?
– At any rate, the profits, instead of going into the hands of the controllers of the banks, will go to the people, and be expended for the benefit of the people. If anyone goes to a bank for an overdraft, a charge of 6 per cent., or even 8 per cent., and as high as 10 per cent., is made - for the privilege of getting some of our own money back. When an overdraft is given, the bank simply allows the applicant to use a little of the product of his own labour, or of the labour of his neighbour, and charges him interest. The banks, it appears to me, make a big profit on current accounts by lending one set of people money deposited by another set of people.
– Very simple, is it not?
– It is certainly not so intricate as the honorable member led us to believe yesterday. The honorable member predicted the greatest disaster as the result of the Commonwealth note issue; and we can quite understand the present gloomy forebodings from such a quarter.
– The disaster will come in time.
– There are honorable members opposite who are attempting to claim some credit for the Commonwealth note issue now that it has become a success. I shall, however, read some extracts from speeches showing that, at any rate, 75 per cent. of the gentlemen opposite predicted untold disaster. I am glad to hear interjections from honorable members, because we can all learn and as a young member I am quite prepared to receive instruction. At present I am merely giving the result of my own observation, though this may appear to others in an entirely different light. Honorable members opposite, when discussing this or any other proposal which extends State enterprise, seem to compare it with private enterprise. The two, however, are altogether different; and the difference appears to lie in the fact that, while in a private business the trader supplies the goods and the people provide the trade, in the banking business, the people not only provide the business, so to speak, but also provide the goods. And what are the goods ? They, are simply credit, which, in other words, means public confidence. I do not think honorable members opposite could explain the position in any other way. What is there wrong in the people conducting this business for themselves, and obtaining the profits which at present go to the few? I want no other reasons to convince me of the equity of this Bill than are afforded in some of the benefits that the whole people will obtain from the establishment of a Commonwealth Bank. It is evident that there will be greater security for depositors, seeing that the whole credit of the Commonwealth will be at the back of the bank, and that that credit must be greater than that of any individual or set of individuals. In private banking, there seems to be a sort of “ honorable understanding “ in regard to interest charged. The honorable member for Angas told us that there is no monopoly in banking; but I think we may say, in sweeter-sounding words, that there is an “honorable understanding”; and the establishment of a Commonwealth Bank would do much to break up this little ring. Then, again, a Commonwealth Bank will have a steadying influence in time of panic.
– In what way?
– There will be more confidence behind the Commonwealth institution.
– It will rediscount for the other banks.
– And consequently at a time when it is most necessary, there will be a steadying influence, and, as f have already said, the profits, instead of being paid away in dividends, may be utilized in the liquidation of our National debt. I hope the day is far distant when this country will have to go on the London, or any other market, to borrow money. Still such a step may be necessary in the future for reproductive public works, though I think that, so long as the present Government remain in power, we shall not find ourselves in such circumstances. However, if we had to borrow, the establishment of a branch of the Commonwealth Bank in London will result in the saving of considerable expense, which at present drives up the rate of interest. We have to pay 1½ per cent, for underwriting, 2^ per cent, for brokerage, and numerous other charges. We have a National debt of £258,000,000 ; and . a supple sum shows us that the charges paid by this country must have amounted to something like £22,000,000 or £23,000,000.
– We are paying interest on ‘moneys we never received !
– We pay interest, not only on the debt, but on the incidental expenses, which are considerable. The objections raised to this measure have been raised at all times against proposals for the extension of the State functions. I promised a little while ago to read some extracts from speeches of honorable members opposite when the note issue proposal was before us, and I said that we must expect the same gloomy predictions to-day. The honorable member’ for Fawkner said - lt looks a harmless sort of measure, but I can assure .honorable members as one who has had considerable financial experience that, if passed in its present form, this Bill will do more harm to Australia than any measure that has been brought before this House.
This and the following extracts are typical of the observations made from the other side of the House. The honorable member foi” .Bendigo said -
I regard the Bill as injurious, not only in its immediate effects, but as offering a menace of even more detrimental legislation in the near future. I think that this Bill - which” he described as a revolutionary change - involves a leap in the dark, and, that it will lead to trouble, dangers, and disasters undreamt of and unexpected by its framers.
He described the Commonwealth note issue as a revolutionary change. The honorable member was Postmaster-General in the late Government, and yet we have his colleague, the honorable member for Swan, during his speech on the Address-in-Reply, claiming the whole credit, practically, for the Commonwealth note issue. That honorable gentleman said -
The Notes Issue Bill which had been previously drafted under my instructions was practically the Bill which became law last session.
These are the words of a late colleague of those honorable members who predicted all sorts of disaster from the Commonwealth note issue. We are, however, becoming quite used to these sort of prophecies whenever there is a proposal to extend the functions of the State, and thus give to all the people that which a few now enjoy. We hear a great’ deal about the disasters that are going to befall the poor widow, and I can imagine the splendid material which this cry about the State Savings Banks being interfered with will furnish for afternoon tea meetings. The honorable member for Wimmera spoke about the Bill as a raid on the State Savings Banks. That is unfair criticism, put forward in an attempt to play to the gallery, and intended for electioneering purposes.I am sure the honorable member himself does not believe that any one will go round armed with shot and shell to destroy the Savings Banks, as he would have the people believe. Would honorable members opposite refuse to give the management of the bank any power to establish a Savings Bank, say, at the Federal Capital, or in the Northern Territory? If they have no objection to that, why not put the power in the Bill? Would they expressly forbid the management of the bank establishing a branch of the Savings Bank anywhere? Either they must give power to establish it, or they must not. Undoubtedly power to establish branches of the Savings Bank should form a part of this National Bill. If there is a branch of the existing State Savings Bank at any country centre, and no branch of the Commonwealth Savings Bank is put there, will not the people be in precisely the same position ? If a branch of the Commonwealth’ Savings Bank is established there, will not the people simply have a double opportunity of investing their money, seeing that they can please themselves where they go? Where, then, does the danger come in? Do my honorable friends think that the Governor of the bank will go out of his way to run up. against one of the present Savings Banks ? Will the establishment of a branch of the Commonwealth Savings Bank at any centre give the people less opportunities than they have at present? Honorable members know that it will not.
– What effect will it have on the State Savings Banks?
– The only effect on the State Savings Banks will be the effect which the depositors voluntarily bring about.
– Precisely. The talk about raiding the State Savings Banks is simply dished up, like other electioneering bogies, for afternoon tea meetings. It will not suit the intelligence of this House. My honorable friends must see that it is an insult to the intelligence of the House to ask it to believe that sort of scare-crow talk. If it was only for the ears of the House, they would not use it ; but it is meant for the ears of innocent people outside, on whom they think these bogies will work.
Mr.Fairbairn. - We gave reasons for it.
– The honorable member cannot answer a simple question: Will the establishment of a branch of the Savings Bank under this Bill give the people less facilities than obtain at present? The honorable member knows that it will not ; and all this talk about inconvenience to the public and making a raid on the present Savings Banks is so much waste of time. Still in my search for enlightenment, I wish to make sure that I have understood the arguments put forward by honorable members opposite, particularly by the honorable member for Richmond. He said that the profits of the present private banks amounted to only 4.1 per cent. The Insurance and Banking Record for last January, an authority which, I am sure, honorable members opposite will not repudiate, gives figures which are a complete answer to the honorable member’s contention.
– My contention was that, for the last twenty-six years, on the average, the profits were 4.1 per cent.
– I am going back only ten years. The honorable member went back to times of disaster.
– The honorable member is going to pick out what suits him, and leave out what does not. I took the Government figures for the whole period dealt with in the return.
– I propose to take the figures from this book, going back ten years. I suppose, if the honorable member did not get figures to suit him by going back twenty-six years, he would have gone back to the time of Noah, and then he would’ have been bound to find some to suit his argument.
– If I had gone back only fifteen years they would have suited me much better.
– If by going back ten years I can prove that the figures work out in a different way, it must show that the honorable member’s average was made only to suit himself. According to the Insurance and Banking Record, the profits of the private banking institutions of Australia amounted, in 1910, to £2,512,348, and the total paid-up capital was about £19,000,000. The profit for that year, therefore, on the total paidup capital was131/3 per cent.
– What about the other shareholders’ funds - the reserves?
– They are simply undistributed profits.
– They are invested in the business, and earn dividends.
– The honorable member works out his argument by adding the reserves, which are merely undistributed profits, to the total paid-up capital. If I lend £1,000, and earn a profit of £200 by it, that is a profit of 20 per cent. The honorable member, however, would call, say, , £100 a dividend, and place £100 to a reserve fund. He would then calculate that his profit was £100 on a total capital of £1,100, or only nine and one-eleventh per cent. It is fair to calculate the profit on the amount of money put into a business. The profit made by the banks on their paid-up capital, therefore, amounted to131/3 per cent, instead of 4.1 per cent.
– Were the earnings of the reserves included in those figures ?
– I calculated the profit upon the paid-up capital.
– A large part of the capital was written off and lost.
– You have to take that risk in any private business. Going back for ten years, the net profits averaged between 8 and 9 per cent. on the paid-up capital, or double the rate arrived at by the honorable member for Richmond. That is the testimony of my honorable friend’s own production, and I do not think more conclusive figures can be obtained. I shall be glad to. hear the one who is to follow me on the Opposition side show me where the figures are wrong. The honorable member for Richmond also cited the case of Germany, stating that what caused the rush upon the Bank of Germany in the time of the war was that the credit of the individual was mixed up with the credit of the State or nation. If that argument was followed to its logical conclusion, and the enemy took Germany, would the money be any more safe in the private banks than if guaranteed by the national Government?
– It would; because, if Germany was beaten, the enemy could claim the German Government’s share. If the money was privately owned, they could not.
– If the enemy took the country, would not the privately-owned money be treated in the same way, whether it was in a private or a State Bank. The honorable member opened his argument by saying that there was danger in mixing up the credit of the individual with the credit of the nation. He practically told us, therefore, that the private credit was better than the national credit, and yet he wound up by saying, to quote. his own words, “ in times of crisis, it is important that the State should come to the rescue of the private banks.” That statement was made, not only by the honorable member, but by the honorable member for Angas and others, who declared that if we passed this Bill we should prevent the nation from coming to the rescue of the private banks.
– The honorable member is a little mixed.
– The honorable member was very much mixed on the question of the 4. 1 per cent. which I think I have shown to be entirely erroneous.
– Why not refer the Bill to a Select Committee, and the honorable member would obtain all the information he requires.
– If we did I do not suppose we should hear any more of it. The honorable member for Angas’ concludedhis speech by saying that it was necessary that the State should be able to come to the rescue of our private banking institutions, and the honorable member for Richmond asked what was to become of the people when they demanded their money in times of crises. My honorable friend had an example in the disastrous times of 1893, when, but for Sir George Dibbs’ action in making notes a legal tender in New South Wales, thereby bringing the credit of the State to the rescue of the banking institutions, we should have had even more serious results.
– It was not Sir George Dibbs alone, but the Parliament of New South Wales. I was a member of it at the time.
– Then I will say that it was the Parliament of New South Wales which came to the rescue. In other words, the credit of the State came to the rescue of the private banks, and, to a certain extent, saved the situation. I am glad that the Commonwealth Government intend to utilize the great credit of the Commonwealth, under the scheme proposed. Seeing that we are allowing our private institutions to make great profits - that we are giving them free of interestthe use of £55,000,000 of our money - it is time that the people took steps to secure for themselves a little of the profit arising from that which they supply to the banks at the present time in the shape of confidence or credit.
– But the bank will be required to be built upon sound foundations.
– I hope that it will ; and surely it will be an infinitely safer institution than is any private bank. The Opposition do not deny that the credit of the Commonwealth will be greater than that of private banking institutions, but they raise the old Conservative cry of ‘ ‘ The time is not yetripe for action.” The time was ripe when a number of our private banks failed in 1893, bringing ruin and destitution to many of our people, and it has been ripe ever since. While the Opposition are to day employing against this Bill arguments which they think will be of use to them at election times - whilst they are evincing so much concern for the “poor widow,” they had little to say in the way of consoling the victims of the private bank failures of some years ago. We then heard very little from them. They had then little sympathy for these people, some of whom have not yet recovered from that disaster. But now, because the Commonwealth Government is proposing to offer greater security to those who were robbed by the private institutions in years gone by, they are expressing much sympathy for the poorer section of the community. It would not do to say that their concern is really for the gentlemen conducting our private banks, but no doubt they think it very desirable to raise the scarecrow of “ the poor widow, who is going to be ruined.” I see in this Bill something that will make, not only for the well-being of the nation, but which will offer a better security for the poorer section of the community, as well as for the people as a whole, and I have, therefore, much pleasure in supporting it.
.- Before proceeding to state my main objections to the scheme embodied in this Bill I propose to refer to two or three points made by the honorable member who has just resumed his seat. I agree with him as to the standards by which we should determine the advisableness of voting for or against a Bill of this kind. We should, undoubtedly, consider the necessities and conditions of the times. We should consider whether such a bank is necessary or advisable, and whether or not it will be for the benefit of the people. Those are preliminary considerations which we may well take into account. The honorable member, in proceeding to develop his main arguments in favour of this Bill, in the first place, drew attention to the immense amount of capital at the disposal of the twenty-two existing banks. He argued that the existing banks enjoyed an unfair advantage which they used for their own special benefit, and not for the benefit of the public. He stated that they have about £19,000,000 by way of paidup capital ; about £55,000,000 of cash and deposits on current account; and also £74.000,000 on fixed deposit. As to the earnings on the paid-up capital and fixed deposits, I fail to see that any National bank could earn more, or do any better,” with any capital at its disposal than the existing Associated Banks couid do. No doubt the banks have the opportunity to let out money held on fixed deposit at a higher rate of interest. It has been found that, on the average, the banks may obtain money at3½per cent., and let it out again at rates varying from 5 per cent. to6½ per cent. That means, a.t the most, a saving of 2 per cent., or 2½ per cent., and, if that saving be appropriated to the expenses of management, gold held in reserve and so earning nothing, rent and kindred charges, there is not a great deal left. I have seen it stated on very good authority that the net profits on money so let out by the Associated Banks amounts to about only 5s. in each £100 that the banks borrow and re-lend. That does not appear to be a very grasping amount of profit. Any Government bank that might be established would probably have to borrow and lend money on the same lines. The feature which seemed to excite the honorable member’s feelings of disgust related to the way in which the banks have enjoyed an unfair advantage in the use of £55,000,000 said to be deposited with them on current account. I am not a banker, and do not profess to have any very expert knowledge, but, speaking as an ordinary man of the world, one would be disposed to think that it would be unsafe for any bank to indulge in speculations, or even in investments, with money held at call. As a matter of fact, if we turn to the banking records we shall find, in all probability, that this money, held on current account, which may be demanded at any moment without notice, is kept within the banks - among their reserves - in their vaults, to be available on demand.
– How much could they pay if a demand were made upon them to-morrow morning?
– They would, at all events, be able to meet those demands to the extent of the money in their vaults.
– About10s. in the£1.
– I fail to see that there is any evidence to support the honorable member’s statement. I am dealing, however, not with that precise question, but with the question of whether the banks can be said to utilize to their own profit this money held on current account. They may to a small extent, but only to a very small degree, compared with any profit they may gain by lending out money held on fixed deposit.
– They have deposits to the extent of about £60,000,000, on which they pay no interest, and they are lending about £40,000,000.
– According to the honorable member for Indi, the deposits on current account amount to £55,000,000. Very little of that money can be let out on any profitable investment. It would not be safe, and I do not think it is the practice of the institutions to lend out that money on fixed investments in such a way that it would not be available for any sudden demand that might arise.
– That is an excellent belief ; but is there any ground for it?
– The records show that they have money in their reserves, and, therefore, it cannot be let out. The honorable member for Indi said, further, that the credit of the Commonwealth Bank would undoubtedly give greater security to investors than would the credit of any private institution. But strength of credit, whether we look for that credit in a private financial institution or in a. State Bank, depends, I apprehend, upon the availability of the liquid assets and the possibility of either the State or the private bank, as the case may be, having command over cash reserves ready and capable of being made available to meet any sudden demand that might arise.. That takes away, to a great extent, any unnecessary weight given to the fact that the Commonwealth will be at the back of the National bank. The whole of the credit of the country will be at the back of the bank, but that will not be of any avail unless the bank itself has at its command assets that may be readily converted and made available to meet any emergency or crisis which may arise. “ The honorable member also said that one of the advantages of the Commonwealth Bank would be that the Government would be able to do all its businessthroughit, that it would be able to float its loans through its agency, and thus save the expenses of flotation and underwriting. Is it proposed that this bank, which is to be launched as a business proposition,” and is expected to pay its way on business lines, . is to do the banking business of the Commonwealth free of charge? It would be a most unfair burden to cast on this bank, which is being launched with such a flourish of trumpets. It is said that, by means of a branch in London, the Commonwealth could negotiate big financial transactions at the saving of the ordinary flotation charges: but it is doubtful whether the bank would command the influence in the London money market necessary to secure the success of a big financial undertaking. The advantage gained by the employment of a London bank, or a big Australian bank with a London connexion, is that by reason of the experience of its administration, and the prestige of its capital and business connexions, it is able to attract investors ; and it is paid, not so much for guaranteeing a loan against failure, but for providing tenderers for the debentures which are offered. But even if the work were done by the Commonwealth Bank, the services rendered would have to be paid for. 1 do not think, therefore, that the advantages claimed on behalf of the scheme are sufficient to justify its adoption. Applying the same tests as the honorable member for Indi, I have arrived at the conclusion that there is no need for another bank. Last night the Attorney-General challenged the Opposition to state the grounds, if any, for declaring that the Bill is unconstitutional. I am not aware that any member on this side has raised such a contention. The weight of the argument contained in the able speech of the honorable member for. Angas, and in the speeches which followed, was directed to prove that the proposed bank is not needed in the interests of the Commonwealth, or of the people, and is not justified on the grounds of public utility. I am not aware of an agitation on the part of moneylenders, borrowers’ of money, or business and commercial men, for the establishment of a Commonwealth Bank, the existing banks being apparently sufficiently numerous and strong for the financial business of Australia. It certainly cannot be said that there is a monopoly in banking, which, since the first bank was established, nearly a hundred years ago, has been free and unfettered, under State laws which are broad, comprehensive, and elastic. Whenever there has been thought to be a sufficient increase of trade and commerce 4o justify the creation of a new bank, financiers have been ready to put money into the venture, and were there an opening for another bank now, money would be available to start it. But the tendency of late years has been towards the reduction and consolidation of the banks, because it has been found that several which were started in the hope of getting business left untouched by the older banks have failed to earn a sufficient return on their capital. The multiplication of banking agencies increases the cost of banking, and makes it harder for the public to get cheap money. No doubt, the Commonwealth Bank is expected to obtain a share of the business of the existing twenty-two private banks ; and the cut-throat competition which may result must cause either the Commonwealth Bank to be run at a loss, or the profits of the existing banks to be reduced. These twenty-two banks have ja network of branches throughout Australia. Whenever a new township springs up, a bank is established, and I have seen banks in remote districts where one would not think it possible for them to earn interest on capital.
– There is no central bank.
– I shall deal with that objection presently. The twenty-two associated banks have 1,924 branches, of which- 572 are in New South Wales, 645 In Victoria, 254 in Queensland, 232 in South Australia, 167 in Western Australia, and 54 in Tasmania; and, in addition, there are 1,838 branches of Savings Banks It cannot be said, therefore, that Australia is underbanked. Whereas here there is a private bank to every 2,273 inhabitants, in the United Kingdom there is a bank to only every 5,015 inhabitants. The charges made by the banks range from per cent, to 6 per cent., and naturally depend on the value of the security.
– Is 6 per cent, the highest?
– I believe it is for any well-secured customer.
– In the city or the country ?
– All round, I think; it depends on the security of the customer. We cannot expect a bank to grant an overdraft to a precarious business on the same easy terms as to a substantial customer.
– Any number of advances are made at 5 per cent.
– I suppose there are. That does not leave much margin of profit, either for the shareholders on their paid-up capital, or for the bank on its fixed deposits or borrowed money. In any case, the average profit will not exceed 2 per cent., and, after paying the expenses of management and other liabilities, it is estimated, as I have said, that the profits do not amount to much more than 5s. per £100. What, then, of the alleged enormous profits and dividends? The paid-up capital of the banks is set down at £19,000,000 odd, and last year the dividends declared amounted to £1, 527, 507. It has already been shown that the profits are distributed, not only over the paid-up capital, but also over the reserves, amounting to £8,000,000 or £9,000,000, and they represent only 5$ per cent., or about £5 7s- 7d- It cannot surely be said that that is very excessive. It has been urged that in estimating the profit we ought to consider only the paid-up capital, and not the reserve fund. But .this reserve fund is part of the added capital of the banks. It represents savings and earnings, and is placed to the credit of the banks, and helps to earn the profits. A Commonwealth Bank, established on the lines indicated in the Bill, will have to be conducted on business principles, in the same way as are private banks, otherwise it will soon go smash. A Commonwealth Bank will expect to earn its profits in the same way and by the same methods that are adopted by private institutions. I venture to say that such a bank will have to charge its customers interest substantially the same as that now charged by the private banks ; it will have to be guided by the law of supply and demand, and regulated by the state of the money market. It will not be able to lend money at a lower rate of interest than that at which it borrows ; and it is merely a question of what has to be charged above the rate at which it borrows in order to pay interest and the expenses of management, and provide reserves of gold in the vaults, and so forth. It appears to me that the promise of cheap money is doomed to lead to disappointment. I fail to see how such a promise can be realized, ‘speaking, not as a banking expert, but purely as an ordinary man of the world. As to the stability of the banks, we have already been informed that the assets amount to £139,000,000, against liabilities on only £135,000,000, while the amount of bullion held in reserve is, at least, 50 per cent. of the total liabilities. In America, I understand that only 8 per cent. of coin and bullion is held against the liabilities. The Minister of Home Affairs referred to the question of a central bank; and I remind him that, in Australia, at the present time, under our banking system, we have what are called the Associated Banks, which, by an unwritten law or common understanding, have arrived at a scheme of friendly co-operation. They have realized what the honorable member for Angas pointed out as lacking in America - union and co-operation - the absence of which in America led to cut-throat competition, and, in many instances, to disaster. The associated banking system here serves all the purposes, and gives all the advantages, of a central bank.
– The banks do not help one another in times of emergency.
-In times past the big banks have frequently come to the rescue of the weaker banks, and saved them from closing. In London, at any rate, that is the case.
– The Bank of England does that business.
– I fail to see what more co-operation could be brought about by a Commonwealth Bank than there is at the present time. I do not know that a Commonwealth Bank would be able to exercise any more moral influence over the twenty-two Associated Banks than is exercised at present, when they are pledged to assist one another. My fundamental objection to the scheme in the Bill is that it has no substantial precedent in the history of the world’s finance and banking. It is to be started, practically, on a debt - its capital is to be raised on debentures, which are only a polite substitute for IOU’s. The Bank of Arkansas was started on bonds guaranteed by the State, but it came to a miserable and inglorious end aftera very short existence. Contrast the genesis of this Commonwealth Bank - with a debit’ balance of a million hanging like a millstone round its neck - with the establishment of our private banking insti tutions. These were all started with the savings of the shareholders, planked down and placed to the credit of the bank - not borrowed savings, but the realized wealth of the shareholders. There is an element of weakness, infirmity, and danger in the proposed scheme that dooms it to failure.
– Is the absence of precedent any reason for failure?
– Our experience of so-called State banks in America justifies me in indulging in that prediction. The Bank of Kentucky was started on the faith and credit of the State in 1820, and it failed miserably in 1830, and no other experiment of the kind has been indulged in by the people of Kentucky. The Bank of Alabama was started in 1823 on the faith and credit of the State, and in 1837 it went into liquidation. The charter lapsed in 1845, and the State lost upwards of £1,000,000. So disgusted were the people that, on the next revision of the Constitution, they inserted a clause forbidding the Legislature to pass any law authorizing the State to hold stock in banks. The next dismal example is the Real Estate Bank of Arkansas, to which I have already referred. The State advanced bonds on which to raise the necessary capital.
– That bank wasnot run by the State.
– But the State advanced the bonds. That bank got into trouble, and subsequently a State Bank was established to take over the assets and liabilities. This bank failed in 1838, and, so far as I know, the bonds are still unredeemed. The State Bank of Illinois was established in 1821, and failed miserably in 1825. So enraged were the taxpayers of the State, that on the next amendment of the Constitution they followed the Kentucky example, and passed a law forbidding the establishment of any State Bank or the Government owning any stock in a bank.
– Does the honorable member call those National banks ?
– They were State Banks of the United States.
– They were not National banks.
SirJOHN QUICK.- The bank now proposed is a State Bank owned by the Commonwealth. In 1838 the State of Mississippi founded a bank which ran headlong to ruin in four years ; and other examples may be found in the Bank of Tennessee - which was established in 1820 and closed in twelve years - and the Banks of Louisiana, Georgia, and Vermont. The Constitutions of some of those States were afterwards amended to forbid them entering into State banking. The National banks that are said to exist in America are in reality not Federal banks, but merely banks authorized and created by Federal la.w in the same way as banks are authorized and created here, the Federal law regulating their conduct and their issue of paper money. I think the fate which overtook some of the American banks which 1 have already enumerated, and which were founded upon the boasted credit of the State, may be cited as an ‘example of the failure of financial institutions based upon Stale faith and credit. It all depends upon the availability of liquid assets for these banks to pay their way when the crisis comes. I see nothing in the constitution of this proposed bank to render it immune from the disasters which overtook the institutions that I have already cited. Their fate may be regarded as the handwriting upon the wall, warning the Commonwealth of Australia, as well as other political communities, away from rash experiments of the kind. Here is a bank which it is proposed to float into existence upon an IOU of a million sterling to start with. A debt can surely not be considered a capital. The bank is not to be floated upon any of the savings of which the word “ capital “ is always suggestive. It starts with a debit balance of a million sterling, the interest on which will have to be met until it is paid off, if it ever is, and then it is expected to be able to compete with banking institutions that have been established upon the savings of shareholders. I should like to draw attention to the inherent contrast between a bank established on money advanced by creditors and a bank established by shareholders, who advance their own money. In the case of the private institutions of Australia, the money has been advanced by the shareholders, it is to be presumed, out of their own pockets, and is not borrowed money. The shareholders by the constitution of the banks, and the law of the land, are entitled to a voice in their management, a share in the choice of the directorate, and in the determination of their policy and career. There is a great deal of difference between shareholders who advance the capital -for these private institutions, and the creditors of the proposed Commonwealth Bank - debenture holders whose money will be at stake in the bank, and yet who will have no voice in its management, no choice of - the directorate, and no say in checking any dangers, or reversing a tendency to go on the downward path. That is the inherent difference between the private banking institutions which have been run so successfully, and the experiment in the direction of government banking represented by this Bill. Some honorable members have done the Bank of England the indignity of comparing it with a possible Commonwealth Bank. The honorable member for Hindmarsh referred to the Bank of England with just pride. Every Britisher the world over is justly proud of it as one’ of the financial bulwarks of. the country. I frankly confess that when, during my recent visit to London, I first caught sight of the dull, plain, windowless walls of the Bank of England at the corner of Threadneedle-street and Princess-street, I was awe-struck, and proud that a bank with such unpretentious outward surroundings should be one of the bulwarks of the finances of the world, and the honour and pride of its country. The honorable member for Hindmarsh did not mention that the capital stock of the Bank of England was raised by the shareholders and planked down in gold. The Bank of England was not founded upon an .IOU or debentures.
– Are the notes issued on a gold basis now?
– The notes are all right, but I am now dealing with the capital subscribed. What is called the proprietors’ capital amounts to £14,553,000, subscribed by the shareholders in gold. It has been there for upwards of 100 years. That bank was not floated on credit, but on a gold basis. The fatal objection to this scheme is that it is floated, not upon a gold basis, but upon the socalled credit of the Commonwealth - credit without cash. Credit is all very well ; but in a banking institution you want the ready cash for any emergency. The Commonwealth has abundance of assets, with plenty of taxpayers from whom to raise money ; but in dealing with this bank we want, not merely a guarantor, but the cash in hand in the shape of liquid assets, that may be made available to meet the demands at the counter. If the new Commonwealth Bank ever had to meet a run, it would be poor consolation for the manager to tell the customers who were knocking at his doors that the Commonwealth guaranteed the bank. It would be a guarantee ‘under the Act, no doubt, but no consolation for the depositors; whose money might be in -jeopardy,’ or who might think that their money was in jeopardy, and want it out. The essence of a bank is not merely credit, but cash. Where have you got it in this Bil] ? Reference has often been made in the debate to banks in other countries which are said to be Government banks, and to supply an argument in favour of the establishment, of a bank for the Commonwealth. I take this opportunity of pointing out, in the clearest and most unqualified terms, that none of the great banks of the world are financial institutions under the control or management of the Government. The Bank of England has been cited as a National, or Government, bank. I deny that it is a Government bank in the true sense of the term. It does the Government business, but it is no more a Government bank for that reason than are the Associated Banks of Australia because they have the accounts current of the Commonwealth and State Governments.
– It holds the nation’s reserves.
– That does not constitute it a Government bank, such as this is to be, under Government influence and control. At page 8, of Senate Documents, Vol. 14, Banking and Currency Systems, issued by the authority of Congress, some particulars are given as to the organization of the Bank of England. This is a compilation of evidence taken by the National Monetary Commission, under the presidency of Senator Aldrich. It is very interesting, because it summarizes the true nature of the relations of the Bank of England to the Government, which I have been some time in finding out. The Governor of the bank was asked -
What control have the shareholders over the management and conduct of the business? and his answer was -
The proprietors, i.e., the holders of bank stock, elect the governors and directors, and may make what by-laws they please in general court for the conduct of the bank’s business, provided that the “ by-laws are not repugnant to the laws of this our Kingdom.”
He was further asked -
Has the Government any voice in the management of the bank or any interest in it through the ownership of shares? - The Government has no voice in the management of the bank, nor does it own any stock.
– Who has been saying that it did?
– It has been said to be a Government bank under the influ ence and patronage of the Government. It is further stated -
The supreme control of the affairs of the bank rests with the governor, deputy governor, and” court of twenty-four directors, who are elected1 annually by the stockholders.
The honorable member for Hindmarsh contended throughout that this bank is founded” on the lines of the Bank of England ; but,, as a matter of fact, the only relationshipbetween the Bank of England and the Government of the United Kingdom is that the Government owe the bank £11,000,000. They exercise no control over the bank, except what is provided for by the statute law in regulating the note issue.
– And the Government come to its assistance if it finds itself in> difficulties.
– I understood that it was the bank that came to the assistance of the Government. The Government regulate the note issue according to the financial exigencies of the time. Allow me tocompare the management of the Bank of England with that of the proposed Commonwealth Bank, whose destinies are to be placed in the hands of a Governor and Deputy-Governor. The debentureholderswho advance the money have no voice in the management of the bank, such as the shareholders have in the Bank of England. Supreme control of the affairs of the Bank of England rests with the Governor, the Deputy-Governor, and a court of twentyfour directors elected annually by the stockholders. With regard to Government supervision, the following question appears or* page 11 of this volume: -
Is either your issue or your banking department at any time examined by the Government,, or in any way under its supervision ?
The answer is -
There is no actual inspection or supervisionby the Government but by Act of Parliament trie bank is required to furnish weekly statements of their position to the Chancellor of the Exchequer and to the Commissioners of Stamps and Taxes.
What local or general taxes are paid by the bank? - The bank is subject to the same local and general taxes as other banks and householders.
That shows that the Bank of England is an independent, private institution. The next great bank to which I desire to draw attention is the Royal Bank of Scotland.. At page 128 of the same volume, the following questions are asked : -
Has the Government any voice in the management of the bank or any interest in it through the ownership of shares? - No.
Describe the organization and management of the bank, stating the number of. officers and directors, with their respective functions; and for what periods and by whom are they elected? - The management and control is vested in a governor, a deputy-governor, nine ordinary and nine extraordinary directors. The ordinary directors have the management of the bank; the governor and the extraordinary directors are not entitled to interfere in the management, and their offices are honorary, but they may be called in to consult and advise.
The great Bank of Scotland is also free from Government control, and is managed, not by a single director, but, I was going to say, by a semi-corporate body. The Commission made inquiries as to the creation and organization of the Bank of France, and at page 189 of this volume, we have set forth an interview with the Governor, M. Pallain. He was asked -
Is the Bank of France ever attacked in the controversies between political parties -
He replied -
No charge has ever been made that the bank favoured or aided any political party. There ns never any claim that politics enters in any degree into the management of the bank.
Further on, he was asked -
Has the Government any interest in the ownership of the bank? Does it own any shares?
No, the bank is a private establishment.
Further questions and answers put were as follows -
Then the capital is entirely private property? - Yes. All the shares are divided between 30,000 shareholders, of which about 10,000 have mot more than one share -
Showing the general distribution of the interests of the bank, and that it does not belong to one small clique -
How often do the shareholders meet? - Once a year.
What do the shareholders do at this meeting? - They are told about the business of the bank during the year, and are called upon to elect or re-elect the regents and censors.
How many regents and censors are there? - There are fifteen regents and three censors. Five regents and the three censors must be chosen from among the commercial and industrial parties, and three regents must be taken from among the iresorierspayeurs generaux (general paying treasurers).
Further particulars are given, but those which I have quoted show that the organization and management of these great banks are entirely independent of the Governmnent; that the Government does not hold any stock in them, and has no voice in their management or control. In other words, they are divorced from political influence and control. I come now to the -favorite bank of the Minister of Home
Affairs, the Reichsbank, concerning which I make the following quotations from the evidence given in this volume -
By whom are the shares of the Reichsbank owned? - It is all private ownership. The shares are held mostly in Germany and Holland and distributed in small lots. The Government owns no shares.
Will you kindly describe the organization and management of the Reichsbank ? - We have, so to speak, three boards : first, the Curatorium ; second, the Direktorium (president and directors) ; third, the Central Ausschuss.
The Curatorium is composed of five members. The chairman is the Chancellor of the Empire. The Emperor appoints the second member, and it has been the custom to appoint the Prussian Minister of Finance.
It is further stated that the Direktorium is appointed by the Emperor for life. It consists of nine members, seven of whom are directors, and two of whom are the president and vice-president respectively. The third body, the Central Ausschuss, is composed of fifteen stockholders, who are elected at the annual meeting of the stockholders, together with fifteen alternates, who serve in the absence of any of the members of the Board.
– What does all this go to prove ?
– That the bank which the Government are proposing to launch is without precedent in the history of financial operations; that the wisdom of financiers of the past, who have created such great banks as the Bank of England, the Bank of France, and the Reichsbank, has led to an endeavour to divorce them from the State.
– But directly they shut their doors, they want the State to come to their aid.
– The Reichsbank is based upon the capital of the shareholders, and not upon the guaranteed credit of the State. Certain great functionaries of the State hold official positions on its Board of management, but those official positions are not exclusive of the control by the shareholders ; since, along with the Government Board, there is a Board authorized and appointed by the shareholders. In the case of the Commonwealth Bank, which is to be based upon an IOU for £1,000,000, the responsibility is to be vested in one man. It is to be a one-man bank. The Governor is not to be surrounded by a Board of officials, or shareholders, or even a strong Government Board. He is to be the dictator of the bank policy, except to the extent to which he may be interfered with by direct political instructions and regulations.
Although there is reserved to the Government, in the last resort, power to interfere and dictate, the Governor is not to be assisted by a council of advisors as are the managers of ordinary banks. H’e stands alone. This is a proposal to impose on one man too much power, risk, and responsibility. It is all very well to say that, generally speaking, the general manager of a bank moulds its destiny, butthat is not so iri practice. As a matter of fact, the general manager of a bank is surrounded by a council of men who know all that is going on, and1 who are selected from amongst the best financial experts known to the shareholders. What better selecting body could there be than the shareholders themselves, whose money is at stake, and who have to stand the racket in the case of any loss? But in this case the debentureholders who advance the money to launch the Commonwealth Bank are to have no voice in its management. I do not say that in the end they are likely to lose their capital, but this bank, under the conditions in which it is to be launched, may at some time get into real difficulties, and in such a position it will suffer just as much as did any other of the State Banks I have cited, which failed miserably because they were not properly backed up.
– The Government of New Zealand saved the New Zealand’ Bank.
– No one denies the right and duty of the Government to interfere in a great national crisis. The Government have never lost by such intervention. They have, perhaps, helped the banks out of a tight corner, but, speaking generally, they have never lost in connexion with advances made by them to the great financial institutions of this country. The organic structure of this scheme is inherently bad and inefficient. It is not scientific. The bank, to be a success, should be on a better basis than that on which it is proposed to be built. Before making a few observations with reference to the proposal to give the bank power to do what is known as Savings Bank business, in addition to general banking business, I wish to make a remark that I should have made at an earlier stage regarding the wide powers conferred on the bank to enter upon what is generally known as the business of borrowing and lending. One could understand a scheme intended to meet the argument that the Government of the Commonwealth ought to have a bank of its own to do its own special banking business, although at the present time the Treasuriesof the Commonwealth and the States transact most of the financial business of thecountry, and do the work fairly well. Onecould understand a proposition to createa bank to deal with Government business strictly so called, but this is avowedly a scheme to create a new bank to competewith existing financial institutions in securing private business in regard to borrowing, and lending, the discounting of bills, and also in regard to exchange. Even from) the stand-point of the advocates of the scheme it goes beyond the immediate forceof the argument in favour of a Government bank to meet Government necessities. The Attorney-General is reported to havesaid last night that the Commonwealth waspaying heavily for the banking businessdone for it. If he meant that the Commonwealth is losing by having its ordinarybanking business transacted through theAssociated Banks of Australia, I venture to say there is no -proof of sucha loss. Some people think that theholding of the public accounts of the Commonwealth or the public accounts of the States by the various Associated’ Banks is a great gain to them. That is not so. There may be a certainamount of prestige gained, but I believethat little if any material benefit is given to the Associated Banks by the holding of the current accounts of the Commonwealth. I understand that in South Australia eachof the banks keeps the Commonwealth account for a month, and in some of the otherStates it is equally distributed. But inevery case the money is- at call, and cannot be invested or made to earn interest. I understand that the banks do not charge for transfers within a State, and that a Government cheque drawn on a bank in onepart of a State is payable anywhere within the State without exchange. For Inter state transfers a charge is made which isonly sufficient to cover the value of theservice rendered. Were there a Commonwealth Bank, with branches throughout Australia, Inter-State transfers would have tobe charged for. I am told that the Commonwealth can buy a draft on London, payable sixty days after sight, at a discount” of J per cent.
– A private individual cannot do that.
– I have authority for saying that the Government can buy in* Melbourne a draft for ,£100, payable in?
London, for £99 10s. This advantage is possible because of the business connexions of our banks in the United Kingdom. The Commonwealth Bank would not have the same facilities .and opportunities for the transfer of credit, even though it possessed a branch in London.
– Why are the banks desirous of getting the Commonwealth custom, if they gain nothing from it ?
– I do not know that they are desirous of getting it. I am replying to the Attorney-General, who said that the Government pays heavily for the transaction of its banking business, by showing that it now gets that business transacted on better terms than will be obtainable from the Commonwealth Bank. The effect of the Bill on the Savings Banks pf the States has been exhaustively dealt with by other honorable members, and therefore I shall not devote much time to it. Undoubtedly the measure will inflict a serious blow on those institutions. The friends and supporters of the scheme will probably be ready, if they are depositors in- the Savings Banks of the States, to transfer their balances to the Commonwealth Savings Bank, which will possess a certain glamour and attractiveness, and may appeal to the Australian sentiment. Even without a difference in the rate of interest, this transfer will probably go on to a large extent. The withdrawal of money from the Savings Banks of the States will seriously affect local development and State financial administration. In Western Australia a very large sum has been paid into the Savings Bank, and the State Government has in times of emergency, with the sanction of the law, made temporary use of the money. The withdrawal of this money from the State Savings Bank will put an end to that.
– Could not the State and Commonwealth Savings Banks be worked together?
– An understanding to that end might be possible, but as the Savings Banks of the States will no longer be able to use the post-offices, they will be seriously crippled, and money which is now available to the Governments of the States for expenditure on public works will no longer be at their command. Again, as mentioned by the honorable member for Wimmera, the Commissioners for the Victorian Savings Banks make large advances to fanners and settlers on freehold security. If their money is transferred to the Commonwealth Savings Bank, it will no longer be available for this kind of investment. Moreover, a drain on the Savings Banks.may mean pressure upon those who have borrowed from them. The Prime Minister evidently contemplates the doing away with the Savings Banks, because he said that probably in time there will be only one Savings Bank system. With the withdrawal of post-office facilities, and the belief that the Commonwealth can offer a. better security, the State Savings Banks will be doomed, though the passing away of such useful and well-managed institutions will be a calamity. In New South Wales there are 653 Savings Banks; in Victoria, 416 ; in Queensland, 233 ; in South Australia, 250 ; in Western Australia, 149 ; in Tasmania, 137 - a total of 1,838.
– Are not some of these Savings Banks entirely separate from the Post Office?
– Not many. There” are a few called Trustee or Commissioner Savings Banks.
– There are sixty odd in Victoria.
– Supposing there are, the great bulk- are what .are known as Post Office Savings Banks in the general meaning of the term ; and it would be serious if these useful institutions disappeared under the scheme proposed.
– There is no such, idea.
– It will be so under the Bill, and that idea is supported by the speech of the Prime Minister, so far as I heard and read it.
– What is that?
– The Prime Minister said that he expected, in course of time, that there would be one system of Savings Banks throughout the Commonwealth, and that the Commonwealth system would supersede the. State system.
– I expressed the opinion that it is inevitable that the Commonwealth Bank shall grow.
– That is sufficient, for if this bank is allowed to grow, with special facilities available in the Post Offices, it will mean the utter ruin and destruction of the State institutions. Such a contingency cannot be regarded with equanimity, but rather with misgiving and anxiety. Something ought to be done before the Bill goes through, to preserve these useful institutions from the fate which undoubtedly awaits them.
– The Commonwealth institution may prove just as useful.
– I do not think it will be as useful as the existing institutions, which are under State guidance, and are fostered by the States - they possess certain financing ability within the States themselves, apart from the convenience of the customers or depositors. Here is a sacrifice that the States will have to suffer. On the whole, I do not view this scheme with favour. There is no public demand or necessity for it ; there are sufficient banking facilities now to meet all public requirements; and this scheme has been brought forward, not to meet any public utility, but merely to carry out a partv political cry.
.- The honorable member for Bendigo belongs to a profession the members of which can find fault in everything. The honorable member, I know, did good work in the Victorian State Parliament, of which he was a member for years, and I propose to read two sections from the State Bank and Currency Act of 1890, as illustrative of the conditions under which notes were issued by private banks. There is a widely-spread idea, which has been enunciated even in this House, that the note issue was a first claim on the bank’s assets. As a matter of fact, the notes represented a claim on the assets only if these assets were not mortgaged. Section 12 of that Act is -
Notes payable to bearer at sight or on demand issued in Victoria by any banking company firm or individual banker in the hands of any bond fide holder thereof for value who has received the same in the ordinary course of business without notice that the same have been issued or dealt with contrary to the provisions of this Act and has not subsequently dealt with the same otherwise than in the ordinary course of business shall in the event of such company being wound up or such firm or banker being insolvent or bankrupt be a first charge on the assets in Victoria of such company firm or banker not being the subject of any mortgage pledge lien charge or other security in favour of any other creditor.
Section 14 of the same Act is as follows : -
No banking company firm or individual banker shall issue notes payable to bearer at sight or on demand unless such company or firm has a subscribed capital of not less than Two hundred and fifty thousand pounds and a paid-up capital of not less than One hundred and twenty-five thousand pounds or unless such individual banker has a capital of not less than One hundred and twenty-five thousand pounds, and any company firm or banker issuing notes contrary to the provisions of this section shall be liable to a penalty amounting to Twentyfive pounds per centum of the amount of the notes so issued, to be recoverable with full costs of suit by any person who may sue for the same.
It will be seen that if any body of men were determined to swindle, they had only to provide a capital of £125,000 to enable them to issue notes in millions, and by mortgaging their securities, they could escape any claim on account of those notes.. If that is a sample of the banking supported by the honorable member for Bendigo, only his legal training could cause him to argue in favour of it. I have here a photograph of a bank-note issued in the boom time, when bank after bank closed, with untellable pain and misery to thousands of men, women, and children. There were not enough notes in Victoria, and the Bank of Australasia sent over some Sydney notes, which were altered by striking out the words “Sydney” and “New South Wales”; but, keen bankers as they were, the managers did not actually sign the alteration. I have here another bank note illustrative of the old system of banking, which is supported by honorable members opposite, as against the proposed scheme of the Commonwealth. When there is any proposal by a body of men in this House for the good of the community, and it is desired to find fault, or flaws, without any idea of real criticism, or improvement, commend me to a member of the legal profession. I think it was the great Sumner, of America, who said that, for the betrayal of a great cause, or of a country, it was not necessary to seek, for it could be found ready-made, in any lawyer. On the 1st January, 1892, after the great financial collapse, we were told, in an Exchange Circular -
Under these circumstances, provided no furtherbreach of confidence occurs, and the horizon looks fairly clear at present, there should bescope for sound speculation in City of Melbourne, Commercial, Federal, Mercantile, National, Royal, and Bank of Victoria shares, at present prices.
Where are three of these banks to-day?” They are unknown on the Stock Exchange. I remember one man who had been employed in the Commercial Bank standingin the street, and shaking his fist at the Stock Exchange; and, doubtless, he was justified, for he blamed the Exchange for much of the financial trouble. The banking system which gives the greatest stabilityis the best for any country. I fully admit the greatness of the Bank of England, but I know that, so far as actual monetary currency to meet its demands is concerned, it stands only eighth in the list of the world’s banks. Behind the bank, however, is the glamour and greatness of the British race, with its reputation for wealth. People outside think that the Bank of England is actually supported by the British Government ; and 1 make bold to say that, if that Government dared to allow the Bank of England to fail, under any circumstances whatever, the effects would be more terrible than that of a great revolution in the streets of London. The great firm of Baring Brothers, which is unknown to-day, was the central figure in a great crisis ; and the representatives of the banks of England, supported by the British Government, decided that it should be saved, and a terrible disaster in England was thus avoided. The Bank- of England was started by a reverend gentleman named Patterson. In 1797, it suspended payment . of specie, which meant that gold could not be obtained for notes. There was depreciation in 1814, when a £5-note was worth only 73s., and gold was at 37 per cent, premium. For a period of over twenty-two years, gold could not be obtained on demand for Bank of England notes. The honorable member for Swan told us yesterday that three times since 1844 the charter of the Bank of England had been suspended, owing to crises. In 1809, the notes were worth only 17s. in the £1 ; in 1812, they were 16s. in the £1 ; and in 1813, they were 15s. in the £r. The Bank of Venice existed for 600 years, during the major portion of which period it had no gold reserves; in other words, it was a bank run purely on credit, and there was not a single crisis, until the victorious arms of France swept over Italy, and took possession of Venice. This, I believe, caused Napoleon to look into the question, and the Bank of France was established. This bank had authority to issue £4-notes, and, some fifty years after, £2-notes. Subsequently, the bank was authorized to suspend specie payment, and to issue notes to the value of £260,000,000, some as low as five francs, or 4s. The last edition of the Encyclopadia Britannica shows that the country which has the most stable banking system is the one from which we should seek knowledge. Dealing with France, it says -
The advances on securities were in the same year £106,280,124. The rate of discount in Paris is, as a rule, lower, and the number of alterations fewer, than in London. From May, 1900, to January, 1906, there was no change, the rate remaining uniformly at 3 per cent.
For six years there was no wavering, but any one who follows the prices current in the columns of the papers will see that during all that time the Bank of England was wavering in the balance -
Bills as low as 4s. 2d. are admitted to discount, including those below Ss. ; about 232,000 of this class were discounted in 1906.
My point is that it is credit at the back of the Bank of England that gives it its greatness. Webb, the successor to Mulhall - who, when alive, was known as the prince of statists - shows that, in 1908, the Bank of England had £39,000,000 in- gold, whereas the Bank of France had £126,000,000 in gold ; the Treasury of the United States of America, £208,000,000 in gold; and the National banks of the United States of America, £32,000,000 in gold. At page 53, the figures relating to the total metallic reserve, including gold and silver, at 30th June, 1908. are given as follows : -
Bank of England, £39,400,000 ; Imperial” Bank (Germany), £51,600,000; Bank of Fiance,- £162,900,000 ; Bank of Italy, £40,300,000 ;. Bank of Spain, £42,600,000; Bank of AustriaHungary, £60,600,000; Russian State Bank,. £115,400,000. United States - Treasury ,.. £317,500,000; and National Banks (May 14),. ;£38>500,°°°-
The Bank of England would be much’ stronger if it were the National Bank of England. Henry Clay stated in the early days that never was a cent lost through a National bank. So far as my reading goes, I do not know of a single penny ever being lost by a National bank. The State banks quoted as failures by the honorable member for Bendigo were little banks in the States of America in the early part of last century, possibly enabled to start by men of swindling proclivities.
– They were slaveexchange banks.
– I want to establish a National bank with the whole Commonwealth behind it, so that every hill, every valley, every river will be a guarantee that it can never break. Surely, both sides of this House can agree that if there is any fault, we should join in friendship, and do away with it, and that, if any amendment can be made to make the rough places smooth, we should adopt it. The amendment moved by the honorable member for Ballarat is only in keeping with his record. The one thing that always dogs him like a shadow is “delay, delay.” If he had only a little energy, and could do as well as he could speak, he would have moved the world. He knows well the truth of the remark of the witty German, that if God had placed the making of the world in the hands of a Commission or Committee, it would never have been made. The honorable member for Bendigo and the honorable member for Parramatta know well that in nine cases out of ten, the appointment of a. Select Committee, or Royal Commission, necessitates delay, sometimes unlimited delay. The Opposition plead that no one is to have control over the Governor of the bank, but he is to be appointed during good behaviour. I remember one gentleman who had the distinction of being a bank manager, in London, at twenty-one years of age, and 1 know he used to handle his directors very firmly indeed. Men experienced in banking do not care to join a sinking ship, but we all know that many bankers are seeking to obtain employment under the Government. Surely, that shows that they have confidence that the Commonwealth Bank will not go down. An injustice is being done under the present system of banking, but, so far, I have not heard any voice raised against it in this debate. The unclaimed balances lying in the banks, representing money belonging to the people of Australia, are being eaten away, except, I believe, in South Australia, where they have to be paid into the general Treasury. The time was when the Associated Banks did not charge anything for keeping current accounts, but some years ago they fixed on a charge of ros. per year, which is eating year by year into the unclaimed balances inthe State of Victoria. In course of time, every particle of them will be absorbed. No honorable member would venture to say that that unclaimed money belongs to the banks. Surely, the State has the greatest right to it, and I would willingly vote for the inclusion of a clause in this Bill to provide, as is done in South Australia, that all unclaimed balances should be handed over to the State without reduction after a certain time, accounts being kept of them in a ledger, so that the owner may recover them if he makes a claim for them.
– I think that is in the Bill.
– I am glad to hear it. To its credit be it snid that the Colonial Bank of Australia objected to the imposition of that charge of10s. per annum. The clearing-house returns for 1907, according to Mulhall, were £31,900,000,000 in the United States of America, £19.660.000.000 in Germany, and £12,730,000,000 in Great Britain. The whole of the gold produced in the world from 1493, the date of the invasion of America by the Span iards, to 1907, has been estimated at £2,601,000,000 worth; silver being a little more, or £2,701,000,000 worth. The whole of the gold produced,therefore, would not pay one month’s transactions on the stock exchanges of the world. The words of Carnegie, to the effect that 98 per cent. of the monetary transactions of America are on paper, and only 2 per cent. in currency, are very true. The Bill has my full support. 1 am willing to make a sporting offer to the honorable member for. Bendigo to argue on this Bill as against the banking business of Victoria during tne time the honorable member has been in political life. If the honorable member would like to name the public platform, I shall be pleased to meet him. For twenty-one years, to my knowledge, the people of Victoria have been demanding a State Bank. It was asked for long before Federation, but we propose now to establish an even greater institution in the shape of a National bank. Any one who is privileged to help on and not destroy this Bill, will, 1 am confident, deserve well of future generations.
– The honorable member for Parramatta.
– Is the honorable member for Boothby ready to speak ?
– Order ! I have called on the honorable member for Parramatta.
– I had thought to say a few words on this subject to-night, or possibly to-morrow, and have not my powder with me. I have, however, sent, out for a small flask of it. Many learned speeches have been made on the subject, but I do not propose to add to their number. I could not if I tried. All the theoretical field has been explored. We have had the history of similar institutions, I believe, since the fourteenth century, which was mentioned by the honorable member for Melbourne as being a century remarkable for the establishment of a National bank. From that period onward we have been taken all over the world, including the whole of the States of America, and we finish up, after all, with the consideration in Australia of a little Bill, which, on the authority of the Prime Minister himself, is only a very little one. I confess that I had not read the Prime Minister’s speech until this afternoon, when 1 went through it carefully to ascertain the underlying motive for the introduction of this very important proposal. First of all, I think we are entitled to look at the genesis of this measure. A proposal for the establishment of a National bank has appeared on the platform of the Labour party, according to the honorable member for East Sydney, ever since 1890. That is over twenty years ago. My recollection is that, in connexion with every election, it has been advocated as a measure of economic reform - as an instrument to lever up the great people who are underneath, and who want, by some such means associated with this bank, to make for themselves a more comfortable place in life than they at present occupy. In other words, this bank has been advocated as an instrument of economic reform. I have always understood that this was one of the Labour party’s proposals for raising up what Robert Blatchford calls the “bottom dog,” and making him equal in every way with his fellows. This was to be a measure of radical social reform, and as such has been advocated on every platformon which my honorable friends have appeared for the last twenty years. During the election campaign preceding the famous 13th April - and it helped no doubt materially to contribute to the result they then achieved - the following statement was issued on the authority of the Political Labour League in Victoria, and was, therefore, I presume, subscribed to by the honorable member for Corangamite, the honorable member for Indi, and other Victorian representatives who are members of the Labour party-
– We never saw it.
– It was published in thousands of pamphlets, together with photographs of candidates.
– It is a blunt, straightforward statement of the results they hope to achieve by the establishment of the bank.
– Is that the manifesto from which the honorable member for Kooyong quoted last night?
– Why repeat the quotation?
– For the sake of a little emphasis, and to contrast the statement in the manifesto with the sucking dove sort of statement made by the Prime Minister in introducing this Bill. I wish to show how the tune has altered since the last elections.
– What is the honorable member going to read from ?
– From one of the pamphlets of the honorable member’s party.
– From a manifesto issued by the Political Labour League in Victoria -
Banking is one of the frauds by which capitalism bleeds the people. . . . The Labour proposal is not to nationalize the existing banks, but to establish a Commonwealth Bank with unlimited powers, which will have a branch in every considerable centre of Australia, and will enter into competition with the company-owned banks. The proposed bank would be one of the strongest in the world, and would, of course, manage the public debt of the Commonwealth.
The gradual extinction without compensation of the present banks would follow as a matter of course.
That is a statement made in a manifesto issued as recently as eighteen months ago.
– Read on.
– That is all.
– Oh, no.
– I defy the honorable member to produce anything that will modify this statement.
Mr.Fenton. - I shall produce something. The honorable member has not read the whole manifesto.
– I do not pretend to have read the whole of it. The honorable member may confound me, but I am not to be confounded with “ bluff.”
– Has the honorable member’ quoted the full statement in regard to the banks? He knows he has not.
– I know I have not, and I have refrained from doing so in order to save the time of the House.
– To save the honorable member’s skin.
– Let the honorable member for Maribyrnong produce the statement.
– I will.
– I shall be very glad if the honorable member does so. In addition to this statement the honorable member for New England stated in this House a week or two ago that the establishment of the Commonwealth Bank was to bring about a lower rate of interest, cheaper money for the working man, and, ultimately, to reduce rents very materially, and so forth.
– Hear, hear !
– I put these two statements together. In the first place we have the statement in the manifesto that this bank is to stop the bleeding of the people on the part of private banking institutions, and is to destroy other banks.
– I said nothing about destroying the other banks.
– No, the statement is contained in the manifesto. I wish to compare these statements with that made by the Prime Minister in introducing this Bill. The right honorable member told us ineffect that it was quite harmless. It was only a little toy gun, and would not go off. It might or might not enter into competition with other banks. It might or might not interfere with the Savings Banks of the States. I always congratulatethe Labour party on the possession of a mildmannered Prime Minister, such as they have, for 1 think he would disarm-
– Joseph Cook.
– Well, he does disarm me. I cannot find it in my heart to attack him. There is that in his exterior which would deceive any one of us if we did not know what was underneath it. Beneath it all, however, we know that there is a perfect Machiavellian purpose. I desire to show how far away he is in regard to this Bill from the people on whose support he relies to carry it. It is my duty to show what they expect and what he proposes to give. So far as the great struggling masses outside are concerned, this is another piece of Dead Sea fruit that the Government are offering them. They can give them nothing that will ameliorate their position, and, according to the statement made the other day by the Prime Minister, it is scarcely intended to do anything of the kind by means of this measure. The right honorable gentleman asked, “Is there any necessity for this bank at all ?” And he replied, “ I think there is.” He proceeded to give. his reasons. In the first place, he laid that credit must be given to the existing banks. He did not say that they were the frauds by which capitalism bleeds the people. On the contrary, he paid a tribute to them. Which is correct - the statement that the banks are bleeding the people, or the tribute of appreciation which the Prime Minister pays to the private banks, to whom he says credit must be given for thegood work they have done in developing the productivities of Australia ? Both statements cannot be right. Then there is the further statement which appeared in the Brisbane Worker in April, 1910, to the effect that this bank will be a big step towards making the Australian nation master of its own currency, and liberating its citizens from the talons of the money power. The Prime Minister, very correctly, in my judgment, started off by paying a meed of praise to the banks. He said that they had done their duty, and done it well in many respects, and that they had helped to make the country what it is to-day.;. He went on to state that they were making good profits, and that is the first reason for establishing this bank. He said, “ Honorable members will see that the banking returns are growing rapidly,” and after giving certain particulars he went on to state that the banks now doing business here pay7¼ per cent. on their combined capital and reserves. I am told by those who have gone very carefully into this matter that the amount is not7¼ . per cent., but about5½ per cent.
– That return has been checked by the banks themselves.
– A banking authority told me the other day that after carefully checking the whole of the figures, he came to the conclusion that on the capital and reserves there was an average return of not more than about per cent. The fact that banking has, on the whole, been a fairly profitable business in recent years - the banks now obtaining a return of7¼ per cent. - is given as one of the reasons for the Government proposal. The honorable member for Parkes pertinently interjected at the time -
The drapers are making more than the bankers. Why not go into the drapery business?
Of course, the suggestion was brushed aside. The only other reason I can find for the proposal, which has really been forced on the Government by the electoral promises of the party, is this -
We shall just add this one bank to the others, and see how it is accepted by depositors. If the other banks are making profits that are too high they are extracting those profits from the industries of the country. The slightest reductioninthe rate of interest should, if properly applied, add to the productivity of the country, and, therefore, be of distinct advantage to the Commonwealth.
As the margin on which the banks do business is very narrow, if the rate of interest earned on loans, overdrafts, and other accommodation is reduced, it will be necessary also to reduce the rates on deposits; and that that will be the effect of the establishment of a Commonwealth Bank seems certain from the reference of the Prime Minister to the American Savings Bank, which, he says, is such a success that only 2 per cent. is paid for the money deposited in it. Therefore, the proposal of the Prime Minister amounts to this : that lower interest is to be charged to the capitalists of Australia, and lower interest paid to the small depositors in the Savings Bank.
– If the Commonwealth Savings Bank gives a lower interest than the State Savings Banks, there will be no transference of accounts to it.
– The bank which the Government proposes to establish is very different from that anticipated by their supporters, who voted to return the Labour party to power in the belief that a Commonwealth Bank would be established which would destroy the private banks, and make money cheap and plentiful. Those who will benefit from the proposed bank will be the capitalists who are engaged in trading concerns and as speculators; while the small workmen who have placed their little earnings in Savings Banks have the prospect of finding their interest reduced. In New South Wales the Labour party is competing with private enterprise by starting brickworks and other industries. The New South Wales Labour party is supplying cheap bricks for the speculative builders of Sydney, but the rents paid by working men are not being reduced. The people ask for bread, and the Labour party gives them bricks and banks, but does nothing to increase their welfare. A good result which will follow from the return of the Labour party to power is that the people will see its limitations, and it will become evident to them that economic laws cannot be changed by their interference. The Prime Minister told members of the Opposition that the fact that the Commonwealth Bank will compete with private banks should not give them concern, because they profess to believe in private enterprise ; but he gave no good reason for this revolutionary proposal. My main objection to the Bill is that it provides for a politically-controlled bank.
– The honorable member might as well go the whole hog in his condemnation.
– I do not wish to do that. I can conceive of a National bank serving a useful function, but its control must be divorced from political influence! One of the surprises of the debate is the rabid advocacy by honorable members opposite of one-man government. These Democrats opposite desire to set up an Autocrat !
– This is individualism?
– It is individualism run mad, untempered even by prudence. This one man is to be supreme over all ; he is to determine all the actions of the bank, according to his own sweet will, influenced from time to time by the Treasurer. This Bill ties the Governor of the bank to the Treasurer in a way which, I believe, is very sinister, and will work out to the detriment of the bank, and the country.
– Then the Governor of the bank is not an autocrat, after all?
– He is an autocrat, so far as the people are concerned; but he is a puppet so far as the Treasurer is concerned.
– To whom is the Treasurer responsible ?
– To this Parliament. The interjection reminds me of another criticism of the Prime Minister regarding bank directors. The right honorable gentleman says that the manager of a bank controls the whole concern, while the directors simply draw their fees. Now, that is rather insulting to bank directors in Australia, particularly in the case of the larger banks. I believe that if the very able general manager of the Bank of New South Wales were removed, any member of the directorate could control the institution. All the directors are keen, able, business men, and it is absurd to suppose that they do not impose a salutary check on a manager, no matter how able or experienced the latter may be. The Prime Minister has told us that in the case of the Commonwealth Bank we have what is better than a Board of Directors, namely, Parliament. How far is that from my statement, at which thePrime Minister frowned so much the other night, that the Caucus is to be the Board of Directors of the Commonwealth Bank? I presume that the Caucus is now directing this Parliament - that is no exaggerated statement - and the Prime Minister’s assertion that the Board will be the Parliament is only a variation of my expression of opinion that the Caucus is to be the directorate. The very structure of the Bill makes it impossible to come to any other conclusion ; political influence is inwrought into its texture. Honorable members opposite will be very wise, if they desire the bank to succeed, to eliminate political influence as much as possible, and make the bank subject to independent expert control. I do not complain of there being a State guarantee, though I think that could be varied in its form. While there is that guarantee, the working of the bank should not be imperilled by admitting political interference at every point in connexion with the detailed management.
Sitting suspended from 6.30 to 7.45 p.m.
– I proposed to address myself to honorable members opposite, but, as usual, they are absent from the chamber ; and it is disgraceful that they should take so little interest in a proposal of this kind. The bulk of the speakers yesterday and to-day have talked to absolutely empty benches opposite. I presume that the knowledge of the Government and their supporters is so extensive that they do not require any discussion of the Bill. We know, of course, that any discussion will make no impression, because their minds are made up. To me it is extraordinary that a National Bill of this kind should be discussed in a comparatively empty House, not only for an hour, but for days together.
– The honorable member is very severe on his own side !
-I am not speaking of my own side, but of the House, though particularly of the Government benches. When we rose for dinner I was speaking of the one-man control of this bank. The more I think over it the more extraordinary it seems that the Government should be so violently prepossessed in favour of one-man government. The Government tell us that this is to be an ordinary business concern, but they proceed at once to show that they have no desire to treat it as such.. Whatever the ultimate purpose may be, they are setting up a control which will make it almost impossible to conduct the bank on ordinary sound business lines. Is it not strange that men, who are violent Democrats, should be so obsessed with the idea of one-man control ?
– Does the honorable member think that three men would make the control more Democratic?
– Three men would make the control more Democratic.
– Not necessarily.
– I always understood that the rule of Democracy was the rule of the many. I may have been wrong all my lifetime, but my impression is that the fundamental theory of Democracy is that when all are governing the country is safely governed. I hear, however, from members of the Government that, after all, that may be a’ wrong theory entirely, and that Democracy does not mean the rule of the many. What is all the trouble just now about the one-man rule in the Post Office? I understand that the desire is to multiply the control of that Department by setting up a Board of three.
– Not many desire that !
– A great many desire it, and, moreover, a great many desire to curtail the powers of the Public Service Commissioner.
– The honorable member is, I think, now going beyond the question.
-I am entitled, I think, to make that brief reference, in order to show that the Government are departing from the trend of the sentiment of members of their own party in relation to the Post and Telegraph Department, and are proceeding to set up another Government Department under the control of one man. On this point, the Treasurer said -
I do not think the fact that there isonly one man makes the conditions dangerous. I believe they are stronger and safer because we are putting our whole trust in one man.
This bank is to be better governed by one man than it would be if a Board took part in its control, says the Treasurer. Apply that to the system of government under which we are living. Would this country be run better by one man than by the present Cabinet of ten? They are even appointing Honorary Ministers, who are not needed, for the administration and control of separate Departments, dragging them in, I presume, because in the multitude of counsellors there is safety. But here they are turning their heads over their shoulders, saying, “ We must have strong, autocratic, despotic control over the bank by one man.” I should like to point out one reason, in particular, why a. Board would be very desirable to advise the manager and act with him. The new bank will have to cater for business, and those who have had banking experience will know that amongst the very first men wanting to open accounts with it may be those who are less solid than others in business circles. What have been described as the “ lame ducks “ in business will all want to open accounts with the new bank. That is where a Board of experienced business men would prove of incalculable advantage to the Governor of the bank in their knowledge of the ramifications of business, and their estimate of the business offering. I believe that is a good reason for appointing a Board. One of the greatest necessities in opening an institution of this kind will be to discard the bad business and be careful and prudent in the selection of the accounts which are permitted to be opened.
I should like to know where the business of the bank is to come from. I should have thought that the Prime Minister would tell the House where he expected to get it from. He should have done what any outside company would do when issuing a prospectus. They would say, “ This is the business we expect to get. This is where we expect to make dividends for the shareholders whom we invite to put their money into the concern. Here is our plan of operations. We think it is profitable, and will be prosperous.” Nothing of that kind is sketched for us by the Prime Minister. I believe he has not the remotest idea where the business of the bank is to be got from.
– From Australians.
– Has the honorable gentleman had any communication with the States as to their business ?
– Order ! This is not the time for asking questions.
– That is rather severe. I do not think I am overstepping the bounds in asking the Prime Minister a question. I should like to know from him where he expects to get his business from with which to start the bank. If you, sir, shut down on an innocent remark of that kind, I must go on without it ; but I think it is holding the reins pretty tightly. I should have thought the Prime Minister would consult the States in this matter. Their business is important, both in character and volume, and we shall be very lucky if we get the States to transfer it to our bank. Without it, what is our own business going to be? It is considerable, but not very profitable. The business of the States is profitable, because they all have large loan accounts, -and large sums lying in the coffers of the banks for use from time to time. We have nothing of that kind. I believe that 70 or 80 per cent. of the business of the various Federal Departments must always be lying at call, and cannot be invested for a period with the reasonable certainty of not being called upon. While the State moneys are to be coveted, if we are left to our own resources our own business will not be found very profitable. Has the Prime Minister obtained from the States any intimation that he is likely to get their business, or whether they are going to leave their money in the private banks? I suppose the Government, going into the ordinary banking business, will naturally expect to develop an exchange business ; but I do not see how they are going to do much of that. Are they likely to get the exchanges connected with the export of our wool, for instance? To do so, they will have to cut the rates and give more favorable terms to the merchants and squatters and others who now do the business than the private banks are giving. If the Commonwealth Bank is going to do that purely commercial business more cheaply than the private banks do it now, again I ask where it is to get its profits from to build up its reserves and pay interest? These are questions as to which we ought to have some outline from the Prime Minister as a reason for establishing the bank. All that we can get from him is that he is going to establish an Australian Bank. An AustralianBank to do what ? If it is to do ordinary banking business, he must cut rates very severely to get into these foreign exchanges. I presume that the bank will not be a trading bank to the extent that a private bank is, and will have to do business much more conservatively. It will’ be required to take less risks. There will be something of the Government conservatism and Government stroke about it. How, then, is it to compete in this matter of exchanges alone with the other banks, which will be able to take greater trading risks?
– The merchant goes wherever he can buy credit most cheaply.
– Of course he does ; and therefore if the Treasurer is going into the business of the private banks, and to do it more cheaply than they, in fierce world-wide competition, are able to do it, I want to know how he is going to make the profits that will enable him to lend the traders of the community money at a low rate of interest, such as he outlined in his speech.
Why refer this Bill to a Select Committee? We had one reason during question time “tins afternoon. The honorable member for Richmond asked the Prime Minister -
What was the total .amount paid to the banks by the Commonwealth for conducting its banking business, including exchange on remittances during the last financial year?
In other words, what is it costing us to-day to do our banking business? That should be an elementary question in connexion with a proposal like this, but what was the answer? The Prime Minister said, in effect, “ I do not know. I cannot get you the information until Tuesday.” This debate will then be at an end. There has never been a more pitiable exhibition than this helplessness on the part of the Prime Minister, in view of a national proposal of this kind. He has no information to give us ; does not know what business he is going to give the National bank ; and does not know what it is costing the Government to carry on its financial business to-day. He practically says, however, “ Whatever it is, here goes for a National bank ! Never mind whether it pays or not. We are going to get Australian business.” He may or he may not get it ; but it seems to me that the right honorable member ought to have been able to tell us in connexion with a proposal of this kind what the value of our own business, to go no further, is. It seems, however, that it is impossible for him to give us that information at present. The honorable member for Richmond put to him the further question -
What was the total amount received from the banks by the Treasury as interest on deposits held by the bank during the last financial year, excluding any moneys deposited from the Australian notes fund?
Again no information was ‘ forthcoming. The Treasurer, after submitting the country’s balance-sheet, was unable to tell us in connexion with this proposal to set up a National bank how much he has been receiving from the banks in respect of the moneys on deposit with them.. All these are reasons why we should get the_ information for which we seek before we set up a bank of this kind. It ought not to be a mere speculation - a mere carrying out of a theoretical idea. It ought to be a bona fide attempt to set up a bank to do the nation’s business, and we ought at least to know what the nation’s business is worth at the present time.
– All this is quite beside the question. The proposal for this bank is on the Labour platform, and that is enough.
– Quite so. We are ignoring the world’s experience in the initial stages of National banks. Before the United States set up her banks she held inquiries on commission, and invited experts from every part of the world to go over and give her evidence. Before Germany set up her banks, as we were told to-day, in the learned speech delivered by the honorable member for Bendigo, she inquired in England, again on commission, and only after exhaustive inquiries in every part of the world did she adopt the Britishmethods, and frame her banks accordingly. But here Ave have self-satisfied Ministers who do not want knowledge - who tell us they have not got it, and who do not want to hear anything about it. These, are urgent reasons why the House ought to pause before plunging into this enterprise, which must be fraught with serious .consequences to the future of Australia. At least we ought to proceed with knowledge, and that knowledge should be the result of specific inquiry into our own environment as well as the environment of banks that are successful in other parts of the world.
I propose now to make brief reference to the Savings Bank aspect of this Bill. The Prime Minister told us that there is ultimately to be only one bank. The purpose of this Bill is ultimately to destroy the State Savings Banks. The right honorable member says that there is ultimately to be only one bank. This bank is to grow to the disadvantage of the State Banks. It is impossible for two banks to exist side by side in the same post-office. This therefore clearly means that the Government are going to bundle the State Savings Banks out of the post-offices. There is to be an eviction. The State Savings Banks will have to go, and in their place our own bank is to be set up, and our own machinery inaugurated. And for what? Is it to give the people a higher rate of interest? The right honorable member said, “ Perhaps so,” and then asked us to sail with him to the United States to see what the Government there were doing in the way of a National Savings Bank. He says that there is one over there which is prosperous beyond the dreams of those who set it up, and which is paying 2 per cent, interest on the money that the people lend it. This is the ideal for Australia ! Two per cent, in America, for the poor working man’s deposits! And this, we are told, is success. It would be eminently disastrous for the working men of Australia who now get 3 per cent, and 3J per cent, on their deposits in the various Savings Banks in the States.
It seems to me that it is impossible that this can be destined to be other than a political bank. The Government would have been well-advised had they left out of the Bill the provisions in regard to a Savings Bank for the reason that if the National bank is to succeed as a bank it will want the cordial co-operation of the States. Instead of that, you tell the States plainly that ultimately their Savings Banks must be absorbed in the Commonwealth Savings Bank, it being impossible for the Post Office to do the business of both. Is that the proper attitude to take, seeing that the bank’s success depends largely on their cordial co-operation ? Already the States are protesting against the proposed interference with their Savings Banks, South Australia being the latest to do so. No doubt, these protests will come from all the States. The public will be chary about transferring its deposits to the Commonwealth Savings Bank, in view of what the Treasurer has said about the American Savings Bank, which he alluded to as such a success, and which is paying only 2 per cent, on deposits. I have said that the bank will be politically managed. Under clause 10, the Treasurer begins by lending it money. Under clause 18, the Governor is bound to report to the Treasurer concerning the business of the bank at the end of every quarter. I do not know whether what is contemplated is an ordinary quarterly statement of accounts, or whether something more is intended. If the Treasurer is to poke his nose into the minutia of the bank’s business, customers will not cater to have their accounts kept by it, because all privacy will be at an end. There is to be, also, a half-yearly statement, to be accompanied by an auditor’s report, and presented to the Treasurer, th& President, and the Speaker. Are the latter banking authorities ? No. The report goes to them for presentation to Parliament. Could not the Treasurer present it to Parliament? For fear that he might not do so, copies have also to be sent to the President and to the Speaker. But if copies go to them, there will be no need for sending a copy to the Treasurer. Apparently, the bank, will not be able to open a branch without the Treasurer’s consent. The Government cannot frame a rule for the conduct of the bank’s business - I do not refer to regulations - without the consent of the Treasurer. The bank will not be able to do business anywhere without that consent. It cannot appoint an attorney without the Treasurer’s consent, and the classification of officers must, be within his purview. The Treasurer, with ‘the one hundred-and-one things that make his life a burden in some respects, is to pay regard to the classification of the bank’s officers. With all due respect to the present Treasurer, I say that he is the last person in the world who would be qualified to classify the officers of a bank, and his successors will probably be like himself in that matter. The Governor will not be able to lend money on mortgage, and scarcely in any other way, without the Treasurer’s consent; that is made clear by clause 34. The Treasurer, not the Governor, is to determine the rate of interest. If ‘the Cr6dit Foncier system is introduced, will not the Caucus, under this arrangement, have something to say - because it will be a matter of policy as well as of business - as to the terms on which money is to be lent to the farmers ? Cheap money for the farmers is part of the political programme of the Labour party.
– Would it not be a good thing ?
– Of course. But my point is that the Caucus would be entitled to its “ say “ as to the rate of interest at which money should be advanced to farmers and others. In my opinion, the influence of the Treasurer and of Parliament should be divorced from the control of the bank. There should be a Board, which should choose one of its members Chairman, and all communications with the Treasurer should be through the Auditor-General. You may be sure that that intermediary is a disinterested one. The less the Treasurer has to do with the control and active management of this bank, the better for all concerned, and certainly the better for his own peace of mind. You can have no more direct interference with the management of the bank than when the Treasurer exercises power to determine the rate of interest. ‘ Is that not the very crux of the whole thing? The Treasurer is to determine how and to what extent the bank shall do business and make money. Inspire of all we are told that this is not a political bank, I say that it is nothing else, while these provisions remain in the Bill.
– We might as well’ have a Minister of Railways dictating freights and fares.
– I say that this Governor, in view of clause 64, might as well be a member of the Cabinet. If the Governor is to make all the regulations governing the bank, he might as well be a member of the Government as be outside it. The Treasurer is to lay down the rules as to what the rate of interest is to be. He is to determine in vital particulars the kind and extent of the bank’s operations. Therefore, this can be nothing more than a political bank. It sets out on its career handicapped in every way, by the pressure of interests which are not expert in character, and can only lead to bad banking business” and to unprofitable transactions in general. However, the Government are not disposed to take any advice in this matter. Therefore, they must be left to take their own course. But it is our duty to point out these things to them, and leave them with the responsibility. This bank, rightly conducted and rightly constructed, may perform a useful service in the Commonwealth. But the Government are going the’ wrong way- the very worst of all ways -about it, when making it a mere Department -of the Government. It should be an independently-controlled bank, doing business for the nation, with the nation’s guarantee behind it, giving to the country the guarantee, as far as its management is concerned, that its business enterprises will be conducted on business lines, undisturbed by any intrusive elements from politicians or anybody else.
– I regret that I should be labouring under the disability of recovering from a sore throat. For that reason, I shall confine my remarks fo as brief a compass as possible. There is another cogent reason why supporters of the Government should hot dwell on the measure too much, and that is that we are near the end of the session. That brings me to the point that I am not quite able to understand the attitude of the Leader of the Opposition in moving an amendment, which means delay, and nothing else. Of course, the honorable member for Bendigo, and the honorable member for Parramatta, have absolutely blown to pieces the necessity for the amendment. They have shown its utter uselessness, and have proved to the House that this bank will be an absolute failure. They have also, however, proved that it will be an absolute’ success in regard to its Savings Bank business. When a bank can be declared both .an absolute failure and an absolute success at the same time, it is surely appropriate that the Opposition should give up their criticism, which is a cue to the Government to go straight ahead and pass the Bill. The function of providing credit for the people of this Commonwealth has been too long in private hands. This Government will go down to history as the first Commonwealth Government to step out and put the credit of the nation in the hands of the people themselves. This is purely a co-operative banking measure, with the whole of the people as shareholders. I can quite understand the feeling of those honorable members who come here to put up a fight for the favoured few, who have hitherto had the privilege of providing credit for the public, taking the results in benefits for themselves. I can quite understand their “bluffing” attitude. But I .cannot congratulate the private banks of this country on the calibre of the speeches that have been made in opposition to the measure. I might rake up the ashes of the dead past by dipping into the history of the Victorian bank failures. I might deal with the Bank Issue Bill of New South Wales. I might turn to America, and show what has happened there. The honorable member for Bendigo has been very unfortunate in quoting American banking experience, which stinks in the nostrils of the world. If I cared to follow in the footsteps of members of the Opposition, I could create a stench, not political, but financial , concerning .the story of American banking, which would, to a very great extent, discredit private banking generally. I might refer to the history of the great Queensland National Bank, and the scandals connected with it. But I have more respect for the financial stability of the Commonwealth, and of its people, to take that line of argument. I do not object to honest criticism as far_ as we have had honest criticism from the* Opposition. 1 have absolutely no objection to that. But 1 have an objection to honorable members opposite attempting to slander the credit of the Commonwealth. They know, as every honorable member knows, that at the back of this bank to be established 5y the Commonwealth will be the credit of the whole of the people of Australia. The people will stand behind their bank. Yet honorable members opposite are prepared to let it go forth to the world that the, credit of the Commonwealth will not be sufficient to carry on this institution. We are told that the general banking business is bound to be a failure, but that the Savings Bank business will be a success. We are assured that we are going to create absolute ruin to the State Savings Banks. But do honorable members opposite take the people who have their money in the States Savings Banks for lunatics? Are they likely to draw it out of those institutions to deposit it in the Commonwealth Bank? No. They will keep their deposits where they are safe. Are the depositors in our State Savings Banks likely to withdraw their deposits if they can get only 2 per cent, interest upon them by putting them in the Commonwealth Bank, when, as a matter of fact, . they can get 3 per cent, upon them by leaving them untouched? Whoever heard such balderdash talked upon a great national question? When honorable members urge that this bank ought to be hedged round with every safeguard that it is possible to devise, I am absolutely with them, and I invite their co-operation in Committee, with a. view to securing that end. I wish this bank to be conducted upon the best possible business lines. I want to see the best men in Australia conducting its affairs, and I know from” my association with the Prime Minister that that is what he has in view. He comes from the canny Scotch race. He has accomplished much in this Bill.- The measure represents a tremendous amount of work. But it is not the last Bill that we shall have upon this subject. I can quite believe that next session we shall have an amending Bill introduced, and during the following session a further amending Bill. But when once the institution is a going concern, I hope that we shall not hesitate to do our duty to the whole of the people of Australia by safeguarding it in every shape and form.
I congratulate a number of those honorable members who have spoken upon their admission that it is desirable to establish a National bank. I was under the impression that they would argue in an opposite direction. But my amusement was very great when I heard the honorable member’ for Bendigo urge, in all seriousness, that there is no precedent for the establishment of this bank. Should we make any progress whatever in legislation if we always waited for the establishment of a precedent? Certainly we know that Government after Government in State after State has had to go to the rescue of private banks in times of financial crises. That precedent has been well established. The right honorable member for Swan stated that he would like to see some provision made in respect of crises. Here is one safeguard in that direction. The Government of the Commonwealth will be behind the institution. All the credit of the nation will be behind it.
To say that there is no precedent for the creation of a National cooperative bank is to ignore the fact that on the Continent to-day £200,000,000 are afloat in connexion with co-operative banking systems. It is quite true that neither France, Italy, Germany, nor Denmark has established a bank of this character. But they have reached their end in another way. Their object is to get down to the humblest man in the community who wants to borrow even so small a sum as £5 upon his good name. That result has been accomplished on the Continent by means of the co-operative system of banking, and the system has been so successful that it has killed the necessity for adopting a bank such as is proposed in this Bill. But had it not been for the safety-valve which is provided by co-operative banks, it is certain that the clamour for the establishment of a National bank in Germany would have been very great indeed. If I may crave the indulgence of honorable members, I would like to make a few quotations from the splendid work on Co-operative Banking, by Henry W. Wolff. In his introductory remarks he says -
Co-operative banks have been before the world just about sixty years. In the words of M. G. Francois, himself a banker of standing, they have become a power in the world, a force tobe reckoned with, a potent factor for good, for the democratization of credit, for the relief of distress, for the creation of wealth, for the turning to account of industrial and agricultural opportunities. No country which has adopted them now wishes to do without them. Its leaders in economic opinion, its capitalists, its typical men of business may have expostulated against the necessity, have protested that there is no want, no room for them. The banks have come, they have found wants waiting and uses abundant. Business has gravitated to them, thousands of needs for them have been discovered. Their merits have become known, recognised, prized. And they have proved most useful helps to social advancement and agriculture and industrial development. In Germany, where they have been longest established, and have become most advanced in’ business and most powerful, they now provide millions of money to turn to productive uses, at the very points of the economic and social system - that is at the base of the pyramid - where money help is most urgently called for, and can alsoelect socially and productively largest good. It is to the medium and small manufacturer and dealer, the artisan, the working man with the- little needs of his household or his calling, the farmer and the small cultivator, that they bring longed-for and valued help. A sovereign made available in that humble stratum, doubles, trebles, quadruples itself in little time, and brings relief proportionately to the largest number. And the same quantity of gold diffused in that wide stratum produces more happiness and prosperity in a nation than when lumped together in heavy gilding at higher joints. For a happy, well-employed, and well-to-do working class necessarily means a prosperous nation. From the bottom the benefit of this application rises to the higher strata much more xeadily and more effectually than it is apt to filter down through the impervious lining of capitalistic pockets. And so the effect becomes spread out over the entire Commonwealth.
I maintain that this is an attempt to establish a co-operative bank in Australia, the only difference being that we propose to take the direct step towards the highest form of co-operation. A National bankrepresents co-operation in its highest form. In every branch of the institution there will be a manager who will occupy the same position as that occupied by the manager of any other bank. He will have to judge the calibre of the men who come in to ask faim for credits and arrangements. He will have other men to assist him to judge the securities offered. But, after all, the man who asks for the credit is the greatest asset.
I may say that when I saw a draft copy of the Bill to be laid on the table by the Prime Minister I had some little trepidation as to whether it would be possible under its provisions to establish detailed co-operative banks to work on the small credit system. I maintain that the big central banks, such as will be established in the large towns and cities, could not take up in detail the very small credits. The way in which it is done on the Continent is simplicity itself. A few farmers in a little district are asked to form a cooperative society, giving a combined guarantee, and the National bank lends them the amount with which to conduct their banking operations. They become a directorate in themselves, they take shares and work out their destiny, each man watching his neighbour to see that he is honest. That is the principle which obtains there.
– But that is not the principle of this Bill.
– I had some doubt as to whether it could be carried out in detail under the Bill, but there is a blessed word in paragraph d of clause 7, which says that the bank is to make advances by way of loan, overdraft, or other wise. That blessed word “otherwise” covers, I think, all methods of legitimate banking. All that we need is sympathetic administration.
-Borrowing made easy.
– I thank my honorable friend for the interjection. What a man needs who looks for credit is sympathetic treatment. I ask honorable members if the poorer class of borrower has always got sympathetic treatment from the banks.
– Borrowing made easy.
– Is it made easy? My honorable friend makes a grave error indeed I would not have borrowing on security made any easier than it is at present, but I would have it made extensive. I would give no preference to the rich over the poor.
– No preference to unionists ?
– That preference has been given too much to bank directorates, where directors have been allowed overdrafts without security at all. That is the sort of preference to unionists which has beenextended. I warn my honorable friend not to probe too much the past mismanagement of the banks, or the want of real stability behind the present banking system. If he does so,I shall refer him to the Bill of an honorable senator who admits that a decided alteration is necessary to better secure the stability of shareholders in banks. He may go and read the speeches on the measure. If the private banks were perfect, would Senator Walker need to bring down such a Bill ?
– Order !
– What has that to do with this Bill?
– If the honorable member probes, he will get a little more as we go along. The precedents which stand behind our action are the failures of private banks, which strew the track of finance. I think it is a glorious precedent on which to work. As I said, I do not want to probe these failures too much ; I have too great respect for the present banking institutions to wish to do that. I give to them every credit for an honest endeavour to get on to right lines of finance, and to be honest to the lending public. The banks of to-day in Australia are transformed institutions compared with those of twenty years ago. I believe in giving credit where it is due. It is not the fact that the banks do not allow decent rates of interest, and render good service, which drives me to ask for the passing of this measure. I come now to a point which is exciting the risibility of honorable members on the other side. I do not object to any honorable member laughing at me, or at any one else. I do not profess to have been employed in a bank, but I claim to have had a good sound mathematical education. I had the good fortune to go to school until I was twenty years of age, and to get a very careful training in mathematics. I do not arrogate to myself more common sense because of that fact than is possessed by any honorable member who did not have such a training. But I do claim to have sufficient power of brain to analyze conditions when I see them. I propose to refer to a thing which does not require a mathematical education to solve.
– The honorable member should have been an unmarried bank clerk, and then he would have known all about it.
– The most amusing incident of my last electoral campaign was the visits of bank clerks after my meetings had concluded. They dare not say anything at the meetings because their souls are hardly their own in that respect. They came to me afterwards, and asked where the Labour party would get the money to establish a National bank. I felt so sad that I almost whispered the information into their ears. I did not like to make it too public. I told them quietly that we would get the money just where the private banks got it. I said that we could conduct the people’s credit arrangements for them in just the same way as the private banks were doing, only with very much more profit to them. The matter of cheaper interest my honorable friends have been trying to drive home, and have implied that we should have to borrow all the money which we would lend out. Do the banks borrow money to give their credit? What do they pay for the fifty odd million pounds on current account, against which they may issue at any time credit to the amount of ^£30,000,000 or £40,000,000? Nothing. If the banks make a gain on that, more power to their elbow, so long as the people let them do so. I want that gain to come into the pockets of the shareholders of the National bank - that is, the whole people of the Commonwealth. When I talk about cheaper money, I come down to the fact that the profits of the Commonwealth Bank will go into the people’s pockets, and reduce the amount which they pay. But to come back to the point at which 1 was aiming when I was diverted by an interjection, this is a problem which needs very little knowledge of mathematics to solve. If a man knows that two and two make four that is quite enough to know in order to solve this problem. Ask a farmer who has borrowed £100 or £200, but knows very little about finance, to go for a stroll in a country town, and show him one banking institution, one bank manager, and a set of clerks ; next, take him to another street in the town, and show him another bank, another bank manager-, and another set of clerks; then take him, to another street, and show him another bank, another bank manager, and another set of clerks, and ask him to tell you who pays for the four banks where one bank would do. Give us a National bank properly developed, and there will be only need for one bank, one bank manager, and one staff of clerks in each town. Do honorable members mean to tell me that there is no saving in doing, without the three buildings of the other banks and abolishing the three managers and staffs? The noble buildings which have been constructed throughout this Commonwealth to shelter the gentlemen who have been arranging the credit of the people have been put up by the people themselves. The whole expense of banking is borne by the people, who take advantage of the conveniences it supplies. I want this National bank, because its effect will be to make credit cheaper, and if there is any power on this earth to stimulate industry it is the power of cheap money. Let the security be as good as honorable members please. I do not want any security such as Mr. Gregory Wade offered prior to the last election in New South Wales in order to secure votes.. As Leader of the Liberals in that State Mr. Wade came forward with a proposal to lend to the people, through a State Bank, amounts up to 95 per cent, of the value of their assets. If ever there was a deliberate attempt to wreck the people’s bank that was one. I never heard of anything of the kind before. The idea of lending up to 95 per cent, of the value of the security. In my most extravagant addresses advocating the Credit Foncier I have never asked for more than 75 per cent. The practice of the banks in New South Wales is to lend up to 66 or 60 per cent., and the moment one goes beyond that he reaches the danger line.
This is another matter which _ I desired to see carried out under this Bill, and I think it will be covered by its provisions. I think’ it will be competent for the Commonwealth Bank, under this Bill, to,, lend money on the Credit Foncier system. I was very sorry to come into conflict with the honorable member for Richmond, who is new to this House. He made a statement some time ago to the effect that during an election campaign I advocated the lending of money at rj per cent., but, being a new member, he did not know me, and I forgave him. There was, however, some foundation for his statement, and it was that in explaining the Credit Foncier system of New Zealand, I often made use of the statement that, under the system adopted there, settlers were allowed to pay back loans at the rate of 1½ per cent, of the principal every six months. The system provided for the repayment of loans at the rate of 3 per cent, of the principal per annum, and it was the practice to accept two halfyearly payments of rj per cent. Borrowing on an overdraft is all right. For the man with good assets, and who does not want a great margin or much accommodation, it is a very handy system of banking indeed. But where the. shoe pinches is that, if a panic arises, and the borrower is forced to meet his overdraft when he is unable to do so, he goes doen”wallop” and we have then an example of the awful effects of an enforced payment. For the man who is going to develop this country, the man who goes into the bush, hews his way through timber, and builds his fences and his own little home, taking all the risks of the first four or five years of occupation, the system of borrowing upon easy repayments of principal is the best system yet devised- Although some of the States have established State Banks, which are doing this business, all have not done so, and the Commonwealth Bank will afford facilities to men in every State to obtain money on easy terms. I may inform honorable members that the interest charged in New Zealand was 4J and 5 per cent., but- the people of the Dominion are not altogether satisfied with the success of their lending institutions. We have often heard talk of autocrats and the power of bosses, but if ever there was an autocrat in the world of Australasian politics, it was the Right Honorable Richard Seddon. I lived for two years in New Zealand under his regime, taking a part, as I have always done, in the fight for Democracy, and I was very much interested in examining his systems of finance. I consider that the gravest blunder that Seddon ever made was when he got behind the Bank of New Zealand with a guarantee of £2,000,000, instead of establishing his own State Bank. Many people are under the impression that in New Zealand there is a State Bank established. There is nothing of the kind. There is a system of loans to settlers to establish which the Government had to float debentures, and go on the money market for a loan of- £3,000,000. The system has been reconstructed over and over again, and considerable sums have been lent under it on leasehold. Of course, the Government could not lend anything like 60 per cent, of the value of a leasehold. There were perpetual leaseholds when the system was started, but that tenure has since been altered. .The reason for the alteration was that freeholders complained that the perpetual leaseholders were in a better position, and that they should be put more upon an equality. The reason for the better position of the perpetual leaseholder was that he held his lease without a condition of re-appraisement, and men who got such leaseholds on a valuation of £3 per acre found themselves able to get out at £20 per acre in a very short time. I know many cases in which trafficking in land, exchanged under the leasehold system, was as marked as it was under the freehold system. I quote the following with respect to New Zealand, from the Argus of 25th October, 1911 -
The Farmers’ Co-operative Banks Bill, which has been introduced by the Government, provides for the incorporation of ten or more Farmers’ Associations’ Banks. The State Lending Department is empowered to make advances to these banks, not exceeding in any case ^’500, all loans to be made a charge on the landed interests of members of the bank, and each bank’s affairs to be administered by a board of its own members. Other lending institutions outside the State are not permitted to lend to a member of a Co-operative Bank without the approval of the Minister of Finance, and then advances will be limited to ^500. In any case advances made to members of a bank will be strictly limited to improving or carrying on farms. The Bill will not be proceeded with this session.
It is to be dealt with next session. I have quoted this extract to show honorable members the value of the Bill before us, under which it will be possible to institute the Credit Foncier system, and this system as well. I appreciate and admire honest criticism of this measure; but I deprecate the laughing insinuations of honorable members who try to make the public believe that honorable members on this side are absolutely too ignorant to grasp financial problems. The Budget placed on the table by the Treasurer is as well -constructed and prepared as any Budget introduced previously ; the same heads of Departments prepared the figures as when previous Governments were in office ; and the average capacity of honorable members on this side, when dealing with these great questions affecting our national interests, is about equal to the average capacity of honorable members opposite. The less we slander the credit of the Commonwealth, even to make political capital at the expense of an opponent, the better it is for the community at large. When I first entered this Parliament there was much crying of “ stinking fish” in regard to our financial position ; and it is not desirable that there should be too much of this influence when we are dealing with important questions like that now before the House. Weare trenching on the preserves of the privileged few, and we must expect some opposition ; but I dare any honorable member opposite to honestly say that there ought not to be a Commonwealth Bank, or that the people have not the right to arrange their own credits and conduct their own financial affairs - that the community has no right to take the profits of banking when it makes the profits. The menace of the money power is well recognised in the nations of the world, because it has become even greater than that of Governments in England, America, France, Germany, and elsewhere.
– Governments, as well as kings, have become puppets ; and why ? Because the man who controls our overdraft is the man who controls our lives; and the ramifications of finance and banking are so great that they embrace all, from the King to the humblest subject. We are striking a death-blow at that state of affairs in Australia. Howsoever humble a nation we may be, with our population of only 5,000,000, the eyes of the world are upon this Government in their efforts to nationalize banking. It may be that the eyes are only those of the politicians who take an interest in economic questions, and who have the duty of solving such problems in various nations ; but this bank is not being established for to-day or to-morrow. lt has come to stay, thanks to the majority in this Parliament; and I should like to see any honorable member - even my namesake, the honorable member for Wakefield - enter upon a crusade for the abolition of this Commonwealth Bank once the people have had experience of it. I am a wholehearted believer in the policy that whatever the Government can best do should be done by the Government ; and I should have preferred a measure for the nationalization of banking. I would much sooner have seen representatives of the Government meet the representatives of all the great private banks in Australia, and arrange an amalgamation into a National bank, with fair and honest arrangements in regard to the present shareholders. But in the wisdom of the majority it has been decided to proceed on the lines laid down in the Bill, and I welcome the measure with joy.If this bank be conducted honestly, and with proper safeguards, I expect the competition will be severe, and that, in the near future, there will be an absorption of a number of the private banks. When the adjustment does come - and it is coming in more directions than in that of banking - I hope the wind will be tempered to the shorn lamb - that the past misdeeds of the banks will not be thought of, and that the transition will be made in a square and honorable way, so that there will be the least possible disruption of Australian finance. Of all curses that beset humanity, a financial crisis is one of the greatest, because, once confidence is lost. God help any institution. From the history of the past I am moved to affirm that never was a financial institution established with such confidence behind it as this National bank proposed by the Treasurer.
– I am glad the honorable member for New England is so pleased with the proposals in the Bill. I was at a theatre one night in New York, and saw a piece in which a Dutch farmer, who had made a good deal of money, was induced by two friends to invest in a bank. When he arrived at the bank each morning, and asked what he should do, he was told, “Pay in.” He did so regularly ; and as soon as he left, his two friends “ drew out,” so that at the end of the piece the Dutchman ‘had the bank, and the friends had all the money. Some people seem to think that all that is necessary for a successful bank is a signboard and the counters.
– The public are the “ Dutchman “ at the present time.
– I am not sure that the Government will not be the “ Dutchman “ if the bank is conducted on the lines set down in the Bill. If this had been instituted as a “ bank of banks,” to assist in times of emergency, it would have been very valuable in the interests of the community. I do not say that the bank, as a commercial concern, will not pay, because, if it is conducted on exactly the. same lines as are other banks, it has an equal chance of making profits.
– Has it not a superior chance ?
– That can be gauged only by experience. As a matter of fact, the Government are starting the bank, without a shilling of capital, in opposition to banks which have capital and reserves amounting to something like £30,000,000. They propose to borrow £1,000,000 from the public to start the bank on. They will have to pay about 3$ per cent, for that money if they want it for a fixed term ; and if they make 1½ per cent, profit out of it they will be doing as well as they can. That means about £15,000 a year to pay the whole of the working expenses and management of the bank. In addition, banking premises have to be obtained. The present banks have 1,750 brandies, or one branch to 2,500 inhabitants, and with their capital behind them they are powerful institutions. What will our puny little bank be compared with them, without capital and with a debt of a million? What would any Judge in an Insolvency Court say to a debtor who started business and contracted large engagements simply on his credit, and without any finances at the back of him? This ‘bank will have to get business premises in central positions. There will have to be a central bank in Sydney, another in Melbourne, another in Adelaide, and others in other cities.
– It is all ready in Sydney.
– If that is so, not a word is said about it in the Bill. The Government will not get land and buildings for bank premises in Melbourne under £150,000. It will cost them probably £200,000 in Sydney, where land is dearer than in Melbourne. Before they have their five or six principal banking premises open, they will have to invest something like £500,000. That will be so much capital invested without giving any return, and yet the Government will have to pay interest on the money borrowed towards the payment of expenses. Do honorable members think that money will pour into this bank simply because it is a Commonwealth Bank, without any sovereigns in the till ? Would not people rather deal with a bank like the Bank of New South Wales, with about £5,000,000 capital at the back of it, a large sum in reserves, and a big quantity of gold in its cellars, than with an institution which is simply working on its credit? What is the use of credit to a man who wants breakfast, and has not a shilling to pay for it? An account at the Commonwealth Bank will not be of the slightest use to him. I do not think it is fair to criticise without making some suggestions, and so I have written out a few points as to the lines upon which I think the bank should go. If I wanted to -start this bank, I would give it at once a capital of £1,000,000, and increase that capital to £5,000,000 or £10,000,000 as its business increased. That money would have to come out of the Commonwealth Consolidated Revenue. The existing banks got their capital from their shareholders. I know of no bank that has ever started without funds of its own. I would put a million sovereigns into the coffers of the bank to start with. I would then take power to issue irredeemable debentures or funded stock starting with £1,000.000,. and paymS 3! Per cent, for them. As the funds of the bank increased, these debentures could be balloted out if desired. In order to get that money it would be necessary for Parliament to give power to trustees to invest trust moneys in the bank debentures and funded stock. No such power is given to trustees in the Bill.
– We could not confer that power on trustees.
– I am inclined to think that we could. We have a general jurisdiction over the whole of Australia in certain respects.
– A similar clause appeared in the Naval Loan Bill brought in by the Fusion Government, but was taken out in this Chamber on the matter being pointed out.
– I do not know whether it would be constitutional or not; but without looking carefully into the matter, I should be inclined to think that this Parliament could give trustees power to invest trust moneys in any stock they liked. At any rate, the question could be tested in the High Court. In any case, it is much better to issue irredeemable debentures or funded stock than debentures for a limited term. Australia has within the next few years to meet about £80,000,000 worth of debentures in the Mother Country. Every time a conversion loan has to be floated, it means a serious loss to the State concerned, because it has to pay commission, and perhaps a higher rate of interest. It is a great mistake to have one man as the Governor of the bank. I should have five directors. It is all very well for honorable members to say in this Chamber that the Governor will have the sole control and management of the bank. I had some ideas like those of honorable members until I became connected with a bank about a year ago. I can tell honorable members the procedure in that bank. There is not an overdraft granted, or an advance made, without the authority of the directors. Every proposal for an advance is entered in a book, and as it is approved of it is initialed by myself as chairman of the bank. In that case, the directors have control of the advances, and are responsible for the losses. Every bill that is discounted is dealt with in the same way. No general power is given to one man to deal with the funds of the institution. 1 do not think power is given to any bank manager in Australia to deal out money as he thinks fit without the consent of his directors.
– What about the policy of advances in certain districts on certain securities?
– I presume the honorable member means in the country branches. A small limit is allowed to managers, but a request for any considerable advance is referred to the head office. Do the Government propose to give throughout Australia absolute power to each of their local managers to lend what money he likes without consulting the central authority?
– Then the local borrowers will be in no better position than the borrowers from existing banks are. All these matters must be submitted to head-quarters, and exactly the same course must be followed in this case. If the Government are wise, they will look round and pick out the best five men they can get in Australia to be commissioners, or directors, of the bank, and not leave the responsibility all to one man.
Wherever there has been a one-man institution, in the great majority of cases, frauds have been perpetrated. Look at the frauds committed by some of the insurance companies and banks in America. Wherever there was a one-man institution, he worked it in his own1 interests, and that of his friends. I do not know who the manager of the bank is to be; but the Government are placing in his way too much temptation to favour himself and his friends, because there will be no check whatever. It is much more difficult for five men, than one, to rob a bank, unless they are burglars. I should also eliminate the Savings Bank part of the Bill. The Savings Banks. are managed by Commissioners, and there are no better managed institutions in the world, because those who control them have local knowledge. The honorable member for New England, when speaking of the land banks in Germany, touched the very point. Their great safety lies in the local management. They are small co-operative banks, managed by local people, who have local knowledge. Our Savings Banks Commissioners have that local knowledge of the value of land, so that they can check the reports of their valuers. I doubt whether one large institution managed from YassCanberra, or any other central position, can deal as safely with the people’s money as can the State Savings Banks.
– The headquarters of this bank must be in a commercial city, and not at Yass-Canberra.
– How can a man in Melbourne judge the value of land in Western Australia, the Northern Territory, or Northern Queensland?
– The Governor would get a valuation before he lent money on it. The honorable member’s bank does not lend money without a. valuation.
– Yes, I have often refused to lend money on valuations because I have known them to be in excess of my own valuations. A bank cannot always be obtaining valuations. It must rely to some extent on local knowledge, and the local knowledge of the States Savings Banks is a great safeguard.
– How are values for landtax purposes arrived at?
– The owners have to fix their values.
– And valuers are appointed to check those values. They must have some local knowledge.
– If we are to have local valuers in connexion with this bank, we shall have such an army of officers that the revenue of the bank will be mopped up by expenses.
– The borrower has to pay for the valuation.
– Not in the. case of a loan obtained from a bank, and, according to an advertisement relating to the Victorian Savings Bank, no charge is made in connexion with a mortgage.
– Then the system has been changed very recently.
– When the Commonwealth Bank has borrowed £1,000,000 with which to commence operations, it will not be able to lend the whole of that amount at once. It must have some tillmoney. Probably 25 per cent. of that amount will have to be kept in gold. That being so, the bank will only be obtaining interest on three-fourths of the amount that it has borrowed. If interest is to be paid on call-money, the bank will be taking a greater risk than any of the private banks care to undertake.
– There are a great many “ ifs “ in this debate.
-I have to point out the difficulties.
– Because the honorable member is on thin ice.
– I am not. My desire is to make this measure as perfect as possible. I do not wish to see the Government discredited, nor do I want ‘to see the money of the people lost by mismanagement. I have no personal interest to serve. I have a few shares in the Colonial Bank of Australasia, which are not worth more than £1,000. That represents all my interest in banking, and, therefore, it cannot be said that I am speaking now in the interests of any bank. Any suggestion I may offer will be with a view of endeavouring to make this institution a success. I am pointing out the difficulties that other banks have experienced in trying to pay interest on current accounts. Only a very small percentage of deposits on current account can be used, because the money may be called at any time. Last year our exports of gold amounted to about . £3,500,000, whereas this year we have already sent out of the Commonwealth £9,000,000 in sovereigns. This shows that the exchanges are against us. In the year before last we had a great wool and wheat yield, and there was no necessity for us to send any money out of the country to pay our debts abroad.
– If that state of affairs continues for two or three years, what will be the position of the private banks?
– The banks and the people generally will have to be careful. The banks are looking forward to bad seasons, and are carefully upholding their reserves. The bank with which I am connected has a reserve of £1,250,000. It is preparing against bad times, and in doing so is acting wisely. The majority of the banks. I believe, are working on similar lines. If the Commonwealth Bank is to lend all its money up to the hilt, so to speak, it will have the same trouble as the banks experienced on the occasion of the great financial crisis. The credit of the Commonwealth will not save it if it has no sovereigns in its coffers.
– The credit of the State saved other banks when they had no money in their coffers.
– At the time referred to, every weak bank went under.
– Before the State came to the rescue.
– The State did not come to the rescue of any banks here. The only banks to survive the crisis were those who had good calling power on their shareholders, and were able to tide over the reconstruction. The weak banks were wiped off the slate.
– How many of them?
– The Mercantile, the Federal, the Standard, and the City of Melbourne bank all went under in this. State. There were about half-a-dozen.
– And two in South Australia.
– The weak ones here were wiped out altogether. A man: who places his money on current account with a bank wants sovereigns when he asks for them, and he is entitled to have them. What would be the position of a State or Federal Bank if, when its depositors asked for sovereigns, it could not hand them over? It would be useless for this bank to start without capital. It must have a certain amount of money towork on. There must be a reasonable margin.
– What about the Commonwealth business?
– It may be of some value. We pay in the Mother Country something like £10,000,000 per annum by way of. interest on the State debts, and there is a certain amount of financing to be done in connexion with those payments and exchanges. We do not send sovereigns Home to meet our debts. The people who come to Australia to buy wool, for instance, get credits on the Australian banks. I do not know whether or not the Commonwealth Bank is to issue credits in England, or whether it will advance against wool bills where die wool has been purchased in this country. If it does advance against wool bills, it will run the risk of any depreciation. But if it has strong credits - if the people coming from the Old Country are well backed - the position will be much better. If this sort of business is to be conducted, a London branch will . be necessary. Where are the Government going to get the money for a big central office in London ? No provision is made for it in the Estimates. The bank must have some money of its own with which to commence operations. How can it compete without capital with the twenty-two banks doing business in the Commonwealth, and having £9,000,000 of reserves? Banks in the Old Country are amalgamating and strengthening themselves ; the stronger they are, and the more capital they have behind them, the better. A weak bank is a menace to a community. I wish to see a strong Commonwealth Bank established, but the bank cannot be strong unless money is put into it. A National bank should control and manage the National note issue. That would be a more economical arrangement than the present one. The gold reserve would be held by the bank, and any balance over and above could be used in its business. Instead of having two financial concerns under Government control, you would then have one. I would suggest that any profit - say, 4 per cent. - earned on the capital of the bank should be used to build up a substantial reserve fund, because at times a bank must make losses. Droughts and commercial depression will affect the National bank as they affect private banks, and provision must be made against depreciation of securities. Any further surplus could be used in reducing the cost of money to borrowers. A National bank on the lines I have suggested ought to be a success, but I do not think that a bank on the lines provided for in the Bill would be. It will be impossible for the National bank to make money unless it has a capital of its own. With regard to the Savings Bank proposal, if the Commonwealth institution is to be on the same lines as the State institutions, the Government is asking us to do something equivalent to the building of a second railway from Melbourne to Sydney, which, of course, no one would think of doing, because it would double the expense of the service without obtaining any more traffic. As- for mopping up the money of the existing Savings Banks, the States will oppose that. They will object to handing over to the Commonwealth £50,000,000 of the savings of the people, part of which, in times of depression, would be taken by the Government; because, in tight times, the Government would be the chief borrower. If the Commonwealth Savings Bank works merely on the deposits received from day to day, and does not issue debentures, it will not be able to lend out its money to any extent. The Savings Banks of the States have their money lent out to farmers and small freeholders for periods of thirty years, the principal being repayable by instalments. But they issue debentures extending over thirty or forty years. A bank trading on the money of its depositors would not be safe, in time of panic, if there were, a run on it - that is, if it lent out much of its money for long periods. I was a member of the Government which instituted the Victorian Credit Foncier system. We saw the danger of having money out at short dates, which had been deposited on call, and provided for the issue of debentures, the proceeds of which are lent out in the way I have described. At the time of the land boom, there was a slight run on our Savings Banks. Therefore, the Commonwealth Savings Bank will have to borrow money to lend out. In my opinion, it is a mistake to try to run a commercial and a Savings Bank under the one management.’ A commercial bank, if managed on sound lines, will pay, but it will be better to have the Savings Bank separate, if you must have one. A bank cannot work a building society’s business without coming to grief. Honorable members have spoken of the banks as having £50,000,000 on current account, on a great part of which they pay no interest, but the money is of little use to them, because they dare not lend out much of it. As much as 50 per cent., 80, and even 100 per cent, of the deposits are kept in hand, lest there should be a run on the bank. In times of depression, men are out of work, and have to draw on their savings to keep their families. Often their savings are exhausted before they get work, and the deposits in the bank consequently largelydepleted’. I think that it would be wise to take power to buy -up one of the existing banks. What a magnificent thing it would be if the Commonwealth could purchase an institution like the Bank of New South Wales, or one of the big English banks, with connexions and a business already made. It would be worth more than the value of the shares to do that. The Bill should give the Government power to buy up a bank that is in full working order. That would give the National bank an immense start. The Commonwealth might not make as big a return as was being obtained under private enterprise, but the bank would have the advantage of being a going concern from the start. Any one who has had anything to do with the Starting of a. bank knows that the worst accounts are offered first. A bank manager having bad accounts would suggest, ‘ Try the Commonwealth Bank. “ It would be landed with some of those accounts. That is a question for the Ministerial party and for the Government to consider. My suggestions are made in the best interests of the Bill. They may not be taken in that way by honorable members opposite, and I infer from some of their interjections that they do not give me credit for bona fides in this matter. But that will not prevent me from making suggestions which I honestly believe will be for the improvement of this measure.
– The honorable member is the best man in this House for giving information, and it is always good information !
– I am aware that the Bill contains provisions for auditing. But an audit of the accounts of a bank is, after all, of very little value. You must have your audits and inspections from inside. It is utterly impossible for any half-dozen auditors to certify as to the condition of a banking institution. All that an auditor can do in his report is to say that the figures presented to him were correct. He cannot value the securities. There is no provision in this Bill for the auditors or the Auditor-General going into the securities. You are going to place the control of millions of money in this bank in the hands of one man. Who is going to check that man ? No auditor can check him. All that the Auditor-General can certify at the end of each quarter is that the accounts presented to him were correct. No power is given to him under the Bill to inspect or value or investigate the securities on which the bank’s money is advanced. If you are going to leave this matter in the hands of one man, you will have to have greater control over him. Therefore, I think the safest plan would be to appoint three or five - on principle I should prefer five - persons to manage the concern, and make them responsible to the Government for itsproper management.
– I think the honorable member is wrong. The Auditor-General has powers of inspection and audit.
– Does the Honorary Minister think that the AuditorGeneral can manage the auditing of the accounts of the Commonwealth, audit the accounts of this bank, and report on all the securities held by the bank, which perhaps in a few years will amount to millions of pounds? It will be utterly impossible for him to do it. If the auditing is to be done properly the auditor will have to investigate the securities in connexion with every advance made by the bank.
– We shall require to have a man in the bank all the time.
– You will have the Governor in the bank, but you will want a check on the Governor.
– Why not put a woman there? Women are very good auditors.
– The Governor might fall in love with the lady. If the Government do not provide for some such supervision, and do not have a means of controlling and inspecting by a staff appointed for the purpose, they will run great risk of losing money, no matter who the Governor may be.
– If the State Governments have made a success of their Savings Bank business, why should not the Commonwealth make a success of this business?
– The Savings Banks of Victoria are controlled by five Commissioners, all knowledgable, shrewd business men, who understand the value of land and of properties. All moneys advanced have to be passed by them.
– On the reports of their valuers.
– And on their own knowledge.
– The Commissioners dc not go round and inspect land and properties.
– In many instances they do. I know of cases in which the Commissioners have gone round districts and inspected land.
– Very rarely.
– They may have done so rarely, but it is a wise thing to do. I also know of cases where the Commissioners have come ‘to the conclusion that their valuers were valuing, too high, and have changed them. That shows that they had local knowledge, and used it. Under this Bill the Government do not propose to have a Board of Commissioners to control the Governor. The Treasurer himself cannot control that official. He has quite enough to do to manage the financial affairs of the nation, and to deal with the business of this ‘House. Therefore, any connexion which the Treasurer of the Commonwealth may have with the bank wil-l be merely a kind of outside or supervisory connexion. He cannot be in contact with the business management of the bank. He cannot control or know what is going on. In addition to that, provision must be made in the Bill as to the amount of reserve that is to be kept. I do not think that any Governor or Manager should be allowed to lend out the whole of the funds of this institution. There should be certain provisions as to the quantity of money to be lent. One honorable member seemed to think that any person of good character could go into the Commonwealth Bank and borrow money. When 1 was a member of the State Parliament of Victoria, an Act was passed, which I believe is still in operation, enabling the Government to grant advances to mining companies. The Vic- torian Government has lost thousands and thousands of pounds in this direction. I do not believe that 10 per cent, of the advances have been repaid, and I feel sure that the amount of money lost, if totalled up, would run into hundreds of thousands of pounds.
– That was a “ sinking fund “ all right.
– It was absolutely a “ sinking fund.” The Minister of Home Affairs, while he was in Tasmania, said, according to a reported speech, that any prospector who wanted to put up machinery on his mine would only have to go to the Commonwealth Bank and get it.
– On good security.
– The State Government took the security of the whole of the property of the mining companies to which money was advanced ; but when the companies threw the mining plant on their [in] hands, in many cases it dia not’ realize 25 per cent, of the amount of the advances, made.
– They were Liberals advancing to Liberals !
– If the Commonwealth Bank be’ conducted on those lines, we shall incur great losses. It will be found that the bank will have to be run as nearly as possible on the same lines as the existing banks are conducted. Otherwise not much money will be made.
– If a small mangets a rich man to indorse a promissory note, the security is good. .
– It is; but in every instance where I have guaranteed a man in that way - and I have done so five or six times during my lifetime - I have had. to pay the full amount. I think that that will often be the experience of indorsing; bills by the Commonwealth Bank. It will be found that the Commonwealth will have to pay. The bank could probably do good business by following upon the lines of the Bank of England, namely, by discounting bills indorsed by other banks, or submitted by other banks. We might go further than that, and make such advances absolutely safe by declaring every advance made by the Commonwealth Bank to another bank to be a first charge on the assets of that bank. Then we should not lose any money at all, and should be doing a very sound, safe business. But when you come into- competition with other banks, and with money-lenders, you will find that you will have to take the same risks as they do, and will- lose money as they do.
– I suppose the Governor will be” guided by regulations?
– I do not know what regulations will be framed to provide against over-lending; but I certainly think we should provide for the percentage “of coin, as against advances, that should be kept in the bank. At all events, it » worthy of the consideration of the Minister in charge of the Bill whether a provision of that kind would not insure working onsound lines. It has been acknowledged that it is not the desire of Parliament that the bank should make much profit. We arenot out to make big profits, but to do good’, to the community by “lowering .the rate of: advances. If you can make advances to those who are necessitous in business - if you can get good security, and can insure retaining ample gold reserves, the bank will be kept in a sound position. But if you are going to work the bank with the object of paying dividends, you will have totakethe same amount of risk as other banks do. It will be better to work on sound lines, and keep a strong reserve, so as to meet heavy depreciation, or a time of depression, or runs. I do not say that there is very much danger in connexion with the bank.
– What is the percentage of losses made by other banks?
– I do not know. I have only had a year’s experience as a bank director, and that is not considerable. But I know that they always hold a certain amount in reserve to meet their annual losses.
– They lose very little.
– If they lose only1 per cent, upon a large turnover, it amounts ‘to a considerable sum. Then I think that the governing body of the proposed bank should be given absolute control over its staff. If Parliament is to be at liberty to interfere with it, it will be placed in a very embarrassing position. We shall probably hear of some member of the staff who thinks that he is labouring under a grievance exclaiming, “ The member for our. district is a friend of mine, and I will gethimto bring my case up in Parliament.”
– The same thing might be said in reference to the honorable member as a director of a bank.
– And I admit that I am worried by persons in that connexion. I accepted the position which I hold as a bank director very reluctantly, and in opposition to my own desire. I find that it is not a very enviable office to occupy.
– It does not add to a man’s popularity.
– It does not. I repeat that the Government will be wise if they leave the absolute control of the bank to the officers of that institution.
– They will be under the control of the Public Service Commissioner.
– We ought not to transfer them from one control to another. Honorable members have no idea how difficult it is to secure the services in banks of highly-trained men. It is easy to com mand the services of plenty of individuals who possess a certain amount of knowledge, but it is not every man who has the capacity to manage a bank.
– The employes in private banks are principally accountants.
– Yes. Plenty of able accountants are available; but to be a successful banker, a man requires to possess a knowledge of human nature, and also a certain commercial experience which cannot be acquired in a day. I would strongly urge upon the Government the desirableness of starting the proposed Commonwealth Bank upon commercial lines. Should it prove a success, they might then consider the propriety of establishing a Commonwealth Savings Bank. But they should not attempt to bite off more than they can chew. They should provide the capital necessary to start such an institution. If they launch it on a capital of a borrowed£1,000,000, they will find that it is utterly impossible for the institution to pay its way during the first year of its existence. In such circumstances, they will have no option but to approach Parliament with a request for a monetary vote to defray its expenses. That will be a nice confession to make. Is it not infinitely preferable that the bank should be equipped with the necessary capital at the outset of its career? These are the points which I desire to emphasize, and I am certain that if the Government do not start the proposed bank on the lines I have suggested, itwill not be the creditable institution which they anticipate - at any rate, for some time.
.- With an innocence which a more or less unsophisticated new member has a right to assume - at least for a brief period - I did expect that, when the Leader of the Opposition preferred the simple request last evening that the consideration of this Bill should be delayed, the Prime Minister would have gladly accepted the opportunity to subject it to the tests of time, of scrutiny, and of criticism. But not so. In effect, the Government have said, not merely to the Opposition, but also to the public : “ Here is our Bill. You had better shut your eyes, open your mouths, and swallow it holus-bolus.” Indeed, their attitude appears to be that, so perfect is the measure, that we ought not to exhibit a desire to cross a “ t “ or dot an “ i “ of it. Practically they say, “ We have the power, and die public may just as well accept the measure in the form in which we consider it should be passed, without asking any further questions about it.” Now, it is a very line thing to possess a giant’s strength, but it is not always desirable that the force Of a giant should be exhibited in this manner. I was very much surprised last night - and I desire to state the position with all generosity - to hear the somewhat hasty remark of the Prime Minister - a remark which I am sure he will qualify in due course - that he does not think it the business of the Government to supply the Opposition, and through them the public, with information upon a matter of this sort. That is a new theory m connexion with parliamentary government, and the sooner it is abandoned the better.
– It is a theory which the honorable member himself has propounded.
– That was my understanding of the Prime Minister’s remark.
– The honorable member’s understanding was an incorrect one.
– Then I withdraw my statement. But that was the impression which was conveyed to me by the remark of the Prime Minister, and that is why I felt sure that when he looked at the matter calmly, he would not only qualify it, but withdraw it. I am led to make these observations because, in the very interesting and business-like statement which he made in moving the second reading of the Bill, the Prime Minister admitted that this question has been before the Australian public in a more or less acute form for quite twenty years. Indeed, I think we might go back even further than that if we desired to trace the origin of the discussion of the wisdom’ or otherwise of establishing a national banking system. We might even dig deep into the history of other countries, and we shall see that after all this subject is not a particularly new one. Nor has it been launched upon the House with undue haste. We know, as a matter of fact, that the Federal Convention made it possible for the Bill to be under discussion here to-night. It . has been in the platform of the Labour party for a considerable number of years, and has been discussed on various public occasions. We know, too, that the present Administration claim to have come here with a mandate from the people to pass this and other legislation. So that, from that point of view, we cannot say that the Bill was born yesterday. Nor can the claim be substan tiated from the other side of the chamber that this is particularly the child of the Labour party. It has taken die present Government eighteen months to prepare the Bill, and it seems to me a little unreasonable that we should be expected to consider it within a week of debate, that the simple request made by the Leader of the Opposition that further consideration should be given to a subject which is admittedly a very difficult one, should be met with the point-blank refusal of the Prime Minister last night, and that honorable members on each side of the chamber should be invited to accept the responsibility of voting at once for or against the second reading1.The reason why I mentioned that the Government have taken eighteen months to prepare the Bill is, that I think it a good argument for asking that we should have at least eighteen days to debate and consider it. The Government have had all the advantage of knowing the details of the scheme which they “wish to launch, but I have only had seven days in which to consider the Bill. I did think that this debate would have gone on for at least a fortnight’; in fact; I came from Adelaide a few days ago with.. that idea strongly in my mind. The Prime Minister has told us that the bank is to be a business concern from the start. I was very pleased to hear that statement. It will drive hard-and-fast bargains just like those capitalistic institutions about which we have heard. The customers ofthis great Commonwealth Bank will have to be prepared to go down on the carpet and to be squeezed in the orthodox fashion. In fact, the bank is merely to be an addition to the financial institutions of which we already have a fair number in this country. This old and materialistic world in which two plus two,, as the honorable member, for New England says, still make four, and 20s. must still go to the j£i, will not be toned down, particularly by this new bank. It will come into competition with- the other banking institutions, and will, I . am sure, be more Or less welcomed by them as a new duckling on the financial pond., It will not only have rivals on the spot, but it will have to meet rivals in the open markets of the world in the business of buying and selling - as the AttorneyGeneral put it last night - in the buying and selling of credit. Like similar institutions it will have to face the fluctuating fortunes of the seasons and of the markets of the world, and will be subject to the inevitable, economic laws, and particularly ‘the law of supply and demand. Traders will buy and sell documents of exchange just so long as the Commonwealth Bank is able to offer them, as it ought, in many circumstances, better., rates of exchange than the competing institutions. I think that we have not to look very far into the future in connexion with the conversion of loans and the notation of new loans - which will become necessary, notwithstanding the non-borrowing policy of honorable members opposite - when we will have to face the possibility of the Commonwealth going upon the London market, in which case the Commonwealth Bank should serve an exceedingly useful purpose from the point ofview of the Federal Government.. Not only should it serve a very important function from; that aspect,but it; should be in a position to give favorable rates of exchangeto traders. From that stand-point I look forward to the Commonwealth Bank not only taking its place amongst the banking institutions’ of Australia, but possibly being able to offer better terms to traders, and to draw some of the business from the present banks.- All these dry facts have to be faced-, for the window dressing, to use another phrase of the Attorney-General, which has been done in the past, was ruthlessly torndown by the Prime Minister in his straightforward statements when moving the second reading of the Bill. 1 do not approach this subject inany party spirit, or with any desire to make captious criticism.’ We, on this side of the chamber, I hope- at least I am - are as anxious as anyhonorable member opposite can possible be, that the framework of this structure, of what we all hope to be a great National bank in the future, shall stand the strainand stress of time. We Want the foundation of the structure to be bound together, ‘if I may so put it, by the ferro-concrete of sound economic principles, rather than to rest on the unstable quicksands of sentiment . Or sophistry. That is why, at the outset, I claim that in connexion with a Bill which, according to the Prime Minister, has been in various ways under consideration for twenty years, and which it has taken the Federal Government, at least, eighteen months to frame, and which proposes to lay a foundation to last,’ not for to-morrow or next year, or the next five years’, but down through’ all the centuries,’ as we believe this nation of Australia will continue, adelay of six months; and even an inquiry by a Select Committee gatherine: information of all the best expert sources of Australia, was not, after all a very unreasonable demand. Whilst I agree that the Prime Minister left very little to be desired in the business-like statement he put to the : House, I should have preferred, had it been possible, that we might have had the benefit of a written report by the gentleman who is to be appointed Governor of the bank, or by a body of experts, who, I am sure, must be at the command of the Government, covering, all the details and groundwork upon which this great superstructure is to be raised. The Bill itself does not give us a great deal of information with regard to the possible operations of the bank, which might have been contained in a report by an expert or a body of experts. This bank, we know, is going to be established. It will, I believe, in the process of years, grow, and possibly become, a great institution. We have a right to assume that it will be carefully managed on sound lines, and that all this fear which has been expressed that something extraordinary might happen in connexion with its management will not be justified by experience. Whilst I admit all this, and am prepared to recognise that this bank will find a place amongst the banking institutions of Australia, I am not prepared to subscribe to the anticipation or wish expressed by the honorable member for New England when he said that he looked forward to the time when it might absorb or wipe out other institutions of the kind. The honorable member said this in no unfair spirit, and clearly holds that if it. is to absorb, other banking institutions it must be upon honest lines. I cannot look forward with the pleasurable anticipation the honorable member evinced to the Commonwealth Bank doing anything of the kind. It will be merely another competitor for the banking business of Australia. Assuming, as I do all through, that this National bank will be managed on the business-like principles mentioned by the Prime Minister, we may rest assured at the same time that the other banks will be able to take care of themselves. They will secure a certain share of the banking business of Australia, and it will not be an easy matter either to wipe them out or absorb them, so that some might realize the dream, not only of ‘ one continent, one people, ‘ ‘ but one continent, one bank. I look forward to the Commonwealth Bank - and I. am going to suggest another title for it presently- exercising a considerable amount of influence and usefulness in connexion with the taking over of the State debts, an obligation which I hope this House will be- prepared to face in the very near future. I anticipate that when, in’ the not very distant future, we have to face the problem of linking up the great capitals of Australia and developing the centre of Australia and the Northern Territory, we shall witness a “breaking down ofthe non-borrowing policy of honorable members opposite. This bank shouldnot only serve a good purpose in connexion with the conversion of the State debts, but should be able to exercise a good influence as a financial agent on the London market when our honorable friends opposite recognise the wisdom of developing this country by borrowing for reproductive works. I class myself with honorable members opposite as amongst those who have had to go through the mill, and who have acquired some practical experience of the problems of everyday life, and I am, therefore, only the more surprised that they should regard borrowing as a bogy. If there is one thing which more than another we young Australians ought to be proud of it is our National Debt and the uses which have been made of it. It is true that we have borrowed nearly £300,000,000, but onehalf of that sum is represented in our State-owned railways, which earned, over and above working expenses, no less than £6, 000,000 last year. Our waterworks, also, our harbors, telephones, telegraphs,
And all kinds of public utilities stand as the assets of our National Debt, and we are justified in taking some pride in this when we recognise that the National Debts of older countries of the world have mostly gone in gunpowder smoke.
– For killing Christians.
– Yes, and Americans. When we realize the nature of the obligations confronting us, and the necessity for developing this great country, and for borrowing money on business principles, this Commonwealth Bank ought to be in a position to exercise a considerable and beneficial influence in that regard. I come now to the Bill itself, and I notice that it is proposed to call this institution “ The, Commonwealth Bank ofAustralia.” It may be said that there is not much in a name, but I always think there is a good deal in a title. Indeed, the virtue of many a newspaper article is to be found in a well-chosen title, rather than in the sub ject-matterof the article. Consequently, I attach a good deal of importance to the signboard which will adorn the bank . premises of this National institution. It. seems to me that “ The Commonwealth Bank of Australia “ is rather a long and awkward title. We have aspirations that this bank, in due course, will become a sort of understudy to the Bank of England; and why not boldly call it “The Bank of Australia?”
– There isa Bank of Australasia, and the titles would be somewhat similar.
– I am aware that there is a Bank of Australasia, and also, I believe, an institution in Sydney known as the Bank of Australia. I think, however, that there can be no patent rights to a title ; and possibly some arrangement might be made, if not the taking of that of any other bank, as the foundation for a National bank, for the Government adopting at least this short and simple title. If itis not possible to use that title, we might call the National bank “ The Federal Bank.”
– The Federal Bank here went bust !
– The new bank would rise Phoenix-like from the ashes. I think a mistake is made in clause 9 in limiting the capital to £1,000,000. There would be no obligation, if a larger amount were named, to call up the whole capital at once. It may be pointed out that this is a; matter, of. detail to be adjusted later on; butit seems to me that fixing the capital at £1,000,000 is rather an assumption on the part of the Government that they are going to begin in a small way. The capital might be at least £3,000,000 or £4,000,000, and it could be called up as deemed necessary. I . have looked in the Bill for any provision for the debentures being made a new and safe investment for the large and always accumulating trust funds ‘ throughout Australia. This bank will be above suspicion ; and it would be well worth the while of the Government to consider the advisability of inserting a clause to afford an opportunity for the investment of trust funds. I quite admit that the proposal of the Government to have this institution managed . by one Governor is an excellent testimony to individualism. But we can have too much of a good thing ; . and unreasonable individualism may be just as bad as. any other ism in an unreasonable degree. I prefer the proposal which was placed before the House some two years ago, with considerable detail and knowledge, bv my honorablefriend, the Minister - of Home Affairs, If I have by any chance excited a suspicion that I possess a knowledge of banking, it may be as well to make the open confession that any such knowledge’ must have been gathered from the Minister during the long period he was a member of the House of Assembly of South Australia. I carried about with me for a considerable time, and read with much interest, that wonderful speech which the Minister delivered in this House two years ago. Looking it up to-day in order to refresh my memory, I thought that he had a far better idea regarding the management of this institution than that embodied in the Bill. He proposed that the Board of Management should consist of a Controller-General representing the Commonwealth, and one representative from each of the subscribing States. There is a good deal to commend that proposal, because it means not only consulting the States, but taking them in as partners. The States were to be invited to subscribe a portion of the capital of the bank; and the arrangement would at once have assured to the Commonwealth the banking business of the States, so far as the States were able to give it, not only in respect to loans, but ordinary banking business now conducted by private institutions.
– We have had a little experience of the States since that time !
– Whatever that “experience” may have been, it is merely our own experience; the States are not foreign bodies, and the residents are merely ourselves. I am quite sure that, whatever the honorable member may refer to as further “ experience “ since 1909, it can only show that we, as a Federation, can trust the States just as much as the States should be prepared to trust us as a Federation.
– We trust them, but they do not trust us.
– I have no evidence before me of any such distrust on the part of the States. The States may be critical of Federation, just as the honorable member himself may be critical of any’ public officer or public institution. Criticism does not always suggest distrust. The States have a right to expect 20s. in the £1; and to drive as good a bargain as they can with the Federation, seeing that the States, as States, are responsible for their own financial obligations’.
– The States are now paid 25s. per capita.
– I am not to be “ sidetracked “ by any suggestion as to the financial relations between the Commonwealth and the States. Whatever financial obligations the Commonwealth mayfeel it has in relation to the States, they are obligations which were faced when United Australia ceased , to be a dream and became a fact. We knew on entering; Federation that the Commonwealth was going to accept a certain financial obligation for a number of years; and we as States were prepared to trust Australia collectively, to honour that obligation even after the expiration of the operation of the Braddon section. Considering the great revenue-earning power transferred by the States to the Federation, I am not prepared to admit that even 25s. per capita is anything more than bare justice to the States. The Minister of Home Affairs also proposed that the capital of the bank should be represented by 12,000 shares of £100 each, of which at least 6,000 were to be in the hands of the Commonwealth Government, while of the balance no State Government was to hold more than 1,000. He stipu-. lated that the shares were to be transferable only to the Governments of the Commonwealth and the States ; that the failure of any or all of the State Governments to subscribe should not prevent the bank from commencing operations ; and that, in the event of a State Government desiring to, dispose of shares, the Commonwealth Government should have the first option of purchase. He proposed to create a National bank of deposit, issue, exchange, and reserve, for the purpose of carrying out with facility and economy the financial transactions of the Commonwealth and State Governments, a sinking fund in connexion with all public debts for which the Commonwealth became responsible, and the appointment of sinking fund trustees whose position was to be such as to prevent the misappropriation of funds by an impecunious Treasurer. In that proposal, which was elaborated with characteristic ability and thoroughness by the honorable ‘ gentleman, there are merits which are lacking in the groundwork of the scheme now before us. We are building up what the Government expect to become, in courseof time, a great institution; and, therefore, I was disappointed to find in the Bill such a petty, miserable, pin-pricking provision as clause 17, which decrees that the officers of the bank shall not borrow from the bank. I have heard that clause favorably commented upon from this side of the House; but if the financial experts upon whom the Government are, more or less, relying in formulating this scheme think that any provision of the kind is necessary, we might surely trust the Governor of the bank to frame such a regulation in respect of his officers as will safeguard the bank.
– Does not the honorable member know that this has been the principal pitfall in bank failures hitherto?
– I am sure we shall be on safe ground if we trust the management of this institution, without embodying such petty details in the Bill. I do not like to see such provisions in an important measure which will go out to the world as a great National banking scheme for Australia. T hope an effort will be made in Committee to take out the clause to which I refer. We are placing so much trust in the Governor that we allow him, and properly so, to form branches, and carry out other important transactions in the name of the bank. Surely, therefore, . we can trust him to safeguard his institution against a few hundred clerks, who will be under his control. We cannot imagine that any official of the bank will be in a position to offer such securities as will entitle him to borrow sufficient money to injure the credit of the institution.
– The trouble is that they borrowed without security in the old days.
– In a matter of this sort we might well let the dead past bury its dead, and not throw stones at private institutions, or lay too much stress on human frailties. We have had bank failures in the past, and, possibly, we shall have them in the future; but I am convinced that none of the failures of 1893 were due to the lending of money to any official of the banking institutions of those days. The causes were of a much more far-reaching character. Whilst in Part IV. of the Bill the Government intrust the Governor of the bank with the very important function of creating branches throughout Australia, there’is a restriction in clause 23, in that he can establish a branch in London only after he has received the consent of the Treasurer ; while he may, with the like consent, establish branches in any other place beyond the Commonwealth. I am not in favour of the management of the bank being centred altogether in one person ; but that is a matter df detail, which I shall not elaborate. Assuming that we have a general manager, or Governor, or president, with a Board of Governors, one appointed by each State Government, why not give the manager, to whom the affairs of the bank are being intrusted, straight-out power to establish branches wherever he pleases? I am sure we can trust him not to establish a branch at’ Monte Carlo, for instance: We must trust the man on the spot to establish a branch in London, which will be as necessary as a branch in Sydney or Adelaide. I take it that due’ of the first objectives of the Commonwealth Bank is to have a branch in London to deal with the finances of the States and the Commonwealth; We want breadth and we want depth in the formation of this National institution ; and when trusting the Governor to do so many important things, we ought not to hedge him about with so many restrictions and” thou shalt nots. “ I come now to what, to me, is the most vulnerable portion of this measure. I do not know that I should have taken very much objection to it- Certainly I should not have spoken to this motion - but for Part V. of the Bill. I have a lively recollection of - and some honorable members opposite well remember it too - an attempt that was made bya State Government to absorb the Savings Bank of South Australia in their desire to establish in those days a State bank. I know with what indignation that proposal was received on the part of even the keenest supporters of the Government of the day. The Government were compelled to abandon that portion of their policy, and to leave the Savings Bank to grow, and to be controlled in the manner in which it has been controlled over a long series of years. If there is one institution more than another in South Australia of which we have reason to be proud, it is surely the great Savings Bank of that State. It is not a private institution. It is not conducted by capitalists for the benefit of capitalists. It is an institution governed by trustees appointed by the Government of the clay. Whilst, no doubt, the honorable member for Angas was right from a legal point of view in stating that the Savings Bank of South Australia had not behind it a Government guarantee, we know, as a matter or fact, that the Government of that State does stand behind it, and would stand behind it in the event of an approaching crisis. To all intents and purposes, therefore, the bank, although in its management removed from political influences, is a State institution, and has behind it all the stability of the Government of that State. It has grown to such an extent that today, although the total population of the State is only a little over 400,000 people, it has no less than 210,000 depositors. This proves at once its popularity. Its balance-sheets show that the average deposit is very small, and so indicate that it is the bank of the poorer section’s of the community. It is because of the fact that it is intended to be the bank of the poorer people that a limitation has been placed upon the amounts on which interest can be derived. Another source of weakness in the Bill before us is that there is no limitation as to the amount of money upon which a depositor may receive interest. I recognise there is no special virtue in any limitation. There is no special virtue in the limitation of £250 imposed in the case of the Savings Bank of South Australia any more than there is in other limitations that may prevail in connexion with the Savings Banks of the other States. The principle underlying the management of the Savings Bank is that people with a fair amount of money shall not be allowed to deposit with the bank sums of any considerable magnitude.
– Because it is thought-
– That it might interfere with private banks.
– No; I think the idea is that the cost of management should be kept down to the lowest possible limit in order that the bank shall pay the maximum amount of interest on deposits.
– Is it not the case that the percentage of cost is higher when the amounts are small?
– No. The cost of management of the Savings Bank of South Australia per head of the depositors will compare more than favorably with the cost of managing similar institutions in any part of the world. The idea is that the institution shall be, in fact, as well as in name, a Savings Bank, and that people who command capital shall not be able to place de posits at call with this institution, and secure in respect of them the comparatively” high rate of interest which it has been able to pay. I view with much concern the attempt through the agency of this Bill to absorb such an institution as the Savings Bank of South Australia. The honorablemember for Adelaide, with that fine discrimination which has always distinguished his choice of language, had his sensibilities offended to-day, as I had, by the suggestion which came from this side of the House that a “ raid “ was to be made on the Savings Banks of the States. I think, however, that the word “raid “ was used in the political rather than in the commercial sense. I do not believe that there is a desire on the part of this Government to in any way raid an institution such as the Savings Bank of South Australia. I think, however, that I am justified in pointing out that the Prime Minister, in moving the second reading of this Bill, distinctly told us that, in his opinion, there would beultimately only one Savings Bank in Australia. He went on to express the hope that the State Savings Banks would continue to carry on their own business in their own way, but he gave it as his own personal opinion that the advantages of the Commonwealth Savings Bank would be such that, probably, in addition to securing new depositors, it would obtain some of the money now deposited with State Savings Banks. He further expressed the opinion that, in the evolution of things, that would be the inevitable result of the establishment of this institution. We were justified in expressing somefeeling of alarm when the Prime Minister went on to say -
I think it is impossible for two Savings Banks to be carried on in the same post-office without some difficulty arising, but I do not say that the State Savings Banks conducted in postal buildings should be interfered with immediately.
We understand, of course, that there will be no unfair tactics, or hasty action, oh the part of the Government. The present Government, no more than any other Government that might be in power, would not do anything to ruthlessly destroy the credit or usefulness of such a State institution as a Savings Bank. The Savings Bank of South Australia has been able hitherto rouse the post-offices throughout the State as branches, which has been an inestimable advantage in enabling it to collect small amounts from depositors in country districts. If the Commonwealth establishes a Saving’s Bank, it will, of course, use the post-offices for its own business, and thus- the State institutions will have their working expenses considerably increased, and will have to reduce their rate of interest on deposits correspondingly, and, in process of time, must give way to their stronger rival.
– In the principal centres, the Savings Bank authorities are already withdrawing their business from the postoffices .
– Only in about six centres.
– I am speaking of the business done in country districts, where the post-offices are convenient places of call, in which Savings Bank business can be best and most economically conducted. _ A Commonwealth institution in competition with the State institutions would obtain some of their money, and their usefulness would be thereby reduced. I am sure that it is not intended to make a raid on the State Savings Banks, but the competition that is proposed will, by increasing the cost of management, lead to a reduction in the interest on deposits. The South Australian Savings Bank has loaned out, in small sums to private borrowers, £1,600, 000, and £4,500,000 to the State Government. This financial assistance has been of great service, and’ has on many occasions rendered it unnecessary to go to the London money market for funds for the carrying on of public works. The proposal of the Government may, therefore, interfere considerably with the finances of the Governments of the States. I think that there should not be this interference, to the injury of small depositors and the embarrassment of State Governments. In any case, the Savings Bank should be separated from the National bank, though there might be some cooperation which would enable the funds of the Savings Bank to be employed by the National bank. It is sounder, and will be more acceptable to the public, to keep the two banks separate. The Treasurer of South Australia, Mr. Vaughan, when questioned in the House of Assembly regarding the possibility r>f the absorption of the State Savings Bank by the proposed Commonwealth Savings Bank, said, as reported in the Adelaide newspapers of Wednesday last-
I think anything that will interfere with the Savings IBank would not be beneficial. I think it would not be advisable on the part of the Federal Government to bring forward its proposal for starting a Savings Bank that will be in opposition to the present Savings Bank, or that might be inclined to absorb it. My own personal view is that if the Bill is passed to establish a Federal institution it will be ‘ in opposition to our own State Savings Bank.
Mr. Vaughan expects the Federal Government to be reasonable, and not to rush its proposals through as if the Australian nation had only a few years to live. He takes the view of the Leader of the Opposition, that a delay of six months would not matter much. He further ‘indicated his readiness to join with other State Governments, some of them Labour Administrations, in a protest against what is proposed. The Government would be well advised to eliminate the provisions of the Bill dealing with the Savings Bank. Savings Bank business is not worthy of the great institution which the Commonwealth Bank will become, if successful. This is the greatest objection I have to the introduction of this scheme - that it unnecessarily interferes with the management of State institutions which have not only played their part well in respect to small depositors, but have been of inestimable advantage to the various State Governments in enabling them to borrow money at low rates of interest. The system of mortgages which has been introduced by the semi-State institution in South Australia has been of incalculable benefit to the poorer section of the community, by means of the easy system of paying off principal and interest together. I think it would be advisable for the Government to consider the wisdom of dropping that portion of the Bill which refers to Savings Banks’. I am quite sure that it will meet, not only with the opposition of the State Governments, who are in many respects in sympathy with the policy of the Commonwealth Ministry, but that it will cause a good deal of more or less uneasy feeling on the part of depositors, who, whilst not doubting in any way the stability of the coming Commonwealth Bank, or the continued stability of their own State Savings Banks, will believe that the Commonwealth, through coming in as a competitor, will involve increased cost of management. There is only one source from which that increased cost can be made up. It must be met either out of the funds of the depositors, or at the expense of those who do business with the Savings Banks in other ways.
Debate (on motion by Mr. Groom) adjourned.
Naval College: Banking Facilities in Federal Territory - Inter- State Trade.
– I move -
That the House do now adjourn.
I desire to say, in reply to the honorable member for Parramatta, who made an inquiry concerning certain papers respecting the proposed site of the Naval College, that I have consulted the Minister of Defence, and that the papers referred to will be laid upon the table and made available to honorable members in a day or two.
.- Some three weeks ago, when I was at Duntroon, certain workmen asked me whether I would interest myself in their behalf for the purpose of obtaining facilities for them to bank their earnings. I asked a question in the House about the matter, and on the 7 th of last month the PostmasterGeneral informed me that he would see that it was attended to. The honorable gentleman went on to say. that the Minister of Home Affairs could not make a statement on behalf of his Department, but he assured the House that the requirements of the men would be attended to. I again asked a question on the subject yesterday, desiring to know whether any steps had been taken in the matter. The answer which I received was that the Government had asked the Deputy PostmasterGeneral, Sydney, to communicate with the State Government, in order that facilities for banking money might be provided at Duntroon. The Minister, however, was not yet aware of the result of the interview. Yesterday morning I received a letter from one of the workmen, who said -
Friday last was pay day, and on Saturday the postal official was here as usual to issue postal notes and money orders, but no deposits were taken.
I think that these workmen have a just cause for complaint. 1 hope that the Minister will lose no time in carrying out his promise to this House, and will see that banking facilities are provided forthwith. Attention has been called to the fact that these workmen have to guard their earnings as best they can in their tents. There has been a fear on the part of some of them that they may be robbed or even murdered. I notice that the Government have been able, as a matter of urgency, to purchase a motor cnr to meet the needs of the officials, but they have not been able to arrange banking facilities for the men. .
– That is a State matter. Why should not the men go to their State member?
– This is Federal Territory, and I have yet to learn that it can be a State matter, especially as these men are the employes of the Federal Department of Home Affairs.
– The Savings Bank matter is in the hands of the State.
– The State Government has no right to go into Federal territory and establish a bank there.
– I told the honorable member that we were endeavouring to make arrangements with the New South Wales Government for Savings Bank facilities to be provided.
– Three weeks have elapsed since the Minister made that statement, but nothing has yet been done.
– That is not so. We had to get the State authorities to set to work.
– The men say, and rightly so, that the Federal Government had no difficulty in finding £500 for a motor car, but that they seem to have a difficulty in providing the services of a man, who would not cost more than 10s. a week, to take their savings into Queanbeyan, and thus enable them to deposit their money in safety. I hope that the Minister will do more than “endeavour.” He should put his “endeavour” into actual practice by seeing that some official is there on pay day to receive the deposits of the men.
.- Last session the Minister of Trade and Customs gave an assurance that he would make inquiries, and look into the question of produce passing from State to State. Will he be good enough to let the House know the result of those inquiries, and how far he has pushed them ?
– I will try to get the information which the honorable member requires.
– I desire to intimate that the understanding is that the debate on the second reading of the Commonwealth Bank Bill shall close at 3 o’clock to-morrow afternoon.
Question resolved in the affirmative.
House adjourned at 11. 8 p.m.
Cite as: Australia, House of Representatives, Debates, 23 November 1911, viewed 22 October 2017, <http://historichansard.net/hofreps/1911/19111123_reps_4_62/>.