17th Parliament · 3rd Session
Mr. Speaker (Hon. J. S.Rosevear) took the chair at 10.30 a.m., and read prayers.
Motion (by Mr. Chifley) agreed to -
That the House, at its rising, adjourn to to morrow, at 10.30 a.m.
– Is the Minister for Commerce and Agriculture aware that, of 800 tons of chaff recently delivered in Victoria, fewer than ten trucks were sent to country districts, notwithstanding the claim of the State Department of Agriculture that from 30 per cent. to 50 per cent. of the total deliveries were being made available to rural areas? Has the Minister seen the report of the Government Statist in Victoria that the stocks of hay in that State at the 31st March totalled approximately 460,000 tons? In view of the discrepancy between those figures, andother figures given by the Minister of Agriculture in Victoria, and the small quantity of chaff that is being distributed in drought areas and being made available for projects of the State Rivers and Water Supply Commission, will the Minister again ask the Minister of Agriculture in Victoria to examine afresh the acquisition and equitable distribution of fodder in that State, with the object, even at this late stage, of applying the plan that is in operation in South Australia?
– I have not been informed of the quantity of fodder distributed in rural areas in Victoria, and its proportion to the quantity received from other States. I have received numerous requests from such areas fox advice as to the possibility of obtaining supplies of fodder, and my reply has been that they should be directed to the State Department of Agriculture, with which rests the responsibility for making an equitable distribution. I expect that Mr. Martin, the Minister of Agriculture, will be able to explain the reason for the discrepancy between his figures and those of the Government Statist. I shall have the matter examined, with a view to a more equitable distribution being made in country districts.
Operations at Newcastle.
Mr. Harrison having addressed a question to the Acting Prime Minister,
– Order ! From time to time,I have tried to impress upon honorable members the necessity for refraining from introducing debatable ma Itter in a question. The Standing Orders provide ample scope for the submission of questions in proper form.
– Then I ask the Acting Prime Minister to state whether or not some wharf labourers are at present on strike at Newcastle, and that. Army personnel has been sent to that port to load urgent supplies for the fighting forces in forward areas? If so, does this indicate that surplus Army personnel is available to undertake such duties? I understand that the loading of many ships at Newcastle is being delayed ‘because of shortage of wharf labourers. Will the Minister now take steps to ensure either that further surplus Army personnel shall be provided to man these ships, or that the necessary national security regulations shall be introduced in order to overcome the difficulty?
– I endeavour to reply to questions genuinely seeking information j but I am always-inclined when an attempt is made to introduce political propaganda not to answer the questions at all, or at least to have them .asked upon notice so that a full examination may be made. The honorable member has asked several questions, and I shall endeavour to furnish him with the information sought by him. Because of the shortage of labour, the use of service personnel has been found necessary in many instances. Even when all the waterside workers who have been available have been employed, the use of service personnel has been resorted to. I understand that there is an industrial dispute at Newcastle which involved the despatch of service personnel to the port to dp the work. I am not familiar with the details of the matter, but I shall endeavour to obtain them and furnish a full reply.
Long-service Troops: Service in Combat Amas - Post-war Establishment.
-I desire to direct a question to the Acting Prime Minister on’ a matter of great urgency, but, for security reasons, I am in considerable difficulty in framing it. ‘My inquiry affects many soldiers who have given long service in’ the Army, and it also affects their relatives in Australia. Have any men, who were qualified for release after having given five years’ service in the Army and having served overseas, been sent into combat areas since the Acting Prime’ Minister’s announcement to Parliament that they would be released ? If so, how many? Why were they not retained within the Commonwealth before their units sailed, seeing that the announcement had been made ? Will they be returned to Australia’ immediately for discharge?
– No particular case has been brought to my notice. I understand that in some instances - there were a couple of very striking cases last week - when an opportunity was given to men to leave the service, they refused to concur in the release. It has not been the practice of the Government, except in special circumstances, to try to get men to leave the service, if they do not themselves desire release. It is evident that, as time goes on, that position will have to be reviewed. In some cases, at any rate, it will be necessary to require men to leave the service, whether they desire to do so or not. Referring to the particular aspect mentioned by the honorable member for New England, I understand that in one or two cases, particulars of which I do not recall, men who went into combat areas did not wish to be relieved of that task.
– An offer having been made, was an opportunity given to them to accept it before they went into combat areas ?
– In one or two cases that came to my notice, that was done. However, I think it is only fair to say that I am not familiar with all aspects of the matter. I shall have inquiries made, and a reply will be furnished insofar as security considerations permit.
– I ask the Acting Prime Minister whether the Government has yet determined the size of the Permanent Army that will be set up after the war? Will members of the existing forces with long service and good records be given preference in the selection of members oE the permanent peace force? For the information of members of the present forces, will he make an. earl*’ announcement of policy?
Mr.CHIFLEY. - There are several aspects of the matter of the forces likely to be retained after the war on which, at this stage, I do not think I should elaborate. There maybe certain responsibilities which Australia will be expected to accept and should accept when this war ends, but it is not possible at the moment to determine them. The Government has given consideration to many aspects of the matter, but it is naturally more concerned with war issues than others-, although it is not unmindful of the points raised by the honorable gentleman. I shall see whether it is possible to give him more information than I now think I can.
– On the 7th June the Minister for Post-war Reconstruction wrote to me a letter which contained the following paragraph : -
I note that the letter was sent as the result of all advertisement inserted in an Adelaide newspaper by the secretary of an organization, the object of which is to launch a campaign in regard to the present housing shortage, of which the Government is well aware. As you know the construction of houses is a responsibility of the respective States, but I shall cause inquiries to be made. . . .
Is the Minister entitled to impute that I know that housing is the responsibility of the States, in view of repeated statenients by Commonwealth Ministers, including ‘ himself, regarding what the Commonwealth Government is going to do about housing? Is the Government now, like Pontius Pilate, washing its hands of the housing issue?
– The position is perfectly clear. Under the Constitution, the Commonwealth Government has no power to build houses except for its own employees, including ex-servicemen, who are regarded for this purpose as employees of the Commonwealth Government. Apart from this, the Commonwealth can only take enabling action so that the States may put housing programmes into effect. It can see that sufficient manpower and material shall be made available so that the States may carry out the programmes allotted to them. There is no doubt regarding the position, and the honorable member knows it as well as I do.
Exclusion of “ Sydney Morning Herald
– Will the Minister for Information inform the House whether it is a fact that the representative of the Sydney Morning Herald was excluded from the conference of the Australasian Council of Trade Unions in Sydney this week? In view of the close liaisonbetween the council and the Government, does this occurrence indicate the attitude of the Government to the freedom of the press? Is it a fact that, to enable the Minister to inform himself on these matters, he has been appointed to represent the Government at the proposed world press conference which is to be held at an early date?
– The only information I have that the. representative of the Sydney Morning Herald was excluded from the conference of the Australasian Council of Trade Unions was derived from press sources. If it is true, I commend the Australasian Council of Trade Unions on its acumen, and the wisdom of its decision. I have neither the inclination nor the ambition to attend any world conference of the free press because, as I have repeatedly said in this House, there canbe no such thing as freedom of the press, except for the owners and editors of newspapers, while capitalism lasts.
Rail Transport of Coal
– In view of the very grave danger of flooding in the Hunter River Valley, and the possibility of coal supplies from the midland and northern coal-fields being cut off from Newcastle, will the Government give consideration to a request made by me to the present and previous governments, for the construction of 3 miles of railway between the Richmond Main railway and the West Wallsend to Cockle Creek railway, which would enable supplies to be continuous, notwithstanding the flooding of the Hunter River valley?
– I do not remember this matter coming up for my consideration earlier. I shall consult with my colleague, the Minister for Supply and Shipping, and I hope to he able to give a reply to the honorable member soon. re-establishment and employment bill 1945.
– Is the Acting Prime Minister yet in a position to reply to my previous question relating to the number of departmental officers engaged in the drafting of the Re-establishment and Employment Bill, and the number of officers called during the committee stage to advise the the Minister for Post-war. Reconstruction, as well as their ages, military service and salaries? If not, what is the reason for the delay, and will the Minister arrange for the information to be supplied before the bill reaches the committee stage in the Senate?
Mr.CHIFLEY. - I do not remember a previous question on this subject; I assume that it was asked upon notice.
– Yes. The answer has been held up for some time.
– i have not gone into the matter personally; but I shall try to have the answer expedited, as far as it is possible to supply the information sought.
– Is the acting Minister for External Affairs aware that there is much criticism as the result of the recent appointments of Messrs. Stewart, Stokes and Shann to important positions in the Department of External Affairs? How long have these gentlemen been in the Commonwealth Public Service and what are the positions, with the salary in each case, to which they have been appointed? Is it a fact that these young men, although of military age, have successfully evaded the usual military call-up? Is there any truth in the current rumour that some of them have been appointed because they are personal friends of the gentleman temporarily in charge of the department?
– Recently the honorable member for Bendigo (Mr. Rankin) asked a question in relation to the appointment of Mr. Stewart. In my reply to that question the honorable member for Griffith (Mr.Conelan) will find the information that he seeks concerning that officer. Mr. Stokes has been a temporary officer of the department since 1942. He was recently sent to Chungking as Acting First Secretary at the Australian Legation. His salary at the time was £784 per annum. Mr. Shann has been a permanent public servant for six years, and is at present occupying the position of senior administrative officer in the Department of Labour and National Service, at a salary ranging from £522 to £594 per annum. His provisional promotion to the position of clerk, £594-£672, in the Department of External Affairs was notified in the Commonwealth Gazette of the 7th June, 1945, in accordance with section 50 of the Public Service Act and regulation 109 under that act.
– He is an able officer.
– I am informed that no question as to military service arises in any of the three cases.
– Has the Acting Prime Minister seen the statement in the press of the 8th June that the Government of New Zealand has discontinued the censorship of mails to Great Britain and the United States of America. “Will he issue instructions to the Chief! Post and Telegraph Censor to cease the censorship of mails to and from those countries in conformity with the example set by New Zealand ?
– I have not seen the report, but consideration will be given to the honorable gentleman’s suggestion.
- by leave- I desire to make a statement regarding recent amendments to the National Security (Landlord and Tenant) Regulations which have been announced by the Minister for Trade and ‘Customs (Senator Keane). I do so because of the universal interest in this problem as one phase of the present acute housing shortage. Honorable members will recall that on the 3rd May I made a motion requesting that certain amendments be made to these regulations. The motion was seconded by the honorable member for Barker (Mr. Archie Cameron), and the Acting Attorney-General (Mr. Beasley) replied on behalf of the Government. 1 had attempted to approach the problem constructively, and suggested specific amendments; and I believe that I may fairly claim that the Acting Attorney -‘General was sufficiently impressed with the case made out to take the unusual course of virtually committing the Government in advance to the acceptance of six of the amendments which had been proposed.
– They had already been agreed to.
– The fact is that those amendments had not at that time appeared-, although we had been waiting for them for a very long time. The Acting Attorney-General to whom I express my appreciation of the part he lias played in this matter, was good enough to say at the time that he would recommend those particular amendments to the Cabinet. On the 24th May, when the matter next came before the House, the Acting Prime Minister (Mr. Chifley) informed us that he was arranging a conference between the Minister for Trade and Customs, the Acting Attorney-General and myself in order that we might, before the matter was completed, have a. full discussion of views which I had put before them and which they themselves might hold. I interpose at this point that, following the original publicity given to this matter, I received a flood of letters from all parts of the Commonwealth raising different points which represented the experience of many people of the operation of the Landlord and Tenant Regulations. I placed the originals of those letters in the hands of the Acting AttorneyGeneral, .because I thought that all of us might be able to learn something from them and that they might help in some way in the shaping of the proposed amendments. He in turn passed them on to the Minister for Trade and Customs, and later showed me the comments which the Deputy Prices Commissioner, Mr. McCarthy, had made on the sugges tions contained in those letters. After the Acting Prime Minister had announced on the 24th May that this conference would take place, I received another batch of letters from all parts of the Commonwealth. I placed those letters also in the hands of the Deputy Prices Commissioner. That was done as late as last Friday. I might add that, knowing that this conference was to take place, I also went to considerable trouble to contact what I thought would be the responsible authorities and persons who had some direct experience of the working of these regulations, and I obtained from many of them comments on the proposals which had been submitted. I mention this fact because I have tried right from the outset to deal with the problem in a constructive way, believing, as I am sure the Government believes, that if we can improve upon hastily conceived war-time regulations the obligation rests upon all of us to do so.
Without debate at this stage, I desire to comment briefly on the amendments that have been announced. So far as I can see from the press statement which has been issued, the amendments adopt six of the proposals that were contained in my own recommendations to the Government, together with one or two minor additions on which I had previously made representations. I have no doubt that other amendments, which were suggested to the Government by other parties, have been incorporated, but in at least three important respects, the regulations have not been placed in satisfactory form. I desire to mention them briefly to the Government, because there is still room for a conference on a constructive plane between members representing the Government and members representing the Opposition.
My first contention is that the Government has apparently not seen fit to adopt the recommendation made by its own Regulations Advisory Committee, of which the honorable member for Eden-Monaro (Mr. Eraser) is chairman, that a home-owner, not at present in occupation of the one home that he or she possesses, should have the right, upon giving three months’ notice, to occupy that dwelling. This problem of the home-owner, dispossessed and unable to secure possession of his own home, will become even more acute as many servicemen arc demobilized. When they enlisted, they let their homes, and their wives went to live with their parents. As those men are discharged from the forces, they cannot secure possession of their own homes, and are placed in the entirely unsatisfactory position of having to pay rent for other premises, whilst the income which they receive from their own home is taxed in- their hands at the property rate. That problem requires the attention of the Government, and I believe that a formula could have been found to meet cases of that kind and at the same time deal with the problem of hardship which the giving of three months’ notice might cause to persons at present in occupation of premises.
The second matter is the problem of sub-tenancy. Here again, a formula could have been found if members of thE Government and the Opposition parties had conferred on the subject. What is being done under the regulations in no way remedies the present racketeering practice under which a tenant sells the key of the premises to a sub-tenant. Nor does it prevent the present racketeering practice of a tenant sub-dividing his present tenancy without the permission of the owner. Whilst there is something to be said on both sides, a formula could have been evolved to give to the owner the right to refuse consent, provided that such refusal was not unreasonable.
The third point has reference to flat life. Those honorable members who live in flats know that in a large building the lives of nine-tenths of the occupiers can be made unbearable by the unmannerly and inconsiderate conduct of the tenth. The amended regulations have failed to place in the hands of the landlord the necessary degree of discipline over the unruly tenant. That discipline would work in favour not only of the landlord, but also of 90 per cent, of the occupiers of flats in the building, who themselves were disturbed by the unmanageable minority. Perhaps in many other directions the regulations should be amended, but I do not propose to discuss them at this juncture. The Government evidently preferred, rather than have delay which conferences would entail, to promulgate the regulations now. I do not attach any blame to the Acting Prime Minister (Mr. Chifley) for the fact that the conference, which he promised, was not held, because a misunderstanding may have arisen on that matter. But sufficient has already been stated to show that, at a conference, the regulations already amended might still be substantially improved for the benefit of owners and tenants alike.
– by leave - It is true that at least on one or two occasions the honorable member for Fawkner (Mr. Holt) agreed to a postponement of the motion which appeared on the notice-paper in his name, on the understanding that a conference would b<* held with the two Ministers concerned. I had. thought that this conference had been held, and I must confess that I may have been in some degree remiss in not ensuring that the meeting took place. I do not attach any blame to the Ministers, one of whom was absent from Canberra. These unfortunate things happen. I do not propose to debate the case advanced by the honorable member, but I apologize for not having ensured that the promise which I made was carried out. If the honorable member still believes that there are certain faults which should be discussed, the Acting Attorney-General (Mr. Beasley), with whom I have just conferred, will be prepared to arrange a conference between the honorable member, the Minister for Trade and Customs (Senator Keane), and himself for that purpose.
Motion (by Mr. Holloway) agreed to-
That leave be given to bring in a bill for an act to amend the’ Invalid and Old-age Pensions Act 190S-1044.
Bill presented, and read a first time.
– by leave - I move -
That the, bill be now read a second time.
The purpose of this hill is to give effect to the Government’s decision, -announced in February last, to increase the maximum rate of invalid and old-age pensions “by 5s. 6d. per week from 27s. to 32s. 6d. per week. The new maximum rate will he the highest ever paid since the introduction of invalid and old-age pensions, and I am sure that the Government’s action Will meet with general approval. The new rate will accord with that payable in the Dominion of Now Zealand, with which country in 1943 we established reciprocity in connexion with invalid and old-age pensions, and invalid and age benefits. The rate of pension payable to inmates of benevolent institutions will be increased from 9s. 6d. per week to lis. 6d. per week. The payments to pensioners in institutions are in a different category from those made to persons outside, who have to meet the full cost of their maintenance out of the pension. In the case of the former, the cost of maintenance is borne almost entirely by the institution, and the pension payment made to the inmates is more in the nature of pocket money, which will enable them to purchase tobacco and other comforts not provided by the institution. The cost of maintaining inmates of institutions throughout the Commonwealth varies, but the average cost is from £80 to £90 per annum. The present number of invalid and old-age pensioners is 310,501. They will all receive the full increase of 5s. 6d. per week, at a cost of £4,440,000 per annum. The cost of the increase in respect of 4,930 institutional pensioners will be £70,500 per annum. The total addition to the annual liability will, therefore, be £4,510,500. As all honorable members appreciate, these increases make a heavy demand on departmental administration and it is desired, therefore, to have this bill passed as soon as possible. “We wish to make the first payment at the now rate on the first pay-day ip July.
Later during this session, the Government will introduce a bill to consolidate all social service legislation in one act, and I give to the House the Government’s undertaking that at that time honorable members will have an oppor tunity for a full discussion of all phases of pensions legislation. I therefore ask honorable members to give this bill a speedy passage.
Debate (on motion by Mr. Harrison) adjourned.
Motion (by Mr. HoLLOWAY) agreed to-
That leave by given to bring in a bill for an act to amend the Child Endowment Act l!)41-It)42.
Bill presented, and read a first time.
– by leave - I move -
That the bill be now read a second time.
I have pleasure in submitting for the consideration of honorable members a bill to amend the Child Endowment Act by increasing the rate of endowment for every endowed child by 2s. 6d. a week. The new weekly rate will be 7s. 6d. a week in lieu of 5s. a week. I am sure that all honorable members will give their support to this measure, which will materially improve the comfort and wellbeing of the children of Australia. Since the introduction of child endowment in 1941, reports received from various sources have commended the benefit and given ample proof of the advantages derived therefrom. The number of children in respect of whom child endowment is at present being paid is 935,411, and the annual liability in respect, thereof is £12,160,000. The increased rate will advance this liability by £6,080,000, making a total annual expenditure of £18,240,000. As an alteration of the rate of child endowment involves considerable administrative work, it is desired that this measure be passed as early as possible.
As I indicated on the previous measure, a consolidating social services measure will be introduced later in the session, and honorable members will then have an opportunity for a full discussion of all matters contained in this bill. I therefore hope that the bill will have a speedy passage.
Debate (on motion by Mr. Harrison) adjourned.
In committee: Consideration resumed from the 12th June (vide page 2893).
Clause 67 (Period of advances).
– Under this clause, the period’ of an advance for the purpose of assisting, a primary industry is to he limited to one year. In actual practice, that is not sufficient. Orderly marketing is beneficial to the community as a whole, and certainly helps to stabilize primary industry. It is essential that primary commodities shall bo distributed throughout the twelve months, and provision has to be made accordingly by the organizations which handle them. Advances are made on crops immediately the first part of the crop is received. Each organization would have its own accounting period, and at times a crop the first part of which was received at the beginning of. the year would not be finally marketed at the end of the year. Orderly marketing assures (hat surpluses shall not be placed on the market when crops are received, because the result of that would be to glut the market and reduce the price. In the event of nature providing this year sufficient to meet demands for eighteen months, and insufficient to meet demands next year, orderly marketing obviously would make the distribution evenly over the two years. Therefore, the advances under this clause should not be limited to twelve months. I admit that there has not been any trouble with the Commonwealth Bank in the past, extensions of time having been granted merely on formal application. I should like to know the reason for a statutory limitation. Either the fixed, period should be deleted, or there should be an extension to at least two years.
Mr. SPENDER (Warringah) [11.18 J. - I support the suggestion of the honorable member for Maranoa (Mr. Adermann). I imagine that this provision had its origin principally in the fact that, in the past, most securities in relation to primary produce have been crop liens or stock mortgages, which have always had a currency of about twelve months. Having regard to the fact that, under clause 5, “ primary produce “ can be extended to mean “ any goods associated with the production of primary produce “, it seems unjustifiable to limit to one year the advances which may be made in respect of it. I should like to hear from the Minister assisting the Treasurer (Mr. Lazzarini) what justification there can be for imposing a limitation on the currency of an advance, and why the Government is not prepared to delete the clause.
– The clause is similar, in effect, to section 136 of the act. The annual clearance of indebtedness is consistent with the purpose for which the department is established. Advances are essentially seasonal, and although some carry-over of stocks between harvests is desirable, any determination to hold off the market with a view to securing a higher price would generally operate against the industry concerned. In practice, if for some sound reason a body is unable to clear its indebtedness within the statutory period of one year, the bank will be able to make satisfactory arrangements so that the restriction shall not operate harshly against it. One method would be to transfer the indebtedness to the general banking division, at the rural credits rate. It is desirable to retain the clause, because of the authority which it vests in the bank to be selective in the business of the Rural Credits Department. Without it, pressure would be applied for the provision of, not seasonal but long term finance against stock or commodities, the disposal of which might prove unduly protracted. This is the general practice in connexion with marketing.
Clause agreed to.
Clause 68 (Discounting of bills).
– The clause provides for the discounting of bills secured upon primary produce placed under the legal control of the bank, in lieu of making advances. I should like the Minister to state what discount rate is envisaged. Is it to be the same rate as the bank gives on treasury-bills, which presumably are firstclass paper, or the rate of discount which the Bank of England gives on first-class paper in London?
Mr. LAZZARINI (Werriwa- Minister for Home Security and Minister for Works) “11. 23]. - The honorable member knows that rates of interest cannot be embodied in legislation, because they vary from time to time.
– It is interesting to hear the Minister say that rates of interest cannot be embodied in legislation, because that is exactly what has been done in relation to the deposits of the trading banks in the Banking Bill.
– That is purely a legal quibble. The right honorable member knows that the trading bank deposits held by the Commonwealth Bank are in a different category. This provision relates to general trading business, in respect of which the rates of interest will vary. I hope that the variation will not be very great, because it is the policy of the Government in all such legislation to keep the rates of interest as low and as stable as possible. That has been the dominating aim in all its actions, and I assure the committee that it will be applied in this case.
.- Would it bc possible to apply this method so as to operate the functions of that part of the original act relating to the issue of debentures which is to be repealed? Can the Minister give the assurance that there will be no lessening of the use of funds by the Rural Credits Department, so that its activities in this connexion shall be as wide as possible? If it be found wise to issue short term bills in order to increase the funds which the Rural Credits Department may devote to the assistance of primary production, will the provisions of this clause be made to apply to such cases?
.- The Government will always take any action that it considers wise. Whatever method the Government finds necessary for the making of advances, in giving effect to this clause, will be adopted. This clause has nothing to do with debentures, and the Government, in giving effect to its policy with regard to rural credits, has no intention to issue them.
Mr. ABBOTT (New England) [11.27 J. - The Minister has apparently misunderstood my previous remarks. I was- not particularly concerned about rates of interest. I draw attention to two important and specific matters affecting primary producers throughout Australia. I ask whether the rate of discount on first-class paper will be the same as that given by the Commonwealth Bank in respect of treasury-bills, or whether it will he the rate operating in the London bill market. The Minister will no doubt recall certain evidence given before the Macmillan Committee by Sir Robert ‘Kindersley, head of the firm of Laggard’ Brothers, who pointed out the efficacy of the London bill market in financing primary production. He spoke of the financing of the handling of timber from the time it was cut in Finland until it reached the merchants’ stores in Great Britain. I presume that the Government has some idea of the principles which should operate in the discount market to be created under this clause. Has the Government considered what the rate of interest should be, and whether it should be correlated to the discount rate operating with regard to treasury-bills, or does the Government consider that the rate should be the same as that observed in respect of first-class paper by the Bank of England? The Minister should answer that point instead, of giving to us a spate of words, in which he alleged, the raising of legal quibbles by the Leader of the Opposition (Mr. Menzies). I know nothing about legal matters; but I know that, in the hurly-burly of primary production, it was possible in pre-war days in many cases to get a. rate of discount which lowered by a considerable amount the rate of interest which had to bc paid on overdrafts for 90 days. The Minister is so regardless of the interests of the primary producers that he merely condemns members of the Opposition for raising these important points. He shows that neither he nor the Government has considered the great need for the lowest possible interest rate on short-term loans for the financing of produce from the place of production to its ultimate market. The Minister treats the Opposition in a cavalier fashion. When it draws attention to matters which call for an explanation, all that it gets from the Minister is a written statement obviously prepared by clerks outside the chamber. The Minister is violating a principle which has operated in this country since the institution of parliamentary government. He seems to be completely ignorant of how the bill market should operate, and how it has operated in the past.
– I am not wedded to the word “debenture”, as there are many synonyms for it. The Minister may call it a bill or anything he likes, so long as provision is made for a maximum amount of funds to be made available for the orderly marketing of primary produce. I also ask that, where possible, the accounts of the Rural Credits Department be separated from those of the Commonwealth Bank. The balance-sheet of the bank as at the 30th June, 1944, shows the following items under “Liabilities”: -
On the “ Assets “ side one notices such items as -
lu order to enable the people of Australia, and particularly the primary producers, to realize exactly how much money is to be made available for the orderly marketing of primary produce, the balance-sheet should contain a statement which would enable us to appreciate the position at a glance. There are special entries on the “ Lia’bilities “ side for the Rural Credits Department and the Mortgage Bank Department, and similar statements should appear on the “ Assets “ side, to enable the various activities of the bank to be considered separately. By this bill the Government has brought fresh activities into being, and they are being kept separate so far as their actual administration is concerned. In order to enable us to obtain a proper picture of each undertaking, separate statements regarding their operations should be made. Of course the Minister would have to discuss the matter with the Governor of the Commonwealth Bank, and I suggest that that should be done .before the bill reaches the Senate. It is desirable that we should be able to see the position with regard to the funds on both sides of the ‘balancesheet.
– That is provided in clause 179.
– Yes ; but it is not provided that the information shall he published. It is provided that accounts shall be kept showing the profits, &c., of the various branches of the bank, and it should be provided that this information shall be published from time to time so that the people may better understand what is being done.
Clause agreed to.
Clause 69 (Funds of Bank not to be used except in accordance with this Act).
. ‘ - I should be glad if the Minister (Mr. Lazzarini) would’ inform me what is the value of this clause, and I hope he will not merely tell me that a similar provision is to be found in the present Commonwealth Bank Act. Either this bill is in many respects a mere repetition of existing legislation, or it represents an entirely new approach to banking. It is provided in clause 65 that the bank may make advances to the Rural Credits Department of such amounts, and subject to such terms and conditions, as the Governor of the bank determines. Under that provision the bank may make advances without limit to the Rural Credits Department. Clause 63 says tha.t the capital of a Rural Credit Department shall be £2,000,000. I do not know what is meant by “ capital “ in that sense. Perhaps the Minister can tell us. Thus, we have the position that, under clause 65, unlimited amounts may be advanced by the bank to the Rural Credit Department, while, by virtue of clause 9, the Governor of the bank can be compelled by the Treasurer to advance any sum’ of money which the Treasurer thinks fit. Therefore, I should be glad if the Treasurer would explain to me what purpose is served by including clause 69 in the bill.
.- The answer to the honorable member for Warringah (Mr. Spender) is that the clause means what it says, namely, that -
Except as expressly provided for in this Act, the funds of the Bank shall not bc used in the business of the Rural Credits Department.
That is what the claus© says. That is what the clause means.
– The amazing behaviour of the Minister (Mr. Lazzarini) brings me to my feet again. He says that the clause means exactly what it says. I congratulate him. In the bill the clause occupies two lines and is, therefore, probably one of the few clauses in the bill which either he or any other Minister has read. The clause provides that the funds of the bank shall not be used in the business of the Rural Credits Department, except as expressly provided. How could the funds of the bank be used in the business of the Rural Credits Department except by permission of the Governor? That is a simple question. It is no legal quibble. Clause 65 of the bill says that the bank may make advances to the Rural Credits Department of such amounts, and subject to such terms and conditions, as the Governor determines. Thus, the Rural Credits Department cannot get money from the bank except with the permission of the Governor. Now clause 69, for good measure, says that it cannot get money anyway - and the Minister says that the clause means exactly what it says.
– So it does.
– The Minister will discover that he is “ dead wrong “ on the subject of this bill. He might as well admit it, and get rid of some of the dead wood that is to be found in the bill.
Clause agreed to.
The net profits of the Rural Credits Department in each year shall be dealt with as follows: -
one-half shall be placed to the credit of a. fund to be called the Rural Credits (Department Reserve Fund; mid
oue-half shall be placed to the credit of a fund to be called the Rural Credits Development Fund, which shall be used, in such maimer as the Bank determines, for the promotion of primary production.
– Clause 19 provides that the net profits of the General Banking Division in each year shall be dealt with in a certain fashion, but no provision is made for dealing with losses incurred by either the General Banking Division or by the Rural Credits Department-
– The bank cannot make losses so long as it can print more notes.
– This is a clear indication that the Government proposes to use its power under the bill to ensure that no losses shall be acknowledged in any department of the bank. Clause 65 provides that the central bank, of which the General Banking Division is the predominant part, may make advances to the Rural Credits Department. I can visualize the possibility of the Rural Credits Department finding itself in much the same position as was the Agricultural Bank of Western Australia, which made a loss of £12,300,000. Presumably, such a loss would be covered by advances from the central bank. We must look to the central bank to see how the accumulated losses in this section will be dealt with, because I have no doubt that there will be losses. Instead of making provision for possible losses in the general banking section the Government, in. clause 19, visualizes nothing but profits. I want to know where the money to meet losses, which are inevitable in a government concern of this nature, is to come from. I go back to the clause dealing with the powers about which so much has been said, and can only conclude that in no circumstances will the Government allow losses to be associated with the bank, because of the right of the Treasurer to print as many notes as he likes. I should like the Minister to say what is intended.
– With one exception, every rural credits institution in Australia has been most conservative in the making of advances, and therefore I do not expect the Rural Credits Department of the Commonwealth Bank to make the losses which the honorable member for Wentworth (Mr. Harrison) seems to think will be inevitable. Even if there should be small losses in individual cases, the great advantages which will accrue from the development of our latent rural wealth will more than offset them. The suggestions of the honorable member could be adopted only by the charging of higher interest rates and the exercise of great care in making advances. The honorable member seems to be more concerned about possible losses than about the development of rural industry; he seems to be afraid that the policy of the Rural Credits Department will be too liberal. The operations of the Queensland Agricultural Bank, and of most similar institutions in Australia, have been conducted at a profit. The only exception is the Agricultural Bank of Western Australia which, although it incurred losses, conferred on the community indirect benefits of great value. We need not be concerned about the wording of this clause, because I expect that the department will be conducted at a profit. If I were to make a suggestion to the Government, it would be that the terms to primary producers should be even more liberal.
– We hope to be able to make them more liberal in the future.
– I believe that this department of the Commonwealth Bank will confer great benefits on primary producers.
– The points raised by the honorable member for Wentworth and the honorable member for Wide Bay should be answered.
– They expressed different views.
– That is true. The honorable member for Wentworth spoke ofthe possibility of losses, whereas’ the honorable member for Wide Bay said that, having regard to the policy which the Commonwealth Bank had pursued in the past, losses were not likely. I remind the honorable member for Wide Bay that hitherto the Commonwealth Bank has followed a prudent policy because it has been controlled by a board. Careful management has resulted in profits; but the policy of the past will not be pursued under the new control, because wise guidance by a board is to be replaced by political control of the bank. As the honorable member for Wentworth rightly reminded us, Government-controlled institutions in Australia have a poor record. He referred to the unhappy experience of the Agricultural Bank of Western Australia under political control. In view of the changed control contemplated by the Government, losses are almost inevitable. The balance-sheet of the Commonwealth Bank for the year ended the 30th June, 1944, shows that, despite prudent and careful management by men with wide experience, the bank made a profit of only £37,827. It is easy to visualize that meagre profit being converted into a loss under the less prudent management, which is likely to result from political control. The bill should provide against losses, which I believe to be inevitable under the new management.
. - I should not have spoken but for the remarks of the Leader of the Australian Country party (Mr. Fadden). This clause provides for the distribution of the profits of the Rural Credits Department. Half of the profits are to be placed to the credit of a reserve fund, which can be drawn upon to meet any losses which may arise, and the other half will he devoted to the development of primary production in Australia. I can understand the honorable member for Wentworth (Mr. Harrison) being opposed to the establishment of the Rural Credits Department, because he, as a member of the Liberal party, represents big city interests rather than those of rural producers. The honorable member for Wide Bay (Mr. Corser) expressed an entirely different view; he as a member of the Australian Country party spoke in the interests of primary production. I am utterly astonished that the leader of the party that claims to represent the primary producers threw bricks at the Rural Credits Department, whose very purpose is to assist them.
– I did not.
– The right honorable gentleman did. He did nothing but talks about losses in order to cause the primary producers to lose faith in it.
– I rise to order. I neither said nor implied any such, thing. All I referred to was the necessity to provide for losses, which, in my opinion, arc inevitable” in a loosely controlled organization.
The CHAIRMAN (Mr. Riordan).That is not a point of order.
– The right honorable gentleman gave figures to show how likely it was for the department to fail. He criticized it. He threw bricks at it. Wanting to “knock” the whole scheme of this legislation, the right honorable gentleman is prepared to bring the primary producers down with it; but soon they will realize the benefit of the Rural Credits Department and all other departments of the Commonwealth Bank under this measure.
– Whilst the remarks of the honorable member for Wentworth (Mr. Harrison) could be properly applied, to other parts of the banking structure, they cannot be applied to the Rural Credits Department. There will be practically no danger of losses because advances will be made for it period of not more than one year upon the security of primary products actually in the process of being marketed. The whole scheme of the Rural Credits Department ensures that the primary producer shall derive maximum advantage. When the Rural Credits Department was created, it was not decided or intended that it should make substantial profits, and it was decided that what profits it did make should be used for the benefit of the primary producers, for whose benefit the department was established. The net profits are, therefore, equally divided between the Rural ‘Credits Department Reserve Fund, which enables the department to make still further and more liberal advances, because the reserve funds provide additional interest-free capital to the department and the Rural Credits Development Fund, which has been of inestimable value in the promotion of primary production. I am glad that the Government has retained that provision and has not provided, as elsewhere, that half of the profits shall go to the National Debt Sinking Fund. Farmers, before they can get a return from their products must prepare the ground, sow the seed, and wait months for the harvest and the sale of their products, but advances from the Rural Credits Department tide them over the waiting period between the harvesting and the marketing of the crop. I think the clause should stand as it is. I commend the Government for having included at least one wise provision in this legislation by retaining the original clause intact.
– I agree with the clause as it stands. I notice in the balance-sheet of the Commonwealth Bank that under the heading “ Development Funds “ an amount of £44,870. Is that money expended to promote primary production at the bank’s discretion? In what way and for what purpose has that money been used?
– I cannot supply that information without research, but I will get it for the honorable member.
– It is right that it should be expended to the advantage of the primary industries upon whose products the profits have been earned. I hope that it is not intended to use any of that money as a part of the Government’s contribution to the Wool Use Promotion Fund.
– The clause definitely prevents that.
– That is the point upon which I wish- to be clear. The Minister (Mr. Lazzarini) was unfair towards the Leader of the Australian Country party (Mr. Fadden), from whose remarks the only inference that could be drawn was that he thought there should be a provision against losses by the Rural Credits Department. It is not inconceivable that it could make losses. In Queensland, the Rural Credits Department made advances to a co-operative association - not to a marketing board, all of which have been successful - and then had to take over the commodity and sell it in order to secure the bank’s funds. That could happen at any time and could, in some circumstances, result in a loss. I make that explanation on behalf of the Leader of the Australian Country party.
– I thank the right honorable member for Cowper (Sir Earle Page) for his clear explanation of this clause. The Minister (Mr. Lazzarini) made ‘three attempts to clarify the clause, ‘hut failed. The failure of the Minister to apply himself to his task is lamentable. Bte will not even read the clauses. I appeal to him to assist the work of this committee by, if necessary, seeking the aid of his advisers, when endeavouring to answer questions. The honorable member for Wentworth- (Mr. Harrison) asked whether provision should be made in this clause, or some other clause, against losses. We all know, none better than the Minister, that in this bill every possible protection of the note issue is being removed. The Commonwealth Bank Board is to be abolished; the gold reserve is to disappear; there is to be no limitation of the number of notes that may be issued without the approval of the Parliament. Therefore, no department of the Commonwealth Bank will have protection, if the Government embarks on a wild orgy of expenditure. It is imperative that every possible precaution against losses should be devised. Reference has been made to losses made in Western Australia on advances to rural industries. Ils losses exceed £12,000,000. Since the Government established the Mortgage Bank Department extraordinary care has been exercised by the Commonwealth Bank Board in making advances of this class. In fact, only a small proportion of applicants have been granted assistance.
– In Victoria only from 33 to 40 per cent, of applications have been granted.
– The Government, when it introduced its mortgage bank legislation promised the primary producers the moon, and as it is now under pressure from honorable members opposite who represent country districts, itwill, no doubt, yield to that pressure, and permit advances without strict regard to business considerations. In such circumstances arises the danger of an orgy of expenditure, and this is rendered still more probable by the removal of protective provisions. As the honorable member for Wentworth has pointed, out, we should make provision in respect of losses, because, no doubt, there will be losses as the result of the Government’s policy.
– I remind honorable members that this provision deals specifically with profits. Should we concentrate on the possibility of losses, a view with which I disagree, we should be obliged to place upon primary producers an additional impost with respect to these advances. Last year the Rural Credits Department made a profit of only £33,000. I should be greatly perturbed had it made a very big profit because it could only do so by rendering correspondingly less service to primary producers.
– Does the honorable member believe that that principle should be extended in respect of advances to secondary industries?
– Yes, provided that similar provisions with respect to security were applied. In my view this provision gives an additional benefit to primary producers. At present, the department can lend only on the security of primary produce placed under the legal control of the bank; and on that basis, as I have already said, the department last year made a profit of £33,000. That fact shows that it is unjustifiable to place a higher charge on the primary producers. ‘This is the one provision in the bill that pleases me very much, because under it the department will not only continue to make advances in respect of the marketing of primary produce, but will also be empowered to lend upon any kind of security acceptable to the bank.
– It can now do that.
– No. It can lend only in respect of primary produce ready for marketing, whereas in future it may lend upon any kind of security acceptable to the bank so long as the purpose in respect of which the advance is made ‘is associated with the production, or marketing, of primary produce. Therefore, advances may be made, not merely in respect of marketing, but also production, and that will undoubtedly prove to be of great benefit to primary producers as a whole. It is pointless to talk about the possibility of losses, because, with the exception of the
Agricultural Bank of Western Australia, losses have not been a feature of the provision of finance to primary producers in the past. So far as the man on the land is concerned, there will be no orgy of spending. Up to date he has always met his obligations except in time of drought. This provision, I repeat, will be most acceptable and of very great assistance to primary producers. I deplore any attempt to endanger this concession by relating it to the proposal to abolish the Commonwealth Bank Board.
.- I should not have participated in this debate had it not been for the great play made by honorable members opposite upon the losses associated with the operation of the Agricultural Bank of Western Australia. That institution came into existence as an industrial assistance board charged with encouraging the development of the back country of Western Australia, and it has done a good job in that direction. Judging from this debate, one is forced to the conclusion that honorable members who have had some experience of the difficulties of the man on the land desire to help the Government to improve our land finance policy, whilst honorable members who know nothing, or very little, of their hardships and trials are reluctant to improve the banking system to enable it to support an improved land policy for the development of our countryside and the protection of the welfare of primary producers. The Agricultural Bank of Western Australia is not a bank in the real sense. Bather, it is a lending institution established to render financial service to farmers. It had to commence its operations as a bank with the great handicap that the land for which it became responsible was to a large degree over-capitalized. Its losses have been incurred largely as the result of wiping off a large amount of the capital value of the land granted to farmers under various settlement schemes. I do not think that the right honorable member for Darling Downs (Mr. Fadden) would claim that such action was altogether undesirable. Farmers were obliged to pay high rates of interest, and they often found that the land was unsuitable.
Consequently, the Agricultural Bank was obliged from time to time to write off substantial portions of the capital value. Much the same position exists with regard to the trading banks: in Western Australia, although those institutions have not been required to write down capital values to the same degree. In addition, the business of the trading banks is spread over a greater variety of securities. The losses of the Agricultural Bank of Western Australia have been incurred in an endeavour to ease the financial burden of the farmers, and, at the same time, develop and increase the productivity of out-back lands in that State. The Primary Producers Bank Limited, of Western Australia, was concerned only with financing settlers in the agricultural districts of the State. Like other financial institutions that confined their business to one phase of banking operations, the Primary Producers Bank Limited found that, in a period of economic depression, it had no other field of industry against which to offset its losses on its advances to rural industries. When it encountered years of low prices and poor returns, this private trading hank became insolvent. That experience has not been mentioned in this chamber, because it proves that a trading bank, unless’ it has spread its risks over the whole field of industry and over the whole continent, will inevitably meet financial difficulties in a period of stress. The major point which occurs to me is : Do we desire the Commonwealth Bank to make big profits from financing primary producers, ultimately driving many farmers off the land, or build up a large rural population by adopting a policy of liberal advances and a reasonable rate of interest? The honorable member for Wide Bay spoke wisely when he referred to the policy that the Rural Credits Department should adopt. It could make huge profits Aor a period, but the results of charging high rates of interest on advances to primary producers would he disastrous. Profits would accrue, and losses could be written off against them; but, in the main, if a reasonable rate of interest is charged, our rural industries will develop, and the country as a whole will become more prosperous.
– The honorable member Bor Wide Bay (‘Mr. Bernard Corser) desires to safeguard the interests of the primary producer, and that is an admirable trait in his character. But I assume that he does not consider that the Commonwealth Bank, as a whole, should be jeopardized because of his anxiety to protect the rural industries. I had not intended to “ point the bone “ at primary production, because I had previously drawn attention to the fact that the bill does not envisage the possibility of the General Banking Division making losses on its operations. Now, I go further than that, and indicate that no provision is made for the Mortgage Bank Department, the Industrial Finance Department or Rural Credits Department making losses. For example, clause 86 refers only to the profits of the Mortgage Bank Department. That omission is readily understood when we recall that unlimited powers have been given to the Treasurer of the day to issue as many banknotes as he may think fit, and to supplement, if necessary, the funds of the Central Bank by an issue of notes, so that huge losses by the various departments of the Commonwealth Bank may be written off. The bill makes it evident, that the Central Bank may father all the departments of the Commonwealth Bank, and its funds may be supplemented by judicious inflation by the Treasurer from time to time. So the set-up Ls complete. The Government is creating an inexhaustible reservoir of money - a perennial fountain which will spout unlimited streams of inflationary currency. No drought, however serious, will be able to affect it, and no international or domestic incident will be able to alter it.
The honorable member for Wide Bay applauded the intentions of the Government regarding the Rural Credits Department, although he discovered no virtues in the remainder of the bill. The honorable member considers that unlimited credit should be made available to primary producers, regardless of what any other section of the community may suffer. He said that the Rural Credits Department will not make losses., because its policy will be conservative.
– I did not say that.
– The honorable member for Perth (Mr. Burke) explained that the loss of £12,300,000, made by the Agricultural Bank of Western Australia, occurred because of the institution’s efforts to relieve the plight of the man on the land. Of course, we can always ease the position of any section of the community simply by making available to them from the inexhaustible source of credit all the money required to cover their losses. The granting of bounties and the establishment of equalization schemes for the assistance of primary producers are to the advantage of the country as a whole, and I find no fault with them. Our outbaek areas must be developed, and primary producers are as entitled to a fair reward for their labour as are workers in secondary industries. But I disagree entirely with the premise that any losses that may be made by the Rural Credits Department should be covered simply because the primary producers are the most important section of the community.
– I did not say that.
Mr. HARRISON .^1 should like the Minister (Mr. Lazzarini) to explain why the bill does not contemplate the various departments of the bank making losses. Docs he visualize a set of circumstances under which losses are not likely? If he does, he is visualizing a Nirvana which only his uninformed mind could imagine.
.-! desire to record in Hansard an answer to the statements made by the honorable member for Wentworth (Mr. Harrison) about the losses made by the Agricultural Bank of Western Australia. That institution is not a bank in the true sense of the word. It was established for the purpose of making loans to primary producers for the development of the State. After it had granted a. first mortgage for the development of a farm, the bank was not permitted to undertake general banking business, or even issue cheques. Consequently, the benefits which the private trading banks derive from general banking business were not available to the Agricultural Bank.
– I. rise to order. The clause now under discussion has nothing whatever to do with the Agricultural
Bank of Western Australia. I submit that the honorable member is out of order.
– I rule that the honorable member for Forrest is in order.
– I am referring to what virtually was the rural credits department of a certain institution. The facts are these: Advances by the Agricultural Bank of Western Australia to farmers were limited. For instance, in respect of a 1,000-acre farm, an advance might be limited to £1,000.
– I rise to order. I point out that advances by the proposed Rural Credits Department of the Commonwealth Bank will be available only for primary production. The department will not be able to make advances against land, whereas, as the honorable member for Forrest (Mr. Lemmon) himself has pointed out, the Agricultural Bank of Western Australia could make advances against land only. It was virtually the land bank of the Western Australian Government. I submit that the activities of that bank have nothing to do with the clause now under discussion.
The TEMPORARY CHAIRMAN.I rule that the honorable member for Forrest is in order.
– As I have said, the limit on an advance by the Agricultural Bank of Western Australia in respect of a 1,000-acre property might be £1,000; but subsequently the farmer might improve that property to a value of, say, £5,000, with the result that he would require greater financial accommodation, perhaps to build a house, or buy machinery. He was then forced to go to the private banking institutions, because although he may have been a good client of the Agricultural Bank and met his interest obligations, he could not obtain the financial accommodation that he required as he could not have his account on a daily balance basis. Therefore, this institution which was called a bank was really a lending organization. Immediately a client became profitable, and was in a position to return something to the institution, he transferred his business to a private bank. He was forced to do that because of the limit on advances. There- fore, the only clients which remained with the Agricultural Bank were largely those who were unable to meet their interest obligations. It was because of the limitations placed upon the Agricultural Bank by a non-Labour Government, that certain losses were caused. Not long ago there was an alteration of the Western Australian legislation, whereby the Agricultural Bank can obtain ite full amount of interest, with the result that for five years it has not made a loss.
– I should like to clear up a point raised by the honorable member for Wide Bay (Mr. Corser). I would point out to the honorable member that clause 70 of this bill is identical with clause 140 of the Commonwealth Bank Act 1911-1943, with which the honorable member for Cowper (Sir Earle Page) was closely associated, with the exception of one word’: Where the word “ Board “ appears in paragraph h of clause 140 of the Commonwealth Bank Act, the word “ Bank “ appears in this clause.
– Owing to the new circumstances.
– Yes. Consequently, the only difference between what this clause proposes and what wa3 done under the original legislation, is that the “bank” and not. the “ board “ will deal with the profits, where profits are derived. I rise not to challenge the disposition of such profits as the Rural Credits Department will make. In fact, I am very happy to think that there may be some profits accruing from the operations of this department; but my fears have been reinforced by the speeches of the honorable members for Perth (Mr. Burke) and Forrest (Mr. Lemmon). It has been the unhappy experience of this country that banks, or institutions as they have euphemistically been called, which have set out to advance money on rural properties, not only have failed almost invariably to conduct their affairs on a profitable basis,, but also they have come directly under the influence of political pressure, which has led to their undoing. We have heard from two Western Australian members something of the record of the Agricultural Bank of Western Australia. We have been informed that that organization is not a hank, but an institution; I say tha>t any government which describes an institution as a bank, knowing all the implications that banks and bank failures have in the minds of the people, is guilty of a gross error of judgment. I believe .that one is entitled, both on its name and record, and on its operations, to take the Agricultural Bank of “Western Australia for what it says it is. Therefore, I believe that the committee should hear something of the history of this bank. First, I point out that in the lifetime of this organization two royal commissions have been set up to investigate its operations. The first was in 1917, and I believe that the language of the report of that body still has sufficient freshness, because of its topicality, to interest members of the committee. I quote the following passage from the Minutes of Votes and Proceedings of the Parliament of Western Australia, 1917, page 25 -
Although settlers universally give . the Agricultural Bank all praise for its assistance, there is an unmistakable tendency to regard further State advances, not as a privilege but as a right, and we fear that the best results will never bo obtained while our settlers rest content with the idea that it is tha State and not the individual, who must be relied on to promote progress. From the banks point of view, political management - with its fatal accompaniments, lack of discrimination, the changes of policy, - is frankly intolerable and impossible. Under the present system the bank cannot control its own business and the effect of the system is to weaken the self-reliant fibre of an artificially fostered rural community.
The commission recommended that there should be no political control of the bank. The words are as true to-day as they were then. We are handing over political control of rural development to the Commonwealth Bank. The second royal commission on the affairs of the Agricultural Bank of Western Australia was appointed in 1934, and I again quote its report from the Minutes of Votes and Proceedings of the Western Australian Parliament -
The financial position of the bank is alarming. For the last 20 years in order to meet the commitments of the bank the trustees have been drawing on capital and/or loan moneys to make up deficiencies.
The accrued, actual and estimated contingent loss on account of the Agricultural Bank and its allied institutions is £12,304,600.
What the honorable member for Forrest has said confirms that statement. He claimed as a virtue of the bank the fact that it acted as a developmental institution. The report continued. -
If the allegation of the trustees that they were purely instruments for carrying out ministerial policy is correct, then political interference in the development policy and internal administration of the bank has had a disastrous effect on its control by the trustees.
The royal commission made the following recommendation : -
All political interference in the management of the bank and the control of ite policy must be abolished.
There is a proper place for government administration in the development of rural properties. One of the important tasks of government is to ensure that our rural areas are developed, with State assistance if necessary. However, honorable members opposite are confusing a function of government with a function of banking. It is not a function of a bank to lend money for developmental purposes on projects which represent a bad banking risk; the proper function of a bank is to conduct its operations on a profitable basis, whether it be a State-controlled bank or a private bank. Therefore, the great danger inherent in political control of banking is that those who have control are liable to regard what ought to be a function of government as a function of banking. We have seen the disastrous effect of this mistaken policy in the history of the Agricultural Bank of Western Australia. I have no doubt that the honorable member for Forrest, and other Government supporters who agree with him, consider that what is proposed to be done by the Commonwealth Bank in this regard is a proper function of banking. If the Commonwealth Bank should suffer, on a proportionate scale, losses such as were sustained by the Agricultural Bank of Western Australia, the effect on the stability of banking in Australia would be disastrous. Honorable members opposite should establish clearly in their minds the difference between the functions’ of government and the functions of banking. If1 they want our rural areas to be developed, they should not apply political pressure to the banking system in order to achieve their purpose. Such interference would make it impossible for the banks to carry on their proper functions.
– I have never known the Rural Credits Department of the Commonwealth Bank to be excessively liberal in making advances to producers, although, in my experience, there has never been a great element of risk attached to such transactions. I understood the honorable member for Wentworth (Mr. Harrison) to say that there would be unlimited advances for primary production. I remind him that advances by the Rural Credits Department of the Commonwealth Bank are limited to 80 per cent. of the estimated value of commodities produced. When those commodities have been produced and delivered to the appropriate marketing board, a comprehensive insurance policy covers them. I see no element of risk in that regard. The Minister for Repatriation (Mr. Frost) spoke of driving producers into the hands of private banks. Obviously, the Australian Country party does not favour anything that would cause that to be done. A prominent member of that party, the right honorable member for Cowper (Sir Earle Page) was responsible for the establishment in 1925 of the Rural Credits Department of the Commonwealth Bank and the introduction of low interest rates on loans made by that department to primary producers. An investigation of the latest balance-sheet issued by the Commonwealth Bank shows that the rate of interest charged on advances made by the Rural Credits Department was considerably lower than rates of interest on other loans. Whilst we must endeavour to see that the department operates successfully, we should not seek to obtain undue profits for it at the expense of the primary producers. A primary producer’s return from the sale of his products represents his wage, and the rate of interest on loans necessary to produce that wage should not be higher than is absolutely necessary.
– A great deal of discussion on this clause has related to two different matters. The first of these is the problem of financing the orderly marketing of primary products, which is a short-term proposition. I have been assured by bank officers that the slight amendment regarding securities other than primary products has been made only to overcome practical difficulties which have been experienced in the operation of the Rural Credits Department of the Commonwealth Bank during the last twenty years. The amendment makes no alteration of principle. The second matter, which was dealt with by the honorable member for Forrest (Mr. Lemmon) and the honorable member for Perth (Mr. Burke), is not related to this clause ; it was more of a long-term proposition which could be dealt with by the Savings Bank. Section 35 of the Commonwealth Bank Act, as amended in 1927, provides for the handling of these activities in the right way by the right funds. Section 35w contains the following provision: - (1.) The Savings Bank may invest any moneys held by it-
That made provision for long-term loans for capital expenditure. The value of the Rural Credits Department lies in the fact that it was formed to handle the short-term financing of primary products. I trust that nothing will be done either by legislation or administration to interfere with the high security value which primary products are able to secure under this system. If we do anything which will lengthen the time allotted for the marketing of those products, or if we incorporate in the Rural Credits Department anything that deals with capital expenditure we shall depreciate the security value of primary products. This would cause the rate of interest on these short-term loans to increase and would thus damage the whole financial structure of our primary industries.
Siiting suspended from 12.45 to 2.15 p.m.
.- The provision in this clause is identical with that contained in section 140 of the Commonwealth Bank Act, which the bill proposes to repeal. I can recall the introduction of that legislation in 1925 by the right honorable member for Cowper (Sir Earle Page). Australian primary producers have been materially assisted by the Rural Credits Department in the orderly marketing of their products; up to the beginning of the war, primary produce to a value of £125,000,000 had been marketed in an orderly manner, with profit to the growers. I pay tribute to the right honorable gentleman for the service which that legislation has rendered ; up to 80 per cent. of the marketable value of the commodities disposed of has been advanced by the Rural Credits Department. The only variation between the clause and section 140 of the act is that the words “ the Bank determines “ are to be substituted for the words “ the Board directs “. That is the weakness of this proposal, because the effect of it will be to destroy the effectiveness of the provision. The Deputy Leader of the Opposition (Mr. Harrison), in anticipation of the losses that must occur by reason of the adoption of the extravagant and wild financial proposals of the Minister assisting the Treasurer (Mr. Lazzarini)–
– His unrestrained financial proposals.
– Under the operation of section 140 of the act, the marketing of primary products was protected by reason of the application of the skill, knowledge and experience of the experts on the Commonwealth Bank Board, particularly those associated with primary industries. An organization was established to ensure that the Australian pound note should have real value; it was backed by a gold reserve, or gold plus sterling, equal to 25 per cent. of the amount of notes issued. The Government proposes to remove the Bank Board, and not to have any limit on the amount of notes that may be printed. Failures are bound to occur, and I want to protect the interests of the primary producers. In marketing their commodities with the assistance of the Rural Credits Department, they should not be asked to make any contribution towards losses occasioned by government banking policy. The Minister should not remain silent, but should indicate clearly how it is proposed that losses caused by that means shall be made good. Despite the denials of honorable members opposite, the honorable member for Fawkner (Mr. Holt) has proved that political interference with the control of the Agricultural Bank in Western Australia caused that institution to lose more than £12,000,000. A royal commission which sat in 1934 recommended that political control should be withdrawn from its operations. That recommendation hashad no effect upon honorable members opposite. I again appeal to the Minister to state that losses caused by government financial policy will be made good in such a way that primary producers will not be required to make a contribution to them.
Clause agreed: to.
Clause 71 agreed to.
Clause 72 (Investment of surplus funds).
.- I should like the Minister to throw some light on the purpose of the clause, the language of which is similar to that contained in section 142 of the act. It provides that any surplus funds in the Rural Credits Department may be invested in such manner as the Governor thinks fit. This clause should be considered in conjunction with clause89, which deals with the Mortgage Bank Department and makes a similar provision. Under section 157 of the existing act, all surplus funds in the Mortgage Bank Department must be invested in specified securities : Government securities generally, on fixed deposit with the bank, or in any other prescribed manner. If a manner is prescribed’, one knows what is intended. For some reason, however, the Government has decided to provide that all surplus funds in the Mortgage Bank Department and the Rural Credits Department may be invested in such manner as the Governor thinks fit. By reason of the operation of that provision, the Parliament may not have knowledge of an investment until after the event. The Government will be enabled by this legislation to make funds available for the purposes of the Rural Credits Department and the Mortgage Bank Department, and any surplus funds not required at the time by either of those departments may be applied as the Governor thinks fit; for example, in financing an industry, or engaging in ventures such as the Commonwealth Oil Refineries Limited, Amalgamated Wire less Australasia Limited, the Newnes shale-oil undertaking, or the aluminium project. The transaction may be completed without the Parliament having any knowledge of it. The giving of such general power is characteristic of recent legislation. The Government is seeking to make identical provision in relation to the Mortgage Bank Department and the Rural Credits Department. I agree that the disposal ofl surplus funds should be treated in the same way in both instances; but the proper course would be to have surplus funds invested only in specified securities or in any other manner prescribed. The manner prescribed would become public knowledge, and could be discussed before any step was taken to invest in a venture of which the Parliament or the public would not approve. Inherently, there is great danger in the Government’s proposal. My objection will not be answered by saying that the power has not been exercised in the past, or that it already appears in the act. The Government having placed all surplus investable funds on the one footing, why should not the provisions of section 157 of the act be applied ? If securities are specified in which surplus funds may be invested, or if they may be invested in any other manner prescribed, there is no limitation of authority; rather is there a safeguard in that funds cannot be invested other than in specified securities, unless the manner is prescribed, and then the transaction comes to public knowledge. Why is the practice under the act to be followed in the one case and not in the other?
.- The honorable gentleman has answered his question in some respect, by agreeing that the one principle should apply in both cases. He wants the funds to be invested in specific securities. The Government, in framing the legislation, aimed at leaving with the Governor of the bank the very wide discretion that he should have. I promise to bring the matter to the notice of the Treasurer (Mr. Chifley), and to ask him to consider it. I could not undertake to make an alteration at this stage.
Clause agreed to.
Clauses 73 and 74 agreed to.
Clause 75 -
The capital of the Mortgage Bank Department shall bc Four million pounds, consisting of -
– 1 move -
That the words “Four million pounds “ be left out with a view to insert in lieu thereof the following words: - “Rix million pounds or such greater sum “.
My purpose is to increase the capita! of the Mortgage Bank Department to £6,000,000, and to make a continuing contribution of the £150,000 per annum that is paid to the Mortgage Bank Department from the profits derived from the issue of Australian notes. Both the clause and the amendment have relation to clause 46, which the committee has passed. That clause provides that the contribution of £150,000 per annum from the profits derived from the issue of Australian notes shall cease to be paid to the Mortgage Bank Department when its capital amounts to £4,000,000. There does not appear to be any good reason for fixing the capital of the Mortgage Bank Department at the arbitrary amount of £4,000,000. It might equally as well be fixed at £5,000,000, £6,000,000, £10,000,000, or any other amount. It seems to me to be indefensible to cease to make a contribution from the profits derived from the note issue when the capital of the Mortgage Bank Department totals £4,000,000. For that reason, as a first barrel I am proposing that the capital of that department shall be increased to £6,000,000; and, secondly, I desire that its capital shall exceed £6,000,000 as the result of the continued accretion of funds from the profits of the note issue. There are further provisions relating to the financing of the Mortgage Bank and to mortgages in later clauses. A great part of the funds for financing farm mortgages is designed to come from
Savings Bank funds made available toy the Commonwealth ‘Savings Bank Department to the Mortgage Bank Department. The funds from the Savings Bank will have to carry an interest rate at least comparable with the market rates of interest which could be obtained for those savings by the Savings Bank depositors from either fixed deposits or some other form of secure investment. Therefore, the interest on long-term mortgages will always have a strict relationship to the market rates of interest on long-term deposits, whatever they may be.
The design of the Mortgage Bank is to provide farmers with long-term mortgage funds at the lowest possible rate of interest. As speaker after speaker has said in this debate, one of the most important considerations to which we should give attention in the financing of farmers is the necessity for a low rate of interest. Most of the farmers have been burdened for many years, first, with excessive capital values, and, secondly, with interest charges which they could barely meet from the proceeds of the sale of their farm produce. Therefore, if the Government desires to help the farmers with long-term mortgages, it should take every step that can be devised to provide them with money at a low rate of interest. One of the best means of doing that is first to build up the capital of the Mortgage Bank with money which is interest free. Its capital of £4,000,000 will have been derived from receipts from profits of the other departments of the Commonwealth Bank. It does not carry any requirement to meet interest charges, and therefore it can in turn bo lent to the farmers at a low charge. Savings Bank interest is between 2i per cent, and 3 per cent., and, as the note issue profits carry no interest at all, the average rate of interest which the farmers will have to pay will be levelled down to a rate which ought to be substantially below that prevailing on the market. That, of course, is what we aim to do in relieving the farmers of heavy interest indebtedness. Section 144 of the Commonwealth Bank Act 1911-43 provides -
The capital of the Mortgage Bank Department shall cbe the aggregate, not exceeding four million pounds, of the following amounts: -
the sum of one million pounds transferred from the special reserve account in pursuance of sub-section (5.) of section one hundred and nine of this Act;
the amounts paid to the Mortgage Bank Department from the net profits of the Bank; and
the amounts paid to the Mortgage Bank Department from the profits derived from the issue of Australian notes.
So the Mortgage Bank capital is built up all the time from profits from other activities of the Commonwealth Bank. Those profits are not liable to interest call, and therefore can be made available, interest free, for loan to the farmers. “We should be letting the farmers down if, for some reason which is not disclosed, the arbitrary sum of £4,000,000 were fixed in the bill. That is the sum which was determined upon in 1943 when the Mortgage Bank legislation was passed. Despite what may ib said on either side of the chamber, it is well known that, because of inflationary trends, the value of the £1 has not quite so much purchasing power now, in most material respects, as it had in 1943. Therefore, if £4,000,000 was the capital fixed in 1943, a greater sum is required to meet a similar call in 1945; but I do not argue precisely on those premises. The arbitrary fixation of the amount of capital of the Mortgage Bank at £4,000,000 will not nearly meet the requirements of the primary producers. If we are sincere in our desire to do everything possible for them, we shall increase this suan to a much higher figure than the £6,000,000 which I have suggested. It would be much in the interests of the formers to have the capital of the bank raised to the highest possible level, so that £6,000,000 or even £10,000,000 of interest-free money might be made available to them.
– Come over here !
– That is not Douglas credit. How the money will be obtained is obvious. The Commonwealth Bank is making profits running into millions of pounds, and it apportions part of them to the Mortgage Bank Department. Therefore that money is not subscribed by Saving? Bank depositors or any otter investors. The farmers will he let down seriously if we limit the capital sum to such a minimum as the Government can “get away with”.
– Even the sum of £6,000,000 might not be nearly sufficient.
– I agree. I have tried to be reasonable, and I have not suggested an extravagant sum. In view of the altered conditions since 1943, the present value of £6,000,000 is not tremendously greater than that of £4,000,000 a couple of years ago. By choosing the amount of £6,000,000 we should only provide a reasonable sum merely to preserve the status quo. I have suggested that sum because I am making a bona fide attempt to improve the bill, in order to make the Mortgage Bank Department a worthwhile institution from the point of view of the farmers. This proposal is linked with clause 46 which the Minister has promised to reconsider. I have submitted my amendment to test the sincerity of the Government’s attempt to provide money at the lowest possible rate of interest for the primary producers.
– The Government cannot accept the amendment. The honorable member speaks as though the capital of £4,000,000 provided for in the clause is as unalterable as the laws of the Medes and the Persians. It was said when the Mortgage Bank was established that the sum of £4,000,000 was not an arbitrary figure, but that the Government considered that sum to be sufficient at the outset. The Commonwealth Bank was established with a few thousand pounds of original capital. As the Mortgage Bank develops, as we hope it will, in helping rural industries, its capital can be increased. An amendment of the Commonwealth Bank Act would be necessary, but if, in future, the government of the day considered that the capital was insufficient, the amount could be increased to a fixed sum, or the Mortgage Bank Department could accumulate its own funds as the parent bank has done. The Government does not feel disposed to alter any of the present provisions with regard to the Mortgage Bank.
– I support the amendment submitted by the honorable member for Richmond (Mr. Anthony).
– More stone-walling !
– It would be a lot better for the primary producers if a greater desire to help them were shown_ by honorable members opposite. .Without hearing my argument as to why the capital of the Mortgage Bank should be increased, the honorable member for Hume (Mr. Fuller) jumps into the ring against the interests of the primary producers. The honorable member for Richmond has succinctly pointed out that by increasing the capital of the bank by means of the profits from the departments of the general bank to £6,000,000, the interest rate throughout the whole structure of the Mortgage Bank could be lowered, even if additional money had to be borrowed from the general bank, or got in some other way; but he did not say that by having an increase of capital in the Mortgage Bank the rate of interest could be as low as zero without that bank being embarrassed or losing any money. The Minister at the table (Mr. Lazzarini) said that this clause was not like the laws of the Medes and the Persians, but if ever there was an example of a man who is ridden by bureaucrats, and takes for gospel truth everything he is told by his departmental officers and refuses to exercise free thought, the Minister has provided it. The Minister assisting the Treasurer said that the Government believes £4,000,000 to be a reasonable amount of capital, but advances to the pastoral and agricultural industries of Australia by the nine trading banks up to January, 1945, .amounted to £101,000,000, and, as was pointed out by the Royal Commission on Monetary and Banking Systems, many of the advances are in reality for long terms. I have not the figures here, but it is probable that the insurance companies have advanced not less than another £100,000,000 to the rural industries. Because some one, perhaps in the Treasury, has told the Minister assisting the Treasurer that these poor people in the country do not understand finance, and do not need money at a low rate of interest, he is afraid to use his own judgment and to point out to caucus and to Cabinet the insufficiency of a capital of £4,000,000 for this department, as compared with £200,000,000 which has been advanced by private institutions to rural industry. It is evident that the Assistant Treasurer knows little about the needs of the rural industries, and is unwilling to learn. The amendment providesfor increasing the capital of the Mortgage Bank Department from £4,000,000 to £6,000,000. I should have gone further, and fixed the amount at something that bore a closer relation to the actual needs of the rural industries.
.- Honorable members opposite complain that the proposed capital of the Mortgage Bank Department, namely, £4,000,000, will be inadequate. In this connexion, it is interesting to note the amount of paid-up capital held by the private trading banks, which have lent such vast amounts of money on mortgage. The honorable member for New England (Mr. Abbott) said that they had advanced £101,000,000 on long-term mortgages.
– No, about 50 per cent. of that would be represented by longterm advances.
– I have here some particulars taken from the Australian Insurance and Banking Record, dated the 21st April of this year. It shows that the Bank of Australasia, which is the only bank operating under a Royal Charter, has a paid-up capital of £4,500,000. It has, of course, assets running into many millions of pounds. The private banks have not a very large capital, although it. is true that they have established reserves out of profits, as the Mortgage Bank Department eventually will. The Bank of New South Wales, which handles most of the mortgage and general banking business in Australia, has a paid-up capital of £8,780,000, whilst its total assets amount to £208,627,093. The English, Scottish and Australian Bank has a capital of £5,000,000. It is true that these banks have reserve liabilities of shareholders’ capital on which they can draw, and this corresponds to the provision by which the Commonwealth Bank may advance money to the Mortgage Bank Department if need be. In the case of the
English, Scottish and Australian Bank, the paid-up capital from which it has created its enormous assets amounts to only £3,000,000 out of a total nominal capital of £5,000,000. Actually, none of the banks has called up any of its reserve capital for many years past. The Commercial Banking Company of Sydney has a paid-up capital of nearly £5,000,000. I believe that the capital of £4,000,000, which is to be provided for the Mortgage Bank Department, will prove to be adequate for its immediate needs. As profits accrue a reserve will be established out of which further advances canbe made. In any case, should the need arise for more capital, Parliament can take action to provide it. No good purpose would be served by providing a vast amount of capital for the bank during its initial operations. This is borne out by the fact that the private banks are able to carry on with only a comparatively small nominal capital, not all of which is subscribed or paid up.
Mr.FADDEN (Darling Downs- Leader of the Australian Country party) [2.52]. - The honorable member for Perth (Mr. Burke) has missed the main point of the argument of the honorable member for Richmond (Mr. Anthony). The whole point is that the private banks, in addition to their paid-up capital, have at their disposal millions of pounds of depositors’ money out of which to make advances. In January of this year, these deposits amounted to £580,000,000. The banks have to pay interest on the deposits, a fact which has a bearing on the rate of interest which they must charge to those who borrow on mortgage. The bill provides that the capital of the Mortgage Bank Department shall be £4,000,000, to which are to be added amounts from the net profits of the bank and from the profits of the note issue; but this basic capital corresponds to shareholders’ funds in the private banks, amounting to about £80,000,000. This is small compared with the amount of nearly £650,000,000, out of which the private banks make advances. It is desirable, in the interests of rural industry, and of the community generally, that the rates of interest charged by the mortgage bank should be low, and that is why the honorable ra ember for Richmond sought to have placed at the disposal of this department as much interest-free capital as possible. Unless the Government wishes to use this department of the bank as a profit-making instrument, or unless it is apathetic to the welfare of the rural industries, there is no reason why it should not accept the amendment by the honorable member for Richmond.
.- I assure honorable members that I did not miss (he point of the argument of the honorable member for Richmond (Mr. Anthony). They will note that in subclause 2 of clause 7S it is provided that the Treasurer may, under the provisions of the Commonwealth Inscribed Stock Act, borrow money for making advances to the Mortgage Bank Department. Money raised in this way would correspond to the deposits held by the private banks. I agree that interest rates should be kept as low as possible, but I. do mot think that the rural industries can properly be singled out for especially favorable treatment. Home-builders also need money at a low rate of interest, because they, as well as the primary producers, are unable to pass on the cost.
– The amendment is so simple and logical that I should have thought that the Government would grab it with both hands. Henceforth the Mortgage Bank Department will range over a far wider field than hitherto when a capital of £4,000,000 was sufficient. I should say that its activities will be 50 per cent. greater, andi that, that being so, 50 per cent, more capital will be needed. That is the purpose of the amendment of the honorable member foi- Richmond (Mr. Anthony). That capital will be interestfree. If the bank has to borrow, in the event of its capital being insufficient, in order to make advances on mortgage, it will have to pay interest on the money borrowed, and the result will be a tendency towards an increased instead of a lower rate of interest. The primary producers who borrow on mortgage will have to provide suitable security. Secondary industries should also be able to borrow on the same terms.
.- It is refreshing to hear members of the Aus tralian Country party advocate a new system of banking in respect of the Mortgage Bank Department of the Commonwealth Bank. Earlier they condemned the Government for what some of them called nationalization and others socialization o£ banking, and complained bitterly about the unfair competition by the Commonwealth Bank with the trading banks. They now advocate an unlimited amount of cheap money - the cheaper the better - for rural industries through the Mortgage Bank Department of the Commonwealth Bank, to the exclusion of the associated banks. None of them has used either “socialization” or “nationalization” in this respect. I do not care what word they use, but they should be consistent. I agree that the primary producers should bc able to obtain cheap money and that the Mortgage Bank Department should supply all their requirements, but they have no right, on the one hand, to demand that for the farmers, and, on the other, to slander the Labour Government because it is endeavouring to give the same treatment to the rest of the community. The Australian Country party should broaden its outlook, and’ remember that other people besides farmers are entitled to fair treatment and. cheap money. Had they adopted their present attitude in regard to other clauses, I should have credited them with an honest and sincere desire to improve this bill, but I believe their only aim is window-dressing in order that they may be able to tell the farmers at the next general election that they fought hard to get cheap money for them but that the Labour Government would not give it. This effort to make political capital will fail, because I believe the Government’s proposal will satisfy the primary producers. If £4,000,000 is insufficient, more will be provided. We believe the Commonwealth Bank should finance the industries of this country and we shall not erect hurdles to deprive primary producers of the full advantage of advances at the very lowest rate of interest from the Mortgage Bank Department.
– That is what I am trying to ensure.
– Now ; but the honorable member’s present attitude is in direct contrast to his attitude to other clauses.
Had he supported similar clauses I should have credited him with a desire to do more than window-dress for political purposes. T repeat that if the capital of £4,000X00 proves to be insufficient and Labour remains iu office, the capital will be increased to ensure that the primary producers shall get the money they need.
.- Honorable gentlemen opposite who have spoken on this clause have revealed divergencies of thought. The Minister assisting the Treasurer (Mr. Lazzarini) discounted my sincerely moved amendment with the statement that I regarded’ the capital of the Mortgage Bank Department as immutable as the laws of the Medes and the Persians.
– The honorable member spoke as if he did.
– I did, and my experiences since have reinforced my conclusion, because honorable gentlemen opposite, without any consideration at all of my arguments, have swept them aside with the vague promise that, if it should be necessary to increase the capital, the Government will do so. That is not a very concrete statement to give to those who look to the Mortgage Bank Department for assistance. If the Government refuses, when the bill is before the committee, to make the alterations that I have suggested, the prospects of altering the act later are not bright. The honorable member for Perth (Mr. Burke) substantially missed the point. He referred to the amounts of capital of the various trading banks, saying that the Bank of Australasia had £4,500,000, the Bank of New .South “Wales £8,780,000, the English, Scottish and Australian Bank £5,000,000, and so on. That is beside the point. I do riot argue that the Mortgage Bank Department of the Commonwealth Bank could not function without a capital of £4,000,000 or £6,000,000, because it could function on a shoe-string. It could function with a capital of £1,000, because it could borrow from the Commonwealth Savings Bank funds to lend on mortgage. I refer the committee to clause 76 - (1.) The Bank may make advances to the Mortgage Bank Department of such amounts, and subject to such terms and conditions, as the Governor determines, but so that the total amount of such advances not repaid shall not at any time exceed One million pounds. (2.) The Savings Bank may make advances to the Bank, for use in the Mortgage Bank Department, of such amounts, and subject to such terms and conditions, as the Governor determines.
So the Mortgage Bank does not require other than a nominal amount of capital in order to function. However, a material factor is low interest rates, and that is why I am attempting to build up an interest-free fund in the Mortgage Bank Department. That money, plus money borrowed, by the Mortgage Bank Department from the Savings Bank, could be lent and the interest averaged. Therefore, the greater the interest-free capital the Mortgage Bank Department possesses the better for the primary producers, because they will be able, therefore, to borrow at the lowest possible rate of interest. So the arguments of the honorable member for Perth have no bearing on the subject.
– Capital is only the excess of assets over liabilities.
– That may be so. But whatever the capital of a trading bank may be, it must make a profit thereon in order that the contributors of that capital may draw dividends, whereas the capital in the Mortgage Bank Department will not need to be profitmaking. The analogy is a father who gives his son £5,000 with which to buy a farm worth £7,000. The son has to borrow £2,000 on which he has to pay interest. The interest is averaged over the whole capital of £7,000. That is how it will be with the Commonwealth Bank and the Mortgage Bank Department. The more interest-free capital that that department has from which to make advances the lower will be the rate of interest charged on the money it advances. The rate of interest will be in ratio to the rate of interest that it will have to pay on the money that it will have to borrow in excess of its other capital in order to meet the requirements of its borrowers. That is-why I have suggested a capital of £6,000,000 instead of the £4,000,000 proposed, and why I have provided also that annually the capital of the Mortgage Bank shall be increased by £150,000 from the profits of the Note Issue Department. That would ultimately carry the capital far beyond £6,000,000. The beggarly sum of £150,000 a year from the profits of the Note Issue Department will not be a very great contribution to the solution of the problems of primary producers. Last year, the profits from the Note Issue Department were £2,743,000/ of which £2,628,000 was paid into the Treasury. Consequently, the Mortgage Bank Department will receive only about 5 per cent, of the profits of the Note Issue Department. The honorable member for Bourke (Mr. Bryson) exploded any idea that honorable members opposite have sympathy for the primary producer. He wanted to know why the man on the land should receive preference in regard to low interest rates over other sections of -the community.
– Preference for supporters of the Australian Country party.
– Many primary producers voted for the Labour party, and they will draw little consolation from the remarks of the honorable member. I desire to show why farmers should be advanced money at a lower rate of interest than, for example, persons who build homes, which offer a greater measure of security. I have received from the editor of the Tweed Daily, at Murwillumbah, an urgent telegram which illustrates the vicissitudes that the unfortunate farmer experiences. It reads -
Tweed suffered major disaster. Thousands cattle without feed. Urgent Federal-State assistance to rush stocks there. Fodder most urgent.
Honorable members have read iu the newspapers descriptions of the disaster wrought by the floods in northern New South Wales, and that telegram is the first intimation that I received from my electorate of what has occurred. It is testimony, in itself, to what the unfortunate primary producer suffers from the vicissitudes of weather and the fluctuations of the markets. The conditions under which the primary producer lives, and his exposure to the vagaries of such factors as the weather and the markets, cause him great difficulty in meeting his debts and render it imperative that he shall receive’ advances at the lowest possible rate for the expansion of his property and the discharge of existing debts. The lowest possible rate can be secured through the Mortgage Bank Department only by the granting of interest-free funds; in other words, by increasing the capital of the bank from £4,000,000 to £6,000,000. To conform to my own view, the capital should be £10,000,000, but I did not desire to submit a proposal completely unacceptable to the Government. The only way in which the farmer may receive advances at a lower rate of interest than thatoffered by private financial institutions is by the “process that I have described. If the Government rejects this amendment as arbitrarily as it appears to intend, all the protestations by honorable members opposite that they desire to reduce the rate of interest payable by primary producers, are worthless.
.- 1 am in complete accord with any amendment to reduce the rate of interest on mortgage loans to primary producers. An intimate relationship exists between the reduction of interest rates to farmers, and a general lowering of interest rates. However, primary producers are in a position peculiarly different from that of most other borrowers, because of the risks which they encounter in conducting their business. Farming is not a business in the sense that we apply the word to other profit-making activities, because it is impossible to produce an actuarial plan which would be certain to return profits, as is the case with other forms of business activity. When the bill which created the Mortgage Bank Department of the Commonwealth Bank was under consideration, I submitted an amendment that the rate of interest payable by farmers should be 3 per cent., and that the rate payable by ex-servicemen should be 1 per cent, less than that payable by civilians. The Opposition, with the exception of the honorable member for Bendigo (Mr. Rankin) and some others, did not accord to those amendments a measure of support. The honorable member for Richmond (Mr. Anthony) voted against them. Nevertheless, I am now gratified to see his change of heart.
– One must support, not an arbitrary statement, but a statement of fact. Any honorable member may move that the rate of interest shall be a certain figure.
– I am glad to be able to support the amendment based on premises that it will reduce the rate of interest.
– Is it likely to have that effect?
– That is problematical, and will depend on many other factors. In any event, the capital of the Mortgage Bank Department provided in this bill is, in my opinion, inadequate. The amount should be increased in order to provide a margin over working capital, and enable a greater expansion of lending, so that thousands of primary producers throughout Australia shall have the advantage of long-term loans at a low rate of interest. Generally speaking, the rate of interest now charged by the Mortgage Bank Department is not low, because accommodation can be obtained privately at the same, or an even lower, rate. Consequently, this clause will not give to primary producers the degree of assistance that it should. Although I could speak at considerable length on this subject, I am satisfied now to intimate that the amendment has my support.
– When the Commonwealth Bank Act was amended in 1943 for the purpose of creating a Mortgage Bank Department, the amount of capital provided for the purpose was £1,000,000. At the same time, an arrangement was made under which the bank could issue certain debentures in order to obtain money for issue. Having listened to the remarks of the honorable member for Perth (Mr. Burke), I should be excused for thinking that the amount of money which a bank had on loan was limited by the actual capital of the institution.
– I did not suggest that.
– Then, why did the honorable member refer to capital? The Mortgage Bank Department is a special division of the Commonwealth Bank, and the manner of its operation is not in any sense to be compared with, or related to, that of any of the private trading banks. One of the points raised in this discussion has been that the capital provided for the Mortgage Bank Department should be lent free of interest. I cannot trace the source of that suggestion, although I have searched the act and the administration of the Mortgage Bank Department in an effort to find it. The honest fact is that whatever the capital of the Mortgage Bank Department may be, the department will never be able to function efficiently as a mortgage bank unless it is able to attract to itself money on deposit from the general public. Every private trading bank is in a similar position. It does not live on its own capital, but conducts its business by the volume of money that is entrusted to it by lenders, because the bank lends that money to clients who desire to borrow it.
– Similar provision is made in sub-clause 2 of clause 78.
– Thatis so. References to the capital of the Mortgage Bank Department being used to provide interest-free money are so much “moonshine”. A good deal has been said about extremely low interest rates. Personally, I do not believe in extremely low interest rates, and every sensible man will agree with me. Too much nonsense is talked about expecting money to work for next-to-nothing. The moment we remove the incentive to save, we destroy thrift. A great majority of the people save money in order to secure a return for it. The moment we destroy that return, we destroy the incentive to save. In other words, people will not invest money unless they get a return for it. If honorable members opposite believe that interest rates should be reduced almost to vanishing point, the sooner they formulate a policy that embraces the mosaic law, the better it will be. Let them assert that interest should be abolished, and, in order to be consistent, they would have to declare that rents and profits also should be abolished. The net result of that would be that there would be no wages.
Question put -
That the word proposed to be left out (Mr. Anthony’s amendment) stand part of the clause.
The committee divided.
Question so resolved in the affirmative.
Clause agreed to.
Clause 76 (Advances to Department by Bank and Savings Bank).
– This clause contains one provision that the bank may make advances to the Mortgage Bank Department, but so that the total amount not repaid shall not, at any time, exceed £1,000,000; and another that the Savings Bank, which is a separate institution, may make advances to the bank for the use of the Mortgage Bank Department of such amounts and subject to such terms and conditions as the Governor determines. I understand that the limitation on the advance that the bank may make to the Mortgage Bank Department is £1,000,000, but that no limitation is placed on the amount that the Savings Bank may advance. I am aware that section 145 of the existing act contains a similar provision, but it, was enacted at a time when the bank was under the management of a board, whereas this provision will operate at a time when the bank will be under political management. In the opinion of honorable members on this side of the chamber that is a material difference. I have no objection to Savings Bank money being made available to the Mortgage Bank Department, for the security that will be available would be suitable, in my opinion, for savings bank investment. I wish it to be made quite clear, however, and I ask the Minister (Mr. Lazzarini) to give an assurance to that effect, that the £1,000,000 that may be advanced by the bank will have no relation whatever to the amount that may be advanced from savings bank funds.
– No limit whatever is being placed on the amount that may be advanced from Savings Bank funds. Such amount will be determined by the Governor. There will be a limit of £1,000,000 on the amount that may be advanced by the Commonwealth Bank, as distinct from the Savings Bank.
Clause agreed to.
Clause 77 agreed to.
Clause 78 (Advances by Treasurer).
– This clause raises once again an issue that was debated at some length at an earlier stage. The clause provides - (1.) The Treasurer may make advances to the Bank, for the purposes of the Mortgage Bank Department, of such amounts, and subject to such terms and conditions, as are agreed upon between the Treasurer and the Bank. (2.) The Treasurer may from time to time, under the provisions of the Commonwealth Inscribed Stock Act 1911-1943, borrow money for the purpose of making advances to the Mortgage Bank Department under this section.
It will be apparent to honorable members that the authority of Parliament, in this matter as in other matters referred to in the bill, is being overridden. The Treasurer (Mr. Chifley) will be able to make a decision on this important matter without referring the subject to the Parliament. I ask the Minister for Home Security (Mr. Lazzarini) to explain why the principle of parliamentary authority over finance is being overridden in this manner, and I hope that he will be able to give us some logical explanation of the attitude of, the Government. This Government claims to uphold democracy, yet it is seeking authority to disregard the Parliament altogether.
Clause agreed to.
Clause 79- (5.) The owner of any estate or interest in land upon the security of which a loan has been made under this section shall not, without the consent in writing of the Bank, mortgage or charge the estate or interest in land upon the security of which the loan was made.
– I move -
That sub-clause (5.) be left out.
My reason for doing so is that I believe that- its inclusion will have the effect of seriously hampering the Mortgage Bank Department in giving due consideration to the legitimate needs of primary producers. Clause 82 of the bill provides -
The amount of any loan under this Part, or, if there are two or more such loane to any one person or to persons jointly, the aggregate amount of those loans, shall not exceed seventy per centum of the value (as determined by the Bank) of the estate or interest in land on which the loan or loane are secured, or Five thousand pounds, whichever is the less.
Unfortunately the bank is operating at present on a most conservative basis in regard to advances, as is shown by a letter which I have received recently from Mr. IE. C. Moulder, M.L.C., of Condobolin, New South “Wales. Mr. Moulder, who is thoroughly informed on pastoral” problems, ‘being a stock and station agent, writes as follows: -
I would advise that a representative of a Pastoral House has mentioned to me the matter of the Mortgage Bank and its effect iu connexion with the rehabilitation of the man on the land.
This branch of the bank was brought into being with the view of assisting the pastoralist and I understand that quite a number availed themselves of the benefits Offered, many securing the limit of advances available. The Mortgage Bank Act precludes the borrower from mortgaging the equity in his holdings so that these men are now debarred from obtaining further financial assistance to replace stock lost during the drought and just after the rain after having heavily mortgaged their stock to purchase fodder.
The procedure that is being proposed for the general banking division of. the bank will also have a restrictive effect. A dairy-farmer in .my electorate was in trouble because he did not have suffi cient capital to purchase his propertyOnly 70 .per cent, of the valuation of a property will be advanced by the Mortgage Bank Department, but, in? many instances, men who apply for loans have amounts of capital invested in stock, farming plant and the like, and they desire to offer such security to the general banking division in order to ‘ secure a little more money than will be advanced to them by the Mortgage Bank Department if they are purchasing to make up their investment to the 3 per cent, value of the property. The general banking division, however, will not make advances on this security with a second mortgage on the land as collateral. In this connexion I invite the attention of honorable members to the following letter, dated the 9th April, 1945, which I have received from the Treasurer (Mr. Chifley) : -
As promised in reply to your question, ! have made inquiries of the Commonwealth Bank and have been informed that, in accordance with normal banking practice in Australia, the bank does not consider mortgagee over live-stock to bc first-class security for overdraft accommodation, and that only in very special cases are advances so made without other cover.
No legislative embargo exists on the making of advances on the security of stock and plant in this way. As the Treasurer’s letter states, the embargo is due to banking practice. Mr. Moulder pointed out in his letter that the Mortgage Bank legislation’ “ precludes the borrower from mortgaging the equity in his holdings”, so that if men are not able to obtain an additional advance on collateral security “ they are in a most difficult position. This may mean that they will be unable to maintain their operations. The position is that the total amount that the Mortgage Bank Department may advance on a property valued at’ £5,000 is £3,500, leaving a margin of £1,500 in the equity of redemption. If, in addition, the propertyowner possesses live-stock and plant to the value of £1,500, not an unreasonable figure, he would have an equity of £3,000. In such circumstances, it is surely not unreasonable to expect that the general trading bank should be permitted to make a loan. The manner in which the Mortgage Bank Department is being operated <at the present time is making it extremely difficult for primary producers to carry on, and is stultifying completely the principle enunciated by the Royal Commission on Monetary and Banking Systems, and advocated by primary producers of all shades of political opinion for many years. Sub-clause 4 provides -
Except to the extent that any money lent under this section is used to discharge a prior mortgage or charge, any money so lent shall be used by the borrower in connexion with his farming, agricultural, horticultural, pastoral or grazing operations, or in connexion with such oilier form of primary production as the Bank thinks fit, and where any money so lent is not used for any’ such purpose, the money lent, together with the interest on the money, shall, at the option of the Bank, become due and payable on demand, and, after the exercise of the option, interest shall accrue from day to day.
That provision will compel a borrower from the Mortgage Bank Department to obtain more than his day to day requirements. He may use up to the full amount of his loan during the yean When he obtains returns from the sales of seasonal products, hia commit*ment to the bank will be lowered. If the provision be operated strictly, he will have to repay to the department whatever surplus he may have, and under the provision of sub-clause 5 he will be prevented from obtaining from a trading bank, a pastoral company, or any other financial institution whatever amount he may need for his working expenses during the year, because the department will not allow him to give a second mortgage Over his equity of redemption, with stock or plant as collateral security. The position can be put right only by deleting the clause. The borrower is not a child, but a responsible mail who knows what he is doing. If he considers that his best interests will be served by having an overdraft from a trading bank, a pastoral company, or the general banking division of the Commonwealth Bank, and it is necessary to have a second mortgage over the equity of redemption, it will be utterly wrong for the Mortgage Bank Department to stultify the whole of his operations by means of this provision. The letter from Mr. Moulder definitely proves that that is occurring. For that reason, I ask the Minister to treat the matter in a non-party spirit and agree to delete sub-clause 5.
– The Government cannot accept the amendment. The honorable gentleman knows that the clause merely provides that, if the Mortgage Bank Department provides financial accommodation its consent must be obtained to the raising of a further amount, by means of a second mortgage, or in any other_ way. It must examine the position of the borrower in order to protect not only his interests, but also its own interests. On the one hand, the honorable gentleman accuses the Government of instituting a system which will destroy the soundness of the Commonwealth Bank, and on- the other hand takes the Government to task for providing that the Mortgage Bank Department shall be empowered to ensure that too great a load of debt shall not be placed on a property. It is all very well to say that borrowers are grown men. The tragic feature of primary production in this country, as many honorable members pointed out on the second reading, is that bankers, agents and others have led primary producers into a position from which they have not been able to escape, with the result that finally they have become bankrupt. The Government intends, by this and other means, to ensure that primary producers shall be established firmly. Those with whom the honorable gentleman is associated have “ settled “ many of them. The honorable gentleman displays an extreme readiness to quote the Commonwealth Bank Act. Not one member of the Opposition has said a word about the Wheat Commission, which made strong reference to the burden of debt on the wheat-growers. The wool industry also is heavily weighted with debt. The honorable gentleman desires that the Mortgage Bank Department shall not be able to impose any check on a primary producer who, because of mis-judgment or undue pressure, is led into a gambling proposition. The Government regards this provision as vital, and intends that it shall be retained.
Clause agreed to.
Clauses 80 to 90 agreed to.
Clause 91 (Establishment of Indus trial Finance Department).
– This is one of the most important clauses in the hill because, if those proposals are given effect, industry will be nationalized for all time. The Government will have the right to participate in it as an owner, and conditions may be imposed precedent to the accommodation sought by industry being made available.
Clause 94 sets out the functions of the new department. These are -
Clause 95 defines the powers of the department, in these terms -
The bank shall have, and may exercise through the Industrial Finance Department such powers as are necessary for the exercise of the functions of the Industrial Finance Department under the last preceding section and, without limiting the generality of the foregoing, may, through the Industrial Finance Department -
lend money; and (b)purchase or otherwise acquire shares and securities and sell or otherwise dispose of shares and securities so purchased or acquired.
This is another novelty in connexion with Australian banking practice, namely, that the Commonwealth Bank is to become a shareholder in industry. The principles of general banking in Australia have been designed to keep it as far as possible from industrial entanglement; in other words, a bank is regarded as a lender of money, not as an investor, sharing in profits and losses. That is very sound policy. But it will be departed from with the establishment of the Industrial Finance Department. If we gave a little thought to the experience overseas, we would set our faces firmly against the establishment of this department, because it proves that, in Germany and Japan particularly, a step of this nature has been the first move towards the establish ment of a totalitarian regime. The Government, by means of this legislation, seeks to make the Treasurer a dictator. We are rapidly heading towards the adoption of the principle of totalitarianism.
I understood that the policy of the Government was to strengthen the central banking system. It will be departing entirely from central banking principles, in the establishment of the Industrial Finance Department, which should be associated solely with central banking. It is true that there is a limitation of £4,000,000 on the advances to the department by the general trading division. On the other hand, as has been pointed out in connexion with the Mortgage Bank Department and the Rural Credits Department, the Savings Bank may be required to make advances up to any amount which the Governor of the bank or the Government may fix. This is a dangerous provision. Ultimately, the Commonwealth Bank must be responsible for the liquidation of the Savings Bank account. A substantial sum may be drawn from the Savings Bank to finance this department, and this may make it urgently necessary for the Treasurer to expand the note issue. Everything must depend ultimately on the Government. Thus, in essence, this is political interference with industry. It is assumed that a bank, when making advances for industrial purposes, must be prepared to take risks. Under the bill, the risks taken by the Industrial Finance Department will fall largely on the depositors in the Savings Bank, because the Government is to be given authority to draw unlimited amounts of money from the bank with which to finance the operations of the Industrial Finance Department. Does the Government really believe it to be fair that Savings Bank depositors should have to bear this risk? The financing of industrial enterprises is, in the main, accepted by the trading bank? as a gamble. The sooner Savings Bank depositorsrealize that the Government is prepared to risk their money in ventures of this kind the better, because they will then understand to what lengths it is prepared to go to bring about the nationalization of industry. There is no need, under the bill, for the manager of the Industrial Finance Department to be a banker. He is not to be appointed by the Governor of the bank, but by the Government itself, a fact which is highly suspicious in that it opens up a new field for political gerrymandering. Already, Mr. Thornton has been sent overseas as the representative of Australian trade unionism, and perhaps the next thing we. shall hear i3 that he has been appointed as general manager of the Industrial Finance Department of the Commonwealth Bank. This would be in keeping with the Government’s policy of spoils to the victors, a policy already being applied in other directions. It would appear that the Government proposes that the Industrial Finance Department shall be more in the nature of a Government department than a branch of the bank, and through it the Government is evidently seeking to get its fingers into the industrial pie. The provision that the banks may not increase 1 .heir pre-war reserves, will check their expansion, so that those proposing to establish, new industries and desiring financial accommodation will he compelled to approach the Industrial Finance Department of the Commonwealth Bank. The bill provides that such accommodation will bc given only on the Government’s terms, and it is easy to imagine what those terms may be when the department has at its head a political appointee, and when the declared policy of the Government is socialization of industry. The manager will demand information regarding the entire ramifications of the industry concerned. Indeed, he may declare that accommodation will be granted only on conditions that the Government is permitted to take up a majority of the shares in the enterprise. This is the Government’s back-door approach to nationalization. Recently, a bill was introduced, to establish the aluminium industry in Tasmania. Had this legislation then been in force, it would not have been necessary to approach Parliament for permission. The Government could have obtained control, by making it a condition of advancing money for the inauguration of the new industry. Under the bill, it is not even necessary that the enterprise seeking accommodation should possess assets.
The CHAIRMAN (Mr. Riordan).The honorable member’s first period has expired.
– As no other honorable member has risen, I shall take my second period. Clause 100 states - (1.) The Bank shall not provide finance under this Part for the establishment or development of an industrial undertaking, unless the Bank is satisfied that the industrial undertaking has reasonable prospects of continuing to be, or of becoming, a profitable undertaking. (2.) In determining whether or not finance shall be provided under this Part for the establishment or development of an industrial undertaking, the Bank shall have regard primarily to the prospects of the undertaking continuing to be, or becoming, a profitable undertaking and shall not necessarily have regard to the present value of the assets of the undertaking.
Thus, the assets of the undertaking need not be taken into consideration before an advance is made. If the Governor of the bank believes that the new enterprise has a reasonable prospect of success he may authorize the making of an advance, even though there are no assets at all. Clause 92 of the bill is as follows : - (1.) There shall be a General Manager of the Industrial Finance Department, who shall be appointed by the Governor-General and shall hold office during good behaviour for a period not exceeding seven years . . .
If the Government really wishes to make this department of the bank an effective instrument for the promotion of industry, instead of merely another government department, it should place a banker in charge. If this is not its purpose, it will probably appoint as manager some one of the type of Mr. Ernie Thornton.
– The honorable member for Wentworth (Mr. Harrison) has made a general attack on the Government’s proposal to set up an Industrial Finance Department of the Commonwealth Bank. Therefore, it may be as well for me to quote what the Treasurer (Mr. Chifley) himself said on this subject when introducing the bill, so that it may appear in the record beside the remarks of the honorable member for Wentworth. This is what the Treasurer said -
The question of adapting modern hanking to give assistance to industries, particularly small industries, outside the ambit of ordinary banking practice, has received consideration in other parts of the world, notably in Great Britain and Canada, and special provisions have been made in these countries to meet the expected needs of secondary industry in the post-war period. Some similar provision is required in Australia. The Royal Commission on Monetary and Banking Systems pointed out that in general the Australian banks avoided long-term investments in industry in order to maintain the liquidity of their assets. The commission expressed the view that there was a lack of facilities for providing long-term capital for small-scale industry, lt is therefore proposed to expand the Commonwealth Bank by the creation of an Industrial Finance Department in order to bridge the gap in the existing facilities. In a recent report the present Commonwealth Bank Board commented on this particular need.
It is not intended that the Industrial Finance Department will assist an industrial undertaking without proper investigation. It will be necessary for the undertaking to have reasonable prospects of continuing to be, or of becoming, a profitable undertaking before it will be assisted. The Commonwealth Bank, through the Industrial Finance Department, is therefore empowered to lend money to establish and develop such undertakings. It may also extend assistance to an undertaking by direct investment in the shares and securities of that undertaking.
The new department will require specialized knowledge apart from ordinary banking-
The honorable member for Wentworth had much to say about the need to have a special technical man as manager -
The general manager who will administer the department, subject to the governor of thu bank-
The honorable gentleman said nothing about that - is therefore to be appointed by the GovernorGeneral. Given appropriate management, there is every reason to hope that the Industrial Finance Department will render valuable service in the future development of Australian secondary industry.
That was the reason given by the Treasurer in his second-reading speech for the establishment of this department. My own reply to the honorable gentleman ls that, although he is much concerned about nationalisation of industry and so on, there is nothing dealing with that in this clause, the purpose of which is to give to bright young Australians, with inventions or new processes but little capital, a chance to develop them without having to place themselves at the mercy of big industrial combines. Years ago, in this Parliament, I cited the case of Mr. Baxter, of Goulburn, a boot manufacturer, who lost the fruits of his genius in that way. The Industrial Finance Department will be managed by a man capable of investigating whatever industrial propositions are put to him.
– The present Governor of the bank came from private enterprise - one of the private banks.
– I am talking about the Industrial Finance Department.
– I am talking about the principle. It cuts both ways.
– Yes. The Government considers that the direction of the Industrial Finance Department should be in the hands of a man with whatever banking knowledge may be required - and in this case not much should be necessary - and high technical qualifications to enable him to investigate propositions and furnish to the Governor, under whose general direction he will be, a proper estimate of the worth of propositions, whether they be inventions, new processes or efforts to establish new industries in Australia. The Government considers that the Industrial Finance Department is a necessary adjunct to the banking structure, and, notwithstanding what honorable gentlemen opposite think, this clause will stand.
– It is ironical that the Minister assisting the Treasurer (Mr. Lazzarini) should be so solicitous about young men starting in business and so anxious that they shall be able to establish themselves and become successful, because I remind those anonymous young men that as soon as they become successful, they will become the object of the hatred of the Minister and his colleagues. ,So long as they remain completely unsuccessful, they will be pleasant fellows; but, the moment they become successful, they will be in the class known, I believe, as “ big business “, and therefore the enemies of the honorable gentleman. The crocodile tears he sheds on their behalf will not dim the vision of the young men, although they may dim the eyes of the Minister. A recommendation of the Royal Commission on Monetary and Banking Systems could hardly be twisted from its true substance more than in the present instance. When the Minister rose just now he did a very wise thing. He quoted some one else. He quoted the speech of the Treasurer (Mr. Chifley) in moving the second reading of the bill. Then, the Minister characteristically explained how this provision was designed to help those who were establishing themselves in industrial enterprises. The Treasurer issued an explanatory memorandum. I say parenthetically that explanatory memorandums are not read half so much as they should be. The honorable gentleman incorporated in it, in leaded type, an excerpt from the royal commission’s report. I do not intend to follow the Treasurer on what has happened in other countries, because one of my colleagues has particular knowledge of that and will say something about it. All I propose is to touch on paragraph 572 of the royal commission’s report -
There is also a lack of facilities for the provision of long-term capital for persons of limited means who have been successful on a small scale in a secondary industry which is capable of expansion and deserving of encouragement in the public interest.
Then it went on to say that it was not always easy in circumstances of that kind to get bank accommodation. Later, in paragraphs 685-6, it came back to this topic -
To meet the heeds of small concerns in secondary industries, it is desirable to provide facilities cither in the form of a new institution specially established for the purpose, or by some adaptation of an existing institution. It would be necessary for any such institution to have available the services of technical advisers, firstly to examine the prospects of the business, and, if a loan is made, to advise the owners on such matters as manufacturing methods, factory lay-out, costing and marketing. Since the object of the institution is to enable industries to be developed in the national interest, profit should not be its main consideration, but there is no reason why it should not make profits.
As the industries we have in mind may be aidedas a matter of national policy or local policy, the provision of the necessary machinery and funds might fall to either the Commonwealth or a State Government, according to the circumstances.
Then, in paragraph 687, it said -
We recommend -
The Governments, with the assistance of the Commonwealth Bank, should investigate the problem of setting up institutions to supply the needs of small concerns in second industries.
If those paragraphs mean anything, and I think they do, they mean that the pro blem that is being attacked is the problem of small industries which cannot readily issue shares to the public, because they are not sufficiently established, or cannot readily get bank accommodation, because they are making their first hesitant steps in the business world, but are good industries and should be helped. That is the problem to which the royal commission directed itself and that is the problem adverted to in the memorandum; but what does this bill provide? It is true that, in clause 94, it does pay a little lip service to the matter, because one of the functions of the department prescribed therein is - to provide finance for the establishment and development of industrial undertakings, particularly small undertakings;
But, apart from that one verbal recognition of the problem, the part of the bill headed “Industrial Finance Department” is as appropriate to the Government intervening in and taking over large and established businesses as it is to anything else. Here we have, avowedly set up for the particular purpose that 1 have described, a department which is virtually a new bank. It is true that it is under the same general management as the Commonwealth Bank, but, under the bill, unlimited resources as well as power are given to it as we shall see when we come to discuss the later clauses. In clause 95, which prescribes its powers, we do not see one word about helping the “small man”. What we do find is that it is given power to “ lend money “, just is those terms, and-
The Bank shall have, and may exercise through the Industrial Finance Department, such powers as are necessary for the exercise of the functions of the Industrial Finance Department under the last preceding section and, without limiting the generality of the foregoing, may, through the Industrial Finance Department -
lend money; and
purchase or otherwise acquire shares and securities and sell or otherwise dispose of shares and securities so purchased or acquired.
There can be no doubt that, under the powers conferred upon it, this new bank, as I have described it, could set about purchasing a controlling share interest in the largest enterprises in this country. It could, without bothering Parliament with a bill or a debate, undertake, for example, the aluminium project in Australia. By mere executive action, through this new bank, the Government takes power to buy shares as well as to lend money, and to attach any terms and conditions it likes to the lending of money in relation to industrial undertakings in the widest possible sense. I shal’l not anticipate What I want to say in relation to some of the later clauses. I propose, on those clauses, to substantiate in detail the statements that I have now made broadly, but my real purpose in rising was to indicate to the committee that whatever pious allegations may be made about the purpose of this new part, the truth is that it brings into existence a new financial instrument by which the Government hopes to obtain unprecedented control of industry in Australia.
– Having listened to the Leader of the Opposition (Mr. Menzies), I have very pleasant visions of the possibilities of this Industrial Finance Department.
– Do not tell me that you did not know.
– I say, quite sincerely, that the possibilities envisaged by the right honorable gentleman had not been given consideration. I thank him for his suggestions.
– I have no doubt that the Government will act on them.
– But the fact is that this matter is not one on which Government supporters have had Strong views. Certain representations were made to the Royal Commission on Monetary and Banking Systems, in some instances by struggling enterprises, and in others by people in a much larger way, who considered, that some assistance should be given industrially by the Commonwealth Bank. If the honorable member (lor New England (Mr. Abbott) were here he would remember some of the evidence. I am trading on my memory in referring to the evidence given by Mr. Holden, of General Motors-Holdens Limited, in Adelaide. I need not worry the committee with the whole story, but he gave, as an illustration of the need for some form of help to be given smaller industries, the case of a man engaged in the manufacturee . of motor car jacks. He said that that was an instance of a man who did not need financial assistance so much as technical adVice about the layout of his factory and costing to put him on the right road to the establishment of a new Australian industry. The royal commission unanimously agreed that this feature had been entirely neglected by the Commonwealth and State Governments, with the exception of the Government of South Australia, which had, directly or indirectly, made some money available for the purpose of assisting small industries.
– I think that there is almost complete unanimity in the House on the same point.
– As Treasurer, I took full responsibility for presenting this matter to Cabinet and the Labour party for adoption. I am sure that if the Labour party had heard the views of the Leader of the Opposition I should have experienced no difficulty in obtaining approval for this particular feature. However, I did not submit it to Cabinet or to the party in the terms in which the right honorable gentleman has presented it to the committee, and his remarks suggest, that I might with advantage engage him as an advocate when I put forward similar proposals in future. I agree that all sorts of things could possibly happen under such a proposal. That is not novel. When a man is granted a licence to drive a motor car, he might deliberately kill another person. But it is not assumed that he will do so. So it is with the banks. When concluding the second-reading debate on this bill, I remarked that if the Government had had in mind the possibilities forecast by the Leader of the Opposition, it would have approached the problem differently. The intention is to help industries which are struggling for existence because they have no security, either personal or business assets, which would, enable them to obtain financial accommodation in the normal way from banking institutions. Assistance will now be granted, not for the purpose of allowing an industry to make large profits, but in the national interest. The assistance might be in the form, not of finance but of technical advice. Attached to the Industrial Finance Department should be officers possessing a technical knowledge of costing or engineering to advise a client, if necessary, regarding the conduct of his business. When the financial position of the industry had improved sufficiently, the man would leave the Industrial Finance Department and become a client of the general banking division in the normal way. Honorable members opposite are at liberty to read what they like into this particular provision, but I accept full responsibility for submitting it to the Government.
– The Minister assisting the Treasurer (Mr. Lazzarini) declared that the provision meant what it said.
– Every story has a background. I listened to the speech of the Minister, who has given to me very valuable assistance, which I appreciate. He made a good statement of the case. It is true that this provision is intended to help struggling industries. Ag Mr. Holden pointed out to the Boya! Coin mission on Monetary and Banking Systems, a man had an idea for improving certain mechanism, but lacked capital and the technical knowledge required to develop it. If he had not been able to obtain advice, he would have gone out, of business. A* the result of getting that advice, he established a valuable industry in the national interest, producing an article which previously had been imported.
– Has the Government studied the practice in other countries?
– 1 have given a good deal of thought to this matter. I was one of those who drafted the report for adoption by the royal commission.
– That was eight years ago.
– Since then I have given a great” deal of thought to the subject and have discussed it with various people. As time passed, I became convinced of the need for some kind of an institution to meet this requirement. Provision is made for the appointment of a general manager of the Industrial Finance Department who shall be a man possessing outstanding qualifications. The more fact that a man was a good banker would not necessarily fit him to control this department. Members of the Opposition may continue to picture all kinds of dangerous possibilities under this clause, but I had no such things in mind when I submitted the proposal to the Government. Generally speaking, the clause is designed to meet a particular feature of banking in Australia. Although the royal commission issued its report eight years ago, anti-Labour governments made no attempt to give legislative effect to its recommendations. Honorable members may have differences of opinion regarding how this particular provision should be made; I at least am attempting to provide this service, and I believe the method proposed is the best possible.
Mr. HUTCHINSON (Deakin) [4.39 J. - The Treasurer (Mr. Chifley) has been described as the “ most amiable and ingenious socialist in the- history of Australia “, and having heard his speech this afternoon, I cordially agree with that description of him. He remarked that the speech of the Leader of the Opposition (Mr. Menzies) had given him very pleasant visions, which had not been in his mind when he submitted this bill to Cabinet and the Labour party for approval. In a very clear statement, the Leader of the Opposition pointed out to the committee that the Royal Commission on Monetary and Banking Systems recognized the necessity for granting financial assistance to struggling businesses and secondary industries, but that need is more than met in this . bill. The explanation which the Treasurer gave to the committee, was far from complete. Clause 94 will enable the Government to use the Industrial Finance Department for. the purpose of intervening most exclusively in industry. In fact, I describe this part of the bill as the ways and means to socialize industry. The department is to have a capital of £4,000,000 and the unlimited use of deposits in the Commonwealth Savings Bank. The explanation which Ministers have given of this clause may accurately describe what they now have in mind, but the clause in operation may have different results. The Opposition will attempt to amend the bill suitably in order to test the sincerity of the Government. We desire to learn whether the Treasurer was genuine when he made his explanation, or whether he has some of the visions which many of his supporters have.
In this part I note again the repeated use of the mandatory word “ shall “. Sub-clause 1 of clause 91 reads -
For the purposes of this Part, there shall bc an Industrial Finance Department of the Bank.
Clause 92 provides that there “ shall “ be a general manager of the Industrial Finance Department who “ shall “ hold office during good behaviour. In order that the general manager of this department shall not feel too independent lie “shall hold office for a period not exceeding seven years “, and clause 93 provides that he shall, under the Governor, manage the department. As honorable members know, the Governor of the bank will be under the control of the Treasurer of the day. I should like the Minister assisting the Treasurer (Mr. Lazzarini) to explain, with the clarity that he usually exhibits when elucidating the clauses of this bill, what is meant by clause 94. An industrial establishment may be assisted in various ways, apart from an advance by the bank; for instance, it may be given man-power or technical advice. Again, clause 95 provides that the Commonwealth Bank, through the Industrial Finance Department, may purchase or otherwise acquire shares and securities. In other words, the Treasurer of the day will possess almost unlimited power to socialize industries by purchasing a majority of shares in them. This ambition on the part of the Government is not new. Last August the Government submitted to the people a referendum which, if carried, would have enabled it to control industry and regiment the people. When the Government’s proposals were defeated, Ministers conceived other ways of achieving their objective. Under this clause, such ways and means undeniably exist. The Labour party is a socialist organization and one of the planks of its platform is the complete socialization of industry. It must not be forgotten that Savings Bank money may be used on such terms and under such conditions as the Treasurer determines. Therefore, if the hon- orable gentleman wishes to allay the fears of honorable members on this side of the chamber, of the thousands of SavingBank depositors throughout the country, and of the people at large, he should give an assurance that the money will be used only for the purpose of giving the prescribed, assistance and not for other purposes. An authoritative statement should be made of the ultimate aims of the Government in this matter. Is it proposed that the bank shall operate under this part only in the capital cities, or will branches be established all over the country, with consequent serious overlapping of banking services? Does the Government intend to purchase or rent banking premises in every town, or will these facilities be available only in big centres of population? If complete decentralization is contemplated, serious duplications will occur. As honorable members are well aware, the private banks of Australia have branches in almost every centre of population, and it will be a most serious matter’ if the Commonwealth Bank duplicates this service. I can see no reason why the procedure in Canada should not be followed in Australia. In the sister dominion, full advantage was taken of the existing facilities of the private banks, and I have yet to learn of any abuses that resulted therefrom. The Government should say, in effect, to the private banks, “ We are facing a problem in relation to the provision of assistance for small secondary industries. The Royal Commission on Monetary and Banking Systems recognized the existence of this problem. We believe that assistance should be provided to enable small secondary industries to expand. Will you help us in this regard? The business may involve somewhat greater risks than those incurred in ordinary banking practice, but the Government is willing to guarantee you against losses, or to make a reasonable contribution towards them, if you will help to meet the situation.” That would be a common sense approach, to which, I believe, the private banks would respond in a worthy way. I am sure that they would say, through their appropriate mouthpiece, “ Yes, we recognize the existence of the problem.. We recognize, also, that we possess staff, buildings, and resources to cope with it. This would involve some departure from ordinary banking practice, but if the Government will meet us, we will do what we can to cope with the need.” The Leader of the Opposition spoke some weighty words on what should be the proper approach to the problem. I sincerely hope that the Government will heed his remarks, and that the issues that confront us will not be faced with regard only to the political philosophy of the Labour party.
.- In normal times this part of the bill would be regarded as sufficiently important to constitute a complete legislative enactment in itself. As the Treasurer (Mr. Chifley) has pointed out, the problem of providing financial assistance to permit adequate expansion by small secondary industries was referred to in the 1937 report of the Royal Commission on Monetary and Banking Systems. I bring to the notice of honorable members the following relevant paragraph from its report : -
There is also a lack of facilities for the provision of long-term capital for persons of Hunted means who have been successful on a small scale in a secondary industry which is capable of expansion and deserving of encouragement in the public interest. The requirements of this type of borrower are too small to justify a public issue of shares, and in most cases a public issue is not likely to be successful. Bank advances arc usually very difficult to obtain for any purpose of this kind, and being subject to repayment on demand fire unsuitable in most cases, as there is no prospect of repayment for a period of years. “Unless the proprietors are able to raise the money privately, the business can expand only nut of re-invested profits. In the initial stages, it is improbable that these would be sufficient to provide for the necessary expansion. It is usually very difficult for such a business to raise money privately, and other facilities should bc provided which would enable loans to be made for periods of from three to tcn years at appropriate interest rates.
I emphasize the point made in that paragraph that, to a considerable degree, small secondary industries had to rely for funds for expansion on the re-investment of their own profits. It must be obvious to everybody that even if that source of financial reinforcement had been adequate in 1937, it cannot possibly be regarded as satisfactory to-day, having regard to the much heavier taxes that are now in force. During tho war years a tremendous strain has been placed upon our small secondary industries, and they have found their available financial resources to be totally inadequate to their needs. Consequently, a clear case exists for malting additional funds available to enable their capital resources to be expanded. The large industrial enterprises of this country were able as a rule, before the war, to obtain capital for developmental projects, but even in those days an unhealthy concentration of industrial strength was manifest, for our big industrial enterprises were under the control of a relatively few people. The total investments in the six largest industrial companies in Australia were equal to the total investments in the remaining two-hundred-odd public companies. To my mind that indicated a serious lack of industrial balance. Moreover, that statement of the case does not take into account the existence of probably tens of thousands of small enterprises which were financed privately. I have received from the Acting Commonwealth Statistician a short table which sets out the details of employment in factories in Australia. “With the consent of honorable members I shall incorporate it in Hansard -
1 ! will be seen that the number of employees in factories employing 100 hands and more, rose from 294,000 in 1938-39 to 469,000 in 1942-43, whilst the number in other factories remained almost stationary. In 1939-40, the employment in factories employing up to 100 hands represented 51 per cent, of the total factory employment, whilst the employment in factories employing more than 100 hands represented 49 per cent, of the total - a slight difference in favour of the smaller factories. In 1942-43, the percentages were respectively 39 per cent, and 61 per cent. Doubtless, the experience of members of the committee confirms that during the war years the previous tendency towards concentration in the hands of a comparatively few industrial groups has become accentuated as the result of the bureaucratic and regimentation processes that have been associated with our war-time economy.
– Is not that almost inevitable in war-time?
– It may be. But the Government claims to be the spokesman for the smaller sections of the community. Certainly, honorable members on this side of the chamber are. I should have thought that the Government would have sought to remedy a situation thrust upon us by the war.
Let us consider the proposals which in Great Britain and the United States of America are designed to meet this problem. I shall quote, first, some passages from a very striking article-by Mr. Henry “Wallace, now Secretary of Commerce in the United States of America, the title of which is “ Planning for Freedom “. Mr. Wallace will be commended to some honorable members by reason of the fact that he was prominently associated with the American New Deal. In that regard, his opening sentences are interesting. They are these -
T am against a planned economy. It means tyranny. It means that all economic decisions would be made by a small group at a central spot.
Nevertheless I favour planning. I favour planning to keep our American economic system completely free. I go further. I favour planning to make our economic system free-er than it is to-day.
That is a view which honorable members on this side certainly will accept. He shows the importance of small industry in America when he says -
In 1044 the United States contained 3,000,000 separate business enterprises. Only 3,000 of them employed more than 1,000 workers. 2,000,000 of them employed less than 100 workers. Those 2,000,000, employing from 99 workers down to only one worker (namely, only the owner himself), can be called “small business”. They might seem too tiny to be important. Yet look! In 1944 they provided 45 per cent, of the whole total of American industrial and commercial employment. “ Small business “ is still approximately half the population of our American business economy.
So it was in Australia in pre-war years, but it has shrunk to less than 40 per cent, at the present time. He goes on to say -
Point two is to see to it that new small businesses have a reasonable access to credit. They do not have it to-day. In the matter of credit, of finance, of loans, they are much v worse ofl than they were 30 years ago.
To begin with, it costs more to-day to start business. Machines for production have become more complicated and expensive. Marketing mechanisms have become more elaborate and require greater initial expenditures. The new capital necessary for a new small business is therefore much larger now than formerly.
Meanwhile, the banks have become much stricter in extending loans. The federal bank examiners have more and more insisted that the loans by banks shall be ultra-safe. In the old days there were multitudes of loans known as “ character loans “. The borrower borrowed on a “ collateral “ consisting of virtually nothing but his known good character. Such loans are rapidly becoming extinct.
I interpose to comment that the experience is fairly general that Australian banks are most reluctant to lend against machinery installed or even stocks held by a manufacturing business. In that regard they seem to be more conservative in respect of manufacturing than in respect of stock held by farmers; for example, liens are given over stock, and advances are made against various other securities on the farm, yet the manufacturer experiences the greatest difficulty in securing any advance against machinery installed or stock held. That may not apply so much to the older, stronger and more solidly established business but it certainly has been my experience of the smaller business which may be employing between 50 and 100 hand’s.
– The first portion of the honorable member’s time has expired
– As no honorable member has risen to speak, I shall take my second period now. Mr. Wallace also tells his readers - fet the country abounds in savings. lt abounds in saved dollars held in private hands. These dollars run each year into the billions. They should flow back into business. In large measure they do not do so. That is one of the main reasons for recurrent unemployment.
Our most basic national economic problem is: How can the total of our annual savings he induced to find its way into total energetic investment? The biggest field in which such investment is needed.” and in which it falters, is small business.
Those remarks show that the problem in America, although on a larger scale, Ls identical in principle with the problem in Australia. There is an interesting contrast between what is proposed here and what Mr. Wallace proposes. I give his exact words -
En other words, if: the business were of a “chancey” character, and the bank, in view of its normal trading position, was not justified’ in lending because of the nature of the risk, the government agency would interpose. I now emphasize the most- important part -
There must be a minimum of rod tape in Washington.
I contrast that approach by America with the approach that is made under this bill. There, the private lending institution must first examine the proposition. No large government department is to be established, with all the paraphernalia of bureaucratic red tape and large staffs, the cost of which has to be defrayed by the taxpayer. Secondly, the proposition has to be such as a lending institution would not normally be able to handle; and, thirdly, there is insistence upon a minimum of red tape. If there is one thing which the small business man resents more than anything else - and this I apply to business men of the greatest honesty, integrity and goodwill towards the Government in the conduct of its affairs - it is the attempt by government officials to tread all over him, and to worry him with a mass of forms that have to be filled in, and of bureaucratic requirements that have to be met. Mr. Wallace has shown great realism and understanding in having laid emphasis upon a minimum of government interference. He says further - l am convinced lli.it under such an arrangement our private loans to private small business would hu revived and multiplied into new thousands and hundreds of thousands. I am convinced that under such an arrangement the forces of free enterprise in this country would be greatly expanded and strengthened. The number of free enterprisers would be every year steadily increased. Their businesses would remain entirely their own. What the Government would be doing would be simply but vitally this:
It would be helping to pump our private savings back info private investment.
It would be helping to avert unemployment. ft. would bc helping to revitalize small business in its contest for survival against big business.
It would be helping to promote American economic freedom.
I have quoted at some length from that article, because I believe- that it hits with great force at our method of dealing with the problems that we have before us to-day.
– And it was written by a man who is in no sense a conservative.
– In fact, he is regarded in some quarters in America as a “ Leftwinger “. He has shown great realism, and first-hand knowledge of the problems of small business. Those who are sufficiently interested to read the whole of the article will learn that he has been a small businessman, and has absorbed the painful lessons and problems of that section of the community.
I come now to what is being done in Great Britain. That country has had a very realistic approach to the problem of keeping industry healthy ever since the beginning of the war. It saw its export trade falling off, and realized the need to revive it. It. has taken care from the outset that there should be maintained an incentive for industry to carry on and offered the prospect of successful expansion at the termination of the war. One of the most important of its provisions is the deferred credit, which will lead to the refund of one-fifth of the excess profits tax collected. The amount of this tax in a year is approximately £400,000,000. In addition, emergency or unusual provisions have been announced by the Chancellor of the Exchequer, in order to encourage new development after the war: First, an initial allowance of 10 per cent, of the cost of constructing new industrial buildings. This will date back to the 6th April, 1944. The. allowance will .be given to the trader who constructs buildings for his own use, or to the landlord who builds for the purpose of letting to a trader. There is also an annual depreciation allowance of 2 per cent, on the cost of the building. The effect of these two allowances will be to write off the cost of new industrial buildings within a period of 45 years. In addition, an initial allowance of 20 per cent, on plant and machinery, whether new or second hand, is made, while the present ordinary annual allowance for depreciation will be increased. Capital expenditure on such things as research laboratories and welfare amenities will carry their own special allowances. Those are the measures a government can take to encourage industry. They can remove hampering restrictions and provide an incentive to industry to expand. My complaint against this bill is that it represents an unreal, impracticable and bureaucratic approach to the problem of the small industry. Far from encouraging the development of small industries, this branch of the Commonwealth Bank will operate to retard their development. By the credit of the central Commonwealth Bank the whole credit of the nation will stand or fall. Our credit overseas will be gauged by what happens to the Central Bank; therefore the Governor of the bank must necessarily apply a conservative policy in the matter of advances. He cannot afford to report at the end of the year that the Industrial Finance Department shows a loss of some millions of pounds. Such an admission would immediately be seized upon as a sign of weakness in the bank as a whole. Thus, instead of the Industrial Finance Department becoming a flexible instrument for the promotion of secondary in- dustries, it is likely to become, as did the Mortgage Bank, even more conservative than the private banks themselves. Moreover, since this is to be a government institution, there will be interference and supervision by government officials. Finally, there is this consideration: Once a trader has tied, himself to the Commonwealth Bank by applying for, and obtaining, accommodation from it, he will be bound to that institution, and will be unable to avail himself of the competitive propositions which other institutions might offer. The problem of small secondary industries is crying out for solution, but the present proposal of the Government would not help in that direction.
.- 1 have long advocated the giving of assistance to small secondary industries. Ever since 1914, our secondary industries have steadily expanded and have absorbed more and more of our primary products. The policy speeches which have been made by the leaders of the parties on this side of the House have always advocated the granting of financial assistance to small secondary industries. The need for such assistance will be greater than ever after the war, because the dead hand of the Minister for War Organization of Industry (Mr. Dedman) during the years of the war crushed a great many small industries out of existence. Presently, our servicemen will return, those men who have done so much for us, and to whom we owe a debt that we can never repay. Many of them have been in other parts of the world and they will return with ideas for establishing industries in Australia. In addition to their war gratuities, they will need financial accommodation to enable them to set up in business. Secondary industries .in Australia have for many years been the largest employers of labour, and it is to existing secondary industries, plus those which will be established, that we must look for the employment of our exservicemen. The encouragement of secondary industries was touched upon in the report of the Royal Commission on Monetary and Banking Systems, which stated in paragraph 572 -
There is also a lack of facilities for the provision of long-term capital for persons of limited means who have ‘been successful on a small scale in a secondary industry which is capable of expansion and deserving of encouragement in the public interest. The requirements of this type of borrower are too small to justify a public issue of shares and in most cases a public issue is not likely to be successful. Bank advances are usually very difficult to obtain for any purpose of this kind and being subject to repayment on demand arc unsuitable in most cases, as there is no prospect of repayment for a period of years. Unless the proprietors arc able to raise the money privately, the business can expand only out of reinvested profits.
It is practically impossible to make provision out of profits for the expansion of a business after the Federal Treasurer has extracted from it the last sou in taxation. When he has finished, there is nothing left to spend on the repair of war-worn machinery that has been working continuously with little attention for the last six years, and there is certainly nothing for the purchase from overseas of up-to-date plant ‘with which to meet competition from other countries. The Government is not attempting to give effect to the recommendations of the Royal Commission on Monetary and Banking Systems. A great many small industries have been strangled by the bureaucratic control of the Department of War Organization of Industry so that secondary industry as a whole is in a deplorable condition. The Government should follow the lead of Canada, the United States of America and Great Britain in taking active measures to encourage industry. Far from doing that, however, it is proposing to set up an entirely new department, which will require office accommodation and staffing, in order to do what the Commonwealth Bank is quite able to do now.
Clause 92 of the bill provides that the Governor-General - which means the Government - shall, appoint a general manager of the Industrial Finance Department. He is not to be appointed by the Governor of the bank, and presumably he will be a political appointee whom the Government will place in the job in accordance with the practice of spoils to the victor. There are in the Commonwealth Bank men who have spent the best part of their lives studying the problems of primary and secondary industry, but the appointment will not be made from amongst them. A man does not become Governor or even Deputy Governor of the Commonwealth Bank unless he has a knowledge of the problems of industry, but the assistance of the Governor is not to be invoked in the making of this appointment. The Government will be doing a serious injury to the Commonwealth Bank if it duplicates the existing facilities of the bank in order to set up this new department.
Under section 94 of the bill the Government may impose any conditions it likes upon a person or firm which approaches the bank for accommodation. It can acquire the buildings and plant and even purchase shares so as to assume full control. It is evident that behind this proposal is the intention to socialize secondary industries in piecemeal fashion. I ask the Government to accept the amendment forecast by the Leader of the Australian Country party (Mr. Fadden), so that assistance may be given to secondary industries through existing banking machinery. We must remember that Australia’s magnificent war effort was made possible only by the efforts of those engaged in our secondary industries. The manufacture of military equipment, including guns, ammunition and aeroplanes, has gone forward in accordance with a plan laid down by the present Leader of the Opposition when he was Prime Minister. He established an organization under the direction of Mr. Essington Lewis, which has enabled Australia to meet all the demands made upon it by the war. The job it has done has earned the plaudits of every one, particularly visiting industrialists from overseas. The organization set up by the Menzies Government was so sound that the Curtin Government, despite all its previous criticism kept it in operation throughout the major part of the war. Now that they have accomplished what this country needed the men that came from secondary industry to take key posts in the Government’s war-time organization are returning to their ordinary vocations. They should he told how indebted this country is to them for the wonderful work they did. What they accomplished was done with the aid of the banking system which, has existed in Australia since .the early days of its history. I ask the Minister assisting the Treasurer to examine the two amendments, one moved by the Leader of the Opposition (Mr. Menzies) and the other foreshadowed by the Leader of the Australian Country party (Mr. Fadden). Their adoption would ensure the remodelling of the makeshift proposals contained in this part of the bill, which, in their present form, will in no way assist secondary industries but will arouse suspicion and defeat the object of the royal commission’s recommendation.
Clause agreed to.
Clause 92- (I.) There shall be si General Manager of the Industrial Finance Department, who shall bc appointed by thu Governor-General and sim 11 hold office during good behaviour for a period not exceeding seven years but shall be eligible for re-appointment. (2.) The General Manager of the Industrial Finance Department shall be paid such salary and allowances as the Governor-General determines.
– I move -
That the word “ Governor-General “, whereever occurring, be left out with a view to insert in lieu thereof the word ‘’ Governor “.
This clause provides that the general manager of the Industrial Finance Department shall be appointed- by the Governor-General. That is, he is to be appointed by the Executive. The odd thing is that, although he is to be appointed by the Executive, and no provision, so far as I can find, exists for any consultation with the Governor of the bank in relation to the appointment, clause 93 provides that the general manager shall .manage the Industrial Finance Department under the Governor. I was interested to hear the reasons advanced by the Minister assisting the Treasurer (Mr. Lazzarini) for the appointment of a person of some special type as general manager of the Industrial Finance Department, but I do not understand why the Government cannot obtain a man with some qualifications other than those of hanking and still have the appointment made in circumstances which will preserve the authority of the Governor. What the Government is doing under the bill is this: first it wipes out the Bank Board, saying that the Governor is the roan who is in charge of the Commonwealth Bank in all its activities - general banking, central banking, rural credit, and so on - and the Savings Bank. He, therefore, will have enormous authority and responsibilities, subject to what instructions the Treasurer may give him ; but, when it comes to this subdivision, he is put in the absurd position of having presented to him a genera! manager, who is to serve under him. but in whose appointment he has had no voice whatever. That seems to me, without labouring the matter, to be about as unbusinesslike an arrangement as one could imagine. Consequently, my amendment is directed at ensuring that the Governor, under whom the general manager of the Industrial Finance Department will work shall be responsible for his appointment.
– The Government cannot accept the amendment. The Treasurer (Mr. Chifley) and I have already clearly stated why this departure has been made in respect of the general manager of the Industrial Finance Department. It will be necessary for not only the general manager but also, perhaps, some members of the staff of the Industrial Finance Department to have technical knowledge which will enable them to advise the Governor, under whom the general manager will work, in connexion with small industries. The general manager will not need to have any great knowledge of banking. It will be more necessary for him to have knowledge of industry, costing systems, and the like. That is why the Government considers it necessary in the appointment of the general manager of this department to depart from the procedure set down in respect of the appointment of general managers of other departments, and provide that the Governor-General shall, on the advice of the Government, make the appointment. We shall choose some one with the appropriate qualifications.
– A .famous comedian, one of the idols of the theatre-going public of Sydney, whenever he met some one who particularly appealed to him, used to say, “You little’beauty’”. I make the same remarktothe Minister assisting the Treasurer. What he said in answer to the Leader of the Opposition (Mr. Menzies) was the quintessence of humour -I would not say “ ignorance “. First, he said that the Industrial Finance Department would carry out all the operations of banking; then he said that he saw no reason why the general manager of that department should need to have any knowledge of banking.
– There is no reason.
– I am glad to have the Minister’s assurance that it is absolutely unnecessary for a man conducting a bank to have knowledge of banking.
– I am not sure whether that excludes the Minister or lets him in.
– It lets him in, I should say, in view of his booklet. Honorable gentlemen will remember that Opposition speakers have had a lot to say about the abolition of the Bank Board, on which men with experience of all branches of industry and finance were gathered. Honorable gentlemen opposite, particularly the Minister, are opposed to the Bank Board, because they state that men with experience of that character are of no use whatever in directing banking policy.
– That is true.
– Now the Minister, with a maladroit handspring, has landed upside-down, because he tells us that, in carrying out banking policy, it is not necessary to have a banker in charge, but that it is indeed necessary to have a man with some knowledge of industry. In the explanatory note we find the real reason. The Treasurer (Mr. Chifley) thinks that if he provides explanatory material the committee is likely to swallow it. The explanatory note reads -
It will be essential that the department should have as its executive officer a man thoroughly equipped with a knowledge of industry and finance who will be capable of developing the specialized technique of industrial banking.
The trading banks have been carrying out the “specialized technique of industrial banking” for a great many years under the directions of bankers with the advice of men experienced in the various fields of industry. That seems to be the correct set-up. But what do we find in this clause? The Governor-General, which means the Government, is to appoint as general manager of the Industrial Finance Department a man who understands the technique of socialization and nationalization of industry without which special knowledge he would be of no use to the Government. I am perfectly certain that the Minister’s explanation is on all fours with the Government’s policy to nationalize industry.
.- The more I hear from Government members the more half-baked this proposal appears. Earlier I told the committee what was done by the Government of the United States of America in making advances to small secondary industries. I would welcome a statement from the Treasurer (Mr. Chifley) or his assistant (Mr. Lazzarini) as to why that practice would not suit Australian conditions. During this war, the Treasurer, on the advice of the Department of Munitions, had recommended to the Commonwealth Bank that certain advances should be made in order to ensure expanded munitions production. So why is it necessary to create this new department with a general manager and all sorts of functionaries under him, in order to achieve results which have been achieved in this war without all that elaborate machinery ? We have in existence the Secondary Industries Commission, the Department of Post-war Reconstruction and the Tariff Board, all or any of which could investigate applications for assistance by some small industry. If the private financial institution did not consider that it should be called upon to carry the entire responsibility alone, and the industry were of a type ‘that the Government desired to expand, why should not the same practice be adopted regarding that industry as was adopted in war-time in order to increase the production of munitions? I emphasized earlier the need for granting special assistance of that kind, but I have yet to be convinced by the Government that the most effective way in which to obtain the desired result’ is to create a large new department functioning under the Commonwealth Bank.
Assistance has been given to industry in war-time. Why cannot the lessons that we learned in the years of war for the expansion of munitions production be applied with equal success in the post-war years for the expansion of small secondary industries?
. [ am not able to reconcile clause 92 with the provisions of clause 93. The Leader of the Opposition (Mr. Menzies) has submitted an amendment to provide that the Governor of the Commonwealth Bank, not the Governor-General, shall appoint the general manager of the Industrial Finance Department. If that amendment were accepted, clause 92 would be in consonance with clause 93, which provides -
The General Manager of the Industrial Finance Department shall, under the Governor, manage that Department.
The explanation given by the Minister (Mr. Lazzarini) left me in some doubt as to whether he appreciated the contention of the Leader of the Opposition. The Commonwealth Bank will be placed under the supreme control of the Governor, who will appoint the managers of the Rural Credits Department and the Mortgage Bank Department. He must carry out the decisions of the Treasurer of the day, but subject to that, his word will be law. He will be responsible for the conduct of the bank. It will be to him that the Government will look if anything goes wrong with the institution. But the general manager of the Industrial Finance Department is, or seems to be, in a different position from that of the heads of other departments of the bank and must possess qualifications apart from a knowledge of banking. He is to be a man with experience of managing businesses. As the Industrial Finance Department will deal with small undertakings, the general manager must have some practical knowledge of secondary industries, because under clause 94 one of the functions of the department shall be -
To provide advice on the operations of industrial undertakings with a view to promoting the efficient organization and conduct thereof.
Although the general manager will provide advice on the operation of industrial undertakings, the financial transactions of the department will ultimately be the responsibility of the Governor. The general manager must work under the Governor.
– That is so.
– Very well ! The general manager will manage the Industrial Finance Department in exactly the same way, and his relations with the Governor will be exactly the same as those of the manager of the Mortgage Bank Department and the manager of the Rural Credits Department. Why has the Government made this distinction between the appointment of the general manager of the Industrial Finance Department and the managers of other departments of the bank? What is the purpose? The Minister did not make it clear. Personally, I am not able to see any distinction. The general manager of the Industrial Finance Department may consider that a small undertaking should be granted an advance of £20,000 or £200,000. Incidentally, when we expend over £500,000,000 a year on the conduct of the war, it is not easy to define a small undertaking. The advances made to a number of small undertakings will amount to a considerable sum. Is the Governor of the bank not to say, “ Thus far, and no further. You must satisfy me that what you propose to do is sound”? Of course, he must have that final authority. Therefore, the general manager of the Industrial Finance Department will be in exactly the same position as, say, the manager of the Rural Credits Department.
Why has the Government made this radical change in the method of appointment? There must be some reason for it. Perhaps the explanation is to be found in the kind of man that the Government has in view. He must have a wider freedom of action than the managers of other departments of the bank. It appears as if this department has been created .in order to serve as an antidote against the fear in the mind of the public that industries are to be socialized. To allay that fear, the Government will reply, “ You say that we want to socialize industries. We have created a department of the bank, the special purpose of which is to nurse and coddle small business men. When they get into difficulties, we shall give them a feeding bottle or a hypodermic injection, and send them away all smiles with £3,000, £30,000, or £300,000”. Surely, the Minister can see in this clause far-reaching implications. I ask him to explain why the general manager of the Industrial Finance Department is not to be appointed, as the managers of the other departments of the bank will be, by the Governor.
– Members of the Opposition expect that when a clause embodies a principle of Government policy, the Government will stand firm upon it. We know from experience that matters of policy are carefully considered by Cabinet, and the political party in office, before the legislation is introduced. But a machinery provision which is devised by officials and the Parliamentary Draftsman, is in another category. Members of the Opposition, then, have the right to expect that when they reveal a fault in the machinery, the Government will consider the logic of their contentions, and, if necessary, rectify the error. I have been a member of this chamber for a long time, but never have I seen bills treated in the manner in which this Government treats them. No matter how logical is our case, or how clearly we expose a fault, the Government puts into operation the oldest law of politics, which is, briefly, “ Nothing matters but numbers “.
The Leader of the Opposition (Mr. Menzies) has submitted an amendment to clause 92, the purpose of which is to enable the Governor of the bank to appoint the general manager of the Industrial Finance Department. The Government’s proposal is that the GovernorGeneral shall appoint that official. The right honorable gentleman moved the amendment because, under clause 93, the general manager of this department will be under the control of the Governor. Consequently, the Governor may, and probably will, make the final decisions. As the general manager is to be subordinate to the Governor, it is only logical that the Governor should appoint him. The Minister assisting the Treasurer (Mr. Lazzarini) explained that the general manager need not necessarily be a person with a profound knowledge of banking, and that one of his qualifications will be a. knowledge of secondary industry. Is it not to be assumed that the Governor, who should have some knowledge of banking, will be in a better position to choose the general manager than will the government of the day? If the Government desires to refute any charge of political expediency in making these appointments, it should leave the choice of general manager to the Governor of the bank. But, no! The Government insists that the general manager shall be under the control of the Governor, but shall be appointed by the Governor-General. That contention is ridiculous.
In this matter, the case advanced by the Opposition should find strong support. The argument which is now developing shows how much better it would be to permit the central bank to use the skilled officers of the trading banks for the purposes of the Industrial Finance Department. After all, the trading banks employ men who, for many years, have had experience of many kinds of industrial undertakings. But the Government will not avail itself of their services. In future, a different construction from the Minister’s interpretation may be placed on this clause. Undeniably, there is latitude for almost complete control by the Government of all the assets of industry. I urge the Minister to accept the. amendment, because it is only logical that the Governor of the bank, who will control this department, should appoint the general manager of it. If that amendment is unacceptable, the Minister should agree to the following amendment : -
The General Manager shall be appointed by the Governor-General in consultation with the Governor.
That means that, before an appointment is made, the Administration must consult with the Governor of the bank in selecting an ideal applicant for the position. If the Minister rejects; this amendment, the Opposition can only conclude that the Government policy is immutable and that logic falls on deaf ears.
Sitting suspended from 6 to 8 p.m.
.- I support the amendment, the purpose of which is to ensure that the Governor of the bank, and not the Governor-General, which, of course, would mean the Government, shall appoint the manager of the Industrial Finance Department. No unbiased person would entertain for a moment the notion that any authority other than the Governor of the bank should make this appointment. Of course the intention of the Government is to place in the office a person who is a supporter of the Labour party. That procedure will be in conformity with the instruction given to the Government at the Easter Conference of the Australian Labour party in Melbourne. At that conference a “ horrible hate “ of the Government was expressed by certain union representatives because it had appointed to positions of responsibility persons who were not dyedinthewool Labour supporters, lt must be clear to all honorable members that one object of this bill is to strangle the private banks or, to freeze them out of existence. The officers of the private banks are alarmed at the prospects before them. Many of these men have given a lifetime of faithful and efficient service, and it is not difficult to understand their state of mind at the prospect now opening out before them. Apart from the older men to whom I have referred, many young men in (he employ of the private banks who are at present serving in the armed forces of Australia must naturally wonder what their prospects will be when they return to civil life.
The CHAIRMAN (Mr. Riordan).Order ! The honorable member must confine his remarks to the clause.
– It is deplorable that men who are to-day serving in Tarakan, Borneo, Bougainville, or New Guinea should be given cause to be apprehensive about their future because of the policy which this Government is applying. In the past, competent bankers of wide experience have been appointed to manage the various branches of the Commonwealth Bank, but it would appear that in the future only persons who are subservient supporters of this Government can look for appointments in the service of the bank. No consideration is to be given to banking experience or general industrial knowledge. When this department of the bank begins operations many people engaged in small industries who require financial assistance will look to it for advances, and other people desiring to establish new industries will also seek help from it. It will be deplorable if the proprietors of these various old or new industries have to make their applications to bank managers who have had no experience of industrial practice or banking procedure. The men now employed in administrative positions in the service of the Commonwealth Bank have a wide knowledge of financial affairs. They are accustomed to examining in’ detail the applications made to the bank for advances, and their judgment can be relied upon. Naturally men who engage in this class of business week in and week out become, expert at it. Their judgment can be relied upon. The Government seems to have made up its mind to throw aside such experienced assistance and advice. It would appear that the officers of the associated banks are to be entirely disregarded. That would be bad enough, but when we realize that the Government also seems determined to disregard the claims of persons who are already in the employ of the Commonwealth Bank, merely because they may not be supporters of the Labour party, the situation becomes tragic. Because the Victorian branch of the Labour party has issued an edict that only supporters of the Labour party shall be appointed to public positions, this Government seems intent on putting aside all previous considerations in relation to the necessity for experience and judgment.
– The honorable member should read clause 102.
– Beyond any question the Governor of the bank is. the proper person to appoint the manager of the Industrial Finance Department. If the Government will not agree to adopt that procedure, I trust that at least it will agree to a provision that the appointment shall be made only on the recommendation of the Governor of the bank.
– I oppose the amendment. The Government will be charged with the responsibility of appointing the Governor and the Deputy
Governor of the bank, and I can see no reason why we should depart from that principle in regard to the appointment of the manager of the Industrial Finance Department. As the honorable member for Cook (Mr. Sheehan). indicated by interjection a moment ago, the position is already adequately covered by clause 102, which reads -
For the purpose of the efficient operation of the Industrial Finance Department, the bank shall -
employ officers adequately experienced in the financing, organization and conduct of industrial undertakings; and
obtain such expert advice as is necessary.
Only a person whose outlook is warped by prejudice would consider, for a moment, that a responsible government would appoint an unqualified person to a position of5 such importance as this one will be in the industrial world. This Government may be relied upon to exercise due discretion in the making of this appointment. The provision is not inconsistent with other clauses to which the committee has already agreed in relation to the appointment of the Governor and Deputy Governor of the bank.
Question put -
That the words proposed to be left out (Mr. Menzies’s amendment) stand part of the clause.
The committee divided. (The Chairman- Mr. W. J. F. Riordan.)
Question so resolved in the affirmative.
Clause agreed to.
Clause 93 agreed to.
Clause 94 -
The functions of the Industrial Finance Department shall be -
– This clause deals with the functions of the Industrial Finance Department. It has three paragraphs. The explanatory notes circulated by the Treasurer (Mr. Chifley) inform us that it will be the function of this department to provide not only financial assistance, but also expert advice on the operations of industrial undertakings. From that explanation one would imagine that these provisions had been designed especially to help industry. But the functions of the department are not confined to those mentioned in the explanatory note; they include also assistance in the establishment and development of industrial undertakings. What exactly has the Government in mind?
– The honorable gentleman has been told a dozen times.
– We are still no wiser. The Treasurer will not give a reasonable explanation of what is intended. The Industrial Finance Department will bo enabled to provide financial accommodation for industry under certain terms and conditions. It is understood that the Government will be empowered to acquire shares in industry. Even without consulting the Parliament, the Government may nationalize any industry, by providing financial accommodation only on the condition that it us permitted to acquire an interest in the enterprise. Is it the intention to appoint an overriding Gestapo, which will say to industry : “ If you seek accommodation we shall conduct an investigation to determine whether or not you have been correctly established and developed, and, indeed, take the matter in hand on your behalf”? If those are the circumstances in which financial accommodation is to bemade available, industry must languish, as it. invariably does when there isgovernment interference with it, and the development of this country must be retarded.Ifthe Treasurer explains the intention of the Government, the com- mittee and the country will be able to judge how far we have proceeded along the road to nationalization of industry.
– Notwithstanding the irritation of the Minister, the Deputy Leader of the Opposition (Mr. Harrison) has raised a real question, which requires an answer. The clause says that the Industrial Finance Department shall have three functions. The first; is quite intelligent; it is to provide finance. The third is quite clear; it is to provide advice.What the advice may be worth is a different matter, but at least we understand what is meant by “ advice “.If our experience of the last three days counts for anything, advice is something that is given but never taken. Rut what about paragraphb? I invite the Minister to tell the committee what assistance is contemplated which is not financial and is not advisory. That, after all, is the real question raised by the Deputy Leader of the Opposition, and it requires an answer. Is it proposed that the Industrial Finance Department shall provide something which is not money and not advice? If so, what is it to be? That isa fair question. There is an oldfashioned prejudice in the minds of many of us, to the effect that an act of parliament and the language that it contains ought to mean something. I am delighted to notice that the Minister is finding out. what paragraph b is designed to mean from the officers. Having completed his inquiry, he can now tell us.
– The Minister tells me that he does not know. Yet he has been refreshed with advice!
– Has the Minister not had advice?
– The Minister went to get advice, yet he got none. So I come back to paragraph b. What does it mean? If it means nothing, we must vote against it.
.- The clause purports to set out the functions of this important new department. It is interesting to note that the explanatory statement issued by the Treasurer (Mr. Chifley) in regard to what this department is to do, covers precisely two lines. We have feared that the result of the establishment of this new department would be merely to duplicate the advisory work which could be or has been done by a number of other government instrumentalities. I remind the committee that already there are in existence at least three government instrumentalities capable of giving the advice which the clause sets out toprovide for small secondary industries. First, there is the Secondary Industries Commission; secondly, there is the Tariff Board, which has been used by the Government, from time to time, to make special inquiries concerning the advisability of carrying on new Australian industries; and, thirdly, there is a very large department under the administration of the Minister for Post-war Reconstruction (Mr. Dedman), which abounds with advisers, economists, technical experts, professors and the like. All of those people have been given, from time to time, the task of deciding what advice can or should be given to private industry. So the committee is entitled to more explicit information as to what additional service this department will render. Are we to . expect a large new bureaucratic development? If advice is to be given as to secondary industry, necessarily there will be many advisers, because secondary industries are of many types, and their activities cover a very wide range throughout the Commonwealth. For the time being, we are left with no more than the bare two lines of explanation. The Minister remains mute. Those who sit behind him have a very shallow notion of their responsibilities to the people if they accept this important new administration without a more complete story in regard to the composition of it.
– Commencing with clause 91, members of the Opposition have debated every clause dealing with the Industrial Finance Department. They have advanced the same arguments, and have asked for the same explanation on each clause. If they want to indulge in tedious repetition, they cannot expect me to follow them and delay the passage of the bill by answering the same questions over and over again. This matter was raised this afternoon. The honorable member for Wentworth (Mr. Harrison) repeats the one story, like 8 gramophone record. The information that he professes to seek has been given to him twice. The Treasurer (Mr. Chifley) has pointed out that the Industrial Finance Department is to be established to assist industry in the maimer set out in this clause. The honorable gentleman claims that there is no necessity for paragraph b. The Government has included that paragraph because industry may be assisted apart from advice or finance. Honorable members may wax as indignant as they like. Paragraph b is supplementary, and if the vanity of the honorable member for Wentworth may thereby be flattered, I concede that it would not matter very greatly whether it was included or not.
– Then leave it out.
– The decision of the Government is that it shall remain in the bill.
– The Assistant Treasurer (Mr. Lazzarini) says that he has explained the meaning of this provision on a number of occasions, but he now tells us that there is no reason why paragraph b should be included in the clause at all. Apparently, it has just been thrown in to make up weight. The practice of the Government seems to be to include all the things it first thought of, and then to add a kind of blanket clause to provide for whatever may crop up later. This, of course, is an old trick in the drafting of legislation. Now, the Assistant Treasurer has the effrontery to admit that this measure, which must have been deliberately designed to strangle the trading banks and to take the control of the Commonwealth Bank out of the hands of a board and place it in the hands of the Treasurer, contains a redundant paragraph. I take him at his word and move -
That paragraph (fj) be left out.
– The transparent clarity of the Minister’s Mediterranean mind is evident from his explanation of this clause, an explanation which disclosed no ripple on the surface nor any pearl at the bottom. He says, in effect, that you can put paragraph b in the bill or leave it out, and it will not make any difference. I have been in this chamber for eleven years, but I cannot ever remember, when measures of such importance have been debated, the Minister in charge saying, time after time, that the bill must stand as printed, no matter what arguments are advanced in favour of amendments. In effect, he has declared that the bill is here to be passed, not to be amended. Members of the Opposition, are compelled to conduct a one-sided debate because hardly any government supporters have risen to defend the bill. This clause is so wide in its scope that it could affect every industry in Australia. No one can forecast what may be required by the Government in respect of a new industry which it is proposed to start. The Deputy Leader of the Opposition (Mr. Harrison) has moved that paragraph b be left out. This is the paragraph which provides that the Industrial Finance Department may assist in the establishment and development of industrial undertakings. That is a fairly tall order. Paragraph a says that the department may provide finance for the establishment and development of industrial undertakings, particularly small undertakings. This is interesting, in view of the fact that the Curtin Government has done more during the last three and a half years to close down small undertakings than other governments” have done in the whole history of federation. Small undertakings of every kind have been pushed to the wall by one subterfuge or another. If these undertakings are to be resuscitated, all the assistance which can be given them underclause 94 will be required. Paragraph c of the clause says that the Industrial Finance Department may provide advice on the operations of industrial undertakings with a view to promoting their efficient organization and conduct. There is no limit to what may be done under that provision. Evidently, the intention of the Goverment is to bring about a state of affairs so complicated that only the master mind of the Attorney-General (Dr. Evatt) will be able to understand what is going on. This is probably the most extraordinary clause ever included in any bill. The Assistant Treasurer promised to make an explanation, but the only information he can give is what he gets from some one else. He has shown day after day during the consideration of this bill that he docs not know what arc the implications of its various provisions.
A men dment negatived .
Clause agreed to.
The Bank shall have, and may exercise through the Industrial Finance Department, such powers as are necessary for the exercise of the functions of the Industrial Finance Department under the last preceding section and, without limiting the generality of the foregoing, may, through the Industrial Finance Department -
lend money; and
purchase or otherwise acquire shares and securities and sell or otherwise dispose of shares and securities so purchased or acquired.
. -Honorable members will note that the bank is to be empowered under this provision to purchase or acquire shares and securities, and to sell or otherwise dispose of them.
Mr.Calwell. - There is nothing wrong with that.
– I cannot see anything right with it. If this becomes a law of the land, the Commonwealth Bank may become part owner of any industrial undertaking without the knowledge of the House of Representatives, which is supposed to be in control of public finance. We have had two examples of the intrusion of governments into mongrel industrial concerns. I refer to Amalgamated Wireless (Australasia) Limited and Commonwealth Oil Refineries Limited. If ever there was a monstrosity it is Amalgamated Wireless (Australasia) Limited.
-It was established by a government of which the honorable member was a supporter.
– It was established when the right honorable member for North Sydney (Mr. Hughes) was Prime Minister. Had I continued as Postmaster-General a bill would have been brought before Parliament to dissolve the Commonwealth’s partnership in Amalgamated Wireless (Australasia) Limited. I have previously criticized the Commonwealth’s association with Commonwealth Oil Refineries Limited. Under that arrangement petrol users in Australia have not benefited in the least degree. Commonwealth Oil Refineries Limited is part and parcel of a world petrol organization. Amalgamated Wireless (Australasia) Limited has not done a filling for the benefit of Australia, either. The association of the Commonwealth with these undertakings was brought about by acts of Parliament, and even so they stand as unfortunate examples of government participation in industry. What are we to expect when the Government, through the Commonwealth Bank, may become ashareholder to an unlimited degree in any industrial undertaking, without even the knowledge of Parliament? Then, having become the owner of such shares it may dispose of them on any terms it likes. Thus, Parliament will never know from day to day the real position regarding the ownership of any industry, nor will it know what losses are being incurred by the Treasury as a result of the Government’s participation in industry. We know that losses were incurred in the operation of certain State banks. I shall not concern myself with names, andI concede that they were established with the best political motives, but nevertheless losses were extensive. Now it is proposed to give power to an untried
Commonwealth authority to participate in the ownership of industrial enterprises, and Parliament is not to know who is responsible for entering into such transactions. This is an amazing provision. Among honorable members opposite are men of al’l avocations; some are professional men, others are from the land, £>nd so on. I cannot understand how such a proposal as this ever ran the gauntlet of caucus unless, indeed, proceedings in caucus are a replica of those iu this chamber. Therefore, I fear the very worst in regard to the future of industries which may be acquired, controlled, or, in some way, looked after when this legislation becomes the law of Australia.
– I agree with what has been said by the honorable member for Barker (Mr. Archie Cameron). Once it is understood that under clause 94 the Industrial Finance Department will be able to provide finance for the establishment and assistance of business undertakings of any size, not only small ones, the significance of clause 95 becomes apparent, and I emphasize to honorable members that under clause 95 the Commonwealth Bank, through its Industrial Finance Department will be able, not only to lend money without restriction, but also to buy or otherwise acquire shares and securities, and to sell shares and securities. Apart altogether from the fact that the department maycar ry’ on the business of buying and selling shares, I wish to dwell for a moment on the buying of shares, not shares in small businesses, but shares in any business at all. In the past we have had examples of what can happen. The honorable member for Barker has referred to Amalgamated Wireless (Australasia) Limited. In that case an agreement was made and authorized by the Parliament. In the case of the Commonwealth Oil Refineries Limited an agreement was submitted to and authorized by Parliament. Under this clause, however, the Commonwealth Bank under the Industrial Finance Department may buy shares in any undertaking. It may buy shares in the
Broken Hill Proprietary Company Limited, Australian Iron and Steel Limited, the Amalgamated Zinc Company Limited, or any other great industrial corporation of Australia. It may buy them without let or hindrance. There is not one word in this bill which will prevent the bank’s money from being used for that purpose. In other words,, here is an instrument by which the Commonwealth Government may establish itself in partnership with private enterprise as a subordinate partner, an equal partner, or a predominant partner, and, the moment it is a predominant partner, it is, for all practical purposes, the owner. Let us take a case. Under this very power, quite unmodified, the Commonwealth Bank, through the Industrial Finance Department, buys a controlling interest in some business. The immediate result is that that business is, for all practical purposes, a business of the Commonwealth of Australia, and the marvel to me is that the community that would sit up and take notice if it were proposed by the Government of the Commonwealth to nationalize industry “ A “, is apparently to sit back and do nothing whatever when a proposal is made under which industry “A” can be nationalized with complete practical effect. Here is a clause which will enable the Commonwealth Government, through its servant., because that is the Commonwealth Bank’s true position now, to go into any business operation, and, by the simple device of buying shares in a particular business, exercise a controlling influence over that business. There are three ways of nationalizing industries. One is the honest, direct way of bringing in a bill to nationalize them. We understand that at some time iri the future we shall have such a bill to deal with the airlines, although I believe that there is a little “ to and fro “ behind the scenes in that matter. I do not want to pry into the secrets of the charnel-house. The second way is to crush private business by pressure of competition, so that the Government competitor shall occupy the field. That is what is to be done with the banks. The third way is to take power by executive action, unreviewed by Parliament, unknown to Parliament, and uncontrolled by Parliament, to buy a controlling interest in whatever business the Government wants to take over. I said “ unknown to Parliament and uncontrolled by Parliament”. Let me emphasize to my colleagues that we shall never know about these things. Do they find any requirement in this part that the proposed purchase of shares in the “ AB “ company, shall be known to Parliament? Why, this is a mere matter of the internal economy of the bank. The Governor says to his general manager, whom he has had no share in appointing but with whom, I trust, he will live in amity-
– Do not the private banks do exactly that - buy shares?
– The honorable gentleman will surprise me immensely it’ he tells me that the ordinary trading banks of Australia buy shares.
– They hold a controlling interest in companies.
– Ali! They accept shares as security.
– The directorates are interlocked.
– If the honorable member for Robertson (Mr. Williams) is intervening on behalf of the honorable member for Wimmera (Mr. Wilson), I am astonished, because, as a lawyer, he knows perfectly well that there is all the difference in the world between taking a charge over shares and purchasing shares, because the man or bank that takes a charge over shares is mortgagee of th em but not the owner.
– What about when the mortgagors fail to pay the interest?
– -Suppose they do, would the banks not dispose of the shares?
– They would own them.
– They would not.
– They would have to own them to dispose of them.
– The honorable member falls into an elementary error if he thinks the mortgagee that comes into possession of shares is the owner of them. He may well have power of sale, but i3 not the owner. Here is a simple, naked provision by which the bank buys shares and is entitled to hold them, having bought them, and is entitled, if it thinks fit, to sell them. So it may become a jobber in shares or the beneficial owner of a proprietary interest, in a business concern and, consequently - this will encourage some honorable members opposite - under this very clause, the Commonwealth Bank, acting as the servant of the Commonwealth Government, may buy a controlling interest by the process of purchasing shares in any business which it desires to control. If the Government desires to nationalize industries, as I understand it does, I commend to it the direct, honest course of saying “ Very well, here is an industry that would be better run by the Commonwealth than by private industry. We will proceed to buy it out. We will compensate the owners of this business and we will give just terms for the property that the Commonwealth has acquired, and, hereafter, the industry will be run by the Crown”. I could understand that; I might not agree with it, but I could understand it. That seems to me the only straight-forward way of doing things, but this wretched provision, by which, by a sort of side wind, with no knowledge iu Parliament, no disclosure of the facts to Parliament, no parliamentary discussion, no parliamentary control at all, the Commonwealth Government, through its servant, the bank, purchases a controlling interest, is a scheme which inspires in me nothing but hostility and great contempt. That is what happens under this clause. I have no doubt that the Minister assisting the Treasurer (Mr. Lazzarini) will elucidate this matter characteristically.
– The words mean what they say.
– The Minister took the words out of my mouth. The Minister having said that, I will present this committee with a complete phenomenon: I agree with him. entirely. The words do mean what they say. There are fair numbers of people left in the community, not including the honorable member for Robertson and me, who have some opinion that the words of acts of Parliament mean what Ministers say they mean when the bills are debated. I say to the committee, “ Forget it ! “ When the bills become acts of Parliament and come under the cold scrutiny of people with entirely detached minds, they will mean what they say, and if some SolicitorGeneral of the future - and I trust that one or two of my friends in the corner will occupy that post - is invited to say whether under section 95 of the act the Government can do A, B, C, or D. of the things I have described, the answer will be “Yes”, and, if it is only six months after the general election, instead of twelve months before, the Labour Government will do them.
. -I have little to say on clause 95. One characteristic of the Leader of the Opposition (Mr. Menzies) is that he has an almost animal instinct for ferreting out any suggested encroachment on the rights of the big vested interests of this country. The right honorable gentleman is always at the forefront in defending them in the law courts as well as in the Parliament. In a sneering voice he said, “ The bank is now the servant of the Government “. The Government intends it to be, for, being the servant of the Government, it will be the servant of the nation, not the boss of the Government and of the nation as it was in the days of the depression. The Government intends the Commonwealth Bank to be an instrument which will serve this nation so that the democratically elected government shall not. be stopped from doing what it wants to do by a board, which, hitherto, has been able to refuse to do what the nation wants to be done to assist the development of this country. I have both opposed and supported the payment of largesse in the form of bounties to growing industries in this country, which, as soon as they have had sufficient help from the Government, have become arrogant, and begun to show their teeth as opponents of all progress and development except their own. Every monopoly in this country has been spoonfed for twenty years or more by this Parliament. The right honorable gentleman referred to the Broken Hill Proprietary Company Limited. That has been spoonfed with bounties to the stage at which, when the workers agitate for more wages, it says, “ No, give us the wage conditions of the world and we do not want any protection “, whereas its representatives have almost crawled and cringed in the lobbies to Labour members to vote for either the duty or the bounty that they have been seeking on its behalf.
– If it were not for the support of the employees of Australian Iron and Steel Limited and other industrial undertakings at Port Kembla, the Minister would not be a member of this Parliament.
– I am not discussing that aspect. I am endeavouring to combat the contentions of the Leader of the Opposition. Under this clause, the bank will be able to lend money, and acquire share.-; in industrial undertakings. Instead of lending money to a business, the bank, acting on the advice of its experts, may elect to purchase shares in it. That procedure would relieve the enterprise of the obligation to pay interest on an advance from the bank. Members of the Opposition, with their suspicious minds, can wander where they please in the realms of fantasy, but I emphasize that the clause means no more than I have stated. To say that the Commonwealth Bank will become a hawker of shares is to indulge in fantastic nonsense. As J said, the bank may decide to purchase shares in an industrial undertaking in the ordinary way. After seven years, the business may be firmly established, and the bank may decide to sell its shares. The clause has no other meaning, and 1 ask honorable gentlemen opposite not to be so suspicious.
– It is always interesting to note how the Minister assisting the Treasurer (Mr. Lazzarini) explains a clause to the committee. Indeed, I feel encouraged to speak on the subject at great length, because every time the honorable gentleman attempts to explain a provision, he “ puts his foot in it completely “.
– Order ! I ask the honorable member to confine his remarks to the clause.
– In dealing with the clause, I must discuss the observations of a comedian. The Minister made it perfectly clear that the Government intends that the bank shall be its servant. A servant does whathe is told, and the b:i::!: will do what the Government tells it to do. From time to time, honorable members opposite have declared that assertions that they propose to nationalize industry are without foundation. If this clause is not designed to nationalize industry, it is certainly intended to intimidate industry. A few days ago, this chamber had a classical example of that policy. The Minister for Labour and National Service (Mr. Holloway) referred to a strike by employees in the sugar industry in Melbourne. Because the Colonial Sugar Refining Company Limited decided to obey a ruling of the Arbitration Court in regard to certain strikers, the Minister declared that it was time that the Government took control of the industry. How could the Government take control of an industry? When this bill is passed, the Government, through its servant, the Commonwealth Bank, will be able to acquire a majority of the shares in a company, and generally exercise control over any industry that opposes trade union law. Honorable members opposite may contend that trade union law does not influence the Government to any great degree, but I remind them, that the secretary of the Ironworkers Federation, Mr. E. Thornton, informed the secretary of the Trade Union Council, Sir Walter Citrine, in London recently, that, “In Australia, the Government is responsible to the unions; the unions are not responsible to the Government “. If a firm offends the trade union movement by refusing to bow to pressure brought to bear upon it, the Government may take control of it through the machinery provided in this clause. Obviously, the Industrial Finance Department, will be used to purchase a controlling interest in- an offending company, so that the Government may control its policy and operations, I dealt with this subject in my second-reading speech, and again in discussing earlier clauses of the bill. Under this legislation, the Government is establishing a power that will affect the whole financial and economic position of Australia. It will invite the trade union movement to apply pressure on industry. If the Government is so recreant to its trust to the people as to permit those powers to be exerted, the day of reckoning will come, and the Government will face an indignant electorate. I warn the Minister that all the pettifogging and clowning in which he has indulged, and his vague explanations of clauses, will recoil upon him.
.- During the course of a somewhat varied political life, I have had some experience which indicates to me the probable operation of this clause. State governments, through their parliaments, have subsidized in one way or another many industries within their boundaries, and action by the Commonwealth Parliament to subsidize an industry is not novel. Under this clause, the Commonwealth Bank will have power to lend money to industrial undertakings, particularly small undertakings. When I was the Leader of the Legislative Council of Tasmania, I had some unpleasant experiences in dealing with subjects about which the members were not fully informed and upon which they were not capable of giving a considered opinion. When one bill was before the Legislative Council, urgers filled the lobbies and endeavoured to persuade members to defeat the legislation. Yet I am asked to believe that those conditions of lobbying are better than the proposal in clause 94, under which the Commonwealth Bank, through the Industrial Finance Department, will be empowered to assist industrial undertakings. Negotiations for financial or other forms of assistance would take place, not in the political arena, but in the sane and sensible atmosphere of the offices of the bank. The two methods are not comparable. By a reasoned approach to the problem, the bank is competent to make a general assessment of the position, and examine the over-all effect of the proposals on the national economy. That method is infinitely preferable to the introduction of legislation for the purpose of assisting an industry, because the proposal becomes a party matter, and urgers for and against it obstruct honorable members in the lobbies. Under those conditions, honorable members cannot study the legislation with an unprejudiced mind. If honorable members had had my experience, they would not indulge in wild utterances against imaginary dangers in this clause.
One’ of the last bills that 1 introduced into the Legislative Council of Tasmania was to subsidize the paper pulp industry, in which the State Government invested £250,000. The Government also held shares iri the carbide industry. When the enterprise was operating successfully, the State sold its shares at a considerable profit. Under this bill, the Government itself will not subsidize an industry, but the bank, after making an estimate of the position, will either lend money to the undertaking or acquire shares in it. Honorable members opposite talk of “socialization”, “nationalization” and “ democracy “, whatever those vague words mean. I do not know what they mean.
– We do not. know what the honorable member means.
– Perhaps Webster and Company opposite will tell me the exact meaning of the words, but one would be excused for thinking that nationalization is not known in Australia. Has no one heard of the government-owned railways?
– Have we heard ?
– Although the people condemn government-owned railways, they would not be prepared to sell them to private enterprise.
– The Victorian railways are very good.
– The right honorable gentleman is being very tactful. Honorable members opposite declare that nationalization is pernicious, but our railways, tramways, water supplies, and postal services have been nationalized for as long as we can remember. Now honorable members opposite assert that the Government will take advantage of this clause to become the butcher, the baker and the candlestick-maker. The sole purpose of this clause is to enable a competent authority, the Industrial Finance Department of the Commonwealth Bank, to assist the development of industrial undertakings in various ways. If, next week, we were to ask members of the Opposition whether they desired an experienced officer of the bank to deal with these propositions in preference to the Parliament, obstructed by a hand of urgers, they would declare unhesitatingly that the matter should be left to the bank. I hope that this clause will be agreed to without further delay.
– iSo much heat has been engendered by “ the blast furnace of Werriwa “ and the honorable member for Denison (Dr. Gaha) that I shall endeavour to cool the atmosphere a little. I cannot understand why the Government did not include in this bill a provision similar -to that contained in the Industrial Development Bank Act of Canada. The preamble to that act reads -
Whereas it is desirable to establish an industrial development bank to promote the economic welfare of Canada by increasing the effectiveness of monetary action through ensuring the availa.bili.ty of credit to industrial enterprises which may reasonably be expected to .prove successful if a high level of national income and employment is maintained, by supplementing the activities of other lenders and by providing capital assistance to industry with particular consideration to the financing problems of small enterprises: Therefore, His Majesty, by and with the advice and consent of the Senate and House of Commons of Canada, enacts as follows : -
In dealing with the business and powers of the bank, the act provides -
Subject to section fourteen of this Act, in order to provide credit or other financial resources which would not otherwise be available on reasonable terms and conditions, the Bank may -
purchase or otherwise acquire with a view to resale thereof, the whole or any part of any issue of stock, bonds or debentures of a corporation engaged in or about to engage in an industrial enterprise in Canada, from the corporation or from any .person with whom the Bank has entered into an underwriting agreement in respect of such issue, and may subsequently .C1/ or otherwise dispose of the said stock, bonds or debentures.
The Canadian Industrial Bank was authorized, to buy shares in order to permit companies to be floated, but as soon as they became established the bank was required to sell the shares. I ask the Minister (Mr. Lazzarini) whether it is the intention of the Government that the Industrial Finance Department of the Commonwealth Bank shall act in that way.
– I said that the bank may elect to act in that way if it so desires. It is a matter which the bank may determine for itself.
– Then the bank need not resell the shares that it acquires?
– It is a matter that the bank may decide for itself.
– It. is not mandatory for the bank to resell the shares?
– It, is not.
– For that reason Opposition members desire to know why this bill does not follow the Canadian act in this regard. That measure undoubtedly gives the Canadian bank the kind of power that an industrial bank should have.
– The reason why we did not follow that legislation is that we have a mind of our own.
– Those who have listened closely to this debate must be amazed that such supreme confidence can reside in the head of the Minister! I still cannot understand why this bill does not follow the wise procedure laid down in the Canadian act. 1” hope that, at a later stage, an amendment will be moved, from this side of the committee which will ensure that private enterprise may have made available to it the benefits which, we are told, will flow from this legislation, so that full employment and the raising of the living standards of our people may be realized. Those desirable results will never flow from government enterprise.
.- One of the purposes of this legislation is to provide financial assistance for small industrial enterprises. It is hardly reasonable for us to anticipate and provide for every circumstance which may arise from the passage of this legislation. I hope that after the war small co-operative industrial groups will be formed, probably by men who have returned from active service. But to establish such groups financial assistance will be necessary. We know very well from past experience that such assistance is not very likely to come from private financial institutions. For that reason it is necessary to provide it from a public institution. I do not fear that situations will arise such as those which the Leader of the. Opposition has foreseen. I remind the right honorable gentleman that private banks in this country do acquire stocks and shares at present though, as a rule, they do not buy them on the market. They also acquire laud, as mortgagees. As a rule they do not hold the land any longer than is necessary, for they have no wish to become liable for the rates and taxes that may be levied upon it. I cannot agree with the Leader of the Opposition that this is a dangerous clause. I believe that it conforms, in general terms, to private banking practice. The banks, including the Commonwealth Bank, may, therefore, be trusted to secure themselves by the most effective means available to them, including the holding of shares as provided in this clause.
– I 3aid earlier this evening that there wore ways and means by which we could test the sincerity of the Government and its supporters in regard to the various provisions of this bill. At the beginning of our discussion of this clause the Leader of the Opposition (Mr. Menzies) directed attention to paragraph 685 of the report of the Royal Commission on Monetary and Banking Systems. That paragraph reads -
To meet the needs of small concerns in secondary industries, it is desirable to provide facilities either in the form of a new institution specially established for the purpose, or by some adaptation of an existing institution. It would be necessary for any such institution to have available the services of technical advisers, firstly to examine the prospects of the business, and, if a loan is made, to advise (he owners on such matters as manufacturing methods, factory lay-out. costing and marketi,i /.. Since the object of the institution is to enable industries t<> be developed in the national interest, profit, should not be its main consideration. but there is no reason why it should wl make profits.
We have been trying to discover from the Minister (Mr. Lazzarini) whether the intention of the Government is to give effect to the recommendations in that paragraph, but the honorable gentleman has merely ?aid, in an airy way, “What we have in mind is the actual implementation of the recommendation of the banking commission “. That being so. T intend, before I resume my seat, to move an. amendment the vote on which, will test the sincerity of honorable gentleman opposite. It cannot be denied that the clause, as it stands, will give the bank power to buy and sell land and shares, to secure control of existing businesses, and to establish new businesses. If that is the intention of the Government, we should he so informed. If it is not the Government’s intention, I can see no reason why paragraph b of the clause should not be deleted and I intend to move accordingly. I am sick and tired of the vague generalities to which the Treasurer treats us. It often happens that having addressed the committee without giving it any information whatsoever, he at once walks out of the chamber. We know very well that private banks accept shares as collateral security, but they do not traffic in shares. In my opinion this clause will give the Industrial Finance Department of the bank power to traffic in shares, and I am opposed to that procedure. It is clear to me that the funds for this trafficking in shares are to ‘be provided, not from the £4,000,000 which will constitute its capital, but from the accumulated funds of the hundredsof thousands of Savings Bank depositors. It is intended, undoubtedly, that the Industrial Finance Department of the bank shall be allowed to handle, or mis-handle, the funds of Savings Bank depositors. The Minister (Mr. Lazzarini) said, “ If the industry is sound the bank can dispose of the shares in the ordinary way. That is all that is in the bill “.
– I said that the bank would have the option of doing so.
– The Minister also said later, in an interjection while the honorable member for New England was speaking, “ We have a mind of our own”. That has not been apparent in the course of this discussion. I do not agree that it will be sound practice for the Industrial Finance Department of the bank to traffic in shares in the open market. If I fail to have paragraph b deleted, I shall move for the insertion of a new paragraph, to read-
I shall also move for the insertion of a new sub-clause, to read - (2.) Nothing in this section shall empower the Commonwealth Bank to purchase or otherwise acquire shares or securities except for the purpose of providing finance as prescribed under paragraph (a) of Section 04.
Those amendments will provide a real test of the sincerity of the Government, and of the Minister’s statement. I now move -
That paragraph (6) be left out.
.- The honorable member for New England (Mr. Abbott) implied that under the provisions of the Canadian act covering a similar institution, shares are acquired inan industry only with a view to resale. That is not the position. Whether or not any shares shall be disposed of, is left entirely to the discretion of the bank. Furthermore, the time for which shares maybe retained also is left entirely to the discretion of the bank. The provisions of the Canadian act do not differ from those of this clause in regard to the purchase of shares in industry.
– I am opposed to the clause, because there is no limit on the degree to which the Industrial Finance Department may traffic in shares, and no restriction on the quantum of advances that may be made, as is provided in the Rural Credits Department and the Mortgage Bank Department. The honorable member for Wimmera (Mr. Wilson) has said that every trading bank engages in this activity. The two sets of circumstances are not comparable. The trading banks deal in shares only as security, and dispose of them in the event of the failure of the person to whom money has been advanced. But under this clause straight-out power is to be given to the Industrial Finance Department to lend money, and to purchase or otherwise acquire shares and securities, and sell or otherwise dispose of shares and securities so purchased or acquired. There is no restriction as to the terms on which the shares or securities may be acquired, or the length of time for which they may be held. This provision is quite different from the Canadian provision, which makes mandatory the disposal of the shares purchased. Under the Canadian law, the department which deals with the matter is an underwriting department; it has the power to underwrite share issues, bond issues, debenture issues or ether forms of capital in an industrial or financial activity. Because in underwriting it has to find purchasers for the shares, it has the power to dispose of them. Otherwise, it has not the power to traffic in shares. The power given in this clause should be considered in conjunction with the provision in clause 97-, that the Treasurer may make advances to the bank for the purposes of the Industrial Finance Department, of such amounts and subject to such terms and conditions as are agreed upon between the Treasurer and the bank. So there is no limitation on the degree to which the Treasurer, or the bank through the Treasurer, may traffic in shares under this clause. This is a very dangerous provision. I said in my second-reading speech, and I have repeated in committee, particularly on clause 9, that the Treasurer has at his disposal every means to usurp the functions and strangle the activities of the trading banks, by utiliz- ing their special deposits with the Commonwealth Bank, which according to the test available data amounted to £240,000,000. So the bank, under the Government’s political direction, will be able, in effect, to take over some of the trading banks, by using the deposits of those institutions if that were found necessary. The Treasurer will not have to bring the matter to this Parliament. I have uo doubt that the express purpose of the clause is to facilitate the socialization of industry, by acquiring first a controlling and ultimately a total interest in any activity. I particularly emphasize the decided weakness of the general financial structure through the absence of any safeguard against the unfair and unwise utilization of the surplus deposits of the trading banks that are now held by the Commonwealth Bank. If the Industrial. Finance Department is not to use the advances that may be made to it under the authority of clause 97, as a means for implementing socialistic policy, the Treasurer should give that assurance to the committee and the amendment should be accepted. Conditions should be imposed on the acquisisition of shares, and the period during which they may be held before being resold should be stipulated.
seemed to imply that, in opposing the clause, members of the Opposition do not wish groups established on a co-operative or any other basis to be able to obtain finance. That is not correct. We realize the necessity for ex-servicemen to be assisted to branch out in businesses of their own. We believe in the principle of private enterprise, and arc pleased to support any proposal which will assist it. The doubt in our minds is that, whilst it may appear that private enterprise is to be assisted in this regard, there is the danger of nationalization, which would be unfair to those who are struggling to establish themselves in industry. Unlike the provision in relation to rural advances, and those made by the Mortgage Bank Department, this clause does not fix any limit to the amount that may be advanced by the Industrial Finance Department. I am not concerned, if that will assist the genuine borrower who desires to establish himself in industry. But we know that there will be the possibility of nationalizing industry, by securing a controlling interest in an undertaking. To what could such control lead us? Queensland embarked on the socialization of industry. Great cattle stations were bought at too high a price. Money was lost while they were being operated, and they” were sold at less than the figure at which they had been purchased. All who lived near them, were happy, because they did not need to kill their own beef or breed their own calves, but the public had to defray the loss of millions of pounds. Butchers’ shops were established in every town, the effect being to close down many private batchers who were operating in country districts. Great fish markets were set up, but when an acceptable price could not be obtained, fish was dumped. The loss on the marketswas so great, that they had to be sold. Produce markets were opened, but they, too, had to be sold. Brickworks were purchased, run at a loss, and then sold for less than had been paid for them.
– Stevens gave away the State brickworks in New SouthWales.
– Probably, by saving further losses the sale was a profitable transaction.
– They had made big profits.
– The Government bought a coal mine at Warren, but its only use was to water cattle. It also bought a smelter. I do not want to say too much about that, but a lot of money was lost. Then the Government bought saw-mills and they, too, were run at a loss, so that the unfortunate taxpayers, on this and other State enterprises, had to foot a bill of millions of pounds.
– And they are still paying interest on this money.
– Yes, and will continue to pay interest on it until the Assistant Treasurer gets his printing press to work. The Government of Western Australia bought a steamship, and all loved to see it coming into port. As a matter of fact, it was so anaemic that it used to have to stop to whistle. Those were some of the experiences of the Queensland Government in the socialization of industry, and they have not been forgotten in Queensland. Neither Labour supporters nor the supporters of other political parties ever want any further experience of State enterprise.
.- I am in complete agreement with the remarks of the Leader of the Australian Country party (Mr. Fadden). A very important principle is involved in this clause and in the preceding one. I should like to know from the Assistant Treasurer whether any advice has been sought regarding the constitutionality of proposed legislation which provides that the
Industrial Finance Department of the Commonwealth Bank may purchase or otherwise acquire shares and securities and sell or otherwise dispose of them. For my part, I think that it is at least doubtful whether such a provision is constitutional. We know that the Commonwealth has power to make laws in respect of banking,- but I do not think that such operations as the purchase or acquisition of shares and securities come clearly and indisputably within the scope of banking. TheCommonwealth is entitled to legislate for such legitimate, purposes as the financing of industrial undertakings, particularly small undertakings, but it has become evident since the referendum that the Government is seeking in various ways to attract to itself powers which it does not possess under the Constitution. I am fearful that the Government is seeking to evade the limitations imposed upon it by the Constitution. There must be a reason for seeking to give the Commonwealth Bank power to purchase shares and securities, because such power is not necessary merely for the purpose of lending money. For that it is necessary only to take security for the money lent. When this clause is considered in conjunction with the previous one, it is apparent that the purpose of the Government is much deeper than appears at first sight. In the absence of any explanation from the Government, one can only conclude that it has a purpose which it is not prepared to reveal. We know that the Government holds the view that there are ways, apart from amending the Constitution, in which the powers of the Commonwealth may be increased - for example, by entering into treaties with other governments regarding matters which, under the Constitution, are otherwise outside the legislative authority of the Commonwealth Parliament. We have also noted examples of questionable appropriation of public money for other than what arc properly Commonwealth purposes. We in this Parliament are the custodians of the Constitution.. It behoves us to uphold the Constitution, not to seek ways of getting around it, especially when the people have expressed their opinion on the matter. I am one of those who believe that the Commonwealth should have greater powers, but I also believe that, when the people have expressed their opinion on the matter, that opinion should be respected. There are only two ways in which the Commonwealth may acquire shares in any organization - by the exercise of the appropriation power under section 81 of the Constitution; or by setting up,as is here provided, an industrial department of the Commonwealth Bank with unlimited power to acquire or purchase shares and securities, whether or not the operation is associated with the lending of money. It is, I would have thought, clear that the appropriation power of the Commonwealth under the Constitution should be exercised only in respect of matters regarding which the Commonwealth may legislate. It is proposed,under clause 94, to give power to the Commonwealth Bank to finance undertakings, particularly small undertakings, and to assist in the establishment and development of industrial undertakings. The committee is entitled to know, what is meant by this provision. Clause 95 provides that-
The Bank shall have, and may exercise through the Industrial Finance Department, suchpowersas are necessary for the exercise of the functions of the Industrial Finance Department under the last preceding section and. without limiting the generality of the foregoing, may through the Industrial Finance Department -
lend money; and
purchase or otherwise acquire shares and securities and sell or otherwise dispose of shares and securities so purchased or acquired.
If it is proposed merely to finance industrial undertakings, no power is necessary other than the power to lend money on such terms as the Governor of the bank or the general manager of the Industrial finance Department may think fit. I should like to know from the Assistant Treasurer what is the policy of the Government. Is it intended to go further than the mere financing of enterprises? I am entitled to have an answer to this question.
– The matter has been already explained.
– The Minister assisting the Treasurer has treated the committee with the utmost contempt. When he has spoken he has done so rudely, or he has revealed com plete ignorance of the subject under discussion. If he is not prepared to give an explanation, perhaps he will send for the Treasurer, or some other Minister who is able to do so. The Minister at the table seems to be overwhelmed by the authority placed in his hands, and he is prepared to disregard the people, and this democratic institution which it is his duty to uphold. If the purpose of the Government is merely to assist small undertakings, as recommended by the Royal Commission on Monetary and Banking Systems, the proposal has my complete approval. I fear, however, that this is merely another attempt to get around the provisions of the Constitution, and to exercise powers which the Government does not. rightly possess.
– When the Minister assisting the Treasurer made some remarks on this clause - they in no sense constituted an explanation - he said that the Commonwealth Bank might purchase shares with the intention of not collecting any dividend on them. In this way, the Government could use the bank in order to subsidize an industry which it was not prepared to assist by tariff or bounty.
– The honorable member may put what construction he likes on my remarks.
– When a tariff schedule is put through Parliament, every member of Parliament, and every member of the public, may know the degree of assistance which is to be afforded to any industry, and that is true also of a bounty bill. However, if the Commonwealth Bank may purchase shares and not collect the dividend on them, it can in this way subsidize an industry without Parliament being any the wiser.
– What about the bank’s depositors? Is no consideration dueto them ?
– The Government is not worrying about them. This afternoon, when I predicted that money might beplaced at the disposal of the Rural Credits Department to lend free of interest, this was contradicted. Now, we have the opposite view put forward by wayof explanation, whether rightly or wrongly I cannot say. Perhaps the Treasurer (Mr. Chifley), who has just come into the chamber, can tell us.
– I told the honorable member all about it this afternoon, and T shall not go into it again.
– My sorrow at the departure of the Minister assisting the Treasurer (Mr. Lazzarini) is to some extent mitigated by the arrival of the Treasurer (Mr. Chifley). It would be a pity if the. Treasurer had to give a blind vote. The matter before the Chair is a proposal by the honorable member for Deakin (Mr. Hutchinson) that sub-clause b of clause 95 be omitted, and, in our several fashions, we have been saying that we can very well understand without difficulty that the Industrial Finance Department of the Commonwealth Bank needs power to lend money, but many of us are under the impression that, when it has the power to lend money, it has the power to take security over the loan. Indeed, the legal advisers of the Government will have no hesitation in declaring that the power to lend money includes the power to take all proper and necessary security. If that security consists of shares and such things, very well, let them be taken. If they be taken as security, that, follows the normal practice. Then, when the loan has been repaid, the shares are released or, in the event, of foreclosure, the shares may be sold. In other words, the security is realized. If it is required to acquire shares as a part of the lending transaction, there is no need for subclause b, because the power to lend covers the whole ground. But if it is intended to acquire .shares irrespective of loan transactions, sub-clause h is needed, and. because sub-clause b .is put in independently and is defended resolutely, although somewhat incoherently, by the Minister assisting the Treasurer, the only conclusion that the. committee oan reach is that it is intended as a substantive power, for purposes other than to make loans, that the Commonwealth Bank shall be able to purchase, or otherwise acquire, shares and securities and sell them. One other thing has occurred which I think the Treasurer will appre ciate. We have had the advantage of having been addressed by my humorous, and now, I am unhappy to say, absent friend, the honorable member for Denison (Dr. Gaha). Ho spoke out of the rich experience of a former Tasmanian Minister, and, as you, Mr. Temporary Chairman, know, life on the island may be short, but it is intense. Speaking out of the rich experience that he had as a State member, he told us that nothing could be more boresome or irritating to the nerves than to have to bring before Parliament statutory proposals for the advancing of money to ventures or for the pureba?* of shares in public undertakings, because, as he picturesquely stated, .you have a hunch of urgers on the one side, and a bunch of urgers on the other, and lire becomes miserable. That is how I understood it. ft. was a touching, appealing, pathetic human story. I am happy to see the honorable member for Wilmot (Mr. Guy) in the chair, because, as a Tasmanian, he will understand these tilings. But, as I listened to the speech, I could not help but feel that the real awkwardness is met if you have to come to Parliament and have these things publicly discussed. I am old-fashioned enough to believe that it is a very good thing that these matters should be publicly discussed if large sums of publicmoney are to be put in. the hands of a private entrepeneur in some industry. L= it not a good thing that the public should know what is going on and that the Parliament should have the opportunity to discuss it? Mere passing embarrassment or awkwardness on the part of a Minister of the Crown weighs as nothing in the scale against the supreme public interest that is involved in knowing what is happening to public money- -where it is going, and on what terms. The apologia pro vita sua of the honorable mem her for Denison, far from being an argument against the amendment of the honorable member for Deakin, is an overwhelming argument in its favour, i rose really to convey to the Treasurer. who is so happily with us, that thin amendment has been moved, that it. commands the support of the Opposition, and that it should command at least, the interest, and thought-, of the Government.
So far we have been unable to obtain anything from the Minister assisting the Treasurer except the somewhat rhetorical statement that words mean what they say. a proposition which he denies by implication every time he gets to his feet to address honorable members.
.- There is scope for an Industrial Finance Department of the Commonwealth Bank, but I am disappointed that the department is to be used in the way proposed in this bill, a way which is quite foreign to that recommended by the Royal Commission on Monetary and Banking Systems, namely, that it should exist to provide assistance to small business undertakings. That is something of which I am quite in favour if the ventures represent sound banking business. I am, however, totally opposed to the Commonwealth Government employing the Industrial Finance Department of the bank in orderter into partnership in privatenal undertakings. During the life the Commonwealth Parliament, especially since the 1914-18 war, there have been notable instances in which, it has been found prudent that the Commonwealth Government should associate itself with certain industrial undertakings. I instance Amalgamated Wireless (Australasia) Limited, the Commonwealth Oil Refineries Limited, and the Glen Davis project for the extraction of oil from shale.
– I do not regard them as very happy instances.
– I just cite them as cases in which there was undoubtedly a good deal of doubt. I remember that the Amalgamated Wireless (Australasia) Limited transaction, which was discussed in this Parliament, was the subject of an investigation by a specialcommittee of the Parliament and that the repercussions from that committee’s report lasted the whole time I was in office in the twenties. So one would not say that the Amalgamated Wireless (Australasia) Limited was an extraordinarily happy partnership. However, the point I am trying to make is that in all those cases there was considerable doubt as to the wisdom of the risk. If the Government is to become a partner in such ventures, that should only be after full consideration in this Parliament.. I therefore see great danger in this proposal. Consider the GlenDavis project. We have an agreement between the Commonwealth Government, the Government of New South Wales and a private entrepreneur,but it has not worked very successfully. The capital originally set aside for it proved insufficient and had to be continually enlarged. That is bad enough, but public funds - and the funds of this department are largely to be found by the Treasurer, because the other capital provided by the Commonwealth Bank is to be relatively insignificant - should not be used in the way in which they could, be used under this clause without reference to Parliament. For the department to lend money only in the ordinary way is one thing, but surely it is another that it should buy or otherwise acquire shares. I do not know what “ otherwise acquire shares “ means. Does it mean that they will be picked up or confiscated? It is an extraordinary provision.
– The bank could promote a company and issue vendor shares.
– Yes, it could promote a company as well. So there should be some limit to the size of the companies to which money may be advanced. I am quite prepared to agree that the bank should hold certain interests in small companies, if they are approved, though, of course, that raises the point made by the honorable member for Warringah (Mr. Spender) that this clause jeopardizes the constitutionality of this part of the bill. That, gives me hope that it may invalidate the whole of this legislation, because I think the constitutionality of the housing loans division is also doubtful, and if this legislation is so riddled with holes that it will not be able to float, I shall be glad. If this provision is tobe used in such a way that the Commonwealth Bank will be able, on behalf of the Commonwealth Government, to invest in big business undertakings without prior full discussion in the Parliament, it will be a bad thing. Surely the right procedure is the constitutional and traditional procedure under which the Executive comes before the Parliament and places all its cards on the table in order that the public may see exactly what is taking place. Under this system, the proceedings will be secreted in the statements of the Commonwealth Bank and nothing will be made known to the people about how their funds are beingused. I therefore support the amendment which would provide at least one safeguard.
– Will the Treasurer (Mr.Chifley) answer my reading of this clause 95 (b) ? Clause 97 (l) says -
The Treasurer may make advances to the Bank, for the purposes of the Industrial Finance Department, of such amounts, and subject to such terms and condition, as are agreed upon between the Treasurer and the Wank.
Will the Treasurer agree that it would be quite competent under those two clauses, without reference to Parliament, to advance money to, or in co-operation with, the State of Tasmania, or any other State, on exactly the same basis as money was advanced to Tasmania under the Aluminium Industry Act, which came before Parliament?
– So that those who fear that sub-clause 95 (b) is the back-door to the socialization of industry may sleep soundly to-night, I repeat my assurance that socialization of industry cannot be realized in that way at any rate. The Industrial Finance Department of the Commonwealth Bank is to be created for the purposes I mentioned this afternoon. It will have the right to acquire shares under sub-clause b in the establishment of a company which it considers ought to be set up. I stated earlier the sort of companies I have in mind. That is one phase of the matter. Later, the bank may want to sell those shares. That is the other phase. All I want to say about this matter is that this is not, as honorable members opposite suggest, the back door to complete socialization of industry.
I turn now to the point raised by the honorable member for Warringah (Mr. Spender). If I listen to this discussion much longer, I shall learn a good deal about the possibilities of this legislation. However, none of the possibilities envisaged by the honorable member were contemplated in the drafting of this legislation.
– Could the Government make an advance such as I mentioned without seeking the approval of the Parliament?
– I do not imagine so, but I admit that I had not considered the matter raised by the honorable member.
– Will the Treasurer endeavour to answer my question before the third reading?
– The honorable member asked whether the Treasurer could; my impression is that he could not, and in any case would not. Amendment negatived.
. -I move -
That the following words be added: - “ Provided that the purchase or other acquisition of shares in any one undertaking shall not exceed the sum of Twenty-five thousand pounds or forty per centum of the total share capital issued whichever is the smaller ; “Provided also that shares shall he purchased or otherwise acquired only with a view to resale thereof. “ (2.) Nothing in this section shall empower the Commonwealth Bank to purchase or otherwise acquire shares or securities except for the purpose of providing finance as prescribed under paragraph (a) of the last preceding section.”.
In the words of the Minister assisting the Treasurer (Mr. Lazzarini), this amendment is self-explanatory. Asthe main purpose of the clause is to assist in the establishment and development of new industries, the Treasurer should agree that the proposal to limit advances to £25,000 is satisfactory. I emphasize that the acquisition of shares should have reference to paragraph a, which provides that the bank may, through the Industrial Finance Department, lend money for the establishment and development of industrial undertakings.
Question put -
That the words proposed to be added (Mr. Hutchinson’s amendment )be so added.
The committee divided. (The Chairman- Mr. W. J. F. Riordan.
N oes . . . . 31
Majority . . 16
Question so resolved in the negative.
Clause agreed to.
Clause 96 (Capital of Department).
– Clause 98 provides -
The Bank may make advances to the Industrial Finance Department of such amounts, and subject to such terms and conditions, as the Governor determines, but so that the total amount of those advances not repaid shall not at any time exceed One million pounds.
In addition, the Savings Bank may make advances to the bank for use in the Industrial Finance Department, of such amounts and subject to such terms and conditions as the Governor determines. Under clause 98, unlimited sums may be paid from the Savings Bank into the Industrial Finance Department. The disposition of that money would notbe of such importance if sub-clause 2 of clause 100 did not provide -
In determining whether or not finance shall be provided under this Part for the establishment or development of an industrial undertaking, the Bank shall have regard primarily to the prospects of the undertaking continuing to be, or becoming, a profitable undertaking and shall not necessarily have regard to the present value of the assets of the undertaking.
I object to the savings of the average citizen being used to build up the capital of the Industrial Finance Department, when the bank “ shall not necessarily have regard to the present value of the assets of the undertaking”. Surely, it is unreasonable not to have a more specific method of determining the manner in which the capital of the Industrial Finance Department shall be obtained. The savings of the people should not be treated in this fashion.
Clause agreed to.
Clause 97 (Advances by Treasurer).
.- This clause deserves attention, because it lends a great, deal of point to what has been said on the immediately preceding clauses. Subclause 1 authorizes the Treasurer -
To make advances to thebank for the purposes of the Industrial Finance Department, of such amounts, and subject to such terms and conditions as are agreed upon between the Treasurer and theBank.
That subclause does not impose any limit, because under this legislation the Treasurer and the bank occupy a position which I may describe, without offence, as that of master and servant. What the Treasurer desires, the bank must do, in the long run, through the Governor. Therefore, an agreement between the Treasurer and the bank will be very easily arrived at, having regard to the terms of clause 9. That means that the advances to the bank will be without any limit whatever.
Sub-clause 2 provides -
The Treasurer may from time to time, under the provisions of the Commonwealth Inscribed Stock Act 1911-1.943, borrow money for the purpose of making advances to the Industrial Finance Department under, this section.
In case any honorable member believes that the reference to the Commonwealth Inscribed Stock Act. imposes some limit, T must point out that it does not. All that happens under that act is that power is taken to create capital stock called Commonwealth Government Inscribed Stock, or Australian Consolidated Inscribed Stock, for “ raising by way of loan any money authority to borrow which is granted by any Act”. Accordingly, the position is that sub-clause 1 of clause 97 provides for unlimited advances, and sub-clause 2 provides for unlimited borrowing. The honorable member for Warringah (Mr. Spender), in the course of his last speech to the committee, asked a question, which was not very satisfactorily answered, as to whether, having regard to these provisions., it would any longer be necessary to bring to the Parliament such an arrangement as that concerning aluminium production in Tasmania. I point out to the committee that it most palpably would not. If the Treasurer has unlimited power to make advances to the bank for the purposes of the Industrial Finance Department, the authority of which would obviously include the development of an aluminium industry in Tasmania or elsewhere, and if the Treasurer, for the purposes of those advances, may borrow without, limitation under the terms of the Commonwealth Inscribed. Stock Act, it is quite clear that this bill is not dealing with mere amounts of £10,000 or £20,000 to be invested in a small industry; it may equally deal with amounts of £1,000,000 or £2,000,000 to be used for a major industry somewhere in Australia. And having regard to the terms of clause 97, read in conjunction with the terms of the earlier clauses, it is plain that such agreements as the Aluminium Agreement need no longer bc brought to Parliament, not that’ as agreements they could be kept from Parliament, but that no agreement of that kind need be made at all. What would hap pen would be that the Commonwealth Bank would deal with the matter, and the Commonwealth Bank would be told by the Treasurer that the policy of the Government waa that the advance should be made for the establishment of the aluminium industry. The bank would deal with the matter, and whatever monetary commitment was involved would be undertaken only by the bank; and the stand taken by the Treasurer, and the whole transaction, need never come to Parliament at all, as. indeed, it never would come to Parliament. I rise not to move an amendment to the clause, because it fits too closely into the scheme for any amendment to be really effective; but if any clause substantiates the view taken by the Opposition on this matter, clause 97 does.
– Sub-clause 2 means that th( proposed Industrial Finance Department will be unlimited in respect of the amount it may lend. Thus, the Treasurer, will be enabled to borrow without limit from the bank. This will enable him through tin’s department to carry on, for instance, un-y industrial undertaking he think* fit, or any industry which caucus thinks fit to instruct him to undertake without the sanction of Parliament. Since other provisions enable the Government to control the bank, there need be no limit to the outpourings of bank credit under this clause. It_ would be possible for the Government to participate in any industry : and, indeed, the way is wide open for the socialization of industry. Therefore, it seems essential to place some upper limit to the funds at the disposal of the Treasurer, particularly as an industrial undertaking is not defined under the bill. I draw attention to the relevant provision in the Canadian act. That act limits the size of the industrial bank to a balance sheet total of £20,000,000 Australian. On a proportionate basis we should limit to £10,000,000 the amount which the Treasurer shall be permitted to lend without the sanction of Parliament. I urge the Treasurer (Mr. Chifley) to have another look at this clause before the bill goes to the Senate. If it is intended under this clause to implement the Government’s socialization policy by the use of the Central Bank’s funds, and through those funds the deposits of the trading banks, some safeguard should be provided by limiting the amount which the Treasurer shall be permitted to lend without the sanction of Parliament.
Clause agreed to.
Clause 98 (Advances to Department by Bank and. Savings Bank).
– This clause certainly deserves some emphasis. Subclause 1 provides -
Thebank may make advances to the Industrial Finance Department of such amounts, and subject to such terms and conditions, as the Governor determines, but so that the total amount of those amounts not repaid shall not at any timeexceed one million pounds.
And sub-clause 2 provides -
The Savings Bank may make advances to the Bank, for use in the Industrial Finance Department, of such amounts, and subject to such terms and conditions, as the Governor determines.
Some honorable members may recall that on clause 76 I invited the Minister (Mr. Lazzarini) to corroborate a view I had formed that although this £1,000,000 limit applied to the advances by the bank direct, there was no limit whatever to the advancesby the Savings Bank; and the Minister, after taking advice on the subject, agreed that that was so. Therefore, the language being identical, the same is true with respect to clause 98. So, I point out to honorable members that under sub-clause 2 an unlimited amount of savings bank money ran be used in the Industrial Finance Department for the purposes of that department. This is a point which deserves a great deal more consideration than I am afraid it is likely to receive in the committee at this late hour. The essence of the savings bank in this country is its utter security. Savings banks are used, notby the rich people. Rich people do not deposit very great amounts in savings banks. The savings bank is essentially the bank of wage and salary earners, and what they look for in the savings bank is complete security for their deposits. They are not looking for high rates of interest. They receive a modest rate of interest, but they have utter security; and’ in order that there shall be utter security it has been the practice in banking to be extremely conservative in determining the nature of the investments inwhich savings banks may engage.
Mr.Russell. - Does not the right honorable member admit that many people of considerable affluence deposit money with the savings banks in order to have some money at call?
– A little, but not much. I am perfectly certain that the honorable member would agree with me that the great majority of savings bank depositors are wage and salary earners. That is all I am concerned with. I am not concerned with a minority of wealthy people who may make some deposits with a savings bank. All I want to establish is that the majority of these depositors are wage and salary earners, and that from their point of view utter safety is of the first importance. I have before me the State Savings Bank Act of Victoria, which is typical of that class of legislation. We find that there are two kinds of investments which are open to savings banks. One of them is an investment on mortgage on feesimple land’. You must have a title in fee simple, and on that the savings banks will lend on mortgage or on the Credit Foncier system. And the other class of investment available to the bank is Government securities. Why is it that the investments available to savings banks are investments of such utter safety and so conservative in character ? The answer is that because from the point of view of the savings bank depositor, security is of the essence. He is not putting his money into the savings bank because he believes that he will make a profit out of it. He knows he will collect interest from time to time, and he is glad to have it, but it is the utter safety with which he is most concerned ; yet in this bill, for the first time in my experience of such legislation, a proposal is inserted which will authorize the bank to take Savings Bank moneys and invest them, not as in the past, under the Savings Bank provisions of the Commonwealth law, in these firstclass securities which are conservative, safe and proven, but in the purchase of shares in industrial undertakings.I am sure that the honorable member for Grey will agree that the Industrial Finance Department will not succeed merely by assisting industries that were bound to succeed in any event. If it is to succeed at all, it Will do so within its legitimate charter as explained by the Treasurer, by helping industries which otherwise would have a struggle. In other words, here is a finance department, which in the very nature of things, ought to be prepared to take some risks, because unless it will take risks, it will not help small struggling businesses to become successful, any more than a man who is not prepared to accept risks can himself succeed. The result is that we find that Savings Bank deposits to which there ought to be attached the utmost security are to be made available without limit for investment, which in its naturi; is speculative.
– But the Commonwealth would be responsible all the time for the safety. of these moneys.
– If the answer is that the Commonwealth stands behind the Savings Bank, and therefore is responsible for the savings, there is no occasion to put any limit on the amount of investment that the Commonwealth Bank may make at all; yet, when the honorable member comes to look at the Savings Rank provisions of this measure he will find that this very Government which he supports is inserting provisions as to how the money of the .Savings Bank may be invested. If the honorable member is right, it does not matter a snap how the money is- invested. It could all be invested in Tattersalls to-morrow, and it would not matter because the Commonwealth is the guarantor. However, I remind the honorable member that in the very case which I have used by way of analogy, namely, that of the State Savings Bank of Victoria, the bank is guaranteed by the Government of Victoria, and if the guarantee of the Government is adequate, restrictions on investment need not be inserted at all. Of course, the legislators realized that whilst it is a good thing to have money guaranteed, it is equally important to have prudent administration of funds entrusted to the .Savings Bank. So, having shown as I believe that Savings Bank moneys should never be invested through a department of this kind, I come back to the concession of the Treasurer that sub-clause 2 of clause 9S means that the Savings Bank may make advances to the bank for use by the Industrial Finance Department, of amounts which will be limited only by the discretion of the Governor. There is no specific limit of £1,000,000, £2,000,000 or £3,000,000. An unlimited sum of Savings Bank money may find its way to this destination, and I desire to make the strongest protest against this grave departure from what I believe to be sound savings bank practice. If it were any other institution but a savings bank, I should attach immeasurably less importance to it, but whatever views we may have on other matters, Savings Bank money should be treated with the utmost safety and prudence, aud with a great deal of conservatism by those who have to administer it.
– it, is quite true that the clause provides that the Savings Bank may make such advances as the Governor determines. We have heard many times charges that there may be irresponsible Treasurers, but now apparently there is a charge that Governors also may be irresponsible.
– Under clause 9 the Governor will have to do what he is told.
– I do not think that the right honorable member can construe the clause to mean that in the utilization of moneys within the bank, the Treasurer will dictate to the Governor how they shall be invested.
– Of course he will.
– Of course, if one’s imagination is vivid enough one can visualize almost anything. This clause provides that the Governor of the bank may sanction advances to the Industrial Finance Department. Such transactions will be purely within the bank itself. What has been said by the honorable member for Robertson (Mr. Williams) is correct. Under section 125 of the Commonwealth Bank Act, these deposits are specifically guaranteed by the Commonwealth Government itself.
– As deposits in the Victorian Savings Bank are guaranteed by the State.
– I recall one bank which was guaranteed by a State government, but, when put to the test, that government was unable to keep the bank doors open. No matter what government may be in office, in no circumstances will the Commonwealth Savings Bank ever close its doors, because it is constituted in an entirely different manner. 1 did not hear any great objection to clause 76 under which Savings Bank money may he advanced to the Mortgage Bank Department.
– But that is for advances on land.
– And there is a specific limit.
– That is true. That provision was adopted by a parliamentary committee; but there are lands and lands, just as there are industries and industries. If the bank were foolish enough to make a ridiculous advance on land it could find itself in exactly the same position as honorable members have suggested could arise in connexion with advances to industrial enterprises. It is all a matter of sound judgment on the part of the people handling these funds.
– Clause 76 limits advances to £1,000,000.
– That, does not matter. Money can be lost.
– But there is a limit.
–Cl.ause 76 states- (2.) The Savings Bank may make advances to the Bank, for use in the Mortgage Bank Department, of such amounts, and subject to su-h terms and conditions, as the Governor determines.
If the Governor is foolish and his judgment is unsound, he will make the same mistakes in connexion with land as he will make in connexion with industrial undertakings. I rose merely to refute the suggestion that the Governor and the Treasurer will be so irresponsible that the savings bank deposits of the people will be foolishly advanced for the purpose of assisting enterprises that will give no return.
Mr. ABBOTT (New England) “10.50]. - It will be possible to make unlimitedadvances to the Industrial Finance Department from the savings of the small people. The .report of the Royal Commission on Monetary and Banking Systems stated in paragraph 572 -
There is also a lack of facilities for the provision of long-term ca.pi±al for persons of limited means who have been successful on a small scale in a secondary industry which i» capable’ of expansion and deserving of encouragement in the public interest. The requirements of this type of borrower are too small to justify a public issue of shares, and iri most cases a public issue Ls not likely to be successful.
On that ground, the commission recommended facilities which would enable small industries to establish themselves. But this bill goes far beyond that. In three paragraphs, there are provisions which will enable unlimited advances tobe made to the Industrial Finance Department. This is an example of the manner in which the recommendations of the royal commission have been prostituted throughout the bill. Statements in the report have been torn from their context, and used to try to induce the people to believe that the bill gives effect to the recommendations of the commission, whereas actually it does nothing of the sort. It. is all very well for the Treasurer to try to reassure the committee. He is the greatest reassurer I have ever seen. He has a happy, homely manner, and one can almost visualize him, pipe in hand, reassuring the people of the Commonwealth and trying to make them believe that the black lettering in the bill is white. He claimed that no objection was raised by the committee to advances being made by the Mortgage Bank Department on land, and added that all land is not alike, that industries are in the same category, and that if the Governor were foolish he might err in respect of land as much as in respect of an industry. I point out, however, that land is physical, and can be inspected by bank valuers. Competent valuers would know the productive capacity of any land, and could decide whether or not a loan should be made in respect of it.
– The honorable member has heard the history of some advances that, were made in Western Australia.
– I listened in Perth to the sad story being related to the royal commission hi regard to those advances. The trouble was largely caused by the type of settler who was put on the land.
My friend the Minister for Repatriation (Mr. Frost), who is shouting at me. has never read the evidence given before that commission. I heard the evidence of representatives of the Agricultural Bank in Western Australia, which allowed that very many of the failures had been due to migrants who had been bus-drivers and had served in stores having been placed on the land under conditions to which they were not accustomed. I was informed that the bank had lost approximately £12,000,000. I shallnot be put off by shouting or reassurances. I do not impute that bank valuers are stupid persons, who recommend the making of advances because of a love for getting rid of money. Competent valuers will place a correct valuation on land, and an appropriate amount will be advanced. But these secondary industries are not yet in being, and there is no possibility of stating with certainty what their prospects may be. Money may be simply poured down the sink, as has occurred in connexion with the Glen Davis shale oil project. The Minister for Repatriation will learn that that will be the experience in connexion with the aluminium industry in Tasmania before it has gone very far.
– No industry in Tasmania has yetbeen a failure.
– It is useless for the
Minister to talk like that. When the aluminium industry was being discussed in this chamber, and we finally wrung from the Attorney-General the reports that had been made in regard to it, we found that no estimate had been given of the cost, of producing aluminium in Tasmania.I have been reliably informed that a conservative estimate is that the cost of production will be 2s.6d. per lb., compared with a cost of 10 cents in Canada, equivalent to about 7d. in Australian currency. That is the kind of industry on which may be expended millions of pounds that have been taken from the Savings Bank. Earlier in the debate, the honorable member for Wide Bay (Mr.Corser) gave examples of industrial ventures by a Labour government in Queensland. No doubt it had advisers similar to those on whom the Treasurer is relying. It dissipated millions of pounds on enterprises such as cattle stations and butchers’ shops. The honorable member for Wide Bay referred to a State steamship which had to “stop to whistle”. There is a sinister motive behind this provision. The Government has completely lost sight of the necessities of small industries. There is very little evidence of an intention to relieve the people of Australia from the tremendous taxation that is now imposed on them. If this is not done, it will be impossible to effect the savings that will be needed for investment in the economic structure which will enable industries to expand, and provide the employment expected of them. The record of government industrial enterprises is such as to make the people terrified that their life’s savings, which are largely in government savings banks, will be dissipated, exactly as were State funds in butchers’ shops and cattle stations in Queensland, and as Commonwealth funds will be dissipated in the aluminium industry in Tasmania when it begins to operate.
– Name one Tasmanian industry that has been a failure.
– The aluminium industry in Tasmania will probably be the greatest failure in this country. It will follow the example of the State cattle stations in Queensland. The carbide industry in Tasmania was only pulled out of the doldrums by Sir Henry Jones, one of the ablest men that Tasmania has ever produced.
.- Sub-clause 2 emphasizes the point which I made in discussing clause 96. It is a financial axiom that the interest rate which the people are prepared to accept depends on the security offered. The more secure the investment the lower the rate of interest which they are prepared to accept, whilst the greater the risk the higher the interest rate they expect to get. Savings Bank deposits carry a rate of only 2 per cent. whilst, for money advanced for industrial ventures 5 per cent . or6 per cent., and even up to 10 per cent., is expected. It behoves this Parliament, in whichLabour Government which claims to represent the small workers is now in control, to make certain that the savings of the people are properly safeguarded. There are ways of investing Savings Bank funds to ensure that they shall be safeguarded, and one of the surest means is to secure them by investment in first mortgages on farmlands or on -real estate. As to farm-lands the position in every country -prior to the war was that mortgage bank debent,urea could be sold on the international (market at 2$ per .cent, or 2$ per cent, when governments were paying from 3 per cent, to 5 per cent, for the money which they needed for their ordinary undertakings. It is ridiculous for the Treasurer (Mr. Chifley) to say that industrial undertakings into which it will be possible under this -measure to turn an unlimited flow of Savings Bank deposits can compare, in point of security, with mortgage .bank investments, or other means which could be adopted in order to handle these moneys for the benefit of the people. A farm is a tangible asset, and it is necessary to lend only a certain proportion of its real value, but under this clause the bank could lend an unlimited amount of Savings Bank money for industrial undertakings, and it would not be necessary to have regard to their present value. It would be Accessary only to have regard to their prospective value. If a limitation of £1,000,000 is to be placed on general bank advances, surely, there should be some limitation of Savings Bank advances for undertakings of this kind. Otherwise the Commonwealth Savings Bank may be in a similar position to that in which the Government Savings Bank of New South “Wales found itself some years ago.
– That is what the right honorable member is now trying to do.
– The honorable member for Hume (Mr. Fuller) is talking nonsense. All of the major goodpoints of this bill have been copied by the Treasurer from the principal act, which I, as Treasurer of the day, introduced in this Parliament in 1924. I referto all of those features which give confidence in regard to public finance, such as the National Debt Sinking Fund, the Financial Agreement and the Loan Council. It is scandalous that an attempt should be made to put the Commonwealth Savings Bank in a position in which the people would regard it as not the right institution with which to entrust their sayings. .Irrespective of the rate of interest they get, all -they want is complete security, and! .we should ensure by the text of the bill, and not by reliance on statements by the Treasurer or anybody else, that that security shall be irreproachable.
Clause agreed to.
Clauses 99 to 101 agreed to.
The following paper was presented : -
Audit Act - Finance - Treasurers Statement of Receipts and Expenditure for year 1943-44, accompanied by the Report of the Auditor-General.
Ordered to be printed.
House .adjourned at It. 10 p.m.
The following answers to questions were circulated: -
t asked the Minister for Labour and National Service, upon notice -
Will he consider extending by National Security Regulation the terms of section 06 of the Commonwealth Public Service Act [mutatis mutandis) to those concerned in the Port Kembla stoppage, and to other industrial workers, so that they will be subjected to the same conditions as Commonwealth employees?
n asked the Minister representing the Minister for Trade and Customs, upon notice -
– The Minister for Trade and Customs has supplied the following answers: -
ROYAL AUSTRALIAN AIRFORCE :
Disposition ofair Crews.
n asked the Acting
Minister for Defence, upon notice -
– The answers to the honorable member’s questions are as follows : - 1.No communication has been received from General MacArthur expressing the view mentioned. The position is that there is an authorized strength for theRoyal Australian Air Force in the South-West Pacific Area, the operational control of which has been assigned to the Commander-in-Chief. It is the obligation of the Australian Government to keep this strength up to establishment, and this is being done.
Departmental Legal Officers.
r asked the Acting
Prime Minister, upon notice -
– The information is being obtained and a reply will be furnished to the honorable member as early as possible.
y. - On the 22nd May the honorable member for Robertson (Mr. Williams) asked the following question : -
Does the Minister representing the Minister for Trade and Customs know that goods in the shape of novelties clearly marked “Made in Japan “ are now being sold in Sydney shops? Will the Minister have inquiries, made with a view to discovering when the goods were imported and whether there is any trade in enemy goods throughneutral channels? Does the Minister know that this useless rubbish is being sold to the Sydney public at exorbitant prices?
The Minister for Trade and Customs has supplied the following answer: -
From inquiries which I have made, I am satisfied that there is no evidence of trade with Japan through neutral channels. In the case of one shop, the name of which was supplied by the honorable member, the owner was able to prove that the Japanese toys on sale were imported more than twelve months before Japan entered the war and that the prices charged were the same as five years ago.
y.- On the 12th June the honorable member for Wilmot (Mr. Guy) asked a question concerning potato crops in Tasmania. T. now advise the honorable member that no undue deterioration has taken place in the Bismarck potato crops in that State. It is not proposed to assess the crops, but the position is being watched closely by the field staff of the Australian Potato Committee. The announcement made by the Tasmanian Minister for Agriculture in regard to reducedacreage for Bismarck potatoes next season, as reported on the 6th June, is not new. The policy was announced in April after it had been decided that the proportion of Bismarck potatoes to the total crop was too high, and should be reduced to the 1941-42 proportion. The area under potatoes in Tasmania has increased considerably in the last few seasons in response to requests for more production. Early Bismarcks have had more than their share of the increase, despite warnings to growers that they are likely to over-plant this particular variety, and the undue increase with early Bismarcks has led to some marketing difficulties. Next season it. is intended to keep the Bismarck production in its normal relation to other varieties and so prevent over-production of early potatoes, which do not keep well. These varieties will be planted in the same ratio as in 1941-42, and the growers concerned have been allotted by the State Department of Agriculture a quota acreage for Bismarcks. This means that they will have to make up the balance of their acreage with other varieties and so give a better spread of the crop over the marketing season. The effect will be that the Bismarck and some other early varieties will be reduced about 20 per cent. on this season. This year about 25,000 acres of Bismarcks were planted and next season there will bo 20,000 acres. The growers concerned will make up the rest of their area with later varieties which are needed more and which, incidentally, are profitable to grow. The whole point is that Tasmania is over-planting early varieties, and a reduction has to be made so as to get a proper proportion of the later season potatoes. broadcasting : British Comedians;
Banning of Records. mr. Holt asked the Minister representing the Postmaster-General, upon notice -
– The answers to the honorable members questions are as follows : -
General, who is responsible for administering the Australian Broadcasting Act, that he has not issued any direction in the matterof broadcasting of the records referred to by the honorable member. It is understood, however, that the Australian Federation of Commercial Broadcasting Stations arranges for the auditioning of all new records which are of a type that might be calculated to give offence and therefore be not appropriate for broadcasting and, where necessary, the federation advises its member stations of any such record? which are thought to be unsuitable to be broadcast. The honorable member will doubtlessbe aware that the conditions governing the operation of commercialbroadcasting stations arc laid down in the Australian Broadcasting Act. These conditions permit the licencees a good deal of latitude in the selection of programme material but certain stipulations are proscribed in section 91 of the act with the object of ensuring that matter which is broadcast shall conform to accepted standards of propriety. In those cases where a person is alleged to have contravened the section referred to the Minister may call upon such person to show cause why an order should not be made directing that hebe prohibited from rendering any item or front! passing or selecting any matter for broadcasting.
y asked the Minister representing the Acting Minister for the Army. upon notice -
Did he see the statement by Professor
– The Acting Minister for the Army has supplied the following answers : -
s asked the Minister representing the Acting Minister for the Army, upon notice -
– The Minister for the Army has supplied the following answers : -
Australian Army : Detentions in Civil Gaols.
t asked the Minister representing the Acting Minister for the Army, upon notice -
– The Acting Minister for the Army has supplied the following answers : - 1. (a) It is advised that the number of members and ex-members of the Australian Military Forces in each State of the Commonwealth in civil gaolsas at the 1st May, 1945, who were serving sentences imposedby courts-martial were ; -
The number of members and exmembers serving sentence in each category and the list of offences for which they had been sentenced were: - Queensland; Members - . Absent without leave,5; desertion, 10; conduct to the prejudice of good order and military discipline, 1; escaping from military custody. 10. Ex-members - Absence without leave. 14; desertion, 73; mutiny, 4; insubordination, 17; violence to superior officer, 9; conduct to the prejudice of good order and military discipline,6; escaping from military custody, 50. New South Wales: MembersNil.Exmembers - Absence without leave, 3,1; desertion, 90; violence to superior officer, 1: conduct to the prejudice of good order and military discipline, (I; escaping, 20; deserting and escaping, 90; civil offences. 10. Victoria: Members - Nil. Ex-members - Absence without leave, 1 : desertion, 1 ; mutiny, 1 ; civil offences, 1. South Australia: Members - Nil. Ex -members - Civil offences, 0. Western Command : Members - Nil.Ex-members - Desertion, 3; escaping, 2; civil offences, 1. Tasmania: Members - Desertion, 1: civil offences. 2.Ex-members - Desertion, 4: civil offences, 2.
n asked the Minis ter representing the Acting Minister for the Army, upon notice -
Do figures recently supplied to the honorable member for Barker on houses still occupied include flats occupied?
n. - The Acting Minister for the Army has supplied the following answers : -
Yes. 2. (a) (i)9,196 squares, (ii) 1,659 squares,
Cite as: Australia, House of Representatives, Debates, 13 June 1945, viewed 22 October 2017, <http://historichansard.net/hofreps/1945/19450613_reps_17_183/>.