House of Representatives
14 November 1957

22nd Parliament · 2nd Session

  1. House of Representatives
  2. 22nd Parliament
  3. 1957

Mr. SPEAKER (Hon. John McLeay) took the chair at 10.30 a.m., and read prayers.

page 2149

QUESTION

UNIVERSITIES COMMITTEE REPORT

Dr EVATT:
BARTON, NEW SOUTH WALES

– I address a question to the Prime Minister with regard to the report of the Murray committee on the universities, which the Prime Minister, some time ago, said would be made available. Can the right honorable gentleman say when the report will be available, and is he able to expedite its publication?

Mr MENZIES:
Prime Minister · KOOYONG, VICTORIA · LP

– I expect to have the matter dealt with in Cabinet by the end of next week, and immediately thereafter I shall make the report available.

page 2149

QUESTION

WHEAT

Mr JEFF BATE:
MACARTHUR, NEW SOUTH WALES

– I ask the Minister for Primary Industry: What are the causes of the shortage of wheat in New South Wales? What forecasts were made, on the basis of which flour millers, and particularly the Australian Wheat Board, could decide the quantity of wheat for export from New South Wales? Who is to blame for the present situation? Will the Minister investigate every possible means to protect the purchasers of flour, wheat and stock feed in New South Wales against the consequences of this shortage?

Mr McMAHON:
Minister for Primary Industry · LOWE, NEW SOUTH WALES · LP

– The answer to the first question is that climatic conditions have caused the wheat shortage. The answer to the second question is that, in August of this year, the New South Wales Government predicted a crop of 39,000,000 bushels, whereas the forecast is now as low as 5,000,000 bushels, so that there has been a very substantial fall due to climatic conditions. As to the third and fourth questions, as the honorable gentleman knows, the Government has considered this problem carefully and has already conveyed its decision to the New South Wales Government. I did hear that that government was proposing to take certain action. I am sure that if it makes a request to the Commonwealth, the request will be considered by the Prime Minister.

page 2149

QUESTION

NATIVE LABOUR IN PAPUA AND NEW GUINEA

Mr BRYANT:
WILLS, VICTORIA

– My question is addressed to the Minister for Territories. I understand that, some months ago, new native labour legislation was introduced in the Legislative Council of Papua and New Guinea, and that it has been referred to a select committee. I was under the impression that the Minister intended to explain this legislation in the course of his recent speech on the Estimates. Can he now state the principles of the legislation, which has come in for public criticism in Victoria, at least on the part of some sections of the community?

Mr HASLUCK:
Minister for Territories · CURTIN, WESTERN AUSTRALIA · LP

– To give a complete account of the native labour .legislation would detain the House for a longer time than I think its patience would last at question time. I had proposed to make a statement on this matter during the debate on the Estimates, but I was interrupted by cries from the Opposition of “Why waste the time of the House?” It is rather a revelation to find that the Opposition, contrary to its previous form, is no longer interested in the conditions of the people who work in Papua and New Guinea.

The legislation comprises a series of measures, the drafting of which followed investigations which had proceeded since 1953 or 1954, and which took into account various representations that had been made. It tries to liberalize and generally make more favorable to the native worker the conditions of employment at the same time as it tries to adjust the terms under which native labour is employed to the new conditions which are developing in the Territory. For example, there are now in the Territory an increasing number of indigenous workers who have attained some degree of skill and to some measure of capacity to look after their own affairs. So, to meet that sort of condition, the legislation will provide for labour outside the ordinary agreement labour, that is freely engaged labour, the native worker offering his services at a rate much higher than is provided for agreement labour and being able to travel with a greater degree of freedom in order to take labour.

So far as agreement labour is concerned - that is, labour engaged by agreement for a two-year term - one of the changes being made is designed to deal with the problem of the breaking of agreements. There is no re-introduction of sanctions, but a system of cards is being introduced so that a worker who is engaged under agreement will have the fact that he is engaged under agreement noted on his card. If he should abscond, as sometimes happens, from the employment in which he is engaged, it will be an offence for any employer to engage him if the fact of his previous agreement is entered on his card. If he has had no previous agreement for labour, he will be free to be engaged again.

I have given only two examples of a very wide variety of reforms that are being made. The changes, I think, on the whole, are beneficial to the native labourer and pay recognition to his improved skills and his improved opportunities. The procedure adopted is to introduce this legislation into the Legislative Council and move the second reading and, in recognition of the fact that the Legislative Council meets for brief periods, to adjourn the second-reading debate and allow it to be resumed when the council next meets. That is designed to give full opportunity to the Territory community as well as to the members of the Legislative Council to examine the proposals and to form their opinions on them.

page 2150

QUESTION

WATERFRONT EMPLOYMENT

Mr DEAN:
ROBERTSON, NEW SOUTH WALES

– My question, directed to the Minister for Labour and National Service, concerns the stoppage on the Sydney waterfront. I ask the Minister: Is it more than a coincidence that the return of the general secretary of the Waterside Workers Federation from Russia has been followed by a resurgence of industrial strife on the waterfront? Is it a coincidence that the Waterside Workers Federation, under the leadership of the general secretary, is taking, in defence of an unnaturalized Yugoslav who has been disciplined by the Australian Stevedoring Industry Authority, a line of action of a nature which the federation does not normally take on behalf of Australians? Finally, can the Minister give any further information about yesterday’s hold-up on the Sydney waterfront?

Mr HAROLD HOLT:
HIGGINS, VICTORIA · LP

– The matter to which the honorable member for Robertson refers is an important one in that an attempt is being made to implicate waterside workers in other ports of the Commonwealth with the Sydney waterside workers, and I think it is desirable, therefore, that I should give the facts even at some length to the House.

Dr Evatt:

– You have got all your material ready.

Mr HAROLD HOLT:
HIGGINS, VICTORIA · LP

– Of course I have it all ready, but not in response to this question. This is a matter which, clearly, should be considered by this House. I suppose the Leader of the Opposition-

Mr SPEAKER:

– Order ! I ask the Minister to resume his seat for a moment. I remind honorable members that we are now in question time and I ask them to cease interjecting.

Dr Evatt:

– I rise to order. What is your attitude, Mr. Speaker, in respect of questions which are obviously pre-arranged, like a question that was asked earlier this morning? It has never happened before in the history of the House to the extent that it is being used and abused now. I submit that you should exercise more control over it.

Mr SPEAKER:

– There is really no point of order. The honorable member for Robertson was quite in order and it is the prerogative of the Minister to reply as he thinks fit. That is outside the control of the Chair. I ask honorable members to accede to my request for good behaviour.

Mr HAROLD HOLT:
HIGGINS, VICTORIA · LP

– For the information of the Leader of the Opposition and his colleagues, I say that ever since this development occurred, I have been keeping closely ‘in touch with it, and, had the opportunity not arisen at question time, I would have made a statement to the House at the end of question time.

Dr Evatt:

– The Opposition should have an opportunity to reply.

Mr HAROLD HOLT:
HIGGINS, VICTORIA · LP

– The right honorable gentleman may seek an opportunity to reply, if he wishes. 1 have been asked whether I believe that it is more than a coincidence that there has been a resurgence of serious industrial unrest on the waterfront following the return to Australia of the general secretary of the Waterside Workers Federation, Mr. Healy, who is, as is well known, a member of the central committee of the Australian Communist party. I believe that it is more than- a coincidence. I shall state the facts to the House and let the House and the countryform their own conclusions. ‘

The first fact that I want to state is that for most of the period that Healy has been Overseas, there was remarkable quiet on the waterfront by contrast with earlier times. The number of working days lost in the first nine months of this year was about a tenth of the number lost last year, the precise figures being 47,000 and 458,000 respectively. That, in itself, is not without significance. Some confidence was being restored on the Australian waterfront -among shippers and others concerned. I believe that the facts of this matter should be known by all because an attempt is now being made to tie up all the ports of the Commonwealth and to drag waterside workers all around Australia into this issue.

The short facts, as I am advised on them, are that this man, Krespi, was deregistered because of conduct on the waterfront. He had been found drunk and was discharged. Krespi, it is of interest to know, was not concerned for the first time in this way. He came from Yugoslavia in 1949. He seems to be one of our least desirable importations. He was registered on the waterfront in April, 1955. Within a month, “he had been called before the local representative, suspended, and warned about his working record. In August, 1955, he was fined £2 by the union. In September, 1 955, he was dismissed for being under the influence of alcohol but, on that occasion, he was given the benefit of the doubt and, later, was reinstated. In January, 1956, he was suspended for drinking on the job. In April, 1956, he was suspended and given a final warning because of his bad working record. He was also fined by the union.

Apart from his waterfront record, I am advised that he has a long record of trouble with the law. In August and October, 1952, he was before the courts for larceny and wilful damage. In June, 1953, he was charged with resisting arrest, indecent “language and assault by kicking. In June, 1955, it was assaulting a female. This is the man who has been made a cause celebreby Mr. Healy and his colleagues! First of all, he was dismissed for being drunk on the wharf. When this happened; he claimed that he had been assaulted by two foremen. The fact is that within a short while of leaving the wharf he was back again saying that he had been assaulted, but so conducting himself that the police had to be called. He was then arrested for being drunk on the wharf and was convicted the next morning.

Mr Webb:

– Is he naturalized?

Mr HAROLD HOLT:
HIGGINS, VICTORIA · LP

– I understand that he is not. If the facts are challenged, there is a very clear method of determining them. The significant factor is that on other occasions when men are de-registered by the authority and where the union feels that it has any sort of a case, it is active in having an appeal lodged against that de-registration. Although there was an opportunity to appeal in this instance, no such action was taken. The normal processes which the union follows were not pursued.

What significance can we draw from these circumstances? First of all, it is well known that there has been a long record of bitterness between the union and the foremen stevedores, and it was a foreman stevedore who was alleged to have been assaulted - an elderly man 60 years of age, a respected member of the association. He was one of the principal figures in this dispute. There is a long record of bitterness, because the federation itself wants to take over the job of the foremen stevedores. That is well known.

Mr Ward:

– Is this an answer to a question?

Mr HAROLD HOLT:
HIGGINS, VICTORIA · LP

– It is. It is relevant to an issue which may involve all waterfront workers in this country. They are entitled to know the facts when a Communist official seeks to embroil them in an issue of this kind.

The other point I want to make is that, in typical Communist fashion, the issue having started over this man Krespi, is now swung on to the whole issue of the disciplinary provisions obtaining under the powers of the authority. All I wish to say at this stage is that in substance those disciplinary powers are the same as the ones which were instituted by the Government of which Mr. Chifley was Prime Minister, and those powers have continued throughout.

The waterside workers of this country have gained a new respect in the eyes of shippers and people engaged in waterfront affairs. Because of the conduct of the workers on the waterfront there is a good prospect of re-building trade in interstate and overseas cargoes. I warn those workers against being involved in an Australia-wide dispute because Mr. Healy has now returned and seeks to disrupt what has been a very much more satisfactory situation on our waterfront.

page 2152

QUESTION

NORTHERN TERRITORY

Mr NELSON:
NORTHERN TERRITORY, NORTHERN TERRITORY

– I ask the Minister for Territories whether he has seen the report of the select committee set up by the Legislative Council of the Northern Territory to study and recommend constitutional reforms, in respect of both the Legislative Council and representation in the Federal Parliament? This committee consists of Government members and elected members. I ask the Minister whether it is the intention of the Government to implement the recommendations that have been made.

Mr HASLUCK:
LP

– As 1 informed the honorable member for Warringah in answer to a question earlier in the week, I have not yet seen a copy of this report. All I have seen is some newspaper reference to the fact that such a report was presented to the Legislative Council of the Northern Territory. Until I see a copy of the report it would be unwise for me to comment on it.

page 2152

QUESTION

EUROPEAN IMMIGRANTS

Mr ANDERSON:
HUME, NEW SOUTH WALES

– I ask the Minister for Immigration a question without notice. Yesterday, in reply to the Leader of the Opposition, the Minister stated that the fares of European immigrants were paid by a United Nations agency - the InterGovernmental Committee for European Migration. The Minister further stated that the bulk of the funds used by the Inter-Governmental Committee for European Migration came from the United States, although Australia and several other countries are contributors. As the United States is the largest contributor to this committee, does that mean that the committee or the United States has any power to determine the number of European immigrants coming to Australia or to influence their selection according to their nationality?

Mr TOWNLEY:
Minister for Immigration · DENISON, TASMANIA · LP

– Neither Australia nor any other country would accept from the Inter-Governmental Committee for European Migration, or from the United States of America, direction as to the composition, the numbers, or the nationality, of the immigrants that it takes. Australia has made agreements with various European countries with emigration programmes, and has its own teams in Europe to make its own selections. I think that perhaps I could best illustrate what is happening by outlining briefly to the honorable member the assisted migration programme for the current year. We shall take from the United Kingdom 30,000 immigrants, and from Malta 2,000, making a total of 32,000 from British countries. The general assisted passage scheme - commonly known as G.A.P.S. - for European countries, is confined mostly to Denmark, from which we shall take 3,000 immigrants. We shall take from Holland 8,000, from Germany, 5,000, from Italy 3,000, from Austria 5,000, a further 5,000 refugees from Hungary, and from Greece 2,000 immigrants. Under the assisted passage scheme, we shall take 31,000 people from Europe, through I.C.E.M., and 32,000 immigrants from British countries. But I repeat that we make our own selections of the people who come from Europe, although I.C.E.M. provides the passage money.

page 2152

AUSTRALIAN DEFENCE

Mr HAYLEN:
PARKES, NEW SOUTH WALES

– I should like to ask the Prime Minister whether he has a reply to the serious charges about defence made by the “ Sydney Morning Herald “, in which it has been alleged that £1.200,000,000 has been misspent, that the Chiefs of Staff are wrangling, that there is no effective organization, that it is impossible for us to discharge our commitments under the Anzus, Anzam, and Seato pacts, and that the Army could not be mobilized in less than six months.

Mr Menzies:

– Is this a repetition of a newspaper report, Mr. Speaker?

Mr SPEAKER:

– Order! Is the honorable member’s question based on a newspaper report?

Mr HAYLEN:

– It is not based on a newspaper report. It relates to a series of general conclusions that has appeared over the last week. The final part of my question is: Will the Prime Minister sack the Minister for Defence and get a ruthless and competent Minister?

Mr MENZIES:
LP

– If I had first, to read, and secondly, to answer in this House all the critical articles that appear in the newspapers, and particularly in the “ Sydney Morning Herald “, the shop would be open for no other business.

page 2153

QUESTION

SOUTH VIET NAM

Mr FAIRBAIRN:
FARRER, NEW SOUTH WALES

– I desire to address a question to the Minister for External Affairs. During his recent visit to South-East Asia, did the Minister gain the impression that the new state of South Viet Nam was progressing favorably? Does he believe that the southward march of communism has been halted in this area? Are agents of H6-chi-Minh still active in South Viet Nam?

Mr CASEY:
Minister for External Affairs · LP

– I believe that one of the outstanding features of events, in SouthEast Asia in recent years has been the increase of stability in South Viet Nam, largely, I think, at the instance of that country’s distinguished president, who recently visited Australia. Economically, politically, and militarily, stability has increased, and I believe that that condition is continuing. South Viet Nam is an example to a great many other countries of how communism can be coped with. I think that, if honorable members cast their minds back to a period three years before the advent as president of Mr. Diem, when there was very little hope for South Viet Nam, and compare that situation with circumstances to-day, they will acknowledge that most remarkable progress has been made.

I had at least a week in South Viet Nam on what was my fourth visit within a relatively few years. I visited the other States of South-East Asia, also. I think that, if we have a debate on international affairs, something might be said about them as well.

page 2153

QUESTION

POSTAL DEPARTMENT

Mr MINOGUE:
WEST SYDNEY, NEW SOUTH WALES

– I direct a question to the Postmaster-General. Has the PostmasterGeneral’s Department overlooked representations made by the residents of

Darlinghurst-road, Kings Cross, Sydney, through the Darlinghurst branch of the Australian Labour party, about the removal of a mail receiver from Darlinghurst-road? If the letter box had to be removed in the interests of road traffic, why was it taken from Darlinghurst-road in the West Sydney electorate and placed two streets away on the eastern side of Victoria-street, which is in the Wentworth electorate? I am gravely concerned about the residents and shopkeepers in this area who have to cross two streets, Mr. Speaker, in heavy traffic to post their letters, or else travel 150 to 250 yards in another direction. Our request is for another letter box to be erected in Darlinghurstroad to make everybody happy.

Mr DAVIDSON:
Postmaster-General · DAWSON, QUEENSLAND · CP

– I seem to have some recollection of the case which the honorable member has mentioned. If my recollection is correct it is a matter which he submitted to me some time ago and on which I gave him a reply.

Mr Minogue:

– It was a bad reply.

Mr DAVIDSON:

– Of course, Mr. Speaker, that depends entirely on one’s point of view. But I did think, when he was asking the question, that it was one to which I had already applied my mind. I do not know that the honorable member has put forward in his question any facts which have not already been considered. However, I shall have another look at the matter and see whether there is any aspect of it to which we have not given attention.

page 2153

QUESTION

REPATRIATION PENSIONS

Mr CHANEY:
PERTH, WESTERN AUSTRALIA

– I direct a question to the Minister representing the Minister for Repatriation, which I preface by saying that ex-members of the services who are entitled to the 100 per cent, rate pension but are in receipt of a part pension from the British Ministry of Pensions receive 100 per cent., less this amount. They are not, however, entitled to treatment in repatriation hospitals for other disabilities as are others who are in receipt of 100 per cent, rate pensions. Could some consideration be given to correcting this anomaly?

Dr DONALD CAMERON:
OXLEY, QUEENSLAND · LP

– I shall submit the matter to my colleague, the Minister for Repatriation, and ask him to provide the honorable member with an answer.

page 2154

QUESTION

COAL-MINERS’ PENSIONS

Mr KEARNEY:
CUNNINGHAM, NEW SOUTH WALES

– My question is directed to the Minister for Labour and National Service. Is it a fact that industrial relations in the coal-mining industry of New South Wales are disturbed as a result of the contributions to the mine-workers’ pensions fund being increased by 2s. to 8s. per week? Can the Minister confirm that similar pensions schemes are operating in Tasmania, Western Australia, Victoria and Queensland? Is it a fact that for purposes of financing the long service leave fund a uniform excise tax on coal applies in all States? Will the Minister advise this Parliament what are the objections of the Government to applying the same principle by imposing an excise tax on coal to provide for the full payment of mine-workers pensions throughout Australia?

Mr HAROLD HOLT:
HIGGINS, VICTORIA · LP

– It has not been brought to my notice that there has been any serious industrial trouble arising out of this particular issue. My impression is that the miners’ pension arrangements work rather more favorably than do pension schemes, either private or public, connected with other sections of industry. It is my impression that the scheme is already financed largely by what is, in effect, a charge to the consumer of coal resulting from the addition of a certain amount to the price of coal. However, I shall examine in detail the question as he has put it to me and see whether I can give him a more complete answer in the course of the next week.

page 2154

QUESTION

WHEAT

Mr DRUMMOND:
NEW ENGLAND, NEW SOUTH WALES

– I desire to ask the Minister for Primary Industry whether his attention has been drawn to a unanimous protest by all parties in the New South Wales Parliament against arrangements for the bringing to New South Wales of sufficient wheat to tide it over the present disastrous drought. When the Minister is further considering this matter, will he have regard to the fact that the wheat stabilization scheme was drawn up on a national basis, and that the price of wheat used for normal domestic purposes is determined on the basis of “ ports “ Williamstown? Has the Minister’s attention been directed to the fact that on only four occasions since 1915 has there been a serious shortage of wheat in

New South Wales, and that on only two occasions has there been a disastrous drought such as we are now experiencing? In view of the serious consequences of the shortage of wheat to our cost of living, and to the poultry and milling industries and certain export industries, will the Minister recommend to the Government that the matter be treated on a national basis, and that money required to meet the situation should be provided from national sources, not by the citizens of one State during a temporary crisis?

Mr MCMAHON:
LP

– I think I should state definitely that there was no united protest made by Liberal and Country party members in the New South Wales Parliament yesterday. There was a unity of view in the two parties as to what should be done, and it was recommended that the New South Wales Premier should adopt a different approach to this problem. Liberal and Country party members told the Premier what they thought the approach should be, .and that they hoped that after the new approach was adopted a further request would be submitted to the Prime Minister. As the Prime Minister pointed out yesterday, nothing further has yet been received by him. Frankly, we do not know what the nature of the request may be. Therefore, I am unable to say what the Government’s reaction to a new request would be. As to the second point raised by the honorable member, the basis of the wheat stabilization scheme is a guaranteed return to growers. I should point out that when the scheme was being negotiated three States, Western Australia, South Australia and Victoria, refused to agree to a New South Wales request that when a drought occurred in New South Wales the price of wheat should be loaded to meet the cost of bringing wheat to New South Wales. I point that out to the honorable member, because I think it should be made known. As to the final part of his question, I can assure him that when the matter was considered previously it was looked at in great detail, and consideration was given to the implications of the scheme not only for New South Wales but also for other parts of Australia and the country as a whole. If any further requests are received I can assure the honorable member that they will be carefully considered.

page 2155

QUESTION

WATERFRONT EMPLOYMENT

Mr CLYDE CAMERON:
HINDMARSH, SOUTH AUSTRALIA · ALP

– Has the

Minister for Labour and National Service given us all the facts concerning the individual who is the alleged cause of the dispute on the waterfront? For example, is it a fact that he is staying at a boarding house the landlady of which is a suspected Communist and has a third cousin who travelled to work last Tuesday morning in a tram driven by a Communist member of the tramways union?

Mr HAROLD HOLT:
HIGGINS, VICTORIA · LP

– There may be a good deal of information relating to this gentleman that I have not been able to give the House. I have tried to give the facts substantially as they have come to me. As to this gentleman’s Communist associations, if any, I shall be grateful to the honorable member for Hindmarsh if, from his own knowledge, he will supplement my information.

page 2155

QUESTION

DISPOSALS SALES

Mr SWARTZ:
DARLING DOWNS, QUEENSLAND

– Has the Minister for Air any knowledge of a statement made in Canberra in which information was sought regarding the recent disposal of a large quantity of tools, including some anvils, in Brisbane? Is it not a fact that the items referred to were war-time stores which had been transferred to No. 7 Stores Depot, Royal Australian Air Force, after the war, and which had been declared surplus to requirements? Would the Minister also confirm that the disposal of these surplus stores conformed entirely to normal current procedures for the disposal of surplus Service stores through the Department of Supply?

Mr OSBORNE:
Minister for Air · EVANS, NEW SOUTH WALES · LP

– I am aware of the information that was sought in Canberra regarding the disposal of a large quantity of stores, and the honorable member is correct in suggesting that the stores came from No. 7 Stores Depot of the Royal Australian Air Force at Toowoomba. The circumstances are not at all unusual. Large quantities of tools, including anvils, were acquired during the war and held in No. 7 Stores Depot to meet mobilization requirements and also for ordinary use. Tradesmen in the R.A.A.F. had been complaining for some time of the uneven standard of tools with which they were supplied. New standards were laid down and any tools which did not comply with those standards were disposed of in the ordinary process of administration.

page 2155

QUESTION

SOUTH-EAST ASIA

Mr WARD:

– I ask the Minister for External Affairs: Is it a fact that his recent tour of South-East Asian countries was undertaken as a goodwill tour aimed at restoring the prestige lost by Australia in that area as a result of the policy adopted by the Australian Government on the Suez Canal dispute? If so, will he state what success he achieved in correcting the harm done by the undiplomatic conduct of the Prime Minister?

Mr CASEY:
LP

– My visits to South-East Asian countries in recent times were not in any way connected with the Suez dispute, and in fact the word “ Suez “ was not mentioned during the many discussions I had with leaders of those countries. I have quite considerable knowledge of the situation in South-East Asia, and it is not true to say that Australia has lost the confidence of countries in that area as a result of the attitude adopted by this Government in respect of the Suez Canal dispute a year ago. Each year I endeavour to visit as many countries in South and South-East Asia as I possibly can. This year my visit was brought about principally by reason of the fact that there was a Colombo Plan conference in Saigon, which provided a convenient opportunity to visit three or four other South-East Asian countries, which I was very glad to do.

page 2155

QUESTION

CITIZEN AIR FORCE

Mr FORBES:
BARKER, SOUTH AUSTRALIA

– In directing my question to the Minister for Air, I refer to the unfortunate death of a Citizen Air Force pilot in a flying accident at Mallala, in South Australia, last Sunday. Can the Minister say whether the inquiry into that accident has been completed, and, if so, what the inquiry disclosed?

Mr OSBORNE:
LP

– The honorable member’s question refers to a very regrettable accident at Mallala on Sunday last in which a pilot of No. 24 Squadron of the Citizen Air Force lost his life. No detailed information is yet available as to the cause of the accident, but a court of inquiry has been established and is at present sitting at Mallala. According to the evidence available, the court of inquiry will in due course determine the cause, or probable cause, of the accident. The only information I have at present pomes from people who saw the accident. lt appears that the aircraft seemed to lose power shortly after take-off and crashed while the pilot was attempting to make a forced landing. This is, unhappily, the second fatal accident which has occurred this year in this squadron. It is not possible to say why an accident of this nature should follow shortly after another. However, I assure the honorable member that the two accidents are totally different in character and, quite clearly, not causally related. I also assure the honorable member that these accidents in no way reflect upon the efficiency or enthusiasm of No. 24 Squadron, which is widely recognized throughout the Royal Australian Air Force as one of the most efficient and enthusiastic units of the Citizen Air Force.

page 2156

QUESTION

JAPANESE FISHING OFF AUSTRALIA

Mr WHITLAM:
WERRIWA, NEW SOUTH WALES

– Can the Minister for External Affairs indicate the stage that has been reached in the proceedings before the International Court of Justice between Japan and Australia, concerning fishing above our continental shelf? In particular, I ask the right honorable gentleman whether the two countries have agreed to leave the proceedings in abeyance until the United Nations has considered the report of the International Law Commission on the law of the sea.

Mr CASEY:
LP

– The question concerns a highly technical legal matter. I shall ascertain the facts and inform the honorable gentleman of them.

page 2156

QUESTION

TELEVISION

Mr DOWNER:
ANGAS, SOUTH AUSTRALIA

– Is the PostmasterGeneral aware of the possible dangers arising from a new form of television advertising called “ subliminalism “? This, apparently, is a meteoric flash across the screen which leaves a lasting impression on the subconscious mind of the viewer. As this subtle device of commercial suggestion already is causing concern in England and America, will the Minister induce the Australian Broadcasting Control Board to prevent its introduction to this country?

Mr DAVIDSON:
CP

– I have to confess that the honorable member, for once, has me rather stumped. Whether that is due to the subliminal nature of his question, I do not know, but I assure him that I shall ask the Australian Broadcasting Control Board to have a look at the matter to see whether these flashes are due to a technical fault, or something of the kind, or whether there is some deeper significance in them.

page 2156

QUESTION

COMMONWEALTH BOARDS

Mr CLARK:
DARLING, NEW SOUTH WALES

– The Prime Minister may remember that, some time ago, I asked him a question which sought information about the number of boards in existence, their functions and the cost of maintaining them, and that the reply given was that it would take some time to collate the information, but that when it was available I would be supplied with it. I now ask the right honorable gentleman whether he has any information on this matter to give to me.

Mr MENZIES:
LP

– I shall at once make inquiries to see what has become of the request.

page 2156

QUESTION

WHEAT

Mr JEFF BATE:

– I address a question to the Minister for Primary Industry, supplementary to that asked by the honorable member for New England. How much wheat and flour was exported from New South Wales in the cereal year 1956-57? Is it important to the consumers of stock feed in New South Wales that some bran and pollard should be provided through the milling of flour for export? Will the Minister see members of the Parliament who represent constituencies that are most affected by the shortage of stock feed, with a view to an endeavour being ma’de to alleviate the position?

Mr MCMAHON:
LP

– Very little wheat has been exported from New South Wales since December of last year. I think that the total amount exported was approximately 4,000 tons. The figures for flour are difficult to obtain. I think that the honorable member will appreciate that there always has been a desire, on the part of the New South Wales Government, to keep up the export of flour, particularly because of the offals that are retained in the State. I shall be happy to discuss with the honorable member the matters that he raised in his third and fourth questions, and should the honorable member for New England also care to come to my office, I shall be happy to discuss them with him, too.

Mr Drummond:

– I shall be delighted.

Mr McMAHON:

– I think that the honorable member for New England would like it to be known that the Leaders of the Australian Country party and the Liberal party in New South Wales both urged the State Premier to acknowledge the fact that New South Wales, as a sovereign State, should accept its responsibilities, and that if it found that those responsibilities involved expenditure beyond its financial capacity, that Government should follow the normal constitutional procedures.

page 2157

SOCIAL SERVICES

Mr ROBERTON:
Minister for Social Services · Riverina · CP

– by leave - Several years ago, the Department of Social Services, faced with the problem of everincreasing numbers of benefits payments, prepared a plan for the complete mechanization of its payment processes to cover all types of benefit throughout the Commonwealth. This programme envisaged a reduction of staff of 200 persons and an annual saving of £90,000. I am glad to say that the initial stages - the mechanization of child endowment payments in New South Wales and Victoria - have been a conspicuous success. I also am pleased to be able to inform the House that a second new and important stage in the mechanization programme of the department, a stage that will affect 250,000 pensioners, will be inaugurated next week with the conversion to an electronic process for the payment of age, invalid and widow pensions in New South Wales.

On Thursday next, 21st November, which is the next pension pay day for age and invalid pensions, more than 90,000 new South Wales age and invalid pensioners who receive payment at post offices will be asked to exchange their pension certificates for order books containing punched cards. The 143,000 age and invalid pensioners who are paid by cheque will continue to receive the present type of cheque until 19th December, when it will be replaced by punched card cheques. Widow pensioners who are paid at post offices will receive their new order books on 26th November, and those who are paid by cheque will receive their first punched card cheques on 17th December.

Honorable members will be interested to know that the new system, while ensuring an improved service to pensioners, will result in substantial economies within the department and will provide it with uptodate statistical information which was not previously available. As the changeover will affect 250,000 people, as it will be the first major alteration of pension payment procedure since pension certificates were introduced in 1909, and as it is a vital part of the greatest mechanization payment programme that has been attempted in Australia, I shall be grateful for the cooperation of honorable members, and also that of the press and the public, in ensuring that it is accomplished with the minimum of inconvenience to all concerned.

page 2157

BILLS RETURNED FROM THE SENATE

The following bills were returned from the Senate, without amendment: -

Estate Duty Assessment Bill 1957.

Western Australia Grant (Water Supply) Bill 1957.

page 2157

QUESTION

SHIPBUILDING

Mr. SPEAKER (Hon. John McLeay).I have received a letter from the honorable member for Dalley (Mr. O’Connor) proposing that a definite matter of urgent public importance be submitted to the House for discussion, namely -

The need for more positive action by the Government to arrest the growing unemployment in the shipbuilding industry due to the serious reduction which has taken place in ship construction and repair work throughout the Commonwealth.

I call upon those members who approve of the proposed discussion to rise in their places. (More than the number of members required by the Standing Orders having risen in their places) -

Mr O’CONNOR:
Dalley

.- The Opposition believes that the languishing condition of the shipbuilding industry throughout Australia and the consequent growing unemployment in that industry call for positive action on the part of the Government to bring a halt to this catastrophic state of affairs. I will show the

House in submissions I will make from information I have received from not only trade union sources but also shipbuilding companies that they are seriously perturbed at the growing unemployment in the industry. This trend is evident throughout Australia, but in the port of Sydney it appears to be particularly accentuated because of the lack of shipbuilding orders forthcoming from the Australian National Line. I have evidence to give to the House on this matter, which I have received from some of the unions located in the port of Sydney.

I have been informed by the Ship Painters and Dockers Union that more than 100 men on its books are unemployed. The secretary of the Federated Shipwrights and Ship Constructors Association of Australia told me that due to the lack of shipbuilding orders in the port of Sydney and following retrenchments that have taken place among members of his union, many of these men were drifting from the industry. 1 feel that I should emphasize this drift because it can have a serious effect. After men leave the shipbuilding industry and become settled in other industries they do not feel disposed to give up their credits of long service to return to it. If this Government allows this industry practically to go out of existence, it will take years to recover.

From information supplied to me by the Federated Ironworkers Association of Australia, in the port of Sydney, in 1955, 2,821 of its members were employed in the shipbuilding industry. These were ironworkers. In 1957, the number had dropped to 2,300, a reduction of 500. An agreement provides that for every ironworker employed a tradesman must also be employed; and these figures indicate that since 1955, that is in the last eighteen months, approximately 1.000 men have been dismissed from the shipbuilding industry. These dismissals relate only to men in the metal trades groups. There are other unions which do not come within that category, and it is obvious that unemployment is increasing at an alarming rate in the shipbuilding industry.

The New South Wales Trades and Labour Council has taken an active interest in this matter and has sought the co-operation of the Australian Council of Trade Unions. I have here the minutes of a meeting of the Shipping and Shipbuilding Sub-committee of the A.C.T.U. which was held in Sydney on 9th July, at 11 a.m. I wish to give to the House the conclusions reached by that subcommit ee which emphasize the serious view that the trade unions take of this matter. That sub-committee resolved -

That the A.C.T.U. shipping and shipbuilding policy should be based upon the necessity of retaining national revenue for the benefit of the Australian people instead of overseas shipping monopolies. In order to achieve this objective the policy and programme should include:

Establishment and development of a coastal and overseas shipping line in Australia.

Utilization of the present capacity of shipbuilding yards for construction of shipping for the nation’s needs and, where the programme demands, the Government should initiate construction of shipbuilding yards to enable the building of appropriate refrigerated fast cargo ships.

Commonwealth Government should increase, where necessary, the shipbuilding subsidy in Australia.

Trade union movement emphasizes its preparedness to co-operate with all interests to implement this programme.

According to figures as at 30th June, 1957, Australian yards are now building fifteen ships. The Australian National Line has ordered twelve, the Broken Hill Proprietary Company Limited two, and the Adelaide Steamship Company Limited one. The fifteen ships are being built in the following yards: - Evans Deakin and Company Limited, Queensland, four; Broken Hill Proprietary Company Limited, South Australia, seven; Walkers Limited, Queensland, two; and the State Dockyards, New South Wales, two. The dead-weight tonnage of all these vessels totals 148.000 tons. Three of these ships have been completed, and at the end of 1958 all these orders will have been completed. Overseas, fourteen ships are being built for private owners in Australia. These orders could have been placed only with the authority of the Commonwealth Government. Eleven of them are being built in the United Kingdom, one in Belgium, one in West Germany and one in HongKong. Their total dead-weight tonnage is 78,650 tons. Of these, six have been completed, and all will be completed by the end of 1958.

In order to emphasize again the seriousness of this situation, I wish to convey to the House some idea of the conditions that are obtaining among shipbuilding companies in the port of Sydney. I have given to the House the attitude and viewpoint of the trade union movement, but I have also information obtained from several shipbuilding companies. The first I mention is Poole and Steel Limited. During the war years this company employed 600 men, but eighteen months ago the number had been reduced to 400 and is now 165, with a possibility of further reductions. This company can build a ship of up to 3,000 tons capacity. Its managing director informed me that a few weeks ago in Sydney the shipbuilders had a conference and expressed their perturbation at the conditions that have developed in this industry.

On this subject, I have certain matters to put before the Minister which I think call for an answer. Poole and Steel Limited inform me that the company has never been asked to quote for jobs for the Australian National Line. The company has been asked for quotations for work beyond its capacity, but for jobs for which they could have tendered it has never been asked to submit a tender. It has had to find other ways of submitting a quotation. This company came into existence in 1900 and has been engaged in shipbuilding ever since. Last year it showed a loss of £23,000. The manager told me that when he made inquiries of the Australian Shipbuilding Board, which controls the building of merchant ships, as to what the figure of the successful tender was, he was not supplied with that information. It is rather an extraordinary state of affairs when this semi-governmental body calls for tenders and after accepting one refuses to make public the price. That condition is hard to understand. Any other governmental or semi-governmental body, particularly in municipal fields, which calls for tenders readily makes public the prices of the successful tenders. The manager of Poole and Steele Limited has told me that, notwithstanding the fact that he has made repeated inquiries, he cannot get that information concerning dealings with the Australian National Shipping Line. Why it is withheld, I do not know. Perhaps the Minister might be able to assist in that respect.

During the war years the Mort’s Dock and Engineering Company Limited in the port ot Sydney employed as many as 2.000 men. The figure was down to 1,000 eighteen months ago. To-day, it has been reduced to 680, with the possibility of more to go. In the last month, no less than 60 men have been dismissed from Mort’s Dock. When that company finishes the refit of “ Dalby “ this week, so I have been informed, further retrenchments will have to be made. This company has proved that it can build ships of up to 7,000 tons, lt has no shipbuilding orders on hand at the moment, and the outlook is very grim indeed. Those are the words of the managing director of Mort’s Dock. During the war years, Storey and Keers, a company which does not build ships but which engages in maintenance surveys, refits and repair work, employed 750 men. It was employing only 230 men eighteen months ago. To-day, that figure has fallen to 130.

I have given to the House conclusive and definite evidence of the serious decline in the shipbuilding industry, particularly in the port of Sydney. This, I submit, requires positive action on the part of the Government, which has evaded its responsibility to protect the shipbuilding industry. The Chifley Government did not run away from its responsibility to protect this vital industry by referring the matter to the Tariff Board. It took parliamentary action to set the amount of subsidy that should be paid to the industry. The present Government has declined to take that action. I submit that if it continues to keep referring these matters to the Tariff Board they will be postponed indefinitely and the situation will continue to deteriorate.

Let us see how long it took to resolve the question of an increased subsidy when if was referred to the Tariff Board on 24th March, 1954. The hearing commenced on 28th September, 1954. The report was completed on 16th June, 1955, and was ordered to be printed on 12th April, 1956. In other words, it took almost two years to have something done on this matter. A few weeks ago, at the annual meeting of the Mort’s Dock company, the chairman of the company said that this Government had failed in i*s promise to protect the shipbuilding industry. A few days ago, at the annual meeting of Poole and Steele

Limited, the managing director of the cornmany said that the only hope that the industry had of surviving was an increase in the subsidy.

This is a vital industry. It has a great potential. In case there are any doubts about it, may I quote from the Tariff Board report dealing with this very vital industry? It reads as follows: -

At the time of the inquiry, the five merchant shipbuilding yards and their sub-contractors were employing approximately 4,500 men and of this number, approximately 4,000, including those engaged by sub-contractors, were directly engaged on shipbuilding. All yards reported a shortage of labour-

That was in 1954, 1 remind the House - and the indications were that if all plant available worked to capacity a further 3,000 employees would be required, giving an industry employment figure for merchant shipbuilding of approximately 7,500 men.

These figures do not include those employees engaged in the manufacture in Australia of main and auxiliary machinery, ships’ fittings and equipment, estimated by Mr. Weymouth at 1,500 persons.

I think that I have demonstrated to the House that shipbuilding is of the utmost importance to Australia.

Mr SPEAKER:

– Order! The honorable member’s time has expired.

Mr TOWNLEY:
Minister for Immigration · Denison · LP

– I am sure that the House has listened with the greatest of interest to the case presented by the honorable member for Dalley (Mr. O’Connor). I have listened to it with tremendous interest and I appreciated many of the facts that he mentioned. When honorable members have industrial trouble or signs of unemployment in their electorates they all feel the deepest concern and, therefore, we can appreciate the feelings which have prompted the honorable member to propose this matter for discussion.

The subject falls into two clear and definite parts. In the first part, there is an implied criticism that there is growing unemployment in the shipbuilding industry; the second part contains the criticism that this is due to the serious reduction which has taken place in ship construction and repair work throughout the Commonwealth. After I have spoken, the Minister for Labour and National Service (Mr. Harold Holt) will deal with that part of the criticism concerning unemployment. I intend to confine my remarks to the second criticism which refers to a serious reduction which is said to have taken place in ship construction and repair in Australia.

The first thing that it is necessary to do in this, or any other, debate is to establish the facts because, until the facts have been established, it is impossible to bring any balanced judgment to bear. When I first read the text of the matter proposed for discussion I was reminded of a question which the honorable member for Werriwa (Mr. Whitlam) asked recently. I looked up the reply in “ Hansard “ of 8th October, 1957. The honorable member for Werriwa asked: -

  1. How many ships are under construction or on order (a) in Australia and (b) overseas for (i) the Australian national line and (ii) other owners?
  2. What is the tonnage of these ships?

He also asked for other information. The answer that I gave him was to the effect that four ships of 10,000 tons deadweight were under construction by Evans Deakin and Company Limited, Brisbane, and the Broken Hill Proprietary Company Limited, Whyalla. I think that the honorable member for Dalley referred to some of these in his contribution to the debate. I told the honorable member for Werriwa that two bulk carriers of 14,000 tons were being built at Whyalla; that a vessel of 7,000 deadweight tons was being built at the State dockyard at Newcastle; and that a new ferry of 6,000 tons was being built at the State dockyard, Newcastle - so that the mainland will not be quite so isolated from Tasmania. I also told him that another ship was being built by Walkers Limited, Maryborough.

All those ships are being built for the Australian Coastal Shipping Commission. In addition, two bulk carriers of 19,000 tons are being built by the Broken Hill Proprietary Company Limited, Whyalla, and a bulk sugar carrier of 5,200 tons is being built by Evans Deakin in Brisbane. As those vessels came to my mind, I made a further examination of the position in the shipbuilding industry in Australia to-day. Clearly, if, as the honorable member for Dalley has suggested, there has been a serious reduction in ship construction and repair work, it must have been reduced to something, and the figure to which it has been reduced must represent the position in Australia to-day. I have found that fifteen vessels with a total deadweight capacity of 160,015 tons have been under construction in Australia in the current year. The average weight of those ships is 10,667 tons. Four of them have actually been completed and it is estimated that three more will be finished this year. The ones that will be completed will total 56,000 tons, and they will average 8,000 tons. The cost will be £5,500,000. If, as the honorable member for Dalley has suggested, there has been a serious reduction in ship construction, that is what it has been reduced to.

In addition to the figures for the current year I have the figures for the last ten years, which are very illuminating, because just as we have a figure that we are reduced to, so we must have a figure from which we are reduced. Let us go back ten years to the time that Labour was in government. It is interesting to see what transpired during the last year of Labour’s term. At that time seventeen vessels were under construction. The total dead weight was 79,000 tons. The vessels averaged 4,649 tons each. In that year three vessels were completed of a total dead weight of 7,536 tons. The vessels averaged 2,512 tons and the total expenditure was £1,217,000. Coming to 1949, we find that sixteen vessels of a total dead weight of 77,000 tons were under construction. The average weight of those vessels was 4,859 tons. Four of the vessels, of an average weight of 4,000 tons, and costing £2,000,000 were completed. It is interesting to compare the figures for the last year of the Labour government with the present figures. In that year, the total dead weight of vessels constructed was 79,000 tons, compared with 160,000 tons now under construction. The average weight of ships built during Labour’s regime was 4,649 tons, compared with 10,667 tons to-day. Three vessels were completed in the last year of the Labour government, compared with seven to be completed in the current year.

Mr Curtin:

– Were any naval vessels constructed in 1949?

Mr TOWNLEY:

– These figures relate to merchant vessels only, and they are related to each other. The cost of ships built during Labour’s last year of office was £1,217,000, compared with £5,500,000 for the current year. If I went through the whole of the last ten years we would get the same picture. Let me take the current year, and the preceding four years. In every year under this Government, including the present year, the dead weight of ships built in Australian yards has been more than twice the dead weight of ships constructed by the Labour government when it was in. office. In addition, the ships being built to-day average 10,667 dead weight tons, compared with a dead weight of 4,649 tons under the previous government. The tonnage of ships completed in each year of the present Government’s term of office has been greater than the tonnage completed in the last year of Labour’s term of office. In 1948-49, the dead weight of ships completed was 7,536 tons. In 1956-57 the figure was 22,000 tons, and the estimate for 1957-58 is 56,000 tons.

Under the Labour government, £1,217,000 was spent in shipbuilding yards in Australia, but the present Government is spending £5,500,000 in Australian shipbuilding yards. If, as the motion before the House suggests, there has been a serious reduction in employment, what has caused the reduction? I have cited the performance figures of the previous government. When those figures are compared with to-day’s figures, it is seen that infinitely more activity is now going on in shipyards than ever before in this country.

Let us consider the position in the war years. If ever there was a time when the Australian community responded to the danger and the urgency of the situation, when man-power controls and many other kinds of control were the order of the day, it was during the war years. But there were not then as many ships under construction in Australian yards as there are now. Here are the figures. In 1941, after the Menzies Government had set up the Australian Shipbuilding Board, it was estimated that 60 vessels would be built by this authority during the war years. In 1941, nine vessels of a total dead weight of 76,500 tons were ordered, but 1942 brought a change to this country. The Japanese had entered the war, and the Australian shipyards had to deal more extensively with repairs and maintenance. But in the four war years from 1942 to 1945 Australian shipyards turned out 21 vessels of a total dead weight of 87,000 tons. I remind the House that the figure for this year is 160,000 tons. This Government continued the very generous subsidy that the Labour government was paying when we took over in 1949, which was referred to by the honorable member for Dalley. The Labour government paid the subsidy to encourage the Australian shipbuilding industry to keep going. In order to maintain employment in the industry, that government paid a subsidy of 25 per cent, on the cost of every ship built in Australia. I commend the Labour government for its generosity in paying that subsidy. This Government continued the subsidy from 1950 to 1955. in a further effort to encourage and stimulate the shipbuilding industry in Australia, this Government increased that generous subsidy from 25 per cent, to 33 J per cent. The results have been most gratifying. Since the increase of subsidy, 27 vessels of a total dead weight of 240,000 tons have been built in Australian yards. During this Government’s term of office, nineteen vessels of a total dead weight of 150,500 tons have been built for the Commonwealth. In addition, eight vessels, totalling 90,000 tons, have been built for private firms. The credit for a lot of that building activity can be traced back to 1955, when this Government did its best to encourage the shipbuilding yards of Australia.

When we get down to the facts we find that not only has there been no serious reduction in shipbuilding, as the motion before the House suggests, but on the contrary there has been a most dramatic increase. I submit that this motion has no substance and must be rejected.

Mr COUTTS:
Griffith.

.- The Minister for Immigration (Mr. Townley) has dealt with the motion moved by the honorable member for Dalley (Mr. O’Connor) on an arithmetical basis, but I propose to follow the lead of my colleague and deal with this matter on a national, economic, and bread and butter basis. Members on this side of the House are concerned with the fact that large numbers of skilled tradesmen are losing their jobs, particularly in the port of Sydney and in the ship-building area of Maryborough, in Queensland. As a result, skilled men in other shipyards are in daily fear of losing their jobs. Those who have an opportunity to vacate the industry are doing so because of that fear. Wherever possible they arc obtaining work in other industries. This is a disastrous state of affairs, when one con siders the efficiency displayed in the construction of ships in Australia. In order to keep the shipbuilding industry at a high pitch of efficiency, it is important to retain this skilled body of workers. That is one reason why I support the motion.

At Kangaroo Point, in my own electorate of Griffith, there is one of the largest shipbuilding yards in Australia, second only to the Whyalla yards of the Broken Hill Proprietary Company Limited. The yards al Kangaroo Point are actively engaged in the construction of ships at the present time, and their current programme will take them up to early in 1959. Fears caused by growing unemployment in the shipbuilding industry - I say this without authority - are exercising the minds, not only of the management there, but also of the employees. The Government should create a feeling of stability in the shipbuilding industry throughout Australia, so that those engaged in it may look forward to a long period of satisfactory employment in this very worthwhile industry.

The industry has had a chequered career in Australia. In time of war, it has risen to very great heights of efficiency and production achievement. In time of peace, unfortunately, the private shipping interests seem to abandon their concern for the construction of ships in Australia. That is what is happening now. The shipbuilding industry is of the utmost importance from the stand-point of defence. If we are spending £200,000,000 a year on defence iri peace-time, we must be prepared to contribute to the peace-time maintenance of this industry, on which we depend for the construction of the ships needed for our mercantile marine, which plays such an important role in time of war. If it is considered desirable to spend, over a period of two years, £26,000,000, or more, on the construction of an ammunition filling factory at St. Mary’s in time of peace, surely it is equally important to maintain Australia’s shipbuilding industry at a high pitch of efficiency. Should we become involved in a war, and should the ammunition filling capacity of the St. Mary’s factory be needed, it will be just as necessary for us to build in Australian yards ships to transport troops and materials of war. If the members of this

Parliament, and particularly those who support the Government, are content to sacrifice this efficient industry at the insistence of the private shipowners, a great disservice will be done to the nation.

Walkers Limited, at Maryborough, in Queensland, has played a noble role in shipbuilding for many years. However, that company’s yards have now almost reached the point of stagnation.

Mr Hulme:

– The company is two years behind with its contracts.

Mr COUTTS:

– It is not. It has on the stocks one ship, which will be launched in the first half of 1958, and it has no other orders. Therefore, the 250 men employed in those yards face unemployment, and, even worse, the nation faces the consequences of their dismissal from a very important Australian industry. Generally speaking, the position throughout Australia is much the same. It has been stated that our shipbuilding yards are not fully occupied. Indeed, it is estimated that only about half their capacity is being used.

I do not suggest that the remedy ls merely to encourage the shipping lines to have more ships constructed. They have placed orders for the construction of a number of ships. The point is that those orders have not been placed with Australian shipbuilding yards. If, by legislative or administrative action, the Government forced the private shipping interests to have the vessels that they require constructed in Australian yards, the efficiency of the industry would be increased, and construction costs would be materially reduced, because a great deal of plant that is now lying idle could be utilized.

The honorable member for Dalley, who proposed this matter for discussion, mentioned some of the ships that are being constructed in overseas yards for Australian shipping companies. It is not to the credit of some of the Australian shipping lines, which enjoy a binh degree of protection and receive considerable subsidies from State governments, that they should obtain new vessels from overseas yards. Let me cite the case of the Adelaide Steamship Company Limited, which is having a 7,150-ton bulk sugar carrier constructed in Scotland. We all know that the sugar industry is the most highly protected industry in Australia. In fact, in order to protect it, an embargo has been placed on the import of sugar from other countries. Yet the Adelaide Steamship Company Limited, in association with the sugar interests, is importing a vessel to be used entirely in the carriage of sugar in bulk from Lucinda Point to Pyrmont, in Sydney. The ship is not to be built in Australia, as one would think it ought to be, since it will be used for the carriage in bulk of sugar produced by Australians, and destined to be consumed by Australians. Instead, it is being built in Scotland. John Burke Limited, a Brisbane shipping company, receives from the Queensland Government a very liberal subsidy for operating its vessels between Brisbane, Thursday island and the Gulf of Carpentaria, lt has just purchased for use on these services a new vessel constructed in the United Kingdom, and originally ordered by the Adelaide Steamship Company Limited.

State governments, also, have an obligation to assist the shipbuilding industry by insisting that Australian-built vessels should be used on subsidized services.

Mr Hulme:

– Oh!

Mr COUTTS:

– It is all very well for the honorable member to scoff, but the proposal is perfectly reasonable. The subsidy should be related to all the circumstances. The Commonwealth Government could ensure that Australian-built vessels were used, because the Minister for Shipping and Transport must license any vessel built overseas before it can be used in Australian services, and a licence could be withheld in order to impose on the shipping companies an obligation to have their vessels constructed in Australia. If the Government were to adopt a positive approach to shipbuilding in Australia, we could develop a very much more efficient industry which would soon be able to export vessels to other countries. Indeed, it would boom, and could become as efficient as the Australian motor car industry is.

Mr HAROLD HOLT:
Minister for Labour and National Service · HIGGINS, VICTORIA · LP

– The proposal of this matter for discussion has at least served the very useful purpose of enabling the Government to put on record the very important performance in shipbuilding that we have seen in Australia since a shipbuilding board was first established in 1941 by a government led by the present Prime Minister (Mr. Menzies), at a time when we needed shipping to meet our war needs. At that time, of course, the overriding consideration was the need for more ships. Therefore, construction was based on a cost-plus arrangement. We had had no earlier experience of any consequence in shipbuilding, and that was the basis that we found it necessary to adopt in order to establish the industry. Later, the Chifley Government, very properly, wanted to maintain the industry in peace-time, and it decided that a subsidy of 25 per cent, should be paid on the construction of merchant shipping in this country.

When we are trying to decide what would be a reasonable measure of assistance to the industry, we must not merely be content to keep the show going, but also must have regard to transport costs and consumer charges in Australia. Those are important considerations also. As a consequence, we have to strike a balance. We should give reasonable assistance and protection to an industry that, if efficiently conducted, would be able to compete with shipping from overseas, but we should not allow it to develop in such a way that inefficiency would impose on Australian transport, and Australian consumers, a heavier burden of costs than would be reasonable.

The Government’s consideration of the report presented by the Tariff Board in 1955 was motivated by that sort of consideration. The Tariff Board recommended a subsidy of 33J per cent. - and do not forget that in Australia we have the added advantage that the competing shipbuilder must bring his ship to Australia, so there is a very heavy transport cost involved as well.

It is quite clear, from the figures supplied by my colleague, that under those arrangements the shipbuilding industry has progressed quite noticeably and commendably in this country. In the last full year of office of the Labour government, 7,536 dead weight tons were completed. In the current year, 1957-58, we estimate that 56,000 dead weight tons of construction will be completed.

Mr Curtin:

– How many naval ships are in that?

Mr HAROLD HOLT:
HIGGINS, VICTORIA · LP

– I knew that the honorable gentleman would try to intro duce a red herring into the argument. The main concern of the honorable member who submitted this proposal for discussion was, I think, Mort’s Dock, where there has been some slackening of activity. Mort’s Dock has never carried out naval construction work. Certainly, it has not been doing so in recent times. Cockatoo Dock, on the other hand, which is engaged on naval work, is not only fully employed, but has been able to absorb some of the displaced labour from Mort’s Dock in recent times. It is an unhappy but well-established fact that merchant shipbuilding orders placed at Mort’s Dock have been particularly slow in completion, and the work has proved very costly. The performances of the yard and its quotations for work have not been such as to win the placing of further shipbuilding orders. The difficulties at Mort’s Dock are very largely the product of its own experience and its failure to measure up to a really efficient performance.

Those are some of the outstanding immediate facts, and this Government, which was instrumental first in getting the board established and, secondly, in adopting a higher rate of subsidy than that provided by the Labour government will again, when the Tariff Board reviews this industry in 1958, see what further action should be taken in relation to it. When I say that this Government adopted a higher rate of subsidy than that provided by the Labour government I do not make that statement as a point of criticism, because it was done on the recommendation of the Tariff Board. We do want an efficient shipbuilding industry in this country. We do not want to nurse an industry, or a section of aD industry which is the weakest element in it and is not able to give the reasonable degree of performance that others can provide. We do not have this same problem at Whyalla, for example, where there is an establishment efficiently conducted by Broken Hill Proprietary Company Limited. At the moment there are many work vacancies waiting to be filled at Whyalla. I think it is true to say that this is an industry in which, normally, some fluctuation of employment can be expected. As I think the honorable member who submitted the proposal said there are, from time to time, about 100 ship painters and dockers registered for employment, whereas, on the other hand, we have some hundreds of vacancies waiting to be filled. The precise figure at the end of October, recorded by the Department of Labour and National Service, was 376 vacancies in shipbuilding firms around Australia.

The department makes a regular monthly survey which covers 23 of the larger firms in the industry, and over the whole 23, employment has been virtually stable for the year. Aggregate employment was 6,342 at the end of June and 6,288 at the end of October. Now, that does not mean that in some particular sections there may not have been more fluctuation than in others. By the same token, you can have, as the records of the department show, these hundreds of vacancies and at the same time some falling off in employment in a particular section. But the industry has a responsibility, because it is working under a substantial subsidy, to make itself as efficient as it can, and those yards which have not developed the degree of efficiency that has put others in a good competitive position, have a responsibility to do so. I have no doubt that if Australian shipbuilding yards are able to deliver the goods with the subsidy they enjoy, the orders given to them will increase.

There is another aspect which I should also like to mention, seeing that the Australian Council of Trade Unions and the New South Wales Trades and Labour Council have been brought into the debate. One of the factors which bears on the rate of shipbuilding construction in Australia is the tonnage of cargo carried round our coast, and it is an unhappy fact that over recent years the volume of general cargo carried interstate has fallen very substantially. It has fallen because of the poor performances on the waterfront and the poor performances on the part of the seamen of this country. So if the trade union movement is really concerned to see the shipbuilding industry in this country flourish, let it look to the first things that need correction in order that shipbuilding will be stimulated. Let it give us an efficient performance on the waterfront, and efficient carriage of cargoes round our coast, and there will be no problem of shipbuilding. If that were done the demand for shipping would be such that every yard already in existence would be fully employed and encouragement would be given to the institution of more yards.

The remedy for the present problem is very largely in the hands of those by whom this proposal has been submitted for discussion. We have no lack of sympathy with this industry. We have given it encouragement. We intend to continue to give it encouragement. But all of us in this place have a responsibility to see that it is an efficiently conducted industry, and that the service it is designed to provide is built up by efficient cargo carriage and waterfront performance around our coast. The honorable member for Dalley has served a useful purpose in bringing this matter up for general discussion.

Mr ACTING DEPUTY SPEAKER:
Mr. Lawrence

– Order! The Minister’s time has expired.

Mr CURTIN:
Smith · Kingsford

– Mr. Deputy Speaker-

Motion (by Mr. Townley) put -

That the business of the day be called on.

The Housedivided. (Mr. Acting Deputy Speaker - Mr. W. R. Lawrence.)

Ayes . . . . . . 53

Noes . . . . . . 31

Majority . . 22

Question so resolved in the affirmative.

page 2166

RESERVE BANK BILL 1957

Second Reading

Debate resumed from 12th November (vide page 2085), on motion by Sir Arthur Fadden -

That the bill be now read a second time.

Mr STOKES:
Maribyrnong

.- In an endeavour to bring some clarification to the present discussion of the proposed banking legislation, 1 should like to give some attention to the origin and growth of our banking system, about which, 1 am afraid, little is generally known, because, like Topsy of “ Uncle Tom’s Cabin “ fame, it “ just growed “.

During early colonization days, many tradespeople acted as the people’s bankers. They issued forms of cheques which were backed by their own resources and their reputations and good names. Later private banks came into existence. They also issued their own notes, backed by their own resources. From those early banks and branches of English banks established in this country our present private banking system arose.

It was not until 1910 that the issue of notes was undertaken by the Commonwealth Treasury. In the following year the Commonwealth Bank was established by the Government as a trading bank, but also having savings bank facilities. It was not until 1913 that the Commonwealth Bank became a banker to the Commonwealth Government. Although it had not central bank functions, it did assume the powers of a central bank during World War I. in order to execute the Government’s financial policy. The function of issuing notes, under the control of a special board, was transferred by the Treasury to the Commonwealth Bank in 1920. In 1924 a board of eight members was established to administer the bank, with full control of the note issue and with authority to handle the exchange settlement accounts of the trading banks. In 1925 the Rural Credits Department was established to assist with the financing of primary production pending the sale of products by the various marketing authorities.

The Commonwealth Bank gradually took over the control of gold transactions and overseas exchange during the 1929-30 depression, and it was at about this time, and not until then, that the private trading banks began to recognize the Commonwealth Bank as a central bank. However, it was not until the introduction of the emergency war-lime measures in 1939-45 that the Commonwealth Bank obtained wide powers of direct control over interest rates, bank credit and foreign exchange. These powers were conferred on it under the National Security (War-time Banking Control) Regulations, and it was by virtue of those powers that the special accounts provisions were introduced, requiring the trading banks to lodge a percentage of their deposits with the Commonwealth Bank, in order to preserve financial stability. This requirement did not extend to the trading bank section of the Commonwealth Bank. In 1943 the Mortgage Bank Department was established, for the purpose of making long-term loans against mortgages of land used principally for primary production.

In 1945 the Chifley Government enacted legislation which continued most of these war-time emergency powers of the Commonwealth Bank and formally acknowledged it as the central bank. Provision was also made at this time for the establishment of the Industrial Finance Department, which provided facilities for hire-purchase loans. The basis for the present special accounts system was also laid down, including the discriminatory power to call up from any individual bank the full amount determined under a certain formula. The formula was based on the amount standing to the credit of the trading bank in its special account established under the National Security (War-time Banking Control) Regulations, with a ceiling equal to the amount originally transferred plus the total of the increase in the bank’s Australian deposits since the commencement of the 1945 act. Provision was also made for the Commonwealth Bank to pay interest at half-yearly intervals on the balance of a bank’s special account at a rate not exceeding 17s. 6d. per cent., as determined by the Commonwealth Bank and the Treasury from time to time.

In 1947 the late Mr. Chifley, realizing the private banks’ distrust of a central bank which was engaging in competition with them, endeavoured to sweep aside the then existing arrangements and give the Commonwealth a new banking structure, with a Commonwealth monopoly bank. The people showed emphatically that they did not want this.

Mr Webb:

– It cost the private banks a few thousand pounds to stop it.

Mr STOKES:

– The actions of the people always speak louder than money. In 1951 the main act was amended to provide for control by a Commonwealth Bank Board, which, however, was still under the direction of the Treasurer. The only check on Treasury direction of the board was in the requirement that correspondence relating to such direction had to be tabled in this House within fifteen sitting days, but no provision was made for any recess period. Much damage, therefore, could be done if a recess occurred before the expiration of the fifteen days.

In 1 953 the Commonwealth Trading Bank was constituted as a separate legal entity, subject for the first time to the special account provisions. The Commonwealth Trading Bank’s base amount, however, for the purposes of these provisions, was fixed as a definite sum at £15,750,000, and the base level of deposits in that bank was fixed as a definite sum at £104,827,000. The base amount in the case of a private trading bank was the amount in its special reserve account as at a date in October, 1952, and the central bank had the power to call up 75 per cent, of the increase in Australian deposits in a trading bank as from that date. This particular provision has been referred to as the discriminatory power. I will deal with that later. It will be seen, therefore, that the functions of the Commonwealth Bank grew from expedients emanating from the effects of two world wars and a general depression. No deliberate policy had been originated up to that time.

To-day we see in this country a most illogical banking system with, first, the central bank operating, or allowing to operate under its control, the Mortgage

Bank Department and the Industrial Finance Department, both of which are in direct competition with public trading banks. However, neither is subject to any special account provisions. Secondly, the Commonwealth Trading Bank is operating under conditions which give rise to unfair competition with the public trading banks. I say “ unfair “ for the following reasons: First, despite the restrictions under the Banking Act with regard to the confidential information which is supplied by the trading banks io the central bank, it cannot be expected that the Governor or staff who move between those departments will nol be affected in their decisions by knowledge which they have gained; and secondly, the public trading banks are controlled by a body which is, and can only be, sympathetic to its government-owned competitor. So, at the present time, the functions of the central bank in Australia are the absolute antithesis of those adopted in most other advanced countries. No doubt it is admitted that the central banking system of most of the great nations provides for a non-trading central bank charged with the task of preserving the stability of the currency and controlling the overall balance of credit. To carry out these tasks it is given limited powers of control over commercial or trading banks on matters of national economic policy, and the central bank itself is subject to control by Parliament.

Preservation of stability of the currency should preclude the central bank from engaging in any trading activities because, if it does, it may become adversely affected by the same conditions which have upset the trading banks, and therefore, could not render the assistance necessary to preserve the stability of the currency. Under our existing banking legislation the Treasurer in a Socialist government could, by directive to the central bank, use the discriminatory power of calling up reserves of individual private trading banks and thus gradually force them out of business in favour of what would become a Commonwealth monopoly bank. This fact, I know, has been propounded quite often and in repeating it I feel somewhat like the boy who cried “ wolf “; but do not let us lose sight of the fact that the Labour party in Australia stands unequivocally by the major plank of its platform which is the nationalization of production, distribution and exchange.

Mr Anderson:

– You mean production, marketing and exchange.

Mr STOKES:

– It is the same thing. It is, therefore, for the purpose of correcting the anomalies existing in our present banking legislation that the Treasurer has now brought before this House four bills for the purpose of establishing in this country for the first time a sound and generally accepted banking system. The first of these bills is that relating to the Constitution and policy of the Reserve Bank. It creates an independent Reserve Bank divorced from all normal banking functions and with powers, inter alia, to control the note issue and the Rural Credits Department. This department provides not general rural finance but finance to assist in the marketing of primary produce and the processing or manufacturing of primary produce, and finance to statutory authorities or co-operative associations engaged in pastoral pursuits as, for instance, the Australian Wheat Board.

Of the remaining three bills the first establishes the Commonwealth Banking Corporation, the second lays down the new banking system and replaces the Banking Act, whilst the third, the Banking (Transitional Provisions) Bill, covers the machinery necessary for the change-over to the new system. The general effect of these measures, as was pointed out by the Treasurer in his second-reading speech, is to separate the functions of the present Commonwealth Bank, other than the central bank, into three clearly defined entities.

The general set-up of the Commonwealth Banking Corporation, as all honorable members know, is a board of directors comprising eleven members with a managing director, deputy managing director, the Secretary to the Treasury as an ex-officio member, and eight people not employed by a bank in the Commonwealth Public Service; and from that pool the appointments of a chairman and a deputy chairman are made. Under that framework we have separate charters for the three banks - the Commonwealth Trading Bank, the Commonwealth Savings Bank and the newly established Commonwealth Development Bank. The control of those banks under independent general managers is exercised by executive committees appointed from the board, each consisting of five members with a managing director appointed by the board. The

Development Bank under its charter takes over and amalgamates the functions of the Mortgage Bank Department and the Industrial Finance Department. There seems to be no provision made for service by the general manager of each of those banks on the executive committee; but I make that point merely in passing.

Next, is the provision of a system of statutory reserve deposits to replace the old system of a special reserve account. Briefly, that system can be summarized in this way: Each trading bank is required to maintain a statutory reserve deposit account with the Reserve Bank and to have on deposit in the account such percentage of its Australian deposits, called the statutory reserve deposit ratio, as is determined from time to time by the Reserve Bank, normally not exceeding 25 per cent. The Reserve Bank can call up another 25 per cent., or any fraction thereof, on giving certain notice, 45 days in a case of emergency. There are several other provisions of the same type which apply not to any one bank. Any call-up above 25 per cent, must be levied on all trading banks with the exception of the four banks of restricted activity.

Another matter of interest is that the Reserve Bank is required to inform the trading banks, at least once in each quarter, of its estimate of likely changes in certain banking figures and of its expected policy with regard to increases of statutory reserve deposit ratios. Therefore, this provision will remove the two main anomalies of the special account system, first, by applying the reserve deposit ratio to the total average deposits of each trading bank, instead of the present system which operates on a base amount plus the call-up of a percentage of the increase since October, 1952; and, secondly, by precluding the ability of the Reserve Bank to discriminate between trading banks by calling up increases of the original special reserve deposits.

In measures of such a comprehensive nature as those that have been brought before the House, particularly having regard to the colossal task of legal drafting involved, there must be certain aspects which, at first glance, are apt to arouse criticism. I feel that, if any criticism is to be levelled at this legislation, it is mainly in regard to the provisions which are applicable to the Development Bank. The problem which confronted the Treasurer and the Commonwealth Bank Board was what to do with the Mortgage Bank Department and the Industrial Finance Department which, as I have said, were required to be divorced from the Reserve Bank. It was, apparently, considered that these two departments would not function satisfactorily if they were merged with the Commonwealth Trading Bank, and so we see that the decision was to form a new bank, the Commonwealth Development Bank, to take over those departments.

The Development Bank is to be given wider powers than those that were extended to the two departments which it is to take over, lt is to be given full trading bank functions, but without any of the normal controls and restrictions which appertain to the Commonwealth Trading Bank. For example, it will have no special reserve deposit account, and there will be no provision for internal reserves, because the whole of its capital can be used in the business. That capital will be the total of the capital of the Industrial Finance Department and the Mortgage Bank Department, plus £5,000,000, and the ability to borrow an additional £2,000,000 from the Reserve Bank, plus its own profits. It will not pay taxes and will be capable of obtaining additional capital at the discretion of the Treasurer, for the time being, of the Commonwealth, to an unlimited extent.

Another important matter concerns the composition of the executive committee. The appointment to the committee of the managing director of the Commonwealth Banking Corporation will be mandatory, but the other four members must be drawn from the deputy managing director and seven of the eight non-official members of the board. The chairman of the board is exempted from serving on the committee. Therefore, the position could arise that the Executive Committee of the Commonwealth Trading Bank, and also that of the Development Bank, consisted of the same individuals. While it is certain that the operations of this Development Bank will provide additional credit with which to boost both primary and secondary industries that have been held down and restricted through lack of credit facilities, it may be that we are creating an institution which could, under a socialist government, attain proportions beyond those that it is intended to have.

The Treasurer gave an assurance in his second-reading speech that it was not intended that the Development Bank should cut across existing financial institutions to any significant degree, but that it should co-operate with them and supplement the types of finance that they provide. However, I feel that I should, at this stage, sound a note of warning about the ramifications which could perhaps follow manipulation of the Development Bank by a socialist government. I agree, to some extent, that the bank, by reason of its special operations, should not be subject to the restrictions applicable to the trading bank such as the special reserve deposit account provisions, the payment of taxes and the maintenance of liquidity reserves, but I do not consider, on the other hand, that its functions should be widened to embrace the full range of general banking. However, in my opinion the matter of major importance concerns the powers conferred upon the Treasurer by clauses 84 and 85 of the Commonwealth Banks Bill. Clause 84 (a) limits the total amount of money that may be borrowed by the Development Bank, and not repaid, to an amount which shall not exceed £2,000,000 at any time, except with the consent of the Treasurer. The effect of this provision, therefore, is to give to the Treasurer the power to authorize the exceeding of this amount. Undoubtedly, this provision is intended to put in the hands of the Treasurer an emergency power, so that funds may be obtained quickly, should the liquidity of the Development Bank be in danger; but it could be an instrument, in other hands, that could be used to inflate the capital of the bank for different motives altogether.

Again, in Clause 85, it is provided that the Treasurer shall be given power to lend to the Development Bank, from time to time, from moneys legally available, such amounts, and subject to such conditions, as are agreed upon between the Treasurer and the Commonwealth Banking Corporation Board. This clause turns on the interpretation of the words, “ moneys legally available “. It has been suggested that those words restrict the source to grants from Consolidated Revenue, which must be appropriated by the Parliament for the purpose, but there is some doubt that the words could extend to the investment of trust funds, such as the Commonwealth Superannuation Fund, if a Socialist government, through its Treasurer, exerted its influence to achieve that purpose. Returning to the main source - that of Consolidated Revenue - there is no indication of any time limit for the introduction of the necessary appropriation measure in the Parliament. If it happened that such advances were made from the Treasurer’s funds, the introduction of the necessary appropriation measure could be delayed even until the next Budget was brought down, so that months could elapse before the Parliament and the people had knowledge of the transaction.

If there is any weakness in this great piece of legislation now before the House - and I have given the matter some consideration - I think it lies mainly in these two provisions. I hope that this aspect will be examined fully. It may be thought that present normal parliamentary procedure provides sufficient safeguard, but if there is insufficient safeguard, I hope that consideration will be given to an amendment at the committee stage, first, with a view to requiring the Treasurer of the day to bring before the Parliament, within a stated period, a statement of the position in the event of additional borrowing in excess of £2,000,000, as provided by clause 84 (a); and secondly, in the event of an appropriation from consolidated revenue, requiring the necessary appropriation measure to be brought down within the stated time; or if the money is to be obtained from other sources, requiring that a statement shall be made in the Parliament within the stipulated period, so that the Parliament and the people may know of the transaction.

Apart from that criticism, I consider that, in these four major measures, the Treasurer has introduced some of the greatest and most acceptable legislation in the history of the Commonwealth. It satisfies not only the private trading banks, and attempts to meet their difficulties and problems, but also the Commonwealth Trading Bank and the various savings banks, lt will ensure to the people of Australia a greater availability of credit, due to the increase of liquidity in the private banks by the removal of the baffle of the special reserve accounts system, and will enable the Commonwealth Trading Bank to have more funds because of the altered tie-up with the Commonwealth

Savings Bank. In addition, there is the special provision as a result of which both the Commonwealth Trading Bank and the Commonwealth Savings Bank will be’ able to make marketing and housing loans to individuals on Credit Foncier terms. Thus it is apparent that, apart from the query I have raised with respect to safeguards relating to the Development Bank, the Treasurer has pleased all sections of the banking community - private banks, the Commonwealth Bank and the general public. He has failed to please only members of the Opposition who, if returned to power, would need to take much wider measures to achieve their objective of nationalization. The easing of credit restrictions which should emanate from this legislation is timely in view of the fact that our overseas reserves are in a much healthier condition than they were twelve or eighteen months ago. We have heard the catchcry of the Opposition, “ Hands off the people’s bank “. I say to the Opposition, “ Hands off the people’s liberties “.

Mr BIRD:
Batman

.- The introduction of this bill illustrates the necessity for constant vigilance on the part of those who have genuine solicitude for the Commonwealth Bank. Of course, such people include the members of the Labour party in this House. It is our ambition and objective to ensure that the Commonwealth Bank’s splendid achievements since 1911 will not be nullified by the passage of this legislation. All sorts of reasons have been trotted out by Government supporters for the introduction of this legislation. The other night, the Minister for Primary Industry (Mr. McMahon), when speaking to the measure, stated that this series of bills would take the Commonwealth Bank out of politics. He then proceeded to give an intensely party political speech on the necessity for the bill. In other words, his reasons ran counter to his assertions. We have just heard a most extraordinary allegation by the honorable member for Maribyrnong (Mr. Stokes) that the easing of credit restrictions will follow the passage of this legislation. The easing of credit restrictions has nothing whatsoever to do with this bill. This measure merely alters the structure of the Commonwealth Bank. I hazard the opinion that no easing of credit restrictions will follow if this bill is implemented.

Everybody knows why the bill has been introduced. The reasons are not those that have been submitted by Government supporters. Everybody knows - even the dogs in the street are barking it - that it has been introduced as a result of a campaign by the private banks. As a result of the ceaseless lobbying of Government members sufficient numbers have been induced in their caucus to bring this bill into being. Rumour has it, however, that several Ministers were opposed to the introduction of this legislation but were outvoted. We have been told - and it has never been denied - that the Treasurer himself (Sir Arthur Fadden) was most unhappy about the provisions of these measures, but his resistance was overcome in the party room.

Ever since this legislation was mooted some months ago, ceaseless propaganda has been put forward for the purpose of obscuring the real objects of the bill. All sorts of reasons have been trotted out during this discussion in the House and also in the columns of the press. But it has only been wi-.h the idea of pulling the wool over the eyes of the Australian people. Undoubtedly, the real purpose of the bill is a calculated and deliberate move to bolster up the private banking system at the expense of the enormously successful people’s bank. That is the real purpose of the bill, and everybody knows it. For honorable members on the Government side to say that it will ease credit restrictions and take banking out of the realm of politics is mere eyewash, and they know it. Why do they not come out in the open and say forthrightly that they do not believe in the Commonwealth Bank or in public enterprise in the sphere of banking? Why do they not say that they hope that eventually one result of this legislation will be the disintegration of the people’s bank? If they said that, they would at least win the respect of this party, if nothing else.

Sitting suspended from 12.45 fo 2.15 p.m.

Mr BIRD:

– I have expressed doubt about the validity of the reasons submitted by members of the Government for the introduction of this legislation, and I have criticized some of the statements that have been made by them. I should think that the prize for the quaintest reason for the legislation should be given to the Minister for the Interior (Mr. Fairhall), who stated that, as a result of this legislation, the Commonwealth Bank would be strengthened. To me, that is certainly the overstatement of the year. The very reason why this legislation was introduced was that the private banks thought that, under present circumstances, the Commonwealth Bank occupied a very strong position which had to be weakened if their interests were to be increased or even preserved. So how on earth can anybody argue that legislation brought forward to strengthen private banks at the expense of the public bank would strengthen the Commonwealth Bank? To me it does not make sense. Of course, it is just part of the specious and spurious reasoning put forward by Government supporters to cover the real aim of this legislation. Labour would be recreant to its trust if we did not point out what these proposals really mean. The Government has shown, in its approach to the bill, that it recognizes the esteem in which the Commonwealth Bank is held. It does not like the Commonwealth Bank, but it is not game enough to say so in the open forum of the Parliament, because it recognizes that the bank is held in the highest esteem by the Australian people. Therefore, it is not game to launch a frontal attack on the bank, because it realizes that it would be politically unwise to do that.

Everybody admits the efficiency of the Commonwealth Bank over the years. As a matter of fact, its efficiency since 1935 has been of such a nature that it is impossible to place a stricture on it. In view of the people’s estimation of the bank, if the Government were to make an open attack on it, quite unashamedly, as the private banks would like it to do, the political repercussions would be entirely unpalatable to the Government. Therefore, the Government has decided to use Trojan horse tactics in order to destroy the present importance of the bank in the economic and political life of the community. By means of the series of bills that has been introduced, the Government will finally achieve its objective, which is the stultification of the bank’s present progress and activity.

The Labour party makes no secret of its profound interest in the bank. Had it not been for the presence of a Labour party in the National Parliament there never would have been a Commonwealth Bank. In 1907 the establishment of the Commonwealth Bank was placed in the federal policy of the Australian Labour party. Our forebears in the party recognized, even in those faroff days, that the control of credit literally meant the power of life and death over thousands of Australians and that such control could determine whether periods of employment would be long or short. That was the real reason for the establishment of the bank. We recognized that monetary control is too important a function to be vested in the hands of a group of private individuals who are responsible to nobody but a small group of shareholders.

When we advanced that policy in this Parliament in 1911, the party corresponding politically to the Liberal party of to-day was most hostile to the formation of the Commonwealth Bank. The members of that party did not think that the control of monetary policy should be vested in the people’s bank. Nothing was further from their thoughts and they opposed it with all the vim and vigour at their disposal in 191 1, as perusal of the “ Hansard “ reports of debates and divisions will show.

Although the Commonwealth Bank was established in 1911 it was not until the passage of the Commonwealth Bank Act of 1 945 that the bank really became an instrument to be used in the interests of the economy and the people. In 1945, the Chifley Government stood up to the private banks, being determined to ensure that the Commonwealth Bank fulfilled its function of controlling national credit policy and its function as a central bank, in every sense of the word. From 1945 to 1953 the central bank carried out its functions in an impartial and efficient manner.

I say most advisedly, that never at any time had the central bank discriminated between the private banks and the Commonwealth Trading Bank, despite the fact that we have been told by members on the Government side of the House that one of the reasons for the separation of the trading bank from the central bank is that the private banks are in an inferior position as a result of the central bank being a part of the Commonwealth Bank. But I defy any Government supporter to cite one case in which the central bank has discriminated against the private banks in the interests of the Commonwealth Bank. Yet we are being told, ad nauseum, that, under the existing legislation, the private banks suffer.

The Treasurer (Sir Arthur Fadden), in introducing the bill, said that because of apprehensions on the part of the private banks it was necessary to alter the existing law. In order to present the idea as a sugar-coated pill, the Treasurer said that the private banks had made it plain that they did not criticize the way in which the central bank had used its powers under the existing legislation. In other words, although, according to some newspaper reports, the private banks said otherwise when advocating this legislation, the Treasurer has now admitted that the central bank never exercised its powers adversely to the interests of the private banks. That is a belated but welcome admission. He then went on to say -

On the contrary, they have been at pains to commend the competence, integrity and impartiality of the central bank. They say that their complaint is simply and solely against the banking legislation as it stands . . .

I submit that if the complaint is solely against the banking legislation as it stands, the legislation before the House will be in their interests. I suggest that a most valid reason why the existing legislation should be changed would be that it has operated adversely against the private banks. But we have not heard a case cited to show that that is so. The private banks have attempted to create suspicion in the minds of the people, and that attempt has been supported by honorable members opposite. Only this morning, the honorable member for Maribyrnong (Mr. Stokes) said that this legislation would stop any future Labour government from nationalizing the banks - or he used words to that effect.

It is time that the people got the facts straight. I shall cite a leading article from a journal which never, at any time, can be construed as a supporter of the Labour party or its banking policy. I refer to that very staid, conservative journal, operating in Collins-street, Melbourne, “ The Age “. On 6th September that newspaper published a leading article entitled, “ Changes in ‘ The People’s Bank ‘ “, dealing with the argument about bank nationalization. It said -

It would be wrong to argue, as the trading banks do, however, that the separation of the two organizations has become necessary because of fears of another attempt to nationalize banking by a future government. This seems to be purely an emotional undertone to their campaign for the change.

Any question of the power of a federal government to nationalize the banking system was finally disposed of by the Privy Council. Without some future amendment to the Constitution, fears of a further attempt are groundless.

Obviously the “ Age “, a non-Labour paper, is unable to stomach the arguments put forward by Government supporters that under the present legislation it is possible for future Labour governments to nationalize the banks. A future Labour government could not nationalize the banks, and honorable members opposite know that. In my opinion the reasons given by Government supporters for this most unnecessary change lack realism and substance. They are just attempting to cover up for the Government’s real reason, which is a concealed policy on behalf of the private banks to sabotage the Commonwealth Bank. The Commonwealth Bank’s main crime, in the eyes of Government supporters and the private banks, is that as a government instrumentality it has been too successful. Honorable members opposite are always trotting out the argument that no government enterprise can succeed. They say that government enterprises always lose the taxpayers’ money, that they are inefficient, and that they fail to give service to the public. The Commonwealth Bank is an instrumentality that gives the lie to that contention. Government supporters are not too happy about the Commonwealth Bank, because it Undermines one of their most cherished political philosophies. They decided that something had to be done to get rid of it, because the private banks are insisting on the destruction of the Commonwealth Bank as their pound of flesh. But just as Shylock insisted on his pound of flesh and ultimately came off second best in the deal, I feel sure that the private banks, by insisting on their pound of flesh by this legislation, in the long run will rue the day that they ever suggested it to the Government.

It is obvious that one of the first acts of an incoming Labour government will be to repeal this legislation - if it is put through this House and if it goes through another place. So how on earth can this new legislation prevent a future government from doing something to the banks if its first action is to repeal this legislation? That will be our first job; I have no doubt about that. Therefore, within two weeks or a month of Labour coming to power we will again have the position that operates now. The present legislation will be in existence. How on earth can it be a safeguard against nationalization of the banks if, as soon as Labour returns to power, the present legislation is restored? Government supporters are entirely bereft of logic and reasoning in submitting their arguments for a change in the present set-up.

In 1953 the Government, in response to pressure from the private banks, went part of the way towards separating the Trading Bank from the central bank. These are the Treasurer’s reasons for altering the 1953 set-up -

By degrees we have come round to the belief that only by completely separating the central bank from the rest of the Commonwealth Bank group will the source of friction be eliminated and the way opened for a lasting settlement of the issue.

The Treasurer says, “ By degrees we have come round “. All I can say is that if onehalf of what we hear is true, the phrase “ by degrees “ is a misstatement. Because of consistent and heavy pressure on the part of the private banks, the Government has introduced this legislation. It has not been just a process of time that has brought about the change in the banking structure. The Treasurer arrived ultimately at a position where, by degrees, he wanted this structure changed. Opposition members know that the only degree was a degree of force and coercion on the Government by the private banks, because everybody knows that it was forced through the Government’s “ caucus “ against the wishes and the expressed desires of some Ministers. How can anybody think that this has been a peaceful policy of changing one’s mind with the evolution of time and the observance of bank practice in this country and abroad? It was nothing of the kind! It has been brought about solely because of the pressure brought to bear on the Government by the private banks and other interested people.

The proposal before the House is to separate the central bank from the Trading Bank, both physically and administratively. No intelligent and logical reason has been put forward for this proposed change, but only a series of reasons that a school child can see through in four or five minutes. Government members have engaged in flights of fancy about the dire results that could happen under the present set-up, but they have never happened because the private banks have never been penalized under the present set-up. Government members draw on their imagination and think that it could happen, but it has never happened, so why worry about it? No evidence has been forthcoming to substantiate this fanciful allegation on the part of Government supporters. I do not think the honorable member for Hume, who has been interjecting, really believes that the central bank at present has ever done anything inimical to the private banks. Of course it has not. The honorable member knows that a Labour government will repeal this legislation and replace the present legislation on the statute-book.

I prefer to take the advice, not of the so-called economic experts on the other side of the House, the so-called banking experts, who throw out their chests like pouter pigeons and pose as men who know all there is to know about banking, but of a man who does know something about banking. I re-emphasize what the honorable member for Melbourne Ports (Mr. Crean) said in relation to the contentions of the Governor of the Commonwealth Bank, Dr. Coombs. He is a man whose knowledge of banking is unexcelled in any part of this country, and that includes members on the opposite side. Dr. Coombs stated quite recently that the link between the central bank and the trading banks can be of particular value in times when the economy is threatened with declining employment. To me and to hundreds of thousands of Australians this is a more important reason why the link should be retained than the reasons submitted by honorable members opposite why it should be severed. I have vivid recollections of how the bank, from 1929 to 1 934, dodged its responsibilities. I want to see the present bank remain with its present powers, because since 1945 it has got powers which it must implement if the government of the day insists. Therefore, the Governor of the Commonwealth Bank is of the opinion that, to counter a state of unemployment, the present link between the central bank and the trading banks should be retained. That is a much better reason than the 101 reasons that might be brought forward by honorable members opposite, because it is a vital reason. It is a human reason, and if it was put to the Australian people they would emphatically endorse it. We want all the machinery left intact in case there is another depression. 1 am not prepared to think that history will not repeat itself, and that sooner or later this country will not find itself in the throes of a depression. If that happens, the maintenance of the employment level will be most vital. Therefore, any move calculated to remove the safeguards to this employment level must be resisted. The Governor of the Commonwealth Bank thinks that if we are to have employment as full as possible in a period of depression, the present set-up must remain. If it is good enough for the Governor of the Commonwealth Bank, it is good enough for me, and I suggest that the Australian people think that it is good enough for them, because they can remember the vicissitudes and the untold misery that were inflicted upon them, not by reason of any apathy on the part of the Commonwealth Bank, but because of conditions beyond its control, although it could have done far more to ameliorate those conditions than it did. To-day we have the opinion of the Governor of the Commonwealth Bank that from the point of view of beating another depression, the present machinery should be maintained.

The second change of note in the banking system to be made by these measures concerns the special accounts procedure. Prior to 1953, the central bank was empowered to call into the special accounts up to 100 per cent, of any increase in the surplus investible funds of the private banks. The Chifley Government, from 1947, laid down the policy that, in order to facilitate the post-war demand for credit to finance expansion, the central bank should call into the special accounts such proportions of the increase in the trading assets of the private banks as were necessary to maintain the total of the funds in the special account of, and the treasury-bills held by, any one bank at 50 per cent, of its deposits. In 1953, the present Government limited the ability of the central bank to control the nation’s credit policy, although the system then current had been working smoothly and effectively. It had been working extraordinarily well, and there was nothing wrong with it, but the present Government, being iconoclastic where the people’s bank is concerned, decided, at the instigation of their masters - the private banks - to alter the system, and to permit the central bank to call into the special accounts only 75 per cent., instead of 100 per cent., of any increase in the deposits of a trading bank, with the proviso that any uncalled balance at the end of the year in excess of 10 per cent, was to be cancelled.

As every one who has taken the slightest interest in the effects of the 1953 legislation knows, it severely limited the ability of the central bank to control the nation’s credit policy. It did not completely stultify the central bank’s control, but it restricted its activities, and, therefore, from the national stand-point, was bad. The present proposal is that the central bank shall be able, on one day’s notice, to call up a maximum of 25 per cent, of the Australian deposits of the trading banks. It will have to give 45 days’ notice before calling up amounts in excess of 25 per cent, of the Australian deposits. I am at a loss to understand why any change is needed, because the present legislation inflicts no hardship on the banks. At present, the amount that may be called up is limited to the relatively small amount of £186,000,000, which applied in 1953, plus 75 per cent, of the increase in deposits since. So far, that increase has been relatively small. The figures for last month indicated that the existing legislation inflicts no hardship on the banks, because £300,000,000 was held in the special accounts, or only 22 per cent, of their total Australian deposits of £1,342,000,000. Therefore, why alter the present system? It has had no bad effect upon private banks. I cannot help repeatedly asking myself, “ Why is the change being made? “ No good reasons have been given why the change should be made.

The Government’s proposals contain provision for the uniform treatment of major trading banks, including the Commonwealth Trading Bank. There has never been any discrimination between the private trading banks and the Commonwealth Trading Bank in relation to special deposits. Not once has the central bank favoured the Commonwealth Trading Bank. Yet supporters of the private banks contend that the existing banking legislation has been beneficial to the Commonwealth Trading Bank and inimical to the private banks, although they cannot cite one instance to substantiate their contention. I submit that the Government has failed to give any specific examples of abuse under the present legislation. The Commonwealth Trading Bank has not received any favoured treatment at the hands of the central bank.

The Government’s current proposals are only part of a pattern. We are well aware that they are only part of a plan ultimately to crucify the Commonwealth Bank, and hand the control of credit and monetary policy back to the private banks. I know that the private banks will never rest until they get it. I do not believe for a moment that, if these bills become law, the private banks will say, “ We are satisfied for all time “. Of course they will not. The present measures are only another step in the process. If, by some strange miracle, this Government is returned to office at the next general elections, it will probably bring in a further instalment of its plan in two or three years’ time, and reduce the amounts that may be called into the special accounts to perhaps 5 per cent, of the Australian deposits of the private banks. It will doubtless say, “ We have got away with it so far. We will sell the Commonwealth Bank to private interests.” That is the bank’s destiny under the administration of this Government.

The proposals now before the House are part of a plan to whittle down, indiscernibly, but remorselessly, the power of the central bank, because it conflicts with the profit motives of the private banks. That is the only reason for these proposals. One can find no other reason. Government supporters may trot out all sorts of airyfairy stories containing reasons why these changes should be made, but the real reason for them is that the profit-hungry private banks have decided that the Commonwealth Bank is inimical to their interests, and adversely affecting their profits. Their decision is that, therefore, it must go. Perhaps when the historians of a later era come to write the political history of the present era, in. say, 50 years’ time, they will show how systematically legislation was periodically enacted in order to crucify the people’s bank. T know that

Government supporters do not think that the measures now before us will be the last of this kind. They say, as do the private banks, that they will be satisfied when these measures become law. The people should not believe that. I do not believe what they say, and they do not believe it themselves.

Mr SPEAKER (Hon John McLeay:
BOOTHBY, SOUTH AUSTRALIA

Order! The honorable gentleman’s time has expired.

Mr OSBORNE:
Minister for Air · Evans · LP

– Banking legislation in this country has a long, and at times, a turbulent, history. From that history, there has emerged a clear need for a strong and independent central bank, one which is able effectively to play its part in dampening the tendency to rapid swings in the Australian economy, and, at the same time, to hold the balance fairly between the private banks themselves, and between the private banks and the Government banking institutions. There has been clear progress towards this end. Part of the distance was travelled in 1953. In a speech made on the second reading of the Commonwealth Bank Bill of that year, I said that I hoped to be in this House long enough to see the establishment of a true and independent central bank. The measures now before the House will establish, for the first time in Australia, a true and independent central bank, and I am very glad to see them introduced, and very happy indeed to support them.

I have referred to the need for a strong and independent central bank, a bank which is able effectively to dampen the rapid swings in the Australian economy, and to hold the balance fairly between the country’s banking institutions. It is necessary, in the public interest, that the Reserve Bank should be strong, and that it should have effective powers over the country’s monetary system. It is necessary, also, that there should be public confidence in the Reserve Bank, and, particularly, that the country’s banks should have confidence in it. It is necessary, further, that that bank should be free from the pre-occupation of itself conducting an institution in competition with the banks that it has to control.

These needs have given rise, over the years, to unease about our present central banking system, and to a steadily mounting demand, not only from private bankers, but also from everybody interested in banking whose mind is not trammelled with ideas of nationalization and socialism. It has given rise to a steady demand for a review of our institutions in order to create an independent central bank, which will ensure fair competition between the private banks themselves and between them and the Government banks. It must have strong powers of control, but under adequate safeguards for the preservation of the private banks and financial institutions against future threats by socialist governments, as far as that is practicable under the law.

I have said that there has been a steady and mounting demand throughout the country for a review of the present system, as many members of this House know well. Ideas have crystallized generally around two points. The first is the suggestion that the central bank should be dissociated from any trading function.’ The second is that its means of controlling the degree of activity of the private banks should be fair, so that they cannot be capriciously wiped out.

It is only fair to say that the present system, under laws which aTe not wholly satisfactory - as this Government has shown by its introduction of this measure - has been operated fairly by the present Commonwealth Bank Board and Governor. That is a tribute to the integrity and good sense of the members of the board and of the Governor. It is also a tribute to the common sense of the people who control the private banks. Nevertheless, as I have said, there has been an underlying unease, which has inhibited the effective establishment of a central banking system in this country, because the first requisite of any national reserve bank is that the institutions whose duty it is to control shall have confidence in it. Under the system now being established that confidence will grow, and will be firmly established.

The needs I have mentioned are being met by the present comprehensive series of bills. In the first place, an independent Reserve Bank is being established for the first time in Australia. It is to be free of all functions except those of reserve banking, the only possible exception being its operation of the rural credit system. The Rural Credits Department of the Commonwealth Bank, which was established by the right honorable member for Cowper (Sir Earle Page) in 1925 when he was Treasurer, will be handed over to the Reserve Bank. Its function is to finance the seasonal requirements of the primary industries of this country, which is to some extent a central banking function. The Reserve Bank of Australia, as it will be called, will have a separate staff and separate premises, and its head office will be in Sydney. I have heard the hope expressed that in the course of time the head office will move to Canberra. I believe that the central bank of a country should be established in a main centre of financial activity, and should remain there. Its establishment in Sydney is correct, and I think it is correct that it should stay there.

I said before that the main criticisms of the existing system had crystallized around two points. The first was that the Reserve Bank should be independent of other banking functions. The second was that its means of controlling the private banking system should be fair, and not open, even in theory, to abuse. This has been achieved by the provisions in these bills which will replace the former special accounts system under which the central bank could call up three-quarters of the deposits of any private bank in excess of the amount of deposits at a given date in 1953. That system is being replaced by a system of statutory reserve deposits under which the Reserve Bank will be able to call up, on one day’s notice, 25 per cent, of the deposits of any bank at that time and, on 45 days1 notice, any further amount. There are additional provisions in the bill to enable increasing calls to be made on the private banks by the Reserve Bank, in each case at 45 days’ notice.

I heard the honorable member for Batman (Mr. Bird) criticizing this provision - if I understood him correctly - on the basis that they will limit the powers of the Reserve Bank. On the contrary, whereas under the previous system the Reserve Bank, or the central bank as it was then called, could call up only three-quarters of the deposits of any private bank over a given amount in 1953, there will be no limit in future on the amount of deposits which may be called up, except a limit of time - 45 days’ notice will be required for any amount over 25 per cent, of the deposits. Less than 25 per cent, may be called up at any time on one day’s notice. As the

Treasurer (Sir Arthur Fadden) pointed out in his second-reading speech, no bank has had more than 25 per cent, of its deposits called up by the central bank at any time in recent years. A 25 per cent, call is more than has been required to be made by the central bank at any time in the last four years. It is not chicken feed. In addition to that, the Reserve Bank, on due notice, which is necessary to enable the private banks to make arrangements to meet these calls, will be able, in theory, to call up the whole of any private bank’s deposits. So to suggest that this is a limitation of the powers of the central bank is plainly absurd. In fact, it will greatly strengthen the power of the central bank.

I have referred to the two great reforms which this system introduces. First, there is the establishment of a Reserve Bank free from any other banking function and, secondly, there is reform of the method of controlling the degree of activity allowable to private banks at any time, so as to put it on a basis that is fair and uniform.

I should have mentioned that an important part of this new statutory reserve deposit system is that no calls can be made on any one bank that are not applied to the other banks, with the exception of a minor provision in favour of four banks. That provision is so drawn that they cannot be treated more onerously than the other banks. So there will be uniformity, lt is very important to notice that the Commonwealth Trading Bank will itself be subject to the same control by the Reserve Bank as are any other banks in the country. A statutory obligation will rest on the Reserve Bank to deal uniformly with the private banks and the Commonwealth Trading Bank.

To give effect to these reforms has required a series of measures of great complexity. The Treasurer has been involved for a long time in an immense task, and the long series of bills now before us is the result. The most complex problem was how to fit into this new system the special agencies of the Commonwealth Bank. That has resulted in the creation - when these bills are passed into law - of the Commonwealth Banking Corporation, which will control the Commonwealth Trading Bank, the Commonwealth Savings Bank and a new institution to be known as the Commonwealth Development Bank. The Commonwealth Development Bank will combine the functions of the Mortgage Bank Department and the Industrial Finance Department of the present Commonwealth Bank. It is intended, as stated in clause 72 of the Commonwealth Banks Bill, which contains the charter of the new Commonwealth Development Bank - to provide finance for persons -

  1. for the purposes of primary production; or
  2. for the establishment or development of industrial undertakings, particularly small undertakings, in cases where, in the opinion of the Development Bank, the provision of the finance is desirable and the finance would not otherwise be available on reasonable and suitable terms and conditions; . . .

The Development Bank is designed to give assistance in the development of the primary and industrial activities of this country, to people who, by reason of their character, their energy and their training, have prospects of establishing successful primary or secondary ventures but who do not offer security that is attractive under the traditional banking system. It is an institution that should appeal strongly to honorable members of the Opposition, but as yet I have not heard one word from any one of them which would indicate that he had even looked at the provisions of clause 72 of the Commonwealth Banks Act.

It is inevitable that in a series of measures as complex as these banking bills there should be some criticism. The criticism that we have heard from honorable members opposite has been, I regret to say, uninformed criticism. The Leader of the Opposition (Dr. Evatt) set himself out to create an imaginary, sinister sell-out. He endeavoured to appeal to the people’s emotion by suggesting that these measures have been introduced in the interests of the imaginary monopolies, which constitute his constant preoccupation. I do not believe that any person interested enough to examine these measures will be moved in the slightest degree by this talk about monopolies and the re-iterated allegation that this is a sell-out to monopolies. If the right honorable gentlemen knew anything at all about the private banking system of this country, he would know that there is fierce and active competition between the private banks themselves. Anything less open to a charge of monopoly than the private banking system of this country would indeed be hard to imagine.

The honorable member for Melbourne Ports (Mr. Crean), from whom this House is accustomed to hear more informed and reasonable criticism on financial matters than it does from his leader, unfortunately contented himself with the thesis that the legislation is unnecessary. We do not believe it is unnecessary, for the reasons I stated at the beginning of this speech. The honorable member has said that the legislation has been brought down at the instance of the private banks. As I have been at pains to point out to the House, there is. as my colleagues on this side of the Parliament know, a very considerable body of opinion throughout the country which believes that there is cause to be uneasy about the present state of the law governing our financial institutions. There is a strong and deep-seated conviction that the law needs to be reformed. It is because of that widespread opinion that these measures are now before the House.

The honorable member for Melbourne Ports also said, if I understood him correctly, that there is no need for a central bank in this country.

Mr Crean:

– No.

Mr OSBORNE:

– I am glad that the honorable member assures me that such is not the case.

Mr Crean:

– There is no need for a central bank constituted in the way that the private banks want it. The job of a central bank is to control all banks.

Mr OSBORNE:

– This measure should at least leave the honorable member content that a central bank with very wide and complete powers will be established.

Mr Crean:

– Weaker powers.

Mr OSBORNE:

– Not weaker, but wider powers. I have already directed attention to one instance of those wider powers, in connexion with the statutory reserve system. The whole of the deposits in the private banks may be called up, whereas at present there is a limitation on the amount. The Commonwealth Reserve Bank will have the confidence of the commercial community, because it will be known that it does not itself run a trading bank in competition with other trading banks. As I have gladly conceded on other occasions, those in control of the private banks have confidence in the present Governor and the board of the Commonwealth Bank, but that confidence arises from the good sense and integrity of the people concerned. lt is not the result of the system under which those people operate. There is a fear that the central bank, through its preoccupation with the management and control of a great and successful trading bank, the Commonwealth Trading Bank, could be diverted from its proper duty of holding a fair balance in the trading banking system. This fear militates against the establishment of a truly independent and strong reserve banking system in this country. That fear will now be overcome.

The criticism that we have heard from the Opposition has been built around the phrases, “ sell-out to the monopolies “, “ tools of the private bank “, and all the old stuff that we have heard ad nauseam in this House, and I do not believe that it will go down very well outside the ranks of Opposition members. Indeed, I do not detect any real enthusiasm for it even amongst honorable members opposite. They must surely be getting rather bored with the same old theme song.

There has been what I might call some right-wing criticism expressed outside this chamber. As a matter of fact, it has been more cogent than the criticism expressed here by the Opposition. At least it has been directed towards the measures themselves, and after some consideration of them. The first general line of this rightwing criticism is a fear that in the Commonwealth Banking Corporation there will be created a colossus which will eat up the private banking institutions of the country. Personally, I do not fear it. I understand, from what I have read, that those who run the private banking system do not fear it either. If there is any virtue in the private enterprise system, there is no need to fear it, because the more effective is the competition offered by the Commonwealth Banking Corporation, the more effective will be the response from the private banking institutions, and the country will benefit by all the advantages that flow from active competition for business.

Fears have been expressed about the Development Bank itself. Again I might call them right-wing fears. I believe them to be groundless. I have directed the attention of the House to the charter of the Development Bank. Its purpose, as clearly stated in clause 72 of the Commonwealth Banks Bill, is to assist those people who, because of their character, energy and training have prospects of success in primary or secondary industries or commercial undertakings, but who have not the kind of security that it attractive under the present banking system. As I understand it, the purpose of the Development Bank is not to finance vast undertakings with enormous amounts of capital. Big enterprises of that sort will raise their capital as they have done in the past. They will rely on issues of shares or debentures to the public or on loans from banks, either the Commonwealth Trading Bank or the private banks. Those are not the sort of undertakings to be assisted by the Development Bank. Small undertakings will look to that bank for assistance. This does not mean,, however, that the Development Bank will be a small bank. I hope it will be a bank of great importance and considerable size. The line of criticism to which I referred and which I believe to be groundless, arises from the power the Development Bank will have under the act to receive deposits. It could hardly be a bank if it did not have that power. We must remember that the whole constitutional basis of this legislation rests upon the banking powers set out in the Constitution.

Another fear has been expressed to the effect that the Development Bank might be able to expand its capital unduly. I believe that to be groundless also. The Development Bank commences with the present capital of the Mortgage Bank Department and Industrial Finance Department of the present Commonwealth Bank. It will be able to borrow, as other banks can; but that borrowing will be subject to the control of the Reserve Bank. It can borrow from the Treasury, but any money so borrowed will have to be voted by Parliament. Tt will have power to borrow up to £2.000,000 from the Reserve Bank, and beyond that amount the consent of the Treasurer will be necessary. The suggestion has been made that this power to borrow from the Reserve Bank should be subject to parliamentary approval. If capital over and above £2,000.000 is required by the Development Bank from the

Reserve Bank in this way, I do not believe it desirable that an ordinary banking transaction of that sort should be made the subject of political debate in Parliament. In any event, parliamentary surveillance’ over such a transaction is not necessary, because the safeguards already incorporated in the system are adequate. In the first place, the Development Bank has a board of its own which ‘has to initiate and approve such a matter. Secondly, it is subject to the control of the Reserve Bank; and thirdly, when an amount above £2,000,000 is involved, the approval of the Treasurer is necessary.

The ultimate control is this: Under this legislation a logical and effective banking system is set up. The Reserve Central Bank will be removed from other considerations and its sole duty will be to supervise the banking system in the interests of the national economy. In those circumstances I have no fear that the Development Bank will grow into some sort of colossus which will wipe out the other institutions, the Commonwealth Trading Bank and the private banks. The question I have referred to of parliamentary approval to loans of more than £2,000,000 is not a matter of great importance. There could be different views on it, but I am content with the system as outlined in this series of bills.

Turning again to the line of criticism offered by the Opposition that this is a sell-out to the private banks and that the intention is to wipe out the Commonwealth Trading Bank, I state quite clearly that the Commonwealth Trading Bank is an established institution enjoying wide public support and the approval of this Government. I entertain no idea, hope or expectation of any attempt, nor would I approve of one, to alter the nature of the Commonwealth Trading Bank as a government bank. I can say with assurance that the Government has no doubts about the validity of a government owning a trading bank in our banking set-up. What the Government desires, as this series of bills indicates, is to establish a banking system in which the public institutions will operate in fair competition with private institutions, so that Australia can enjoy the advantages of a private enterprise financial system in which government-owned banks play a part. The very establishment of the Development

Bank itself is an interesting illustration of the futility- of the Opposition’s line of criticism, that we are always “trying to sell out public institutions in the interests of private ones.

I believe the establishment of the Development Bank shows the modern liberal tendency, constantly illustrated by the actions of this Government, within a private enterprise system, to give to the public the advantages of publicly-run and publiclysupported institutions where a clear need for- them exists, but not- to allow them to operate so as to destroy or exclude private institutions. The sort of criticism to whichI have been referring arises from the preoccupation of the Opposition with nationalization and socialism. Honorable members opposite cannot think beyond that. The honorable member for Batman (Mr. Bird) said he wants the present bank with the present powers. Does he remember what he and his colleagues, said in 1953? They wanted the present institution then, and they want the present institution now. My hope is that if, in the distant future, Labour comes back to office, he will want to retain the existing system, which will be the system set up by these bills.

Mr SPEAKER:

– Order! The Minister’s time has expired.

Mr O’CONNOR:
Dalley

.- In order to convey my point of view I believe I can do no better than quote Professor Julian Huxley on the subject of usury. He said -

The most vital problem of these modern times is whether modern man, with the enormous powers science has recently placed in his power, will use it for advancement or insanely permit the cancer of usury to destroy himself and this civilization.

I think we live in an age when usury has become a virtue, and advocates of private enterprise believe that the making of profits is all that counts. As a layman participating in this debate, I shall also quote from Sir Basil Blackett, a noted London banker, who puts the matter in its proper perspective. In the 1931 Halley Stewart Lecture, entitled “The World’s Economic Crisis”, he stated -

It is said in proportion to their number there are more chess experts in the lunatic asylums than any other class, and next to them come currency experts. In view of what we have done with currency and what currency has done with us in the last twenty years, we are all of us fit for a lunatic asylum.

That being the opinion of a noted economist of his day, as a layman I am bold enough to take part in this debate and express my views about what is proposed by the Government in the legislation before the House.

A noticeable feature of the Government’s approach to this question has been its determination to destroy the impression that this legislation has not been brought down at the behest of the private trading banks. Even the private trading banks themselves have, at times, made that assertion. I think their determination to impress their views upon the Government, which they have succeeded in doing, has contributed to the financial and economic difficulties that have besieged this country during the last seven or eight years. As a result, legislative amendments involving major changes in the economy and financial structure of Australia have been made. On each occasion, these attempts have been made at the behest of the private trading banks.

I wish to refer to the report of the directors of the Commercial Banking Company of Sydney Limited, for the year ended 30th June, 1957, in the course of which the following statement is made: -

The views of the banks have repeatedly been brought before the government and we were pleased when the Prime Minister, on 10th April, 1957 announced proposals for amendments to the legislation. We now look forward to the introduction of new legislation embracing the principles we have advocated. The amendments desired are in conformity with sound banking principles and practice and in no way conflict with the legitimate aims of the Central Bank and good government.

Yet, the Minister for Air (Mr. Osborne) has attempted to deny that the campaign against the Commonwealth Bank has emanated from the private trading banks, despite conclusive evidence to the contrary! The Minister said that there had been a steady and mounting demand throughout the country for the legislation. A steady and mounting demand by whom? Obviously, by the private trading banks, which always have sought to neutralize the Commonwealth Bank. When the Treasurer (Sir Arthur Fadden) introduced this legislation, he might have been expected to attempt to justify it by reference to authorities that favoured it. He said that the legislation, in the view of the Government, was necessary, but the Government has accepted the views of the private trading banks, which are entirely opposed to the present banking system.

I turn now to the report of the Royal Commission on Monetary and Banking Systems, which considered the question of the separation of the central bank from the Commonwealth Bank. In dealing with this aspect, in paragraph 574, at page 223, the royal commission stated -

During the next few years, as the Bank developed the exercises of its central bank powers, mistakes were made, but this does not detract from our conclusion that the existence of the Commonwealth Bank, exercising central bank powers, has been of the utmost importance to the banking system and to the community.

There, we have the considered conclusion of the royal commission, which is at variance with the proposal that we are discussing. The Treasurer himself made it abundantly clear that this legislation was introduced in response to requests that had been made from time to time by the private trading banks. If the Minister for Air had taken the time to read the Treasurer’s speech, he would know that that is so. The right honorable gentleman stated -

The private banks have made it plain that they do not criticize the way in which the central bank has used the powers and functions it has under present legislation. On the contrary, they have been at pains to commend the competence, integrity and impartiality of the central bank. They say that their complaint is simply and solely against the banking legislation as it stands, and that their fears relate wholly to the wrong uses that might be made of that legislation.

So, in effect, the private trading banks have no reasonable ground of objection to the existing legislation, as it relates to the functions of the central bank. They have merely expressed certain fears, which leads one to think that, provided that an organization can base a case for protection on the fears that it holds, the Government must act.

Later in the Treasurer’s speech, he said -

There is one main reason why the Government has decided to separate the central bank from the rest of the Commonwealth Bank group - and it is a practical reason. Experience has shown that there cannot be full harmony within the Australian banking system, nor that close co-operation which ought to subsist between the central bank and the trading banks, until and unless this separation is effected.

Why cannot there be full harmony within the Australian banking system? If full harmony has not prevailed, I suggest that that has been due to the attitude of the private trading banks. The history of these banks demonstrates conclusively that they have been a disturbing force in the banking system. Until 1911, when the Commonwealth Bank was established, the banking arrangements of this country were handled exclusively by private trading banks, and from the very day of the inception of the Commonwealth Bank the private banks have not taken kindly to the change. They have always opposed changes in the banking system.

One might think that, having regard to the attitude of the private banks to this matter, they had fared badly under the banking arrangements; that they had been severely harassed; that they were carrying on under great difficulties; and that they were facing bankruptcy. But what has been their position down the years, under conditions which they claim to have been most adverse to them? We find that, from 1950 to 1955, they have been able to increase their combined capital by 40 per cent. In the same period, annual profits have risen from an average of 9.5 per cent, to 11.5 per cent. I suggest that banks which are making a revealed profit of approximately 11 per cent, per annum are not doing too badly. I use the words “ revealed profit “ advisedly, because it is widely accepted that nobody is able to analyse accurately the balance-sheets of the private trading banks. The Royal Commission on Monetary and Banking Systems, which attempted to do so, stated that the evidence indicated clearly that the banks were understating their profits by at least 10 per cent., and that they were also understating their concealed reserves by at least 10 per cent.

The supporters of this Government have tried, time and again, to prove that the private trading banks have had nothing to do with the introduction of this legislation, but Professor Arndt has shown the attitude of the private banks. I know that in some quarters the works of Professor Arndt are not sympathetically received, but I believe that those who dispute his findings should try to prove them wrong. In his latest work on banking in Australia, we have a highly documented book. If the views that are expressed in it are unpalatable to honorable members opposite, they should try to disprove them. The author shows that the private banks have tried to play a dual role in their attitude to the central bank. On the one hand they try to make out that they are in favour of such a policy, but on the other hand they make contradictory statements which show that they are attempting to bring about a change.. Professor Arndt, at page 197 of his book, writes -

During their united struggle against the greater threat of nationalisation, the trading banks thought it politic to soft-pedal their objections to the existing system of control. To quote one bank chairman’s solemn declaration-

He then quoted from the annual report of the chairman of the National Bank of Australasia Limited in 1949 in which the chairman said -

I state clearly this bank’s attitude towards the Banking Act of 1945. (1) At no time has thisbank, directly or indirectly attempted to attack the 1945 Act. … (3) This bank wholeheartedly accepts the principle of a Government central bank. (4) This bank agrees it is a duty of the central bank to give leadership to thefinancial system and that it is its duty to accept such leadership and abide by it.

That reflects the contradictory attitude of the private trading banks towards the question of a central bank. It is quite obvious that the trading banks themselves contributed to the downfall of the Chifley Government. Their interference in the politics of this country was completely unwarranted. Everybody knows perfectly well that not only the financial support which they gave to this Government but also the services of their staffs which they made available to it helped immeasurably to return this Government to office in 1949. When the chairman of the National Bank of Australasia was addressing his annual meeting he stated that it cost that bank at least £250,000 in contributions to the Liberal’ party’s funds to bring about the defeatof the Chifley Government. That statement was made by that gentleman. Most honorable members will remember the setup which prevailed in their electorates in- 1949. I had the good fortune to represent a fairly secure seat, but notwithstanding that fact a member of the staff of theBank of New South Wales was appointed” to do nothing else for twelve months thanto organize a campaign against me in my electorate. In view of the fact that the banks placed members of their staffs in electorates where they knew that the antiLabour candidate could not possibly win. what must they have done in cases where they thought they had a chance? Most members of the Opposition also recall that during that campaign at meeting after meeting they always found a coterie of employees of private trading banks who acted as spearheads in making interjections and disturbances. It is rather regrettable that the employees of the private trading banks could not have directed their energies to other interests, such as trying to bring about a better set of conditions for themselves, rather than allow themselves to be used as pawns in the campaign to defeat a Labour government.

The attitude of the private trading banks to the Labour government, as shown by the part they played in the 1949 election campaign, was obvious to every one. They have interfered in the politics of this country on a scale which no other organization has attempted to do. They have succeeded in having this legislation brought down to destroy their rival, the Commonwealth Bank. The Government has set up a central bank and has added to it the rural section of what was formerly the Commonwealth Bank. Why it has been necessary to add the rural section to the central reserve bank nobody has yet satisfactorily explained to me. That section which operated previously under the direction of the Commonwealth Bank Board now becomes a part of the Reserve Bank. This scheme which sets out to dismember completely the Commonwealth Bank has been evolved at the behest of the private trading banks.

The private trading banks have contended that the Commonwealth Bank is a rival which must be eliminated. At all times they have objected strongly to its existence, and at certain times they have not carried out the financial policy of this country as announced by the Commonwealth Bank Board. Evidence is to hand that on many occasions they have deliberately flouted the instructions and advice of the Commonwealth Bank Board. On the question of reserves, it has been demonstrated that only two private banks complied with the directives of the board.

They were the Commercial Bank of Australia and the Commonwealth Bank itself. The other trading banks refused to give information to the Commonwealth Bank. The private trading banks, as a result of the unrestricted activities and their attitude generally to the financial and monetary setup of Australia, have set themselves above the law and have considered that the only thing they are entitled to ask for and achieve is profits for themselves, irrespective of what happens to other people.

As a result of the sympathetic consideration which they receive from this Government, they have been allowed to enter the savings bank field. It is noteworthy that since the private trading banks have been operating in this sector, the activities of the Commonwealth Savings Bank have been curtailed. In the latest report of the Commonwealth Bank, the profit and loss account reveals that whereas the savings bank profit for 1956 was £725,186, last year it was £580,386. The profit of the Commonwealth Savings Bank over the last twelve months dropped by approximately £145,000. The private trading banks were allowed to come into the savings bank field, and that in itself has accentuated and accelerated inflation.

In addition, they have been permitted to enter the hire-purchase field. To-day, corporations and banks, including many of the private trading banks, have interests up to 50 per cent, in some of the larger hire-purchase companies. Overall, these corporations, large and small, have approximately £230,000,000 in circulation. These forces are concerned only with profitmaking, and by their activities they are constantly making money dearer by pushing up the interest rate. Therefore, it is idle for this Government to make statements full of cliches about the virtues of private enterprise, when it has in its hands a remedy which it refuses to use. It is quite obvious that the private trading banks wield an influence in the ranks of this Government. The fact that there is a small division of opinion in the ranks of Government members is quite obvious, but it counts for very little. If that opinion had had any influence it would have been able to stop legislation of this kind. But it is so small that, while a few Government supporters might be vocal in the party room, the Government brings down legislation at the behest of the private banks. Its supporters have succumbed to the pressure of the private trading banks.

The Government, as a result of its neverending legislation on behalf of the private trading banks in the last five or six years, has caused, in some degree, the fluctuations and contractions that have occurred in our economy, and the private trading banks have done very well under this system. One asks when they will ever be satisfied. Their attempts to destroy the Commonwealth Bank do them no credit and no credit is due to the Government for succumbing to their pressure.

Mr MALCOLM FRASER:
WANNON, VICTORIA · LP

– It is not surprising that the public is, at times, confused about many of the arguments put forward on a subject which is essentially a highly technical one. But if members of the public cannot, at all times, understand the technical arguments in relation to the Reserve Bank or the old central bank, I am quite sure that they can understand the political arguments that have been put forward by honorable members opposite and answered by honorable members on this side of the House.

The public can understand quite well that the Australian Labour party has been twice defeated on the banking issue at elections. That is not something which honorable gentlemen who are in opposition in this Parliament are likely to forget. Perhaps it is a pity that a subject with such possibilities for constructive debate should have been brought on to a highly political level. It should have been debated more on the economic issues that are involved and on the effects of central banking theory and practice, because both have great relevance to the bills now before the House.

There has been no mention in the debate, so far, of the inter-action of central banking policy and budget policy, nor of the interaction of those two things on exchange policy. In those three subjects alone, there would be sufficient material to provide debate in this House for many hours.

The Reserve Bank has three main objectives. Under section 10 of the Reserve Bank Bill, the first objective is to maintain the stability of the currency in Australia; the second objective is the maintenance of full employment in Australia; and the third objective is economic prosperity and the welfare of the people of Australia. It is worth noting that the Leader of the Opposition (Dr. Evatt) and the Deputy Leader of the Opposition (Mr. Calwell) both tried to make a cheap point on those objectives by saying that they had been left out of the charter of the Commonwealth Banking Corporation. If they had been a little more honest they would have said frankly that those objectives had never been written into the charter of the trading section of the Commonwealth Bank. They have only ever applied to the central bank and they still apply to the central bank - that is, to the reserve bank.

The three objectives that I have mentioned are not always complementary to each other. The stability of the currency in Australia can mean either of two things. It can mean the stability of the currency in relation to overseas economies and currencies or it can mean the stability of the currency inside Australia in relation to the Australian price level. The first interpretation of the term could be in conflict with the second two objectives - the maintenance of full employment and the economic prosperity and welfare of the people of Australia. Indeed it is almost true to say that the first interpretation which relates to the stability of the currency in Australia is a hangover from the old days of the gold standard when the central bank paid little or no attention to the questions of full employment, and the prosperity of people inside a country. It then looked to exchange and the relationship of the currency to overseas currencies far more than does the central bank, or any central bank, at present.

The three objectives of the Reserve Bank contain sufficient material for a great deal of debate, but they have received but scant attention, except from the honorable member for Melbourne Ports (Mr. Crean). The banking structure for which provision has been made in the bills before the House has been designed to meet Australia’s particular and peculiar needs. I should like to say a few words on four points - the principle of separation, the statutory deposit ratios, the special functions of the Australian banking institutions, and the Development Bank.

We cannot leave out the historic aspect of separation. Even though the Bank of England had originally been incorporated as a normal joint stock bank, in the last century it refused to accept any new trading bank account for the simple reason that it recognized that if it was to operate effectively as a central bank it must not compete in the banking structure. That attitude has been followed by central banks in every other country. I know that the honorable member for Melbourne Ports said that central bank activities and functions have changed and widened greatly since the 1930’s. That is true. But the principle of separation remains untouched by the new functions that have devolved upon central banks.

The history of the Commonwealth Bank itself supports that view. Up to the present time, it has never competed as actively as it could have competed, considering its deposits and reserves, with the private trading banks because it has been trying to set an example to the other trading banks, and because it has been tied to central banking functions. One Commonwealth Bank, in fact, implies that there is no real competition between the Commonwealth Trading Bank and the private trading banks. If that is Labour policy, it is not the policy on this side of the House.

In a period of inflation, the central bank exerts restraint through its special accounts procedure, now to be the statutory deposit system. It also exerts restraint through caution on the part of the Commonwealth Trading Bank. This means that the Commonwealth Trading Bank is going to have larger reserves and more liquid assets than the private trading banks and also inhibits the Commonwealth Trading Bank from engaging in as full competition as it might otherwise have undertaken with the private banks. This is borne out by the fact that over the last several years the ratio of liquid assets and government securities to total deposits, together with the special account ratio, of the Commonwealth Trading Bank has been generally 10 per cent, or more higher than the equivalent position for the private trading banks. Indeed, it is worth noting that over the last few years, the deposits of the Commonwealth Trading Bank have been increasing at a much greater rate than the deposits of the private trading banks. This shows all too clearly the latent competitive ability within the Commonwealth Trading Bank which will come into full play when these bills become law and the Commonwealth Trading Bank is no longer tied to the coat-tails of the central bank, as it has been since its introduction.

If we want active competition between the Commonwealth Bank and the private trading banks, and an active central bank, we must have two national banks. There are many authorities to support this point of view, one of whom the honorable member for Melbourne Ports tried to debunk to some extent. He was formerly a Labour Treasurer, Mr. Theodore. It is worth noting that Mr. Theodore, in introducing his bill, mentioned the very things that are primarily and significantly the reasons for this legislation. I should like to quote a little from his second-reading speech of 1930-

There are some who, while approving of a central reserve bank for Australia, think that we ought to allow the Commonwealth Bank gradually to become such a bank. They consider that there is no need to set up such an institution as the bill outlines. In answer to them, I can only point out that the Commonwealth Bank was established by its founders, and was carried on for a number of years, with an objective quite different from that desired in the establishment of a central reserve bank. The Commonwealth Bank was intended to be a trading institution, and to operate freely in competition with the private trading banks.

But it has never been able to operate as freely as it might, and if Theodore’s bill had become law the Commonwealth Trading Bank would have been an active competitor for over twenty years instead of never being as active as it could have been. He stated further -

An attempt was made to enable it to develop into a central reserve bank; but it has not succeeded in fulfilling the functions of such an institution, and cannot be regarded as a central reserve bank. The principal obstacle in the way of such development was the attitude towards the Commonwealth Bank of the private trading banks.

That is one of the obstacles that has prevented the Commonwealth Bank from acting as a true and proper central bank, and it is something that it is only sensible to try to overcome. That is one of the things that this bill tries to do. Mr. Theodore then said -

We do not desire to destroy the Commonwealth Bank.

Apparently somebody was laying that charge at his door also. He went on -

I do not think that there are many persons in the community who would like to see that bank abolished, or to see it retire entirely from the field of competition. We must, however, recognise the right of the private trading banks, and if we want a central reserve bank in Australia it must be an institution separate from the Commonwealth Bank. This bill proposes to set up such an institution.

I maintain that even though the functions and duties of central banking have widened considerably since 1930, and since the abandonment of the gold standard, nevertheless the principles outlined by Mr. Theodore and the subject-matter he dealt with, are still valid to-day. The Bank of England is a further authority for separation. Of its own volition, it apparently gave up its trading bank activities. The history of the Commonwealth Bank shows that if we want an active competitor and an active central bank, we must have two institutions. At the present time, we have the absurd position of the Governor occupying two jobs. In the first job he is trying to compete with the banks, and in the second job he is trying to control them. One of those functions must suffer. His Commonwealth Trading Bank function is the one that has suffered. When that situation ceases to exist, as a result of this new legislation, the Australian public will be better served by a more competitive system, because the Commonwealth Trading Bank will be able to compete more effectively with the private trading banks.

The Leader of the Opposition (Dr. Evatt) charged that the separation of the functions of the Commonwealth Bank has been undertaken at the wish of the private trading banks, that the bill had been brought in for that reason. That is no reason to reject or to oppose this bill. The fact that a particular person does support a measure does not mean that the measure is a bad one. That person may be prejudiced or biased. If we can be unprejudiced judges we can look at his criticism or advocacy in that light. Surely honorable members opposite would not reject the claims of any trade union in respect of any particular measure or bill because the advocacy came from a trade union leader or secretary.

The banks have had their legitimate fears. Under the old legislation, there was the power of discrimination through special accounts. Even though that power may not have been used, the possibility that it could be used was present, and the banks had two good reasons for thinking that the power may be used. Under the initial legislation, the special account procedure did not apply to the Commonwealth Trading Bank. The second reason was that in 1947 Labour tried to nationalize the banks. Therefore, quite honestly, and with justice the private banks fear what could happen under the existing legislation. That being so, it was only sensible to try to do away with those fears in the interests of a sound and better banking system throughout Australia, and that is what the Government is trying to do.

I should like to say a few words about the statutory deposits ratio. This is a simple and a strong power. I cannot agree with the Leader of the Opposition and other honorable members opposite who claim that the requirement of 45 days’ notice is unreasonable and will unduly weaken the central bank. Any governor of a central bank, if he knows his job and his functions, will be able to look sufficiently far into the future to be able to predict whether that power will be needed. I should like to give an instance of when that power may be needed. In order to prevent great or sudden inflation, it may be necessary to call up more than the 25 per cent., which is allowed without any special notice. If the price of wool doubled overnight, that situation would arise, although its effect would not be felt throughout the Australian economy until a considerably longer period than 45 days had elapsed. In the first place, it is at least one month after a person sells his wool before he gets his return. In the early stage of a sale, only a few people sell their wool in any case, and the total amount concerned is not very great. I believe that for any emergency that could be envisaged the 45 days’ notice would be quite adequate, because a reasonable and sensible government would be able to predict with accuracy whether that power would be needed. Furthermore, under this provision the power to discriminate between one bank and another is abolished, again eliminating a further fear which the private banks have held.

The honorable member for Melbourne Ports compared this particular power with the powers of the Bank of England and the reserve banks of the United States. But the honorable member was not quite accurate in his assessment of what happened in those two countries. He claimed that the Bank of England could use two separate powers. The first, he said, was the bank rate, and the second the open market operations through the discount houses. But it has only one power. Raising or lowering the bank rate is quite meaningless unless the bank at the same time intends to force the discount market into the bank to make that rate effective. The Bank of England has only one, not two powers.

Mr Crean:

– This is only half a power.

Mr MALCOLM FRASER:
WANNON, VICTORIA · LP

– It is an entirely different power, because the Bank of England has no power at all over the liquidity ratios of the different banks. I admit that the custom is rigid, that those liquidity ratios will be maintained at one particular place. But here our liquidity ratios are not so rigid and therefore we have a power which is, in effect, more drastic and more severe than the open market bank rate power of the Bank of England, in that the ratios can be raised or lowered quickly by the central bank without waiting for the delay which inevitably occurs through open market operations.

Also, as the honorable member for Melbourne Ports mentioned, we have no shortterm money market, and that is the principal reason why open-market operations cannot be successful in this country. Another reason why they have not been successful here is that liquidity ratios have not been so stable in Australia as they have been in the United Kingdom. But it is worth noticing that, over the last four years, during a period of inflation when the prices of government bonds have been low, and the return to people who wish to sell them has been unduly small, the central bank, instead of buying and selling freely on the open market in the normal way, has done far more buying than selling, in an effort to keep interest rates down and to keep the values of government bonds higher than they would have been if it had bought and sold in order to strengthen the special accounts procedure. This is just another reason why open-market operations are not effective in Australia.

I want to emphasize, as the honorable member for Melbourne Ports said, that the effectiveness of changes in the statutoryreserves depends upon the stability of the”ratio of liquid assets and government securities to total assets - commonly called the L.G.S. ratio - and it is up to the private banks to play the game, and to make sure that they maintain proper ratios within normal seasonal operations. If they do not, movements of the statutory reserves will have to be much greater than would otherwise be necessary.

I wish to refer now to one further special function in Australian banking - that undertaken by the Rural Credits Department, which will now be part of the proposed Reserve Bank of Australia. The honorable member for Bonython (Mr. Makin) said that the Rural Credits Department had been left with the Reserve Bank as a sop to our friends on my right, who belong to the Australian Country party. That statement shows how little the honorable member knows about Australian banking in particular, and about the shortcomings of a banking system that has no traditions going back over a long period as is the case in the United Kingdom. The Rural Credits Department would not be needed in Australia if there were a shortterm bills market, as there is in the United Kingdom, where the bills discounted very largely cover goods held in store, or goods in transit. I suggest that that is very largely the purpose of the Rural Credits Department in relation to primary industry, because the primary producer does not receive the return from the sale of his products until a considerable time after they pass out of his hands. Because there is no short-term money market, it became necessary years ago to establish a special department of the Commonwealth Bank peculiarly adapted to Australia’s situation. Quite clearly, owing to the peculiarities of the Australian banking system, this department can be attached only to the proposed Reserve Bank.

Fourthly, I want to discuss the proposed Commonwealth Development Bank. In his second-reading speech on the Commonwealth Banks Bill 1957, the Treasurer (Sir Arthur Fadden) outlined the functions of this bank as follows: -

Its function will be to provide finance to assist primary production or the establishment or development of industrial undertakings, especially small undertakings, in cases where in its opinion the provision of finance is desirable and the finance would not otherwise be available on reasonable and suitable terms and conditions . . in determining whether or not finance shall be provided in any case, the Development (Bank shall have regard primarily to the prosspects of the enterprise becoming, or continuing to be, successful, and shall not necessarily have regard to the value of the security available.

I believe, Mr. Acting Deputy Speaker, that this represents the most important change in rural policy in Australia for many years.

Mr Forbes:

– Hear, hear!

Mr Drummond:

– Hear, hear!

Mr MALCOLM FRASER:
WANNON, VICTORIA · LP

– I am glad to receive some support for my remarks on this proposal. It will do for primary producers and primary industry what has been done for secondary industry since 1945, when the Industrial Finance Department of the present Commonwealth Bank was established. A man’s character, and the profitability of his undertaking and its prospects of success, will be taken into consideration in determining whether he should be given a loan, just as they have been taken into consideration with respect to small secondary industries. This change has long been needed. In the past, many primary producers have been unable to improve and develop their properties because they lacked capital for development. This applied in particular to small farmers and producers, who could not improve their farms out of income, because, if their income was not above a certain level, the benefit of the special depreciation allowances was not available to them, and because family living expenses competed for the funds that they had available, which otherwise would have been put into the development of their properties. I hope that, when the proposed Development Bank is operating, many farmers will be able to lift their incomes to a level at which they will be able to take advantage of the special depreciation allowances, which have done much to help increase rural output throughout Australia.

There has been some criticism of the proposed borrowing powers of the Development Bank. If we examine the Commonwealth Banks Bill 1957 closely, and compare it with the Commonwealth Bank Act of 1945, we find that the changes are not so great as some people seem to fear.

The chief change relates to the security required of primary producers, who will now be treated in the same way that people who wish to establish small secondary industries have been treated since 1945. Since it is only reasonable to expect that this treatment will bring a new group of people to the doors of the proposed bank, which will take over the present capital and reserve funds of the Mortgage Bank Department and the Industrial Finance Department of the present Commonwealth Bank, the capital of those two departments being transferred to the new bank is to be increased by £5,000,000. In addition, the Development Bank will be able to borrow from the Reserve Bank, £2,000,000, or more with the approval of the Treasurer.

Some honorable members have criticized this proposal, and have asked why the proposed Development Bank should be able to get this additional capital if the trading banks cannot get additional capital. The truth of the matter is that the trading banks can go to the proposed Reserve Bank, as the lender of last resort, and I understand that there is practically no limit on that function of the bank. I believe that the powers of the Development Bank were limited because of the peculiar functions that it will perform. Its loans will be less secure than are the loans of a normal trading bank. Because of the nature of its business, and the purpose that it is designed to fulfil in relation to primary industry, it may well be that, owing to drought or adverse movements of the prices of primary products, the ability of many primary producers to repay the bank may be materially affected, and they may not be able to repay within the time expected by the bank. In such circumstances, the bank could borrow from the Reserve Bank. I believe that a limit on the amount that it may borrow without the Treasurer’s approval has been imposed in order to prevent the Development Bank from unduly exercising its powers, and from making too many advances without the knowledge of the Treasurer.

With respect to advances by the Treasurer, the provisions of section 85 of the Commonwealth Banks Bill 1957 are exactly the same as those of sections 79 and 98 of the Commonwealth Bank Act of 1945, which provided for the Mortgage Bank Department and the Industrial Finance Department of the present Commonwealth Bank. With respect to the Commonwealth Savings Bank, advances will be permissible without limit, as they were under the provisions of sections 77 and 99 of the 1945 act. The Leader of the Opposition asked why the proposed Development Bank should have access to the proposed Reserve Bank, if the trading banks had not, and he claimed that because of this the trading banks would be short of capital. But he did not say that the trading banks rely for their expansion upon increases in their deposits, and that the capital behind a trading bank is relatively unimportant in its normal functions.

I believe that, even if there were nol other great achievements to the credit of the Treasurer, he would be remembered for these memorable measures. He has established three things that will live, despite the prognostications of Opposition members. First, he has established sound central banking in Australia. Secondly, he has ensured active and fair trading competition between the public bank and the private banks. Thirdly, he has established a Development Bank to answer Australia’s peculiar developmental needs - a bank that will do a great deal to help the primary producers of this country in the years to come.

Mr BRYANT:
Wills

.- The honorable member for Wannon (Mr. Malcolm Fraser) has been perhaps only slightly more persuasive than other honorable members on the Government side. He mentioned the position regarding liquidity ratios in England. Australian conditions are completely different from the conditions in England. The Australian constitutional situation, and this Parliament’s power over banks and financial institutions, are completely different from the power lodged in the British Parliament. Therefore, from that angle, we can afford to take fewer risks in this country than can be taken in the United Kingdom. The honorable member referred to the fact that the Bank of England has no overriding power over the liquidity ratios. But he then admitted that there were certain traditions and precedents which applied in that field, and prevented banks from doing anything but obey the Bank of England. Anybody who has studied the constitutional and legal history of England knows exactly how strong precedent and tradition are in the governmental structure of that country. Whereas the United

Kingdom Government is in a position to issue orders to private banks, because of our peculiar constitutional position and governmental structure the Australian Government accepts its orders from the private banks. That is one of the points I should like to make in joining issue with the honorable member for Wannon. In tha matter of the central bank’s measure of control over the whole banking structure, thehonorable gentleman said that as a result of.’ the separation of the Commonwealth Trading Bank from the central bank the Trading Bank would be in a position to enter into competition with the private banks in a bigger, brighter and better way. That is something of which we on this side of the House would approve. But the whole structure of central banking is based on the central banks being able to issue orders controlling the banking structure. What is achieved by breaking away the Reserve Bank of Australia, as it is now to be called, from the Trading Bank? In Australia we have eight trading banks - the Commonwealth Trading Bank and seven private trading banks. Through the Commonwealth Trading Bank - an integral part of the structure of the banking system - the central bank has controlled at least one-eighth of the general trading in the banking system. In other words, even if the private banks chose to ignore the instructions of the central bank there was one-eighth of the system already inside its rigid control. Therefore, all that is done, in the light of the argument of the honorable member for Wannon, by separating the central bank and the Commonwealth Trading Bank, is to remove from the field of our control that proportion of the banking structure over which we have had absolute control. This is a serious matter, because one has only to read the reports of the Governor of the Commonwealth Bank, in which he analysed the liquidity position of the various banks, to see how the private banking structure has failed to honour in any way the more or less implied agreement or gentlemen’s agreement entered into by them. I believe the Banking Act should have been strengthened so that these orders could have been issued and properly obeyed, but in fact, the private trading banks - seven-eighths of the trading bank structure in this country - have mostly chosen to ignore the instructions of the central bank or the general principles and policies expressed by it in its desire to maintain certain liquidity ratios. The general English position is that liquidity is based on a ratio of about 30 per cent. But if you have a look at the position of the private trading banks in Australia, as expressed in the figures which were given to the honorable member for Melbourne Ports (Mr. Crean) in answer to a question some time back, you will see that their liquidity ranged as low as 6.4 per cent, in 1955 - and it has been the same since. This is a very serious matter and I think that a subject that ought to come up for very close scrutiny in this House is the power of the private banks to avoid obeying the instruction of the central bank, the position in which this has placed them in relation to the creation of credit, and the position the Government is in through not being able to exercise full control over the credit and financial structure of the nation. That is very important, and I hope I will have time to refer to it later.

Those are the general principles of the speech of the honorable member for Wannon to which I want to refer. He was inclined to use such emotional words as “ fair “, “ just “, “ true “ and “ proper “. These are all very fine words, but in referring to a very abstract system like the banking system I am not too sure that “ true “ and “ proper “ and “ just “ are the correct terms. There is one thing that has to be just about it. Does it work for the benefit of the citizens of Australia? Does it allow this Parliament, expressing the viewpoint of the Australian citizenry generally, to exercise complete control over the banking system? That is the way in which I would desire to look at the banking structure.

The honorable member for Wannon said that the Leader of the Opposition (Dr. Evatt) and the Deputy Leader of the Opposition (Mr. Calwell) had tried to score cheap debating points by saying that the charter had been ignored. The position is that the charter of the Commonwealth Bank is set out in section 8 of the 1945-53 legislation as follows: -

It shall be the duty of the Commonwealth Bank within the limits of its powers, to pursue a monetary and banking policy directed to the greatest advantage of the people of Australia, and to exercise its powers under this Act and the

Banking Act 194S in such a manner as, in the opinion of the Bank, will best contribute to the stability of the currency of Australia; the maintenance of full employment in Australia; and the economic prosperity and welfare of the people of Australia.

The relevant section in the Commonwealth Banks Bill is clause 9, part 2, which reads -

It is the duty of the Board, within the limits of its powers, to ensure that the policy of the Corporation, and the banking policy of the Trading Bank, of the Savings Bank and of the Development Bank, are directed to the greatest advantage of the people of Australia and have due regard to the stability and balanced development of the Australian economy.

There is a fundamental difference between the approach of the old act and that of the new legislation. The Labour party and the people of this country believe in the maintenance of full employment. That is a fundamental part of their political philosophy. Its removal from the charter of the new bank is no accident. I do not say it is done with the suggestion that will at some stage accept unemployment as a piece of Government policy, but it does show that the Government will bring to any consideration of these problems a policy based on abstractions and mechanics, disregarding the human element. We believe that the development of the human being, his rights and his protection, was part of the reason for this bank’s very being and has been the whole basis of its policy over the 40-odd years since it was established. I say that this is a fundamental change in banking viewpoint which may react very seriously to the detriment of Australia in the long run. I believe that the Government has, in the last seven or eight years, not used any of its powers to direct the bank on special matters in the national interest. But the bank has taken no particular action to assist in respect of, say, the unemployment that has developed in the building industry or in the coal mines - fields in which, under the various powers in the Commonwealth Bank Act it could have taken specific steps. That is more than a cheap point. It is a fundamental change and I support the view expressed by the leaders on this side of the House that it is something to which the people could at least turn their minds when considering the very basis for this legislation.

There are numerous points of criticism that we have to offer. In the first place we are interfering with a unified financial structure which is a going concern. There has been some suggestion that we are inclined to look at the banking system from the point of view of vandals. A person who breaks up or dismembers something that is already a going concern which is working effectively is a vandal. We object to the breaking up of the unity of the Commonwealth Bank. I believe that the introduction of more outside people into the control of the bank’s affairs and the creation of new boards is not going to make it any easier to control the system generally. The Commonwealth Bank and the Government have failed to take firm steps in the past to control liquidity ratios. In other words, there has been over the last few years no effective control over the private banking structure and this makes the position worse.

Honorable members on the other side of the House have made quite a song about the Development Bank. What are the facts? By the provisions of clause 72 of the bill the Government has chosen to step into a field of banking that is not profitable for private enterprise, and it will use the people’s money for this purpose. This kind of action, of course, is fundamental to the Government’s policy. If we examine the speech of the Minister for the Interior (Mr. Fairhall), we are forced to the conclusion that he contends that government enterprise exists only to encourage and protect private enterprise and all it stands for.

We believe that the legislation presented by the Government will interfere with the ability of the Commonwealth Bank to expand its activities, because the taxation provisions of the legislation will reduce the amount of capital available to the bank for expansion. After all, the bank has only its own capital upon which to build. It has not the ability, as the private banks have, to call up new capital or to water its stock. It must rely upon its own dynamics, and I believe that the taxation provisions of this bill will stifle it.

Mr Anderson:

– Why?

Mr BRYANT:

– I shall explain that directly, but if the honorable member reads the speech of the Leader of the Opposition (Dr. Evatt), he will find explained quite clearly the reasons why the taxation provisions will reduce the capital available to the bank. The removal of what might be called the unemployment plank from the charter of the Commonwealth Bank is another matter to which objection must be taken.

One of the most objectionable features of the whole legislation is that it has been brought down at the behest of the private banks.

Mr Mackinnon:

– Ah!

Mr BRYANT:

– I do not know whether the honorable member for Corangamite is gasping with horror or dismay, or whether he is indicating agreement with my proposition. However, I. will cite the statements of the Treasurer (Sir Arthur Fadden) and of various representatives of the private banks, and if they do not clearly indicate that this legislation has been brought down at what almost amounts to the direction of the private banks, then the honorable member can endeavour to explain the remarkable coincidences that are evident from a study of those statements.

This legislation will blunt the efficiency of the central bank by removing the trading section from it. I believe that the provisions for 45 days’ notice of calling up money into extra reserves will reduce the flexibility of the bank and cut down its power to take action at any given time.

The fraction izing of the whole structure of the Commonwealth Bank, at a time when all commercial institutions are amalgamating in order to achieve more power, seems to me to be a move contrary to present trends in industry in this country. It will weaken the government organizations in a fundamental way. I believe, also, that we should give some consideration to the proposed interference with the administration of the bank. I think it was the Minister for the Interior who said that there will be some heart-burnings on the part of the staff. Apparently the heartburnings on the part of some 4,000 or 5,000 staff are as nothing compared with the heart-burnings of the 48 directors of the private banks. One honorable member on this side points out that the total cost of this administrative interference will possibly be of the order of £3,000,000. I direct attention, too, to the petty decision that the central bank must remove itself, lock stock and barrel, bag and baggage, from the head office in Sydney, and find itself a home somewhere else.

These proposals are indefensible, and they can be traced to a tendency on the part of honorable members on the Government side - in fact a wild desire on the part of many of them - to strangle and stifle the Commonwealth Bank because they have some feelings of loyalty to the private banking system. Private banking means something to them which, so far, they have not been able adequately to explain to those who have listened carefully to their speeches. There is something about private banking that means more to them than the lives and individual freedom of the people in the community generally, and it is idle for them to use high-flown terms such as those used by the honorable member for Maribyrnong (Mr. Stokes), who concluded his speech by saying that he believes in private liberty. We have only to examine other legislation of this Government, such as the Commonwealth Conciliation and Arbitration Act and the bill introduced in 1951 which vitally affected civil liberties to realize just how serious it is for Government supporters to speak of liberty in association with private banking. I suppose they mean that we are all at liberty to start a bank if we wish to. These arguments by Government supporters concerning individual liberties have no validity in this debate.

One of the most amusing aspects of this matter is the contrast between the statements made by what we might call the upper hierarchy of the Government and the liberal sentiments expressed by honorable members who occupy the back benches on the Government side, and who do not have to be directly responsible for these matters of policy. The honorable member for Wannon (Mr. Malcolm Fraser) spoke about competition, but I do not remember his exact words. Let us consider the remarks of the honorable member for Barker (Mr. Forbes), who said -

More vigorous competition will be introduced into the banking field.

Earlier in the debate on the same day, 12th November, the Minister for Primary Industry (Mr. McMahon) said -

The Commonwealth Trading Bank associated with it, might become too big a competitor and in time might drive them out of the banking field.

What, exactly, does the Government think? Here we see a fundamental contradiction. Almost every back-bencher on the Government side has raised the point that the bill allows the Commonwealth Bank to step into the field as a competitor, and every Minister who has spoken has expressed the contrary view. Of course, these contradictions merely illustrate the authoritarian structure of the Government parties, because, despite this actual conflict between the views of back-benchers and of Ministers, the back-benchers will toe the line when they are called upon to do so. Of course, in the end it will not do them any good, because there are 30 senators who will see that this legislation does not become law and inflict itself on the Australian people. We can give a guarantee of that.

I have spoken of the points of contradiction in statements of honorable members opposite. One of the other aspects of the debate that intrigued me was the highly doctrinaire approach by some of the leading lights on the Government side. The Minister for Works (Mr. Fairhall), who is more notable for doctrine than humanity in the handling of the affairs of his department, said on 7th November -

The Government has no function in trade.

What does that mean to Trans-Australia Airlines, to the Commonwealth Bank and to other enterprises controlled by the Government, such as the timber undertaking in New Guinea? The Minister continued -

Wherever a Government trades it finally starts to prostitute its legislative powers in order to protect the business which it has no right to be in, anyway.

What is the menace hidden behind that statement? We have all seen and heard the Minister for the Interior in this House, He puts up a great show. He is a rising, star. If this Government survives much longer - and I doubt that it will - he will be one of the formative policy-makers of the Government. The people of Australia should watch the position very carefully, because persons who express opinions such as I have cited are not to be trusted with the control of Australia’s financial institution.

I say to honorable members opposite, who drowse and dream rather than consider these important matters, that Australian development has been largely the result of government enterprise, whether in the fields of whaling, banking, aviation, oil search or coal-mining. Whenever a developmental activity has become too difficult for private enterprise, the government has stepped in and done the job, and this Government is now pursuing its doctrinaire course of getting rid of all profitable government enterprises. It cannot, of course, remove the Commonwealth Bank, because the influence of that bank reaches out into the home of nearly every Australian person. If you interfere with the Commonwealth Bank, you interfere with something that has strong roots in the Australian community. The Commonwealth Savings Bank, for instance, has 6,207 branches or agencies, and approximately 4,700,000 accounts. More than half of the people in Australia have accounts with this bank. It is all very well to come here and talk about the rights of the private banks, and about private bank deposits, but the Commonwealth Bank is something that is fundamental to every Australian. The Trading Bank itself is continually expanding despite the restrictions placed upon it by the traditions of the past. It now has 604 branches throughout Australia with something like 500,000 depositors. We need only refer to the following words of Mr. Staniforth Ricketson, a prominent businessman -

When the private banks could no longer meet the expanding needs of their customers, the Commonwealth Trading Bank, by virtue of its strong liquid position, was able, and quite properly in the national interest was ready, to expand its advances, thus inevitably attracting to its fold important customers of the private trading banks.

In effect, the Commonwealth Bank, a government institution, has been able to set the pace and outpace those who are supposed to be the monarchs of private enterprise. Therefore, any step which is taken to interfere with the strength of this business and Parliamentary control over it, is to be strongly resisted at every point; and, let there be no doubt, it will be resisted at every point.

I will now refer briefly to the matter of outside pressure. That brings some snorts from honorable members opposite.

Mr Stewart:

– And snores.

Mr BRYANT:

– They will not go to sleep while I am talking; I will see to that.

The honorable member for Barker (Mr. Forbes) spoke about true democrats. Imagine a Liberal party member from South Australia speaking about true democracy! It does not make sense when we know how the franchise is restricted under the electoral system in that State. Sir Arthur Rymill, chairman of the Bank of Adelaide, is one of the democrats in the Legislative Council in South Australia - one of the bastions of democracy that the Liberal party maintains.

Mr Mackinnon:

– A product of a great State.

Mr BRYANT:

– A product of a Great Public School should look at the expenditure by the South Australian Government on its State schools system before he talks about products. At the annual meeting of the Bank of Adelaide, the chairman, Sir Arthur Rymill, said yesterday -

The proposed banking legislation closely followed the recommendation long urged by the private trading banks.

I do not know how many attended that annual meeting; but if we regard liquidity as being important, I know that the liquidity of the Bank of Adelaide dropped to an alarming degree. Let us examine the pressure from outside. The honorable member for Wannon (Mr. Malcolm Fraser) said that this legislation was one of the Treasurer’s great achievements. As far as the Opposition can ascertain, the Treasurer’s greatest achievement has been in fights and barneys in the party room to prevent this bill from being worse than it is. The Treasurer said -

There is no essential reason why, under the present system, there need be such lack of confidence, we cannot deny it exists; nor can we deny that, while it exists, it must constitute a barrier to the achievement of a truly satisfactory banking system.

There are 48 directors of the private banks. We must have confidence in these 48 monarchs of private enterprise. The private banks have expressed fears about the use that might be made of the system of special accounts. In his second reading speech, the Treasurer stated -

Eventually the private banks submitted revised proposals which, while not wholly satisfactory from our standpoint, did offer a basis on which we could create a new system- and so on and so on. That is a statement by the Treasurer, one of the leaders of the

Government. A statement by the president of the Bank of New South Wales in November, 1952, reads -

The structure of the Commonwealth Bank, which combines central banking, trading and specialized functions, is not conducive to the unbiased leadership of the present banking system.

Again, in November, 1956, Sir Leslie Moreshead, the then president of the Bank of New South Wales, said -

Existing legislation could be manipulated as the weapon for nationalizing the banking system and for the ultimate control of industry and commerce.

In 1952, Sir Edward Knox, chairman of the Commercial Banking Company of Sydney Limited, stated -

The competitive trading sections of the Central Bank are a serious barrier to complete confidence and co-operative goodwill.

These are very powerful citizens who are on the Government’s side politically, and they seem to have taken very successful action. Mr. H. D. Giddy - and nobody could deny his persuasive power; I think he is chairman of the National Bank of Australasia Limited and a director of the Melbourne “ Herald “ and broadcasting and television stations-

Mr Mackinnon:

– A very competent man.

Mr BRYANT:

– I am not denying that, but his very competence makes him a danger to the community when he obtains too much power. The very competence of these people, successful in their own field, makes them dangerous because it is their duty to consider first their shareholders and not the welfare of the nation or the stability of the currency. Their very competence and strength make it even more necessary that this Parliament should ensure that not one jot or tittle of its power is handed to outsiders. For that reason we oppose this bill tooth and nail and will fight it to the last ditch. We may even have our Christmas dinner here.

I summarize our position. First, we oppose the measure in view of the very strong evidence that this bill is the product of pressure on the Government from the private banking structure. Honorable members need only read the reports of the private banks, the article by Mr. Staniforth Ricketson in “The Banker” of January, 1957, and recall the protests made year after year by Government backbenchers to know that this measure is the product, not of people anxious to preserve the way of life of the Australian people, but of some people who have some mystical viewpoint of the rights of private bankers in the national structure. I believe we have turned the clock back 300 years. On 13th October, 1660, Samuel Pepys said -

I went out lo Charing Cross to see MajorGeneral Harrison hanged, drawn and quartered; which was done there, he looking as cheerful as any man could do in that condition.

In this case the Governor of the Commonwealth Bank cannot be hanged, drawn and quartered, but the instrumentality he controls can be quartered and scattered. It can be ruined and prevented from expanding in the way it should. Just as in 1649 the people in England fought out the matter of responsibility for political organization, in 1957 we have to fight out the matter of responsibility for financial organization.

Mr DEPUTY SPEAKER (Mr Adermann:
FISHER, QUEENSLAND

– Order! The honorable member’s time has expired.

Mr DRUMMOND:
New England

– As honorable members on both sides have consistently claimed, the measures before the House form some of the most important legislation presented to this Parliament. The first thing to be considered is the Government’s record in regard to banking legislation since it took office. This Government came to office at a time when the people of the nation were gravely concerned about what they deemed - and I think rightly deemed - to be an attack on their financial independence and by implication, an attack against every private liberty that they possessed. I say that advisedly, because before this Government first came to office there had been an attempt by the government of the day to assert complete supremacy over the whole financial system of the country.

It has been said in this House that those associated with private trading banks and other financial organizations contributed liberally towards the defeat of the government of that day. Surely it would be extraordinary if the people, who naturally had leadership in the community and the means at their disposal, did not do what most people do when they are attacked and in danger, financially or otherwise, and retaliate with everything in their power! I think that the members of the Opposition who frequently put forward this point of view as something derogatory of people associated with finance and this Government, entirely overlook the fact that, since then, the Government has been returned to office on three other occasions. It was quite possible for the electors, if they thought they had made a mistake in the first place, to proceed to rectify their mistake. But they have not done so. Therefore, these red herrings which have been trailed across the track have had little effect upon the people of Australia, who have endorsed the actions of the Government.

Nevertheless, I am not oblivious of the fact, nor is any honorable member, that there has been criticism of the Government on the score that it has failed in the past to strengthen the financial structure and to ensure reasonable financial stability for individuals and corporations. I say that if those who have criticized in this way consider what is involved in bringing about a complete change in a system that has operated since 1909, when, I think, the first step was taken, they will see that the Government has acted with both wisdom and restraint. There has been wisdom in the soundness of the measures that have been taken, and there has been restraint in that the Government has not permitted itself to be bustled into action for which neither it nor the nation was ready.

It is easy to smash a case of eggs, but it is exceedingly difficult, if not impossible, to unscramble them. There may now be some mechanical process, of which I am not aware, for doing that, but I think that the point of the nursery rhyme about Humpty-Dumpty who fell off the wall still holds good. We have before us at the present time, although we are not debating them in their entirety, no fewer than fourteen bills which are associated with this final step that the Government is taking to re-organize the public banking system of Australia. Four very important measures are being debated in globo, although I understand that they will be dealt with separately at the committee stage. These four measures alone represent a great deal of work. When we consider, also, that there are ten other machinery measures, some of which are extraordinarily important, I think that the public of Australia will have some conception of the magnitude of the task which confronted, first of all, the Treasurer (Sir Arthur Fadden), as the responsible Minister, and then the Government, in attacking this problem. They have acted with restraint and a sense of responsibility. In bringing before the House the measure that we are now discussing, I believe that they were inspired by a desire to give to Australia a workable and sound reserve bank, to give stability to the Commonwealth Bank and its various branches, and to preserve to the private trading banks, which have played an enormous part in the development of this country, reasonable security. I understand that the first bank in Australia was the great trading bank known as the Bank of New South Wales. It has served throughout the years, with the various other banks that have been established, in a way that has been of major value to this country, through all phases of its economic and other troubles.

I think that it would be entirely beside the point if we failed to appreciate that, underlying the objections which are brought forward, to the existing legislation on the one hand and to the proposed legislation on the other, there are certain political philosophies and conceptions which should be kept in mind. The background of the bills before us is a struggle between people who have three different conceptions of public finance. The first group is that section of the community - I do not think that it is a very great section, but nevertheless it is one that lingers - which believes in complete laisser faire for private finance and private enterprise, without any trammelling by government action, whether by means of legislation or otherwise. Then there is the socialistic idea of the use of public finance for the nationalization of the means of production, distribution and exchange. Those who belong to that school of thought believe that if the whole of public finance can be brought under control, particularly of a central government, it is possible to mobilize that finance in such a way that the nation itself will become better integrated and stronger. I do not intend to develop that idea, but pass on to the third group which supports the international Communist conception of the control of all finance as a means to the so-called dictatorship of the proletariat. The methods that the Communists would use, apart from the application of force instead of constitutional action, follow the lines of the socialistic conception. In effect, they involve the complete subservience of the many for the benefit of the few.

When we discuss legislation, we are entitled to address ourselves to the underlying principles of it rather than to attempt to deal with it as we do at the committee stage. The whole idea of debate at the second-reading stage, of course, is essentially one of discussion of principle. So I say that behind this legislation, though it may be relatively dormant at the present time, there is a clash of three different schools of thought, and that also behind it lies the threat, so clearly stated by Lenin, who launched the Russian revolution. His thesis was that he who has complete control of the finance of a country will control everything else. That is a selfevident factor.

As I interpret the policy of this Government, expressed in the measure before us, it adheres to none of those three schools of thought. It believes that there is a supreme danger to the private independence and personal integrity of every man, woman and child if the point is reached where the whole of the financial control is placed in the hands of a ruling group, however beautiful may be its name or -whatever attempts are made to cover up the wolf with the clothing of human brotherhood. This Government, and certainly the party of which I am a member - I am sure that I interpret correctly the ideas of those with whom I am associated - believe that this danger should be provided against by every possible means in our power and that we should ensure to the people of Australia that no one group, either of the right, left, or anywhere else shall be able to get complete control of the financial machinery of Australia. Once that is permitted to happen, the point is reached at which Lenin pointed out the country would arrive and, consequently, power would be given to a group to control not only finance but also every other activity of the community.

In the banking legislation which the Government has brought forward it has en deavoured to ensure, as far as an act of Parliament can, that on one hand the public financial institutions shall have their reasonable rights preserved and, on the other hand, that the private banking interests and private enterprise shall be given reasonable freedom, and that in the Reserve Bank there shall be embodied principles which will enable it, in time of crisis, to control certain of the financial aspects of our economy, and also to prevent crises from occurring.

I wish to quote from a letter written by an extremely eminent constitutional lawyer no less than fifteen years ago. I cannot mention his name, not only because of the rules of the House, but also because I cannot ask him for his permission to do so. Upon this subject he wrote -

I think one might point out that times have changed since it was said that one Parliament could always undo the mistakes of another. If Lang’s proposals had been carried out changes would have been made which would have been irreparable. It might also have been pointed out that a political leader, strong enough to coerce his followers, might mislead the electors and bring in proposals which he had not put before them.

That is the real danger - “ which he had not put before them “ - or even which he had undertaken not to bring forward.

The writer then contrasted the policies of Lenin and Baldwin. The man who wrote these words did not do so from a partisan point of view. He pointed out that, on one hand, there may be a political leader perhaps strong enough to coerce his followers into a certain line of action which would not commend itself to the electors if they had a chance of speaking upon it, or, alternatively, a certain situation could arise, as it did in the case of Stanley Baldwin, who, having said that he would not engage in re-armament, proceeded immediately to do so. I shall not canvass the motives or intentions of either of those persons. This is not the proper place to do it. I have quoted the words of this writer in order to point out that when those who allow a particular judgment to overbalance them into giving to one side or the other the right to take away something from people without their consent or consultation, they do irreparable harm to the very essence of democracy itself.

I come back to my original thesis in dealing with this matter - that the Government, in bringing down this legislation, has endeavoured to strike a real balance between the rights of all parties concerned and to give some measure of security not only to private enterprise and to private banking, but also to the great Commonwealth Bank, its officers and the various branches of its operations.

During this debate, the honorable member for Dalley (Mr. O’Connor) referred to a statement made by the Treasurer (Sir Arthur Fadden), which I think is worth re-quoting. Having criticized the Government for its action, the honorable member wanted to know just exactly what was involved in this statement by the Treasurer -

Experience has shown that there cannot be full harmony within the Australian banking system, nor that close co-operation which ought to subsist between the central bank and the trading banks, unless and until this separation is effected.

My reply to the question raised by the honorable member is that the real break in the harmony was the feeling that the Governor of the Commonwealth Bank - and, for that matter, the Commonwealth Bank Board itself - was placed in an impossible position of trying to maintain with detachment an objective approach to central banking because, as the head of the board, he himself is an integral part of one of the greatest banks of Australia. A more simple and direct answer to the query raised by the honorable member is found in the words which were uttered some thousands of years ago -

No man can serve two masters.

I, myself, find great pleasure in the fact that the Government has, at last, seen its way clear to bring about the termination of what I have always deemed to be an impossible position in which to place an extremely able and, I believe, valuable public servant of this country, as well as those associated with him. Consequently, the establishment of the Reserve Bank as a separate entity from the general Commonwealth banking system is a matter of major importance.

The question has arisen of the value of this separation of the Reserve Bank and its officials from the general Commonwealth banking system. I direct the attention of those who criticize this proposal to clause 17 of the Reserve Bank Bill, which sets out that the following persons, amongst others, are disqualified from being members of the Commonwealth Reserve Bank -

A director, officer or employee of a corporation (other than the Bank) the business of which is wholly or mainly that of banking.

That is the crux of the whole matter. The answer is that the Governor of the Commonwealth Bank will be placed in charge of the Reserve Bank, and so relieved of many of his original preoccupations. It is laid down in this clause, also, that no other banker or person engaged in any other bank can be a member of the governing body of the Reserve Bank. I think that that is a most important fact.

I pass on to the question of liquidity which has been raised by honorable members opposite, particularly the honorable member for Wills (Mr. Bryant), who mentioned the low standard of liquidity which had been reached by certain members of the banking system. I am not going to enter into a discussion of detail on that matter. But I recall to honorable members opposite that when the banking commission of which the late Mr. Chifley was a member was receiving evidence, two of the most eminent men that we have known in banking in this country gave very valuable evidence on the subject of liquidity. They were the late Sir Alfred Davidson, general manager of the Bank of New South Wales, and the late Sir Leslie McConnan. They expressed the opinion, in no uncertain terms, that there should be no limitation on deposits - neither an upper nor a lower limit. They pointed out that, in times of drought, it would be necessary to lower the ratio of liquidity very much in order that the community might function properly. They also said that if there was a sudden and marked increase in prices, the bank would need to act quickly to prevent an inflationary trend.

Unfortunately, that was before the day when the late Mr. Chifley decided to do something which made it clear that unless one had some safeguard against the raiding of bank deposits, there would always be an element of grave uncertainty as to their position. So, in this measure there is a safeguard against that kind of thing happening and I understand that it is regarded as reasonable from the point of view of central bank finance, which is vital to the general economy of Australia. It is also regarded as acceptable from the general banking point of view.

I do not think that anybody with any knowledge, in this late day, would cavil at the idea of central banking. Any doubts that we had on that subject must have disappeared, first of all in the great depression of the 1930’s and, subsequently, with the complete destruction of many national economies during the last world war. It is an accepted fact that if this, or any, country is to function efficiently from the financial and economic point of view, it must have a strong central reserve bank. I think that the Government is to be congratulated upon striking a fair compromise between freedom, on the one side, and the essential restrictions required in the national interest, on the other.

I should like to say a word or two on the subject of the Commonwealth Development Bank. If the honorable member for Wannon (Mr. Malcolm Fraser) were here, I would congratulate him on his very clear exposition of the purpose and intention of the bill relating to the Development Bank. It is stated very clearly in the bill itself that the Development Bank will simply take over, in the first place, the functions of the Industrial Finance Department which since 1945 has been working in respect of secondary industry in a special way that has not been generally acceptable to the ordinary banking institutions. They have felt that the Industrial Finance Department has dealt with various factors in a way which is not, as a rule, acceptable from a purely banking point of view. So far, similar provision has not been made in the Rural Credits Department of the Commonwealth Bank.

That is one reason why some provision has been made for the Development Bank to give those who are engaged in rural industry the same advantages as those who are engaged in industrial development. I think that one of the major factors that we have to keep in mind is that clause 73 of the Commonwealth Banks Bill reads as follows: - (1.) In determining whether or not finance shall be provided for a person, the Development Bank shall have regard primarily to the prospects of the operations of that person becoming, or continuing to be, successful and shall not necessarily have regard to the value of the security available in respect of that finance. (2.) The Development Bank shall not provide finance for a person to enable that person to acquire goods for use otherwise than in the course of his business.

Reduced to simple terms, that means that if a person has wide knowledge of primary industry and a good training in that industry, and is of proven character but has not much in the way of assets, his application for assistance to become established will be considered. I believe that that will be a major factor in improving settlement. Certain crises in the affairs of primary producers in the past have been considered by the private banks - and rightly so - to be outside the scope of their normal operations. These things have been dealt with by special rural credit agencies which have been set up by the States to help primary producers by providing finance other than through the ordinary banking system. It has been contended - and rightly so - that a banker cannot say to a primary producer, “We completely refuse finance to you on your security “, and then say to another person, “ We will grant it to you “. That is why the special agencies have been set up.

It has been stated in one of the great metropolitan dailies in Sydney that there will be no control whatever over the Development Bank. It had visions of people running amok with the bank’s funds. I was very impressed to find, about a week later, that the person who had written so learnedly and forcibly on this subject had to admit that this bank will be under the control of the Commonwealth Banking Corporation Board and that any application will be considered by the board. I am glad that this bogy, which has been used to try to defeat one of the most valuable proposals that has been brought forward, has been laid.

Mr ACTING DEPUTY SPEAKER:
Mr. Lawrence

– Order! The honorable member’s time has expired.

Mr CURTIN:
Smith · Kingsford

– This legislation provides for an act relating to the Reserve Bank of Australia and for other purposes. I repeat the words - “for other purposes”. In this legislation

I see a further attempt by this dying Government to destroy the greatest banking institution in Australia at the direction of the absentee controllers of the private banking institutions. Their purpose, of course, is to remove from the banking field for all time, all forms of competition, thus leaving all sections of the people of Australia at the mercy of those financial bandits who are bent upon further plunder in this rich field of operations.

These ghouls who prey upon the people in times of peace and war, accumulate by fraud more money than they can use. They have the audacity to denounce as traitors all those who question their criminal methods. Those who try to point out their criminal actions are also denounced by their stooges, the yellow press. One can understand the yellow press because it is woven into these banking organizations. It is part of the citadel of capitalism. But one recoils at the thought of a government, consisting mainly of ex-servicemen - men who did great service in World War II. - men who fought to defend their native land - which is now prepared to sell the country to the Shylocks who are waiting hungrily for this legislation to become law so that they can prey upon the savings of the people. The savings of the people of Australia are in danger of confiscation. My advice to the people is to demand the withdrawal of this destructive legislation. The cry that should be taken up throughout the length and breadth of Australia is, “ Hands off the Commonwealth Bank “.

Surely honorable members can remember the attempt made in the 1930’s by these self-same gentlemen who sit on the Government benches. In the 1930’s, they tried to destroy the Commonwealth Bank, but their efforts were frustrated by the people, who threw them out of office. They must not succeed this time. This matter will be taken up in every electorate from every soap-box on every street corner. Labour representatives will campaign day and night, with all the means in their power, to destroy this Liberal-Australian Country party Government which, as I said before, is prepared to sell out the savings of the people to the private banking institutions, to these banking pirates who already possess more wealth and more power over the destinies of the people than they should. In fact, legislation should be before this House to curb their powers instead of increasing them. The taking away of financial power from the people is on all fours with this Government’s deliberate sell-out of Commonwealth Oil Refineries Limited, Amalgamated Wireless (Australasia) Limited, the Glen Davis shale oil undertaking, the Whaling Commission, and other profit-earning organizations belonging to the people. It is significant that the name Commonwealth Oil Refineries Limited has been abandoned. It is now British Petroleum Limited.

This bill provides for the destruction of the name “ Commonwealth Bank of Australia “. It will in future be known as the Reserve Bank. Why? Our bank is on the auction block. The private banks are poised for the kill. The separation of the Trading Bank from the rest of the Commonwealth Bank will immediately place it in a vulnerable position. The source of its capital increase will be limited to its net profits. One half of its profits will go to the Commonwealth, and taxation is to be paid from the other half - another form of strangulation. Access to the central bank is denied deliberately. As a result, the Trading Bank must find itself short of capital, which will result in delay in the development and expansion of Australia. In my opinion, this provision has been carefully thought out so that it may be used as the basis of a press campaign for the introduction of private investment. This is the thin end of the wedge. Later, there will be an increase of the interest rate. We have the horrible thought that the actions of the private financial moguls in England will be repeated in Australia. It may be well to mention here that the interest rate in England is now 7 per cent. Due to the snide tactics adopted by the private banks in Australia, they are receiving up to 18 per cent, and 20 per cent, for their money. This money, instead of being lent through ordinary banking channels, orthodox banking channels, at 5i per cent., is being lent through hire-purchase channels at enormous interest rates. The Government turns a blind eye, of course, to such skulduggery. This legislation will leave the people to the tender mercies of the monopoly bankers.

The cause of all our troubles in Australia to-day is the unholy alliance between this Government and its big business supporters. Inflation, unemployment, and lack of housing are the result. Ex-servicemen needing war service homes are sacrificed to the usurer. Unemployment is caused primarily by dear money. Home building is severely restricted for the same reason. Dear money causes restriction of expansion and development. Bankruptcies are becoming more numerous. More business men are finding it difficult to carry the heavy burden of restricted credit, and they give up the unequal struggle. Thus monopoly marches on. The burden of interest is too great to bear. It continues to increase, not merely on fresh borrowings, but also because of the heavy blackmail exacted by the financial junta at every renewal of old mortgages. The latest trick is the flat rate loan, interest on which is outrageous. It keeps the masses poverty stricken. Their savings from earnest endeavours in more prosperous times are callously snatched from them by high living costs that are caused by high interest rates, which reduce the purchasing power of their money. Thus, the hard-earned savings of the many pass into the hands of the few. This is what is called inflation.

Under the present bill, income tax is imposed for the first time on the net profits of the Trading Bank, and after this tax is paid, one half of the remaining profits are placed to the credit of this Commonwealth Trading Bank Reserve Fund, and one half to the credit of the Commonwealth. Under the new bill, the Trading Bank is to be assisted with additional capital of £2,000,000. This bank, which has to develop and expand its business of general banking, will find this contribution inadequate, but the action of the Government shows how far this corrupt Government, through its Treasurer, is prepared to go in its efforts to cripple our great national banking institution at the instance of those people who are generous donors to its election funds - the private banks, to which both the Liberal party and the Australian Country party are tied hand and foot.

The present Commonwealth Bank has 500,000 customers, and the number is increasing at the rate of 40,000 a year. This should prove to all that the present bank operates in the interests of its customers, and of the welfare of the general public, and that the people are well satisfied with its efficient service, and will brook no inter ference with it. The Government would be well advised to withdraw these measures before it is too late. The people have already suffered enough at the hands of this Government, and they are in no mood to permit further interference with their savings. These bills are framed in order to permit the eventual confiscation of those savings. “ Confiscation “ is the only term that can be applied to it. “ Hands off the people’s bank”, is the cry that will echo throughout Australia.

No one has asked for these banking measures. In the 45 years of its existence, the Commonwealth Bank has done a remarkable job. It has made profits, of course, but those profits have been ploughed back into developmental and expansion projects throughout Australia, and are not subject to the plundering of overseas bondholders and foreign banking institutions that have no interest in Australia, except what they can squeeze out of it by way of excessive interest charged on bonds and loans. As a consequence, we now have this effort to forestall the people’s bank’s endeavours to serve the people by honest and genuine business methods, which have met with the approval of all. This plan is now to be embarked upon by a government elected by the Australian people to govern the country in the best interests of the people, and not in the interests of a bunch of foreign crooks who are now itching to get their hands on the people’s bank.

Mr DEPUTY SPEAKER (Mr Adermann:

– Order! I suggest that the honorable member ought to moderate his language.

Mr CURTIN:

– The Reserve Bank Bill 1957 stipulates that the Rural Credits Department of the present Commonwealth Bank will be taken over by the proposed Reserve Bank of Australia. The function of that department is the making of advances to statutory bodies and co-operative organizations in order to assist the marketing of primary products, and the processing, or manufacture, of such products. This requires large funds. So the department must rely on the central bank for its financial requirements. Therefore, the Rural Credits Department will remain attached to the central bank. This indicates that the Australian Country party, which the Treasurer (Sir Arthur Fadden) leads, was not prepared to sacrifice the big primary producers, or the big processors and manufacturers of primary products, by casting them adrift from the central bank. They will be assured of all the financial accommodation that they require, but not so the small manufacturers and businessmen who are struggling along and trying to meet the needs of the community. One-sided and preferential treatment will be accorded to the favoured few - the large land and insurance companies - that batten on the small man.

The Reserve Bank Bill prescribes the constitution of the Reserve Bank Board. The Governor of the Reserve Bank will be chairman, and the deputy governor will be deputy chairman. The Secretary to the Treasury will be a member, and there will be seven other members, of whom at least five shall be persons who are not officers of the bank, or of the Public Service. The weak-kneed attitude of this parasitical government is indicated again by its refusal to trust high officers of the Public Service, or of the Commonwealth Bank, who have studied for years, and worked hard in their respective positions, and who eagerly looked forward to the promised promotion that they so richly deserve. They are now being callously thrown to the wolves - the private banking wolves, who are not prepared to accept them as members of the Reserve Bank Board, despite their high skill and long experience. The private bankers suspect that these honest men of high integrity would not be prepared to prostitute their good names, and carry through the fraud that is about to be perpetrated on the people’s bank. Therefore, private individuals will be appointed to the board. They will be pliable people who will be prepared to submit to the direction of the private bankers.

The five private individuals not associated with banking, of course, will help to form a majority on the board. As a consequence, policy binding on all sections of the new organization will be formulated largely by those outsiders. It should be noted that the remaining two members of the board will hold office only during the pleasure of the Governor-General, who, of course, is advised by the Treasurer. This means that they will hold office only during the pleasure of the Treasurer, representing the Government, and honorable members may be assured that, if those members do not jump to the crack of the whip, their appointments will be terminated.

I think that it is plain for all to see that nothing has been left to chance in the drafting of the Reserve Bank Bill. That view is confirmed by clause 17, which provides for disqualification from membership of the board. It says nothing about qualifications for membership. In clause 18, it is provided, merely, that appointment may be terminated by the Governor-General, which means the Government. If members of the board do not jump to the crack of the whip, out they go!

Another aspect of this Government’s sympathetic assistance to the private banks should be considered during this debate. I refer to the increase in interest rates in 1956. and the withdrawal of Government support from the bond market in order to implement measures demanded by the private banks. The increase in interest rates brought about the collapse of the value of the bonds of hundreds of thousands of small, patriotic investors, who lost as much as 10 per cent, or 12 per cent, of their savings, because their bonds were worth that much less than their face value. Small investors who found it necessary to obtain ready money were forced to sacrifice their bonds at greatly reduced prices, and some of them lost as much as £12 in every £100. That was sheer highway robbery. The private banks, ever ready to cash in on people’s changed circumstances, bought up the bonds, enhanced their profits, and will now be able to collect the increased interest that will accrue. I suppose that one could not find a better illustration of a straightout confidence trick. This callous Government aided and abetted the private banks and helped them to rob good, sincere, patriotic citizens of their hard-earned savings, which they were prepared to make available to the Chifley and Curtin governments during World War II. when Australia was in grave peril of invasion by the Japanese. As it has turned out, Mr. Deputy Speaker, this Government and the private banks have proved to be an even greater menace to Australia’s safety.

I turn now to the proposal to constitute a Commonwealth Banking Corporation. Extraordinary methods are being adopted as the Government goes to ever greater lengths to appease the financial thugs who are its masters. The Treasurer, in his second-reading speech on the Commonwealth Banks Bill 1957, stated -

It would not be a practical matter, even were it so desired, to separate the trading bank and the savings bank in point of staff and premises, and so these institutions must continue to work with a common stall and accommodation. At the same time the Government has been most anxious to preserve the separate identities of those banks . . and to give to each body a role and status of its own and adequate scope for expansion.

The corporation will be the controlling body for the Trading Bank, the Savings Bank and the Development Bank, the last of which is to take over the present Mortgage Bank and Industrial Finance Departments of the Commonwealth Bank. The corporation will have power to determine the policy of the three banks and control their affairs and to provide a common staff for conducting the business of the three banks. This corporation will have a board of eleven members comprising the managing director of the corporation, the deputy managing director and the Secretary of the Treasury, who will be ex-officio members, and eight other members of whom one will be the chairman of the board and another the deputy chairman of the board. These other persons will be outsiders.

Mr Hulme:

– What is wrong with that?

Mr CURTIN:

– What is wrong with it? What is right with bringing in outsiders to control our bank?

Mr Hulme:

– It is not your bank. It is the people’s bank.

Mr CURTIN:

– As I say, one of the outsiders will be the chairman of the board and another the deputy chairman. This is a further insult to members of government departments, highly skilled in their various duties, and a further illustration of the complete dominance by the private banks of this spineless aggregation of persons which is described as our National Government.

The utter confusion that will occur will be beyond description. The overhead cost of such top-heavy administration will be colossal. I might add that there will be an executive committee of five members for each of the three constituent banks. The proposal reeks with suspicion. This action of the Government is perhaps the last straw - the carefully prepared sell-out of our great national bank to high finance. The people of Australia at the first opportunity will, as before, surely pass judgment on this criminal action.

I would like to add - and this is for the benefit of the people - that Labour’s banking policy envisages a nation-wide trading bank handling the ordinary banking business of the community, a savings bank performing the ordinary functions of such a bank; the direction and control of credit resources and banking to be vested in the Commonwealth Bank operating under the control and authority of the Commonwealth Parliament - the people’s elected representatives; control of interest rates by the Commonwealth Bank to be so exercised as to reduce the financial burden upon public and private undertakings - this will be of much importance to people who desire to build homes; the abolition of all banking exchange rates within the Commonwealth of Australia; and abolition of the Commonwealth Bank Board. This policy will be implemented immediately a Labour government is returned.

In conclusion, I say that this legislation is the last straw, and that before many days are over the people of Australia will be clamouring for the resignation of the Menzies-Fadden Government.

Mr ANDERSON:
Hume

.- The honorable member for Kingsford-Smith (Mr. Curtin) is the very voice of Labour. He voiced Labour’s opposition to these banking bills, and those who were in the House to hear him and watch the faces of his fellow members of the Labour party, spellbound at his words, know that at least he has their support. I am inclined to believe that he would have done a better job of opening the Opposition’s case than the Leader of the Opposition (Dr. Evatt) did. I would also be intrigued to know why the honorable gentleman who, I really believe, loves his country, can go on slandering institutions that have existed since he was born, and the way of life we have in Australia, which is the way of life to which the honorable member for Kingsford-Smith has been brought up. I am quite prepared to believe that the honorable member is probably the strongest supporter of that way of life and yet, for political purposes, he usually slanders that way of life and our system.

The Australian Country party is said b> some to be opposed to these measures, but actually every member of the Australian -Country party is very strongly in favour -of the bills. In the past there has been a certain amount of uncertainty as to why the final banking reforms in the Government’s programme were not executed. The Treasurer (Sir Arthur Fadden) has produced here a monumental work which should supply Australia with a first-class banking system for all time. I honestly believe that with the new system we can look forward to a really fine era of progress and development.

The Government’s policy on banking reform is exposed in the legislation. It is there in black and white for the Opposition to attack, for its weaknesses to be shown by the Opposition. But the whole approach of the Opposition has been doctrinaire. Honorable members opposite still look back to the late Right Honorable J. B. Chifley, whose attitude towards private banking is -well known. He dissented from the majority report of the royal commission of which he was a member, and in his dissent made at perfectly clear that he could not possibly :see how a banking system could work in the interests of the community so long as some banks were actuated by the profit motive. The profit motive is something with which socialists cannot agree. They wanted to abolish it. That is why they constantly attack it. But can a socialist change a man’s character? After all, the profit motive is part of all national character.

Mr Whitlam:

– Rubbish!

Mr ANDERSON:

– I have met people of many races and I have yet to meet a person who is not motivated by the profit motive. Therefore, if the socialists want to get their way they have to set out to change the profit motive, to change the character of human beings. Look at the process that has been going on in Europe recently. Every time the weapons of fear and terror which hold down man’s desire for freedom are relaxed to the slightest degree man immediately strives for his freedom. On the last occasion on which I was a member of Parliament we passed the original banking bill. I have marked some passages in “ Hansard “ containing remarks of members of the Opposition to the effect that our legislation was designed to destroy the people’s bank, but I do not want to waste time of the House or to embarrass the Opposition by reading them. I point out, however, that during the last eight years the Commonwealth Bank has made enormous strides. That criticism, therefore, is not based on fact, because we have had eight years’ experience of this Government’s legislation.

The late Mr. Chifley said that it was impossible to progress under a banking system that permitted the operation of free banks. The whole of the Western world, however, has progressed under such a system. I would have thought that those who put up such an argument seriously would have tried to produce evidence of experience in a country enjoying the benefits of socialism and having a central bank. Why did not honorable members opposite produce some evidence to show how the people of Russia have benefited from a nationalized bank? That was the very evidence that might have proved their arguments. They would not have had to rely on mere theory; instead, they could have told us of the practical results of a system such as they now advocate. Up to date, speakers on the Opposition side have not produced a shred of evidence to show how a centralized banking system in a socialist country works for the benefit of the people. Let me say this, however: If private banking were permitted to commence operations in Russia, what do honorable members think would happen? Enormous changes would occur immediately in the living standards of the people.

The Leader of the Opposition (Dr. Evatt) said in his speech in this debate that this legislation was brought down at the behest of the private banks. He was supported in this statement by the honorable member for Batman (Mr. Bird) and the honorable member for Dalley (Mr. O’Connor). Those honorable members used the term “ behest “, but let us say that the private banks requested the Government to introduce this legislation. Let us argue the matter from that stand-point. Have the private banks no right to make representations to the Government? Are they not engaged in the banking industry? Do Opposition supporters contend that no representatives of industry may approach the Government? When Labour was in power, did not the trade unions approach the government and request certain facilities and alterations to the industrial laws? Do not trade unions in New South Wales approach the Government of that State requesting alterations in the State arbitration legislation? Have banking institutions no right to approach the Government and request it to alter legislation that they think is wrong? Is this a sort of forecast of the position that will obtain if Labour comes to power? Will the State have complete control and the individual no rights? Is this what will happen in the socialist state that honorable members opposite wish to introduce in Australia? Surely to goodness the banks have the same right as ordinary citizens have to approach the Government, lt appears that the trade unions may make such approaches, but if the representatives of private industry make an approach they are accused of participating in an evil, wicked, suspicious conspiracy.

I wish to comment on one other point that was stressed by Opposition speakers. My old friend, the honorable member for Batman, became quite militant about this matter. He quoted as a great banking authority, the honorable member for Melbourne Ports (Mr. Crean), who was sufficiently modest to blush. The honorable member for Batman said that he did not believe the link between the central bank and the Commonwealth Trading Bank should be broken.

Mr Calwell:

– Hear, hear!

Mr ANDERSON:

– The honorable member for Melbourne says, “ Hear, hear! “ but I remind him that there is such a link.

Mr Calwell:

– A missing link!

Mr ANDERSON:

– The honorable member has evidently not read the bill. Has not the Treasurer (Sir Arthur Fadden) the right to direct the policy of the Reserve Bank? Has not the Treasurer the right to give a direction to the Banking Corporation? Is not that the link? It is exactly the same kind of link as existed previously, except that in this legislation there is complete separation of the various banking activities, each being directed into its own sphere. The link exists, even though honorable members opposite say there is no such link, and that we have chosen to destroy it. The link is there, and it is an effective one.

The Leader of the Opposition said that each of the components of the Banking

Corporation would be gravely affected by their separation from the trading bank, but he did not show how they will be affected. Are we to accept his dictum? His authority is Professor Arndt. Should we go to a socialist, who has very fixed ideas on banking matters, for advice in this connexion? Professor Arndt is a very able man, but he is a socialist, and one does not go to a socialist theorist to get information on a banking system to be employed in a capitalist country. Professor Arndt is opposed to the principles of capitalism, so how can one expect to get reliable advice from him? One of the reasons why the Labour party’s case in this debate is so weak is that it went to Professor Arndt for advice.

As I said, the Leader of the Opposition contended that all of the various components will be gravely affected. Will the central bank be affected because it is separated from the trading bank? Why should it be affected? It will have its bank board, its charter, its job to do. It will be able to concentrate on its true work as a central bank. There is no evidence at all that it will be adversely affected. Neither the Leader of the Opposition nor any other honorable member opposite could produce evidence to show why the central bank would be affected by a separation from other banking organizations.

The Leader of the Opposition told us that one result of the separation will be to separate and complicate and weaken the trading section of the Commonwealth Bank. He contended that this would result from the dissociation of the trading section from the Reserve Bank. How will it be complicated and weakened? Is it contended that it will be complicated and weakened by being taken away from the Reserve Bank and put in the position of a true trading bank? It cannot be weakened in that way. It will have its board, its officers to control it and its policy to carry out. The Leader of the Opposition went on to say that the Trading Bank would be weakened and complicated because the Government has sold out certain trading interests that it did not want. He then spoke of certain trading activities that the Government has disposed of. The Government sold its interests in Commonwealth Oil Refineries Limited because it was not prepared to put up £20,000,000. It sold out its interests in Amalgamated Wireless (Australasia) Limited because it does not believe in engaging in trade. Those are the arguments the honorable member used to support his claim that the Trading Bank would be weakened by separation.

Then the right honorable member said that there would be a shortage of capital. That is the only argument of substance that he raised. The rest was propaganda. In support of this contention he said that, after taxes, only half the net profit will go to capital appreciation, and the rest to the Commonwealth. He admits that there is an amount of £2,000,000 to come from the Reserve Bank, so that the bank’s capital must be increased to this extent. What he did not mention, however, throughout his speech, is that the Trading Bank will get a further £2,000,000 and 2i per cent, of all the deposits in the Commonwealth Savings Bank as capital, and the Leader of the Opposition said that the capital would be weakened, but he did not mention the main source of fresh capital that would go to the Trading Bank. The deposits in the Commonwealth Savings Bank total about £700,000,000, 2) per cent, of which amounts to £15,000,000 or £18,000,000.

As one examines the statements of Opposition speakers in this debate, one begins to wonder whether they do not, in fact, approve of the legislation, because they have not produced a single worthwhile argument against it. The Leader of the Opposition said, to show how bad the odds are against the Commonwealth Trading Bank, the private banks enjoy a ratio of paid-up capital reserves to deposits of 7.7 per cent. That is the advantage they have. The Commonwealth Trading Bank, however, has a ratio of only 4.4 per cent. He continued -

In spite of that, however, the activities of the Commonwealth Trading Bank were excellent and the results were supremely good, but the necessity for additional capital to expand and carry out the statutory duty is obvious.

In spite of this limitation, the bank was able to carry out its functions with supremely good results. Therefore, ‘his argument really contradicted what he was trying to say. And has the bank done well? Let us look at how this Government has destroyed the people’s bank. In 1950, when we took office, the bank had 423 branches and agencies with deposits of £84,000,000. Yet, by 1957, the number of branches had grown to 589 whilst deposits amounted to £193,000,000, an overall increase of 166 branches and £112,000,000 in deposits. But those are not the most important figures I wish to cite. When we took office, the deposits of the Commonwealth Trading Bank were 7.7 per cent, of the deposits of the major trading banks. To-day the figure is 12.5 per cent. If this Government is trying to destroy the Commonwealth Trading Bank, as honorable members opposite suggest, it is going about it in a very funny way. The Opposition has to rely on slogans to quote to the rabble - “ You are selling out the people’s assets “, “ Hands off the people’s bank “. Surely, Government supporters must be credited with some intelligence. If we wanted to sell out the Commonwealth Trading Bank to our friends the bankers of private banks, would we make the Commonwealth Trading Bank stronger or would we let it run down? What would honorable members opposite do if they were going to sell a business to their friends? Would they build it up or would they let it run down? The Opposition says we are the stooges of the private banks, yet we are making the people’s bank increasingly strong, and more difficult for the private banks to buy. The Opposition’s argument does not make sense, and I do not think the people of Australia will believe that story and the slogans that are being used to deceive them.

Honorable members opposite have said that in the old days the Commonwealth Trading Bank made no effort to obtain new business. That is not true. Some time ago when I was dealing with a private bank the Commonwealth Trading Bank placed a satisfactory proposition before me. As a result I commenced to deal with it, and I have continued to do so. I know the honorable member for Maranoa (Mr. Brimblecombe) has had a similar experience. I have had excellent service from the people’s bank and also from the private banks. How many members opposite deal with the people’s bank? Mighty few!

People in a free country are entitled to bank with whom they will. I believe there is room for a government trading bank. I believe, as do people in all modern civilized countries, in the necessity for a State central bank; but the remainder of the banks may be privately controlled. The people must have the choice. Members of the Opposition say that the people want to bank with the people’s bank, but the extraordinary thing is that the private banks hold a tremendous amount of money in deposits. Within 21 months of the Government giving certain trading banks the right to accept saving bank deposits, those deposits amounted to £125,000,000. People in a free country are entitled to deposit their money in whatever bank they wish. If they thought so much of the people’s bank, why did they deposit £125,000,000 with private savings banks in only 21 months?

How will the Commonwealth Savings Bank be affected by this new legislation? Under the old system the Commonwealth Savings Bank was controlled by a general manager and, finally, the governor of the bank. Now, it is to have its own general manager and be entirely separate from the Trading Bank. Is that a bad thing or a good thing? After all, Labour policy believes in demarcation - nobody shall do this job if he belongs to that job; if he is a bricklayer, he shall not do a plumber’s job, and so on. Now, we have demarcation in the bank. Honorable members opposite say we are trying to destroy the Government Trading Bank. They still have the opportunity to criticize these banking proposals on their merits.

The Development Bank is of particular interest to the Australian Country party. The honorable member for Kingsford-Smith (Mr. Curtin) said this was a bank for the big, wealthy grazier. It is not. It is meant for the small man, the man who has not sufficient capital to set himself up in business. I believe this bank has a tremendous future ahead of it. All honorable members know that when one goes to a bank and asks for a loan, some security is required; but the Development Bank is something different. It is for those people who have not got security. A man might have a holding of virgin land which will be worth perhaps £2 an acre. If he puts work into it, clears it and makes it productive, the land in a further period of ten years might be worth £15 an acre. That man will get credit on the future value of his land when he approaches the Development Bank for a loan.

I have had a lifetime of experience in farming and I know that ordinary banking systems are not suitable for farming communities. Most nations have agricultural banks. In Australia we have the Rural Bank of New South Wales, but that bank is. not large enough. Other States also have rural banks. I believe Australia has a tremendous potential field of banking which is outside the range of ordinary commercial banking. It has been a grave disadvantage that we have not had a bank specially adapted to rural development. TheDevelopment Bank is well founded, designed correctly and will prove a blessing in the development of our country. I believe it will encourage to go on the land men who have not assets of the type which commercial banks require. The Development Bank will meet a great need in this country, and I compliment the Treasurer for proposing to establish it. The bank will be of first-class importance to the development of Australia.

I turn now to the system of special deposits, which has been one of the main weapons for controlling liquidity, interest rates and the finances of the country generally. As we know, the new legislation proposes to alter this system. The Leader of the Opposition (Dr. Evatt), while admitting that slightly greater power would be given to the Reserve Bank under the new system, complained of the possibility of delay. I suggest that he would have made out a much better case if he had stated the conditions under which delay could occur. But he did not do so. Perhaps he forgot to ask Professor Arndt about it - I do not know. Certainly, he did not state the conditions under which the delay of 45 days would be dangerous. Does the right honorable member think that the banks would be so foolish, knowing that, in a state of emergency, they could be asked to increase the ratio of their deposits to the total deposits, as to indulge in risky financial methods? That does not make sense. Despite all the criticisms, it is obvious that the Government proposes to curb the trading banks, including the Commonwealth Trading Bank, and that the curb, although stronger than that which is at present in use, will be fairer to the banks. In conclusion, I say that the Opposition has not produced a single argument to weaken the case of the Government for the establishment of these four banks.

Sitting suspended from 5.58 to 8 p.m.

Mr RIORDAN:
Kennedy

.- In dealing with the measures before the House I do not propose to refer to the history of the Commonwealth Bank except to join with other honorable members on this side in expressing Labour’s policy in one phrase - “ Hands off the Commonwealth Bank “. That is where this party stands. Ever since this bank was established, anti-Labour governments, including the present Government, have done everything possible to stifle its growth, to crush it and to prevent its expansion. Subtle methods have been used so that the people were not aware of what was taking place. In 1924, the right honorable member for Cowper (Sir Earle Page), “ tragic Treasurer “ of the BrucePage Government, applied the first brake when he decreed that the Commonwealth Bank should not compete with the trading banks. He brought down legislation which, in effect, was the first step in the direction of annihilating this great national institution. This bank had a great record of service to the Australian people and to Australia itself during World War I. It again rendered great service during World War II. Even to-day, in financial circles, reference is often made to the action this bank took to prevent secondary inflation in Australia.

Now we are considering further legislation introduced by this Government for the express purpose of taking this bank along the road to annihilation. The House is debating certain bills which have as their objective the amendment of various banking acts. Naturally, questions are being asked, inside this House and outside it, about the necessity for these measures. Why has it been necessary, at this particular stage, for the Government to introduce these bills? They are designed, ultimately, to smash this institution. There is no doubt that that has always been the policy of anti-Labour governments. In support of that contention, let me straight away turn to the profits this bank has made since its inception in 1911. From that year until 1957-1 shall quote figures supplied by the Commonwealth Bureau of Census and Statistics - the Commonwealth Bank has made profits amounting to £183,941,000. One can see immediately why the private trading banks have used pressure on this Government to effect some amendments, as they call them, to the present banking legislation. They want to get their hands on a portion, at least, of the profits that the Commonwealth Bank is making. Had it not been for the Labour government which established this bank, that amount of £183,941,000 would now be in the hands of the private trading banks.

Because of the active competition of the Commonwealth Bank with the trading banks from 1945 onwards, the profits it has made in the last twelve years have been two and a half times greater than its profits in the 34 previous years. That gives some indication of the popular support that this bank has been receiving. Is it any wonder that the trading banks have squealed to this Government for assistance and have asked it to do something about clipping the wings of this particular institution?

The legislation before the House provides for the splitting up of the Commonwealth Bank group. One section is to become the Reserve Bank, and another the Commonwealth Banking Corporation. An interesting feature of the legislation is that the Rural Credits Department is to be attached to the Reserve Bank. The trading bank is to be separated from the Reserve Bank and is to be attached to the Commonwealth Banking Corporation. What is the reason for this arrangement? Why the differentiation? Why attach one section to the Reserve Bank and one to the corporation. We have not been told. That is one of the things we want to know. There are suggestions associated with these measures which have not been revealed in this House.

One of the chief reasons for the legislation is to divide the functions of the Commonwealth Bank. The old adage is true, “ United we stand, divided we fall “. The principal purpose of this legislation is, in reality, to destroy the Commonwealth Bank - the people’s bank, the nation’s bank - by dividing it into sections, thus weakening it and leading, ultimately, to its annihilation. The trouble with the bank is that it has been too successful. This separation is part of the plan of the wealthy un-Australians who dominate this Government. They are compelling this Government to carry out their instructions, in return for the support which they accord it at every federal election. It is common knowledge that members of the Government parties have done everything possible to delay the implementing of this legislation. The honorable member for Hume (Mr. Anderson) this afternoon said that the Australian Country party supports the Government on this issue. There was no need for the honorable member to make that suggestion except, perhaps, to clear his conscience and to make it known publicly that there was some trouble over this matter with the Country party at least.

I want to know why the Government has waited for eight years to effect changes which are embodied in the legislation before the House. It enacted amending legislation in 1951 and 1953, but nothing of this kind was done then. Why has the Government waited until 1957 to make this change? It is quite obvious that the pressure from the private trading banks has forced the Government to take this action. The pressure has been pretty heavy for the reason that the private trading banks supported this Government in 1949 and also at subsequent elections.

It is interesting to note the reasons given by the Government for introducing these bills. The honorable member for Hume said that the deposits in the Commonwealth Bank, in relation to the total deposits, have increased from 7.7 per cent, to 12 per cent. He asked why any government would interfere with an institution that has been so successful. That is just the point. It is because of the success which the Commonwealth Bank has attained, particularly during the last twelve years, that this legislation has been brought down. It is interesting to note, also, that on page 2 of the “ Australian Financial Review “, published on 12th September last, in a leading article headed “ More or less power over banking “, the whole show is given away. The opening paragraph of that article contains this passage -

Now that the terms of the Government’s revision of the banking structure are known, it is clear that the private banks have been granted nearly everything they asked for.

This publication cannot be said to be a Labour publication, or one sympathetically disposed towards the Labour party, but at least it furnishes further evidence that these bills have been brought down because of the pressure on this Government by the private trading banks. The article goes on -

The only question mark is the composition of the lay members on the Commonwealth Bank Executive Committee. These men will, by law, have a majority of one over the two official members of the committee.

It is quite obvious from that statement that the paper thought that the majority should have been greater so that there would not have been any doubt about the private banks’ point of view prevailing. Again, the paper queries the lay members. Surely it was not concerned about where those lay members should come from. They will be the friends of the Government or of the trading banks. The paper says that the trading banks have acknowledged that in these bills they have been granted nearly everything for which they have asked. So, the paper answers its own query.

The “ Australian Financial Review “ draws attention to the tragic spectacle of the Treasurer doing what financial interests outside this Parliament have told him and the Government to do. We know of the February meeting of the Prime Minister (Mr. Menzies), the Treasurer and the representatives of the banks. We know that the Treasurer’s previous actions have been against the proposals contained in these bills but, after eight years, he has succumbed. Why?

This afternoon the honorable member for New England (Mr. Drummond) said, with regard to this splitting-up, that the Governor of the Commonwealth Bank could not serve two masters. The honorable member for Hume (Mr. Anderson) said that the Governor should concentrate on the central bank. The speeches delivered by the Prime Minister when the amending bill on the Commonwealth Bank was put through this chamber in 1953 is interesting. He said -

I know that there are some people who believe quite strongly that the Governor of the Commonwealth Bank should be unrelated to the affairs of the Commonwealth Trading Bank. The Government does not share that view. The Government believes that the most efficient management of this new banking organization will be achieved if we have a proper order of authority. The Governor of the Commonwealth Bank is a very important officer, and he is Chairman of the Commonwealth Bank Board.

The view taken by the Prime Minister in 1953 was different from the view that he takes in 1957. He now advocates the very thing which, in 1953, he said should not be done. He is now dividing the institution and putting it under two controls although, in 1953, he said that the whole institution should be left under the control of the Chairman of the Commonwealth Bank Board. It is true that the Commonwealth Trading Bank is one of a group of institutions under the control of the Bank Board. The members of the board have acted, at all times, in the best interests of the Australian people. Now the Government proposes to introduce changes which the private trading banks have desired so that they can get their hands on some of the profits to which I referred earlier.

The principal argument used by the supporters of the private banks is that the trading bank functions of the Commonwealth Bank should be separated from those of the central bank because of the unfair advantage which the Commonwealth Trading Bank otherwise has. That is only a squeal resulting from the profits that the Commonwealth Bank has made. As I have said, the Prime Minister himself answered that contention in 1953. It is true that the Commonwealth Bank Board said, in its 1952 report, that the Commonwealth Bank was unique in that it was a central bank which had a trading bank associated with it. It is true that the Bank of England never failed to be shocked whenever this matter was mentioned. The private bankers have never ceased to criticize this aspect of the Commonwealth Bank, the reason being of course the profits that it is making.

Dr. Coombs, the Governor of the Commonwealth Bank, has said that the Commonwealth Bank is in a position to influence the Commonwealth Savings Bank and the Commonwealth Trading Bank. That is to say, it can influence them in the interests of the nation. Under this legislation, that influence will go or, at least, it will be severely restricted. The people of Australia will notice that the Government is now doing as requested by the private trading banks. It is proposing to split the people’s bank, against the expressed opinion of the Commonwealth. Bank Board which the Government itself appointed. I do not think that anybody could say that the appointees, excluding the bank officials, were supporters of the Australian Labour party. The bank’s report of 1952 states -

The 1951 amendment transferred control of the policy of the bank to a board, but the management of the bank remained in the hand of the Governor, subject to the policy determined by the board and any directions of the board. The board consists of the Governor, the Deputy Governor, the Secretary of the Treasury, and seven other members appointed by the GovernorGeneral of whom at least five must be persons who are not officers of the board or of the public service.

Among those five outsiders at the time of the report in 1952 were captains of industry who included Mr. Grimwade, the chairman of Drughouses of Australia Limited and a director of the Australian Mutual Provident Society and other major companies; Mr. W. L. Sanderson, Managing Director of Elder Smith and Company Limited; Mr. J. W. Fletcher, a grazier who, at that time, was general manager of the Gladstone Meat Works, a director of pastoral companies, a director of the Australian Mutual Provident Society and of other companies. Nobody could suggest that those men were members or supporters of the Australian Labour party. The Commonwealth Bank Board’s report of 1952 continued -

There are four trading departments of the bank, the General Banking Division, the Mortgage Bank Department, the Industrial Finance Department and the Rural Credits Department. Each of these trading departments has its own capital, reserves and borrowing powers and each keeps its accounts and transactions separate and distinct from those of the other departments. Between them, they offer a wide range of banking services to the public. The general banking division acts primarily as a trading bank and, as such, competes with the private banks but the other departments are essentially of a specialised nature, offering some facilities not adequately provided by other institutions.

Now I come to the most important part of the report which stated -

This concentration of activities under the control of the central bank is unique in central banking but affords strength to the central bank. Through the trading departments, the central bank has been able to maintain contact with business and to give its staff a wide and diversified banking training. Further, through the direct lending operations ot these departments and through the Commonwealth Savings Bank the central bank is able to exercise a positive influence on the economic situation.

The statement that the central bank is able to exercise a positive influence on the economic situation should be sufficient for any fair-minded person. This is an authoritative statement, not by some partisan, but by a body responsible to this Parliament. It is a condemnation by a board which the Government itself appointed on division of the bank into two sections. Members of the board were appointed to direct the policy of the bank and as I have said the outside members could not be regarded as Labour supporters. The private trading banks are concerned about the positive influence that the central bank exercises over the economic situation. They have said, in effect, that if the central bank is separated from the other sections of the Commonwealth Bank it will not be able to exercise the positive influence over the economy of the Commonwealth that it should. The private trading banks want to exercise that influence in their own interest, and they do not want to be subject to any control by the central bank. They believe in free and unrestricted activity for themselves, but in restraint for the Commonwealth Bank. That is another reason why the Government and the private trading banks, and the interests they represent, want the separation. They desire to see the strength of the central bank whittled away. Why is not the Government honest? Why does it not tell the people that this is one of the real reasons why its masters want to crucify the central bank and interfere drastically with the national economy? They want to curtail the trading activities of the Commonwealth Bank. They want to dismember the Commonwealth Bank not because, as they claim, it has knowledge of the business affairs of the private trading banks and thus enjoys an unfair competitive advantage, but because they want to prevent it from exercising a positive influence over the national economy in the national interest.

The private trading banks have supported their demand for this legislation with the argument that the Commonwealth Trading Bank must enjoy an unfair advantage over the private trading banks as long as it is controlled by the governor and the board of the central bank. If the Commonwealth Trading Bank has enjoyed any special advantage, it has derived from the trading banks’ association with the Commonwealth Savings Bank, rather than from its association with the central bank. The private banks know this, and therefore, realizing the value of a savings bank, they opened savings banks in competition with the Commonwealth Savings Bank. It is interesting to note that the savings bank sections of the private banks showed handsome profits for the year ending 30th September, 1956. The net profit of the Bank of New South Wales from savings bank business was £37,135. The net profit from savings bank business of the Australia and New Zealand Bank Limited was £24,705. The total net profit of these two banks was £61,840. The trading banks, in effect, realized the value derived by the Commonwealth Trading Bank from its association with the Commonwealth Savings Bank, and they started similar institutions so that they could assist their own trading activities.

The Commonwealth Trading Bank, by virtue of its association with the central bank, was restrained right up to 1945 by the dictum that it was not to compete with the private trading banks. The private trading banks are well aware that this policy of no competition from the Commonwealth Trading Bank has gone for ever. So they want the Commonwealth Trading Bank to be separated from the central bank, but its capital is to be so limited that competition from the Commonwealth Trading Bank cannot, develop to the same extent that it has developed in the last twelve years. There are some sections of the community which say that this separation will mean more active competition - and I hope this is so - with the private trading banks, and in consequence they cannot understand why the trading banks have forced the issue. They claim that there must be a hidden motive. What is this motive? These people claim that the banks will be able to use their influence, which is by no means small, while this Government remains in office to see that the corporation controlling the Commonwealth Bank restrains competition from the Commonwealth Trading Bank, and if possible places the Commonwealth Trading Bank in a position similar to the one it occupied prior to 1945.

Justification for this point of view is found in the capital increase limitation imposed on the Commonwealth Trading Bank by the present legislation. A capital increase of £2,000,000 is proposed - a mere drop in the financial sea. Further increases will have to come from half the profit after reserves are provided for, and it is interesting to note that the legislation also provides that the Commonwealth Bank shall pay income tax to the tune of 7s. 6d. in the £1. Of the remaining 12s. 6d., half will go to Consolidated Revenue - at the moment, 10s. goes to Consolidated Revenue - and of the 6s. 3d. left, portion will go to the bank’s reserves, leaving very little with which to increase capital. Thus, the Commonwealth Trading Bank will not be able to increase its business at anything like the same rate as during the last twelve years. The policy of the private trading banks in relation to the Commonwealth Bank is, divide and conquer. In that way, they hope to check, and eventually to put out of business, the Commonwealth Trading Bank, and to reduce the influence of the central bank.

These are facts, and the Government cannot evade them. It may happen at some future date that, because of the small capital increase permitted the Commonwealth Trading Bank, the private trading banks will be asked to supply additional capital, and later still, we shall have a repetition of what we have seen with regard to Commonwealth Oil Refineries Limited and Amalgamated Wireless (Australasia) Limited. The Commonwealth Trading Bank will be bought out by the private banks just as C.O.R. and A.W.A. were bought out by private commercial interests.

The Government has had a lot to say recently about increases in the Public Service, but the division of the Commonwealth Bank will mean duplication of staffs. First of all, there will be a bank board and a corporation. Then, there will be two secretaries with two departments; two actuaries with two departments; two chief accountants with two departments; two superintendents of bank premises with two departments; two separate architects and their assistants; two staff inspectors with two departments; and two cost accountants with two departments. In addition, there will be two sets of buildings, which will mean additional maintenance costs and insurance. All this will contribute towards reducing the profit of the Commonwealth Trading Bank and increasing its overhead. This is being done by a government which has set up a Cabinet committee to investigate staffing in the Public Service. All I can say is that this Government holds the public of Australia in contempt when it makes such a suggestion. It is obvious that the legislation is the result of standanddeliver tactics on the part of the private banks. Legislation has been designed to smash the Commonwealth Bank and make the way easier for the trading banks to hold the people of this country to ransom. The private banks are eager to get their hands on some of that £184,000,000 profit for their shareholders. I am sure that when the people realize the full import of this legislation they will rise up in their wrath, and at the next elections they will drive this Government out of office. In conclusion, I say - hands off the people’s bank!

Mr MACKINNON:
Corangamite

– I should like to join with other Government supporters in congratulating the Treasurer (Sir Arthur Fadden) on the preparation and introduction of the most momentous legislation that has been presented to the Parliament in many years. I congratulate, also, those advisers who assisted the right honorable gentleman in this vast work. These banking measures, I believe, are a blueprint for a reorganization of the Australian banking system that is in keeping with the demand that will be made by the future development of this country. These very important measures conform with developments in the public banking system in Australia over a period of years. Reduced to its simplest terms, this legislation, first, brings up to date Australia’s banking structure, and brings it into conformity with practices generally recognized throughout the world, particularly in relation to central, or reserve, banking. Secondly, it removes the authorities concerned with national banking and credit control from active participation in commercial banking.

May I, at this stage, Mr. Speaker, point a simile that will be well known to followers of football, and say that these measures remove the umpire, or referee, from the field of direct competition with the players on the ground. Thirdly, whether or not anything that this Government may do can be undone in the future by a hostile government, these measures make it harder for a flank or a disguised attack on the existing institutions of the private banking system to succeed. They will make much more difficult the isolation and destruction of individual banks one at a time - a mode of attack that was possibly open to a hostile government by the exercise of the old discriminatory special accounts power in the existing legislation, if it should decide to deal with the private banking system. The Government’s proposals will induce in the minds of the people a feeling of security against the fulminations of persons such as the Deputy Leader of the Opposition (Mr. Calwell) and the honorable member for East Sydney (Mr. Ward), whose intention to deal with the private banking system at the first available opportunity has been well publicized. This legislation is designed, among other things, to preserve to the Australian public a private banking system that, over a century, has reflected great credit on itself, and been of great help in the development of this country, by protecting that system from the predatory fingers of the socialist theorists whose views have already been rejected by the people of Australia at two general elections. I suggest, Sir, that, in this matter, there is no question about where the interests and the wishes of the Australian public lie.

In the time allowed under the Standing Orders, it is obviously difficult to discuss adequately the vast re-organization proposed in the measures now before the House. Indeed, it is impossible to go closely into the details. However, I should like to review, in simple terms, some of the developments that have led to these proposals. The Commonwealth Bank of Australia came into being as a trading bank. Initially, it did not have control even of the note issue. Throughout its history, it has conformed with the demands of development, and its sphere of action has developed in accordance with the additional responsibilities and duties imposed upon it by a progressive economy, and also by the increasing international obligations that Australia has from time to time assumed. The bank has progressed in conformity with modern banking developments, particularly in regard to reserve, or central, banking, and its relation to government fiscal policy.

At this stage, it may be as well for me to outline briefly the organization proposed in these measures. Under the old system, there was the Commonwealth Bank Board, under the chairmanship of the governor of the bank, with direct control over the central banking section of the Commonwealth Bank, including the Note Issue Department, the Rural Credits Department, the Mortgage Bank Department, and the Industrial Finance Department. Secondly, there was the Commonwealth Savings Bank, and thirdly, the Commonwealth Trading Bank. Under the new scheme, the central banking functions will be divorced from the trading section of the bank. The first of the four bills before the House is the Reserve Bank Bill 1957, which constitutes the Reserve Bank of Australia, under the Reserve Bank Board, presided over by the Governor of the Reserve Bank. The Reserve Bank will control central banking, the Note Issue Department and the Rural Credits Department. I think that it is well to mention, in passing, because some people are confused about the activities of the Rural Credits Department, that it handles banking activities in relation to the various large primary industry stabilization schemes and their credit needs. It has nothing to do with loans of the ordinary kind to individual farmers, although its name may seem to imply that it has. This arrangement conforms with central banking practice in other parts of the world.

On the other side of the picture we have the Commonwealth Banking Corporation, under the Commonwealth Banking Corporation Board, which controls three separate banks, each under its own executive committee. These banks are the Commonwealth Trading Bank, the Commonwealth Savings Bank and the Commonwealth Development Bank, which merges the activities of the present Mortgage Bank Department and the Industrial Finance Department of the Commonwealth Bank. This sub-division of functions conforms with the trend that has taken place over a number of years, and with modern practice, and these measures give legislative effect to modern banking developments.

Although it is obvious that the discussion of these highly technical matters should revolve around the features of the bills, and should concern the maintaining of proper banking facilities, and possible future developments and their relation to the normal banking structure in Australia, unfortunately, by its very nature, the discussion must have a highly political content, and must become the subject largely of the expression of political beliefs. To illustrate this, 1 need refer only to remarks that have already been made by Opposition members, which indicate that the discussion of these bills will be based more on political grounds than on practical banking considerations. Labour believes in a banking system controlled by a government-directed bank over which the Australian Labour party can exert political control of policy, and through which it can exercise power over the lives and affairs of every one in the community. In relation to this, I would mention the observation of Lenin, a wellknown authority whose remarks are often quoted in these matters. He said that, if you control the people’s money, you can control them body and soul.

Mr Webb:

– That is what the Government wants to allow the private banks to do.

Mr MACKINNON:

– 1 hope that the honorable member will listen, and become better informed. The arguments advanced by Opposition members have been based on the rather threadbare claptrap about the imaginary evils of the private banks, which they always trot out on these occasions. It has never occurred to them that the private banks have just as big a stake in Australia’s future as has any one in the country, and that they have just as great an interest in the development of Australia as has any one else. They have, also, just as great an interest in seeing that Australia does not fall under a totalitarian government. I would remind honorable members opposite, who are piqued, that those people who deposit their money in the private banks are just as good Australians as are Opposition members. It is quite obvious that, if Labour does not want to preserve the private banking system in Australia, this Government must try to give effect to the wishes of the people which have been expressed at two general elections.

Labour can never forget the past; can never forget the part the private banking system played in bringing about the political defeat of the Labour Government in 1949, at a time when Labour thought, and boasted, that the Labour party was in power for an indefinite period. Labour’s judgment still remains clouded by the bitterness and the animosities associated with its defeat on that occasion. I suppose that Labour expected the private banks to take the Labour government’s nationalization proposals lying down; to accept their death sentence without a fight. When the private banks did struggle against the fate that Labour had decreed for them, they were accused of using pressure tactics. If some of these honorable gentlemen opposite would only study the position of the private trading banks in Australia they would realize that these banks are staffed by some of the best citizens of this country - men and women of great character and knowledge who, quite rightly, expressed the determination not to allow their livelihood to be made the plaything of a lot of socialist doctrinaires.

Throughout this debate the sterility of the Opposition’s arguments has been obvious. One or two main points have been brought out by every speaker on the Opposition side. We had the references by the Leader of the Opposition (Dr. Evatt) to a “ sell-out “. The suggestion - quite fantastic to anybody with any real knowledge of banking in Australia - was made that this legislation is the lead-up to a transfer of the banking system to the private banks. Whoever heard of such rubbish? I think the public will not be worried by that particular argument.

Then we have the Opposition’s constant references to the sayings of Professor Arndt. My colleague, the honorable member for Barker (Mr. Forbes), gave us some of Professor Arndt’s sayings in a very apt and appropriate manner to refute the arguments of honorable gentlemen opposite.

Mr Hulme:

– Professor Arndt wrote to them.

Mr MACKINNON:

– Yes, the honorable member produced a letter in which Professor Arndt made some reference to the fact that the establishment of the new Development Bank would add great strength to the general banking structure rather than weaken the system as a whole. Honorable members opposite who have been quoting so freely from Professor Arndt’s sayings would have been more honest if they had quoted his statements fully instead of extracting the pieces that suited them.

Let us examine the need for a central bank. At the beginning of this century there were no central banks in existence, but two world wars and the circumstances of the great economic depression, in conjunction with the developing economies of many countries, brought about the requirement for some government-controlled bank which would have measures of fiscal policy at its fingertips and would carry out government directions throughout the whole credit structure of a country. So every country to-day has some form of central bank. Their establishment is a recognition of the need, in the interests of financial stability under modern conditions, to have centralized cash reserves and currency and credit control placed in the hands of a single bank over which government supervision is maintained in a greater or lesser degree.

The constitutional structure and the powers of various central banks vary considerably from country to country, but their functions generally are accepted as being the regulation of currency, the conduct of general banking agency services for the government, the custody of the cash reserves of the trading banks, the custody and management of the nation’s reserves of international currency, the provision of accommodation for trading banks, control of the money market and general responsibility for banking in the last resort, the control and clearance of balances between banks and, probably the most important and, in modern political thinking, the most significant function, the control of credit in accordance with business requirements within the State, and, in most countries, in accordance with the broad fiscal policy adopted by the Government, the regulation of the supply, cost and use of money.

The general world trend has been for central banks to vacate the field of commercial banking and to concentrate on these very important tasks with which they are charged. One of the serious reasons why I myself believe that it is far better for our banking system to have the central bank divorced completely from trading bank activities is that if the central bank is associated with commercial banking activities such operations must, to a greater or lesser degree, conflict with its higher duty of controlling the credit system of the country.

It cannot be denied that the success of the central banking system depends largely on the support, confidence and cooperation of the trading banks which form the rest of the banking structure. The central bank should be free to devote its whole efforts and resources to the control of the monetary system. It can achieve far wider and more comprehensive knowledge of the conditions of the economy through a much fuller discussion with the officers of the trading banks than would be possible if the central bank were engaged in full trading competition with those banks. In other words, by being divorced from actual trading and the implication of competition associated with actual trading, the central bank can bring to the deliberations on the monetary position within the country far greater knowledge by having the confidence of the people who are actively engaged in the commercial banking side, and by being able to consult with them and hear their views. Furthermore, a central bank engaged in trading activities is, and I believe, always will be - certainly when Labour is in office - subject to political pressure and so is not always able to operate in a free and independent manner. That applies particularly when, as in this instance, the central bank and the trading bank are housed under the same roof. The possibility is that advance information on interest rates policy and advances policy and on various other items will be available to the trading section of the Commonwealth Bank which is in direct competition with the private banks. I am not suggesting that this has occurred in the past, but I am going to suggest, Mr. Speaker, that it could happen if ever Australia were foolish enough to change the present Government.

I might mention in passing that the central banks of the major countries - the Bank of England, the Federal Reserve Bank in the United States, the Bank Deutschlander in Germany, the Bank of Canada and the Reserve Bank of New Zealand - have no trading activity. So we are following on the lines of world practice.

My colleague, the honorable member for Wannon (Mr. Malcolm Fraser), made a magnificent contribution to the debate this afternoon. He mentioned the late E. G. Theodore, who was Treasurer of a federal Labour government in 1930 and whose knowledge and judgment of these highly technical matters I would hold far superior to those of the present generation of Labour members, including the brains trust of the Opposition, which is trying to mould Labour’s financial and political views at the moment. I refer to “ Hansard “, Volume 123, at page 1325, which reports Mr. Theodore as saying, when discussing the establishment of a reserve bank at that time -

We do not desire to destroy the Commonwealth Bank, and I do not think that there are many persons in the community who would like to see that bank abolished or to see it retire entirely from competition. We must, however, recognize the rights of the private trading banks, and if we want a central reserve bank in Australia it must be an institution separate from the Commonwealth Bank.

I am going to suggest, Mr. Speaker, that those remarks of Mr. Theodore could equally well be used in the debate on the legislation now before us.

As I draw towards the conclusion of my remarks, I would like to direct the attention of the House to the attitude of the Labour party on this subject. I am sorry, in a way, that, probably because of the series of vicissitudes that the party has experienced over the last few years, Labour supporters are bringing to the discussion of this legislation a sense of nostalgia, and are endeavouring to recapture some of the early glories that surrounded the party in the days of King O’Malley. They have been trying to recapture the spirit of the party in the days when it possessed some distinction. Their attitude is like that of the proud owner of a T-model Ford, who insists that what was good enough for 1911 is good enough for 1957.

In conclusion I wish to compliment the Treasurer and his advisers, and to congratulate them on the production of this mammoth piece of work which, I believe, will provide us with a saner, more uptodate banking system, conforming to the natural trend of modern development throughout the world, and having the potential capacity to provide for the growing needs of an expanding economy and for the future development of this country which, obviously, given a continued period of peace, will have years of development and progress ahead of it.

Mr CLYDE CAMERON:
HINDMARSH, SOUTH AUSTRALIA · ALP

– It is rather amusing to see the honorable member for Corangamite (Mr.

Mackinnon), who is reputed to be the owner of property valued at something like £500,000, rising in this House to congratulate the honorable member for Wannon (Mr. Malcolm Fraser), another wealthy squatter from the western districts of Victoria. It is just as amusing to hear both of those honorable members posing as authorities on the banking system of Australia. If either of those gentlemen had had to live through the depression years and suffer its consequences as many of us on this side of the House were obliged to do, they would not have spoken as they have done in this debate. Neither would they have spoken in that way in this debate had they been small farmers, thousands of whom were sold up in the time of the depression, by the private banks that they now so stoutly defend.

What is the position with regard to this legislation? We have received from the Government a plan to separate completely the central bank from the Commonwealth Trading Bank, and to give to the central bank the authority to control the note issue. In addition to that, the central bank will be entrusted with the administration of statutory reserve deposits, exchange control, the acquisition and sale of gold, the protection of depositors in other banks, the determination of the advance policy to be followed by trading banks and savings banks, and the regulation of bank interest. Attached to that central bank, which is to have the powers that I have enumerated, will be the Rural Credits Department of what is now the Commonwealth Bank of Australia. The Australian Country party seems to have gained a magnificent victory. It has insisted upon the establishment of the Commonwealth Development Bank of Australia for the sole purpose of giving to itself and to the people it represents something that that party is not prepared to grant to the rest of the community; that is, protection from the private banking system of Australia. I congratulate the Country party on having been able, for the first time since I have been in this Parliament, to achieve something for the people it represents. It has undoubtedly gained a magnificent victory over the Liberal party. Whether the members of the Country party are prepared to stand by their victory is an entirely different matter.

What we must keep in mind is that there are other persons than farmers in the community who must be considered, and the Australian Country party would have shown a more national attitude had it insisted on the same rights being extended to other sections of the community as to the farming community. Having succeeded in forcing the Liberal party to provide this special facility for the people that it represents, why has the Australian Country party allowed to be attached to the central bank - of all banks, if it is supposed to be a truly central bank - the Rural Credits Department, the function of which is one that those representing the farming community should have endeavoured to have attached to the Commonwealth Development Bank of Australia.

Another result of the legislation is the establishment of the Commonwealth Banking Corporation. The Government is not prepared to allow the name Commonwealth Bank of Australia to be used any longer in the legislative vocabulary of this country. That proud and famous name is to be wiped completely from our statutes, and in its place will appear the new name, Commonwealth Banking Corporation. No longer do we find that a change of name symbolises failure, as has been the case with the Liberal party, which has changed its name on several occasions following dismal legislative failures. In this case, the opposite has occurred. The Commonwealth Bank of Australia has been too successful, and so the name has been changed. It is as if a famous trade mark, for example Rolls Royce, is being changed to Volkswagen or some other name, so that the makers of the Rolls Royce can no longer take advantage of the proud record and prestige that they have built up in the motoring world. The name Commonwealth Bank of Australia is to be obliterated completely from the statutes of this country, and the Commonwealth Banking Corporation is to be set up for the purpose of controlling three separate banks, the Commonwealth Trading Bank of Australia, the Commonwealth Development Bank of Australia and the Commonwealth Savings Bank of Australia. The corporation is to be controlled, not by the officers of the Commonwealth Trading Bank, who ought to control it, not by bankers and experts within the Commonwealth Banking Corporation, who will have an interest to see that the bank succeeds,, but by eight persons drawn from private? enterprise, about whom I will have something to say in a moment. The activities and policy and general administration of the Commonwealth Banking Corporation and the three banks under its jurisdictionwill be at the whim and will of private enterprise.

I want to ask a question that the Leader of the Opposition (Dr. Evatt) asked theother night when he spoke in this debate: Why is it that these banking functions have been separated? The honorable member for Corangamite has quoted Mr. Theodore in. this regard. He also quoted King O’Malley. I recollect clearly, from reading the political history of this country, that when Mr. Theodore and King O’Malley were alive they were condemned as being Communists and Bolsheviks by the very people whohave the cheek to get up in this House and suggest that those gentlemen were great authorities on banking. The very people who to-day praise Ben Chifley are those who described him as a Communist agent when he was alive. I have no doubt that when the Leader of the Opposition passes on and can no longer be a threat to them, those who sit opposite will remember the great things for which he became famous, his activities as a great High Court judge and United Nations President. All these things will be remembered when the right honorable gentleman is dead and can no longer represent a threat to the wealthy interests that those opposite support.

Leaving aside for a moment what honorable members have said on the subject of central bank and trading bank activities, let us look at the report of the royal commission that was appointed by the Lyons Government to inquire into the monetary and banking systems of Australia. The chairman of the royal commissioners was Sir John Mellis Napier, the present Chief Justice of the Supreme Court of South Australia. The royal commission was held in 1936, and the unanimous decision of the commissioners included the following remarks, which appear at paragraph 521 of the report: -

The present structure of the Commonwealth Bank, consisting as it does of a central bank with trading bank powers and a savings bank, is, in our opinion, essential to the efficient exercise of its functions as a central bank.

I ask honorable members opposite to try to answer that suggestion by the royal commission that there is a need not to separate, but to keep the two functions together. It is 21 years since that opinion was expressed. From 1945 until 1950 the actual practices of the Commonwealth Bank as a trading bank and central bank combined proved that the opinion expressed 21 years ago was correct, because during the period from 1945 until 1950 the Commonwealth Trading Bank, attached as it then was to the central bank, worked magnificently.

An attempt was made by the Menzies Government in 1953 to destroy what it thought would be the advantages attached to the Commonwealth Trading Bank by being associated with the central bank, but it failed dismally to achieve its objective because, perhaps for one reason more than any other, Mr. Armstrong, general manager of the Commonwealth Trading Bank, knew too much about banking to allow the private bankers in this country to beat him. He succeeded in saving the Commonwealth Trading Bank from the fate which the Liberal party intended for it. In the meantime the Commonwealth Trading Bank crept forward steadily from being the minor bank of all the trading banks in Australia until now only three of the private trading banks hold greater depositors’ balances than the Commonwealth Trading Bank. It will not be very long before the Commonwealth Trading Bank depositors’ balances will surpass those held by the other three trading banks, because they are not very far ahead of it.

I believe that the position has been reached when, if the private trading banks arc to be permitted to engage in hire-, purchase activities, the Commonwealth Trading Bank ought to be allowed to engage in hire-purchase activities also. If wb are going to talk about free enterprise and healthy competition, then let us have a bit of real competition. Let us give to the Commonwealth Trading Bank the same rights to compete in the hire-purchase field as are given to the private trading banks, because practically every one of the private banks is engaged in either hire-purchase or savings bank activities, and, in some cases, in both. I quote from the excellent address to this House on Tuesday last by the honorable member for Stirling (Mr. Webb). He said -

The National Bank of Australia Limited holds shares representing a 40 per cent, interest in Custom Credit Corporation Limited. The Bank of Adelaide holds a 40 per cent, interest in Finance Corporation of Australia Limited. The English, Scottish and Australian Bank Limited subscribed all the capital of £2,000,000 of Esanda Limited, and the Commercial Bank of Australia Limited holds a 45 per cent, interest in General Credits Limited. The latest move in this field is by the Bank of New South Wales, which has acquired a 40 per cent, interest in the Australian Guarantee Corporation.

The Development Bank of the Commonwealth Banking Corporation is the only section of the corporation that will be permitted to engage in hire purchase, but then only for the purpose of providing farmers with farm implements, and for small industrial undertakings. It will not be permitted to engage in hire-purchase financing of domestic appliances and thus offer competition to the private trading banks; and it will not be permitted to engage in financing hire purchase of motor cars, as the Commonwealth Bank did when this Government came into office. I was one of those fortunate enough to be able to purchase a motor car through the hire-purchase facilities offered by the Industrial Finance Department of the Commonwealth Bank at 41 per cent, interest. If I were compelled to purchase a motor car on hire purchase from the private banks to-day, I would be lucky to obtain the finance at 8 per cent, interest, and that is a flat rate.

Mr Jeff Bate:

– It is 5 per cent.

Mr CLYDE CAMERON:
HINDMARSH, SOUTH AUSTRALIA · ALP

– Whether it is 5 per cent., as the honorable member for Macarthur says, or whether it is 8 per cent., which I assert is the correct figure, the figure is approximately doubled to arrive at the simple interest rate that applies. So, even on the admission of the honorable member for Macarthur who says it is a flat rate of 5 per cent., that works out to be a rate of 9b per cent, simple interest; and on my assertion, which cannot be contradicted, the rate is about 16 per cent, or 18 per cent, simple interest.

Let us examine the consideration shown by this Government, which believes in healthy competition, to the Commonwealth Bank in order to give it the opportunity of engaging in healthy competition. It says to the bank, “ You will be compelled to pay income tax on your profits, the same as the other trading banks; but in addition to that, after you have paid the same income tax on your profits as the trading banks pay on theirs, you will still have to pay 50 per cent, of the balance of the profits into the Treasury, another 10s. in the £1 “. That is not because the Commonwealth Bank owes the Treasury any money as the result of advances from Consolidated Revenue, because the reverse is true. The Commonwealth Bank over the years has paid into the Treasury millions and millions of pounds in excess of any amount it ever received from the Treasury in the form of advance capital. But in order to justify the provision to prevent the Commonwealth Bank from using the balance of its profits for healthy competition against the private banks, the Government argues that the private banks have to pay dividends to their shareholders.

Mr McMahon:

– And taxes.

Mr CLYDE CAMERON:
HINDMARSH, SOUTH AUSTRALIA · ALP

– And taxes too, but taxation is covered because the Commonwealth Trading Bank is to be taxed. How can the Government justify the proposal that the bank must pay tax and, as well, 10s. in the £1 of its profits to the Treasury?

Mr McMahon:

– For the very good reason-

Mr CLYDE CAMERON:
HINDMARSH, SOUTH AUSTRALIA · ALP

– For the reason, as the Government argues, that the private banks have to pay dividends to their shareholders. The Minister nods his head in agreement with that proposition. Therein lies the great difference between socialism and capitalism. Socialism says a banking institution is operated for the public good rather than for private profit. The great advantage in having a socialist banking system as against a capitalist banking system lies in the fact that a socialist banking system operates for the public good and does not concern itself with private shareholders. If it were possible to convert the whole of the banking structure in Australia into a socialist system no dividends would be payable to private shareholders and, consequently, the banking system could reduce interest rates to a minimum or be able to expand and give facilities to the public generally which are not now provided.

I turn now to the Commonwealth Savings Bank. Here we find another example of magnificent success on the part of the Commonwealth Savings Bank which now has at its disposal approximately £730,000,000 worth of depositors’ funds and reserves, as compared with an amount of approximately £125,000,000 held by all the private trading banks combined. That latter amount has become almost static because the first great impulse of the private savings bank departments was represented merely by the decision of their customers to transfer surplus credit from current accounts into savings bank accounts in order to obtain a higher interest rate. The private trading banks which do not want the Commonwealth Trading Bank to have the advantage of its savings bank assets have now decided to permit - and that is the correct word - this Government to allow the Commonwealth Trading Bank to have a paltry £2,000,000 plus 2i per cent, of its reserves in excess of that amount, that is a paltry capital of £20,000,000, out of a total of £750,000,000. That is all the capital which the private banks have permitted this Government to allow the Commonwealth Trading Bank to use. The Leader of the Opposition (Dr. Evatt) asked who had sought this alteration. Why is this Government bringing down this legislation at all?

Is it because the public is clamouring for an alteration? The answer is no! Is it because the staff of the Commonwealth Bank wants the alteration? Of course not! Is it because the Commonwealth Bank Board has asked for the alteration? Again, the answer is no! Is it because the royal commission said there ought to be a separation? Again, the answer is no, as I have already indicated by reading from the report of the royal commission. Is it because the Commonwealth Bank has failed? Again, the answer is an emphatic no! It is simply because this Government is the stoolpigeon, and the plaything of the private banks which financed the Government’s election fund in 1949. I quote from “ Hansard “. vol. 209 at page 392, a statement made by Mr. J. B. Chifley on 5th October, 1950, when he was Leader of the Opposition. He said that the trading banks had subscribed hundreds of thousands of pounds to assist the anti-Labour parties to defeat the Chifley Government at the previous election, and he also said that he could produce evidence to show the source of the funds, the amounts subscribed and the purpose of the subscriptions. For the information of honorable members opposite, I point out that that evidence is still to be had and is available to honorable members on this side of the chamber.

Let us see what organizations subscribe to the campaign funds of the Liberal party. They include the Commercial Banking Company of Sydney Limited, the Bank of New South Wales, the National Bank of Australasia Limited, the English, Scottish and Australian Bank Limited, the Australia and New Zealand Bank Limited, the Commercial Bank of Australia, and the Bank of Adelaide. Those are the organizations which are calling the tune for the Liberal party and upon which the party is so dependent for financial assistance at election time. The honorable member for Corangamite (Mr. Mackinnon), in speaking of these banks, said that their controllers were of the very best citizens of Australia, lt may be true that they have all been given C.M.G.’s, or have been knighted, but that does not necessarily make them good citizens. In the interests of the people, I shall tell the House the names of those who control these banks, and I shall also state the other companies that they control. First, there is the Commercial Banking Company of Sydney Limited. One of the directors is Sir Edward Knox, who is also a director of the Colonial Sugar Refining Company Limited, Perpetual Trustee Company (Limited), the Sydney Exchange Company, and the United Insurance Company Limited. Then there is Mr. G. B. Kater, who is also a director of the Colonial Sugar Refining Company Limited, the Permanent Trustee Company of New South Wales Limited, Electrical Equipment of Australia Limited, Drawing Office Equipment of Australia Limited, and Newcastle Wallsend Coal Company Limited.

Another director is Mr. E. W. Street, who is also a director of Tooheys Limited and Tooheys Standard Securities Limited. A fourth director of the bank is Mr. R. J. Vicars, a friend of the Minister for Supply (Mr. Beale), and also a director of Brick Mills (Australia) Limited, Courtaulds (Australia) Limited, John Vicars and Company

Limited, Sydney Woollen Mills Proprietary Limited, Tooth and Company Limited, and United Insurance Company Limited. These are the people who are so fond of the little people in the community! These are the people whose hearts simply bleed for the poor farmer, the poor waterside worker and every man who has to work for his living! 1 turn to the Bank of New South Wales. The directors are, first, Sir Leslie Morshead, who is also a director of Amalgamated Wireless (Australasia) Limited, David Jones Limited, Mutual Life and Citizens’ Assurance Company Limited, with which the Minister at the table also is associated, the Sydney Stock Exchange Company Limited, and the Trustees Executors and Agency Company Limited. Mr. John Cadwallader, another director, is also a director of Allied Mills Limited, Australian National Industries Limited, Queensland Insurance Company Limited, and Trustees Executors and Agency Company of South Australia Limited.

The Hon. R. C. Wilson, a Liberal member of the New South Wales Upper House, in addition to being a director of the Bank of New South Wales, is a director of Allied Mills Limited, the Australian Guarantee Corporation, Toohey’s Limited, and Transport and General Insurance Company Limited. Mr. Dudley Lewington, another director, is also a director of British Tobacco Company (Australia) Limited, Courtaulds (Australia) Limited, Farmers Holdings Limited, and Tooth and Company Limited. Mr. S. G. Rowe is also a director of Anthony Hordern and Sons Limited, the Australian Mutual Provident Society, the Australian Stockbreeders Company Limited, Goldsbrough Mort and Company Limited, Hastings Deering Finance and Investment Company Limited, Hastings Deering Service Limited, Queensland Trading and Holding Company Limited, and the Royal Exchange Assurance Company Limited. Another, Mr. Vincent Fairfax, is also a director of the Australian Mutual Provident Society, John Fairfax Limited, and the Sydney Exchange Company. Mr. J. W. Dunlop is also a director of the Bank of New South Wales and of the Colonial Sugar Refining Company Limited, Edwards Dunlop and Company Limited, and the United Insurance Company Limited.

Now, I turn to the National Bank of Australasia Limited. One of the directors, Mr. H. D. Giddy, is also a director of the Australia Newsprint Mills Limited, Herald and Weekly Times Limited, and Tweedside Manufacturing Company Limited. Another, Mr. J. A. Forrest, is also a director of Australian Consolidated Industries Limited, Drug Houses of Australia Limited, and the North British and Mercantile Insurance Company. Mr. F. E. Loxton, another director, is also a director of the shipping combine known as Burns Philp and Company Limited. Another director is Sir George Coles, who is also a director of G. J. Coles and Company Limited, and Leviathan Limited. Mr. L. Darling, another director, is also a director of Australian Iron and Steel Limited, and the Broken Hill Proprietary Company Limited.

Other directors are Mr. D. S. Forbes, who is also a director of Castlemaine Perkins Limited, Millaquin Sugar Company Limited, Queensland National Pastoral Company Limited, U.M.I. Sales Limited, and United Metal Industries Limited. Sir Clive McPherson, who is also a director of the Union Trustee Company of Australia Limited and Younghusband Limited, and Mr. D. Y. Syme, who is also a director of a shipping company known as the Melbourne Steamship Company Limited, and the Mount Lyell Mining and Railway Company Limited.

The English, Scottish and Australian Bank Limited is controlled by English directors. So, too, is the Australia and New Zealand Bank Limited. The directors include people such as the Baillieu family. I turn now to the Commercial Bank of Australia Limited. It is controlled, first, by Mr. W. S. Reid, who is also a director of La Mode Holdings Limited, and the New Zealand Loan and Mercantile Agency Company Limited. Then there is Mr. V. Y. Kimpton, who is a director of the Fourth Victorian Permanent Building Society, the National Mutual Life Association of Australia, and the New Zealand Loan and Mercantile Agency Company Limited. Another is Mr. C. F. Meares, who is a director of Squatting Investment Company Limited, and Valley Worsted Mills Proprietary Limited. Finally, we have Mr. Normand Hill, who is also a director of Yarra Falls Limited, and Mr. F. S. Vine, who is a director of James Miller Holdings Limited.

On the Bank of Adelaide directorate we have Sir Arthur Rymill, also a director of

Advertiser Newspapers Limited, Bennett and Fisher Limited, South Australian Brewing Company Limited, Valley Worsted Mills Proprietary Limited, and W.M.L. Fertilizers Limited. Mr. A. E. Hamilton, who is also a director of Goldsborough Mort and Company Limited, Onkaparinga Woollen Company Limited, the South Australian Brewing Company Limited, and Waymouth Motor Company Limited. Mr. S. Powell is another director who is also a director of Adelaide Cement Company Limited, Charles Geddes and Company Limited, Executor Trustee and Agency Company of South Australia Limited, Guinea Airways Limited, Onkaparinga Woollen Company Limited, Quarry Industries Limited, and Salt Industries Limited. Another is Mr. A. M. Simpson, who is also a director of Clarkson Limited, Elder Smith and Company Limited, and Simpson Distributors Limited. Mr. A. M. Moulden, who is another director, is also a director of Adelaide Rope and Nail Company Limited, Bradford Insulation (South Australia) Limited, Commercial Union Insurance Company Limited, Guinea Airways Limited, Newton McLaren Investments Limited, South Australian Brewing Company Limited, and Wakefield Investments (Australia) Limited.

We have here a combination, through the private trading banks of Australia, of wool brokers, stock and station agents, trustee companies, investment companies, hire purchase companies, holding companies, newspapers, the shipping combine, airways, road transport, breweries, huge emporiums, giant manufacturing firms, and monopolies like the Colonial Sugar Refining Company Limited, the Broken Hill Proprietary Company Limited, Australian Iron and Steel Limited, Drug Houses of Australia Limited, Amalgamated Wireless (Australasia) Limited, Courtaulds (Australia) Limited, Australian Chemical Industries Limited, and the British Tobacco Company (Australia) Limited.

I turn to the Commercial Banking Company of Sydney Limited and the Bank of New South Wales to show how much real competition there is between these private banks. These two banks have five directorate links with each other through, first, the Sydney Exchange Company, where Sir Edward Knox, who is a director of that company, also represents the Commercial Banking Company of Sydney, and on the some directorate he sits with Sir Leslie

Morshead and Vincent Fairfax, who are directors of the Bank of New South Wales. On the directorate of Toohey’s Limited we have Mr. E. W. Street, who is a director of ihe Commercial Banking Company of Sydney Limited, sitting alongside Mr. R. C. Wilson, who is a director of the Bank of New South Wales.

On the directorates of Tooth and Company Limited and Courtaulds we have Mr. R. J. Vicars, who is a director of the Commercial Banking Company of Sydney Limited, sitting alongside Mr. D. Lewington, who is a director of the Bank of New South Wales. On the directorate of the United Insurance Company, we have Mr. R. J. Vicars and Sir Edward Knox, who are directors of the Commercial Banking Company of Sydney Limited, sitting with Mr. J. W. Dunlop, who is a director of the Bank of New South Wales, ls it any wonder that there is no real competition between the private banks when there is such a tie-up between one bank and another?

On the directorate of the Colonial Sugar Refining Company Limited, the same thing occurs, with Sir Edward Knox and Mr. G. B. Kater sitting alongside Mr. J. W. Dunlop from the Bank of New South Wales. The link with the Bank of New South Wales does not stop there. Through Goldsbrough Mort and Company Limited, it is linked with the Bank of Adelaide, through Mr. A. E. Hamilton, who is a director of both boards. This grand link between the banks is perfected on the board of the Commonwealth Bank itself. Here we have the amazing spectacle of a government that talks about complete separation, appointing to the board of the Commonwealth Bank, which is going to control the central bank, Mr. G. H. Grimwade, who is a director of Commonwealth Industrial Gases Limited, which recently succeeded in having sales tax lifted completely from its product. He is a director of Courtaulds Limited, and of Cuming Smith and Company, Drug Houses of Australia, the Perpetual General Insurance Company, and the Victoria Insurance Company. He links the Commonwealth Bank Board with the National Bank of Australasia Limited through Mr. J. A. Forrest, who is a codirector of Drug Houses of Australia Limited, as well as a director of the National Bank. He is linked with the Com mercial Banking Company of Sydney, through Mr. J. R. Vicars, with whom he sits on the directorate of Courtauld’s Limited. Mr. Grimwade has an indirect link with the Bank of New South Wales through Mr. Dudley Lewington, who also sits with him on the directorate of Courtauld’s Limited. Mr. W. A. Gunn, another member of the Commonwealth Bank Board, has only one interest, that is Rothmans of Pall Mall (Australia) Limited. Professor Hytten, who is the Liberal party’s adviser and who believes in a constant pool of unemployment in order to make workers vie with one another for extra work, is also a director.

These are the type of people who will be appointed to control the Commonwealth Banking Corporation. There is no doubt whatever that when the corporation is established it will hand over control of the people’s bank completely to private enterprise and to the private banks. The Labour party has always asked for competition but we want fair and active competition, not stifled competition of the kind this Government has imposed on Trans-Australia Airlines and which it is now trying to impose on the Commonwealth Trading Bank. We believe that our banking system should operate for the public good and not for private profit. We believe that the banking system should be used to provide cheap interest rates in the hire-purchase field. We believe that the control of finance is too great a responsibility to be left in the hands of private enterprise. It should be placed in the hands of the elected representatives of the people.

Mr DEPUTY SPEAKER:

– Order! The honorable member’s time has expired.

Mr JEFF BATE:
Macarthur

.- The honorable member for Hindmarsh (Mr. Clyde Cameron) has made some intelligent speeches in this House, but to-night he seemed to run out of material on this bill. About half of his speech was devoted to naming a long list of distinguished people who are connected with various organizations. I do not know what listeners to the broadcast of proceedings to-night think of the honorable member’s speech, but if the organizations which he mentioned did subscribe to the funds of the party to which I belong, I should prefer subscriptions from them to any from the Communist party. Not so long ago we listened in this House to Bill Bourke, the former member for Fawkner, telling the truth about Communist contributions to the Labour party - the party in which the honorable member for East Sydney (Mr. Ward) and the honorable member for Hindmarsh are such decorations. According to Mr. Bourke, the Communist party gave thousands and thousands of pounds to the Labour party whilst a Labour senator said the Communist contribution to the Labour party was not chicken feed. The Communists concerned now dominate the executive of the Australian Council of Trades Unions and include such famous names as Healy, Parkinson and many others, lt would be only boring to go through them all. They are top “ Coms “, and they have subscribed to the funds of the Labour party. I should be proud to receive subscriptions from men of the type named by the honorable member for Hindmarsh, whereas the Communists who subscribe to Labour party funds advocate the “ red “ policy of Russia which is responsible for the most scientific exploitation of the workers ever known in history. Those are the people who are supporting the Labour party, because it offers them a track to power.

The honorable member referred to a pool of unemployment. The Labour party has fixed the “ safe “ unemployment figure at 5 per cent. That was stated in this House by the honorable member for Parkes (Mr. Haylen). Since the present Government has been in office the level of unemployment has never been as high as 5 per cent’. To-day there are very few unemployed persons in Australia. This Government has every right to be proud of its record of employment.

I shall now deal with some of the lame arguments advanced by the honorable members opposite in criticism of this bill. The Leader of the Opposition (Dr. Evatt) in his speech praised the Commonwealth Bank of Australia and cited some impressive figures. But it is interesting to recall that in 1953 when a bill to amend the Commonwealth Bank Act was being debated the right honorable member said -

The private banks are entitled to compete to the best of their ability with the trading branch of the Commonwealth Rank rf Australia, but 1 submit that this bill goes much further than that.

It subverts and destroys the structure of the Commonwealth Bank; it gives to the private banks an unfair advantage.

The other night he said that the Commonwealth Bank, which four years ago he said would be destroyed, was so successful that its customers numbered not fewer than 500,000 and were increasing at the rate of 40,000 a year. That prosperity has come to this bank since this Government amended the Commonwealth Bank Act in 1953, which the right honorable member said would result in destroying the Commonwealth Bank. The whole argument of Labour members consists of clap trap like that. Every time an intelligent move is made to strengthen the banking system, the Labour party condemns it.

But members of the Opposition do noi believe what they say in Parliament. In Sydney, the honorable member for East Sydney goes past the Commonwealth Bank with its safe deposit to do business with the Bank of New South Wales. The Labour Government of New South Wales has refused to obey its party’s edict to bank with the Commonwealth Bank. It has many accounts with private trading banks, having its principal account with the Bank of New South Wales. That bank has resources which entitle it to be the banker for such a large organization as the New South Wales Government. I could give many other illustrations to prove that members of the Labour party do not believe the things they say about banking. The Labour party is dishonest in its attacks on the private banks. I have just pointed out that the honorable member for East Sydney prefers to do business with the Bank of New South Wales rather than the Commonwealth Bank. I should like to refute the malicious lie that he keeps only his birth certificate in his safe deposit at the Bank of New South Wales. I should think that he has more valuable articles deposited there.

Why does the Bank of New South Wales provide a special department to handle the financial affairs of the Labour Government of New South Wales? A spokesman for the bank said that its resources are very substantial. It has a large number of branches, some of which are in remote areas where there is no other bank. In those places the officers are instructed to kee” the branch open after normal banking hours so that a fettler or any other similar worker may be able to cash his pay cheque on his return to the centre at the end of the day. lt would be embarrassing for the Labour Government of New South Wales to take its business from that bank which has given service to that Government and the people for more than 100 years, including a period of 50 years before there was a government bank. The honorable member for Kingsford-Smith (Mr. Curtin), who is an executive member of the Labour party in New South Wales has been endeavouring to persuade Mr. Cahill, the Premier of New South Wales, to take his Government’s business from the “ Wales “ and place it with the Commonwealth Bank, but so far he has not been successful. However, he is still trying. The Bank of New South Wales in Sydney has handled the principal accounts of the New South Wales Labour Government. While that is so, and so long as honorable members opposite have their accounts with private banks, they are dishonest in their attacks upon them. ft will be clearly remembered by honorable members and by many persons outside that this banking controversy started following a judicial decision upholding the Melbourne City Council’s refusal to obey the edict of the Commonwealth Government that it must bank with the Commonwealth Bank. The right honorable member for Barton will correct me if I am wrong.

Shortly afterwards a famous pronouncement was made by the Labour government in August, 1948. Probably the right honorable member for Barton had some part in drafting it. Mr. Chifley, who was then Prime Minister, in a short, tersely worded statement demonstrated the arrogance of the socialists when he said, “ We will prepare legislation to socialize all private banks “. If we want further proof of that intention of the Labour party we need only recall the speech of the honorable member for Hindmarsh. In the short time that he devoted to banking to-night he expressed his party’s intention to socialize banking. Labour supporters have quoted Professor Arndt to the effect that it would now be useless to socialize the banks and that there is no need to do so. Statements of that kind began the great controversy when Labour badly misjudged the people of Australia. In October, 1947, the then Prime Minister, Mr. Chifley, used these words in cold blood -

The purpose of this bill is to empower the Commonwealth Bank to take over the banking business at present conducted in Australia by private banks. State banks and savings banks will not be affected.

I say that that statement was made in cold blood because, for sheer colossal audacity there has never been a statement like it. Of course, the people reacted to it. The largest meetings we have ever seen were held in protest against the action of the Government. That was when Labour made its greatest mistake, lt went out of office for a decade and the best observers say that it will probably be out of office for another decade. It will probably destroy itself and the State Labour governments with it. When Mr. Chifley, said, “ We are going to socialize the banks “, the people of Australia, including many supporters of the Labour party, decided that they would not have long-haired socialists interfering with banking.

Probably no people are less favorable to bank nationalization than are the people of Australia. If honorable members on the other side of the House had been in the Australian Imperial Force they would have been able to judge better the Australian personality and character which is one of rugged individualism and devotion to freedom. If they had known the Australian character and had not been so arrogant they would never have made the mistake of trying to socialize the trading banks. Labour tried, at one blow, to take away the freedom of the people - the freedom of their private lives, the freedom of their business, and the freedom of their commercial interests. Had the move succeeded, everybody would have had to go to a monopolistic government bank.

The Government has been charged, and I have been charged, with trying to do the work of the private banks. The House knows that the Labour party started this fight when it tried to take over the banks and so to take away individual freedom. Because of that, the people ejected Labour for good. Australia is probably a Labourminded country because in years gone by a majority of people supported the Labour party; but they could not support it in that mad proposal of 1947.

The Reserve Bank Bill will finally clean up the central bank by making it a central bank in the true sense of the word. The bill emphasises the importance of central banking. It says -

The Reserve Bank -

  1. shall carry on business as a central bank; and
  2. subject to this Act and to the Banking Act 1957, shall not carry on business otherwise than as a central bank.

The Reserve Bank will be a true central bank. It is accepted in the community that there should be a central bank and that Australia no longer should be behind the rest of the modern civilized world. The Labour party, through Mr. Theodore, moved towards this objective in 1930. The Senate rejected the proposal. Since then, the wheel has turned and the Labour party is trying to prevent the implementation of its policy of 1930.

This legislation will be a barrier against socialism because the Labour party will no longer be able to socialize through the central bank. Between the Labour party and the bank will be the Reserve Bank Board. Also, section 1 1 of both the Commonwealth Banks Bill and the Reserve Bank Bill prevent the Treasurer from imposing his will on the boards without coming to Parliament. Section 11 of each of the bills has been lifted out of old legislation. After the passing of the Reserve Bank Bill, the Labour party will not be able to socialize the Australian banks through the central bank. That will be prevented because, in order to do it, a Labour government would have to come to Parliament, and as soon as it came to Parliament, in the open, the people of Australia would again revolt.

The Australian Labour party has stated that it believes in the national control of credit. I think it was Mr. O’Halloran, the leader of the Labour party in South Australia, who, in a broadcast from South Australia stated -

The Australian Labour party believes in national control of credit.

Then he went on to say -

That is why we are opposing this bill.

Of course, the Reserve Bank Bill will give national control of credit, through the central bank. I think that Mr. O’Halloran’s statement is typical of the way in which the members of the Labour party look at this matter. They say that they want national control of credit; but they will oppose this legislation which will give national control of credit.

I believe that these bills are so important that Parliament should have a good look at them. It does not matter if we debate them for two or three weeks or even if we sit here until 25th December. We should have a good look at them. At the moment, there is no argument against a central bank. This has been agreed upon. All authorities say that a central bank should be set up in a civilized country for the control of credit and that no other bank should be attached to it. It should not compete with banks which it controls. The private banks can have full trust and confidence in a central bank which has not a trading bank tacked on to it. It has not been said that the present central bank has used confidential information given to it by the private banks, but it could have used such information. So there was always a sort of distrust between the private banks and the central bank which was operating with the Commonwealth Trading Bank. This bill will give us a real banking system and will be a monument to the efforts of the party to which I belong.

I come now to the Development Bank. When the Government stripped the central bank of all the authorities, institutions and organizations around it, it had to find somewhere to put them. It was thought unwise to attach the Mortgage Bank Department and the Industrial Finance Department to the Commonwealth Trading Bank which, it was considered, ought to be like the other trading banks and work in fair competition with them - a policy for which the Government parties received a mandate in 1949. So the Mortgage Bank Department is being placed with the Industrial Finance Department in an organization called the Development Bank. The Mortgage Bank Department, under sections 112 and 113 of the existing legislation, could only lend to farmers up to 70 per cent of the bank’s conservative valuation of the property. Further, there was another frustration to the Mortgage Bank Department because it was forced to get from the borrowers each half-year, not only interest, but instalments of the money owing. In other words, there was a fixed instalment to be paid each halfyear and that was not attractive to borrowers. Farmers prefer overdraft accommodation which rises and falls according to receipts. It meant that the Mortgage Bank Department was not very successful and was not availed of very much by farmers because of those two sections. Those two sections have been dropped and the new Development Bank will be able to lend to farmers in the ordinary way, and it will thus fill a need.

I believe that the intention behind the formation of the Development Bank is extremely good. I think at this stage I should reply to the honorable member for Hindmarsh, who said something about the Australian Country party having had a victory because the Development Bank would be able to lend only to the farmers. Clause 72 of the Commonwealth Banks Bill states -

The functions of the Development Bank are -

to provide finance for persons -

for the purposes of primary production; or

for the establishment or development of industrial undertakings, particularly small undertakings, in cases where, in the opinion of the Development Bank, the provision of the finance is desirable and the finance would not otherwise be available on reasonable and suitable terms and conditions; and

to provide advice and assistance with a view to promoting the efficient organisation and conduct of primary production or of industrial undertakings.

The honorable member for Hindmarsh overlooked the clause for industrial undertakings. That clause provides that the Development Bank shall have regard primarily to the prospect of the operations of the person becoming, or continuing to be, successful and shall not necessarily have regard to the value of the security available in respect of finance. But the restriction of credit to-day does not depend so much on security. Most people to-day have good security. The restriction is brought about by the shortage of funds and central bank deposits, and I think it will be the capital provided that will be the important test of the success or otherwise of this bank.

I believe that the time will shortly come when primary production and all other production in Australia must continue to expand, probably in quite difficult times. At the moment, some sections of primary industry, such as the producers of eggs, cheese and butter are meeting with slow sales. Wool is possibly the only commodity still selling at above the cost of production in Australia. But our population is increasing so fast that the actual production of primary goods per capita is falling. In other words, primary production is not going ahead as fast as the population is increasing - or rather, that was the position last year before the drought started. We must begin to look towards expansion of primary production in this country. All the sound land districts have been exploited and we are now beginning to go into the areas which are not so sound from a farming point of view. I am thinking of the south-east of South Australia, where there is a good rainfall, but the land requires special treatment with trace elements. To bring that land into production is a scientific and technological matter rather than a banking matter. Therefore, a specialized form of assistance must be given. I think that the Development Bank is intended to do that, and I heartily applaud the thought and the intention behind it. I think there are some parts of the Esperance area of Western Australia and the Channel country of Queensland which require special treatment because of special problems. When we get into those areas we will have need of the Development Bank.

In other countries, this job is undertaken by a specialized authority. In the United States there is a Rural Finance Corporation, which undertakes the work of moving farmers who have not been very successful. If a man has been rearing pigs unsuccessfully he might be moved onto dairy-farming. If he has failed at cottongrowing, the corporation might give him something else to do. But in this case, this bank is placed inside a nest of banks; we will have the Development Bank, and the Commonwealth Trading Bank in the one building in each country town. Each will be under a separate general manager at the head office and have separate instructions and separate authority. But surely one person in the local office will be responsible for discipline and decisions relating to staff and so on.

This is the situation as I visualize it: If the Commonwealth Trading Bank runs short of funds because of the restrictions upon its activities through the statutory reserve deposit mechanism, which takes 25 per cent, of its liquidity, and through the 2i per cent, restriction on the Savings Bank money, it can say to the Development Bank, “ This is yours “. In other words, what the Government has sought is fair competition. We have sought to put the same controls on the Commonwealth Trading Bank, which has been so successful, as applied to the private banks, which have not been quite so successful. We wanted to make it fair, and we had a mandate to do that - a continuing mandate. I am suggesting that the Development Bank legislation should be looked at very critically. When a borrower goes into the Commonwealth Trading Bank and insufficient funds are available to accommodate him, the question of security does not enter into the matter, lt is a case of sufficiency of funds. When you go to borrow from a bank to-day, you have to wait a considerable time until your turn comes. But under this new arrangement, particularly if the Treasurer is favorably disposed, sufficient funds will be available in the Development Bank to finance almost anything. On the one hand, the Reserve Bank bill affirms the principle of a central bank and the national control of credit, lt affirms the principle of fair competition among the banks, but in the Development Bank there will be unfair competition by a backdoor method. The Development Bank provides a means of financing people when funds are short in the Commonwealth Trading Bank. I do not think that this result was meant by those who drew up the bill, but if the measure is studied, that possibility is apparent.

The farmers should be assisted. There should be expansion of primary production, but I do not suggest that any farmer would seek material gain if that would endanger the whole banking structure and lead to socialism. Under the present Treasurer, there would not be a greater movement of funds to the Development Bank than was intended. But a Labour Treasurer, or a socialist Treasurer, pledged - as the honorable member for Hindmarsh said tonight - to socialize could socialize the whole community through the Development Bank. Clauses 84 and 85 provide that the total amount of moneys borrowed by the Development Bank and the Reserve Bank and not repaid at any time shall not exceed £2,000,000. As clause 84 commences with the words, “ Except with the consent of the Treasurer “, it would be simple for a socialist Treasurer, supported by Communists, to supply substantial funds and to socialize banking, without even bringing the matter before the Parliament. I suggest that this bill should be amended, particularly clause 84. The phrase, “ Except with the consent of the Treasurer “ should be amended to read, “ Except with the consent of the Parliament “.

Mr Curtin:

– What is the difference?

Mr Thompson:

– He could not continue as Treasurer if he did not have the support of the Parliament.

Mr JEFF BATE:

– The Prime Minister (Mr. Menzies), when speaking on the Banking Bill in 1947 said this - and it is relevant to the interjections -

The whole history of democracy which, we should be proud to say, is still primarily the history of the English-speaking peoples, is one of struggle for the control of government by the people, not for control of people by the government - for that freedom which can exist only when the powers of government are limited, when legislators and administrators are responsible to the people, and when no great chances in the material structure of life can be made without popular mandate and approval.

If there is danger of socialization or radical change being brought about through the agency of the Commonwealth Development Bank, its activities should be regulated by the Parliament. If it needs more money, it should not be left to the Treasurer to give his consent to its borrowing that money. That is very different from the Parliament’s consenting. When these matters come before the Parliament, they are brought to the attention of the press, and, through the press, to the attention of the people. Therefore, in my view, the Parliament should exercise supervision over these things. That principle is confirmed by sub-clause (7.) of clause 1 1 of the Commonwealth Banks Bill 1957, which provides that, if there is a difference of opinion between the Government and the Commonwealth Banking Corporation Board, the Treasurer shall cause certain documents relevant to the disagreement to be laid before each House of the Parliament within fifteen sitting days after he has informed the board of the policy determined under the provisions of sub-clause (4.). When that is done, the Parliament will have full cognizance of the matter, and the people will be able to see whether any material change is being made.

The Reserve Bank Bill 1957 represents a magnificent coping stone in Australia’s banking edifice. It is something that we have wanted for many years. On 5th March, 1953, I proposed an amendment to the Commonwealth Bank Bill 1953, and on 9th March, 1956, I took action to introduce a private member’s bill which triggered off this legislation. I am delighted at the introduction of this Reserve Bank Bill, but I am afraid that the provisions in the Commonwealth Banks Bill relevant to the proposed Commonwealth Development Bank indicate that what we have been given with one hand may, in the future, be taken away with the other hand.

Mr R W HOLT:
WANNON, VICTORIA · LP

.- I was interested to hear the honorable member for Macarthur (Mr. Jeff Bate) mention the private member’s bill of which he gave notice in May of last year. The interests of the private banks having been well served by the hand-out of about £1,500,000 given to them in the little horror Budget, it seemed to Opposition members rather ungrateful of the honorable member for Macarthur to propose further amendments to the Commonwealth Bank Act. He, the honorable member for Mitchell (Mr. Wheeler), the honorable member for Evans (Mr. Osborne), the honorable member for St. George (Mr. Graham), and the honorable member for Lowe (Mr. McMahon), may be regarded as those who were directed by the private trading banks to attend to their interests in this House. Apparently, the private banks were not satisfied with the liberal hand-out that they received at the hands of the Prime Minister (Mr. Menzies), and, ungrateful wretches that they were, they proceeded to bite the hand that fed them. Proof of the willingness of the honorable members whom I have mentioned to satisfy the detailed behests of the private banks is to be found in an excellent, and muchquoted, statement made by Mr. Staniforth Ricketson, chairman of directors of the

Capel Court Investment Company (Australia) Limited, at the company’s annual meeting, in March of this year. At page 7 of the printed copy of his address that I have, he is recorded as having said -

The revival of the fight occurred when a strong section of the Parliamentary Liberal Party, dissatisfied with the manner in which the accepted policy of the Party had been ignored, made strong demands on the Prime Minister and his Ministers for the implementation of that policy. In particular, they urged that the banking reform measures promised prior to the Government’s election should be carried out.

Therefore, we can discount the few intelligible things that the honorable member for Macarthur has said. He certainly has the interests of the private banks at heart to that extent, and therefore his observations can be discounted completely.

Mr Hamilton:

– Now let us have some pearls of wisdom.

Mr R W HOLT:
WANNON, VICTORIA · LP

– Certainly, and I will cast them in the appropriate place.

Government supporters, including particularly the honorable member for Corangamite (Mr. Mackinnon), and the honorable member for Macarthur, referred to a central bank, but they did not attempt to define, or adequately describe, what a central bank was, or, above ali, what its functions were. The Treasurer (Sir Arthur Fadden) said that the object of this legislation is to restore full harmony within the Australian banking system. I take it that that means that the object is to placate the disgruntled private trading banks, because all the portents point towards a very satisfactory trading position for the Commonwealth Trading Bank.

So far as the Opposition is concerned, the Government’s case must fall to the ground if we can prove, first, that this legislation will not bring about harmony in the banking system; secondly, that, even if it does not bring about harmony, it is detrimental to the national interest; and, thirdly, that it is totally unnecessary. On these three grounds, so far as the Opposition is concerned, the Government’s case fails, and this legislation will fail, for three specific reasons that I will state shortly.

The prime object of central banking, in the view of Opposition members and of central banking authorities throughout the world, is stated by the Governor of the South African Reserve Bank, in his treatise on central banking, as follows: -

The guiding principle for a central bank is that it should act only ih the public interest and without regard to profit us a primary consideration.

Section 8 of the Commonwealth Bank Act which is now being amended, states - lt shall be the duty of the Commonwealth Bank … to pursue a monetary and banking policy directed to the greatest advantage of the people of Australia, and . . . (he maintenance of full employment.

The 1951 and 1953 acts, and the measures now before the House, all favour the private trading banks in that they tend to weaken, in a positive way, the authority of the central bank.

During the consideration last year of the Fishing Industry Bill 1956, the Minister for Trade (Mr. McEwen) stated that he favoured private enterprise, and that continued government activity in the whaling industry could be justified only by socialist policy. The Minister for the Interior (Mr. Fairhall) said much the same thing in the debate on these bills last Thursday evening. If this Government is to give effect to its anti-socialist policy in its entirety, it must amend the Banking Act in order to prevent any attempt to safeguard the interests of the people by reinforcing the powers of the central bank. The interests of the private trading banks are those of Government supporters, and I submit that the real object of this legislation is to hamper and fetter the Commonwealth Bank of Australia - the people’s bank - in the exercise of its authority.

It is admitted by everybody that the Commonwealth Trading Bank has done a particularly good job. In the address that I have already cited, our friend, Mr. Staniforth Ricketson, said, also -

Under the guidance of the present able and enterprising General Manager, the Commonwealth Trading Bank has attained an impregnable position . . .

In Victoria likewise, capable and efficient management has been exercised by Mr. Len Dooling, the Victorian manager of that bank. The consistency of the service given by the bank apparently is recognized by all. I suspect that, for some people, this recognition stems from the competitive trading of that bank. The Government hopes to make the people’s bank subservient to the private trading banks simply by putting it under the control of a board on which the private banks will have a majority of representatives. This criticism has been levelled so consistently and effectively by previous Opposition speakers that there is no need for me to labour it-

I congratulate the honorable member for Melbourne Ports (Mr. Crean) on his excellent analysis of the situation that will be brought about by the substitution of a fixed ratio reserve system for the special accounts system. Apparently, this Government thinks that it must decry anything that is Australian. The special accounts system was evolved to suit the peculiar circumstances applicable to Australia, where we have a form of federal government under which constitutional powers are divided. Therefore, the present Government seems to think that anything that is characteristically Australian, and is successful, is not good enough for it, and that it must substitute something else. The substitution of a fixed ratio reserve, with notice of 45 days required before it can be increased, does definitely limit the power of the central bank to control the private trading banks in their persistent search for private profits regardless of the effect on the public interests of the people of Australia.

The central bank was not permitted by this Government, in 1954 and 1955, to use its powers to the full to prevent the inflationary boom that occurred then. I say that if the central bank had been permitted to use those powers we could have controlled the inflationary boom in 1954-55 and 1955-56. That the central bank could not use those powers was due entirely to the fact that under the 1953 legislation the full amount of surplus investable funds that could be called in from the trading banks under that power had been exhausted, and the central bank was not able to control the private trading banks in their so-called gentlemen’s agreement. The fact that the advances control was available to the central bank and was not used must indicate only one thing - that there was a conflict between the central bank board and the Governor of the bank, Dr. Coombs, which was not resolved.

So we find the Australia and New Zealand Bank Limited and the English, Scottish and Australian Bank Limited, the two most un-Australian banks, following their policy of excessive advances, allowed their ratio to get as low as 6 per cent. The absence of any comment by Dr. Coombs on this matter can only be interpreted as indicating that there was a conflict and that this Government, through the Treasurer, used its power in favour of allowing the private trading banks to break their so-called gentlemen’s agreement with the central bank, thus accelerating inflation unduly. This is borne out again by a quotation from an excellent article by Professor Arndt in the Italian magazine “ Banca Nazionale Del Lavoro “, dated December, 1956, under the title “ A study of fifteen years of Australian experience “. I quote from page 22 of this magazine. Professor Arndt wrote -

The only banks which kept their LGS ratios at or above the agreed level were the Commonwealth Trading Bank and the Commercial Banking Co. of Sydney, As in the first post-war inflation, the Melbourne banks, and particularly the two London head office banks, went furthest in allowing their advances to rise at the expense of their liquidity, the E.S. & A. Bank finding itself in June, 1935, with a ratio of liquid assets and government securities to deposits of only 6.4 per cent.

The Commonwealth Bank’s attempt to reconstitute central banking in Australia on the basis of voluntary co-operation by the trading banks through adherence to a conventional liquid asset ratio had signally failed.

The immediate reason for the failure was, of course, the refusal of the majority of the private trading banks to follow the central bank’s policy.

And here we come to the core of the accusations levelled by the Labour party. The article continued -

The brute fact is that most of the trading banks still, at heart, felt about central banking much as, according to Giblin, they had done in the thirties: “ While consideration for profits and prestige was in part responsible for this resolve (to fight effective control of their credit policy by the central bank), with some banks at least it was almost sanctified by the conviction that their judgments on the appropriate monetary policy in any given circumstances were better than that of the Commonwealth Bank “.

In other words, that their desire for private profits at any price should take priority and precedence over the general welfare and the general good of the people of Australia.

The evidence is irrefutable that the Government is firmly behind the trading banks in their assertion of the superiority of private banking profits as opposed to the good of the people as a whole.

I said earlier that these bills should be judged on whether they assist banking to be carried out in the public interest and without regard to profit as a prior consideration. It is in regard to hire purchase particularly that the greatest betrayal of the interests of the people as a whole in favour of the private trading banks is disclosed in these measures. Since the last war, throughout the whole of the western world hire purchase has become a banking system on its own. lt has become a system of credit which, in Australia, exceeds twofold in volume the personal advances made through the whole of the Australian banking system. It threatens to eclipse bank advance policies so far as advances for the purchase of retail goods, and personal advances, are concerned. I quote again from the Quarterly Review of the “ Banca Nazionale Del Lavoro “ of March, 1957 in which is published a table showing the growth of hire purchase in Australia. In the consecutive years from 1948 to 1956 the total amount of hire purchase rose from £32,100,000 in 1948 to £48,100,000 in 1949, to £70,300,000 in 1950, £92,600,000 in 1951, £102,100,000 in 1952, £112,700,000 in 1953, £165,000,000 in 1954, £223,800,000 in 1955 to £255,200,000 in 1956.

Similarly the Bank of Montreal Review of 22nd August shows that this terrific credit system has extended in Canada since 1948, when the total was 537,000,000 dollars, to a total of 2,366,000,000 dollars in 1957. So this field is a very lucrative one. In the words of the final recommendation made by the Board of Governors of the Federal Reserve System in America, it is going to increase still further and threatens to eclipse the banking system so far as credit advances are concerned. The board made this statement -

Whatever the actual growth proves to be, it is reasonable to expect that instalment credits will continue to grow, to aid in the financing of expenditures for goods and services, to facilitate the spreading of new products and to help raise living standards.

We find from this legislation that the United States predictions that hire-purchase finance will increase are true, and that the future prospects of it are unlimited. We know that hire purchase is the wageearner’s bank, therefore any legislation or any factors affecting the wage-earner’s bank must receive greater consideration and greater care than usual. There should be no exploitation. The rates of interest should be such as the traffic can bear and not usurious. But we learn from the “ Sunday Mail “ of 4th July last that this type of finance is increasing, and that the usurious interest rates charged threaten to bring about one of the greatest financial scandals. In this article we learn that every second car purchased to-day is bought on hire purchase. We also learn that failures to keep up payments under hire-purchase contracts number one in 200 on household requirements and only one in 400 on motor vehicles. So there is not very much risk attached to selling a car on hire purchase, and therefore the interest rates should not be high if the risk is low.

On those figures alone complete justification exists for a reduction of interest rates to ensure that the wage and salary earners who use this type of credit will not be exploited. We find, however, that interest rates of between 15 per cent, and 20 per cent, are being charged. This is confirmed in the Italian article from which I have just quoted. On household goods, i( states, the interest rates range from 15.5 per cent, to 19.5 per cent. The interest rates for hire purchase of motor vehicles are 1 1 per cent, and 15.5 per cent for new and used cars respectively, and for new and used trucks the rates are 15.5 per cent, and 17.5 per cent. The return on this type of investment is very lucrative, and this Government has given every facility to enable the private trading banks to enter exclusively into this field of finance.

Mr Cope:

– They are exploiting the people.

Mr R W HOLT:
WANNON, VICTORIA · LP

– That is correct. They are exploiting the people, and the people’s bank, which could provide some relief, is deliberately debarred from doing so. Honorable members on the Government side have said that there is no discrimination against the Commonwealth Trading Bank, but Mr. Staniforth Ricketson has remarked what a wonderful bank it is, because it has been able to finance at a low rate of interest, for a relatively small return, semi-governmental and similar loans. It has financed these loans at an interest rate of 5i per cent, when the private banks would not touch such loans. They have been able to exploit the penury of the wage-earners and obtain returns of 15 per cent., 19 per cent, and 20 per cent, on money which should have been invested in the interests of the nation as a whole at a rate of only 5i per cent. This legislation, in conjunction with the calculated provisions of the 1953 legislation, will have the effect of preserving the domain of hire purchase almost exclusively for the private trading banks.

After 1951 the Commonwealth Bank withdrew from this type of finance and financed only producer credit lines. It is true that it was financing the hire purchase of motor cars for private use. It voluntarily withdrew from this line of business, but it had the right to go back to it at any time. The 1953 amendment gave the private trading banks the right to invest in securities and in other avenues of investment which previously were controlled. In other words, the investment policy of the private banks was de-controlled by the 1953 legislation. After that year, the private trading banks proceeded to lend money to the hirep /chase companies, and we found later that they actually converted their advances to those companies into shareholdings. Thus it came about that in the Australian Guarantee Corporation Limited the Bank of New South Wales acquired a holding equivalent to 40 per cent, of the ordinary stock of the company. This was done by taking up 2,500,000 ordinary 20s. fully paid shares. Similarly, in General Credits Limited a virtual controlling interest was acquired by the Commercial Bank of Australia Limited. This bank acquired a 45 per cent, interest in the subscribed capital of the company. Custom Credit Corporation Limited was taken over by the National Bank of Australasia Limited, when it acquired a 40 per cent, holding in that company. Esanda Limited was the hirepurchase company for the English, Scottish and Australia Bank Limited. That bank controlled exclusively the whole of the assets, and directed the administrative and financial control of the company. We find also that the Finance Corporation of Australia Limited is now controlled by the Bank of Adelaide. One of the more recent deals to be carried out under the 1953 amendment was the acquiring by the Australia and New Zealand Bank Limited, of h controlling interest in Industrial Acceptance Holdings Limited.

The private banks had been investing their money in hire-purchase companies and receiving three times the return that they would have obtained had they been required to carry out their traditional banking policies, as the Commonwealth Trading Bank was forced to do. Why cannot the farming and agricultural people in Victoria, in electorates such as those of the honorable member for Mallee (Mr. Turnbull), obtain advances from the private trading banks to acquire land or to put some superphosphate on the land they already hold, or to improve their properties? They cannot do so because the banks will not lend money at 5i per cent, to the farmer who wan.s to get rid of skeleton weed or do some similar work. The money is not available for that purpose, but it is available for hire purchase at a rate of 191 per cent. The Commonwealth Trading Bank has had the right to enter the hire-purchase field at any time, either consumer hirepurchase or producer hire-purchase. This legislation, however, will restrict that lucrative field to the private trading banks only. The Commonwealth Development Bank will be excluded from the most lucrative section of hire purchase, namely, that connected with consumer requirements. It will be required to finance only industrial hire purchase. I refer again to the publication entitled “ Banca Nazionale Del Lavoro, Quarterly Review”, of March, 1957. From the statistics on page 32, we get an idea of the enormity of the crime of preserving this kind of hire-purchase exclusively for the fell purposes of the private trading banks. They show that in 1955-56, of the total amount of hire-purchase debits outstanding, 71.7 per cent, was in respect of motor vehicles, 23.8 per cent, for household goods and 4.5 per cent, for plant and machinery, which would be the main avenue of lending for the Commonwealth Development Bank. Of the total amount to be lent for hire purchase, the magnificent proportion of 4.5 per cent, may be allowed to the Commonwealth Development Bank. Outstanding hire-purchase debits this year amount to £245,000,000, and the Development Bank is to be limited by this generous Government, which desires to see fair and open competition between the two banking systems, to a 4.5 per cent, cut of the total hire-purchase investment.

Honorable members of the Australian Country party have been endeavouring to interject, but I suggest they should keep quiet at this stage. One can only compliment them on the attitude that they have taken towards this legislation on behalf of their supporters. I remind honorable members that on 27th May, 1956, an article appeared in the Sydney “ Sun-Herald “ under the heading “ Hire-purchase Outcry; Interest Rate Hits Wheat Men “. which included the following remarks: -

Up to 18 per cent, interest is being charged by hire-purchase companies on essential farming equipment.

My noble friends from the Australian Country party say, “ Oh, yes, we agree with all the propaganda put out by the Liberal party. We agree that this legislation is necessary in the interests of private investors whom the Liberal party represents, and in order to make profits sacred and curtail the inroads being made by the bank belonging to the masses. We agree, by all means, that we should restrict the Commonwealth Bank and the central bank and thereby bolster the inefficient private banking system. But we ourselves must have access to hire purchase at 4$ per cent, or 5 per cent, from the Commonwealth Bank.” I compliment them. The only matter upon which I cannot compliment them is their complete political dishonesty and inconsistency, which has been exceeded only by the unscrupulousness of the Government in taking the guts of the financial system for the benefit of its supporters and throwing the people to the wolves. This they have been able to do only by throwing away the people’s bank.

The last point that I want to mention is the contention that hire purchase is controlled by the States and that, therefore, the Commonwealth has no control over it. Having allowed the private banks to infiltrate the hire-purchase companies, I believe that Section 92 of the Constitution would prevent the Commonwealth Government from forcing them out of those companies. They are in there to stay, and the only effective way in which the Commonwealth central bank may control hire purchase is by putting a competitor in the field to reduce interest rates and give a little justice and equity to the helpless wage or salary earner who is being exploited by unscrupulous supporters of the Government in their desire for profits.

Mr FREETH:
Forrest

.- In the same way as a Russian named Pavlov induced certain reflex actions in a dog by external stimuli, the Labour party has developed conditioned reflexes which react when the word “ banking “ is mentioned.

Mr Haylen:

– Like the pup in Sputnik.

Mr FREETH:

– The honorable member would probably do a better service to mankind if he were circling the earth in the Russian satellite in the place of the unfortunate dog. As I was saying, that is the only reasonable explanation I can find for the degree of opposition which the Labour party has announced it is determined to offer to this legislation. Indeed, it announced its determination to defend the present banking structure to the last ditch, or at any rate to the last senator, even before any one knew what the bills under discussion contained. The degree of frenzy which the subject of banking arouses in members of the Opposition is illustrated by the statement made to-day by the honorable member for Batman (Mr. Bird) who claimed that if this legislation is passed, the Labour party on its return to office will restore the present banking structure. Honorable members who have been in this House for some years will remember the heated debates that took place on the restoration of the Commonwealth Bank Board, and the double dissolution of Parliament that followed, because the Labour party objected to the present banking structure. Yet, the outcome of their opposition on this occasion is that they are prepared to defend the present system with the same unrestrained violence with which they previously assailed it. So, we can only conclude that they have either been converted to the merits of the present system or have completely forgotten the debates of a few years ago.

The Leader of the Opposition (Dr. Evatt) made three points in his rather long speech with which I should like to deal. Firstly, he queried whether the new banking legislation was necessary. He claimed that it was not. Secondly, he said that it weakened the central bank; and thirdly, he claimed it disclosed some sinister intentions against the Commonwealth Trading Bank. “Whether the legislation is necessary or not does not brand it as bad legislation. An alternative and possibly improved form of banking can be introduced without any urgent necessity. I do not believe that this particular legislation is necessary from the point of view of urgency. I do not believe that it will make any great difference to the system of banking in this community over the next few years. So, from that point of view there is some merit in the argument of the Leader of the Opposition. But it is not really an argument against the legislation now under debate, which would never have been introduced if the people of Australia and the trading banks had had some assurances of future Labour party policy in regard to banking.

I invite honorable members opposite to clarify some of the doubts in our minds about their future intentions. The honorable member for Batman - and I do not suppose he plays a very great part in determining the policy of the Labour party - told us it was his intention to work for the restoration of the present legislation. Other honorable members opposite have suggested that they will try to intensify the competitive activities of the Commonwealth Bank. The Leader of the Opposition has endeavoured to allay public fears to some degree by suggesting that because of the decision of the Privy Council no legislative attempt will be made in future to nationalize the banks outright. Of course, that is quite obvious. He does not promise, however, that if Labour is returned to office no legislative way will be found of getting around the difficulties created by section 92 of the Constitution. One cannot say, in view of the reasoning of the Privy Council in its decision, that some ingenious way may not be found to defeat the effects of that decision. The Leader of the Opposition does not say that the Commonwealth Trading Bank will not try to eliminate the private trading banks one by one by some form of unfair competition, or that there will not be administrative attacks on private trading banks.

I invite honorable members opposite to say what their intentions are if they are returned to office. What do they propose to do with regard to the private trading banks? So far we have heard nothing from them on that score. The methods open, if they wish to eliminate the private banks administratively, are these: First, through the bank board under the present system there could possibly be a breach of confidence on matters confided to the board, as the authority for the central bank, by the private trading banks. That could be passed on to the trading section of the Commonwealth bank under the present structure. The private trading banks have very real fears that that would be one of the methods employed. If honorable members opposite wish to allay the fears of the private bankers on this point, let them do so. If they were in office, would they resist this method of trying to destroy the private trading banks?

Secondly, there is the method of discrimination with regard to special accounts. Private trading banks could be picked off one by one. Under the present banking structure, I do not believe any future Labour government would have the temerity to create financial chaos by calling in at once the maximum’ amount from all the trading banks; but when a particular trading bank was in a weak and vulnerable position, it would be quite easy to call in a large amount for the special account from that particular bank, and so damage it. I invite honorable members opposite to say whether that would be one of the methods they would employ if the present banking structure were to continue in operation.

The final method would be by unfair competition which would even involve carrying on the business of a government trading bank at a loss in order gradually to accumulate the present customers of the trading banks. Those are the fears of the private bankers, the business community and the people of Australia under the present legislation. I do not believe that the legislation we are now discussing will eliminate all the dangers of administrative destruction of the private trading banks. Therefore, to some degree I support the contention of the right honorable member for Barton that this legislation was not necessary. Nevertheless, I say that it proposes to create in the Commonwealth a banking structure which, at any rate, will remove some of the weaknesses of the present structure, and at the same time it will make slightly more public the malicious designs that the Labour party may have against the trading banks.

The honorable member for Melbourne Ports (Mr. Crean), whom I must commend for a very reasoned argument, and who dealt with the subject with far less hysteria than did any other honorable member opposite whom I have yet heard, spoke at some length on the question of the central Reserve Bank, and in that respect he took up the argument of the right honorable member for Barton that this legislation would weaken the central bank. The argument there lies between the merits of a central bank carrying on the functions of a trading bank at the same time, and thereby having some influence over, and control and knowledge of, the state of the economy, and the merits of a reserve bank which is entirely removed from the activities of a trading bank. The honorable member for Melbourne Ports quoted, of course, as his strongest authority, the report of the 1937 Royal Commission on Monetary and Banking Systems. He also said that, in Australia, contrary to the practice in England and other modern countries, where the reserve bank is quite separate from trading bank functions, we have no bank rate. I point out that the bank rate is only one means of controlling credit and only one stabilizing factor in the economy. The remarks of the royal commission in 1937 were made before the special account system was placed on a statutory basis. They were made long before the 1945 Banking Act and our wartime experience in controlling and regulating credit. They were made before the control of interest rates was written into our legislation as a function of the central bank; and they were made before the direction of credit was made a function of the central bank.

I submit that all these things that have been written into our legislation have in fact given the central bank very strong control over the economy. In view of the fact that most other modern countries have a central bank entirely removed from trading banking, I suggest that it is entirely a matter of opinion whether the central bank should be detached from trading activities. It has certainly not been proved that it will be weaker under the new legislation. I believe that the central bank, as it is proposed to be constituted by this legislation, will at least be as strong and effective in controlling the economy as it was formerly. It will have power to compel the making of statutory reserve deposits, about which I shall say a few words shortly. In addition, it will have power to mobilize foreign currency, which, of course, is very important for a central bank, and it will have power to buy and sell foreign exchange.

In the days of the depression, the activities of the Commonwealth Bank in that regard played a very important part in the move towards restoring stability to the economy. The central bank controls the advance policy of trading banks, and that control can be exercised fairly rigidly in times of crisis. It can control the interest rates of the trading banks, and it controls such other things as gold. The banking legislation insists on banks providing proper balance-sheets in a statutory form which, in turn, will afford additional control over the activities of the trading banks. When all these things are added up, I fail to see how it can be said that this legislation in any way weakens the effective control of the central Reserve Bank over the economy of the country.

Some mention has been made of the matter of special deposits, or statutory reserves, as they are to be called, lt is proposed to change the system under which 75 per cent, of the increased deposits of trading banks may be called up. Instead, 25 per cent, of the total deposits may be called up. In practice, over the last few years the central bank has never called into special account an amount which came up to 25 per cent, of the total deposits. The increased deposits in the period concerned must be 50 per cent, of the total deposits for 75 per cent, of the increase to equal 25 per cent, of the total. I offer that information for the honorable member for Melbourne Ports, whom I see shaking his head. He will find that that is so, if he sits down and works it out. Therefore, the central bank will still have a very effective control in a period of inflation. I submit that inflation would never be so rapid that the increase in deposits would increase at the rate of more than 50 per cent, of the total deposits in a short period, so that it would be quite practicable for the central bank to give the required 45 days’ notice if it were necessary to call up more than 25 per cent, of the total deposits.

The other aspect that was raised in relation to the special account system concerned this matter of discrimination, which I mentioned earlier. One of the fears that the trading banks expressed was that discrimination could lead to their being picked off one by one. In actual practice, as the system has been operating, at least while this Government has been in office, discrimination between the trading banks has been used as a means for their protection, and not as a means for harming them. There have been occasions when banks, for some reason or other, have allowed their liquidity position to get dangerously low and have been in an awkward situation. In those circumstances, they were not required to deposit quite as much as were other banks whose position was strong, and so the discrimination in respect of the special accounts can be said, in effect, to have protected the trading banks.

If honorable members opposite have evil designs on the private trading banks, this removal of discrimination could in fact strengthen their hand, because it would only be necessary for them to set a fairly conservative policy for the Commonwealth Trading Bank to follow, and then to fix the percentage of statutory reserve deposits by Commonwealth Trading Bank standards, for a private trading bank that was in difficulties immediately to feel the effects. While this legislation may remove some of the fears of the private trading banks, I submit that if honorable members opposite desire to damage those banks administratively, it will still be open to them to do so under the legislation. As I say, 1 am at a loss to understand the frenzy with which they have attacked the legislation.

The next argument of the Opposition, of course, was that the Commonwealth Trading Bank was to be weakened and ultimately destroyed. The record of the Commonwealth Trading Bank, while this Government has been in office, indicates that the bank has been going from strength to strength. In this very legislation, it is proposed to increase its capital by £2,000,000. Surely, that would be rather a peculiar attitude to be adopted by a government which intended to destroy the Commonwealth Trading Bank! For my part, I propose to give a categorical assurance to the Opposition. I have invited honorable members opposite to state their views of future Labour policy, and I give them my assurance, for what it is worth, that I believe there should be a strong Commonwealth Trading Bank in active competition with the private trading banks. I do not think that any honorable member on this side of the House would ever support a suggestion, such as that made by the right honorable member for Barton, that this Government intended to convert the Commonwealth Trading Bank into a kind of public company. We are prepared to give these assurances, but honorable members opposite have not given any assurance about their intentions in regard to the trading banks.

This legislation also will strengthen the structure of the savings banks. That is a matter of vital interest to honorable members. It encourages greater investment for housing. In many ways, the corporation’s structure is to be used to strengthen the position of the various adjuncts of the Commonwealth Bank.

The honorable member for Hindmarsh said that the provision relating to taxing of the profits of the Commonwealth Trading Bank was one way of attacking that bank. I want to point out to him that the legislation provides that the banking corporation is not in fact bound to make any profits at all. Sub-clause (2.) of clause 9 of the Commonwealth Banks Bill states -

It is the duty of the board-

That is the Commonwealth Banking Corporation Board - within the limits of its powers, to ensure that the policy of the Corporation, and the banking policy of the Trading Bank, of the Savings Bank and of the Development Bank, are directed to the greatest advantage of the people of Australia and have due regard to the stability and balanced development of the Australian economy.

Therefore, the suggestion by the honorable member for Hindmarsh that the functions of the Commonwealth Trading Bank are going to be damaged to any degree by making the bank pay income tax on profits as well as place half its profits in the Treasury is quite absurd. As has been pointed out, the private banks pay taxation, and they also pay profits to shareholders. When the honorable member suggests that this is done only to destroy the Commonwealth Trading Bank, and when he argues that the bank should be for public use and not for profit, he overlooks the fact that to destroy the private trading banks, the Commonwealth Trading Bank, according to his theory, must make a profit. But we know it is not bound to make any profits at all in carrying out its functions.

The honorable member for Hindmarsh diverted this House for a long time in reading out a long list of names of great Australians who form the directorates of the various banks and who are also woven, as it were, into the directorates of all the major industries in Australia. I, for one, am very content with that situation. Those great companies which the honorable member mentioned provide all the major employment in Australia. On their success and prosperity will the success and prosperity of every one in this community rest. These directors are sound men of proved ability, and I greatly prefer them to run the industries of this country than to see them run by many honorable members opposite or any other socialist body of men who think they can do better.

The reason why these men are on the boards of the private banks and the companies is that very often the private banks have brought up these companies from the beginning of their development. The private banks have financed them and helped them. For that reason, in many cases directors of private banks have seats on the boards of the great companies.

I come now to the argument submitted by the honorable member for Macarthur (Mr. Jeff Bate), who fears that the Commonwealth Development Bank may be used as an instrument for socialization. If honorable members opposite wish to use the new banking structure as a means of destroying the private trading banks administratively there are plenty of ways left open to them other than resorting to the Development Bank. I believe that the Development Bank, with its strengthening under this legislation, is a very good creation. 1 know of hundreds of farmers in my electorate who would welcome the type of finance which this bank is designed to provide. Indeed, there is a crying need for it in Australia.

The Commonwealth Trading Bank Board will control the general policy of the Development Bank within the framework of the statute, and T believe that the Commonwealth Banking Corporation Board would not allow the Development Bank to supersede in any way the operations of the Trading Bank.

Finally, I think that what I have said to-night provides conclusive proof that the people of Australia, failing the assurances T have invited honorable members opposite to give, can rest assured that the banking structure of this country will be saved from socialist depredations only so long as we have a non-socialist government.

Debate (on motion by Mr. Courts) adjourned.

page 2236

BILLS RETURNED FROM THE SENATE

The following bills were returned from the Senate: -

Without amendment -

Coal Industry Bill 1957.

Gift Duty Assessment Bill 1957.

States Grants (Special Financial Assistance) Bill 1957.

States Grants Bill 1957.

Without requests -

Customs Tariff Bill (No. 4) 1957.

Customs Tariff (New Zealand Preference) Bill 1957.

Customs Tariff (New Zealand Preference) Bill (No. 2) 1957.

Customs Tariff (Papua and New Guinea Preference) Bill 1957.

Customs Tariff Bill 1957.

Customs Tariff Bill (No. 2) 1957.

page 2236

ADJOURNMENT

International Affairs - Dutch New Guinea - Australian Defence - Royal Australian Naval College

Motion (by Mr. Beale) proposed -

That the House do now adjourn.

Mr CAIRNS:
Yarra

.- I desire to place before the House for its consideration a matter related to international affairs and foreign policy. This is a matter of great importance, and I quote the honorable member for Mackellar (Mr. Wentworth), who said, during the adjournment debate last Thursday night -

The thread upon which our lives hang cannot remain under tension indefinitely without snapping. If it snaps, humanity dies.

This thread upon which the lives of humanity depend can be discussed in this House only in connexion with foreign policy or international affairs. For many months, the only opportunity we have had of discussing international affairs in this House has been on the adjournment, with all the limitations on discussion which that occasion involves. If the Prime Minister (Mr. Menzies) desires to speak on international affairs, even he has to come into the House late at night and speak on the adjournment. It is a great strain for a man getting on in years, but nevertheless, that is forced upon him.

I want to draw the attention of the House to some of the important developments in recent days. First, there was the speech delivered to the Liberal party’s federal conference in Canberra by the Prime Minister on 21st October, when he took as his subject a letter written by Mr. Khrushchev to the socialist parties in various parts of the world. I quote from that speech by the Prime Minister -

It is an interesting disclosure of an attitude of mind and, properly considered once we’ve got past all its superficial absurdities and falsities, which I’ll say something about in a moment - it may lead us, if there is a grain of genuineness behind it, to a re-thinking on both sides of the Iron Curtain of our attitude towards the Middle East.

It may lead us to a re-thinking of our attitude to other things. I suggest that this speech by the Prime Miniser on 21st October meant a change of attitude on his part and, therefore, the certainty of a change in the attitude of the Government if the Prime Minister had maintained his change of attitude. I shall illustrate what I mean by a change of attitude by referring again to the Prime Minister’s speech. He said of Mr. Khrushchev’s letter -

It is rather suggestive-

And he quotes the following passage from the letter: - proceeding from the premise that there has been at present a certain rapprochement between the points of view held by the British Labour party and the Soviet Communist party on a number of most important questions dealing with the preservation of peace and international security, the Central Committee of the Soviet Communist party considers that the joint efforts of our parties could contribute to the preservation of peace in the Near and Middle East.

The Prime Minister went on to say -

You may have read various things into that, but at least I think we are entitled to suppose that it is possible, I say nothing more than that, that it is possible for this exhibits some desire in the background to have the Middle East problem dealt with in a peaceable way.

There could be no doubt that what the Prime Minister was saying was that if we had a policy similar to that of the British Labour party - and, it followed, a policy similar to the policy of the Australian Labour party - then it would be possible to reach agreement in some areas with the Soviet Union on these important matters. I suggest that it is a most important development. It has been recognized that there is a change in the attitude of the Prime

Minister. Some of the newspapers have had a debate about whether the Prime Minister has adopted the views of the Minister for External Affairs or those of the Leader of the Opposition. I do not intend to go into that debate. Provided the Prime Minister adhered to that attitude, I would be prepared to give him full credit for initiating it. But the position that the Prime Minister has taken up is this: The faults are not all on one side. If we have a policy similar to that of the British Labour party, there will be some genuineness in the attitude of Mr. Khrushchev and some hope of settling the problems. Therefore, we must proceed with negotiations.

There can be no doubt about this change because, in the very same speech, the Prime Minister went on to pronounce six points which he considered are essential 4o the solution of the Middle East problem. I will refer to four of them. The first, in the Prime Minister’s speech on 21st October, was the united promotion of discussions at a high level without any mention of preliminary conditions. The second was economic aid without military strings. The third was peaceful trade, good for both buyer and seller, in the Middle East apparently, without regard to the politics of either buyer or seller. The fourth was co-operation and international guarantee in the matter of oil supplies and not merely international competition.

That is in direct contrast to the position previously taken up by the Prime Minister and the Government. In the first place, the suggestion that there should be top level talks is in direct contrast with the position previously taken up by the Prime Minister that the Soviet Union must perform a wide range of actions before it could prove its good faith. The second suggestion of economic aid without strings is in direct contrast to the Eisenhower doctrine. The third proposal of peaceful trade in the Middle East without regard to the politics of either buyer or seller is the opposite of American policy which has been followed so religiously by this country. Lastly, the suggestion of the Prime Minister that oil supplies must be dealt with on a cooperative basis is in direct contrast to the position taken up previously, that oil has nothing to do with the Middle East.

Honorable members will recall that proposition being stated by the Minister for External Affairs, and it is in direct contrast to the attitude of the United States of America in regard to Saudi Arabia and other Middle East oil countries.

That speech of the Prime Minister gave some hope for the future but now it seems that he has gone back to his old attitude of aggressive words. That was demonstrated in his speech in this House last Thursday night and in his speech at the Lord Mayor’s dinner in Melbourne on Friday last. He has turned again to a verbal battle with communism in which he uses such words as “ bullets “. He advances on the enemy from the dinner table in Melbourne or from the table of this House. That was a departure from his suggestion of settlement of international problems by negotiation. It is very difficult to explain this change in attitude on the part of the Prime Minister and his desire to be strong and uncompromising, yet limiting himself, nearly always, to the expression of strong, bold words. I suggest that the only time in his life he has chosen peace was at the outbreak of war in 1914. His present attitude contributes nothing whatever to the strength of Australia or to the solution of great problems by negotiation.

There must be something mysterious which leads the Prime Minister back to this attitude. One explanation could be that he is not psychologically qualified to be a negotiator; that he cannot bring himself to perform this task. It is only too obvious, consequently, that the party which he leads requires a continuation of international tension in order to give it the best chances of winning elections in this country. For a few minutes, on 21st October last, the Prime Minister, in his speech to the Liberal party council outlined a sensible policy on international affairs. It was one which could solve many of our problems, relieve international tension and make a contribution towards peace. But this cannot be done, because international tension is necessary for success for the policy followed by the party of which the Prime Minister is leader.

Mr SPEAKER (Hon John McLeay:

Order! The honorable member’s time has expired.

Mr ASTON:
Phillip

.- We have heard a muddled diatribe from the honorable member for Yarra (Mr. Cairns), who, as usual has indulged in McCarthyism by smearing the Prime Minister (Mr. Menzies). The sort of statements he makes are becoming every day occurrences from the “ red “ corner of the Opposition. I am sure that the Prime Minister would be really thrilled to think that he had the support of the honorable member for Yarra. Nothing would please him more. I am sure that the peddling of the old Communist line in which the honorable member indulges and for which he has become famous in this House is really falling flat. Honorable members are all becoming used to it and I suggest that the honorable member for Yarra should confine his smear campaigns to the Yarra bank. 1 wish to speak on external affairs in relation to a matter a little nearer home than that dealt with by the honorable member for Yarra. Recently a joint statement was released simultaneously by the Dutch and Australian Governments, and the principles enunciated in it outlined the views of the two Governments quite clearly in relation lo Dutch New Guinea. This is of great importance to Australia. There has been no change of attitude on the part of Australia towards Dutch New Guinea, and this statement is really a re-affirmation of a continuing policy. We have repeatedly stated our support for the Dutch Government. I believe that such statements have the full support of the Australian people, among whom there is a growing awareness of the increasing strategic importance of Dutch New Guinea as well as an acute appreciation of the work which is being done in New Guinea by both Australian and Dutch Governments in their respective areas.

The aim of both governments is to improve the lot of the indigenous population in health, education and welfare, to raise their living standards and to bring them to a point where they will be capable of accepting responsibility of selfdetermination and self-government. This huge task is, of necessity, a slow one. It is the task of building a new nation in the Pacific; and it will take years to educate the inhabitants of this Territory to a standard where they can accept full responsibility of government. Persons like the honorable member for East Sydney (Mr. Ward) and the honorable member for Hindmarsh (Mr. Clyde Cameron), who agitate for immediate self-rule for these people, show a complete lack of understanding of the inhabitants’ circumstances. Nor have they any real regard for the welfare of those inhabitants. Indonesia, our nearest neighbour, is making consistent claims to control the Dutchoccupied territories. Does Indonesia’s claim disguise a new form of colonialism? It is well to remember that the Indonesian people were helped by the Dutch to attain a standard of education and living that was necessary before they could undertake the responsibility of self-government. Would they deny the same opportunity to those indigenous people? Are they concerned with the welfare of the natives, or is their claim made only for political reasons?

Indonesia cannot genuinely establish its claim to Dutch New Guinea on either ethnical or geographical grounds. The validity of its claim cannot be substantiated, for several reasons. It is an emotional claim and has no realism in its substance. Yet Indonesia has, for the third time in a very short period, brought its claim before the United Nations and its various spokesmen have repeatedly expressed a desire foi a peaceful solution of this important problem. But, on the other hand, repeated statements have been made which do nol in any reassuring way make Indonesia’s motives quite clear. For example, the press statement which was made recently by Dr. Helmi, the Indonesian Ambassador to Australia, was, to my mind, a mere propaganda sheet. In it, he attempted to justify this statement which was made recently by Dr. Subandrio at the United Nations -

The only question is whether the United Nations is the place where the solution to the West New Guinea problem may be forged or whether we must embark upon another course, even at the risk of aggravating the position in South-East Asia and perhaps inviting cold war tensions to further muddy the waters of peace in that region of the world.

Dr. Helmi said he believed that no impartial mind could fail to understand the true spirit in which Dr. Subandrio spoke.

What is this true spirit? Is it one of co-operation, or is there, by innuendo, a threat by Indonesia? It is well to remember that good-neighbourly talk is not one-way traffic and that good faith on both sides must be displayed. Indonesia has to play her part, together with Australia and the

Netherlands, in an endeavour to obtain a peaceful settlement of this problem. Inflammatory and obscure statements can do this cause nothing but harm. After the issuing of a joint statement by the Dutch and Australian Governments, Dr. Subandrio, not content with his previous statement, said -

Indonesia’s security may be jeopardised by a Dutch-Australian alliance.

And he added that Indonesia might -

  1. . forcibly find ways and means to face the threat.

Is this the true spirit of goodneighbourliness and co-operation of which Dr. Helmi spoke? Did Dr. Subandrio read into the joint statement words which were not there, and extract a meaning which is being used for propaganda purposes? Such statements are not conducive to fostering improved relationships between countries. On the contrary, they appear to be part of a campaign on behalf of the Indonesian Government to foster support and votes for their claim at the forthcoming meeting of the United Nations, by influencing smaller nations with brave words.

Attempts to overshadow or nullify the importance of the joint statement of the Dutch and Australian Governments by making statements of an intimidatory character are part of a well-timed campaign. The statements of both Dr. Subandrio and Dr. Helmi, by accident or otherwise, coincided with the “West Irian Week” in Indonesia, during which emotional feeling was whipped up against both the Australian and Dutch Governments. At the conclusion of the demonstrations, our ambassador made, through the correct channels, a verbal protest to the Indonesian Government. Contrast this action with Dr. Helmi’s action in releasing for publication a threeandaquarterpage statement in an attempt to justify various actions taken and statements made. If Dr. Helmi is being instructed by his Government to endeavour to influence our Government and the Australian people, then he is doing his duty by his own Government. But if the Indonesian Government is sincere in its desire for a good neighbour policy, it should look more carefully at this kind of propaganda and the continued reiteration by its spokesmen of false claims. Recently, before this Government had reached a decision on the training of Indonesian cadet officers in Australia - a decision with which I cannot reconcile myself -

Dr. Helmi released to the press his version of the Government’s decision which, incidentally, was incorrect. This was a breach of protocol and showed that Indonesia’s representatives have a great deal to learn about the forms of diplomacy.

May I suggest, with respect, that Dr. Helmi follow the example of the representatives in Australia of other countries, who discuss matters of variance between their country and ours with the appropriate Minister in the correct manner, and do not resort to the issuing of propaganda sheets or the foreshadowing of decisions before they are made. No attempt should be made to stop Dr. Helmi from making statements, but he should pause to consider his diplomatic position in this country and the possible consequences of such statements upon our present good relations with Indonesia. Indonesia, by dropping its false claim to Dutch New Guinea, could receive the approbation of all the free world and prove to all the sincerity of its concern for the care and welfare of the indigenous people.

Dr EVATT:
Leader of the Opposition · Barton

– I do not want to take up very much time, not because the matter raised by the honorable member for Phillip (Mr. Aston) is not important - I think it is important - but because I think it would be better discussed when we have a full-length debate on the subject of international affairs generally, after the Minister for External Affairs (Mr. Casey) and the Prime Minister (Mr. Menzies) have agreed about bringing the whole subject before the House.

But there are one or two things that I must say. I do not think that the honorable member is very familiar with the problem of Indonesia and the struggle for selfgovernment in that area, which was dealt with so fully by the United Nations. 1 think it is important, before we say very much about the matter, to recall that situation. After the armistice with Japan in 1945, there was fighting on a very considerable scale in Indonesia, primarily between, on the one hand, those people in the Dutch East Indies who were demanding self-government, and, on the other hand, the Dutch forces. For a time the position seemed so serious that, had the fighting broadened towards a full-scale war, there would undoubtedly have been loss of life on a tremendous scale. The country is densely populated, and the whole area was in a state of great excitement. Australia, America and Great Britain had, in the Atlantic Charter and the United Nations Charter, promised the peoples of the Pacific and Asia the right of self-government and self-determination at the end of a successful war. There were no exceptions. We promised that in the Atlantic Charter. The honorable gentleman to whom I am addressing my remarks chiefly apparently does not know that. Must I read the terms of the Atlantic Charter and the United Nations Charter? I cannot do that in the time available to me, but that promise is in those charters. That was the catalyst which caused this tremendous reaction throughout South-East Asia, particularly in the Dutch East Indies.

What was the position to be? Let us face the facts. The war was won, but the promises made during the war were gradually coming to be regarded as matters of No. 2 priority, No. 3 priority and so forth. What was to be done in that situation? Enormous loss of life was threatened. One country referred to the United Nations the dispute between the Dutch East Indies and what was proclaimed to be the Republic of Indonesia. But opposition came from the great powers. They did not want the dispute referred to the United Nations. The general feeling in the United States of America and Great Britain was that the matter should not go to the United Nations, as the oil deposits in the Dutch East Indies were so important. Therefore, for a while, the Labour government postponed action, but the fighting got worse, and in the end we took the responsibility, as we had the right to do under the Charter, of referring the matter to the Security Council. By doing that, undoubtedly, a tremendous loss of life was avoided.

When the matter came before the Security Council, the first action taken was to order a cease fire. .It was unanimously ordered on Australia’s proposal. That continued in 1947, 1948 and 1949. Honorable members will remember that a committee was appointed to inquire into the matter. A conciliation committee was sent there. Mr. Justice Kirby, of the Commonweatlh Arbitration Court, was Australia’s nominee to the conciliation committee. In the end, an agreement was made between the Dutch and the Republic of Indonesia in which Holland recognized the Republic of Indonesia. In other words, it ceased to be under the sovereignty of Holland. One thing that was left open under the written agreement was the question of sovereignty in Dutch New Guinea. I remember pointing out that fact in answer to questions in this House many years ago.

It seems silly to argue over the sovereignty of Dutch New Guinea, in itself. The federal conference of the Australian Labour party, when it considered this matter a couple of years ago, made a decision which is the solution to the problem. It did not engage in the swashbuckling talk that has been used in Indonesia and by people in this country who are just as good at it. This was the settlement that we suggested -

A mutual regional pact for security and welfare should be negotiated between Australia, Holland and Indonesia. The pact should aim at promoting the security of the entire areas of Indonesia and New Guinea. It should also aim at improving the standard of life for all the peoples throughout this area - so vital to Australia.

That is a simple statement, lt is absurd to argue about sovereignty when the Dutch and Indonesians cannot agree about it. The United Nations cannot be expected to decide the issue. It depends on the meaning of the word “ Indonesia “ in the original agreement. If it includes Dutch New Guinea, the decision might go one way; if not, it might go the other. Ethnographical reasonscome into it.

I agree with some of the things that the honorable member for Phillip (Mr. Aston> said about speeches by diplomats in Australia, in Indonesia, and in this House. They have been shaping up a little to each other, but it has been nothing very serious. Such conduct is useless. Australian should still extend the hand of friendship, both to the Dutch, who were our allies in the war, and to the people of Indonesia. That is what we want. Surely we are not going to have an argument as to who should have the sovereignty of Dutch New Guinea unless the exploitation of that territory by certain interests is involved. Why cannot we agree with them? There is no reason to have an academic argument.

Let me sura up. Everything that I have said needs to be supplemented by fuller information and discussion. I think that it was right to bring up the matter, but it would be better to have it fully argued before the House in a full-dress debate on the subject. I believe that what the Labour party decided should be the line of settlement. We want the people of New Guinea to progress and we want their standards to rise. They need to be raised. The standards of the people of Dutch New Guinea are even lower than those of the people of New Guinea. Indonesia has a sentimental attachment to Dutch New Guinea because so many political prisoners in Indonesia were imprisoned in Dutch New Guinea under the old regime. Let us forget all that. The Indonesians are only feeling their way in the great area of nationhood. If Australia had not acted under the auspices of the Chifley Government the developments of that time would have resulted in one of the greatest holocausts in the history of warfare. That possibility was averted. We want to conciliate and take an attitude that will prevent threats and counter-threats. We should now avoid the silly argument about the sovereignty of Dutch New Guinea.

We need an agreement between Australia which has an interest in this matter, Indonesia which is the neighbour, and Holland. They are the three countries concerned. If we do not try to gain points on each other, perhaps we will come to a settlement. At any rate, I suggest that that view should be adopted and, therefore, I am not answering the statement of the honorable member for Phillip in detail. I have no doubt that what he said about some of these things may be fair comment. I am not going into them. I know so much about the dispute in the United Nations because I took part in all of it. I believe that it was due substantially to the efforts of the Australian Government, whose views I put forward at the United Nations, that a settlement was reached.

Mr SPEAKER:

– Order! The right honorable member’s time has expired.

Mr BOSTOCK:
Indi

.- I agree with the right honorable member for Barton (Dr. Evatt) that the subject of foreign affairs should be the basis for a full-scale debate. It is very difficult to deal with items in isolation. However, I want to make one comment about the speech of the right honorable gentleman. It is perfectly true that the United Nations Charter to which we subscribe has, as one of its main principles, the self-determination of the peoples of the various nations. I believe that the British peoples have been foremost in subscribing to that view. Nobody has been more forward than the British people in giving to what were colonial countries the right of self-government. Where I differ from the right honorable gentleman is in the implied contention that West New Guinea is part of Indonesia. I do not think it is, ethnically, culturally, or politically. As I have said, I think that this matter should be the subject of a fulldress debate and I do not propose to pursue it any longer.

I want to speak about a matter which is somewhat related to that one because it concerns the defence of this country. During the last few days the “ Sydney Morning Herald “ has published a series of four articles dealing with Australian defence. I do not believe that the criticism contained in those articles is altogether justified. Changes in foreign relationships, changes in world conditions, and the rapid development of armaments and weapons make it impossible for a set defence plan to be pursued without variation by this or any other country. Nevertheless, I believe that we could do something quite material to improve the efficiency of our own defence system on the higher organizational and administrative planes.

At present, like most other countries - certainly like the United Kingdom - we have three autonomous services, each controlled by a Minister who is advised by the chief of staff from the service for which he is responsible. Each of the three Ministers is directly responsible to the Cabinet for his own service. In addition, there is a Minister for Defence whose role, as I understand it, is the formulation of policy with the advice of the Defence Committee. He, also, is responsible to the Cabinet. So in fact, in our defence set-up we have four service Ministers, all of whom have the right to represent views to the Cabinet and three of whom - the Minister for the Navy, the Minister for the Army and the Minister for Air - represent the sectional views of their individual fighting service.

I do not complain of that. I do not believe that a chief of staff is worth his salt unless he gets as much as he can for his own service. But I submit that, in a position such as that, a chief of staff is unable to see the wood for the trees. He cannot see the overall picture because he is preoccupied with the requirements of his own service. Consequently, the result is compromise and delay. The allocation of money, equipment, and man-power, all of which are in short supply, becomes the subject of a dog fight among the chiefs of staff. In fact, I do not think that the Chiefs-of-Staff have ever been unanimous on these questions. Each man is fighting for his own service - and quite rightly. He advises his Minister and, consequently, each service Minister presents to the Cabinet a conflicting view on these vital matters which control the efficiency and effectiveness of our fighting forces.

The Minister for Defence is supposed to co-ordinate these matters, but he is dependent for his advice on the same ChiefsofStaff who are fighting for their own rights before the Defence Committee. The Defence Committee’s advice to the Minister, therefore, is also a compromise. Incidentally, the Defence Committee is chaired by a civilian, though it is required to present its advice to the co-ordinator - the Minister for Defence advising the Cabinet. All these things lead not only to delays but also to compromise, which is not always in the best interests of the overall defence plan.

As long ago as 1951, 1 suggested an alternative in a speech I made in this House on this very subject. I believe that the ideas I put forward are just as appropriate to-day as they were then, and more urgent. The alternative that I suggest is an integrated defence force with a single Minister responsible to Cabinet for military advice. That would involve the disappearance of the three Service Ministers and the amalgamation of the four departments - the Department of Defence, the Department of Air, the Department of the Navy and the Department of the Army - in one department, though that department might be divided into four sections. The four sections would be a co-ordinating section, a naval section, an army section and an air section. If necessary, an Assistant Minister could be in charge of each section. I thought at one time that such appointments would be necessary, but now I do not believe that they are at all necessary.

I consider, then, that we could have a Department of Defence, divided into sections, but controlled by a single Minister, the Minister for Defence. That is basically the proposal on the political side.

On the military side, I believe that the three Services should be amalgamated into an integrated force commanded by a CommanderinChief with a general staff. The general staff world then be drawn from the present services - the Chief of the Air Staff, the Chief of the Naval Staff and the Chief of the Army Staff. They would be advisers to the Commander-in-Chief. The CommanderinChief would be responsible only to convey his military views to the Minister for Defence. Below the level of the general staff, there could be, and should be, no material alteration in the three Services. There would be three arms of the one Service, wearing their own uniforms, following their own traditions and carrying out their own traditional work but co-ordinated as an integrated force - as three arms of a single service - under the CommanderinChief and the general staff.

In the ten minutes at my disposal, I have been able to give only a brief and inadequate outline of my proposal. If any honorable member on either side of the House is interested, I suggest that he set aside a quarter of an hour and read my speech on this subject, which I delivered in this House on 25th October, 1951. On that occasion, I dealt with the matter in much more detail, and my views would be much more intelligible.

Mr HAYLEN:
Parkes

– Behind the solemn, sober statement of a high-ranking member of the armed forces of this country, who is now a parliamentarian, is a suggestion that should be considered by the Government. I believe that the honorable member for Indi (Mr. Bostock) would not have spoken at all if he were not concerned about the defence position. His concern is shared by honorable members on this side of the House. From his knowledge, he has been able to suggest a re-arrangement of personnel and of ministerial portfolios. However, the Opposition would like to know what has happened in regard to the situation which has existed for some years and which has been brought to a head by a series of articles in the “ Sydney Morning Herald “ that cannot be overlooked.

Five articles have appeared in the newspaper and each of them categorically lines up Minister after Minister, including the two who are sleeping on the benches at the moment. Those articles ask the Government what it is doing for the defence of this country and whether it can answer the categorical charges that are made. The St. Mary’s filling factory is included, and questions are raised about the Navy, the Army and the Air Force, as well as the general subject of control. The matter of administration mentioned by the honorable member for Indi is also raised. The positions of the civilian staff of the defence departments, the parliamentarians and the Ministers are considered in a sober analysis in the five articles in the “ Sydney Morning Herald “. Those articles report chaos in defence throughout the country and ask that something be done.

During question-time to-day, I tried to blast through a question concerning these statements, but I received an evasive reply from the Prime Minister (Mr. Menzies). We want to know whether there is an answer to the charge that £1,200,000,000 has been spent on defence, with absolutely nothing to show for it. The “ Sydney Morning Herald “ said that certain purchases had been made, but, in a general sense, the Government had nothing to show for the money that had been spent. Of course there is nothing to show for it! We have asked about the small mobile force, and the responsible Minister has told us again and again that it is coming up. It still does not exist! I ask the Government to answer the challenge issued by the most responsible newspaper in this country. I am not asking Government supporters, who are interjecting, to question what I know about defence; I ask them to answer the charge that there is an interplay of hatreds and jealousies between the “ brass “. The “ top brass “ have been fighting each other and. as the honorable member for Indi said, each man will fight for his own service, but we must have unity in the general plan.

The questions of civilian control and of mobilization arise again. Twelve months ago, we were horrified to hear that it would take many months to mobilize our small army. Our troglodyte of defence, the Minister for the Army (Mr. Cramer), said, “ I will have the whole 96 of them in the Middle East within three months “.

Believe that or not! That statement stirred the nation to its very depths. Now we want to know about civilian defence. A few weeks ago, the honorable member for Indi brought that matter up in a most serious vein. I do not want to delay the House and I do not want to overstress this subject. However, a responsible serviceman of high rank has raised it and behind his words is deep anxiety. When the “ Sydney Morning Herald “ asks the Government, in effect, why it does not sack the Minister for Defence, surely some answer can be given. The expenditure on St. Mary’s was defended with rhetoric, but not with facts. The Government may have won with numbers in this House, but it has not convinced the people that it is right.

The honorable member for Indi said that strategy is shot to pieces now. Indeed it is! Surely,’ with the money that we are spending, we should be able to get some results. We should have a balance-sheet, and we should be able to feel at least some release from the anxiety that there is a dispute between the civilian architects of defence, the Ministers responsible for defence and the defence chiefs in the field. There is anxiety and chaos. Surely these questions can be answered! Categorical charges have been made by the newspaper I have mentioned. In five articles, it has laid responsibility right at the door of the Government and said, “ Answer these charges “. It used a specialist writer to prepare the articles. It has made serious charges, but nobody has answered them. The Prime Minister has said that, if he were to answer all the questions asked, he would take up all the time allowed for questions in this House. But usually he loves to talk about defence. Whenever a Minister has anything to say about the affairs of his department, the Prime Minister interposes his body between the Minister and the public. He tells a long, circumstantial story, but when it is examined it means precisely nothing.

The Government knows that it has failed on the subject of defence. That has been highlighted by the honorable member foi Indi, who, in the kindest possible way, issued a warning. He asked honorable members to read the speech he made in 1 95 1 and to try to have the defence services properly organized. The defence situation is reminiscent of St. Mary’s. The Chiefs of Staff conferred as to whether the facts should be published, because if they are not published the Minister for Supply and Minister for Defence Production (Mr. Beale) will have something to say about them. I leave the matter there, because honorable members on this side of the House have reason not so much to support the honorable member for Indi, but to highlight the anxiety that he feels and which is felt by responsible newspapers for the Government’s dead, slack hand of inaction. Defence is in the doldrums, both politically and administratively. In the circumstances the Prime Minister should make a general statement upon this matter.

Mr CLEAVER:
Swan

.- In his usual way, the honorable member for Parkes (Mr. Haylen) has over-exaggerated and over-emphasized the position. How he gloats because a certain newspaper, which normally he would criticize, now has something to say in criticism of the Government on the subject of defence. I am sure that at a more appropriate time this criticism will be adequately answered by my colleagues on this side of the House.

I am glad that the Minister for the Navy (Mr. Davidson) is in the chamber to-night, because I intend to criticize Strongly the administration of the Department of the Navy, as far as it relates to the selection, training, and handling of potential officers. I want to acknowledge, in the first place, the protection of selection boards, which have been operating for some years now, to ensure that the Navy selects the best type of young lad for training. Experienced personnel sit on the selection boards and select outstanding lads with an almost assured potential of leadership. This system of selection boards should produce results greatly in excess of those achieved by any commercial house when selecting junior staff. Naval trainees should, on the average, prove good material for the Navy.

In the second place, dealing particularly with midshipmen, in the selection of young lads at the age, say, of thirteen years, the Naval College has had a further protection. Not only have the lads been selected by selection boards, but a midshipman received by the Naval college at Flinders, having been brought in from the stage of primary education only, becomes the responsibility of the Flinders Naval College for the subjects of secondary and specialized education. These lads are entirely in the hands of the professors and tutors of the college. Let it therefore be noted that subsequent deficiencies in educational standards should be laid at the door of the college itself. If a lad shows that he not up to standard, I would hope that his parents would be asked to remove him from the college well before his fourth or graduation year.

Unfortunately, I know of a deplorable example of what should not occur. This is the instance of a lad from Western Australia, a boy whose results each year after admission to Flinders were poor. It was clearly indicated that he would not graduate and that he would not be a successful trainee. But I understand that he was allowed to proceed right through the four years, notwithstanding his poor record. His parents travelled from Western Australia to Melbourne for his graduation. The boy had been supplied with his overseas kit. He was outfitted ready for movement, and arrangements were made for his transport. Then his parents were advised in Melbourne that he had failed. They were not even given an opportunity to inspect the college where he had spent four years. Is it any wonder that the boy’s father experienced a breakdown in health?

I want to move now to a more glaring example which warrants my criticism to-night. I want to give to the House the history of an acknowledged bright boy, a boy who received impressive leadership reports throughout his seven years’ training in the Royal Australian Navy. That boy - who has been discharged - was returned from England and no suitable post in the naval service was found for him. I suggest that this is a shocking instance of bad administration and an unnecessary waste of public moneys. I am not satisfied with the Minister’s reply to the approach that I have made to him. I claim that there are several statements in that correspondence which do not accord with the facts.

The boy in question was accepted as a midshipman at the age of thirteen years. His father signed indenture forms, accepting certain responsibilities, and he naturally expected the Navy, through the Minister, to look to him as the parent until the boy reached adulthood. The boy was trained at the Flinders Naval College from 1951 until early in 1955. I emphasize that, if he later proved weak in subjects such as physics and chemistry, the instruction he received in those subjects was at the Flinders College. If he was later found to be educationally weak for an engineering course in England, it must be remembered that his preparation for that course took place at Flinders.

In October, 1954, the boy faced his graduation examination and, according to the Minister’s letter, he did not succeed. His results were not satisfactory at that examination. His parents understood that his examination results were the equivalent of a pass, but the boy was called unexpectedly before the principal and informed that he had not succeeded in the graduation examination. Notwithstanding that, he was held back for only three months, and he was then allowed to proceed as a graduate of the college. The Minister’s correspondence to me does not refer to the boy’s next period of training after leaving Flinders. It does not refer to the very successful training at sea that he received following his college preparation. For eight months, he was on the training carrier, “ Triumph “. He then served for four months on “Ark Royal “, and another four months on “ Defender “. The normally conservative reports from the commanders of these training ships were not forthcoming. However, the boy did receive very high commendation for his potential as a future naval officer, and other officers on board these training ships expressed their surprise at the quality of the reports on the boy. I am disappointed that the Minister’s correspondence omitted any reference to this period of training and these reports.

This lad then applied for special training at the Royal Naval Engineering College, at Manadon, Plymouth. The significant feature of this is that the Royal Australian Naval Board confirmed the boy’s application on the result of his training. The board assessed that he was fit to do a very stiff engineering course, which any honorable member will concede would be a difficult course for any lad. The Royal Australian Naval Board confirmed his application. What followed? In his first year at that college, the boy was not successful. In his second year, he was allowed to repeat the first year’s work, but in August of that year he failed in his second term progress examination and he failed in the repeat examination. The college principals informed him that they were impressed with his leadership qualities and that they intended to strongly recommend that, although he was not considered to be suitable for engineering training for the Navy, they intended to recommend him for re-posting to executive training. The boy then reported, under instructions, to the Naval Liaison Officer in London, only to find that this officer was the same officer who had held him back for three months at Flinders. The officer, unfortunately, did not give helpful advice to the boy when it was needed. The boy then asked for re-posting to executive, in the light of what the naval college officers had indicated. He was promptly informed that he would be recommended for supply only, or discharge. He was given 24 hours in which to make up his mind. Apparently this single officer located in London, and termed a liaison officer, has been vested with authority to over-rule all other recommendations. The boy endeavoured to telephone to his relatives in Western Australia, but found the connexion was not good and thus could not get helpful encouragement and advice he needed.

Mr SPEAKER:

– Order ! The honorable member’s time has expired.

Mr DAVIDSON:
PostmasterGeneral and Minister for the Navy · Dawson · CP

– The matter that has been raised by the honorable member for Swan (Mr. Cleaver) is one which I have investigated very closely over a period of some weeks as a result of representations that he has made to me. Therefore, I want to put some facts regarding it before the House in addition to those presented by the honorable member for Swan. He commenced his speech by saying that the examples he quoted indicated some justification for criticism of the system of training potential officers for the Navy.

I do not agree that the specific case he has cited to support his argument does anything of the sort. The Royal Australian Navy is served by a splendid body of officers who have been trained at our naval college and there can be no real criticism of that training. The honorable member stated that because of the system of selection boards, lads of great potential should be available to the Naval Training

College from whom good officer material will be developed. That is quite true, but let us all remember that many a young fellow in his early stages of training does not exhibit great potential scholastic ability. However, he is given a chance if he possesses the qualities of keenness and good bearing and displays keen interest in the service. On many occasions, the staff of the college finds itself in the position of having to determine whether it should persevere with a lad whose scholastic abilities might not be very promising at the start, but who, if persevered with and given encouragement, may be turned into a splendid officer. They are not all swans from the start. There are entrants who start off brilliantly and then fail; on the other hand there are those who start badly but succeed brilliantly.

Let me correct some of the statements that have been made regarding the midshipman to whom the honorable member for Swan has referred. In the main, the honorable member’s statements as to the lad’s early training were correct. He went through the Royal Australian Naval College at Flinders and did reasonably well until his final examination. There are indications in the reports that he possessed the requisite potential, keenness for the service, charm and enthusiasm. These qualities made it worthwhile for the authorities to persevere with him. Therefore, when he failed in three subjects in the final examination, he was given another year, after which he succeeded in passing the examination. After that, he was sent to the Royal Naval Engineering College in England and succeeded in passing his first year tests in seamen’s specialization.

Here, then, was a young fellow who had not been exactly brilliant, but who had good qualities and it was considered that he should be persevered with because it was hoped that eventually he would make a good officer. Then he began to deteriorate, shall I say, scholastically, and in his second year at the engineering college he failed rather badly in two important subjects - physics and chemistry. Again, he was given a chance to recover his lost ground, but in his second term he failed still more badly.

The Admiralty conducts this college and makes reports to the Naval Board on which the board bases its determinations. After discussing the position with the midshipman, the Admiralty obtained a statement from the lad himself that his failure was due to the standard required of him being beyond his capacity. The Admiralty then recommended that he be withdrawn from the college. Again, because of favorable reports of the keenness of the lad from members of the college staff, a further attempt was made to determine whether he could be placed in another branch of the service. The honorable member, in referring to that, said that the boy was asked whether he would take a posting to supply specialization, that he was given 24 hours in which to make up his mind and that he refused the posting. It has been suggested that that time was not sufficient for him to make a considered decision. Here is a lad who is now nearly 21 years of age.

Mr Cleaver:

– He was nineteen years old.

Mr DAVIDSON:

– He is now nearly 21. At the time the offer of the posting was made he was nearly twenty years old. He had been in naval colleges with other students since he was thirteen or fourteen years old. He had been struggling for some time and obviously had known that it was not certain whether he would be able to qualify for the seamen’s specialization that he desired. At naval colleges it is well known that lads are constantly discussing their possibilities and chances of making the grade. They consider what else they can do if they fail to make the grade in the section they choose. So, it could hardly reasonably be said that when this lad was finally asked whether he would transfer to supply specialization, such a prospect was entirely new to him and that he had not had sufficient time to consider it. I suggest that this must have been one of the considerations in his mind, and the decision was not thrown upon him suddenly.

Mr Joske:

– He should have been given more than 24 hours.

Mr DAVIDSON:

– He had a great deal more than 24 hours in which to make up his mind. The honorable member for Swan stated that in the letter I wrote to him, I made no reference to the lad’s training at sea and the reports that had been made on his service at sea. The honorable member said that the midshipman had had very good reports, that high commendations were made of his potential as a leader, and that, generally, the officers were impressed with his qualities of leadership and would recommend him for a continuation of his course. That statement could have been made by the honorable member for Swan only from information he received from the lad himself and from his parents.

I have put before the House information obtained from the records of the Naval Board which can be perused. These records are compiled from reports of officers on the various ships on which the lad did his training. They indicate only average scholastic ability, but emphasize the charm of this lad and the good bearing and enthusiasm that he brought to his task. The gradings he was given in reports made by the ships’ officers were only average, particularly those relating to his grasp of seamanship and navigation. The reports do not contain highly complimentary recommendations concerning the lad’s capacity. Finally, the Naval Board had to consider whether it would continue to persevere with this lad who, because of his good qualities, had been given several chances, but failed to take advantage of them and had failed to make the grade. The board decided that he should be returned to Australia. As a last resort, because of the statements made on his behalf by the honorable member for Swan, I had the case examined by the Second Naval Member in charge of personnel to see whether there was any classification or specialization to which the lad could be appointed. The final report from the Second Naval Member was that his record did not warrant a recommendation for his retention in any other specialization.

Those are the facts of the case, as I know them, and if I have to choose between reports that I have received from the lad’s parents and official reports based on the records of the Naval Board, naturally, I stand by the latter.

Several honorable members rising in their places,

Motion (by Mr. Beale) put -

That the question be now put.

The House divided. (Mr. Speaker - Hon. John McLeay.)

AYES: 45

NOES: 22

Majority . . . . 23

AYES

NOES

Question so resolved in the affirmative.

Original question resolved in the affirmative.

House adjourned at 11.57 p.m.

page 2247

ANSWERS TO QUESTIONS

The following answers to questions were circulated: -

Rain-making

Mr Swartz:

z asked the Minister in charge of the Commonwealth Scientific and Industrial Research Organization, upon notice -

Will he indicate, from reports received, the results which have so far been achieved by the scientists of the Commonwealth Scientific and Industrial Research Organization who have been recently engaged in rain-making experiments in the various States?

Mr Casey:
LP

– Under the conditions of cloud seeding in the recent series of emergency rain-making operations, it is not possible to estimate the extent to which the seeding operations influenced any rainfall which may have occurred on the days on which seeding was undertaken.

Censorship

Mr R W HOLT:
WANNON, VICTORIA · LP

olt asked the Minister representing the Minister for Customs and Excise, upon notice -

  1. What is the number and what are the titles of all books and films the import of which into Australia has been (a) permanently banned or (b) temporarily banned pending decision?
  2. What is the average time taken for departmental decisions to finalize the banning of such books and films?
  3. On what aspect of public policy was the import of the book “ The Dollar and the Vatican “ by Avro Manhattan temporarily suspended last September?
  4. In regard to the rejection of the 16-mm. film, “Shadow over Italy”, will the Minister state in what respect it depicted matter the exhibition of which is undesirable in the public interest?
Mr Osborne:
LP

– The Minister for Customs and Excise has now furnished the following answers to the honorable member’s questions: -

  1. In regard to books a review is now being undertaken by the Literature Censorship Board of the present list of publications which have been banned over the years with a view to removing from the list those which the board considers should be released under present-day conditions. Upon completion of this review, it is proposed to send copies of the revised list to the chief librarians of public libraries in every State. In regard to films in most instances where objection is taken by the Commonwealth Film Censorship Board the offending sections are cut from the film and it is subsequently released.
  2. To supply the information sought would require a considerable amount of work and it is not considered that this would be warranted. As announced recently by the Minister for Customs and Excise action has been taken by him which is designed to speed up the handling of books detained for examination.
  3. The book was temporarily detained to ascertain whether it came within the scope of Customs legislation relating to the prohibition of literature.
  4. The film was refused registration under the terms of regulation 13 of the Customs (Cinematograph Films) Regulations for the reason that, in the opinion of the Film Censorship Board, it depicted matter the exhibition of which is undesirable in the public interest. On appeal the Appeal Censor upheld the board’s decision but at the same time stated that if a number of specified passages in the narration were eliminated, the film could be released.
Mr Bryant:

t asked the Minister representing the Minister for Customs and Excise, upon notice -

  1. What books have been banned under Customs regulations on political or similar grounds?
  2. What films have been banned on similar grounds?
  3. What was the status of the officer who initiated the ban in each case?
Mr Osborne:
LP

– The Minister for Customs and Excise has now furnished the following answers to the honorable member’s questions: -

  1. Regulations under the Customs Act prohibit the import of literature which advocates the overthrow by force or violence of established governments, or of all forms of law, the abolition of organized government, the assassination of public officials or the unlawful destruction of property. The prohibition also embraces literature wherein a seditious intention is expressed or a seditious enterprise advocated. A broad view is taken by the Commonwealth Government in dealing with this class of literature and few publications have been deemed to offend to a degree to warrant prohibition of entry. In fact, no publication of the nature concerned has been banned during the last fifteen years.
  2. In the past five years the following films have been rejected on political or similar grounds: - “ Oppose Bacteriological Warfare “, “ Evidence of United States Germ Warfare in China and Korea”, “The Untilled Field” and “The Bloody Trail”.
  3. Decisions on literature of the type mentioned would be taken by the Minister for Customs and Excise after consultation with the AttorneyGeneral. In the case of films decision are taken by the Commonwealth Film Censorship Board.
Mr Ward:

d asked the Minister representing the Minister for Customs and Excise, upon notice -

  1. What are the grounds considered adequate under Commonwealth book censorship to warrant a book being placed on the banned list?
  2. What books have been banned since Commonwealth book censorship was introduced?
  3. In what instances was the ban subsequently removed?
Mr Osborne:
LP

– The Minister for Customs and Excise has now furnished the following answers to the honorable member’s questions: -

  1. The Customs (Prohibited Imports) Regulations prohibit the importation of books if they are - (a) blasphemous, indecent or obscene; or (b) considered to unduly emphasize matters of sex, horror, crime or violence or likely to encourage depravity; or (c) of a “ seditious “ nature.
  2. All books which have been deemed to come within the scope of the above-mentioned prohibitions.
  3. The Minister for Customs and Excise has requested the Literature Censorship Board to review the present list of publications which have been banned over the years with a view to removing from the list those it considers should be released under present day conditions, and he has already stated that heintends to send copies of the revised list to the chief librarians of public libraries in every State. In view of this it is thought that no good purpose would be served by furnishing the names of books which have already been released from the prohibited list.

Kirribilli House

Mr Ward:

d asked the Minister for the Interior, upon notice -

  1. Has a property in Sydney known as Kirribilli House been acquired by the Commonwealth Government?

  2. If so, (a) when and for what purpose was it acquired, (b) what was the price paid, (c) how much has since been spent on alterations, repairs, renovations and refurnishing, (d) when did the property become available for occupation by the Commonwealth, (e) by whom and for what periods has it since been occupied, (f) what permanent staff is employed on (i) maintenance work and

    1. providing service for the occupants, and (g) what is the estimated annual cost of maintaining this property?
Mr Fairhall:
LP

l. - The answers to the honorable member’s questions are as follows: -

  1. Yes. 2. (a) On 17th January, 1920, in “Commonwealth Gazette”, No. 5, for defence purposes. (b) The compensation paid was £15,505 19s. (c) No information is available as to expenditure prior to 1944, but over the eleven years from 1944 to 1955, an amount of about £1,270 was spent on general maintenance. I understand that the present renovations to the House, the rehabilitation of the grounds and refurnishing will cost between £50,000 and £60,000. (d) and (e) I have no information as to its occupation prior to 1930, but since 1930 it has been leased to various private tenants and, on a few occasions, occupied by some of the Governor-General’s staff. I understand that the Prime Minister stayed there for three days recently, (f) (i) None, (ii) a married couple. (g) The administration of this property is under the Prime Minister’s Department, but I am advised that the estimated annual cost of maintaining it would be of the order of £6,000.

Cite as: Australia, House of Representatives, Debates, 14 November 1957, viewed 22 October 2017, <http://historichansard.net/hofreps/1957/19571114_reps_22_hor17/>.

View PDF View XML View in Voyant