House of Representatives
10 June 1930

12th Parliament · 1st Session

Mr. Speaker (Hon. Norman Makin) took the chair at 3 p.m., and offered prayers.

page 2571




– Messrs. H. V. McKay (Queensland) Limited have issued the following circular to their agents : -

We regret that an increase in cost makes it necessary for us to increase the price of chain and pulley yokes, as indicated in the sticker for price book which we enclose herewith.

The House was given to understand that this firm had agreed not to advance its prices, following the increases of customs duties on agricultural implements. Will the Prime Minister include chain and pulley yokes in the inquiry he ismaking regarding the effect of the new tariff schedule ?

Minister for External Affairs · YARRA, VICTORIA · ALP

– Messrs. H. V. McKay Limited and other manufacturers of agricultural implements undertook to make a 5 per cent. reduction in the prices of specified items of machinery included in the last tariff schedule, and the information in my possession indicates that that promise has been honoured. I shall inquire whether chain and pulley yokes were affected by the last tariff schedule and whether the prices of them have been increased lately.

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Rural Lessees Board


– Is the Minister for Home Affairs yet able to announce the personnel of the advisory board that is to be appointed to deal with rural leases in theFederal Capital Territory, and when that body will be likely to function ?


– I hope to be able to announce the appointment of the board at an early date.

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– Now that an aerial passenger service is, operating between Melbourne and Sydney, will the Minister for Defence offer an inducement to Australian National Airways or some other company to include Canberra in its itinerary, and so provide quicker transport to and from the Federal Capital, and relieve to some extent the isolation of its people ?


– The matter will receive consideration.

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Victualling - Spectacle Island


asked the Minister for Defence, upon notice -

  1. In the returns to the Navy Office from the Royal Edward Victualling Yard, is it the custom to prepare a voucher showing the quantities of rations expended in testing?
  2. Do the facts disclose that over 90 per cent. of the rations thus recorded are used by the victualling storeofficer, deputy victualling store officer, and assistant victualling officer for lunches ?
  3. Are such things as tea, sugar, salt, pickles, sauces, tinned fruits, jams, milk, meat, &c, used and accounted for in the foregoing manner ?
  4. Are sauces, pickles, milk, meat, fruit and jams guaranteed for periods of six to twelve months by the contractors?
  5. Who made the tests?
  6. If such tests were made by the victualling store officer or his deputy or assistant, what qualifications have they for this work?
  7. What was the result of each test, and what were the articles tested?
  8. Will the Minister consider the question of reorganizing the services outlined?

– Inquiries are being made and a reply will be furnished to the honorable member as soon as possible.


asked the Minisrer for Defence, upon notice -

  1. Has an assistant been appointed to Spectacle Island to assist the armament officer or man in charge of the island?
  2. If so, why is it necessary to provide assistance to this officer when ships are being paid off to reserve and the staff is being reduced?

– The answers to the honorable member’s questions are -

  1. Yes; he is an Australian who was sent to England over twelve months ago to be specially trained to fill a vacancy and has now replaced an admiralty officer who was on loan.
  2. The work of the armament depots has increased by the advent of new types of ships and the development of Newington magazine. Moreover, the paying-off of ships means increased work as their ammunition is landed to the armament depots for care and maintenance.

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asked the Prime Minister, upon notice -

  1. How many persons were appointed, either permanently or temporarily, from outside the Commonwealth Public Service to the departments controlled by the Prime Minister since 1919, and prior to October, 1929?
  2. Who are the persons so appointed?
  3. To what positions, respectively, were such persons appointed, at what salaries, and were applications called for the positions?
  4. What are their present duties and salaries, respectively ?
  5. How many of the officers of the departments controlled by the Prime Minister, with longer service, are in receipt of less salary than the most highly salaried person appointed from outside the service within the period mentioned?

– The preparation of the information sought by the honorable member would involve a considerable amount of research, and I am looking into the matter.

page 2572




asked the Minister for Home Affairs, upon notice -

  1. What was the amount of the expenditure in taking the last census?
  2. What isthe estimated cost of taking the census due in 1931?
  3. Is it a fact that at a conference of Commonwealth and State statisticians held recently, the proposed postponement of the 1931 census was condemned?

– The answers to the honorable member’s questions are -

  1. £274,360.
  2. £350,000.
  3. The conference did not “ condemn “ the proposed postponement, but regretted “the necessity which has been found for postponing till 1933 the census which ordinarily should have been taken in 1931”.

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Transfers and Dismissals

Assistant Minister assisting the Minister for Industry · WEST SYDNEY, NEW SOUTH WALES · ALP

– On the 4th June, the honorable member for Angas (Mr. Gabb) addressed to the PostmasterGeneral the following questions, upon notice -

  1. Have 38 mechanics been transferred from the telephone branch, Queensland, to South Australia within the last two years?
  2. Is it intended to transfer another 23 mechanics from Queensland to South Australia in the near future?
  3. Have the services of about 30 temporary mechanics been dispensed with in South Australia ?
  4. Have the services of all temporary mechanics in the telephone branch, Queensland, been dispensed with?
  5. Has portion of the surplus of telephone mechanics in Queensland been transferred to any State other than South Australia?

The information desired by the honorable member is as follows: -

  1. Yes.
  2. The question of transferring 23 additional mechanics from Queensland to South Australia is under consideration.
  3. Yes.
  4. Yes.
  5. Yes; some were transferred to New South Wales.

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The following papers were presented : -

Public Service Act - Appointments - AttorneyGeneral’s Department - J. S. Hurrey, T. H. Robinson, C. A. Fox, T. Hodgkinson, J. M. Benjamin.

Arbitration (Public Service) Act - Determinations by the Arbitrator, &c. -

No. 16 of 1930 - Federated Public Service Assistants Association of Australia.

No. 17 of 1930. - Meat Inspectors Association, Commonwealth Public Service.

Nationality Act - Regulations amended - Statutory Rules 1930, No. 58.

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Motion (by Mr. Forde) agreed to -

That he have leave to bring in a bill for an act to amend the Commerce (Trade Descriptions) Act 1905-1926.

Bill brought up by Mr. Forde, and read a first time.

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Second Reading

Minister for Home Affairs · Darling

– I move -

That the bill be now read a second time.

The measure is almost identical with that which was introduced in 1928, Its purpose is to attempt to place Australian forestry on a sounder basis. Legislation of this character is long overdue because of the pressing problems that are constantly arising, and particularly because of the prospect that within the next 20 or 25 years the whole world will be experiencing a shortage of timber. Because of the noticeable falling off in our exports of timber and the complaint of the other main timber-producing countries that their supplies are becoming exhausted, there is a quickening interest amongst the peoples of the world in the science of forestry. Timber plays a very important part in civilization. The oak in the chair which you, Mr. Speaker, occupy, was in the roof of Westminster Hall for over 500 years, and, if it is not damaged by accident, may remain sound and serviceable for another 1,000 years. Because of the strength and beauty of timber, and the many uses to which it can be put, people are gradually developing a forest sense. The history of Australia in the matter of afforestation is much the same as that of other couutries. In Australia, as in other countries, the pioneers burned, felled and otherwise cleared timber in order that land might be used for the production of foodstuffs and other crops. Thus much valuable timber has been destroyed, and we have done that which we would not have done had we the knowledge that we now possess concerning the great value of timber. The essential difference between Australia and America, which is a big timber-producing country, is that Australia has a much smaller forested area. ‘ Australia comprises 1,900,000,000 acres, of which only approximately 15,000,000 acres is forest. We have been prodigal in exploiting our timber, resources, and have given little or no consideration to re-afforestation. On passing through a forest near Ballimore five years ago, from which sleepers had been obtained 40 years ago, I found that sleepers were still being cut in the same area. If care had been exercised in making the first cut, and proper protection afforded, that forest could still produce a large quantity of the sleepers required in New South Wales.

Our trade balance is affected by our exports and imports of timber. ,1 shall not weary ‘ honorable members by giving our exports and imports over a series of years ; but will quote sufficient to indicate the extent to which we export and import. In 19S7, our imports totalled 499,920,000 super, feet, consisting principally of softwood varieties, valued at £5,034,000;’ and our exports totalled 114,000,000 super, feet, valued at £1,372,000. These exports consisted mainly of hardwood, the great bulk of which was obtained in Western Australia. Despite the extremely high tariff imposed upon timber, our imports in 1929 totalled 401,000,000 super, feet, again mainly softwoods, valued at £3;900,000, and our exports in the same year totalled 82,200,000 super, feet, valued at £1,120,000, or a reduction of 32,000,000 super, feet between 1927 and 1929. It will be seen that we import approximately four times the quantity of timber that we export. Our imports represent 8l£ super, feet, valued at 16s. 6d. per capita, and our exports 18£ super, feet valued at 4s. 6d. per capita. Since 1903, our exportation of timber has for various reasons been steadily declining. This is due largely to the fact that our forest areas are gradually being depleted and that little or no attempt is being made to establish new plantations or to encourage natural afforestation by providing protection against bush fires. Protection has been provided in certain areas.

Mr Mackay:

– All the States are doing something.


– Undoubtedly. Certain areas are ranged and protected, and in them some afforestation is being undertaken. For every 1,000,000 acres receiving attention there are probably 5,000,000 acres that do not receive any protection other than that provided by graziers and others in preventing fires.

Mr Francis:

– Is it proposed to establish new forests?


– A certain amount of forestry work is now being undertaken in the Federal Capital Territory. The diminution in our exports of timber is due to the fact that we are over-cutting and making insufficient provision in the matter of re-afforestation. In Western Australia, some large hardwood mills have actually closed down. The great bulk of our imports consists of softwood, principally the Douglas fir, a well known

Oregon timber, which is grown on and shipped from the Pacific slopes. America is exceedingly fortunate in being able to supply the needs of its population of 110,000,000 people and at the same time to have a large “exportable surplus; but that country with its magnificent forests is finding that spruce and other such timbers used for the making of paper pulp are being exhausted. . Much of the pulp used in paper-making, which up to ten years ago was manufactured in the United States of America, is now being produced in Canada where many of the activities in connexion with wood pulping are undertaken. As the wonderful forests of America and Canada cannot continue to produce the same large quantities of timber indefinitely without attention, keen interest is being taken in re-afforestation and the protection of existing forest areas. It has been authoritatively stated that in 25 years’ time America will not have an exportable surplus of timber, and if that should be so Australia will then have to obtain its supplies of softwoods from other countries. If America should discontinue to export softwoods, Australia will, unless steps are taken to produce her own requirements, be in an unenviable position. At the present time we are enjoying the advantages of the fierce competition between the various milling companies in the United States of America and Canada, as a result of which Australia is able to purchase timber in larger quantities and atat much more reasonable price than she can hope to do in a few years’ time: Although our afforested areas are now limited to approximately 15,000,000 acres, by proper care and attention they can be increased. Certain types of land that are not at present producing the right kinds of timber can be utilized to supply the kinds we need. We have three sorts of timber: there is a magnificentrange of hardwoods; the range of softwoods is not so great, but it includes many splendid timbers; and we have cabinet timbers. The hardwoods include red gum, mountain ash, messmate, blue gum, and the red, grey and narrow leaf ironbark. Some years ago I witnessed in Sydney the demolition of a building that had been standing for about 55 years. Out of that building were taken ironbark girders 30 ft. x 14 in., which did not show the slightest sign of bending but were as good as, if not better than, they were when put in, although they had borne the tremendous weight of two storeys for the period that the building had been standing. Ironbark is now being used in the Federal Capital Territory for flooring purposes.

Properly treated, it is able to compete with the magnificent jarrah that is obtained in Western Australia. At a mine at Captain’s Flat, which I inspected recently, I saw eucalypts that were placed in position 40 years ago, for 25 years of which they had been submerged in mineralized waters. I was not able to identify the particular class of eucalypt,but probably it was red gum or box. To the extent that it could be tested with a pick, it appeared to be as sound as the day that it was put in. Then we have the tallow woods, white beech, spotted gum and turpentine. They comprise a beautiful range of timbers, and are suitable for almost any use. The cabinet timbers are cedar, maple, blackwood, black bean - which decorates this chamber - and walnut. With artistic treatment these can hold their own with the much vaunted mahogany from overseas. Nature has been considerably less generous to us in regard to softwoods ; apparently the climatic conditions of Australia are more suitable for the production of hardwoods.

Mr Bayley:

– It is a question of rainfall.


– Possibly; that remains to be seen, at the conclusion of a series of experiments with various softwoods over a period of years. It is intended to conduct in the Federal Capital Territory certain experiments with respect to American timbers. In passing, I may mention that at the entrance to the nursery at Canberra is a douglas fir, or Oregon. It has been there for fourteen years, and although it has not made the growth that would have occurred with a higher rainfall and at a greater altitude, nevertheless it a very fine tree. We intend to plant at a level of 3,500 feet, spruce, Oregon, redwood, and other timbers. We have the rainfall and the altitude in which, we think, those timbers will flourish and be a commercial proposition. That will be an experiment, the result of which can be gauged only in future years.

Mr Francis:

– Why not carry out the experiment on the west coast of Tasmania?


– In the Federal Capital Territory we have altitudes ranging from 1,800 feet - the height above sea-level of the floor of this House - to 6,290 feet.

Mr Francis:

– We have not the necessary rainfall.


– We have a very good rainfall; quite sufficient to grow any timber. Our main softwoods are the hoop, bunya, cypress, kauri, celery top and Huon pines. The annual cut of our softwoods is such that supplies are fast disappearing; and it seems certain that, unless action is taken in the very near future in the direction of afforestation, there will be no softwoods, with the exception of Huon pine, left in Australia.

Mr Francis:

– We have a fifteen years’ supply.


– In the life of a nation, fifteen years is but a very brief period. There is, in forestry, nothing spectacular, nothing that grips the imagination ; and there is no quick return from expenditure. You plant your tree to-day, and give it more or less constant care and attention for, maybe, 30 years. Then, and not until then, you reap the harvest. That is probably accountable for the fact that forestry has not been given so much attention as other industries have received. The total cut of our softwoods is about 25 per cent, of our softwood requirements, the remaining 75 per cent, being imported. Because of the wide range of timbers that we have in Australia, and in spite of the lack of attention that forestry has received in the past, even at this late stage we can make ample provision for our future requirements if each of the States will embark upon an active afforestation scheme, with the participation of the Commonwealth in its own territories and its assistance in their endeavours. Under systematic management and proper supervision, so that at all times our afforestation would equal what we cut, Australia could more than supply its own requirements. Our present unenviable position is due exclusively to a refusal to acknowledge a fundamental principle, the’ principle that the cut must not exceed the growth. That is the main factor in all afforestation schemes, and it is a principle that applies not only to afforestation but also to governmental, company, and all other enterprises.

As only three-quarters of an acre per capita is needed to maintain our requirements, it is not a very difficult proposition. If a sound policy of afforestation had been observed in the Commonwealth during the last 30 years, our present requirements would be met by a standing forest of 5,000,000 acres, and we should be in a position to export timber equal in quantity to the amount required for home consumption.

Timber-growing -offers a wide field of employment. It is estimated that the timber industry should give employment to 100,000 men, exclusive of carpenters, ‘ cabinet makers, and others of similar avocations. Yet at present the industry is providing employment for only 45,000 people, and this number’ is gradually being reduced, largely because the industry is being managed inefficiently, and our forests are being depleted.

Mr Bell:

– The number employed is being reduced because the importation of timber is increasing. :


– That cannot be advanced as a reason for the closing down of two large timber mills which for many years were operating in the magnificent forests in Western Australia. They have been obliged to cease operations owing to the scarcity of suitable standing timber.

Mr Nairn:

– That is not the reason.


– The honorable member can study the. position and ascertain for himself whether or not my statement is correct.

Another important matter that should not be lost sight of is the effect of a wellestablished afforestation policy upon our waterways and irrigation schemes. During the last few years the Commonwealth has, in partnership with the States pf South Australia, Victoria and New South Wales, expended a huge sum of money on the Hume Weir. The construction of a dam across the Murray near Albury has made possible a constant flow of water, year in and year out, irrespective of the nature of the seasons. Upon this great water conservation scheme depend numberless irrigation projects and pastoral enterprises. It has been established, however, that unless remedial measures are applied promptly to check the erosion which is now taking place on the

Murray River and other catchment areas, together with the immense siltation which is being reported in the various weirs, the Commonwealth and the State Governments will be obliged to incur heavy expenditure for many years to maintain these water conservation schemes in an efficient state. I recently had brought to my notice an interesting paper written and read by Professor Gordon L. Wood, a member of the staff of the Melbourne University before the last Empire Forestry Conference in Canberra. In his paper Professor Wood said, among other things -

It is agreed by most authorities that for the forest catchment to have its most beneficial effect in stream regulation it should not be fired, grazed, or. otherwise disturbed in its normal function. In .this respect Australian settlement has proceeded and is still proceeding in complete disregard of the effects of forests on water economy.

The Burrinjuck Dam is supplied from a huge catchment, but already siltration is noticeable from, the Mumimbidgee and the Goodradigby areas. We have the same thing happening nearer home at the Cotter Dam. Those who have had an opportunity to observe the condition of that dam during the last ten years will have been impressed by the noticeable siltration that has taken place. Ultimately, unless the erosion in the upper catchment area is checked by afforestation, the silting of the dam will become a serious menace to the water supply for the Capital City area. The same thing is taking place in the Hume Weir, because the catchment areas have been either ringbarked or fed off by stock, with the result that the subsoil has become exposed and gradually it is being washed away. If a catchment area is well covered with forest, trees, the constant falling of the leaves forms a mat which prevents a too rapid run-off of winter rain, which under natural forest conditions is conserved. The evil in Australia is becoming more accentuated each year.

Mr Morgan:

– China is a classic example of the folly of deforestation.


– Any country which neglects reafforestation must expect to suffer for it eventually.

The bill does not create a new department. It merely provides the machinery for activities which are already in operation, including the Forestry Bureau, with its skeleton staff, and also for the Forestry School, situated in the Capital City area. In 1922, the Commonwealth Government, realizing its national obligation with regard to forestry, sent a trained forester to Papua to study forest conditions there. The Forestry Bureau was created in 1925, and the Forestry School established in the following year.

The Forestry School was established for the purpose of training foresters, and so far it has done very good work. The Empire Forestry Conference, held in Australia in 1928, which was attended by some of the leading foresters in the British Empire, warmly approved of the afforestation work that had already been done by Australia. In a report issued during the progress of the conference the following comments were made in regard to the Commonwealth Government’s forestry scheme: -

  1. A sound policy has been developed in the Federal Capital Territory, and extensive coniferous plantations have been made within the catchment area of the Cotter.
  2. An investigation of the forest resources of the territories of Papua and New Guinea has already been made and a report furnished. The question of giving effect : to the recommendation contained in it is under the consideration of the Government.
  3. There are small, but very valuable reserves of Norfolk Island pine timber in the territory bearing that name, and it is proposed to train one of the young islanders to take charge.
  4. The forestry bureau has acted in an advisory capacity to several of the States, principally Tasmania, and has furnished a detailed report on the forestry position of Tasmania, and also reported upon the pine planting proposition that has been instituted in the south.
  5. The Australian Forestry School has been established, and is being successfully conducted in Canberra.

The conference also carried the following motion in regard to the research work of the- bureau : -

We lay special stress on the need for silvicultural research in Australia’, and strongly recommend that steps be taken to organize research work and prosecute it on a sound basis. We recognize that while each State should carry on research into problems confronting it, some central organization for the encouragement and correlation of forest research is necessary. The Commonwealth Forestry Bureau, already in existence should be strengthened in order to provide the machinery necessary for carrying out this work.

The financial position of the Commonwealth will not permit the Government to increase the staff of the bureau at present, but it is considered to be necessary to set up the machinery which will make possible the development of its research department as the financial position improves, so that we may be able to face many of the afforestation problems that confront us. The cost of the Forestry Bureau is relatively small. In 1928-29 fl0,l7l was spent upon it, and this year the expenditure will be about £10,810. After the 30th June next, we shall be relieved of an expenditure of . £2,875 per annum in rent. The skeleton staff of the institution is being filled out gradually. It is not the policy of the Commonwealth to appoint foresters now working in the various States to Commonwealth positions. Eather do we regard it as our duty to train men’ for the States. Very valuable work in this connexion is being done at the Forestry School at Canberra. The method of education is to give to suitable graduates from the various universities postgraduate tuition at Canberra. After they have passed the necessary examinations here, they are sent abroad for overseas experience. One of our graduates is at present in the southern States of America, and two of them are in Europe. One of the successful students has now almost completed his European tour, and will return to Australia this year to take up research work in connexion with the Forestry Bureau. An excellent type of student is being obtained for forestry work. Only men who show a natural aptitude for life in the open spaces and woods of Australia, and are temperamentally inclined for such wort, are chosen for post-graduate tuition at Canberra.

The Empire Forestry Conference gave considerable attention to the work of the Australian Forestry School, and appointed a committee to consider its methods and curriculum. After a thorough investigation of the whole subject this committee made the following recommendations to the conference, which were adopted: -

That the higher training of Australian forest officers be recognized as a matter for the Canberra school only and the training of overseers, foremen, and similar grades as a matter for each State.

That steps be taken, as soon as possible, to bring the staff of the Canberra school up to full strength by the selection of a principal and the appointment of a laboratory assistant.

As I have said, the bureau has only a skeleton staff at present. The financial position has obliged us to refrain from appointing even the principal ‘ of the school ; but as soon as the financial clouds roll by that will be done. The concluding recommendation of the Forestry Conference Committee was as follows : -

That the Australian universities be approached forthwith with a view to granting a degree in his own university to any man who successfully completes the agreed two years’ course in science at his university, together with the forest course at Canberra.

So far, 24 graduates have passed through the school and have gone into the forestry service of the States, where they have already made their presence felt. The Forestry Conference suggested that a degree in forestry should be conferred upon students who pass the necessary examinations, and four Australian universities have already agreed to ‘ make provision for this to be done.

We are fortunate in having a number of patriotic citizens and organizations which have shown a practical interest in forestry, and in even the short time that the Forestry School has been established some notable donations have been made to it. The Sydney and Suburban Timber Merchants Association makes an annual grant of £50 to the school ; a private citizen donates £10 annually for the best essay by a student on forestry; and the trustees of the Schlich Memorial Fund, established in honour of the late Sir William Schlich, one of the leading foresters in the British Empire, has made a gift of £75 to the school, to be invested for the purpose of providing a gold medal each year for the best student. That medal is a much prized honour at the Canberra School. A magnificent donation of £5,000 was made by Mr. Russell Grimwade, of Melbourne, who provided a travelling scholarship which is available every two years. To control properly and invest such gifts, the bill provides that the forestry fund shall be managed by the Inspector-General of Forests, the Secretary to the Department of Home Affairs and the Secretary to the Treasury. The trustees will have power to invest fund moneys, and apply them for the furtherance of forestry. Donations to the fund will be received by the Inspector-General.

Afforestation is worth while in Australia. Notwithstanding that an ample rainfall is essential to the production of soft woods, we have climatic conditions- sufficiently favorable to enable us to produce not only our own requirements of hardwoods, and of softwoods; but an exportable surplus as well. The story of the timber industry of Sweden reads like the prospectus of a mining company. That country has a population of 6,105,190 and its area is small compared with Australia ; but its production of timber last year amounted to i8,780,000,000 super, feet, it exported 3,636,000,000 super, feet, its local consumption was 15,144,000,000 super, feet, and its production, of wood-pulp was 2,092,541 tons, valued at £20,258,833. Sweden, although a comparatively small country, with a population less than that of Australia, has forest products amounting in annual value to about £53,000,000. Of that sum the forest-owners receive only £11,500,000; the workmen, including the timber-getters, about £22,000,000 ; the Swedish merchant fleet £2,800,000; and the Swedish State railways £2,000,000. What is done in Sweden, because of its natural climatic advantages and other factors contributing to the efficient and economic production of timber, can he done in Australia, despite our disabilities. It is to be hoped that the forestry scheme, which’ was started in 1925,. will, in the course of 25 years, create a forestry sense among the people of Australia and that they will then realize that unless they are prepared to grow timber, no other country will do it for them. .

Debate (on motion by Mr. Gullett) adjourned.

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Second Reading

Debate resumed from the 6th June, (vide page 2569) on motion by Mr. Theodore: -

That the bill be now read a second time.


– Most of the arguments adduced by members of the Opposition regarding this measure relate to the danger of illconsidered or improper action by the Government under the powers conferred by the bill. I replied to those arguments on Friday last, and referred to the credit systems of other countries. I shall endeavour to show that there is no danger of a government, under this bill, seeking to inflate or deflate the currency of this country at its own sweet will. Those who still imagine that bank notes or gold silver and copper form the currency of a country belong to the stone age of finance. All the authorities who are quoted to-day with confidence state definitely that, in a country where the cheque system has been developed, the currency consists of cheque pounds. Mulhall, the eminent British statistician, pointed out, in 1887, that 97 per cent, of the currency of Great Britain consisted of cheque pounds. That is a currency manufactured by the banks themselves, and it is as fraudulent as any counterfeit currency that has ever been uttered. The Commonwealth Year-Booh of 1929 shows that the total assets of the associated banks of Australia amounted in that year to £332,000,000, and the liabilities were £296,000,000. Under the heading “ liabilities,” the main table of figures is that relating to deposits, which are shown as amounting to £289,000,000, and the main assets are described as overdrafts, amounting to £264,000,000. Subtracting the latter sum from £289,000,000, we have the sum of £25,000,000, which is the total amount of currency available to the banks out of deposits. The £264,000,000 consists of cheque pounds created by the banks. McKenna, McLeod and other authorities agree that all this currency of the banks to-day is created, as the late Treasurer, Dr. Earle Page, admitted in his budget speech two or three years ago, by the bankers themselves. Their own figures show that the Australian banks never had in their possession more than £50,000,000 in legal currency.

Mr Mackay:

– What would be the use of having hundreds of millions of pounds lying idle in their vaults? They must lend their money.


– Our associated banks never had more than £50,000,000 in legal currency, but on the strength of that they lent out £260,000,000, and drew interest on it.

Mr Mackay:

– What -would the honorable member have them do?


– I am simply pointing out that the banks themselves created currency which they lent out and drew interest on. If a man goes to a bank for an overdraft of £2,000, he will probably have to pledge as security £5,000 worth of assets. He will have to pay interest on the- £2,000 he borrows, but he has given a mortgage over £5,000 worth of property. Even then the bank does not lend the borrower £2,000; all the bank does is to give him a cheque book with which he can draw cheques on the bank.

Mr Archdale Parkhill:

– But the borrower can use the cheque book to draw actual money if he likes.


– It would be impossible for all the borrowers to draw all the money they have borrowed for the simple reason that, although the banks have lent £260,000,000, they never actually possessed more than £50,000,000. That is admitted by the banks themselves, and is demonstrated by their own books. My authority for these statements is the same as that which is greatly respected by honorable members opposite. These things have been admitted by the representatives of the very interests which honorable members opposite represent. I should not have spoken of this aspect of the matter now but for the fact that the Leader of the Opposition (Mr. Latham) and the Leader, of the Country party (Dr. Earle Page) have been continually harping upon what they describe as the danger of inflating the currency if this scheme is put into operation. They seem to fear that the country will be flooded with notes. The Leader of the Opposition deprecated very much a resolution passed by the Canberra conference of interstate representatives of the Australian Labour party. This conference formulates a Labour platform, just as the party conventions, to which honorable members opposite owe allegiance, formulate their policies for them. The Canberra conference recommended that the power of the Government over the currency should be used to make available £20,000,000 worth of credits for the relief of unemployment by instituting works of a national and reproductive character. The proposal is incontestably sound, and no one in this chamber could refute it by logical argument.

Mr Gullett:

– Is the Government going to do it?


– I do not know what the Government proposes to do; I am merely pointing out what it very well could do. If this course were fol.lowea, i* would be in full accord with the Government’s protectionist policy. Itwould increase the purchasing power of the community, so that there would be a market, not only for secondary manufactures, but alSO for the wheat, milk, butter, fruit, &c, of the primary producers. Furthermore, it would create a higher taxable income, which would permit of the establishment of a sinking fund to redeem the who]’ issue in twenty years. What honorable members opposite seem to forget is that the flotation of loans on the money market constitutes just as effective an inflation of the currency as would the putting into effect of the proposal recommended by the Labour Conference. There is this difference, however, that whereas the country pays 5 per cent, interest on loans, and never pays them off, under the scheme which has been recommended the amount represented by the new credits would be wiped off at the end of twenty years, and the country would be the richer by the roads, weirs or other productive works which had been constructed.

Mr Archdale Parkhill:

– Why stop at a paltry £20,000,000? Let us not be mean about it.


– £20,000,000 would be sufficient for the purpose at the present time. After a few years, when the sinking fund had been well established, it could be used as the basis of further credit expansion. In fact, the system could be worked in somewhat the same manner as is employed by the “ go-getters “ when subdividing city estates. They sell the land on terms, and when the necessary sum has been obtained by the collection of instalments, it is used for the purchase of further areas, so that as many as a dozen subdivisional schemes may be going on concurrently, all of them financed with practically the same capital.

Mr Archdale Parkhill:

– Some of the “ go-getters “ have found their way into jail.


– Yes, and so have many counterfeiters who have endeavoured, in their small way, to inflate the currency; but the banks, which, by the issue of cheque credits, inflate the currency to the extent of hundreds of millions of pounds, are regarded as public benefactors. All that is proposed in the scheme recommended by the Canberra Labour Conference is that the power of creating credits should be taken away from the banks, and used by the Commonwealth in the interests of the people as a whole. That does not violate a single canon of established banking practice. Its only effect would be to place the power of creating credits in the hands of the Commonwealth, which would institute a perfectly sound sinking fund system, instead of leaving this power in the hands of private individuals and corporations which, in return for their services, levy an interest toll on generations yet unborn. .

Mr Mackay:

– Is . this the honorable member’s own discovery?


-It is not. If the honorable member would spend some of his time in the library reading thebooks which have been written on this subject, and would use the intellect God gave him in an endeavour to understand those books, he would learn that this scheme has been advocated for years. The trouble is that the honorable member and others opposite are still under the spell of the financial medicine men who have doped them with their theories of currency and banking until they are as benighted and ignorant as superstitious savages who go in terror of the tribal ‘witch doctor. The men who have written the books to which I have referred have been hounded out of America and their books have been destroyed because their opinions are opposed to the vested interests of the money kings who rule the world. Honorable gentlemen opposite say that this scheme is an attempt to obtain easy wealth. In this connexion let me quote briefly from The Theory of Credit, by McLeod -

The invention of cash credits has advanced the wealth of Scotland by centuries. We have an enormous mass of exchangeable property credited out of nothing by the mere will of the bank and its customers, which produces all the effects of solid gold and silver, and when it has done its work it vanishes again into nothing, at the will of the same persons who called it into existence.

Hence we see the mere will of man has created vast masses of wealth out of nothing, and then, having served their purpose, they are decreated into nothing, from whence they came, which are melted into air - into thin air.

But their solid results have by no means faded, like the baseless fabric of a vision, leaving not a wreck behind.

On the contrary, their solid results have been vast tracts of moor converted into smiling fields of waving corn; the manufactures of Glasgow, Dublin, Dundee and Paisley; the unrivalled steamships of the Clyde; great public works of all kinds, roads, canals, bridges, harbours, docks, railways and many others, and poor young men raised up into princely merchants.

What the Nile is to Egypt, that has her banking system been to Scotland, and it was fortunate for her that the foundation of her prosperity was laid broad and deep before the gigantic fallacy was dreamt of that the issue of banks should be inexorably restricted to the amount of gold they displace, that no increase of money can be of any use to a country, and before Mill had proclaimed to the world that to create credit in excess of specie is robbery.

That is the fallacy which the ex-Treasurer (Dr. Earle Page) and the Leader of the Opposition (Mr. Latham) propounded last week. McLeod, steeped in the capitalistic system of banking, showed that that system enriched a few individuals by creating individual wealth. I want to do something which will benefit, not a few individuals, but the whole nation, by creating national wealth. To-day the primary producers of Australia are at the mercy of the shipping combine, because the late Government disposed of its line of steamers.

Mr Prowse:

– It did well to get rid of them.


– That is the honorable gentleman’s opinion ; but he is” oneeyed,” and his brain contains only one cell. Australia needs ships, railways, roads, irrigation systems and other such things. They can be obtained. In the same way that the existing banking system creates wealth for a few individuals, let a national system of banking provide these things for the nation, and so enrich it.

Mr Mackay:

– If it is done on the same sound principles that the bankers adopt, we shall have no quarrel with the honorable member.


– That is what I am advocating. I challenge honorable members to prove that what I am advocating violates any banking principle accepted in the British Empire for the last 100 years.

Mr Archdale Parkhill:

– Apparently, the honorable member has failed to convince his own party of the soundness of the principle he advocates.


– I am refuting the arguments of the Leader of the Opposition and the ex-Treasurer, whose speeches showed that they still worship the gold fetish, and still bow in abject submission to the “ medicine man “ of civilization. It was obvious that the speech of the Leader of the Opposition had been prepared for him by the bankers, because from start to finish he reiterated their jargon. According to McLeod, the bankers have even invented a language of their own, which no one, least of all themselves, can understand. His remark applies with force to the speech of the Leader of the Opposition. The Bulletin poses as an authority on financial matters; but, instead of analysing my views on financial matters, and dealing fairly with them, that journal has, at times, adopted the role of a dirtslinger. It has indulged in deliberate misrepresentation, and in an endeavour to ridicule those with whom it does not agree, it has indulged in some crude jokes. The same may be said of the Sydney Morning Herald. The reporters employed by these “ rags “ have to write what they are told. Yet even The Bulletin is not opposed to inflation when that policy suits its own purpose. In an article dealing with the gold bonus, that journal published the following: -

In normal times The Bulletin would have no use for a gold bonus. But the times are exceptional; and, anyhow, the Commonwealth will have to continue the special grants to Westralia or devise a substitute. What more fruitful form of assistance could there be than s. bonus limited to two years and payable in Australian notes through the Commonwealth Bank?

And apparently The Bulletin will argue that when gold was obtained as a result of the printing of notes, more notes would be printed using the gold as a reserve. To the foolish view expounded by that journal, honorable gentlemen opposite subscribe. First, we should have notes, then gold, then more notes, and so on. Paper money is the basis of their scheme.

Those who advocate that the present is not the time to interfere with banking principles have cravenly surrendered to the existing system. The methods adopted by our banking institutions have brought the world to its present sorry plight. But the theories of the wiseacres of the past are disappearing like the mist before the sun. Yet we are told that we must not interfere with the existing system. What an abject surrender to the. forces that have brought about the present deplorable state of affairs! Before the present acute financial depression - a depression which is world-wide because its cause is world-wide - Arthur Kitson wrote -

The present world position is analogous to the aftermath of the American civil war. The stupid attempt to bring all currency to a gold and silver basis (deflation). This piece of idiocy caused years, of serious depression, the bankruptcy of thousands, and curtailed production enormously. But bankers and financiers grew rich, every dollar they had invested in American war loans grew to be 2, 3, 4, 5 and even 0 dollars, and by destroying a vast mass of the national paper currency the bankers compelled the public to borrow their paper credit at rates from 7 to 10 per cent.

Is that not exactly the position of Australia and Europe to-day?

Mr Yates:

– What did Senator Watson say?.


– The late honorable Thos. E. Watson, United States senator, said -

Always, everywhere, the money-changer is the same. If he wants a panic, he will have one. If he wants prices to fall, he contracts circulation and credit. He wants a currency he can limit, control or expand at his leisure, or contract, at his behest, thus ruling values with a rod of iron. Call him what you will, Jew or Gentile, he is the indentical creature that defiles the temple, trades on the misery of his country, puts greed above the promptings of patriotism or humanity. Christ scourged him from the temple, and Abraham Lincoln said “He ought to have his infernal head shot off”.

We know well that the depression, misery, and woe we have in the world to-day have been brought about by the deliberate action of financiers, and it is due to hypocrisy on our part if we are not prepared to back up any authority that would deprive these financiers of the privileges they have enjoyed for years.

To say we must rehabilitate capitalism before Labour can reach its ideals is as hypocritical as to say we must rehabilitate paganism before we can reach the idealism of Christ. ‘[Quorum formed.]


.- It is a great pity that honorable members of the Opposition are so stupid that they cannot realize the fundamental principles of finance as laid down by the honorable member for Werriwa (Mr. Lazzarini). It is probably a greater pity that honorable members on his own side, particularly the Treasurer, have not been able to realize that we could quickly get rid of the national debt and all our pressing financial responsibilities if the remedy the honorable member suggests were applied.

Mr Yates:

– What the honorable member for Werriwa said was all very true.


– It may have been and it is, therefore, regrettable the Prime Minister cannot take the honorable member for Werriwa with him to London so that the British people may learn hod easily they can get rid of their great war debt. The honorable member specifically referred to banking systems and to the value of the cheque book, meaning, of course, the value of credit; but surely he sees that every care must be taken to prevent anything being done that is likely to disturb the financial credit of Australia and its industries. There may, however, be something behind the honorable member’s suggestions, inasmuch as the bill under consideration gives the Government the control of the Australian note issue.

Under certain conditions a central reserve bank would be of value to Australia, but, in my opinion, with deficits in all the States and in the Commonwealth, the present time it not opportune for bringing in a bill of this sort. There is in many directions a grave desire to inflate the currency. Although the various Governments of Australia took £180,000,000 from the people last year they were still £6,000,000 to the bad, and there is every possibility of the deficit being larger this year. State railways have had heavy losses, trade and commerce are in a very unsatisfactory state, unemployment is rampant,, and there is, therefore, in the opinion of many people, every excuse for urging the Commonwealth Government to inflate the currency for the purpose of overcoming the difficulties of the present. But, apart from this aspect of the question, the establishment of a central reserve bank at the present time would, undoubtedly, disorganize the financial arrangements of those who are engaged iti trade and commerce. The money on deposit in the associated banks amounts to £318,500,000, of which £113,200,000 is not bearing interest. Advances by the banks total £307,500,000, leaving a balance of only £11,000,000 to meet any sudden calls that may be made upon them. The banks have thus gone almost to the limit in making advances to meet the requirements of trade and industry. The margin is smaller than is usually regarded as safe.

Mr Martens:

– Are they on the danger point?


– They are cautious. They have, of course, their capital and their reserves to fall back upon, but one never knows when a run on a bank may take place. We have had runs on Australian banks in the past, and we may easily have them again. As I have said, the margin between advances and deposits is small, yet it is proposed in this bill to take £20,000,000 from the associated banks and to hand it over to a central reserve bank. Of course they can get a certain portion of it back in the shape of credit, but the point I am emphasizing is that this is a most inopportune time to take this money from them. The effect upon the manufacturing interests and on trading interests generally must be serious. Manufacturers who require huge sums of money to provide plants, and acquire stocks of raw material and pay their weekly wages bills, go to the banks and secure advances. Big trading emporiums carrying large stocks do not operate on a cash basis. They get advances from the associated banks; and so do small traders and primary producers. To -take £20,000,000 from the associated banks at the present time must have an immediate and serious effect on all industries and on primary production as well. Quite recently, in answer to a question, I was informed that the associated banks in Western Australia have advanced £20,000,000, although the money on deposit with them does not exceed £10,000,000. That shows the effective work these private institutions are doing, and at the same time how careful we need to be before we pass legislation which will have the effect of limiting the work it is possible for them to do. Any reduction of their resources at the present time must be disastrous to this country. I can imagine no greater madness than the introduction of such far-reaching legislation at a critical period of the Commonwealth’s history. The bill would be less objectionable if it were to come into force, say, two years hence, when conditions might be normal. But as soon as it is passed it can be brought into operation by proclamation. “What is the objective of the Government ? We cannot shut our eyes to the fact that the Government has introduced another measure dealing with the Commonwealth Bank, and we must proceed warily. Has the Treasurer been converted by the golden oratory of the honorable members for Adelaide (Mr. Yates), Werriwa (Mr. Lazzarini), and Eden Monaro (Mr. Cusack), who would lead the people to believe that all our financial and economic difficulties can be overcome by merely setting the printing press in motion? It may be that these two banking measures are the first instalment of the socialistic objective of government control of banking. If this bill is passed, what assurance shall we have that trade and commerce and the primary and secondary industries will be more efficiently financed than they are to-day? I fear that this legislation will really increase our present difficulties, for it is clear that the central bank is to be controlled and dominated by the Government. Isthe Government yielding to the pressure from some of the financial fanatics who urge that the State should finance all its enterprises by printing millions of pounds worth of notes? Or does the Government desire to transfer compulsorily £20,000,000 now held by the trading banks into a central fund upon which it will be able to draw in order to finance some of its pet socialistic schemes ? We cannot forget that in 1924-25 the associated banks for their own protection imported £10,500,000 worth of gold, and that the present Government was compelled to commandeer the gold from the banks in order to pay interest on oversea loans. Possibly the Government desires to get £20,000,000 into a central bank administered by Government appointees so that the money may be at its disposal.

The control of the bank is to be wholly political. Thebill provides for the appointment by the Government of a governor and two deputy governors. Why are two deputy governors needed? The Government is practising economy at the expense of the country’s defence, but apparently there is to be no economy in the administration of this bank. The Secretary to the Treasury, who also will be a member of the board, is a Government official, and five other directors are to be appointed by the Government. It is obvious that the institution will be wholly controlled by the Ministry of the day. No other country except Switzerland has established a central bank on these lines. Federal reserve banks are established throughout the United States of America, but the names of the directors of the Federal Reserve Board must be approved by the Senate, otherwise central banks are non-political in their control. By this bill the Government will be able to dictate the policy of the bank through public officials and appointees. The governor of the bank is to be appointed for seven years, but all the other directors will retire at the end of three years. That is unwise ; the directors will be wholly dependent on government influence. If the directors retired in rotation, the incoming ones would have the advantage of the knowledge and experience of those still remaining, and continuity of policy would be possible. If the trading banks are to be required to hand over £18,000,000 or £20,000,000 to the central reserve bank why should not the bank’s shareholdersor the depositors have a say in choosing the directors who will control the commandeered funds? Doubtless the Government regards the system of control for which the bill provides as likely to prove very advantageous to it, because the central bank may make advances to the Government of the Commonwealth or a State or to any authority constituted under a law of the Commonwealthora State. In no other central bank charter is such a wide power contained. The directors will have power - to make loans or advances against the security of stock or debentures of the Government of the Commonwealth or of the States or any other authority constituted under the law of thu Commonwealth or of any State, or good trade bills, such bills having a currency of not more than six months to date of maturity.

There is no limitation regarding the currency of government debentures on which money may be advanced. The funds in a central bank should he liquid. Rarely are municipal bonds quoted in the financial columns of the newspapers, and they cannot be regarded as liquid assets. If big advances are made on assets of this kind, how will the bank be able to provide cash when suddenly required to do so? If a central bank were in existence to-day under the charter proposed in this bill what would be the demand upon it for funds? I can understand that pressure could be brought to bear from all quarters to provide money for unemployment relief, and public works would be undertaken which would never repay the expenditure upon them, and the wealth of the community would be dissipated. The savings of the people, which are at present deposited in the banks, and which should be available for trade and industry, would be restricted. But the Government would readily obtain for all its projects the commandeered funds and trade and industry would languish. The aftermath would be bankruptcy, impoverishment, and destitution.

A central bank under certain conditions can be advantageous, but the present is not the time for an innovation which must make more difficult the financing of industry. The best example of a central reserve bank is the Bank of England. Yet it has no legislative charter, and its conduct of its affairs is wholly divorced from State control. Its development as a reserve bank has been gradual, and based solely upon a mutual trust between bankers and government. The bankers’ balances with it amount to many millions of pounds; yet no bank is compelled to keep any balance in it. Many of us have hoped that the Commonwealth Bank would develop upon those lines. A good understanding has been established between the associated banks and that institution, and there seemed to be a prospect that the Commonwealth Bank would gradually evolve into a central bank which could render great service to Australia. A true reserve bank free of political control and framed on accepted lines would be a good addition to the present banking system. Central banks have more and more come to be regarded as analogous to large public trusts and less and less as departments of State. The bank which the Treasurer is proposing will be wholly a political institution. Guided by the disastrous financial experiences of Germany. Austria, Russia and, to a lesser extent, Italy, during and after the war, the German Parliament in 1924 legislated for the establishment of a central bank. The Reichbank in Germany is independent of Government control, and the vicepresident is not even appointed by the government. The sufferings and experience of that nation through political interference in finance should induce us to exercise care and judgment before we commit ourselves. It is not my intention to refer to the difficulties which arose in that country, in consequence of the undue inflation of the currency, or to the hardships that were experienced in an endeavour to reach a normal basis, but honorable members are aware of the detrimental effects of undue inflation upon trade and commerce generally. In a report upon the Central Bank of Chile, the president of that institution, Professor E. W. Kemmeren, pointed out that there was a widespread and pronounced fear that the success of the bank would be wrecked by politics and undue government interference. Is there anything in this proposed charter that will remove the fear of the central reserve bank being wrecked by political interference and undue government influence? There is every indication of the operations of the bank being severely handicapped by political interference. If the bank is under the direct or even indirect control1 of the Government, it will become easy for the Government when in difficulties to finance itself, a course which has proved to be the first step towards currency depreciation. If the sum of £20,000,000 were taken from the associated banks and placed under the control of the central reserve bank it would not be long before the Government would be approaching that institution, asking for an advance on the security of treasury-bills in order to help it to carry on, with the result that moneys so advanced .would not be available for carrying on and developing the industries in this country. If this measure is enacted it will leave room for political intrigue, and there will be no guarantee that the policy of the bank will be without bias. If this measure is enacted, a weekly report should be published showing the amounts advanced by the bank to the Commonwealth Government or to any State Government. I quote the following passage from the Central Banks, A Study of the Constitutions of Banks of Issue by Kisch and Elkin:-

But in other instances, especially in the countries which have only recently reestablished their financial and currency systems, it is of cardinal importance that it should be made as difficult as possible for the Governments to resort to the expedient of borrowing from the bank, a practice which, if continued, can only load to a repetition of past disasters. At least, such clauses indicate a standard of wise finance, the formal recognition of which is likely to be beneficial, and the provisions carry the safeguard that if there is a question of increasing the amount of the State credits, the matter must be .brought before the legislature, and cannot legally be effected by mere pressure on the bank. Moreover, the existence of restrictions on Government borrowing from the bank strengthens the hand of that body in exerting influence on the Government to pursue a policy of financial prudence. The offer of wise counsels in such matters is one of the important services that a strong Central Bank can render to the nation, but such services can only be looked for when the bank’s independence is fully safeguarded by law and practice.

For some time past Commonwealth and State Governments have been faced with large deficits, and confronted with financial difficulties which they find it difficult to overcome, and which some suggest should be met by the issue of additional, notes. Some honorable members strongly advocate the use of the printing press in order to relieve the financial situation. [Quorum formed.’] Under this proposal the note issue will be in the hands of the central reserve bank, which will be dominated by the Government, as it is to make all the appointments to the board.

Mr Yates:

– Did not the Government control the note issue when it reached its maximum ?


– When a Commonwealth Bank Bill was under consideration in 1922, I directed attention to the fact that, under the principal act, the Treasurer could supersede the Note Issue Board, and an amendment, which I submitted, was accepted to prevent that being done.

Mr Yates:

– That was after the note issue had reached £58,000,000.


– In 1923 it reached £57,000,000.

Mr Gabb:

– It was £58,000,000 in 1920.

Mr Yates:

– Yes. Those figures do not suit the argument of the honorable member for Swan.


– I have not the figures before me. The honorable member for Adelaide (Mr. Yates) should enlighten honorable members as to how he

WOUld use the printing press.

Mr Yates:

– I am not in favour of printing another note.


– What is the effect of the honorable member’s published statement ?

Mr Yates:

– I said that not a single additional note need be printed.


– I was under the impression that the honorable member strongly advocated the issue of additional notes.

Mr Yates:

– No, the extension of credit.


– It is difficult to understand what the honorable member means by an extension of credit. If the Government has control of the appointments to the board of the central reserve bank it will also be able to influence the note issue.

Mr West:

– Whom does the honorable member suggest should have the power to appoint the board?


– Those who have invested their money in the banks. As the Government proposes to take £18,000,000 to £20,000,000, which belongs to the depositors from the associated banks, and place it in the reserve bank, surely they should have some voice in the appointment of the board. In connexion with the note issue I quote a report concerning the note issue in the Irish Free State-

The arguments against Government control of the central banks have already been stated, and the objections apply with peculiar force in reference to the note issue. If the Government itself has the right of note issue, either alone or in association with one or more banks, political considerations and the pecuniary needs of the State rather than considerations of a sound monetary economy are likely sooner or hater to become the determining factor. There will be a risk of excessive issues and consequent depreciation. The observations of the Irish (Free State) Banking Commission on this point are 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 government, 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 custody of the securities it holds.

During the war period the Commonwealth Government issued £18,000,000 worth of notes as a loan to the States for the purpose of carrying out public works which caused an appreciation which continued for some time followed by the usual reaction. It is to he regretted that during recent years an effort has not been made to come down to bedrock, and to adopt a policy such as that which has been followed in other countries. At present we are confronted with financial difficulties, and the problem is how best to overcome them. Is it to be by the use of the printing press? Should we not realize that we have been living in a fool’s paradise, and should get down to work if we are to progress.

Mr Long:

– How does the honorable member suggest that we should do’ so ?


– By less government interference.

Mr Long:

– And more overseas borrowing.


– Not by excessive borrowing. Overborrowing is our greatest curse, because on loans, whether floated inside or outside the Common^ wealth, a huge annual interest bill has to be paid. We should endeavour to make some progress without borrowing, and by dispensing with government interference in industrial affairs.

Mr Rowe:

– The Government which the honorable member supported was a heavy borrower.


– I am not blaming any particular government. I am not suggesting that the present Government is extravagant or otherwise. I am speaking of governments generally. Government interference in industry should be discontinued, and a policy of common sense, based on that of older countries, should be adopted. Reference has been made to the wealth of Australia, and to the huge sums deposited in the associated banks and in the savings banks. It has been said that £260,000,000 is deposited in our sayings banks. Where is that money? It has been expended on railway and other constructural undertakings, and in developmental work generally. Consider the enormous sum which has been spent in the city of Sydney.

Mr Lewis:

– What about the Federal Capital Territory?


– -That is the last place that should be mentioned in this connexion. The cost of bricks here is £10 a thousand, and of tiles, £34 a thousand. This building, that was estimated to cost £220,000, actually C03t £660,000. There are miles and miles of roads, sewers, waterpipes and electric lighting, and very few people, so that it is impossible for Canberra ever to be a paying proposition. In Sydney, buildings for which probably £200,000 was refused a couple of years ago are giving no return to-day, the tenants are being asked to remain in them so that they will not suffer depreciation by being vacated. The Treasurer of New South Wales has expressed the conviction that next year a marked difference will be discernible in the return of incomes from the Sydney metropolitan area, because of the extent to which values have dropped. We can either make or mar the future. It will be marred if we adopt extravagant and wasteful methods, and interfere with industry. Reference is frequently made to the amount on deposit in the banks. That money is not in the banks; it has been lent to big pastoral companies, manufacturers and traders.

Mr Yates:

– It can be used again.


– The point that 1 am making is that it is not lying idle, but is being utilized over and over again ; but, as the value decreases, so do the potential wealth and credit of the country. It cannot be gainsaid that our wealth has diminished. The fact that there are “ to-let “ notices on so many buildings indicates that the income of the owners has decreased. The value of the wool production this year will be less by £30,000,000 than it was last year ; consequently there will be so much less wealth in the community. “We must not take any action that is likely to disturb finance.

Mr Yates:

– Is the honorable member aware that £81,500,000 of railway assets are dead, and yet interest is being paid on them.


– I know that. .The cause is government control, combined with the evils of the Arbitration Court.

Mr Yates:

– Quite so - bad government control.


– The position would not be any better if control were in the hands of the honorable member.

Mr Yates:

– It would.


– That is a matter of opinion. Bad administration may occur, whether a Labour or an anti-Labour Government be in power; but in many cases administration is worse under Labour. “What I desire to point out isthat, at the present time, we are in grave difficulties, and that it is not wise to do anything that may disarrange our financial condition.

Mr Lewis:

– The proposal of the Government is to arrange, not to disarrange.


– I place no value, from the point of view of building up industry or commerce upon any suggestions that I have heard from the honorable member for Corio (Mr. Lewis).

I have no further comment to make upon the bill, except to say that I hope that the Government will permit it to be altered drastically in committee, more particularly in regard to the amount that may be taken from the banks, the appointment of directors, the power of the central government to make advances to other governments, and the returns that are to be made. Those returns should be made weekly, so that we may be able to learn whether the action of the

Government is prejudicial to the finances and the commerce of this country.


.- The principal argument of the honorable member for Swan (Mr. Gregory) was that Australia is in grave financial difficulties. Every honorable member admits that that is so; and in my opinion it is the soundest reason that can be advanced for honorable members on this side of the chamber standing behind the Government in its endeavour to grapple with the problem. One speaker after another has juggled with millions of pounds, but only in debate. Although our financial difficulties are so acute, and the army of unemployed so large, we appear to be doing little more than talk about the matter.

By the introduction of this bill the Government is making an honest endeavour to grapple with a problem, which, strangely enough, is the result of the administration of governments that for thirteen and a half years were supported by the honorable -member for Swan. Immediately this Government attempts to take action that, in its wisdom, it believes will have some effect upon the money market, our honorable friends opposite are against it. They are consistent only in their inconsistency, when they attempt to frustrate the efforts of those who sit on this side to advance the interests of Australia by minimizing the control that is exercised by private banking institutions over the wealth production of Australia. The honorable member for Swan enlarged upon the amount at deposit in the banks of Australia, and, touching upon the note issue, sounded a warning in regard to the possibility of inflation. Honorable members who sit on this side are concerned, not so much with the note issue, as with the extension of the credit system for the development of our industries and the absorption of those who are unemployed. The amount standing to the credit of the people of the Commonwealth in State and private banks on the 19th April last, was £529,037,470. The bank notes in circulation totalled £44,000,000, against which the banks held gold to the value of £26,000,000. “Why does the honorable member for Swan attempt to raise a scare on that issue, seeing that in August, 1914, the value of the gold held in reserve by the whole of the banks in the British Empire was merely £60,000,000, and the war was fought on credit amounting to 25 times that sum?

Notwithstanding its enormous social importance to every member of the community, finance admittedly is not a particularly popular subject for discussion. Quite a number of people do their utmost to avoid such a discussion, because it concerns a branch of science that very few understand. I make bold to say that it is least understood by those who occupy the Opposition benches. Proof of that contention is furnished by the fact that they supported governments which held office for over thirteen years; yet, to-day, Australia is in a greater slough of despondency and debt than she has occupied previously in her history. It must be admitted that while Labour was in occupancy of the treasury bench its handling of the finances was so capable that the position of Australia was considerably better than it had been previously, or has been since.

Mr Riordan:

– Australia was really El Dorado then.


– It was, insomuch that hardly a man who was willing to work sought employment in vain. Those who have followed the history of finance in all countries will agree with the following quotation that I make from a work by John Stuart Mill: -

There cannot be intrinsically a more insignificant thing for the economy of society than money, except in the character of a contrivance for sparing time and labour, lt is a machine for doing quickly and commodiously what would be done, though less quickly and commodiously, without it. The prime economic factor is production in finance. Finance is merely the artificial aid to production and exchange.

John Suart Mill is recognized the world over as a financial authority. The fact is impressed upon my mind that this subject can be viewed from two distinct and opposite standpoints. On the one hand we have the bankers and money lenders, and on the other hand the producers. Money is regarded by the banker as a valuable commodity, from which he must draw dividends in the shape of interest. He knows that cheapness in regard to money is as helpful to the money lender as is cheap clothing to the sweater.

For this reason, banking interests the world over have waged, are still waging, and will continue to wage, an unceasing warfare against State banking, or what they are pleased to term cheap money expedients. The history of cheap currency experiments has been written mostly by bankers, their employees, or professors who have invariably presented the subject from the point of view of this interested class. At the expiration of twenty years from the termination of the Great War we shall have paid in interest charges to private bankers a sum approaching the entire cost of the war, without having reduced the original debt by a single shilling. That is the secret of banking. Honorable members who sit opposite can be expected always to fight for the retention of private banking, when ‘ those who sit on this side take action to endeavour to alleviate the sufferings of the people of the Commonwealth. A simple arithmetical calculation will show that production does not keep pace with the demands made by interest charges, to anything like the 6 per cent, that is stipulated by the banks, after providing nourishment and assistance for the two prime factors. Land and labour show that production and reproduction may continue and develop, but after reserving the necessary amount for war services and interest on capital, and making deductions for the expenses of national and municipal government, the residue will not be sufficient to pay an average of anything like 6 per cent, on the nation’s capital. That is to say, as fast as the workers of not only Australia, but also every other country, produce wealth, it is absorbed by the huge interest charges imposed upon the people by private banking combines. This process has been in operation in Great Britain since the establishment of the Bank of England by William Paterson at the latter end of the 17th century.

Honorable members opposite are unceasing in their attacks upon all industrial workers. They complain of the lack of production. I agree that .an increase in the production of wealth is essential to the prosperity of Australia, but I deny emphatically that the workers are not producing their fair share of it and more.

Mr SPEAKER (Hon Norman Makin:

– Order! How does the honorable’ member connect his remarks with the subjectmatter of the bill?


– I submit that since production is the first essential to the creation of wealth, and since wealth in Australia is controlled by our banking institutions, my remarks are relevant to the bill.


– I shall not be able to allow the honorable member to proceed too far on those lines.


– Accepting your ruling, Mr. Speaker, I turn now to make a comparison of the respective banking systems of England and Germany, and to note their influence in the progress of the two nations. The German banker understands that his chief and most important client is his own countryman, and is always ready to assist him to the best of his ability. The German manufacturer, inventor, merchant, tradesman, agriculturist and producer generally have little or no difficulty in securing whatever financial support they require, provided, of course, they can satisfy their banker of their ability to produce and sell goods at a reasonable profit. The German banker, therefore, shares in the profits of the. industry he supports. Hence the holders of his bank shares do not depend on the mere interest charges on loans. It will be seen - and .this is the point I wish to emphasize - that German banks are part and parcel of German industries, aiding and supporting them, ready to assist in every emergency, and in every industrial development which promises success. Contrast this system with British and Australian methods of banking. The British banker produces only the goods he has been accustomed to handle all his life, and he makes little or no effort to improve his methods or understand the ways, of foreigners. His terms are always strictly cash against documents, or so many days after receipt of invoice. For some inscrutable reason the British banker, for the last century or more, considered that British interests in foreign ports were as safe, or safer, than those in Britain itself. In addition to these disadvantages the British manufacturer and merchant reap no benefit at the hands of the banker be cause of their being British citizens. The English bank system has been extolled by the money-lending classes and foreigners throughout the world. Viewed from the stand-point of the foreigner there is no question that it is a wonderful institution, for it collects the savings and earnings of the British people and distributes them with the utmost impartiality to the highest bidder, whether British or foreign, all over the world. Can anyone deny that ? The London banker is essentially an internationalist. He is swayed by one motive only, namely, the’1 determination to win big dividends with the least possible risk. It is notorious that, if a foreign bidder requires financial accommodation, and is willing to pay a higher rate of interest than the British producer with the same security, the foreigner wins.

There are scores of flourishing German industries that have been built up and supported by British capital. It has long been the cry of English firms, and of Australian firms too, that their banks offer them little or no support in their enterprises whatever these may be. [Quorum formed.] Thus it will be seen that the broad distinction between the British and German banking system is that whilst the British banker depends for his rewards on what the ancients term.ed “ usury “ that is, payment for use, the German banker depends upon production within his own country. Between these two systems there is an enormous gulf. Obviously one is less concerned than the other with the industrial success of his own country. This is the reason which has actuated the Government in bringing forward this proposal. Its desire is to see the Wealth produced in this country put back into industry so as to widen the field of productive employment.

Our economic system has been ingeniously described as an inverted pyramid resting upon its gold apex, which is expected to carry all the credit of the country. With this system we have developed all our trade, manufactures, and businesses generally. The amount of gold has been a very, varying’ quantity, but in any case it represents an extremely insignificant sum in proportion to the load it has had to carry. Just prior to the war, the total amount of gold available in Great Britain was estimated at less than £60,000,000. The volume of credit raised upon this ran into hundreds of millions. Bank deposits on loans, subject to withdrawal at sight, were at least ten times all the gold available. It is safe to say that the volume of credit redeemable in gold on demand on 1st August, 1914, was more than 25 times all the gold that the banks could produce, thus revealing the truth of the statement that ever since the passing of the Bank Charter Act practically every bank in the Empire has been doing business, not on a margin of safety, but on a margin of bankruptcy. An engineer who is about to construct a bridge or machine makes careful estimates, draws plans, and chooses his material on the basis of a margin of safety. Such precautions are not always observed in the business of banking. The Bank Charter Act has compelled British bankers to adopt the margin of risk rather than the margin of safety. No provision is made for extraordinary events such as the outbreak of war or the sudden development of a financial panic. On three ocasions since the passing of that act, Great Britain has been saved from bankruptcy by the suspension of the act, to free the nation from its disastrous effects.

To proceed further with the comparison of the British and German banking systems, it is necessary to have some knowledge of the industries of the respective countries. Germany admits that she owes her commercial and industrial development largely to the policy of her banks. Judged by the higher standard, namely, the development and growth, of the nation’s industries, it must be admitted that the German policy has proved itself to be immeasurably superior to the British system. Do British banks intend to assist British manufacturers to capture German trade in the future? If they do they must alter their policy. “Which is better for the nation - the possession of great and varied manufactures, of numerous engineering works, ship-building yards, electrical undertakings and general industries, or a monopoly of the world’s banking business? How much employment does the latter give in comparison with the former? “Would either the United States or Germany be willing to exchange its iron, steel, and electrical industry for the whole of the British banking business ? Is it not better for a nation, morally and socially, to be able to employ its people as scientists, agriculturists, mechanics, engineers, chemists and electricians, than as bank clerks, chauffeurs, footmen and butlers? I repeat that the thing that matters most to us is that our industrial and productive activities shall be developed to meet the public needs, and provide for national expenditure. The loss of the private banking monopoly might injure a few hundred, or at most a few thousand people; the loss ‘of the world’s markets in trade and commerce would mean the beginning of the downfall of the British Empire. Let us at once face the actual facts. If in the future our currency and credit are to be based upon gold, and if they are to be made redeemable in gold on demand, then our ‘ industries as well as our trade and commerce must be restricted. In other. words, the limit of enterprise and industry must be the amount of gold that our banks are able to control, and are willing to make available. On the other hand, if the people of this country hope gradually to increase their trade and commerce, and if they have any serious intention of capturing the world’s trade, the gold basis will have to be abandoned as being insecure and insufficient, and a much safer and broader basis of national credit will have to replace it. In short, the gold standard and the gold basis mean that trade’ and commerce must be cut down solely in the interests of the moneylending classes, in order that these may be allowed to continue their control of credit-

It is strange that, although more wealth was produced in Australia during the year 1929 than during any preceding year, it was produced by fewer workers than were engaged in 1928. I have always contended that human flesh and blood should be the first consideration of any government. I welcome this bill if it will have the effect of conferring a benefit upon the people of Australia as a whole, even though it does so at the expense of the private banking institutions. The workers of this country must be regarded as useful units of production, and should be treated as such, and it should not be within the power of a group of private persons in control of the banking institutions to manipulate credits in such a way as to throw thousands of persons out of employment. When money is plentiful industries nourish, and there is employment for all. When credits are restricted industries languish, and unemployment becomes rife. I believe that the establishment of a central reserve bank will have a beneficial effect, and although I do not agree with every detail of the bill, I am prepared to support it. It is, I think, a step in the right direction.


.- The chief objections advanced against this bill by honorable members opposite have been, first, that the present time is not opportune for the introduction of such a measure - that the time is not ripe for it - and secondly, that there is danger that the management of the proposed bank will in some fashion permit of undue political influence being exercised on the banking practice of Australia. These critics have also expressed a fear that the Government of the day, either this or some successor to it, would be able to interfere unduly with the financial system of the country. They appear to fear that some baneful influence will be exercised by the Government upon the note issue, and that as a consequence the country will be subjected to the evils attendant upon an inflation of the paper currency. Some honorable members cited the difficulties which had arisen in European countries as a result of currency inflation. While I agree with them that there are evils inherent in undue inflation of the currency, I ask them to point out to what extent the masses of Europe have suffered as a result of the alleged inflation of the currency, and further, to what extent has the deflation of the paper currency contributed to the improvement of their conditions. As a matter of fact, since the restoration, in part, of the gold standard in those countries, unemployment, instead of lessening, has become more acute. Commercial crises have not only been more serious, but have extended over longer periods than was usually the case in prewar times. Recent economic history has made it clear that so far as Australia, at any rate, is concerned, since prices have fallen unemployment has become worse, and since credits have been restricted economic conditions have become more severe. It is also true that countries in which there has been no suspicion of political interference with the administration of central reserve banking, and in which there has never been a scintilla of interference with the national currency or with the policy oi the private banks, find themselves to-day in the same unhappy economic plight ai» those nations in which currency inflation has been practised. I suggest, therefore that whatever may be the theory of banking, the world has undergone such a complete revolution since the beginning of the World War that the dogmas of the economist must now be accepted with considerable reserve. We have been obliged to resort to make-shifts during the post-war period to alleviate the consequences of war-time finance. We cannot hope in one measure, or in a number of measures, to retrieve completely the situation created by the extraordinary negation of every pre-war banking principle which took place during the war.

The right honorable member for Cowper (Dr. Earle Page), said that he was prepared to welcome the introduction of a central reserve bank in Australia, but not at this time. Indeed, the Leader of the Opposition (Mr. Latham) himself, said much the same thing. According to those gentlemen, “Australia never is, but always to be blest.” The traditional doctrine of honorable members who now form the Opposition is that, however good a thing may be in itself, it is not wise for us to have it until we are grown very old, and the present generation at all events is not entitled to it. That is their attitude to this bill, and they have said the same thing about every constructive proposal that has ever been submitted to the judgment of the democracy of this country.

In 1924 the Government which was supported by honorable members opposite brought down a bill to amend the Commonwealth Bank Act. The main purpose of the measure was to establish a reserve bank in Australia, and it proposed to graft on to the functions of the Commonwealth Bank very many of the powers and duties with which it is proposed to endow the central reserve bank now under consideration. Unfortunately for the right honorable the ex-Treasurer, he was then obliged to bow to the weight of public opinion, and his proposal did not go through its original form. He was compelled to recognize that the Commonwealth Bank had been originally established as a people’s bank, that it had been created for the specific purpose of competing with the existing private banking organizations. In the end, therefore, while he did not succeed in completely destroying the trading functions of the Commonwealth Bank, and did not establish a central reserve bank as such, the Commonwealth Bank became a sort of hybrid, which performed in a degree the functions of both. It continued to trade, but it is no reflection on its management to say that it has carried on its trading functions since 1924 with much diminished vigor. The competition of the bank has been blanketed, while the management was unable to employ the reserve functions of the bank as fully as was desired, because the private banking institutions feared to strengthen a trade competitor by making it the repository of their reserves. As a result the Commonwealth Bank has been neither the same vigorous competitor of the trading banks that it was before 1924, nor able to perform adequately its functions as a reserve bank.

The Leader of the Opposition referred to the policy of the Labour party, and said that this bill was an instalment of the party’s general programme. He said that the proposal involved the nationalization of banking, which was on the platform of the Australian Labour party, and that the creation of a reserve bank would enable that policy to be put into effect. That brings me to the consideration of the part and place that the banking institutions of Australia have played in the national economy. I think that it is not wrong to say that the great monopoly in Australia, as in America, is the money monopoly, and so long as it continues it will be impossible to have freedom and initiative in the ordinary conduct of industrial enterprises. No great industrial country can develop its resources, exploit its opportunities, or carry on as a front rank power except by the operation of the process of credit that is essential under our present economic system. In Australia, as in most new countries, this system is concentrated. By that I mean that the growth of a nation, industrially and commercially, and indeed, the control of all its major activities, is in the hands of a comparatively few men, who constitute the directorates of the various banking institutions. These persons, even if their actions be honest and intended for the public good, necessarily have their attention concentrated principally on the commercial undertakings in which they are personally interested. In Australia it is extremely difficult to find a director of a private bank who is not also associated with the conduct of some important industrial enterprise, and in his capacity as a bank director he is able to guide substantially, the financial policy of the industrial enterprise in which he is interested. Therefore, he has power to influence the bank policy, not only in facilitating the granting of credit to the institution in which he is interested or of which he approves, but, worse still, by the granting or refusal of credit to industrial establishments that are engaged in undertakings in opposition to those in which he may be personally interested. If we took an inventory of the occupations and investments of the men who are to-day in control of the private banks of Australia, we should discover that their relations with industrial enterprises, through the network of directorates on which they sit, give them not only control of the financial policy of Australia, but also power to help certain industrial establishments at the expense of competitors.

Without reflecting on anybody, let me deal with the point raised by honorable members opposite that the provision in this bill for the appointment of a directorate gives the Government power to control the policy of the reserve bank, because the Government, so it is said, will make the appointment of the governor, the two deputy governors, and the representatives of labour and the various other interests concerned. Yet the present directorate of the Commonwealth Bank is allpowerful in connexion with the control of that institution, and this directorate was appointed by a government ! One member of the board retires each year and the government of the day has the right of reappointment. The late Government, in providing for the control of . the bank, appointed five men who had not been elected by the nation to any responsible positions. ‘ One of these was the managing director of a life insurance company, and a holder of substantial interests in the pastoral industry. Another was the controller pf a great emporium. Another was the manager of a bank in Queensland which had practically become defunct Another was prominently connected with the wool, skin and hide industry for the purpose of his own private profit. Ho was concerned with the conduct of that enterprise in order that he might make money out of it, and he is still on the bank board. He is definitely connected with two distinct interests, one a national institution in which the control of the credit of Australia substantially reposes, and the other a private commercial enterprise.

Mr Archdale PARKHILL:

– A fine man, too !


– I make no reflection on him; I am merely stating facts. Honorable members opposite say that the governor and deputy governors of the bank will be the puppets of the Government of the day, and the Ministry will be able to influence them because they are in its employ. To say that is to make a reflection on their integrity and independence, such as might be made with equal justification upon the impartiality of, say, the director appointed by the late Government who was interested in the prosperity of a great emporium. Naturally no matter how great might be the desire of such a man to act in the public interest, he could not, while conducting the management of the bank, cease to be interested in what transpired in his own emporium. There is no independence about the present directorate of the Commonwealth Bank; the men who comprise it are not detached from the commercial life of this nation. They still control great commercial activities, which they carry on for the purposes of profit and private advantage. I venture the opinion that if there is anything wrong in appointing governmental nominees who are the servants of the Crown, infinitely worse may be said of the appointment to important posts, involving responsibility to the nation of men who continue to be interested in the profit and loss accounts of private commercial enterprises. Such men are now on the board of directors of the Commonwealth Bank.

As to where the responsibility of the nation begins and ends, it was stated in the budget speech last year that the restriction and expansion of credit affects profoundly the whole industrial and commercial structure of a country, and is too important a function to be regarded other than as a national one. What are the facts? All over the world, the power to create credit -reposes in banking institutions, and if honorable members opposite will read the speeches of the Right Honorable R. McKenna, formerly Chancellor of the Exchequer in England and now chairman of the Midland Bank, they will find, in his annual addresses to the shareholders of that institution, support for the contention that banks do create, restrict, and destroy credit. They grant it to Brown and refuse it to Smith. They determine the prices at which it will be available to clients, and, through the power -they possess, they really exercise a dictatorship before which even the governments must bow. I think that I reminded the House, in a former speech, that Henry Ford stated in his autobiography that he could not have achieved the success that he has attained in his motor car enterprise had it not been for the fact that he became his own banker. It was only when he freed himself from dependence on the resources of the privately-controlled banking institutions of the United States of America that he was able to develop his enterprise as he desired.

I submit that the credit power of the community belongs to the people as a whole, and should not be restricted by any private individuals or groups whatever. I put that statement forward as a kind of declaration of national independence. It seems to be the very pivot on which the trade of a country rests. What is credit? To describe it as the foundation of modern business - or as the very blood stream of its being - is not to explain it. In its primary sense it is faith - the belief that the creditor will pay when the debt falls due. But what will he pay? Honorable members opposite talk a great deal about the gold standard, and the tremendous risk that this country would run if, inadvertently or deliberately, as a matter of policy, the note issue were unduly inflated; but we do not pay our debts in gold. Gold is a medium of international adjustment, while the internal trade of every country is carried on irrespective of the quantity of gold it possesses. It matters not very much whether the gold supply of a country is great orsmall, whether it is amply proportionate or disproportionate to the paper currency, so far as a country’s internal economy is concerned its transactions are carried on without gold. The United States of America is a land in which practically the whole of the gold reserve of the world has been accumulating, and Germany is a country whose gold supply was sapped as a result of the Treaty of Versailles. Both nations are marvellously efficient, in the industrial sense, having extraordinary natural resources, and the wonderful development of their technical powers has been demonstrated time and again by their capacity to exploit the world’s markets on the basis of competitive prices. Yet, although one country has mountains of gold, and the other no gold at all, both are to-day experiencing the misery caused by hunger; workless men tramping through their cities, and children being without adequate food. It appears, therefore, that whether a country has gold or not, its commercial prosperity or depression is not absolutely determined by the magnitude of its gold reserves.

What has happened in Australia? Various figures have been cited; but I produce my own. On the 24th June, 1929, the actual amount ofthe Australian gold reserve was £22,151,000, and, against that, the Government had issued notes - paper promises to pay gold when demanded- to the extent of £42,258,000. That is not all. At that time the public debt of Australia was £1,094,974,058. If gold alone were the basis of our wealth we should have been insolvent. But the people from whom we borrowed did not lend us gold; and they do not expect gold in return. They lent us purchasing power based on credit, and their security is the power of the people of Australia to produce wealth. In that power the lenders of this credit had faith.

When Smith goes to a private bank for an advance, what is the advance based upon? Is it based upon the capital, or on the accumulated reserves of the bank? Of course it is not. Not a man in Australia gets an advance from a bank based upon the capacity of the bank to lend; the advance is always based entirely upon the security or asset of the borrower. He must have sufficient wealth-producing capacity to satisfy the requirements of the bank before it will lend him anything. The plain fact is that all banks operate exclusively on other people’s money. All the talk about what the shareholders have put into the banks is beside the mark.

Let us look at the position as it stands to-day, so that we may realize what has happened to this nation. In 1914 Australia engaged in a war which caused the greatest tragedy in the history of civilization. Our men went to the battlefields, while our women remained at home to weep. I need not dwell upon the horrors, the frightfulness, and the ghastliness of that frightful struggle; nor upon the troubles that it brought upon our country; I am interested at the moment only in what happened to the banks. In 1914 the surplus of assets over liabilities of the banks of Australia was £5,071,000. After three years of human misery, tragedy, and misfortune, during which thousands upon thousands of our people suffered indescribably, the surplus of assets over liabilities of these banks had increased to £26,447,000. That was in 1917. In the post-war period, when chickens were coming home to roost, and when every industry in Australia was floundering in a morass of difficulty because of the sharp ascent of prices, what happened to the banks? The Leader of the Opposition quoted certain figures to show what the assets and liabilities of the banks were on the 30th March last. I took his figures and by the simple process of subtraction found that the surplus of assets over liabilities at that date was £76,792,000. While every industry in the country that was ministering to the material comfort of the people - the boot manufacturers, who were’ producing boots; the farmers, who were growing wheat ; the contractors, who were building roads and bridges ; and the host of others who were performing some useful service to the community - were in travail and difficulty and did not know from day to day how their balance-sheet stood, this financial oligarchy, which levies toll upon every productive act of the people, waxed fat and fatter, and gathered vast riches to itself; becoming possessed of the title deeds of the merchants and producers of the nation, and mortgaging our commerce and industry for the future.

I mention these facts because of the objections which honorable members opposite have taken to this measure. They have argued that it will lead to political interference with the banking policy of the nation. The very arguments which they have advanced in opposition to the bill are the arguments upon which I justify my support of it. They say that there should be no political interference with the banking institutions; hut I do not regard the credit resources of this nation as immune from the exercise of national policy. . I do not agree that the control of this tremendously important factor in the economic life of the nation should be left to a few men who are elected to bank directorates by small groups of bank shareholders.

Mr Nairn:

– Does the honorable member believe in political interference with the central reserve bank?


– I believe in the bill as it stands, with a proper provision for the appointment of a representative directorate to determine the policy of the bank.

Mr Nairn:

– The honorable member has not answered my question. Does he believe in political interference with the bank?


– If the honorable member expects me to answer his question in the way that he desires, he does an injustice to my intelligence. Honorable members opposite like to make their speeches in their own way, and then to put words in the mouths of honorable members on this side to quote against them. I believe in this bill. It has been brought down to help to improve the financial position of the nation. The control of the credit resources of the nation is inseparable from its well-being. It is fundamental to the success of our economic activities. Therefore, it should not be controlled exclusively by a group of men representing private and sectional interests. I insist that the national policy shall, if not wholly, at least substantially, control and influence the operation of the credit resources of this country.

While these banking institutions have been accumulating enormous assets during a period in which the nation as such, and every individual of it, has been passing through difficulties and misfortunes, they have also been able to increase their accumulated reserve funds from £13,706,414 in 1914, to £33,635,596 in 1928. These reserves have been built up by not distributing profits in dividends. In the same period, by the issue of premium shares and the diversion of portion of the reserves, the paid-up share capital of the banks has been increased from £23,142,587 to £49,153,442. If it had not been for the distribution of profits in bonus shares, the reserve funds would have been very much greater than they are. So it cannot be said that the banking institutions of Australia have not developed to a tremendous extent in the last sixteen years by exploiting the credit resources of the country, which they have not created. On the other hand, it can be said that they have become tremendously opulent, and are, beyond question, the richest organizations in this country. They do not make boots; they do not feed hungry children; they do not produce food of any kind; they do not produce anything useful ; they simply provide the medium by which the makers of boots can exchange their boots into flour or bread. They control the tokens, the abracadabra, the medium of exchange, by which the life of the country is maintained.

When a bank grants a loan it merely issues to the borrower a licence, in the form of a cheque, to acquire goods or services. The bank does not lend goods or service; it lends only the right to draw upon the community’s goods and services. The community as a whole provides the essentials to production - the labour, the machines and materials with which such things as hospitals and bridges are made. Nothing is ever built of money in itself. Without the known existence of these other things the bank could not issue credit, for money or credit is of no use unless there are goods and services to buy with it. And the community provides these, not the bankers.

I wish to quote a passage from Annual Speeches, 1925, 1926, 1927, by the right honorable Reginald McKenna, chairman of the Midland Bank, to support my contention in this regard. It is -

The amount of money in existence varies only with the action of the banks in increasing or diminishing deposits. We know how this is effected. Every bank loan creates a deposit, or money, and every repayment of a bank loan destroys one.

In his Post-War Banking Policy the same authority says -

Purchasing power is increased by additional bank loans or advances. A credit given by a bank becomes, as it is drawn upon, a new bank deposit, and as a general proposition we take the first step towards inflation when a bank makes a loan or advance.

The fear of honorable members opposite is that there may be inflation as the result of the operation of the policy outlined in this bill. I do not believe that. It is true that the board of the central reserve bank will have control of the note issue. But prices do not rise in proportion to the number of notes issued. The right honorable member for Cowper (Dr. Earle Page), in one of his budget speeches, which the honorable member for Henty (Mr. Gullett), found such a source ofinspiration for effective criticism, said that the note issue had increased during the war by 620 per cent. That is perfectly true. But during the same period prices increased by only 125 per cent. The fear of honorable members opposite is, therefore, groundless. Prices rose during the war, not solely because of the inflation of the note issue, but because of the extraordinary demand for commodities owing to their scarcity in consequence of the absence on active service of so many producers. Prices rose because the supply, at that time, was not equal to the demand. [Quorum formed.]


- Mr. J. Russell Butchart, in delivering the Joseph Fisher Lecture in Commerce at the University of Adelaide, said that the Australian banks formed one of the closest combinations in the world. Let me quote his own words -

The association of the Australian banks forms one of the closest combinations in the world, and whilst it cannot be denied that the close preserve tends to build up strong institutions, yet there is no doubt, on the other hand, that the chief object of the preserve is that of all such combinations - to obtain profits beyond what would be possible were demand and supply allowed to freely operate. By their combination, the Australian banks are enabled to obtain rates of exchange beyond what the trading position often warrants, and beyond what would be obtainable were the operations of supply and demand not stifled by the preserve.

Mr. Butchart then quoted a statement by Sir Robert Anderson, of Sydney, who, when he returned from London, commented upon the rates of exchange charged by the banks in London when there was an immense surplus of Australian money in London, in the following terms:-

Three London managers of Australian banks admitted that the rates were artificial, but they could dp nothing because of the castiron agreement between the banks; and, satisfaction as a shareholder in Australian banks at the large profits being made was tempered by the feeling that their profits, in this direction at all events, constituted a grave imposition on the trade of the country.

May I givefrom the same authority an example of the manner in which the whole of the industries of this country have been ruthlessly ravaged by the directorates of Australian banks, with the assistance in recent years of the directorate of the Commonwealth Bank? -

The banks on 1st January employ, say, £100 of their money in Australia in buying a sight draft on London against some export of Australian produce. They receive that £100 in London at about 1st February, and the same day apply the money to buy a demand draft on Australia against imports. That draft is paid in Australia and the money back where the transactions commenced by about 3rd March. The bank has been out of its money one-sixth of a year, and it has earned on an average over 22 years, 10s. 6d. on buying the draft in Australia, and 41s. in London, in all 51s. fid., of which about 16s. 6d. was interest and the balance, 35s. exchange; thus the total earnings of the bank on the two transactions were 51s. 6d. in one-sixth of a year, which is at the rate of’ 309s. per annum on £100, or 15½ per cent. per annum.

It is an extraordinary coincidence that during the last six or seven years the average dividend paid by Australian trading banks to their shareholders has approximated 15£ per cent. That, of course, does not include the colossal reserves which, as the result of nondistributed profits, they have been able to accumulate.

This bill separates the trading functions of the Commonwealth Bank from its reserve functions, and concentrates each under a definite management. It distinguishes, in part at least, between the two functions which the nation has hitherto exercised. The bill establishes a national reserve bank, and, by implication, it leaves the Commonwealth Bank to carry on as a national institution the trading functions which it was originally designed to perform. It gives the reserve bank that authority over the mobilization of credits which either the private banks or the various branches of the Commonwealth trading bank have hitherto exercised. The bill will free available credit for the purpose of assisting Australian industry. At present the margin which each bank considers necessary from the standpoint of safety leaves an immense reservoir of credit untapped. The functions of the reserve bank in Australia being in this respect identical - with those of reserve banks generally, the reserve bank will mobilize these reserve resources, liquefy them, and make them available for the purpose of carrying on the ordinary trade and commerce of the country.

I believe that in the mysteries of the financial system, in the authority that it exercises, and in the fact that it has come to be the supreme arbiter, as it were, of the way in which industries shall develop, there is hidden the real explanation of all the industrial bitterness and the economic paradoxes that are characteristic of our social system. Never before in the history of the world has the productive genius of man been so wonderful; never before could it be said that poverty was less attributable to man’s ignorance; man has triumphed in a thousand fields of production ; his ability to produce the things he needs is something at which to marvel; yet, as Tolstoi said when contemplating the remarkable changes that had taken place in Europe : “ Why are there so many poor “ ? I put that question to civilization to-night. Despite great land areas richly endowed by nature, despite tremendous mechanical equipment, making it possible for one man to do work which, in some instances, formerly took 200 or even 400 men to do; despite the veritable revolution in the methods of production in all countries - whether republican or monarchic, free trade or protectionist - we are confronted by the extraordinary paradox of an almost infinite capacity for production while millions of human beings are barely able to procure the necessaries of life.

Mr Yates:

– That is the problem we have to face.


– No solution of the economic problem is possible without a radical change in the credit policy of the great banks. Until that change takes place nothing that employers or employees can do - even with the best will in the world - can establish peace in industry. Their present attempt to agree on a principle for distributing dividends and wages in equitable proportions must fail. That attempt has failed during the past 25 years; and it will continue to fail, despite arbitration acts and courts, peace conferences, and all attempts to agree: It must fail because, in whatever proportions dividends and wages are distributed as between the two parties, the total sum is insufficient to meet the cost of production now accounted into prices, after all the levies which governments, either by means of taxation, both direct and indirect, or banking systems, through the taxation which they impose upon industry, have been met. Those charges, once levied, leave an insufficient amount to provide profits for the employers and a decent subsistence for the great mass of labour.

The charges which financial institutions levy upon society are becoming increasingly extortionate. In his Evolution of Modern Capitalism, Mr. John A. Hobson said that -

The structure of modern capitalism throws an ever-increasing power into the hands of the men who operate the monetary machine.

Honorable members opposite object to the bill because it threatens the domination of the men who operate the monetary machine of this country. They object to the introduction of governmental authority in the operation of that machine. They believe that the only persons who should have anything whatever to say in determining the banking policy of Australia are those who are elected as the directors of banking institutions by dividendseeking shareholders. The honorable member for Swan (Mr. Gregory) said that at least the depositors in the private banks should have representation in the management of the reserve bank, because the bill provides for the calling-up of a proportion of the available reserves of those banks. I point out that the depositors in the trading banks have no representation whatever in the management of the banks with which they deposit their funds. The only persons who have any voice in their management are those who have invested money in the business.

Credit and exchange are operated by banking institutions throughout the world with an entire disregard of national interests or the welfare of society. The trading banks engage in the buying and selling of money as an ordinary business transaction for the purpose of profit. I submit that there are increasing occasions when the stimulus under which they operate becomes antisocial and a menace to the well-being of the community. Before the German Monetary Commission in 1908, Von Wangenheim, manager of the German National Bank, said -

The battles of the nations (sometimes followed by the battles of the national armies) are to-day fought on the financial field of the great credit banks. Such vital processes, which may bc decisive of the existence or nonexistence of the State, and of the distinctive civilization of its people, ought not to be committed to the dividend interest of private banks.

It seems to me that we have reached that stage at which we have either to agree or disagree regarding certain fundamental principles. If credit is essential to the carrying on of the industries of the nation, then it becomes a legitimate subject for national policy, and most certainly the only persons in a nation who are authorized to speak for the nation, and to administer a national policy, are those whom the nation directly appoints for that purpose. In a

Ifr, Curtin. democracy it is incompatible with true freedom that the control of credit should remain in the hands of a section of the community. The Swiss Minister for Finance, M. R. Comtesse, once said -

A national bank, supreme over, and ultimately absorbing, all private institutions, represents the most powerful bulwark for our credit, the security of our people, and the resources of our country.

Honorable gentlemen opposite who say that business and government can have no relation, that financial systems must be kept apart from politics, should realize that there is just as much to be said on the other side. What is politics but the science of government? What is the purpose of law but the good of the people? Anything, that hinders the good of the people becomes a legitimate subject for the application of the law, and the national banking instrument should not be operated and administered by persons with no responsibility to the nation.

The Government in appointing the directors of the proposed central reserve bank from the sources stated in the bill has regard for the representation of points of view; for representation of specific interests; but those interests will not be entitled to select their .own particular representatives. The Government will be responsible for selecting those whom it deems to be capable and qualified to do the work they will be expected to do in the interests of the nation as a whole, and not of private banks, or any particular section of primary producers, manufacturers, or importers. Private banking operations have too often been in the interest of importers at one time, and to their detriment at other times. In the evidence given, before the American Monetary Commission is told the story of how in 1907 the great primary producers of the Middle West were absolutely ruined as a result of a change of policy on the part of the banking interests. One of ths documents exhibited to the American Monetary Commission lays it down that a national bank if it is to be a truly national institution must control, or fail in its duty. Up to date in Australia the control of credit has been in the hands of private institutions. They have been masters of the situation, they have extended currency or restricted it, they have been the authority to determine whether an industry required additional capital, they have been able to oppress industries or assist in their development; in a word they have been the real governments of the industrial life of this nation.

One of the remarkable changes that has come over civilization in the last 40 years is the emergence of this new class of financial entrepreneurs who have insinuated themselves into the social system to such purpose that they have become its masters in every civilized country. Look at what has occurred since 1914. The only group of traders to whom prosperity has come as if a Fortunatus purse had been opened for them are the banking institutions and the shareholders in them. There is not a nation in the world to-day but is being levied upon for heavy interest on borrowed money. Honorable members opposite will say that that is due tothe law of supply and demand; that money is short ; that there is not sufficient money available for the purpose of expansion. But that superstition is knocked on the head. If any man in Australia in 1913 had said that during the next four years this country could borrow £400,000,000 locally for the purposes of developing railway systems, or country water supplies, or for enabling facilities to be made available for increased production there would not have been a banker, or a professor of any university, or a member of the Nationalist party in Parliament who would not have said “It cannot be done. Only a madman would put forward such a proposition.” Honorable members opposite would have declared it to be impossible for the financial system of the country to incubate £400,000,000 in four years out of the resources of Australia, not for the purpose of destroying wealth, but for augmenting the productive capabilities of this country. But we know now that the war brought out the resources of credit in a way that was almost indeterminable, and in a world in which the capacity for wealth production is being increased so markedly as at present, it is very arguable if any point can be arbitrarily determined, beforehand, at which it becomes impossible for the financial system to provide the requisite sinews to carry on trade and enterprise. I venture the opinion that even the difficulties of Australia to-day are largely due to the determination of the banks, in concert with certain interests, to deflate the price of labour and costs generally. At any rate I cannot overcome the belief that the directorates of the private banks, constituted for the most part of persons who are directly interested as shareholders in great industrial enterprises, are interested in securing labour at reduced prices compared with what it costs to-day.

Mr Gregory:

– Quote the banks’ deposits and advances.


– It is true that during the last few months the banks have increased their advances, but that does not alter the fact that every advance made creates a new deposit, and every advance repaid destroys a deposit. I have already quoted on the authority of Reginald McKenna what precisely takes place when a bank does advance on its credits.

There is very little more I feel disposed to say. Honorable members opposite have indicated that in the committee stage they propose to attempt to alter certain phases of the bill. I feel that so far as the central reserve bank becomes definitely a part of the authority for the mobilization of the credits of Australia under one control, it is a step forward. It does two things of value to the nation. It pools the resources of Australia and enables sums that at present cannot be used to be freely used; and it gives to this Parliament a direct participation in, and responsibility for, the credit policy of Australia. I also venture the opinion that, on the establishment of the reserve bank, it will be increasingly easy for the governments in Australia to finance their requirements. I believe that there can never be a period put to the external borrowings of Australia until we first mobilize our own credit resources. So long as the world operates in the way it does, it will be impossible for Australia to take full advantage of the enormous , latent resources which should be available, particularly in this time of difficulty, to enable our industries to serve the common good. To honorable members opposite, who believe that the whole wisdom in connexion with the monetary policy of this country reposes in the bankers and in the financial entrepreneurs of the country, I commend the words of President Wilson, uttered not long before he died: -

No country can afford to have its prosperity originated by a small controlling class. The treasury of .America does not lie in the brains of the small, body of men now in control of the great enterprises. … It depends upon the inventions of unknown men, upon the originations of unknown men, upon the ambitions of unknown men. Every country is renewed out of the ranks of the unknown, not out of the ranks of the already famous and powerful in control.

To those words I add my own observation, that there is more of value to the life of this nation in the financial policy of the Labour party, about which the Leader of the Opposition is fearful, than is to be gained from the advice that comes from the conferences of representatives of the associated banks. I support the bill.


.- Although Australia has been very tardy in the establishment of a reserve bank, it must not be thought that reserve bank principles have not been applied to its banking methods. As a matter of fact, the head office of each of the associated banks has acted as a reserve bank as far as its various branches are concerned, and of late, and especially since the note issue was entrusted to its care, the Commonwealth .Bank has functioned as a reserve bank. There is no doubt that it was originally intended that it should act as such, but unfortunately those who were in control of the Labour party at the time of the establishment of the Commonwealth Bank thought otherwise, and the bank commenced business purely as a trading bank, performing functions that had previously been performed to the entire satisfaction of the general public by the associated banks. The country was not one whit better off by the establishment of the Commonwealth Bank. The bank rate and other charges were not lower in its case than they were in the case of any of the private banks. It was not necessary for the Commonwealth Bank to be established. Banking minds throughout the world had, just about that time, come to the conclusion that great economies could be effected through amalgamation, and from then till now, many amalgamations have taken place amongst the associated banks.

It was not until the Commonwealth Bank took unto itself some of the duties of a reserve bank thar. it began to justify its existence, and when in the near future, as the result of the passage of this bill, it fully functions as a reserve bank, I sincerely hope that it will close down as a trading bank. The Bruce-Page Government played no small part in its conversion into an organization closely approaching a reserve bank. The intention of the then Governmentwas then clearly set out by its Treasurer (Dr. Earle Page). Speaking on the 13th June, 1924, on the introduction of the Commonwealth Bank Bill, he said -

When the question of a Commonwealth Bank was first mooted, it was generally expected that a truly national bank would be established - a bank of deposit issue, discount, exchange and reserve. When the bill was introduced, however, expectations were not realized, and when the bank began to function, it became perfectly clear that a national bank had not been established, but merely a governmental institution in competition with the private banks. The bill the Government now brings forward is designed to carry out the original expectation. As has been generally anticipated, the Government proposes to substitute the management of a board for one-man control, but the bill, will do much more than that. It will place the note issue under the control of the general board of the bank, and aims at making the Commonwealth Bank the keystone of the financial arch of Australia.

How is it then, that we have lagged so far behind other countries in the establishment of a central reserve bank? The reason is that Australia is so rich in natural resources that we can make economic blunders without being called upon to pay the full penalty. Australia has experienced crises, but none of them have been comparable with those through which people in other countries have had to pass. The primary function of a reserve bank is to preserve the business stability of the country. The Bank of France has long recognized that and made it one of its principal aims. On one occasion the management of the Bank of England was asked what it conceived to be its duty in regard to the bank rate, and it replied that the rate was raised when it was desirable to retain gold in the country and attract it from other countries, and that when gold was abundant the rate was lowered.

As the honorable member for Fremantle (Mr. Curtin) said, the control of banking means the control, of the business pf the country and, therefore, the selection of the men to be placed in charge of a re. serve bank is of great moment. The proposed bank will be virtually under governmental control. What we have to. guard against is political control. Experience lias shown us that public and semi-public institutions have been, generally speaking, operated in the interests of the community, rather than in the interest of one political party. That is due to thefact that . although parties lay down policies, the administration of public institutions and governmental activities is in the. hands of civil servants who know no politics. Therefore, in the final resort, what we have to fear is not political control, but ignorant or inexperienced political’ control. I am confident that the Government, in proposing this legislation,, has no other motive than to establish a reserve bank that will adequately protect the financial resources of the country. There are, however, Government supporters whose views do not coincide with those of the majority of the ministerial party, and honorable members of the Opposition will support the Government in endeavouring to so build a reserve bank that it will be impossible for financial extremists to give effect to their harebrained ideas and thus cripple, ‘ if not wreck the Commonwealth.

The honorable member for Fremantle, when dealing with the control of banks, referred to a statement by the honorable member for Swan (Mr. Gregory) regarding the position. I am partly in agreement with the honorable member for Swan; it is true that the bank deposits in the aggregate greatly exceed the money subscribed by shareholders. Therefore, the interests of the depositors should receive first consideration by the bank, and in practice they do, for unless a bank considered the interests of the depositors, deposits would diminish and eventually the institution would be compelled to close. By the same token the borrowers also must be considered. No banking business can be conducted successfully unless the welfare of the borrowers is taken into account.

By this bill, the trading banks will be compelled to build up a fund to permit the reserve bank to function. The latter will be acting as an agent for the associated banks, and will be in duty bound to pay due regard to the welfare of the community as a whole. If it functions, as it should, in the best interests of the whole community, . no section will benefit more fully than the wage-earner. In times of financial stress, the wage-earners are the first to feel the pinch. All other sections of the community are in a better position to face a crisis. A worker must needs be in .practically permanent employment if he is to maintain himself and his family adequately, and any long period of unemployment resulting from general business depression or the bursting of a boom produces most distress in the class to which’ he belongs. But excessive unemployment is felt very keenly also by the farmers and manufacturers; in fact, by all who earn a livelihood by the sale of’ goods or service. That country is best off, whose prosperity curve is most even in its upward trend, but the tendency in all countries is for progress not to ‘ be maintained at an even rate. Nowhere is the ‘ prosperity curve continuous ; now it shows . a depres sion, and now a rise. These fluctuations, unless they are too marked or protracted, have little or no effect on the general public. If as a result of business depression, progress is impeded for a short period, comparatively few people suffer,’ but the deeper the depression and the longer it continues, the wider suffering spreads. When progress is arrested, the , duty of a reserve bank is to take action to remove the impediments, and restore prosperity to an even gradient. What can the bank do in such circumstances? Its duty is to lower the discount rate, and by buying up government securities, flood the market with abundant and cheap money, which would be an inducement to manufacturers and others to enlarge their enterprises. Soon, as a result of that policy, the depression would be removed from the curve and once more the country would be moving on an even keel. At times there may be a sudden rise in the prosperity curve - a period of boom, during which prices rise rapidly, people become super-optimistic, and, by outbidding each other, cause prices to rise far above real values. When that danger sign appears, the bank should step in, raise the discount rate in order to make money dear and difficult to get, and sell government securities, in that way drawing money from the market and making increasingly difficult speculation in the necessaries of the community. With the shortening of money, conditions would soon become normal.

Australia has passed through several financial crises, principally caused by land booms, and the misery that resulted is still within the recollection of some of us. It will be seen that if the reserve bank is to function properly it must at one time make borrowing more difficult, and at another time make it possible for people to obtain money cheaply and easily. When the people want money, it will be hard to get; when there is little demand for it, the reserve bank will make plenty of it available cheaply as an inducement to people to use it. Occasions will arise when the bank will find itself out of harmony with the borrowing public, and that is one of the arguments that has been advanced against political control. During the course of this debate, the honorable member for Swan (Mr. Gregory) interjected that the Federal Reserve Bank of the United States of America failed to prevent the financial crisis in 1929. I shall content myself with replying that the work done by the reserve bank in the United States of America for eighteen months prior, to the financial crisis did much to soften the blow and localize the effects. All previous financial crises in America. had been felt from the Atlantic to the Pacific, but when in 1929, the New York stock market collapsed as a result of wild speculation, practically the only people who suffered were those who were actively engaged in speculation. The price of goods remained normal, and there was little or no unemployment as the result of the crisis. This was attributable almost entirely to the work of the central reserve bank. Had the central reserve bank acted earlier a crisis would have been averted. A rapid rise in prices is a sure indication of unhealthy commercial conditions. Money can be earned by speculation or by the manufacture and sale of goods or the salt of services rendered; but in only one of these ways can the wealth of this or any other country be increased. Money made by speculation does not improve the financial position of any country. A bank working in the best interests of the community should encourage those engaged in the legitimate business of manufacturing and selling goods and should frown upon those engaged in wild speculation. Speculators are of no use to any country, and the absence of severe financial crises in this country is due largely to the wisdom and foresight of those controlling the associated banks under whose aegis the development of Australia has been largely carried on.

I do not anticipate that the associated banks will suffer any pecuniary loss as a result of the establishment of a central reserve bank unless the loss of the interest incurred owing to forced subscriptions which will amount to approximately £22,000,000 will be greater than the gain that will accrue through increased’ financial stability brought about, by the establishment of such a bank. I sincerely trust that the associated banks will not incur any loss because they have rendered excellent service to Australia and our thanks are due to them for the important part they have played in the development of the Commonwealth. Having referred to the associated banks I should now say something concerning the Commonwealth Bank because those who have been responsible for the conduct of that institution have built wisely and well and to-day we have a bank of which we should all be proud.


– And the honorable member wishes to get rid of it.


– No. I suggest that it ‘ should discontinue operating as a trading bank as it was never intended that it should operate as such. Since its establishment it has not quoted lower exchange rates or performed any service that was not being satisfactorily performed by the associated banks. The whole tendency to-day is in the direction of amalgamation. There are fewer banks in Australia to-day than there were fifteen years ago, and the movement in the direction of amalgamation has not yet ceased. The operations which the banks of Australis are now conducting could be carried on by perhaps four, and if further amalgamations resulted, overhead expenses could be reduced, and a better service rendered to the people. Why should we have three or four banks operating in some of our small country towns when in most cases one or two could do all that is necessary ? If the associated banks had been fully alive to their opportunities and their responsibilities they would of their own volition have established a central reserve bank in Australia many years ago. One of the weaknesses of the present system is that the associated banks have been operating without a reserve bank, although each head office has acted as a reserve bank for its branches. The associated banks have been in active competition with each other. During periods of commercial optimism a customer may be granted a loan on what may be regarded as doubtful security. The bank, acting against its better judgment, grants it, because if it were refused, it might be granted by some other bank.

Mr Lewis:

– In other words, they gamble.


– They do not.

Mr Lewis:

– If they grant a loan against good judgment they must be gambling.


-Not necessarily: There are many detailsof the measure with which I am not in agreement, and when the committee stage is reached I intend to make certain suggestions which I trust the Government will accept.

Question resolved in the affirmative.

Bill read a second time.

In committee:

Clauses 1 to 3 agreed to.

Progress reported.

page 2603


Second Reading

Mr. BEASLEY (West Sydney- Assistant Minister [9.4]. - I move -

That the bill be now read a second time.

This measure proposes to amend the Superannuation Act, 1922-1924. That act provides, by section 11, that at the expiration of each period of five years after its commencement an investigation shall be made by an actuary appointed by the Superannuation Board as to the state and sufficiency of the fund.

That investigation was made in 1927, when it was found that there was in the fund a surplus of £97,862. The actuary recommended to the board that there should be a distribution of £43,000of that amount. The principal reason for the introduction of this measure is to give effect to that recommendation. Advantage has been taken of the opportunity thus created to make on the recommendation of the board a number of other minor amendments to the act, with the object of enabling it to work more smoothly. The last Government had the whole matter under consideration for legislative action when it went out of office.

The actuary expressed the view that the safety and- soundness of the fund would not be jeopardized by the distribution of the amount that I have mentioned, and that there would be a sufficient margin to meet any contingencies that might arise. In making his report the actuary took into consideration similar schemes in operation in the Commonwealth and in other parts of the world, and came to the conclusion that it would be safe for the Government to adopt the. course that it is now proposed to take. The board’s suggestions were -

  1. That £12,000 be refunded to the representatives of male officers who have died or who die in the Service and who were or are either single men or widowers without children under the age of 16years;
  2. That an amount of £2,000 be utilized in increasing children’s pensions from £13 to £20 per annum in the case of children who have lost both parents; and
  3. That £29,000 be distributed as a cash benefit on the basis of £5 a unit on the death of a contributor or a pensioner who has been a contributor.

The last Government considered that the whole of the payments should be made in perpetuity; but the actuary was not prepared to. give it as his opinion that the scheme was sufficiently strong to provide for such payments to be made indefinitely. He recommended that the benefits under (a) be operative from the 5th January, 1923 - the date of the commencement of contributions to the fund - to the 30th June, 1933; and that the benefits be operative under (b) and (c) for a period of six years from the 1st July, 1927, to the 30th June, 1933. He further recommended that the balance of approximately £55,000 should be reserved.

This amount, he considered, was sufficient to meet any unforeseen contingencies that might arise, and would provide a sufficient margin for the next quinquennial period.

As I have already stated, this matter was considered by the last Government. It, however, was averse to providing for these benefits for a limited period. It was anxious that, if a scheme of distribution was embarked upon, it should be made permanent. That, however, could not be done. The actuary reported that he was unable to certify that the fund could, with safety, stand a permanent addition of these benefits to its liabilities. He further reported that if it were the desire of the Government to include in an amending measure only those benefits that could reasonably be guaranteed in perpetuity without increasing officers’ contributions, it would be better to withdraw the third benefit and restrict the permanent provision to the refund of contributions to the representatives of single men and widowers who die in the Service, and the increase in the pensions of children who have lost both parents. The board supported this view, and it was agreed to by the last Government.

The present Government has given full consideration to the matter, and is in agreement with the view of the last Government that the first two benefits should be included as permanent provisions in the act, the expenditure in each case to be wholly chargeable against the fund. As the actuary has certified that the amount of £55,000, which is to be placed in reserve, is sufficient to safeguard the fund during the present quinquennium that expires on the 30th June, 1932, the Government considers that effect should be given to the original recommendation of the board by including in the bill provision for a cash benefit of £5 a unit to be paid upon the death of a contributor, or a pensioner who has been a contributor, until the 30th June, 1933, which is one year after the expiry of the quinquennial period, and thereafter until a date to be notified by the Governor-General in the Gazette. The reason for providing that these payments should be continued until 1933 is to allow sufficient time for the completion of the next investigation, which will take place in 1932. The board and the Government will then know exactly how the fund stands. The actuary has reported that, after making allowance for the first two benefits to be paid in perpetuity, there will remain an amount sufficient to make payments under the third benefit from the 1st July, 1927, to the 30th June, 1933.

In order to give effect to the recommendations of the board, clauses 5, 11, 12, 13, 14, and 17 of the bill have been framed. In addition, it is proposed to make certain other amendments. One that has been suggested by the board is to alter its title from “ Superannuation Fund Management Board,” to “ Superannuation Board.” It contends that it does not merely manage the fund, but has many other duties that warrant the suggested alteration.

It is further proposed to amend section 4a of the principal act to meet a situation that has arisen in connexion with certain contributors who are members of the naval . forces. Some members of the naval forces took advantage of the opportunity to contribute to the fund when it was established; but after some time had elapsed the naval authorities decided that their system of deferred pay was sufficient to make provision for the future of the members of the naval forces, and was better suited to their conditions of service. Presumably it was felt that their activities were quite distinct and altogether different from those of the ordinary members of the Public Service. The decision that members of the naval forces should not be allowed to become contributors to the fund was, however, not reached until certain of them had already contributed. The late Government arranged that these officers should pay contributions to the revenue at the same rate as they would have continued to pay to the fund and that on retirement annual allowances would be provided from revenue. The result is that, unless some provision is made for them by legislation, they will be entirely at the mercy of any government that may be in power in regard to their pension rights. The board suggested an amendment to section 4a to overcome the difficulty, and its suggestion Kas been adopted by the Government.

Clause 6, sub-clause a ‘ of the bill amends sub-section 2 of section 12 of the principal act, which fixes the date of cessation of contributions. The actuaries, in determining the rates of contribution, intended that payments in respect of each individual unit should cease an exact number of years after the commencement of the contributions in respect of each unit. The act provides that contributions in respect of all units taken up from time to time by a contributor shall cease at one date, which is an exact number of years from the date upon which the employee first commenced to contribute to the fund. It has been found that some contributors pay more and some less than the actuaries intended should be paid. To overcome that anomaly and to place every contributor to the fund upon an equal basis it has been decided, on the recommendation of the board, to amend section 12 in the manner indicated. Sub clause b of clause 6 gives certain officers who had either retired or were on the eve of retirement, and whose salaries were subsequently increased to a higher salary group, from a date prior to the cessation of their contributions, the right to elect for additional units for which they could have elected had their salary been fixed before their contributions ceased. The reclassification of the Public Service by the Public Service Board was spread over a number of years. As a result of this reclassification certain officers were placed in higher salary groups, and would thus have been entitled to contribute for a greater number of units than the number for which they had elected prior to reclassification. It is felt that they should now be given the opportunity to contribute under the scale fixed for their salary group, even though in some cases they have actually retired from the Service. This amendment has been recommended by the board and has been approved by the Government. It is only fair to the officers concerned that they should not suffer owing to cessation of contributions or retirement intervening before the Public Service Board had finally settled the rates of salary that they should receive. The officers who elect to contribute under this amendment will be called upon to pay a full year’s contribution at the rate corresponding to the maximum age for retirement.

Clause 10 amends section 30 of the principal act by giving the board power to cancel a pension granted to a female contributor who retired on the ground of infirmity, but who has re-married after retirement and become restored to health. Should >there be a recurrence of the infirmity which was the cause of her retirement, the pension will again become payable. The number of contributors affected will not bc very considerable. It is felt that the Government should not be compelled to continue” to make payments to female . contributors who have remarried after retirement on the ground of infirmity and become restored to health, but if there should be a recurrence of the complaint which, caused that- retirement, the pension will” again become payable in regard to pension payments. I may add that the board checks up pensioners in this category from time to time, so that any recurrence of an infirmity, in the case of a female contributor to whom pension payments have been cancelled would be known immediately.

Clauses 16 and 18 give the hoard power, in circumstances such as the illness of pensioners, to pay pensions to other than principals. Certain pensioners take advantage of the opportunity to leave the Commonwealth for a short period, and representations have been made to the board that pensions should be made payable to persons nominated by them.

Clause 19 makes’ certain amendments to section 50, and provides for the cancellation of ‘ pensions where pensioners are restored to health, and are engaged in employment other than permanent employment under the Commonwealth.

Clause 20 makes provision for the cancellation of the Commonwealth share of a pension during the re-employment of a pensioner, who had been retired after attaining the retiring age. There is further provision to cover cases where double pension’s become payable owing to certain pensioners becoming contributors. Cases have been brought under the notice of the Government of employees who have been retired from the Service, and subsequently re-engaged to do certain work on behalf of the Government. The Government feels that it should not be called upon to continue the payment of its proportion of the pensions whilst they are being re-employed in the Public Service. That portion of a pension represented by the actual contributions made to the fund will be continued and be paid.

Clauses 21 and 22 amend section 52 and 53 of the principal act to provide that employees with State rights to pensions or gratuities who have been transferred to the Commonwealth since the commencement of the Superannuation Act may become contributors to the Commonwealth fund on conditions similar to those with State rights who were in the Commonwealth service at the date of the commencement of the act, with the exception that the concession to contribute at rate for age 30, which is strictly limited to employees in the permanent service of the Commonwealth at the commencement of the principal act, will not apply.

It is necessary that I should make some reference to the position that has arisen in connexion with this rate for age privilege. A request was made to the previous Government and also to this Government, that a number of permanent employees, who did not become contributors should now be allowed to do so, and to obtain the benefits of the rate for age 30 concession. We feel, however, that this would be a dangerous course to adopt at this stage. I am informed that in addition there are about 1,100 contributors who failed to contribute for the full number of units available to them under this provision notwithstanding that subsequent to the establishment of the fund a further opportunity was extended by an amending act in 1924. It is felt that if the representations made were acceded to the concession may have to be extended to all those who failed to take advantage of it at the time, thereby prejudicing the actuarial soundness of the scheme. Those who have lately been pressing for this right are a number of public servants, who found, after the scheme had been in operation for a few years, that the retiring age had been lowered from 65 years to 60 years, and possibly they now see some advantage in coming under the scheme. I believe most honorable members will agree that, because of the risk mentioned, it is not wise to allow them to do so at this stage. They had their opportunity but failed to take advantage of the liberal concessions offered by the Government at that time so the reponsibility must rest upon them.

The amendments made in clauses 21 and 22 -have reference only to those who entered the Service since the .commencement of the act, and brought with them certain State rights which ‘ include gratuities payable on retirement.

Clauses 23 and 24 extend the provisions of sections 57 and 58 to enable the officers referred to in clauses 20 and 22 to transfer their rights to the board as in the case of officers with State rights who were in the Service at the commencement of the Superannuation Act. It has been found necessary to make these amendments in the interests of a number of officers in Western Australia. In the back-blocks of that State at the commencement of the Superannuation Act there were a number of postal employees entitled to certain rights under the State law. Provision is made to give these officers with State rights, who failed in the twelve months allowed under the principal act to transfer their right for new rights of pensions for themselves, their widows and children, another opportunity to make application to transfer. Representations have been made by a large number of officers in Western Australia who failed to come under the act at its commencement to be given another chance, the reason advanced being that many of them were stationed in remote parts of the Commonwealth when the act was passed, and were disinclined to do anything with regard to their pension rights nothwithstanding that the board took special care to fully advise them of the provisions of the act that applied to their cases. Since then they have learned the value of the privilege they missed and are desirous of having another chance. The benefits may be summed up in this maimer: These employees had certain pension rights which were payable only to themselves on retirement. When the officer died all rights to pension lapsed. They have since learned that in the case of the husband’s death payment is made under the Commonwealth scheme to his widow, so they are now anxious to transfer their rights from the State to the Commonwealth fund, in order to provide for their widows and children. The board sees no objection to these requests being acceded to as the new rights of pension for the officers, their widows and children will be the actuarial equivalent of the existing rights which the Commonwealth is bound to honour, and the transfer will not involve the Commonwealth in any additional expenditure. I want it to be clearly understood that no risk whatever is being taken, as any transfer effected will not involve the Commonwealth in any increased expenditure. Those who did not come into the scheme in the first instance, and who still remain in it, will not be affected, because an actuarial calculation will be made on a common date. Clauses 23 and 24 make further amendments consequent on the others, and authorize the actuary of the board to calculate as on the date of the commencement of this act the actuarial equivalent of the rights of those officers who transferred their rights in 1922. It is very desirable that the rights of those who have transferred, and of those who will transfer, be valued at one common date, so as to avoid any inequities that would arise if the value of these rights, which change as time passes, were ascertained at varying dates or periods. Clause 28 deals with members of the military and air forces, and relieves the fund of liability to pay pensions in the case of persons who, while absent without leave, or while deserters, attain’ the retiring age, or become incapacitated or die. From time to time persons desert from the military and air forces, and as the act now stands they would, upon reaching the age of retirement, be eligible for pensions, or upon death their dependants would be entitled to receive pensions. It is proposed to alter the act to make that impossible, so that when they desert the force, they also desert their right to a pension.

Clause 27 also makes certain amendments, the object of which is to extend the provision of section 60(1) of the act, so as to give power to the board to arrange for medical examination of defence employees retired on the ground of invalidity, as is provided in respect of pensioners of other departments. Clause 29 refers to those air officers, or employees, who were retired through incapacity, and are in receipt of reduced pensions proportionate to the degree of their incapacity. Provision is made that should the degree of incapacity be increased these officers shall receive increased pensions proportionate to the degree of the increased incapacity. Clause 30 legalizes an arrangement made by the late Government to protect the fund in respect of pension claims by, ‘or on behalf of aviators or mechanics who are injured or who die owing to accident whilst engaged in flying operations. The special rate of contributions fixed by the actuaries to cover aviation risks is so heavy that it was not considered equitable that the officers whose duties include flying operations should be called upon to bear it in addition to their ordinary contribution. Payment of this special rate, therefore, is not made to the fund which, under the clause, is relieved from liability in the event of injury or death to the aviator when flying. Pay-, ment of pension in such cases would be made by the Commonwealth. Clauses 31 and 32 alter the designation of the “ Superannuation Fund Management Board “ to “ Superannuation Board.” Clause 32 also provides for the election of a representative to the board by the contributors. According to the present act the contributors’ representative was appointed by the Government from persons nominated by the contributors. In order to meet the wishes of contributors, the board will consist of a chairman, appointed by the Government, a further nominee of the Government, and a representative of the contributors. At present the Government’s second nominee is Mr. Wickens, and the contributors are represented by Mr. Page. Clause 33 gives the Governor-General power to appoint members of the board for. any period not exceeding seven years. As the section now stands no member of the board can be appointed for a term of less than seven years, and it may be found inexpedient to renew or make an appointment for so lengthy a term. Clause 34 is a consequential amendment following on provisions for the election of the con-, tributors’ representative to the board.

Honorable members will agree that the bill is one, debate upon which can advantageously be deferred until the committee stage. The Government,in dealing with the superannuation scheme, must be guided very largely by the advice of its actuaries. The first consideration is that the fund shall be administered efficiently in order to secure to contributors the benefits to which they have a right to look forward. From my short acquaintance with the members of the board I am convinced that they have administered the fund in the most efficient manner. All sections associated with the fund express the most complete satisfaction, and the board has always been prompt to meet just claims. I commend the bill to honorable members, and express the hope that it will beinstrumental in solving many of the difficulties in regard to superannuation that have been brought under the notice of the Government. If any further explanation is necessary I shall do my best’ to furnish it when the bill is being discussed in committee.


– Will the Minister make available the actuary’s report on the measure previously brought down? I ask leaveto continue my remarks at a later date.

Leave granted; debate adjourned.

page 2608


Second Reading

Minister for Home Affairs · Darling

.- I move -

That the bill be now read a second time.

This bill is a very short one, and is designed to furnish the Government with statutory powers to give effect to an announcement made recently regarding the taking of a census. Sub-section 1 of section 11 of the Census and Statistics Act states -

The census shall be taken in the year 1911, and in every 10th year thereafter.

The effect of the amendment is to add the following words: - or at such time as is prescribed.

This will permit of the postponement of the census until a time to be fixed. It is proposed by the Government that the taking of the census shall be postponed until 1933. It is merely a temporary postponement, and I emphasize the point that at present the financial position of the Commonwealth does not warrant the spending of £350,000 on the taking of a census. .

BARKER, SOUTH AUSTRALIA · LP; NAT from 1925; UAP from 1931

– Would not most of this money be paid to persons who are now unemployed?


– No; alarge, amount, of it would be spent otherwise than in providing employment. If it were a questionof spending money for the relief of unemployment there are 469 better ways of doing it.

Debate (on motion by Dr. Earle Page) adjourned.

page 2608


” Australasian Manufacturer “ - Attackon Dr. Earle Page- Fruit Canning Machinery.

Motion (by Mr. Scullin) proposed-

That the House do now adjourn.


.- I rise to reply to an unjustifiable attack made on me by a newspaper published in Sydney called the Australasian Manufacturer, and I would not do so if this attack were not also a continuation of a slander uttered by Mr. Heine, President of the Australian Metal Trades Employers Association, concerning those manufacturers who are now trying to carry theburden of export in contradistinction to his firm,which is bearing only the burden of Australian production.A fortnight ago, I made a speech in which I pointed out that secondary industries would be materially assisted in cutting the costs of production if the machines with which they made boots, biscuits, flour, &c., could be supplied to them at reasonable prices, and that in those cases where themachines could not be commercially made in Australia, they should be admitted free of duty. In consequence of that statement, a gross attack was made upon me, and, following on my reply to it, a leading article appeared in this newspaper on the 7th June. There are several points in the article dealing with myself, which I shall quote merely to show the gross inaccuracy of all the statements and figures published. I shall reply to the criticism in other respects by quoting from official documents, reading three letters from business firms, which appear on the file of the Department of Trade and Customs, and a minute- by Senator Crawford, then Acting Minister for Trade and Customs, as a complete refutation of. the statements made. First of all, to show the looseness with which this newspaper quotes figures, and the general inaccuracy of its statements, I point out that it stated that, between February, 1923, and the end of 1928, I “ managed to increase the public debt of the Commonwealth by the stupendous sum of £78,000,000, or, roughly, by £12 per head.” The official figures of the Commonwealth, of course, show that during the six and a half years when the late Government was in office, the total debt increased from £364,839,590 in 1922, to £377,621,573 in 1929, an increase of £12,781,983. It is thus seen that this newspaper has multiplied the actual sum six times. It was stated by it,- that the public debt was increased to the extent of £12 per head;’ but, the actual figures show that during that period, it decreased by £6 12s. 5d. per head. This newspaper, referring to the amount of £78,000,000’ went on to say-

Even at 4 per cent, per annum that represented an annual increase of £3,120,000 in the interest bill.

There is no need .to reply to that statement, because the British Economic Mission, which visited Australia two years ago, completely refuted it. After an exhaustive examination of official Commonwealth figures, it showed, on page 7 of its report, that, in 1921-22, the interest payable by the Commonwealth was £18,976,803; the amount available from revenue-producing assets was £876,202, and the balance covered by taxation was £18,100,601; while, in 1926-27, the interest payable was £20,749,113, the amount available from revenueproducing assets was £2,768,467, and the balance covered by taxation was £17,980,646, which was less than when the late Government assumed office. I think that those figures clearly show the gross inaccuracy of the statements of this newspaper. It is necessary to nail this lie down once and for all, because those industries which go into the markets of the world and fight the battle for Australian production should be given a reasonable chance of succeeding, and should not be slandered. This newspaper further stated -

Apparently, Dr. Page’s controversial methods arc as bad as his finance, and just as vulnerable to criticism, as displayed by his sad story of the Shepparton (Vic.) fruit canning factory. “ Three years ago, when he was Commonwealth Treasurer, said Dr. Page, the Shepparton fruit cannery, whose chief competitors are the great American canning’ companies on the London market, was desirous of improving its plant. It applied to the Customs’ Department for permission to introduce the most modern plant for equipping the factoryThe department referred the factory to an Australian maker, and the factory, for one section of its plant, gave an order at a much1 higher price . than the overseas quotation. This particular machinery was installed, but was so faulty, said Dr. Page, that when the tins were pressed the fruit squirted out at one end and the juice out of the other. In consequence of’ this fiasco, the factory had to import American machinery. The use of the Australian machine,’ according to Dr. Page, occasioned the factory a heavy loss, and the machine had to he discarded.

On .this American ‘machinery the factory had to pay heavy duties, even after it had paid a heavy price for an Australian machine that failed to do its job, and had: to be discarded. Then, again, ‘ it had to pay ,a heavy price for the American machine it is now using. To enable the cannery to compete with the Americans, the Government has to pay it a bounty’ on its exports.”

That is a more or less bowdlerized version of my statement. Then the newspaper commented as follows: -

It is a nice tale, and what makes it more nice still, is that whilst all this was happening, Dr. Page was Commonwealth Treasurer; and that there were in existence by-laws for admitting free of duty machinery that could not be satisfactorily produced in Australia. Also, does the ex-Treasurer expect a sceptical world to believe that the cannery paid the Australian makers for a machine that could not do its work? Did the cannery not try it out before paying?

Then enter upon the scene, Mr. John Heine, of the Metal Trades Employers Association, with a different version of the story, and one which Dr. Page cannot afford to ignore, and which he must either disprove or stand for ever convicted of gross misrepresentation.

According to Mr. Heine, the Shepparton fruit cannery was originally equipped from end to end with American machinery, on which no duty was paid. The machine that, according to Dr. Page, caused the fruit to squirt out at one end and the juice the other, was an American product.’ On other American machines subsequently imported, the duty was paid under protest, but despite the departmental recommendation that there should be no refund, the Government refunded the duty to the Shepparton cannery.

As . said before, Dr. Page cannot afford to ignore that challenge of his veracity.

The man who made that statement is Mr. John Heine, senior partner of the firm which supplied those machines, and he knew as well as I did the exact truth of what I had said. He made a statement in the Sydney Morning Herald denying that those were Australian machines, and he challenged the statement that any other cannery in Australia was dissatisfied with Australian-made machines. On that point, I propose to read the following letter from the Shepparton Cannery, dated 12th July, 1926, which was addressed to Mr. Pratten, then Minister for Trade and Customs: -

Regarding Canning and Can-making Machinery.

Dear Sir -

We desire to point out the experience we have had during the past year with Australianmade machinery for can-making and also an exhaust box in connexion with our canning plant.

When it was necessary to increase our canmaking plant we decided to give the Australianmade machines a fair trial and purchased from Australian manufacturers the following machines : -

  1. . One body forming machine for making the can bodies.
  2. One automatic feed stamping press for making tops and bottoms for same (guaranted to stamp 160 lids per minute).
  3. One rotaryflanging machine for cans.
  4. One superseamer closing machine guaranteed to close 200 cans per minute.
  5. One combination die for the stamping press.
  6. One exhaust box for one of our canning lines.

Thismachinery was installed in OctoberNovember, 1925, and our season extended to early May, 1926, and we now wish to lay before you our report on the above machines in detail -

  1. Body-forming machine has never made satisfactory cans nowithstanding the fact that the Australian manufacturers had from time to time from one to three of their own men from Sydney to try and put it right over a total period of about four to six weeks, and we then had to abandon all attempts to make cans on the machine for last season. The soldering and the side seam work were both unsatisfactory, and in addition, two main driving gear wheels wore out twice within two weeks though only working part time.
  2. Automatic feed stamping press was very unsatisfactory for several weeks as the crank bearings could not be stopped from running hot and seizing. The feed can had to be altered and the Australian manufacturer’s man had to give the machine a lot of attention for weeks to make it work at all. When the first difficulties were overcome it was found that the machine produces 25 fewer lids per minute than a similar American machine which is now six years old.
  3. Rotary flanging machine. The chucks for this machine were unsatisfactory and had to be replaced by us. Otherwise this machine has operated satisfactorily.
  4. Closing machine. The Australian manufacturers had from one to three men (including their chief draftsman who designed the machine, and also two members of thefirm) working on this machine for about ten weeks without succeeding in making it close cans satisfactorily. While trying to remedy the faults the castiron main driving sleeve broke down on two occasions. This was then replaced by a steel sleeve without making the machine do proper work. During this period we gave the manufacturer’s men every assistance, but eventually had to refuse to accept the machine and are holding it on their account at our factory.

When the manufacturers found it impossible to make the machine work, they hired an American closing machine from a firm in Melbourne at their own expense to help us out of our difficulty until we could get delivery of a similar machine from America which we were compelled to order by cable, and which arrived in Shepparton about11th February last.

The Australian machine was guaranteed to close up to 200 empty cans per minute, but never reached a speed above 140 per minute.

  1. Combination die. This cost us £32, but was unsatisfactory and had to be scrapped soon after the machine was installed, and we have had to alter machine in order touse American dies.
  2. Exhaust box. In this case the machine worked satisfactorily for one season, but when overhauled was found to be so badly worn in certain parts that we had to go to the expense of replacing a considerable number, whereas similar type American machines working alongside the Australian machine have done six seasons and still do not require any of the replacements referred to.

The next letter I propose to read is from the Ardmona Fruit Products Cooperative Company.When this factory was established, it was hailed as a triumph of Australian engineering, and Mr. Heine said that it was impossible to find any Australian machinery that had not worked satisfactorily. In a letter addressed to the Department of Trade and Customs, dated 24th August, 1927, this company wrote as follows: -

Application for Rebate on Duty.

Dear Sir -

We write again to inquire whether any further reconsideration has been given to the application made by this company for a rebate on duty charged upon certain American canning machinery, which we were compelled to import from the United States of America last year owing to the failure of the Australianmade machinery installed at this company’s plant. Our application is more particularly set out in our letter of the 18th August, 1920, and the matter has been referred to in correspondence frequently between that date and the .present time.

We find it necessary to further increase our plant and also to replace additional defective Australian machines and we propose to order from America. - One additional closing machine; two 12-valve syrupers; one mechanical can drainer.

We desire to apply for the admittance of these machines under tariff item 174 - 10 per cent. - as the experience of our company prove similar machines cannot be manufactured or provided by Australian manufacturers at the present time. We desire to apply also for the remission of the loading charge of 20 per cent, charged in connexion with one 9 D/S double seamer and parts received ex steamers Niagara and Macedon about the middle February this year. Considerable hardship is inflicted upon this company, not only by the heavy impost of duty inflicted on imported machinery but also by the fact that the interest upon loading charges is accumulating and being a co-operative company, owned by fruit-growers, we are not in a position to carry these additional burdens. We trust, therefore, an early decision will be given us in connexion with the above matter.

The third letter that I wish to quote is from the Kyabram Co-operative Fruit Preserving Company, which sent the following letter to the Minister for Trade and Customs on the 2nd February, 192S :-

With reference to your visit to the Kyabram Cannery on Friday last, the 27th ultimo, when we discussed our application to your department for a rebate of certain duty paid on canning machinery imported from the United States of America during 1922 and 1925, I herewith enclose a statement of the chief items of machinery imported, the duty paid and the amount of refund claimed. From this you will see that on machinery the invoice value of which was £3,142 lis. 4d., we paid £1,709 7s. 8d. duty and claim a refund of £1,423 14s. As long ago as November, 1922, we submitted an application to the department, but so little hope was then held of being successful with the claim that it was not followed up. Later, however, on 19th September, 1927, following’ the deputation received by the Prime Minister on 15th September last, . we submitted an application to your department for a refund of £1,423 14s., the amount named in the attached statement. We claim that the several items of machinery, the subject of our claim, are not commercially manufactured in Australia. Although in 1922, when our cannery commenced operations we did not install any Australian machinery, in 1925, when extensions to the plant became necessary, we considered most fully the question of installing all the Australian machinery possible. As verbally mentioned to you, at this time, we had on our staff, as works manager, a man who had been employed for several years as a foreman by John Heine and Son Ltd., Sydney, the Australian manufacturer of canning machinery. He advised us against putting in the Australian exhaust boxes, syrupers, double seamers, and in fact against everything except the cooker and cooler, which you viewed last Friday. The cooker and cooler has given fairly satisfactory service though an overhaul was necessary last year after two seasons’ work. This is not necessary with the American cookers and coolers. The reason given by our expert for advising us against the purchase of the above machinery was that it was only in its experimental stage. We therefore thought it wise to let others try it out. Of their unfortunate experiences you are already aware. As you know, each year the fruit canners find it necessary to obtain financial assistance from the Federal Government to export their products, and we feel that the imposition of such heavy dutieson the plant necessary to process fruits militates against our successful operation. In view of the foregoing facts we shall be pleased if you will do what you can to help us in the matter.

These three statements from three different firms in the Goulburn Valley speak for themselves. I wish also to quote a minute on the same subject by Senator Crawford, as Acting Minister for Trade and Customs, dated the 13th June, 1928. It is as follows: -

Shepparton, -Ardmona and Kyabram Com panies - Application for Admission Under Item 174 of Can-making and Canning Machinery.

In August of last year I had the opportunity of inspecting the works of John Heine & Sons. This firm owns a large and wellequipped engineering establishment in Sydney and has specialized in the production of canmaking and canning machinery. For many years such machinery appears to have met the requirements of purchasers, but I have reluctantly concluded from my investigations at the Goulburn Valley Canneries that Australian can-making and canning machinery has not kept pace in all respects with the improvements of oversea competitors.

To be compelled, in these circumstances, to use Australian machinery, or to pay considerable sums in customs duty on imported, would not be of great consequence to those engaged solely, or even chiefly, in canning for the Australian market, but it would constitute a serious handicap to canneries which, like Shepparton, Ardmona, and Kyabram, have to export the major portion of their output.

I am, therefore, of opinion that the machinery imported by the Shepparton, Ardmona, and Kyabram Canneries should be admitted under item 174, with the exception of cookers, coolers and exhausters and the three double-seamers imported by the Kyabram Company in 1922.

These three firms definitely stated that the machinery necessary for the carrying on of their operations was not being manufactured commercially in Australia and the Acting Minister of the day agreed to their statement. Mr. Heine has : given many reasons why the machinery manufactured by his firm will not work. In the case of Ardmona he said that it was because the firm did not keep a competent mechanic employed; but it would be remarkable if a firm of that magnitude did not have on its staff employees capable of looking after such machines. In the case of Shepparton it was said that the wrong oil was being used ; but a firm that has been able, by its enterprise, to increase the value of its’ output from about £17,500 per annum to £500,000 per annum in ten years would surely know what grade ‘ of ‘6il to use in its machinery. “ This firm.. is able to market its products successfully in competition with -the biggest American firms, yet- Mr. Heine suggests that it does not know how to manage its own affairs.

The conclusion that is forced upon everybody upon hearing -facts like these is: that it is grossly -unfair that duties imposed for the purpose of encouraging the manufacture of machinery in Australia should be enforced in such a way as to inflict penalties upon other industries either by forcing them to be inefficient or by compelling them to pay extra for foreign efficient machinery. The instances to .which I have referred occurred in the electorate of the ex-Minister for Works and Railways (Mr. Hill) who, being personally cognisant of all the facts, brought them under the notice of his Government. The Minister visited these canneries and he saw the machines for himself. Yet it took six years in one case and three years in the other two cases to obtain a refund of the duties which have been paid. Honorable members can guess for themselves how long it would have taken firms which did not have the ear of a member of a government to obtain redress. This whole business suggests that it is necessary for us to deal with matters of this kind by act of Parliament. They should not be left to ministerial discretion or to be adjusted by departmental officers. Parliament itself should say which machines are and which’ are not being commercially manufactured in Australia to a degree that will entitle them to protective duties.

I felt it necessary to make these statements in view of the reflections cast upon the Shepparton factory by Mr. Heine in regard to the installation of American machinery. It is true that in the early days of the factory all the machinery was American, but as the business grew the firm installed as much Australian machinery as possible, and at present it is using all the Australian-made machinery that is of any real value. But it insists, and rightly so, in my opinion, that it should have the right to go to America or anywhere else ‘to obtain the most up-to-date plant possible when it is not available here.


.- I wish to bring under the notice of the Government a somewhat similar case, but having promised the Acting Minister for Trade and Customs (Mr. Forde) that T would not speak at length on this subject unless he was in the House, I shall refer only briefly to the facts. On the 18th March a certain firm wrote to the Trade and Customs Department for permission to import at concession rates machinery for the making of metal toys. In replying to the department’s refusal of the application it wrote as follows: -

It appears to us that Messrs. Heine & Sons have given a very strong argument why you should admit this machine, which according to their report, is not satisfactory, as it would be a lesson to us not to import any more; but unfortunately, we have seen the same machine in England working nearly three times as fast as Heine’s two-operation machine, and we venture to disagree with them.

I do not mind Mr. Heine standing up for Australian production. I believe that his firm is most efficiently conducted, but I also know that there is no more progressive firm in Australia than the one which made the application for the importation of this machine at concession rates. I do not know whether Mr. Heine has been in England lately, but a representative of the firm to which I have referred saw this machine working in England and knows very well that it will do the work it is intended to do much better and faster than the machinery manufactured by Messrs. Heine & Sons. It will turn out more than double the quantity of work that Heine’s machine can handle in the same time. The Department of Trade and Customs, in maintaining its refusal to allow this firm the privilege sought, stated -

Mr. Heine stated that he is not surprised at the claim that the machine under notice has a larger output capacity than the English machine, because makers ofcannister machines in England have not improved the type of their unite for years. Mr. Heine stated that English manufacturers of canning machinery have remained stationary in so far as progress is concerned, and are building the Borne type of machine as was built years ago.

I cannot accept that as a true representation of British industry, especially as the applicant has seen the machine working in England. I have risen at this stage, because the case to which I have referred supports the arguments of the right honorable member forCowper (Dr. Earle Page), in relation to canning machinery. Messrs. Heine and Sons appear to have too much influence in preventing manufacturers from getting the most up-to-date machinery. If this machine is introduced’ and will do what is claimed for it, then at least a dozen such machines will be required, with the result that our machine-making industry will be stimulated. I shall say no more now ; but if the firm to which I have referred is unable to import the machine at concession rates, I shall refer to the matter again. The granting of a concession in this instance would render assistance to our manufacturing industries.

Question resolved in the affirmative.

House adjourned at 10.11 p.m.

Cite as: Australia, House of Representatives, Debates, 10 June 1930, viewed 22 October 2017, <>.