12th Parliament · 1st Session
Mr. Speaker (Hon. Norman Makin) took the chair at 11 a.m., and offered prayers.
Officers : Gabber Island - Naval Establishment - Medical Unfitness - Retrenchment
asked the Minister for Defence, upon notice -
– The answers to the honorable member’s questions are -
asked the Minister for Defence, upon notice -
– The answers to the honorable member’s questions are -
asked the Minister for Defence, upon notice -
– Inquiries are being made, and a reply will be furnished to the honorable member as soon as possible.
asked the Minister for Defence, upon notice -
– The answers to the honorable member’s questions are-
Owing to retrenchment, there are a number of naval officers in excess of naval requirements, and it is, unfortunately, a fact that the Naval Board has been compelled to servo notices of dismissal. Inquiries are being made with the view of obtaining positions in the Commonwealth Public Service for those under 30 years of age, and an amendment of the Public Service Act will shortly he introduced to give effect to this scheme, which will be applicable also to graduates of the Royal Military College.
asked the Prime Minister, upon notice -
– The answers to the honorable member’s questions are - 1 and 2. The importations of radium into Australia during the years 1927-28 and 1928-29 were as follows : - 1927-28, £103,487 (includes equipment imported into Victoria) ; 1928-29, £9,749.
asked the Acting Minister, for Trade and Customs, upon notice -
– The answers to the honorable member’s questions are: -
asked the Acting Minister for Trade and Customs, upon notice -
What are the total quantities of (a) oregon, (b) Baltic pine, (c) hemlock, (d) spruce, (e) redwood, (f) cedar, (g) kauri, and (h) Pacific maple, imported during 1928-29, and the countriesof origin in each case ?
Mr.FORDE.- The information will be obtained.
asked the Minister for Home Affairs, upon notice -
In view of the fact that on two occasions the honorable member for Melbourne has failed through questions on notice to obtain the name or names of the architect or architects who designed the plans of the following hotels, viz., Hotel Canberra, Hotel Kurrajong, and Hotel Acton, and also the hostels known as Gorman House, Bachelors’ Quarters, and the Printers’ Quarters, will the Minister insist upon his departmental officers supplying the information?
– On the 22nd March, 1929, and the 21st May, 1930, the honorable member was informed that the Hotels Canberra, Kurrajong, and Acton were designed by the Department of Works and Railways. On the latter date, the honorable member was also informed that Gorman House and the Printers’ Quarters were designed by the Department of Works’ and Railways, and that the Bachelors’ Quarters were designed by the same department, the additions thereto being made by the late Federal Capital Commission. Inquiries will be made of the Department of Works andRailways as to whether it is possible to supply the names of the individual officers concerned in the preparation of the designs.
asked the Acting Minister for Trade and Customs, upon notice -
What are the total amounts and values for each year since the inauguration of the Commonwealth of the imports of wattle bark and wattle bark extracts from South Africa into Australia?
– The information is being obtained.
– On the 5th June the right honorable member for Cowper (Dr. Earle Page) asked the following question upon notice -
What was the average rate of interest during 1928-29 on advances made by (a) the Renewal Department of the Commonwealth Bank, and (b) the Rural Credits Department of the Commonwealth Bank?
The Commonwealth Bank has now furnished the following reply : -
The rate of interest charged through the General Department of the Commonwealth Bankon all advances, including advances to Governments, but excluding investments in London, during 1928-29, averaged £61s. per cent. The rate on advances made through the Rural Credits Department during the same period averaged £5 10s. per cent.
The following papers were presented -
Northern Australia Act - North Australia Commission - Third Annual Report for the year 1929.
Public Service Act-Appointment of W. J. Owen, Department of Health.
In committee. Consideration resumed from 12th June(vide page 2713) :
Clause 22 - (5.) The board may appoint from amongst its members an executive committee of not less than three members to hold meetings and carry on the business of the reserve bank between meetings of the board.
– On further reflection, I am not so opposed to this clause as I was last night. If the committee is not agreeable that the directors shall be selected because of their fitness, and irrespective of their own business interests and avocations, it may be wiser to retain the clause. I do not concealmy disappointment that there are in this committee men who desire to have on the board representatives of sectional interests, who can be approached when matters particularly affecting those interests are under consideration. I dissociate myself from that reprehensible view, but as it is held and expressed in the bill, the executive should exclude sectional representation as much as possible, and the bank should be carried on in ‘accordance with banking principles. If I wanted information regarding the operations of a bank, I should not approach a director whose only qualification was that he had been a primary producer, a manufacturer, or a representative of the workers; I should seek banking information from a banker. As two of the three members of the executive will be officials, the third man will not count. I agree with the Treasurer that the governor should be a man of dominating personality, who will take the leadership in the bank’s affairs. Apparently, the bank will be controlled by the governor, a deputy governor, and one other director. Will the two official members of the executive be men of such strong personality that they will be able to resist political pressure? Or will the Treasurer of the day have an even more dominating personality, and control the executive? If he has, the fears and doubts expressed at the beginning of this debate will persist. We have to rely on the Treasurer of the day to resist the conservative pressure from one party and the frenzied financiers in another party, and to allow the business of the bank to be conducted on sound non-political lines. If he can do that, the bank will be a success; if he cannot, all the ills of political control that have been predicted during this discussion will fall upon an unfortunate people.
– I cannot understand why warmth should have been imported into the discussion by the honorable member for
Warringah (Mr. Archdale Parkhill). It has never been the practice for sections of the community to approach, or attempt to influence, individual members of the Commonwealth Bank Board, and I hope that no such development will occur in connexion with the Central Reserve Bank. I recognize the need for a small executive, because I hope that the board will consist of men appointed from various States, and full meetings may not be convenient more often than once a month. Provision should be inserted to ensure that at meetings of the executive, three shall form a quorum - at which one outside director at least will always be present. The clause follows the corresponding section in the Commonwealth Bank Act, but in the latter no safeguard such as I have suggested is necessary, because there are only two official members on the board. The Treasurer has foreshadowed an amendment which meets the wishes of the committee in regard to the composition of the executive, and I wish to make sure that at all meetings three directors will be present.
– I am prepared to move that of the members of the committee not more than two shall be chosen from the official members of the board, and that at meetings of the board three shall constitute a quorum.
Amendment (by Mr. Theodore) agreed to-
That after sub-clause 5 the following new sub-clauses be inserted: - “(5a.) Of the members of the Executive Committee not more than two shall be chosen from the official members of the board. “(5b.) At meetings of the Executive Committee three shall form a quorum.”
– I strongly disapprove of the proposal to have sectional representation on the board. The reserve bank should be controlled by the Governor and the Deputy Governor. A successful manufacturer is not necessarily qualified for a position on the board.
– The honorable member may not discuss a clause that has been passed by the committee.
– I am aware of that, but I am replying to criticism offered last night by the honorable member for More ton (Mr. Francis), who made a plea for the representation of remote States. In any event a successful business man would not care to give up his business for £600 a year, which he would receive as a member of the board.
Clause, as amended, agreed to.
Clause 23 verbally amended and, as amended, agreed to.
– I move-
That before the word “there” sub-clause 2, the following words be inserted: - “he shall retain all his existing and accruing rights and”.
This will give adequate protection to all officers transferred from one bank to the other.
– Will the rights of all Commonwealth Bank officers as well as the rights of all public servants be adequately protected?
– I understand from the Treasurer’s statement that the rights of all officers of the Commonwealth Bank who may be transferred to the Reserve Bank will be protected in their entirety.
– After the bill was drafted attention was directed to this matter by certain members of the staff of the Commonwealth Bank, and the position was fully discussed with the draftsmen and the Crown Law officers. They have assured me that the insertion of the words contained in my amendment will fully protect all existing and accruing rights of officers of the Commonwealth Bank, and that there is no need to further specify those rights.
– Then the amendment covers more than merely superannuation rights?
– Yes, it covers all rights, whatever they may be.
Amendment agreed to.
Clause, as amended, agreed to.
Clause 25 agreed to.
Clause 26 (Yearly balance-sheet).
. -This clause makes provision for the publication by the board of a balance-sheet at least once each year. I suggest that a balance-sheet might, with advantage, bo submitted twice a year, but I do not stress that point. I rose to direct attention to the fact that no provision is made for the publication of a weekly report, which practice is followed by the Bank of England and, I understand, by all other central banks. The Bank of England does not publish a balance-sheet, but issues weekly returns giving all necessary information of its operations. Kisch and Elkin, who are recognized as the standard authorities on central banking, point out that in the case of the Central Bank of Esthonia the League of Nations insists, in Article 48, that the bank shall publish a return of its assets and liabilities on the 7th, 15th, 23rd, and last day of each month, or not later than a week after these dates, in the form set out in the annexe to the law. The annexe provides that the return shall show on the assets side the reserve of gold coin and gold bullion, the net foreign exchange, the subsidiary Esthonian coin, the home bills discounted in relation to commercial, agricultural, and timber transactions; the loans and advances, the immovable property and equipment and other assets. The inclusion in the return of home timber bills is due to the fact that timber is one of the important local industries. On the liabilities side, the bank is required to publish weekly a return of its capital, reserve fund, current liabilities, including notes in circulation, sight deposits, current accounts, and other liabilities. It must also indicate the percentage proportion of reserve to current liabilities. Similar returns are demanded of the Central Bank of Chile. There is no provision in this bill requiring the proposed central bank to furnish any returns, other than a balance-sheet at least once a year. I do not know if this matter has been overlooked, or whether the Treasurer considers that the information should not be given to the public. The bank should be obliged to furnish a weekly return, as is done by the Bank of England.
– I agree that the bank should furnish a weekly statement showing its assets and liabilities, and giving other details of its business. It is the present practice of the Commonwealth Bank to issue such a statement, although it is not required by statute to do so. The Bank of England issues a weekly statement, giving information as to the quantum of reserve funds in the bank. It is not compelled by law to do this, but it has become the bank practice. There is not the slightest doubt that the same policy will be adopted by the proposed reserve bank. If it were thought desirable to include such a provision in the bill, it could be inserted, but Ido not think it is necessary.
Clause agreed to.
Clause 27 agreed to.
Clause 28 consequentially amended and, as amended, agreed to.
Clause 29 agreed to.
Clause 30 (Issue, re-issue and cancellation of notes).
.- I regard this as one of the most important clauses in the bill. It places the note issue in the hands of the central bank board. The other night I directed attention to what I termed the manipulation of the note issue by either the Commonwealth Bank or the Bruce-Page Government for the purpose of financing the wool clip or wheat harvest. The circumstances are well known to honorable members. While the honorable member for Gippsland (Mr. Paterson ) was speaking on the. subject, I rook a careful note of certain passages in his speech. He said, among other things -
Immediately that became known, assets which were then frozen became liquid.
– I certainly said that.
– What did the honorable member mean by the words “ when that became known “ ? Was he referring to the fact that it became known that the Bruce-Page Government was going to allow the Commonwealth Bank to free the assets, and make, available the right to draw-
– On securities in London.
– I know all about the securities in London.
– What was done, was clone not by the Bruce-Page Government, t.ir by the authorities of the Commonwealth Bank.
– At any rate, the note issue was being used for the purpose of making fluid, assets which were then frozen.
– It had that effect.
– The honorable member said that immediately that became known, . assets that were then frozen became liquid.
– That is so.
– As soon as that became known negotiations were entered into, and credit that otherwise would have remained frozen was made fluid. The deed was done.
– The notes were issued with the solid backing of the wheat crop and the wool clip.
– The honorable member has made that statement frequently. He insists that wheat and wool constitute a fixed asset ; but the honorable member for Werriwa’ (Mr. Lazzarini) has made it clear that when the wheat is sold most of the asset upon which an advance has been made goes out of the country.
– And the notes will be withdrawn accordingly.
– The honorable member does not know that.
– That stipulation was made in the case to which the honorable member has referred.
– We shall see how that stipulation was carried out. In any case, the thing was done; credit would have become fluid if not another note had been issued. My proposal is that the same sort of credit shall be made free again now, and it can be made free without hurt to this Commonwealth, and without fear of insolvency, or the dislocation of the affairs of this country, by putting the unemployed to work on the creation of assets that will eventually be reproductive. These will not be assets such as are sold and sent overseas. There is plenty of work required to be done that is not being done, and ‘that must, be carried out eventually. Moreover, every man in the community has the inherent right to live, and it is the duty of the Government of this country to .provide work whereby he can earn a living. Men can be employed on the construction of railways and public buildings that are urgently required, and will ultimately be constructed out of loan moneys. But if credit can be freed for one purpose, and frozen assets made liquid, surely at this time of stress and want in the community credit can be freed to give our people employment on reproductive work. We are proposing to establish a central reserve bank which is to be a buttress to the private banks of this country. That may be quite a good thing to do, to stabilize banking, but, as I pointed out in my second-reading speech, Mr. Glynn said, at the time when the proposal to establish the Commonwealth Bank was before this Parliament, that the Australian banks are, perhaps, the safest in the world. They, therefore, do not absolutely require any stabilizing. They do not actually need a central reserve bank. Yet we are establishing this bank, and to control its operations directors are to be appointed at salaries totalling thousands of pounds a year. These directors will meet once a month just to gain some knowledge of what banking business is being done, and to overlook reports supplied to them by the executive committee of the bank. We are doing this at a time when one of the daily newspapers of this country has published a photograph, showing stalwart men, not derelicts or decrepit men, but men. that we need not be ;ashamed of - carrying bags along Circular Quay in Sydney to receive rations, in order to relieve depots that are issuing rations elsewhere. The incongruity of these facts is shameful in a country like this. We could free frozen credit if we so desire so as to give employment to these men, yet certain honorable members are getting a lot of kudos and credit by bluffing the people and ridiculing my idea of using the note issue for the relief of the unemployed. I warn honorable members that the chickens will come home to roost in a manner that may not be appreciated by them. Some day it will be realized that my proposal must be given effect. The other day ,the honorable member for Swan (Mr. Gregory) said by interjection that the note issue had not been inflated until it was placed under the control of the board.
– I said that in . 1918 there was an inflation of the note issue. At that time an amount of £18,000,000 was lent to the States.
– The Notes Board was established in 1920. Some honorable members’ facetiously say that I want to resort to the printing press to turn out more notes. They know that such a statement goes down with the unthinking part of the public, although in their hearts they are well aware that we can expand credit without the issue of one additional note. We can expand credit to the utmost requirements of the nation, without borrowing at all from the private money-lenders.
What is the history of the note issue? I invite honorable members opposite to read the criticism and comment that were madeby members of their own party when the proposal to establish a Commonwealth note issue was first made. I do not wish to repeat what was then said, although it may be necessary later to place those speeches again on record. This question must be discussed Until it is thoroughly understood and adopted.
– Until it is thoroughly understood, and not adopted.
– I say that it will eventually be adopted, The Commonwealth note systemwas adopted despite the most doleful jeremiads of the party which the right honorable gentleman represents. When the note issue was established, the condition was laid down that there must be a 25 per cent, gold reserve for the issue of £7,000,000 worth of notes and £1 in gold for every £1 note issued in excess of £7,000,000 worth. That was agreed to by Mr. Fisher, the then Prime Minister. What has happened since then? I refer honorable members to the figures published in the last budget, which show that the scheme that I am proposing has already been put into , practice. It has been carried out by the Commonwealth and has had no ill effect. According to this statement, in 1910 the issue of notes amounted to £3,389,476. In 1911 it increased to £7,986,223, and remained about that figure until 1915, when it was considerably increased. I ask my critics, whether on this or that side of the chamber, how- that was done, what was the effect, and for what purpose were the notes used? The reason for the increasedissue was the outbreak of the war. In 1914 the total notes in circulation amounted to £9,573,738, and, in 1915, the value of our notes increased to £32,128,302. Was there any mention of gold reserves on that occasion ?.
– Did not wages keep well behind the prices of commodities?
– Yes. The profiteers saw to that. The right honorable member knows that had he given effect to his own statement and placed a gun at the top of Flinders Lane, he could have shot all the profiteers in Melbourne. At that time he wanted to “turn on the light,” and make the profiteers “drop the loot.” On this occasion I want to turn on the light and to make those who are exploiting the nation in this time of its agony and distress, drop the loot. How was it possible for the note issue to be so enormously increased during the war? The reply must come from my critics. I am giving them the official figures’ to prove my case. At the outbreak of war, in addition to inflating the note issue, we commenced to borrow considerable sums, both here and abroad, and the private money-lenders were given an additional . opportunity to stick their talons into the community and to exploit it to the fullest extent. Credit was then created for the purpose of carrying on the war; and it did the job effectively. I shall not deal with the figures for the intervening years after 1915, except to point out that in the year that the control of the note issue was handed over to a board the note issue went up to £56,000,000. Was it not just and essential that credit should be made available when the control of the note issue was in the hands of the Commonwealth Government? When it was found necessary to increase the note issue, the issue was increased. I ask those honorable members who now hold up their hands in holy horror at the thought of increasing the note issue, what harm came from utilizing the credit of the nation, through its note issue department, to the extent I have stated? Notwithstanding that the control of the note issue was in the hands of a board, the circumstances of the moment were such that the board could not prevent the expansion of credit. The note issue reached its peak in 1921, when it rose to £58,228,070 10s. Did not that expansion of credit serve our purpose just as well as if we had borrowed money from outside Australia?
– It created inflation.
– Necessary works must at all times create inflation. But are we to allow our people to starve, or obtain sustenance from food depots, merely because we are afraid of inflation ?
– We might make things worse than they are.
– We might make them better. If there is a danger of the further exploitation of the community because we utilize our own credit instead of borrowing money overseas, then we should do well to adopt the suggestion of the right honorable member for Cowper (Dr. Earle Page) that we should train our guns upon the profiteers.
– It was not I who said that.
– The right honorable gentleman expressed himself to that effect, if not in those actual words. At least he will not deny that he once said that he would “ turn on the light,” and make the profiteers “ drop the loot.” Yet, a little later he helped them to gather in the loot. Honorable members opposite will not dare to contend that the increase in the note issue from £9,000,000 to £39,000,000 was the cause of the increased prices dm> ing that period, for they are aware that prices rose at the decree of the chambers of commerce before there was any increase of the’ note issue. Prices started to rise before a penny was borrowed for war purposes.
– It is possible to have inflation by means other than the note issue.
– Honorable members >say a great deal about inflation. The inflation that I should like to see is the inflation of the stomachs of the workers. The note issue is credit expanded and used for the benefit of the nation. That is why honorable members opposite fight it so. They know that an increase of the note issue will rob those whom they represent of their chances of making extortionate profits.
– Would the honorable member fix any limit to the expansion of credit ? ‘
– I would limit it only by the capacity of the people to produce and meet requirements.
– That is a sound limit.
– Then incorporate the principle in the bill. What was the limit of the country when we were at war? What would have been the limit if the war ‘ had not ended when if did? I remind the honorable member for Fawkner (Mr. Maxwell) of what Sir William Irvine said in this House. He told the farmers that, if need be, the fire-stick must be put into their crops so that they could go overseas. In order to save the nation, there was to be no limit. Things were then so desperate that action which otherwise would have been inconceivable was justified in the interests of the nation. It was realized then that, if we lost the war, we lost everything. I do not want to go to extremes like that.’ I do not call it inflation to obtain what we need any more than I would call it inflation if a hungry man had his hunger satisfied. I am not proposing anything unreasonable. If the money market was favorable, the Treasurer would not hesitate to borrow. In that case he would not talk about inflation.
– Is it not inflation if it takes £2 to buy what previously cost only £1?
– I call that raising of prices not inflation, but profiteering. The honorable member and those who hold his views have bluffed the community by the use of the term “ inflation.” It is our duty to stop profiteering. If the high prices charged for commodities during the war period resulted from the inflation of credit, 1 ask why it was necessary to pass a War-time Profits ‘ Tax. That tax was imposed to get something back from the “ looters “ who, at a time when the people could not defend themselves, and the cream of the country was fighting on the western front or elsewhere, indulged in robbery. I again ask honorable members opposite what harm has come to the country, as a country, from the expansion of credit that then took place? Has not this country made progress since that time? Is it not in a better position to-day than during the war period? I have here an article which states that during the last 25 years Sydney has practically been rebuilt.
– Mostly on borrowed money.
– The big establishments to be seen on every hand in Sydney were not built on borrowed money, but on wealth which has been filched from those who produced it - the farmers, the pastoralists, and the other workers of this country. Does the honorable member for Swan (Mr. Gregory) seriously urge that Sydney has been rebuilt on borrowed money ?
– Yes, to a great extent.
– Most of the money we have borrowed has gone into railways.
– On which the losses since 1919 have amounted to £40,000,000.
– The only railway in Australia which is really owned by the people - the others being owned by the bond-holders in other countries - is that which was built by the use of the note issue. Moreover, it is the only railway which does not show huge losses, excepting on working expenses. There is no huge interest bill to be met in connexion with that railway. The average capital of the Australian Stateowned railways is £266,300,000; their average yearly earnings £9,288,000, which, capitalized at 5 per cent., represents £184,800,000. The surplus capital on which we are paying interest is, therefore, £81,500,000. For the building of those railways we have borrowed money, both in Australia and overseas, instead of utilizing our own credit for the purpose.
– The honorable member’s time has expired.
.- If the views of the honorable member for Adelaide (Mr. Yates) were as sound as they are sincere and enthusiastic, they would provide us with an ideal way out of our difficulties. He believes that a manipulation of credit by the Govern ment can solve the financial, economic and industrial problems by which we are confronted at the present time. I suggest, however, that the extension of credit beyond the amount of wealth existing or to be created is fundamentally unwise.
-What limit does the honorable member himself suggest?
– The honorable member does not recognize the danger of allowing a government to issue paper money freely. But even he must concede that there is an economic limit to the issue of paper money, and I ask him if a government, confronted as governments must be with acute political difficulties, could always be trusted to recognize and observe that economic limit? I suggest that the limit is to be found in the profitable use of the currency created. Some expenditures are made irrespective of profit.
– On war, for instance.
– Unfortunately, war furnishes one example, and the relief of destitution provides another. The idea that an extensive issue of paper money could solve our difficulties at the present time is fundamentally wrong, and vicious and dangerous.
– With governments as with individuals, the unlimited issue of I.O.U.’s must cause financial and economic disaster. The views of the honorable member for Adelaide were expressed in an attractive form by Mr. W. J. Duggan, at a recent Labour conference in Melbourne. Dealing with the causes of the present depression in Australia, this gentleman attributed all our difficulties to the machinations of bankers, in illegitimately and callously restricting credit. He considers that we require a completely new outlook on economics, one differing as greatly from that generally accepted to-day as the Copernican theory of astronomy differed from the Ptolemaic theory which it displaced. He is reported as follows : -
He believed that wewere in the grip of a handful of financiers who were squeezing the wealth producers, and robbing them of the products of their toil by the tribute they were levying in theform of interest on loans fictitiously created. . . Those who opposed nationalization of credit sought to ridicule the idea by. sarcastically referring to printing presses and notes. He saw no difference between printing notes and printing cheques.
That adequately summarizes the position.
– Tell us what the difference is.
– In the first place, the printing of a cheque achievesnothing. For the drawing of a cheque a signature is required, and the value of the cheque depends upon the value of the signature on it, which, in turn, depends on the realized or. realizable wealth possessed by the person who signed the cheque.
– Words ! words! words!
– I am interested to hear that comment from the honorable member, and I should much like to test the honorable member’s convictions by offering him an unsigned cheque for a large amount, and asking him to cash it. Were I to do so he would quickly realize that there must besomething behind a cheque or a note to make it valuable. What must that something be? It must either be realized or realizable wealth. I use those phrases to show that I do not mean merely money in currency form. Realizable wealth is as good as realized wealth for the purpose of giving value to an instrument of credit. There cannot, economically, be an unlimited issue of I.O.U.’s, and a bank note is only an I.O.U. bearing the promise of the Government to pay in gold. When the note is inconvertible, and the holder can only exchange it for some other form of paper money, there is the beginning of that condition of financial artificiality and insecurity which would be the inevitable outcome of the proposals advocated so earnestly by the honorable member for Adelaide (Mr. Yates). Some such restriction must be placed on the issue of notes as there is upon the issue of cheques. We can draw cheques only to the amount of our credit with our bankers, which depends upon our absolute possessions, or, where there is an overdraft, in their belief in our ability to meet our financial obligationswhen called on to do so.
– We can only draw against our assets.
– If we have productive enterprises of a profitable nature, a loan for the purpose of developing them is a justifiable operation of finance. In the management of their business, bankers must have regard to the financial, commercial, and economic aspect of. every transaction. Governments in control of a note issue are, unfortunately, not restricted in the same way. A government possessing control of a note issue must be under an irresistible temptation to issue notes beyond any economic limit that could be suggested. The economic limit suggested by the honorable member for Adelaide, and those who support him, is sovague and shifty that it is very difficult to ascertain what is intended. The honorable member must recognize that there must be some limit. For example, the issue of £100,000,000 worth of notes next week would not provide a solution of our existing difficulties.
-I have never advocated that.
– I admit that, and it is evident, therefore, that the honorable member does recognize the need for some limit. But where is that limit to be drawn ? The limit can be determined only by persons who are not influenced by political considerations. That, in substance, is the answer I make to the contention of the honorable member.
.- The Leader of the Opposition (Mr. Latham) has argued that I have not indicated any limit to the creation of credit, or the issue of paper money. I ask him to state what is the limit recognized by governments in their borrowing? What is the limit to the borrowing capacity of a nation ?
– The readiness with which lenders are prepared to make advances.
– Is it not the nation’s capacity to pay?
– That is determined by the outside lender.
– It is determined by the nation being unable to meet its commitments in interest. Australia has borrowed so much now that she is unable to tax her people any higher to meet interest commitments. Therefore, she has reached the economic limit in her borrowing.
– Because the borrowed money has not been profitably invested.
– It cannot be profitably invested unless we alter our present system of public expenditure. I do not know what the position is in Victoria, but I know that in South Australia not one government department is paying its way, with the possible exception of the Water Works Department, and even it is paying only at the expense of others. Economically, these government undertakings do not pay, but governments go on borrowing. Still, the requirements of this nation can be met with its own credit, so long as the people are working. What limit would honorable members opposite have imposed on our borrowing to finance the war?
– We would have borrowed up to the point of bankruptcy.
– It was not necessary to go so far.
– We did not go so far.
– But the country was very near it. Australia has a national debt upon which she can barely pay the interest. The effort to dp so has beggared thousands, and thrown them out of employment.
– And yet the honorable members wants us to continue that course.
– I do not. I invite the honorable member to study the figures given in my circular in regard to the note issue. Those figures were prepared in reply to a question asked by a very shrewd politician, Lord Forrest, in his day and generation; a man who had made a close study of the working of the note issue department. They are quoted on page 7923 of the Mansard report for the 17th May, 1916. As honorable members know, at that time an advance of no less than £28,000,000 was made to State and Commonwealth Governments out of the note fund. There remained a balance of £15,000,000 in currency, which represented the till cash of the country. The money advanced to the State and Commonwealth Governments was used for the same purposes as borrowed money would had been used for. This sum of £28,756,400 was interest earning, and, according to the latest information I have been able to get from the Treasurer, had earned, up to the 30th June, 1929, £17,566,545. If that interest had been credited to the notes fund in this transaction, it would have left £11,189,855 outstanding; that is the extent of the liability of the notes fund. The honor able member for Swan (Mr. Gregory) smiles, but if I were to give him the power to utilize the Note Issue Department as a separate department, with’ a right to retain the profits, would he not contend that the profits of the transaction cancelled the amount I have stated? I maintain that under a proper system of book-keeping the amount earned cancelled the original debt. We have to determine the earning capacity of the machine to ascertain how far we can go; the note issue can be expanded to that extent. Let me show what happened during the war period, when the note issue reached the maximum value of £58,000,000. According to the latest budget papers, those for 1929-30, the value of the notes in circulation has now been reduced to £42,258,266, a reduction of £14,000,000.
The States were holding £20,000,000 worth of Commonwealth notes, but today they do not hold more than £6,000,000 of our note issue. They have reduced their liability to the Notes Issue Department by approximately £14,000,000. But they have not paid off their debt. What they have done has been to transfer the payment of interest to the private money lenders. With our assistance, they have transferred the debt which earned interest for the note issue to private money lenders, and I defy any one to truthfully assert that that is not the position. According to the figures given, the actual amount required in currency to carry on the ordinary transactions of the country remains nearly constant at about £15,000,000. It is made up in the following way : -
A number of these were lying idle, and were never used. I do not think it necessary to have £1,000,000 worth of £100 notes in the currency of the country backed up by a gold reserve. Honorable members opposite who speak of the indiscriminate use of the printing machine should be ashamed of themselves for allowing the note issue to be used in such ah illicit way. But let us get back to 1919, when the note issue stood at £155,000,000, and when £1,000 notes to the value of £26,112,000 were issued. Notes of that value were printed, tied up in bundles, placed in cold storage, and, to use the words of the honorable member for Gippsland (Mr. Paterson) became frozen. They did not see the light of day, but their value was charged against the Notes Department. In 1921, when the Notes Issue Board took control, began the return of what had been loaned from the fund into the hands of private money lenders. The £1,000 notes were then valued at, £23,630,000 ; in 1922 their value decreased to £19,000,000 ; and in 1923 to £17,000,000; but in 1925- this was when the right honorable member for Cowper (Dr. Earle Page) and Mr. Bruce were iD power- the value of the £1,000 notes was increased to £21.200,000. An additional number of notes of this denomination was printed, and when that .became known,, assets which were regarded as frozen then became liquid, and were operated upon.
– Does the honorable member think that these notes were given to the banks?
– Did they ever see the light of day, or even leave the department? I doubt whether many of them ever left the strongrooms of this Notes Printing Department, which it is now proposed to extend, and to furnish with strongrooms with doors manufactured by Chubbs, in preference to all other manufacturers.
– If a large quantity of additional notes were put into circulation, does the honorable member contend that the notes now in circulation would have the same value?
– What is the honorable member’s practical suggestion in connexion with the clause under discussion ?
– I am endeavouring to show the extent to which the circulation of notes has been reduced. I was referring to the position in 1925 where the issue of £1,000- notes increased. In 1926 it commenced to recede again, as the £1,000 notes held at that time were valued at £18,000,000, and during the subsequent years the amount annually decreased to £17,000,000, £10,000,000, and £6,000,000, until, in 1929, it had been reduced to £4,000,000. In June of last year, the date to which the budget was made up, the £1,000 notes held by the Notes Department stood at £5,000,000 as against £23,000,000 some years previously. Generally speaking, from 1916 up to the present year the number of notes of different denominations in circulation has remained about the same. They can be regarded as fluid currency, The £1,000 notes were held against investments allowed to the States in the manner I have shown. The point is that the £1,000 notes have been reduced by approximately £14,000,000. Notes to that ‘ value have been destroyed, representing the difference between the £20,000,000 held by the States in 1916 and about £6,000,000 held by them at the present time.. I tried to obtain the complete story from the Treasurer, who endeavoured to supply me with what I required ; but I was unsuccessful I am not accusing the Minister of trying to hide anything. I was anxious to obtain particulars to enable the information supplied to the late Lord Forrest to be brought up to date, to ascertain what has been spent from the notes fund and what has been purchased. It was an eyeopener to me to find that Australian notes have been used for the following purposes: - Kalgoorlie to Port Augusta railway, land for Federal Capital, land and buildings in London, Northern Territory loan redemption, property in Perth - that property is now worth ten times more than the price at which it was purchased by Mr. King O’Malley - and the Pine Creek railway, which now ^belongs to the Commonwealth, and not to the foreign money-lenders. The railway and wharfs in Papua were paid for with Australian notes and are now Commonwealth property, and whatever interest is paid goes towards the £17,000,000 to which I have referred.
– Why not issue more notes and buy the earth?
– Because we have not the courage, we do not continue this system.
– Does the honorable member suggest that we should continue issuing notes and purchase everything we require ?
– No. Other works which have been paid for with Australian notes include land for post and telegraph purposes to the amount- of £210,631. If we can utilize £200,000 odd for that purpose, could we not utilize £2,000,000 ? If ive cannot, will some honorable member opposite tell me why?
– So long as the money is spent on a profitable investment.
– Are the wharfs at Papua and the Pine Creek railway profitable investments? Are the buildings in London which were purchased with Australian notes showing interest on the capital invested? Governments have been borrowing and investing money in unprofitable investments, and will continue to do so until the day of judgment. When I suggest that we should expand our credit and pay interest to ourselves I am ridiculed and laughed out of court. If Ave can use Australian notes to pur*chase conduits and to pay for undergrounding our telephone wires, as has already been done, why cannot we use the note issue for an extension of that work, and thus provide employment for those who are vainly seeking it? We can .if the Government has the courage. If the notes were used for that purpose in 1916, when the country was at death-grips with a foreign power, why cannot it be done to-day? As notes have been used, as I have said, for paying for the construction of the wharfs at Papua and for purchasing land and buildings in London, surely money can be obtained from the same source to provide work for the unemployed. I challenge honorable members opposite to truthfully, assert that it cannot ‘ be done. It means changing our system and discontinuing obtaining money from bond-holders and money lenders. Further. I find that Australian notes have been used for the purchase of machinery for Cockatoo Island Dockyard. If we could pay into Consolidated Revenue £371,117 for war purposes we ought to be able to use some amount from the same source to provide work for the unemployed.
– Of whom is the honorable member complaining?
-I am complaining of this Parliament. The ideas that I am expressing have, I contend, been proved by experience to be sound, and if this
Government will not adop’t them some other Government will do so. The time will come when there will be more of this kind of financing
– What practical suggestion has the honorable member to offer in connexion with the provisions of this clause?
– The clause provides that the bank shall issue, re-issue and cancel’ Australian notes. I suggest that for the purpose of providing money to find work for ‘the unemployed and to develop this country the bank should issue Australian notes against the credit of the nation. If* through the Note Issue’ Department it wo’uld give the Government a credit of, say, £10,000,000 the Government would then draw against this by cheque to pay its contractors, the cheques being paid into the credit of each contractor. The latter in turn draw against their credits. The whole process, is exactly the same as that which is followed when the Government is operating on loan moneys. If £8,000,000 could be ‘ made available in thatway in 1916 for the purpose of constructing underground conduits, and building the Pine Creek railway and the East-West railway, credit could be made available in a similar way to-day. I am not suggesting that notes of a denomination of £1,000, or anything like that, should be issued; but merely that the bank should issue ordinary notes to the Government against the credit of the country.
– But if that were done, and the notes used, as the honorable member suggests, would there not still be a debt against them?
– When the notes were returned to the Government or the bank in the way that I suggested they could be placed to the credit of the depositor as is ordinarily done in banking transactions, and to the extent of the profit earned an equal number of notes could be cancelled. The Government would meet its obligation in that wa.y and the bank could grant credit by using the notes already in circulation. Plenty of them are still available. That is my answer to the honorable member for Fawkner (Mr. Maxwell), though I do not suppose that he will agree that it. is a good answer.
I have shownhow. the Government spent the notes issued to it; and I have no doubt that if I could follow in a similar way the £20,000,000 worth of credit granted to the States, I should be able to support my argument even more effectively, for no doubt all the States created some assets with the notes made available to them. According to the Treassury return, New South Wales still holds £1,142,500 worth of notes; Victoria, £632,000 worth; Queensland, £1,608,500 worth; South Australia, £326,000 worth; Western Australia £3,025,000 worth; and Tasmania, £251,000 worth. Seeing that the Commonwealth and the States were assisted by Commonwealth notes during the war period, there seems to be no reason why they should not be similarly helped to-day. If that were done, we should have sources of taxation available to us which are not now available, and the people would have a purchasing power which they have not today. The solution of our difficulties is to be found in making the credit of the nation available to the nation. I am sorry that the Government and the Treasurer cannot see eye to eye with me on this subject; but I am quite satisfied that my views are sound.
– I have listened carefully to the argument of the honorable member for Adelaide (Mr. Yates), and have endeavoured to ascertain exactly what he desires the Government to do; but I confess that I cannot understand his proposals. His arguments on some points were altogether fallacious. He spent a considerable time in contending that great benefit would accrue to the nation if additional Australian notes were issued, and used to provide funds for public works, and he supported his argument by quoting from a longschedule of public works which were constructed with money provided by the Australian notes fund. It is quite true that the profits of the first issue of notes were used as he has stated. When the Commonwealth Parliament created the Australian note issue, and made it illegal for the private banks to continue to issue notes, and compelled the Queensland Government which, at that time, had its own note issue, to retire from that field of finance, the Commonwealth profited by issuing its own notes to meet the currency requirements of the community. The first issue was on a moderate scale ; but as gold was withdrawn from circulation and the notes of the private banking companies cancelled, the value of Government notes issued increased until it now stands at nearly £43,000,000, of which £22,000,000 or £23,000,000 is in the hands of the public. The notes of large denomination referred to by the honorable member for Adelaide were used to meet the requirements of private banking companies as part of their cash reserves; they were never used as currency for circulation as is the case with notes of small denomination, but were held in the vaults of the banks. In recent years the trading bankshave adopted the practice of keeping a proportion of their cash reserves as deposits at the Commonwealth Bank. This has resulted in a large amount of the notes previously held by the banks being returned to the Commonwealth Bank and cancelled. Their place is taken by a credit balance in the ledgers of the Commonwealth Bank.
The honorable member has suggested that as the Government was able to make available so many million pounds worth of notes when the first issue was made, and that these funds were used to pay for various public works, that processcould be repeated over and over again. He has not told us how it could be done, nor has he shownus how the interest charges could be met. I think he said that no interest would need to be paid.
– I did notsay anything of the sort;I said that the interest paid could be used to cancel the debt.
– The honorable member wants the interest to be used to cancel the notes, but he does not seem to realize that the interest and other profits of the notes fund are credited to Consolidated Revenue and expended in the ordinary services of the Government every year. He seems to assume that we could issue another £43,000,000 worth of notes, and when that issue was exhausted repeat the process, using the notes to build public works and thus escape thenecessity of paying any interest in respect of the moneys raised in that way. It is upon that point that I join issue with him. He says that we can go on increasing the aggregate note issue by £30,000,000 or £40,000,000 a year, with out any evil consequence. He has not told us, and I cannot see, how that can be done without bringing about a currency inflation similar to that which brought disorder and financial ruin to many other countries.
He seems to think that the notes of large denomination which have been returned by the banks could be used again ; but those notes were a portion of the banks’ cash reserves. It was never intended that they should be put into general circulation. In recent years the banks have been depositing more and more of their reserves with the Commonwealth Bank, and have thus established credits with the Commonwealth Bank. As that has been done, the notes of large denomination which they held have been cancelled; but that does not mean that there has been any deflation of the currency. It simply means that instead of the banks holding the notes in their vaults, these notes have been returned to the Commonwealth Bank and credit given in respect of them in the books of the Commonwealth Bank. The Commonwealth Bank gets no interest on these deposits. It is true that more bank credit could be created without the necessity of immediately issuing more notes; but the creation of this credit depends upon the trading banks. That is the normal way in which additional credit is made available to the community. It will be seen, therefore, that the Commonwealth Bank has, after all, only a limited control of the creation of additional credit. Sound banking practice requires that there must be a certain percentage of cash reserves to meet any liability incurred in respect of expanded credits.
Sitting suspended from 12.45 to 2.15 p.m.
– I was explaining, prior to the luncheon adjournment, that I had difficulty in following the reasoning of the honorable member for Adelaide (Mr. Yates). It seems to me that what can be accomplished by the note issue is apparent, and what will happen if too much dependence is placed upon it is also apparent. By an overissue of notes there can be caused an inflation which is reflectedby depreciated value in currency corresponding almost in exact measureto the over-issue of notes. The honorable member referred frequently to what happened during the late war. We know at that time there was a great deal of dependence on the note issue on the one hand, and, on the other, upon the. artificial creation of credit for the purpose of supplying the needs of the nation in respect of its heavy current financial requirements. That operation resulted in an inflation of a deliberate kind. It was an inflation deliberately injected into the monetary system of the nation, and it was presumably considered by the governments of those days to be the easiest way of raising the credit they wanted at that time.
-The only way.
– At all events they resorted to that method and the country suffered. The consequence of it was shown in the enormously increased price levelsand the tremendous instability of the financial system. A great deal of hardship and injustice was the inevitable result of our war-time finance and our war-time inflation.
– Many persons became millionaires as the result of it.
– Yes ; that is one of the evils that arise from any deliberate policy of inflation. I am not denying that the private banks have the power to create credit to a certain extent, and they exercise that power according to their discretion and judgment. The trading banks, acting in conjunction with a central bank that controls the note issue, have almost unlimited power to create credit, and in creating it they may bring about a greater or. smaller amount of inflation. A central reserve bank is intended to regulate these movements, and maintain the monetary system on an even keel in order to keep commodity price levels as steady as possible. That is found by experience to be practicable. There are many disturbing factors, of course, that no one institution can guard against entirely, but the central reserve bank is designed to counteract them so far as practicable.
At the present time Australia is suffering not from inflation, but from deflation. We are suffering acutely from the effects of deflation. It is not deflation brought about by any authority, individual or institution within Australia. It is a deflation brought about by worldwide conditions - deflation of the commodity price levels of the world - and Australia, together with other primary producing countries, is suffering to a greater degree than most other countries, because it is essentially a primary producing country. Our wheat, wool, dairy produce, metals and all other primary products now command greatly diminished prices in the world’s markets. Unhappily, we are suffering from the consequences of that terrible deflation, concurrent with the effects of financial stringency in the overseas market. We cannot obtain credits overseas to anything .like the extent we could a year or two ago, and there has been, therefore, a stoppage of supplies of funds to Australia, concurrently with the fall in our commodity prices, and consequent diminution in the total amount of credit at our command.
It is possible that the private trading banks might have done more than they are doing in easing the credit situation. It is possible that they have been unduly alarmed and have been operating to an undue extent to curtail credit. It must be admitted that they have been overtrading in the past, and that they are now contracting credit. This, too, is having its adverse effect; but that is also a matter which, it is hoped, the central reserve bank will to some extent influence. Such a bank, having been established, can watch entirely the various movements which are affecting our. monetary policy in Australia, and by taking proper and judicious action, perhaps rectify the position. I am not asserting that this bank can cure all the monetary evils or credit difficulties from which we suffer. I have never made that assertion; but I believe it will prove a very useful instrument in better regulating our credit system.
If there were as simple a way of overcoming our present difficulties, as is imagined “by the honorable member for Adelaide - I do not charge him with any lack of sincerity in this matter - it would certainly be resorted to. It must not be supposed that governments that consist of, let us hope, common-sense men, who are able to understand these problems - governments drawn not only from one political party,’ but from various parties and in various countries - would not haveavailed themselves of an easy solution of the terrible economic and monetary difficulty that the countries of the world arcconfronted with, if one were available.. But an easy solution of the problem isnot to be found. There are fallacies in the honorable member’s reasoning. There are obstacles that prevent effect being given to the policy that he advocates - obstacles that, in my opinion, he has not foreseen. I am unable to see any logical way of carrying out his scheme. I admit that credit can be created in the manner I. have just indicated through the banks, and more especially if the banks cooperate with a central reserve bank that controls the note issue. It can be created to a certain extent, and perhaps to a considerable extent, without causing the evil consequences that we do not wish to ensue. But, if this process is carried on to an unlimited extent, the consequences will be worse than the evils that we are trying to remove. Whether we have gone to the limit to which we may safely go in Australia is quite another matter. Personally, I, think that the trading banks could go further than they have gone. The Government does not control the funds of the banks, nor will it do so under this bill; but we hope that the central reserve bank, functioning properly and without political influence, will tend to make credit easier, more easily controlled, and more susceptible to adjustment in accordance with the needs of industries, and, commerce.
Dr. EARLE PAGE (Cowper) [2.23 J. - Knowing the fate that always befalls one who mixes up in a family dispute, I hesitate to intrude in this debate between the honorable member for Adelaide (Mr. Yates) and the Treasurer (Mr. Theodore). It seems to me that, while the Treasurer recognizes the hardship that inflation can cause to a community, bringing profit to a few and suffering to the great mass of the people, he is not taking under this measure stringent steps to ensure that inflation will not be readily caused. I agree with him as to the evil effects of inflation, which I fear as much as any devouring pestilence. The honorable member for Adelaide said, this morning, that during the war we had an increase of credit by the printing of notes, and he asked what had been the result. We recall that during the war years, instead of producing a rosy picture, with everybody in employment, and enjoying complete happiness, inflation caused increasing hardship. Who were least well off at that time? Whether inflation is used for destructive purposes, or, as it was in Germany, subsequent to the late war, for constructive purposes, its effects are always the same. It forces up price levels. The price level in Australia in 1913 was, say 100, and in 1919 it was 247. In other words, the goods one could buy for £100 in 1913 cost £247 in 1919. Whom did that affect most? First of all, during the process of the gradual rise in prices, it affected the wage-earners of this country more than anybody else. While the increase in prices was occurring, some 363,000 persons went overseas to fight for the Empire, and yet there were continual strikes during the war period. Inflation was the main cause of the industrial unrest at that time because prices rose faster than wages.
I shall take two or three types of people who suffered most in 1919 as the result of the inflation. In 1913, the oldage pensioner was receiving 10s. a week, and, in 1919, he was paid 12s. 6d. a week; but the 12s. 6d. only enabled him to buy as much as 5s. would have purchased in 1913, so the old-age pensioner is evidently one of those who suffers always when there is any great rise in price levels due to inflation. The history of the world shows that the results of inflation are the same whether it occurs in times of peace or war. It always raises price levels, and the persons who suffer most are those lagging behind. A person who, 30 or 40 years ago, insured his life for £100, found in 1919, owing to the increased prices of commodites,that the purchasing power of that £100 was only £40. A man who had been putting his small savings into a savings bank for years, and had finally accumulated £200, in 1919 discovered, owing to the inflation, that his £200 would buy only what £80 would have purchased five or six years before.
– What about the property owner ?
– As the honorable member has said, and as the Treasurer has also pointed out, those who benefit are the men who are in a position to make huge profits, but these are only a few. The great mass of the people suffer under such a system. I hope that the Treasurer will maintain the firm stand that he has adopted in this matter, and put into the bill such provisions as would ensure that, even if the present Government were displaced, and a dominant position in the party opposite were obtained by the section holding the extreme views that have been put forward on various occasions, another government would not be able to carry them into effect without first obtaining the sanction of this Parliament. I feel that this view of the matter should be put to the public. The suggestion is that if we keep on increasing the credit of this country and inflating the note issue, we shall provide more and more work. The fact is, however, that as a result price levels will be raised, and the workers will find themselves earning wages of less value than at present, so involving them in greater hardship than ever.
.- I shall not allow to pass unchallenged the statement of the right honorable member for Cowper (Dr. Earle Page) concerning the alleged family feud that exists in this party. The honorable member’s remarks on the subject are mere humbug. There are members on this side who are fighting for principles which they believe to be right, and who will go to extremes in an endeavour to have those principles carried into effect, but anything in the nature of internecine strife is as remote from the proceedings of this party as is the devil.
Honorable members opposite persistently harp on the theme of inflation. I thought that bogy had been scotched long ago. The honorable member for Forrest (Mr. Prowse) interjected during the speech of the honorable member for Adelaide (Mr. Yates) to the effect that. the £1,000 notes tb which he referred were not given to the banks. The honorable member for Gippsland (Mr. Paterson) declared that prices -would have been higher had those notes been put into circulation. Those notes enabled the banks to expand their . credit, in effect, four times over. , Under the administration of the Bruce-Page Government the banks expanded credit on the right to draw the notes; a budget speech by the right honorable member for Cowper (Dr. Earle Page) indicated - that they were issued merely to give the associated banks the right to draw them and expand credit. In many cases they were not put into circulation, but even when they were, they were circulated in the form of bank cheques, and not as Commonwealth bank notes. The honorable member for Cowper said that inflation- took place during the war, and that thousands in Australia suffered dire distress as a result. That is a misrepresentation of the position. Throughout the war Australia enjoyed a remarkable era of prosperity, and was not embarrassed by the poverty and unemployment that now exists. The distress came afterwards, through a process of exploitation. The Treasurer stated that the note issue had increased by 150 per cent, since the war. I have statistics which prove that the sovereign depreciated over- a period of 30 years prior to the war. While the issue of notes has increased by 150 per cent., prices have increased 600 per cent. I have very bitter recollections of the profiteering that took place during the war period. I have previously related one incident in this chamber and I shall do so again in order to prove that it was the predatory instincts of the profiteers rather than the issue of additional notes that caused prices to soar. At the time I was a draper. I had an order with a Sydney wholesaler for 100 pieces of a ‘certain material which was. quoted to me at 12£d. a yard, and which in pre-war years sold at 3#d. a yard. Later I received a letter from the firm intimating that, through, an act of war, the ship carrying consignments of cloth to Australia had- been submarined, and they could not supply the material at 12-Jd., but were prepared to accept a new order to supply it at- ls. 6d. a yard. Considering that that was too expensive for my trade I went to Sydney to interview the firm.-‘ I went direct to the fifth floor of that warehouse, the Manchester department, and there I saw a room bigger than this chamber stacked from the floor to. ceiling with tens of thousands of pieces of the very cloth that I had ordered. Does an increased note issue inflate prices, or is it caused by roguery and thieving of that description ?
– The same thing occurred in connexion with galvanized iron.
– I am aware of that, but am confining myself to the trade in which I was interested. . The predatory instincts of the profiteers impelled them to fatten and batten on the people of this country in an endeavour to bleed them white. I have statistics with me to prove that deflation has caused the trouble that exists to-day. The Treasurer (Mi-. Theodore) spoke about satisfying the currency needs of the country. Does he think that the currency needs of the country are satisfied when there are 150,000 to 200,000 individuals without jobs, and starving. What does the term “ currency needs of a country “ mean ? The doctrine is of little use to me when it leaves Australia with such huge armies of unemployed. The statistics in my possession indicate that since 1926 the population of Australia has increased from 5,357,435 to 6,414,373, the value of annual production from £343,680,000 to £453,311,000 in 1928, while bank capital and fixed deposits have increased from £157,388,122 to £284,579,904, and savings bank deposits from £136,904,536 to £225,485,764. In the same time currency has decreased from £157,500,119 to £138,662,978- nearly £19,000,000 less than in 1926, and about £33,000,000 less than what would be a normal currency. It was suggested that we should not issue these additional notes. I contend that even if £100,000,000 worth of notes were issued, and each unemployed man given £100 worth, they would simply be spent, passed’ through the business houses, and thence tb the bank and would become a means of expanding credits. Honorable members talk of the material basis behind cheques. These £l,000-notes were issued by the nation ; bankers were given the right to draw them, and they used that as a basis to exploit the credit of the country. There is no security behind the cheque power, so far as the bank that issues the cheques is concerned. Australia has gradually extended its note issue since the war, and during the war period Great Britain itself was compelled to issue notes to the extent of £160,000,000 without even endorsing on them a promise to pay the bearer in gold. Has that country gone bankrupt because of that action? Huge quantities of those notes are still in existence, and a lot of them circulate in Australia, and may be purchased at our own bank.
– Workmen have to accept them in payment of wages.
– Of ‘course they do, and creditors have to accept them in repayment of debts. A rational extension of credit would not mean inflation; it would tend rather to check the deflation of credit that is occurring in Australia. Only to-day I saw a letter written by a man who owns freehold property to the value of £.10,000, and who cannot pay his income tax this year. Where does the argument of the Leader of the Opposition (Mr. Latham) come in, that you can. issue cheques so long as you have something behind them? You cannot. The banker is the arbiter who says whether you may or may not do so. It is not a matter of having assets to the value of £10,000, or even of £50,000. If they are not fluid - if you have not the currency - it is within the province of the banker to say whether you shall have an advance or otherwise. When the nation floats a loan for governmental work it issues bonds to the public, and intimates that it will pay, say, 5 per cent, per annum on the amount borrowed, and that it will liquidate the total sum ‘by a certain date. All that the creditor receives is a piece of paper upon which is written the face value of the bond, and a promise by the Government to pay. What security is behind that bond? Nothing that, is tangible. Yet, paradoxical as it may seem, those bonds represent the best security in the world, the security afforded by the confidence of the people in the Government and in the ability of the country to pay. The people are prepared to submit to being taxed in order to pay the interest on the loan and, presumably, the principal. Of course, the principal is never paid. The nation simply borrows additional amounts later to repay, and so perpetuate it. At times governments give the people an opportunity to renew their loans. Would it not be preferable for the nation- to say that it will use its own instrumentalities to extend and use the collective credit of the nation that is now given to somebody else, and then tax the general community to effect an annual reduction of 5 per cent, on the loan. In twenty years’ time the whole debt would be wiped out, and the public work created by the spending of the money would remain the property of the people.
– That seems fair enough.
– I challenge the honorable member to fault the logic of my proposal. Under it there is a 5 per cent, reduction annually, and a total redemption in twenty years. Under the ordinary system the 5 per cent, interest is paid in perpetuity, a charge against unborn generations. That compels the nation to carry a burden of debt, a veritable old man1 of the sea, for all time. All we ask is that the nation shall do the job through its own instrumentality instead of allowing private individuals to use the collective credit of the nation to exploit the present generation and generations yet unborn.
.- The subject with which the bill deals is of great national importance. Economic and financial’ reform is a problem of universal interest, and Australia has an opportunity to lead the world by removing the obstacles to progress constituted by the present monetary system. I have spent many nights in pondering these matters which, although very complicated, and not understood by the majority of members, are of great interest to me. Mine has been an active life, and I have known the bitterness and disappointment the reformer feels when obstacles are put in his way by his own colleagues. We are all familiar with the opposition that was encountered by Samuel Plimsoll when he was endeavouring to introduce the load line on ships; on one occasion he was provoked to throw a book at the Speaker, and for that offence was committed to the tower in the
House of Parliament. The Earl of Shaftsbury, when agitating for an improvement of the conditions of the masses, could only get the rooms of the Ragged School and Church Schools in which to holdhis meetings. The reformer, like the prophet, is without honour in his own country. In a pamphlet I issued regarding health and unemployment, I wrote -
The loan debt of Australia amounts to £1,116,834,298 and no thoughtful elector can view this appalling position without feelings of apprehension as to the wisdom of further committing Australia to overseas moneylenders. In five years, the Commonwealth debt has increased £8,000,000; the States debts, £150,000,000.
I am told that the actual wealth of Australia is £2,000,000,000. The honorable members for Adelaide and Werriwa have told the committee that the credit of Australia will bear a further issue of notes.I put before the public a scheme by which notes could be issued without increasing the public debt. I proposed, let me say, by way of illustration, that water supply and sewerage boards should apply to the Federal Government to issue £1,000,000 worth of notes to be used for the carrying out of specified reproductive works, and to be redeemed at the rate of 5 per cent. per annum. Notes to the value of £50,000 would be destroyed each year, and at the end of twenty years the whole liability would be extinguished, but the assets resulting from the expenditure would be the absolute property of the governing body concerned. The ratepayers would not have to pay rates to provide for these works, and in that way the taxation of the community would he reduced or else used for other essential services.
– Will the honorable member let the committee proceed with the bill ? The Government desires to complete it this afternoon.
– The trouble with the Treasurer is that he is against our ideas of financial reform. He has been reared in a different atmosphere from some of us.
– I ask the honorable member to address his remarks to the clause.
– The clause relates to the issue of notes and I am endeavouring to explain how notes can be issued with great benefit to the community and without addition to the national debt. J. Taylor Peddie, in his book The Flaw in the Economic System, says -
All sorts of superficial remedies have been tried, without effect. New remedies, laws and theories are now proposed, such as rationalization, trustification, and co-partnership; but these, also, will have no effect. Where then is the flaw in the economic system?
I am endeavouring to point out the flaw. The national debt of Australia has reached its maximum.
The TEMPORARY CHAIRMAN.The honorable member must confine his remarks to the clause.
– No honorable member has been able to suggest a means of redeeming the national debt.
The TEMPORARY CHAIRMAN.The clause does not relate to the redemption of loans. Imustinsist that the honorable member address himself to the clause.
– Peddie says-
The burden of the national debt cannot justly be discharged without a substantial increase of purchasing power in the hands of the people. In a monetary system wherein money is the counterpart of production, the people can have adequate purchasing power provided they work for it; but to enable them to do this they must be given the requisite working conditions.
Every man who is unemployed for a year represents a loss to the community of £350. Unless we can provide employment and make every citizen an effective working unit, we shall achieve nothing. I may be charged with having been inspired by the statements and resolutions of the Labour conference.
– I hope the honorable member will not develop that argument. I have had to call other honorable members to order for irrelevancy, and the honorable member also must obey the direction of the Chair.
– I am not deliberately offending. The clause relates to the issue ofnotes and I am contending that that is dependent upon the removal of certain anomalies in the financial system. The bill is a party measure and, therefore, I cannot vote against it. I sent copies of my pamphlet to many representative persons and corporations and the first reply I received was from the manager of a large insurance company, who wrote -
I read your circular and . your letter with great interest. I go further than you, and I say that the Federal Government could very easily increase the note issue by ten millions of money and not do any damage at all. 1 don’t mean with regard to the ten millions of money to allocate any portion of it to any new works, but I do say, and say without any hesitation, and no nian of intelligence will disagree with me, that certain works of a reproductive nature which have been commenced and on their completion will be revenue-producing, should be completed.
The writer went on to say that no. harm would result from the increase of notes, such as I propose, because every 10s. expended in carrying out reproductive public works would increase the national wealth and add to the prosperity of the community. A manufacturer who discussed the financial situation with me, admitted that the adoption of my proposal would be of immense benefit to the Commonwealth, a’nd agreed that we must cease looking overseas for financial resources to develop this country. I understand it, is the wish of the Treasurer to pass the bill this afternoon and I do not desire to delay the committee unduly. I feel, however, that this subject should not lightly be disposed of. Mr. . Lloyd George once asked - “ What is the value of the Bank of England note for fi ?” He himself supplied the” answer - “ The nation is behind it.” Mr. Snowden, the present Chancellor of the Exchequer in Great Britain, has made the same statement in so many words. Similarly the nation is behind the notes issued by the Commonwealth Bank, and we have the added advantage that in Australia we have greater facilities than other countries enjoy for the utilization of our note issue. We have no frontiers. The Australian note is legal tender within the territorial waters of the Commonwealth, and every £1 note will buy 20s. worth of goods.
The principles of high finance appear to confuse many people. Actually there is nothing very mysterious in the business, but a nation, like an individual, must be honest in all its transactions.. Any honorable member who, like myself, has been in business recognizes the need for this cardinal business principle. If a business firm indents goods from Great Britain, the banker accepts his shipping note which he holds until it is. satisfied. If a
State Government wishes to raise money locally, it invites applications from the people and issues treasury-bills for cash received. It is possible to learn the business of banking in a few hours.
Some honorable members appear to be alarmed at the possibility of an inflation of the note issue. In a recent issue of The Economist there appeared a report of a meeting of the shareholders of the Bank of England. Some of those present expressed a doubt as to whether the bank authorities were acting wisely in reducing, instead of increasing, the rate of interest. One of the directors explained the risk of inflation, but another declared that an inflation of the note issue would make money available for the development of business enterprises and so relieve the acute unemployment problem in the Mother Country. Under my proposal there would be no possibility of inflation. If the note issue department increased the issue by £20,000,000, the additional notes could be automatically redeemed within 20 years. This is a matter of vital interest to the people of Australia, and it should receive careful consideration fr.om honorable members irrespective of the parties to which they belong.
Last week there was a meeting of the Loan Council, and subsequently there was an announcement that a loan of £10,000,000 would be issued. The proportion to be allocated to New South Wales will not be of much practical use to that State. To-day I received a telegram from Sydney informing me that the State Treasurer had intimated that the money would not be available for reproductive work, but would be applied to meet the losses due to the recent dispute in the coal-mining industry. The people of New South Wales will be called upon to pay 6 per cent, on that loan for eight years, although it will be of no value to them, because it will be applied to make good losses 1 due to an attempt by Mr. Bavin and the Nationalist Government to lower the “standard of living in that State. -
.- I am sure the majority of honorable members were pleased to hear the Treasurer say that the policy of the central bank would be to ensure stability in finance. But I. do not think he was quite justified in suggesting that the existing banking institutions were not doing all that could be expected of them in this crisis. If he will examine the statement of deposits and advances of the various banks, he will discover that they have been doing all that was possible to aid commerce and industry. As for the honorable member for Adelaide (Mr. Yates), all I can say is that it is a pity he was not a director of one of the trading banks prior to the note issue being taken over by the Commonwealth Rank. He would then have been able to put into practice his financial scheme, and if it has in it the virtue which he claims for it, he would have been able to earn magnificent profits for his bank. I understand it is the wish of the Treasurer topass the bill before the adjournment this afternoon. It is to be regretted that so much time- has been lost. We have had a long dissertation from the honorable member for Adelaide, and an almost equally long speech from the Treasurer. Many of the clauses yet to be passed contain highly important provisions. I hope, therefore, we shall be allowed ample time to discuss them.
.- I do not wish to delay the committee, but I feel I must reply to the statement made by the honorable member forWerriwa (Mr. Lazzarini) He. outlined two methods by which money may be raised by the Government; namely, the issue of bonds and the issue of notes. The honorable member pointed out that if bonds were issued, the Government, besides being required topay interest upon them, would have to redeem them eventually, whereas if it issued noninterest bearing notes, it could levy 5 per cent. redemption from the general revenue, and, at the end of twenty years, they would be redeemed without cost to the community. The point which the honorable member for Werriwa overlooked was this: Suppose, for the sake of argument, there was £100,000,000 worth of currency in Australia, and the. Government issued bonds to the value of £10,000,000. When those bonds had been taken up, the country would still have only £100,000,000 in currency, of which £90,000,000 in cash and £10,000,000 in bonds would be in the hands of the general public and the banks, and the Government would have £10,000,000 in cash for its use, so that when the bonds were issued the currency would not be inflated and the amount of money in circulation would notbe increased. But, under the scheme of the honorable member for Werriwa, the country would still have the £100,000,000, and an additional £10,000,000 in notes, so the currency would be inflated to the extent of £10,000,000. One has only to carry his scheme a little further to see to what extent currency would be inflated and the whole commercial fabric of the Commonwealth brought about our ears.
Clause agreed to.
Clause 31 agreed to.
Clause 32. (Disposal of proceeds of issue of notes).
.- There is one point which I wish to have cleared up. This clause is not quite the same as section 60 i of the act. That section provides for the manner in which the note issue shall be invested. This clause states that part of the money derived from the issue of notes shall be held by the reserve bank for the purposes of reserve, and the bank may utilize the remainder or any part thereof in its ordinary business. I object to this provision because it will enable the reserve bank to buy long-dated and other securities which are not readily realizable.
– On account of the clause dealing with central banking, it is necessary to depart from the terms of the original Commonwealth Bank Act, under which one of the means of disposing of the proceeds of the issue of notes was by deposit with the reserve bank. As this bank is to be the central reserve bank, there is no necessity for that provision.
– The point that I am making relates solely to moneys from the issue of notes, and I think that they should not be used for the purpose of acquiring municipal securities.
Clause agreed to.
Clauses 33 to 35 agreed to.
Clause 36 (Definitions).
– This clause reads as follows: -
In this division - “ Commonwealth security “ means any Australian note issued in pursuance of the Australian Notes Act 1910-1914, or the, Commonwealth Bank Act 1911-1929,or in pursuance of this part; “ Form of Commonwealth security “ means any form of a Commonwealth security, or any form intended’ or likelyto pass for the form of a Commonwealth security, and includes any part of a form of a. Commonwealth security.
I should like an explanation from the Treasurer as to why the term “ Commonwealth security” has been chosen. It has a fairly definite meaning to the generalpublic, because it refers usually toa bond, whereas in this case it is applying to a note. Could not a better term be applied?
– It. would apply to securities of this kindas well as to notes. The offence would be of the same nature if it were an attempt to defraud, forge, or utter an Australian note or a Commonwealth security.
.- This division deals only with Australian notes and “Commonwealth security “is defined to mean an Australian note. The Commonwealth security mentioned in this clause does not refer to bonds, or, indeed, to any securities other than Australian notes.
– That is the definition in this division.
– Yes. A special meaning is attached to “ Commonwealth security” in this division, and that meaning is confined to Australiannotes, and does not include bonds.
– This clause is taken word for word from the original Commonwealth Bank Act, and I am assured by the Deputy Governor that it does refer to securities other than notes.
Clause agreed to.
Clauses 37 and 38 agreed to.
Clause 39 -
Every person who, without the authority of the Governor, (proof whereof shall lie upon him), makes or has in his possession -
any form of any Commonwealth security; or
b ) any instrument or thing which may be used in making any form of any Commonwealth security, shall be guilty of an indictable offence.
.- I move-
That paragraph (b) be omitted with a view to insert in lieu thereof the following paragraph: -
any instrument or thing which has been used by that person, or is intended by that person to be used, in making any form ofany Commonwealth security.
That amendment is necessary in consequence of some difficulty in. obtaining an indictment or conviction recently.
.- This is a clause which I am aware the authorities of the bank have long wished to have in the law. It appears to me, however, that the clause is too farreaching and difficult, because the words are so general. Portion of it reads -
Every person who, without the authority of the Governor, makes or has in his possession, any form of any Commonwealth security or any instrument or thing which may be used in making any form of any Commonwealth security.
The instrument may be a pen, an engraving instrument, or a lithograph. The clause is far-reaching, and I ask that, before the bill is presented in another place, further consideration be given to it. I suggest that a provision relating to. wrongful intent be included in the clause. Is the Treasurer agreeable to that?
Amendment agreed to.
Clause, as amended, agreed to.
Clauses 40 to 42 agreed to.
Clause 43 -
Every person who -
wilfully mutilates, defaces, or disfigures an Australian note;
writes, prints, stamps or draws any thing on an Australian note;
makes on, or attaches to, any Australian note any advertisement; or
designs, makes, issnes or circulates any advertisement in the form of or resembling or apparently intended to resemble any Australian note, shall be guilty of an offence.
Penalty: Twenty pounds.
.- I move -
That after the word “ person “ the words “other than an officer of a trading bank cancelling notes to be remitted to the reserve bank “ be inserted.
I think that it is essential that some distinction should be made.
– I accept the amendment.
Amendment agreed to.
Clause, as amended, agreed to.
Clauses 44 to 46 agreed to.
Clause 47 (Counterfeit notes to be marked).
.- I wish to draw attention to what I think is a rather severe penalty under this clause, which among other things, states that if any officer of the reserve bank wrongfully writes or stamps “ counterfeit “ on any genuine Australian note he shall, upon presentation, redeem it at the face value thereof. I do not think that that is a fair provision because the teller behind the counter may be under the impression that a note is counterfeit when actually it is genuine.
– That provision is in the Commonwealth Bank Act. If a teller marks an Australian note “ counterfeit “ and subsequently finds it is genuine, he does not lose anything by having to redeem it on presentation. There is no personal loss to the officer.
Clause agreed to.
The reserve bank shall hold, in respect of Australian notes and in respect of its liabilities to depositors, a reserve amounting to not less than -
Such portion of the reserve as is held in the Commonwealth of Australia, not being less than fifty per centum of the total reserve, shall consist entirely of gold coin and bullion.
.- This is one of the most important clauses in the bill, dealing as it does with the reserve of the bank, and especially the gold reserve that must be maintained against the issue of notes. It also deals with the reserve that must be held against other liabilities of the bank. At the present time Australia is going through a period of financial difficulty, and if there is a time when we should not be thinking of changing horses in crossing a stream, it is when the waters are deep and troubled. The Government, in this case, is attempting to change its horse for a pony at a time when the stream is deep and angry, as I shall show in connexion with the gold reserve which is to be maintained against the issue of Australian notes. The history of the gold reserve as against Australian notes is briefly this : At the beginning the system adopted was that practically in operation in England. There was a fiduciary issue of £7,000,000 against which 25 per cent. gold reserve was held as well as other securities and £1 in gold had to be provided against every £1 note issued above that amount. That was altered in 1913 to £1 of gold for every four £1 notes issued over the whole issue and that is the position to-day. The Commonwealth went off the gold standard some seven or eight months ago, and if ever there was a time when we should not make public to the rest of the world any intention on our part to’ reduce the gold reserves of this country, surely that time is the present. I suggest that we should retain the gold reserve as against the issue of notes where it is at present, and to that end I move -
That after the word “ reserve “, second occurring, sub-clause 5, the words “ and not being less than twenty-five per centum of the note issue “ be inserted.
The position that will arise so soon as this law operates in regard to the resources of the banks, the deposits of the central reserve bank, and the note issue, is roughly this : There are some £44,000,000 of notes issued, and under the law as it at present stands, there must be behind those notes £11,000,000 of gold. At present we actually hold £18,000,000 of gold, so that the issue is well covered. Immediately this legislation is proclaimed the banks will deposit £20,000,000 with the central reserve bank. Against that amount of £44,000,000 of notes and £20,000,000 of deposits- or £64,000,000 in all - under this clause we must maintain a reserve of £16,000,000, half of which may be held in London and half in Australia. So that there may be £8,000,000 of that reserve held in either place but the reserve held in Australia alone must be in gold; whereas at the present it is essential that we shall hold £11,000,000 in gold. It is important to remember that during the time of the peak of our inflation, we held at least 40 per cent, of gold against the note issue. It seems to me that no matter how readily convertible the London securities may be, we should maintain either in London or Australia a gold backing which is at least equivalent to £11,000,000 representing 25 per cent, of the total £44,000,000 worth of notes issued. This is an extraordinarily difficult time for us to be reducing the percentage of the gold reserve held against the total note issue. It may be said, of course, that the gold is, after all, no better than various securities which are readily convertable. The position is that none of the other countries have brought down their gold reserves to anything like the percentage that we are proposing to do. In the United States of America the statutory provision is that the Federal Reserve Board must hold 40 per cent, of gold against Federal Reserve notes in circulation, and 35 per cent, of gold against deposits that have been placed in the Federal Reserve Bank by the other banks. The percentage of gold reserves required to be held by the Federal Reserve Bank would be 37-J per cent, if notes and deposits were equal. The Bank of England has a fiduciary issue of £260,000,000. Above that figure one pound in gold must be held for every pound issued. The position is similar in Norway and Japan. In Germany the percentage of gold reserve is 40 per cent. ; in Italy 40 per cent, against notes and other obligations; and in Chili 50 per cent, against notes and deposits. In view of those figures I would suggest that we are now taking a deplorable action that will have a serious effect indeed on outside investors. Some seven or eight months ago the Commonwealth went off the gold standard, and there may be no prospect of returning to it for quite a long time. It will therefore be very unwise to pass this clause in view of the inevitable repercussion on public opinion elsewhere. I shall not labour the question, but I feel that, part from its practical results, its effect on the minds of the people of other countries will be bad indeed.
– I can understand the contention of the right honorable member for Cowper (Dr. Earle Page), but I do not agree that, in fact, we are reducing the gold reserve by this provision. This clause provides that a portion of the gold reserve may be held in Australia and a portion in London. There is nothing unsound about that in principle.
– The Commonwealth Bank is already doing that.
– That is so. If it is proper to hold a portion of the gold reserve in London, it cannot be improper to provide that that reserve should be gold or the equivalent of gold. If it is the equivalent of gold, there can be no lessening of the safety of the reserve.
– In that case, why does the English Act provide that, after a certain sum, the amount of gold must be £1 for £1 for the notes issued?
– The English Act relates to a bank that is itself at the centre of the money market. That is not analagous to the position in Australia where some of our reserve is held in another country. That is why securities may be the equivalent of gold to us, but not to the Bank of England. For Australia British consols are undoubtedly the equivalent of gold at their proper marketable rate. They are just as saleable as gold bar or bullion. They are, in fact, recognized as such by the Bank of England. The advantage to us is that such securities can earn interest. Surely there can be no valid objection to a portion of the gold reserve being represented by such securities. Many central reserve banks, which have been established during the last ten. years have made provision for this very thing.
– Shall we get interest for the money in England?
– Yes, if it is held in certain classes of securities other than gold. The reserve banks of Denmark, Germany, Hungary, Greece, Italy and Poland are authorized to hold a portion of their gold reserves in London, or in whatever international market they do their chief exchange business. That is the only facility for which we ask here. It is strongly advised by the Commonwealth Bank, and I see no valid abjection to it. This matter is altogether apart from the question as to whether or not 25 per cent, is an adequate reserve against the note issue. Personally, I think that- it is sufficient. Confidence in Australia in the Australian note is such that a gold reserve is really not essential. There would be no disaster if the gold reserve were reduced, provided that the dependence, on a reduced reserve was not used for the undue issue of further notes. As a means of establishing confidence in the minds of the public, the necessity for a gold reserve no longer exists.
– Yet the United States of America still requires 40 per cent, of gold against notes.
– And actually holds about 70 per cent.
– That country is not so hard pressed for gold as Australia is. We do not want to tie up an undue proportion of our gold reserve in the vaults of the Commonwealth Bank. So long as we have a fair basis-
– It is being whittled away.
– We are still retaining 25 per cent, of the whole note issue, although we are providing that a portion of it may be held in London. That proportion must be either gold or the equivalent of gold. So long as it is the equivalent of gold, there is nothing at which to cavil; it still represents 25 per cent, of the issue. If it could be shown that British Government securities are not the equivalent of gold for Australian note purposes, there would be something in the contention of the honorable gentleman. I strongly urge that the clause, as printed, be agreed to, because it will enable the central reserve bank to offer facilities to the trading banks, and in connexion with international exchanges, to’ an extent never before available. If a central reserve bank had been functioning during the last two years, we should have avoided a large measure of our exchange difficulties.
.- The amendment by the right honorable member for Cowper (Dr. Earle Page) is an important one, and ought to be accepted. I am sorry that the Treasurer is not prepared to accept it. The present law, as set out in section 60, k, of th, Commonwealth Bank Act is that the board shall “hold in gold coin and bullion a reserve of an amount not less than one fourth of the amount of Australian notes issued. Applying that provision to the existing facts, it is necessary to hold a reserve of £11,000,000 against the existing note issue. In fact, there is held against that note issue a gold reserve of £18,000,000. If the clause is accepted, it will be sufficient to hold against those notes, in the form of gold, only £8,000,000. The requirement for holding gold against the whole of the liabilities of the bank in the way of notes and deposits will be met by holding £8,000,000 in gold instead of a present minimum requirement of £11,000,000 in gold against notes only. The Treasurer says that the other forms in which the reserve may be held, such as British Government securities and first-class trade bills, are the equivalent of gold. This bank is intended to operate, so far as its reserve is concerned, for the purpose of preventing a crisis in an approaching time of emergency, or in an actual emergency. At such a time there is nothing that is truly the equivalent of gold. Ordinarily, first-class trade bills are worth their face value, subject only’ to market discounts, but in times of emergency consols drop in value. At such times gold has no equivalent. There is nothing which can give the same security, either in fact or psychologically, as can a reserve of gold. It appears, therefore, that this clause which reduces to a very large extent the requirement for holding gold against the’ Australian note issue, marks a step in the wrong direction. I regard it as ‘ a serious feature in the bill. Having regard to the fact that at present £18,000^000 is held in gold against the note issue, I had hoped that the Treasurer would at once have acceded to the request of the right honorable member, for Cowper. I conclude by saying that it appears to me that a very grave mistake is being made by this reduction of the amount of the gold reserve.
.- I regret that the Treasurer is not prepared to accept my amendment, because the position in the future will be worse than it has been in the past. At present under the existing act the reserve must be 25 per cent. in gold, while the balance may comprise approved securities and trade bills with a currency not exceeding 120 days. Under the act as it stands there must be, first of all, a 25 per cent. gold reserve, and the balance of the reserves can be held, if necessary, in securities of the United Kingdom, or in trade bills of 90 days, which, the Treasurer says, are as good as gold. Unless this clause which permits this percentage to be lowered to 17 per cent. or even lower is amended it will represent a further step in whittling away our gold reserves, and that is certainly how it will be interpreted by the public. The danger of increasing the note issue without maintaining an adequate gold reserve was emphasized by Professor Gifford in a recent article which showed how it could permit an inflation of 50 per. cent. above the present note issue. If the Government has any real regard for the country’s financial prestige, it should not attempt to alter the present relation between the gold reserve and notes issued.
, - I strongly support the amendment of the right honorable member for Cowper (Dr. Earle Page). At the present time there is in circulation £44,000,000 in notes, against which we must have a gold reserve of at least £11,000,000. It is probable that the deposits of private banks with the central reserve bank will amount to about £20,000,000. This bill requires that there shall be a reserve of 25 per cent., not necessarily in gold, against that £20,000,000. There will be a total of £64,000,000 in notes and deposits, for which a reserve must be provided, and if wefollowed the American practice of requiring a percentage of gold reserve for both notes and deposits, it would be necessary for us to have in reserve £16,000,000 in gold, instead of £11,000,000 as now stipulated. We are not asking for so much as that, but we are seeking by means of this amendment to maintain the present gold reserve of 25 per cent. against the note issue itself. I hope that even at this stage the Treasurer will see his way to accept the amendment, the purpose of which is to maintain our credit in the eyes of the world.
Clause agreed to.
Clauses 49 and 50 agreed to.
Clause 51 verbally amended, and, as amended, agreed to.
Clauses 52 to 55 agreed to.
Clause 56 -
The board may make rules, not inconsistent with this act or the regulations made by the Governor-General thereunder, for any of the following purposes: -
The good government of the reserve bank ;
The classification of the officers of the reserve bank;
To provide a superannuation and fidelity fund; and
Any matter necessary or convenient to be provided for carrying on the business of the reserve bank.
.- I move -
That the words “ The classification,” paragraph b, be omitted with a view to insert in lieu thereof the words, “ The conduct, control, and classification.”
This will authorize the board to make rules, not only in regard to the classification of officers of the reserve bank, but also in regard to their conduct and control.
Amendment agreed to.
Amendment (by Mr. Theodore) agreed to -
That after paragraph b the following new paragraph be inserted: - (ba) Prescribing conditions of employment of employees of the note and stamp printing branch of the reserve bank.
Clause, as amended, agreed to.
Clauses 57 to 62 agreed to.
Clause 63- (2.) Corporations carrying on the business of banking shall not charge any exchange or commission for cashing or negotiating any official cheque (payable within the Commonwealth) of the Commonwealth Government or a State Government, or the Reserve Bank, whether drawn on the bank cashing or negotiating the cheque on any other bank, nor upon any cheque (payable with the Commonwealth) drawn in favour of the Government of the Commonwealth or a State, or the Reserve Bank, and tendered for deposit to the credit of the Government of the Commonwealth or a State, or any department thereof.
.- I move-
That the following proviso be added to the clause: -
Provided that nothing in this section shall debar a bank from applying for reimbursement of out-of-pocket expenses when it is put to any unusual expense in carrying out any transaction specified in this sub-section.
.- I suggest that this proviso does not carry out the intention of the Treasurer. It should state that nothing should debar a bank from “ applying for and receiving “ reimbursements, &c.
– I accept the suggestion.
Amendment - by leave - amended accordingly, and agreed to.
Clause also verbally amended and, as amended, agreed to.
After a date to be fixed by proclamation, the board shall fix and publish from time to time the rate at which the Reserve Bank will discount and re-discount approved bills of exchange and short-dated Government securities.
Amendment (by Mr. Theodore) agreed to -
That the words “After a date to be fixed by proclamation “ be omitted.
Clause, as amended, agreed to.
Clause 65 agreed to.
Amendments (by Mr. Theodore) agreed to -
That the following new clauses be inserted : - “20a. A person who is -
a director of any corporation (other than the Reserve Bank) the business of which is wholly or mainly that of banking; or
an officer of any corporation (other than the Reserve Bank) the business of which is wholly or mainly that of banking, shall not be capable of appointment, or of continuing to act, as a member of the board.” “24a. - (1.) Where an officer of the Reserve Bank is affected in his employment by an action of any authority of the Reserve Bank, other than the board, the officer may, within the prescribed time, submit in writing an appeal to the board. (2.) An appeal under this section shall state fully the action appealed against and the grounds of the appeal. (3.) The board shall refer the appeal to an appeal board consisting of three members, one of whom shall be appointed by the board, and one of whom shall be elected by the officers of the Reserve Bank in the manner prescribed, with an independent chairman chosen by mutual agreement between the other two members, or, if those members fail to agree, appointed by the board. (4.) The appeal board shall consider any appeal referred to it under this section and shall submit its report thereon to the board, which shall determine the appeal and notify the appellant of its determination which shall be final and conclusive.”
Preamble and title agreed to.
Bill reported with amendments.
Motion (by Mr. Scullin) - by leave - proposed -
That the report be adopted.
.- Before the report is adopted I desire to place on record my opposition to the bill as it has been passed by the committee. I supported the motion for the second reading because I believe that a central reserve banking system will be a great advantage to Australia. Throughout the committee stages the Opposition has attempted by constructive suggestions to make the bill one which will be acceptable to Australia and to the rest of the financial world. In some respects, particularly in regard to the management of the bank, the Treasurer (Mr. Theodore) has me* us to a considerable extent; but it is regrettable that he has not adopted our proposals to keep the resources of the bank sufficiently fluid, or to maintain a sufficient gold reserve against the notes to be issued. In these circumstances I am dissatisfied with the bill. It seems that the whole administration of the bank is to be left to the discretion of the board, and that the bank will be in the position of what geologists term an erratic rock resting upon such a small point that it may easily be dislodged and smashed. The skids have been well greased by the speeches of some honorable members opposite, and I am afraid that if a strong board is not appointed now that the provisions of the bill leave so much to their discretion we may be faced with the spectacle of the bank operating in such a way as to lead Australia to financial disaster.
Question resolved in the affirmative.
Bill - by leave - read a third time.
Employment oe Southern. Europeans on Queensland Cane-melds.
Motion (by Mr. Scullin) proposed -
That the House do now adjourn.
.- On Wednesday last the honorable member for Lilley (Mr. Mackay), in asking a question, quoted an extract from a letter which I had sent to the secretary of the British Preference League at Innisfail, and asked if the statement made in my communication was correct. My letter was as follows: -
My sympathies are entirely with you in the direction of preference of employment to Britishers in the sugar industry.
I do not think that any honorable member in this House will take exception to that statement. The letter continues -
I have 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.
I take second place to no man in supporting the retention of the sugar embargo. I have written to Mr. Pritchard, Mr. Hudson, Mr. Curlewis, and Mr. Doherty concerning this matter, and have told them that nothing is more, likely to bring about an alteration of the present policy than the continued employment of 100 per cent, of foreigners in certain of the Queeusland sugar cane-fields. The southern newspapers have given publicity to the fact that in certain mills in Queensland 100 per cent, of the men employed consists of foreigners ; but it is remarkable to find a statement in the Sydney Morning Herald to the effect that the Colonial Sugar Refining Company denies any responsibility in this respect. That company does not employ any cane-cutters, but it is significant that in four of the five places where practically 100 per cent, of the men employed are foreigners the Colonial Sugar Refining Company is engaged in crushing cane. At Victoria and Macnade, in the Ingham district, 100 per cent, of foreign labour is employed. Mills at these centres are owned by the Colonial Sugar Refining Company. Only yesterday Goondi farmers, mostly British, and where the Colonial Sugar Refining
Company are the millers, called for labour, and although 200 Britishers applied for employment, not one Britisher was selected. Mourilyan is another centre where I believe there is a majority of foreign cane-growers who wish to, and do give, preference to their own people, and notwithstanding that there are British farmers there, not one British , cutter is employed. At Hambledon, in the Mulgrave district, where another Colonial Sugar Refining Company mill is operating, there are only 105 Britishers out of a total of 300. In the Cairns district, owing to the agitation by the Returned Soldiers League and the Australian Workers Union an increased percentage of Britishers is employed. I have mentioned a few of the centres in which there is a preponderance of foreign labour ; there are many others that could be cited, but the percentage is small. If the industrial workers of Australia get it into their heads that this industry is, to a very large extent, in the hands of foreigners it will be very difficult for us to secure their approval to the continuance of the embargo.
– Are these foreigners employed at less than the ruling rate of wages?
– The employers dare not openly employ them at less than the ruling rates, but there are ways of getting round that. I do not know why they are employed, but the fact remains that they are employed. A report that appeared in the Canberra Times, of yesterday’s date, states that of the 302 canecutters engaged in the Hambledon cane area on Tuesday, 105 were Australian or British born, 31 were of French origin, 56 were Jugo-Slavs, 107 Italians, and 7 Greeks. A report which appeared in the Sydney Morning Herald of to-day’s date states -
Although 200 British workmen offered themselves for engagement as cane-cutters at Goondi mills this morning not one was engaged.
A report from Townsville which appeared in the telegraph news of the Canberra Times to-day reads -
Figures have been prepared in answer to the Acting Minister for Customs’ statement that Italians arc in a minority in the sugar fields.
It is shown that with the exception of South Johnstone, where 75 per cent. of the workers are British, the whole industry north of Townsville is practically in the hands of aliens. It was stated that in the Ingham district last season there was not one British gang among 700 workers.
It is reported that -
Only two and a half per cent. of the total labour in the district employed in the pick-up yesterday for Halifax and McNade mills were of British extraction.
Those statements are misleading and inaccurate; and it is unfortunate that the capitalistic press should seek to lead people in the south, who do not know the real position, to believe that this industry is passing into alien hands. South of Townsville a very small percentage of foreign labour is employed in the sugar areas. Some years ago the Australian Workers Union made an agreement with the Babinda mill which provided for the employment of 75 per cent. British and 25 per cent. other labour; the position is better than that to-day. I understand that 81 per cent. of the employees of that mill to-day are British. In the Tully area there is not one foreign canecutter, and Tully is well above Townsville. About 300 cutters are employed there in the season. Only a very small percentage of foreign cutters is employed in the Mulgrave area, although some of the farms about there are owned by other than British born. At Mossman, where between 230 and 240 cutters are employed, every employee is British born or naturalized. The position, therefore, is not nearly so bad as has been stated in certain quarters, and I submit that my attitude in connexion with it is thoroughly justified. I have always stood for first preference to people of my own nationality.
I wish also to say, for the benefit of the honorable member for Lilley (Mr. Mackay), that the Prime Minister stated in his policy speech that he was definitely in favour of a continuation of the sugar embargo. I do not think that the embargo is in any danger at present, but there may come a time when public opinion will not stand for it, because the industry may have passed into foreign hands. For the present, however, a very small percentage of it is in the control of foreigners.
-I direct the attention of the Prime Minister to an important matter affecting the butter industry of Australia. Queensland is one of our largest butter exporting States and I have been requested by many persons interested in the industry in that State to urge the Government to take steps to prevent the export of so much second-grade butter to England under the Kangaroo brand. The position is becoming acute and requires the immediate attention of the Government. The High Commissioner for Australia referred to this matter in his last report, just received, in the following terms : -
Apart from many of the Victorian Kangaroo butters, which turned out first quality, there were many, averaging about 22 per cent. which turned out only second grade. . . Unfortunately factory managers in Victoria do not seem to have yet discovered the causes of their butter turning out of inferior quality in London, and early arrivals in October of Victorian butter in Kangaroo boxes showed very serious defects in quality, and this continued up to the end of December, 1929, causing many complaints to be received from importers and buyers concerning the quality generally, and the return of the butter by purchasers in a number of instances. The position is therefore most unsatisfactory, for inferior butter in Kangaroo boxes tends to weaken the prices obtainable for Australian butter generally.
Reports of a similar nature have appeared in the press.
– Who controls the. export of this butter?
– The Commonwealth. Under the federal dairy export scheme the butter is packed in boxes and branded with the Kangaroo brand as an evidence that it is of first-class quality. Before butter can be exportedit must be up to this standard. It will be seen, therefore, that the marketing of inferior butter bearing the national brand, is damaging to our reputation, and is a serious injustice to butter exporting States such as Queensland. Our position has been seriously jeopardized by inferior consignments from Victoria. I do not say that all the inferior butter comes from that State, but, according to reports, the great bulk of it has been shipped from Victoria.
-Under what scheme is this butter exported?
– It is exported under the provisions of the Dairy Export Control Act. The- Government has inspectors at each point of export to examine the butter and certify that it is of the required standard.
– Is not the butter dealt with under the Paterson Stabilization Scheme?
– That has nothing to do with it, and I regret that an honorable member of this House should be ignorant of the fact. I stand solidly behind the Paterson Butter Stabilization Scheme, for I know that it has been of immense value to the producers, ensuring them at least a fair return for their labours. It is extremely serious that inferior butter should be marketed under the national . Kangaroo brand, for buyers in England have been led to believe that that brand is the hall mark of quality and quantity - the nation’s guarantee that the butter so exported is first class. Australia looks to her butter export trade, together with her exports of wheat and wool, to assist her to contend against her economic difficulties and overcome her unfavorable trade balance; and urgent steps should be taken to ascertain and remove the cause of the falling off in the quality of our butter. Professor Wadham, of the Melbourne University, who recently conducted a special investigation into the dairying industry throughout Australia, has pointed out that dairymen everywhere are genuinely eager for instruction. If there is a lack of proper knowledge, or an absence of adequate supervision, of the’ grading of our butter, the Government should take immediate steps to meet the situation so that there shall no longer be any grounds for reports of the nature to which I have referred. Any falling off in the quality of butter exported seriously affects the whole of the Australian market, and is reflected in the prices received by producers both here and overseas. The export price regulates the amount received by the producer for the cream that he sends to the factory. A recent tariff restriction has brought about the promised retaliatory measures both in France and Italy, and this will limit our overseas market. . In 1927-28, we sent to France, alone, butter to the value of £45,000. It looks- as if we might possibly lose our market in Italy and then our export trade in butter will be more or less restricted to the United Kingdom. If by faulty methods of inspection in the ports of Australia, or for any other reason, our overseas trade is injured, it will seriously affect the income of the producers generally, and injure the good reputation of Australian products in the world’s markets. I hope that this matter will be considered by the Minister as one of urgency, and that at an early date he will advise us as to what steps are to be taken to overcome the difficulty and to ensure that the reputation of Australian products overseas will not be injured.
– The honorable member would have been well advised if, on a matter such as this, he had consulted me beforehand. The complaint to which he has referred has been under the consideration of the department, and is now being dealt with. It will be agreed that it is very unwise to make statements in Australia that will have the effect of injuring our trade.
– I took that view when the Minister spoke in that way in regard to apples, a year or two ago.
– I think that the honorable member will admit that I consulted him privately with regard to apples.’ When a person who has slight information on a subject broadcasts serious statements, it generally is found on investigation that there is very little ground for them. Enough people already are trying to injure the reputation of Australian products in the markets of the world without honorable members of this House doing it for the sake of personal publicity. If the honorable member seriously desires to rectify something that he believes to be wrong, there is a way of doing it without broadcasting the disabilities of our producers to the world.
– What is the Minister going to do about it?
– If the honorable member really wished to advance the interests of the producers, he would make his complaints direct to me or to my department. I have received a report from the High Commissioner on the matter that he has raised, and have a complete answer to his statement. The fact is that a number of persons overseas bought butter at high prices. The market has since slumped, and they are now left with large quantities of butter on their hands. Numbers of them are complaining to-day that there is excess moisture in the butter; but if they had not been left with this butter on their hands, their complaint would probably not have been made. The position to-day in regard to excess moisture is no different from last year, and it is practically the same as it was three or four years ago.
– That statement does not accord with the report of the High Commissioner. .
– If the honorable member had come to me, I could have told him the result of the inquiries made in consequence of the High Commissioner’s report. Those who have large quantities of butter on hand on a falling market have complained about its quality for purposes that are well known. For the information of the honorable member, I may say that I, personally, and the officers of the department, have been investigating the position in regard, not only to excess moisture, but also other complaints. It has been said, for instance, that there is a taint in Queensland butter owing to the kind of timber used in the boxes. For some time we have been trying to minimize this trouble, and discover whether it is actually due to the use of Queensland timber. The honorable member will agree that it would be a serious matter for the Queensland timber trade if it were found impossible to use that timber for the manufacture of butter boxes.
– I personally caused aL inquiry to be made into that complaint, and it was proved that there was no ground for it.
– -Since 1 have been in office I have been dealing with the problem of excess moisture in butter, and I can say definitely, from our latest reports by experts, that the position has improved of late.
– Is there anything in the complaint as to the quality of Victorian butter?
– Nothing unusual. Our expert has returned to Australia in the last week or two, and he ought to know all about this matter. I refer to Mr. Wigan, to whom I spoke last week, and who told me that a few factories were slow in removing excess moisture; but, speaking generally, the Kangaroo brand from the majority of the factories of Australia compares favorably with the best butter in the world. I can assure the honorable member that I have been taking steps to see_ that punishment is inflicted on those factories who do anything calculated to injure the good name of Australian butter abroad.
– Does the High Commissioner say that the complaints are nol well founded?
– He refers to the fact that there are certain factories that are still offending in this matter; but the expert informs me that our butter generally compares with the best in the world. I am now going further, to see that our inspectors visit the factories, because we are determined to bring those who are remiss in this matter right up to the mark. Enough people already are going out of their way to slander Australian industries, and honorable members ought not to repeat complaints of this natura until they are seised of all the facts. I think that the honorable member for Moreton will admit that, if he had come to me -first, he would have avoided the risk of damaging the industry itself and acquainted himself of all the facts.
Question resolved in the affirmative.
House adjourned at 4.20 p.m.
Cite as: Australia, House of Representatives, Debates, 13 June 1930, viewed 22 October 2017, <http://historichansard.net/hofreps/1930/19300613_reps_12_124/>.