12th Parliament · 1st Session
Mr. Speaker (Hon. Korman Makin) took the chair at 2.30 p.m., and offered prayers.
– Is the Prime Minister in a position to say -whether it is a fact that until the Leader of the Opposition (Mr. Latham) used his position in this House last night to announce to the world mere rumours concerning the alleged difficulties of the Government Savings Bank of New South Wales nothing had appeared in the Sydney press-
– Order ! A question may not contain statements or observations. Its purpose must he to elicit information.
– That is all I am trying to do. Does not the Prime Minister consider it a fact-
– The honorable member is not in order in asking the Prime Minister to express a personal opinion.
– Is it not a fact that until the Leader of the Opposition made a statement in this Blouse last night-
– I made no statement. I asked for a reassuring statement by the Prime Minister.
– Until the honorable member spoke last night nothing had appeared in the Sydney press that would be likely to precipitate a run on the
– I do not know that Ican offer any opinion upon the matter raised by the honorable member.
– The right honorable gentleman would not be in order in doing so.
– I have no more to say now than I said last night.
– Has the Prime Minister been informed from Sydney that the action of the Leader of the Opposition in the House last night has caused unnecessary panic in the minds of depositors in the Government Savings Bank of New South Wales?
– I have not received any such information.
– Will the Prime Minister endeavour to have the Standing Orders amended so as to prevent this Parliament from being made a sounding board by panic-mongers desirous of creating a financial panic in this country.
– I do not know’ in what direction the Standing Orders could be amended to prevent that from happening.
– Will the PostmasterGeneral state whether the expense of bringing the British air mail from Koepang to Australia is being borne by Imperial Airways, the British Post Office, or the Commonwealth Post Office?
– By Imperial Airways.
– A few weeks ago many newspapers published a statement that the Government had decided to take a referendum at the next federal election on proposed alterations of the Constitution. As no reference was made to that matter in the policy speech broadcast by the Prime Minister on Monday night, can the right honorable gentleman say whether the Government has given any consideration to it, and, if so, whether he will be able to make an announcement at an early date?
– I shall make an announcement on that important subject at a very early date.
– I ask the Prime Minister whether the palatial residence provided for the Prime Minister at Canberra is still unoccupied. Is the right honorable gentleman aware that the exiled King of Spain has been offered homes in different countries? Will the Prime Minister offer to place his official residence at the disposal of Alfonso?
Question not answered.
Distribution of Clothing
– The distribution of certain military garments to the unemployed in country districts is governed by a stipulation that the clothing must be dyed before it is given out. ls the Minister for Defence aware that facilities for dyeing clothing are not available in country districts, and will he undertake to have the dyeing done at the ‘cost of the local organizations which will distribute the garments?
– The intimation sent to New South Wales members of this House included a statement that the cost of dyeing must be borne by the local organizations, but the intention was that the actual work should be done by the Defence Department in their behalf. The Government has since made arrangements by which the dyeing will be done by the Defence Department without cost to the local organizations, which will, however, have to bear the cost of freight. A letter to this effect will be sent to each Mew South Wales member within the next two or three days.
– Has a similar intimation been sent to Victorian members and local bodies? If not, does the Minister propose to send one?
– In States other than New South Wales the clothing is being hnnded over to the State Governments for distribution, and they will bear the cost of dyeing and other charges.
– As there is some ambiguity regarding the dyeing of these garments, I wish to know whether the Government proposes to have this work carried out at its own expense, or does it propose to undertake the work itself?
– I have already stated that the Government is making arrangements to have the garments dyed without any expense to the organization concerned.
– Is the Government meeting the cost of dyeing in respect of garments distributed to the other States as well as to New South Wales?
– The Premiers of the other States were communicated with, and, as on previous occasions, they undertook to meet the cost of dyeing and also of f reight in cases where the material was sent from the other States to South Australia and Western Australia. The Governments of those States are bearing the cost of dyeing, freight, and distribution.
– Will the Prime Minister indicate what reserve power is vested in the Commonwealth Government which would enable it to prevent the flight of capital from Australia, and by what administrative means such power would be exercised?
– The Commonwealth Government has power to control all exports from Australia, to direct by what channels they shall be shipped, and to what bank or banks in London credit may be made available.
– Has the Government any administrative power to control the export of goods other than the limited power conferred by section 112 of the Customs Act?
– That is the only statutory power of which I am aware. The Parliament has, however, reserve power-
– Of legislation.
– Yes, and possibly of administration also. We have been advised that that power is sufficient; but before anything was done we would make certain that the legislative power in existence is sufficient, and if not, further legislation would be brought down. I am not announcing that the Government is using that power. I merely stated in my speech yesterday that, should it become necessary, we would use the re-, serve power of the Commonwealth.
– It is stated in this morning’s press that Flight-Leiutenant Owen, who has just returned to Sydney from Wellington, has said inter aiia, that civil aviation is in an infinitely better position in New Zealand than in Australia. Will the Minister for Defence, in view of that statement, have an inquiry made into the subject, especially in view of the recent loss of an air liner? Will he state if any alteration will be made in regard to the provision of wireless for aeroplanes, and of providing more landing grounds ?
– I have not seen the statement referred to by the honorable member, but I shall have inquiries made, and furnish him with the information desired.
– Is it the intention of the Government to bring in this session a slight amendment of the bankruptcy law, in respect of which many complaints have recently been received from Western Australia and some of the other States?
– The matter is having the close consideration of the Government, and will probably be the subject of early legislation. I cannot be more definite than that.
– On the 18th of last month I asked the Prime Minister a question concerning the reciprocal agreement which has for many years existed between New South Wales and Victoria in respect of the registration of motor vehicles engaged in travelling from one State to the other. I pointed out that Victoria had now broken that agreement.
– The honorable member is not in order in asking a question based upon a previous question asked this session.
– Will the right honorable gentleman give consideration to the question that I asked him on the 18th of March last ?
– I shall have inquiries made, and inform the honorable member of the result.
asked the Treasurer, upon notice -
– The answers to the honorable member’s questions are as follow : -
Services of Advertising Experts
asked the Minister for Markets, upon notice-
– The answers to the honorable member’s questions are as follow: -
The trade advertising scheme referred to is subsidized by the Commonwealth on a pound for pound basis with the interests concerned in the products named.
When in London last year I closely examined the trade publicity referred to, and found it to be of great value to the Commonwealth. The trade publicity carried -on under Mr. A. E. Hyland, and his assistants, is meeting all requirements in Great Britain. Steps are now being taken to extend the scheme to Canada at an early date. Later on consideration- will be given to the question of advertising in other countries. In addition, a Commercial Intelligence Bureau has been established in connexion with the Department of Markets for the collection and dissemination of statistical and other information regarding the Australian export trade.
asked the Minister for Trade and Customs, upon notice -
– The answers to the honorable member’s questions are as follow : -
asked the Postmaster-
General, upon notice -
– The answers to the honorable member’s questions are as follow : -
asked the Prime Minister, upon notice -
Whether, in view of the fact that the last land valuations for taxation purposes were made at the period when land values were at peak level because of the high prices obtained for wool and wheat, and in view of the present depressed position of the wool and wheat-growers, the Government will take immediate steps to give instructions that assessments be made forthwith on present values?
– Assessments have been made on values as at 30th June, 1930, as required by the law. The matter of altering the law is under considera- tion.
asked the Minister for Defence, upon notice -
– Records of military clothing issued by the Ordnance Branch, in accordance with distribution list furnished by the Victorian State Government, show that distribution is not limited to State metropolitan applications. Country centres have received a considerable proportion of the clothing made available. With the exception of New South Wales, the distribution is - being arranged by the State Governments.
asked the Minister for Home Affairs, upon notice -
– The latest figures available are those for 1928-29, when 343 persons were so employed. The average wage for that year was £218 per annum.
asked the Minister for Defence, upon notice -
– The answers to the honorable member’s questions are as follow : -
asked the Treasurer, upon notice -
– The answers to the honorable member’s questions are as follow : -
Short-term: Indebtedness of Commonwealth and States.
asked the Prime Minister, upon notice -
What was the amount of the short-term indebtedness in (a) Australia, and (b) London, 1st October, 1929; 1st January, 1930; and 1st April, 1931, for the Commonwealth and each of the States respectively?
– The information is being obtained, and will be furnished as soon as possible.
– Yesterday the honorable member for Balaclava (Mr. White) asked whether the Munitions Branch of my department had appointed the firm of Noyes Brothers to be sole agents for the distribution of sheet brass rolled at the munitions factory, to the exclusion of other buyers?
I am now in a position to inform the honorable member that Noyes Brothers have been appointed sole agents for distribution of the products of the Government Rolling Mills. The appointment was made following a decision to give preference to the applicant with suitable qualifications who first applied.
– Yesterday the honorable member for Adelaide (Mr. Yates) asked me the following questions, upon notice -
I am now in a position to advisehim as follows : -
– As Chairman of the Standing Orders Committee, I present the first report of the committee, and lay it upon the table of the House.
.- I move-
That the paper be printed.
I ask honorable members to carry this motion without discussion, on the undertaking of the Government that the consideration of the report will be the first Government business to-morrow.
Motion agreed to.
That the consideration of the report be made an order of the day for the next sitting.
– I lay upon the table of the House a copy of the report furnished by an officer of the Auditor-General’s Department and an officer of the Department of Trade and Customs on their investigations into the price of petrol, and move -
That the paper be printed.
Honorable members are aware that in October, 1930, the officers to whom I have referred were instructed by the Acting
Prime Minister to conduct this investigation. They have now presented their reportwhich, however, relates to only two of the companies operating in Australia, namely, the Shell Company of Australia Limited, and the “Vacuum Oil Company Proprietary Limited. The Government is at present considering what further s’teps it is desirable’ to take to supplement the information contained in the report. It is the Government’s intention to afford the House an opportunity for the consideration of the report at a later stage. I have referred the matter to the Leader of the Opposition, and assure honorable members that if they carry this motion I shall immediately afterwards give notice of a motion which will place this subject upon the business paper.
Motion agreed to.
– by leave- I give notice of my intention to move the following motion to-morrow: -
That in the opinion of the Government it is desirable that the House should consider the contents of the report furnished by an officer of the Auditor-General’s office and an officer of the Department of Trade and Customs on their investigations into the price of petrol.
Motion (by Mr. Theodore) proposed -
That he have leave to bring in a bill for an act to amend the Income Tax Assessment Act 1922-1930 and for other purposes.
Mr. Theodore. - Yes.
Question resolved in the affirmative.
Bill brought up by Mr. Theodore, and read a first time.
– by leave - I move -
That the bill be now read a second time.
The purpose of this bill is to amend the Income Tax Assessment Act in two important respects. The object of the first amendment is to authorize the imposition of a special tax of 3s. 6d. in the £1 on income derived from certain Government stocks and bonds. It will apply to all such interest paid after the passing of this measure. It is intended to impose this tax on all Commonwealth loans raised in Australia, and on all loans raised by the States subsequent to the 31st December, 1923. The provisions of the bill will also apply to any of the loans raised in Tasmania after that date, which are to-day subject to State taxation. The object of the second amendment is to provide for a modification of the existing special tax upon the salaries of members of the Commonwealth Public Service to provide that, the tax shall be payable, at a graduated rate, on salaries ranging from £251 to £900 per annum.
The taxation of interest on Government loans will apply to a very large proportion of the outstanding Government loans in Australia. The amount involved is about £453,000,000. Of the total amount of the loans at present current about £90,000,000 was issued under tax-free conditions. The provisions of this bill will not apply to those loans. At present none of the States, with the exception of Tasmania, imposes any income taxation on interest received from Government loans. In Tasmania the interest received from loans is taxable at the rate applicable to income from property.
The bill makes provision for the granting of two rebates in connexion with this taxation. Where any State income taxation is applicable to income from interest on loans, provision is made for the tax paid to the State authority to be rebated by the Commonwealth authority. The only ‘State to which that provision will apply is Tasmania. As to the special tax, where the total income does not exceed £400, rebates will be granted. Where the taxpayers’ total income does not exceed £200, the rebate will be the full amount of the tax leviable. Where the income exceeds £200, the rebate allowable will be the residue of the tax deducted at the source after taking off 1 per cent, for every £2 by which the total income exceeds £200, the effect being that the rebate will disappear when the total income reaches £400. The following table will be useful to honorable members in following my explanation of the bill: -
It will be seen that where the total income is £200 the full amount of the tax will be rebated. Where the total income is, say, £300, the amount of rebate will be £26 5s, and the net tax payable £26 5s. Where the total income is £400, the amount of the tax will be £70, and there will be no rebate. The proposed tax will be deducted at the source when it becomes due and payable. In the case of loans raised in Australia, the deduction will be made from every amount of interest which becomes payable, irrespective of the place of residence of the owner of the stocks or bonds. In the case of loans raised outside of Australia, the tax will be applicable to the interest which is payable to a resident of Australia. Where the interest is payable in Australia, it will be deducted at the source by the person or authority entrusted with the payment of the interest. This interest is usually payable by the Commonwealth Bank or one of the ordinary trading banks on behalf of the borrowing authority. In the case of some State loans, the State Treasurers pay the interest as agents for the Commonwealth. The practice which operates in England, where income tax on loan interest is deducted at the source, is for the authority entrusted with the payment of the interest to issue a receipt for each deduction, and it is proposed to follow that practice here.
– Does the honorable gentleman think it safe to allow the present State Treasurer of New South Wales to collect the tax?
– The right honorable gentleman may feel reassured on that score, as the obligation rests upon the State Treasury, and not the occupant of the office of Treasurer.
Persons entitled to interest are required to allow the tax on it to be deducted at the source, and the deducting authority is acquitted and discharged of a sum equal to that deducted as though that amount had actually been paid to the person entitled to receive the interest. The bill contains suitable provision for the protection of trustees in this connexion, but requires a trustee to account to the estate for any rebate of tax received by him in his representative capacity. Power is taken in the bill to recover the special tax from any person entitled to receive interest from which the tax has not ‘been deducted before the payment of the interest. Applications for rebate must be made tothe Commissioner of Taxation and must be accompanied by a receipt in the prescribed form for the amount of tax deducted at the source. Under the general powers conferred upon the Commissioner by the Income Tax Assessment Act, the Commissioner will require every applicant for rebate to prove his ownership of the stock or bonds from the interest of which tax has been deducted at the source.
There is a definition of “ total income “ which has some significance, and to which I desire to refer, because the bill provides that total income shall be taken into account in arriving at the rebate. That definition is as follows : -
The “ total income “ of a taxpayer means -
the total amount of loan interest paid to a taxpayer (including any amount deducted in pursuance of the act ) during the financial year in which the tax is deductible at the source ; and
the net amount of all his other income from sources inside or outside Australia which, if- it were all assessable to income tax, would be the amount from which the statutory exemption, if any, would be deducted in accordance with section 24 of the Principal Act.
For purposes of the rebate it has been considered necessary to make special provision to secure proper distribution of the burden of the tax in the case of the incomes of husbands and wives living together and of members of families- living together. In such cases the amount of rebate to be allowed to either the husband or wife or to any one member of the family living together, will be determined by the aggregate of the total incomes of husband and wife and of the members of families respectively. Any rebate then found to be allowable in the case of a total income equal to that aggregate will be apportioned between the respective parties pro rata to the amount of interest included in their respective total incomes.
– The bill is very far reaching. In the case of a married son, living in the same house with his wife and his father, their incomes would be aggregated for the purpose of assessing the amount of tax payable.
– The Leader of the Opposition will see that it is necessary to group family incomes in order to avoid the possibility of a general evasion of the tax. A great proportion of the stocks at present outstanding are hearer bonds, and the ownership of it is not evident. Where, say, £10,000 worth of such bonds was held by one member of a family, it would be a simple matter for him to distribute the coupons among the remaining members of the family. Each would then be in a position to claim a rebate, and thus prevent any effective tax being enforced against the proper holder of the bonds. Eoi- the purposes of this special super tax it is thought to be reasonable to aggregate the family income in arriving at a determination as to who shall be entitled to any rebate.
– If the members of the family lived in different houses they would be able to evade the tax.
– In the case of different households the opportunities for evasion are fewer. If the right honorable member suggests that this is an unwise provision, his contention can be considered in committee. No great principle is involved, the intention being merely to make the law effective with regard to interest paid on bearer bonds.
– It would not apply to inscribed stock.
– No, because inscribed stock is registered in the name of its owner, and taxation of the interest from such stock causes no difficulty. Of the government securities outstanding, a considerable sum is held in the form of bearer bonds, and the evasion of taxation in respect of interest on those bonds is extensive.
– Will not this provision apply to those holding inscribed stock who live in the same house?
– Application may be made for a rebate, which will be granted on presentation of the receipt, and a declaration of ownership. The inscription of the stock will be evidence of real ownership, which will not be challenged by the Commissioner.
The bill will allow the Commissioner to vary this rule, where he is of the opinion that its application would cause undue hardship in any particular case. The special tax of 3s. 6d. in the £1 on loan interest will be in substitution for the existing special tax of ls. 6d. in the £1 on all kinds of income from property, but only as regards the loan interest mentioned in the bill. On all other kinds of property income the present special tax of ls. 6d. in the £1 will remain. The tax will apply as from the date upon which the act comes into operation, and will be deductible from interest that becomes payable thereafter.
It is estimated that the total amount of interest payable per annum upon Commonwealth and State loans held in Australia as at the 31st December, 1930, was £28,227,000, and of the total amount of government loans which are outstanding there are approximately £90,000,000 tax free. We must, therefore, deduct from that £28,227,000 an amount of £4,146,000, representing interest on the tax-free loans, which leaves a volume of taxable interest amounting to £24,0S1,000, as at the 31st December last. Of £90,000,000 of government securities exempt from taxation under the present law’ about half is held by public or semi-public institutions, such as savings banks, government insurance offices, superannuation funds, &c. The amount held by the public requires the distribution of about £2,100,000 in interest annually. The £24,000,000 distributed in interest annually, and taxable under this proposal, represents an average return to holders of bonds and stocks of about 5^ per cent. The present super tax of ls. 6d. in the £1 on income from government stocks and bonds, introduced by the honorable member for Wilmot (Mr. Lyons) when Acting Treasurer, yields £300,000 a year. I dwell on these figures, because they show the need for changing the system of collecting this tax. The ordinary tax, which applied prior to the imposition of the super tax of ls. 6d. in the £1, yields annually £400,000, so that the total income from £24,000,000 worth of taxable interest paid in Australia is only £700,000 a year. The amount of income from government bonds and securities returned for taxation purposes by taxpayers amounts to only £4,000,000 a year, while about £15,000,000 worth of such income is unaccounted for. No return of it is made by taxpayers, although the major portion of it is undoubtedly taxable. The amount of £4,000,000 in respect of which returns are made, together with the remaining £15,000,000 on which they should be made, makes a total of ‘ £19,000,000, which differs from the taxable income of £24,000,000 received in respect of government bonds and securities by the amount of the interest on such bonds and securities as are held by friendly societies, savings banks, superannuation funds, &c, and, under the present law, are not taxable. The small return under the present system of taxation indicates the urgent need for a change, and constitutes, I think, the strongest argument in favour of a tax which can be collected at the source, as proposed in this measure.
– Is this new tax to be an addition to the tax already imposed.
– The new tax of 3s. 6d. in the £1 will supersede the existing super tax of ls. 6d. in the £1 imposed last September, but will operate in addition to the ordinary property rates on income.
– Will a person in receipt of an income which would be ordinarily so small as to be exempt from taxation be able to recover the amount of the tax which will, under this proposal, be stopped at the source ?
– Yes. When a person’s income does not exceed £200, the whole of the tax will be refunded, and on incomes of less than £400 a portion of the tax will be refunded. It is expected that the total yield from this tax will be £3,750,000.
– Would it not be possible to vary the tax according to the rate of interest paid?
– That is not possible, as the tax is collected at the source. The obligation will be upon the officers of the Commonwealth Bank, and other agents distributing interest, to deduct 3s. 6d. in the £1 from the payments made. It would not be practicable to draft a measure under which those officers would be required to make the deductions according to a graduated scale.
– The return from some loan3 at present is 6£ per cent., while others which will be subject to this tax return only 5 per cent.
– Most of the loans which bear low- rates of interest - such as 3 per cent., 3£ per cent, or 4 per cent. - will be exempt from this tax, because they are tax-free loans issued prior to’ 1924. The major portion of the taxable loans was raised on the market either as new money or for conversion purposes since 1925. These loans return a rate of interest averaging 5-j per cent., and do not vary much above or below that amount.
– There is a big difference between a return of &i per cent, and one of 5 per cent.
– That will be equalized to some extent by the application of the existing property rate tax.
– When the bond holders invested their money in the loans to which this tax will apply, they had no reason to believe that they would be singled out for special taxation.
– They were given no undertaking that they would be exempt. It was clearly set out in the prospectus of the loans that the interest would be free of State taxation, but would be subject to Commonwealth taxation.
– Will this proposal apply to loans issued before 1924?
– It will not, in fact, apply to loans of any magnitude issued before that date, because only those loans which were issued subject to taxation will come within its scope. The earlier loans were tax-free.
– Were the State loans issued before 1924 tax-free?
– Such of them as were tax-free will not. be taxed under this proposal.
– Were any of the old State loans subject to taxation?
– I think that only loans issued by Tasmania are subject to State taxation. The total amount of Commonwealth and State Government loans outstanding at the present time is £543,419,000, on which the interest payable is £28,227,000. It is estimated that these securities are held as follows: -
The second portion of the bill will not come into operation until the 1st July, 1931. It deals with the taxation of salaries payable by the Commonwealth, and represents an extension of the present salaries tax so that it shall apply to salaries above £250, except those fixed by Arbitration Court awards. A 10 per cent, reduction was recently made in such salaries by the Arbitration Court. The Government has decided to impose a graduated tax on salaries from £251 up to £900; and tax at a flat rate on salaries from £901 to £1,000; and to retain the existing tax on salaries exceeding £1,000.
At present, the salaries tax does not apply to any salary below £725 per annum. On salaries from £726 to £1,000 per annum there is now a tax at the flat rate of 10 per cent., subject to the proviso that where the deduction of the tax would bring the net salary below £725, the’ amount of the tax shall be the difference between the amount of the salary and £725. Under the present proposals, which will be definitely expressed in a rates bill, to be introduced subsequently, the tax will commence at the rate of 3.51 per cent, on salaries of £251, and will increase uniformly by .01 per cent, for each increase of £1 in the salary, so that, when the salary is £900 the rate of tax will be 10 per cent. But in the case of the lowest salaries in the grade, the deduction of tax will be regulated so that the net income remaining shall not be reduced below £250 in any case.
The lowest salaries of the grade which would be reduced below £250 by deduction of tax at the full appropriate percentage are those ranging from £251 to £259 both inclusive. In the case of those salaries, the amount of tax will be the difference between the salary and £250. On salaries of £260 up to £900 the tax will be calculated at the appropriate percentage. This may be found by dividing the salary by 100 and adding 1 to the result. For example, the rate payable on a salary of £260 is 260/100=2.6 plus 1=3.6. The percentage rate on £900 is 900/100=9 plus 1=10. Comparing this scheme with the existing scheme of taxation on salaries of £726 upwards, the present tax payable on a salary of £726 is £1, being the difference between the salary and £725. Under the present proposals the tax will be at the rate of 8.26 per cent.=£59 19s. 2d. On salaries between £900 and £1,000, there will be a flat rate of 10 per cent. In the case of salaries exceeding £1,000, the existing rates and amounts of tax will operate.
It is desirable to explain that the Government decided to introduce this scheme to bring about equality of sacrifice, to impose not only a special tax upon the sheltered class which draws interest on Government bonds and securities, but also to require the Commonwealth Public Service to make its contribution. In accordance with that proposal the Prime Minister had a conference with representatives of the Public Service unions, who readily agreed to fall into line in connexion with a scheme that would enable them to do their part. That, scheme involved making cost of living adjustments in existing salaries, enabling those adjustments to come into operation at an earlier date than would be required under Public Service awards. As a consequence of that settlement adjustments are being made. A decision has not yet been announced by the Public Service Arbitrator, but it is expected in the course of a day or two, and it is anticipated that the reduced rates will operate from the 16th April.
– How much saving will be made by that’ means ?
– I shall give the figures. The cost of living adjustments were necessarily arranged under arbitration awards and the Public Service Act, upon a flat rate basis, amounting to £18 per annum in the existing salaries of certain adult officers. But as £18 taken off the salary of a person receiving £270 a year would be a much higher percentage reduction than £18 cut off the remuneration of an, officer in receipt of £1,000 a year, to bring about equality of sacrifice, the proposal to tax the remaining salaries and commence at £251 was decided upon by the Government. It is only fair to say that the Public Service associations were not asked to agree to this; the Government itself must take the responsibility for the proposal. The scheme provides for taxation ranging from 3.51 per cent, on salaries exceeding £250 to 8.96 per cent, on salaries of £796, at which point it merges into the taxation scheme already in operation on salaries exceeding £796. The effect of this scheme, and the cost of living adjustments are estimated in this way: The cost of living adjustments are expected to yield a saving of £500,000 for a full year, and the special taxation of the Service is expected to yield £400,000 for a full year. The Commonwealth Public Service permanent officers’ cost of living adjustment is expected to effect an annual saving of £455,000. The taxation, including £40,000 collected under the existing act, amounts to £285,000, making a total reduction of £740,000, or about 9 per cent, of the existing salaries. If the deduction is calculated with regard to salaries from £251 and upwards, the percentage contribution is more than 10 per cent. With regard to other employees, the cost of living adjustments are expected to yield £45,000, and the taxation £115,000, making a total saving to the exchequer of £900,000. If we include a further £100,000, which it is anticipated will be saved by granting leave instead of paying for overtime, holiday and Sunday pay, and travelling lime, the total annual saving will be approximately £1,000,000. This will be in addition to the savings already effected in various ways by the exercise of that rigid economy for which this Government has been distinguished since its advent to office.
– Will the Treasurer (Mr. Theodore) furnish more detailed information with regard to travelling time payments? Are they governed by awards ?
– Mostly by awards under the Public Service Act, but if the honorable member will defer his question until the bill is in committee, I shall be better able than now to answer him. I understand that the saving of £100,000 contemplated by this means is not to be effected by a reduction of the rates paid for overtime, &c, but by granting leave in lieu of payment.
The bill makes an attempt to equalize the burden that must be borne by the whole community. Everybody who has studied the economic situation in Australia in the last twelve or eighteen months realizes that this burden rests now inequitably on the different sections of the people. A great deal has been said about the sheltered position of the Public Service, though I think that the benefits enjoyed by public servants have been greatly exaggerated. It is true that the public servants retained their salaries without diminution for a period far exceeding that enjoyed by those in outside employment who are working under awards; but the cost of living had gone up many months before the public servants, under their special award, received the higher cost of living allowances. The operation of the provision in the law ha3 enabled the public servant to retain cost of living allowances months after the cost of living has, in fact, declined; but the Public Service unions, through their representatives, have agreed to expedite the revision of their awards, so as to enable the new awards to operate immediately. The other great class that has been enjoying immunity from the evils of depression consists of those having fixed money claims on the community. Many of them not only have not suffered any sacrifice, but have actually gained advantage because of the depression. The deflationary processes adversely affected almost immediately the wages of the workers, who were selected to withstand the first shock. Almost before the community realized that the depression had set in, attacks were being made upon wages. Honorable members will recollect that more than two years ago the wages of the organized timber-workers were drastically cut. That was followed by an onslaught on the coal-miners and various other sections of workers.
– The Treasurer supported them when they were on strike.
– They were not on strike; they were deliberately locked out by the owners. The fact is, I think, generally accepted, that certain sections of the community are required to bear the brunt of depression before others, and no economic system yet devised is so perfect as to obviate such inequalities. In Australia the workers withstood the first shock, and have suffered greatly in the last two years. The primary producers also felt the effect of the depression very quickly. As soon as prices tumble their incomes diminish, although their costs continue at the old level for months, and perhaps years before an adjustment takes place. The ordinary profits of industry have shrunk. Persons who invested their money in industry, and depended on trade activity for a return, have suffered a loss of profit. But there are sections of the community who so far have not been called upon to make any large contribution to the national sacrifice. Economists calculate that the national income has diminished from £033,000,000 in 1928-29 to £470,000,000 this ‘year, a decline of £193,000,000. That estimate is calculated on a formula which economists have accepted as a reliable means of measuring the fluctuations of national income. Somebody has to make good that loss, but there are in Australia owners of fixed money claims amounting to at least £70,000,000, whose incomes have not been diminished, at any rate, to any extent.
– They have suffered by the increase of taxation.
– That is the only’ way in which it can be diminished, and that is the justification for the proposed increase of taxation.
– How will this affect future loan conversions?
– I shall deal with that later. Fixed money claims may be classified as government bonds, fixed mortgages, long-term leases, and bank deposits on extended terms. The proceeds of mortgages, interest on bank deposits, and dividends from preference shares are taxable by both Commonwealth and States. Therefore, equalization of sacrifice can be made to’ apply to them by means of taxation. If the States and the Commonwealth will tax them there can be no ground for the complaint that they are in a specially privileged class.
But there are government securities that are subject to taxation only by the Commonwealth and not by the States, and unless the Commonwealth discriminates against them by imposing a higher rate upon income from this source than applies to ordinary property income, they will undoubtedly enjoy an advantage at the expense of the rest of the community. This matter is not brought up to-day for the first time. It has. been the subject of controversy for many_ months past. The taxation of these fixed money claims has been advocated by some economists and denounced by others. The Prime Minister and I discussed the matter with the representatives of the State Governments at the Premiers’ conference held at the beginning *of February last. We had already discussed it with the representatives of the banks when placing before them the Government’s general policy for the rehabilitation of Australian finance. All acknowledged that there should be some means by which the holders of these fixed money claims can be required to make a special contribution to the general sacrifice. My own early opinio:? was that the most equitable way to secure an equal distribution of the fall in national income would be to reverse the deflationary process and restore the old value of money. Instead of the value of money being enhanced from week to week and month to month, as has been happening for the last year, it should be allowed to depreciate to some extent in order to get back to the level of 1929.
– How could we get back to the 1929 export values ?
– I have never suggested that anything we could do would increase the prices of our products shipped for sale overseas. But we could do something that would compensate to some extent for the decline of such prices. Much depends on whether the scheme is sound, and how it is operated. The primary producer gets an advantage from the premium on exchange.
– Does the Treasurer suggest that the exchange would increase relatively to the increase of local prices ?
– It should.
– But would it?
– Exchange, like other factors, is controllable. It is arbitrarily controlled to-day by the banks, and one complaint I make against them is that they did not allow it to go to the proper level, but kept it at a fictitiously low level, and thereby deprived the primary producers of the premium they should have realized on their exported products. Exchange remained at less than £10 until a few months ago, when the disparity became so great that a higher rate had to be fixed.
After discussing with the representatives of the banks, and with others, on numerous occasions, how all sections could be made to share fairly in the national sacrifice, we found fairly general agreement that the holders of government securities could be made to contribute by means of direct taxation. The members of the Commonwealth Bank Board expressed that opinion, and the board in its letter to me for presentation to the Premiers’ conference mentioned the need for dealing with interest. That is the only method of ensuring equality of sacrifice, unless we are prepared to declare that interest on government bonds shall be absolutely sacrosanct in all circumstances, and that, regardless of any advantages the holders of these fixed claims may get from the decline in prices, and the increase in the value of money, they are not to be required to contribute more than they are paying at the present time. Either we must tax the proceeds of these securities or inflate the value of the currency. The matter was frankly and freely discussed at the Premiers’ Conference, and in pointing out to the State Treasurers the difficulty of reducing Commonwealth expenditure, I enumerated certain federal obligations which, in my opinion, were not controllable. Included amongst them were invalid and old-age pensions, war pensions, and interest on war loans.
– The maternity bonus?
– I did not mention that. Some people objected to my statement, and said that although interest is not controllable, war pensions are controllable. The Melbourne Argus, of the 10th February. expressed that sentiment in the following cogent terms : -
The contention of both Mr. Theodore and Mr. Scullin that if war pensions are controllable the interest upon the war debt is controllable is utterly untenable. There is no analogy. War pensions are ex gratia payments and properly subject to the state of the public exchequer. War debts are an inviolable contract.
I know that that sentiment is held by one section of the community, but I do not agree with it, and I am sure the Government does not. We acknowledge the need for observing our contractual obligations to those who have invested their money in war or other loans, but we have to recognize the obligations due to others, and if, because of the enormous decline in the national income, the workers are to be ground down to semipoverty, and the primary producers are to be threatened with extinction, it is time we overhauled the whole economic fabric to ascertain to what extent other sections now sheltered can be made to contribute. That is all this measure proposes to do. It deals first with the Public Service, which admittedly so far has escaped the sacrifice being made by the community generally. On the other hand it also deals with the holders of Government securities, who will have to contribute what they ought to contribute - an additional tax as their proportion of the sacrifice.
– The point is that this bill proposes to levy a special tax which will be in addition to the general taxation now imposed.
– It must be a special tax, otherwise an absolutely unbearable burden must be imposed upon those deriving incomes from ordinary property, because such income is already subject to both Commonwealth and State taxation. The tax must be discriminatory in order that the holders of Government securities may make a fair contribution.
– Is not most of this interest already subject to taxation?
– It is subject to the ordinary property tax.
– Has the Treasurer any information to show the effect of this additional taxation?
– I have a return of -which I am quite willing to make copies available to honorable members. There is one matter that honorable members are apt to overlook when they suggest that an increase of 3s. 6d. in the £1 as a super tax will somehow tend to rob the holders of Government securities of part of their property rights. The Government securities’ to which this tax will apply were in the main subscribed for by the public between the years 1925 and 1929. The loans totalling £453,000,000 to which this tax will apply were almost wholly subscribed for, either as new loans or as conversions, after the beginning of 1925. Between 1925 and 1929 money had less value than to-day. The loans were subscribed when money was less valuable than it is now.
– I suppose that 50 per cent, of the loans represent conversions?
– That makes no difference. A conversion which took place in 1925 was made under the conditions prevailing then, whatever the conditions when the original loan was taken up, perhaps many years earlier. For instance, a loan of 3 per cent, would have been converted in 3925 under the conditions then existing.
– A person who converted £1 00 would get £100 of new value, whatever it was.
– My argument is that money to-day is much more valuable than it was in 1925. From the beginning to the end of 1930 money values appreciated about 20 per cent. If the general level of commodity prices falls by 20 per cent. - in other words, if the purchasing power of money increases by 20 per cent. - a contract entered into before the fall in commodity prices will compel the debtor to give the creditor more goods, to the extent of 20 per cent., than the two parties had bargained for. That represents the position to-day in respect . of the relations of the Government and its creditors. I do not say that we have the right to alter the interest rate arbitrarily, but the position to-day does justify an increase of taxation on stocks and bonds, and the owners of stocks and bonds can be subjected to an increase of taxation without suffering any considerable hurt. The total value of interest to-day, if calculated and measured in the equivalent volume of commodities, has been enormously enhanced compared with three years ago. Approximately £28,000,000 has to be distributed among the holders of Australian securities who are domiciled in this country, and that has a value, on the basis of commodities, about 25 per cent, greater than three years ago.
– There is no evidence at the Hotel Canberra in support of that contention.
– The honorable member cannot dismiss my argument in that way. If honorable members doubt the truth of my statement, it can easily be checked. The honorable member is living in a blind man’s paradise, and ignoring what is happening round him, if he contends that there has been no fall in commodity prices. I invite his attention to the decline which has taken place as shown in the Quarterly Summary of Commonwealth Statistics. Since 1929 the wholesale price index number has declined from 1803 to 1397.
– We cannot, therefore, expect interest rates to fall.
– One would expect that as money increased in value, and received a greater purchasing power, it should have a smaller earning power.
– That is not the way in which our monetary system works.
– It is the way in which it should work. The redistribution of wealth, because of the violent changes in commodity prices and values has made the holders of fixed claims richer. Of course we are not the only country that is faced with the problems that I have discussed this afternoon. In the London Times of the 9th December, appeared the following article, written by Sir Arthur
Salter, who is one of the economic authorities attached to the League of Nations : -
Throughout the whole economic life of the country all who have rights expressed in terms of sterling or gold, holders of debentures, of bonds, or long-term contracts of all kinds as distinct from shareholders, secure an unjust advantage as prices go down, which involves on extra strain on the active elements in the community which most need encouragement. The only really satisfactory way of dealing with this is, of course, by a world monetary policy, which will secure stability in the general level of prices. That is a policy which we may assist but cannot determine. If in spite of every effort prices continue to fall the strain of fixed charges may become intolerable. Before either repudiation in some form or departure from the gold standard is threatened perhaps the taxation system could ease the strain by some discrimination against such high unearned income as comes from fixed interest bearing securities, &c, as distinct from share dividends.
In that statement Sir Arthur Salter virtually advocates the principle embodied in this bill. This subject was raised at the Premiers’ conference of Eebruary last, which made the following declaration : -
The conference is convinced that immediate action is necessary to avoid default in Government payments and to restore confidence. It has, therefore, agreed to adopt a three-year plan to meet the national emergency and bring about an adjustment of burdens. The objects aimed at are -
Re-absorption in industry of workers at present unemployed.
Maintenance of national solvency.
Restoration of budget equilibrium.
An equitable spread of the loss of national income over all sections of the community.
The proposals for the three-year plan as adopted by the conference included -
A flat rate Commonwealth income tax at the rate of 3s. 6d. in the £1 without rebate to be imposed at the source on interest on all Commonwealth and State loans, which are subject to federal income tax, and on. the securities of local government bodies; this tax to replace the recent Commonwealth super tax of ls. Gd. in the £1.
The Premiers’ conference adopted that resolution, but not unanimously. The Premiers of Western Australia and Tasmania demurred to the proposal. The other Premiers and representatives agreed to it. This Government has not gone quite so far as is provided in that resolution. We are not imposing a tax without rebate. We are allowing for rebates to those with small incomes, and we are not imposing the tax upon the securities of local government bodies, because they are already taxable by the Commonwealth and the States. One honorable member has asked what effect this tax will have on future loans. One has to recognize that it will have an effect which cannot be ignored. I recognized this when discussing this subject with the banks. We thought that a change of the monetary policy would bring about a fairer distribution of the national sacrifice than resort to taxation of this sort. But the weight of opinion among the banks as well as among others with whom I discussed this subject was in favour of taxation. Most economists have made a definite recommendation that the fixed money claim should be taxed in a special effort to make the holders contribute their share to the general burden.
– Did they suggest discriminatory taxation such as this?
-They suggested discriminatory taxation in the sense that it would be a tax by the Commonwealth upon property and other incomes.
– But not specially on bonds.
– What point is the . honorable member raising? Does he say that it is unfair to levy this tax upon bonds without at the same time increasing the tax upon ordinary property?
– This tax involves discrimination.
– The original contract as contained in the loan prospectus says that the loan shall be free of State taxation and subject to Commonwealth taxation.
– If the interest were brought under the ordinary property tax it would be a fair thing.
-No; because we cannot increase the rate to such a level as would represent a fair contribution from holders of that class of securities.
– The money is not wrongly earned.
– I am not saying that it is. The honorable member ap-‘ parently takes the stand that the whole of the Government securities, war loans and general loans in Australia, are sacrosanct and should not be taxed. Let the farmer be starved off his farm and let the worker continue in a state of poverty ; but if there is any suggestion of an extra contribution by the holders of Government bonds and stocks, it is anathema to the honorable member.
– The Treasurer knows that be is doing me an injustice. I want to bring the tax under the same rate as if the income were from rent.
– I have explained that income from property - say from rents as a typical case of property - at the present time bears a super Commonwealth tax in addition to a high State tax, and the suggestion that we ought to increase the general property income tax if we are going to increase the tax upon Government loans is a preposterous suggestion, and would impose a burden on property that could not be borne. As the honorable member knows, these rates are already very high. In some cases more than 50 per cent, of the total income from this source is payable in taxation.
– Would it not be impossible to impose the property tax on bonds because the bonds change hands so frequently?
– The attempt to tax interest from bonds at the rate applicable to property has failed. Although it is known that interest amounting to £24,000,000 is being paid annually in Australia at present the taxation yield from this source is only £700,000. This is because bonds can be so easily handled. Bearer bonds, for instance, represent a very large sum, and there is no means of ascertaining the ownership of them.
– The evasion of taxation is not the subject dealt with in this bill.
– That is true, but surely that subject is relevant to the general question. The problem which we are discussing is the distribution of the national loss. It is only because of the loss that has occurred in national income that this bill has been introduced. Had there been no such loss the bill would not have been brought down. This is not an ordinary revenue measure.
– Is this not specific legislation against dishonest persons which covers honest persons as well.
– It covers honest persons, but it does not cover them unfairly, in my opinion.
– That is a matter for argument.
– The imposition of a tax of 3s. 6d. in the £1 on bonds is, in the opinion of the Government, legitimate, and itwill not involve the taxpayer in receipt of such income in any heavier taxation relatively than those in receipt of income from other sources.
– If all the holders of bearer bonds were paying the existing rate of ls. 6d. in the £1, would not the receipts from this source greatly exceed £700,000?
– They certainly would.
– But that evasion could surely be dealt with by means of ordinary legislation.
– The trouble is that it is so difficult to ascertain who are the holders of these bonds. Inscribed stock comes into the same class. The taxation receipts from these sources comes from only about £4,000,000 of interest per annum, although the amount paid in interest exceeds £24,000,000 per annum.
– Why is there this evasion ?
– I suppose the holders of the bonds simply neglect to state in their returns the amount of interest that they have received.
– Is the whole of the £24,000,000 referred to by the Treasurer subject to property taxation?
– Not all of it, for it includes the amounts paid to certain institutions, including the savings banks. Only about £19,000,000 of the interest payments would normally be taxable under the existing property rate.
The honorable member’s interjection reminds me that the provisions of the bill will apply to savings banks, insurance companies, friendly secieties, superannuation fund authorities, and the like. I have agreed to receive a deputation of representatives of the friendly societies this afternoon. They have intimated that they will place before mc facts which will show that this measure would most adversely affect their surplus earnings because their original benefits are based, in the first place, on certain actuarial calculations, and only a small margin of profit is allowed them. They contend that the imposition of this taxation upon them will have very serious results, and interfere with the distributions they make by way of benefits to their members. If that is so, I think they should be exempt from the provisions ‘ of the bill. It is probable that we shall have to make some provision to grant such exemptions not only to the friendly societies, but also to the superannuation fund authorities. But I do not know that there is any reason for granting exemption to larger institutions such as the savings banks, and the insurance companies.
– The insurance companies could advance similar arguments. They are thrift institutions in which the humbler citizens of the community invest their money.
– That is true, but the actuarial basis upon which they operate allows them a much bigger margin of profit than is actually required to safeguard the interests of their policyholders. Most of these organizations are earning amounts considerably in excess of the profits required to provide the benefits they offer.
– Can the Treasurer give an estimate of the amount involved in the granting of the rebates already provided for?
– It is impossible to make such a calculation with any accuracy. After the Commissioner of Taxes had investigated the subject he thought that between £500,000 and £600,000 might provide for the rebates. After allowing for all such legitimate claims it is estimated that the amount of revenue from this source will be about £3,750,000.
– Has any allowance been made to offset probable losses in other directions?
– Before a taxpayer becomes liable for the payment of any taxation under this bill, his total income from all sources must be in excess of £200. Otherwise the amount of taxation that he would pay would be rebated to him. There will also be a partial rebate to taxpayers whose income does not exceed £400.
– Is the Treasurer aware that some friendly societies have lately raised their interest rate on. mortgages?
– I am not aware of that. I take it that the honorable member is suggesting that an increase which is not legitimate has been made. I shall cross-examine the deputation on that point this afternoon.
The Prime Minister and I recognize that the method proposed in this bill of distributing the national loss may be construed by some persons as an infringement of the terms of the contract that has been made; but I have tried to explain that the contract has not been adversely affected in any way. There is a right under the contract to impose certain taxation, and the Government, without evading its contractual obligations in any way, is seeking to impose this taxation in order to bring about equality of sacrifice.
– Does not this bill mean that the person who lends money to his country will be more heavily taxed than the person who lends money to a bank?
– Not at all.
– It means that; but it means something else. That is, at least, a portion of the truth.
– But surely it is useless to rely upon a portion of the truth? If the man who lends money to his country is not subject to any increase in taxation in times of acute difficulty, such as these, he is in an infinitely better position than the man who lends money to a bank or to a private corporation by taking up debentures or preference shares; and he is also in a better position than the person who invests his money in any other class of fixed monetary securities.
– He would have less to pay in taxation if he lent his money to a bank than if he lent it to his country.
– The honorable member surely would not claim that the money lent to a bank by the taking up of debentures is not taxable by the Commonwealth at present.
– A man could put his money on fixed deposit.
– Interest on money from fixed deposit is, in some’ circumstances, liable to taxation at a higher rate than that at present proposed. Of course, it depends upon the amount of income which a man draws from all sources.
– This tax is not graduated in any way.
– It is impossible to impose a graduated tax under the principle of imposing taxation on income at its source. The only measure of graduation is provided by means of the rebates. The man with a low income will not pay as heavily as the man with a high income.
– Could the Treasurer provide us with a table showing the effect of this proposal on interest drawn from, say, 5 per cent, and 6 per cent, loans?
– I have had such a table prepared. It is as follows: -
– Could the Treasurer also provide us with a table showing the taxation on incomes of various sizes from all sources, and the comparative effect of this special tax and the federal property rate of tax on incomes of a specified amount ?
– I have had a number of tables prepared with the object of affording honorable members information on every aspect of this subject. I shall furnish each honorable member with a copy of each table.
Debate (on motion by Mr. Latham) adjourned.
Debate resumed from the 21st April (vide page 1086), on motion by Mr. Theodore- -
That the bill be now read a second time,
Upon which Mr. Eldridge had moved, by way of amendment -
That all the words after “bill” be omitted with a view to insert in lieu thereof the words, “be withdrawn and a now 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 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;
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 - 1½ per centum 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 -2½ per centum per annum ;
for twelve months and any period less than two years - 2¾ 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 acf”.
.- When the debate was adjourned last night I was endeavouring to point out to certain honorable members who support Mr. Lang’s policy, and also to some other honorable members of the House, that the payment of interest was inevitable. Although gold is the basis of credit and the medium of exchange in trade, it changes hands frequently; and as there is an unequal distribution of brains and ability, some men will lose money by barter or by gambling and others will gain it. It follows, therefore, that the man who has money will lend it at a rate of interest which wall not only repay him for being without the use of the money, but also cover him for the risk involved. Interest is nothing more than rent for money. It is just as feasible to rent money as to rent houses. No one would think of repudiating the liability to pay house rent, and it is just as unreasonable to talk about repudiating the liability to pay money rent. The person lending money must cover himself for being without the use of bis money, and insure himself against the loss of it. The following illustration will show what I mean -
Suppose a man pays another 8 per cent, on £.1,000 and continues to pay it for twenty years, and then fails. If out of the 8 per cent, the lender put by 3 per cent, per annum find invested it at compound interest at 5 per cent., it would take twenty years to amount to £1,000. Thus a man who lends another £1,000 on second mortgage at 8 per cent., and makes a complete loss at the end of twenty years, has not received more than 5 per cent, interest, the other 3 per cent, being required to provide an insurance fund to cover the final loss.
In bad times, although the normal rate of interest may increase, the actual rate falls because of the greater risk involved. Certain honorable members opposite, who have radical tendencies, have lashed themselves to a fury against what they have called the usurers. One honorable member spent nearly half an hour last night in quoting scripture with the object of showing that the usurer was, as he said, a cormorant, a vulture, and so on. Another honorable member, who is allied to the Lang-Garden faction of the Labour party, and who accompanied Mr. Lang on his recent tour, also furiously attacked those who receive interest from their investments. But these honorable members must realize that in this chamber it is not mere assertion, but actual argument which counts. This is not the Domain. 1 The statements of honorable members are recorded in Hansard, and can be examined dispassionately.
It appears to me that the Prime Minister, the Treasurer, and other honorable members opposite, are endeavouring to create an atmosphere of hatred against the banks. They are endeavouring to engender a psychological attitude in the minds of the people which will cause them to cry, “Down with the banks; we want what the banks hold”. But the banks are sound business organizations. Their affairs are conducted by men who have made a life study of finance. These men are not likely to be stampeded by honorable members opposite, who have had- no business training and who are not qualified to discuss financial matters, on equal terms, with those who have been engaged all their lives in the conduct of important business institutions. Their attitude in. the matter is one which gives food for thought, and must be regarded with a certain amount of alarm in view of the rumours which are current with regard to a certain savings bank in New South Wales. Banks can work only on their capital and the deposits which they receive. During the crash of the ‘nineties the whole of the capital and deposits of the banks were wiped out, and unpaid capital of shares called up, so that many of the shareholders in the banks were ruined.
The latest figures that I have been able to obtain with regard to the eleven big associated banks in Australia and their 2,500 branches are for the quarter ended 30th September last. They disclose that current accounts with those banks amount to £82,000,000, which may be withdrawn at any time. Approximately £179,000,000 is on fixed deposit, and a portion of it daily becomes payable. The figures represent a total of £262,000,000, on which the banks had actually loaned £257,000,000, or something like 98 per cent, of the total. At the present time over i00 per cent, of their holdings have been loaned, and they are now working well into their own capital. All the coin and notes in the custody of the eleven banks and their branches amounts to £35,764,792 compared with £82,000,000 upon which the people may call at any moment.
The Prime Minister and other honorable members last night expressed confidence that all of the banks trading in Australia were solvent. There is good cause for that confidence, as those institutions possess sound assets in addition to their monetary holdings. Let me compare the present position with that of the ‘nineties. When the banks crashed certain wiseacres said that they did not know their own business ; that they had overloaned, and denounced them on that ground. Yet, in September, 1892, the quarter before the banks crashed, their deposits amounted to £27,286,741, and their note holdings to £4,658,495, a total of £31,945,236, against which they held coin and bullion amounting to £20,586,960, or 64 per cent, of their deposits at call. At the present time the total amount of bullion and notes in possession of the banks of the Commonwealth represents but 43 per cent, of their deposits. That is something upon which those who speak of the banks as institutions that are grinding down the people may ponder. It is because those institutions are safeguarding the money that belongs to the people and refuse to be panicked by the utterances of any party seeking to control them politically, that they are denounced.
It is also very popular to make denunciations in connexion with Australia’s war debt. The honorable member for West Sydney (Mr. Beasley) and his chief, Mr. Lang, who have been touring the country with their troupe, including Jock Garden, have made repeated assaults upon the attitude of the British Government with regard to Australia’s war indebtedness. We know that Great Britain has graciously extended the period of the repayment of our loan by two years, which has meant an immediate postponement of the payment of £1,600,000 and its exchange by the Commonwealth. The honorable mem ber for West Sydney (Mr. Beasley) stated that Australia’s overseas war debt was in the vicinity of £500,000,000. The honorable member knows that it is nowhere near that amount. I asked him, by way of interjection, to quote the exact figure and the interest payable on it, and he assured me that he would do so. However, to be consistent with his repudiation policy, the honorable member resumed his seat without making further reference to the subject. He and his friends are touring the country advocating a policy of repudiation. Mo’st honorable members have met in private life the individual repudiationist, the man who borrows a pound and never repays it, and the person who purchases something from a business and does not pay for it. That is the policy that the honorable member for West Sydney and his supporters are advocating that Australia should adopt. They even desecrate the dead, and claim that the sacrifice made by our departed comrades overseas is sufficient; that the nation should not pay anything monetarily in redemption of its war debt. Their talk, of course, is merely antiBritish communist propaganda. On the other hand Mr. Lang and his friends have an extraordinary solicitude for the United States of America. Although certain indebtedness of New South Wales to Great Britain carries interest at the rate of 3 per cent, and other indebtedness to the United States of America bears a rate of interest of 5 per cent., Mr. Lang prefers to pay the higher rate and to repudiate tlie debt to Great Britain. [Quorum formed.’] Great Britain is the rock of ages against which the waves of communistic Russia have dashed so long without avail. Recently the Russian comrades of the honorable member for West Sydney (Mr. Beasley) tried conclusions with the doughty little nation of Poland, and received a good beating. Those individuals look upon Great Britain as their greatest enemy, and are assiduously disseminating their anti-British propaganda throughout the world, in which task their emissaries are meeting with a certain amount of tolerance in some quarters. Their latest plan is to ruin the world economically, by dumping wheat and commodities into Britain. In this they have achieved a measure of success.
Actually Australia’s war debt originally amounted to £92,000,000. £13,000,000 of that total was used only for war purposes; £2,000,000 bears interest at the rate of 3½ per cent., while the remaining £11,000,000 carries interest at 4½ per cent. £79,000,000 was used for the equipment of troops, arms, ammunition, transport, hospital treatment, &c, and advances for the payment of our troops. After the war, it was agreed to fund the total debt, and that 5 per cent, should be paid on the £79,000,000, the £13,000,000 carrying the rate of interest previously arranged. That made the rate for the whole amount £4 18s. 4d. per cent. When Prime Minister, the right honorable member for North Sydney (Mr. Hughes) agreed that Australia should pay 6 per oent., of which £4 18s. 4d. per cent, represented interest, the remaining £1 ls. 8d. per cent, being a reduction of the principal. Our original war debt has been reduced to £82,000,000, while the only interest that we pay, including the reduction of principal, amounts to £5,520,000 per annum. Not one penny of that indebtedness is owed in New South Wales or any other State. Mr. Lang and his communist friends know that the money that New South Wales owes to Great Britain was borrowed for developmental purposes within their State. Yet those gentlemen are strenuously endeavouring to work up hostile feelings against Great Britain. It is opportune that I should clear up the very flagrant misrepresentation of the position put forward by the honorable member for West Sydney.
This Government has met the repudiationists half way in their attacks on the banks. I should imagine that the Prime Minister said to his Treasurer, “What are you going to do about it; Mr. Lang is outdoing you in his propaganda and is getting away with it?” Certainly, at the Melbourne stadium and elsewhere, Mr. Lang told an unlikely story, and got away with it. So these two, who were previously anti-inflationists, have now turned inflationists and have met Mr. Lang half way in his attack upon the banking policy of the nation. The phraseology of the bill makes that evident. I might cite as a simile a cloakroom in which there are a number of hats. The Prime Minister and the Trea surer stand outside and possess no cloakroom tickets, so they propose to print a number and claim all the hats within the cloak-room. They forget that the deposits in the Commonwealth Bank represent the savings of the people. I am prepared to support the appointment of a delegation to go abroad and engage in research into financial matters, even if it were somewhat similar in nature to the board mentioned in this bill. The delegation would report the results of its investigations to Parliament, which would take whatever action it considered necessary. I urge the Treasurer to give consideration to the Norman plan, whereby it is proposed to hold an international conference to consider ways and means to provide finance for impecunious nations.
Interest rates will not be lowered until there is a revival of trade and confidence is restored in the country. In my opinion that cannot be brought about while we have a government such as this in power, supported, as it is, by a little coterie of repudiationists. The only way to bring about a restoration of confidence is to have an election and remove the Government from power.
Debate (on motion by Mr. Bell), adjourned.
– by leave - I have just received a telephonic communication from the Commonwealth Government’s representative on the Commonwealth Bank Board to the following effect: -
The Secretary of the Government Savings Bank of New South Wales has written to the Governor of the Commonwealth Bank as follows : -
I am directed by the commissioners to advise you that the bank will not re-open for business from to-morrow, inclusive.
I am also able to advise that the Commonwealth Bank Board is still sitting in conference, dealing with the proposals that have been submitted to it. I hope to be able to make a further statement to the House on the subject later in the day.
.- This bill is a very crude and futile attempt to regulate rates of interest. If further evidence were wanted in the matter, it is available in the answer that the Treasurer made to the amendment that was submitted by the honorable member for Martin (Mr. Eldridge) last night. In stating reasons why he would not accept that amendment, the honorable gentleman said that the Commonwealth had no constitutional powers to regulate interest rates generally. The arguments advanced by the Treasurer in support of his bill prove only that, as an attempt to regulate interest, the measure is doomed to failure. Of course, it is obvious that the trading banks, apart from the State savings banks which will not be affected by this bill, do, to a considerable extent, influence the rate of interest, because a great deal of the borrowing done by the community is negotiated through the banks. There is, however, a very wide field of finance outside the banks, and if the rate of interest payable by, or to, the banks is fixed, borrowers, in their eagerness to obtain money, will be driven to seek it from private money lenders. That, in itself, is sufficient to condemn the bill. Many of those who have supported this measure have endeavoured to create distrust of the banks. It appears to be popular at the moment to abuse banking institutions; even members of the Government have descended to such abuse. The Government to-day is in the position of many private borrowers who have exhausted their credit, and being unable to obtain further advances, would like to reduce the rate of interest payable on the money already borrowed. When they raised the loans, they were indifferent to the rate of interest charged; all they wanted was to get the money. Now they are unable to repay the money or to get further accommodation, and they abuse the institutions from which they borrowed. That is the position of the Government. It can raise no more money. It has, indeed, admitted so much. Therefore, in this and in another bill, it proposes to fix the rate of interest payable on its existing commitments. One effect of this measure, if it ever becomes law, will be to make it more difficult for struggling business men and primary pro ducers to obtain the financial accommodation which they urgently require. The demand for money to-day is not for investment in industry, but to meet existing commitments. Struggling farmers and business men require money with which to carry on their legitimate business. One of the apparently cruel things which the banks have done during this time of crisis is to insist that many perfectly solvent business men and farmers shall reduce their overdrafts, because other borrowers, who are mortgaged up to the hilt, are unable to meet their commitments. The effect of this action by the banks will be to ruin a great many people. I do not propose to criticize banking methods, because I am not one of - those who profess to know more about banking than do those engaged in the business; but it seems very hard that many honest, hard working and solvent persons must be ruined through the banks calling up overdrafts. I realize that the demands made upon the banks by Governments, especially the Commonwealth Government, in recent months are largely responsible for the treatment of private borrowers by the banks. The effect of this measure, however, will be to make the lot of such persons even more difficult. The Government, although it condemns the banks because of the high rates of interest, is itself, together with its predecessors, more culpable than are the banks. The present high rates of interest are very largely due to the action of the governments outbidding private borrowers in the loan market. It has been stated by other speakers that the banks do not benefit from the depression. That, of course, is obvious. Nor do they benefit from high interest rates. Every one who understands anything about banking and finance realizes that it is the margin between the rate paid on deposits, and the rate charged for loans, which constitute? a bank’s profit. When interest rates are high, the volume of business is affected, and the turnover of the banks reduced. Many honorable members opposite -who have addressed themselves to this subject have shown a complete lack of understanding as to the reason for the high interest rates which prevail; they have, as a matter of fact, confused cause and effect.
– I support the measure’ now before the House. Recently I came across a few lines of verse which expressed in poignant terms the anguish, heart-break and misery of the masses in this modern Gethsemane - the financial and economic crisis through which we are passing. The verse is as follows : -
O’er garnered fields a wintry wind doth freeze
My hollow cheeks, and doth increase
The gnawing at my stomach’s pit;
It shakes my frame, my brow close knit
In pain; makes keen the thought
That I and millions more have nought
But this: to wait and starve, or be
Beholden unto charity!
Oh God! Oh God! forgive the cry, letme die!
That verse was published in a paper called The New Leader, an English publication, and the words are applicable, I believe, to the situation in which a large number of our citizens find themselves to-day. It is a strange standard of ethics and social morality, peculiar to capitalistic society, that ignores the rights of human flesh and blood, but stresses the privileges of property and financial interest. Like the Bourbons, honorable members opposite have learned nothing and forgotten nothing. In their evident eagerness to. protect and promote the interest of the classes to which they belong, they are entirely oblivious of the danger which confronts them, and threatens to overwhelm the whole fabric of society. It is the grim irony of fate that honorable members on this side of the House, who believe in and advocate the principles of the collective control of the means of production, distribution and exchange, who believe in nation-wide cooperation in place of the inhuman competitive system under which we live to-day, should be forced by circumstances, in order to alleviate the sufferings of the workers, to bring in legislation which will have the effect of bolstering up the rotten and tottering capitalistic system that is responsible for all our trouble. [Quorum formed.] The misery and distress of the masses make it imperative for this Parliament to relieve their sufferings, particularly those who, through unemployment, have been reduced to destitution in the midst of plenty. There is an abundance of food of all kinds in Australia not only to satisfy the primal needs of man, but also to provide a considerable degree of comfort.
While there are many causes contributing to the present financial and economic depression in every part of the world, it is generally recognized that the burden of interest on both public and private debt is rendering the position of this country extraordinarily difficult. The fall in the national income due to the lowering of commodity price levels has brought no corresponding reduction of interest rates. On the other hand, the reduction of price levels, and the depreciation of the purchasing power of money, have conferred upon the holders of all gilt-edged securities a ‘far greater proportion of the wealth that is produced than was contemplated when their contracts were made. This class of society, occupying a unique and privileged position, is receiving, in terms of commodities, a far larger share of the nation’s wealth than that to which it is entitled, although there has been no change in the nominal rate of interest on government securities. Honorable members opposite would have us treat as sacrosanct the rights and privileges of these investors to exact whatever terms they choose to impose upon their clients, without regard to the human interests affected, and without consideration of the effect of that action upon either the debtors or the community generally. In so doing, honorable members opposite place the claims of capital above those of the human units of society, and thus upset the natural order of things, since the claims of human beings should supersede all others.
The extent to which the burden of interest has increased may be seen by reference to the report of the AuditorGeneral at page 21. It shows that, since the late war, the population of the Commonwealth has increased 22 per cent., the aggregate public debt 42 per cent., the debt per head of the population 17 per cent., and our interest obligations 61 per cent. The interest charges, per head of the population, increased 34 per cent., which is 100 per cent, greater than the increase in the public debt per head of the population. The burden of interest is becoming intolerable, and, unless checked in some degree, it must lead to a choice between repudiation, regulation of interest rates, or a depreciation of our currency. Any of those proposals would meet with the uncompromising hostility of honorable members opposite; but, unless they are prepared to accept the regulation of interest rates, they must eventually face the alternatives that I have mentioned.
Mr. J. M. Keynes, in his book, Monetary Reform, points out that there is a limit to the financial burden which any community will consent to bear, and that, when the interests of the creditor class reach the stage at which the fulfilment of obligations imposes an intolerable burden upon the debtor class, the debtors will refuse any longer to bear that burden. This is the natural order of things, for the debtor class outnumbers by far the creditor class, and is engaged in doing what is most essential to the continued existence of ordered society - the real work, the productive work of the world - while the creditor class lives upon the proceeds of the labour of others. Mr. Keynes, at page 67, appropriately observes - _
There is a respectable and influential body of opinion which, repudiating with vehemence the adoption pf either expedient, fulminates alike against devaluations and levies, on the ground that they infringe the untouchable sacredness of contract; or rather of vested interest, for an alteration of the legal tender and the imposition of a tax on property are neither of them in the least illegal or even contrary to precedent. Yet such persons, by overlooking one of the greatest of all social principles, namely the fundamental distinction between the right of the individual to repudiate contract and the right of the State to control vested interest, are the worst enemies of what they seek to preserve. For nothing can preserve the integrity of contract between individuals, except a discretionary authority in the State to revise what has become intolerable. The powers of uninterrupted usury are too great. If the accretions of vested interest were to grow without mitigation for many generations, half the population would be no better than slaves to the other half. Nor can the fact that in time of war it is easier for the State to borrow than to tax, be allowed permanently to enslave the taxpayer to the bond-holder. Those who insist that in these matters the State is in exactly the same position as the individual, will, if they have their way, render impossible the continuance of an individualist society, which depends for its existence on moderation.
These conclusions might be deemed obvious if experience did not show that many conservative bankers regard it as more consonant with their cloth, and also as economizing thought, to shift public discussion of financial topics off the logical on to an alleged “ moral “ plane, which means a realm of thought where vested interest can be triumphant over the common good without further debate. But it makes them untrustworthy guides in a perilous age of transition. The State must never neglect the importance of so acting in ordinary matters as to promote certainty and security in business. But when great decisions are to be made, the State is a sovereign body of which the purpose is to promote the greatest good of the whole. When, therefore, we enter the realm of State action, everything is to be considered and weighed on its merits. Changes in death duties, income tax, land tenure, licensing, game laws, church establishment, feudal rights, slavery, and so on through all ages, have received the same denunciations from the absolutists of contract, who are the real parents of Revolution.
Those are weighty words, and, therefore, in this bill, the Government is following the lead of a trustworthy authority. Unless the financial institutions and the investors are prepared to accept regulation in the form suggested in this measure, a worse fate may befall them. There are not wanting at the present time signs of a growing restiveness among all “sections of the community, owing to the intolerable conditions now _ prevailing. Nobody who values the happiness and prosperity of the people could fail to view with dismay the unleashing of the forces crf social disorder in our midst, which seems to be inevitable unless something is done to rectify the wrongs and grievances from which so many of our people are suffering.
– Is any principle laid down in the bill for regulating the rates of interest ?
-Yes; it is proposed to establish a hoard, which will be charged with that responsibility.
– Under this measure the matter will be left to the sweet will of any government in power.
– But the Government could not act unless this Parliament approved the remission to the board. The responsibility for giving effect administratively to the decision of the board will rest finally with the Government.
– But no principle is laid down on which the rate of interest is to be fixed.
– The board will see to that aspect of the matter.
– The recommendations of the board need not be accepted by the Government.
– Upon the Government will rest the final responsibility.
It is becoming increasingly apparent that the policy of honorable members opposite is to impose upon the workers and salary-earners, particularly those in receipt of small incomes, who never at any time are able to make adequate provision against long periods of idleness, illness, or unemployment, the full burden of the loss of national income. We cannot view with equanimity this attempt to introduce in Australia a policy that was successfully enforced in Great
Britain by the moneyed, propertied, and investing classes. How successful have been the efforts of those classes in evading their responsibilities, and imposing upon the workers and primary producers the burden of loss, the following illuminating figures, taken from the annual returns furnished by the British Commissioner of Inland Revenue, show. Details are given from five different schedules - landed property-owners, holders of Government bonds, business and professional men, civil and public servants, and workers. The trade depression in Great Britain began in 1920, and has continued without intermission. Yet the following remarkable figures are disclosed by the report: In 1919-20, landed property-owners returned their incomes as £290,000,000. After ten years of depression their incomes in 1929-30 were £415,000,000, an increase of £98,000,000. The income of bondholders in 1919-20 was £90,000,000; after ten years of depression their share of the national income in 1929-30, was £160,000,000. This is the class that is constantly raising an outcry against the crushing burden of taxation! Business men showed profits of £1,197,000,000 in 1919-20. The extent to which they suffered from the depression is indicated by the fact that in 1929-30 their incomes were returned as £1,397,000,000. So much for the burden of sacrifice borne by these classes! Now I come to the people who are said by their unreasonable demands to gobble up all the profits of enterprise and refuse to other sections of the community a chance to participate. Those workers who, in 1919-20, paid income tax, had an aggregate income of £836,000,000. After ten years of depression their returns of taxable income had dropped to £335,000,000. The primary producers returned in 1919-20 an income of £98,000,000, which, by 1929-30, had dropped to £49,000,000, a fall of exactly 50 per cent.
– Was the exemption unchanged throughout that period ?
– I cannot say. Thus we find that the burden of sacrifice has fallen upon two classes, the workers and producers in rural industries, and the workers in commercial and industrial undertakings. The toiling masses had lost £528,000,000. To them, the depression was very real indeed, but it passed lightly over the heads of other classes. Their incomes were augmented and their economic position improved. Ten years of depression left them unscathed.
I welcome this measure if only as a short step towards the regulation of the tribute that may be exacted from production by the moneyed interests. If we can prevent an increase of interest rates, and regulate them in keeping with commodity price levels, so as to ensure that the burden of interest shall not become so intolerable as to cause business and trade stagnation and loss of employment to thousands of people, we shall have done a valuable service to the country. [Quorum formed.’]
– My opposition to this bill is not based on disapproval of the regulation of interest. That everybody - with the possible exception of lenders - believes in low rates of interest, is almost axiomatic and, therefore, most people will welcome any legitimate proposal to effect a reduction of interest; but it must be reasonable and fair to all concerned, and such as will not cause financial and economic confusion. This bill does not conform to those conditions. It merely aims at control by the Government of banking to a much larger extent than at present, and is a continuation of that vendetta which the Treasurer has for some time past carried on against the banking institutions. On this subject he seems to have an obsession. His careful analysis of the proposed board to regulate interest carries no conviction to my mind. Although he stated that this and that section would be represented, the fact is inescapable that the appointees will be merely the factotums of the Government, and will be expected to carry out the desires, and even the behests, of the Treasurer. That is demonstrated by his speeches inside and outside this House, and if further proof be needed it is supplied by the interview he gave to the London Daily Herald, wherein he stated without equivocation that his objective is the nationalization of banking and finance generally. That being so, why does he attempt a camouflage of this character in order to deceive the general public and the electors into the belief that the proposed board will be the bona, fide representative of all sections of the community? I object to the socialistic aims and communistic sentiments of the Government being wrapped up in high sounding phrases, so that the Treasurer may further his objective of the nationalization of banking and the political control of- finance. It is a striking fact that this bill deals only with the banks. It aims to regulate what they shall do in -regard to the raising and lowering of interest rates, and makes them liable to penalties of from £500 to £1,000. But it makes no mention of investment and insurance companies; nor does it make provision for such a state of affairs as developed in America. When an effort was made there to regulate the. rates of interest to be charged by banks, in a manner similar to the proposal in this bill, people merely conducted their business of buying, selling and lending in Wall-street, independently of the banks.
This measure cannot succeed, and I do not think that the Government intends it to succeed. It is merely another electioneering placard to accompany the Fiduciary Notes Bill, the Wheat Bill, and an impending bill relating to unemployment, which involves the inflation of the currency to the extent of £12,000,000. The Federal Labour party will tell the people of this country that by the aid of this legislation it hoped to lead them out of the land of Egypt into the land of Canaan, but that their efforts in that direction were thwarted by members of the Nationalist party in another place. The introduction of this bill is a preliminary canter over the course that will be traversed hundreds of times at the next election, which, I suppose, will take place when the two warring Labour camps have come to some understanding, which will enable them to present a united front to the people. Although the bill provides for the appointment of a directorate, it also provides that the Government may, if it feels so disposed, take no notice of any recommendations of that body so that unless the directorate adopts the policy of the Government its work, will be ineffective. Sub-clause 3 of clause 10 provides that the bill has no application whatever to overdrafts and contracts existing at a certain date. Judging by the number of overdrafts and contracts already in existence one can readily imagine that a large avenue of business is to be excluded from the operations of this measure. Nearly every business man has an -overdraft or has contracted some financial obligation, and he needs only to continue or to expand these to ‘be exempt from this special taxation. The bill not only taxes the banks and exempts other institutions but also is to be most partially administered. Clause 13 provides -
The Governor-General may make regulations not inconsistent with this act, prescribing all matters which are required or permitted to be prescribed or which are necessary or convenient to be prescribed for carrying out or giving effect to this act.
The bill is a mere skeleton, because the Government, under Clause 13, will be able from time to time to bring into operation regulations of far more importance than the actual provisions of the bill. An innovation is to be introduced into this House, in that honorable members will not receive a copy of any regulation framed under this measure unless it is specifically asked for. It is quite probable that under this and other measures the Government will issue regulations in respect of important financial matters that should, really be discussed and decided by the national Parliament.
– The regulations will be supplied to honorable members who ask for them.
– I have no doubt that the Prime Minister is adopting this course in the interests of economy ; but I am criticizing the principle of introducing a skeleton bill and deciding by regulation important matters that should be discussed and decided on the floor of this House. The Lord Chief Justice of England, Lord Hewart, has recently written a book called The New Despotism, in which he shows in a most illuminating way how governments of to-day are introducing legislation embodying provisions which make the decisions of public servants and other authorities above the law. He also instanced in that book the way in which Great Britain is being governed by regulations which have not received the sanction of either the. House of Commons or the House of Lords. I most emphatically protest against any extension of that principle under the provisions of this bill. During the debate quite a lot has been said about the bondholder, but surely he is entitled to some consideration in the political and social cosmos in which we exist to-day. We must not forget that during the war the assistance of the bondholder was keenly sought to enable Australia to play its proper part among the allied nations. Since the war he has been besought to invest his money in government loans, so as to provide work for the unemployed and to permit of the operations of the various functions of the Government.
– At one time he was even threatened.
– At one period the bondholder was threatened with drastic action unless he took a greater part in loan conversions. At various times we have been told to buy a bond of honour. Judging by the legislation that is being introduced into this Parliament, this Government is evidently seeking to place the brand of dishonour upon Commonwealth bonds.
– The honorable member is not entitled to make that observation.
– I bow to your ruling, sir. The worst word in the vocabulary of the Treasurer (Mr. Theodore), the honorable member for Adelaide (Mr. Yates), and the Lang satellites in this House is not good enough for the bondholder of Australia. He is, in their eyes, a kind of pariah and a fit subject for the opprobrium of every ruffian who talks at the street corners. The decent people of this community have had, under Labour rule, to put up with many indignities, and that position is being accentuated by the introduction of this class of legislation. This bill attacks the decent and thrifty people of the community - the people who are the bone, sinew, and fibre of this country. They are entitled to be admired rather than abused, but to-day they are getting from this Government a deal worse than that given to any other section of the community. They are now to be subject to punitive taxation, although only a few months ago the Income Tax Act was amended to place a further burden on their shoulders by means of an additional tax on property. (Quorum formed.] One wonders whether thrift has any real merit in this community; whether it would not be better for people, instead of saving a little money for their old age, to spend it in riotous living like others have done, and then to apply for the oldage pension.
– Order ! There is so much interjection and audible conversation that it is difficult for me to follow the argument of the honorable member for Warringah (Mr. Parkhill). I ask honorable members to assist in the maintenance of proper order.
– I wish now to refer to one of the celebrated cablegrams sent by the Prime Minister to his colleagues while he was abroad. Those cablegrams rang with a clarion appeal to the people.
– The honorable member would be bankrupt for argument if it were not for those cablegrams.
– Not at all; but I have no doubt that they will be the basis of a great deal of argument during the next election campaign. On one occasion the right honorable gentleman promised to explain the reasons for sending these cables; but *ie has ever since maintained a deathlike silence in regard to them. There is not the slightest justification for the change in the attitude of the Prime Minister since he was being feasted and feted by the people of Great Britain. This cablegram reads -
Our government floated ‘a loan and guaranteed public safe investment - thousands of people withdrew savings from savings banks assist the1 Labour government.
– What is wrong with that ?
Mr. ARCHDALE PARKHILL.Nothing at all. The cablegram crystallizes in a few words the opinion of the people of this country; but the trouble is that the Government is now seeking to impose fierce taxation upon the very people from whom it then desired assistance. This section of the community’ is being abused in almost every speech made by certain unworthy members of this chamber and people outside of it.
The Government now proposes ro reduce the income of a certain section of the community by an additional 3s. 6d. in the fi. Bondholders are to be required to pay a special tax at this rate, hi addition to the tax of ls. 6d. in the £1 which is already applicable to interest from loans. I agree that it would not be right to allow persons whose entire income was obtained from bonds to escape all taxation; but there, are very few persons in that position in Australia. The interest paid on government loans is spread over the whole community and is a necessary source of income to many wage-earners.
– I rise to a point of order. I submit that the honorable member, throughout his speech, has failed to connect his remarks with the subject-matter of the bill.
– If that were so, it would be a reflexion upon the Chair. I have carefully followed the speech of the honorable member. He has kept within measurable distance of the bill, and is in order.
– It may satisfy the honorable member for Bendigo (Mr. Keane) to know that every argument that I have advanced has been used to refute the arguments of honorable members opposite.
A good deal has been said during this debate about equality of sacrifice. Supporters of the Government have argued that the workers are the only people in the community who have been called upon to make any sacrifice. But their definition of “ worker “ is very limited. They seem to think that only those who are members of trade unions and who are working under Arbitration Court awards, or wages boards determinations, are workers. I dispute that. I regard as workers all those who, by brain or hand, carry on the affairs of this community. “Worker” is a generic term which means a great deal more than the member of a trade union.
– I must ask the honorable member to connect these remarks with the bill.
– I propose to do, sir. The Treasurer said that the workers of Australia were sacrificing £40,000,000 in order to off-set the loss in national income. Our national income has fallen from £663,000,000, in 1928-29, to £460,000,000. If the statement of the Treasurer is correct, it would mean that the whole of the £460,000,000 was represented by wages. Obviously this is not so and his calculations are inaccurate. One has only to think of the losses incurred by people who have invested their money in stocks and shares to realize that other sections of the community are making- heavy sacrifices. A circular issued *by the Bank of New South “Wales shows that the market price of shares in a number of well known companies fell to the extent of 46.6 per cent, between January, 1929, and January, 1931, while the dividends paid by those companies fell to the extent of 23.8 per cent.
In a recent report published by the Auditor-General it is stated that out of 3,500,000 electors in Australia only 264,763 paid Federal income tax. If this bill is passed a crushing addition will be made to the burden which the thrifty section of the community is already carrying. In my opinion the bill does not deal in any real way with the interest problem. It is merely another effort by the Government to obtain control of the banking institutions of Australia. The Leader of the Opposition has intimiated that, at the appropriate time, he will move an amendment to provide that only three directors shall be appointed to the Bank Interest Board, and that he will also move an amendment to the clause which provides for the manner of their appointment. I approve of both of the amendments that are forecast. I am also of the opinion that there is no reason why a salary should be paid to these persons.
I object to the political control of banking. In my opinion it is an altogether vicious principle. In this connexion I quote the following paragraph from the report of the Select Committee of the Senate on the Central Reserve Bank Bill
In Kisch and Elkin’s Central Banks (1930 edition), page 20, will be found this further outline of the functions of a Central Reserve Bank and of the need for preserving to it the power and freedom to serve common rather than sectional interests: - “ The theory underlying the conception of a State Bank centres on the proposition that since a wise central banking policy is the basis of a sound national economic life, the bank should be under the control of the national Government. But the dangers of this course are great. Just because the decisions of the bank react on every aspect of the economic activities of the country, it is essential that its direction should be as unbiassed as is humanly practicable, and as continuous as possible. But clearly if the Bank is under State control continuity of policy cannot be guaranteed with changing Governments nor can freedom from political bias in its administration be assured. In most economically developed countries the probabilities are that the national government will be the largest individual customer of the local money market. In such circumstances it is evident that, if it also controls the administration of money market policy, it may easily find itself in an equivocal position where it may be called upon to decide between, two courses, one of which may be immediately convenient to itself and the other conducive to the ultimate interests of the country as a whole. The creation of such dilemmas should be avoided. In their report in support of the Bill creating the Central Bank of Chile, the Commission of Financial Advisers, under the presidency of Professor E. W. Kemmerer, pointed out that there was a widespread and pronounced fear lest the success of the bank should be wrecked by politics and undue Governmental influences, a fear which the past banking history of many South American countries has shown to be fully justified.”
The report also contains an appendix which sets out clearly the powers of the Central Banks in various countries. It shows that the predominant form of ownership is by individuals or legal persons. There are in all, sixteen shareholder banks. Nine Central Reserve banks are owned partly by the State and partly by shareholders. Only five - those of Bulgaria, Finland, Latvia, Russia and Sweden - are State banks. In every case, even that of Soviet Russia, there is a strict limit placed on the amount that may be advanced to governments. Every reserve bank in the world is divorced from political control. In all these circumstances I am totally opposed to the control of the banking institutions of this country by the Government. This bill provides, clearly and definitely, for the government control of banking, and nothing can get away from that fact.
The honorable member for West Sydney (Mr. Beasley) introduced into his speech, as usual, the King Charles’ head of our indebtedness overseas. It is quite true that we owe £573,000,000 overseas, of which £92,480,000 originally represented war debt. Almost £11,000,000 has been paid off our war indebtedness, leaving a balance of less than £81,000,000. The honorable member for West Sydney (Mr. Beasley) is continually complaining that we have to pay interest amounting to £5,000,000 per annum to Great Britain on that debt, and that in doing so we are not reducing the principal. The honorable member forgets that State Governments which have had his support have at times borrowed £481,000,000 overseas, and expended it on public works, old-age pensions and social services, the benefit of which the community is now enjoying. After all, what is this comparatively paltry sum of £5,000,000 a year that we have to pay on our war indebtedness? Australia undertook that its soldiers should be the best paid, best trained and best clothed of any that fought in the war, and we must pay for what that cost. Only a man with a craven spirit would complain, now of having to pay for what he proudly boasted about during the war years.
– That payment of £5,000,000 includes £1,000,000 which goes to a sinking fund to redeem the debt.
– That is so. I often think, when I hear these craven expressions, of the noble race from which many of us have sprung. I remember the wonderful people of Great Britain, and the manner in which they are shouldering their responsibilities. Recently, in a speech that was broadcast to the people of the United States of America and Canada, Mr. Phillip Snowden, the British Chancellor of the Exchequer said -
The War has left Great Britain with a debt of over £7,000,000,000. We have to raise each year from taxation a sum of £360,000,000 for the service of this debt without making an appreciable impression on the amount of the debt. At the present rate of repayment of the debt it will take 140 years to liquidate it. Our taxpayers have to pay on our debt services £1,000,000 per day, £40,000 per hour, over £000 per minute. It takes the whole-time labour of 2,000,000 workers, year in, year out, to produce the means to pay the annual cost of our debt service. Add to this the £115,000,000 we annually spend on the lighting services, and £50,000,000 we pay yearly for war pensions, and we get a total of £520,000,000 a year, £1,000 a minute, which the people of Great Britain have to provide for war purposes.
We have to raise annually from taxes for national expenditure a sum of £606,400,000. Three-quarters of our taxes are spent on paying for past wars and preparing for future wars. Our people are the most heavily taxed in the world. The average amount of local and national taxation works out at about £100 per year per family. We have an income of 4s. in the £1 and a super income tax running up to an additional 16s. in the £1. In addition the duties on estates passing at death range as high as 40 per cent. The whole of the yield of these heavy taxes is only sufficient to provide two-thirds of the cost of providing for the annual war debt charges, war pensions, and the lighting services.
That is what that great race is doing, without a whine from its Government or from any section of its community. The utmost discredit is reflected on the small, miserable, section in this country that is endeavouring to persuade Australia to dishonour its obligations and to squeeze further concessions from the Mother land. What we hear to-day is merely a rising to the surface of the anti-British sentiment that has been simmering in the Labour movement for years. The antiBritish section are now in charge of the movement and, allying themselves with foreign socialists and communists, they are doing their utmost to white-ant Great Britain, the bulwark that has so long withstood the sinister designs of communism. Unfortunately, increasing numbers of people are becoming so misguided or foolish that they are assisting that dangerous and undesirable section in the endeavour to achieve their fell purpose. [Quorum formed.]
.- I regret very much the concluding sentences of the honorable member for Warringah (Mr. Parkhill), particularly those which allege that a section of this party is anti-British, and is doing its utmost to injure the Old Country. Being Australian-born I have always fought in this House and outside it to uphold Australia’s rights. Recently the Australian Commonwealth was granted the full right of self-government, and the readiness with which that right was conferred makes me feel more than ever grateful to the Old Country. Instead of weakening the bonds of Empire that act of grace will tend to increase and strengthen them. I believe that when the honorable member for Warringah (Mr. Parkhill), reads his words in Hansard he will very much regret their utterance.
Upon financial matters, I am one of the most conservative men on this side of the House. I did not join in any attack that was made upon the visit of Sir Otto Niemeyer to Australia. That gentleman came to this country at our invitation, and did his work well, and I regret the attacks that were made upon him. I am also sorry for the circulation of certain statements that were attributed to Sir Otto, concerning our internal public administration. I have no objection to the appointment of Sir Robert Gibson as Chairman of the Commonwealth Bank Board. I believe that the Prime Minister and the Treasurer did good work for Australia, when they reappointed him to that position, which requires a man of ability and courage. I believe that Sir Robert Gibson possesses both those qualities. I am very much opposed to those who say that a politician should have been appointed to that responsible office, as I do not believe that the Commonwealth Bank should be under the control of politicians. The safety of the bank is too important to be made a party issue. Private banks have also been subjected to attack, but I think that they have strained their resources to the utmost, and have gone as far as their safety permits in making advances to all sections, in an endeavour to help the community during the existing depression. I have nothing to say against them. In spite of those convictions, I contend that unless a government controls its finance, finance will control the government. The honorable member for Warringah claimed that banking should be absolutely divorced from politics. The wise and big men who established our Constitution included in their provision for the peace, order, and good government of Australia, the control of banking as one of the Commonwealth powers. They believed that a time would come when it would be absolutely necessary to regulate a force that might other-wise become our master. This bill is an attempt to control the rates of interest charged by banks. Let me refer to precedents in this Commonwealth with regard to the control of interest. In 1893, when the banks were endeavouring to rehabilitate themselves after suspending payment, legislation was passed, not to protect the people, but to protect the banks. Because of their weakness and default, our banks had Seized the current accounts and deposits of our people, and the right was conferred upon them to repay, not on normal rates of interest, but at rates that were absurdly low. I particularly mention the English, Scottish and Australian Bank. Although every other bank has since repaid the amounts then seized, the English, Scottish and Australian Bank, after making arrangements to pay 4J per cent, to its creditors, succeeded in having an Imperial act passed which decreased that rate to 3£ per cent., which it continues to pay to this day on its permanent inscribed stock. In order to increase its very large profits, it bought up its own debts on the market at less than 10s. in the £1 ! Those honorable members opposite, who object to rates of interest being controlled as a protection to the community have not objected to the English, Scottish and Australian Bank continuing to hold the deposits of the people, many of whom were very small depositors, who trusted it in 1893, although it has been paying dividends of from 12^ per cent te 15 per cent, for the last eight to ten years.
– They are robbers. .
– As the bank has been able to pay 12£ per cent, and 15 per cent, annually in dividends, it should not allow that blot to remain on its reputation. In 1893 it seized the depositors’ money, and has since been able to make very substantial profits largely by the purchase of its own debts at a discount.
– Had not the depositors a remedy at law?
– No ; the money which the bank held at a time when reconstruction took place was divided into several classes, repayable at various periods, but a large amount was converted into perpetually inscribed deposit stock, and this stock it advertises as one of its sources of banking strength.
– That must have been agreed to by the depositors.
– It was agreed to by them, and the schemes of reconstruction agreed upon were ratified by panic legislation. Those schemes, however, were sanctioned, not by the small depositors, but by the big depositors who were also large shareholders. After the colonial legislatures, as the State parliaments were then, had passed acts ratifying the schemes of reconstruction, we had the scandal of the English, Scottish and
Australian Bank, a British institution, getting an Imperial act which reduced its interest payments still further.
– But this measure will not remedy that trouble.
Mr.CROUCH.- No, but the honorable member for Warringah (Mr. Parkhill) said that there was no precedent for legislation of this kind. I have pointed out that there is a precedent. This is an attempt to ensure that the banks shall deal fairly by their clients. It is admitted on all sides that interest rates must come down, yet when an honest attempt is made by the Government to meet the position by appointing a representative body to determine rates of interest, whether higher or lower than the present rates, honorable members opposite object. We are told that the banks’ interests must be considered.
– No one says that the’ banks’ interests must be considered. We are jealous of the people’s interests.
– It is agreed by every one, I think, that for the benefit of the community bank interest rates should be reduced.
– I did not say that they should not.
– Then why object to the remedy here proposed. Although I propose to support this bill because I support the Government which has introduced it, I believe that it will be largely ineffective. Its provisions can be evaded by the banks. I remember that the Commercial Bank of Australia after its reconstruction, because a certain part of its business was not being carried on to its satisfaction, formed an assets realization company, and placed a large part of its business in its hands. The bank provided all the capital, and left the company to do the work which the bank was not able to do itself. The same sort, of thing would be done if an attempt were made to limit interest rates. The banks would form subsidiary companies outside the scopeof the act because federal legislation under the Constitution can only apply to banks and those companies would carry on the business formerly done by the ‘banks themselves. They would be able to charge what rate of interest they liked, because they would not be subject to oontrol by this Parliament. The hon orable member for Werriwa (Mr. Lazzarini) brought forward a proposal which would cover the interest chargeable by all financial institutions, and by all money lenders, but his proposal is unconstitutional, because our powers as a parliament are limited to the control of banking. In these times a great deal of money lending is done by institutions other than banks. In America there are very powerful trust companies, which overshadow even the banks, and if the interest earnable by the banks in this country were limited by legislation, similar trust companies would be formed here. Many persons who have occasion to borrow money do not deal with banks, but with financial institutions such as building societies, &c. That is true of the workers, whose interest the honorable member for Corio (Mr. Lewis) so consistently and characteristically defends. The interest charged by those societies works out at about 7¾ per cent., but they cannot be brought within the scope of a measure of this kind. In Melbourne several investment trusts have recently been formed, and they also will be outside the scope of this measure. Moreover, the fact that outside institutions are paying high rates of interest will affect the judgment of the board charged with the task of fixing interest rates payable to and by banks. The board will recognize that unless the banks are allowed to pay rates approximating those paid by outside institutions the banks will be unable to obtain any business.
– Does the honorable member say that in order to make this measure effective it will be necessary to alter the Constitution?
– Yes; it will be necessary to alter the Constitution so as to give the Commonwealth power to legislate for the control of all financial institutions. As a matter of fact, I doubt whether we have power now to control even the banks. It was thought once that the Commonwealth Parliament had full power to legislate in respect of companies, but the High Court gave a judgment in the case of Huddart Parker and Company v. Moorehead, 8C.L.R. 300,.which very seriously limited the powers of Parliament in that direction.
– During the nest elections I shall publish this speech of the honorable member just to show what is the value of this bill.
– We on this side are able to speak our minds. We are not bound down by any Nationalist caucus. On a party measure honorable members opposite have to speak as directed.
– The honorable member himself said that he proposed to vote for this bill merely because it was a party measure, although he did not believe it would be effective.
– In spite of the defects I am describing, I shall vote for this bill as it is an honest attempt to reduce interest rates and the only available one under our limited Constitution. I am prepared to give it a trial. There is one other direction in which I believe the bill will stultify itself. Every Australian bank has a London branch, and until the present restrictions were imposed upon the export of gold, the banks were able to move their funds freely from Australia to London. When the Nationalist Government assumed power to control gold exports, it placed in the hands of succeeding governments power to control the operations of the financial institutions of this country. If, however, the time comes when banks are again allowed to export their money without restriction, they will take advantage of that power, if interest rates are pegged against them here, to transfer their funds overseas, and use them to their greater profit there. That will have a deleterious effect upon business generally in this country. There is one outstanding reason, however, why interest rates chargeable by the banks should, in my opinion, be limited. I am intimately associated with a building society in Melbourne, which lends money to people seeking to ‘build homes. This money is, in many cases, lent at 7 per cent., and until recently the society was working, as it had- been for nineteen years, on a bank overdraft on which it paid per cent, interest. On the 1st January of last year, the society received a notification from the bank that the interest on its overdraft would thereafter be 7½ per cent., which made : it impossible for it to reduce its interest charges to meet the prevailing depression. That is an example of how institutions desirous of making money available to the people at as reasonable a rate as possible are prevented from doing so by the banks. It furnishes at least one argument in favour of the bill. I trust that this measure will be passed through Parliament. There are difficulties in the way of its successful operation, but it is an honest attempt to meet a real difficulty.
Sitting suspended from 6.15 to 8 p.m.
.- I shall avoid traversing the ground that has been so well covered by previous speakers on this side of the House. I am in complete agreement with, at any rate, one sentiment expressed by the honorable member for Werriwa (Mr. Lazzarini), who said that the bill was a sham, and was introduced purely for vote-catching purposes. That would not be sufficient to prevent me from supporting it, if I thought that in the long run it would bring any relief at all to the hard-pressed debtor classes in Australia, particularly the primary producer debtors; but I am quite satisfied that the introduction of this measure was only an effort on the part of the Treasurer to bid against the Premier of New South Wales for votes and pre-selection, and can only make financial conditions more difficult. The bill is very limited in its scope, for the reasons which the Treasurer gave in introducing it. It applies practically to banking transactions only. Generally speaking, the debts owing to banks throughout the country are not the most onerous which primary producers and other classes of debtors are carrying today. The interest paid to banks is a good deal lighter than the average interest which debtors are paying on short time advances, and more or less unsecured finance, which so largely is the class of finance with which banking transactions are concerned. The Treasurer himself gave figures regarding the overdraft rates ruling some years ago, as compared with the rates obtaining to-day. On the whole, the figures given by him as the present rates are above the actual average rates now in force and do not show as great an increase. He said that in 1913 the advance rates charged by the trading banks ranged from 5£ per cent, to 7 per cent., and in 1924, from 6^ per cent, to 8 per cent., the present rates being from 7 to 8 per cent. I certainly know that a good many advances have been made recently by the banks at less than 7 per cent., and I am quite satisfied that the Treasurer did not frankly quote the rates in operation at the present time.
– That is a strong statement.
– It is justified, and I shall give figures in support of it.
I shall quote, in a few moments, from evidence given very recently before the royal commission that inquired into the disabilities of South Australia under federation. In going through one of the Mallee districts, that body took evidence from the manager in that district of the branch of the State Bank of South Australia. He probably is in a better position than anybody else to know the private affairs of all the settlers in any particular district, because, sooner or later, settlers in financial trouble, who have failed to obtain accommodation, turn to him for assistance. His evidence is certainly authoritative, and he says that the rates of interest range from 61 per cent, to 7£ per cent. In my personal experience, I have found that overdraft rates range from 6$ per cent, to, in some cases, 8 per cent.
– What about the rates charged by machinery firms ?
– They are the sort of lenders which this bill does not touch. Interfering legislation of this description is likely to make finance more difficult, and can only drive persons in need of funds to just that kind of accommodation. In this bill the Treasurer is competing with the Premier of New South Wales for preselection, and absolutely disregarding the true interests of debtors, and, particularly, primary producer debtors. It is certain to make it more difficult for them to obtain accommodation from the banks, which, on the whole, treat them with consideration. The banks keep interest rates within some sort of bounds.
– Does the honorable member say that bank interest rates should not be reduced?
– The principal thing that keeps them high is the low credit of the Government. The best way to reduce the rates, and do the least possible damage to the people, is to restore government credit. Then Australia will get the benefit of the cheaper money rates obtaining in most of the other countries of the world. The Leader of the Opposition has explained fully that the bad credit of the Government enables those who buy Government bonds to get a very high return from their money, and that they are not prepared to make money available to industry when they can get such a high return by buying gilt-edged securities.
This bill, as I have said, applies only to bank rates. If the banks are to have their business interfered with in this way, they will have difficulty in obtaining funds. Their deposit rates will be reduced, while large returns will be possible from government loans. If the earnings of the banks are reduced, they will naturally lend, only on the pick of the security that is offering, and that means that an even larger proportion of the unfortunate persons who are compelled to seek finance to enable them to carry on will have to turn elsewhere. Finance is obtained from merchants, storekeepers, and societies, and most of the societies do not advance funds for the carrying on of ordinary business, as banks do. The money obtained from storekeepers, merchants and traders of that kind has usually come from the banks, and almost invariably it is dearer than that advanced directly by the banks because of the greater risks. I have been reminded, by way of interjection, of the interest being charged in certain cases by machinery firms, the name of a particular firm having been mentioned in the evidence from which I shall quote. I know from experience that the following statement by the Manager of the State Bank of South Australia, is substantially true : -
Many farmers have been given credit by other concerns. The highest rate for the renewal of bills would be about 15 per cent., which is paid to “ General Motors “. I should say there are twenty farmers in this district who are paying that rate of interest. In some cases the rate charged for the renewal of machinery bills is only 12 per cent.
In another part of his evidence the witness asserted that only about 5- per cent, of the farmers had not had assistance from the banks, and some of the liabilities were not even secured. I may say that there are about 300 farmers in that district, and that would mean that all but fifteen have received assistance. Of the 285 assisted, only about twenty are paying the high rates up to 15 per cent. ; more would be paying 12 per cent.
That is the sort of finance to -which the Treasurer would drive borrowers, in his desire to “ dish “ Mr. Lang and the honorable member for Martin (Mr. Eldridge), and obtain the pre-selection that he is after. I endorse what has been said in that connexion by the honorable member for Werriwa. This is a votecatching bill. It is a sham, and that is quite a sufficient reason for opposing it.
The Treasurer has an almost uncontrollable desire to regulate things, and above all, he has a passion for controlling finance. I submit that in this case, when, apart from that natural tendency of the Treasurer, he is obviously indulging in window-dressing, and competing against a man who is a confessed repudiationist, the House would be well advised to vote against the second reading of the bill. If the measure is not defeated, I hope that honorable members will support the amendments circulated by the Leader of the Opposition, which would do something to prevent the political control of everything, which the present Government is seeking. But I would not like the bill, even if the amendments indicated by the Leader of the Opposition were accepted. It would give to a board a certain amount of power to engage in price fixing. A government authority is the worst possible instrument for fixing the price of anything. It nearly always makes some mistake, either starving the market or causing a tremendous glut. The world is full of examples of the failure of price fixing, which is one of the things that has led the wheat industry into trouble. The fact that the wool industry has got away from price fixing will enable it, I hope, to turn the corner and face the rest of the year, at any rate with hope. Therefore, I advise the House to reject the bill, and, if it is not defeated, to accept the amendments to be submitted by the Leader of the Opposition.
.- I have been amazed at the speeches of the members of the Opposition. I assume that everybody is agreed regarding the need for a reduction of the cost of production, a phrase which has been very frequently in the mouths of honorable members opposite during the last twelve months. The capitalistic forces have succeeded in diverse ways in bringing about a reduction of wages. Admittedly wages are part of the cost of production, but interest is a much bigger factor. This measure is designed to give effect to the ideal that the sacrifice necessitated by the decline of the national income shall be shared by every section of the community. The Treasurer has told the House that the workers subject to awards have lost £44,000,000 in hard cash during the last twelve months. The interest charge is a burden on secondary and primary production and on governmental activities. Yet the suggestion that an effort be made to regulate interest rates is met with the same vague generalities and conservative platitudes as have been advanced against every attempt by the party in power to secure control of the government of Australia in the only way that can be effective - namely, by control of finance. A bill of this character is long overdue.. We are told that of all the handicaps upon industry, interest alone must not be touched. Last week this House was considering a bill to provide relief to the wheat-growers. During the debate upon it every speaker agreed that the primary producers were experiencing abnormal difficulties, and some honorable members represented that one of the greatest burdens borne by the man on the land was the interest on his capital debt. Yet the vital bill on which the financing of the wheat scheme hinged was rejected in another place. In spite of long consultations with representatives of the Government, the banks will not agree to reduce interest rates. Obviously they cannot be the final arbiters of Australia’s destiny, and the Government is asking this Parliament to declare that if a reduction of wages is right, a reduction of interest, which forms a greater part of the cost of production, is equally right.
– Have the banks said that they “will not reduce interest rates ?
– They have not definitely refused,; but they have (clearly stated their opposition to this bill. The costs of. production must be reduced; but I have never been able to concede that wages form as big a part of that cost as some honorable members allege. I make that statement after long experience in the Arbitration Court. There are other charges, including interest, which are burdening, production and retarding national development. Machinery for the regulation of interest rates is justified, if adequate safeguards are provided, as they are in this bill. The Government proposes to create a board, on which every big interest will be represented. It is true that the board will have only recommendatory powers, but it will be composed of experts in banking practice, and they will be able to advise the Government from time to time as to what would be a fair rate of interest to be charged. Should the farmers in my electorate be charged the same rate of interest to-day as when the price of wheat was double what it is to-day? Should pastoralists pay the same rate when wool is 8d. a lb. as when it was ls. 8d.? All the conditions of industry would be considered by an expert board, which would recommend certain rates of interest on bank overdrafts and advances. A recommendation to the Governor-General would follow, and certain legislative machinery would exist for policing the decisions in order to ensure the observance of the law. Eor the life of me, I cannot understand the. attitude of honorable members of the Opposition. If the means proposed in the bill are the wrong way to reduce interest, what is a better way? None has been suggested so far; but the old propaganda tale - that if the present Government were out of office tons of money would be available to supply all our wants - has been reiterated. No opponent of the measure has submitted any proposal for interfering with the rates charged by the trading banks. I believe the bill to be well warranted, because it will give relief to primary producers, traders, and all persons engaged in industry. It applies only to banking companies, but if they are obliged to charge reasonable rates, other organisations trading in money will be compelled to adjust their rates or lose their business.
– The States could compel them to do so.
– That is so. Every State government is to-day considering the desirability of declaring a moratorium to give relief to land-holders in rural districts and others. I believe the bill is as sound as a bell. At a time when Australia seems to be approaching a financial and economic Armageddon, there is an obligation on all sections to assist in the rehabilitation of industry, and a considerable amount of relief would be afforded to the primary producers if reasonable rates of interest were fixed, not by minor authorities, but by a law of this Parliament. The bill is a sincere effort to give relief to all sections of the community without undermining the stability of the banking organizations. Production costs consist of wages, rents, and interest on capital. “Wages have been extensively cut, apart from the reductions which have been effected as a result of work rationing and the deprivation of thousands of men of their jobs, which were their all. A regulation of interest rates will help to spread the burden of sacrifice which should be shared by all sections, including the bankers. The honorable member for Wakefield (Mr. Hawker) quoted statistics regarding the current interest rates. The average rate for overdrafts charged by the Commonwealth Bank has been 6½ per cent. In 1913 the rate charged by the trading banks on ordinary advances ranged from 5½ to 7 per cent.; in 1924 the range was 6½ to 8 per cent. At present the average for all the private trading banks is 7 to 8 per cent., notwithstanding that in this period of deflation primary producers and workers have to accept lower prices for their goods and labour. An early rectification of this anomaly would give substantial relief to all phases of industry. If the interest rates on bank advances were reduced all round by1½ per cent., industry would be saved £4,000,000 a year, or 20 per cent, of its present interest burden. On government overdrafts the average rate charged by the Commonwealth Bank in 1914 was 4½ per cent.; since 1922, it has remained at 5½ per cent. But the private banks are charging governments 6½ per cent. Honorable members will realize that that difference of 1 per cent, represents a large amount of money, and is a colossal burden on every government. As a rural member I am convinced that the greatest relief that could be given to the man on the land would be to lift from his shoulders some of the burden of exorbitant interest. This liability was incurred at a period of land inflation. Unfortunately, the land has lost much of its earning capacity, which must remain low for some years. The small wool-grower who paid interest at the rate of from 7 per cent, to 8 per cent, when the price of wool was ls. 8d. a lb., is now being compelled, because of the weakness of our banking law, to pay the same rate of interest even though the price of wool has fallen to 8d. a lb. Any honorable member who attempts to defend such a position cannot be credited with any financial genius. Honorable members opposite are opposed to any banking reform, but in an abnormal time like this, when the banks have refused to release credits, at least this measure, which is not being objected to by the banking authorities of Australia, should be acceptable to them, and they should use every means in their power to make it the law of the land. By reducing interest rates we shall give relief to this country without in any way debasing or degrading our financial institutions. A reduction of l½ per cent, in interest rates would give more relief to unemployment than has been given by the recent action of the Arbitration Court in cutting wages by 10 per cent. This measure, if given effect, will be for the benefit of nearly every section of the community. It will assist in the rehabilitation of Australia, because once money becomes cheaper, industry and trade will rapidly revive. The banking institutions have insisted upon increasing the rates of interest, and their action has certainly been to the detriment of industry generally. I have examined the bill, and I am satisfied with its provisions. It provides for the establishment of a board consisting of five experts, including representatives of commercial interests, of the primary producers, and of the government in power. A reduction of interest rates will undoubtedly bring about the early employment of thousands of our workers, and ultimately lead to the rehabilitation of this country.
Debate (on motion by Mr. Hughes) adjourned.
– by leave - I have been advised by the Chairman of Directors of the Commonwealth Bank Board that he is making the following statement tonight : -
The Board of Directors of the Commonwealth Bank of Australia has given consideration to the adoption of some measure of relief to the depositors in the Government Savings Bank of New South Wales who may be involved in serious embarrassment through the closing of that institution. In pursuance of this, the Directors have addressed a communication to the Premier of New South Wales advising him of the board’s willingness to provide some assistance through the Commonwealth Savings Bank of Australia to the depositors in the institution that has closed. The Directors have submitted a certain course of action which, they feel it would be necessary for the New South Wales Government to take, to enable such relief to be made available. Subject to the approval of the New South Wales Government to these proposals aud the passing by the State Parliament of the necessary legislation, the proposed relief would be made available, and an announcement of the nature of such relief will be made by the Board of the Commonwealth Bank of Australia at the earliest possible moment.
– I ask leave to make a statement.
– If the Leader of the Opposition (Mr. Latham) is permitted to make a statement, I wish to be given the same privilege.
– Statements can be made only by leave, and one objection is fatal. The Leader of the Opposition desires to make a statement. Is leave granted?
– I shall object, if I cannot make a statement on the same subject.
– I should say that there would be no objection to the honorable member making a statement.
– by leave- I think that all honorable members have heard with great satisfaction the statement of the Prime Minister.
It is important that we should safeguard the interests of the depositors and the credit of the country, and I am glad to hear that the Commonwealth Bank Board is finding a means to protect those essential interests.
. - by leave - Information has been conveyed to me that the responsibility for the happenings in connexion with the Government Savings Bank of New .South Wales must, in some measure, be borne by the Leader of the Opposition.
– Following upon the statement that ‘he made last night-
– I made no statement. I asked the Prime Minister to make a statement.
– Following upon the speech of the Leader of the Opposition last night, and the telegraphing of information to Sydney, arrangements were made by leading newspapers in conference to publish the information in such a way as not to create a panic in the minds of the depositors of the Government Savings Bank of New South Wales. Those newspapers agreed to take that course, but this morning the Sun, which apparently took a different view, published a fairly full account of the speech of the Leader of the Opposition, and within half an hour of the newspaper being sold in the streets a rush took place at the head office of the State Savings Bank and at the various branches in the suburbs.
– That statement is a mere invention.
– The Leader of the Opposition has already had an opportunity of speaking on this subject.
– I resent these insinuations.
– The statement of the honorable member for West Sydney must be heard without interruption.
– I ask that the interjection that my statement was mere invention be withdrawn. The Leader of the Opposition has no ground for his remark.
– I cannot regard the interjection of the Leader of the Opposition as unparliamentary.
– It is undeniable that a panic has arisen in Sydney to-day. The action of the Leader of the Opposition is an example of the extent to which the Nationalist party is prepared to go in order to damage the reputation of the Government of New South Wales. The people of that State will, in due course, know of the happenings which led to the present position. They will soon have an opportunity when the facts of this conspiracy are made known to express their opinion as to where the blame lies, and the result then will undoubtedly have the effect of solidifying the Labour movement to an extent which has never before been experienced in the history of New South Wales. The credit of this country and the interests of those who have deposits in the Government Savings Bank of New South Wales are to honorable members opposite a secondary consideration. They are concerned only with gaining political power and control, and with damaging the Labour movement, particularly in New South Wales.
.- by leave - I should not have risen to add to the statements of the Prime Minister (Mr. .Scullin) and the Leader of the Opposition (Mr. Latham), had it not been for the fact that the honorable member for West Sydney (Mr. Beasley) has attempted to show that, within the last few hours, something which has taken place in this House has brought about this unfortunate happening in connexion with the Government Savings Bank of New South Wales. That is not so. The trouble in Sydney has been brewing for weeks. It is now a considerable time since the commissioners of that bank, knowing the danger that was approaching, knowing the growing lack of confidence in the bank because of its association with the Government of New South Wales, found themselves compelled, long before the Leader of the Opposition spoke on this subject, to expend large sums of money in displaying huge advertisements in the newspapers of New South Wales, in an endeavour to restore the confidence that was gradually slipping away from that institution. That has been known throughout Australia. The commissioners have had to take action in the last few hours which they might wisely have taken at an earlier stage, before the position became so serious. I am pleased! indeed that the Prime Minister is able to inform us that, the Commonwealth Bank proposes to assist the State Government institution. I hope that the arrangements that will be made will assure the depositors that they will be saved from definite loss. I also trust that the action of the Commonwealth Bank in standing beside the New South Wales Government Savings Bank will restore confidence in the whole of our banking institutions, and prevent the spread of this trouble in any shape or form. I congratulate the Commonwealth Bank Board upon its action.
Debate resumed from page 1180.
– This bill deals with a matter of immense importance and, on the whole, has been discussed in a manner which reflects credit upon the House. It is true that there is divergence of opinion as to the best method of controlling interest, but there seems to be a general concensus of opinion that if it is possible to do anything to bring about the reduction of interest it should be done. There is confusion in the minds of certain honorable members as to exactly what the bill proposes to do. The honorable member for “Wakefield (Mr. Hawker) referred to advances made by bodies other than banks. . This bill proposes to deal only with bank interest. The bank rate is the foundation of all interest charges. Where the rate is substantially higher than the bank rate the extra amount is to cover the risk involved in the loan. In all human enterprises there must, of course, be a certain element of risk. But the interest charged by the banks is interest charged for the use of money lent upon the assumption that the principal will be repaid in due course. This is economic interest - payment for the use of capital. It is this economic interest that the Government proposes to regulate.
The Treasurer (Mr. Theodore) has said that there is no precedent for this bill. That, I think is true. I know of no enactment dealing with the rate of interest other than the bill recently introduced by Mr. Lang into the Legisla tive Assembly of New South Wales. This bill makes provision for fixing the rate of interest, and an amendment incorporating the operative clauses of that bill has been moved by the honorable member for Martin (Mr. Eldridge) to the motion for the second reading of this bill. We should not reject this measure merely because it is without precedent. What we must ask ourselves is whether the bill is likely to produce the effects which the Treasurer desires, and what would be the effect of any legislative regulation of interest charges. We are dealing with a structure delicate and complex, and we should realize how easy it would be, by hasty action, to work incalculable and irreparable harm. If interest is to be regulated it can only be done by men of experience and technical knowledge who are completely independent of all outside influences.
It is said that interest rates are too high. I believe that that is so. But can this legislature do anything effective to reduce them? If so, does the bill provide the machinery for doing it? When we examine the measure we see that, in substance, it is an attempt to give the Government of the day power to control the rate, of interest. Brushing aside all immaterial things, it is apparent that the Bank Interest Board which is to control the interest rate will, in turn, be controlled by the Government of the day. That is a very bad thing. The honorable member for Bendigo (Mr. Keane) said that if it was right to reduce wages it was right to reduce interest. I think the honorable member would be the first to admit that while it might be right to reduce both Wages and interest, it would be prudent to consider the effects of such reductions. He would be the first to say that while the reduction of wages down to a certain point was permissible and even necessary in the present circumstances, the effect of reducing them below that point might be disastrous to the country. And the same applies to interest rates. A reduction in interest may be desirable, may even be necessary; but how far is that reduction to go? Who is to determine the point to which wages shall be reduced and the level at which interest rates shall be fixed? Should this legislature or the Government do it? Those who suggest this course accept a most extraordinary doctrine. A careful consideration of the facts forces upon us the realization that upon the interest rates depend prices, conditions of industry, wages, and the amount of currency which is necessary at any particular moment.
– There is a tribunal to fix wages, but none to fix interest.
– The interest rate is one of the important factors in our economic life. When these rates are interfered with, the equilibrium of our whole economic structure is disturbed. The honorable member for Grey (Mr. Lacey) says that there is a tribunal to fix wages but none, to fix interest rates. The distinguishing quality of the tribunal appointed to deal with wages is that it is entirely independent of political control. It would not be suggested for a moment that the Trades Hall should fix the rates of wages.
– Why not?
– The banks fix the rate of interest.
– That the wage-fixing tribunal is entirely independent of political influence is its sole right to the respect of the community. It is said by one section of the community that the tribunal leans one way and by another that it leans in the opposite direction ; but whatever it does is of its own volition - it has nothing to hope for or to fear from the Government. The Government cannot remove it or influence it. It makes its decisions upon the evidence submitted to it. If we are to have a tribunal to deal with interest rates it must be as far and as completely removed from political control as the tribunal which regulates wages.
Some honorable members do not appreciate the important position that interest occupies in our present economic and monetary system. A central bank to determine the bank rate - that is, the minimum discount rate - is necessary for the maintenance of the gold standard. I admit that the gold standard has failed to do what its advocates maintained it would do; but a central bank is an integral part of the monetary system of the civilized world. And this is the only body that can effectively and safely regulate the rate of interest. Its out standing qualifications are that it is directed by men of wide experience, and that it is entirely free from political and all outside control. In this country the control of the bank interest rate should be one of the functions exercised by the Commonwealth Bank, for upon the bank interest rate rests all other interest rates.
I remind the honorable members of this House who were members of the 1910-13 Parliament that one of the claims made by those responsible for the creation of the Commonwealth Bank was that it would be entirely free from political control. Its success has been mainly if not entirely due to our adherence to this wise policy. We have had this evening new and convincing evidence of the great advantages of having the national bank entirely independent, not only of the Government, but of outside financial interests. And this raises another issue: The body that regulates interest ought not only to be free from political but all outside influences. It is quite obvious that to leave with or confer upOn private financial institutions the power to regulate interest is open to objections.
The honorable member for Wimmera said that banks fixed the rate of interest. I am not in favour of private institutions fixing interest rates; but any attempt to regulate these by political control must end in disaster. The honorable member for Bendigo (Mr. Keane) claims that by reducing interest by from 1 to 1-J per cent, industry would be stimulated. Probably it would. But what guarantee have we that the reduction would stop short at that point? The line of reasoning that appeals to many who support the honorable member is that if a reduction of li per cent, would stimulate industry, a reduction of 3i to 4-J per cent, would still further stimulate it. Where should it stop?
We cannot shut our eyes to facts. In the last analysis the policy and conduct of honorable members opposite are determined by outside organizations. If there were any semblance of political control in the regulation of interest, and their Government were in power, the outside junta would issue the instruction that interest must be so and so, and the Government would have to give effect to the edict. That would speedily lead to disaster. The honorable member for Bendigo and others have referred to the proposed board, and the Prime Minister stated that it would be a monstrous thing if the Government of- the country was not to have control of finance. Up to a certain point I agree entirely with the right honorable gentleman. In this Parliament, as the national legislature, must rest the unfettered control of the public purse. But when we talk about fixing rates of interest we must consider what that means. Prevailing rates of interest determine the amount pf capital available for investment. If they are unduly low the inducement is small and saving is not practised; if interest rates are adequate capital is forthcoming to stimulate industry. The greater the amount of the return to capital the greater the amount of capital that will be available. That is obvious. By regulating rates of interest the central banks determine the demand for capital, and, of course, the demand for goods. So that it may be said that a rate of interest neither too high nor too low encourages industry, stabilizes prices and promotes the general welfare.
All sections of the community should make equal sacrifices; the wageearner should not be singled out to lead the vanguard in our economic rehabilitation. While interest rates should come down, the decision as to the point to which they should be reduced is clearly outside our scope, or that of anybody else over whom we have control. For that reason I am entirely opposed to this measure. Whether the project is good or bad in itself is beside the question. In my opinion, the only way in which interest can be regulated is by a board under the control of the Commonwealth Bank, which is really a central bank, whose function it should be to determine from day. to day what shall be the bank rates. I have no doubt whatever that such a board, exercising its powers in that way, would satisfy the community that its welfare was safeguarded, and that the rate of interest was not higher than it ought to be. What motive could induce the Commonwealth Bank Board, which has nothing to gain by obliging the Government, to raise the rate of interest higher than it should be? It would not be good business for the bank to do that. The interests of such an institution are best served by raising or lowering interest rates as circumstances from time to time require. The price of money is, like the price of every other commodity, determined by the demand.
I express the hope that the amendments submitted by the Leader of the Opposition (Mr. Latham), which aim at appointing a board of only three men, independent of political influence, will be accepted by this House. Were the measure to pass in its present form it might work incalculable harm to the country. It is not possible to reduce rates of interest in the way suggested by some honorable members opposite. Some have spoken as though by a stroke of the pen or wave of the hand, these rates could be reduced until they became almost a figment of the imagination. That is not possible.
– We were told the same story about the regulation of wages.
– If wages are reduced below a certain point there is a detrimental reaction on every part of our economic life, and it is the same with interest. If you reduce it below a certain point, like Sampson of old you pull down the whole economic structure upon your head. While the reduction of interest will stimulate industry, an excessive reduction would merely shackle industry, because capital will not be made available without sufficient inducement in the form of interest. The bill differs from the measure introduced by Mr. Lang in the New South Wales Legislative Assembly only in that, instead cif effecting its purpose directly, it is to operate through a board over which, in the last analysis, the Government shall have control.
– When the honorable gentleman was in power he liked to have plenty of control.
– I remind honorable members opposite that they are not masters in. their own household. Their policy to-day will not necessarily be their policy to-morrow. There is at present a battle’ royal being waged for control of the Labour movement. Who will win, nobody knows. It is “ five to four on the field “.
– Mr. Speaker, is the right honorable gentleman afraid that the tables of the money lenders in the temple will be pulled down by some political Sampson ?
– Order! The honorable member is not in order in making that interjection.
– Political control by a government of Solons, independent of all outside influences, might conceivably enable the functions which this bill allots to the proposed board to be carried on.
– What about a bill to control the Arbitration Court judges?
– The Arbitration Court judges have not to accept the instructions of caucus from time to time, the result of decisions forced upon honorable members opposite by outside bodies. The existing economic system depends on an abundance of capital being available. Unless the amount is adequate, high wages cannot be paid to the worker, and industry will languish. Honorable members opposite, despite the vacillation of the past few months, during which they have discarded one policy after another, ask to be entrusted with the power that would practically decide the economic life or death of the nation. I do not feel inclined to grant it.
.- It strikes me as extraordinary that a financial expert such as the right honorable member for North Sydney (Mr. Hughes) should be expected to stand down for his leader, one who, comparatively speaking, knows nothing about the science. I look upon this bill as a most important one. In the olden days, when the right honorable gentleman from North Sydney was Prime Minister there existed in London a barometer, which measured the rate of interest. Now the London market is closed to us, and we have available to us a circumscribed market which. exploits our borrowing possibilities. To-day the Australian’ nation is suffering from a financial famine. It is difficult for it to obtain money. When three workers are unemployed and only one job is available, the employer offers whatever wages suit him and he can sweat him. So if £1,000 is available for loan in Australia, and there are three applicants for it, the money lender asks for an outrageous rate of interest. Figuratively speaking, he can roast or boil the applicants, or treat them as he wishes. In the circumstances it is necessary that a measure such as this should be introduced to remedy the situation. I would not care if there was no such thing as an arbitration system in force in Australia, provided that there was as much work available as our men desired to accept. When business was brisk it was impossible to get men to work for the basic wage; they had to be paid £1 or £2 a week more. The same principle obtains with regard to money. If there were millions of pounds available for loan to-day, and not too many persons trying to borrow it, there would be no need for a bill of this sort, but because there is a shortage’ of money, and every one wants to borrow, we have to pay up to 12 per cent, for it. Persons wishing to borrow money from a bank have to go to the manager cap in hand. Clients dare not spit on the floor, or call the manager Tom or Bill, but must prefer their requests humbly. I believe that the Commonwealth Bank could do much to keep down interest rates. If that institution fixed the rate of interest at 5 per cent., the other banks would not care to charge more.
– Then why not fix the rate in the bill?
– It is necessary to have some authority, such as the board provided for in the bill, to determine a proper rate of interest. Australia today is the victim of the financial institutions which are trying to squeeze the lifeblood out of industry, and I am surprised that the Government is receiving so little assistance in its attempt to control those institutions. Members of the Opposition are opposed to cheap money. Sir Henry Bradden has stated that there are £400,000,000 of deposits in the private banks, and if the interest rate were reduced by 2 per cent., the banks would receive £8,000,000 a year less on the money lent out. With £8,000,000 at stake, it is no wonder that Mr. Hardy is able to fly about the country in an aeroplane. I predict that shortly we shall see twelve of the Hardys flying out of the clouds with a Niemeyeran lying tongue in each cockpit.
– Will the honorable member kindly connect his remarks with the bill?
– With £8,000,000 at stake, it is no wonder that the financial institutions were able to induce certain persons to abandon their leadership of one party, so that they might unite all the other parties in opposition to the Government’s attempt to reduce interest rates. We have been told that we must not place the banks under political control. The trouble at the present time is that there is already too much political control of the Commonwealth Bank. What sort of Constitution is it that allows a government, which has been returned by an overwhelming majority, to be thwarted by a hostile opposition in the Senate, and to have its policy checkmated by appointees of the previous administration? If the honorable member for Warringah (Mr. Archdale Parkhill) were Chairman of the Commonwealth Bank ‘Board, he could not be a more uncompromising opponent of the Government than is the present occupant of that office. When the Fisher government created the Commonwealth Bank, some measure of political control was exercised over it through the appointment of Sir Denison Miller, but it was a beneficent control. He established the Commonwealth Bank throughout the country without cost to the taxpayer. He could have built Canberra in the same way, and before he retired from the managership the bank was earning a profit of £1,000,000 a year. Then our enemies obtained control, and the policy which was carried out during the regime of the Fisher government was reversed. It has been said by honorable members opposite that, in. order to end the present deadlock, the Government should resign. The Leader of the Opposition-
– Which one?
– Has the honorable member not heard that when grandfather Gibson came to Canberra he gave to his political children a toy which, when squeezed, roared like a lion; but which, when the mask was taken off, proved to be only a teddy hear. This teddy bear has now climbed to the top of the Nationalist tree, where it is sheltered from the cold winds by that tree’s unbrageous branches. We have been told that the only remedy for our troubles is a change of government; yet those who would replace the present administration are the very persons who were responsible for the difficulties in which we find ourselves. It was they who piled up the mountain of debt which is crushing the country, and they now seek to hinder the Government in its endeavours to remove that burden. The altitude of the mountain of misery is such that its peak is covered with snow, so to speak, all the year round. We all feel the blizzard of the south winds that blow from it, and we are threatened to be overwhelmed by the avalanche from it. Those who are responsible for building that mountain of misfortune are now like political troglodytes sheltering in caves at its base. From that safe position they sneer at the failure of the present Government in its impotence to diminish the* mountain’s dimensions. It is said that the hand that gives can also take away. All that we can expect from the clammy hands of those who built up the mountain of our troubles is that if power were again given them they would add to its height. Honorable members opposite say that if their party were in power it would be able to borrow money. That may be true, and that is probably why they desire to keep up interest rates. If rates are high when they come to borrow money, it will place millions of pounds in the pockets of their friends, and then, no doubt, every one of. them will have an aeroplane for himself. I do not believe the rumour that £40,000 was paid to the honorable member for Wilmot (Mr. Lyons) to induce five members of the Labour party to join the Opposition. The honorable member for Wilmot acted from patriotic motives. He is a man animated by the highest ideals, and that is why he has reached the top of the highest tree in the forest of nationalism - like any other teddy bear.
We should look at these matters from a business point of view. Suppose the honorable member for Angas (Mr. Gabb) were to take over a business, say a wine manufacturing concern, which had become bankrupt. What would he say if the bookkeeper insisted on carrying on according to the system under which the firm had been rendered insolvent? Yet that is virtually what the banks are trying to do in their relations with the present Government. This Administration was elected to carry out a specific policy for the benefit of Australia, but because our predecessors appointed to certain positions men who are opposed to our policy, we can do nothing. If this Government had a free hand, and appointed as chairman of the Commonwealth Bank the honorable member for Martin (Mr. Eldridge), I cannot visualize the party opposite, upon assuming power, suffering itself to be dictated to by him. Honorable members opposite are trying to frighten the people by saying that there should be no political control of banking, but they are quite prepared to allow a government to mortgage the country up to the hilt. What more damage could a government do if it controlled the banks? Honorable members are prepared, in effect, to give governments an axe with, which to cut down the tree, but will not let them have a hose to water it and make it grow. I know that it is of no use trying to convince honorable members opposite, because they have already entered into a compact to oppose the bill. They have recently been in consultation over the deputy leadership of their new party. Although the discussion took place in the party room, the Canberra Times and the Labor Daily seem to have been unable to find out anything of the turmoil that went on; as with the Labour caucus.
.- The encouragement given by honorable members opposite to the honorable member for Eden-Monaro (Mr. Cusack) indicates their lack of knowledge of economic affairs. I do not propose to comment on the voluminous amendment that appears on the notice-paper, which shows the trend of thought in the Labour organizations. The bill is designed to assist in carrying out the policy of the Labour party for the national control of banking, and it is also something in the nature of election propaganda. As the right honorable member for North Sydney (Mr. Hughes) has pointed out, a central reserve bank would be empowered to control exchange and interest charges, and there is no doubt that in the near future such an institution should be established in Australia; but the present time, when the country is in financial trouble, is not opportune for such a drastic change. I hope that when a central reserve bank is established, action will be taken in the direction of controlling interest charges; but I object to this bill, because it provides for political control of bank rates. Complaints have been made regarding the increase in those charges, and probably some blame is attachable to the banking corporations themselves, because they have been touting for deposits, and offering high rates of interest on money deposited for a couple of years. The banks, as a rule, do not lend money on mortgage. The men on the land endeavour to borrow on long terms, so that they may enjoy a degree of financial safety. They go to trustees and to insurance companies for money. If they obtained accommodation from the banks by way of overdrafts, their position would be too uncertain. This bill would not have the effect of reducing mortgage rates. It gives power only in relation to banking corporations.
Owing to the present shortage of capital in Australia, persons with money to invest are looking for gilt-edged securities, and we cannot blame them for that. Every effort should be made to encourage the introduction of capital to Australia. Our country is as large as the United States of America, but its population is only 6,500,000. Nature has richly endowed us, and if it were not for the shameless exactions extorted from the producers our present trouble would not have arisen. Everybody knows how easy it is to frighten capital out of the country, and yet the Treasurer and the Prime Minister himself have suggested that a situation may arise in which it will be necessary to prevent persons from sending their capital out of Australia and only permit export under licence. There has been talk in this chamber about the Arbitration Court fixing interest rates; but I claim that blundering interference by politicians in business affairs is the cause of much of our present trouble. The Government should not have the right to go to the Commonwealth Bank and seize the people’s money. It is the Government’s duty to come to Parliament for legislation to enable it to raise money by taxation, rather than demand more and more credit from the banks.
– Is not the honorable member a representative of the primary producers ?
– Yes ; but I try to represent the people of Australia as a whole, as well as the farmers. We should not allow huge imposts to be placed on the men on the land, who produce the real wealth of this country.
The latest report of the Commonwealth Bank Board points out that in June, 1929, the overdrafts and treasury-bills provided for the various Governments in Australia by the Commonwealth Bank amounted to £1,500,000. In December of that year the total had increased to £7,800,000; in June, 1930, to £18,200,000; in December, 1930, to £30,300,000; and at the 2nd April, 1931, to £51,495,000. I am not taking into account the £39,000,000 of debt which hangs like a pall over the people, and is owing in Great Britain on short-dated bills. I recently obtained a return showing the amounts due in respect of overdrafts and short-dated bills in Australia. The overdrafts amount to £2,879,357, and the treasury-bills to £16,670,000, a total of £19,549,357. It is because the banks have had to find these huge sums to finance the Government that the farmers cannot get the assistance they need in their dire distress. .Should we permit the Government to nationalize banking, and enable the honorable member for West Sydney (Mr. Beasley) and his followers to grab the people’s money? If we did, the Commonwealth Bank would soon be in the same position as the Government Savings Bank of New South Wales. When the Commonwealth Bank Act was amended in 1924, I did not imagine that I should be responsible for the restriction which the present Government has experienced in the last twelve months. Under the act of 1913, it was provided that the Treasurer could supersede the Notes Issue Board; but this power was being allowed to remain in the act, and on the second reading of the amending bill in 1924, I pointed out the grave danger of this provision, and said that the time might arrive when the Treasurer, short of funds, would supersede the board and issue notes at its own sweet will. I gave notice of an amendment for the repeal of the section to which I have referred, and my amendment was approved by the Government, with the result that it is now impossible for the Treasurer to take control of the issue of notes. But for that amendment the Treasurer would not have been worrying much of late about the Central Reserve Bank Bill and the other financial measures introduced by the Government; he would simply have set the printing press to work.
I do not like this bill. I do not believe that it would have the good effect anticipated by supporters of the Government. If they persist in passing the second reading, the measure should be considerably amended; otherwise it would be hopeless to ask the other branch of the legislature to give the Government power to fix bank rates irrespective of the recommendation of the proposed board.
I give notice of a further amendment to provide that the .act shall remain in force not longer than three years, to be reviewed in the light of experience at the expiration of that period. If it were found to have operated in the interests of the people it could be reenacted. I hope that all the amendments suggested by the Leader of the Opposition (Mr. Latham) will be accepted and that my proposal to limit the operation of the measure will have sympathetic consideration.
.- I am glad that the Government has introduced this bill. It is not all that I could wish, and I would be glad if the amendment, moved by the honorable member for Martin (Mr. Eldridge) could be accepted. Perhaps, however, Constitution limitations will prevent us from doing all that we would like to do. This is “ a bill for an act relating to rates of interest and discount and for other purposes,” and applies only to banks and bankers. I would prefer that it went as far as the Moratorium Act of New South Wales, for I know that thousands of persons in Victoria are being forced into insolvency, whereas if they were in New South Wales they could secure a stay of proceedings. ^Quorum formed.’] Section 4 of the Moratorium Act of New South Wales provides -
A mortgagee shall not, without leave of the court -
The act includes many other fine sections. The amendment movedby the honorable member for Martin (Mr. Eldridge) would put this bill on a par with the Moratorium Act, and it would be wise further to improve it by adopting the amendment. Apparently the bill makes no provision to control the time payment system. Any honorable member who has had experience of that system knows the bitter suffering that it causes to humble families who are trying to acquire comfortable furniture for their home. Sometimes after they have paid off 80 per cent or 90 per cent, of the liability their furniture is sold off for a mere song, because their instalments have fallen into arrears.From the commencement of history moneylenders have been a curse to humanity. The first banks in Europe were established in Genoa, but in China notes similar to the banknotes of to-day were issued 4,000 years ago. I remember reading this inscription on the back of one of those old Chinese notes, “ Spend wisely, go not into debt, and be economical in your purchasing.” From the inception of banking, efforts have been made to clear moneylending of the evils associated with it. That was done in ancient Rome, and we shall not be discharging our duty to humanity until we penalize moneylending as a crime. In my many years of life I have often thought that it would be well if all debts were made debts of honour. The Jewish statute of limitations provided that after a debt had been current for one year the lender could not claim from the borrower. British law has gone some way towards adopting the Jewish law by making the limitation of debt six years. No language would be stronger than that which the Bible employs in reference to lawyers and money-lenders. Sometimes when I have been in courts I have been ashamed of the lawyers, because of the manner in which they defend the moneylenders, and seek to extract every penny from the unfortunate borrower. Some say that hell includes a special compartment for lawyers. Whilst I do not like their profession, there are many legal men whom I love very dearly, and they always chaff me when I start talking about the iniquities of their calling.
From my personal experience I have nothing but praise for the private banks. By absorbing some of their smaller competitors and buying up their assets, they strengthened themselves to cope with the difficulties which have developed throughout the world through the cursed system of the gold standard. I must exempt from this commendation the English, Scottish and Australian Bank, and I thank the honorable member for Corangamite (Mr. Crouch) for his trenchant exposure of its action in repudiating its liabilities to those who had entrusted their deposits to it. I have a keen recollection of homes being lost through that action. The most complete statement on this subject, of which I have knowledge, is contained in a speech delivered by the Honorable J. Ryan, M.L.C., of New South Wales, on the 10th February, 1927. I refer honorable members to it if they are desirous of ascertaining the facts in detail. The crash which followed the land boom commenced with the closing of the doors of the building societies and land companies. The decline of deposits in the ‘nineties weakened and undermined the financial institutions, including the banks. As a result of the withdrawals in 1893, thirteen of the 25 banks of issue suspended payment and failed. Thousands of families were ruined, and the careers of young men were destroyed. Many whom I had known as playmates lost the homes for which they had almost paid and had to start life again as labourers. The late Sir George Dibbs utilized the credit of the State of New South Wales to guarantee the Bank of New South Wales and other institutions. He induced. Parliament to pass, in 1893, the Bank Issue Act, which empowered the
Governor-in-Council to declare ‘banknotes legal tender for twelve months. That was followed a little later by the Current Account Depositors Act, which authorized the Treasury to advance treasury notes to the amount of one half of the current accounts locked up. The Bank Notes Act, of 1893, regulated the issue of banknotes and also made them legal tender at the chief offices of the banks. That provision was similar to the false statement printed on Commonwealth notes, that they may be exchanged for gold at the head office of the Commonwealth Bank of Australia. Any honorable member who attempts to get gold for notes will be disappointed. The Reconstructed Companies Act, of 1893, provided for the transfer of all assets of an old company which had been reformed to a new company.
I hope that the Government Savings Bank of New South “Wales, which is in difficulties to-day, will be taken over by the Commonwealth Bank. Labour members who voted for the original Commonwealth Bank Bill, after having forced Mr. Fisher, against his will, to introduce it, desired that there should be only one savings bank operating throughout Australia. Queensland and Tasmania were wise enough to follow that lead. Let us hope that the Government Savings Bank of the mother State will be taken over by the Commonwealth Bank. All those acts were passed for the benefit, not of the banks, but of the public. The banks which suspended payment held £90,000,000 in funds and their liabilities to shareholders amounted to £13,000,000, making a total liability of £103,000,000. Some of the banks when reconstructed absorbed others. One bank, the Australian Bank of Commerce, stood out as a splendid example, because it made every effort to mete out justice to its stockholders. The English, Scottish and Australian Bank had in 1893 £4,000,000 of deposits, but how did that institution treat the people who trusted it? It repaid over a series of years £1,000,000 at 4£ per cent. It then met another £1,000,000 by the issue of 4 per cent, debentures, and the remaining £2,000,000 was converted into 4J per cent, inscribed stock. Neither of the last two amounts were repayable until the bank liquidated its assets. Prom 1893 to 1896 there was a great fall in interest rates on deposits. In 1896, the English, Scottish and Australian Bank, not content with the laws of Australia, in which country it was making its money, persuaded the British Parliament to pass a special act which reduced the interest rate on the inscribed stock from 4£ per cent, to 3 per cent. On the 30th June, 1896, the amount of the 4 per cent, debentures unredeemed was £983,500, and of the 3 per cent, preferred deposit stock £889,490; or a total sum unredeemed of £1,872,500, at an average rate of 3£ per cent, in respect of a debt of £2,000,000. The balance-sheet of that bank showed on the 30th June, 1896, that its net profits were £542,000. It paid a dividend of 12 $ per cent, but it did not pay the people who had trusted it, and they have not been paid even to the present day. Yet I dare say there are among the directors of that bank men who are bitterly criticizing some members of the Labour party. The Queensland National Bank took advan.tage of its depositors by refusing to pay interest on 25- per cent, of its debt. That was a blot on the escutcheon of Queensland, to its unutterable shame. In 1897, the Queensland Government passed an amending act which protected itself, but not the unfortunate public. What did the Australian Mutual Provident Society, which is the largest society in Australia and I think the second largestin the British Empire, say of the action of the English, Scottish and Australian Bank? On the 6th March, 1924, the following letter signed by Mr. H. W. Apperly, the general manager of that society, was sent to Mr. B. J. Parkinson, who represented the committee of stockholders : -
Your letters of the 27th ultimo and 3rd inst. were placed before my directors at their meeting yesterday, and I have now to say that they expressed strongly the opinion that under the existing altered conditions the bank is not morally justified in adhering to the terms arranged with its creditors at and after the bank crisis of 1893. As you very rightly point out the creditors in 1896 consented to still easier terms in order to give the bank a chance to pull through. Now that interest rates are so much higher and the bank has attained a strong position my directors do not consider it just that it should continue to take advantage of terms which the creditors were practically forced to agree to under the stress of circumstances which existed at the time.
The grand secretary of the Grand United Order of Oddfellows wrote -
My committee of management of Victoria who are large customers of the abovementioned institution . . . have long deplored the action of the bank in not readjusting the rate of interest upon the securities … I have been authorized by the Friendly Societies Association, which represents 105,000 members of the various orders, to act on their behalf and to protest against what is considered to be a great injustice to these self-supporting and thrifty organizations.
At that time the quotation for English, Scottish and Australian preferred stock of £1 in value was only 9s. 9d. buyers, with no sellers. The following letter was written by the managing director of the National Trustee Limited i -
This company as trustee in various estates desires to inform you that it fully concurs in the view that the bank is not giving equitable Or reasonable treatment to its old creditors in regard to interest on debenture stock. Surely if a reduced standard of interest was operative in 1890, and the bank took advantage of that fact, it is to our minds unfair and unjust as well as inconsistent for it to maintain the low standard of interest now that a much higher one operates.
The Bishop of Newcastle wrote -
You may add my name to the list of those who think that the English, Scottish and Australian Bank should -show more consideration to the depositors whose money saved the bank so many years ago.
The trustees of the Australian Natives Association, now one of the largest friendly societies in Australia, wrote -
It is an English sporting maxim that debts of honour must be paid whatever becomes of debts of trade. The debt of the bank to its old depositors in so far as interest over 3 per cent, is concerned is simply one of honour and we appreciate your efforts to induce the powers that be of the bank to awaken to a due sense of honour that may lead to at least some improvement in the treatment of those through whose locked up deposits the bank has primarily attained to its present prosperous condition.
An actuarial expert estimated that the bank had made 2 per cent, on the £3,000,000 that it had withheld from its shareholders. Sir Josiah Symon, K.C., one of the legal lights of Australia, said -
I thoroughly agree with you that it is the duty of the directors in the present overflowing prosperity of the bank, paying its shareholders’ 12i per cent., to raise and give to the debenture and stockholders a more just participation in the profits which are largely due to the small rate, of interest, which for the last five and twenty years has been paid upon the depositors’ money represented by the debentures, &c. In fact, as you point out, for all these years the bank and the shareholders have had the benefit of all this depositors’ capital without fairly paying for it, and it must be remembered also that the contribution of the deposit in this way was compulsory upon the depositor. Their money, in fact, was taken from them for the use of the shareholders at what may have been then, hut is not now and has not been for years, a fair reward.
The following statement was made by Mrs. Hale, one of the unfortunate depositors, who had to sell depreciated stock : -
I sold my stock to the bank last September, taking only £73 Ga., though the bank admitted owing me £113.
Those statements show that repudiation on the part of the banks is nothing new. When it comes to a time of crisis the bankers will assist their friends, but not those who trusted them by depositing their savings with them. According to Commercial Crises of the Nineteenth Century, written by H. M. Hyndman, Mr. Lidderdale, chairman of the Bank of England, who received the thanks of the Government, and was presented with the freedom of the City of London, fell with the financial crash of 1890. Lord Revelstoke was at that time head of the great Baring firm, which, because of its financial difficulties, was turned into a limited company. When the crisis took place a guarantee fund was formed and £21,000,000 was collected from various banks and firms; gold to the amount of £3,000,000 was borrowed by the Bank of England through the Rothschilds from the Bank of France, and more was obtained from Russia. The Bank of France on no less than two occasions has assisted the Bank of England in its time of need. For 21 years following the Napoleonic wars, the Bank of England did not pay gold. Even the Royal Bank of Russia helped it in its hour of need. The following extract is taken from Commercial Crises of the Nineteenth Century: -
That the whole crisis will be a permanent record of the imbecility of English investors there can already be no doubt whatever . . Not a single bondholder or shareholder was represented on this great committee, of which Lord Rothschild was the chairman, and the whole affair was arranged to the ruin of investors so as to suit the pockets of those who sat with him round the table.
I pay a great compliment to King O’Malley, the father of the Commonwealth Bank, and those who helped him to establish it. There was a hot time in caucus when we compelled Mr. Fisher to introduce the Commonwealth Bank Bill. That bank now stands on a sounder foundation than that of the Bank of England, because it is backed by the whole of the assets of this country. Those who sneered at the Commonwealth Bank, and spoke of “Fisher’s flimsies,” lived to thank God that such an institution existed, particularly during the war when our loans were floated under the able supervision of the late Sir Denison Miller, at the low rate of 5s. for every £100 raised.
I shall make one more quotation which. is pertinent to the subject-matter of this bill. When the banks agree upon a certain course, action invariably follows. In America, silver coinage was minted to a considerable extent until Grover Cleveland was elected President. Shortly afterwards, because of the influence exerted by certain financiers, who wanted to abolish silver coinage, according to Hattersley^ Age of Plenty,, a confidential circular was sent to all the national bankers of the nation. It contained the following sentence: -
You will at once retire one-third your circulation and call in one-half your loans.
The banker is supposed to be respectable in comparison with the ordinary money lender; but the money lender must obtain legal sanction for the transaction of his business, while the bank manager may sit at his table and act at a moment’s notice. The circular from which I have already quoted also stated -
Be careful to make a money stringency felt among your patrons, especially among influential business men. Advocate an extra session of Congress for the repeal ‘of the purchase clause in the Sherman law, and act with the other banks in your city in securing a large petition to Congress for its unconditional repeal as per accompanying form. Use personal influence with Congress men and particularly let your wishes be known to senators.
The conspiracy - one of the cruellest and most scandalous in the history of the republic - was successful.
The object of this bill is to reduce interest rates. Every business man in Australia would welcome the achievement of this object. The business methods adopted by the bankers of the United States of America are the methods of the bankers in Australia to-day. The ordinary procedure is for the bank manager to invite his customer to attend an interview. The customer is then asked to reduce his overdraft. This actually happened to me recently. I was asked to reduce my overdraft by £500, and my bankers released certain of the securities which I had lodged for the purpose of obtaining’ a loan of £500. I was able, after a good deal of trouble, to reduce the overdraft, and hope shortly to be able to reduce it still further. But how can business men hope to develop their business unless they can obtain credit on their securities? The Moratorium Act of New South Wales gives the people of that State a breathing space.
In conclusion I revert to the advantages of developing our silver coinage. To-day I asked the Treasurer -
Is it a fact that with silver at ls. per oz. £1,000,000 worth of silver would give a total of £5,500,000 in silver currency, and at a charge of minting at 3 per cent, the net amount of silver would be £5,335,000?
He replied - £1,000,000 of silver purchased at ls. an oz. would yield £5,500,000 in Australian silver currency. The charge for minting in Australia is approximately 5.75 per cent., but this would not affect the amount of silver coined, which would be £5,500,000.
I then asked the honorable gentleman -
Is it a fact that the British Government introduced and passed a Coinage Act in 1920?
Is it a fact that this act reduced the pure silver content of silver coinage from 925 parts silver in 1,000 parts to 500 parts pure silver in 1,000 parts?
He replied in the affirmative to both questions. I next asked -
If so, in view of the Australian mintage of 925 parts pure silver, in 1,000 parts, giving from £1,000,000 worth of silver at ls. per ounce a gross total of £5,500,000, what would be the gross total in England by minting £1,000,000 worth of silver containing 500 parts of pure silver to 1,000 parts of silver coinage?
I received the following reply: - “ £10,175,000.” In view of all these circumstances it must appeal to honorable members that the British Government could afford relief more quickly to the people of that country by means of minting silver coins than by any other means. This is also true of the Australian Government. I know that the Premiers of all the States would be glad to borrow such money at 2 per cent, interest, and if they were able to do so, and spent the money on reproductive works, the country would be infinitely better off than it is to-day.
I hold in my hand two silver coins. One of them was minted in England and contains 500 parts pure silver in 1,000 parts. The other coin was minted in South Africa and contains 925 parts pure silver in 1,000 parts. The English coin contains as little pure silver as any coin minted in England since the days of Edward the Confessor, with the single exception of certain coins minted in the 34th year of the reign of Henry VIII., of anything but sacred memory. In the 37th year of Henry’s reign silver coins were minted which contained only onethird pure silver - the lowest proportion in the history of England. This was not the fault of the people of Great Britain, for silver was then 7s. 5½d. per ounce, and it was actually paying people to melt the coinage and sell the silver.
I welcome this bill in the hope that it will prove to be only the thin end of a wedge. Money-lending in all its forms should bc subject to rigorous control, and banking institutions should not be permitted to drain away the monetary lifeblood of the people.
.- Judging from the speeches of honorable members opposite one would imagine that this bill had something to do with the restriction of profiteering. Whenever honorable members opposite refer to rates of interest they make an attack upon profiteering. Actually the bill deals with the rates of interest which banks are to charge, and it has no resemblance to anti-profiteering legislation. In no way does it refer to the excessive rates of interest that are charged by pawnbrokers and money lenders, which in some cases reach 40 per cent.
– Does the honorable member want to reduoe rates of interest?
– I ask the honorable member to keep quiet. His continual and senseless interjections remind me of a type of individual in the United States of America known as a “hoojah” who opens his mouth on every conceivable occasion to pour out utterances for which nobody has any use ; a person whose selfcomplacency is phenomenal. I hope that I shall hear no further interjections from the honorable member while I am on my feet.
It is the policy of honorable membersopposite to attack any big institution, because the bigger the thing that you attack, the more spectacular are your utterances. Usually, too, a big concern has no friends. Unfortunately, the attempts of honorable members opposite are not aimed at reconstruction, or even renovation. They wish to inaugurate a completely new system, opposed to the experience of the ages. Our banking system has not sprung up overnight; it is the result of centuries of evolution. Honorable members opposite, men without qualifications in dealing with financial problems, set themselves to refute the traditions and experience of the centuries. I have heard them persistently attack gentlemen of the calibre of Sir Robert Gibson. One would think that such gentlemen belonged to a class of human beings entirely different from our own.
– Hear, hear !
– I shall give the honorable member who interjected the life history of one of Australia’s most prominent bankers, Mr. A. C. Davidson.. He was one of the bigger boys at the school that I attended. I was then ten and he thirteen years of age. His origin was similar to that of the majority of honorable members. Always a diligent student, his example was held up to us by the head-master as one that we should follow. He passed his scholarship examination, and later entered the Bank of New South Wales. Long after he left school Davidson’s application to study was cited to us as worthy of emulation. Steadily, by sheer grit and ability, he forced his way through the ranks, until now he is general manager for Australia of the Bank, of New South. “Wales. His life is typical of that of many of our great masters of commerce. Because he was not content to remain in the rut, or to live by the wagging, of his tongue, as do many others, he is hounded down by certain honorable members opposite as if. he were a creature to be abhorred.
Anybody would think that it was a crime to be a creditor; that such people should be pilloried. Things would be much happier in Australia if we could find a few new creditors now. A banker is a creditor, a merchant in money. His position is similar to that of any storekeeper. He must make a profit from his banking transactions, and the amount that he makes depends upon his ability. No money lender runs after a person to persuade him to borrow. Occasionally a man may decide to borrow, in an effort to expand his business.
– I rise to a point of order. Are the honorable member’s remarks relevant to the bill?
– The honorable member’s remarks are quite relevant.
– Such a man goes to the bank and borrows. He is not forced to do so. His intention is not to make a present to the bank of 6 per cent, or 7 per cent, in the form of interest, but to earn 10 per cent, if he can do so on the additional money that he handles, and so show a profit. In that way progress is made by individuals and nations. Honorable members opposite would have us believe that by lending money a banker is adversely affecting the interests of the people. They would have him lend money without charging interest. I should like to know the man who is prepared to lend money and not expect any return for the service.
Things have changed since Australia, contracted its debts. At that time a state of semi-prosperity existed, and the money was needed to expand our activities. Now prices and profits have fallen, but the rates of interest remain fixed, and have become a severe burden on the nation. While those rates are heavy, they are not in any way exorbitant, as many people would have us believe. If one could get out of paying interest it would certainly be a considerable relief, and, in many cases, would make all the difference between profit and loss ; but speaking from experience gained by my perusal of many people’s books, I can assure honorable members that the amount of other expenses is so huge in almost every form of trading, that people are suffering losses on trading apart from interest payments. Yet instead of attacking the general list of expenses, the Government’s attack is upon interest rates only, and as interest is generally owing to some big concern like a bank, it is a favorable practice of attack because a big concern has no friends. Everything is” pressing on the people to-day; not only interest rates, but also lack of income and, in some cases, lack of employment. On every hand there is a feeling of hopelessness. The honorable member for Warringah (Mr. Parkhill) spoke against whining and instanced the attitude of the people in the Mother Country. It is 37 years since Australia last experienced a slump of any serious proportions.. We got out of the trouble which then came to us. Many people who at the time were down and out subsequently became wealthy. In other countries we do not find intervals of nearly 40 years between serious slumps. Although the United States of America is the wealthiest country in the world, it has a financial crash every eight or ten years. We have a lot to be thankful for in Australia, seeing that it is such a long time since our last serious slump, and the way in which we recovered from that reverse indicates that there must be something in this country which enables it to recuperate quickly and solidly, and to have the next evil day postponed for a longer period than is possible in most other countries.
The Government proposes to apply to interest rates the principle of price fixing adopted in other measures. But that principle will fail in the case of interest as it has failed in other directions. The Government has no chance of getting this legislation accepted by another place, and it makes me wonder why this innovation - because such legislation has not been attempted in any other part of the world - has been submitted for our approval.
I am forced to the conclusion that the purpose of the Government is to attack the banks, because that is popular and will make good election propaganda. I should like to know if the Treasurer in framing this bill consulted experts available in Australia, or followed the advice of authorities whose writings were to he obtained in the library; or whether we are simply to take his assurance that this legislation is sound. “We are a deliberative assembly, supposed to be capable of commenting upon and effecting improvements in any legislation submitted to us, hut the practice of this Government has been to bring in a bill and say, “ That is the last word in excellence.” Ministers have said it in regard to this bill. If their belief in the soundness of this measure is genuine, surely they will demonstrate it by trying to meet the wishes of honorable members who know something on the subject, and by accepting any sensible amendment that will have the effect of improving the hill.
An obnoxious feature of the measure is that it is an attempt by the Government to secure political control over the financial systems of the Commonwealth. Tho bill rests entirely upon the appointment of a hoard whose recommendations must he subject to the approval of Cabinet. During the regime of the Bruce-Page Government the then Opposition criticized its fondness for appointing hoards and commissions; hut in the last six months the present Government has appointed about a dozen boards. I could name four or five of them. If boards were had- in the days of the late Government, they must be equally bad to-day. But the fact of the matter is that they are not all had, and at times it is preferable to have commissions of experts to control by inexperienced politicians.
This hill provides that no matter what the hoard to be appointed may recommend the Government is not obliged to carry out its recommendation. The GovernorGeneral may declare the rate of interest apart from the recommendations of the board. So there is really no need for a board at all to effect the Government’s purpose. Furthermore, although the board is to consist of five members, the bill mentions only three of them, the other two appointments may (possibly be held out as a bait to induce people to vote for this measure. We are told that ono may he a representative of the primary producers. It may he the idea of the Government that the representatives of primary producers in this chamber may say “let us have this bill because it will give one of our supporters a chance of getting on this’ board.” That is a bait which no one on this Bide of the chamber will swallow. We are not told who the fifth member of the board would be. I think that the three mentioned in the bill should he quite sufficient for the purposes of the bill. The right honorable member for North Sydney (Mr. Hughes) correctly said that the rate of interest, if it is to be fixed at all, should be fixed by those who are in ‘ control of the central ‘ reserve bank. We have no such hank, but the three members of the hoard suggested in this bill should be in a position satisfactorily to perform this function of a central reserve bank. Certainly no government should attempt to do it. There is, therefore, no need for clause 10, which provides that the Government shall have control of the matter. If the Government is to have that control all that we need is a short bill giving it power to do this, that, or the other thing. ‘ It is certain that no government would live if it adopted the recommendation of a board that interest rates should be increased. The Government would be very chary of doing so, because it would be blamed throughout the country for raising interest rates. It would become a political catch-cry that this or that government had raised or lowered interest as the case may be.
This hill, as it stands, would not do what it is proposed to do. It would not touch the profiteering money lender, and would affect only the banks. The amount of interest paid by small farmers and small traders is not great, and does not constitute a large proportion of their expenses. It is- safe to say that the great burden of interest payments in general is borne by large corporations. A man owing £1,000 is committed to pay only £70 a year in interest, and any reduction of interest which might be effected as a result of this proposal would’ not save him very much. Yet this bill is being spoken of by members of the Government in such a way as to induce the farmers to believe that if it is passed they will be relieved of a big part of their liabilities. Every one is of opinion that interest should be reduced, but there is a right way and a wrong way of doing it. I have outlined the method by which I think the bill ought to be improved. The board should be gives power to fix the rate of interest, not merely to make recommendations. It has been said that the Government should control the banks, and not have the banks control the Government. It is true that no banks ought ever to control the Government; nor should any government be able to use its power over the banks to serve its own party interests. If the bill were amended along the lines which the Leader of the Opposition has proposed, it might do some good. As it stands it is useless, and might do much harm.We cannot force people to lend- their money, or to deposit it with the banks. Capital can be attracted, however, and the attraction is the rate of interest offered. It La not the fault of the banks that interest rates are high. The banks would do better if rates were low, because then there would be a greater demand for money, and their profits would be greater. Interest rates arc high because governments have made such heavy demands on surplus funds that private borrowers have been unable to obtain money except by paying high rates of interest. The banks, in order to attract deposits, have had to raise the interest rate, and must then charge more for money lent. I intend to support the amendments of the Leader of the Opposition, and if the Government is genuine in its desire to make the bill workable it will accept those amendments.
Question - That the words proposed to be omitted (Mr. Eldridge’s amendment) stand part of the question - put. The House divided. (Mr. Speaker - Hon. Norman Makin.)
Majority . . 49
Question so resolved in the negative.
Original question resolved in the affirmative.
Bill read a second time and committed pro forma.
House adjourned at 11 p.m.
Cite as: Australia, House of Representatives, Debates, 22 April 1931, viewed 6 July 2017, <http://historichansard.net/hofreps/1931/19310422_reps_12_128/>.