9th Parliament · 2nd Session
Mr. Speaker (Rt. Hon. W. A. Watt) took the chair at 11 a.m. and read prayers.
– I understand that the Treasurer is meeting the Treasurers of the various State Governments to-day to discuss financial matters. Will he place before them the desirableness of making some arrangement for the adoption of a uniformrailway gauge in Australia? This is a most important subject.
– That is a matter for a Premiers’ Conference rather than a Treasurers’ Conference.
asked the Minister representing the Postmaster-General, upon notice-
– The answers to the honorable member’s questions are as follow : -
asked the Prime Minister, upon notice -
– I am unable at present to supply the full informationdesired by the honorable member, but I am having inquiries made, and shall advise him in the matter as early as possible.
asked the Prime Minister, upon notice -
In view of the immense importance to the commerce and industries of Australia that the note issue should be sound and stable and yet sufficiently clastic to meet the seasonal requirements of Australia’s trade, will he consider the advisability of referring the Commonwealth Bank Bill to a select committee, to take evidence and report to the House on those clauses relating to the note issue?
– Expert advice has been obtained in connexion with the drafting of this bill, and, in addition, the laws and experience of other countries have been closely studied. Memberswill have ample opportunity for discussion of the clauses referred to when the bill is being considered. For these reasons it is not thought necessary to submit the measure to a select committee as suggested by the honorable member.
– On the 25th June, the honorable member for Bourke asked the following questions: -
I promised that the information would be obtained. The following are the replies : -
At country offices postmasters are instructed to pay for authorized overtime not later than four days after the closing of the pay period.
Agreement Between the Commonwealth Government and the Colonial Combing, Spinning and Weaving Company.
– Recently the honorable member for Yarra (Mr. Scullin) asked me to lay on the table a statement of accounts received by the Government in connexion with the agreement of the 12th March, 1920, between the Commonwealth Government and the Colonial Combing, Spinning and Weaving Company Limited, and also the papers and correspondence relating to the claim made by the Central Wool Committee and Bawra in relation to the wool taken from the Pool under that agreement. I have looked into the matter and shall lay on the table of the Library the report of the auditor, Mr. G. Mason Allard, and also the papers and correspondence referred to.
The following papers were presented : -
Public Service Act - Appointment of G. S. Peddie, Department of Works and Railways.
Seat of Government Acceptance Act and. Seat of Government (Administration) Act- City Leases Ordinance 1921-24 - Amendments of Regulations.
– I move -
That leave be given to bring in a bill for an act to amend the Post and Telegraph Rates Act, 1902-23.
– How is it proposed to amend the rates?
– The purpose of the bill is simply to provide for free meteorological services. It is purely a departmental matter.
Question resolved in the affirmative:
Bill presented by Sir Littleton Groom, and read a first time.
In Committee (Consideration of Governor-General’s Message) :
Motion (by Mr. Bruce) agreed to -
That it is expedient that an appropriation of revenue be made for the purposes of a bill for an act to grant and apply out of the Consolidated, Revenue Fund the sum of £2,500,000 for naval construction and for a reserve for defence.
Standing Orders suspended; resolution adopted.
That Mr. Bruce and Sir Littleton Groom do prepare and bring in a bill to carry out the foregoing resolution.
Bill presented by Mr. Bruce, and read a first time.
.- I move-
That the bill be now read a second time.
This is a bill for the appropriation of the £2,500,000 that was provided last year out of our surplus for the purpose of further and extra provision for defence. It proposes that £2,000,000 shall be expended in naval. construction, and that £500,000 shall be set aside as a general defence reserve. Although the money was provided twelve months ago no action was taken to appropriate .or expend it, for honorable members will recollect that the Imperial- Conference was about to be held, and it was felt that it would be better for us not to expend the money until the result of the deliberations of the- conference on the general question of empire defence was known. The money was provided because’ it was generally recognized that something further would have to be done with regard to .defence, but it’ was a little difficult at that time to know exactly what course should be adopted “ in’ the best interests of the Commonwealth with the means at our disposal. Honorable mem?bers -now know, the decisions that were arrived at by the’ Imperial Conference.
Oh a previous occasion I dealt at some length with. them, and I do not propose, now to . discuss them all again. But I direct -the attention- of honorable members to two of them. The first is–
The conference affirms that it is necessary to provide, for the adequate defence of the territories and trade pf the several countries comprising ‘ the “British Umpire.
Certain principles were affirmed by the canferen.ce iii suPPort of that resolution, one of -which WAS-
The ‘primary- responsibility of each portion of the Empire represented at the conference for -its own- local defence.
It is proposed now to expend £2,500,000 in giving effect to that guiding- principle. T think that all of lis have come to the conclusion that the view originally taken of. the benefits that would flow from the pact arrived- at by the Washington Disarmament’ ‘ Conference was a little exaggerated, and that the drastic retrenchment that’ was made in Australian defence expenditure after that conference’ left us without a defence .provision proportionate to our financial circumstances. The amount provided., by this . bill is for additional expenditure which’ the Government proposes to . make 1 in ‘ order to .’ rectify . the position. We propose to .make- this; a part of a definite” programme, which, as I shall try to demonstrate to honorable members a little later, will best meet the most vital heeds of the Commonwealth -. But before dis- ‘ : cussing the exact method of expenditure, we must consider, the position of Australia, and the necessity for her to provide for a measure “of defence. We all have very clearly -in- our -minds what Austra-lia’s position is and lias :been throughouther history, : but- there are many .person’s .in the community who- apparently have a’ great reluctance to admit it.’ At np timehas -Australia been, in ,a position’ to pro- vide for her own -national defence. . T.Q– day, a.s in the past,’ we ai-e dependent upon the protection .afforded :. to us by :Great Britain.* .’Wp.-M ve, to recognize that fa’ct.It is useless for anybody to maintain that if we” were ‘ an independent nation, withno connexion -with the British Empire,’ we should be in a position to protect ourselves, The .certainty: that we could -not defend ourselves would, be-a considerable incentive to any country /to- take -action against us.” We have the’ most wonderful. > unprotected white’ man’s country in theworld. with only five and “a half tip. six. millions of people inhabiting it. Looking : round the world, however, we see teeming millions in other countries, and knowing the rate at which their populations are increasing, we recognize the difficulties’ with which they are –faced in. finding anoutlet for them.–’ Few of us fail to recognize that Australia, undefended, would be a great temptation to any - country. We all subscribe to the White Australia^ policy j which we say shall never, under any circumstances, be abandoned. We intend to keep this country white and not to allow its people to be faced with the problems that at present are practically insoluble in many other parts of the world. In affirming the
White Australia policy, the great bulk of our people appear to have no apprehension of a time when other nations may demand that we shall not exclude their people from “ coming freely into this country. It is true that, in the past, our right to assert this policy has never been seriously challenged, but it has enjoyed immunity from challenge because we are part of the British Empire,’ and have had the whole force of Britain behind us throughout our history. Those facts have to be considered very carefully by anyone who professes to be a- true lover of this country. The world’s circumstances, and recent happenings in Great Britain, make thoughtful men wonder whether in the future we can rely so absolutely upon Britain’s assistance.
In pre-war days Britain had a standard of naval power known as the “ two-pow.er .” standard, and it was then .considered that the safety of the Empire would be imperilled if that standard were departed from. To-day the very , best that she can hope to achieve is the maintenance, of a “ one-power “ standard. That was the basis of naval power taken .at the Imperial Conference, and it is the most that we can possibly; contemplate. Among the guiding principles that were set out at that conference was - (<i) The desirability of the maintenance of a minimum standard of naval strength,- namely, equality with the naval strength of any foreign power,, in accordance with the provisions of the Washington Treaty on limitation of armaments -as approved’ by Great Britain, all the selfgoverning -dominions and India.
We should never lose sight of the fact that during the last ten or ‘fifteen years the position has completely changed respecting’ the Empire’s pre-eminence at sea. Remembering how hard-pressed Britain is,- and that she, like ourselves, has popular government, and . knowing how the views of a democracy change from time to’ time, we must be preparedto contemplate a period when, the people of that country may be against the maintenance of even a “. one-power “ standard. If that happened, and Great Britain’s strength was weakened, even though only temporarily, Australia’s position would be imperilled. The question of the naval strength of the Empire is of the most vital importance to us. We are a very long way from Great Britain, and we have had evidence from time to time that the people of Britain do not fully realize the position of Australia, and its value to the Empire. It is quite possible that in Britain, hard pressed as she is with the war burden, a short-sighted vision may be taken of the problem of Empire defence, and expenditure may be concentrated upon the immediate’ defence of Britain to the detriment of the outlying parts of the Empire.
– We have had some evidence of that recently.
– That is so. .1 do not propose to discuss, at this time, the debatable question of the Singapore Base, but I would remind the House that there were two paramount questions that had to he considered by the British Government in framing their defence estimates for this year. One was the provision of a first class base in the Pacific, for the general defence of the Empire, and the other was an increase in the air defence of Great Britain, for; the immediate defence of her own shores. We all know that the former was vetoed, while the latter was put into operation. That was an indication of lack of knowledge on the part of the people of Great “ Britain reV garding the Empire and its far-flung dependencies. There. is. the danger that Empire defence may, in future, be relegated to the second place, Britain’s own defence . becoming her primary consideration. Looking at future possibilities I do .not think there is any’ one in- .Australia who fails to appreciate the necessity for prudent action, as far as possible with - .our limited population and financial resources, to ensure the maximum of defence for this country. It may be argued, and is argued by many people, that we need not worry about defence. They .say that the time when nations- should be seriously concerned with defence’ has passed,, and that we should reduce pur expenditure on defence. I sincerely- wish that ‘every nation could reduce the. amount. .of i* expenditure on defence, but I-‘ say .’without hesitation that the time has not. .yet come when we can do anything of the sort. We are all determined to go forward’ and evolve, if possible, . between . -.-nations. r a basis ‘ of agreement “that” “will’ ‘-cause- th-e steady and continuous reduction of armaments. The necessity and- desirability of that being done was proved at the Imperial Conference. Resolution 5. reads-
The conference, while deeply concerned far the paramount importance of providing for the safety and integrity of all .parts of the Empire, earnestly desires, so far as is consistent with this consideration, the further limitation of armaments, and trusts that no opportunity may be lost to promote this object,
That was the considered opinion: of the representatives of every self-governing part of the Empire. I think it is the desire of every man and woman in Australia! that we should try to promote the general reduction of armaments in every possible way. I tell the country that that is the policy of the Commonwealth Government, and that we shall do. .everything in our power to promote it. I hope ‘ in this discussion honorable members - will treat the subject -of defence- as above party -politics-, and will at least accept the view that we are all equally desirous of bringing about a reduction of armaments. We have to consider on what basis this can be done, the necessity for the defence of Australia in view of the world’s circumstances, and the probability of bringing about universal peace by a change in the minds and hearts of the peoples of the world. 1 propose to review some of the reasons that are given for concluding that that state of affairs, which we all earnestly hope for, has already come about. We are “told that in all countries there is a revulsion of feeling against warfare,’ because of the experiences of the late war. I agree that there is. I believe that every nation that was engaged in that war is determined, by all means in its power, to prevent its participation . in another such struggle. But some years have now elapsed since the war. People are growing up in all the countries that were combatants who played no part in, and had no experience of the war. The number of such people will inevitably increase as the years go by. Those of us who participated in, and those who lived during the war will, as the years go by, of course, became fewer. I regret that already the revulsion of feeling against war appears to be becoming weaker, and that there is a tendency to forget the lessons that the war taught. If that feeling were all we could rely upon for our security it would be a .slender reed for this continent to. lean upon. We have to remember that all nations are not in the happy position of Australia. We are . a new nation, without a history, and without the inherited hatreds and antagonisms *of older nations. It is very fortunate *hat we have no past. But we must not forget that most of the .nations of the world are not similarly blessed. The older nations have their hatreds, which have endured for centuries, and it is obviously impossible for them to wipe the slate clean and start anew. We all hope that a new world will be created, but it cannot come as quickly as some people believe. We have to recognize not only that there are national hatreds, but also that they may lead to complications in which innocent nations may become involved. Another thing that we have to remember is that the governments of the world and forms of government have been changing rapidly of late. We have seen countries that Mr. Bruce. were monarchies go to the farthest extreme of democracy. In building up a new social and industrial order, it nearly always happens that a group of men, who have managed to seize power inside a community, gain their influence and position by appealing to the national sentiments and aspirations of the people over whom they rule. Having achieved their immediate aim they frequently have to continue their appeal in order to retain their positions. A very real and very grave danger to the peace of the world lies in the fact that leaders, to maintain their position, may appeal to the sentiments of a people and arouse their national ambitions. With all these facts in mind, we . must also remember that human nature has not changed, and that if we rely only upon the new spirit that has grown up, dangers from which we must protect ourselves will still remain. Yet I would remind honorable members that while all these things are true, we may nevertheless take steps to ensure, as far as possible, that the nations of the world shall follow the paths of peace. We have a great groundwork for peace in that the overwhelming majority of the peoples of ‘most countries desire to be rid of the hideous arbitrament of war, and’ to substitute for it a wiser and saner policy, composing their differences in a less tragic way. We have made a start, for we have attempted to create machinery to ensure that the people of the world shall not, impelled by natural instincts, rush into war whenever they have a difference of opinion. The League of Nations has come into being, and I say again, as I have said on many occasions, that it is the greatest hope of the world to-day. Anything I can do to assist it, or to ensure that it shall obtain the power and prestige by which its will may become paramount, I shall do. I intend to do everything that lies in my power to promote its interests and authority. Nevertheless I recognize that it has not the power to-day to enforce its will upon the nations. Three of the greatest nations - the United States of America. Germany, and Russia - are not members of the League. Until all the nations are within the League, it will certainly be hampered and weakened in its efforts to secure world peace. Though it has striven earnestly and consistently since it was created to bring about a reduction of armaments, it has not yet succeeded, and there does not at this moment appear to be any real hope that it will succeed. It has been frustrated by almost insurmountable difficulties. I would remind those honorable members who sometimes talk of the Treaty of Washington and the wonderful results that flowed from it, suggesting that we might take similar dramatic action in the reduction of land defences, that the problem of the reduction of land defences is a thousand times more difficult and complicated than the problem of the reduction of naval defences. The main proposal which the League of Nations is now considering is the Treaty of Mutual Guarantee, about which the honorable member for Perth (Mr. Mann) recently asked a question. That treaty has in it an inherent defect, for the one thing that has confronted the League of Nations since its creation has been the objection of many nations to Article 10 of the Treaty which constituted it, which provides that all the nations belonging to the League shall take action to ensure each other’s territorial integrity. The Treaty of Mutual Guarantee runs very much on the same lines as Article 10. We in Australia, in the meantime, are faced with the question whether we should take further steps to defend ourselves, and the view of the Government is that the Treaty of Mutual Guarantee is not likely to be so generally accepted that we can place any reliance upon it for ensuring the world’s peace. The Washington Treaty has been accepted by some people as a solution of the problem of Australia’s defence, for they argue that it has rendered unnecessary any further action on our part to secure our own safety. I merely remind those people of the provisions of that treaty. It achieved a great work, in that it stopped the competition in naval armaments between Japan, America, and Great Britain; but, apart from stopping that competition, all it did was to prevent the countries bordering on the Pacific from attacking one another. It provided that the bases from which those nations could operate should be so far away from- the country they might desire to attack that attack would be almost impossible. As honorable members know, the United States of America cannot go farther west than Honolulu, while Japan is restricted on the other side of the Pacific. Great Britain could have had a base at Singapore, but even then the three countries would be so far away from one another in the essential factor of bases that attack would be almost impossible. A feature that has been overlooked, however, is that there is nothing in the treaty that would prevent - and not for a moment do I suggest that anything of the sort would happen, or could be contemplated - Japan attacking the American’ possessions at Manila. In leaving the consideration of that point, I merely indicate that while the Washington pact did’ a valuable work in stopping naval competition between three great powers, it really did not ensure for all time peace in the Pacific, for there are many problems still left unsolved. If, remembering that the people whose countries border on the Pacific belong to different races, have different outlooks and different mentalities, and are of different colours and of different religions, one can be certain that the temper now prevailing will continue, the peace of the Pacific may be regarded as assured. But I do not. think, taking all the factors into account, bearing in mind the possibility of changes of view, and’ visualizing the complicated and difficult questions involved in China and the East, that any one would - be prepared to say with certainty that the nations which are . now working in absolute accord might not find themselves opposed to one another on questions that there might be the greatest possible difficulty in settling. I wish to deal with one other argument that is used to show that there is no necessity for defensive measures being taken in Australia. It relates to the friendly gestures of one nation to another. Friendly gestures may be valuable, but if they take the form of great nations stripping themselves of their defensive power, they will not accomplish what is hoped for. A friendly gesture by one nation to another, if it is responded to within a reasonable time, may lead to further gestures of a similar character, and by it much may be achieved ; but gestures along the lines of ever reducing your own armaments, and eventually placing yourself in the position of being incapable of defence, will not promote the world’s peace, but will be a direct incentive to aggression by the. less, scrupulous’ nations. We do root know whether’ the gestures that have been made will be responded to,, on whether: they wilL have any effect. I sincerely trust they will. We should clear from our minds, one view which I have heard expressed, and which, appears, to be gaining currency, namely, that, .the gesture recently made by’ the British- -Empire stands for all time, and that in no circumstances will steps be taken to reverse the decision already given. A gesture has been made, but only with a view to inducing other nations to respond to it. If there is no response, another course must be adopted.
– Example is. always better than precept.
– However much we may desire peace and the reduction of armaments, there are so many circumstances io be considered that Australia must take steps to ensure a. reasonable and prudent measure of defence. In recommending to the House the manner in which this £2,500,000 shall be allocated, the Government is ‘-‘hot submitting its defence proposals1 for tie ‘future. This is only a measure to- ‘ appropriate an amount which v?as- allocated last, year,’ but which has not been appropriated. It is obvious that the defence proposals of the Government cannot, be presented to the House until they can be shown in their relation to the general defence expenditure for the year. -The Government hopes that .the. budget proposals’ will be brought down early, when the. whole picture will . be shown. When the Defence Estimates are introduced, the Government proposes to submit a .programme not only for the ensuing year; but for the succeeding four years also, that is’ to say, a programme embracing a period of five years.. At this stage proposals’ for the next year only can? be- dealt with’ by this- House. Personally, I very’ much regret that the question of defence cannot be removed! tibia the arena of party politics, so that wo could lay down a programme1- for’ a period of years’, in the- full knowledge .that, unaffected by changes-‘ of government, that programme would be proceeded .with’. Unfortunately, that cannot ‘be’ done. The- Government, however, proposes to. place before- the House’ a- pro1gramme for a term of ‘ five yeaTs’. That programme deals with’ the three* arms of defence - the navy, the army, and’ the air -as well as with the supply of’ the: muni tions’ required by those- three arms: ‘ The: f-ull objective- will’ ‘not be reached: for fiveyears.
I now desire to” refer to a vital matter in connexion with Australia’s defence, which, it is not proposed to include in the proposals for the coming year: I refer to. the provision of a first class base in the Pacific. In view of the decision of the British Government that the construction of a naval base at Singapore shall, not be proceeded with at present,, tie Government has considered the position very carefully. Ministers are stilL convinced of the paramount importance of that base,, in the interests of the Empire as a .whole, and believe that it is only ‘ a matter of time for that decision to be reversed. The gesture made by the British Government, was in. the hope that a base at Singapore would prove to be unnecessary.
– Let us hope it will be so.
– I entirely concur in the honorable member’s sentiment. This Government does not propose, to take- any act-ion at present towards establishing a first class naval base. It is, of course, necessary that the provision of docking, facilities for our own units shall be considered, but that does not conflict in any way . with any determination, which -may be arrived at regarding the establishment of a first class base. ‘ The - Government hopes that,, by adopting a ‘programme, which is spread over a period, of, five years, and which places before’ each’ arm of defence a. .definite objective, better provision for the defence of1 Australia will be made, and waste eliminated.. Waste was. inevitable ‘ when, our defence’ proposals covered’ a period of one year only, arid when: changes OS policy took place with, each change of Government, ‘and sometimes with a change of” individual Ministers. We’ believe- that the proposals’ of the Government will be- the most satisfactory to’ ensure results commensurate with the expenditure to be- incurred. Under .this- bill two trust funds will be. created1- one for naval construction,’ and! the other for an ordinary defence’ reserve. The- objects of the general defence; reserve1 are set out’ in ‘ clause 5-, and I need- not, therefore, deal with them” at length at? this- stage-. The- establishment .’of a trust; fund for’ naval: construction, involves a; very” important principle. I f eel’ that’’ it is incumbent on me- to give’ to the House -the reasons which- led: the Government to decide on the construction of two 10,000- to& modern cruisers,’ and for their belief that ‘ such vessels constitute^ - the’ most effective, provision we can mike for the defence ‘of Australia. - Honorable members are aware- -that both the Melbourne and the Sydney are . due for replacement in the present year1. In’ view of the fact that all nations- are’ now building 10, 000 -ton cruisers- the maximum size permitted under the Washington treaty- out cruisers are out df’ date, and could not successfully engage a-‘ modern, cruiser, which to-day is the1 principal arm of naval defence? uséd .by neatly every nation. We’ must . als’o’ .realize- that our -present Vessels have’ a; sp”eed Of 23 knots only, which is not sufficient tinder existing conditions.
– What year’s model will the new cruisers’ conform to?’
– The plans have only been finished within the last month or two. Tho Government considers that these two cruisers are- vital to the protection of Australia. To show that I must refer shortly to the problem of Australian defence. We must recognize that Australia’s defence problem is primarily, a .’naval one. All branches of the defence service- navy,, army, and air- admit that.. While it is true- that we” must pro,vide a measure of defence on land, yet, .as the Commonwealth is completely sur- . rounded by water, amy attack must .come from across the sea. . We must protect ourselves against any. force’ landing/ on- our ..shores^ an’d- also against the* interruption of our .trade routes and ‘our commerce on .the seats. It is obvious” that- naval- protection is essentially and the question .arises,, what form shall that protection take? . Let us; consider first!- the possibility of an attack upon Australia-. We ,Have- to contemplate^ two’ contingencies ‘ismly.;’ -first, that a> great- expeditionary force may be sent against us1, and, second, that a raiding -force- of -a minor character -say’ atta’ck us1. -We1 can set aside1 the first contingency’ as a- practical impossibility. -No, nation1- would -contemplate sending’ an’ ‘‘expe&ftoriary” force1- “against Australia unless’ it’ bald1 complete and’ ablate1 control *<A the seas. Still’, it is we’ll that we- Should5’ be f reminded c” the posi’tion1 in- which Australia is now placed With two;’ or’ even” four cruisers’, Australia could noli prevent /any first class ‘power from obtaining’ absolute’ control of the Pacific. Had- we: to rely solely” on our own’ navy an expeditionary - force could not be’ prevented from landing in -Australia. It is only because 6f the .naval strength of Great Britain that *0 other power is able to obtain Complete control Of the Pacific. Another’ factor which mUSt be Considered is that by the Washington Tre’aty we’ have”’ signed away our right to construct Capital ships. It is frequently said that because- of the great development’s which have taken place in Connexion with submarine’s a-nd £h> the air, the capital Ship1 is nol longer the- determining factor’ in naval warfare, -dr in arriving at naval supremacy When in Great Britain I examined the arguments respecting ‘capital Ships very closely, and on that Subject obtained a great deal of information. No doubt honorable’ members’ recollect the Statements; made fey Admiral Field, When he was. in Australia with the Special1 Service “Squadron. In’ dealing with this matter he’ Started from’ the” basis of a nation possessing’ Submarines, which were’ countered by another’ nation’ with a mosquito fleet capable 0f destroying submarines-; The first nation had5 then to produce ‘something bigger in’ .the way of surface craft to destroy the” mosquito1 fleet . of its enemy. Again the tables would be turned, until at last yOU worked up again to’ the final and determining factor-the. capital ship. I do not propose to deal sit length with’ Admiral Field’s illustration, but I Shall put before’’ honourable members a, few facts in regard to capital ships. I think’ there are’ onlY two well-known British naval men who’ hive asserted” that the’ day’ of .the capital ship is. over’. One is Admiral Sir Mark Kerr and’ the other Admiral Sir Percy Scott. With regard to these exponents of the theory that the ‘day 6’f the capital ship is OVer I remind honorable member’s that Admiral Sir Percy ScOtt has propounded1 the theory for a very lon-g’ time’. After the war, when’ th’e British Government and the Adinira’% desired’ to discover whether there’ was; anything in th’e theory’ that the” capital ship had- seen its d’ay”,. they invited’ Admiral Scott to give’ evidence* before- a mixed committee- of Government members’’ and experts’, -bitt the Admiral* did not appear before the: committee, and did not give evidenced As a- matter of fact he’ lias” never given evidence’ before”’ any. expert commission to: substantiate the’ view he’ has put forward. - Against his content tion it is significant to remember that there is not one single senior naval officer who served in the late war who subscribes to the view that the capital ship is not still the determining factor. There is also the fact, which must carry considerable weight with those who are not experts upon the subject, that the three great naval powers of the world to-day are Great Britain, the United States of America and Japan. Each has its Admiralty advisers and every -one of these holds the view that the capital ship is still the determining factor in naval questions. The conclusion arrived at by the three greatest, naval nations on the best expert opinion is, rather more valuable than the views expressed in newspaper and magazine articles, written by persons who have never held any great position in any navy in the world. Another fact to be remembered is that during the war the British Admiralty had two departments established, one for the improvement of the submarine and its power of offensive action, and the other to improve methods for countering the submarine. These two departments were pitted against each other and on every occasion the counter-submarine department’ defeated the department , established to improve the submarine. Upon all the evidence before us we have to recognize that to-day the submarine is not .the menace- that it was imagined it would be. It is a valuable and -useful arm in some respects, but it is not a menace to the modern capital ship. If honorable members., know any slang they may have heard an expression which I propose to use because it seems to me to describe the position extraordinarily well. It is that if the modern capital ship has a bulge upon it, it has also a bulge on the submarine.
Another . important, feature of defence is air defence, and it is suggested that air. forces can successfully attack and destroy a modern capital ship. I need not deal with that contention - at great length, because I think that most persons, while they appreciate the importance of an air force, are agreed that it is really no menace at all to the modern capital ship. The . first point to be remembered of course is that the range of attack from the air is very limited. It is only in narrow waters and for purposes of coastal defence that -air forces will be a menace. In view of the use of anti-aircraft guns on war ships, and the fact that a first- class modern fleet ‘ would be accompanied by aircraft carriers from which aircraft could counter an offensive from the air upon the capital ship, I do not think that any one can seriously contend that an air force is a menace to the modern capital ship.
– A number of experts think it is.
– The honorable gentleman may be able to produce the opinion of a number of experts to that effect, but I can only say that when in Britain I made the most exhaustive inquiries .on the subject, and I know of no modern opinion of any one who held senior rank and command during the late war, or since the war, that endorses the view that at the present time an attack from the air should be regarded as a menace to the modern capital ship. The best expert view now held is that neither submarines nor aircraft are a serious menace, because both can be successfully countered. I have referred to these matters for the reason that we have to recognize that the capital ship is a determining factor in naval warfare, and so long as the capital ships of Great Britain are afloat no country dare send a great expeditionary force against Australia. But a minor force might be dispatched, convoyed by 10,000-ton cruisers, and that would be a serious thing for us unless we had means to counter such an attack. We have a coast-line of 12,000 miles, and an intending invader could choose his point of attack, and it would be impossible to take measures to meet an attack at every possible point. There is, of course, a great part of our coast-line on which it would be useless for an invader to land, but there is still a considerable part upon which it would suit him to land, and which it would be impossible for us to defend.
– How many boats would be required to defend our coast-line of 12,000 miles?
– A comparatively limited number, for the reason that our vessels would seek out the intending invader and try to prevent him from coming here. If he succeeded in getting here we might disrupt his communications. Thus we might prevent an invader from risking the attempt to come here. That is the great value of a mobile sea force as against a much greater land defence force. If -wo hid not sufficient naval provision to make the landing of an invading force in Australia too hazardous an adventure, we should find it difficult to equip and transport a land force to meet the invader. In a new country of such vast extent as this our inadequate means of transport would so limit our effort and hamper our land defence as to make it almost useless.
The last consideration which it appears to me proves our problem to be. a naval one is the necessity of keeping our trade routes open so that our commerce may be carried freely to other countries of the world, and thus enable us to continue our economic life. One may take the view that we need not worry about naval defence; but that we should provide ourselves with reasonable land defence to cope with any possible invader or any expeditionary force that might come against us; that we should have a very efficient air force, and a certain number of trained men ready at any moment to defend the country. But unfortunately that would not suffice if we got into trouble. At the present time we cannot economically establish munition works to supply the whole of our requirements in modern munitions. In the programme which the Government is bringing down it is dealing with the question of munitions, and we propose to go as far as we economically can at the present time to make Australia self-contained in certain respects with regard to the supply of munitions. But when we have done everything that we can possibly do in this direction it will still be essential, if our troops are to be put into the field to meet their opponents on equal terms, to bring from overseas a great part of the munition requirements. Unless our sea routes are open and our ships can safely travel over them, that will be impossible.
These are the reasons which have led the Government to the view that it is essential that we should build at the earliest possible date two modern cruisers of 10,000 tons each to replace the cruisers Sydney and Melbourne, now due for replacement. The provision proposed, as honorable members will see, is an amount of £2,000,000 for naval construction. Unfortunately two 10,000 ton cruisers cannot be built for that sum. The cost of building one cruiser in Great Britain will be somewhere between £1,900,000, and £2,000,000. Unfortunately I cannot at the present moment say exactly what the cost of building a cruiser of this class in Australia would be. It would be substantially more than the cost of building it in Great Britain. The Government is now proceeding with its inquiries and investigations to ascertain what it would cost to build such a cruiser in Australia and the time it would take to build it. The bill contemplates a sum of £2,000,000 being made available for cruiser construction, and the Government tells the House quite frankly that what is proposed is the building of two cruisers. At the present moment I cannot say exactly where the second cruiser will be built. All I can tell honorable members is that the first cruiser is to be built in Great Britain.
– What time will it take to build it?
– It will probably take two years to build it.
– Does the right honorable gentleman say that the Government has decided to build the cruiser in Great Britain before he knows what it would cost to build it in Australia?
– I can tell the honorable gentleman that all the investigations made’ to date disclose the fact that the cost of building one of these cruisers in Australia could not be under £3,000,000.
– I do not believe it.
– If the honorable member is able to produce evidence that that estimate of the cost of building a modern cruiser in Australia is not correct nobody will be more pleased than I. The facts before the Government show that the minimum cost of building a cruiser in Australia would be £3,000,000. We have had the opinion that it would be substantially more. The Government is very anxious that at least one cruiser should be built in Australia. Many reasons for this must be immediately obvious to any one. One is that the Government would naturally be desirous of promoting industry in Australia. Another is that unless it is to come about that defence will not be required we shall in future years have to make provision for the construction of further units of the Australian navy. To do that it will be essential that we shall have a ‘first class dockyard, and a first class staff in Australia capable of doing the work. Apart from this we have the fact that from time to time we shall inevitably require to repair our ships. We shall not be in a position to do that until we have actually built in the Commonwealth snips of the class we require.
– Any economy in that way would be possible only if both vessels were built in the same yardandwith the same plant, but that cannot be done in Australia because of the big delay that would be involved. If two cruisers were constructed within the Commonwealth they would require to be built in two separate yards.
– Would it, not make some difference in the cost if one were built at Newcastle and the other at Sydney?
– It would make practically no difference. If. both could be built in the one yard the cost might be materially reduced, but on accountof the delay we cannot possibly agree to that. Therefore, it is proposed that an order for one cruiser shall be placed immediately in Great Britain, and we shall get delivery of itwithin two years. In regard to the second cruiser the Government is continuing its investigations regarding the possibility of having, the vessel built locally. Of the estimates we have received . so far, £3,000,000 is the lowest, and some are very much higher. That is a very seriousstate of affairsbutthe Government will investigate the matter further, in thehope that itmay be found that the cruiser can be built locally at a lower figure than any we have yet received. Upon this measure the Housemust come to a decision regarding the first cruiser, but no decision will be arrived at in regard to the second cruiser until the whole of the facts and the circumstances have been again placed bef ore theHouse, and the House has had. an opportunity of expressing its views uponthem. I apologize to honorable members forhaving detained them at such great length; my excuse is that themeasure relates to a matter of vital importance to Australia, and the Government thinksit imperative thata decision thereon should be. made attheearliestpossiblemoment.
.-I move -
That this bill be now read a second time.
This bill deals with a large and important subject affecting commerce throughout the continent, and requiring uniformity in legislation within the Commonwealth. The need for this legislation has become increasingly urgent, owing to the expansion of interstate trade and commerce; and theextension of intercourse throughout the Commonwealth. The power of Parliament to legislate on this subject is contained in placitum xvii. of section 51 of the Constitution, which provides that Parliament shall, subject to the Constitution, have power to make laws for the peace,order and good government of the Commonwealth with respect to bankruptcy and insolvency.
The bill submitted provides for one systemof bankruptcy throughout Australia. It had its origin in a conference between representatives of the Commonwealth and the states of New South Wales, Queensland, Western Australia, and South Australia, convened by me as Federal Attorney-General in June, 1907. A bill had been prepared by the Commonwealth, officers, and was submitted to the conference, but it was not until 1912 that that bill came before Parliament, although it had beenready for submission to Parliament as far back as 1908. It was introduced in. the House of Representatives in 1912,but itdidnot proceed beyond the first reading.. In1914, it again made its appearance in the Senate, and advanced in committee to clause 179. The war then intervened, and it was not practicable toreconsider the measure till 1922, when it wasagain introduced in the Senate, after undergoing careful revision by the AttorneyGeneral’s Department. The present bill resembles, in. principles, the first bill introduced, but. the English bankruptcy acts havingbeen revisedand enacted in consolidatedform this proposed legislation has been revisedaccordingly. It has also been studiedin detail by chambers ofcommerce, law institutes, and other public bodies, and their representations have been given the fullest consideration. Valuable advice has been given by Judge* Moule, of Victoria, and Mr. Justice Street, of New South Wales. Representations from, the states have also been considered, and the officers of the Commonwealth Law ‘ Department, too, are deserving of commendation for their constant attention and patient research in the preparation of this measure.
The bill, whilst including, the main enactments of the English law,, has been framed solely with a view to meeting the requirements of the* Commonwealth. The position, at present, is that six state systems prevail in the Commonwealth. The six states, as far as bankruptcy is concerned, are six distinct countries. When this measure is passed, there will be a uniform bankruptcy law throughout Australia. The laws, of the several states- have been derived from the English law, but under their legislative powers, the states have moulded their legislation to suit their own purposes. This has naturally led to many, divergences. It is not necessary to go in detail into the history of the: bankruptcy and insolvency laws- of Australia, or into the early history of bankruptcy legislation in the’ United.1 Kingdom. For our. purpose, we need only refer as* far back as 1869, when the English Bankruptcy Act was passed. That Act was for a’ time a model for Australian enactments, but it was. superseded in 188!3. There* was- a further amending act in- 1890, and the law was consolidated by the Bankruptcy Act of 1914. Bankruptcy law,, though in the: main the creature of statute, has also been influenced.’ in- it3 development by judicial decisions-.
Of the leading statutes in force in the Australian States, the. New South Wales Bankruptcy Act. of .1898 is a consolidation of all the Acts in force in the state at that time, and is based, in the main,-‘ on the English Bankruptcy Act of 1883. ;The most, recent consolidation in Australia is th’e Victorian Insolvency Act of 19’f5. The old law in Victoria was based mainly on the English Bankruptcy Act of 1S69, ,but the present “ statute contains provisions taken* horn, the English Bankruptcy Acts-of 1883- and 1890;r~and the English Deeds of, .Arrangement Act 1887. The Queensland Insolvency Act of 18^4 is modelled principally “ on the English Bankruptcy Act . off “1S69, as- is also the Tasmanian Bankruptcy Act o£ 1870. The SOuth Australian; Insolvent- Act of 1886 is. a. consolidation of the laws relating to insolvent debtors’, but all ‘.those laws were passed prior to the English Bankruptcy Act of 18831 The Western- Australian Bankruptcy Act’ of 1892 was adapted from the English Bankruptcy Acts of 188% #nd 1S90. ‘- In 1898 it was- alteredto include Par-tt XI. of the South Australian Insolvent Act.
Though there, is a general resemblance1 in the1 principles of bankruptcy and insolvency in the’ several States, a number of variations in their laws have naturally grown, up. These differences relate,- in the main, to administration and details of procedure. For illustration, let us look at th’e- modes of dealing with a debtor’s” estate in the several states. In’ New South Wales, after a petition is presented, an’, order of sequestration is made. Under this, the estate; of the insolvent debtor is’ realized and distributed . among his creditors: They may, however, resolve to- accept a proposal by the bankrupt . for a composition or a scheme of arrangement, and the- sequestration order1 may then- be annulled. Another alternative1 method for the- realization and distribution of the estate is in pursuance of. a- deed oi conveyance’ or assignment for: the’ benefit of- creditors’, which, if duly registered: under the- act5 is- protected, but as: to’ the carrying out of which1 no’ provision; is ‘ contained iri the act.’ In Victoria, there are”. ‘ several methods. An; estate may be* administered under’ the act, after an adjudication, or: there may be a -liquidation by arrangement or a composition without adjudication of insolvency, or’ a Composition or , scheme of arrangement may -be agreed? -to after sequestration. .Provision is also made for registration of- private deeds ;of arrangement.. In South Australia, art estate may be administered : under an adjudication of insolvency r. and there…ma.y be a composition or scheme of arrangement, with or without insolvency. The law also contains extensive provisions governing private deeds ..of assignment, under which many estates are dealt with without adjudication1 by the court. In Queensland, provision “ is’ -made” for administration in bankruptcy . .on . an order “ adjudicating the debtor insolvent. The creditors’ may subsequently accept a proposal- for a composition or a scheme of. arrangement. An estate maty, also be administered’ without- insolvency by a liquidation, by arrangement or by a” composition.- . A large number of - -estates is dealt with under private deeds of assignment which ‘are not subject to regulation under the insolvency legislation of the state. In Western Australia, a receiving order is made upon a petition, after which the creditor may accept a composition or scheme of arrangement without bankruptcy. If no composition or scheme is accepted an order of adjudication is made, after which a composition or scheme may be accepted. There may also be compositions, schemes of arrangement and deeds of assignment without bankruptcy, as in South Australia. In Tasmania, an estate may be administered under an adjudication of bankruptcy, after which a composition or scheme of arrangement may be accepted by the creditors; or under a liquidation by arrangement or a composition without adjudication. There appears to be nothing in any of the states, except Victoria, to prevent private assignments taking place outside the insolvency statutes; but they consitute acts of bankruptcy. The purpose of the bill is to simplify the procedure and make it uniform throughout the Commonwealth.
Information on the manner in which the various modes of administering the estates of debtors are availed of in the several states is given by the statistics, which we have obtained from state official sources. In New South Wales, the number of sequestrations for 1921 to 1923 was as follows:– .
Private deeds of assignment are used in Queensland. I am informed that the average annual figures are as follow: - Assignments, 200; liquidations by arrangement, 20; and insolvencies, 100. This return takes into account a number of years.
In South Australia, the respective figures are: -
No estates were dealt with in Victoria under the liquidation by arrangement or composition without insolvency provisions. In Queensland the average was only 20 ; but in Tasmania, liquidation by arrangement appears to be mOre popular.
Differences, which may be specifically mentioned, have also arisen in regard to particular phases of the proceedings. Whilst acts of bankruptcy are practically the same in all the states, the period before the presentation of the petition within which they must have been committed differs (in South Australia it is twelve months, but in the other states it is only six months), and the amount of the debt entitling a creditor to present a petition varies in the different states as follows : -
New South Wales, £50. ‘. Victoria, £50.
Queensland - Single creditor, £50; two creditors, £70; three or more creditors, £100.
South Australia - Single creditor, £20; two creditors, £30; three or more creditors, £40.
Western Australia, £30.
Tasmania, £50. The property divisible amongst creditors is of the same nature in each state, but the extent to which it is applicable to the payment of his debts varies in some cases, as, for example, in the case of life insurance policies. Debts provable in bankruptcy or insolvency are practically the same in each state, but the provisions as to the priority of debts vary. In all states, except Western Australia, the Crown has priority over all other creditors. In Western Australia the Crown has priority only as regards certain debts. Wages and salaries of clerks, labourers, &c., are given certain priority in all states, but the extent of the protection varies. The rules for the examination of the bankrupt also differ. In Victoria and Queensland, examination is discretionary. In the other states it is compulsory. Important differences are found in the respective provisions as to fraudulent preferences. The law on this point in New South Wales is peculiar, in that it avoids transactions which have the effect of giving a preference to one creditor over another. The other states all rely on the intent to prefer. The time after the making of the payment, &c, within which the transaction may be attacked under the provisions also varies. The relation back provisions also show divergences. The Victorian law contains no such provision, and in the other states the period of relation back varies considerably.
These diversities of practice clearly indicate the need for a federal measure, and the business community has been most pressing that this Parliament should enact a uniform law. It will, be interesting for honorable members not closely in touch with bankruptcy affairs to learn of some of the difficulties which the commercial community wishes to obviate.
There is the strong desire, for in- . stance i for a standardization of the methods of handling estates whether they are wound up under the bankruptcy acts or under private deeds of arrangement made without sequestration. It has been pointed out by a business authority that where there are interstate creditors, uncertainty-. always exists- about’ the winding up .procedure. This feeling is quite apart from the difficulties that have arisen in completing different forms of proofs of debt to be sworn before commissioners with the proper qualification. Modern views of legislation, as expressed in the English and Victorian legislation, favour regulation and supervision as provided in this bill in connexion with the winding up of assigned estates in the interest of .creditors generally. Interstate - creditors will especially appreciate the. supervision that will be made possible by the -bill, which will bring our legislation in this regard, up to. date.
The advantages of . obliterating state boundaries, and enacting a general law over the Commonwealth, have also frequently been advocated -by business men. By this measure many of the difficulties attending the handling of assets in the states other than that in which the bankrupt sequestrates his estate will be removed. It will simplify the procedure, not only in cases in which a bankrupt holds assets in more than one state at the time of sequestration, but especially when he, without obtaining his certificate of discharge, commences trading and acquiring- property in another state. In experience in the past it has been found impracticable to follow .the afteracquired property of an uncertificated bankrupt owing to the lack of coordination between the state courts. In this connexion, I mention the case of Hall v. Wolf, -7 C.L.R. 207 (1908), in which a person in Queensland, whose estate was being wound up under’ the liquidation by arrangement provisions, subsequently went to “Western Australia. It was held by the court that, although the assignment of a bankrupt’s property to the representative of his creditors under the law of a country which has jurisdiction over his person, operates as an assignment of the movables of the bankrupt wherever locally situate, the rule does not extend to after-acquired property situate in another country which property is acquired by the bankrupt when he is not domiciled in the country where the assignment was made.
There is a desire, also, for uniformity in the effects and incidence of bankruptcy in. such matters as the effect of bankruptcy upon” insurance policies. An amendment to the bill will be sub- mitted to honorable members to make a still more generous provision in this- respect. ‘
The bankruptcy and: insolvency ;’ lawsof the several states i necessarily have a limited territorial application. In the event of judgment being obtained in Victoria against a debtor, and execution being levied, although not completed, and the debtor becoming bankrupt in New South Wales before the completion of execution, the official- assignee in New South Wales would have no title as against the judgment creditor” in Victoria, as the retrospective operation of the order of sequestration under the New-South WalesBankruptcy Act does not divest the’ title of the execution creditor in Victoria (Union Bank v. Tuttle, 15 ‘V.L.R., 258).
There is also urgent need -for uniform legislation throughout the Commonwealth to ensure that those, who commit breaches of the law in any part of the Commonwealth shall be liable to punishment. Th a case of insolvency that occurred’ in Adelaide some time5 a.go, . involving some deceitful and fraudulent methods, Mr. Commissioner RuSsell made certain observations, which were ‘thus reported : -
It seemed to His Honour a matter q’f regret, and perhaps one of the strongest reasons that existed for the federal legislation which had been contemplated, to enable the court in any of the states to grapple and deal’ once and .for all with insolvents, whether they be in New South Wales or any other part of the Com.monwealth. But he had to deal with legislation as it was. South Australian legislation had its limits. The principle was that “ you must catch your hare before you can cook it.” The jurisdiction and .powers of the court were territorial. They had to inquire whether the insolvent- .was a blunderer, a bungler, or a dishonest man. The insolvent, as regarded his acts in Victoria, could not be penalized here under section 175. There was no ‘doubt that the man had acted wrongly, but the answer tothat was that the tribunal capable of punishing him was across the border. The offences in Melbourne would not be dealt with if he were punished in this state, and the court could only deal with his South Australian offences.
In framing the bill’, the following points have been kept in view: - (a) The measure will extend to’ all parts of the Commonwealth. In any sequestration, therefore, there may be creditors in all such .parts : (b) as far as is consistent- with the effective administration of the bankruptcy law, the new system must not prejudicially affect the administration of the laws of the states : (c) it will take some time to establish, a uniform organization throughout the Commonwealth, and, therefore, provision is necessary to enable the existing organizations to continue in the. meantime: ((Z) the English .ca.se law forms an important:, part pf the existing bankruptcy and “insolvency laws of the states.’ Existing phraseology, therefore, whenever possible, ‘ must be retained : . (,«) ^ministration- must be as economical as possible, consistent with efficiency, . The English Bankruptcy Act .and Deeds of Arrangement Apt have been taken .as the basis for this measure. At the same time, the acts of the states have been carefully considered, and- an ‘attempt has been made to harmonize the provisions ofthe state legislation which differ in principle or detail. It is recognized that the rights of Creditors of a debtor in’ pus state should not. be greater or less than those of creditors’ pf . the same debtor in another state. Australian conditions generally have’ been considered in framing a measure that ‘will afford reasonable relief to creditors in any -part of the Common* wealth, without necessitating harsh treatment of debtors. . I shall now deal in general terms with the principles proposed in the bill, in considering which, it will be well to keep in mind what the chief aim of such a measure should be. Ringwood, in his work,, The Principles of Bankruptcy, writes - r
The chief aim of bankruptcy should be to combine and regulate two great objects: first, the distribution pf the debtor’s effects in the most expeditious, equal, and economical manner; and secondly, his release from his creditors, when he has made a full disclosure and surrender of his property, and has not been guilty of fraud or misconduct.
Although the creditor has to be considered, yet the debtor, too, must be justly treated. He is not to be merely the prey of the creditors. If he has acted fraudulently, he should be punished ; but when unfortunate, he should get reasonable protection.
Three methods of dealing with the. estate of the debtor are provided in the bill. The first ig the sequestration of the estate^ including provisions for a composition or -scheme of arrangement, after sequestration. This procedure is practically available at present in all the states. The second is a composition . scheme of arrangement of assignment without sequestration. Under this method, the provisions for liquidation by arrangement contained in the Victorian, Queensland, and Tasmanian statutes, will vanish. I have already shown that they are not used in Victoria, little used in Queensland, but more popular in Tasmania, The provisions relating to this method, known as Part XI., are taken from the acts in force in South Australia and Western -Australia, where they are used in practice- They are some-: what similar to -the liquidation by arrange-i ment provisions before referred to. The third method is a deed of arrangement^ under the provisions known as Part XII. This is in force .in Victoria only.The provisions, adapted to Australian. needs) are taken from the English Deeds of Arrangement Act 1-914. Private deeds of arrangement are to-day- used freely in’ all the states; but .under this bill, unless’ registered, they will be void. These methods, which I shall explain, more fully at a later stage-, will be the standards’ to’ be followed in .Australia: Experience will prove the value of each. At present, they have all been inserted in the bill to meet the needs of the commercial world.-‘ This measure will apply to the Commonwealth and . may be extended to its Territories, but will not apply: to corporations, partnerships,’ associations, or companies registered under any Commonwealth or State Act which provides for their winding up. It will apply to all o.ther debtors, including married women, foreigners, and persons having privilege of Parliament. Except as otherwise’ expressly provided, the bill will bind the Crown, as representing the Commonwealth or a state, so far as it relates to remedies against the property of a debtor, the priorities of debts, the effect of a composition or scheme of arrangement, and the effect of an order of discharge. The bill effects changes in the existing law regarding the. Crown’s right to claim priority over all other creditors. In England, the Crown is expressly bound, as in sub-clause <$.of clause 5 of this bill. In the Commonwealth, Western Australia alone has followed the English legislation. , When this measure is passed, it will also be binding upon the Crown as representing the states. Modifications, have been made. in it to meet the situation in certain respects in the several states. Advances have been made by the states for the purposes of furthering and assisting land settlement - for example, advances to settlers for the provision of wire netting. Under clause 5 the Crown’s right of preference is preserved as regards certain existing debts to the states, and this is further provided for in paragraph h, subclause 1, of clause 84. In this connexion we held communication with the states, and considered it advisable to insert the provisions in question, because under state laws the repayment of advances of that nature made to settlers and farmers is at present given priority. The assets are so small and the security so uncertain that the states had to rely on this protection to secure the moneys for the Crown.
Under the bill, jurisdiction in bankruptcy will be vested in (a) such federal courts as parliament creates to be Courts of Bankruptcy, and (b) such state courts or courts of a territory as are specially authorized by the GovernorGeneral by proclamation to exercise that jurisdiction. It is proposed at the present stage not to create federal Courts of Bankruptcy, but to utilize existing state courts. In New South Wales, the bankruptcy law is administered by the Supreme Court, in its bankruptcy jurisdiction, the jurisdiction of the court being exercised by a judge in bankruptcy. In Victoria, it is exercised by a Court of Insolvency with the powers of the Supreme Court, and the County Court judges are also judges of the Insolvency Court. In Queensland, the jurisdiction is exercised by judges of the Supreme Court. In South Australia, it is vested in a Commissioner of Insolvency, and, locally, in stipendiary magistrates. In Western Australia, the Supreme Court has bankruptcy jurisdiction, the business being transacted under one of the judges assigned for that purpose. In Tasmania, the insolvency jurisdiction is administered by a Supreme Court judge at Hobart, and the Commissioner in Bankruptcy at Launceston. Under the bill, the jurisdiction in bankruptcy of a state court or a court of a territory may be exercised, in the case of a state court, by one or more judges of the court, as the GovernorGeneral, with the- concurrence of the Governor of the state, appoints for that purpose; and in the case of a court of a territory, by such one or more judges of the court as the Governor-General appoints. An appeal lies to the High Court. Every court having jurisdiction in bankruptcy is to have jurisdiction throughout the Commonwealth, or within such districts as the Governor-General directs, and every order and warrant of the court is enforceable throughout the Commonwealth, and all peace officers and constables will be required to aid in the enforcement thereof. All the courts having jurisdiction in bankruptcy, and judges and officials of the court, are required to severally act in aid of, and to be auxiliary to, each other in matters of bankruptcy. Sitting suspended from 1 to 2.15 p.m.
– I shall now deal with the methods of administration, which vary in the different states. It is proposed in the bill to place the Attorney-General of the Commonwealth in charge of the administration of the act. An inspector-general will perform general duties’ of supervision throughout Australia, with a view to securing both uniformity and * efficiency. The Governor-General will be empowered to divide Australia into districts, and in this regard consideration has been given to the fact that we are dealing with a scattered population. The conditions in Victoria and Queensland, and even in Victoria and Tasmania, are entirely different. Tasmania appears to have two areas for the administration of the law, and Queensland has three distinct districts in the state. In each of the Commonwealth districts there will be a registrar, and such deputy registrars, official receivers, and other officers as are necessary. The registrars will be public officers appointed under the Public Service Act. The official receivers may be salaried officials or may be paid by fees or commission out of the estate, as is the practice in New South Wales. The creditors will have power to elect trustees in any estate. The official receiver may be appointed an interim receiver of the estate after a petition has been presented, and will perform such duties as the court thinks expedient, or as are prescribed. In any case, his duties as regards the debtor will be to investigate the conduct, property, and transactions of the debtor; the cause of bankruptcy, the amount of assets and liabilities, and the books and accounts of the debtor, and to report thereon to the court. He will also report to the court whether the debtor has committed certain offences against the act, will make other investigations and reports as directed or prescribed, will take part in the examination of the debtor, and will take part in the prosecution of a bankrupt. As regards the estate of the debtor, his duties will be to act as trustee where necessary, to summon and preside at the first meeting of creditors, and to advertise sequestration orders, &c., in the Commonwealth Gazette.
To obtain the sequestration of a debtor’s estate, the proceedings must be instituted by a petition, which may be presented either by a creditor or the debtor. If a debtor has committed an act of bankruptcy the court may, on a bankruptcy petition being presented, make an order called a sequestration order. When the order has been made, the debtor thereby becomes a bankrupt, and continues a bankrupt until an order of discharge has been issued to him, or the sequestration order has been annulled. On the making of the order the property of the debtor vests in the official receiver named in the order. The order is based upon an act of bankruptcy having been committed. The acts of bankruptcy provided for in the bill are similar to those in existing state laws. The act of bankruptcy must have been committed within six months of the presentation of the petition, and the bankruptcy will relate back to, and be deemed to have commenced from, the date of the first act of bankruptcy committed within that period.
Mr.Brennan. - The provision for relating back is a mysterious thing.
– Itis based on the English law. After sequestration the bankrupt must furnish a statement of affairs, a meeting of creditors must be held within fourteen days, and the court may hold a sitting for the examination of the bankrupt. At the first or any subsequent meeting, the creditors may appoint the official receiver, or any other qualified person,to be trustee of the property of the bankrupt, and a committee of inspection to superintend the administration of the bankrupt’s property. On the appointment of a trustee the property of the bankrupt will pass from the official receiver and vest in the trustee.
Part VIII. of the bill, which deals with trustees, contains provisions that will be new in some of the states. It will be necessary for trustees to apply to the court for registration to entitle them to act as trustees of estates. The object of that provision is to secure supervision over trustees, and to ensure that only men of the requisite standard shall be entrusted with the important duties of trusteeship. The applicant will make application to the court, which will give directions for the registration and a certificate will be issued. Every trustee will be required to enter into a bond for the proper performance of hiss duties.. There are provisions dealing with the supervision of the trustee in his administration, the audit of his accounts, and the securing of effective control over the exercise of his powers and functions.
The bill deals with the effect of bankruptcy on transactions antecedent to sequestration. There will be no alteration in the general provisions of the law of the states dealing with voluntary transfers and settlements of property. A change is made regarding the voidance of preferential transfers and payments to creditors. The bill incorporates the New South Wales provisions with certain modifications, the general effect being that such transactions are void if they give a preference to one creditor over another, but bona fide payments, transfers, and other dealings for valuable consideration and in the ordinary course of business are protected.
The only property that will not vest in the trustee when the debtor is adjudicated insolvent will be property held in trust for others; certain policies of life assurance and policies for annuities; tools of trade not exceeding £20 in value, and the necessary wearing apparel, &c., of the bankrupt and his family, including any sewing machine used for domestic purposes; goods hired under a valid contract for letting and hiring, goods subject to bills of sale, stock mortgages, liens on crops, and mortgages on wool and certain book debts; and the separate property of a married woman the income of which is subject to a restraint on anticipation.
The powers of the trustee to deal with the property of the bankrupt will be, very wide. He will be able to sell the property by public auction or tender, transfer stock, compromise debts, &c, and with, the permission of the creditors, or the committee of inspection, or by leave of the court, carry on the business of the bankrupt, bring or defend actions relating to the property, mortgage the property, make an allowance to the bankrupt, and so on. When the estate is wound up it will be his duty to declare dividends, and clause 112 prescribes his duties in that, respect. The first dividend should be declared and distributed within four months after the conclusion of the first meeting of creditors, and subsequent dividends at intervals of not more than six months.’ .’ When- the trustee has realized all the property of the bankrupt, or so much thereof as, in the- joint opinion of ‘-the trustee- and the committee -of- inspection, can be realized without needlessly protracting the trusteeship, he must declare a final dividend. The bankrupt is entitled to any surplus remaining after payment in full of the creditors and of the costs, charges, and expenses of the bankruptcy. . I wish now to deal with the provision for payments out of the insolvent ‘estate. The bill prescribes an order of priority, which will be uniform throughout the Commonwealth. The estate of the bankrupt will be applied in the payment of the following matters in the order in which they are mentioned : -
The provisions dealing with the discharge of a bankrupt are taken from the English legislation. In Queensland and Tasmania a special application must be made to close the insolvency of bankruptcy. But such order doe3 not discharge the bankrupt, and a further application is necessary for his discharge. Moreover, the nature of the discharge differs in the various states. In most of them the court makes the order or issues the certificate of discharge, but in New South Wale3, while the court orders the certificate to issue, the discharge does not take effect until the certificate is issued by the registrar. ‘ In South Australia, there are three classes of certificates. In the. other states the different circumstances are provided for by the power to suspend or to attach conditions to orders or certificates of discharge. Under the bill the bankrupt will have power, at- any time after, he has been publicly examined, or at such time as is prescribed, to apply for an order of discharge, and will be compelled to do so when ordered by the court. On . hearing the application, the court will have power to grant or refuse an absolute order of discharge, to suspend the operation of the order ‘for a specified time, or to ?rant an order, subject to conditions, with respect to future earnings or income, or after acquired property. On proof of certain facts, including that the bankrupt has assets not equal to 10s. in the £1, that he has failed to keep the usual books, or to account satisfactorily for loss of assets, that he has continued to trade after knowing that he was insolvent, or has given undue preference to any creditor, or has committed a fraud or a fraudulent breach of trust, the court will be required to refuse him a discharge, suspend. the order for not less than two years,1 suspend the order until’ a dividend of 10s. -in the £1 is paid, -or require the bankrupt, as a condition to discharge, to consent to judgment .being entered against him for the balance of the debts due under the bankruptcy. The order of discharge will not, unless the Treasurer of lie Commonwealth or of a state, as the case requires, consents thereto, release the bankrupt from any debts on a recognizance, or with which he is chargeable at the suit of the Crown, or any. person, ‘ for an offence relating to any branch of the public revenue, or on a bail bond; nor will discharge release him from any debt incurred by fraud or fraudulent breach of trust, or whereof he has obtained forbearance by fraud. He will not, in such circumstances, be released from liability under certain .judgments or affiliation orders; nor will the order of discharge release any person jointly bound with the bankrupt. It will, however, release him from all other provable debts. In granting an order of discharge where the liabilities do not exceed £300, the court may order a special dividend to be paid to certain creditors or classes of creditors. A sequestration order may be annulled where a composition or scheme is accepted and approved after sequestration, where a sequestration order ought not to have been made, or where it is .proved to the court that the debts of the bankrupt are paid in full.
I propose now to refer to a pro.vision which, although, taken from the .English legislation, is new to Australia, with the exception of Western Australia. It concerns small bankruptcies. Where a sequestration order has been made in an estate in which neither the assets nor the liabilities of the debtor are likely to exceed £300, the court may order the estate to be ndministered in a summary manner. Thereupon the provisions of the act in relation to the bankruptcy will be subject to modifications, with a view to simplifying procedure and saving expense. The official receiver alone in these cases will act as the trustee in bankruptcy. The .provisions relating to the examination of the debtor and his discharge cannot, however, be modified. It is anticipated that this part of the bill will afford considerable relief in the case of small estates.
– Does the amount of £300 relate to the assets of the estate, or the liabilities only ?
– It relates to both assets and liabilities. Part X., which provides for the administration of the estates of persons dying insolvent, is new to many of the states, although its provisions have been adopted in Western Australia. and Victoria has a somewhat similar enactment. The New South Wale3 act provides for sequestration of the deceased’s estate in the event of the executor or administrator committing an act of bankruptcy whereby the creditors may be defeated or delayed in obtaining payment of their debt. It is thought desirable that the provisions of this part of the bill should apply to the whole of the Commonwealth .
I shall now deal with compositions ‘or Schemes of arrangement after sequestration. A bankrupt intending to make a proposal for a composition or scheme will be required to lodge a proposal in writing with the trustee. A meeting of creditors will then be held, at which the proposal may be accepted, but any creditor who has proved may assent to, or dissent from, the proposal. After acceptance, the bankrupt or trustee may apply, to the court for its approval. Should that- be done, the court must hear the report of the trustee as to its terms, the conduct of the bankrupt, as well as any objections by any creditor. The court may approve the proposal, or refuse it. Should approval be accorded, the composition or scheme is binding on all the creditors, so far as it relates to provable debts, and the court may annul the sequestration order.
– Does the insolvent make direct .application to the court ?
– Application for the approval of a proposal can be made by either the bankrupt or the trustee.
The- provisions of Part XI. are incorporated in the bill, because commercial men have been pressing for this form of administration. It may not be availed of to any great extent, as possibly Part XII. will be more generally adopted. The desire of the Government is to adapt the bill to the needs of Australia, and where a certain procedure has been extensively followed in connexion with bankruptcy, we have endeavoured to preserve it so as not to cause undue dislocation when the transfer from state .to federal authority is made. This part, which deals with compositions, schemes of arrangement, and assignments without sequestration, is similar to the laws in force in South Australia and Western Australia. The proceedings do not require any sequestration of the estate under the former provisions. Proceedings are originated by a meeting of creditors called by the debtor, his solicitor or agent, by circulars delivered or posted to hi3 creditors. After the delivery or posting of the letters, power is conferred upon the court to stay proceedings in any action or legal process in respect of any .debt provable in the bankruptcy. The procedure at the meeting is specified. The debtor must attend and submit a. statement of his assets and liabilities. The creditors at the meeting, by an extraordinary resolution, may resolve either to accept a proposal for a composition in satisfaction . of the debts due to them, or a proposal for a scheme of arrangement of the debtor’s affairs. The composition or scheme of arrangement is not binding unless confirmed in accordance with the provisions specified. As an alternative, the creditors may, by special resolution ‘at a meeting, resolve that the debtor shall execute a deed under this partto a trustee to be named in the resolution. The trustee must be registered as qualified to act in that capacity. A .certificate of the resolution must be filed. The debtor must, within seven days of the passing of the resolution, convey and .assign his real and personal estate by deed, for the benefit of his creditors to the trustee named in the resolution. Every such deed must comply with the provisions specified. It must, inter alia, provide for the payment in priority to all other debts of the debts specified in clause 84. There must be a schedule of the debtor’s property, and a schedule of his - creditors. The deed must be executed by the trustee within seven days after its execution by the debtor, and notice of the deed must be given to the registrar of the court. In addition, the deed must be assented to by three-fourths in value, and one-half in number, of the creditors, every creditor for under £10 being reckoned in value only. Assents shall be given by the creditors resident in Australia within 30 days, and, as regards other creditors, within six months, from the execution of the deed by the debtor. The effect of the deed is to release the debtor from all provable debts, and to vest the property, of the debtor in the trustee upon the trusts, and for the purposes of the deed. Clause 166 applies the general provisions of the act in the case of an assignment as if a sequestration order has been made. The effect is practically to give to creditors the same rights as they have in bankruptcy. A creditor or trustee may have the debtor examined, and a trustee may also be examined. The’ duties of the trustee are defined in clause 175. Power is given to the court to declare the deed void, on the ground of noncompliance with the act, or fraud, or any wilful and material error; and, if. it thinks fit, on a petition of more than onefourth in value, or one-half in number, of the creditors, the court may declare the deed void, and make a. sequestration order. Under clause 183 the court may, on the application of a trustee or creditor, grant a certificate of the validity of deed.
Part XII., which deals with deeds of arrangement, will be- new to five of the states, but not to Victoria. At present in those five states individual debtors nave the power to transfer their property to trustees to be held in trust for the purpose of distribution amongst the creditors. In England, owing to certain practices which prevailed, it was found necessary to alter the law, and to require all these deeds to be registered. If. not registered they are void. Victoria followed that practice. I think it was Mr. Justice Isaacs who was responsible for introducing the modifications- in that state. It is now proposed, to apply those provisions to the whole of ‘Australia. Private deeds of arrangement, outside of statutory enactments, are made now in all the states of Australia except Victoria. After the passing of this bill all such deeds will be void and inoperative unless registered under the act. This part applies to every deed of arrangement as defined therein, but does not apply to a composition or scheme after sequestration under Division 5 of Part IV., nor to a composition or scheme of arrangement or deed of assignment under Part XI. A deed of arrangement includes any of the instruments of the classes set- out, made by, for, or in respect of the affairs of a debtor for the benefit of his creditors generally, or made by, for, or in respect of the affairs of a debtor who was insolvent at the time of the execution of the instrument for the benefit of any three or more of his creditors. The classes of instruments referred to- are - (a) an assignment of property; (6) a deed or agreement for a composition ; and, in cases where the creditors obtain any control over a debtor’s property or business; (c) a deed of inspectorship entered into for the purpose of carrying on or winding up a business; (d) a letter of licence authorizing the debtor or any other person to manage, carry on, realize, or dispose of a business with a view to payment of debts, and (e) any agreement or instrument entered into for the purpose of carrying on or winding up the debtor’s business, or authorizing the debtor or any other person to manage, carry on or realize or dispose of the debtor’s business with a view to the payment of his debts. A deed of arrangement will be inoperative and invalid unless it is registered within a specified time, or before a certain time receives the assent of a majority in number and value of the creditors. A new provision included is that contained in clause 193, requiring that the deeds shall comply with certain conditions regarding schedules of the property of the debtor and the list of his creditors. Th& provisions of the bill as to payment in priority of certain debts, the proof of debts, the respective rights of secured and unsecured creditors, and the examination of the bankrupt and other persons will apply to deeds of arrangement. The provisions as to trustees will apply to trustees of deeds, and several provisions which are in the English and Victorian acts are, therefore, unnecessary in this part of the bill.
– Could the Minister give a short summary indicating the distinction between Parts XI. and XII. of the bill.
– I can say shortly that Part XI. incorporates the South Australian practice under which upon notice given a meeting of creditors is called, and the procedure is along statutory lines. In the other case, the debtor, finding himself in a difficult financial position, goes to the trustee, and decides to execute a deed of trust to which the creditors subsequently assent.
– The general effect is the same in both cases.
– The South Australian system embodie’d; in Part XI. of the bill is more formal, and not nearly as elastic as that under which deeds of arrangement are regulated. 1 There is, of course, in both cases an assignment, of the property of the debtor. He is not adjudicated insolvent, and his status is affected only to the extent that he transfers his property for the payment of his debts.
The provisions of the bill as to offences have been carefully considered and revised, and it is believed that they will secure compliance with the law and the honest administration of estates.
Honorable members will recognize that the bill embraces a very- wide area. It deals with complications arising from the existence of six different bankruptcy systems prevailing in the different states. In the drafting of the bill the desire was to secure uniform legislation having due regard to the practice in every part of Australia. The bill will effect a very great reform. It will greatly facilitate the winding up of estates. It will assist in the prevention of fraudulent practices. It will promote law and order, and will assist in securing justice in Australia. The measure does not introduce any novel legislation. It makes no experiments, but adopts’ parts of the law from the legislation of the United Kingdom and of the different states which have been proved by experience to be necessary. The aim in the drafting of the bill has been to enact bankruptcy legislation that will be uniform, modern, and suitable to Australian requirements. Honorable members in going through the bill will realize the very great difficulty with which members of this Parliament were faced in the early days of federation in dealing with measures consolidating the legislation of the states. They will recognize the difficulties that had to be surmounted in the passing of the Navigation Act to provide for a uniform navigation law for Australia, and in the passing also of such acts as the Patents and Trades Mark Act, the Public Service Act, and similar consolidation measures. This bill, in general outline, gives effect to the desires of the commercial world. It will establish a court which will operate throughout Australia, to which an Australian creditor may apply, no matter in what state he may reside. Under the measure the assets of an Australian debtor, -wherever they may be, will be made available for his creditors, wherever they are in Australia. The man who commits a breach of the law will, under this bill, be amenable, to the law, wherever he may be in Australia/ Honorable members, I am sure, will agree that the bill will provide for a considerable improvement of existing conditions, and for the commercial and business community of Australia a measure of relief for which it has been asking for some time. I may inform honorable members that I have had prepared a special statement, giving a summary of the laws dealing with bankruptcy in the different states.. I have also had a table specially prepared, showing each clause of the bill and each corresponding section or subsection in each of the different state acts and the English acts as well. Further, a very complete index to the bill itself has been prepared, which will enable honorable members readily to refer to any clause in the measure.
– Will honorable members be supplied with a proof of the honorable gentleman’s speech ?
– Yes; that will be done at once. Honorable members will find that they will have plenty of material to enable them to give full consideration to the measure.
Debate (on motion by Mr. Brennan) adjourned. ‘
Debate resumed from 20th June (vide page 1513),. on motion by Dr. Earle Page -
That the bill be now read a second time.
On which Mr. Charlton had moved , by way of amendment -
That all the words after “ That “ be omitted with a view to insert in lieu thereof the words ‘’ in order to preserve the Commonwealth Bank as a national institution, and to extend its operations for the purpose of controlling credit and exchange, it is desirable that financial experts to be fully employed in the service of the bank should be appointed to its management, the proposal of the Government to appoint persons representing squatting and commercial interests, who are diametrically opposed to national banking, being designed more in the interests of private financial institutions than of the people’s bank. . Mr. MANNING (Macquarie) [2.48]. - I am quite sure that honorable mem bers on both sides appreciate the way in which the Treasurer (Dr. Earle Page) placed this very important measure before the House. The great detail into which he went must materially assist honorable members in endeavouring to arrive at .a satisfactory solution of one of the most important problems with which we are faced to-day. Since the adjournment of the debate I have gone very carefully into the facts so concisely and yet so fully submitted by the Treasurer in a speech, which I venture to say, was not only explanatory,, but also educational. The bill is one which must have very far-reaching effects on the future of this country. Its introduction at the present time is most opportune, because we are passing through a time of financial stress. If we deal with the subject properly, as we may in considering this question, we should be able to give very considerable relief, and save a great deal of trouble to the people of Australia. I have such implicit faith in Australia that I think it will progress, no matter what legislation we may pass. At the same time, we should remember that by passing judicious legislation we may materially assist, instead of retarding, the progress of the country. I feel sure that the Treasurer recognizes the importance of the bill, and -will welcome criticism of it. I .trust that he will give due consideration to criticism, so that the united wisdom of the House may make the measure a better one than, perhaps, it is .atthe present time. The honorable member for Capricornia (Mr. Forde), speaking yesterday on a measure before the House, said that it was satisfactory, and that his statement of that opinion showed that the Opposition was not present in this chamber merely to oppose. I should like to remind the honorable member of the old saying that the exception proves the rule, and I trust that, notwithstanding the statements of the Leader of the Opposition, this measure will be found to be one of those exceptions. . I listened very attentively to the speech of the Leader of the .Opposition, and made many notes on it. I must say that I was very much disappointed at the tone he adopted. He adopted the tone of a schoolmaster, and lectured honorable members for the greater part of an hour. Yet I did not hear one word of constructive criticism during his speech. What we need in. the consideration of a measure .such as this is constructive criticism. The Leader of the Opposition made three points which stood out in his remarks. One was that the Commonwealth Bank Act, which this bill is introduced to amend, is a measure of which we have every reason to be proud. His second point was that, there is not one power provided for in the bill now under consideration which does not exist under the original act. The third point be made perfectly clear ‘before he sat down wasthat, there is not one provision .in this bill which should nOt be condemned. I have .to confess that my intelligence is not of the kind to- enable me to reconcile those three statements. In referring to the growth of the Commonwealth Bank, the honorable gentleman regretted that it had not been, quicker, and expressed the opinion that its growth was most unsatisfactory. When he considers the reflection they cast upon the management of the Commonwealth Bank, 1 feel sure that the honorable gentleman will be sorry that he uttered those words. We have had in .the growth of the Commonwealth Bank, what has been regarded, not only in Australia, but throughout the world, as a phenomenal, and almost a mushroom growth. Under the special conditions which prevailed during the war the importance of the, Commonwealth Bank -was realized. There has been a greater growth of business in. that hank in “the last decade than would, in ordinary circumstances, have occurred in “ a quarter of a century. Bearing in mind the enormous sum of money held by the bank free of interest, amounting at its peak to £40,000,000, and. knowing perfectly well that but for war conditions that amount of money .would never have been deposited with the hank, we can realize how greatly the war assisted in the development of that institution. To say that the business of the bank has not increased as it should have done is to cast a slur not upon the .Government, but upon the governor to whom Parliament gave complete control. The late Sir Denison Miller had unfettered authority to say how many branches ‘should be opened, and what line of business should be adopted, and although I will not say that he did not make any mistakes - he would have been a superman if -.he had made no mistakes when grappling with such a great task - the Labour Government that founded the bank was fortunate ‘ in selecting a man of such high -calibre to guide its initial destinies. The statement that he did not do all that was passible for one man to do for the ..development of the business of the bank .is a slur upon the memory” of the deceased gentleman, which, I am quite sure, was not intended by the Leader of the Opposition (Mr. Charlton). We have had experience of control by one man - an exceptionally able man: - but the business of the bank has now outgrown the directorial, capacity of any one individual. The Leader of the Opposition suggested also that the .Commonwealth Bank should become a banker’s bank. He quoted the system in operation in the United States of America, and urged that the trading banks should be compelled to deposit a portion of their reserves with the federal bank. If the Commonwealth Bank is to continue to be a popular bank of deposit and issue - and I wish it to so continue, because I realize what an asset it is to the country - we cannot reasonably insist that the trading banks shall contribute funds to a competitor in ordinary banking business. If the Commonwealth Bank Is to be made a bank of reserve, it must cease to be a people’s bank; it must become a banker’s bank only, and that will be a retrograde step. One of the most important alterations proposed by the bill is the change of control from one governor to a board of directors. That is decidedly a step in the right direction, but it is essential that directors with the proper qualifications shall be appointed. The Leader, of the Opposition suggested that the board should be composed of bank officials. Under such control the bank will surely fail, because we cannot, with any prospect of satisfaction, appoint lower grade officers to sit round the board table with their superiors. No subordinate could oppose the opinions of his superiors at the board table, if he had to revert to his subordinate position in the bank immediately the sitting was over. In this matter we should be wise to be guided by the experience of the private trading banks. They have found, by experience, that a board of directors is necessary, and the proposal in the bill that the board shall include representatives of .pastoral, agricultural, and other primary industries is a step in the right direction.
– Honorable members opposite are always posing as the friends of the man upon the land, but when any proposal is made that will put the producer on a better footing, it is met by them with an amazing show of antagonism. Their hostility to the man on the land amounts to an obsession, so that they are not qualified to deal with any question on its merits. It is essential, if the Commonwealth Bankis to function satisfactorily, that the board of directors shall include men who are thoroughly acquainted with the primary producers and their needs. On the board of nearly every private trading bank are such men, and although those banks have done much to assist the development of the country, honorable members will admit that such assistance would have been more liberal had practical knowledge been more largely represented on the bank directorates. It must be remembered that in Australia and Canada, primary production is paramount, whereas in the United States of America the secondary industries are the principal concern of the banker. It is necessary that we shall have on the board men who understand the requirements of the primary producers and* are prepared to help them on a sound financial basis. Several grazing and financial institutions are managed by men who possess that knowledge, and if a couple of them could be induced to take seats on the board of directors of the central bank, their services would be of immense value to the Commonwealth. Those companies have done a great deal to help the producer in circumstances in which the trading banks, oh account of their conservative system of finance, have declined to do so. If the Commonwealth Bank is to function as it should, it must engage in general banking business more extensively than it has done in the past. It will be more to the advantage of the country if the bank, instead of confining its activities to lending money to municipalities and other public bodies, extends its general banking business in every direction.
– Will that be likely to occur if the bank becomes a bank of reserve?
– I have already said that I do not approve of the Commonwealth Bank being converted into a banker’s bank. One thing that we must avoid in connexion with the board of directors is political appointments. Men must be appointed solely because of their practical knowledge, and a satisfactory board is much more likely to be obtained in the manner laid down in the bill than in any other way. It is proposed that in each of the principal cities a local board of advice shall be established. I assume that by “ principal cities “ is meant the capital cities. In this matter, we should do well to proceed slowly. I , realize that a certain amount of confidence will be created* if the control of the bank is not concentrated in one city; for instance, a board in Melbourne would experience difficulties in dealing with matters in Perth or Brisbane. On the other hand, a feeling of distrust amongst in vestors might easily be caused by such a system. The bill provides that at least one member of the local board shall be a member of the board of directors. I suppose the head manager in the state will also be a member, leaving the third member to be selected from the commercial community. In connexion with private institutions the system of having a board of directors in one state and advisory boards in other states has often been detrimental to business, because financial men are disinclined to let their competitors in business know what they are doing. For that reason I do not think the proposed creation of local boards is wise. However, one criticizes these proposals with a certain amount of diffidence. Any criticism I offer is intended to be helpful and improving, but I reserve to myself the right to change my opinions as a result of debate. The duties of the present Notes . Board are to be handed over to the bank, and I think that an excellent proposal, which will increase the status of the bank. The past policy of the Notes- Board has brought it into discredit with the financiers of the Commonwealth. To this matter I have given a great deal of thought, and I am sorry to have to say that to a great extent the financial stress which we are now experiencing is due to the conservative and hidebound policy pursued by the present Notes Board.
– It is a safe policy.
– It is a safe policy overdone. It has been said that our financial stringency has been caused by local borrowing. I do not agree with that contention, and I can see no justification whatever for it. The more one investigates the matter, the more one realizes that the fact that two-thirds of our debt is owed inside of Australia helps our financial position rather than aggravates the difficulties in connexion with it. When the Government took from the private banks the power to issue notes, it was expected that the Notes Issue Board would provide sufficient currency for legitimate commercial needs. That has not been done. This is a vexed question, but a very important one. We know that notes have not been issued, because of the fear of inflating our currency. Many countries are suffering from the inflation of currency caused by the issue of notes for which there is insufficient financial backing. The printing press makes the money.
But that is a very different thing from issuing a sufficient number of notes to enable ordinary commercial affairs to be conducted without hindrance. Unfortunately, it is not possible for us even yet to escape from the influences of the war. Things are not normal, and the exchange position is most difficult, but when we realize that our joint-stock companies, our trading banks, and our ordinary businesses have increased their turnover by two and a half times in the last seven years, and that in the same period our currency has been actually reduced by £3,000,000, we can understand the difficulties that face business men. In view of our circumstances in this respect, the policy that has been adopted by the Note Issue Board cannot be justified. It is the policy of safety carried to an extreme. Australian trade and commerce is suffering to-day because of the shortage of currency. Quite a number of reasonable and even excellent propositions that have been made to the Note Issue Board for the issue of additional notes on substantial security have been refused. One wellknown eastern bank proposed to a private trading bank in Sydney that it should lend 200,000 notes on the security of 200,000 sovereigns. The banks concerned were on the most cordial terms, and the local bank would gladly have accepted the proposition but it did not have sufficient currency to do so. The proposal was then made to the Note Issue Board, which rejected it on the ground of fear of inflating the currency. The result of that kind of thing is that the banks cannot give credit, and in this particular instance a number of eastern wool-buyers were prevented from competing at the recent wool sales. In another case a leading banking firm in New Zealand made application to a local bank for a similar loan on similar conditions. I am not making these statements on hearsay evidence. The facts were given to me by a director of the local bank concerned. He knew that I intended to mention them in discussing this bill, and he would be the last man in the world to mislead me. He said that the New Zealand bank wanted to make the arrangement in order that some of its customers could buy Australian wheat. The local bank was unable to agree to the proposal, as it had not sufficient currency. Honorable members know that in trade between Australia and New Zealand we have the advantage. The position is equalized to a large extent by the fact that Australian money is invested in New Zealand, but owing to the present stringent situation, it is not possible for us to carry on ordinary trade relations with New Zealand, and New Zealand is compelled to correct her trade balance through Great Britain. The result is that she is put out of the market so far as the purchase of Australian wheat is concerned. On another occasion a local bank wished to obtain 100,000 notes on the security of 100,000 sovereigns, and the application was refused. A similar application by a bank in a sister dominion was not persisted in on account of the failure of other like proposals. In refusing these applications the Note Issue Board has done great, if not irreparable, harm to Australia. Of course, we know that some persons benefit by the shortage of notes. The value of 100 sovereigns at present is represented by 113 notes, and if the shortage of notes can be made so acute that the value of a note increases until it reaches the value of a sovereign, certain individuals stand to reap a great advantage. But that kind of thing is not in the best interests of Australia, and we ought not to permit ourselves to be led astray by those who say that it is safe finance. The details in connexion with the application of the New Zealand bank for notes on the security of sovereigns were published in the Sydney Morning Herald on the 4th inst. The paragraph reads as follows: -
Exchange difficulties, it is reported, have lost Australia the sale of wheat to New Zealand. Canada will sell her wheat. New Zealand required a million sterling worth of wheat. As Australian funds are very heavy in New Zealand, and as such a transaction would add still further to Australian funds there, exchange was a costly item. Then it was proposed that the bankers of New Zealand should obtain a loan from the Notes Board of £200.000 in notes on the security of 200,000 sovereigns deposited with the Notes Board. At the time the board had a somewhat similar proposition from another bank, and eventually refused to make the loan.So the proposition on behalf of New Zealand was not persisted in. If the notes had been issued by way of loan to the bankers of the New Zealand Government it would have enabled the purchase of Australian wheat to be financed on better terms than New
Zealand could have mode the purchase from Canada. The quantity of wheat involved would have been between three and four million bushels.
It is serious to our commercial interests that the Note Issue Board does not make available sufficient currency to permit ordinary business transactions to be conducted. In a producing country such as Australia, where we have to market our two principal primary products, namely, wool and wheat, in the same period of the year, it is necessary that there should bo some elasticity in the currency. A similar problem had to be faced many years ago in Egypt, and it was overcome by the issue of special notes to tide over the selling period. The same problem is met in Canada also by increasing the note issue. The Treasurer, in his secondreading speech, described the Canadian and American systems to us. I have no hesitation whatever in declaring that the Canadian system is preferable to that of the United States of America. This bill also attempts to cope with the exchange situation, which is such a serious factor in world finance at present. If our present methods of doing business are continued, the existing difficulties will be accentuated rather than relieved. It is almost impossible now to obtain any large amount” of gold from London. We cannot get money from London, for in the present state of world finance it is impossible to transfer money from one country to another. In an important speech, made some little time ago to the sharebrokers of the Midland Bank in England, Mr. li. McKenna made the following statement : -
People often talk of money going abroad or of foreign money coming here, but as a fact, when gold is not in use, money is incapable of migration. An individual may sell his sterling to an American for dollars, but the American will then own the sterling in England and the Englishman dollars in the United States. The change of ownership does not remove the money, which necessarily remains, and can only be expended where it was created. No exchange transactions, no purchase nor sale of securities, no import of foreign goods nor export of our own, .can take the money out of the country or bring it here.
That is” the situation” as laid down by Mr..McKenna, who is considered by men who know to be one of the greatest authorities in the’ world on finance.- The -more one looks into the position; the more one’ sees the soundness of’ it. The present nominal exchange rate is 3$ per cent., which is a direct tax on the export of primary products. An honorable member said, to me last night that the primary producers were the only ones who suffered from the exchange difficulty. I was very sorry to hear him say so, but I am sure that after I have explained the situation he will change his opinion. The primary producers of this country cannot be detrimentally affected, without that affecting the interests of every other citizen. A great deal of the trouble we are experiencing is indirectly caused by the exchange difficulty. The honorable member for Barton yesterday attributed much of the unemployment to the exchange situation. There would “be nothing like the unemployment that there is if we had arrived at a satisfactory solution of the exchange problem. In. any case, the difficulty will not be solved by following the ordinary rules that have been laid down. Expert advice is of no use in this case. As with most of the scientific discoveries, the solution will emanate from an amateur. I recently listened to an address by the .honorable member for Calare (Sir Neville Howse) on a subject with which we are all familiar, and a learned member of his own profession sitting alongside him said, “ We shall find some remedy for this particular disease, but it will be found not by a member of the ‘medical profession, but by an outsider.” His reason for such a statement was that the medical fraternity kept in a groove, and would not budge one side or the other. The greatest discoveries in wireless telegraphy have been made with lowpowered plants operated by amateurs who have had to use their ingenuity to overcome difficulties. A satisfactory solution of the exchange problem will probably not be found by financial experts. It has been stated that the present position of exchange stultifies the tariff. Certain honorable members yesterday stated that we should raise the duties on imports : but they are dealing with the cause, and not the effect. The tariff is sufficient if the exchange is right. There is an inducement, to import goods owing to the easy method of financing abroad. The importer may have to pay more for English goods than if he had purchased locally, but as he cannot get credit here he is ‘ obliged to trade with England, where credit is- obtainable. “Yesterday a. person, whose opinion I would not hesitate to accept, told me that he had a client with £35,000 in Government securities. He wished to complete the purchase of a property, and wanted to negotiate a loan of £20,000 on those securities, but owing to the financial stringency he could not do so. If he .had gone to any of the leading bankers and said, “ I have £35,000 worth of Government securities ; will you advance me £20,000 in London?” it would have been done at once. This position tends . to increase our imports, and is doing .more than anything else to stultify the effect of the tariff. If it is increased, the price of imported goods would also need to be increased, to try to equalize . the exchange. By getting rid of the exchange difficulty, we shall lessen the incentive to import goods. It was published in the papers recently that a wholesale man wished to obtain credit for £40,000 to buy Australian-made blankets, but owing to the financial stringency here he was unable to do so. When he asked for £40,000 in London to enable him to buy English blankets, he obtained credit at once. We should do our best to end this state of affairs as soon as possible. Reverting to the possibility of transferring capital from one country to another, I contend that this would be no solution of the difficulty. A credit in London can be exchanged for goods, which on arrival in Australia must be sold under the restricted financial conditions existing here. Not one penny more will be placed in circulation owing to the arrival of these goods. The transference of capital from one country to another is no solution of the exchange difficulty. We must stop borrowing abroad, as while we continue this practice, the position is going from bad to worse. Only recently the Commonwealth Government placed on the London market a loan of £10,000,000, £5,000,000 of which, we were told, was to be used for redeeming short-dated treasury bonds, which had just previously been issued, because that market was then unfavorable for a permanent loan. If the Treasurer had approached the trading banks of the Commonwealth, ‘ and offered them Australian notes for “that amount, they, without difficulty, would have arranged for funds in London to meet that obligation. This would have greatly helped to modify the ex change difficulty abroad and the ‘“financial stringency here. The banks have the funds in London, and would have been willing to give a bonus to the Treasurer if such an arrangement had been made. The banks will not burden themselves with more notes than they can profitably use. The following statement appeared in the Treasurer’s speech : -
Some persons hold that currency should be supplied in unlimited quantities as long as it is desired for the “ legitimate requirements of trade.” These overlook the fact that one essential of a currency system is the limitation of quantity. An increase of currency not redeemable in gold permits an increase of bank credits up to, say, four or five times . the amount of the additional currency; and, unless production has meantime increased to a corresponding extent, the result is an increase of prices in terms of that currency.
I take exception to the statement that an increase of currency not redeemable in gold permits an increase of ‘ bank credit up to, say, four or five times the amount of the additional currency, as, in the opinion of leading banking men “of Australia, it is incorrect. The reason for that assumption is that a bank limits ‘its advances in accordance with its fixed or current deposits. It is considered safe banking to hold in reserve 20 per cent. to 25 per cent, of the money deposited.
That, is quite a different thing from the statement of the Treasurer that banks may advance’ four ‘or’ five ‘ time’s the , amount of the additional currency not redeemable in gold. They would “be legitimately entitled to make advances up to 75 per cent, or 80 per. cent. …Of such amount. The honorable member for Perth (Mr. Mann) asked what check would there be? Any one who has followed the history of banking . in Australia since the crisis of 1893 knows that we have a check on the operations of banks in the type of men in control. No banking system in the world is rim on more conservative and sound “lines than ours. If those in control have power to obtain additional notes, they will not depart from the practice that “has been laid down for the last 30 years.
– If necessary, we could legislate to that effect…….. ‘” Mr. ‘ MANNING.- That “is -entirely unnecessary. We know” that .the practice of 30 year’s” will not be changed “simply because the’” provisions of the bill will be put ‘into operation-. My solution. is to issue notes in Australia against moneys or satisfactory securities lodged with the Commonwealth Bank in England, and at the proper time I shall move an amendment to that effect. I know that the statement will be made that the adoption of my suggestion would bring about inflation. Would honorable members suggest that the surplus credit we have in England - whether it be £30,000,000 or £50,000,000 does not matter - would cause inflation if we had that money in Australia ?
– It could.
– It would not. It would cause an era of prosperity instead of financial distress. Inflation and prosperity are quite different things. What would be the effect of having that money here? Would the honorable member for Barton (Mr. F. McDonald) then have moved his motion relating to unemployment? The effect would be that business would increase in a way that is not possible now, when it is hampered by financial stringency. Honorable members cannot seriously think that if we had our own money here it would cause inflation. We know that this exchange difficulty will not last for ever; it will right itself in time, and the sooner we can find a solution of the difficulty the better it will be. These approved securities could be lodged with the Commonwealth Bank. I say “ approved “ securities advisedly, because if they were turned into money, and the money placed in the Commonwealth Bank, the bank would have to invest it in securities. If the securities were approved we could just as well hand them to the Commonwealth Bank as hand the money to it. If exchange went against us, the Commonwealth Bank could realize on the securities and right the position. There is nothing more nervy than finance. We all remember the story of the old woman in the banking crisis of 1893, who went to a bank to demand her money, because she thought the bank might fail, but when the money was offered to her, handed it back. The story might . be applied, to a certain extent, to international exchange. If the public pulse could be restored to normal, it would not be so difficult to solve our problems. When the bill is in committee I shall move an amendment to give honorable members an opportunity to discuss the matter. We arc under another great disability in at- . tempting to right the position by increasing our imports. By that means we are transferring our credit and bringing goods here, but when the goods arrive, perhaps 40 per cent, duty is paid on them, and we imagine that it is income, whereas it is a portion of our capital.
– Take off the tariff.
– That might temporarily solve the difficulty, but it would get’ us into greater trouble. I want to make the tariff operate satisfactorily by. righting the exchange. It is said that we cannot continue trading with a country if we have the balance of trade against us. The Minister for Trade and Customs (Mr. Pratten) pricked that bubble when he spoke in the House recently. We have to remember that trade is balanced in two ways. It is balanced directly by the exchange of goods, but it is quite possible to import £30,000,000 worth of goods from a country that receives only £1,000,000 worth from us. The central financial clearing-house of the world is London, and any remainder that is not balanced by the exchange of goods has to be cleared through London. We have an external indebtedness in this country. We have to pay abroad a large amount of interest which will take up a great deal of our surplus of exports over imports. I trust that we shall get beyond that seme day, but we can always wipe out our credits abroad by using the money stored abroad and floating local loans. I commend that suggestion to honorable members. The Utopia to which protectionists look forward, when we shall produce and manufacture more than we need, is not likely to be realized in my time. If we legislate for the time being, while we have this external indebtedness, we shall satisfy the needs of this generation. The speech delivered recently by the Minister for Trade and Customs will well repay careful study. It should be kept for reference by honorable members. Unless the problem of exchange is solved in the near future there is every likelihood that our pastoral industry will be disorganized. The fact that credits cannot be established by woolbuyers will mean that local sales of wool will have to be postponed indefinitely.
– They never had so much money in their lives.
– There again the honorable member tabes the superficial view and jumps at a conclusion like a cod at a frog. He did that because I mentioned something for the benefit of the primary producer. Woolbuyers, although they can establish credits in England, cannot get them liquidated in Australia, and unless they can do that there is a probability that the wool market will be disorganised, with disastrous consequences to Australia.
– Why not establish credits here instead of in London !
– It is beyond me to explain anything that can be understood bythe honorable member for East Sydney (Mr. West). I know my limitations, and shall not attempt the impossible. Most people with experience in this country recognize the value of the work that has been done by the trading banks to assist development. They have stood the test of time, and have been a help to the producers. It has been suggested that we should adopt the American system of banking, but those who have taken the trouble to go into the matter, or to read the report of the Treasurer’s speech, will realize that the United States of America, inhaving 27,000 banks with practically no branches, is in a very different position from Australia. We have our great trading bankswith branches throughout the country, and if there is a period of stress in one part and an abundance of credit in another, deposits in one place automatically go to another. In America it is different, and they need the federal reserve banks to pass money from one part of the country to another. We have every reason to be proud of our trading banks, and I am satisfied that if we grant them the right they are entitled to, the right they are asking for, we shall not meet any trouble through over-inflation, or through them adopting a policy that they have rejected for more than a quarter ofa century.
.- The bill will have far-reaching and grave consequences to the people of the Commonwealth. I regret that the Government has failed to protect the people of Australia against the rapacious demands of the great money changers. I shall endeavour to prove this charge in the course of my speech. For that reason I have seconded the amendment of the
Leader of theOpposition. Irecognize that in that amendment an endeavour is made tosafeguard the interests of the Commonwealth and to place the people in the position which they should occupy in the affairs of. the state, of being the masters of their own business. I regard the bill as sacrificing the Commonwealth Bank. Idesire to move the adjournment of the debate.
– As the honorable member has been speaking for some time, he cannot now move the adjournment of the debate. He may, however, ask leave to continue his remarks at a futuredate.
Mr.MAKIN.- I do so.
Leave granted ; debate adjourned.
– As honorable members are aware, this is the last sitting day of the financial year. There are certain measures now before another place for which we shall have to wait. In the circumstances, Mr. Speaker, I suggest that you leave the chair for a quarter of an hour.
– Without fixing a definite time, the bells will ring for two minutes before the resumption.
Sitting suspended from 4.4 to 4.46 p.m.
Bill returned from the Senate with requests.
In Committee (Consideration of Senate’s requests) :
Clause 1 - (1.) This act may becited as the Main Roads Development Act 1924. (2.) The MainRoads Development Act 1923 is, in this act, referred to asthe principal act. (3.)The principal act, as amended by this act, may he citedas the Main Beads Development Act 1923-1924.
Senate’s Request. - Sub-clause 1, after “ 1924 “ insert” 1925.”
After subclause 3, leave out “ 1924 “ and insert “ 1925.”
– The amendments requested by the Senate in this bill involve merely the alteration of the date in the short title of the bill from 1924 to 1925. The amendments will not affect the operation of the bill in any way. Of course, the obvious intention of the requested amendments is to throw the proposed expenditure of £500,000 into next year’s accounts instead of into those of the present year. The Government is accepting the amendments because their adoption will not prevent the money being made available for main roads development. Ministers were in a position to know before the budget figures were finalized that the money would be available. There will be a surplus on the year’s transactions, out of which the proposed vote of £500,000 can be paid. The Senate’s requested amendments involve merely a bookkeeping alteration of the period to which the amount of the vote should bo charged. I move -
That the amendments be agreed to.
.- I have no desire to embarrass the Government in connexion with this matter, but this House should retain absolute control of expenditure. The Senate, by its requested amendment, presumes to decide what this House should do with the public funds. I do not know of any more glaring attempt by the Senate to control the public finance, and dictate r.o the Government what year’s revenue expenditure should be paid from. I understand that it is the intention of the Government to provide in tho budget for an expenditure of £500,000, and to debit that expenditure to this financial year, when, fortunately, it will have a surplus. But the expenditure would have to be debited to next year if the amendments requested, by the Senate were agreed to. We should always be very jealous of the right of this House - given it by the Constitution - to control expenditure. If the House of Lords were to do what the Senate has done in this case the House of Commons would not tolerate it for a moment. I enter my protest against the action of the Senate, and though honorable members may decide to go no further, they should at least express their objection to the Senate dictating to this House in connexion with expenditure it has proposed.
Motion agreed to.
Resolution reported; report adopted.
Bill returned from the Senate without amendment.
House adjourned at 4.57 p.m.
Cite as: Australia, House of Representatives, Debates, 27 June 1924, viewed 22 October 2017, <http://historichansard.net/hofreps/1924/19240627_reps_9_107/>.