13th Parliament · 1st Session
Mr. Speaker (Hon.G. H. Mackay) took the chair at 2.30 p.m., and read prayers.
Assent to the following bills reported : -
Loan (UnemploymentRelief Works) Bill. Financial Agreements Enforcement Bill (No. 4).
– In view of the general opinion expressed in various newspapers that the recent attack on Alderman J. S. Garden, of Sydney, was a gigantic political frame-up, and having regard to the fishy nature of the evidence given in the prosecution that followed, will the Prime Minister ask the Commonwealth Investigation Branch to expedite its inquiries into this matter so thatthe honorable gentleman may be able to make a statement to the House on Tuesday next?
– I have been notified of the intention of the honorable member forWestSydney (Mr. Beasley) to move the adjournment of the House to-day to discuss a matter that may be related to the subject of this question. When speaking to that motion, I shall have an opportunity to indicate the attitude of the Commonwealth Government.
– Has the Prime Minister read the newspaper reports that the Premier of New South
Wales (Mr. Lang) stated in the Legislative Assembly on Wednesday that the Board of the Bank of England consisted mainly .of foreigners and that the Governor of the Bank was an American? la that statement accurate?
– The honorable member was good enough to inform me that he proposed to ask this question, and, therefore, I am in a position to supply to the House information which flatly contradicts Mr. Lang’s statement. In order to prevent public opinion from being misled it is advisable to state the full personnel of the board controlling the Bank of England. It is: Governor, The Bight Honorable Montague Norman : Deputy Governor, Sir Ernest Harvey ; Directors - Sir Charles Stewart Addis, Sir Alan Garrett Anderson, Sir Basil Phillott Blackett, George Macaulay Booth, Lord Cullen of Ashbourne, Sir Andrew Bae Duncan, Albert Charles Gladstone, Kenneth Goschen, Edward Charles Grenfell, Charles Jocelyn Hambro, Colonel Lionel Henry Hanbury, Lord Hyndley of Meads, Sir Robert Molesworth Kindersley, The Honorable Roland Dudley Kitson, Cecil Lubbock, Robert Lydston Newman, Edward Robert Peacock, The Honorable Alexander Shaw, Sir Josiah Charles Stamp, Frank Cyril Tiarks, Henry Alexander Trotter, Walter Kennedy Whigham, and Arthur Whitworth. AH these gentlemen arc British citizens.
– Is the Mr. Owen Dixon, K.C., who was responsible for drafting in 1928 the bill for the referendum’ to include the Financial Agreement in the Constitution identical with Mr. Justice Owen Dixon of the High Court?
– The suggestion contained in the question is in keeping with a statement made yesterday in the Legislative Assembly of New South Wales by Mr. Lang, in the course of one of the most disgraceful attacks on the judiciary ever made by any Australian politician. As usual, Mr. Lang’s statements were totally untrue. Mr. Owen Dixon did hot draft any referendum proposals for the Commonwealth Government, and I emphatically deny the innuendo con,tained in the question of the honorable member for Hunter (Mr. James).
– I ask the PostmasterGeneral whether the Labor Daily is registered as a newspaper. If it is will the Government consider the advisability of placing it in the same category as the Red Leader, and similar publications which are refused transmission through the post? As the Labor Daily advocates violence and rebellion against the laws of the Commonwealth, will the PostmasterGeneral inquire whether this filthy rag is a newspaper within the terms of the Post and Telegraph Act or merely a revolutionary propaganda sheet?
– The honorable member’s suggestion will be considered.
– In view of the fact that the copy of the Labor Daily filed in the Library of this Parliament is so much in demand that all honorable members cannot read it, will you, Mr. Speaker, be good enough to order that a second copy of that journal be filed?
– As Chairman of the Library Committee I shall have the honorable member’s suggestion inquired into.
– Owing to the publication in the Labor Daily of scurrilous and disloyal statements which are offensive to honorable members, will you, Mr. Speaker, seriously consider the removal of that paper from the Library?
Mi-. SPEAKER. - The honorable member’s suggestion will be placed before the Library Committee.
– In view of the attacks upon the King’s representative in New South Wales, Sir Philip Game, by the Sydney Morning Herald, the Daily Telegraph, the Bulletin and the Sydney Sun. will you, Mr. Speaker, consult the Library Committee regarding the removal of these scurrilous rags from the Library ?
Question not answered.
– To assist the Salvation Army and other benevolent institutions and organizations which in Melbourne provide cheap meals and beds, thus enabling the unemployed to live on the dole, but which lose money thereby,- will the Assistant Treasurer consider the exemption of the purchases of such organizations from the Sales Tax?
– The honorable member’s suggestion will receive consideration.
– In view of the disastrous effect upon New South Wales of the Lang gang policy of default, will the Prime Minister express ah opinion regarding the possibility of that policy, if persisted in, causing the bankruptcy of Queensland and other States unless it is countered by the Commonwealth Government?
– I have said on numerous occasions, and I repeat now, that if the Lang policy is persisted in the credit of Australian Governments must absolutely collapse. If the Commonwealth is to continue to pay the debts that the New South Wales Government will not pay, it must utilize, for that purpose, funds that should go to other States, including Queensland and Tasmania. The continuance of that policy must involve Australia in financial disaster. My Government will do everything in its power to avert such a catastrophe.
– Has the attention of the Prime Minister been drawn to speeches recently made by the honorable member for West Sydney (Mr. Beasley) and East Sydney (Mr. Ward), in which they openly advocated and urged that the people of New South Wales should defy the laws of the Commonwealth? If the honorable gentleman has not read those speeches, will he investigate them and consider the possibility of proceeding against those .two honorable members under the Crimes Act ?
– I have been too busy in Canberra doing the job I was elected to do to follow all the statements by irresponsible persons on the platform of New South Wales, but as my attention has been drawn to speeches made by the two honorable members mentioned, I shall have them investigated.
Formal Motion for Adjournment. Mr. SPEAKER (Hon. Gr. H. Mackay). - I have received an intimation from the honorable member for West Sydney (Mr. Beasley) that he proposes to move the adjournment of the House for the purpose of discussing a definite matter of urgent public importance, namely, “ the Defence Department’s association with the New Guard “. Is the motion supported?
Five honorable members having rismin their places,
– The honorable member for Richmond (Mr. R. Green) must not debate his point of order. The honorable member for the Northern Territory is not entitled to vote in this House. He is entitled only to take part in debates. I noticed particularly the number of honorable members who rose in their places to signify the support of the honorable member for West Sydney’s motion, and a sufficient number rose apart from the honorable member for the Northern Territory and the honorable member for West Sydney to entitle the honorable member to proceed.
– I noticed that the honorable member for West Sydney rose. Was he counted among the five?
– I have already stated that five honorable members, independent of the honorable member for the Northern Territory and the mover of the motion, rose in their places.
– I also rise to a point of order. I should not like the ruling which has just been given from the Chair in respect of the honorable member for the Northern Territory to pass unchallenged. I take my point irrespective of the particular motion no.w before the House. I have no desire to be dogmatic; but I am under the impression that the honorable member for the Northern Territory can do anything in this House that any other honorable member may do except vote. He may, for instance, move a motion or an amendment, and may be counted as one of the honorable members necessary to form a quorum. I should not like the honorable member to have any of his rights filched from him, because he has not too many.
– The point raised by the Leader of the Opposition (Mr. Scullin) is of considerable importance. I would not willingly give a ruling which
Gould not be supported. My impression as to the position of the honorable member for the Northern Territory is as I have stated, but I shall look further into the matter, and if there is any occasion to vary my ruling I shall do so to-morrow.
– I rise to a point of order. In determining the point raised by the Leader of the Opposition, I ask that consideration be given as to whether my rising in support of the motion of the honorable member for West Sydney, and the giving of a definite vote on a matter before the House, are not two different things? I also ask whether I was not within my rights in rising to support the honorable member for West Sydney?
– I shall look into the matter closely, and decide according to such authorities as may be consulted.
– My purpose in taking this action is to bring under the notice of the House and the country, the association between the Defence Department and an organization in New South Wales known as the New Guard. I propose to discuss only the position of the Defence Department, because I feel that I can amply substantiate what I have to say in that connexion, and that that institution is the only one of the two involved over which this Parliament has any authority. It is the duty of the Government of New South Wales to deal with the other organization. What I have to say, therefore, will concern this Parliament. When the New Guard was launched, its promoters boasted that the Defence Department was in sympathy with its objects and aims. Its leaders, as a matter of fact, went to great pains in the course of many public utterances to show that the New Guard could expect assistance and support from the Defence Department. I have not brought with me into the House copies of the statements made by its leaders in that connexion, but I am sure honorable members will readily recall what has been said in that regard. The organizers of this body also talked about the sympathy of the Police Department of New South Wales with its aims and objects. Circumstances of recent date have proved conclusively that the police organization has no sympathy in any respect with the New Guard.
– That is not true.
– The honorable member for Barton must not characterize any statement made in this House as being untrue.
– Put him out!
– Not only did the New Guard leaders boast that they could get military assistance, but in order to support their statements in that respect, they made a great deal of use of military titles. I have only to remind honorable members of utterances made by the New Guard leaders on public platforms and elsewhere-
The honorable member for Richmond (Mr. R. Green) interjecting,
– You go back to the bar where you should be. You are drunk now. You came into the House upset.
– Order !
– That is a lie.
– Order !
– You go back to the sewer where you belong.
– Order !
– I most strongly object to the statement that I am drunk, and I ask that it be withdrawn.
– I am sure that the honorable member for West Sydney will withdraw the statement which he has just made regarding the honorable member for Richmond.
– I withdraw it; and I ask that the honorable member withdraw his interjection in respect to myself and the sewer. I did not intend to take any notice of it; but the honorable member cannot pursue those tactics. If he does, something will have to be done.
– I rise to a point of order.
– I shall settle one point at a time. The honorable member for West Sydney has made a statement that was objected to, and he has withdrawn it. I now ask the honorable member for Richmond whether he made a statement in which he mentioned the word “ sewer “ in relation to the honorable member for West Sydney ?
– The honorable member for West Sydney said that I was drunk, and that I should go back to the bar where I belonged, and in replying to it I said that he should go back to the sewer where he belonged. I objected strongly to the honorable member’s statement in relation to myself.
– The honorable member for Richmond must resume his seat. At his request, I called upon the honorable member for West Sydney to withdraw the statement complained of, and he did so.
– But he did not apologize.
– Order ! I now ask the honorable member for Richmond to withdraw the statement of which the honorable member for West Sydney has complained.
– I ask first for a with, drawal and an apology of the statement he made concerning me. If you like you can put me out.
– I ask the honorable member for Richmond to withdraw the statement that has been complained of. Does he intend to obey the Chair?
– I think the honorable member for West Sydney should apologize. You can put me out if he does not.
– I give the honorable member for Richmond one more opportunity for withdrawing his statement.
– I should like to make one point in regard to this matter.
– Order ! For the last time, T ask the honorable member for Richmond to withdraw his statement. Does he do so ?
– Temporarily, yes.
– That is not fair.
– On a point of order, I ask whether that is a proper withdrawal.
– There is no need for heat or excitement. If the honorable member for Richmond still feels aggrieved at something that has been said he may rise to a point of order, for he has withdrawn the statement that he was requested to withdraw.
– He said “ temporarily “.
– I ask the honorable member for the Northern Territory (Mr. Nelson) not to disregard the Chair. If the honorable member for Richmond wishes to complain of something else that the honorable member for West Sydney has said, he may rise and do so now on a point of order.
– A statement was made concerning myself’ which was most objectionable to me. My reply, which I was subsequently asked to withdraw, was provoked by the statement of the honorable member for West Sydney. I ask that the honorable member withdraw and apologize to me.
– The honorable member for West Sydney made a reference to the honorable member for Richmond which the Chair asked him to withdraw, and he did so. The honorable member for West Sydney then complained of a statement made by the honorable member for Richmond, and that has now been withdrawn.
– I rise to a point of order. I wish to know whether the honorable member for West Sydney was asked to withdraw and apologize.
– He was asked to withdraw, but not to apologize.
– I think he should have apologized.
– Order !
– Members of the New Guard, as I was saying when interrupted, made much use of military titles in their propaganda, and encouraged the point of view that the Defence Department was in sympathy with their aims and objects. We know now from the New South Wales police reports that they were in touch with -the Defence Department, and that the organization carried on its work apparently in a very secret way. It has now been borne out conclusively that it has acted in association with the Defence Department. A raid was made recently by the police upon the head-quarters of the New Guard, and various homes were also visited. Much information was collected by the Police Department in this way which, no doubt-
– It is faked evidence!
– Order !
– I ask honorable members to give me a fair hearing. I propose to place before the House some of the information collected by the Police Department, and I shall make out a case to justify the taking of serious steps by the Government to ascertain who in the Defence Department were responsible for allowing secret information to be placed at the disposal of this organization to assist it in adopting measures which have for their object the destruction of the New South Wales Government. The first document to which I shall refer sets out the details and value of certain positions in a gaol for the setting up of machine guns, &c. If this organization could go to this extent, it is obvious that it must have had at its disposal a number of machine guns and a quantity of. ammunition suitable for its purpose. The second document to which I refer is dated the Sth March, 1932, and refers to the transfer of arms and ammunition from Victoria Barracks to Garden Island. Pinned to it is a memorandum from a Mr. H. R. Slocombe, dated the 8th March, 1932, forwarding it to a “zone commander “. It is obvious, again, that some one was capable of-
– I rise to a point of order. Are not honorable members entitled to know the journal from which the honorable member for West Sydney (Mr. Beasley) is quoting?
– The honorable member is entitled to state his case in his own way. If he is making quotations it is not necessary for him to give their source.
– The honorable member is quoting from a newspaper.
– That is quite immaterial.
– I want to know what newspaper the honorable member is quoting from.
– Order !. I warn honorable members that points of order must be taken seriously, and not merely to embarrass the honorable member who i3 addressing the Chair.
– I was about to say that it is strange that a report regarding the transfer of arms and ammunitions from Victoria Barracks to Garden Island should be available to this organization. It is of an exceptionally secret character from a defence point of view, and nobody outside the very inner circle of that department should be conversant with it. Yet it is plain from the information now in the possession of the police department of New South Wales that the New Guard was able to obtain that secret knowledge. That organization also possessed the code of names which is used by the Commonwealth Defence Department in connexion with rifles, Lewis machine guns and other firearms. The New Guard had a fullpage report dealing with bayonets at the drill hall, North Sydney, and a one-page undated report dealing with the issue of rifles to New Guardsmen at North Sydney.
– I rise to a point of order. From my observation it is apparent that the honorable member for West Sydney (Mr. Beasley) is quoting from a newspaper. Should he not state to the House what newspaper it is?
– It is not necessary for the honorable member to divulge his source of information.
– There was also found a full-page report dealing with the wireless system under the control of the Government, a one-page undated reportdealing with the disposition of rifle bolts, a plan of Victoria military barracks, a full list of code names for firearms, and an undated report regarding military activities, -which apparently discloses in detail what the military department is doing. Further, there was a report dealing with bayonets that were taken to Middle Head, and a full-page report of the movements of permanent soldiers, enabling the New Guard to know the exact location of the permanent military forces of the Commonwealth. There was a full-page report regarding the disposition of machine guns at Liverpool camp, another military establishment, and a report dealing with. arms at Leichhardt, another depot belonging to the Defence Department. That enabled the New Guard to determine the quantity of ammunition that was at the disposal of the department. There was a further report addressed to “ Second Chief, Military,” which reads -
Please obtain list of n.c.o. instructors in charge of stores at Randwick small arms machine gun school.
The New Guard, it was found, also possessed a plan of the Liverpool Military Camp, setting out -in detail the arms and munitions stored there. This waa accompanied by a full page report on the subject.
All of those documents are now in the hands of the New South Wales Police Department, and were secured on a search warrant that was issued to the Acting Metropolitan Superintendent of Police in that State. The fact that the New Guard has been able to obtain this information indicates that it must have been made available to the organization from somebody inside the department - obviously a person occupying a high and confidential post, who is also in the councils of the New Guard.
There must be a purpose behind the securing of this information. If this Government and the Commonwealth Defence Department are to be parties to a set of circumstances which enables an organization that defies the laws of the country to obtain information such as that disclosed by the Police Department, a very sot’ious position has arisen in this country. The Commonwealth Government cannot allow matters to stand where they are. No doubt within the next few days we shall have much more information on the subject, because the New South Wales Police Department has not yet had an opportunity to deal in detail with all the things in their possession. It is to be hoped that all information in the possession of the Police Department will be made known far and wide, so that the general public may realize that our socalled Defence Department is honeycombed with high placed officers who are using their positions, and the pay which they receive from the Commonwealth, for political purposes, to assist an outside organization, whose definite purpose is to overthrow constitutional government in
Australia. There is another point which the Defence Department has not yet satisfactorily answered. .
The honorable member for Richmond interjecting,
– Order ! The honorable member for Richmond (Mr. R. Green) has already been warned on two or three occasions.
– An incident associated with the action of a Dutchman, who was responsible for a certain happening in connexion with the opening of the Sydney Harbour bridge, has not yet been satisfactorily explained by this Government or by the Minister for Defence (Senator Pearce). It is remarkable that that person should have been able to join up with the military, and attach himself to the Governor-General’s escort. I do not know what the Government has to say on the subject, but this act has never been satisfactorily explained to the people. It must be obvious to all that that action constituted a definite insult to His Majesty’s representative. It may have suited some people, who scoff and laugh at the incident, that that insult should be directed at the gentleman who occupies the high and honorable office of Governor-General, because he is an Australian. The incident certainly pleased those who conducted a campaign of spleen against the Scullin Government for making His Excellency’s appointment.
– Order ! The honorable member’s time has expired.
– I move -
That the honorable member be granted an extension of time.
– There can be no extension of time on a motion for the adjournment of the House.
– The propaganda in which the honorable member for West Sydney (Mr. Beasley) indulged in his closing remarks affords a clear indication of the object of this motion. Having used the Parliament of New South Wales to disseminate propaganda in support of an entirely dishonest policy, a policy that is maintained by those who are to-day lawbreakers of the country, the honorable member, who has spent the last week or so on the platforms of New South Wales endeavouring to bolster up that rotten policy, comes here and endeavours to use the National Parliament as a further means of disseminating his propaganda.
This Government accepts the responsibility of carrying on the affairs of the country, and seeing that its administration is conducted upon sound constitutional lines. It refuses to be associated with any organization of an illegal or unlawful character. It has yet to be shown that the New Guard comes within that category. It has been declared very emphatically in the New South Wales Parliament that the attempt to show that the New Guard was guilty of violating the law, was based upon a fabrication and a “ frame-up “.
– Bot !
– The honorable member for West Sydney, who asks for an inquiry, does not support the demand for a royal commission to investigate all the circumstances surrounding this case. The honorable member made it clear to-day that he desires that any investigation that may be made shall be restricted to the Defence Department, so that there will be no opportunity to inquire into the manner in which certain convictions were recently secured. I shall have more to say on that subject before I am finished, and my remarks will be emphatic.
The Commonwealth Government does not accept the declaration of the honorable member that the Defence Department is responsible for making available to any organization the information to which he has referred. This Government and the Defence Department have been most careful indeed to take every precaution to see that no information of the nature referred to is made available to any individual or to any organization which is not entitled to it. As to the organization referred to by the honorable member, it has yet to be shown that it is not a lawful one, prepared to- assist in the maintenance of peace and good order in the community. If it is not, if its objects should be the opposite, then this Government will deal with it as it would with any other organization of the same character. The Government, however, is not yet satisfied with what has been shown concerning it. Honorable members will recall that, because it was reported to the Government that certain activities that appeared to be of a military character, such as drilling, &c, were taking place, I issued a warning, which the New Guard organization accepted, thus indicating that no partiality was shown by the Government. The Government made it it clear at that time, that if anything unlawful took place, the offenders would be dealt with according to law.
We now come to the alleged participation of the Defence Department in the activities complained of. I have here a telegram which was handed to me as I came to the table to-day.
– Another “frame-up”?
– No. This telegram ia from the secretary of the Defence Department, and is as follows: -
In reply to your inquiry, I can definitely assure you that the Defence Department is in no way associated with the New Guard, and has had no communications official or otherwise with that organization. I may add that all officers of the permanent military forces were instructed some time ago that they were not to’ become or remain members of such organizations, and they were required to sign a statement to the effect that they did not so belong.
When this matter previously came under the attention of the Government, the Adjutant-General issued a warning . to permanent officers of the Defence Forces that they were not to associate themselves with any organization of the character of the New Guard. Individual officers knew that it would be wrong to make available to any outside organization information relating to the disposition of arms and material. That is the attitude of the Government to all these organizations, and that is where the Defence Department stands so far as permanent military officers are concerned. As honorable members know, the defence forces of the Commonwealth are comprised mainly of citizen forces, and the individual members of those forces are free to join any organization, so long as it it a lawful one; but they have no right to give away information. It has yet to be proved that any such information was given away, or that the information referred to by the honorable member is reliable.
I know perfectly well that the object of this motion is to render what assistance is possible to a State Government which to-day is carrying on in absolute defiance of the law of this country. Is it not hypocritical for those who support a government -that is avowedly acting in defiance of the law, to criticize any organization or any administration which is in direct conflict with it. The people of Australia will, I am sure, require more convincing evidence than has been adduced up to date before they will condemn either this Government, the Defence Department, or the organization which has been attacked. Further evidence is necessary, and in obtaining it, it is only right that we should seek evidence also as to the bona fides of the hold-up in Sydney, as a result of which these disclosures have been made.
– The Prime Minister will get all he wants from such an inquiry. He is in it up to his neck.
– This is a serious matter. The Commonwealth Government is responsible for the maintenance of peace throughout the country as a whole, and it is not going to brush aside the statements of the honorable member for West Sydney. On the contrary, it is prepared to have a close and exhaustive investigation made by a royal commission, not merely into the allegations of one side, but into those of the other as well. We desire that the truth may be made known to the people of Australia. The charge was made by an honorable member of the Parliament of New South Wales that the Government of that State had engaged the services of an agent to arrange the hold-up referred to, and the Commonwealth Government is determined that the inquiry which was asked for in the New South Wales Parliament, but which was refused by the Government of that State, shall be held under the direction of the Commonwealth Government. These charges must be sifted to the bottom in justice to the Defence Department, and to the Police Department of New South Wales, in which I take this opportunity of expressing my own absolute confidence.
– The Prime Minister said a little while ago that the whole thing was a “ frame-up “.
– I do not suggest that it was a police “ frame-up,” but it has been claimed by a member of the New South Wales Parliament that there has been a political “ frame-up “. That charge must be investigated as well as the others. The Commonwealth Government has nothing to fear from any investigation. Therefore, I give the House an assurance that a royal commission will be appointed which will inquire into this matter, as well as into other matters in connexion with New South Wales.
Honorable members interjecting,
– Order ! I remind the House that we cannot have calm deliberation if honorable members persist in interjecting freely. One interjection leads to another. Many of them are provocative, and lead to disorder. I ask honorable members to restrain themselves, and allow the question to be debated calmly
.-If ever there was a time in the history of Australia when the National Parliament ought to discuss calmly matters of this kind it is now, and your appeal, Mr. Speaker, should be taken to heart by various sections of honorable members in this House. I cannot regard what has been said here this afternoon as unimportant, nor can I look upon anything or everything that has been said as political propaganda. A very high feeling is running, particularly in one of the States of Australia, and if there is one place in which men ought to keep their heads it is in the National Parliament. I regret the heat that was shown by some honorable members, particularly by interjection, and I expected something better from Ministers on the front bench. I also think that the mover of the motion, when dealing with so serious a matter, could have presented his case in a more judicial manner.
– Was he given the opportunity ?
– I admit that he was provoked very often to answer interjections. It was not fair. Any honorable member who, in support of a serious charge of this kind, can lay before the
House what must be regarded as prima facie evidence, ought to be accorded a respectful hearing. The Prime Minister (Mr. Lyons) made some reference to political propaganda. Unfortunately, there is too much of it in this House. There was some propaganda, I am afraid, in the Prime Minister’s speech.
– Of course, the Leader of the Opposition never indulges in it !
-.- We are all guilty of disseminating propaganda at times, and some more than others. This matter, however, is too serious for such tactics. I do’ not think that we ought to alarm the people; but we must face the facts, and realize that a very serious charge has been laid.
– The difficulty is to get
– It is. While the honorable member for West Svdney (Mr. Beasley) was presenting his case, he was challenged to name the newspaper from which he was quoting. I think I recognized the cutting ; but, in any case, I have taken the precaution of looking at the reports published in the Sydney World and the Sydney Sun, and they bear out what the honorable member quoted. A Minister asked the honorable member how he knew of these things. No honorable member should make statements of this sort in the House without some authority. If he did, he would not be fit to be a member of the House. I do not vouch for the accuracy of the newspaper reports, but they are sufficiently circumstantial to require us to take some notice of them. The reports mention documents that were laid before the Central Court in Sydney by DetectiveSergeant Alford. They may be spurious documents; I hope they are.
– The case is still sub judice.
– That is so; but we are not now discussing the merits of the case. The documents referred to purported to record the transfer of arms and ammunition from Victoria Barracks, in Sydney, to Garden Island, and there was a minute by a man who signed himself “ H. S. Slocombe “. I do not know who he is, or anything about him. And so the list of documents goes on. The Prime Minister has alleged that a certain hold-up that took place in Sydney was a fabrication. I do not know whether it was or not.
– I said it had been alleged in the Parliament of New South Wales that it was a fabrication.
– That charge ought . to be investigated along with the others. I welcome the announcement of the Prime Minister on behalf of the Government, that a full and complete inquiry by a royal commission will be instituted. I, as a rule, do not like royal commissions, but I do not know of any other way in which we can get at the truth of this affair. We must sift all the evidence, and inquire into every aspect of the charges and counter charges. As one who has been the head of a government, I feel that I have some responsibility in this Parliament, and I say that, unless convincing evidence is brought before me, I shall refuse to accept any statement that officers of the Defence Department have been responsible for giving away the information referred to in these charges. When I was Prime Minister, I had some inquiries made into matters relating to the Defence Department, and was satisfied that I could place implicit faith in the controlling officers of that department. That, however, does not prove that there are not individuals in the community who were in possession of the knowledge referred to, and who may have passed it on to others. There are now in civil life men who have had very close association with the defences of our country, and we do not know what men. excited by political’ passion, may do in these troublous times. The first test to determine the genuineness of these documents would be to establish their accuracy or otherwise. That can be done through the Defence Department. If they are found to be accurate, no stone should be left unturned to discover the source from which the information was obtained. I welcome the proposed appointment of a royal commission, and I suggest that the whole matter might now be left in its hands for inquiry. We should not pre-judge either sides to the dispute. We are all more or less inclined to be biased, even unconsciously, and there is a tendency as soon as some prima facie evidence is brought to light for one, party to accept it as positive evidence of the existence of a serious danger to the community. When strikes have been raging in this community I have seen in the press statements concerning the discovery of plugs of gelignite! The same old plug of gelignite has been brought forward again and again by the newspapers ! And so I say we should not allow our political prejudices to lead us into accepting as absolute proof what is merely prima facie evidence concerning any organization. Let us not pre-judge this case, but sift it to the bottom. Freedom of speech and freedom , of the press are very dear to the people of Australia, yet we hear in this House such questions as, “Will the Government stop the Labor Daily from going through the post?”
– The Lang Government boycotted another newspaper.
– Does that justify this Government taking similar action?
– When such a question is put it is countered by a question from another section of the House, “ What about other newspapers?” The Bulletin was mentioned. I saw in the Bulletin to-day something that I did not think would be published in that journal. I refer to a disgraceful cartoon holding up to ridicule, scorn, and contempt, a representative of the King in this country. It depicted the Governor of New South Wales as Pontius Pilate.
– I agree with the honorable member for Fawkner (Mr. Maxwell) that it is a shame that such a thing should be published, and that a journal, which ought to be standing for the highest respect being shown, to the representative of the King, and for law and order, should have published the following statement : -
When he (the Governor) tells the people it is up to them to save themselves, while denying them the constitutional method of attack, His Excellency is surely pointing them to the alternative method - that of violence.
I am glad that there is to be an investigation into every phase of the subject which has been raised this afternoon.
– The honorable member’s time has expired.
Motion (by Mr. Mabb) put -
That the question be now put.
The House divided. (Mb. Speakeb - Hon. G. H. Macxat.)
Question so resolved in the affirmative. Question - That the House do now adjourn - put. The House divided. (Mb. Speakeb - Hon. G H. Mackay.) Ayes . . . . 4
Question so resolved in the negative.
– The honorable member for Swan (Mr. Gregory) has asked a series of questions, upon notice, regarding embargoes and surtax on imports with special reference to galvanized iron. The matter is being looked into, and a reply will be furnished later.
– Information will beobtained as soon as possible in reply to a question, upon notice, by the honorable member for Grey (Mr. McBride) regarding collections of federal land tax.
Peofits of Colonial Sugak Refining Company Limited. Mr. LYON’S. - The honorable member for Bass (Mr. Guy) has asked a series of questions, upon notice, regarding the sugar .agreement, and the profits of the Colonial Sugar. Refining Company Limited. I shall look into the honorable member’s questions, and let him have a reply as soon as possible.
– Information is being obtained, and will be furnished as soon as possible to the honorable member for Melbourne (Dr. Maloney) in reply to a question, upon notice, regarding un employment relief in Great Britain, the States of the Commonwealth, Canberra, and New Zealand.
asked the Minister representing the Attorney-General, upon notice -
– The answers to the honorable member’s questions are as follow : -
asked the Minister for Trade and Customs, upon notice -
In view of the urgent need of assisting private employers to absorb our unemployed people into industry at the earliest moment, will he make a definite statement as to whether the Government intends to alter the present import and/or excise duties upon crude and/or refined petroleum, as such a statement may mean the immediate employment of 500 or 600 men?
– The matter is receiving consideration, and will be settled at an early date.
AUSTRALIAN COMMONWEALTH LINE OF STEAMERS. Mr. LYONS. - Information is being obtained and will be furnished as soon as possible to the honorable member for Hunter (Mr. James) in reply to a series of questions, upon notice, regarding the Australian Commonwealth Line of Steamers.
– Information will he obtained, and will be furnished as early as possible to the honorable member for East Sydney (Mr. Ward) in reply to a series of questions, upon noiict, regarding the militia forces established since the abolition of compulsory military training.
Sales Of Munitions and Arms. Mr. WARD asked the Assistant Minister for Defence, upon notice -
Have any Bales of ammunition or arms by the Defence Department taken place within the past twelve months; if so, by whom were the purchases made?
– The following shows sales of arms and ammunition during twelve months ended the 30th April, 1932 :-
Sales of ammunition and rifles authorized by Standing Orders to members of rifle clubs have not ten included. Ministerial approval for sale was obtained in each of the above-mentioned cases. As regards sales of ammunition to private firms the conditions of sale provide that the firms concerned i *it* to maintain records showing names', fta, of persons to whom the ammunition is retailed, and that such ecords are to be made available for inspection by the Department if required. The Department recently exercised its right to inspect the sale records of one of the purchasers.
Message received from the Senate transmitting the following resolutions: -
That a select committee be appointed to join with a select committee of the House of Representatives to consider and report upon any revision which should he made in the acts of the Commonwealth.
That the number of senators appointed to serve on the committee be four.
That the committee have power to send for persons, papers and records and to sit during any adjournment of the Parliament.
That a message be sent to the House of Representatives requesting its concurrence, and asking that four members of the House of Representatives bc appointed to serve upon the said committee.
That one member of the Senate, sitting with three other members of the committee, shall constitute a quorum, provided that in such quorum both Houses shall bc represented.
Question - That Mr. Speaker do now leave the chair - proposed.
.- When I spoke on the Loan (Unemployment Relief Works) Bill last week, I was compelled, by a heavy cold, to abbreviate my remarks, and I take this opportunity to supplement them with a suggestion I had intended to offer then. The limited amount of money made available by the Commonwealth Government is to be expended under the control of councils to be appointed in the various States. I realize the need for such bodies to ensure that the money will be wisely used, but as the measures proposed to date are merely palliatives, and the unemployment problem calls for something more farsighted and continuous, I urge the Government to consider the advisability of setting up a nucleus organization which will be able to co-ordinate the work of the State councils and collaborate with them, evolving, as a result of continuous study of a large and difficult problem, s plan to be submitted to Commonwealth and State Ministers at their periodical conferences.
Motion (by Mr. Maru) proposed -
That the debate be now adjourned.
– Mr. Speaker, I wns on my feet before the Minister for Health (Mr. Marr).
– The honorable member for Denison (Mr. Hutchin) was entitled to the call, and in ordinary circumstances I would have called next a member from my left, but the Minister for Health rose, and it’ is customary to give the call to a Minister regardless of who preceded him.
Question - That the debate be now adjourned - put. The House divided. (Mb. Speaker - Hon. G. H. Mackay.)
Question so resolved in the ‘affirmative. Debate adjourned.
Debate resumed from the 11th May (vide page 600), on motion by Mr. Bruce -
That the bill be now read :i second time.
.- The bill and the second-reading speech of the Assistant Treasurer (Mr. Bruce) constitute a complete answer to the mischievous political propaganda that has don’1 so much injury to the credit of Australia in the last two years. For that, and for other reasons which I shall state, I welcome the bill. By permitting the Commonwealth Bank Board to hold the reserve against the note issue in either gold or sterling,, as the bill proposes, the board will be empowered to ship the gold abroad, sell it, and invest the proceeds in British securities. In this way, the dormant gold’ now in the vaults of the Commonwealth Bank may become a live asset/earning interest which may be set off against the interest we have to pay overseas. Supplementing the Assistant Treasurer’s brief review of the financial history of Australia during the last few years, I remind the House that the legislation towards the end of 1929 which relieved the Commonwealth Bank of the obligation to redeem notes in gold, has made this bill possible. The act of 1929 was designed to meet the dangerous situation that had been created in Australia by a continuous adverse trade balance. As the Assistant Treasurer pointed out yesterday, the exchange position in 1924 was almost the opposite of that to-day; at that time, the exchange was against our exporters, whereas to-day it is in their favour. In 1924, we had accumulated large credits abroad, largely due to the release of B.A.W.R.A. money after the war. But this condition was intensified by the policy of heavy borrowing overseas. , At a time when we had credits abroad, and should have been utilizing them to reduce our overseas obligations, both Commonwealth and State governments were increasing our foreign debt by pursuing a reskless loan policy. These loans encouraged and financed tho importation of goods which we should have made in this country, or goods which we could have done without. ‘ From that period onward Australia suffered from an. excess of imports over exports due to the continual borrowing of money from overseas at a time when we should have been reducing our overseas indebtedness. The continual excess of imports over exports was responsible eventually for the drain on our gold. When the loan supplies were beginning to peter out importers made demands for gold in order to finance further imports and to pay for imports already made.
To give some indication of the extent to which the position had drifted, but without going into detail figures, I point out that in the five years from 1925 onward our imports of merchandise exceeded our exports by £82,000,000. In the same five year period we had to meet £130,000,000 in overseas interest. Instead of having an excess of exports of £130,000,000 to meet those interest payments we had an excess of imports of £82,000,000 so that in that five-year period Australia went to the bad by £212,000,000. In that period bur Commonwealth and State oversea debts increased by £109,000,000. Gold to the value of £35,000,000 was exported but still there were huge amounts of trade money for foreign importations which were piling up in Australia. It was the accumulation of trade moneys as the result of our importations of goods that created the dangerous position which we faced towards the end of 1929.
The Assistant Treasurer told us yesterday that the Commonwealth Bank Board had warned his government of the position, and had suggested that action be taken to meet it. An election intervened however, and nothing was done. But very shortly after the Government which I led assumed office it received a communication from the Commonwealth Bank Board which expressed disquietude at the general financial position and especially at the position that had arisen in London, and stressed the need- for credits in London to meet our overseas obligations. Traders in overseas products in order to get money away to pay for imported goods and to permit further importations were presenting cheques to the Commonwealth Bank for notes to pay for the goods. They were converting the notes into gold and exporting the gold. Had that policy been allowed to continue the whole of our gold . would have been drained away and we should still have had nothing to supplement our slender resources in London to meet our overseas commitments. The result would have been that we should have been faced, early in 1930, with the prospect of absolute default. But in 1929 Parliament passed an act giving the Com-monwealth Bank power to requisition the gold held by other institutions. The gold was to be concentrated in the hands of the Commonwealth Bank and that was done. Practically the whole of the available gold was requisitioned. Only a little was left in the hands of the banks to meet their overseas commitments. This action was followed by my Government by the introduction of very drastic tariff measures designed to check the flow of imports to Australia. The mobilization of gold and the tariff restrictions were absolutely essential to stave off default and financial collapse in Australia.
That 1929 legislation definitely put Australia off the gold “ standard. When paper currency is not exchangeable for gold on demand, a country is off the gold standard. It was necessary to take that action to prevent our gold resources being depleted by traders in foreign commodities and to save Australia from going over the precipice to bankruptcy. That legislation gave the Commonwealth Bank complete control of all gold. The bank was also relieved of the obligation to hold gold against notes, for although notes were still redeemable in gold any one who presented notes for gold could have the gold requisitioned immediately. Actually therefore, the Commonwealth Bank Board was no longer under necessity to hold gold against notes.
The gold is, therefore, now valuable only to meet overseas obligations when such obligations cannot be met by surplus exports or other means. Such reserves are just as effective to meet these obligations if held in British securities as if held in gold. Therefore, the gold which we hold now can be sold and the proceeds invested. Instead of it being a dead asset it can be earning interest which can be used in part to meet our overseas obligations. This will save our funds in Australia and also save large amounts that would otherwise be spent in exchange. The returns that will be obtained from these investments will depend upon the nature of the investments. The interest rate will be the ruling rate for short term securities, because these investments must be made in short term securities in order to keep the reserves liquid. This policy, in my opinion, is sound and sensible, and should have been put into operation long ago. It was sheer waste to have large amounts of gold held sterile in the vaults of banks when we were straining every nerve to meet our national obligations.
A gold reserve for notes was adopted for two reasons. It was required originally to ensure confidence by the public. The provision to pay gold on demand gave a certain amount of confidence. But the fact that our notes have been inconvertible since 1929, and that there has been no panic among the people, shows that it is no longer necessary. Although our notes are still nominally convertible into gold they are not actually so.
The other reason why a gold reserve was established behind the notes was to limit the issue of notes. But there is no need for a gold reserve to limit a note issue. In any case, it is not an effective limit. It would be possible for the board controlling a note issue, if it were reckless, to use its funds to buy more gold, and so keep issuing notes so long as it maintained the statutory reserve. It could go on purchasing its gold and issuing notes, and so bring about inflation, and yet have a gold reserve. A gold reserve in itself is, therefore, no definite limit to a note issue. A much more definite limit is a parliamentary limit by_ statute. Parliament could determine what the limit should be, and provide that the authority controlling the notes must not go beyond it. In such a case a bank board would have to get the permission of Parliament to increase the note issue. This Parliament bas passed a statute, making a limitation, and it could do so again. But it could also alter the percentage of gold reserve if it desired to do so. It may either fix a statutory limit to the note issue or determine the gold reserve. It actually did alter the gold reserve by, I think, the unanimous vote of the Parliament. It will be seen, therefore, that there is no limit to the note issue that can he more definite than the statutory limit set up by Parliament itself by statute.
– And the limit should be determined by the volume of real business that can be done.
– That should be the determining factor. I would say further, that the Parliament should have the advice and the advantage of consultation with those in charge of the note issue.
The definition of “sterling in the bill is a special one that has been used only for the purpose of this legislation. It cannot be taken as the standard definition of sterling, although I do not disagree with its adoption for the purpose for which it is now intended. The’ first part of the definition, which reads -
English sterling means currency which is legal tender in the United Kingdom, oan be taken to express the real meaning of sterling. But the definition in this bill includes more than that. It includes balances standing to the credit of the bank in London, bills of exchange, or advances secured by bills of exchange, and treasury-bills, or other securities in the United Kingdom, which mature in not more than three months. The object of this broader definition is to enable our reserve to be held in those classes of security.
– And they would be convertible into sterling.
– Yes. The definition does not mean that our currency is definitely tied to sterling.
Clause 3 of the bill repeals the promise contained on our bank-notes to redeem the notes in gold coin. That promise has been purely nominal for some time.
– Then why be hypocritical ?
– It is because we do not desire to l»e hypocritical that the promise is being eliminated. I presume that when the new notes are being printed they will not contain the promise to pay in gold, but merely a promise to pay £1. I believe that the Bank of England notes contain that kind of /promise, though I have not seen any of them recently.
Clause 5, which is really the principal clause of the measure, removes the obligation on the Commonwealth Bank Board to hold gold against notes. The obligation to redeem notes in gold is now definitely removed, for our reserves may be held in either gold or sterling. I presume that they will be held in sterling.
– What will take the place of the promise to pay in gold?
– The promise to pay £1. The bank must hold liquid assets against all its liabilities, which include the note issue. Our reserves are to be liquid, and I entirely agree with that principle. There, is no real need to hold a special reserve against the note issue, because the only real reason for us doing so was to enable the Commonwealth Bank Board to meet the obligation to redeem notes in gold. That obligation is now being removed. Under the provisions of this legislation the Bank Board will be able to hold its securities in liquid form, and there is no real reason why any part of the security should be held in gold. Should the reserves be required they would be needed under existing conditions to meet overseas obligations, and not to convert notes. When our exports are not sufficient to pay for our imports, and to meet our other obligations, we should be able to draw upon our reserves. Australia, being a debtor nation, must, in order to remain solvent, export every year about £35,000,000 or £36,000,000 worth of goods more than she imports, in order to meet her interest, obligations. In recent years our exports have not been sufficient to meet our overseas comniitments. Honorable members must realize that it is not. only within the last two years that Australia has really been off the gold standard, strictly speaking. We kept our exchange at par only by a series of extravagant borrowings overseas. When our loan market, failed us, and we had no excess of exports, but,- on the contrary, an excess of imports, we went off par. The question arises, for what purpose is a reserve required? This proposal will not weaken the power of the nation to meet any emergency that may arise. British credits held in liquid form will be just as good to meet an obligation as was the gold. So that there will be no danger from this step.
– To the extent that Britain can meet her obligations in gold so shall we be able to do so.
– Exactly. If British securities become worthless, our debts f.0 Britain will become worthless, and the One will offset the other. However, we do not anticipate that calamity.
The only need for a reserve is to cope with a conversion loan, or meet any obligation that may arise when we have not the necessary excess credits abroad, and cannot raise the money either by short or Iona: dated loans. This reserve could not be called upon for that purpose. If it were ever required an amendment of our banking law would be necessary. This financial legislation will not precipitate such an emergency.
Attempts have been made in sections of the press, and some of them appear to be inspired, to show that this proposal differs fundamentally from that advanced by the Scullin Government last year. I invite honorable members to read in Hansard the speeches that were delivered in the Senate and in this chamber on the Commonwealth Bank Bill introduced by my Government. They will find that strong exception was then, taken by our political opponents to the shipment of the gold; not to the route, or as to who would handle the gold, but to the actual shipment of the gold itself. Unfortunately, the then Opposition not only defeated that measure; it created fears both at home and abroad that the Government of the day was entering upon a wild career of financial instability and reckless inflalion which would lead to the destruction of our whole monetary system. The last federal election was to a large extent fought on that issue. During that election I had handed to me notes that were distributed in hundreds of thousands, allegedly a replica of the note that was to be issued by the Scullin Government. Written across those notes was the word, “ Danger “. They were issued under the authority of Mr. P. T. Shaw, of Adelaidestreet, Brisbane, and had the likeness of Mr. Lyons ou one side and those of Mr. Theodore and myself on the other. Inscribed on the notes were the words, “ Hands off the note issue, or you will have a Lang wait for your money “. 1 suggest to the Minister in charge of the bill that if the necessary power does not exist, legislation should be introduced to prevent the issue of imitation notes for business or political purposes.
– I arn told that some people cashed those notes.
– Some may have got away with even that. The device was clever. It. was also very contemptible. My Government took steps to balance our trade and to prevent foreign traders d ru wing our gold away and leaving nothing here to meet overseas obligations. It then sought to release credits to stimulae trade and absorb unemployed. When the banks could not be induced to make adequate advances for the purpose, the Government introduced a bill to provide fiduciary notes to the amount of £1S,000,000. That was opposed strongly by honorable members who were then in opposition, and who now compose the Government. They jeered at it, and used the term “ fiduciary “ as one of opprobrium. What does this bill propose? If the Commonwealth Bank uses to the full the power that will be conferred upon it, as it assuredly will, the whole of our £52,000,000 note issue will become a fiduciary issue. I see absolutely nothing wrong or dangerous in that. But the fiduciary note issue proposed by my Government was only for £18,000,000, and it had behind it the credit of the nation.
– The Scullin Government fiduciary issue was to be politically controlled.
– That is not so. The notes were to be issued by the Commonwealth Bank. If it expressed unwillingness to do that, power was given to the Government to issue the notes through the Treasury. That issue was to relieve the wheat-growers of the country to the extent of £6,000,000, and to provide funds to relieve unemployment at the rate of £1,000,000 a month for twelve months. I make only passing reference to the project to show how the term “ fiduciary “ was sneered and jeered at.
– The honorable member did not coin the term. 1 Mr. SCULLIN.- I did not. It is applied to the £270,000,000 British note issue. It is not the gold backing that gives strength to our note issue, but the fact that those notes are legal tender and have behind them the backing of the nation. There is nothing unsound in the proposal, and it should not give rise to anxiety.
The public can disregard general statements that were made by opponents of the Labour party, including present Ministers, against the proposal of the Scullin Government last year to sell our gold to meet a debt then due and to hold the balance in British securities. Members of Parliament in particular, and responsible members of the public in general, can surely support their political beliefs without indulging in extravagant statements that may affect the prestige and credit of the nation. In my opinion there was no excuse for the illbalanced opposition to the proposal that was advocated by my Government^ which is similar to that now before the House. It was not the method of procedure that was opposed, but the fact that it meant the shipment of gold. That is exactly what this bill means. With what recklessness did Mr. Lyons, Mr. Latham, and their colleagues attack that bill. How they disregarded the possibility of injuring the credit of the nation ! The present Prime Minister had been in the Scullin Government for some time and knew the difficulties with which that Administration was confronted. Yet his first speech when he became Leader of the Opposition was calculated to destroy credit and confidence in Australia. Listen to what he said, and weigh each word in the light of the legislation that is now before us -
As the result of the shipment of our gold there will be nothing left but a fiduciary note issue, because that is what our currency will be when the gold backing has gone. . . When it has been shipped abroad the last vestige of confidence in our currency will be destroyed.
Mr. Latham said
Under this clause we are asked to agree to the exporting of gold for use in the discharging of the indebtedness of the Commonwealth in London. There will be no relation at all between Commonwealth currency and gold. That will be a serious step to take.
Mr. Gullett also rushed in with an attack, and declared - 1 cannot conceive of a step more likely to shatter completely what little remains of this nation’s credit. . . Our gold reserve is a very definite check to currency inflation. . . It would be the same as If the Government were determined by shipping all the gold out of the country to make our currency a fiduciary one.
The whole of the attack at that time was against the proposal to ship the gold. My Government proposed to use ?5,000,000 of our reserve to meet an immediate obligation. That was passed by this House, but defeated in the Senate. A few weeks after my Government sent up another bill to the Senate which countenanced the shipment of gold to the value of ?5,000,000. After some difficulty was experienced that was passed. It was not proposed to use the whole of our gold reserve, but merely ?5,000,000 to meet an immediate necessity, and to have the balance of the gold earning interest, awaiting any emergency that might arise.
– It would have involved a big loss of sterling.
– The reserve that the Government will now provide in the form of British securities will be used in exactly the same way as my Government proposed to use that ?5,000,000. The honorable member for Grey (Mr. McBride) raised the point as to any loss that might have been incurred. I point out, incidentally, that this Government could have made an additional ?1,000,000 on the transaction had it shipped its gold a little earlier. However, I do not cavil at that. The fact is that, had it been sold when we first proposed, we should not have got as good a price as is to be obtained now ; but it would have been earning interest for the past year. If this Government had sold when it had the power to do so, it could have got a better price.
The present Prime Minister, when he was Leader of the Opposition, in the course of an attack upon my Government, said that, in addition to exporting the fold reserve, the Government proposed, y depreciating the pound, to pass on to the community the responsibility which should be accepted by the Government; yet the same gentleman, at the recent Premiers Conference, urged the adoption of the expert committee’s report which advocated an increase in the exchange rate. That was a deliberate proposal to depreciate the Australian pound, and the term usually applied to that is inflation. I am not criticizing him. because he recommended that. One can use the word “ inflation “ to frighten people. I am not of the inflationist school, and never have been, but I can see the difference between a policy of wild inflation, and one of a controlled currency for the arrest of deflation. Economists and bankers all over the world are pointing that out to-day, but when we put up proposals in regard to that we were charged with attempting to destroy the assets and injure the credit of the country, and we were linked up with repudiation ists. Charges of that sort should never be made against those associated with the Government of the country, particularly during times of crisis.
I do not condemn the Government for its sudden conversion; I welcome it. This is a period of rapid change, and of important discoveries. It has been discovered how to split the atom, but even that achievement is no more remarkable than the discovery by this Government of virtues in the policy enunciated by the Labour Government.
The speech delivered by the Assistant Treasurer, when introducing this bill yesterday, comprised a very interesting review of the financial history of recent times. The House listened to it with great attention, and, what was more remarkable, with great calmness. If the right honorable gentleman had walked into this chamber twelve months ago, and delivered that speech, word for word as he delivered it yesterday, it would, irrespective of what proposal was before the House, have created a sensation. Wow it is accepted almost without comment. This drives home the fact that we should avoid extravagant language when dealing with such a very delicate subject as finance. It teaches us that we should not be too dogmatic, and that we should avoid talk of inflation which is likely to injure the nation, whether it comes from those who are extreme inflationists, or from those who are so timid of inflation that they hardly dare breathe the word. We must try to preserve our mental balance.
In opposition, this party will take exactly the same view as it took when we were a government. We shall not utter one word to weaken the nation’s credit or injure its currency. In fact, I can claim, ‘with due modesty, that I urged the Government two months ago to do what it is proposed in this bill to do now. The Assistant Treasurer, when introducing the bill yesterday, quoted in support of it a cabled statement of Professor Gregory, which was made on the 8th March. That statement was a comment on my statement made on the 1st March, in which I urged the very action which the Government is now taking. Because of that, and because of the soundness of the proposal, I support the bill with confidence, believing that it will afford some measure of relief from the heavy strain now being imposed upon our national resources.
– I welcome this bill as a step in the right direction. The Assistant Treasurer (Mr. Bruce), in his second-reading speech yesterday, seemed to be concerned lest it might be regarded as revolutionary. He need not have no apprehension on that score. All the bill does is to adapt the banking practice of Australia to that now prevailing in Britain, and so maintain, our traditional policy of modelling our institutions on those of England. The right honorable gentleman yesterday very properly referred to those questions which naturally arise out of the consideration of this measure. He dealt with the gold standard, with exchange rates, and with matters incidental thereto, and so enabled us to look at this measure in true perspective. I shall follow his excellent example by venturing to review the position as it exists to-day, and in particular by endeavouring to make clear what I meant when I said that this bill, was a step in the right direction. I shall show to what goal it leads.
As honorable members know, Britain went off the gold standard on the 21st September, 1931. The Assistant Minister reminded us that, except during, and immediately after, the war, it had been a devotee of the gold standard for the greater part of the last century. We are to consider this, measure in its relation to the circumstances which impelled Britain to turn her back upon her traditional policy, because the raison d’etre for this bill is to enable the Commonwealth Bank to adjust itself to changed conditions in England. The changes have , been revolutionary. We have never known a time when gold was not regarded as the basis of our currency. Even during the war, when we had, in fact, an inconvertible note issue, gold was still regarded as the basis of our currency, and remained as the standard by which our currency was regulated.
Before I deal in detail with this point, let me repeat what the Assistant Treasurer said yesterday in regard to the gold standard. The gold standard, until quite recently, was the monetary ‘system adopted by the whole of the western world. Under that system, as honorable members know, notes were tied to gold in such a way that, the volume of notes was limited by the gold backing. It therefore follows that the volume of currency in every country under the gold standard was limited by the amount of gold backing which it possessed. The characteristic feature of gold is its mobility, and thus it was expected that it would flow freely whenever supplies were desirable. As honorable members know, it was held until quite recently - how recently the Assistant Minister has just reminded us - that the gold standard’ would automatically stabilize prices. But when gold became immobile, it was inevitable that it should lead to a catastrophic collapse of prices. It is of no use condemning the gold standard for this failure, because, in normal circumstances,’ gold furnishes one of the best measures of value available. Gold has been, from time immemorial, a thing treasured by mankind. It used to be held that the free movement of gold under the gold standard would prevent abnormal fluctuations in price levels, and so in exchange rates.
But the times are abnormal, and the gold standard has failed. It has not failed because of any inherent fault in the gold standard itself. It has failed, first, because of . the inadequate supply of gold; but the immediate cause of the failure has not been’ a shortage of* the world’s supply of gold, but the maldistribution of gold available for currency. And this maldistribution was due to reparations, war debts, and tariffs. These three factors have combined with the relative scarcity of gold - which alone would not have had this effect - to bring about the stagnation in trade and industry which is afflicting the world to-day. They have precipitated a crisis without parallel in the history of the world. It is with the appalling effects of this crisis that the nations of the world are grappling to-day. The gold standard has been accepted by us as the natural and proper standard. And Britain was regarded as the citadel of the gold standard ! How great, then, must have been the pressure, how irresistible must have been the forces that compelled this high priest of .t he temple of the gold monetary stan- dard to desert the temple; to hold ajar its doors, to abjure its ancient creed. On the 2lst September, 1931, Great Britain went off the gold standard. The effect of this upon Britain, Australia, arid the world generally was profound and far-reaching. Many people prognosticated disaster for Great Britain as a consequence of her abandonment of the gold standard. It is important that we should not lose sight of what were its effects, because this bill has been introduced in direct consequence of what Great Britain did on the 21st September, and the experience gained by that country during the intervening months. Ear from Great Britain going down to irreparable disaster, it has made a most miraculous recovery. It was sick almost unto death before it abandoned the gold standard, but under sterling its . trade has increased, its unemployed decreased. Its export trade had been reduced by hundreds of millions of pounds and its industries and manufactures were stagnant. But Great Britain, although far from normal, is enjoying better conditions than it has experienced since 1925.
– The number of unemployed in Great Britain has increased.
– I do not say for a moment that all is well with Great Britain; but, comparing its conditions before the 21st September with its conditions afterwards, no sensible man will deny that Great Britain has taken a step in the right direction. Britain has turned its back upon gold. ~
We are asked in this bill to approve that principle in so far as it applies to the note issue. Gold has fallen from its pedestal. No authority can speak with such weight as can the great financiers of England. London has long been the gold centre of the world, yet it turned its back upon gold. A bill substituting sterling for gold was introduced into the House of Commons, at the instance of the Governor of the Bank of England. That is the answer to all those who say that this bill is a revolutionary step, for its sponsors are men whose authority none can dispute. Whether it is good or bad is another matter. We are to judge that from the experience of Great Britain duri ng the intervening months, and from the fact that half the world lias followed in its train. What was the immediate effect of Great Britain going off the gold standard ? Its export trade had been reduced by hundreds of millions of pounds. On the 20th September a manufacturer, quoting an article for Bale in France, Germany, or Austria, would be able to quote, say, 50s» a dozen, expressed in terms of francs, marks, or kroner, but, on the 22nd of September, he could quote 37s. 6d. “What had happened? There had been a devaluation of the £1, and that had given Great Britain an enormous advantage. That advantage it still retains, and will retain unless sterling recovers, and gets back, in effect, to par. Lf sterling returns to par, Great Britain will be no better off under sterling than it was under gold. If internal price levels rise, then external prices will naturally be affected ; but the fact remains that sterling prices have, as the Assistant Treasurer reminded us yesterday, been remarkably steady.
– The price of gold has fallen,
– Naturally. What has happened is that sterling has now been accepted by Great Britain, and by most of the other countries of the world as the new monetary standard. I have already stated that it was at the instance of the Governor of the Bank of England ! that this momentous revolutionary change was made. I have said -that this bill is not revolutionary. It maintains the traditional policy that our institutions must be in harmony with those of Great Britain and modelled upon them. But so far as England itself is concerned, it, took a revolutionary step. No greater one has ever been taken in England, and if. was followed in a .few months by another revolutionary step - the abandonment of the fiscal policy by which Great Britain had sworn for at least 100 years. Great Britain has done these things, not because any one has converted it by argument, not because of the eloquent appeals of propagandists, but because it has bowed the knee to inexorable circumstances. The Governor of the Bank of England advised the British Government that amending legislation was necessary. That legislation was passed by the British Parliament, and immediately the conditions in England materially im proved. I. admit, with the honorable member for Angas (Mr. Gabb), that there is much yet to be deplored in the condition of England, but it is not for us, who live in glass-houses, to throw stones.
Let me now quote another authority not less reputable than the Bank of England itself. The Bank of New South Wales - the oldest and most important private bank in Australia - issued a circular letter on the 2nd April of this year; and I commend it to honorable members and the people of this country as being a most timely and memorable document, and one that must be regarded as an unmistakable sign of the times. The opening sentence reads -
The political follies of reparation and wardebt settlements, concentrated upon gold by tariffs and embargoes on trade, have broken the gold standard. The use of gold as a means of discharging international debts was restored and extended after the post war chaos of paper moneys, it was expected that it would bring back stability in the command of money over goods as well as in the terms of changing one money into another. Instead of these results there has been since 1929 a collapse of prices so rapid that enterprise has been paralysed, and the honouring of contracts made impossible, especially in those countries which have clung to the old contents of their moneys in gold.
It states further -
A new monetary standard will probably come into general use, as the gold standard did, through Britain giving the world a lead which will meet its practical needs. a managed sterling currency seems likely to restore the balance between enterprise and security by being more staple in its command over goods than gold has proved to be under the excessive strain put on it by foolish policies.
I have said that I welcome this measure as a step in the right direction, and I have been endeavouring to make clear the road along which this first step leads. That is, or should be, sufficiently clear. The circular of the Bank of New South Wales says in definite terms that the cause of the world depression is a collapse in price levels, and that there is no remedy for the disease from which the world isuffering except that of raising price levels to a point which will give to industry a profit on its undertaking. The statement continues -
We need not merely regain a general pricelevel at which normal readjustments in response to particular market changes cun preserve the balance. Having regained a sound price-level we must hold it. Security against intiation, as well as deflation, thus calls for not only (a) restored chances of profit in the main activities of the community and (b) budgets steadily progressing towards early equilibrium but, above all else, it requires a central reserve bank politically and economically independent.
The point that emerges from a review of the circumstances which have made this bill necessary is that the whole world is now being compelled to recognize that for one reason or another the gold standard has brought about such a collapse of price levels as to bring civilization within an ace of irreparable disaster. 1 rejoice at this rare opportunity to discuss this subject, free from all party prejudices and preconceived ideas. These preconceived ideas, these great principles, these landmarks by which we have been guided for many years, these ancient principles, are still good; but we must recognize that we are living in a new world, and that we have to deal with conditions without precedent. We have to deal with facts. We have evolved doctrines and principles suited to a world of scarcity, that world of scarcity which stretched back to the beginning of time. Suddenly, we have been projected into a world of abundance, yet people are still talking about principles and doctrines, which, although admirably adapted to a world of scarcity, are quite unfitted for a world in which the outstanding factor is overflowing abundance. Modern civilization is exceedingly complex, and fragile, and every sensible man should approach- this subject without party prejudice. This is a matter of life and death, not merely for us, but for civilization at large. It has been admitted that if the war had continued, it would have destroyed civilization. But, unless we can find a remedy for this malady that affects the world, civilization is doomed. Only yesterday Mr. Winston Churchill declared that the great need of the times is such an adjustment of our monetary policy as will bring back to the world the possibility of prosperity. There can be no prosperity while price levels remain below the cost of production, and I am supported in that view by the circular issued by the Bank of New South Wales. The bank is not a revolutionary institution; it is conventional and respectable, it represents tie existing order, but the statements in its circular are as significant as the writing on the wall. It has shown to Australia the way out; like the Bank of England, it has yielded not to argument and propaganda, but to inexorable facts. The Bank of England has adopted sterling because under the. gold standard price levels had been reduced to such an extent as to bring British trade to the verge of ruin. The remedy for the world is such a reform of currency as will ensure the stabilization of prices at a level that will give industry a profit on its enterprise. Mr. Winston Churchill has said that this cannot be achieved by any one nation; that is true.
The Leader of the Opposition was excusably critical of the hostile attitude of the then Opposition towards the banking bill introduced by his Government last year. I did not join in the clamour against that measure, but I submit that there is a difference between the position that existed then and that which exists now. But whatever the Scullin Government did last year and whatever this Government is proposing now, I am content that both ministerial and opposition parties are in agreement with the fundamental and vital principle embodied in this bill. The Leader of the Opposition supports it, as I do, because it is a step in the right direction, but whether his reasons are the same as mine is for him to say. The Assistant Treasurer also must recognize the immense implications of this measure. That the world has taken a definite step towards a new order of things is undeniable. The fortunes of Australia are linked with those of Great Britain; the prosperity of the United Kingdom will mean the prosperity of Australia; her downfall will mean our destruction ; her abandonment of the gold standard has stimulated her stagnant industries to activity ; but, unless sterling is stabilized at a level which will act as a spur and stimulus to industry, her condition under sterling will be no better than under the old order. What is imperatively needed is the stabilization of forces at a sound economic level. This is now recognized by Britain, for she has already taken steps by getting authority to borrow £150,000,000 to stabilize foreign exchanges and, in effect, stabilize ‘internal price levels. I said that this bill was a step in the right direction; along what road it leads us cannot be doubted. Therefore, we adopt this innovation with our eyes open. An honorable member who supports this measure does not necessarily bind himself to support all that may logically arise out of it. But it is evident that all nations are being compelled to recognize that the great problem of the world is the monetary system. Those who won the war and those who lost ; those who amassed gold that should have been available for the nations, and those whose gold was drained from them, all alike, are in dire straits. The remedy which Great Britain has adopted has been forced upon her. For the gold standard she has substituted a flexible standard that can be adjusted to her circumstances of to-day - to the circumstances of a nation carrying a load of £7,000,000,000 of debts and reparations. The world must face the facts. There can be no prosperity or salvation for the nations until they come together and recognize that they must adjust their financial obligations on a practicable basis.
This bill will certainly not place Australia in a worse position than it occupies to-day. It will not detrimentally affect our trade. Id sterling the reserve against the note issue will be as liquid as gold would have been. The Leader of the Opposition has rightly said that until Great Britain collapses our securities in sterling will be as good against the world as if they were in metallic currency. Necessarily Britain’s departure from the gold standard lessens Australia’s loan liability in respect of both principal and interest. When sterling is worth about 16s. instead of 20s. gold parity, our obligations are reduced correspondingly. The Assistant Treasurer dealt with the effect of this alteration upon exchange rates. I do not agree entirely with his explanation of the factors that determine exchange rates. I would rather say that the main factor in determining these rates is price levels.
– That should be so, but in the past it has not been. Borrowing has been a big factor.
– Is not the balance of trade a bigger factor?
– Both borrowing and balance of trade are important factors, but the main factor is the price levels in the respective countries - what the currency of one country will buy in the other. The existing exchange rate of £25 10s. benefits the exporter, for he now receives £125 in Australian currency as against the £100 he would receive if the exchange were at par. Then, too, the effect of the high rate of exchange upon the currency is to increase the purchasing power of the community. On the other hand we have to pay so many more Australian pounds for imported goods and for interest and loan redemption. So that we may say that what Australia gains on the swings it may lose on the roundabouts. But the stimulation of the primary industries is most desirable, and I am entirely in favour of such an exchange rate as will help them to tide’ over the bad times. There must be such an adjustment of the internal price levels and purchasing power, as will enable the primary producer to get a higher price for his commodities. The circular of the Bank of New South Wales recommends that the rate should be raised. -That is for the Commonwealth Bank to determine.
I support this bill because - and I commend this view to the Leader of the Opposition - it is based on sound principles, inasmuch as it leaves the control of the gold reserve and the currency to a body that is independent of political and economic control. That is vitally important. One of the reasons why the fiduciary notes proposal received scant mercy from some sections of this Parliament was that the currency would have been under the control of authorities that were not beyond political and economic pressure.
– The fiduciary issue was to be limited by statute and the objects to which it was to be applied were to be specified.
– Quite so; but I remember when Mr. Theodore was asked what would happen if the £18,000,000 of fiduciary notes proved insufficient, he replied that if more were required more would be issued.
– Parliament would have determined that.
– Of course it would; but I am opposed to Parliament doing that.
– Is riot Parliament making the change which this bill proposes?
– It is merely giving the Commonwealth Bank power, in its discretion, to keep gold in Australia or ship it abroad, or to maintain the reserve partly in gold and partly in sterling.
– What does the right honorable gentleman think that the bank will do?
– I do not know; but I draw a fundamental distinction between a currency managed by parliament or any authority subject to political control and a currency managed by a body free from such control.
– No one suggested that Parliament should manage the currency.
– Everyone with any sense must know that that would have been inevitable if the policy of the previous Government ‘had been adopted.
– The right honorable gentleman is spoiling a good speech; he should stick to facts.
– I am dealing with the facts.
– The right honorable member is dealing with suppositions.
– That is not so. If the £18,000,000 desired by Mr. Theodore had been made available, it is as sure as it is that the sun will rise tomorrow that another £18,000,000 would have been asked for very shortly afterwards. I draw a fundamental distinction between the principle of the control of the currency by the Commonwealth Bank Board and the control of it by Parliament.
– At any rate, this proposal means that our gold will be exported.
– It means that the bank may do as it thinks fit. The Leader of the Opposition (Mr. Scullin) says, “Stick to facts”. The fact is that the Commonwealth Bank Board may, if this bill is passed, convert its reserves into English currency, or it may hold them in gold.
– The future will tell whether the gold will be exported or not. Mr. HUGHES.- Then, let us leave it to the future. In the meantime, I, like the Leader of the Opposition, will support this measure, because I believe that it will not in any way weaken the credit of Australia. It is an adaptation of ourselves to circumstances and a gesture which shows approval of the policy of Great Britain and willingness to follow her in this as we have followed her in many other directions.
.- The right honorable member for North Sydney (Mr. Hughes) made some quotations from the excellent report issued last month by the Bank of New South Wales. I wish that he had directed the attention of honorable members to the chart published ‘in that report, which shows the price levels of the exports and the products of the sheltered industries of Australia.
The Leader of the Opposition (Mr. Scullin) was somewhat plaintive in his endeavour to get honorable members to believe that the policy underlying this bill was analogous to that brought forward b^y his Administration eighteen months or two years ago, when a bill was introduced into this House for the establishing of a Central Reserve Bank. It was provided that the bank should be empowered to lend unlimited sums of money to the government of the day without security. There is nothing like that in this legislation.
In regard to the proposed export of gold, it will be remembered that when Sir Robert Gibson appeared at the bar of the Senate, the question arose whether it was preferable for Australia to default or to send her gold reserves away. I defy any honorable member to prove that thp legislation introduced by the previous Government provided that the gold should be sent away and sold for the purpose of investing the Droceeds in firsi class British securities. . But that is the object of this measure. The policy of the previous Government was to find money for the time being. Complete indifference was shown to the future. Its inflationary policy was denounced by the Opposition of the day; but the present Leader of the Opposition is trying to make the country believe that this Government is following in his footsteps. It will be remembered that in one of the financial measures introduced by the previous Government it was provided that power should be given to the Treasurer, without reference to the Commonwealth Bank Board, to issue bank notes to the value of £18,000,000. Mr. Theodore, who was the Treasurer at the time, made it very clear in a speech which he delivered at Adelaide, that, when that money was spent, more would be found if necessary.
The right honorable member for North Sydney spoke of the wonderful recovery of Great Britain. No doubt there has been a remarkable improvement in that country since she went off the gold standard. But the right honorable gentleman should have stated that the improvement was entirely due to the fact that the British budget was balanced. Had the budget not been balanced, British sterling would not be in the position it is in to-day. Two years ago Sir Otto Niemeyer told the previous Government of the dangers which faced it and of the necessity for it to put its house in order. Had his advice been followed we should not have witnessed the debacle of the last few months.
The Leader of the Opposition was very ill advised in making his remarks to-day, because every one knows very well that the policy pursued by his Government, particularly while Mr. Theodore was a member of it, was tending towards extravagance in government and the shirking of major issues in every way. The object of the proposed fiduciary note issue was simply to provide funds to carry on operations for the time being. It is of no use for us to try to delude ourselves. The question before us is whether our gold shall or shall not be shipped to England to be sold and the proceeds invested in gilt-edged securities to enable as to meet our overseas obligations. That is the whole thing in a nutshell. First-class British securities lodged with the Bank of England will be more useful to us there than gold here. It is a pity that this policy was not adopted five or six months ago, when gold was selling for £7 7s. an ounce, for the resultant profits would then have been greater. First-class
British, securities will be more valuable to us in England than the gold lying sterile in the bank vaults here.
I do not desire anybody to assume that I think that, having got away from the gold standard, we should never return to it. It is true that bimetallism, silver, denomination, and silver exchange may become factors in our monetary system, but we must face the fact that gold is the one basis of value which every nation in the world will accept. I hope that, when we overcome our present troubles, we shall return to the gold standard, for gold, in financial affairs, is like a solid foundation in a great building. It is the emblem of security. If ever we desire to borrow money overseas, and I hope we shall not return to the bad practices of a few years ago in that respect, it will be well for us if our financial structure is sound, and it will be if we return to the gold standard at the right time.
The arguments advanced by the right honorable member for North Sydney (Mr. Hughes) were economic rather than monetary. It is useless for us here to talk about the fixation of price levels, for we can do very little to determine the price of our exportable commodities. We may talk about exchange rates, but our exchange rates are not dictated by price levels. If we had three times the quantity of wool, wheat, and other commodities to sell, even though prices were low in London, exchange rates would not be greatly affected unless they created a reserve credit. It is simply because our credit has been lowered in England that the exchange has been against us.
I hope that consideration will be given at Ottawa to the devaluation of the pound. In view of our huge war debts, and the tragic losses of European countries, this issue should be raised. Even though certain countries may refuse to cancel war debts, they may agree to the devaluation of the pound and the dollar, and so bring the interest bill down considerably.
I do not think that the Assistant Treasurer (Mr. Bruce) gave to the associated banks the credit due to them for the part they have played in assisting in the management of the finances of Australia, particularly during the war. I well remember what happened in 1924. when the Note Issue Board caused considerable trouble here through its deflation policy. Wool sales which were being held in Brisbane were stopped, because money was not available. A Japanese firm offered to ship £200,000 worth of gold through San Francisco to Sydney in exchange for notes, in order to buy wool, conditionally upon being able to get gold of the same value back when the notes were returned. At that time, when the position became intolerable, the associated banks imported into Australia no less than £10,542,807 worth of gold, to strengthen their security. The gold was lodged in their vaults and was recently commandeered by the Commonwealth. In addition these banks lent £10,000,000 in gold to the Commonwealth during the war, and took £10,000,000 in notes in exchange for it. It was mainly through the actions of the associated banks that, pursuant to recent legislation, Australia was able to export, large quantities of gold to enable her to pay her debts.
Because of the remarks of two influential members of this Parliament, I wish to take some credit to myself for the attitude that I adopted when a bill to amend the Commonwealth Bank Act was before this House in 1924. The government of the day deliberately allowed a provision to remain in the measure to allow the Treasurer to supersede the Note Issue Board at any time he thought fit. In my secondreading speech I drew attention to the grave danger of leaving such a power in the hands of the Treasurer, and intimated that I intended to move an amendment for the repeal of this provision, which was contained in section 60p. In consequence of the trend of the debate at that time, the guillotine was brought into operation under conditions which prevented any honorable member from moving amendments; but I obtained a promise from the Prime Minister that the amendment which I desired to propose would be introduced in the Senate. It was subsequently moved in that chamber by Senator Pearce, and agreed to. If it had not been for that action, we should not have had an election towards the end of last year, Mr. Theodore would have been able to assume complete control of the note issue, and many . honorable members who are now supporting the Government in this chamber would still have been private citizens.
I hope that this gold is not being sent overseas merely to reduce exchange artificially. I oppose any political interference with exchange. We owe it entirely to the Bank of New South Wales that exchange rose from 8 per cent, to 30 per cent. It was because of the action of the Commonwealth Bank, which was probably justified, that the rate has been reduced to 25 per cent. I believe that, with the influence of the associated banks, the Commonwealth Bank will see that a fair and reasonable rate obtains. I am also of the opinion that an effort was made to keep exchange pegged, through the representations of the Commonwealth Government and the Commonwealth Bank, in the interests of the sheltered industries. The associated banks saw that that could only result in the destruction of our primary industries, and took action accordingly. I shall support the bill, a3 I believe this to be a. wise procedure at the present time. However, I hope that, as we begin to recover our lost financial prestige and trade develops, we shall get back to the gold standard upon which we remained for so many years. Every other central bank in the world, while keeping a percentage of its reserves in foreign exchanges, ensures that an adequate proportion of gold is retained. We are departing from that sound practice, for all our gold is to go overseas. I trust that the Government will make every endeavour to see that we return to the gold standard when conditions improve.
.- It is amusing to me to listen to the speeches that have been made this afternoon, and particularly that of the right honorable member for North Sydney (Mr. Hughes). In his concluding remarks, the right honorable gentleman sought to make it clear that he has at no time favoured the political or national control of banking. We know very well that he was a prominent member of the Australian Labour Party, a plank of whose platform advocates the control of the credit of the nation by the Commonwealth Bank, and that the right honorable gentleman was a member of the
Government that established that bank. Now he repudiates his former beliefs.
We must all realize that, under the prevailing capitalistic system, civilization is adrift. That is inevitable while we worship the fetish of a gold standard. While this measure may afford temporary relief, it cannot control the position for long. Most of the civilized nations have abandoned the gold standard, and it is universally admitted that an alteration in our method of currency is desirable. Obviously, the only true basis of wealth is the productive capacity df a country. Gold is not a commodity that one can eat. It is a metal that is mined from the earth, and then stored away in vaults seeing the light of day only when a country finds it necessary to rectify an adverse trade balance. [Quorum formed.’]
This bill proposes that, in future, the backing to our currency shall be English sterling. I gather from the speeches to which I have listened that the English note issue is backed by a treasury-bill, which has for many years maintained parity with the gold basis. During the war years Britain went off the gold standard, which was re-established in 1925, and again abandoned it this year. If honorable members opposite are content to back our credit by the note issue of another country, why was there such strong opposition to the proposal of the Scullin Government for a fiduciary issue, backed by the credit of the nation? Our people realize the potentialities of Australia, and must prefer its assets to the English note issue as a backing to our credit. At the same time, I realize that this proposal may be to our advantage in our trade relations with Great Britain. However, I cannot forget that when the Scullin Government proposed a fiduciary note issue to the extent of £18,000,000 the bill was roundly condemned by honorable members who are now on the Government side. Later, again in the teeth of strong opposition, the Scullin Government passed a measure sanctioning the export of £5,000,000 of our gold reserve. Was that action not on all fours with the present proposal? As a matter of fact, this is infinitely more drastic, for it contemplates sending the whole of our gold reserve overseas. In opposing that measure the present Attorney-General (Mr. Latham) said -
Under this clause we are asked to agree to the exporting of gold for use in the discharging of the indebtedness of the Commonwealth in London. . . There will be no relation at all between Commonwealth currency and gold. That will be a serious step to take. .
It would be interesting to know what the honorable member has to say regarding this bill. The present Minister for Customs (Mr. Gullett) declared -
I cannot conceive of a step more likely to shatter completely what little remains of this nation’s credit. . . Our gold reserve is a very definite check to currency inflation. . . It would be the same as if the Government were determined by shipping all the gold out of the country to make our currency a fiduciary one.
It is contemptible to make political propaganda out of a measure which is designed to benefit the country. I do not propose to oppose this measure. I believe that we should go even a little further. We should obtain control of banking as well.
I criticized the right honorable member for North Sydney (Mr. Hughes) for having deserted the Labour party, and I could, with equal right criticize the Prime Minister (Mr. Lyons), because he, too, was at one time a Labour supporter. He knew the policy of- the Labour party regarding banking, but in a speech which he delivered in this House, he opposed that policy as enunciated by a leader of the party. Referring to the proposed shipment of gold, he said that, when the gold was sent away, there would be nothing left but a fiduciary note issue, because that is what our currency would be when the gold backing had gone. When the gold had been shipped abroad, he said, the last vestige of confidence in our currency would be destroyed. The honorable gentleman is not in the House at the moment, and I do not know what he has to say about this measure; but he will have some difficulty in reconciling his attitude on that occasion with his support of the measure now before the House.
For years, our note issue has been based on the gold standard. The Bank Act required that we should have a gold backing of 25 per cent, of the notes issued. On many occasions, we have exceeded that statutory issue, notably during the war. During that period, and even afterwards, the statement on the face of our bank notes that they might be exchanged for gold was simply an untruth, because the notes were, in fact, inconvertible. At the present time, we have £52,303,426 of notes in circulation, whereas our gold reserve amounts to only £10,509,000.
We have reached a stage, not only in this country, but in the world as a whole, when we must get on to the new basis of currency. There must be an international agreement for the establishment of a new monetary standard, and, at the same time, there must be an arrest of the fall of prices as the only means of avoiding a crash, which would be a greater calamity than anything the world has yet suffered. Through economic circumstances over which we in this country have no control, we are faced with the alternative of abandoning our present system of currency, or of accepting a greatly reduced standard of living. The gold standard has outlived its usefulness. The right honorable member for North Sydney said that we could do nothing while world prices continued to fall. The fact is that the cost of production in European countries, and countries with a white population, is to-day higher than in Asiatic countries, so that the Asiatic countries are able to undersell their white competitors. They are getting the trade to-day, and unless we take measures to protect ourselves, we shall have to come down to the coolie standard of living. Even if we did this, what i3 there to prevent a further depression in the coolie standard?
– What is the next stage ?
– The coolie standard today is sack cloth for clothing, and a bowl of rice for food. The next step, I suppose, is to abandon the sack cloth. Gold is not needed, except as a token of international exchange. I suggest that, if we wish to find some use for our gold, we might make of it a bust of the Hon. J. T. Lang. If this bust were exhibited, and a charge made to see it, much revenue might be obtained. Or we might’ go further, and, as the Israelites did, we might make a golden calf, set it up in Canberra, and let the worshippers of Mammon pay something to look at it. At any rate, that would be better than locking up the gold in the vaults.
Much opposition emanated from honorable members who now support the Government, when the Scullin Government brought down its proposal for a fiduciary note issue. I remind honorable members that, when the present bill is passed, and the last ounce of gold is shipped abroad, we shall have’ a fiduciary note issue, not of £18,000,000 aa was proposed by the Scullin Government, but pf £50,000,000, or whatever is the number of notes in circulation. The Government is to be complimented upon its adoption of Labour’s financial proposals in a small measure, even if that adoption comes somewhat late. I am glad that it is intended to remove from our bank notes the deceiving statement that the bearer may exchange the note for a golden sovereign. [Quorum formed.] It will be interesting to hear what the honorable member for quorums - I mean the honorable member for Angas (Mr. Gabb) - will have to say when he speaks to this measure. He was a very bitter opponent of the fiduciary notes proposal ; in fact, that was one of the main reasons for his leaving the Labour party.
– I left the Labour party because it took back into its ranks a discredited man before he had cleared himself.
– I remember that the honorable gentleman had a great deal to say about the fiduciary notes proposal, as well. I think it was he who suggested that the fiduciary notes should boar on one side of them a picture of the ex-member for Dalley (Mr. Theodore) and on the other that of a bottle of “Old Court” whisky. I shall be interested to hear how the honorable members justifies his support of the bill now before the House.
My only complaint against the Government’s proposal is that, while it embodies part of Labour’s financial policy, it does not embody the whole of it. Steps should be taken, not only to control the note issue, but to control cheque currency as well. By means of cheque currency, the assets of the country are exploited by private banking institutions. All forms of property, including our homes and our industries, are mortgaged to private banking institutions per medium of cheque currency. When the Commonwealth Bank was first established by a Labour Government led by the late Andrew Fisher, and took over the control of the note issue, it was really thought by the government of the day, that it had taken a step well on the road to the nationalization of banking, which is the policy advocated by the Labour party. But it left out of its calculations the right of the private banking institutions to exploit the people through the cheque currency. The private banks, without any gold backing, used the assets of the people in order to operate the cheque system. This amounted to a creation of currency by private institutions which was accepted as legal tender. By this means they “have been permitted to exploit the people for their own profit. When a person interviews the bank and asks for a loan on his property, he is given the equivalent of about onethird of its value, not in cash, but in the form of a cheque book for which a charge nf 5s. is made. The private banks are using the homes, property, and industries of the people with which to back their cheque currency. The high rates of interest that are exacted from the people on loans against their assets should not be placed in the hands of private banks. The only bank that should have the right to exploit the country’s assets is the Commonwealth Bank, and this measure should provide that after a certain date it will be illegal for any banking institution other than the Commonwealth Bank to issue cheques. The Commonwealth Bank was originally intended to be the people’s bank, but the right honorable member for Flinders (Mr. Bruce), when Prime Minister in 1924, converted it into a sort of reserve bank. He made it a bankers’ bank, for the buttressing of the private banking institutions. The Commonwealth Bank should be used in the people’s interest, which was the intention when it was established in 1912.
Under this measure it is proposed to adopt the currency of Great Britain, but that currency is no more stable than our own. We should back our note currency by the issue of treasury-bills to the extent that is deemed advisable at the time. In that way we should be able to exercise on our currency a check that will not be possible if we adopt the currency of Great Britain.
– Does the honorable member intend to oppose this bill?
– I am not opposing it but putting forward suggestions with the object of improving it. Of course I realize that my suggestions will be fruitless because the Government will refuse to accept any amendments submitted by the members of the party to which I belong. This measure is being introduced as a result of the heavy debts incurred by many nations during the war. Well known economists have stated that war debts must be cancelled before the world can regain financial equilibrium. Many people to-day contend that all debts should be cancelled, but when the Premier of New South Wales (Mr. Lang) suggested that there should be « moratorium in respect of our overseas debts, and a reduction in interest rates, he was abused by practically the whole of tha press of Australia and the supporters of the Commonwealth Government.
– The debts of New South Wales are not war debts.
– Much of the debts. of New South Wales and of Australia generally was incurred as a result of the war.
– New South Wales has expended millions of pounds on the repatriation of returned soldiers and the establishment of soldier settlement^: That State accepted that responsibility willingly and borrowed money to enable it to carry out the necessary works. Tha,* loan is included in our overseas indebtedness. I am willing to supply to the Postmaster-General a statement issued by the Minister for Lands in New South Wales which bears- out what I have said.
– I rise to a point of order. I submit that a discussion on war debts, and in particular the debts of New South Wales, has no application to this bill, the object of which is to permit of the transfer of our gold reserves to the extent of £10,500,000, to Great Britain.
– The point of order raised by the honorable member for Perth (Mr. Nairn) is perfectly sound. I am sure that the honorable member for Hunter (Mr. James) does not desire to discuss war debts at any length, and I ask him to connect his remarks with the bill as early as possible.
– The Postmaster-General has said that the debts of New South Wales are not war debts, and I am replying to him. I can supply him” with a statement of the Minister for Lands in New South Wales, which shows that that State has incurred heavy debts as the result of the repatriation of returned soldiers and the establishment of soldier land settlements. Our borrowings overseas have depleted the gold reserves of this country, and it is because of that that this measure has been introduced. But we should also seek relief by joining with other nations in the agitation for the cancellation of war debts, or, at least, for a reduction in the interest rate on our overseas indebtedness; otherwise this legislation will not afford the relief that is anticipated. Neville Chamberlain, speaking recently in the House of Commons, said -
You may easily destroy, by proposed action at Lausanne, the powerful movement in favour of debt reductions which is reaching all classes, in the United States. I counsel and urge that we lay aside every impediment and concentrate on the one vital prior objective, namely, international action to arrest the fall in prices.
Sitting suspended from 6.15 to 8 p.m.
– It is desirable that an international conference be .called to consider currency. The monetary system is not the only problem confronting the world; unemployment has reached gigantic proportions, largely due to the mechanization of industry, and, whatever monetary policy be adopted, the problem of finding employment and a market for the displaced labour will still remain. The provision in this bill to permit the Commonwealth Bank to ship abroad a portion or. the whole of the gold reserve with a view to converting it into sterling is similar to the proposal of the Scullin Government to issue a fiduciary currency. The old theory that gold backing is essential to a currency has been abandoned by many countries, including Australia. For years past our Australian notes have been inconvertible, but the stability of our internal currency has not been affected. So long as people can secure 20s. worth of value for £1 their confidence in the Australian note will continue. The £10,500,000 of gold held in reserve by the Commonwealth Bank will realize £13,500,00Q worth of sterling. Sterling is backed only by the productive wealth of Great Britain, and we are now asked to accept the credit of another nation for the backing of our internal currency. I have said before that we should rely on the assets and productive wealth of our own country as was proposed in connexion with the fiduciary note issue. At the present time £52,300,426 worth of notes is in circulation or held by the Commonwealth Bank; that is £3,000,000 in excess of the statutory limit. To what extent will the note issue be extended when the £10,500,000 worth of gold is converted into sterling? Will the note issue then have a smaller backing than 25 per cent. ?
– Where did the honorable member get those figures?
– From the speech of the Assistant Treasurer (Mr. Bruce) ; if the honorable member for Richmond (Mr. R. Green) had been in the House he would have heard them.
– The honorable member for Hunter is wrong.
– I thought so.
– The gold backing is 20 per cent, of the note issue, whereas the statutory requirement is only 15 per cent.
– Order! The honorable member’s time has expired.
– I knew he was wrong.
– You go back to the pub; that is where you came from. You come here to annoy every other member of the House..
– I take exception to that remark, and ask that it be withdrawn.
– Of what remark does the honorable member complain?
– I am sorry that you did not hear it, sir. I have a distinct objection to what was said by the honorable member for Hunter (Mr. James).
– I suggest to the honorable member for Richmond that by his frequent interruption of the honorable member for Hunter he invited some unpleasant retort. If any remark of the honorable member for Hunter was personally offensive to the honorable member for Richmond, I shall ask that it be withdrawn. What were the objectionable words?
– The honorable member tor Hun.ter certainly made an objectionable remark concerning myself. I am sorry that you, Mr. Speaker, did not hear his statement that I should go back to the “ pub “. I take objection to that remark, especiallv as it comes from-
– Order ! The honorable member for Richmond must resume his seat. He is not entitled to make a speech when asking for the withdrawal of a remark to which he takes ».xception. I did not hear any statement that was personally offensive, and as the honorable member for Richmond has not repeated the remark of which he complains, although I have twice asked him to do so, I cannot, ask that it be withdrawn.
– I am sorry that you appear to be so deaf, sir.
– The honorable member must not reflect on the Chair. The honorable member for Perth.
– I rise to a point of order. The words used by the honorable member for Hunter were “ You go over to the pub again “. As a member of the House [ regard that remark as offensive.
– The Speaker is deaf; he cannot hear these remarks. Mr. SPEAKER.- I ask the honorable member for Richmond to withdraw that reflection on the Chair and apologize.
– I withdraw the remark and apologize.
– Will the honorable member for Perth proceed with his speech ?
– I object to these offensive words being used in the chamber, as they frequently have been to-day, and I ask that they be withdrawn.
– Order ! The Chair regards the incident as closed. If the honorable member for Perth is not prepared to proceed with his speech I shall call on another honorable member.
– So far as-
– Order! Mr. R. Green. - All right, put me out if you. like.
– I name the honorable for Richmond (Mr. R. Green) for repeatedly disregarding the authority of the Chair.
– I urge the honorable member for Richmond to -submit to the authority of the Chair. I am sure that on calm reflection he will recognize that that is the right thing to do.
– I would like a little fairness from the Chair. After the appeal by the Prime Minister, I withdraw the remark to which you, Mr. Speaker, have taken exception, but I hope you will be impartial in future.
-Order! No debate can follow the naming of a member. I ask the Prime Minister to take the usual action.
– May I be permitted to make a final appeal to the honorable member for Richmond to Avithdraw unreservedly the reflection he has cast upon the Chair?
– Doubtless the Prime Minister desires to be kind, but the honorable member for Richmond has grossly violated his privileges as a member of the House, and the circumstances demand that he be punished.
– In view of your statement Mr. Speaker, I regretfully move -
That the honorable member for Richmond (Mr. R. Green) be suspended from the service of the House.
Motion agreed to.
Mr. R. Green accordingly withdrew from the chamber.
.- I rise to explain briefly the reason why I support this bill although I opposed the banking legislation introduced last year by the Scullin Government. Last year’s bill contemplated, as this bill contemplates, the export of the gold reserve, but that is the only respect in which they bear any resemblance. The Scullin Government intended, when it disposed of the gold overseas, to use the proceeds for the’ current requirements of the Commonwealth, and by that means create a little temporary prosperity while dissipating the capital assets of the country. To that proposal the House took strong exception, and I think always would. This bill, on the contrary, while providing that the gold reserve may be sent overseas to take advantage of the enhanced price which gold will realize abroad at the present time, definitely prescribes that the proceeds shall not be spent, but shall be paid into the. reserve supporting the note issue. A further feature of the proposal of the Scullin Government was that it was definitely associated with a policy of inflation. The then Treasurer submitted a bill to increase the note issue by £18,000,000 without any additional backing, and said that if that sum proved insufficient the currency would be further increased “ by many scores of millions,” if necessary. That was inflation pure and simple, and is distinguishable entirely from the proposal now before us, which is simply that the reserve held against the note issue may be converted from gold to sterling. There is no provision here for either the destruction or diminution of the reserves. Circumstances have altered somewhat since the measures of the Scullin Government were before Parliament. Great Britain has in the meantime, gone oft” the gold standard. We are inextricably associated with Great Britain, particularly in fianancial affairs, and there is every reason why we should follow her example and adopt the sterling standard. Australia can safely follow Great Britain in this respect. The amount of gold now held is valued at £10,500,000, and it is stipulated in the bill that this amount shall be retained us a reserve; but there is liberty to pay whatever measure of profit may be obtained for converting the gold into sterling - estimated’ at about £3,000,000 - into a fund to be used for the purpose of maintaining the exchange rate. The Commonwealth Bank has, with the consent of the Government, and the approval of. the private banks, undertaken to maintain the exchanges of the country. To do this it is absolutely essential that the bank shall have substantial sums at call in London, and this £3,000,000 will probably be much more valuable if used in that way than if retained for investment. The primary industries of Australia, ‘as we know, are getting an advantage of about 20 per cent, from the existing exchange rate. If it were not for this they would almost all go out of existence. It is of the greatest importance, therefore, that the authority con- trolling the exchange rate shall be pui in a position to maintain a reasonable advantage to assist in the maintenance of our primary industries.
The proposal to export our gold it not new. It has been definitely recommended to us by leading financial experts in England. It is proposed that the gold shall be sold in New York, which al present provides the best market, and that the proceeds shall be invested in sterling securities in England. These securities are as good as any that Australia can expect to obtain.
The Leader of the Opposition (Mr. Scullin) has stated that the export of our gold will make our note issue wholly fiduciary. In that respect the right honorable gentleman is in error. It is true that our note issue is to a large extern fiduciary. Any note issue is fiduciary to the extent, to which it is not backed by tangible assets, and to which it depends on the trust of the country. Our note issue has, at present, a backing of £10,500,000 in gold. Under this proposal this backing will be converted into currency with a tangible backing of. more than £13,000,000 sterling. To say, therefore, that the note issue is wholly fiduciary is quite inaccurate. It is fiduciary only to the extent to which the total issue, now about £52,000,000, exceeds the actual reserve which represents £10,500,000 in gold, and which, it is estimated, will represent more than £13,000,000 in sterling.
An important feature of this proposal is that the securities which will be purchased will be reasonably though not absolutely liquid. It is provided thai they shall be of such a character that they can be quickly converted. It is estimated that they will return interest to the extent of £250,000 a year. The proposal, therefore, is in the nature of a good financial investment, and for that reason the Government is entirely justified in making it.
I do not wish to deny the Leader of the Opposition any credit that may be due to him for having vigorously advocated the shipping abroad of our gold. He is entitled to all the credit due to him in that respect; but, as I have said, the idea is not entirely new. The right honorable gentleman is wrong, however, in trying to persuade the House that the method of conversion proposed by this Government is similar to the method of dissipation proposed by his Government.
The fear has been expressed in some quarters that the passing of this measure will be the first step in the utilization of our small reserve fund to meet the current financial requirements of the country, and, particularly, if necessity arises, to meet a loan of £13,000,000 which is becoming due very shortly by New South Wales. If I thought that there was any possibility of such a thing happening I should unhesitatingly vote against the bill. But the measure provides explicitly that the proceeds from the sale of the gold shall be invested in sterling securities in Great Britain. That means that if at any future time an improvident government wished to use this money for the ordinary requirements of the country, it would have to obtain the authority of Parliament to do so. I, for one, would be very loth to vote for such a proposal. I should only do so in a case of extreme emergency. That would be the only thing which would justify us spending the last bit of security which we possess. Because this bill protects the interests of the public, is a good banking proposition, and will enable a profitable and useful investment to be made, I wholeheartedly support it.
.- The Leader of the Opposition (Mr. Scullin) has ably placed before the House the views of the Federal Labour Party on the important subjects of the gold standard and the shipping of our gold reserves abroad. The right honorable gentleman also showed clearly where the credit should be placed for this measure of reform in our monetary policy, and at which door the blame should be laid for setting the reckless financial course along which Australia has been heading for so many years. That blame must rest with the administrations in office prior to the end of 1929.
The honorable member for Perth (Mr. Nairn) has said that if this measure is passed our note issue will not be fiduciary.
– I said that it would not be wholly fiduciary.
– It will certainly be known as a fiduciary note issue, because it will have no gold backing behind it. Under this measure the Commonwealth Bank Board will be able to ship abroad our gold reserves, and, as there will be no gold behind our notes, they will become fiduciary, just like the £270,000,000 worth of notes issued in Great Britain. The bill authorizes the Commonwealth Bank to hold our reserves in either sterling or gold. The way was cleared for the introduction of this bill by the legislation introduced by the Scullin Administration in 1929. I point out, in reply to the observations of the right honorable member for North Sydney (Mr. Hughes), that if the Commonwealth Bank Board does not ship our gold abroad, sell it and invest the proceedings in sterling securities, we shall be wasting time in passing the bill. Surely no one is innocent enough to think that the Bank Board has asked for the introduction of this bill, but has no intention of exercising the power which it provides. If the gold is sold this Government will have caused to be done exactly what the Labour Government proposed to do last year. If the gold is shipped overseas our notes will have no gold backing.
It is amusing that honorable members opposite should try to show that this proposal is different from that of the previous Government. Such an absurd statement is not likely to hoodwink the public.
– The currency will not be increased under this proposal; but it would have been increased under the proposal of the previous Government.
– The right honorable gentleman is confusing two subjects. The fiduciary note issue was one proposal of the Scullin Government, and the proposal to ship our gold overseas was another, and quite a different one. The fiduciary note issue of £18,000,000 would have had behind it, if it had been made, the resources of the whole of Australia. The proposal to export our gold reserve was contained in the Commonwealth’ Bank Bill (No. 2). It cannot be denied that, unless the Commonwealth Bank Board ships the gold abroad and invests the proceeds in sterling securities, the provisions of this bill will be valueless. The right honorable member for North Sydney said that the Scullin Government would have done certain things had it remained in power. He evidently looked upon the Leader of that Government as a dictator, who could do what he liked. We all know that the right honorable member for North Sydney was himself a dictator, and the Mussolini of Australia, for a brief period,, and he evidently judges other people by his own standards.
The honorable member for Balaclava (Mr. White) made an observation during f.he debate that the previous Government intended to use the proceeds from the sale of the gold to meet current expenses. That is utter balderdash. It was proposed that the gold should be exported and sold for the purpose of reducing our overseas liabilities in cases of emergency and ultimately £5,000,000 worth of gold was exported. The members of another place rejected our proposal to export £10,000,000 worth of gold, but eventually they agreed to export half that amount, and it was used, with their approval, to save Australia from defaulting. The gold that will be shipped under this measure will probably be used for a similar purpose. Power is to be given to the Commonwealth Bank Board to sell that gold and the proceeds will be invested in securities abroad, and utilized, if necessary, to meet an emergency.
There is no fundamental difference between this proposal and that of the Scullin Government. Yet, when that Government introduced a bill to ship portion of our gold reserve overseas, honorable members opposite opposed it strongly. It was not the method to be employed that met with their opposition, but the idea of shipping any of our gold abroad. The present Prime Minister (Mr. Lyons), the Minister for the Interior (Mr. Parkhill), the right honorable member for Cowper (Dr. Earle Page), and the AttorneyGeneral (Mr. Latham), were vehement in their protests. The Prime Minister, then Leader of the Opposition, said -
As the result of the shipment of our gold, there will be nothing left but a fiduciary note issue, because that is what our currency will be when the gold backing has gone.
Now the honorable gentleman is seeking authority for the Commonwealth Bank Board to ship the whole of our gold re- serves overseas. No credit is given to the Scullin Government for its farsightedness in the matter. The right honorable member for Cowper was in charge of the Treasury for many years. I am aware that he was referred to by a certain Minister as the most tragic Treasurer that the Commonwealth has had. The right honorable gentleman deplored the fact that provision was being made to ship our gold overseas, and said -
Australia is to remain in a position of splendid isolation among the civilized countries of the world, without a gold reserve.
The present Minister for the Interior also constituted himself an authority on the subject and declared -
The gold reserve which we now hold represents the remnant of confidence which the people of Australia have in our financial institutions.
Any honorable member who is impartial in the. matter must recognize that those who support the Government have shifted their ground.
We are informed that there will be an issue of notes to the extent of £12,000,000 or £18,000,000, to back this proposal. Is that not getting away from the gold reserve and resorting to a fiduciary issue? We know that when countries are in financial difficulties they are prepared to turn to new methods. What was formerly anathema to them has their approval. Professor Gustav Cassell, the eminent Swedish economist, in an article in the Melbourne Herald, quotes the opinion of Lord D’Abernon in these terms -
At the conclusion of his brief, but striking analysis of the economic position he said that he regarded the former handling of the question as wholly ineffective, and emphasized the fact that we can hope -for no favorable results in the future so long as we carry on with the old methods.
That was the asertion of the principal financial adviser of the League of Nations, and is based on the expression of opinion of Lord D’Abernon, who surely cannot be suspected of being a robust, radical.
Professor Gregory, who occupies the chair of banking in the London University, and whom I had the pleasure of hearing lecture before the Australian Economic Society in Mellbourne, is. now a great advocate of the export of our gold. Recently he said - 0
Australia is perfectly justified in shipping gold. It should be shipped to New York and sold, the dollar proceeds to be transferred to London, obtaining the maximum _of profit. . . The profits could be used to pay part of the overseas debt.
Only recently the Melbourne Herald of the 7 th May published this cable message : -
London, 3rd May. Apropos of the proposal for the shipment of gold overseas, opinion in London financial and commerical circles is that Australia cannot longer afford such a luxury as a gold reserve.
As long as Australia keeps her bullion idle a few hundred thousand pounds in interest goes begging.
Shipment of her gold overseas would merely bring Australia into line with England. Such legislation can no longer be regarded as revolutionary.
The whole world is becoming mildly inflationary, with the approval of bankers and leading economists.
While I found the second-reading speech that was delivered by the Assistant Treasurer (Mr. Bruce) was most interesting, it was notable for two things. Although the right honorable gentleman quoted the opinions of a number of people, he had not the common fairness to give the credit that was due to the present Leader of the Opposition for having urged over two months ago that the Australian gold reserve should be shipped overseas and disposed of to advantage. Secondly, his speech interested me, because the whole history of the matter showed that the Government is adopting, one by one, the financial planks of the Labour party’s financial platform, which were anathema to it six months ago. It must be noted that Britain did in 1931 what the Scullin Government wanted to do in Australia in 1929. I know that the honorable member for Fawkner (Mr. Maxwell) will smile at that, but it is, nevertheless, a fact. The British Government found it necessary to adopt a protectionist policy in order to stop its financial drift, and it went off the gold standard. In effect, Great Britain tuned in with Australia. The Scullin Government found it necessary in 1929 - two and a half years earlier -to sponsor a similar course of action, because of the adverse trade balances which had accumulated over a period of eight years to £111,000,000, and because of the crazy policy of borrowing overseas which resulted in an annual importation into Australia of £150,000,000 worth of goods, the legacy of the BrucePage Government. Had the Scullin Government not taken drastic steps to rectify our adverse trade balance, and put Australia on an even keel by stimulating our export trade and Australian manufactures until we were able to send overseas sufficient of our exports to meet imports and interest charges, we should be on the rocks to-day.
Honorable members opposite claim that when the Bruce-Page Government was in office exchange was at par. It was kept at par only by extravagant borrowing overseas. I remember listening to the Assistant Treasurer, when he was Prime Minister, addressing a very large and enthusiastic gathering in Adelaide, and endeavouring to justify to the hilt the policy of borrowing £30,000,000 a year iri London. He said, in effect, “ This is a young country, and we should not hesitate to borrow this money for the development of our great industries.”
– Late in 1928 or early in 1929, just about the time when the present Minister for Trade and Customs said, “Let us go on merrily spending £80,000,000 a year of loan money, if necessary” - a notable contribution to the debate, which probably secured him his place in the Cabinet.- I should like honorable members to listen to what Professor Cannan of the London University, a world-famous economist, writing in the London Observer for the 29th March, 1931, stated. Strongly supporting an increase in the note issue of England, the professor said -
It is difficult to say how far the gradual fall in prices which preceded the slump was due to the idiotic way the gold standard is being worked. Buying and storing up the supply of gold, for that is what the central banks are really doing, by their policy, sends up the value of gold just as buying up houses and keeping them empty would tend to increase the value of houses. What one has to knock into the heads of the nations is that locking up so much gold does a great deal of harm to everybody, besides being expensive to themselves.
– That was not the result of the gold standard, but because of the folly of two nations.
– It indicates that the gold standard has proved a failure. I am aware that conservative bankers hesitated for a long time about going off that standard, but to-day it is generally recognized throughout the world that the gold standard has failed to come up to the expectations of those who clamoured for it for years. Nearly ten years ago it was recommended at the Genoa Conference that was convened by the League of Nations to examine the monetary systems’ of the world, that the principal countries should return as rapidly as possible to the gold standard, the object being the stabilization of prices, the prevention- of violent trade fluctuations, and the avoidance of acute, economic crises and business depressions which periodically trouble the trading companies of the world. As a result of the recommendations of that conference Austria was the first country to return to the gold standard, in the year 1923. She was followed in 1924 by Hungary, and by England in 1925, together with the dominions. By 1930, most of the civilized countries in the world were on the gold standard, but did it protect them from fluctuations in price levels? It has not preserved their prosperity, as was predicted. It has not prevented violent oscillations in price levels, which have proved disastrous to the countries concerned, and have brought about a great deal of disturbance, unrest, and suffering.
When we find men who are reputed to be the leading economists and financiers of the world groping in the dark, we cannot blame the mass of the people for failing to understand so complex a subject. At the present time, millions of people are on the verge of starvation, although our farms and factories are able to produce as much as ever they did. The trouble is that our monetary system has broken down. As Professor Cassel has said, what was thought to be unwise four or five years ago is now being attempted. Only by an international conference of financiers and economists can this problem be solved.
The right honorable member for North Sydney (Mr. Hughes) referred to the fiduciary notes issue bill, but I reminded him when he was speaking that that was something entirely different from the bill seeking authority to ship gold. The fiduciary notes bill provided for authority to issue fiduciary notes to the value of £18,000,000, £12,000,000 to be expended at the rate of £1,000,000 a month for the relief of unemployment, and £6,000,000 in assisting wheat-farmers. Judging by the remarks of some honorable members at that time, one would imagine that that was a revolutionary proposal, but the fact is that the Bank of England has authority to issue notes to the value of £270,000,000 without any gold backing whatever. When the bill before us is passed, and the gold shipped away, our note issue will become an entirely fiduciary one. Recently Sir Robert Home and Mr. L. E. Amery urged controlled inflation in Great Britain, thus vindicating the policy of the Scullin Government. Mr. Winston Churchill, who is a conservative and was once Chancellor of the Exchequer, speaking a few days ago, made a strong demand for international action to arrest the world-wide fall in wholesale prices. In other words, he urged modified inflation. Even that greatest of British economists, J. M. Keynes, has joined the band of inflationists, and, in a recent article in the Atlantic Monthly, he stated -
Great Britain’s abandonment of the gold standard is the starting point of the world’s economic recovery. Great Britain to-day is decidedly the most prosperous country in the world. The forces released by her abandonment of the gold standard will in time undermine and destroy the creditor position of France and the United States of America. A policy of inflation may prevent the almost complete collapse of the financial structure of modern capitalism. I recommend a similar policy for the United States of America. In the United States of America it is almost inconceivable what rubbish a public man has to utter, if he is to keep respectable, but the best bankers see the need for inflation. The United States of America will have to wait for a stimulus for economic recovery from outside. Such recovery will come first of all to Great Britain and the group of overseas countries, which look to her for financial leadership.
It is interesting to note that honorable gentlemen opposite, when they were in Opposition, were compelled, in order to remain “ respectable,” to talk utter nonsense in regard to currency matters.
– The honorable member must not refer to the debates in this House as nonsense.
– President Hoover, a couple of months ago, outlined the efforts that would be made to meet unemployment, and said, “ We must put some steel beams in the foundations of our credit structure”. On the 29th January last, Mr. Reginald McKenna said -
Either we must have a soundly-managed gold standard, which can only be secured by well-ordered international action, or we must definitely abandon gold and rely upon a managed standard without any metallic basis. In cither event one thing is certain; the art of monetary management must be relied upon more and more to obviate such a catastrophe to economic life as we are witnessing to-day. Our experience in the last few months has taught us. which of the alternatives mentioned we should choose.
These are the opinions of gentlemen who have a higher standing in financial circles than honorable gentlemen opposite who, but a few months ago, denounced the proposals of the Scullin Government to ship gold abroad, saying that it would shatter the last vestige of confidence in Australia’s financial stability. Now they are eating their own words. They are supporting a proposal to do exactly what the Labour Government proposed to do when it was in office.
I am glad to see that the Government is adopting one of the planks of the Federal Labour party’s policy, which also provides for the establishment of a central reserve bank to maintain stability of national credit. The Labour party further desires the extension of the activities of the Commonwealth Bank, so that it may become a more active competitor with private banks. In the past, private banking institutions in Australia have exercised too much influence with members of the party opposite. They have tried to mould, not only the political, but also the economic policy of the whole nation. It is only in times like this that monetary reforms can be forced upon them. I do not oppose the Government’s proposal to convert our note issue into a fiduciary one. I believe that the proposal is sound, and that honorable members opposed a similar proposal by the Scullin Government largely out of ignorance. Let them be fair enough now to give credit to the Scullin Government for originating that proposal.
.- I think that we are all aware that it is to a shortage of gold that we may attribute the present fall in world prices, and that shortage is accentuated by the maldistribution of existing gold supplies and their sterilization through being accumulated in the United States of America and France. The Assistant Treasurer (Mr. Bruce), when introducing the bill, made an excellent speech, as did the right honorable member for North Sydney (Mr. Hughes). The Leader of the Opposition (Mr. Scullin), speaking this afternoon, supported the bill which, I think, receives practically the unanimous support of the House. The right honorable gentleman said that these were times of rapid change, and he reminded us that scientists had been successful even in splitting the atom, which was something we might marvel at. I am constrained to marvel also, not only, at the slipshod loquacity of the honorable member for Capricornia (Mr. Forde), but at the splitting of straws by the Leader of the Opposition. Both these gentlemen tried to prove that the. measure now before us is, in effect, the same as that which the Scullin Government introduced last year. There is, as a matter of fact, a very great difference between the two measures. Seeing that the Leader of the Opposition flatly contradicted me when I ventured to suggest that the two measures were different in that the Scullin Government’s proposal was to ship our gold reserve abroad to settle Australia’s indebtedness, I have provided myself with a copy of the bill introduced by the then Treasurer (Mr. Theodore) on the 24th March. It might save a great deal of discussion if I quote clause 7 (e) of that bill; it will, I think, place the issue beyond doubt. Clause 7 (e) reads as follows : -
The Treasurer may, from time to time, notify the board in writing that it is, in his opinion, desirable that the board use for the discharge of the indebtedness of the Commonwealth in London in respect of treasury bills maturing on the thirteenth day of June, One thousand, nine hundred and thirty– one, such amount of gold held by the bank ur by the board as is specified in the notice, and the board may, if it agrees with the opinion notified to it, cause the gold specified in the notice to be so used accordingly, and the Treasurer shall, in exchange for any gold so used, issue to the bank Commonwealth securities to an equivalent amount.
The bill now before us seeks authority for sending overseas certain gold reserves held as a backing for our note issue. This gold will be sold, and the proceeds put into interest-bearing securities in Great Britain. The proposal of the last Government was, in effect, to transfer our present capital account in gold into a current account, with which to settle our debts - a most profligate proceeding, and one closely linked with the fiduciary notes proposal.
Honorable members opposite also endeavoured to show, in the course of their speeches, that the present bill bears some resemblance to the fiduciary notes bill introduced by the last Government. We know that the Treasurer in the last Government, in the course of an oft-quoted speech, said that the fiduciary notes issue would wipe out deficits. When he was asked what would be done when the issue of £18,000,000 was exhausted, he said that he would print more and more notes. The policy of the Labour party at that time was uncontrolled inflation. Honorable members opposite are now trying to get headlines in the press so as to create the impression in the outside world that the policy that they advocated then is the policy which this Government is now adopting. They must have short memories if they believe that. We all know that this measure is totally different from that which was introduced by the Scullin Government. No one will deny that the world’s monetary system can be reformed. What, I ask, is not capable of change in this imperfect world? We are being forced more and more into the position of adopting the system of bi-metallism. Even a conservative thinker such as Mr. Winston Churchill has recently suggested that bimetallism would be useful as supplementing the present metal currency. Even symetallism could be considered when the definite ratio between gold and silver, which is so debatable at the moment, is settled by alloying them in bars and using them for international payments.
I would point out to the members of the Opposition that every member of the
Government is behind this bill. The first of the three financial measures which were introduced by the last Government and for which honorable members opposite are taking great credit, provided for the mobilization of the gold reserves of the trading banks. The consequence was that the trading banks had to hand over their gold at par, but private holders and hoarders of gold reaped an enormous profit by shipping the gold themselves at greatly enhanced prices. Had that provision been brought into effect by proclamation instead of statute, a great deal of revenue would have accrued to the .Commonwealth in a time of great financial stress.
This bill provides for the shipping overseas of our gold reserve and converting it into sterling securities, which will mean that in the future Australia will be tied to sterling. We are tied to Great Britain by other ties - the ties of Empire. Even the most anti-Imperial member - and there are some such members opposite - must confess that Great Britain has, at least, possessed the financial brains of the world for many generations. That was shown when Great Britain went off the gold standard recently, when foreign countries by withdrawing short-term investments in gold visualized the financial crash of Britain, considering it too conservative to depart from accepted policy. That action with a small measure of additional protection provided the necessary reserve to enable Great Britain to balance its budget by honest methods, and not by the methods adopted by a prominent and not very estimable State Premier in Australia. We are tied by blood ties to the people of Great Britain, and we can give them credit for their success in financial matters. Our family jewels, as it were, are to be shipped overseas, and we are putting them in good hands. The only doubt in our minds is what will be the future of sterling if sterling fails. If the British Empire fails we fail with it ; but I am confident that Great Britain will weather any financial crisis that arises. I am also satisfied that the sending of our gold reserve overseas and converting it into sterling securities is a sound investment because we shall receive interest on the money invested instead of having the gold lying sterile in the vaults of the Common wealth Bank.
.- I support the bill. It provides for the shipment from Australia of approximately £10,000,000 of gold that has previously been held in reserve against the note issue. The export of gold is nothing new to Australia, and it is not the vital point that has to be considered in this bill. We must consider what will happen when the gold arrives in England, and what securities will be accepted in exchange for the gold. That transaction will show a profit to this country of between £3,500,000 and £4,000,000. I have no objection to that; but there are one or two other matters with which I am somewhat concerned. The Commonwealth Bank Act states that approximately 25 per cent, of the profit from the note issue shall be credited to the capital of the Rural , Credits Department. There is in this amending bill a clause which sets out how the profits from this particular transaction shall be distributed. But I wish to emphasize the importance of conserving the interests of the Rural Credits Department of the Commonwealth Bank, in view of the fact that that department is the sheet anchor of the rural industries of Australia. Our rural industries provide the greater portion of the national credits of this country, and it is to the Rural Credits Department that the rural industries look for the financing of their commercial undertakings which are carried on by the producers themselves, or by large rural interests. I appeal to the Assistant Minister to ensure that the Rural Credits Department of the Commonwealth Bank will not be deprived of any proportion of profit that may be derived from this transaction, because the gold reserve is primarily connected with the note issue. The present law provides that 15 per cent, of the gold reserve shall be held against the note issue, although we have been assured by the Assistant Treasurer (Mr. Bruce) that to-day the reserve is 20 per cent. It may be quite safe to have the note issue based on a 15 per cent, gold reserve; but it may be necessary for us to consider the advisability of increasing the 15 per cent, to perhaps 20 per cent, when we convert our gold reserves into some other security which, in the bill, is referred to as English sterling. The definition clause explains what securities may be accepted as English sterling. But we cannot get away from the fact that the securities upon which the note issue is based will be transferred largely from this country to Great Britain. It will be converted from a gold standard to English sterling, and it may therefore be necessary to amend the bill to provide that the sterling reserve shall be 20 per cent, of the note issue, which as we are informed is the position at present.
The honorable member for Hunter (Mr. James) has said that there is no difference between the value of an Australian note and that of an English note. That statement, if not corrected, may give a wrong impression to the public. The Australian note is on a footing quite different from that of the English note at present. During the last six months the English note has returned almost to its face value. Unfortunately that cannot be said of the Australian note. As a result of the shipping of our gold reserve to London, what is termed English sterling will be the basis of our note issue. That will not entail any great risk because British finances are on a very sound footing. English sterling is probably on a sounder basis than “that of any other country in the world, largely because the British Government has not only balanced its budget, but has also conserved its capital in other ways, so as to avoid anything that would undermine the finances of that country. Unfortunately that position does not obtain in respect of every State of Australia. I hope that good will be the outcome of transferring our gold reserve to London, and that it will, to some degree, assist in restoring financial stability in Australia. Difficulties have arisen in this country in the past as well as at the present time, not because we had not sufficient gold in this country as a reserve against our note issue, not because we had more gold than was necessary, but because our exports were not sufficient to meet our financial obligations overseas. Years ago we had a large gold reserve. It was not very long ago when most of our transactions were made in sovereigns. Sovereigns were plentiful but gradually they disappeared from the market and paper money took their place. This country, as a primary producing nation, has been absolutely dependent upon its exports to maintain its financial position irrespective of the gold reserve altogether. During the last ten or fifteen years, the financial conditions of other countries have greatly altered, and the monetary system that was suitable ten or fifteen years ago is not applicable to present day conditions. We have to alter our currency to meet developments as they arise. Section 60n of the Commonwealth Bank Act, which is evidently not being amended by this legislation, states that Australian notes shall -
If we shift practically the whole of our gold reserve to London and accept English sterling in exchange, we should delete from the Commonwealth Bank Act the provision stating that any person is entitled to demand gold in payment for notes presented at the head office of the Commonwealth Bank. Unless we do that, misunderstanding is likely to be caused in the minds of the public. In abandoning the gold standard, Australia has been guided by the decisions of other countries, which control the finance and currency of the world. But we have nothing to fear from following the United Kingdom in this respect’. Because we are dependent on the export of primary products, we can maintain our finances with much greater ease without the gold standard than with it. But it is futile for honorable members to suggest that Australia will or should abandon the gold standard for all time. Gold is essential as the basis of our trading relations with other countries, because it is impossible for any country, particularly a primary producer like Australia, to balance its finances by a system of barter. Through variations of climatic conditions, .we may have a large exportable surplus one year, and yet have to import extensively in the following year. Our productive history is full of glaring instances of that. Again, through the wide fluctuation of values, whilst we may maintain the volume of our exports, the actual value of them in one year may be only onethird or one-half of the value in the preceding year. Or, the value of our imports may greatly alter, not as the Leader of the Opposition (Mr. Scullin) stated, through the operation of a prohibitive tariff, but because of the decreased purchasing power of our people. The reduction of imports from this cause, would enable Australia to build up financial credit overseas by the shipment of primary products. We are doing that now; the volume of our exports has been maintained despite the depression, and notwithstanding that the producers have had to suffer severe privation and serious financial losses.
The establishment of these foreign credits will assist us to meet our financial commitments. But it may be necessary for us to fall back upon gold as a means of balancing our accounts with other nations. Therefore, we cannot afford to keep off the gold standard permanently. As the world rights itself and the present economic and financial difficulties are overcome, as they will be, countries will gradually revert to the gold standard which will do more than anything else to put us on a sound financial basis. So long as we can maintain’ the volume of our primary production, we shall be able to weather the storm better than those countries which are dependent wholly upon their secondary industries. Our primary products must be purchased by other countries. We may suffer periodical setbacks through world gluts, but they do not last very long. Throughout commercial history, a glut has been followed by a lean period, a lean period by abundance, extremely high prices by low prices, and vice versa. We are .’justified in anticipating that the extremely low values of to-day will be followed by high values - perhaps not within the next few months, but inside two or three years. We are therefore wise in legislating to enable the Commonwealth Bank to utilize the gold reserve in whatever way will confer the greatest benefit upon the Commonwealth, and afford the maximum assistance in overcoming the financial and economic difficulties that have developed throughout Australia during the last fewyears. I earnestly appeal to the Minis- x.er in charge of the bill to consider seriously the two principal points I have raised - the conservation and allocation to the Rural Credits Department of the Commonwealth Bank of 25 per cent, of the profits of the note issue, and the need for avoiding possible misunderstanding, by retaining an anomalous provision that notes may be exchanged for gold when, in fact, no gold will be available to meet such a demand.
Mr. CASEY (Corio [9.20].- I support the bill. It is a simple measure, although the principle enshrined in it is important. “We are invited to. give power to the Commonwealth Bank Board to export the remaining gold held by the bank as a backing for the note issue, and with it purchase British sterling securities of varying degrees of liquidity, but all with a high degree of liquidity. In further cementing the monetary bond’ between Australia and Great Britain, wc are allying ourselves with a country that has proved itself, even in this economic blizzard, to be the centre of gravity of the financial world by reason of the stability of its institutions. Gold during the last 2$ yearar has doubled in value; in other words, the price level based on gold has been halved, indicating that gold is an unsatisfactory medium in modern circumstances for any country to rely upon.
Events have proved that even a ma; i aged sterling currency is likely to prove a more satisfactory anchor to Australia than gold has proved in the past.
During the last generation or so, two principal reasons have been advanced for maintaining gold as a reserve. The first is to provide a statutory percentage of gold backing for the note issue, and so limit the extent of the paper currency, and the second and more recent, is to regard gold as an instrument with which to meet discrepancies in trade balances, to act as a shock absorber, to take up the slack, when external circumstances impose a shock on the public finance of a country, until it has had a chance to adjust its internal economy to the outside stimulus. The former was, until recent years, accepted as practically the sole reason for holding a gold reserve. But during the last two or three years, that conception of the use of gold has very rapidly changed, until to-day the gold conscience of the community has almost disappeared, and the second reason applies almost generally. A gold reserve is now regarded principally as a reservoir from which to meet the external commitments of a country when the ordinary trade balances fail to do so. None the less, if this bill becomes law, we shall be able to live up to both those specifications, as well as if the gold standard had been maintained.
The honorable member for Balaclava (Mr. White) has rightly stated that Australia is tied to Great Britain. That has always been so, in that the Australian pound is inevitably linked with sterling by reason of the fact that Australia has no direct financial relations with any other country but Great Britain. Our trade commitments with foreign countries have to be met through the banking institutions in Great Britain. Australia has not sufficient trade with any other country to warrant the establishment of direct banking facilities and independent exchange quotations. Therefore, in fact if not in theory, if Australia has to pay a bill in a foreign country, Australian pounds have to be translated first into pounds sterling, which are then converted into the currency of the creditor country. A specific example of Australia’s connexion with British finance will be found by an examination of the conditions obtaining on the day before and the day after Great Britain went off the gold standard. On the day before that event £100 of Australian currency could have been translated into about 390 American gold dollars. On the day after, although nothing of importance had happened in Australia in the meantime, the 100 Australian pounds would purchase only about 300 American dollars. In other words, the Australian currency in relation to gold had automatically depreciated 20 per cent, overnight by reason of the fact that Great Britain had gone off the gold standard.
We have been told in criticism of this bill that, if it is right for Australia to ship all its gold abroad, and convert it into the securities of another country, it would be equally wise for Great Britain and America to do the same. That argument is spurious; Australia does all its banking transactions with the outside world through British institutions, and for that reason is concerned only with sterling. Therofore, gold as between Australia and Great Britain does not enter into our calculations. Great Britain, on the other hand, has to deal with countries some of which are still on the gold standard, and it would be unwise for her to depart wholly from the gold basis to the extent of shipping her gold overseas and investing it in foreign securities.
I have no knowledge of the intentions of the Government; but I gather, from my reading of the bill, that, as the Commonwealth Bank is merely given a discretionary power to ship the gold reserve overseas, that action will not necessarily be taken immediately. The passage of this bill, however, will open an opportunity to our delegates at the Ottawa Conference, at which Imperial monetary and currency questions are to be discussed, to induce the other selfgoverning British countries to follow our lead, and so inaugurate a sterling exchange group within the Empire. We know that several European countries are already on a partial sterling exchange basis. But, so far as I know, none of the British communities have a sterling exchange basis such as this bill is implementing. I hope that we may, using this measure as a lever, induce other self-governing British dominions to follow our lead. Great Britain desires it, and, if we can form a strong sterling exchange group within the Empire, we shall be able to argue effectively with countries that still adhere to the gold standard.
I do not propose to take advantage of the opportunity which this bill presents to discuss other attractive and related subjects, such as exchange, fiduciary issues, price levels, and monetary policy generally, although the temptation has not been resisted by some of the speakers who have preceded me ; but if it is not entirely irrelevant, I shall say a few words in reply to the remarks of the Deputy Leader of the Opposition (Mr. Forde) The honorable gentleman, in the strain which honorable members opposite frequently adopt, told us that we were talking utter nonsense in respect to monetary question!* Tfe mads quite a play on the use of the word “ fiduciary “ as other honorable members opposite have done. It seems to me that the word “ fiduciary “ has no meaning at all except the meaning which flows from the use of the term in practice in Great Britain. In Britain portion of the paper currency is completely backed with gold, and the remainder amounting, I think, to £270,000,000 is the so-called fiduciary issue which is backed, pound by pound, by first-class paper consisting of government and municipal securities. If we in this country give ourselves the freedom to use the word “ fiduciary “ we should have respect to the British meaning of it, and not apply it, as the Deputy Leader of the Opposition has done, to the proposal of the late Government to issue notes in the form of a so-called fiduciary issue. Had that proposal been approved, the issue would have been backed by a piece of heavily embossed paper embellished with the signature of Mr. E. G. Theodore, and with no more important security. Such an issue would have been vitally different from the fiduciary issue of Great Britain which, as I have said, is backed pound for pound with first-class government and municipal securities. If we set out to create a note issue as visualized by Mr. Theodore, we surely have no right to call it a fiduciary issue; we should coin for ourselves a word which will express our meaning.
The Deputy Leader of the Opposition, as I understood him, maintained that there was no difference between the practice advocated and actually adopted by the late Government of shipping gold abroad, and the proposal of this bill; but there is all the difference in the world. Little as I wish to criticize the actions of the late Government in shipping our gold abroad, I must point out that ‘ the shipping of gold abroad in the last eighteen months or two years has been for ‘the purpose of meeting what might almost be called current commitments. The gold which will be sent abroad, if this bill is agreed to, will be used to provide assets which will be retained as capital by the Commonwealth. That is the simple and straightforward difference between the two things.
– Can the honorable member guarantee that this gold will not be used in England to meet commitments that may arise?
– I cannot allow myself to deal in political futures; but it is obvious that that is not the intention of the bill.
– About the end of the year, commitments totalling between £10,000,000 and £15,000,000 will have to be met. Can the honorable member guarantee that this gold will not be used for that purpose?
– My personal guarantee would not be worth a great deal. If a calamity should arise, there are worse purposes to which the money could be applied.
Going a little further in my criticism, I think, it will be admitted that if two people read the same document, they are very liable. to get two different impressions of its meaning. That may be the explanation of my having interpreted a document referred to by the Deputy Leader of the* Opposition differently from the way in which he has interpreted it. The honorable gentleman referred, though not to-day, to the Macmillan report, and seemed to me to give the impression that it advocated inflation in some form and the raising of price levels within a country. That, I maintain, is quite a wrong impression of the contents of the report. I admit that it advocated the raising of price levels, but by international action, which is an entirely different thing from raising them in any one country by unilateral action. The honorable member also referred to the Genoa Conference of some years ago, and gave me at least the impression that that important conference principally confined its resolutions to the sponsoring of the gold standard. As I understand it, the principal lesson that the Genoa Conference sought to teach the world, was that . the central banks of all countries should co-operate, whatever the basis of their currency, in order to smooth out the curve of price levels.
Again, the Deputy Leader of the Opposition sought to show that Britain had gone off the gold standard by her own deliberate action. That statement, I maintain, is unfair to Great Britain, for she struggled most manfully to remain on the gold standard, but was eventually, and by circumstances quite beyond her own control, swept from her gold moorings. These may seem to be only slight differences in the opinions of the honorable member and myself on these subjects, but I beg leave to think that they are important differences.
Yet again, if Mr. Keynes reads in the press to-morrow morning that he has been quoted by the Deputy Leader of the Opposition in Australia as an inflationist he may possibly have a sleepless night, and the Deputy Leader of the Opposition may find himself, in the course of the next six weeks, supplied with three or four of Mr. Keynes’ works, with an appropriate expression of the author’s compliments on the fly leaf.
If I may indulge in a final irrelevancy, I shall refer to the remarks attributed in this morning’s press to Mr. Lang with regard to the nationality of the members of the Bank of England Board. That gentleman tied his remarks quite definitely to the Bank of England when he referred to the stream of advisers which had come from it to Australia to show us how to run our affairs. He then went on to refer to other matters which have been ably dealt with by the Assistant Treasurer. It is obvious that Mr. Lang was thinking about the Bank for International Settlements, of which the chairman is an American, and most of the directors are, quite naturally, foreigners. I make this observation to show that. Mr. Lang’s knowledge of these matters must be somewhat defective, or else he has been misled. It is not necessary for me to explain to the members of the House the difference between the Bank of England and the Bank for International Settlements.
.- Surprise has been expressed by some honorable members that this bill should have been introduced by the Government. In considering our monetary system we need to realize that it is only a utility for the benefit and use of the people, and that when circumstances change it is inevitable that our monetary system shall change so that it may be brought into conformity with the changed conditions of the community. In the making of these changes we should not tie ourselves hard and fast to the usages and practices of the past, but we should be prepared to delve into and investigate anything that may be placed before us, and any suggestions that emanate from various authorities, in connexion with the matter. This Government has definitely shown that it is not conservative or dogmatic in regard to the monetary system. It has been said during this debate that the present world depression is due to the monetary system of the various countries ; but we must admit that many other causes have contributed to our present situation. Although the monetary system is one of these, others are possibly just as important. I do not think that any one will say that the difficulties of the United States of America are due to her monetary system, nor will any one deny that if her note issue is insufficient to meet her currency requirements she could, without inflation, expand it to a very large degree, and still have the requisite gold backing.
The frequent references that have been made to-day to the abandonment by Great Britain of the gold standard show an altogether incorrect appreciation of Britain’s position. As pointed out by the previous speaker, Great Britain did not of her own volition go off the gold standard. Neither did she go off it with any idea of doing away with the gold backing for her note issue. We have already been told during this debate that there are two note issues in Great Britain, one of which has a gold backing, and the other of which is fiduciary. Great Britain did not abandon the gold standard for the purpose of dissipating the gold backing to her note issue. As a matter of fact the very opposite is the case. She went off the gold standard for the purpose of conserving, and not of dissipating, her gold reserve. I have not heard a single suggestion from any economist or banking official of note that Great Britain should get rid of her gold. She has actually definitely attempted to accumulate as much gold as she considered necessary to back her notes. It has been inferred by some honorable members during this debate that gold is now useless and redundant. If that were so, we should not be able to sell our gold; but it is perfectly evident that there are many countries, including Britain, which are willing to buy our gold, and give us a good price for it. That statement is warranted in view of the confusion of thought which has been shown in respect to what going off the gold standard really means. Great Britain’s action in that connexion was taken for the purpose of relieving the banks of their obligation to pay gold for any notes presented to them. We, in Australia, went off the gold standard very much earlier than Great Britain, although the Commonwealth Bank will not be actually relieved of the obligation to redeem notes by gold until this bill is passed. We know, of course, that for some time past, although the bank has been under a legal obligation to provide gold for notes, it has had power under a different act of Parliament to requisition the gold immediately. In practice, we departed from the gold standard some years ago.
An endeavour has been made to-day to show that the proposal in this bill is similar to that made by the previous Government, and the Leader of the Opposition (Mr. Scullin) has endeavoured to bolster up the proposals of the former Treasurer (Mr. Theodore) in regard to a fiduciary note issue. The difference between the fiduciary note issue of Great Britain and the fiduciary note issue proposed by the previous Government has already been explained, but there is one point that I wish to clarify. I was not a member of this Parliament at the time that that proposal was submitted to it, but I know the impression that the proposal made on private citizens. It was stated, and I think correctly, that Mr. Theodore’s fiduciary note issue proposal was made with the object of allowing the Government of which he was a member to avoid making economies in government expenditure which had been recommended to it on several occasions. I do not think that any one will deny that the general impression abroad was that if Mr. Theodore’s scheme to issue fiduciary notes had been agreed to the Scullin Government would not have accepted the Premiers plan. In my opinion, the acceptance of that plan was one of the best acts of that Government. On the hustings, Mr. Scullin took a great deal of kudos to his Government for having accepted it, and I, for one, do not want to take away any honour due to it in that connexion. Had the rehabilitation plan been carried out in its entirety by all the governments of Australia, the nation would be in a much better position than it is now in. In substantiation of that I refer to the case of South Australia. Although that State had a Labour Government in office, Mr. Hill, the Premier, gave effect to that plan in a way that was second to no other government. The results are becoming evident. Unemployment is rapidly decreasing in South Australia. Figures recently published prove that the numbers of unemployed have been reduced by something like 20,000 during the last five months, and only in this morning’s press I noticed that the Premier has stated definitely that , by keeping within the bounds of the plan, he hoped to have a surplus of £100,000 over the figure prescribed for South Australia, It is, therefore, incumbent upon all of us to give effect to the plan and help the country out of its difficulties.
Among other things, Mr. Theodore advocated a return to the price levels of 1929. I entirely agree with the honorable member for Corio (Mr. Casey) that any suggestions that were made overseas with regard to price levels were of ali international and not of a national or internal character, while those advocated by Mr. Theodore concerned Australia only. Had that gentleman been successful in inducing Parliament to accept his proposals, the effect would, undoubtedly, have been to increase the cost of production both to primary and secondary industries, and we should have been labouring under greater disadvantages than we are at present. I am glad, therefore, that the proposals of the then Treasurer were not accepted by this Parliament.
Members on this side of the House are definitely of .the opinion that the Commonwealth Bank should be segregated from political control. It is our duty to criticize exhaustively any legislation which is before Parliament concerning the bank, but once it has been passed we should alienate that institution from political control. The right honorable the Leader of the Opposition said that, although we may pass a bill now it may be altered later, therefore the control of the bank is ultimately under the control of Parliament. There is the qualification that such legislation must pass both Houses of Parliament; it does not come within the discretion of a Minister or Cabinet. That is one of the differences between our ideas of banking control and those of honorable members opposite.
This bill proposes to confer authority on the Commonwealth Bank to export our gold. It has been said that once this gold is exported our note issue will be purely fiduciary. That may be so in the same sense as the £270,000,000 note issue in Great Britain is fiduciary, or even to the extent of that amount of our note issue that is not actually covered by security. However, I do not think that we shall be in any different position in regard to the actual backing of the note issue, whether it is in gold or sterling. As has been pointed out we are indissolubly linked with sterling, which is as valuable to us as gold, provided that England remains solvent. I also support the honorable member for Corio with regard to the opportunities that will be presented at Ottawa for the discussion of the monetary system that shall prevail in the British Empire, and I urge our representatives at that conference to do everything in their power to evolve a scheme which will be of an Empire nature, and which will benefit this country. I am quite sure that if the proposals that are decided upon necessitate further legislation to give additional powers to the Commonwealth Bank Board, this Parliament will be quite willing to assent to it and support the monetary system decided upon by the conference.
The proceeds of the sale of this gold may be utilized for certain specified purposes, including the stabilization of exchange. I urge upon the Government the necessity to stabilize our exchange. As a primary producer, I am definitely of the opinion that there are very few producers in Australia who could carry on at the moment if exchange were dropped to par. It is only because of the benefits they are enjoying from the existing exchange rate that they are still in business. The practice at present is for the-
Commonwealth Bank to review the exchange weekly and proclaim the rate that will obtain for the following week. I should like to see the period fixed at three months instead of a week. That would give exporters a greater feeling of confidence, and enable them to give producers a more liberal portion of the exchange than is now possible, for they have to take certain risks with regard to exchange rates under the prevailing system. I suggest, and this is not original, because the report of the last economic conference held in Australia definitely urged that exchange should be held at the present rate or increased - that the surplus money that will be obtained from the conversion of our gold into sterling should be used to guarantee the bank against any loss that it might make if it decided to declare a firm rate of exchange for a three months’ period. In that way producers would obtain a greater benefit than is possible now. I have great pleasure in supporting the bill.
.- These are days of experimentation in the monetary realm, and it is not my intention to speak at length upon the bill. I express regret that it is considered necessary by the Commonwealth Bank Board that a bill like this should be presented and passed by the National Parliament. I listened attentively to the fine but sad speech which was delivered by the Assistant Treasurer (Mr. Bruce) yesterday. The right honorable gentleman traced the history of our currency as compared with sterling, and showed that it had lapsed from an appreciation to a depreciation. As I sat here I could not help thinking to myself how true are the words of scripture, “ For whatsoever a man soweth that shall he reap “. What makes me sad is the thought that this is a further step from the gold standard, a further utilization of the reserves of the Commonwealth Bank to meet the needs of- the moment. It has been said that this bill does not provide for that. That is quite true; but in the political arena a government has to deal with its public very gently. I cannot help expressing the opinion that within twelve months the Government will introduce an amending bill and declare it is a matter of altering the act along the lines desired to meet our commitments overseas, or defaulting. That is why I feel sorry.
I shall not deal with the gold standard except to say that Australia has been forced off that standard, as was Great Britain. It is useless for any honorable member to speak of the gold standard as an exploded theory. I am confident that the day will come when the governments of Great Britain and Australia will return to the gold standard. I regret that our gold is gradually being sent away, because I remember that, in the days of her affliction, France held tightly to her gold reserve, and strengthened it as time and opportunity offered. Unfortunately, the bill follows the line of least resistance, and perpetuates the practice that has grown up in Australia of trying to find an easy way out, instead of facing the problem and courageously calling upon all sections to make any further sacrifice that is necessary.
– I support the measure, and, like the last speaker, was pleased to hear the explanatory speech of the Assistant Treasurer (Mr. Bruce) yesterday afternoon. The introduction of this bill ought to afford us all a great deal of satisfaction, because it is a step in the right direction. If I understood the Assistant Treasurer correctly, the effect of the measure will be to give the Commonwealth Bank Board greater powers, and enable it to pursue a more flexible policy in regard to the contraction and release of credits. It will relieve the board of that iron-bound statute, which almost made it impossible for the bank, or so it used to say, to release further credits, no matter how much the community needed them. But while this makes our monetary system more flexible, so far as legal requirements are concerned, the value of this provision will be determined, to a large extent, by the board’s general outlook. It is not our duty at the moment, and I do not think that it was the idea of the Assistant Treasurer, that this bill should be regarded as an effort to control the international medium of exchange, or to alter the international monetary system. It has -been introduced because of the need to do something internally to stimulate and revive Australian industry.
The Commonwealth Bank Board has, in the past, persistently refused, because of the restriction of its old charter, to release further credits beyond the limits provided by statute. I disagree with the last speaker, who expressed certain fears regarding our departure from the gold standard. That standard has been a myth for many years. I also disagree with the right honorable member for North Sydney (Mr. Hughes), who said that Australia went off the gold standard in 1931. Australia has been on and off the gold standard for years past. International reports two or three years old have classified Australia among those countries, which have long been off the gold standard. The right honorable member for North Sydney said that Britain only recently departed from the gold standard. Every one who has followed the activities of the Bank of England during the last two or three decades knows that that institution has been on and off the gold standard many times during that period, and has reversed its policy in this respect 50 or 60 times during the course of its life. On many occasions when Britain has been overtaken by some lean period, the bank has been taken under the control of the Government, and the gold standard has been set aside. In 1923 or 1924, the smallest piece of gold which could be withdrawn from the Bank of England was an ingot weighing 400 ounces. As a matter of fact, the gold standard, as popularly understood, has not operated in Great Britain probably during the last quarter of a century. As I . have said, however, we ought not to be concerned at the moment with the international monetary situation. The principal object of this measure, I hope, is to bring some immediate relief to the people of Australia.
With the increased power which this bill will confer upon it, the Commonwealth Bank will in future be able to assist industry, and the people generally, to a much greater extent than has been possible hitherto. Whether that is the purpose of the Government in introducing the measure, I do not know ; I hope it is. I hope that its intention is not merely to give the bank authority to transfer portion of our gold reserve to Great Britain, and invest it there in a profit able and, I think, wise manner. I trust that the intention is to go much further than that, and to encourge the Bank Board to use ite increased powers for the benefit of Australia internally as well a? externally. Even this measure represents, to some extent, political control of the bank, because it removes a restriction which a previous government imposed upon the activities of the bank some years ago. If I display any lack of enthusiasm over it, it is not because I find fault with the proposal itself, but because I am afraid that the Bank Board will stick to the old idea of not allowing the Commonwealth Bank to enter actively into affairs associated with our internal trade. It is well known that the Bank Board is opposed to the bank becoming a serious competitor with private banking institutions in Australia. Whether that is right or wrong is a matter for individual belief; but I hope that the board’s new powers will be exercized in the direction of assisting industry and business activities, even if it means entering seriously into competition with the private banks. If that is not done, I fear that this measure, valuable as it will prove for the moment, will not confer a continuing benefit on the people of Australia.
It ought to be obvious that Australia has suffered during the last few years because of a want of sufficient credits. On several occasions the last Government waited on the Commonwealth Bank Board, and urged it to release more credit to business people, and to the Government. The board always replied that it had released all the credit it could without endangering the financial stability of the bank, or violating its legal charter. Efforts were made to furnish the board with greater powers in this direction. I think that the board itself suggested that powers such as this measure will give should be conferred upon it; but, when a measure designed for that purpose was brought before Parliament, the Senate decided that the extra powers should not be given. I agree with the right honorable member for North Sydney that our principal object should be the stabilization of price levels. We should seek first to raise price levels, arid thus checkmate the evil effects of deflation. I believe that some such idea was in the mind of the Minister who introduced the bill. This is a hopeful sign. If at any time during the last two or three years any one had suggested that prices were getting too low, and that trade could not be revived unless the fall in prices were checked, he would have found scant support in this chamber. I am convinced that this measure is intended, among other things, to check the process of deflation, to raise prices, and generally to revive industry. It will have those effects whether that is its object or not, and, because I am certain that it will do these things, I am in favour of the measure. The exposition of the Assistant Treasurer in moving the second reading of this bill, was fair and entirely free from any display of party political feeling. He did not attempt to belittle the efforts made by the last Government to deal with the currency problem.
I again suggest that the arresting of the fall in prices is one of the greatest advantages that could accrue from this measure; otherwise there will not be much hope of a business revival in Australia. The financial policy that the last Government attempted to put into operation provided for the release by the Commonwealth Bank, upon its own assets, of an- amount of credit which would make possible the granting of assistance to the struggling wheat-growers of this country, and the initiation of a programme of public works which would put a large number of people in employment, for the purpose of creating increased purchasing power which would help private enterprise to get upon an even keel. It was suggested, therefore, that there should be a fiduciary issue similar to that which had been repeatedly made by the British Government. That Government did not suggest, as was said in Australia, because of a sentence dropped by the last Treasurer on one occasion, that it was intended to administer repeated doses of fiduciary currency.
– But the honorable member will not deny that that is what the Labour caucus wanted?
– The honorable member did not remain in the caucus long enough to find out what it desired. The policy of the last Government, as announced in this chamber, and as enunciated through the press, and from the public platform, made it clear that it was not intended to go beyond the stabilization point. It was declared that the guiding principle in future would be that if prices could be raised to the level that obtained between 1928 and 1929, that would be acceped as an intimation that it was unnecessary to release further currency.
– That did not solve the problem of unemployment.
– Much credit will have to be released before that happy result can be achieved. The 1929 price level was not accepted in a casual way. It was made the guiding principle after a close study of the statistics over many decades, to ascertain which price levels had been associated with the greatest prosperity, and had remained stable for the greatest number of years. Strange to say, the British economists who are now trying to put Britain on an even keel have suggested going back to the price levels that ruled in 1928. Most members of this House seem to have been suddenly converted to the ideas set out in the recent British budget.
I do not oppose this measure. I am glad that it has been introduced, and am sure that it will be passed. Its success or otherwise will depend entirely, in my opinion, on the outlook of the Commonwealth Bank Board, which is no longer confronted with the difficulty which it claimed made it impossible last year for it to release those credit’s of which the country stood in dire need. This measure will give the board power to release them, and unless it is prepared to seize opportunities to increase its business, entering into competition with the trading banks, securing some of the profits which are to be made out of the banking business, and using them to assist the. Government to carry on the activities of this country, the powers given under this bill will not be properly utilized. I hope that our gold will be sold to the best advantage, and that a more sympathetic reply than has been obtained in the past will be received from the board to the requests for the release of the credits that are essential to the carrying on of public and private enterprise in this country.
– I do not intend to delay the House very long in replying to the debate on the motion for the secondreading of this measure. I certainly shall not discuss such subjects as gold reserves, sterling reserves, or any other matters with which I dealt at considerable length yesterday; but I desire to refer briefly to one or two points raised by the Leader of the Opposition (Mr. Scullin), in case a wrong impression may be created by ‘his observations as to the object of the bill. The right honorable member suggested that this proposal was on all fours with that made by his Government.
– No. I said that it was a similar proposal in that it provided for the shipment of gold.
– I have no wish to misrepresent the right honorable gentleman. If his only suggestion was that this bill contemplates the possibility of gold being . physically shipped out of Australia, and that the measure brought down by his Government also provided for that, I entirely agree that the two are similar in that respect. But in case anybody may have gained a wrong impression from his speech, I wish to make it clear that, apart from the common factor of the possible movement of gold, there is a distinct difference between the two measures. The bill now before us in no way touches upon the principle of maintaining a reserve against a note issue. There is no suggestion in it that we should abandon the principle of having such a reserve for Australia, or, in other words, a backing of a particular character for the note issue. It touches on that principle only in that it gives the Commonwealth Bank Board the alternative of either holding that reserve in gold or sterling, or partly in one and partly in the other. It is not contemplated that any part of the gold reserve or any part of the sterling that might be obtained if the gold were sold shall be used for any other purpose than to support the currency of the country. There is no power under this measure which would enable any part of the reserve to be used for assisting government finance. In that respect it is quite different from the bill submitted to this Parliament last year and rejected. A subsequent measure em bracing part of the original proposal was approved. Under that bill, power was given to utilize part of the gold reserve for the purpose of meeting the obligations of the Commonwealth. I desire that there shall be no misunderstanding whatever on that point.
The other matter on which I propose to touch is the suggestion that there is a relation between the Government’s proposal under the present bill and the fiduciary note issue contemplated by the last Government. That was to be a straight out issue of £18,000,000 of notes authorized by Parliament. There is no attempt to do anything of that nature in the present bill. I shall not discuss the suggestion made in the debate that when the £18,000,000 proposed to be raised under the previous measure had been exhausted, and further sums were required for other purposes, more notes would be issued, and that gradually the currency would be inflated to such an extent that eventually it would be completely out of control. What I emphasize is that there is no possible relationship between that proposal and the one embodied in this bill.
Another matter which I wish to clear up relates to price levels about which we have heard a good deal in Australia. I agree with the honorable member for Angas (Mr. Gabb) that we are always inclined to seek some easy way out of our troubles instead of getting to the root of them, and trying to place our finances on a sounder and more secure basis. A proposal which- has been very much discussed is that action should be taken to raise price levels in Australia to those of 1928. That is wholly different from dealing generally with price levels on an international basis, and endeavouring to maintain the stability of the currencies of the different nations. Such a proposition is totally different from the proposal that ari isolated country like Australia, in order to maintain its standards, and to overcome the troubles which we are experiencing, should raise its price levels, and in that way try to overcome its problems. Any action in that direction, unless balanced by other measures calculated to reduce the costs _of production, would have the effect of making our own position more desperate and difficult. One trouble which we were up- against in this country, as the depression deepened, was that our costs of production were far too high. They were handicapping us in competing in the external markets of the world, and in our internal market; and necessitated the raising of tariff barriers to protect our main industries. The fundamental trouble was that our general costs were too high. Most thinking people recognize that during periods of abnormal prosperity and good seasons we allowed our costs to become too high, and the effect of trying to maintain that level by artificial means in a period of unparalleled depression throughout the world, would have been, not only to handicap Australia in the future, but also to make the possibility of our recovery very remote. I wish to make clear the distinction between the proposal, which has been so much discussed in this country, that we should increase our internal price levels as a simple cure for all our difficulties, and the discussion which has taken place on this measure as to whether in determining our exchange we should not take into account the general world prices of commodities so as to try to avoid those fluctuations which have recently been taking place, and which have had, generally, a disastrous effect upon trade and commerce.
The honorable member for Melbourne Ports (Mr. Holloway), in his commendation of the bill, suggested that it would, to use his own words, remove from the Commonwealth Bank Board some of its( difficulties of the past, in respect of refusing to release credits to the full extent. This measure does not alter the bank’s position with regard to the issue of credit. We are not altering the proportion of the reserve to the total note issue in any way. All that we are providing for is an alternative to the gold, in which those reserves can be held, namely, sterling. If the Commonwealth Bank was in any way handicapped in releasing the credits which were deemed necessary - I am not admitting that it was, but am simply using the honorable member’s own words - then the Bank Board will be in exactly the same position after the passage of this measure-
This bill does not provide any easy way of releasing credit. It is constantly being asserted that Australia is suffering from a shortage of credit, and that if more credit could be released Australia would soon be on the road to prosperity; but an analysis of the position shows that the very reverse would be the case. What Australia is suffering from is an oversupply of credit in the past. That has led us into a dangerous situation. We certainly would not overcome our trouble by an unlimited release of credit. During recent years there has been a suggestion underlying these discussions that all credits have been suspended. While it is true that our overseas borrowings have ceased, it is no use being under the delusion that we, as a nation, have stopped borrowing. We have been borrowing in a much more vicious way than when we borrowed and expended moneys on loan works, because what we have been forced to do is to borrow for the purpose of meeting deficits. That means that for the borrowings for that purpose that have taken place we have no assets of any sort, good, bad or indifferent. There is probably a no more dangerous cry in Australia at present than that we require an unlimited release of credit. We do not want anything of the sort; if we had it it would probably be the most disastrous thing that could happen to Australia. I am not talking of the drying up of credits. The credits that are being released are credits that meet our present requirements. There would not be the slightest difficulty in releasing credits for the development of this country if we were getting back to a thoroughly sound basis, balancing our budgets, and working towards prosperity. I want to leave no impression in the minds of honorable members and of the public that this measure will admit of the release of unlimited credits. In view of the long speech that I made when introducing this measure, there is nothing more that I need say. Any point on which honorable members are in doubt can be cleared up in the committee stage.
– Can the Assistant Treasurer tell us why it is that Great Britain, having gone off the gold standard so often, always seems to have returned to it at the earliest possible moment?
– It is because the traditional policy of Great Britain has been to remain on the gold standard. I do not think that the suggestion made by the honorable member for Melbourne Ports as to its departures from and reappearances on the gold standard can be substantiated. There are many interpretations of what is’ meant by being on or off the gold standard.
– There are shades of being off and on.
– As the right honorable gentleman says, there conceivably are shades of being off and on. But I do not think that that can be applied to the case of Great Britain. That is the country which has the greatest tradition in regard to the gold standard. Although it was off the gold standard for the period of the war, and up to 1925, when it returned to it, it cannot be said that it is in the habit of being on it one year and off it another.
Question so resolved in the affirmative.
Bill read a second time.
Clauses 1 to 4 agreed to.
Clause 5 (Reserve).
.- This is the principal clause, and it gives me an opportunity of again stating what I consider to be the facts.
The suggestion has been made that I have endeavoured to make it appear that this proposal is identical in all its details with the measure which was introduced last year by the Government of which I was the leader. I have not done that. But I did affirm, and I repeat, that the fundamental principles of this bill, and its main object, are identical with those of the bill which was introduced last year. That measure was designed to enable the gold reserve to be used, a portion of it to pay off an obligation, and the balance to be invested in British securities to be held as a reserve, and while so acting to earn interest. The difference between that bill and this is that the reserve here held, is that which is behind the notes, while the reserve that we proposed to hold in the same security was one to meet our obligations under any emergency that might arise overseas. That may appear to be a very important difference at this stage. But I agree entirely with the hon- orable member for Angas (Mr. Gabb), that eventually it will be proved that there is no difference. When I say “ eventually “, I hope that that stage will never be reached. - Should the emergency arise that would render necessary the use of the money invested in British securities in discharge of an overseas obligation, I suggest that it will be used in exactly the same way by this Government as it would have been used under our proposal, with this difference, that this act would be amended to meet the new situation. I am not criticizing the Government for not taking that step at the present time. Perhaps there is some wisdom in waiting until a hurdle is encountered before attempting to jump it. But there is no use in trying to suggest that there was something wild and irresponsible about our proposal when we made provision giving us all the legislative power we considered necessary to meet any emergency that might arise. There is no need for notes to be backed by gold to-day, because we have definitely gone off the gold standard. I agree that the reserve should be held in the form of British securities. That was the definite proposal that I advanced over two months ago. It is not the case, as some honorable member has very unfairly suggested, that we proposed to sell the gold and use the proceeds to meet current expenditure. That was never suggested or contemplated. Our proposal was that -it should . be used only when the emergency arose. Where is the honorable member who will say that it would be better to default than to use this reserve? If it came to a question of not being able to convert a loan that was maturing, and the Commonwealth held a reserve in British securities, the Government would use it rather than default The fundamental, point is, that ours was a proposal to sell the gold and invest the proceeds in British securities with the exception of the £5,000,000 that we had to use immediately; whereas this proposal is to give to the Commonwealth Bank Board the power to sell the gold. If that board does not exercise that power, and thus make the gold a live asset, this legislation might as well not have been introduced, because it will have no value and no purpose.
The question of the gold standard has been raised. It was asked why countries that had gone off it had come back to it. Australia went off the gold standard, and so did Great Britain, because we, and they, were compelled to do so. The return to the gold standard in 1925, as the Assistant Treasurer (Mr. Bruce) said yesterday, has been responsible for many of the ills from which the world is suffering to-day. Thinking, persons realize that it is stupid to retard the progress of production and the employment of the people because there is a scarcity of one metal, due to the cornering of that metal by two nations, and also to the fact that progress in production has outstripped the production of gold. How is it that this was not felt more definitely in the years that have gone? It is hecause, fortunately, there have been recurrent discoveries of new gold-fields. In California, Australia, Klondike, and South Africa, new fields have been opened up at different times, and they have been responsible for the infusion of fresh gold supplies. But it is now some time since there have been such discoveries, and the production of the world and the demand for a basis for currency and credit have outstripped the production of gold. Unless new fields are discovered, the whole world will go off the gold stanward. It would be senseless to keep millions of men and extensive machinery idle, and lands unfilled, - because of the failure to discover gold in sufficient quantity to make it a basis for currency.
The only reference that I made to the Fiduciary Notes Bill, which was introduced by my Government, was to draw attention to the jeers that were indulged in concerning the very idea of having such a currency. I point’ out, however, that this measure will enable the Bank Board to dispose of the gold that is now held, and that we shall have a fiduciary issue. My previous protest concerning the criticism that had been offered did not relate to differences of opinion. As a matter of fact, hardly a dozen persons who write or speak upon this subject are in entire agreement in regard to what method ought to be followed. I have no quarrel with differences of opinion. But when we are dealing with such a delicate question as a nation’s credit, I do quarrel with extravagant condemnation, and suggest that the methods adopted have destroyed our credit and the confidence of our people in the currency of the country. At least, we should agree to differ upon these- questions, and not injure our nation. While in Opposition, I may disagree with the methods and principles involved in monetary proposals of the Government, but I shall not consciously do anything that may weaken the credit of the country or destroy the confidence of the people.. The proposal contained in this bill is sound and safe, and we need have no fear of it. The real value of the Australian note lies in the fact that it is legal tender, and the strength behind it is the whole credit of the nation. It ill becomes any member of this committee to say the only support of the note issue is the credit of a bankrupt nation. If Australia were bankrupt the 15 per cent, gold reserve would not prevent the note issue from collapsing; but Australia is not bankrupt. It has vast resources, and even though the whole world should crash, we would still be able, if our methods of production were properly organized, to clothe and feed our people. We are passing through difficult times, and we have to adjust our -policy to meet changing conditions; but I definitely repudiate the suggestion that my Government was committed to a wild inflationary, proposal. Whatever may have been said hurriedly in reply” to an interjection . at a public meeting, I know what was the intention, of the Government of which I was Prime Minister. The bill we introduced definitely limited the amount of the fiduciary issue; there could be no extension of it without the legislative authority of this Parliament. Whatever credits might be asked for by the banks, or whatever authority they might be given by the issue of notes, it was clearly understood that a close watch would be maintained on price levels, and that in no circumstances should they be allowed to rise above the levels of 1929. The Assistant Treasurer (Mr. Bruce) stated that the raising of price levels in Australia alone would make our position worse. I agree that the hope of the world lies in the universal raising of prices to normal, but I believe that something can be done at the Ottawa Conference if all the governments represented there can agree. The Empire is self-contained, and if the British family of nations raises price levels, other countries will be forced to follow. I do not admit that Australia alone can do nothing to restore price levels. As a matter of fact, an expert committee submitted to the last conference of Premiers in Melbourne a report which the Commonwealth Government adopted, and which the Prime Minister invited the conference to adopt. That report contained a proposal to increase the rate of exchange. The effect of .raising the exchange rate is to devalue the Australian pound, thus raising price levels in the Commonwealth only.
– It raises the prices of our primary products abroad too.
– An increase in the rate of exchange does not give us one penny more for our products overseas. It merely gives a larger return expressed in Australian currency, and involves an internal rise in price levels. The honorable member for Forrest (Mr. Prowse) interjected approval of the suggestion that we should do nothing to raise price levels in Australia; but he is amongst those who insist that we should maintain the exchange rate at £25 10s.
– A rise in price levels must be universal to do any good.
– But the effect of a high rate of exchange is not universal. The honorable member is endeavouring to maintain for primary products price levels that are not universal. To-day the wheat-grower is receiving £125 in Australian currency for grain that is sold in the United Kingdom for £100 sterling. I support the maintenance of the exchange rate because without it under present conditions thousands of farmers would go out of production and Australia would be very much poorer. No doubt as the level of world prices rises the exchange rate will fall; but while prices are below the cost of production we must endeavour to maintain the high rate of exchange.
.- The Commonwealth Bank Act provides that one-quarter of the profits from the note issue shall be allocated to the Rural Credits Branch of the bank. These profits may arise from losses of notes or from the cancellation of notes not re deemed within a specified period. I ask that at least 25 per cent, of any profits derived from the sale of gold under this bill shall also be allocated to the Rural Credits Branch. If we increase the capital available to that branch we shall be doing something to stabilize and benefit those industries that are producing the national wealth.
– I understood the Assistant Treasurer (Mr. Bruce) to say that this bill does not alter the reserves which the Commonwealth Bank is required to hold against the note issue. This clause obviates the necessity for holding any gold reserve whatever. It provides that the words “ coin and bullion “ in the principal act be omitted and the words “ or in English sterling or partly in gold or partly in English sterling” be inserted in their stead. Does that mean that the Commonwealth Bank Board can carry on with a number of Australian notes equal in value to a certain number of English notes, which will be regarded as a satisfactory reserve without holding any jrold at all ? If that is so, could the Commonwealth Bank Board do what the private banks did a few years ago, when the present Assistant Treasurer was Prime Minister, and, by reason of its own . assets, create some millions of pounds worth of notes to use as security upon which to issue credits to the community? If that is not so, I should like the Assistant Treasurer to explain the position. Under this clause power is given to the board, if it thinks fit, to dispose of its bullion, and to retain in its place English sterling as a security. English sterling is more valuable than an Australian pound note. If that is so, why could not Australian pound notes of greater volume provide the necessary security for the Commonwealth Bank Board? Could not the board do as it did in 1924, when it made available an additional £15,000,000 of Australian notes to provide a security upon which the private banks could lend money to their customers ?
– The right honorable the aLeader of the Opposition (Mr. Scullin), in dealing with this clause, made an interesting contribution to the debate, which he himself admitted was bordering on a second-reading speech. I do not propose to deal with the various points lie has raised. I have no desire to make this in any sense a controversial measure. We are all agreed that what the Government proposes is the right course to adopt at the present moment, and I do not intend at this juncture to say whether the policy adopted by others has been right or wrong. Such policies have certainly been the subject of considerable discussion at different periods, and I shall leave the matter at that.
The honorable member for Calare (Mr. Thorby) asked to what extent the rural credits branch of the Commonwealth Bank may be affected under sub-clauses 3 and 4 of clause 5. Sub-clause 3 deals with the position which may arise when, after a period of years, Commonwealth bank notes have not been redeemed. Under that sub-clause, no profits will be available. It Ls contemplated that an amount will be placed to reserve in respect of notes which are not redeemed, but there will be no profit as a result of the transaction, and, therefore, no profit will be taken into account. If the notes are not redeemed, their value will remain with the bank, but there will be no profits for distribution. The law at present provides that the note issue branch is not liable to meet notes in circulation after a certain period has expired; but, in practice, if they are presented for payment, even after that period has elapsed, they are paid. As I have said, the amount represented by unredeemed notes will be held, and there will bc no profits available for distribution to the rural credits branch.
With respect to sub-clause 4, I cannot agree with the honorable member that 25 per cent, or any part of the profit realized on the sale of gold should go to the rural credits branch of the bank. It should be used for no other purpose than that specified. Under the power conferred by this clause it can be used for stabilizing exchange or for the purposes of the Note Issue Department. I think that upon reflection, the honorable member for Calare will realize that there would be no more justification for withdrawing these moneys and placing them to the credit of the rural credits branch than there would be for dealing with them as profits under section 60.t of the principal act and paying them into the Treasury.
In reply to the honorable member for Melbourne Ports (Mr. Holloway), I may say that no provision is made in the bill to alter the present position in regard to the maintenance of a reserve against the note issue. It is requisite to hold a reserve against the note issue and that reserve must represent a certain percentage of the notes which are actually issued and in circulation. The only alteration that is made is that instead of holding that reserve in gold the alternative power is given to hold it either in gold or in sterling, or partly in gold and partly in sterling. The same limitation will be placed upon the note issue as exists at present - the statutory percentage laid down is to be adhered to. With respect to the point raised by the honorable member as to the Commonwealth Bank coming to the assistance of other banks, that can be done by the issue of notes, but the amount is limited by the statutory requirements as to the percentage reserve. I repeat that this measure does not alter the position in any way except that instead of the reserve being in gold it can be held in gold or sterling or partly in gold and partly in sterling.
– Will the profit on the sale of the gold go to the note issue reserve, and so enable an increase to be made in the note issue?
– At present the Commonwealth Bank holds £10,000,000 in gold, which is taken into account in the balance-sheet of the Note Issue Board as being £10,000,000. It does not define what “pounds” they are; but it is taken into account as if it were 10,000,000 Australian pounds, because the whole account is in Australian currency. At present we have an internal gold reserve which in terms of sterling would be equivalent to £13,500,000. Assuming the board decided to transfer this gold into sterling, we would then have £13,500,000. That amount would appear in our accounts, and we would then have a special reserve of £3,500,000. The £10,000,000 held at present is sum- cient to meet the statutory percentage requirement; but as that percentage requirement increased we should have been faced with the difficulty of having either to acquire gold or reduce the note issue. That difficulty has been overcome by the fact that wc shall now be entitled to hold our reserve in sterling or in gold. The board will have a sufficient number of pounds in sterling to meet that requirement; but it would be eating into the volume of profits to adopt the suggestion made.
Clause agreed to.
Clause 6 agreed to.
Title agreed to.
Bill reported without amendment. Report adopted and bill - by leave - read a third time.
Bill returned from the Senate with amendments.
The following papers were presented.: - Income Tax Assessment Act - Regulations amended - Statutory Rules 1932, No. 30. Northern Territory Acceptance Act and Northern Territory (Administration ) Act- Ordinance of 1932 - No. 10 - Interpretation.
Health Ordinance - Regulations amended ‘ (2).
Stock Diseases Ordinance - Regulations amended.
Public Service Act - Regulations amended - Statutory Rules 1932, No. 42.
House adjourned at 11.5 p.m. -
Cite as: Australia, House of Representatives, Debates, 12 May 1932, viewed 22 October 2017, <http://historichansard.net/hofreps/1932/19320512_reps_13_134/>.