12th Parliament · 1st Session
Mr. Speaker (Hon.NormanMakin) took the chair at 2.30 p.m., and offered prayers.
– Has the report of the Tariff Board on the timber industry been presented to the Acting Minister for Trade and Customs? Ifso, when will he be able to vouchsafe some further information in regard to it?
– I have received the board’s report, and it will be considered as early as possible. For obvious reasons I can make no further statement on the matter at this stage.
Southern European Labour
– Has the Prime Minister read newspaper statements regarding the British Preference League, which is demanding that British workers shall have preference in employment on the cane-fields of Northern Queensland? What steps does the right honorable gentleman propose to take to ensure that Australian workmen will get a fair deal in that industry?
– I have read the statements referred to by the honorable member. So far as the Commonwealth Government is concerned, the matter is receiving consideration.
– Has the attention of the Prime Minister been drawn to a message published in the Daily Guardian of to-day, headed “Racial Fight at Innisfail “, and containing this paragraph: -
Interest in the fight between the Italians and Australians over employment on the canefields has been sharpened by a letter from Mr. Martens, M.P. for Herbert, in which he. expresses opinions which are interpreted as indicating that unless southern Europeans are restricted on the cane-fields, Australia’s protection policy may no longer apply to the sugar industry.
Was the honorable member for Herbert expressing the views of the Government when he wrote to the secretary of the British Preference League -
I hare advised the employers’ representatives of the sugar industry that the surest way to lose the embargo is to continue in certain areas to give 100 per cent. preference to southern Europeans.
– The whole subject of the control and protection of the sugar industry is now being considered by the Government.
– The Daily Pictorial ofyesterday published this paragraph -
Asserting that oversea countries knew of the heavy new tariff before Australia, Mr. P. W. Fisher, importer, returned yesterday after a visit to Japan.
Mr. Fisher, who is a Melbourneman, and an importer of goods from China and Japan, said that, when he sailed from Australia at the beginning of March, there was no rumour of the prohibitive tariff.
Yet, at Manila (Philippines) everybody knew about it, and the local merchants were delighted. liters was nothing official till he got a cable in Japan.
Will the Acting Minister for Trade and Customs cause an investigation to be made to discover whether, and, if so, how such a leakage of information occurred?
– I have been told that Mr. Fisher made a general allegation, but produced no evidence in support of it. Although I understand that the statement is without foundation, I shall inquire further into the matter.
Construction by Day Laboub.
– A paragraph published in the Canberra Times of today in regard to the erection of cottages in Canberra, says -
In conformity with the policy of the Government, the houses will be erected by the Department of Works by day labour.
I ask the Prime Minister whether the paragraph is correct, and whether the Government intends to carry out all Government works by day labour ?
– I have not read the paragraph, but the portion which the honorable member has quoted is correct.
– Will the Prime Minister indicate whether it is the definite policy of the Government that all future work shall be carried out departmentally by day labour? This matter is causing a considerable amount of anxiety among contractors.
– It is the policy of the Government, wherever practicable, to carry out work by day labour, under the control of its own departments.
-Will the Acting Minister for Trade and Customs state whether the Tariff Board has yet submitted a report to the Government with regard to the deferment of duties upon ships? The present deferment expires at the end of the month.
– The matter has been receiving the consideration of the Tariff Board,but as that tribunal is exceptionally busy, it has not yet had an opportunity to submit a report to the Government on the subject. I understand, however, that the report is now on its way, and it will receive the consideration of the Government as soon as practicable.
– In view of the promise made to the Prime Minister by Messrs H.V. McKay Limited to reduce the price of certain items of agricultural machinery by 5 per cent., following the increase of customs duties on agricultural implements, will the right honorable gentleman supply the House with an itemized price list of the machinery involved ?
– I shall endeavour to obtain such a price list and make it available to honorable members.
– I direct the attention of the AttorneyGeneral to the following statement, which appeared in last Sunday’s Guardian: -
From time to tune footwear manufacturers of New South Wales have approached various governments with a request for a Footwear Branding Act, making it compulsory for footwear to be branded on the soles with the name of the maker and the country of origin. Such an act islong overdue.
Will the honorable gentleman urge the Government to consider and take some action in the matter ?
– A similar matter has been brought under my notice by the honorable member for South Sydney (Mr. E. Riley). I am having a considered statement prepared in relation to it.
asked the Minister for Defence, upon notice -
– The answers to the honorable member’s questions are as follow: -
asked the Prime Minister, upon notice -
– Inquiries have been instituted through the Council for Scientific and IndustrialResearch, and a reply will be furnished as early as possible.
Use of Launches
asked the Minister for Defence, upon notice -
– The answers to the honorable member’s questions are as follow: -
asked the Prime Minister, upon notice -
– The preparation of the details asked for will involve the dissection of a large number of accounts and will occupy a considerable time. I am, however, looking into the matter and will further advise the honorable member as soon as possible.
asked the Minister for Works and Railways, upon notice -
– The answers to the honorable member’s questions are as follow : -
withdrawal of survey ships.
asked the Minister for Defence, upon notice -
Whether, in view of retrenchments in the Navy Department, and the withdrawal of sur vey ships hitherto operating, he will indicate what action, if any, is being taken to safeguard navigation interests in Australian waters ?
– There are in existence charts of the various routes in Australian waters which are ordinarily followed by shipping and these are available to all ship-masters. The naval surveying vessel, when in commission, simply seeks to improve these charts.
asked the Acting Minister for Trade and Customs, upon notice -
Whether he will pay a visit of inspection to the factory of Messrs. A. Simpson & Son, Limited, Adelaide, and so place the firm in a position equal to that of other firms engaged in the metal industry?
– I make a practice of visiting every factory possible and on the occasion of my first visit to Adelaide; I will certainly make an inspection of this factory if at all possible.
Imports and Exports
askedthe Acting Minister for Trade and Customs, upon notice -
– The answers to the honorable member’s questions are as follow : - 1 and 2.-
asked the Minister for Works and Railways,upon notice - 1.Is it proposed to make extensions to the Note Printing Department in Melbourne?
– The answers to the honorable member’s questions are as follow : -
Rates of Interest
asked the Treasurer, upon notice - 1.Has he yet received information to enable him to answer the following questions asked by the honorable member for Werriwa : -
What is the rate of interest charged by the Associated Banks to primary and secondary producers for such credits?
– The answers to the honorable member’s questions are as follow : -
asked the Minister for Defence, upon notice -
– The question of the employment of civilians in certain clerical positions in the Air Force is at present receiving consideration, but the matter has not yet been finalized.
asked the PostmasterGeneral, upon notice -
– The answers to the honorable member’s questions are as follow: -
In committee (Consideration resumed from 10th June, vide page 2603) :
Clause 4 (Definitions) :
.- Does the Treasurer consider that the definition of “Bank” is sufficiently explicit? He has not . adopted the definition that appears in the. South African legislation. Possibly, many firms that at present do ii certain amount of banking business would not be included in it. Would it not be wise to adopt the South African definition, which is as follows: -
Bank or banker means and includes every person, firm, and company using in its description or title bank or banker or banking, and every person, firm, or company receiving or accepting deposits of money subject to withdrawal by cheque, draft, or order.
– I do not think that the wider -definition suggested by the honorable member for Swan is necessary. It may, perhaps, be advisable to consider what class of institution shall be regarded as a bank. “Bank” is a definitely understood term; it applies to a certain class of commercial business. I do not apprehend that any difficulty will arise in the application of this definition; its application will depend largely upon the terms laid down by the central bank. This definition is required so as to make it clear that the Commonwealth. Bank shall be regarded as a bank for the purposes of this legislation.
Clause agreed to.
Clauses 5 and 6 agreed to.
Clause 7 (Capital of the bank).
.- This clause provides that the whole of the capital of the reserve bank shall be subscribed by the Government; in other words, that it shall be taken from the funds of the Commonwealth Bank of Australia. The question arises whether the central reserve bank shall be controlled wholly by the Government, or whether the public shall be asked to subscribe a certain proportion of its capital, and have a voice in the election of its directors. The latter policy has been adopted in the majority of other countries, but principally where reserve banks have been newly created. I feel strongly on this matter, because I do not want established a bank that will be subject to political influence. I hope that the Treasurer and honorable members opposite will not regard my remarks as a reflection upon the present Administration; they apply to any administration. This will be a big trading organization; it will wield considerable influence; and there always will be danger if it is dominated politically. It is not my intention to move an amendment to the clause; but I raise the question so that honorable members may consider whether it is wiser to have a bank controlled wholly by the Government, or influenced partly by the public.
. In this age it is amusing to hear an honorable member raise an objection to political control. From the cradle to the grave, we are subject to some form or other of political interference. When one is born, one must be registered ; and thereafter one’s actions are influenced to a greater or less extent by political action. Wherever we move, we are under political control. Any member, of this Parliament who does not believe in political action has no right to be here. The honorable member for Swan (Mr. Gregory) has expressed antagonism to control, politically, of the proposed central reserve bank. When the Labour party first established the Commonwealth Bank it appointed two gentlemen to control that institution, one as Governor and the other- -as Deputy Governor. Can any honorable member point the finger of scorn at the administration of those gentlemen? They controlled its affairs without undue interference, and made a success of it. The Country party is a political association, and is dominated by politics. The mere fact that it is represented in this House by a number of honorable members shows that it takes a keen interest in the politics of this country. Why should not appointments to the board of the proposed central reserve bank be made on political line3? We cannot get away from political control; that is the atmosphere in which we live. Most of the members of this Parliament have to submit their names to a pre-selection ballot, and then to an election by the people; and those returned to Parliament should be regarded as capable of expressing the views of the people whom they represent. At the last general election, I was opposed by a business-man ; but a majority of the electors decided that because of my political experience, I was more fitted to represent them. The representatives of the people in this Parliament, therefore, should not be debarred from appointment to the proposed board. Persons who have succeeded in obtaining the confidence of the people should be capable of representing the taxpayers on the board of a central reserve bank, which should be controlled by government appointees, particularly as the Government has to find the money for the bank.
– The private banks are finding the money.
– I understand that the associated banks are to lodge between £18,000,000 and £22,000,000 of their funds, but £2,000,000 of capital is to be provided by the Government. As the board is to control the note issue, which is a very important responsibility, we have the responsibility of ensuring that the note issue shall be safe-guarded to protect the interests of the people. I do not think that any exception can be taken to political control in the case of a central reserve bank, although strong exception was taken to such control by the Leader of the Opposition (Mr. Latham). If we do not have political control what form of control should be adopted ?
.- I ask the Treasurer whether something cannot be done in the matter of the provision of capital in conformity with the practice adopted since the war in connexion with the establishment of central reserve banks in other countries, by providing that within a limited number of years the public may acquire some interest in the capital of the proposed central reserve bank. I make the suggestion, not because I am afraid of the political control referred to by the honorable member for South Sydney (Mr. E. Riley), but in order to ensure, so far as possible, continuity of policy, in connexion with the bank itself. Alexander Hamilton pointed out a century ago in connexion with the banking system of the United States of America, that if appointments are to be made periodically by governments having different policies, there is more likely to be a diverging bank policy than if control is exercised by a board elected by private shareholders, whose opinions would not tend to change to the same degree. Although this suggestion was made so long ago, the argument is sound to-day. That that is so is borne out by the. fact that in various countries in which central reserve banks have been created since the termination of the war such a policy has been adopted. The trouble that arose during and after the termination of the war resulted in an endeavour being made to ensure continuity of policy by introducing private capital. The Central Reserve Bank in Denmark has a capital of 27,000,000 kronen, of which 3,000,000 kronen are held by the State. In Greece, which established a central reserve bank in 1927, the Government took up the whole of the capital when the bank was established ; but provision was made that, within two years, the whole of the capital should be offered to the public, and that ultimately not more than one-tenth should be held by the State. The capital of the
Central Reserve Bank of Esthonia was 5,000,000 kronen, made up of 100,000 shares each valued at 50 kronen, and provision was made that within two years the capital should be offered for public subscription, and within one year over 30,000 shares were sold to the public. In Bulgaria there had been a banking department of State - practically a nationalized banking system - but they established what was to a degree a State central bank. Ultimately the central bank had to be made completely independent of government control and its independence guaranteed to the satisfaction of the League of Nations. I urge the Government to consider the desirability of adopting a similar policy in connexion with the proposed central reserve bank, and to decide whether in the next year or two the capital of the bank should not be made available to public subscription. Provision should be made whereby the shareholders should have representation on the board. That is one of the safeguards in the matter of continuity, of policy that we desire, and I urge the Government to consider the suggestion, as it may be. a means of stabilizing the bank at the outset and obtaining the confidence of the people in the institution.
.- As the trading banks have to contribute approximately £22,000,000 in the form of levies of 10 per cent, and 5 per cent., they should have some voice in the general control of the bank. I am not opposing the principle of a central reserve bank, which is sound, as it ‘ stands for stability in finance. Mr. Montagu Norman, the Governor of the Bank of England, in a publication entitled Better English Banking, states -
There appears to be no convenient record of charters, laws or statutes, nor any scientific opinion as to how much liberty or how much power of control is or should be permitted.
It appears to me that a select committee or a royal commission should be appointed to hear evidence from those who have had experience, particularly in connexion with central reserve banks, before providing what the capital should be and what amounts should be subscribed by the Commonwealth and by the associated banks. This is not a party matter, but one which should be calmly considered in order to prevent something of a revolutionary character being introduced into our banking system. The private banks have to provide 10 per cent, of their reserves and 5 per cent, of their fixed . deposits as capital for the central reserve bank. Recently they were compelled to disgorge all their gold, and hand it over to the Commonwealth Bank. Where are they to get the money which, they will be required to put up as capital for the reserve bank ? Some of the banks are sounder than others, and will be able to meet the demand readily enough perhaps, but others will be compelled to call in overdrafts, thus creating further business depression, and causing more unemployment.
This is not a time for embarking upon an- expensive undertaking like this, especially when we remember that our defence system is being undermined by retrenchment and ‘ rationing, and that we cannot find’ even £50,000 to maintain a survey ship. I presume that the governor of this bank will receive a salary of about £4,000 a year, the salaries of the two deputy governors will be not less than £2,500 each, and the allowances to the directors will bring the total salary charges to about £13,000 a year without other expenditure. If the banks have to call in overdrafts it will create depression, not only in manufacturing and business circles, but amongst pastoralists also. I ask that further consideration be given to the whole scheme, and urge that a select committee be appointed to take evidence from banking experts, as being better informed than members of Parliament. The Treasurer may be an expert on banking; probably he is.
– That is the first generous thing the honorable member has ever said.
– I have yet to say anything of the- kind about the honorable member who has just interjected. If a select committee were appointed as I have suggested, it should take evidence from experts on central reserve banking. I know that such experts are not unanimous, as the charters of such banks throughout the world vary according to local conditions; but we should hear all sides of the question. There is no urgency about the matter. There is no great demand for a central reserve bank at the present time, and it would be wise, I submit, to hold the matter up until the whole subject has been thoroughly investigated.
– The honorable member who has just resumed his seat does not sufficiently distinguish between the capital of an institution of this kind and the deposits placed in its keeping. He assumes that if the private banks place deposits with a central reserve bank they should be entitled to representation on the board, and have a say in the management, of the central bank. That cannot be conceded.
– The money they advance is capital.
– No. It would not be capital any more than are the deposits of an ordinary customer in a private bank. The capital of a bank is ,a different thing altogether. The public may have millions of pounds worth of deposits with a private bank, but those depositors have no say in the control of that bank, nor are those deposits taken into account when assessing its capital. The right honorable member for Cowper (Dr. Earle Page) argued that it would be a good thing to raise the capital for the proposed bank by private subscription, as has been done for similar institutions in other countries. That plan, I know, is favoured in some quarters, but it would be contrary to the whole purpose of this bill. We are proposing to establish a national central reserve bank. It is to be national in the same sense as the Commonwealth Bank is to-day, but it need not, for that reason, be politically controlled. I indicated quite clearly in my second-reading speech that the Government desired to keep the central reserve bank free from political control. The bill itself makes it evident that this will be done.
– What about the Labour party platform?
– The party platform never laid it down that banking, even if nationalized^ should be under party political control. It is possible to have a national institution without its being under political control.
– What clause of the bill provides against party political control?
– The whole design of the bill is against it. The bank is to be controlled by directors possessing plenary powers. There is no justification for assuming that the bank will be under political control because the governors and directors are to be appointed by the Government. If that were admitted, the same objection would apply to the High Court.
– The judges of the High Court are appointed for life.
– There are many high officials discharging important public duties who are appointed for terms of seven years or less.
– But in this case some of the appointments are for only three years.
– The honorable member knows that it is proposed to amend the clause which provides for the appointment of directors so as to ensure that continuity of policy which is so much to be desired.
.- The arguments of the honorable member for Swan (Mr. Gregory) and the honorable member for Balaclava (Mr. White) have touched on aspects fundamental to this proposal. The honorable member for Swan questioned whether political control of finance is necessary or advisable. By political control I assume he meant parliamentary control. From the speech of the honorable member for Balaclava I gathered that he has no objection to parliamentary control of finance, but he thinks it would be prudent for this House to consult banking authorities before arriving at a decision in regard to the proposal before us. Both views are entitled to careful consideration, and I propose to offer my frank opinion of them.
In the first place it seems to me that we are forced to recognize that the financial interests of this country are ruling the country. It is idle to assume that this Parliament or the Federal Government is ruling Australia. If Parliament possessed the actual power to rule Australia this measure would not be necessary. I should be the last mau in the world to deprive the Treasurer of the smallest meed of praise to which he is entitled, and while I congratulate him on the intention behind this measure, I express my disappointment at its limitations. If honorable members opposite seem, apprehensive that this bill will interfere with the grip that financial interests have on Australia I can assure them that their fears are ill founded. The bill, unfortunately, will not give a moment’s unrest to those interests. To regard the measure as merely a step in the right direction is the most we can do.
If we believe that credit is the life blood of the commercial system of the day, we should at least try to understand the meaning of the term “ credit “. Actually there are two forms of credit : “ real credit “, which may be defined as the “ estimate of the capacity of the community to produce and deliver goods and services of necessity and advantage to humanity, as, when and where required “ ; and “ financial credit “, which is of a different type entirely, though, when men speak of credit, what is generally in their mind is this latter form only. Financial credit is the estimate of the capacity of a community to produce and deliver money as, when and where demanded by the dominant financial interests of the day. It is the banker who decides whether this credit shall be made available to the public or not, and he decides it entirely from the financial credit point of view. That is to say, he determines whether or not a certain industry shall be commenced or continued. To the extent he does so it follows that whoever controls credit issue determines and controls the character and extent of the activities of a country, and whether human beings shall be allowed to work and earn wages or not; in other words, whether they shall be allowed to live.
– Who should decide the matter?
– Certainly not a few private individuals. The State should control it just as it restrains the activities of robbers or murderers. Can any reasonable man have any doubt as to the ultimate character of the financial domination of the world to-day? Recently the textile industries in England remained at a standstill while the impoverished millions of that country cried aloud in vain for clothing. That was done to maintain prices ; to obtain dividends on capital invested in industry; often on watered capital - industry overcapitalized. About the same time, in another part of the world, incidentally illustrating the international ramifications of the financial institutions, while millions of human beings were perishing from starvation in Europe, millions of bushels of wheat - the staff of life - were deliberately destroyed in the Argentine in order to maintain prices.
– Who destroyed the wheat ?
– These steps were taken under names that have considerable fashionable currency, that is, in the name of national prosperity and of scientific business administration. In reality, they were crimes committed against the human family, and those responsible for them were criminals against society.
– Were they bankers?
– The honorable member knows that bankers figure as the arch criminals.
– I should like the honorable member now to confine his remarks to the clause, which relates to the financial capital of the bank.
– I began my remarks by indicating that the honorable member for Swan (Mr. Gregory) and the honorable member for Balaclava (Mr. White) had raised the question whether or not there should be parliamentary control of finance through the creation of a central reserve bank, and I am doing no more than endeavouring to establish the fact that we should look their suggestions frankly in the face. Surely I am entitled to inquire into the ultimate effect of this system, to the continuance of which this bill is merely a mild challenge, but is nevertheless welcome for the attempt at reform that it represents.
– What is the alternative?
– The alternative is to some extent to be found in the bill. Although a country may be equipped with the most modern and scientific productive arrangements in the world, those who control its finances may make use of that equipment in a direction diametrically opposed to the interests of the people. Let us examine what has actually occurred in the United States of America, a country which is to-day the most scientifically and thoroughly equipped in the world, industrially, for productive capacity. Such equipment controlled by money interests alone merely “ enables a Few completely to enslave the Many “. I quote now from W. H. Wakinshaw’s book on The Solution of Unemployment -
Thus it was calculated that in 1850 the wealth of the United States of America was $8,000,000,000, of which the producers took 62 per cent., non-producers 38 per cent. As it doubled by I860, the producers’ portion had fallen to 43 per cent., while non-producers Tan to 57 per cent. By 1870 it was $30,000,000,000, the respective shares being now 33 per cent, and 67 per cent., until by 1900, along the same lines, out of the natural wealth of $100,000,000,000 the producers only had 10 per cent, and the non-producers 90 per cent. (Flurscheim - Clue to the Economic Labyrinth. )
In the Ford plants, 28 men used to do 175 assemblies of cars a day. Now it is 10,400 in eight hours; while 60 men on a riveting job used to do what now one man does in a day. In the United States of America, one operator in 1890 produced 432 socks a day; he can now turn out 3,600. A modern steam navvy is worth 200 men, while a bricklaying machine is in use in Glasgow by three men laying 1,200 bricks an hour. In Sheffield four men can produce 100 tons per hour of If-inch billets. The cotton industry in Lancashire could produce all the requirements for this country for the year in under a month. Conversely, together with the recent triumph of the rubber planters in cutting down production in order to save their industry from financial collapse, stock raisers in the Argentine have had to kill off all calves born overnight, to keep their market prices firm and themselves from heavy money losses.
The unemployment and distress now being experienced in this country is directly attributable to the policy of the private financial institutions which have deliberately brought about a depression. The introduction of this bill is amply justified in that it shows a determination of the Government of the Commonwealth that there shall be a beginning of parliamentary control of credit, which is a duty that vitally affects the national welfare of our country.
.- The speech just delivered by the honorable member for Martin (Mr. Eldridge) emphasizes the importance of the suggestion put forward by the honorable member for Balaclava (Mr. White) that the bill should now be referred to a select committee foi’ further investigation. It is plain that the opinion expressed by the Treasurer (Mr. Theodore) does not represent the unanimous view of his party. I am inclined to think that th# opinion - and it is an important one - voiced by the last speaker, is held by a large and influential section of Labour representatives both in this Parliament and outside it. I have heard the honorable member described - and I believe correctly - as one of the “Big Four” of the *ex officio** financial committee of the Labour party in this Parliament. While I do not share his opinion, he and those associated with him are entitled to have their views respected. I read the report of the conference of the Australian Labour party that was held recently at Canberra. That body passed a resolution in accordance with the opinion just expressed by the honorable member, and declared that, at the present juncture, the Government should issue some £20,000,000” of notes for the purpose of relieving unemployment.
– Nothing of the sort.
– I ask the honorable member for Perth to confine his remarks to the clause under consideration.
– I support the suggestion that before honorable members give further consideration to the bill it should be referred to a select committee. We cannot afford to ignore the resolution of the Labour conference. We were told in the House yesterday that the policy of the Labour party was directed by its annual conference, and that it was the duty of the Labour Cabinet to take its directions from that body.
– Just as the party opposite takes its directions from the Nationalist conference.
– That may be so.
The TEMPORARY CHAIRMAN.Order! There is no amendment before the Chair- referring to a select committee.
Honorable members must now confine their attention to clause 7.
.- We are dealing with one of the most important subjects that could be considered by any Parliament. We are endeavouring, by this bill, and under this clause, to evolve a system of credit that is urgently needed for the successful conduct of commerce and industry. The clause under discussion provides for the transfer of £2,000,000 from the Commonwealth Bank to the proposed reserve bank, which could not carry out its functions if it were not provided with capital. I am satisfied in my own mind, and I believe that the majority of honorable members will agree with me, that there is no need to refer the bill to an outside committee. Those who have framed this measure are as well acquainted with the financial needs of the Commonwealth as any committee that could be selected. The original capital of the Commonwealth Bank was £11,000. This amount was provided by the Treasury and subsequently refunded. As one who helped to place the proposal for the establishment of that bank on the Labour platform many years ago, I recall that it was intended that the institution should operate as a reserve bank as well as a trading bank. When the Bruce-Page Government gained office it took away from the Commonwealth Bank its function as a reserve bank, although the bank was established for that purpose. I ask honorable members not to oppose this clause.
Clause agreed to.
Clause 8 -
The reserve bank shall, in addition to any other powers conferred or limitations imposed by this act, have power -
to issue notes in accordance with Part IV. of this act;
to buy and sell in the open market in the Commonwealth of Australia or abroad cable transfers, bankers’ acceptances and bills of exchange;
to buy, sell, discount or re-discount securities issued by the Government of the Commonwealth, or of any State, or of Great Britain and Northern Ireland, or of any authority constituted under the law of the Commonwealth or of any State;
to act as agent for the issue and management of loans on behalf of the Commonwealth or of any State and of any authority constituted under the law of the Commonwealth or of any State;
to make advances direct to other corporations carrying on the business of banking or re-discount for such other corporations bills having a currency of not more than one hundred and twenty days to date of maturity, including bills drawn on London and on foreign countries;
to establish accounts with other central reserve banks in the United Kingdom or foreign countries ;
to accept money on deposit oncurrent account and collect money for public corporations and others;
to make loans or advances against the security of stock or debentures of the Government of the Commonwealth or of a State, or any authority constituted under the law of the Commonwealth or of any State, or good trade bills, such bills having a currency of not more than six monthsto date of maturity;
to make advances to the Government of the Commonwealth or of a State, or to any authority constituted under the law of the Commonwealth or of any State;
to buy, sell and deal in specie, bullion, and gold dust;
) tobuy and sell securities for customers; and
to do anything incidental to any of its powers.
.- I move -
That, at the end of paragraph 6, the following words be added: - “ Provided that the reserve bank shall not draw or accept bills of exchange payable otherwise than on demand.”
I have moved this amendment for two reasons; first, that it is essential that the resources of the central reserve bank shall be as liquid as possible, and that, of course, can be absolutely ensured if the amendment that I have moved - that the central reserve bank shall not draw or accept billsof exchange payable otherwise than on demand - is added at the end of paragraph b. Such a bill of exchange would be in the same category as cheques, upon the presentation of which cash may be obtained. I can see no objection to this amendment, if it is intended that the bank itself shall not engage in general exchange business. I take it that the aim of the Government is to make this new bank purely a central reserve bank. The honorable member for Corangamite (Mr. Crouch) was especially keen about the bank being purely a central reserve bank. The Government should, therefore, be prepared to accept the amendment that I have moved. The eleventh point of Sir Ernest Harvey’s brochure on central banks -is that the central bank should not engage on its own account in general exchange business for the purpose of earning profits. Paragraph b, as it stands, would enable the central reserve bank to go on the open market for the purpose of drawing bills for any duration, and thus to encroach upon the business of the trading banks or of the Commonwealth Bank in its new form after its central banking function has been detached from it. The central reserve bank would, in that case, be able to enter into competition with those banks which it is primarily intended to assist.
– Does not the right honorable member think that bills of exchange would be more likely to go to the central reserve bank than to. other banks?
– That is not the intention of the bill. The intention of the bill is to make it easy for the trading banks which have drawn such bills to have them discounted if so desired. I think that the. Treasurer will agree that the main function of the central reserve bank is to stand behind other banking institutions. I take it that there is no intention in the Government’s mind or in the bill that the central reserve bank should engage in the open exchange business for the purpose of making profits. I should, therefore, like the position safeguarded in some way.
– Why should not the central reserve bank have the right to make profits on bills of exchange? That is a function of the ordinary trading banks.
– The Commonwealth Bank, when the central reserve bank has been established, will, undoubtedly, enter into this business, but it is not the function of the central reserve bank to enter into competition with other banks a percentage of whose deposits are in its keeping for the purpose of providing the assets that are necessary to enable it to function.
– Is not the amendment to the effect that bills of exchange shall be accepted only when payable on demand?
– This is a question, not of accepting cheques payable on demand, but of buying and selling in the open market in the Commonwealth of Australia or abroad, cable transfers, bankers’ acceptances and bills of exchange. The central reserve bank, under this clause, will be able to buy, sell, discount or re-discount securities. If the amendment that I have moved is not acceptable to the Government, I ask that it amend the clause so as to ensure that the central reserve bank shall not engage in the open exchange business for the purpose of making profits.
. - The amendment is altogether too restrictive. The central reserve bank should not engage in general exchange business for the purpose of making profits, and should not compete with other banks which have been established primarily for the purpose of making profits. But it may happen that the central reserve bank will, under certain circumstances, enter upon exchange business in exactly the same manner as the Commonwealth Bank has done in the exercise of its central reserve banking powers. It is left to the discretion of the directors not to encroach upon any class of business which, properly, is not the function of the central reserve bank. This powers, conferred upon the bank under this clause are restricted under Clause 9.
– Can the Treasurer suggest any modification of the amendment so that the intention of the bill may be better understood?
– I have already stated that it will not be part of the policy of the bank to enter into competition with other banks.
– Could not that intention be made plain in the bill?-
– The honorable member will realize that Clause 8 confers upon the bank certain powers which are restricted under clause 9, which contains inhibitions and prohibitions which are essential in order to establish the character of the central reserve bank. They are in accordance with the orthodox principles of central reserve banking as laid down by Sir Ernest Harvey.
. If the reserve bank is to be successful and to make profits why should it not sell bills of exchange in the open market ? Its success will ensure the stability of the other banks.
– But it is not to be a trading bank.
– I understand that, but it should be empowered to make as much profit as it can.
.- I am sure that the Treasurer has not the slightest intention that the reserve bank should operate for the making of profit.
– But it should.
– It will make some profit I assure the honorable member.
– The main purpose of the central bank is to regulate the finances of the community, and according to every authority I have read, the first essential is that its assets shall be liquid.
– Hear, hear !
– Therefore, I think that the amendment should be accepted by the Treasurer. It is important that when a demand is made upon a central bank it should be able to realize some of its assets quickly in order to provide the money that is required,
.- Will some high panjandrum of finance, who thoroughly understands banking, explain what is meant by the liquefying of assets ? The workers have been fooled too long by the legerdemain of bankers who pretend to pull rabbits out of hats, and I shall .put forth every effort to loosen the stranglehold of the money power. If I want to raise money, I deposit the deeds of my house as security for the amount which the bank agrees to advance. To the extent of the overdraft allowed to me, I can draw cheques which become currency.
– The central bank would not advance money on the honorable member’s house.
– Why not? One can get from the banks as much money as he requires if he has enough houses to offer as security.
– -But not from a central reserve bank.
– That is a little more of the dope that is fed to the workers. After all, the central bank is merely the warehouse which keeps reserve stocks upon which the retail houses engaged in banking draw. The honorable member for Swan (Mr. Gregory) says that it is essential that the assets of a reserve bank shall be liquid. A bank will advance on the security of a factory or a pastoral holding or a prospective wool clip. A factory is just as frozen an asset as is my house.
– But the reserve bank would not advance on those securities.
– When honorable members talk of liquid assets, the general public imagines that the assets will be contained in bottles standing on shelves in the banking chamber. The whole scheme is a huge joke. If a borrower can offer sufficient security, banks will liquefy the earth.
.- There seems to be a good deal of confusion in the minds of honorable members regarding the difference between trading banks and the central reserve bank. Finance affects the foundation of our well-being, and it is essential that we should know what we are doing. I have listened this afternoon to statements regarding the awful effects of financial control and the machinery of credit, but it is obvious that the advance of civilization and the betterment of mankind during the last 100 years have been rendered possible only by modern advances in the use of the machinery of credit. The statement that the community is being reduced to rags because of methods of financial control is mere bunkum. But for the modern machinery of credit Australia could not have developed as it has, and its people would be much worse off than they are.
– The rags of the people are very real to-day.
– They may be, but they are rarer than they were 100 years ago, and even the most impoverished sections of the community are better off than used to be the case in respect of sanitary conditions, education, and the general standard of living. The development of credit has made more work. Because credit is of such importance to the welfare of the community, I am anxious that the machinery to be created for its utilization shall be efficient. The trading banks will pay into the reserve banks £15,000,000 of their cash resources which are now used as till money or as reserves against a “run”. If the private banks find it necessary at the present time to keep a large sum in cash, it is reasonable that this Parliament should insist that when their money is paid into the reserve bank it shall be kept in a liquid form. The Treasurer agrees with me that the central reserve bank should not, for the sake of profit, buy and sell bills of exchange on the open market, although, occasionally, it may be necessary for the bank to operate in that way. I do not think that the public or the trading banks will be properly safeguarded by the clause, but if some amendment more elastic than that I have proposed is suggested, I shall accept it.
.- I do not think that the mover of the amendment understands the intention of the clause. If we debar the central bank from buying bills of exchange it will be deprived of its legitimate business. It may have an opportunity to buy international exchange. If the power to do so were granted, the general public would have greater confidence in its stability. The right honorable member has evidently considered only the likelihood of a private bank being deprived of this business.
– The Treasurer has intimated that the bank will not usually carry on this business.
– The right honorable member does not know what the bank will do. It has such great potentialities for good that one cannot yet realize how beneficial its influence will be on the community. At the last general election the people of Australia expressed their confidence in the Government to initiate a far-seeing measure such as this, and I am glad that it has not failed in its task. Those who seek to deprive the bank of this function are ill-advised. A crisis has arisen that demands every effort being used to remove the flaws that exist in our economic system. It is our duty to establish precedents. Some time ago I drew the attention of the honorable member for Gippsland (Mr. Paterson) to the fact that Australia had already established precedents. What if we do occasionally make an error? That is the privilege of every progressive body. I appeal to the right honorable member for Cowper (Dr. Earle Page) not to persist in his endeavour to deprive the central reserve bank of this power.
.- I move -
That after the word “ securities “, paragraph c, the following words be inserted: - “having a currency of not more than two years.”
The central reserve bank is being brought into being to make certain that the required credit to be provided shall be available for issue should trouble arise. That cannot be done if the bank’s assets are “ frozen.” Most other countries which have established central reserve banks have taken steps to ensure that the various methods of investing the assets of those banks shall allow of the securities being converted into cash in an instant, so that if a run on a bank takes place, and, say, £1,000,000, is needed to tide it over its immediate difficulty, the central reserve bank can convert its resources immediately to meet it. For that reason, central reserve banks tend to define the quality of the securities in which their money is invested. As a rule, they choose trade bills of very definite and shortdated maturity, say, 90 days, and at the end of the period the asset is selfliquidating. The bill as it now reads gives power to the central reserve bank to buy securities of the Commonwealth, of any State, of municipalities, and so on, of any maturity whatsoever. It might invest in securities of the cities of Grafton or Geelong, maturing in 1960 or 1980.
– That would be a good speculation.
– No doubt, but it should be carried out by the savings banks, which have money for investment on long terms. It is certainly not an investment to be made by a central reserve bank. I contend that the longest date of maturity of these investments of the reserve bank should be two years. In most countries it is three months, although, in some, six months is the length of maturity allowed.
I appeal to the committee to make sure that the resources of this bank will be kept fluid, without any frozen element.
– Is that not provided for later in the bill?
– No. Clause 9 provides that the reserve bank may not purchase municipal securities or debentures having a currency more than two years to date of maturity. Nobody would suggest that our system should be less elastic than that of Bulgaria, and I remind honorable members that the Central Reserve Bank of that country is not permitted to discount State guaranteed . bonds, having a currency of more than three months to date of maturity. I suggest that we should insure that the maturity in our case should not be beyond two years.
– Does not the right honorable gentleman think that the central reserve bank should have power to deal with the London overdrafts of private banks?
– It is not very satisfactory to take over an ‘ overdraft.
– I mean in regard to adverse balances connected with foreign exchanges.
– That matter is dealt with by paragraph b, in connexion with which our advice was rejected. I urge, in the interests of the central reserve bank, that the Government should take action to limit the date of maturity of these securities.
– I am afraid that the amendment is impracticable. Paragraph c relates to the buying, selling, discounting or rediscounting of securities issued by the Government of the Commonwealth, or of any State, or of Great Britain and Northern Ireland. Those securities are not issued with a view to the central reserve bank utilizing them for the purpose of buying, selling, discounting and rediscounting ; they are issued to the market and are available to and may be purchased directly by financial institutions. If they have a market value, and are freely dealt with on the market, they are a class of security that can be held by the central reserve bank or advanced against without interfering with the liquidity of that bank’s assets or reserve.
– It depends on their date of maturity as to how readily they will sell.
– Not to any extent*
– I can give the honorable gentleman an instance-
– I know that the right honorable gentleman can give an instance of popular short-dated Commonwealth loans. On the other hand a Commonwealth security that is popular is the loan maturing in 1948, which is in favour because it can be applied to the payment of probate duties. That class of security is much sought after, and it may be the class that the bank will find it useful to discount or re-discount. It would be absurd to limit the class of Commonwealth or British Government security that may be dealt with under this clause, to securities that mature within two years. The main test is, not the- date of maturity, but whether the security will be readily marketable on the stock exchanges if the hank should find it necessary to realize upon it. Some of the most liquid securities on the British stock exchange are interminable; such, for example, as British consols. I do not think it will be suggested that, for the purposes of the transactions of a central reserve hank, they are not a desirable class of security. We must rely upon the judgment, discretion, wisdom and knowledge of marketing conditions possessed by the management of the bank. It is not likely that they will tie up their funds in assets that may become frozen.
– Does that argument apply to the latter portion of the paragraph?
– It applies to the whole of the paragraph. I do not say that the reserve bank must purchase, discount, or re-discount the securities of any authority, but it should have the power to do so. It will not purchase a Commonwealth or any other security that cannot be readily realized on the market. The point I make is that it ought not to be prohibited from dealing in any class of security which, in its discretion, can be readily realized, and will not interfere with the liquidity of its funds.
– The practice in other countries is to impose a limitation.
– We have followed the lines laid down in the creation of other central reserve banks in regard to the class of securities that may be advanced against, discounted or rediscounted. This power is almost identical with that which is held by the Central Reserve Bank of South Africa.
– Can the honorable gentleman explain why a distinction has been drawn between the securities of the Government of the North of Ireland and those of the Irish Free State?
– The stock is that of “Great Britain and Northern Ireland,” not df the Government of the North of Ireland.
– That is one entity.
– It is the stock of the British Government.
.- The right honorable member for Cowper (Dr. Earle Page) misunderstands the position. Any person who has a knowledge of municipal loans realizes that there is no safer security than a city loan.
– This is a question, not of security, but of realizing quickly upon any security that may be held.
– A city loan is the safest security that can be held. Although it may not be disposed of except at the due date, its value suffers no depreciation. Values in country municipalities, however, differ from those in the city, and there is a greater probability of their depreciating. That, possibly, is the reason why the banks impose a limit of 90 days in regard to country securities, whereas they are prepared to accept a period of two years in the case of securities in the capital cities. The right honorable member for Cowper will do an injustice to the town of Grafton, which is in his electorate, if he persists with his amendment. Country municipalities have imposed upon them limitations in regard to the amount that they can raise by way of rates or loans. The capital cities are administered under special acts that- confer upon the authorities power to borrow up to a certain amount ; and if that is found to be insufficient no difficulty .is experienced in having amending legislation introduced. The clause as it stands is to the advantage of country municipalities, and if the right honorable member for Cowper supports it he- will be acting in the interests of those that are in his electorate.
.- I hope that the Treasurer will reconsider this matter, because I believe that he has been misinformed. He has told the committee that this provision is identical with the legislation that has been passed in South Africa. I contend that that legislation is totally different from this. So far as I have been able to inform my mind by reading, it appears to me that it has been the policy of parliaments to impose restrictions upon the charter that is given to a central reserve bank. The South African Reserve Bank, according to Kisch and Elkin, is permitted to “ buy, sell, or re-discount up to 20 per cent, of the bank’s total discounts, agricultural paper, bearing two or more good signatures, and with maturity not exceeding six months ; to buy, sell, or rediscount bills, promissory notes, or other commercial paper bearing two or more good signatures, and having maturity not exceeding 90 days; to buy, sell or rediscount bills and promissory notes not exceeding 90 days’ maturity, and drawn for purposes of trading in Union Government securities, subject to their bearing endorsement of a bank ; to buy, sell, or rediscount Union Government or local authorities’ bills of not more than six months’ currency; to make loans and advances against (a) government or municipal securities not exceeding six months’ currency; (i) gold or documents relative to shipment or storage thereof.” Particular care was taken also to limit the powers exercised by the Reichsbank. A limitation has been placed on the amount of government securities that may be taken as collateral, and the Central Bank ordinarily is allowed to advance only against government, municipal, railway, and similar securities having a currency of not more than six months, and to an amount not exceeding 30 per cent, of the value of the security. I trust that, if this central reserve bank is established, it will not be involved largely in transactions in securities that cannot be converted into cash when cash is needed.
.- I am sure that the Treasurer (Mr. Theodore) has not intentionally misled the committee in regard to the position- in
South Africa. I intend to make a pertinent quotation from Kisch and Elkin, which will prove to honorable members chat I am right in the contention that I have put forward, and that his statement does not square with the facts. At page 375, this work says that the South African Reserve Bank is entitled to do certain things, including the following: -
To buy, sell, or re-discount bills and pro- missory notes not exceeding ninety days’ maturity, and drawn for purpose of trading in Union Government securities, subject to their bearing endorsement of a bank;
To buy, sell, or re-discount Union Government or local authorities’ bills of not more than six months’ currency.
The clause that the committee is considering, proposes to confer on the reserve bank the power “ to buy, sell, discount, or re-discount securities issued by the Government of the Commonwealth, or of any State” without any time limit. A further provision in the South African legislation entitles the Reserve Bank of that country to “ make loans and advances against (a) government or municipal securities, not exceeding six months’ currency”; and, subsequently, “to buy and sell government and local authorities’ securities not ‘having more than six months’ currency; to invest sums not exceeding capital and reserve in Union or other government securities of not more than two years’ currency, and invest staff and superannuation funds in Union Government securities of any currency “. The point that I wish to stress is that the corresponding power in the case of the South African bank is limited to maturity securities that can be bought, sold, discounted, or rediscounted.
– What magic is there in a period of two years?
– I am prepared to make the period six months as the South African bill does; I was anxious to make the matter easier for the Government. I can say, as a result of my experience as Treasurer, that when in difficulties it is very much easier to deal with a bond that matures in two years than with one that matures in ten or twelve years. I know of cases in which a bank has had government stock to the value of £500,000 on its hands, and it has taken it not less than two years to liquidate that stock so as to complete the transaction without loss and in such a manner as not to cause a serious disturbance of the market. It is quite impossible to protect either the Government or those who purchase stock, that has a long currency.
– The right honorable gentleman is opposed to political control; yet he advocates political dictation, and is not prepared to allow the directors to act at their discretion.
– Before I deal with the question of discretion, I shall state exactly the position in Bulgaria, If the people of Bulgaria are not permitted to enter this country by this Government surely it should endeavour to provide a banking system at least as good as that which operates in that country. Other countries have found it necessary to provide safeguards which we are not making, and to that extent the system provided in this measure must be regarded as inferior. Kisch and Elkin, in dealing with the position in Bulgaria, states -
The bank may discount, purchase or sell Treasury bills with a maturity of not more than three months, endorsed by an approved bank, person or firm. The total amount of Treasury bills acquired in accordance with this paragraph . . . may not together at any time exceed 200,000,000 levas.
The Treasurer (Mr. Theodore) has stated that it is. not within the province of this Parliament to dictate the policy to be adopted by the board of the central reserve bank, but clauses 8 and 9 definitely provide certain rules and regulations which the board must observe, and which can be regarded .as dictation on the part of Parliament.
– They involve matters of principle.
– This clause provides the basis upon which the whole of our banking structure is to be built, as we have to determine whether the securities to be handled are to be liquid or otherwise. I have referred to the position in South Africa, and also in Bulgaria, in the first of which the Central Reserve ‘ Bank is privately owned, and where nothing approaching the same political pressure is likely to be exercised. The legislation passed by the Parliament of South Africa provides that the control of the bank can he exercised by the representatives of private shareholders. But in Australia, “where the central reserve bank is to be controlled by the Government, it is to be made more generous in its treatment of government securities, but to such a degree that we may freeze our resources at a time when every one is looking . to the bank for assistance. Clauses 8 and 9 constitute dictation, as they specifically provide what the board may and may not do. I cannot see that there is any difference between the Parliament providing that the board may discount securities at a certain date and providing that the bank shall not discount securities at all. I urge the Treasurer to amend the clause by providing for some period, say, from six months to two years, in order to assist the work of the bank in stormy times.
– The suggestion of the right honorable member that the board of the central reserve bank should be tied down to buying, selling, discounting, or rediscounting government securities of a six months’ currency is absurd. What government stocks available in Australia to-day - excepting the issue maturing next December - will mature within six months. Next year, after the December stock has been dealt with, there would be no such stocks to be bought, sold, discounted, or re-discounted, if the amendment were agreed to. That would place the bank in an absurd position. During times such as the present, when the private banks may be feeling the financial pinch, they may wish to hand over securities to the central reserve bank for re-discounting, and it should be within the discretion of that bank to decide what security it shall handle, so long as whatever may be offered is sound and liquid. The bill does not provide that the bank shall be compelled to accept longdated Commonwealth securities, but gives it power such as the Bank of England possesses to. accept Commonwealth or British Government securities.
– But the Bank of England is not tied up by legislation such as will control this bank.
– The charter of the Bank of England provides that the bank may not make advances on government securities without the expressed authority of parliament. Yet there is nothing to prevent the Bank of England from purchasing exchequer bills or the other government securities which by law it is authorized to purchase, and there is a limitation as to currency in regard to such bills or securities. Securities with a currency of twenty years may be more liquid than securities maturing in a much shorter period. I have referred to the 5 per cent. Commonwealth 1948 loan as such a security which is now readily saleable on the market. Why should not such securities be available to the central reserve bank for rediscounting?
– If the banks suggest that the course I have advocated is a wise one, will the Treasurer adopt it? The Treasurer says that what is proposed is in the interests of the banks.
– Is the right honorable member suggesting that I should approach the representatives of the associated banks and ask them if I should accept the amendment submitted by him? It should be obvious to every one who takes a dispassionate view of the work of a central reserve bank in the matter of discounting government securities that securities with a currency of some years may. be more liquid than those of a shorter currency. Surely the right hon.orable member is not suggesting that the board of the central reserve bank should be restricted in the matter of rediscounting British consols, and that we should limit the period of maturity in their case to two years or less. Although some British consols are interminable and others are long-dated, they are readily negotiable on the stock market.
– Why is the South African Central Reserve Bank so restricted ?
– I do not know what has been done in the case of that bank, though it would appear from what the right honorable member has read that the South African bank is restricted to securities maturing at an early date. I do not know whether our position is comparable with that of South Africa, or whether the Reserve Bank of South Africa has occasion to make advances against or to discount or rediscountBritish Government securities; but we shall have to do so.
– In South Africa the restriction may be regarded as irksome.
– It may. The right honorable member suggests that we are providing in this clause against the creation of frozen assets. We wish to avoid any possibility of the reserves of the bank being tied up in unrealizable securities.
– What I have suggested is a safeguard.
– It is a drastic restriction.
– If these securities are so readily negotiable why should a private bank approach the central reserve bank instead of placing them on the market?
– A private bank may not desire to realize on its securities in that way. To put such securities on the market might have a disturbing effect on it. A private bank might desire accommodation for three months only, and might offer its paper to secure such accommodation. If the private bank approaches the central reserve bank, that may keep stock off the market, and prevent the market from being disturbed.
– Will the Minister agree to divide the clause into two subclauses as has been done in South Africa ?
– No. The right honorable member has failed to make out a case in support of his contention.If he can show me that, in all the circumstances in which this bill may operate, government securities maturing within six months or within the periods he has mentioned will always be more readily negotiable than government securities of a longer maturity, he will make out a case; but he has not done so.
– I am prepared to rely upon the opinion of the managers of the associated banks of Australia.
– We cannot have our legislation adjudicated upon in that way. If it were advisable for such matters to be decided by some outside authority, we should refer to the Commonwealth Bank Board for its opinion.
– Has the Minister received a recommendation from that board ?
– No. Does the right honorable member suggest that we cannot introduce a new banking system without the permission, advice, or guidance of some such authority? As I have stated, Commonwealth Government securities maturing within two years are not. always more readily negotiable on the market than thoseof longer maturity.
– Surely not in times of financial stringency.
– Is it suggested that a security with a short maturity is always more negotiable than one with a long maturity? At present, we are experiencing financial stress and stringency to a greater degree than for many years past, yet some of the securities that are most readily negotiable on the stock exchange are long dated.
– Are not the December securities negotiable?
– Yes, but not more so than the 5 per cent. securities maturing in 1948.
.- I desire to support the right honorable member for Cowper(Dr. Earle Page) in his contention that the central reserve bank should, so far as possible, deal with liquid assets - the more liquid the better. The right honorable member quoted Kisch and Elkin on the point. I should like to quote from the same authority. The point which the right honorable member desires to make is that a central reserve bank should deal in securities for the sole purpose of maintaining the stability of the finances of its own country, and not for the purpose of making profits. I should like to know from the Treasurer (Mr. Theodore) if it is the Government’s intention that the central reserve bank should go on the open market to purchase securities for the purpose of maintaining financial stability, or for the purpose of making a profit? If the latter, I am opposed to it, and shall endeavour to frame an amendment to prevent the directors from embarking upon activities which I consider to be the privilege of the trading banks.
– I suggest that the buying and selling of government securities on the market is a function of neither a central reserve bank nor of the private trading banks.
Mr.BAYLEY. - If the Treasurer will give me his assurance that it is not proposed that the central reserve bank shall engage in the buying or selling of government securities solely for profit, I will accept the clause.
– I do not see anything objectionable in this clause, and I am prepared to accept the Treasurer’s explanation of it. I cannot see any reason for limiting the period of these securities, so long as they are defined and restricted, as in the present act. It is laid down that the directorate shall discount only certain stocks. Surely it is wise to leave these matters to the discretion of the directorate. It is reasonable to assume that the directors will do their bestto safeguard the interests of the institution with which they are connected. I am prepared to vote for the clause as it stands.
Question - That the words proposed to be inserted be so inserted . (Dr. Earle Page’s amendment) - put. The committee divided. (The Temporary Chairman - Mr. Mackay.)
Majority . . . . 25
Question so resolved in the negative.
.- I move -
That the words “ or of any authority constituted under the law of the Commonwealth or of any State,” paragraph c, be omitted.
The Treasurer gave as his reason for not accepting my previous amendment that long-dated Commonwealth securities were more easily realizable than short-dated securities. That consideration does not apply in regard to the matter we are now considering.
– The right honorable member is overlooking the fact that these are trade bills.
– They are not. I ask the Treasurer to follow the practice which has been adopted in South Africa. In the South African Act, one section authorizes the bank to buy, sell, or redistribute bills not exceeding 90 days, and another section authorizes it to buy, sell, or re-discount government securities of not more than six months’ currency. If our central reserve bank is permitted to deal in debentures issued by municipalities such as Grafton, Orange, or Geelong, it may find itself in the position of not being able to realize its assets when it needs to do so. In other countries, special precautions have been taken to avoid trouble of that kind. In South Africa it is laid down that the bank shall not buy government bonds of more than six months’ currency, while in Germany the period is twelve months. In other countries, it is provided that the proportion of funds that can be used for such purposes must be small in comparison with the capital of the bank itself.
– Does the right honorable member’s amendment refer to government securities?
– No; it refers to local government securities. I desire to make certain that this bill will command respect, and my amendment, if carried, will help to achieve that end.
– The honorable member assumes that the reserve bank will have the right to buy, sell, discount or re-discount the securities of municipalities and other local bodies whose securities may be of any period of maturity; but that is not the case. The power given in this clause is qualified by the restrictions of clause 9 which provides -
The reserve bank may not
purchase municipal securities or debentures (other than those of any capital city in Australia) having a currency of more than two years to date of maturity.
Mr.BAYLEY.-Canthe Treasurer give some indication of the class of securities covered by that paragraph?
– The paragraph covers a class of securities which a reserve bank may have to purchase for the purpose of regulating the money market in Australia, or for the purpose of regulating supplies of money. It may purchase out of the market in order to feed capital into the market or it may sell on to the market in order to take money out of it. It is one of the essential functions of a reserve bank to do these things; and as the class of security covered by the paragraph is one that is very largely dealt with in the markets of Australia this power must be available to the bank. Its power in this respect is, however, restricted by the bill to securities or debentures of capital cities which are freely quoted on our stock exchanges. It will be a matter for the judgment and discretion of the bank to exercise its power to buy, sell or discount that class of security; but it must have the power to do so, because these securities function very largely on the stock exchanges of Australia to-day. One of the principal means by which a reserve bank can ease the money position in a time of transient difficulty is by purchasing these securities upon the open market, thussupplying money to the market. Likewise, a contrary action may be necessary -in order to restrict a tendency to overtrading by selling stock to the market, thus taking money from it, which is a well known operation carried on by central banks everywhere where money market conditions prevail, and wherever banking has been organized. This is only one of the powers which are essential to enable the central reserve bank to function properly.
– Can the honorable member illustrate his remarks by specifying some of the authorities constituted under the law of the Commonwealth or of any State?
– Every municipality is one of those authorities.
– That is so, but the limitation imposed by clause 9, paragraph d, restricts the paragraph to securities with a two years’ currency except in the case of securities or debentures of capital cities. The Metropolitan Board of Works in Melbourne, the Water and Sewerage Board in Sydney, and other bodies of that kind issue bonds or securities on the market.
– Would the Tramways Board in Melbourne be regarded as one of those authorities?
.- It has often been stated that New Zealand can go on the open market and secure loans on much more advantageous terms than we in Australia can get, and seeing that the dominion is our nearest neighbour, I think it would be a matter of courtesy as well as good business to have the securities of the Dominion of New Zealand added to the list specified in paragraph c of clause 8.
– New Zealand is not included because its bonds are not readily negotiable on the Australian market. The only overseas securities we include are those of Great. Britain and Northern Ireland.
.- All charters of central banks contain rigorous restrictions against the purchase of municipal securities. I am afraid the Treasurer (Mr. Theodore) is not quite correct in saying that the securities or debentures of local authorities in capital cities are always readily saleable. We rarely see them quoted in the financial columns of the press and, to my mind, they are not a class of negotiable stock that may be expected to sell readily.
– I do not say that they are all freely dealt with on the stock exchanges; but if they are not, the reserve bank will not be dealing with them.
– In South Africa power is not given to the reserve bank to make loans and advances against government and municipal authorities exceeding six months’ currency, whereas in this bill the two years’ limitation in clause 9, paragraph d applies only to municipalities outside capital cities. There are also restrictions in regard to the amount that can be advanced by the Reichsbank in Germany on bonds of any German State or municipality. I think our bill is going too far, and I hope that when clause 9 is reached the Treasurer will favorably consider some modification of paragraph d.
.- I cannot allow the clause to pass as it stands without putting on record my strongest protest against the power given to the central bank to deal in securities issued by various local bodies in Australia. No one can suggest that they are first-class securities or readily marketable. It is all very well for the Treasurer (Mr. Theodore) to say that everything must be left to the discretion of the board of the bank, but here is whore we should make it clear that it is our intention that the bank must not deal in anything but first-class securities and securities of short date. I regard paragraph c of the clause as containing a fatal flaw, which is likely to cause a considerable reaction, and I am firmly of the belief that it is a power that ultimately will have to be taken away from the bank.
.- Charters of banks usually contain the words “ approved securities,” and I suggest that paragraph e, which gives power to the bank to make advances direct to other corporations carrying on the business of banking, should be amended by inserting the words “ against approved securities “ after the word “ advances.”
– There is no need to insert the words suggested by the honorable member. The reserve bank is given priority over all other claimants against any other bank, and is, therefore, in a particularly safe position to make advances to other corporations carrying on the business of banking. Of course, the board has to use its discretion as to the extent to which it will make such advances, but it is one of the first responsibilities of a central bank that it shall not overlend to any institution.
.- Paragraph g gives power to the bank to accept money on deposit on current account, and collect money for public corporations and others. It seems to me that the words “ and others “ are the widest and most nebulous definition of a class of people I have ever seen. If they mean anything, they should be defined. If they mean nothing they should be deleted. At any rate, the position should be defined in some way so that the bank board, which will be guided by the letter of the law, and not by any discussion in this chamber, will know exactly what is desired by Parliament. Can the Treasurer meet the position in any other way than by the use of the words, “ and others “ ?
– I am afraid that I cannot suggest a term that would be more explicit than that now in the clause. The persons who would avail themselves of the power given by the paragraph to which the honorable member has drawn atttention are corporations and individuals, who really constitute the money market. As a matter of fact, the class is restricted because of the inability of the bank to pay interest on money accepted on deposit on current account. It is not permitted to do so. I explained on the second reading that the Bank of England accepts the deposits of a certain number of persons - I was going to say class of persons; but they can hardly be defined as a class except that they have a certain status and a certain range of business in the money market in England. Under the rules of the Bank of England these persons keep a minimum deposit in the Bank of England. The amount on deposit may be required to be £50,000, but they receive no interest on that amount. On account of the position they occupy in the money market they become underwriters of loans, or perhaps operators on the stock exchange. They fulfil certain functions, and are recognized as fulfilling them. The Bank of England accepts them as depositors, but pays no interest on the amount of the deposit. I do not think any such class of business will develop in Australia, but if a bill market is developed here it is possible that operations of that character will follow, and it may therefore be wise to give the central bank the right to receive deposits without interest from certain operators on the money market.
– Is the power given in paragraph b to establish accounts with other central reserve banks wide enough to cover the proposed international bank?
– I think the provision is wide enough to enable our central reserve bank to establish accounts with the Bank of International Settlements that is now being organized to deal with the reparation payments, in which Australia is directly interested. This authority will enable that to he done.
– Under paragraph h, the reserve bank is given power “ to make loans or advances against the security of stock or debentures of the Government of the Commonwealth or of a State, or any authority constituted under the law of the Commonwealth or of any State,” &c, and I wish to secure some restriction of this power, because it seems to me that this provision is far too liberal in its terms. There would be nothing to prevent the reserve bank from holding practically the great bulk of its resources in securities of this nature.- These might not be merely those approved securities that the Treasurer has spoken of as being readily saleable ; they might be securities of all descriptions, some of which could not be easily converted into currency. In practically every country provision has been made to prevent the great bulk of central banking reserves being held in government stock. I have already referred to the position in South Africa. In 1927, a central reserve bank was established in Greece, and that institution may grant advances against government bonds for periods not exceeding six months. No advance must exceed 80 per cent, of the market value of bonds, or 70 per cent, of the market value of treasury-bills, and the aggregate amount of the advances may not exceed one-tenth of the sum budgeted for in the current financial year. The provision to which I am referring is undoubtedly too wide for safety, and must be regarded as containing an element of danger by those who desire to see the resources of the bank kept in a liquid form. I move -
That in paragraph h, after the word “ State “, first occurring, the words “ having a currency of more than five years and up to not more than eighty per centum .of the market value thereof “ be inserted.
– I am afraid that, if the amendment were accepted, it would have a very restrictive effect. The proposed central bank is intended, naturally, to act as banker for the Commonwealth Government and also for other governments and governmental authorities. It is a proper function of such a bank to act as banker for the Commonwealth and State Governments, and it may become necessary, at times, for the bank to carry government overdrafts.
– Will not the Commonwealth Bank do that?
– No. It is intended that the central reserve bank shall do that here, as in other countries.
– Without a limit?
– A limit will certainly be imposed. The fact that this bank will act as banker for the Government does not imply that the Government will be able to draw upon it ad libitum. Any accommodation required must be arranged between the Government and the bank by negotiation and treaty. There may be agreements between the two authorities as to the limit of overdraft accommodation. There may be an arrangement for the bank to manage the loan issues, and indeed, in certain circumstances, the bank may act as underwriters, or share with other banks in the underwriting of government loans in the local market. In such circumstances it would be unwise to place a limit upon the currency of the securities that may be accepted. It would be proper to put a limit on the amount of temporary accommodation that is provided by way of overdraft, and there always would be such a limitation, as there is to-day. Governments in Australia make overdraft arrangements with their respective banks, and they freely use that right; but no bank gives any government the right to depend permanently upon, overdraft accommodation, which is usually in the nature of temporary accommodation pending the issue of a loan, the raising’ of revenues, or the replenishment of funds in some other way. So far as overdraft accommodation is concerned, there would be no objection to restricting the currency of an advance to a limited period; but there are certain classes of advances that might be made to the Commonwealth Government, or to other governments, by the central reserve bank in connexion with which it might be undesirable to restrict the currency- to five years.
– Will the Treasurer indicate their nature?
– I have already done so. Suppose the bank became a party to the. underwriting of a Commonwealth loan, and a portion . of the stock were left with it, it would hold that stock until it could sell it on the market ; yet that stock might have more than five years’ currency. In view of the possibility of such an occurrence, I think that it would be undesirable to restrict the currency of securities . which the bank might hold, as would be done under the proposed amendment. So far as other authorities constituted under the law of the Commonwealth are concerned, I think that the objection raised by the right honorable member is covered by clause 9. The reserve bank will not have the right to purchase municipal securities other than those of any capital city, having a currency of more than two years to the date of maturity.
– Why not put the matter beyond doubt?
– I refer the right honorable member to paragraph d of clause 9.
– I have grave doubt as to the soundness of the contention advanced by the Treasurer. It seems to me that, if we are to allow the reserve bank to hold unlimited quantities of government paper, we shall make unlimited inflation possible, and the central bank may be unable to realize its securities.
– It would be failing iri its duties and functions if it held unlimited quantities of stock.
– Other countries, have found it wise to limit by legislation the powers of the reserve bank in these matters. Here is an opportunity for the Treasurer to accept a constructive suggestion from the Opposition side in order to make the bill acceptable to the general public and to financial authorities; but he is adopting an unfortunate attitude. It seems to me that his explanation of the effect of the clause is not very convincing. It will be most dangerous if, as the Treasurer suggests, this bank may have a huge quantity of Commonwealth securities left on its hands.
– I- do not suggest that there will be a huge amount.
– The Treasurer says that it is impossible to put a limit upon the amount, and in the next breath he tells us that this power will not be used. He is a master of the English language, and surely he can tell us what is intended. I ,am making an honest effort to improve the bill.
– Does the right honorable member suggest that we should place a quantum limit in the clause?
– If the Treasurer will, not fix the period, he should limit the amount. This bank is not being brought into being to act as the bank of the Government, but as a central reserve bank, and under this clause it is being prostituted for the purposes of the Government.
– That is most unjustifiable criticism.
– In support of my argument, I refer to Kisch and Elkin, at page 137 -
It is desirable that the securities should be of free marketability, and of as short currency as local conditions allow, and that, if their maturity extends beyond a few months, the advance should bc limited to an amount leaving an adequate margin in relation to the market value of the security, as in Belgium, where even government securities are only reckoned at four-fifths value. Again, a limit should be placed on the amount of government securities taken as collateral. These are in practice, likely to predominate among the securities offered as a basis for loans, and it is important that they should not be permitted to Obtain a position in the bank’s business that might lead to the subordination of credit policy to State exigencies. In the case of Chile, the Central. Bank is ordinarily only allowed to advance against government, municipal, railway and similar securities up to an amount not exceeding 20 per cent, of the bank’s paid-up capital and surplus, though the proportion may, in special circumstances, be raised for a period of not more than six months to 30 per cent. In Germany, advances against government or municipal bonds maturing within one year may only bo made to banks of known solvency, and up to three-quarters of the market value of the securities. The holdings of three months’ treasury-bills by the Reichsbank must not exceed RM.400 million. Power may be granted in special circumstances by the General Council of the Reichsbank for the acceptance of bonds of the Reich of distant maturity if, apart from the security, two obligees are liable for the loans (one to be a bank doing business in Germany ) . The total loans against these distant maturities may not exceed the amount of the bank’s capital and reserves.
– There is no restriction, so far as the four hundred million Reichsmarks are concerned. These are treasury-bonds-.
-.- I am suggesting a currency of five years, and Germany insists on’ a three-months’ limit for treasury-bonds and a quantum limit. Other countries find it necessary to impose a definite limit as to the amount and the terms.
– Take the practice of the Bank of England.
– The Treasurer is willing to be guided by the policy of the Bank of England on one particular point only; but he disregards it in practically every other respect. If the Treasurer wishes to comply strictly with the practice of the Bank of England he will discard this bill, and allow the Commonwealth Bank to continue as ‘ at the present time. The question which we now have to answer is whether we are to allow the central reserve bank to be the puppet of the Government.
.- I hope that some alteration will be made to this paragraph, because, at present, we do not know whether the central reserve bank is being established to assist the Government in times of stress, or to build up the industries of Australia. If this paragraph is passed as it stands, it may happen that, because of political pressure, the reserve bank may, to a large extent, be used for making advances to the Government or for purchasing Government securities. Surely we are justified in following the practice adopted in other countries. The Bank of England may nol make advances to the Government without the express authority of Parliament. The South African legislation provides that loans or advances may be made by the Reserve Bank against Government securities for periods not exceeding sis months. Under paragraph i this reserve bank will be able to make advances to the Government of the Commonwealth or of a State, or to any authority constituted under the law of the Commonwealth or of any State. There is no restriction in any shape or form upon advances to the Government. The Reichbank of Germany, after its recent experience, has received specific instructions in respect of making advances to the Government. I venture to say that, if this clause becomes law, future governments will, in times of stress, exert political influence upon the directors of the bank. They will be appointed by the Government for a limited term and, because of that, will always be liable, in some degree, to government pressure. There is, in the bill, no limitation on the advances that may be made to the Government. An advance may be made of £1,000,000 or £5,000,000 ; in fact any advance may be obtained by a future government to enable it to carry on a spendthrift policy. It would be wise on out part to place in this bill restrictions upon the advances or loans that may be obtained from the reserve bank by this ot any future government.
– Does the honorable member think that some private banks have been over-generous to governments in order to hold their business?
– The Reichbank will not accept bonds unless they bear the endorsement of a bank, and, in some instances, it requires three well-known signatures before any advance, is made. Under this legislation there is no restriction whatever upon advances. We should, therefore, ensure, in this legislation,, thai the bank will be used solely as a reserve bank and not as a feeder to an extravagant government.
Question - That the words proposed to be inserted by so inserted (Dr. Earle Page’s amendment) - put. The committee divided. (The Temporary Chairman - Hon. D. Watkins.)
Majority . . . . 17
Question so resolved in the negative.
.- I move -
That, in paragraph h after the word “ State “ the words “ or any authority constituted under the law of the Commonwealth or of any State “ be omitted.
There is no need for me to labour this point, because it , has already been discussed at great length in connexion with previous clauses. The reasons advanced by the Treasurer for the retention of other words inother parts of the bill, would, apparently, suggest that the words “or any authority constituted under the law of the Commonwealth or of any State “ should be omitted. I desire only to point out that the security of any authority constituted under the law of the Commonwealth or of any State would not be recognized by any financial institution as first class security or as a security able to be freely marketed in times of crisis.
.- I move -
That after the word “ State “, first occurring, paragraphi, the following words be inserted : “ to an amount not exceeding at any time one-fifth of the amount received by the Government by taxation in the preceding financial year.”
The object of this amendment is to limit the amount of accommodation that can he given by the reserve bank to the Government,
– What is meant by “ taxation.”
– The total taxation. In the case of the Commonwealth it would be the amount received through the customs and from direct taxation.
– Does the right honorable member mean revenue or taxation?
– Taxation, because revenues are derived from certain government enterprises which I do not wish to be included. Unless some such restriction as this is made,: it will be possible for the central bank to utilize practically the whole of its resources for the purpose of assisting the Government of the day. Without doubt, the best way to make sure that the bank will be kept free from political interference is to limit the temptation of a government to go to it for assistance. If the amount of assistance which the bank may give to a government is limited by statute, the government will not want to interfere with the policy of the institution. On this point I quote the following passage from Kisch and Elkin’s Central Banks : -
The temptation of the State to intervene in the affairs of the Central Bank is diminished if the accommodation which the bank may give to the State is limited. Thus, while the Austrian and Hungarian statutes permit the National Bank to discount the bills drawn by the State commercial undertakings, managed as independent enterprizes, it is provided that the Government may not have recourse to the bank unless they pay the equivalent in gold or in foreign drafts. In Germany, the Reichsbank is allowed to make loans to the Government for short periods, and to a limited amount, but at the end of the businessyear the Reich must not be indebted to the bank. In Holland the bank is bound on the request of the Ministry of Finance to advance money free of interest to the State in their current account against treasury bills, but the total of such loans is not to exceed 15,000,000 gulden. In the statutes of the Bank of Esthonia, it is laid down that the bank may “make temporary advances to the Government for expenditure authorized in the annual State budget, provided that the whole of the advances outstanding at any time does not exceed one sixth of the estimated revenue of the year, and that all advances are repaid not later than at the end of the quarter following the close of the fiscal year in respect of which the advances are made “. Restrictions on these lines exist also in Bulgaria, where the capital of the bank has been provided by the State.
There is a similar provision in the case of Czecho Slovakia, which limits the amount of accommodation that the .Central Bank may give the Government. Roughly, the taxation- of the Commonwealth yields between £50,000,000 and £60,000,000 per annum. One-fifth of that would be between £10,000,000 and £12,000,000, and that seems to me to be a reasonable limit to the accommodation which the bank should be permitted to give the Government under this clause.
– I must congratulate the right ‘ honorable member for Cowper (Dr. Earle Page) upon his ingenuity. He has travelled all over the world to find reasons for reducing the value of- this bank to the community ; but he has not made an instructive contribution to the debate. It is beside the mark to- compare Australia with the countries to which he referred,’ because the conditions here are different from the conditions there. It is ridiculous to suggest that any government will exhaust the resources of the bank for its own purposes. If the right honorable member wishes us to take him seriously, he should not make such amusing remarks. This bill was drafted by Australians to meet the financial circumstances of Australia. The ex-Treasurer is like a man who employs elephants to chase butterflies. I understand that he is an excellent surgeon, but he has shown conclusively that he is .not a financier. I hope that the Treasurer will stand by the provisions of the bill. If the board of directors is composed of men who are intellectually alert and thoroughly informed of the Australian position, no trouble need be expected. Although the right honorable member for Cowper has told us that he desires to improve the bill, he is seeking to include in it provisions which will make it useless. I sincerely hope that he will not continue to exhibit his financial incompetence.
.- If no restrictions are provided in this clause it may seriously interfere with the success of the bank. The Bank of England is subject to very little control, but I quote the following from Kisch and Elkin’s Central Banks regarding the relations of the Bank of England with the’ State : -
An annual return has to be laid before Parliament of the amount of exchequer’ bills, treasury bills, &c, purchased by the bank, or upon which any Bums have been advanced for the Public Service.
The proposal of the right honorable member for Cowper (Dr. Earle Page) is reasonable. Kisch and Elkin say that the charter of the Bank of Greece limits the amount of temporary advances to the Government to 400,000,000 drachmas, and requires that all advances shall he repaid within three months of the close of the financial year in which they are made. A little later, in the same chapter, I find the following observations on this point: -
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 lead 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 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 on the bank strengthen 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.
That shows clearly the wisdom of not making it too. easy for a government to borrow from a central bank. The real object of such a bank is to assist industry, and the object of this bank is to assist Australian industry. If a limitation of this nature is not made, a spendthrift government may bring influence to bear on the bank to force it to make large advances for so-called national purposes. But we should not make it easy for that to be done. It would be wise, in my opinion, to insert a clause in the bill to provide that, before the bank should make any advances to governments beyond a certain specified amount, an enabling bill must be passed through Parliament. I regret that no provision is being made in the returns that must be furnished to distinguish advances made to governments from those made to private corporations. Such a distinction should be made. I trust that the Treasurer will accept the amendment, and hope that his desire is to make this bill something that he will be proud of, and something that will make impossible the adoption of wild financial practices in this country.
.- This is no minor amendment. I disagree with those who think that everything should be left to the discretion of the board. The board must, of course, have some discretion in regard to the general management of the bank; but, if all power is to be given to it, there is no need for the long list of restrictions already provided in the bill. Unless a provision of the nature now before us is agreed to, there will be no limit to the amount that the bank may advance to Commonwealth or State governments, or to the term of the advance. On this point I invite the attention of honorable members to the difference between paragraph h and paragraph i of the clause. Paragraph h provides that the bank shall have power -
To make loans or advances against the security of stock or debentures of the Government of the Commonwealth or of a State, or any authority constituted under the law of the Commonwealth or of any State, or good trade bills, such bills having a currency nf not more than six months to date of maturity.
Paragraph (.provides that it shall have power -
To make advances to the Government of the Commonwealth or of a State, or to any authority constituted under the law of . the Commonwealth or of any State.
In respect of government securities, the need for a limitation is recognized by the restriction to securities of not more than six months currency to maturity.
– Yes, but there is a distinction between loans and advances.
– There is not much distinction. There are temporary loans and! advances.
– An advance is always temporary.
– A loan is very often described as an advance.
– In respect of a loan a security is issued, but an overdraft is an advance.
– A loan is a fixed sum for a definite period, but an advance is a fluctuating amount up to a certain limit.
– I never previously heard of that distinction. There is nothing in paragraph i to indicate that the advances referred to will be temporary. If the intention is to limit the advances to a period of one month or six months, let- us say so, but the clause does not limit either the amount of the advance or the period for which it may be made.
– What does the honorable member suggest?
– That there should be some limitation of amount; that is more important than a time limit. The failures of other reserve banks have arisen principally from the ability of the Government of the day to lay its hand upon the reserve funds, and our complaint against this bill is that a government will be able to use its influence with the members of the board to acquire money which otherwise would remain in the bank as a reserve to secure the financialstability of the country. Why should an opportunity be given to any government’ to acquire money that should be left in a central fund for the protection of the’ public credit ? There is no reason why the Government should not be able to obtain limited advances, although why they should not be obtained from the Commonwealth Bank I cannot understand.
.- Will the Treasurer tell the committee what the clause means and what use the Government intends to make ‘ of the bank ? I have in mind the £20,000,000 which I desire to see made available.
– That will be for unemployment relief.
– That is what I am after. I want something practical to meet the circumstances of the moment.
– Doe’s the honorable member think that that is the function of a reserve bank?
– J am asking the Treasurer to tell us what the reserve bank is to do. I believe that the South- Australian Government has an overdraft of £4,000,000. What bank has allowed the overdraft ? Will-, the central bank have authority to give an overdraft on the securities of a. State Government? To what extent the Commonwealth Government is indebted- by overdraft I do not know. All borrowing is supposed to be authorized by thi? Parliament for specified purposes, but shortly we may be told that the Commonwealth is in pawn with the Bank of England. or the Westminster Bank or the Commonwealth Bank. How does this position come about ? Will the Treasurer let. the’ committee know how . the machine works ? Advances to a Commonwealth or State Government or any authority created by the Commonwealth or a State are. sound; there is no need for any security. But how will the board controlling the reserve bank decide whether a government should have the money for. which it ask3? I agree with the honorable member for Fremantle (Mr. Curtin) that it is the function of a democracy to control and operate the financial system for the bene fit of the general community, and not to hand over the control of the machine to a board. If the Commonwealth applies to the board for mon.ey how will the application be dealt with; what reservations will the board make? The right honorable member for Cowper (Dr. Earle Page) has proposed that the advances shall not exceed one-fifth of the taxation capacity of the borrowing authority, but I doubt whether the board will give credit to even that limit.- It will go justas far as the Commonwealth Government of the day wants it to go.
– That is the danger.
– Apparently the honorable member did not see that danger when the Government of which he wasa member authorized an advance for £10,000,000 to finance the wool clip. Th, Government of the day had power to do that, and did it in the interests of one section of the community. When th, Nationalists want money from the financial machine they can make it respond to their wishes. If the financial magnates want certain power and credit they can put the screw on a Nationalist Government. Now Labour is in power in the Commonwealth, and I want it to be able to do the same.
Sitting suspended from 6.15 to 8 p.m.
– I have very little more to add to my remarks on this clause. It is the most vital in the bill, and upon its operation depends the success of the scheme. It provides that the bank may make advances to the Commonwealth and State Governments, and I want to know precisely where and how they get on and get off. The Treasurer should make clear what are its limitations and whether under it the Commonwealth Government will be able to obtain the accommodation necessary to ensure the maintenance of the best interests of the community.
.- It seems to be manifest that the forces of the Government are seriously divided on this bill. It is my opinion that the amount of advance to governments should be based on the taxable capacity of the country. That principle is generally recognized in municipal government. Municipal councils are prevented from overdrawing and excessively pledging futurity, and a similar provision should be made in this bill to govern advances by the central reserve bank to the various governments. Otherwise, it can easily be imagined that governments might extract from the bank excessive advances that would prove a hindrance to posterity. I think that it was the honorable member for Adelaide (Mr. Yates) who said that the Government acted without check with regard to the financing of our wheat and wool. I remind the honorable member that it is permissible to make almost unlimited advances against a perfect asset. A bank, when advancing money, is always cautious to see that its advances are adequately covered by assets. The central reserve bank should be equally cautious in its transactions, and the bill should qualify the amount that may be advanced. I support the amendment.
– Honorable members must realize that there will be a board of directors to administer the affairs of the central reserve bank. Apparently, many seek to put leg-irons on those gentlemen. The right honorable member for Cowper (Dr. Earle Page) wants to limit the amount of money that the Commonwealth Government may borrow from the bank by incorporating a restrictive proviso in the bill. Suppose that the Commonwealth Government decided to bring about the unification of our railway systems. That would cost many millions of pounds, and would be an important reproductive work. Such a provision as the right honorable gentleman suggests would prevent the Government obtaining through this agency the means to carry out the work.
– It would be hobbled !
– It certainly would be hobbled. No government should be bound hand and foot in that manner. Again, suppose that a war took place, and that the Government wanted money for the defence of the country, but could not raise it because of this limitation imposed upon the central reserve bank. The position would be an absurd one. The directors of the bank are the servants of the country, whereas this Parliament is elected by the people, who entrust the Government with the duty of governing the country in the best interests of the community as a whole. I hope that the amendment will be rejected.
.- As the clause now stands, the central reserve bank is empowered to make advances to the Government of the Commonwealth or of a State. No limitation is imposed either as to the amount of the advance, or as to the time over which it may extend. The right honorable the Leader of the Country party (Dr. Earle Page) has moved an amendment to limit such an advance to an amount not exceeding at any time one-fifth of the amount received by the Government by taxation in the preceding financial year. That amendment is so eminently sane and sound that I am surprised that the Treasurer has not accepted it. The limitation it seeks to impose is no narrow one. The central reserve bank would still be free to advance something approaching £12,000,000 to the Commonwealth and, I think, approximately £5,000,000 to £6,000,000 to the States, in any one financial year. The amendment is really more an expression of principle than anything else; an intimation that the central reserve bank shall not have power to make an unlimited advance to any government at any particular time. I think that the committee will agree that the financial condition of the Commonwealth would be in a pretty desperate position if the amount requested from the bank exceeded £12,000,000.
The Treasurer must not complain if the whole bill becomes suspect as a result of his attitude towards so desirable an amendment. The debate has been extraordinarily fair and reasonable. I did not speak on the second-reading stage, and I should not have intervened now had the Treasurer not adopted such a highhanded attitude towards amendments emanating from this side of the chamber. What are the facts as presented by the bill itself and the honorable gentleman in charge of it?’ First,, the Treasurer has repeatedly protested that there is to be no political control of this bank ; that it is to be purely a reserve bank created in the interests, in the broadest sense, of financial stability. It is not to be a bank for profit, or to serve any political party which may be in power. Next, as the bill now stands, the Government, directly and definitely, is to make all appointments to the management of the bank without consultation with anybody.
– Has, that anything to do with this clause?
– A great deal, as I shall shortly show. The bill gives to this proposed central reserve bank infinitely greater powers than those possessed by any other reserve bank in the world, with the single exception of the Bank of
England. The Treasurer has quoted that bank. I remind himof the all-important fact that that institution is a privatelyowned bank. It is true that, in some respects, it is a semi-official bank, but actually it is owned by private shareholders and is, in the main; administered free from political control, indeed, from any consultation with political control except in. times of grave national emergency. So the Bank of England may be cut out of the picture. The Opposition comes along with a very reasonable amendment, such as that now before the committee, and the Treasurer gives a point-blank refusal to place any limitation uponthe amount of. money that the reserve bank may advance to any government of the moment. Naturally, the whole thing becomes highly suspect. Reference has been made to the very extraordinary and timely, or perhaps untimely from the Treasurer’s point of view, series of resolutions on the subject of unemployment incorporated in the report of. the Federal Labour conference recently held at Canberra.
– I ask the honorable member toconnect his remarks with the amendment.
– I intend to show why the committee should insist upon some limitationbeing imposed on the amount that can be advanced by the board of the proposed bank to any government. The Labour conference that sat in Canberra a couple of weeks ago brought in a report on the subject , of unemployment, the chief point made by which was that it is difficult to provide relief for the unemployed, to-daybecause of the extraordinarily rigid systemof banking that prevails in Australia. The Government was instructed to so modify the banking system that £20,000,000might be made available for the immediate relief of unemployment.
Mr.Lazzarini.- On reproductive works.
– The honorable member for Werriwa (Mr. Lazzarini) has said that the gentlemenwho assembled at that conference represent the governing body of the Australian Labour party. Therefore, they are the masters of this Administration. The honorable member for Ade laide (Mr. Yates) admitted this afternoon that opposite this clause in his copy of the bill he made the note “£20,000,000.” When I said “That is for unemployment,” he replied “It is.” In effect he asked what action would be taken in that direction under the bill. The honorable member for South Sydney (Mr. E. Riley) has stated quite frankly that the proposed bank should be controlled politically. I applaud the honesty of those three honorable members. I wish that every honorable member opposite would come into the open and tell us where he stands. I trust that, if the Treasurer deigns to make the slightest reference to the arguments that I am putting forward, he will not charge me with having misrepresented the purpose of the Government when I say that a restriction should be placed upon the powers of this bank. All the suggestions of a misuse of those powers have been made by honorable members opposite.
– How can the honorable member call it a misuse of power?
– The honorable member for Adelaide (Mr. Yates) does not admitthat it would be a misuse of power ?
– I do not; it would be a common-sense administration of the act.
– The honorable member is piling up embarrassment for his Treasurer, and providing me with infinite satisfaction in the argument that I am endeavouring to put forward. If the Treasurer wishes to avoid further personal and political embarrassment he will accept this curtailing amendment. His embarrassment would have been less if he had accepted a number of the amendments that were moved this afternoon. But he has adopted an arbitrary, high-handed attitude towards this amendment, and is determined to go for the whole bill and nothing but the bill. That is a remarkable attitude for a Minister to adopt towards a measure that embodies such high principles as this does. We all subscribe to the principle of a central reserve bank; but I submit that there is considerable room for reasonable disagreement in regard to essential features. I consider that the amount, that the bank should be empowered to advance to either a State or a Commonwealth Government, but especially the latter, should be limited, because of the circumstances surrounding the creation of this institution. The present Government is financially embarrassed. I admit that that is the fault, not of the Government but of the times in which we find ourselves. The Government is being subjected to the heaviest pressure by its own supporters to find money at any cost. It proposes to set up an important new financial institution, and to invest it with power to raise large sums of money and make them available to the Government. At the outset of its career the bank will be managed by a number of gentlemen who have been appointed by the Government. If we pass the bill as it stands we shall do a great wrong. I do not appeal to the honorable gentleman to change his view, because evidently he has definitely made up his mind; but I protest as strongly as I can against the passage of the clause in its present form.
.- I am glad to have the pleasure of following the honorable member for Henty (Mr. Gullett) in this debate. I waited for the opportunity to follow him on the second reading’ of the bill; but was deprived of that privilege because he did not address himself to the measure at that stage. The honorable gentleman stated more than once during the course of his speech that the Government is embarrassed financially. What I am concerned about is the embarrassing position of a large number of married men with families’ who have no food in the cupboard and no money with which to pay their rent. It is they whom this Government is trying to relieve. Their plight has caused me many sleepless nights, and I shall put forward every endeavour to have the credit of Australia employed in removing the incubus that rests upon them. The honorable member ‘ for Henty referred repeatedly to the conference of the Australian Labour party that sat recently in Canberra, That conference passed certain resolutions for which I am not answerable; but it was actuated by such humanitarian ideals that I am proud to associate myself with them. Some time -ago I propounded a scheme that would be of untold benefit to the people of Australia if I could induce this Parliament to agree to it. I proposed the following :-
That application could . be made by such bodies, but particularly the water and sewerage board, to the Federal Government, to increase the note issue to a certain sum, say £1,000,000. This amount would be allocated for the carrying out of specified reproductive works, and would be subject to redemption at 5 per cent, per annum, i.e., 50,000 notes to the value of £50,000 would be destroyed per annum, and at the end of twenty years the whole of the liability of £1,000,000 would be thereby extinguished. The assets resulting from this £1,000,000 expenditure would then become the property of the particular governing body concerned, and incidentally the property of the people.
As the whole transaction would be completed in twenty years, I could not be accused of attempting to inflate the currency of Australia. The scheme is so simple that some honorable members opposite must wonder at their lack of foresight in having failed to advocate it. At this period of Australia’s history it is essential to set up a central reserve bank. The passage of the clause that the committee, is now considering will enable those who are to be entrusted with the management of the institution to make possible the carrying out of reproductive works. I am confident that the Government will appoint only gentlemen who are fitted for the position. From 1910 to 1913 a Labour government was in office and it made numerous appointments - more than any other government has since made - and it left office without a stain on the character of its members. The honorable member for Henty fears that political appointments will be made. Is that fear the result of the lesson that he learned when he was a member of the Bruce-Page Ministry ? I assure him that this Government will not make appointments at a salary that it is impossible for a man to earn. Such assertions do no good to Australia, and only belittle this Parliament. After all, we are the elect of’ the people. Does the honorable member for Henty believe that the people would elect as their representatives men who are not fit to occupy such a high and responsible position? I do not. I am of the opinion that the people are satisfied with their representatives. My constituents, at all events, are satisfied with their representative. The clause merely provides that the board shall have power to make advances to the Government of the Commonwealth or of a State. Is it suggested that the board will deplete its assets to such an extent that it will be unable to meet its liabilities and may have to close its doors? The board . will carry out its duties in such a way that there will be no need to fear that it will act detrimentally to the interests of the community. It is unreasonable to suggest that any limitation should be placed upon any such advances as advocated by the right honorable member for Cowper (Dr. Earle Page). This measure, which I am sure will be wisely administered, will have a very beneficial effect UPOn our economic position, and will assist in removing a good deal of the hardship which at present exists in consequence of the prevalence of unemployment. I trust that a better spirit will be displayed by honorable members opposite and that they will assist in the passage of this measure, which will be of inestimable benefit to the poor people of this country, many of whom are constantly knocking at my door asking for assistance. The front room of my home is not large enough to accommodate those who wait upon me during the week-end asking for assistance. The only sound basis upon which we can operate is to utilize the credit at our disposal instead of borrowing £1,000,000, as the Government did some time ago, and actually receiving only £922,500. Interest and redemption amounting to £2,200,000 will have to be paid for that loan.
– I ask the honorable member to discuss the subject-matter of the clause.
– The object of this measure is to improve our financial and economic position and to remove many of the disabilities with which we are confronted. The bleak days of winter are upon us, and as unemployment is so prevalent it is the duty of all sections of the community to assist the Government to relieve the position.
.- I support the amendment moved by the right honorable member for Cowper (Dr.
Earle Page). The clause provides that -
The reserve bank shall, in addition to any other powers conferred or limitations imposed by this act have power . . .
to make advances to the Governments of the Commonwealth or of a State or to any authority constituted under the law of the Commonwealth or of any State.
The right honorable member for Cowper has moved to insert after the word, “ State,” the words, “ to an amount not exceeding at any time onefifth of the amount received by the Government by taxation in the preceding financial year.” The policy adopted by central reserve banks throughout the world is to impose a definite limitation upon advances that may be made to governments, as is provided in the amendment before the committee. There has been a very definite suspicion concerning the object of the Government in introducing this measure, but this, I think, could easily be removed by the acceptance of the amendment. No valid reasons have been advanced by the Treasurer or by honorable members opposite for the introduction of the bill and, in view of the utterances of the honorable member for Adelaide (Mr. Yates) and the honorable member for Werriwa (Mr. Lazzarini) and others said to constitute the “big financial four “ amongst the Government supporters, some limitations should be placed upon the powers of the board with respect to government advances. Some honorable members opposite have advanced extraordinary theories regarding the extension of credit and the augmentation of the note issue for different purposes which should be more fully explained if the right atmosphere is to be created.
– Did the honorable member say that extraordinary theories have been advanced?
– The honorable member does not know his book.
– I am expressing my own views.
– The views I have expressed are not theories.
– I disagree with the honorable member’s theories. There has been an absence of enthusiasm on the part of honorable members opposite concerning this proposal of the honorable the Treasurer to constitute a reserve bank. The overseas press as well as organizations of employers and others closely associated with banking and the trade and commerce of this country have carried resolutions in opposition to the Government’s proposals as embodied in this bill, and have emphatically stated that this is not the time to introduce legislation of this nature which will create further chaos and confusion in financial circles. Kisch and Elkin, in their publication entitled Central Banks, state that -
Temptation to the State to intervene in the affairs of the central bank is diminished if the accommodation which the bank may give to the State is limited.
Austrian and Hungarian statutes permit the national bank to discount bills drawn by the State provided that the Government shall not have recourse to the bank unless it pays the equivalent in gold or in foreign drafts. In this and other ways a definite limitation is imposed on the State. In Germany the Reichsbank is allowed to make loans to the Government for short periods and to a limited amount, and it is provided that at the end of the year the Reich must not be indebted to the bank. The advances are limited both as to amount and the period. The Central Reserve Bank of Holland is empowered to make advances to the State, but they must not exceed 15,000,000 gulden. Again, in Esthonia, the Central Reserve Bank may make temporary advances to the Government for expenditure authorized in the annual State budget provided the whole advances do not exceed one-sixth of the estimated revenue for the year. In Bulgaria a limitation is also imposed as the State is entitled to receive advances not exceeding 400,000,000 leva at 5 per cent, interest which must be repaid within the first three months of the succeeding financial year. In Greece and Czecho-Slovakia similar limitations are imposed upon the central reserve banks in the matter of advances for governmental purposes. I could also mention other countries in which a definite limitation, both with respect to time and amount, is imposed; in fact that is the policy adopted in every country.
– That statement is incorrect. What is the position of the Bank of England ?
– That is not under governmental control.
– The honorable member for Moreton (Mr. Francis) said that the policy he is advocating is adopted in every country.
– The Bank of England is a semi-private institution and cannot be compared in this respect with central reserve banks already established, or with the bank it is proposed to establish in Australia. The Bank of England is not controlled in the manner in which the proposed central reserve bank in Australia is to be controlled and the conditions under which its functions differ considerably from those embodied in this measure. Moreover, some of the central reserve banks in the countries which I have mentioned have only recently beer established, and after the fullest information has been obtained from all available sources as to the basis upon which a central reserve bank should operate. Many of these banks have been established since portions of the continent of Europe have been recast and others have been reconstructed .as a consequence of the peace treaties entered into after the recent World. War. The more recently constituted reserve banks were established as a result of the Dawes plan. After becoming acquainted with the experiences of other countries they framed their own banking legislation, and included in it a provision limiting the amount which might be obtained by governments from the bank. The Treasurer referred to the Bank of England, and the honorable member for Swan (Mr. Gregory) has handed me a statement in reply to the Treasurer’s contention. In regard to the Bank of England, the law requires that -
The bank may not make advances to the Government without the express authority of Parliament.
– That is exactly what we are proposing to do.
– The provision continues -
An annual return has to be laid before Parliament of the amount of exchequer-bills, treasury-bills, &c, purchased by the bank or upon which any sums have been advanced for the public service.
– How does that suit the honorable member’s argument?
– It suits my argument very well. The provisions under which the Bank of England is operating, and those under which it is proposed that this central reserve bank shall operate, are widely different. I urge the Treasurer to accept the amendment of the right honorable member for Cowper (Dr. Earle Page). I appeal to him to bring his proposal up to date, and relieve the public mind of the suspicion which it must entertain if the bank is to be allowed to advance unlimited sums of money to the Government for any purpose whatsoever. Recently, a Labour conference in Canberra, of the kind which presumes to issue instructions to the Government, urged that the Government should immediately obtain from anywhere, at any price, £20,000,000 for the relief of unemployment.
– The honorable member receives his instructions from the banks.
– I take instructions from no one. I am in the happy position of having signed nothing, and of having received no instructions whatsoever from any one. I bear allegiance to the general policy of the party to which I belong, and I am supporting the amendment of the right honorable member for Cowper because I believe it would improve this bill and be in the best interests of the country. Examples have been quoted of the serious position of the Bank of France a few years ago because the statutory limit in regard to the making of advances to the Government was not observed. This may be verified by reference to the authoritative work on central banking by Kisch and Elkin, extracts from which are published at page 2397 of Hansard. Millions of francs in excess of the legal limit were obtained by the Government of the day from the bank, with the result that there were serious financial crashes in 1925 and 1926. These facts make it all the more imperative that the amendment of the right honorable member for Cowper should b.e accepted, and that the advances made to the Government in any one year should not exceed one-fifth of the annual amount received by way of taxation.
This would provide the Government with £12,000,000 or £15,000,000 a year which, in addition to the revenues received from taxation and other sources, should be sufficient to meet the requirements of any government having a proper regard for economy. I urge the Treasurer to accept the amendment in the interests of the financial stability of the country, and to promote confidence in the central reserve bank.
Mr. WHITE (Balaclava) [8.50J. - I support the amendment of the right honorable member for Cowper (Dr. Earle Page). As the sub-clause now reads it would authorize the bank to make advances to the Commonwealth Government, or to a State Government, or to any authority constituted by a law of the Commonwealth Government or of any State, without limit as to amount or period. The right honorable member’s amendment would limit the amount to one-fifth of the taxation received for any one year. If no limit is imposed, a spendthrift government might squander the amount subscribed for the formation of a central reserve bank. I do not suggest that this Government would do so, but any government might.
– Does the honorable member suggest that the Government would squander the reserves of the bank unless it received advances?
– The bank might overlend to the Government. The bill should definitely provide a limit beyond which the bank might not go. I also think that the period of the loan should be limited by legislation, and I would like to see a time limit added to the amendment. The Controller of the Bank of England has stated that the English system of short-dated bills is preferable to our overdraft system. I suggest, therefore, that the period of a loan should be for not more than four months.
The expenses of government in Australia are exceedingly heavy. For the last year for which figures are available they amount to £202,200,000. Of this £81,000,000 was for Federal Government services, and £120,000,000 was expended by the State Governments. It is evident, therefore, that governments are frequently in great need of money, and may make heavy demands on a central bank. We should make it impossible for the bank to overlend to them. I oppose the inauguration of a central bank at all at the present time. The principle of central banking has been accepted everywhere; but it is a matter of unjustifiable expenditure at this moment. l.f the Government persits in the establishment of the bank, it should be founded on HiM-h sound lines that there will be no possibility of failure. If the bank were to overlend to the States it would weaken th’e whole financial structure of the Commonwealth. The trading banks depend for the money they handle upon the trade of the country. Trade is the life-blood of the community. The money handled by the trading banks comes from the business, manufacturing, and agricultural interests of the community. The money with which the central bank will operate, will come from the same sources through the trading banks. If the central bank hands this money out in a prodigal way to any of the State Governments or municipalities, or to the Commonwealth Government, it will soon find itself in difficulties.
The present Government has sponsored the central banking proposal, and must accept responsibility for its mistakes, if such occur. Up till 1927, the platform of the Australian Labour party provided for the socialization of all the means of production, distribution, and exchange, and the nationalization of banking. In 1927 this plank of the platform was slightly altered to provide for “ the extension of the scope and powers of the Commonwealth Bank until the control of all the banking facilities of the country are in the hands of the people.” The Government must, therefore, be suspect unless it alters the sub-clause under discussion, in order to make the bill fool-proof.
At a recent conference of the Australian Labour party in Canberra a resolution was passed that the Government would be justified, in order to provide work for the unemployed, in utilizing the credit resources of the Commonwealth, and that as a first step towards this the Federal Government should find immediately £20,000,000. That is almost as much as the trading banks are to be required to furnish in order to start the central reserve bank. Certain honorable members opposite have been candid enough to state that they believe it would be a good thing if the Government accepted the recommendation of the Canberra Labour conference. There are some persons who are communistic at heart, and think that the treasure of the country should be equally distributed, ignoring the fact that brains and energy have not been distributed equally. Unless the Government accepts the amendment of the right honorable member for Cowper it leaves itself open to the suspicion that it may be tempted to put into effect the scheme suggested by the Canberra Labour conference.
– I hope it does.
– The honorable member for Adelaide (Mr. Yates), who “hopes it does,” when speaking on the second reading of this bill challenged me to quote an instance of any Labour government having offended in the past. I maintain that the Labour Government offends so long as it believes in the socialization of finance and industry. And that aspect of the matter is particularly pertinent when we are dealing with a proposal to establish a reserve bank. Those behind this Government say that the credit resources of the Commonwealth should be used to raise £20,000,000 for the relief of unemployment. The honorable member for East Sydney (Mr. West), in the course of an amusing speech - I do not know what it was about, but it was amusing, nevertheless - said that it was very necessary to make £20,000,000 available for unemployment relief, and he went on to tell a harrowing tale about the sufferings of the unemployed. We know that there is a great deal of unemployment at the present time, but the advocacy of fantastic schemes for giving away £20,000,000 to the State Governments without any guarantee, is sheer madness, and any attempt to put such schemes into operation would shake the stability of the Commonwealth. Unemployment would increase rather than diminish if that sort of thing were done.
– We must do something to relieve unemployment.
– I agree with the honorable member in that, but if the Government starts giving away in prodigal fashion, it will create such depression that eventually the banks will foreclose on persons to whom they have granted overdrafts, and the business and manufacturing activities of the community will be so restricted that further unemployment will ensue. The present depression, with its accompanying unemployment, can be cured only by the rehabilitation of trade, and by the jettisoning of the foolish industrial ideas that prevail among honorable members on the other side of the House. “When the people of Australia get down to work, and forget some of their fantastic notions about shorter hours and higher wages, and realize that only the money circulating in an industry can be spent by it, they will begin to make Australia live within her income.
– What is the honorable member’s idea of an ideal day’s work?
– The honorable member who has just interjected is an authority on the Yarra bank, but not on central banking. I have taken up a non-party attitude on this bill, but if this amendment is not accepted, the Government must become suspect. The public will be justifed in believing that the Government proposes to carry out some of the socialistic planks of its platform, and to indulge in an orgy of reckless spending. The central reserve bank will not remain solvent long if no limit regarding time or amount is placed upon the advances that it may make to governments. If the amendment is not accepted the definite object of the bill, which is allegedly to promote the financial stability of the Commonwealth, will be defeated.
– I think that honorable members of the Opposition are more anxious to create an opportunity for debate than to improve the bill.
– That is not fair; we have tried to be helpful.
– It is, of course, a very common strategy for an Opposition to concoct an amendment, talk all round it, and then suggest that, if the Government will not accept it, the Government’s whole proposal is, to adopt a word frequently used by the Deputy Leader of the Opposition (Mr. Gullett), suspect. I suggest that this amendment was con ceived in the same spirit - that it does not really mean anything. Nobody knows better than does the right honorable member for Cowper (Dr. Earle Page) that .a central reserve bank should have the right to make advances to governments. In addition to performing its ordinary functions as a bank for bankers, and controlling the note issue, a central bank is properly a banker for the Government in the country in which it is established.
– That is quite right.
– It is quite right, and in carrying out its functions as banker for the Government it necessarily must consider making advances to that Government.
– That is also quite right.
– But the right honorable member for Cowper (Dr. Earle Page) suggests that there is really no need for this bill. He has pointed out that without this legislation the Commonwealth Bank would develop towards a central reserve bank in the truest sense, but I point out that the Commonwealth Bank Act does not contain the limitation which the honorable member now proposes for the central reserve bank.
– The Commonwealth Bank is an ordinary trading bank as well as a reserve bank, whereas this is a bill for an act to provide for an institution which will be purely a reserve bank.
– According to the right honorable member for Cowper, the Commonwealth Bank is carrying out reserve bank functions. Very well ! Under its statute it has authority to make advances to governments without any limitation as to amount or duration of the security.
– Only as an ordinary bank and not as a reserve bank.
– The Commonwealth Bank makes advances as a reserve bank and as an ordinary trading bank. It does the banking of virtually all the governments in Australia.
– As a trading bank.
– Certain of the governments of Australia have had accounts with the Bank of England. It has done the hanking business of Australian governments in London, not as a trading bank, but as a central bank, and has had the right to make and has made advances to those governments without any limitation at any rate as to their duration.
– But the Australian governments did not control the Bank of England as the Commonwealth Government will control the proposed central reserve bank.
– Honorable members opposite are shifting from one point to another. When I answer this objection the Deputy Leader of the Opposition wants to get back to Australia.
– The two cases are not analagous.
– The right honorable member for Cowper claims that we would have had a central bank without this legislation by allowing the Commonwealth Bank to carry out the functions of a central bank. But in carrying out those functions and in making advances to the Government by way of loan, overdraft, or otherwise, there is no limitation to the amount of those advances that may be made by the Commonwealth Bank, nor to the duration of them.
– It is time there was such a limitation.
– The right honorable member for Cowper (Dr. Earle Page) was six and a half years a member of a government, yet he made no limitation in this regard with respect to the Commonwealth Bank. He only suggests it now that a Labour Government has brought down a bill to establish a central reserve bank. I do not deny that there is a limit beyond which a central reserve bank should not go in making advances to governments. The Commonwealth Bank, acting in the capacity of banker to a number of Australian Governments, is to-day carrying overdrafts with respect to its London and Australian accounts, but there are limits to what it can do. It would no doubt not hesitate to inform a government that it was approaching its limit or that the bank could not carry it any further. In the same way a central reserve bank, if it found that a government was depending too heavily on it, or was asking for advances beyond what it” considered a safe and reasonable amount to advance, would soon inform the Government of the fact and tell it that it must either go on the market or make some other provision to reduce its overdraft. That would be the natural consequence of. too great a dependence on the temporary accommodation furnished to a government by a central reserve bank. There is no need for inserting a provision in the bill to ensure that that practice would be followed. The New South Wales Government banks with the Bank of New South Wales and the Commercial Banking Company of Sydney, and those banks give it overdraft accommodation up to a very considerable limit.
– The Government cf New South Wales does not appoint the directors of those banks.
– No, but it probably gets as great a share,, proportionately, of . temporary accommodation from its own private, bankers as the other Governments of Australia get from the Commonwealth Bank. This all points to the fact that there is no need to import into this bill the unusual and unnecessary limitation suggested in order to ensure safety with regard to the administration of the central reserve bank, and that is the only thing about which I am concerned.
– The honorable member will agree that the amount provided for in the amendment is ample.
– I agree that if the Governments get at any time up to onefifth of their ordinary tax collections they may be considered to be getting a very generous accommodation from the central reserve bank ; and it is more than probable, I should think, that they would not be reaching that limit. But I can see no necessity to limit the clause as proposed, because I think that in carrying out the practice in regard to these matters the board controlling the bank will be guided by sound principles, common sense, and judgment.
.- Among other pearls of wisdom which fell from the lips of the honorable member for East Sydney (Mr. West) was the phrase, “ This borrowing has to be stopped “. Yet the honorable member wants the Government behind which he sits to be able to borrow all it can from this new central reserve bank per medium of unlimited overdrafts, whereas honorable Members of the Opposition seek to limit those overdrafts to an amount equal to 20 per cent, of the taxation receipts of the previous year. If these advances must always be temporary, as the Treasurer (Mr. Theodore) has said they must be, it presupposes a capacity to repay promptly, and surely if the liability is confined to 20 per cent, of the previous year’s taxation, there is much more likelihood that a government can repay promptly than would be the case if it borrowed to the fullest extent possible. Very sound arguments have been advanced by the right honorable member for Cowper (Dr. Earle Page), the Deputy Leader of the Opposition (Mr. Gullett), and other honorable members of the Opposition in favour of the amendment, but it seems to me that if further arguments were required in support of it they have been supplied by the honorable member for Adelaide (Mr. Yates) and the honorable member for East Sydney, who have spoken about the necessity to obtain, apparently per medium of this central hank, large sums of money for relief work for unemployed. It must be conceded that sympathy with the unemployed is not confined to honorable members on the Government benches, but surely we are not establishing a central reserve bank for the particular purpose of providing money for relief works for unemployed.
– Hear, hear!
– The honorable member for South Sydney admits that.
– No, I say that we are not doing it.
– The honorable member will also admit that the central reserve bank should not be used for that purpose. Among other things, the honorable member for Adelaide said that if the bank were to be of any use to the Government it must be able to do these things. Surely this bank is not being established simply to be of use to the Government. We, on this side, understood that it was to be of some good to Australian industry generally.
– Of some use to Australia as a whole.
– If it is to be of use to Australia as a whole, and not merely to the Government, its funds must not be too much locked up -in loans or advances to Governments. The honorable member for Adelaide compared the advances which might be made under this clause, if it is not amended, with the advances made some years ago by the Commonwealth Bank when a difficulty arose in connexion with financing the sale of our wool clip and wheat harvest. There is no analogy between the two. An advance even by way of an additional temporary note issue against the sale of wheat or wool is an absolutely sound proposition, because wheat and wool are money just as much as gold is money, and notes issued in addition to the ordinary circulation for that purpose may always be withdrawn as soon as the temporary need is past. In fact these additional notes were issued only on the definite understanding that they would be withdrawn in a very short period, and very little additional circulation of notes was actually necessary, because, if my memory serves me right, as soon as the private banks realized what was about to be done by the Commonwealth Bank, credit which had previously been frozen, easily became liquid. It is, therefore, useless to compare that transaction with that which was suggested by the honorable member for Adelaide and the honorable member for East Sydney. If the Treasurer’s mind is adamant on this amendment then I submit that whatever apprehension there is in the public mind with regard to the use this or any other Government might make of the bank must be added to by the views expressed by the honorable member for Adelaide and the honorable member for East Sydney. And there surely never was a time when there was greater need to improve the nation’s credit than the -present. The limitation proposed in the amendment would do something to enhance our credit and remove apprehensions which are generally felt in connexion with this bill. The Treasurer said that since the previous Government had not seen fit to insert this limitation in the Commonwealth Bank legislation, he could not see the necessity for putting it into this particular legislation. He made that observation in a way that suggested he thought it should stifle all criticism on the matter, but I submit that such a limitation could not rightly be imposed upon the powers of the Commonwealth Bank as a trading bank, because it would prevent it from acting as a trading bank. Limitations, which would not be proper for the Commonwealth Bank, may quite fittingly be imposed on an institution established for the purpose of doing central reserve bank business.
– That is the whole reason for bringing in the present bill.
– Then the Treasurer must admit that the limitation suggested is reasonable in this legislation, although it would be unreasonable in legislation dealing with the Commonwealth Bank which acts as a trading bank in addition to acting, to some extent, as a central reserve bank.
The honorable member for East Sydney ridiculed illustrations from this side of the chamber of what had been done in other countries in respect of central reserve bank legislation.
The lights having failed for eleven minutes,
The lighting of the chamber having been restored,
That the bill be further considered in committee forthwith.
– Before the chamber was plunged into darkness, owing to the failure of the electric light, I was about to comment on remarks made by some honorable members opposite concerning statements by honorable members on this side regarding the practice adopted in various European countries. I do not intend to traverse the ground that has already been covered, but I propose to allude to the practice in one of the European countries to which reference has been made, and in Great Britain. It seems to me that we shall put ourselves in a very poor position if we are satisfied with anything less than the legislative safeguard made by some of the countries which have been referred to by honorable members on the Government side as minor nations. The legislation of Greece, for instance, provides that the advances made by the
Central Bank in any year shall not amount to more than 10 per cent. of the sum raised by that country by way of taxation in the previous year. The amendment of the right honorable member for Cowper (Dr. Earle Page) is twice as generous as the legislature of Greece; it proposes that up to 20 per cent. of the amount raised by way of taxation in the previous year may be advanced. It is unnecessary, of course, that the Commonwealth should copy Greece, or any other continental country, for that matter ; but surely it would be unsatisfactory to us to accept a provision which is not regarded as good enough for Greece. The argument was used by the Treasurer that in Great Britain no limitation was put upon the amount which could be lent to the British Government by the Bank of England. That is true; but there is a limitation in connexion with borrowing in Great Britain which is not proposed to be inserted in this bill. The Treasurer will admit that borrowing from the Bank of England cannot be undertaken by the British Government without specific parliamentary sanction.
– That will apply here, too.
– The position is not the same.
– Exactly the same.
– An indirect sanction may be implied, but is not set out in the bill.
– We must have statutory authority to borrow.
-The Government of theday, under this measure, may borrow money, or obtain an overdraft - whichever term may be preferred - from the central bank without perliamentary sanction, and, months later, the Government may seek parliamentary sanction of its action.
– No; it must have prior parliamentary sanction.
– Does the Treasurer mean that an overdraft could not be obtained unless the Government first brought down a bill for it?
– The Government could not borrow from the bank, even temporarily, unless it had prior statutory authority to make such an arrangement.
– Does the Minister suggest that, if Parliament were not sitting, it would be impossible for the Government of which he is a member to obtain an advance from the reserve bank?
– We could get an advance; but it would be done under the authority of an act still current under which we had authority to continue borrowing.
– That would be distinctly different from the practice in Great Britain, where specific legislation relating to any sum to be borrowed must be passed.
– The position is the same here.
– No. The Treasurer has made it clear that the Government could borrow fromthe bank under the authority of legislation of a general character.
– There would have to be a prior authority.
– But it would only have to be a general authority in that case, and not a specific authority regarding a particular borrowing transaction, which is required in Great Britain. I submit that there is in the British practice a safeguard which is not present in merely a general authority for borrowing. I strongly support the amendment. If it were accepted I believe that it would give confidence in quarters where confidence is to-day sadly lacking. [Quorum formed.]
.- I am becoming rather tired of hearing the constant reiteration of the banking practices of Bulgaria, Greece, and other countries by honorable members opposite who usually speak with the utmost contempt of the nationals of those countries. Honorable members opposite should know that the economic reconstruction that has taken place in those countries has been brought about by the conditions imposed upon them by the international financiers in their efforts to obtain some security for the loans that were floated during the war. The right honorable member for Cowper (Dr. Earle Page) stated that in the case of Greece the Government provided the capital of the Central Reserve Bank for two years, after which period that obligation was to rest upon the general community. Surely that is clear evidence that that country adopted a temporary expedient in order to reconstruct its economic position. All the talk about the central banking systems of these countries is so much humbug, because conditions have been imposed upon them by the international financiers to gain their own ends. When honorable members opposite ask us to follow the example of those countries, we know full well that they want Australia to be tied hand and foot to the international financiers. This provision, when given effect, will do more than anything else to reconstruct Australia’s financial position to the advantage of the people generally.
– Why this clause ?
– This clause offers a means whereby the credit of Australia can be mobilized and utilized in the interests of the people, and not in the interests of the associated banks.
– In what way?
– I spoke for over an hour on the second reading of the bill, and the right honorable member is fully aware of my opinion.
– Does the honorable member think that this clause will bring about what he desires?
– No ; but it is a step in the direction of the gradual mobilization of our financial resources. In saying that I am not giving anything away because it stands in black and white on the platform of the Australian Labour party.
– The honorable member is certainly honest.
– Honorable members opposite are trying to cloud the issue. They keep trotting out as examples, countries like Greece, Bulgaria, and Esthonia, when in actual fact those countries are almost nonentities so far as their economic positions are concerned.
– What about Germany?
– Honorable members opposite constantly refer to Germany, but if they had spoken in such eulogistic terms of that country two or three years ago they would have been put in gaol. Now they hold up that country as a pattern. I am not concerned with the position of Germany.
– The honorable member knows nothing about it.
– I know more than the honorable member, and I am prepared to put my statement to the test in his own electorate.
– The honorable member can put it to the test on the floor of this chamber.
– Germany to-day is in the hands of the international financiers, and I am pleased indeed that Australia is not in a similar position. If honorable members wish the financial affairs of this country to be in the hands of the international financiers they will vote for the amendment moved by the right honorable member for Cowper (Dr. Earle Page).
.- The Treasurer in his remarks rather suggested that honorable members on this side are deliberately delaying the passage of this clause.
– I meant that honororable members opposite were simply resorting to the usual tactics of an Opposition.
– If the Treasurer really thinks that, he should not blame us for doing as his party did when in opposition. Under the pretence of acting in the interests of the country it delayed the legislation introduced by the Bruce-Page Government. The Treasurer should blame his own supporters for any delay in the passage of this clause, because they have made most alarming statements which we cannot disregard. After the speech of the honorable member for Werriwa (Mr. Lazzarini) little doubt can be left in the minds of honorable members on this side that some precautions are necessary in respect of advances to the Government. I ask, for what purpose does the Treasurer anticipate that he will need an advance of £12,000,000? We know that there has been a considerable conflict of statements with regard to the financing of the wheat pool. Is it that the Commonwealth Bank requires some business-like arrangement for that purpose, and that this bill has been introduced out of a desire on the Government’s part to enable it to make such an arrangement with the bank? Thenwe have been told that there is a possibility of a deficit of some £10,000,000. during the financial year.
– A Commonwealth deficit?
– The position is not quite so bad as that. Surely the honorable member must be referring to the next financial year.
– That is so. Possibly it is that the Treasurer desires to be in a position to obtain money from a reserve bank in order to meet such a deficit. In any case it is of the gravest importance that there should be some limit to the amount which any government will be able to draw from the reserve bank. I have a particular objection to advances being made by the reserve bank. There is need for a limit to advances to the Government by ordinary trading banks, and a much greater need for a limit in the case of the reserve bank. We know that this bank will have a capital of £2,000,000 taken from the Commonwealth Bank, and further assets variously estimated to be between £15,000,000 and £20,000,000 taken from the private banks.
– Not as capital.
– As deposits. Necessarily any advance made by the reserve bank must be against its assets, which, of course, will consist of the deposits of the private hanks. I suggest that a clause of this nature in a bill which proposes the establishment of a reserve bank and which should be a buttress to the private banks of Australia, requires a limitation. The Treasurer has told us that he is anxious to help the private banks and to make them secure, so that they may continue, to hold the confidence of the people. At the same time he brings down a proposal which will enable the reserve bank to make unlimited advances to the Commonwealth Government, the. State Governments, and other authority constituted under the law of the Commonwealth or of any State.
– There is no compulsion on the bank to make advances.
– If the provisions of the bill are carried out and the controlling authority of the reserve bank is appointed by the Government for a short term, necessarily the bank directors will be influenced by the Government of the day. The amendment is intended to limit the amount of the advance to one-fifth of the amount received by the Government in taxation during the preceding financial year. It is fair and reasonable. If the Treasurer thinks that one-fifth is not sufficient, the right honorable member for Cowper might agree to substitute onefourth. Personally, I cannot imagine that the Commonwealth Government would ever need a temporary advance of more than £15,000,000. There should also be a limit to the amounts that may be loaned to the State Governments and local governing authorities in such circumstances. Seeing that the Treasurer has said that there is to be no political interference with the management of this bank, I cannot see why he will not accept the amendment.
– I hope that a limit will not be put upon the amount of money that the bank may lend to the Commonwealth Government, the State Governments, or local governing authorities. The object of the amendment is, in my opinion, to restrict the usefulness of the bank. If a government requires credit from an institution of this nature it should be able to get it. If local governing authorities could obtain money from some such source at present, they could do a great deal to relieve the prevailing unemployment. If this bank is not intended to make this possible I have not very much interest in it. Certain honorable members opposite have adversely criticized a finance resolution of the Labour party conference held in Canberra recently; but I, like the honorable member for East Sydney, am proud to associate myself with such a proposal, and I hope that the Government will do its utmost to give effect to it. I was amazed to hear the honorable member for Swan (Mr. Gregory) say that the board of directors of the institution should be appointed by the depositors of the money which the bank will control. That would mean that the directors would be the directors of the private banking institutions, which would be ridiculous. T am diametrically opposed to the policy of allowing private institutions to exploit the credit of the nation. Seeing that the Commonwealth Government will provide this bank with its initial capital of £2,000,000 it should have something to say about the directors. The honorable member for Henty (Mr. Gullett) has told us that he would like to see a bank established in Australia like the Bank of England; but does he know the personnel of the board of directors of that bank? On the 19th June, 1929, Mr. Arthur Kitson, speaking at Caxton Hall, Westminster, said -
It is only within the last 50 years that the sinister influence of the Bank of England has become so apparent and so dangerous to the welfare of Britain. The Bank of England is now an international trading company, controlled by 25 directors, eight of whom represent American interests and four represent German interests, with Montagu Norman, the Governor-General. Britain’s real ruler is neither Kng George V. nor Parliament; the ruler is the man or men who control the bank, who cause trade to boom or stagnate as they wish.
In the light of these statements, it should not be dreadful to contemplate that this bank may be subject to some measure of political control. .Personally, I believe in complete political control of banking. That is the policy of the Labour party. The measure now before the House is mild ; there is nothing in it that should cause honorable members opposite to hold up their hands in holy horror. The credit and currency of the country should be controlled by the government of it. Sir William Irvine’s remark that “finance is government and government is finance “ has frequently been quoted in this chamber; and I consider that it is the first duty of a government to control the finance of the country it governs. At present a fall in the prices of our stable commodities immediately reacts seriously upon the people. I take it that one of the objects of this bank is to counteract such depressions.
– The clause before the Chair deals with the powers of the bank, and I must ask the honorable member to connect his remarks with that subject.
– The amendment has been deliberately drawn to restrict the usefulness of the bank, and I hope that it will be rejected. Honorable members opposite have not made any constructive suggestions to overcome our present financial difficulties. If governments and local governing authorities could raise money to-day, they could put in hand reproductive works which would at once benefit the general community and provide work for the unemployed. Many local government’ works could be put in hand in my own electorate. Towns like East Maitland and “West Maitland, each of which has a population of- about 20,000, are crying out for the extension of their water mains and the establishment of deep drainage sewerage systems. The town of Greta has to rely for its water supply to a very large extent upon storm waters caught in underground or galvanized-iron tanks. In Cessnock, which has a population of 18,000, the sewerage system has been only half completed, and the work has been held up because of the financial stringency. If this proposed bank will not be able to make money available for works of that nature it will not have my blessing.
– I hope that the Treasurer will see fit to accept the amendment, which is in every respect reasonable. Whilst I am disinclined to limit the powers of the board unnecessarily, certain limitations should be written into the instrument which will form the charter of the bank. The clause, as drafted, will provide opportunities for embarrassed governments to make claims that should not be entertained by the board and which, if entertained, may land the directors in serious difficulties. This clause should not be used as a means by which impecunious governments may escape their obligations, and embark upon wild-cat schemes of unemployment relief with the funds provided for reserve purposes. The purpose of a reserve bank is not to help governments that should help themselves, or to finance trading or political schemes, but to buttress the trading banks in times of national crisis. I impress upon the Treasurer the desirability of accepting the limitation that has been proposed.
– The eleven trading banks are’ operating under charters which impose no restriction as to the amounts they can lend, or the currency of the loans.
– They are trading banks. The reserve bank would not be a trading bank.
– Surely the directors may be trusted to exercise their common sense as to the extent and period to which credit ‘shall be given. The trading banks have operated successfully without any limitations, and the reserve bank should have the same opportunity. The Commonwealth “Bank Act does not impose any limitation upon the amount of money that that institution may lend.
– It is a trading bank.
– It also discharges some of the functions of a reserve bank. Without the restriction now proposed by the right honorable member for Cowper (Dr. Earle Page) it has been helpful to the trading banks. Give the reserve bank also a fair opportunity. After all, the board will not be able to lend more money than.it has at its disposal. I hope that the Treasurer will not accept the amendment.
.- The honorable member for South Sydney (Mr. E. Riley) does not appreciate the difference between a reserve bank and a trading bank. The Treasurer said that the Commonwealth Bank has operated to some extent as .a reserve bank, but there is a great deal of difference between it and a central reserve bank, with which the associated banks will have to deposit about £20,000,000. The protracted debate on this measure has served a good purpose, insofar as it has made the public aware of the objective of the majority of honorable members supporting the Government. The Government desires to create this reserve bank and give it tremendous authority to enable it to take over money from private banks, not to assist in maintaining the credit of the country, and thus promoting development, but to sink the money so acquired in socialistic schemes to the detriment of Australia. Honorable member after honorable member opposite has specific^ ally stated that the money will be used for certain purposes. Sir Ernest Harvey, the eminent authority on banking, recommended that there should be a central bank in Australia, but that it should be free from government control and the influence of politics. He said that it might lend money to governments, but in all cases the loans should be of a purely temporary nature, with the date of repayment clearly defined. The charter of the Central Reserve Bank of the United States of America permits that institution to deal in bonds and notes of the Government, and in bills, notes, revenue bonds, and warrants having up to six months’ maturity, issued in anticipation of the collection of taxes or in anticipation of the receipt of assured revenues of any State or local government authority. What the right honorable member for Cowper (Dr. Earle Page) suggests in his amendment is that similar advances here should be limited according to the revenue to be obtained by taxation by the Commonwealth, the State, or the local authority concerned.
– The amount will not be limited, even if the honorable member talks all night.
– The honorable member has not yet got the bill passed.
– What is the significance of that statement?
– That we shall fight it for a long time yet.
– Is the honorable member threatening a stonewall?
– Then what is the significance of the honorable member’s statement ?
– That I do not believe that the bill will” be passed in another place in its present form. The Treasurer might be good enough to tell us who drafted this bill. It is the most important financial measure that has ever been brought before this Parliament. The activities of this central reserve bank must inevitably interfere with the operations of the great financial organizations of Australia. How will our private banks be able to obtain credit for the purpose of carrying on their ordinary trading if such enormous sums of money are to be taken from them? In the circumstances the Treasurer might inform honorable members who is responsible for the . drafting of the measure. Is it his own?
– I am entirely responsible for the measure as brought down here.
– The bill departs from the charter of every other financial institution mentioned in this work by Kisch and Elkin, Central Banks, which has an appendix exhaustively detailing the central banks of the world.
– How many solely government banks are mentioned in that appendix?
– Only one; that of Switzerland. The amendment proposed by the right honorable member for Cowper proposes an essential safeguard against any spendthrift government. As the directors of this bank will be appointed by the Government, a certain amount of political influence must necessarily be wielded over the institution. I hope that the Treasurer will accept the amendment.
.- I rise to reply to a remark that was made by the honorable member for Gippsland (Mr. Paterson) while I was temporarily in the chair. The honorable member made reference to the time when the Bruce-Page Government manipulated the note issue at the behest of the private bankers. The right honorable . member for Cowper (Dr. Earle Page) was then Treasurer.
– I have never done such a thing in my life.
– Those banks put pressure on the right honorable gentleman’s Government and forced it to make available £5,000,000, and then £10,000,000, in notes in order to finance the wheat and wool sales of Australia. The actual words of the honorable member for Gippsland were “Immediately it became known, assets which were then frozen became liquid “. I suggest that that was done at the behest of financial institutions, which placed pressure on the honorable member’s Government.
– That is absolutely false.
– I do not expect the right honorable gentleman to admit it, but that is what happened, and the honorable member for Gippsland admitted it in this chamber to-night. I suppose a similar thing will take place when the Wheat Marketing Bill comes into operation. Wheat certificates will then play the same part as cheques now- do, or as bonds did during the war. At that time business people pasted in their windows notices to the effect that bonds would be accepted, and Governments urged the people to take up bonds. But those people did not get value for their bonds. Some remarkable financial transactions occurred during the war period.
– I ask the honorable member to connect his remarks with the clause, which does not mention the honorable member for Gippsland.
– I submit that the whole of my remarks are germane to the subjectmatter of the clause, and to the amendment of the right honorable member for Cowper. If this Government puts into effect the recommendations of the recent Labour Conference, and makes fluid an amount of £20,000,000 to assist unemployment, it will be following the example of the Bruce-Page Government and manipulating the fluidity of the credit of Australia not to promote wild-cat schemes to relieve unemployment as suggested by the honorable memberfor Darling Downs but to prosecute public works. Is the unification of the railway gauges of Australia a wildcat scheme? No more progressive work can be imagined; yet Australiais not prepared to undertake it. Then, in Adelaide, there are government officeswhich, in their uncompleted state, are an eyesore in one of the finest cities in the southern hemisphere. If the erection of that building is a wild-cat scheme, why was it commenced? The admission of the honorable member for Gippsland that when, during the régime of the Bruce-Page Government, the private banking institutions were empowered to draw against notes to the value of £50,000,000 to finance the wool and wheat crops, assets that were frozen became liquid, should disperse any fear that might have been caused by the resolution of the conference of the Australian Labour party that £20,000,000 be made available to absorb the unemployed in reproductive works. No government is generous enough to pay a workingman a wage unless valueis given for it. It is all tarradiddle to talk about wild-cat schemes to relieve unemployment. It is the wealthy speculator who makes big profits out of wild-cat schemes.
I have never known a working-man to be given employment except in useful and necessary work, It is time that this Parliament did something to relieve the unemployed. I make no accusation against the Government. Under this measure it is endeavouring to. provide a solution of the problem. I am hopeful that it will accomplish all that it has in mind, but I doubt whether it will be able to do so. The unemployed cannot be put off much longer. In South Australia some men have been out of work for three years, and their ranks are being added to daily. Eight months have elapsedsince there was a change of government. Something must be done, or there will be a reaction against this Government, in which I would be involved, and rightly so. If honorable members opposite believe that a man is a greater asset when employed than when unemployed, let them cease stonewalling this measure and put it to the test to see whether it will effect the purpose for which it was designed. I am prepared to give it a try-out; but I shall still advocate an expansion of the credit of Australia for the purpose of carrying out useful public works that are necessary to absorb the unemployed, because I do not believe that this proposal will wholly meet the situation with which we are faced.
Motion (by Mr. Scullin) proposed -
That the House do now adjourn.
.- This afternoon I asked the Minister forWorks and Railways whether it was proposed to. make extensions to the Note Printing Office in Melbourne; and, ifso, whether the specifications would be supplied and public tenders called forthe supply of strongroom doors and fireproof safes. I was informed that this work, the estimated cost of which is £230,000, is in hand by departmental labour, and that my inquiry in regard to the strongroom doors and safes would be referred to the Commonwealth Bank authorities, by whom they are to be installed. The point that I wish to make is that it has been the practice of the Commonwealth Bank authorities to place all orders for the supply of strongroom doors and fireproofsafes with one firm - Chubbs. Possibly, there is not in Australia a firm that can compete withChubbs in certain lines.
– Are notChubbs established in Australia?
– They have an agency in Australia, but I do not think that they actually manufacture here. But whether they do or not, the praotice of the Commonwealth Bank of giving preference to them is not understandable. There are other makes of safes and doors which, in some respects, are quite as good as those that are manufactured by Chubbs, such as Milner’s, Tann’s and Ratner’s. Apart from the specific safes and doors that only Chubbs can make, there are many other requisites of the Commonwealth Bank that I know can be produced in the Commonwealth. I know that thosethat are manufactured in South Australia are second to none. I suggest that inquiries be made so that other manufacturers in Australia may have an opportunity to compete for the business that is offering.
.- I support the remarks of the honorable member for Adelaide (Mr. Yates). I also received certain information in reply to a question concerning the policy of the Commonwealth Bank in this respect, as also did the honorable member for Perth (Mr. Nairn) and was informed that the Government was not aware that the bank requirements in this respect could be manufactured in Australia. I understand that the firm mentioned is manufacturing strongroom doors in Australia, but only of the cheaper variety, but I contend that an opportunity should be given for other Australian manufacturers as well as agents representing overseas manufacturers to quote for any of the safes and doors required. It is time that matters of this kind were taken out of the handB of the Commonwealth Bank and tenders called in every instance to see what savings may possibly be effected.
– I understand that the safes and the doors referred to are manufactured in Australia.
– Only strongroom doors of a cheaper variety are made in Australia.
– The orders given by the Commonwealth Bank are for doors manufactured in Australia; preference is given to Australian manufacturers. I do not know if honorable members are complaining because Australian-made instead of imported doors are being used by the bank, but if that is their complaint, they will not have my sympathy.
– Objections have been raised because tenders are not called.
– That is because the firm mentioned is the only one manufacturing strongroom doors.
– There are other manufacturers operating in Australia, and also agents of overseas makers.
– I am not aware of any Australian firm manufacturing doors of the type required other than that which is supplying the Commonwealth Bank.
Question resolved in the affirmative.
House adjourned at 10.34 p.m.
Cite as: Australia, House of Representatives, Debates, 11 June 1930, viewed 22 October 2017, <http://historichansard.net/hofreps/1930/19300611_reps_12_124/>.