12th Parliament · 1st Session
Mr. Speaker (Hon. Norman Makin) took the chair at 3 p.m., and offered prayers.
Mr.R. GREEN. - On the motion for the adjournment on Friday last the Prime Minister invited me to suggest means by which a double dissolution of this
Parliament could be effected immediately. I now ask the right honorable gentleman whether he will accept the suggestion that he should reintroduce one of the bills which the Senate rejected a few months ago?
– It is not in order for an honorable member to offer advice when asking a question.
Mr.R. GREEN.- Is the Prime Minister prepared to reintroduce any one of the measures that wero rejected by the Senate over three months ago, so that the double dissolution which apparently he, as well as honorable members on this side of the chamber, desire may be brought about immediately?
– I am prepared to send back to the Senate one of tha measures which it rejected, so that this Parliament may be sent to the country by a double dissolution on a vital issue.
– Is the statement correct that the Government is not prepared to reintroduce any one of the bills which were rejected in another place last year, but prefers to postpone the double dissolution for some months until it is possible to reintroduce a bill which was rejected last week ?
– Either the honorable gentleman was not present when I answered the previous question or was not paying attention to the business of the House.
– Will the Prime Minister tell the House whether he thinks that at the present time caucus would agree to a double dissolution in any circumstances?
– Questions are asked for the purpose of eliciting information, not to invite expressions of opinion.
– Will the Prime Minister inform the House whether the Thomas Walsh, who is to-day a fervent organizer and advocate of the All for Australia League, is identical with the gentleman whom the Leader of the Opposition, when Attorney-General, tried to deport from Australia?
– I cannot say, but if the honorable member’s suggestion is correct, the ex-Attorney-General must be very glad that his endeavours to deport an Australian citizen did not succeed.
– I ask the Prime
Minister whether from the Treasurer’s recent letter to the Chairman of the Commonwealth Bank Board the House is to understand that the Government has now adopted the first clause of a motion proposed in the Labour caucus by the honorable member for Calare (Mr. Gibbons), namely -
That the Commonwealth Bank be required to create sufficient credit as and when required for the following purposes -
– As an exMinistervery much ex at the present time - the honorable member must know that it is not customary to make announcements of Government policy in answer to questions.
– Apropos of the speech broadcast by the Prime Minister last evening, I ask the right honorable gentleman whether he did not previouslystate that, but fora certain resolution of the Labour caucus, little difficulty would have been experienced in funding the £30,000,000 of debt that has accumulated in London?
– I did not refer to the matter in the speech which was broadcast last evening.
– Is the Government considering the sending of the Treasurer to America for the purpose of endeavouring to float a large Commonwealth loan there?
– I have heard of no such proposal. When I do, I shall let the honorable member know.
REPUBLIC OF SPAIN.
– A newspaper cablegram conveys the impression that because the British Government has not yet received replies from dominion governments it is delaying recognition of the new Republic of Spain. Will the Prime Minister state the attitude of the Commonwealth Government in the matter?
– The Commonwealth Government received a communication from the Government of the United King dom indicating that it proposed to recognize the new Government of Spain, and asking if it might announce similar recognition by the Commonwealth. My Government immediately replied in the affirmative.
AMENDMENT OF THE CONSTITUTION.
– Will the Prime Minister state whether any request was made at the recent Imperial Conference that a Dominion Parliament should have power to amend its Constitution other than in the manner at present prescribed, and without amendments being approved by the Imperial Parliament ?
– The status, rights, and powers of the dominions were considered at the Imperial Conference, and definitedecisions were reached which will bo disclosed when I, as the senior delegate from Australia, lay on the Table a summary of the proceedings of the conference and present my report.
– I ask the Minister for
Defence whether the munitions branch has appointed the firm of Noyes Brothers to be sole agents for the distribution of sheet brass, rolled at the munition factory, to the exclusion of other buyers ?
– I shall make ininquiries, and let the honorable member have a reply.
CIVIL WAR IN NICARAGUA.
– Has the Prime Minister been in communication with the British Government regarding the civil war in the Republic of Nicaragua? If so, can he inform the House if the newspaper statement is correct that the British Government has informed the Government of the United States of America that if it is not prepared to protect the lives of British citizens in that republic in accordance with the obligations it assumed under the Monroe doctrine, a British warship will be sent to the scene ?
– I have no statement to make on that subject at the present time.
Service and Pensions
asked the Minister for Defence, upon notice -
– The answers to the honorable member’s questions are as follow : -
asked the AttorneyGeneral, upon notice -
– The information is being obtained, and will be furnished to the honorable member as early as possible.
asked the Treasurer, upon notice -
– The answers to the honorable member’s questions are as follow : -
Selling Agents’ Price
asked the Minister for Markets, upon notice -
– The answers to the honorable member’s questions are as follow: -
asked the Minister for Home Affairs, upon notice -
– The answers to the honorable member’s questions are as follow: - 1 and 2. Mr. H. Barkley, Assistant Director (Research), Common wealth Meteorological Bureau, has been selected for provisional promotion to the position of Commonwealth Meteorologist.
asked the Treasurer, upon notice -
Whether imperial ex-service men residing in Australia receive the benefit of the existing exchange rate in respect of payments of British war pensions made in this country?
– Arrangements have been made under which British pensioners resident in Australia will receive the equivalent in Australian currency of the sterling payments made by the British authorities to the High Commissioner on their behalf. In that way the British pensioners will receive the benefit of exchange. The details of the arrangements have not yet been finally settled. A representative of the British Ministry of Pensions is at present in Australia with the object of discussing details connected with this matter with the Commonwealth authorities.
Scarlet Fever Outbreak
asked the Minister for Health, upon notice -
– The answers to the honorable member’s questions are as follow : -
Payments of Cotton Bounty
Mr.YATES asked the Minister for
Trade and Customs, upon notice -
– The answers to the honorable member’s questions are as follow : -
asked the Prime Minister, upon notice -
Will the Government, in the same way that it is off-setting amounts payable by the Commonwealth to New South Wales against the repudiated debts of that State, ask the British Government to sequestrate wheat from the Russian Soviet against the repudiated British debt, and thus prevent further “ dumping “ while assisting Australian wheat-growers in retaining their share of Empire markets?
– A committee composed of representatives of Great Britain and Russia hasbeen dealing for some months with the matter of Russian debts to Great Britain in an endeavour to arrive at a satisfactory arrangement. I do not think that any good purpose would be served by taking the action suggested by the honorable member.
asked the Minister for Home Affairs, upon notice -
– Replies to the honorable member’s questions will be furnished as soon as possible.
asked the Minister for Trade and Customs, upon notice -
What were the quantities of Australiangrown leaf manufactured into tobacco in each of the years 1928-29, and 1929-30?
-Information is being obtained.
– On the 18th March, the. honorable member for Fremantle asked me a question, without notice, regarding the matter of making available the “First and Second Interim Reports of the Gold Delegation of the Financial Committee of the League of Nations.”
A supply of copies of this document has now been obtained and made available to the Clerk of the House to meet the requirements of honorable members.
– On the 17th April, the honorable member for Balaclava (Mr. White) asked me the following questions, upon notice -
The answers to the honorable member’s questions are as follow: -
– On the 15th April the honorable member for Balaclava (Mr. White) asked the following question without notice : -
In view of the possibility of an international organization granting loans to impecunious nations under what is known as the Norman plan, will the Treasurer investigate the possibility of Australia participating in such assistance so that the inflation policy of the Government may be obviated?
The answer to the honorable member’s question is as follows: -
The only information known to the Treasury on this subject is that contained in the press cables. The proposal seems to be in the initial stages, and, no doubt, the High Commissioner will advise us if, and when, the matter may be considered to be of practical interest to Australia.
– On the 15th April the honorable member for Herbert (Mr. Martens) asked the following questions, upon notice -
With reference to a question concerning alleged poisoning of the Cairns water supply, asked by the honorable member for Herbert on the 18th December, 1914, and the reply thereto by the Minister of External Affairs (Hansard, Vol. LXXVI., page 2270) -
Will the Minister lay the file concerning the matter on the table of the library ?
Will he also state whether inquiries were made into the matter, as promised, and, if so, will he lay the result of such inquiries on the table of the library?
I am now in a position to inform the honorable member as follows: -
– On the 17 th April, the honorable member for Corio (Mr. Lewis) asked the following questions, upon notice -
I am now in a position to advise him as follows : -
– On the 19th March the honorable member for Corangamite (Mr. Crouch) asked the following questions, upon notice -
I am now able to furnish the honorable member with the following information : -
– On the 17th March, the honorable member for Corangamite (Mr. Crouch) addressed to me the following question, upon notice -
The information which I promised to obtain for the honorable member in respect of parts 4, 6 and 7 of the question is as follows: -
– I lay upon the Table of the House the report of the Australian delegation to the Eleventh Assembly of the League of Nations held at Geneva from the 10th September to the 4th October, 1930.
– I move-
That the paper be printed.
I ask leave to continue my remarks at a later date.
Leave granted; debate adjourned.
– I lay upon the Table of the House the text of the draft conventions and recommendations adopted by the International Labour Conference at its 14th session held from the 10th June to the 28th June, 1930, together with the reports of the Australian delegation.
.- I move -
That the paper be printed.
I ask leave to continue my remarks at a later date.
Leave granted; debate adjourned.
– I have received from Mrs. Chapman, the widow of Senator Chapman, a letter thanking the House for its resolution of sympathy.
The following papers were presented : -
Arbitration (Public Service) Act - Determinations by the Arbitrator, &c. - 1931 -
No. 1 - Commonwealth Public Service Artisans’ Association.
No. 2 - Commonwealth Public Service Clerical Association.
Public Service Act - Appointments ofF. W. Clements and T. J. Cotter - Department of Health.
Debate resumed from the 25th March (vide page 577), on motion by. Mr. Theodore -
That the bill be now read a second time.
.- The purpose of this bill is to enable the Government of the day to fix the rate of interest payable by banks on deposits or on overdrafts, or in relation to the discounting of bills. It is important that the character of the measure should be fully appreciated from the beginning. The bill provides for the appointment of a Bank Interest Board, but, as I shall show, these provisions do not matter at all, for if the measure were passed in its present form the Government could act independently of any recommendation from the board having been made and independently of the terms of any recommendation that it might make. The question which honorable members have to determine is, therefore, whether it is desirable to invest the Government of the day with the power to fix interest rates in the area to which I have referred.
The Treasurer has declared that the object of the bill is to bring about a general reduction of interest charges. It has been impressed upon us that interest rates are one of the most important costs of industry, and that the Government is now setting out upon a campaign to reduce costs, although “we understood that not very long ago it was irrevocably opposed to this course. The object of the bill, in so far as it is an attempt to bring about the reduction of interest rates, is desirable, if it can be attained by fair means, and without doing more harm than good. I propose to examine the measure as an experiment, and to consider what amendments to it are desirable in order to justify support of it in accordance with sound principle.
There is admittedly no precedent for the bill. In the course of his secondreading speech, the Treasurer was asked by the honorable member for Lilley (Mr. Mackay), whether there was any precedent for the measure, and he said that he was not aware of any. Having regard to the knowledge and experience of our treasury officials, we may, therefore, take it for granted that there is no, precedent for it. Of course, it is easy for Parliament to pass a bill saying that the price of money shall be so much or the price of goods so much; or that stalks of wheat shall bear two ears instead of one, or that there shall be rain next week; but there are. limits to the effect of legislative measures. The mere enactment of an act to reduce interest rates, even if it were to be done by direct enactment of rates, would not necessarily bring about that result. There are already in operation in the various States of the Commonwealth money-lending acts, the provisions of which are directed against the imposition of excessive, harsh or unconscionable rates of interest; so that those who are in a difficult position financially, and might be forced into accepting loans upon terms which are unfair, already have legislative protection. But this bill is not directed against harsh and unconscionable transactions. Its object is to bring about a general reduction of interest rates throughout the community.
It is important, however, that we should examine the scope of the measure in order to see how limited it is. I have pointed out that it applies only to banks. Banks lend a great deal of money, partly by overdraft, partly on mortgage, and partly on trade bills. But the bill excludes the State Savings Banks, which are a most important part of the financial machinery of the country. Our Constitution prevents this Parliament from legislating with respect to State banks. The position is, therefore, that the Commonwealth Bank, the Commonwealth Savings Bank, and the general trading banks are to have determined for them by the government of the day, the rates of interest which they may pay and receive. The State Savings Banks, on the other hand, which are in competition with the Commonwealth Savings Bank for the deposits of the people, are to be entirely free from any federal legislation. Honorable members will be able to check what I say by reference to clause 2, which provides that the term “ bank “ or “ banks “ includes the Commonwealth Bank, and such corporations carrying on the- business of banking as are specified by proclamation, but does not include any State bank. It would, therefore, appear obvious that, even, regarded as a measure to fix bank interest, the bill is limited in its scope, because the rates of interest payable by State savings banks on deposits are an important element in determining the interest rate chargeable on money employed in business generally. Many other corporations and individuals which are engaged in lending money in Australia are outside the scope of the bill. It, therefore, becomes a question for consideration how far it is likely to be effective, seeing that all these institutions are unaffected by the provisions. For instance, insurance and trustee companies lend millions of pounds upon mortgage, and the great pastoral companies in Australia are concerned largely in the financing of the wool industry, and all other primary industries. There are, also, the professional money lenders. They, too, are outside the scope of the bill as well as merchants upon whose accounts farmers are paying interest. Private loans on mortgage or upon any other business transaction are not covered by the measure. From what I have said it will be seen that the bill must necessarily be ineffective over the general area of transactions in relation to which interest is charged, except in so far as the general interest rate is affected indirectly by the rate which the banks which fall within the scope of the bill are allowed to charge or receive. Therefore it cannot, in its present form, attain the desired object. It might, however, make some contribution towards that object. I, therefore, purpose examining it from that point of view.
In the first place, what are the interest rates which it is desired to reduce? I am sure that honorable members expected the Treasurer (Mr. Theodore), when moving the second-reading of the bill, to tell them of, some unreasonable increase that had taken place in interest rates. The information which the honorable gentleman placed before the House was that in 1913 the overdraft rate charged to the public was from 5-jjj per cent, to 7 per cent.; in 1924, it was from 6-J per cent, to 8 per cent., and at the present time it is from 7 per cent, to 8 per cent. These figures show that there has not been, in interest rates, the same proportionate increase which has been noticed in the prices of all other goods and commodities. Deposit rates, on the other hand, have gone up, from 4$ per cent, in 1914, to 5J per cent, in 1930. Therefore, it may reasonably be contended that the increase in interest rates from 1913 to 1931 has not been remarkable.
– Not more than the amount of depreciation in the pound sterling.
– It has not been so much. The Treasurer appeared to assume that it is possible, by means of legislation, to deal with interest rates as such. But what really determines the rate of interest paid by a government or a private borrower? Certainly the matter is not governed by legislative regulation. The supply of money available for investment is an important factor in determining interest rates. Another factor is the demand for money. Unfortunately, at the present time in Australia, the demand for capital for investment in private enterprise is very slight, whereas the demand for money to be used for the payment of existing debts is heavy. This is by no means an encouraging sign.
The interest payable in respect of any transaction is determined by two factors - the demand for the use of money, and the nature of the risk involved. There are some borrowers to whom no prudent financier would lend money upon any interest terms whatever. The risk with regard to the principal sum, as has been said in a legal decision in a moneylending case, would be as great as if a chop were thrown to a hungry dog. Unhappily, at present the general view of the public inside and outside Australia is that the risk of lending money in Australia is very great. People are unwilling to lend money because of the lack of confidence in certain leading governments - notably the Government of the Commonwealth and the Government of New South Wales. The Premier of New South Wales is, at present, actively engaged in a campaign of repudiation. It would be unreasonable to expect persons in control of finance to lend money to a government that was conducting a campaign of repudiation. On the contrary they would be very cautious indeed about putting out money in a country where such a government was in power. The Commonwealth Government has embarked upon a policy of inflation which necessarily means the depreciation of the currency. It is the Government’s intention to depreciate the currency, although the phrase ordinarily used is the restoration of price levels. The result is that people, in increasing numbers, are reluctant to lend money while this policy is being advocated by the Government. On the continent of Europe during the inflationary period following the war, interest rates of over 20 per cent. per day were common in an attempt to guard against the depreciation of money. It necessarily follows that if the government of any country subscribes to a policy for the inflation of the currency there will be a restriction of the money market, and a tendency to an increase of interest rates, which reflect general business conditions. These are not matters which can he dealt with by provisions in a bill. Interest rates are really a direct reflection of the condition of business in a community. At present, short money at a rate” of from 2 to 3 per cent. is obtainable overseas. In Australia it is possible to invest money - I take my figures from the Sydney Morning Herald of this morning - in certain government bonds, including redemption, so as to earn 107/8 per cent., and to get the money this year.
– Government securities have firmed considerably.
– About a fortnight ago they were selling at a price which would return 12 per cent.
– It is evident that the people have increasing confidence in the Government.
– I am afraid not. At the same time, exchange is against Australia to the extent of about 30 per cent., and honorable members can work it out for themselves, that any one who has confidence in Australia and who has or is able to borrow money abroad, would, in view of the 30 per cent. premium here and the tremendous interest return obtainable by purchasing Commonwealth bonds, be able to make an enormous profit; but what do we find ? Instead of money being sent to Australia, it is, most unfortunately, being removed as fast as people can get it away, and exchange rates have been increased in an attempt to prevent the continuance of this. If there were confidence in Australia generally, a tremendous flow of money into Australia would necessarily, on the figures which I have quoted, take place, yet the reverse process is in operation. This matter was examined by the officials of four State Treasurys of Australia, and they presented a report upon it to the recent Premiers’ Conference. Paragraph 30 and following paragraphs of that report, dealing with the rates of interest, read -
In other countries this rate has fallen very considerably, not only for short-term loans, but also for long-term or “ funded “ loans. Whereas the effective yield to purchasers of Australian stocks has risen to an alarming extent both at home and abroad, the rate for sound investments of new savings has moved in the opposite direction in the world’s capital markets. This anomaly is due in the main to lack of confidence in the position of Australia. While this condition continues, any reduction in rates of interest for Australian governments or industries is impossible. The effective rate of interest is indeed likely to increase unless confidence is restored. At present there is a flight of capital which is registered in the panic rates of exchange now prevailing. There are also large maturities of loans due for conversion in the near future. No approach to any reduction of interest rates is feasible until confidence is completely restored. To temporize with the situation is only to postpone the time when a reduction of interest rates will be possible.
The recent increase in rates of interest is clearly due to fears of predatory action against capital. These fears have their effects on capital in two ways; they provoke the transfer of liquid funds owned abroad, but normally invested in Australia, as well as the transfer of savings made by Australians. There is also a shortage of savings in Australia due to the loss of income. The effect on the supply of loanable funds is obvious. The prospect of a reduction in the rates of interest depends first on a reversal of this process. Secondly, it depends on lessened competition of borrowers for the funds available. The less the governments come on the market for new money in competition with industry, the less will be the interest burden on both. Nevertheless, when confidence is restored, a fall in the Australian rate of interest comparable to the fall in the world’s rate may be anticipated. Reduction cannot be accomplished by direct government action. The most hopeful means of reducing rates is that private enterprise should attract capital from abroad. But there are possibilities of reduction in Australia itself. The magnitude of our savings, bank deposits exerts a great influence on the rate of interest. The rates offered by these banks affect interest rates generally, including the rates paid by industry and by governments and public authorities on loans raised in Australia. These savings bank rates are much higher than in other countries.
To attempt any reduction in these rates at present would be to invite a further exodus of savings, and a further pressure on the rate of exchange. When confidence is restored, the savings banks and the trading banks together might take common action to reduce the rates paid on deposits, and the rates on overdrafts and loans generally. A reduction in rates of interest, equivalent to reductions in other costs, may reasonably be looked for as soon as recovery has definitely commenced.
That is a lucid examination of the causes which bring about a particular level of interest rates. The real way to reduce interest rates is obviously to deal with the causes of high interest rates. The failure to deal with these matters which are referred to in the report of the Treasury officials, has had the result of bringing about a rate of interest which is higher than would otherwise be the case. The Treasury officials point out that the principal factor in reducing interest rates must be the restoration of confidence in Australia. I am not going to turn this debate into a general attack upon the Government. I have, on many occasions, indicated plainly enough my complete lack of confidence in this Government. Until there is a government in power which at least has the general confidence of the country, I can see hut little chance, whether the bill is passed or not, of any real reduction in interest rates.
– No government can have the general confidence of the country. The Opposition and their Supporters are always against it.
– The Government can have the general confidence of the country in. relation to some matters. The Treasurer (Mr. Theodore) in his second-reading speech, referred to the banks, and indicated his intention to attack them generally, as somehow or other, the enemies of Australia, as if the whole interest of the banks were not in the direction of the prosperity of this country and the revival of industry! I refer, in connexion with this bill, to a recent statement of the general manager of the Bank of New South Wales which appeared in the Sydney Morning Herald of the 16th of this month. It is headed “ Interest Rates ; Plans for Reduction ; Mr. A. C. Davidson’s Assurance.” A portion of this report, which is very relevant to the object of this bill, reads : -
Plans have been laid for many months for a general reduction of the rates of interest as soon as governments put us in a position to ido it on a sound basis.
In making the foregoing statement at the Graziers’ conference yesterday, Mi-. .A. C. Davidson, general manager of the Bank of New South Wales, assured the delegates that the desire of banks and financial institutions to reduce interest rates was as strong as their own. They knew from figures their country customers gave them how great was the burden of interest on primary producers. But suggestions of repudiation and the variations of existing contracts were frightening money away, and, it needed a return of confidence to bring it back. Then and only then could they obtain a reduction of interest charges on sound lines. “ If and when we reach the stage when the governments of the country start about living within their incomes, you will find that all the things you desire can be quickly achieved,” Mr. Davidson said, “ We shall be able to reduce rates of interest, and very soon afterwards, probably, provide all the credit required for productive purposes.
About Mr. Davidson’s statement I should like to make the rather obvious observation that it does not pay the banks to impose very high overdraft rates, because that naturally restricts business. The profits which the banks make depend very largely upon the difference between the deposit rate and the overdraft rate. A high overdraft rate does not mean that the banks are making undue profits, when they are paying, as they are at present, very high deposit rates. I should think that the banks would be content with the same margin between deposit rates and overdraft rates as exists at present, if the rates in both cases were considerably reduced. It is of no advantage to the banks to have high interest rates - it is the difference between the deposit and overdraft rate that is important.
– What is a fair margin ?
– I have not sufficient knowledge of the subject to inform the honorable member.
– As an old banker, let me say that it is between 1 and 1$ per cent.
– What of the high dividend rates which the banks usually pay?
– That has nothing to do with the question now before the House. I have tried to show that the raising of interest rates is not of great importance to the banks. Probably a low rate of interest pays them better than a high rate. When the rates are low they are able to lend money more readily, and there is a quicker turnover. It is the difference between the deposit and overdraft rates which is important. This measure does not relate to the profits of the banks.
There are very serious difficulties in the way of effectively dealing with this question by legislation. Interest rates, as I have stated, reflect generally the business condition of the community. So much is necessarily excluded from this bill - the Commonwealth Parliament not having power to legislate on general interest rates - that it appears to me to be doubtful whether it will produce any beneficial results. I regard it as an experiment which, subject to proper safeguards, might be tried. I do not regard the measure as satisfactory in its present form, and in committee I propose to move certain amendments to which I shall refer. Although it is proposed that the Bank Interest Board shall consist of five members, all of whom are to be appointed by the Government, I consider that a board of three should be sufficient. The representative of the private banks is to be selected for appointment, in such manner as is prescribed. I suggest for the consideration of the Government that the board should consist of a representative of the Treasury appointed by the Government, a representative of the Commonwealth Bank appointed by the Commonwealth Bank Board, and not by the Government, and a representative of the private banks, appointed by the private banks themselves. Clause 7 provides that the members of the board shall receive such remuneration as is determined by the Governor-General. I suggest that the members of the board should not receive any remuneration at all. The representatives of the Treasury, Commonwealth Bank Board, and the private banks should perform their functions without additional ‘remuneration, as they would be doing work in which the Treasury or the banks were concerned. Moreover, as the board would meet only occasionally, there is no need to provide for the remuneration of its members. I direct particular attention to clause 10, which I ask honorable members to read in conjunction with clause 9. Clause 9 provides that the Bank Interest Board may make recommendations to the Treasurer with respect to maximum deposit, overdraft and discount rates. I presume that the Treasurer will submit an amendment to exclude the general control of foreign exchange from the scope of the bill, as he said, during his second-reading speech, was intended. In these circumstances I shall confine my remarks to the overdraft, and deposit rates with respect to which the board may, under clause 9, make recommendations. Clause 10 provides that the GovernorGeneral may from time to time, by notice in the Gazette, declare maximum interest rates. Whether the board does or does not make recommendations, the Government can do as it likes. The board may recommend a particular rate of interest, but the Government need not accept that recommendation ; it may fix another rate. Under the bill the Government may fix interest rates without even having received a recommendation from the board. The bill does not provide that the Government shall obtain the advice of the board before acting. This involves a very important matter of principle. I object to the political control of banking in all its aspects, and I regard it as most unwise to allow the Government to fix interest rates. Honorable members are aware of the controversy waged in this House and elsewhere with respect to the political control of banking, which is an essential principle of the bill. It is proposed in the bill that the Government may, without any recommendation from the board, fix interest rates as it thinks proper. As I do not regard any government, and particularly this Government, as being fitted to discharge a function of that character, I propose, in committee, to move an amendment to provide that if the Governor-General acts at all under clause 10 in fixing interest rates, he shall do so only on the recommendation of the board. There would then be concurrence between the Bank Interest Board and the Government in connexion with any prescription of interest rates. That, of course, raises an important matter of principle. According to the Treasurer this measure has been brought forward because the Government considers that fixing of interest rates ought to be the responsibility of the Government. That is a proposition which I challenge. If amendments are accepted which will enable the rates to be fixed by the concurrence of the board and the Government, and will secure the appointment of the board in the manner that I have indicated, I am prepared to give the bill a trial. Those amendments would remove the power to exercise political control over interest rates. They would require the concurrence of the Government and the board in any original recommendation.
But even, though an original recommendation were made in which the Government and the board had concurred, as the bill stands at present, the Government might, either with or without a recommendation, alter it as it thought proper. I suggest that the committee should consider an amendment providing that the board might invite the Government to concur in altering an interest rate originally fixed, and that if the Government did not, within a specified period, concur with the board, the board itself might then, by a declaration in the Gazette, fix the interest rate.
– Do not the suggestions of the honorable gentleman involve the drafting of an entirely new measure ?
– We can, by amendment, so alter the nature of the bill as to make it much more acceptable than it now is to honorable members who sit on this side of the House. If it were altered in the manner that I suggest, we would get rid of what I regard as a vicious and dangerous feature, the political control of interest rates by a government.
While I am exceedingly doubtful of the bill producing any useful result, owing to the large area that necessarily has been left uncovered by it, I hope that the House will consider the possibility of so moulding it as to bring it into accord, not only with sound financial principles, but also with sound political principles.
– The Leader of the Opposition (Mr. Latham) has made a very critical and careful analysis of the bill. I find no fault whatever with the manner in which he has approached its consideration, but rather commend the tone of his criticism. I hope that a broader view will be taken of it than is sometimes brought to bear in the consideration of the legislation of this Government.
The honorable gentleman said at the outset that under the bill the Government can act independently of the board - and, I presume, of the banks. At the present time, we are endeavouring to correct a position that enables the banks to act independently of the Government. After all, the Government must govern, in regard to banking as well as with respect to every other matter. To-day, the bank3 have control of, and can arbitrarily fix, the rates that they shall pay. and the charges that they shall make. I believe that the power to regulate arbitrarily these vital charges is too great to be allowed to remain in the hands of a private institution to be used for its own purposes.
The Leader of the Opposition said that this is a proposal to reduce costs; and he added that he thought that the Government was opposed to such an idea. In that he is quite wrong. We favour rather than oppose the reduction of costs, and believe in the regulation of prices for the prevention of profiteering in regard to not only interest rates, but also all other matters. What we have protested against is the assumption of some advocates of the reduction of costs that it should involve merely a lowering of wages.
The Leader of the Opposition quoted figures to show that there had not been a very considerable increase in the rates of interest within recent years. The fact is that in 1924 the rate of interest for overdrafts was from 6£ per cent, to 8 per cent., and that this year it is from 7 per cent. to 8 per cent.
Mr.crouch. - The lowest rate is71/2 per cent.
– I believe it is true that very little accommodation can be obtained under 71/2 per cent. I agree that in February last the general rate for advances and deposits was raised by1/2 per cent. The point to be borne in mind, however, is, not the relative increase in the interest rate within recent years, but the ratio which that interest hears to-day to the national income. While in every other direction costs are falling, the interest rate is either unchanged or has risen. It is interesting to note the weight of that burden. Until two years ago, interest in Australia represented 16 per cent. of the national income; to-day, it represents 25 per cent. While prices are coming down, and wages have been brought down, interest remains at the same fixed rate, and in some cases is at an increased rate. The burden is becoming intolerable.
– What about the element of risk?
– How much is paid for the risk to human life and limb? Do honorable members consider that interest rates should be allowed to rise while the remuneration of men who take their lives in their hands in order to carry on industry in this country is being lowered ? But I do not want to be diverted from an examination of the speech of the Leader of the Opposition, who was listened to in comparative silence. I commend to honorable members opposite the suggestion that they extend to me the same consideration that he received.
The honorable gentleman pointed out that the States have legislation which protect people against usury. Surely he does not say seriously that that is sufficient to protect the people and the industries of this country from excessive bank rates? There is no relation between the two.
– He did not say so.
– He did not say so; but there was that implication. If his reference had no relation to this matter, I put it aside. The honorable gentleman pointed out that the bill applies only to private banks, and that State banks will not be affected by it. That is quite true, the reason being that under the Constitution we have not the power to apply it to State institutions. To that extent I agree that its operation is limited. But is that a reason why it should not be persevered with? Is it argued that neither the States nor the Commonwealth should do anything because each can go only a certain distance? Such an argument would not be logical. We should exercise our powers, so far as we are able, in the right direction, leaving it to other governments to exercise whatever powers they possess in a similar direction. The States have the power to. regulate interest, and some of them are doing so, or attempting to do so. The Government of New South Wales has made the attempt, although perhaps not along lines that may be generally approved.
– It is not paying interest.
– I maintain that the States have a right to regulate the rate of interest on mortgages and the rates charged by insurance companies. In reply to the Leader of the Opposition (Mr. Latham), I point out that, generally speaking, the bank rate of interest is the rate which governs interest other than that charged by private money lenders. The bank rate of interest is usually the rate charged by mortgage offices, insurance companies and other institutions. The State banks - mainly the State Savings Banks which cannot be brought under this bill - are in competition with the CommonwealthSavings Bank and the trading banks. I suggest that if the rate of interest on deposits and advances is fixed for the trading banks, the Commonwealth Bank, and the Commonwealth Savings Bank, the State Savings Banks will be forced into line, because of the competition which will result. Indeed, at a recent Premiers’ Conference the State Premiers themselves stated that the rate of interest paid by the State and Commonwealth Savings Banks is too high, and that it ought to be regulated. They suggested that the ratecould be lowered as a result of conferences. But the private banks must also be brought into the arrangement. We were told that they were prepared to enter into negotiations to that end. They have been talking about these things for a long time; but so far they have done nothing. It would appear that, because of the competition which exists between them, the banks are finding great difficulty in arriving at a common agreement to reduce interest rates. This legislation will provide an opportunity to bring about uniformity. It is fair both to those banks which desire to meet the public demand for reduced interest rates, and those which do not. I have here a letter sent by the associated banks to the Commonwealth Treasurer, in which the banks indicate their desire to reduce the rate of interest.
– Yes, they stipulate certain conditions. But what are those conditions? The letter states that the banks consider that the suggestions by the committee of experts are on. the proper lines and should be generally followed. If those steps are taken as suggested, the banks believe that some action might be possible by the Government, Commonwealth Bank, trading hanks, and savingsbanks to effect some reduction in the rate of interest. Honorable members will notice that the banks require certain definite steps to be taken along the lines of the report of the expert committee, whereupon it might be possible for the banks to reduce interest. On the one hand certain definite steps are demanded; on the other, interest rates might be reduced. I emphasize the word “might”. “What are the definite steps recommended by the committee of experts other than the cutting down of the pensions of soldiers, invalids, and aged persons, the restriction of social services and charitable grants, and the reduction of salaries and wages?
– Why not?
– The reduction of the rates of interest should be the first step.
– Pensions should also be reduced.
– I believe that this country can carry on without reducing any pensions.
– Pensions have already been reduced by inflation.
– All the inflation that has taken place in Australia so far took place during a period when the Labour party was in Opposition in this Parliament.
– That is not correct.
– I repeat that all the inflation which this country has ever experienced was indulged in when governments other than Labour Governments were in office.
The Leader of the Opposition quoted the report of a speech made by Mr. A. C. Davidson. I have a copy of that report before me, and I make the . same observation concerning it that I made in connexion with the letter from the associated banks. Mr. Davidson imposes certain conditions.
– Quite right.
– He says that budgets must be balanced. I remind honorable members that one of the factors which prevent the balancing of budgets, both public and private, is the heavy burden of interest. I suggest that those persons in private enterprise who advocate the balancing of budgets by governments should themselves lead the way, and lessen the burden of interest which makes impossible the task of balancing budgets. Already there has been an arbitrary cut of 10 per cent. in wages. Why should there not be a corresponding reduction in the burden of interest? If we are to balance budgets - whether those of governments, wool-growers, wheatgrowers, or traders - we shall have to lift the burden of interest.
– It should be done honorably.
– I agree with the honorable member; but I point out that a stiff-necked attitude of refusing to reduce interest is the underlying cause of dishonorable methods being advocated. I believe in reducing interest by honorable means. Honorable members opposite profess to believe in such means, but every suggestion made by the Government to bring about a reduction of interest is resisted by them. I am not now saying that the Leader of the Opposition (Mr. Latham) has offered any resistance to a reduction of interest; my remark has reference to interjections which have been made.
I desire to refer also to a statement issued by the Producers Advisory Council, through its chairman, Sir Adrian Knox -
Every element that keeps up costs of production in Australia is retarding the beginning of recovery. The most important element is the high rate of wages, but high interest rates are a formidable obstacle. They affect more than private production, being a cause of heavy and intractable burdens on public budgets. A reduced rate of interest would bring wide-spread benefits. While lightening the charge for working capital throughout industry, it would relieve the burden of mortgage interest on homes, on production, and on distribution.
Sir Adrian Knox recognized that heavy interest rates place a burden on governments, and make exceedingly difficult the balancing of budgets. Prices have come down in all directions; wages have been arbitrarily cut. I see no reason why, in the circumstances, interest should remain unchanged.
– The Prime Minister, in effect, wishes to see the rivers in flood in seasons of drought.
– I am not desirous of seeing the rivers in flood; I am content to see them flowing. If the banks get together and reduce the rate of interest, there will be no occasion for this measure to operate. I remind honorable members that in the past the banks have acted arbitrarily in raising interest rates. During the whole period of the war, the Commonwealth Bank maintained at 6 per cent. the rate of interest on overdrafts. No other bank in Australia did that.
Mr.White. - The State Savings Bank of Victoria has recently reduced the rate of interest on mortgages.
– That is an instance of a government institution giving a lead which private institutions might well follow. In this measure, the Government is trying to assist such institutions to bring down the rate of interest.
The Leader of the Opposition made one statement which I think he ought not to have made without first ascertaining the facts. He said that money is going out of Australia as fast as people can get it out. If that statement is to be subject to the qualification that money is leaving Australia only as fast as people can get it out of the country, then it is all right.
– A great deal of money has left Australia within the last eighteen months.
– The flight of capital from Australia has not been so great as is suggested.
– It has been very substantial.
– More money has been accumulated in Australia by traders who are unable to send it away without paying the high rate of exchange than has left Australia. The position has been watched very carefully by the Commonwealth Government in co-operation with the banks.
– What could the Commonwealth Government do ?
– It has a reserve power that could stop it absolutely.
– Has it ever exercised that power?
– No. Do honorable members opposite wish the Government to do that?
– Then they should not accuse the Ministry of not doing something which they do not wish it to do. We may have to exercise this power; but we will not rush in to operate it unless it becomes essential to do so. If the exchange rate gets right out of the hands of the banks themselves, the Government will operate that power to prevent any serious flight of capital.
– Has not the rate of exchange proved that there has been a flight of capital?
– The rate of exchange is preventing that at the present time.
The Leader of the Opposition made a point which has been emphasized by the honorable member for Darwin (Mr. Bell), that the competition for capital is so keen that there is a shortage of it; but what warrant is there for those who have capital to lend to those in need of it to charge profiteering rates of interest? Living costs and the cost of all services have come down. Those who wish to engage labour or purchase commodities have less to pay for them now than formerly. But should those who have money to lend be permitted to bleed the rest of the community?
– Interest is an insurance.
– Interest has no sacred rights and the honorable member must learn that. The shortage of capital is used as a justification for bleeding those members of the community who are in need, of it. That is a strange argument. I could understand it if those who have money to lend had to meet increased costs; but the facts go to show that the cost of all services has been reduced.
– Many who have capital are suffering losses.
– They are not making many losses; they are well secured.
The subject of bank dividends has been discussed by the Leader of the Opposition. In reply to the honorable member for Fremantle (Mr. Curtin), he said that the subject of bank dividends was not dealt with under this bill. I suggest that it is; perhaps in an indirect way, but in a very real way, because the fixing of the rates on advances and deposits will itself determine the margin that the banks will get. The margin between the two bears a very close relation to bank dividends and interest rates. The margin, I suggest, is very great. The rates vary from 4$ per cent, to per cent, on deposits, and up to 8 per cent, on advances. I think that there is ample room for a reduction of that margin; in any case, it is a phase of the matter that is well worth examination. But if it be true that the present margin is equitable, and it is only a matter of the advance rates and deposits going up or down, then this measure is not a mere attack upon the banks, for it seeks to regulate the rates to prevent competition among the banks to get a certain control of the available money, which puts an unnecessary burden on industry. This bill will provide a safeguard to legitimate banking, as well as to the community, and I recommend its acceptance by the House on that account.
The Leader of the Opposition (Mr. Latham) has said that this proposed measure is an experiment to which, with certain safeguards, he is prepared to give a. trial. He has referred to the constitution of the board, and we can examine his suggestions in committee. The Government is not adverse to considering amendments, provided that they will not destroy the effectiveness of the bill. It is not pro posed that the members of the board shall have fixed high salaries; but, in the first instance, the board may have to make investigations extending over some weeks, and certain remuneration will have to be allowed for that work. Apart from that, it is not proposed to set up a permanent board whose members will draw high salaries. That would impose a further burden on the community.
– How many members will compose the board?
– The proposal is to have five members. That is set out in the bill. One of the members will represent the Treasury, one the Commonwealth Bank, and one the private banks. Two others are to be appointed, and the Treasurer, I think, when introducing the bill, announced that one of them would represent either the commercial interests or the agricultural interests. That matter has not yet been determined, but it is not proposed that a member shall be elected by either commercial or agricultural bodies. Those appointed will truly represent the interests affected.
It was mentioned by the Leader of the Opposition that, under the bill, the board might make a recommendation, or might fail to do so; but, whether it made a recommendation or not, the Government could act. That is quite true; but under the Tariff Board Act, which was not passed by this Government, a similar position obtains. The very fact that a hoard is to be set up suggests, surely, that it will set about an investigation, and make recommendations which will be a guide to the Government. But we cannot have government by boards; we must have government by the Government, and control by the Parliament. Boards are set up merely to guide the Government. If a board fails to make a recommendation, that is no reason why the Government should not take action.
– Could the Government act against the decision of the board ?
– Undoubtedly, just as it can act against a decision of the Tariff Board.
– But there is a distinction between tariff policy, which can be controlled in this House, and the political control of bank rates.
– The Leader of the Opposition has made a most extraordinary statement. He says that there should be no political control of banking. Let us examine that proposition. If it means that the Government, by administrative act, should not be able to say to the banks that Brown should get an overdraft and Smith should not, and that it should not interfere with the personal relations of bankers and clients, I entirely agree; but what is meant by saying that there should be no political control? Does the honorable gentleman mean that there should be no parliamentary control?
– If it means that there, should be no banking laws-
– I have just disclaimed that.
– If the honorable gentleman agrees that there should be banking laws, they involve the political control of banking.
– Not at all.
– Then what does the honorable gentleman mean?
– The Prime Minister understands quite well the distinction between legislation and administration.
– I do, and I know also that there can be administration only after there has been legislation.
– All the banks are operating now under statutes.
– Quite so. Under this bill Parliament is asked to legislate in regard to banking, and to that extent it provides for the political control of banking. It is parliamentary control of banking; it is governmental control in the interests of the people. If we are not to have parliamentary and governmental control of banking, we ought not to have any laws on banking, or indeed any parliament at all. If there is one thing which ought to be under the law, and subject to the control of government, it is the administration of the banks, which can control the very life blood of industry.
– That- is a declaration in favour of the nationalization of banking, which is quite distinct from legislation dealing with banking matters.
– It is not a declaration in favour of the nationalization of banking, but I am quite prepared to declare myself in favour of that policy. No one need have any misapprehension as to where I stand with regard to that. However, I am now speaking of trading banks as private institutions which are, nevertheless, subject to control through banking legislation. Honorable members opposite cannot dispose of the Government’s proposals simply by saying that they constitute political control of the banks. The Leader of the Opposition (Mr. Latham) said that he believed in banking laws, but that he did not believe in giving power to a government to regulate the banks by controlling their business or their charges. Why should not the Government have that power? Why should not the Government, which represents the people, have power to regulate banking charges, which so vitally affect the welfare of industry? During the war it was found necessary to regulate prices in Australia, and in Queensland to-day there are laws, of which I thoroughly approve, for the regulation of commodity prices. I regret that similar legislation was not passed by all the States when the Commonwealth Government relinquished this power after the war. Parliament should certainly have control of the rate of bank interest, and I hope that some day we shall have constitutional power to deal with the whole subject. Honorable members can get it out of their minds that this is, as some of them have said, an onslaught on the banks of Australia. I desire to have no part in a fight against the banks, or against any other institution as such. We are prepared to fight for principles, and any institution, be it a bank or not, which thinks it can control the Government of Australia while the present Administration is in office is making a mistake. Our desire is to co-operate with all institutions and all sections of the community in these difficult times, but we will not suffer banking institutions to lay down the conditions under which the Government is to be carried on ; nor will we allow those institutions to have unlimited power to condition the lives of persons dependent upon them for the capital necessary to carry on industry. We have men on the land to-day with practically no incomes, who are being crushed by the burden of interest payments. Some of these men have grown wheat which has returned them less than the cost of production; others have grown wool which has yielded them little if any profit. They are able to go to the Arbitration Court and plead the condition of their industry as a reason for having wages reduced, whereupon the judges cut the remuneration of the men who do the hard toil on the land, who bear the heat and burden of the day. The one thing which is sacrosanct, which judges cannot touch, and which imposes an ever-increasing burden on an impoverished community, is the rate of interest. The banks are able to take advantage of the shortage of money, and the increased need for it, to extract more and more from a suffering community. It is time that legislation was brought down to regulate the business in a waythat will be equitable to all parties.
.- Everybody, I think, agrees as to the desirability of reducing rates of interest. What people differ widely about is the methods which ought to be adopted to bring about that end. The Government has advanced a proposal which, it says, will have the effect of reducing interest rates, but the Prime Minister, in his argument in support of the bill, begged the question. His speech was a mixture of pathos, sentiment, and argument, and he tried to convince the House that the Government’s proposal was one which would give practical results. He said that the Government desired to correct the existing system, under which the banks could act independently of the Government in fixing the rate of interest. An examination of the facts will show that the banks, in fixing the rate of interest, are influenced very greatly by the price paid by governments for loans, and by the interest rate paid by State savings banks. The Prime Minister added that existing interest rates impose a tremendous burden on industry, especially during this time of falling prices. The Government’s proposal, however, . far from reducing interest rates, will, in my opinion, tend to make them higher. The Treasurer, in his second-reading speech on this bill, concluded with these words -
It has been brought down because of a desire to carry out a complete scheme that will relieve industry of burdens ‘that have become more and more onerous because the financial stress has become more and more acute.
This bill is one of a series of financial measures which together make up a comprehensive plan whereby the Government proposes to abolish the gold standard in Australia, and replace the present currency by an issue of irredeemable paper money. The present bill deals with the machinery which will control interest rates under that scheme. Experience has shown that when an attempt lias been made in any country, to control rates of interest, the effect has been, not to bring about a reduction, but to make the rates of usury higher than before. Such interference makes it more difficult to borrow money; it makes money scarcer, and, therefore, more expensive. That will be the result here. Moreover, this bill is bound up with a proposal to inflate the currency. The effect of this, and of other financial measures introduced or contemplated by the Government, will be to drive capital away from Australia. The Prime Minister said that there was some doubt as to the amount of capital that had already been driven abroad. Perhaps there is some doubt as to the actual amount, but there is no doubt whatever that capital, which is a very shy bird, desires very much to get away, and would do so to a much greater extent were not the exchange rate operating against it.
– My reference was to that capital which would ordinarily have gone out of the country - capital which had accumulated here from the sale of exports.
– The Treasurer has said that one of the reasons for the present high rate of exchange was the panic desire of certain persons to take their capital out of Australia. But I wish to point out that in every country the inevitable effect of the policy which the Prime Minister and Treasurer are attempting to impose on the people of Australia has always been a reduction of its working capital. That was the result in Germany. Mr. Schacht, the President of the Reichsbank says -
Arbitrary and irresponsible as the war itself, the inflation had claimed its hecatombs. Tears, bitterness and despair beyond all measure were the end of it.
Finally the courts in Germany, during the period of inflation in 1923, recognized that 22 per cent, per day was a reasonable rate of interest to charge on loans. It works out at something like 7,000 per cent, per annum. The effect of inflation on the working capital of any country can be ‘seen from what happened in Germany: - In 1913 the savings banks of Germany had in their coffers some 19.7 milliard marks. In 1923, after a couple of years of inflation, after the application of the policy which the Commonwealth Government now desires us to embark upon, the total amount on deposits in the savings banks of Germany was 0.1 milliard marks. The savings of the people of Germany thus declined from 19.7 milliard marks to one-tenth of a milliard. In 1913 the banks of Germany held in their coffers 13.4 milliard marks. In 1923 the amount was only 2.7 milliards. The amount of working capital declined by five-sixths. The working capital of co-operative societies declined from 4.46 milliards in 1913 to .4 milliards in 1923 and that of assurance societies from 6.3 milliards in 1913 to 1.2 milliards in 1923. The total working capital in Germany in 1913 was ‘44 milliard marks. By 1923 this was reduced to 4.4 milliards, exactly one-tenth. The biggest diminution occurred in the savings banks, in which the savings of the workers of the country were invested and in the co-operative societies in which the savings of the farmers, as well as workers, were invested. What occurred in Germany is exactly what would occur in Australia if the present Government’s policy were put into effect. There would be a continual decline in the amount of capital available for the purpose of lending to and assisting productive industry. In every country, the first concern is rather to get any capital at all and then to learn what the rate of interest on it is likely to be, and anything which tends to make capital fly away from the country should, therefore, be avoided because it makes it first scarce and then dear. We know of the flight of capital from France during the period of inflation, before that country reached the stage of stabilization which our Treasurer says should be our aim in Australia. There was also a steady flight of capital from Germany during the period of inflation, and the same flight is apparent in Australia to-day. Our Prime Minister says that he will attempt to restrain it; but people will find all sorts of means to avoid any restraint that may be applied. The more money is made scarce the less there is available and the higher the rate of interest.
No matter what legislation is passed to restrict rates of interest, unquestionably those rates must increase. The inexorable law of competition must come into play. People will refuse to lend if they do not get what they regard as a proper return for the risk they are taking, and because of the gambler’s risk they would be taking in Australia they will require a gambler’s rate of interest.
Interest is the price in a free market for the supply of capital. The Prime Minister says that his policy is to fix that price, but experience has shown that it is practically impossible to fix it. The more one attempts to regulate it, the more usury flourishes. Risks affect the movements of capital. Everyone knows - in fact the Treasurer (Mr. Theodore) has said - that one of the effects of inflation in Australia would be to diminish the value of the fixed capital of the country. There is no question that the risks capital runs in Australia affect its movement from Australia. Credit, which is the other factor determining the position, has beer, defined as “ suspicion asleep “ ; but bills such as we have had brought before us will make suspicion very much awake, and this bill, instead of bringing about a decrease of the rates of interest, will tend to bring about a steady rise of these rates. The only means by which we can, bring about a permanent reduction of interest rates in this country is to do something to restore confidence in Australia, both here and abroad.
The Prime Minister (Mr. Scullin) objects because the banks in their memorandum declare that some attempt by governments must be made to balance their budgets. Experience has shown con- clusively that the quickest way to inflation has always been through the failure of governments to balance their budgets, and the use of the printing press to make up the leeway or the abuse of the extra credit made available. That is the typical way in which inflation starts. It is certainly the way in which it has begun in Australia. The Prime Minister said that the late Government was responsible for it, but when that Government went out of office the exchange rate, which is the test of the degree of inflation in a country, was normal, whereas to-day it is over 30 per cent., demonstrating the present measure of inflation in Australia, and showing also that it has occurred under the regime, and largely because of the policy, of the present Government. The banks in Australia, in the last analysis, really determine the rate of interest by two important factors. These are the rate offered to depositors by savings banks, which are government institutions, and the rate which governments are willing to pay for loans. If the savings bank interest rate is high, and the rate paid for government loans is high, the banks are obliged to offer a higher rate for deposit money, and must charge a correspondingly higher rate of interest on advances. Our savings banks have gradually increased their interest rate from 3 per cent, to 5 per cent. - it varies in different States - and they offer all sorts of inducements to bring into their coffers money which was never intended to go into savings banks. For instance, they allow multiple accounts, and they have increased the limit of the amount which can be deposited. At one time, that limit was £300. It was subsequently increased to £500, and later to £1,000. By these means, the savings banks have brought into their coffers money which really does not properly belong to savings banks, and. for which they were never intended. We are told now that there has been a sudden withdrawal of these amounts - that during the last six months £20,000,000 has been withdrawn from the savings banks of Australia, and, for the first time in their history, the position of many of these institutions is exceedingly precarious. One of the main reasons for this precarious position is the increased rate of interest they are paying, which present circumstances do not permit them to reduce, and the removal of the other safeguards which should have been continued. Since June, 1929, the excess of withdrawals over deposits in the State savings banks has been £29,000,000.
– Where did that money go?
– A large amount of it was contributed to the recent conversion loan. Much money has been withdrawn by people who have been out of work, or whose circumstances are not as good as they were. Other people have withdrawn money and remitted it abroad in order to escape’ conditions which they feared might arise in Australia. The high rates which government institutions have been paying on deposits have compelled the trading banks to pay correspondingly more for the money deposited with them. Government loans have been another potent factor. The December conversion loan was floated at 6 per cent, for two years. That is an extraordinarily high rate for short term money, and was never equalled in the previous history of Australia. At no time during the last 40 years, at any rate, have the private banks been able to offer terms even approximating that 6 per cent, for a loan of two years currency. The rates they are. offering at the present time vary from 3-^ per cent, for three months to for two years. Only by paying those high rates can they retain their deposits, and necessarily a substantially higher rate must be charged to borrowers for the subsequent use of the money deposited at these high rates to the height of bank deposit rates.
Government loans have been a menace in Australia ever since the outbreak of the war in 1914. Before that year very few governmental loans were floated in Australia, and such stocks did not represent a big part of the investment market ; but during the war the Commonwealth Government borrowed in Australia £250,000,000, and government stocks became a very attractive form of investment. When the Bruce-Page Government came into office and had to convert a substantial proportion of that debt - some £230,000,000 during six years - it set out to reduce the interest rates to a minimum. It did that, first, by the establishment of a sinking fund by the aid of which it was able, in one year, to buy up £6,000,000 worth of Australian stock on the local market; and, secondly, by* co-ordinating governmental borrowing through the establishment of a loan council. The effect of this policy was seen during the period in which the last Government was in office. In 1921, the Commonwealth had paid an effective rate of 7$ per cent, for the last peace loan. The first loan floated by the Loan Council was worth to the lender £6 8s. per cent., but gradually the rate of interest was reduced by the co-ordination of government borrowing through the Loan Council to oi per cent. That fall was reflected in the overdraft rates paid to the banks, because they were able correspondingly to reduce the rates for fixed deposits. That policy should still be followed.
Nobody has publicly stated the difficulties which have beset the banks because of the huge conversion loans which are constantly being floated on the Australian market. In 1923, they amounted to £42,000,000 ; in 1’925, to £72,000,000 ; in 1927, to £70,000,000, and last year to £70,000,000. During the six years of the Bruce-Page Administration £230,000,000 of debt was converted in Australia. Huge loans, many of which were raised during the fever of the war, and induced people who really had not surplus money to invest what they could obtain in order to save the country, had to be converted when patriotic sentiment was less responsive. These obligations hung like a pall over the Commonwealth’s financial position, and helped to maintain high rates of interest. The Bruce-Page Government, through the Loan Council, decided to limit as far as possible the amount of new money to be taken for governmental purposes each year out of the Australian market. That was one of the main reasons for the establishment of the Loan Council, By co-ordinating government borrowing to ensure that the minimum amount of money would be taken from the local market, and that only after due consultation and discussion on a concerted plan, the maximum amount was available for private enterprise. We found that if we took more than
Dr. Earle Page. £10,000,000 to £12,000,000 of new money for governmental purposes during any one year the local market was severely strained and private enterprise suffered. Yet during last year an attempt was made to get from the Australian-money market, for governmental purposes, £15,000,000; unquestionably, the market is unable to stand such a drain, especially in these difficult times.
The reasons I have mentioned have forced the banks to maintain the interest rates on loans. They are not on their trial in this bill, because it is immaterial to their profits whether the rate of interest be high or low. In fact the percentage of profit is probably larger when the deposit rate is low than when it is high, because the margin between rates paid for deposits and on advances is more or less constant. Therefore, they are not concerned with this proposal to ‘ fix rates of interest, except in-so-far as it affects national solvency and the financing of private enterprise. There is no reason to believe that they have not done their best to meet the requirements of the community and r.revent deflation. During the last three years their deposits have increased from £290,000,000 to £307,000,000, an increase of £17,000,000, while the advances have risen from £253,000,000 to £292,000,000, an increase of £39,000,000. This was not in accordance with the sound banking practice which requires that of every £10 deposited not more than £S shall be advanced.
I agree with the Leader of the Opposition that the bill in its present form will be valueless as a solution of the problem that confronts us. In’ fact, a board composed of three government appointees, and two others, who, although they may be said to represent the private banks and the . Commonwealth Bank Board, would also be appointed by the Government, would be dangerous, because the Government would have complete control of the board. The bill should be amended to provide for a board of three members,- representative of the private banks, the Commonwealth Bank, and the Treasury respectively. These appointees should act without fees, because the fixation of interest rates would be part of their ordinary work. The House should insist also that the Government shall not he able to act independently of the recommendation of the board. I am quite willing that the Government should have the right to refuse to act upon a recommendation of the board, but if it does act it should be on such a recommendation. That would not be at all derogatory to Parliament, because, after all, this is a matter for experts. The lowering of the interest rate at the wrong time or for too long a period might tend towards the inauguration of a boom, the after effects of which would be much worse than a brief restriction of credit. The fixation of interest rates is a matter for expert decision, and not for political discussion. This Parliament is the worst qualified body to deal with such a complicated matter. We do not attempt to fix the wages, hours and conditions of industry. Those matters are left to be determined by a special tribunal in accordance with evidence. The same policy should be adopted in regard to the lowering and raising of interest rates. It is equally a technical matter, requiring the application of expert knowledge, and an examination of all the facts, which is not possible in what must necessarily be a partisan chamber, the members of which are too busy with a multiplicity of matters to become financial experts. I shall support the bill if it is amended in the direction I have indicated. Unless it is altered in that fashion it will be a menace to the people.
I am still convinced that the correct way to bring about a reduction of interest rates is to face the facts in the manner suggested by the experts, not bankers, ‘ but representatives of the Commonwealth and State treasuries and ‘well-known economists. As soon as we show a determination to put’ our house in order in accordance with those recommendations, we shall be able to get assistance in dealing with our short-term commitments that will enable them to be lifted off our shoulders, and in dealing with our deficits so that the banks may have more ample credits to offer to industry. When that is possible we shall soon experience a recovery of trade to conditions approaching normal.
.- The right honorable member for Cowper (Dr. Earle Page) said that interest was affected by capital leaving the country. I am under the impression that capital consists of mines, factories, railways, and other material assets. I have yet to learn that anybody has left Australia with a coalmine in his pocket, a factory in his portmanteau, or a railway under his arm. That of which the right honorable member speaks is not capital, but the profits of capital invested in securities. This glib talk of capital leaving the country shows a lack of clear thinking as to what capital really is. .
The Prime Minister said in reply to the Leader of the Opposition that the burden of interest is one of the main things that prevents the balancing of budgets. He said, moreover, that the banks fix the interest rate arbitrarily. I agree that they do, but there is no provision in the bill to prevent them from doing so. We know that the Commonwealth Bank works in collusion with the associated banks, and their representatives, having technical knowledge, would probably collaborate to dominate the board. After the experience which the present Government has had of the Commonwealth Bank Board it should be chary of creating a new board, especially one to control finance. This measure will have little effect on the rate of interest, and will make no substantial change in the present system. Things will be left much as they are unless the Government is prepared to override the decisions of the board. For that reason I want to see embodied in the bill a definite provision to limit rates of interest. If that is not done the measure will in no way alleviate the existing evil. It will merely perpetuate the system which allows Sir Robert Gibson and his colleagues to tell the Government, in effect, to mind its own business, and which permits the Commonwealth Bank to function practically as a private institution. The members of this board are to be appointed for a period of not longer than five years. The phrasing of that provision reveals the employment by the Treasurer of one of those tricks at which he is so adept. The honorable gentleman used the argument in caucus that in appointing these gentlemen for a period that shall not exceed five years, he would have an opportunity to terminate the engagement in one year if they did not prove amenable to reason. I am confident that if they are appointed for five years *uey will remain in office for that period, and that their convictions will be of the same anti-Labour nature as are those of individuals who have occupied similar positions in the past. It seems to me like appointing burglars to preside over a police court, to convict their fellows. These gentlemen are to be appointed, allegedly, to check the roguery of their friends. It is just as improper to appoint bankers to this board as it is to appoint employers to preside over an arbitration court. If the act were to operate properly it would detrimentally affect prevailing rates of interest, which are such a godsend to the banks, and it is extremely unlikely that the personnel of the proposed board will do anything that will hurt their friends. I class the appointment of Sir Robert Gibson, or any other director of the Commonwealth Bank, to this board in the same category as I would the appointment of a director of a private bank to one of these positions. The Treasurer himself has admitted that the Commonwealth Bank is on all fours with a private institution, so far as its activities are concerned. We have received no information as to the type of person who will be selected to fill the remaining two positions on the board. Possibly, they, too, will be drawn from the banks. Perhaps they may be taken from an industrial organization, or from any other body. We have not been enlightened on that score.
Much has been said about the remuneration of these men. As they will control the rates of interest that will operate, that should be adequate remuneration for them. For that reason I agree with those who contend that they should receive no payment for their services. Those in control of our banking system will ensure that the board fixes rates of interest as they would have them. The Treasurer promises that much will be done by this board to reduce existing rates, but actually very little will be done to relieve the position. I wish to see rates of interest definitely fixed by Parliament.
– That could not be done.
– Why not?
– Because rates must fluctuate to meet changing economic conditions.
– It is impossible to escape the consequences of the law of supply and demand.
– That is a factor which never operates so far as our credit is concerned. We are suffering from depression and economic misery, simply because the law of supply and demand has not been allowed to function. Those who control our banking system decide who should and should not have credit, and what the amount of that credit should be. They parcel out credits in sufficiently small amounts to ensure that interest rates should remain high, and become increasingly so.
We hear much about the burden of our national debt. The Prime Minister has admitted that our excessive interest bill prevents the Government from balancing its budget. Can any honorable member point to one country which had a national debt prior to the inauguration of private banking institutions. Great Britain had no national debt to speak of before the establishment of the Bank of England. That is an unchallengeable financial fact. Private banking institutions will continue to have a strangle-hold on the nations of the world unless they are attacked by governments. This bill should be a move in a real fight, not a pretence in a sham one. The Government should say to the bankers, “ The rate of interest will be so much and no more.” In an endeavour to rectify the position, I move -
That all the words after “bill” be omitted with a view to insert ja lieu thereof the words “be withdrawn and a new bill immediately introduced to provide the following provisions : -
An obligation to pay interest, however arising, shall be deemed to be satisfied by payment of interest at the rate prescribed by this act and appropriate to the case.
Any agreement for the payment of interest which provides for the payment of interest at a rate in excess of the rate prescribed by this act, and appropriate to the case, shall, in respect of such excess, be void and unenforceable by any means whatsoever.
This section shall extend to an obligation arising and to an agreement made before the commencement of this act as well as to an obligation arising and an agreement made thereafter, but shall only extend to interest accruing after such commencement.
This section shall take effect, notwithstanding any agreement to the contrary.
The prescribed rates of interest for the purposes of section 5 of this act shall be as follows : -
a ) rate upon any loan for a fixed term upon the security of any property -
upon first mortgage -5 per centum per annum;
ii ) upon second or any subsequent mortgage only -6 per centum per annum;
rate upon verdict or judgment debt - 5 per centum per annum;
rate upon purchase price of goods which may be included in instalment upon the hire-purchase of the goods - 5 per centum per annum;
rate upon purchase price of land upon purchase by instalments - 5 per centum per annum;
rate for money held upon deposit -
rate on money at short call or any period less than three months -11/2 per centum per per annum ;
rate on fixed deposit -
for three months and any period less than six months - 2 per centum per annum;
for six months and any period less than twelve months - 21/2 per centum per annum;
for twelve months and any period less than two years - 23/4 per centum per annum;
for two years or any greater period - 3 per centum per annum;
rate in any other case not above specified - 5 per centum per annum.
Where interest is included in an instalment of purchase money of land or goods at any higher rate than 5 per centum per annum, either party to the agreement in default of re-adjustment of the amount of the periodical payments by consent may apply to the court of petty sessions nearest to the place of abode of the debtor and holden before a stipendiary or police magistrate for a readjustment of the payments.
The court may determine the amount of the periodical payments to be made, having regard to the rates of interest prescribed by this act”.
The measure should specifically stipulate rates of interest. The present wording of the bill gives us no guarantee that existing rates will not be increased, or that they will be reduced. The Prime Minister has said that interest rates must be reduced, but I fail to see how that is to be brought about by the bill as it stands. Australian Governments have made laws to fix rates of wages, and at one time legislative machinery existed in the Com monwealth to fix prices. Why should we not determine the rates of interest? The usurious rates now charged are the greatest burden that falls upon industry and the nation generally. My amendment affords a chance to effect a definite reduction. Only the other day the chairman of directors of the Commonwealth Bank Board issued a statement which proved that Australia is continuing to borrow money, and to pay high rates of interest, and that is the case with all nations. The position would be laughable if it were not so tragic. To perpetuate the system is deliberately to commit suicide. Unless we check the evil we shall allow those in charge of our affairs to put a rope around the national neck, and eventually destroy our nation. Honorable members opposite talk a good deal about inflation. Can there be a more pernicious form of inflation than that of a government continuing to pile up overdrafts to pay its overhead administrative expenses. No system could be more calculated to destroy the financial fabric of a country. I do not blame this Government for what has happened in the past, but I urge it to change the existing system. [Quorum formed.] Any government, whether it be conservative or labour, which continues the present financial scheme must find itself sooner of later, dependent upon bank overdrafts, and without sufficient money to pay its interest bill, and the overhead costs of government. Even if we were to close Parliament House and wipe out the entire Public Service, except those departments which are rendering essential services, such as the PostmasterGeneral’s Department, the Government would still find itself in extreme difficulties. Out of an estimated budget expenditure of £65,000,000, excluding the Postmaster-General’s Department, between £35,000,000 and £36,000,000 is required for interest. If the amount of interest paid by shire councils, municipalities, and other bodies is included, the total interest bill would be between £55,000,000 and £60,000,000 per annum. Every government which continues to finance its operations under the existing system is heading for disaster. The piling up of interest charges must inevitably lead to the closing down of industry, and the dismissal of workmen.
The Leader of the Opposition (Mr. Latham) said that if we had a government with a sound financial policy everything would be well ; but all I heard from the honorable gentleman was a lot of sound and no policy. He also said that if we had a government in which the people had confidence - and he meant a government which would follow the dictates of the bankers - there would be no difficulty in floating another loan. The honorable gentleman desires to perpetuate the system followed by the government of which he was a member for, I think, about five years. The honorable member for fawkner (Mr. Maxwell), the honorable member for Swan (Mr. Gregory), and the honorable member for Forrest (Mr. Prowse) talk a lot about economy, but not one of them cast a vote against the previous government while it was engaged in an orgy of expenditure. They may have criticized the Government, but it is votes, and not words, that count in this chamber.
I wish to make some quotations from a book published in 1919 by Mr. Frank Locke, who shows, by many of his observations, that he- is far from friendly to the Labour movement. The title of this book is The Nationalisation of Credit. In discussing our interest position he said -
If we continue borrowing as up to the present, in 100 years the interest bill will be fi 0,000,000,000.
Th6 rate of interest has actually increased since 1919 and if Mr. Locke estimated the position to-day he would probably mention £12,000,000,000 or £13,000,000,000, instead of £10,000,000,000. To illustrate the way in which interest accumulates, Mr. Locke gave this illustration, though I do not suppose that he would claim originality for it -
If, at the birth of Christ, a penny piece had been invested at compound interest, and had been allowed to accumulate until 1895, the result would be fifty-nine sextimillions of pounds, which, in gold bullion, would make a solid block containing 259,360,000,000,000 cubic miles, and if equally divided, it would give every human being on the earth sixteen pieces of gold, each piece of gold as large as the earth upon which we dwell.
Of course an investment of that kind could not be made. No one man con- tinues to pay interest for generations, nor has the interest rate ever been regular.
Our only hope of permanent relief from the burden of interest is the reduction of interest rates by half, if possible. If my amendment were accepted the rates would be reduced to nearly half what they are at present. One has only to think for a few minutes to realize that our interestpayment policy imposes a crushing burden upon the whole community. Take for example the amount spent in interest in connexion with the building of homes. If a workman obtained a loan of £1,000 at 6 per cent, under any of the home building schemes that are in. operation to-day, and paid 30s. a week to cover interest and the repayment of the loan, he would have paid, in 25 years, £959 in interest and £993 in principal, or nearly double the amount of the original loan. Of course the position is actually worse than that, for very few people are able to obtain loans under those conditions.
The policy of borrowing money for the purpose of paying interest simply means that a crushing burden is being placed upon the shoulders of posterity. Generations still unborn will have to carry this load, and to do it they will be brought down to the standard of the coolie. They will have to live on bread and fat, and be content with a loin-cloth. It will be almost impossible for them to eke out a bare existence. Even within living memory, children have been compelled to delve in coal-mines and nearly naked women have worked alongside men in. the bowels of the earth. It is not so very long ago since little children were compelled to work in factories, and often had their fingers and hands mutilated doing work for which they were entirely unfitted. It is all very well for some honorable members to toss their heads. I assert that unless something is done to reduce our interest bill we shall be forced back to the shocking standards of those bygone days.
To appoint a board of bankers or friends of bankers with the object of bringing about the reduction of interest is entirely foolish. The Government is making a sham fight against the financiers. It is merely making election ammunition. Let it stand up and fight in a straightforward way on a declared policy. Let it have the courage to put a definite proposition to the other place, for it to throw out if it is game to do so.- It is amazing that the Government should he put in the position of having to submit to the receipt of dictatorial notes from the Commonwealth Bank Board - from such men as Gibson, Duffy and others.
I wish to quote some figures used by Mr. Lang, the Premier of New South Wales, in moving the second-reading of the Interest Reduction Bill in the State Parliament. So far as I know these figures were not challenged at any stage of the debate. Mr. Lang said -
The returns of the wheat-farmers of New South Wales will not exceed £10,000,000: they will have to meet over £10,000,000 in interest.
That is, of course, in the aggregate. How is the farmer to meet this huge bill, and yet put in his crop for the next harvest? Mr. Lang also said -
Out of the railway and tramway fund £9,500,000 is paid in wages, and £7,000,000 is paid in interest.
Only £1,000,000 less is paid in interest than in wages. He went on to say -
From the Consolidated Revenue £8,000,000 is paid in wages and approximately £7,000,000 in interest.
Only £1,000,000 less is paid in interest than in wages. Many illustrations have been given to show how our interest bill is being increased. Although I do not desire to be wearisome I propose to indicate it by giving the result of investing, say, £10,000 five years ago in certain directions. If one man had invested this sum of money in building houses, he would have provided employment for carpenters, bricklayers, painters and other tradesmen and created real wealth in the community. Even if the houses were let under the rent system they would provide shelter for the people. If another man had invested £10,000 in government stock, on the advice of cheap Yankee financiers and others, he would have taken no risk and provided no employment of any kind, and yet drawn a substantial revenue, and remained in possession of his capital.
– Would not the Government have provided employment with the money so obtained?
– I am talking about the man who takes no risk; but even the
Government would have used most of the money to pay interest. As regards employment value, these figures show that. £1 spent by private enterprise is equal to £3 spent by a government in present day activities. This pernicious banking policy has been responsible for the present depression, and the process of re-adjustment is now taking place. The value of property worth £10,000 has shrunk to about £7,000. Every time assets in this form decline by 1 per cent, there is an increase in face value securities of 1 per cent. This system will be perpetuated under the Government’s proposal, with the result that the most deserving class of citizens will continue to be penalized.
– Does the honorable member suggest that a person who lends’ money to the Government of New South Wales takes no risk?
– The honorable member’s interjection, even from his point of view, is pointless for the simple reason that in the cases which I have in mind, the money was loaned, not to a Labour government, but to a Nationalist government. It is a fact, nevertheless, that a person lending money to the present Government of New South Wales risks nothing. It is seldom that I am able to quote with approval any remarks made by Chief Judge Dethridge, but I certainly do endorse certain comments made by him in the Arbitration Court last December. Honorable members opposite look to him for light and leading, and usually subscribe to all that he has to say on industrial matters. This is what he said on the occasion referred to -
It seems to me that the mortgagee class will have to be satisfied with receiving, for every £100 they invested, not more than £60. Both parties will have to share the losses in as equitable a manner as possible.
Mr. Long has never said anything worse than that.
The present world position has been deliberately manufactured by those in control of the world’s monetary policy. Mr. Arthur Kidston, a well-known writer on financial economic subjects, in a pamphlet entitled “ A Fraudulent Standard “, gives illustration after illustration to prove that the policy of deflation to destroy the value of holdings in the national debt, was a popular one in Europe after the Napoleonic wars, and in the United States of America after the Civil War. Every student of history knows that the banking authorities of those times adopted the same attitude as that taken by banking institutions of to-day. Interest expressed in monetary terms is relative. Its value is measured by its capacity to purchase commodities. Surely it is clear to all honorable members that, if in. return for borrowed money which would buy only one bale of wool, or one bag of wheat, the people of this country are now required to return in interest a sum which will buy three bales of wool or three bags of wheat, they are being robbed. They may, if they like, regard it as the orthodox operation of the laws governing business transactions; but in plain language, it means robbery, and avoidable robbery at that. It is about time that the people in all countries realized that financial institutions have been playing ducks and drakes with the economic forces of the world.
The amendment which I have submitted is a definite step in the direction of placing control of the finances of the Commonwealth in the hands of the Government representing the people. It is not a placard. It is not like a promise given by the honorable member for Dalley (Mr. Theodore) that if Labour were returned to power the coal mines in New South Wales would be opened within a fortnight. It is not a promise deluding the people that something may be done. It is a plain statement of what can be done, and what ought to be done - a definite declaration that rates of interest within the Commonwealth shall be fixed by statute. It will put an end to the present chaotic and wholly unsatisfactory system operating in the different States. I have always contended that the economic problems arising out of the existing monetary system of the Commonwealth, can only be solved by legislation passed by this Parliament. Circumstances may force us to do something in this direction in the not distant future. No one can challenge successfully the right of this Parliament to legislate in this matter. Parliament has full constitutional authority to deal with the present position, and it should have the opportunity to do so. Even if this bill is passed, the proposed board to advise the Government concerning rates of interest will not function this side of a double dissolution. If the Government means what it says through the mouth of the Prime Minister (Mr. Scullin), there will be a double dissolution at the earliest possible moment allowed by the Constitution. Therefore it is obvious that the Bank Interest Board will not operate prior to the appeal to the people.
– Nor afterwards.
– That will rest with the Government. If the Government adopts my amendment, it will go to the people with a definite proposal to right our present economic wrongs. If it does this it will be returned by a majority as great as it received at the last election. It is of no use to say that the objective can be attained through inflation. If this fight against the interest charge is to be a genuine struggle on behalf of the people, to ease the huge burden which capitalistic finance has placed upon them; if it is to be agenuine fight and not a makebelieve appeal, there canbe noobjection whatever to my amendment. Any proposal which falls short of what it seeks to do will be of little use to industry or the Government. This Ministry has been in office for eighteen months, during which time it has been backing and filling, but doing nothing definite to reach the true objective of the Labour movement. If it is in earnest about this matter, it should accept the proposal which I have put before the House. My amendment means business. If adopted by the Government, it will arouse the enthusiasm of a sorelytried people who have hoped for so much, but up to the present have received so little, from a Labour Ministry. This Government came into office on the crest of a wave of enthusiasm but, so far as its promises are concerned, the people have to be content with merely bitter memories.
– Is the amendment seconded ?
– I second it. I do not know what it is.
– In those circumstances, I shall read the amendment to the House.
The amendment having been read,
– When the honorable member for Werriwa proposed the amendment, I naturally thought that he had arranged to have it seconded.
– Is the honorable member making a personal explanation ?
– Yes. I seconded the amendment purely out of good nature, because no other honorable member rose to do so; but now that I have heard it read, I wish to withdraw my seconding of it.
– That can be done only by leave of the House. Is it the wish of the House that the seconding of the amendment shall be withdrawn ?
Honorable Members. - Hear, hear!
– Under Standing Order 131 an amendment proposed, but not seconded, shall not be entertained by the House, nor entered in the Votes and Proceedings.
Mr. PROWSE (Forrest) [5.50 j.When ore examines the bill, one is impressed, not so much with its provisions as with the unfortunate knack that this Government has of introducing last principles first and first principles last, and we do not yet know what are the first principles of this Government. On the 5th November last, which happened to be Guy Fawkes Day, I agreed with the statement of the Prime Minister which embraced principles in which the majority of the people of Australia believed. At that time he said that the Government could not deliberately coerce the administration of the banks. To-day he is sponsoring a bill that proposes the deliberate coercion of the administration of the banks. One cannot but lose confidence in a government the leader of which fails to stick to any principle, one way or the other. It may be necessary for legislation of this character to be considered by this Parliament, but its place should be lower down on the business-paper. The banks themselves are willing to assist this Government provided that it takes action to put its own house in order by reducing governmental expenditure and effecting other economies. Until that is done we are unlikely to have the assistance of the banks or of people overseas from whom we formerly borrowed. I can foresee great injury to the primary producers, particularly the more necessitous, and to the other sections of the community, if the banks advance money only against gilt-edged security. This is a rich man’s bill, because it will, if passed, enable the bankers to advance only to the holders of very sound securities. When the banks are forced by legislation to reduce interest rates they will lend only to those persons who have sound and safe security.
– At present the banks advance only against gilt-edged securities.
– That has been the custom ever since I can remember; they always endeavour to get good security, and if the honorable member were a money lender he would undoubtedly apply the same principle in his dealings. He would not be ready to lend a few pounds of his money to a bleary-eyed individual who had no prospect of re-paying it.
– Does the honorable ‘ member do that?
– No. When I lend money I use recognized business methods, and that is what the banks intend to do. The associated banks have deposits amounting to £312,000,000, and against that they have advanced, as a business transaction, £316,000,000 to people in need of financial assistance.
– At increased interest rates.
– The rates have certainly been increased, and for that reason I have said that this legislation is worthy of the consideration of this Parliament. If, after Government expenditure had been reduced and other economies effected, the hanks still refused to reduce interest rates, I should he prepared to support a measure of this character, because I, like other individuals in the community, have no desire to pay heavy interest rates. We are in the midst of a depression, and the banks have been forced to raise the interest rates for the protection of their depositors. Any one who has read the history of the boom and the subsequent financial crash in the ‘nineties knows that the banks suffered considerably, some of them being compelled to close their doors ; but it was the drastic action which the banks took later that placed the State of Victoria, in particular, in a position of stability much more quickly than would otherwise have been possible.
– In what way would the honorable member reduce the interest rates applying to our wheat lands, which have practically been abandoned ?
– I have already stated that this legislation should have a place on the business paper of this Parliament, but it should have been preceded by four other measures embodying principles in relation to the restoration of confidence and credit in this country. This is a popular political bill, and the honorable member’s interjection is an evidence of that. I am keenly conscious of the weight of interest and other burdens on the man on the laud. He is suffering greatly from the high cost of agricultural machinery, high railway freights, and the . high cost of living and production, all of which have been brought about by this Government in its efforts to give effect to its policy of excessive protection ; but as this bill is not retrospective in its application it will not help the farmer.. I admit that the high rate of interest is a heavy burden on the community. The honorable member for Werriwa (Mr. Lazzarini) is not the only honorable member who has referred to the difficulty of repaying a pound which was borrowed some two or three years ago. The wheat-grower, who some years ago borrowed a pound on the security of one bag of wheat,, has now to repay it with four bags of wheat. The small wool-grower is in a similarly difficult position.
– Is not that a good argument for the bill?
– Yes ; but the banks, as I have already said, are willing to assist the Government provided that it takes steps to put its own house in order. If this bill is passed, it will operate in favour of the rich man - the man who has plenty of security to offer. The Treasurer (Mr. Theodore) knows that the banks are not too flush of money, and are not pressing advances on the people, but this measure will enable them to pi::k the plums out of the pudding. Within the last few months there has been a considerable change of front on the part of the Prime Minister (Mr. Scullin), who, judging by his actions in trying to force the banks to provide credit, seems to have a sort of vendetta against them. “ When abroad, the right honorable gentle man cabled his colleagues in Australia as follows : -
Banks are expected to carry any shortage in budgets, also to underwrite loan conversion. That, together with responsibility to finance harvest, will be a heavy burden on banks. To create credit for £20,000,000 for loan works is unsound, and I expect the banks to refuse to do so.
The right honorable gentleman expected the banks to refuse to finance works, yet he subsequently tried to coerce them by introducing a measure the object of which was to. provide assistance to the wheatgrowers - a scheme which he knew the banks could not finance. He “further stated -
Governments cannot deliberately coerce the administration of the banks
Notwithstanding that definite statement, the Government of which the right honorable gentleman is the leader has introduced this measure, under which it is proposed to coerce the banking institutions of this country. The Prime Minister continued -
Such a proposal means permanent inflation, which could not be checked as is implied, and would demand further inflation.
That in itself is sufficient to show the inconsistency of the right honorable gentleman. After unsuccessfully attempting to coerce the Commonwealth Bank Board, the Government introduced a bill to provide for aD inflation of the currency to the .extent of £18,000,000. He continued -
All this talk about creating credits and inflation is most damaging, and will seriously prejudice the conversion of maturing loans and treasury-bills.
Notwithstanding that definite statement, the Prime Minister introduced a policy of inflation. He continued -
Since inflation was suggested efforts are being made by men here to withdraw their money from Australia, as they would lose by payment in a depreciated currency.
The effect of the measure recently rejected in another place would have been to depreciate currency. He went on to say -
Depreciation in currency would decrease values of savings banks deposits, property would increase in price, there would be a rush to sell bonds for investment in property, and financial panic may result.
– What is the title of the volume from which the honorable member is quoting?
– I am quoting from a book entitled The Crisis in Austraiian Finance 1929-31, by Mr. E. O. G. Shann and Professor D. B. Copland. On 7th November, the then Acting Treasurer (Mr. Lyons) informed the Prime Minister of the caucus decision to suspend loan conversion. Mr. Lyons said -
This is absolute repudiation. I immediately notified the party I would not be prepared to carry out their decisions, but would communicate with you, and ask you, if you approved of their actions, to relieve me of my position in the cabinet, and appoint a successor to submit the necessary legislation which will inevitably smash the credit of Australia. Pending your decision I propose to carry out my previous intention to recommend a loan to the meeting of the Loan Council on Tuesday. During the discussion an effort was made, and received considerable support, to demand the Commonwealth Bank to take up the whole £27,000,000, failing which demands should be made that the board resign. Fenton informed of this message.
I am quoting these messages to show how the Prime Minister, in whom I once had great confidence, has changed his principles. When the right honorable gentleman was in opposition I regarded him as consistent and straightforward, and always anxious to do his best for his country. On his return from Great Britain he was welcomed at a large public meeting, when he said, “I am returning to my post to carry out ‘ my intentions regardless of political consequences “. The then Acting Prime Minister (Mr. Fenton), and the then Acting Treasurer (Mr. Lyons) adhered to their policy, which the Prime Minister, the Attorney-General (Mr. Brennan), and the Minister for Markets (Mr. Parker Moloney) endorsed. In reply to the message from the then Acting Treasurer (Mr. Lyons) the Prime Minister (Mr. Scullin) said -
I do not approve and will not support, resolution of party, which 1 agree is repudiation which is dishonest and disastrous. Brennan and Moloney concur. We agree that you are right in recommending to the Loan Council issue of loan, as party’s resolution lias demoralized Australian stocks here, and unless rescinded will render renewal of bills here, as well as conversions in Australia impossible. Inform Fenton of this message. Will telephone early as possible.
Later the Prime Minister despatched the following message: -
I appeal to the party to reconsider its resolution which has demoralized Australian stock here, rendered renewal of treasury bills impossible. 1 came to London with the consent of the party. Apart from the Imperial Conference my most important mission was to restore Australian credit so that we could fund the floating debt, and, if possible, raise some new money to relieve our economic position. My efforts would have succeeded had party support been maintained. World depression, affecting the price of our exports, combined with the inability to obtain loans hits Australia very hard. I found in London a desire to assist, and plans were maturing to approach the loan markets when budgets were balanced. Although there was disappointment in financial circles that our budget is not quite balanced the door was not quite closed, and I still had hopes of success until the appalling resolution was passed last Thursday. That proposal was disastrous. It is a reversal of the party’s declared policy to honour national obligations, and no selfrespecting’ government could agree to it. Our Government floated a loan and guaranteed the public a safe investment. Thousands of people withdrew their savings from the savings banks to assist the Labour Government. To default on this loan would weaken the value of their investments, would destroy public confidence, and would delay for years the restoration of economic prosperity. . . . Brennan and Moloney concur.
Sitting suspended from 6.15 to 8.0 p.m.
– I have shown- how completely the Prime Minister (Mr. Scullin), the Attorney-General (Mr. Brennan) and the Minister for Markets (Mr. Parker Moloney), when in London, were in agreement in regard to what constitutes the creation of confidence and credit in this country, and how utterly they failed to fulfil the promises which they made when in proximity to the finest financiers of the world, and those from whom Australia has borrowed so much money. They then recognized that the proposals being propounded by the Labour caucus in this country were entirely detrimental to the interests of Australia financially.
The following statement by the Producers’ Advisory Council of New South Wales expresses the opinion of the primary producers of Australia -
Every element that keeps up costs of production in Australia is retarding the beginning of recovery. The most important element is the high rate of wages, but high interest rates arc a formidable obstacle. They affect more than private production, being a cause of heavy and intractable burden on public budgets. A reduced rate of interest would bring widespread benefits. While lightening the charge for working capital throughout industry it would relieve the burden of mortgage interest on homes, on production and on distribution. Generally speaking, a low rate of interest provides an environment favorable to revival.
Rates of interest in almost every other country have already fallen to low levels. The only remaning reasons for high rates of interest in Australia are unbalanced Government budgets mid the consequent lack of confidence in the security offered by Australian investments.
A lowering of the rate of interest will be practicable when Governments balance their budgets. On the other hand, a continuance of unbalanced budgets, involving inflationary finance, would inevitably lead to increasing rates of interest.
Tlie Prime Minister this afternoon endeavoured to show that the passage of this measure would be of assistance to the primary producers. I fail to see how he arrived at that deduction, because it is not to operate retrospectively. Its effect will be to make interest low for the man with gilt edged securities. The Prime Minister has admitted that the banks cannot stand the strain of providing further loans for the Governments of this country. Those Governments, by means of treasury bills and overdrafts, have obtained from the Commonwealth Bank and other banks and the different savings banks no less a sum than £55,000,000. Therefore this measure cannot by the widest stretch “,f imagination be expected to be of any Assistance to the primary producer. As I have stated previously, it is a rich man’s measure.- If it should become law the banks, having restricted finance, will avail themselves of every opportunity to pick up gilt edged securities, and will leave the farmer to swim as he may.
It is passing strange that I -should agree with the honorable member for Werriwa (Mr. Lazzarini) ; but I concur with him in his statement that this is purely a vote catching measure.
While in the Old Country, the Prime Minister, the Attorney-General and the Minister for Markets were determinedly opposed to the inflationary measures suggested by the caucus of the Labour party. Even while they were returning to Australia they forwarded messages expressing their intention to adhere to those sound principles, regardless of political consequences. When they arrived in this country, however, they “ let down “ the members of their party who had stood by those sound principles, and to-day they are prepared to adopt inflationary measures, and to attack interest, while leaving other conditions untouched. They are ready to bring forward any vote-catching measure regardless of the principles which they held when they so unitedly concurred in London. They no longer concur in those sound principles which they then espoused.
In saying that this, like many other measures brought down by the Government within recent months, is merely a vote-catching measure, I cannot conceive of the Prime Minister, the AttorneyGeneral and the Minister for Markets concurring.
.- The human family possesses all the ingenuity and skill necessary to conceive whatever the heart may desire. It has the ability to construct, to accomplish, to achieve, and it has to its hand all the material required. That is axiomatic, and cannot be denied. All that this world contains is the result of man’s ingenuity to conceive, and his skill to execute. We have gone a long way towards making the best use of those two faculties, but we could never have made any use of them had we not possessed the necessary materials. At, the present time those God-given rights are being denied to us by a man-made power, the power of money - which, in itself, is entirely valueless. If gold were demonetized to-morrow it would not be worth digging out of the ground. To-day, as much of it as can be conserved for the purposes of our monetary system i3 hidden in cellars. Those who wish to perpetuate that idea in regard to the development of this country are nothing more than troglodytes. They are willing that life and limb should be risked in delving into the bowels of the earth to recover a metal which, apart from the fictitious value placed upon it by a monetary system, is absolutely useless to mankind. This bill is designed to fix the rates at which those who may require it shall have it made available to them. The only value which attaches to money is that given to it by the people themselves, through their Parliament. They make what honorable members opposite describe as “real money”. ‘They create a measure of value for the satisfaction of claims between one individual and another on account of services rendered. These are the fundamental principles underlying our present system of production.
Those big Australians who wish to do something for the country that has bred them should come down off the stalking horse of hypocrisy, get down to essentials, and assist the people who go to make up the nation. Broad acres do not make a nation. The happiness of the people is an index as to whether a country is well or badly managed. It is our duty to see that the people are not illicitly deprived of a God-given right. “We have been elected to govern, not to trade. What more important duty have we than to regulate the circumstances which determine whether a man shall earn his living or exist upon “charity? The position in which the world finds itself to-day is n disgrace to civilization. In every country on the face of the globe there is extreme poverty in the midst of such wealth as the human mind has never previously contemplated. That should not be the case. It is all very well to argue that the Government is making this a political measure arid to talk of the Prime Minister, the Attorney-General and the Minister for Markets having concurred in opposing inflation. I do not believe that the Attorney-General and the Minister for Markets would ever concur in a system that would bring about the results to which I have referred.
While I do not approve of the bill in its entirety - it does not wholly meet my desires - I realize that the Government has been driven to take action to control the power that is controlling the people.
– Does the bill go too far ?
– It does not go far enough. I shall not hesitate to express my views candidly in regard to usurers. I shall not camouflage my sentiments, nor shall I make a political speech. It is my intention to get down to essentials and to propound root principles.
It has been asserted, I believe by the Leader of the Opposition (Mr. Latham), that it is wrong to allow governments to fix interest rates or to interfere with the banking institutions or the monetary system of this community. In what sense is that wrong? Who has a greater right to do it than the Government of the country, which is representative of its people? Who will deny the right of the Government to control the rate of exchange, to say what shall be legal tender and to assess values? Are we for ever to be governed by the banks and other financial institutions as we are at present? I shall not be satisfied until we have a full measure of self-government and are able to control those things which tend to retard or restrict the liberties and rights of the people whom we are supposed to govern. I would make the Commonwealth Bank the only bank in Australia, and would give to it the power to control the currency. If the Commonwealth Bank were allowed to operate in the best interests of the country, this bill would not be needed, for there would then be no need to deal with those individuals who now control the world in the fixing of bank rates of interest. Unfortunately, these individuals, when checked in one direction, will, like the burglar’ or any criminal, find some means of circumventing the law and again getting people into their clutches to be bled white, as they are being bled to-day. Yet wo are told that the Government has no right to interfere with them. I maintain that it is our duty to control them. Although, at the moment, the Government may not be prepared to do what it knows ought to be done, the day is not far distant when these money changers will be scourged out of our midst, even as in days that are past they were driven out of the temple at Jerusalem. The only difference between the money changers of old and the financial interests of to-day is one of habitation, not of principle. Five of the most palatial buildings in Sydney are hanking institutions. Has any honorable member ever seen a plough, or a tractor, or a grimy man with bowyangs come out of one of those buildings?
– Then we may take it for granted that he was there for the purpose of depositing his hard-earned savings, and as a result has been exploited by those who control the institution. It is rarely, if ever, that the men who do the work of the country are seen within our banks ; they are more frequently seen on the Yarra bank, or similar places. I could show honorable members hundreds of such men on the
Torrens bank in Adelaide, where, in the misery of the unemployed, we read the truth concerning the system which so many people applaud. It is the duty of Parliament to attack the existing financial system and those who control it, and use it for their own ends.
The Leader of the Opposition (Mr. Latham) said that there were many things not included in this bill. That is true. The bill does not, for instance, set out to control the small money lenders who, if possible, are 100 per cent, worse than the big financial institutions which bleed the producers of this country.
– Federal legislation to control them would be invalid.
– Those unfortunate persons whom force of circumstances compels to give a note of hand for £5 or £10, get £4 or £8 of ready money; and after they have paid two or three times the amount received by them they still owe the principal. We all know that these Shylocks, sharks, cormorants, and vultures are to be found in every city. Their victims can be counted by the hundred. Fortunately, I have never been in their clutches; but I have come in contact with many of their victims. They are as parasitical in the community as are burglars and other criminals.
– They are not dealt with in this bill.
– These small fry are not dealt with in the bill before us; but the bigger fry are. At the moment I am referring to the small fry who, if anything, are worse than others.
– The honorable member will agree that his remarks are scarcely in order.
– I am speaking of usurers, both small and great. The Leader of the Opposition said that some of them were not dealt with in the bill, and I was pointing out that they, as well as the larger financial institutions, trade on the present system.
The right honorable member for Cowper (Dr. Earle Page) referred to the floating of loans during the war period. When the right honorable gentleman made his famous speech in 1924, he “ blew the gaff “ as to how those loans were foisted on the workers of the community. That speech ought to be brought up to date. I have already referred to a notable speech by the honorable member for Bourke (Mr. Anstey), who wanted to prevent the usurers from getting a stranglehold on Australia. Prior to that time the Government, led by the late Honorable Andrew Fisher, had never borrowed money abroad. The honorable member for Bourke showed where money could be obtained without incurring any war debt. I defy any honorable member to show that the system then advocated by the honorable member is unworkable. But the people were not ready for it. Only three men in the Federal Parliament - the late Mr. Hampson, who represented Bendigo, the honorable member for Ballarat (Mr. McGrath) and the honorable member for Bourke (Mr. Anstey) were sufficiently courageous to critize the system about to be foisted on the people. Those men took their courage in their hands, and, in defiance of precedent and of party, resisted the introduction of a financial system which at that time had not, as it has now, obtained a throttling grip on the people of this country and, indeed, on the people of the world.
In his most recent speech, the right honorable member for Cowper did not tell us what “ e told us in 1924. During the war peril loans were raised on sentiment, as w&o cbe case with the recent £28,000,000 loan with which the honorable member for Wilmot (Mr. Lyons), who to-day is a popular idol, was associated. By appeals to sentiment, persons with limited capital who were unaware of the facts were induced to enmesh themselves for a further three to five years in the hope of receiving high rates of interest. They did not know that the financial interests in the community received a substantial rake-off. The right honorable member for Cowper, in the speech to which I have referred, showed that 90 per cent, was made available in notes to the banks for every 10 per cent, of their own capital that they put up. The right honorable gentleman went on to say that, not only on those notes, but on the right to draw notes, the banks expanded their credit to fifteen times the amount of money deposited with them. These are things which the honorable member for Forrest (Mr. Prowse) will never find in that little red book which he was reading to-night. After he has read the little red book the honorable member might take the people into his confidence and explain how they got into the hole they are now in.
We are told that the plan advocated by the expert committee must be adopted if we are to regain national solvency. What is thai plan beyond one of reducing costs? Do honorable members who advocate that plan really think that interest will come down if costs are reduced? I remind them that already 10 per cent. has been taken from the legitimate rights of the workers in addition to 12 per cent. caused by the operation of a policy of deflation. According to the Treasurer (Mr. Theodore), the workers have already been called upon to make a sacrifice of £44,000,000. What has been done with that amount? Have budgets been balanced? Has extra work been found for the workers? Have interest rates been reduced? It is for those honorable members who contend that a reduction in costs will bring about our financial salvation to answer these questions. If the policy they advocate will get us out of our difficulties, then I ask why the position has not already been relieved? Instead of the position improving, it is getting worse. Mr. T. R. Ashworth, the President of the Employers Federation of Victoria, has a prescription which he says willcure our financial ills. He needs no expert committee, no sub-deputy Leader of the Opposition, no Heaven-sent individual like Joe Lyons to advise him.
– Order !
- Mr. Ashworth points out that the workers have already sacrificed 22 per cent. of their income. He, therefore, demands a similar sacrifice by public servants, old-age, invalid and war pensioners. He would reduce the vote for social services to a like extent. That means that he would reduce the grants to hospitals and for educational purposes. The Creator has said : “ Man, know thyself “ ; but Mr. Ashworth would deny the people the opportunity to educate themselves. He would even deny them a healthy body. What would be gained if social services were discontinued or restricted? The proposals of Mr. Ashworth apply only to the persons still in employment. They cannot apply to the 300,000 men and women in our midst who are out of work, for already their incomes have been reduced to vanishing point. But that is not all that Mr. Ashworth advocates. He said that if a reduction of 22 per cent. in the pay of those still in employment is not sufficient, there should be an abrogation of arbitration court awards. In that matter he has the support of honorable members opposite. But supposing all these things were done, would confidence be restored? We are told that if wages are reduced, and production costs are brought down, new industries will spring up in our midst.
– Did the 10 per cent. cut which has already been made provide any men with employment?
– It did not. I ask those who say that a reduction in costs will result in the establishment of new industries and the strengthening of existing industries whether they know of one manufacturer in Australia who is unable to fulfil the orders he receives. Where is the industry that will be called into being by the means advocated by Mr. Ashworth and honorable gentlemen opposite - squeezing the working man? And even if new industries were established, how would people without money buy the goods that were manufactured in them ? These proposals are absurd ; they will not work.
– Say something about the bill.
– I have been referring to arguments used by the Leader of the Opposition (Mr. Latham). If I have departed from a discussion of the bill, then it is evident that he also departed from it. The honorable gentleman does not know how far he got away from the bill in his speech. But I shall say something about the bill. It is intituled “A bill relating to rates of interest and discount and for other purposes.” The honorable the Leader of the Opposition dealt more with the “ other purposes “ than with the rates of interest and discount. I was replying to his arguments.
The honorable member for Warringah (Mr. Parkhill) a few nights ago remarked that honorable members on this side of the House read nothing, or, if they did, they did not understand what they read.
– That is so.
– I realize that the honorable member is sufficiently arrogant to make that assertion. I propose to make one or two quotations regarding usury, and, in that connexion, I shall refer to an authority whose authenticity no honorable member will dare to challenge. I hold in my hand a brochure entitled Common Sense. Such publications show that the world is beginning to realize that the octopus of finance is strangling humanity. The quotation will indicate the need for utilizing the credit of the people, and demonstrate how usury prevents men and women from leading the life that they were intended by the Creator to live. Common Sense states -
Selfishness Seizes on Money.
In every age, men, unmindful of the danger it portended to the common good, have attempted to treat money as a commodity to be hired out with a charge for the use of it.
Its deadly effect on civilization in past ages caused the writers of the Bible to denounce it; and with the establishment of the Christian Church about the5th Century it was universally denounced and prohibited. It was then called Usury - meaning interest. Usury as used in the Bible meant interest, increase, any per cent. was usury. Up to 00 years ago there was but one definition in the dictionaries for usury, “ interest on money”. As late as the 17th Century its prohibition was a cardinal doctrine of the Christian Church. The most severe language the tongue could use was uttered against it. The horrible experience of the people through the Dark Age was attributed to it by the men of wisdom; and universally so, at that time, by the Christians.
I defy any honorable member successfully to controvert that assertion. I shall read another chapter from the authority that I have just quoted. It will give the honorable member for Warringah something to study, and something that he cannot controvert, if he subscribes to the Christian faith, the ethics of which are the basis of our present civilization. I think that the right honorable member for North Sydney (Mr. Hughes), in his book, Bond or Free, declared that all the ills fromwhich the world suffers are manmade. I have always considered that those ills could be relieved.’ and for that reason I am placing the following quotation on record. Those who hold that view should pay serious regard to what I am about to quote from the good old Book -
The Bible on Usury.
As the reader reads the following quotations he should remember that “ Usury “, as used in the Bible, means “ interest on money “, any interest. It remained, to have but this one meaning till about 60 Years ago. “Ezekiel,ch.18, v. 13.Hath given forth upon usury, and hath taken increase; shall he then live? He shall not live; he hath done all those abominations; he shall surely die; his blood shall be upon him.” “Ezekiel, ch. 22, v. 12 and 13. . . .; thou hast taken usury and increase and thou hast greedily gained of thy neighbors by extortion andhast forgotten me, saith the Lord God. Behold, therefore, I have smitten mine hand at thy dishonest gain which thou hast made….. “ “Leviticus, ch. 25, v. 30 and 37. Take thou no usury of him, or increase; but fear thy God; that thy brother may live with thee. Thou shaft not give him thy money upon usury. …” “Nehemiah, ch. 5, v. 7. Then I consulted with myself, and I rebuked the nobles, and the rulers, and said unto them, Ye exact usury, every one of his brother. And I set a great assembly against them.” “ St. Matthew, ch. 21, v. 12. And Jesus went into the temple of God, and cast out all of them that sold and bought in the temple, and overthrew the tables of the money changers. “. “Deuteronomy, ch. 23, v. 19 and 20. Thou shalt not lend upon usury to thy brother; usury of money, usury of victuals, usury of anything that is lent upon usury. Unto a stranger thou mayest lend upon usury. . . . (The authenticity of the last sentence is questioned. See next chapter.).”
Isaiah, ch. 24, v. 2 to 5. . . .; as with the lender, so with the borrower; as with the taker of usury, so with the giver of usury . . . they have transgressed the laws, changed the ordinance, broken the everlasting covenant.”
Coming out of the Dark Age, it was in the 5th century that the Christian religion was accepted. For many centuries, thereafter, the Catholic church was the recognized head of the Christian religion and from it we first get the opinion of the church on this subject.
The Catholic Encyclopedia, page 235, says - “ ‘ In the article, Interest, we have reserved the question of the lawfulness of taking interest on money lent; we have hero to consider first, usury as a subject of controversy: and, secondly, Usury as condemned by all honest men. …” (Page 236.) “The canonical laws of the Middle Age absolutely forbade the practice.”
It then proceeds to give the claims of both sides after the question was opened up by the insistence of would-be money-lenders.
The Lateran Council.
English Economic History, by Ashley, part 1, third edition, page 149 - “Among the canons of the great Lateran Council held by Alexander III., in 1179, one ian :is follows : ‘ Since in almost every place the crime of usury has become so prevalent . . wc ordain that manifest usurers shall not be admitted to communion, nor, if they die in their sin, receive Christian burial, and that no Priest shall accept their alms.’ . . .” The Pope in letters to the Archbishop of Salerno and the Bishop of Piacenza, had pronounced that usurers, and even the heirs of usurers, ought to lie compelled to restore their unjust gains under similar penalties.” (Also, Decretales Gregorii, lib, 5 tit, 19, De usuris cup 3, cd 1018, page 694; and lb., cc 5, 9.) The game authority says - “ It was at another great council, that of Lyons in .1274, that Gregory ‘X. ventured to make a fresh advance in both these directions. In one he ordains that no community, corporation or individual should permit foreign usurers” (local usurers seem to have been under control) “to hire houses, or indeed to dwell at all upon their laud, but rather should expel them within three months; and he forbids any one to let houses to them.” And again - “ The next canon ordained that the wills of unrepentant usurers - of usurers who did not make restitution - -sl,oum be without validity.” And again, same authority - “ We therefore decree, with the approval of this sacred council (of Vienne), that whatever authorities, captains, rectors, counsels, judges, councillors or any other presume to make in future any statutes, either that debtors snail pay usury, or, that a usurer is not bound to restitution shall incur sentence of excommunication.”
Schaff-Herzog says, “ All apostolic fathers condemned the taking of usury.” The Encyclopedia of Religious Knowledge declares the same. Chrysostum said, “ Nothing is baser in this world than usury, nothing more cruel.” ( Usury-Elliott, page 69. )
Aristotle (350 B.C.) said, “Usury is most reasonably detested, as the increase arises from the money itself and not by employing it to the purpose for which it was intended “.
All who claim adherence to the Christian faith, if they are sincere in their convictions, must condemn, not only the payment of interest as dealt with under this bill, but also usury in the main. We should endeavour to get back to first principles. If a man is prepared to earn his living by the sweat of his brow, he should be allowed to enjoy the fruits of his labour without having to pay tribute to another. The brochure from which I have been quoting refers also to usury as practised in England. It states -
Elliott on Usury, beginning on page 262, says - “In the earliest periods of which we have any records we find that the doctrine, that letting money to hire was sinful, prevailed universally over the island of Great Britain. It was the prevailing opinion that interests, or usury, as it was then called, was unjust gain, forbidden by Divine law, and which a good Christian could neither receive nor pay. In common law the practice of taking increase was classed among the lowest crimes against public morals. So odious was it among Christians that the practice was confined almost wholly to the Jews, who did not exact usury of Jews but. of the Christians -
There was no dog eating dog about the Jews. - “ The laws of King Alfred, about 900 A.D., directed that the effects of money lenders upon usury should be forfeited to the King, their lands to the lords under whom they were held, and they should not be buried in consecrated ground. “ By the laws of Edward the Confessor, about 1050 A.D., the usurer forfeited all his property and was declared an outlaw -and banished from England. In the. reign of Henry II., about the close of the twelfth century, the estates of usurers were forfeited at their death and their children were disinherited. “ His successor, Richard I., was yet more severe, forbidding the usurers attending his coronation, nor would he protect them from mob violence. “ During the thirteenth century the severities against the usurers were not relaxed. King John confiscated their gathered wealth without scruple. It is recorded, that he exacted an enormous fine of a Jew in Bristol for his usuries and when the Jew refused to pay he ordered one of his teeth to be drawn daily until he should pay. The Jew is said to have endured the pulling of seven, but then weakened and paid the fmc It is written in the chronicles of England, 1251, A.D., ‘ By such usurers and licentious liurs as belong to him, the realme had alreadie become sore corrupted.” “In the fourteenth century, under the three Edwards, the taking of interest was an indictable offence and Edward III. made it a capital crime. “Attorney-General Noy, in the reign of James I., thought the taking of money by usury was no better than taking a man’s’ life. He said, ‘ Usurers are well ranked with murderers.’ “
I place this on record as a contribution to the discussion on the ethics of the Government’s proposal, of whether or not we should attempt to regulate the rate of interest charged by financial institutions to which the bill applies. The time will come, I believe, when we shall get back to the old Christian laws, the old English laws, on this matter, and prevent financial institutions from profiting by the sweat and degradation and ruin of the people. This sort of thing goes on because, under our present system, there stands between the ingenuity and skill of man, and the material he requires to prosecute his designs, this awful barrier of interest; this stipulation that, unless he pays some one else what is demanded for the right to live, he will he treated as are those now out of work and starving.
If honorable members do not take cognizance of what I am saying, I hope that when the time comes for holding those elections, which honorable members opposite claim to be so anxious to contest, the people will recognize to how great an extent our troubles are due to the money interests of the world, and will give Parliament a mandate for dealing with them. I believe that the lesson is being driven home, and the time of awakening is at hand. I continue the quotation as follows: -
We now come to that crucial period in the history of the human race that the present period is paralleling in economic laws, cruelty and despotism; - the coming of Christ and the Apostolic era: - when Peter the Apostle of Christ, announcing his vision, said - “ And in another great hike, full of pitch and blood and mire bubbling up, there stood men and women up to their knees; and these wore the usurers and those who had taken interest. And the Apostle Paul, relating his vision said - “And I saw another multitude of pits in the same place, and in the midst of it a river full of a multitude of men and women, and worms consumed them. But I lamented and sighing asked the angel and said, Sir, who are these? And he said to me, These are those who exacted interest on interest and trusted in their riches and did not hope in God that He was their helper “.
Those are the affirmations of two of the Saints of the Church. I need say no more. I do not believe that the bill will be operative. Those against whom it is directed are too shrewd to be affected by any action short of that taken at Jerusalem when the tables of the money changers were overturned, and they were driven out of the Temple. The question of usury, of taking interest on money lent, is the crux of the whole problem, and is at the root of all our difficulties. We are in trouble, not because there is a shortage of wheat or wool or wine or dairy produce or of minerals. What is stopping our nation from progressing, and is the real cause of the depression, is the piling up of money upon money, and the charging of interest for its use. It is time the nation declared for itself what shall be legal tender, and laid down the conditions attaching to its use. Financial authorities such as Thorsby and Crowley, the insurance expert, have affirmed that the word “ inflation “ is used to frighten the public, just as children are threatened with bogy-men. When a man borrows from a bank, he is participating in a process of inflation, pure and simple. If he deposits a bond with’ the bank, the bank will allow him to overdraw his account to the value of the bond less the discount which it may impose. I have done it myself. I deposited with a bank a bond I had -bought, and with the credit issued on the strength of that bond, the bank allowed me to use money which, the presumption is, was money used by the Government to pay me my wages when I was overseas with the Australian forces. In-so-far as there was any actual money in the transaction at all, it was paying me with my own money, although the Government was presumed to have spent it as I have already pointed out. When I deposited that bond with the bank, I overdrew my account by issuing a cheque, and paid the cheque to a firm of land brokers, who deposited it in the bank. That was the end of the transaction so far as the bank was concerned, and I was left to reduce my overdraft to recover my bond. Of course, the- whole transaction was a huge fraud, on the part of the bank, but that is how they work their credit system. I trust that those engaged in money-lending will, if they do not repent, be thrust into the bog of pitch, to be eaten by worms, as described by the Apostle, Paul.
.- In one respect I am entirely in accordance with the honorable member for Werriwa (Mr. Lazzarini), the chief spokesman of the Lang faction, upon whose votes the Government must rely to hang on to office. He said that this bill was nothing but a vote-catching measure, and I agree with him. As for the harangue of the honorable member for Adelaide (Mr. Yates), I remind him that legislation dealing with money lenders and usurers has been on the statute-books of the various States for generations. Every State of the Commonwealth has passed laws to restrict usury, laws which were passed long before the Labour party was thought of. Listening to the speeches of honorable members opposite, one might be pardoned for forgetting what the purposes of the bill really are. It proposes to authorize the Government to set up a board which shall make recommendations in respect of the rate of interest paid on deposits in banks, or charged on bank loans, advances or overdrafts, and to fix the discount rates that may be charged by banks on bills, drafts and other securities. It will be noted that the board is to be empowered only to make recommendations, which need not be accepted by the Government. Foi; all practical purposes the measure will be useless, and cannot relieve the situation in any way. I believe that a reduction of interest is highly desirable if it can be brought about by honest means, and without injury to the community.
– How does the honorable member suggest it should be done?
– I shall explain that later. Even under the bill, it is proposed to control interest rates only partially and, therefore, ineffectively. When introducing the bill the Treasurer said that when the Government negotiated with the banks, they raised no objection to the principle that the rate of interest payable on deposits or chargable against bank loans should be reduced. They raised no objection to the principle, it is true, but they objected to the methods proposed.
We have here a bill designed, as the honorable member for Werriwa said, merely to catch votes, though ostensibly for the purpose of coercing the banks. Those institutions, which have long been noted for their fair dealing and sound financial methods, know that the bill is impracticable. It has no chance of succeeding. It does not apply to the savings banks, and one of the difficulties with which the trading banks are confronted is the manner in which the rate of interest has been forced up step by step through the competition of the Commonwealth and State savings banks. Not long ago the rate of interest on deposits in the savings bank was 3 per cent. ; then it rose to 3-J per cent. Later, as the competition between the Commonwealth and State savings banks became keener, it was increased to 4 per cent., and in some instances, 4£ per cent, was paid. While the savings banks, which are outside the scope of this bill, are allowed to compete against one another in this way, it will not be possible to restrict the rate of interest charged by the private banks. The action of the savings banks, together with the policy of this Government since it assumed office, has done more than anything else to raise the rate of interest.
No legislation designed to reduce interest rates can be effective while the savings banks and other financial institutions, such as insurance companies, trustee and pastoral companies, and professional and private money-lenders are outside its scope. [Quorum formed.] With all these institutions outside its scope the bill cannot achieve its objective or be effective. Its purpose, therefore, is merely to secure a political advantage, and the Government’s idea seem3 to be to carry on a campaign against the banks so as to interfere with the clear thinking of the people upon the difficult- problems of to-day. Subclause 3 of clause 10 provides -
Notwithstanding anything contained in any notice published under this section, interest in respect of any deposit or advance made for a fixed period under any contract in force at the date of the publication of the notice or the date specified in the notice, as the case may be, may continue to be payable for that period at the rate fixed by the contract.
In addition to the institutions I have already named, it will be seen from this sub-clause 3 of section 10 that all overdrafts and contracts already entered into would be excluded from the scope of the bill, and the rate of interest payable on them would operate for all time. In these circumstances this bill is nothing but a farce.
– Then why worry about it?
– Because it is my duty to show that the Government is resorting to political propaganda, and i3 wasting time when it should be giving attention to matters that would be of help to the country. I read the following extract from the Sydney Morning Herald of the 20th April last :-
The object of the Government in its currency and banking legislation, despite all that Ministers have said to the contrary, is the placing of the banking system of the Commonwealth under political control. Mr. Theodore challenges the right of the Commonwealth Bank to cut off money supplies from the Government. Accounts of governments in Australia are overdrawn with the Commonwealth Bank to the amount of £44.340,000. If in these circumstances the Commonwealth Bank were not to have the right to say to governments, “Thus far we can supply you At money, but no further,” and must continue to honour any cheques that governments may draw, then plainly the directors, would have no control over what funds they have or over the issue of. currency. These funds would be at the absolute command of governments of Australia, and when these funds were exhausted by government demands on them, then the bank, in order to meet the demands of governments subsequent to that exhaustion, would be compelled to issue more notes. Inflation would be in full career. Every note the bank issued to meet the demands of governments would reduce the purchasing power of every preceding note issued. Governments paying their way in this manner would rob the people. They would not pay to government employees the full value of the services rendered by” those employees to the Commonwealth. At the same time, the value of the wages and salaries paid in private enterprise would also be reduced.
When the Commonwealth and other Labour Governments have extracted the utmost they can obtain from the banks, what chance has private enterprise to obtain any money to carry on its activities? We know that all it can get for the purpose is what remains after governmental demands have been exhausted, and where there is competition between governments and private enterprise to obtain assistance, it automatically follows that the rate of interest is raised: The bank interest rate is a direct reflection of the state of the market, but the inflation proposals of the Commonwealth Government and the repudiation proposals of the Lang Government of New South Wales have also materially caused an increase of the interest rate.
When fear prevails or there is a lack of confidence in a community, such as exists to-day, interest ‘ rates are raised, and when money is also drawn freely from the banks by the governments, as it has been of late, it is very difficult to prevent it from going higher and higher. The law of supply and demand cannot be affected by acts of parliament. The Governments of Australia have been far too rapacious in demanding from the banks the savings of the people. In this connexion, a very per- tinent article appeared in yesterday’s Sydney Sun. I quote the following from it:-
It has been assumed bv both the Federal and the State Labour Ministries that it is the duty of the banks of the country to come to the aid of any government at any time and in any circumstances, whether that Government is able to afford the security of a decent, solvent life and policy, or whether it is entirely irresponsible in policy and extravagant in administration. “Control of Banking” simply means the power at any time to raid the people’s savings and investments for governmental schemes. It would inevitably lead to inflation of the grossest kind and the destruction of all financial stability and industrial enterprise. Better a government should crash than the whole finance of the Commonwealth.
The Federal Government’s Banking Bill and Currency Bill were obviously aimed at governmental control of the people’s money, and it will be the task of Mr. Theodore to persuade the electors that any government, bad or good, cautious or reckless, effective or ineffective, should have control of the whole of the money owned by every depositor in any bank. That this proposition will be accepted by the Australian public is hardly likely after its recent lessons in government finance.
It is doubtful, indeed, whether the public wishes to hear any more about inflation, repudiation, and banking “ reform.” What it would like to sec would be an immediate opportunity to express its opinion of a government which now commands no respect and frankly admits itself bankrupt of ideas, except the idea of inflation and raiding the banks.
I could quote other interesting press comments upon the proposals of the present Government, which the honorable member for Werriwa (Mr. Lazzarini) has described as nothing more than windowdressing for election purposes. Rates of interest can be brought down, not by legislation, but by removing the cause. The Government’s proposals do not tackle the cause. They serve only to destroy all incentive for the investment of money in Australia, either by our own people or by people overseas. One of the ultimate results of the application of the Government’s policy would be to destroy confidence, drive capital out of Australia, and intensify the present lack of development in Australia, the stagnation of our industries, and the percentage of unemployment.
The banking records show that the amount made . available by the banks to the Government and the community is equal to 105 per cent, of their deposits. They have prob- ably gone beyond the limit of safety in making available capital to help the country. If instead of bringing forward proposals, which on the face of them would indicate that the banks have not come to the aid of Australian Governments, the Commonwealth Government had made an honest attempt to restore confidence by a genuine effort to balance its budget and live within its income, if it would give up the practice of living on ever increasing overdrafts, the rate of interest would automatically come down. Nothing is more desirable at the present time than that interest rates should come down. We would all welcome it. No effort on the part of this Government to coerce the banks to reduce interest rates, however, can have that result. On the contrary, it will only serve to increase them.
I propose now to quote some economists and financial experts, who can speak with authority on this subject. I quote first of all Professor Copland, Dean of the Faculty of Commerce, at the Melbourne University.
– He is paid to preach capitalistic economics only.
– That is childish. Professor Copland has said -
The measure to control interest rates, like the proposals for a fiduciary note issue and the transfer of the control of the gold reserve from the Commonwealth Bank Board to the Federal Treasury, were clearly an indication of the serious effects of the present Commonwealth Government’s policy. “None of these measures would be necessary,” he declared, “ if the country had confidence in the capacity and willingness of the Government to balance its budget. “ In the absence of such action by the Government desperate measures are being attempted, and insofar as they are put into action, they will do harm rather than good.”
The next gentleman I quote is Mr. Tranter, chairman of the associated banks. He has said -
It was futile for a Ministry to try to regulate interest rates. Certainly rates could be fixed, but the Government was powerless to compel any one to lend at those rates if he did not believe they would give a fair return for the investment. The laws of supply and demand had never been and could not be successfully defied.
He had repeatedly pointed out in recent months that in his view the only effective way to reduce interest was not by the arbitrary method of an Act of Parlaiment, but for Governments to take the necessary steps to re store confidence at home and abroad. People would then lend their money willingly at reasonable rates.
Mr. Davidson, general manager of the Bank of New South Wales, one of the oldest and soundest of the banks in Australia has said -
Banks can undoubtedly render assistance in promoting economic recovery by - (1.) Co-operating in a general plan for reducing the rate of interest. (2.) By sustaining producers already heavily indebted to the banks, and extending credit where possible. (3.) By pursuing their present policy of allowing exchange rates to move freely.
These constitute a monetary policy sufficient to meet the special difficulties of Australia, but they cannot be successfully applied until Government expenditure has been reduced, and there is a prospect of budgets being balanced within a reasonable time. No monetary policy can be successful in the absence of confidence and budget equilibrium.
Given these conditions it will be possible for the banks to proceed with the measures suggested above. The fall in the rate of interest would stimulate the expansion of industry, for which some extension of credit would be necessary, and the whole process would load to a check in the fall of prices, and possibly to some upward movement. Moreover, a wholesome effect upon the prices of Government bonds would follow, and the Government would be able to finance conversion operations on improving terms. A reduction in Government expenditure will make it possible for the banks to divert credit now being used to finance Government deficits to the more fruitful channels of private industry, thus relieving unemployment.
All our financial authorities are appealing to the Government to come down to earth and get rid of their wild cat ideals.
A committee of experts appointed by the Treasurers of the different States recently submitted a report to a Premiers’ conference urging that the proposals of the Commonwealth Government as subsequently submitted to this Parliament would do far more harm than good ; and it laid down a policy of economy that ought to be observed by the Parliaments of Australia. The Commonwealth Government has refused to adopt that policy. In August of last year the Premiers in conference at Melbourne agreed to carry out the proposals which the committee of experts then said would restore confidence in Australia, and through its representative at that conference the Commonwealth Government also agreed to carry them out ; but, under the terrorism of caucus, Ministers lost their heads and, instead of adopting a sane policy, are showing their cowardice by proposing to reduce interest by Act of Parliament or regulation. That is not possible, and the consideration of such a scheme when the country is on the verge of a crisis is wicked waste of time.
The honorable member forFremantle (Mr.Curtin) asked while the Leader of the Opposition (Mr. Latham) was speaking “ What about the high dividends paid by the banks to-day”? The following table illustrates the fall in the market values and dividends of shares in some well-known companies: -
It is clear from those figures that the banks and other big companies are bearing their share of the depression, and the allegation of the honorable member forFremantle cannot be sustained.
In the next five years loans to the amount of £265,291,000 will mature. The rates of interest on them are -
If public confidence is further shattered by proposals such as that now before the House, instead of the loans being renewed at interest of from 3 to 5 per cent., much higher rates will be charged; thus, an additional load will be placed upon the shoulders of the already overburdened taxpayers. The foolish policy which the Government is pursuing will burden our people with an incalculable load of interest. If the Government persists with this measure, I hope that at the committee stage it will he materially amended by the removal of the more obnoxious clauses. In its present form the bill is, on the face of it, a mere sham. It will do no good, but on the contrary, will do irreparable injury to Australia and her people.
.- Any attempt on the part of a government to cope with the existing financial distress encounters opposition of two types. One alleges that governmental action is unsound because it will interfere with the stability and security of existing financial institutions and injure the financial system generally. The other is that such action involves an attempt at political control of banking which is considered highly improper. As to the first objection, it is strange, having regard to the fact that the existing financial system is anything but sound and secure, that objection should be taken to a proposed alteration on the ground that it would bring about insecurity and uncertainty. As to political control, our opponents seem curiously to disregard the fact that originally banking was the prerogative of the Crown. That prerogative has been usurped by banking interests to such an extent that the purposes of banking have now become perverted, for instead of being a means of providing currency and exchange for the benefit of the community it has been converted into a debt, interestbearing transaction in all its ramifications for the advantage of financial interests. The bill now before the House is an attempt by the Treasurer to cope with the burden of interest. We are living in times when apparently everybody is agreed that something should be done to reduce interest, and the party to which I have the honour to belong, while welcoming any attempt to that end. would prefer a measure designed more effectively to control interest. In that regard I propose to offer some specific suggestions.
Industry is suffering to-day from inflated interest rates, and a period of deflated values. At such a time the justice of a measure such as this cannot be disputed. The general terms in which the honorable member for Adelaide (Mr. Yates) described the position must be endorsed by every thinking man and woman. Let us consider the subject in its bearing upon the human factor. Human beings derive their economic existence from the external, inanimate universe, and any law, whether man-made or claiming divine sanction, which is opposed to the laws of nature, is a contradiction which is responsible for the sad condition of humanity throughout the world to-day. The economic being of humanity is derived from the external, inanimate universe by a continuous flow of energy. That energy directed by human intelligence, love, and industry constitutes the real wealth of the world. Finance, as it is practised to-day - usury in the language of the honorable member for Adelaide - and the increment of debt at interest are entirely man-made institutions. Science has reached such a point of development that the future presents an almost endless vista of expansion. The resources of nature are ample to meet the needs of man to an unlimited extent, and given the necessary human intelligence, love, and industry, it seems that all economic problems should vanish and humanity enjoy an ever-improving standard of living.
In the City of Sydney to-day to see many features which are regarded as evidences of security and progress. They are anything but that. The most con.spicious sights are palatial insurance offices and banking premises. Some of them are of marble. Apparently in order that clerks may add figures it is considered that they must be housed in marble halls, while other human beings may become homeless. Whose money provided these buildings? Whilst they are in evidence we do not see in the streets of Sydney, except on rare occasions and in isolated instances, the human wastage of the pernicious system that is responsible for the creation of these palatial buildings. It will be found to-night in the Domain and the parks where unfortunate human beings are driven to seek shelter, and also in gaols, lunatic asylums and hospitals.
We cannot consider a bill of this character without paying attention to the factors I have mentioned. No person of sensibility can contemplate these things without a feeling of deep emotion and compassion for our brothers and sisters of the human family who are broken and bruised, many beyond repair, and the majority of whom have never had a chance from the moment they entered this world.
We feel that our support to this bill would have been entire but for the circumstance that it is not definite in its proposal to effect a reduction of interest. We believe that there should be such a reduction, that it should be immediate and specific. Unfortunately, the measure makes no provision of that character. A board is to be appointed to deal with the matter. In all fairness, I ask the Treasurer and Government why, if they believe that the rates of interest should be reduced, and have formed any ideas as to the extent of that reduction, their ideas have not been clearly specified in the bill? It is because of this failure that I move -
That all the words after “ bill “ be omitted with a view to insert in lieu thereof the words “ be withdrawn and a new bill be immediately introduced to provide the following provisions : -
An obligation to pay interest however arising shall be deemed to be satisfied by payment of interest at the rate prescribed by this act and appropriate to the case.
Any agreement for the payment of in- terest which provides for the payment of interest at a rate in excess of the rate prescribed by this act, and appropriate to the case, shall in respect of such excess be void and unenforceable by any means whatsoever.
This section shall extend to an obligation arising and to an agreement made before the commencement of this act as well as to an obligation arising and an agreement made thereafter, but shall only extend to interest accruing after such commencement.
This section shall take effect notwithstanding any agreement to the contrary.
The prescribed rates of interest for the purposes of section 5 of this act shall be as follows : -
rate upon any loan for a fixed term upon the security of any property -
upon first mortgage - 5 per centum per annum;
upon second or any subsequent mortgage only -6 per centum per annum;
rate upon verdict or judgment debt - 5 per centum per annum :
rate upon purchase price of goods which may be included in instalment upon the hire-purchase of the goods - 5 per centum per annum;
rate upon purchase price of land upon purchase by instalments - 5 per centum per annum ;
rate on money at short call or any period less than three months - 11/2 per centum per annum; (ii) rate on fixed deposit -
for three months and any period less than six months - 2 per centum per annum;
for six months and any period less than twelve months - 21/2 per centum per annum;
for twelve months and any period less than two years - 23/4 per centum per annum;
for two years or any greater period - 3 per centum per annum;
rate in any other case not above specified -5 per centum per annum.
Where interest is included in an instalment of purchase money of land or goods at any higher rate than 5 per centum per annum, either party to the agreement in default of re-adjustment of the amount of the periodical payments by consent may apply to the court of petty sessions nearest to the place of abode of the debtor and holden before a stipendiary or police magistrate for a re-adjustment of the payments.
The court may determine the amount of the periodical payments to be made, having regard to the rates of interest prescribed by this act.’ “
.- I support the amendment. Like the honorable member for Martin (Mr. Eldridge) I hold the view that the bill now before the House does not definitely make provision for that which the Government professes to be its intention. No doubt the Treasurer considers that the course he has adopted is suitable from the stand-point of making it appear that the Government is sincere in its determination to deal with this very important subject. No one will deny that every day the demand of all sections of the community is becoming more forceful with regard to a reduction of the rates of interest. The Government realizes that and feels that one way to meet the demand and to satisfy the appetite of the people is to bring down the measure that is now before the House. I, and those associated with me, believe that the measure is inadequate and not explicit and because of that we believe that the House should definitely determine what the rates of interest should be.
We have always found that when dealing with matters that concern the workers, and particularly wages and conditions, the opponents of Labour employ all the means at their disposal, and are always definite in their proposals to attain their objective. During the regime of the Bavin Government we had such an experience. When it became necessary from their point of view to deal with the wages of the workers that Government decided that it was necessary to take immediate action, and stated that the circumstances in which the State was in “ were so serious that they would brook no delay.” So the Bavin Government brought down an act of Parliament which effected an arbitrary cut of 8^ per cent, in the rates of wages of the public servants of New South Wales. We claim that if it was competent foi- that Government to deal with the wages of its employees in that direct manner, similar action should be taken by the Commonwealth Government to deal with the reduction of rates of interest. Instead of taking that course this Government has t brought down a bill which provides for the appointment of a board. The Government and all who sit on this side of the chamber severely criticized the Brace-Page Government for the maimer in which it appointed boards and commissions. Most honorable members will agree that one of the features of the last federal campaign was the effort made to bring home to the public of Australia the fact that the BrucePage Government was responsible for the creation of more boards and commissions than were appointed by all other governments since federation.
– And when this Government assumed office it wiped out many of those boards and commissions.
– It did, and the people generally have supported its attitude in the matter. Now, strangely enough, following its adverse criticism of the Bruce-Page Government, this Government proposes to set up another board to deal with rates of interest and exchange. It is merely handing over to other people matters which should be dealt with by Parliament itself. I, and those associated with mc, believe that Parliament should carry out the business for which it was elected, and not delegate the work to any other body, and we believe that ths amendment, moved by the honorable member for Martin (Mr.- Eldridge) provides a means whereby that can be done.
It is suggested that the board should consist of five members, one to represent the Treasury. No doubt, Mr. Heathershaw will be appointed for that purpose, as he is the head of the Treasury Department, and it is logical that the choice should fall upon him. The representa tive of the Commonwealth Bank may be Sir Robert Gibson, with whom the Government have dealt a good deal lately, and with whom I had a lot to do during the fifteen months that I was a member of the Government. From my experience I am quite sure that we shall not receive sympathetic treatment from him or assistance in bringing down the rates of interest in accordance with the desires of the people. The private banks are also to have a representative on the board. Judging from the recent activities of Mr. Tranter, the chairman of the associated banks, he will probably be selected. Not only has he played an active part in connexion with private banking institutions, but recently he usurped the position of Sir Robert Gibson and replied to the Treasurer’s scathing criticism of the attitude of the Commonwealth Bank Board. That is rather a remarkable position, and it must indicate clearly to the people the close cooperation between the private banks and Sir Robert Gibson, in his administrative capacity. If Mr. Tranter were not selected the choice would probably fall on Mr. Davidson, chairman of directors of the Bank of New South Wales. The bill does not give any details as to the fourth representative.
– Perhaps it will be Sir Otto.
– I hardly think that. I believe that Sir Otto Niemeyer has gone for good, and that we shall hear no more about him.
– What about Mr. Duffy?
– We have not heard much about Mr. Duffy, and I am certainly not here to apologize for him. I believe that during the discussion of the bill the honorable member for Martin endeavoured to obtain information as to the attitude of Mr. Duffy on this matter.
– What is his attitude ?
– No one appears to know. It would seem that he has followed the line of least resistance, instead of taking the course that was expected of him. I advance no apologies for the purpose for which Mr. Duffy was appointed.. He was placed in that position to support the aims of Labour, and not blindly to follow the desires of Sir Robert Gibson and bis associates. “We have heard a good deal about the political control of the Commonwealth Bank. Honorable members opposite who dilate on that subject do not believe in it when it affects the development of society from the Labour point of view, but heartily endorse political control when it is in the Nationalist interests. I proved that when I met the Bank Board and met Mr. Drummond, who was allegedly appointed to represent rural interests, and who definitely declared that he would not accept any proposals put forward by the Labour party. There is no doubt that when he gave expression to that statement he was clearly indicating the purpose for which he was appointed. I have no misgivings about the attitude of the honorable member for Warringah (Mr. Archdale Parkhill) and the Nationalist party generally with regard to such appointments. After all, their appointees faithfully discharge their duties on behalf of those they represent. It is well for one to be honest in the matter. I am sorry to say that Labour does not always adopt a similar policy when in office, and when the opportunity presents itself. I make no apology for my attitude when I declare that when these appointments are made they should be in step with modern thought and ideas. Mr. Reading is another member of the Commonwealth Board. He is Managing Director of the British Australasian Tobacco Company, the organization that made a profit of over £1,000,000 last year.
– A record year’s profit.
– Yes, in spite of the alleged depression, and the suffering that exists on all sides in our rural and other industries.
I have departed somewhat from the subject-matter of the bill to answer, in a small way, the criticism levelled against political control of the Commonwealth Bank. There can be no doubt whatever that the bank is; politically controlled by the Nationalist party to-day, and I applaud the Government for every opportunity it presents to us to expose the nature of this political control, and to disclose to the general public what is going on. Seeing that the measure before the House does not definitely deal with this question’ in a proper way, but simply refers it to a board which would be similar to the present bank board we have the right to assume that the interests represented are not likely to do anything to harm themselves and consequently will do nothing to ease the burdens of interest on the shoulders of the people.
I hold the view that if the Government were sincere in this matter it would tackle the problem definitely by bringing down a bill declaring what the rates of interest should be. If it was good enough to deal with the workers’ wages in this way, such as the Bavin Government did - and we have also had the further experience recently of fighting wage reductions with the Arbitration Court, by which ultimately a 10 per cent, cut was made - it should be good enough to deal definitely with this question of interest. I interjected while the honorable member for Adelaide (Mr. Yates) wa3 speaking, “Has the 10 per cent, cut provided any more employment “, because it was said by the employers when they were asking for a reduction of wages that if their request were granted, plenty of work would be provided. That has not been the case, nor is it likely to be. On the other hand the position is infinitely worse now than it was at that time.
When the necessity for reducing interest was brought under the notice of Chief Judge Dethridge, he declared that it was not his responsibility to deal with that subject. He admitted that interest rates were too high and were a burden on industry, but said that his court had no jurisdiction to deal with the matter, which was one for the legislature. His words should carry weight with the gentlemen opposite; and I suggest that it is incumbent upon the legislatures, both Commonwealth and State, to take definite steps to reduce interest rates, and not to deal with the subject as it is being dealt with in this bill.
I ask honorable members to recall the statement made last week to the effect that the Commonwealth deficit this year would amount to more than £19,000,000, of which £7,000,000 was due for interest alone. Of all the matters that are under public consideration at present none is of such importance as the reduction of interest rates. We have to bear in mind that, according to authoritative statements published by the Government, Australia during the next five years will be required to meet internal loans amounting to £290,000,000. If the method followed in the floating of the £28,000,000 loan in December last is adopted to meet them, that is, if the money is to be raised through the ordinary channels, the rate of interest will be increased enormously. If the honorable member for Wilmot (Mr. Lyons) has the responsibility of dealing with these loans, and he handles them as he handled the last loan - I must admit that he was successful in getting the Government of the day to accept the responsibility for placing that loan on the market at an increased rate of interest - he will add enormously to the public debt. A portion of the loan money redeemed by the £28,000,000 loan was raised at 4 per cent.; but the rate of interest on the new loan was 6 per cent. That loan added £200,000 to the annual interest debt of the country. In my opinion, it is absolutely essential that we should depart from the old method of converting loans, and that this Parliament should be prepared to take definite action in this respect, and not refer it to a board or any other tribunal.
The interest debt of Australia now amounts to £8 14s. per head of the population. The seriousness of the situation will be realized when I say that 54 per cent, of the revenue of one New South Wales Government instrumentality, the Water and Sewerage Board, is absorbed in the payment of interest, and this is typical of the experience of many other undertakings both of a government and a private nature. It must be apparent to everybody that in these circumstances we cannot carry on operations. The honorable member for Fremantle (Mr. Curtin) recently published a pamphlet, in which he dealt with railway finances. He pointed out that in 1914 every mile of railway in Australia had to earn £3*56 per annum to pay interest; but that in 1929 this figure had increased to £587 ; a difference of £231. This shows clearly the enormous burden which our public undertakings are carrying. It is humanly impossible to maintain operations under these conditions.
The Premier of New South Wales, in the course of the debate on the Interest Reduction Bill in the House of Assembly in New South Wales, said -
Out of the railway and tramway fund, £9,500,000 is paid in wages and £7;000,000 in interest. From the Consolidated Revenue £8,000,000 is paid in wages and approximately £7,000,000 in interest.
This shows clearly that cuts in wages will not ease the situation in any way. The burden of interest is growing so greatly that definite action must be taken if our public institutions are to maintain their existence. It was for this reason that the New South Wales Government introduced the Interest Reduction Bill, which the lower House of the legislature passed. That Government took the same course in regard to interest that the Bavin Government took in regard to wages.
In order to show how enormously our financial obligations have grown, I direct the attention of honorable members to the fact that in 1914 the public debt was £300,000,000, and the rate of interest averaged 3£ per cent., while to-day it is £1,100,000,000, and the average rate of interest 5j per cent. In these circumstances, it must be apparent to honorable members that there is urgent need for taking steps to rectify the trouble. An interesting table was published not long ago, which showed that a British loan of £2,000,000,000, raised at 5 per cent., in 1917, was costing the taxpayers of that country £100,000,000 per annum in interest. It was also pointed out that by 1947, that is, in 30 years, the amount paid in interest would be £3,000,000,000, and the whole of the principal would still be owing. Miss Margaret Bondfield Minister for Labour in Great Britain, has pointed out that the payment of that interest required the provision of £190 per minute every day and night for the next 30 years.
– Yet the British taxpayers are not growling. There is some courage in the British race. The people there are not squealing.
– The honorable member does not know too much about courage, yet he will need a let of courage in the next twelve months if he is to remain the representative of the constituency which he now represents in this House.
The situation in Great Britain is extremely serious, no matter from what angle it is viewed. It is well known that quite a large number of persons in Great Britain have not worked since they left school, not because they do not want to work, but because the opportunity to work has not presented itself to them. They are ekeing out a bare existence with the help of the dole. No one can get away from the fact that this has a most demoralizing effect upon a nation. No honorable member of this House desires things to come to that pass in this country. We hope to maintain a standard of living in Australia which will be the envy of the world. The fact that such conditions exist in Great Britain is no justification for allowing them to exist in Australia. If the statesmen of Great Britain will not stand up for the rights of the British people and take some steps to overcome the difficulties which are crippling the country, there is no reason why the leaders of the people of Australia should stand idle while our people suffer. At present we have more than 300,000 unemployed in Australia. Thousands of people are drawing rations in the capita cities and country towns throughout the Commonwealth. We are heading for experiences like those through which Great Britain is now passing. Whether honorable members opposite like it or not, they will be obliged before very long, for their own preservation and for the preservation of the interests they represent in this Parliament, to do something tangible to relieve the community from the burden of interest which is to-day crippling it. Wage reductions will not solve the problem which we are facing, nor will the setting up of a tribunal to determine interest rates meet the situation. The amendment which has been moved attacks the problem in a definite way. The people who have suffered wage cuts in Australia have been sorely tried. On the other hand, there are many people in the community who have money invested in gilt edged securities, and in other ways, who have suffered no hardship whatever. It is because we believe that this measure is not specific enough and does not adequately deal with the situation that the amendment has been moved with the object of securing the withdrawal of the bill and the meeting of the situation in a more definite way.
. - The Government feels that something should be said from its point of view with relation to the amendment which has been moved. This amendment provides for the withdrawal of the bill and the drafting of a measure to make provision for the control of other classes of interest than interest upon bank loans and advances. But I am afraid that it contemplates the exercise of power which the Commonwealth Parliament has no authority to exercise and which it does not possess. The Commonwealth Parliament has no authority to control rates of interest upon mortgages, time payment transactions, or other loans of the like nature unless they can be construed as interstate dealings. In that case the Commonwealth could deal with them under its interstate commerce power. It would be foolish for the Commonwealth Parliament to attempt to exercise control in a sphere over which it has no jurisdiction. It would also be a waste of time and, to some extent, a humbugging by Parliament of people who urgently need relief. I do not deny that interest rates upon transactions of the kind to which I have referred, and in respect to all sorts of financial accommodation under timepayment agreements, mortgages, and the like, are, in some cases, extortionate, and should be brought under legislative control. But, obviously, in relation to purely State transactions it is the business of the. State, and not of the Commonwealth, to control them.
This bill deals with interest that may be charged by banks upon advances and loans, and the discount rate that may be charged upon bills and other commercial paper. Undoubtedly the Commonwealth has power under the Constitution to control banking other than State banking, and this bill is an exercise of that power. Moreover, I should point out that if there is effective control over the interest rates charged by banks for loans, that control will have a general effect upon rates of interest in respect of other classes of financial transactions. A considerable number of business concerns and financial institutions, which provide accommodation for their clients, derive their funds from the banks by way of advances, so the control of bank rates, either by a bill, such as the one now before the House, or voluntarily by the banks themselves, must influence the general rates of interest charged upon all kinds of transactions. It was realized at the Premiers’ Conference, and also at the conference between the Commonwealth Government and representatives of the trading banks, that the first step towards a general reduction in the interest burden should be taken by the banks in connexion with advances and deposits. It was felt that if we could secure a reduction of interest rates by the Commonwealth Bank, the trading banks and the savings banks, we should be able to ensure a general reduction in interest charges. There would be, of course, certain exceptions. Because of the risks to which they are exposed, or to the nature of thesecurity offered, money lenders might still be able to charge usurious rates against their clients. But that is a matter for control by State Parliaments. It does not fall within the ambit of Commonwealth legislation.
-Why is it necessary to appoint a board to advise the Government with regard to rates of interest?
– So that the Government, before it operates its plenary power to fix the maximum rate of interest to be charged, shall be informed upon the facts which bear upon the rates prevailing, or that should prevail throughout the Commonwealth. It will be the duty of the board to obtain such information.
– Does not that mean that advice will always be tendered from the point of view of the bankers?
– I think the honorable member is under a misapprehension. The bill provides for the appointment of a board which will conserve the interests of the general community. It will comprise five members, one representing the Commonwealth Bank, one representing the Treasury, one the trading banks, and two others appointed by the Government, one of whom may be selected to represent landed interests which are vitally concerned in interest charges, and one to represent the mercan tile community or the general commerce of the country.
– Both of them representing the Labour party.
– Becauseof the honorable member’s psychology, no board would be satisfactory to him, if, on it, there was a representative of either the Labour party or the workers. The Government will be actuated by the desire to secure a board which can reasonably and rationally advise what should be a fair maximum rate of interest to be charged on bank loans and advances, in the interests, not of any section of the people, but of the whole community. The bill as drafted is a reasonable effort to meet what is the responsibility of the central government. I therefore must oppose the amendment.
.- In ordinary circumstances I should not have spoken on this bill, but I do so because I feel that the sooner it is disposed of and the sooner this Government is forced to go to the country and a new administration placed in power the better it will be for the people. We have just had from the honorable member for West Sydney (Mr. Beasley), a speech couched in language characteristic of the honorable member. His particular speciality is to support and endorse the rabid statements of the Premier of New South Wales (Mr. Lang). One can only conclude, from the remarks which he has just made, that he is prepared to sabotage Australia and make it ready for communism. The answer to his speech and to the utterances of the “ tub-thumper “ from Adelaide - I offer no disrespect to you, Mr. Speaker, when I say that - was just now furnished by way of interjection from the honorable member for Warringah (Mr. Parkhill) who said it was reported that a certain New South Wales bank was unable to meet its obligations.And yet these are the men who are keeping this Ministry in power and preventing the return to office of a government pledged to honest finance. The attendance in this House of two representatives of the party represented by the honorable member for West Sydney (Mr. Beasley) give this Government its majority. Their particular hatred at the moment seems to be Great
Britain and the interests which she represents. The honorable member for Adelaide (Mr. Yates) suggests that all money lenders are usurers. He implies that it.is wholly immoral on the part of any person to lend money to a government. Apparently he and those who share his views lose sight of the fact that the people who would suffer most by this smashing of the Savings Bank of New South Wales are the working people in that State, who put their money, for safe custody, into the hands of a State institution. The statement made by honorable members opposite, that Labour has already contributed £44,000,000 to the solution of our difficulties owing to the fall in the national income, is not correct. Those figures were based upon the assumption that there was no unemployment in this country, when, as a matter of fact, we have approximately 300,000 persons out of work. It is suggested that since the wage-earning section of the community has already sacrificed £44,000,000 in wages, there is now an obligation on employers to absorb the whole of the unemployed. Interest is attacked as if it were utterly wrong to accept interest in return for money loaned to a government. I do not deny that there is a time when all money is of equal value. But if one man, or one corporation approaches another and borrows money for certain definite purposes, rent is charged for it - interest is merely rent for money plus a certain charge for the risk involved. The outside view of the risk with respect to Australian loans is seen in the present adverse rate of exchange of 30 per cent. I ask leave to continue my remarks at a later date.
Leave granted; debate adjourned.
Motion (by Mr. Scullin), proposed -
That the House do now adjourn.
.- I rise to ask the Prime Minister (Mr. Scullin) whether he is in a position to make a statement with reference to a report, which probably all honorable members have heard, that the Government Savings Bank of New South
Wales is unable to meet the demands of its depositors. Since the report is current in the House it is doubtless current throughout Australia. Probably also it has been cabled abroad. I, therefore, invite the Prime Minister to say whether he has any authentic information with respect to this matter. If he is able to say that there is no truth in the report, I am sure that all honorable members, whatever their views on finance and banking, will be greatly relieved. If, on the other hand, thereis any foundation of truth in the report, it is very desirable that the exact facts should be stated. I suggest that the right honorable gentleman, in replying to my observations, should at least lend the weight of his authority as Prime Minister of the Commonwealth to these three propositions: First, that whatever may be the position - and I sincerely hope that in the interests of our citizens it is a sound position - of the Government Savings Bank of New South Wales, the Commonwealth Savings Bank is entirely unaffected and that its depositors have no reason to feel any apprehension with respect to the safety of their deposits. Secondly, I would suggest that the Prime Minister should also make an unequivocal statement to the effect that other State savings banks are equally unaffected by the position of the Government Savings Bank of New South Wales. Thirdly, that, as in the case of the other State savings banks, the Government Savings Bank of New South Wales is guaranteed by the Government of that State. Therefore, the responsibility for the safety of deposits made with it and the protection of its depositors rests, in the first place, with that Government. If there is any uncertainty as to the solvency of that institution, it is important that before the Commonwealth should go to the rescue or the assistance of that institution, the people should understand precisely that if there is a failure, it is a failure of not only the bank, but also the Government of New South Wales led by Mr. Lang. A statement to that effect will have, I suggest, a good effect in New South Wales, in the Commonwealth and abroad. If the depositors, many of them persons of humble means, who have toiled in arduous years and placed their savings in the custody of the savings bank, guaranteed by the government which represents them, are running the risk of the loss of some or of all their hardly accumulated savings, then, at least, let the responsibility for loss be placed where it really rests. I, therefore, invite the Prime Minister to make a statement on these three points, which I hope I have specifically stated. I suggest that such a statement will ultimately be for the benefit not only of the credit of the country as a whole, but particularly, in the long run, for the benefit of those citizens of New South Wales who have entrusted their savings to a bank guaranteed by the government of their State.
– I trust that if the Prime Minister (Mr. Scullin) makes the analytical statement suggested by the Leader of the Opposition (Mr. Latham), he will trace the reasons for the reported suspension of payment on the part of the Savings Bank of New South Wales, provided, of course, that that has taken place. I trust also that he will refer to the electioneering stunts of Mr. Bavin when Premier of New South Wales, who, supported by the daily press, stated that if Mr. Lang and his Labour colleagues were returned to power, they would make a raid on the Government Savings Bank of New South Wales. I suggest that the Prime Minister quote the statements of Mr. Bavin, Mr. .Stevens, the exTreasurer, and of the daily press of Sydney. The Commonwealth Treasurer himself made the public statement that Mr. Lang would lay predatory hands on the Government Savings Bank of New South Wales.
– I have never said that.
– I should have said that the Treasurer was reported to have made that statement. However, I shall examine the newspaper files to-morrow to ascertain the facts. I also suggest that the Prime Minister read carefully the statement of the honorable member for Maribyrnong (Mr. Fenton), who went about the country endeavouring to give some importance to his new political role as an opponent of Labour, and a repudiator of the principles of a system, to the effect that the Government Savings Bank of New South Wales was about to become insolvent. The
Savings Banks hold deposits amounting to £280,000,000, yet to-day the whole of the savings banks of Australia have not £30,000,000 in actual cash with which to meet a demand for payment of those deposits. That position applies in respect of the Savings Banks of Victoria, South Australia and Western Australia. If payment has been suspended by the Government Savings Bank of New South Wales it is because of the statements of honorable members opposite and, to some extent, of the Prime Minister and the Treasurer. Their attacks upon the Premier of New South Wales have led large, depositors in the Government Savings Bank of that State to make an undue rush on that institution. In less than one month £2,000,000 in excess of ordinary calls were withdrawn from that bank. Despite all the talk of the Leader of the Opposition about the soundness of other banks, let me say that if the depositors made a raid on any of the savings banks or trading banks in Australia to-day, the institutions affected would have to shut their doors. Neither the associated banks, which owe £100,000,000 to their depositors and have only £30,000,000 in actual cash, nor the Commonwealth Savings Bank would be able to survive a concentrated and engineered raid., such as that which has now been made on the Government Savings Bank of New South Wales. The attack of the Leader of the Opposition on the New South Wales institution is the most cowardly action taken by any honorable member in the history of Australian politics. He represents those who have engineered an organized raid upon that institution. Actually it is the soundest bank in Australia to-day, not excepting the Commonwealth Bank. It has stronger and better assets than the Commonwealth Savings Bank, but they are not liquid assets. Honorable members opposite talk about confidence and security in the country, but there is not one banking institution in the world that has sufficient liquid securities to tide it over a concerted raid on the part of its depositors. If the Government Savings Bank of New South Wales closes its doors to-morrow, it will be as a result of a deliberate raid, not by the wage earners, as has been suggested by the Leader of the Opposition, but by those who have fairly large deposits in the bank, and whose action has been taken at the behest of the Leader of the Opposition, the Prime Minister, the Treasurer, Mr. Bavin, Mr. Stevens and Mr. Buttenshaw. This is a political stunt to rehabilitate two dying parties, which stink in the nostrils of the citizens of this country, and they alone will be responsible for any loss to depositors arising out of any action taken by the Government Savings Bank of New South Wales, Judged by all the canons of banking and finance, that institution is one of the soundest in the world. Although no less than £280,000,000 is at call in the various savings banks of Australia only about £30,000,000 is held in the form of liquid assets. If the Government Savings Bank of New South Wales is compelled to close its doors then every other financial institution in this country will be forced to do the same, because the assets of that institution are as valuable as those of any other such institution, and more valuable than those of most of them.
. -I trust that the rumour which is current to-night that the Government Savings Bank of New South Wales is in such a position that it has to suspend payment is untrue. I am not concerned in apportioning the blame for such action, but I am concerned with the misery and mental agony that will be caused to hundreds of thousands of persons in New South Wales if the position is as stated. I remember, as a boy, the financial crash in 1893, when a number of private banks in Sydney closed their doors, and the Government Savings Banks assisted in their rehabilitation. I shall never forget the intense mental agony experienced by every one who had deposited money in the banks which failed. I rose, not to indulge in petty party wrangling as to who is responsible for the position which is alleged to have arisen, but to ask the Government to conduct an expeditious examination into the whole situation to see if it is possible for action to be taken in accordance with a request said to have been made by New South Wales for the Commonwealth Savings Bank to take over the Government Savings Bank of
New South Wales, and thus restore confidence at the earliest possible moment. Section 35d of the Commonwealth Bank (Savings Bank) Act reads - (35d. ) 1. The Savings Bank may, with the approval of the Treasurer, enter into an arrangement with the proper authority controlling any Savings Bank constituted under the laws of a State for the transfer to the Savings Bank, upon such terms and conditions as are agreed upon between the Savings Bank and the proper authority, of the whole or any part of the assets, liabilities and business of that Savings Bank.
If, through the proper authorities, the Government will examine the whole position, and bring down to Parliament a recommendation as to the action which can be taken by this Parliament, I can assure the Government of the wholehearted support of the Country party, which is anxious to assist in removing the mental agony which will be experienced by those concerned.
.-I trust that the Government will adopt the suggestion of the right honorable member for Cowper (Dr. Earle Page). The position, which is alleged to have arisen, is a result of the system under which we are operating. There should be no need for the mental agony mentioned by the right honorable member in a country like Australia, which possesses so much wealth. It is the duty of the Government to adopt whatever means lies within its power to re-establish confidence in the minds of the people. Could not the Government introduce a measure declaring a state of financial emergency? During the war period a state of emergency was declared, and, although we are not now at war, a financial crisis such as that which has arisen under the system which we are operating affects the people almost as severely. As I have said onprevious occasions, this Parliament has power to declare what shall be regarded as money, and how it shall be used. It is the duty of the Government to act in this matter, and if it does, I trust it will have the assistance of the Opposition. The Government has made a determined attempt to meet a situation which is not its responsibility, but is due largely to the conditions which existed when it came into office. It has now reached the culminating point, and I am not surprised at what has happened.
Are we to allow our present monetary system to bring about a state of financial chaos in a land of plenty? In a sense,I am glad that such a situation has arisen as it will lead the people to realize that it is our monetary system which is causing chaos. It is not the first time in history that such a thing has happened. I have heard the honorable member for Werriwa (Mr. Lazzarini) mention an instance when the banks of England were rushed, and when money drawn from one bank was immediately deposited in the Bank of England only to be sent out again and again to meet the same rush. That could be done in Australia. The Government must stand behind the banking institutions of this country in order to protect the savings of the depositors, whose property must not be sacrificed. It is not the people who have caused the trouble, and if the policy of the Premier of New South Wales, Mr. Lang, is responsible - which I do not admit, or believe - some action must be taken. Our present position is inevitably the result of the system under which we are working; and it is the responsibility of the National Parliament to act immediately. Notwithstanding the wealth we have produced, particularly during the past ten years we are now faced with a crisis. Have the banks earned the wealth which we have in Australia to-day? In response to an appeal by the Prime Minister (Mr. Scullin) to produce more wheat the farmers increased the area under cultivation and a record harvest was reaped. But the bottom has fallen out of the market, and those who produced the wealth cannot now receive a fair return for their labour. The workers did their share. Every producer in this country did all he could, but his efforts have been in vain. I join with the right honorable member for Cowper (Dr. Earle Page) in deploring the mental agony which will be caused if the report is true, and I trust that no one will suffer unduly inconsequence of the defect in our present financial system. The people are as thrifty and deserving as they have ever been. It is the responsibility of this Government to come to the assistance of the Government Savings Bank of New South Wales or any other bank in order to allay the fears of de positors. We are not worthy of our position if we cannot help. I trust that the Prime Minister will act speedily in this matter, and if a state of emergency is declared I trust he will have the assistance of the Opposition in giving whatever relief is possible.
– I should not have taken part in this debate had it not been for the remarks of the honorable member for Werriwa (Mr. Lazzarini). Perhaps the honorable member does not know that only recently the Commonwealth Bank on two or three occasions came to the assistance of a certain bank. With reference to the report mentioned by the honorable member I know that for two days the Labor Daily starred certain statements that I was reported to have made at Ballarat. Mostly what I said was that from a personal point of view, and from the viewpoint of depositors, I hoped that certain rumours that were afloat were not true. I have it from a fairly reliable source that Mr. Lang has asked the Commonwealth Bank authorities to take over the Government Savings Bank of New South Wales. Everybody ought to be glad to know that the situation is not so bad as it was first stated to be. I add my plea to that which has already been made by members on both sides of the House to the Prime Minister to take whatever steps may be open to the Government to deal with the matter. There are certain persons, who, in the present unfortunate conditions, are dependent for their living upon whatevery they may have in the Government Savings Bank of New South Wales. I hope that whatever assistance can be rendered, not only by the Commonwealth Bank, but also by all other banks, on behalf of the poorer depositors, will be forthcoming immediately. There may be other depositors who can wait for some time for their money. I have not the slightest hesitation in saying that the resources of Australia are quite equal to any emergency that may arise. I do not believe that any depositor will lose one penny of what he has deposited. The Prime Minister will know best what to do when he has been supplied with full particulars. I trust that he will announce that other banks have the backing of the Government, and that in conjunction with those institutions and the Commonwealth Bank it will stand by poor depositors in their time of dire distress.
.- I trust that the Prime Minister will not take it amiss if I express the hope that in his reply to the Leader of the Opposition he -will voice disapproval of the contemptible attempt that has been made to place the Prime Minister in the position of having to commit himself to a statement that might prevent this Government and the Commonwealth Bank from giving any assistance that may be necessary along the lines so worthily suggested by the Leader of the Country party (Dr. Earle Page.) The Leader of the Opposition, one noted, did not express a wish to be informed by the Prime Minister of the destination of the money that has been so systematically withdrawn from the Government Savings Bank of New ‘South Wales, as a result of intensive propaganda deliberately designed to bring about the result that the honorable gentleman professed to deplore.
– I suggest to the Prime Minister that, in view of the gravity of the position which has arisen, and of the fact that there are various aspects of these .transactions which may require confirmation, he should not make a statement upon the matter to-night as the Leader of the Opposition has requested, but* that he should defer such a statement until, perhaps, to-morrow. I am not aware of the nature of the information that is in his possession ; but during the evening rumours have been current, one of which has been contradicted, and unless the right honorable gentleman has had a consultation with the authorities of the Government Savings Bank of New South Wales and of the Commonwealth Bank, I believe that the interests of the community would be best served by deferring any pronouncement until we meet to-morrow.
– This is the most serious matter that has come before any Parliament in Australia since the financial crash that succeeded the land boom in 1893. The Prime Minister to-day stands in a position much stronger and much higher than that in which Sir George
Dibbs, as Premier of New South Wales stood when the run was made on the banks in that year. Honorable members will perhaps recall the assurance that Sir George Dibbs then gave the people, that, the Government of New South Wales stood behind the bank. This had the effect of stopping, the rush upon it. The debacle would have been much more severe had he not made that announcement. I hope that, if after mature consideration, it is found that the Commonwealth Bank can assume responsibility for the liabilities of the Government Savings Bank of New South Wales, it will do so. Honorable . members are acquainted with the story of the little child who stopped a leak in the dykes of Holland. That ripple was small enough at the time to be “Stemmed with a finger, and the child prevented it from spreading until help arrived. Here we have what is a mere trickle; but if this Parliament and the nation as a whole do not adapt preventive measures the consequences will be more awful than those that accompanied the crash which followed the land boom, when unemployment on a terrible scale was experienced. We have a frightful amount of unemployment in our midst to-day, and it is time that we faced it, as we have faced war. It is well-known that if money were needed for purposes of war it would be poured out in millions, and that thousands of our young men would be sent forth to be slaughtered. Yet we will not spend one-twentieth of the amount thus involved to deal with the curse of unemployment, which is second only to the curse of war.
I resent strongly the statement that any particular man has been responsible for the present position. Will any one dare to say that had John Lang not been Premier of New South Wales this would not have occurred, considering the conditions that prevail throughout the world to-day ?
– It would not have occurred had Lang not been there.
– You babbler, keep quiet, and display a little humanity!
– I am sorry that I was drawn aside by this man. In view of my experience of the land boom, and of the present conditions in Sydney and Melbourne, I should like all the members of this House to join in a great concerted effort to keep men and women employed. We have been blessed by nature with a splendid harvest, and have more food than could be consumed by five times our population. In those circumstances we should say that no human being fashioned in God’s likeness shall suffer want. That is what is happening to-day. I fear that what has occurred may be but the prelude to a greater amount of trouble and suffering. That is why I appeal to the Prime Minister to see whether, out of the wisdom that is possessed by the experts, he cannot find some way of removing the present difficulty.
Mr. BEASLEY (West Sydney) [10.39). - We have witnessed to-night an exhibition of political bias and treachery on the part of the Leader of the Opposition (Mr. Latham).
– Order ! It is not in order for the honorable member so to express himself concerning the Leader of the Opposition. I call upon him to withdraw what he has said.
– In deference to you, sir, I withdraw it. But the exhibition that we have witnessed from the Leader of the Opposition to-night will, I think, be long remembered in this House. After all, it is well known to the Labour organizations in New South Wales that systematic propaganda has been indulged in for months by the Nationalist party in order to bring about certain circumstances which would embarrass the Lang Government.
– That is entirely untrue.
– Order ! The honorable member for Warringah must withdraw that remark.
– I withdraw it.
– One has only to review the movements of the Leader of the Opposition in the New South Wales Parliament (Mr. Bavin) during the last few months to see what has happened. He has rushed from one suburb to another making speeches calculated to cause depositors to withdraw their savings from the Government Savings Bank of New South Wales and to place them with the Commonwealth Savings
Bank. We have known for some time what has been going on. Such actions show to what length the anti-Labour political parties are prepared to go to achieve their ends. I warn them that while they might accomplish their purpose in embarrassing Labour Governments, either State orFederal, they will bring upon themselves consequences more severe than those which will come upon the governments or the people whom they seek to injure. The remarks of the Leader of the Opposition about the poor and needy are sheer hyprocisy.
– Order ! The honorable member must withdraw the term “ hypocrisy “.
– I withdraw it, and substitute the term “ eyewash “. I cannot find language suitable to express what. I think of the honorable member’s treatment of those in need. The honorable gentleman now speaks of the poor and needy;but he must know that these people for the past two years have been drawing on their savings until to-day they have little or no money left. Unfortunately, owing to unemployment, that state of affairs exists throughout Australia. I hope that the Prime Minister willnot pay too much heed to the lecture which the Leader of the Opposition, in the role of schoolmaster, has delivered to him, his pupil, or be led to use his position as Prime Minister for the political purposes of the Opposition. In their anxiety to secure again the treasury-bench, honorable members opposite are prepared to adopt any tactics. For my part, and on behalf of those associated with me, I say to honorable members opposite that they will never return to the treasury-bench if we can prevent it.
.- If the news which has been circulated throughout this building to-night is true, it is not only fraught with great and disastrous consequences to every section of the community, but is a happening unprecedented in the history of this country. There have been banking crises before in Australia. They occurred in pre-federation days. In 1893 there was a rush on the private banks which caused many of them to collapse; but in no case did any savings bank fail to meet its obligations to its depositors. That was because the several State Governments at that time possessed prerogatives and privileges which are now vested in the Commonwealth Government. In that crisis the Government of New South “Wales issued a notice which restored confidence. It ha3 not the power to do that to-day. The Government of New South Wales, led by Sir George Dibbs, authorized legal tender other than gold in order to meet the rush made on the banks. During the regime of the Hughes Government, and also during that of the Bruce-Page Government, additional powers were vested in the Commonwealth Bank. Under those powers the bank has authority to protect particularly the interests of small depositors. Under section 29a. of the Commonwealth Bank Act the Bank Board has power to fix and publish the rates at which it will discount and re-discount bills of exchange, and under section 60a the Commonwealth Bank Board may issue Australian notes to the associated banks against securities lodged with London branches of the banks. In other words, it may even issue notes against securities outside Australia. When I heard the rumour this evening, I said that there was no need for the Government Savings Bank’ of New South Wales to close its doors, because this power exists to protect the savings of the masses of the people so that they shall not lose one penny. The security of the nation stands behind their deposits. The news which has reached us has tremendous possibilities. The ripple which it has caused may extend to the extremities of the pool. It is true that a blow may be struck at Mr. Lang, and the faction which he represents ; but in the striking of that blow other sections of the community will be more seriously affected. Indeed, no section of the community will escape. I warn those who would destroy Mr. Lang and his faction that, in their desire to accomplish their end, they incur the risk of destroying themselves and the country. I submit for the consideration of the Prime Minister that not only need the Government Savings Bank of New South Wales not close its doors, but that it need not refuse to meet the demand of every person who has deposited his savings in that institution. Had the Commonwealth Bank Board exercised the power which it possesses, and given to the Savings Bank of New South Wales the concessions which within the last few monthsit has given to the associated banks, this crisis would not have occurred. It is a crime of crimes if the Nationalist enemies of Labour, with the consent of” the very man we placed on the board torepresent the workers, have exercised their power to refuse to issue notesagainst securities held by the Government Savings Bank of New South Wales, although day after day and week afterweek they have issued notes against securities held by the associated banks. Sir Robert Gibson, the chairman of the Commonwealth Bank Board, has stated, and his statement has been repeated in thedaily press, that the Commonwealth Bank has discounted the paper of the associated banks and. indeed, given them every facility possible. I repeat that if theCommonwealth Bank Board has failed todo the same for the Government SavingsBank of New South Wales it is a crime of crimes. It is a crime againstthe vital interests of Labour. Such action has been taken, not only to strike a blow at’ Mr. Lang and those associated with him, but also because the Prime Minister (Mr. Scullin) and the Treasurer (Mr. Theodore) have dared to stand up against the power of the associated banks. Because they have done that, Nationalistfinanciers have precipitated a crisiswhich, while perhaps accomplishing their immediate desire, will not only plungethe country into a state of chaos, but alsodestroy themselves unless immediate steps; be taken to avert it. I appeal to thePrime Minister not to concern himself so much with the effects of this rumoured action of Mr. Lang, but to view it froma wider angle. Had those in control of the Commonwealth Bank exercised theirpowers and accepted from the State Savings Bank of New South Wales thesecurities it offered, re-discounted them,, and issued notes against them, this crisiswould not have occurred. I again warn the members of the Opposition that, intheir anxiety to seize the reins of government and pull down the temple of Labour,, they may bring about the very crash which they profess to be so anxious to avoid.
.- I am much more afraid of what may be the effect of what has been said in this chamber to-night than of any action that may have been taken in Sydney. If we members, who perhaps know more than the outside public, feel to some extent afraid of what may happen, can we blame the people if, when they read in to-morrow morning’s press what has been said here to-night, they are seized with panic, and stand at the doors of not only the Government Savings Bank of New South Wales, but also the Commonwealth Savings Bank and all the other banks? There is danger of panic, but there is not one bank in Australia, whether a savings bank, a private bank or a building society bank, that is not absolutely solvent to-day, including the Government Savings Bank of New South Wales. I believe that it will be broadcast to-morrow that every bank throughout the Commonwealth is absolutely safe. The trouble, of course, is that the people have been seized with panic.
It has been stated to-night in this chamber that this panic has been brought about for some ulterior purpose by political opponents of the Labour Government. I have an office in Sydney, and many persons have asked me whether I would advise them to withdraw their deposits from the Government Savings Bank of New South Wales. I have advised them not to do so, and every chartered accountant, for the last three months, has told his clients to leave their money in the bank. Therefore, I claim that there has been no concerted action to precipitate this crisis. The people have got it into their heads that there is something wrong with the New South Wales Government, and the savings bank of that State simply had not sufficient liquid assets to cope with the run made on it. If it is given time, however, every penny will be paid. The banks failed in 1893 ; but never again can banks fail in Australia, and the people should be made to understand that. Neither government banks nor private banks can fail, and that must be made clear to the people, to counteract the panic that may be occasioned when they read their newspapers to-morrow. I hope that the Prime Minister will offer words of hope and comfort in order to prevent a stampede on thebanks.
– When I moved the adjournment of the House, I thought that I was allowing honorable members to get away somewhat early on this the first meeting night of the week ; but I will not move the adjournment so early on another occasion. I am amazed at the turn that this debate on the adjournment has taken. I do not know what information honorable members have which the Government does not possess. We are keeping as closely as we can in touch with the position of the banks, and we have no information that the doors of any bank have been closed.
Honorable Members. - Hear, hear!
– I urge honorable members not to do anything in this Parliament that may start a panic.
Honorable Members. - Hear, hear!
– If we become panicky, what must we expect of the people outside? I deeply regret that this debate has occurred.
– Why did not the Prime Minister stop it?
– I did not start it.
– The right honorable gentleman could have risen in his place and stated the facts.
– I could have moved the application of the gag. I could have made a statement about the whole matter when I moved the adjournment; but I did not think that I was called upon to mention it at all, because the Government has not sufficient information in its possession to enable it to make an announcement. I shall tell honorable members all that I know, apart from many rumours that I have heard. We have been in touch by telephone this evening with the representative of the Treasury on the Commonwealth Bank Board, and we have learned that to-day the Government of New South Wales has submitted a proposal to the board relating to a merger of theState Savings Bank with the Commonwealth Bank.
– That should have been done long ago.
– The reply made by the Chairman of the Commonwealth Bank Board was, I understand, that the whole matter would be explored. That will take some time, and when the subject has been investigated, a recommendation, if possible, will be made to the
Federal Treasurer, as provided under the act. No such amalgamation could take place without the consent of the Treasurer of the Commonwealth. Copies of the whole of the correspondence are being posted to the Treasurer to-night, and, until we see that correspondence, we do not know the nature of the representations made by the New South Wales Government, nor do we know the exact nature of the reply that has been given. It would be very wrong of me, as Prime Minister, to state that this or that bank is safe, unless I could supply the assurance given by the honorable member for Maranoa (Mr. Hunter) that all banks are safe.
– They are all solvent.
– I believe that they are. It is quite true that, if panic is caused among the people, all the banks may suffer difficulties and disabilities. The Commonwealth Bank may be called upon to come to the aid of some of the institutions in this country, and I can say that, so far as this Government is concerned, all the resources of the Commonwealth and of the Commonwealth Bank will be behind any savings bank in order to save the deposits of the people.
– Hear, hear !
– We have not absolute control over the Commonwealth Bank Board, but, to the extent that we have control over it, that authority will bo exercised for the benefit of the people. But in saying that, I point out that the Commonwealth Bank Board, too, has its responsibilities. It is true, as mentioned by the honorable member for Bourke (Mr. Anstey), that the only bank in Australia to-day that has reserve powers to be exercised in times of stress or panic is the Commonwealth Bank. I refer to the power of issue. The Commonwealth Bank powers to-day are limited by this Parliament, which may be called upon to give it greater power. We may see the Fiduciary Notes Bill in this Parliament again earlier than we anticipated. I merely mention that for the information of honorable members.
– Party politics had better be kept out of this matter.
– If I had desired to bring party politics into this discussion, I could have made replies to statements made on both sides of the House to-night, and to charges that have been levelled against me personally ; but I thought that this was not a time to introduce either party politics or factions. I think that this is too serious a matter for that. This Parliament ought to keep its head cool, because I believe that we shall emerge from this crisis, as we shall emerge eventually from the depression, with Australia solvent, and none of its people suffering from any of the losses that are feared. But we must play our part. In the meantime, negotiationswill take place, I have no doubt, between the Government of New South Wales and the Commonwealth Bank Board, and when the board requires advice and support, it will probably come to the Commonwealth Government. I repeat that the resources of the Government, whatever they are, will be behind the Commonwealth Bank, and, so far as the Government can influence this Parliament, it will endeavour to extend the powers and functions of the Commonwealth Bank in order to save the depositors in every savings bank in Australia.
Honorable Members. - Hear, hear!
Question resolved in the affirmative.
House adjourned at 1 1 p.m.
Cite as: Australia, House of Representatives, Debates, 21 April 1931, viewed 6 July 2017, <http://historichansard.net/hofreps/1931/19310421_reps_12_128/>.