12th Parliament · 1st Session
Mr. Speaker (Hon. Norman Makin) took the chair at 2.30 p.m., and offered prayers.
Telephone Communication with Mainland.
– On the 20th March the Postmaster-General, in answer to a question by me, promised that he would take an early opportunity to make a statement regarding the progress made towards linking Tasmania with other parts of the Commonwealth by telephone. When will the House receive that information?
-Prior to the present Government assuming office, tenders were called for the installation of a wireless telephone service between Tasmania and the mainland. Subsequently an investigation was conducted to ascertain whether wireless or cable would give a better telephone service. The superiority of the cable is beyond dispute. It would assure a full 24-hours’ service, absolute secrecy, and reliability at all times. On the other hand, it would cost three times as much as a wireless service, and the installation would occupy nearly two years. Having regard to these circumstances, and the difficulty of raising money at the present time, the Government has decided to install, for the time being, a wireless service. When circumstances are more favorable, the more efficient cable service will be substituted, and the wireless plant can then be utilized for general broadcasting. The project to establish wireless telephone communication between Tasmania and the mainland will be referred to the Public Works Committee for investigation and report.
– About a fortnight ago the newspapers reported that a ship inward bound called atFremantle with a full complement of migrants, of whom only nine were Britishers. Is not the wholesale admission of alien migrants contrary to the declared policy of the Government ?
– I do not recollect the report to which the honorable member referred, but I shall make inquiries into the matter.
– The Canberra Times of to-day published the following telegram from Adelaide : -
The Leader of the Opposition (Mr. Butler) stated in the Legislative Assembly to-day that he had sent a telegram to the Prime Minister (Mr. Scullin) and the Premiers and Leaders of the Opposition in other States asking whether they would be prepared to attend a conference for the purpose of discussing the financial and economic problems of Australia.
If the Prime Minister has received such a telegram from the Leader of the Opposition in South Australia, does he not regard it as extraordinary in view of the results of the elections in that State a few months ago?
-Order! In asking a question an honorable member may not offer comment.
– I ask the Prime Minister whether he has received a telegram from Mr. Butler, if so, what action does he propose to take?
– I received yesterday a telegram in the terms indicated by the honorable member from Mr. Butler, exPremier of South Australia. I replied to him that the Premier of South Australia had broached this matter to me about six weeks ago and that I proposed to discuss it with him in Canberra next week. This matter was discussed at the last Premiers Conference, and I subsequently made a statement to this House on the subject. At the last conference the State Premiers expressed the opinion that owing to the long distances which the representatives of some of the States Would have to travel to attend a federal gathering, conferences might be more advantageously held in each State. If there is a desire for a general discussion of financial and economic problems by the representatives of the Commonwealth and the States the periodical conferences of Premiers and the meetings of the Loan. Council provide adequate opportunities.
– Has the Prime Minister read the following statement published in to-day’s Labor Daily : -
Believing that the present price of petrol is far too high and that Australian users are being exploited by the big oil companies, Labour members are demanding that the Commonwealth Oil Refineries should be instructed to take action in the direction of forcing a substantial price cut.
I ask the right honorable gentleman what action the Government proposes to take in compliance with this demand?
– I am not aware of any such demand having been made, but the Government has for some time been considering the price of petrol. A subcommittee of Cabinet is dealing with the subject and has conferred with the Government representatives on the board of the Commonwealth Oil Refineries.
– The project for the construction of a railway from Red Hill to Port Augusta has been before the House on many occasions and some time ago the commencement of the work seemed imminent. I ask the Minister for Transport whether any consideration has been given to the project recently by the Government; if not, in view of the large extent of unemployment in South Australia, will this proposal receive attention at an early date?
– Early consideration will be given to the matter, and the honorable member will be informed of the result.
– Is the Minister for Works and Railways in a position to say when the South Brisbane to Kyogle railway will be open for traffic, also what progress has been made with the work?
– I am not in a position at the moment to give the honorable member the information he seeks, but I shall obtain and supply it to him.
asked the Minister for Home Affairs, upon notice -
– The answers to the honorable member’s questions are as follow : -
asked the Prime Minister, upon notice -
– The answers to the honorable member’s questions are as follow : -
asked the Acting Minister for Trade and Customs, upon notice- -
What were the total imports into Australia for each of the last five years (1924-25 to 1928-29) of the following: -
– The answers to the honorable member’s questions are as follow : - (a)-
These figures represent class xvi. (a) paper in Oversea Trade Bulletin. Tonnage is not available. (c)-
asked the Prime Minister, upon notice -
– The matter has been under consideration since 1925, and I understand that a number of investigations have been made by the Civil Aviation authorities. I am calling for a report as to the present position of the matter.
Comments by “Manchester Guardian Weekly.’’
asked the Prime Minister, upon notice -
– It is felt that it would be derogatory to the high office of Governor-General for a representative of the Commonwealth to engage in anything in the nature of a controversy on the subject.
asked the Minister for Health, upon notice -
-The answers to the honorable member’s questions are as follow : -
Landing Ground at Canberra.
asked the Minister for Defence, upon notice -
In view of the fact that National Airways Limited intends eventually to arrange for its eighteen-passenger aeroplanes to call at Canberra, will he see that a suitable landing ground is prepared hefore that time arrives?
– Negotiations are proceeding at the present time in relation to the Canberra aerodrome, and as soon as the matter has been finalized a statement will be made public.
Employment of Foreigners
asked the Acting Minister for Trade and Customs, upon notice -
Company, of Sydney, has discharged a number of Australian boys and girls owing to financial stress and lack of work?
– The answers to the honorable member’s questions are as follow : -
asked the Treasurer, upon notice -
What was the average rate of interest during 1928-29 on advances made by (a) the General Department of the Commonwealth Bank, and (b) the Rural Credits Department of the Commonwealth Bank?
– I am bringing the right honorable member’s question under the notice of the Commonwealth Bank.
asked the Minister for Markets and Transport, upon notice -
Is he in a position to answer the following questions in connexion with the Paterson butter scheme: -
What was the amount of bounty per ton for the 1928-29 export season?
Taking each State of the Commonwealth separately, what is -
The amount of butter tax;
The bounty received;
The loss or gain to each?
What was the average price of butter per lb. sold on the London market during the 1928-29 season?
What was the average consumption of butter per lb. per head of the population of Australia for the year 1928-29 ?
Is it a fact that Australia is the highest consumer of butter per head of population in the world?
What was the average price per lb. paid for butter by consumers in each State of the Commonwealth for the year 1928-29?
– It will not be possible to furnish all the information desired, but as much as is obtainable will be supplied to the honorable member as soon as possible.
asked the Acting Minister for Trade and Customs, upon notice -
– The information is being obtained.
Rationing of Employment
asked the Minister for Defence, upon notice -
– The answers to the honorable member’s questions are as follow : -
asked the Minister for Defence, upon notice -
Was the honorable gentleman correctly reported in the Labour Daily of Tuesday last, as having stated that it was intended to send ex-service men to India for garrison or police duty?
– No statement of this kind has been made by me, nor has such action ever been considered.
– In reply to the inquiry made yesterday by the honorable member for Fremantle (Mr. Curtin), in regard to the Canberra allowance, I have had a return prepared, and now lay it on the table for the information of honorable members.
The following papers were presented : -
Officers of Parliament- Statement showing amount of Canberra allowance paid to parliamentary officers.
Northern Australia Act - Ordinances of 1930-
Central Australia - No. 4 - Aboriginals.
North Australia - No. 5 - Aboriginals.
Post and Telegraph Act - Regulations amended - Statutory Rules 1930, Nos. 48, 54.
In committee (Consideration resumed from 4th June (vide page 2484).
Proposed new schedule -
At such times as wheat is offered for sale to any other country preference shall be given to millers for the purchase of reasonable quantities of wheat at the same price for the purpose of enabling them to export the wheat in the form of flour to such other country and, in the event of millers desiring wheat for export as flour to an overseas destination to which Australian wheat is not customarily sold, wheat may be made available to such millers at the same price as if the wheat were to be exported to the United Kingdom.
.- Last night the committee had reached clause 10 of the proposed new schedule to the bill. I have an amendment to that clause, which raises a matter of first-class importance, not only to this chamber, but also to the whole of Australia. During the debate upon the bill there has been some doubt as to the intention of the Government with regard to making up any loss that may be incurred as a result of the operation of the compulsory wheat pool. The purpose of my amendment is to give the Government an opportunity to say what is the real intention of the wheat pooling scheme with respect either to price-fixing or making provision for any loss that may be sustained under the guarantee. The points I desire to clear up are two in number. First I wish to discover by the reception of my amendment whether the guarantee of 4s. by the Commonwealth and State Governments is really all that there is in this compulsory pooling arrangement. Is it the intention of the Government to guarantee 4s. a bushel for the wheat, and, in the event of that figure not being realized in the ordinary commercial way at the country railway stations, to make up the deficiency? As an alternative, I desire to test by my amendment whether the wheat-pooling scheme is deliberately designed to hand over to a pool board of wheat-growers an absolute monopoly of the Australian wheat market, with a charter to fix such prices for Australian wheat, flour and bread, as will give it for all wheat grown in Australia, including the exported wheat, any price that it may deem satisfactory. I appeal to the Minister to be absolutely candid as to what is in his mind and the mind of the Government. I appeal to members of all parties to treat the amendment seriously; and I trust that the Government will endeavour to accept it. If it is accepted, the liability of the Government and the people under this scheme will be clearly limited and defined. Today wheat is worth approximately 3s. 9d. a bushel at country railway stations. Let us assume that there will be a crop of 170,000,000 bushels, of which 20,000,000 bushels are withdrawn for seed. On that basis, with a guaranteed price of 4s. a bushel, there would be a loss of 3d. a bushel, and the cost to the Governments of the Commonwealth and the States would amount to £1,800,000, say, £2,000,000.
– The honorable member has made his calculation on a bigger crop than we have ever had in Australia.
– The coming crop may easily be the biggest that we have had. On a number of occasions, as a private member and also publicly, but particularly in a speech from which I quoted a week or two ago, the Minister has declared that 4s. a bushel is quite unprofitable to the farmers.
– Hear, hear!
– I am glad to have the honorable member’s approval to that statement. The Minister has declared the average cost of producing a bushel of wheat in Australia is us., and that the price of 4s. a bushel represents a dead loss to the farmer on his capital and labour. It is fair to assume, therefore, that if this amendment is not accepted, and the Government intends to hand over to the pool the power to fix prices on the definite understanding that the scheme is not to cost the Government anything, the price fixed for local consumption will be substantially raised. If the pool decided that 4s. a bushel was a fair thing, and if wheat was worth only 3s. 9d. a bushel, as is the case to-day, there would have to be an all-round increase of 3d. a bushel. That would cost the Australian consumers approximately £2,000,000, or about 6s. a head. Assuming that the Australian consumption totals 30,000,000 bushels, it is interesting to note that by every 3d. a bushel that the price is increased on the total harvest, the price of that required for local consumption is increased by1s. 3d. a bushel. If the price for the total harvest were raised to 4s. 6d. a bushel - and I doubt whether the pool would make it less than that - the price for Australian consumption would be increased from 3s. 9d. to 7s. 6d. a bushel, compared with 3s. 9d. a bushel abroad. But I believe that the pool will make the price 5s. and not 4s. 6d. a bushel. Let us test the matter on that basis. An increase from 3s. 9d. to 5s. a bushel would add £10,000,000 to the price paid by the Australian miller for wheat to be milled into flour for Australian consumption. If we add £2,000,000 for profit on the capital outlay of £10,000,000, we find that the bread bill of the Australian people will be increased by £12,000,000, or approximately £2 for every man, woman and child in this country. That is what this compulsory pool will mean. Honorable members should face the facts, and realize what this ghastly proposal means to the nation.I wish, particularly, to drive it home to honorable members opposite who represent the workers of this country. I am anxious toascertain whether the cost of this scheme, which will be at the rate of £2,000,000 for every 3d. a bushel that is added to the price of wheat, is to be defrayed out of Consolidated Revenue and raised by general taxation, or is to be loadedon to the price of bread. Those two forms of taxation are entirely different. If it is to be taken out of Consolidated Revenue, it will be limited and defined; we shall know what the scheme will cost, and can put a margin on it. But if the matter is handed over to the wheat pool, we do not know where it will land us.
Let us analyse these two forms of taxation. If the money is taken out of Consolidated Revenue, and raised by way of income tax or other direct taxation, as it would have to be, the basis will be ability to pay; the more a man has the more he will pay towards this national cause. But if we depend for the raising of the money on an increase in the price of bread, the inverse ratio will apply; the lest a family has, the more it will contribute, to this scheme, because the relative consumption of bread by the workers is out of all proportion to its consumption by the rich. The workeron the basic wage, and his family of two or three children, habitually eat more bread than does a rich man’s family of the same size on an income of £5,000 or £10.000 a year. Every honorable member knows that the narrower and simpler the diet, the larger is the relative consumption of bread. If money for the assistance of the wheat industry is to be raised by what is virtually a tax on bread, this will be one of the most odious pieces of class legislation that Parliament has ever been asked to sanction.
Is this a time to double the price of bread, or even substantially increase it? The great trouble with Australia to-day is the high cost of production, and yet it is here proposed deliberately to take a step which will surely increase the cost of living, especially to the worker. I am not at the moment opposing the bill or the pool, but I appeal to the members of all parties in this House to rid themselves of their prejudices, and, when considering this matter, to bear in mind Australia’s economic position. A week or two ago Parliament passed legislation, the effect of which will be to make cotton clothing, which is chiefly used by the workers, the dearest cotton clothing in the world. Now it is proposed to make bread, which enters so largely into the diet of the worker’s family, dearer here than anywhere else in the world. And yet we wonder why we have 250,000 unemployed in Australia ! Evidently the Government, with the idea of ameliorating their unhappy lot, is taking steps to increase the price of bread !
I am really sympathetic towards the wheat-grower. I favour the guarantee of 4s. a bushel for this year, but I do not favour the compulsory pool, nor the placing of undue power in the hands of the pool authorities. While I think that for this year a guarantee of 4s. per bushel should be given, I believe that there is a better way of assisting the growers. If we desire to increase .the export of wheat, and put £2,000,000 or £3,000,000 in the hands of the wheatgrowers, let it be done by making available to them cheaper superphosphates, and by a bonus on fallow. Lot us getdown to the root of the matter. The Government’s scheme will really tend to do. more harm than good, because it will induce farmers to sow wheat on every available scrap of stubble, without allowing it to lie fallow for a sufficient time. Every one will be anxious to avail themselves of the good thing while it lasts. I appeal to the Government, even at this stage, to restrict the operation of the scheme to one year, and to take the money required out of the Consolidated Revenue. Above all things, let the Government adopt measures to prevent any increase in the price of bread in Australia. I warn my friends of the Country party, who are growing restive under this argument, that if the price of bread is raised it will result in the destruction, not only of their wheat pooling scheme. but of other precious marketing schemes as well. This practice of bolstering up industries with bounties, of living in one another’s pockets, as it were, and of creating monopolies of manufacturers and primary producers must come to an end, and I think we arc almost at the end now. If the Government insists on perpetrating this latest outrage, the whole false and rotten fabric will speedily collapse. Therefore, I move -
That in clause 10 of the proposed new schedule the words from and including “ export the wheat “ to the end of the clause be omitted with a view to insert in lieu .thereof the words “ manufacture flour for home consumption or for expert.”
.- The Deputy Leader of the Opposition (Mr. Gullett) has indulged in a great deal of arm-waving, and has made a pathetic appeal on behalf of the workers - as if there were any workers likely to heed him, or to accept him as a friend.
-Do not get nasty about it. Let us get down to economics.
– I did not utter one word while the honorable member was orating and beating the air; but as soon as I attempt to show the feebleness of his argument, he becomes fearful of the trend of the debate, and attempts to interrupt. He tried to show that if the price of wheat for home consumption was raised above world parity rates, ‘ there must follow an increase in the price of bread. He spoke as if he were in possession of figures and statistics to bear out his contention, when, as a matter of fact, air the data procurable is directly opposed to him. He did not attempt to quote any figures or facts in support of his argument; he merely made ‘bald statements, and was content to emphasize them with much bodily contortion. I believe that, when he resumed his seat, he had not even convinced himself; much less any one else, of the truth .of his assertions. Honorable members who spoke in favour of the bill during the second-reading debate quoted figures and statistics which’ have not yet been refuted. As showing the relative prices of wheat and bread over a number of years, some figures taken from the quarterly summary of Australian statistics for March, 1930, are illuminating. In New South Wales in 1920-21 the average price of wheat was 8s. lid. per bushel and the average price of bread for five large towns including the capital was 6.22d. per 2-lb. loaf; but in 1928-29 the average price of wheat had dropped to 4s. 9$d., or about half the 1920-21 price,, yet the price of bread dropped to only 5.88d. Comparative figures for South Australia for 1920-21 were 9s. per bushel for wheat, and 5.74d. for bread, and for 1928-29, 4s. 8£d. per bushel for wheat and 5.51d. for bread. The figures for Western Australia for 1920-21 were 9s. for wheat and 5.46d. for bread, and for 1928-29, 4s. lid. for wheat and 5.86d. for bread. It will be seen, therefore, that in Western Australia the price of bread was actually higher when the price of wheat was 4s’. Id. per bushel lower. The position in Victoria has been thoroughly investigated recently and I shall refer to it in a moment. The figures I have quoted are a flat contradiction of the argument of the Deputy Leader of the Opposition (Mr. Gullett), which was that if the price of wheat for local consumption were increased by ls. per bushel there would be an increase in the price of bread.
– Does the Minister say that the price of wheat has nothing whatever to do with the price of bread?
– If the price of wheat increased very greatly it would have some effect on the price of bread; but the figures that I have quoted show that although the price of wheat fell in the period under notice by more than 4s. a bushel in the three States to which I have referred there was only a fraction of difference in the price of bread. The reason for this is easily explained. The merchants who operate between the producers and the consumers have reaped the whole of the advantage of the difference in prices. The middlemen always get the advantage of such variations in price, and not the consumers. The object of the Government in providing for this better system of marketing wheat is to cut out these intermediaries and to safeguard the interests of both the producers and the consumers. We feel that by allowing the wheat-growers to manage their own affairs we shall be able greatly to improve their position and also that of the consumers. In view of the official statistic* which I have quoted, it is ridiculous for the Deputy Leader of the Opposition to attempt to tickle the ears of a certain section of the people by such erroneous and entirely unsupported statements as he has made this afternoon. My figures are a definite answer to the honorable gentleman.
But I now come to the position of Victoria. Recently the Victorian Government appointed a commission to inquire into the price of bread in relation to the price of wheat, and the commission found that “ any increase in the price of wheal for local consumption to the extent of ls. per bushel does not in any way affect the price of bread.”
– From what section of the report is the Minister quoting? I have a report which makes an entirely different statement.
– I have quoted from the official report, in which there is not a tittle of evidence to support the argument of the Deputy Leader of the Opposition. The position in Queensland is also enlightening. In that State the millers are charged up to 9d. a bushel above export parity for wheat for local consumption. Queensland does not grow enough wheat for her own consumption. That is the reason why an amount up to 9d. a bushel is added to the price of wheat for local consumption. According to the Deputy Leader of the Opposition this would be reflected in the price of bread. If his contention had any substance in it, it would be so; but it is not so. The price of bread in Queensland is 5£d. per 2-lb. loaf, which is lower than the price in Western Australia. This fact is exceedingly interesting. The price of wheat for local consumption in Western Australia is consistently lower than in any other State ; but the price of bread there is about 6d. per 2-lb. loaf, or one halfpenny per loaf higher than in Queensland.
– The moral is that if you want to lower the price of bread you should put up the price of wheat.
– These statements are borne out by actual figures. I could talk for a long while, and, like the Deputy Leader of the Opposition, throw my arms about and make wild assertions; but I am content to rely upon the official statistics. I have now dealt with the position of thefive mainland States.
I come now to another point. In normal times the cost of transporting wheat from Australia to London varies between1s. and1s. 3d. per bushel. Surely it will be admitted that the Australian wheat-grower should be entitled to receive export parity for wheat sold for local consumption plus the1s. or1s. 3d. a bushel which it costs to transport wheat overseas.
– It is to be hoped that the board will adopt that basis.
– It would be a reasonable basis, as even the Deputy Leader of the Opposition should admit.Would anybody say that it would be unreasonable if, under those circumstances,1s. were added to the export parity price? Of course it will, in any case, be a matter for the board which can be depended upon to do the fair thing.
– But it would add £8,000,000 or £10,000,000 to the bread bill.
– The honorable member thinks that if he says that sufficiently often he will convince some one, even against his will, of the truth of the statement. Any reasonable person would say that there should be added to the price for local consumption a figure representing the amount charged for the transport of wheat from Australia to London, and, according to the statistics, that makes no appreciable variation in the price of bread. I have given official figures to show that a variation of as much as 3s. a bushel in the price of wheat for local consumption has made a difference of only a decimal point in the price of bread. The whole of the facts are against the honorable member’s argument, which was fully answered in the debate on the second reading of the bill. Therefore, I cannot accept his amendment.
– I have been waiting to hear the Minister answer the precise point made by the Deputy Leader of the Opposition (Mr. Gullett), who, as I understood his argument, said first that it was quite irrelevant to refer to previous years in which there had been a fall in the price of wheat which had not been accompanied by a fall in the price of bread. We know that there are many who are willing to take up any. slack in connexion with the manufacture and distribution of bread. This fact, however, has no bearing on the position in the case of a rising price for wheat. If the Minister anticipates that the price of bread will remain stationary when the price of wheat has increased from 3s. 9d. or 4s. to 7s. 6d. or more per bushel, then I suggest that he is due for a rude awakening.When the price of wheat is falling, it may very well be that owing to arrangements between millers and their employees and between bakers and their employees, the public does not get the benefit of the fall.We are all aware of that; but the case is very different when the price of wheat increases from 50 to 100 per cent. Take one basis of argument that the honorable member for Henty (Mr. Gullett) adopted. If it is desired so to handle the wheat pool as to pay 5s. per bushel to farmers over the whole production of Australian wheatan object which the Minister has not disclaimed - its achievement will inevitably be followed by certain consequences.
– There is nothing in the bill in that regard.
– Th at is so. The bill, as I pointed out in my second-reading speech, is perfectly ambiguous. It suggests that a real payment will be made, under the guarantee, of any shortage that the Commonwealth Bank suffers as the result of paying 4s. a bushel to the farmers. It became obvious, however, in the course of the debate, that it is not intended that the Commonwealth and the States shall find this money at all. The intention is that the Australian price shall be raised to such an amount as will provide for, not only the 4s. guarantee, but also some extra amount. The Minister argues that the Australian farmer is entitled to what is generally described as an Australian price. With that contention many of us have a great deal of sympathy; but the Minister has not answered the point made by the honorable member for Henty that, upon a crop of about 170,000,000 bushels, of which some 20.000,000 bushels will be used for seed and about 30,000,000 bushels will be consumed in Australia and 120,000,000 bushels exported, if the pool is so handled as to pay the farmers 5s. over the whole of the crop, it will mean an increase of £10,000,000 in the price of wheat to the Australian public. As to that result, upon that hypothesis, there can be no dispute; it is merely a matter of arithmetic. The amount is not quite £10,000,000; it is over £9,000,000, and well on towards’ £10,000,000, and it cannot be put on to the price of 30,000,000 bushels of wheat without very substantially increasing the cost of the raw material of the millers. This £10,000,000 must be obtained from, some source. It must come either from additional charges for bread and other wheat pro-, ducts in Australia - and of all wheat products, bread is easily the most important - or from some source in between the farmer and the distribution of bread at the doo)1 of the consumer. To put it shortly, it must be taken from the millers’ profits or from the bakers’ profits. Those are the only sources from which I can see that it could come, if not from the public. The honorable member for Henty has said, and with reason, that it must be paid by the public. It is impossible to compel either the millers or the bakers to carry on at a loss. We cannot insert in this bill a provision for the reduction of the wages of the employees of the millers and the bakers; nor do we desire to do so. But if wages are not to be reduced, and the costs of milling, baking, and distributing bread are to remain the same, then the £10,000,000 must come either out of the profits of the millers and bakers, or from increased charges- to the Australian public for bread. That is the case which has to be answered.
In purporting to answer it the Minister has pointed to past experience and has shown that when the price of wheat has fallen there has not been a corresponding fall in the price of bread to the consumers.
– Can the honorable gentleman disprove that?
– I am not challenging it. I am conceding that point. But it does not follow from that fact that a considerable increase in the price of wheat would not .mean an increase in the price of bread. On the basis of 5s. a bushel, the extra charge to the Australian public will be about £10,000,000. That money will not be obtained from the air; it must come from somewhere. The Minister has not told us where it is to come from. If, in reply to the remarks of the honorable member for Henty (Mr. Gullett), the Minister had said that, on the figures given, the increase would not be so great as 5s., that would have been an answer pro tanto ; if, on the. other hand, he had said that a sum of nearly £10,000,000 was not, in his opinion, an unreasonable charge, and had proceeded to gh-e reasons for his opinion, that also would , have been an answer. But the Minister gave no answer whatever.
– Did I not say that if the price were raised ls. a bushel for local consumption, that would be fair and reasonable, and no one would have cause to grumble?
– The Minister now says that an extra charge of some millions of pounds would bc fair and reasonable. I ask him whether that would not involve an increase in the price of bread?
– Is it not time that the farmer had an innings?
– Yes; but there are other ways of giving it to him than by this tremendously expensive and risky socialization scheme.
– Does the Leader of the Opposition say that an increase of ls. for local consumption would increase the price of bread?
– It is impossible to increase the price of wheat without affecting the price of bread, unless there is in the profits of the millers and the bakers such an amount that bread can still be produced and sold at the old price. There is no guarantee that such profits are made by the millers and bakers and this bill contains no provision for taking this large amount out of those profits. Indeed, if it were seriously suggested that any amount comparable with the sums mentioned should come out of the pockets of the millers and the bakers there would be an outcry from one end of Australia, to the other. As the increased charge cannot come from nowhere, it would appear that it must come from increased charges for bread. To that contention I am asking for an answer. Reference to the price of wheat on a falling market has nothing to do with the position which obtains when it is proposed to increase the price of wheat while maintaining the existing costs incurred in the production of bread.
.- The Minister’s contention that in the past the price of bread has been unaffected by the price of wheat is unanswerable. That it should be so is to the discredit of the coUntry. As a result, of combinations and the organization of distribution, the millers and the master bakers, particularly in capital cities, have been able to exploit the consumers of Australia bowel.lessly. Inquiry after inquiry has been hold into the price of bread. During the period that there was a Prices Regulation Commissioner in “Western Australia it was made plain that the profits of the members of the Master Bakers Association were extortionate. Although the price of wheat has fallen the price of bread has remained constant.
– It would appear from the honorable member’s statement that in the bread-making business there is an opportunity for men to make fortunes.
– Men cannot easily go into a business where monopolies are definitely in control of the marketing of the product concerned. That is one of the reasons why, in ordinary business enterprise to-day, there is little real competition. When honorable members opposite plead for competition in business, they really plead for the right of existing trade monopolies to continue their monopolistic control as against the establishment of State instrumentalities.
– The baking trade is free.
– It is one of the closest kartells in Australia to-day.
I object to the principle that the guarantee that will be given to the wheat-growers should be met by levies imposed on the consumers. I feel that a principle of taxation is at stake in this matter. The commitments which the Commonwealth Government, in conjunction with the State Governments, will enter into in order to ensure a minimum price for wheat, should be met by a charge against the Consolidated Revenue of the Commonwealth and the States. No section of the community should be entitled under statute to receive money in order to supplement the price it receives for its product - whether it be galvanized iron, cotton, or wheat - unless the amount is raised by means of a tax on the community generally.
– Does the honorable member claim that there should be no increase in the price of bread?
– The honorable member fails to distinguish between the principle of taxation which is involved in this question and the alleged facts put forward by the Deputy Leader of the Opposition (Mr. Gullett). In the past the price of bread has not borne a true relation to the price of wheat. The Minister has shown that while the price of wheat has steadily fallen the price of bread has remained constant.1 There has been an increasing margin of exploitation of the consuming public by the master millers and the master bakers.
– Or by the men.
– Not by the men. The men have their rates of pay fixed as a result of a judicial inquiry. The price of bread is not fixed in the same way. Thereis no authority to say what is a fair price to be charged by the master bakers for bread supplied to the consuming public.
– It was fixed in New South Wales. ‘
– New. South Wales appears to be an extraordinary State. The board, constituted in pursuance of the provisions of this bill, should not have power to fix the price at which wheat should be sold for local consumption. I believe it should be a purely marketing organization and its activities confined to the orderly marketing of pooled wheat at the market prices. I do not agree with the Minister that the price of wheat in Australia should be the same as in London plus the cost of transportation. I understood him to say that nobody would object to that principle. I object to it because I believe the people are entitled to the full benefit of the natural resources of this country. If Australia produces a certain commodity in abundance the people should enjoy to the full the natural advantage which they possess.
– They should not be expected to pay more for the local commodity than is charged overseas.
– My statement of the principle involved does not mean that. This is where I part company with honorable members opposite. The producer of a commodity in Australia should get a fair return for the work that he does. I, therefore, agree that the grower should get a guaranteed price per bushel for his wheat, but the guarantee should be a charge on the whole of the people and not, in the major aspect of the case, a charge upon those who consume more bread than another section of the community.
The principle of indirect taxation in Australia is wrong. I imagine that honorable members opposite will not endorse this sentiment, because for years they supported a Ministry which practised most extensively this unjust system of indirect taxation in such a form and to such an extent that it became the real factor in making the cost of production artificially high.
– I have condemned that system in this House for years.
– The honorable member did. not condemn it when he was a Minister. He said nothing about it last year.
– For nearly seven years the honorable member for Henty (Mr. Gullett) supported a Government which was responsible for that policy.
– Quite so. I repeat that whatever the wheat guarantee is going to cost the people of Australia the charge should be part and parcel of the demand which will be made upon the Consolidated Revenues of the Commonwealth and the States. It should not be met, even in part, by the imposition of an additional charge upon that section of the community which happens to be the largest consumer of wheat products. This seems to be a sound principle of taxation.
– That is what my amendment means.
– That being so, it is to be regretted that the honorable member supported it with the arguments which he employed. If he had confined his remarks to the principle of taxation involved, he would have had an excellent chance of carrying it.
– I compared the two systems of taxation, just as the honorable member is doing.
– I am inclined to think that it will be extremely difficult for honorable members opposite to subscribe to the doctrine which I offer for consideration, because the Paterson butter scheme embodies the identical principle which the honorable member for Henty (Mr. Gullett) objects to as being vested in the powers which this bill gives to the board.
– Those schemes are all . doomed.
– There are two considerations which I should like to put to the committee. In the nature of things it appears probable that all the States of Australia will not be parties to the wheat agreement.
– The honorable member denied that yesterday.
– The honorable member is in error. I said that all the States will be subject to control by the board in the export of wheat, whether or not. they join the pool.
– They should not be.
– We have to deal with realities. They will all be under the control of the board in relation to the export of wheat, but they will not all be obliged to contribute towards the guarantee except in .so far as an indirect impost is levied upon them in the form of increased prices fixed by the board for wheat intended for local consumption. This is an objectionable principle. I object to it in connexion with the sale of every commodity produced in Australia. If the Commonwealth is to come to the rescue of all industries, the national guarantee should be subscribed to by every citizen in proportion to his income, and not in proportion to the demand that he makes, as a consumer, upon the particular commodity in question. This is the principle which I stand for in connexion with this bill.
– The honorable member did not stand for that principle when we we’re dealing with the Wine Bounty Bill.
– The next point I wish to make is this. Either one of two things should be done. Either the board should be prohibited from fixing a price in excess of London parity for wheat consumed in Australia, or else the power of the board should be considerably expanded to enable it to fix not only the price of wheat to flour millers for bread-baking purposes, but also the price of flour sold by the miller to the baker. I doubt that there would be any objection to the board doingthis. The sales would, I presume, be effected under licence.
.- I listened with some surprise to the outburst of the Deputy Leader of the Opposition (Mr. Gullett) who, following his usual practice, made an extraordinary attack on the measure when there was a full muster of press representatives in the gallery, and then subsided. I can best describe my impression of the honorable member’s speech in the words of Shakespeare - “ I understood the fury in his word, but not the words.”
In other words, I could not understand upon what he based his words. The figures he quoted were most amazing. A 170,000,000 bushel crop, he said, after putting aside 20,000,000 bushels for seed, would allow for 150,000,000 bushels to be marketed. Then by some strange process of reasoning he took 3s. 9d. a bushel as his basis, saying that it was the present price of wheat.
– I said that it was approximately the present price of wheat.
– The market quotation for wheat in any capital city of Australia is 4s. 6d. a bushel.
– I was speaking of the railway siding price, on which the guarantee is based.
– The honorable member deliberately or mistakenly adopted the railway siding price when he was fixing the income, but when he proceeded to arrive at a balance he took as a basis 4s. 6d. a bushel.
– I was still speaking of the railway siding price and was assuming that it was increased by 9d. a bushel by the pool, which would have the effect or doubling the price of wheat for Australian consumption..
– The honorable member may have based hiscalculation on the railway siding price in both cases, but in inferring that the price of wheat for local consumption would be considerably higher than 4s. 6d. a bushel, he did not take into account the fact that any increased income from the pool would be deducted from the price of wheat for local consumption. He ignored the fact that the pool would probably effect considerable savings in handling charges and freight, without adding one penny to the price of bread or wheat. In the receiving of wheat at railway sidings there are usually from four to six agents, and in order to keep that number of men going there is a receiving charge of1½d. a bushel. Some years ago it was1¼d. a bushel. One or two agents could easily do all the work of receiving wheat at each railway siding at1d. a bushel. It is a small item, true, but that saying of ½d. a bushel would represent a big item on 170,000,000 bushels. At the other end of the rail, by elimination of various shipping firms, each with their different stacks, there should be a saving of at least another½d. a bushel. That makes 1d. a bushel for handling, alone.
– Yet the Minister speaks glibly of putting up the price by from1s. to1s. 6d.
– I have not yet finished.
– Like all socialistic efforts it does not work out in practice.
– Let me proceed. At present wheat trucks are consigned to half a dozen firms or flour millers, involving the railways in considerable expense in clerical work and shunting. When all the trucks are for delivery to the pool an immense saving can be made by the railways.
– But the railways will derive the benefit.
– Logically the pool should benefit. I have mentioned the smaller items of savings first. I come now to. the big saving in freight. It should be at least 6s. a ton.. At present the. overseas freight is- from 40s. to 42s. 6d. a ton, largely owing to the fact that the shipping combine is closely organized, and there are: half a dozen wheat firms competing for space . With a 170,000,000 bushel crop there should be a saving of at least 6s. a ton by having one chartering agent. That represents 6d. a bag, or 2d. a bushel. The honorable member for Forrest (Mr. Prowse) has mentioned marine insurance.
– How much would be saved on insurance?
– I am not quite sure. The amount per bushel would certainly be fractional, but over 170,000,000 bushels the saving should be considerable. However, I merely mention insurance in passing. On the main items there should be a saving of 3 1/2 d. a bushel, which the honorable member for Henty deliberately ignored. In estimating the additional amount that Australian consumers would be expected to pay for bread, the honorable member started at £6,000,000 and soared up to £9,000,000 and £10,000,000 and ultimately reached £12,000,000. He might just as well have gone to £20,000,000 and made a job of it. It would have looked much better’ than £12,000,000 in the headlines of the Melbourne Herald. When the honorable member starts out to perform a star turn, he should go the whole hog.
– At 5s. a ‘bushel it, would amount to approximately £10,000,000 or £12,000*000.
– The honorable member’s slogan a little while ago was “ Spend £50,000,000 bravely.” Now he is performing the star turn of “ Spend £12,000,000 foolishly”. I wondered whether the honorable member for Henty spoke as a private member or as Deputy Leader of the Opposition, but to my astonishment his leader supported him, and other members of the Opposition interjected in chorus their approval. Therefore I assume that those two leaders expressed the views of the once great Nationalist party. The honorable member for Henty said that this scheme would mean the end of everything; in other words, when the wheat-growers are placed on the same basis as other sections of the community, the worst will have happened. What is that but an admission that the primary producers have been carrying the whole of the burden. The honorable member said that the 4s. guarantee does not cover the cost of production. Of course it does not. The wheat must be marketed in new sacks for which the farmer usually pays at least 9d. Therefore his net return will be not more than 3s. 9d. a bushel. Any honorable member who contends that with the present high cost of production and the seasonal fluctuations, 3s. 9d. is an adequate. return for the wheat-grower is advocating sweating.
– We are prepared to guarantee a fair price.
– The honorable member knows that the public treasury is not in a position to guarantee more.
– The scheme can be financed by direct taxation.
– When the honorable member was on the treasury benches, how much did he do to substitute direct for indirect taxation?
– I spoke against indirect taxation again and again.
– Yes, but when the honorable member was a .Minister, and, therefore, in a position to translate his preaching into practice, he did nothing.
– What did the honorable member for Wimmera do for the wheat-growers when he was a Minister?
– I at least had the decency to leave the treasury bench when I differed from my colleagues.
– And the honorable member has been crying ever since. He is a sore man.
– The honorable member is welcome to that interpretation of my attitude. This Parliament having declared that other sections of the community arc entitled to a living wage,. I claim the same for the wheat-growers.
– The amendment would give it to them.
– It would not.
– The moneywould come from Consolidated Revenueinstead of from the consumers.
– The honorable member knows very well the condition of theConsolidated Revenue. Withdraw sugar and all the secondary industries out of the charmed circle of artificial support,, let all be placed on an economic basis,, and I shall be ready to oppose this scheme-
– We must’ make a start somewhere.
– I am not prepared*, to start with the wheat-growers. When all industries are on the same platform, all can step down together. The wheatgrower has been the under dog long enough; in. spite of my opposition, legislationhas been passed by this Parliament which imposes additional burdens upon him. To its credit this Government has at least submitted a proposal to give to the wheat-growers something no previous government offered. Nationalist members are endeavouring to delude the people, and the wheat-growers in particular, into the belief that they are yearning to do something for the primary producers, but when they were in power; and were asked by my constituents to stabilize the wheat-growing industry, they deliberately refused to do so. Their whole attitude condemns them as against the primary producers. I am glad that the members of the Country party are at last doing what the primary producers elected them to do - discussing proposals on their merits, regardless of the source from which they emanate, and supporting those which are in the best interests of the people.
.- I appeal to honorable members of all parties to support me in protesting against the manner in which the citizens are exploited. If this bill has one fault it is that there is no provision to regulate the price of bread over the counter in accordance with the price of wheat. Figures I shall give can be checked, and I challenge any honorable member to prove that they are wrong. From 3,000 lb. of wheat the miller produces 2,000 lb. of white flour and 1,000 lb. of pollard and bran. The flour, plus water, will yield 2,600 lb. of bread. If the same quantity of wheat is made into wholemeal flour, that flour, by reason of its greater absorption capacity, will yield more than 3,900 lb. of bread, that is 1,300 lb. of bread in excess of the yield by white flour. Despite the fact that the bakers get 1,300 lb. of wholemeal bread more than of white bread from the same quantity of wheat, they charge ½d. per lb. more for the former. That infamy should be prevented. The Minister has rightly stated that the price of bread does not always fall in accordance with a decline in the wheat market, but if bread were sold over thecounter at list prices based on the current price of wheat, the consumers would not be robbed as they are to-day.
– All honorable members admit that the price of wheat for homo consumption will be higher than the export price. The Minister estimated the difference at1s. to1s. 6d. a bushel; the. honorable member for Echuca (Mr. Hill), at1s., and the honorable member for Henty (Mr. Gullett), at considerably more. In my second-reading speech I estimated the difference at 3s. per bushel, and I am convinced that experience will prove that figure to be fairly accurate. The honorable member for Wimmera (Mr. Stewart) said that members of the Opposition are basing their arguments on supposition, and then he proceededto enumerate several supposititious savings that might be effected by pool management. Why have they not been effected by the voluntary pools which,weare told, are perfectly managed? Why were they not made in connexion with both the compulsory and voluntary pools in New South Wales? The experience of the past is a more reliable guide than hazy speculations as to the future. It is admitted that there is going to be an additional cost on wheat used for home consumption, and it is urged that that will not affect the price of bread. Throughout the debate I have been unable to understand how the supporters of the bill can, one after another, claim that the higher the cost of wheat the less will be the price of bread. Not a single supporter of this pool has said that an increase in the cost of wheat will increase the cost of bread. Time and time again the Minister has quoted statistics and supplied them to others in an endeavour to prove that the price of bread cannot be increased by any addition to the cost of wheat. Let me reduce the argument to an absurdity by saying that if the price of wheat for home consumption were fixed at £1 a bushel, farmers would get that good innings about which the honorable member for Angas (Mr. Gabb) speaks, and the price of bread would be cheaper than ever. What an absurdity! Some people are having too good an innings already, and Bradman’s recent innings will be as nothing compared with the innings that these farmers will have under this bill. It has been claimed that there have been reductions in the past in the cost of flour and wheat, and that that has made no difference to the price of bread. That is perfectly true, and it is a regrettable state of affairs. At the recent National General Convention a master baker drew attention to the wage increases paid to bakers and carters since 1921. He pointed out that whereas in 1921 bakers’ wages were £5 3s. 6d. a week of 44£ hours, and those of carters, £4 17s. for 54 hours, they now are, respectively, paid £6 8s. 6d. for 44 hours, and a week’s holiday on full pay, and £5 8s. 6d. for 48 hours, and a fortnight’s holiday each year. In 1926 the Lang - Government passed the Day Baking Act, and that, coupled with workers’ compensation, childhood endowment and other incidental costs, again inordinately increased the price of - bread. This afternoon the honorable member for Fremantle (Mr. Curtin) said that the money had gone to the millers and bakers, who had a monopoly. There are others who have a monopoly: for instance, the operative bakers and carters, and it is their demands that have contributed towards the present high cost of bread to Australian consumers. %This same delegate to the National General Convention also stated that, from 1921 to 1930, the price of flour had been reduced by £8 15s. a ton. In the same period the reduction of Id. a loaf was relatively equal to £5 10s., but the increase in wages and alteration in conditions involving expense were equivalent to another £3 5s. 6d. a ton of flour. Those are statistics supplied by a master baker, the president of his organization.
– What is his name?
– Mr. Frederick Reed.
– He was a Nationalist candidate.
– From what is the honorable member quoting?
– The Australian National Review. A similar statement was published in the Sydney Morning Herald, if the honorable member is not prepared to accept my authority.
– Why cannot Mr. Reed sell bread in the future at 6d. a loaf if wheat is to cost 8s. a bushel, as has been the case in the past?
– I am prepared to answer questions, but not conundrums. I suggest that the honorable member should apply direct to Mr. Reed for an answer. The Minister made reference to the report of the royal commission appointed by the Hogan Labour Government to inquire into and report upon the prices of flour and bread, and said that the report suggested that the price of wheat did not affect the price of bread. In answer to the honorable gentleman I quote paragraph 61 of the report which reads -
It does not follow that the changed prices are reflected immediately in the cost of the loaf, as bakers usually buy in advance of requirements for a greater or lesser period of time, dependent on their financial position, and their anticipation of probable further fluctuation in the price of flour.
The next paragraph reads -
Given the price of flour per ton, the cost of flour in the loaf can be easily calculated . . therefore, with flour at £11 a ton, the cost of flour used in the manufacture of a large loaf is 4d., and a variation of £1 7s. 6d. per ton of 2,000 lbs. in the price of flour is equivalent to a rise or fall (as the case may be) of id. in a 4-lb. loaf.
During the week ‘I have had sent to me a circular printed by the Labour Gall, 24 Victoria-street, Carlton, on behalf of the Federated Millers and Mill Employees Association of Australasia. This is what that organization seeks -
My organization desires to identify itself with an application of the Mill Owners Association that millers will be able to obtain wheat for their export trade, at London parity prices, from day to day; otherwise, we fear, they will be unable to carry on this important export trade, and any reduction in exports of flour will mean excessive unemployment for our members, and that is something we desire to avoid.
Observe how mill-owners and mill employees work together when they have a common object to achieve. They want wheat for export at London parity prices. If that is good enough for the members of the union surely it is good enough for the constituents of the honorable member for Hunter (Mr. James) ; for the men and women who have nothing at this stage beyond the money they are at the moment earning, and accumulated debts 1 The circular continues -
We understand the Prime Minister has made a statement to the effect that there will not be any increase in the’ price of bread in Australia consequent upon the enactment of the Wheat “Marketing Bill; and to help in the successful fulfilment of this prediction we ask that conditions will be provided whereby it will be made possible for flour mills to continue on their customary three shifts per day running, and thereby, in addition to all the foregoing advantages, keep our flour-mill workers in employment, and keep down the price of flour, and consequently bread.
Surely no further evidence is necessary to demonstrate that the price of bread is affected by the price of wheat. I have established beyond the shadow of doubt that that is so. If there is to he an increase in the price of wheat to our consumers, varying from ls. to 3s. a bushel, it will be reflected in an increased cost of bread. Who is going to bear that increase? Even if it is only ls. a bushel on wheat used for home consumption, it will make a difference of from £2,000,000 to £2,500,000. It is ludicrous to contend that the millers will meet the difference. Every honorable member in this chamber knows in his heart that the difference will be passed on to the consumer, per medium of the additional price of bread. I have no objection to primary producers obtaining a fair price for their product, one above the sweating rate alluded to by the honorable member for Wimmera (Mr. Stewart) ; but I have the greatest objection to their obtaining that price by pinching the stomachs of the children of the workers of Australia. If the wheat-farmers must get this increased price, let them obtain it out of the Consolidated Revenue, on the basis advocated by the honorable member for Fremantle (Mr. Curtin). Let the members of the Government support that proposal, which would do the fair thing by the farmers, and at the same time not penalize the workers during the winter by precipitating them into additional unemployment, and so making more acute their present dire misery and distress.
.- I noticed yesterday that the Deputy Leader of ‘the Opposition (Mr. Gullett) chided honorable members on this side with their silence. The main reason for our silence has been our desire to expedite the passage of this bill, which has already been before us for three or four weeks. We realize that it still has to go to the Senate, and that provision has to be made in the State legislatures for the scheme to be put into operation. I should not have risen at this stage had it not been for the remarks of the honorable member for Warringah (Mr. Parkhill). Here we have a gentleman, who was at one time the king-pin of the Nationalist organization, making extraordinary statements. While the honorable member for Warringah (Mr. Parkhill) was speaking, I interjected that it was time that the farmer had an innings; and he retorted that Bradman’s innings was as nothing compared with what the farmers would get out of this bill. When such statements are made by members of the Nationalist party, one cannot wonder at the fact’ that the Leader of the Country party (Dr. Earle Page) has at last awakened to the necessity for drawing a clear line of demarcation between the two parties. It is a mis-statement of the facts to draw a comparison with Bradman’s innings. The honorable member for Wimmera (Mr. Stewart) argued that it is time that the farmer shared in what is going, and added, “If you are prepared to come down to the hard economic position “- - meaning that we should do away with the tariff as well as bounties on the production of sugar and other commodities^ - “ I am prepared to vote against this bill.” The reply of the honorable member for Warringah to that suggestionwas that if anything was proposed along those lines, a start should be made with the wheat-growers of this country. In the light of these facts, the action of the Leader of the Country party is perfectly understandable. He realizes that the primary producers cannot look for protection to the party that watches the interests of the bag merchants, the wheat merchants, and the superphosphate combine. The honorable member for Warringah has attempted to blame the men who are engaged in the bread-making industry for the fact that the price of bread has not fluctuated in accordance with the fluctuations in the price of wheat. Is he aware that in practically every State in Australia, certainly in New
South Wales, when bakers have reduced the price of bread the millers have refusedto supply them with flour?
– I do not know that, and I do not agree with it.
– The honorable member has endeavoured to make it appear that the men who are engaged in the breadmaking industry have been getting the whole of the cream out of this business. That is not so. Most of the cream has gone into the possession of the millers.
– What I said was that the increased wages of the operatives, and day-baking,were a contributing factor, and I showed to what extent that is so.
– Did the honorable member say, suggest, or infer that the millers have not been making more than they should have made?
-No, because I do not know that they have been.
– I would not expect the honorable member to admit the correctness of my statement, because he belongs to a party that looks after the interests of the flour-millers and wheat merchants, and it is his duty not to show them up. I ama member of a co-operative society at Port Adelaide. Repeatedly, when the chairman of the board of directors of that society has been criticized in regard to the price being charged for bread, he has stated that if the price were reduced they would have difficulty in obtaining flour from the millers. In one half year I received a dividend of 4s. 6d. in the £ from that society. That dividend was distributed out of profits made from the sale of bread, and it indicates what has been going on among bakers and millers. It is not correct to say that this proposal of the Government will have the effect of withholding from both farmers and consumers a benefit that they should obtain. The Minister in his secondreading speech told the House that some millers welcome the bill because it will make for more orderly, systematic and stabilized conditions throughout the industry. They are the best type of millers. The reason that, so far, I have remained quiet during the consideration of this measure is, not that my mouth has been closed by caucus, but because I wish to see the bill go through, so that the farmers may be assisted.
Mr.PATERSON (Gippsland) [4.36].- One point that should have been raised in this debate has not been touched upon. The statement was made by the Deputy Leader of the Opposition (Mr. Gullett), and repeated in a different form by the honorable member for Warringah (Mr.Parkhill), that if these powers are given to the wheat board it may charge as much as 7s. 6d. a bushel for wheat for local consumption. The honorable member for Warringah said that the price for local consumption might be 3s. a bushel above the ordinary price. It is absolutely impossible for a wheat board, or any other organization in Australia, to fix a price so much above world’s price, on account of the existing tariff, whichis 1s. 6d. per cental or11d. a bushel. The highest price that any organization, possessing all the powers that this Parliament can confer, could fix is world’s price plus the existing tariff. If the wheatgrower, the butter producer, or any other individual, unreasonably exploits the consumer, this Parliament has it in its power to remove the tariff protection, which alone enables an artificial price to be obtained.
– The honorable member knows perfectly well that this Government will never remove any tariff protection.
– It can do so, however, and I want to show how absurd is the contention that it will be possible for any organization to make the Australian community pay a price so much above world’s price. It is an economic impossibility to do so. When I first read the amendment of the Deputy Leader of the Opposition I thought that the honorable gentleman was giving full play to his sense of humour; but, after the honorable gentleman had been speaking for some little while, I realized that he was as serious as he usually is. The honorable gentleman pleaded for frankness, and asked the Minister to state candidly what are the intentions of the Government. He should have sought to ascertain -the intentions of the board in regard to the local price. The honorable member for Echuca (Mr. Hill) was exceedingly frank in expressing his opinion as to what price should be charged. That honorable member is in the inner councils of those who have been connected with wheat pooling ever since the war. He said that there are three bases which can be adopted. The first, export parity price, he considers is too low. The second, import parity price, he admits is too high, although it is the price upon which practically the whole of the secondary industries of this country base their prices. In his opinion, the wheat-farmer should receive world’s price ; not the price ruling on the wharf after all deductions have been made to cover the cost of transportation to the world’s markets; but the actual value of the wheat in the great markets of the world. He expressed the view that that would be a fair thing, and that it would- amount on the average to about1s. a bushel more than export parity rate.
– That would more than double the price for Australian consumption.
– The honorable member is under a misapprehension. The honorable member for Echuca (Mr. Hill) suggested that the farmer should receive world’s price without freight deductions only for that portion which was sold in Australia. As one who represents primary producers, although not very many wheat-growers, I say that it would be quite unthinkable and unpardonable for a section of primary producers to raise the price of what they sell in Australia to a level that would always enable them to cover all deficiencies on export. At best the primary producers can only demand, and all they demand is a fair Australian price for that portion of their produce which they sell within Australia. I do not believe that either the wheatgrowers or any other section of primary producers desire or suggest that they shall have more than that.
– On that principle the farmers would get world’s price, as defined by the honorable member for Echuca (Mr. Hill), for that portion which they sold in Australia, and the real world’s price for that portion which they sold outside Australia.
– They would get world’s price without deductions for what was sold within Australia, and world’s price with all the deductions incidental to transportation for what was sold over seas. I do not; say that the wheat board will regard itself as absolutely bound by the proposal advanced by the honorable member for Echuca. But I do say that it will be quite impossible for the wheat board to exploit the community in the manner suggested by the Deputy Leader of the Opposition (Mr. Gullett), and the honorable member for Warringah (Mr. Parkhill), because of the limitation imposed by the tariff.
There is one other point. Notwithstanding the arguments that they have used, the honorable member for Warringah and the Deputy Leader of the Opposition have said that they believe in giving a fair price to the wheatfarmers of Australia.. The Deputy Leader of the Opposition went so far as to describe this measure as punitive class legislation. Any man who will attempt to so amend the bill as to condemn the wheat-grower to accept export parity rates, not world’s rates, is guilty of punitive class legislation. The primary producers of this country have to pay an Australian price for everything they use on their farms and in their homes.
– It is the difference between the two systems of financing that I was referring to. I would give this guarantee out of the Consolidated Revenue.
– I point out that this guarantee is for a limited period. The bill states that it is to be for one year.
– Inferentially, it is promised for three years.
– There has been a definite promise for one year. Therefore, while the guarantee might lift the wheatfarmer above world’s parity, if it be exceedingly low, for one year, there is no assurance that it would do so in future years. If this amendment is carried, the millers must obtain wheat for milling into flour, for local consumption as well as for export, at a figure considerably lower than world’s rates, owing to the deduction of the cost of transport. In other words, the Australian consumer, protected as he is by arbitration court awards and so forth, would get as a discount off world’s prices the benefit of the cost of transportation from this country overseas, in respect of goods that were not so transported. Such an amendment is unreasonable, in view of the fact that we are all living under artificial economic conditions. It is impossible for any section of the community to carry on permanently outside of those artificial conditions. It is unreasonable to expect that one section of the community shall pay Australian prices for everything they use, and sell all they produce at something less than world’s prices.
– Has the honorable member indicated on what principle the Australian price should be fixed?
– I do not profess to be an expert on wheat pooling. I am prepared to leave the fixing of prices to the pool authorities.
– The honorable member said that there should be a fair Australian price. Surely he can tell us, at any rate, upon what principle he.would fix that price.
– The honorable member for Echuca (Mr. Hill), who is an expert in those matters, has suggested that the Australian price should be equal to the world price, without any deductions incidental to export. That would be about ls. a bushel higher than export parity rates. If the wheat-farmer, through this pool, sells wheat to the Australian consumer not at export parity, but at London rates, he is doing something for the community which no secondary industry has been able to do. If all the industries in Australia were to adopt the reasonable price level suggested by the honorable member for Echuca for the guidance of the Wheat Board, and sell their products at the rates ruling in Great Britain, there would be an immediate and very substantial reduction in the cost of living.
.- I propose to move an amendment which I trust the Minister will accept. If he does not, I shall absolutely lose confidence in him, and his pretensions regarding the bill. If he accepts it I shall be satisfied that the bill will be of great assistance to the country generally, and will stimulate the wheat-growing industry, while, at the same time, establishing Austraiian finances on a sound basis. Under my proposal all the taxpayers would bear any loss suffered by the pool. I trust that the Minister will take a broad national view of the matter, and agree to a proposal which I am sure would induce all the States of the Commonwealth to join the pool. Therefore, I move -
That the words “ and each of the States in which a State Wheat Board shall be constituted”, sub-clause (1.) of clause 11 of the proposed new schedule be omitted.
If this amendment is agreed to, I shall move further amendments, so that the clause will read -
The Commonwealth shall guarantee to the wheat-growers of each State in respect of the wheat of the seasons 1930-1931, 1931-1932, 1932-1933, grown in that State, and delivered to a State Wheat Board, a payment of 4s. per bushel of fair average quality wheat. Such payment shall be less the dockages assessed on wheat of below fair average quality, or wheat delivered in inferior sacks or in bulk.
– The honorable member’s amendment is out of. order ; its effect would be to increase the amount of the appropriation required.
– I quite agree with your ruling, sir.
Provided that prior to the effecting of such equalization any advantage of a State arising
– I move -
That the following words be added to clause 15 of the proposed new schedule: - “ The sum by which the amount realized net on wheat for use or consumption within the States exceeds the value of such wheat at net export parity shall be put into the equalization fund and accounted for to the respective States in ratio to the quantities, of wheat produced and delivered for sale in such States respectively.” 1 understood from the remarks of the Minister that it was intended that States which are large exporters of wheat and small consumers should get the benefit of higher prices in the Australian market. That, however, does not appear to be made plain in the agreement. Clause 15 is the only one which touches the matter at all, and the only relevant words in that clause are that an equalization will be effected. The words themselves do not convey any definite assurance how an equalization scheme will be put into effect, nor is it quite clear just what equalization means. I can see a likelihood of trouble when it comes to the distribution of the pooled funds. It may be difficult to get the several States to agree upon any basis of equalization. It would be better, I think, to make the position quite clear in the agreement itself.
– If the honorable member looks closely at the wording of clause 15 he will see that it provides for everything which he seeks to achieve by means of his amendment. The clause gives almost unlimited power to effect any measure of equalization justified by circumstances. In my second-reading speech I informed honorable members that when the bill was in committee I would explain some of the details of the equalization scheme. I cannot explain . the matter better than by quoting a definite example. Supposing the price for home consumption is ls. a bushel higher than the export price. If New South Wales has a local consumption of 13,000,000 bushels, Victoria one of 10,000,000 bushels, South. Australia one of 4,000,000 bushels, and Western Australia one of ‘ 3,000,000 bushels, there will be available a sum equal to 30,000,000 shillings in excess of what would have been realized had the wheat been exported. This sum will be allocated among the States which are parties to the agreement in proportion to the amount of wheat they have put into the pool. Thus, if the total wheat crop were 200,000,000 bushels, and Western Australia produced 40,000,000, she would be entitled to one-fifth of the surplus fund. Prior to such allocation, however, adjustments may have to be made so that any State enjoying an existing advantage would be allowed to retain such advantage. For instance, New South Wales may be able to substantiate a claim that ordinarily the price of wheat in that State for home consumption is 3d. per bushel higher than export parity. If that should be so, she would be entitled to retain 3d. a bushel on her 13,000,000 bushels, and if there were no other claims, 9d. per bushel of the ls. would go into the equalization fund. Victoria might be able to claim that her home consumption price is 4d. per bushel above export parity, in which case, if she had no right to make any other deductions, she would pay 8d. per bushel on her 10,000,000 bushels into the equalization fund. In the case of Western Australia there would no doubt be a claim based on geographical considerations. It is said that Western Australia enjoys a freight advantage over the eastern States of about 3/4 d. a bushel. If Western Australia could satisfy the board on that point she would be entitled to deduct that amount, in addition to any other advantages which may be due to her, from the equalization fund.
– But cheaper handling should not be considered, unless it is due to her geographical position.
– I have suggested that the claim may be made because of freight considerations.
– That would be a proper deduction.
– Then deductions may be made on account of seasonal conditions. If, for instance, a drought occurred in New South Wales which resulted in that State being able to produce only sufficient wheat for home consumption, but none for export, or if the drought was so serious that it caused her to import wheat from the other States, that would have to be taken into consideration.
– What would happen if so much wheat was exported that a scarcity occurred in Australia and the price of wheat for local consumption was increased?
– We are not considering that point at the moment. It has been said that the States with the smaller populations, such as South Australia and Western Australia, might be at a disadvantage as against the States with a large population, because their local consumption would be proportionately small and they would have to export the greater part of their production. In the case of Western Australia, I understand that the local consumption is only about 3,000,000. bushels, whereas in New South Wales it is about 13,000,000 bushels. The States with the smaller populations would be at a disadvantage because they could not make up any ground on wheat for home consumption.. This point was given a great deal of consideration by the conference and it was agreed that it should be a factor in determining what amount a State should pay into the equalization fund. The delegates from New South Wales, and also from the other States with a large home consumption, considered that this was only fair so long as their States were not placed in a disadvantageous position. The object of this clause is to counteract any possible disadvantages of the kind thatI have mentioned.
.- I am sure that honorable members have listened with interest to the explanation of the Minister of the objects of this clause. But the explanation depends almost entirely upon the meaning of the word “ equalization “ which appears to be a charmed word. I doubt whether any single word could mean as much as the Minister intended it to mean.
– “ Equalization “ and “ socialization “ appear to be very similar in meaning.
– Every one understands, in general, the ideas sought to be conveyed by the word “ equalization “ ; but I point out to the Minister that although he has described the meaning of the word on a certain basis-
– Which is not equalization.
– It is possible to contend that some other basis would result in a fairer equalization. The words used in the clause are “ an equalization shall be effected between the respective State Wheat Boards.” That is a very general phrase to cover all the accounting, &c, to which the Minister has referred.
– Perhaps “ artificialization “ would be a better word.
– It appears that those who are familiar with these subjects have evolved a language of their own, which they seem to understand fairly well, but which, so far, has not been subjected to very much argument. Having had matters in their own hands there has been no one to raise points as to the methods by which they have carried on their transactions.
– Is not “equalization” just trade jargon?
– I had thought of using that word but did not wish to hurt any one’s feelings. This “ equalization “ will involve some intricate accounting which could be conducted on some other basis than that suggested by the Minister. I suggest that it would be safer to set out in the clause exactly what “ equalization “ means, and also the precise process to be adopted to bring about the particular kind of equalization which he has in mind. The proviso now limits the advantages to three classes, whereas in the original agreement the advantages to which the States were to be entitled were referred to in the general phrase “ any geographical or other advantage enjoyed by a State.” That left it open for a State to argue that there were other than geographical advantages. The headings b and c, which appear in the clause in its extended form, were not part of the original clause. I do not know whether any States enjoy other advantages than the three mentioned, but it is important that honorable members should understand that if they do no consideration can be given to them if we agree to the new clause. There is one other point I desire to mention. Apparently the equalization account is to be made by the Australian Wheat Board, and it may be that on a true interpretation of the clause the accounts so made would be final as between the parties, and that they would have no right of appeal, no right of criticism, and no means of relief if they were dissatisfied with the accounts. But the proviso provides - that prior to the effecting of such equaliza tion any advantage arising . . . shall be taken into consideration and accounted for to the State Wheat Board concerned.
So this particular matter is not left to the discretion of the Australian Wheat Board after all. Any State will have, as I presume it is intended to have, the right of litigation if the Australian Wheat Board is not prepared to allow it as much in respect of its advantages as it considers itself to be entitled to, or it may have the right to go to law if it considers that the value of the advantages allowed to another State are higher than they should be. If, on the other hand, it is intended that the Australian Wheat Board shall be the final judge, I suggest that some consideration should be given to the desirability of allowing such a body to adjudicate finally on a question which involves such huge sums of money, and so profoundly affects the interests of the farmers.
.- When I first read this bill I thought it was intended that we should have an Australian pool; that the Government desired to provide by legislation that all the Australian wheat should be brought under one control, and that there should be an equal distribution of the proceeds to the various States. Likewise, when I read that there was to be an equalization fund I naturally assumed that it would be true to its name and that after all the expenses of the scheme had been met the States would get the same amount per bushel for the wheat which they entrusted to the pool. Now I am not surprised that Queensland should give such wonderful support to this scheme, for it appears that as the price of wheat for home consumption in that State has been 6d. per bushel higher than export parity Queensland will still get that advantage in respect to all the wheat which she puts into the pool.
– Her production is very small.
– But Victoria has a large production, and last year, according to the Minister, the price of wheat for home consumption in that State was 4d. per bushel more than export parity.
– I did not say that. I used the figure of 4d. simply for the purpose of illustration. The actual figure may be only 2d.
– It is between 3d. and 4d. The figures that I have before me give the minimum as 3d. Victoria must receive that extra price for the three years, and as long as the pool lasts. What is South Australia to get? I see no record of that State having received any extra price. For the whole period of the pool, three States are to receive the advantage of the extra prices that they have enjoyed in their local markets; but South Australia and Western Australia will not benefit in that direction.
– If South Australia has not enjoyed an extra price in the past, it will not lose anything.
– I am considering what is to happen in the future.
– That State may get an extra pricein the future.
– If it saw fit to sell its wheat locally at London parity, and the other States obtained an increased price, it does not follow it should get no advantage in the future. If we could escape from this system of compulsion, I should like to see the time when the farmers could charge the local consumers the prices that they would have to pay if they imported their wheat from other countries. So many charges are imposed upon the producers for everything they buy that they are specially penalized. This Parliament should endeavour to see that equal justice is done to all sections. If there are to be advantages, they should go to the men who are producing the basic wealth of this country, but, by our legislation in the past, we have built up conditions that invariably favour the people in the cities. I hope that a proper equalization scheme will be devised, because, with the consent of the Commonwealth and the States, this pool could be continued beyond the three-year period, and this special concession to Victoria, NewSouth Wales and Queensland continued for all time.
– Equalization can be brought about only while the guarantee continues.
– I hope that the honorable member will be able to satisfy the farmers of his State that this provision is advantageous to them. I shall not be able to show that it is in the interests of the producers in my State. Under paragraph c of the proviso, consideration is to be given to any advantage of a State arising “from an excess in the average price enjoyed in respect of wheat of the 1929-1930 season sold for use or consumption within the State over the average price of Australian wheat of that season sold for export.” In my opinion, that provision should be struck out.
.- I think that the word, “ equalization “ should be defined. Further difficulty will arise through this attempt to make allowances for advantages that have been enjoyed by certain States in the past. It seems to me that Western Australia will be at a disadvantage. A more simple arrangement would be to apply the scheme equally to all States. If Western Australia enters the pool it will save a lot of the pin-pricks that are likely to be experienced. Western Australia, with her geographical advantages in the matter of freight, may be able to show that she is getting several pence per bushel more than the other States on local sales.
– Why stonewall the bill?
– It would be better for all concerned if the honorable member would cease interjecting, and allow the committee to deal with this important matter in a serious way. I do not know whether the Minister has anticipated the difficulty that must arise from the equalization proposal. It should apply equally to all the States which join the pool. Has the Minister considered whether the carry-over of last year’s wheat will not nullify the equalization arrangement for the first year? I have heard no explanation as to how that difficulty is to be overcome. Benefit cannot be derived from local sales unless the carry-over is acquired by the States. [Quorum formed.]
.- -The explanation given by the Minister would be entirely satisfactory if his definition of “ equalization “ could be read into the measure; but the act will be read quite apart from the debates in this chamber.
We shall have the bare words of the statute, and a court would not be permitted to consider statements that may have been made by Ministers, or other members, during the debate on the bill. There is every risk of a dispute arising as to what “ equalization “ means. The States will sell wheat at varying prices, and it will be asked whether the prices realized in the foreign market will be taken into consideration in connexion with the equalization. The word, in itself, conveys varying meanings to a dozen different minds. Since the proposal affects a fund that may amount to £1,600,000, or more, it is particularly important to States that produce a great deal of wheat and consume comparatively little. If a dispute arises the people of Western Australia will be at a decided disadvantage, if they are not entitled to the benefits which the other States will share. I am sure that the Minister is sympathetic to the idea. It would be more satisfactory to every one, and a greater inducement to the States to join the pool, if the matter were made perfectly clear. I hope that the Minister will make it clear beyond all doubt that the smaller States will be given the benefit of the equalization scheme.
– I take it that there is a fear in the minds of the people of Western Australia that what is proposed to be done in connexion with the equalization scheme might not be done, and for that reason the honorable member for Perth (Mr. Nairn) wants a definite assurance that Western Australia will get out of the equalization fund the amount which I suggested. I have an amendment which should meet the position.
It provides for the deletion of the words “ being greater than the average net realization of wheat exported, an equalization shall be effected between the respective State wheat boards and” and the substitution of the words “ exceeding the average net realization of wheat exported, and equalization shall be effected between State wheat boards as follows: - The amount of the excess shall be contributed to an equalization fund and, subject to sub-clause 2 of this clause, such funds shall be distributed between the States in the proportion that the quantity of wheat of that season grown in each State and delivered to a State wheat board bears to the total quantity of wheat of that season grown in all the States and delivered to State wheat boards.”
.- I ask leave to withdraw my amendment in favour of that proposed by the Minister.
Amendment- by leave - withdrawn.
Amendment (by Mr. Parker Moloney) - by leave - proposed -
That the words “ being greater than the average net realization of wheat exported, an equalization shall be effected between the respective State wheat boards and” be omitted with a view to insert in lieu thereof the words “exceeding the average net realization of wheat exported, an equalization shall be effected between the State wheat boards as follows : - The amount of the excess shall be contributed to an equalization fund and, subject to sub-clause 2 of this clause, such fund shall be distributed between the States in the proportion that the quantity of wheat of that season grown in each State and delivered to a State wheat board bears to the total quantity of wheat of that season grown in all the States and delivered to State wheat boards.
.- I am glad that the Minister has done something to define the vague word “ equalization “. At the same time, I feel that the introduction of the amendment at this stage, and the reading of it by the Minister from a document which he alone has, must leave in the minds of honorable members generally a rather vague idea as to its effect. So far as I could follow it, however, the amendment seems to meet fairly the criticism which I directed against the use of a vague word in an important clause. I have had no opportunity of reading the amendment, and I think that a good many members are taking it on trust in the dark. I rise only to suggest that it would be desirable for honorable members to scrutinize it carefully in order that any ambiguity or uncertainty may be removed in another place.
Amendment agreed to.
.- I move -
That the words “ provided that “ in the proviso to clause 15 of the proposed new schedule be omitted with a view to insert in lieu thereof the figure “2”.
If this amendment is agreed to the proviso will become sub-clause 2. It will clear the ground fromthe Western Australian point of view.
Amendment agreed to.
Proposed new schedule, as amended, agreed to.
Title agreed to.
Bill reported with amendments.
.- I move-
That the bill be recommitted for the reconsideration of clauses 2 and 7.
At an earlier stage the Leader of the Opposition (Mr. Latham) suggested an amendment to sub-clause 5 of clause 7 to which I agreed. I also desire to submit two amendments to clause 2, which will render the measure more effective.
Question resolved in the affirmative.
In committee (Recommittal) :
Clause 2 -
Sections one, two and four of this act shall commence on the day onwhich this act receives the royal assent and the remaining sections of this act shall commence upon a date to be fixed by proclamation :
– I move-
That the words “ two and four “ be omitted with a view to insert in lieu thereof the words “ and two “.
The effect of this amendment will be to bring into operation only sections 1 and 2 when the act is assented to, and the remaining sections when it is proclaimed, which will not be until at least three States have signed the agreement. If section 4 came into operation on assent being given, and only two States had agreed to sign the agreement, the Commonwealth would be committed to the whole agreement.
Amendment agreed to.
– I move -
That the following new sub-clause be added : -
It may happen that some of the States will not be able to pass the necessary legislation this year, in which case the growers would be deprived of the benefits of this legislation. The new sub-clause will give them an. opportunity to come in next year on the same conditions for that year as would apply if the scheme started this year.
-With or without the 4s. guarantee?
– In clause 11 (2) of the agreement, already agreed to by the committee, provision is made for the Commonwealth and not less than three of the States to agree jointly on a guaranteed price for wheat for the two seasons following the 1930-31 season. The price is not stated. The 4s. guarantee will be only for the 1930-31 season. The new sub-clause will enable States which may not be able to join the scheme this year to do so next year as though the scheme had started in 1930-31.
– They can do so as the bill now stands.
-We want to make sure that those States which might not be able to pass the necessary legislation this year will be able to come in on the same terms that would apply to them if they came in this year, with the exception that the 1931-32 season will not take the place of the 1930-31 season. In other words, all the conditions, with the exception of the guarantee, will apply to the 1931-32 season.
– I take it that for the scheme to begin three States must sign the agreement for the first year.
Amendment agreed to.
Clause, as amended, agreed to.
Clause 7 - (5.) State representatives on the hoard shall hold office for the period for which they are appointed.
.- I move -
That after the word “shall,” sub-clause (5), the words “ subject to the law of the State which they represent “ be inserted.
The amendment is in accordance with a suggestion I made earlier and which the Minister said he was prepared to accept.
– I accept the amendment.
Amendment agreed to.
Bill reported with further amendments. Reports - by leave - adopted, and bill - by leave - read a third time.
Debate resumed from 3rd June (vide page 2398), on motion by Mr. Theodore -
That the bill be now read a second time.
– I regret that the debate on this measure, following the speech of the Treasurer, in moving its second reading, was interrupted by a prolonged discussion, in committee, on the Wheat Marketing Bill, which has just been disposed of. The honorable the Leader of the Opposition (Mr. Latham), in a comprehensive criticism of the proposal, raised a considerable number of objections to it. It was obvious that he was speaking from a brief which he did not fully accept or understand. Those who know how briefs are prepared, could see that whoever instructed the Leader of the Opposition, furnished him with evidence, which was not supported by the facts and opinions of authorities which, upon examination, proved to be obsolete, over-ruled, and of no practical value in the discussion of this measure. The honorable gentleman based his criticisms largely upon a report issued in 1926 with regard to a proposal to establish a central reserve bank for the IrishFree State. He appeared to forget altogether - and this seems to be vital in the consideration of a measure like this- that Dublin, the capital of the Irish Free State, is within 70 miles of London, where a Central Reserve Bank has been established since 1844. How can the position be compared with a country 12,000 miles from London.
Several honorable members interrupting
– Order! The conversations between honorable members are far too audible. It is almost impossible for me to hear what the honorable member for Corangamite is saying. The practice of carrying on conversations during debates has been growing of late. I ask honorable members to assist me to maintain order, so that the House may have the advantage of the views of the honorable member who is speaking.
– It should be remembered also that Ireland is served by a number of well-established banking institutions, including the Bank of Ireland, the Royal Bank, and the Northern Bank, which have their head offices or affiliations in London. Unlike Australia, the Irish Free State has not an independent banking system. This shows that the report upon which the honorable member for Kooyong (Mr. Latham) relied so much, has been proved to be obsolete as an authority on banking systems. Since it was issued there have been two other pronouncements upon central banking which are up-to-date, and deserving of far greater attention than has been given to them. In 1927 the act constituting the South Africa Reserve Bank was thoroughly overhauled by a committee of experts, and as a result of their report, valuable amendments were made to it. Much water has also flown past the mill since the publication of the report on the proposed central reserve bank for the Irish Free State in 1926. Sir Ernest Harvey, Comptroller of the Bank of England, in 1927 paid a visit to Australia at the invitation of the Commonwealth Bank Board, to report upon central banking operations in this country. His report is of the greatest value to honorable members in debating, this measure. I have a copy, and I propose quoting at some length from it later.
The Leader of the Opposition took the view that provisions in this bill will render the proposed central reserve bank liable to political control. The majority of the directors, he said, would be under the control1 of the Government. The honorable gentleman has forgotten, apparently, .that until the change in the management of the Commonwealth Bank was made following the amendment of the act in 1924, the same charge might have been levelled at that, institution. It was not till 1925 that the directorate of the bank included persons actively engaged in agriculture, commerce, finance and industry. Previously it was under the control of one Government appointee.
It may not be generally known that the strongest central bank outside the Central Reserve Bank of the United ‘ States of America in proportion to its area of influence and the population which it serves, is the Bank of Sweden. In recent years Sweden has become so prosperous that it has a premium in exchange on London and New York, and instead of placing an embargo on the export of gold, has taken steps to prohibit the importation of the precious metal, because of the effect of a surplus of gold on price levels. I take the following extract relating to the constitution of the’ Swedish Riksbank from “Willis and Beckhart’s Foreign Banking Systems: - The Riksbank is not administered by the executive Government, but is placed under the direct supervision of the Parliament. The Riksbank is governed by seven delegates. One of these, the chairman, is nominated by the King for a period of three years, and the remaining six are elected by the Parliament, also for a period of three years. Two of the last mentioned members resign each year, but they may be- re-elected. The seven delegates select one of themselves to act as first president and two as second presidents, and these three assume principal charge over the work of the bank and its administration.
Nobody who has knowledge of central banking will deny that the dollar exchange rate of the Swedish bank on the Bank of New York is better than the rate for the Bank of England or the central banks of any European country. We may take it, therefore, that the appointment by the executive government of the directorate of a central bank does not necessarily imply that the institution itself will be adversely affected by political control.
I turn now to the position in South Africa. The Reserve Bank of the Union of South Africa is accepted as a standard of what a central reserve bank should be. It was established in 1923, and its charter was amended in 1927. The proposal, which was endorsed by the Leader of the Opposition, that the representatives of trading banks should be appointed to the board of the proposed central reserve bank, was adopted in South Africa in 1923 ; but in operation it was found to be inconvenient if not dangerous. Consequently the act was amended in 1927 and the provision for the appointment to the directorate of representatives of the trading banks was deleted. The reasons for this course are stated in Willis and Beckhart’s authoritative work at page 990, in the following terms: -
The bank is a corporate body with head office at Pretoria. The bank management consists of a board of eleven directors, of whom originally three experienced in banking and finance were nominated by the stock-holding banks and appointed by the Governor-General, and were known as the banking representatives ; three (described as the commercial and industrial representatives) who at the time of their election had to be actively engaged, one in commerce, one in agriculture and one in some other industrial pursuit, were elected by stock holders other than banks; and three (described as the Government representatives) appointed by the Governor-General, who also appointed the remaining two, the governor and the deputygovernor. By the Amendment Act of 1923 the banking representation was abolished on June 30, 1923, and six directors (the commercial and industrial representatives) who must be or have been actively engaged, three in commerce or finance, one in agriculture and two in other industrial pursuits, are now elected by the stock-holders. The remaining five are appointed by the Governor-General as before. The reason for this change was that the board found it difficult to discuss certain aspects of banking policy before representatives of the banks.
I have already shown that the whole of the capital of the Bank of Sweden is provided by the State. It is an answer to one of the claims put forward by the Leader of the Opposition (Mr. Latham) on behalf of the trading banks and chambers of commerce whose resolutions he read to the House, that they should provide part of the capital of the central reserve bank and have representatives upon the bank’s directorate.
– Do private banks provide part of the capital of the Central Reserve Bank in South Africa ?
– The capital of the South African bank was originally contributed in part by the trading banks, and three of the directors of the central bank represented the trading banks; but the experience was, to use the words of the authors I have just quoted, that “the board found it difficult to discuss certain aspects of banking policy before the representatives of the banks.” As a consequence the Union Government not only took over the capital subscribed by the trading banks, but also replaced the three representatives of those banks on the directorate with government nominees.
– The total capital involved did not amount to more than £3,000,000 or £4,000,000.
– It is true that the capita] of the bank was very small, but at that .time “there were only five banks operating in South Africa, two large English banks, two small Dutch banks, and a bank doing business in Cape Town. The two large banks put up a fight just as the trading banks in Australia are now putting up a fight against the proposal to have a central reserve bank.
– The circumstances in South Africa at the time are not comparable with those in Australia to-day.
– The Central Reserve Bank in South Africa was a small institution with infinitesimal funds at the time of which the honorable member is speaking.
– It may be that at the start it was a small concern, but it was large enough to make arrangements for the purchase and supply of stocks of gold’ for the Bank of England, in addition to financing itself. As to its success, I shall be able to speak later.
The directors of the Bank of Japan are also appointed entirely by the Government. The Japanese have shown themselves financial experts. Although they have had financial troubles, they have always shown themselves to be great bankers. The Yokohama Specie Bank has probably more branches in the world than any other bank. They are located in every important port in America, Africa, Asia, Australia and Europe. The directors of that bank are appointed by the Government. There are nine of them, and they are all officers of the bank controlling different departments. By its financing of Japan after the Russo-Japanese War, and by the part it has played ever since in world finance, the Yokohama Specie Bank has more than justified its establishment.
– Does the honorable member suggest that the Japanese system would be applicable in Australia, because it is very different from what .is proposed in this bill?
– I am not suggesting that it should be adopted here. I am merely trying to combat the honorable member’s argument that our central reserve bank will be a political institution because of the large number of government appointees on it. The Swedish, the South African and the Japanese central banks have not turned out to be political banks, yet those in control of them are government nominees,
A large portion of the speech of the honorable member for Kooyong (Mr. Latham) was devoted to an attempt to prove that if credits amounting to approximately £20,000,000 are got together, the central reserve bank will immediately be subjected to demands for money to carry out all sorts of wild-cat schemes. As his statements in this regard were published under large headlines in the Nationalist newspapers, there is every reason for letting those who read Hansard know that his arguments were basedupon absolutely false premises.
– Does the honorable gentleman think that the central reserve bank ought to be under political control?
– No. I am completely opposed to that. The honorable member, however, need not fear that there will be any political control of the proposed bank.
The honorable member said that even now the trading banks of Australia have £13,000,000 on deposit in the Commonwealth Bank, and, when I demurred at his statement, he said, to use his own words, that the money was very largely required for clearing house purposes. If he had paused to think, hecould not possibly have contemplated as much as £13,000,000 lying in the vaults of the Commonwealth Bank for the clearing house requirements of the trading banks.
– It is not what I said, nor what I meant.
– I should think that £2,000,000 would meet those requirements. The facts are that the £13,000,000 has been voluntarily deposited in the Commonwealth Bank by trading banks, because they are aware that, under the provisions of the Commonwealth Bank Act relating to the export of gold, their gold reserve could be compulsorily taken over by the Commonwealth Bank in order to meet any demand by the trading banks for exchange purposes overseas.
– If it is used overseas, surely it cannot be still in the Commonwealth Bank to the credit of the trading banks?
– Quite so. Although £13,000,000 may have been deposited in the Commonwealth Bank by the trading banks, it does not mean that that amount has not been drawn against for credits in London ; nor does it mean that £13,000,000 is not in excess of requirements for exchange purposes. But the point I am seeking to establish is that the money has been deposited in the Commonwealth Bank because the trading banks knew that it could be compulsorily acquired, and, having it there, they are making use of it, as they are entitled to do, for exchange purposes.
– It is only right for me to say that considerable deposits were kept in the Commonwealth Bank by the trading banks before their gold was taken from them.
– I made it clear that the money they had deposited in the Commonwealth Bank was not all used by them for clearing house purposes.
– But the honorable member stated it was mainly used for clearing purposes. In the absence of the clearing house proposals now in existence, it would be absolutely necessary to have some association for exchange purposes. Until the Commonwealth Bank came into this field, the trading banks never knew what the exchange balances were in London, nor did one bank know what the others were doing. I quote again from Foreign Banking Systems -
Any approach to a banking combine or money trust . . . would undoubtedly cause great apprehension . . . Such a combine would mean that the financial safety of the country . . . would be placed in the hands of a few individuals . . . Moreover, the position of the Bank of England . . . would be seriously undermined.
Although Canada has no clearing bank system and relies on the Central Reserve Bank of the United States of America - Canadian bankers deposit their surplus gold in New York - it has an inspectorgeneral and a controller of its commercial banks. That is an authority we have not yet exercised in Australia, but I think it is an example we could readily follow.
Sitting suspended from 6.14 to 8 p.m.
– The central banking movement is of comparatively recent growth. The Banking and Currency Act of 1844 gave to the Bank of England the powers of a central reserve bank, with control of the note issue, subject to certain exceptions. Later, the rights of the private banks were bought up and the Bank of England is now the only authority in the United Kingdom that can issue notes. The financial power of the Bank of England, together with the commercial and shipping resources of the. United Kingdom, has enabled Great Britain to avoid the crises that have occurred in other countries. The Baring bank crash, which completely upset the finances of the United States of America, was successfully weathered in England. Although the United States of America has much greater financial resources than has the United Kingdom, it realized the necessity to adopt a similar system of central banking. A law introduced by Alexander Hamilton prevents .the establishment of a branch system such as exists in Australia and Canada, but by arrangement between the banks that legislation through the operations of chain banks has been overcome to some extent by subterfuge. Owing to frequently recurring crises, .the Federal Reserve Bank was established in 1914. It operates from seven centres, representatives of which, meeting in “Washington, form, with the Treasury of the United States, the central board of control. The organization is similar to the marketing system adopted in Australia where boards operate in each State and delegates from the State boards constitute the federal board. Although financial crises have occurred in America since the Reserve Bank was established, they have not been of sufficient magnitude to upset seriously the finances of the country, and the recent bull and bear speculations on the New York stock exchange, which might otherwise have been disastrous to the country, were successfully negotiated. During the great war, the Federal Reserve Bank was able to buy up American bonds and securities that were held abroad, and through the advantages which have accrued from its operations the United States of America enjoys a degree of financial stability and order that were unknown in its previous history. The outbreak of war in 1914 led to the complete collapse of European banking systems. Germany, Austria, France, and other countries resorted to a system of inflation which produced a chaotic state of affairs. In 1922, following meetings of the International Economic Commission, central banks were established in Austria-Hungary and Germany as part of the Dawes Plan, and- a. new credit system was adopted. In 1921, the South African Reserve Bank was established; in 1923, it was amended, and in 1927 further amended, and is now operating very successfully.
A remarkable change has occurred iti the attitude of the private trading banks to the proposal for the establishment of a central reserve bank. A few years ago the associated banks found that the Commonwealth Bank was interfering seriously with their profits. In answer to a question asked by the honorable member for Corio (Mr. Lewis) in this House a few weeks ago, the Treasurer stated that the profits of the Commonwealth Bank since its inception totalled £18,125,000. One can imagine with what alarm the private banks, whose object is to make profits for their shareholders, viewed this intrusion upon their preserves. Their jealousy of the Commonwealth Bank found expression in consistent antagonism, usually passive but sometimes active ; and particularly since the war the animosity of the trading banks toward the Commonwealth Bank has been displayed in many directions. Knowing the value of the central banks created in other parts of the world under the Dawes plan, the success of the Federal Reserve Bank in the United States of America, and the effectiveness of the Bank of England as a great financial reserve power, the private banks have clamoured for the establishment of a central reserve bank in Australia. But they hoped by the creation of such an institution to terminate the competition of the Commonwealth Bank in ordinary trading and to enjoy the advantages of “ a bank of banks “ which would finance them, increase their resources, allow them to use Commonwealth notes for their own purposes, and so enable them to increase their profits.
The National Bank of Australasia publishes monthly a valuable statement dealing with the financial position of the Commonwealth, and a few years ago that publication consistently urged the establishment of a central reserve bank by which credit would be expanded, the gold reserve would be increased, and exchange abroad would be organized. The financial writers in the Argus and other conservative journals also then advocated that policy, but always subject to the condition that the Commonwealth Bank should discontinue ordinary trading operations. In order to support that advocacy the Commonwealth Bank brought to Australia in 1927 Sir Ernest Harvey, Comptroller of the Bank of England, to report upon the establishment of a central reserve bank. I have tried in vain to get a copy of his report. After it was presented questions were asked repeatedly in Parliament as to when it would be made available. The answers of Mr. Bruce and the right honorable member for Cowper (Dr. Earle Page), who was then Treasurer, were to the effect that Sir Ernest Harvey had come to Australia by arrangement with the Commonwealth Bank to conduct a confidential inquiry, and that his report was not intended for Parliament. The report remained a secret, and at no time were honorable members able to get any information about it. But I have been fortunate in discovering the report of an address he” delivered before the Economic Society of Melbourne on the 8th April, 1927. My friend, Mr. E. C. Dyason, a leading Victorian financier, presided. Although Sir Ernest Harvey was not able to give the society in detail the contents of his report to the Commonwealth Bank, he clearly indicated the nature of it, and his address is published in the Insurance and Banking Record of the 21st May, 1927. My time does not permit me to read the whole of his address, but the headings show how consistently the bill now before the House follows his advice.
I have already referred to the advocacy of a central reserve bank by the National Bank of Australasia. The following extract from a speech by the chairman of directors, Sir John Grice, published in the Melbourne Age of the 29th May, shows how the attitude of the bank has changed -
Why not lot well alone in a time like this? Like the Bank of England, our Commonwealth Bank is not a 100 per cent, reserve bank according to some foreign standards, but is in its own way functioning satisfactorily in the capacity of a reserve institution, working quite well in useful and friendly co-operation with the trading banks, most of whom keep large credit balances in it . . It is sig- nificant that the banks of Australia are united in desiring that under existing financial conditions there shall be no disturbance of the constitution and status of the present Commonwealth Bank.
Sir John Grice does not now want a central reserve bank, in addition to a Commonwealth Bank competing with the trading banks in ordinary business. He knows that if the Commonwealth Bank is relieved of its reserve functions as the Government proposes, it will enter into keener competition with the private banks. They would prefer a continuance of the present hybrid institution, partly engaged in reserve work, but without final authority as a central reserve bank, and with 72 branches engaged in ordinary trade, rather than that a separate reserve bank should be established which would leave the Commonwealth Bank free to compete for ordinary business. Yet the demand for the Commonwealth Bank to engage in ordinary trading has ‘been heard on all sides. Sir Ernest Harvey, in the course of his address before the Economic Society, said -
Before reviewing these principles, however, let us for a moment consider the advantages claimed foi- a system based on the centralization in one institution of the banking and currency reserves of the country. What is the alternative? It is the decentralization of reserves or the holding by each bank in the country of its own reserves. When, under this latter system, decentralization, the need arises for a bank to strengthen its reserves, it can only do so by calling in its loans and overdrafts or by disposing of other assets, and unless the general volume of credit is to be curtailed, the loans or overdrafts called in or the assets disposed of must be taken over by another bank.
That opinion, written in 1927, is a most accurate expression of the condition of affairs that now exists. Is it not that through, fear of financial stress every bank is calling in loans, reducing overdrafts, increasing overdraft rates and in every way creating in their own fashion a mild financial panic? Sir Ernest Harvey continued -
Before reviewing these principles, however, let us for a moment consider the advantages claimed for a system, based on the centralization in one institution of the banking and currency reserves of the country. What is the alternative? It is the decentralization of reserves or the holding by each bank in the country of its own reserves. When, under this latter system, decentralization, the need arises for a bank to strengthen its reserves, it can only do so by calling in its loans and overdrafts or by disposing of other assets, and unless the general volume of credit is to be curtailed, the loans and overdrafts called in or the assets disposed of must be taken over by another bank.
It is not improbable, however, that the very circumstances which have given rise to the need for a strengthening of reserves in the one case are common to all banks, and that the need of one is in greater or lesser degree the need of all. Yet the strengthening of one bank’s reserves can only be accomplished at the expense of those of another bank, and unless reserves happen to be very unevenly distributed between the banks, contraction by one bank may compel other banks to take similar action for their own protection. It must not be forgotten that the need for strengthening reserves may arise from causes quite outside the control of the banks. It may be due to such occurrences as droughts, hurricanes, earthquakes, or other climatic or natural phenomena not necessarily in the country in which the banks are operating.
Recently it was the Hatry case in London, and the bulling and bearing on the New Yorkstock exchange that caused financial tension. Continuing, the extract reads -
But it may be in lands thousands of miles away overseas, with which the country happens to have large and important trading interests. In circumstances such as these, attempted action by one bank may precipitate similar action by the rest, in which case even the most liquid assets become unrealizable, confidence may be shaken, credit become unobtainable at any cost, and a crisis which could under an alternative system have been avoided, may result, even bills of exchange, which should provide the most liquid form of assets, cannot be turned into cash where the rediscount facilities afforded by a central bank do not exist. To sum up the position, with decentralized reserves actual cash is the only asset which can be relied upon as an effective reserve in time of general crisis, and the amount of cash, unemployed and unremunerative, which must be held is considerably greater than would be necessary if the banks could hold other short assets such as bills of exchange with the certain knowledge that in’ case of need they could immediately be turned into cash through the medium of a central bank. On the’ other hand, where there exists a properly conducted central bank a trading bank can, in such circumstances as I have described, turn to it for assistance and obtain the support which it requires without detriment to the position of any other bank The central bank, if its business has been conducted in conformity with the principles of true central banking, will probably not itself be involved in the causes which have rendered it necessary for other banks to turn to it for assistance, and it will be in a position to bring the whole weight of its resources to. bear in any direction in which help is necessary.
If the opinion of this financial expert, based upon years of experience gained in association with the Bank of England and with other great trading banks of the world, is to be believed, we should welcome the establishment of a central reserve bank in Australia. A few years ago the proposal was a welcome one. Whynot now?
– Sir Ernest Harvey gives a very solemn warning against political control being exercised in connexion with a bank.
– I thought that I had dealt with that phase of the matter. Sir Ernest says -
I will now quote some of the most important principles of central banking, and make a few short comments on them. (1.) A central bank should possess the exclusive right of note issue -
That seems to be generally accepted - (2.) A central bank in its management and policy should be free from government control and the influence of politics.
I am ready to face that. I do not believe in political control. We are told that “ finance is government, and government is finance.” But no government can absolutely ignore the financial institutions of a country, nor should any government interfere with their direct management. This bill provides for an independent board, free from political control. I have already referred to South Africa, where the Government withdrew from the South African Reserve Bank the directors from the boards of trading banks and appointed their own nominees. That sort of thing is well guarded against in this bill. At the same time there must be some representation of the Government on the board of such an institution as this.
There is not the slightest doubt that we are the slaves of the monied interests of the world. As the result of the great European war Australia is indebted to people who have such control over us that, if they liked to use their power, they could interfere with our politics and direct our policy.
– The honorable member refers to the policy of the Labour party.
– Whether it is the policy of the Labour party or not, it is the country’s policy. We may not be a good party in the opinion of the honorable member for Warringah (Mr. Parkhill), but the country has declared that we are the best party. That is indicated by the composition of this House. If the honorable member is prepared to accept the principle of democratic government, he must accept the decision of the people last October. By that decision the policy of the Labour party is Australia’s policy. We must remember that our country and the whole of the world is at preseut in bond to the monied powers. A sum of 21 billion pounds were raised for war purposes. That is a permanent mortgage upon the industry, commerce, and shipping of the world, and it has to be paid off. Even if we create a sinking fund and pay off all our debts, a similar debt will’ exist somewhere else. These debts cannot be eradicated. . Perhaps some four or five billion pounds of that stupendous sum represents the savings of the people in savings banks, life insurances, and so forth, but the remainder is an absolute charge for all time on the industry of the world. The peoples of the world think that they are independent, but finance controls and crushes them. It is necessary to face this permanent incubus, and the best way to do so is by organizing our resources and credit in the form of a central bank.
It is necessary for the Government to be represented on the board of that bank, and what better representation could it have than that in the form of the Secretary to the Treasury, who is to be one of the directors. But surely that is not political management. I- shall turn to what Sir Ernest Harvey thinks of politi-cai control, and any honorable member objecting to the bill on that ground will have to justify his opinion against that of this eminent financial expert. Sir Ernest says -
For the rest, the board should consist of persons not prominently engaged in politics who can, between them, bring to its meetings a wide knowledge of finance, both local a.nd international, and of the country’s more important industries and trade. They should also bo persons of such standing and independence as to ensure that the affairs of the hank will be dealt with in a broad and statesmanlike spirit, without regard to personal or petty sectional interests.
Will any one insinuate that any member of the board of this bank will be actively engaged in politics? If not, where does the Opposition’s definition of “political control “ come in ? Sir Ernest Harvey is mentioned in all British books of finance as an eminent authority on the subject. He was associated with the McKenna and other important British commissions, and his advice cannot be disregarded.
– Does the honorable member suggest that unless members of the board are actively engaged in politics there can be no political control?
– No; but those who claim that there will be political control will have to prove their case.
– Does the honorable member not think that the fact that four members out of a board of seven, apart from the Secretary to the Treasury, are to be elected every three years, tends to make that body liable to political influence?
– The honorable member forgets that originally the control of the Commonwealth Bank was vested in one man, the late Sir Denison Miller, who was appointed and re-appointed by Federal Governments. Was that gentleman subject to political control? I venture the opinion that no man was more independent of control and stood up against interference by governments than did he.
– That was because of the character of the individual concerned.
– The natural inference to be drawn from the honorable member’s interjection is that the four gentlemen who will be appointed by the Government will not be men of character.
– Oh, no.
- Sir Ernest Harvey continues -
A central bank should bc entrusted with the entire banking busines of its own government.
A central bank should be the banker of the trading banks and should act as a settling agent for clearing differences between such banks.
I do not think that that is objected to. The trading banks do not like the Commonwealth Bank or a central reserve bank, but, as was pointed out by the Leader of the Opposition (Mr. Latham), the associated banks are using large sums of money for clearing purposes. The article goes on -
A central bank should not ordinarily compete with the trading banks for general banking business.
That is the kernel of the position.
– Does the honorable gentleman agree with Sir Ernest Harvey in that?
– Both I and the Government do. Consequently the Government has separated completely the trading banks from the central reserve bank section. I point out that the Bank of England has nineteen branches trading all over Great Britain, and that the Central Reserve Bank of South Africa has many branches which are trading separately. Also, the Bank of Sweden, which is the most successful central reserve bank in the world, has seven trading branches. We are adopting the strict attitude that the central reserve bank shall not ordinarily compete with the trading banks for general banking business. What is the alternative? Does any honorable member opposite suggest that the Commonwealth Bank should be absolutely disbanded? When the central reserve bank has been established, what is to happen to the Commonwealth Bank, with its 71 branches? Are we to hand over to the private banking institutions the goodwill and organization that have been built up over. a period of years, and that have enabled the Commonwealth Bank to make substantial profits? Honorable members opposite must either accept this proposal to have a central reserve bank, of which the Commonwealth Bank will be a constituent part, or propose that the Commonwealth Bank, which has rendered wonderful service to Australia, and has made profits aggregating over £18,000,000, shall be thrown on the scrap heap. No one should be more grateful to the Commonwealth Bank than the right honorable member for Cowper (Dr. Earle Page). During his regime’ as Treasurer he was able to show, in more than one budget, that a large portion of the national debt had been wiped off out of its profits. Thus the trading banks, by the consequential reduction of their taxation, in common with the community as a whole, were- relieved from additional taxation.
The next principle enunciated by Sir Ernest Harvey is -
A central bank should ensure to the public the provision of adequate banking facilities on reasonable terms.
A central bank should not take moneys at interest on its own account.
It does not, except from the trading banks.
– According to the bill, this bank will be able to accept deposits from anybody. I hope that that provision will be amended.
– It can accept deposits without interest. The Leader of the Opposition (Mr. Latham) desires that it shall not on any account accept them. No man who possesses financial sense will deposit much money in a bank that does not pay interest, if he can obtain interest from another institution, unless it ‘ be under some special arrangement, or for the purpose of obtaining greater security. This bank will meet that requirement of’ Sir Ernest Harvey. The next two requirements arc -
A central bank should quote publicly the rate at which it is prepared to discount approved bills, and should publish at regular and frequent intervals a clear statement of its position.
The assets of a central bank should bc of the most liquid character possible. The bank should not lend money on mortgage of real estate or grant unsecured advances or overdrafts.
I do not ‘ suppose there will be any disagreement with those. I agree with the Leader of the Opposition that, in regard to some of the items that he read out, there is not the degree of liquidity that is necessary ; but it is only a question of seeing that we keep a sufficient volume of liquid assets. The tenth principle laid down by Sir Ernest Harvey is as follows : -
A central bank should not draw or accept bills payable otherwise than on demand.
– That condition is not satisfied by this bill.
– There is a provision for two months’ bills. The majority of central reserve banks issue bills at 90 days. Unfortunately, we have not a bill market in Australia. But neither has New York. That is one of the reasons why it cannot establish itself as a foreign place of exchange, and why London still remains the financial centre of the world. The bills of the world are drawn on London ; they still pass through that recognized channel. It is quite correct, as the Leader of the Opposition said, that we have not a bill discount market, and we cannot make one, because we have not the foreign trade that other countries have. Any one who reads the Insurance and Banking Record will know that recently the Bank of France made a serious attempt to attack the position of the Bunk of England as the world’s discounting centre by establishing a bill market; but it was unable to do so. The Leader of the Opposition merely tells us what we already know, and what has been deplored for years, when he says that Australia has not a market for the discounting of bills; but that cannot be used as an argument against the establishment of a central reserve bank. [Extension of time granted.]
I am grateful to honorable members for the courtesy that they have extended to me. I have made a close study of this question for years, and I hope that my contribution to the debate will prove helpful. The next principle laid down is as follows: -
A central bank should not engageina general exchange business on its own account for the purpose of earning profits.
Provision along those lines has not been made in this bill ; but it does provide for the following: -
A central bank should not engage in trade or have any interest in any commercial, industrial or other undertaking.
The bill departs from the following principle : -
A central bank should have no branch outside its own country, but may have agencies abroad.
Provision is made for the establishment of branches outside Australia. On the question of making profits, Sir Ernest Harvey has the following to say: -
I do not think anybody need have any anxiety as to whether a central bank is going to make profits or not, because it cannot help making them.
– There is one point upon which the honorable member has not touched. Does Sir Ernest Harvey approve of the principle of a State bank?
Mr.CROUCH. - He is opposed to a State bank; but I do not think that we need consider that aspect of the matter, because State banking is accepted as a part of our general policy, and at this stage of Australia’s history we cannot consider the abolition of the system. Only a State Bank can impartially and authoritatively control such reserve operations. The present Government in Great Britain is seriously considering whether the Bank of England should not be turned into a State bank. It is now a trading bank.
– It cannot fairly be described as a trading bank.
– If that is the objection of the honorable gentleman to this bill.it is so fundamental that he must be opposed to the establishment of any central reserve bank in Australia. A central reserve bank can be established only by the State, because no other authority is sufficiently dissociated from individual interests.I have not heard nor have I read of its being suggested that any modern central reserve bank should he established by any authority other than the State. The South African Reserve Bank is a State institution. The Reserve Bank of the United States of America is under the direct control of the American Treasury, Although the Bank of England is a private corporation, there can be no doubt that, if it did not exist in its present form, no authority other than the State would undertake the control of national finance in Great Britain.
– The honorable member has advocated the extension of the trading section of the Commonwealth Bank.
– I do not wish to destroy the existing institution, because it is a profitable concern.
Although the complete terms of the organization have not yet been arranged, there has already been instituted an international bank which is to have its head-quarters at Berne. The gold supply of the world is running short. Gold is one of the great riddles of finance. Every country in the world is competing for it, and making all sorts of demands in order to obtain it. The race has been such a stern one that the Bank of England discount rate fluctuated from 3½ per cent. to 6 per cent. i.ii a period of six weeks, the object being to prevent the depletion of its gold reserves. Because of this cut-throat competition for gold, the nations of the world nave agreed that their central reserve banks shall combine to establish an international bank. No trading bank can become a member of that institution; only the central reserve banks of the different Countries will have a voice in it. The establishment of this international bank proves that it is necessary for Australia to have a central reserve bank, in order to become one of its constituent members, and to conserve our gold supplies.
I hope that the. consideration of this measure will be approached by all honorable members in a non-party spirit, with the sole object of advancing the welfare of the Commonwealth. This is an honest attempt to provide an institution that has been needed in Australia for many years. It will help the community tremendously. The proposal of the Government meets all the requirements laid down by Sir Ernest Harvey and other authorities who have made a study of banking practice and organizations throughout the world. It will stand as a strong guardian of all Australian financial interests.
– There would be little objection to a central reserve bank if the Commonwealth Bank were to function exclusively as a reserve bank, and if its management and control were entirely divorced from politics. Unfortunately, the assurances of Ministers in this regard has been lame and unconvincing. The Commonwealth Bank building in Sydney will house under the one roof, a central bank in which the trading banks are required to make certain deposits, and to which they will have- to make available the most confidential information regarding their activities, and a Commonwealth trading bank which will be competing in every avenue of banking with the utmost keenness. The management of both the Central Reserve Bank and the trading branch will be controlled by a directorate and officers appointed by the political party in power, a practice which is contrary to the principles of sound banking as conducted in other countries of the world. In addition to these defects, it must be remembered that the scheme has emanated from a Labour Government, which, according to its own party platform, favours the nationalization of banking, and the extension of the functions of the Commonwealth Bank until control of banking is -entirely in the hands of the State-. Moreover, there is a large section of the Labour party, and even a percentage of the Federal Labour caucus, if not a majority of it, that favours the inflation of the note issue and other radical and unsafe banking methods. The widest difference of opinion exists as to what will really happen when the Central Reserve Bank is established. One section of the community seems to believe that when the system is in operation, money will ,be advanced to industrial organizations and enterprises without the inconvenient though usually insisted upon condition that there shall be adequate security. Others, again, think that loan money will be made available for all sorts of undertakings in unceasing quantity. Then -there are the manufacturers who have been favored with protection by embargoes and high duties to the extent of removing all competition and who now find that the public are not able to pay the high prices demanded. They are hoping that under the new regime it will be possible for members of the public to obtain without earning it, money to buy the goods they purvey. In view of all this, it is not surprising that thinking people arc asking that we shall proceed slowly with this alleged reform.
The Treasurer, when introducing this measure, made the extraordinary statement that there was no sinister purpose behind it. Why should he feel called upon to make that public statement in the National Parliament?
– Because of the utterances of the honorable member and his leader (Mr. Latham).
– Which had not. then been made!
– Did the Treasurer mean by his statement that it was not the intention of the Government to carry out the Labour party’s banking policy; that the new scheme would not serve the purpose which the honorable member for Adelaide (Mr. Yates) will advocate presently - namely, the inflation of the note issue; that it will not be used for the de-valuation of the pound, .as advocated by the honorable member for Martin (Mr. Eldridge) in a circular to members of this House; and that the Government will not use the Central Bank to make available £20,000.000 for unemployment relief as advocated at a recent Labour conferonce? Probably the Treasurer meant to convey the impression that the Central Reserve Bank Bill is a measure designed merely to continue the banking business of this country on the same sound lines as those upon which it is being conducted now by the trading banks. An authoritative statement by the Treasurer or the Prime Minister on these points would greatly relieve the public mind. There is no doubt that there is a vast body of public opinion which views these proposals with the strongest misgivings, and which hesitates to place in the hands of the Government the power which it seeks in this bill. The Government should endeavour to dissipate that distrust both in the minds of the public and of honorable members of this side of the House - though I have no hesitation in saying that the Treasurer would have great difficulty in removing all suspicion from my mind. Nevertheless, it might be worth the Treasurer’s while to give an assurance that the scheme has not been evolved in the interests of any one section of the community, that it will not be used to further wild plans for note inflation, or for the devaluation of the £. Above all, the public must be assured that their savings will be in no wise endangered. In the course of his second-reading speech, the Treasurer said -
There is a generally held opinion amongst economists, bankers, and financiers generally, that our banking and financial system has proved defective, and that it lias been partly responsible for the difficulties which Australia lias encountered in the last year or two. The lack of. means for the mobilization of credit resources has been a serious obstacle to the prevention of the contraction of credit and the deflation experienced within recent months.
That is a misleading and inaccurate statement. I deny that any such opinion has been expressed by bankers, economists, financiers, or other persons in authority. On the other hand, such persons repeatedly called attention to the serious position into which the country was drifting as a result of our artificial standard of living, bolstered up by arbitration awards, our excessive tariff duties, and our heavy overseas borrowing. The position has been accurately summed np in a leading article which was published in the London Times on the 5th March. I quote the following extract -
Ever since the war, the Commonwealth has been living beyond its means, overspending and over-borrowing. An artificial standard of living, based upon borrowed money, and sheltered behind an ever-rising wall of tariffs, resulted in high costs of production and handicapped the export trade, which had not only to iwy for a large volume of imports, but also to provide interest on a huge and increasing debt abroad. So high have the costs of production soared that the export trade in many primary products could only be maintained by artificial schemes, under which Australians paid high prices for what they consumed in order that the balance could be sold abroad at prices sufficiently low to command a market. A succession of good seasons with good prices for Australia’s staples, wool and wheat, helped to disguise the essential unsoundness of the system; but, even so, it was only kept going, and could only be kept going, on borrowed money.
I submit that the banking system of Australia is to-day on a sounder basis than was the case some years ago, and that it will compare favorably with that prevailing in other countries. I do not think that the Treasurer will deny the very great assistance the bank has been to the
Government and to industry during the last few years. He will have great difficulty in showing that there has been anything lacking in the mobilization of national credit. Mr. Montagu Norman, Governor of the Bank of England, once said -
The principles of banking are dynamic and. not static, and will have to be developed and frequently modified.
That may be true but I contend that the banking system of Australia is capable of developing to meet all the demands likely to be made upon it. The Treasurer said that the American central reserve- bank came to the rescue of the American stock exchange during the recent crisis. That statement is entirely incorrect, for bankers and others agree that for a considerable period the Federal Reserve Bank stood aside and wrung its hands in impotence, metaphorically speaking. When at last it did interfere it did so in such an inefficient way that it would have been better had it not interfered at all.
The real objects of a central reserve bank are set, out clearly by the Governor of the Bank of England in evidence which he gave before the Royal Commission on Indian Currency and Finance, from whichI abstract the following: -
It should have the sole right of note issue; it shouldbe the channel, and the sole channel, for the output and the intake of legal tender currency; it should be the holder of all the Government balances; the holder of all the reserves of the other banks and branches of banks in the country. It should be the agent so to speak, through which the financial operations at home and abroad, of the Government, wouldbe performed. It would further be the duty of a central bank to effect, as far as it could, suitable contraction and suitable expansion in addition to aiming generally at stability, and to maintain that stability within as well as without. When necessary it would be the ultimate source from which emergency credit might be obtained in the form of rediscounting of approved bills, or advances on approved short securities or government paper.
Sir Ernest Harvey’s name has already been mentioned in this debate, and will doubtless be mentioned many more times before the discussion concludes. He also has set out clearly the principles which should govern the operations of a central reserve bank. I have compressed them into the following paragraph : -
A central bank should possess the exclusive right of note issue and be free in its management and policy from government control and influence of politics.
This aspect of the subject was mentioned briefly by the honorable member for Corangamite (Mr. Crouch) and I shall refer to it later. Sir Ernest also said -
It should be entrusted with the entire business of its own government and be the banker of the trading banks; act as settling agent for clearing differences between such banks and, whilst not ordinarily competing with the trading banks for general business, should ensure to the public the provision of adequate banking facilities on reasonable terms.
After declaring in those words what should be the real functions of a central reserve bank, Sir Ernest went on to indicate what a central reserve bank should not do. He said -
A central bank should not take moneys at interest on its own account, but should quote publicly the rate at which it is prepared to discount approved bills, and should publish at regular and frequent intervals a clear statement of its position.
The assets of a central bank should be of the most liquid character possible.
A central bank should not draw or accept hills payable, otherwise than on demand, nor engage in general exchange business on its own account for the purpose of earning profits, nor engage in trade nor have any interest in any commercial, industrial, or other undertaking. It should have no branch outside its own country, but may have agencies abroad.
I wish to add to the opinions of those two authorities another statement of the general scope of a central bank which is to be found in the first clause of Bank Law, of August, 1924, regulating the Reichbank, and also quoted by Kisch and Elkin in their Central Banks. It declares the duties of a central bank to be as follows : -
To regulate the circulation of money in the whole area of the Reich, to facilitate the clearance of payments and to provide for the utilization of available capital…. The main operations in which a central bank engages derive from these responsibilities and are set forth in a summary form below -
The issue of notes.
Dealing in precious metals and foreign exchange.
Discounts, loans, and advances.
Deposit business, especially in relation to commercial banks, and the organization of arrangements for clearing.
The Commonwealth Bank already functions as a reserve bank in that it is charged with the responsibility of maintaining the currency at due parity of gold by the control of the note issue and gold reserves ; and itsfunctions could easily, and without very much criticism, be extended to include the holding of reserves and’ the dealing with exchanges, bills, &c. if it. confined its operations to those of a central reserve bank. I do not think that the trading banks can decline to lodge with the proposed reserve bank a proportion of their reserves.Whether the proportion proposed by the Treasurer is too high has to be considered; but he has already indicated that he is prepared to reduce them if it can be shown that the demands of bill money and other ordinary trading will not permit the lodging of the amounts which he has mentioned without causing inconvenience.I consider that the proposed percentages are too high for Australia, because the trading banks have established many branches for the convenience of the public in all parts of Australia, which they are required to maintain at considerable expense. I should like to make one more quotation from Kisch and Elkin’s Central Banks -
The very idea of a central bank presupposes that the commercial banks will deposit their cash resources, other than till money, with it, and that a system will be established under which the commercial banks will not counter the credit policy of the central bank by any action on their part . .’ .
The cash reserves held by . the commercial banks may be regarded as a percentage of their liabilities to the public, and though the hanks have no uniform ratio the percentage held in the form of cash and balances with the Bank of England is in the neighbourhood of 10 to IS per cent, of deposit liabilities.
To overcome this prejudice, it may be necessary to insist on a scheme for obligatory deposits by the commercial banks with the central bank, for if these deposits are withheld the central banking organization cannot achieve its full purpose . . .
If we had a central reserve bank in this country, it is obvious that the trading banks would have to lodge a percentage of their reserves with it. But, as [ have already pointed out, it would be anomalous to have operating in the same building in Sydney a central reserve bank with which the trading banks would have to place their reserves, and to which they would have to supply information, and the Commonwealth Bank, with which the private hanks would have to compete and which, with the help of its quasigovernment facilities, would endeavour to drive them out of business. The Treasurer admitted in his second-reading speech that the difficulty experienced in obtaining full and -confidential information from the trading banks was due to the fear that the Commonwealth Bank would use it in competition with them. He also admitted that such fear was not unnatural or unreasonable. I wish to know how the honorable gentleman proposes to get over that difficulty by permitting the Commonwealth Bank to continue its competition with the private banks, and at the same time setting up a central reserve bank with a directorate which may be political in character. I appreciate the fact that the Government moy desire to use the Commonwealth trading bank in order to lead the way to new developments of banking, which it is claimed that the conservative control of the commercial banks will not permit to be used-; or, to use the words of Sir Ernest Harvey, “ To ensure to the public the provision of adequate banking facilities on reasonable terms.” But I do not think that there are any safe banking methods that can he adopted that the trading banks do not already employ, or are not. willing to employ; nor do I think that the public lack “ adequate banking facilities on reasonable terms.”’ Increased competition by the Commonwealth trading bank will only lead to a reduction of the facilities which are now enjoyed in many country centres, and to an increase in the general cost of banking facilities to the public.
I can also well appreciate that the Government must be in constant communication and co-operation with the Board of Directors of the Commonwealth Bank, but its action in seeking to adopt the hazardous course of controlling and operating a central reserve bank, and of carrying on a trading bank, may easily be interpreted as a desire and an effort to remove the competition of the existing commercial trading banks with the Commonwealth Bank, and to make bankingentirely a Government monopoly.
The Treasurer has brought down an amendment to the Commonwealth Bank. Act so that honorable members may have a full view of the Government’s bankingintentions; but the contents of the bill are far from reassuring. I suggest tothe Treasurer that he should give earnest reconsideration to the proposed management and direction of the reserve bank if he wishes to gain the confidence and co-operation of the existing banks and the general public.
It has been argued in favour of the bill that the establishment of a central reserve bank will introduce an alteration in the banking system of Australia in relation to borrowing, in that it will involve the adoption of the American system of working on promissory notes and bills and enable borrowers to get money at a cheaper rate of interest. But while this may be so, it is also true that under that system the borrowers will have to pay for the money whether they use it or not. It is doubtful whether these new methods will be appreciated by the public unless they are introduced slowly, and are accompanied by a substantial reduction in stamp duty. Bills are not used to any extent to-day in Australian banking.
This bill may be much more effectively discussed in committee; but there is one other vital point to which I would refer. It is a fundamental principle of central reserve banking that the directorate should be entirely free from political control. The honorable member for Corangamite (Mr. Crouch) endeavoured to show, by referring to the Swedish Bank - which is not a very considerable institution as banks go - and to the Yokohama Bank of Specie - which is an institution peculiar to Japan, and is hardly a suitable model upon which western people should build - that there was no danger in giving effect to the proposals in the bill. But on this point, I quote again from Kisch and Elkin’s Central Banks as follows : -
The observations of the Irish (Free State) Banking Commission on this point ure interesting.
Mindful as it is of the disasters of past years in all countries where currency was issued by the Government, and recognizing the hazards which come from changes of governments, from the development of budget deficits and other evils, from which no country has found itself immune, the commission is definitely of the opinion that the management of the legal tender note issue should be placed in the hands of a non-political and independent body, which shall control the conditions of issue and shall have full control and the custody of the securities it holds. . . .
The same authority goes on to . say that -
The theory underlying the conception of a State bank centres on the proposition that 3ince a wise central banking policy is the basis of a sound national economic life, the bank should be under the control of the national government. But the dangers of this course are great. Just because the decisions of the bank react on every aspect of the economic activities of the country, it is essential, that its direction should be as unbiassed as is humanly practicable, and as continuous as possible. But clearly if the bank is under State control continuity of policy cannot be guaranteed with changing governments, nor can freedom from political bias in its administration be assured. In their report in support of the bill creating the Central Bank of Chile, the Commission of Financial Advisors, under the presidency of Professor K W. Kemmerer, pointed out that there was a widespread and pronounced fear lest the success of the bank should be wrecked by politics and undue governmental influences, a fear which the past banking history of many South American countries has shown to be fully justified. . . .
Later, the following statement is made -
But if the government has a controlling influence over the bank, there are obvious ways by which the more powerful interests in- the country can try to enforce their wishes. The road is open for political intrigue, and there oan be no safeguard that the policy of the bank will be carried on without bias as national interests require. . . .
I submit that the truth of those views is. inescapable. Let me add still another quotation as follows -
If it is recognized as a matter of principlethat the board must not be subjected to interference by the State in the discharge of itsordinary business, and if the limits of the accommodation that may be given to the Stateare clearly defined, there should ordinarily beno need for any considerable representation of the Government as such on the board, and it is desirable in any case, in order to remove grounds for any suggestion that bank policy may be directed by considerations of State finance, that the official element should be in- the minority. This is the line generally adopted for those banks that combine a nominated and elected element on their governing boards.
I now refer to the Reichsbank, which, as the honorable member for Corangamite pointed out, was established under the Dawes policy. Kisch and Elkin point out that the German Bank Act of 1904 opens with this sentence - “ The Reichsbank i3 a bank independent of government control “. I have no doubt that my next quotation will appeal to honorable members opposite. It refers to the Bank of Russia -
The State Bank forms part of the People’s Commissariat of Finances and is directly subordinate to the People’s Commissariat of Finances
The two banks of Germany and Russia are probably the latest examples of reserve banks, and in those cases the main principle established is that of noninterference by the Government and freedom from political control.
The bill provides for the appointment of a Governor, two Deputy Governors, the Secretary to the Treasury, and five others, representing commercial banking, labour and other interests in Australia. These are all to be appointed by the Government. Therefore, in this respect, the bill is clearly in. conflict with the opinions that I have quoted, and contrary to all sound principles of reserve banking. This is government control in excelsis What need is there for two Deputy Governors? The reason given, by the Treasurer is most unconvincing. He 3aid that it was necessary that there should be two experts with special knowledge of two separate branches of banking. This, of course, is absurd. If we appoint a governor of a bank, we expect him to have a general and intimate knowledge of all aspects of banking, and any knowledge that he may lack can be supplied to him by the experts in the bank, who need not be made deputy governors. I hardly like to suggest that it looks as though the Government had two officials marked out for these positions, men who had already given it assistance in connexion with this matter. If that is so, it indicates, indubitably, government control. There is no need, in my opinion, for two deputy governors, and the board should be left to appoint its own deputy chairman.
Another clause provides for the appointment of directors to represent sections of the community. I am sure that the Government wilh find great difficulty in obtaining suitable persons for these positions, apart from the directors of the existing trading banks and the Legislative Councils in the various States. I go to the length of suggesting that the Government should consider whether membership of a State Legislative Council should be regarded as a disqualification. Permit me to quote Kisch and Elkin again -
The appointment of individual members of the board by special interests, such as commercial banks, manufacturing or agricultural Associations, carries the risk of introducing -sectional influences on the board.
I know that this course is adopted in South Africa, but I do not agree with it. The South African banking system is not analogous to that of Australia, and we cannot look to it for useful guidance. In my opinion, the best men should be appointed irrespective of sectional representation, which I contend has never been a success. In Great Britain, the private banking houses and financial institutions, whose operations have extended over years - almost centuries - provide the type of man required for bank directorates in greater profusion than is to be found here. Hartley “Withers, in his book The Meaning of Money, puts the matter clearly in these words -
The foreign connexions arising out of the original trading operations, with which they laid the first foundations of their mercantile position, naturally led these houses into providing monetary accommodation for the governments of the countries for which they traded, and there thus grew up out of the Tanks of successful city merchants a class of merchant bankers, financiers, and accepting houses, which, along with the old private banking houses, constituted a sort of aristocracy in the city, which still survives to some extent. They are often described as merchant bankers, but it is important to remember that they are not bankers in the strict sense of the term - that is, they do not pay cash across the counter against cheques drawn on them - because it is from their ranks that the directors of the Bank of England are chiefly recruited …
The same authority goes on to say -
And it is very important that the ruler of the Bank of England should be amenable to, and ‘express, the broad common sense of thu commercial community as a whole, and not the prejudices and convictions of any. individual, however gifted . . .
I say that the same principle should apply to the control of an Australian central reserve bank. Hartley Withers further states -
In short, as the Economist said in its issue of 26th January, 1929, the bank has shown, and is showing itself, eager to take every possible opportunity of enlisting in its service wide and modern experience . . .
That is the policy that should also be pursued by the Government in their appointments to the directorate of this bank. Let me read a tribute paid to the Governor of the Bank of England, which, I think, is worth placing on record. This also comes from the authority that I have just quoted -
In the meantime, every one admits that Mr. Norman has set the whole financial world a fine example of disinterested and tireless energy; and that he, working in double harness with the late Mr. Benjamin Strong, of the Federal Reserve Bank, of New York, carried out a task of quite incalculable benefit to the world at large in the difficult after-war years. When the politicians were still talking strife and making ugly faces and ugly gestures, these two men got the financial world to see that reconstruction and co-operation were the needs of the moment, and worked like Trojans to put Europe on its legs again. Their success would have been still greater -than it was had it not been that while they were helping the shattered nations to stabilize currencies, and issue reconstruction loans and getting them to work together, the politicians were putting up and raising trade barriers, and shouting to their deluded publics that it is bad for one’s country to buy foreign goods.
I have clearly expressed my views as to the class of person who should be appointed to the directorate, and the nature of the appointments.
Having disagreed with the proposal before the House, I feel that I should make some alternative suggestion, and I submit that since the trading banks are supplying, by their reserves, the capital on which the reserve bank will largely work, they might reasonably have representation on the board. Their reserves will not be kept in the vaults of (the bank in cold storage, but will be the funds on which the bank will operate, *nd, therefore, it is fair and reasonable that they should have some representation on the board. I commend this suggestion to the Government in order to break down the deep-rooted objection to a governmentappointed board of partisans or political friends.
It is also proposed in this bill to appoint an executive from the Bank directorate. I am opposed to that for three reasons. The first is t&at the executive would do all the work, the board meeting once a month merely to confirm what had been done by the executive. In the second place, if a member or members of the board expounded views in opposition to the official opinion an executive could be formed that would deprive them of active participation in the government of the bank by the simple process of leaving them off the executive, if it were considered inconvenient or inadvisable to have them as members. Thirdly, an ^executive of three officials, if the deputy governors and the Secretary to the Treasury were retained on the board, would make a purely official triumvirate that would bo governmentcontrolled, and destructive of public confidence. For these reasons I contend that there should be no executive, but that there should be weekly, or even more frequent, meetings of the board of directors. There are a number of amendments which I consider essential, and I shall submit them when the bill is in committee.
I have not dealt with the subject of the inflation of the note issue.
– The honorable member is leaving that to me.
– Yes ; but it does not, and should not, come within the scope of this measure. If it does, that is a further reason why the bill should be rejected, and shows that all the distrust and suspicion in the mind of the public to-day is absolutely warranted. If it were necessary to deal with that aspect of banking, authorities could be produced from all over the world to demonstrate the infinite amount of harm that such a policy would inflict on the workers of this country and on the people generally. Only those who do not understand the principles of sound banking would advocate such a policy. On that point I refer honorable members to an article published in the Sydney Morning Herald, of the 3rd May last, by Professor Gifford, lecturer on economics and history in the Queensland University. Referring to the present proposal, he said -
Since no declared policy of credit control is to be imposed by the bill on the centra] bank, the obvious conclusion from this study is that it is unwise to entrust the proposed bank with such wide powers. To prevent inflation by this method an absolute limit to the note issue might be set while the gold export restrictions last. A suitable limit in order to allow for some seasonal expansion of the note issue in the summer months, would he £40,000,000.
That is the opinion of a professor of economics in the Queensland University.
– Has he ever managed a bank?
Mr. ARCHDALE PARKHILL.Doubtless his opinion on banking is worth more than that of the honorable member for Indi. The honorable gentleman was prepared to accept the opinion of professors when they spoke in favour of granting a bonus oh gold. This bill is unnecessary; it will not achieve anything that cannot be accomplished to-day without it; it will damage rather than help our credit; it is a hazardous experiment in the realm of the nationalization of banking; it will entail considerable expense in its operations; it is not understood. For these and other reasons it should at least be delayed for further examination and investigation.
– I do not think that very great knowledge, profound judgment, or exceptional ability is required of a banker. Honorable members smile; but that is not my declaration. It is the statement of the Honorable P. McM. Glynn when the bill for the constitution of the Commonwealth Bank was introduced into this House. He knew a great deal about banking, and is renowned as one of the finest constitutional lawyers in Australia. When he said that great knowledge, profound judgment and exceptional ability were not required of a banker he knew what he was talking about. It is urged that a central bank is necessary to stabilize the existing banks.
– Instead of stabilizing them, it will stab them.
– They are beyond stabbing. This bill leaves me stone-cold. It will not interfere with the private banks. Indeed, the Government has no intention of interfering with them. The bill has been introduced because the Government believes that it will alter economic conditions. I hope that it will attain the results expected; but I do not think that it will. What is banking? It is toying with results of the labour of the workers. I know that a certain amount of bookkeeping is associated with banking;but bookkeeping is not banking. The headquarters of the Government Savings Bank of New South Wales is a fine example of architecture. It is wealth in excelsis. One would almost expect to find the assistants in such a building with haloes round their heads. That magnificent building, which is the result of the toil and industry of the workers in the community, is only one instance of the many fine buildings which the various banks have erected in different parts of Australia. When I see such fine buildings and reflect on the use to which they are put, I am reminded of the way in which the temple at Jerusalem was desecrated by the money changers, whose tables Christ overturned when He exclaimed that “they had turned the house of God into a den of thieves. That is what is happening in our banking institutions to-day; and that is why this bill leaves me stone-cold.
– In the instance to which the honorable member has referred the objection was not to the business itself, but to the place in which it was conducted.
– The objection was to the business. Christ objected to usury. At one time usury was a capital offence. If it were not for usury these ornate buildings would not exist.
– Is it an offence to have capital ?
– No ; but it is an offence for a man to make capital out of his fellow men while he himself sits idly by. Usury is an offence against both man and God ; it is immoral.
This bill proposes to alter our system of banking by establishing a central reserve bank. When we have that bank, shall we be better off as a people? In the United States of America and other countries there are central reserve banks, but those countries have also their large armies of unemployed. Will the establishment of a central reserve bank in Australia so alter economical conditions that those now in want will find food ? Will it render unnecessary the housing of workless men in military tents during the winter months? If a central bank will relieve unemployment and alleviate suffering, let us have it; but I do not think that it will do so. The establishment of a central bank will do no more to remedy existing conditions than will the shifting of a piece on the chess board. I do not think that honorable members opposite are very fearful regarding this bill. The speech of the Leader of the Opposition (Mr. Latham) showed no marked hostility to it. It may be as the honorable member for Corangamite (Mr. Crouch) said when commenting on that speech, that that honorable gentleman’s brief had not been properly prepared. The speech of the Leader of the Opposition amounted to a blessing of the bill, provided that the Treasurer would alter the proportion of the trading banks’ assets which must be deposited with the central bank from 10 and 5 per cent. to 7 and 3 per cent., respectively, of demand liabilities and time liabilities.
The honorable member for Warringah (Mr. Parkhill) expressed the real fear of the Opposition when he said that this bill would place banking under political control. Honorable members opposite fear that the business of banking will be interfered with so drastically that the depredations of bankers will be curtailed, and that the people will derive some benefit as the result of the proper control of the life blood of this country and the discontinuance of the present rake-off. This country is in a deplorable state, the remedy for which we are told is that we must work harder and produce more. More than once I have stated in this House that this country was never more wealthy and’ had never produced more than, during the last ten years. But, in spite of that greater production, there is more unemployment and poverty to-day than has ever previously existed.
– What is the honorable member’s explanation for the present state of affairs?
– The money changers and big business generally, which made fortunes by the high prices they charged when the nation was at war, do not want to let go the profits which they made then. That is why I want to expand the credit of this country. If the Commonwealth Bank has not been instituted to do the work of the Commonwealth, why was it instituted? The assets of the banks are the assets of Australia. Bankers are growing opulent as a. result of the energy expended by the workers of this country. The Leader of the Opposition (Mr. Latham) mentioned eleven of the principal banks, although he did not enumerate them. Why did he pick out eleven and exclude the others? It could not have been that he was unable to find statistics concerning them, for they are all to be found in the Commonwealth Year-Book. As the honorable gentleman did not give statistics for all the banks operating in Australia, I shall do so, but not in detail. In 1918-19 the paid-up capital of the banks trading in Australia was £35,696,904. At that time 23 banks were operating in Australia, exclusive of the Comptoir National and the Yokohama Specie Bank. Their half-yearly dividends amounted to £1,863,772, and their reserves to £23,543,496. In the short space of ten years those 23 banks have increased their paid-up capital to £69,153,442 - nearly double what it was in 1918-19. I leave it to honorable members to say the methods by which those results were obtained. Their half-yearly dividends increased during the same period to £4,795,224, and their reserves to £48,384,120. That is what the Y ear-Book shows. Evidently there is no better industry in the Commonwealth. Honorable members can work out for themselves the ratio of dividend to the paid-up capital. Needless to say they know how the profits are made. This is why Australia is in its present position. The Government has no intention of exerting political con trol over the bank as inferred by honorable members opposite. No Labour government has ever been “ cranky “ enough to do anything that would leave it open to that charge.
– On the contrary, Labour governments are remembered for their misdeeds in that respect.
– The honorable member is merely exposing his ignorance concerning the business for which he was elected to this House. I challenge him or any other honorable member to study the legislation passed by Labour governments and show me in what respect they have acted detrimentally to the best interests of the people. On the contrary, everything that goes to the building up of a nation, and to make the world a better place, is the outcome of Labour’s activity in politics, backed up by the trade union movement.
– The honorable member is merely displaying his fanaticism.
– I invite the honorable member to substantiate his statements when he is speaking to this bill and show in what respect I am wrong. I shall expect him to state specifically in what way a Labour government has acted to injure the interests of the Commonwealth.
– It has done so by its patchwork arbitration system.
– Arbitration has regulated the industrial life of this community, and the honorable member for Balaclava knows it.
– Order! It will not be in order for the honorable member to proceed on those lines.
– I’ am merely inviting the honorable member for Balaclava to prove his words.
– I shall do so when I speak on the Arbitration Bill,
– And I shall be pleased to listen to the honorable member. I feel sure that he will deal largely in those hackneyed misrepresentations to which we have been accustomed of late, and which do not contain a scintilla of truth. But let me return to the bill.
The honorable member for Warringah (Mr. Archdale Parkhill) and the Leader of the Opposition (Mr. Latham) have declared- that the passage . of this measure will leave the way open for political control of the bank. They infer that the Government will impose its policy on the management, and that to all intents and purposes the proposed central reserve bank will function in the interests of the party to which I belong.
– Is not that the intention?
– I wish it were the intention of the Government. But the Leader of the Opposition cannot deduce that from the provisions of the bill.
– They will permit of that happening.
– The Leader of the Opposition evidently was not concerned so much with the provisions of the bill as with the thought which had been evolved in his own mind. He wished to believe that the bank would be susceptible to political influence. I admit candidly that if I had my way the bank would function in the way suggested.
– That is the policy of the Labour party in regard to the bank.
– It is one of the planks of the Labour party’s platform.
– The policy of the Labour party 13 to be seen in the legislation which this Government has introduced with the full approval of the members supporting it.
– Then we may take it that the legislation represents the policy of the Labour party?
– I repeat that Labour’s policy is indicated by the legislation introduced with the backing of members of this side of the House. I am backing this bill.
– The honorable member said, a little while ago, that it left him stone-cold.
– I admit that it does not express my own views on the best banking system for a country, but we must accept it and hope for the best. It has been complained that this bill will make for political control. I remind honorable members opposite that when the Government which they supported was in power it was not slow to take advantage of its opportunities. This i3 seen in the appointments which it made to the Arbitration Court.
– Judges Lukin and DrakeBrockman, for instance.
– “We did not seek direction from trade union secretaries.
– Of course not. The Government supported by the honorable member’s party would scorn to do anything like that! But let us see what happened to the Commonwealth Bank under the Bruce-Page Administration. I take the following from the Commonwealth Y ear-Book, No. 19, page 386 : -
The Commonwealth Bank Act, 1924, was assented to on 20th August, 1924, and was brought into operation on 10th October, 1924. This act was passed to broaden the scope of the Commonwealth Bank and to enable it to perform the functions for which it had been established. Five main amendments to the Bank Act 1911-20 are included, in accordance with which the following changes have* been made: - (1) A board of directors has been appointed to control not only the general business, but also that of the note issue. The board consists of the governor of the bank, the Secretary to the Treasury, and six others who are or have been actively engaged in agriculture, commerce, finance or industry. In addition to the above board there is a board of advice in London. (2) The bank has been strengthened by the capitalization of £4,000,000 of the accumulated profits, and the Treasurer is authorized to raise by loans sums aggregating £6,000,000 and to lend the proceeds to the Commonwealth Bank as additional capital. The Ministry does not propose to interfere with the authority already included in the Commonwealth Bank Act to issue debentures up to £10,000,000. (3) The board is to fix and publish its discount rate. (4) The associated banks settle their exchanges through the Commonwealth Bank. (5) The associated banks supply to the Treasurer each quarter a statement of average weekly liabilities and assets in accordance with the schedule prescribed.
The Bruce-Page Government made the Commonwealth Bank a bankers’ bank. Lt changed it from a people’s bank; capitalized £4,000,000 of its profits; and authorized the Treasurer to borrow £6,000,000 and loan it to the bank. It permitted outside institutions to get a “ rake-off.” If the policy of the Bruce-Page Administration did not give evidence of political control of the bank, then. I do not understand the meaning of the printed word. I say unhesitatingly that any government would be entitled to use the bank to give effect to its policy in the interests of the people. That clearly was the intention when the bank was established.
The Leader of the Opposition paid particular attention to the possibility of an expansion of the note issue. Honorable members opposite are afraid that this proposal will mean inflation. I wish I were as confident as they are fearsome that there will be an expansion of credit under this proposal, but I know the Government has no such intention. Its purpose is to meet the banking situation as it is met in other countries in like circumstances. This policy does not meet with my approval. We are told that it is a “ safe “ policy. I should like to hear the views of the Leader of the Opposition concerning the efficacy of note issue expansion under judicious direction and. control. The honorable gentleman referred to the situation in France, Germany, Austria, Hungary and Poland, following a policy of note inflation. I know nothing about those countries. The banking authorities may have used the note issue in a manner detrimental to the best interests of the country, but can any honorable members say that the position of those countries is worse than that of Great Britain or Australia? Can they show that the manipulation of credit materially injured the economic position of those nations? No one can deny that Australia would have been in a much more parlous state than it is to-day if, during the war, the Government had not been in control of the note issue. It is, of course, impossible to say what might have happened had the Commonwealth Bank not been in existence. I can, however, say with confidence that if the proposal submitted by the honorable member for Bourke (Mr. Anstey) had been accepted by the Government the nation’s credit would have been expanded by £10,000,000, and we should not have been called upon to-day to pay such a heavy interest bill on our indebtedness. I challenge any one to say, in the light of subsequent experience, that that policy would not have worked out to the benefit of the Commonwealth.
What happened to our note issue during the war period? When it was first proposed to issue Australian notes the precaution was taken that the Treasurer must hold in gold coin a reserve to an amount not less than one-fourth of the amount of Australian notes issued up to £7,000,000, and to an amount equal to the amount of notes issued in excess of £7,000,000. But during the War our note issue went up to £58,000,000. No one knew how it came about. I remember Sir Joseph Cook warning the Commonwealth that the danger-point was being approached in issuing notes to a value exceeding £13,000,000, nevertheless, the issue went up as high as £58,000,000. After the war, Mr. Watt said that it must be contracted to £15,000,000, but that has not yet been done, and the country has suffered no ill effects. In a circular recently issued by myself, I pointed out that but for the political interference with the note issue in another five years from now the profits on the issue would have cancelled all debentures, or, in other words, the notes themselves with the exception of the currency of the moment. What industry in the country could show a like result? The note issue, conjointly with the Commonwealth Bank, helped to save Australia during the war. How can any one talk of being frightened at a possibility of inflation?
In this connexion, I have a quotation to make from a speech delivered by Mr. Glynn on the 2nd November, 1911, as reported on page 2869, volume 62, of Hansard. Mr. Glynn was speaking about the establishment of the Commonwealth Bank, and like others, not being a banker, he quoted some one who was supposed to know something about banking. The gentleman he chose as his authority was Alexander Hamilton. Mr. Glynn said -
I was looking through some of the lessons of the financial crisis, in connexion with which the great name of Hamilton is referred to with very great respect. Perhaps I might read to honorable members what he said . . . on banking in general. Dealing with what issue really means, he showed that there is no difference between a note issue and deposits, bills of exchange and cheques, which constitute 97 or 98 per cent, of the currency of London, and,. I believe, a, still greater percentage of that of Australia, where banking is very highly developed and very sound. Hamilton said, in 1790 -
Every loan which a bank makes is in its first shape a credit given to the borrower in its books, the amount of which it stands ready to pay either in its own notes or in gold or silver at its option. But in a. great number of cases, no actual payment is made in either. The borrower frequently by use of a cheque or order transfers his credit to some other person to whom he has a payment to make. This man in his turn is as often content with a similar credit, because he is satisfied that he can, whenever he pleases, either convert it into cash or pass it to some other hands as an equivalent for it. In this manner the credit keeps circulating, performing in every state the office of money until it is extinguished by a discount with some other person who has a payment to make to the bank to an equal or greater amount.
There is nothing unsafe or unstable in a note issue. “When the productivity of a country is maintained, the safest security is a note drawn upon the nation. The point is whether it will stand up to a time of crisis. “When war broke out, the Bank of England, with all its reserves and power, could not carry on. It shut its doors and the British Government was obliged to issue notes for the purpose of meeting the requirements of the country. There was no gold behind the notes it issued ; the only backing they had was the confidence of the people in the need of the nation at the time. In 1914, the British Government notes in circulation in England amounted to £33,719,000. In the succeeding years, the notes in circulation increased as follows: -
What have those gentlemen who talk about inflation to say in reference to those figures? The notes issued when Great Britain was struggling in a tremendous war, are still the currency of the country. But there is a more pleasing feature of the British note issue applied, as the Australian note issue has been, to meet the needs of currency. In my opinion, if our note issue were applied to meet government requirement it would show a like result to that shown in England during the war. I quote the following from British Budgets, Second Series, 1913-21, page 354-
Under a minute of 3rd May, 1915, however, the Treasury ordered that all interest payments into the note account should be utilized firstly to provide a fund termed the Investments Reserve Account, to meet possible losses upon realization of securities, and, .when this reserve account exceeded 5 per cent, of the total securities held and advances outstanding by more than £100,000 the excess was to be paid into ‘the Exchequer.
Such payments appear in the .national accounts under the head of miscellaneous revenue, and for the years under review were as follows: -
111 1918 there was in the miscellaneous revenue -account and the investments reserve account £3,568,050; in 1919, £21,471,450; in 1920, £30,4)77,900 ; in 1921. £32,840,850, or a total profit on the note issue that stood behind the nation in its time of crisis, of £98,358,250. To what extent those profits have continued since the war, I cannot say, but the paper currency continues. Prior to the war, only £5 notes were issued by the Bank of England, and they were legal tender to only a limited amount, but to-day the £1 and 10s. notes are legal tender to any amount. I assume that the same ratio of profit as was earned during the war continues and will continue, but it will go through the Bank of England. In 1928, Parliament decided that the note issue should be removed from political control and restored to the Bank of England. Section 1, sub-section 2 of the Currency and Bank Notes Act of 1928 provides -
Section 6 of the Bank of England Act, 1833 (which provides that bank notes shall be legal tender), shall have effect as if for the words “ shall be legal tender to the amount expressed in such note or notes and shall be taken to be valid as a tender to such amount for all sums above five pounds on all occasions on which a.ny tender of money may be legally made “ there were substituted the words “ shall be legal tender ‘ for the payment of any amount.” “When honorable members opposite criticize my proposals for utilizing the paper currency for the development of Australia, I remind them that the note issue was the financial “ rock of ages “ upon which Great Britain leant during the war. Sub-section 5 provides -
Notwithstanding anything contained in section 8 of the Truck Act, 1831, the payment of wages in bank notes of one pound or ten shillings shall be valid, whether the workman does or does riot consent thereto.
I invite the honorable member for warringah (Mr. Archdale Parkhill) to assimilate that. The English workman cannot demand gold; he must accept notes in payment for his labour, and that provision justifies my contention as to what can be done in Australia. The paper currency of England that served a great national purpose during the war is continued in time of peace, but the gold standard has been abandoned, because section 2 provides -
We have always had the Bank of England held up to us as a pattern on which to model our banking operations. But that bank does not always meet with similar approval from individuals of my own frame of mind, even from those who are members of the Mother of Parliaments. It is not held to be as sacrosanct as some people would have it believed. While some look upon it as a sort of rock of ages, others have courage enough to say, that, although generously fostered by the Government of the Old Country, it does not do that which it ought to do. I shall quote from the debates of the House of Commons as reported in vol. 217, 7th May to 24th May, 1928, on the Currency and Bank Notes Bill. These remarks, made by Mr. Maxton, who, I believe, is a Clydesider, read -
The honorable member who spoke on behalf of the Bank suggested that there was something irreligious, almost blasphemous in discussing the Bank of England, and that it was an institution above reproach and above discussion. But it is only an ordinary business like any other business in this country, except that it has special privileges granted to it by the State. It uses its special privileges and powers to make profits like any other capitalist institution. Since the War, because it was incapable of doing the job it was set up to do, the governments of the post-war period had to set up the Trade Facilities Act. The Government had to come in and do the banking business that the big national banks were unfit or unwilling to do. Millions of pounds were advanced to various commercial ‘enterprises because the bank was not doing its job. Since that time we have had the sugar beet subsidy. Surely, if there is one defence for private enterprise banking it is that this institution will advance’ money to encourage a new and somewhat risky enterprise to establish itself. But private enterprise banking, including the Bank of England, would not face up to the establishment of a new industry like the growing of sugar beet and the production of beet sugar, although the Government and the Government’s advisers were all of opinion that both from an industrial and a national welfare standpoint this was an industry that should receive financial backing. This House had to vote out of the public purse moneys to support private enterprise, because private enterprise, which is supposed to do the job, would not take it oil. I might mention also the position of the mining industry, which got right down into ruin. Private enterprise in mining ought to make its arrangements inside private enterprise in banking to get its financial support, but what did they do? They caine running to this Government, that is now saying that the Bank of England must bc trusted with all the Government’s financial operations, and the Government handed them, again out of the public coffers, some £20,000,000 that the banks were afraid to advance to this derelict industry. Industrialists in the one department could not run the business efficiently, the financiers in the Bank of England would not advance them further credit, and they came to the Government and took money out of the pockets of the ratepayers, which means the rest of the working class, to subsidize the mine-owners of this country. It is one great regret in my life that I have to use my position in this House to patch up the evils of capitalism in order that the workers may not suffer starvation.
The position then was comparable with that in which we now find ourselves. The Bank of England and the private bankers generally would not do their job, and the British Government had to issue an additional £20,000,000 of currency. Where did they get that currency? They obtained it by paying the money lords exorbitant interest, which had to be met by the taxpayers. The Bank of England, the institution which is lauded to the skies as the head, body, limbs, feet, tail, the everything, the grand panjandrum of high finance, fell down on its job. If I were the right honorable member for North Sydney (Mr. Hughes) I should say that it lacked the “guts,” but as I am not I shall content myself by saying that it lacked the mechanism to achieve the desired result. I shall quote one more extract from Mr. Maxton’s speech, an extract which embodies an opinion to which I should give expression if a similar position existed here. The Commonwealth Bank is our bank, and it should do our work and serve the nation.
– Why quote Mr. Maxton? He is merely a “ voice that crieth in the wilderness “ and has no following in Great Britain.
– He is a man whom I admire. I know that the honorable member for Warringah (Mr. Archdale Parkhill) has a considerable following. I appreciate how high he stands in the regard of the National party. At the same time he fails to give voice to his genuine opinion, and therein he differs from Mr. Maxton. The honorable member for * Warringah bolsters up the rotten position in which the people find themselves to-day. Mr. Maxton points out its faults. If the honorable member desires to be as good a representative as Mr. Maxton he will state the facts as was done by that gentleman. Continuing his remarks on the same bill Mr. Maxton said -
The job now is for the nation to take over the Bank of England, and to inquire afterwards.
The Commonwealth Bank is our own creation. It was called into existence to serve the nation. It must function in the interests of the whole of the people, and not merely on behalf of a coterie of bankers. I offer no objection to the bill. I merely regret that the Government did not go further. I suppose that, having its finger on the financial pulse of the Commonwealth, it knew best how far to go. The time will come when more drastic action will have to be taken in regard to our currency and credit, and in controlling the profiteers who are exploiting the people of this country. I am satisfied that the people will demand a further amendment of the Bank Act in that direction, whether honorable members opposite approve of it or not.
.- The majority of honorable members must be disappointed with the speech that has just been delivered by the honorable member for Adelaide (Mr. Yates). It was a rare opportunity for him to make a full statement of his plans for giving the people plenty of money without their having to work for it. He must have been taken to task by his leader, and warned against making extravagant statements prejudicial to his party.
We can afford to discuss this question on its merits. If honorable members who sit on this side disagree radically with those who sit opposite, that fact must not be attributed to party prejudice. It is well known that the policies of the Labour party and the Nationalist party differ materially. The Labour party stands for the socialization of industry, while members who sit on this side believe that the best method of conducting the affairs of this country is by private enterprise. I admit that the Commonwealth Bank has been singularly free from political influence in the conduct of its business. It has been fortunate in having had, as a board of directors, business men who have not shown any pronounced political partiality. As a matter of fact, it has exercised the principal functions of a central bank with a considerable degree of success. There is no reason to doubt that if it continued to develop in cooperation with the private banks it would assist Australia through the difficult times that are ahead, just as effectively as could a reserve bank.
The bill proposes that an entirely new financial institution shall be established. The Treasurer (Mr. Theodore), in his second-reading speech, said that there is no sinister purpose behind the proposal to set up a central reserve bank. Later he said -
A central reserve bank will not interfere in any adverse way with the existing banking institutions carrying on business to-day. It will not hamper them nor restrict their operations. It will, indeed, assist them to carry out their proper functions.
It is generally conceded that the Treasurer made an excellent speech. Beading it in Hansard one could be pardoned for concluding that the present Government intends to act as a godfather to the trading banks. The honorable gentleman cannot be attacked for what he said; but I believe that he can be attacked for what he failed to say. It is suspected that this Government will endeavour gradually to weaken the trading banks, with the object of establishing a Government monopoly in banking. The objective of the Labour party is clearly laid down in its platform. It is, the socialization of industry, production, distribution and exchange by various methods. In regard to banking the platform says -
The Commonwealth Bank, in the matter of policy, to remain free from association or agreement with the private banks.
Later, it says -
The extension of the scope and power of the Commonwealth Bank until complete control of hanking is in the hands of the people.
So far, the experience of this House and of the country has been that the Government does not regard its platform as ornamental. It believes that it is free to act in the way that it conceives to be in the best interests of the people. It has behind it in the country various organizations which, from day to day, are clamouring for some plank or other to be given effect.
The Treasurer may say that there is no intention on the part of the Government to interfere with the trading banks, and that their rights will be recognized; but one naturally would like to know how long that state of affairs will continue. There can be no doubt that, sooner or later, there will be a conflict of policy. The honorable member for Corangamite (Mr. Crouch) made no secret to-night of the fact that, if he had his way, he would abolish the private trading banks and have a government monopoly in banking. The honorable member for Adelaide (Mr. Yates) makes so many extravagant statements that I do not think even the members of his own party take him very seriously. It cannot be said that the existing banking and financial system has proved defective. The present crisis was brought about by a steady depreciation of the values of our principal exports. The cost of production has been so high that our primary producers have not been able to export except at a loss. The Government recognizes that that is the case because, by means of the Wheat Marketing Bill, the wheat-growers of Australia are to be assisted; and its willingness to pay half the salary of a member of the Development and Migration Commission while he is engaged in an investigation of the wool industry proves that it recognizes the necessity of assisting the wool-growers. Various political parties also have been partially responsible for our present position. There has been unwise borrowing by both State and Federal Governments, with the inevitable result that there is a shortage of money in the community. Before we can return to prosperity there must be a general recognition of that fact by every section of the community. When we talk about reducing the cost of production, certain honorable members opposite immediately accuse us of favoring a reduction of wages. I go further than that, and say that before we can return to a sound economic position we must consider not only wages but also rents, profits and interest. All these must be reduced before we can hope to get back to a sound footing.
It has been said that the Commonwealth Bank cannot function as a reserve bank while it is in active competition with the * trading banks. If that is true, honorable members on this side of the House would prefer to eliminate the trading operations of the bank, and allow it to develop as a central reserve bank. The private banks in Australia control a large amount of capital, and enjoy the confidence of the public. Leading authorities from England and other countries have commented favorably on the excellent way in which our financial institutions have ‘been conducted. The honorable member for Adelaide (Mr. Yates) quoted what he described as returns from twenty-three separate banks in Australia. Personally, I have been unable to find out anything about any bank other than the eleven principal banks which have between them no fewer than 2,500 branches. Their authorized capital is £77,000,000, and of this amount £44,643,000 has been paid up. They have reserves of £34,000,000. and there is a reserve liability to the shareholders of £29,789,000. The paidup capital and reserves are used in the business of the bank. At a Labour conference held the other day in Canberra, mention was made of the alleged restriction of credit which, it was said, was responsible for unemployment. The following report of the proceedings of that conference appeared in the Canberra Times -
The report of the Unemployment Committee stated that preventable unemployment had been aggravated by the restriction of credit due to present banking practice. This has operated to prevent potential employers, i.e., manufacturers, agriculturists, local ‘ governing bodies, and the like, being able in the case of the first class, to extend their factories in order to supply the home market which recent tariff policy has secured to them; in the second instance, to crop increased areas for primary’ production which supplies the great bulk of our exports, and in the case of the municipal bodies, to carry out necessary works for the comfort and the good of the people. Undoubted securities apparently as a matter of financial policy have been rejected.
Little reliance can be placed on those statements in view of the fact that during the two years ended 1929 there was an increase of deposits in the various banks of £20,000,000, whereas the increase of advances was no less than £41,000,000. These figures show how generous the batiks have been, in the matter of advances. According to the Government Gazette, the banking figures for the quarter ending 31st March, showed that the total deposits in the eleven trading banks amounted to £292,000,000, while the total advances were £291,600,000, showing that the banks have met the demands for money to the utmost of their resources. If this bill is passed, and a new financial institution is established, a very considerable amount of money will be taken from the trading banks to be placed in the proposed central reserve bank. So far as I have been able to find out, approximately £20,000,000 will be needed for this purpose. How will it be possible for the Treasurer to take this money from the trading banks without injury to the credit of the country? I have already pointed out that the fixeddeposits with the banks have just about been exhausted by the advances made against them. Paid-up capital and reserves amounting to £42,500,000 are held in coin, bullion, notes and cash in the Commonwealth Bank, and a balance of £14,500,000 represents value of promises, notes, bills, &c. The Treasurer proposes to require the trading banks to deposit 10 per cent, of their current accounts and 5 per cent, of fixed deposits with this central reserve bank. If this is done it will tend to restrict the credit still further.
The private trading banks have been of considerable assistance to the Commonwealth Government in raising loans. I particularly remember one loan of £10,000,000 which they underwrote towards the end of last year. The fact that the Commonwealth Bank has developed a large business, and has a considerable number of branches throughout the Commonwealth, is used as an argument by some persons in favour of its continuing its trading operations. I would have no
Lt>»] objection to that, nor, I think, would any of the trading banks, provided, the Commonwealth Bank competed on its merits without receiving government preference. Sir Ernest Harvey was brought out to Australia by the previous Government to advise it regarding the establishment of a central reserve bank. I am not against central reserve banking of some kind, but I do not favour the creation of a second Commonwealth financial institution with the object of extending the trading operations of the Commonwealth Bank. In the course of an address to a meeting of the Economic Society of Victoria some months ago, Sir Ernest Harvey laid down the following conditions in respect to central reserve banking: -
The honorable member for Corangamite (Mr. Crouch) quoted from this address, but he did not quote one or two paragraphs which I think are pertinent. Sir Ernest Harvey said -
I have been asked many times whether I am in favour in theory of the establishment of a State bank for the conduct of ordinary trade banking . . .
If it is contended that such a bank is necessary for the provision of ordinary banking facilities which are not available elsewhere, or are available only on terms which are unreasonable, I should reply that a central bank can provide the public with all the protection in this direction which is necessary . . .
The only other possible object of such a bank, so far as I can see, is that it shall provide extraordinary facilities which, whether required to foster some purely political object or not, do not possess that sound financial basis which would recommend the business as attractive to’ other banks, with this almost inevitable result, that in course of time such a bank will find that its principal function will be to do business which is not attractive to other banks.
– Does not the honorable member think that those arguments are eighteen years too late?
– I do not; I think that they are right up-to-date.
– What would the honorable member do with the existing State banks ?
– The honorable member for Corangamite must have been absent from the chamber when I said that I did not believe that there should be two government-controlled banks operating side by side, and that I would rather have the proposed reserve bank, and so would abolish the trading bank. I do not desire to be misunderstood on this subject. In my opinion the private trading banks have given a very good account of themselves, and they would have no quarrel about having to meet the Commonwealth Bank in fair competition. But it is only natural that as the policy of the Government is the nationalization of banking it should endeavour to give the Commonwealth Bank preference over and to endeavour to weaken the private banks.
Sir Ernest Harvey’s other points were
– Practically every one of those conditions has been met in this bill.
– That may be so; but there appears to be an important exception. It is rather regrettable that honorable members opposite should try to disguise the fact that in introducing this bill the Government is seeking to give effect to the Labour party platform. It is amusing to us on this side of the chamber to find that whenever the Government is credited by us with seeking to give effect to its policy, there is an outcry from its supporters. I should not think much of the Government which did not strive to give effect to its platform. If its platform is acceptable to the people, there should be no argument about the wisdom of giving effect to it; if it is not acceptable to them, they will doubtless say so when they have an opportunity to express their opinion. There is no doubt whatever that the policy of the Labour party is to extend the operations of the Commonwealth Bank until the private banks are completely stultified. It has already taken some steps to that end, for it has obliged the private banks to hand over part of their gold reserves, on the plea that it is seeking to mobilize the gold of the country. Now it is seeking to compel the private banks to lodge with the central reserve bank 10 per cent. of their current accounts and 5 per cent. of their fixed deposits. If they have to do this, it will, of course, cripple them for the time being, and possibly injure them permanently.
I do not propose to enter upon a discussion, of the intricate and difficult subjects mentioned by Sir Ernest Harvey. I am sure that the Treasurer has considered all these arguments. He has evidently agreed with some of them, but disagreed with others. The plain fact is that Sir Ernest Harvey does not think that there is any particular need for a second government financial institution in Australia, and, as I have said, I believe that the Commonwealth Bank could be developed into the kind of central reserve bank that is necessary in Australia.
I wish, however, to make a few remarks in connexion with the proposed management of the bank. The bill provides that there shall be a board of directors consisting of a Governor; two Deputy Governors; the Secretary to the Treasury; and five other persons representing respectively the following interests : - Banking, commerce, labour manufacturing and primary production. I do not think that it is necessary to provide for the representation of all these interests. It would be better for the Government to find the best qualified men to do this work and appoint them to the board. It appears to me to be unnecessary also that there should be two Deputy Governors, for they would undoubtedly be able to over-rule the Governor if they desired to do so.
– Does not the honorable member think that there are a number of farmers in the community who possess the necessary qualifications to act on the board of directors?
– I do not think that there are any practical farmers with the necessary experience of banking who could fill these offices.
– Some practical farmers also have practical banking experience.
– That may be so, but to-day banking is a highly specialized business which calls for a long and careful training. I suggest that the Government should, if the bill iB passed, look for the very best men it can find in the community and appoint them to the board. When the Commonwealth Bank Savings. Bank Bill was before the House on the 7th of October, 1927, the present Prime Minister showed that he was not favorable to the appointment of a huge directorate for the bank. His remarks in that connexion, as reported in volume 116 of Hansard, at page 868, were -
I know of nothing that hoa been done by the bank directorate that was not being done formerly by the Governor, his deputy and hia staff, who did the pioneering work, and they controlled the bank without the assistance of a directorate. There has been no subsequent improvement because of the directorate.
Apparently the Prime Minister changed his. mind about having a big directorate for this bank between the time when he made those remarks and when he was consulted by the Treasurer regarding the bill.
The Treasurer was not convincing in his advocacy of two deputy-governors. He said that one was necessary to consider loans and advances and the other should be a specialist in currency and gold reserves. I cannot imagine that one man would find great difficulty in dealing with all four subjects. They are intimately related to one another, and there are many men in the banking world who might be selected for such a position. It iB quite unusual’ to have a general manager of a business, with two deputies who could upset his plans at any time they chose. Many clauses of the bill will no doubt be discussed in committee, but I propose, at this stage, to refer particularly to the provision for making unsecured loans or advances to the Government. Financial institutions could, of course, be used for the purposes of the Government, and could be influenced by a government in a way that would probably create disastrous demands for credit. We know well that all political parties are subject to pressure of some kind. We had evidence of that recently when the conference of the Australian Labour party was held at Canberra. A report published in the Canberra Times, of 80th May, referred to a discussion by the conference on this subject. The report, which was headed, “Attack on Banks - Australian Labour party wants twenty millions from Federal Parliament to solve unemployment,” stated -
Attacking the present banking practice in restricting credit and thus increasing unemployment, the Unemployment Committee, in its report to the Federal Conference of the Australian Labour party, yesterday, recommended that the Commonwealth Parliament, by reason of the fact that banking is within its legislative jurisdiction, should take all available measures to establish the necessary capital to help the unemployed.
As a first contribution in this direction the committee, considered that the Federal Parliament should find £80,000,000, which should be allotted among the States, which had the machinery for employment in a variety of occupations of large numbers of those at present out of work.
That shows the pressure which may be brought to bear upon a political party, and we do not know what may happen in that respect.
– Is the honorable member afraid that the unemployment position might’ be improved 1
– We all sympathize with those who are out of work or in want, but if we are to make progress we must proceed on sound lines. Financial stability cannot be brought about merely by the use of the printing press. Many representations have been made to the Treasurer from various sources. I have resolutions passed by the wool-growers. The Treasurer has been communicated with by the various banks and the chambers of commerce, and has been asked to postpone this legislation until a more suitable time than the present. The Minister mixes with the business world, and is well acquainted with the difficulties of finance. If he has not prosecuted thorough inquiries in every possible quarter, I urge him to make them. It is not too late to withdraw the bill; but if the Government insists on proceeding with it - I realize that it has been put into office by the vote of the people - it must accept responsibility for its action. When the committee stage is reached, I hope to submit a number of suggestions to the Government, and if a reasonable spirit is shown, it will help to give the people outside some confidence in the measure.
Debate (on motion by Mr. Cusack) adjourned.
House adjourned at 11.5 ji.in.
Cite as: Australia, House of Representatives, Debates, 5 June 1930, viewed 22 October 2017, <http://historichansard.net/hofreps/1930/19300605_reps_12_124/>.