6th Parliament · 1st Session
Mr.SPEAKER took the chair at 3 p.m., and read prayers.
– On the 9th ultimo the honorable member for Oxley raised a question as to the purchase of cattle in Northern New South Wales for slaughter at meat works in Queensland. I have obtained reports from the Collectors of Customs, New South Wales and Queensland, as to the number of cattle so purchased and treated during the period January to June, 1915. This information is set out in the form of a statement, which I now beg to lay upon the table of the House: -
Owing to increased competition, bad season, find facilities for treating cattle in Queensland, exporters are turning their attention to thesupplies obtainable in the northern districts of New South Wales.
The fact that Brisbane is the most convenient market must also be taken into consideration.
The honorable member also asked for particulars as to the slaughter of female stock. ‘ The following is the information possessed by the Department : -
– In view of the fact that many, if not all, of the State Governments will probably be faced with financial difficulties during the current financial year, will the Treasurer favorably consider the suggestion that he should consult with them, so that the proposed War Loan may be made to cover their necessities as well as those of the Commonwealth.
– The War LoanBill will be under consideration within a few minutes, and this matter can then be discussed. In my opinion, our first duty is to provide money for the payment and equipment of our soldiers, so that the country may be protected; other matters must stand over until a later day.
– In view of the financial situation, will the Prime Minister give the House an opportunity to reconsider the proposed expenditure for the current financial year?
– Supply Bills will have to be passed from time to time, and their consideration will give honorable members ample, opportunity to do what isasked.
– Has any decision been arrived at with a view to meeting the request of the deputation that waited on the Minister for Trade and Customs last week regarding the duty on jute goods ?
– I placed the statements of the deputation, and the representations1 of honorable members on this side of the House who were unable to take part in the deputation, before the Cabinet, which, after full consideration, decided that it is not advisable to open the Tariff question in any regard.
– Will the Minister consider the advisability of following in regard to corn sacks the procedure adopted in the United States, and allow a rebate or drawback on all imported sacks that are sent out of the country ?
– I shall be pleased to consider the matter.
– I ask the Minister for the Navy if any representations have been made to the Minister of Defence regarding the circulation, at Tumut, New South Wales, of literature designed to prevent recruiting, and, if so, has any action been taken to prevent the circulation of any such unpatriotic literature at Tumut or elsewhere? If no action has been taken, will the Minister give the matter immediate attention 1
– I shall obtain the information asked for, and give the honorable member an answer to-morrow. The honorable member for Brisbane some days ago asked me -
Does not the Assistant Minister of Defence consider the enormous number of rejects on account of physical unfitness amongst those who volunteer for active service serious enough to warrant an investigation by a Board?
The following is the reply -
In view of the relaxation of the medical regu lations recently decided upon, it is not considered advisable to take any action in the direction suggested at the present time.
The following papers were presented: - High Commissioner’s Fifth Annual Report. Ordered to be printed.
Defence Act - Aerial Navigation Regulations (Provisional) -Statutory Rules 1915, No. 113.
Military Forces - Financial and Allowance Regulation Amended (Provisional) - Statutory Rules 1915, No. 115. Norfolk Island - Ordinance of 1915, No. 3-
Public School. Public Service Act - Regulations Amended -
Statutory Rules 1915, No. 121. . Promotions of -
Tax Branch, Central Staff.
Tax Branch, Victoria.
Collected Diplomatic Documents relating to the Outbreak of the European War.
– In view of the volume and urgency of the business done by honorable members of this House with the Defence Department, will the Minister for the Navy confer with the PostmasterGeneral to see if a direct telephone line can be. used to connect this building with the Defence Offices? It is impossible for members to jostle all day to get connexions.
– I have no objection to complying with the honorable member’s request.
– Is it a fact, as stated in the Argus of yesterday, that while the retailers of sugar have been called upon to sacrifice some portion of their profits, the sugar-growers of Queensland are to be paid £3 or £4 more per ton for their cane than they would have got had the Federal Government not intervened ?
– I have seen the statement which appeared in the Melbourne press regarding the injustice that is said to have been done to the retailers of sugar in Melbourne, but a calculation that I have made shows that those who complain are asked to distribute sugar through their shops for a sum of money about half as great as the grower gets for the cane that produces the sugar.
– Have the Federal authorities any oversight in respect of the various patriotic funds for which money is being collected in Australia? If not, will the Prime Minister consult with the State authorities, and with the Committees which have charge of these funds, with a view to arranging for some regular method of distribution and management, so that certain misapprehensions that exist in the mind of the public may be allayed ?
– I have twice answered that question in the affirmative. This Parliament has not sovereign power to deal with the matter. Undoubtedly there are anomalies and difficulties and, I am afraid, mischief occasionally; but I hesitate to intervene unless the way of the Commonwealth Government appears perfectly clear. I shall be glad to communicate in a friendly way with the State Premiers so that we may have cooperative action for ‘the protection of the public.
– Is the AttorneyGeneral prepared to make a statement to the House in regard to the metal contracts, and particularly as to whether the Government have granted any permits for the export of zinc concentrates?
– A statement on the subject is being typewritten at the present moment, and I hope to deliver it to the House in the course of to-day’s sitting.
– Will the AttorneyGeneral make a statement to the House in regard to the zinc concentrates which are at present hung up at Broken Hill ?
– The Amalgamated Zinc Company has. made application for permission to ship 50,000 tons of zinc concentrates to a firm in America. Seven thousand five hundred tons has previously gone to various firms. The position has been most carefully inquired into, and the Imperial Government is being communicated with in order to ascertain whether there is any objection to the transmission of metals to the agency of this firm in America. If there is no objection, permission will be granted; otherwise it will not.
Alleged Treachery : Certificates for Rejects : Sydney Recruiting Office
– Has the Minister for the Navy anything to communicate to the House in reference to the case of an Australian officer who was. alleged to have been shot by a man of German descent, who was a member of the Australian Expeditionary Forces? Is it a fact that the man in question has been brought back to Australia on the. transport Kyarra?
– I made inquiries ort this subject this morning, and ascertained that no reply has yet been received to the cable sent by the Government.
– Do the Government propose to give to men who have failed to pass the medical test some tangible evidence of their having volunteered, so that unwarrantable imputations that are often cast upon these young fellows by busybodies may be removed T
– This has been provided for, as will be seen from the attestation sheet.
– Will the Minister for the Navy take into consideration the advisability of the recruiting office in Sydney being kept open until 4 o’clock daily instead of being closed at 12 o’clock noon?
– I shall make inquiries into the matter.
– I should like to ask the Prime Minister whether, in view of the present regrettable suspension of work on the coal fields in Wales, and having regard to the fact that Australian interests are being jeopardized equally with those of other parts of the Empire, he will submit to the Imperial Government, on the lines of the resolution of this Parliament in ‘ reference to Home Rule, a suggestion that the Government should commandeer the coal supplies of Wales ?
– It may be laid down a3 a general rule that it is not advisable for one Legislature to advise another, but I announced to the House some time ago that we had communicated with the British Government stating that, as they were reported to be short of coal, and as there were thousands of men in the Newcastle district who were unemployed, or only partially employed, we would be glad to supply the Home authorities with coal immediately. To that offer we, unfortunately, did not receive a favorable reply.
– Is the AttorneyGeneral in a position to give to the House the promised memorandum setting forth the terms of the arrangement between the Commonwealth and the Queensland Government in regard to the sugar crop ?
– I am not in a position to submit the memorandum to the House to-day, but I propose to do so shortly.
Fixing of Food Prices.
– I ask the Attorney-
General if his attention has been drawn to the fact that when Mr. Walter Runciman moved the second reading of a Bill in the House of Commons to fix the price of coal in Great Britain, Sir A. B. Markham said “ that the maximum retail price should also be fixed, in order that the poor might not be fleeced by the middleman “ ? If so, does the Attorney-General consider it possible to submit the referenda proposals to the people earlier than December, so that the Commonwealth Government may be able to prevent the private exploitation of the Australian public, particularly in regard to food supplies?
– The earliest dateat -which the referenda proposals can be submitted will be some day in December. No earlier date can be fixed, owing to the provisions of the law in regard to the preparation and distribution of the pamphlets containing the case for and against, and also owing to the wide area over which these pamphlets and other electoral matter have to be distributed.
– Before submitting the referenda proposals at any earlier period, will the Attorney-General ascertain whether it is not a fact that, in every case where the price of goods has been fixed, it has been at a tremendous increase, and not a decrease?
– So far as I know, that is not the case; and, as I have a great deal of work in hand, I ask the right honorable gentleman not to’ press his request.
– Is the AttorneyGeneral aware whether the price of butter, as fixed by the Board in New South Wales, is higher than its price in Victoria, where it has not been fixed?
– It is a fact that the price of butter is higher in Victoria than in New South Wales.
Mr.RICHARD FOSTER.- In fixing the date for the referenda poll, did the Attorney-General have regard to the fact that, in December, the Australian farmers will be at the very busiest part of their harvest, and will possibly be experiencing unexampled difficulties?
– The matter of fixing the date of the referenda poll is governed by considerations quite unconnected with such circumstances as the honorable member mentions.
returning Wounded : Porterage on Telegrams: Posters.
– Will the Minister for the Navy see whether in future, when wounded soldiers are returning from abroad, arrangements cannot be made to have the wounded men separated from others, and given a fitting welcome ?
– I see no objection to effect being given to the honorable gentleman’s suggestion.
– Has the attention of the Minister for the Navy been drawn to a statement which has appeared in the newspapers that a mother was obliged to pay 5s, porterage on a telegram notifying her that her son had been wounded, and that when this matter came under the notice of the Postal Department instructions were issued that in future such telegrams were to be delivered by letter carriers, and not by special porterage?
– I have not seen the paragraph, but I shall inquire into the matter.
– Can Ministers explain why there are no posters on the Post Office in Melbourne, or other Commonwealth buildings, inviting people to join the colours?
– I am not aware of any objection on the part of the Post Office to display posters if required.
– Have any inquiries been made into certain charges that I made in connexion with the Rabaul courts martial and the disparity of treatment between officers and men ? The Prime Minister will remember that he promised to have independent inquiries made. Can he say what has been the result of. those inquiries ?
– I have carried out my promise to the letter. Every investigation has been made, and certain discoveries have revealed information qualifying the charges made by the honorable member. The matter is now finally in the hands of the Attorney-General, and the honorable member for Bourke may rest assured that the report and the facts will be brought to the House as soon as the investigations are completed. The honorable member will find that they will qualify, to a great degree, the statements which he has made.
Promotions During the War.
– In regard to. the new regulation issued under the Public Service Act and relating to promotions during the war, will the Prime Minister ascertain whether the rights of persons, such as mechanics, who have qualified for positions by examination, and whose rights to appointments may expire by effluxion of time before the war is over, will be conserved ?
– The honorable member has raised a point worthy of consideration. The policy in this regard is that those who, before they enlisted, were equally qualified with others remaining behind should not be at a disadvantage with respect to their absence on such war service. Those who have enlisted and those who remain behind will neither gain nor lose their comparative status, so far as .it existed before the war.
– Has the Minister of Trade and Customs noticed that the Victorian Minister of Agriculture still claims the power to prevent the export of meat? Has the Commonwealth abrogated its constitutional right to control all imports and exports?
– The Commonwealth has not abrogated its power to control imports and exports. Full power in that matter rests with the Commonwealth; and if the Commonwealth had not prohibited the export of meat before the State Government took action their action would have been of no effect.
– In view of certain disconcerting rumours in New South Wales, I desire to know from the Prime Minister whether the Government have ever contemplated seizing wheat or any other agricultural product of the coining harvest, either by themselves, or through the State Government?
– That policy has not been considered.
– Was it not so decided by the Adelaide Conference?
– The Adelaide Conference has nothing to do with this Parliament.
– Is there any truth in the statement that the Broken Hill companies, or any portion of them, have offered their products, or any portion of their products, to be placed at the disposal of the Government?
– With the permission of the House, I should like to read a statement regarding the whole position. In doing so, I must ask the indulgence of the House, as it is a matter of some importance. The statement has been made as brief as possible.
– Is it the pleasure of the House that the Attorney-General have leave to make a statement?
– On 10th July instant I made a statement dealing with the base metal industry in the press, in the course of which I said -
The agencies through which the metallic products of Australia find their way to British and other markets of the world are still dominated mainly by German influence. I know this to be a very serious allegation to make, but it is absolutely true. Names have been changed, English names have taken the place of German names, but the German influence remains. It would be folly to assume that this influence has been exercised for the benefit of Great Britain…..
I then went on to deal with the attitude of the mining companies towards their contracts with the enemy. I said -
Not one contract lias been filed. This fact speaks for itself. It may be that there is room for doubt as to the validity of the Act. I do not for one moment admit that it is so. Surely it is not asking too much of the great companies of Australia that in this life-and-death struggle with Germany they will take some risk and make some sacrifice. Britain culls aloud for munitions. Our metallic products are essential for the production of munitions, yet it is still true, as it was before the war. that the metal market is dominated by our mortal enemies; that they control the selling agencies, manipulate the market, and thus bleed (..Teat Britain and the Allies of money, and so strike a blow right at her heart.
Patriotism and common prudence alike, suggest nt this juncture the wisdom of controlling those metals upon which, indeed, success in the great war must depend.
I quite realized that this statement contained grave charges against certain persons, but, in my opinion, they were absolutely warranted by the facts. Some effort has been made to confuse the minds of the public by stating that these charges meant that the metals were finding their way to the enemy. Senator Millen is reported to have said so in Saturday’s press. No such deduction can be drawn from my statement, . which is clear and unambiguous. The Government of the Commonwealth is now and has been determined since its accession to office not to allow goods of any sort or kind to reach the enemy. My charge was not that the metals were reaching the enemy, for that would be a charge against the Government of which I am a member, but that the channels through which Australian metallic products found their way to British and neutral markets were still dominated by German influence, and that Britain and the Allies were being bled of millions of money in order to secure the necessary munitions. That was the charge. It is a most serious one, and attempts to evade it by confusing the minds of the public cannot be allowed.
Since my statement was made on 10th July instant, great concern has been exhibited by some of the mining companies. They have always assured me that they were prepared to sever their contracts with enemy agents. Some have now indicated that they are going to do so. Several contracts have been filed for annulment under the Enemy Contract Annulment Act.
All this is satisfactory as far as it goes. But I must remind the Australian public that the consequences of the refusal to do so long ago are irreparable. The war has now been raging for nearly twelve months, and it has been a war of finance as well as of arms - a war of munitions, in which lead, zinc, and copper were essential to victory: Great Britain has been and is compelled to pay prices for lead, zinc, and copper very greatly in excess of those which the enemy were paying, and this is largely due to the fact that the Australian metallic products1 were marketed through agencies dominated by German influence. In this way Britain has been and is being bled of millions during the war, while the great: German metal firms’ accumulated share of these profits arising out of these high prices, and renewed control of the metal industry after the war, are assured.
Will any one say for a moment that this conduct is one compatible with true patriotism ? This is a war of resources - of money. If Germany can buy spelter, as she can, for £30 per ton, while Great “Britain has to pay £100, and if, without zinc, lead, and copper, we cannot make munitions, the handicap upon us is too heavy; victory is almost impossible. But even the victory would be a barren one if the industry were to fall back into German hands after the war. In order to avoid this, two things are essential : That British and Allied Governments or firms should control metal during the. war. and that British and Allied influences should control the industry after the war. In order to insure this latter it is essential that all enemy influence should be stamped out and that British firms should be assured regular and continuous supplies. These conditions do not now exist.
It may be said - it will be said - that the statement that German influence has dominated the Australian metal market during the war is not true. It is true, and I propose to give the House some facts to prove it.
The whole of the Broken Hill Proprietary Company’s output of pig-lead” sold in Britain was handled, up to 30th June last, by H. R. Merton and Company - the London house of Mertons of Frankfort^ in other words, Metallgesellschaft.
Most of the argentiferous lead and lead bullion produced and exported from Australia is desilvered and refined by Enthoven and Company. This is another company trading in Great Britain in which Mertons are interested. The British Government has appointed supervisors over both these firms - a fact which speaks for itself.
Numerous offers by “English firms who are anxious and eager to get rid of the German influence in the lead market, to purchase the whole of the Commonwealth’s output of lead, have been received from time to time. But they have not been accepted.
As a result of very strong pressure by the Federal Government, the Lead Convention was dissolved on 30th June last, as far as Australian lead was concerned. The Lead Convention was dominated by German influence, and it fixed prices and controlled the market. English buyers, through British agents, were led to believe that after its dissolution they had a clear field, but this is not the case. For offers submitted by bond fide British agents during this month were not accepted.
On Saturday an offer was made on behalf of the board of the Associated Smelters of their lead output to the British Government. This offer was submitted to the Federal Government, which immediately cabled its approval to the Imperial authorities. But this offer is not enough. It is just as patriotic to supply genuine British manufacturers who require metal for munitions of war as to supply the War Office itself. And, further, so far as the future is concerned, it is to the British manufacturer that we must look to take our products after the war. The war will pass, but the industry will remain, and it is necessary that permanent customers for our products should be secured, and that, in order that these can be secured, they must have an assurance that supplies will be available after the war as well as during its progress.
Owing to the costly nature of the distilling process, the disposal of zinc concentrates is a difficult problem. But it must be solved, and without delay. Limited quantities of concentrates have been despatched to the small distilleries in England, and some parcels have been forwarded to Holland for treatment only, the metal itself being returned to England. Recently a parcel ‘has been sent to the Vieille Montagne, in France.
Cargoes to American distilleries are to be consigned to several works in the United States. The companies are registered as American, but there is a considerable amount of German capital invested in some of them, and German influence is very considerable in many other cases. It is most difficult to learn the true position as to how far this influence goes. There is no doubt that it is very far-reaching. From the information at our disposal it appears that, at any rate, the Bartlesville Zinc Company is largely controlled by Mertons, of Frankfort; the National Zinc Company, by Beer Sondheimer and Company, Frankfort; the American Zinc, Lead, and Silver Company, by Aaron Hirsch and Company ; while among the shareholders of the Minerals Separation American Syndicate are Beer Sondheimer and Company, Aaron Hirsch and Company, and Metallgesellschaft.
At the present time nearly all metallic zinc used by Great Britain comes from America, and the prices are about 400 per cent, higher than pre-war prices.
Prior to the war Germany (Silesia), Belgium, and Northern France, and the United States were the world’s greatest producers of metallic zinc, and although Australia is the second largest producer of zinc minerals in the world, only 5,000 tons annually of metallic zinc are distilled within the Commonwealth.
Great Britain under normal conditions consumes 180,000 tons: annually of metallic zinc, but distills less than 30,000 tons, hence she is dependent on imports for the major portion of her home requirements. To instal plant in Great Britain to treat any considerable portion of Australia’s zinc concentrates will occupy at least eighteen months to two years, and a longer period would be occupied if the plant were erected ,in Australia.
Had the contracts providing for the sale of zinc concentrates through enemy agents been annulled at the outbreak of war, and a regular and continuous supply of zinc concentrates during the war and subsequent thereto been guaranteed to British buyers, British enterprise could have grappled with the position, and distilleries would have been now nearly completed. But this was not done. The result is that the spelter market is “ cornered” in America; there is a dearth of the metal; faming prices rule, and Australia is unable to market the zinc concentrates, of which 400,000 tons per an- num are produced, containing 180,000 tons of metallic zinc. Britain is paying £105 a ton for a product that her enemy can get for £29, while the Australian producer is no better off than before the war, for he does not share in the high price of spelter.
So much for zinc. Let me now deal with copper. This terrible war has been raging nearly twelve months. The position of the metal industry has been set out again and again with great emphasis. The ramifications of. German influence, and the power of Merton’s and the Metallgesellschaft have been made clear to all save those who will not heed. Yet one of the largest companies producing copper in Australia to-day is selling its output through Merton’s and Smith’s. Merton’s is the very fountain-head of the German metal domination, while the latter, prior to the war. were one of the London agents of Aaron Hirsch and Sohn
Twelve months of war has raged between Germany and Britain, but Francis IF. Snow is still - or was a few days ago - their solo purchasing agent. Aaron Hirsch and Sohn still owns one-third of the total shares in their refining company. For many months the Government have endeavoured, by every means at their disposal, to persuade this company to cut itself free from all these enemy influences. The Commonwealth Government have offered it substantial inducements to establish the manufacture of copper goods in Australia, only asking in return that it should free itself from all enemy domination or connexion, but they have failed. The company has been fertile of excuses and explanations for its failure to comply with our reasonable and proner requests. Since my recent statement it has been roused to protest and some semblance of action. Nevertheless, the position remains as I have said.
Yesterday, the crowning point in this display of patriotic ineptitude - to use no stronger term - was reached. I am indeed at a loss to find words to express my opinion of those responsible for it. But I give the facts, that honorable members may judge for themselves. About a fortnight ago the Australian Metal Company, the agent in Melbourne of the Metallgesellschaft and Merton’s. was declared an enemy firm, and so forbidden to trade at all. A few days earlier I had taken such steps as made it obvious to the company that the Government would use whatever remedies were at their disposal to compel it to put an end to all German influence here, and that, in consequence, its arrangements with Smith’s, of London, must terminate.
The German metal group had thus lost the services of their agents here, and were certain to be similarly treated in London, and it became necessary, if German interests were not to be sacrificed, to secure other agents. These, of course, could not be German, as -no German firm is permitted to trade at all. It thus became necessary to obtain an Australian firm to act as the agent of the great German Metal Combine during a war in which Britain and Germany were locked in death grips, and the control of metals, by Britain was essential to victory. This has not been found impossible. An Australian firm has made application, and yesterday, in set form, applied to me for permission to act as sole agent in Australia for H. E. Merton s. the firm lately represented in Australia by the Australian Metal Company - the agent of the Metallgesellschaft - for the purchase of copper, zinc, lead, and other metals. 1. shall add nothing to this except to say that the two directors of this firm are also directors of the mining company above referred to. I place these facts before the House and the country. They speak for themselves. They demand action, and the Government have decided to act.
Our powers are limited to the control of the metallic products at this end. We cannot deal with them after they leave Australia, but we can do something towards destroying German control over our products here and elsewhere. And this we shall do. It is proposed to create an Australian metal exchange under Government control. No metals or metallic products will be allowed to leave Australia unless they are sold in Australia under the rules and regulations drawn up. No persons will be allowed to buy unless they are registered members of the metal exchange. No persons will be registered unless the Government is satisfied that their application is bond fide and the applicants pro-British.
– I desire now to again ask the Attorney-General the question I put to. him earlier. Is there any truth in the report that the Broken Hill companies have offered to place the whole of their products at the disposal of the Government?
– In the course of my statement, I think I said that some of the companies had offered to place their output at the service of the Government, and that some of them had not.
– What happened? Can you give us the result?
– I am afraid I must refrain from answering that question now, but if the honorable member presses his question-;-
– Yes, certainly.
– Of course, I must make it clear that these offers were made to the Imperial Government, and that we recommended their acceptance. That was the position up to Saturday last, and it was then that a cable went to London conveying our recommendation.
Mr. GREENE (for Mr. ORCHARD’ asked the Assistant Minister representing the Minister of Defence, upon notice -
Is it a fact that a Dr. Heupt, recently stationed at the Liverpool Camp hospital, has left for the ‘front with the Forces?
Is Dr. Brunich engaged by the military authorities at the Garrison Hospital, Victoria Barracks, Sydney?
Is Dr. Weihan engaged at the Naval Depot, Garden Island?
Are these medical men British-born or arc they naturalized subjects?
If the latter, when were they naturalized?
– The answers to the honorable member’s questions are -
asked the Minister for the Navy, upon notice -
– The answers to the honorable member’s questions are -
asked the Minister for the Navy, upon notice -
If ho will have, inquiries made into the question of the protection used by the British or other navies to safeguard their men and officers from certain diseases?
– This matter has been inquired into already, and the instructions in force in the Royal Navy have been made available and are in force in the Royal Australian Navy.
asked the Minister for the Navy, upon notice -
– The answers to honorable member’s questions are -
To naval civil engineer to 30th June, 1915, £150.
To general foreman of works to 26th June, 1915, £88.
To foreman (or leading hand) to 26th June, 1915, £502 7s.
To one of the labourers to 26th June, 1915, £433 13s. 4d.
To two of the labourers to 26th June, 1915, £40 10s. each.
To one of the labourers to 26th June, 1915, £40 0s. 2d.
To one of the labourers to 26th June, 1915, £39 5s. 0(1.
To one of the labourers to 26th June, 1915, £8 15s. 9d.
Amounts paid to staff and workmen formerly engaged at the base -
Naval civil engineer, £262 10s. General foreman of works, £194. One carpenter, £5 0s. 4d. One cook, £27 12s. Ten labourers, £806 19s.
asked the Minister for the Navy, upon notice -
– The answers to the honorable member’s questions are -
asked the Minister for the Navy, upon notice -
– The desired information has been compiled, and is as follows : -
It will be found that the above list comprises sixteen civil servants-.
asked the Minister for the Navy, upon notice -
– The answers to the honorable member’s questions are -
Paragraph 42 of the War Precautions Regulations provides that “ if any person without lawful authority supplies a naval or military uniform or badge to any person not being a member of His Majesty’s Forces, or any such badge as aforesaid to any person not authorized to wear the badge, he shall be guilty of an offence against the Act.”
Section 70 of the Defence Act provides that “ any person who has in his possession except for lawful cause (the proof of which shall lie upon him) any arms, accoutrements, or other naval or military articles belonging to the Commonwealth or to any corps, shall be liable to a penalty not exceeding £20, and may be ordered by the Court by which he is tried to lie imprisoned for a period not exceeding throe months unless in the meantime he delivers up the articles or pays its value.”
These are the only provisions relating to traffic in military uniform and equipment. The Defence Department recognises that they are inadequate, and some weeks ago it requested the Attorney-General’s Department to prepare a regulation under the Defence Act which will impose a penalty on any person who buys or sells any article of military uniform and equipment except with the permission of the Minister.
asked the Prime Minister, upon notice -
Whether, in view of the fact that the State Governments have readily consented to collect statistics relative to foodstuffs and other necessaries of life, he will ask each State to cede so much power to the Commonwealth Parliament as will enable it to pass such, laws as are necessary to immediately control the distribution of commodities during the war period and prevent the exploitation of the public?
– A temporary grant of power to the Commonwealth by the States cannot be made. The powers necessary to enable the Commonwealth to effectively protect the public involve amendments of the Constitution. Proposed laws for this purpose have already been passed by the Parliament and are to be submitted to the electors for approval.
’ Mr. GREENE (for Mr. Fowler) asked the Minister for the Navy, upon notice -
Is it a fact that there have been many cases of desertion from the Expeditionary Forces in Australia by “ wasters “ who, after being paid, fed, and clothed for months, “ clear out “ on the eve of the departure of their unit to the front?
What is the extreme penalty for desertion in time of war?
What is the maximum penalty imposed up to the present time?
– The answers to the honorable member’s questions are -
asked the Minister for the Navy, upon notice -
Whether any action has been taken to give effect to his recommendation in his report to the Minister of Defence on the troopship inquiry in Brisbane: “That Mr. Stacey be relieved of his position in Brisbane”?
– Yes. This officer has been relieved of all work as regards transports.
asked the Minister for the Navy, upon notice -
Will he supply the names of the Commandant, the Chief of Staff, and the Staff Officer in the Military Forces of Western Australia?
– The answer to the honorable member’s question is -
The names of the Commandant and members of the District Head-quarters Staff in Western Australia are as follow: -
Commandant - Colonel J. H. Bruche.
Deputy Assistant Adjutant and Quarter master-General - Major B. M. Ralph.
General Staff Officer - Lieut, (temporary Captain) E. S. Davis.
asked the Minister for the Navy, upon notice -
Will the Minister of Defence make provision -
For drill instructors to impart instruction to members of rifle clubs?
For males not now undergoing military instruction, and, if fit, to join such clubs during the war?
– The answers to the honorable member’s questions are -
asked the Minister for the Navy, upon notice -
If he will inquire into the alleged official blundering reported in the Age of 16th July, said to have occurred at the Sturt-street depot, and report to the House -
Whether it is true that recruits have been seriously harassed, as stated? 2.If there is any penalty attachable to an officer who commits such blunders? 3.Is it proposed to enforce the penalty in this case?
Is it known that any recruits have withdrawn in consequence?
– The answers to the honorable member’s questions are -
Attestation papers from the country are not always delivered by mail before the man arrives, but in such cases the men are provided with meals and accommodation until they can be dealt with.
asked the AttorneyGeneral, upon notice -
Will he ask the Government Statistician to report on the two schedules in the War Census Bill as to what portion can be obtained from the Land Tax and Statistical Departments of both the Commonwealth and the States, and what portion is not bo obtainable; and as to how he thinks the whole information can be most easily and most quickly obtained?
– The information required is not in the possession of the Land Tax or Statistical Departments of Commonwealth or State. The manner in which it is to be obtained is a question of policy which comes within the province of the Government to determine.
Mr. FISHER (Wide Bay- Prime
Minister and Treasurer) [3.59]. - In moving -
That this Bill be now read a second time.
I cannot do better than put the measure itself into Hansard; it is so very brief. It is-
To authorize the Raising and Expending of the sum of Twenty million pounds for War purposes.
BE it enacted by the King’s Most Excellent Majesty, the Senate, and the House of Representatives of the Commonwealthof Australia, as follows : -
A year ago, when most people were dreaming of universal peace, Germany fell upon Belgium, with which nation it had no quarrel, and crushed it with the might of its armed forces. This involved Europe and the world in the greatest war in history. Great Britain sprang to Belgium’s aid, and Australians rushed to the colours before they were called. Since then there has been no looking back, nor can there be until the day our brave soldiers and sailors return with victory and the assurance of a lasting peace. It is to hasten that day that I present this Bill, and ask for it a speedy passage. The first step - taken by the Cook Government with general approval - was to place the Australian Navy at the disposal of the Imperial Government, and to raise a division of 20,000 Australian troops for service abroad. From that date to the present, the Government of the Commonwealth has raised for active service abroad, and actually despatched to the front, a total of 74,576 troops of all ranks, comprised as follows: -
What these men have already done, and what history they have made in the world’s theatre, is well known to honorable members. We intend to see the matter through to the last man and the last shilling. It should be made clear at the outset that the whole cost of our Naval and Military Forces within and without Australia is borne by the Government of the Commonwealth. I think that that statement is necessary, because many people are of the opinion that the British Government pays our Forces when they are overseas, and quite a number of them think that the States contribute proportionately to the cost of the recruits raised within their borders. As a matter of fact, however, the Government of the Commonwealth alone is responsible for the whole cost of equipping and maintaining the Australian troops. that are engaged overseas or are in training in Australia.
It is estimated that the cost to the Commonwealth Government of these war services to the 30th June last was -
– I am unable to answer the question, because I have before me only a statement of bare facts as furnished by the Military and Naval Departments. They say that that is the average cost. and I presume that it will be reduced slightly; it is possible that, if shipping charges increase, it may become larger. The estimated cost per man prior to embarkation is £57; the average cost of first issue of personal clothing and equipment, £23 per man; average cost of maintenance of clothing for twelve months, £12 per man; average cost of clothing and equipment, including both personal and regimental equipment, such as field and machine guns, waggons, mechanical transport, &c, £50 per annum.
– Is that additional to the other amounts?
– No. Turning now to the subject of previous loans, the Commonwealth Government has arranged to borrow from the Imperial Government for war purposes, up to December next, a total of £24,500,000. The Commonwealth Government has received up to date from the Imperial Government -
– Where has that £3,600,000 gone ?
– A portion has been expended. A portion is in hand. May I refer the right honorable gentleman to the original £18,000,000 which the Commonwealth borrowed for war purposes, and which enabled us to lend to the States £18,000,000, covering the period up to November of this year.
– You have given them £12,000,000 of that sum, and you have spent another £3,600,000.
– The £3,600,000 has nothing to do with the States.
– Is it included in the £13,000,000 that you have spent?
– Part of it is included.
So that during the same period in which the Commonwealth raised the loan from the Imperial Government, it has loaned to the States actually more than it has received. That is to say, of the original loan of £18,000,000, the Commonwealth has received to date, £12,000,000, and has loaned to the States, £12,125,000. With regard to the additional loan of £6,500,000 from the Imperial Government. which forms the subject of a sepa rate Bill that is already in the hands of honorable members, I have anticipated parliamentary authority by taking advantage of the offer of the British Government to lend it on the same terms as the £18,000,000.
At this point I should like to draw the attention of honorable members to an important fact. His Majesty’s Imperial Government, on the 6th July last, made it known to the Government of the Commonwealth that it would be very agreeable to the Home authorities if the Commonwealth could raise the money necessary to meet the war expenditure of its own Forces.
Such a communication demanded immediate and favorable consideration. The result is the Bill now before this House;, which I hope will have a speedy passage through Parliament, so that we may make an early appeal to the patriotism of the people of Australia. I cannot conceive of any prouder occasion in the life of a young dominion nation under His Majesty than an opportunity such as this. “Up to date we have equipped and transported our Australian Forces - the most expensive units that are fighting in this war - at our own cost. The time has come when we must supplement that achievement by finding the money necessary for future war operations, and I believe that our own people will be able to do that. I believe that by an appeal to their patriotism, and an appeal to their monetary resources, apart altogether from their patriotism, the people of Australia can do this successfully, and the day when the Commonwealth can equip and send away an army of 100,000 men, and atthe same time raise the necessary money to meet all expenses, will be the day when this country will take its place amongst the other nations of the earth .
It is difficult to attempt to reckon the sacrifices that it is my duty to invite the country to make to meet the expenses of the war. Much will depend on the duration of hostilities; but, assuming that the war lasts to the end of the financial year, it is estimated that our requirements, for war purposes only, during this financial year, will be not less than £40,000,000.
In these circumstances, the Government felt that it devolved upon them to take immediate steps to appeal to the people of Australia to provide the Commonwealth with a loan of £20,000,000, to be used for war purposes only.
The people of Australia have conducted themselves with admirable courage in most difficult and trying circumstances, and we feel that they will rise to the occasion now when so much is required from them. At this stage I embrace the opportunity to reply to some of the criticism of friends and opponents. I understand that the States would have preferred the Commonwealth Government to have consulted them more in this matter, but time was the essence of this legislation. We could not, under the circumstances, go upon the Australian, or any other, market at the present time to raise money for any purposes except the war, and the States,- as States, could not be helped by any discussion whatever in regard to any money that could be raised now. Therefore, we had to take occasion by the hand and accept the best advice available to deal with this matter as one of urgency, and to communicate that fact to the States. I wish to assure all of the States, and every Australian citizen, that in this matter there has been no tinge of political feeling or any desire on the part of the Commonwealth Government to obtain an advantage. We had a desperate, but patriotic and urgent, task before us, and we have set ourselves to carry it out to the best of our ability and with the greatest expedition.
It has been well pointed out that the Australian people are at their best when dealing with a big problem. Their soldier sons have borne themselves with unflinching bravery in face of unparalleled dangers, and have won the admiration of the world. The Government feel that such a people will not fall short of their expectations ; that they will respond to the call of duty, and that they will gladly provide the sinews of war, which are essential to our success in this great struggle.
The Government have availed themselves of the best advice obtainable. I desire to thank the representatives of large financial interests in Australia who readily responded to the invitation to confer with Ministers in regard to the flotation of a Common wealth war loan. While Ministers had full confidence in their official advisers and in the ability of the people to raise large amounts of money for war purposes, their position has been strengthened by the conferences that have taken place, affording a full discussion of all phases of the financial situation, the present position, and the future prospects of the country. The banks have generously agreed to charge neither commission nor exchange in connexion with subscriptions to the loan.
It is intended to raise an amount of £20,000,000 for war purposes only, at A per cent., issued at par. It will not ‘be underwritten. The term of the loan will be ten years, and the loan will be issued in instalments. The first instalment will be of £5,000,000, subscription lists for which will close on 31st August next. The amount asked for in the first instalment is £5,000,000, but the full amount subscribed will be accepted. Interest will be payable halfyearly.
Perhaps the question may arise in Committee as to whether the Government should have given subscribers a guarantee, as was done in connexion with the last Imperial loan, that if the Government paid a higher rate of interest for a subsequent loan, or if this stock were at a discount and another loan were raised later, the subscribers to this loan would be given stock in the new loan in exchange for their stock at par. That matter was considered in all its phases, and I am glad to say that the advice offered by outside authorities coincided with the views of the Government that such an undertaking was unnecessary.
The general opinion is that this loan will be successfully floated in Australia, without a serious disturbance of the money market if it is floated in four parts of £5,000,000 each; but, as I pointed out earlier, if the amount subscribed on the “first issue exceeds £5,000,000 - and I should not be surprised if we got £10,000,000 - - the amount so subscribed will be retained as though we had asked for it. It is the opinion of experts that if we were to make the same offer as was made by Great Britain, it would have prevented, rather than have assisted, the success of our loan. Interest is to be paid half- yearly, the first payment being due on the 15th December next. This fact should be a considerable inducement. The amount that this earlier payment will add to the interest on the loan is practically nominal, and the advantages to be derived will override any little disadvantages.
– If more than £20,000,000 is subscribed, will the full amount be accepted ?
– It would be necessary to bring in a further Bill. The Government would be very happy, with the consent of the subscribers, to hold the surplus pending the passage of the necessary legislation.
– In other words, the Government are prepared to take an unlimited amount?
– We are prepared to take any surplus subscribed ; but I do not look for a subscription of £20,000,000 at the present time - in fact, it would not be an advantage to have that amount subscribed at the first issue; we shall do well if we get £10,000,000. By December next we hope to be in the position of having a record grain harvest, and ‘if the crop can be transported to the markets of the world, the money available for the next issue of £5,000,000 should be comparatively easily got.
Another important factor to be considered is the fact that more than three-fourths of our expenditure for war purposes is made in Australia, so that the question of exchange .oversea does not arise to as great an extent as many people believe. It is to the credit of Australia that, owing to our having the necessary factories, we can carry out the equipment of our troops to a very large extent. We have also the advantage that our people who are fighting our battles overseas are leaving behind them for their wives, families, and relatives a considerable portion of their pay. The disabilities, therefore, are not nearly so great now as they would have been a few years ago in the matter of equipping forces to fight overseas.
The stock will be inscribed in accordance with the provisions of the Commonwealth Inscribed Act 1911-15, and the inscription books of the loan will be kept at the Commonwealth Treasury at the Seat of Government, where all transfers of stock will be made. This is con sidered necessary, because there may be a single subscription running into hundreds of thousands of pounds.
The loan may be taken up in the shape of inscribed stock or Treasury bonds, and, at the option of the holder, one form of security may be exchanged at any time for the other. Thus, a person who has taken up inscribed stock may have it converted into bonds which, being documents made payable to bearer, can be more easily negotiated, and are really personal security that may be used in any way whatsoever commercially. The minimum for inscribed stock will be £100, and the smallest bond will be for £10. The honorable, member for Melbourne Ports has suggested that the bonds might be of a lower denomination than £10, but the honorable member will see that the prospectus is only for the first portion of the loan. If the £10 bond proves a success, it will be an inducement to provide for the issue of bonds at, say, £5 in the next prospectus. I have made a suggestion to the officers in the Treasury, which will be communicated to the Governor of the Commonwealth Bank on his return from Tasmania, with reference to bonds which may be taken up by people working in the country, or people who have not places of security in which to keep them. My suggestion was that arrangements might be made so that these bonds could be held by the Treasury and by the Commonwealth Bank for their owners at nominal fees or free of cost. The difficulty in regard to documents payable to bearer is to recover them once they are lost; and if, through our Commonwealth agencies - which, I am glad to say, are always increasing in number - we are able to provide for safeguarding these bonds, there will be mutual advantage to the nation and to the people who purchase them.
– Such a step would make the bonds an additional attraction to country people. ‘ Mr. ‘ FISHER.- I am rather proud of the idea, because in my earlier days I remember that even in the case of mining scrip, which gives more security, there was always trouble to know where to put it or to make it secure. If this arrangement can be carried out, the small man as well as the large man will be equally secure. I am glad to be able to say that the Attorney-General has advised the Government that all bonds and transfers of inscribed stock will be free of Commonwealth and State stamp duty, and that the interest payable will be free of Commonwealth and State income tax.
– That is not by arrangement with the States ?
– The Attorney-General of the Commonwealth has informed me that this is the law.
– The right honorable gentleman means to say that the Commonwealth has the power to do this?
– Yes. I take my law from the Attorney-General, and he says that this interest cannot be taxed by the States’. Whether the Commonwealth taxation will reach interest on State investments I do not know; I am not here to discuss that aspect of the question. Bonds and inscribed stock will be accepted at par in payment of probate and succession duties to the Commonwealth. This is a good provision. I understand that a large number of wealthy people live in dread of the trouble that they may occasion their heirs and successors by the amount of probate and estate duties that will have ‘to .be paid to the various Governments on their demise. Here is a simple and admirable way in which they can make provision beforehand, that is, by taking up a sufficient amount of this loan, because they will be carrying out a patriotic duty, and, at the same time, relieving their minds of worry in this regard.
– Will the bonds and stock be exempt from all forms of Commonwealth taxation ?
– All bonds and all transfers of inscribed stock will be free of Commonwealth and State stamp duty, and interest will be free of Commonwealth and State income tax.
– But will it be free from other forms of taxation existing and, possibly, contemplated?
– In the meantime, I will not put my opinion on that question into words.
– That means it will not, evidently.
– Does the Prime Minister say that money put into these funds will be free from probate duty?
– No ; the bonds will be accepted in payment of probate and succession duty at their face value; and that is a very considerable concession. Surely honorable members are not going to ask me to say that, because people invest in this loan, they are not to pay probate duty?
– Do not misunderstand me ; I was not urging that the bonds should be so free, but that we ought to know the position, as a matter of policy.
– It would be quitewrong to induce people to go into this investment on the ground that it was free from every kind of taxation. I do not think that any reasonable person would ask such a thing.
– Would you make any distinction between the wealth tax and an income tax?
– A statement ought to be made showing what taxation this investment is liable to.
– I think the better way would be to say what taxation it will not be liable to, for the obvious reason that one Parliament cannot bind another. The States have been approached on behalf of the Commonwealth, and asked to so legislate that trustees may be allowed to invest in this stock, whether it be at a premium, at a discount, or at par ; and I am glad to say that all the States, except one, have replied up to this afternoon agreeing to that proposal. I feel sure that every State in the Commonwealth will pass legislation to that end, permitting trustees to invest in this loan under the ordinary conditions applying to State stocks. I have to express my appreciation of what the States have done, because, as we know, the Commonwealth has not power in that matter.
– It is a fair return for the kindness to the States previously.
– What I am referring to now is not a Commonwealth, but a State, affair.
– We are all acting together.
– We are all “in it.” As the honorable member for Flinders said some time ,ago, some people can give their lives, others their wealth, and some their wealth and also their lives: but we are all in this trouble, and those who do not want to be in it had better get out, for I do not think anybody desires them here. This is not the time to stand on ceremony. We have’ to play our part. At first it was a shock to find that we would have to rely largely on our own resources, but every day that has passed has made me more and more proud of the fact that this great opportunity has come to Australians. If we rise to the occasion, we shall probably make a name for ourselves in the world’s history that those who come after us will never regret.
Applications for the loan are authorized to be received by the Commonwealth Bank of Australia on behalf of the Treasury - the loan will be issued by the Treasury, and the Commonwealth Bank will manage it.
As’ my last words, I would say that we are face to face with our biggest financial problem; but it is not too big a problem for Australians to solve. I repeat that, happily, the people of this country are at their best when dealing with big things; and this is a big thing, concerning us all. Success will do us honour, and cheer the hearts of those who are staking their lives for our national freedom.
– I have listened to the statement of the Prime Minister with very considerable interest, and I rise to say one or two words in support of the general proposition he has put before the House, and, at the same time, to offer some friendly criticism. In the first place, I should like to say that we are proceeding in this matter in a way in which people do not proceed in countries where they have much larger obligations to face, and where they are really carrying the whole brunt of the financial consequences of the war. What I mean is that we have this Loan Bill placed before the Chamber as a segregated bit of our finance. We are told nothing whatever about our general ways and means; and it does appear to me that we are putting the cart before the horse. What we require is a statement of the outgoings for the next twelve months in relation to the whole cost of government, including the war and everything else. When we had that general statement of our finances before us, showing the outlook for the year, both as to income and expenditure, and more especially with regard to expenditure, then, and then only, I submit, would be the time to bring forward proposals in
aid of the general revenue to meet the totality of the obligations of the Government.. Instead of that, we have only a partial financing of the immediate obligation arising out of the war. It is proposed to raise £20,000,000 to meet an estimated outgoing of £40,000,000 on account of the war expenses alone.
– This is £20,000,000 on account.
– But how is the other £20,000,000. to be made up ? What is contemplated in regard to the residue which we are told will be required before the financial year closes?
As to the sum of £40,000,000, may I say that I welcome the statement that so large a sum is to be expended on the war? Why do I welcome the largeness of the sum ? It is because it indicates to me that at last the country has awakened to the necessity of sending an adequate army overseas - the necessity to maintain 100,000 men at the front. I cannot but congratulate the country on a statement of the kind, and I am glad to have this expression of the Government’s determination. At last we have a definite objective to work to in .connexion with the war. Why I wanted that definite objective to be stated in clear terms as a binding intention on our part many months ago was not because I felt it could be done at once, not because I felt that we could raise an army of 100,000 men by stamping on the ground, as some one has said, but because to put such an army at the front would require a reconstruction and expansion of our military organization. Had we begun with a definite objective like that many months ago, we should have been in a much better position to-day. However, we have now come to the conclusion that we must have this army in the field, and I suppose our organization will be expanded with a view to placing that army there, now that the recruits are flowing in more freely. All this, of course, requires a tremendous military expenditure, estimated,, as the Prime Minister said, at £40,000,000 for the year. That seems a large sum, and yet really it is a very small one. While the Prime Minister was speaking I figured out that our total outgoing for the year of £40,000,000 represents about one twenty-seventh part of the outgoing of the United Kingdom for the same period. It is quite true that part of that financing in the Old Country contemplates loans to the outside Dominions-, but, apparently, we are to be shut out from those from this time on .
– Loans- were made to all the Dominions.
– And the Allies, too. We were told in Mr. McKenna’s statement that £200,000,000 of the £1,095,000,000 was for loans to the Dominions and the Allies.
– To the end. of the next financial year, ending on 16th March.
– Quite so. It is quite’ clear that all our expenditures are out of hand, and it is so wherever war is being waged. The Prime Minister can tell us nothing regarding the general financial situation, though he hopes to make a balance-sheet and present the Budget a little later on..
– No Budget has ever been made so early in the year as this.
– I suppose the right honorable gentleman will confess quite frankly that he sees some difficulty looming up in regard to the Budget for the ordinary expenditure?
– This is only July.
-Let me go on.
– Do not suggest that we are late with the financial statement; it has never been made so early.
– The right honorable gentleman cannot have been listening. I am not complaining as to the lateness of the statement, but suggesting that where war is being waged expenditure is necessarily more or less out of hand.
– I am afraid I must agree with the right honorable member there.
– The right honorablegentleman has said the same thing himself in this House a number of times, and, therefore, should not quarrel” with me when I say it. The fact that these towering sums have to be provided, and that so much financial chaos meets us wherever we turn, provides an additional reason, I think, for prosecuting’ this war to a finish, and making the possibility of a recurrence of these troubles - financial and otherwise - impossible within the lifetime of any here. An inconclusive peace wouldbe one of the greatest tragedies that could arise as a consequence of this war.
– Death in preference to it!
– I am not so sure that it would not mean death in the long run, if we were to have only breathing time, so. that we might go at each other’s throats again and repeat the great tragedy that is now astounding the world. Better far to finish the job while we. are at it, no matter what its cost: may be, or how much we may be exhausted in the process. Remember that the more we spend, and the quicker we spend it, the easier terms we shall make in. the end, and the more favorable will they be to all concerned. I hope our Allies and we are not to bleed for nothing in this war-, for that would be an infinite pity in view of what has taken place.
– Do you think Germany will have anything left?
– In my opinion, we ought not to underrate German power even now, so far as her internal condition is concerned. I remember distinctly, at the outbreak of the war, one of the foremost financial authorities in Australia telling me, with complete confidence, that he did not think Germany could last more than three months - that she would be financially bankrupt by then. That was said by a man whose opinion to-day is entitled to the fullest confidence and respect; and yet he evidently misjudged the whole financial situation. When Germany is spoken of in this connexion, one salient fact in connexion with German finance should not be forgotten. At the outbreak of the war Germany not only issued notes, but she fixed the price of everything that these notes could buy, and in that respect may have been able to maintain an internal parity. I know there will be trouble later; but the mere cutting off of occasions for exchange, outside Germany, has had the effect of relieving Germany’s internal finances. Therefore, we should not . underrate the capacity of German finance. Germany can travel a long way yet, although I hope she will not have to go much further before she is beaten thoroughly and put into her proper place..
As I understand it, the loan the Government now ask for is imperative. We have been told by the Imperial Government that, for the immediate future, we must look to our own resources. I am rather glad than otherwise of that notification. Rightly or wrongly, I have felt, since the war broke out, that, while we were getting the money from Great Britain to pay for it, our aid or help was not complete.
Mr.Fisher. - May I say that the Imperial Government do not put the position so strongly as that. They have said that it would be very agreeable to them if we did do as suggested.
– That may be; but it is strong enough when we know the intimation comes through delicate diplomatic Imperial channels. We have now to look to our own resources, and, in my judgment, we are quite able to do so. It is difficult to get accurate figures, but it does not appear to me that a £20,000,000 loan is a tremendous difficulty, when we consider that our annual production reaches a value of £230,000,000, and that we already have in the Savings Banks Federal and State - deposits amounting to £95,000,000.
– But it would not be wise to disturb that.
– I do not suggest that it should be disturbed; but it an go to maintain the national credit when loan money is wanted for war purposes. In addition, the private banks hold £170,000,000. I know that this money is out earning interest,as it should be, but both sums form a reserve of credit which may be drawn upon for war purposes in the last resort.
– Does that sum include current accounts?
-Everything. I think these figures establish the soundness and solvency of our position as a nation, and, therefore, a loan of £20,000,000 ought not to make any serious inroad either into our real resourcesor into the money we need for ordinary purposes. I tried the other day to get figures which would show the actual wealth of the population of Australia, but I could not ascertain this, notwithstanding all the statistics prepared by Mr. Knibbs. The nearest estimate I could get was one furnished some years ago when discussing the amount likely to be available for probate duty in the various States. Mr. Knibbs, after a somewhat ingenious calculation, arrived at the deduction that Australia’s wealth might be set down at £1,725,000,000 sterling. That was in 1910. A solid slice may be taken from that sum, and a very considerable balance will remain.
– Does Mr. Knibbs give any indication of what portion of that wealth is or is not the working capital of the country?
– I suppose a great deal of it is.
– Practically the whole of it.
– Yes; but even if it is the actual working capital, it still enters into all the considerations that go to make up the credit and solvency of the country, the soundness of which, in the face Of this loan of £20,000,000,I am trying to establish; and I say that such a loan ought not to hurt us in any way,
The Prime Minister has done a good deal of financing out of his notes account; and has taken a good deal of credit for having done it.
– No, no. I have only tried to meet the situation.
– I think I have heard my right honorable friend say that we have had to pay no interest at all.
– Nor have we.
– That is all quite true; but for every note the right honorable gentleman has issued - and he has been issuing them very freely since the outbreak of war - an action which I am not going to criticise here - but-
– There is a limit.
– The honorable member has pledged himself on the back of every note, that later on he will redeem it.
– But he has not paid any interest for the money.
-I know that; but he has pledged the credit of the Commonwealth behind every note. I only want to suggest that as the right honorable gentleman himself finds that there is a limit to the value of the paper press - -
– Hear, hear!
– And that he has apparently reached “what he regards, if not the danger point, at least the point of caution-
– Hear, hear!
– And that he can hope for no more loans from that particular direction for the financing of the war-
– We have some little way to go yet.
– Does the right honorable member think that?
– Oh, yes.
– Then I express the hope he will not go any further under present conditions. In ray opinion, he is even now right at the danger point.
– That view is not accepted everywhere.
– I know it is not accepted by my right honorable friend; but there are other authorities which do accept it, and I would like to remind the right honorable gentleman that this matter is now causing grave concern to some of the best thinkers in the world. I mean the question of how far notes should be issued in proportion to the substantial assets behind. If the honorable member will look at the Contemporary Review, which is now on the Library table, he will find it stated by Professor Patterson, of the School of Finance and Commerce, in Pennsylvania, in discussing the question of tire issue of Imperial notes, that -
England has issued Government notes in return for a lien on bank assets, but has been gradually changing them into simple Government promises protected by a gradually increasing gold reserve which is now over 55 per cent, of the notes, but less than 40 per cent, of the total liabilities that have been created. Such a procedure is dangerous. In England it is suggested that the danger point was reached at 40 per cent. My right honorable friend says he has not got to the danger point at 34 per cent. Professor Patterson continues -
But it should be added that, on 14th April, the gold and bullion alone deposited against the 43.52 millions of notes was £28.5 millions, or over 65 per cent. In addition there were Government securities, and the balance at the bank. It is of little use regarding total issues to date. The crux is between the amount outstanding and the gold and securities at the bank to balance that.
I understand the Government has already made preparations for the issue of £2,000,000 more in notes in return for a small quantity of gold to cover the issue. By the time the Government has finished the transactions that are already projected, Commonwealth notes will have been issued on a 30 per cent, gold basis. Other authorities state that that is a long way below the danger point.
– Yes; but notes are our only liability; the Bank of England has other liabilities.
– I know that; but I am speaking of the note issue pure and simple. The point is that we may not hope to further finance the war from our note issue, and that we have now to go on to the open market, just as anybody else has, to get the funds we need. May I just for a moment refer to Germany’s position regarding the issue of notes? The figures for Germany, according to the Financial Review of Reviews, are very striking. According to this journal, on the 15th June Germany had issued from the Reichsbank alone notes to the value of £265,000,000, against which she had a gold deposit of £180,000,000. I understand that the German Treasury has also issued, through the various war loan banks, notes to the value of another £50,000,000. So that, on the 15th June, Germany had notes to the value of £315,000,000 - every one of which was inconvertible.
– Do you believe in inconvertible notes?
– I believe in having them inconvertible when it is impossible for them to be converted. One does not know what may take place in a time of national stress, when one is driven, as Germany has been driven, to these methods of internal finance; but what would” be Germany’s position if she had to do as the Allies are doing? How would Germany exist if she had to carry on an ocean trade and meet the liabilities that this trade would incur. She would be in a state of bankruptcy. So much has she been relieved by the absence of her outside commerce that she has been able to make her notes inconvertible in Germany, and by fixing prices has maintained these notes at their par value.
Our trouble is not merely with this loan.
– Has the honorable member a statement of the French situation?
– Not here ; but I am aware that the French situation is better than the German situation. In France they have a tremendous reserve of gold, and are doing their best to prevent its depletion. Every European nation is hugging its gold in a manner for which our Prime Minister does not see any necessity, though I admit that the conditions of Australia are not similar to those of Europe, where the national financing has to be done through one bank. The Prime Minister operates his note issue apart from the banks, and apart even from the Commonwealth
Bank, which I do not think gives it its best function; but he sees no trouble connected with the bringing down of the metallic reserve to about 30 per cent. In other countries they believe in making the reserve two-thirds of the issue, and more if possible.
– Does the right honorable member suggest that gold is the only security for the Commonwealth note issue?
– No. But when the pressure of the war is over, the Prime Minister may be required to redeem many million pounds worth of notes. To-day about £34,000,000 worth of notes have been issued, but for ordinary purposes a circulation of not more than £10,000,000 or £.12.000,000 is required, and when the war is over the balance will have to be redeemed. I am afraid that those who are supporting the Prime Minister will then see that there has been a kind of borrowing after all, and it seems to me that he will have to borrow to get gold with which to redeem his surplus notes. However, we need not worry much about that now.
I should like to look for a moment at the general financial situation. The proposed loan is only for the financing of the war, and has no relation to our incoming and outgoing for the ordinary purposes of government. The Prime Minister very astutely, and very wisely, confined himself strictly to war questions connected with the proposed loan. He proposes to borrow £20,000,000, but he has not told how he will make good the other £20,000,000 which he will need to cover the war expenditure of the year. He has said that he intends to impose further taxation. If this loan were all that Australia had to make provision for, we could arrange for it without any trouble. It will mean an interest charge of less than £1,000,000 a year, and I do not think that any one would say that Australia could not find that amount in addition to her ordinary expenditure. But on top of the war there is the trouble caused by the drought, and the burden of the direct taxation for ordinary purposes. We often imagine that Australia is a very lightly-taxed country, but when I compare it with other- countries, I am not so sure that she is. We are now threatened with more direct taxation, and I do not suppose that any of us will cavil at it if it is seen to be necessary and is imposed equitably and put on a proper basis. We must stand up to the war, whatever the consequences may be; we have to see it through. If we cannot borrow, we mUst pay further taxation, and we are. concerned only with the discussion of the best and most equitable methods of raising the money that is needed. Taxation for war purposes ought to be placed fairly and justly on the back of every man in the community, no matter how high or how low his position, financially or otherwise. In the imposition of a war tax, above all other taxation, we should do substantial justice, and every man should be made to stand under the burden to the extent of his ability to bear it.
– There is not a man in Australia who desires to .be treated as a pauper.
– I think that is so. A wa r tax is the one tax to which every one will willingly subscribe, if you get it into the heads of the people that they are being dealt with fairly and squarely. The other day we were told of the gigantic burden of taxation that the wealthy people of Great Britain have to bear. The income taxation and super-taxation of one kind and another imposed in Great Britain will produce this year about £103,000,000. A proportionate contribution by the people of Australia would be a little over £11,000,000, but I find that for the ordinary purposes of government .we pay almost this amount in taxation now. According to Mr. Knibbs the revenue raised by the States from direct taxation in the year 1913-14 was: Prom probate duties, £1,345,529; from stamp duties, £1,122,929; from land tax duties, £56S,S04; from income and dividend taxes, £2,869,005, making a total of £5,906,267. Since then the Premier of New South Wales has levied an additional £1,000,000 from direct taxation, and- the Premiers of Western Australia and Tasmania have also increased the direct taxation of their States, so that it is safe to say that the State direct taxation now amounts to over £7,000,000 per annum. In addition, £3,000,000 is obtained from the Commonwealth probate and land taxation, and therefore, for the ordinary purposes of their Governments, the people of Australia contribute altogether over £10,000,000 from direct taxation, which. is not so much less than the British people are paying in direct taxation for war purposes. We have not yet begun to tax for war purposes.
– We shall soon begin. That is when a financial statement will have to be made.
– Yes, and I trust that the Government will endeavour to impose its war taxation fairly and equitably on all classes if they must do so.
– Does the honorable member object to exemptions?
– I cannot say just at the moment what I would propose; but if the statements of Mr. Knibbs are anything like accurate, the wealth of Australia is about £1,725,000,000. Assuming it to be only £1,000,000,000, a general wealth tax of 1 per cent, on wealth would produce £10,000,000 a year for war purposes. I am not suggesting this taxation; I am merely thinking aloud, in the- endeavour to elucidate the general problem of direct taxation. I have always been in favour of a general wealth tax, but I know how difficult it is to collect it. I should prefer to see the Commonwealth confine itself to a general wealth tax rather than see our direct taxation as at present. The more you impose income taxation the more the anomalies you create. A uniform Commonwealth income tax must bear unequally upon the citizens of Australia, because they are treated differently in different States. For instance, in New South Wales a super-tax has to be paid in addition to the ordinary income tax, and the Victorian citizen pays much less income tax than is paid by the citizen of New South Wales. The scale and the range of the direct taxation of the States are so great that any uniform additions of direct taxation must create more anomalies than they cure.
Mr.- Fisher. - Has the right honorable member in his mind the taxation of all wealth ?
– I do not know enough of the factors to say now precisely what I would suggest. One can only take rough, broad figures.
– I suppose there are 1,000,000 people possessing wealth in furniture, &c, to a considerable amount, but that form of wealth cannot be taxed.
– The right honorable member is quite right, and many things perhaps would require to be excluded from even a straight-out wealth tax. However, the point I am making is1 that I hope that whatever taxation is proposed, the obligations placed upon us by ‘ the war will not be laid upon a few shoulders; nor do I think we should! be asked to shoulder the whole of the obligations in a few years. We are fighting to preserve this country for those who will come after us, and they have a right to take a share of the burden. That is all I am suggesting, and if the burden be extended reasonably and equitably over the range of those whowill gain the benefit from the fighting we are doing to-day, we will have approximated to justice as nearly as possible.
– Our sinking fund for all loans is £ per cent.
– Is that sinkingfund to apply to this loan ? I understand that the loan has a currency of ten years.
– The Act provides for a sinking fund on all loans.
– Will it apply to this loan ?
– It will have to apply unless the Act is amended. If the market is more suitable in ten years’ time, weshall endeavour to get the money at a. lower rate, but the £ per cent, sinking: fund will apply.
– I am not surethat that rate of sinking fund is notgoing to the other extreme. A warloan does not rest on the same basis as an ordinary loan. Speaking economically, this is a loan for unproductive purposes. We shall have nothing to show as an asset for the money after we have spent it, Themoney will have been blown away, and the country will be poorer in a» economic sense for its having beenspent. Nevertheless, it is expenditure that may be regarded as insurance,, and I am not sure that the rate of sinking fund attaching to ordinary loans should apply to this one.
– Does the right honorable gentleman think the sinking fund should be higher ?
Mi-. JOSEPH COOK.- I think the sinking fund of a war loan should be more than per cent., but what the rate should be I -cannot at the moment say..
The Treasurer is faced with difficult and delicate financial problems, and I am urging that he should have regard to the needs and difficulties of those who will have to pay the Federal taxation as well as the State exactions, and that we should treat them as individual units carrying “the whole burden of taxation both by the States and the Commonwealth, and adjust our taxation as far as possible so as not to increase unfairly the total burden they will have to bear. I have already said that war loans deplete the national stock, because we have no assets for them. In .addition to that, 100,000 men have been withdrawn from production; therefore, while our outgoing is increasing immensely, our income must be decreasing because of the number of men who are withdrawn from production. I read a statement that in Europe this year there will be 2,000,000 less men engaged in the primary industries than were engaged last year. That fact must make a tremendous difference both in the value of commodities and in the wealth of the various countries that have to support those workers in their unproductive labours. There is less production, therefore, with correspondingly increasing obligations - less income and larger outgoings. These facts point .with warning finger to a duty that is obvious and imperative.
First of all, we should try to increase our production by every and any means, and we are fortunate in this respect, inasmuch as while, the enemy is losing trade, we need not lose any. We. can pick up the trade which the enemy has lost, and many opportunities for doing so are presenting themselves. Thanks to the British Fleet, the seas are open, and I hope they may continue so until in the end victory crowns our efforts. But we should do more than endeavour to increase our production:. We should try to reduce our outgoing in a reasonable way. There is a duty, which is being stressed by various newspapers, and properly stressed, that there shall be individual economy as well as national economy. There are plenty of luxuries of which we could rid ourselves, and be the better for their loss. When America was passing through a financial crisis, some years ago, and was letting out some of the wind and water which had brought her to a stand-still, a great many of her people suffered, and I remember reading a, statement that the doctors were complaining that their occupations were £one. Simple living on the part of the people had abolished the doctors’ bills, and I- ‘am not sure that we could not deny ourselves in these times in many personal ways.
– Two meals a day.
– No, thanks; not for me. That is good enough for the King, no doubt,, but I shall not follow him in that respect. There are many ways in which we could make our meals simpler, and lop off a great many of the extras and luxuries in which we are still indulging, notwithstanding the continuance of this world tragedy..
We should also save nationally as far as we possibly can. Before the Government impose fresh taxation and borrow these huge and towering sums for war purposes, they are under the necessity of undertaking a rigid and stern review of every shilling of our expenditure.. I hope the Government will betake themselves to that unpleasant but imperative duty, shear down our expenditures wherever it is possible to do so, and save by other means also.
– The honorable member does not mean retrenchment on reproductive works ?
– I think there might be a stricter inquiry than there is ordinarily as to what are reproductive works. In any case, the test ought to be, not whether a work standing by itself is reproductive, not whether it would be advantageous to carry it through, and not whether we should all like the work done, but whether it is absolutely necessary. That is the test we should apply to all proposals for additional expenditure at the present time, and I believe that while the war lasts we can shear immense sums of money from our ordinary outgoings in that respect alone. In other words, waste at the present time is nothing more nor less than wicked profligacy.
As to the loan itself, the interest to be paid is 4£ per cent. Whether that is enough to maintain the loan at par remains to be seen. I think we are very fortunate in being able to float war loans as we are doing in the present circumstances. This rate of 4^ per cent, is the rate being paid in the Old Country and in France. Let it be remembered that our standards of value are a great deal higher than those of France or the United Kingdom, and yet we are raising- money at the same rates as those countries are paying. Surely that fact speaks eloquently of the soundness of our financial position, and of the patriotism of the people who control Australian nuance, and more eloquently still of the value of the Imperial connexion to us in regard to the war we are engaged in. I take it that the Prime Minister has made all inquiries and has satisfied himself that the loan will not fall below par.
– The people must subscribe at par.
– But suppose that they do not.
– We will all put a bit in.
– I am expressing the hope that the right honorable gentleman has a guarantee that he will get the loan at par. It is a great thing to be able to start off our borrowing in this way, upon a basis which is so advantageous to us, compared with the rest of the world. It was said when we initiated Federation that the Commonwealth would get better credit than the States. Whether that be so or not, we shall not quarrel with the credit of the Commonwealth to-day if this loan be a success, having regard to the fact that we shall be getting the money for the same purposes as the Imperial Government are raising their loans, and at the same rate as is being paid in England and in France. In this respect we are more fortunate than a great country like Russia, whose last loan was floated at 5^ per cent, with a currency of a few years - I think until 1921. After that year the rate of interest will be 5 per cent., or the subscribers will have the option’ of redeeming the loan and taking the money again in 3f)20. It seems to me, therefore, that we may congratulate ourselves on the price we are proposing to pay for this money, although I notice that, in addition to the 4-i- per cent., we are making the subscribers a present of accrued interest for about ten weeks for this half-year.
– That is equal to Is. 6d. more.
– Whatever the difference be, if we can get this loan floated at 4^ per cent., and maintain parity, we shall have done a good stroke of business for Australia. I only hope that the right honorable gentleman will see that the terms and conditions and facilities for subscribing are made as easy as possible for the bulk of the people of .Australia. I should like to see the loan spread over the bulk of the community. I should like to see the trade unions investing some of their money in it.
– The law will not allow them to do so.
– I think they ought to be allowed to do so. I should like to see the friendly societies investing some of their money in the loan. Here is an excellent investment for them - I dare say a better investment than many of those they are privileged to make now. If the loan can be distributed over the whole range of our social life, it will be on the broadest, best, and most secure basis we can get. I am glad to see that the right honorable gentleman is making the denomination such as will make it available for this purpose.
I have spoken of taxation, and I merely wish to say one word more in that regard, and that is that in connexion with the war equality of sacrifice should be the essence of any taxation imposed. Every man, right from the bottom of the social scale to the top. of it, should be taxed in proportion to his ability to bear.
– Hear, hear! But he must first have a living wage.
– It is difficult to say arbitrarily what is a living wage in war time; it varies and. fluctuates very considerably at such a period ; but I am merely laying down principles, leaving the application of them to the Government. Above all, I hope that in this war we shall not impose anything in the shape of further taxation which will have the resemblance of punishing success, or be anything in the nature of penal taxation. If we avoid doing this, no one can complain. The task is not an easy one, but the obligation rests with the Government. I hope, also, that posterity will take its fair share of this war obligation.
– The principle of equality of sacrifice is that if one person is earning £10 a day, and another person is earning £1 a day, both should give a day’s pay.
– I think that if the right honorable gentleman applies such a rule-of-thumb principle, he will find many other factors tending to make inequality of sacrifice. He, for instance, will not be taking into account the invested wealth that individuals may possess. In merely taking two citizens at work, with, nothing to start with, his illustration may be a good one; but there are plenty of other factors to be taken into account in laying this burden equitably on the shoulders of the people. I close my remarks with these observations: We are entering on strenuous days - we are already in the midst of them - beset with difficulties on every hand, and the only thing for us to do is to push through them with as much energy and determination as it is possible for us to display. The sooner the war is ended the better for us financially, as well as in every other respect. Therefore, I welcome this large expenditure; I could wish it were larger if it would indicate that even more men were proceeding to the seat of war. Men and munitions are needed to end the war, requiring the expenditure of a tremendous amount of money; and the more we spend - always supposing it to be spent wisely and economically - the more efficiency we shall have, and the more efficiency we have the sooner this war will be over. I have already said that not to fight through, and to conclude the matter prematurely would be bub perpetuating the tragedy we now have. There is no need for fear. We have only to call upon the resolute determination of this great country, and if these burdens are laid equitably on the people, they will respond to a man. As for the future, we can trust to the initiative of our people, and the resources, as well as the other vested interests and sentiments of the great land in which we are pleased to dwell.
.- The Prime Minister, in the course of his remarks in introducing the Bill, stated that -
We were performing a desperate but patriotic task, and it was the duty of the Government to set out to fulfil it with the utmost expedition.
Apparently, the right honorable gentleman had weighed these words well, because he fortified himself with a prepared document from which he quoted them. The Leader of the Opposition, in the concluding remarks of his speech, said thai; -
These were desperate days, and we were beset with difficulties on every hand.
Another remark made by the Prime Minister during the course of his speech was -
The Australian people are at their best in dealing with big problems.
This Parliament has been in session since October last with a brief adjournment, but we have had no complete statement, of our financial position, or as to how we are to meet it either immediately or in the future.
On the 14th October last, when the subject of the grant of £100,000 to Belgium was” before this Chamber, I voted against the proposal, on the distinct and specific ground that we had had no statement of our financial position ; not because I was lacking in sympathy with the urgent conditions of the Belgian people, but. because even then I considered that we should have had a free and frank discussion, possessed of every information in the hands of the Government, and that this Parliament should even then set about making the financial arrangements which every one must have seen would have to be made to meet the crisis bound to arrive at some time or other.
Again, on the 21st May of this year, I urged that we should have what I call a non-party meeting of some description in thi6 House, where, as one important matter becoming increasingly urgent, the financial situation might be thoroughly discussed, canvassed, and dealt with by the best ability and experience, and in the light of the best information, that this whole House could bring to bear on the subject.
The Prime Minister has stated that he has had the best advice obtainable. Presumably he means that he has had the advice of those connected with ‘ banking and financial institutions, but there certainly has not been a conference of the public men of this country elected by the people to deal with the matter. However sound the views of a few outside persons may be in dealing with a situation of this kind, the value of consultation, conference, and advice in a national assembly should not be under-estimated.
The way in which to deal with a difficulty is not to postpone it, but to face it and grapple with it. Difficulty avoided is difficulty accentuated. In “this matter we are merely following circumstances. We are not moulding circumstances. The National Parliament is the creature of circumstances. As these desperate circumstances arise we are compelled, from sheer desperate and urgent necessity, to deal with them in some piece-meal, unrelated, unscientific way. Surely to foresee difficulties and to face them as a whole, to work out a solution, not of some temporary difficulty, tout the whole financial problem which is developing here and all the world over, we should discuss matters comprehensively. This would enable us to face these crises as they arrived with principles and machinery thoroughly considered and adequately prepared.
It is quite evident that the whole of the credit of Australia is involved at the present time. The “position of the States, as well as that of the Commonwealth, is involved. It is announced that the Imperial Government have notified Australia that further loans cannot be raised in London. The embargo applies equally to the -States and the Commonwealth. As a matter of fact, it is nearly twelve months since the State Governments found that they could not go on the London money ‘market for the purpose of successfully negotiating loans, and the Commonwealth, in co-operation with the Imperial Government, had to come to their rescue ; and the fact that the Commonwealth is also not able to raise loans in London does not render any less urgent the position of the States in regard to loan moneys.
When the Prime Minister was met with the interjection as to whether there had been any consultation with the States as to their position, he replied that it would be impossible to appeal to the local money market for loans for other than war purposes. That means that, in the opinion of the Prime Minister, it will be impossible for the States to appeal to the Australian loan market for loan moneys. Apparently the States are covered by loan moneys until about the end of November next. ‘ Happily, £17,000,000 of State loan moneys falling due this year have been provided for, but at the end of November, when the arrangement entered into between the Commonwealth and the Imperial Government on the one hand, and the Commonwealth and the State Governments on the other hand, has run its time, the States will find themselves again in difficulties. Surely the time for considering those difficulties will not be the middle of November; surely the time is the present.
Every day from the meeting of this Parliament to the present has been the day of salvation in regard to our having a definite scheme to meet the financial storms appearing on the horizon. To-day is the day of salvation. The day of salvation will be every day which passes,, until it is properly and systematically dealt with.
The Prime Minister states that he has not had time to consult with the States; but it is -a matter of urgent necessity thatthe States should be consulted at theearliest possible moment. If it has not beenpossible to have this consultation beforethe introduction of the Loan Bill, thereought to -be an intimation that the Stateswill be consulted at the first convenient opportunity that offers.
– What could we have done, supposing that we had met i
– No one knowswhat you could have done until you met and put your heads together. I am not prepared to give the final word. But thedifficulty exists, and will increase.
– About what”?
– The first thing would be to meet, and to recognise the difficulties that f ace us. The Prime Minister has told us that moneys cannot be raised at the present time except for war purposes. If that be so, the position of the State Governments is desperate, because they are dependent upon loanmoneys.
– That is our position.
-Apparently, then, both -governing authorities are financially embarrassed.
– We must raise money for war purposes only.
– That is so, certainly; but the States must also shortly raise money, and if they cannot go toLondon, and have to enter into competition with the Commonwealth on the Australian market, we are at the beginning of a very serious position. To put thisoff until November, when the desperateness of the situation is driven right hometo us, when the crisis has arrived, is not the proper way; the proper way is torealize that the trouble is coming, and deal with it now. If, through loan moneys being suddenly cut off, State operations are curtailed, the resultant distress will be partly upon our shoulders.
The States have control of £96,000,000’ in the various Savings Banks, while the Commonwealth has £6,000,000 in its own Savings Bank. If there is competition between the Government authorities for loans, we shall have one bidding against the other; indeed, we- ‘have seen that already, because the Savings Bank of Victoria has increased its rate of interest, and it is quite plain that that is for the purpose of preventing money being taken out of the Savings Bank and invested in the Commonwealth loan.
– I would not say that.
– It is obvious. “The interest was nob raised by the Victorian Savings Bank until this Commonwealth loan was announced.
– The State .Savings Bank raised its rate of interest when the Commonwealth Bank was established.
– Quite so; that showed the State to be apprehensive of the Commonwealth competition for money. Now an effort is being made to prevent Savings Bank money being invested in the Commonwealth loan. The States are -apprehensive to-day. To-morrow they will enter into competition for loans. The public will suffer, and the money-lenders wax. fat.
– That last statement can not be correct, because interest at 3^ per cent, would not keep money from investment at 4$ per cent.
– But the money in the Savings Bank is ab call.
– Due notice must be given.
– Only a matter of a few days.
– I am not acquainted with all the details in all the States; but I know that in New South Wales a depositor in the Savings Bank can get his money at any time.
– it is not safe to assume -that money cannot be raised in London.
– But we have a fair indication when the Imperial Government sends us a notification that they cannot, in their Imperial loans, provide for loans for Australia.
– They did not say that; .and I was careful not to say that.
– Those are not the words used. What they really say is that they would be glad if we would take the responsibility on our own shoulders. That is the polite language used between Governments. To the average man in the street, however, it means-
– The overdraft is stopped !
-. CATTS. - That is the way to put it; we are told that we must put -our own financial house in order, and provide for Australia ourselves. The Imperial Government would never have sent that communication had there not been some imperative reason.
– The reason is, of course, the war.
– Quite so, and consequently the tightness of the money market in Great Britain, caused by the necessity for the raising of large amounts by the Imperial Government. This war has cost the Imperial Government £1,012,000,000 already, and it has cost Great Britain, France, Russia, and Italy £4,500,000,000.
– Where does the honorable member get his figures from?
– I take the figures from a leading Age article of Saturday last.
– What does the Age know about ib?
– I take it for granted that the Age verified its figures.
– How could the Age verify the expenditure of Austria and Ger-‘ many ?
– I have not referred to Austria and Germany; neither did the Age refer to those countries.
The financial position of Germany is totally different from that of the Allies. The geographical situation enables Germany to make an arrangement for a currency of its own within its own borders during the war ; and it is quite apparent that both Germany and Austria had made such arrangements. They have nationalized public credit, currency, plants, material, and physical exertion. The case of the Allies, however, is quite different. They are under the necessity of trading with neutral nations, and with each other. This does not permit of the same easy arrangement in regard to currency. There is no comparison between the two financial positions. The Allies have to redress trade balances with neutral countries and among themselves. To do so with gold is impossible. .To do so with goods ‘is impossible with present industrial dislocation. And credit has its limits. The danger facing the Allies is financial exhaustion, not shortage of men. I should not say that Germany is bankrupt,’ while she has raw material within, and a proper arrangement as to manufacture. ‘ Her currency will have nothing to do with her position until it comes to trading with the other nations of the world; then Germany will find herself in a difficult position, and her emergency currency at present in vogue will not ava.il her with other countries.
There has been a great deal of talk about mobilizing, organizing, and utilizing the resources of Australia to their utmost in this time of war. It is generally admitted that that should be the object aimed at, but it does not appear to have been found necessary - although this is the very basis - to nationalize or socialize the public credit of Australia. This is left to be operated by the States and the Commonwealth separately - to be operated by private banking corporations separately. We are to utilize credit under the competitive, not under the cooperative, system.
It is regrettable that the Labour party’s programme in regard to the national bank was not given full effect to. The scheme I am alluding to was that prepared for the establishment of a national bank, and agitated for a number of years by the honorable member for Darwin. In April, 1908, that scheme was printed and issued as a parliamentary paper, and in July of that year, at the Brisbane Labour Conference, there was a notice of motion on the business paper practically for its adoption. That Labour Conference, at which I was present, did adopt the scheme, and included it in its fighting platform - that was a Commonwealth Bank of issue, deposit, exchange, and reserve. I do not say that the Conference or the party were bound in every detail to the scheme of the honorable member for “Darwin, but they were committed to the fundamental basis and broad outlines of the scheme. When, however, we came to the establishment of the Bank, it was done only in a piece-meal fashion.
We have established the note issue as a separate and distinct activity of the Government, whereas it should never have been separated from the Bank. The time is now rotten ripe for carrying out the Labour party’s platform in regard to the National Bank, which should be the bank of issue, deposit, exchange, and reserve - the great reserve bank of Australia.
– Hear, hear! It should be financing the States now !
– If the scheme promulgated by the honorable member for Darwin had been carried out, and the bank had been jointly owned and controlled by the States and the Commonwealth, the Commonwealth, at this crisis, would have been able to .finance whatever loans are necessary to carry us over our difficulties. The revenue of the States amounts to nearly ?41,000,000, and that of the Commonwealth to ?21,000,000, or a total revenue of ?62,603,627; and that volume of money could now have been passing through the Commonwealth Bank. The municipal and other local governing authorities in the various States depend very largely on the directions of the State Governments; and they also could have been doing their business through this Bank. This volume of business would create trading balances which would enable extensive credit or loans to be issued. Commonwealth and State loans could then be arranged through the Bank.
The whole position is illustrated by a statement made by Senator Pearce in the Senate on Friday, and reported in the press of last Saturday. Senator Pearce is reported to have said -
The Government intended to submit proposals for a loan of ?20,000,000 for war purposes. Arrangements were being made that would insure the success of Australia’s first war loan. It was entirely a war loan. It was satisfactory to know that at least threequarters of the money raised would be expended in Australia - Australian material and Australian people. By placing the loan in instalments when the first lot had been received and expended, that money was still availablein Australia for investment. The money would not leave the Commonwealth, but would btcirculated in the country and among the community. The Commonwealth, therefore, would be in almost as good a position to face the second and third instalments as it was to face the first. . . . The position was weakened only to the extent of the money spent outside the Commonwealth.
Senator Pearce went on to give details showing that only a very small amount of this money would not be spent inside the Commonwealth.
The Adelaide Register, a Conservative paper, discussing this loan on 15th July, said -
A loan for purely local objects and local expenditure would simply be circulating money in. channels whence it would revert back to its original source.
By reason of the fact that this loan is being raised in instalments of ?5,000,000, when the second instalment is required,, most of the original money will have found its way back into the banks, and will be used in the second instalment.
The Commonwealth itself, through the Commonwealth Bank, ought to have been in a position to finance all the loans that it would have been necessary to raise for the conduct of the war and for the States; but the actual position is such that the private money lenders - the private banks - do all the business and reap all the profit. Tor the money lenders of the country it is a grand thing that there is a war now and again.
I can only express my own opinion in this matter, but there is, under our present system, no way in which a member can insure that notice will be taken of his remarks. Speeches made by members of Parliament are merely uttered and put down as records of their views. It ia quite at the option of the Leader of the Government whether any notice whatever is taken of them. The only way to achieve anything in the nature of a definite objective is to propose some kind of a motion. Then every member of the House is compelled to “ toe the mark “ and to vote. Such a course, however, may mean a challenge to the very existence of the Government. If a Minister refuses to accept any such proposal, all members can do is to range themselves in one camp or the other. Under such circumstances, it is ours not to reason why, it is ours but to do or die. As I have said before during the past few days, that is the result of our parliamentary procedure. It has nothing to do with the party machine. It is the principle of parliamentary procedure that prevails on both sides of the House.
With such problems of outstanding importance in front of us, the Government should invite the whole of the intelligence, experience, and ability of Parliament to help. We should have all the cards on the table. All the information at the disposal of the Government should be placed before Parliament, and members should state their views upon that information. An effort should be made to ascertain the mind of the House as to the best course to follow. If any matter of party principle arose the parties could arrange themselves oil their respective party sides, but no party principle is involved in this matter-
– There ought to be no party principle affecting a question of public finance on an occasion like this.
– And where there is no party principle involved, the whole House ought to be given the opportunity of threshing out the ways and means of dealing with it. This would especially apply to what is admittedly a desperate and urgent situation.
– That would be an innovation.
– It would be an innovation; but precedents, ceremonies, and practices do not concern me at all. I want to see the most effective way of dealing with a thing adopted ; and if the most effective way means the turning upside down of every precedent in the rule-book let it be done. If necessary, wipe out all precedents. We should then be able to start afresh and deal with the matter before us in an effective way.
– The honorable member is just realizing the original intention of Parliament.
– If the honorable member would do me the honour to look at the remarks I made last Thursday-
– I heard them.
– He would find that I dealt with that situation then.
– He was right on the spot, too.
– My remarks were right on the spot, no matter which Government was in power. It is a matter of regret to me that the brains and ability of this House are not being more fully utilized in dealing with the situation, and I feel it is my duty to press forward the views I hold in this connexion each time the opportunity is given me.
– I should strongly advise the honorable member to come over to this side. He will find that we always think that.
– I am afraid my views are too Socialistic to enable me to range myself on the same side as an extreme individualist like the honorable member for Parkes. I hold nothing in common with him on questions of political economy, and it would be impossible for me to associate myself with the party of which he is a member.
I believe thoroughly in the objective of the Labour movement. I do not use extravagant or extreme language, but I am prepared to go a long way further than many people who do use extravagant phrases. At the same time, I can see no prejudice to the principles I believe in, or to the platform or the objective of the party to which I belong, in my asking that, upon matters of a non-party character, upon questions wherein the principles of the party are not at issue, we should make use of the best brains and the best ability that the electorates have sent into this National Parliament.
.- I had not the privilege of hearing the introductory speech made by the Treasurer upon this Bill, and I shall have to deal -with the Bill as it stands alongside the prospectus which the Treasurer has been good enough to circulate. I gathered from the remarks of the Leader of the Opposition that considerable time has been devoted by the head of the Government to questions outside the scope of this measure - to alternative questions of raising extra revenue by means of taxation. In that there is a very fruitful field of inquiry into which one might be tempted to embark in connexion with a Bill of this kind; but I take it that the occasion is not appropriate. It seems to’ me that the questions of raising loan money and of adding to the permanent revenue strength of the Government are separable, and ought at the present time to be kept separate. If we read the press communications aright, the Prime Minister will very shortly give this Parliament the opportunity of deciding upon the recommendations of the Government on questions of taxation, and then we shall have the opportunity of going into the whole matter. Another field upon which I hesitate to tread is that alluded to by the honorable member for Cook in many of his very striking and forcible utterances. The question of international finance, of how far Germany or Austria is capable of self -sustenance during this critical time, is surely not a question for us to consider, let alone to decide. It seems to me that the issue before us is narrowed down to a question as to whether the Government deserve the support of Parliament in their proposition to raise, by means of bonds or inscribed stock, the sum of £20,000,000 in one or more stages, and on that question I beg leave to speak for a few minutes. I agree with the honorable member for Cook, if I may say so, before coming to the subject-matter of the Bill proper, in his view that it is time we had a complete statement from the Treasurer regarding revenue and expenditure. Members on both sides of the House have exercised considerable restraint in permitting the right honorable gentleman who presides over the Treasury to take Iris own time and hour for the consideration of questions of finance. It is plain to us, especially those of us who have watched the preparation of Budgets in other spheres, that this is not the time to expect - at all events before we rise, if we intend to rise within the next fortnight - anything in the nature of a full Budget for the year we have just entered upon. I think it would be a mistake to attempt such a statement. But a pre-Budget statement, giving in broad outline a review of the year just concluded, and an allusion to the general prospects of the year upon which we have now entered, ought to be given before we rise, and I hope the Prime Minister, who is now, unfortunately, absent from the chamber, will hear from his colleagues that this request has been put in quite a reasonable spirit, not with the object of embarrassing him in the discharge of those heavy financial responsibilities that hang around his shoulders at the present time, but with the desire that we should discharge our consultative obligations faithfully. We are sent here to control the affairs of a united Australia. We cannot control them if we sit in darkness. We cannot, by merely nodding our heads as each financial proposal is brought along, be held to be discharging our obligations to our constituents. I, for one. would like to hear from the Prime Minister such a statement as he may be able to give us, at least before the adjournment.
– Will that statement not be made when the taxation proposals come forward ?
– If we are to get it on the taxation proposals, well and good; if not, the head of the Government should select his own opportunity, with the complete concurrence of both sides, to give us the information we desire, and rightly desire. I read this Bill to be a proposition put forward by the Government to raise within Australia for the first time in her history the sum of £20,000,000 for war purposes, either by the inscription of stock, or by the issue of bonds, or tern- porary vouchers for bonds, in various multiples clown to £10, and I rise to support the proposition. It is. sound finance for the’ Government to come along, and recognise Chat they cannot be expected to finance all the requirements of this extreme war period, either by borrowing from the older sources of loan in .England, or by the placing .of extra taxation on our own people. It was plain to many of us that the enormous obligations of the .British Chancellor would .shortly lead him to .indicate in some ‘considerate way, that Australia should do something -of this kind for herself. It was inconceivable that we should rely upon London alone for our .financing during this war period. Tine .question is pertinent whether .the right time for this -operation has arrived, and, if so, whether the right (means are being employed by the Government. .In my opinion, Ministers have managed to obtain very skilled advice, judging by the terms of the prospectus and the general outline <of (the Bill. To raise .£20,000,000 one sum would have been practically .impossible, or at least would have led to the dislocation of important financial interests lying -at the root of the employing and industrial activities of -the country. Therefore the Government proposes to test the market by asking, in the first place, for a fourth of the whole amount required, without -underwriting, and offers’ terms attractive to the ordinary investor. If we project our minds back to the conditions ‘existing before the war, we know that this loan would have been regarded then as the most tempting offer ever made to investors, and to the thrifty classes of the community.
– It is a double giltedged investment.
– Yes. There are, however, some points regarding it about which we ought to have information. It seems wise to assure intending investors that the interest paid to them will not be charged with any State or Federal income tax. Whether the assurance regarding immunity from State taxation has been given after consultation with the authorities of the States, or is based only on a knowledge of the legal position, I do not know., as I did not hear the Treasurer’s remarks on the point.
– No arrangements have been made with the States.
– Apparently the Government relies on accepted interpretations of the law fox its assurance that interest from the loan will not be chargeable with .a State income tax.
– The Prime .Minister has been in communication with all the States.
– I suggest for the consideration of Ministers -that if there be the slightest difference among legal authorities in this House as to the value of the assurance, relying only on the interpretation of the law., statutory assurance should be obtained at the earliest opportunity from the State Parliaments.
– Suppose they would .not give it, what then?
– Then we must rely .on tour interpretation of the law. 33ut it ia surely in the interests of the States that the loam should ‘be successf ul. The hon.orable .’member for Cook has pointed out that there are State interests which clash with this proposed operation. That is true. But at is not to the interests of any ‘State to have the loan fail, because, if Australian credit is not equal to the demand made on it now, it is not likely that the governing authorities of any .one part, of Australia would sg-et better treatment fr.om the investors than the Commonwealth authority had received.
– The State ‘Governments a-re fairly selfish.
– They, like the National Government, have their own interests .and their obligations to the people for whom they act. Although the clash of interests has brought about some display of selfishness and conservatism, there is now.. a new spirit abroad in regard to financial and constitutional matters, and a general desire to co-operate. Another point to which I would draw attention is .this.: We are not sure that income taxation, is the only form of taxation to which the bonds, or the interest paid .on them, may .be subjected. I think that in the prospectus a distinct assurance should be given to the investing Public that no wealth tax will affect this investment.
– Would that be right ?
– If we guarantee freedom from income taxation, State and Federal, but not freedom from wealth taxation, the fear of a .Federal wealth tax may militate against the success of the loan. This is the first time in the history of our country when a loan of any size has been proposed without .underwriting., and it is for Ministers to consider whether it would not be advisable to give to the investing public the explicit and unmistakable assurance that the loan will be free from taxation of all kinds.
Sitting suspended from 6. SO to 7.1/6 p.m.
– Before the House adjourned for dinner, I was generally supporting the measure before the House, and alluding more particularly to the guaranteed immunity from taxation which is embodied in the first paragraph of the prospectus. I was suggesting the application of a wider form of that guarantee to insure the success of this Joan. I do not think I need elaborate that point any further, but will proceed to two or three other matters that seem to me worthy of consideration. Further down in the prospectus there is the statement, “ A full half-year’s interest will be, paid on the 15th December, 1915,” and reading onward to the mode of demanding instalments in connexion with the loan, this phase opens up : Applications for the loan close on the 31st August. The first instalment of 10 per cent, is due on the date of application, 15 per cent, on the 15th September, 20 per cent, on the 15th October, 25 per cent, on the 15th November, and the balance - 30 per cent. - on the 15th December, so that over a long period during the six months for which interest is guaranteed these graduated instalments extend, with the result that for two months of the half year for which interest is fully paid no money at all is lodged. By the end of the third month, 15th September, there is only 25 per cent, of the loan paid up, by the end of the fourth month 45 per cent, and in the last two months the balance of 55 per cent, is paid. Broadly speaking, on an approximate calculation, the Treasurer will have possession of the whole £100 for only two months out of the six. That is to say, he will pay full interest for six months, and have the use and enjoyment of the money for an average of two months. This is the problem generally referred to as accrued interest in the flotation of all loans. But I do not think that I know of any case - and I speak as a supporter of the Bill and the loan proposition - when so vast a dividend in accrued interest has been given to the investing public as this proposition means.
– It makes the loan much more attractive to the public
– It does. Those terms would make it appear as if the Treasurer had been guided by the very skilful external advice which I am glad he has had the courage to avail himself of. I am not aware of the source of that advice, but it does seem as if it has been tendered somewhat in the interest of the lending fraternity. The effect of this proposition is that for two months out of the six months- we enjoy the money, and we pay interest on it for the whole six months. For the first six months this money is going to cost three times what it will cost annually after that date? That is, it is going to cost the Treasurer three times 4i per cent, for this period of beneficial enjoyment between the 15th June and the 15th December. That is a huge and unreasonably high rate of interest to pay as a bonus to the investing public in the shape of accrued interest. Another calculation may be put in this form : If we were not paying accrued interest, but were paying interest as the instalments fell in, the money would cost at the rate* of 4 1/2 per cent., whether we were enjoying it for a long or a short period. But as we shall be enjoying it for only a third of the period we are giving away interest at the rate of an extra 3 per cent, per annum.
– It would be about £300,000 for the six months.
– I have not worked out the total ; 3 per cent, is the extra rate we would pay per annum, but as it only operates for half a year it is 1^ per cent, that we shall be giving away as accrued interest. That rate is in excess of underwriting charges. This loan is not underwritten. We depend on the attractiveness of it, the methods of flotation, and the need of the moment to bring the loan to a successful culmination. But if we desired none of those risks we would have undertaken underwriting. The highest underwriting price during the last ten years -has been 1£ per cent. Sometimes the loans have been underwritten at 1 per cent., the price at which the last two Victorian loans have been underwritten.
– The only calculation that is worth while is what is the added interest during the term of the loan.
– Thirteen shillings.
– I do not think it is half that. . i
– The calculation is a simple one, and the Secretary to the Treasurer would be able to tell his Ministerial chief in a minute what the extra interest would be. But I am not dealing with that subject. 1 am trying to test whether th© course which the financial advisers on whom the Government now rely have suggested that the Treasurer should take is, after all, the wisest course. I take leave to doubt whether it is. It seems to me that to insure the success of the loan, underwriting would have been preferable. We probably insure its success by this tempting morsel of accrued interest, but we shall be doing it’ at a greater cost than underwriting would have meant.
– You prefer to give the extra amount to the underwriters rather than to the holders?
– I am not suggesting that that should be done, but we are right in trying to analyze what this, our first big loan transaction, means. During recent years, all the States - and, in fact, all other parts of the British Empire - have had their loans floated with the protection of underwriting. That has been the invariable process in London during the last seven or eight years.
– That is no recommendation for a loan.
– Not necessarily, except that in a period of trouble, when there may be some doubt as to whether this instalment will succeed - as we all hope it will - we ought to put the matter beyond all doubt and risk, especially if we can do it at less cost than the proposed method will involve. I recommend these considerations to the attention of the right honorable gentleman, not to fault the procedure, but in order to suggest that, although he is probably committed to the terms of this particular instalment, he should consult with his advisers inside and outside the Department before the second instalment is offered to the public in order to see whether the loan can be floated in a surer and cheaper way. I was not privileged to hear the Treasurer’s remarks upon this motion, but on reading the first paragraph on page 2 of the prospectus, it seems to me that he relies on and accepts the services of the Commonwealth Bank for the reception of applications for the loan, and I am not clear as to whether that bank is to be paid any fee.
– No bank will get any fee.
– And apparently the banks are not to enjoy the 5s. commission which the ordinary stockbrokers get.
– Turning then to the question of the sinking fund, the parent Act, if I remember rightly, provides for the payment of at least £ per cent. The object of that self-denying ordinance, and a very proper provision, was to sink the loan during a term of extended currency. We did not contemplate that the first Australian national loan floated within Commonwealth borders would have a currency of less than ten years, and £ per cent, cannot be regarded as an adequate sinking fund for such a loan.
– The honorable member cannot contend-that that is a reasonable argument. He will see that ^ per cent, would cover all loans because the refloatation of’ a loan does not affect the principle of the sinking fund at all.
– I am aware that the object of the Act was to compel the setting aside of a general sinking fund which need not be allocated, and was not in a statutory way allocated, for a particular loan, but which would, as other loans fell in with the faultless recurrence which characterizes loans of that kind, enable the Government to take up the whole or portion of any of them.
– The time in which £ per cent, sinking fund liquidates a loan is a reasonable time for all loan transactions, and the fact that a loan may be refloated does not affect the principle.
– Quite so. None of the Australian loans has a currency which would enable £ per cent, to operate as a real sinking fund. The average duration of Australian loans is, roughly, between twenty and thirty years, and it would mean - a substantial addition to per cent, with compound interest reckoned in sinking-fund fashion, to sink them at the end of their time.
– We never do sink them.
– Sometimes the States have sunk them, and sometimes they have been enabled, out of a £3,000,000 or £4,000,000 loan, to put aside a quarter out of the redemption sum, and say to the underwriters, ‘ ‘ We do not want the whole of this loan renewed, but only three-quarters of it.” It is a very good advertisement for a country to be able to say that.
– But it is still borrowing.
– Yes, but it is reducing the amount borrowed, and that is the vital thing.
– That is the vital thing; otherwise the sinking fund may be very like Micawber’s I.O.TJ.
– In all cases, provided you invest the sinking fund properly, it is an earnest to the lender of the endeavour of the borrowing State or nation to reduce its liability. And I think we may say that a close study of the Australian national debt will frighten nobody. The more we look at the national debt of the States or the nation, the larger the assets loom against the indebtedness.
– We are not really indebted at all.
-I think I could show, without any strain on the imagination, but by a legitimate argument on facts, that some States are not in debt. Most of the older countries of the world which have national debts have shot the money away in dynastic wars or wars of conquest, and have nothing but the general status of the nation to show for it. But the States of Australia have really, legitimately, and advisedly expended their loans on policies of public works, and in most cases the money has been wisely invested. As the result, even thus early in our history, we are able to show a substantial credit in the shape of receipts from public works against the interest bill of the nation. In regard^ to two States in particular, after paying working expenses on public works in which loan money has been spent, during the last five years there has been a net credit more than equivalent to the whole of the interest bill of the two> States. In fact, the receipts from public works in Victoria have gone to the relief of revenue to’ the extent of between £30,000 and £50,000 a year, showing that the capital sunk in these enterprises has been wisely and advantageously spent. There ore other countries in which private individuals do what we in Australia do with public money. In Canada, for example, there are vast railways corporations which go almost every year to the London lender and ask for increased capital, in order to construct some branch services or new trunk lines. They ask for an increase of capital of £5,000,000 - we ask for a loan, of £5,000,000; in the case of a private^ corporation it is called “ increase of capital “ ; in the case of a State it is called “ borrowing,” but the “process is the same and the purpose to which the money isapplied is identically the same. We are able to say that the Australian debt, ascarried by the States, is, broadly speaking, earning its own interest.
– In some cases it has done more.
– I am aware of it; but wecan safely say that Australian public works, payable and non-payable, on which loan money has been spent, ,are nearly paying the interest bill that Australia hasto meet.
– I think that the tablethat I gave in my Budget speech established that f act.
– I am not grumbling at the provision for a sinking fund, except that, if we are to deal with a loan of short currency, anything up to ten years, we shall need to consider the question of increasing the i per cent, for which provision is made in the parent Act, or else,, at the expiration of this loan, our contributions towards its reduction will be somicroscopic as to be almost laughable. As we have no desire to see that, we should: increase that per cent, sinking fund in. regard to loans on short currency, and revert to that basis for the longer loans. The honorable member for Cook dwelt on the relationship the finances of the Commonwealth will have in a new form tothe finances of the States. We are passing through a period of flux which,, whether we like it or not, will substantially change the borrowing powers which reside in the States under the Constitutions of Australia. I cannot conceive of the loan indebtedness of the Commonwealth for war purposes, or otherwise, mounting up without impinging on the power of the States to borrow. It must here and abroad alter the attitude of the money lender with respect bo the seven Australian borrowers. Naturally this brings us to the position that, whatever -may have been the views of the authorities of the Commonwealth or the States in years gone by as to the advisability of consolidating the debts of Australia, and “whether we like it or not, and whether the circumstances be propitious or not, early after this war Ave shall have to give sustained and final attention to this matter.
– And also to the question of the seven taxing authorities.
– For the moment I am dealing with the relationship of the Commonwealth and the States in the matter of raising loans. If the views of financial doctors at the other end of the world be accepted, we are in for u period of dear money after the Avar.
– We have it now.
– I am speaking of the post-war period. We are pledged to our policy, and must raise money to carry on the war by revenue or loan; but the judgment of the financial journals appears to be that after the war we are in for a period of dear money. No one can tell how long that period will last, but the -enormous demand for the restoration of the territories injured by the war and for the recreation of old agencies stopped by the war will bring to the tables of the big lenders of money vast requisitions, the effect of which will be to advance steadily the price of money. But whether there be cheap or dear money or an eccentric market it will be of the utmost importance for the States of Australia to know whether they can continue to conduct a public works policy in view of the requirements of the Commonwealth Government for that and similar purposes. I hope that the necessity for adopting some definite lines in regard to the States debts problem will be considered by the Commonwealth and the States soon after the war in order to see whether some harmonious policy cannot be formed. On the question of how far the taxation which may follow this loan is likely to injure or cripple the States, a question of importance to the Treasurer as well as to the State Governments, I cannot conceive, if we put on a special land tax on top of the old Federal land tax, and special estate duties, and follow with a tax on income or surplus wealth, that all these taxes are to come off immediately after the war; because, as the Leader of the Opposition very wisely suggested, if we wish to spread the provision we make for our expenditure on war out of revenue, we can only do so by continuing the taxation for a period after the war is closed. Otherwise we would have to borrow, thus largely increasing the permanent interest bill. Possibly the Prime Minister might say, ‘ 1 Let half be provided out of revenue and half out of loan.”
– If we are to liquidate a war loan by a sinking fund we must continue it until the loan has been liquidated.
– I have not suggested that the sinking fund could be sufficiently heavy to liquidate the loan at the end of ten years without our heavily loading ourselves. I cannot conceive that we can do . all this business out of loan moneys raised - here or abroad. There must be an earnest attempt to tax the resources of the country to meet the special war expenditure that Parliament thinks it necessary to pay out of revenue. .If this is so we cannot ‘ do it all in one or two years. There must be a period after the termination of the war when what is; really a war tax to help to pay the portion which we think should be met out of revenue will persist and continue. That being so, the taxes that we now think are temporary expedients may remain in force for many years.
– We may not be able to wipe off a cost of, say. £100,000,000 under sixty years.
– That is so. We might have a special levy to provide a special sum, thus allowing posterity to bear its share. We cannot take all the burden off posterity. We are fighting, as the British are fighting, for an enduring result, and we hope that generations after us will get the accumulated benefits of this fight through the opening of the highways to its commerce with that freedom from molestation we think should be our lot. I think we can, without any impropriety, load a fair share of this period’s expenditure on to posterity. But, as we do not desire to do more than is fair, taxation must bear its share, while loan indebtedness also bears its share. But if these temporary taxes are kept on longer than we thought, what are the States to dot It is not conceivable that the citizens of New South Wales and Queensland, who have to pay two income taxes, two probate duties, and two land taxes, and possibly another, besides local taxes, are likely to be content to labour long under those unfortunate conditions. There must be some authority springing out of this Parliament that will endeavour to assist the governing forces of Australia to coordinate all this taxation. We cannot be coming six times at our citizens without their vastly misunderstanding it, and feeling the drain of it. One effect of the war will be to recast quite a number of our conceptions of the possibilities of State activities, and, above all, the power of the States to continue indefinitely their loan enterprise policy. I offer these views; I know that they are not .quite apropos to all phases of the question, and I close by saying that the Government are wise in bringing down this Bill, I hope that they will choose a suitable time for the second and third, and fourth instalments of the loan ; if so, I think that there will be no opposition from any who, like myself, might be supposed to be representing some of the people who will put money into this loan. I have said, and I shall continue to. say, that the wealthy people of Australia ought to take their share of responsibility in this war and cheerfully make the sacrifice that the Legislature demands, whether it be in the shape of taxation or voluntary contributions to a war loan.
– I do not see anything in the Bill with reference to a sinking fund.
– There is a general Statute providing for a sinking fund for all loans.
– And there is special provision that it can be taken out when it is so desired.
– Only by Statute.
– Sinking funds have never been worth much.
– I am anxious to know whether the sinking fund will be put under trustees, or whether it will be left to the control of impecunious Treasurers. There is one thing for which I admire the right honorable member for Swan. When he was in Western Australia he built up great reserves for paying off the Western Australian debt.
– And borrowed money all the time.
– It is a good thing to borrow money if one knows how to use it; but it is bad to borrow if the money is managed by men who do not know how to use it. That is the way to the Bankruptcy Court. I would infinitely sooner have a 5 per cent, stock and a 1 per cent, sinking fund, than a 4^ per cent, stock without a sinking fund. It would be far better for the first bonds that we publicly float to be above par, say, from £100 to £110; but the chances are that, if we float this loan at 4£ per cent., it will very shortly be below par. I regret that the Treasurer did not give the bankers a small sum to guarantee the underwriting of the loan, because, as we know, “boodle” is very timid, and I know what it means to have a failure in a flotation. We are constantly asked where can be got a safe security with a fair rate of interest. Men of ordinary experience and superficial knowledge of finance will answer at once, but the man who is very cautious will not answer at all, because he cannot. One of the hardest things in Australia to-day is to get a safe security with high profit.
– I think that applies generally !
– The currency of this loan is only ten years, and I think it would be far better if it were made that term, with the right reserved to the Government of conversion or continuing it if they so desire.
– That would not be so attractive a loan.
– Well, I do not know.
– We are told that the rate of interest will be down before ten years.
– If so, the Government would have the right of nonversion.
– The Minister of Home Affairs told us the other day that the average rate of interest in the future will be only 3 per cent.
– I wish I could believe that, but the Minister of Home Affairs is a born financier, whereas I am not - I was only trained to it. I do not think interest will be low, because everything points to its being terribly high for the next twenty years. As the honorable member for Balaclava pointed out, it will take untold millions to replace those towns and villages over which the Kaiser has passed. The Argentine Republic has double the population of Australia, and it has lately placed 25,000,000 dollars on the market in America and 25,000,000 dollars in England - gold bonds, guaranteed by the Customs of the Republic.
– And they are at 6 per cent.
– Exactly; and yet the underwriters have to carry, on one of these loans, 22,000,000 dollars, only 3,000,000 dollars being taken up by the public. After all, we have to remember that the surplus that can be put into permanent securities is very limited. The Canadian municipalities have floated in New York somewhere about 120,000,000 dollars, and Brazil is also out for loans. As a matter of fact, the Central American .Republics have made application to the United States to have bonds of the United States exchanged for Central American Republican bonds, with a margin of 1 per cent, in favour of the United States.
– The Central American States are very “ fishy “ !
– They are not “fishy” now, because the. United States Government have a Treasurer in almost all the South American Departments. I do not wish to see this Commonwealth loan a failure, and, although everybody thinks it will go off flying, I ask honorable members to pause for a moment. Let us see where are our available funds to be utilized for the absorption of securities. Again, these are very limited. They come principally from the Savings Banks’ deposits: they do not represent an expansion of commercial credit, but the actual savings of the masses. In the second place, they come from that portion of the accumulated funds of the commercial banks which produces profit, and which can be withdrawn from business without injury to business. In the third place, they come from the accumulated funds of fire and life insurance companies. The total accumulations of life insurance companies of Australia is about £54,000,000.
– The honorable member is excluding the English companies?
– I am taking only the Australian companies; we have nothing to do with the English companies.
– Except as regards deposits.
– We have no power over them.
– I am talking about where we come in - not .where they go out.
– We have no power over that either.
– Have we not?
– Why, Senator Pearce could come up to the House to-morrow, and propose to take every man in Australia who is able to carry a gun, and utilize him and his belongings. Anything can be done in wartime; and I saw that done myself in wartime in America. However, what I wish to say is that, in the fourth place, these funds come from the accumulated funds of charitable, benevolent, and educational institutions; from estates in cases where the executors or trustees decide to change the assets, and take the risk of general business in which the owners need not bother themselves about the management; from the accumulated funds of retired business men who follow the same course for similar purposes; from the increments which are derived from other investments, aud which the owners have not spent; and the accumulated funds of the investments of commercial banks which are maintained for the purpose of having liquid assets that can be converted into cash immediately if required. As I say, the power of absorbing securities is very limited.
– The list the honorable member has given is not very limited. What does the honorable member suggest is the total of these funds?
– I have not been able to ascertain the total, but I know that when I was Minister, and I desired the necessary power to deal with these matters, I was opposed by the Senate, which was then controlled by honorable members opposite.
– There are about £50,000,000 in the life assurance companies, and nearly £100,000,000 in the Savings Banks.
– I do not know what the amount is in the case of the fire insurance companies, but in the Savings Banks there are £87,918,000, as shown by Bulletin “U, of May, 1915, issued by Mr. Knibbs. The amount in the Commonwealth Savings Bank is £6,627,000.
– Some small portion of the funds that have been mentioned by the honorable member may be in the Savings Banks.
– Of course, and I am not denying it; and the danger is that a great. many people may withdraw their money from the Savings Banks in order to invest it in this loan. The total deposits in the commercial banks is £168,900,000.
– Some on fixed deposit, and some not.
– Of that amount £72,000,000 hears interest, and £96,000,000 does not. I wish honorable members to understand that this is not the total bullion; the total bullion in Australia is only £34,578,000; and” if we deduct the bullion from the figures connected with the Savings Banks and the commercial banks, which total £256,000,000, we have £222,000,000 in deposits which represent only an expansion of credit. The question is, is that available for investment? The total bullion in Australia is only £34,578,000, and so I say that, however we may look at it, we cannot get away from the fact that there is £222,000,000 expansion of credit. In 1893, when we had the great banking crisis in Australia, the banks had more fold than at any time in their history, ‘et their deposits were millions behind what they were in 1892, because of the contraction of credit.
– Have you taken the note-issue into consideration in that expansion of credit?
– No; because the note-issue does not represent wealth.
– But it is an expansion of credit.
– But it does not represent wealth. When a man grinds out notes from a machine his action does not represent wealth any more than my borrowing of £10,000 from the bank would. Another point of view that I want to discuss - and it is a very serious one - has reference to the rate of exchange. We are going to be not only a debtor country, but our exports to foreign countries are going to be millions less than our imports. They are now. Will not that affect the rate of exchange? And if it affects the rate of exchange will it not affect the rate of interest? That is the next point we ought to consider.
– Are you contemplating a record harvest?
– Yes; I am looking into the harvest very carefully. I am very interested in the harvest. If the amount of our commodities exported to foreign countries next year is less than the amount of commodities imported into Australia, that will immediately cause a demand for foreign exchange.
– The demand is here now. A man with money to sell in London can get a good price for it.
– We are at that stage now. When money is sent away it is sent by means of an international system of exchange through credits. If our balance in Great Britain, or America, or anywhere else, is against us, we let it stay there, and pay interest on it, if they will agree, until such time as we can send away shiploads of wheat or wool, sell these, get bills of exchange, and cancel our debts. We are not in a position to do these things now, and we shall not be. ‘
– If we have a bumper harvest, and our imports are restricted, as they are, the balance of trade will rapidly come in our favour.
– I hope so. That will immediately affect the price of exchange. I wonder if my honorable friends are aware that if they want to get a sight draft to-day they can only get $4.78 cents in Australia for the sovereign. The legitimate currency when I was in America was always $4.87 cento per £1.
– Do you mean that it is 11 cents down?
– Yes. I’ ascertained that the other day when I was in the bank looking into the whole thing. I wanted to see if these statements were correct, and I found they were. The moment we have a bigger foreign balance than we have here the rates of exchange will come down. Our foreign trade and commerce do not alone regulate foreign exchange or foreign interest, and we must not forget that if rates of interest are high in Australia, if this is a very enticing loan, our local merchants, bankers, brokers, and capitalists representing large groups of security seekers will invest their money here instead of sending it out of the country to buy, or investing it in foreign bills of exchange. On the other hand, if interest is low here and high in other countries, then they will immediately cable their money to the country where they can take advantage of the higher rate of interest. If money is 6 per cent, in other countries’, it only requires a cable message to send it out, and a cable does not cost much. I know the Treasurer said the other day that the Government would stop the export of gold, but I do not see how they can stop it. If they do, the man who is going to send back his goods will also stop.
– The Imperial loan will settle that for a time.
– The embargo on the export of gold has been lifted.
– They must lift it. Supply and demand ! No matter what our political views may be we cannot stop that. These are the three points I wish to emphasize, and I would now invite the Treasurer to make this a 5 per cent, stock with a 1 per cent, sinking fund.
– Would you float it at 4 ?
– No; I would float it at 5, and I would put by 1 “per cent, for a sinking fund. I would give it a currency of thirty years, and make it redeemable at the will of the Government, at par. Loans in Australia during years gone by have not been “floated with the best judgment. I think, also, that we ought to consider the States. My hope is that if this loan is a big success that the Commonwealth Government will come in and re-organize our Bank, putting it in such a position that the Commonwealth and the States will be partners, and that the Commonwealth will, for the future, float all loans for the States. Why? This loan is purely for the production of material for destruction, and the danger is that we are going to shoot away our surplus wealth. We cannot help it; it has got to be done; but, at the same time, we ought to help the States so that the States will keep their great interactivities and enterprises operative. For whilst the Commonwealth is engaged in the work of destruction, the States are engaged in production. I say, then, that we ought to try to meet the States. I am sorry that the Commonwealth and the States have not already become more closely associated. The States are political entities. For years and years in the United States of America the States tried to carry on great irrigation and conservation works. When President Roosevelt, that wonderfully strenuous and active man, became President, he called all the Governors of the States to Washington, and they had a Conference that lasted for three weeks, as a result of which the States agreed to carry out the great irrigation works in America in conjunction with the nation. I wish any one could travel through Arizona. When I first went through Arizona as a cowboy, you had to carry your own tucker or starve.
– The last time you told us “that yarn you said you were a parson.
– I wish I were; I would go to the front as a chaplain. But I say we must not forget the States, each of which will require, money this year, and surely something can be done to meet them. There is going to be a new system of taxation that will be a national system of taxation. We ought not to be bringing out loans and paying interest on them to other countries. The clanger of de’bt is this: That when you have to incur debt to carry out your public works, it means you are doing it ‘because .most of your community are too poor to own their share of the work. Here we are piling up debts. The burden is on posterity, I admit. To me that is sad. We Ought to learn from the Germans. It is in regard to organization that the Germans and the Britishers differ. While the Germans are superficially sentimental’, they are essentially practical; and the Britishers, while superficially practical,, are essentially sentimental. The German will cry, but he will shoot you a few minutes afterwards. He does his duty to the State. The nature of the Germans makes them lend themselves to State organization. We shall .have to follow their example. Why is it that the Irish could never fight at home? Because they are individualists, and they could not discipline themselves ; but when they got to America, and the Americans put them into the army, they fought like tigers. The .Southern States, with 600,000 men, and every port closed,, fought for four years against the army of the North, of 3,000,000, and had to depend ou coloured labour. We are up against the toughest proposition that the world ever knew, in having to crush an organized nation like Germany. AsMoltke said, 5,000,000 or 10,000,000 persons, without organization, are merely a mob. To-day the United States of America are learning a lesson. Although Mr. Wilson is a Christian man, an inner Christian, belonging to the inner circle of the Inner Temple, he recognises that the nation must organize, and they are starting to do it. I again urge the Treasurer to provide for a reasonable sinking fund, and to see if it is not possible to- get these great States to come together and make the Commonwealth Bank a great institution. There are £81,000,000 in the Savings Banks of the States, and only £6,000,000 in the Commonwealth Savings Bank; and although the deposits in the private banks total £168,000,000, the deposits in the Commonwealth Bank are very small.
– The Commonwealth* Savings Bank pays a lower interest by £ per cent, than the State Savings Banks pay.
– That is not the reason for her position. She did not start right. She is not getting the run. The floods of Australia are not carrying the boodle to her. If she were organized, with the States as partners, and had a board of directors so that she could have the advantage of the brains of Australia, her position would be very different. The honorable member for Henty would see that the boodle of the Board of Works went into the Commonwealth Bank.
– The Board of Works banks with the Commonwealth.
– We have just borrowed £300,000 from the Commonwealth Bank.
– That is no good to us.
– It is by lending its money that a bank makes profit.
– The honorable member said that the man who borrowed had brains.
– If the honorable member’s Board put into the Commonwealth Bank £50,000 a month, and the Bank could be sure of a certain cash balance every afternoon, it could make an actuarial calculation covering a series of months. It could, perhaps, lend £7 privately, and £12 publicly, on credit. I wish to increase Australia’s credit, and to use the collective credit of the nation for the benefit of the individual.
.- I congratulate the Government upon having introduced the Bill, and I hope that Ministers will not think it advisable to increase the taxation of the people. The position of the banks at the present time is a very sound one, and there is a big margin available for investment. The bonds of the proposed loan are to be of the denominations £10, £100, and £500 ; but the Prime Minister would be well advised to provide for £1 and £5 bonds as well, or at least for £5 bonds.
– If the first flotation succeeds, it may be possible to have £5 bonds in the next flotation.
– A great many persons who are able to invest only £1 will be glad of the opportunity to assist their country, and to acquire a vested interest of this kind. We might well take a leaf from the book of the French Republic, which made its bonds so small that every citizen could invest in them; I think, too, that we might profit from the example of the United Kingdom. A rising money market is anticipated, and the public would be encouraged to invest in the loan if it were provided that the rate of interest should increase as the price of money increased.
– I think that quite inadvisable.
– If the Old Country offers better advantages than we can offer, many persons may deem it advisable to send their money to England to secure an extra per cent, in interest.
– That could not be done. Mr. PIGOTT. - It is provided that the loan shall - be repayable at par, at the offices of the Commonwealth Bank in the capitals of the States. But I suggest that it should also be repayable at the office of the Commonwealth Bank in London. A great many of our old colonists reside in London, and opportunity should be given to them to invest in this loan.
– The suggestion is a good one, and will be considered, though there might be a risk of creating the impression that the loan was not an Australian loan. Very often the exchange is against us, as much as 30s.
– We have arrived at an unfortunate period of our history. Not only are we engaged in an awful war, but we have also just gone through one of the severest droughts that were ever known. I was in the Hay district last Saturday, and the bank manager there informed me that 50 per cent, of the sheep in the district had died during the drought. The loss of stock will greatly decrease our income next year. The banks require a great amount of capital to finance the coming harvest and shearing, and we cannot expect a big return from the wool crop ; because it will be reduced 50 per cent, in both quantity and quality. Mr. Riley. - Prices will be increased. Mr. PIGOTT.- That will be counteracted by the reduction in the quality of the wool. According to Mr. Knibbs. on the 30th June. 1914, the deposits in our banks amounted to £93,659,000. and their paid-up capital value to £31,142,000- a total of £124,801,000. Overdrafts and Government securities amounted to £122,000,000, leaving a balance of £2,000,000. In addition, there were £70,000,000 of current accounts, and that balance, I take it, less their cash reserves, is available for investment. The” Prime Minister proposes to borrow £20,000,000, and of that amount something like £5,000,000 will have to be sent abroad, leaving £15,000,000 in the country to go back into the coffers of the banks. These figures take no account of the credits in the Savings Banks. During a conversation which I had in Sydney yesterday with the Consul for the United States of America, he informed me that in his country tremendous sums of money were available for investment purposes.
– At what rate of interest ?
– He told me that 4$ per cent, interest might attract investors.
– They never raise money for themselves at that rate.
– We are a young country, and many millions of pounds are required for development and expansion, for the construction of railways, the clearing and fencing of land, and other similar enterprises. If friendly countries like the United States of America would gladly help us, we should give them the opportunity.
– I wish the honorable member would make me an offer on behalf of the United States of America.
– I can merely give the Prime Minister the benefit of the conversation, which I have repeated.
– Recently New York floated a loan at 6 per cent.
– That was for the Argentine Republic.
– The honorable member for Darwin spoke of the United States of America lending to municipalities of the Dominion of Canada 120,000,000 dollars.
– At what rate?
– From 4 per cent, to 4^ per cent.
– The Prime Minister knows of the attack that was made by the Germans on Mr. Morgan because he was financing the Dominion of Canada. *
– And England in regard to its munitions.
– Up to the present time munitions to the value of about £140,000,000 have been supplied by the United States to Great Britain, and the trade- balance is gradually changing to America.
– We are buying material there.
– I am referring to the ability of America to lend a helping hand to Australia if we need it. It will be a good idea to conserve our own Australian capital as far as possible, and to accept the assistance of the United States in this matter. We know that, indirectly, the banks will have to find this money, and the Prime Minister might take into consideration the advisability of allowing the banks to again circulate their own notes, and provide the Government with money to the amount of that circulation. The banks have to find the gold in order to put into circulation the Government notes, and why should they not be allowed to put into circulation their own notes to the value of £15,000,000 or so, and provide the Prime Minister with that amount of gold?
– Because they have not the gold security for that amount.
– One of the leading bankers in Sydney made that proposal to me, and I pointed out that the difficulty was that the banks would not be inclined to hold more notes in the Treasury than the average circulation. Prior to the Commonwealth Bank taking over the note issue, the average circulation of paper money was about £5,000,000.
– Now it is very nearly £15,000,000.
– Fifteen million pounds in the coffers of the banks may represent that amount in circulation so far as the Treasury is concerned, but it is not in circulation so far as the banks are concerned. Every honorable member in the House is greatly interested in the flotation of this loan. A recruiting campaign is to be conducted in New South Wales, and I think honorable members should take advantage of it to bring the loan before the notice of the public, and invite them, for patriotic reasons, to come forward and invest their funds. Lord Kitchener said a few days ago that in order to prosecute the war he required men, money and munitions.
– Order ! The honorable member must confine his remarks to the question before the House.
– I desire merely to say that honorable members are about to engage in recruiting propaganda, and that money is one of the great essentials for the successful prosecution of the war. Therefore, I suggest that those who are engaged in recruiting endeavours should impress upon the public what this Bill means to Australia generally.
.–] would like to say a few words on this Bill - just to give it my blessing. I do not suppose anybody will agree with my remarks j I am sure nobody on the Opposition side will. To my mind, the most pleasing thing about this debate is the marvellous unanimity on the part of the leaders of both parties in this House. Who says we have not a National party, when we find two leaders who are in such thorough agreement ? If they do not share the responsibility, they at least share the honour of having opinions that are akin. From the commencement of this war we have been told that there are immense responsibilities to be borne. There have been ‘most remarkable consultations. We have received the advice of men of influence, of men who know something about business, and are conversant with banking propositions, and it did not matter whether it was before the elections or after them,, whether the Liberal party was in office or the Labour party was in office, or whether Joseph Cook or Mr. Fisher was Prime Minister - always there have been triangular consultations between the managers of the banking institutions and the presidents of the stock exchanges of Sydney, Melbourne, and Adelaide, and the political chiefs of this continent. And out of the latest of these consultations there has been evolved a national financial policy perfectly satisfactory to v.he leaders of the great financial interests of this country - a policy sound and diplomatic, if not from the Labour point of view, at least from the stand-point of the managers of the great financial institutions of the country. Who are they ? The Attorney-General told us this afternoon about the leaders of the great mineral resources of Broken Hill and Mount Lyell, of the administrators of tin, copper, and spelter, of their alliances and associations with the Germanic enemy. Who are the managers and directors of the great banks of this country, and of those big financial institutions which have their head offices in this city ?
You have just to look at their principals - the directors of the Broken Hill Company and of Mount Lyell, or Jamieson or Baillieu,.or all that crowd. Whereever you find men associated with Germanic interests, you find the men who hold the reins of the financial institutions in their hands. And we consult them for a great national financial policy ! In Queensland and New South Wales the position is the same. You need only look to the heads of the Sugar -Company on the one hand, and of the Sydney gaslighting monopoly on the other, and there you find the men who control the Bank of New South Wales and. the Bank of Queensland. With those gentlemen we enter into alliances and deliberations in order at this crisis in our history to evolve a national financial policy. And we have evolved this- a Bill for a £20,000,000 loan. Why, if I close my eyes and listen, whether the voice be that of Beaconsfield or Gladstone, of Joseph Cook or Fisher, I hear the same language, and the same phraseology. Whether gathered from the Tory camp or the Labour Caucus they all talk the same language, they all trade in the same principles. We are to float a loan for £20,000,000, and interest for the six months is to be paid on the 15th December. This policy was developed apparently after consultation with the leaders of the stock exchanges and the leading lights of the great banks.
– That is an error.
– Well, I make so many that one more will not matter.
– The stock exchanges were not consulted in this matter.
– I understood that they had been consulted. It is only by making general statements that one can get at the facts. By making broad assertions I get somebody to contradict me, and so by that round-about way I get at the facts.
– I consulted the stock exchange brokers with a view to reducing the rate; and the bankers, in order to ascertain how much money we could raise.
– Just so, friends of the people ! I could imagine we were back in the days when the banks and the stock exchanges controlled the destinies of this country, but I do not remember that they ever asked for my views, and I am hanged if I would ask for theirs at this particular juncture. Between the policy as evolved by the Radical Labour Government of- Australia and the policy as evolved by the Liberal-Tory combination in England, there is not much difference; both follow the same principle, both propose to give a fine bonus to those who can lend money.
– What do you suggest?
– I will come to a few suggestions, but I am sure the honorable member will not agree with them. In the first place, the Treasurer is to raise £20,000,000, and is to pay six months’ interest on the 15th December. The last 30 per cent, of the loan is to be paid on the last day in November, so we will have the use of 30 per cent, of the £20,000,000 for a fortnight, and for that fortnight’s use of about £6,000,000 we are to pay a half-year’s interest. Good business! Good patriotism ! These men will make sacrifices for their country while other men are dying on the battlefields. This means that the lenders are to get £135,000 for a fortnight’s loan. That is the sort of policy we have evolved. A sum of £5,000,000 will be available to the Government for a month, and for that the lenders will get half a year’s interest; £4,000,000 is to be available for two months, and for that they will get half a year’s interest,; £5,000,000 is to be available for three months, and for that they will get a halfyear’s interest; so that, on the average terms between this and December, on a loan which, over its entirety will have an average duration of six weeks, we are going to pay a half-year’s interest. Working it out for six weeks, whether it be £5,000,000 or £20,000,000, we will pay £450,000, whereas the normal interest for the period would be £112,000. We make a gift of £338,000 to these “patriots” who so dearly love their country on this one item alone, but we are told that it is not to be the total. No honorable member believes that this £20,000,000 is the total amount that we shall have to borrow. Before the end of the year we shall have to double the loan, and the people of Australia will, on the present terms, have to pay £2,000,000 a year in interest. To whom? To those who give their money? No. To those who lend their money without interest? No. It is to be paid to those who, while others are struggling and suffering to maintain the nation, are trying to make a profit out of the national crisis.
We started the war with interest at 3^ per cent. To-day the “ money-grubbers “ have raised the level of the money market to 4£ per cent., and, let the war go on another six months, and they Will raise the rates to 5$, 6, or 7 per cent. Every increase in the intensity of the struggle of the nation to maintain its existence will mean an increased rate of interest that these “ bloodsuckers “ will put on the Government and the community. While one section of the community are- sacrificing their lives, why should another class be permitted to reap a harvest out of a nation struggling for its* very existence? Why should the women and children of those who are fighting on the battlefield be called upon to pay £2,000,000 more to people who stop at home and invest their money? This Bill says that the interest upon this loan shall be free from any income tax, and we are also to have a war tax. The position will be that any man who now has £50,000 invested at 3£ percent, in a private institution will draw it out and put it into the waT loan; because, glory be to God, the more blood spent on the field of battle, the higher becomes the rate of interest on the suffering nationalities, and money will be drawn from national enterprises and invested in highpriced loans. As the honorable member for Balaclava has said, we shall suffer from a higher rate of interest, becausewar means a high rate of interest; and when the Avar is over money will flow back into industries at that higher rate. Peace means accumulated profits and a diminished rate of interest. If a man leaves his money in a bank where he i» getting 3^ per cent., or puts it into an industry, or invests it in any path of peace, he Will be called upon to pay “thewar tax; but if he draws his money out of the bank, or out of the industry, and puts it into the war loan at 4^ per cent., he will not only draw a higher rate or interest, but will also escape the Avar tax. There is to be no tax upon the man whoinvests his money in the Avar loan, and yet I am asked to support that proposition, that has been developed after consultation with the leaders of the great financial institutions. I do not intend to support it. I do not suppose that anything I may say or move in this Chamber will affect the decision of the great body of men who are here assembled. no matter on which side of the House they sit, but I want to take this opportunity, of explaining why I absolutely decline to vote for any proposal of this character. I have not onlylooked at the social problems of life, I have also sought to discover a set of principles to be a guide in public life; and, looking around at things in general, and those phases of society which have evolved the Labour party and brought it into existence - the aggregation of wealth on the one hand and the struggle of the working classes on the other - we have to discover, nob merely a sentimental policy, nob merely an ideal system, bub a set of principles of which it can be said, to quote the remark of Mr. Winston Churchill, “ Our principles are ae a star; the darker the night, the brighter it shines.” If a man has a principle, and believes it to be his own, there never comes a time in his life when he should abide by it more than when the nation is struggling in the midst of a great crisis. Now is the hour when the principles on which the Labour party stands can demonstrate their validity or falsity. If valid, they will be true for all time. In the first place, we say that the troubles that afflict the human race are the result of certain forms of exploitation, the accumulation of rent, the accumulation of interest, and the accumulation of profit. The first rests on the monopoly of land, and out of this we have evolved our land policy. The second rests on the forces of monopoly in production, and out of this we have evolved a system of anti-monopoly and the demand that we should nationalize all those processes that tend towards monopoly. But when we come to the question of finance, it is most remarkable that men who are essentially Radical in all that appertains to land and industrial enterprises should be found to be absolutely Conservative. What has been evolved to-day in modern society? The instruments of exchange are no longer based on gold. We have evolved the cheque system, or a system of credits, and vast organizations, known as banks, have grown up; and as these banks are in the hands of a few men, who hold what we describe as the monopoly of the instruments of exchange, it is essentially the policy of the Labour party that we should attempt to nationalize them. Four years ago the
Mr. Anstey. honorable member for Angas was speaking on the note issue. At that time I did not agree with the note issue. It was the first speech I made in this Chamber. I said -
I support this Bill, but not because it goes as far as I wish it to go. I have no hesitation in saying that I am an advocate of a National Bank to utilize our national credit, free from the limitations and restrictions of any private corporations whatsoever.
Though I am opposed to the proposed method of raising money to meet the national needs at this particular juncture, I say that if we believe in the utility of the National Bank as we have established ib, we should nob leave ib, as the honorable member for Darwin puts it, to be a mere dog’s tail to the private institutions of the country, but we should make it the great central Bank of the Continent, serving the requirements of the Government in this crisis. I went on to say -
I hold strongly to the opinion that that bank should precede any note issue, but I can give the fullest measure of respect to men whose honesty of conviction has stood the .storm and stress of many years. Although I disagree with the order of precedence adopted, it is sufficient for me to know that we are at least taking one step towards the realization of the definite policy which this party has been advocating for twenty-fire long years.
That was the step we took four years ago, and we got no further. The honorable member for Angas, on that occasion, was quoting M>. William Liston, a bank manager, and said -
A paper currency is the spontaneous outgrowth of modern commercial life; natural and safe so long as it is based upon the certainty or very high probability that its component parts can, when required, be converted into gold to an amount equal to the amount represented, or into commodities which gold to an equal amount would procure.
No one has ever disagreed with that proposition, but the last Quarterly Review states that the gold theory has been abandoned. The very position of the world has compelled its abandonment. The Quarterly Review says that however it may be discussed, and whatever views may have been adopted, the fact remains, describing it in the terms of the bulletins which are familiar to the generals of defeated armies - that the gold theory has been abandoned, and it is recognised that the only basis of the currency of a nation is the credit established by the nation itself, outside of which there is no stability. Mr. White, speaking in the
Canadian House, in reply to Sir Wilfrid Laurier, said -
It is an object of the Government to conserve gold.
Every country in the world recognises the absolute necessity of not leaving gold in private hands, but of mobilizing it under the control of the Government, so that it may be concentrated wherever it may be necessary to serve the national purpose. Americans, individualists as they are, have found it necessary to combine among themselves as bankers, in order to keep a national reserve. Mr. White went on to say -
Therefore, we have made notes legal tender and discontinued redemption. That was found necessary, in order’ to conserve the gold resources of the country. At the present time, like other countries, wc are not on a gold basis.
The honorable member for Calare said that a banking friend of. his has suggested that the banks ought to issue £20,000,000 of notes on their securities. There is nothing wrong with that proposition. The very same thing was proposed at the Bankers’ Conference in 1895. It was laid down at that Conference that a note issue was absolutely sound. As long as the currency was issued on good security, saleable on the market, it wasabsolutely good and solvent. A Commission was held in Victoria abour, the same time, and Mr. Gyles Turner said that paper money issued on good security was as sound as the Bank of England. Ten years later, when Mr. Watson was putting forward his proposals in this Chamber in connexion with the Canadian system, the bankers wished the Government to leave to them the note circulation. There is no banker in this country who has not admitted in some place or another at some time or another - I am saying this because it is leading up to what I am going to put forward as a counter proposal to the proposed loan - there is not a banker of eminence in the country, whether it be Mr. French, Mr. Finlayson, or anybody else, who, at some time or other, before some Commission or other, or in some written article in the Bankers’ Record, has not laid it down that a currency, whether based on cheques or on notes, is absolutely safe, so long as it is based on a saleable security. Whether that currency be based on things that represent property, loans that represent thenational power of taxation, or bills that represent products, or on taxation, it is absolutely good. The Round Table, in its article on Lombard Street in War, said that loans are the basis of transactions and the basis of credits; and credits are given in bank-books. How are credits circulated ? By the medium of cheques. As the honorable member for Angas and others have admitted, modern currency is not gold; it does not consist of a few trivial notes circulated in the form of small change; currency consists wholly and solely of cheques. That is not my statement, but it is based on the opinion of every commercial man and banker.
– There is a gold basis at the back of the cheque.
– No, there is not.
– The assumption is that there is.
– Ah, yes; you may assume that you have had a drink, but you may not have had it. The Round Table goes on to say that behind all the cheques that are circulating in England, as the proper instrument by which credits are transferred, there is not 1 oz. of gold. In the same article we are told that, according to the report of the Commission of 1895, Mr. Finlayson and Mr. H. Gyles Turner, both bank managers, said that money issued on good security is as sound as the Bank of England. Then McLeod said that the amount of banking credits had increased by scores of millions, and that these increased banking credits, being circulated by cheques, are currency in exactly the same way as notes. Sir Felix Schuster, of Smith’s Bank, has said that the currency of the country is supplied by cheques instead of, as the Bank Act intended, by Bank of England notes. .
– Is Schuster a’ German?
– Do not the Germans run the banks, and all the business?
– The banks are not run by Germans here.
– Are they not? From what the Attorney-General said this afternoon, it would appear absolutely true that German influence is running the -banks in this country.
– The Attorney- General said that the men who control the metallic resources of this country are under German’ influence.
– Not the banks.
– Those who control the metallic resources are the very men who are the directors of the banks. This does not require any argument. Let honorable members go into the Library, and see who are the controllers and directors of the metal resources of this country - of the copper mines of Broken Hill, of Mount Lyell. Let honorable members turn up Nash’s Directory to see who are the men who have control of the banking institutions in this State; and they will find that all are the same men. Look at them in the insurance companies! The honorable member for Flinders is smiling.
– He is a director . himself.
– The honorable member for Flinders is the director of a large insurance company in this State; and every insurance company which has its head-quarters here, with the exception of the National - I think that fs the company with which the honorable member for Flinders is connected - is controlled by the men who control the banks, and who control Broken Hill and Mount Lyell.
– This is -not a place in which to amuse ourselves ! We are dealing with big things !
– And I am dealing with “ big things.”
– These general statements carry no weight without de? tails. To whom do you refer?
– I do not wish to occupy too much time. If the honorable member would spend an hour in the Library he could ascertain who are the directors of the joint stock companies, shipping companies, mines, and banks.
– Take the biggest bank in Australia - the Bank of New South Wales I
– Very good; I shall. Who are connected with that bank?
– And what is Walker connected with? The Sugar Trust. Take the Bank of New South Wales,’ the North Queensland Bank, the A. B.C. Bank of New South Wales, and you will find who are” the controlling influences. You will find that these are the men who control the Sugar Company, Burns, Philp, and Company, and the Gas Light Company.
– Are they Germans?
– Then what is your case? What has this to do with Germans? Theallegation was that the banks are controlled by Germans.
– The right honorable gentleman asked me two questions; he asked me about A, and also about Z, and when I answer Z, he asks me what that has got to do with A. I spoke of bankswhich have their head-quarters in Melbourne, and I said that they are controlled by the men who the AttorneyGeneral said this afternoon were dominated by German influence.
– That is a plain statement, but the difficulty about it isthat it is not true.
– I would not say it if’ it were not true.
– Then you might give us names.
– I never thought for one moment that my word ‘would bedoubted; and I am sure that the honorable member, if he thinks for a moment,, will not doubt it. The Prime Ministerasked about the Bank of New South Wales; but that bank, I point out, hasits head-quarters in Sydney, and not in Melbourne. The Sydney banks are not controlled by the German metallic group, but by the Sugar Company, the GaslightCompany, and the Burns, Philp, and Company group - there are two distinct groups. I say distinctly that it is an outrage that, at this particular juncture, we have no better proposition, no saner device, no fairer policy, no other schemeevolved, than that of the British Government, which is influenced largely by the Tory and moneyed classes of Great Britain. Speaking in London the other day, Viscount St. Aldwyn - formerly Sir Michael Hicks Beach - said the Government had called into consultation the men principally concerned ; and that is simply what we have done here. What is going to happen ? Will these people deposit notes for the loan? No. What will they do* They will simply send in their cheques, and write a credit against the National Government of £5,000,000 at 4$ per cent., plus something for themselves. These men will take the Government bonds and circulate them; and, as soon as the cheques have sufficient time to go out in payment of the obligations of the Government, they will be ready to perform the same operation over again. That is- what the Round Table, in its last issue, tells us. England floats a £350,000,000 loan, and the same process is repeated again and again. What has become of “the Commonwealth Bank ? Where is it ? Was it not instituted by the State for the State ? If £20,000,000 is good enough for private institutions, is it not good enough as a foundation for the currency of the ‘Commonwealth Bank? What is the country going to get out of this? A few weeks ago, when this question was under discussion, the Leader of the Opposition said to the Prime Minister, “You are not getting gold for it,” and the Prime Minister said “ No.” The Leader of the ‘Opposition went on to say that the Treasurer was getting only credit, and the Prime Minister said that was so.
– So it is.
– I hope the Prime Minister will not shift from that position - credit and gold are the same thing. Mr. Fisher. - Certainly; you can get it any day.
-.- That is all I want. Stick £20,000,000 of bonds into the National Bank, and let the Bank give the Government credit for £20,000,000, less the expenses of administration.
– How could the Governor give that, if I wanted gold for export to-morrow ? We have to pay our debts.
– What has that to do with it?
– We owe money in America.
– Do you? I thought you said you were not exporting gold.
– I did; but things change in these times.
– Is there not a proclamation against the export of gold ?
– That proclamation is in order that I may know about every bit of gold that is going.
– The same thing applies to the local banks as to the Commonwealth Bank.
– What does” the country want a gold-chest for?
– For national purposes; but I am talking of local purposes. We do not require a gold-chest for local purposes. The honorable member was -speaking of something that has nothing to do with the proposition; we are dealing with local purposes - local obligations.
– If the honorable member’s argument was any good we might just as easily raise £1,000,000,000 as £5,000,000.
– That is quite true.
– And peanuts would be just as good as gold - just the same thing.
– Why do we not all get rich?
– Why not? The honorable member for Henty said that if you could do what I suggest now, you could do it for all time.
– No; what I said was that, if your statement were true, you could raise £1,000,000,000 as well as £5,000,000.
– Does the honorable member say that it is not so?
– I do, certainly.
– I do not ask the honorable member to take my opinion, but if he will walk into the Library, and consult any financial journal he likes when it is. dealing with the finances of this war, he will find support for my argument. The Round Table in its very last issuer - and I suppose it is an authority on the subject of finance - states that this process can be. continued as long as you like, so long as the securities are there.
– Quite so; but that is another matter.
– Well, the securities are here. Are not the securities of the Commonwealth as good as those- of any private individual ? Dealing with the private banks of America, France, and Germany, the Round Table says that this process can be repeated indefinitely, because it brings into operation the system by which loans of this kind are dealt with. Actual gold is not lent. You cannot shift a house and lend it. All that is necessary is a ledger,, with securities behind it. If anybody doubts that, let him take McLeod on Securities, or the report of the Banking Commission formulated by the American Government. Sir Felix Schuster, of Smith’s Bank, London, stated some time ago that banking theory is one thing, but banking practice is another. You place your security, whether it be a house or a bond, with the bank, which credits you with a certain amount, and debits you with any amount you draw, and, as the Round Table, points out. this sort of thing can be repeated indefinitely, so long as you have one thing. What is the one thing?
– National confidence.
– Of course. That is the thing upon which private banks grow. If the private banks can draw on national confidence, surely that is a good enough foundation upon which a National Government can conduct operations without having to pay blood money. The honorable member for Parramatta touched upon this aspect of the situation this afternoon. When speaking about international complications, he said that Germany had been rendered solvent by the fact that a ring had been put round Germany through which she could neither import nor export, and that, therefore, she was driven to production for use, and not for profit. Germany is engaged in producing munitions of war and food for the population and army, and so long as it is possible for Germany to continue doing as she is now, so long will she be able to conduct the war, and keep her own money market practically undisturbed. But, as the writer in the Bound Table pointed out, the Allies, and England especially, are being disastrously affected in their carrying on of this struggle. The operations of the British Government are restricted by the fact that England has to obtain enormous quantities of munitions and other supplies from America, the payment for which is transforming her credit balance into a debit balance, and England can only meet her debit obligations by the export of gold, or by floating bonds in America, as has been done through Pierpont Morgan. England is in this danger: that she cannot export her gold without at once interfering with the basis of her financial structure.
– Half the amount that will have to be paid to America will be met by the transfer of American obligations due to England.
– That is what is being done now, but how long will it continue?
– There are other resources as well.
– At the same time, there are influences at work which go to bear out what the honorable member for Parramatta said. But so far as a country like Australia is concerned, whilst we can continue producing the requisite food, clothing, and munitions of war, this process of borrowing through the private banks can only have the effect of piling up our debt obligations. When we talk about the little investor coming in with his £10 loan, we know we are talking about a mere fly - something to make it appear that the loan is popular - to fill the public eye. The men who will contribute to this loan are those associated with the great financial institutions. They will take up these bonds bearing 4£ per cent., and you will get nothing else but cheques and credits in the private banks. What I affirm should be done is that this £20,000,000 should be put into the National Bank, and upon that the Governor should be instructed to write up credit to the extent of £20,000,000. When he does that, he will do just exactly as the private banks will do under the operation of this Bill. We may be asked where the credit is to come from. Where does the credit of the private banks come from? They will merely write up credit in their books, yet the result will be that before the end of the war £2,000,000 additional interest - blood money - will “ have to be paid to the men who have not risked their lives. Who is going to justify the proposition that one class of men shall shed their blood, that another class of men shall be taxed to pay the cost, and that a third and exclusive class - a privileged section in the community - shall neither shed- their blood nor contribute anything to the cost of the war, nor be subjected to any war tax upon the income they obtain from any contributions they have made to the national exchequer. Yet this small and exclusive class is to draw £2,000,000 per annum as the result of this war, whilst higher prices are to prevail as the result of the additional taxation that will become necessary. Why should we not do all that is necessary by giving the Commonwealth Bank security for the £20,000,000, and if we are to pay 4£ per cent, or 5 per cent, for it, let it be by means of an annual redemption, so that, after a period of, say, twenty years, we shall be free of any obligation. During the Civil War in .America it was said that the private banks could have gone on for ever lending out their money in a circle. They wanted Lincoln to float his loans in small ‘ amounts, so that the money could be issued again and again. Lincoln refused to do anything of the sort, for such reasons, as I have referred to. I take this opportunity of protesting against the creation out of this war of any small class of bond-holders who are to extract anything from £1,000,000 to £2,000,000 out of the people as the result of the war. I protest against the action of any Government which taxes the community to keep 100,000 men in the trenches to maintain the conflict that is now going on, yet, while the second section is being taxed to maintain this Army, permits another one exclusive class to exact taxation from that section of the community which is struggling, not only to pay pensions to the wounded, but which has to submit to taxation for ever and ever, to pay an indemnity that is simply an investment in blood. I move -
That after the word “That,” the following words be inserted: - “bonds to the extent of £20,000,000 be deposited in the Commonwealth Bank, and that the Governor of the said Bank Be instructed to credit the Commonwealth Government to a like amount, less such charges as are necessary to pay the expenses of the Bank in operating the account of the Government.”
– Is any interest attached to your scheme?
– No, of course not.
Mr.HAMPSON (Bendigo) [9.57].- The question of finance is one that a layman has some difficulty in discussing amongst men who have had large experience, like the Leader of the Opposition, who has been Treasurer, or the honorable member for Balaclava, who for years was Treasurer in the State Government, or the Prime Minister, or the honorable member for Darwin, who was trained as a banker; but I confess that some of the ideas used in the argument of the honorable member for Bourke have been running in my mind for some time, and I would like to know from those financial experts who are in this House whether it is not possible to have some different and better scheme of financing the war loan than that proposed. The Leader of the Opposition said that Germany would be up against bankruptcy if she had to go into the open market, but that in her internal finance she was adopting methods for the conduct of the war which were satisfactory. If Germany can finance herself internally, why should not the Commonwealth attempt to do so? The honorable member for Bourke, with his characteristic vigour, painted in vivid colours the sacrifices that are being made in this war, and I agree with him in failing to see that investors will make any corresponding sacrifice in lending their money to the Government, notwithstanding what has been said by the honorable member for Balaclava. The honorable member for Bourke has moved an amendment to provide for the payment to the Commonwealth Bank of £20,000,000 worth of bonds as a credit of the National Government. Why should we not have a special issue of war notes to that value ? For the conduct of the war an immense sum of money will have to be raised by the taxation of income or of wealth, and why should not that be redeemed out of the war-note issue. I do not claim to be a financier, nor to be as well versed in finance as some honorable members, but the honorable member for Cook has suggested that we should say what is in our minds, and what we think the best way of financing Australia in the present crisis. It has been pointed out that if the Commonwealth borrows £20,000,000 in the ordinary way the money will be drawn from the ordinary channels of industry. What I propose is to avoid that. Even if the Government risked the depreciation of the notes which they would issue - and I cannot see that that would happen - would it not be better to take the risk and allow the States to appeal to. the Australian public for what they need for their own purposes? It seems to me that something better can be evolved than the proposition of the Government. I find myself practically in agreement with many of the main ideas of the honorable member for Bourke. I think that we should do better than we are doing.
.- As a division is to be called for, I do not propose’ to give a silent vote on the amendment. The amendment proposes that the Government issue £20,000,000 in bonds to the Commonwealth Bank, and obtain in return a credit or loan to that extent. If the Commonwealth Bank had been established in accordance with the platform of the Labour party as a bank of issue, deposit, exchange, and reserve, operated and controlled by a Board, on which the Commonwealth and the States were represented, I would say, without hesitation, that it should handle the loan in the manner proposed by the honorable member for Bourke. But as the deposits in the Savings Bank and in the general business of the institution total only about £11,000,000, and its liabilities are as much, or perhaps more - so -that it has no balance upon which to issue extensive credit - it would be impose sible for the Bank, without the preparations which, I am sorry to say, we have neglected to make, to handle a £20,000,000 loan. I, for one, am not prepared to take the risk.
We should, however, prepare the way for this to be done. Now is the day of salvation, and until the alterations are made the Bank will not be what was intended. I do not know why this has not been done. Probably it is because the leaders of the Labour movement are not prepared to make what they might call an experiment. Probably they think that to go to the full length of the Labour platform would be too big an experiment, and they are not prepared to take the risk. Prepare the- machinery - create our Bank a full-sized national institution1, and arrangements could be made for- efficiently and safely handling all public loans.
It is a very significant thing that everything big that has been done in Australia has come from the Labour Conferences - from the rank and file of the Labour- leagues and delegates. We get none of. our big ideas from the so-called leaders’ of’ the movement.
– Will the honorable member confine himself to the question.?
– All our experience of the Labour movement is that it is the resolutions which come from the Labour leagues, and from the ranks-
– The honorable member must confine himself to the amendment. The Labour movement has nothing to do with the question before the Chair:
– I beg to differ.
I say that the Labour movement has a great deal to do with it.
– The honorable member has exercised his right to speak on the general question by speaking at some length, and now he must confine himself to the amendment. He cannot again roam over the ground which he travelled this afternoon. . Mr. J. H. CATTS.- Of course, when .we are in this House, we are compelled to bow to your authority, Mr. Speaker; but, ..with great deference to yourself, I submit that the proposition to call upon the Commonwealth Bank to issue £20,000,000 worth of credit to meet the expenditure of the Commonwealth during this period of war raises as. wide a discussion as the original proposition.
– IRVINE - Is it proposed that the Commonwealth Bank should issue £20,000;,000 worth of bonds?
– It has been proposed that the Government should hand over to the Bank £20,000,000 worth of bonds, and call on it to issue a credit to the Commonwealth for that amount. I say that that proposal raises as wide a discussion as did the original proposition. If the preliminary preparation laid down by the Labour platform of 1908-
– If the honorable member persists, I must take action. I again ask him to confine himself to the amendment.
– I submit-
– If the honorable member wishes to dissent from my ruling, there is a proper course for him to follow.
- Mr. Speaker, you have interrupted- me in the middle of a sentence, and could not know what I was going to say. I submit that we are entitled to discuss those measures that would be necessary to place the Commonwealth Bank in a- position to issue safely £20,000,000 worth of credit. Surely, if we. are not entitled to. discuss that, we are not entitled to discuss anything connected with the amendment. I submit that I am perfectly in order in discussing it ; but, if effect were given to the Labour platform–
– Will the honorable member resume his. seat? I have reminded him that he must not discuss the Labour platform,, as it has nothing to do with the question before the Chair, which is the insertion of the following words after the word “That”: - bonds to the extent of £20,000,000 be deposited in the Commonwealth Bank, and that the Governor of the said Bank be instructed to credit the Commonwealth Government to a like amount, less such charges as are necessary to pay the expenses of the Bank in operating the account of the Government.
The honorable member will see that that lias nothing whatever to do with any action that the Labour party, or any other party, may have taken in regard to the establishment of the Commonwealth
Bank. The question is whether the Bank should do a certain thing - whether what is proposed is wise; not how the Bank should be constituted.
– If I am not in order in discussing whether the present machinery is efficient for handling £20,000,000 worth of credit, I can proceed no further. But I shall take the earliest opportunity of discussing the matter.
– I am very much inclined to vote for this proposal. Why? Because, if the Commonwealth Bank is not able to finance it, we ought to try to give her a show to do it. The Commonwealth Bank now ought to have £100,000,000 worth of deposits. As the author of the Bank, the establishment of which I preached for fourteen years, pointing out what the Bank could do if we could get her to the state of perfection that she ought to have attained, and which, I am sure, it is not my fault that she has not attained
– Will the honorable member suggest how the Commonwealth Bank could do what is proposed to be done?
– I could easily tell you how the Commonwealth Bank could do it, if she had more than £11,000,000 of deposits.
– How could she do it now?
– That is not the question. I can easily tell you how it can be done. In the first place, there is a credit put on the ledger, and the Commonwealth will order machinery, transport ships, and so on, and draw cheques against that credit. The sovereigns that are in the Bank will not be paid out. There is the ledger, and there is the debit, and at 3 o’clock in the afternoon, when they balance, they simply clear by offsetting indebtedness. Bill’s cheque is put against Pat’s cheque, and Pat’s cheque is put against Bill’s promissory note, and for whatever difference is left they issue a cheque on some other bank of exchange to clear. I can easily see how it can be done. The difference between exercising the banking function and lending money as a private individual is this: When a private lender comes to the end of his legitimate capital he cannot lend any further; but an institution exercising the banking functions can lend until the crows come home to roost, providing that it is able to make its clearances every afternoon. If, to-morrow, I go to a bank and get a loan of £10,000, I increase the bank’s loans by that amount; and if the banker gives me a bank-book, and enters up a credit for the £10,000, I have increased his deposits by £10,000, although I have not lodged or withdrawn a penny of “ boodle.” The ideas of the honorable member for Bourke are sound, but the Treasurer cannot adopt them because the necessary machinery is not prepared.
– We have not the money.
– We have the money. Will any one say that the credit of the Commonwealth is not as good as the credit of the private banks? If the Treasurer will hand the loan over to me I will negotiate it alone. Such a good security was never offered in Australia. I would have preferred the interest to have been 5 per cent., with 1 per cent. sinking fund. The Commonwealth ought to be in a position to finance this loan, and the whole of the loan requirements of Australia. But I ask the honorable member to withdraw his amendment for the reason that the Treasurer is not prepared to carry it out. We must accept things as they are, unfortunately. I have been preaching in this country like Jonah in the whale’s belly for the last twenty years, and I could not get people to listen to me. When I am dead, they will think of what I have said, and fix this matter up. But how can the Commonwealth Bank, to-day, with £11,000,000, finance a loan of £20,000,000? I recommend the Treasurer to get to work quickly, and see if the Commonwealth Bank cannot be made a big national institution.
.- The honorable member for Bourke made a speech that was very eloquent, and, in many respects, very attractive; but it was based upon the opinion that complete confidence would prevail throughout the Commonwealth with regard to the financial operations of the Commonwealth Bank and the Government. If the Commonwealth Bank had all the public and private deposits that are held by the twenty-two banking companies in Australia, it might be able to carry out a financial operation such as the honorable member has described. But the Commonwealth Bank has not that business.
As yet, it is only an infant, and even if it had all the banking business now carried on by the private banks in Australia, in which the public have a great deal of confidence, confidence in the Commonwealth Bank would be given by the public only so long as the Government carried on their business- in a sound way. If the Government of the day carried out wild-cat enterprises, and constructed public works which could not pay their way, public confidence in the Commonwealth Bank would commence to decline.
– And that Government would be put out’ of office.
– Not until they had muddled the affairs of the country.
– Probably the Government would be kicked- out, but by that time the harm would have been done. When the southern States of America were at war with the Federal States, they were in need of money, and they took a printing press and printed paper dollars.
– They fought the war with those dollars.
– That is true, but those paper dollars decreased in value to such an extent that, in the end. it took sixty paper dollars to purchase ‘ one golden dollar’s worth of goods. Finally, the southern States, when at their wits’ end, appealed to other countries for money, and were able to borrow £3,000,000 from confiding people in Great Britain, but that money was never repaid, and probably never will be. Suppose the Prime Minister were to do what the honorable member for Bourke proposes - that is, to print off £20,000,000 worth of notes.
– My proposal is that the security which is given to the private banks should be given to the Commonwealth.
– When these notes were put into circulation they would not be in the same position as the Commonwealth notes of to-day. The present notes are good for £1 to-day, because the people know they can get a sovereign in gold for every £1 note; but if the Prime Minister were to issue £20,000,000 worth of paper money, the £1 would almost immediately commence to depreciate in value, and, before long, forty or fifty of them would be required to buy £1 worth of goods. I would like to help the honorable member for Bourke in regard to the
Commonwealth Bank. When the Bill for the establishment of that Bank was before the House, I expressed the view that the States ought to have been taken in as partners, and that they ought to be allowed to participate in the profits on condition that they gave to the Commonwealth Bank all their business; but I cannot support the amendment now before the House, because I do not think the Commonwealth Bank is in a position to give effect to it. I do not think the honorable member’s, proposition is sound. The honorable member referred to the Prime Minister having consulted the hanking men throughout Australia, and the presidents of the stock exchanges. We must realize that the bankers and the chiefs of the stock exchanges, could, if they chose, make this loan a failure. By passing word round amongst the people who have money to lend, they could make it impossible for the Commonwealth Government to get money at per cent., because the people who have money to lend are very timid, as any one may see by looking at the stock and share list from day to day. I believe that the advice and assistance given by the representatives of the banks and stock exchanges, having regard to the fact that the business of the Commonwealth Bank is so small, will have a considerable beneficial effect in enabling the Treasurer to raise this £20,000,000.
– They have too much concern for their own safety to pass word, round in the way you suggest.
– That is a matter of opinion. If there is anything timid in this world it is capital.
– If they were to make the Commonwealth loan a failure they would damage their own reputation.
– I have met people who have been thrifty all their lives, and the older they grew the more timid they became in regard to their possessions. I know of one gentleman who sold some of his securities immediately he heard that it was proposed to float a Commonwealth loan. He feared that there would be a slump, and, unfortunately, there has been a slight slump; the prices of various stocks and shares are lower to-day than they were before mention was made of the flotation of a Commonwealth loan. I very much regret that I cannot support the honorable member’s proposal.
– I suggest to the honorable member for Bourke that he should withdraw the amendment. I do not agree with his proposition; I do not think it is practicable or sound. The assumption seems to be that this credit is an ephemeral thing that can be passed alone, and picked up again and still be substantial. A woman comes long with £10, representing her savings, and says - “I put that money into this loan; what are you going to give for the use of it during the time you hold it? I can get 5 per cent, for it in & commercial transaction; what will the Commonwealth give?” We are told that we do not want the money. The honorable member for Darwin says that we should issue a 5 per cent, loan at a premium.
– And 1 per cent, sinking fund.
– To be paid to whom? If no one needs to provide this substantial or ephemeral thing that the honorable member for Bourke says is required, why should we pay interest? One honorable member suggests 5 per cent, interest, and the honorable member for Bourke says that no interest at all should be paid - that we should simply write the Commonwealth’s name to a cheque, and draw upon it. Draw upon whom ? This is very serious business. Few people in Australia recognise the gravity of the situation. Whatever we may do, let us all be together. We can debate academic matters later on. I pretend to no financial knowledge, but I have met a great number of men who are supposed to know something about finance, and we have taken the best of advice. The credit of the Commonwealth will be as good as that of the Empire; and if we can do what is set forth in the prospectus, we shall be starting on a financial expedition that will do credit to the country and to the people. J hope that the honorable member will withdraw his amendment.
– I should not have spoken on this amendment had I not felt that I could persuade even the honorable member for Bourke that there was at least one fallacy lurking in the reasons that he advanced with so much fervour and eloquence. I endeavoured to follow the arguments of the honorable member with all the ability I could apply, but I found my mind in a perfect whirl. Gleaming visions of a financial paradise came before us, only to be followed by apparent and obvious fallacies. The honorable member commenced by assuming that the banking institutions would absorb a large portion of this loan, and get great benefit by so doing. I desire to assure the honorable member that the business of a bank is to borrow money from the very class of people who look to this kind of investment and desire it. The banks who are giving their depositors 4 J per cent., have to take the money deposited with the .small amount of capital subscribed as the amount they have available to advance at higher rates, in order to support commercial and trading credit, and also every other form of industry requiring financial support. No bank in Australia could venture to invest a considerable portion of the funds at its disposal in these bonds, because it would become bankrupt in a short time if it attempted to do so.
– The Savings Banks might do so. . Sir WILLIAM IRVINE. - No. This is the point to which I wish to direct the attention of the honorable member for Bourke. It is quite true that, though all banks and insurance companies, if they are to survive at all, must be prepared to advance moneys at greater risks, and at higher rates of interest than Government securities provide, they do invest a very small proportion of the moneys available to them in various Government securities, and this war loan will be one of those securities which possess attractive features. With regard to that very small proportion of capital these insurance companies and banks can afford to keep for the purchase of any Government securities, they will probably regard this war loan as being quite as good as other Government securities, and perhaps better than others; but it is but a very small proportion of their funds that they could afford to put .into this form of security. The effect that this war loan will have on banks will be that it will at once withdraw from them a considerable proportion of the money which they now draw on : that is, the deposits deposited with them. This money will be withdrawn from the capital now available to the banks for the purpose of making advances and supporting trade credit. The honorable member for Capricornia, though he did not agree with the amendment, indicated that if the Commonwealth Bank were in a strong position, and held large amounts of deposits
– I said “if it were doing all the business that is now being done by the private banks.”
– Supposing it were doing so, it could not for a moment advance this money or it would also have- to go down. One of the objects of the Prime Minister, and of the party, supporting him, in establishing the Commonwealth Bank was that it should not merely do business for the Government in financing loans, but that it should also enter into the ordinary commercial business of the country. Whether it will succeed in doing so remains to be proved, but if it is to do this ordinary business it could not allow its funds to be invested in Government securities.
– The banks in Great Britain have taken up a great deal of the Imperial loan.
– I do not think that they have in the sense that the honorable member means. I dare say that a good many of the banks have underwritten a certain amount, or taken up certain bonds in order to sell them again. The commercial banks in England cannot keep more than a small percentage of their funds in this form of security. The rate of interest is too low. They take greater risks, and get a greater rate of interest, and they have to do so, because they act as the medium of exchange between thousands of small depositors and the persons who require the money and take business risks. The banks merely act as collectors of the funds of the people who are themselves unable to find investment and deposit their money with the banks, and the latter lend it’ out at higher rates of interest than can be got from Government securities.
– The cables have mentioned the names of about a dozen banks in Great Britain who’ have subscribed many millions to the British war loan.
– Five banks are said to have subscribed £62,000.000.
– If they have done so, they have clone it merely in the way of underwriting. If we wanted any institution to undertake that work I should say that the Commonwealth Bank, if it were in a position to do so, would be the on© to which the Government would first look. But I have explained the complete fallacy at the bottom of the honorable member’s argument that the banks will absorb a quantity of this loan out of the funds at their disposal. It is quite impossible; they cannot do it. Before I sit down, I wish to refer to some other remarks made by the honorable member for Bourke. He spoke of the position of bank and insurance directors in Melbourne. Such statements, if they are allowed to go abroad uncontradicted, bear fruit. The honorable member said that the bank directors and those who control our banking and insurance companies in Australia,, especially in Melbourne, are the same persons who control the companies which deal in the metals that the AttorneyGeneral said were largely under German influence.
– That is correct.
– It is an absolutely incorrect statement.
– Upon what do you base that assertion?
– Because I know.
– I know also; and my knowledge is just as good as that of the honorable member.
– I challenge the honorable member to give names.
– I challenge the honorable member to contradict my assertion..
– I do contradict it. Usually a man who makes such a damnatory allegation is asked to give some facts in support of it. It should not rest with those who deny it tohave to disprove his assertion. I challenge the ‘honorable member if he has proof of his damaging statement to prove it by giving names.
– If I furnish the proofs’ what will become of the honorable member’s contradiction ?
– It will go to “the winds. An unsupported statement of that kind going abroad into the country does a vast amount of harm, and I am afraid that it indicates the kind of statements often made on platforms where there is no one to contradict them. I regret very much that such statements are made.
– I wish to try to show the honorable member for Bourke why,, if his proposal
War Loan_ [21 July, 1915.]_ Bill (No. 1). 5171 were pressed and put into operation, nothing could more rapidly bring the Commonwealth Bank into a state of insolvency. The proposal looks so attractive to any one who does not understand the actual operations of banking, and how it would work out, that it is just as well to put something on record alongside the honorable member’s statement. I admit that he put his proposal in very attractive - language and in a very eloquent form, but if we are to follow the operation right through - that the Commonwealth Government should place £20,000,000 worth of bonds into the keeping of the Governor of the Commonwealth Bank, and the latter should then give its credit to the Commonwealth to the extent of £20,000,000 - what would happen? The Commonwealth Government would immediately start to draw on that £20,000,000 worth of credit in the books of the Commonwealth Bank and the cheques would be paid out all over the Commonwealth and abroad, and the people who would receive them, not being for the most part customers of the Commonwealth Bank, would pay them into their credits at the other banks. Every one knows that when the banks come to settle among themselves they ascertain the exact amount of money which they owe to each other in the process of the exchange of cheques, and inasmuch as this is a vast sum of money, the net result would be that for a long time the exchange would be against the Commonwealth Bank. These balances have to be met in cash. It is the only way in which the banks can finalize the exchanges and come to a definite settlement. They pay these balances in cash.
– Then if there was only one bank the whole operation would be all right.
– Of course, if there were one bank instead of many, the whole thing would be internal in the bank itself.
– That is a great admission from the honorable member, anyhow!
– I am not speaking of the principle of what the honorable member has proposed this evening; thereis the economic side of the question on which I do not propose to touch. All I am doing is to point out the practical result of the operation.
– Under existing circumstances.
– Quite so. With the exchanges universally against the Commonwealth Bank, it would not be long before the Bank would have to get rid of the bonds and give them as security to borrow money from somebody else’ to meet those adverse exchanges. If the honorable member carried his argument to its ultimate result he would find, in the end, the Commonwealth paying interest on the greater part of the loan of £20,000,000, for which it would be receiving nothing at all. The honorable member can only come to the conclusion that if his scheme were put into operation, it would be only a very short time before he would send the Commonwealth Bank into the Insolvency Court.
.- The suggestion has been made (hat I should withdraw my amendment, and I should be very pleased to do so if I could. I wish to say, however, that I hold my opinion so strongly that I cannot accede to the request.
Question - That the words proposed to be inserted be so inserted - put. The House divided.
Majority . . 38
Question so resolved in the negative.
Debate (on motion by Sir John- For- rest) adjourned.
I take advantage of this opportunity to announce to honorable members the names of those who will form the nonparty Committee, to whom matters connected with the war will be referred by Ministers, and who will sit at convenient times. The Opposition members of the Committee will be Senator Millen, Sir John Forrest, Sir William Irvine, and Messrs. McWilliams, Watt, and Glynn. The members of the Committee from this side of the House will be Senators Long and Findley, and Messrs. Poynton, Webster, Page, and Sharpe.
I hope that honorable members generally will assist the Government to get the War Loan Bill through to-morrow, so that the prospectus of the loan may be sent out. The matter is extremely technical, and I ask honorable members to refrain from speaking at length, and assist the Government to bring the consideration of the Bill to a conclusion early to-morrow.
Question resolved in the affirmative. House adjourned at 10.57 p.m.
Cite as: Australia, House of Representatives, Debates, 21 July 1915, viewed 22 October 2017, <http://historichansard.net/hofreps/1915/19150721_reps_6_77/>.